10-K 1 document.txt 10K DOCUMENT FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 [] 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 0-2673 NAVARRE-500 BUILDING ASSOCIATES (Exact name of Registrant as specified in its charter) A New York Co-Tenancy [Formerly 13-6082674 [formerly a partnership] as partnership] (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 60 East 42nd Street, New York, New York 10165 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 687-8700 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: $3,190,000 of Participations in Co-Tenant Interests (Title of Class) 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 [ ] The aggregate market value of the voting stock held by non- affiliates of the Registrant: Not applicable, but see Items 5 and 10 of this report. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___ An Exhibit Index is located on pages 29 through 31 of this Report. Number of pages (including exhibits) in this filing: 39 PART I Item 1. Business. (a) General Registrant was organized as a partnership on March 21, 1958. Registrant owned the tenant's interest in the long-term ground lease (the "Lease") of the buildings located at 500 and 512 Seventh Avenue and 228 West 38th Street, New York, New York (the "Property") until Registrant sold the Lease on December 23, 1999 on the economic terms described in the accompanying financial statements. Registrant ceased to be a partnership on December 23, 1999 when the interests of its partner Agents were redeemed by conveyance to them of direct pro rata interests in the Property. The partnership's final tax return was filed for the period ending December 23, 1999. After December 23, 1999, such former partners (the "Agents") continued the ownership of the Lease as co-tenants for the benefit of the Participants, and the co-tenancy has conducted its business under the name "Navarre-500 Building Associates, a co-tenancy", all for the benefit of the Participants on all the same pre-existing economic and investment terms through the date of such sale and thereafter. Accordingly, reference herein to Registrant is a reference to Navarre-500 Building Associates, a co-tenancy. Registrant's partner Agents were Peter L. Malkin and Thomas N. Keltner, Jr., who are now the co-tenant Agents. The land underlying the buildings was owned by an unaffiliated third party and was leased to Registrant under the Lease. The current term of the Lease as extended was to expire on May 1, 2024. The Lease provided for one additional 21-year renewal option. The annual rent payable by Registrant under the Lease was $487,500 during the current and each renewal term. Registrant did not operate the Property, but subleased the Property to 500-512 Seventh Avenue Associates (the "Sublessee") pursuant to a net operating sublease (the "Sublease"). The current renewal term, as extended, of the Sublease was to expire on April 30, 2024. The Sublease provided for one renewal option for a term co-extensive with the period contained in the Lease. Peter L. Malkin, an Agent in Registrant, has also been a partner and now a co-tenant in Sublessee. The Agents in Registrant are also members of Wien & Malkin LLP, which provides supervisory and other services to Registrant and to Sublessee (the "Supervisor"). See Items 10, 11, 12 and 13 hereof -2- for a description of the services rendered by, and compensation paid to, Supervisor and for a discussion of certain relationships which may pose actual or potential conflicts of interest among Registrant, Sublessee and certain of their respective affiliates. Registrant did not maintain a full-time staff. See Item 2 hereof for additional information concerning the Property, which has been sold by Registrant. (b) The Sublease Under the Sublease, Sublessee paid (i) annual basic rent of $1,167,500 during the current renewal term and each additional renewal term (the "Basic Rent") and (ii) additional rent to Registrant during the current term and each renewal term equal to 50% of Sublessee's net operating profit in excess of $620,000 for each lease year ending June 30 (the "Additional Rent"). There was no Additional Rent paid for the lease year ended June 30, 1999 by Sublessee and for the short-period of the final lease year ended 12/23/99. Additional Rent income was recognized when earned from the Sublessee, at the close of the lease year ending June 30. Such income was not determinable until the Sublessee, pursuant to the Sublease, rendered to Registrant a certified report on the Sublessee's operation of the Property. The Sublease required that this report be delivered to Registrant annually within 60 days after the end of each such lease year. Accordingly, all Additional Rent income and certain supervisory service expense could only be determined after the receipt of such report. The Lease does not provide for the Lessee to render interim reports to Registrant, so no Additional Rent income was reflected for the period between the end of the lease year and the end of Registrant's fiscal year. See Note 3 of the Notes to the Financial Statements filed under Item 8 hereof (the "Notes") regarding