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) January 7, 1998
(December 29, 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
Wellsford Ventures, Inc. ("Ventures"), a wholly owned subsidiary of
Wellsford Real Properties, Inc., has joined with Fleet Real Estate, Inc.
("FRE"), a subsidiary of Fleet Financial Group, to issue an approximately
$32.5 million subordinated credit facility (the "IPH Mezzanine Facility") to
Industrial Properties Holding, L.P. ("IPH"). Each of Ventures and FRE have
committed to advance up to 50% of the IPH Mezzanine Facility. IPH is a
single purpose entity which was formed to acquire six industrial properties
which are intended by IPH to be sold to Cabot Industrial Trust, a real estate
investment trust. To date, approximately $19.6 million has been advanced to
IPH, of which Ventures has advanced approximately $9.8 million. If required,
the balance of the IPH Mezzanine Facility is expected to be advanced on or
before February 15, 1998. Advances to date under the IPH Mezzanine Facility
are cross collateralized by second mortgages on three of the six properties.
If the IPH Mezzanine Facility is fully advanced in connection with IPH's
acquisition of the remaining three properties, it will be cross
collateralized by second mortgages on all of the six properties. The IPH
Mezzanine Facility is subordinated to an approximately $55.3 million senior
loan commitment from a commercial bank, of which approximately $32 million
has been advanced to date. Advances under the IPH Mezzanine Facility bear
interest at an annual rate of LIBOR plus five percent; however, interest is
payable monthly at an annual rate of LIBOR plus three percent, with the
remaining two percent payable out of available cash flow from the properties
or accruing until maturity. The IPH Mezzanine Facility has a stated maturity
date of June 30, 1998. Ventures and IPH have entered into an option
agreement (the "Option") giving Ventures the right under certain
circumstances to acquire the properties securing the IPH Mezzanine Facility
following the stated maturity date for an amount equal to the outstanding
advances under the IPH Mezzanine Facility. If Ventures exercises the Option,
it will acquire the properties subject to the outstanding advances under the
senior loan commitment with certain modifications thereto, and will retire
the advances made by FRE under the IPH Mezzanine Facility.
The three properties securing the advances made to the date are
located in Grapevine, Texas, total approximately 1.2 million square feet, and
are currently 100% leased to eight tenants. The three properties which would
secure additional advances are located in Mira Loma, California, Dacula,
Georgia, and Mechanicsburg, Pennsylvania, total approximately 0.9 million
square feet, and are currently 100% leased to three tenants.
Item 7. Financial Statements, Proforma Financial Information and Exhibits
(a) Financial Statements
The DFW Trade Center I, L.P., Buildings 1, 2 and 3 Financial Statements:
Independent Accountants' Report of Arthur Andersen LLP dated
November 24, 1997.
Combined Statements of Revenue 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 and related footnotes (unaudited).
Pro Forma Consolidated Income Statement for the Year Ended
December 31, 1996 and related footnotes (unaudited).
Pro Forma Consolidated Balance Sheet for September 30, 1997
and related footnotes (unaudited).
(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: January 7, 1998 By: /s/Gregory F. Hughes
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Gregory F. Hughes
Chief Financial Officer
<PAGE>
Report of Independent Public Accountants
The Owners of the
DFW Trade Center, I, L.P., Buildings 1, 2 and 3:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of the DFW Trade Center I, L.P., Buildings 1, 2 and 3 (the
Portfolio) from the date of inception (July 1, 1996) to December 31, 1996.
The Combined Statement of Revenue and Certain Expenses is the responsibility
of the Portfolio's management. Our responsibility is to express an opinion
on the Combined Statement of Revenue and Certain Expenses 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 Combined Statement of Revenue
and Certain Expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
made in the Combined Statement of Revenue and Certain Expenses. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation
of the Combined Statement of Revenue and Certain Expenses. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Wellsford Real
Properties, Inc. Current Report on Form 8-K as described in Note 2 and is not
intended to be a complete presentation of the Portfolio's revenues and
expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses
referred to above presents fairly, in all material respects, the revenue and
certain expenses of the Portfolio described in Note 2 for the period from
inception to December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 24, 1997
<PAGE>
DFW Trade Center I, L.P., Buildings 1, 2 and 3
Combined Statements of Revenue and Certain Expenses
From the Date
Nine Months of Inception
Ended (July 1, 1996)
September 30, to December 31,
1997 1996
---------------------------------
(unaudited)
Revenues:
Base rents $ 1,289,844 $315,038
Tenant reimbursements 304,903 32,400
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Total revenues 1,594,747 347,438
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Expenses:
Property operating costs 93,369 38,177
Maintenance and repairs 20,256 4,397
Real estate taxes 306,802 40,993
Management fees 44,392 10,580
Insurance 24,802 8,064
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Total Expenses 489,621 102,211
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Revenues in Excess of Certain Expenses $1,105,126 $245,227
================================
The accompanying notes are an integral part of this combined financial
statement.
