0001193125-12-466760.txt : 20121113 0001193125-12-466760.hdr.sgml : 20121112 20121113132907 ACCESSION NUMBER: 0001193125-12-466760 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20120930 FILED AS OF DATE: 20121113 DATE AS OF CHANGE: 20121113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 250 WEST 57TH ST ASSOCIATES L.L.C. 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02666 FILM NUMBER: 121197697 BUSINESS ADDRESS: STREET 1: C/O MALKIN HOLDINGS LLC STREET 2: ONE GRAND CENTRAL PLACE, 60 EAST 42ND ST CITY: NEW YORK STATE: NY ZIP: 10165 BUSINESS PHONE: 2126878700 MAIL ADDRESS: STREET 1: C/O MALKIN HOLDINGS LLC STREET 2: ONE GRAND CENTRAL PLACE, 60 EAST 42ND ST CITY: NEW YORK STATE: NY ZIP: 10165 FORMER COMPANY: FORMER CONFORMED NAME: 250 WEST 57TH ST ASSOCIATES DATE OF NAME CHANGE: 19920703 10-Q 1 d412458d10q.htm 10-Q 10-Q

 

 

FORM 10-Q

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 0-2666

 

 

250 WEST 57th ST. ASSOCIATES L.L.C.

(Exact name of Registrant as specified in its charter)

 

 

 

A New York Limited Liability Company   13-6083380
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

One Grand Central Place

60 East 42nd Street

New York, New York 10165

(Address of principal executive offices)

(212) 687-8700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

$3,600,000 of Participations in LLC Member Interests

 

 

Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x.    No  ¨.

Indicate by check mark whether Registrant is a shell company (as defined in Rule 12b-2 of the Act)    Yes  ¨    No  x.

Indicate by check mark whether Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large Accelerated Filer   ¨    Accelerated Filer   ¨
Non-Accelerated Filer   ¨      Smaller Reporting Company   x

 

 

 


PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements.

250 West 57th St. Associates L.L.C.

(A Limited Liability Company)

Condensed Balance Sheets

 

      September 30, 2012     December 31, 2011  
     (Unaudited)        

Assets

    

Real Estate at 250-264 West 57th Street, New York, New York:

    

Building

   $ 4,940,682      $ 4,940,682   

Less: accumulated depreciation

     (4,940,682     (4,940,682
  

 

 

   

 

 

 
     —          —     
  

 

 

   

 

 

 

Building improvements

     44,082,575        41,215,430   

Less: accumulated depreciation

     (7,153,282     (6,334,722
  

 

 

   

 

 

 
     36,929,293        34,880,708   
  

 

 

   

 

 

 

Tenant improvements

     4,817,085        2,702,193   

Less: accumulated depreciation

     (1,019,804     (548,783
  

 

 

   

 

 

 
     3,797,281        2,153,410   
  

 

 

   

 

 

 

Land

     2,117,435        2,117,435   
  

 

 

   

 

 

 

Total real estate, net

     42,844,009        39,151,553   

Cash and cash equivalents

     1,269,384        2,325,024   

Due from Supervisor, a related party

     60,000        60,000   

Due from Lessee, a related party

     3,558,414        —     

Deferred costs

     1,414,890        790,019   

Other receivable

     79,774        —     

Prepaid insurance

     10,144        —     

Leasing costs, less accumulated amortization of $926,333 in 2012 and $740,183 in 2011

     1,383,370        795,274   

Mortgage financing costs, less accumulated amortization of $1,500,935 in 2012 and $1,263,152 in 2011

     726,885        964,668   
  

 

 

   

 

 

 

Total assets

   $ 51,346,870      $ 44,086,538   
  

 

 

   

 

 

 

Liabilities and members’ deficiency

    

Liabilities:

    

Mortgages payable

   $ 44,164,732      $ 44,935,520   

Accrued mortgage interest

     196,607        201,523   

Payable to Lessee, a related party

     9,350,095        3,576,129   

Accrued supervisory fees, a related party

     —          20,000   

Accrued expenses

     11,540        55,901   

Due to Supervisor, a related party

     322,718        153,445   
  

 

 

   

 

 

 

Total liabilities

     54,045,692        48,942,518   

Commitments and contingencies

     —          —     

Members’ deficiency (at September 30, 2012 and December 31, 2011, there were 720 units (at $5,000 per unit) of participation units outstanding)

     (2,698,822     (4,855,980
  

 

 

   

 

 

 

Total liabilities and members’ deficiency

   $ 51,346,870      $ 44,086,538   
  

 

 

   

 

 

 

See notes to the condensed financial statements.

 

1


250 West 57th St. Associates L.L.C.

(A Limited Liability Company)

Condensed Statements of Operations

 

     For the Three Months      For the Nine Months  
     Ended September 30,      Ended September 30,  
     2012      2011      2012      2011  
     (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)  

Revenue:

           

Basic minimum annual rent, from a related party

   $ 866,936       $ 818,005       $ 2,599,408       $ 2,453,508   

Advance of primary overage rent, from a related party

     188,000         188,000         564,000         564,000   

Secondary overage rent, from a related a party

     3,558,414         4,350,339         3,558,414         4,350,339   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total rent income

     4,613,350         5,356,344         6,721,822         7,367,847   

Interest and dividend income

     151         214         501         699   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

     4,613,501         5,356,558         6,722,323         7,368,546   
  

 

 

    

 

 

    

 

 

    

 

 

 

Expenses:

           

Interest on mortgages

     677,516         642,626         2,041,850         1,937,598   

Supervisory services, to a related party

     31,797         31,425         94,648         92,425   

Additional payment for supervisory services, to a related party

     —           284,745         —           284,745   

Depreciation of building and tenant improvements

     451,047         379,159         1,289,581         1,112,272   

Amortization of leasing costs

     75,083         46,247         186,150         142,985   

Formation transaction expense

     56,738         41,589         95,575         81,417   

Professional fees, including amounts to a related party

     188,824         72,395         291,827         133,227   

Miscellaneous

     8,366         —           25,534         3,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     1,489,371         1,498,186         4,025,165         3,787,669   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

   $ 3,124,130       $ 3,858,372       $ 2,697,158       $ 3,580,877   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income per $5,000 participation unit, based on 720 participation units outstanding during the period

   $ 4,339.07       $ 5,358.85       $ 3,746.05       $ 4,973.44   
  

 

 

    

 

 

    

 

 

    

 

 

 

Distributions per $5,000 participation unit consisted of the following:

           

Income

   $ 250.00       $ 250.00       $ 750.00       $ 750.00   

Return of capital

     0         0         0         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total distributions

   $ 250.00       $ 250.00       $ 750.00       $ 750.00   
  

 

 

    

 

 

    

 

 

    

 

 

 

See notes to the condensed financial statements.

 

2


250 West 57th St. Associates L.L.C.

(A Limited Liability Company)

Statements of Members’ Deficiency

 

     For the Nine
Months Ended
September 30, 2012
    For the Year
Ended
December 31, 2011
 
     (Unaudited)        

Members’ deficiency:

    

January 1, 2012

   $ (4,855,980  

January 1, 2011

     $ (4,860,381

Add net income:

    

January 1, 2012 through September 30, 2012

     2,697,158     

January 1, 2011 through December 31, 2011

       3,287,105   
  

 

 

   

 

 

 
     (2,158,822     (1,573,276
  

 

 

   

 

 

 

Less distributions:

    

Distributions January 1, 2012 through September 30, 2012

     540,000     

Distributions January 1, 2011 through December 31, 2011

       720,000   

Distribution, December 14, 2011

       2,562,704   
  

 

 

   

 

 

 
     540,000        3,282,704   
  

 

 

   

 

 

 

Members’ deficiency at the end of the period

   $ (2,698,822   $ (4,855,980
  

 

 

   

 

 

 

 

3


250 West 57th St. Associates L.L.C.

(A Limited Liability Company)

Condensed Statements of Cash Flows

 

     For the Nine
Months Ended
September 30, 2012
    For the Nine
Months Ended
September 30, 2011
 
     (Unaudited)     (Unaudited)  

Cash flows from operating activities:

    

Net income

   $ 2,697,158      $ 3,580,877   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation of building and tenant improvements

     1,289,581        1,112,272   

Amortization of leasing costs

     186,150        142,984   

Amortization of mortgage refinancing costs

     237,783        237,783   

Changes in operating assets and liabilities:

    

Other receivable and Due from Lessee

     (3,637,489     (4,424,412

Leasing costs paid

     —          (159,949

Change in prepaid insurance

     (10,144     —     

Change in due to Supervisor, a related party

     88,641        —     

Change in accrued mortgage interest

     (4,916     (3,529

Change in accrued supervisory fees, a related party

     (20,000     253,745   

Change in accrued expenses

     (44,361     (66,481
  

 

 

   

 

 

 

Net cash provided by operating activities

     782,403        673,290   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of building and tenant improvements

     —          (2,931,285

Increase in payable to Lessee, a related party

     16,984        3,091,234   
  

 

 

   

 

 

 

Net cash provided by investing activities

     16,984        159,949   
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Repayment of mortgages payable

     (770,788     (729,331

Deferred costs

     (544,239     (297,604

Distributions to Participants

     (540,000     (540,000
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,855,027     (1,566,935
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (1,055,640     (733,696

Cash and cash equivalents, beginning of period

     2,325,024        1,513,152   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 1,269,384      $ 779,456   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid for interest

   $ 1,808,983      $ 1,703,342   
  

 

 

   

 

 

 

Supplemental information of non-cash, investing and financing activities.

    

Net cash used in financing activities excludes an increase of $80,632 in Due to Supervisor for deferred costs for the period ended September 30, 2012.

    

Net cash used in investing activities excludes an increase of $4,982,037 in payable to Lessee for Building improvements and Tenant improvements purchased during the nine months ended September 30, 2012.

    

See notes to the condensed financial statements.

 

4


Notes to Condensed Financial Statements (Unaudited)

Note A Interim Period Reporting

In the opinion of management, the accompanying unaudited condensed financial statements of 250 West 57th St. Associates L.L.C. (“Registrant”) reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Registrant as of September 30, 2012 and its results of operations for the three and nine months ended September 30, 2012 and cash flows for the nine months ended September 30, 2012 and 2011. Information included in the condensed balance sheet as of December 31, 2011 has been derived from the audited balance sheet included in Registrant’s Form 10-K for the year ended December 31, 2011 (the “10-K”) previously filed with the Securities and Exchange Commission (the “SEC”) except as disclosed in Note H. Pursuant to rules and regulations of the SEC, certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from these financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited condensed financial statements should be read in conjunction with the financial statements, notes to financial statements and the other information in the 10-K. The results of operations for the nine months ended September 30, 2012 are not necessarily indicative of the results to be expected for any interim period or the full year. For purposes of comparison, certain items shown in the 2011 condensed financial statements have been reclassified to conform with the presentation used for 2012.

Note B Organization

Registrant is a New York limited liability company which was organized as a joint venture on May 25, 1953. On September 30, 1953, Registrant acquired fee title to the building known as 250 West 57th Street (the “Building”), formerly known as the Fisk Building, and the land thereunder located at 250-264 West 57th Street, New York, New York (collectively, the “Property”). On November 30, 2001, Registrant converted to a limited liability company under New York law and is now known as 250 West 57th St. Associates L.L.C. The conversion did not change any aspect of the assets and operations of Registrant other than to protect its Participants from future liability to a third party. Registrant’s members (“Members”) are Peter L. Malkin and Anthony E. Malkin (collectively, the “Agents”), each of whom also acts as an agent for holders of participations (“Participations”) in their respective member interests in Registrant (the “Participants”). The Members in Registrant hold senior positions at Malkin Holdings LLC (“Malkin Holdings” or the “Supervisor”), One Grand Central Place, 60 East 42nd Street, New York, New York, which provides supervisory and other services to Registrant and Lessee. See Note E below.

Note C Lease

Registrant does not operate the Property. Registrant leases the Property to Fisk Building Associates L.L.C. (the “Lessee”) under a long-term net operating lease dated May 1, 1954 (the “Lease”). In 1985, the Participants in Registrant consented to Registrant’s Agents granting Lessee four options to extend the Lease, in each case for an additional twenty-five year renewal period, the last expiring in 2103, all on the same terms as the original lease. The Agents intend to grant such options on behalf of Registrant, subject to Lessee’s compliance with such consents. Such options have been granted by the Agents and exercised by Lessee as to (a) the first renewal period from October 1, 2003 through September 30, 2028, and (b) the second renewal period from October 1, 2028 through September 30, 2053. The Participants in Registrant have consented to the granting of options to the Lessee to extend the lease for two additional 25-year renewal terms expiring in 2103. Lessee is a New York limited liability company whose members consist of, among others, Anthony E. Malkin and entities for the benefit of members of Peter L. Malkin’s and Anthony E. Malkin’s families, respectively.

 

5


Under the Lease, effective May 1, 1975, between Registrant and Lessee, basic annual rent (“Basic Rent”) was equal to mortgage principal and interest payments plus $28,000 for partial payment to Malkin Holdings for supervisory services. The lease modification dated November 17, 2000, and as further modified, between Registrant and Lessee provides that Basic Rent will be equal to the sum of $28,000 plus the installment payments for interest and amortization (not including any balloon payment due at maturity) currently payable on all mortgages. 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 mortgages 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 mortgages. See Note D.

Lessee is required to make a monthly payment to Registrant, as an advance against primary overage rent (“Primary Overage Rent”), of an amount equal to its operating profit for its previous lease year in the maximum amount of $752,000 per annum. Lessee currently advances $752,000 each year, which is recorded in revenues in monthly installments of $62,667 and permits Registrant to make regular monthly distributions at 20% per annum on the Participants’ remaining original cash investment (which remaining cash investment at September 30, 2012, was equal to the Participants’ original cash investment of $3,600,000) and to pay $1,667 monthly to Supervisor as an advance of the additional payment (the “Additional Payment”).

Lessee is also required to make an annual payment to Registrant of secondary overage rent (“Secondary Overage Rent”) subsequent to September 30th of the amount representing 50% of the excess of the net operating profit (as defined) of the Lessee for the lease year ending September 30 over the Primary Overage Rent of $752,000, less the amount representing interest earned and retained by Registrant on funds borrowed for the building improvement program described below. Registrant recognizes Secondary Overage Rent when earned from the Lessee, at the close of the lease year ending September 30 and records such amount in revenue in the three months ended September 30.

Rent income, earned from a related party, was $6,842,028 and $7,367,847 for the nine months ended September 30, 2012 and 2011, respectively.

For the lease year ended September 30, 2012, Lessee had net operating profit of $7,869,123 after deduction of Basic Rent. Lessee paid advances of Primary Overage Rent of $752,000 for that lease year prior to September 30, 2012 and Secondary Overage Rent of $3,558,414 is payable subsequent to September 30, 2012. The Secondary Overage Rent of $3,558,414 represents 50% of the excess of the Lessee’s net operating profit of $7,869,123 over $752,000, less $148 representing interest earned and retained by Registrant on funds borrowed for the improvement program. The amount of any Secondary Overage Rent available for distribution by Registrant to the Participants and any Additional Payment to the Supervisor will be reported in its Annual Report on Form 10K for the year ending December 31, 2012. Such distribution and Additional Payment depends on reserves required for general contingencies and professional fees, including fees in connection with a proposed consolidation of Registrant, other public and private entities supervised by the Supervisor and the Supervisor and certain affiliated management companies into Empire State Realty Trust, Inc., a newly formed real estate investment trust (collectively the “Consolidation”) and the initial public offering of Class A common stock of Empire State Realty Trust, Inc. (the “IPO”).

 

6


For the lease year ended September 30, 2011, Lessee reported net operating profit of $9,452,901 after deduction of Basic Rent. Lessee paid Primary Overage Rent of $752,000 for that lease year prior to September 30, 2011 and Secondary Overage Rent of $4,350,339 subsequent to September 30, 2011. The Secondary Overage Rent of $4,350,339 represents 50% of the excess of the Lessee’s net operating profit of $9,452,901 over $752,000, less $111 representing interest earned and retained by Registrant on funds borrowed for the improvement program. As a result, the Secondary Overage Rent paid by the Lessee subsequent to September 30, 2011 of $4,350,339 plus $110 of interest was available for distribution by the Registrant to the Participants. After deducting a total of $1,500,000 for (i) fees relating to the proposed Consolidation and IPO, (ii) the increase in the supervisory fee to Supervisor, (iii) accounting fees, (iv) the New York State annual filing fee, and (v) general contingencies, and the Additional Payment to Supervisor of $284,745 (Note E), the balance of $2,562,704 was distributed by Registrant to the Participants on December 14, 2011.

