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file | filename |
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EXCEL - IDEA: XBRL DOCUMENT - 60 EAST 42ND STREET ASSOCIATES L.L.C. | Financial_Report.xls |
EX-32.2 - EXHIBIT 32.2 - 60 EAST 42ND STREET ASSOCIATES L.L.C. | c22393exv32w2.htm |
EX-31.2 - EXHIBIT 31.2 - 60 EAST 42ND STREET ASSOCIATES L.L.C. | c22393exv31w2.htm |
EX-31.1 - EXHIBIT 31.1 - 60 EAST 42ND STREET ASSOCIATES L.L.C. | c22393exv31w1.htm |
EX-32.1 - EXHIBIT 32.1 - 60 EAST 42ND STREET ASSOCIATES L.L.C. | c22393exv32w1.htm |
EX-24.1 - EXHIBIT 24.1 - 60 EAST 42ND STREET ASSOCIATES L.L.C. | c22393exv24w1.htm |
Table of Contents
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2011
or
o | 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)
A New York Limited Liability Company | 13-6077181 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
One Grand Central Place
60 East 42nd Street
New York, New York 10165
(Address of principal executive offices)
60 East 42nd Street
New York, New York 10165
(Address of principal executive offices)
(212) 687-8700
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
None
Securities registered pursuant to section 12(g) of the Exchange Act:
$7,000,000 of Participations in LLC Member Interests
$7,000,000 of Participations in LLC Member Interests
Indicate by check mark whether 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 Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes þ. No o.
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to
submit and post such files). Yes
o
No o
Indicate by check mark whether Registrant is a shell company (as defined in Rule 12b-2 of the Act)
Yes o No þ.
Indicate by check mark whether Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company.
Large Accelerated Filer o | Accelerated Filer o | Non-Accelerated Filer o | Smaller Reporting Company þ |
TABLE OF CONTENTS
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements. |
60 East 42nd St. Associates L.L.C.
(A Limited Liability Company)
Condensed Balance Sheets
(Unaudited)
(A Limited Liability Company)
Condensed Balance Sheets
(Unaudited)
June 30, 2011 | December 31, 2010 | |||||||
Assets |
||||||||
Real estate: |
||||||||
Building |
$ | 16,960,000 | $ | 16,960,000 | ||||
Less: accumulated depreciation |
16,960,000 | 16,960,000 | ||||||
0 | 0 | |||||||
Building improvements and equipment |
67,386,889 | 66,034,042 | ||||||
Less: accumulated depreciation |
12,912,610 | 12,076,880 | ||||||
54,474,279 | 53,957,162 | |||||||
Tenant improvements |
6,008,077 | 5,598,316 | ||||||
Less: accumulated depreciation |
961,944 | 515,948 | ||||||
5,046,133 | 5,082,368 | |||||||
Land |
7,240,000 | 7,240,000 | ||||||
Total real estate, net |
66,760,412 | 66,279,530 | ||||||
Cash and cash equivalents |
10,101,205 | 11,555,334 | ||||||
Due from Supervisor |
87,202 | 87,202 | ||||||
Other receivable |
3,357 | 3,357 | ||||||
Deferred costs |
683,118 | 454,277 | ||||||
Leasing commissions, less accumulated
amortization of $2,899,269 in 2011 and
$2,742,063 in 2010 |
1,210,552 | 1,367,758 | ||||||
Mortgage refinancing costs, less accumulated amortization of $1,643,422 in 2011 and
$1,461,613 in 2010 |
1,230,210 | 1,412,019 | ||||||
Total assets |
$ | 80,076,056 | $ | 81,159,477 | ||||
Liabilities and members deficiency |
||||||||
Liabilities: |
||||||||
Mortgages payable |
$ | 92,614,550 | $ | 93,719,850 | ||||
Accrued mortgage interest |
433,720 | 438,819 | ||||||
Accrued supervisory fees, a related party |
156,000 | 78,000 | ||||||
Payable to Lessee, a related party |
1,928,007 | 1,082,082 | ||||||
Due to Supervisor |
| 43,555 | ||||||
Accrued expenses |
60,775 | 238,200 | ||||||
Total liabilities |
95,193,052 | 95,600,506 | ||||||
Commitments and contingencies |
| | ||||||
Members
deficiency (At June 30, 2011 and December 31, 2010, there were 700 units (at $10,000 per
unit) of participation units outstanding) |
(15,116,996 | ) | (14,441,029 | ) | ||||
Total liabilities and members deficiency |
$ | 80,076,056 | $ | 81,159,477 | ||||
See notes to the condensed financial statements.
