EX-13 2 west13a.txt EXHIBIT 13 A [LETTERHEAD OF WIEN & MALKIN LLP] March 2, 2001 To Participants in 250 West 57th St. Associates Federal Identification Number 13-6083380 We enclose the annual report of 250 West 57th St. Associates, the joint venture which owns the Fisk Building at 250 West 57th Street, New York City, for the year ended December 31, 2000. The reported income for 2000 was $2,952,547. This was less than distributions of $2,993,151 representing the current monthly distributions totaling $720,000 per annum and the additional distribution of $2,273,151, which was paid to participants on November 30, 2000. The difference results primarily from amortization of mortgage refinancing costs. Since the inception of this investment, a portion of the distributions has constituted a return of capital, and has not been reportable as income. As a result, the book value on December 31, 2000 of an original cash investment of $10,000 was a deficit balance of $1,950. Additional rent for the lease year ended September 30, 2000 was $3,327,722 or an excess of $2,525,723 over advances of $801,999 by the lessee against additional rent ($720,000 to participants, $32,000 to Wien & Malkin LLP and $49,999 of interest earned on funds borrowed for the improvement program.) As approved by the participants, Wien & Malkin LLP received $252,572. The balance of the additional rent of $2,273,151 was distributed to the participants on November 30, 2000. The additional distribution of $2,273,151 represented an annual return of about 63.1% on the original cash investment of $3,600,000. Regular monthly distributions are at the rate of 20% per annum on the cash investment so that total distributions for the year ended December 31, 2000 were about 83.1% on the original cash investment. The enclosed Schedule K-1 form(s) (Form 1065), containing 2000 tax information, must be reviewed in detail by your accountant. If you have any question about the enclosed material, please communicate with our office. Please retain this letter and the enclosed Schedule K-1 form(s) for the preparation of your income tax returns for the year 2000. Cordially yours, WIEN & MALKIN LLP By: Stanley Katzman SK:fm Encs. -37- [LETTERHEAD OF ROGOFF & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS] Independent Auditor's Report To the Participants in 250 West 57th St. Associates (a Partnership): We have audited the accompanying balance sheet of 250 West 57th St. Associates as of December 31, 2000, and the related statements of income, of partners' capital (deficit) and of cash flows for the year then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 250 West 57th St. Associates at December 31, 2000, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. New York, New York February 9, 2001 -38- 250 West 57th St. Associates Balance Sheet December 31, 2000 Assets
Cash: Fleet Bank $ 49,196 Distribution account held by Wien & Malkin LLP 60,000 Fidelity Money Market Account (U.S. Treasury Income Portfolio) 139,008 Emigrant Savings Bank (Money Market Fund) 1,690,594 1,938,798 Fisk Building, 250 West 57th Street, New York City: Land $2,117,435 Building $4,940,682 Less: Accumulated depreciation 4,940,682 - Building improvements 688,000 Less: Accumulated depreciation 688,000 - Tenants' installations and improvements 249,791 Less: Accumulated amortization 249,791 - Building improvements in progress 2,198,806 4,316,241 Mortgage refinancing costs 516,549 Less: Accumulated amortization 12,557 503,992 Other investments (Note 3) - Total Assets $6,759,031 Liabilities and Partners' Capital (Deficit) Liabilities: First mortgage $7,000,000 Accrued interest on mortgages 43,814 Due to Fisk Building Associates 415,596 Rent received in advance 1,469 Total liabilities 7,460,879 Partners' Capital (Deficit), December 31, 2000 ( 701,848) Total Liabilities and Partners' Capital (Deficit) $6,759,031 The Accompanying Notes are an Integral Part of these Financial Statements. -39- 250 West 57th St. Associates Statement of Income For the Year Ended December 31, 2000 Income: Basic rent $ 429,739 Additional rent 3,277,723 Dividend income 33,195 Interest income 12,721 Total income 3,753,378 Expenses: Interest on first mortgage $293,299 Interest on second mortgage 84,969 Supervisory services 312,572 Professional fees 40,359 Total expenses 731,199 Net income before amortization 3,022,179 Amortization of mortgage refinancing costs 69,632 Net income $2,952,547 The Accompanying Notes are an Integral part of these Financial Statements. -40- 250 West 57th St. Associates Statement of Partners' Capital (Deficit) December 31, 2000 Partners' capital (deficit), January 1, 2000 $( 661,244) Add: Net income for the year ended December 31, 2000 2,952,547 2,291,303 Less: Monthly distributions to participants January 1, 2000 through December 31, 2000 $ 720,000 Distribution to participants on November 30, 2000 of balance of additional rent for the lease year ended September 30, 2000 2,273,151 2,993,151 Partners' capital (deficit), December 31, 2000 $( 701,848) The Accompanying Notes are an Integral part of these Financial Statements. -41- 250 West 57th St. Associates Statement of Cash Flows For the