As a result of its revenue recognition policy, rental income for the year ending December 31 includes the advances of Primary Overage Rent received from October 1 to December 31, but does not include any portion of Secondary Overage Rent based on the Lessee’s operations during that period.

The Supervisor of the Registrant has filed a registration statement on Form S-4 for the solicitation of consents of the Participants in the Registrant and other public limited liability companies supervised by the Supervisor to the Consolidation (as defined below). In the Consolidation, (x) the property interests of the Registrant, such other public limited liability companies and certain private entities supervised by the Supervisor, and (y) the Supervisor and certain affiliated management companies will be contributed to the operating partnership of Empire State Realty Trust, Inc., a newly organized real estate investment trust.

Consents are required from Participants in the Registrant and such other public limited liability companies for them to contribute their interests in the Consolidation, and the solicitation of such consents will not commence until the SEC declares effective the registration statement on Form S-4. Consents have been obtained from participants in the private entities and the Supervisor and certain affiliated companies and affiliates of the Supervisor for them to make such contribution.

The consideration to be paid to the contributing companies and entities in the Consolidation will be allocated in accordance with exchange values determined based on appraisals by an independent third party. Such method of allocation has been approved by the Lessee. Based on the exchange values, if the Consolidation proposal is approved by the Registrant’s Participants, the consideration with respect to the Property will be allocated approximately 50% to the Registrant and 50% to the Lessee, which the Supervisor believes is in accordance with the historical treatment of the Registrant and the Lessee.

 

7


Note D Mortgages

On December 29, 2004, a first mortgage (the “First Mortgage”) was placed on the Property in the amount of $30,500,000 with Prudential Insurance Company of America. At closing, $3,000,000 was drawn and the remaining $27,500,000 was drawn during 2005. These draws paid off the pre-existing first mortgage of $15,500,000 with Emigrant Savings Bank on September 1, 2005 and were used to finance capital improvements as needed. The initial draw of $3,000,000 and all subsequent draws required constant equal monthly payments of interest only, at the rate of 5.33% per annum until January 5, 2007. Commencing February 5, 2007 Registrant is required to make monthly payments of $184,213 applied to interest and principal calculated on a 25-year amortization schedule. The balance of the First Mortgage is $26,640,483 at September 30, 2012. The First Mortgage matures on January 5, 2015 when the principal balance will be $24,680,713. The First Mortgage may be prepaid at any time, in whole only, upon payment of a prepayment penalty based on a yield maintenance formula. There is no prepayment penalty if the First Mortgage is paid in full during the last 90 days of the term.

On May 25, 2006, a second mortgage (the “Second Mortgage”) was placed on the Property in the amount of $12,410,000 with Prudential Insurance Company of America. At closing, $2,100,000 was drawn and the remaining $10,310,000 had been drawn as of March 5, 2009. The initial draw of $2,100,000 and all subsequent draws required constant equal monthly payments of interest only, at the rate of 6.13% per annum until March 5, 2009. Commencing April 5, 2009, Registrant is required to make monthly payments of $80,947 applied to interest and principal calculated on a 25- year amortization schedule. The balance of the Second Mortgage is $11,589,633 at September 30, 2012. The Second Mortgage matures on January 5, 2015 when the principal balance will be $10,936,920. The Second Mortgage may be prepaid at any time, in whole only, upon payment of a prepayment penalty based on a yield maintenance formula. There is no prepayment penalty if the Second Mortgage is paid in full during the last 60 days of the term.

On October 15, 2009, Registrant closed on a $21,000,000 line of credit from Signature Bank secured by a mortgage on the Property, subordinate to the existing senior mortgage debt held by Prudential Insurance Company of America in the original amount of $42,910,000, and to be used for capital improvements. At closing $934,616 was drawn, and an additional $5,000,000 used for improvements and tenanting costs was drawn on December 22, 2011. The balance of the line of credit was $5,934,616 at September 30, 2012. The Signature Bank loan requires payments of interest only and is co-terminus with the existing senior mortgage debt. The $21,000,000 loan from Signature Bank was modified effective as of January 10, 2012 to provide for a reduction in the fluctuating rate of interest from a floor of 6.50% to 4.25% and to a reduction in the fixed rate to the greater of (i) 4.75% or (ii) 300 basis points in excess of the weekly average yield on U.S. Treasury Securities adjusted to a maturity date closest to the mortgage maturity date. The loan was also modified to allow borrower to elect prepayment without any prepayment fees if the fixed interest rate were the greater of (i) 5.00% or (ii) 300 basis points in excess of the weekly average yield on U .S. Treasury Securities adjusted to a maturity date closest to the mortgage maturity date.

 

8


The estimated fair value of Registrant’s mortgage debt based on available market information is approximately $46,733,412 as of September 30, 2012. The fair value of borrowings is estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made by us.

In 1999, the Participants in Registrant and the members in Lessee consented to a building improvement program (the “Program”) estimated to cost approximately $12,200,000. In 2004, the Participants and Lessee approved an increase in the Program from $12,200,000 to approximately $31,400,000 under substantially the same conditions as had previously been approved. To induce the Lessee to approve the Program, Registrant’s Participants authorized a grant to the Lessee, upon completion of the Program, of the right to further extensions of the Lease beyond 2103, based on the net present benefit to Registrant of the improvements made.

The Program for improvements was further increased in 2006 from $31,400,000 to up to $82,300,000, again on the basis that such increase would allow a further extension of the Lease based on the net present benefit to Registrant of the improvements made. The Participants in Registrant and the members in Lessee have approved increasing the financing from the total of $42,910,000 provided by the First and Second Mortgages to up to $63,900,000. As of September 30, 2012, Registrant had incurred or accrued costs related to the improvement program of $49,587,660 and estimates that costs upon completion will be approximately $82,300,000. The balance of the costs of the Program will be financed primarily by the additional borrowings available under the $21,000,000 previously approved loan that closed on October 15, 2009 and Lessee’s operating cash flow. Amounts Payable to Lessee related to the program were $9,350,095 (for unpaid building improvements and leasing costs) and $3,576,129 as of September 30, 2012 and December 31, 2011, respectively.

Note E Supervisory Services

Supervisory and other services are provided to Registrant by its supervisor, Malkin Holding LLC (“Malkin Holdings” or “Supervisor”), a related party. Beneficial interests in Registrant are held directly or indirectly by one or more persons at Malkin Holdings and/or their family members.

Registrant pays Supervisor for supervisory services and disbursements. The basic fee (the “Basic Payment”) had been payable at the rate of $40,000 per annum, payable $3,333 per month, since the fiscal year ended September 30, 1980. The Basic Payment was increased, with the approval of the Agents, by an amount equal to the increase in the Consumer Price Index since such date, resulting in an increase in the Basic Payment to $102,000 per annum effective July 1, 2010 to be adjusted annually for any subsequent increase in the Consumer Price Index. The fee is payable (i) not less than $2,333 per month, (ii) an additional $1,000 per month out of Primary Overage Rent payment and (iii) the balance out of available reserves from Secondary Overage Rent. Any deficiency in the portion of the fee payable from Primary or Secondary Overage Rent shall be payable out of Secondary Overage Rent in the next year in which Secondary Overage Rent is sufficient. The Agents also approved payment by Registrant, effective July 1, 2010, of the expenses in connection with regular accounting services related to maintenance of Registrant’s books and records. Such expenses were previously paid by Supervisor.

 

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Registrant pays Supervisor an Additional Payment equal to 10% of all distributions to Participants in any year in excess of the amount representing a return to them at the rate 15% per annum on their remaining cash investment in Registrant (which remaining cash investment at September 30, 2012 was equal to the Participants’ original cash investment of $3,600,000). For tax purposes, such Additional Payment is recognized as a profits interest, and the Supervisor is treated as a partner, all without modifying each Participant’s distributive share of reportable income and cash distributions.

The basic supervisory services provided to Registrant by Supervisor include, but are not limited to, maintaining all of its entity and Participant records, performing physical inspections of the Building, providing or coordinating certain counsel services to Registrant, reviewing insurance coverage, conducting annual supervisory review meetings, receipt of monthly rent from Lessee, payment of monthly and additional distributions to the Participants, payment of all other disbursements, confirmation of the payment of real estate taxes, active review of financial statements submitted to Registrant by Lessee and financial statements audited by and tax information prepared by Registrant’s independent registered public accounting firm, and distribution of related materials to the Participants. Supervisor also prepares quarterly, annual and other periodic filings with the SEC and applicable state authorities.

Accrued supervisory fees, to a related party, were $0 and $20,000 at September 30, 2012 and December 31, 2011, respectively. Due from Supervisor, a related party, was $60,000 at September 30, 2012 and December 31, 2011, respectively. Due to Supervisor, a related party, was $322,718 and $153,445 at September 30, 2012 and December 31, 2011, respectively.

Registrant pays Supervisor for other services at hourly rates. Pursuant to the fee arrangements described herein, Registrant incurred supervisory fees of $94,648 and $377,170 for the nine-month periods ended September 30, 2012 and 2011, respectively. The fee of $377,170 for the nine months ended September 30, 2011 included the Additional Payment of $284,745. As indicated above in Note C, an Additional Payment to Supervisor for the current lease year will be reflected in Registrant’s Annual Report on Form 10K for the year ending December 31, 2012. No remuneration was paid during the nine-month periods ended September 30, 2012 and 2011 by Registrant to either of the Members. Included in professional fees are amounts for services from related parties of $43,518 and $81,120 for the three and nine months ended September 30, 2012, respectively, and $15,144 and $40,977 for the three and nine months ended September 30, 2011, respectively.

Distributions are paid from a cash account held by Supervisor. That account is included in the condensed Balance Sheets as “Due from Supervisor.” The funds of $60,000 at September 30, 2012 and December 31, 2011 were paid to Participants on October 1, 2012 and January 1, 2012, respectively.

Reference is made to Note C above for a description of the terms of the Lease between Registrant and Lessee. The respective interest, if any, of the Members in Registrant and in Lessee arise solely from ownership of Participations in Registrant and of Member interests or participations in Lessee. The Members as such receive no extra or special benefit not shared on a pro rata basis with all other Participants in Registrant or members in Lessee. However, all of the Members hold senior positions at Supervisor (which supervises Registrant and Lessee) and, by reason of their positions at Supervisor, may receive income attributable to supervisory or other remuneration paid to Supervisor by Registrant and Lessee.

 

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Note F Subsequent Events

An additional $9,000,000 was drawn on November 7, 2012 on the Signature Bank line of credit to fund building improvements and tenanting costs bringing the total amount advanced to date to $14,934,616.

Note G Fair Value Measurements

Fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, Financial Accounting Standards Board guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).

We use the following methods and assumptions in estimating fair value disclosures for financial instruments.

Cash and cash equivalents, due from Supervisor, a related party, due from Lessee, a related party, other receivable, accrued mortgage interest, accrued supervisory fees, a related party, payable to Lessee, a related party, due to Supervisor, a related party, and accrued expenses. The carrying amount of cash and cash equivalents, due from Supervisor, a related party, due from Lessee, a related party, other receivable, accrued mortgage interest, accrued supervisory fees, a related party, payable to Lessee, a related party, due to Lessee, a related party, due to Supervisor, a related party, and accrued expenses reported in our Condensed Balance Sheets approximate fair value due to the short term maturity of these instruments.

Mortgages payable: The fair value of borrowings, as disclosed in Note D, is estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made to us.

The methodologies used for valuing financial instruments have been categorized into three broad levels as follows:

Level 1—Quoted prices in active markets for identical instruments.

Level 2—Valuations based principally on other observable market parameters, including:

Quoted prices in active markets for similar instruments;

Quoted prices in less active or inactive markets for identical or similar instruments;

Other observable inputs (such as risk free interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates); and

Market corroborated inputs (derived principally from or corroborated by observable market data).

 

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Level 3—Valuations based significantly on unobservable inputs.

Valuations based on third-party indications (broker quotes or counterparty quotes) which were, in turn, based significantly on unobservable inputs or were otherwise not supportable as Level 2 valuations.

Valuations based on internal models with significant unobservable inputs.

These levels form a hierarchy. We follow this hierarchy for our financial instruments measured at fair value on a recurring and nonrecurring basis and other required fair value disclosures. The classifications are based on the lowest level of input that is significant to the fair value measurement.

Fair Value of Financial Instruments

The following disclosures of estimated fair value were determined by management, using available market information and appropriate valuation methodologies as discussed in Fair Value Measurements. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The mortgages payable had an estimated fair value based on discounted cash flow models, based on Level 3 inputs, of approximately $46,733,412, compared to the book value of the related debt of $44,164,732, at September 30, 2012.

Disclosure about fair value of financial instruments is based on pertinent information available to us as of September 30, 2012. Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

Note H Offering Costs and Formation Transaction Expenses

In connection with the Consolidation and IPO we have incurred or will incur incremental accounting fees, legal fees and other professional fees. Such costs will be deferred and recorded as a reduction of proceeds of the Consolidation and IPO, or expensed if the Consolidation and IPO is not consummated. Certain costs associated with the Consolidation and IPO not directly attributable to the solicitation of consents and the IPO, but rather related to structuring the formation transaction, are expensed as incurred.

Through September 30, 2012 we have incurred external offering costs of $1,414,890, including an adjustment of $38,837 for the six months ended June 30, 2012 as a result of the reclassification discussed below, of which we have incurred $624,871 and $297,604 for the nine month periods ended September 30, 2012 and 2011, respectively, and are reflected as deferred costs on Registrant’s Condensed Balance Sheets. A total of $208,303 and $127,671 of these costs are in Due to Supervisor at September 30, 2012 and December 31, 2011, respectively. Additional offering costs for work done by employees of the Supervisor of $81,120 and $40,977 for the nine months ended September 30, 2012 and 2011, respectively, were incurred and advanced by the Supervisor and have or will be reimbursed to the Supervisor by the Registrant.

 

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Correction of an Immaterial Error in the Financial Statements

Our prior period financial results have been adjusted to reflect an immaterial correction which has no impact to the net change in cash reported on the statement of cash flows. During fiscal year 2012, we determined that certain costs related to the structuring of the formation transaction that were previously included in deferred offering costs should have been expensed in the periods incurred. The correction impacted the 2011 and 2010 periods and had accumulated to an amount of $252,337 as of June 30, 2012. Adhering to applicable guidance for accounting changes and error corrections, we concluded that the error was not material to any of our prior period financial statements. The correction resulted in immaterial changes to deferred costs and formation transaction expenses for the years ended December 31, 2011 and 2010. We applied the guidance for accounting changes and error corrections and revised our prior period financial statements presented.

The following tables present the effect this correction had on our prior period reported financial statements. Additionally, financial information included in the notes to the financial statements that is impacted by the adjustment have been revised, as applicable.

 

     As of December 31, 2011  
     As reported     Adjustment     As adjusted  

Deferred costs, net

   $ 1,003,519      $ (213,500   $ 790,019   

Members’ deficiency

     (4,642,480     (213,500     (4,855,980
     For the six months ended June 30, 2012  
     As reported     Adjustment     As adjusted  

Formation transaction expenses

   $ —        $ 38,837      $ 38,837   

Net loss

     (388,135     (38,837     (426,972

Net cash provided by operating activities

     577,173        (38,837     538,336   

Net cash used in financing activities

     (1,286,315     38,837        (1,247,478

Net change in cash and cash equivalents

     (692,158     —          (692,158
     For the nine months ended September 30, 2011  
     As reported     Adjustment     As adjusted  

Formation transaction expenses

   $ —        $ 81,417      $ 81,417   

Net income

     3,662,294        (81,417     3,580,877   

Net cash provided by operating activities

     754,707        (81,417     673,290   

Net cash used in financing activities

     (1,648,352     81,417        (1,566,935

Net change in cash and cash equivalents

     (733,696     —          (733,696
     For the three months ended September 30, 2011  
     As reported     Adjustment     As adjusted  

Formation transaction expenses

   $ —        $ 41,589      $ 41,589   

Net income

     3,899,961        (41,589     3,858,372   

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

Readers of this discussion are advised that the discussion should be read in conjunction with the financial statements of Registrant (including related notes thereto) appearing elsewhere in this Form 10-Q. Certain statements in this discussion may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Registrant’s current expectations regarding future results of operations, economic performance, financial condition and achievements of Registrant, and do not relate strictly to historical or current facts. Registrant has tried, wherever possible, to identify these forward-looking statements by using words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or words of similar meaning.

Although Registrant believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties, which may cause the actual results to differ materially from those anticipated in the forward looking statements. Such factors include, but are not limited to, the following: general economic and business conditions, which will, among other things, affect demand for rental space, the availability of prospective tenants, lease rents and the availability of financing; adverse changes in Registrant’s real estate market, including, among other things, competition with other real estate owners, risks of real estate development and acquisitions; governmental actions and initiatives; and environmental/safety requirements.

