10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

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 13 of this Report.

Number of pages (including exhibits) in this filing: 13

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

60 East 42^nd Street Associates L.L.C.

Condensed Statements of Income

(Unaudited)

For the Three Months

Ended March 31,

2005 2004

Income:

Basic rent, from a related party (Note B)	$657,457	$582,820
Additional rent, from a related party (Note B)	263,450	263,450
Dividend income	55,017	14,531
Total income	$975,924	$860,801

Expenses:

Interest on mortgages (Note B)	$706,475	$591,006
Supervisory services, to a related party (Note C)	7,845	7,845
Depreciation of building improvements and equipment	173,574	146,720
Amortization of mortgage refinancing costs	51,489	66,020
Amortization of leasing commissions	29,219	0
Special fees (Note D)	140	0
Miscellaneous expense	733	700
Total expenses	969,475	812,291
Net Income	$6,449	$ 48,510
Earnings per $10,000 participation unit, based on 700 participation units outstanding during the period	$ 9.21	$ 69.30

Distributions per $10,000 participation unit

consisted of the following:

Income	$ 9.21	$ 69.30
Return of Capital	364.51	304.42
Total distributions	$ 373.72	$ 373.72

At March 31, 2005 and 2004, there were $7,000,000 of participation units outstanding.

See notes to the condensed financial statements.

60 East 42nd St. Associates L.L.C.

Condensed Balance Sheets

(Unaudited)

		March 31, 2005		December 31, 2004
Real estate:
Land		$ 7,240,000		$ 7,240,000
Buildings	16,960,000		16,960,000
Less, accumulated depreciation	16,960,000	0	16,960,000	0
Building improvements and equipment	28,809,154		25,008,318
Less, accumulated depreciation	3,560,560	25,248,594	3,386,986	21,621,332
Building improvements in progress		7,951,633		4,773,698
Cash in banks and money market fund		113,050		325,148
Receivable from participants re: NYS estimated tax		36,048		0
Cash segregated for payment of building improvement costs		6,962,199		9,838,010
Mortgage refinancing costs	2,059,544		2,055,344
Less, accumulated amortization	68,617	1,990,927	17,128	2,038,216
Leasing commissions	898,330		554,771
Less, accumulated amortization	53,522	844,808	24,303	530,468
Total assets		$50,387,259		$46,366,872
Liabilities and Members' Deficiency:
Liabilities:
First and second mortgage payable		$53,250,000		$49,000,000
Due to lessee		4,841,881		4,810,035
Accrued expenses		236,963		243,266
Total liabilities		$58,328,844		$54,053,301

60 East 42nd St. Associates L.L.C.

Condensed Balance Sheets

(Unaudited)

(CONTINUED)

	March 31, 2005	December 31, 2004
Members' deficiency:
Members'deficiency, January 1,	$(7,686,429)	$(6,756,782)
Add, Net income:
January 1, 2005 through March 31, 2005	6,449	0
January 1, 2004 through December 31, 2004	0	6,298,875
	(7,679,980)	(457,907)
Less Distributions:
Monthly distributions
January 1, 2005 through March 31, 2005	261,605	0
January 1, 2004 through December 31, 2004	0	1,046,420
Additional distribution on November 30, 2004	0	6,182,102
Total distributions	261,605	7,228,522
Members' deficiency:
March 31, 2005	(7,941,585)
December 31, 2004		(7,686,429)
Total liabilities and members' deficiency:
March 31, 2005	$50,387,259	0
December 31, 2004		$46,366,872

See notes to the condensed financial statements.

60 East 42nd St. Associates L.L.C.

Condensed Statements of Cash Flows

(Unaudited)

January 1, 2005 January 1, 2004

through through

March 31, 2005 March 31, 2004

Cash flows from operating activities:
Net income	$6,449	$ 48,510
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of building improvements and equipment	173,574	146,720
Amortization of mortgage refinancing costs	51,489	66,020
Amortization of leasing commissions	29,219	0
Change in leasing commissions	(343,559)	0
Accrued expenses	(6,303)	(2)
Net cash provided by (used in) operating activities	(89,131)	261,248
Cash flows from investing activities:
Purchase of building improvements and equipment	(6,978,771)	0
Change in cash segregated for payment of building improvement costs	2,875,811	60,814
Change in receivable from participants	(36,048)	(40,130)
Net cash provided by (used in) investing activities	(4,139,008)	20,684
Cash flows from financing activities:
Proceeds from refinancing	4,250,000	0
Payments for refinancing costs	(4,200)	0
Cash distributions	(261,605)	(261,605)
Change in amounts due to lessee	31,846	(1,722)
Net cash provided by (used in) financing activities	4,016,041	(263,327)
Net increase (decrease) in cash and cash equivalents	(212,098)	18,605
Cash and cash equivalents, beginning of period	325,148	533,839
Cash and cash equivalents, end of period	$ 113,050	$ 552,444
Cash paid for:
Interest	$687,563	$591,006

See notes to the condensed financial statements.