Table of Contents
60 East 42nd St. Associates L.L.C.
(A Limited Liability Company)
Condensed Statements of Operations
(Unaudited)
(A Limited Liability Company)
Condensed Statements of Operations
(Unaudited)
For the Three | For the Six | |||||||||||||||
Months Ended June 30, | Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
Basic rent income, from a related party |
$ | 1,868,518 | $ | 1,868,769 | $ | 3,737,032 | $ | 3,737,537 | ||||||||
Advance of additional rent income, from a
related party |
263,450 | 263,450 | 526,900 | 526,900 | ||||||||||||
Total rent income |
2,131,968 | 2,132,219 | 4,263,932 | 4,264,437 | ||||||||||||
Dividend income |
268 | 414 | 548 | 821 | ||||||||||||
Total revenue |
2,132,236 | 2,132,633 | 4,264,480 | 4,265,258 | ||||||||||||
Expenses: |
||||||||||||||||
Interest on mortgages |
1,394,642 | 1,424,671 | 2,796,948 | 2,856,589 | ||||||||||||
Supervisory services, to a related party |
46,845 | 7,845 | 93,690 | 15,690 | ||||||||||||
Depreciation of building improvements and
equipment |
648,277 | 420,337 | 1,281,725 | 832,609 | ||||||||||||
Amortization of leasing commissions |
77,246 | 92,289 | 157,206 | 208,328 | ||||||||||||
Professional fees, including amounts to a
related party |
36,800 | | 87,668 | 3,000 | ||||||||||||
Total expenses |
2,203,810 | 1,945,142 | 4,417,237 | 3,916,216 | ||||||||||||
Net Income (Loss) |
$ | (71,574 | ) | $ | 187,491 | $ | (152,757 | ) | $ | 349,042 | ||||||
Income (loss) per $10,000 participation unit,
based on 700 participation units
outstanding during each period |
$ | (102.25 | ) | $ | 267.84 | $ | (218.22 | ) | $ | 498.63 | ||||||
Distributions per $10,000 participation
unit consisted of the following: |
||||||||||||||||
Income |
$ | 0 | $ | 267.84 | $ | 0 | $ | 498.63 | ||||||||
Return of capital |
373.72 | 105.88 | 747.44 | 248.81 | ||||||||||||
Total distributions |
$ | 373.72 | $ | 373.72 | $ | 747.44 | $ | 747.44 | ||||||||
See notes to the condensed financial statements.
Table of Contents
60 East 42nd St. Associates L.L.C.
(A Limited Liability Company)
Statement of Members Deficiency
(Unaudited)
(A Limited Liability Company)
Statement of Members Deficiency
(Unaudited)
For the | For the | |||||||
Six Months Ended | Year Ended | |||||||
June 30, 2011 | December 31, 2010 | |||||||
Members deficiency: |
||||||||
January 1, 2011 |
$ | (14,441,029 | ) | |||||
January 1, 2010 |
$ | (13,459,008 | ) | |||||
Add net income (loss): |
||||||||
January 1, 2011 through June 30, 2011 |
(152,757 | ) | | |||||
January 1, 2010 through December 31, 2010 |
| 64,399 | ||||||
(14,593,786 | ) | (13,394,609 | ) | |||||
Less distributions: |
||||||||
Monthly distributions: |
||||||||
January 1, 2011 through June 30, 2011 |
523,210 | | ||||||
January 1, 2010 through December 31, 2010 |
| 1,046,420 | ||||||
Total distributions |
523,210 | 1,046,420 | ||||||
Members deficiency at the end of the period: |
$ | (15,116,996 | ) | $ | (14,441,029 | ) | ||
See notes to the condensed financial statements.
