UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 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 of organization) (I.R.S. Employer 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) 687-6400 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Participations of Limited 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 such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) 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. [X] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of December 31, 2001 is not applicable. The number of Participations of Limited Partnership Interests outstanding of the Registrant as of December 31, 2001 was 820,000. APPLICABLE ONLY TO REGISTRANTS 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 [ ] DOCUMENTS INCORPORATED BY REFERENCE None. Investment Properties Associates Form 10-K For The Fiscal Year Ended December 31, 2001 INDEX Page ---- Part I ............................................................... 1 Item 1. Business....................................................... 1 Item 2. Properties..................................................... 4 Item 3. Legal Proceedings.............................................. 4 Item 4. Submission of Matters to a Vote of Security Holders............ 4 Part II ............................................................... 5 Item 5. Market for the Registrant's Participation Interests and Related Security Holder Matters.............................. 5 Item 6. Selected Financial Data........................................ 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................... 8 Item 7A. Quantitative and Qualitative Disclosures about Market Risk..... 13 Item 8. Financial Statements and Supplementary Data.................... 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................... 13 Part III ............................................................... 14 Item 10. General Partners of the Registrant............................. 14 Item 11. Executive Compensation......................................... 15 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................... 16 Item 13. Certain Relationships and Related Transactions................. 18 Part IV ............................................................... 19 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................................... 19 Signatures..................................................... 21 -i- PART I This report contains certain forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of any number of factors discussed herein including, without limitation, under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." When used in this report, the words "anticipate," "estimate," "intend," "believe," "project," and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, expected, estimated, intended, believed or projected. Item 1. Business. ------- --------- General. Investment Properties Associates ("IPA" or "Registrant") is a limited partnership formed in accordance with the New York Revised Limited Partnership Act, and pursuant to a Limited Partnership Agreement, dated as of May 15, 1969, and as amended on October 2, 1969, October 31, 1969, December 3, 1969 and May 30, 1997 (the "Partnership Agreement"). The Registrant's sole business is the ownership and operation of commercial real estate. Current Property. On October 22, 2001, Registrant 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, Registrant 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 Registrant resumed marketing activities with respect to the Property. Registrant retained the non-refundable deposits from the buyer in the amount of $1,500,000. Sales of Property. On July 11, 2001, Registrant sold its interest in two parcels of undeveloped land in Houston, Texas for a sales price of $100,000. In connection with the sale, Registrant recognized a gain of approximately $95,000, after payment of closing costs and other commitments of approximately $5,000. Dividends. On June 25, 2001, Registrant declared a special dividend of $5,200,000 from its available cash to its General Partners and Special Limited Partners and holders of record of the Participations of Limited Partnership Interests (the "PPIs") as of the close of business on July 6, 2001. In accordance with the Partnership Agreement, a distribution of $2,600,000 was paid to the General Partners and Special Limited Partners and $2,600,000 was paid to the holders of PPIs. On December 21, 2001, Registrant declared a special dividend of $410,000 to its General Partners and Special Limited Partners and holders of record 1 of the PPI's as of the close of business on December 31, 2001 from its available cash. In accordance with the Registrant's Partnership Agreement, $205,000 will be distributed to the General Partners and Special Limited Partners and $205,000 will be distributed to the holders of its PPIs. In addition, as of December 31, 2001, Registrant has accrued a distribution in the amount of $280,965 in respect of 2001 net operating revenues, of which $140,482 will be paid to its General Partners and Special Limited Partners and $140,483 will be paid to the holders of record of the PPIs. These dividends will be paid on March 31, 2002. Background. Harry B. Helmsley, a General Partner of Registrant, died on January 4, 1997. Upon his death, Mr. Helmsley's general partnership interest in Registrant was converted to a special limited partner interest, which was inherited by his spouse, Leona M. Helmsley, from Mr. Helmsley's estate as of December 31, 1997 (the "Converted Special L.P. Interest"). Under the terms of the Partnership Agreement as in effect on the date of Mr. Helmsley's death, the General Partners were required to create a new limited partnership with the same attributes as Registrant and to convey all of the assets and liabilities of Registrant to such entity. Such action would have involved substantial transfer tax, insurance premium costs and other related expenses and no benefit to the partners of Registrant or to the holders of PPIs in the limited partnership interest of the limited partner of Registrant. Accordingly, Registrant obtained the approval of the holders of a majority of the PPIs to, among other things, amend the Agreement to permit the remaining General Partners to elect to continue the business of Registrant in the event of the death of a General Partner and to make such election with respect to the death of Mr. Helmsley. Such amendments were effective on May 30, 1997 (the "Amendments"). As contemplated by the amended Partnership Agreement, effective July 3, 1997, H Associates L.L.C. ("H Associates"), an entity owned by Leona M. Helmsley, was admitted as a General Partner of Registrant. H Associates' economic interest in Registrant was acquired from Helmsley-Noyes Company, Inc., also a General Partner of Registrant. On June 10, 1998, ScogBell Acquisition, L.L.C., a Delaware limited liability company ("ScogBell"), purchased from Leona Helmsley all of her interests in Registrant. The interests from this sale that were acquired by ScogBell from Leona Helmsley included, among other things, general partnership interests (0.05%), special limited partnership interests (33.29%) and an aggregate of 282,377 PPIs. Also on June 10, 1998, ScogBell acquired 28,550 PPIs in the over-the-counter market. As a result, ScogBell 2 became a beneficial owner of 310,927 PPIs in Registrant which represents 37.9% of the outstanding PPIs. (a) Financial Information About Segments. --------------------------------------- Registrant's sole business is the ownership and operation of commercial real estate. All of Registrant's revenues, operating profit or loss and assets relate solely to such industry segment. (b) Narrative Description of Business. ----------------------------------- Registrant's only business is the ownership and operation of commercial real properties. During 2000, Registrant disposed of its remaining income producing properties and, at December 31, 2001, Registrant's remaining real property consisted of one vacant commercial office building, which was held under contract for sale, subject to certain closing conditions. In January 2002, due to the buyer's inability to satisfy the closing conditions, the contract expired and Registrant resumed marketing activities with respect to the Property. The primary cost associated with Registrant's remaining Property is real estate taxes. All of the real property owned and operated by Registrant is set forth in Item 2. Registrant's needs for working capital are satisfied by existing cash balances which were generated primarily from previous sales of properties. Registrant employs one person who handles maintenance of the remaining Property. All of the Registrant's other operating functions, which consist primarily of property management and administrative services, are performed by Helmsley-Spear, Inc. ("HSI") or affiliates of HSI, which entities may be deemed to be affiliates of Registrant. Management fees and leasing commissions charged by HSI aggregated approximately $0, $393,000 and $1,288,000 during the fiscal years ended December 31, 2001, 2000 and 1999, respectively. HSI also earned $3,000, $6,754,000 and $3,962,000 in brokerage commissions in 2001, 2000 and 1999, respectively, in connection with the sale of two parcels of undeveloped land in Houston, Texas in 2001, the 50% undivided interest in the Marbridge Building and the 245 Fifth Avenue and 261 Fifth Avenue properties in 2000 and the Mojud and 1440 Broadway properties in 1999. Registrant believes that such services are supplied at prices that approximate those that would be available from non-affiliates. See Item 13. 3 Item 2. Properties. ------- ----------- General. At December 31, 2001, Registrant's Property included fee title to one vacant commercial office building. The Property is located at 570 Broad Street, Newark, New Jersey. The table below sets forth a description of the Property owned by Registrant on December 31, 2001, its location, type of ownership and rentable area in square feet. Total Rentable Property Description Ownership Area (Sq. Ft.) -------- ----------- --------- -------------- 570 Broad Street Newark, New Jersey(1) 14-story office bldg. Fee 190,000 (1) The Property has been vacant since 1996, and was held under contract for sale, subject to certain closing conditions. In January 2002, due to the buyer's inability to satisfy the closing conditions, the contract expired and Registrant resumed marketing activities with respect to the Property. Item 3. Legal Proceedings. ------- ------------------ There are no material pending legal proceedings to which Registrant is a party or of which any of Registrant's property is the subject. Item 4. Submission of Matters to a Vote of Security Holders. ------- ---------------------------------------------------- No matters were submitted to a vote of holders of PPIs at a meeting or otherwise during the fourth quarter of 2001. 4 PART II Item 5. Market for the Registrant's Participation Interests and Related Security ------- ------------------------------------------------------------------------ Holder Matters. --------------- Market Information. As discussed above, Registrant is a limited partnership. PPIs represent the beneficial interest of the Registrant's sole Limited Partner. On September 27, 2000, PPI's ceased to be traded in the over-the-counter ("OTC") market on the National Association of Securities Dealers Automated Quotations System ("NASDAQ") under the symbol "IVPA." After such date, the PPI's have continued to trade in the non-OTC market on the NASDAQ under the symbol "IVPA." During the fiscal year of 2001, and at December 31, 2001, there was no established public trading market for these securities and quotations are limited and sporadic. The following quotations represent prices between dealers, do not include retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The range of high and low closing bid quotations for PPIs for the two most recent fiscal years was as follows: 2001(1) 2000(2) ----------------- ------------------ High Low High Low ---- ---- ---- ---- First Qtr. 2.50 1 150 50 Second Qtr. 3.50 2.95 80 3.75 Third Qtr. 3.50 0.10 9 6 Fourth Qtr. 7 0.60 7 5 (1) Trading volume for PPIs was low and quotations are limited and sporadic. (2) Quotations from January 1, 2000 through September 26, 2000 are OTC NASDAQ market quotations. All quotations on and after September 27, 2000 are non-OTC NASDAQ market quotations. Trading volume for PPIs was low and quotations are limited and sporadic. Holders. As of December 31, 2001, there were 505 holders of record of PPIs. 5 Dividends. Pursuant to the Partnership Agreement, Registrant is required to make certain cash distributions to holders of PPIs. Net operating revenues for each calendar year are distributable to the partners of Registrant approximately as follows: General Partners (as a group): .55% Irving Schneider Minlyn, Inc. ScogBell AG, Inc. (formerly known as Helmsley-Noyes Company, Inc.) ScogBell Converted Special L.P. Interest: .95% ScogBell Special Limited Partners (as a group): 48.50% ScogBell Irving Schneider Limited Partner (nominee for holders of PPIs): 50.0% The Limited Partner is the nominee for the holders of PPIs and all distributions to the Limited Partner are distributed ratably to the holders of 820,000 Participations of Partnership Interests. If with respect to any calendar year the Limited Partner's distributive share (computed on the same basis as that used in preparing Registrant's Federal income tax return) of income (loss), plus one-half of such partner's distributive share of long-term capital gains, exceeds the net operating revenue allocated to the Limited Partner as referred to in the preceding paragraph, then Registrant must also distribute additional funds in an amount equal to such excess to the holders of PPIs. If Registrant does not have funds for such distribution (from cash on hand or borrowings), the Partnership Agreement obligates the General Partners to lend or contribute funds to Registrant for such purpose. In 2001, Registrant had "net operating revenues" of $280,965, of which $140,483 in the aggregate (or $0.17132 per PPI) will be distributed on March 31, 2002 to the holders of PPI's and $140,482 will be distributed to the Special Limited Partners and the General Partners. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." On July 18, 2001, Registrant paid a special dividend of $5,200,000 to its General Partners and Special Limited Partners and holders of record as of the close of business on July 6, 2001 of its PPIs from its available cash, of which $2,600,000 was paid to the General Partners and Special Limited Partners and $2,600,000 was paid to the holders of its PPIs. 6 On December 21, 2001, Registrant declared a special dividend of $410,000 to its General Partners and Special Limited Partners and holders of record of its PPIs as of the close of business on December 31, 2001. In accordance with the Registrant's Partnership Agreement, $205,000 will be distributed to the General Partners and Special Limited Partners and $205,000 will be distributed to the holders of its PPIs. Such distribution will be paid on March 31, 2002, together with the aforementioned 2001 net operating revenues. In 2000, Registrant had "net operating revenues" of $3,908,231, of which $1,954,116 in the aggregate (or $2.38 per PPI) was distributed on March 31, 2001 to the holders of record of PPIs as of December 31, 2000 and an aggregate of $1,954,116 was also distributed to the Special Limited Partners and General Partners on that date. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." On January 18, 2000, Registrant declared a special dividend of $37,000,000 to its General Partners and Special Limited Partners and holders of record of its PPIs from its available cash in connection with the sale on such date of Registrant's 50% undivided interest in the Marbridge Building, of which $18,500,000 was paid to the General Partners and Special Limited Partners in January of 2000 and $18,500,000 was paid to the holders of its PPIs in February of 2000. On May 8, 2000, Registrant declared a special dividend of $120,000,000 to its General Partners and Special Limited Partners and holders of record of its PPIs from its available cash in connection with the sale of the 245 and 261 Fifth Avenue properties, of which $60,000,000 was paid to the General Partners and Special Limited Partners in May of 2000 and $60,000,000 was paid to the holders of its PPIs in June of 2000. "Net operating revenues" is defined in Registrant's Partnership Agreement as follows: for any year, (i) net taxable income of the Registrant, plus (ii) depreciation and amortization expenses allowable for income tax purposes during such year (but only to the extent of mortgage repayments), (iii) plus amortization of Bond issuance costs and Bond discount (which is not relevant after 1994), (iv) plus amortization of financing costs, (v) less principal repayments on mortgages. In recent years, cash distributions to Registrant's partners have generally exceeded the amount defined as net operating revenues. See Item 7 below. 7 Item 6. Selected Financial Data. ------- ------------------------

