10-K 1 east10k.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 [] 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 0-2670 60 EAST 42ND ST. ASSOCIATES L.L.C. (Exact name of registrant as specified in its charter) New York 13-6077181 State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 60 East 42nd Street, New York, New York 10165 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 687-8700 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: $7,000,000 of Participations in Partnership Interests Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The aggregate market of the voting stock held by non-affiliates of the Registrant: Not applicable, but see Items 5 and 10 of this report. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___ An Exhibit Index is located on pages 33 through 35 of this Report. Number of pages (including exhibits) in this filing: 35 PART I Item 1. Business. (a) General Registrant is a partnership which was organized on September 25, 1958. On October 1, 1958, Registrant acquired fee title to the Lincoln Building (the "Building") and the land thereunder, located at 60 East 42nd Street, New York, New York (the "Property") On November 28, 2001, Registrant converted to a limited liability company under New York law and is now known as 60 East 42nd St. Associates L.L.C. The conversion does not change any aspect of the assets and operations of Registrant other than to protect its participants from any future liability to a third party. Registrant's partners are Peter L. Malkin, Anthony E. Malkin, Scott D. Malkin, Jack K. Feirman, Mark Labell, Thomas N. Keltner, Jr.,and Fred C. Posniak (individually, a "Partner" and, collectively, the "Partners"), each of whom also acts as an agent for holders of participations in the Registrant (each holder of a participation, individually, a "Participant" and, collectively, the "Participants"). Registrant leases the Property to Lincoln Building Associates (the "Lessee") under a long-term net operating lease (the "Lease") the current term of which expires on September 30, 2008. There is one additional 25-year renewal term which, if exercised, will extend the Lease until September 30, 2033. See Item 2 below in connection with the granting of additional lease extensions. Lessee is a partnership whose members consist of, among others, trusts for the benefit of members of Peter Malkin's family. Four of the seven Partners in Registrant are current members of Wien & Malkin LLP, 60 East 42nd Street, New York, New York, which provides supervisory and other services to Registrant and to Lessee (the "Supervisor"). See Items 10, 11, 12 and 13 hereof for a description of the ongoing services rendered by, and compensation paid to, Supervisor and for a discussion of certain relationships which may pose actual or potential conflicts of interest among Registrant, Lessee and certain of their respective affiliates. As of December 31, 2001, the Building was approximately 95% occupied by approximately 503 tenants who engage principally in the practice of law, accounting, real estate, engineering and advertising. Registrant does not maintain a full-time staff. See Item 2 hereof for additional information concerning the Property. (b) The Mortgages -1- A first mortgage loan on the Property was closed on October 6, 1994 (the "Mortgage Loan"). The material terms of the Mortgage Loan are as follows: (i) A principal amount of $12,020,814; (ii) Annual charges of $1,063,842, payable in equal monthly installments of $88,654, representing interest only at the rate of 8.85% per annum; (iii) A term of ten years; and (iv) A maturity date of October 31, 2004. The Mortgage Loan is prepayable in whole after October 6, 1995, with a penalty providing certain interest protection to the mortgagee. The Mortgage Loan is prepayable in whole without penalty during the 90-day period prior to its maturity date. The refinancing costs were capitalized by Registrant and are being expensed ratably during the period of the mortgage extension from October 6, 1994 to October 31, 2004. (v) A second mortgage loan with Emigrant Savings Bank in the amount of $27,979,186 was closed on March 9, 2000 and advances of $13,000,000 have been taken as of December 31, 2001. Monthly payments of interest only at the rate of 8.21% per annum apply to the advances made through September 30, 2000. Amounts advanced from October 1, 2000 through September 30, 2002 and amounts in excess of $13,000,000 are at interest only at the 30 day LIBOR rate. Amounts advanced after October 1, 2002 require interest only payments at 1.65 points in excess of the yield on U.S. Treasury Securities. Maturity is October 31, 2004. During the prepayment period, Borrower has the option to prepay the second mortgage note in whole only, on the first day of any month upon (i) prior written notice given by prepaid registered or certified mail at least sixty (60) days prior to the date fixed for prepayment and (ii) the payment of the prepayment premium plus accrued interest. There shall be no prepayment premium after October 1, 2004 to and including the Maturity Date. (c) The Lease The Lease, as modified March 1, 2000, provides that Lessee is required to pay Registrant: (i) annual basic rent (the "Basic Rent") equal to the sum of $24,000 for supervisory services payable to Supervisor plus the constant installment payments of interest and amortization (excluding any balloon principal due at maturity) payable during -2- such year under all mortgages to which the Lease is subordinate, provided that the aggregate principal balance of all mortgages now or hereafter placed on the Property does not exceed $40,000,000 plus refinancing costs. (ii) (A) additional rent (the "Additional Rent") equal to the lesser of (x) Lessee's net operating income for the lease year or (y) $1,053,800 and (B) further additional rent ("Further Additional Rent") equal to 50% of any remaining balance of Lessee's net operating income for such lease year. (Lessee has no obligation to make any payment of Additional Rent or Further Additional Rent until after Lessee has recouped any cumulative operating loss accruing from and after September 30, 1977. There is currently no accumulated operating loss against which to offset payment of Additional Rent or Further Additional Rent.) (iii) An advance against Additional Rent equal to the lesser of (x) Lessee's net operating income for the preceding lease year or (y) $1,053,800, which, in the latter amount, will permit basic distributions to Participants at an annual rate of approximately 14.95% per annum on their remaining cash investment in Registrant; provided, however, if such advances exceed Lessee's net operating income for any Lease year, advances otherwise re- quired during the subsequent lease year shall be reduced by an amount equal to such excess until Lessee shall have recovered, through retention of net operating income, the full amount of such excess. After the participants have received distributions equal to a return of 14% per annum, $7,380 is paid to Supervisor from the advances against Additional Rent. Further Additional Rent income is recognized when earned from the Lessee, at the close of the lease year ending September 30. Such income