60 East 42nd St. Associates L.L.C.

Condensed Statements of Cash Flows

(Unaudited)

For the Three Months

Ended March 31,

2005 2004

Supplemental disclosure of

noncash investing and financing

activities:

Short-term debt owed to lessee

and others incurred for purchase

of building improvements $ - $ 829,056

========== ==========

See notes to the condensed financial statements.

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 March 31, 2005, its results of operations and cash flows for the three months ended March 31, 2005 and 2004, and its changes in Members' deficiency for the three months ended March 31, 2005. Information included in the condensed balance sheet as of December 31, 2004 has been derived from the audited balance sheet included in Registrant's Form 10-K for the year ended December 31, 2004 (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 signific ant 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 and notes thereto and the other information contained in the 10-K. The results of operations for the three months ended March 31, 2005 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 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 42^nd 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 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").

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. 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 (the "Supervisor"), 60 East 42nd Street, New York, New York, which provides supervisory and other services to Registrant and to Lessee. See Note C of this Item 1.

The Lease has one additional 25-year term which, if exercised by Lessee, will extend the Lease until September 30, 2033. In 1999, the Participants in Registrant and the members in Lessee consented to a building improvement program (the "Program") estimated to cost approximately $22,800,000 and expected to take approximately three years to complete.In 2000, the Participants and the Lessee approved an increase to the program from $22,800,000 to approximately $28,000,000 under substantially the same conditions as had previously been approved. To induce the Lessee to approve the program, Registrant agreed to grant to the Lessee, upon completion of the Program, the right to further extensions of the Lease to 2083. The Program was further increased in 2004 to up to $100,000,000. Such increase would extend the lease beyond 2083, based on the net present benefit to Registrant of the improvements made.

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 $100,000,000 (in accord with the 2004 program approved by the Participants), 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 ending September 30 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.

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, 2004 was $6,869,702. After deducting a reserve of $700 for annual New York State limited liability company filing fees and $686,900 to Supervisor as an additional payment for supervisory services, the balance of $6,182,102 was distributed to the Participants on November 30, 2004.

On November 29, 2004 a new first mortgage was placed on the property in the amount of $84,000,000 with Prudential Insurance Company of America. At closing, $49,000,000 was drawn down to pay off the former first mortgage with Morgan Guaranty Trust Company in the amount of $12,020,814 and the second mortgage in the amount of $27,979,186 with Emigrant Savings Bank. The remaining proceeds of $9,000,000 and all subsequent drawdowns will pay for capital improvements as needed. The initial drawdown of $49,000,000 and all subsequent drawdowns require constant equal monthly payments totaling $2,616,600 per annum for interest only, at the rate of 5.34% per annum until July 5, 2007 and thereafter, commencing August 5, 2007, equal payments of $507,838 applied to interest and then principal, calculated on a 25 year amortization schedule. An additional $4,250,000 was drawn down in the first quarter of 2005. The mortgage matures on November 5, 2014.

The mortgage may be prepaid at any time, in whole only, upon payment of a prepayment penalty based on a yield maintenance formula. There will be no prepayment penalty if the mortgage is paid in full during the last 60 days of the term.

The refinancing costs of $2,059,544 were capitalized by Registrant and are being expensed ratably over the term of the mortgage.

Note C - Supervisory Services

Registrant pays Supervisor for supervisory services and disbursements. Supervisor receives as compensation an annual fee of $24,000, payable in equal monthly installments ("Basic Payment"), and 10% of all distributions to Participants in any year in excess of the amount representing a return to them at the rate of 14% per annum on their remaining cash investment ("Additional Fee"). At March 31, 2005, the Participants' remaining cash investment was $7,000,000. Supervisor receives $7,380 a year as an advance against the Additional Fee, which Registrant expenses each month.

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. No remuneration was paid during the three month period ended March 31, 2005 by Registrant to any of the Members as such. For the lease year ended September 30, 2004, Registrant incurred $686,900 as an additional payment for services performed by Supervisor.

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 March 31, 2005, Peter L. Malkin owned a member 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 and Registrant. 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 Member who holds a position at Supervisor (which supervises Registrant and Lessee) may, by reason of his position at Supervisor, receive income attributable to supervisory or other remuneration paid to Supervisor for services rendered to Registrant and Lessee.

As of March 31, 2005, the Members owned of record and beneficially an aggregate $61,667 of participations in Registrant, representing 0.88% of the currently outstanding participations therein.