~~Total~~2001 ~~Rentable~~2000 ~~Property~~1999 ~~Description~~1998 ~~Ownership~~1997 ~~Area (Sq. Ft.)~~ ---- ---- ----~~-------~~ ----~~-----~~ ----~~----------~~ ~~Texas~~Income ~~Edgewood~~Statement ~~Shopping~~Data ~~Center~~Gross ~~(Houston)~~revenues ~~Unimproved~~from ~~Land~~real ~~Fee~~$ --143,887 ~~Bellway~~$ ~~Shopping~~5,969,098 ~~Center~~$ ~~(Houston)~~31,640,834 ~~Unimproved~~$ ~~Land~~43,454,081 ~~Fee~~$46,463,473 estate Net Income transferred to $ 376,061 $153,829,678 $150,779,832 $112,747,733 $ 8,726,836 Partner's capital accounts Net operating revenues, as $ 280,965 $ 3,908,231 $ 12,606,987 $ 9,803,570 $ 9,174,787 defined Net income per PPI: $ 0.1713 $ 65.3015 $ 87.8823 $ 60.4848 $ 5.5280 Balance Sheet Data Total assets $5,631,958 $ 12,959,799 $102,611,031 $ 49,762,234 $53,585,976 Mortgages payable $ -- ~~New~~$ ~~Jersey~~-- ~~570~~$ ~~Broad~~4,000,000 ~~Street~~$ ~~(Newark)(1)~~23,847,488 14$36,847,488 Affiliate Loans $ -~~story~~- ~~office~~$ ~~bldg.~~-- ~~Fee~~$ ~~190~~-- $ -- $18,000,000

