UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1998
                                       OR
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

              For the transition period from ________ to __________

                         Commission File Number: 0-5537

                        INVESTMENT PROPERTIES ASSOCIATES
             (Exact Name of Registrant as specified in its charter)

A New York Limited Partnership                           13-2647723
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                  60 East 42nd Street, New York, New York 10165
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:  (212) 687-6400

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

           Securities registered pursuant to Section 12(g) of the Act:

             820,000 Participations in 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 (ss. 229.405 of this chapter) is not contained herein, and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
Registrant -- Not applicable.

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

      Indicate by check mark whether the  registrant has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

         Yes_________               No_________

Documents Incorporated by Reference -- None.



<PAGE>

                                     PART I

      This report contains certain  forward-looking  statements.  Actual results
could differ materially from those projected in the  forward-looking  statements
as a result  of any  number  of  factors  discussed  herein  including,  without
limitation,   under  the  captions  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations" and "Business." When used in this
report, the words "anticipate,"  "estimate," "intend," "believe," "project," and
similar expressions are intended to identify  forward-looking  statements.  Such
statements are subject to certain risks,  uncertainties and assumptions.  Should
one or more of these risks or uncertainties  materialize,  or should  underlying
assumptions  prove  incorrect,  actual  results may vary  materially  from those
anticipated, expected, estimated, intended, believed or projected.

Item 1. Business.

      (a) General  Development  of Business.  Investment  Properties  Associates
("IPA" or "Registrant") is a New York limited  partnership  formed pursuant to a
Limited Partnership Agreement dated as of May 15, 1969, as amended on October 2,
1969,  October 31, 1969,  December 3, 1969,  and May 30, 1997 (the  "Partnership
Agreement").

      Harry B. Helmsley,  a General  Partner of  Registrant,  died on January 4,
1997. Upon his death, Mr.  Helmsley's  general  partnership  interest in IPA was
converted to a special  limited  partner  interest,  which was  inherited by his
spouse,  Leona M. Helmsley,  from Mr.  Helmsley's estate as of December 31, 1997
(the  "Converted  Special L.P.  Interest").  Under the terms of the  Partnership
Agreement as in effect on the date of Mr. Helmsley's death, the General Partners
were required to create a new limited  partnership  with the same  attributes as
Registrant and to convey all of the assets and liabilities of Registrant to such
entity. Such action would have


                                      - 2 -

<PAGE>

involved  substantial  transfer tax,  insurance  premium costs and other related
expenses  and no benefit to the  partners  of  Registrant  or to the  holders of
Participation  Interests  ("Participation  Interests"  or "PPIs") in the limited
partnership  interest  of  the  limited  partner  of  Registrant.   Accordingly,
Registrant  obtained  the  approval of the holders of a majority of the PPIs to,
among other things, amend the Agreement to permit the remaining General Partners
to elect to continue the business of  Registrant  in the event of the death of a
General  Partner  and to make such  election  with  respect  to the death of Mr.
Helmsley. Such amendments were effective on May 30, 1997 (the "Amendments").  As
contemplated  by the amended  Partnership  Agreement,  effective July 3, 1997, H
Associates  LLC ("H  Associates"),  an entity  owned by Leona M.  Helmsley,  was
admitted as a General Partner of Registrant.  H Associates' economic interest in
Registrant  was  acquired  from  Helmsley-Noyes  Company,  Inc.,  also a General
Partner of Registrant.

      On June  10,  1998,  ScogBell  Acquisition,  L.L.C.,  a  Delaware  limited
liability  company  ("ScogBell"),  purchased  from  Leona  Helmsley  all  of her
interests in  Registrant.  The  interests  from this sale that were  acquired by
ScogBell from Leona Helmsley included,  among other things,  general partnership
interests  (0.05%),  special  limited  partnership  interests  (33.29%)  and  an
aggregate of 282,377  Participation  Interests.  Also on June 10, 1998, ScogBell
acquired 28,550  Participation  Interests in the  over-the-counter  market. As a
result, ScogBell became a beneficial owner of 310,927 Participation Interests in
IPA which represents 37.9% of the outstanding Participation Interests.

      At December 31, 1998, Registrant owned fee titles to, or leasehold estates
in, six commercial  properties,  a 50% interest in one commercial property,  and
fee title to two unimproved real properties  (collectively,  the  "Properties").
The Properties are located in New


                                     - 3 -


<PAGE>

York, New York; Midland,  Texas; Houston,  Texas; and Newark, New Jersey. During
1998, Registrant sold six of its properties. 

      On January 22, 1998,  Registrant,  as ground  tenant,  sold its  leasehold
interest  in its  ground  lease with the City of  Newark,  New Jersey  under the
property located at 1180 Raymond Blvd. in Newark.  Consequently,  Registrant was
relieved  of  liability  for  ground  lease  rent and real  estate  taxes on the
property  from and after January 22, 1998.  The leasehold  interest was sold for
$1,350,000.

      On  September  28,  1998,  Registrant  sold  its five  Chicago  commercial
properties (the "Chicago Properties") for $121,000,000.  The sales proceeds from
the  sale of the  Chicago  Properties  were  used to  first  pay  mortgage  debt
($10,000,000), Affiliate Loans ($18,000,000), closing costs, including brokerage
commissions  paid to an affiliate  of a General  Partner  ($3,500,000),  accrued
distributions payable to General Partners,  Special Limited Partners and Limited
Partners   ($25,200,000)  and  other  commitments   ($7,300,000),   aggregating
approximately   $64,000,000.   In  accordance  with   Registrant's   Partnership
Agreement,  Registrant also made special distributions to its partners of record
on October 30, 1998 using the proceeds  from the sale of the Chicago  Properties
in the approximate amount of $57,000,000.  The Chicago Properties  represented a
total  rentable  area of  approximately  2,093,000  square feet of  Registrant's
Properties.  During 1998,  approximately 29% of Registrant's Gross Revenues from
Real Estate and 33% of  Registrant's  expenses were  attributable to the Chicago
Properties.

      On February 1, 1999,  Registrant  entered  into a contract for the sale of
the Mojud Building in Long Island City, New York for a sales price of $6,500,000
for which  Registrant  has  received  a $650,000  deposit  that is being held in
escrow pending the closing of the property.  The expected  closing date for this
property is on or before April 19, 1999.


                                      - 4 -

<PAGE>

      On  November  30,  1994,   Registrant   borrowed  $6,000,000  from  Irving
Schneider, a General Partner of Registrant, and $12,000,000 from an affiliate of
Harry B. Helmsley, also a General Partner (collectively, the "Affiliate Loans").
The Affiliate Loans, which were due and payable on demand,  bore interest at the
rate  announced  from time to time by Chase Bank,  N.A.  ("Chase") as its "prime
rate." Registrant paid $1,160,124 and $1,540,750 in interest under the Affiliate
Loans during 1998 and 1997,  respectively.  The  Affiliate  Loans were repaid in
October, 1998 from the proceeds of the sale of the Chicago Properties.  See Item
2.

      On December 1, 1994, Chase loaned  $10,750,000 to Registrant,  which funds
were used by Registrant to repay its 9% Junior  Mortgage  Bonds (the "Bonds") in
full on such  date.  Chase  also  agreed to extend  the final  maturity  date of
Registrant's mortgage loans relating to its 1440 Broadway,  245 Fifth Avenue and
261 Fifth Avenue properties in New York, New York, and to its One North Dearborn
and One LaSalle  buildings  in Chicago  (collectively,  the "Chase  Loans") from
January  2, 1995 to January 2, 1997.  On April 25,  1995,  Registrant  and Chase
entered into a Note  Modification  Agreement  providing for the extension of the
maturity of the Chase Loans and the cross  collateralization  and cross defaults
among the properties  that secure the Chase Loans.  In addition,  the Registrant
was given the option of paying  interest  on the Chase Loans based on LIBOR plus
2.25% or prime plus 0.375%.  Pursuant to a Second Note  Modification  Agreement,
the  maturity  of the Chase  Loans was  extended  to January 2, 1999.  Effective
January 2, 1999,  pursuant to an agreement with Chase, the maturity of the Chase
Loans was extended further to January 2, 2000 and require  principal  repayments
of $3,000,000 in 1999.

      On November 9, 1998, Registrant received an extension to April 30, 1999 on
the  maturity  of its  mortgage  loan with  Apple  Bank  pertaining  to its 1328
Broadway property in New


                                     - 5 -
<PAGE>

York City. The  $8,000,000  first mortgage loan with Apple Bank on 1328 Broadway
in which  Registrant has a 50% tenancy in common  interest,  which became due on
November 24, 1997 and was extended to April 24, 1999, has been extended  further
to April 30, 1999,  at an interest rate of 8.5% per annum.  Registrant  believes
that it will be able to refinance its mortgage loan from Apple Bank with respect
to its 1328 Broadway property in New York City.

      During 1998,  Registrant  made  principal  payments of  $13,000,000 in the
aggregate on its Chase  Loans,  including  $10,000,000  from the proceeds of the
sale of the Chicago Properties to make these principal  payments.  The aggregate
principal amount of the Chase Loans at December 31, 1998 was $19,847,488.

      (b) Financial  Information  About  Industry  Segments.  Registrant's  sole
business is the  ownership  and  operation of  commercial  real  estate.  All of
Registrant's revenues, operating profit or loss and assets relate solely to such
industry segment.

      (c) Narrative  Description of Business.  Registrant's only business is the
ownership and operation of commercial real properties which it leases to various
tenants.  Registrant's  principal  source of revenues is rent received from such
tenants.  The primary costs  associated with owning and leasing  commercial real
estate are real estate  taxes,  utilities,  interest on  indebtedness,  property
management  and  leasing  fees,   payroll  and  related  expenses,   repair  and
maintenance expenses and depreciation.  All of the properties owned and operated
by Registrant are set forth in Item 2.

      Registrant's  Properties  taken as a whole are leased to large  numbers of
lessees and  Registrant is not  dependent  upon any single  lessee,  the loss of
which would have a material  adverse effect on Registrant.  Due to the nature of
the Registrant's business, Registrant has only


                                      - 6 -
<PAGE>

one identifiable market segment and has no new products,  uses no raw materials,
owns no patents, trademarks,  licenses, franchises or concessions and expends no
sums for research and development.  No material portion of Registrant's business
is seasonal in nature.

      Registrant's  needs for  working  capital  are  similar  to those of other
owners and operators of commercial  real property and,  generally,  are provided
for with cash generated from operations and, in some cases, borrowings.

      Each property owned by Registrant competes with real properties of similar
function and quality in its geographic area. Commercial rental properties within
a given geographic area tend to compete on the basis of location,  amenities and
price.  Demand for  commercial  rental  space is also  dependent  upon  economic
conditions  prevailing in the particular  geographical  area and the quantity of
suitable space in such area.

      Registrant  employs  approximately  46 people  who  handle  maintenance of
its properties. All of the Registrant's other operating functions, which consist
primarily of property leasing and property management services, are performed by
Helmsley-Spear,  Inc. ("HSI") or affiliates of HSI, which entities may be deemed
to be affiliates of Registrant.  Management fees and leasing commissions charged
by HSI  aggregated  approximately  $1,969,600  in 1998,  $2,098,300  in 1997 and
$2,330,400 in 1996. HSI also earned $3,025,000 in brokerage  commissions in 1998
in connection with the sale of the Chicago Properties. Additionally,  Registrant
purchases some of its maintenance  supplies and materials from Deco Supplies Co.
("Deco"),  which may be  deemed an  affiliate  of one of its  partners.  No such
purchases were made in 1998 but purchases  aggregated  approximately  $61,000 in
1997 and $23,000 in 1996.  Registrant  believes  that such services and products
are  supplied  at prices that  approximate  those that would be  available  from
non-affiliates. See Item 13.


                                     - 7 -

<PAGE>

Item 2. Properties.

      General. At December 31, 1998, Registrant's Properties included fee titles
to, or leasehold  estates in, six commercial  properties,  a 50% interest in one
commercial  property,  and fee  title to two  unimproved  real  properties.  The
Properties are located in New York, New York; Midland,  Texas;  Houston,  Texas;
and  Newark,   New  Jersey.  The  Properties  have  a  total  rentable  area  of
approximately 2,274,000 square feet.

      The table below sets forth a description of each of the  Properties  owned
by Registrant on December 31, 1998, its location, type of ownership and rentable
area in square feet.