In addition, as of March 31, 2005, 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 $135,714 of Participations. Peter L. 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. 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 three months ended March 31, 2005, special fees of $140 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.

Forward Looking Statements

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

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

Financial Condition and Results of Operations

As stated in Note B, Registrant was organized 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 three month period ended March 31, 2005, 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 30, 2004, Registrant made an additional distribution of $8,831.57 for each $10,000 participation. Such distribution represented Further Additional Rent paid by the Lessee in accordance with the terms of the Lease after the Additional Payment to Supervisor and reserves for New York State non-resident taxes and state fees. 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 Additional Rent and Further Additional Rent payable to Registrant are 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:

Total income increased for the three-month period ended March 31, 2005, as compared with the three-month period ended March 31, 2004. Such increase is the result of an increase in Basic Rent income to cover an increase in debt service and an increase in dividend income rent for the period ended March 31, 2005, as compared with the period ended March 31, 2004.

Total expenses increased for the three-month period ended March 31, 2005, as compared with the three-month period ended March 31, 2004. Such increase is the result of an increase in interest on the mortgage paid by Registrant, depreciation of building improvements and equipment, amortization of leasing commissions and special fees and miscellaneous expenses for the period ended March 31, 2005, as compared with the period ended March 31, 2004.

Liquidity and Capital Resources

Registrant's liquidity has decreased at March 31, 2005 as compared with March 31, 2004 as a result of payments being made on the improvement program. However, costs relating to the improvement program are funded from proceeds of the first mortgage of $84,000,000, of which $53,250,000 has been drawn at March 31, 2005. Registrant may from time to time establish a reserve for contingent or unforeseen liabilities.

The mortgage matures on November 5, 2014. 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.

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 members 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 believes that there has been no material change in the impact of inflation on its operations since the filing of its report on Form 10-K for the year ended December 31, 2004.

Item 4. Controls and Procedures.

1. Evaluation of disclosure controls and procedures. The person(s) who functions in the capacity of Registrant's chief executive officer and Registrant's chief financial officer, after evaluating the effectiveness of Registrant's "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period have concluded that Registrant's disclosure controls and procedures were adequate and designed to ensure that material information relating to Registrant would be made known to them by others within those entities on a timely basis.
2. Changes in internal controls over financial reporting. There were no changes in Registrant's internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to affect, the Registrant's internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The Property of Registrant is the subject of the following material pending litigation:

Wien & Malkin LLP and Peter L. Malkin, a member of Registrant, have been engaged in a proceeding with Helmsley-Spear, Inc. commenced in 1997, concerning the management, leasing and supervision of the property in which Wien & Malkin and Mr. Malkin have sought an order removing Helmsley-Spear. In this connection, certain costs for legal and professional fees and other expenses have been paid and incurred by Wien & Malkin and Mr. Malkin, and additional costs are expected to be incurred. Wien & Malkin and Mr. Malkin have represented that such costs will be recovered only to the extent that (a) a competent tribunal authorizes payment by Registrant or (b) an investor voluntarily agrees that his or her proportionate share be paid. Accordingly, Registrants' allocable share of such costs is as yet undetermined, and Registrant has not provided for the expense and related liability with respect to such costs in these financial statements.

The original action was commenced in June 1997 and was referred to arbitration. The March 30, 2001 decision of the Arbitrators, which was confirmed by the court, (i) reaffirms the right of the investors in Lessee to vote to terminate Helmsley-Spear without cause, (ii) dismisses Helmsley-Spear's claims against Wien & Malkin and Peter L. Malkin, and (iii) rejects the termination of Helmsley-Spear for cause. The parts of the decision under appeal were initially affirmed by the Appellate Division, and the New York Court of Appeals declined to review such ruling. On October 6, 2003, the United States Supreme Court granted Wien & Malkin's petition, vacated the judgment of the Appellate Division, and remanded the case to the New York court for further consideration of the issues raised by Wien & Malkin's appeal., On October 14, 2004, the Appellate Division issued a unanimous decision reversing the Arbitrators. The Appellate Division decided (i) that there was a covert assignment wi thout Lessee's knowledge or consent and (ii) that the corporation controlled by Irving Schneider and now named "Helmsley-Spear," which has represented itself to be Lessee's managing agent since September 1997, in fact never received a valid assignment to become Lessee's managing agent. Lessee's previously authorized managing agent, the original corporation named "Helmsley-Spear," was owned by Harry B. Helmsley and is no longer active. On May 10, 2005, Helmsley-Spear was granted leave to appeal the Appellate Division's decision, and such decision is stayed pending appeal.

