10-K 1 document.txt 10K DOCUMENT FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [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 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 0-768 GARMENT CAPITOL ASSOCIATES (Exact name of registrant as specified in its charter) New York 13-6083208 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: Title of each class Name of each exchange on which registered N/A N/A Securities registered pursuant to section 12(g) of the Act: $10,470,000 of Participations in Partnership 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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No An Exhibit Index is located on pages 34 through 36 of this Report. Number of Pages (including exhibits) in this filing: 36 PART I Item 1. Business. (a) General Registrant, a partnership, was organized on January 10, 1957. On May 1, 1957, Registrant acquired fee title to the Garment Capitol Building (the "Building") and the land thereunder, located at 498 Seventh Avenue, New York, New York (the "Property"). Registrant's partners are Peter L. Malkin, Thomas N. Keltner, Jr. and Richard A. Shapiro (individually, a "Partner" and, collectively, the "Partners"), each of whom also acts as agent for holders of participations in their respective partnership interests in Registrant (each holder of a participation, individually, a "Participant" and, collectively, the "Participants"). As described below, the Property has been sold and distributions from sale proceeds has been made to the Participants. Registrant did not operate the Property. Registrant leased the Property to 498 Seventh Avenue Associates (the "Original Lessee") under a net operating lease (the "Operating Lease") which commenced as of May 1, 1957 and was scheduled to expire on April 30, 2007. In 1994 and 1995 the Original Lessee made capital calls on its partners in the aggregate amount of $1,300,000 to defray certain operating expenses and improvement costs at the Property. Despite these new capital infusions, however, the Original Lessee concluded that to return the Property to profitability would require a very large additional capital investment, estimated by the Original Lessee to be as high as $16,000,000. Therefore, on December 29, 1995, in accordance with the terms of the Operating Lease, the Original Lessee assigned the Operating Lease to 4987 Corporation (the "New Lessee"), thereby effectively terminating the liability of the Original Lessee and its partners under the Operating Lease. The shares in the New Lessee are owned by the partners in the Original Lessee except that a substantial portion of the shares originally owned by Peter L. Malkin is held for the benefit of members of his family but he retains voting control. The New Lessee had paid basic rent under the Operating Lease through March 27, 1997, (NSP) the date of the sale of the Property, as hereinafter described. Registrant applied these rents to cover (1) its monthly mortgage payments to the Apple Bank for Savings ("Apple Bank") on Registrants' fee mortgage on the Property (the "Mortgage Loan"), (2) its monthly fee for supervisory services and (3) its distributions to the Participants in Registrant. The New Lessee did not pay the New York City real estate taxes and Business Improvement District ("BID") assessments in the amounts of $936,180.00 and $29,695.14, respectively, and certain other minor assessments and charges aggregating less than $1,500, all of which were due on January 1, 1996 or shortly thereafter. The New Lessee also failed to pay the New York City real estate taxes and BID assessments in the amounts of $1,053,254.50 and $28,529.26, respectively, which were due on July 1, 1996 and $740,845.50 and $28,529.26, respectively, which were due on January 1, 1997. As a result, although payment of the January 1, 1996 and July 1, 1996 and January 1, 1997 real estate taxes and BID assessments has been made as described below, the New Lessee was in default of the Operating Lease as of January 1, 1996. The New Lessee requested that Registrant forbear from exercising its rights and remedies under the Operating Lease, including termination of the Operating Lease, by reason of the failure to pay the January 1, 1996 and July 1, 1996 real estate taxes and BID assessments, while management of Registrant solicited the consent of the Participants to a sale of the Property (the "Solicitation"). On July 26, 1996, the Partners mailed to the Participants a STATEMENT ISSUED BY THE AGENTS IN CONNECTION WITH THE SOLICITATION OF CONSENTS OF THE PARTICIPANTS (the "Statement") requesting their authorization for a sale of the Property and forbearance in favor of the New Lessee. The details of the Partners' proposal are provided in the Definitive Proxy Statement which was filed with the Securities and Exchange Commission as Schedule 14-A on July 25, 1996, and is incorporated herein by reference. If Registrant did forbear, the New Lessee agreed to cooperate fully with Registrant in connection with the sale of the Property and to continue to perform its other obligations under the Operating Lease, including payment of Basic Rent, to enable Registrant to continue its monthly distributions to the Participants, pay its supervisory fee and pay its monthly mortgage obligation. The continuation of the Operating Lease was also to serve to insulate Registrant from third party liabilities attendant on property operations. Because the consent solicitation program included the continuation of the Operating Lease with the New Lessee, Registrant did not send a notice of default under the Operating Lease based on the failure of the New -2- Lessee to pay the January 1, 1996 and July 1, 1996 real estate taxes and BID assessments. Although the failure to pay the January 1, 1996, July 1, 1996 and January 1, 1997 real estate taxes and BID assessments also constituted a breach of Registrant's obligations under the Mortgage Loan, Apple Bank had agreed to forbear from exercising its rights and remedies during the period of the solicitation of consents through a sale of the Property based on arrangements consummated in March 1996 between the shareholders of the New Lessee (or designees on their behalf) and Apple Bank to fund the January 1, 1996 real estate taxes and BID assessments and certain future real estate taxes and BID assessments on the Property (together with the January 1, 1996 real estate taxes, the "Real Estate Taxes") through protective advances under the Mortgage Loan. The shareholders of the New Lessee (or designees on their behalf) had personally borrowed from Apple Bank (a) on April 2, 1996, the sum of $1,012,274.18, equal to the January 1, 1996 real estate taxes and BID assessments and interest thereon to the date of the borrowing, and certain other minor city charges and interest aggregating less than $1,500 and (b) on June 28, 1996, the sum of $1,081,783.76 equal to the July 1, 1996 real estate taxes and BID assessment and (c) on December 31, 1996, the sum of $769,374.76 equal to the January 1, 1997 real estate taxes and BID assessment. The April 2, 1996 borrowing was used to fund a protective advance by Apple Bank to pay the January 1, 1996 real estate taxes and BID assessments, interest thereon and such minor charges, through the purchase of a subordinate participating interest in the Mortgage Loan in such amount. The June 28, 1996 and December 31, 1996 borrowings were used to fund protective advances by Apple Bank to pay, respectively, the July 1, 1996 and January 1, 1997 Real Estate Taxes and BID assessments through the purchase of additional subordinate participating interests in the Mortgage Loan in such amounts. Interest and principal required to be paid on the protective advances and on any future protective advances have been paid by the New Lessee. On January 29, 1997, Registrant received the consent of the Participants for the sale and forbearance program and for the liquidation of Registrant, as described in the Statement. See Items 10, 11 12 and 13 hereof 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, Original Lessee, New Lessee and certain of their respective affiliates. -3- Registrant, together with the New Lessee, entered into a contract with George Comfort & Sons, Inc., as Agent, and Tirrem Management Company, Inc., collectively as Purchasers, to sell the Property to the Purchasers for $42,000,000, subject to adjustments (the "Contract of Sale"). The sale closed as of March 27, 1997. After priority allocation for certain payments, as more particularly described in the Statement, net sale proceeds of $34,885,810 were allocated between Registrant and the New Lessee pursuant to the formula described in the Statement, as approved by the Participants. From its share of the proceeds, Registrant had made an initial distribution on March 31, 1997 of $27,000,000 to the Participants, and each holder of an original $10,000 Participation, as reduced to $5,000, received an initial distribution of sale proceeds of $25,714, which included the return of the Participant's remaining original capital investment. On July 23, 1997, an additional distribution of $800,000 ($761.90 per $5,000 participation unit) was made to the Participants out of the proceeds of sale. Based on advice from legal counsel, the partnership was terminated on November 30, 1997. At the time of termination, Registrant was still involved in litigation. In order to provide for the anticipated costs of the litigation, an escrow account, in the amount of $165,357 is being held by Supervisor as of December 31, 2000. See Item 3 hereto. (b) The Operating Lease Under the Operating Lease, the New Lessee paid (i) annual basic rent of $1,090,000 (the "Basic Rent") to Registrant and (ii) additional rent equal to 50% of New Lessee's net operating profit in excess of $200,000 for each Operating Lease year (the "Additional Rent"). Additional Rent income was recognized when earned from the New Lessee, at the close of the lease year ending April 30. Such income, if any, was not determined until the New Lessee, pursuant to the Operating Lease, rendered to Registrant a certified report on the operation of the Property. The Operating Lease required that this report be delivered to Registrant annually within 60 days after the end of each such lease year. All Additional Rent income and certain supervisory service expense could only be determined after the receipt of such report. The Operating Lease did not provide for the New Lessee to render -4- interim reports to Registrant, so no Additional Rent income was reflected for the period between the end of the Operating Lease year and the end of Registrant's fiscal year. There was no additional rent for the eleven months ended November 30, 1997 and for the fiscal year ended December 31, 1996. See Note 4 of Notes. (c) The First Mortgage Loan On March 23, 1995, Registrant entered into a Modification and Extension Agreement (the "Modification"), as of December 1, 1992, with Apple Bank concerning the Mortgage Loan, which was originally made on November 30, 1987 in the principal amount of $3,485,000. The Mortgage Loan was secured by a first mortgage on the Property. The principal terms of the Modification were as follows: Date: As of December 1, 1992. Amount as of the effective date of the Modification: $3,376,340.61. Term: Five years, maturing on December 1, 1997. Interest Rates: 10.0% per annum from December 1, 1992 through October 31, 1993; 10.50% per annum from November 1, 1993 through November 30, 1994; and 10.60% per annum from December 1, 1994 through December 1, 1997. Monthly Payments: $36,282.33 from January 1, 1993 through November 1, 1993; $37,276.35 from December 1, 1993 through December 1, 1994; and $37,465.52 from January 1, 1995 through December 1, 1997. Prepayment Privilege: The Mortgage Loan was prepayable at any time in whole only, without penalty, on 60 days' prior written notice. -5- The following provisions from the Mortgage Loan before the Modification continued to be applicable during the extended term: Liability: No Partner had personal liability for the obligation under the Mortgage Loan to pay principal and interest; Due on Sale: Upon a sale or further encumbrance of the Property without Apple Bank's consent, the Mortgage Loan would have become immediately due and payable; and Operating Lease: No modification or cancellation of the Operating Lease was permitted without Apple Bank's consent. The Mortgage Loan was repaid in full in connection with the sale of the Property. The total amount paid to Apple Bank in respect of the Mortgage Loan was $5,809,686. This amount consisted of the following elements: (a) principal - $2,886,125 (b) accrued interest on the principal balance to the date of sale - $22,945; (c) prepayment charges to expiration of 60 day notice period (as reduced based on discussions between Apple Bank and Supervisor - $14,419; (d) real estate tax advances - $2,863,433 (of which amount $333,181 was paid by the New Lessee from its share of sale proceeds, as contemplated by the statement; and (e) accrued interest on the real estate tax advances - $22,764 (paid by the New Lessee). (d) Competition Since the sale of the Building in March, 1997, no operations have been conducted at the Building directly or indirectly for the account of Registrant or the New Lessee. (e) Tenant Operating Leases The New Lessee operated the Building 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 -6- decrease in the amount of rent payable by a tenant was governed by the provisions of the tenant's lease. Item 2. Property. Registrant owned the Building located at 498 Seventh Avenue, New York, New York, known as the "Garment Capitol Building," and the land