-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ATtgMzOhIoReU726Hwj6gTgTeDIafknUW3eexCYlE8aAlq4tOyrEHGJW6b38SnC1 EvxiVKpL2M5pSTANW2DOLw== 0000100412-99-000008.txt : 19990630 0000100412-99-000008.hdr.sgml : 19990630 ACCESSION NUMBER: 0000100412-99-000008 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990629 FILED AS OF DATE: 19990629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 250 WEST 57TH ST ASSOCIATES CENTRAL INDEX KEY: 0000100412 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 136083380 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-02666 FILM NUMBER: 99654783 BUSINESS ADDRESS: STREET 1: C/O WEIN MALKIN & BETTEX STREET 2: 60 WEST EAST 42ND STREET CITY: NEW YORK STATE: NY ZIP: 10165 BUSINESS PHONE: 2126878700 DEF 14A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [XX] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission Only [XX] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12 Commission File No. 0-2666 250 West 57th St. Associates (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if other than Registrant) Payment of Filing Fee (Check the appropriate box): [XX] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and determined): 4) Proposed maximum aggregate value of transaction: 5) Total fee paid: [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: 250 WEST 57th ST. ASSOCIATES c/o Wien & Malkin LLP 60 East 42nd Street - 26th floor New York, New York 10165-0015 Telephone (212) 687-8700 Telecopier (212) 986-7679 STATEMENT BY THE AGENTS IN THE SOLICITATION OF PARTICIPANT CONSENTS Dated June 28, 1999 This Statement is issued in connection with the Solicitation of Participant Consents by Peter L. Malkin and Anthony E. Malkin as the agents (the "Agents") for the participants (the "Participants") in 250 West 57th St. Associates ("Associates"). Associates was formed in 1953 to acquire the land and improvements known as 250 West 57th Street in New York City (the "Building"), subject to a net operating lease (the "Lease") to Fisk Building Associates (the "Lessee"). See Section I. - Background. The Agents are requesting that the Participants consent to a program proposed by the Lessee for financing and completing improvements which the Lessee and the Agents have concluded are necessary to preserve the Building's physical plant, its competitive market position, and Associates' long-term investment return. Under the Lessee's proposal, a substantial portion of the cost of such improvements and certain other improvements in the future will be paid from the proceeds of an increase in the fee mortgage (the "Fee Mortgage"), and the Lessee's basic rent to Associates will increase to pay the resulting increase in debt service. This Fee Mortgage financing will spread the improvement cost and stabilize the amount available for distribution to the Participants. As attorneys-in-fact for the Participants, the Agents will implement the program after receiving the Participants' consent. As part of this program, the Agents will be authorized, as they deem appropriate for the benefit of Associates from time to time in the future, to refinance the Fee Mortgage with an institutional lender and without personal liability for a principal amount not to exceed $15,000,000 plus refinancing costs. The proceeds of any increased debt will be applied to the Property, and any increased debt service will be paid by an equivalent increase in basic rent paid by the Lessee. It is anticipated that this Statement and the accompanying form of Consent will be mailed to the Participants on June 28, 1999. The Solicitation of Consents will terminate 90 days after the date of this letter, unless extended by the Agents, but in no event later than December 31, 1999. The Agents will advise all Participants of the Solicitation results not later than 90 days after the termination date, including any extension. I. BACKGROUND A. Organization of Associates Associates is a New York joint venture organized in 1953 by Lawrence A. Wien, who served until his death as one of Associates' joint venturers. Peter L. Malkin continues to serve as a joint venturer, and Anthony E. Malkin is the other joint venturer. Each joint venturer acts as the Agent for one or more groups of Participants under a participating agreement for each group (a "Participating Agreement"). The terms of the Participating Agreements are identical. Participants have the right to approve or disapprove certain Agent actions, including this financing and improvement program. The percentage of Participants required to approve this proposal is described in Section XI. - Terms of Solicitations of Consents. B. The Property The Property consists of 250 West 57th Street, a 409,000 square feet 26-story building that occupies the entire blockfront on the south side of West 57th Street between Broadway and Eighth Avenue (the "Property" or the "Building"). The Building was constructed in 1921. The Building contains retail stores on the street level and approximately 341 office tenants engaged in a variety of businesses and professions. As of June 1, 1999, the Building was approximately 99% occupied. C. The Lease 1. Term The current term of the Lease expires in 2003, with a 25-year renewal term expiring in 2028. Associates has consented to the Agents' granting the Lessee three additional 25-year renewal options expiring in 2103. There is no change in the terms of the Lease during the renewal periods. 