<TABLE>
<CAPTION>
Property                           Description                      Ownership          Total Rentable
                                                                                       Area (Sq. Ft.)
<S>                                <S>                              <C>                <C>    
New York, New York

1440 Broadway                      25-story office bldg.            Fee                690,000

261 Fifth Avenue                   25-story office bldg.            Fee                402,000

245 Fifth Avenue                   26-story office bldg.            Fee                287,000

Marbridge Building                 11-story office bldg.            50% of Fee         357,000
(1328 Broadway)

Mojud Building(1)                  5-story loft building            Fee                181,000
(Long Island City)

Texas

Midland Savings Bldg.              14-story office bldg.            Fee                167,000
(Midland)(2)                       (currently vacant)

</TABLE>

_______________________
(1)   On February 1, 1999,  Registrant  entered  into a contract for the sale of
      the Mojud  Building  in Long  Island  City,  New York for a sales price of
      $6,500,000.  The expected  closing date for this  property is on or before
      April 19, 1999.

(2)   Registrant is not  attempting to rent space in such building since it does
      not believe  that the building can be operated  profitably  under  current
      market   conditions.   Such  property  is  not  material  to  Registrant's
      operations.


                                     - 8 -

<PAGE>

<TABLE>
<CAPTION>
                                                                                     Total Rentable
Property                              Description                 Ownership          Area (Sq. Ft.)
--------                              -----------                 ---------          --------------
<S>                                   <C>                         <C>                <C>    
Edgewood Shopping Center 
(Houston)                             Unimproved Land             Fee                --

Bellway Shopping Center               Unimproved Land             Fee                --
(Houston)

New Jersey

570 Broad Street (Newark)(3)          14-story office bldg.       Fee                190,000

</TABLE>

      On January 22, 1998,  IPA sold its leasehold  interest in its ground lease
with the City of Newark,  New  Jersey on the  property  located at 1180  Raymond
Blvd.  in Newark.  As a  consequence  of the  transaction,  IPA is  relieved  of
liability for ground lease rent and real estate taxes on the ground  lease.  IPA
was incurring  operating losses of approximately  $65,000 per month with respect
to 1180 Raymond Blvd. The leasehold interest was sold for $1,350,000.

      On  September  28,  1998,  IPA  sold  its  five  Chicago   Properties  for
$121,000,000.  The sale  proceeds  were applied first to the payment of mortgage
debt  ($10,000,000),  Affiliate  Loans  ($18,000,000),  closing costs  including
brokerage  commissions  paid to an affiliate of a General Partner  ($3,500,000),
accrued distributions payable to General Partners,  Special Limited Partners and
Limited Partners ($25,200,000) and other commitments  ($7,300,000),  aggregating
approximately  $64,000,000.  IPA made a  special  distribution  to its  partners
following  the end of the  September  30, 1998  quarter to partners of record on
October  30,  1998  in  the  approximate  amount  of  $57,000,000.  The  Chicago
Properties  represented a total rentable area of approximately  2,093,000 square
feet of Registrant's Properties. During 1998, approximately 29% of

_____________________________
(3) Vacant since 1996.

                                     - 9 -
<PAGE>

Registrant's  Gross Revenues from Real Estate and 33% of  Registrant's  expenses
were attributable to the Chicago Properties.

      Additional  Property   Information.   Three  of  Registrant's   Properties
individually account for 10% or more of its total assets or revenues at December
31, 1998. Such properties are referred to above as 1440 Broadway,  New York, New
York, 261 Fifth Avenue,  New York, New York, and 245 Fifth Avenue, New York, New
York.

      The estimated  occupancy rate for the Registrant's  1440 Broadway property
for 1998,  1997,  1996, 1995 and 1994 was  approximately  74%, 74%, 61%, 73% and
70%,  respectively.  The average annual base rent per leased square foot at such
property  was  approximately  $22.90 in 1998,  $26.91  in 1997,  $28.10 in 1996,
$23.94 in 1995 and $24.57 in 1994.

      The  estimated  occupancy  rate  for the  Registrant's  261  Fifth  Avenue
property for 1998, 1997, 1996, 1995 and 1994 was approximately 84% 80%, 80%, 78%
and 72%,  respectively.  The average rental per square foot at such property was
approximately $22.88 in 1998, $22.61 in 1997, $21.28 in 1996, $21.25 in 1995 and
$20.49 in 1994.

      The  estimated  occupancy  rate  for the  Registrant's  245  Fifth  Avenue
property for 1998,  1997, 1996, 1995 and 1994 was  approximately  78%, 74%, 67%,
57% and 56%,  $20.50,  respectively.  The average rental per square foot at such
property  was  approximately  $25.03 in 1998,  $22.17  in 1997,  $20.84 in 1996,
$20.38 in 1995 and $20.05 in 1994.

      Registrant's  1440  Broadway  property  is a 25  story  commercial  office
building in midtown Manhattan. Three separate tenants, all of which are clothing
retailers,  occupy 10% or more of the rentable area of such property. The rental
per annum of the first clothing  retailer is $4,225,476 and its lease expires on
December 31, 1999,  subject to two consecutive five year renewal options to 2004
and 2009 at then prevailing market rentals. The rental per annum of the


      `                               - 10 -
<PAGE>

second  clothing  retailer  is  $1,914,800  per year and such  lease  expires on
December  31,  2002 with no renewal  options.  In January,  1998,  approximately
92,950 square feet was rented to a third  clothing  retailer whose lease expires
in 2013.  The  rental  per  annum  through  January  2003  under  such  lease is
approximately  $1,431,000.  From 2003 to 2008,  the  rental  per  annum  will be
approximately  $2,555,800.  From 2008 to 2013,  the  rental  per  annum  will be
approximately $2,931,700.

      Registrant's  261 Fifth Avenue property is a 25 story building  located in
midtown Manhattan. No single tenant of such property occupies 10% or more of the
rentable area of such property.

      Registrant's  245 Fifth Avenue property is a 26 story building  located in
midtown Manhattan.  One tenant occupies 10% or more of the rentable area of such
property.  The rental per annum is  approximately  $1,159,200 and the tenant has
three leases which expire on June 30, 1999 with respect to rent of approximately
$164,000,  December 31, 1999 with respect to rent of approximately  $695,500 and
December 31, 2002 with respect to rent of approximately $299,600.

      While the New York  commercial  real estate market is highly  competitive.
Registrant  has achieved  occupancy and rental rates at its New York  properties
which  have  enabled  it to  operate  these  properties  profitably.  Registrant
believes that rental rates will remain high enough to operate  these  properties
profitably for the  foreseeable  future,  although there can be no assurances in
this regard.

      The  following  table  sets forth  certain  information  concerning  lease
expirations for the Registrant's principal properties at December 31, 1998:


                                     - 11 -
<PAGE>

                                  1440 Broadway
              Number of          Total Leased                           % of
            Tenants whose           Area in                         Gross Annual
Year      lease will expire       Square Feet       Annual Rental      Rental
----      -----------------       -----------       -------------      ------

1999             19                 196,172          $4,217,922         35.4
2000              6                   7,025             168,749          1.4
2001              3                  26,470             900,759          7.6
2002              3                  85,987           1,970,228         16.5
2003              2                   7,518             236,032          2.0
2004              1                   2,000             225,583          1.9
2005              4                  13,884             882,173          7.4
2006              2                  72,762           1,647,405         13.8
2007              0                       0                   0          0.0
2008 or later     3                  96,546           1,667,113         14.0
                 --                 -------         -----------        -----
  Totals         43                 508,364         $11,915,964        100.0
                 ==                 =======         ===========        =====

                                261 Fifth Avenue
              Number of            Total Leased                       % of Gross
            Tenants whose            Area in                            Annual
Year      lease will expire        Square Feet      Annual Rental       Rental
----      -----------------       -----------       -------------       ------

1999             23                  58,739          $1,378,677          17.4
2000             16                  45,466           1,025,200          12.9
2001             11                  40,012             900,744          11.4
2002             11                  35,584             813,105          10.3
2003              5                  13,043             307,964           3.9
2004              4                  38,743             978,143          12.4
2005              4                  30,668             749,896           9.5
2006              0                       0                   0           0.0
2007              4                  73,327           1,681,086          21.1
2008 or later     1                   1,000              84,080           1.1
                 --                 -------          ----------        ------
  Totals         79                 336,582          $7,918,895         100.0
                 ==                 =======          ==========        ======



                                     - 12 -
<PAGE>

                                245 Fifth Avenue
              Number of            Total Leased                       % of Gross
            Tenants whose            Area in                            Annual
Year      lease will expire        Square Feet       Annual Rental      Rental
----      -----------------        -----------       -------------      ------

1999             18                   73,850           $2,110,609        38.6
2000              5                    9,505              246,547         4.5
2001             16                   59,590            1,436,689        26.3
2002             13                   45,213            1,023,543        18.7
2003              5                   12,975              319,161         5.8
2004              2                    9,607              190,655         3.5
2005              1                    2,324               60,773         1.1
2006              1                    4,684               84,312         1.5
2007              0                        0                    0           0
2008 or later     0                        0                    0           0
                 --                  -------           ----------       -----
Totals           61                  217,748           $5,472,289       100.0
                 ==                  =======           ==========       =====

Item 3. Legal Proceedings.

      There are no material  pending legal  proceedings to which Registrant is a
party or of which any of  Registrant's  property  is the  subject.

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

      No  matters  were  submitted  to a vote of holders of PPIs at a meeting or
otherwise during the fourth quarter of 1998.

                                     PART II

Item 5. Market for the Registrant's Participation Interests and Related Security
        Holder Matters.

      As discussed  above,  Registrant is a limited  partnership.  Participation
Interest,  which  represent the  beneficial  interest of the  Registrant's  sole
Limited  Partner,  are  traded in the  over-the-counter  market on the  National
Association of


                                     - 13 -
<PAGE>

Securities  Dealers Automated  Quotations  System  ("NASDAQ")  under the  symbol
"IVPA."  There  is  no  regular  market  for these securities and quotations are
limited and sporadic.

      The  range  of  high  and  low  closing  bid  quotations  for  PPIs in the
over-the-counter market for the two most recent years was as follows:

                             1998                               1997
                             ----                               ----
                    High              Low              High              Low
                    ----              ---              ----              ---
First Qtr.           85               70 1/8            60               38
Second Qtr.         102               72 1/2            85               57
Third Qtr.          119               99 1/2            86               65 1/2
Fourth Qtr.         110               61                71               61

      The  foregoing   over-the-counter   quotations  represent  prices  between
dealers,  do not include  retail  mark-up,  mark-down or commission  and may not
necessarily  represent actual transactions.  As of December 31, 1998, there were
535 holders of record of Participation Interests.

      Pursuant  to the  Partnership  Agreement,  Registrant  is required to make
certain cash distributions to holders of Participation  Interests. Net operating
revenues for each calendar year are  distributable to the partners of Registrant
approximately as follows:

                  General Partners (as a group):                            .55%

                           Irving Schneider

                           Minlyn, Inc.

                           ScogBell AG, Inc. (formerly known as
                           Helmsley-Noyes Company, Inc.)

                           ScogBell(1)

_____________________________
(1)   Based upon  information  in a Schedule  13D filed by  ScogBell on June 23,
      1998, the Registrant  believes that ScogBell was formed to acquire,  hold,
      finance  and  sell  interests  in  the  Registrant.   By  agreement  among
      ScogBell's  members,  the  management  and  control of  ScogBell is vested
      exclusively  in ScogBell AG Manager,  Inc.,  a Delaware  corporation,  and
      ScogBell SB Manager, Inc., a Delaware corporation, as managers.



                                      - 14 -
<PAGE>

                  Converted Special L.P. Interest

                           ScogBell                                         .95%

                  Special Limited Partners (as a group):                  48.50%

                           ScogBell

                           Irving Schneider

                  Limited Partner (nominee for
                  holders of Partnership
                  Participation Interests):                                50.0%

      The  Limited  Partner is the  nominee  for the  holders  of  Participation
Interests and all  distributions to the Limited Partner are distributed  ratably
to the  holders  of  820,000  Participation  Interests.  If with  respect to any
calendar year the Limited  Partner's  distributive  share  (computed on the same
basis as that used in  preparing  Registrant's  Federal  income  tax  return) of
income (loss),  plus one-half of such partner's  distributive share of long-term
capital  gains,  exceeds  the net  operating  revenue  allocated  to the Limited
Partner as referred to in the preceding  paragraph,  then  Registrant  must also
distribute  additional funds in an amount equal to such excess to the holders of
Participation Interests. If Registrant does not have funds for such distribution
(from cash on hand or borrowings),  the Agreement obligates the General Partners
to lend or contribute funds to Registrant for such purpose.