is not determinable until the Lessee pursuant to the Lease, renders to Registrant a report on the operation of the property. Further Additional Rent for the lease year ended September 30, 2001 was $8,057,690. After the payment of $805,769 to Supervisor as an additional payment for supervisory services, the balance of $7,251,921 was distributed to the Participants on November 30, 2001. If the Mortgage is modified, the Basic Rent shall be equal to the Wien & Malkin LLP annual supervisory fee of $24,000 plus an amount equal to the annual debt service payments under the refinanced mortgage ( not including any balloon principal payment due at maturity). (d) Competition Pursuant to tenant space leases at the Building, the average base rent payable to Lessee is approximately $35.40 per square foot (exclusive of electricity charges and escalation) and current deals range from $38 to $48. (e) Tenant Leases -3- Lessee operates the Building free from any federal, state or local government restrictions involving rent control or other similar rent regulations which may be imposed upon residential real estate in New York City. Any increase or decrease in the amount of rent payable by a tenant is governed by the provisions of the tenant's lease, or, if a new tenant, by then existing trends in the rental market for office space. Item 2. Property. Registrant owns the Building located at 60 East 42nd Street, New York, New York, known as the "Lincoln Building," and the land thereunder. See Item 1. Registrant's fee title to the Property is encumbered by Mortgage Loans with an unpaid principal balances of $25,020,814 at December 31, 2001. For a description of the terms of the Mortgage Loans, see Item 1 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and Note 3 of the Notes thereto. The Building, erected in 1930, has 55 floors, a concourse and a lower lobby. It is located diagonally opposite Grand Central Terminal, on 42nd Street between Park Avenue and Madison Avenue. The Building is net leased to Lessee. See Item 1 hereof and Note 4 of the Notes for additional information concerning the Lease. In 1999, the participants of Associates and the Lessee consented to a building improvements program (the "Program") estimated to cost approximately $22,800,000 and expected to take two to three years to complete. The Lessee is currently financing the Program and billing Associates for the costs incurred. The Program (1) grants the ownership of the improvements to Associates and acknowledges its intention to finance them through a fee mortgage increase, and (2) allows for the increased mortgage charges to be paid by Associates from an equivalent increase in the basic rent paid by the Lessee to Associates. Since any overage rent will be decreased by one-half of that amount, the net effect of the lease modification is to have Associates and the Lessee share the costs of the Program equally, assuming overage rent continues to be earned. To induce the Lessee to approve the Program, Associates agreed to grant to the Lessee, upon the completion of the Program, an extension of the lease for an additional 50 years to 2083. In January 2000, the participants of the Lessee were asked to approve an increase to the Program from $22,800,000 to approximately $28,000,000 under substantially the same conditions as had previously been approved. The increased amount has been previously authorized by the participants of Associates. Such increase would extend the lease beyond 2083, based on the net present benefit to Associates of the improvements made. -4- Item 3. Legal Proceedings. The property of Registrant is the subject of the following material pending litigation: Wien & Malkin LLP, et. al. v. Helmsley-Spear, Inc., et. al. On June 19, 1997 Wien & Malkin LLP and Peter L. Malkin filed an action in the Supreme Court of the State of New York, against Helmsley-Spear, Inc. and Leona Helmsley concerning various partnerships which own, lease or operate buildings managed by Helmsley-Spear, Inc., including Registrant's property. In their complaint, plaintiffs sought the removal of Helmsley-Spear, Inc. as managing and leasing agent for all of the buildings. Plaintiffs also sought an order precluding Leona Helmsley from exercising any partner management powers in the partnerships. In August, 1997, the Supreme Court directed that the foregoing claims proceed to arbitration. As a result, Mr. Malkin and Wien & Malkin LLP filed an arbitration complaint against Helmsley-Spear, Inc. and Mrs. Helmsley before the American Arbitration Association. Helmsley- Spear, Inc. and Mrs. Helmsley served answers denying liability and asserting various affirmative defenses and counterclaims; and Mr. Malkin and Wien & Malkin LLP filed a reply denying the counterclaims. By agreement dated December 16, 1997, Mr. Malkin and Wien & Malkin LLP (each for their own account and not in any representative capacity) reached a settlement with Mrs. Helmsley of the claims and counterclaims in the arbitration and litigation between them. Mr. Malkin and Wien & Malkin LLP then continued their prosecution of claims in the arbitration for relief against Helmsley-Spear, Inc., including its termination as the leasing and managing agent for various entities and properties, including the Registrant's Lessee. The arbitration hearings were concluded in June 2000, and the arbitrators issued their decision on March 30, 2001, ordering that the termination of Helmsley-Spear, Inc. would require a new vote by the partners in the Lessee, setting forth procedures for such a vote, and denying the other claims of all parties. Following the decision, Helmsley-Spear, Inc. applied to the court for confirmation of the decision, and Mr. Malkin and Wien & Malkin LLP applied to the court for an order setting aside that part of the decision regarding the procedure for partnership voting to terminate Helmsley-Spear, Inc. and various other parts of the decision on legal grounds. The court granted the motion to confirm the arbitrators' decision and denied the application to set aside part of the arbitrators' decision. Mr. Malkin and Wien & Malkin LLP have served notice of appeal of the court's determination. Item 4. Submission of Matters to a Vote of Participants. -5- No matters were submitted to the Participants during the last quarter of the period covered by this report. PART II Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters. Registrant, a limited liability company, was organized on September 25, 1958. The securities registered by it under the Securities Exchange Act of 1934, as amended, consist of participations in the partnership interests of the Partners in Registrant (the "Participations") and are not shares of common stock or the equivalent. The Participations represent each Participant's fractional share in a Partner's undivided interest in Registrant. One full unit of the Participations was offered at an original purchase price of $10,000; fractional units were also offered for proportionate purchase prices. Registrant has not repurchased Participations in the past and is not likely to change its policy in the future. (a) The Participations neither are traded on an established securities market nor are readily tradable on a secondary