<PAGE>
DFW Trade Center I, L.P., Buildings 1, 2 and 3
Notes to Combined Statement of Revenue and Certain Expenses
December 31, 1996
1. Business
The accompanying Combined Statement of Revenue and Certain Expenses relates
to the operations of DFW Trade Center I, L.P., Buildings 1, 2 and 3 (the
Portfolio). The Portfolio consists of three buildings in Grapevine, Texas
totalling approximately 1,182,361 rentable square feet as follows:
Property Type # Tenants Date of Inception Square Feet
------------- --------- ----------------- -----------
Workspace Industrial 3 February 7, 1997 202,361
Bulk Warehouse 2 July 1, 1996 540,000
Bulk Warehouse 2 June 30, 1997 440,000
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1,182,361
==========
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Current Report on
Form 8-K of Wellsford Real Properties, Inc. The statement is not
representative of the actual operations of the Portfolio for the period
presented nor indicative of future operations as certain expenses, primarily
depreciation, amortization and interest expenses, which may not be comparable
to the expenses expected to be incurred by Industrial Properties Holding,
L.P. in future operations of the Portfolio, have been excluded.
The combined financial statement, and information included in these notes to
the combined financial statement, for the nine months ended September 30,
1997, is unaudited. In the opinion of management, such financial statement
and information reflect all adjustments necessary for a fair presentation of
the results of the interim period. All adjustments are of a normal,
recurring nature.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Combined Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from
those estimates.
3. Rental Revenue
All leases are classified as operating leases.
4. Future Minimum Rental Receipts
Future minimum rental receipts due on noncancelable operating leases for the
Portfolio as of December 31, 1996 were as follows:
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1997 $ 2,113,650
1998 4,052,194
1999 4,189,944
2000 4,275,444
2001 3,906,861
Thereafter 15,741,473
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$34,279,566
============
The above amounts do not include additional rental receipts that will become
due as a result of the expense pass-through and escalation provisions in the
leases. The Portfolio is subject to the usual business risks associated with
the collection of the above scheduled rents.
<PAGE>
Wellsford Real Properties, Inc.
Pro Forma Consolidated Income Statement
Nine Months Ended September 30, 1997
(In thousands except per share data)
(Unaudited)
IPH
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUE
Rental income $ 1,260 $ 1,260
Interest income 4,125 810 (A) 4,935
Joint venture income 160 160
-------- ------ -------
Total Revenue 5,545 810 6,355
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EXPENSES
Property operating and maintenance 241 241
Real estate taxes 106 106
General and administrative 1,521 1,521
Depreciation 221 221
Interest 0 291 (B) 291
Property management 18 18
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Total Expenses 2,107 291 2,398
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Income before income taxes 3,438 519 3,957
Provision for income taxes 1,003 229 1,232(C)
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Net income $ 2,435 $ 290 $ 2,725
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Net income per common share $ 0.14 $ 0.16
======== =======
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 interest income on the net $9.8 million advance on the IPH
Mezzanine Facility for nine months at 11% (LIBOR + 5%).
(B) Represents interest on a $5.0 million draw on the Company's credit
facility for nine months at 7.75% (LIBOR + 1.75%).
(C) 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)
IPH
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUE
Rental income $ 0
Interest income $ 757 $1,080 (A) 1,837
Joint venture income 0
------- ------ -------
Total Revenue 757 1,080 1,837
------- ------ -------
EXPENSES
Property operating and maintenance 0
Real estate taxes 0
General and administrative 0
Depreciation 0
Interest 388 (B) 388
Property management 0
------- ------ -------
Total Expenses 0 388 388
------- ------ -------
Income before income taxes 757 692 1,449
Provision for income taxes 305 305(C)
------- ------ -------
Net income $ 757 $ 387 $ 1,144
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<PAGE>
Wellsford Real Properties, Inc.
Notes to Pro Forma Consolidated Income Statement
Year Ended December 31, 1996
(Unaudited)
(A) Represents interest income on the net $9.8 million advance on the IPH
Mezzanine Facility for one year at 11% (LIBOR + 5%).
(B) Represents interest on a $5.0 million draw on the Company's credit
facility for one year at 7.75% (LIBOR + 1.75%).
(C) 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)
IPH
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
ASSETS
Real estate assets, at cost:
Land $ 0 $ 0
Buildings and improvements 0
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0 0 0
Less, accumulated depreciation 0
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0 0 0
Construction in process 21,864 21,864
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21,864 0 21,864
Notes receivable 145,880 9,821 (A) 155,701
Investment in joint venture 32,425 32,425
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Total real estate assets 200,169 9,821 209,990
Cash and cash equivalents 5,533 (9,821)(A) 712
5,000 (B)
Restricted cash 6,717 6,717
Deferred tax assets 0
Other assets 1,983 1,983
-------- ------ --------
Total Assets $214,402 $5,000 $219,402
======== ====== ========
LIABILITIES AND EQUITY
Liabilities:
Tax exempt mortgage note payable $ 14,755 $ 14,755
Credit facility 10,000 5,000 (B) 15,000
Other liabilities 6,667 6,667
-------- ------ --------
Total Liabilities 31,422 5,000 36,422
-------- ------ --------
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
outstanding 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 $5,000 $219,402
======== ====== ========
<PAGE>
Wellsford Real Properties, Inc.
Notes to Pro Forma Consolidated Balance Sheet
September 30, 1997
(In thousands)
(Unaudited)
(A) Represents funding of the IPH Mezzanine Facility ($9.8 million at
LIBOR + 5.0%).
(B) Represents a draw on the Company's credit facility.