      In 1998,  Registrant had "net operating  revenues" (as defined below),  of
$9,803,570,  of which  $5,442,159 in the  aggregate (or $6.64 per  Participation
Interest)  was  distributed  on March 31,  1999 to the  holders  of record as of
December 31, 1998 of  Participation  Interests.  An aggregate of  $5,442,159  in
respect of 1998 net  operating  revenues is required  to be  distributed  to the
Special  Limited  Partners  and  General  Partners  identified  above.   Accrued
distributions with



                                     - 15 -
<PAGE>


respect to net  operating  revenues for 1994,  1995,  1996 and 1997  aggregating
$20,310,705 were paid to the General Partners and Special Limited  Partners,  in
1998 using the proceeds of the sale of the Chicago Properties. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

      In 1997,  Registrant had "net operating revenues" of $9,174,787,  of which
$4,923,892  in the  aggregate  (or $6.00 per  Participation  Interest,  $0.48 of
which,  for financial  reporting  purposes,  represents a return of capital) was
distributed  on March 31, 1998 to the holders of record as of December  31, 1997
of  Participation  Interests.  An aggregate of $4,923,892 in respect of 1997 net
operating revenues is required to be distributed to the Special Limited Partners
and General  Partners  identified  above.  The  Special  Limited  Partners  also
deferred receipt of their distributions in respect of net operating revenues for
1994,  1995,  1996 and  1997.  See  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations."

      "Net operating revenues" is defined in Registrant's  partnership agreement
as follows:  for any year, (i) net taxable income of the  Registrant,  plus (ii)
depreciation and amortization  expenses allowable for income tax purposes during
such  year  (but  only  to  the  extent  of  mortgage  repayments),  (iii)  plus
amortization  of Bond issuance  costs and Bond  discount  (which is not relevant
after 1994),  (iv) plus  amortization  of financing  costs,  (v) less  principal
repayments  on mortgages.  Net operating  revenues of Registrant in recent years
has generally exceeded cash available for distribution to Registrant's partners.
This trend is  anticipated  to continue.  Consequently,  Registrant  may have to
borrow  additional  funds or sell properties to fund such  distributions  of net
operating revenues in the future. See "Item 7" below.

      Four of Registrant's  properties are encumbered by first mortgages,  three
of which  require  payments  of interest at  variable  rates.  Consequently,  if
interest rates on such variable rate


                                     - 16 -
<PAGE>

mortgages  were to  increase,  Registrant  could have less funds  available  for
distribution to holders of Participation Interests.

Item 6. Selected Financial Data.

<TABLE>
<CAPTION>
                                    1998                1997               1996               1995               1994
                                    ----                ----               ----               ----               ----
<S>                            <C>                    <C>                <C>                 <C>               <C>        
Income Statement Data
Gross revenues from real       $43,454,081            $46,463,473        $52,216,081         $53,879,055       $52,739,194
estate

Net Income transferred to      112,747,733              8,726,836          8,452,069           9,331,341         8,702,453
Partner's capital accounts

Net operating revenues, as       9,803,570              9,174,787          8,342,911           9,857,034        10,212,572
defined 

Net income per                     60.4848                 5.5280             5.8636              5.8446            5.4269
Participation Interest:

Balance Sheet Data

Total assets                   $49,762,234            $53,585,976        $55,393,657         $55,061,349       $55,524,560

Mortgages payable              $23,847,488            $36,847,488        $40,314,558         $43,363,342       $46,408,730

Affiliate Loans                         --            $18,000,000        $18,000,000         $18,000,000       $18,000,000

</TABLE>

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

        Liquidity and Capital Resources:

      Historically,  Registrant's  income for operations has been  sufficient to
provide for its expenses.  From time to time,  however,  Registrant has borrowed
funds to meet its short  term  liquidity  needs.  Registrant  believes  that its
properties are not overly leveraged and that, under normal market conditions, it
will be able to obtain additional  financing as needed.  The Registrant has sold
significant  assets  during 1998 and may sell assets in the future to  discharge
its obligations.

      On  September  28,  1998,  Registrant  sold  the  Chicago  Properties  for
$121,000,000.   The  sales  proceeds  were  used  to  first  pay  mortgage  debt
($10,000,000), Affiliate Loans


                                     - 17 -
<PAGE>

      ($18,000,000),  closing costs,  including brokerage commissions paid to an
affiliate of a General Partner  ($3,500,000),  accrued  distributions payable to
General  Partners,  Special Limited Partners and Limited Partners  ($25,200,000)
and other commitments ($7,300,000),  aggregating approximately  $64,000,000.  In
accordance with Registrant's Partnership Agreement, Registrant also made special
distributions  to its  partners of record on October 30, 1998 using the proceeds
of the sale of the Chicago Properties in the approximate amount of $57,000,000.

      On January 22, 1998,  Registrant,  as ground  tenant,  sold its  leasehold
interest  in its  ground  lease with the City of  Newark,  New Jersey  under the
property located at 1180 Raymond Blvd. in Newark.  Consequently,  Registrant was
relieved  of  liability  for  ground  lease  rent and real  estate  taxes on the
property  from and after January 22, 1998.  The leasehold  interest was sold for
$1,350,000.

      On February 1, 1999, a contract for the sale of the Mojud Building in Long
Island City, New York was entered into for a sales price of $6,500,000 for which
Registrant has received a $650,000  deposit that is being held in escrow pending
the closing of title in respect of the property.  The expected  closing date for
this property is on or before April 19, 1999.

      Pursuant  to an  agreement  with Chase  effective  January  2,  1999,  the
maturity of Registrant's  Chase Loan having an outstanding  principal balance of
$19,847,500 was extended to January 2, 2000. See "Business"  above.  Pursuant to
an agreement on November 9, 1998, the Registrant's mortgage loan with Apple Bank
pertaining  to its  1328  Broadway  property  in New  York  City,  which  has an
outstanding  balance of $8,000,000 of which  Registrant is obligated for its 50%
tenancy in common  interest of  $4,000,000,  was extended to a maturity  date of
April  30,  1999.  Registrant  believes  that it will be able to  refinance  its
mortgage loan from Apple Bank with respect to its 1328 Broadway  property in New
York City.

      Registrant is required to make certain cash  distributions to its partners
for each year. See "Item 5." In October,  1998, payment of accrued distributions
to the General Partners and


                                     - 18 -
<PAGE>

Special Limited Partners aggregating $20,310,705 in respect of 1994 through 1997
net  operating  revenues  were paid for with  cash from the sale of the  Chicago
Properties. Also in October, 1998, Registrant made a special distribution to its
partners of approximately  $57,000,000 which was paid with cash from the sale of
the Chicago Properties.  Registrant  anticipates  satisfying its working capital
requirements for 1999 generally  through cash from the operations and additional
short-term borrowings or mortgage refinancings and/or the sale of properties.

      Net cash provided by operating  activities was approximately  $9.4 million
in 1998,  as compared to $7.7 million in 1997.  Such higher  levels in 1998 were
primarily  due to the improved  performance  of  Registrant's  Properties in New
York. Net cash used in financing  activities was approximately $113.4 million in
1998,  as compared  to $8.4  million in 1997 which was due to the  repayment  of
indebtedness  and payment of  distributions  using the proceeds from the sale of
the  Chicago  Properties.   Net  cash  provided  by  investing   activities  was
approximately  $115.6 million in 1998, as compared to net cash used in investing
activities  of $2.2 million in 1997.  Such an increase was  attributable  to the
proceeds received from the sale of the Chicago Properties.

      On  November  30,  1994,   Registrant   borrowed  $6,000,000  from  Irving
Schneider, a General Partner of Registrant, and $12,000,000 from an affiliate of
Harry B. Helmsley, also then a General Partner, pursuant to the Affiliate Loans.
The  Affiliate  Loans bore interest at the rate  announced  from time to time by
Chase as its "prime rate" and were due and payable on demand.  In October, 1998,
the Affiliate  Loans were repaid using the proceeds from the sale of the Chicago
Properties. See "Item 2."

      At December 31, 1998,  Registrant has outstanding mortgage indebtedness in
connection with its Chase Loans of $19,847,488  which is secured by three of the
New York


                                     - 19 -
<PAGE>

properties.  The Chase  Loans  bears  interest  at LIBOR plus 2.25% and  require
principal  repayments  of  $3,000,000  during  1999 with the  balance due on the
maturity date of January 2, 2000.

      During 1998,  principal  repayments on the Chase Loans of $13,000,000 were
made  including  a payment of  $10,000,000  in  connection  with the sale of the
Chicago Properties.  Registrant is also obligated for one-half of the $8,000,000
mortgage  payable  to Apple Bank which  bears  interest  at 8.5% and which has a
maturity date of April 30, 1999.

      Pursuant  to an  agreement  with  Chase,  Registrant  has agreed to invest
$1,000,000 at its 1440 Broadway  property in New York. See  "Business."  Through
December 31, 1998,  Registrant has invested  approximately  $2,051,000 on tenant
improvements and leasing commissions at such property. Registrant has no present
material  commitments  for any other  capital  expenditures  in excess of normal
business  requirements  and does not anticipate  incurring any such  commitments
through 1999.

      Four of Registrant's  properties are encumbered by first mortgages,  three
of which  require  payments  of interest at  variable  rates.  Consequently,  if
interest  rates on such variable  rate  mortgages  were to increase,  Registrant
could have less funds  available for  distribution  to holders of  Participation
Interests.

      Year 2000 Disclosure:

      Until recently, computer programs were written to store only two digits of
date-related  information  in order to more  efficiently  handle and store data.
Thus the programs were unable to properly  distinguish between the year 1900 and
the year 2000.  This is  frequently  referred  to as the "Year 2000  Problem" or
"Y2K."


                                     - 20 -


<PAGE>

      Registrant has been informed by its vendors that each has developed a plan
to  address  the  affected  informational  (accounting,   billing  payroll)  and
operational (HVAC, fire alarms,  security,  elevators,  and lighting) systems of
Registrant.

      Registrant has determined that the majority of its systems,  including all
mission critical systems, are already Y2K compliant. Registrant also anticipates
that any issues  encountered with  informational or operational  systems will be
remediated.  Registrant  expects  that where  appropriate  all mission  critical
systems will be tested by the close of the second  quarter of 1999.  The cost of
Registrant's  compliance for Y2K was not material to 1998  operations and is not
expected to be material to 1999 operations.


                                     - 21 -
<PAGE>

      Results of Operations:

1998 Compared to 1997

      Gross  revenues from rentals for 1998 decreased  approximately  $3,009,000
(approximately 7%) as compared to 1997, primarily due to decreases in revenue as
a result of the sale of the Chicago  Properties  offset in part by  increases in
revenue from  Registrant's  New York  properties.  Net income for 1998 increased
approximately  $104,000,000 primarily due to the sale of the Chicago Properties.
Total  expenses  decreased  by  approximately  $5,294,000   (approximately  15%)
primarily as a result of decreases in leasehold rentals,  interest,  real estate
taxes,   repairs  and  maintenance  and  other  property   operating   expenses,
attributable to the sale of the Chicago  Properties in September,  1998. 

      During  1998,  approximately  8  tenants  in  various  properties  with an
aggregate  annualized  rental of  approximately  $236,000 vacated their premises
prior to the  expiration  of their leases.  While leasing  activity has recently
been more active in New York,  it remains  relatively  flat in Newark.  Although
Registrant  anticipates  continuing its practice of  negotiating  new leases and
renewing existing leases upon their expiration,  there is no assurance that some
of  Registrant's  tenants  will  not go  out of  business,  reduce  their  space
requirements or relocate. 

      For 1998,  Registrant's interest expense decreased  approximately $848,000
(approximately  18%),  primarily  due to lower  levels  of  average  outstanding
indebtedness  resulting from mortgage  principal  repayments of $13,000,000  and
repayments of Affiliate Loans of $18,000,000.


                                     - 22 -
<PAGE>

      Registrant's  real  estate  tax  expense in 1998  decreased  approximately
$2,269,000  (approximately  24%),  primarily  due to  the  sale  of the  Chicago
Properties in September,  1998. Registrant,  under certain commercial leases, is
able to pass a portion of the increases in real estate taxes, operating expenses
and  increases  in the  consumer  price  index  to the  tenants  based  on lease
escalation clauses.

      Management  fees decreased  approximately  $251,000  (approximately  18%),
primarily  due to the  sale  of  the  Chicago  Properties  in  September,  1998.
Depreciation  expenses decreased  approximately  $658,000  (approximately  14%),
primarily due to the sale of the Chicago Properties in September, 1998.

1997 Compared to 1996

      Gross revenues from rentals for 1997 decreased  approximately $5.7 million
(approximately 11%) as compared to 1996, primarily due to the vacancy of the 570
Broad Street property in Newark,  New Jersey since December 31, 1996, as well as
the  disposition  of  two  other  properties  in  Newark.  In  addition,   lease
termination  fees  decreased  in 1997 as compared  to 1996.  Net income for 1997
increased  approximately  $275,000  (approximately  3.2%)  primarily  due  to an
increase in other  revenues  relating  to real estate tax refunds and  insurance
proceeds.  Total expenses decreased by approximately $4.2 million (approximately
9.8%) primarily as a result of decreases in leasehold  rentals,  interest,  real
estate taxes, repairs and maintenance and other property operating expenses.