Table of Contents
60 East 42nd St. Associates L.L.C.
(A Limited Liability Company)
Condensed Statements of Cash Flows
(Unaudited)
(A Limited Liability Company)
Condensed Statements of Cash Flows
(Unaudited)
For the | For the | |||||||
Six Month Ended | Six Month Ended | |||||||
June 30, 2011 | June 30, 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | (152,757 | ) | $ | 349,042 | |||
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |
||||||||
Depreciation of improvements and equipment |
1,281,725 | 832,609 | ||||||
Amortization of leasing commissions |
157,206 | 208,328 | ||||||
Amortization of mortgage refinancing costs |
181,810 | 181,809 | ||||||
Changes in operating assets and liabilities: |
||||||||
Due to Supervisor |
(43,555 | ) | | |||||
Accrued supervisory fees, to a related party |
78,000 | | ||||||
Accrued mortgage interest and other expenses |
(182,524 | ) | (5,521 | ) | ||||
Net cash provided by operating activities |
1,319,905 | 1,566,267 | ||||||
Cash flows from investing activities: |
||||||||
Purchase of building improvements and equipment |
(1,352,847 | ) | (1,507,463 | ) | ||||
Purchase of tenant improvements |
(409,761 | ) | | |||||
Increase in payable to Lessee |
845,925 | 1,506,778 | ||||||
Net cash used in investing activities |
(916,683 | ) | (685 | ) | ||||
Cash flows from financing activities: |
||||||||
Other receivable |
| (2,165 | ) | |||||
Repayment of mortgages payable |
(1,105,300 | ) | (1,045,935 | ) | ||||
Financing costs |
| (2,831 | ) | |||||
Distributions to Participants |
(523,210 | ) | (523,210 | ) | ||||
Deferred costs |
(228,841 | ) | | |||||
Net cash used in financing activities |
(1,857,351 | ) | (1,574,141 | ) | ||||
Net decrease in cash and cash equivalents |
(1,454,129 | ) | (8,559 | ) | ||||
Cash and cash equivalents, beginning of period |
11,555,334 | 16,810,403 | ||||||
Cash and cash equivalents, end of period |
$ | 10,101,205 | $ | 16,801,844 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid for interest |
$ | 2,620,237 | $ | 2,679,601 | ||||
See notes to the condensed financial statements.
Table of Contents
Notes to Condensed Financial Statements (Unaudited)
Note A Interim Period Reporting
In the opinion of management, the accompanying unaudited condensed financial statements of 60
East 42nd St. Associates L.L.C. (Registrant) reflect all adjustments, consisting of
normal recurring accruals, necessary to present fairly the financial position of Registrant as of
June 30, 2011 and its results of operations for the three and six months ended June 30, 2011 and
2010 and cash flows for the six months ended June 30, 2011 and 2010. Information included in the
condensed balance sheet as of December 31, 2010 has been derived from the audited balance sheet
included in Registrants Form 10-K for the year ended December 31, 2010 (the 10-K) previously
filed with the Securities and Exchange Commission (the SEC). Pursuant to rules and regulations
of the SEC, certain information and disclosures normally included in financial statements prepared
in accordance with U.S. generally accepted accounting principles have been condensed or omitted
from these financial statements unless significant changes have taken place since the end of the
most recent fiscal year. Accordingly, these unaudited condensed financial statements should be
read in conjunction with the financial statements and notes thereto and the other information
contained in the 10-K. The results of operations for the three and six months ended June 30, 2011
are not necessarily indicative of the results to be expected for any interim period or the full
year.
Reclassification
Certain prior year balances have been reclassified to conform with the current period presentation.
Note B Organization
Registrant was originally organized as a partnership on September 25, 1958. On October 1,
1958, Registrant acquired fee title to One Grand Central Place, formerly known as the Lincoln
Building, at the address 60 East 42nd Street, New York, New York (the Building) and the land
there under (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
did not change any aspect of the assets and operations of Registrant other than to protect its
participants from liability to third parties. Registrants members (Members) are Peter L. Malkin
and Anthony E. Malkin (collectively, the Agents), each of whom also acts as an agent for holders
of participations (Participations) in their respective member interest in Registrant (the
Participants). The Members in Registrant hold senior positions at Malkin Holdings LLC (Malkin
Holdings or Supervisor) (formerly Wien & Malkin LLC), One Grand Central Place, 60 East 42nd
Street, New York, New York, which provides supervisory and other services to Registrant and to
Lessee. See Note E below.
