<PAGE>
       
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                         Securities Exchange Act of 1934

                                                              Commission File
For the year ended December 31, 1998                          Number  0-13500
                   -----------------                                  -------

                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP
                  --------------------------------------------
             (exact name of Registrant as specified in its charter)

     Massachusetts                                     04-2808184
---------------------------                           --------------
  (State of organization)                    (IRS Employer Identification No.)

5 Cambridge Center, Cambridge, Massachusetts                        02142
---------------------------------------------                    ----------
   (Address of principal executive offices)                      (Zip Code)

Registrant's telephone number including area code: (617) 234-3000
                                                   --------------

Securities registered pursuant to Section 12(b) of the Act: None
                                                            ----
Securities registered pursuant to Section 12(g) of the Act:

                      Units of Limited Partnership Interest
                      -------------------------------------
                                (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 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. [ ]

No market exists for the limited partnership interests of the registrant, and,
therefore, no aggregate market value can be computed.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                    - None -

                                           Exhibit Index is located on Page 44


<PAGE>


                                     PART I
                                     ------

Item 1.  Business.

Organization

         1626 New York Associates Limited Partnership (the "Partnership") was
organized as a Massachusetts limited partnership under the Massachusetts Uniform
Limited Partnership Act on December 6, 1983, for the purpose of owning a general
partnership interest in, and serving as a general partner of, Nineteen New York
Properties Limited Partnership (the "Operating Partnership"), a Massachusetts
limited partnership. The Operating Partnership was organized on December 6, 1983
for the purpose of acquiring a diversified portfolio of nineteen commercial
properties (the "Properties") located in New York City, from the John D. and
Catherine T. MacArthur Foundation.

         The general partners of the Partnership (collectively, the "General
Partners") are Two Winthrop Properties, Inc., a Massachusetts corporation ("Two
Winthrop"), Winthrop Interim Partners I, A Limited Partnership, a Maryland
limited partnership ("WIPI") and Linnaeus-Lexington Associates Limited
Partnership, a Massachusetts limited partnership ("Linnaeus-Lexington"). Two
Winthrop is a wholly-owned subsidiary of First Winthrop Corporation ("First
Winthrop"), a Delaware corporation which in turn is controlled by Winthrop
Financial Associates, A Limited Partnership ("WFA"). The general partners of
WIPI are Two Winthrop and Linnaeus-Phoenix Associates Limited Partnership, a
Massachusetts limited partnership ("Linnaeus-Phoenix").

         The Partnership was initially capitalized with contributions totaling
$2,500,019 from the General Partners. On October 13, 1984, the Partnership
completed a private placement of 1,344 units of limited partnership interest
(the "Units") at an aggregate purchase price of $336,000,000 pursuant to
Regulation D under the Securities Act of 1933.

Description of Business

         The business of the Partnership is investing as a general partner in
the Operating Partnership. The other general partner of the Operating
Partnership is First Winthrop. The limited partners of the Operating Partnership
are WFA and WFC Realty Co., Inc. ("WFC"), a Massachusetts corporation which is a
wholly-owned subsidiary of First Winthrop.

The Properties

         In January 1984, the Operating Partnership acquired the Properties
consisting of: (1) seventeen commercial office buildings and the land underlying
such buildings located at 757 Third Avenue (the land was acquired in May 1984),
410 Park Avenue, 535 Fifth Avenue, 545 Fifth Avenue, 61 Broadway, 1372 Broadway,
366 Madison Avenue, 1697 Broadway, 509 Fifth Avenue, 300 Park Avenue South, 227
East 45th Street, 134 West 29th Street, 218-220 Fifth Avenue, 31-33-39 West 34th
Street, 271 Church Street, 136-20 Roosevelt Avenue and 345 


                                       2
<PAGE>


Adams Street; (2) the 15 Columbus Circle building and a leasehold interest in
the ground underlying such building; and (3) the ground underlying another
office building located at 450 Park Avenue.

         The Operating Partnership financed the acquisition of the Properties
primarily through (a) the $336,000,000 raised from Limited Partners of the
Partnership, (b) the assumption of existing mortgage loans, and (c) the
placement of the $330,000,000 loan from General Electric Pension Trust ("GEPT"),
which has been refinanced.

         As of December 31, 1998, the Operating Partnership owned an interest in
only one of the original Properties, 757 Third Avenue (the "Remaining
Property"). It is expected that unless the New York City office building market
significantly appreciates, the Remaining Property will eventually be lost
through foreclosure.  See "Property Matters-Sales/Dispositions" below.

Property Matters

         A.    Sales/Dispositions

               535 Fifth Avenue, 545 Fifth Avenue, 509 Fifth Avenue and 300
Park Avenue South - In order to settle the default on the mortgage debt
encumbering the properties located at 535 Fifth Avenue, 545 Fifth Avenue and 757
Third Avenue, New York, New York, 535 Fifth Avenue LLC, 545 Fifth Avenue LLC,
757 Third Avenue LLC, 509 Fifth Avenue LLC and 300 Park Avenue South LLC,
entities in which the Registrant indirectly held a 99% economic interest,
entered into a settlement agreement dated October 22, 1998 with Westhill
Equities LLC, Zeus Property LLC ("Zeus") and Isaac Asset LLC (collectively, the
"Lender") pursuant to which (1) the properties at 535 Fifth Avenue and 545 Fifth
Avenue were conveyed to a designee of Lender in satisfaction of the mortgage
debt encumbering these properties, (2) the mortgage debt encumbering the
Remaining Property was modified to extend its maturity to February, 1998 (which
subsequently was further extended to October 22, 1998) and as otherwise
described below, (3) with the consent of Solomon Brothers Realty Corp. ("SBRC"),
the lender holding the mortgage debt on the properties at 509 Fifth Avenue and
300 Park Avenue South, New York, New York, and Lender with respect to its rights
as pledgee of all the membership interests in 509 Fifth Avenue LLC and 300 Park
Avenue South LLC (the "Pledged Collateral") securing that $10,000,000 promissory
note ("19 NY Note") dated February 28, 1996, by the Operating Partnership, the
properties at 509 Fifth Avenue and 300 Park Avenue South were conveyed to a
designee of Lender, subject to existing mortgage debt held by SBRC, and (4) the
holder of the 19 NY Note released its lien on the Pledged Collateral and such
holder accepted as substitute collateral to secure the 19 NY Note the managing
member's interest in 757 Third Avenue LLC (the "Remaining Company"). As a result
of the foregoing, the sole remaining asset of the Operating Partnership is its
ownership interest in the Remaining Company.

         1372 Broadway - On January 13, 1998, this property was sold to an
unaffiliated third party for $52,000,000. Prior to the sale, the purchaser
acquired the portion of the Modified Loan (as defined below) allocated to 1372
Broadway thereby removing it from the cross-


                                       3
<PAGE>


collateralization provision of the Modified Loan. The unsatisfied portion of the
loan originally allocated to 1372 Broadway was reallocated among the other
properties.

         227 East 45th Street - During 1995, the Partnership concluded that the
debt securing the property was substantially greater than the value of the
property. As a result, on January 15, 1996 the Partnership and Sanwa Business
Credit Corporation ("Sanwa"), the lender holding the mortgage on the property,
agreed that in exchange for the delivery by the Partnership of a deed in lieu of
foreclosure to a designee of Sanwa, Sanwa would release the Partnership from any
liabilities or obligations associated with the mortgage loan on 227 East 45th
Street and would release its second mortgage on the 509 Fifth Avenue property
for no additional consideration. The Operating Partnership transferred title to
the property to Sanwa on January 24, 1996. As required by the terms of the
January 15 agreement, Sanwa released the Operating Partnership, as of the
closing date, from all claims, demands, liabilities, obligations, actions and
causes of any kind with regard to the Sanwa loan, other than the second mortgage
on 509 Fifth Avenue, which second mortgage was subsequently released. See "Item
8, Consolidated Financial Statements and Supplementary Data, Note-3."

         B.       Loan Restructuring.

          757 Third Avenue - In connection with the transfer of 535 Fifth Avenue
and 545 Fifth Avenue to the Lender's designee, the debt securing the Remaining
Property was restructured into two non-recourse loans. The first component in
the amount of $27,193,000, bears interest at 295 basis points over 30-day LIBOR
and matures on April 1, 1999. The second component in the amount of $48,257,000,
bears interest at 9% and matures on February 28, 2016. A mandatory prepayment of
$7,500,000 against the second component is due on April 1, 1999.

Deferred Purchase Price

          In connection with the acquisition of the Properties, the Operating
Partnership agreed to make deferred payments to the seller in future years equal
to 6% of the gross proceeds of certain refinancings, sales or transfers of any
of the Properties or equal to the fair market value of any Properties not
disposed of by January 18, 2006. At the time of the acquisition of the
Properties, the Operating Partnership estimated this liability at $25,296,177
based on the cash portion of the purchase price paid at that time. The
Partnership has made payments totaling $22,914,703 (including a $209,000 payment
made in January 1998 in connection with the sale of 1372 Broadway) to the seller
as a Deferred Purchase Price. The total liability has been reduced to zero as of
December 31, 1998 due to the sales and transfers of various properties and the
estimated fair market value of the remaining property.

Winthrop Funding

         In 1985, the Partnership obtained a 99.99% interest in Winthrop Funding
for $99.99 and also contributed to Winthrop Funding the final installment of the
Investor Notes in the aggregate amount of $42,998,592. Winthrop Funding issued
zero coupon bonds in the face amount of 


                                       4
<PAGE>


$40,850,000 at a discount of $21,367,818 with the final installment of the
Investor Notes pledged as collateral. As of March 1992, Winthrop Funding
collected the entire amount of the last installment of the Investor Notes except
for $68,542 which remains outstanding as of December 31, 1998. As of May 1992,
Winthrop Funding paid the entire face amount of the zero coupon bonds to the
bondholders.

Employees

         As of December 31, 1998, the Partnership did not have any employees.
Services are generally performed for the Partnership by the General Partners and
their affiliates and agents retained by them. Other services are performed for
the Operating Partnership by affiliates and agents retained by the Operating
Partnership.

Property Management

         From 1985 until March 1996, Winthrop Management (a Massachusetts
general partnership and an affiliate of WFA) or its affiliates performed the day
to day management services for the Properties, including preparation of
operating budgets, collection of rents, repairs and maintenance, advertising,
maintenance of records, maintenance of insurance and financial reporting. See
Item 13, "Certain Relationships and Related Transactions."

         On March 1, 1996, the Operating Partnership's properties began being
managed by Axiom Real Estate Management, Inc. (an affiliate of Grubb & Ellis
Company) and leasing activity began being performed by the Galbreath Company,
Newmark & Co. and Koll Company. These firms are neither affiliated with WFA nor
any of its affiliates. The terms of these contracts are at market rates. The
Operating Partnership is not permitted to change the management agent or leasing
agents unless these parties are in default of their obligations under their
respective agreements and the Operating Partnership shall have submitted to Zeus
an acceptable replacement candidate. One effect of this is to terminate the
payment of all management or leasing fees to the General Partners and their
affiliates by the Operating Partnership, the Partnership or the properties. The
Partnership will receive from the Properties up to $240,000 as reimbursement for
Partnership expenses.