Additional Rent payments by Sublessee for the fiscal years ended December 31, 2000, 1999 and 1998. (c) Competition Pursuant to tenant space leases at the Property, the annual base rentals payable to Sublessee averaged $14.85 per square foot (exclusive of electricity charges and escalation) when the Property was sold. Registrant no longer has any direct or indirect interest in the operation of the Property, so local real estate competition is no longer relevant to Registrant's operation or financial results. (d) Tenant Leases Prior to the sale of the Property, Sublessee operated the Property free from any federal, state or local government restrictions involving rent control or other similar rent regulations which may be imposed upon residential real estate in Manhattan. Any increase or decrease in the amount of rent payable by a tenant was governed by the provisions of the tenant's lease. -3- Item 2. Property. Prior to the sale of the Property as stated in Item 1 hereof, Registrant owned the leasehold of the buildings located at 500 and 512 Seventh Avenue, New York, New York. The building at 500 Seventh Avenue contains 17 stories; the building at 512 Seventh Avenue contains 44 stories. The buildings together occupy the entire block front on the west side of Seventh Avenue between 37th and 38th Streets in New York City's Garment District. Pursuant to the Lease, Registrant also held a leasehold interest in an adjacent 5-story building located at 228 West 38th Street. The two principal buildings, erected in 1921 and 1931, respectively, contain showroom, office and loft space. Item 3. Legal Proceedings. The Registrant and/or its assets are the subject of the following 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, which did include the Registrant's Sublessee prior to the 1999 sale of the Property. The arbitration hearings were concluded in June 2000, and the arbitrators issued their decision on March 30, 2001, ordering that the termination of Helmsley-Spear, Inc. would require a new vote by the partners in the Lessee, setting forth procedures for such a vote, and denying the other claims of all parties. Following the decision, Mr. Malkin and Wien & Malkin LLP are evaluating with counsel possible court review of the decision and other action. -4- PART II Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters. Registrant was a partnership and is now a co-tenancy. Registrant did not issue any common stock. The securities registered by it under the Securities Exchange Act of 1934, as amended, consisted of participations in the interests of the Agents in Registrant (the "Participations") and are not shares of common stock nor their equivalent. The Participations represent each Participant's fractional share in an Agent's undivided interest in Registrant, and are divided approximately equally among the Agents. A full unit of the Participations was offered originally at a purchase price of $5,000; fractional units were also offered at proportionate purchase prices. Registrant has not repurchased Participations in the past and it is not likely to change its policy in the future. (a) The Participations neither were traded on an established securities market nor were readily tradable on a secondary market or the substantial equivalent thereof. Based on Registrant's transfer records, Participations were sold from time to time in privately negotiated transactions and, in many instances, Registrant is not aware of the prices at which such transactions occur. (b) As of December 31, 2000, there were 609 Participants of record. (c) Registrant did not pay dividends. During the years ended December 31, 1999 and December 31, 1998, Registrant made regular monthly distributions of $83.33 for each $5,000 Participation. Distributions in 1999 include non-cash distributions of $306 and cash distributions of $1,000 for each $5,000 Participation. There were no restrictions on Registrant's ability to make distributions; however, the amount of such distributions, particularly distributions of Additional Rent, depended solely on Sublessee's ability to make payments of Basic Rent and Additional Rent to Registrant. See Item 1 hereof. Registrant expected to make distributions so long as it received the payments provided for under the Sublease. See Item 7 hereof. -5- [SELECTED FINANCIAL DATA] Item 6. NAVARRE-500 BUILDING ASSOCIATES SELECTED FINANCIAL DATA

-6- Item 7. NAVARRE-500 BUILDING ASSOCIATES (A GENERAL PARTNERSHIP CONVERTED IN 1999 TO A CO-TENANCY) QUARTERLY RESULTS OF OPERATIONS The following table presents Associates' operating results for each of the eight fiscal quarters in the period ended December 31, 2000. The information for each of these quarters is unaudited and has been prepared on the same basis as the audited financial statements included in this Annual Report on Form 10-K. In the opinion of management, all necessary adjustments, which consist only of normal and recurring accruals, have been included to present fairly the unaudited quarterly results. This data should be read together with the financial statements and the notes thereto included in this Annual Report on Form 10-K.

