Mendik Real Estate Limited Partnership – ‘10-K’ for 12/31/97

As of:  Wednesday, 4/15/98   ·   For:  12/31/97   ·   Accession #:  928790-98-62   ·   File #:  0-15463

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         51±   223K 
 2: EX-10       Ground Lease Extension Relating to 330 West 34th       1      8K 
                          Street                                                 
 3: EX-27       Financial Data Schedule for 1997 10-K Mendik Real      1      5K 
                          Estate Limited Partnership                             

10-K   —   Annual Report
Document Table of Contents

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, 1997 
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:  0-15463

MENDIK REAL ESTATE LIMITED PARTNERSHIP
Exact name of registrant as specified in its charter

 New York                                               11-2774249
State or other jurisdiction of                               I.R.S. Employer    
incorporation or organization                              Identification No.   

Attn: Andre Anderson                                                            
3 World Financial Center, 29th Floor, New York, New York         10285          
Address of principal executive offices                          Zip Code        

Registrant's telephone number, including area code:  (212) 526-3237             

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

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

Units of Limited Partnership Interest 
Title of Class

Indicate by check mark whether the registrant (1) has filed all reports         
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of   
1934 during the preceding 12 months (or for shorter period that the registrant  
was required to file such reports), and (2) has been subject to such filing     
requirements for the past 90 days.                                              

Yes  X      No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405  
of Regulation S-K is not contained herein, and will not be contained, to the    
best of the Registrant's knowledge, in definitive proxy or information          
statements incorporated by reference in Part III of this Form 10-K or any       
amendment to this Form 10-K.  [ X ]                                             

State the aggregate market value of the voting stock held by non- affiliates of 
the registrant:  Not applicable.                                                

Documents Incorporated by Reference:  None                                      

PART I          

Item 1.  Business                                                               

General                                                                         
Mendik Real Estate Limited Partnership (the "Partnership" or "Registrant") is a 
New York limited partnership formed in October 1985 pursuant to an agreement of 
limited partnership (as amended, the "Partnership Agreement") for the purpose   
of acquiring, maintaining and operating income-producing commercial office      
buildings in the Greater New York Metropolitan Area.  NY Real Estate Services 1 
Inc., a Delaware corporation ("NYRES1") (formerly known as Hutton Real Estate   
Services XV, Inc.), and Mendik RELP Corporation (formerly known as Mendik       
Corporation), a New York corporation, are the general partners (together, the   
"General Partners") of the Registrant. (See Item 10.)                           

Commencing May 7, 1986, the Partnership began offering up to a maximum of       
1,000,000 units of limited partnership interest (the "Units") at $500 per Unit  
with a minimum required purchase of 10 Units or $5,000 (four Units for an       
Individual Retirement Account or Keogh Plan).  The Partnership offered Class A  
Units to taxable investors and Class B Units to tax-exempt investors.  The      
offering of Units was completed on September 18, 1987.  The Partnership held    
closings on June 18, 1986, September 4, 1986, January 22, 1987, March 31, 1987, 
June 1, 1987 and September 18, 1987 at which time investors who purchased the   
Units ("Investor Limited Partners") were admitted to the Partnership.  Investor 
Limited Partners are not required to make any further capital contributions to  
the Partnership. Upon completion of the offering on September 18, 1987 the      
Partnership had accepted subscriptions for 395,169 Units for gross aggregate    
cash proceeds to the Partnership of $197,584,500.  Net proceeds to the          
Partnership after deducting selling commissions, organization expenses, and     
other expenses of the offering were approximately $172,766,598.  These proceeds 
were used to: (i) repay the principal and interest of interim financing         
obtained by the Partnership to fund the acquisition of a property located at    
1351 Washington Boulevard, Stamford, Connecticut (the "Stamford Property");     
(ii) acquire the leasehold interests in a property located on Mamaroneck Avenue 
in Harrison, New York (the "Saxon Woods Corporate Center") and in a property    
located at 330 West 34th Street, New York, New York (the "34th Street           
Property") and; (iii) acquire an approximate 60% interest in Two Park Company,  
the joint venture which owns a property located at Two Park Avenue, New York,   
New York (the "Park Avenue Property") (collectively, the "Properties").  The    
remaining 40% interest in Two Park Company is currently owned by B&B Park       
Avenue L.P., of which, Mendik RELP is the general partner.  On April 15, 1997,  
FW/Mendik REIT LLC, an affiliate of Mendik RELP Corporation, acquired           
substantially all of the interest in B&B Park Avenue L.P.  Following this sale, 
FW/Mendik LLC conveyed its interest in B&B Park Avenue L.P. to an affiliate of  
Vornado Realty Trust ("Vornado"), a real estate investment trust whose shares   
of stock are traded on the New York Stock Exchange.  The conveyance to the      
affiliate of Vornado was in connection with the consolidation of Vornado and    
Mendik Management Company, Inc.  and certain of its affiliates, which           
consolidation was also consummated on April 15, 1997.  In connection with this  
transaction, Mendik Management Company Inc. ("Mendik Management") assumed all   
property management and leasing responsibilities at the Properties, which were  
formerly performed by Mendik Realty Company, Inc. ("Mendik Realty").  On        
December 29, 1994, the Partnership transferred title to the Stamford Property   
to the mortgage holder in lieu of foreclosure.  See Notes 2 and 5 to the        
Consolidated Financial Statements under Item 8 for a further discussion of the  
transfer of the Stamford Property.                                              

The Saxon Woods Corporate Center, 34th Street Property and Park Avenue Property 
are each referred to as a "Property" and collectively referred to as the        
"Properties."  See Item 2 of this Report and Note 5 to the Consolidated         
Financial Statements under Item 8 for a further description of the Properties.  
The Partnership does not intend to acquire any additional properties.           

The Partnership's primary investment objectives with respect to the Properties  
(in no particular order of priority) are (i) capital appreciation, (ii)         
distributions of Net Cash From Operations (as defined in the Partnership        
Agreement), and (iii) preservation and protection of capital.  The attainment   
of the Partnership's investment objectives had been adversely affected by the   
impact of the significant downturn in the commercial office real estate market  
in the Greater New York metropolitan area which occurred during the late 1980s  
and early 1990s.                                                                

Overview- Real Estate Market                                                    
The Midtown Manhattan commercial real estate market continued to improve during 
1997, largely as a result of improving economic conditions.  The improvement in 
the city's economy is evidenced by the fact that in 1997, more than 50,000 net  
private sector jobs were added in the New York metropolitan area, up from an    
average of 39,000 for each of the prior three years.  Tenants generating strong 
demand for Midtown office space include those in advertising, printing and      
publishing, financial services, legal services and communications industries.   
Other factors have also been positive in New York City's revitalization,        
including a streamlining of local government, a reduction in various taxes, a   
sharp reduction in crime and the emergence of various public/private ventures   
(e.g. Business Improvement Districts), which provide additional services in     
certain areas, including the general vicinity around Penn Station, where the    
Partnership's 330 West 34th Street property is located.  As a result of the     
increase in demand for office space, the Class A Midtown Manhattan commercial   
office market has experienced positive absorption of previously vacant office   
space for five consecutive years, which has led to a significant reduction in   
vacancy rates.  This decline in vacancy rates has been reinforced by the        
relative lack of new additions of office space since 1992, with no significant  
supply expected to be added until 1999.  According to Cushman and Wakefield,    
Inc. ("Cushman"), a national real estate firm, the Class A vacancy rate in      
Midtown Manhattan was 8.2% in the fourth quarter of 1997, a decrease from 10.0% 
in the fourth quarter of 1996.                                                  

Property Sales                                                                  
With the improvement in the real estate markets in which the Properties are     
located, as well as the high occupancy rates of each of the Properties, the     
General Partners believe that it is an opportune time to sell its interest in   
each of the Properties.  Accordingly, the General Partners are currently        
negotiating a potential sale of the Properties (see Item 3).  While the General 
Partners believe the negotiations will result in an eventual sale, there can be 
no assurance that the Properties will be sold, that certain prices will be      
achieved or that the Properties will be sold in the near term.  If all the      
Properties are sold, the Partnership will be liquidated and the sale proceeds   
will be distributed according to the terms of the Partnership Agreement.        

As a result of the Partnership's decision to pursue negotiations for a          
potential sale of all the Properties, they are classified on the Partnership's  
consolidated balance sheet as "Properties held for disposition, " at December   
31, 1997.                                                                       

Competition                                                                     
Each of the Properties is subject to competition from similar types of          
properties located in the same vicinity.  The business of owning and operating  
commercial office buildings in the Greater New York metropolitan area is highly 
competitive, and the Partnership competes with a number of established          
companies, some of which have greater resources than the Partnership.           

Both of the General Partners and their respective affiliates participate        
directly or through other partnerships or investment vehicles in the            
acquisition, ownership, operation, and sale of properties which may be in       
direct competition with one or more of the Properties.                          

Employees                                                                       
The Partnership has no employees.  For a discussion of transactions with        
affiliates, see Item 13 and Note 8 to the Consolidated Financial Statements     
under Item 8.                                                                   

Item 2.  Properties                                                             

Park Avenue Property                                                            

Valuation.  Two Park Company, the joint venture in which the Partnership owns   
an approximate 60% general partnership interest, acquired the Park Avenue       
Property for $151,500,000.  The Property's appraised fair market value as of    
September 1, 1987 was $165,000,000. The appraised value of the Property as of   
December 31, 1997 was $123,000,000, compared to an appraised value of           
$110,000,000 as of December 31, 1996.  The Partnership's original investment in 
its interest in Two Park Company at acquisition was $95,965,732, including      
$35,820,000 which represented the Partnership's share of first mortgage debt to 
which the Property was subject when the Partnership acquired its interest and   
excluding $1,722,532 of acquisition expenses.  The appraised value of the       
Partnership's interest in the Property as of December 31, 1997, before the      
Partnership's share of first mortgage debt, was $73,431,000, compared to        
appraised values of $65,670,000 as of December 31, 1996 and $98,505,000 as of   
September 1, 1987.                                                              

Due to the Partnership's efforts to market the Park Avenue Property for sale,   
the property was reclassified as "Property held for disposition," effective     
September 30, 1997, in accordance with the provisions of Statement of Financial 
Accounting Standards No. 121.                                                   

Location.  The Park Avenue Property is located at Two Park Avenue, New York,    
New York, on an approximately one-acre site that occupies the entire western    
frontage of Park Avenue between East 32nd and East 33rd Streets in midtown      
Manhattan.  The Park Avenue Property is located four blocks east of             
Pennsylvania Station and nine blocks south of Grand Central Station, New York   
City's largest transportation hubs. Grand Central Station serves as the         
Manhattan terminal for the Metro North rail system.  In addition to a subway    
stop located below the building, several major arteries for the New York City   
subway system have stops in and around Grand Central Station and Pennsylvania   
Station, providing access to passengers from the New York City boroughs of      
Brooklyn, Queens and the Bronx.                                                 

Site and Improvements.  The improvements to the Park Avenue Property consist of 
a 28-story office building that contains approximately 947,000 net rentable     
square feet, based on current standards of measurement.  The building includes  
two lower levels consisting of a subway concourse, a small tenant garage        
containing approximately 43 spaces, rentable storage areas and mechanical       
facilities.                                                                     

Renovations.  During the period from 1987 through 1997, the Two Park Company    
expended approximately $51.2 million on capitalized renovations, including      
tenant improvement construction, which were funded from cash flow, Property and 
Partnership reserves, and borrowings.                                           

Financing.  For information regarding the recently refinanced mortgage secured  
by the Park Avenue Property which aggregates $65 million, reference is made to  
Item 7 and Note 6 to the Consolidated Financial Statements under Item 8.        

Leasing.  The Property's occupancy as of December 31, 1997 and 1996, was 97%    
and 98%, respectively.  During 1998, the Partnership will continue to market    
the Property's available space to commercial office tenants.  Based upon data   
provided by Cushman, the overall vacancy rate for Class A office space in the   
Murray Hill section of Midtown Manhattan, where the Park Avenue Property is     
located, totaled 15.6% for fourth quarter 1997 compared to 16.5% for fourth     
quarter 1996.                                                                   

Major tenants at the Park Avenue Property are The Times Mirror Company Inc.,    
which leases approximately 292,000 square feet (approximately 31% of the total  
leaseable area in the Property) under leases expiring on September 30, 2010,    
and Smith Barney, Inc.  Smith Barney, Inc. leases approximately 100,000 square  
feet (approximately 11% of the total leaseable area in the Property) under a    
lease expiring on May 30, 1998.  Smith Barney has vacated its space, and as a   
result, the Partnership has entered into another lease agreement with a         
subtenant of Smith Barney for 20,000 square feet.  Smith Barney continues to    
remain current on its rental payments to the Partnership in accordance with the 
terms of its existing lease.  In addition, the Partnership recently executed a  
lease agreement with United Way, effective June 1, 1998.  United Way will       
occupy the bulk of the space (60,572 square feet) that was previously occupied  
by Smith Barney, Inc. at rental rates higher than the Smith Barney lease.       

34th Street Property                                                            

Valuation.  The Partnership's investment in the leasehold interest in the 34th  
Street Property at acquisition was $34,883,132, excluding acquisition expenses  
of $728,268.  The Property's appraised value as of November 1, 1986 was         
$39,000,000.  The appraised value of the leasehold interest as of December 31,  
1997, based on two separate appraisal techniques which differ in their          
treatment of the ground lease valuation, ranged from approximately $7,600,000   
to $11,000,000 compared to an appraised value of $4,000,000 at December 31,     
1996.                                                                           

Due to the Partnership's efforts to market the 34th Street Property for sale,   
the Property was reclassified as "Property held for disposition," effective     
September 30, 1997, in accordance with the provisions of Statement of Financial 
Accounting Standards No. 121.                                                   

Location.  The 34th Street Property is located at 330 West 34th Street, New     
York, New York, which is between Eighth and Ninth Avenues in Manhattan's Penn   
Plaza district, five blocks west of the Empire State Building, one-half block   
west of Pennsylvania Station and three blocks east of the Jacob Javits          
Convention Center.  The Property is also one block from Madison Square Garden   
and across the street from the General Post Office.  It is anticipated that the 
potential conversion of the General Post Office into an Amtrak train terminal   
may lead to renewed interest in the area.  The Penn Plaza district is located   
in midtown Manhattan and comprises the seven-block area that surrounds          
Pennsylvania Station, New York City's largest transportation hub.  Pennsylvania 
Station serves as the western terminus for the Long Island Railroad, the        
Manhattan terminal for the Amtrak rail system and the eastern terminus for the  
New Jersey Transit rail system.  In addition, several major arteries of the New 
York City subway system have stops in and around Pennsylvania Station,          
providing access to passengers from the New York City boroughs of Brooklyn,     
Queens and the Bronx.  Madison Square Garden, New York City's largest spectator 
arena, is located above Pennsylvania Station.                                   

Site and Improvements.  The 34th Street Property consists of an 18- story       
structure and a two-story attached annex containing in the aggregate            
approximately 637,000 net rentable square feet, based on current standards of   
measurement.  The 46,413 square foot site also includes an above-ground parking 
area containing 39 spaces that is currently leased to an independent garage     
operator.                                                                       

Ground Lease.  Per the terms of the ground lease agreement, the annual ground   
lease payment to the unaffiliated ground lessor for the parcel of land          
underlying the 34th Street Property increased to $2.25 million effective        
January 1, 1992 through December 31, 1999.   The Partnership has the option to  
renew the ground lease for successive terms of 21, 30, 30, 30 and 39 years at   
annual rentals, determined at the commencement of each renewal term, equal to   
7% of the then-market value of the land considered as if vacant, unimproved and 
unencumbered, valued at the highest and best use under then-applicable zoning   
and other land use regulations as office, hotel or residential property, but in 
no event less than the greater of (i) $2.75 million or (ii) the base rent for   
any consecutive 12-month period during the then-preceding renewal term.  The    
Partnership was required to give notice to renew the ground lease for an        
additional term of 21 years not later than two years (December 31, 1997) prior  
to the expiration of the current term of the ground lease which is scheduled to 
expire on December 31, 1999. In the fourth quarter of 1997, the Partnership     
gave notice to the ground lessor of its intention to renew the lease and was    
subsequently granted an extension on the ground lease, under the same terms,    
until December 31, 2020.                                                        

Renovations.  During the period from 1987 through 1997, the Partnership         
expended approximately $11.6 million on capitalized renovations, including      
tenant improvement construction, funded from cash flow, Partnership reserves,   
and borrowings.                                                                 

Financing.  The 34th Street Property is no longer encumbered by a mortgage      
obligation.  The previous mortgage was paid off in June 1995 for a discounted   
amount of $1.75 million, or approximately 10% of the property's outstanding     
debt balance of approximately $18 million, including principal and accrued      
interest.  Funding for the payoff was provided by an affiliate of NYRES1.  The  
NYRES1 Loan bears interest at the prime rate less one and one-quarter percent   
and matures upon the earlier of December 31, 2025 or the termination of the     
Partnership. Accrued interest and principal are payable on a current basis to   
the extent there is net cash flow available from the property.  The loan is an  
unsecured obligation of the Partnership.                                        

In order to further supplement the Property's cash flow, beginning in January   
1992, Mendik Realty, an affiliate of Mendik RELP Corporation and former         
property manager, agreed to defer its management fees that would otherwise have 
been payable with respect to the 34th Street Property, although it had no       
obligation to do so.  Effective April 15, 1997, property management             
responsibilities were assumed by Mendik Management  (see Item 1).  The          
Partnership's outstanding obligation to pay the management fees to Mendik       
Management will bear interest at a rate per annum equal to the prime rate of    
Morgan Guaranty Trust Company of New York less 1.25%. Principal and interest    
will be payable on December 31, 2025, or such earlier date on which the term of 
the Partnership terminates, subject to a mandatory repayment from the net       
proceeds from the sale of any of the Properties, after repayment of all debt    
secured by the Property sold. In addition, Mendik Management agreed to defer    
its leasing commission with respect to the long-term lease with the City of New 
York and any further leasing commissions associated with additional leasing     
activity at the Property. For additional information regarding the deferral of  
leasing commissions, reference is made to Note 8 to the Consolidated Financial  
Statements under Item 8.                                                        

Leasing.  During the first quarter of 1997, the Partnership reached an          
agreement with the City of New York to amend and extend its existing lease at   
the property for approximately 300,000 square feet for a term of approximately  
ten years from the previous scheduled expiration date of February 28, 2001.  In 
accordance with the terms of the lease amendment, the City will have the right  
to terminate its lease in whole or in part at any time after the fifth          
anniversary (March 21, 2002) of the signing of the lease amendment, with a      
cancellation fee equal to the then unamortized brokerage commissions and        
architectural fees paid in connection with the lease amendment.  Also in        
connection with the lease amendment, the ground lessor has agreed to fund up to 
$100,000 in costs associated with tenant improvement work that will be          
completed on the space occupied by the City.  The terms of the amended lease    
call for the City to make annual base rental payments of approximately $5.4     
million for the first five years of the amended lease, approximately $5.9       
million for years six through ten of the amended lease, and approximately $6.5  
million for years eleven through fifteen of the amended lease.  In addition,    
the City is required to pay its proportionate share of increases in real estate 
taxes and operating expenses over a predetermined base year amount.             
Substantially all of the property's cash flow will be used over the next        
several years to fund the costs associated with the City's lease amendment,     
including the third party brokerage commission, as well as costs associated     
with leases that were previously entered into.                                  