Note C Lease
Registrant does not operate the Property. Registrant leases the Property to Lincoln Building
Associates L.L.C. (Lessee) pursuant to an operating lease as modified (the Lease), which is
currently set to expire on September 30, 2033. Lessee is a New York limited liability company whose
members consist of, among others, entities for the benefit of members of Peter L. Malkins family.
Table of Contents
The Lease provides that Lessee is required to pay rent to Registrant as follows:
(i) annual basic rent (Basic Rent) equal to the sum of $24,000 plus the constant annual
mortgage charges on all mortgages. In accordance with the Ninth Lease Modification Agreement dated
November 5, 2009, Basic Rent was increased to cover debt service on a $100,000,000 mortgage. See
Note D. Basic Rent will be increased or decreased upon the refinancing of the mortgages provided
that the aggregate principal balance of all mortgages now or hereafter placed on the Property does
not exceed $100,000,000 plus refinancing costs.
(ii) additional rent (Additional Rent) equal to, on an annual basis, the lesser of (x)
Lessees net operating income (as defined) for the lease year ending September 30 or (y) $1,053,800
($87,817 per month) and further additional rent (Further Additional Rent) equal to 50% of any
remaining balance of Lessees 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.)
The Lease also requires an advance against Additional Rent equal to, on an annual basis, the
lesser of (x) Lessees net operating income for the preceding lease year or (y) $1,053,800 which is
recorded in revenue in monthly installments of $87,817, 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 Lessees net
operating income for any lease year, advances otherwise required 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.
Lessee is required to make an annual payment to Registrant of Further Additional Rent, which,
as explained above, is the amount representing 50% of the remaining net operating income reported
by Lessee for the lease year ending September 30th after deducting the advance against Additional
Rent. The Lease requires that the report be delivered by Lessee to Registrant annually within 60
days after the end of each such lease year. Since it is not practicable to estimate Further
Additional Rent for the lease year ending on September 30th which would be allocable to
the first nine months of the lease year until Lessee, pursuant to the Lease, renders to Registrant
a report on the operation of the Property. Registrant recognizes Further Additional Rent when
earned from the Lessee at the close of the lease year ending September 30th and records
such amount in revenue during the three months ended September 30th.
For the lease year ended September 30, 2010, Lessee reported net operating income of
$1,164,498. Lessee paid advances against Additional Rent of $1,053,800 for that lease year prior to
September 30, 2010 and Further Additional Rent of $55,347 subsequent to September 30, 2010. The
Further Additional Rent of $55,347 represents 50% of the excess of the Lessees net operating
income of $1,164,498 over $1,053,800. During November 2010 Registrant did not make any additional
distribution of Further Additional Rent received for the lease year ending September 30, 2010 to
Participants but added to the contingency reserves of Registrant.
Table of Contents
Note D Mortgages Payable
On November 29, 2004, a new first mortgage (Mortgage) was placed on the Property in the
amount of $84,000,000 with Prudential Insurance Company of America to provide financing for the
improvement program described below. At closing, $49,000,000 was drawn to pay off the former first
mortgage with Morgan Guaranty Trust Company in the amount of $12,020,814 and the second mortgage in
the amount of $27,979,186 with Emigrant Savings Bank. The remaining $35,000,000 available under the
Mortgage was drawn on various dates through July 5, 2007. The proceeds of $49,000,000 drawn at
closing and all subsequent draws have been used to pay for refinancing costs and capital
improvements as needed. The initial draw of $49,000,000 and all subsequent draws required constant
equal monthly payments of interest only, at the rate of 5.34% per annum, until July 5, 2007.
Commencing August 5, 2007, Registrant is required to make equal monthly payments of $507,838
applied to interest and then principal calculated on a 25-year amortization schedule. The entire
$84,000,000 has been drawn and at June 30, 2011 the balance is $77,010,194. The Mortgage matures on
November 5, 2014 at which time the principal balance will be $69,797,589.
On November 5, 2009 Registrant took out an additional $16,000,000 loan with Prudential
Insurance Company of America secured by a second mortgage on the Property, subordinate to the first
mortgage and to be used for capital improvements. The loan requires payments of interest at 7% per
annum and principal in the aggregate amount of $113,085 calculated on a twenty-five year
amortization schedule and is co-terminus with the first mortgage. At June 30, 2011, the balance is
$15,604,356. The mortgage matures on November 5, 2014 with a principal balance of $14,613,782.