In January 1998, Irving Schneider, who is one of the controlling principals of Helmsley-Spear and has no record or beneficial interest in Registrant or Lessee, brought litigation against Lessee's supervisor, Wien & Malkin, and member, Peter L. Malkin, claiming misconduct and seeking damages and disqualification from performing services for Lessee. In March 2002, the court dismissed Mr. Schneider's claims. Mr. Schneider has appealed this dismissal. Wien & Malkin and Mr. Malkin are defending against these claims.

At Lessee's May 20, 2002 special meeting, a vote of the investors was conducted on proposals for the removal without cause of Helmsley-Spear as managing and leasing agent and its replacement by a designated independent firm, including payment by Lessee of the expenses for the preparation of the solicitation statement, the solicitation of votes, and the implementation of the new program. On May 21, 2002, the proponents of the proposals, Peter L. Malkin and Wien & Malkin, filed a court application to determine and confirm all investors' votes for removal without cause and replacement and to set the final date for Helmsley-Spear's termination. After Helmsley-Spear filed objections, the court confirmed such votes and ruled that Helmsley-Spear has been discharged. Helmsley-Spear's subsequent appeals since September 2002 have been denied, and the proponents believe the time has expired for further Helmsley-Spear appeal, so that the court's confirmation of the May 20, 2002 vote to replace Helmsley-Spear may now be considered final. Helmsley-Spear has indicated it believes it has further appeal rights but has not to date filed any further appeal. Since November 20, 2002, Helmsley-Spear has not been the managing and leasing agent and has been replaced by Newmark & Company.

In accord with Lessee's May 20, 2002 vote, the expenses for the preparation of the solicitation statement, the solicitation of votes and the implementation of the new program are being paid by Lessee. Such payments have totaled $285,780 (including fees of $75,000 plus disbursements of $7,212 to Wien & Malkin), and have been included in other professional fees in the years 2002, 2003 and 2004 as applicable.

Item 6. Exhibits and Reports on Form 8-K.

(a) The exhibits hereto are being incorporated by reference.

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 Members in Registrant, pursuant to Powers of Attorney, dated October 9, 2003, October 10, 2003, October 14, 2003, October 22, 2003, October 23, 2003 and October 29, 2003 (collectively, the "Power").

60 EAST 42ND ST. ASSOCIATES L.L.C.

(Registrant)

By: /s/ Mark Labell

Mark Labell, Attorney-in-Fact*

Dated: May 31, 2005

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/ Mark Labell

Mark Labell, Attorney-in-Fact*

Dated: May 31, 2005

_____________________________________________________________________________

• Mr. Labell supervises accounting functions for Registrant.

Exhibit 31.1

CERTIFICATIONS

I, Mark Labell, certify that:

1. I have reviewed this report on Form 10-Q of 60 East 42^nd St. Associates L.L.C.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this 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-15(e) and 15d-15(e)) for the registrant and we have:

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

1. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
2. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

1. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

1. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: May 31, 2005

By /s/ Mark Labell

Name: Mark Labell

Title: Member of Wien & Malkin LLP, Supervisor of 60 East 42^nd St. Associates L.L.C.

Exhibit 31.2

CERTIFICATIONS

I, Mark Labell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of 60 East 42^nd 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 report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this 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:

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

1. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
2. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

1. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

1. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: May 31, 2005

By /s/ Mark Labell

Name: Mark Labell

Title:Senior Member of Financial/Accounting Staff of Wien & Malkin LLP, Supervisor of 60 East 42^nd St. Associates L.L.C.

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
3 (d)	Certificate of Conversion of Registrant to a limited liability company dated November 28, 2001 filed with the New York Secretary of State on December 3, 2001.
13 (a)	Letter to Participants dated April 29, 2005 and supplementary financial reports for the fiscal year ended December 31, 2004. 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. EXHIBIT INDEX
Number	Document	Page*
24	Powers of Attorney dated October 9, 2003, October 10, 2003, October 14, 2003, October 22, 2003, October 23, 2003 and October 29, 2003 between Partners of Registrant and Mark Labell which is filed as Exhibit 24 to Registrant's 10-Q for the quarter ended September 30, 2003 and is incorporated by reference as an exhibit hereto.
31.1	Certification of Mark Labell, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Mark Labell, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Mark Labell, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Mark Labell, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

_____________________________________________________

* Page references are based on sequential numbering system.

Exhibit 32.1

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

Pursuant to Section 906

of Sarbanes - Oxley Act of 2002

The undersigned, Mark Labell, is signing this Chief Executive Officer certification as a member of Wien & Malkin LLP, the supervisor* of 60 East 42^nd St. Associates L.L.C. ("Registrant") to certify that:

1. the Quarterly Report on Form 10-Q of Registrant for the period ended March 31, 2005 (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: May 31, 2005

By /s/ Mark Labell

Mark Labell

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 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.