Year Ended December 31, 2000 Cash flows from operating activities: Net income $2,952,547 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of mortgage refinancing costs 69,632 Rent receivable 13,304 Mortgage refinancing costs (516,649) Accrued interest on mortgages 13,600 Due to Fisk Building Associates 170,636 Accrued expenses (2,109) Net cash provided by operating activities 2,700,961 Cash flows from investing activities: Improvements in progress (1,953,846) Cash flows from financing activities: Proceeds from first mortgage 7,000,000 Principal payments on second mortgage (1,500,000) Principal payments on first mortgage (2,789,171) Monthly distributions to participants (720,000) Distribution on November 30, 2000 of balance of additional rent for the lease year ended September 30, 2000 (2,273,151) Net cash used by financing activities ( 282,322) Net change in cash 464,793 Cash at beginning of year 1,474,005 Cash at end of year $1,938,798 Supplemental Cash Flow Disclosures Year Ended December 31, 2000 Cash paid during the year for interest $ 364,668 The Accompanying Notes are an Integral part of these Financial Statements. -42- 250 West 57th St. Associates Notes to Financial Statements December 31, 2000 1. Business Activity 250 West 57th St. Associates ("Associates") is a joint venture which owns an office building located in New York City. The building is net leased to Fisk Building Associates. 2. Significant Accounting Policies Basis of Presentation The financial statements have been prepared on the accrual basis of accounting. Depreciation Depreciation of the cost of the building was computed by the straight- line method over estimated useful life of 30 years through September 30, 1983. The cost of the building improvements was depreciated by the straight- line method over various periods from date of completion of improvement through September 30, 1983. The cost of tenants' installations and improvements was amortized by the straight-line method over the terms of the leases. Amortization Capitalized mortgages refinancing costs of $130,508 are being charged to expense ratably during the period of the mortgage through June 1, 2000. Use of Estimates Preparing financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 3. Other Investments In 2000, Associates received 3,152 shares of common stock of Broadband Office, Inc., warrants to acquire 8,107 shares and 6,600 shares of common stock of Gillette Global Network, Inc. ("Gillette") and ENN Providers, Inc. ("Narrowcast"), respectively, (each of the aforementioned companies collectively referred to as the "Companies"). The stock and warrants were provided to Associates for allowing the Companies, at little or no cost to Associates to wire the building to provide high speed internet access and other telecommunications services, the installation of monitors in the building's elevator cabs to display current news and weather reports, advertisements and building information messages. The Lessee received an equal amount of shares and warrants. In addition, the Lessee will receive from 5% to 10% of the revenues generated by such services from advertising and subscriptions with tenants of the building. No income from these sources was earned in 2000. The warrants are exercisable, generally, following an initial public offering ("IPO") of each of the Companies. There is no expectation that such an IPO will occur at anytime soon. The Gillette and Narrowcast warrants expire on August 29, 2003 and August 17, 2005, respectively. There are restrictions as to the transfer of stock and there is no current market for the warrants or the stock. Since they did not have an ascertainable value as of the date they were granted or at December 31, 2000, no amounts have been recorded in the accompanying financial statements for such warrants or stock. -43- 250 West 57th St. Associates Notes to Financial Statements December 31, 2000 4. Lease and Related Party Transactions (a) Effective May 1, 1975, the lease between 250 West 57th St. Associates, as lessor, and Fisk Building Associates, as lessee, provides for basic rent equal to mortgage principal and interest payments plus $28,000 payable to Wien & Malkin LLP for supervisory services. (b) The lease modification dated November 17, 2000 provides that the basic rent will be equal to the sum of $28,000, plus the installment payments for interest and amortization (not including any balloon principal payment due at maturity) required annually under the new $15,500,000 first mortgage loan (the "First Mortgage") from Emigrant Savings Bank. Basic rent is payable in monthly installments on the first day of each calendar month in an amount equal to $2,333.33 plus the projected debt service due on the First Mortgage on the first day of the ensuing calendar month (with a reconciliation to be made as soon as practicable thereafter); provided, however, that basic rent due on December 1, 2000 shall include interest prepaid at the closing of the First Mortgage or accrued thereafter. Basic rent shall be adjusted on a dollar-for-dollar basis by changes in the annual debt service on the First Mortgage. (c) In accordance with a lease