Item 7. Management's Discussion and Analysis of Financial Condition and Results ------- ------------------------------------------------------------------------ of Operations. -------------- Liquidity and Capital Resources Registrant disposed of two unimproved parcels of land in Houston, Texas during 2001. At December 31, 2001, Registrant's remaining Property consisted of one vacant commercial office building located in Newark, New Jersey, which was under contract for sale, subject to certain closing conditions. In connection with this contract, Registrant received non-refundable deposits aggregating $1,500,000 from the prospective buyer. In January 2002, due to the inability of the buyer to satisfy the closing conditions, the contract expired and Registrant resumed marketing activities with respect to the Property. Registrant will seek to consummate a sale of this property during 2002, after which the Registrant will initiate steps to wind up its affairs, but there can be no assurance that such sale will be consummated. On July 11, 2001, Registrant sold its undeveloped land in Houston, Texas for $100,000. The sale proceeds were used to pay closing costs and other commitments of approximately $5,000. In connection with this sale, Registrant recognized a gain of approximately $95,000. On July 18, 2001, Registrant paid a special dividend of $5,200,000 to its General Partners and Special Limited Partners and holders of record as of the close of 8 business on July 6, 2001 of its PPIs from its available cash, of which $2,600,000 was paid to the General Partners and Special Limited Partners and $2,600,000 was paid to the holders of its PPIs. On December 21, 2001, Registrant declared a special dividend of $410,000 to its General Partners and Special Limited Partners and holders of record of its PPIs as of the close of business on December 31, 2001. In accordance with the Registrant's Partnership Agreement, $205,000 will be distributed to the General Partners and Special Limited Partners and $205,000 will be distributed to the holders of its PPIs. In addition, Registrant is required to make certain cash distributions to its partners for each year (see Item 5). Accordingly, Registrant has accrued distributions in the amount of $280,965 in respect of 2001 net operating revenues, of which $140,482 will be paid to the Special Limited Partners and the General Partners, and $140,483 will be paid to the holders of record of its PPIs. The aforementioned special dividend and 2001 net operating revenues, in the combined aggregate amount of $690,965, will be distributed on March 31, 2002. Registrant anticipates satisfying its working capital requirements for fiscal year 2002 generally through existing cash reserves. Registrant also anticipates generating additional liquidity through the consummation of the sale of its remaining property; however, there can be no assurances that such sale will be consummated. Net cash provided by operating activities was approximately $2.3 million in 2001, as compared to $4.4 million in 2000. Such decrease was primarily due to decreased property operating income as a result of the sale of Registrant's New York properties in 2000. Net cash provided by investing activities was approximately $95,000 in 2001, as compared to $164.4 million in 2000. Such decrease was primarily attributable to a net decrease in the proceeds received from the sales of properties of $164.9 million. Net cash used in financing activities was approximately $9.1 million in 2001, as compared to $239 million in 2000. Such decrease was primarily due to decreased distributions of approximately $226 million and repayment in 2000 of Registrant's 50% share of the mortgage on the Marbridge Building in connection with the sale of its undivided interest in that property. 9 Results of Operations 2001 Compared to 2000 --------------------- Gross Revenues from real estate for 2001 decreased approximately $5,825,000 (approximately 98%) as compared to 2000, primarily due to the impact of the sales of the 50% undivided interest in the Marbridge Building (sold in January of 2000), and the 245 Fifth Avenue and 261 Fifth Avenue properties (sold in May of 2000), representing all of Registrant's remaining income producing properties. Total expenses decreased by approximately $2,311,000 (approximately 63%) as a result of the aforementioned property sales. Net income for 2001 decreased approximately $153,454,000 primarily due to a decrease of approximately $150,405,000 in the gain on sale of real estate offset by a decline in property operating income of approximately $3,083,000 as a result of the aforementioned property sales. During 2001, gross revenue from real estate was generated primarily by the final settlement of certain closing adjustments and prorations associated with the sales of properties which occurred during 2000. During 2000, Registrant's rental income was generated by the operations of its 50% undivided interest in the Marbridge Building and the 245 and 261 Fifth Avenue properties, which were sold during 2000. Interest and other income in 2001 increased approximately $432,000 (approximately 37%) primarily due to the receipt in 2001 of $1,293,000 in real estate tax refunds relating to the Marbridge Building and 261 Fifth Avenue Building (which were sold in 2000), and the 6 North Michigan Avenue, 360 North Michigan Avenue and One LaSalle properties (which were sold in 1998), offset by decreased interest income of approximately $861,000 due to reduced investments in commercial paper as a result of distributions in 2000 of the net proceeds of sales of properties. For 2001, Registrant incurred no interest expense due to the repayment in 2000 of Registrant's 50% share of the $8,000,000 mortgage loan on the Marbridge Building in connection with the sale of Registrant's 50% undivided interest in such property. Registrant's real estate tax expense in 2001 decreased approximately $290,000 (approximately 53%), due to the sale of its 50% undivided interest in the Marbridge Building in January 2000 and the sale of the 261 and 245 Fifth Avenue properties in May 2000. Management fees decreased approximately $110,000 (100%), because Registrant had no income producing properties during 2001, and as a result, incurred no management fees. In 2000, management fees were incurred with respect to Registrant's 50% undivided interest in the Marbridge Building, 245 Fifth Avenue and 261 Fifth Avenue properties, all of which were sold in 2000. 10 Payroll and related expenses decreased approximately $303,000 (approximately 70%), due to the sale of the aforementioned properties in 2000. Repairs and maintenance expenses decreased approximately $239,000 (100%), due to the sale of the aforementioned properties in 2000. Other property expenses decreased approximately $692,000 (approximately 84%), due to the sale of the aforementioned properties in 2000. Administrative expenses increased approximately $196,000 (approximately 31%), primarily due to the payment in 2001 of a $250,000 settlement relating to an escalation dispute with a former tenant. Depreciation and amortization expenses decreased approximately $830,000 (100%), due to the sales of the aforementioned properties in 2000. Registrant's remaining property, a vacant office building, is classified as property held for sale and depreciation is not recorded. 2000 Compared to 1999 --------------------- Gross Revenues from rentals for 2000 decreased approximately $25,672,000 (approximately 81%) as compared to 1999, primarily due to the impact of the sales of the 50% undivided interest in the Marbridge Building (sold in January of 2000), the 245 Fifth Avenue and 261 Fifth Avenue properties (sold in May of 2000), and the sale of the 1440 Broadway property (sold in December of 1999). Total expenses decreased by approximately $14,160,000 (approximately 79%) as a result of the aforementioned property sales. Net income for 2000 increased approximately $3,050,000 primarily due to an increase of approximately $14,065,000 in the gain on sale of real estate offset by a decline in property operating income of approximately $11,196,000 as a result of the aforementioned property sales. During 2000, Registrant's rental income was generated by the operations of its 50% undivided interest in the Marbridge Building and the 245 and 261 Fifth Avenue properties, which were sold during 2000. For 2000, Registrant's interest expense decreased approximately $1,633,000 (approximately 97%), due to the repayment of Registrant's 50% share of the $8,000,000 mortgage loan on the Marbridge Building on January 18, 2000 in connection with the sale of Registrant's 50% undivided interest in such property. Registrant's real estate tax expense in 2000 decreased approximately $4,086,000 (approximately 88%), due to the sale of its 50% undivided interest in the Marbridge Building in January of 2000 and the sale of the 261 and 245 Fifth Avenue properties in May of 2000. Registrant, under certain commercial leases, was able to pass 11 a portion of the increases in real estate taxes, operating expenses and increases in the consumer price index to the tenants based on lease escalation clauses. Management fees decreased approximately $407,000 (approximately 79%), due to the sale of the aforementioned properties. Payroll and related expenses decreased approximately $1,467,000 (approximately 77%), due to the sale of the aforementioned properties. Repairs and maintenance expenses decreased approximately $1,544,000 (87%), due to the sale of the aforementioned properties. Other property expenses decreased approximately $3,089,000 (approximately 79%), due to the sale of the aforementioned properties. Administrative expenses increased approximately $44,000 (approximately 7%), due to the increased professional fees associated with the administration of the partnership activities. Depreciation and amortization expenses decreased approximately $1,978,000 (approximately 70%), due to the aforementioned sales. Recent Accounting Pronouncements. In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (FAS 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a segment of a business. FAS 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. The Registrant expects to adopt FAS 144 as of January 1, 2002 and it does not expect that the adoption of the Statement will have a significant impact on the Registrant's financial position or results of operations. 12 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. -------- ----------------------------------------------------------- At December 31, 2001, Registrant 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 borrowing. Item 8. Financial Statements and Supplementary Data. ------- -------------------------------------------- The response to this Item 8 is submitted in a separate section of this report. Item 9. Changes in and Disagreements With Accountants on Accounting and -------- ---------------------------------------------------------------------- Financial Disclosure. --------------------- None. 13 PART III Item 10. General Partners of the Registrant. -------- ----------------------------------- Registrant is a limited partnership formed in accordance with the New York Revised Limited Partnership Act. It does not have directors or executive officers. The information set forth below is provided with respect to the General Partners of the Registrant, who may be considered to occupy positions equivalent to directors or executive officers. There is no specific term of office for any General Partner of the Registrant. Each General Partner, with the exception of ScogBell, has served in such capacity since December 4, 1969. The names, ages, and business experience during the past five years of the General Partners of the Registrant, including their principal occupations and employment during that period and the name and principal business of any corporation or other organization in which such occupations and employment were carried on, is as follows: Irving Schneider - 82; Executive Vice President of Helmsley-Spear, Inc. Mr. Schneider has been in the real estate business for over 50 years and owns and operates, individually or through partnerships, numerous real estate investments. Minlyn, Inc. was formed in 1968. All of its stock is owned by Mr. Schneider. Mr. Schneider is a director of Reliance Group Holdings, Inc. and Reliance Insurance Company. Registrant has been advised that ScogBell was created in June 1998 to acquire, hold, finance and sell interests in Registrant. Control of ScogBell is vested exclusively with ScogBell AG Manager, Inc. and ScogBell SB Manager, Inc., as managers. ScogBell AG, Inc. (formerly known as Helmsley-Noyes Company, Inc.), was incorporated in 1926 and it is a real estate management firm in New York City which was acquired by ScogBell on June 10, 1998. Harry B. Helmsley was a General Partner of Registrant until his death on January 4, 1997. He was succeeded by H Associates on July 3, 1997. H Associates acquired a nominal general partner interest from Helmsley-Noyes Corporation in connection with its admission as a General Partner. On June 10, 1998, H Associates ceased to be a General Partner of Registrant and was replaced by ScogBell as a General Partner pursuant to a sale of its entire beneficial ownership position. See "Business." 14 Item 11. Executive Compensation. -------- ----------------------- Registrant is a limited partnership. It does not have officers, executive officers or directors. The information set forth below is provided with respect to the General Partners and the Special Limited Partners of the Registrant, who may be considered to act in capacities similar to directors, or perform policy-making functions similar to those of executive officers or officers in charge of a principal business unit, division or function. Paragraph 11A(3) of the Partnership Agreement provides for certain guaranteed payments to be made to the General Partners and Special Limited Partners of Registrant equal to 8-3/4% per annum of their "Remaining Original Cash Contribution." The Remaining Original Cash Contribution is $1,500,000, less the cumulative amounts distributed to the General Partners and Special Limited Partners from time to time in respect of the net proceeds from the sale of Registrant's properties. The Remaining Original Cash Contributions of December 31, 2001 was $1,160,000. For the fiscal year ended December 31, 2001, Registrant paid or accrued, pursuant to such paragraph 11A(3), guaranteed payments to the General Partners and Special Limited Partners in an aggregate amount of $101,500 as follows: Irving Schneider - $33,732, ScogBell - $67,576, ScogBell AG, Inc. (formerly known as Helmsley-Noyes Company, Inc.) - $91 and Minlyn, Inc. - $101. Under the terms of the Partnership Agreement, since January 1, 1973, the General Partners are entitled to receive an annual payment equal to 1/2% of the gross revenue from real estate of the Registrant. During the fiscal year ended December 31, 2001, the General Partners waived their right to such payment. Mr. Schneider and ScogBell are entitled to receive distributions of net operating revenues in each of their respective capacities as Special Limited Partners. See "Item 5" above. The Registrant does not provide any compensation to the General Partners or the other persons in the form of option or stock appreciation right grants, long-term incentive plans, or a defined benefit or actuarial plans. The Registrant has no standard arrangements for payment of fees to General Partners (other than for their interest as General Partners, as described above), or employment contracts or change-of-control agreements. 15 Item 12. Security Ownership of Certain Beneficial Owners and Management. -------- --------------------------------------------------------------- (a) Registrant is a limited partnership. Except to the extent set forth below, it does not have voting securities. The right to control the business of Registrant is vested in the General Partners of Registrant by virtue of provisions of the Partnership Agreement and the New York Revised Limited Partnership Act. The Partnership Agreement provides for modification or amendments of the Partnership Agreement upon obtaining the consents or affirmative votes of specified percentages of the Special Limited Partners and the Limited Partners, each voting as a class. The sole limited partner votes as directed by the holders of PPIs. To the extent that the Special Limited Partnership Interests and PPIs are considered voting securities, the following information is provided as to holders of 5% or more of each such class at December 31, 2001:

~~2000~~Name ~~1999~~and ~~1998~~Address ~~1997~~of ~~1996~~Amount and Nature of Percent Title of Class Beneficial Owner Beneficial Ownership of Class ---- ---------- ---------------- -------------------- -------- ~~Income~~Special ~~Statement~~Limited ~~Data~~ScogBell ~~Gross~~Direct ~~revenues~~66.66% ~~from~~Partnership $Interest ~~5,969,098~~660 $Madison ~~31,640,834~~Ave. $New 43York,~~454,081~~ ~~$46,463,473~~NY ~~$52,216,081~~10021 ~~real~~Irving ~~estate~~Schneider ~~Net~~Direct ~~Income~~33.34% ~~transferred~~880 toFifth ~~$153,829,678~~Avenue ~~$150,779,832~~New ~~$112~~York,~~747,733~~ $NY ~~8,726,836~~Converted $Special ~~8,452,069~~Limited ~~Partner's~~ScogBell ~~capital~~Direct ~~accounts~~100.00% ~~Net~~Partner ~~operating~~Interest ~~revenues,~~660 asMadison $Ave. ~~3,908,231~~New ~~$ 12~~York,~~606,987~~ $NY ~~9,803,570~~10021 $PPIs ~~9,174,787~~ScogBell ~~$ 8~~310,~~342,911 defined Net income per PPI:~~ 927(1) ~~$ 65~~37.~~3015~~92% $660 ~~87.8823~~Madison ~~$ 60~~Ave.~~4848~~ $New ~~5.5280~~York, $NY ~~5.8636~~10021 ~~Balance~~Long ~~Sheet~~Island ~~Data~~Jewish ~~Total~~Medical ~~assets~~Center ~~$ 12~~90,~~959,799~~095 ~~$102,611,031~~10.99% ~~$ 49,762,234 $53,585,976 $55,393,657 Mortgages payable $~~ 270--05 $76th ~~4,000,000~~Avenue $Direct ~~23,847,488~~New ~~$36,847,488~~Hyde ~~$40~~Park,~~314,558~~ ~~Affiliate~~NY ~~Loans $ -- $ -- $ -- $18,000,000 $18,000,000~~11040

---------- (1) Includes PPIs purchased from the following: 258,877 PPIs owned directly by Leona M. Helmsley; also 4,000 PPIs held by Helmsley-Noyes Company, Inc. (0.5%), a company owned by Helmsley Enterprises, Inc., which in turn is wholly-owned by the Harry B. Helmsley Revocable Trust, under agreement dated December 13, 1989; 13,000 PPIs held by HBH Holdings Corp. (1.6%), 6,500 PPIs held by Park Lane Hotel, Inc. (0.8%) and 28,550 PPIs in the over-the-counter market. 16 (b) Registrant is a limited partnership and, as such, its affairs are managed by its General Partners. The following table sets forth the amount and nature of the beneficial ownership at December 31, 2001 of each class of partnership interests by its General Partners individually and as a group:

~~Amount~~Name and ~~Nature~~Address of ~~Name~~Amount and ~~Address~~Nature of ~~Beneficial Percent~~ Title of Class Beneficial Owner Beneficial Ownership Percent of Class -------------- ------------------- -------------------- ---------------- General Partnership Irving Schneider Direct(1) 90.91% Interests 880 Fifth Avenue New York, NY ScogBell Indirect 9.09% 660 Madison Ave. New York, NY 10021 As a group 100.00% Special Limited ScogBell Direct(2) 66.66% Partnership ~~Interest~~Interests 660 Madison Ave. New York, NY 10021 Irving Schneider Direct(2) 33.34% 880 Fifth Avenue New York, NY As a group 100.00% Converted Special Limited ScogBell Direct(2) 100.00% ~~Limited~~ Partner Interest 660 Madison Ave. New York, NY 10021 ~~PPIs~~Participation Interests ScogBell 310,927~~(1)~~ 37.92% 660 Madison Ave. New York, NY 10021 ~~Long Island Jewish Medical Center 90,095 10.99% 270-05 76th Avenue~~ Direct ~~New Hyde Park, NY 11040~~(3)

(1) Mr. Irving Schneider owns approximately 90% of such interest directly and 10% indirectly through his ownership of Minlyn, Inc.; 60 East 42nd Street, New York, New York, which is also a General Partner of Registrant. (2) The Special Limited Partnership Interests have the rights set forth in the Partnership Agreement and are not securities issued by Registrant. The Converted Special L.P. Interest represents the economic interest in Registrant formerly owned by Harry B. Helmsley in his capacity as a General Partner. See "Business." (3) Includes PPIs purchased from the following: 258,877 PPIs owned directly by Leona M. Helmsley; also 4,000 PPIs held by Helmsley-Noyes Company, Inc. (0.5%), a company owned by Helmsley Enterprises, Inc., which in turn is wholly-owned by the Harry B. Helmsley Revocable Trust, under agreement dated December 13, 1989; 13,000 PPIs held by HBH Holdings Corp. (1.6%), 6,500 PPIs held by Park Lane Hotel, Inc. (0.8%) and 28,550 PPIs in the over-the-counter market. 17 Item 13. Certain Relationships and Related Transactions. -------- ----------------------------------------------- (a) Transactions with Management and Others. None. (b) Certain Business Relationships. As set forth in Item 11(a) above, during the year ended December 31, 2001, Registrant paid certain fees and certain guaranteed payments to each of its corporate General Partners, ScogBell AG, Inc. (formerly known as Helmsley-Noyes Company, Inc.) and Minlyn, Inc., pursuant to the Partnership Agreement. See Item 10 hereof as to the ownership of said corporations. In 2001, HSI earned $3,000 in brokerage commissions in connection with the sale of two parcels of undeveloped land in Houston, Texas. The amount of the commissions paid for such services is believed by Registrant to be no more than the amount which Registrant would be required to pay to unrelated parties performing such services. (c) Indebtedness of Management. None. 18 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. -------- ----------------------------------------------------------------- (a) (1) and (2) The response to this portion of Item 14 is submitted as a separate section of this report. (a) (3) Exhibits. Subject to Rule 12b-32 of the Securities Exchange Act of 1934 regarding incorporation by reference, listed below are the exhibits which are filed as part of this report and are hereby incorporated by reference (according to the numbers assigned to them in Item 601 of Regulation S-K): (3)(i) Registrant's Limited Partnership Agreement dated as of May 15, 1969, as amended on October 2, 1969, October 31, 1969, and December 3, 1969 is hereby incorporated by reference to Exhibits 3.1, 3.2, 3.3 and 3.4 to Registration Statement No. 2-33132 which was declared effective by the SEC on December 4, 1969. (ii) Amendment to Agreement of Limited Partnership, dated as of May 30, 1997. (10.1) Management Agreement dated May 20, 1969 between Helmsley-Spear, Inc. and Registrant is hereby incorporated by reference to Exhibit 12.1 to Registration Statement No. 2-33132. The leasing commissions and management fees currently being charged to the Registrant are consistent with the rates generally charged in the areas where the properties are located. (b) Reports on Form 8-K filed during the period covered by this Report: (i) On June 25, 2001, Registrant filed a Current Report on Form 8-K relating to the special dividend of $5,200,000 paid on July 18, 2001 to its General Partners and Special Limited Partners and holders of its PPIs. (ii) On June 26, 2001, Registrant filed a Current Report on Form 8-K/A relating to the special dividend of $5,200,000 paid on July 18, 2001 to its General Partners and Special Limited Partners and holders of its PPIs. (iii) On October 24, 2001, Registrant filed a Current Report on Form 8-K relating to the contract to sell 570 Broad Street, Newark, New Jersey for $11,500,000. 19 (iv) On December 28, 2001, Registrant filed a Current Report on Form 8-K relating to a special dividend of $410,000 to its General Partners and Special Limited Partners and holders of record as of the close of business on December 31, 2001 of its PPIs. (c) Financial Statement Schedules. The response to this portion of Item 14 is submitted as a separate section of this report. 20 SIGNATURES 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, in the City of New York, State of New York, on March 25, 2002. INVESTMENT PROPERTIES ASSOCIATES By: /s/ Irving Schneider ------------------------------- Irving Schneider General Partner; Financial and Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of Registrant and in the capacities indicated on March 25, 2002. Signature Title --------- ----- /s/ Irving Schneider General Partner, ------------------------------------ Principal Executive, Irving Schneider Financial and Accounting Officer MINLYN, INC. General Partner By: /s/ Irving Schneider -------------------------------- Irving Schneider President SCOGBELL AG, INC. General Partner By: /s/ Craig Effron -------------------------------- Craig Effron President SCOGBELL ACQUISITION, L.L.C. General Partner By: /s/ Craig Effron -------------------------------- Craig Effron President ScogBell AG Manager, Inc., Manager 21 Annual Report on Form 10-K Item 14(A)(1) And (2) and Item 14(D) List of Financial Statements and Financial Statement Schedule Financial Statements and Financial Statement Schedule Year Ended December 31, 2001 Investment Properties Associates (A New York Limited Partnership) New York, New York Investment Properties Associates (A New York Limited Partnership) Index Of Financial Statements And Financial Statement Schedule Page Report of Independent Auditors...............................................S-1 Balance Sheets-December 31, 2001 and 2000....................................S-2 Statements of Income-Years Ended December 31, 2001, 2000 and 1999......................................................S-3 and S-4 Statements of Changes in Partners' Capital (Deficiency)- Years Ended December 31, 2001, 2000 and 1999...............................S-5 Statements of Cash Flows-Years Ended December 31, 2001, 2000 and 1999..............................................................S-6 Notes to Financial Statements........................................S-7 to S-18 The following financial statement schedule of Investment Properties Associates is included in Item 14(d): Schedule III-Real Estate and Accumulated Depreciation..............S-19 and S-20 All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions, are inapplicable or have been otherwise disclosed, and therefore have been omitted. Report of Independent Auditors Investment Properties Associates We have audited the accompanying balance sheets of Investment Properties Associates (a New York Limited Partnership) as of December 31, 2001 and 2000, and the related statements of income, changes in partners' capital (deficiency) and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule listed in the index at Item 14. These financial statements and schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Investment Properties Associates at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP New York, New York January 23, 2002 S-1 Investment Properties Associates (A New York Limited Partnership) Balance Sheets December 31, 2001 2000 ----------- ----------- Assets Real estate held for sale, at cost (Note 3) $ 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 2,788,292 9,514,349 Due from managing agent (Helmsley- Spear Inc.) (Note 5) 229,291 730,578 Receivables, principally for rentals 3,553 8,215 Other assets, (Note 4) 457,515 553,350 ----------- ----------- Total assets $ 5,631,958 $12,959,799 =========== =========== Liabilities and partners' capital (deficiency) Accounts payable $ 7,903 $ 113,368 Accrued real estate taxes -- 11,086 Distributions payable to General Partners, Special Limited Partners and Limited Partner (Note 8) 698,179 3,915,446 Guaranteed payments due to General Partners, Special Limited Partners and Limited Partner (Note 6) 146,500 180,553 Due to managing agent (Helmsley- Spear, Inc.) (Note 5) 35,661 41,820 Sundry and accrued liabilities 233,638 172,545 Deposits (Note 3) 1,500,000 -- ----------- ----------- Total liabilities 2,621,881 4,434,818 ----------- ----------- Commitments and contingencies (Note 12) Partners' capital (deficiency) (Notes 1, 6, 7 and 8): General Partners (2,495,206) (2,465,397) Special Limited Partners 3,286,292 5,966,387 Limited Partner (represented by the equivalent of 820,000 Participation Interests) 2,218,991 5,023,991 ----------- ----------- 3,010,077 8,524,981 ----------- ----------- Total liabilities and partners' capital (deficiency) $ 5,631,958 $12,959,799 =========== =========== See accompanying notes. S-2 Investment Properties Associates (A New York Limited Partnership) Statements of Income