During the first quarter of 1997, the Partnership also entered into a long-term 
lease with Information Builders Inc. for approximately 30,000 square feet,      
including 5,000 square feet of basement space. The tenant began paying rent     
under the new lease on October 1, 1997.                                         

During the second quarter of 1997, the Partnership entered into a long term     
lease with B&H Foto and Electronics Corporation encompassing 5,550 square feet  
of basement space and 4,000 square feet of parking space.  The tenant began     
paying rent on August 1, 1997.                                                  

The Property's occupancy rates as of December 31, 1997, 1996 and 1995, were     
100%, 92% and 90%, respectively.  Based upon data provided by an unaffiliated   
real estate services firm, the vacancy rate for secondary office space in the   
Penn Station section of Midtown Manhattan, where the 34th Street Property is    
located, totalled 18.5% at December 31, 1997, compared to 25.2% at December 31, 
1996.                                                                           

Saxon Woods Corporate Center                                                    

Valuation.  The Partnership's investment in the leasehold interest in the Saxon 
Woods Corporate Center at acquisition was $20,664,379, excluding acquisition    
expenses of $536,454.  The Property's appraised value as of January 21, 1986    
was $22,000,000.  The appraised value of the leasehold interest as of December  
31, 1997, was $20,500,000, compared to $16,700,000 at December 31, 1996.        

Due to the Partnership's plan to market the Saxon Woods Corporate Center for    
sale, the Property was reclassified as "Property held for disposition",         
effective December 31, 1996, in accordance with the provisions of Statement of  
Financial Accounting Standards No. 121.                                         

Location.  Saxon Woods Corporate Center is located on Mamaroneck Avenue in      
Harrison, New York, approximately 18 miles north of New York City in            
Westchester County.  The office park is located near the Mamaroneck Avenue exit 
of Hutchinson River Parkway, approximately one mile north of Interstate 95,     
which is the major artery connecting New York City to Westchester County and    
Connecticut.  Westchester County Airport is located approximately three miles   
north of the site.                                                              

Site and Improvements.  Saxon Woods Corporate Center consists of two five-story 
office buildings.  The building at 550 Mamaroneck Avenue consists of            
approximately 109,000 net rentable square feet and the building at 600          
Mamaroneck Avenue contains approximately 123,000 net rentable square feet,      
based on current standards of measurement.  The buildings are situated on a     
15.28 acre site, which provides ground-level parking for more than 800 cars.    

Ground Lease.  The parcel of land underlying each building is leased from an    
unaffiliated ground lessor pursuant to a ground lease which terminates in       
September 2027 and provides the Partnership with the option to renew for two    
25-year periods and one 39-year period.  Each ground lease provides for an      
annual net rental of $170,000, with an increase of $20,000 every five years     
commencing in January 2001.                                                     

Renovations.  During the period from 1986 through 1997, the Partnership         
expended approximately $12.3 million on capitalized renovations, including      
tenant improvement construction, funded from cash flow, Partnership reserves,   
and borrowings.                                                                 

Financing.  During the third quarter of 1996, the Partnership finalized an      
agreement with the lender of the $6.5 million non- recourse credit financing    
secured by a first leasehold mortgage on the Property to extend the maturity    
date of the Partnership's mortgage indebtedness to September 1997.              
Subsequently, three three-month extensions were obtained to facilitate a sale   
of the Property, with a maturity date of June 26, 1998.  For additional         
information regarding the Saxon Woods Line of Credit, reference is made to Note 
6 of the Consolidated Financial Statements under Item 8.                        

Leasing.  The Property's occupancy rates as of December 31, 1997, 1996 and 1995 
were 99%, 97% and 81%, respectively.  The vacancy rate in Westchester County,   
where the Saxon Woods Corporate Center is located, was 14.6% as of December 31, 
1997, as compared to a vacancy rate of 16.9% at December 31, 1996.  The         
Partnership signed a lease amendment during the first quarter of 1997 with      
Commodity Quotations, pursuant to which the tenant will extend its lease for    
approximately 24,000 square feet for approximately five years.  Commodity       
Quotations will also expand the amount of its leased space by approximately     
3,300 square feet.  In connection with the amendment to the tenant's existing   
lease, the tenant will no longer have the option of terminating the lease prior 
to its expiration.                                                              

Item 3.  Legal Proceedings                                                      

On February 6, 1996, a purported class action, Sword v. Lehman Brothers         
Holdings, Inc., was commenced on behalf of, among others, all Investor Limited  
Partners in the Circuit Court for Baltimore, Maryland against the Partnership,  
Lehman Brothers Holdings, Inc., E.F. Hutton & Company, Inc. and others (the     
"Defendants").  The complaint alleged that the Investor Limited Partners were   
induced to purchase Units based upon misrepresentations and/or omitted          
statements in the sales materials used in connection with the offering of Units 
in the Partnership.  The complaint alleged, inter alia, claims of fraud,        
negligent misrepresentation and breach of fiduciary duty (the "Action").  On or 
about March 21, 1996, the Defendants removed the Action to United States        
District Court for the District of Maryland. On or about April 19, 1996, the    
plaintiffs filed a motion to have the Action remanded back to state court.  As  
of that date, no discovery or other proceedings in the Action had commenced.    
After the parties had entered into successive stipulations extending the time   
for the Defendants to respond to plaintiffs motion to remand and/or respond to  
the complaint, the Court stayed and administratively closed the case by order   
dated June 6, 1997.                                                             

On October 18, 1996, a purported first consolidated and amended class action    
complaint was filed in the Court of Chancery of the State of Delaware and for   
New Castle County on behalf of all persons who purchased units in the           
Partnership, among other investments.  The complaint names NYRES1, Lehman       
Brothers Inc. and others (the "Defendants").  This case consolidates previous   
actions against the Defendants.  The Partnership was not named as a defendant.  
The complaint alleges, among other things, that the Unitholders were induced to 
purchase Units based upon misrepresentation and/or omitted statements in the    
sales materials used in connection with the offering of Units in the            
Partnership.  The complaint purports to assert a claim for breach of fiduciary  
duty by the Defendants based on the foregoing.                                  

On January 14, 1997, two individual Investor Limited Partners commenced a       
purported class action suit against NYRES1, Mendik RELP Corporation, B&B Park   
Avenue, L.P. and Bernard Mendik in the Supreme Court of the State of New York   
County of New York, on behalf of all persons holding limited partnership        
interests in the Partnership.  The complaint alleges that for reasons which     
include purported conflicts of interest, the defendants breached their          
fiduciary duty to the Investor Limited Partners and the General Partners of the 
Partnership also breached their contractual duty to the Investor Limited        
Partners. The plaintiffs further allege that the proposed transfer of the 40%   
interest in Two Park Company (the interest not owned by the Partnership) will   
result in a burden on the operation and management of Two Park Avenue because   
the purchaser of the 40% interest will have no fiduciary duty to the            
Partnership yet all decisions regarding any proposed sale or refinancing of Two 
Park Avenue will require its consent, with the result that, among other things, 
the transfer will prevent the Partnership from negotiating for the sale of Two  
Park Avenue at better terms than a sale on only the Partnership's approximate   
60% interest.  The complaint also alleges, among other things, that the         
transfer of the 40% interest violates the Partnership's rights of first refusal 
to purchase the interest being transferred and fails to provide the Investor    
Limited Partners in the Partnership a comparable transfer opportunity.          

Shortly after the filing of the complaint, another Investor Limited Partner     
represented by the same attorneys filed an essentially identical complaint in   
the same court.  Among other things, both complaints claim that the purported   
class has and will continue to suffer unspecified damages, and seek a           
declaration that the suits are properly class actions, and seek accounting and  
certain injunctive relief including an injunction enjoining the transfer of the 
40% interest and a judgment requiring either the liquidation of the Partnership 
and the appointment of a receiver or an auction of Two Park Avenue.  The time   
for defendants to respond to the complaints and to certain discovery requests   
has not yet expired.  In the interim, plaintiff's counsel have requested an     
agreement to consolidate the two actions and have stated that they may seek to  
amend the complaints in unspecified ways, as well as to file a motion seeking a 
preliminary injunction.  The parties to the litigation are presently            
negotiating a potential settlement of the action that would result in the sale  
of the Park Avenue Property, the 34th Street Property and Saxon Woods Corporate 
Center, and in the liquidation and dissolution of the Partnership.  There can   
be no assurance that such a settlement can be achieved.  If there is no         
settlement and the actions proceed, the defendants intend to vigorously defend  
the actions.                                                                    

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

During the fourth quarter of 1997, no matter was submitted to a vote of         
security holders through the solicitation of proxies or otherwise.              

PART II           

Item 5.  Market for the Partnership's Limited Partnership Units and             
Related Security Holder Matters                               

As of December 31, 1997, there were 19,363 holders of Units.  No established    
public trading market has developed for the Units, and it is not anticipated    
that such a market will develop in the future.  The transfer of Units is        
subject to significant restrictions, including the requirement that an Investor 
Limited Partner may transfer his Units only with the consent of the General     
Partners, which consent may be withheld in the sole and absolute discretion of  
the General Partners.                                                           

During the first quarter of 1989, distributions to the partners were suspended  
following a decision made by the Partnership to establish reserves in the       
amount of what would otherwise be Net Cash From Operations to help meet         
anticipated Partnership requirements.  For the years ended December 31, 1997    
and 1996, no distributions were paid to the partners.                           

Item 6.  Selected Financial Data                                                

The information set forth below should be read in conjunction with the          
Partnership's Consolidated Financial Statements and notes thereto included      
under Item 8 and "Management's Discussion and Analysis of Financial Condition   
and Results of Operations," also included elsewhere herein.                     

                      At or for the Years Ended December 31,
              1997          1996          1995        1994          1993

(Dollars in                                                                     
thousands,                                                                    
except for per                                                                
Unit data)(1)                                                                 

Total                                                                           
income (2)    $ 36,434      $ 36,549      $ 33,549    $ 39,571(8)   $ 34,616    

Income (loss)                                                                   
before                                                                          
extraordinary                                                                   
item             5,113(6)    (47,092)(5)(6) (4,635)     (6,174)(8)(9)(11,407)(9)

Extraordinary                                                                   
item                 _             _        16,248           _             _    

Net income                                                                      
(loss)(3)        5,113(6)    (47,092)(5)(6) 11,613(7)   (6,174)(8)(9)(11,407)(9)

Total                                                                           
assets (2)     152,141       146,458       213,013     220,468       237,798    

Total                                                                           
mortgages                                                                       
and notes                                                                       
payable (2)     73,730        73,730        72,275      95,161       107,043    

Net cash                                                                        
provided by                                                                     
operating                                                                       
activities (2)   7,628         4,348        15,247       4,279         1,275    

Net income                                                                      
(loss) per                                                                      
Unit (3)(4)      12.81(6)    (117.97)(5)(6)  24.43(7)   (15.47)(8)(9) (28.58)(9)

Cash                                                                            
distributions                                                                   
per Unit (4)         _             _             _           _             _    

Net asset                                                                       
value per                                                                       
Unit (3)(4)(10) $146-$155(11)   $101           $99         $82           $99    

Notes:                                                                          

(1)  Selected Financial Data and the Consolidated Financial Statements include  
    the accounts of Two Park Company, a joint venture of which the Partnership
owns an approximate 60% interest.                                     

(2)  Includes the approximate 40% interest in Two Park Company not owned by     
the Partnership.                                                      

(3)  Excludes the approximate 40% interest in Two Park Company not owned by     
the Partnership.                                                      

(4)  395,169 Units outstanding.                                                 

(5)  Includes an unrealized loss on property held for disposition of $5,411,536 
at December 31, 1996.  See Item 7.                                    

(6)  Includes a write-down in 1996 of the carrying value of the Partnership's   
 Properties in the amount of $59,491,089 at December 31, 1996.  In 1997,
    includes a recovery of the valuation allowance on the Saxon Woods property
of $2,920,968.  See Item 7.                                           

(7)  Includes a $16,247,734 gain on retirement of debt resulting from the       
discounted payoff of the 34th Street Line of Credit in June 1995.     

(8)  Includes a $5,564,391 gain on transfer in lieu of foreclosure resulting    
from the transfer of the Stamford Property on December 29, 1994.      

(9)  Includes an unrealized loss on properties held for disposition of          
$4,010,962 and $4,240,608 at December 31, 1994 and 1993, respectively.

(10) The calculation of net asset value assumes a hypothetical sale of the      
Properties at their appraised values and the distribution of the net  
  proceeds of such sales, together with the Partnership's working capital,
to the partners.  The net asset value represents an average per unit  
liquidation value and, consistent with prior practice, is computed by 
dividing the total value of the Partnership's net assets by the total 
number of units outstanding.  Pursuant to the Partnership Agreement,  
  distributions to individual unit holders upon liquidation will vary from
  distributions upon sale or refinancing of individual Properties when the
   Partnership is not liquidating.  In a liquidation, distributions are made
in proportion to positive capital account balances which vary between 
  Class A and B units as a result of the annual allocation of depreciation
solely to Class A units, in accordance with the Partnership Agreement.
   With respect to the individual Class A units, there is a further variance
in capital accounts resulting from the six separate closings for the  
purchase of units.  Separately computed, assuming a hypothetical      
liquidation as of December 31, 1997, the amount distributable to an   
    average Class A unit would range from approximately $102.00 to $108.00 per
unit (range depending on the appraised value used for the 34th Street 
Property), with earlier issued units receiving less  and later issued 
    units receiving more, and the amount distributable to a Class B unit would
   range from approximately $212.00 to $224.00 per unit.  The calculation of
 net asset value does not take into account numerous other factors which
 would determine the actual value received for individual units, such as
 the   timing of Property sales and distribution of related proceeds, as
well as the actual values realized upon sales of the Properties.  In  
    addition, as a result of these factors and the lack of a public market for
  the resale of units, the price at which units may be resold is likely to
be significantly different from the computed net asset value per unit.

(11) $146.00 per Unit assumes a $7.6 million appraisal value for the 34th       
   Street Property, $155 per Unit assumes an   $11.0 million appraisal value
for the 34th Street property.                                         

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

Liquidity and Capital Resources                                                 

During the year-ended December 31, 1997, the Partnership funded operating       
costs, the cost of tenant improvements, leasing commissions, and building       
capital improvements from the following:  (i) cash flow generated by the        
property located at Two Park Avenue (the "Park Avenue Property"), the           
Partnership's leasehold interest in 550/600 Mamaroneck Avenue, Harrison, New    
York (the "Saxon Woods Corporate Center") and the Partnership's leasehold       
interest in the property located at 330 West 34th Street, New York, New York    
(the "34th Street Property"), (ii) Partnership reserves, (iii) the deferral of  
property management fees and leasing commissions with respect to certain of the 
Properties by Mendik Management, an affiliate of Mendik RELP Corporation, and   
(iv) the deferral of interest payments on the NYRES1 Loan.  Because certain of  
the properties may be sold, it is expected that funds from certain of these     
sources may be reduced or unavailable in the future.                            