market or the equivalent thereof. Based on Registrant's transfer records, Participations are sold by the holders thereof from time to time in privately negotiated transactions and, in many instances, Registrant is not aware of the prices at which such transactions occur. During 2001, Registrant was advised of 32 transfers of Participations. In four instances, the indicated purchase price was equal to 3.5 times the face amount of the Participation transferred, i.e., $17,500 for a $5,000 participation. In all other cases, no consideration was indicated. (b) As of December 31, 2001, there were 757 holders of Participations of record. (c) Registrant does not pay dividends. During each of the years ended December 31, 2001 and 2000, Registrant made regular monthly distributions of $124.57 for each $10,000 Participation. On November 30, 2001 and November 30, 2000, Registrant made additional distributions for each $10,000 Participation of $10,359.89 and $7,937.20, respectively. Such distributions repre- sented primarily Additional Rent and Further Additional Rent payable by Lessee in accordance with the terms of the Lease. See Item 1 hereof. There are no restrictions on Registrant's present or future ability to make distributions; however, the amount of such distributions, particularly distributions of Additional Rent and Further Additional Rent, depends solely on Lessee's ability to make payments of Basic Rent, Additional Rent and Further Additional Rent to Registrant. See Item 1 hereof. Registrant expects to make distributions so long as it receives the payments provided for under the Lease. See Item 7 hereof. -6- [SELECTED FINANCIAL DATA] Item 6. EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) SELECTED FINANCIAL DATA
Year ended December 31, 2001 2000 1999 1998 1997 Basic rent income $ 6,018,750 $ 6,018,750 $ 6,018,750 $ 6,018,750 $6,018,750 Overage rent income 26,072,502 14,583,762 7,582,109 4,109,852 2,401,300 Dividend income 248,948 256,963 144,690 84,615 10,377 Miscellaneous income 1,660,904 - 0 - - 0 - - 0 - - 0 - Total revenues $34,001,104 $20,859,475 $13,745,549 $10,213,217 $8,430,427 Net income $29,512,491 $17,315,601 $10,901,065 $ 7,507,228 $4,752,560 Earnings per $10,000 participation unit, based on 3,300 participation units outstanding during the year $ 8,943 $ 5,247 $ 3,303 $ 2,275 $ 1,440 Total assets $32,347,669 $20,842,972 $13,253,481 $ 8,787,638 $5,930,702 Long-term obligations $ - 0 - $ - 0 - $ - 0- $ - 0 - $ -0- Distributions per $10,000 participation unit, based on 3,300 participation units outstanding during the year: Income $ 5,182 $ 3,185 $ 2,033 $ 1,500 $ 1,179 Return of capital - 0 - - 0 - - 0 - - 0 - -0- Total distributions $ 5,182 $ 3,185 $ 2,033 $ 1,500 $ 1,179
-7- Item 7. EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) QUARTERLY RESULTS OF OPERATIONS The following table presents the Company's operating results for each of the eight fiscal quarters in the period ended December 31, 2001. The information for each of these quarters is unaudited and has been prepared on the same basis as the audited financial statements included in this Annual Report on Form 10-K. In the opinion of management, all necessary adjustments, which consist only of normal and recurring accruals, have been included to present fairly the unaudited quarterly results. This data should be read together with the financial statements and the notes thereto included in this Annual Report on Form 10-K.
Three Months Ended March 31, June 30, September 30, December 31, 2000 2000 2000 2000 Statement of Income Data: Minimum net, basic rent income $1,504,687 $1,504,688 $1,504,688 $ 1,504,687 Additional rent income - - - 14,583,762 Dividend income 95,211 48,471 52,024 61,257 Total revenues 1,599,898 1,553,159 1,556,712 16,149,706 Leasehold rent 492,500 492,500 492,500 492,500 Supervisory services 39,854 39,854 39,854 883,165 Amortization of leasehold 52,117 52,117 52,117 52,117 Professional fees - - - 362,679 Total expenses 584,471 584,471 584,471 1,790,461 Net income $1,015,427 $ 968,688 $ 972,241 $14,359,245 Earnings per $10,000 participation unit, based on 3,300 participation units outstanding during each period $ 307 $ 294 $ 295 $ 4,351
-8- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. Registrant was organized solely for the purpose of acquiring the Property subject to a net operating lease held by Lessee. Registrant is required to pay, from Basic Rent under the Lease, mortgage charges and amounts for supervisory services. Registrant is required to pay from Additional Rent and Further Additional Rent additional amounts for supervisory services and then to distribute the balance of such Additional Rent and Further Additional Rent to the Participants. Under the Lease, Lessee has assumed sole responsibility for the condition, operation, repair, maintenance and management of the Property. Registrant is not required to maintain substantial liquid assets to defray any operating expenses of the Property. The following summarizes the material factors affecting Registrant's results of operations for the three years ended December 31, 2001: (a) Total income increased for the year ended December 31, 2001 as compared with the year ended December 31, 2000. Such increase is mainly attributable to the payment of an increased amount of Further Additional Rent received by Registrant in 2001 and interest income. Total income increased for the year ended December 31, 2000 as compared with the year ended December 31, 1999. Such increase is attributable to the payment of an increased amount of Further Additional Rent to Registrant in 2000 and interest income. See Note 4 of the Notes. (b) Total expenses increased for the year ended December 31, 2001 as compared with the year ended December 31, 2000. Such increase resulted from an increase in mortgage interest, the additional payment for supervisory services payable with respect to an increased amount of Further Additional Rent received by Registrant in 2001, amortization of second mortgage refinancing costs and depreciation of assets placed in service in 2001. Total expenses increased for the year ended December 31, 2000 as compared with the year ended December 31, 1999. Such increase resulted from an increase in mortgage interest, additional payment for supervisory services payable with respect to Further Additional Rent received by Registrant in 2000, amortization of second mortgage refinancing costs and professional fees. Registrant's results of operations are affected primarily by the amount of rent payable to it under the Lease. The amount of Overage Rent, sometimes referred to as additional rent and further -9- additional rent payable to Registrant, is affected by the New York City economy and real estate rental market. It is difficult for management to forecast the New York City real estate market, Liquidity and Capital Resources There has been no significant change in Registrant's liquidity for the year ended December 31, 2001 as compared with the year ended December 31, 2000, and Registrant may from time to time establish a reserve for contingent or unforeseen liabilities. No amortization payments are due under the Mortgages to fully satisfy the outstanding principal balance at maturity, and