~~Amount~~Years ~~and~~ended ~~Nature~~December of31, ~~Name~~2001 ~~and~~2000 ~~Address~~1999 of------------ ~~Beneficial~~------------ ~~Percent~~------------ ~~Title~~Revenues: ofGross ~~Class~~revenues ~~Beneficial~~from ~~Owner~~real ~~Ownership~~estate of(Note ~~Class~~10) $ 143,887 $ 5,969,098 $ 31,640,834 Interest and other income 1,607,060 1,174,914 798,599 ------------ ------------ ------------ 1,750,947 7,144,012 32,439,433 ------------ ------------ ------------ ~~General~~Expenses: ~~Partnership~~Real ~~Irving~~estate ~~Schneider~~taxes ~~Interests~~258,100 ~~880~~547,845 ~~Fifth~~4,633,769 ~~Avenue~~Interest ~~New~~-- ~~York~~43,584 NY1,676,492 ~~Direct~~Management fees (1Note 5) ~~90.91%~~-- ~~ScogBell~~109,737 ~~Indirect~~517,005 ~~9.09%~~Payroll ~~660~~and ~~Madison~~related ~~Ave.~~expenses ~~New~~128,403 ~~York~~431,153 NY1,898,115 ~~10021~~Repairs Asand amaintenance ~~group~~expenses ~~100.00%~~-- ~~Special~~239,056 ~~Limited~~1,783,373 ~~ScogBell~~Other ~~Direct(2)~~property ~~66.66%~~expenses ~~Partnership~~133,753 ~~Interests~~825,410 ~~660~~3,914,440 ~~Madison~~Administrative ~~Ave.~~expenses ~~New~~833,226 ~~York~~636,900 NY592,736 ~~10021~~Depreciation ~~Irving~~and ~~Schneider~~amortization ~~Direct(~~of real estate -- 598,174 1),974,245 ~~33.34%~~Amortization ~~880~~of ~~Fifth~~leasing ~~Avenue~~commissions ~~New~~-- ~~York~~232,160 NY831,865 AsAmortization aof ~~group~~mortgage ~~100.00%~~refinancing ~~Converted~~costs ~~Special~~-- ~~Limited~~-- ~~Partner~~1,593 ~~Interest~~------------ ~~ScogBell~~------------ ~~Direct(2)~~------------ ~~100.00%~~1,353,482 ~~660~~3,664,019 ~~Madison~~17,823,633 ~~Ave.~~------------ ~~New~~------------ ~~York,~~------------ NYIncome ~~10021~~before ~~Participation~~items ~~Interests~~shown ~~ScogBell~~below ~~310~~397,~~927~~465 ~~37.92%~~3,479,993 ~~660~~14,615,800 ~~Madison~~Gain ~~Ave.~~on ~~New~~sales ~~York,~~of NYreal ~~10021~~estate ~~Direct~~(Note 3) 95,096 150,500,239 136,434,754 ------------ ------------ ------------ Income before guaranteed payments required under the Limited Partnership Agreement $ 492,561 $153,980,232 $151,050,554

See accompanying notes. S-3 Investment Properties Associates (A New York Limited Partnership) Statements of Income (continued)

~~Year~~Years ended December 31, 2001 2000 1999 ~~1998~~ ------------ ------------ ------------~~---------~~ ~~Revenues:~~Guaranteed ~~Gross~~payments ~~revenues~~required ~~from~~under ~~real~~the ~~estate~~Limited Partnership Agreement (Note 116): To the Limited Partner $ 515,~~969,098~~000 $ 3115,~~640,834~~000 $ 4315,~~454,081~~000 ~~Interest~~To General and ~~other~~Special ~~income~~Limited 1Partners 101,~~174,914~~500 ~~798~~101,~~599~~500 ~~917~~101,~~010~~500 To General Partners -- 34,054 154,222 ------------ ------------ ------------~~-------~~ 7116,~~144,012~~500 32150,~~439,433~~554 44270,~~371,091~~722 ------------ ------------ ------------~~---------~~ ~~Expenses:~~Net ~~Leasehold~~income ~~rentals~~$ ~~-- -- 409~~376,~~095~~061 ~~Real estate taxes 547~~$153,~~845 4~~829,~~633,769~~678 7$150,~~149~~779,~~045~~832 ~~Interest~~============ ~~(Notes~~============ 4============ ~~and~~Net 5)income ~~43,584~~allocable ~~1,676,492~~as ~~3,842,192~~follows ~~Management fees~~ (~~Note~~Notes 6)7 ~~109,737 517,005 1,121,955 Payroll~~ and ~~related~~13): ~~expenses~~General ~~431,153~~Partners ~~1,898,115~~$ 42,~~220,947~~591 ~~Repairs~~$ ~~and maintenance expenses 239,056~~ 1,~~783~~103,~~373~~106 ~~3,139,757~~$ ~~Other property expenses 825~~865,~~410~~880 ~~3,914,440~~Special ~~8,463,862~~Limited ~~Administrative~~Partners ~~expenses 636~~232,~~900~~987 ~~592~~99,~~736 309~~179,~~626~~316 ~~Co-owners' share of expense -- -- 25~~77,~~027 Depreciation and amortization of real estate 598~~850,~~174~~455 ~~1,974,245~~Limited ~~2,781,850~~Partner ~~Amortization of leasing commissions 232~~140,~~160~~483 ~~831~~53,~~865 1~~547,~~100,072~~256 ~~Amortization of mortgage refinancing costs -- 1~~72,~~593 24~~063,~~323~~497 ------------ ------------~~---------------------~~ ~~3,664,019 17,823,633 32,587,751~~ ------------~~---------------------------------~~ ~~Income~~$ ~~before items shown below 3~~376,~~479,993~~061 14$153,~~615~~829,~~800~~678 11$150,~~783~~779,~~340~~832 ~~Gain~~============ on============ ~~sales~~============ ofNet ~~real~~Income ~~estate~~Per ~~(Note~~Limited 3)Partner ~~150,500,239~~Participation ~~136,434,754~~Interest ~~101~~(820,~~295,596~~000 ~~---------------------------------------------~~units ~~Income~~outstanding): ~~before~~$ ~~guaranteed~~0.1713 ~~payments~~$ ~~required~~65.3015 ~~under~~$ ~~the~~87.8823 ~~Limited~~============ ~~Partnership~~============ ~~agreement $153,980,232 $151,050,554 $113,078,936~~============

See accompanying notes. S-4 Investment Properties Associates (A New York Limited Partnership) Statements of Changes in Partners' Capital (Deficiency)

~~Year~~Special ~~ended~~Limited ~~December~~Total ~~31,~~General ~~2000~~Partners ~~1999~~Partners ~~1998~~Limited Partner ------------- ---------------- --------------- --------------- ~~Guaranteed~~Partners' ~~payments~~Capital ~~required under the Limited Partnership agreement~~ (~~Note 7~~Deficiency): ToJanuary ~~the~~1, ~~Limited~~1999 ~~Partner~~$ 6,721,813 $ 15(2,~~000~~768,948) $ 15(21,~~000~~325,648) $ 1530,~~000~~816,409 ToDistribution to General ~~and~~Partners, Special Limited Partners ~~101~~and Limited Partner (Note 8) (141,~~500~~898,110) ~~101~~(780,~~500~~440) ~~101~~(70,~~500~~168,615) To(70,949,055) ~~General~~Net ~~Partners~~income 34for the year ended December 31,~~054~~ ~~154~~1999 (Note 7) 150,~~222~~779,832 ~~214~~865,~~703~~880 77,850,455 72,063,497 ------------- ------------- ------------- ------------- ~~150~~Partners' Capital (Deficiency) December 31,~~554~~ ~~270~~1999 $ 15,~~722~~603,535 ~~331~~$ (2,~~203~~683,508) $ (13,643,808) $ 31,930,851 Distribution to General Partners, Special Limited Partners and Limited Partner (Note 8) (160,908,232) (884,995) (79,569,121) (80,454,116) Net income for the year ended December 31, 2000 (Note 7) 153,829,678 1,103,106 99,179,316 53,547,256 ------------- ------------- ------------- ------------- ~~Net~~Partners' ~~income~~Capital (Deficiency) December 31, 2000 $~~153~~ 8,~~829~~524,~~678~~981 $~~150~~ (2,~~779~~465,~~832~~397) $~~112~~ 5,~~747~~966,~~733~~387 ~~===============================================~~$ ~~Net~~5,023,991 ~~income~~Distribution ~~allocable~~to asGeneral ~~follows~~Partners, ~~(Notes~~Special 8Limited Partners and ~~14):~~Limited ~~General~~Partner ~~Partners~~(Note $8) 1(5,~~103~~890,~~106~~965) $(32,400) ~~865~~(2,~~880~~913,082) ~~$ 694~~(2,~~652~~945,483) ~~Special~~Net ~~Limited~~income ~~Partners~~for ~~99,179,316~~the ~~77,850,455~~year 62ended December 31,~~455,572~~ ~~Limited~~2001 ~~Partner~~(Note 537) 376,~~547~~061 2,~~256~~591 72232,~~063,497~~987 49140,~~597,509~~483 ------------- ------------- ------------- ------------- ~~$153,829,678~~Partners' ~~$150,779,832~~Capital ~~$112,747,733~~(Deficiency) ~~===============================================~~December ~~Net~~31, ~~Income~~2001 ~~Per~~$ ~~Limited~~3,010,077 ~~Partner~~$ ~~Participation Interest~~ (~~820~~2,~~000 units outstanding~~495,206): $ ~~65.3015~~3,286,292 $ ~~87.8823~~2,218,991 ~~$ 60.4848~~ ============= ============= ============= =============

See accompanying notes. S-5 Investment Properties Associates (A New York Limited Partnership) Statements of Cash Flows