The mortgage loans may be prepaid at any time, in whole only, upon payment of a prepayment
penalty based on a yield maintenance formula. There is no prepayment penalty if the mortgages are
paid in full during the last 60 days of the term.
The estimated fair value of Registrants mortgage debt based on available market information
is approximately $97,019,193 as of June 30, 2011.
Mortgage financing costs of $2,873,632 were capitalized by Registrant and are being amortized
ratably over the terms of the mortgages.
In 1999, the Participants of Registrant and the members in Lessee consented to a building
improvements program (the Program) estimated to cost approximately $22,800,000. In 2000, the
Participants of Registrant and members in Lessee approved an increase in the Program from
$22,800,000 to approximately $28,000,000 under substantially the same conditions as had
previously been approved. To induce the Lessee to approve the Program, Registrant authorized
the Agents to grant to the Lessee, upon completion of the Program, the right to further
extensions of the Lease to 2083. The Program was further increased in 2004 to up to
$100,000,000. Such increase is expected to permit extending the Lease beyond 2083, based on the
net present benefit to Registrant of the improvements made. The granting of such Lease extension
rights upon completion of the Program is expected to trigger a New York State Transfer Tax under
current tax rules, which will be paid from mortgage proceeds and/or the Lessees operating cash
flow. As of June 30, 2011, Registrant had incurred costs related to the Program of $73,394,966
and estimates that the Program upon completion will be approximately $100,000,000 including
sprinkler work, required to be completed by 2019. The Participants of Registrant and the
members in Lessee had approved increased refinancing of $16,000,000 from the total of
$84,000,000 provided by the Mortgage to up to $100,000,000. As noted above, the additional
$16,000,000 financing closed on November 5, 2009. Costs of the Program in excess of financing,
if applicable, will be funded out of Lessees operating cash flow.
Table of Contents
Note E Supervisory Services
Registrant pays Supervisor for supervisory services and disbursements. The basic fee has been
payable at the rate of $24,000 per annum, payable $2,000 per month, since October 1, 1958. The
Agents approved an increase in such fee in an amount equal to the increase in the consumer price
index since such date, resulting in an increase in the basic fee to $180,000 per annum effective
July 1, 2010. The basic fee will be subject to further increase in accordance with any future
increase in the consumer price index. The fee is payable (i) not less than $2,000 per month and
(ii) the balance out of available reserves from Further Additional Rent. If Further Additional Rent
is insufficient to pay such balance, any deficiency shall be payable in the next year in which
Further Additional Rent is sufficient. In addition, the Agents also approved payment by Registrant,
effective July 1, 2010, of the expenses in connection with regular accounting services related to
maintenance of Registrants books and records. Such expenses were previously paid by Supervisor.
The basic supervisory services provided to Registrant by Supervisor include, but are not
limited to, maintaining all of its entity and Participant records, performing physical inspections
of the Building, providing or coordinating certain counsel services to Registrant, reviewing
insurance coverage and conducting annual supervisory review meetings, receipt of monthly rent from
Lessee, payment of monthly and additional distributions to the Participants, payment of all other
disbursements, confirmation of the payment of real estate taxes, active review of financial
statements submitted to Registrant by Lessee and financial statements audited by and tax
information prepared by Registrants independent registered public accounting firm, and
distribution of related materials to the Participants. Supervisor also prepares quarterly, annual
and other periodic filings with the SEC and applicable state authorities.
Registrant pays Supervisor for other services at hourly rates. Pursuant to the fee
arrangements described herein, Registrant incurred supervisory service fees of $93,690 for the
six-month period ended June 30, 2011. Supervisory fees were $15,690 for the six-month period ended
June 30, 2010. No remuneration was paid during the six-month periods ended June 30, 2011 and 2010
by Registrant to any of the Members.
Supervisor also receives a payment (Additional Payment) equal to 10% of all distributions to
Participants in Registrant in any year in excess of the amount representing a return to them at the
rate of 14% per annum on their remaining cash investment in Registrant (which remaining cash
investment at June 30, 2011 was equal to the Participants original cash investment of $7,000,000).
For tax purposes, such Additional Payment is recognized as a profits interest, and the Supervisor
is treated as a partner, all without modifying each Participants distributive share of reportable
income and cash distribution. Supervisor receives $7,380 a year as an advance against the
Additional Payment, which Registrant expenses monthly.