With the improvement in the real estate markets in which the Properties are     
located, as well as the high occupancy rates of each of the Properties, the     
General Partners believe that it is an opportune time to sell its interest in   
the Properties.  Accordingly, the General Partners are currently negotiating a  
potential sale of the Properties. While the General Partners believe the        
negotiations will result in an eventual sale, there can be no assurance that    
all the Properties will be sold, that certain prices will be achieved or that   
the Properties will be sold in the near-term.  If all the Properties are sold,  
the Partnership will be liquidated and the sale proceeds will be distributed    
according to the terms of the Partnership Agreement.                            

As a result of the Partnership's decision to pursue negotiations for a          
potential sale of the Properties, they are classified on the Partnership's      
consolidated balance sheet as "Properties held for disposition, "at December    
31, 1997.                                                                       

Park Avenue Property - As of December 31, 1997, the Park Avenue Property was    
approximately 97% leased.  The costs of leasing space at the property are being 
funded with existing property cash flow and reserves maintained by Two Park     
Company, the partnership that owns the Park Avenue Property.  Pursuant to the   
new Park Avenue mortgage loan, as discussed below, as of December 31, 1997, the 
Partnership had placed approximately $6.0 million in a reserve account to fund  
the costs of future leasing commissions and tenant improvements.                

The Park Avenue Property was subject to nonrecourse financing totaling $65      
million in principal which was scheduled to mature in December 1998, however,   
the lender had the right to accelerate the maturity upon six-months notice.  In 
order to address the risk of such acceleration, Two Park Company refinanced the 
existing loan, which refinancing closed in April 1997.  Under the new mortgage, 
which matures on March 1, 2000, interest is payable at a floating rate (LIBOR   
plus 150 basis points), which should reduce debt service costs (assuming        
short-term LIBOR rates remain stable).  Additionally, there will be no          
prepayment penalty (other than in connection with breakage costs of any LIBOR   
contract), in the event Two Park Company repays the full amount due under the   
mortgage prior to maturity.  This should provide the Partnership with           
flexibility in connection with its plan to sell its 60% interest in Two Park    
Company.                                                                        

The remaining 40% interest in the Park Avenue Property is owned by B & B Park   
Avenue L.P. ("B&B"), of which Mendik RELP Corporation was a general partner. On 
December 13, 1996, FW/Mendik REIT LLC, an affiliate of Mendik RELP Corporation, 
entered into a contract with the partners that owned substantially all of the   
interest in B&B to acquire their interest in B&B.  The closing under the        
contract took place on April 15, 1997.  Following the closing, FW/Mendik REIT   
LLC conveyed its interest in B&B to an affiliate of Vornado Realty Trust        
("Vornado"), a real estate investment trust whose shares of stock are traded on 
the New York Stock Exchange.  The conveyance to the affiliate of Vornado was in 
connection with the consolidation of Vornado and Mendik Management Company Inc. 
and certain of its affiliates, which consolidation was also consummated on      
April 15, 1997.  In connection with this transaction, Mendik Management assumed 
all property management and leasing responsibilities at the Properties, which   
were formerly performed by Mendik Realty.                                       

Major tenants at the Park Avenue Property are The Times Mirror Company Inc.,    
which leases approximately 292,000 square feet (approximately 31% of the total  
leaseable area in the Property) under leases expiring on September 30, 2010,    
and Smith Barney, Inc.  Smith Barney, Inc. leases approximately 100,000 square  
feet (approximately 11% of the total leaseable area in the Property) under a    
lease expiring on May 30, 1998.  Smith Barney has vacated its space, and as a   
result, the Partnership has entered into another lease agreement with a         
subtenant of Smith Barney for 20,000 square feet.  Smith Barney continues to    
remain current on its rental payments to the Partnership in accordance with the 
terms of its existing lease.  In addition, the Partnership recently executed a  
lease agreement with United Way, effective June 1, 1998.  United Way will       
occupy the bulk of the space (60,572 square feet) that was previously occupied  
by Smith Barney, Inc. at rental rates higher than the Smith Barney lease.       

Saxon Woods Corporate Center - The Saxon Woods Corporate Center consists of two 
office buildings, which had a combined leased rate of approximately 99% as of   
December 31, 1997.  The Partnership signed a lease amendment during the first   
quarter of 1997 with Commodity Quotations, pursuant to which the tenant agreed  
not to exercise its cancellation option and also extended its lease at the      
property for approximately 24,000 square feet. Commodity Quotations also        
expanded the amount of its leased space by approximately 3,300 square feet for  
a five-year term through September 30, 2002, coterminous with the lease for     
24,000 square feet.                                                             

During the third quarter of 1996, the Partnership obtained a one-year extension 
of the mortgage indebtedness to September 1997. Subsequently, three,            
three-month extensions were obtained to facilitate a sale of the Property, with 
a maturity date of June 26, 1998.                                               

34th Street Property - As of December 31, 1997, the 34th Street Property was    
100% leased.  The largest tenant in the property is the City of New York Human  
Resources Administration (the "City") occupying approximately 47% of the total  
leaseable area under a lease which was originally scheduled to expire in        
February 2001.                                                                  

During the first quarter of 1997, the Partnership reached an agreement with the 
City of New York to amend and extend its existing lease at the property for     
approximately 300,000 square feet for a term of approximately ten years from    
the previous scheduled expiration date of February 28, 2001.  In accordance     
with the terms of the lease amendment, the City will have the right to          
terminate its lease in whole or in part at any time after the fifth anniversary 
(March 21, 2002) of the signing of the lease amendment, with a cancellation fee 
equal to the then unamortized brokerage commissions and architectural fees paid 
in connection with the lease amendment.  Also in connection with the lease      
amendment, the ground lessor has agreed to fund up to $100,000 in costs         
associated with tenant improvement work that will be completed on the space     
occupied by the City.  The terms of the amended lease call for the City to make 
annual base rental payments of approximately $5.4 million for the first five    
years of the amended lease, approximately $5.9 million for years six through    
ten of the amended lease, and approximately $6.5 million for years eleven       
through fifteen of the amended lease.  In addition, the City is required to pay 
its proportionate share of increases in real estate taxes and operating         
expenses over a predetermined base year amount. Substantially all of the        
property's cash flow will be used over the next several years to fund the costs 
associated with the City's lease amendment, including the third party brokerage 
commission, as well as costs associated with leases that were previously        
entered into.                                                                   

During the first quarter of 1997, the Partnership also entered into a long-term 
lease with Information Builders Inc. for approximately 30,000 square feet,      
including 5,000 square feet of basement space, of the available leaseable space 
at the property.  The tenant began paying rent under the new lease on October   
1, 1997.                                                                        

During the second quarter of 1997, the Partnership executed a long- term lease  
with B&H Foto and Electronics Corporation encompassing 5,550 square feet of     
basement space and 4,000 square feet of parking space.  The tenant began paying 
rent on August 1, 1997.                                                         

The 34th Street Property is no longer encumbered by a mortgage obligation.  The 
previous mortgage was paid off in June 1995 for a discounted amount of $1.75    
million, or approximately 10% of the property's outstanding debt balance of     
approximately $18 million, including principal and accrued interest.  Funding   
for the payoff was provided by an affiliate of NYRES1.  The NYRES1 Loan bears   
interest at the prime rate less one and one-quarter percent and matures upon    
the earlier of December 31, 2025 or the termination of the Partnership. Accrued 
interest and principal are payable on a current basis to the extent there is    
net cash flow available from the property.  The loan is an unsecured obligation 
of the Partnership.  In connection with the loan, Mendik Management agreed to   
continue to defer its management fees and leasing commissions with respect to   
the property.                                                                   

Operating Cash Reserves and Other Assets                                        
The Partnership's cash and cash equivalents were $4,786,697 at December 31,     
1997, largely unchanged from $4,727,720 at December 31, 1996.  Restricted cash  
was $7,041,844 at December 31, 1997, compared to $960,489 at December 31, 1996. 
The increase is primarily attributable to the transfer of funds from U.S.       
Treasuries to a money market reserve account.  Pursuant to the new Park Avenue  
mortgage loan, as of December 31, 1997, the Partnership had placed              
approximately 6.0 million in a reserve account to fund the cost of future       
leasing commissions and tenant improvements.                                    

Rent and other receivables totaled $903,270 at December 31, 1997, compared to   
$1,192,114 at December 31, 1996. The decrease is primarily due to the timing of 
rental payments made by certain tenants at the Properties.                      

At December 31, 1997, U.S. Treasuries and Agencies were zero compared to        
$2,121,910 at December 31, 1996.  The majority of U.S. Treasuries and Agencies  
funds were used to fund the $2 million reserve for the cost of future leasing   
at the Park Avenue Property.                                                    

Short- and Long-term Liabilities                                                
Accounts payable and accrued expenses were $1,572,939 at December 31, 1997,     
compared to $1,859,961 at December 31, 1996.  The decrease is primarily         
attributable to the payment of leasing commissions and administrative costs in  
the first quarter of 1997 that had been accrued in previous years.              

Accrued interest payable was $727,944 at December 31, 1997 compared to $799,315 
at December 31, 1996.  The decrease is primarily the result of the refinancing  
of the Park Avenue Property's mortgage note in April 1997.                      

Results of Operations                                                           

1997 vs. 1996                                                                   
For the year ended December 31, 1997, the Partnership generated net cash from   
operating activities of $7,627,599, compared to $4,347,586 for the year ended   
December 31, 1996.  The higher balance in the 1997 period is primarily          
attributable to lower interest expense.  The Partnership generated net income   
of $5,113,351 for the year ended December 31, 1997, compared to a net loss of   
$47,091,683 for the year ended December 31, 1996.  In 1996 the Partnership      
recorded write-downs in the value of its real estate totalling $64,902,625.     
Rental income for the year ended December 31, 1997 totalled $36,189,134,        
compared to $36,301,921 for the year ended December 31, 1996.                   

Property operating expenses totalled $20,827,352 for the year ended December    
31, 1997, compared to $20,118,066 for the year ended December 31, 1996.  The    
increase is due to higher cleaning and utility expenses at Two Park Avenue and  
Saxon Woods properties.                                                         

Depreciation and amortization expense for the year ended December 31, 1997      
totalled $5,246,432, compared to $11,257,102 for the year ended December 31,    
1996.  The $6,010,670 decrease is primarily due to the reclassification of the  
Saxon Woods Property as "Property held for disposition" effective December 31,  
1996, and the reclassification of Two Park Avenue and 34th Street as            
"Properties held for disposition" effective September 30, 1997.  The            
Partnership ceased depreciation of the respective properties on the dates they  
were reclassified to held for disposition in accordance with FAS 121.           

Interest expense for the year ended December 31, 1997 totalled $6,162,361,      
compared to $7,225,953 for the year ended December 31, 1996.  The $1,063,592    
decrease was due primarily to the refinancing of the Park Avenue Property       
mortgage indebtedness in April 1997, which decreased the interest rate on the   
outstanding principal balances.                                                 

1996 vs. 1995                                                                   
For the year ended December 31, 1996, the Partnership generated net cash from   
operating activities of $4,347,586, compared to $15,247,357 for the year ended  
December 31, 1995.  The higher balance in the 1995 period was primarily         
attributable to the prepayment of rent by The Times Mirror Company Inc. in      
connection with the lease restructuring at the Park Avenue Property in November 
1995.  The Partnership generated a net loss of $47,091,683 for the year ended   
December 31, 1996, compared to net income of $11,613,040 for the year ended     
December 31, 1995. The net loss for the year ended December 31, 1996 includes   
the recognition of a write-down in connection with the reduction in the         
carrying value of the Properties in December 1996, net of B & B Park Avenue     
L.P.'s minority interest share in the write-down expense of the Park Avenue     
Property, in the amount of $39,545,219.  The net loss for the year ended        
December 31, 1996 also includes the recognition of a provision for valuation    
allowance on property held for disposition (Saxon Woods) in the amount of       
$5,411,536 as of December 31, 1996.  Net income for the year ended December 31, 
1995 includes the recognition of a $16,247,734 extraordinary gain on the        
retirement of the 34th Street Line of Credit in June 1995.  No such gain was    
recognized by the Partnership during 1996.  Excluding these items, the          
Partnership generated a loss before writedown of real estate investments and a  
provision for valuation allowance on property held for disposition in the       
amount of $2,134,928 for the year ended December 31, 1996, compared to a loss   
before extraordinary item of $4,634,694 for the year ended December 31, 1995.   
The lower loss in 1996 was primarily attributable to an increase in rental      
income and a decrease in interest expense, partially offset by an increase in   
depreciation and amortization expense.                                          

Rental income for the year ended December 31, 1996 totalled $36,301,921,        
compared to $33,334,516 for the year ended December 31, 1995.  The increase was 
due primarily to significant leasing activity at the 34th Street Property       
during the fourth quarter of 1995, and to new and renewal/amended leases        
executed at the Park Avenue Property during 1995.                               

Property operating expenses totalled $20,118,066 for the year ended December    
31, 1996, largely unchanged from $19,938,170 for the year ended December 31,    
1995.                                                                           

Depreciation and amortization expense for the year ended December 31, 1996      
totalled $11,257,102, compared to $10,199,677 for the year ended December 31,   
1995.  The $1,057,425 increase was primarily due to increased amortization of   
leasing commissions related to The Times Mirror Company Inc.'s lease at the     
Park Avenue Property.                                                           

Interest expense for the year ended December 31, 1996 totalled $7,225,953,      
compared to $8,796,859 for the year ended December 31, 1995.  The $1,570,906    
decrease was due primarily to: (i) the $10 million paydown of the outstanding   
principal balance of the mortgages secured by the Park Avenue Property in the   
fourth quarter of 1995, and (ii) the June 1995 discounted payoff of the 34      
Street Property mortgage.                                                       

Item 8.  Financial Statements and Supplementary Data                            

See Index of the Consolidated Financial Statements and Financial Statement      
Schedules at Item 14, filed as part of this Report.                             

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

None.                                                                           

PART III          

Item 10.  Directors and Executive Officers of the Registrant                    

The Partnership has no officers or directors.  Mendik RELP Corporation and      
NYRES1, as General Partners, jointly manage and control the affairs of the      
Partnership and have general responsibility and authority in all matters        
affecting its business.                                                         

Mendik RELP Corporation                                                         
Mendik RELP Corporation was incorporated under the laws of the State of New     
York on November 13, 1985.  On January 16, 1997, the Mendik General Partner     
changed its name from Mendik Corporation to Mendik RELP Corporation to avoid    
confusion with the names of other Mendik entities.                              

All of the capital stock of Mendik RELP Corporation is owned by Bernard H.      
Mendik.  Pursuant to Section 22(b) of the Partnership Agreement, Mr. Mendik has 
contributed to the capital of Mendik RELP Corporation $2.5 million in the form  
of a demand promissory note, which represents the only substantial asset of     
Mendik RELP Corporation.  Mr. Mendik has a net worth in excess of such amount.  
Mendik RELP Corporation maintains its principal office at 330 Madison Avenue,   
New York, New York 10017.                                                       

The executive officers and sole director of Mendik RELP Corporation (none of    
whom has a family relationship with another) are:                               

Name                   Age     Office                   
Bernard H. Mendik      68      Chairman and Director    
David R. Greenbaum     46      President                
       Christopher G. Bonk    43      Senior Vice President, Treasurer
                                 and Chief Financial Officer
Michael M. Downey      56      Senior Vice President    
David L. Sims          51      Senior Vice President    
Kevin R. Wang          40      Senior Vice President    

All officers and directors of Mendik RELP Corporation have been officers or     
directors of the corporation since its incorporation in November 1985.  All     
officers of Mendik RELP Corporation hold the same position in Mendik            
Management.  Prior to April 15, 1997 all officer of Mendik RELP Corporation     
held the same position in Mendik Realty, which transferred its property         
management and leasing responsibilities to Mendik Management on that date (see  
Item 1).                                                                        

Bernard H. Mendik has been an owner/manager and developer of office and         
commercial properties since 1957. Mr. Mendik was named Chairman of Mendik       
Management in 1990.  Prior to his appointment as Chairman, Mr. Mendik had       
served as President of Mendik Management since 1978.                            

David R. Greenbaum was appointed President of Mendik Management in 1990.  Prior 
to his appointment as President, Mr. Greenbaum had served as Executive Vice     
President of Mendik Management since 1982.                                      

Christopher G. Bonk has been with Mendik Management since 1981, most recently   
as Senior Vice President, Treasurer and Chief Financial Officer.                

Michael M. Downey has been with Mendik Management since 1978, most recently as  
Senior Vice President of Operations.                                            

David L. Sims has been with Mendik Management since 1984, most recently as      
Senior Vice President of Leasing.                                               

Kevin R. Wang has been with Mendik Management since 1985, most recently as      
Senior Vice President of Leasing.                                               

NYRES1                                                                          
NYRES1 is a Delaware Corporation formed on September 9, 1985, and is an         
affiliate of Lehman Brothers Inc. ("Lehman").                                   

On July 31, 1993, Shearson Lehman Brothers, Inc. ("Shearson") sold certain of   
its domestic retail brokerage and asset management businesses to Smith Barney,  
Harris Upham & Co. Incorporated ("Smith Barney").  Subsequent to the sale,      
Shearson changed its name to Lehman Brothers Inc.  The transaction did not      
affect the ownership of the Partnership or the General Partners.  However, the  
assets acquired by Smith Barney included the name "Hutton."  Consequently,      
effective October 22, 1993, Hutton Real Estate Services XV, Inc. changed its    
name to NY Real Estate Services 1 Inc. to delete any references to "Hutton."    

