10-Q 1 e15491_10q.txt FORM 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003. 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: 0-5537 INVESTMENT PROPERTIES ASSOCIATES (Exact name of registrant as specified in its charter) A New York Limited Partnership 13-2647723 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 60 East 42nd Street, New York, New York 10165 (Address of principal executive offices) (Zip Code) (212) 687-6400 (Registrant's telephone number, including area code) 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. [X] Yes [ ] No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [ ] Yes [ ] No 820,000 participations of Limited Partnership Interests are outstanding as of the date hereof. INVESTMENT PROPERTIES ASSOCIATES FORM 10-Q For the Fiscal Quarter Ended June 30, 2003 INDEX Page PART I. FINANCIAL INFORMATION...............................................1 Item 1. Financial Statements................................................1 Balance Sheets......................................................1 Statements of Operations............................................2 Statements of Cash Flows............................................3 Notes to Unaudited Financial Statements.............................4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................................5 Item 3. Quantitative and Qualitative Disclosures About Market Risk..........6 Item 4. Controls and Procedures.............................................6 PART II. OTHER INFORMATION...................................................7 Item 6. Exhibits and Reports on Form 8-K....................................7 Signatures..........................................................8 i PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INVESTMENT PROPERTIES ASSOCIATES (A New York Limited Partnership) BALANCE SHEETS AS AT JUNE 30, 2003 AND DECEMBER 31, 2002

~~SEPTEMBER~~JUNE 30, ~~2002~~2003 DECEMBER 31, ~~2001~~2002 ASSETS (Unaudited) (Note) ------ ------------- ----------------- ~~ASSETS~~Real ~~(Unaudited)~~estate ~~(Note)~~held ~~Real~~for ~~estate~~sale, at cost $~~8,033,347~~ -- $ 8,033,347 Less: Accumulated depreciation and amortization ~~5,880,040~~-- 5,880,040 ----------- ----------- ~~2,153,307~~-- 2,153,307 Cash and cash equivalents 17,~~335~~339,~~079~~405 21,~~788~~516,~~292~~410 Due from managing agent (Helmsley-Spear, Inc.) ~~179~~38,~~125~~395 ~~229~~47,~~291~~380 ~~Receivables 3,553 3,553~~ Other assets ~~462~~4,~~294~~289 ~~457~~16,~~515~~881 ----------- ----------- $4 7,~~133~~382,~~358~~089 $5 3,~~631~~733,~~958~~978 =========== =========== LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY) Accounts payable $ 1418,~~405~~512 $ 76,~~903~~547 Distributions payable to General Partners, Special Limited Partners and Limited Partners 75,~~213~~500,000 ~~698~~457,~~179~~752 Guaranteed Payments Due to General Partners, Special Limited Partners and Limited Partners 88,250 146,500 Sundry liabilities and other accrued expenses ~~272~~105,~~885~~410 ~~415~~105,~~799~~230 ~~Deposits~~ -- ~~1,500,000~~ ---------- ----------- ~~294~~5,~~503~~712,172 2716,~~621,881~~029 ----------- ----------- Partners' Capital (Deficiency) General Partners (29,~~490,648)~~184 (2,495,~~206~~163) Special Limited Partners 3825,~~696,123~~774 3,~~286~~290,~~292~~185 Limited Partners (represented by the equivalent of 820,000 Participation Interests) 2834,~~633,380~~959 2,~~218~~222,~~991~~927 ----------- ----------- 31,~~838~~669,~~855~~917 3,~~010~~017,~~077~~949 ----------- ----------- $4 7,~~133~~382,~~358~~089 $5 3,~~631~~733,~~958~~978 =========== ===========

Note: The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date. See accompanying notes to financial statements. 