-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R3q6XD7OwUkYjB9lbVVVNM8h8TQXrrCR9bKreQPhg9PRCEK+dDEQhiOljW0n9Nzn dH0lziOujHX62qcS+5iDeQ== 0000090794-02-000018.txt : 20021119 0000090794-02-000018.hdr.sgml : 20021119 20021119172615 ACCESSION NUMBER: 0000090794-02-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 60 EAST 42ND STREET ASSOCIATES CENTRAL INDEX KEY: 0000090794 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 136077181 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02670 FILM NUMBER: 02833782 BUSINESS ADDRESS: STREET 1: C/O WIEN & MALKIN LLP STREET 2: 60 EAST 42ND STREET CITY: NEW YORK STATE: NY ZIP: 10165 BUSINESS PHONE: 2126878700 MAIL ADDRESS: STREET 1: C/O WIEN & MALKIN LLP STREET 2: 60 EAST 42ND STREET CITY: NEW YORK STATE: NY ZIP: 10165 10-Q 1 east10q.txt 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, 2002 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 0-2670 60 EAST 42ND ST. ASSOCIATES L.L.C. (Exact name of registrant as specified in its charter) A New York Limited Liability Company 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) (212) 687-8700 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) 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 such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ]. No [ ]. An Exhibit Index is located on Page 20 of this Report. Number of pages (including exhibits) in this filing: 23 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. 60 East 42nd St. Associates L.L.C. Condensed Statements of Income (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2002 2001 2002 2001 Income: Basic rent, from a related party (Note B) $ 542,095 $ 400,520 $ 1,482,348 $1,112,963 Advance of additional rent from a related party (Note B) 263,450 263,450 790,350 790,350 Further additional rent from a related party (Note B) 6,944,789 8,057,690 6,944,789 8,057,690 Interest income 25,906 18,309 28,863 138,733 ------------ ---------- ---------- ----------- Total income $7,776,240 $8,739,969 $ 9,246,350 $10,099,736 ------------ ---------- ---------- ------------ Expenses: Interest on mortgages(Note B) $ 561,821 $ 412,829 $ 1,493,031 $ 1,233,696 Supervisory services, to a related party (Note C) 700,676 813,614 316,366 829,304 Special fees, to a related party ( Note D) 1,892 2,791 1,892 2,791 Depreciation of building improvements and equipment 131,586 10,828 344,245 32,484 Amortization of mortgage refinancing costs 66,021 66,021 198,061 198,061 Miscellaneous -0- -0- 325 -0- ---------- ---------- ---------- ---------- Total expenses $1,461,996 $1,306,083 $2,753,920 $2,296,336 ----------- ----------- ---------- ---------- Net Income $6,314,244 $7,433,886 $6,492,430 $7,803,400 ======== ======== ======= ======== Earnings per $10,000 participation unit, Based on 700 participation units outstanding during the period $9,020.35 $10,619.84 $9,274.90 $11,147.71 ======== ======== ======= ======== Distributions per $10,000 participation unit consisted of the following: Income $ 373.72 $ 373.72 $ 1,121.16 $ 1,121.16 ----------- ---------- --------- --------- Total distributions $ 373.72 $ 373.72 $ 1,121.16 $ 1,121.16 ========= ========= ========= ======== At September 30, 2002 and 2001, there were $7,000,000 of participation units outstanding. See notes to condensed financial statements. -1- 60 East 42nd St. Associates L.L.C. Condensed Balance Sheets (Unaudited) Assets September 30, 2002 December 31, 2001 Current assets: Cash $ 305,612 $1,950,750 Emigrant Money Market 12,790,765 -0- Rent Receivable 33,269 -0- Further additional rent due from lessee, a related party (Note B) 6,944,789 -0- ----------- ---------- Total current assets 20,074,435 1,950,750 ----------- --------- Real estate Land 7,240,000 7,240,000 ---------- --------- Buildings 16,960,000 16,960,000 Less, allowance for depreciation 16,960,000 16,960,000 ----------- ----------- -0- -0- ----------- ---------- Building improvements and equipment 20,814,817 13,882,233 Less, allowance for depreciation 2,124,634 1,780,389 ----------- ---------- 18,690,183 12,101,844 ----------- --------- Mortgage refinancing costs 1,361,096 1,361,096 Less, allowance for amortization 810,940 612,879 ---------- ---------- 550,156 748,217 ---------- ----------- Total assets $46,554,774 $22,040,811 =========== =========== Liabilities and Members' Equity (Deficiency): Current liabilities: Accrued supervisory fees, to a related party $ 692,831 $ -0- Due to Lessee 4,396,554 2,372,779 Accrued expenses and building improvement costs payable 1,165,586 55,030 ----------- ----------- Total current liabilities 6,254,971 2,427,809 Long-term debt 40,000,000 25,020,814 ----------- ----------- Total liabilities $46,254,971 $ 27,448,623 ----------- ----------- -2- 60 East 42nd St. Associates L.L.C. Condensed Balance Sheets (Unaudited) (CONTINUED) September 30, 2002 December 31, 2001 Members'Equity (Deficiency): Members'Deficiency, January 