2. Rent The Lease requires the Lessee to pay the following rent for each fiscal year (October 1 through September 30): a. Basic rent ("Basic Rent") each year equal to the sum of (i) the annual debt service on the Fee Mortgage and (ii) $28,000. -2- b. Overage rent ("Overage Rent") equal to (i) 100% of the Lessee's net profit from the Property up to $752,000 ("Primary Overage Rent") and (ii) 50% of the Lessee's remaining net profit ("Secondary Overage Rent"). Basic Rent is payable monthly and is subject to adjustment equal to any increase or decrease in Fee Mortgage debt service on the existing principal amount. Primary Overage Rent is advanced monthly based on the Lessee's net profit for the prior fiscal year and then adjusted in the following fiscal year based upon actual results. Secondary Overage Rent is payable within 60 days after fiscal year-end. For the past 10 fiscal years, the Lessee has paid the full $752,000 of Primary Overage Rent plus Secondary Overage Rent. For the most recent fiscal year ended September 30, 1998, the Lessee paid $752,000 of Primary Overage Rent plus $2,282,064 of Secondary Overage Rent. Although the Lessee is permitted to deduct accumulated losses from certain prior fiscal years against advances for Primary Overage Rent, there is currently no accumulated loss from past fiscal years to be deducted against current or future payments of Primary Overage Rent. See Section I.F. Financial Information. 3. Other Material Lease Terms The Lessee pays all insurance, real estate tax, repair, maintenance and other operating expenses for the Property. The Lessee is not required to make capital improvements to the Property. The Lessee has the right to assign the Lease without Associates' consent, so long as the assignee assumes all Lease obligations. The Lessee also has the right to surrender the Lease to Associates on 60 days' notice. D. Fee Mortgage The Fee Mortgage balance is currently approximately $2,800,000, having been last refinanced in 1995, when it was increased to provide advances for Property renovation. The maximum Fee Mortgage authorized under this program is $15,000,000 plus refinancing costs, on the basis that (i) the proceeds of any increase in the Fee Mortgage shall be applied to improvements and repairs at the Property and (ii) any increased debt service on the Fee Mortgage shall be paid by Associates from an equivalent increase in Basic Rent paid by the Lessee. Interest payable on the existing Fee Mortgage principal balance is at the annual rate of 9.4%. The Fee Mortgage matures June 1, 2000. Based upon preliminary discussions with Apple Bank for Savings, the current holder of the Fee Mortgage, it is anticipated that for the initial Fee Mortgage increase in 1999 of -3- about $1,500,000 the annual interest rate will be about 5.2% through such maturity date in 2000. For the subsequent Fee Mortgage refinancing and increase at then current market interest rates, it is anticipated that the debt service will be based on a 25-year amortization schedule and the maturity will be approximately five years. The increase in the Fee Mortgage may be incurred in multiple drawdowns or from different lenders, in order to enhance borrowing cost efficiency, and the mortgage may be standing with interest only. E. Competition Pursuant to new space leases, the average rental rate currently asked of prospective office tenants at the Building is approximately $30.00 per square foot (exclusive of electricity charges). The Building's existing rents are currently lower than those charged by similar office buildings of similar age and location. The Lessee operates the Building free of any federal, state or local governmental rent regulation. Rents are governed by existing leases and market conditions. F. Financial Information The Participants have received total distributions representing an annual return on their original cash investment at rates of approximately 77.0% for 1998, 52.7% for 1997, and 61.5% for 1996. These percentages were calculated by dividing the cash payments to the Participants in each year by the Participants' original $3,600,000 cash investment in the Property. Certain Participants may have purchased their interests for amounts different than the original cash investment, and their return on their investment will thus be different. Each monthly installment of Basic Rent is applied to pay monthly debt service on the Fee Mortgage and basic supervisory compensation to Wien & Malkin LLP. Primary Overage Rent is applied to pay monthly distributions to the Participants, and Secondary Overage Rent is applied to pay additional distributions to the Participants, in each case including any required additional supervisory compensation to Wien & Malkin LLP. See Section I.G. - Supervisory Services to Associates. Attached are audited financial statements of Associates as of December 31, 1996, 1997, and 1998, including in each case the balance sheets and the related statements of income, partners' capital and cash flows. Also, See Section VIII. Agents' Discussion and Analysis of Financial Condition and Results of Operation. Rogoff & Company, P.C., serves as Associates' independent public accountants and has performed certain other financial accounting work for Associates, including tax return preparation. -4- G. Supervisory Services to Associates No Agent receives remuneration from Associates for serving as Agent. Peter L. Malkin is Chairman and Anthony E. Malkin is Senior Director of Supervisory Services of Wien & Malkin LLP. Wien & Malkin LLP has acted as supervisor and legal counsel for each of Associates and the Lessee from inception. A non-exclusive list of Wien & Malkin LLP's supervisory services to Associates includes maintaining partnership records, performing physical inspections of the Property, reviewing insurance coverage, conducting annual partnership meetings, issuing reports to the Participants, administrative oversight of special transactions such as the proposed program, monthly receipt of rent from the Lessee, payment of monthly and additional distributions to the Participants, payment of all other disbursements, confirmation of the payment of real estate taxes, review of financial statements submitted to Associates by the Lessee and of audited financial statements