thereunder. See Item 1 hereof. The Building, erected in 1921 and containing 24 floors, stands on the southwest corner of Seventh Avenue and 37th Street in New York City's Garment District. The Building contains office, showroom and loft space. The Building is equipped with individual air- conditioning units and has 11 passenger elevators and 10 freight elevators. The Building was leased to the New Lessee under the Operating Lease, the initial term of which expired on April 30, 1982 and which contained two 25-year renewal options, the first of which was exercised on January 7, 1981. See Item 1 hereof for additional information concerning the Operating Lease. The Property was sold on March 27, 1997 pursuant to the Contract of Sale. See Item 1. Item 3. Legal Proceedings. The Property of Registrant is the subject of the following pending litigation: On October 4, 1996, the alleged holder of three participation interests in Registrant brought suit in the U.S. District Court for the Southern District of New York against the New Lessee, the Original Lessee, the partners in Registrant, and Supervisor. Registrant was a nominal defendant. The suit claims that defendants violated the anti-fraud provisions of the federal securities laws and committed breaches of fiduciary duty and fraud in relation to the Solicitation. The suit is a class action. The suit seeks to enjoin the allocation of sale proceeds to the New Lessee approved by the Participants, money damages and related relief. Defendants responded to the complaint with a motion seeking dismissal of the action in its entirety. The Court granted that motion and dismissed the action by order and decision dated December 8, 1997. Upon plaintiff's appeal of that order, the U.S. Court of Appeals affirmed in part and reversed in part the dismissal of the action. By Order dated August 11, 1999, plaintiff's derivative -7- claims were dismissed. The case was certified as a class action by order dated February 1, 2000 and was tried to the court (Baer, J.) and a trial jury beginning on September 18, 2000. On September 27, 2000, the trial jury returned a verdict for all defendants on all claims. Plaintiff made a motion for judgment notwithstanding the verdict and for a new trial. By opinion and order dated January 17, 2001, the court denied plaintiff's motion for judgment notwithstanding the verdict and for a new trial, and plaintiff has filed appeals from the jury verdict and the denial of those motions. The complaint does not seek any relief against Registrant, and, accordingly, Registrant's litigation counsel is of the opinion that no material loss or other unfavorable outcome of the action against Registrant is anticipated. In accordance with the Solicitation, sale proceeds were allocated to repay the Fee Mortgagee protective advances as well as all other sums then outstanding on the Fee Mortgage. Pursuant to an agreement between counsel for the plaintiff in the 1996 proceeding and counsel for the defendants, net sale proceeds allocated to the New Lessee in accordance with the formula set forth in the Solicitation would not be distributed to the New Lessee, except upon 30 days' notice to counsel for the plaintiff. Such allocated funds currently are being held by Supervisor. The required 30-day notice was given to counsel for the plaintiff on October 2, 2000. On March 13, 1997, the alleged holder of a fractional participation interest in Registrant brought suit in the U.S. District Court for the Southern District of New York against New Lessee, Original Lessee, Registrant's Partners and Supervisor. Registrant was a defendant. The suit is essentially similar to the legal action described in the preceding paragraph, alleging that defendants violated the Federal proxy rules, committed breaches of fiduciary duty and fraud in relation to the Solicitation for the sale and forbearance program and for liquidation of Registrant. The suit seeks to enjoin the allocation of sale proceeds to New Lessee approved by the Participants, money damages and related relief. Defendants responded to the complaint with a motion seeking dismissal of the action in its entirety. The Court granted the motion and dismissed the action by the same order and decision dated December 8, 1997 and referred to in the preceding paragraph. Upon plaintiff's appeal of the order, the U.S. Court of Appeals affirmed in part and reversed in part the dismissal of the action. By Order dated August 11, 1999, plaintiff's derivative claims were -8- dismissed. The case was certified as a class action by order dated February 1, 2000 