Pursuant to Section 22(b) of the Partnership Agreement, an affiliate of Lehman  
has contributed to the capital of NYRES1 $2.5 million in the form of a demand   
promissory note, which represents the only substantial asset of NYRES1.  Such   
affiliate has a net worth in excess of such amount.                             

Certain officers and directors of NYRES1 are now serving (or in the past have   
served) as officers or directors of entities which act as general partners of a 
number of real estate limited partnerships which have sought protection under   
the provisions of the Federal Bankruptcy Code.  The partnerships which have     
filed bankruptcy petitions own real estate which has been adversely affected by 
the economic conditions in the markets in which the real estate is located and, 
consequently, the partnerships sought the protection of the bankruptcy laws to  
protect the partnerships' assets from loss through foreclosure.                 

The executive officers and sole director of NYRES1 (none of whom has a family   
relationship with another) are:                                                 

Name                  Age       Office                  
Mark Marcucci         35        President and Director  
       Moshe Braver          44        Vice President, Chief Financial
                         Officer, Director
Lawrence M. Ostow     29        Vice President          

Mark Marcucci, 35, is a Senior Vice President of Lehman Brothers Inc. in its    
Diversified Asset Group.  Since joining Lehman Brothers in 1988, Mr. Marcucci's 
responsibilities have been concentrated in the restructuring, asset management, 
leasing, financing, refinancing and disposition of commercial office and        
residential real estate.  Prior to joining Lehman Brothers, Mr. Marcucci was    
employed in a corporate lending capacity at Republic National Bank of New York. 
Mr. Marcucci received a B.B.A. in Finance from Hofstra University and a Master  
of Science in Real Estate from New York University.  In addition, Mr. Marcucci  
holds both Series 7 and Series 63 securities licenses.                          

Moshe Braver, 44, is currently a Managing Director of Lehman Brothers and has   
held such position since October 1985.  During this time, he has held positions 
with the Business Analysis Group, International and Capital Markets             
Administration and currently, with the Diversified Asset Group.  Mr. Braver     
joined Shearson Lehman Brothers in August 1983 as Senior Vice President.  Prior 
to joining Shearson, Mr. Braver was employed by the accounting firm of Coopers  
& Lybrand from January 1975 through August 1983 as an Audit Manager.  He        
received a Bachelor of Business Administration degree from Bernard Baruch       
College in January 1975 and is a Certified Public Accountant.                   

Lawrence M. Ostow, 29, is a Vice President of Lehman Brothers and is            
responsible for the management of commercial real estate in the Diversified     
Asset Group.  Mr. Ostow joined Lehman Brothers in September 1992.  Prior to     
that, Mr. Ostow was a Senior Consultant with Arthur Andersen & Co. in the Real  
Estate Services Group, beginning in July 1990.  Mr. Ostow earned an M.B.A. from 
the Stern School of Business in 1997 and a B.A. degree in Economics from the    
University of Michigan in 1990.                                                 

Item 11.  Executive Compensation                                                

Neither of the General Partners nor any of their officers or directors received 
any compensation from the Partnership.                                          

The General Partners are entitled to varying percentages of Net Cash Flow       
distributed in any fiscal year and to varying percentages of the Net Proceeds   
of capital transactions.  See Note 4 "The Partnership Agreement" of the Notes   
to the Consolidated Financial Statements, included in the Partnership's Annual  
Report to Unitholders for the year ended December 31, 1997, which is filed as   
an exhibit under Item 14.                                                       

Item 12.  Security Ownership of Certain Beneficial Owners and Management        

As of March 31, 1998, no person was known by the Partnership to be the          
beneficial owner of more than five percent of the Units.                        

Set forth below is a chart indicating, as of March 31, 1998, the name and the   
amount and nature of beneficial ownership of Units held by the General Partners 
and officers and directors thereof.  Only those General Partners and officers   
and directors thereof which beneficially own any Units are listed.  No General  
Partner or any officer or director thereof, or the officers and directors of    
the General Partners as a group, beneficially owns in excess of 1% of the total 
number of Units outstanding.                                                    

Beneficial Ownership of Units                           
Name of Beneficial                         Number of    
Owner                                    Units Owned    
Bernard H. Mendik                           1,276 (1)   
David R. Greenbaum                            525 (2)   
Kevin R. Wang                                  20 (3)   
Christopher G. Bonk                            49       
Michael M. Downey                              33       
David L. Sims                                  16       

The General Partners and all officers and               
   directors thereof as a group (10 persons)   1,919 (1)(2)(3)

(1)  Includes 1,027 Units owned by Mr. Mendik, 200 Units held in trust for Mr.  
Mendik's children and 49 Units owned by Mendik Management.  Does not  
include 40 Units owned by Mr. Mendik's wife, as to which he disclaims 
beneficial ownership.                                                 

(2)  Includes 325 Units owned by Mr. Greenbaum and 200 Units owned by Mr.       
Greenbaum's wife.                                                     

(3)  Does not include four Units owned by Mr. Wang's wife, as to which he       
disclaims beneficial ownership.                                       

Item 13.  Certain Business Relationships and Related Transactions               

As a result of the suspension of cash distributions, neither NYRES1 nor Mendik  
RELP Corporation received net cash from operations with respect to the year     
ended December 31, 1997.  For the 1997 fiscal year, $51,134 of the              
Partnership's net income was allocated to each of NYRES1 and Mendik RELP        
Corporation.  For a description of the shares of Net Cash From Operations and   
Sale or Refinancing Proceeds (as defined in the Partnership Agreement) and the  
allocation of items of income and loss to which the General Partners, the       
special limited partner, and the Investor Limited Partners are respectively     
entitled, see Note 4 of Notes to the Consolidated Financial Statements.         

Pursuant to Section 12 of the Partnership Agreement, Mendik Management has      
agreed to limit its payment of leasing commissions at any Property in any year  
to not more than 3% of the gross operating revenues of that Property in such    
year less leasing commissions paid to other brokers in connection with that     
Property in such year.  Any excess will be deferred but is payable only if and  
to the extent such limit is not exceeded in the year paid.  As of December 31,  
1997, there was a liability of approximately $1,037,195 to Mendik Management as 
a result of leasing commissions earned in 1997 and prior periods from the 34th  
Street Property, Park Avenue Property and Saxon Woods Corporate Center.  During 
1997, Mendik Management deferred its leasing commissions earned in connection   
with the leasing of space at the 34th Street Property and will continue to      
defer these commissions during 1998.                                            

B&B Park Avenue L.P. ("B&B"), a limited partnership of which Mendik RELP        
Corporation is a general partner, owns the remaining 40% interest in Two Park   
Company, the joint venture that owns the Park Avenue Property.  On December 13, 
1996, FW/Mendik REIT LLC, an affiliate of Mendik RELP Corporation, entered into 
a contract with the partners that owned substantially all of the interest in    
B&B to acquire their interest in B&B.  The closing under the contract took      
place on April 15, 1997.  Following the closing, FW/Mendik REIT LLC conveyed    
its interest in B&B to an affiliate of Vornado Realty Trust ("Vornado"), a real 
estate investment trust whose shares of stock are traded on the New York Stock  
Exchange.  The conveyance to the affiliate of Vornado was in connection with    
the consolidation of Vornado and Mendik Management Company Inc. and certain of  
its affiliates, which consolidation was also consummated on April 15, 1997.     

Mendik Management receives fees for the management of the Partnership's         
Properties and is reimbursed for the cost of on-site building management staff. 
During 1997, Mendik Management earned management fees from the Partnership      
totalling $960,780, of which $211,198 has been deferred, and was reimbursed     
$498,232 for the cost of on-site building management salaries.                  

Mendik Management has deferred certain management fees and leasing commissions  
payable to it by the Partnership in connection with the 34th Street Property    
totalling $2,113,880 as of December 31, 1997. Such amount includes interest on  
the unpaid management fees.  During 1998, Mendik Management has agreed to       
continue to defer management fees in connection with the 34th Street Property.  
See the information under the caption "34th Street Property" in Item 2 of this  
Report. See Note 8 of Notes to the Consolidated Financial Statements.           

Building Maintenance Service LLC ("BMS"), an affiliate of Mendik RELP           
Corporation, performs cleaning and related services for the properties at cost  
(plus an allocable share of overhead expenses).  As of January 1, 1993, Guard   
Management Service Corporation ("GMSC"), an affiliate of Mendik RELP            
Corporation, began providing security services at the Park Avenue Property and  
Saxon Woods Corporate Center, which services will be provided by GMSC at cost   
(plus an allocable share of overhead expenses).  During 1997, GMSC and BMS      
received from the Partnership $5,049,788 for such services.                     

During 1997, certain expenses incurred by the NYRES1 general partner, its       
affiliates, and an unaffiliated third party service provider in servicing the   
Partnership, which were voluntarily absorbed by affiliates of the NYRES1        
general partner in prior periods, were reimbursable to the NYRES1 general       
partner and its affiliates.                                                     

See Note 8 of the Notes to the Consolidated Financial Statements for additional 
information concerning amounts paid or accrued to the General Partners and      
their affiliates during the years ended December 31, 1997, 1996 and 1995 and    
all balances unpaid at December 31, 1997.                                       

PART IV           

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K        

(a)(1) Financial Statements and Schedules                             Page      

Independent Auditors' Report                                      F-1 

Consolidated Balance Sheets at December 31, 1997 and 1996         F-2 

Consolidated Statements of Operations for the years ended             
 December 31, 1997, 1996 and 1995                                F-3

Consolidated Statements of Partners' Capital (Deficit) for            
 the years ended December 31, 1997, 1996 and 1995                F-3

Consolidated Statements of Cash Flows for the years ended             
 December 31, 1997, 1996 and 1995                                F-4

Notes to the Consolidated Financial Statements                    F-5 

(a)(2) Financial Statement Schedule                                             

Schedule III - Real Estate and Accumulated Depreciation           F-19

All other schedules for which provision is made in the applicable     
    accounting regulations of the Securities and Exchange Commission have been
omitted since (1) the information required is disclosed in the        
    consolidated financial statements and the notes thereto; (2) the schedules
   are not required under the related instructions; or (3) the schedules are
inapplicable.                                                         

(b)    Reports on Form 8-K.                                                     

No reports on Form 8-K were filed in the fourth quarter of 1997.  

(c)  Exhibits                                                                   

Subject to Rule 12b-32 of the Securities Exchange Act of 1934 regarding         
incorporation by reference, listed below are the exhibits which are filed as    
part of this report:                                                            

3 (a)    Amended and Restated Certificate and Agreement of Limited Partnership
  of the Partnership (included as Exhibit A to the Prospectus of
        Registrant dated April 7, 1986 included as Exhibit 28(b) to the 1986
         Annual Report on Form 10-K of the Partnership and incorporated herein
by reference thereto).                                      

(b)    Amendments to Amended and Restated Certificate and Agreement of    
        Limited Partnership of the Partnership (included as Exhibit A to the
       Prospectus Amendment of Registrant dated April 29, 1987 included as
Exhibit 29(c) to the 1989 Annual Report on Form 10-K of the 
Partnership and incorporated herein by reference thereto).  

10 (a)    Form of Property Management Agreement between the Partnership and     
Mendik Management Company Inc. (included as Exhibit 10(a) to
   Amendment No. 2 to the Registration Statement (Registration No.
       33-01779) (the "Registration Statement") and incorporated herein by
reference thereto).                                         

(b)    James Felt Realty Services appraisal of the Stamford Property      
(included as Exhibit 10(b) to the Registration Statement and
incorporated herein by reference thereto).                  

 (c)    Contract of Sale, dated June 25, 1985, between 1351 Washington Blvd.
 Limited Partnership, Bernard H. Mendik and Hutton Real Estate
        Services XV, Inc. and related assignments (included as Exhibit 10(f)
     to Amendment No. 1 to the Registration Statement and incorporated
herein by reference thereto).                               

(d)    Cushman & Wakefield, Inc. appraisal of Saxon Woods Corporate Center
     (included as Exhibit 10(g) to Amendment No. 2 to the Registration
Statement and incorporated herein by reference thereto).    

(e)    Copies of Ground Leases relating to Saxon Woods Corporate Center   
     (included as Exhibit 10(h) to Amendment No. 2 to the Registration
Statement and incorporated herein by reference thereto).    

(f)    Memorandum of Contract, dated December 24, 1985, between The       
  Prudential Insurance Company of America and 550/600 Mamaroneck
       Company relating to the acquisition of Saxon Woods Corporate Center
     (included as Exhibit 10(i) to Amendment No. 2 to the Registration
Statement and incorporated by reference thereto).           

(g)    The Weitzman Group, Inc. appraisal of the 330 West 34th Street     
         property (included as Exhibit 10(j) to Post-Effective Amendment No. 2
      to the Registration Statement and incorporated herein by reference
thereto).                                                   

(h)    Copy of Ground Lease relating to the 34th Street property (included
as Exhibit 10(k) to Post-Effective Amendment No. 1 to the   
         Registration Statement and incorporated herein by reference thereto).

(i)    Agreement of Assignment of Contract of Sale, dated September 25,   
     1986, between 330 West 34th Street Associates and M/H 34th Street
         Associates (included as Exhibit 10(l) to Post-Effective Amendment No.
        1 to the Registration Statement and incorporated herein by reference
thereto).                                                   

(j)    Agreement, dated December 5, 1986, between Park Fee Associates, The
       Mendik Company, Chase Investors Management Corporation New York and
   M/H Two Park Associates relating to the acquisition of the Park
Avenue Property (included as Exhibit 10(m) to Post-Effective
     Amendment No. 1 to the Registration Statement and incorporated by
reference thereto).                                         

(k)    James Felt Realty Services appraisal of the Park Avenue Property   
       (included as Exhibit 10(n) to Post-Effective Amendment No. 7 to the
         Registration Statement and incorporated herein by reference thereto).

(l)    Exhibits (l) through (aa) to the Partnership's Form 10-K for the   
  fiscal year ended December 31, 1990 are incorporated herein by
reference thereto.                                          

(m)    Loan Agreement of $6,500,000 to Mendik Real Estate Limited         
    Partnership from Friesch-Groningsche Hypotheekbank Realty Credit
   Corporation dated September 25, 1991 secured by the Saxon Woods
         Corporate Center (included as Exhibit 10(m) to the Partnership's Form
     10-K for the fiscal year ended December 31, 1991 and incorporated
herein by reference thereto).                               

  (n)    Appraisal of the 34th Street Property as of January 1992 by Cushman &
        Wakefield, Inc. (included as Exhibit 10(n) to the Partnership's Form
     10-K for the fiscal year ended December 31, 1991 and incorporated
herein by reference thereto).                               

(o)    Letter Opinion of Value of the Park Avenue Property as of January  
       1992 by Cushman & Wakefield, Inc. (included as Exhibit 10(o) to the
       Partnership's Form 10-K for the fiscal year ended December 31, 1991
and incorporated herein by reference thereto).              

(p)    Letter Opinion of Value of the Stamford Property as of January 1992
  by Cushman & Wakefield, Inc. (included as Exhibit 10(p) to the
       Partnership's Form 10-K for the fiscal year ended December 31, 1991
and incorporated herein by reference thereto).              

(q)    Letter Opinion of Value of the Saxon Woods Corporate Center as of  
        January 1992 by Cushman & Wakefield, Inc. (included as Exhibit 10(q)
         to the Partnership's Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference thereto).         

(r)    Modification effective January 1, 1991 of the $12,500,000 first    
        mortgage loan secured by the Stamford Property between New York Life
       Insurance Company and the Partnership (included as Exhibit 10(r) to
      the Partnership's Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference thereto).         

(s)    Reimbursement Agreement dated as of January 1, 1991 among the      
   Partnership, Mendik Management, Mendik RELP Corporation and SLH
      Lending Corp. related to the deferral of management fees and loans
 made to the Partnership with respect to the Stamford Property
     (included as Exhibit 10(s) to the Partnership's Form 10-K for the
  fiscal year ended December 31, 1991 and incorporated herein by
reference thereto).                                         

(t)    Agreement dated as of January 1, 1992 among the Partnership, Mendik
       Management, Mendik RELP Corporation and SLH Lending Corp. (included
         as Exhibit 10(a) to the Partnership's Form 10-Q for the quarter ended
June 30, 1992 and incorporated herein by reference thereto).

  (u)    Appraisal of the 34th Street Property as of January 1993 by Cushman &
        Wakefield, Inc. (included as Exhibit 10(u) to the Partnership's Form
     10-K for the fiscal year ended December 31, 1992 and incorporated
herein by reference thereto).                               

(v)    Letter Opinion of Value of the Park Avenue Property as of January  
       1993 by Cushman & Wakefield, Inc. (included as Exhibit 10(v) to the
       Partnership's Form 10-K for the fiscal year ended December 31, 1992
and incorporated herein by reference thereto).              

(w)    Letter Opinion of Value of the Stamford Property as of January 1993
  by Cushman & Wakefield, Inc. (included as Exhibit 10(w) to the
       Partnership's Form 10-K for the fiscal year ended December 31, 1992
and incorporated herein by reference thereto).              

