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, 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 13 of this Report.

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statments

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

Condensed Statements of Income

(Unaudited)

For the Three Months

Ended March 31,

2002 2001

Income:

Basic rent, from a

related party (Note B) $ 468,261 $ 339,610

Additional rent, from a

related party (Note B) 263,450 263,450

Interest Income 2,226 76,026

---------- ----------

Total rent income 733,937 679,086

---------- ----------

Expenses:

Interest on mortgages (Note B) 464,487 409,636

Supervisory services, to

a related party (Note C) 7,845 7,845

Depreciation of improvements 93,508 10,828

Amortization of mortgage

refinancing costs 66,020 66,020

---------- ----------

Total expenses 631,860 494,329

---------- ----------

Net Income $ 102,077 $ 184,757

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

Earnings per $10,000

participation unit, based

on 700 participation units

outstanding during the period $ 145.82 $ 263.94

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

Distributions per $10,000

participation consisted

of the following:

Income $ 145.82 $ 263.94

Return of capital 227.90 109.78

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

Total distributions $ 373.72 $ 373.72

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

At March 31, 2002 and 2001, there were $7,000,000 of participations outstanding.

See notes to the condensed financial statements.

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

Condensed Balance Sheets

(Unaudited)

Assets: March 31, 2002 December 31, 2001

Current assets:

Cash $ 669,330 $ 1,950,750

----------- -----------

Total current assets 669,330 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 15,451,002 13,882,233

Less, allowance for depreciation 1,873,898 1,780,389

----------- -----------

13,577,104 12,101,844

----------- -----------

Mortgage refinancing costs 1,361,096 1,361,096

Less, allowance for amortization 678,898 612,879

----------- -----------

682,198 748,217

----------- -----------

Total assets $22,168,632 $22,040,811

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

Liabilities and Members' Deficiency:

Current liabilities:

Due to Lessee $ 2,646,766 $ 2,372,779

Accrued Expense 68,392 55,030

----------- -----------

Total current liabilities 2,715,158 2,427,809

Long-term debt 25,020,814 25,020,814

----------- ------------

Total liabilities $27,735,972 $27,448,623

------------ ------------

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

Condensed Balance Sheets

(Unaudited)

(CONTINUED)

March 31, 2002 December 31, 2001

Members' deficiency:

Members' deficiency, January 1, $(5,407,812) $ (4,924,185)

Add, Net income:

January 1, 2002 through March 31, 2002 102,077 -0-

January 1, 2001 through December 31, 2001 -0- 7,814,714

------------ -----------

(5,305,735) 2,890,529

------------ ------------

Less Distributions:

Monthly distributions,

January 1, 2002 through March 31, 2002 261,605 -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 261,605 8,298,341

----------- -----------

Members' deficiency:

March 31, 2002 (5,567,340) -0-

December 31, 2001 -0- (5,407,812)

----------- -----------

Total liabilities and members'

deficiency:

March 31, 2002 $22,168,632 -0-

December 31, 2001 -0- $22,040,811

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

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,

2002 2001

Cash flows from operating activities:

Net income $ 102,077 $ 184,757

Adjustments to reconcile net income

to net cash provided by operating

activities:

Depreciation of improvements 93,508 10,828

Amortization of mortgage

refinancing costs 66,020 66,020

Change in due to lessee 15,017 (70,421)

Accrued expense 13,362 -0-

--------- ---------

Net cash provided by operating

activities 289,984 191,184

---------- ----------

Cash flows from investing activities:

Purchase of building improvements (1,568,769) -0-

---------- ----------

Net cash used in investing activities (1,568,769) -0-

---------- ----------

Cash flows from financing activities:

Cash distributions (261,605) (261,605)

Increase in amounts advanced by lessee 258,970 -0-

--------- ----------

Net cash used in financing

activities (2,635) (261,605)

--------- ----------

Net decrease

in cash (1,281,420) (70,421)

Cash, beginning of period 1,950,750 5,987,609

----------- ----------

Cash, end of period $ 669,330 $5,917,188

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

Cash paid for:

Interest $ 451,125 $ 409,636

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

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

Condensed Statements of Cash Flows

(Unaudited)

For the Three Months

Ended March 31,

2002 2001

Supplemental disclosure of

noncash investing and financing

activities:

Short-term debt to lessee

incurred for purchase of

building improvements,

construction in progress $ -0- $ 998,174

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

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, 2002, its results of operations and cash flows for the three months ended March 31, 2002 and 2001 and its changes in Members' deficiency for the three months ended March 31, 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 chang es 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 three months ended March 31, 2002 are not necessarily indicative of the results to be expected for the full year.