         Effective April 1, 1998, property management services began being
performed by New Rock Realty Management Company, LLC ("New Rock"), an affiliate
of Zeus. New Rock is providing these services on the same terms as these
services were then being provided.

Insurance

         The Partnership maintains property and liability insurance on the
Properties which it believes to be adequate.


                                       5


<PAGE>


Item 2.  Properties.

         The Partnership does not own any interest in real property other than
its general partnership interest in the Operating Partnership. The Operating
Partnership does not own any interests in real property other than its interest
in the Remaining Company, which, in turn, owns the Remaining Property.

         The Remaining Property, which is located at 757 Third Avenue, New York,
New York, consists of a 27-story office building containing approximately
468,327 rentable square feet of space and approximately 24,567 square feet of
land. The property is located at the northeast corner of Third Avenue and East
Forty-Seventh Street in midtown Manhattan and is used principally by
telecommunications, law, financial and retail firms. Planned capital
improvements at the property include $2,300,000 of tenant improvements.

          KPMG Peat Marwick, a big-five accounting firm, currently leases
approximately 144,713 square feet (30.9% of total space). The lease with KPMG
Peat Marwick is scheduled to expire May 2012.

         The following table sets forth the occupancy rates for the last five
years and the associated gross rental per square foot amount, as footnoted.

                                                  Average Annual Total
                           Percentage             Gross Rental Per SF 
           Year         Occupancy Rate(1)         of Occupied Space(2)
           ----         -----------------         ---------------------

           1994                95%                        $42.93
           1995                98%                        $38,34
           1996                87%                        $34.66
           1997                93%                        $37.94
           1998                90%                        $36.04

 (1)     Occupancy rates are based on December 31 of indicated year and are not
         yearly averages.
 (2)     Calculated using operating revenues, including rent escalations and
         other revenues, for the entire year divided by the total square footage
         of occupied space (based on the occupancy rates reported in this
         table).


                                       6


<PAGE>


         The following table sets forth certain information concerning lease
expirations (assuming no renewals for this property for the period from January
1, 1999 through December 31, 2008).

<TABLE>
<CAPTION>

                     Number of Tenants     Aggregate SF Covered by   Annualized Rental for     Percentage of Total
                     Whose Leases Expire   Expiring Leases           Leases Expiring           Annualized Rental(1)
                     -------------------   ---------------           ---------------           ---------------------
<S>                  <C>                    <C>                      <C>                       <C>

       1999                   6                    34,980                 1,044,181                     8%
       2000                   6                    18,228                   551,400                     4%
       2001                   7                    10,957                   194,014                     1%
       2002                  10                    59,176                 2,085,071                    16%
       2003                  13                    31,974                 1,354,700                    10%
       2004                   1                     6,235                   218,225                     2%
       2005                   5                    17,342                   574,344                     4%
       2006                   0                         0                         0                     0%
       2007                   5                    58,458                 1,954,758                    15%
       2008                   0                         0                         0                     0%


</TABLE>


(1)  Based on actual base rent plus increase from various escalation provisions
 as of December 31, 1998.


Item 3.  Legal Proceedings.

         To the best of the General Partners' knowledge, as of December 31,
1998, there are no material pending legal proceedings to which the Partnership
or the Operating Partnership is a party or to which any of their properties are
subject.


Item 4.  Submission of Matters to a Vote of Security Holders.

         No matter was submitted to a vote of security holders during the period
covered by this report.


                                       7

<PAGE>


                                     PART II

Item 5.  Market for Registrant's Common Equity and 
         Related Stockholder Matters.

         There is no public trading market for the Units of limited partnership
interest in the Partnership. Trading is infrequent and occurs only through
private transactions. Furthermore, transfers of Units are subject to significant
limitations contained in the Partnership's partnership agreement including a
requirement that the General Partners consent to the transfer, which consent may
be granted or withheld in the sole discretion of the General Partners. A copy of
the Partnership's partnership agreement (the "Partnership Agreement") was filed
as Exhibit 3 to the Registration Statement.

         As of March 1, 1999, there were 1,179 holders of 1,339 Units.

         The Partnership Agreement provides that Cash Flow (as defined therein)
will be distributed to the partners in specified proportions at reasonable
intervals during the fiscal year, but in any event no less often than 90 days
after the close of each fiscal year. There are no restrictions under the
Partnership Agreement on the Partnership's present or future ability to make
distributions of cash flow. The Partnership, at the sole discretion of the
General Partners, may retain all or any portion of the Partnership's net
distributable cash flow to the extent deemed necessary to cover anticipated
expenses and to provide reserves for unexpected future property and Partnership
financial needs. Cash flow distributed to partners will be net of any such
amounts so retained. The Partnership did not make any cash distributions in
1998, 1997 or 1996. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for information with respect to
the Partnership's ability to make distributions in the future.


                                       8
<PAGE>


Item 6.  Selected Financial Data.

         The following represents selected financial data for Registrant for the
years ended December 31, 1998, 1997, 1996, 1995 and 1994. The data should be
read in conjunction with the financial statements included elsewhere herein.
This data is not covered by the independent auditors' report.


                         For the Year Ended December 31,
<TABLE>
<CAPTION>

                                                 1998            1997            1996            1995            1994
                                                 ----            ----            ----            ----            ----
                                                                 (in thousands except per unit data)
<S>                                               <C>          <C>             <C>            <C>             <C>
Total Revenues                                   $  31,856     $  43,302       $ 43,864       $  47,957       $  49,084
Total Expenses                                      47,523        64,970         62,992          87,165          62,715
Loss Before Gain (Loss) on Sales                   (15,667)      (21,668)       (19,128)        (39,208)        (13,631)
Gain (Loss) on Sale of Properties/Interest          17,046            --             --              --              --
in Joint Venture
Income (Loss) Before Extraordinary Gain              1,379       (21,668)       (19,128)        (39,208)        (13,631)
Extraordinary Gain                                  36,156            --         14,419              --              --
Net Income (Loss)                                $  37,535     $ (21,668)      $ (4,709)      $ (39,208)      $ (13,631)
                                                 =========     =========        ========       =========       ========= 

Net (Loss) Income per Unit
  Of Limited Partnership
  Outstanding                                    $  28,490     $ (15,537)      $ (5,740)      $ (27,747)     $   (9,997)
Total Assets                                        65,033       171,508        163,647         178,713         214,670
Total Liabilities(1)                               172,948       316,958        287,429         334,948         331,697
Investment in Joint
  Ventures Total Deficit(2)                      $(107,915)    $(145,450)     ($123,782)      $(156,235)      $(117,027)
</TABLE>

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

(1)      Total Liabilities includes long-term debt net of unamortized discount
         of $251,641,000, $250,681,000, $224,342,000, $228,403,000 and
         $75,450,000 for the years 1994, 1995, 1996, 1997 and 1998 respectively.

(2)      Does not include receivables represented by Investor Note installments
         totaling $68,542 at December 31, 1994, 1995, 1996, 1997 and 1998. Such
         installments are credited to capital upon actual receipt.


                                       9


<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

         This Item should be read in conjunction with the Consolidated Financial
Statements and other Items contained elsewhere in this Report.

         The matters discussed in this Form 10-K contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-K and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's liquidity, capital resources and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Registrant's operations.
Accordingly, actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.

Liquidity and Capital Resources

         The Registrant serves as the general partner of Nineteen New York
Properties Limited Partnership (the "Partnership"). As of March 1, 1999, the
Partnership's remaining property is an office building located in New York City
(see below). The Registrant's sole source of revenue is from distributions from
the Partnership and interest income on cash reserves. The Registrant is
responsible for its operating expenses. The Partnership receives rental revenue
from tenants and is responsible for operating expenses, administrative expenses,
capital improvements and debt service payments.

         As of December 31, 1998, the Partnership has maturing debt, totaling
approximately $64,544,000, due on April 1, 1999. It is highly unlikely that the
Partnership will be able to meet its remaining obligation. Accordingly, it
appears there is a substantial likelihood that the remaining Property, if not
sold, will be lost through foreclosure in 1999. In the event that the Property
is sold, all proceeds would be used to satisfy any related outstanding
indebtedness. This raises substantial doubt about the Registrant's ability to
continue as a going concern.

         The Partnership had maturing mortgage debt, totaling approximately
$81,816,000 due in 1998. On October 22, 1998, in order to settle the default on
the mortgage debt encumbering the properties located at 535 Fifth Avenue, 545
Fifth Avenue and 757 Third Avenue, the Partnership entered into a settlement
agreement with Zeus Property LLC ("Zeus") pursuant to which the Partnership's
535 Fifth Avenue and 545 Fifth Avenue properties were conveyed to the lender in
satisfaction of the mortgage debt encumbering these properties. Simultaneously,
the Partnership conveyed title (subject to the existing mortgages) in their 509
Fifth Avenue and 300 Park Avenue South properties to Zeus. For financial
statement purposes, the property dispositions resulted in an extraordinary gain
of $36,156,000 in 1998.

         In addition, the debt securing the Partnership's remaining property,
757 Third Avenue, was restructured into two non-recourse loans. The first
component in the amount of $27,193,000, bears interest at 295 basis points over
30-day LIBOR (8.07% at December 31, 


                                       10
<PAGE>


1998), and was scheduled to mature on February 1, 1999, but was extended to
April 1, 1999. The second component in the amount of $48,257,000, bears interest
at 9% and matures on February 28, 2016. A mandatory prepayment of $7,500,000
against the second component was due on February 1, 1999, but was extended to
April 1, 1999.

         In connection with the above transactions, the $10,000,000 Receivables
Note has been modified. The Receivables Note, which was payable from the excess
cash flow from 509 Fifth Avenue and 300 Park Avenue South, is now secured by a
pledge of the Partnership's interest in their 757 Third Avenue property.

         As a result of the foregoing dispositions and the anticipated
disposition of the Registrant's remaining property in 1999, for tax purposes,
Registrant's partners will be allocated substantial gains in 1998 and 1999 due
to recapture of tax benefits received in prior years.

         The Registrant's original objective of capital appreciation will not be
achieved and it is anticipated that the Registrant's partners will not receive
any future distributions. Accordingly, the Registrant's partners will not
receive a return of their original investment.

         The Registrant and the Partnership had $291,000 of cash and cash
equivalents and $2,410,000 of restricted cash at December 31, 1998, as compared
to $221,000 and $3,354,000, respectively, at December 31, 1997. Restricted cash
primarily includes amounts held in mortgage collateral accounts. The $70,000
increase in cash and cash equivalents at December 31, 1998, as compared to
December 31, 1997, was due to $37,856,000 of cash provided by investing
activities, which was offset by $27,965,000 of cash used in financing activities
and $9,821,000 of cash used in operating activities. Cash provided by investing
activities included $50,389,000 of net proceeds received from the sale of the
Registrant's 1372 Broadway property, which was partially offset by $10,349,000
of improvements to real estate, the majority of which were tenant improvements,
and $2,184,000 of cash expended on leasing activities. Cash used in financing
activities included $37,867,000 of cash used for the partial principal repayment
and $5,252,000 of cash used for the partial repayment of accrued interest on the
allocated portion of the loan encumbering the Registrant's 1372 Broadway
property. Cash used in financing activities also included a $7,270,000 principal
payment on mortgage notes payable to affiliates, which was offset by an
$11,002,000 increase in accrued interest and a $10,375,000 increase in notes
payable and accrued interest to general partners and affiliates. In addition,
Registrant's restricted cash decreased by $1,655,000. All other increases
(decreases) in certain assets and liabilities are the result of the timing of
receipt and payment of various activities.