Financial Condition and Results of Operations

Registrant was organized solely for the purpose of owning the Property subject to a net operating lease of the Property held by Lessee. Registrant is required to pay, from Basic Rent under the Lease, the charges on the First and Second mortgages and the line of credit and amounts for supervisory services. Registrant is required to pay from Primary Overage Rent and Secondary Overage Rent the Additional Payment to Supervisor, other expenses and then to distribute the balance of such Overage Rent less any additions to reserves to the Participants. See Note E to the condensed financial statements. Pursuant to the Lease, Lessee has assumed responsibility for the condition, operation, repair, maintenance and management of the Property. Accordingly, Registrant need not maintain substantial reserves or otherwise maintain liquid assets to defray any operating expenses of the Property.

Registrant’s results of operations are affected primarily by the amount of rent payable to it under the Lease. The amounts of Primary Overage Rent and Secondary Overage Rent are affected by the New York City economy and real estate rental market, which is difficult for management to forecast.

 

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During the nine-month period ended September 30, 2012, Registrant made regular monthly distributions of $83.33 for each $5,000 Participation ($1,000 per annum for each $5,000 participation). There are no restrictions on Registrant’s present or future ability to make distributions; however, the amount of such distributions depends on the ability of Lessee to make monthly payments of Basic Rent, Primary Overage Rent, and Secondary Overage Rent to Registrant in accordance with the terms of the Lease. Registrant expects to make distributions so long as it receives the payments provided for under the Lease.

The following summarizes, with respect to the current period and corresponding period of the previous year, the material factors affecting Registrant’s results of operations for such periods:

Total rental income decreased by $646,025 for the nine month period ended September 30, 2012 as compared with the corresponding period of the prior year as the net result of an increase in Basic Rent of $145,900 to cover an increase in debt service—as a result of a $5,000,000 draw on December 22, 2011 on the Signature Bank line of credit that increased the loan balance—and a decrease in Secondary Overage rent of $791,925 mainly attributable to an increase in Lessee’s operating expenses including improvements and tenanting costs for the nine month period ended September 30, 2012 as compared with the corresponding period of the prior year.

Total rental income decreased by $742,994 for the three month period ended September 30, 2012 as compared with the corresponding period of the prior year, as the net result of an increase in Basic Rent of $48,931 to cover an increase in debt service—as a result of a $5,000,000 draw on December 22, 2011 on the Signature Bank line of credit that increased the loan balance—and a decrease in Secondary Overage rent of $791,925 mainly attributable to an increase in Lessee’s operating expenses including improvements and tenanting costs for the three month period ended September 30, 2012 as compared with the corresponding period of the prior year.

Total expenses increased by $237,496 for the nine month period ended September 30, 2012 as compared with the corresponding period of the prior year, attributable to: (a) a net increase in interest on mortgages payable of $104,252, consisting of an increase of $145,900 due to the $5,000,000 increase of the Signature line of credit loan in December 2011 and an aggregate decrease of $41,648 on the Prudential First Mortgage and Second Mortgage, (b) a net decrease of supervisory fees of $282,522, consisting of an increase of $2,223 in supervisory fees and a decrease in the Additional Payment to Supervisor of $284,745, the amount recorded in the third quarter of 2011, as the Additional Payment has not been determined for the current lease year and shall be reported in Registrant’s Annual report on Form 10K for the year ending December 31, 2012, (c) an increase in depreciation of assets and amortization on leasing costs of $220,474 attributable to improvements placed in service in the last three months of 2011 and first nine months of 2012, (d) an increase in miscellaneous expenses of $22,534 attributable to filing fees, (e) an increase in professional fees of $158,600 including (i) $40,143 to Supervisor for services rendered in connection with the proposed Consolidation and IPO, and (ii) $102,374 for accounting fees in connection with the Consolidation, and consulting fees for the design and implementation of new accounting systems, and an (f) increase in formation transaction expenses of $14,158. The increase in formation transaction expenses is mainly attributable to matters pertaining to the class action litigation including extensive negotiations relating to the settlement (as described in Legal Proceedings). For formation transaction expenses, our prior period financial results have been adjusted to reflect an immaterial correction. During fiscal year 2012, we determined that certain costs related to the structuring of the formation transaction that were previously included in deferred offering costs should have been expensed in the periods incurred. The correction resulted in immaterial changes to deferred costs and formation transaction expenses for the six months ended June 30, 2012 and for the years ended December 31, 2011 and 2010.

 

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Total expenses decreased by $8,815 for the three month period ended September 30, 2012 as compared with the corresponding period of the prior year, primarily attributable to: (a) an increase in interest on the mortgages payable of $34,890 as a result of a $5,000,000 draw on December 22, 2011 on the Signature Bank line of credit that increased the loan balance; (b) a net decrease of supervisory fees of $284,373, consisting of an increase of $372 in supervisory fees and a decrease in the Additional Payment to Supervisor of $284,745, the amount recorded in the third quarter of 2011, as the Additional Payment has not been determined for the current lease year and shall be reported in Registrant’s Annual report on Form 10K for the year ending December 31, 2012; (c) an increase in depreciation of assets and amortization on leasing costs of $100,724 attributable to improvements placed in service in the last three months of 2011 and first nine months of 2012, (d) an increase in miscellaneous expenses of $8,366 attributable to filing fees, (e) a net increase in professional fees of $116,429, including (i) $28,374 to Supervisor for services rendered in connection with the proposed Consolidation and IPO, and $102,374 for (ii) accounting fees in connection with the Consolidation, and consulting fees for the design and implementation of new accounting systems, and (f) an increase in formation transaction expenses of $15,149. The increase is mainly attributable to matters pertaining to the class action litigation including extensive negotiations relating to the settlement (as described in Legal Proceedings). For formation transaction expenses, our prior period financial results have been adjusted to reflect an immaterial correction. During fiscal year 2012, we determined that certain costs related to the structuring of the formation transaction that were previously included in deferred offering costs should have been expensed in the periods incurred. The correction resulted in immaterial changes to deferred costs and formation transaction expenses for the six months ended June 30, 2012 and for the years ended December 31, 2011 and 2010.

 

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Liquidity and Capital Resources

Registrant’s liquidity has decreased at September 30, 2012 as compared with December 31, 2011 as a result of 1) costs incurred in connection with the Consolidation and IPO, and 2) commitments for reimbursement to Lessee under the improvement program. Registrant may from time to time set aside cash for general contingencies. Adverse developments in economic, credit and investment markets over the last several years impaired general liquidity (although some improvement in such markets has arisen recently) and the developments may negatively impact Registrant and/or space tenants at the Building. Any such impact should be ameliorated by the fact that (a) each of Registrant and its Lessee has very low debt in relation to asset value, (b) the maturity of Registrant’s existing and planned debt will not occur within the next 24 months, and (c) the Building’s rental revenue is derived from a substantial number of tenants in diverse businesses with lease termination dates spread over numerous years.

Amortization payments due under the First Mortgage commenced February 5, 2007, calculated on a 25-year amortization schedule. Amortization payments under the Second Mortgage commenced April 5, 2009, calculated on a 25-year amortization schedule. The First and the Second Mortgages mature on January 5, 2015. The line of credit requires payment of interest only and also matures on January 5, 2015. Registrant does not maintain any reserve to cover the payment of such mortgage indebtedness at maturity. Therefore, repayment of mortgage debt will depend on Registrant’s ability to arrange a refinancing. Assuming that the Property continues to generate an annual net profit in future years comparable to that in past years, and assuming further that real estate capital and operating markets return to more stable patterns, consistent with long-term historical real estate trends in the geographic area in which the Property is located, Registrant anticipates that the value of the Property will be in excess of the amount of the senior mortgage debt and the line of credit balances at maturity.

Registrant anticipates that funds for short-term working capital requirements for the Property will be provided by cash on hand, approximately $15,000,000 available to be drawn on the line of credit from Signature Bank, and rental payments received from the Lessee. Long-term sources of working capital will be provided by rental payments received from the Lessee and/or external financing. However, as noted above, Registrant has no requirement to maintain substantial reserves to defray any operating expenses of the Property.

The Supervisor of the Registrant has filed a registration statement on Form S-4 for the solicitation of consents of the Participants in the Registrant and other public limited liability companies supervised by the Supervisor to the Consolidation. In the Consolidation, (x) the property interests of the Registrant, such other public limited liability companies and certain private entities supervised by the Supervisor, and (y) the Supervisor and certain affiliated management companies will be contributed to the operating partnership of Empire State Realty Trust, Inc., a newly organized real estate investment trust.

Consents are required from Participants in the Registrant and such other public limited liability companies for them to contribute their interests in the Consolidation, and the solicitation of such consents will not commence until the SEC declares effective the registration statement on Form S-4. Consents have been obtained from participants in the private entities and the Supervisor and certain affiliated companies and affiliates of the Supervisor for them to make such contribution.

 

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The consideration to be paid to the contributing companies and entities in the Consolidation will be allocated in accordance with exchange values determined based on appraisals by an independent third party. Such method of allocation has been approved by the Lessee. Based on the exchange values, if the Consolidation proposal is approved by the Registrant’s Participants, the consideration with respect to the Property will be allocated approximately 50% to the Registrant and 50% to the Lessee, which the Supervisor believes is in accordance with the historical treatment of the Registrant and the Lessee.

Inflation

Registrant believes that there has been no material change in the impact of inflation on its operations since the filing of its report on Form 10-K for the year ended December 31, 2011. Inflationary trends in the economy do not directly affect Registrant’s operations since Registrant does not actively engage in the operation of the Property. Inflation may impact the operations of Lessee. Lessee is required to pay Basic Rent, regardless of the results of its operations. Inflation and other operating factors affect the amount of Primary and Secondary Overage Rent payable by Lessee, which is based on Lessee’s net operating profit.

Security Ownership

The Members in Registrant do not hold any Participations in their individual capacities.

As of September 30, 2012, certain of the Members in Registrant held Participations as follows:

Entities for the benefit of members of Peter L. Malkin’s family owned of record and beneficially $167,500 of Participations. Peter L. Malkin disclaims any beneficial ownership of such Participations, except that related family trusts or entities are required to complete scheduled payments to Peter L. Malkin.

Peter L. Malkin owned of record as trustee, but not beneficially, $7,500 of Participations. Peter L. Malkin disclaims any beneficial ownership of such Participations.

Anthony E. Malkin owned of record as trustee and co-trustee, but not beneficially, $10,000 of Participations. Anthony E. Malkin disclaims any beneficial ownership of such Participations.

 

Item 4. Controls and Procedures.

• Evaluation of disclosure controls and procedures. The Supervisor after evaluating the effectiveness of Registrant’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934, Rules 13a-15(e) and 15d-15(e)) as of September 30, 2012, the end of the period covered by this report, has concluded that as of that date Registrant’s disclosure controls and procedures were effective and designed to ensure that material information relating to Registrant would be made known to it by others within those entities on a timely basis.

 

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• Changes in internal controls over financial reporting. There were no changes in Registrant’s internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, Registrant’s internal controls over financial reporting.

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

The Property of Registrant was the subject of the following material litigation:

(a) Malkin Holdings and Peter L. Malkin, a member in Registrant, were engaged in a proceeding with Lessee’s former managing agent, Helmsley-Spear, Inc. commenced in 1997, concerning the management, leasing, and supervision of the Property that is subject to the Lease to Lessee. In this connection, certain costs for legal and professional fees and other expenses were paid by Malkin Holdings and Mr. Malkin. Malkin Holdings and Mr. Malkin have represented that such costs will be recovered only to the extent that (a) a competent tribunal authorizes payment or (b) an investor voluntarily agrees that his or her proportionate share be paid. On behalf of himself and Malkin Holdings, Mr. Malkin has requested, or intends to request, such voluntary agreement from all investors, which may include renewing such request in the future for any investor who previously received such request and failed to confirm agreement at that time. Because any related payment has been, or will be, made only by consenting investors, Registrant has not provided for the expense and related liability with respect to such costs in these financial statements.

(b) In March 2012, five putative class actions (the “Class Actions”) were filed in New York State Supreme Court, New York County by participants in Empire State Building Associates L.L.C. and several other entities supervised by Malkin Holdings that own fee or leasehold interests in various properties located in New York City (on March 1, 2012, March 7, 2012, March 12, 2012, March 14, 2012 and March 19, 2012). The plaintiffs assert claims against Malkin Holdings, Malkin Properties, L.L.C., Malkin Properties of New York, L.L.C., Malkin Properties of Connecticut, Inc., Malkin Construction Corp., Anthony E. Malkin, Peter L. Malkin, Estate of Leona M. Helmsley, Empire State Realty OP, L.P., and Empire State Realty Trust, Inc. (“Defendants”) for breach of fiduciary duty, unjust enrichment, and/or aiding and abetting breach of fiduciary duty. They allege, among other things, that the terms of the transaction and the process in which it was structured (including the valuation that was employed) are unfair to the investors in the existing entities, the consolidation provides excessive benefits to Malkin Holdings and its affiliates and the then-draft prospectus/consent solicitation statement which is part of the registration statement on Form S-4 filed with the SEC relating to the consolidation failed to make adequate disclosure to permit a fully-informed decision about the proposed transaction. The complaints seek money damages and injunctive relief preventing the consolidation. The actions were consolidated and co-lead plaintiffs’ counsel were appointed by the New York State Supreme Court by order dated June 26, 2012.

The parties entered into a Stipulation of Settlement dated September 28, 2012, resolving the Class Actions. The Stipulation of Settlement recites that the consolidation was approved by overwhelming consent of the private entity participants. The Stipulation of Settlement states that counsel for the plaintiff class satisfied themselves that they have received adequate access to relevant information, including the independent valuer’s valuation process and methodology, that the disclosures in the registration statement on Form S-4, as amended, are appropriate, that the transaction presents potential benefits, including the opportunity for liquidity and capital appreciation, that merit the participants’ serious consideration and that each of the named class representatives intends to support the transaction as modified. The Stipulation of Settlement further states that counsel for the plaintiff class are satisfied that the claims regarding tax implications, enhanced disclosures, appraisals and exchange values of the properties that would be consolidated into the company, and the interests of the participants in the public entities and the private entities have been addressed adequately, and they have concluded that the settlement pursuant to the Stipulation of Settlement and opportunity to consider the proposed transaction on the basis of revised consent solicitations are fair, reasonable, adequate and in the best interests of the plaintiff class.

 

19


Defendants in the Stipulation of Settlement denied that they committed any violation of law or breached any of their duties and did not admit that they had any liability to the plaintiffs.

The terms of the settlement include, among other things (i) a payment of $55 million, with a minimum of 80% in cash and maximum of 20% in freely-tradable shares of common stock and/or freely-tradable operating partnership units (all of which will be paid by affiliates of Malkin Holdings (provided that no affiliate of Malkin Holdings that would become a direct or indirect subsidiary of Empire State Realty Trust, Inc. in the consolidation will have any liability for such payment) and the Estate of Leona M. Helmsley and certain participants in the private entities who agree to contribute) to be distributed, after reimbursement of plaintiffs’ counsel’s court-approved expenses and payment of plaintiffs’ counsel’s court-approved attorneys’ fees, and, in the case of the shares of common stock and/or operating partnership units, after the termination of specified lock-ups periods, to participants in the public entities and the private entities pursuant to a plan of allocation to be prepared by counsel for plaintiffs; (ii) Defendants’ agreement that (a) the initial public offering will be on the basis of a firm commitment underwriting; (b) if, during the solicitation period of the public entities, any of the three public entities’ percentage of total exchange value is lower than what is stated in the final prospectus/consent solicitation by 10% or more, such decrease will be promptly disclosed by Defendants to participants in the public entities; and (c) unless total gross proceeds of $600,000,000 are raised in the initial public offering, Defendants will not proceed with the transaction without further approval of the public entities, and (iii) Defendants’ agreement to make additional disclosures in the prospectus/consent solicitation which is part of the registration statement on From S-4 regarding certain matters (which are included therein). Participants in the public entities and private entities will not be required to bear any portion of the settlement payment. The payment in settlement of the claim will be made by the Estate of Leona M. Helmsley and affiliates of Malkin Holdings (provided that no affiliate of Malkin Holdings that would become a direct or indirect subsidiary of Empire State Realty Trust, Inc. in the consolidation will have any liability for such payment) and certain participants in the private entities who agree to participate. Empire State Realty Trust, Inc. and Empire State Realty OP, L.P. will not bear any of the settlement payment.