Table of Contents
Reference is made to Note C above for a description of the terms of the Lease between
Registrant and Lessee. As of June 30, 2011, entities for the benefit of Peter L. Malkins family
own member interests in Lessee. The respective interests of the Members in Registrant and Lessee
arise solely from ownership of their respective Participations in Registrant and, in the case of
Peter L. Malkin, entity ownership of member interests for the benefit of family members 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 members in Lessee. However, all of the Members hold
senior positions at Supervisor (which supervises Registrant and Lessee) and, by reason of their
positions at Supervisor, may receive income attributable to supervisory or other remuneration paid
to Supervisor by Registrant and Lessee.
Subsequent Events
Subsequent events have been evaluated for potential recognition and disclosure.
Item 2. | Managements Discussion and Analysis of
Financial Condition and Results of Operations. |
Forward Looking Statements
Readers of this discussion are advised that the discussion should be read in conjunction with
the financial statements of Registrant (including related notes thereto) appearing elsewhere in
this Form 10-Q. Certain statements in this discussion may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements reflect Registrants current expectations regarding future results of operations,
economic performance, financial condition and achievements of Registrant, and do not relate
strictly to historical or current facts. Registrant has tried, wherever possible, to identify these
forward-looking statements by using words such as believe, expect, anticipate, intend,
plan, estimate or words of similar meaning.
Although Registrant believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, such statements are subject to risks and
uncertainties, which may cause the actual results to differ materially from those projected. Such
factors include, but are not limited to, the following: general economic and business conditions,
which will, among other things, affect demand for rental space, the availability of prospective
tenants, lease rents and the availability of financing; adverse changes in Registrants real estate
market, including, among other things, competition with other real estate owners, risks of real
estate development and acquisitions; governmental actions and initiatives; and environmental/safety
requirements.
Financial Condition and Results of Operations
Registrant was organized for the purpose of acquiring the Property subject to an 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 an Additional Payment to Supervisor and other expenses and then to
distribute the balance of such Additional Rent and Further Additional Rent less any additions to
reserves to the Participants. See Note C to the condensed financial statements herein. Pursuant to
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 reserves or otherwise maintain liquid assets to defray any operating expenses of
the Property.
Table of Contents
Registrants results of operations are affected primarily by the amount of rent payable to it
under the Lease. The amount of Additional Rent and Further Additional Rent payable to Registrant
is affected by the New York City economy and real estate rental market, which is difficult for
management to forecast.
Registrant does not pay dividends. During the six-month period ended June 30, 2011, Registrant
made regular monthly distributions of $124.57 for each $10,000 Participation ($1,494.89 per annum
for each $10,000 Participation). There are no restrictions on Registrants present or future
ability to make distributions; however, the amount of such distributions, particularly
distributions of Additional Rent and Further Additional Rent, depends on the ability of Lessee to
make payments of Basic Rent, Additional Rent and Further Additional Rent to Registrant. Registrant
expects to make distributions so long as it receives the payments provided for under the Lease.
During November 2010 Registrant did not make any additional distribution of Further Additional
Rent received for the lease year ending September 30, 2010 to Participants but added to the
contingency reserves of Registrant. See Notes C and D to the condensed financial statements herein.
The following summarizes, with respect to the current period and the corresponding period of
the previous year, the material factors regarding Registrants results of operations for such
periods:
Total revenues decreased for the six-month period ended June 30, 2011 as
compared with the corresponding period of the prior year. Such decrease is
the result of a decrease in dividend income and basic rent for the six-month
period ended June 30, 2011 as compared with the corresponding period of the
prior year.
Total revenues decreased for the three-month period ended June 30, 2011 as
compared with the corresponding period of the prior year. Such decrease is
the result of a decrease in dividend income and basic rent for the
three-month period ended June 30, 2011 as compared with the corresponding
period of the prior year.
Total expenses increased for the six-month period ended June 30, 2011 as
compared with the corresponding period of the prior year. Such increase is
the net result of a decrease in interest on the mortgages payable as a result
of principal payments that reduced the loan balance, an increase in basic
supervisory fees to Malkin Holdings effective July 1, 2010, an increase in
depreciation of improvements and equipment attributable to an increase in
depreciable assets placed in service, a decrease in amortization of leasing
commissions as a result of certain leasing commissions having been fully
amortized, and an increase in professional fees due to the fact that
accounting fees were previously paid by Supervisor and due to the fees paid
to Malkin Holdings for services rendered in connection with certain matters
regarding
ownership and operation of One Grand Central Place for the six-month period
ended June 30, 2011 as compared with the corresponding period of the prior
year.