and was tried to the Court (Baer, J.) and a trial jury returned a verdict for all defendants on all claims. Plaintiff made a motion for judgement notwithstanding the verdict and for a new trial. By opinion and order dated January 17, 2001, the court denied plaintiff's motion for judgement notwithstanding the verdict and for a new trial, and plaintiff has filed appeals from the jury verdict and the denial of those motions. Registrant's litigation counsel is of the opinion that no loss or other unfavorable outcome of the action against Registrant is anticipated. On July 24, 1997, a former holder of a 1.66% partnership interest in the Original Lessee filed a complaint in New York Supreme Court against Registrant, Original Lessee, New Lessee and Peter L. Malkin, individually and as a partner or shareholder in those entities. As against Registrant, the complaint alleges a claim for damages or other relief based on the sale of the Property and the allocation of sale proceeds to Registrant. An answer for Registrant denying all allegations of liability and damages asserted by plaintiff was filed. The claim against Registrant in this action has been discontinued. Item 4. Submission of Matters to a Vote of Participants. On July 26, 1996, the consent of Participants was sought to the sale and forbearance program, and, following a sale, to the liquidation of Registrant, as described in the Statement. The consent of Participants was received by the Partners, and the Property was sold on March 27, 1997. Registrant was terminated on November 30, 1997. See Item 1(a). PART II Item 5. Market for Registrant's Common Equity and Related Security Holder Matters. Registrant was a partnership organized pursuant to a partnership agreement dated January 10, 1957. 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 partnership -9- interests of the Partners in Registrant (the "Participations") and are not shares of common stock or their equivalent. The Participations represented each Participant's fractional share in a Partner's undivided interest in Registrant and are divided approximately equally among the Partners. A full unit of the Participations was originally offered at a purchase price of $10,000; fractional units were also offered at proportionate purchase prices. In November 1957, one-half of the original purchase price was returned to the Participants from the proceeds of a first mortgage on the Property leaving a remaining unreturned cash investment of $5,000 (a "$5,000 Participation"). On March 31, 1997 and July 23, 1997 distributions of sale proceeds from the sale of the Property were made to the Participants. Each holder of a $5,000 Participation received a total of $26,475.90, which included a return of remaining original capital. Registrant has not repurchased Participations in the past. (a) The Participations were not traded on an established securities market, nor were they readily tradable on a secondary market or the substantial equivalent thereof. Based on Registrant's transfer records, Participations were sold by the holders thereof from time to time in privately negotiated transactions and, in many instances, Registrant was not aware of the prices at which such transactions occurred. (b) Registrant did not pay dividends. No Additional Rent was paid by the Original Lessee for the lease year ended April 30, 1997. See Item 1 hereof. There were no restrictions on Registrant's present or future ability to make distributions; however, the amount of such distributions, particularly distributions of Additional Rent, depended solely on the New Lessee's payments of Basic Rent and Additional Rent to Registrant. See Item 1 hereof and Note 9 of the Notes. By reason of the sale of the Property, the Operating Lease has expired and the Registrant was liquidated. There was no additional regular monthly distributions following the distribution on April 1, 1997 in respect of March, 1997 rent under the Operating Lease. -10- Item 6. GARMENT CAPITOL ASSOCIATES SELECTED FINANCIAL DATA