1 INVESTMENT PROPERTIES ASSOCIATES (A New York Limited Partnership) STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE ~~NINE~~SIX MONTHS ENDED FOR THE THREE MONTHS ENDED ------------------------~~-----~~ --------------------------~~---~~ ~~SEPT~~JUNE 30, ~~2002~~2003 ~~SEPT~~JUNE 30, ~~2001~~2002 ~~SEPT~~JUNE 30, ~~2002~~2003 ~~SEPT~~JUNE 30, ~~2001~~2002 ------------- ------------- ------------- ------------- Revenues: ~~Gross~~Interest ~~revenues from real estate~~ $ --8,291 $ 6218,~~788~~518 $ --3,960 $ 516,~~536~~987 ~~Real estate tax refund -- 1,245,541 -- 585,046~~ Other income 118,725 1,501,500 43118,~~139~~725 ~~-- 43~~1,~~139~~500 ~~Interest 24,682 212,988 6,164 16,897~~ ----------- ----------- ----------- ----------- 1127,~~526,182~~016 1,~~564~~520,~~456~~018 6122,~~164~~685 ~~696~~8,~~618~~487 ----------- ----------- ----------- ----------- Expenses: Real estate taxes ~~231~~138,~~714~~482 ~~187~~153,~~258~~942 7760,~~772~~851 6876,~~693~~908 Other expenses ~~378~~323,~~315~~521 ~~641~~274,~~554~~143 ~~104~~167,~~172~~416 ~~242~~88,~~044~~976 ----------- ----------- ----------- ----------- ~~610~~462,~~029~~003 ~~828~~428,~~812~~085 ~~181~~228,~~944~~267 ~~310~~165,~~737~~884 ----------- ----------- ----------- ----------- Income (loss) before items shown below ~~916~~(334,~~153~~987) ~~735~~1,~~644~~091,933 (~~175~~105,~~780~~582) ~~385~~(157,~~881~~397) Gain ~~(loss)~~ on sale of real estate --income 95before guaranteed payments required under the limited partnership agreement 4,~~096~~545,205 -- 954,~~096~~545,205 --~~--------~~ ---------- -~~--------~~ --------- ~~916,153 830,740 (175,780) 480,977~~ --~~--------~~ ----------- --------- --~~-------~~ 4,210,218 1,091,933 4,439,623 (157,397) Guaranteed payments required under the Limited Partnership Agreement: To the Limited Partners 117,~~250~~500 117,~~250~~500 3,750 3,750 To the General and Special Limited Partners 7650,~~125~~750 7650,~~125~~750 25,375 25,375 ----------- ----------- ----------- ----------- 8758,~~375~~250 8758,~~375~~250 29,125 29,125 ----------- ----------- ----------- ----------- Net income (loss) transferred to ~~partners~~Partners' capital accounts $ ~~828~~4,~~778~~151,968 $ ~~743~~1,~~365~~033,683 $~~(204~~ 4,~~905)~~410,498 $ (~~451~~186,~~852~~522) =========== =========== =========== =========== Net income ~~(loss)~~ allocable as follows (based on terms of the Limited Partnership Agreement): General Partners $ 42,~~558~~534,597 $ 45,~~088~~685 $ 2,537,441 (1,~~127~~026) ~~$ 2,485~~ Special Limited Partners ~~409~~255,~~831~~339 ~~367~~511,~~594~~156 511,025 (~~101~~92,~~325~~235) ~~223,441~~ Limited Partners (represented by the equivalent of 820,000 Participation Interests - unchanged during the periods) ~~414~~1,~~389~~362,032 ~~371~~516,~~683~~842 1,362,032 (~~102~~93,~~453~~261) ~~225,926~~ ----------- ----------- ----------- ----------- $ ~~828~~4,~~778~~151,968 $ ~~743~~1,~~365~~033,683 $~~(204~~ 4,~~905)~~410,498 $ ~~451~~(186,~~852~~522) =========== =========== =========== =========== Per Participation Interest: Net income ~~(loss)~~ $ 01.~~5054~~6610 $ 0.~~4533~~6303 $ (01.~~1249)~~6610 $ (0.~~2755~~1137) =========== =========== =========== ===========

See accompanying notes to financial statements. 2 INVESTMENT PROPERTIES ASSOCIATES (A New York Limited Partnership) STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002

2003 2002 ~~2001~~ ----------- ----------- OPERATING ACTIVITIES: Net income $ ~~828~~4,~~778~~151,968 $ ~~743~~1,~~365~~033,683 Adjustments to reconcile net income to net cash (used in) ~~provided by~~ operating activities: ~~Gain on sale of real estate -- (95,096)~~ Changes in operating assets and liabilities: Decrease (increase) in due from managing agent 508,~~166~~985 ~~525~~(3,~~148~~893) Gain on sale of real estate (~~Increase~~4,545,205) -- Decrease in other assets (412,~~779)~~592 4214,~~209~~527 Increase ~~(decrease)~~ in accounts payable 611,~~502~~965 ~~(69~~9,~~906)~~182 ~~Increase~~Decrease in ~~accrued~~guaranteed ~~real~~payments ~~estate~~due ~~taxes~~to General Partners, Special Limited Partners and Limited Partners (58,250) -- ~~59,757~~Increase ~~Decrease~~(decrease) in sundry liabilities and other accrued expenses ~~(142,914)~~180 (75117,~~804~~029) Decrease in deposits -- (1,500,000) -- ----------- ----------- Net cash (used in) ~~provided by~~ operating activities (~~762~~417,~~247~~765) 1(563,~~129,673~~530) ----------- ----------- INVESTING ACTIVITIES: Net proceeds from sale of real estate 6,698,512 -- ~~95,583~~ ----------- ----------- FINANCING ACTIVITIES: Distributions ~~of net operating revenues and proceeds from sale of real estate~~ to General Partners, Special Limited Partners and Limited Partners (~~690~~457,~~966~~752) (9690,~~108,231~~966) ----------- ----------- ~~Decrease~~Increase (decrease) in cash and cash equivalents (15,~~453~~822,~~213)~~995 (71,~~882~~254,~~975~~496) Cash and cash equivalents at beginning of ~~period~~year 1,516,410 2,788,292 ~~9,514,349~~ ----------- ----------- Cash and cash equivalents at ~~end~~June of30 ~~period~~$ 7,339,405 $ 1,~~335~~533,~~079~~796 =========== =========== SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Accrued distributions $ 15,~~631~~500,~~374~~000 -- =========== ===========