1, $(5,407,812) $(4,924,185) Add, Net income: January 1, 2002 through September 30, 2002 6,492,430 -0- January 1, 2001 through December 31, 2001 -0- 7,814,714 ----------- ----------- 1,084,618 2,890,529 ---------- ----------- Less Distributions: Monthly distributions, January 1, 2002 through September 30, 2002 784,815 -0- January 1, 2001 through December 31, 2001 -0- 1,046,420 Distribution on November 30, 2001 of Additional Rent for the lease year ended September 30, 2001 -0- 7,251,921 ----------- ----------- Total distributions 784,815 8,298,341 ----------- ----------- Members' equity (deficiency): September 30, 2002 299,803 -0- December 31, 2001 -0- (5,407,812) ----------- ----------- Total liabilities and members' equity (deficiency): September 30, 2002 $46,554,774 -0- December 31, 2001 -0- $ 22,040,811 =========== ========== See notes to the condensed financial statements. -3- 60 East 42nd St. Associates L.L.C. Condensed Statements of Cash Flows (Unaudited) January 1, 2002 January 1, 2001 through through September 30, 2002 September 30, 2001 Cash flows from operating activities: Net income $ 6,492,430 $ 7,803,400 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of building improvements and equipment 344,245 32,484 Amortization of mortgage refinancing costs 198,061 198,061 Change in additional rent due from lessee (6,944,789) (8,053,165) Change in rent receivable due from lessee (33,269) -0- Accrued supervisory fees 692,831 805,769 Accrued expenses 72,424 87,057 ----------- ---------- Net cash provided by operating activities 821,933 873,606 ----------- ---------- Cash flows from investing activities: Purchase of Building Improvements, including improvements in progress (5,894,452) (6,885,333) ---------- ---------- Net cash used in investing activities (5,894,452) (6,885,333) ---------- ---------- Cash flows from financing activities: Proceeds from second mortgage 14,979,186 -0- Cash distributions (784,815) (784,815) Increase in amounts advanced by lessee 2,023,775 1,469,255 ----------- ---------- Net cash provided by financing activities 16,218,146 684,440 ----------- ---------- Net increase (decrease) in cash 11,145,627 (5,327,287) Cash, beginning of period 1,950,750 5,987,609 ----------- ---------- Cash, end of period $ 13,096,377 $ 660,322 =========== ========== -4- 60 East 42nd St. Associates L.L.C. Condensed Statements of Cash Flows (Unaudited) January 1, 2002 January 1, 2001 through through September 30, 2002 September 30, 2001 (CONTINUED) Cash paid for: Interest $ 1,420,606 $1,146,639 ========== ========== Supplemental disclosure of noncash investing activities: Accrued building improvement costs $ 1,038,132 $ -0- =========== =========== See notes to the condensed financial statements. -5- Notes to Condensed Financial Statements (Unaudited) Note A Organization and basis of Presentation In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Registrant as of September 30, 2002, its results of operations for the nine months and three months ended September 30, 2002 and 2001 and cash flows for the nine months ended September 30, 2002 and 2001 and its changes in Members' equity (deficiency) for the nine months ended September 30, 2002. Information included in the condensed balance sheet as of December 31, 2001 has been derived from the audited balance sheet included in Registrant's Form 10-K for the year ended December 31, 2001 (the "10-K") previously filed with the Securities and Exchange Commission (the "SEC"). Pursuant to rules and regulations of the SEC, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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, 2002 are not necessarily indicative of the results to be expected for the full year. Note B Interim Period Reporting Registrant was originally organized as 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 members are Peter L. Malkin, Anthony E. Malkin, Scott D. Malkin, Thomas N. Keltner, Jr., Fred C. Posniak, Jack Feirman and Mark Labell (individually, a "Member" and, collectively, the "Members"), each of whom also acts as an agent for holders of participations in the Registrant (individually, a "Participant" and, collectively, "Participants"). -6- Registrant leases the Property to Lincoln Building Associates L.L.C. ("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 term which, if exercised, will extend the Lease until September 30, 2033.) Lessee is a limited liability company whose members consist of, among others, entities for the benefit of members of Peter L. Malkin's family. Six of the seven members in Registrant are at 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 Note C of this Item 1 ("Note C"). In 1999, the participants in Registrant and the partners in Lessee consented to a building improvement program (the "Program") estimated to cost approximately $28,000,000 and expected to take two to three years to complete. To induce the Lessee to approve the Program, Associates agreed to grant to the Lessee, upon completion of the Program, an extension of the lease for an additional 50 years to 2083. 