(x)    Letter Opinion of Value of the Saxon Woods Corporate Center as of  
        January 1993 by Cushman & Wakefield, Inc. (included as Exhibit 10(x)
         to the Partnership's Form 10-K for the fiscal year ended December 31,
1992 and incorporated herein by reference thereto).         

(y)    Promissory Note and Loan Agreement Modification and Extension      
    Agreement between Mendik Real Estate Limited Partnership and FGH
  Realty Credit Corp. dated as of September 9, 1996 (included as
      Exhibit 10(y) to the Partnership's Form 10-Q for the quarter ended
     September 30, 1996 and incorporated herein by reference thereto).

(z)    Leasehold Mortgage Modification and Extension Agreement between    
      Mendik Real Estate Limited Partnership and FGH Realty Credit Corp.
   dated as of September 9, 1996 (included as Exhibit 10(z) to the
        Partnership's Form 10-Q for the quarter ended September 30, 1996 and
incorporated herein by reference thereto).                  

  (aa)   Copy of Ground Lease extension dated October 21, 1997 relating to the
34th Street property                                        

27  Financial Data Schedule.                                            

SIGNATURES

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

                      MENDIK REAL ESTATE LIMITED PARTNERSHIP

                      BY:  Mendik RELP Corporation
                   General Partner

Date:  April 13, 1998                BY:     s/Bernard H. Mendik/               
                   Name:   Bernard H. Mendik
                       Title:  Chairman and Director

                             BY:  NY Real Estate Services 1 Inc.
                   General Partner

Date:  April 13, 1998                BY:       s/Mark Marcucci/                 
                 Name:     Mark Marcucci
                          Title:    President and Director

Date:  April 13, 1998                BY:       s/Moshe Braver/                  
                Name:     Moshe Braver
                         Title:    Vice President, Chief
                               Financial Officer
                          and Director

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

              NY REAL ESTATE SERVICES 1 INC.
 A General Partner

Date:  April 13, 1998                BY:       s/Mark Marcucci/                 
                 Name:     Mark Marcucci
                          Title:    President and Director

Date:  April 13, 1998                BY:       s/Moshe Braver/                  
                Name:     Moshe Braver
                         Title:    Vice President, Chief
                               Financial Officer
                          and Director

Date:  April 13, 1998                BY:       s/Lawrence M. Ostow/             
                     Name:     Lawrence M. Ostow
                  Title:    Vice President

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

       MENDIK RELP CORPORATION
 A General Partner

Date:  April 13, 1998                BY:       s/Bernard H. Mendik/             
                     Name:     Bernard H. Mendik
                         Title:    Chairman and Director

Date:  April 13, 1998                BY:       s/David R. Greenbaum/            
                      Name:     David R. Greenbaum
             Title:    President

Date:  April 13, 1998                BY:       s/Christopher G. Bonk/           
                       Name:     Christopher G. Bonk
                          Title:    Senior Vice President,
                                 Treasurer and Chief
                               Financial Officer

INDEPENDENT AUDITORS' REPORT

The Partners                                                                
Mendik Real Estate Limited Partnership:                                     

We have audited the consolidated financial statements of Mendik Real Estate 
 Limited Partnership (a New York limited partnership) and consolidated venture
as listed in the accompanying index.  In connection with our audits of the  
consolidated financial statements, we also have audited the financial       
statement schedule as listed in the accompanying index.  These consolidated 
financial statements and financial statement schedule are the responsibility
 of the Partnership's management.  Our responsibility is to express an opinion
on these consolidated financial statements and the financial statement      
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 audit to   
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis,    
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and         
significant estimates made by management, as well as evaluating the overall 
financial statement presentation.  We believe that our audits provide a     
reasonable basis for our opinion.                                           

In our opinion, the consolidated financial statements referred to above     
present fairly, in all material respects, the financial position of Mendik  
Real Estate Limited Partnership and consolidated venture as of December 31, 
1997 and 1996, and the results of their operations and their cash flows for 
each of the years in the three-year period ended December 31, 1997, in      
conformity with generally accepted accounting principles.  Also in our      
opinion, the related financial statement schedule, when considered in       
relation to the basic consolidated financial statements taken as a whole,   
 presents fairly, in all material respects, the information set forth therein.

         KPMG PEAT MARWICK LLP

Boston, Massachusetts                                                       
March 20, 1998                                                              

  Consolidated Balance Sheets                  At December 31,   At December 31,
                                                        1997              1996
 -----------------------------------------------------------------------------
Assets                                                                      
Real estate investments:                                                    
 Land                                           $          _       $17,528,163
 Building and improvements                                 _        85,279,508
                                                ------------------------------
                                                           _       102,807,671
 Properties held for disposition                 119,791,043        16,200,000
 Cash and cash equivalents                         4,786,697         4,727,720
 Restricted cash                                   7,041,844           960,489
 U.S. Treasuries and Agencies                              _         2,121,910
Rent and other receivables                                                  
net of allowance for doubtful accounts of                                   
 $118,611 in 1997 and 1996                           903,270         1,192,114
 Deferred rent receivable                         11,191,096        10,453,202
Other assets, net of accumulated amortization                               
 of $4,941,591 in 1997 and $6,577,521 in 1996      8,426,941         7,994,965
 -----------------------------------------------------------------------------
 Total Assets                                   $152,140,891      $146,458,071
 -----------------------------------------------------------------------------
Liabilities and Partners' Capital                                           
Liabilities:                                                                
 Accounts payable and accrued expenses            $1,572,939        $1,859,961
 Deferred income                                   5,904,654         6,550,650
 Due to affiliates                                 2,956,140         2,907,737
 Security deposits payable                         1,116,249           960,489
 Accrued interest payable                            727,944           799,315
 Mortgages payable                                71,500,000        71,500,000
 Notes payable to affiliates                       2,230,000         2,230,000
                                                ------------------------------
   Total Liabilities                              86,007,926        86,808,152
                                                ------------------------------
 Minority interest                                21,445,577        20,075,882
                                                ------------------------------
Partners' Capital (Deficit):                                                
  General Partners                                   (419,783)         (470,917)
 Limited Partners (395,169 units outstanding)     45,107,171        40,044,954
                                                ------------------------------
   Total Partners' Capital                        44,687,388        39,574,037
 -----------------------------------------------------------------------------
 Total Liabilities and Partners' Capital        $152,140,891      $146,458,071
 -----------------------------------------------------------------------------

Consolidated Statements of Operations                                           
For the years ended December 31,               1997          1996          1995 
------------------------------------------------------------------------------- 
Income                                                                          
Rental                                  $36,189,134   $36,301,921   $33,334,516 
Interest                                    245,160       247,094       214,049 
                                       ---------------------------------------
 Total Income                           36,434,294    36,549,015    33,548,565
------------------------------------------------------------------------------- 
Expenses                                                                        
Property operating                       20,827,352    20,118,066    19,938,170 
Depreciation and amortization             5,246,432    11,257,102    10,199,677 
Interest                                  6,162,361     7,225,953     8,796,859 
General and administrative                  636,071       449,216       395,434 
(Recovery of) provision for valuation                                           
allowance on property held for                                                
disposition                             (2,920,968)    5,411,536             _
Loss on write-down of real estate                                               
investments                                      _    59,491,089             _
                                        --------------------------------------
 Total Expenses                         29,951,248   103,952,962    39,330,140
------------------------------------------------------------------------------- 
Income (loss) before minority interest                                          
 and extraordinary item                   6,483,046   (67,403,947)   (5,781,575)
Minority interest share of (income)                                             
loss in consolidated venture            (1,369,695)   20,312,264     1,146,881
                                        --------------------------------------
Income (loss) before                                                        
   extraordinary item                     5,113,351   (47,091,683)   (4,634,694)
------------------------------------------------------------------------------- 
Extraordinary Item                                                              
Gain on retirement of debt                        _             _    16,247,734 
------------------------------------------------------------------------------- 
 Net Income (Loss)                      $5,113,351  $(47,091,683)  $11,613,040
------------------------------------------------------------------------------- 
Net Income (Loss) Allocated:                                                    
To the General Partners                  $   51,134  $   (470,917)  $ 1,487,096 
To the Special Limited Partner                    _             _       471,998 
To the Limited Partners                   5,062,217   (46,620,766)    9,653,946 
------------------------------------------------------------------------------- 
                                        $5,113,351  $(47,091,683)  $11,613,040
------------------------------------------------------------------------------- 
Per limited partnership unit                                                    
(395,169 outstanding):                                                          
Net income (Loss) before                                                    
   extraordinary item                        $12.81      $(117.97)      $(11.61)
                                         -------------------------------------
 Net Income (Loss)                          $12.81      $(117.97)      $ 24.43
------------------------------------------------------------------------------- 

Consolidated Statements of Partners' Capital (Deficit)                          
For the years ended December 31, 1997, 1996 and 1995                            
                                             Special
                     Limited      General    Limited
                                 Partners     Partners    Partner        Total
------------------------------------------------------------------------------- 
Balance at December 31, 1994   $77,011,774  $(1,487,096) $(471,998) $75,052,680 
Net income                       9,653,946    1,487,096    471,998   11,613,040 
------------------------------------------------------------------------------- 
Balance at December 31, 1995    86,665,720            _          _   86,665,720 
Net loss                       (46,620,766)    (470,917)         _  (47,091,683)
------------------------------------------------------------------------------- 
Balance at December 31, 1996    40,044,954     (470,917)         _   39,574,037 
Net income                       5,062,217       51,134          _    5,113,351 
------------------------------------------------------------------------------- 
Balance at December 31, 1997   $45,107,171  $  (419,783) $       _  $44,687,388 
------------------------------------------------------------------------------- 

Consolidated Statements of Cash Flows                                           
For the years ended December 31,               1997          1996          1995 
------------------------------------------------------------------------------- 
Cash Flows From Operating Activities                                            
Net Income (loss)                        $5,113,351  $(47,091,683)  $11,613,040 
Adjustments to reconcile net income                                             
(loss) to net cash provided by                                                
operating activities:                                                         
Loss on write-down of real                                                    
 estate investments                              _    59,491,089             _
Depreciation                             3,913,361     9,602,450     8,793,974
Amortization                             1,333,071     1,654,652     1,405,703
 Gain on retirement of debt                       _             _   (16,247,734)
Minority interest share of income                                             
  (loss) in consolidated venture          1,369,695   (20,312,264)   (1,146,881)
(Recovery of) provision for valuation                                         
allowance on property held for                                              
 disposition                            (2,920,968)    5,411,536             _
Net premium (discount) amortization -                                         
 U.S. Treasuries and Agencies               53,777       (25,350)       50,092
Increase (decrease) in cash arising                                           
from changes in operating assets                                            
and liabilities:                                                            
 Restricted cash                          (155,760)      104,966     1,045,662
  Rent and other receivables                288,844      (254,013)     (164,073)
 Deferred rent receivable                 (737,894)   (2,750,852)    4,911,038
  Other assets                           (1,199,438)     (872,529)   (3,856,650)
 Accounts payable and accrued expenses   1,082,764        19,797        21,014
 Deferred income                          (645,996)     (980,097)    7,396,633
 Due to affiliates                          48,403       277,389       894,286
  Security deposits payable                 155,760      (104,966)     (103,135)
 Accrued interest payable                  (71,371)      177,461       634,388
                                        --------------------------------------
Net cash provided by operating                                                  
 activities                              7,627,599     4,347,586    15,247,357
------------------------------------------------------------------------------- 
Cash Flows From Investing Activities                                            
Restricted cash - replacement reserve    (5,925,595)            _             _ 
Additions to real estate                 (1,775,765)   (6,391,539)   (5,619,234)
Accounts payable - real estate assets    (1,369,786)      280,402    (1,156,444)
Acquisition of U.S. Treasuries                                                  
 and Agencies                              (492,602)   (3,021,038)   (3,574,183)
Redemption of U.S. Treasuries                                                   
and Agencies                             2,560,735     3,383,272     4,074,449
                                        --------------------------------------
Net cash used for investing activities   (7,003,013)   (5,748,903)   (6,275,412)
------------------------------------------------------------------------------- 
Cash Flows From Financing Activities                                            
Proceeds from mortgage and                                                      
notes payable                           65,000,000     1,455,476     2,113,688
Payments of principal on mortgage                                               
 and notes payable                      (65,000,000)            _   (11,750,000)
Mortgage refinancing costs                 (565,609)            _             _ 
                                        --------------------------------------
Net cash provided by (used for)                                                 
 financing activities                      (565,609)    1,455,476    (9,636,312)
------------------------------------------------------------------------------
Net increase (decrease) in cash and                                             
 cash equivalents                            58,977        54,159      (664,367)
Cash and cash equivalents, beginning                                            
of period                                4,727,720     4,673,561     5,337,928
                                        --------------------------------------
Cash and cash equivalents, end                                                  
of period                               $4,786,697    $4,727,720    $4,673,561
------------------------------------------------------------------------------- 
Supplemental Disclosure of Cash Flow Information                                
Cash paid during the period                                                     
for interest                            $6,233,732    $7,048,492    $8,015,003
------------------------------------------------------------------------------- 

Notes to the Consolidated Financial Statements                                  
December 31, 1997, 1996 and 1995                                                

1.  Organization                                                                
Mendik Real Estate Limited Partnership (the "Partnership") was organized as a   
limited partnership under the laws of the State of New York pursuant to a       
Certificate and Agreement of Limited Partnership dated and filed October 30,    
1985 (the "Partnership Agreement"), as amended, and subsequently amended and    
restated on February 25, 1986.  The Partnership was formed for the purpose of   
acquiring, maintaining and operating income producing commercial office         
buildings in the Greater New York metropolitan area. The general partners of    
the Partnership are Mendik RELP Corporation and NYRES1 (see below).  The        
Partnership will continue until December 31, 2025, unless sooner terminated in  
accordance with the terms of the Partnership Agreement.  The Partnership        
offered Class A units to taxable investors and Class B units to tax exempt      
investors.                                                                      

On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic    
retail brokerage and asset management businesses to Smith Barney, Harris Upham  
& Co. Incorporated ("Smith Barney"). Subsequent to the sale, Shearson Lehman    
Brothers Inc. changed its name to Lehman Brothers Inc.  The transaction did not 
affect the ownership of the general partners.  However, the assets acquired by  
Smith Barney included the name "Hutton."  Consequently, effective October 22,   
1993, Hutton Real Estate Services XV, Inc., a general partner, changed its name 
to NY Real Estate Services 1 Inc. ("NYRES1") to delete any reference to         
"Hutton."  On January 16, 1997, Mendik Corporation, a general partner, was      
renamed Mendik RELP Corporation.                                                

2.  Liquidity                                                                   
During the twelve months ended December 31, 1997, the Partnership funded        
operating costs, the cost of tenant improvements, leasing commissions, and      
building capital improvements from the following sources: (i) cash flow         
generated by the property located at Two Park Avenue, New York, New York (the   
"Park Avenue Property"), the Partnership's leasehold interest in 550/600        
Mamaroneck Avenue, Harrison, New York (the "Saxon Woods Corporate Center") and  
the Partnership's leasehold interest in the property located at 330 West 34th   
Street, New York, New York (the "34th Street Property"), (ii) Partnership       
reserves, (iii) the deferral of property management fees and leasing            
commissions with respect to certain of the properties by Mendik Management      
Company Inc., an affiliate of Mendik RELP Corporation ("Mendik Management"),    
and (iv) the deferral of interest payments on the NYRES1 Loan (see the section  
captioned "The 34th Street Property" in Note 6 - Mortgage and Notes Payable for 
a further description of the NYRES1 Loan).  Because certain properties may be   
sold, it is expected that funds from certain of these sources may be reduced or 
unavailable in the future.                                                      

Park Avenue Property - The costs of leasing space at the property are being     
funded with existing property cash flow and reserves maintained by Two Park     
Company, the joint venture that owns the Park Avenue Property.  Pursuant to the 
new Park Avenue mortgage loan, as discussed below, as of December 31, 1997, the 
Partnership had placed approximately $6.0 million in a reserve account to fund  
the costs of future leasing commissions and tenant improvements.                

The Park Avenue Property currently generates, and is expected to generate over  
the near term, sufficient cash flow to cover operating expenses and current     
debt service.  The Park Avenue Property was subject to nonrecourse financing    
totaling $65 million which was scheduled to mature in December 1998, however,   
the lender had the right to accelerate the maturity upon six- months notice. In 
order to address the risk of such acceleration, Two Park Company refinanced the 
existing loan in April 1997.  Under the new mortgage, which matures on March 1, 
2000, interest is payable at a floating rate (LIBOR plus 150 basis points),     
which should reduce debt service costs (assuming short-term LIBOR rates remain  
stable).  Additionally, there will be no prepayment penalty (other than in      
connection with breakage costs of any LIBOR contract), in the event Two Park    
Company repays the full amount due under the mortgage prior to maturity.        