and tax information prepared by Associates' independent certified public accountants, and distribution of such materials to the Participants. Wien & Malkin LLP also prepares quarterly, annual and other periodic filings with the Securities and Exchange Commission and applicable state authorities. In consideration of its supervisory services to Associates, Wien & Malkin LLP receives (i) a basic payment of $28,000 a year ("Basic Supervisory Compensation"), (ii) an additional payment of $12,000 a year from Primary Overage Rent so long as the Participants receive annual distributions of at least $540,000 (15% of their original $3,600,000 investment) and (iii) an additional payment of 10% of the cash distributions to Participants from Overage Rent in excess of $540,000 (payments under items (ii) and (iii) being "Additional Supervisory Compensation"). Wien & Malkin LLP pays all disbursements relating to Wien & Malkin LLP's ordinary services to Associates, including accounting and other professional fees, filing and search fees, document preparation, and mailing costs. For the year ended December 31, 1998, Associates paid Wien & Malkin LLP Basic Supervisory Compensation of $28,000 and Additional Supervisory Compensation of $259,959. II. OPERATIONS MATTERS A. Proposed Improvement Program The improvements proposed to be completed after December 31, 1998 are shown in Exhibit A and are estimated to cost approximately $7.7 to $10 million over five years. Each -5- item has been recommended by Wien & Malkin LLP supervisory staff after extensive review with outside engineering consultants and on-site staff. Included in the budget are: (a) $1,107,000 for replacement of the Building's approximately 1,300 windows, (b) $1,415,000 for facade, courtyard, and roof set-back renovation, (c) $685,000 for a new energy efficient chiller plant, (d) $300,000 for converting the Building's remaining DC electrical feeds to AC, (e) $1,012,500 for main lobby and entrance improvements, (f) $160,000 for upgrade of public bathrooms, (g) $1,380,000 for public corridor and elevator lobby improvements, (h) $105,000 for security and communication system improvements, and (i) $290,000 for upgrade and replacement of elevator equipment and system. An additional amount has been allowed for other work requirements which might arise during major upgrade of systems and facade. To the extent additional work is not required, the contingency balance will be available for improvement of tenant spaces or will not be funded. B. Financing The $7.7 to $10 million estimated cost of the improvements over approximately five years will be funded substantially through an increase in the Fee Mortgage (from the current approximately $2,800,000). Associates will own the improvements paid from the Fee Mortgage proceeds and will pay the increased debt service from an equivalent increase in Basic Rent paid to Associates by the Lessee. The increased Basic Rent and cash payments for improvements will be deducted in computing Overage Rent. Assuming that $752,000 of Primary Overage Rent continues to be fully paid each year without reduction for funding improvements, the new debt service and improvement costs will be borne equally by Associates and the Lessee and will be spread through mortgage renewals over many years, thus stabilizing distributions to Participants. Neither Associates nor the Participants will be personally liable for the Fee Mortgage. To minimize interest charges, the Agents will seek the advance of the Fee Mortgage increase in installments as the work proceeds. The maximum Fee Mortgage debt authorized by the program will be $15,000,000, and the actual amount will depend upon future improvements and repairs at the Property and funding available from cash flow. The Fee Mortgage increase, as advanced, will be held by Associates and applied to the improvement program as expended by the Lessee. For purposes of determining Overage Rent, the interest earned on the temporary investment of the Fee Mortgage increase until expended in connection with the improvement program shall be treated as income of the Lessee. If the Lessee were to pay for the improvements in the first five years without such financing, the full cost would be currently deducted against Overage Rent. 100% of the distributions to Participants is derived from Overage Rent. If -6- the full cost were deducted as spent against Overage Rent, distributions to Participants would be significantly reduced, if not eliminated, during the next five years. The proposed Fee Mortgage financing will instead spread the improvement cost through successive refinancings over a longer term and stabilize the amount of Overage Rent payable by the Lessee for distribution to Participants. C. Basic Rent Currently, Basic Rent is $317,157 a year, to be adjusted to reflect any increase or decrease in debt service on the existing principal amount of the Fee Mortgage. Under the program proposed in this Statement, the Basic Rent payable to Associates by the Lessee will increase to pay all debt service on the increase in the Fee Mortgage. Assuming a cumulative increase in the Fee Mortgage over five years from $2,800,000 to $11,800,000 with interest at 7.5% on the additional $9,000,000 and with 25 year amortization, annual Basic Rent will increase by $798,110 to pay debt service on the Fee Mortgage increase, and Overage Rent will decrease by one-half of that amount, prior to any increase in Overage Rent due to increased revenue resulting from the improvements. D. Lease Modification The Lease will be modified as required to confirm the increase in Basic Rent. E. Solicitation and Program Expenses The expenses for the consent solicitation, lease amendment, refinancing, recording taxes, legal fees, and related costs will be paid from the Fee Mortgage increase which is serviced by the Lessee's Basic