furthermore, Registrant does not maintain any reserve to cover the payment of such Mortgage indebtedness at maturity. Therefore, repayment of the Mortgage 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 current real estate trends continue in the geographic area in which the Property is located, Registrant anticipates that the value of the Property would be in excess of the amount of the Mortgage balance at maturity. Registrant anticipates that funds for working capital for the Property will be provided by rental payments received from Lessee and, to the extent necessary, from additional capital investment by the partners in 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. Inflation Inflationary trends in the economy do not directly affect Registrant's operations since, as noted above, 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 Additional Rent and Further Additional Rent payable by Lessee, which is based on Lessee's net operating profit. Item 8. Financial Statements and Supplementary Data. The financial statements, together with the accompanying report by, and the consent to the use thereof, of J.H. Cohn LLP immediately following, are being filed in response to this item. Item 9. Disagreement on Accounting and Financial Disclosure. Not applicable. -10- PART III Item 10. Directors and Executive Officers of the Registrant. Registrant has no directors or officers or any other centralization of management. There is no specific term of office for any Partner. The table below sets forth as to each Partner as of December 31, 2001 the following: name, age, nature of any family relationship with any other Partner, business experience during the past five years and principal occupation and employment during such period, including the name and principal business of any corporation or any organization in which such occupation and employment was carried on and the date such individual became a Partner: Nature Principal Date of Family Occupation Individual Relation- Business and became Name Age ship Experience Employment Partner Anthony E. Malkin 39 son of Real estate Senior Director 1997 Peter L. Supervision of Supervisory Malkin, and Service of Wien brother management & Malkin LLP of and President Scott D. of W&M Properties Malkin L.L.C. Scott D. Malkin 43 son of Chairman and CEO of 1997 Peter L. CEO of real S.D. Malkin Malkin, estate Properties, brother development Inc. of company Anthony E. Malkin Mark Labell 49 None Real Estate Partner 1998 Supervision Wien & Malkin LLP, Thomas N. Keltner, Jr. 55 None Real Estate Partner 1996 Supervision Wien & Malkin LLP, -11- Nature Principal Date of Family Occupation Individual Relation- Business and became Name Age ship Experience Employment Partner Jack K. Feirman 56 None Real Estate Partner 1998 Supervision Wien & Malkin LLP, Peter L. Malkin 68 Father Real Estate Senior Partner 1970 of Supervision and Chairman Anthony E. Wien & Malkin and LLP, Scott D. Malkin Fred C. Posniak 56 None Real Estate Director 2001 Supervision W & M Properties, L.L.C. As stated above, four of the Partners are current members of Supervisor. See Items 11, 12 and 13 hereof for a description of the services rendered by, and the compensation paid to, Supervisor and for a discussion of certain relationships which may pose actual or potential conflicts of interest among Registrant, Lessee and certain of their respective affiliates. The names of entities which have a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or are subject to the requirements of Section 15(d) of that Act, and in which the Partners are either a director, joint venturer or general partner are as follows: Peter L. Malkin is a member in 250 West 57th St. Associates L.L.C. and a member in Empire State Building Associates L.L.C.; and a general partner in Navarre-500 Building Associates and Garment Capitol Associates. Thomas N. Keltner, Jr. is a member in Empire State Building Associates L.L.C. and a general partner in Navarre-500 Building Associates and Garment Capitol Associates. Anthony E. Malkin is a member in 250 West 57th Street Associates L.L.C. -12- Item 11. Executive Compensation. As stated in Item 10 hereof, Registrant has no directors or officers or any other centralization of management. No remuneration was paid during the current fiscal year ended December 31, 2001 by Registrant to any of the Partners as such. Registrant pays Supervisor, for special services at hourly rates and for supervisory services and disbursements. The supervisory fees are $24,000 per annum plus an additional payment of 10% of all distributions to Participants in Registrant in any year in excess of the amount representing an annual return of 14% on the Participants' remaining cash investment in Registrant (which remaining cash investment, at December 31, 2001, was equal to the Participant's original cash investment of $7,000,000). Pursuant to such fee arrangements, Registrant paid Supervisor a total of $837,149 (consisting of $24,000 as an annual basic payment for supervisory services and $813,149 as an additional payment for supervisory services) during the fiscal year ended December 31, 2001. The supervisory services provided to Registrant by Supervisor include real estate supervisory, legal, administrative and financial services. The services include, but are not limited to providing or coordinating with counsel to Registrant, maintaining all of its partnership and Participant records, performing physical inspections of the Building, reviewing insurance coverage and conducting annual supervisory review meetings, receipt of monthly rent from Net Lessee, payment of monthly and additional distributions to the Participants, payment of all other disbursements, confirmation of the payment of real estate taxes, and active review of financial statements submitted to Registrant by Net Lessee and financial statements audited by and tax information prepared by Registrant's independent certified public accountant, and distribution of such materials to the Participants. Supervisor also prepares quarterly, annual and other periodic filings with the Securities and Exchange Commission and applicable state authorities. Out of its fees, Supervisor paid all disbursements and costs of regular accounting services. As noted in Items 1 and 10 of this report, four of the Partners are also members of Supervisor. Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) Registrant has no voting securities. See Item 5 hereof. At December 31, 2001, no person owned of record or was known by Registrant to own beneficially more than 5% of the outstanding Participations. -13- (b) At December 31, 2001, the Partners (see Item 10 hereof) beneficially owned, directly or indirectly, the following Participations: Name and Address Amount of Percent of Beneficial Beneficial of Title of Class Owners Ownership Class Participations Anthony E. Malkin $25,833 .369% 60 East 42nd Street New York, NY 10165 Thomas N. Keltner, Jr. $ 2,500 .036% 60 East 42nd Street New York, NY 10165 Scott D. Malkin $33,334 .476% 27 Hereford Square SW7 4NB London, England At such date, certain of the Partners (or their respective spouses) held additional Participations as follows: Anthony E. Malkin owned of record as co-trustee an aggregate of $25,000 of Participations. Mr. Anthony E. Malkin disclaims any beneficial ownership of such Participations. Peter L. Malkin owned of record as trustee or co-trustee an aggregate of $55,714 of Participations. Mr. Malkin disclaims any beneficial ownership of such Participations. Entities for the benefit of members of Peter L. Malkin's family owned of record and beneficially $107,500 of Participations. Mr. Malkin disclaims any beneficial ownership of such Participations, except that related Trusts are required to complete scheduled payments to Mr. Malkin. (c) Not applicable. -14- Item 13. Certain Relationships and Related Transactions. (a) As stated in Items 1 and 10 hereof, Messrs. Feirman, Keltner, Labell, Anthony E. Malkin, Peter L. Malkin, Scott D. Malkin and Posniak are the seven members in Registrant and also act as agents for Participants in their respective membership interests therein. Mr. Peter Malkin is also among the partners in Lessee. As a consequence of one of the seven members being a partner in Lessee and four of the seven members being members of Supervisor (which supervises Registrant and Lessee), certain actual or potential conflicts of interest may arise with respect to the management and administration of the business of Registrant. However, under the respective Participating Agreements pursuant to which the members act as agents for the Participants, certain transactions require the prior consent from Participants owning a specified interest under the Agreements in order for the agents to act on the Participants' behalf. Such transactions, among others, include modification and extension of the Lease or the Mortgage Loan, or a sale or other disposition of the Property or substantially all of Registrant's other assets. See Items 1 and 2 hereof for a description of the terms of the Lease. As of December 31, 2001, Mr. Peter Malkin owned a partnership interest in Lessee. The respective interests, if any, of the members in Registrant and Lessee arise solely from ownership of their respective Participations, and, in the case of Mr. Peter Malkin, his individual ownership of a partnership interest 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 partners in Lessee. However, each of the four members who is a partner in Supervisor, by reason of his interests in Supervisor, may receive income attributable to supervisory, service, legal or other remuneration paid to Supervisor for services rendered to Registrant and Lessee. See Item 11 hereof for a description of the remuneration arrangements between Registrant and Supervisor relating to supervisory services provided by Supervisor. Reference is also made to Items 1 and 10 hereof for a description of the relationship between Registrant and Supervisor, of which four of the members are among the partners in Supervisor. The respective interests of each member in any remuneration paid or given by Registrant to Supervisor arises solely from such member's ownership of an interest in Supervisor. See Item 11 hereof for a description of the remuneration arrangements between Registrant and Supervisor relating to supervisory services provided by Supervisor. (b) Reference is made to paragraph (a) above. -15- (c) Not applicable. (d) Not applicable. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K. (a)(1) Financial Statements: Consent of J. H. Cohn LLP, Certified Public Accountants, dated February 26, 2002. Accountant's Report of J. H. Cohn LLP, Certified Public Accountants, dated February 26, 2002. Balance Sheets at December 31, 2001 and at December 31, 2000 (Exhibit A). Statements of Income for the fiscal years ended December 31, 2001, 2000 and 1999. (Exhibit B). Statement of Members' Capital Deficit for the fiscal year ended December 31, 2001 (Exhibit C-1). Statement of Members' Capital Deficit for the fiscal year ended December 31, 2000 (Exhibit C-2). Statement of Members' Capital Deficit for the fiscal year ended December 31, 1999 (Exhibit C-3). Statements of Cash Flows for the fiscal years ended December 31, 2001, 2000 and 1999 (Exhibit D). Notes to Financial Statements for the fiscal years ended December 31, 2001, 2000 and 1999. (2) Financial Statement Schedules: List of Omitted Schedules. Real Estate and Accumulated Depreciation - December 31, 2001 (Schedule III). (3) Exhibits: See Exhibit Index. (b) No report on Form 8-K was filed by Registrant during the last quarter of the period covered by this report. -16- [J.H. COHN LLP ACCOUNTANTS & CONSULTANTS] March 27,2002 Empire State Building Associates L.L.C. New York, N. Y. We consent to the use of our independent accountants' report dated March 27, 2002 covering our audits of the accompanying financial statements of Empire State Building Associates L.L.C. in connection with and as part of your December 31, 2001 annual report (Form 10-K) to the Securities and Exchange Commission. J.H. Cohn LLP New York, N.Y. -17- [J.H. COHN LLP ACCOUNTANTS & CONSULTANTS] INDEPENDENT ACCOUNTANTS' REPORT To the participants in Empire State Building Associates L.L.C. (a Limited Liability Company) New York, N. Y. We have audited the accompanying balance sheets of Empire State Building Associates L.L.C. ("Associates") as of December 31, 2001 and 2000, and the related statements of income, members' equity and cash flows for each of the three years in the period ended December 31, 2001, and the supporting financial statement schedule as contained in Item 14(a)(2) of this Form 10-K. These financial statements and schedule are the responsibility of Associates' management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Empire State Building Associates L.L.C. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America, and the related financial statement schedule, when considered in relation to the basic financial statements, presents fairly, in all material respects, the information set forth therein. J.H. Cohn LLP New York, N. Y. March 27, 2002 -18- EXHIBIT A EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) BALANCE SHEETS A S S E T S December 31, 2001 2000 Current assets: Cash and cash equivalents (Note 14): JPMorgan Chase Bank $ 3,739 $ 1,418 Distribution account held by Wien & Malkin LLP 324,111 324,111 Fidelity U.S. Treasury Income Portfolio 29,520,266 15,408,212 29,848,116 15,733,741 Additional rent due from Empire State Building Company L.L.C., a related party 72,502 2,583,762 Prepaid rent 23,831 23,831 TOTAL CURRENT ASSETS 29,944,449 18,341,334 Deferred charges 110,050 - Real estate (Note 2): Leasehold on Empire State Building, 350 Fifth Avenue, New York, N. Y 39,000,000 39,000,000 Less: Accumulated amortization 36,706,830 36,498,362 2,293,170 2,501,638 TOTAL ASSETS $32,347,669 $20,842,972 LIABILITIES AND MEMBERS' EQUITY Current liabilities: Accrued professional fees, including amounts due to a related party (Note 11) $ 316,804 $ 1,854,565 Accrued supervisory services, to a related party (Note 5) 1,474,468 843,310 TOTAL LIABILITIES 1,791,272 2,697,875 Contingencies (Notes 10 and 12) Members' equity (Exhibit C) 30,556,397 18,145,097 TOTAL LIABILITIES AND MEMBERS' EQUITY $32,347,669 $20,842,972 See accompanying notes to financial statements. -19- EXHIBIT B EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) STATEMENTS OF INCOME