See accompanying notes to financial statements. 3 INVESTMENT PROPERTIES ASSOCIATES (A New York Limited Partnership) NOTES TO UNAUDITED FINANCIAL STATEMENTS JUNE 30, 2003 NOTE 1 As permitted by the Securities and Exchange Commission, the accompanying unaudited financial statements and footnotes have been condensed and therefore, do not contain all disclosures required by accounting principles generally accepted in the United States. Reference should be made to the Company's Annual Report Form 10-K for the year ended December 31, 2002, filed with the Securities and Exchange Commission. In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly its financial position as of June 30, 2003 and the results of operations for the three and six month periods ended June 30, 2003 and 2002. The results of operations for the six months ended June 30, 2003 and 2002 are not necessarily indicative of the results to be expected for the full year. NOTE 2 - Taxes The net income for Federal income tax purposes is $4,669,503 (six months ended June 30, 2003) and $926,327 (six months ended June 30, 2002) as compared with net income of $4,151,968 and $1,033,683 respectively, as shown in the statements of operations. The differences result principally from depreciation expense which continued to be recognized for income tax purposes through the date of sale of the property and differences in the gain on sale of the 570 Broad Street property for income tax purposes. NOTE 3 - Other Income On October 22, 2001, the Company signed a contract, subject to certain closing conditions, to sell its only remaining property, a vacant commercial office building located at 570 Broad Street, Newark, New Jersey, for a purchase price of $11,500,000. In connection with the contract, the Company received non-refundable deposits from the buyer in the amount of $1,500,000. In January 2002, due to the buyer's inability to satisfy the closing conditions, the contract expired and the Company resumed marketing activities with respect to the Property. The Company retained the non-refundable deposits from the buyer in the amount of $1,500,000. Other income in 2003 relates to the receipt of real estate tax refunds pertaining to properties sold in prior years. NOTE 4 - Sale of 570 Broad Street Property On June 13, 2003, the Company sold its only remaining property, a vacant commercial office building located at 570 Broad Street, Newark, New Jersey, for a purchase price of $7,000,000. In connection with consummation of this sale transaction, the Company recognized a gain on the sale of approximately $4,540,000 for financial statement purposes as compared with a gain of approximately $5,160,000 for Federal income tax purposes. In connection with the sale of the 570 Broad Street property, on June 20, 2003, the Company declared a special dividend in the amount of $5,500,000 from the sales proceeds of the 570 Broad Street property. In accordance with the Company's partnership agreement, $2,750,000 was paid to the General Partners and Special Limited Partners, and $2,750,000 was paid to the holders of its participations of limited partnership interests in July 2003. 4 INVESTMENT PROPERTIES ASSOCIATES (A New York Limited Partnership) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As a result of the sales of the Company's remaining income producing properties in 2000, the Company no longer derives income from rental operations. The activity of the Company consists of marketing for sale its remaining non-income producing property, a vacant office property located at 570 Broad Street, Newark, New Jersey. On April 24, 2003, the Company signed a contract to sell the 570 Broad Street property for a sales price of $7,000,000, and consummated such sale on June 13, 2003. As a result of such sale, the Company has no remaining real property. See Note 4 of the accompanying notes to the financial statements. On June 20, 2003, the Company declared a special dividend in the amount of $5,500,000 from the sales proceeds of the consummated sale of the 570 Broad Street property. In accordance with the