Rent increase and deducted in computing Overage Rent. Wien & Malkin LLP will represent as counsel Associates and the Lessee in connection with this program at standard hourly rates, and Associates will indemnify Wien & Malkin LLP and the Agents as well as their advisers and affiliates and the managing agent against any claim or expense arising in connection with the program. IV CERTAIN EFFECTS OF THE IMPROVEMENT AND FINANCING PROGRAM A. Generally Payment for the improvement program (whether by repayment of the Fee Mortgage increase through increased Basic Rent or direct payment for services and materials) is deductible in computing Overage Rent. Therefore, each of Associates and the Lessee will ultimately bear one-half of the cost of the improvement program. Stated differently, the value of the -7- Property and of Associates' interest in it will be enhanced, and the Lessee will have contributed half the cost. The Agents believe there are good prospects that increases in rental income from tenants will offset and ultimately be greater than the increases in the Lessee's expense for Basic Rent over the course of the program, thus moderating or avoiding any reduction of Overage Rent and distributions. The improvement and financing program will have no direct effect on the Agents as such. There is no change in the Basic Supervisory Fee or the formula under which Wien & Malkin LLP receives Additional Supervisory Compensation, but such compensation will vary in proportion to any variation in Overage Rent. See Section VI. - Potential Conflicts of Interest. B. Tax Consequences The improvements paid through the Fee Mortgage increase shall be made by the Lessee as agent for Associates and shall be the property of Associates. The applicable income tax deductions for depreciation shall benefit the Participants. To the extent the improvement program is funded from the Fee Mortgage increase, non-deductible amortization payments by Associates under the Fee Mortgage will ultimately equal the tax benefits of the depreciation. If the proposed Fee Mortgage terms require amortization payments through successive refinancings over a 25- year period, the Participants will receive a timing benefit because depreciation deductions will be available during the early years of debt repayment when depreciation exceeds loan amortization. Accordingly, there is a tax benefit to the Participants as a result of the improvement and financing program. V. RECOMMENDATIONS The Agents recommend that the Participants approve the improvement and financing program, for the following reasons: -- The improvements will attract more creditworthy tenants at higher rental rates. -- The improvements are needed to meet the physical and marketing requirements of the Property and will enhance its value. -- The Fee Mortgage financing of the improvements will spread their cost and stabilize distributions to Participants. In the absence of financing, the Agents believe that the Lessee either (a) will not undertake all of the -8- improvements so the opportunity to improve and protect profit and distributions to Participants will be diminished or (b) will undertake the improvements solely with current cash flow, thereby significantly reducing or eliminating distributions to Participants during the next five years. The data and background materials regarding this financing and improvement program are on file in the office of Wien & Malkin LLP and are available for review by Participants. For appointments to inspect and copy such data, and for copies of such data by mail, call Stanley Katzman, Esq. at (212) 687-8700. VI. POTENTIAL CONFLICTS OF INTEREST A. Certain Ownership of Participations in Associates As of June 1, 1999, the Agents beneficially owned, directly or indirectly, the following Participations: Anthony E. Malkin owned of record as co-trustee an aggregate of $8,333 of Participations. Anthony E. Malkin disclaims any beneficial ownership of such Participations. Members of the family of Peter L. Malkin and Anthony E. Malkin, or trusts for their benefit, owned of record or beneficially $88,333.34 of other Participations. Peter L. Malkin disclaims any beneficial ownership of such Participations. B. Relationships with the Lessee As of June 1, 1999, record and beneficial ownership of 13% of the Lessee is held by Peter L. Malkin, Anthony E. Malkin, members of their family, and trusts for their benefit. Certain actions by the Lessee require approval of no less than 75% of the partnership interests in the Lessee. The Agents have been advised that the requisite partners in the Lessee have approved the improvement and financing program on the condition that the program is approved by the Participants. Wien & Malkin LLP receives $48,000 annually from the Lessee for acting as supervisor and additional supervisory compensation of 10% of distributions of cash profit of the Lessee in excess of $100,000 per annum. Wien & Malkin LLP will serve as counsel to Associates in connection with this program at standard hourly rates. The Agents and Wien & Malkin LLP as well as their advisers and affiliates and the managing agent are being indemnified by the Lessee and Associates in connection with the improvement and financing program. -9- VII. FEES AND EXPENSES All fees and expenses relating to this solicitation and the Fee Mortgage increase, including all independent consultants, will be paid from the Fee Mortgage increase which is serviced by the Lessee's Basic Rent increase and deducted in determining Overage Rent. VIII. AGENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION For 1998 for each original $10,000 Participation, Associates made regular monthly distributions from Primary Overage Rent aggregating $2,000 plus additional distributions from Secondary Overage Rent aggregating $5,700. See Section I.C.2. - The Lease. The following