The settlement further provides for the certification of a class of participants in the three public entities and all of the private entities, other than Defendants and other related persons and entities, and a release of any claims of the members of the class against Defendants and related persons and entities, as well as underwriters in the initial public offering and other advisors. The release in the settlement excludes certain claims, including but not limited to, claims arising from or related to any supplement to the registration statement on Form S-4 that is declared effective to which the plaintiffs’ counsel objects in writing, which objection will not be unreasonably made or delayed, so long as plaintiffs’ counsel has had adequate opportunity to review such supplement. Members of the putative class have the right to opt out of the monetary portion of the settlement, but not the portion providing for equitable relief. The settlement is subject to court approval. It is not effective until such court approval is final, including the resolution of any appeal. Defendants continue to deny any wrongdoing or liability in connection with the allegations in the Class Actions.

There is a risk that other third parties will assert claims against the Defendants, including, without limitation, that the Defendants breached their fiduciary duties to participants or that the consolidation violates the relevant operating agreements, and third parties may commence litigation against the Defendants.

 

20


Item 6. Exhibits

 

Number   

EXHIBIT INDEX

Document

24.1    Power of Attorney dated October 11, 2012 between Members in Registrant and Mark Labell which is being filed as Exhibit 24.1 to Registrant’s 10-Q for the period ended September 30, 2012.
31.1    Certification of Mark Labell, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2    Certification of Mark Labell, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1    Certification of Mark Labell, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2    Certification of Mark Labell, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

 

21


SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

The individual signing this report on behalf of Registrant is Attorney-in-Fact for Registrant and each of the Members in Registrant, pursuant to Power of Attorney, dated October 11, 2012 (the “Power”) and is supervisor of the accounting functions.

 

250 WEST 57th ST. ASSOCIATES L.L.C.
(Registrant)

By /s/ Mark Labell

Mark Labell as Senior Vice President, Finance of Malkin Holdings LLC,
Supervisor of 250 West 57th St. Associates L.L.C.* and as Attorney-in-Fact on behalf of:
Peter L. Malkin, Member
Anthony E. Malkin, Member
Date: November 13, 2012

 

* Registrant’s organizational documents do not provide for a Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer or other officer with equivalent rights and duties. As described in the Report, Registrant is a limited liability company that is supervised by Malkin Holdings LLC. Accordingly, this Form 10-Q is being signed by a senior executive and a senior member of the financial/accounting staff of Registrant’s Supervisor in such capacities.

 

22

EX-24.1 2 d412458dex241.htm EX-24.1 EX-24.1

Exhibit 24.1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Mark Labell as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Report on Form 10-Q for the quarter ended September 30, 2012 of 250 West 57th St. Associates L.L.C. and to file the same with all exhibits thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent and his substitutes may lawfully do or cause to be done by virtue hereof.

 

NAME

  

CAPACITY

 

DATE

/s/ Peter L. Malkin

Peter L. Malkin

   Member   October 11, 2012

/s/ Anthony E. Malkin

Anthony E. Malkin

   Member   October 11, 2012
EX-31.1 3 d412458dex311.htm EX-31.1 EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Mark Labell, certify that:

 

   

I have reviewed this Quarterly Report on Form 10-Q of 250 West 57th St. Associates L.L.C.;

 

   

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

   

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Registrant as of, and for, the periods presented in this report;

 

   

Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Registrant and we have:

 

   

Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

   

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

   

Evaluated the effectiveness of Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

   

Disclosed in this report any change in Registrant’s internal control over financial reporting that occurred during Registrant’s most recent fiscal quarter (Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, Registrant’s internal control over financial reporting; and


   

Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

 

   

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect Registrant’s ability to record, process, summarize and report financial information; and

 

   

Any fraud, whether or not material, that involves management or other employees who have a significant role in Registrant’s internal controls over financial reporting.

Date: November 13, 2012

 

By /s/ Mark Labell

Name: Mark Labell
Title: Senior Vice President, Finance
Malkin Holdings LLC, Supervisor of 250 West 57th St. Associates L.L.C.*

 

* Registrant’s organizational documents do not provide for a Chief Executive Officer or other officer with equivalent rights and duties. As described in the Report, Registrant is a limited liability company that is supervised by Malkin Holdings LLC. Accordingly, this Chief Executive Officer certification is being signed by a senior executive of Registrant’s supervisor.

 

2

EX-31.2 4 d412458dex312.htm EX-31.2 EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Mark Labell, certify that:

 

   

I have reviewed this Quarterly Report on Form 10-Q of 250 West 57th St. Associates L.L.C.;

 

   

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

   

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Registrant as of, and for, the periods presented in this report;

 

   

Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Registrant and we have:

 

   

Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

   

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

   

Evaluated the effectiveness of Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

   

Disclosed in this report any change in Registrant’s internal control over financial reporting that occurred during Registrant’s most recent fiscal quarter (Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, Registrant’s internal control over financial reporting; and


   

Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

 

   

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect Registrant’s ability to record, process, summarize and report financial information; and

 

   

Any fraud, whether or not material, that involves management or other employees who have a significant role in Registrant’s internal controls over financial reporting.

Date: November 13, 2012

 

By /s/ Mark Labell

Name: Mark Labell
Title: Senior Vice President, Finance
Malkin Holdings LLC, Supervisor of 250 West 57th St. Associates L.L.C.*

 

* Registrant’s organizational documents do not provide for a Chief Financial Officer or other officer with equivalent rights and duties. As described in the Report, Registrant is a limited liability company that is supervised by Malkin Holdings LLC. Accordingly, this Chief Financial Officer certification is being signed by a senior member of the financial/accounting staff of Registrant’s supervisor.

 

2

EX-32.1 5 d412458dex321.htm EX-32.1 EX-32.1

EXHIBIT 32.1

250 West 57th St. Associates L.L.C.

Certification Pursuant to 18 U.S.C., Section 1350 as adopted

Pursuant to Section 906

of Sarbanes – Oxley Act of 2002

The undersigned, Mark Labell, is signing this Chief Executive Officer certification as Senior Vice President, Finance of Malkin Holdings LLC, the supervisor* of 250 West 57th St. Associates L.L.C. (“Registrant”) to certify that:

 

   

the Quarterly Report on Form 10-Q of Registrant for the quarterly period ended September 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

 

   

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

Dated: November 13, 2012

 

By /s/ Mark Labell

Mark Labell
Senior Vice President, Finance

Malkin Holdings LLC, Supervisor of

250 West 57th St. Associates L.L.C.*

 

* Registrant’s organizational documents do not provide for a Chief Executive Officer or other officer with equivalent rights and duties. As described in the Report, Registrant is a limited liability company that is supervised by Malkin Holdings LLC. Accordingly, this Chief Executive Officer certification is being signed by a senior executive of Registrant’s supervisor.
EX-32.2 6 d412458dex322.htm EX-32.2 EX-32.2

Exhibit 32.2

250 West 57th St. Associates L.L.C.

Certification Pursuant to 18 U.S.C., Section 1350 as adopted

Pursuant to Section 906

of Sarbanes – Oxley Act of 2002

The undersigned, Mark Labell, is signing this Chief Financial Officer certification as a senior member of the financial/accounting staff of Malkin Holdings LLC, the supervisor* of 250 West 57th St. Associates L.L.C. (“Registrant”), to certify that:

 

   

the Quarterly Report on Form 10-Q of Registrant for the quarterly period ended September 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934(15 U.S.C. 78m or 78o(d)); and

 

   

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

Dated: November 13, 2012

 

By /s/ Mark Labell

Mark Labell
Senior Vice President, Finance
Malkin Holdings LLC, Supervisor of
250 West 57th St. Associates L.L.C.*

 