      During  1997  approximately  14  tenants  in  various  properties  with an
aggregate  annualized  rental of  approximately  $262,000 vacated their premises
prior to the  expiration  of their leases.  While leasing  activity has recently
been more active in New York, it remains  relatively flat in Chicago and down in
Newark. Although Registrant anticipates continuing its practice of


                                     - 23 -
<PAGE>

negotiating  new leases and renewing  others,  Registrant  believes  more of its
space may become vacant as a result of additional tenants going out of business,
reducing their space requirements or relocating.  In the competitive  markets in
which the  Registrant's  properties are located,  it is often  difficult to find
acceptable replacement tenants, even at lower rents. These trends have adversely
affected  Registrant's  results in 1997 and could  continue to adversely  affect
Registrant's results in 1998. At December 31, 1997,  Registrant did not have any
receivables associated with such vacancies.

      For  1997,   Registrant's  interest  expense  decreased  to  $4.7  million
(approximately  3.9%),  primarily  due to lower  levels of  average  outstanding
indebtedness.

      Registrant's  real estate tax expense in 1997 totaled $9.4 million,  which
represents a decrease of approximately  4.7% over amounts expensed in 1996. This
decrease  is  attributable   primarily  to  decreases  in  certain  real  estate
assessments and the disposition of certain properties. Registrant, under certain
commercial  leases,  is able to pass a portion of the  increases  in real estate
taxes,  operating  expenses and  increases  in the  consumer  price index to the
tenants based on lease escalation clauses.

      Management fees decreased  approximately 6.0% in 1997 as compared to 1996,
primarily  due to lower  gross  revenues  from  rentals.  Depreciation  expenses
decreased  approximately 2.8% in 1997 as compared to 1996,  primarily due to the
fact that certain of Registrant's  properties  became fully  depreciated by 1996
and the disposition of certain properties.

      On June 1, 1997,  Registrant  assigned  its ground  lease with the City of
Newark,  New Jersey on the  property  located  at 1180  Raymond  Boulevard  to a
newly-formed  corporation.  The  assignee  has agreed that such  assignment  was
received  by it as agent for  Registrant.  In  connection  with  this  transfer,
management had determined that, due to the recurring operating


                                     - 24 -

<PAGE>

losses  sustained  by  this  property  and  the  general  deterioration  of  the
surrounding area, the transferred leasehold had no value, and recorded a reserve
for  impairment  equal to the book value of the  leasehold  of  $711,522  at the
transfer date.In December, 1997, Registrant received from a third party an offer
of $1,350,000 for its 1180 Raymond Blvd. ground lease. Upon receipt of the offer
registrant reversed the previously  recorded reserve for impairment.  On January
22, 1998, the leasehold  interest was sold for  $1,350,000.  In connection  with
such sale, past due property taxes on the property  totaling  $410,143 were paid
to the City of Newark with a portion of the sale proceeds.

Item 7A. Disclosures About Market Risk.

      Registrant  is  exposed  to  interest  rate  risk  on  its  variable  rate
mortgages.  On  December  31,  1998,  Registrant  had  total  mortgage  debt  of
approximately  $23,847,000 of which  approximately $19,847,000 (or approximately
83%) is  variable rate. All of Registrant's mortgage debt is scheduled to mature
within the next 12 months.  If Registrant elects to refinance such mortgage debt
upon   maturity,  Registrant  would  seek  to  manage  its  interest  rate  risk
through the use of fixed rate debt or interest rate  derivatives  in conjunction
with variable rate debt. Registrant believes that it can refinance such mortgage
debt at commercially  reasonable  rates,  although there can be no assurances in
this regard.

Item 8. Financial Statements and Supplementary Data.

      The  response  to this Item is  submitted  in a  separate  section of this
report.


                                     - 25 -
<PAGE>

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

        None.

                                    PART III

Item 10. General Partners of the Registrant.

         (a)  (b)  Identification of General Partners.


      Registrant  is a  limited  partnership.  It does  not  have  directors  or
executive officers.  The information set forth below is provided with respect to
the  General  Partners  of the  Registrant,  who  may be  considered  to  occupy
positions  equivalent to directors or executive  officers.  There is no specific
term of office for any General Partner of the Registrant.  Each General Partner,
with the exception of ScogBell,  has served in such capacity  since  December 4,
1969.

      The names, ages, and business experience during the past five years of the
two individual  General  Partners of the  Registrant,  including their principal
occupations  and  employment  during  that  period  and the name  and  principal
business of any corporation or other  organization in which such occupations and
employment were carried on, is as follows:

      Irving  Schneider - 79; Executive Vice President of  Helmsley-Spear,  Inc.
Mr.  Schneider  has been in the real estate  business for over 50 years and owns
and  operates,  individually  or  through  partnerships,  numerous  real  estate
investments.

      Minlyn,  Inc.  was  formed  in  1968.  All of its  stock  is  owned by Mr.
Schneider.  Mr. Schneider  is a director of Reliance  Group  Holdings,  Inc. and
Reliance Insurance Company.

      Registrant  has been  advised that  ScogBell was created in June,  1998 to
acquire, hold, finance and sell interests in Registrant.  Control of ScogBell is
vested exclusively with ScogBell AG Manager, Inc. and ScogBell SB Manager, Inc.,
as managers.


                                     - 26 -
<PAGE>

      ScogBell AG, Inc.  (formerly known as  Helmsley-Noyes  Company,  Inc.) was
incorporated  in 1926.  It is a real  estate  management  firm in New York City.
It was acquired by ScogBell on June 10, 1998.

      Harry B. Helmsley was a General  Partner of Registrant  until his death on
January 4, 1997.  He was succeeded by H Associates on July 3, 1997. H Associates
acquired a nominal general partner interest from  Helmsley-Noyes  Corporation in
connection  with  its  admission  as a  General  Partner.  On June 10,  1998,  H
Associates  ceased to be a General  Partner of  Registrant  and was  replaced by
ScogBell  as a  General  Partner  pursuant  to a sale of its  entire  beneficial
ownership position. See "Business."

Item 11. Executive Compensation.

      (a) General,  (b) Summary Compensation Table, (c) Option/SAR Grants Table,
(d) Aggregate  Option/SAR  Exercises and Fiscal Year-End Option/SAR Value Table,
(e) Long-Term  Incentive  Plan ("LTIP")  Awards  Table,  (f) Defined  Benefit or
Actuarial  Plan  Disclosure,  (g)  Compensation  of  Directors,  (h)  Employment
Contracts and Termination of Employment and Change-in-Control  Arrangements, (i)
Report on Repricing of Options/SARs,  (j) Additional Information with Respect to
Compensation  Committee  Interlocks and Insider  Participation  in  Compensation
Decisions, (k) Board Compensation  Committee Report on  Executive  Compensation,
(l) Performance Graph.

      Registrant is a limited partnership. It does not have officers,  executive
officers or directors.  The information set forth below is provided with respect
to the General Partners and the Special Limited Partners of the Registrant,  who
may be considered to act in capacities similar


                                     - 27 -
<PAGE>

to directors, or perform  policy-making functions similar to those of  executive
officers  or  officers  in  charge  of  a  principal  business unit, division or
function.

      Paragraph  11A(3)  of  the  Partnership  Agreement  provides  for  certain
guaranteed  payments to be made to the  General  Partners  and  Special  Limited
Partners of Registrant  equal to 8-3/4% per annum of their  "Remaining  Original
Cash Contribution." The Remaining Original Cash Contribution is $1,500,000, less
the cumulative  amounts  distributed to the General Partners and Special Limited
Partners  from  time to time in  respect  of the  net  proceeds  of the  sale of
Registrant's properties. The Remaining Original Cash Contribution as of December
31,  1998  was  $1,160,000.  For the  fiscal  years  ended  December  31,  1998,
Registrant  paid or  accrued,  pursuant  to such  paragraph  11A(3),  guaranteed
payments to the General and Special Limited  Partners in an aggregate  amount of
$101,500 as follows:  Irving Schneider - $33,732,  ScogBell - $67,576,  ScogBell
AG, Inc. (formerly known as Helmsley-Noyes Company, Inc.) - $91 and Minlyn, Inc.
- $101.

      Under the terms of the Partnership  Agreement,  since January 1, 1973, the
General  Partners are entitled to receive an annual payment equal to 1/2% of the
gross operating income of Registrant.  During the fiscal year ended December 31,
1998, Registrant accrued in connection with such annual payments an aggregate of
$214,703 as follows:  Irving Schneider - $64,410,  ScogBell AG, Inc.  (formerly
known as  Helmsley-Noyes  Company,  Inc.) - $6,442,  ScogBell  -  $136,695,  and
Minlyn,  Inc. - $7,156.  Mr.  Schneider  and  ScogBell  are  entitled to receive
distributions  of  net operating revenues in each of their respective capacities
as Special Limited Partners. See "Item 5" above.

      The Registrant does not provide any  compensation to the General  Partners
or the other persons in the form of option or stock  appreciation  right grants,
long-term  incentive  plans,  or a  defined  benefit  or  actuarial  plans.  The
Registrant has no standard arrangements for payment


                                     - 28 -

<PAGE>

of fees to General Partners (other than for their interest as General  Partners,
as described  above), or employment contracts or change-in-control arrangements.

Item 12. Security Ownership of Certain

         Beneficial Owners and Management.

      (a)  Registrant is a limited  partnership.  Except to the extent set forth
below, it does not have voting securities.  The right to control the business of
Registrant  is  vested  in the  General  Partners  of  Registrant  by  virtue of
provisions  of  the  Partnership  Agreement  and  Article  8A of  the  New  York
Partnership Law.

      The Partnership  Agreement  provides for modification or amendments of the
Partnership  Agreement  upon  obtaining  the  consents or  affirmative  votes of
specified  percentages of the Special Limited Partners and the Limited Partners,
each  voting as a class.  The sole  limited  partner  votes as  directed  by the
holders of PPIs. To the extent that the Special Limited


                                     - 29 -
<PAGE>


      Partnership  Interests  and PPIs are  considered  voting  securities,  the
following information is provided as to holders of 5% or more of each such class
at December 31, 1998:

                                                          Amount and 
                                                          Nature of
                                 Name and Address of      Beneficial    Percent
Title of Class                   Beneficial Owner         Ownership     of Class
--------------                   -------------------      ----------    --------
Special Limited                  ScogBell                 Direct         66.66
Partnership Interest             660 Madison Ave.
                                 New York, NY  10021

                                 Irving Schneider         Direct(2)      33.34
                                 880 Fifth Avenue
                                 New York, NY

Converted Special L.P.           ScogBell                 Direct        100.00 
Interest                         660 Madison Ave.
                                 New York, NY  10021

Participation                    ScogBell                 310,927(1)     37.92 
Interests                        660 Madison Ave.
                                 New York, NY  10021

                                 Irving Schneider         90,095         10.99
                                 880 Fifth Avenue         Direct(2)
                                 New York, NY


(1)   Based  upon a  Schedule  13D  filed  by  ScogBell  on June 23,  1998,  the
      Registrant believes that ScogBell was formed to acquire, hold, finance and
      sell interests in the Registrant.  By agreement among ScogBell's  members,
      management  and control of ScogBell is vested  exclusively  in ScogBell AG
      Manager,  Inc., a Delaware  corporation  and ScogBell SB Manager,  Inc., a
      Delaware corporation,  as managers. The following members of ScogBell hold
      Participation  Interests in Registrant in the  following  manner:  231,489
      PPI's  beneficially  owned indirectly and 35,000 PPI's  beneficially owned
      directly by Scoggin,  Inc; 224,489 PPI's beneficially owned indirectly and
      35,000 PPI's  beneficially  owned directly by Scoggin Capital  Management,
      L.P.;  227,989 PPI's  beneficially owned indirectly and 4,000 beneficially
      owned  directly  by  Curtis  Schenker;  62,185  PPI's  beneficially  owned
      indirectly by John M. Angelo;  227,989 PPI's beneficially owned indirectly
      and 2,000 PPI's beneficially owned directly by Craig Effron; 224,489 PPI's
      beneficially owned indirectly by ScogBell SB Manager,  Inc.; 231,489 PPI's
      beneficially owned indirectly and 35,000 PPI's beneficially owned directly
      by S&E Partners,  L.P.;  224,489 PPI's  beneficially  owned  indirectly by
      ScogBell SB Member,  L.L.C.; 62,185 PPI's beneficially owned indirectly by
      ScogBell AG Manager,  Inc.; 62,185 PPI's  beneficially owned indirectly by
      Michael L. Gordon;  62,185 PPI's  beneficially owned indirectly by Angelo,
      Gordon & Co.,  L.P.;  62,185 PPI's  beneficially  owned  indirectly  by AG
      Partners,  L.P.; 62,185 PPI's  beneficially owned indirectly by AG Class A
      ScogBell  Acquisition,  L.L.C.; 62,185 PPI's beneficially owned indirectly
      by AG Class B ScogBell  Acquisition,  L.L.C. and 62,185 PPI's beneficially
      owned indirectly by ScogBell AG Manager, Inc. See "Business."

