EX-13 3 west13a.txt EXHIBIT 13A [LETTERHEAD OF WIEN & MALKIN LLP] March 12, 2003 To Members and Participants in 250 West 57th St. Associates L.L.C. Federal Identification Number 13-6083380 We enclose the annual report of 250 West 57th St. Associates L.L.C., for the year ended December 31, 2002. The limited liability company owns the Fisk Building at 250 West 57th Street, New York City. The reported income for 2002 was $1,496,438. This was less than distri- butions of $1,860,452 representing the current monthly distributions totaling $720,000 per annum and the additional distribution of $1,140,452, which was paid to participants on November 29, 2002. The difference results primarily from depreciation of building improvements and amortization of mortgage refin- ancing 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, 2002 of an original cash investment of $10,000 was a deficit balance of $3,296. Additional rent for the lease year ended September 30, 2002 was $1,920,029 (including $15,396 of interest earned and retained on funds borrowed for the improvement program loan funds) or an excess of $1,168,029 over advances of $752,000 by the lessee against additional rent ($720,000 to participants, $32,000 to Wien & Malkin LLP). As approved by the participants, Wien & Malkin LLP received $126,717 of the additional rent and $1,140,452 was distributed to the participants on November 29, 2002. The additional distri- bution of $1,140,452, including dividend income from prior years, represented an annual return of about 31.7% 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, 2002 were about 51.7% on the original cash investment. The enclosed Schedule K-1 form(s) (Form 1065), containing 2002 tax information, must be reviewed in detail by your accountant. If you have any question about the enclosed material, please communi- cate 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 2002. Cordially yours, WIEN & MALKIN LLP By: Stanley Katzman SK:dm Encs. [LETTERHEAD OF ROFOGG & COMPANY, P.C. CERTIFIED PUBLIC ACCONTANTS] Independent Auditor's Report To the Participants in 250 West 57th St. Associates L.L.C. We have audited the accompanying balance sheet of 250 West 57th St. Associates L.L.C. as of December 31, 2002 and the related statements of income, of members' 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 auditing standards generally accepted in the United States of America. 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 L.L.C. at December 31, 2002 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. New York, New York February 7, 2003 250 West 57th St. Associates L.L.C. Balance Sheet December 31, 2002 Assets Cash and Cash Equivalents: Fleet Bank $ 64,279 Emigrant Savings Bank 100,000 Distribution account held by Wien & Malkin LLP 60,000 Emigrant Savings Bank (Money Market Fund) 1,982,538 2,206,817 Rent receivable 5,669 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 8,313,123 Less: Accumulated depreciation 898,184 7,414,939 Improvements in progress 138,227 9,670,601 Mortgage refinancing costs 517,770 Less: Accumulated amortization 217,795 299,975 Other investments (Note 3) - Total Assets $12,183,062 Liabilities and Members' Capital (Deficit) Liabilities: First mortgage - Emigrant Savings Bank $12,000,000 Accrued interest on first mortgage 55,777 Due to Fisk Building Associates 1,313,983 Total liabilities 13,369,760 Members' (deficit), December 31, 2002 (1,186,698) Total Liabilities and Members' (Deficit) $12,183,062 The Accompanying Notes are an Integral Part of these Financial Statements. 250 West 57th St. Associates L.L.C. Statement of Income For the Year Ended December 31, 2002 Income: Basic rent $ 629,656 Additional rent 1,904,633 Dividend income 2,523 Interest income 10,746 Total income 2,547,558 Expenses: Interest on first mortgage $601,655 Supervisory services 186,717 Professional fees 1,568 Total expenses 789,940 Net income before depreciation and amortization 1,757,618 Depreciation of building improvements 158,462 Amortization of mortgage refinancing costs 102,718 Total depreciation and amortization 261,180 Net income $1,496,438 The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates L.L.C. Statement of Members' Deficit December 31, 2002 Members' deficit, January 1, 2002 $( 822,684) Add: Net income for the year ended December 31, 2002 1,496,438 673,754 Less: Monthly distributions to members January 1, 2002 through December 31, 2002 $ 720,000 Distribution on November 29, 2002 of balance of additional rent for the lease year ended September 30, 2002 1,140,452 1,860,452 Members' deficit, December 31, 2002 $(1,186,698) The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates L.L.C. Statement of Cash Flows For the Year Ended December 31, 2002 Cash flows from operating activities: Net income $1,496,438 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of building improvements 158,462 Amortization of mortgage refinancing costs 102,718 Mortgage refinancing costs (1,152) Rent receivable (5,669) Due to Fisk Building Associates (856,919) Accrued expenses (1,362) Net cash provided by operating activities 892,516 Cash flows from investing activities: Additions to building improvements (2,791,929) Cash flows from financing activities: Increase in first mortgage 5,000,000 Monthly distributions to members (720,000) Distribution on November 29, 2002 of additional rent for the lease year ended September 30, 2002 (1,140,452) Net cash provided by financing activities 3,139,548 Net change in cash and cash equivalents 1,240,135 Cash and cash equivalents at beginning of year 966,682 Cash and cash equivalents at end of year $2,206,817 Supplemental Cash Flow Disclosures Year Ended December 31, 2002 Cash paid during the year for interest $ 589,692 The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates L.L.C. Notes to Financial Statements December 31, 2002 1. Business Activity 250 West 57th St. Associates L.L.C. ("Associates") is a limited liability company which owns an office building located in New York City. The building is net leased to Fisk Building Associates. Effective November 30, 2001, 250 West 57th St. Associates converted from a joint venture to a limited liability company. Ownership percentages were unchanged by the conversion, and the partnership's income tax basis in its assets and liabilities carried over to the limited liability company. 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 costs of building improvements completed in 2001 and 2002 are being depreciated over an estimated useful life of 39 years. Amortization Capitalized mortgages refinancing costs of $517,770 are being charged to expense ratably during the period of the mortgage through December 1, 2005. Cash Equivalents For purposes of the statement of cash flows, money market funds are considered to be cash equivalents. 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. First Mortgage - Emigrant Savings Bank (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 250 West 57th St. Associates L.L.C. Notes to Financial Statements December 31, 2002 3.First Mortgage - Emigrant Savings Bank - continued pay for additional improvements to the property. Additional mortgage advances of $2,000,000 and $3,000,000 were received on January 23, 2002 and December 16, 2002. 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 Company. 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. 4. Lease (a) Effective May 1, 1975, the lease between 250 West 57th St. Associates L.L.C., 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). 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, 2002 was $752,000. Advances against primary additional rent of $752,000 per annum for the lease year ending September 30, 2003 are being paid. No other additional rent is accrued by Company for the period between the end of the lessee's lease year ending September 30th and the end of Company's fiscal year ending December 31st. 250 West 57th St. Associates L.L.C. Notes to Financial Statements December 31, 2002 4. Lease - continued 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, 2002 was $1,152,633. (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. 5. Related Party Transactions a) Rent Income: Rent income is received from a related party since some members or participants in Associates are also members in the Lessee. b) Supervisory and Other Services: Supervisory and other services are provided to Associates by its supervisor, Wien & Malkin LLP, a related party in which Peter L. Malkin, a member in Associates, has an interest. Beneficial interests in Associates are held by one or more persons at Wien & Malkin, their family members, and/or trusts, limited liability companies, or similar entities owned for their family members. Transactions in 2002 with Wien & Malkin are as follows: Basic supervisory fees $ 60,000 Additional supervisory fees* 126,717 Total $186,717 *Wien & Malkin receives 20% of all distributions received by the participants in excess of 20% per annum on the cash investment of $3,600,000. Wien & Malkin also serves as supervisor for Associates' lessee and receives from the Lessee a basic annual fee for such service and a fee based on distributions to its members. Beneficial interests in the Lessee are held by one or more persons at Wien & Malkin, their family members, and/or trusts, limited liability companies, or similar entities owned for their family members. Some partners in Fisk Building Associates are also members in Associates. 