Note B Interim Period Reporting

Registrant was orignally 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 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 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").

Registrant leases the Property to Lincoln Building Associates ("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 partnership whose partners consist of, among others, trusts 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 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 agggregate 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.

Further Additional Rent income is recognized when earned from the Lessee, at the close of the lease year ending September 30. Such income is not determinable until the Lessee, pursuant to the Lease, renders to Registrant a report on the operation of the property. Further Additional Rent for the lease year ended September 30, 2001 was $8,057,690. After the payment of $805,769 to Supervisor as an additional payment for supervisory services, the balance of $7,251,921 was distributed to the Participants on November 30, 2001.

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 advances of $13,000,000 have been taken as of March 31, 2002. Monthly payments of interest only at the rate of 8.21% per annum apply to the advances made through September 30, 2000. Amounts advanced from October 1, 2000 through September 30, 2002 and amounts in excess of $7,000,000 are at interest only at the 30 day LIBOR rate. Amounts advanced after October 1, 2002 require interest only payments at 1.65 points in excess of the yield on U.S. Treasury Securities. Maturity is October 31, 2004.

During the prepayment period, Borrower has the option to prepay the second mortgage note in whole only, on the first day of any month upon (i) prior written notice given by prepaid registered or certified mail at least sixty (60) days prior to the date fixed for prepayment and (ii) the payment of the prepayment premium plus accrued interest. There shall be no prepayment premium after October 1, 2004 to and including the Maturity Date.

Note C - Supervisory Services

Registrant pays Supervisor for special services at hourly rates and 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 March 31, 2002, such remaining cash investment was $7,000,000 representing the original cash investment of Participants in Registrant.

No remuneration was paid during the three month period ended March 31, 2002 by Registrant to any of the Members as such. Pursuant to the fee arrangements described herein, Registrant paid Supervisor $6,000 of the Basic Payment and $1,845 on account of the Additional Payment, for supervisory services for the three month period ended March 31, 2002.

The supervisory services provided to Registrant by Supervisor include, but are not limited to providing or coordinating counsel 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 Net Lessee, payment of monthly and additional distributions to the Participants, payment of all other disbursements, confirmation of the payment of real estate taxes, and active review of financial statements submitted to Registrant by Net Lessee and financial statements audited by and tax information prepared by Registrant's independent certified public accountant, and distribution of such materials to the Participants. Supervisor also prepares quarterly, annual and other periodic filings with the Securities and Exchange Commission and applicable state authorities.

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, 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 partnership interest in Lessee. The Members as such receive no extra or special benefit not shared on a pro rata basis with all other Participants in Registrant or partners in Lessee. However, each of the six Members who is currently at Supervisor (which supervises Registrant and Lessee), by reason of his interests in Supervisor, may receive income attributable to supervisory, service, legal or other remuneration paid to Supervisor for services rendered to Registrant and Lessee.

As of March 31, 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 March 31, 2002, certain of the Members in Registrant (or their respective spouses) held additional Participations in Registrant as follows:

Anthony E. Malkin owned of record as co-trustee an aggregate of $25,000 of Participations. Mr. Anthony E. Malkin disclaims any beneficial ownership of such Participations.

Peter L. Malkin owned of record as trustee or co-trustee, an aggregate of $55,714 of Participations. Mr. 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. Mr. Peter L. Malkin disclaims any beneficial ownership of such Participations, except that related Trusts are required to complete scheduled payments to Mr. Peter L. Malkin.