-7- Item 7. NAVARRE-500 BUILDING ASSOCIATES (A GENERAL PARTNERSHIP CONVERTED IN 1999 TO A CO-TENANCY) QUARTERLY RESULTS OF OPERATIONS (Continued)

-8- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. Registrant was organized solely for the purpose of owning the master leasehold of the Property subject to a net operating sublease of the Property held by Sublessee. Registrant was required to pay from Basic Rent the annual rent under the Lease and amounts for supervisory services. Registrant distributed the balance of such Basic Rent to the Participants. Additional Rent was distributed to the Participants after the Additional Payment to Supervisor. Pursuant to the Sublease, Sublessee had assumed sole responsibility for the condition, operation, repair, maintenance and management of the Property. Registrant did not need to maintain substantial reserves or otherwise maintain liquid assets to defray any operating expenses of the Property. Registrant's results of operations were affected primarily by the amount of rent payable to it under the Sublease. The following summarizes the material factors affecting Registrant's results of operations for the three preceding years: (a) Total income decreased for the year ended December 31, 2000 as compared with the year ended December 31, 1999. Such decrease is attributable to the property being sold in 1999. Total income decreased for the year ended December 31, 1999 as compared with the year ended December 31, 1998. Such decrease is attributable to the annual rent being prorated in the year ended December 31, 1999. See Note 3 of the Notes. (b) Total expenses decreased for the year ended December 31, 2000 as compared with the year ended December 31, 1999. Such decrease is attributable to the property being sold in 1999. Total expenses decreased for the year ended December 31, 1999 as compared with the year ended December 31, 1998. Such decrease resulted from rent expense being prorated for the year ended December 31, 1999 as a result of the sale on 12/23/99. See Note 4 of the Notes. The amount of Additional Rent payable to Registrant was affected by the cycles in the New York City economy, the ladies' garment industry and the real estate rental market. It is difficult for Registrant to forecast when these markets will improve or deteriorate. -9- Inflation Inflationary trends in the economy did not directly impact Registrant's operations, since as noted above, Registrant did not actively engage in the operation of the Property. Inflation could impact the operations of Sublessee prior to the 1999 sale of the Property. Sublessee was required to pay Basic Rent, regardless of the results of its operations. Inflation and other operating factors affected only the amount of Additional Rent payable by Sublessee, which was based on Sublessee's net operating profit. Item 8. Financial Statements and Supplementary Data. The financial statements, together with the accompanying report by, and the consent to the use thereof, of J.H. Cohn LLP immediately following, are being filed in response to this item. Item 9. Disagreements on Accounting and Financial Disclosure. Not applicable. -10- PART III Item 10. Directors and Executive Officers of the Registrant. Registrant has no directors or officers or any other centralization of management. There is no specific term of office for any Agent. The table below sets forth, as to each Agent as of December 31, 2000, the following: name, age, nature of any family relationship with any other Agent, business experience during the past five years and principal occupation and employment during such period, including the name and principal business of any corporation or any organization in which such occupation and employment was carried on and the date such individual became an Agent: Principal Date Nature of Occupation Individual Family Business and became Name Age Relationship Experience Employment Agent Peter L. Malkin 66 None Real Estate Senior Partner 1988 Supervision and Chairman and Law Wien & Malkin LLP Thomas N. Keltner, Jr. 54 None Real Estate Partner 1996 Supervision Wien & Malkin and Law LLP Mr. Malkin and Mr. Keltner are also members of Supervisor. See Items 11, 12 and 13 hereof for a description of the services rendered by, and the compensation paid to, Supervisor and for a discussion of certain relationships which may pose actual or potential conflicts of interest among Registrant, Sublessee and certain of their respective affiliates. The names of entities which have a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or are subject to the requirements of Section 15(d) of that Act, and in which the Agents are either a joint venturer or general partner are as follows: Peter L. Malkin is a joint venturer in 250 West 57th St. Associates; and a general partner in Empire State Building Associates, Garment Capitol Associates and 60 East 42nd St. Associates. -11- Thomas N. Keltner, Jr. is a general partner in 60 East 42nd St. Associates, Empire State Building Associates