(2)   Does not include  31,960 Participation  Interests owned by Mr. Schneider's
      daughters (3.9%).


                                     - 30 -
<PAGE>


      (b)  Registrant  is a limited  partnership  and, as such,  its affairs are
managed by its General  Partners.  The following table sets forth the amount and
nature  of the  beneficial  ownership  at  December  31,  1998 of each  class of
partnership interests by its General Partners individually and as a group:

<TABLE>
<CAPTION>
                                                               Amount and
                                                               nature of
                                    Name and Address of        Beneficial           Percent
Title of Class                      Beneficial Owner           Ownership            of Class
--------------                      -----------------          ----------           --------
<S>                                 <C>                        <C>                  <C>  
General Partnership                 Irving Schneider
Interests                           880 Fifth Avenue
                                    New York, NY               (1)                   90.91

                                    ScogBell
                                    660 Madison Avenue
                                    New York, NY 10021         Indirect               9.09

                                    As a group                                      100.00(3)

Special Limited Partnership         ScogBell
                                    660 Madison Avenue
                                    New York, NY 10021         Direct(2)             66.66
Interests
                                    Irving Schneider           Direct(2)             33.34
                                    880 Fifth Avenue
                                    New  York, NY 

                                    As a group                                      100.00

Converted Special 
Limited Partner Interests           ScogBell
                                    660 Madison Avenue
                                    New York, NY 10021         Direct               100.00

Participation Interests             ScogBell
                                    660 Madison Avenue
                                    New York, NY 10021         310,927(3)            37.92

                                    Irving Schneider
                                    880 Fifth Avenue
                                    New York, NY               90,095                10.99
                                                               Direct(4)

                                    As a group                 401,022(2)(4)         48.91

</TABLE>

(1)   Mr. Irving Schneider owns  approximately 90% of such interest directly and
      10% indirectly through his ownership of Minlyn, Inc.; 60 East 42nd Street,
      New York, New York, which is also a General Partner of Registrant.

(2)   The Special Limited Partnership Interests have the rights set forth in the
      Partnership  Agreement and are not securities  issued by  Registrant.  The
      Converted  Special  L.P.  Interest  represents  the  economic  interest in
      Registrant  formerly  owned by  Harry B.  Helmsley  in his  capacity  as a
      General Partner. See "Business."

(3)   Includes PPI's  purchased from the following:  258,877 PPIs owned directly
      by Leona M. Helmsley; also 4,000 PPIs held by Helmsley-Noyes Company, Inc.
      (0.5%),  a company owned by Helmsley  Enterprises, Inc.,  which in turn is
      wholly-owned  by the Harry B. Helmsley  Revocable  Trust,  under agreement
      dated December 13, 1989;  13,000 PPIs held by HBH Holdings  Corp.  (1.6%),
      6,500 PPIs held by Park Lane  Hotel,  Inc. (0.8%) and  28,550  PPIs in the
      over-the-counter market.

(4)   Does  not include 31,960 Participation  Interests owned by Mr. Schneider's
      daughters (3.9%).


                                     - 31 -

<PAGE>

Item 13. Certain Relationships and Related
         Transactions.

         (a) Transactions with Management and Others.

         (b) Certain Business Relationships.

      As set forth in Item 11(a) above,  during the year ended December 31, 1998
Registrant  paid  certain  fees and certain  guaranteed  payments to each of its
corporate General Partners, ScogBell AG, Inc.  (formerly known as Helmsley-Noyes
Company, Inc.) and Minlyn, Inc., pursuant to the Partnership Agreement. See Item
10 hereof as to the ownership of said corporations.

      HSI,  either directly or through  various  subsidiaries,  acts as managing
agent of the Properties. For such management and leasing brokerage services, HSI
charged  Registrant  the aggregate sum of  approximately  $1,969,570  during the
fiscal year ended  December 31,  1998.  Leasing  commissions  charged by HSI are
based upon varying  percentages  of the annual rent paid by tenants  obtained by
HSI. Property  management fees charged by HSI are based upon negotiated  amounts
that are  believed  to be below  market  rate.  Leasing  fees  charged by HSI to
Registrant are believed to be, from  Registrant's  perspective,  on a basis that
approximate  those that would be available to Registrant from  non-affiliates at
arm's-length.  In 1998,  HSI  earned  $3,025,000  in  brokerage  commissions  in
connection  with the sale of the Chicago  Properties.  Additionally,  Registrant
purchases some of its maintenance supplies and materials from Deco.There were no
purchases by  Registrant  from Deco in 1998.  Prior to September  24, 1997,  Mr.
Helmsley  or his  estate  was the  indirect  owner of  substantially  all of the
capital stock of HSI and Mr.  Schneider  was a stockholder  of HSI and Executive
Vice President of that company.  On September 24, 1997, Mr.  Schneider  became a
principal owner of HSI which, previously, had been owned by Harry B. Helmsley or
his estate.  The amount of the commissions paid for such services is believed by
Registrant to be no more than the amount which  Registrant  would be required to
pay to unrelated parties performing such services.


                                     - 32 -
<PAGE>


      During 1994,  Registrant  also borrowed $18 million from Irving  Schneider
and an affiliate of Harry  Helmsley  pursuant to the Affiliate  Loans.  See Item
1(a) above.  In October,  1998,  the full  balance of the  Affiliate  Loans were
repaid using the proceeds of the sale of the Chicago Properties.

              (c) Indebtedness of Management.

                  None.

                                     PART IV

Item 14. Exhibits, Financial Statement

         Schedules, and Reports on Form 8-K.

      (a) (1) and (2) The  response to this portion of Item 14 is submitted as a
separate section of this report.

      (a) (3)  Exhibits.  Subject to Rule 12b-32 of the  Securities  Act of 1934
regarding  incorporation  by reference,  listed below are the exhibits which are
filed as part of this report  (according to the numbers assigned to them in Item
601 of Regulation S-K):

               (3)(i)   Registrant's  Limited Partnership  Agreement dated as of
                        May 15, 1969, as amended on October 2, 1969, October 31,
                        1969,  and  December 3, 1969 is hereby  incorporated  by
                        reference  to  Exhibits   3.1,   3.2,  3.3  and  3.4  to
                        Registration  Statement  No.  2-33132 which was declared
                        effective by the SEC on December 4, 1969.

               (ii)     Amendment  to  Agreement  of  Limited Partnership,
                        dated as of May 30, 1997.

               (10.1)   Management  Agreement dated  May  20, 1969 between
                        Helmsley-Spear,  Inc.  and  Registrant  is  hereby
                        incorporated  by  reference  to Exhibit 12.1


                                     - 33 -
<PAGE>

                        to Registration Statement No. 2-33132. The leasing
                        commissions and management  fees  currently  being
                        charged to the Registrant are  consistent with the
                        rates  generally  charged  in the  areas where the
                        properties are located.

               (10.2)   Forms of  Promissory  Notes,  dated  November  30,
                        1994,  evidencing  the  Affiliate  Loans is hereby
                        incorporated  by  reference  to  Exhibit  10.2  of
                        Registrant's  Report on Form  10-K for the  fiscal
                        year ended December 31, 1994.

          (b)  Reports on Form 8-K filed  during the period  covered by this
Report:
                   (i)  On September 28, 1998, Registrant filed a Current Report
                        on Form  8-K  relating  to the sale of its five  Chicago
                        commercial properties for $121,000,000.

                   (ii) On August  18,  1998, Registrant  filed a Current Report
                        on Form 8-K relating to its  execution of a contract  to
                        sell   its   five  Chicago  commercial  properties   for
                        $121,000,000.

          (c)     Exhibits -- None.

          (d)     Financial Statement Schedules -- The response to  this  period
of  Item 14 is submitted as  a separate section of this report.

                  (27)   Financial Data Schedule.


                                     - 34 -
<PAGE>


                                   SIGNATURES

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

                                            INVESTMENT PROPERTIES ASSOCIATES

                                            By: /s/ Irving Schneider
                                               ---------------------------------
                                                         Irving Schneider
                                                         General Partner

Dated:  April 15, 1999

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

/s/ Irving Schneider                        General Partner,
-------------------------                   Principal Executive,
Irving Schneider                            Financial and
                                            Accounting Officer

MINLYN, INC.                                General Partner

By: /s/ Irving Schneider
    ------------------------------
         Irving Schneider
         President

SCOGBELL AG, INC.                           General Partner

By: /s/ Craig Effron
    ------------------------------
         Craig Effron
         President

SCOGBELL ACQUISITION, L.L.C.                General Partner

By: /s/ Craig Effron
    ------------------------------
         President
         Scog Bell AG Manager, Inc., manager


                                     - 35 -
<PAGE>


                           Annual Report On Form 10-K

                      Item 14(A)(1) And (2) And Item 14(D)

          List Of Financial Statements And Financial Statement Schedule

              Financial Statements And Financial Statement Schedule

                          Year Ended December 31, 1998

                        Investment Properties Associates
                        (A New York Limited Partnership)

                               New York, New York


<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

         Index Of Financial Statements And Financial Statement Schedule

The  following  financial  statements of Investment  Properties  Associates  are
included in Item 8:
                                                                            Page

Report of Independent Auditors...............................................S-1
Balance Sheets-December 31, 1998 and 1997....................................S-2
Statements of Income-Years Ended December 31, 1998,
1997 and 1996........................................................S-3 and S-4
Statements of Changes in Partners' Capital (Deficiency)-
Years Ended December 31, 1998, 1997 and 1996.................................S-5
Statements of Cash Flows-Years Ended December 31, 1998,
1997 and 1996................................................................S-6
Notes to Financial Statements........................................S-7 to S-20

The following financial statement schedule of Investment Properties Associates
is included in Item 14(d):

Schedule III-Real Estate and Accumulated Depreciation..............S-21 and S-22

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or have been otherwise disclosed, and
therefore have been omitted.

<PAGE>

                         Report of Independent Auditors

Investment Properties Associates

We have  audited  the  accompanying  balance  sheets  of  Investment  Properties
Associates  (a New York Limited  Partnership)  as of December 31, 1998 and 1997,
and the related statements of income,  changes in partners' capital (deficiency)
and cash flows for each of the years in the three year period ended December 31,
1998. Our audits also included the financial  statement  schedule  listed in the
index  at  Item  14(a).   These  financial   statements  and  schedule  are  the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial  position  of  Investment   Properties
Associates at December 31, 1998 and 1997,  and the results of its operations and
its cash flows for each of the years in the three year 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  financial  statements  taken as a whole,  presents  fairly in all
material respects the information set forth therein.