Exhibit 32.2

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

Pursuant to Section 906

of Sarbanes - Oxley Act of 2002

1. The undersigned, Mark Labell, 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 42^nd St. Associates L.L.C.("Registrant"), to certify that:
2. the Quarterly Report on Form 10-Q of Registrant for the period ended March 31, 2005 (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
3. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

Dated: May 31, 2005

By /s/ Mark Labell

Mark Labell

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 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.

EX-13

[LETTERHEAD OF WIEN & MALKIN LLP]

April 29, 2005

To Members and Participants in 60 East 42nd St. Associates L.L.C.

Federal Identification Number 13-6077181

We enclose the annual report of 60 East 42nd St. Associates L.L.C. ("Associates") for the year 2004. Associates, which is treated as a partnership for income tax purposes, owns the premises at 60 East 42nd Street (the Lincoln Building), and at 301 Madison Avenue, New York City. Associates' annual report on Form 10-K for the year 2004 has been filed with the SEC and is available on its website at www.sec.gov. Historical and more detailed information can be found in our 10-K.

The reported income for 2004 was $6,298,875 which was less than distributions of $7,228,522. The difference is treated as a return of capital investment, rather than as taxable income, and results from depreciation of building improvements and equipment and amortization of mortgage refinancing costs and leasing commissions. Taking into account that a portion of prior distributions constituted a return of capital, the book value on December 31, 2004 of an original cash investment of $10,000 was a deficit balance of $10,981.

Monthly distributions during 2004 totaled $1,046,420, or about 14.9% per annum on the original cash investment of $7,000,000. The distributions were made possible by advances from the lessee against additional rent aggregating $1,053,800.

Additional rent for the lease year ended September 30, 2004 was $7,923,504. $1,053,800 at $87,817 per month was advanced against additional rent so that the balance of additional rent is $6,869,704. Wien & Malkin LLP receives an additional payment for supervisory services of 10% of distributions in excess of 14% per annum on the cash investment. After reserving $700 for payment of the annual New York State limited liability company filing fee, $6,869,004 was available for distribution. Accordingly, Wien & Malkin received $686,900 of the additional rent (in addition to $7,830 per annum paid monthly) and the balance of $6,182,104 was distributed to the participants on November 30, 2004. The additional distribution of $6,182,104 represented an annual return of about 88.3% on the cash investment of $7,000,000, so that total distributions for 2004 were at the rate of about 103.2% per annum.

Schedule K-1 form(s) (Form 1065), containing 2004 tax information, were mailed to the participants on March 23, 2005.

If you have any question about the enclosed material please communicate with our office.

Cordially yours,

WIEN & MALKIN LLP

By: Mark Labell

ML:mjt

Enc.

[LETTERHEAD OF J.H. COHN, CPA]

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the participants in 60 East 42nd St. Associates L.L.C. (a limited liability company):

We have audited the accompanying balance sheet of 60 East 42nd St. Associates L.L.C. ("Associates") as of December 31, 2004, and the related statements of income, members' deficiency and cash flows for the year then ended. These financial statements are the responsibility of Associates' management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 60 East 42nd St. Associates L.L.C. as of December 31, 2004, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

New York, N.Y.

March 21, 2005

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

BALANCE SHEET

DECEMBER 31, 2004

Assets
Real estate at 60 East 42nd Street and 301 Madison Avenue, New York City:
		Buildings		$16,960,000
			Less: Accumulated depreciation	16,960,000
		Building improvements and equipment		25,008,318
			Less: Accumulated depreciation	3,386,986	$21,621,332
		Building improvements in progress			4,773,698
		Land			7,240,000
Cash and cash equivalents available for operations:
		Cash in banks and money market fund		237,946
		Distribution account held by Wien & Malkin LLP		87,202	325,148
Cash segregated for payment of building improvement costs					9,838,010
Leasing commissions				554,771
		Less: Accumulated amortization		24,303	530,468
Mortgage refinancing costs				2,055,344
		Less: Accumulated amortization		17,128	2,038,216
			Total assets		$46,366,872
Liabilities and members' deficiency
Liabilities:
	Mortgage payable (including mortgage interest of $218,050)				$49,218,050
	Due to lessee				4,810,035
	Accrued expenses				25,216
	Total liabilities				54,053,301
Commitments and contingencies
Members' deficiency					(7,686,429)
Total liabilities and members' deficiency					$46,366,872

See accompanying notes to financial statements.

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, 2004

Income:
	Basic rental income	$2,377,622
	Additional rental income	7,923,504
	Dividend and interest income	70,757
	Total income	10,371,883

Expenses:
		Interest on mortgages	$2,423,345
		Supervisory services	718,280
		Amortization of mortgage refinancing costs	237,182
		Amortization of leasing commissions	24,303
		Professional fees	71,804
		Miscellaneous	1,086
	Total expenses			3,476,000

Income before depreciation	6,895,883
Depreciation of building improvements and equipment	597,008
Net income	$6,298,875

See accompanying notes to financial statements.