Year ended December 31, 2001 2000 1999 Revenues: Rent income, from a related party (Note 3) $32,091,252 $20,602,512 $13,600,859 Miscellaneous income (Note 11) 1,660,904 - - Dividend income 248,948 256,963 144,690 34,001,104 20,859,475 13,745,549 Expenses: Leasehold rent (Note 4) 1,970,000 1,970,000 1,970,000 Supervisory services, to a related party (Note 5) 1,633,885 1,002,727 581,983 Professional fees, including amounts due to a related party (Note 11) 676,260 362,679 84,033 Amortization of leasehold (Note 2) 208,468 208,468 208,468 4,488,613 3,543,874 2,844,484 NET INCOME, CARRIED TO MEMBERS' EQUITY (NOTE 8) $29,512,491 $17,315,601 $10,901,065 Earnings per $10,000 participation unit, based on 3,300 participation units outstanding during each year $ 8,943 $ 5,247 $ 3,303
See accompanying notes to financial statements. -20- EXHIBIT C-3 EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) STATEMENT OF MEMBERS' EQUITY YEAR ENDED DECEMBER 31, 1999
Members' Members' Equity Equity January 1, Share of December 31, 1999 net income Distributions 1999 Richard A. Shapiro Group $2,382,433 $ 3,633,688 $2,236,444 $ 3,779,677 Thomas N. Keltner, Jr. Group 2,382,432 3,633,689 2,236,445 3,779,676 Peter L. Malkin Group 2,382,432 3,633,688 2,236,444 3,779,676 $7,147,297 $10,901,065 $6,709,333 $11,339,029
See accompanying notes to financial statements. -21- EXHIBIT C-1 EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) STATEMENT OF MEMBERS' EQUITY YEAR ENDED DECEMBER 31, 2001
Members' Members' Equity Equity January 1, Share of December 31, 2001 net income Distributions 2001 Anthony E. Malkin Group (formerly Richard A. Shapiro Group) $ 6,048,366 $ 9,837,497 $ 5,700,397 $10,185,466 Thomas N. Keltner, Jr. Group 6,048,365 9,837,497 5,700,397 10,185,465 Peter L. Malkin Group 6,048,366 9,837,497 5,700,397 10,185,466 $18,145,097 $29,512,491 $17,101,191 $30,556,397
See accompanying notes to financial statements. -22- EXHIBIT C-2 EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) STATEMENT OF MEMBERS' EQUITY
YEAR ENDED DECEMBER 31, 2000 Members' Members' Equity Equity January 1, Share of December 31, 2000 net income Distributions 2000 Richard A. Shapiro Group $ 3,779,677 $ 5,771,867 $3,503,178 $ 6,048,366 Thomas N. Keltner, Jr. Group 3,779,676 5,771,867 3,503,178 6,048,365 Peter L. Malkin Group 3,779,676 5,771,867 3,503,177 6,048,366 $11,339,029 $17,315,601 $10,509,533 $18,145,097
See accompanying notes to financial statements. -23- EXHIBIT D EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) STATEMENTS OF CASH FLOWS
Year ended December 31, 2001 2000 1999 Cash flows from operating activities: Net income $ 29,512,491 $ 17,315,601 $10,901,065 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of leasehold 208,468 208,468 208,468 Changes in operating assets and liabilities: Additional rent due from Empire State Building Company L.L.C., a related party 2,511,260 (1,601,653) (372,257) Deferred charges (110,050) - - Accrued supervisory services, to a related party 631,158 420,744 242,566 Accrued professional fees, to a related party (1,537,761) 362,679 31,545 Net cash provided by operating activities 31,215,566 16,705,839 11,011,387 Cash flows from financing activities: Cash distributions (17,101,191) (10,509,533) (6,709,333) Net cash used in financing activities (17,101,191) (10,509,533) (6,709,333) Net increase in cash and cash equivalents 14,114,375 6,196,306 4,302,054 Cash and cash equivalents, beginning of year 15,733,741 9,537,435 5,235,381 CASH AND CASH EQUIVALENTS, END OF YEAR $ 29,848,116 $ 15,733,741 $ 9,537,435
See accompanying notes to financial statements. -24- EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) NOTES TO FINANCIAL STATEMENTS 1. Business Activity and Reorganization Empire State Building Associates L.L.C. ("Associates") holds the tenant's position in the master leasehold of the Empire State Building (the "Building"), located at 350 Fifth Avenue, New York City. Associates subleases the property to Empire State Building Company L.L.C.("Company"). Associates operated as a general partnership, Empire State Building Associates, until October 1, 2001, when it converted to a limited liability company and changed to its current name. Ownership percentages in Associates were unchanged by the conversion. Associates continues to be treated as a partnership for tax purposes, and the partnership's income tax basis of its assets and liabilities carried over to the limited liability company. 2. Summary of Significant Accounting Policies a. Cash and Cash Equivalents: Cash and cash equivalents include investments in money market funds and all highly liquid debt instruments purchased with a maturity of three months or less. b. Real Estate and Amortization of Leasehold: Real estate, consisting of a leasehold, is stated at cost. Amortization of the leasehold is being computed through its first renewal term by the straight-line method over its estimated useful life of 25 years, from January 1, 1988 to January 5, 2013. c. Use of Estimates: In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Related Party Transactions - Rent Income Rent income for the years ended December 31, 2001, 2000 and 1999 totaling $32,091,252, $20,602,512 and $13,600,859, respectively, consists of the minimum annual rent plus additional rent under an operating sublease dated December 27, 1961, as modified February 15, 1965, with Company (the "Sublessee"), as follows: Year ended December 31, 2001 2000 1999 Minimum net basic rent $ 6,018,750 $ 6,018,750 $ 6,018,750 Additional rent earned 26,072,502 14,583,762 7,582,109 $32,091,252 $20,602,512 $13,600,859 -25- EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) NOTES TO FINANCIAL STATEMENTS (Continued) 3. Related Party Transactions - Rent Income (continued) The sublease provides for the same initial term and renewal options as the leasehold (see Note 4), less one day. In January 1989, the Sublessee exercised its option to renew the sublease for the first renewal period from January 4, 1992 to January 4, 2013. The annual minimum net basic rent during the first renewal term was reduced to $6,018,750, and is to be further reduced to $5,895,625 during each of three remaining renewal terms. Additional rent earned is equal to fifty percent of the Sublessee's annual net income (as defined in the sublease) in excess of $1,000,000. A member in Associates is also a member in the Sublessee. 4. Leasehold Rent Leasehold rent represents the net basic rent of $1,970,000 per annum under an operating lease dated December 27, 1961, as modified February 15, 1965, with The Prudential Insurance Company of America ("Prudential"). Associates exercised its first renewal option in 1988, and the current leasehold rent remains unchanged throughout the first renewal term of the lease, which ends on January 5, 2013. The lease contains options for Associates to renew the leasehold for an additional 3 successive periods of 21 years each. The basic rent is to be further reduced to $1,723,750 per annum during each of the remaining three renewal terms. On November 27, 1991, Prudential sold the property to E.G. Holding Co., Inc. which, through merger and conveyance, transferred its interest as lessor to Trump Empire State Partners. Associates' rights under the master leasehold remain unchanged. See Note 9. 5. Related Party Transactions - Supervisory Services Supervisory services (including disbursements and cost of regular accounting services) during the years ended December 31, 2001, 2000 and 1999, totaling $1,633,885, $1,002,727 and $581,983, respectively, represent fees incurred by the firm of Wien & Malkin LLP. Some members of that firm are members in Associates. Fees for supervisory services are paid pursuant to an agreement, which amount is based on a rate of return of investment achieved by the participants in Associates each year. 6. Number of Participants There were approximately 2,640 participants in the participating groups at December 31, 2001, 2000 and 1999. -26- EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) NOTES TO FINANCIAL STATEMENTS (Continued) 7. Determination of Distributions to Participants Distributions to participants in 2001, 2000 and 1999 of $17,101,191, $10,509,533 and $6,709,333, respectively, represented the following:
2001 2000 1999 Minimum annual rent $ 6,018,750 $ 6,018,750 $ 6,018,750 Additional rent, earned in previous year, distributed in current year 14,583,762 7,582,109 4,109,852 Dividend income earned in previous year, distributed in current year 256,963 144,690 84,615 20,859,475 13,745,549 10,213,217 Less: Leasehold rent expense $1,970,000 $1,970,000 $1,970,000 Supervisory services incurred in previous year 1,002,727 581,983 339,417 Professional fees incurred in previous year 362,679 84,033 188,104 Amount held in reserve to fund payment of accrued legal fees 422,878 600,000 1,006,363 3,758,284 3,236,016 3,503,884 Distributions to participants $17,101,191 $10,509,533 $ 6,709,333
8. Distributions and Amount of Income per $10,000 Participation Unit Distributions per $10,000 participation unit during the years 2001, 2000 and 1999 based on 3,300 participation units outstanding during each year, consisted of the following: Year ended December 31, 2001 2000 1999 Income $5,182 $3,185 $2,033 Return of capital - - - TOTAL DISTRIBUTIONS $5,182 $3,185 $2,033 Net income is computed without regard to income tax expense since Associates does not itself pay a tax on its income; instead, any such taxes are paid by the participants in their individual capacities. -27- EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) NOTES TO FINANCIAL STATEMENTS (Continued) 9. Proposal to Acquire Fee Title to Empire State Building and Subsequent Event On September 14, 2001, Associates' Agents filed a proxy statment with the Securities and Exchange Commission in connection with the Solicitation of Consents of Associates' Participants for a program (a) to acquire the fee title to the Empire State Building for a price not to exceed $57.5 million, and for total acquisition and financing costs not to exceed $60.5 million; (b) to mortgage the fee title and leasehold to finance such total costs; and (c) to effect such acquisition and financing alone or with the operating sublessee or any third party on terms the Agents believe beneficial for Associates. The required consents for the program were obtained prior to December 31, 2001. On March 18, 2002, Associates signed both a purchase contract to acquire the fee title at a price of $57.5 million (with a deposit of $1 million) and a $60.5 million mortgage commitment to finance the acquisition and financing costs. 10. Litigation and Subsequent Events On November 29, 2001, an action entitled Irving Schneider v. Peter L. Malkin et al. was brought in New York State Supreme Court by the holder of a $10,000 original participation in Associates (representing 1/3300th of the interests in Associates) against Associates' Agents, claiming that the Agents had violated contractual and fiduciary duties and that the consent of the Participants to Associates' program for acquisition and financing of the fee title to the Empire State Building pursuant to the September 14, 2001 Solicitation (Note 9) is ineffective. On February 28, 2002, the Court granted an order dismissing all of Mr. Schneider's claims. Mr. Schneider filed on March 8, 2002 a notice of appeal of the order dismissing his claims. Associates has paid the defense costs in this action for professional fees and disbursements, of which $122,442 has been incurred through December 31, 2001. Counsel for Associates' Agents has advised that Mr. Schneider's claims are without merit. It is not possible at this time to determine the potential loss, if any, which might result from this action. No provision for liability has been made in the accompanying financial statements. Associates established a reserve of $500,000 as of March 11, 2002 for future defense costs in any appeal or other proceedings related to this matter. 11. Related Party Transactions - Professional Fees and Miscellaneous Income The accompanying statements of income reflect legal fees paid or owed to Wien & Malkin LLP, a related party (Note 5), as follows: 2001 2000 1999 Reimbursement owing to Agents of their legal and accounting expenses relating to suit by Julien Studley $120,009 $219,386 $39,670 Other payments made or accrued 392,809 143,293 44,363 $512,818 $362,679 $84,033 -28- EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) NOTES TO FINANCIAL STATEMENTS (Continued) 11. Related Party Transactions - Professional Fees and Miscellaneous Income (continued) Accrued professional fees, at December 31, 2002 and 2001 include $220,749 and $1,854,565, respectively, owed to Wien & Malkin LLP. Miscellaneous income of $1,660,904 in 2001 consists of a reimbursement by Company of litigation costs and disbursements expensed by Associates in 2001 and prior years. The litigation costs and disbursements had been incurred in Associates' successful defense of dismissed claims by Julien Studley, a holder of a $20,000 original participation in Associates, against Agents for Associates. 12. Contingencies Wien & Malkin LLP and Peter L. Malkin are engaged in a dispute with Company's managing agent, Helmsley-Spear, Inc., concerning the management, leasing, and supervision of the property that is subject to the net sublease to the operating sublessee. In this connection, certain legal and professional fees and other expenses have been paid and incurred by Wien & Malkin LLP and Mr. Malkin, and additional costs are expected to be incurred. Wien & Malkin LLP and Mr. Malkin have represented that such costs will be recovered only to the extent that (a) competent tribunal authorizes payment by Associates or (b) a participant voluntarily agrees that his or her proportionate share be paid. Accordingly, Associates' allocable share of such costs is as yet undetermined, and Associates has not provided for the expense and related liability with respect to such costs in these financial statements. The original action commenced in June 1997 and was referred to arbitration. The March 30, 2001 decision of the arbitrators, which was confirmed by the court, (i) reaffirms the right of the partners in the lessee to vote to terminate Helmsley-Spear, Inc. without cause, (ii) dismisses Helmsley-Spear, Inc.'s claims against Wien & Malkin LLP, and (iii) rejects the termination of Helmsley-Spear, Inc. for cause. Parts of the decision of the court are under appeal. 