         The Partnership's unsecured credit line provided by Zeus had an
outstanding balance of $19,851,000 at December 31, 1998. This credit line has
been used by the Partnership to fund capital improvements and tenant lease-up
costs at the Fuji Properties. Borrowings under this credit line are subject to
Zeus' discretion. It is anticipated that Zeus will continue to fund capital
improvements and tenant lease-up costs at the remaining property.

         On January 13, 1998, the Partnership sold its 1372 Broadway property to
an unaffiliated third party for $52,000,000. All of the proceeds were used to
partially satisfy the $94,000,000 allocated portion of the Modified Loan
(including accrued and unpaid interest), with the unsatisfied portion of the
Modified Loan being reallocated among the remaining Fuji Properties.


                                       11
<PAGE>


For financial reporting purposes, the sale resulted in a gain of approximately
$17,046,000. For tax reporting purposes, the Registrant's partners will be
allocated a substantial gain in 1998 due to recapture of tax benefits received
in prior years.

         Real Estate Market

         The income and expenses of operating the Properties owned by the
Partnership are subject to factors outside its control, such as the over-supply
of similar properties, increases in unemployment, population shifts, or changes
in patterns or needs of users. Expenses, such as local real estate taxes and
miscellaneous expenses, are subject to change and cannot always be reflected in
rental rate increases due to market conditions. In addition, there are risks
inherent in owning and operating office buildings because such properties are
labor intensive and are susceptible to the impact of economic and other
conditions outside the control of the Registrant.

Results of Operations

         a.       1998 Compared to 1997

         The Partnership generated net income of approximately $37.5 million for
the year ended December 31, 1998, as compared to a net loss of approximately
$21.7 million for the year ended December 31, 1997. Net income for the year
ended December 31, 1998 increased primarily due to the $17.0 million gain on
sale of the Partnership's 1372 Broadway property and the extraordinary gain of
$36.1 million on the transfer of the Partnership's 535 Fifth Avenue, 545 Fifth
Avenue, 509 Fifth Avenue and 300 Park Avenue South properties.

         Rent and escalation income decreased to approximately $31.4 million for
the year ended December 31, 1998, as compared to approximately $42.3 million for
the year ended December 31, 1997. With respect to the remaining property at
December 31, 1998, rent and escalation income increased to approximately $14.7
million for the year ended December 31, 1998, as compared to approximately $14.4
million for the year ended December 31, 1997. The higher rental revenues were
the result of higher effective rental rates and an increase in average occupancy
which was offset by a decrease in escalation income.

         Expenses decreased by approximately $17.4 million for the year ended
December 31, 1998, as compared to 1997. With respect to the remaining property
at December 31, 1998, expenses increased by approximately $2.4 million for the
year ended December 31, 1998, as compared to 1997 as a result of an increase in
interest, depreciation and management fees. All other expenses remained
relatively constant at the Partnership's 757 Third Avenue property.

         Interest expense increased primarily due to an increase in the
principal indebtedness on the Unsecured Note. Depreciation expense increased due
to the effect of the current and prior years additions to fixed assets,
primarily tenant improvements. Management fees increased due to the change of
the managing agent that occurred in connection with the debt extension in 1998.


                                      -12-


<PAGE>


         As of March 1, 1999 and 1998, the 757 Third Avenue property's occupancy
was 90% and 93%, respectively. During 1998, the Operating Partnership signed
new, renewal, extension, and expansion leases at the 757 Third Avenue Property
totaling 105,828 square feet at rental terms comparable to buildings of similar
quality in the market. The decrease in occupancy is the result of certain lease
terminations that occurred in the fourth quarter of 1998.

         b.       1997 Compared to 1996

         The Registrant generated a net loss of approximately $21.7 million for
the year ended December 31, 1997, as compared to a net loss before extraordinary
gain of approximately $19.1 million for the year ended December 31, 1996. The
increase in net loss before the extraordinary gain was due to a decrease in
revenues and an increase in expenses.

         Rent and escalation income decreased to approximately $42.3 million for
the year ended December 31, 1997, as compared to approximately $43.3 million for
the year ended December 31, 1996. Rent and escalation income declined due to a
decrease in rental income at 757 Third Avenue and 535 Fifth Avenue, which was
slightly offset by an increase in rent and escalation income at 545 Fifth
Avenue. The lower rent and escalation income was primarily the result of new
tenants occupying space at the Properties with current base years for escalation
purposes, thus reducing the amount of escalation billings for 1997, as compared
to 1996. Rent and escalation income at the other properties remained relatively
constant.

         Expenses increased by approximately $2.0 million for the year ended
December 31, 1997, as compared to 1996. The increase in interest, depreciation
and amortization expenses were partially offset by a decrease in asset and
property management fees. Overall operating expenses (i.e., real estate and
other taxes, payroll, utilities, repairs and maintenance, and cleaning and
security) remained relatively constant.

         Interest expense increased primarily due to an increase in the
principal indebtedness on the unsecured line of credit and the Modified Loan
incurring interest at an overall higher interest rate in 1997, as compared to
1996. Depreciation and amortization expenses increased due to the effect of the
current years additions to fixed assets, primarily tenant improvements, and the
increase in amortization of leasing costs. This increase was slightly offset by
the effect of assets becoming fully depreciated in 1996. Asset and property
management fees declined due to the elimination of the asset management fee
payable to a related party and the new management agreement (which changed the
previous fee of 2.5% of cash receipts to a fixed fee).

Year 2000

         The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. The Registrant
is dependent upon the General Partner and its affiliates for management and
administrative services. Any computer programs or hardware that have
date-sensitive software or embedded chips may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations 


                                       13
<PAGE>


causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. During the first half of 1998, the General Partner and its
affiliates completed their assessment of the various computer software and
hardware used in connection with the management of the Registrant. This review
indicated that significantly all of the computer programs used by the General
Partner and its affiliates are off-the-shelf "packaged" computer programs which
are easily upgraded to be Year 2000 compliant. In addition, to the extent that
custom programs are utilized by the General Partner and its affiliates, such
custom programs are Year 2000 compliant. Following the completion of its
assessment of the computer software and hardware, the General Partner and its
affiliates began upgrading those systems which required upgrading. To date,
significantly all of these systems have been upgraded. The Registrant has to
date not borne, nor is it expected that the Registrant will bear any significant
cost, in connection with the upgrade of those systems to requiring remediation.
It is expected that all systems will be remediated, tested and implemented
during the first half of 1999.

         To date, the General Partner is not aware of any external agent with a
Year 2000 issue that would materially impact the Registrant's results of
operations, liquidity or capital resources. However, the General Partner has no
means of ensuring that external agents will be Year 2000 compliant. The General
Partner does not believe that the inability of external agents to complete their
Year 2000 resolution process in a timely manner will have a material impact on
the financial position or results of operations of the Registrant. However, the
effect of non-compliance by external agents is not readily determinable.


                                       14
<PAGE>


                 1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                        CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

                                      INDEX

<TABLE>
<CAPTION>

                                                                                   Page

<S>                                                                             <C>
Independent Auditors' Report....................................................F - 2

Consolidated Financial Statements:

Balance Sheets as of December 31, 1998 and 1997.................................F - 3

Statements of Operations for the Years Ended
     December 31, 1998, 1997 and 1996...........................................F - 5

Statements of Changes in Partners' Deficit for the Years Ended
     December 31, 1998, 1997 and 1996...........................................F - 6

Statements of Cash Flows for the Years Ended
     December 31, 1998, 1997 and 1996...........................................F - 7

Notes to Consolidated Financial Statements......................................F - 8

Financial Statement Schedule:

Schedule III - Real Estate and Accumulated Depreciation at December 31, 1998....F - 21
</TABLE>

Financial statement schedules not included have been omitted because of the
absence of conditions under which they are required or because the information
is included elsewhere in the consolidated financial statements.


                                       F-1
<PAGE>

                          Independent Auditors' Report


To the Partners
1626 New York Associates Limited Partnership:

We have audited the accompanying consolidated balance sheets of 1626 New York
Associates Limited Partnership, (a Massachusetts limited partnership) and
subsidiaries (the "Partnership") as of December 31, 1998 and 1997, and the
related consolidated statements of operations, changes in partners' deficit and
cash flows for each of the three years in the period ended December 31, 1998.
Our audits also included the consolidated financial statement schedule supplied
pursuant to Item 14(a)(2). These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming
that the Partnership will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Partnership has maturing debt
payments totaling approximately $64,544,000 due on April 1, 1999. The inability
of the Partnership to meet these obligations raises substantial doubt about the
Partnership's ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of 1626
New York Associates Limited Partnership and subsidiaries as of December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.


                                                    Certified Public Accountants


New York, N.Y.
March 8, 1999


                                       F-2
<PAGE>

                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                          CONSOLIDATED BALANCE SHEETS
                        (In Thousands, Except Unit Data)

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                ----------------------------

                                                                    1998            1997
                                                                -----------     ------------
ASSETS

Real estate:

     <S>                                                        <C>             <C>        
     Land                                                       $    10,270     $    24,440
     Buildings and improvements, net of accumulated
        depreciation of $51,925 and $141,658,
        in 1998 and 1997, respectively                               38,490         114,383
                                                                ------------    ------------

                                                                     48,760         138,823

Other Assets:

     Cash and cash equivalents                                          291             221
     Restricted cash                                                  2,410           3,354
     Accounts receivable, net of reserves of $85 and $259,
         in 1998 and 1997, respectively                                 104             489
     Prepaid expenses and other assets                                1,825           8,617
     Deferred rent receivable                                         7,669          12,306
     Deferred costs, net                                              3,974           7,698
                                                                ------------    ------------

Total Assets                                                     $   65,033     $   171,508
                                                                ============    ============
</TABLE>


                See notes to consolidated financial statements.

                                     F - 3

<PAGE>

                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                          CONSOLIDATED BALANCE SHEETS
                        (In Thousands, Except Unit Data)
                                  (Continued)

<TABLE>
<CAPTION>

LIABILITIES AND PARTNERS' DEFICIT                                                          DECEMBER 31,
                                                                                 ------------------------------

                                                                                     1998             1997
                                                                                 ------------     ------------
<S>                                                                              <C>              <C>         
Liabilities:

     Mortgage notes payable to affiliates                                        $     75,450     $    166,536
     Other mortgage notes payable                                                           -           61,867
     Accounts payable, notes and loans payable, and accrued
         interest to general partners and affiliates                                   35,114           24,739
     Accounts payable, accrued expenses, security
         deposits and other liabilities                                                 3,717           10,085
     Accrued interest on mortgage notes to affiliates                                  58,667           52,135
     Accrued interest on other mortgage notes                                               -               98
     Deferred purchase price obligation                                                     -            1,498
                                                                                 -------------    -------------

Total Liabilities                                                                     172,948          316,958
                                                                                 -------------    -------------

Commitments and Contingencies

Partners' Deficit:

     Limited Partners' Deficit - Units of Investor 
         Limited Partnership Interest
         $250,000 stated value per unit; 
         authorized, issued and outstanding
         -1,340 as of December 31, 1998
         and 1997                                                                    (111,791)        (149,968)
     Less: investor notes                                                                 (68)             (68)
                                                                                 -------------    -------------

                                                                                     (111,859)        (150,036)

     General Partners' Equity                                                           3,944            4,586
                                                                                 -------------    -------------

         Total Partners' Deficit                                                     (107,915)        (145,450)
                                                                                 -------------    -------------

Total Liabilities and Partners' Deficit                                           $    65,033     $    171,508
                                                                                 =============    =============
</TABLE>


                See notes to consolidated financial statements.