                                                           /s/ ERNST & YOUNG LLP

New York, New York
April 2, 1999


                                      S-1

<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                                 Balance Sheets
<TABLE>
<CAPTION>
                                                           December 31,                 
                                                      1998             1997            
                                                  -----------------------------    
Assets
<S>                                               <C>             <C>          
Real estate, at cost (Notes 3 and 5)              $ 68,589,793    $ 136,524,047
   Less accumulated depreciation and
     amortization                                   44,261,629       95,613,778
                                                  ------------    -------------
                                                    24,328,164       40,910,269
Cash and cash equivalents                           13,831,031        2,240,190
Due from managing agent (Helmsley-
   Spear Inc.) including tenants' security
     deposit of $1,614,898 (1998) and
     $1,595,372 (1997) (Note 6)                      2,375,753        2,712,979
Receivables, principally for rentals                   471,968        1,459,925
Deferred rent receivable                             1,045,707             --
Deferred charges, including  deferred
   leasing commissions of $3,399,132
   (1998) and $3,329,055 (1997)
   (Note 6)                                          7,709,611        6,262,613
                                                  ============    =============
Total assets                                      $ 49,762,234    $  53,585,976
                                                  ============    =============

Liabilities and partners' capital (deficiency)
Accounts payable                                  $  1,155,069    $   2,210,354
Accrued real estate taxes                            3,067,023        4,884,856
Accrued interest                                       155,025          393,144
Distributions payable to General Partners,
   Special Limited Partners and Limited
   Partner (Note 9)                                 10,884,318       25,234,597
Guaranteed payments due to General
   Partners, Special Limited Partners and
   Limited Partner (Note 7)                            700,828          384,625
Accrued leasing commissions and
   management fees due to Helmsley-
   Spear, Inc. (Note 6)                                291,405          772,348
Sundry and accrued liabilities                       1,079,965          847,668
Notes payable to related parties(Note 4)                  --         18,000,000
Mortgages payable (Note 5)                          23,847,488       36,847,488
Deposits and rents received in advance of
   $255,641 (1998) and $119,174 (1997)               1,859,300        1,981,789
                                                  ------------    -------------
Total liabilities                                   43,040,421       91,556,869
                                                  ------------    -------------
Commitments and contingencies
(Notes 10 and 13)
  Partners' capital (deficiency)
    (Notes 1, 7,  8 and 9):
     General Partners                               (2,768,948)      (3,089,297)
     Special Limited Partners                      (21,325,648)     (50,128,009)
     Limited Partner (represented by
       the equivalent of 820,000
       Participation Interests)                     30,816,409       15,246,413
                                                   ------------    -------------
                                                     6,721,813      (37,970,893)
                                                  ============    =============
Total liabilities and partners'
    capital (deficiency)                          $ 49,762,234    $  53,585,976
                                                  ============    =============
</TABLE>

See accompanying notes 


                                      S-2
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                              Statements of Income

                                               Year ended December 31,
                                           1998          1997           1996
                                           ----          ----           ----
Revenues:
Gross revenues from real
   estate (Note 11)                    $ 43,454,081  $46,463,473    $52,216,081
Interest and other income                   917,010    1,144,284         74,663
                                       ------------  -----------    -----------
                                         44,371,091   47,607,757     52,290,744
                                       ------------  -----------    -----------
Expenses:
  Leasehold rentals                         409,095      563,446        929,787
  Real estate taxes                       7,149,045    9,418,042      9,883,375
  Interest (Notes 4 and 5)                3,842,192    4,690,344      4,879,233
  Management fees (Note 6)                1,121,955    1,373,436      1,460,004
  Payroll and related expenses            4,220,947    5,026,993      5,208,172
  Repairs and maintenance expenses        3,139,757    2,928,374      3,530,972
  Other property expenses                 8,463,862    9,645,887     11,753,758
  Administrative expenses                   309,626      239,602        236,072
  Co-owners' share of (expense) income       25,027       60,817         53,766
  Depreciation and amortization
     of real estate                       2,781,850    3,349,946      3,447,071
  Amortization of leasing commissions     1,100,072    1,122,721      1,128,228
  Amortization of mortgage
     refinancing costs                       24,323       91,775        184,266
                                       ------------  -----------    -----------
                                         32,587,751   38,511,383     42,694,704
                                       ------------  -----------    -----------
Income before items shown below          11,783,340    9,096,374      9,596,040

Loss on abandonment of real estate             --           --         (765,972)
Gain (loss) on sale of real
   estate (Note 3)                      101,295,596      (14,913)          --
                                       ------------  -----------    -----------
Income before guaranteed
  payments required
  under the Limited
  Partnership
  agreement (Note 7)                   $113,078,936  $ 9,081,461    $ 8,830,068

See accompanying notes.


                                      S-3
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)
 
                        Statements of Income (continued)

                                                  Year ended December 31,
                                            1998           1997         1996
                                            ----           ----         ----
Guaranteed payments required under
  the Limited Partnership
  agreement (Note 7):
     To the Limited Partner             $     15,000   $   15,000   $    15,000
     To General and Special
        Limited Partners                     101,500      101,500       101,500
     To General Partners                     214,703      238,125       261,499
                                        ------------   ----------   -----------
                                             331,203      354,625       377,999
                                        ------------   ----------   -----------
Net income                              $112,747,733   $8,726,836   $ 8,452,069
                                        ============   ==========   ===========
Net income allocable
  as follows: (Note 8)
General Partners                        $    694,652   $   40,829   $  (633,678)
Special Limited Partners                  62,455,572    4,153,067     4,277,582
Limited Partner                           49,597,509    4,532,940     4,808,165
                                        ------------   ----------   -----------
                                        $112,747,733   $8,726,836   $ 8,452,069
                                        ============   ==========   ===========
Net Income Per Limited
  Partner Participation
  Interest (820,000 units
  outstanding):                         $    60.4848   $   5.5280   $    5.8636
                                        ============   ==========   ===========

See accompanying notes.


                                      S-4
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

             Statements of Changes in Partners' Capital (Deficiency)

<TABLE>
<CAPTION>
                                                                              Special
                                                                              Limited
                                               Total      General Partners    Partners   Limited Partners
                                               -----      ----------------    --------   ----------------
<S>                                       <C>              <C>             <C>             <C>         
Partners' Capital (Deficiency)
  December 31, 1995                       $ (34,819,420)   $ (7,597,996)   $(43,291,921)   $ 16,070,497
Distribution to General Partners,
  Special Limited Partners and Limited
  Partner (Note 9)                          (10,482,594)       (157,239)     (5,084,058)     (5,241,297)
Net income for the year ended 
  December 31, 1996                           8,452,069        (633,678)      4,277,582       4,808,165
                                          -------------    ------------    ------------    ------------
Partners' Capital (Deficiency) 
  December 31, 1996                         (36,849,945)     (8,388,913)    (44,098,397)     15,637,365

Reclassification of General Partner
  interest (Note 1)                                --         5,312,950      (5,312,950)           --
Distribution to General Partners,
  Special Limited Partners and Limited
  Partner (Note 9)                           (9,847,784)        (54,163)     (4,869,729)     (4,923,892)
Net income for the year ended
  December 31, 1997                           8,726,836          40,829       4,153,067       4,532,940
                                          -------------    ------------    ------------    ------------
Partners' Capital (Deficiency)
  December 31, 1997                         (37,970,893)     (3,089,297)    (50,128,009)     15,246,413

Distribution to General Partners,
  Special Limited Partners and Limited
  Partner (Note 9)                          (68,055,027)       (374,303)    (33,653,211)    (34,027,513)
Net income for the year ended
  December 31, 1998                         112,747,733         694,652      62,455,572      49,597,509
                                          -------------    ------------    ------------    ------------
Partners' Capital (Deficiency)
  December 31, 1998                       $   6,721,813    $ (2,768,948)   $(21,325,648)   $ 30,816,409
                                          =============    ============    ============    ============
</TABLE>

See accompanying notes.


                                      S-5
<PAGE>

                       Investment Properties Associates
                        (A New York Limited Partnership)

                            Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                              1998              1997            1996
                                                              ----              ----            ----
<S>                                                      <C>                <C>             <C>        
Operating activities:
Net income                                               $ 112,747,733      $ 8,726,836     $ 8,452,069
Adjustments to reconcile net income to net cash
   provided by operating activities:
Depreciation and amortization                                3,906,245        4,564,442       4,759,565
Loss (gain) on sale of real estate                        (101,295,596)          14,913         765,972
Changes in operating assets and liabilities:
Due from managing agent                                        337,226         (631,394)        659,072
Receivables, net                                               (57,750)         (16,349)       (160,659)
Deferred charges, net                                       (3,077,192)      (3,304,107)     (1,820,797)
Accounts payable                                            (1,055,285)        (544,867)        225,737
Accrued real estate tax                                     (1,817,833)         254,271          66,315
Accrued interest                                              (238,119)          (3,009)        (38,373)
Guaranteed payments due to General Partners
   Special Limited Partners and Limited Partner                316,203           (8,375)          8,580
Accrued leasing commissions and management fees               (480,943)        (443,667)        701,176
Sundry and accrued liabilities                                 232,297         (982,367)       (929,238)
Deposits and rents received in advance                        (122,489)          35,150         225,743
                                                         -------------    -------------    ------------
Net cash provided by operating activities                    9,394,497        7,661,477      12,915,162
                                                         -------------    -------------    ------------
Investing activities:
Property improvements                                       (2,201,413)      (2,208,474)     (2,438,279)
Net proceeds from sale of real estate                      117,803,063             --              --
                                                         -------------    -------------    ------------
Net cash provided by (used in) investing activities        115,601,650       (2,208,474)     (2,438,279)
                                                         -------------    -------------    ------------
Financing activities:
Distributions to General Partners, Special Limited
   Partners and Limited Partner                            (82,405,306)      (5,374,588)     (5,330,917)
Principal payments on mortgages payable                    (13,000,000)      (3,025,816)     (3,048,784)
Principal payments on notes payable to related parties     (18,000,000)           --             --
                                                         -------------    -------------    ------------
Net cash used in financing activities                     (113,405,306)      (8,400,404)     (8,379,701)
                                                         -------------    -------------    ------------
Increase (decrease) in cash and cash equivalents            11,590,841       (2,947,401)      2,097,182
Cash and cash equivalents at beginning of year               2,240,190        5,187,591       3,090,409
                                                         -------------    -------------    ------------
Cash and cash equivalents at end of year                  $ 13,831,031     $  2,240,190     $ 5,187,591
                                                         =============    =============    ============
Supplemental disclosure of cash flow information
Cash paid during the year for interest                   $   4,080,311    $   4,693,353    $  4,917,606
                                                         =============    =============    ============
</TABLE>

See accompanying notes.


                                      S-6
<PAGE>

                       Investment Properties Associates
                        (A New York Limited Partnership)

                          Notes to Financial Statements

                                December 31, 1998

1. Description of Business

Investment  Properties Associates ("IPA") was formed as a limited partnership on
May 15, 1969 to acquire and operate  commercial  properties.  Through January 4,
1997,  the General  Partners of IPA were Mr. Harry B.  Helmsley  and Mr.  Irving
Schneider and two corporations  owned or controlled by them.  Collectively,  the
General Partners owned a 1.5% interest in IPA. Upon the death of Mr. Helmsley on
January 4, 1997, the general  partnership  interest  owned by him  automatically
converted to a Special Limited  Partnership  Interest owned by his estate.  As a
result of this  conversion,  the total  interests of the General  Partners  were
reduced to .55%. The Special  Limited  Partners are Mrs. Leona M. Helmsley,  Mr.
Irving  Schneider,  and the  Estate of Mr.  Harry B.  Helmsley  and the  Limited
Partner is Mr. John Bailey.  Undivided  interests in the limited partnership are
represented by 820,000 Participation  Interests ("PPI's").  Changes in ownership
subsequent to January 4, 1997 are described below.

Under  the  terms of the  Partnership  Agreement  in  effect  on the date of Mr.
Helmsley's  death,  the General  Partners  were required to create a new limited
partnership  with  the  same  attributes  as  IPA  and  convey  all  assets  and
liabilities  of IPA to that  entity.  Because such a course of action would have
resulted  in  substantial  expense  to IPA and no benefit  to the  partners  and
holders of PPI's,  the General Partners  obtained  approval of a majority of the
holders  of the PPI's to  continue  the  business  of IPA,  and the  Partnership
Agreement was amended to that effect effective May 30, 1997.

Effective July 3, 1997, the Partnership Agreement was further amended to admit a
newly formed  limited  liability  company  owned by Mrs.  Leona M. Helmsley as a
General  Partner of IPA,  which  entity was  allocated  a portion of the general
partner interest owned by one of the corporate general partners.

On June 10, 1998 the General  Partner  interests of the  corporation and limited
liability  company  owned by Mrs.  Leona M.  Helmsley,  and the Special  Limited
Partner  interests  owned by Mrs.  Leona M.  Helmsley and the Estate of Harry B.
Helmsley were acquired by ScogBell  Acquisition,  L.L.C.  ("ScogBell").  Also on
June 10, 1998 ScogBell  acquired  282,377 PPI's from Mrs.  Leona M. Helmsley and
28,550 PPI's in the over-the-counter market.


                                      S-7
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

2. Significant Accounting Policies

      a.    The preparation of financial statements in conformity with generally
            accepted accounting principals requires management to make estimates
            and  assumptions  that  affect  the  reported  amount of assets  and
            liabilities  and disclosure of contingent  assets and liabilities at
            the date of the  financial  statements  and the reported  amounts of
            revenues and expenses  during the reporting  period.  Actual results
            could differ from those estimates.

      b.    Rental  revenue from tenant  leases is recognized on a straight line
            basis over the terms of the associated leases.

      c.    Depreciation of buildings and building  improvements is provided for
            by the straight-line  method over estimated useful lives of 19 to 39
            years.  Leaseholds,  leasehold improvements and tenants' alterations
            are  amortized  over  the  terms  of  the  related  leases.  Amounts
            applicable  to  tenants'  alterations  and the  related  accumulated
            amortization  are  eliminated  from  the  accounts  at the  time the
            related  lease  expires or, if the tenant should vacate the premises
            prior thereto,  unamortized  assets are charged to operations in the
            year the premises are vacated.

      d.    Costs in  connection  with  mortgage  refinancings  are  included in
            deferred  charges  and are  being  amortized  over the  terms of the
            related mortgages.

      e.    Leasing  commissions  are  amortized  over the terms of the  related
            leases.

      f.    IPA's   employees   are   covered   under   multi-employer   defined
            contribution  pension plans. All  contributions are funded currently
            based upon negotiated union  contracts.  Information from the plans'
            administrators is not available to permit IPA to determine its share
            of unfunded  vested  benefits.  During 1998,  1997 and 1996 IPA paid
            approximately $562,000,  $673,000, and $750,000,  respectively,  for
            employees to union plans for pension, welfare and other benefits.

      g.    For the purpose of determining cash  equivalents,  IPA considers all
            highly liquid  investments  with a maturity of three months or less,
            when purchased, to be cash equivalents.