and Garment Capitol Associates. Item 11. Executive Compensation. As stated in Item 10 hereof, Registrant has no directors or officers or any other centralization of management. No remuneration was paid during the current fiscal year ended December 31, 2000 by Registrant to any of the Agents as such. As accrued through the 1999 sale of the Property, Registrant paid Supervisor, for supervisory services and disbursements, fees of $40,000 per annum, plus 10% of all distributions to Participants in any year in excess of the amount representing 23% per annum on the Participants' remaining cash investment in Registrant. The supervisory services provided to Registrant by Supervisor included real estate supervisory, legal, administrative and financial services. The services included, but were not limited to, providing or coordinating with counsel to Registrant, maintaining all of its partnership and Participant records, performing physical inspections of the Building, reviewing insurance coverage and conducting annual partnership meetings. Financial services included monthly receipt of rent from Sublessee, payment of monthly rent to the fee owner, payment of monthly and additional distributions to the Participants, payment of all other disbursements, confirmation of the payment of real estate taxes, review of financial statements submitted to Registrant by Sublessee, review of 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. Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) Registrant has no voting securities (see Item 5 hereof). (b) At December 31, 2000, the Agents in Registrant (see Item 10 hereof) beneficially owned, directly or indirectly, the following Participations: -12- Name and Address of Amount of Beneficial Beneficial Percent Title of Class Owners Ownership of Class Participations in Peter L. Malkin $ 8,125 .254% Agent Interests 60 East 42nd Street New York, NY 10165 At such date, certain of the Agents (or their respective spouses) held additional Participations as follows: Peter L. Malkin, Trustee of Mattie Saunders 1983 Trust, owned $7,500 of Participations. Mr. Malkin disclaims any beneficial ownership of such Participations. Entities for the benefit of members of Peter L. Malkin's family own of record and beneficially $35,000 of Participations. Mr. Malkin disclaims any beneficial ownership of such Participations, except that the related Trusts are required to complete scheduled payments to Mr. Malkin. In accordance with the provisions of the respective participating agreements, Peter L. Malkin, in his capacity as agent, purchased from non-consenting Participants $1,875 of participations for the benefit of consenting Participants, all on the terms described in the Agents' Consent Solicitations dated July 15, 1999. Each such purchase may be revised at the discretion of the Agent upon receipt of the consent from the applicable non-consenting Participant. (c) Not applicable. Item 13. Certain Relationships and Related Transactions. (a) As stated in Items 1 and 10 hereof, Messrs. Peter L. Malkin and Thomas N. Keltner, Jr. are the Agents in Registrant acting for the Participants. Mr. Malkin's family have also owned equity interests in Sublessee. As a consequence of Mr. Malkin's family having an interest in Sublessee and both Mr. Malkin and Mr. Keltner being members of Supervisor, certain actual or potential conflicts of interest may arise with respect to the management and administration of the business of Registrant. However, under the respective participating agreements pursuant to which Mr. Malkin and Mr. Keltner act as agents for the Participants, certain transactions require the prior consent from Participants owning a specified interest under the Agreements in order for them to act -13- on their behalf. Such transactions included modifications and extensions of the Lease and the Sublease or the sale of the Property or substantially all of Registrant's other assets. See Item 1 for a description of the terms of the Sublease. The interest of Mr. Malkin in the Sublease arose solely from the ownership of his family's interest in Sublessee, and he received no extra or special benefit not shared on a pro rata basis with all other equity owners in Sublessee, except that Mr. Malkin and Mr. Keltner, by reason of their respective interests in Supervisor, were entitled to receive their pro rata share of any supervisory, service, legal or other remuneration paid to Supervisor for services rendered to Registrant and Sublessee. See Item 11 hereof for a description of the remuneration arrangements between Registrant and Supervisor relating to supervisory services provided by Supervisor. See Items 1 and 10 hereof for a description of the relationship between Registrant and Supervisor, of which the Agents in Registrant are among its members. The interest of each of Mr. Malkin and Mr. Keltner in any remuneration paid or given by Registrant to Supervisor arose solely from such person's ownership of an interest in Supervisor. See Item 