                                     F - 4
<PAGE>
                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In Thousands, Except Unit Data)

<TABLE>
<CAPTION>
                                                                               YEARS ENDED DECEMBER 31,
                                                                  ------------------------------------------------

                                                                       1998            1997               1996
                                                                  -------------    ------------      -------------
<S>                                                               <C>               <C>              <C>     
Revenues:
     Rent and escalation income                                   $      31,435     $    42,330      $     43,287
     Interest and other income                                              421             972               577
     Gain on sale of property                                            17,046               -                 -
                                                                  --------------    --------------   ---------------

         Total revenues                                                  48,902          43,302            43,864
                                                                  --------------    --------------   ---------------

Expenses (including $21,837, $25,049 and $21,961 paid or 
     accrued to the general partners and affiliates in 1998, 
     1997 and 1996) (see Notes 3 and 7):

     Interest                                                            23,208          28,807            26,592
     Depreciation and amortization                                        8,603          12,835            11,250
     Real estate and other taxes                                          6,443           9,502             9,626
     Utilities                                                            2,797           4,590             4,889
     Cleaning and security                                                2,731           4,080             3,804
     Asset and property management fees                                     428             549             1,460
     Repairs and maintenance                                                731           1,314             1,563
     Payroll                                                              1,085           1,350             1,198
     General and administrative                                             897           1,194             1,219
     Professional fees                                                      459             544             1,049
     Provision for doubtful accounts                                        141             205               342
                                                                  --------------    --------------   ---------------

         Total expenses                                                  47,523          64,970            62,992
                                                                  --------------    --------------   ---------------

Income (loss) before extraordinary gain                                   1,379         (21,668)          (19,128)

     Extraordinary gain                                                  36,156               -           14,419
                                                                  --------------    --------------   ---------------

Net income (loss)                                                 $      37,535     $   (21,668)     $    (4,709)
                                                                  ==============    ==============   ===============


Net (loss) income allocated to general partners                   $        (642)    $      (848)     $     2,982
                                                                  ==============    ==============   ===============

Net income (loss) before extraordinary item allocated to
   investor limited partners                                      $       2,021     $   (20,820)     $   (18,393)

Extraordinary gain allocated to investor limited partners                36,156               -            10,702
                                                                  --------------    --------------   ---------------

Net income (loss) allocated to investor limited partners          $      38,177     $   (20,820)     $     (7,691)
                                                                  ==============    ==============   ===============

Net income (loss) per unit of investor limited partnership
     interest before extraordinary gain                           $       1,508.21  $   (15,537.31)  $   (13,726.12)

Extraordinary gain per unit of investor limited
   partnership interest                                                  26,982.09            -             7,986.57
                                                                  --------------    --------------   ---------------

Net income (loss) per unit of investor limited
   partnership interest                                           $      28,490.30  $   (15,537.31)  $     (5,739.55)
                                                                  ==============    ==============   ================
</TABLE>


                See notes to consolidated financial statements.

                                     F - 5
<PAGE>

                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

            CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                        (In Thousands, Except Unit Data)


<TABLE>
<CAPTION>
                                                 Units of
                                                 Investor             Investor                General
                                                 Limited               Limited               Partners'                Total
                                               Partnership            Partners'              (Deficit)              Partners'
                                                 Interest             (Deficit)                Equity               (Deficit)
                                             -----------------  ----------------------  ---------------------  ---------------------

<S>                                              <C>                  <C>                  <C>                    <C>          
Balance - December 31, 1995                         1,340             $  (121,525)         $  (34,710)            $   (156,235)
                                                                                                                 
    Capital Contributions                               -                       -              37,162                   37,162
                                                                                                                 
    Net (Loss) Income                                   -                  (7,691)              2,982                   (4,709)
                                                 ---------            ------------         -----------            -------------
                                                                                                                 
Balance - December 31, 1996                         1,340                (129,216)              5,434                 (123,782)
                                                                                                                 
    Net Loss                                            -                 (20,820)               (848)                 (21,668)
                                                 ---------            ------------         -----------            -------------
                                                                                                                 
Balance - December 31, 1997                         1,340                (150,036)              4,586                 (145,450)
                                                                                                                 
    Net Income (Loss)                                   -                  38,177                (642)                  37,535
                                                 ---------            ------------         -----------            -------------
                                                                                                                 
Balance - December 31, 1998                         1,340             $  (111,859)         $    3,944             $   (107,915)
                                                 =========            ============         ===========            =============
</TABLE>


                See notes to consolidated financial statements.

                                     F - 6
<PAGE>

                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                             YEARS ENDED DECEMBER 31,
                                                                                   --------------------------------------------

                                                                                        1998            1997            1996
                                                                                   ------------    -------------    -----------
<S>                                                                                <C>              <C>             <C>        
Cash Flows from Operating Activities:

Net income (loss)                                                                  $     37,535     $   (21,668)    $   (4,709)
Adjustments to reconcile net income (loss) to net cash
 used in operating activities:
     Depreciation                                                                         7,503          11,041          9,969
     Amortization                                                                         1,571           2,884          2,117
     Interest expenses to related party                                                       -               -            694
     Deferred fees to related party                                                           -               -            267
     Change in deferred rent receivable                                                  (3,341)         (3,882)          (484)
     Gain on sale of property                                                           (17,046)              -              -
     Gain on transfer of properties                                                     (36,156)              -        (14,419)
     Provision for doubtful accounts                                                        137            (489)           337

Changes in operating assets and liabilities:

     Decrease in accounts receivable, prepaid
        expenses and other assets                                                         4,339           1,407              8
     (Decrease) increase in accounts payable, accrued expenses,
        security deposits and other liabilities                                          (4,363)          1,259          1,359
                                                                                   -------------    ------------    -----------

         Net cash used in operating activities                                           (9,821)         (9,448)        (4,861)
                                                                                   -------------    ------------    -----------

Cash Flows from Investing Activities:

     Net proceeds from sale of property                                                  50,389               -              -
     Additions to buildings and improvements                                            (10,349)        (14,546)        (7,549)
     Increase in deferred leasing costs                                                  (2,184)         (4,810)          (863)
                                                                                   -------------    ------------    -----------

         Net cash provided by (used in) investing activities                             37,856         (19,356)        (8,412)
                                                                                   -------------    ------------    -----------

Cash Flows from Financing Activities:

     Proceeds from other mortgage notes payable                                               -          24,000              -
     Repayment of other mortgage notes payable                                                -         (19,091)             -
     Payment of accrued interest on mortgage notes to affiliates                         (5,252)              -              -
     Increase in accrued mortgage interest                                               11,002          13,165         11,138
     Principal payments on mortgage notes to affiliates                                  (7,270)         (1,421)        (1,829)
     Increase  in accounts payable, notes and loans
        payable and accrued interest to general partners and affiliates                  10,375          11,697          3,694
     Principal payments on other mortgage notes                                         (37,867)            (80)          (101)
     Decrease in restricted cash                                                          1,655           1,574            229
     Payment of deferred financing costs                                                   (399)           (944)             -
     Deferred purchase price obligation payment                                            (209)              -              -
                                                                                   -------------    ------------    -----------

         Net cash (used in) provided by financing activities                            (27,965)         28,900         13,131
                                                                                   -------------    ------------    -----------

         Net increase (decrease) in cash and cash equivalents                                70              96           (142)

Cash and cash equivalents, beginning of year                                                221             125            267
                                                                                   -------------    ------------    -----------

Cash and cash equivalents, end of year                                             $        291     $       221     $      125
                                                                                   =============    ============    ===========

Supplemental Disclosure of  Cash Flow Information:

     Cash paid for interest                                                        $     12,416     $    13,377     $   13,120
                                                                                   =============    ============    ===========
</TABLE>

Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
     Transfer of properties in 1998 - See Notes 3 and 4 
     Sale of property in 1998 - See Note 5 
     Transfer of debt in 1997 - See Note 4 
     Deed in lieu of foreclosure in 1996 - See Note 6
     Related party debt forgiveness and modification in 1996 - See Notes 2 and 7

                See notes to consolidated financial statements.

                                     F - 7
<PAGE>


                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


NOTE 1       -  ORGANIZATION

                1626 New York Associates Limited Partnership (the "Investor
                Partnership") was organized on December 6, 1983 under the
                Massachusetts Uniform Limited Partnership Act to acquire and own
                a 99% General Partnership interest in and serve as a General
                Partner of Nineteen New York Properties Limited Partnership, a
                Massachusetts Limited Partnership (the "Operating Partnership"),
                which was also organized on December 6, 1983. The Investor
                Partnership and the Operating Partnership are collectively
                referred to as the "Partnerships."

                As of December 31, 1998, the Operating Partnership owns one
                commercial rental property located in New York City (the
                "Property").

                The Operating Partnership financed the purchase of the
                Properties through a private offering by the Investor
                Partnership of 1,344 units of Limited Partnership Interest (1340
                units outstanding at December 31, 1998 and 1997) at $250,000 per
                Unit (the "Unit") for an approximate 94% interest in operating
                profits and losses of the Investor Partnership.

NOTE 2       -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                Basis of Presentation - Going Concern

                The accompanying financial statements have been prepared on a
                going concern basis, which contemplates the realization of
                assets and the satisfaction of liabilities in the normal course
                of business. The Partnerships have maturing mortgage debt,
                totaling approximately $64,544,000 which was due in February
                1999, but was extended to April 1, 1999, (see Notes 3 and 7).
                Based on the current value of the remaining Property, it is
                highly unlikely the Partnerships will be able to meet their
                remaining obligation. Accordingly, it appears there is a
                substantial likelihood that the remaining Property, if not sold,
                will be lost through foreclosure in 1999. In the event that the
                Property is sold, all proceeds would be used to satisfy any
                related outstanding indebtedness. This raises substantial doubt
                about the Partnerships' ability to continue as a going concern.
                The consolidated financial statements do not include any
                adjustments that might result from the outcome of this
                uncertainty.

                Consolidation

                The accompanying consolidated financial statements of the
                Investor Partnership have been prepared on a consolidated basis
                with those of the Operating Partnership and its wholly owned
                subsidiaries. All significant intercompany accounts and
                transactions have been eliminated in consolidation.


                                       F-8
<PAGE>


                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NOTE 2       -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                Use of Estimates

                The preparation of financial statements in conformity with
                generally accepted accounting principles requires management to
                make estimates and assumptions that affect the amounts reported
                in the financial statements and accompanying notes. Such
                estimates that are particularly susceptible to change relate to
                the Partnership's estimate of the fair value of real estate.
                Actual results could differ from those estimates.

                Real Estate

                Real estate is carried at cost, adjusted for depreciation and
                impairment of value. Acquisition fees are capitalized as a cost
                of real estate. The Partnership records impairment losses for
                long-lived assets used in operations when indicators of
                impairment are present and the undiscounted cash flows are not
                sufficient to recover the asset's carrying amount. The
                impairment loss is measured by comparing the fair value of the
                asset to its carrying amount.