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Total expenses increased for the three-month period ended June 30, 2011 as
compared with the corresponding period of the prior year. Such increase is
the net result of a decrease in interest on the mortgages payable as a result
of principal payments that reduced the loan balance, an increase in basic
supervisory fees to Malkin Holdings effective July 1, 2010, an increase in
depreciation of improvements and equipment attributable to an increase in
depreciable assets placed in service, a decrease in amortization of leasing
commissions as a result of certain leasing commissions having been fully
amortized, and an increase in professional fees due to the fact that
accounting fees were previously paid by Supervisor and due to the fees paid
to Malkin Holdings for services rendered in connection with certain matters
regarding ownership and operation of One Grand Central Place for the
three-month period ended June 30, 2011 as compared with the corresponding
period of the prior year.
Liquidity and Capital Resources
Registrants liquidity has decreased at June 30, 2011 as compared with December 31, 2010 as a
result of payments made under the improvement program. Registrant may from time to time set cash
aside for contingencies. Adverse developments in economic, credit and investment markets over the
last two years impaired general liquidity (although some improvement in such markets has arisen
recently) and the developments may negatively impact Registrant and/or space tenants at the
Building. Any such impact should be ameliorated by the fact that (a) each of Registrant and its
Lessee has very low debt in relation to asset value, (b) the maturity of Registrants existing and
planned debt will not occur within the next 36 months, and (c) the Buildings rental revenue is
derived from a substantial number of tenants in diverse businesses with lease termination dates
spread over numerous years.
Amortization payments due under the First Mortgage commenced August 5, 2007, calculated on a
25-year amortization schedule. Amortization payments due under the additional $16,000,000 loan
commenced December 5, 2009 calculated on a 25-year amortization schedule. The mortgages mature on
November 5, 2014 at which time the aggregate principal balance due will be $84,411,371. Registrant
does not maintain any reserve to cover the payments of such mortgage indebtedness at maturity.
Therefore, repayment of the mortgages will depend on Registrants 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 real estate capital and operating markets return to
more stable patterns, consistent with long-term historical real estate trends in the geographic
area in which the Property is located, Registrant anticipates that the value of the Property will
be in excess of the amount of the mortgage balances at maturity.
Registrant anticipates that funds for short-term working capital requirements for the Property
will be provided by cash on hand and rental payments received from Lessee. Long-term sources of
working capital will be provided by rental payments received from Lessee and to the
extent necessary, from additional capital investment by the members 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.
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Registrant anticipates Registrant anticipates that funds for short-term working capital
requirements for the Property will be provided by cash on hand and rental payments received from
Lessee. Long-term sources of working capital will be provided by rental payments received from
Lessee, and, to the extent necessary, from additional capital investment by the members 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
Registrant believes that there has been no material change in the impact of inflation on its
operations since the filing of its report on Form 10-K for the year ended December 31, 2010.
Security Ownership
As of June 30, 2011, the Members in Registrant owned of record and beneficially an aggregate
$25,833 of participations in Registrant, representing 0.4% of the currently outstanding
Participations therein.
As of June 30, 2011, certain of the Members in Registrant held additional Participations in
Registrant as follows:
Peter L. Malkin owned of record as trustee or co-trustee an aggregate of $169,049 of
Participations. Peter L. Malkin disclaims any beneficial ownership of such
Participations.
Entities for the benefit of members of Peter L. Malkins family owned of record and
beneficially $160,000 of Participations. Peter L. Malkin disclaims any beneficial
ownership of such Participations, except that related family trusts or entities are
required to complete scheduled payments to him.
Anthony E. Malkin owned of record as co-trustee an aggregate of $25,000 of
Participations. Anthony E. Malkin disclaims any beneficial ownership of such
Participations.
Trusts for the benefit of members of Anthony E. Malkins family owned of record and
beneficially $40,000 of Participations. Anthony E. Malkin disclaims any beneficial
ownership of such Participations.