-11- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Registrant was organized solely for the purposes of acquiring the Property subject to the Operating Lease. Registrant was required to pay from Basic Rent the mortgage charges and supervisory services and to distribute the balance of such Basic Rent to the Participants. Pursuant to the Operating Lease, the holder of the leasehold interest thereunder had sole responsibil- ity for the condition, operation, repair, maintenance and manage- ment of the Property. Registrant did not 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 Operating Lease. As a result of the Sale, on July 23, 1997, Registrant made a final distribution to the Participants of the remaining sales proceeds. At the closing of the sale pursuant to the Contract of Sale, the interests of Registrant, as lessor, and the New Lessee, as lessee, under the Operating Lease were assigned to the purchaser and the Operating Lease was terminated. There were no additional regular monthly distributions following the distri- bution on April 1, 1997 in respect of March 1997 rent under the Operating Lease. See Item 1. Liquidity and Capital Resources N/A Inflation Inflationary trends in the economy did not directly affect Registrant's operations, since as noted above, Registrant did not actively engage in the operation of the Property. Inflation may have affected the operations of the New Lessee. The New Lessee was required to pay Basic Rent, regardless of the results of its operations. Inflation and other operating factors affected the amount of Additional Rent payable by the New Lessee, which was based on the New Lessee's net operating profit. Item 8. Financial Statements and Supplementary Data. -12- The financial statements are being filed in response to this item. Item 9. Disagreements on Accounting and Financial Disclosure. Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant. Registrant had no directors or officers or any other centralization of management. There is no specific term of office for any Partner. The table below sets forth as to each individual who was serving as a Partner the following: name, age, nature of any family relationship with any other Partner, 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 a Partner: Principal Date Nature of Occupation Individual Family Business and became Name Age Relationship Experience Employment Partner Peter L. Malkin 67 None Real Estate Senior Partner 1983 Supervision and Chairman and Law Wien & Malkin LLP Thomas N. Keltner, Jr. 54 None Real Estate Partner 1998 Supervision Wien & Malkin and Law LLP Richard A. Shapiro 55 None Real Estate Partner 1998 Supervision Wien & Malkin and Law LLP As stated above, the Partners 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 have posed -13- actual or potential conflicts of interest among Registrant, Original Lessee, New Lessee 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 Partners are either a director, joint venturer or general partner are as follows: Peter L. Malkin is a joint venturer in 250 West 57th St. Associates and Navarre-500 Building Associates; and a general partner in Empire State Building Associates and 60 East 42nd St. Associates. Thomas N. Keltner, Jr. is a joint venturer in Navarre- 500 Building Associates; and a general partner in Empire State Building Associates and 60 East 42nd St. Associates; and Richard A. Shapiro is a general partner in Empire State Building Associates and 60 East 42nd St. Associates; and Supervisor was responsible for overseeing the liquidation of Registrant. Item 11.Executive Compensation As stated in Item 10 hereof, Registrant had no directors or officers or any other centralization of management. No remuneration was paid during the current fiscal year by Registrant to any of the Partners as such. Registrant's supervisory fee arrangement with Supervisor provided for (i) the basic payment of $42,500 per annum; (ii) an additional payment of the first $37,500 of Additional Rent paid by the lessee under the Operating Lease in any lease year; and (iii) the payment of 10% of all distributions to Participants in any year from Basic Rent and Additional Rent in excess of the amount representing a return at the rate of 18% per annum on their remaining cash investment in any year. Pursuant to such fee arrangements described herein, Registrant paid Supervisor $21,360 during the eleven month period ended November 30, 1997. The supervisory services provided to Registrant by Supervisor included legal, administrative and financial services. The legal and administrative services -14- included acting as Supervisor to Registrant, maintaining all of its partnership and Participant records, performing physical inspections of the Building, reviewing insurance coverage, providing or overseeing certain legal services and conducting annual partnership meetings. Financial services included monthly receipt of rent from the New Lessee, payment of monthly and additional distributions to the Participants, payment of all other disbursements, confirmation of the payment of real estate taxes, active review of financial statements submitted to Registrant by the New 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. Supervisor did not receive a supervisory fee based on sale proceeds allocated to Registrant but has been paid for its legal services in connection with the Statement, the sale, and various legal and other services rendered to Registrant since the date of sale. Supervisor has also been paid legal fees by the New Lessee for various work in 1996 and 1997. Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) Registrant had no voting securities (see Item 5 hereof). (b) The Partners (see Item 10 hereof) beneficially owned, directly or indirectly, the following Participations: Name & Address Amount of of Beneficial Beneficial Percent Title of Class Owners Ownership of Class Participations Thomas N. Keltner, Jr. $ 2,500 .0476% in Partnership 60 East 42nd Street Interests New York, NY 10165 Peter L. Malkin $42,500 .8095% 60 East 42nd Street New York, NY 10165 -15- At the date of sale, March 27, 1997, certain of the Partners (or their respective spouses) held additional Participations as follows: Peter L. Malkin owned of record as trustee, but not beneficially, a $5,000 Participation. Mr. Malkin disclaims any beneficial ownership in such Participation. Isabel Malkin, the wife of Peter Malkin, owned of record and beneficially, $21,250 of Participations. Mr. Malkin disclaims any beneficial ownership of such Participations. Agency Holdings Associates, an affiliate of Supervisor, owned a $5,000 Participation which was distributed in liquidation to its members. (c) Not applicable. Item 13. Certain Relationships and Related Transactions. (a) As stated in Item 1 hereof, Peter L. Malkin, Thomas N. Keltner, Jr. and Richard A. Shapiro were the three Partners in Registrant and also acted as agents for the Par- ticipants in their respective partnership interests. Mr. and Mrs. Malkin were also among the partners in the Original Lessee and shareholders in the New Lessee. Because one of the three Partners and his wife were partners in the Original Lessee and shareholders in the New Lessee and all three Partners are members of Supervisor (which supervises Registrant and Original Lessee), certain actual or potential conflicts of interest may have arose with respect to the management and administration of the business of Registrant. Conflicts may have also existed in connection with the sale of the Property. Under the respective Participating Agreements pursuant to which the Partners acted as agents for the Participants, certain transactions required the prior consent from Participants owning a specified interest under the agreements in order for the Agents to act on their behalf. Such transactions included modifications and extensions of the Operating Lease or the Mortgage Loan, or a sale or other disposition of the Property or substantially all of Registrant's other assets. As noted in Item 1(a) above, the sale of the Property, as part of the Sale and Forbearance Program described in the Statement, had been approved by the Participants and the closing of the sale was on March 27, 1997. -16- Reference is made to Items 1 and 2 hereof for a description of the terms of the Operating Lease between Registrant and the New Lessee. The respective interests of Messrs. Shapiro, Keltner and Malkin, if any, in Registrant arose solely from the ownership of their respective participations in Registrant. The respective interests of Mr. and Mrs. Malkin in Original Lessee and New Lessee arose solely from the ownership of their respective partnership interests in Original Lessee and shares in New Lessee. The Partners (and Mrs. Malkin) received no extra or special benefit not shared on a pro rata basis with all other Participants in Registrant or partners in Original Lessee and shareholders in New Lessee. However, each of the Partners, by reason of his respective interest in Supervisor, was entitled to receive his share of any supervisory, service, legal or other remuneration paid to Supervisor for services rendered to Registrant and Original Lessee. See Item 11 hereof for a description of the renumeration arrangements between Registrant and Supervisor relating to supervisory services provided by Supervisor. Super- visor has also been paid fees for legal services rendered to the New Lessee in connection with certain of its operations during 1996 and 1997. Reference is also made to Items 1 and 10 hereof for a description of the relationship between Registrant and Supervisor, of which the Partners are among the members. The respective interests of the