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 three month period ended March 31, 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 solely 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, 2001, Registrant made an additional distribution of $10,359.89 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. 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:

Total income increased for the three month period ended March 31, 2002, as compared with the three month period ended March 31, 2001. Such increase is the net result of an increase in basic rent to cover an increase in debt service and a decrease in interest income in the period ended March 31, 2002 as compared with the period ended March 31, 2001.

Total expenses increased for the three month period ended March 31, 2002, as compared with the three month period ended March 31, 2001. Such increase is attributable to an increase in interest on the second mortgage paid by Registrant,amortization of mortgage refinancing costs and depreciation of improvements in the period ended March 31, 2002 as compared with the period ended March 31, 2001.

Liquidity and Capital Resources

There has been no significant change in Registrant's liquidity for the three month period ended March 31, 2002, as compared with the three month period ended March 31, 2001, and Registrant may from time to time establish a reserve for contingent or unforeseen liabilities.

No amortization payments are due under the Mortgages to fully satisfy the outstanding principal balance at maturity, and furthermore, Registrant does not maintain any reserve to cover the payment of such Mortgage indebtedness at maturity. Therefore, repayment of the Mortgage will depend on Registrant's ability to arrange a refinancing. Assuming that the Property continues to generate an annual net profit in future years comparable to that in past years, and assuming further that current real estate trends continue in the geographic area in which the Property is located, Registrant anticipates that the value of the Property would be in excess of the amount of the Mortgage balance at maturity.

Registrant anticipates that funds for working capital for the Property will be provided by rental payments received from Lessee and, to the extent necessary, from additional capital investment by the partners in Lessee and/or external financing. However, as noted above, Registrant has no requirement to maintain substantial reserves to defray any operating expenses of the Property.

Inflation

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.

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 parti es. Following the decision, Helmsley-Spear, Inc. applied to the court for confirmation of the decision, and Mr. Malkin and Wien & Malkin LLP applied to the court for an order setting aside that part of the decision regarding the procedure for partnership voting to terminate Helmsley-Spear, Inc. and various other parts of the decision on legal grounds. The court granted the motion to confirm the arbitrators' decision and denied the application to set aside part of the arbitrators' decision. Mr. Malkin and Wien & Malkin LLP have served notice of appeal of the court's determination.

Item 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.

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: May 20, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned as Attorney-in-Fact for each of the Partners in Registrant, pursuant to the Power, on behalf of Registrant on the date indicated.

By: /s/ Stanley Katzman

Stanley Katzman, Attorney-in-Fact*

Dated: May 20, 2002

__________________________

* Mr. Katzman supervises accounting functions for Registrant.

EXHIBIT INDEX

Number Document Page*

3(a) Partnership Agreement, dated September 25, 1958, which was filed by letter dated March 31, 1981 (Commission File No. 0-2670) as Exhibit No. 3 to Registrant's Form 10-K for the fiscal year ended December 31, 1980, and is incorporated by reference as an exhibit hereto.

3(b) Amended Business Certificate of Registrant filed with the Clerk of New York County on November 28, 1997, reflecting a change in the Partners of Registrant, 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.

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, 1998 and 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 quarter ended March 31, 1998 and is incorporated by reference as an exhibit hereto.

__________________________

* Page references are based on sequential numbering system.

EX-13

[LETTERHEAD OF WIEN & MALKIN LLP]



                                                        April 16, 2002

To Participants in 60 East 42nd St. Associates L.L.C.
      Federal Identification Number 13-6077181

	We enclose the annual report of the limited liability company which owns
the premises at 60 East 42nd Street (the Lincoln Building), and at 301 Madison
Avenue, New York City, for the year ended December 31, 2001.  The general
partnership was converted to a limited liability company on November 28, 2001.

	The reported income for 2001 was $7,814,714.  This was less than
distributions of $8,298,341 which is partly the result of depreciation and
amortization of mortgage refinancing costs.

	Monthly distributions during 2001 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 totalling $1,053,800 against
additional rent.

