FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
60 East 42nd Street, New York, New York 10165
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(Address of principal executive offices) (Zip Code)
(212) 687-6400
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
|X| Yes |_| No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
|_| Yes |_| No
820,000 participations of Limited Partnership Interests are
outstanding as of the date hereof.
INVESTMENT PROPERTIES ASSOCIATES
FORM 10-Q
For the Fiscal Quarter Ended September 30, 2003
INDEX
Page
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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
-i-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
BALANCE SHEETS
AS AT SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
SEPTEMBER 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 1,712,090 1,516,410
Due from managing agent
(Helmsley-Spear, Inc.) 70,677 47,380
Other assets 18,009 16,881
----------- -----------
$ 1,800,776 $ 3,733,978
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Accounts payable $ 400 $ 6,547
Distributions payable to General
Partners, Special Limited
Partners and Limited Partners -- 457,752
Guaranteed Payments Due to General
Partners, Special Limited
Partners and Limited Partners 117,375 146,500
Sundry liabilities and other
accrued expenses 87,570 105,230
----------- -----------
205,345 716,029
----------- -----------
Partners' Capital (Deficiency)
General Partners 8,775 (2,495,163)
Special Limited Partners 788,941 3,290,185
Limited Partners (represented
by the equivalent of 820,000
Participation Interests) 797,715 2,222,927
----------- -----------
1,595,431 3,017,949
----------- -----------
$ 1,800,776 $ 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 NINE MONTHS ENDED FOR THE THREE MONTHS ENDED
-------------------------------- ---------------------------------
SEPT. 30, 2003 SEPT. 30, 2002 SEPT. 30, 2003 SEPT. 30, 2002
-------------- -------------- -------------- --------------
Revenues:
Interest $ 13,688 $ 24,682 $ 5,397 $ 6,164
Other income 118,956 1,501,500 231 --
----------- ----------- ----------- -----------
132,644 1,526,182 5,628 6,164
----------- ----------- ----------- -----------
Expenses:
Real estate taxes 138,482 231,714 -- 77,772
Other expenses 368,986 378,315 45,465 104,172
----------- ----------- ----------- -----------
507,468 610,029 45,465 181,944
----------- ----------- ----------- -----------
Income (loss) before items shown below (374,824) 916,153 (39,837) (175,780)
Gain (loss) on sale of real estate 4,539,680 -- (5,525) --
----------- ----------- ----------- -----------
4,164,856 916,153 (45,362) (175,780)
Guaranteed payments required under the
Limited Partnership Agreement:
To the Limited Partners 11,250 11,250 3,750 3,750
To the General and Special Limited
Partners 76,125 76,125 25,375 25,375
----------- ----------- ----------- -----------
87,375 87,375 29,125 29,125
----------- ----------- ----------- -----------
Net income (loss) transferred to
Partners' capital accounts $ 4,077,481 $ 828,778 $ (74,487) $ (204,905)
=========== =========== =========== ===========
Net income allocable as follows (based
on terms of the Limited Partnership
Agreement):
General Partners $ 2,534,188 $ 4,558 $ (409) (1,127)
Special Limited Partners 218,505 409,831 (36,834) (101,326)
Limited Partners (represented by the
equivalent of 820,000 Participation
Interests - unchanged during
the periods)
1,324,788 414,389 (37,244) (102,452)
----------- ----------- ----------- -----------
$ 4,077,481 $ 828,778 $ (74,487) $ (204,905)
=========== =========== =========== ===========
Per Participation Interest:
Net income (loss) $ 1.6156 $ 0.5054 $ (0.0454) $ (0.1249)
=========== =========== =========== ===========
See accompanying notes to financial statements
2
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2002
2003 2002
---- ----
OPERATING ACTIVITIES:
Net income $ 4,077,481 $ 828,778
Adjustments to reconcile net income
to net cash used in operating activities:
Gain on sale of real estate (4,539,680) --
Changes in operating assets and
liabilities:
(Increase) Decrease in due from
managing agent (23,297) 50,166
(Increase) in other assets (1,128) (4,779)
Increase (Decrease) in accounts payable (6,147) 6,502
Decrease in guaranteed payments due
to General Partners,
Special Limited Partners and
Limited Partners (29,125) --
(Decrease) in sundry liabilities and
other accrued expenses (17,660) (273,914)
(Decrease) in deposits -- (1,500,000)
----------- -----------
Net cash used in operating activities (539,556) (893,247)
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INVESTING ACTIVITIES:
Net proceeds from sale of real estate 6,692,988 --
----------- -----------
FINANCING ACTIVITIES:
Distributions of net operating
revenues to General Partners,
Special Limited Partners and Limited Partners (5,957,752) (559,966)
----------- -----------
Increase (decrease) in cash
and cash equivalents 195,680 (1,453,213)
Cash and cash equivalents at beginning of year 1,516,410 2,788,292
----------- -----------
Cash and cash equivalents at September 30, 2003 $ 1,712,090 $ 1,335,079
=========== ===========
See accompanying notes to financial statements.
3
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 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 September 30, 2003 and the
results of operations for the three and nine month periods ended September 30,
2003 and 2002.
The results of operations for the three and nine month periods ended September
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 $4,595,017 (nine months ended
September 30, 2003) and $697,743 (nine months ended September 30, 2002) as
compared with net income of $4,077,481 and $828,778 respectively, as shown in
the statements of operations. The differences result principally from
depreciation expense relating to the 570 Broad Street property which continued
to be recognized for income tax purposes and differences in the gain on sale as
a result of such depreciation differences.
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 real estate tax refunds received in connection
with 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 the consummation of this sale
transaction, the Company recognized a gain on the sale of approximately
$5,155,571 for Federal income tax purposes as compared with a gain of
approximately $4,539,680 for financial reporting 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 consisted of marketing for sale its remaining non-income
producing property, a vacant office property located at 570 Broad Street,
Newark, New Jersey. On June 13, 2003, the Company consummated the sale of the
570 Broad Street property for a sales price of $7,000,000. 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 cost 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, 2002 in the amount of $450,538 in respect of
2002 net operating revenues. These amounts were paid prior to March 31, 2003.
The Company will seek to distribute all of its available cash in accordance with
the Company's partnership agreement and seek to wind up its affairs prior to
December 31, 2003, however there can be no assurances that the Company will be
able to completely dissolve by such time.
5
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At September 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
An evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures was carried out under the supervision and
with the participation of the Company's management, including the Company's
principal executive officer and principal financial officer ("the Certifying
Officers") as of September 30, 2003. Based on that evaluation, the Certifying
Officers concluded that the Company's disclosure controls and procedures are
effective to bring to the attention of the Company's management the relevant
information necessary to permit an assessment of the need to disclose material
developments and risks pertaining to the Company's business in its periodic
filings with the Securities and Exchange Commission. There was no change to the
Company's internal control over financial reporting during the quarter ended
September 30, 2003 that materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
6
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:
None.
Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.
7
INVESTMENT PROPERTIES ASSOCIATES
(A New York Limited Partnership)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVESTMENT PROPERTIES ASSOCIATES
By: /s/ Irving Schneider
---------------------------------------
Irving Schneider
General and Special Limited Partner and
Chief Executive Officer
By: /s/ Robert Hecht
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Robert Hecht
Chief Financial Officer
Dated: November 14, 2003
8