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Item 4T. | Controls and Procedures. |
(a) | Evaluation of disclosure controls and procedures. The Supervisor after evaluating the
effectiveness of Registrants disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of June 30, 2011, the end of
the period covered by this report, has concluded that as of that date Registrants disclosure
controls and procedures were effective and designed to ensure that material information
relating to Registrant would be made known to it by others within those entities on a timely
basis. |
|
(b) | Changes in internal controls over financial reporting. There were no changes in Registrants
internal controls over financial reporting that occurred during the most recent fiscal quarter
that have materially affected, or are reasonably likely to materially affect, Registrants
internal controls over financial reporting. |
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings. |
The property of Registrant was the subject of the following material litigation:
Malkin Holdings LLC and Peter L. Malkin, a member in Registrant, were engaged in a proceeding
with Lessees former managing agent, Helmsley-Spear, Inc. commenced in 1997, concerning the
management, leasing, and supervision of the property that is subject to the Lease to Lessee. In
this connection, certain costs for legal and professional fees and other expenses were paid by
Malkin Holdings LLC and Mr. Malkin. Malkin Holdings LLC and Mr. Malkin have represented that such
costs will be recovered only to the extent that (a) a competent tribunal authorizes payment or (b)
an investor voluntarily agrees that his or her proportionate share be paid. Accordingly,
Registrants allocable share of such costs is as yet undetermined, and Registrant has not provided
for the expense and related liability with respect to such costs in its financial statements
included in this Form 10-Q. As a result of an August 29, 2006 settlement agreement, which included
termination of this proceeding, Registrant will not recognize any gains or losses from this
proceeding other than the possible charges for the aforementioned fees and expenses.
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Item 6. | Exhibits |
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 Registrants 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, was filed as Exhibit 3(b) to
Registrants 10-Q for the quarter ended March 31,
1998, and is incorporated by reference as an
exhibit hereto. |
||||||
3 | (c) | Registrants Consent and Operating Agreement
dated as of November 28, 2001 |
||||||
3 | (d) | Certificate of Conversion of Registrant to a
limited liability company dated November 28, 2001
filed with the New York Secretary of State on
December 3, 2001. |
||||||
4 | Form of Participating Agreement, which
was filed as Exhibit No. 4 to Registrants 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 Registrants
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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EXHIBIT INDEX
(cont.)
(cont.)
Number | Document | Page* | ||||||
10 | (c) | Form of Lease between Registrant and
Lincoln Building Associates, which
was filed as Exhibit No. 9 to Registrants
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
Registrants 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 Registrants
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 Registrants Form 10-K for the
fiscal year ended December 31, 1979, is
incorporated by reference as an exhibit hereto. |
||||||
10 | (g) | Amendment to Registrants Operating Agreement as
of July 1, 2010 which was filed under Item 10(g)
of Registrants Form 10-Q for the fiscal period
ended June 30, 2010 and is incorporated by
reference as an exhibit hereto. |
||||||
24.1 | Power of Attorney dated September 8, 2011,
between Members of Registrant and Mark Labell
which is being filed as Exhibit 24.1 to
Registrants 10-Q for the quarter ended June 30,
2011. |
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EXHIBIT INDEX
(cont.)
(cont.)
Number | Document | Page* | ||||||
31.1 | Certification of Mark Labell, Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 |
|||||||
31.2 | Certification of Mark Labell, Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 |
|||||||
32.1 | Certification of Mark Labell, Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|||||||
32.2 | Certification of Mark Labell, Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
* | Page references are based on sequential numbering system. |
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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.
The individual signing this report on behalf of Registrant is Attorney-in-Fact for Registrant
and each of the Members in Registrant, pursuant to Power of Attorney, dated September 8, 2011 (the
Power).
60 EAST 42ND ST. ASSOCIATES L.L.C. | ||||
(Registrant) | ||||
By:
|
/s/ Mark Labell
Peter L. Malkin, Member Anthony E. Malkin, Member |
Dated:
September 20, 2011
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 Members in Registrant, pursuant to
the Power, on behalf of Registrant and as a Member in Registrant on the date indicated.
By:
|
/s/ Mark Labell
Peter L. Malkin, Member Anthony E. Malkin, Member |
Dated:
September 20, 2011
* | Mr. Labell supervises accounting functions for Registrant. |