Partners in any remuneration paid or given by Registrant or New Lessee to Supervisor arose solely from the ownership of their respective partnership interests in Supervisor. See Item 11 hereof for a description of the remuneration arrangements between Registrant and Supervisor. (b) Reference is made to Paragraph (a) above. (c) Not applicable. (d) Not applicable. -17- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a)(1) Financial Statements: Balance Sheets at December 31, 2000 and at December 31, 1999 (Exhibit A). Statements of Income for the 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 fiscal year ended December 31, 2000, 1999 and 1998 (Exhibit D). Notes to Financial Statements for the fiscal year ended December 31, 2000. (2) Financial Statement Schedules: List of Omitted Schedules. (3) Exhibits: See Exhibit Index. -18- EXHIBIT A GARMENT CAPITOL ASSOCIATES BALANCE SHEETS (unaudited) A S S E T S December 31, 2000 1999 Current Assets: Cash and cash equivalents: Escrow account held by Wien & Malkin LLP (Note 10).......... $165,357 $173,327 -------- -------- TOTAL CURRENT ASSETS....... 165,357 173,327 -------- -------- TOTAL ASSETS............... $165,357 $173,327 ======== ======== LIABILITIES AND PARTNERS' CAPITAL Current Liabilities: Accrued legal costs reserved re: pending litigation concerning sale of real estate (Notes 9 and 10).... ....... $165,357 $173,327 -------- -------- TOTAL LIABILITIES.......... 165,357 173,327 Partners' capital (Exhibit C)........ - - -------- -------- TOTAL LIABILITIES AND PARTNERS' CAPITAL................... $165,357 $173,327 ======== ======== See accompanying notes to financial statements. -19- EXHIBIT B GARMENT CAPITOL ASSOCIATES STATEMENTS OF INCOME (unaudited) Year ended December 31, 2000 1999 1998 Revenues: Rent income, from a related party (Note 4)............... $ - $ - $ - Interest income............... - - - Dividend income................ 9,827 8,541 11,829 ------ ------ ------- Total Income 9,827 8,541 11,829 ------ ------ ------- Expenses: Interest on mortgage (Note 3)... - - - Supervisory services, to a related party (Note 5)........... - - - Legal fees, to a related party (Note 5)..................... 6,827 6,016 11,829 Accounting fees................ 3,000 2,525 - Amortization of mortgage refinancing costs (Note 2b)... - - - ------ ------ ------- Total Expenses 9,827 8,541 11,829 ------ ------ ------- Income from operations.......... - - - Gain on sale of real estate (Note 9). - - - ------ ------ ------- NET INCOME, CARRIED TO PARTNERS' CAPITAL DEFICIT (NOTE 8)... .$ - $ - $ - ====== ======== ======== Earnings per $5,000 participation unit, based on 1,050 participation units outstanding during each year: Income from operations......... $ - $ - $ - Gain on sale of real estate..... - - - ------ ------- -------- NET INCOME.................. $ - $ - $ - ====== ======= ======== See accompanying notes to financial statements. -20- EXHIBIT C-1 GARMENT CAPITOL ASSOCIATES STATEMENT OF PARTNERS' CAPITAL YEAR ENDED DECEMBER 31, 2000 (unaudited) Partners' capital Share of Partners' capital January 1, 2000 net income Distributions December 31, 2000 Richard A. Shapiro Group............. $ - $ - $ - $ - Peter L. Malkin Group.............. - - - - Thomas N. Keltner, Jr. Group.......... - - - - ------ ------ ------ ------ $ - $ - $ - $ - ====== ====== ====== ====== See accompanying notes to financial statements. -21- EXHIBIT C-2 GARMENT CAPITOL ASSOCIATES STATEMENT OF PARTNERS' CAPITAL YEAR ENDED DECEMBER 31, 1999 (unaudited) Partners' capital Share of Partners' capital January 1, 1999 net income Distributions December 31, 1999 Richard A. Shapiro Group............. $ - $ - $ - $ - Peter L. Malkin Group.............. - - - - Thomas N. Keltner, Jr. Group.............. - - - - ------ ------ ------ ------ $ - $ - $ - $ - ====== ====== ====== ====== See accompanying notes to financial statements. -22- EXHIBIT C-3 GARMENT CAPITOL ASSOCIATES STATEMENT OF PARTNERS' CAPITAL (DEFICIT) YEAR ENDED DECEMBER 31, 1998 (unaudited) Partners' capital (deficit) Share of Partners' capital January 1, 1998 net income Distributions December 31, 1998 Richard A. Shapiro Group (formerly John L. Loehr Group)..... $ - $ - $ - $ - Peter L. Malkin Group (formerly Stanley Katzman Group)..... - - - - Thomas N. Keltner, Jr Group (formerly Stanley Katzman Group)..... - - - - ------ ------ ------ ------ $ - $ - $ - $ - ====== ====== ====== ====== See accompanying notes to financial statements. -23- EXHIBIT D GARMENT CAPITOL ASSOCIATES STATEMENTS OF CASH FLOWS (unaudited)

GARMENT CAPITOL ASSOCIATES 10-K