	Additional rent for the lease year ended September 30, 2001 was
$9,111,490, or an excess of $8,057,690 over the advances of $1,053,800.  Wien &
Malkin LLP received $805,769 and the balance of the excess rent of $7,251,921
was distributed to the participants on November 30, 2001.  The additional
distribution of $7,251,921 represented an annual return of about 103.6% on
the cash investment of $7,000,000, so that total distributions for 2001 were
at the rate of about 118.5% per annum.

	Taking into account that a portion of prior distributions constituted
a return of capital, the book value on December 31, 2001 of an original cash
investment of $10,000 was a deficit balance of $7,725.

	Schedule K-1 forms (Form 1065), containing 2001 tax information, were
mailed to the participants on March 12, 2002.

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

                                                Cordially yours,

                                                WIEN & MALKIN LLP

                                                By:  Stanley Katzman
SK:fm
Encs.






[LETTERHEAD OF J.H. COHN
ACCOUNTANTS & CONSULTANTS]







INDEPENDENT ACCOUNTANTS' REPORT



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, 2001, and the related statements of
income, members' equity (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 auditing standards generally
accepted in the United States of America.  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that
our 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 Street
Associates L.L.C. as of December 31, 2001, 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.


					J.H. Cohn LLP
					1212 Avenue of the Americas
					New York, N. Y. 10036

February 26, 2002


                        60 EAST 42ND ST. ASSOCIATES L.L.C.
                         (A Limited Liability Company)

                                BALANCE SHEET

                              DECEMBER 31, 2001



Assets
    Cash in banks                                                 $ 1,863,548
    Cash in distribution account held
     by Wien & Malkin LLP                                              87,202

                                                                    1,950,750

    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     13,882,233
        Less:  Accumulated depreciation                 1,780,389  12,101,844
               Land                                                 7,240,000

	Mortgage refinancing costs			1,361,096
        Less: Accumulated amortization                    612,879     748,217

           Total assets                                           $22,040,811



Liabilities and members' equity (deficiency)
	Liabilities:
                First mortgage                                    $12,020,814
                Second mortgage                                    13,000,000
                Due to lessee                                       2,372,779
                Accrued expenses                                       55,030

        Total liabilities                                          27,448,623

	Commitments and contingencies

	Members' equity (deficiency)				   (5,407,812)

     Total liabilities and members' equity (deficiency)           $22,040,811




	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, 2001




Income:
        Basic rent income                                   $1,545,186
        Additional rent income                               9,111,490
        Interest income                                        142,019

            Total income                                    10,798,695


Expenses:
    Interest on mortgages                        $1,663,205
    Supervisory services                            837,149
    Amortization of mortgage refinancing costs      264,082
    Professional fees                                13,291

            Total expenses                                   2,777,727


Income before depreciation                                   8,020,968

Depreciation of building improvements and equipment            206,254

Net income                                                  $7,814,714





















	See accompanying notes to financial statements.


                  60 EAST 42ND ST. ASSOCIATES L.L.C.
                   (A Limited Liability Company)

                STATEMENT OF MEMBERS' EQUITY (DEFICIENCY)

	            YEAR ENDED DECEMBER 31, 2001







Members' equity (deficiency), January 1, 2001            $(4,924,185)

	Add, Net income for the year ended
         December 31, 2001                                 7,814,714

                                                           2,890,529

	Less, Distributions:
           Monthly distributions, January 1,
           2001 through December 31, 2001      $1,046,420


           Distribution on November 30, 2001 of
           balance of additional rent for the
           lease year ended September 30, 2001  7,251,921
                                                          8,298,341


    Members' equity (deficiency),
         December 31, 2001                              $(5,407,812)

















	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, 2001


Cash flows from operating activities

	Net income                                             	 $ 7,814,714

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

        Depreciation of building improvements and equipment          206,254
         Amortization of mortgage refinancing costs                  264,082
         Change in accrued expenses                                    5,542

        Net cash provided by operating activities                  8,290,592


Cash flows from investing activities

        Purchase of building improvements and equipment           (9,112,983)

