SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 31, 1997
(December 31, 1997)
Wellsford Real Properties, Inc.
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(Exact name of registrant as specified in its charter)
1-12917 13-3926898
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(Commission File Number) (IRS Employer Identification No.)
Maryland
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(State or other jurisdiction of incorporation)
610 Fifth Avenue, New York, New York 10020
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(Address of principal executive offices)
(Zip Code)
(212) 333-2300
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(Registrant's telephone number, including area code)<PAGE>
Item 2. Acquisition or Disposition of Assets
As of December 31, 1997, Wellsford Real Properties, Inc. (the
"Company") believes that it is probable that it will acquire the property
known as Sonterra within approximately two weeks for approximately $20.5
million based on an extension expected to be granted with respect to the
option described below.
The Company currently owns an option to acquire Sonterra, a 344
unit Class A multifamily apartment complex located in Tucson, Arizona,
construction of which was completed in June 1996, free and clear of all
mortgages and other material liens for approximately $20.5 million through
December 31, 1997 and for approximately $21 million if the sale is
consummated during 1998.
The Company also holds a $17.8 million mortgage loan (the "Sonterra
Loan") made to the owner of Sonterra. The Sonterra Loan was originated in
July 1996 and the principal amount thereof is due on July 1, 1999. Until the
maturity date, the borrower is to pay interest only, monthly, at the rate of
9% per annum. The loan is non-recourse and repayment of the loan is secured
by a first mortgage on Sonterra and by a personal guaranty of an individual
affiliated with the owner. Under certain circumstances, prepayment of the
loan is subject to a prepayment premium equal to 5% of the principal amount
of the loan.
Item 7. Financial Statements, Proforma Financial Information and Exhibits
(a) Financial Statements
The Sonterra Financial Statements:
Independent Accountants' Report of Ernst & Young LLP dated
December 19, 1997.
Combined Statements of Revenues and Certain Expenses for the year
ended December 31, 1996 (audited) and nine months ended September 30,
1997 (unaudited).
Pro Forma Consolidated Income Statement for the Nine Months Ended
September 30, 1997 (unaudited) and related footnotes.
Pro Forma Consolidated Income Statement for the Year Ended December 31,
1996 (unaudited) and related footnotes.
Pro Forma Consolidated Balance Sheet for September 30, 1997 (unaudited)
and related footnotes.
(b) Exhibits
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Wellsford Real Properties, Inc.
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(Registrant)
Date: December 31, 1997 By: /s/Gregory F. Hughes
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Gregory F. Hughes
Chief Financial Officer
<PAGE>
Statements of Revenues and
Certain Expenses
Sonterra at Williams Centre
Year Ended December 31, 1996
with Report of Independent Auditors
<PAGE>
Statements of Revenue and Certain Expenses
Sonterra at Williams Centre
Year Ended December 31, 1996
Contents
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . .1
Statements of Revenues and Certain Expenses. . . . . . . . . . . . . . . . .2
Notes to Statements of Revenues and Certain Expenses . . . . . . . . . . . .3
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Wellsford Real Properties, Inc.
We have audited the statement of revenues and certain expenses of the
property known as Sonterra at Williams Centre (the "Property"), to be
acquired by Wellsford Real Properties, Inc., as described in Note 1, for the
year ended December 31, 1996. This financial statement is the responsibility
of the Property's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit 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 statement is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and the
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form 8-K of Wellsford Real Properties,
Inc. and is not intended to be a complete presentation of the Property's
revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain expenses of Sonterra at
Williams Centre as described in Note 1 for the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
December 19, 1997
<PAGE>
Sonterra at Williams Centre
Statements of Revenues and Certain Expenses
(in thousands)
(Note 1)
Nine
Months Year
Ended Ended
September December
30, 1997 31, 1996
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(unaudited)
Revenues:
Rental income $ 1,787 $ 1,677
Miscellaneous income 89 89
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Total revenues 1,876 1,766
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Certain Expenses:
Property operating and maintenance expenses 385 512
Real estate taxes 143 45
Management fees 64 87
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Total certain expenses 592 644
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Revenues in excess of certain expenses $ 1,284 $ 1,122
==========================
See accompanying notes.