The Partnership owns an approximate 60% general partnership interest in Two     
Park Company.  The remaining 40% interest in Two Park Company is owned by B & B 
Park Avenue L.P. ("B&B"), of which Mendik RELP Corporation was a general        
partner.  On December 13, 1996, FW/Mendik REIT LLC, an affiliate of Mendik RELP 
Corporation, entered into a contract with the partners that owned substantially 
all of the interest in B&B to acquire their interest in B&B.  The closing under 
the contract took place on April 15, 1997.  Following the closing, FW/Mendik    
REIT LLC conveyed its interest in B&B to an affiliate of Vornado Realty Trust   
("Vornado"), a real estate investment trust whose shares of stock are traded on 
the New York Stock Exchange.  The conveyance to the affiliate of Vornado was in 
connection with the consolidation of Vornado and Mendik Management Company Inc. 
and certain of its affiliates, which consolidation was also consummated on      
April 15, 1997.                                                                 

Major tenants at the Park Avenue Property are The Times Mirror Company Inc.,    
which leases approximately 292,000 square feet (approximately 31% of the total  
leaseable area in the Property) under leases expiring on September 30, 2010,    
and Smith Barney, Inc.  Smith Barney, Inc. leases approximately 100,000 square  
feet (approximately 11% of the total leaseable area in the Property) under a    
lease expiring on May 30, 1998.  Smith Barney has vacated its space, and as a   
result, the Partnership has entered into another lease agreement with a         
subtenant of Smith Barney for 20,000 square feet.  Smith Barney continues to    
remain current on its rental payments to the Partnership in accordance with the 
terms of its existing lease.  In addition, the Partnership recently executed a  
lease agreement with United Way, effective June 1, 1998.  United Way will       
occupy the bulk of the space (60,572 square feet) that was previously occupied  
by Smith Barney, Inc. at rental rates higher than the Smith Barney lease.       

The property was 97% and 98% occupied at December 31, 1997 and 1996,            
respectively.                                                                   

The 34th Street Property - The parcel of land underlying the 34th Street        
Property is leased from an unaffiliated third party pursuant to a ground lease  
with an initial term ending on December 31, 1999 that provides for annual lease 
payments of $2.25 million through December 31, 1999.  The ground lease may be   
renewed in 1999 and thereafter at the option of the Partnership for successive  
terms of 21, 30, 30, 30 and 39 years at annual rentals, determined at the       
commencement of each renewal term, equal to 7% of the then-market value of the  
land considered as if vacant, unimproved and unencumbered, valued at the        
highest and best use under then-applicable zoning and other land use            
regulations as office, hotel or residential property, but in no event less than 
the greater of (i) $2.75 million or (ii) the base rent for any consecutive      
12-month period during the then- preceding renewal term.  The Partnership was   
required to give notice to renew the ground lease for an additional term of 21  
years not later than two years (December 31, 1997) prior to the expiration of   
the current terms of the ground lease, which was scheduled to expire on         
December 31, 1999.  In the fourth quarter of 1997, the Partnership gave notice  
to the ground lessor of its intention to renew the lease and was subsequently   
granted an extension on the ground lease, under the same terms, until December  
31, 2020.                                                                       

In 1993, the Partnership signed a long-term lease with the City of New York for 
approximately 47% of the Property's total leasable space in the 34th Street     
Property.  The term of the lease was originally scheduled to expire on February 
28, 2001. During the first quarter of 1997, the Partnership reached an          
agreement with the City of New York to amend and extend its existing lease at   
the Property for a term of approximately 10 years from the previous scheduled   
expiration date of February 28, 2001.  In accordance with the terms of the      
lease amendment, the City will have the right to terminate its lease in whole   
or in part at any time after the fifth anniversary of the lease amendment, with 
a cancellation fee equal to the then unamortized brokerage commissions and      
architectural fees paid in connection with the lease amendment.  Also in        
connection with the lease amendment, the ground lessor has agreed to fund up to 
$100,000 in costs associated with tenant improvement work that will be          
completed on the space occupied by the City.  The terms of the amended lease    
call for the City to make annual base rental payments of approximately $5.4     
million for the first five years of the amended lease, approximately $5.9       
million for years six through ten of the amended lease, and approximately $6.5  
million for years eleven through fifteen of the amended lease.  In addition,    
the City is required to pay its proportionate share of increases in real estate 
taxes and operating expenses over a predetermined base year amount.             

In May 1995, the Partnership successfully negotiated an agreement with the      
First National Bank of Chicago ("FNBC") to reduce the amount needed to pay off  
the 34th Street Line of Credit for $1.75 million, compared to the outstanding   
debt balance of approximately $18 million, including accrued interest.  Since   
the Partnership was not able to obtain financing from a third party, an         
agreement was entered into with an affiliate of NYRES1 to lend the Partnership  
$1.75 million to payoff the 34th Street Line of Credit (the "NYRES1 Loan").     
FNBC's agreement to accept only $1.75 million in full satisfaction of the 34th  
Street Line of Credit effectively meant that substantially all of the           
outstanding principal balance of the loan was forgiven by FNBC. On June 26,     
1995, the Partnership completed the payoff of the 34th Street Line of Credit.   
The NYRES 1 Loan bears interest at the prime rate less one and one-quarter      
percent and matures upon the earlier of December 31, 2025 or the termination of 
the Partnership.  Accrued interest and principal are payable on a current basis 
to the extent there is net cash flow available from the Property.  The loan is  
an unsecured obligation of the Partnership.  No cash flow payments have been    
made on the loan as of December 31, 1997.                                       

In order to improve the 34th Street Property's cash flow, beginning in January  
1992, Mendik Management voluntarily agreed to defer its management fees that    
would otherwise have been payable with respect to the 34th Street Property.  In 
addition, Mendik Management agreed to defer its leasing commission with respect 
to the signing of the long-term lease with the City of New York and any further 
leasing commissions associated with additional leasing activity at the          
Property.  Through December 31, 1997, Mendik Management has deferred            
approximately $2,111,719 in leasing commissions and management fees with        
respect to the 34th Street Property.  In connection with the NYRES1 Loan, these 
fees will continue to be deferred.  The Partnership's outstanding obligation to 
pay the management fees to Mendik Management will bear interest at a rate per   
annum equal to the prime rate of Morgan Guaranty Trust Company of New York less 
1.25%.  Principal and interest will be payable on December 31, 2025, or such    
earlier date on which the term of the Partnership terminates, subject to a      
mandatory repayment from the net proceeds from the sale of any of the           
Properties, after repayment of all debt secured by the Property sold.           

The property was 100% and 92% occupied at December 31, 1997 and 1996,           
respectively.                                                                   

Saxon Woods Corporate Center - The Partnership expects that cash flow from the  
Saxon Woods Corporate Center will cover operating expenses and debt service     
obligations in 1998.  The Saxon Woods Line of Credit is in the amount of up to  
$6.5 million.   Section 13(d) (xviii) of the Partnership Agreement  prohibits   
the Partnership from incurring indebtedness secured by a Property in excess of  
40% of the then-appraised value of such Property (or 40% of the value of such   
Property as determined by the lender as of the date of financing or             
refinancing, if such value is lower) (the "Borrowing Limitation").  With the    
signing of a new lease in August 1996 for approximately 23% of available space  
at the 600 Mamaroneck building, an updated independent appraisal of the         
property was completed during the second quarter of 1996, at which time the     
appraised value of the property increased from $15.2 million at year-end 1995   
to $16.6 million.  With the increase in the appraised value, the Partnership    
was able to draw down the full amount of the credit facility without exceeding  
the Borrowing Limitation.  As of December 31, 1996, the Partnership had         
borrowed the full $6.5 million available under the Saxon Woods Line of Credit.  

The indebtedness secured by the Saxon Woods Corporate Center was scheduled to   
mature in September 1996. During the third quarter of 1996, the Partnership     
obtained a one-year extension of the mortgage indebtedness to September 1997.   
Subsequently, three, three-month extensions were obtained to facilitate a sale  
of the property, with a maturity date of June 26, 1998.                         

The property was 99% and 97% occupied at December 31, 1997 and 1996,            
respectively.                                                                   

Stamford Property - On December 29, 1994, the Partnership transferred title to  
the Stamford Property to the lender in lieu of foreclosure.  The transfer       
resulted in the loss of the Partnership's investment in the property; however,  
the Partnership was not liable for accrued interest or the principal balance of 
the mortgage not otherwise satisfied by transfer of the property. 3.  Summary   
of Significant Accounting Policies                                              

Basis of Accounting - The accompanying financial statements have been prepared  
on the accrual basis of accounting in accordance with generally accepted        
accounting principles.  Income is recognized as earned and expenses are         
recorded as obligations are incurred.                                           

Consolidation - The consolidated financial statements include the accounts of   
the Partnership and of Two Park Company, a joint venture in which the           
Partnership owns an approximate 60% general partnership interest.  The joint    
venture was formed to own and operate a commercial office building.             
Intercompany accounts and transactions between the Partnership and the venture  
have been eliminated in consolidation.                                          

Impairment of Long-Lived Assets - Statement of Financial Accounting Standards   
No. 121, " Accounting for the Impairment of Long-Lived Assets and for           
Long-Lived Assets to Be Disposed Of" ("FAS 121"), requires the Partnership to   
assess its real estate investments for impairment whenever events or changes in 
circumstances indicate that the carrying amount of the real estate may not be   
recoverable.  Recoverability of real estate to be held and used is measured by  
a comparison of the carrying amount of the real estate to future net cash flows 
(undiscounted and without interest) expected to be generated by the real        
estate.  If the real estate is considered to be impaired, the impairment to be  
recognized is measured by the amount by which the carrying amount of the real   
estate exceeds the fair value of the real estate.                               

Real Estate Investments - Prior to September 30, 1997, real estate investments  
which consist of buildings, were recorded at cost, less accumulated             
depreciation and impairment writedowns.  Cost included the initial purchase     
price of the properties plus closing costs, acquisition and legal fees, and     
capital improvements.  Depreciation of the buildings was computed using the     
straight-line method over an estimated useful life of 20 to 35 years.           
Depreciation of personal property was computed using the straight-line method   
over an estimated useful life ranging from 5 to 10 years.  Tenant improvements  
were amortized using the straight-line method over the respective lease terms.  

At December 31, 1997 and 1996, the Partnership completed reviews of             
recoverability of the carrying amount of each property and related accounts     
based upon an estimate of undiscounted cash flows expected to result from each  
property's use and eventual disposition.  Based upon the reviews completed at   
December 31, 1996, the Partnership wrote down the value of its real estate      
investments and related assets in accordance with FAS 121.                      

Property Held for Disposition - The Saxon Woods property, Two Park Avenue       
property, and 330 West 34th Street property were reclassified as "properties    
held for disposition" following the decision to pursue negotiations for a       
potential sale of these properties.  The properties are recorded at the lower   
of amortized cost or their estimated fair value less costs to sell at December  
31, 1997.  Based upon the reviews completed at December 31, 1997, the           
Partnership recovered part of the provision for valuation allowance on the      
property held for disposition (Saxon Woods) at December 31, 1996. (See Note 5). 

Cash Equivalents - Cash equivalents consist of short-term, highly liquid        
investments which have maturities of three months or less from the date of      
issuance.  The carrying amount approximates fair value because of the short     
maturity of these instruments.                                                  

Restricted Cash - Restricted cash consists of a reserve to fund the cost of     
certain future leasing activity pursuant to the new mortgage loan on the Two    
Park Avenue property and tenant security deposits.                              

Marketable Securities - Marketable securities, which consisted of United States 
Treasury securities and Agencies, were carried at amortized cost, which         
approximated market.                                                            

Concentration of Credit Risk - Financial instruments which potentially subject  
the Partnership to a concentration of credit risk principally consist of cash   
in excess of the financial institutions' insurance limits.  The Partnership     
invests available cash with high credit quality financial institutions.         

Rental Income - Rental income is recognized as earned under the leases.         
Accordingly, as certain leases of the Partnership provide for tenant occupancy  
during periods for which no rent or reduced rent is due, the Partnership        
accrues rental income for the full period of occupancy on a straight-line basis 
over the related lease terms.                                                   

The Partnership has determined that all leases associated with the rental of    
space at the investment properties are operating leases.                        

Leasing Costs - Leasing costs are capitalized and amortized using the straight  
line-method over the respective lease terms.                                    

Mortgage Costs - Mortgage costs are capitalized and amortized over              
the term of the mortgage notes payable.                                         

Fair Value of Financial Instruments - Statement of Financial Accounting         
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"      
("FAS 107"), requires that the Partnership disclose the estimated fair values   
of its financial instruments. Fair values generally represent estimates of      
amounts at which a financial instrument could be exchanged between willing      
parties in a current transaction other than in forced liquidation.              

Fair value estimates are subjective and are dependent on a number of            
significant assumptions based on management's judgment regarding future         
expected loss experience, current economic conditions, risk characteristics of  
various financial instruments and other factors.  In addition, FAS 107 allows a 
wide range of valuation techniques, therefore, comparisons between entities,    
however similar, may be difficult.                                              

Income Taxes - The Partnership allocates all profits, losses and other taxable  
items to the individual partners.  No provision for income taxes is made in the 
financial statements as the liabilities for such taxes are those of the         
partners rather than the Partnership.                                           

Use of Estimates - The preparation of financial statements in conformity with   
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities and  
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of income and expenses during the reporting 
period.  Management's review of recoverability of the carrying amounts of real  
estate investments and related accounts is one such estimate.  Actual results   
could differ from those estimates.                                              

Net Income (Loss) Per Limited Partnership Unit - Net income (loss) per limited  
partnership unit is based upon the limited partnership units outstanding during 
the year and the net income (loss) allocated to the limited partners in         
accordance with the terms of the Partnership Agreement.                         

4.  The Partnership Agreement                                                   
Taxable income for any fiscal year shall be generally allocated in              
substantially the same manner as net cash from operations then 85% to the       
limited partners, 14% to the special limited partner and 1% to the general      
partners, except that depreciation allocated to the limited partners will be    
allocated solely to the Class A units.  Tax losses for any fiscal year will     
generally be allocated to the limited partners and special limited partner to   
the extent of their positive capital accounts and then 99% to the limited       
partners and 1% to the general partners.                                        

The Times Mirror Lease Prepayment and the gain on retirement of the 34th Street 
Property debt have been treated as capital transactions for purposes of         
allocation under the Partnership Agreement.  Accordingly, only the Class A      
limited partners, the special limited partner and the general partners have     
received an allocation of income; Class B limited partners received no          
allocation from these transactions. The Partnership Agreement provides that the 
net cash from operations, as defined, for each fiscal year will be distributed  
on a quarterly basis, 99% to the limited partners and 1% to the general         
partners (as defined) until each limited partner has received an amount equal   
to an 8% annual preferred return. The net cash from operations will then be     
distributed, 99% to the special limited partner, Bernard H. Mendik, and 1% to   
Mendik Corporation until the special limited partner has received his special   
preferred return (as defined).  Thereafter, net cash from operations will be    
distributed 85% to the limited partners, 14% to the special limited partner and 
1% to the general partners.                                                     

Net proceeds from sales or refinancings will be distributed first to the        
limited partners until each limited partner has received an 8% cumulative       
annual return (as defined) and then an additional amount equal to his adjusted  
capital contribution (as defined).  Second, the net proceeds from sale or       
refinancing will be distributed 99% to the special limited partner and 1% to    
the Mendik RELP Corporation until the special limited partner has received any  
shortfall on his special cumulative return (as defined).  Third, the net        
proceeds will be distributed to the general partners until the general partners 
have received their deferred incentive shares (as defined).  Thereafter, net    
proceeds will be distributed 75% to the limited partners, 20.33% to the special 
limited partner and 4.67% to the general partners. Liquidating proceeds will be 
distributed to the Partners in proportion to and to the extent of the positive  
capital account balances of the Partners.                                       

If, upon dissolution of the Partnership, the general partners have a negative   
capital account, they shall contribute capital equal to the amount of the       
deficit.  In no event, however, shall the required capital contribution exceed  
1.01% of the total capital contributed by the limited partners less all prior   
contributions by the general partners.                                          

5.  Real Estate Investments                                                     
The major tenants described at each of the properties below represented 45% of  
the Partnership's rental income in 1997.                                        

The Park Avenue Property - In 1987, the Partnership indirectly acquired from an 
affiliate an approximate 60% general partnership interest in a joint venture,   
Two Park Company, formed in 1986 for the purpose of acquiring and operating a   
parcel of land located at Two Park Avenue, New York, New York, together with    
the 28- story office building and related improvements located thereon          
containing approximately 947,000 net rentable square feet (based on current     
standards of measurement).  The affiliate acquired such interest to facilitate  
the acquisition by the Partnership. Two Park Company acquired the Park Avenue   
Property in 1986 from an unaffiliated seller for approximately $151.5 million,  
$60 million of which was financed by a first mortgage loan.  The Partnership    
acquired its interest by contributing $61,868,264 in cash, and assuming its     
share of the $60 million loan secured by a first mortgage on the property.  The 
remaining 40% interest in Two Park Company is currently owned by B & B Park     
Avenue L.P., of which Mendik RELP Corporation is a general partner.  The sole   
stockholder of the other general partner was also the lender of the mortgages   
secured by the Park Avenue Property.  Pursuant to the partnership agreement of  
Two Park Company, each partner has the right to implement "buy-sell"            
provisions.  If either one of the partners in Two Park Company exercises its    
buy-sell rights, then the other partner could be compelled either to sell its   
interest in Two Park Company to such other partner, for the purchase price set  
forth in the partnership agreement of Two Park Company.  In addition, under the 
partnership agreement of Two Park Company, if either partner receives a bona    
fide offer to purchase its interest in Two Park Company (which  such partner is 
willing to accept), such partner must give the other partner a right of first   
refusal to purchase its partnership interest on the same terms and conditions   
as the bona fide offer.  On December 13, 1996, FW/Mendik REIT LLC, an affiliate 
of Mendik RELP Corporation, entered into a contract with the partners that own  
substantially all of the interest in B & B Park Avenue L.P. to acquire their    
interest in B & B Park Avenue L.P.   The closing under the contract took place  
on April 15, 1997.  Following the closing, FW/Mendik REIT LLC conveyed its      
interest in B&B Park Avenue L.P. to an affiliate of Vornado Realty Trust        
("Vornado"), a real estate investment trust whose shares of stock are traded on 
the New York Stock Exchange.  The conveyance to the affiliate of Vornado was in 
connection with the consolidation of Vornado and Mendik Management Company Inc. 
and certain of its affiliates, which consolidation was also consummated on      
April 15, 1997. At December 31, 1997, the appraised fair value of the property  
was $123,000,000, and the appraised value of the property net of the minority   
interest was $73,431,000.  At December 31, 1996, the property's fair value was  
appraised at $110,000,000,  and the appraised value of the property net of the  
minority interest was $65,670,000.                                              