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 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 required 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. -7- 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, 2002 was $6,944,789. After deducting fees of $16,480 relating to Registrant's conversion to a limited liability company and payment of $692,831 to Supervisor as an additional payment for supervisory services, the balance of $6,235,478 will be distributed to the Participants on November 29, 2002. A refinancing of the existing first mortgage loan on the Property in the original principal amount of $12,020,814 was closed on October 6, 1994 (the "Mortgage"). Annual Mortgage charges are $1,063,842, payable in equal monthly installments of $88,654, representing interest only at the rate of 8.85% per annum. The Mortgage will mature on October 31, 2004 and is prepayable in whole after October 6, 1995 with a penalty providing interest protection to the mortgagee. The Mortgage 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. A second mortgage loan with Emigrant Savings Bank in the amount of $27,979,186 was closed on March 9, 2000 and as of September 30, 2002 all proceeds have been advanced. Monthly payments of interest only at the rate of 8.21% per annum apply to the advances of $7,000,000 made through September 30, 2000. Amounts advanced from October 1, 2000 through September 30, 2002 in the amount of $20,979,186 are now at the fixed interest rate of 3.39% commencing with the November 2002 payment. 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. Note C - Supervisory Services Registrant pays Supervisor for supervisory services and disbursements. The supervisory fees are $24,000 per annum (the "Basic Payment"): plus an additional payment of 10% of all distributions to Participants in Registrant in any year in excess of the amount representing a return at the rate of 14% per annum on their remaining cash investment (the "Additional Payment"). At September 30, 2002, such remaining cash investment was $7,000,000 representing the original cash investment of Participants in Registrant. -8- The supervisory services provided to Registrant by Supervisor include, but are not limited to, providing or coordinating counsel services to Registrant, maintaining all of its entity and Participant records, performing physical inspections of the Building, reviewing insurance coverage and 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, and active review of financial statements submitted to Registrant by 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. Registrant also pays Supervisor for other services at hourly rates. Pursuant to the fee arrangements described herein, Registrant paid Supervisor $18,000 of the Basic Payment and $5,535 on account of the Additional Payment, for supervisory services for the nine month period ended September 30, 2002. No remuneration was paid during the nine month period ended September 30, 2002 by Registrant to any of the Members as such. For the lease year ended September 30, 2002, Registrant paid Supervisor $692,831 as an additional payment for supervisory services. See Note B. Reference is made to Note B of Item 1 ("Note B") for a description of the terms of the Lease between Registrant and Lessee. As of September 30, 2002, Peter L. 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 in Registrant and, in the case of Peter L. Malkin, his individual ownership of a member 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 members in Lessee. However, each of the seven Members who hold senior positions at Supervisor (which supervises Registrant and Lessee), by reason of his position at Supervisor, may receive income attributable to supervisory or other remuneration paid to Supervisor for services rendered to Registrant and Lessee. As of September 30, 2002, the Members owned of record and beneficially an aggregate $61,667 of participations in Registrant, representing .88% of the currently outstanding participations therein. In addition, as of September 30, 2002, certain of the Members in Registrant held additional Participations in Registrant as follows: Peter L. Malkin owned of record as trustee or co-trustee an aggregate of $55,714 of Participations. Peter L. Malkin disclaims any beneficial ownership of such Participations. -9- Entities for the benefit of members of Peter L. Malkin's family owned of record and beneficially $107,500 of Participations. Peter L. Malkin disclaims any beneficial ownership of such Participations, except that related trusts are required to complete scheduled payments to him. Anthony E. Malkin owned of record as co-trustee an aggregate of $25,000 of Participations. Anthony E. Malkin disclaims any beneficial ownership of such Participations Note D Special Fees During the nine months ended September 30, 2002 and 2001, special fees of $1,892 and $2,791, respectively, (computed on an hourly basis for special services) were paid to the firm of Wien & Malkin LLP, a related party. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. As stated in Note B, 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 reserves or otherwise maintain liquid assets to defray any operating expenses of the Property. Registrant does not pay dividends. During the nine month period ended September 30, 2002, Registrant made regular monthly distributions of $124.57 for each $10,000 participation ($1,494.89 per annum for each $10,000 participation). 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 on the ability of Lessee to make payments of Basic Rent, Additional Rent and Further Additional Rent to Registrant. Registrant expects to make distributions so long as it receives the payments provided for under the Lease. On November 29, 2002, Registrant will make an additional distribution of $8,908 for each $10,000 participation. Such distribution represents Further Additional Rent paid by the Lessee in accordance with the terms of the Lease after the Additional Payment to Supervisor and fees to convert Registrant to a limited liability company. See Notes B and C. Registrant's results of operations are affected primarily by the amount of rent payable to it under the Lease. The amount of Overage 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. The following summarizes, with respect to the current period and the corresponding period of the previous year, the material factors regarding Registrant's results of operations for such periods: -10- Total income decreased for the nine month period ended September 30, 2002, as compared with the nine month period ended September 30, 2001. Such decrease is the net result of an increase in basic rent income to cover an increase in debt service payable by Registrant, a decrease in interest income and a decrease in additional rent income for the period ended September 30, 2002 as compared with the period ended September 30, 2001. Total expenses increased for the nine month period ended September 30, 2002, as compared with the nine month period ended September 30, 2001. Such increase is the net result of an increase in interest on the mortgages paid by Registrant, an increase in depreciation and a decrease in the additional supervisory fee in the period ended September 30, 2002 as compared with the period ended September 30, 2001. Liquidity and Capital Resources Registrant's liquidity has increased significantly due to the receipt of $14,979,186 from the second mortgage for the nine month period ended September 30, 2002, as compared with the nine month period ended September 30, 2001. Costs relating to the improvement program are funded from proceeds of a second mortgage of $27,979,186, of which all has been drawn down at September 30, 2002. 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 well in excess of the amount of the mortgage balance at maturity. -11- 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 Registrant has been advised 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, 2001, which report and all exhibits thereto are incorporated herein by reference and made a part hereof. Item 4. Evaluation of Disclosure Controls and Internal Control Procedures. (a) Evaluation of disclosure controls and procedures. Our chief executive officer and our chief financial officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date (the "Evaluation Date") within 90 days before the filing date of this quarterly report, have concluded that as of the Evaluation Date, our disclosure controls and procedures were adequate and designed to ensure that material information relating to Registrant would be made known to it by others within the company. (b) Changes in internal controls. There were no significant changes in our internal controls or, to our knowledge, in other factors that could significantly affect our internal controls and procedures subsequent to the Evaluation Date. -12- PART II. OTHER INFORMATION Item 1. 