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

STATEMENT OF MEMBERS' DEFICIENCY

YEAR ENDED DECEMBER 31, 2004

Members' deficiency, January 1, 2004		$(6,756,782)
Add, Net income for the year ended December 31, 2004		6,298,875
		(457,907)
Less, Distributions:
Monthly distributions, January 1,
2004 through December 31, 2004	$1,046,420
Distribution on November 30, 2004 of balance of additional rent for the lease year ended September 30, 2004	6,182,102
		7,228,522
Members' deficiency, December 31, 2004		$(7,686,429)

See accompanying notes to financial statements.

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2004

Cash flows from operating activities
Net income	$ 6,298,875
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of building improvements and equipment	597,008
Amortization of mortgage refinancing costs	237,182
Amortization of leasing commissions	24,303
Change in leasing commissions	(554,771)
Change in accrued expenses	132,532
Net cash provided by operating activities	6,735,129
Cash flows from investing activities
Purchase of building improvements and equipment	(3,920,629)
Change in cash segregated for payment of building improvement costs	(3,291,768)
Net cash used in investing activities	(7,212,397)
Cash flows from financing activities
Proceeds from refinancing	49,000,000
Payments of prior mortgages	(40,000,000)
Payments for refinancing costs	(2,055,344)
Change in amounts due to lessee	552,443
Monthly distributions to participants	(1,046,420)
Distribution on November 30, 2004 of balance of additional rent for the lease year ended September 30, 2004	(6,182,102)
Net cash provided by financing activities	268,577
Net change in cash and cash equivalents	(208,691)
Cash and cash equivalents at beginning of year	533,839
Cash and cash equivalents at end of year	$ 325,148

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

STATEMENT OF CASH FLOWS

Supplemental disclosure of cash flows information

Cash paid in 2004 for interest $2,316,025

Supplemental disclosure of non cash investing and financing activities:
Short-term debt owed to lessee and others for purchase of building improvements	$2,733,676

See accompanying notes to financial statements.

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2004

1. Business Activity and Reorganization

60 East 42^nd St. Associates L.L.C. ("Associates") is a limited liability company owning commercial property at 60 East 42^nd Street and 301 Madison Avenue, New York, N.Y. The property, known as the "The Lincoln Building", is net leased to Lincoln Building Associates L.L.C. (the "Lessee").

2. Summary of Significant Accounting Policies

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 when acquired.

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.

Land, buildings, building improvements, equipment and depreciation

Land, buildings, building improvements and equipment are stated at cost. The buildings, and building improvements costing $1,574,135, have been fully depreciated, using a straight-line method over their estimated useful lives ranging from 20 to 26 years.

In connection with the building improvements program which began in 1999 (see Note 9), costs totaling $23,434,183 at December 31, 2004 have been incurred for new building improvements ($23,304,183) and equipment ($130,000) which have been put into service. These assets are depreciated on the straight-line method by annual charges to operations calculated to absorb the cost of assets over their estimated lives.

Mortgage refinancing costs and amortization

Mortgage refinancing costs are being amortized ratably over the term of the mortgage.

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2004

2. Summary of Significant Accounting Policies (continued)

Revenue Recognition

Basic rental income, as defined in a long-term lease, is equal to the sum of the constant annual mortgage charges plus a fixed amount. Associates records basic rental income as earned on a monthly basis. Additional rent represents a fixed amount of the Lessee's net operating income, as defined, in each lease year and is recorded ratably over the twelve month period. Further additional rent, which is based on the net profits of the Lessee, as defined, is recorded by Associates when such amounts become determinable.

3. First Mortgage Payable

On November 29, 2004, a new first mortgage was placed on the property in the amount of $84,000,000 with Prudential Insurance Company of America. At closing, $49,000,000 was drawn down to pay off the former first mortgage with Morgan Guaranty Trust Company in the amount of $12,020,814 and the second mortgage in the amount of $27,979,186 with Emigrant Savings Bank. The remaining proceeds of $9,000,000 and all subsequent drawdowns will pay for capital improvements as needed. The initial drawdown of $49,000,000 and all subsequent drawdowns require constant equal monthly payments totaling $2,616,600 per annum for interest only, at the rate of 5.34% per annum until July 5, 2007 and thereafter, commencing August 5, 2007, equal payments of $507,838 applied to interest and then principal, calculated on a 25 year amortization schedule. The mortgage matures on November 5, 2014.