Major tenants at the Park Avenue Property are The Times Mirror Company Inc.,    
which leases approximately 292,000 square feet (approximately 31% of the total  
leaseable area in the Property) under leases expiring on September 30, 2010,    
and Smith Barney, Inc.  Smith Barney, Inc. leases approximately 100,000 square  
feet (approximately 11% of the total leaseable area in the Property) under a    
lease expiring on May 30, 1998.  Smith Barney has vacated its space, and as a   
result, the Partnership has entered into another lease agreement with a         
subtenant of Smith Barney for 20,000 square feet.  Smith Barney continues to    
remain current on its rental payments to the Partnership in accordance with the 
terms of its existing lease.  In addition, the Partnership recently executed a  
lease agreement with United Way, effective June 1, 1998.  United Way will       
occupy the bulk of the space (60,572 square feet) that was previously occupied  
by Smith Barney, Inc. at rental rates higher than the Smith Barney lease. Times 
Mirror Company and Smith Barney represented 23% and 12%, respectively, of the   
property's total rental income in 1997.                                         

At December 31, 1997 and 1996, the Partnership completed reviews of             
recoverability of the carrying amount of the Park Avenue Property and related   
accounts based upon estimated undiscounted cash flows expected to result from   
the property's use and eventual disposition.  As of December 31, 1995, it was   
management's intention to hold the property for long-term investment and,       
therefore, management concluded that the sum of the undiscounted future cash    
flow estimated to be generated over the investment's holding period was greater 
than its carrying value.  In light of the continued improvements in the Midtown 
Manhattan commercial real estate market during 1996, management anticipated     
positioning the property for sale over the next 12 to 24 months, and concluded  
that the sum of the undiscounted future cash flow estimated to be generated by  
the property over this shorter holding period was less than its carrying value. 
As a result, the Partnership recorded a write-down in 1996, before              
consideration of the minority interest's share of the write-down, of            
approximately $54,800,000 to reduce the property's carrying value to its 1996   
estimated fair value of $110,000,000.  The fair value was obtained from an      
appraisal report prepared by an independent appraiser.                          

Due to the Partnership's intention to market the Park Avenue Property for sale, 
the Property was reclassified as "Property held for disposition," effective     
September 30, 1997, in accordance with the provisions of Statement of Financial 
Accounting Standards No. 121.                                                   

The 34th Street Property - In 1987, the Partnership acquired the leasehold      
interest in the 34th Street Property, an eighteen-story structure containing    
approximately 637,000 net rentable square feet (based on current standards of   
measurement) from an affiliate of the Partnership.  The building was purchased  
from the affiliate for the purpose of facilitating the acquisition by the       
Partnership.  The purchase price of $35,611,400 consisted of the purchase price 
to the affiliate plus the acquisition and closing costs and costs associated    
with carrying the property. The building is situated on a 46,413 square foot    
site.                                                                           

The parcel of land underlying the 34th Street Property is leased from an        
unaffiliated third party pursuant to a ground lease with an initial term ending 
on December 31, 1999 that provided for annual lease payments of $1.25 million   
through December 31, 1991 and requires annual lease payments of $2.25 million   
for the remaining eight years. The ground lease may be renewed at the option of 
the Partnership for successive terms of 21, 30, 30, 30 and 39 years at annual   
rentals, determined at the commencement of each renewal term, equal to 7% of    
the then-market value of the land considered as if vacant, unimproved and       
unencumbered, valued at the highest and best use under then-applicable zoning   
and other land use regulations as office, hotel or residential property, but in 
no event less than the greater of (i) $2.75 million or (ii) the base rent for   
any consecutive 12-month period during the then-preceding renewal term.  The    
Partnership was required to give notice to renew the ground lease for an        
additional term of 21 years not later than two years (December 31, 1997) prior  
to the expiration of the current term of the ground lease which is scheduled to 
expire on December 31, 1999. In the fourth quarter of 1997, the Partnership     
gave notice to the ground lessor of its intention to renew the lease and was    
subsequently granted an extension on the ground lease, under the same terms,    
until December 31, 2020.  The property's appraised value at December 31, 1997,  
based on two separate appraisal techniques which differ in their treatment of   
the ground lease valuation, ranged from approximately $7,600,000 to             
$11,000,000. The property's value was appraised at $4,000,000 at December 31,   
1996.                                                                           

Major tenants at the 34th Street property are the City of New York and Props    
for Today.  The City of New York which leases approximately 300,000 square feet 
(47% of the total leasable area in the property). The term of the lease was     
originally schaeduled to expire on February 28, 2001.  During the first quarter 
of 1997, the Partnership reached an agreement with the City of New York to      
amend and extend its existing lease at the Property for a term of 10 years from 
the previous scheduled expiration date.  In accordance with the terms of the    
lease amendment, the City will have the right to terminate its lease in whole   
or in part at any time after the fifth anniversary of the lease amendment, with 
a cancellation fee equal to the then unamortized brokerage commissions and      
architectural fees paid in connection with the lease amendment. Also in         
connection with the lease amendment, the ground lessor has agreed to fund up to 
$100,000 in costs associated with tenant improvement work that will be          
completed on the space occupied by the City.  Props for Today leases 95,118     
square feet (15% of the total leasable area) under a lease expiring December    
31, 2006. The City and Props for Today represented approximately 77% and 7%,    
respectively, of the property's total rental income in 1997.                    

At December 31, 1997 and 1996, the Partnership completed reviews of             
recoverability of the carrying amount of the 34th Street Property and related   
accounts based upon estimated undiscounted cash flows expected to result from   
the property's use and eventual disposition.  As of December 31, 1995, it was   
management's intention to hold the property for long-term investment and,       
therefore, management concluded that the sum of the undiscounted future cash    
flow estimated to be generated over the investment's holding period was greater 
than its carrying value.  In 1996, management anticipated holding the property  
for 12 to 24 months and concluded that the sum of the undiscounted future cash  
flow estimated to be generated by the property over this shorter holding period 
was less than its carrying value. As a result, the Partnership recorded a       
write-down of approximately $4,700,000 to reduce the property's carrying value  
to its estimated value of $4,000,000, which represents the property's appraised 
value as of December 31, 1996.  The value was obtained from an appraisal report 
prepared by an independent appraiser.                                           

Due to the Partnership' s intention to market the 34th Street Property for      
sale, the Property was reclassified as "Property held for disposition,"         
effective September 30, 1997, in accordance with the provisions of Statement of 
Financial Accounting Standards No. 121.                                         

The Saxon Woods Corporate Center - In 1986, the Partnership acquired the        
leasehold interest in Saxon Woods Corporate Center, two office buildings        
located in Harrison, New York containing an aggregate of approximately 232,000  
net rentable square feet (based on current standards of measurement) from an    
affiliate of the Partnership.  The building was purchased from the affiliate    
for the purpose of facilitating the acquisition by the Partnership.  The        
purchase price of $21,282,805 was paid from the proceeds of the Partnership's   
offering and consisted of the purchase price to the affiliate plus the          
acquisition and closing costs and costs associated with carrying the property.  
The buildings are situated on a 15.28 acre site which is subject to two ground  
leases, each of which terminates in September 2027 and provides the lessee with 
the option to renew for two 25-year periods and one 39-year period.  Each       
ground lease provides for an annual net rental of $170,000 with an increase of  
$20,000 every five years, commencing January 2001.  The property's  value was   
appraised at $20,500,000 at December 31, 1997, compared to $16,700,000 at       
December 31, 1996.                                                              

Major tenants at the Saxon Woods Corporate Center are: Commodity Quotations     
which leases 27,915 square feet (approximately 12% of the total leasable area)  
under leases expiring September 30, 2002;  Icon Capital Corp., which leases     
29,040 square feet (13% of the total leasable area) under a lease expiring      
November 30, 2004; and AllState, which leases approximately 29,000 square feet  
(13% of the total leasable area), under a lease expiring February 28, 2007.     
Commodity Quotations, Icon Capital Corp. and AllState represented approximately 
29%, 13% and 22% of the property's rental income in 1997.                       

At December 31, 1997 and 1996, the Partnership completed reviews of             
recoverability of the carrying amount of the property and related accounts      
based upon estimated undiscounted cash flows expected to result from the        
property's use and eventual disposition.  As of December 31, 1995, it was       
management's intention to hold the property for long-term investment and        
therefore management concluded that the sum of the undiscounted future cash     
flow estimated to be generated over the investment's holding period was greater 
than its carrying value.  As a result of the Partnership's intention to pursue  
a sale of the property during 1997 and in accordance with FAS 121, the          
Partnership reclassified the property on the Partnership's balance sheet as     
property held for disposition at December 31, 1996.  The carrying value of the  
property was reduced as of December 31, 1996 from the prior carrying value of   
approximately $21,600,000 to $16,200,000.  The valuation allowance was based on 
management's assessment of the estimated fair market value of the property as   
of December 31, 1996.  The determination of fair market value of the property   
as of that date was based upon the most recent independent appraisal of the     
property, less estimated costs to sell.  As of December 31, 1997, the           
Partnership recorded a recovery of the provision for valuation allowance to     
increase the carrying value of the property held for disposition to             
$20,000,000, the property's appraised value less estimated costs to sell at     
December 31, 1997.                                                              

The Stamford Property - In 1985, the Partnership acquired the Stamford Property,
a ten-story office building containing approximately 220,000 net rentable       
square feet (based on current standards of measurement) and an attached parking 
garage located on 1351 Washington Blvd. in Stamford, Connecticut. The purchase  
price of the property was $31,250,000.  The property was transferred to the     
lender in lieu of a foreclosure sale on December 29, 1994.                      

6.  Mortgage and Notes Payable                                                  

The Park Avenue Property - On September 18, 1987, the Partnership acquired its  
interest in the Park Avenue Property by contributing $61,868,264 in cash, and   
assuming its share of the $60 million loan secured by a first mortgage on the   
property.  On June 15, 1989, Two Park Company placed a second mortgage on the   
Park Avenue Property in the amount of $10,000,000.  Interest only was payable   
in monthly installments at a rate of 10.791% through June 15, 1992 and          
thereafter at the rate of 10.625% through December 19, 1998 at which time the   
full amount of principal and any accrued interest would have been due and       
payable.  In November 1995, the Partnership prepaid, without penalty, the       
$10,000,000 second mortgage.  On December 26, 1990, Two Park Company placed a   
third mortgage on the Park Avenue Property in the amount of $5,000,000.         
Intererst was payable in monthly installments at a rate of 11.5% through its    
maturity date of December 19, 1998 at which time the full amount of principal   
and any accrued interest was due and payable.                                   

The $65 million Park Avenue Property mortgage was scheduled to mature in        
December 1998, however, the lender had the right to accelerate the maturity     
upon six-months notice.  In order to address the risk of such acceleration, Two 
Park Company refinanced the existing mortgage loan in April 1997.  Under the    
new mortgage, which matures on March 1, 2000, interest is payable at a floating 
rate (LIBOR plus 150 basis points).  Additionally, there is no prepayment       
penalty (other than in connection with breakage costs of any LIBOR contract),   
in the event Two Park Company repays the full amount due under the mortgage     
loan prior to maturity.                                                         

The 34th Street Property - The Partnership had a $30,000,000 credit facility in 
the form of a first mortgage secured by the Partnership's leasehold interest on 
the 34th Street Property (the "34th Street Line of Credit") with FNBC.  The     
lender agreed to advance amounts under the credit facility up to 40% of the     
lesser of the appraised value of the 34th Street Property or the value thereof  
as determined by the lender.  The credit facility was scheduled to mature on    
May 31, 1997.  As of December 31, 1992, $15,000,000 had been advanced under the 
34th Street Line of Credit. As a result of the default on the loan and the      
decline in the appraised value of the 34th Street Property, the Partnership was 
prevented from borrowing any additional funds.                                  

In May 1995, the Partnership successfully negotiated an agreement with the FNBC 
to reduce the amount needed to pay off the 34th Street Line of Credit to $1.75  
million compared to the property's outstanding debt balance of approximately    
$18 million, including accrued interest.  Concurrently, an agreement was        
entered into with an affiliate of NYRES1 to lend the Partnership the $1.75      
million unsecured loan needed to complete the payoff  of the 34th Street Line   
of Credit prior to June 30, 1995 (the "NYRES1 Loan"). FNBC's agreement to       
accept only $1.75 million in full satisfaction of the 34th Street Line of       
Credit effectively meant that substantially all of the outstanding principal    
balance of the loan was forgiven by FNBC.  On June 26, 1995, the Partnership    
completed the payoff of the 34th Street Line of Credit and the Partnership      
retained its interest in the property.                                          

The NYRES1 Loan bears interest at the prime rate less one and one- quarter      
percent.  Payments of accrued interest and principal will be payable on a       
current basis to the extent there is net cash flow available from the 34th      
Street property.  To the extent that interest has not been paid on a current    
basis from the property's cash flow, any net proceeds realized from the         
conveyance or refinancing of the 34th Street Property or any of the             
Partnership's other properties will be used to pay accrued interest and         
principal on the loan.  No cash flow payments have been made on the NYRES1 Loan 
as of December 31, 1997.  The NYRES1 Loan matures upon the earlier of December  
31, 2025 or the termination of the Partnership.  In connection with the NYRES1  
Loan, Mendik Management agreed to continue to defer its management fees and     
leasing commissions associated with any additional leasing activity that would  
otherwise have been payable with respect to the property.                       

The Saxon Woods Corporate Center - In September 1991, the Partnership           
established a non-recourse line of credit of $6,500,000 secured by a first      
leasehold mortgage on the property located at 550/600 Mamaroneck Avenue,        
Harrison, New York (the "Saxon Woods Property").  The Saxon Woods Line of       
Credit had a term of five (5) years at the rate of 2.5% per annum in excess of  
LIBOR.  During the third quarter of 1996, the Partnership obtained from the     
lender a one-year extension of the maturity of the mortgage to September 1997.  
Subsequently, three, three-month extensions were obtained to facilitate a sale  
of the property, with a maturity date of June 26, 1998.  In addition, the       
Partnership is required to pay 1/2% per annum on the undrawn balance of the     
Saxon Woods Line of Credit.  As additional security for the repayment of the    
Saxon Woods Line of Credit, the Partnership deposited $500,000 with the lender, 
which deposit was used by the Partnership to pay operating expenses in          
connection with the Saxon Woods Property prior to borrowing any sums under the  
Saxon Woods Line of Credit for operating expenses.  The Saxon Woods Line of     
Credit provided the Partnership with a source of funds to pay for those         
improvements necessary to lease additional space at the property.               

As a result of the property's increased occupancy level due to significant      
leasing activity during the year, an updated independent appraisal of the       
property was completed during the second quarter of 1996, at which time the     
appraised value of the property increased from $15.2 million at year-end 1995   
to $16.6 million.  With the increase in the appraised value, the Partnership    
was able to draw down the full amount of the credit facility without exceeding  
the Borrowing Limitation.  As of December 31, 1996, the Partnership had         
borrowed the full $6.5 million available under the Saxon Woods Line of Credit.  