<PAGE>
Sonterra at Williams Centre
Notes to Statements of Revenues and Certain Expenses
For the year Ended December 31, 1996
1. Business
The accompanying statements of revenues and certain expenses relates to the
operations of the property known as Sonterra at Williams Centre (the
"Property"). The Property is a 344 unit multifamily apartment complex
located in Tucson, Arizona, currently owned by Specified Properties VIII,
L.P. Wellsford Real Properties, Inc. owns an option to acquire the Property
and intends to acquire the Property on or about January 15, 1998.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statement has been prepared in accordance with the
applicable rules and regulations of the Securities and Exchange Commission
for the acquisition of real estate properties. Accordingly, the financial
statement excludes certain expenses that may not be comparable to those
expected to be incurred by Wellsford Real Properties, Inc. in the proposed
future operations of the Property. Expenses excluded consist of interest,
depreciation and general and administrative expenses not directly related to
the future operations.
Construction was completed on the Property, consisting of several buildings,
during June 1996. Accordingly, in accordance with Statement of Financial
Accounting Standards No. 67, Accounting for Costs and Initial Rental
Operations of Real Estate Projects, the accompanying statement of revenues
and certain expenses reflects the rental revenues and expenses related to the
buildings which comprise the Property from the time each building was
substantially completed and held available for occupancy. Expenses incurred
prior to that time have been capitalized.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
The statement of revenues and certain expenses for the nine months ended
September 30, 1997 is unaudited; however, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for
a fair presentation of the statement of revenues and certain expenses for
this interim period have been included. The results of interim periods are
not necessarily indicative of the results to be obtained for a full fiscal
year.
<PAGE>
Sonterra at Williams Centre
Notes to Statements of Revenues and Certain Expenses (continued)
2. Summary of Significant Accounting Policies (continued)
Revenue Recognition
Rental income attributable to leases is recognized on a straight-line basis
over the term of the leases, which are generally for one year.
3. Management and Leasing Agreements
The Property is managed and leased by Lexford Properties, Inc. which, since
July 1, 1996, provides property management services at the rate of 3.25% of
gross cash receipts. Prior to July 1, 1996, such services were provided at a
monthly amount of $9,000.
4. Property Operating Expenses
Property operating expenses for the year ended December 31, 1996 include
approximately $26,000 for insurance, $80,000 for utilities, $62,000 in
general and administrative expenses, $88,000 in repair and maintenance costs,
and $256,000 for payroll costs.<PAGE>
Wellsford Real Properties, Inc.
Pro Forma Consolidated Income Statement
Nine Months Ended September 30, 1997
(In thousands except per share data)
(Unaudited)
Sonterra
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUE
Rental income $ 1,260 $ 1,876 (A) $ 3,136
Interest income 4,125 (1,202) (B) 2,923
Joint venture income 160 160
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Total Revenue 5,545 674 6,219
EXPENSES
Property operating and
maintenance 241 385 (A) 626
Real estate taxes 106 143 (A) 249
General and administrative 1,521 1,521
Depreciation 221 475 (C) 696
Property management 18 64 (A) 82
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Total Expenses 2,107 1,067 3,174
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Income before income taxes 3,438 (393) 3,045
Provision for income taxes 1,003 (173) 830 (D)
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Net income $ 2,435 ($ 220) $ 2,215
========== ========= ==========
Net income per common
share $ 0.14 $ 0.13
========== ==========
Weighted average common
shares outstanding 16,912 16,912
========== ==========
<PAGE>
Wellsford Real Properties, Inc.
Notes to Pro Forma Consolidated Income Statement
Nine Months Ended September 30, 1997
(Unaudited)
(A) Represents historical operating revenues and expenses of the Sonterra
property for the nine months ended September 30, 1997.