                                      S-8
<PAGE>


                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

2. Significant Accounting Policies (continued)

      h.    Financial  Accounting  Standards  Board ("FASB")  Statement No. 107,
            "Disclosures  About Fair Value of  Financial  Investments",  defines
            fair  value of a  financial  instrument  as the  amount at which the
            instrument  could be  exchanged  in a  current  transaction  between
            willing  parties.  The methods and assumptions  used to estimate the
            fair value of financial instruments are as follows:

            (i)   The  carrying  value of cash and  cash  equivalents,  accounts
                  receivable,  accounts  payable  and  accrued  liabilities  and
                  deposits and rents received in advance  approximate fair value
                  due to the short maturities of these items.

            (ii)  The  carrying  value  of  notes  payable  to  related  parties
                  approximates  fair value as such notes are variable  rate debt
                  which re-prices monthly.

            (iii) The carrying  value of  mortgages  payable  approximates  fair
                  value due to the short term maturities of the notes.

      i.    FASB Statement No. 121, "Accounting for the Impairment of Long-Lived
            Assets  and for  Long-Lived  Assets  to be  Disposed  Of,"  requires
            impairment  losses  to be  recorded  on  long-lived  assets  used in
            operations  when  indicators  of  impairment  are  present  and  the
            undiscounted cash flow estimates to be generated by those assets are
            less than the asset's  carrying amount or on long-lived  assets held
            for sale when the assets  carrying  amount is greater  than the fair
            market  value less costs of disposal  for those assets on a property
            by property basis.  No indicators of impairment  were present,  and,
            accordingly no provisions  for impairment  have been recorded in any
            of the periods presented.

      j.    Basic  earnings  per share has been  calculated  by dividing the net
            income  allocated  to  the  Limited  Partner  by the  820,000  PPI's
            outstanding.  As IPA  has no  potentially  dilutive  securities,  no
            presentation of diluted earnings per share is required.


                                      S-9
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

2. Significant Accounting Policies (continued)

      k.    Effective  January 1, 1998,  IPA  adopted  FASB  Statement  No. 131,
            Disclosures about Segments of an Enterprise and Related  Information
            ("Statement  131").  Statement 131 superseded FASB Statement No. 14,
            Financial Reporting for Segments of a Business Enterprise. Statement
            131   establishes   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.  Statement  131  also  establishes  standards  for  related
            disclosures about products and services, geographic areas, and major
            customers.  The adoption of Statement 131 did not affect  results of
            operations,  financial position or disclosure of segment information
            as IPA is engaged  in the  ownership  and  operation  of  commercial
            office properties and has one reportable segment. IPA evaluates real
            estate  performance  and allocates  resources based on net operating
            income.  The primary  sources of revenue are  generated  from tenant
            base rents and  escalations  of  operating  expenses and real estate
            taxes.   Operating   expenses   primarily  consist  of  common  area
            maintenance.  The  commercial  office  property  segment  meets  the
            quantitative  threshold for determining reportable segments. IPA has
            no investment in foreign operations.

3. Real Estate

Real estate  excludes  co-owners'  share in one  property and is  summarized  as
follows:

          Classification                               1998             1997
-----------------------------------------          ------------     ------------
Land                                               $ 10,569,184     $ 21,349,575
Buildings and building improvements                  40,105,028       79,852,946
Leaseholds and leasehold improvements                 7,486,730       22,008,106
Tenants' alterations                                 10,428,851       13,313,420
                                                   ------------     ------------
                                                   $ 68,589,793     $136,524,047
                                                   ============     ============


                                      S-10
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

3. Real Estate (continued)

On January 22, 1998,  IPA sold to an unrelated  party its leasehold  interest as
ground  tenant  under  its lease  with the City of  Newark,  NJ on the  property
located at 1180 Raymond  Blvd.  As a  consequence  of the  transaction,  IPA was
relieved  of  liability  for  ground  lease  rent and real  estate  taxes on the
property  after  January 22, 1998.  In  connection  with this  transaction,  IPA
recognized a gain of approximately $611,700.

On September  28, 1998,  IPA sold its five Chicago  commercial  properties  (the
"Chicago  Properties") for  $121,000,000.  The sales proceeds were used to repay
mortgage debt, loans from the General Partners, accrued distributions payable to
the  General  Partners  and  Special  Limited  Partners,  sales  commissions  of
$3,025,000 paid to an affiliate of one of the General Partners and other related
costs, aggregating  approximately  $64,000,000.  In addition, IPA made a special
distribution to its partners of  approximately  $57,000,000.  In connection with
this transaction, IPA recognized a gain on sale of approximately $100,683,900.

On February  1, 1999,  IPA  entered  into a contract to sell the Mojud  Building
located in Long Island City, New York for a sales price of $6,500,000.

4. Notes Payable to Related Parties

On November 30, 1994, affiliates of the General Partners loaned IPA $18,000,000,
evidenced by two promissory  notes (the "Notes") in the amount of $6,000,000 and
$12,000,000.  These notes were repaid in 1998 with the proceeds from the sale of
the Chicago properties.

The  affiliate  notes bore  interest at a variable rate based on the Chase prime
rate and were payable on demand.  Interest  expense for the year ended  December
31, 1998 and 1997,  with  respect to the Notes was  $1,160,124  and  $1,540,750,
respectively.


                                      S-11
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

5. Mortgages Payable

As of December 31, 1998 and 1997 mortgages payable consist of the following:

<TABLE>
<CAPTION>
                                                                               Balance          Balance
                                       Interest Rate at                      Outstanding      Outstanding
                                         December 31,       Maturity         December 31,     December 31,
Description                                  1998             Date              1998              1997
-----------------------------------------------------------------------------------------------------------
<S>                                          <C>             <C>          <C>               <C>          
Chase Manhattan Bank (1):
Mortgage loans with variable interest
   rates collateralized by:
1440 Broadway, N.Y., N.Y.                    7.32%           1/2/00       $  12,203,503     $  15,062,428
261 Fifth Avenue, N.Y., N.Y.                 7.32%           1/2/00             466,985         9,467,810
245 Fifth Avenue, N.Y., N.Y.                 7.32%           1/2/00           7,177,000         8,317,250

Apple Bank for Savings (2):
Mortgage loan in the amount of
  $8,000,000 with fixed interest
  payments collateralized by 1328
  Broadway Building N.Y., N.Y. (in
  which IPA has a 50% tenancy in common
  interest)                                  8.5%           4/30/99            4,000,000         4,000,000
                                                                           -------------    --------------
Total                                                                      $  23,847,488    $   36,847,488
                                                                           =============    ==============
</TABLE>

(1)   IPA executed a Note Modification  Agreement (the "Agreement") on April 25,
      1996  with  Chase   Manhattan  Bank  ("Chase")   whereby   mortgage  loans
      collateralized  by five of IPA's  properties;  1440 Broadway,  NY, NY, 261
      Fifth  Avenue,  NY, NY,  245 Fifth  Avenue,  NY,  NY, One North  Dearborn,
      Chicago, IL and One North LaSalle,  Chicago, IL were generally modified to
      provide for: (a) an extension of the maturity  date until  January 2, 1997
      at which time all outstanding  principal and interest was due and payable,
      (b) interest based on LIBOR plus 2.25% or Prime plus .375% at IPA's option
      subject to certain  limitations  as  defined in the  Agreement,  (c) cross
      default and cross  collateralization  provisions for the five  properties,
      (d) IPA's guaranty of $6,000,000 of the outstanding principal balance, and
      (e) principal  payments  with respect to the mortgage  loans of $3,000,000
      during 1996.

      On December 20, 1996, IPA accepted an early surrender of space  located at
      1440 Broadway,  New York,  New York, in exchange for an early  termination
      payment of $1,000,000 which


                                      S-12
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)


5. Mortgages Payable (continued)

      was  recorded as income at December 31, 1996.  In  consideration  of Chase
      consenting to the early  termination,  IPA agreed to invest $1,000,000 for
      leasing costs and capital improvements at 1440 Broadway.

      On March 28, 1997, a first  modification to the Agreement was made between
      IPA and Chase which  extended the maturity  date of the loan to January 2,
      1998 and  provided  for  principal  payments  with respect to the mortgage
      loans of $3,000,000 during 1997.

      On March 23, 1998, a Second Modification to the Agreement was made between
      IPA and Chase,  which extended the maturity date of the loan to January 2,
      1999,  and provided for  principal  payments  with respect to the mortgage
      loans of $3,000,000 during 1998.

      As of January 2, 1999,  a Third  Modification  to the  Agreement  was made
      between IPA and Chase.  The maturity date was extended through the earlier
      of (a) January 2, 2000, or (b) the first date on which IPA fails to make a
      scheduled  principal  payment.  The  scheduled  principal  payments of the
      mortgage  loans are to be made as  follows;  March 15,  1999 -  $1,000,000
      (which payment was made) June 15, 1998 - $1,000,000,  September 15, 1999 -
      $500,000, and December 15, 1999 - $500,000.

(2)   The loan with Apple Bank for Savings  ("Apple") matured on April 24, 1998.
      The loan has been  extended to April 30, 1999, at an interest rate of 8.5%
      per  annum.  Apple  has  informed  IPA  that  there  shall  be no  further
      extensions of the maturity of this loan beyond April 30, 1999.


                                      S-13
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

6. Management of Properties

The  properties  are managed by  Helmsley-Spear,  Inc. Mr.  Irving  Schneider is
co-chairman and Chief Operating Officer of Helmsley-Spear, Inc., and owns 50% of
its outstanding  stock.  In addition to providing  general  property  management
services,  Helmsley-Spear,  Inc.  locates tenants and negotiates  leases for its
properties.  Management fees are based upon  negotiated  percentages of revenues
for each property in the portfolio.  Leasing  commissions are based upon varying
percentages of the annual rent paid by tenants obtained by Helmsley-Spear,  Inc.
Management fees and leasing commissions  charged to IPA by Helmsley-Spear,  Inc.
aggregated   $1,969,571  (1998)   $2,098,318  (1997)  and  $2,330,424,   (1996).
Additionally,  IPA purchases some of its maintenance supplies and materials from
Deco Supplies Co. ("Deco"), an affiliate of one of its partners.  Such purchases
aggregated approximately $0 (1998), $61,000 (1997) and $23,000, (1996).

Tenants' security deposits for certain properties are held by the managing agent
principally in special bank accounts;  interest thereon accrues  principally for
the benefit of the tenants.

7. Guaranteed Payments Due to Partners

The Limited  Partnership  Agreement requires that certain guaranteed payments be
made to partners and deducted as expenses in determining net income. The General
Partners and Special  Limited  Partners  receive  guaranteed  payments  equal to
8-3/4% per annum of their "Remaining Original Cash Contribution"  ($1,160,000 at
December 31, 1998,  1997, and 1996). In addition,  the General  Partners receive
guaranteed payments equal to 1/2% of gross revenues,  as defined and the Limited
Partner receives $15,000 per annum.