summarizes certain material factors affecting Associates' results of operations for the two years ended December 31, 1998: a. Total income increased for 1998 compared with the prior year, attributable to increased Overage Rent. b. Total income decreased for 1997 compared with the prior year, attributable to decreased Overage Rent. IX. LIQUIDITY AND CAPITAL RESOURCES There has been no significant change in Associates' liquidity for the twelve-month period ended December 31, 1998, as compared with the twelve-month period ended December 31, 1997. X. INFLATION Inflationary trends in the economy may impact the operations of the Lessee, and therefore, Overage Rent. Historically, inflation generally has resulted in an increase in Overage Rent. XI. TERMS OF SOLICITATION OF CONSENTS Peter L. Malkin acts for Participants owning 60% of the original $3,600,000 investment in Associates, and Anthony E. Malkin acts for the remaining 40% of the Participants. On June 1, 1999, no person held Participations aggregating more than 5% of the total outstanding Participations. On June 1, 1999, there were about 563 Participants holding Participations. Each Participant's voting percentage in -10- his or her group is determined by a fraction, whose numerator is the face amount of the Participation and denominator is the group's original investment in Associates. The Joint Venture Agreement requires 75% consent for approval of the proposals in this Statement. Under the Participating Agreement for each group represented by a Joint Venturer, 75% of the total Participations in such group is required for such Joint Venturer's approval of the program. The solicitation of consents will terminate 90 days after the date of this Statement, but may be extended by the Agents through December 31, 1999. There is no record date establishing the identity of the Participants entitled to vote for the program. Holders of Participations as of June 1, 1999 will be recognized as entitled to vote. However, if any Participation is transferred before the consent with respect to that Participation is given, the transferee will be entitled to vote. If consent to the proposals has been given prior to the transfer of a Participation, the transferee will be bound by the vote of the transferor. Wien & Malkin LLP has been authorized by the Agents to solicit the consents of Participants by mail, telecopier, telephone and telegram after the mailing of this Statement. Consent Forms which are signed and returned without a choice indicated will be deemed to constitute a binding consent. Any consent (including a deemed consent) is irrevocable. Participations are not traded on an established securities market, nor are they readily tradable on a secondary or equivalent market. Based on Associates' transfer records, Participations are sold by holders from time to time in privately negotiated transactions, and, in some instances, Associates is unaware of the prices at which such transactions occur. However, Associates has been advised that the known price for isolated private sales during the past four years has ranged from $25,000 to $30,000 per $10,000 original investment. Exhibit A -11- Exhibit A Fisk Building-250 West 57th Street Property Improvement Schedule Project/Item Budget Elevator equipment and system upgrade & replacement $ 290,000 Public corridor and elevator lobby improvements 1,380,000 Bathroom upgrades 160,000 Main lobby and entrance improvements 1,012,500 Windows replacement program 1,107,000 Facade, courtyard and setbacks renovation 1,415,000 New energy efficient chiller plant 685,000 House tanks replacement & capacity upgrade 75,000 DC electric conversion 300,000 New energy efficient heating plant 175,000 Security & communication system improvements 105,000 Misc. mechanical upgrades & new backflow system 150,000 Consultant fees 94,000 Contingency 701,500 __________ Total $7,650,000* * Note: An additional amount of up to $2,350,000 is being allowed for other work requirements which might arise during major upgrade of systems and facade. To the extent additional work is not required, this additional contingency balance will be available for improvement of tenant spaces or will not be funded. CONSENT 250 WEST 57th ST. ASSOCIATES As a Participant in 250 West 57th St. Associates, the undersigned hereby takes the following action in response to the letter from Peter L. Malkin to Participants in 250 West 57th St. Associates dated June 28, 1999 and the accompanying Statement by the Agents in the Solicitation of Participant Consents (collectively, the "Statement"): 1. Proposed Improvement and Financing Program CONSENT WITHHOLD CONSENT ______ Consent to _______ Disapprove of and Approve of _______ Abstain from Consenting to the program for financing and completing approximately $7.7 to $10 million of improvements, all as described in the Statement. 2. Discretionary Refinancing Authority of the Agents CONSENT WITHHOLD CONSENT ______ Consent to _______ Disapprove of and Approve of _______ Abstain from Consenting to giving present and successor Agents discretionary authority to refinance the Fee Mortgage for a principal amount not to exceed $15,000,000 plus refinancing costs, with an institutional lender, non-recourse, from time to time in the future, all as described in the Statement. THE AGENTS RECOMMEND YOUR CONSENT TO ALL THE FOREGOING ITEMS. A PARTICIPANT WHO ABSTAINS IS TREATED THE SAME AS A PARTICIPANT WHO DOES NOT CONSENT. Dated: , 1999 _________________________ Signature PLEASE SIGN, DATE AND PROMPTLY RETURN THIS CONSENT. ONCE GIVEN, CONSENT MAY NOT BE REVOKED. IF THIS FORM IS SIGNED, DATED AND RETURNED WITHOUT A CHOICE INDICATED, THE PARTICIPANT EXECUTING SAME SHALL BE DEEMED TO HAVE CONSENTED. [LETTERHEARD OF ROGOFF & COMPANY, P.C. CERTIFED 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, 1998, 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, 1998, 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 January 30, 1999 250 West 57th St. Associates Balance Sheet December 31, 1998 Assets Cash: Fleet Bank $ 24,124 Distribution account held by Wien & Malkin LLP 60,000 84,124 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 - 2,117,435 Mortgage refinancing costs 41,106 Less: Accumulated amortization 30,013 11,093 Total Assets $2,212,652 Liabilities and Partners' Capital (Deficit) Liabilities: First mortgage $2,814,822 Accrued interest on first mortgage 22,049 Total liabilities 2,836,871 Partners' Capital (Deficit), December 31, 1998 ( 624,219) Total Liabilities and Partners' Capital (Deficit) $2,212,652 The Accompanying Notes are an Integral Part of these Financial Statements. 