13. Receipt of Warrants and Stock in Telecommunications Companies In 2000, Associates received shares of common stock and warrants from certain unrelated companies in exchange for permission for those companies to provide high-speed internet access and other telecommunication services to the Building. The Sublessee received an equal number of shares and warrants. There are restrictions as to the transfer of the stock, and neither the warrants nor the stock has an ascertainable value since their issuance. Accordingly, the accompanying financial statements do not reflect any value for these securities. 14. Concentration of Credit Risk Associates maintains cash balances in a bank, money market funds (Fidelity U.S. Treasury Income Portfolio) and a distribution account held by Wien & Malkin LLP. The bank balance is insured by the Federal Deposit Insurance Corporation up to $100,000, and at December 31, 2001 was completely insured. The cash in the money market funds and the account held by Wien & Malkin LLP are not insured. The funds held in the distribution account were paid to the participants on January 1, 2002. 15. Reclassifications As a result of the reorganization in 2001 (Note 1), certain accounts in prior year financial statements have been reclassified to conform with the presentation in the financial statements for 2001. -29- EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) OMITTED SCHEDULES The following schedules have been omitted as not applicable in the present instance: SCHEDULE I - Condensed financial information of registrant. SCHEDULE II - Valuation and qualifying accounts. SCHEDULE IV - Mortgage loans on real estate. -30- SCHEDULE III EMPIRE STATE BUILDING ASSOCIATES L.L.C. (A Limited Liability Company) Real Estate and Accumulated Depreciation December 31, 2001 Column A Description Leasehold on Empire State Building located at 350 Fifth Avenue, New York, New York. B Encumbrances............................................. None C Initial cost to company Leasehold.............................................. $39,000,000 D Cost capitalized subsequent to acquisition............... None E Gross amount at which carried at close of period Leasehold............................................ $39,000,000(a) F Accumulated amortization................................ $36,706,830(b) G Date of construction 1931 H Date acquired December 27, 1961 I Life on which leasehold amortization in latest income statements is computed 25 years from January 1, 1988 (see Note 2 of Notes to Financial Statements). (a) There have been no changes in the carrying values of real estate for the years ended December 31, 2001, December 31, 2000 and December 31, 1999. The costs for federal income tax purposes are the same as for financial statement purposes. (b) Accumulated amortization Balance at January 1, 1999 $36,081,426 Amortization: F/Y/E 12/31/99 $208,468 12/31/00 208,468 12/31/01 208,468 625,404 Balance at December 31, 2001 $36,706,830 -31- -16- SIGNATURE 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 Partners in Registrant, pursuant to Powers of Attorney, dated March 18, 1998, March 20, 1998 and May 14, 1998 (the "Power"). 60 EAST 42ND ST. ASSOCIATES L.L.C. (Registrant) By /s/ Stanley Katzman Stanley Katzman, Attorney-in-Fact* Date: April 15, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned as Attorney-in-Fact for each of the Partners in Registrant, pursuant to the Power, on behalf of Registrant and as a Partner in Registrant on the date indicated. By /s/ Stanley Katzman Stanley Katzman, Attorney-in-Fact* Date: April 15, 2002 ________________________ * Mr. Katzman supervises accounting functions for Registrant. -32- Exhibit Index Number Document Page* 3(a) Partnership Agreement, dated September 25, 1958, which was filed by letter dated March 31, 1981 (Commission File No. 0-2670) as Exhibit No. 3 to Registrant's Form 10-K for the fiscal year ended December 31, 1980, is incorporated by reference as an exhibit hereto. 3(b) Amended Business Certificate of Registrant filed with the Clerk of New York County on November 28, 1997, reflecting a change in the Partners of Registrant, which was filed as Exhibit 3(b) to Registrant's 10-Q for the period ended March 31, 1998 and is incorporated by reference as an exhibit hereto. 4 Form of Participating Agreement, which was filed as Exhibit No. 4 to Registrant's Form S-1 Registration Statement, as amended (the "Registration Statement") by letter dated June 28, 1954 and assigned file No. 2-10981, is incorporated by reference as an exhibit hereto. 10(a) Deed of Lincoln Building to WLKP Realty Corp., which was filed as Exhibit No. 5 to Registrant's Registration Statement by letter dated June 28, 1954 and assigned File No. 2-10981, is incorporated by reference as an exhibit hereto. _______________________ * Page references are based on a sequential numbering system. -33- Number Document Page* 10(b) First Mortgage evidenced by a Modification, Extension & Consolidation Agreement, dated March 31, 1954, between WLKP Realty Corp. and The Prudential Insurance Company of America ("Prudential"), which was filed as Exhibit No. 6 to Registrant's Registration Statement by letter dated June 28, 1954 and assigned File No. 2-10981, is incorporated by reference as an exhibit hereto. 10(c) Form of Net Lease between Registrant and Lincoln Building Associates, which was filed as Exhibit No. 9 to Registrant's Registration Statement by letter dated June 28, 1954 and assigned File No. 2-10981, is incorporated by reference as an exhibit hereto. 10(d) Deed from Lincoln Building Associates to Registrant, dated October 1, 1958, which was filed by letter dated March 31, 1981 (Commission File No. 0-2670) as Exhibit No. 10(d) to Registrant's Form 10-K for the fiscal year ended December 31, 1980, is incorporated by reference, as an exhibit hereto. 10(e) Second Modification of Lease Agreement, dated January 1, 1977, which was filed by letter dated March 28, 1980 (Commission File No. 0-2670) as Exhibit II under Item 10(b) of Registrant's Form 10-K for the fiscal year ended December 31, 1979, is incorporated by reference as an exhibit hereto. 10(f) Third Modification of Lease Agreement, which was filed by letter dated March 28, 1980 (Commission File No. 0-2670) as Exhibit II under Item 10(b) of Registrant's Form 10-K for the fiscal year ended December 31, 1979, is incorporated by reference as an exhibit hereto. _______________________ * Page references are based on a sequential numbering system. -34- Number Document Page* 13(b) Letter to Participants, dated November 30, 2001 and accompanying financial reports for the lease year ended September 30, 2001. The foregoing material shall not be deemed to be "filed" with the Commission or otherwise subject to the liabilities of Section 18 of the Securities Exchange Act of 1934. 24 Powers of Attorney dated March 18, 1998, March 20, 1998 and May 14, 1998 between the Partners of Registrant and Stanley Katzman and Richard A. Shapiro, which was filed as Exhibit 24 to Registrant's 10-Q for the period ended March 31, 1998 and is incorporated by reference as an exhibit hereto. _______________________ - Page references are based on a sequential numbering system. -35-