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. At its May 20, 2002 special meeting, Lessee approved by the requisite vote the removal of Helmsley-Spear, Inc. as managing and -13- leasing agent and its replacement by one or a combination of designated independent firms (Cushman & Wakefield, Insignia/ESG and Newmark Realty). On May 21, 2002, Peter L. Malkin and Wien & Malkin LLP filed a court application to confirm the vote and to set the final date for Helmsley-Spear, Inc's. termination. Helmsley-Spear, Inc. filed objections. On September 10, 2002 the court confirmed such votes and ruled that Helmsley-Spear, Inc. has been discharged and must effect an orderly transition and departure within 60 days. On September 27, 2002, Helmsley-Spear, Inc. moved in the Appellate Division to stay the court's ruling pending an appeal. On October 31, 2002, the court denied Helmsley-Spear, Inc.'s application for a stay. In accord with the Lessee's approval, the expenses for the preparation of the solicitation statement, the solicitation of votes, and the implementation of the new program are being paid by the Lessee. Such payments have totaled $ 226,711 from inception to date (including $ 70,151 to Wien & Malkin LLP). Item 6. Exhibits and Reports on Form 8-K. (a) The exhibits hereto are being incorporated by reference. (b) Registrant has not filed any report on Form 8-K during the quarter for which this report is being filed. -14- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the 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 (collectively, the "Power"). 60 EAST 42ND ST. ASSOCIATES L.L.C. (Registrant) By: /s/ Stanley Katzman Stanley Katzman, Attorney-in-Fact* Dated: November 19, 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 Members in Registrant, pursuant to the Power, on behalf of Registrant on the date indicated. By: /s/ Stanley Katzman Stanley Katzman, Attorney-in-Fact* Dated: November 19, 2002 __________________________ * Mr. Katzman supervises accounting functions for Registrant. -15- CERTIFICATIONS I, Stanley Katzman, certify that: (1) I have reviewed this quarterly report on Form 10-Q of 60 East 42nd St. Associates L.L.C.; (2) Based on my knowledge, this quarterly 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 quarterly report; (3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; (4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, is made known to us by others within the Registrant particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; (5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and -16- (6) The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 19, 2002 By /s/ Stanley Katzman Name: Stanley Katzman Title: Member of Wien & Malkin LLP, Supervisor of 60 East 42nd St. Associates L.L.C. -17- CERTIFICATIONS I, Stanley Katzman, certify that: 1. I have reviewed this quarterly report on Form 10-Q of 60 East 42nd St. Associates L.L.C.; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, is made known to us by others within the Registrant particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and -18- b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 19, 2002 By /s/ Stanley Katzman Name: Stanley Katzman Title: Senior Member of Financial/Accounting Staff of Wien & Malkin LLP, Supervisor of 60 East 42nd St. Associates L.L.C. -19- EXHIBIT INDEX Number Document Page* 3(a) Attached hereto as Exhibit 3(c) is Registrant's Consent and Operating Agreement dated as of November 28, 2001 as a Limited Liability Company, which incorporates by reference the Registrant's prior Partnership Agreement, dated September 25, 1958, which was filed by letter dated March 31, 1981 (Commission File No. 0-2670) filed as Exhibit No. 1 to Registrant's Registraion Statement on Form S-1 as amended (the "Registration Statement"), and itself 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, was filed as Exhibit 3(b) to Registrant's 10-Q for the quarter ended March 31, 1998, and is incorporated by reference as an exhibit hereto. 3(c) Registrant's Consent and Operating Agreement dated as of November 28, 2001 13(a) Letter to Participants dated April 16, 2002 and supplementary financial reports for the fiscal year ended December 31, 2001. The foregoing material shall not be deemed "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 20,1998and May 14, 1998 between the Partners of Registrant and Stanley Katzman and Richard A. Shapiro which were filed as Exhibit 24 to Registrant's 10-Q for the -20- EXHIBIT INDEX (cont.) Number Document Page* quarter ended March 31, 1998 and is incorporated by reference as an exhibit hereto. 99 (1) Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99 (2) Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 _____________________________________________________ * Page references are based on sequential numbering system. -21- Exhibit 99(1) 60 East 42nd St. Associates L.L.C. Chief Executive Officer Certification Pursuant to Section 906 of Sarbanes - Oxley Act of 2002 The undersigned, Stanley Katzman, is signing this Chief Executive Officer certification as a member of Wien & Malkin LLP, the supervisor* of 60 East 42nd St. Associates L.L.C. ("Registrant") to certify that: (1) the Quarterly Report on Form 10-Q of Registrant for the quarterly period ended September 30, 2002 (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 (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant. Dated: November 19, 2002 By /s/ Stanley Katzman Stanley Katzman Wien & Malkin