11 hereof for a description of the remuneration arrangements between Registrant and Supervisor relating to supervisory services provided by Supervisor. (b) Reference is made to paragraph (a) above. (c) Not applicable. (d) Not applicable. -14- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a)(1) Financial Statements: Consent of J.H. Cohn LLP, Certified Public Accountants, dated February 15, 2001. Accountant's Report of J.H. Cohn LLP, Certified Public Accountants, dated February 15, 2001. Balance Sheets at December 31, 2000 and at December 31, 1999 (Exhibit A). Statements of Income for the fiscal years ended December 31, 2000, 1999 and 1998 (Exhibit B). Statement of Partners' Capital for the fiscal year ended December 31, 2000 (Exhibit C-1). Statement of Partners' Capital for the fiscal year ended December 31, 1999 (Exhibit C-2). Statement of Partners' Capital for the fiscal year ended December 31, 1998 (Exhibit C-3). Statements of Cash Flows for the fiscal years ended December 31, 2000, 1999 and 1998 (Exhibit D). Notes to Financial Statements for the fiscal years ended December 31, 2000 ,1999 and 1998. (2) Financial Statement Schedules: List of Omitted Schedules. (3) Exhibits: See Exhibit Index. (b) No report on Form 8-K was filed by Registrant during the last quarter of the period covered by this report. -15- [LETTERHEAD OF J.H. COHN ACCOUNTANTS & CONSULTANTS] February 15, 2001 Navarre-500 Building Associates (A Co-Tenancy) New York, N.Y. We consent to the use of our independent accountants' report dated February 15, 2001 covering our audits of the accompanying financial statements of Navarre-500 Building Associates in connection with and as part of your December 31, 2000 annual report (Form 10-K) to the Securities and Exchange Commission. J.H. Cohn LLP New York, N.Y. -16- INDEPENDENT ACCOUNTANTS' REPORT To the participants in Navarre-500 Building Associates (a general partnership converted in 1999 to a co-tenancy) New York, N. Y. We have audited the accompanying balance sheets of Navarre-500 Building Associates (the "Company") as of December 31, 2000 and 1999, and the related statements of income, partners' capital and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As more fully described in Note 1 to the financial statements the Company ceased to be a general partnership on December 23, 1999, when it was dissolved coincidental with an in-kind liquidating distribution to its partners of all of the Company's assets, and converted to a co- tenancy. On that date, the co-tenants, operating as Navarre-500 Building Associates, the co-tenancy, sold their individual interests in the leasehold property and received in exchange a purchase money note due on January 4, 2000. After December 23, 1999, the co-tenancy conducted its business as Navarre-500 Building Associates for the benefit of each of the co-tenants, on the same respective economic and investment terms as had existed before the partnership's legal dissolution. As a result of the foregoing and in order to reflect the substance of the conveyance of the property, the co-tenancy's transactions for the period subsequent to the dissolution of the general partnership have been combined in the accompanying financial statements with those of the general partnership. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Navarre-500 Building Associates as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. J.H. Cohn LLP New York, N. Y. February 15, 2001 -17- EXHIBIT A NAVARRE-500 BUILDING ASSOCIATES BALANCE SHEETS A S S E T S

See accompanying notes to financial statements. -18- EXHIBIT B NAVARRE-500 BUILDING ASSOCIATES STATEMENTS OF INCOME

See accompanying notes to financial statements. -19- EXHIBIT C-2 NAVARRE-500 BUILDING ASSOCIATES STATEMENT OF PARTNERS' CAPITAL YEAR ENDED DECEMBER 31, 1999

See accompanying notes to financial statements. -20- EXHIBIT C-1 NAVARRE-500 BUILDING ASSOCIATES STATEMENT OF PARTNERS' CAPITAL YEAR ENDED DECEMBER 31, 2000

See accompanying notes to financial statements. -21- EXHIBIT C-3 NAVARRE-500 BUILDING ASSOCIATES STATEMENT OF PARTNERS' CAPITAL YEAR ENDED DECEMBER 31, 1998

See accompanying notes to financial statements. -22- EXHIBIT D NAVARRE-500 BUILDING ASSOCIATES STATEMENTS OF CASH FLOWS

Supplemental disclosure of noncash investing and financing activities: On December 23, 1999, in connection with the dissolution of the partnership and its conversion to a co-tenancy, the partnership made an in-kind distribution of all its assets to the partners, which had a cost basis of $195,800. On that same date, the co-tenancy sold its leasehold in exchange for a purchase money note receivable in the amount of $52,500,000. See accompanying notes to financial statements. -23- NAVARRE-500 BUILDING ASSOCIATES NOTES TO FINANCIAL STATEMENTS 1. Business Activity, Sale of Leasehold and Basis of Presentation Until its dissolution on December 23, 1999 Navarre-500 Building Associates ("Associates") conducted its business as a general partnership which held the tenant's