250 West 57th St. Associates Statement of Income For the Year Ended December 31, 1998 Income: Basic rent $ 317,157 Additional rent 3,034,064 Total income 3,351,221 Expenses: Interest on first mortgage $265,616 Supervisory services 290,428 Total expenses 556,044 Net income before amortization 2,795,177 Amortization of mortgage refinancing costs 7,830 Net income $2,787,347 The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates Statement of Partners' Capital (Deficit) December 31, 1998 Partners' capital (deficit), January 1, 1998 $( 639,930) Add: Net income for the year ended December 31, 1998 2,787,347 2,147,417 Less: Monthly distributions to participants January 1, 1998 through December 31, 1998 $ 720,000 Distribution to participants on November 30, 1998 of balance of additional rent for the lease year ended September 30, 1998 2,051,636 2,771,636 Partners' capital (deficit), December 31, 1998 $( 624,219) The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates Statement of Cash Flows For the Year Ended December 31, 1998 Cash flows from operating activities: Net income $2,787,347 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of mortgage refinancing costs 7,830 Change in accrued interest on first mortgage ( 184) Net cash provided by operating activities 2,794,993 Cash flows from financing activities: Monthly distributions to participants $( 720,000) Distribution on November 30, 1998 of balance of additional rent for the lease year ended September 30, 1998 (2,051,636) Amortization payments on first mortgage ( 23,357) Net cash used by financing activities (2,794,993) Net change in cash - Cash at beginning of year 84,124 Cash at end of year $ 84,124 Supplemental Cash Flow Disclosures Year Ended December 31, 1998 Cash paid during the year for interest $ 265,800 The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates Notes to Financial Statements December 31, 1998 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 mortgage refinancing costs of $41,106 are being charged to expense ratably during the period of the mortgage from March 1, 1995 to 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. 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. Basic rent is currently $317,157 a year to pay mortgage charges of $289,157 and $28,000 to Wien & Malkin LLP. Upon any refinancing of the first mortgage, the basic rent will be modified and will be equal to the sum of $28,000, plus an amount equal to the rate of constant payments for interest and amortization required under any such first mortgage immediately subsequent to refinancing computed on the principal balance of the mortgage immediately prior to such refinancing. Thus, in the event the first mortgage is refinanced so as to increase the principal balance, the basic rent will not be modified to include the charges on the additional portion of the mortgage. Associates will have to pay such charges out of primary additional rent described below. 250 West 57th St. Associates Notes to Financial Statements December 31, 1998 3. Lease - (continued) (b) 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, 1998 was $752,000. Advances against primary additional rent of $752,000 per annum for the lease year ending September 30, 1999 are being paid. 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, 1998 was $2,282,064. (c) 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. (d) Some partners in Fisk Building Associates are also partners in Associates. 4. 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. 5. 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. 6. First Mortgage (a) Effective March 1, 1995, a new first mortgage was placed on the property with the Apple Bank for Savings in the amount of $2,890,758. Annual mortgage charges are $289,157, payable in equal monthly installments, applied first to interest at the rate of 9.40% per annum and the balance to principal. The mortgage will mature on June 1, 2000, with a balance of $2,777,754. 250 West 57th St. Associates Notes to Financial Statements December 31, 1998 6. First Mortgage - (continued) (b) Prepayment privileges: The mortgage is not prepayable until March 1, 1998. Thereafter, a 3% penalty will be imposed through February 28, 1999 and a 2% penalty will be imposed until March 2, 2000. There will be no prepayment penalty if the mortgage is paid in full during the last 90 days of the term of the mortgage. (c) Principal payments required to be made are as follows: Year Ending December 31, 1999 $ 25,650 2000 2,789,172 $2,814,822 7. 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. 