* Registrant’s organizational documents do not provide for a Chief Financial Officer or other officer with equivalent rights and duties. As described in the Report, Registrant is a limited liability company that is supervised by Malkin Holdings LLC. Accordingly, this Chief Financial Officer certification is being signed by a senior member of the financial/accounting staff of Registrant’s supervisor.
EX-101.INS 7 westas-20120930.xml XBRL INSTANCE DOCUMENT 3000000 30500000 27500000 2100000 12410000 10310000 2100000 5000000 14934616 0.0613 252337 38837 15500000 934616 21000000 42910000 779456 297604 111 2562704 720 0.50 752000 4350339 0 726885 46733412 0.20 44164732 51346870 1269384 1500935 322718 21000000 60000 4817085 5934616 4940682 926333 1414890 2117435 54045692 42844009 11540 2698822 10144 196607 79774 1383370 624871 3558414 3797281 2698822 51346870 0 7153282 4940682 1019804 49587660 0.50 0.50 148 36929293 44082575 63900000 60000 322718 46733412 1414890 1667 3600000 720 9350095 0.50 752000 42910000 3558414 5000 11589633 10936920 26640483 24680713 0.0533 3000000 1513152 4860381 964668 44935520 44086538 2325024 1263152 153445 20000 60000 2702193 4940682 740183 790019 2117435 48942518 39151553 55901 4855980 201523 795274 2153410 4855980 44086538 20000 6334722 4940682 548783 34880708 41215430 60000 153445 720 3576129 5000 790019 4855980 1003519 4642480 -213500 213500 -692158 -426972 -1247478 538336 38837 -692158 -388135 -1286315 577173 -38837 38837 -38837 38837 9000000 159949 699 1703342 -733696 3580877 3787669 253745 -1566935 297604 -3529 1937598 7368546 142985 2931285 92425 133227 1112272 4424412 -66481 673290 237783 284745 729331 7367847 540000 2453508 750.00 3000 750.00 0 4973.44 40977 564000 1500000 284745 -3091234 159949 9452901 0 7367847 5000 4350339 284745 377170 81417 -733696 3580877 -1566935 673290 81417 -733696 3662294 -1648352 754707 -81417 81417 -81417 81417 40977 Q3 2012 10-Q 2012-09-30 0000100412 --12-31 westas 250 WEST 57TH ST ASSOCIATES L.L.C. false Smaller Reporting Company <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Note E Supervisory Services</font></p> <p style="MARGIN-TOP: 6px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Supervisory and other services are provided to Registrant by its supervisor, Malkin Holding LLC (&#x201C;Malkin Holdings&#x201D; or &#x201C;Supervisor&#x201D;), a related party. Beneficial interests in Registrant are held directly or indirectly by one or more persons at Malkin Holdings and/or their family members.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Registrant pays Supervisor for supervisory services and disbursements. The basic fee (the &#x201C;Basic Payment&#x201D;) had been payable at the rate of $40,000 per annum, payable $3,333 per month, since the fiscal year ended September&#xA0;30, 1980. The Basic Payment was increased, with the approval of the Agents, by an amount equal to the increase in the Consumer Price Index since such date, resulting in an increase in the Basic Payment to $102,000 per annum effective July&#xA0;1, 2010 to be adjusted annually for any subsequent increase in the Consumer Price Index. The fee is payable (i)&#xA0;not less than $2,333 per month, (ii)&#xA0;an additional $1,000 per month out of Primary Overage Rent payment and (iii)&#xA0;the balance out of available reserves from Secondary Overage Rent. Any deficiency in the portion of the fee payable from Primary or Secondary Overage Rent shall be payable out of Secondary Overage Rent in the next year in which Secondary Overage Rent is sufficient. The Agents also approved payment by Registrant, effective July&#xA0;1, 2010, of the expenses in connection with regular accounting services related to maintenance of Registrant&#x2019;s books and records. Such expenses were previously paid by Supervisor.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px; FONT-SIZE: 1px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Registrant pays Supervisor an Additional Payment equal to 10% of all distributions to Participants in any year in excess of the amount representing a return to them at the rate 15%&#xA0;per annum on their remaining cash investment in Registrant (which remaining cash investment at September&#xA0;30, 2012 was equal to the Participants&#x2019; original cash investment of $3,600,000). For tax purposes, such Additional Payment is recognized as a profits interest, and the Supervisor is treated as a partner, all without modifying each Participant&#x2019;s distributive share of reportable income and cash distributions.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">The basic supervisory services provided to Registrant by Supervisor include, but are not limited to, maintaining all of its entity and Participant records, performing physical inspections of the Building, providing or coordinating certain counsel services to Registrant, reviewing insurance coverage, conducting annual supervisory review meetings, receipt of monthly rent from Lessee, payment of monthly and additional distributions to the Participants, payment of all other disbursements, confirmation of the payment of real estate taxes, active review of financial statements submitted to Registrant by Lessee and financial statements audited by and tax information prepared by Registrant&#x2019;s independent registered public accounting firm, and distribution of related materials to the Participants. Supervisor also prepares quarterly, annual and other periodic filings with the SEC and applicable state authorities.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Accrued supervisory fees, to a related party, were $0 and $20,000 at September&#xA0;30, 2012 and December&#xA0;31, 2011, respectively. Due from Supervisor, a related party, was $60,000 at September&#xA0;30, 2012 and December&#xA0;31, 2011, respectively. Due to Supervisor, a related party, was $322,718 and $153,445 at September&#xA0;30, 2012 and December&#xA0;31, 2011, respectively.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Registrant pays Supervisor for other services at hourly rates. Pursuant to the fee arrangements described herein, Registrant incurred supervisory fees of $94,648 and $377,170 for the nine-month periods ended September&#xA0;30, 2012 and 2011, respectively. The fee of $377,170 for the nine months ended September&#xA0;30, 2011 included the Additional Payment of $284,745. As indicated above in Note C, an Additional Payment to Supervisor for the current lease year will be reflected in Registrant&#x2019;s Annual Report on Form 10K for the year ending December&#xA0;31, 2012. No remuneration was paid during the nine-month periods ended September 30, 2012 and 2011 by Registrant to either of the Members. Included in professional fees are amounts&#xA0;for services from&#xA0;related parties of $43,518 and $81,120 for the three and nine months ended September&#xA0;30, 2012, respectively, and $15,144 and $40,977 for the three and nine months ended September&#xA0;30, 2011, respectively.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Distributions are paid from a cash account held by Supervisor. That account is included in the condensed Balance Sheets as &#x201C;Due from Supervisor.&#x201D; The funds of $60,000 at September&#xA0;30, 2012 and December&#xA0;31, 2011 were paid to Participants on October&#xA0;1, 2012 and January&#xA0;1, 2012, respectively.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Reference is made to Note C above for a description of the terms of the Lease between Registrant and Lessee. The respective interest, if any, of the Members in Registrant and in Lessee arise solely from ownership of Participations in Registrant and of Member interests or participations in Lessee. The Members as such receive no extra or special benefit not shared on a pro rata basis with all other Participants in Registrant or members in Lessee. However, all of the Members hold senior positions at Supervisor (which supervises Registrant and Lessee) and, by reason of their positions at Supervisor, may receive income attributable to supervisory or other remuneration paid to Supervisor by Registrant and Lessee.</font></p> </div> 16984 501 <div> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Note F Subsequent Events</font></p> <p style="MARGIN-TOP: 6px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2"> An additional $9,000,000 was drawn on November 7, 2012 on the Signature Bank line of credit to fund building improvements and tenanting costs bringing the total amount advanced to date to $14,934,616.</font></p> </div> <div> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">As a result of its revenue recognition policy, rental income for the year ending December&#xA0;31 includes the advances of Primary Overage Rent received from October&#xA0;1 to December&#xA0;31, but does not include any portion of Secondary Overage Rent based on the Lessee&#x2019;s operations during that period.</font></p> </div> <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Note G Fair Value Measurements</font></p> <p style="MARGIN-TOP: 6px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, Financial Accounting Standards Board guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity&#x2019;s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">We use the following methods and assumptions in estimating fair value disclosures for financial instruments.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Cash and cash equivalents, due from Supervisor, a related party, due from Lessee, a related party, other receivable, accrued mortgage interest, accrued supervisory fees, a related party, payable to Lessee, a related party, due to Supervisor, a related party, and accrued expenses. The carrying amount of cash and cash equivalents, due from Supervisor, a related party, due from Lessee, a related party, other receivable, accrued mortgage interest, accrued supervisory fees, a related party, payable to Lessee, a related party, due to Lessee, a related party, due to Supervisor, a related party, and accrued expenses reported in our Condensed Balance Sheets approximate fair value due to the short term maturity of these instruments.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2"><i>Mortgages payable:</i> The fair value of borrowings, as disclosed in Note D, is estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made to us.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">The methodologies used for valuing financial instruments have been categorized into three broad levels as follows:</font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Level 1&#x2014;Quoted prices in active markets for identical instruments.</font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Level 2&#x2014;Valuations based principally on other observable market parameters, including:</font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Quoted prices in active markets for similar instruments;</font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Quoted prices in less active or inactive markets for identical or similar instruments;</font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Other observable inputs (such as risk free interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates); and</font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Market corroborated inputs (derived principally from or corroborated by observable market data).</font></p> <p style="MARGIN-TOP: 6px; MARGIN-BOTTOM: 0px; FONT-SIZE: 1px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Level 3&#x2014;Valuations based significantly on unobservable inputs.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Valuations based on third-party indications (broker quotes or counterparty quotes) which were, in turn, based significantly on unobservable inputs or were otherwise not supportable as Level 2 valuations.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Valuations based on internal models with significant unobservable inputs.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">These levels form a hierarchy. We follow this hierarchy for our financial instruments measured at fair value on a recurring and nonrecurring basis and other required fair value disclosures. The classifications are based on the lowest level of input that is significant to the fair value measurement.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 4%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Fair Value of Financial Instruments</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">The following disclosures of estimated fair value were determined by management, using available market information and appropriate valuation methodologies as discussed in Fair Value Measurements. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">The mortgages payable had an estimated fair value based on discounted cash flow models, based on Level 3 inputs, of approximately $46,733,412, compared to the book value of the related debt of $44,164,732, at September&#xA0;30, 2012.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Disclosure about fair value of financial instruments is based on pertinent information available to us as of September&#xA0;30, 2012. Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.</font></p> </div> <div> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Note A Interim Period Reporting</font></p> <p style="MARGIN-TOP: 6px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">In the opinion of management, the accompanying unaudited condensed financial statements of 250 West 57th St. Associates L.L.C. (&#x201C;Registrant&#x201D;) reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Registrant as of September&#xA0;30, 2012 and its results of operations for the three and nine months ended September&#xA0;30, 2012 and cash flows for the nine months ended September&#xA0;30, 2012 and 2011. Information included in the condensed balance sheet as of December&#xA0;31, 2011 has been derived from the audited balance sheet included in Registrant&#x2019;s Form 10-K for the year ended December&#xA0;31, 2011 (the &#x201C;10-K&#x201D;) previously filed with the Securities and Exchange Commission (the SEC ) except as disclosed in Note H. Pursuant to rules and regulations of the SEC, certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from these financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited condensed financial statements should be read in conjunction with the financial statements, notes to financial statements and the other information in the 10-K. The results of operations for the nine months ended September&#xA0;30, 2012 are not necessarily indicative of the results to be expected for any interim period or the full year. For purposes of comparison, certain items shown in the 2011 condensed financial statements have been reclassified to conform with the presentation used for 2012.</font></p> </div> 1808983 -1055640 <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Note C Lease</font></p> <p style="MARGIN-TOP: 6px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Registrant does not operate the Property. Registrant leases the Property to Fisk Building Associates L.L.C. (the &#x201C;Lessee&#x201D;) under a long-term net operating lease dated May&#xA0;1, 1954 (the &#x201C;Lease&#x201D;). In 1985, the Participants in Registrant consented to Registrant&#x2019;s Agents granting Lessee four options to extend the Lease, in each case for an additional twenty-five year renewal period, the last expiring in 2103, all on the same terms as the original lease. The Agents intend to grant such options on behalf of Registrant, subject to Lessee&#x2019;s compliance with such consents. Such options have been granted by the Agents and exercised by Lessee as to (a)&#xA0;the first renewal period from October&#xA0;1, 2003 through September&#xA0;30, 2028, and (b)&#xA0;the second renewal period from October&#xA0;1, 2028 through September&#xA0;30, 2053. The Participants in Registrant have consented to the granting of options to the Lessee to extend the lease for two additional 25-year renewal terms expiring in 2103. Lessee is a New York limited liability company whose members consist of, among others, Anthony E. Malkin and entities for the benefit of members of Peter L. Malkin&#x2019;s and Anthony E. Malkin&#x2019;s families, respectively.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px; FONT-SIZE: 1px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Under the Lease, effective May&#xA0;1, 1975, between Registrant and Lessee, basic annual rent (&#x201C;Basic Rent&#x201D;) was equal to mortgage principal and interest payments plus $28,000 for partial payment to Malkin Holdings for supervisory services. The lease modification dated November&#xA0;17, 2000, and as further modified, between Registrant and Lessee provides that Basic Rent will be equal to the sum of $28,000 plus the installment payments for interest and amortization (not including any balloon payment due at maturity) currently payable on all mortgages. 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 mortgages 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 mortgages. See Note D.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Lessee is required to make a monthly payment to Registrant, as an advance against primary overage rent (&#x201C;Primary Overage Rent&#x201D;), of an amount equal to its operating profit for its previous lease year in the maximum amount of $752,000 per annum. Lessee currently advances $752,000 each year, which is recorded in revenues in monthly installments of $62,667 and permits Registrant to make regular monthly distributions at 20%&#xA0;per annum on the Participants&#x2019; remaining original cash investment (which remaining cash investment at September&#xA0;30, 2012, was equal to the Participants&#x2019; original cash investment of $3,600,000) and to pay $1,667 monthly to Supervisor as an advance of the additional payment (the &#x201C;Additional Payment&#x201D;).</font></p> <p style="PADDING-BOTTOM: 0px; MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Lessee is also required to make an annual payment to Registrant of secondary overage rent (&#x201C;Secondary Overage Rent&#x201D;) subsequent to September&#xA0;30</font><font style="FONT-FAMILY: Times New Roman" size="1"><sup style="POSITION: relative; BOTTOM: 0.8ex; VERTICAL-ALIGN: baseline">th</sup></font> <font style="FONT-FAMILY: Times New Roman" size="2">of the amount representing 50% of the excess of the net operating profit (as defined) of the Lessee for the lease year ending September&#xA0;30 over the Primary Overage Rent of $752,000, less the amount representing interest earned and retained by Registrant on funds borrowed for the building improvement program described below. Registrant recognizes Secondary Overage Rent when earned from the Lessee, at the close of the lease year ending September&#xA0;30 and records such amount in revenue in the three months ended September&#xA0;30.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Rent income, earned from a related party, was $6,842,028 and $7,367,847 for the nine months ended September&#xA0;30, 2012 and 2011, respectively.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">For the lease year ended September&#xA0;30, 2012, Lessee had&#xA0;net operating profit of $7,869,123 after deduction of Basic Rent. Lessee paid advances of Primary Overage Rent of $752,000 for that lease year prior to September&#xA0;30, 2012 and&#xA0;Secondary Overage Rent of $3,558,414&#xA0;is payable subsequent to September&#xA0;30, 2012. The Secondary Overage Rent of $3,558,414 represents 50% of the excess of the Lessee&#x2019;s&#xA0;net operating profit of $7,869,123 over $752,000, less $148 representing interest earned and retained by Registrant on funds borrowed for the improvement program. The amount of any Secondary Overage Rent available for distribution by Registrant to the Participants and any Additional Payment to the Supervisor will be reported in its Annual Report on Form 10K for the year ending December&#xA0;31, 2012. Such distribution and Additional Payment depends on reserves required for general contingencies and professional fees, including fees in connection with a proposed consolidation of Registrant, other public and private entities supervised by the Supervisor and the Supervisor and certain affiliated management companies into Empire State Realty Trust, Inc., a newly formed real estate investment trust (collectively the &#x201C;Consolidation&#x201D;) and the initial public offering of Class&#xA0;A common stock of Empire State Realty Trust, Inc. (the &#x201C;IPO&#x201D;).</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px; FONT-SIZE: 1px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">For the lease year ended September&#xA0;30, 2011, Lessee reported net operating profit of $9,452,901 after deduction of Basic Rent. Lessee paid Primary Overage Rent of $752,000 for that lease year prior to September&#xA0;30, 2011 and Secondary Overage Rent of $4,350,339 subsequent to September&#xA0;30, 2011. The Secondary Overage Rent of $4,350,339 represents 50% of the excess of the Lessee&#x2019;s net operating profit of $9,452,901 over $752,000, less $111 representing interest earned and retained by Registrant on funds borrowed for the improvement program. As a result, the Secondary Overage Rent paid by the Lessee subsequent to September&#xA0;30, 2011 of $4,350,339 plus $110 of interest was available for distribution by the Registrant to the Participants. After deducting a total of $1,500,000 for (i)&#xA0;fees relating to the proposed Consolidation and IPO, (ii)&#xA0;the increase in the supervisory fee to Supervisor, (iii)&#xA0;accounting fees, (iv)&#xA0;the New York State annual filing fee, and (v)&#xA0;general contingencies, and the Additional Payment to Supervisor of $284,745 (Note E), the balance of $2,562,704 was distributed by Registrant to the Participants on December&#xA0;14, 2011.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">As a result of its revenue recognition policy, rental income for the year ending December&#xA0;31 includes the advances of Primary Overage Rent received from October&#xA0;1 to December&#xA0;31, but does not include any portion of Secondary Overage Rent based on the Lessee&#x2019;s operations during that period.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">The Supervisor of the Registrant has filed a registration statement on Form S-4 for the solicitation of consents of the Participants in the Registrant and other public limited liability companies supervised by the Supervisor to the Consolidation (as defined below). In the Consolidation, (x)&#xA0;the property interests of the Registrant, such other public limited liability companies and certain private entities supervised by the Supervisor, and (y)&#xA0;the Supervisor and certain affiliated management companies will be contributed to the operating partnership of Empire State Realty Trust, Inc., a newly organized real estate investment trust.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Consents are required from Participants in the Registrant and such other public limited liability companies for them to contribute their interests in the Consolidation, and the solicitation of such consents will not commence until the SEC declares effective the registration statement on Form S-4. Consents have been obtained from participants in the private entities and the Supervisor and certain affiliated companies and affiliates of the Supervisor for them to make such contribution.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">The consideration to be paid to the contributing companies and entities in the Consolidation will be allocated in accordance with exchange values determined based on appraisals by an independent third party. Such method of allocation has been approved by the Lessee. Based on the&#xA0;exchange values, if the Consolidation proposal is approved by the Registrant&#x2019;s Participants, the consideration with respect to the Property will be allocated approximately 50% to the Registrant and 50% to the Lessee, which the Supervisor believes is in accordance with the historical treatment of the Registrant and the Lessee.</font></p> </div> 2697158 4025165 -20000 -1855027 2333.33 544239 -4916 2041850 6722323 186150 94648 291827 1289581 3637489 <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Note B Organization</font></p> <p style="PADDING-BOTTOM: 0px; MARGIN-TOP: 6px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Registrant is a New York limited liability company which was organized as a joint venture on May&#xA0;25, 1953. On September&#xA0;30, 1953, Registrant acquired fee title to the building known as 250 West 57</font><font style="FONT-FAMILY: Times New Roman" size="1"><sup style="POSITION: relative; BOTTOM: 0.8ex; VERTICAL-ALIGN: baseline">th</sup></font> <font style="FONT-FAMILY: Times New Roman" size="2">Street (the &#x201C;Building&#x201D;), formerly known as the Fisk Building, and the land thereunder located at 250-264 West 57th Street, New York, New York (collectively, the &#x201C;Property&#x201D;). On November&#xA0;30, 2001, Registrant converted to a limited liability company under New York law and is now known as 250 West 57</font><font style="FONT-FAMILY: Times New Roman" size="1"><sup style="POSITION: relative; BOTTOM: 0.8ex; VERTICAL-ALIGN: baseline">th</sup></font> <font style="FONT-FAMILY: Times New Roman" size="2">St. Associates L.L.C. The conversion did not change any aspect of the assets and operations of Registrant other than to protect its Participants from future liability to a third party. Registrant&#x2019;s members (&#x201C;Members&#x201D;) are Peter L. Malkin and Anthony E. Malkin (collectively, the &#x201C;Agents&#x201D;), each of whom also acts as an agent for holders of participations (&#x201C;Participations&#x201D;) in their respective member interests in Registrant (the &#x201C;Participants&#x201D;). The Members in Registrant hold senior positions at Malkin Holdings LLC (&#x201C;Malkin Holdings&#x201D; or the &#x201C;Supervisor&#x201D;), One Grand Central Place, 60 East 42nd Street, New York, New York, which provides supervisory and other services to Registrant and Lessee. See Note E below.</font></p> </div> -44361 782403 237783 770788 6721822 540000 2599408 -540000 750.00 25534 4982037 -540000 750.00 0 3746.05 1000 81120 P25Y 564000 28000 82300000 3333 0.03 40000 -88641 2000-11-17 1975-05-01 From October 1, 2003 through September 30, 2028 0.0425 For two additional 25-year renewal terms expiring in 2103 102000 -16984 10144 1954-05-01 2103 752000 2333 2158822 0.0500 80632 <div> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Note D Mortgages</font></p> <p style="MARGIN-TOP: 6px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">On December&#xA0;29, 2004, a first mortgage (the &#x201C;First Mortgage&#x201D;) was placed on the Property in the amount of $30,500,000 with Prudential Insurance Company of America. At closing, $3,000,000 was drawn and the remaining $27,500,000 was drawn during 2005. These draws paid off the pre-existing first mortgage of $15,500,000 with Emigrant Savings Bank on September&#xA0;1, 2005 and were used to finance capital improvements as needed. The initial draw of $3,000,000 and all subsequent draws required constant equal monthly payments of interest only, at the rate of 5.33%&#xA0;per annum until January&#xA0;5, 2007. Commencing February&#xA0;5, 2007 Registrant is required to make monthly payments of $184,213 applied to interest and principal calculated on a 25-year amortization schedule. The balance of the First Mortgage is $26,640,483 at September 30, 2012. The First Mortgage matures on January&#xA0;5, 2015 when the principal balance will be $24,680,713. The First Mortgage may be prepaid at any time, in whole only, upon payment of a prepayment penalty based on a yield maintenance formula. There is no prepayment penalty if the First Mortgage is paid in full during the last 90 days of the term.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">On May&#xA0;25, 2006, a second mortgage (the &#x201C;Second Mortgage&#x201D;) was placed on the Property in the amount of $12,410,000 with Prudential Insurance Company of America. At closing, $2,100,000 was drawn and the remaining $10,310,000 had been drawn as of March&#xA0;5, 2009. The initial draw of $2,100,000 and all subsequent draws required constant equal monthly payments of interest only, at the rate of 6.13%&#xA0;per annum until March&#xA0;5, 2009. Commencing April&#xA0;5, 2009, Registrant is required to make monthly payments of $80,947 applied to interest and principal calculated on a 25- year amortization schedule. The balance of the Second Mortgage is $11,589,633 at September&#xA0;30, 2012. The Second Mortgage matures on January&#xA0;5, 2015 when the principal balance will be $10,936,920. The Second Mortgage may be prepaid at any time, in whole only, upon payment of a prepayment penalty based on a yield maintenance formula. There is no prepayment penalty if the Second Mortgage is paid in full during the last 60 days of the term.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">On October&#xA0;15, 2009, Registrant closed on a $21,000,000 line of credit from Signature Bank secured by a mortgage on the Property, subordinate to the existing senior mortgage debt held by Prudential Insurance Company of America in the original amount of $42,910,000, and to be used for capital improvements. At closing $934,616 was drawn, and an additional $5,000,000 used for improvements and tenanting costs was drawn on December&#xA0;22, 2011. The balance of the line of credit was $5,934,616 at September&#xA0;30, 2012. The Signature Bank loan requires payments of interest only and is co-terminus with the existing senior mortgage debt. The $21,000,000 loan from Signature Bank was modified effective as of January&#xA0;10, 2012 to provide for a reduction in the fluctuating rate of interest from a floor of 6.50% to 4.25% and to a reduction in the fixed rate to the greater of (i)&#xA0;4.75% or (ii)&#xA0;300 basis points in excess of the weekly average yield on U.S. Treasury Securities adjusted to a maturity date closest to the mortgage maturity date. The loan was also modified to allow borrower to elect prepayment without any prepayment fees if the fixed interest rate were the greater of (i)&#xA0;5.00% or (ii)&#xA0;300 basis points in excess of the weekly average yield on U .S. Treasury Securities adjusted to a maturity date closest to the mortgage maturity date.</font></p> <p style="MARGIN-TOP: 12px; MARGIN-BOTTOM: 0px; FONT-SIZE: 1px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">The estimated fair value of Registrant&#x2019;s mortgage debt based on available market information is approximately $46,733,412 as of September&#xA0;30, 2012. The fair value of borrowings is estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made by us.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">In 1999, the Participants in Registrant and the members in Lessee consented to a building improvement program (the &#x201C;Program&#x201D;) estimated to cost approximately $12,200,000. In 2004, the Participants and Lessee approved an increase in the Program from $12,200,000 to approximately $31,400,000 under substantially the same conditions as had previously been approved. To induce the Lessee to approve the Program, Registrant&#x2019;s Participants authorized a grant to the Lessee, upon completion of the Program, of the right to further extensions of the Lease beyond 2103, based on the net present benefit to Registrant of the improvements made.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">The Program for improvements was further increased in 2006 from $31,400,000 to up to $82,300,000, again on the basis that such increase would allow a further extension of the Lease based on the net present benefit to Registrant of the improvements made. The Participants in Registrant and the members in Lessee have approved increasing the financing from the total of $42,910,000 provided by the First and Second Mortgages to up to $63,900,000. As of September&#xA0;30, 2012, Registrant had incurred or accrued costs related to the improvement program of $49,587,660 and estimates that costs upon completion will be approximately $82,300,000. The balance of the costs of the Program will be financed primarily by the additional borrowings available under the $21,000,000 previously approved loan that closed on October&#xA0;15, 2009 and Lessee&#x2019;s operating cash flow. Amounts Payable to Lessee related to the program were $9,350,095 (for unpaid building improvements and leasing costs) and $3,576,129 as of September&#xA0;30, 2012 and December&#xA0;31, 2011, respectively.</font></p> </div> 7869123 2 4 208303 0.10 0.15 62667 0.0650 0 6842028 From October 1, 2028 through September 30, 2053 5000 3558414 94648 95575 <div> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">The following tables present the effect this correction had on&#xA0;our prior period reported&#xA0;financial statements. Additionally, financial information included in the notes to the financial statements that is impacted by the adjustment have been revised, as applicable.</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="84%" align="center"> <tr> <td width="64%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As of December 31, 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As reported</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Adjustment</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As adjusted</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Deferred costs, net</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,003,519</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(213,500</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">790,019</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2"> Members&#x2019; deficiency</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(4,642,480</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(213,500</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(4,855,980</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> </table> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="84%" align="center"> <tr> <td width="64%"></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For the&#xA0;six months ended June 30, 2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As reported</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Adjustment</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As adjusted</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Formation transaction expenses</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">38,837</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">38,837</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net loss</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(388,135</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(38,837</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(426,972</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net cash provided by operating activities</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">577,173</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(38,837</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">538,336</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net cash used in financing activities</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(1,286,315</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">38,837</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(1,247,478</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net change in cash and cash equivalents</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(692,158</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(692,158</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> </table> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="84%" align="center"> <tr> <td width="67%"></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For the&#xA0;nine months ended September 30, 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As reported</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Adjustment</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As adjusted</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Formation transaction expenses</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">81,417</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">81,417</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net income</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,662,294</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(81,417</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,580,877</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net cash provided by operating activities</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">754,707</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(81,417</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">673,290</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net cash used in financing activities</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(1,648,352</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">81,417</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(1,566,935</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net change in cash and cash equivalents</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(733,696</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(733,696</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> </table> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="84%" align="center"> <tr> <td width="69%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="10" nowrap="nowrap" align="center"><font style="FONT-FAMILY: Times New Roman" size="1">For&#xA0;the&#xA0;three&#xA0;months&#xA0;ended&#xA0;September&#xA0;30,&#xA0;2011</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1">As&#xA0;reported</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1">Adjustment</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1">As&#xA0;adjusted</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Formation transaction expenses</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">41,589</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">41,589</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net income</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,899,961</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(41,589</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">3,858,372</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> </table> </div> <div> <p style="MARGIN-TOP: 18px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 4%"> <font style="FONT-FAMILY: Times New Roman" size="2">Note H Offering Costs and Formation Transaction Expenses</font></p> <p style="MARGIN-TOP: 6px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">In connection with the Consolidation and IPO we have incurred or will incur incremental accounting fees, legal fees and other professional fees. Such costs will be deferred and recorded as a reduction of proceeds of the Consolidation and IPO, or expensed if the Consolidation and IPO is not consummated. Certain costs associated with the Consolidation and IPO not directly attributable to the solicitation of consents and the IPO, but rather related to structuring the formation transaction, are expensed as incurred.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Through September&#xA0;30, 2012 we have incurred external offering costs of $1,414,890, including an adjustment of $38,837 for the six months ended June&#xA0;30, 2012 as a result of the reclassification discussed below, of which we have incurred $624,871 and $297,604 for the nine month periods ended September&#xA0;30, 2012 and 2011, respectively, and are reflected as deferred costs on Registrant&#x2019;s Condensed Balance Sheets. A total of $208,303 and $127,671 of these costs are in Due to Supervisor at September&#xA0;30, 2012 and December&#xA0;31, 2011, respectively. Additional offering costs for work done by employees of the Supervisor of $81,120 and $40,977 for the nine months ended September 30, 2012 and 2011, respectively, were incurred and advanced by the Supervisor and have or will be reimbursed to the Supervisor by the Registrant.</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> <font size="1">&#xA0;</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font style="FONT-FAMILY: Times New Roman" size="2">Correction of an Immaterial Error in the Financial Statements</font></p> <p style="MARGIN-TOP: 6px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">Our prior period financial results have been adjusted to reflect an immaterial correction which has no impact to the net change in cash reported on the statement of cash flows. During fiscal year 2012, we determined that certain costs related to the structuring of the formation transaction that were previously included in deferred offering costs should have been expensed in the periods incurred. The correction impacted the 2011 and 2010 periods and had accumulated to an amount of $252,337 as of June&#xA0;30, 2012. Adhering to applicable guidance for accounting changes and error corrections, we concluded that the error was not material to any of our prior period financial statements. The correction resulted in immaterial changes to deferred costs and formation transaction expenses for the years ended December&#xA0;31, 2011 and 2010. We applied the guidance for accounting changes and error corrections and revised our prior period financial statements presented.</font></p> <p style="MARGIN-TOP: 12px; TEXT-INDENT: 8%; MARGIN-BOTTOM: 0px"> <font style="FONT-FAMILY: Times New Roman" size="2">The following tables present the effect this correction had on&#xA0;our prior period reported&#xA0;financial statements. Additionally, financial information included in the notes to the financial statements that is impacted by the adjustment have been revised, as applicable.</font></p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="84%" align="center"> <tr> <td width="64%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As of December 31, 2011</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As reported</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Adjustment</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As adjusted</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Deferred costs, net</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">1,003,519</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(213,500</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">790,019</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2"> Members&#x2019; deficiency</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(4,642,480</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(213,500</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(4,855,980</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> </table> <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; FONT-SIZE: 12px"> &#xA0;</p> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="84%" align="center"> <tr> <td width="64%"></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="8%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="10" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>For the&#xA0;six months ended June 30, 2012</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As reported</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>Adjustment</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"><font style="FONT-FAMILY: Times New Roman" size="1"><b>As adjusted</b></font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Formation transaction expenses</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">38,837</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">$</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">38,837</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net loss</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(388,135</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(38,837</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(426,972</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net cash provided by operating activities</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">577,173</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(38,837</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">538,336</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> </tr> <tr> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net cash used in financing activities</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(1,286,315</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">38,837</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(1,247,478</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> <p style="TEXT-INDENT: -1em; MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net change in cash and cash equivalents</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(692,158</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">&#x2014;&#xA0;&#xA0;</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(692,158</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> </table> <p style="MARGIN-TOP: 0px; 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MARGIN-LEFT: 1em"><font style="FONT-FAMILY: Times New Roman" size="2">Net change in cash and cash equivalents</font></p> </td> <td valign="bottom"><font size="1">&#xA0;&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(733,696</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">0</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;&#xA0;</font></td> <td valign="bottom"><font size="1">&#xA0;</font></td> <td valign="bottom"><font style="FONT-FAMILY: Times New Roman" size="2">&#xA0;</font></td> <td valign="bottom" align="right"><font style="FONT-FAMILY: Times New Roman" size="2">(733,696</font></td> <td valign="bottom" nowrap="nowrap"><font style="FONT-FAMILY: Times New Roman" size="2">)&#xA0;</font></td> </tr> </table> <p style="MARGIN-TOP: 0px; 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Organization
9 Months Ended
Sep. 30, 2012
Organization