LLP, Supervisor *Registrant's organizational documents do not provide for a Chief Executive Officer or other officer with equivalent rights and duties. As described in the Quarterly Report, Registrant is a limited liability company which is supervised by Wien & Malkin LLP. Accordingly, this Chief Executive Officer certification is being signed by a member of Registrant's supervisor. -22- Exhibit 99(2) 60 East 42nd St. Associates L.L.C. Chief Financial Officer Certification Pursuant to Section 906 of Sarbanes - Oxley Act of 2002 The undersigned, Stanley Katzman, is signing this Chief Financial Officer certification as a senior member of the financial/accounting staff of Wien & Malkin LLP, the supervisor* of 60 East 42nd St. Associates L.L.C.("Registrant"), to certify that: (1) the Quarterly Report on Form 10-Q of Registrant for the quarterly period ended September 30, 2002 (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 (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant. Dated: November 19, 2002 By /s/ Stanley Katzman Stanley Katzman Wien & Malkin LLP, Supervisor *Registrant's organizational documents do not provide for a Chief Financial Officer or other officer with equivalent rights and duties. As described in the Quarterly Report, Registrant is a limited liability company which is supervised by Wien & Malkin LLP. Accordingly, this Chief Financial Officer certification is being signed by a senior member of the financial/accounting staff of Registrant's supervisor. -23- EX-3 3 eastcon.txt EXHIBIT 3C CONSENT AND OPERATING AGREEMENT FOR 60 EAST 42ND ST. ASSOCIATES L.L.C. Reference is made to 60 East 42nd St. Associates ("Associates"), a partnership existing under a September 25, 1958 Agreement among Lawrence A. Wien and others (the "Agreement"). It is the intent of the undersigned partners in Associates to convert Associates to a limited liability company on the basis that, after such conversion, Associates will as specified in the applicable New York statute be the same entity with the same assets and that Associates' partners and participants will have the same rights and duties, except that such partners and participants will hereafter receive the benefit of the resulting insulation from liability to third parties. To effect the matters herein, the undersigned partners in Associates hereby irrevocably consent and agree (i) to convert Associates to a New York limited liability company with the name "60 East 42nd St. Associates L.L.C.", (ii) to continue at all times to have the same rights and obligations in relation to the other members of such company as the undersigned would have under applicable law as if such company were a partnership, (iii) to cause Associates to continue to be treated as a partnership for income tax purposes, (iv) to instruct and authorize Wien & Malkin LLP, as Associates' Supervisor, to effect the conversion (including, without limitation, acting as agent for Associates and its members in executing and filing any necessary certificate) with such changes in the Agreement as may be deemed necessary by Wien & Malkin LLP under New York law, so long as such changes do not substantively change the rights and responsibilities among the parties to the Agreement or the effect of such conversion as described herein, and (v) to adopt all terms of the Agreement as Associates' limited liability company operating agreement with only the following modifications: 1. Throughout the Agreement, "partnership" shall be amended to read "limited liability company"; "partner" shall be amended to read "member"; and "60 East 42nd St. Associates" shall be amended to read "60 East 42nd St. Associates L.L.C." 2. The following shall be added as a new last sentence of Paragraph 6 of the Agreement: "No member shall have the right to withdraw and receive cash for his or her interest from the limited liability company prior to dissolution and liquidation of the company, but this provision shall not affect a member's right to sell, assign, pledge, or otherwise dispose of such interest hereunder." As amended hereunder, all terms of the Agreement are hereby confirmed and remain fully in effect as Associate's limited liability company operating agreement. By signing below, the undersigned irrevocably consent and become a party to the Agreement as amended hereunder, which shall be binding on the undersigned and their respective heirs, representatives, successors and assigns. The terms of Associates' participating agreements under which the undersigned serve as agents for participants are hereby confirmed and remain fully in effect without change. To confirm the foregoing, the undersigned have signed below as of the date indicated. Date: As of November 30, 2001 Peter L. Malkin Anthony E. Malkin Scott D. Malkin Thomas N. Keltner, Jr. Mark Labell Jack K. Feirman Fred C. Posniak 9227 -----END PRIVACY-ENHANCED MESSAGE-----