position in the master leasehold of property situated at 500 and 512 Seventh Avenue, New York, New York. On December 23, 1999, the general partnership was dissolved coincidental with an in-kind liquidating distribution to its partners of all of Associates' assets, and was converted to a co-tenancy. Also, on that date, the co- tenants, operating as Navarre-500 Building Associates, the co-tenancy, sold their individual interests in the leasehold property for $52,500,000 and received in exchange a 5% purchase money note due on January 4, 2000. After December 23, 1999, the co-tenancy conducted its business as Navarre-500 Building Associates for the benefit of each of the co-tenants, on the same respective economic and investment terms as had existed before the partnership's legal dissolution. As a result of the foregoing and in order to reflect the substance of the conveyance of the property, the co-tenancy's transactions for the period subsequent to the dissolution of the general partnership have been combined in the accompanying financial statements with those of the general partnership. The sale of the leasehold on December 23, 1999 resulted in a gain, computed as follows: Sales proceeds allocated to co-tenants $52,500,000 Less costs of sale: Unamortized cost of leasehold $ 158,919 Expenses of sale 2,712,647 2,871,566 Gain on sale of leasehold, reported in 1999 $49,628,434 In 1999 the co-tenancy borrowed $2,525,935 from a partner, Peter L. Malkin. All of these funds were used to pay the above expenses of sale. In 2000, the purchase money note receivable and accrued interest was collected in full, and additional expenses of sale were incurred by the co-tenancy, totaling $24,475. Associates continues to have held in escrow a reserve for contingencies associated with the operations of the leasehold property (see Note 10). 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. -24- NAVARRE-500 BUILDING ASSOCIATES NOTES TO FINANCIAL STATEMENTS (continued) 3. Related Party Transactions - Rent Income Rent income for the period January 1, 1999 to December 23, 1999 and the year ended December 31, 1998 represents the annual basic rent of $1,167,500, under an operating sublease, as modified, with 500-512 Seventh Avenue Associates (the "Sublessee"). The term of the sublease was to expire in 2024. For 1999 the rent income of $1,139,254 is the annual basic rent, prorated through December 23, 1999. A partner in Associates is also a partner in the Sublessee. The sublease also provided for additional rent to be paid to Associates based on the Sublessee's net operating profit as defined. No additional rent was earned by Associates in 1999 or 1998. 4. Leasehold Rent Leasehold rent paid during the years ended December 31, 1999 and 1998 consisted of the annual net rent of $487,500 under an operating leasehold, as modified, with GSL Enterprises, Inc. For 1999 the annual net rent expense of $475,706 was prorated through December 23, 1999. Leasehold rent was paid pursuant to an operating lease whose term was to expire 2024. 5a. Related Party Transactions - Supervisory Services Supervisory services (including disbursements and cost of regular accounting services) during the years ended December 31, 1999 and 1998, totaling $40,000 in each year, were paid to the firm of Wien & Malkin LLP. Some members in that firm are partners in Associates. Fees for supervisory services were paid pursuant to an agreement, which amount was based on a rate of return of investment achieved by the participants of Associates each year. 5b. Related Party Transactions - Professional Fees Professional fees paid in 2000 include $31,715 paid to the firm of Wien & Malkin LLP. 5c. Related Party Transactions - Interest Expense Interest income in 2000 as shown net of interest expense of $9,542, paid to a partner on his advance in 1999 (Note 1) to cover expenses of sale of the leasehold. 6. Number of Participants There were approximately 600 participants in the two participating groups at December 31st of each period presented. -25- NAVARRE-500 BUILDING ASSOCIATES NOTES TO FINANCIAL STATEMENTS (continued) 7. Determination of Distributions to Participants Cash distributions to participants during 2000 represent mainly the net proceeds from the purchase money note after sale of the leasehold (Note 1), less the co-tenancy's outstanding liabilities at December 31, 1999, and an amount held in escrow. Cash distributions to participants during 1999 and 1998 represent mainly the excess of rent income received over the cash expenses. 8. Distributions and Amount of Income per $5,000 Participation Unit Distributions per $5,000 participation unit during the years 2000, 1999 and 1998, based on 640 participation units outstanding during each year, consisted of the following: Year ended December 31, 2000 1999 1998 Income.......................... $ 266 $1,306 $ 990 Return of capital............... 