Mortgages notes payable at December 31, 1997 and 1996 are summarized as         
follows:                                                                        

                                                              1997        1996
------------------------------------------------------------------------------- 
Secured by Park Avenue Property, bearing interest at a                          
blended rate of 8.16% in 1997 and 10.05% in 1996       $65,000,000 $65,000,000

Secured by Saxon Wood Corporate Center, bearing interest                        
at a blended rate of 8.72% in 1997 and 8.32% in 1996     6,500,000   6,500,000
                                                       -----------------------
                                                       $71,500,000 $71,500,000
------------------------------------------------------------------------------- 

Notes payable at December 31, 1997 and 1996 are summarized as follows:          

                                                              1997        1996
------------------------------------------------------------------------------- 
Note payable to an affiliate of NYRES1, unsecured,                              
bearing interest at prime rate less 1.25%               $1,750,000  $1,750,000

Note payable to NYRES1, unsecured, bearing interest at                          
prime rate less 1.25%                                      330,000     330,000

Note payable to Mendik RELP Corporation, unsecured,                             
bearing interest at prime rate less 1.25%                  150,000     150,000
                                                        ----------------------
                                                        $2,230,000  $2,230,000
------------------------------------------------------------------------------- 

The following summarizes the scheduled maturities of the Partnership's          
mortgages and notes payable:                                                    

Year                                            Amount                    
------------------------------------------------------                    
1998                                     $   6,500,000                    
1999                                                 _                    
2000                                        65,000,000                    
2001                                                 _                    
2002                                                 _                    
Thereafter                                   2,230,000                    
------------------------------------------------------                    
                      $ 73,730,000

Based on the borrowing rates currently available to the Partnership for         
mortgage loans with similar average maturities, the fair value of long-term     
debt approximates carrying value.                                               

7.  Rental Income under Operating Leases                                        
Based upon the leases currently in effect, future minimum rental payments from  
operating leases of the Partnership's properties (which are not cancelable by   
their terms) as of December 31, 1997 are as follows:                            

Year                                             Amount                   
-------------------------------------------------------                   
1998                                       $ 31,021,617                   
1999                                         30,294,162                   
2000                                         28,943,169                   
2001                                         29,206,989                   
2002                                         22,799,591                   
Thereafter                                  123,840,565                   
-------------------------------------------------------                   
                        $266,106,093
                        ------------

In addition to the minimum rental amounts, substantially all of the leases      
provide for escalation charges to tenants for operating costs, real estate      
taxes and electricity.  For the years ended December 31, 1997, 1996, and 1995,  
these amounts were $2,790,259, $2,793,437, and $2,712,976, respectively, which  
amounts are included in rental income.                                          

8.  Transactions with General Partners and Affiliates                           
Certain cash and cash equivalents reflected on the Partnership's consolidated   
balance sheets were on deposit with an affiliate of a general partner during a  
portion of 1996 and all of 1995.  As of December 31, 1996 and throughout 1997,  
no cash and cash equivalents were on deposit with an affiliate of a general     
partner or the Partnership.                                                     

The following is a summary of the amounts paid or accrued to the general        
partners and their affiliates during the years ended December 31, 1997, 1996    
and 1995 and all balances unpaid at December 31, 1997:                          

Due To/(From) Affiliates                  
                      at December 31,              Paid or Accrued
                                      1997        1997        1996        1995
------------------------------------------------------------------------------- 
Management fees and building                                                    
personnel salaries (A)          $1,841,153  $1,459,012  $1,279,660  $1,171,005

Leasing commissions (B)           1,037,195     310,557     170,981     347,488 

Cleaning and related                                                            
services (C)(D)                          _   4,660,182   4,106,631   4,127,071

Security (E)                              _     389,606     425,855     366,322 

Administrative salaries                                                         
and expenses (F)                    77,792     206,431           _           _
------------------------------------------------------------------------------- 
                                $2,956,140  $7,025,788  $5,983,127  $6,011,886
                                ----------------------------------------------

(A)  Mendik Management receives fees for the management of the Partnership's    
   Properties and is reimbursed for the cost of on- site building management
   staff.  Salaries and benefits for building personnel, which have remained
  under the payroll of Mendik Management, for the years ended December 31,
1997, 1996 and 1995 totalled $498,232, $487,796, and $438,616,        
respectively.  Management fees paid or payable to Mendik Management   
    totalled $960,780, $791,864, and $732,389 for the years ended December 31,
1997, 1996 and 1995, respectively. These amounts are included in the  
 table.  Certain management fees included in the above amounts are being
deferred as discussed in Note 6.                                      

(B)  Mendik Management has agreed to limit the payment of its leasing           
  commissions at any property in any year to not more than 3% of the gross
  operating revenues of the property in such year less leasing commissions
   paid to other brokers in connection with that property in such year.  Any
excess will be deferred but is payable only if and to the extent such 
 limit is not exceeded in the year paid.  As of December 31, 1997, there
    were unpaid commissions with accrued interest, on a consolidated basis, of
   approximately $1,037,195 as a result of deferred leasing commissions from
 the 34th Street property, the Saxon Woods Corporate Center and the Park
 Avenue property.  Certain leasing commissions are being deferred as per
the loan modifications discussed in Note 6.                           

(C)  Building Maintenance Service LLC ("BMS"), an affiliate of Mendik           
Corporation, performs cleaning and related services at the properties.
    Such cleaning and related services are provided by BMS at its cost plus an
allocable share of overhead expenses.  Cleaning and related services  
payable to BMS totalled $3,625,689, $3,185,018, and $3,230,148 for the
  years ended December 31, 1997, 1996 and 1995, respectively. The salaries
  and benefits for the property engineering staff were $847,191, $778,884,
and $759,415 in 1997, 1996 and 1995, respectively.  These amounts are 
included in the table.                                                

(D)  BMS provides metal and marble cleaning services to the Partnership at its  
 cost plus an allocable share of overhead expenses, which were $187,302,
$142,729, and $137,508 in 1997, 1996 and 1995, respectively.  These   
amounts are included in the table.                                    

(E)  Guard Management Service Corporation, an affiliate of Mendik Corporation,  
provides security services to the Partnership at its cost plus an     
allocable share of overhead expenses, which in 1997, 1996 and 1995    
 totalled $389,606, $425,855, and $366,322, respectively.  These amounts
are included in the table.                                            

(F)  Commencing January 1, 1997, NYRES1, a general partner, was reimbursed for  
certain administrative salaries and expenses which were voluntarily   
absorbed by affiliates of the NYRES1 general partner in prior periods,
were reimbursable to the NYRES1 general partner and its affiliate     

9.  Litigation                                                                  
On February 6, 1996, a purported class action, Sword v. Lehman Brothers         
Holdings, Inc., was commenced on behalf of, among others, all Investor Limited  
Partners in the Circuit Court for Baltimore, Maryland against the Partnership,  
Lehman Brothers Holdings, Inc., E.F. Hutton & Company, Inc. and others (the     
"Defendants").  The complaint alleged that the Investor Limited Partners were   
induced to purchase Units based upon misrepresentations and/or omitted          
statements in the sales materials used in connection with the offering of Units 
in the Partnership.  The complaint alleged, inter alia, claims of fraud,        
negligent misrepresentation and breach of fiduciary duty (the "Action").  On or 
about March 21, 1996, the Defendants removed the Action to United States        
District Court for the District of Maryland. On or about April 19, 1996, the    
plaintiffs filed a motion to have the Action remanded back to state court.  As  
of that date, no discovery or other proceedings in the Action had commenced.    
After the parties had entered into successive stipulations extending the time   
for the Defendants to respond to plaintiffs motion to remand and/or respond to  
the complaint, the Court stayed and administratively closed the case by order   
dated June 6, 1997.                                                             

On October 18, 1996, a purported first consolidated and amended class action    
complaint was filed in the Court of Chancery of the State of Delaware and for   
New Castle County on behalf of all persons who purchased units in the           
Partnership, among other investments.  The complaint names NYRES1, Lehman       
Brothers Inc. and others (the "Defendants").  This case consolidates previous   
actions against the Defendants.  The Partnership was not named as a defendant.  
The complaint alleges, among other things, that the Unitholders were induced to 
purchase Units based upon misrepresentation and/or omitted statements in the    
sales materials used in connection with the offering of Units in the            
Partnership.  The complaint purports to assert a claim for breach of fiduciary  
duty by the Defendants based on the foregoing.                                  

On January 14, 1997, two individual investor limited partners commenced a       
purported class action suit against NYRES1, Mendik RELP Corporation, B&B Park   
Avenue, L.P. and Bernard Mendik in the Supreme Court of the State of New York   
County of New York, on behalf of all persons holding limited partnership        
interests in the Partnership.  The complaint alleges that for reasons which     
include purported conflicts of interest, the defendants breached their          
fiduciary duty to the limited partners and the general partners of the          
Partnership also breached their contractual duty to the limited partners.  The  
plaintiffs further allege that the proposed transfer of the 40% interest in Two 
Park Company (the interest not owned by the Partnership) will result in a       
burden on the operation and management of Two Park Avenue because the purchaser 
of the 40% interest will have no fiduciary duty to the Partnership yet all      
decisions regarding any proposed sale or refinancing of Two Park Avenue will    
require its consent, with the result that, among other things, the transfer     
will prevent the Partnership from negotiating for the sale of Two Park Avenue   
at better terms than a sale on only the Partnership's approximate 60% interest. 
The complaint also alleges, among other things, that the transfer of the 40%    
interest violates the Partnership's rights of first refusal to purchase the     
interest being transferred and fails to provide limited partners in the         
Partnership a comparable transfer opportunity.                                  

Shortly after the filing of the complaint, another limited partner represented  
by the same attorneys filed an essentially identical complaint in the same      
court.  Among other things, both complaints claim that the purported class has  
and will continue to suffer unspecified damages, and seek a declaration that    
the suits are properly class actions, an accounting and certain injunctive      
relief including an injunction enjoining the transfer of the 40% interest and a 
judgment requiring either the liquidation of the Partnership and the            
appointment of a receiver or an auction of Two Park Avenue.  The time for       
defendants to respond to the complaints and to certain discovery requests has   
not yet expired.  In the interim, plaintiff's counsel have requested an         
agreement to consolidate the two actions and have stated that they may seek to  
amend the complaints in unspecified ways, as well as to file a motion seeking a 
preliminary injunction.  The parties to the litigation are presently            
negotiating a potential settlement of the action that would result in the sale  
of the Park Avenue Property, the 34th Street Property and Saxon Woods Corporate 
Center and in the liquidation and dissolution of the Partnership.  There can be 
no assurance that such a settlement can be achieved.  If there is no settlement 
and the actions proceed, the defendants intend to vigorously defend the         
actions.                                                                        

10.  Reconciliation of Consolidated Financial Statement Net                     
Income (Loss) and Partners' Capital to Federal Income Tax Basis Net Income      
(Loss) and Partners' Capital                                                    

Reconciliation of consolidated financial statement net income (loss) to federal 
income tax basis net income (loss) follows:                                     

                                              Years ended December 31,
                                              1997          1996          1995
  ----------------------------------------------------------------------------
Financial statement consolidated                                          
    net income (loss)                   $5,113,351  $(47,091,683)  $11,613,040

Financial statement adjustments to                                        
    real estate                         (2,920,968)   42,988,230             _

Tax basis depreciation over                                               
     financial statement depreciation    (1,830,341)      (72,357)     (355,352)

Tax basis rental income over (under)                                      
     financial statement rental income    2,055,349      (819,983)      (89,674)

Tax basis recognition of net income                                       
(loss) of consolidated venture                                          
(under) over financial statement                                        
recognition of income (loss) of                                         
   consolidated venture                 (2,568,478)    1,033,441     7,986,697

   Other                                          _             _       (95,214)
  ----------------------------------------------------------------------------
Federal income tax basis net                                              
   income (loss)                         $(151,087)  $(3,962,352)  $19,059,497
  ----------------------------------------------------------------------------

Reconciliation of financial statement partners' capital to federal income tax   
basis partners' capital:                                                        

                                                  As of December 31,
                                                 1997         1996        1995
  ----------------------------------------------------------------------------
Financial statement basis partners'                                       
   capital                                $44,687,388  $39,574,037 $86,665,720

Current year financial statement net                                      
income (loss) over (under) Federal                                      
   income tax basis net income (loss)      (5,264,438)  43,129,331   7,446,457

Cumulative financial statement net                                        
income (loss) over cumulative Federal                                   
   income tax basis net income (loss)      91,955,853   48,826,522  41,380,065
  ----------------------------------------------------------------------------
Federal income tax basis                                                  
   partners' capital                     $131,378,803 $131,529,890 135,492,242
  ----------------------------------------------------------------------------

Because many types of transactions are susceptible to varying interpretations   
under Federal and state tax laws and regulations, the amounts reported above    
may be subject to change at a later date upon final determination by the taxing 
authorities.                                                                    

Schedule III - Real Estate and Accumulated Depreciation                         
December 31, 1997                                                               
                                        Consolidated
                                            Venture:
                 500/600     330 West       Two Park
Description:            Mamaroneck Ave  34th Street         Avenue        Total 
------------------------------------------------------------------------------- 
Location                  Harrison, NY New York, NY   New York, NY           na 

Construction date            1969-1972         1925           1930           na 
Acquisition date              09-04-86     04-23-87       09-18-87           na 
Life on which depreciation                                                      
in latest income statements                                                     
is computed                     25 yrs.      20 yrs.        35 yrs.          na 
Encumbrances                $6,500,000            _    $65,000,000  $71,500,000 
                          ----------------------------------------------------
Initial cost to                                                                 
Partnership:                                                                  
    Land                      $     _      $     _    $27,140,745  $27,140,745
Buildings and                                                         
    improvements           21,282,805   35,611,400    130,411,744  187,305,949
                          ----------------------------------------------------
Costs capitalized                                                               
subsequent to acquisition:                                                      
     Land                            _            _         (3,661)      (3,661)
Buildings                                                             
    and improvements       11,474,228   11,443,884     49,978,436   72,896,548

Accumulated depreciation   (13,508,629)    (752,338)   (52,853,232) (67,114,199)
Write-down                                                            
adjustments:                                                        
         Land                        _            _     (9,608,921)  (9,608,921)
Buildings                                                     
         and improvements   (3,048,404) (43,401,058)   (45,159,328) (91,608,790)
                          ----------------------------------------------------
Gross amount at which                                                           
carried at close of period:                                                     
    Land                            _            _     17,528,163   17,528,163
Buildings and                                                         
    improvements                    _    2,901,888     82,377,620   85,279,508
                          ----------------------------------------------------
Adjusted Basis of real                                                          
estate or Property                                                    
held for disposition                                                  
    at 12/31/96           $16,200,000   $2,901,888    $99,905,783 $119,007,671
1997 Improvements              879,032      165,446        731,287    1,775,765 
1997 Fixed Asset Deletions           _            _        (71,238)     (71,238)
Recovery of valuation                                                           
 allowance                  2,920,968            _              _    2,920,968
Accumulated depreciation             _     (726,519)    (3,115,604)  (3,842,123)
                          ----------------------------------------------------
Property held for                                                               
 disposition at 12/31/97  $20,000,000   $2,340,815    $97,450,228 $119,791,043
------------------------------------------------------------------------------- 

For Federal income tax purposes, the basis of land, building and improvements   
wholly owned by the Partnership at December 31, 1997, 1996 and 1995 is          
$80,159,059, $80,159,059 and $77,051,988, respectively.                         

A reconciliation of the carrying amount of real estate and accumulated          
depreciation for the years ended December 31, 1997, 1996, and 1995 follows:     

                                           1997            1996           1995
Real estate investments:                                                        
Beginning of year                                                               
                                   $102,807,671    $241,634,143   $236,172,782
Additions                                896,733       6,391,539      5,619,234 
Deletions                                (71,238)       (660,870)      (157,873)
Write down adjustment                          _    (128,357,141)             _ 
Accumulated depreciation              (3,842,123)              _              _ 
Reclass to held for disposition      (99,791,043)    (16,200,000)             _ 
                                   -------------------------------------------
End of year                         $          _    $102,807,671   $241,634,143 
                                   -------------------------------------------

Properties held for disposition (1) $ 16,200,000    $          _   $          _ 
Additions                                879,032               _              _ 
Recovery of provision for                                                       
valuation allowance                   2,920,968               _              _
Reclass to held for disposition       99,791,043      16,200,000              _ 
                                   -------------------------------------------
 Total                             $119,791,043    $ 16,200,000   $          _
                                   -------------------------------------------

Accumulated depreciation:                                                       
Beginning of year                   $          _    $ 58,172,619   $ 49,536,517 
Depreciation expense                   3,913,361       9,602,450      8,793,975 
Deletions                                (71,238)       (660,870)      (157,873)
Write down adjustment                 (3,842,123)    (67,114,199)             _ 
                                   -------------------------------------------
End of year                         $          _    $          _   $ 58,172,619 
------------------------------------------------------------------------------- 

(1):  As of December 31, 1996, the Partnership accounted for the Saxon Woods    
Property as held for disposition.  Additionally, as of September 30, 1997, the  
Partnership accounted for the Park Avenue Property and the 330 West 34th Street 
Property as held for disposition.                                               

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-K’ Filing		Date		Other Filings
		12/31/25
		12/31/20
		9/30/10
		2/28/07
		12/31/06
		11/30/04
		9/30/02
		3/21/02
		2/28/01
		3/1/00
		12/31/99
		12/19/98
		6/26/98
		6/1/98
		5/30/98
Filed on:		4/15/98
		4/13/98
		3/31/98		10-Q,  NT 10-K,  NT 10-Q
		3/20/98
For Period End:		12/31/97		NT 10-K
		10/21/97
		10/1/97
		9/30/97		10-Q
		8/1/97
		6/6/97
		5/31/97
		4/15/97
		1/16/97
		1/14/97
		1/1/97
		12/31/96		10-K
		12/13/96
		10/18/96
		9/30/96		10-Q
		9/9/96
		4/19/96
		3/21/96
		2/6/96
		12/31/95		10-K,  NT 10-K
		6/30/95		10-Q
		6/26/95
		12/31/94		10-K,  NT 10-K
		12/29/94
		12/31/93		10-K
		10/22/93
		7/31/93
		1/1/93
		12/31/92
		6/30/92
		6/15/92
		1/1/92
				List all Filings