                                      S-14
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

8. Allocations of Partnership Income

In accordance with the terms of the Limited Partnership  Agreement,  elements of
income for financial  reporting  purposes were credited (but not  distributed in
cash) to the capital accounts of the partners through January 3, 1997 as follows
(see Note 9 for the basis on which cash distributions are determined):

<TABLE>
<CAPTION>
                                                                        Special
                                                       General          Limited           Limited
                                                  -----------------------------------------------------

<S>                                                      <C>             <C>                <C>  
A. Net income before items C, D, E and F below           1.5%            48.5%              50.0%
B. Net losses, before items below                      100.0%             --                 --
C. Depreciation and amortization of real estate:
       1.  Equal to mortgage amortization (as
           defined)                                      1.5%            48.5%              50.0%
       2.  Balance                                       3.0%            97.0%               --
D. Bond discount amortization                            --               --               100.0%
E. Gain on disposition of property:
       1.  To the extent of the aggregate
           depreciation and amortization of such
           property included in C(2) above               3.0%            97.0%               --
       2.  Balance                                       1.5%            48.5%              50.0%
F. Loss on disposition of property                     100.0%             --                 --
</TABLE>


                                      S-15
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

8. Allocations of Partnership Income (continued)

Upon the death of Mr.  Helmsley  on  January 4, 1997 and the  conversion  of his
General Partner interest into a Special Limited Partner  interest,  the elements
of income for financial  reporting purposes are credited (but not distributed in
cash) to the capital accounts of the partners as follows:

<TABLE>
<CAPTION>
                                                  General      Special Limited       Limited
                                                  ------------------------------------------
<S>                                                 <C>             <C>                <C>  
A. Net income before items C, D, E and F below      .55%            49.45%             50.0%
B. Net losses, before items below                 36.67%            63.33%              --
C. Depreciation and amortization of real estate:
       1.  Equal to mortgage amortization (as
           defined)                                 .55%            49.45%             50.0%
       2.  Balance                                 1.1%             98.9%               --
D. Bond discount amortization                      --                --               100.0%
E. Gain on disposition of property:
       1.  To the extent of the aggregate
           depreciation and amortization of such
           property included in C(2) above         1.1%             98.9%               --
       2.  Balance                                  .55%            49.45%             50.0%
F. Loss on disposition of property                36.67%            63.33%              --
</TABLE>

9. Cash Distributions

Net Operating Revenues,  as defined,  are distributable at the discretion of the
General Partners, as follows:

                                             Through                From
                                         January 3, 1997       January 4, 1997
                                         ---------------       ---------------
General Partners                             1.5%                     .55%
Special Limited Partners                    48.5%                   49.45%
Limited Partner                             50.0%                   50.0%

Notwithstanding the foregoing,  if with respect to any calendar year the Limited
Partner's  distributive  share  (computed  on the  same  basis  as that  used in
preparing  IPA's  Federal  income tax return) of income  (loss) plus one-half of
such partner's distributive share of long-term


                                      S-16
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

9. Cash Distributions (continued)

capital  gains  exceeds  the cash  distributions  referred  to  above,  IPA must
distribute  an  additional  amount  equal to such  excess to the  Holders of the
Participation Interests.

In 1998,  1997 and 1996,  Net  Operating  Revenues,  as defined  in the  Limited
Partnership  Agreement,  amounted  to  $9,803,570,  $9,174,787  and  $8,342,911,
respectively.  At December 31, 1998,  1997 and 1996,  IPA accrued  distributions
amounting to  $10,884,318,  $9,847,784 and  $10,482,594,  respectively  of which
$5,442,159,  $4,923,892 and $5,241,297,  respectively,  are distributable to the
Holders of Participation  Interests. An amount of $10,102,642 was distributed in
respect of such accrued distributions on March 31, 1999.

10. Income Taxes

IPA has  obtained a ruling from the  Internal  Revenue  Service that IPA will be
classified as a partnership for Federal income tax purposes, and has received an
opinion of tax counsel  that IPA, as a  partnership,  will not be subject to any
Federal income taxes,  and that each holder of  Participation  Interests will be
treated for Federal  income tax purposes as if he were a limited  partner of IPA
to the extent of his proportionate interest in the Limited Partnership Interest.
Each  partner  of IPA and each  holder of  Participation  Interests  at any time
during the taxable year of IPA must take into account his distributive  share of
all items of IPA's income,  gain, loss,  deduction or credit,  without regard to
whether such partner or holder of  Participation  Interests has received or will
receive any distributions from IPA.  Accordingly,  no provision for income taxes
has been made in the accompanying statements of income.

The amount of income for federal tax purposes  for the years ended  December 31,
1998, 1997 and 1996 was $111,019,115, $9,782,211 and $8,914,979 respectively, as
compared  with  the net  income  of  $112,747,733,  $8,726,836  and  $8,452,069,
respectively,  shown  in the  statements  of  income.  A  reconciliation  of the
differences between income as reflected in the accompanying statements of income
and the amount of income for federal tax purposes is as follows:


                                      S-17
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

10. Income Taxes (continued)

                                                       December 31,
                                         1998            1997          1996
                                         ----            ----          ----
Net income per statements         
  of income                         $ 112,747,733    $ 8,726,856    $ 8,452,069

Depreciation and amortization             929,903      1,083,904      1,149,617

Gain on sale of property               (1,233,105)          --             --

Loss on sale of property                     --          (50,660)          --

Loss on abandonment of property              --             --         (801,642)

Deferred rental income                 (1,045,707)          --             --

Other, net                               (379,709)        22,111        114,935
                                    -------------    -----------    -----------
Income for federal tax purposes     $ 111,019,115    $ 9,782,211    $ 8,914,979
                                    =============    ===========    ===========

11. Gross Revenue From Real Estate

IPA earns rental income under leases principally with commercial tenants located
in its office  buildings.  Such leases  generally  provide for the tenant to pay
minimum  rentals  plus,  in certain  instances,  a portion of  increases in real
estate taxes, operating expenses and increases in the consumer price index based
on lease  escalation  clauses.  Office leases generally range from 5 years to 15
years and contain various renewal options. In addition,  IPA earns rental income
from retail  stores.  Such leases  generally  provide for minimum  rentals  plus
percentage rentals based on the store sales. Retail store leases generally range
from 1 to 5 years and contain various renewal options. All of the aforementioned
leases are accounted for as operating  leases.  Included in Gross  Revenues from
Real Estate for the years ended 1998, 1997 and 1996 are $956,247, $1,089,301 and
$1,745,212,  respectively,  representing revenue from escalations and percentage
rentals,  and for the year  ended  1998,  1997 and 1996,  approximately  $1,397,
$256,000  and  $1,400,000,  respectively,  received  in  connection  with  lease
cancellations with former tenants.


                                      S-18
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)

11. Gross Revenue From Real Estate (continued)

The following is a schedule by years of minimum future rentals on  noncancelable
operating leases as of December 31, 1998, exclusive of amounts due as percentage
rent,  expense  escalations  or amounts that would be due from new leases or the
exercise of renewal options under existing leases:

            Years ending December 31:
                   1999                                 $24,219,000
                   2000                                  17,536,000
                   2001                                  15,180,000
                   2002                                  12,042,000
                   2003                                   8,507,000
                   Thereafter                            24,760,000
                                                       ------------
                      Total minimum future rentals     $102,244,000
                                                       ============
                                                       
12.  Recently Issued Accounting Pronouncement       

In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting   for   Derivative   Instruments   and  Hedging   Activities"   (the
"Statement"),  which is required to be adopted in years beginning after June 15,
1999.  The Statement  permits  early  adoption as of the beginning of any fiscal
quarter after its issuance. The Company expects to adopt the Statement effective
January 1, 2000. The Statement will require IPA to recognize all  derivatives on
the  balance  sheet  at fair  value.  Derivatives  that are not  hedges  must be
adjusted to fair value through income. If a derivative is a hedge,  depending on
the nature of the hedge,  changes in fair value of the derivative will either be
offset against the change in fair value of the hedged asset,  liability, or firm
commitment through earnings,  or recognized in other comprehensive  income until
the  hedged  item is  recognized  in  earnings.  The  ineffective  portion  of a
derivative's  change in fair value will be  immediately  recognized in earnings.
IPA  does not  anticipate  that  the  adoption  of this  Statement  will  have a
significant effect on its results of operations or financial position.


                                      S-19
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

                    Notes to Financial Statements (continued)
13. Contingencies

IPA is involved in various  legal  matters  and  disputes  arising in the normal
course of  operations,  the ultimate  outcome of which is not expected to have a
material effect on the financial statements.


                                      S-20
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

             Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
                                                                   December 31, 1998

            Col. A                Col. B               Col. C           Col. D                 Col. E                  Col. F       
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Gross Amount at                         
                                             Initial Cost of Company                 Which Carried Close of Period                  
                                             ----------------------- Improvements    -----------------------------                  
                                                        Buildings    Capitalized              Buildings                             
                                                           and       Subsequent to               and                Accumulated     
         Description          Encumbrances     Land    Improvements  Acquisition      Land   Improvements   Total   Depreciation    
------------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>           <C>         <C>           <C>          <C>        <C>          <C>        <C>            
Midland Savings Building,                                            
   Midland, Texas                       -- $   593,787 $ 4,354,441   $   286,307  $  349,087 $ 2,717,362  $3,066,449 $ 3,066,449    
1440 Broadway, Building                                               
   New York, New York        $  12,203,503   4,938,421  10,864,525     7,090,220   4,938,421  18,284,860  23,223,281  14,321,360    
261 Fifth Avenue, Building                                           
   New York, New York              466,985     987,731   8,695,910     8,069,399     987,731  16,765,309  17,753,040  12,105,489    
Marbridge Building, New                                              
   York, New York (a)            4,000,000   2,765,881   1,877,196     1,247,163   2,765,881   3,124,359   5,890,240   2,577,411    
Mojud Building, Long Island                                           
   City, New York                       --     346,514     643,526       462,823     346,514   1,106,349   1,452,863     933,670    
Edgewood and Bellway                                                 
   Shopping Centers,                 
   Houston, Texas                       --     447,893          --            --          --          --          --          -- 
570 Broad Street Building            
   Newark, New Jersey                   --     502,032   5,937,404     1,549,324     502,032   7,368,812   7,870,844   5,399,488    
245 Fifth Avenue Building,                                           
   New York, New York            7,177,000     679,520   2,080,700     6,572,856     679,520   8,653,556   9,333,076   5,857,762    
                             ------------- ----------- -----------   ----------- ----------- ----------- ----------- -----------
Totals                       $  23,847,488 $11,261,779 $34,453,702   $25,278,092 $10,569,186 $58,020,607 $68,589,793 $44,261,629
                             ============= =========== ===========   =========== =========== =========== =========== ===========
</TABLE>
                                                                     
                                   Col. G          Col. H
------------------------------------------------------------------
                                               Life on which 
                                              Depreciation in  
                                               Latest Income
                                  Date of      Statements is
         Description            Construction      Computed
------------------------------------------------------------------
Midland Savings Building,    
   Midland, Texas                   1959             34.3
1440 Broadway, Building      
   New York, New York               1925             24.3
261 Fifth Avenue, Building   
   New York, New York               1928             24.3
Marbridge Building, New      
   York, New York (a)               1907             19.3
Mojud Building, Long Island  
   City, New York                   1916             19.3
Edgewood and Bellway         
   Shopping Centers,               
   Houston, Texas                   1957             24.3
570 Broad Street Building    
   Newark, New Jersey               1962             34.3
245 Fifth Avenue Building,   
   New York, New York               1923             24.3
                            
Totals                       


                                      S-21
<PAGE>

                        Investment Properties Associates
                        (A New York Limited Partnership)

       Schedule III - Real Estate and Accumulated Depreciation (continued)

                                December 31, 1998

(a)   Amounts shown represent 50% of amounts  applicable to a tenancy in common,
      in which IPA has an undivided one-half interest.

(b)   Reconciliation of "Real Estate and Accumulated Depreciation":

<TABLE>
<CAPTION>
                                                              Year ended December 31,
                                                 -----------------------------------------------
                                                     1998             1997             1996
                                                 -------------    -------------    -------------
<S>                                              <C>              <C>              <C>          
Investment in Real Estate
Balance at beginning of year                     $ 136,524,047    $ 138,214,361    $ 141,282,613
Sale of real estate                                (67,998,324)      (2,606,881)            --
Abandonment of real estate                                                            (4,183,692)
Improvements and additions                           2,201,413        2,208,474        2,438,279
Fully depreciated assets written off during
   the year                                         (2,137,343)      (1,291,907)      (1,322,839)
                                                 -------------    -------------    -------------
Balance at end of year                           $  68,589,793    $ 136,524,047    $ 138,214,361
                                                 =============    =============    =============
Accumulated Depreciation
Balance at beginning of year                     $  95,613,778    $  95,710,079    $  97,003,567
Depreciation charged to costs and expenses           2,781,850        3,349,946        3,447,071
Less amounts applicable to sale of real estate     (51,996,656)      (2,154,340)              --
Less amounts applicable to abandonment of real
   estate                                                   --               --       (3,417,720)
Less amounts applicable to fully depreciated
   assets written off during the year               (2,137,343)      (1,291,907)      (1,322,839)
                                                 -------------    -------------    -------------
Balance at end of year                           $  44,261,629    $  95,613,778    $  95,710,079
                                                 =============    =============    =============
</TABLE>

The  aggregate  basis of real  estate  assets for  Federal  income tax  purposes
amounted to $71,268,168 (1998), $132,029,646 (1997) and $132,590,090 (1996).


                                      S-22