                Cash and Cash Equivalents

                The Partnership considers all highly liquid investments with an
                original maturity of three months or less at the time of
                purchase to be cash equivalents.

                Depreciation

                The Operating Partnership provides for depreciation of its
                depreciable assets using the straight-line method over their
                estimated useful lives of 14 to 39 years for building and
                improvements and five to eight years for furnishings. Tenant
                improvements are depreciated by the straight-line method over
                the life of the respective tenant's lease.

                Deferred Rent Receivable

                The Operating Partnership leases space to tenants under various
                lease terms. For leases containing fixed rental increases during
                their term, rents are recognized on a straight-line basis over
                the term of the leases. For all other leases, rents are
                recognized over the term of the leases as earned.


                                      F-9
<PAGE>

                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NOTE 2       -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                Deferred Costs

                Financing costs and leasing costs are capitalized and amortized
                using the straight-line method over the term of the related
                agreements. Financing costs are amortized as interest expense.

                Deferred costs at December 31, are as follows (in thousands):

                 Category                              1998            1997
                 ---------                        ------------     -----------

                 Financing costs                  $     2,493      $    5,310
                 Leasing costs                         12,004          26,137
                                                  ------------     -----------
                                                  
                                                       14,497          31,447

                 Less: accumulated amortization       (10,523)         (23,749)
                                                  ------------      -----------
                                                  
                                                  $     3,974     $      7,698
                                                   ===========     ===========

                Income Taxes

                Taxable income or loss of the Partnership is reported in the
                income tax returns of its partners. Accordingly, no provision
                for income taxes is made in the consolidated financial
                statements of the Partnership.

                Advertising

                The Operating Partnership expenses the cost of advertising as
                incurred. Advertising expenses of $61,000, $134,000 and $300,000
                were incurred for 1998, 1997 and 1996, respectively, and are
                included in general and administrative expenses.

                Restricted Cash

                Restricted cash consists primarily of amounts restricted
                pursuant to debt agreements and tenant security deposits.


                                       F-10
<PAGE>


                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NOTE 2       -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


                Disclosures About the Fair Value of Financial Instruments

                Financial instruments held by the Partnership as of December 31,
                1998 and 1997, consisted primarily of cash and cash equivalents,
                short-term trade receivables and payables, for which the
                carrying amounts approximate fair values due to the short-term
                maturity of these instruments, and mortgage notes payable. Due
                to the reduced value of the Partnership's real estate property,
                which is the security for these mortgages and the uncertainty of
                obtaining replacement financing, it is not practicable to
                estimate the fair value of such debt.

                Segment Reporting

                In June 1997, the Financial Accounting Standards Board issued
                SFAS No. 131, "Disclosures about Segments of an Enterprise and
                Related Information," which is effective for years beginning
                after December 15, 1997. SFAS 131 established standards for the
                way that public business enterprises report information about
                operating segments in annual financial statements and requires
                that those enterprises report selected information about
                operating segments in interim financial reports. It also
                establishes standards for related disclosures about products and
                services, geographic areas, and major customers. The Partnership
                has one reportable segment, commercial real estate. The
                Partnership evaluates performances based on net operating
                income, which is income before depreciation, amortization,
                interest and non-operating items.

                Reclassifications

                Certain amounts from 1997 and 1996, have been reclassified to
                conform to the 1998 presentation.

                Partnership Allocations

                The net operating profits and losses and distributions of cash
                flow, as defined in the Partnership agreement of the Investor
                Partnership, with the exception of the depreciation deductions,
                which are allocated solely to the limited partners of the
                Investor Partnership ("Investor Limited Partners"), are, in
                general, allocated as follows:

<TABLE>
<CAPTION>
                   Partner                                                                             Percentage
                   -------                                                                             ----------

                   <S>                                                                                 <C>
                   Investor Limited Partners                                                               94.000%
                   Winthrop Interim Partners I, A Limited Partnership ("WIPI")                              5.200%
                   Linnaeus Lexington Associates Limited Partnership ("Linnaeus Lexington")                  .752%
                   Two Winthrop Properties, Inc. ("Two Winthrop" or the "Managing General Partner")          .048%
</TABLE>


                                       F-11
<PAGE>


                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NOTE 2       -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                Partnership Allocations (Continued)

                WIPI, Linnaeus Lexington and Two Winthrop are collectively
referred to as the "General Partners."

                Any gains (losses) resulting from sales, dispositions or
                refinancings of any of the properties are to be allocated first
                to the Partners having negative (positive) capital account
                balances, in proportion to and to the extent of such negative
                (positive) balances, and thereafter, according to the various
                provisions of the Partnership agreement. Due to this provision,
                the gain on sale of the Partnership's 1372 Broadway property and
                the gains arising from the disposition of the Partnership's 535
                Fifth Avenue, 545 Fifth Avenue, 509 Fifth Avenue and 300 Park
                Avenue South properties (see Notes 3 and 4) were allocated
                entirely to the Investor Limited Partners in 1998. Additionally,
                due to this provision, the gain in 1996 of $14,419,000 arising
                from the foreclosure of the Partnership's 227 East 45th Street
                property was allocated $3,717,000 to the General Partners and
                $10,702,000 to the Investor Limited Partners. No cash
                distributions to the Partners have been made.

NOTE 3   -   MORTGAGE NOTES PAYABLE TO AFFILIATES AND EXTRAORDINARY GAIN

                On February 28, 1996, the Fuji Bank, Ltd. Loan ("Fuji Loan" or
                "Fuji") with an outstanding loan balance of $207,000,000
                (exclusive of $27,300,000 of accrued and unpaid interest,
                calculated using the effective interest method) and secured by
                the Partnerships' 757 Third Avenue, 535 Fifth Avenue, 545 Fifth
                Avenue and 1372 Broadway properties ("Fuji Properties") was sold
                to an affiliate of the General Partners. In connection with the
                sale of the Fuji Loan, additional debt due to the General
                Partners and their affiliates was modified (see Note 7).

                The Managing General Partner and Fuji both recognized that the
                Partnership would not be able to comply with the terms of the
                Fuji Loan and the Fuji Loan would go into default in early 1996.
                A venture comprised of Apollo Real Estate Advisors, L.P.
                ("Apollo"), an affiliate of the General Partners, and Emmes
                Ventures, Inc. ("Emmes") submitted a proposal to purchase the
                Fuji loan. Zeus Property LLC ("Zeus"), a newly-organized limited
                liability company owned by affiliates of Apollo and Emmes,
                purchased the loan from Fuji for $115 million on February 28,
                1996.

                Under the terms of the modified Fuji Loan (the "Modified Loan"),
                the Operating Partnership obtained a reduction in the current
                interest required to be paid under the Modified Loan which,
                based on projections, would greatly reduce the likelihood of
                monetary default under the loan prior to February 28, 1998, the
                new maturity date for a component of the modification. As part
                of the


                                       F-12
<PAGE>

                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NOTE 3   -   MORTGAGE NOTES PAYABLE TO AFFILIATES AND EXTRAORDINARY GAIN
                (Continued)

                restructuring of the Fuji Loan, each of the Fuji Properties was
                conveyed by the Operating Partnership to newly-created limited
                liability companies which are wholly-owned, indirectly, by the
                Operating Partnership and its partners.

                The Modified Loan was comprised of several component
                non-recourse loans, all held by Zeus and its affiliates. In
                August 1997, the senior portion of the Modified Loan, that was
                allocated to 1372 Broadway, was sold by Zeus to the ultimate
                purchaser of the property, thus eliminating the property from
                the cross-collateralization provision of the Modified Loan (see
                Note 5). The remaining senior component of the Modified Loan
                consisted of secured notes in the aggregate principal amount of
                $56,816,000 and $64,086,000 at October 22, 1998 and December 31,
                1997, respectively (the "Secured A Notes"). These notes, which
                had an annual interest rate of 295 basis points over 30-day
                LIBOR (8.59% and 8.80% at October 22, 1998 and December 31,
                1997, respectively), were scheduled to mature on February 28,
                1998, but were extended to October 22, 1998. The junior
                component consisted of secured notes in the aggregate principal
                amount of $102,450,000 at October 22, 1998 and December 31,
                1997, respectively (the "Secured B Notes"). These notes had a
                fixed annual interest rate of 14% through February 28, 1999 and
                then 16.75% thereafter, and were scheduled to mature on February
                28, 2016. A mandatory prepayment of $25 million against the
                Secured B Notes was scheduled to be made on March 15, 1998, but
                was extended to October 22, 1998. In connection with the
                extension of the Modified Loan during 1998, the Partnership has
                paid $399,000 in financing fees.

                On October 22, 1998, in order to settle the default on the
                mortgage debt encumbering the properties located at 535 Fifth
                Avenue, 545 Fifth Avenue and 757 Third Avenue, the Partnerships
                entered into a settlement agreement with Zeus and affiliates
                pursuant to which the Partnerships 535 Fifth Avenue and 545
                Fifth Avenue properties (including all related assets and
                liabilities) were conveyed to the lender in satisfaction of the
                mortgage debt encumbering these properties. Simultaneously, the
                Partnerships conveyed title, subject to the existing mortgages,
                in their 509 Fifth Avenue and 300 Park Avenue South properties
                (including all related assets and liabilities) to Zeus. The
                aggregate related principal indebtedness allocated to the
                transferred properties was $76,219,000. For financial statement
                purposes, the property dispositions resulted in an extraordinary
                gain on extinguishment of debt of $36,156,000. The Partnership's
                535 Fifth Avenue and 545 Fifth Avenue properties had previously
                been written down to their fair value.

                In addition, the debt securing the Partnerships remaining
                property, 757 Third Avenue, was restructured into two
                non-recourse loans. The first component in the amount of
                $27,193,000, bears interest at 295 basis points over 30-day
                LIBOR (8.07% at December 31, 1998), and was scheduled to mature
                on February 1, 1999, but has been extended to April 1, 1999. The
                second component in
    
                                       F-13

<PAGE>


                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


NOTE 3   -   MORTGAGE NOTES PAYABLE TO AFFILIATES AND EXTRAORDINARY GAIN
                (Continued)

                the amount of $48,257,000, bears interest at 9% and matures on
                February 28, 2016. A mandatory prepayment of $7,500,000 against
                the second component was due on February 1, 1999, but has been
                extended to April 1, 1999.

                The following is a summary of the scheduled principal
                maturities, by year, under the debt securing the Partnership's
                remaining property (in thousands):

                           Year                         Amount
                         -----------                 -------------

                         1999                        $   34,693
                         2000                                 -
                         2001                                 -
                         2002                                 -
                         2003                                 -
                         Thereafter                      40,757
                                                     -----------

                                                     $   75,450
                                                     ===========

                A third component of the Modified Loan is an unsecured note (the
                "Unsecured Note") representing the additional financing expected
                to be drawn upon by the Operating Partnership to fund capital
                improvements and tenant lease-up costs with respect to the Fuji
                Properties. However, any borrowings under this credit line are
                subject to the lender's discretion. Accordingly, it is possible
                that the Operating Partnership may not be able to borrow against
                this credit line each time it deems it necessary. The
                outstanding balance against the Unsecured Note was $19,851,000
                and $12,761,000 as of December 31, 1998 and 1997, respectively,
                and is included in accounts payable, notes and loans payable and
                accrued interest to general partners and affiliates. The
                Unsecured Note bears interest at a fixed annual rate of 14%
                through February 28, 1999 and then 16.75% thereafter and was
                scheduled to mature on February 28, 1998, but was extended to
                April 1, 1999.