Note B Organization

Registrant is a New York limited liability company which was organized as a joint venture on May 25, 1953. On September 30, 1953, Registrant acquired fee title to the building known as 250 West 57th Street (the “Building”), formerly known as the Fisk Building, and the land thereunder located at 250-264 West 57th Street, New York, New York (collectively, the “Property”). On November 30, 2001, Registrant converted to a limited liability company under New York law and is now known as 250 West 57th St. Associates L.L.C. The conversion did not change any aspect of the assets and operations of Registrant other than to protect its Participants from future liability to a third party. Registrant’s members (“Members”) are Peter L. Malkin and Anthony E. Malkin (collectively, the “Agents”), each of whom also acts as an agent for holders of participations (“Participations”) in their respective member interests in Registrant (the “Participants”). The Members in Registrant hold senior positions at Malkin Holdings LLC (“Malkin Holdings” or the “Supervisor”), One Grand Central Place, 60 East 42nd Street, New York, New York, which provides supervisory and other services to Registrant and Lessee. See Note E below.

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Interim Period Reporting
9 Months Ended
Sep. 30, 2012
Interim Period Reporting

Note A Interim Period Reporting

In the opinion of management, the accompanying unaudited condensed financial statements of 250 West 57th St. Associates L.L.C. (“Registrant”) reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Registrant as of September 30, 2012 and its results of operations for the three and nine months ended September 30, 2012 and cash flows for the nine months ended September 30, 2012 and 2011. Information included in the condensed balance sheet as of December 31, 2011 has been derived from the audited balance sheet included in Registrant’s Form 10-K for the year ended December 31, 2011 (the “10-K”) previously filed with the Securities and Exchange Commission (the SEC ) except as disclosed in Note H. Pursuant to rules and regulations of the SEC, certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from these financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited condensed financial statements should be read in conjunction with the financial statements, notes to financial statements and the other information in the 10-K. The results of operations for the nine months ended September 30, 2012 are not necessarily indicative of the results to be expected for any interim period or the full year. For purposes of comparison, certain items shown in the 2011 condensed financial statements have been reclassified to conform with the presentation used for 2012.

XML 17 R2.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Balance Sheets (USD $)
Sep. 30, 2012
Dec. 31, 2011
Real Estate at 250-264 West 57thStreet, New York, New York:    
Building $ 4,940,682 $ 4,940,682
Less: accumulated depreciation (4,940,682) (4,940,682)
Building after accumulated depreciation      
Building improvements 44,082,575 41,215,430
Less: accumulated depreciation (7,153,282) (6,334,722)
Building improvements after accumulated depreciation 36,929,293 34,880,708
Tenant improvements 4,817,085 2,702,193
Less: accumulated depreciation (1,019,804) (548,783)
Tenant improvements after accumulated depreciation 3,797,281 2,153,410
Land 2,117,435 2,117,435
Total real estate, net 42,844,009 39,151,553
Cash and cash equivalents 1,269,384 2,325,024
Due from Supervisor, a related party 60,000 60,000
Due from Lessee, a related party 3,558,414  
Deferred costs 1,414,890 790,019
Other receivable 79,774  
Prepaid insurance 10,144  
Leasing costs, less accumulated amortization of $926,333 in 2012 and $740,183 in 2011 1,383,370 795,274
Mortgage financing costs, less accumulated amortization of $1,500,935 in 2012 and $1,263,152 in 2011 726,885 964,668
Total assets 51,346,870 44,086,538
Liabilities:    
Mortgages payable 44,164,732 44,935,520
Accrued mortgage interest 196,607 201,523
Payable to Lessee, a related party 9,350,095 3,576,129
Accrued supervisory fees, a related party   20,000
Accrued expenses 11,540 55,901
Due to Supervisor, a related party 322,718 153,445
Total liabilities 54,045,692 48,942,518
Commitments and contingencies      
Members' deficiency (at September 30, 2012 and December 31, 2011, there were 720 units (at $5,000 per unit) of participation units outstanding) (2,698,822) (4,855,980)
Total liabilities and members' deficiency $ 51,346,870 $ 44,086,538
XML 18 R6.htm IDEA: XBRL DOCUMENT v2.4.0.6
Statements of Members' Deficiency (USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2012
Dec. 31, 2011
Members' deficiency:    
Members' Deficiency, Beginning Balance $ (4,855,980) $ (4,860,381)
Add, net income:    
Net income 2,697,158 3,287,105
Members' Deficiency Before Distributions (2,158,822) (1,573,276)
Less, distributions:    
Monthly Distributions 540,000 720,000
Additional Distribution   2,562,704
Distributions 540,000 3,282,704
Members' deficiency, Ending Balance $ (2,698,822) $ (4,855,980)
XML 19 R22.htm IDEA: XBRL DOCUMENT v2.4.0.6
Fair Value Measurements - Additional Information (Detail) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Fair Value Disclosures [Line Items]    
Estimated fair value of mortgages $ 46,733,412  
Book value of related debt $ 44,164,732 $ 44,935,520
XML 20 R24.htm IDEA: XBRL DOCUMENT v2.4.0.6
Offering Costs and Formation Transaction Expenses - Schedule of Correction of Immaterial Error on Combined Financial Statements (Detail) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended 6 Months Ended 3 Months Ended 9 Months Ended 6 Months Ended 3 Months Ended 9 Months Ended 6 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Jun. 30, 2012
Dec. 31, 2010
Jun. 30, 2012
As reported
Dec. 31, 2011
As reported
Sep. 30, 2011
As reported
250 West 57th ST. Associates L.L.C.
Sep. 30, 2011
As reported
250 West 57th ST. Associates L.L.C.
Jun. 30, 2012
Adjustment
Dec. 31, 2011
Adjustment
Sep. 30, 2011
Adjustment
250 West 57th ST. Associates L.L.C.
Sep. 30, 2011
Adjustment
250 West 57th ST. Associates L.L.C.
Jun. 30, 2012
As adjusted
Dec. 31, 2011
As adjusted
Sep. 30, 2011
As adjusted
250 West 57th ST. Associates L.L.C.
Sep. 30, 2011
As adjusted
250 West 57th ST. Associates L.L.C.
Organization And Offering Costs [Line Items]                                      
Deferred costs, net $ 1,414,890   $ 1,414,890   $ 790,019 $ 252,337     $ 1,003,519       $ (213,500)       $ 790,019    
Members' deficiency (2,698,822)   (2,698,822)   (4,855,980)   (4,860,381)   (4,642,480)       (213,500)       (4,855,980)    
Formation transaction expenses 56,738 41,589 95,575 81,417               38,837   41,589 81,417 38,837   41,589 81,417
Net income 3,124,130 3,858,372 2,697,158 3,580,877 3,287,105     (388,135)   3,899,961 3,662,294 (38,837)   (41,589) (81,417) (426,972)   3,858,372 3,580,877
Net cash provided by operating activities     782,403 673,290       577,173     754,707 (38,837)     (81,417) 538,336     673,290
Net cash used in financing activities     (1,855,027) (1,566,935)       (1,286,315)     (1,648,352) 38,837     81,417 (1,247,478)     (1,566,935)
Net change in cash and cash equivalents     $ (1,055,640) $ (733,696)       $ (692,158)     $ (733,696)         $ (692,158)     $ (733,696)
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XML 22 R7.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Statements of Cash Flows (USD $)
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Cash flows from operating activities:    
Net income $ 2,697,158 $ 3,580,877
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation of building and tenant improvements 1,289,581 1,112,272
Amortization of leasing costs 186,150 142,985
Amortization of mortgage refinancing costs 237,783 237,783
Changes in operating assets and liabilities:    
Other receivable and Due from Lessee (3,637,489) (4,424,412)
Leasing costs paid   (159,949)
Change in prepaid insurance (10,144)  
Change in due to Supervisor, a related party 88,641  
Change in accrued mortgage interest (4,916) (3,529)
Change in accrued supervisory fees, a related party (20,000) 253,745
Change in accrued expenses (44,361) (66,481)
Net cash provided by operating activities 782,403 673,290
Cash flows from investing activities:    
Purchase of building and tenant improvements   (2,931,285)
Increase in payable to Lessee, a related party 16,984 3,091,234
Net cash provided by investing activities 16,984 159,949
Cash flows from financing activities:    
Repayment of mortgages payable (770,788) (729,331)
Deferred costs (544,239) (297,604)
Distributions to Participants (540,000) (540,000)
Net cash used in financing activities (1,855,027) (1,566,935)
Net decrease in cash and cash equivalents (1,055,640) (733,696)
Cash and cash equivalents, beginning of period 2,325,024 1,513,152
Cash and cash equivalents, end of period 1,269,384 779,456
Supplemental disclosure of cash flow information:    
Cash paid for interest 1,808,983 1,703,342
Net cash used in financing activities excluded an increase in due to Supervisor 80,632  
Net cash used in investing activities excluded the increase of payable to Lessee $ 4,982,037  
XML 23 R3.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Balance Sheets (Parenthetical) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Accumulated amortized leasing costs $ 926,333 $ 740,183
Accumulated amortized mortgage financing costs 1,500,935 1,263,152
Participation units outstanding 720 720
Participation unit, par value $ 5,000 $ 5,000
XML 24 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
Offering Costs and Formation Transaction Expenses (Tables)
9 Months Ended
Sep. 30, 2012
Schedule of Correction of an Immaterial Error on the Combined Financial Statements

The following tables present the effect this correction had on our prior period reported financial statements. Additionally, financial information included in the notes to the financial statements that is impacted by the adjustment have been revised, as applicable.