Company's partnership agreement, $2,750,000 was paid to the General Partners and Special Limited Partners, and $2,750,000 was paid to the holders of its participations of limited partnership interests in July 2003. The decrease in interest income was due to the reduction of investments in commercial paper as a result of the payment of 2002 accrued distributions during 2003, as well as the impact of declining interest rates. Other income in 2002 relates principally to the Company's retention of a non-refundable deposit in the amount of $1,500,000 received in 2001 from a prospective buyer of the 570 Broad Street property pursuant to a contract to sell the 570 Broad Street property, which was subject to certain closing conditions. As a result of the prospective buyer's inability to satisfy the closing conditions of the sales contract, the contract expired in accordance with its terms in January of 2002, and the buyer's deposit was forfeited to the Company. See Note 3 of the accompanying notes to the financial statements. Other income in 2003 relates to the receipt of real estate tax refunds pertaining to properties sold in prior years. The increase in other expenses in 2003 as compared to 2002 is principally attributable to an increase in insurance costs and repairs and maintenance expenses at the 570 Broad Street property. Gain on sale of real estate in 2003 relates to the sale of the 570 Broad Street property. As of December 31, 2002, the Company had accrued a distribution to its General Partners, Special Limited Partners and holders of record of the PPI's as of the close of business on December 31, 2001 in the amount of $450,538 in respect of 2002 net operating revenues. These amounts were paid prior to March 31, 2003. 5 INVESTMENT PROPERTIES ASSOCIATES (A New York Limited Partnership) ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK At June 30, 2003, the Company had no interest bearing indebtedness and accordingly was not exposed to market risk with respect to changes in interest rates, and does not anticipate a need to seek additional borrowings. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. The Company's management has evaluated, with the participation of the Company's principal executive officer and principal financial officer, the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this report. Based on that evaluation, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report. (b) Changes in internal control over financial reporting. There was no change in the Company's internal control over financial reporting that occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 6 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 31.1 Section 302 Sarbanes-Oxley Act of 2002 certification of Mr. Irving Schneider as General and Special Limited Partner and Chief Executive Officer Exhibit 31.2 Section 302 Sarbanes-Oxley Act of 2002 Certification of Mr. Robert Hecht as Chief Financial Officer Exhibit 32.1 Section 906 Sarbanes-Oxley Act of 2002 certification of Mr. Irving Schneider as General and Special Limited Partner and Chief Executive Officer Exhibit 32.2 Section 906 Sarbanes-Oxley Act of 2002 certification of Mr. Robert Hecht as Chief Financial Officer (b) Reports on Form 8-K: On April 29, 2003, the Company filed a Current Report on Form 8-K relating to the sale of its 570 Broad Street, Newark, New Jersey property, which is subject to certain closing conditions. On June 24, 2003, the Company filed a Current Report on Form 8-K relating to the consummation of the sale of the 570 Broad Street, Newark, New Jersey, property and the dividend of approximately $5,500,000 paid to its general and special limited partners and holders of record as of the close of business on July 8, 2003 of its participations of limited partnership interests from such sale proceeds. Items 1, 2, 3, 4 and 5 are not applicable and have been omitted. 7 INVESTMENT PROPERTIES ASSOCIATES (A New York Limited Partnership) 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. INVESTMENT PROPERTIES ASSOCIATES By: /s/ Irving Schneider --------------------------------------- Irving Schneider General and Special Limited Partner and Chief Executive Officer By: /s/ Robert Hecht --------------------------------------- Robert Hecht Chief Financial Officer Dated: August 14, 2003 8

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