                Interest expense incurred for the years ended December 31, 1998,
                1997 and 1996, relating to the Modified Loan was $19,519,000,
                $23,504,000 and $19,659,000, respectively.


                                      F-14
<PAGE>


                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


NOTE 4       -  MORTGAGE NOTES PAYABLE

                Dime Mortgage Loans

                The Dime Savings Bank loans (the "Dime Loan(s)") were secured by
                the Partnerships' 300 Park Avenue South and 509 Fifth Avenue
                properties. In 1992, the maturity date and payment terms with
                respect to the mortgage encumbering 300 Park Avenue South were
                modified. Due to the extension of the maturity date and the
                deferral of principal and certain interest payments, this
                restructuring constituted a troubled debt restructuring, as
                defined in SFAS No. 15, Accounting by Debtors and Creditors for
                Troubled Debt Restructurings. In accordance with SFAS 15,
                interest expense was computed using the effective interest
                method. The resulting effective interest rate was 6.15% per
                annum through August 25, 1997.

                On August 25, 1997, the Dime Loans were refinanced with Solomon
                Brothers Realty Corp. ("SBRC"). The existing Dime loans,
                aggregating $19,091,000 (plus $824,000 of accrued and unpaid
                interest) were refinanced with a new loan aggregating
                $24,000,000 (allocated $16,800,000 to 300 Park Avenue South and
                $7,200,000 to 509 Fifth Avenue). The SBRC loan had an annual
                interest rate of 265 basis points over 30-day LIBOR (7.99% at
                October 22, 1998), and was to mature in two years. No scheduled
                principal payments were required until maturity. In connection
                with the refinancing, the Operating Partnership's 300 Park
                Avenue South and 509 Fifth Avenue properties were conveyed by
                the Operating Partnership to newly created limited liability
                companies which were wholly-owned, indirectly, by the Operating
                Partnership and its partners. The Partnership incurred
                approximately $944,000 in financing costs in connection with the
                refinancing in 1997.

                On October 22, 1998, in conjunction with conveyance of the
                Partnership's 535 Fifth Avenue and 545 Fifth Avenue properties
                in satisfaction of the mortgage debt encumbering those
                properties, the Partnership conveyed title, subject to the
                existing mortgages, in their 509 Fifth Avenue and 300 Park
                Avenue South properties to Zeus.

                Transfer of Debt

                In August 1997, a portion of the Modified Loan, that was
                allocated to the 1372 Broadway property, was sold by the related
                party to the ultimate purchaser of the property, thus
                eliminating the property from the cross-collateralization
                provision of the related party loan (see Note 3).


                                       F-15
<PAGE>


                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NOTE 4       -  MORTGAGE NOTES PAYABLE (continued)

                The principal balance in other mortgage notes payable as of
                December 31, 1998 and 1997, is as follows (in thousands):

                      Property                  1998                  1997
                ---------------------    -----------------     -----------------

                300 Park Avenue South        $       -           $   16,800
                509 Fifth Avenue                     -                7,200
                1372 Broadway                        -               37,867
                                             -----------         ------------
                                             $       -           $   61,867
                                             ===========         ============
                                                         
                On January 13, 1998, the Partnership sold its 1372 Broadway
                property (see Note 5).

NOTE 5       -  SALE OF PROPERTY

                On January 13, 1998, the Partnership sold its 1372 Broadway
                property to an unaffiliated third party for $52,000,000. All of
                the proceeds were used to partially satisfy the approximately
                $94,000,000 allocated portion of the Modified Loan (including
                accrued and unpaid interest), with the unsatisfied portion of
                the Modified Loan being reallocated among the remaining Fuji
                Properties. For financial reporting purposes, the sale resulted
                in a gain of approximately $17,046,000.

NOTE 6       -  DEED IN LIEU OF FORECLOSURE

                In January 1996, a deed in lieu of foreclosure agreement was
                reached between the Operating Partnership and Sanwa Business
                Credit Corporation ("Sanwa"). Pursuant to the deed in lieu of
                foreclosure agreement, the Operating Partnership transferred
                title to the property located at 227 East 45th Street to Sanwa
                on January 24, 1996. In exchange, Sanwa released, as of the
                closing date, the Operating Partnership from all claims,
                demands, liabilities, obligations, actions and causes of any
                kind with regard to Sanwa.

                As of December 31, 1995, the related indebtedness to Sanwa was
                $24,409,000. As a result of the above described transactions,
                the Operating Partnership has recognized an extraordinary gain
                on extinguishment of debt of $14,419,000 in 1996. The property
                was stated at its fair value at December 31, 1995 as a result of
                a recorded write-down.


                                      F-16
<PAGE>


                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NOTE 7       -  CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES

                The General Partners of the Investor Partnership are Linnaeus
                Lexington, Two Winthrop and WIPI. Two Winthrop, the Managing
                General Partner of the Investor Partnership, is wholly owned by
                First Winthrop Corporation ("First Winthrop") which in turn is
                controlled by Winthrop Financial Associates ("WFA"). The General
                Partners, who are all affiliates of WFA, own the remaining 6%
                interest in the profits and losses of the Investor Partnership.
                Additionally, WFA, First Winthrop and its subsidiary, WFC Realty
                Co., Inc. ("WFC Realty"), collectively own a 1% interest in the
                profits and losses of the Operating Partnership.

                WIPI is a public real estate limited partnership whose general
                partners are Two Winthrop and a limited partnership, some of
                whose partners are affiliates of WFA. Linnaeus Lexington, the
                other General Partner, is a limited partnership, some of whose
                partners are affiliates of WFA. WFA and its affiliates manage or
                advise a large number of partnerships organized to own or
                operate real estate as well as other investments, or to invest
                in other limited partnerships that own or operate real estate or
                other investments. An affiliate of Apollo acquired control of
                the general partner of WFA in July 1995. As a result, Apollo and
                its affiliates control the Partnerships.

                As part of the sale of the Fuji Loan, the Partnership agreed to
                retain unaffiliated management and leasing agents for all of its
                properties. In connection with the extension of the maturity
                date of the Modified Loan during 1998, the Partnership agreed to
                retain an entity affiliated with Zeus as its new managing agent
                for all properties, effective April 1, 1998.

                The following table sets forth the amount of fees, commissions
                and other costs which the Partnerships paid or accrued to the
                General Partners, Zeus and their affiliates for the years ended
                December 31, 1998, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>

                 Type of Compensation                               1998       1997       1996
                                                                 ---------   --------   ---------

                 <S>                                             <C>         <C>         <C> 
                 Property Management Fees                        $    380    $      -    $    329
                                                                                    -        
                 Leasing Commissions
                   (capitalized as deferred costs)                      -           -          63

                 Construction Supervision Fee
                   (capitalized to the costs of Buildings
                     and Improvements)                                  -           -          72

                 Reimbursement for accounting and                       
                   administrative services                             18          24
                                                                                                -
                 Financing fees                                       399           -           -
</TABLE>

                                     F-17

<PAGE>

                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NOTE 7       -  CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES 
                (Continued)

                In connection with the sale of the Fuji Loan in 1996, WFA and
                certain of its affiliates entered into an agreement with the
                Investor Partnership, the Operating Partnership and an affiliate
                of Zeus with regard to amounts owed to WFA and its affiliates by
                the Partnerships (the "Winthrop Debt Agreement"). Prior to this
                agreement, WFA and its affiliates were owed, in the aggregate,
                $47,162,000 by the Partnerships. This amount is comprised of
                cash advances made by WFA to the Operating Partnership, as well
                as unpaid deferred fees related to the on-site management of the
                properties, asset management and syndication. This amount also
                includes accrued interest on these outstanding balances.

                Under the Winthrop Debt Agreement, WFA and its affiliates
                contributed $37,162,000 of the $47,162,000 to the capital of the
                Operating Partnership in 1996. The remaining $10,000,000
                receivable has been evidenced by a promissory note issued by the
                Operating Partnership (the "Receivables Note") and was payable
                from the excess cash flow, as defined, from 509 Fifth Avenue and
                300 Park Avenue South. WFA then sold the Receivables Note to an
                affiliate of Zeus for a payment of $6 million in cash. The
                Receivables Note has an annual base interest rate of 6% and an
                additional annual contingent interest rate of 9%. Interest, to
                the extent that it cannot be paid currently, accrues until
                maturity. The Note was scheduled to mature on the earlier of
                August 31, 1999 or such time that the SBRC loan became due
                (Notes 3 and 4). In connection with the transfers of properties,
                described in Note 3, the Receivables Note is now secured by a
                pledge of the Partnerships' interest in their 757 Third Avenue
                property. Interest expense incurred during 1998, 1997 and 1996,
                relating to the Receivables Note, was $1,521,000, $1,521,000 and
                $1,279,000, respectively.


<PAGE>


                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NOTE 8       -  COMMITMENTS AND CONTINGENCIES

                (a)   The Operating Partnership leases the property to tenants
                      under a variety of terms, including escalation provisions,
                      renewal options and obligations of the tenants to
                      reimburse operating expenses.

                The aggregate future minimum fixed lease payments receivable
                under non-cancelable leases, for the Partnerships' remaining
                property at December 31, 1998 is as follows (in thousands):

                                  Year                        Amount
                              -----------                 -------------

                              1999                        $     12,491
                              2000                              12,013
                              2001                              11,498
                              2002                              10,993
                              2003                               8,813
                              Thereafter                        59,067
                                                          -------------

                                                          $    114,875
                                                          =============

                (b)   Deferred Purchase Price Obligation

                      As part of the original purchase price of the properties,
                      the Operating Partnership agreed to make deferred purchase
                      price payments to the seller in future years, with respect
                      to each Property, equal to 6% of the gross proceeds of
                      certain refinancings, sales or transfers of the Property,
                      or, if a Property has not been sold or deemed disposed of
                      by January 18, 2006, the Operating Partnership must pay
                      the seller on that date an amount equal to the excess of
                      (i) 6% of the appraised fair market value of such Property
                      as encumbered by all liens, charges and other encumbrances
                      on such Property except mortgage loans or any other
                      mortgage encumbering such Property, over (ii) the amount
                      of any deferred purchase price payments previously made
                      with respect to such Property.

                      At the acquisition date, the Operating Partnership
                      recorded a liability to the seller of $25,296,000,
                      representing the Operating Partnership's estimate of the
                      amount due based on the original purchase price of the
                      Properties. The total liability has been reduced to zero,
                      as of December 31, 1998, due to sales and transfers of
                      various properties and management's estimate of fair
                      market value. In connection with the sale of 1372 Broadway
                      in January 1998, the Partnership paid $209,000 against its
                      deferred purchase price obligation. No payments were
                      required as a result of the transfer of properties in 1998
                      and 1996.