 

 

     As of December 31, 2011  
     As reported     Adjustment     As adjusted  

Deferred costs, net

   $ 1,003,519      $ (213,500   $ 790,019   

Members’ deficiency

     (4,642,480     (213,500     (4,855,980

 

     For the six months ended June 30, 2012  
     As reported     Adjustment     As adjusted  

Formation transaction expenses

   $ —        $ 38,837      $ 38,837   

Net loss

     (388,135     (38,837     (426,972

Net cash provided by operating activities

     577,173        (38,837     538,336   

Net cash used in financing activities

     (1,286,315     38,837        (1,247,478

Net change in cash and cash equivalents

     (692,158     —          (692,158

 

     For the nine months ended September 30, 2011  
     As reported     Adjustment     As adjusted  

Formation transaction expenses

   $ —        $ 81,417      $ 81,417   

Net income

     3,662,294        (81,417     3,580,877   

Net cash provided by operating activities

     754,707        (81,417     673,290   

Net cash used in financing activities

     (1,648,352     81,417        (1,566,935

Net change in cash and cash equivalents

     (733,696     0        (733,696

 

     For the three months ended September 30, 2011  
     As reported      Adjustment     As adjusted  

Formation transaction expenses

     0         41,589        41,589   

Net income

     3,899,961         (41,589     3,858,372   
XML 25 R1.htm IDEA: XBRL DOCUMENT v2.4.0.6
Document and Entity Information
9 Months Ended
Sep. 30, 2012
Entity Information [Line Items]  
Document Type 10-Q
Amendment Flag false
Document Period End Date Sep. 30, 2012
Document Fiscal Year Focus 2012
Document Fiscal Period Focus Q3
Trading Symbol westas
Entity Registrant Name 250 WEST 57TH ST ASSOCIATES L.L.C.
Entity Central Index Key 0000100412
Current Fiscal Year End Date --12-31
Entity Filer Category Smaller Reporting Company
Entity Common Stock, Shares Outstanding 0
XML 26 R18.htm IDEA: XBRL DOCUMENT v2.4.0.6
Lease - Additional Information (Detail) (USD $)
1 Months Ended 9 Months Ended
Dec. 31, 2011
Sep. 30, 2012
Renewals
OptionPlan
Sep. 30, 2011
Leases [Line Items]      
Lease initiation date   May 01, 1954  
Number of granting Lessee options to extend the lease   4  
Additional renewal period   25 years  
Lease expiring date   2103  
First renewal period of lease   From October 1, 2003 through September 30, 2028  
Second renewal period of lease   From October 1, 2028 through September 30, 2053  
Granting of options to the Lessee to extend the lease   For two additional 25-year renewal terms expiring in 2103  
Number of additional renewals   2  
Effective date of third modification lease   May 01, 1975  
Amount of partial payment for basic supervisory services included in basic annual rent   $ 28,000  
Effective date of six modification lease   Nov. 17, 2000  
Amount included in monthly basic rent expense   2,333.33  
Monthly advance of primary overage rent   62,667  
Maximum amount of advance annually against primary overage rent   752,000  
Percentage of monthly distribution   20.00%  
Participants original cash investment   3,600,000  
Monthly supervisory services expense additional payment   1,667  
Percentage of excess amount of the net operating profit of the Lessee, as defined 50.00%    
Rent income, earned from a related party   6,842,028 7,367,847
Net operating profit of lessee after deduction of basic rent   7,869,123 9,452,901
Primary overage rent paid by lessee   752,000 752,000
Secondary overage rent paid by lessee   3,558,414 4,350,339
Percentage of excess of the net operating profit, as defined   50.00% 50.00%
Amount of interest earned on funds borrowed for the improvement program   148 111
Amount of additional payment to supervisor deducted before calculating amount distributed by Registrant to the participants     1,500,000
Additional Payment to Supervisor     284,745
Distributed by registrant to the participants     $ 2,562,704
Allocation of the consideration to the Registrant.   50.00%  
Allocation of the consideration to the Lessee   50.00%  
XML 27 R4.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Statements of Operations (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Revenue:        
Basic minimum annual rent, from a related party $ 866,936 $ 818,005 $ 2,599,408 $ 2,453,508
Advance of primary overage rent, from a related party 188,000 188,000 564,000 564,000
Secondary overage rent, from a related a party 3,558,414 4,350,339 3,558,414 4,350,339
Total rent income 4,613,350 5,356,344 6,721,822 7,367,847
Interest and dividend income 151 214 501 699
Total revenue 4,613,501 5,356,558 6,722,323 7,368,546
Expenses:        
Interest on mortgages 677,516 642,626 2,041,850 1,937,598
Supervisory services, to a related party 31,797 31,425 94,648 92,425
Additional payment for supervisory services, to a related party   284,745   284,745
Depreciation of building and tenant improvements 451,047 379,159 1,289,581 1,112,272
Amortization of leasing costs 75,083 46,247 186,150 142,985
Formation transaction expense 56,738 41,589 95,575 81,417
Professional fees, including amounts to a related party 188,824 72,395 291,827 133,227
Miscellaneous 8,366   25,534 3,000
Total expenses 1,489,371 1,498,186 4,025,165 3,787,669
Net Income $ 3,124,130 $ 3,858,372 $ 2,697,158 $ 3,580,877
Income per $5,000 participation unit, based on 720 participation units outstanding during the period $ 4,339.07 $ 5,358.85 $ 3,746.05 $ 4,973.44
Distributions per $5,000 participation unit consisted of the following:        
Income $ 250.00 $ 250.00 $ 750.00 $ 750.00
Return of capital $ 0 $ 0 $ 0 $ 0
Total distributions $ 250.00 $ 250.00 $ 750.00 $ 750.00
XML 28 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
Supervisory Services
9 Months Ended
Sep. 30, 2012
Supervisory Services

Note E Supervisory Services

Supervisory and other services are provided to Registrant by its supervisor, Malkin Holding LLC (“Malkin Holdings” or “Supervisor”), a related party. Beneficial interests in Registrant are held directly or indirectly by one or more persons at Malkin Holdings and/or their family members.

Registrant pays Supervisor for supervisory services and disbursements. The basic fee (the “Basic Payment”) had been payable at the rate of $40,000 per annum, payable $3,333 per month, since the fiscal year ended September 30, 1980. The Basic Payment was increased, with the approval of the Agents, by an amount equal to the increase in the Consumer Price Index since such date, resulting in an increase in the Basic Payment to $102,000 per annum effective July 1, 2010 to be adjusted annually for any subsequent increase in the Consumer Price Index. The fee is payable (i) not less than $2,333 per month, (ii) an additional $1,000 per month out of Primary Overage Rent payment and (iii) the balance out of available reserves from Secondary Overage Rent. Any deficiency in the portion of the fee payable from Primary or Secondary Overage Rent shall be payable out of Secondary Overage Rent in the next year in which Secondary Overage Rent is sufficient. The Agents also approved payment by Registrant, effective July 1, 2010, of the expenses in connection with regular accounting services related to maintenance of Registrant’s books and records. Such expenses were previously paid by Supervisor.

 

Registrant pays Supervisor an Additional Payment equal to 10% of all distributions to Participants in any year in excess of the amount representing a return to them at the rate 15% per annum on their remaining cash investment in Registrant (which remaining cash investment at September 30, 2012 was equal to the Participants’ original cash investment of $3,600,000). For tax purposes, such Additional Payment is recognized as a profits interest, and the Supervisor is treated as a partner, all without modifying each Participant’s distributive share of reportable income and cash distributions.

The basic supervisory services provided to Registrant by Supervisor include, but are not limited to, maintaining all of its entity and Participant records, performing physical inspections of the Building, providing or coordinating certain counsel services to Registrant, reviewing insurance coverage, conducting annual supervisory review meetings, receipt of monthly rent from Lessee, payment of monthly and additional distributions to the Participants, payment of all other disbursements, confirmation of the payment of real estate taxes, active review of financial statements submitted to Registrant by Lessee and financial statements audited by and tax information prepared by Registrant’s independent registered public accounting firm, and distribution of related materials to the Participants. Supervisor also prepares quarterly, annual and other periodic filings with the SEC and applicable state authorities.

Accrued supervisory fees, to a related party, were $0 and $20,000 at September 30, 2012 and December 31, 2011, respectively. Due from Supervisor, a related party, was $60,000 at September 30, 2012 and December 31, 2011, respectively. Due to Supervisor, a related party, was $322,718 and $153,445 at September 30, 2012 and December 31, 2011, respectively.

Registrant pays Supervisor for other services at hourly rates. Pursuant to the fee arrangements described herein, Registrant incurred supervisory fees of $94,648 and $377,170 for the nine-month periods ended September 30, 2012 and 2011, respectively. The fee of $377,170 for the nine months ended September 30, 2011 included the Additional Payment of $284,745. As indicated above in Note C, an Additional Payment to Supervisor for the current lease year will be reflected in Registrant’s Annual Report on Form 10K for the year ending December 31, 2012. No remuneration was paid during the nine-month periods ended September 30, 2012 and 2011 by Registrant to either of the Members. Included in professional fees are amounts for services from related parties of $43,518 and $81,120 for the three and nine months ended September 30, 2012, respectively, and $15,144 and $40,977 for the three and nine months ended September 30, 2011, respectively.

Distributions are paid from a cash account held by Supervisor. That account is included in the condensed Balance Sheets as “Due from Supervisor.” The funds of $60,000 at September 30, 2012 and December 31, 2011 were paid to Participants on October 1, 2012 and January 1, 2012, respectively.

Reference is made to Note C above for a description of the terms of the Lease between Registrant and Lessee. The respective interest, if any, of the Members in Registrant and in Lessee arise solely from ownership of Participations in Registrant and of Member interests or participations in Lessee. The Members as such receive no extra or special benefit not shared on a pro rata basis with all other Participants in Registrant or members in Lessee. However, all of the Members hold senior positions at Supervisor (which supervises Registrant and Lessee) and, by reason of their positions at Supervisor, may receive income attributable to supervisory or other remuneration paid to Supervisor by Registrant and Lessee.

XML 29 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
Mortgages
9 Months Ended
Sep. 30, 2012
Mortgages

Note D Mortgages

On December 29, 2004, a first mortgage (the “First Mortgage”) was placed on the Property in the amount of $30,500,000 with Prudential Insurance Company of America. At closing, $3,000,000 was drawn and the remaining $27,500,000 was drawn during 2005. These draws paid off the pre-existing first mortgage of $15,500,000 with Emigrant Savings Bank on September 1, 2005 and were used to finance capital improvements as needed. The initial draw of $3,000,000 and all subsequent draws required constant equal monthly payments of interest only, at the rate of 5.33% per annum until January 5, 2007. Commencing February 5, 2007 Registrant is required to make monthly payments of $184,213 applied to interest and principal calculated on a 25-year amortization schedule. The balance of the First Mortgage is $26,640,483 at September 30, 2012. The First Mortgage matures on January 5, 2015 when the principal balance will be $24,680,713. The First Mortgage may be prepaid at any time, in whole only, upon payment of a prepayment penalty based on a yield maintenance formula. There is no prepayment penalty if the First Mortgage is paid in full during the last 90 days of the term.

On May 25, 2006, a second mortgage (the “Second Mortgage”) was placed on the Property in the amount of $12,410,000 with Prudential Insurance Company of America. At closing, $2,100,000 was drawn and the remaining $10,310,000 had been drawn as of March 5, 2009. The initial draw of $2,100,000 and all subsequent draws required constant equal monthly payments of interest only, at the rate of 6.13% per annum until March 5, 2009. Commencing April 5, 2009, Registrant is required to make monthly payments of $80,947 applied to interest and principal calculated on a 25- year amortization schedule. The balance of the Second Mortgage is $11,589,633 at September 30, 2012. The Second Mortgage matures on January 5, 2015 when the principal balance will be $10,936,920. The Second Mortgage may be prepaid at any time, in whole only, upon payment of a prepayment penalty based on a yield maintenance formula. There is no prepayment penalty if the Second Mortgage is paid in full during the last 60 days of the term.

On October 15, 2009, Registrant closed on a $21,000,000 line of credit from Signature Bank secured by a mortgage on the Property, subordinate to the existing senior mortgage debt held by Prudential Insurance Company of America in the original amount of $42,910,000, and to be used for capital improvements. At closing $934,616 was drawn, and an additional $5,000,000 used for improvements and tenanting costs was drawn on December 22, 2011. The balance of the line of credit was $5,934,616 at September 30, 2012. The Signature Bank loan requires payments of interest only and is co-terminus with the existing senior mortgage debt. The $21,000,000 loan from Signature Bank was modified effective as of January 10, 2012 to provide for a reduction in the fluctuating rate of interest from a floor of 6.50% to 4.25% and to a reduction in the fixed rate to the greater of (i) 4.75% or (ii) 300 basis points in excess of the weekly average yield on U.S. Treasury Securities adjusted to a maturity date closest to the mortgage maturity date. The loan was also modified to allow borrower to elect prepayment without any prepayment fees if the fixed interest rate were the greater of (i) 5.00% or (ii) 300 basis points in excess of the weekly average yield on U .S. Treasury Securities adjusted to a maturity date closest to the mortgage maturity date.

 

The estimated fair value of Registrant’s mortgage debt based on available market information is approximately $46,733,412 as of September 30, 2012. The fair value of borrowings is estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made by us.

In 1999, the Participants in Registrant and the members in Lessee consented to a building improvement program (the “Program”) estimated to cost approximately $12,200,000. In 2004, the Participants and Lessee approved an increase in the Program from $12,200,000 to approximately $31,400,000 under substantially the same conditions as had previously been approved. To induce the Lessee to approve the Program, Registrant’s Participants authorized a grant to the Lessee, upon completion of the Program, of the right to further extensions of the Lease beyond 2103, based on the net present benefit to Registrant of the improvements made.

The Program for improvements was further increased in 2006 from $31,400,000 to up to $82,300,000, again on the basis that such increase would allow a further extension of the Lease based on the net present benefit to Registrant of the improvements made. The Participants in Registrant and the members in Lessee have approved increasing the financing from the total of $42,910,000 provided by the First and Second Mortgages to up to $63,900,000. As of September 30, 2012, Registrant had incurred or accrued costs related to the improvement program of $49,587,660 and estimates that costs upon completion will be approximately $82,300,000. The balance of the costs of the Program will be financed primarily by the additional borrowings available under the $21,000,000 previously approved loan that closed on October 15, 2009 and Lessee’s operating cash flow. Amounts Payable to Lessee related to the program were $9,350,095 (for unpaid building improvements and leasing costs) and $3,576,129 as of September 30, 2012 and December 31, 2011, respectively.