modification, effective October 1, 1984, primary additional rent is equal to the lesser of $752,000 per annum or the net operating profit of the property, as defined, after deduction of basic rent. If the full primary additional rent of $752,000 is paid, it will equal 20% of the original $3,600,000 cash investment plus $32,000 payable to Wien & Malkin LLP for supervisory services. Advances against primary additional rent are paid by the lessee based on the net operating profit of the property for the prior year to a maximum amount of $752,000. Primary additional rent for the lease year ended September 30, 2000 was $752,000. Advances against primary additional rent of $752,000 per annum for the lease year ending September 30, 2001 are being paid. No other additional rent is accrued by Associates for the period between the end of the lessee's lease year ending September 30th and the end of Associate's fiscal year ending December 31st. Secondary additional rent is equal to 50% of the net operating profit of the property after payment of basic rent and primary additional rent for lease years ending September 30. Secondary additional rent for the lease year ended September 30, 2000 was $2,525,723. (d) The lessee has exercised its option to renew the lease for a period of 25 years, from October 1, 1978 through September 30, 2003. The lease modification, effective October 1, 1984, provides for an additional renewal term of 25 years from October 1, 2003 through September 30, 2028; the holders of more than 80% of the participations in 250 West 57th St. Associates have consented to the granting of options to the lessee to extend the lease for three additional 25-year renewal terms. There is no change in the terms of the lease during the renewal periods. (e) Some partners in Fisk Building Associates are also partners in Associates. -44- 250 West 57th St. Associates Notes to Financial Statements December 31, 2000 5. Supervisory Services and Related Party Transactions Payments for supervisory services, including disbursements and cost of accounting services, are made to the firm of Wien & Malkin LLP. Some partners in that firm are also partners in Associates. 6. Professional Fees and Related Party Transactions Payments for professional fees, including disbursements, are made to the firm of Wien & Malkin LLP. Some members of that firm are partners in Associates. 7. First Mortgage (a) Effective November 17, 2000, a new first mortgage was placed on the property with Emigrant Savings Bank in the amount of $15,500,000. The Mortgage matures on December 1, 2005. At the closing, the amount of $7,000,000 was advanced to pay off the existing first and second mortgages held by Apple Bank for Savings and to pay for closing and related costs and the costs of improvements made to the property. The balance of the first mortgage loan will be advanced in stages through May 31, 2003 to pay for additional improvements to the property. Monthly payments under the mortgage are interest only. Amounts advanced at the closing bear interest at the rate of 7.511% throughout the term of the mortgage. Amounts advanced after the closing will bear interest at a floating rate equal to 1.65 percentage points above 30, 60, 90, 180 or 360 day LIBOR or the yield on 30-day U.S. Treasury Securities, as selected by Associates. On June 1, 2003 the interest rate on all amounts advanced following the closing will be converted to a fixed rate equal to 1.65 percentage points above the then-current yield on U.S. Treasury Securities having the closest maturity to December 1, 2005. (b) The mortgage may be prepaid at any time, in whole only, upon payment of a prepayment of penalty based on a yield maintenance formula. There will be no prepayment penalty if the mortgage is paid in full during the last 90 days of the term thereof. 8. Income Taxes Net income is computed without regard to income tax expense, since the partnership does not pay a tax on its income; instead, any such taxes are paid by the participants in their individual capacities. 9. Concentration of Credit Risk Associates maintains cash balances in a bank, in a money market fund, and in a distribution account held by Wien & Malkin LLP. The bank balance is insured by the Federal Deposit Insurance Corporation up to $100,000, and at December 31, 2000 was completely insured. The distribution account held by Wien & Malkin LLP is not insured. The funds held in the distribution account were paid to the participants on January 1, 2001. The money market account is not insured. -45- 250 West 57th St. Associates Notes to Financial Statements December 31, 2000 10. Contingencies Wien & Malkin LLP and Peter L. Malkin are engaged in a dispute with Helmsley-Spear, Inc. concerning the management, leasing and supervision of the property. In this connection, certain legal and professional fees and other expenses have been paid and incurred and additional costs are expected to be incurred. The Partnership's allocable share of such costs is as yet undetermined. Accordingly, the Partnership has not provided for the expense and related liability with respect to such costs in the attached financial statements. -46-