8. Concentration of Credit Risk Associates maintains cash balances in a bank 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, 1998 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, 1999. [LETTERHEARD OF ROGOFF & COMPANY, P.C CERTIFIED PUBLIC ACCOUNTANTS] Independent Accountant'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, 1997, 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, 1997, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. Kaufman Goldstein New York, New York January 30, 1998 250 West 57th St. Associates Balance Sheet December 31, 1997 Assets Cash: Fleet Bank $ 24,124 Distribution account held by Wien & Malkin LLP 60,000 84,124 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 - 2,117,435 Mortgage refinancing costs 41,106 Less: Accumulated amortization 22,183 18,923 Total Assets $2,220,482 Liabilities and Partners' Capital (Deficit) Liabilities: First mortgage $2,838,179 Accrued interest on first mortgage 22,233 Total liabilities 2,860,412 Partners' Capital (Deficit), December 31, 1997 ( 639,930) Total Liabilities and Partners' Capital (Deficit) $2,220,482 The Accompanying Notes are an Integral Part of these Financial Statements. 250 West 57th St. Associates Statement of Income For the Year Ended December 31, 1997 Income: Basic rent $ 317,157 Additional rent 2,078,984 Total income 2,396,141 Expenses: Interest on first mortgage $267,721 Supervisory services 190,708 Professional fees 19,909 Total expenses 478,338 Net income before amortization 1,917,803 Amortization of mortgage refinancing costs 7,829 Net income $1,909,974 The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates Statement of Partners' Capital (Deficit) December 31, 1997 Partners' capital (deficit), January 1, 1997 $( 653,537) Add: Net income for the year ended December 31, 1997 1,909,974 1,256,437 Less: Monthly distributions to participants January 1, 1997 through December 31, 1997 $ 720,000 Distribution to participants on December 2, 1997 of balance of additional rent for the lease year ended September 30, 1997 1,176,367 1,896,367 Partners' capital (deficit), December 31, 1997 $( 639,930) The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates Statement of Cash Flows For the Year Ended December 31, 1997 Cash flows from operating activities: Net income $1,909,974 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of mortgage refinancing costs 7,829 Change in accrued interest on first mortgage ( 166) Net cash provided by operating activities 1,917,637 Cash flows from financing activities: Monthly distributions to participants $( 720,000) Distribution on December 2, 1997 of balance of additional rent for the lease year ended September 30, 1997 (1,176,367) Amortization payments on first mortgage ( 21,270) Net cash used by financing activities (1,917,637) Net change in cash - Cash at beginning of year 84,124 Cash at end of year $ 84,124 Supplemental Cash Flow Disclosures Year Ended December 31, 1997 Cash paid during the year for interest $ 267,887 The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates Notes to Financial Statements December 31, 1997 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 mortgage refinancing costs of $41,106 are being charged to expense ratably during the period of the mortgage from March 1, 1995 to 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. 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. Basic rent is currently $317,157 a year to pay mortgage charges of $289,157 and $28,000 to Wien & Malkin LLP. Upon any refinancing of the first mortgage, the basic rent will be modified and will be equal to the sum of $28,000, plus an amount equal to the rate of constant payments for interest and amortization required under any such first mortgage immediately subsequent to refinancing computed on the principal balance of the mortgage immediately prior to such refinancing. Thus, in the event the first mortgage is refinanced so as to increase the principal balance, the basic rent will not be modified to include the charges on the additional portion of the mortgage. Associates will have to pay such charges out of primary additional rent described below. 250 West 57th St. Associates Notes to Financial Statements December 31, 1997 3. Lease - (continued) (b) 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, 1997 was $752,000. Advances against primary additional rent of $752,000 per annum for the lease year ending September 30, 1998 are being paid. 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, 1997 was $1,326,984. (c) 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. (d) Some partners in Fisk Building Associates are also partners in Associates. 4. 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. 5. 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. 6. First Mortgage (a) Effective March 1, 1995, a new first mortgage was placed on the property with the Apple Bank for Savings in the amount of $2,890,758. Annual mortgage charges are $289,157, payable in equal monthly installments, applied first to interest at the rate of 9.40% per annum and the balance to principal. The mortgage will mature on June 1, 2000, with a balance of $2,777,754. 250 West 57th St. Associates Notes to Financial Statements December 31, 1997 6. First Mortgage - (continued) (b) Prepayment privileges: The mortgage is not prepayable until March 1, 1998. Thereafter, a 3% penalty will be imposed through February 28, 1999 and a 2% penalty will be imposed until March 2, 2000. There will be no prepayment penalty if the mortgage is paid in full during the last 90 days of the term of the mortgage. (c) Principal payments required to be made are as follows: Year Ending December 31, 1998 $ 23,358 1999 25,650 2000 2,789,171 $2,838,179 7. 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. 