XML 30 R23.htm IDEA: XBRL DOCUMENT v2.4.0.6
Offering Costs and Formation Transaction Expenses - Additional Information (Detail) (USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Jun. 30, 2012
Organization And Offering Costs [Line Items]        
Accumulated correction impacted amount $ 1,414,890   $ 790,019 $ 252,337
Incurred external offering cost 1,414,890      
Offering costs 624,871 297,604    
Offering costs due to Supervisor 208,303   127,671  
Additional offering costs for work done by supervisor's employees 81,120 40,977    
Adjustment
       
Organization And Offering Costs [Line Items]        
Accumulated correction impacted amount     (213,500)  
Incurred external offering cost       $ 38,837
XML 31 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
Mortgages - Additional Information (Detail) (USD $)
9 Months Ended 12 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 1 Months Ended
Sep. 30, 2012
Dec. 31, 2006
Dec. 31, 2004
Dec. 31, 1999
Dec. 31, 2011
Dec. 22, 2011
Sep. 30, 2012
First Mortgage
Jan. 05, 2007
First Mortgage
Sep. 01, 2005
First Mortgage
Dec. 29, 2004
First Mortgage
Sep. 30, 2012
Second Mortgage
Mar. 05, 2009
Second Mortgage
May 25, 2006
Second Mortgage
Sep. 30, 2012
Line of Credit
Oct. 15, 2009
Line of Credit
Jan. 31, 2012
Line of Credit
Minimum
Debt Instrument [Line Items]                                
Current debt instrument maximum amount                   $ 30,500,000     $ 12,410,000      
Debt instrument outstanding 5,934,616                 3,000,000     2,100,000   934,616  
Remaining balance of debt instrument drawn and outstanding                   27,500,000     10,310,000      
Pre-existing first mortgage                 15,500,000              
Initial drawing of mortgage loan               3,000,000         2,100,000      
Debt Instrument Interest Rate               5.33%       6.13%        
Monthly payments of debt             184,213       80,947          
Term of mortgage             25 years       25 years          
Debt instrument outstanding             26,640,483       11,589,633          
Principal amount on maturity date             24,680,713       10,936,920          
Maturity date of first and second mortgage                     Jan. 05, 2015          
Maximum period for no prepayment penalty at the end of term             90 days       60 days          
Current debt instrument maximum amount, line of credit                             21,000,000  
Debt instrument maximum amount on senior mortgage debt                             42,910,000  
Debt instrument additional balance           5,000,000                    
Interest rate basis point                           5.00% instead of 6.75%, or (ii) 300 basis points instead of 325 basis points, above the weekly average yield on U .S. Treasury Securities adjusted to a maturity date closest to the mortgage maturity date    
Previous floor rate on line of credit 6.50%                              
Floor rate on line of credit 4.25%                              
Interest rate under condition first for fixed rate calculation                               4.75%
Basis points in addition to weekly average yield under second condition for fixed rate calculation 3.00%                              
Modified fixed interest rate for prepayment without prepayment fees 5.00%                              
Fair value of mortgage debt 46,733,412                              
Increase in Building improvement program costs 82,300,000 82,300,000 31,400,000 12,200,000                        
Previous debt instrument maximum amount 42,910,000                              
Debt instrument maximum amount 63,900,000                              
Actual Improvement Cost 49,587,660                              
Additional Borrowing available from line of credit 21,000,000                              
Payable to Lessee, a related party $ 9,350,095       $ 3,576,129                      
XML 32 R15.htm IDEA: XBRL DOCUMENT v2.4.0.6
Offering Costs and Formation Transaction Expenses
9 Months Ended
Sep. 30, 2012
Offering Costs and Formation Transaction Expenses

Note H Offering Costs and Formation Transaction Expenses

In connection with the Consolidation and IPO we have incurred or will incur incremental accounting fees, legal fees and other professional fees. Such costs will be deferred and recorded as a reduction of proceeds of the Consolidation and IPO, or expensed if the Consolidation and IPO is not consummated. Certain costs associated with the Consolidation and IPO not directly attributable to the solicitation of consents and the IPO, but rather related to structuring the formation transaction, are expensed as incurred.

Through September 30, 2012 we have incurred external offering costs of $1,414,890, including an adjustment of $38,837 for the six months ended June 30, 2012 as a result of the reclassification discussed below, of which we have incurred $624,871 and $297,604 for the nine month periods ended September 30, 2012 and 2011, respectively, and are reflected as deferred costs on Registrant’s Condensed Balance Sheets. A total of $208,303 and $127,671 of these costs are in Due to Supervisor at September 30, 2012 and December 31, 2011, respectively. Additional offering costs for work done by employees of the Supervisor of $81,120 and $40,977 for the nine months ended September 30, 2012 and 2011, respectively, were incurred and advanced by the Supervisor and have or will be reimbursed to the Supervisor by the Registrant.

 

Correction of an Immaterial Error in the Financial Statements

Our prior period financial results have been adjusted to reflect an immaterial correction which has no impact to the net change in cash reported on the statement of cash flows. During fiscal year 2012, we determined that certain costs related to the structuring of the formation transaction that were previously included in deferred offering costs should have been expensed in the periods incurred. The correction impacted the 2011 and 2010 periods and had accumulated to an amount of $252,337 as of June 30, 2012. Adhering to applicable guidance for accounting changes and error corrections, we concluded that the error was not material to any of our prior period financial statements. The correction resulted in immaterial changes to deferred costs and formation transaction expenses for the years ended December 31, 2011 and 2010. We applied the guidance for accounting changes and error corrections and revised our prior period financial statements presented.

The following tables present the effect this correction had on our prior period reported financial statements. Additionally, financial information included in the notes to the financial statements that is impacted by the adjustment have been revised, as applicable.

 

 

     As of December 31, 2011  
     As reported     Adjustment     As adjusted  

Deferred costs, net

   $ 1,003,519      $ (213,500   $ 790,019   

Members’ deficiency

     (4,642,480     (213,500     (4,855,980

 

     For the six months ended June 30, 2012  
     As reported     Adjustment     As adjusted  

Formation transaction expenses

   $ —        $ 38,837      $ 38,837   

Net loss

     (388,135     (38,837     (426,972

Net cash provided by operating activities

     577,173        (38,837     538,336   

Net cash used in financing activities

     (1,286,315     38,837        (1,247,478

Net change in cash and cash equivalents

     (692,158     —          (692,158

 

     For the nine months ended September 30, 2011  
     As reported     Adjustment     As adjusted  

Formation transaction expenses

   $ —        $ 81,417      $ 81,417   

Net income

     3,662,294        (81,417     3,580,877   

Net cash provided by operating activities

     754,707        (81,417     673,290   

Net cash used in financing activities

     (1,648,352     81,417        (1,566,935

Net change in cash and cash equivalents

     (733,696     0        (733,696

 

     For the three months ended September 30, 2011  
     As reported      Adjustment     As adjusted  

Formation transaction expenses

     0         41,589        41,589   

Net income

     3,899,961         (41,589     3,858,372   
XML 33 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
Subsequent Events
9 Months Ended
Sep. 30, 2012
Subsequent Events

Note F Subsequent Events

An additional $9,000,000 was drawn on November 7, 2012 on the Signature Bank line of credit to fund building improvements and tenanting costs bringing the total amount advanced to date to $14,934,616.

XML 34 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
Fair Value Measurements
9 Months Ended
Sep. 30, 2012
Fair Value Measurements

Note G Fair Value Measurements

Fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, Financial Accounting Standards Board guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).

We use the following methods and assumptions in estimating fair value disclosures for financial instruments.

Cash and cash equivalents, due from Supervisor, a related party, due from Lessee, a related party, other receivable, accrued mortgage interest, accrued supervisory fees, a related party, payable to Lessee, a related party, due to Supervisor, a related party, and accrued expenses. The carrying amount of cash and cash equivalents, due from Supervisor, a related party, due from Lessee, a related party, other receivable, accrued mortgage interest, accrued supervisory fees, a related party, payable to Lessee, a related party, due to Lessee, a related party, due to Supervisor, a related party, and accrued expenses reported in our Condensed Balance Sheets approximate fair value due to the short term maturity of these instruments.

Mortgages payable: The fair value of borrowings, as disclosed in Note D, is estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made to us.

The methodologies used for valuing financial instruments have been categorized into three broad levels as follows:

Level 1—Quoted prices in active markets for identical instruments.

Level 2—Valuations based principally on other observable market parameters, including:

Quoted prices in active markets for similar instruments;

Quoted prices in less active or inactive markets for identical or similar instruments;

Other observable inputs (such as risk free interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates); and

Market corroborated inputs (derived principally from or corroborated by observable market data).

 

Level 3—Valuations based significantly on unobservable inputs.

Valuations based on third-party indications (broker quotes or counterparty quotes) which were, in turn, based significantly on unobservable inputs or were otherwise not supportable as Level 2 valuations.

Valuations based on internal models with significant unobservable inputs.

These levels form a hierarchy. We follow this hierarchy for our financial instruments measured at fair value on a recurring and nonrecurring basis and other required fair value disclosures. The classifications are based on the lowest level of input that is significant to the fair value measurement.

Fair Value of Financial Instruments

The following disclosures of estimated fair value were determined by management, using available market information and appropriate valuation methodologies as discussed in Fair Value Measurements. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The mortgages payable had an estimated fair value based on discounted cash flow models, based on Level 3 inputs, of approximately $46,733,412, compared to the book value of the related debt of $44,164,732, at September 30, 2012.

Disclosure about fair value of financial instruments is based on pertinent information available to us as of September 30, 2012. Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

XML 35 R16.htm IDEA: XBRL DOCUMENT v2.4.0.6
Lease (Policies)
9 Months Ended
Sep. 30, 2012
Revenue Recognition

As a result of its revenue recognition policy, rental income for the year ending December 31 includes the advances of Primary Overage Rent received from October 1 to December 31, but does not include any portion of Secondary Overage Rent based on the Lessee’s operations during that period.

XML 36 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
Subsequent Events - Additional Information (Detail) (USD $)
0 Months Ended
Sep. 30, 2012
Nov. 07, 2012
Subsequent Event [Member]
The Signature Bank [Member]
Subsequent Event [Line Items]    
Additional borrowing line of credit   $ 9,000,000
Total Line of credit advanced to date $ 5,934,616 $ 14,934,616
XML 37 R5.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Statements of Operations (Parenthetical) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Stated amount per participation unit $ 5,000 $ 5,000 $ 5,000 $ 5,000
Participation units outstanding 720 720 720 720
XML 38 R10.htm IDEA: XBRL DOCUMENT v2.4.0.6
Lease
9 Months Ended
Sep. 30, 2012
Lease

Note C Lease

Registrant does not operate the Property. Registrant leases the Property to Fisk Building Associates L.L.C. (the “Lessee”) under a long-term net operating lease dated May 1, 1954 (the “Lease”). In 1985, the Participants in Registrant consented to Registrant’s Agents granting Lessee four options to extend the Lease, in each case for an additional twenty-five year renewal period, the last expiring in 2103, all on the same terms as the original lease. The Agents intend to grant such options on behalf of Registrant, subject to Lessee’s compliance with such consents. Such options have been granted by the Agents and exercised by Lessee as to (a) the first renewal period from October 1, 2003 through September 30, 2028, and (b) the second renewal period from October 1, 2028 through September 30, 2053. The Participants in Registrant have consented to the granting of options to the Lessee to extend the lease for two additional 25-year renewal terms expiring in 2103. Lessee is a New York limited liability company whose members consist of, among others, Anthony E. Malkin and entities for the benefit of members of Peter L. Malkin’s and Anthony E. Malkin’s families, respectively.

 

Under the Lease, effective May 1, 1975, between Registrant and Lessee, basic annual rent (“Basic Rent”) was equal to mortgage principal and interest payments plus $28,000 for partial payment to Malkin Holdings for supervisory services. The lease modification dated November 17, 2000, and as further modified, between Registrant and Lessee provides that Basic Rent will be equal to the sum of $28,000 plus the installment payments for interest and amortization (not including any balloon payment due at maturity) currently payable on all mortgages. 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 mortgages 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 mortgages. See Note D.

Lessee is required to make a monthly payment to Registrant, as an advance against primary overage rent (“Primary Overage Rent”), of an amount equal to its operating profit for its previous lease year in the maximum amount of $752,000 per annum. Lessee currently advances $752,000 each year, which is recorded in revenues in monthly installments of $62,667 and permits Registrant to make regular monthly distributions at 20% per annum on the Participants’ remaining original cash investment (which remaining cash investment at September 30, 2012, was equal to the Participants’ original cash investment of $3,600,000) and to pay $1,667 monthly to Supervisor as an advance of the additional payment (the “Additional Payment”).

Lessee is also required to make an annual payment to Registrant of secondary overage rent (“Secondary Overage Rent”) subsequent to September 30th of the amount representing 50% of the excess of the net operating profit (as defined) of the Lessee for the lease year ending September 30 over the Primary Overage Rent of $752,000, less the amount representing interest earned and retained by Registrant on funds borrowed for the building improvement program described below. Registrant recognizes Secondary Overage Rent when earned from the Lessee, at the close of the lease year ending September 30 and records such amount in revenue in the three months ended September 30.

Rent income, earned from a related party, was $6,842,028 and $7,367,847 for the nine months ended September 30, 2012 and 2011, respectively.

For the lease year ended September 30, 2012, Lessee had net operating profit of $7,869,123 after deduction of Basic Rent. Lessee paid advances of Primary Overage Rent of $752,000 for that lease year prior to September 30, 2012 and Secondary Overage Rent of $3,558,414 is payable subsequent to September 30, 2012. The Secondary Overage Rent of $3,558,414 represents 50% of the excess of the Lessee’s net operating profit of $7,869,123 over $752,000, less $148 representing interest earned and retained by Registrant on funds borrowed for the improvement program. The amount of any Secondary Overage Rent available for distribution by Registrant to the Participants and any Additional Payment to the Supervisor will be reported in its Annual Report on Form 10K for the year ending December 31, 2012. Such distribution and Additional Payment depends on reserves required for general contingencies and professional fees, including fees in connection with a proposed consolidation of Registrant, other public and private entities supervised by the Supervisor and the Supervisor and certain affiliated management companies into Empire State Realty Trust, Inc., a newly formed real estate investment trust (collectively the “Consolidation”) and the initial public offering of Class A common stock of Empire State Realty Trust, Inc. (the “IPO”).

 

For the lease year ended September 30, 2011, Lessee reported net operating profit of $9,452,901 after deduction of Basic Rent. Lessee paid Primary Overage Rent of $752,000 for that lease year prior to September 30, 2011 and Secondary Overage Rent of $4,350,339 subsequent to September 30, 2011. The Secondary Overage Rent of $4,350,339 represents 50% of the excess of the Lessee’s net operating profit of $9,452,901 over $752,000, less $111 representing interest earned and retained by Registrant on funds borrowed for the improvement program. As a result, the Secondary Overage Rent paid by the Lessee subsequent to September 30, 2011 of $4,350,339 plus $110 of interest was available for distribution by the Registrant to the Participants. After deducting a total of $1,500,000 for (i) fees relating to the proposed Consolidation and IPO, (ii) the increase in the supervisory fee to Supervisor, (iii) accounting fees, (iv) the New York State annual filing fee, and (v) general contingencies, and the Additional Payment to Supervisor of $284,745 (Note E), the balance of $2,562,704 was distributed by Registrant to the Participants on December 14, 2011.

As a result of its revenue recognition policy, rental income for the year ending December 31 includes the advances of Primary Overage Rent received from October 1 to December 31, but does not include any portion of Secondary Overage Rent based on the Lessee’s operations during that period.

The Supervisor of the Registrant has filed a registration statement on Form S-4 for the solicitation of consents of the Participants in the Registrant and other public limited liability companies supervised by the Supervisor to the Consolidation (as defined below). In the Consolidation, (x) the property interests of the Registrant, such other public limited liability companies and certain private entities supervised by the Supervisor, and (y) the Supervisor and certain affiliated management companies will be contributed to the operating partnership of Empire State Realty Trust, Inc., a newly organized real estate investment trust.

Consents are required from Participants in the Registrant and such other public limited liability companies for them to contribute their interests in the Consolidation, and the solicitation of such consents will not commence until the SEC declares effective the registration statement on Form S-4. Consents have been obtained from participants in the private entities and the Supervisor and certain affiliated companies and affiliates of the Supervisor for them to make such contribution.

The consideration to be paid to the contributing companies and entities in the Consolidation will be allocated in accordance with exchange values determined based on appraisals by an independent third party. Such method of allocation has been approved by the Lessee. Based on the exchange values, if the Consolidation proposal is approved by the Registrant’s Participants, the consideration with respect to the Property will be allocated approximately 50% to the Registrant and 50% to the Lessee, which the Supervisor believes is in accordance with the historical treatment of the Registrant and the Lessee.

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Supervisory Services - Additional Information (Detail) (USD $)
9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Sep. 30, 2012
Professional Fees
Sep. 30, 2011
Professional Fees
Sep. 30, 2012
Professional Fees
Sep. 30, 2011
Professional Fees
Related Party Transaction [Line Items]              
Basic fee payable at rate per annum $ 40,000            
Basic fee payable at rate per month 3,333            
Increase in Basic Payment plus annual CPI adjustment 102,000            
Minimum monthly payment for supervisory services 2,333            
Additional monthly payment for supervisory services out of Primary Overage rent payment 1,000            
Additional Payment to Supervisor based on annual distributions to Participants 10.00%            
Participants required rate of return on cash investment for Additional Payment 15.00%            
Participants original cash investment 3,600,000            
Accrued supervisory fees related party 0   20,000        
Due from Supervisor, a related party 60,000   60,000        
Due to Supervisor, a related party 322,718   153,445        
Supervisory fees 94,648 377,170          
Remuneration paid by registrants 0 0          
Extra or special benefit received by members   284,745          
Professional fees, including amounts to a related party       43,518 15,144 81,120 40,977
Due from Supervisor, a related party $ 60,000   $ 60,000