The mortgage may be prepaid at any time, in whole only, upon payment of a prepayment penalty based on a yield maintenance formula. There will be no prepayment penalty if the mortgage is paid in full during the last 60 days of the term.

The following is a schedule of future minimum principal payments in years subsequent to December 31, 2004:

Year ending

December 31,

	$642,023
2008	$1,616,718
2009	1,719,098
Thereafter	80,022,161
	$84,000,000

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS (continued)

DECEMBER 31, 2004

3. First Mortgage Payable (continued)

As of December 31, 2004, Associates was holding approximately $9,838,000 of the mortgage loan proceeds set aside to pay for the Program.

The real estate is pledged as collateral for the mortgage.

The estimated fair market value of Associates' mortgage debt based on available information is equal to its carrying value at December 31, 2004.

4. Rent Income

On January 4, 1982, the Lessee exercised its option to renew the lease for an additional period of 25 years, and the lease period now extends through September 30, 2008. The lease includes an option to renew for one additional period of 25 years through September 30, 2033. See Note 9.

The lease as modified provides for an annual basic rent equal to the sum of the constant annual mortgage charges on all mortgages, plus $24,000. In the event of a mortgage refinancing, unless there is an increase in the mortgage balance, the annual basic rent will be modified and will be equal to the sum of $24,000 plus an amount equal to the revised mortgage charges. In the event that such mortgage refinancing results in an increase in the amount of outstanding principal balance of the mortgage, the basic rent shall be equal to $24,000 plus an amount equal to the product of the new debt service percentage rate under the refinanced mortgage multiplied by the principal balance of the mortgage immediately prior to the refinancing.

The lease, as modified, also provides for additional rent, as follows:

1. Additional rent equal to the first $1,053,800 of the Lessee's net operating income, as defined, in each lease year.

1. Further additional rent equal to 50% of the Lessee's remaining net operating income, as defined, in each lease year.

For the lease year ended September 30, 2004 the Lessee reported additional rent of $7,923,504, based on an operating profit of $13,739,407 subject to additional rent.

Additional rent is billed to and advanced by the Lessee in equal monthly installments of $87,817. While it is not practicable to estimate that portion of additional rent of the lease

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2004

4. Rent Income (continued)

year ending on the ensuing September 30th which would be allocable to the current three month period ending December 31st, Associates' policy is to include in its income each year the advances of additional rent income received from October 1st to December 31st.

Under the building improvement program (see Note 9), the increase in debt service attributable to an increase in the mortgage is funded by a corresponding increase in basic rent payable by the Lessee.

No other additional rent is accrued by Associates for the period between the end of the Lessee's lease year ending September 30th and the end of Associates' fiscal year ending December 31st.

5. Related Party Transactions
1. Rent income

All rent income is received by Associates from the Lessee, a related party. Beneficial interests in the Lessee are held by one or more persons at Wien & Malkin LLP, their family members, and/or trusts, limited liability companies, or similar entities owned for their family members.

2. Supervisory and other services

Supervisory and other services are provided to Associates by its supervisor, Wien & Malkin, a related party in which Peter L. Malkin, a member in Associates, has an interest. Beneficial interests in Associates are held by one or more persons at Wien & Malkin, their family members, and/or trusts, limited liability companies or similar entities owned for their family members. Wien & Malkin receives an additional fee equal to 10% of all distributions received by the participants in excess of 14% per annum on the initial cash investment of $7,000,000.

Transactions in 2004 with Wien & Malkin were as follows:

Basic supervisory fee	$ 24,000
Additional supervisory fee	694,280
Other services	186,217
	$904,497

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2004

5. Related Party Transactions (continued)

Of the $186,217 in other services, $67,253 are included in professional fees and $118,964 were capitalized in connection with the mortgage refinancing.

6. Income Taxes

Net income is computed without regard to income tax expense since Associates does not pay a tax on its income; instead, any such taxes are paid by the participants in their individual capacities.

7. Concentration of Credit Risk

Associates maintains cash balances in two banks and in a distribution account held by Wien & Malkin LLP. In addition, it maintains cash in a Fidelity money market fund (U.S. Treasury Portfolio). The bank balances are insured by the Federal Deposit Insurance Corporation up to $100,000 each, and at December 31, 2004 approximately $135,000 was not insured. The distribution account held by Wien & Malkin and the money market fund are not insured. The funds held in the distribution account were paid to the participants on January 1, 2005.