~~Special~~Years ~~General~~ended ~~Limited~~December ~~Limited~~31, ~~Total~~2001 ~~Partners~~2000 ~~Partners~~1999 ~~Partner~~ ------------- ------------- ------------- Operating activities: Net income $ 376,061 $ 153,829,678 $ 150,779,832 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization -- 830,334 2,807,703 Deferred rent -- --~~------------------------------~~ ~~Partners'~~(1,082,359) ~~Capital~~Gain on sale of real estate (~~Deficiency~~95,096) ~~January~~(150,500,239) 1(136,434,754) ~~1998~~Changes $in operating assets and liabilities: Due from managing agent 501,287 2,091,590 (37446,~~970~~415) Receivables 4,~~893~~662 459,017 139,042 Other assets 95,835 676,101 (121,133) $Accounts payable (3105,~~089~~465) (564,~~297~~809) $(50476,~~128~~892) Accrued real estate tax (11,~~009~~086) $11,088 15(1,~~246~~586,~~413~~162) ~~Distribution~~Accrued interest -- (29,278) (125,747) Guaranteed payments due to General Partners, Special Limited Partners and Limited Partner (~~Note~~34,053) 9(120,168) (68400,~~055,027~~107) Due to managing agent (~~374~~6,~~303~~159) (33189,~~653,211~~293) (3460,~~027,513~~292) ~~Net~~Sundry ~~income~~and ~~for~~accrued ~~the~~liabilities ~~year~~61,093 ~~ended~~(438,167) ~~December 31~~(469,253) ~~1998~~Deposits ~~(Note~~and 8)rents ~~112~~received in advance -- (1,~~747~~696,~~733~~853) ~~694~~(162,~~652~~447) ~~62,455,572~~Deposits 491,~~597~~500,~~509~~000 -- -- ------------- ------------- ------------- Net cash provided by operating activities 2,287,079 4,359,001 12,361,016 ------------- ------------- ------------- ~~Partners'~~Investing ~~Capital~~activities: ~~(Deficiency)~~Property ~~December~~improvements ~~31,~~-- ~~1998 6,721,813~~ (2595,~~768,948~~995) (211,~~325~~371,~~648~~534) ~~30,816,409 Distribution to General Partners, Special Limited Partners and Limited Partner (Note 9) (141,898,110) (780,440) (70,168,615) (70,949,055)~~ Net ~~income~~proceeds ~~for~~from ~~the~~sale ~~year~~of ~~ended~~real ~~December~~estate 3195,096 ~~1999 (Note 8) 150~~164,~~779~~953,~~832~~897 ~~865~~149,~~880 77~~599,~~850,455~~635 ~~72,063,497~~ ------------- ------------- ------------- Net cash provided by investing activities 95,096 164,357,902 148,228,101 ------------- ------------- ------------- ~~Partners'~~Financing ~~Capital~~activities: ~~(Deficiency)~~Distributions ~~December 31, 1999 15,603,535 (2,683,508) (13,643,808) 31,930,851 Distribution~~ to General Partners, Special Limited Partners and Limited Partner (~~Note~~ 9,108,232) (~~160~~234,~~908~~972,~~232~~567) (~~884~~74,~~995~~802,647) Principal payments on mortgages payable -- (794,~~569~~000,~~121~~000) (8019,~~454~~847,~~116~~488) ~~Net~~------------- ~~income~~------------- ~~for~~------------- ~~the~~Net ~~year~~cash ~~ended~~used ~~December~~in ~~31,~~financing ~~2000~~activities (~~Notes 8 and 14) 153~~9,~~829~~108,~~678~~232) 1(238,~~103~~972,~~106~~567) 99(94,~~179~~650,~~316~~135) ~~53,547,256~~ ------------- ------------- ------------- (Decrease) increase in cash and cash equivalents (6,726,057) (70,255,664) 65,938,982 Cash and cash equivalents at beginning of year 9,514,349 79,770,013 13,831,031 ------------- ------------- ------------- ~~Partners'~~Cash ~~Capital~~and ~~(Deficiency)~~cash ~~December~~equivalents ~~31,~~at ~~2000~~end $of ~~8,524,981~~year $( 2,~~465~~788,~~397)~~292 $ 59,~~966~~514,~~387~~349 $ 579,~~023~~770,~~991~~013 ============= ============= ============= Supplemental disclosure of cash flow information Cash paid during the year for interest $ -- $ 72,862 $ 1,802,239 ============= ============= ============= Supplemental disclosure of non-cash investing and financing activities: Deferred rent receivable charged to cost of sales $ -- $ -- $ 1,993,760 Deferred leasing commissions charged to cost of sales -- 2,350,881 1,703,931

See accompanying notes. S-6 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements December 31, 2001 1. Description of Business Investment Properties Associates ("IPA") was formed as a limited partnership on May 15, 1969 to acquire and operate commercial properties. Through January 4, 1997, the General Partners of IPA were Mr. Harry B. Helmsley and Mr. Irving Schneider and two corporations owned or controlled by them. Collectively, the General Partners owned a 1.5% interest in IPA. Upon the death of Mr. Helmsley on January 4, 1997, the general partnership interest owned by him automatically converted to a Special Limited Partnership Interest owned by his estate. As a result of this conversion, the total interests of the General Partners were reduced to .55%. The Special Limited Partners are Mrs. Leona M. Helmsley, Mr. Irving Schneider, and the Estate of Mr. Harry B. Helmsley and the Limited Partner is Mr. John Bailey. Undivided interests in the limited partnership are represented by 820,000 Participation Interests ("PPI's"). Changes in ownership subsequent to January 4, 1997, are described below. Under the terms of the Partnership Agreement in effect on the date of Mr. Helmsley's death, the General Partners were required to create a new limited partnership with the same attributes as IPA and convey all assets and liabilities of IPA to that entity. Because such a course of action would have resulted in substantial expense to IPA and no benefit to the partners and holders of PPI's, the General Partners obtained approval of a majority of the holders of the PPI's to continue the business of IPA, and the Partnership Agreement was amended to that effect effective May 30, 1997. Effective July 3, 1997, the Partnership Agreement was further amended to admit a newly formed limited liability company owned by Mrs. Leona M. Helmsley as a General Partner of IPA. This entity was allocated a portion of the general partner interest owned by one of the corporate general partners. On June 10, 1998, the General Partner interests of the corporation and limited liability company owned by Mrs. Leona M. Helmsley, and the Special Limited Partner interests owned by Mrs. Leona M. Helmsley and the Estate of Harry B. Helmsley, were acquired by ScogBell Acquisition, L.L.C. ("ScogBell"). Also on June 10, 1998, ScogBell acquired 282,377 PPI's from Mrs. Leona M. Helmsley and 28,550 PPI's in the over-the-counter market. S-7 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 2. Significant Accounting Policies a. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. b. Rental revenue from tenant leases is recognized on a straight line basis over the terms of the associated leases. c. Depreciation of buildings and building improvements is provided for by the straight-line method over estimated useful lives of 19 to 39 years. Leaseholds, leasehold improvements and tenants' alterations are amortized over the terms of the related leases. Amounts applicable to tenants' alterations and the related accumulated amortization are eliminated from the accounts at the time the related lease expires or, if the tenant should vacate the premises prior thereto, unamortized assets are charged to operations in the year the premises are vacated. d. Costs in connection with mortgage refinancings are included in deferred charges and are being amortized over the terms of the related mortgages. e. Leasing commissions are amortized over the terms of the related leases. f. IPA's employees are covered under multi-employer defined contribution pension plans. All contributions are funded currently based upon negotiated union contracts. Information from the plans' administrators is not available to permit IPA to determine its share of unfunded vested benefits. During 2001, 2000 and 1999, IPA paid approximately $18,000, $93,000, and $273,000, respectively, for employees to union plans for pension, welfare and other benefits. g. For the purpose of determining cash equivalents, IPA considers all highly liquid investments with a maturity of three months or less, when purchased, to be cash equivalents. S-8 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 2. Significant Accounting Policies (continued) h. Financial Accounting Standards Board ("FASB") Statement No. 107, "Disclosures About Fair Value of Financial Investments", defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. The methods and assumptions used to estimate the fair value of financial instruments at December 31, 2001 and 2000 are as follows: (i) The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and deposits approximate fair value due to the short maturities of these items. i. Gains on sales of real estate are recognized at closing in accordance with FASB Statement No. 66, "Accounting for Sales of Real Estate". j. FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flow estimates to be generated by those assets are less than the assets' carrying amount or on long-lived assets held for sale when the assets' carrying amount is greater than the fair market value less costs of disposal for those assets on a property by property basis. IPA evaluates each of its properties for indicators of impairment by reference to the undiscounted cash flows to be generated from the operation and sale of the properties. No indicators of impairment were present, and, accordingly no provisions for impairment have been recorded in any of the periods presented. k. Basic earnings per share has been calculated by dividing the net income allocated to the Limited Partner by the 820,000 PPI's outstanding. As IPA has no potentially dilutive securities, no presentation of diluted earnings per share is required. l. Effective January 1, 1998, IPA adopted FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information ("Statement 131"). IPA is engaged in the ownership and operation of commercial office properties and has one reportable segment. IPA evaluates real estate performance and allocates resources S-9 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 2. Significant Accounting Policies (continued) based on net operating income. The primary sources of revenue are generated from tenant base rents and escalations of operating expenses and real estate taxes. Operating expenses primarily consist of common area maintenance. The commercial office property segment meets the quantitative threshold for determining reportable segments. IPA has no investment in foreign operations. 3. Real Estate Real estate is held for sale and is summarized as follows: Classification 2001 2000 -------------- ---------- ---------- Land $ 502,032 $ 502,032 Buildings and building improvements -- -- Leaseholds and leasehold improvements 7,531,315 7,531,315 ---------- ---------- $8,033,347 $8,033,347 ========== ========== On October 22, 2001, IPA entered into a contract to sell its only remaining property, a vacant commercial office building located at 570 Broad Street in Newark, New Jersey for $11,500,000. In connection with this contract, IPA received non-refundable deposits from the buyer aggregating $1,500,000 which is included in Deposits in the accompanying balance sheet. In January 2002, due to the buyer's inability to satisfy the closing conditions, the contract expired and IPA resumed marketing activities with respect to the property. On July 11, 2001, IPA sold its undeveloped land in Texas for $100,000. In connection with this transaction, IPA recognized a gain on the sale of approximately $95,000. On May 8, 2000, IPA sold the 245 Fifth Avenue and the 261 Fifth Avenue, New York, New York, properties for $135,000,000. The sales proceeds were used to pay closing costs of approximately $4,400,000 and a sales commission to one of the general partners of approximately $5,110,000. In connection with this transaction, IPA recognized a gain on the sale of approximately $113,570,000. In addition, distributions of $60,000,000 were paid to the General Partners and Special Limited Partners in May 2000 and $60,000,000 was paid to the holders of Participation Interests in June 2000. S-10 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 3. Real Estate (continued) On January 18, 2000, IPA sold its 50% undivided interest in the 1328 Broadway, New York, New York, property for $43,500,000. The sales proceeds were used to repay IPA's 50% share of the $8,000,000 mortgage loan encumbering its interest in the property, pay closing costs of approximately $1,400,000 and a sales commission to one of the general partners of approximately $1,650,000. In connection with this transaction, IPA recognized a gain on sale of approximately $36,930,000. In addition, distributions of $18,500,000 were paid to the General Partners and Special Limited Partners in January 2000 and $18,500,000 was paid to the holders of Participation Interests in February 2000. On December 16, 1999, IPA sold the 1440 Broadway property for $152,000,000. The sales proceeds were used to repay mortgage debt of approximately $17,347,500, sales commissions of $3,800,000 paid to an affiliate of one of the General Partners and other closing costs of approximately $5,047,000. In connection with this transaction, IPA recognized a gain on sale of approximately $130,557,000. In addition, on December 16, 1999, IPA declared a special distribution to its partners of approximately $128,000,000 of which $64,000,000 was paid to the General Partners and Special Limited Partners in December 1999 and $64,000,000 was paid to the holders of Participation Interests in January 2000. On May 18, 1999, IPA sold the Midland Savings Building located in Midland, Texas for a sales price of $300,000. In connection with this transaction, IPA recognized a gain of approximately $298,000. On April 14, 1999, IPA sold the Mojud Building located in Long Island City, New York for a sales price of $6,500,000. The sales proceeds were used to pay sales commissions of $162,500 to an affiliate of one of the General Partners and other closing costs of approximately $239,000. In connection with this transaction, IPA recognized a gain of approximately $5,580,000. S-11 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 4. Other Assets Other assets consist principally of amounts held in escrow by the buyer of the Partnership's Chicago properties, which were sold in 1998. 5. Management of Properties The properties are managed by Helmsley-Spear, Inc. Mr. Irving Schneider is co-chairman and Chief Operating Officer of Helmsley-Spear, Inc., and owns 50% of its outstanding stock. In addition to providing general property management services, Helmsley-Spear, Inc. locates tenants and negotiates leases for its properties. Management fees are based upon negotiated percentages of revenues for each property in the portfolio. Leasing commissions are based upon varying percentages of the annual rent paid by tenants obtained by Helmsley-Spear, Inc. Management fees and leasing commissions charged to IPA by Helmsley-Spear, Inc. aggregated $0 (2001), $393,447 (2000), and $1,287,902 (1999). Tenants' security deposits for certain properties are held by the managing agent principally in special bank accounts; interest thereon accrues principally for the benefit of the tenants. 6. Guaranteed Payments Due to Partners The Limited Partnership Agreement requires that certain guaranteed payments be made to partners and deducted as expenses in determining net income. The General Partners and Special Limited Partners receive guaranteed payments equal to 8-3/4% per annum of their "Remaining Original Cash Contribution" ($1,160,000 at December 31, 2001, 2000 and 1999). In addition, the General Partners receive guaranteed payments equal to 1/2% of gross revenues, as defined, and the Limited Partner receives $15,000 per annum. S-12 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 7. Allocations of Partnership Income In accordance with the terms of the Limited Partnership Agreement, elements of income for financial reporting purposes were credited (but not distributed in cash) to the capital accounts of the partners through January 3, 1997, as follows (see Note 8 for the basis on which cash distributions are determined):