250 West 57th St. Associates L.L.C. Notes to Financial Statements December 31, 2002 6. 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 members in their individual capacities. 7. Concentration of Credit Risk Company maintains cash balances in a bank and money market funds. The Federal Deposit Insurance Corp. insures bank balances up to $100,000 each. Uninsured balances amount to $2,006,817 as at December 31, 2002 as follows: Cash in Bank $ 24,279 Investment in Emigrant Savings Bank (Money Market Fund) 1,982,538 $2,006,817 The funds held in the distribution account were paid to the members on January 1, 2003. 8. Litigation Wien & Malkin and Peter L. Malkin, a member in Associates, have been engaged in a dispute proceeding with Helmsley-Spear, Inc. commenced in 1997 concerning the management, leasing and supervision of the property subject to the net lease, in which Wien & Malkin and Mr. Malkin have sought an order removing Helmsley-Spear. In this connection, certain costs for legal and professional fees and other expenses have been paid and incurred by Wien & Malkin and Mr. Malkin and additional costs are expected to be incurred. Wien & Malkin and Mr. Malkin have represented that such costs will be recovered only to the extent that (a) a competent tribunal authorized payment or (b) an investor voluntarily agrees that his or her proportionate share be paid. Accordingly, Associates' allocable share of such costs is as yet undetermined, and Associates has not provided for the expense and related liability with respect to such costs in these financial statement. The original action was commenced in June 1997 and was referred to arbitration. The March 30, 2001 decision of the arbitrators, which was confirmed by the court, (i) reaffirms the right of the investors in the Lessee to vote to terminate Helmsley-Spear without cause, (ii) dismisses Helmsley-Spear claims against Wien & Malkin and Peter Malkin, and (iii) rejects the termination of Helmsley-Spear for cause. The parts of the decision under appeal were affirmed by the Appellate Division on December 5, 2002, and were further appealed by Wien & Malkin and Mr. Malkin on January 13, 2003. 250 West 57th St. Associates L.L.C. Notes to Financial Statements December 31, 2002 8. Litigation - continued At the Lessee's May 20, 2002 special meeting, a vote of the investors was conducted on proposals for the removal without cause of Helmsley-Spear as managing and leasing agent and its replacement by one or a combination of designated independent firms (Cushman & Wakefield, Insignia/ ESG, and Newmark Realty), including payment by the Lessee of the expenses for the preparation of the solicitation statement, the solicitation of votes, and the implementation of the new program. On May 21, 2002, the proponents of the proposals, Peter L. Malkin and Wien & Malkin, filed a court application to determine and confirm all investors' votes for removal without cause and replacement and to set the final date for Helmsley-Spear's termination. Helmsley-Spear filed objections, and on September 10, 2002 the court confirmed such votes and ruled that Helmsley-Spear has been discharged and must effect an orderly transition and departure within 60 days. As of November 20, 2002, Helmsley-Spear is no longer the managing and leasing agent and has been replaced by Cushman & Wakefield, Inc. Helmsley-Spear continues to pursue its appeal. In accord with the Lessee's May 20, 2002 vote, the expenses for the preparation of the solicitation statement, the solicitation of votes and the implementation of the new program are being paid by the Lessee. Such payments have totaled $245,251 (including $72,052 plus disbursements of $10,522 to Wien & Malkin) and are included in other professional fees. 9. Other Investments In 2000, the Lessee received shares of common stock and warrants from certain unrelated companies in exchange for permission for those companies to provide high speed internet access and other telecommunication services to the building. Associates received an equal amount of shares and warrants. The Lessee will receive from 5% to 10% of the revenues generated by such services from advertising and subscriptions with tenants of the building. There are restrictions as to the transfer of the stock, and neither the warrants nor the stock have an ascertainable value as of the balance sheet date. Accordingly, the accompanying financial statements do not reflect any value for these securities. No income from stock or warrants was received in 2002.