        Net cash used in investing activities                     (9,112,983)


Cash flows from financing activities

        Proceeds from second mortgage loan                         6,000,000
        Monthly distributions to participants                     (1,046,420)
        Repayment of amounts advanced by lessee                     (916,127)
	Distribution on November 30, 2001 of
	 balance of additional rent for the
         lease year ended September 30, 2001                      (7,251,921)

             Net cash used in financing activities                (3,214,468)

Net change in cash                                                (4,036,859)

Cash at beginning of year                                          5,987,609

           Cash at end of year                                  $  1,950,750


Supplemental disclosure of cash flows information

        Cash paid in 2001 for interest                          $  1,657,663



	See accompanying notes to financial statements.

                        60 EAST 42ND ST. ASSOCIATES L.L.C.
                         (A Limited Liability Company)

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2001


1. Business Activity and Reorganization

   60 East 42nd St. Associates L.L.C. ("Associates") owns commercial property
   at 60 East 42nd Street and 301 Madison Avenue, New York, N.Y.  The property
   is net leased to Lincoln Building Associates (the "Lessee").

   Associates operated as a general partnership, 60 East 42nd St. Associates,
   until November 28, 2001, when it converted to a limited liability company and
   changed to its current name.  Ownership percentages in Associates were
   unchanged by the conversion.  Associates continues to be treated as a
   partnership for tax purposes, and the partnership's income tax basis of its
   assets and liabilities carried over to the limited liability company.



2. Summary of Significant Accounting Policies

   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 10), costs totaling $12,308,098 at December 31, 2001 have been
   incurred for new building improvements ($12,178,098) and equipment
   ($130,000) which have been put into service.  Depreciation on these assets
   is provided using the straight-line method over an estimated useful life
   of 39 years for building improvements and 7 years for equipment.

   Mortgage refinancing costs and amortization:

   Mortgage refinancing costs of $249,522, incurred in connection with the
   October 6, 1994 refinancing of the first mortgage (see note 3), are being
   amortized ratably over the term of the first mortgage, from October 6, 1994
   through October 31, 2004.

   Mortgage refinancing costs of $1,111,574, incurred in connection with the
   March 8, 2000 refinancing of the second mortgage, are being amortized
   ratably over the term of the second mortgage, from March 8, 2000 through
   October 31, 2004.


                     60 EAST 42ND ST. ASSOCIATES L.L.C.
                        (A Limited Liability Company)

                  NOTES TO FINANCIAL STATEMENTS (Continued)



3. First and Second Mortgages Payable

   On October 6, 1994, a first mortgage was placed on the property with Morgan
   Guaranty Trust Company of New York, as trustee of a pension trust, in the
   amount of $12,020,814.  The first mortgage requires constant equal monthly
   payments totaling $1,063,842 per annum for interest only, at the rate of
   8.85% per annum, and matures on October 31, 2004.

   In connection with the building improvements program referred to in Note 10,
   a second mortgage loan was placed on the property on March 8, 2000, with
   Emigrant Savings Bank.  The principal amount of the second mortgage note is
   $27,979,186, to be drawn down as payments for the building improvements are
   needed.  Through December 31, 2001 Associates has drawn down advances of
   $13,000,000 against this loan.  The loan agreement permits additional
   advances to be made through September 1, 2002 in amounts of not less than
   $1,000,000 each, provided that no more than six advances may be made during
   any twelve consecutive calendar month period.

   The second mortgage calls for the first $7,000,000 of loan proceeds advanced
   through September 30, 2000 to bear interest at the rate of 8.21% per annum
   through the term of the loan.  All loan proceeds advanced after September
   30, 2000 bear interest at a Floating Rate, defined to be either the prime
   rate, a U.S. Treasury based rate or a LIBO-based rate, as selected by
   Associates.  At December 31, 2001 the floating rate interest on $6,000,000
   of second mortgage debt, drawn down since September 30, 2000, was being
   calculated at a rate of approximately 3.7%.  Monthly payments for debt
   service on the loan are interest only.  The second mortgage also matures on
   October 31, 2004.