~~Year~~Special ~~ended~~General ~~December~~Limited ~~31,~~Limited ~~2000 1999 1998~~ ------- ------- -------~~------------------------------------~~ ~~Operating~~A. ~~activities:~~ Net income $before ~~153,829,678~~items ~~$ 150~~C,~~779,832~~ ~~$ 112~~D,~~747,733~~ ~~Adjustments~~E toand ~~reconcile~~F ~~net~~below ~~income~~1.5% to48.5% ~~net~~50.0% ~~cash~~B. ~~provided~~Net ~~by operating activities: Depreciation and amortization 830~~losses,~~334~~ ~~2,807,703~~before ~~3,906,245~~items ~~Deferred~~below ~~rent~~100.0% -- ~~(1,082,359)~~-- ~~(1,045,707)~~C. ~~Gain~~Depreciation onand ~~sale~~amortization of real estate ~~(150,500,239) (136,434,754) (101,295,596) Changes in operating assets and liabilities~~: ~~Due from managing agent 2,091,590 (446,415) 337,226 Receivables, net 459,017 139,042 987,957 Deferred charges, net 676,101 (121,133) (3,077,192) Accounts payable (564,809) (476,892) (~~1~~,055,285)~~.Equal ~~Accrued real estate tax 11,088 (1,586,162) (1,817,833) Accrued interest (29,278) (125,747) (238,119) Guaranteed payments due~~ to ~~General~~mortgage ~~Partners~~amortization ~~Special Limited Partners and Limited Partner~~ (~~120,168)~~as ~~(400,107~~defined) ~~316,203~~1.5% ~~Accrued~~48.5% ~~leasing~~50.0% ~~commissions~~2.Balance ~~and~~3.0% ~~management~~97.0% ~~fees (189,293) (60,292) (480,943) Sundry and accrued liabilities (438,167) (469,253) 232,297 Deposits and rents received in advance (1,696,853) (162,447) (122,489)~~ --~~-------------------------------------------------------~~ ~~Net~~D. ~~cash~~Bond ~~provided~~discount byamortization ~~operating activities 4,359,001 12,361,016 9,394,497~~ -- --~~-----------------------------------------------------~~ ~~Investing~~100.0% ~~activities:~~E. ~~Property~~Gain ~~improvements~~on ~~(595,995)~~disposition ~~(1,371,534) (2,201,413) Net proceeds from sale~~ of real estate 164,953,897 149,599,635 117,803,063 --------------------------------------------------------- Net cash provided by investing activities 164,357,902 148,228,101 115,601,650 --------------------------------------------------------- Financing activitiesproperty: ~~Distributions~~1.To tothe ~~General~~extent ~~Partners,~~of ~~Special~~the ~~Limited~~aggregate ~~Partners~~depreciation and ~~Limited~~amortization ~~Partner~~of ~~(234,972,567)~~such ~~(74,802,647)~~property ~~(82,405,306)~~included ~~Principal~~in ~~payments on mortgages payable~~ C(~~4,000,000~~2) ~~(19,847,488)~~above ~~(13,000,000)~~3.0% ~~Principal~~97.0% ~~payments on notes payable to related parties~~ -- -- (18,000,000) --------------------------------------------------------- Net cash used in financing activities (238,972,567) (94,650,135) (113,405,306) --------------------------------------------------------- (Decrease) increase in cash and cash equivalents (70,255,664) 65,938,982 11,590,841 Cash and cash equivalents at beginning of year 79,770,013 13,831,031 2~~,240,190~~.Balance --------------------------------------------------------- Cash and cash equivalents at end of year $ 9,514,349 $ 79,770,013 $ 13,831,031 ========================================================= Supplemental disclosure of cash flow information Cash paid during the year for interest $ 72,862 $ 1~~,802,239~~.5% $48.5% ~~4,080,311~~50.0% ~~=========================================================~~F. ~~Supplemental~~Loss ~~disclosure~~on ofdisposition ~~non-cash investing and financing activities: Deferred rent receivable charged to cost~~ of ~~sales~~property $100.0% -- ~~$ 1,993,760 $~~ -- ~~Deferred leasing commissions charged to cost of sales 2,350,881 1,703,931 --~~

S-13 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 7. Allocations of Partnership Income (continued) Upon the death of Mr. Helmsley on January 4, 1997, and the conversion of his General Partner interest into a Special Limited Partner interest, the elements of income for financial reporting purposes are generally credited (but not distributed in cash) to the capital accounts of the partners as follows:

~~December~~Special ~~31,~~General ~~2000~~Limited ~~1999~~Limited ~~1998~~ ------- ------- -------~~------------------------------~~ A. Net income ~~per~~before ~~statements~~items ~~of income $153~~C,~~829,678~~ ~~$150~~D,~~779,832~~ ~~$112,747,733~~E ~~Depreciation~~ and ~~amortization~~F ~~153,124~~below ~~762,866~~.55% ~~929~~49.45% 50.0% B. Net losses,~~903~~ ~~Gain~~before onitems ~~sale~~below 36.67% 63.33% -- C. Depreciation and amortization of ~~property~~real ~~(7,414,167)~~estate: ~~42,439~~1.Equal to mortgage amortization (~~1,233,105~~as defined) ~~Loss~~.55% on49.45% ~~sale~~50.0% of2.Balance ~~property~~1.1% 98.9% -- D. Bond discount amortization -- -- ~~Loss~~100.0% E. Gain on ~~abandonment~~disposition of property: --1.To --the --extent ~~Deferred~~of ~~rental~~the ~~income~~aggregate --depreciation ~~(1,082,359)~~and ~~(1,045,707)~~amortization ~~Other,~~of ~~net~~such ~~(34,148)~~property ~~(127,477)~~included in C(~~379,709~~2) above 1.1% 98.9% --~~-------------------------------------------------~~ ~~Income~~2.Balance ~~for~~.55% ~~federal~~49.45% ~~tax~~50.0% ~~purposes~~F. ~~$146,534,487~~Loss ~~$150,375,301~~on ~~$111,019,115~~disposition ~~===================================================~~of property 36.67% 63.33% --

8. Cash Distributions Net Operating Revenues, as defined, are distributable at the discretion of the General Partners, as follows: Through From January 3, 1997 January 4, 1997 --------------- --------------- General Partners 1.5% .55% Special Limited Partners 48.5% 49.45% Limited Partner 50.0% 50.00% Notwithstanding the foregoing, if with respect to any calendar year the Limited Partner's distributive share (computed on the same basis as that used in preparing IPA's Federal income tax return) of income (loss) plus one-half of such partner's distributive share of long-term capital gains exceeds the cash distributions referred to above, IPA must distribute an additional amount equal to such excess to the Holders of the Participation Interests. S-14 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 8. Cash Distributions (continued) In 2001, 2000 and 1999, Net Operating Revenues, as defined in the Limited Partnership Agreement, amounted to $280,965, $3,908,231 and $12,606,987, respectively. At December 31, 2001, 2000 and 1999, accrued distributions amounted to $698,179, $3,915,446 and $77,979,781, respectively. The accrued distribution at December 31, 2001 consists of $280,965 in respect of 2001 Net Operating Revenues and $410,000 in respect of the special distribution (which was declared on December 21, 2001). 9. Income Taxes IPA has obtained a ruling from the Internal Revenue Service that IPA will be classified as a partnership for Federal income tax purposes, and has received an opinion of tax counsel that IPA, as a partnership, will not be subject to any Federal income taxes, and that each holder of Participation Interests will be treated for Federal income tax purposes as if he were a limited partner of IPA to the extent of his proportionate interest in the Limited Partnership Interest. Each partner of IPA and each holder of Participation Interests at any time during the taxable year of IPA must take into account his distributive share of all items of IPA's income, gain, loss, deduction or credit, without regard to whether such partner or holder of Participation Interests has received or will receive any distributions from IPA. Accordingly, no provision for income taxes has been made in the accompanying statements of income. The amount of income (loss) for federal tax purposes for the years ended December 31, 2001, 2000, and 1999, was $(452,532), $146,534,487, and $150,375,301, respectively, as compared with the net income of $376,061, $153,829,678, and $150,779,832, respectively, shown in the statements of income. A reconciliation of the differences between income as reflected in the accompanying statements of income and the amount of income for federal tax purposes is as follows: S-15 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 9. Income Taxes (continued)