                                     F-19
<PAGE>


                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

NOTE 9       -  RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING

                The differences between the accrual method of accounting for
                income tax reporting and the accrual method of accounting used
                in the consolidated financial statements are as follows (in
                thousands):
<TABLE>
<CAPTION>
                                                                            1998            1997             1996
                                                                        ------------    ------------     ----------

                 <S>                                                    <C>             <C>              <C>             
                 Net income (loss) - financial statements               $     37,535    $    (21,668)    $   (4,709)

                 Differences resulted from:

                    Depreciation                                             (1,813)          (1,961)        (2,785)
                    Rent concessions                                         (4,344)          (5,276)        (2,003)
                    Rental revenues                                              262            2,710          2,000
                    Amortization                                                   -            (738)          (603)
                    Mortgage recording taxes                                       -              151            352
                    Bad debt expense                                           (173)            (484)            334
                    Interest expense                                           5,718            8,995          7,194
                    Gain on disposal                                          18,287                -          1,107
                    Other timing differences                                   (374)              215          1,021
                                                                        -------------   --------------   ------------

                 Net income (loss) - income tax method                  $     55,098    $    (18,056)    $     1,908
                                                                        =============   ==============   ============
</TABLE>

                The  Partnership's  taxable  income  (loss) per unit of limited 
                partnership  interest  for 1998,  1997 and 1996 was $32,929,
                $(13,256) and $678, respectively.


                                     F-20
<PAGE>


                                                                   Schedule III

                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                    Real Estate and Accumulated Depreciation
                               December 31, 1998
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                                                                   
                                                                                                                              
                                                                                                                              
                                                                                            
                                        January 1984 Acquisition Costs                                                        
                                              Real Estate Assets                         Mortgage                             
                                      ------------------------------------               Discount                             
                     Encumbrances                           Buildings                   Allocation                            
                      (excluding                               and          ----------------------------------
     Description   accrued interest)       Land           Improvements           Land          Bldgs & Imp.          Total    
-----------------  -----------------  ----------------  ------------------  ----------------  ----------------  --------------
<S>                <C>                <C>               <C>                 <C>               <C>               <C>           
757 Third Avenue   $         75,450   $        11,934   $          66,872   $          (125)  $          (397)  $      78,284 
                   =================  ================  ==================  ================  ================  ==============

<CAPTION>
                     Costs Capitalized /                                                                                 Life     
                          (Deducted)                     Gross Balances @ 12/31/98 (1)                                 on which
                  Subsequent to Acquisition  ---------------------------------------------------                      Depreciation
                  -------------------------                          Impairments                                      is computed
                               Buildings                Buildings      to Land                                  Date  in latest
                                  and                     and            &                      Accumulated      of  statements of
     Description     Land    Improvements     Land    Improvements     Building   Total (2) Depreciation (3) Constr. operations
----------------- ---------  ------------  ---------- ------------  ------------- --------- ---------------  ------- ------------
<S>               <C>        <C>           <C>         <C>           <C>          <C>        <C>              <C> 
                  $    130    $ 33,395      $ 11,939    $   99,870   $  (11,124)  $100,685     $     51,925    1963   5 - 39 Years
757 Third Avenue    ======    ========      ========    ==========   ==========   ========     ============
</TABLE>

                            See accompanying notes.

                                      F-21

<PAGE>

                                                                    SCHEDULE III

                  1626 NEW YORK ASSOCIATES LIMITED PARTNERSHIP

                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                               December 31, 1998
                                 (In Thousands)

NOTES:

(1) The aggregate cost for federal income tax purposes is $112,777.


(2) Balance, January 1, 1996                                        $   274,757
    Improvements capitalized subsequent to acquisition                    7,549
    Cost of rental property disposed of                                 (18,348)
    Impairment of value of rental property disposed of                    1,977
                                                                    ------------

    Balance, December 31, 1996                                          265,935
    Improvements capitalized subsequent to acquisition                   14,546
                                                                    ------------

    Balance, December 31, 1997                                          280,481
    Improvements capitalized subsequent to acquisition                   10,349
    Cost of rental property disposed of                                (190,145)
                                                                    ------------

    Balance, December 31, 1998                                      $   100,685
                                                                    ============


(3) Balance, January 1, 1996                                        $   129,020
    Additions charged to expense                                          9,969
    Accumulated depreciation of rental property disposed of              (8,372)
                                                                    ------------

    Balance, December 31, 1996                                          130,617
    Additions charged to expense                                         11,041
                                                                    ------------

    Balance, December 31, 1997                                          141,658
    Additions charged to expense                                          7,503
    Accumulated depreciation of rental property disposed of             (97,236)
                                                                    ------------

    Balance, December 31, 1998                                      $    51,925
                                                                    ============


                                      F-22
<PAGE>

Item 9.  Changes in and Disagreements on Accounting and Financial Disclosure.

         Effective September 19, 1996, the Partnership dismissed its prior
Independent Auditors, Arthur Andersen LLP ("Arthur Andersen") and retained as
its new Independent Auditors, Imowitz Koenig & Co., LLP ("Imowitz Koenig").
Arthur Andersen's Independent Auditors' Report on the Partnership financial
statements for calendar year ended December 31, 1995, did not contain an adverse
opinion or a disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles. The decision to change
Independent Auditors was approved by the Partnership managing general partner's
directors. During calendar year ended 1995 and through September 19, 1996, there
were no disagreements between the Registrant and Arthur Andersen on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope of procedure which disagreements if not resolved to the
satisfaction of Arthur Andersen, would have caused it to make reference to the
subject matter of the disagreements in connection with its reports.

         Effective September 19, 1996, the Partnership engaged Imowitz Koenig as
its Independent Auditors. The Partnership did not consult Imowitz Koenig
regarding any of the matters or events set forth in Item 304(a)(2) of Regulation
S-K prior to September 19, 1996.

                                      36
<PAGE>


                                    PART III

Item 10. Directors and Executive Officers of Registrant.

         The Partnership has no officers or directors. Two Winthrop manages and
controls substantially all of Registrant's affairs and has general
responsibility and ultimate authority in all matters effective its business. As
of March 1, 1999, the names of the directors and executive officers of Two
Winthrop and the position held by each of them, are as follows:

                                                                   Has Served as
                       Position Held with the                      a Director or
Name                   Managing General Partner                    Officer Since
----                   ------------------------                    -------------

Michael L. Ashner      Chief Executive Officer and Director        1-96

Thomas C. Staples      Chief Financial Officer                     1-99

Peter Braverman        Executive Vice President and Director       1-96

Patrick J. Foye        Vice President - Residential and Director   10-98

Carolyn Tiffany        Chief Operating Officer and Clerk           10-95

         Michael L. Ashner, age 46, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") and the Managing
General Partner since January 15, 1996. From June 1994 until January 1996, Mr.
Ashner was a Director, President and Co-chairman of National Property Investors,
Inc., a real estate investment company ("NPI"). Mr. Ashner was also a Director
and executive officer of NPI Property Management Corporation ("NPI Management")
from April 1984 until January 1996. In addition, since 1981 Mr. Ashner has been
President of Exeter Capital Corporation, a firm which has organized and
administered real estate limited partnerships.

         Thomas C. Staples, age 43, has been the Chief Financial Officer of WFA
since January 1, 1999. From March 1996 through December 1998, Mr. Staples was
Vice President/Corporate Controller of WFA. From May 1994 through February
1996, Mr. Staples was the Controller of the Residential Division of Winthrop
Management.

         Peter Braverman, age 47, has been a Vice President of WFA and the
Managing General Partner since January 1996. From June 1995 until January 1996,
Mr. Braverman was a Vice President of NPI and NPI Management. From June 1991
until March 1994, Mr. Braverman was President of the Braverman Group, a firm
specializing in management consulting for the real estate and construction
industries. From 1988 to 1991, Mr. Braverman was a Vice President and

                                      37
<PAGE>

Assistant Secretary of Fischbach Corporation, a publicly traded, international
real estate and construction firm.

         Patrick J. Foye, age 41, has been Vice President-Residential and
Director of the Managing General Partner since October 1, 1998. Mr. Foye has
served as Executive Vice President of Apartment Investment and Management
Company ("AIMCO") since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989
to 1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.

         Carolyn Tiffany, age 32, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. Ms. Tiffany was a Vice
President in the asset management and investor relations departments of WFA from
October 1995 to December 1997, at which time she became the Chief Operating
Officer of WFA.

         One or more of the above persons are also directors or officers of a
general partner (or general partner of a general partner) of the following
limited partnerships which either have a class of securities registered pursuant
to Section 12(g) of the Securities and Exchange Act of 1934, or are subject to
the reporting requirements of Section 15(d) of such Act: Winthrop Partners 79
Limited Partnership; Winthrop Partners 80 Limited Partnership; Winthrop Partners
81 Limited Partnership; Winthrop Residential Associates I, A Limited
Partnership; Winthrop Residential Associates II, A Limited Partnership; Winthrop
Residential Associates III, A Limited Partnership; 1999 Broadway Associates
Limited Partnership; Nantucket Island Associates Limited Partnership; One
Financial Place Limited Partnership; Presidential Associates I Limited
Partnership; Riverside Park Associates Limited Partnership; Springhill Lake
Investors Limited Partnership; Twelve AMH Associates Limited Partnership;
Winthrop California Investors Limited Partnership; Winthrop Growth Investors I
Limited Partnership; Winthrop Interim Partners I, A Limited Partnership;
Southeastern Income Properties Limited Partnership; and Southeastern Income
Properties II Limited Partnership.

         Except as indicated above, neither the Partnership nor Two Winthrop has
any significant employees within the meaning of Item 401(b) of Regulation S-K.
There are no family relationships among the officers and directors of Two
Winthrop.

         Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Partnership under Rule 16a-3(e) during the Partnership's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Partnership with respect to its most recent fiscal year, the Partnership is not
aware of any director, officer or beneficial owner of more than ten percent of
the units of limited partnership interest in the Partnership that failed to file
on a timely basis, as disclosed in the above Forms, reports required by section
16(a) of the Exchange Act during the most recent fiscal year or prior fiscal
years.

                                      38
<PAGE>

Item 11. Executive Compensation.

         The Partnership is not required to and did not pay any compensation to 
the officers or directors of Two Winthrop. Two Winthrop does not presently pay
any compensation to any of its officers or directors. (See Item 13, "Certain
Relationships and Related Transactions.")

Item 12. Security Ownership of Certain Beneficial Owners and
                  Management.

         (a)      Security Ownership of Certain Beneficial Owners.

                  Two Winthrop, WIPI and Linnaeus-Lexington own all the
outstanding general partnership interests in the Partnership. No other person or
group is known by the Partnership to be the beneficial owner of more than 5% of
the outstanding partnership interests as of December 31, 1998.

         (b)      Security Ownership of Management.

         No officers, directors or partners of Linnaeus-Lexington and First
Winthrop and none of the other officers, directors or general partners of WIPI
beneficially own any Units. Affiliates of First Winthrop, however, own in the
aggregate, 19 units which represents less than one percent of the total
outstanding units.

         (c)      Changes in Control.

         There exists no arrangement known to the Partnership the operation of
which may at a subsequent date result in a change in control of the Partnership.

Item 13. Certain Relationships and Related Transactions.

         The General Partners and their affiliates are entitled to receive
certain cash distributions and allocations of taxable income or loss. In
addition, the General Partners and their affiliates have earned various fees in
connection with the formation and operation of the Partnership and Operating
Partnership. Further, subsequent to the offering of units, the General Partners
and their affiliates entered into contracts to perform various services for the
Operating Partnership.