   On October 1, 2002, the interest rate on the second mortgage will be
   converted to a Fixed Rate.  The Fixed Rate is equal to 1.65% per annum in
   excess of the yield on U.S. Treasury Securities having the closest maturity
   to October 31, 2004, as last published prior to October 1, 2002 by the
   Federal Reserve Board.

   The real estate is pledged as collateral for the first and second mortgages.




4. Rent Income and Related Party Transactions

   On January 4, 1982, Lincoln Building Associates (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 10.

   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.

             60 EAST 42ND ST. ASSOCIATES L.L.C.
                (A Limited Liability Company)

	NOTES TO FINANCIAL STATEMENTS (Continued)



4. Rent Income and Related Party Transactions (continued)

   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.

   2.  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, 2001 the Lessee reported additional
   rent of $9,111,490, based on an operating profit of $17,169,179 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 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.

   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.

   Peter L. Malkin is a member in Associates.  A trust for the benefit of
   Peter L. Malkin's family is a partner in the Lessee.



5. Supervisory Services and Related Party Transactions

   Payments for supervisory services, including disbursements and the cost of
   regular accounting services, are made to the firm of Wien & Malkin LLP.
   A member of that firm is a member in Associates.



6. Professional Fees and Related Party Transactions

   Included in professional fees are payments of $2,791 made to the firm of
   Wien & Malkin LLP, a related party.



7. 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.



                60 EAST 42ND ST. ASSOCIATES L.L.C.
                  (A Limited Liability Company)

           NOTES TO FINANCIAL STATEMENTS (Continued)



8. Concentration of Credit Risk

   Associates maintains cash balances in two banks and in a distribution account
   held by Wien & Malkin LLP.  The bank balances are insured by the Federal
   Deposit Insurance Corporation up to $100,000 each, and at December 31, 2001
   approximately $1,807,000 was not insured.  The distribution account held by
   Wien & Malkin LLP is not insured.  The funds held in the distribution account
   were paid to the participants on January 1, 2002.



9. Contingencies

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

   The original action commenced in June 1997 and was referred to arbitration.
   The March 30, 2001 decision of the arbitrators, which was confirmed by the
   court, (1) reaffirms the right of the partners in the lessee to vote to
   terminate Helmsley-Spear, Inc. without cause, (ii) dismisses Helmsley-Spear,
   Inc.'s claims against Wien & Malkin LLP, and (iii) rejects the termination of
   Helmsley-Spear, Inc. for cause.  Parts of the decision of the court are
   under appeal.



10. Building Improvements Program and Agreement to Extend Lease

    In 1999 the participants of Associates and the Lessee consented to a b
    uilding 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 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.  The increased amount had
    previously been authorized by the participants of Associates.

    The Lessee is currently financing the Program and billing Associates for
    the costs incurred.  The Program (1) grants the ownership of the
    improvements to Associates and acknowledges its intention to finance them
    through 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.



                        60 EAST 42ND ST. ASSOCIATES L.L.C.
                          (A Limited Liability Company)

                  NOTES TO FINANCIAL STATEMENTS (Continued)



10. Building Improvements Program and Agreement to Extend Lease (continued)

    The 1999 consent authorized the Agents of Associates 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 of
    improvements and to later date(s) for consideration and upon such terms
    as the Agents deem appropriate for the benefit of Associates.



11. Receipt of Warrants and Stock in Telecommunications Companies

    In 2000, Associates received shares of common stock and warrants from
    certain unrelated companies in exchange for permission for those companies
    to provide high speed internet access and other telecommunication services
    to the buildings.  The Lessee received an equal amount of shares and
    warrants.  There are restrictions as to the transfer of stock, and neither
    the warrants nor the stock have an ascertainable value as of the balance
    sheet date.  Accordingly, the accompanying financial statements do not
    reflect any value for these securities.


12. Reclassifications

    As a result of the conversion of Associates to a limited liability
    company (Note 1), certain accounts at January 1, 2001 have been reclassified
    to conform with the presentation in the current year financial statements.