8. Concentration of Credit Risk Associates maintains cash balances in a bank 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, 1997 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, 1998. Independent Accountant'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, 1996, 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, 1996, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. Kaufman Goldstein New York, New York January 23, 1997 250 West 57th St. Associates Balance Sheet December 31, 1996 Assets Cash: Fleet Bank $ 24,124 Distribution account held by Wien, Malkin & Bettex LLP 60,000 84,124 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 - 2,117,435 Mortgage refinancing costs 41,106 Less: Accumulated amortization 14,354 26,752 Total Assets $2,228,311 Liabilities and Partners' Capital (Deficit) Liabilities: First mortgage $2,859,449 Accrued interest on first mortgage 22,399 Total liabilities 2,881,848 Partners' Capital (Deficit), December 31, 1996 ( 653,537) Total Liabilities and Partners' Capital (Deficit) $2,228,311 The Accompanying Notes are an Integral Part of these Financial Statements. 250 West 57th St. Associates Statement of Income For the Year Ended December 31, 1996 Income: Basic rent $ 317,157 Additional rent 2,410,477 Total income 2,727,634 Expenses: Interest on first mortgage $269,636 Supervisory services 225,848 Total expenses 495,484 Net income before amortization 2,232,150 Amortization of mortgage refinancing costs 7,830 Net income $2,224,320 The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates Statement of Partners' Capital (Deficit) December 31, 1996 Partners' capital (deficit), January 1, 1996 $( 665,228) Add: Net income for the year ended December 31, 1996 2,224,320 1,559,092 Less: Monthly distributions to participants January 1, 1996 through December 31, 1996 $ 720,000 Distribution to participants on November 30, 1996 of balance of additional rent for the lease year ended September 30, 1996 1,492,629 2,212,629 Partners' capital (deficit), December 31, 1996 $( 653,537) The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates Statement of Cash Flows For the Year Ended December 31, 1996 Cash flows from operating activities: Net income $2,224,320 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of mortgage refinancing costs 7,830 Change in accrued interest on first mortgage ( 152) Net cash provided by operating activities 2,231,998 Cash flows from financing activities: Monthly distributions ($ 720,000) Distribution on November 30, 1996 of balance of additional rent for the lease year ended September 30, 1996 ( 1,492,629) Principal payments on first mortgage ( 19,369) Net cash used by financing activities (2,231,998) Net change in cash - Cash at beginning of year 84,124 Cash at end of year $ 84,124 Supplemental Cash Flow Disclosures Year Ended December 31, 1996 Cash paid during the year for interest $ 269,788 The Accompanying Notes are an Integral part of these Financial Statements. 250 West 57th St. Associates Notes to Financial Statements December 31, 1996 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 mortgage refinancing costs of $41,106 are being charged to expense ratably during the period of the mortgage from March 1, 1995 to 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. 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 & Bettex LLP for supervisory services. Basic rent is currently $317,157 a year to pay mortgage charges of $289,157 and $28,000 to Wien, Malkin & Bettex LLP. Upon any refinancing of the first mortgage, the basic rent will be modified and will be equal to the sum of $28,000, plus an amount equal to the rate of constant payments for interest and amortization required under any such first mortgage immediately subsequent to refinancing computed on the principal balance of the mortgage immediately prior to such refinancing. Thus, in the event the first mortgage is refinanced so as to increase the principal balance, the basic rent will not be modified to include the charges on the additional portion of the mortgage. Associates will have to pay such charges out of primary additional rent described below. 250 West 57th St. Associates Notes to Financial Statements December 31, 1996 3. Lease - (continued) (b) 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 & Bettex 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, 1996 was $752,000. Advances against primary additional rent of $752,000 per annum for the lease year ending September 30, 1997 are being paid. 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, 1996 was $1,658,477. (c) 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. (d) Some partners in Fisk Building Associates are also partners in Associates. 4. 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 & Bettex LLP. Some partners in that firm are also partners in Associates. 5. First Mortgage (a) Effective March 1, 1995, a new first mortgage was placed on the property with the Apple Bank for Savings in the amount of $2,890,758. Annual mortgage charges are $289,157, payable in equal monthly installments, applied first to interest at the rate of 9.40% per annum and the balance to principal. The mortgage will mature on June 1,2000, with a balance of $2,777,754. 250 West 57th St. Associates Notes to Financial Statements December 31, 1996 5. First Mortgage - (continued) (b) Prepayment privileges: The mortgage is not prepayable until March 1, 1998. Thereafter, a 3% penalty will be imposed through February 28, 1999 and a 2% penalty will be imposed until March 2, 2000. There will be no prepayment penalty if the mortgage is paid in full during the last 90 days of the term of the mortgage. (c) Principal payments required to be made are as follows: Year Ending December 31, 1997 $ 21,270 1998 23,358 1999 25,650 2000 2,789,171 $2,859,449 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 participants in their individual capacities. 7. Concentration of Credit Risk Associates maintains cash balances in a bank and in a distribution account held by Wien, Malkin & Bettex LLP. The bank balance is insured by the Federal Deposit Insurance Corporation up to $100,000, and at December 31, 1996 was completely insured. The distribution account held by Wien, Malkin & Bettex LLP is not insured. The funds held in the distribution account were paid to the participants on January 1, 1997. -----END PRIVACY-ENHANCED MESSAGE-----