         In February 1996, certain affiliates of the General Partners (the
"Affiliates") entered into an agreement with the Operating Partnership, the
Partnership and an affiliate of Zeus with regard to amounts owed to the
Affiliates by the Operating Partnership and the Partnership (the "Winthrop Debt
Agreement"). Prior to the entering into of this agreement, the Affiliates were
owed in the aggregate approximately $46.6 million by the Operating Partnership
and the Partnership. This 


                                   39
<PAGE>

amount was comprised of cash advances made to the Partnership and the Operating
Partnership in order to fund operating deficits and also includes accrued
interest on outstanding balances as well as unpaid deferred fees related to the
on-site management of the properties, asset management and syndication. Under
the Winthrop Debt Agreement, the Affiliates contributed approximately $36.6
million of the $46.6 million to the Operating Partnership. The remaining $10
million receivable has been evidenced by a promissory note (the "Receivables
Note") issued by the Operating Partnership which is secured by a pledge of the
excess cash flow from 509 Fifth Avenue and 300 Park Avenue South and is payable
only from those properties. Upon receiving consent of The Dime Savings Bank,
the holder of the first mortgage on these properties, the Affiliate Note is to
be secured by a second mortgage on 509 Fifth Avenue and 300 Park Avenue South.
The Receivables Note was then sold to an affiliated of Apollo Real Estate
Advisors, L.P. ("Apollo"), an affiliate of the Partnership, for a payment of
$6,000,000. The Receivables Note has an annual base interest rate of 6% and an
additional annual contingent interest rate of 9%. Interest is payable only from
available cash flow after payment of debt service on the Dime Loan. Interest,
to the extent it cannot be paid currently, accrues until the maturity of the
Receivables Note on July 31, 1997.

         As a result of the sale of the Receivables Note and the purchase by
Zeus of the Fuji Loan, these loans are held by affiliates of the Partnership.

         Prior to the consummation of the transactions contemplated by the
Winthrop Debt Agreement, the Affiliates performed management, cleaning,
construction and leasing services for the properties and advanced certain
amounts to the Partnership or the Operating Partnership to fund operating
deficits and loan guarantees. All of these amounts were either contributed to
the Partnership or included in the Receivables Note. Accordingly, subsequent to
the closing of the transactions contemplated by the Winthrop Debt Agreement and
the sale of the Receivables Note, the Partnership and the Operating Partnership
had no amounts due to the Affiliates and the property management, cleaning,
leasing and construction services are being performed by unaffiliated third
parties.

         The following table sets forth the amounts of fees, commissions and
cash distributions which the Partnership and the Operating Partnership accrued
for the account of the General Partners and their affiliates for the years ended
December 31, 1998, 1997 andS 1996. As described above, these fees have either
been contributed to the Partnership or are evidenced by the Receivables Note.

<TABLE>
<CAPTION>
           Type of Compensation                          1998          1997         1996
           --------------------                          ----          ----         ----
<S>        <C>                                         <C>          <C>           <C>    
           Property Management Fees                    $380,000           --      $329,000
           Leasing Commissions                               --           --      $ 63,000
           Cleaning Fees                                     --           --            --
           Construction Supervision Fee                      --           --      $ 72,000
           Financing Fee                               $399,000           --            --
           Reimbursement for Accounting and
           Administrative Services                      $18,000      $24,000            --
</TABLE>

                                      40
<PAGE>

        The Operating Partnership accrues on any unpaid fees or advances due to
First Winthrop and its affiliates at an interest rate of prime plus .75%. The
total interest incurred during 1996 was $694,000. All unpaid fees, advances and
accrued and unpaid interest were included in the Winthrop Debt Agreement.

         For the years ended December 31, 1996, 1997 and 1998, the Partnership
allocated $10,478, $(2,445) and $61,000, respectively, of taxable income
(losses) to Two Winthrop in accordance with its interest in the Partnership. For
the years ended December 31, 1996, 1997, and 1998 the Partnership allocated
$232,300, $(38,323) and $1,235,000, respectively, of taxable income (losses) to
Linnaeus-Lexington in accordance with its interest in the Partnership. For the
years ended December 31, 1996, 1997 and 1998, the Partnership allocated
$1,887,389, $(265,000) and $9,710,000 respectively, of taxable income (losses)
to WIPI in accordance with its interest in the Partnership.

         The directors, officers and partners of First Winthrop and
Linnaeus-Lexington and the directors, officers and general partners of WIPI
receive no remuneration or other compensation from the Partnership, the
Operating Partnership or the Joint Ventures.


                                      41
<PAGE>


                                     PART IV

Item 14. Exhibits, Financial Statements, Schedules and Reports
                  on Form 8-K.

         (a)      The following documents are filed as a part of this report:

                  1. Financial Statements - The Consolidated Financial
Statements listed on the accompanying Index to Consolidated Financial Statements
are filed as a part of this Annual Report.

                  2. Financial Statement Schedules - The Consolidated Financial
Statement Schedules listed on the accompanying Index to Consolidated Financial
Statements are filed as a part of this Annual Report.

          3. Exhibits - The Exhibits listed on the accompanying Exhibit Index
are filed as a part of this Annual Report.

         (b) Reports on Form 8-K - On November 4, 1998, the Registrant filed a
Form 8-K to disclose the disposition of assets.


                                      42
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                     1626 NEW YORK ASSOCIATES LIMITED

                                     PARTNERSHIP

                                     By:   TWO WINTHROP PROPERTIES, INC.
                                              Managing General Partner

                                            By: /s/   Michael L. Ashner
                                               ---------------------------------
                                                      Michael Ashner
                                                      Chief Executive Officer

                                         Date:  March 29, 1999

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Signature/Name            Title                               Date
--------------            -----                               ----

/s/ Michael Ashner        Chief Executive Officer             March 29, 1999
---------------------     and Director
Michael Ashner             

/s/ Thomas Staples        Chief Financial Officer             March 29, 1999
---------------------
Thomas Staples

/s/ Peter Braverman       Executive Vice President            March 29, 1999
---------------------     and Director
Peter Braverman            


                                      43
<PAGE>


                                                   EXHIBITS INDEX
<TABLE>
<CAPTION>

             Exhibit                                                                                     Page
<S>           <C>                                                                                        <C> 
3,4          Amended and Restated  Limited  Partnership  Agreement of 1626 New York Associates  Limited  (1)
             Partnership (the "Partnership")

3(a)         Amendment to Amended and Restated Limited Partnership Agreement dated August 23, 1995       (2)

10(a)        Third Amended and Restated Limited  Partnership  Agreement of Nineteen New York Properties  (3)
             Limited Partnership ("19 NY") dated as of September 20, 1990

10(b)        Commercial  Brokerage  Agreements  between 19 NY and First  Winthrop  Realty Co., Inc., as  (3)
             amended

10(c)        Commercial Management Agreements between 19 NY and Winthrop Management, as amended          (3)

10(d)        Agreements for building cleaning services between 19 NY and Venture Services, as amended    (3)

10(e)        Pledge and  Security  Agreement  by Winthrop  Interim  Partners  I, A Limited  Partnership  (1)
             ("WIPI") and Winthrop Financial Co., Inc. ("WFC") in favor of Chemical Bank

10(f)        Investor Note Loan Agreement dated September 17, 1984 between the Partnership and Chemical  (1)
             Bank as agent of The First National Bank of Boston, Citibank, N.A., Bank of Montreal, 
             Bankers Trust Company and Manufacturers Hanover Trust Company

10(g)        Intercreditor  Agreement  dated  as of  September  17,  1984  by and  between  Continental  (1)
             Casualty  Company and Chemical Bank acting on behalf of itself and The First National Bank
             of Boston,  Bankers Trust  Company,  Citibank,  N.A.,  Bank of Montreal and  Manufacturers
             Hanover Trust Company

10(h)        Form of Investor Bond issued to the Investor Partnership by Continental Casualty Company    (1)

10(i)        Mortgage made by 19 NY Limited  Partnership  to The Fuji Bank ("Fuji")  relating to a $250  (3)
             million Mortgage Loan on 757 Third Avenue,  410 Park 
</TABLE>


                                      44
<PAGE>

<TABLE>

<S>          <C>                                                                                         <C>
             Avenue, 535 Fifth Avenue, 545 Fifth Avenue and 1372 Broadway, dated as of January 18,
             1990, and related Mortgage Note Consolidation, Modification and Restatement Agreement

10(j)        Fuji Loan Mortgage  Modification and Restatement  Agreement  between Fuji and 19 NY, dated  (3)
             as of  September  18,  1990,  and  related  Mortgage  Note  Modification  and  Restatement
             Agreement, dated September 18, 1990

10(k)        Second Amended and Restated  Mortgage  Note,  Second  Amended and Restated  Mortgage,  and  (3)
             Renovation   Agreement   between  Fuji  and  19  NY,   relating  to  The  Fuji  Bank  Loan
             Restructuring, dated as of September 30, 1992

10(l)        Restructuring  Agreement,  dated  February 28, 1996 among Fuji, 19 NY and 535 Fifth Avenue  (4)
             LLC, 545 Fifth Avenue LLC, 757 Third Avenue LLC and 1372 Broadway LLC  (collectively,  the
             "LLCs"),  Four New York  Properties  Holdings  LLC  ("Holdings")  and  Zeus  Property  LLC
             ("Zeus") and Westhill Equities LLC

10(m)        Debt  Modification  and  Purchase  Agreement  dated  February  28,  1996  among 19 NY, the  (4)
             Partnership,  Isaac  Asset  LLC,  WFC,  First  Winthrop  Corporation,  Winthrop  Financial
             Associates,  A Limited  Partnership,  Winthrop  Management,  The Cleaning Force, A Limited
             Partnership and First Winthrop
             Properties, Inc.

10(n)        Second Amended and Restated  Deposit,  Disbursement and Security  Agreement dated February  (4)
             28, 1996, between the LLCs and Fuji

10(o)        Splitter Note A1, dated as of February 28, 1996, between Fuji and the LLCs                  (4)

10(p)        Form of Splitter Note A2-A29, dated as of February 28, 1996, between Fuji and the LLCs      (4)

10(q)        Form of Splitter Note B1 and B2, dated as of February 28, 1996, between Fuji and the LLCs   (4)

10(r)        Unsecured Promissory Note, dated as February 28, 1996, between Zeus and the LLCs            (4)

10(s)        Unsecured Loan Agreement, dated February 28, 1996 between the LLCs and Zeus.                (4)

16.          Letter dated September 19, 1996 from Arthur Andersen LLP.                                   (5)
</TABLE>

                                      45
<PAGE>

<TABLE>

<S>                                                                                                      <C>
27.          Financial Date Schedule                                                                     47

(1)       Incorporated by reference the Partnership's Registration Statement
          on Form 10, File No. 0-13500 as filed on April 30, 1985 and thereafter amended

(2)       Incorporated by reference to the Partnership's Current Report on
          Form 8-K filed on September 6, 1995

(3)       Incorporated by reference to the Partnership's Annual Report filed
          on Form 10-K for the year ended December 31, 1991.

(4)       Incorporated by reference to the Partnership's Annual Report filed
          on Form 10-K for the year ended December 31, 1995

(5)       Incorporated by reference to the Partnership's Current Report on Form 8-K
          dated September 19, 1996.
</TABLE>

                                      46