(B) Represents the reversal of interest income from the $17.8 Sonterra Loan
at 9% for nine months.
(C) Represents depreciation on the Sonterra property for nine months
utilizing a 27.5 year estimated useful life.
(D) Represents the Company's estimated provision for federal and state
income taxes at rates of 35% and 14%, respectively.<PAGE>
Wellsford Real Properties, Inc.
Pro Forma Consolidated Income Statement
Year Ended December 31, 1996
(In thousands except per share data)
(Unaudited)
Sonterra
Pro Forma
Historical Adjustments Pro Forma
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REVENUE
Rental income $ 1,766 (A) $ 1,766
Interest income $ 757 (757) (B) 0
Joint venture income 0
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Total Revenue 757 1,009 1,766
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EXPENSES
Property operating and
maintenance 512 (A) 512
Real estate taxes 45 (A) 45
General and administrative 0
Depreciation 634 (C) 634
Property management 87 (A) 87
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Total Expenses 0 1,278 1,278
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Income before income taxes 757 (269) 488
Provision for income taxes (119) (119)(D)
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Net income $ 757 ($ 150) $ 607
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<PAGE>
Wellsford Real Properties, Inc.
Notes to Pro Forma Consolidated Income Statement
Year Ended December 31, 1996
(Unaudited)
(A) Represents historical operating revenues and expenses of the Sonterra
property for the year ended December 31, 1996.
(B) Represents the reversal of interest income from the $17.8 Sonterra Loan
at 9% for the period it was outstanding.
(C) Represents depreciation on the Sonterra property for one year utilizing
a 27.5 year estimated useful life.
(D) Represents the Company's estimated provision for federal and state
income taxes at rates of 35% and 14%, respectively.
<PAGE>
Wellsford Real Properties, Inc.
Pro Forma Consolidated Balance Sheet
September 30, 1997
(In thousands)
(Unaudited)
Sonterra
Pro Forma
Historical Adjustments Pro Forma
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ASSETS
Real estate assets, at cost:
Land $ 0 $ 3,075 $ 3,075
Buildings and improvements 17,425 17,425
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0 20,500 (A) 20,500
Less, accumulated
depreciation 0
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0 20,500 20,500
Construction in process 21,864 21,864
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21,864 20,500 42,364
Notes receivable 145,880 (17,800) (A) 128,080
Investment in joint venture 32,425 32,425
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Total real estate assets 200,169 2,700 202,869
Cash and cash equivalents 5,533 (2,700) (A) 2,833
Restricted cash 6,717 6,717
Other assets 1,983 1,983
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Total Assets $ 214,402 $ 0 $ 214,402
========== ========= ==========
LIABILITIES AND EQUITY
Liabilities:
Tax exempt mortgage note
payable $ 14,755 $ 14,755
Credit facility 10,000 10,000
Other liabilities 6,667 6,667
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Total Liabilities 31,422 0 31,422
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Commitments and contingencies - - -
Minority Interest 3,092 3,092
Equity:
Common Stock, 197,650,000
shares authorized -
16,572,043 shares, $.01
par value per share, issued
and outstanding as adjusted 166 166
Class A Common Stock, 350,000
shares authorized - 339,806
shares, $.01 par value per
share, issued and outstand-
ing as adjusted 3 3
Series A 8% Convertible
Redeemable Preferred Stock,
2,000,000 shares authorized
- no shares, $.01 par value
per share, issued and
outstanding - -
Paid in capital in excess
of par value 178,288 178,288
Retained earnings 1,431 1,431
---------- --------- ----------
Total Equity 179,888 0 179,888
---------- --------- ----------
Total Liabilities and Equity $ 214,402 $ 0 $ 214,402
========== ========= ==========<PAGE>
Wellsford Real Properties, Inc.
Notes to Pro Forma Consolidated Balance Sheet
September 30, 1997
(In thousands)
(Unaudited)
(A) Represents the purchase of the Sonterra property for $20.5 million
utilizing the Sonterra Loan balance of $17.8 million and $2.7 million of
cash.