73,354 - 10 TOTAL DISTRIBUTIONS......... $73,620 $1,306 $1,000 Distributions in 1999 include non-cash distributions of $306 and cash distributions of $1,000. Income in 1999 per $5,000 participation unit includes $342 from gain on sale of leasehold and related income (Note 1). 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. 9. Concentration of Credit Risk At December 31, 2000 the money held by Wien & Malkin LLP as escrow agent was not insured. 10. Contingency From June 1997 through the date of Associates' sale of its leasehold, Wien & Malkin LLP and Peter L. Malkin, an agent for Associates, were engaged in a dispute with Helmsley-Spear, Inc. the managing agent of the Sublessee, concerning the management, leasing and supervision of the property. In this connection, certain legal and professional fees and other expenses were paid and incurred. Associates' allocable share of such costs is as yet undetermined. Accordingly, the expenses and related liability with respect to such costs has not been reflected in the financial statements. -26- NAVARRE-500 BUILDING ASSOCIATES OMITTED SCHEDULES The following schedules have been omitted as not applicable in the present instance: SCHEDULE I - Condensed financial information of registrant. SCHEDULE II - Valuation and qualifying accounts. SCHEDULE III - Real estate and accumulated depreciation. SCHEDULE IV - Mortgage loans on real estate. -27- SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The individual signing this report on behalf of Registrant is Attorney-in-Fact for Registrant and each of the Agents in Registrant, pursuant to Powers of Attorney, dated August 6, 1996 and May 14, 1998 (collectively, the "Power"). NAVARRE-500 BUILDING ASSOCIATES (Registrant) By:/s/ Stanley Katzman Stanley Katzman, Attorney-in-Fact* Date: April 16, 2001 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 Agents in Registrant, pursuant to the Power, on behalf of the Registrant and as an Agent in Registrant on the date indicated. By:/s/ Stanley Katzman Stanley Katzman, Attorney-in-Fact* Date: April 16, 2001 ________________________ * Mr. Katzman supervises accounting functions for Registrant. -28- EXHIBIT INDEX Number Document Page* 3(a) Partnership Agreement, dated March 21, 1958, which was filed as Exhibit No. 1 to Registrant's Form S-1 Registration Statement, as amended (the "Registration Statement") by letter dated April 3, 1958 and assigned File No. 2-14019, is incorporated by reference as an exhibit hereto. 3(b) Amended Business Certificate of Registrant filed with the Clerk of New York County on August 10, 1998 reflecting a change in Partners which was filed as Exhibit 3(b) to Registrant's Report on Form 10-Q-A for the quarter ended September 30, 1998 and is incorporated herein by reference. 4 Form of Participating Agreement, which was filed as Exhibit No. 4 to Registrant's Registration Statement by letter dated April 3, 1958 and assigned File No. 2-14019, is incorporated by reference as an exhibit hereto. 10(a) Deed from Garment Center Capitol Inc. to The Prudential Insurance Company of America ("Prudential") dated May 1, 1957, filed by letter dated March 31, 1981 (Commission File No. 0-2673) as Exhibit No. 10(a) to Registrant's Form 10-K for the fiscal year ended December 31, 1980, is incorporated by reference as an exhibit hereto. _______________________ * Page references are based on a sequential numbering system -29- Number Document Page* 10(b) Purchase Agreement between Navarre- 500 Building Associates and 500-512 Seventh Avenue Associates, dated March 25, 1958, which was filed as Exhibit No. 2 to Registrant's Registration Statement by letter dated April 3, 1958 and assigned File No. 2-14019, is incorporated by reference as an exhibit hereto. 10(c) Net Lease, dated May 1, 1957, between Prudential and 500-512, Inc., which was filed as Exhibit No. 3 to Registrant's Registration Statement by letter dated April 3, 1958 and assigned File No. 2-14019, is incorporated by reference as an exhibit hereto. 10(d) Assignment of Net Lease from 500-512, Inc. to 500-512 Seventh Avenue Associates, dated May 1, 1957, which was filed as Exhibit No. 3(a) to Registrant's Registration Statement by letter dated April 3, 1958 and assigned File No. 2-14019, is incorporated by reference as an exhibit hereto. 13(a) Letter to Participants, dated January 31, 2001 and accompanying financial reports for the fiscal year ended December 31, 2000. The foregoing material shall not be deemed to be "filed" with the Commission or otherwise subject to the liabilities of Section 18 of the Securities Exchange Act of 1934. _______________________ * Page references are based on a sequential numbering system. -30- Number Document Page* 24 Powers of Attorney dated August 6, 1996 and May 14, 1998 between Peter L. Malkin and Thomas N. Keltner, Jr. as Agents in Registrant and Stanley Katzman and Richard Shapiro, was filed as Exhibit 24 to Registrant's 10-Q dated March 31, 1998 and is incorporated herein by reference. _______________________ * Page references are based on a sequential numbering system -31-

NAVARRE 500 BUILDING ASSOCIATES 10-K