~~2000~~December ~~--------------------------------------------------------- Three Months Ended March~~ 31, ~~June~~2001 302000 ~~September~~1999 ~~30 December 31~~ --------- ------------- -------------~~----------------------~~ ~~Gross~~Net ~~revenue~~income ~~(expenses)~~per ~~from~~statements ~~real~~of ~~estate~~income $ 4376,~~057,422~~061 $ 1153,~~797~~829,~~052~~678 $ ~~(128~~150,~~103) $ 242~~779,~~727~~832 ~~Net~~Depreciation ~~income~~and ~~(loss)~~amortization ~~39,557,263 115,100,658~~ (~~969~~229,~~346~~480) ~~141~~153,~~103~~124 ~~Net~~762,866 ~~income~~Gain ~~(loss)~~on ~~credited~~sale toof ~~the~~property ~~partners~~-- ~~capital accounts~~ (~~a): General Partners 233~~7,~~163 874~~414,~~499~~167) (542,~~331)~~439 ~~776~~Loss ~~Special~~on ~~Limited~~sale ~~Partners~~of ~~20,963,468~~property ~~78,625,414~~ (~~479~~599,~~342~~113) ~~69,775~~-- ~~Limited~~-- ~~Partner~~Deferred ~~18,360,632~~rental ~~35,600,745~~income ~~(484,673) 70,552~~ -- --~~-----------------------------------------------------~~ ~~$39,557,263 $115,100,658 $~~ (~~969~~1,~~346~~082,359) ~~$ 141~~Other,~~103~~ ~~=========================================================~~net ~~Net~~-- ~~income~~ (~~loss~~34,148) ~~per Limited Partner Participation Interest 22.3910 43.4155~~ (~~0.5911~~127,477) ~~0.0860 ========================================================= 1999~~ --------- -------------~~-----------------------------------~~ ~~Three Months Ended March 31 June 30 September 30 December 31~~ -------------~~--------------------------------------------~~ ~~Gross~~Income ~~revenue from real estate $ 7,894,118 $ 7,849,392 $8,319,977 $ 7,577,347 Net income 3,415,467 9,037,349 4,237,424 134,089,592 Net income credited to the partners capital accounts~~ (aloss): ~~General~~for ~~Partners~~federal ~~51,232~~tax ~~135,560~~purposes ~~23,306 655,782 Special Limited Partners 1,656,501 4,383,115 2,095,406 69,715,433 Limited Partner 1,707,734 4,518,674 2,118,712 63,718,377 ---------------------------------------------------------~~ ($ 3452,~~415,467~~532) $ 9146,~~037~~534,~~349~~487 $~~4,237,424~~ ~~$134~~150,~~089~~375,~~592~~301 ========= =============~~===================================~~ ~~Net income per Limited Partner Participation Interest 2.0826 5.5106 2.5838 77.7053~~ =============~~============================================~~

10. Gross Revenue From Real Estate IPA earns rental income under leases principally with commercial tenants located in its office buildings. Such leases generally provide for the tenant to pay minimum rentals plus, in certain instances, a portion of increases in real estate taxes, operating expenses and/or increases in the consumer price index based on lease escalation clauses. Office leases generally range from 5 years to 15 years and contain various renewal options. In addition, IPA earns rental income from retail stores. Such leases generally provide for minimum rentals plus percentage rentals based on the store sales. Retail store leases generally range from 1 to 5 years and contain various renewal options. All of the aforementioned leases are accounted for as operating leases. Included in Gross Revenues from Real Estate for the years ended 2001, 2000 and 1999, are $0, $1,839, and $536,325, respectively, representing revenue from escalations and percentage rentals. For the years ended 2001, 2000 and 1999, approximately $0, $259,290, and $17,000, respectively, was received in connection with lease cancellations with former tenants. Since disposing of its remaining income producing properties during the year ended December 31, 2000, IPA has no minimum future rentals due on noncancelable operating leases as its remaining properties included vacant land located in Houston, Texas, which was sold during 2001, and a vacant office property at 570 Broad Street, Newark, New Jersey (see note 3). S-16 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 11. Recently Issued Accounting Pronouncement In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (FAS 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a segment of a business. FAS 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. The Company expects to adopt FAS 144 as of January 1, 2002 and it does not expect that the adoption of the Statement will have a significant impact on the Company's financial position and results of operations. 12. Contingencies IPA is involved in various legal matters and disputes arising in the normal course of operations, the ultimate outcome of which is not expected to have a material effect on the financial statements. S-17 Investment Properties Associates (A New York Limited Partnership) Notes to Financial Statements (continued) 13. Summary of Quarterly Financial Information (Unaudited) The separate results of operations of IPA for the years ended December 31, 2001 and 2000 are as follows:

~~Col.~~2001 ~~A Col. B Col. C Col. D~~ -------------------------------------------------------------------~~-----------------------~~ ~~Initial~~Three ~~Cost~~Months ofEnded ~~Company~~ ------------------------- ~~Improvements Capitalized Buildings and Subsequent to Description Encumbrances Land Improvements Acquisition~~ ------------------------------------------ March 31 June 30 September 30 December 31 ---------- --------- ------------ -----------~~------~~ ~~Edgewood~~Gross ~~and~~revenue ~~Bellway~~from ~~Shopping~~real ~~Centers~~estate $ 3,232 ~~Houston~~$ 8,020 ~~Texas~~$ --51,536 ~~447~~$ 81,~~893~~099 --Net --income ~~570~~(loss) ~~Broad~~415,103 ~~Street~~(123,590) ~~Building~~451,852 ~~Newark~~(367,304) ~~New~~Net ~~Jersey~~income --(loss) ~~502~~credited to the partners' capital accounts: General Partners 2,~~032~~283 5(680) 2,~~937,404~~485 (1,~~593~~497) Special Limited Partners 205,~~911~~268 (61,115) 223,441 (134,607) Limited Partner 207,552 (61,795) 225,926 (231,200) --------- --------- --------- ---------~~------------------------------------------------------~~ ~~Totals~~ $ --415,103 $~~949~~(123,~~925~~590) $5 451,~~937,404~~852 $1(367,~~593,911~~304) ========= ========= ========= ========= Net income (loss) per Limited Partner Participation Interest $ 0.2531 $ (0.0753) $ 0.2755 $ (0.2819) ========= ========= ========= =========~~==================~~

~~Col.~~2000 ~~E Col. F Col. G Col. H~~ -----------------------------------------------------------------------~~-------------------~~ ~~Gross~~Three ~~Amount~~Months atEnded ~~Which Carried Close of Period Life on which~~ ---------------------------------- ~~Depreciation in Latest Income Buildings Accumulated Date of Statements is Land and Improvements Total Depreciation Construction Computed~~ ------------------------------------- March 31 June 30 September 30 December 31 ------------- ------------- ------------- -----------~~---~~ --Gross --revenue --from --real ~~1957~~estate ~~24.3~~$ ~~502~~4,~~032~~057,422 7$ 1,~~531~~797,~~315~~052 8$ (128,~~033~~103) $ 242,~~347~~727 Net income (loss) 39,557,263 115,100,658 (969,346) 141,103 Net income (loss) credited to the partners' capital accounts: General Partners 233,163 874,499 (5,~~880~~331) 776 Special Limited Partners 20,~~040~~963,468 ~~1962~~78,625,414 ~~34.3~~(479,342) 69,775 Limited Partner 18,360,632 35,600,745 (484,673) 70,552 ------------- ------------- ------------- ---------~~------------------------------------------~~ $~~502~~ 39,~~032~~557,263 $7 115,~~531~~100,~~315~~658 $8 (969,~~033,347~~346) $5 141,~~880,040~~103 ============= ============= ============= ========= Net income (loss) per Limited Partner Participation Interest $ 22.3910 $ 43.4155 $ (0.5911) $ 0.0860 ============= ============= ============= =========

S-18 Investment Properties Associates (A New York Limited Partnership) Schedule III - Real Estate and Accumulated Depreciation December 31, 2001

~~Year~~Col. ~~ended~~A ~~December~~Col. ~~31,~~B Col. C Col. D Col. E ------ ------ ------ ------ ------ Gross Amount Initial Cost of Company at Which Carried Close of Period ----------------------- Improvements -------------------------------- ~~2000~~Capitalized ~~1999~~Buildings ~~1998~~Buildings and Subsequent to and Description Encumbrances Land Improvements Acquisition Land Improvements Total ----------- ------------ ---- ------------ ------------- ---- ~~Investment~~------------ in----- ~~Real~~570 ~~Estate~~Broad ~~Balance~~Street atBuilding ~~beginning~~Newark, ofNew ~~year~~Jersey $ ~~40,649,960~~-- $ 68502,~~589,793~~032 $~~136~~5,~~524~~937,~~047~~404 ~~Sale of real estate (33~~$1,~~212~~593,~~608)~~911 ~~(29~~$502,~~311,368)~~032 ~~(67~~$7,~~998~~531,~~324)~~315 ~~Abandonment of real estate Improvements and additions 595~~$8,~~995 1~~033,~~371,535~~347 ~~2,201,413 Fully depreciated assets written off during the year~~ -- ------ ~~(2,137,343)~~ -------- ---------- ---------- -------- ---------- ---------- ~~Balance~~Totals at$ ~~end~~-- of$502,032 ~~year~~ $5,937,404 8$1,~~033~~593,~~347~~911 $502,032 40$7,~~649~~531,~~960~~315 $ 688,~~589~~033,~~793~~347 ======== ======== ========== ========== ======== ========== ~~Accumulated~~========== ~~Depreciation~~Col. ~~Balance~~F atCol. ~~beginning~~G ofCol. ~~year~~H $------ ~~26,391,697~~------ $------ ~~44,261,629~~Life $on ~~95,613,778~~which Depreciation ~~charged~~in toLatest ~~costs~~Income ~~and~~Accumulated ~~expens~~Date ~~598,174 1,974,245 2,781,850 Less amounts applicable to sale~~ of ~~real~~Statements ~~estate~~is ~~(21,109,831)~~Depreciation ~~(19,844,177)~~Construction ~~(51,996,656)~~Computed ~~Less amounts applicable to fully depreciated assets written off during the year -- --~~ (~~2,137,343~~1) ------------ ------------ ------------ 570 Broad Street Building Newark, New Jersey $5,880,040 1962 34.3 ---------- ---- ---- ~~Balance~~Totals ~~at end of year~~ $ 5,880,040 ~~$ 26,391,697 $ 44,261,629~~ ==========~~============================================~~ (1) At December 31, 2001, the property is classified as held for sale. Accordingly depreciation has not been recorded in 2001.

S-19 Investment Properties Associates (A New York Limited Partnership) Schedule III - Real Estate and Accumulated Depreciation December 31, 2001 Reconciliation of Real Estate and Accumulated Depreciation:

The aggregate basis of real estate assets for Federal income tax purposes amounted to $7,298,926 (2001), $7,898,039 (2000), and $44,822,622 (1999). S-20

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