8. Contingencies

Wien & Malkin and Peter L. Malkin, a member in Associates, have been engaged in a proceeding with Helmsley-Spear, Inc. commenced in 1997 concerning the management, leasing and supervision of the property subject to the net lease, in which Wien & Malkin and Mr. Malkin have sought an order removing Helmsley-Spear. In this connection, certain costs for legal and professional fees and other expenses have been paid and incurred by Wien & Malkin and Mr. Malkin, and additional costs are expected to be incurred. Wien & Malkin and Mr. Malkin have represented that such costs will be recovered only to the extent that (a) a competent tribunal authorizes payment or (b) an investor voluntarily agrees that his or her proportionate share be paid. Accordingly, Associates' allocable share of such costs is as yet undetermined, and Associates has not provided for the expense and related liability with respect to such costs in these financial statements.

The original action was commenced in June 1997 and was referred to arbitration. The March 30, 2001 decision of the Arbitrators, which was confirmed by the court, (i) reaffirms the right of the investors in the Lessee to vote to terminate Helmsley-Spear, Inc. without cause, (ii) dismisses Helmsley-Spear's claims against Wien & Malkin and Peter L. Malkin, and (iii) rejects the termination of Helmsley-Spear, Inc. for cause. The parts of the decision under

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2004

8. Contingencies (continued)

appeal were initially affirmed by the Appellate Division, and the New York Court of Appeals declined to review such ruling. On October 6, 2003, the United States Supreme Court grantedWien & Malkin's petition, vacated the judgment of the Appellate Division and remanded the case to the New York court for further consideration of the issues raised by Wien & Malkin's appeal.

On October 14, 2004, the Appellate Division issued a unanimous decision reversing the Arbitrators. The Appellate Division decided (i) that there was a covert assignment without Lessee's knowledge or consent and (ii) that the corporation controlled by Irving Schneider and now named "Helmsley-Spear," which has represented itself to be Lessee's managing agent since September 1997, in fact never received a valid assignment to become Lessee's managing agent. Lessee's previously authorized managing agent, the original corporation named "Helmsley-Spear," was owned by Harry B. Helmsley and is no longer active. Helmsley-Spear has requested leave to appeal the Appellate Division's decision.

In January 1998, Irving Schneider, who is one of the controlling principals of Helmsley-Spear and has no record or beneficial interest in Associates or the Lessee, brought litigation against Associates' supervisor, Wien & Malkin and Peter L. Malkin (or his affiliate), claiming misconduct and seeking damages and disqualification from performing services for the Lessee. In March 2002, the court dismissed Mr. Schneider's claims. Mr. Schneider has appealed this dismissal. Wien & Malkin and Mr. Malkin are defending against these claims.

At the Lessee's May 20, 2002 special meeting, a vote of the investors was conducted on proposals for the removal without cause of Helmsley-Spear as managing and leasing agent and its replacement by a designated independent firm, including payment by the Lessee of the expenses for the preparation of the solicitation statement, the solicitation of votes, and the implementation of the new program. On May 21, 2002, the proponents of the proposals,

Peter L.Malkin and Wien & Malkin, filed a court application to determine and confirm all investors' votes for removal without cause and replacement and to set the final date for Helmsley-Spear's termination. Helmsley-Spear filed objections, and on September 10, 2002 the court confirmed such votes and ruled that Helmsley-Spear has been discharged. Helmsley-Spear's subsequent appeals since September 2002 have been denied, and the proponents believe the time has expired for further Helmlsey-Spear appeal, so that the court's confirmation of the May 20, 2002 vote to replace Helmsley-Spear may now be considered final. Helmsley-Spear has indicated it believes it has further appeal rights but has not to date filed any further appeal. Since November 20, 2002, Helmsley-Spear has not been the managing and leasing agent and has been replaced by Newmark and Company.

In accordance with the Lessee's May 20, 2002 vote, the expenses for the preparation of the solicitation statement, the solicitation of votes and the implementation of the new program

60 EAST 42ND ST. ASSOCIATES L.L.C.

(A Limited Liability Company)

NOTES TO FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2004

8. Contingencies (continued)

are being paid by the Lessee. Such payments have totaled $285,780 to December 31, 2004,

including $75,000 to Wien & Malkin plus disbursements of $7,212.

9. Building Improvements Program and Agreement to Extend 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. In 2000, the participants of Associates and the Lessee approved an increase to the Program from $22,800,000 to approximately $28,000,000 under substantially the same conditions as had previously been approved.

In 2004, the participants of Associates and the Lessee approved an increase in the Program from approximately $28,000,000 to up to $100,000,000 under substantially the same conditions as had previously been approved.

The Lessee is 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 an increase in the fee mortgage (Note 3), 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.

The 1999 consent authorized the members of 60 East 42nd St. Associates L.L.C. who act as agents for the participant investors (the "Agents") to give additional extension rights to the Lessee beyond the September 30, 2033 expiration date (Note 4) to September 30, 2083 upon completion of the Program, and to later date(s) for consideration and upon such terms as the Agents deem appropriate for the benefit of Associates.