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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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| FORM 10-Q |
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{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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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 1-12917
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Wellsford Real Properties, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 13-3926898
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(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
535 Madison Avenue, New York, NY 10022
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(Address of principal executive offices)
(Zip Code)
(212) 838-3400
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___X___ No ______
Number of shares of common stock, $.01 par value per share, outstanding as of
May 14, 1999: 20,410,615.
Number of shares of Class A common stock, $.01 par value per share,
outstanding as of May 14, 1999: 339,806.
PAGE
<PAGE>
WELLSFORD REAL PROPERTIES, INC.
FORM 10-Q
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| INDEX |
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Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1999 (unaudited) and December 31, 1998 3
Consolidated Statements of Income (unaudited) for the
three months ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure of Market Risk 14
PART II. OTHER INFORMATION 15
SIGNATURES 16
PAGE
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1999 1998
------------ ------------
ASSETS (Unaudited)
Real estate assets, at cost:
Land $ 18,813,000 $ 18,813,000
Buildings and improvements 115,477,870 115,425,760
--------------- --------------
134,290,870 134,238,760
Less, accumulated depreciation (3,725,550) (2,707,390)
--------------- --------------
130,565,320 131,531,370
Construction in progress 23,202,311 18,791,075
---------------- --------------
153,767,631 150,322,445
Real estate held for sale 7,230,490 -
Notes receivable 99,315,649 124,706,499
Investment in joint ventures 108,756,211 80,776,338
---------------- --------------
Total real estate assets 369,069,981 355,805,282
Cash and cash equivalents 14,166,469 10,122,037
Restricted cash 7,921,300 8,007,850
Prepaid and other assets 12,045,787 11,035,489
--------------- --------------
Total Assets $ 403,203,537 $ 384,970,658
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 119,945,129 $ 120,176,790
Credit facilities 35,000,000 17,000,000
Accrued expenses and other
liabilities 9,781,714 12,788,324
--------------- --------------
Total Liabilities 164,726,843 149,965,114
--------------- --------------
Commitments and contingencies - -
Minority interest 4,209,849 3,380,721
Shareholders' Equity:
Series A 8% Convertible Redeemable
Preferred Stock, $.01 par value
per share, 2,000,000 shares
authorized, no shares issued
and outstanding - -
Common Stock, 197,650,000 shares
authorized - 20,410,605 shares, $.01
par value per share, issued and out-
standing at March 31, 1999 204,106 204,106
Class A Common Stock, 350,000
shares authorized - 339,806 shares,
$.01 par value per share, issued
and outstanding at
March 31, 1999 3,398 3,398
Paid in capital in excess of par
value 228,212,205 228,212,205
Retained earnings 13,993,523 11,385,274
Deferred compensation (3,206,250) (3,240,023)
Treasury stock, 489,671 shares (4,940,137) (4,940,137)
--------------- --------------
Total Shareholders' Equity 234,266,845 231,624,823
--------------- --------------
Total Liabilities and Shareholders'
Equity $ 403,203,537 $ 384,970,658
=============== ==============
See accompanying notes.
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
--------------------------------------------
1999 1998
------------------- ----------------
REVENUE
Rental income $ 4,341,454 $ 2,490,990
Interest income 3,610,213 3,468,312
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Total Revenue 7,951,667 5,959,302
------------ ------------
EXPENSES
Property operating and
maintenance 857,081 463,455
Real estate taxes 421,611 247,081
Depreciation and amortization 1,163,019 622,654
Property management 166,070 73,659
Interest 1,906,652 891,663
General and administrative 974,907 1,182,503
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Total Expenses 5,489,340 3,481,015
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Income from joint ventures 1,016,794 265,866
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Income before minority interest 3,479,121 2,744,153
Minority interest (7,872) (18,864)
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Income before taxes 3,471,249 2,725,289
Income tax expense 863,000 1,248,000
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Net income $ 2,608,249 $ 1,477,289
============= =============
Net income per common
share, basic $ 0.13 $ 0.08
============= =============
Net income per common
share, diluted $ 0.13 $ 0.08
============= =============
Weighted average number of
common shares outstanding 20,750,411 18,376,910
============= =============
See accompanying notes.
PAGE
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
--------------------------------------------
1999 1998
------------------- ----------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 2,608,249 $ 1,477,289
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 1,213,843 660,923
Undistributed joint
venture income (557,070) (265,866)
Decrease (increase)
in assets
Restricted cash 86,550 (948,124)
Prepaid and other assets (1,138,030) (2,717,768)
(Decrease) increase in
liabilities
Accrued expenses and other
liabilities (2,183,856) 3,429,423
---------------- -------------
Net cash provided by
operating activities 29,686 1,635,877
---------------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Investment in real estate
assets (11,693,836) (87,775,709)
Investment in notes
receivable (2,150,000) (2,233,751)
Investment in joint ventures (3,285,712) (2,909,505)
Repayments from notes receivable 3,375,955 27,653,521
Proceeds from sale of
real estate assets - 59,018,737
---------------- --------------
Net cash provided by
(used in) investing
activities (13,753,593) (6,246,707)
---------------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from credit
facilities 35,000,000 48,000,000
Repayment of credit
facilities (17,000,000) (55,500,000)
Proceeds from mortgage
notes payable - 16,400,000
Repayment of mortgage
notes payable (231,661) (86,684)
--------------- -------------
Net cash provided by (used
in) financing activities 17,768,339 8,813,316
--------------- -------------
Net increase (decrease) in cash
and cash equivalents 4,044,432 4,202,486
Cash and cash equivalents,
beginning of period 10,122,037 29,895,212
---------------- --------------
Cash and cash equivalents,
end of period $ 14,166,469 $ 34,097,698
================ ==============
SUPPLEMENTAL INFORMATION:
Cash paid during the
period for interest $ 2,147,186 $ 903,728
Cash paid during the
period for income taxes $ 1,831,585 $ 625,428
SUPPLEMENTAL SCHEDULE OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES
Shares issued in connection
with acquisition of
commercial office properties
and notes receivable $ - $(39,362,500)
Warrants issued in connection
with acquistion of joint
venture investment $ - $ (750,000)
Notes receivable contributed
to joint venture $(24,218,113) $ -
See accompanying notes.
PAGE
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
Wellsford Real Properties, Inc. (the "Company") was formed on January 8,
1997, as a corporate subsidiary of Wellsford Residential Property Trust
(the "Trust"). On May 30, 1997, the Trust merged (the "Merger") with
Equity Residential Properties Trust ("EQR"). Immediately prior to the
Merger, the Trust contributed certain of its assets to the Company and
the Company assumed certain liabilities of the Trust. Immediately after
the contribution of assets to the Company and immediately prior to the
Merger, the Trust distributed to its common shareholders all of the
outstanding shares of the Company owned by the Trust (the "Spin-off").
On June 2, 1997, the Company sold 12,000,000 shares of its common stock
in a private placement (the "Private Placement") to a group of
institutional investors at $10.30 per share, the Company's then book
value per share.
The Company is a real estate merchant banking firm headquartered in New
York City which acquires, develops, finances and operates real
properties and organizes and invests in private and public real estate
companies. The Company has established three strategic business units
("SBUs") within which it intends to execute its business plan: an SBU
for commercial property operations which is held in its subsidiary,
Wellsford/Whitehall Properties II, L.L.C. ("Wellsford/Whitehall"), an
SBU for debt and equity activities and an SBU for property development
and land operations.
In August 1997, the Company, in a joint venture with WHWEL Real Estate
Limited Partnership ("Whitehall"), an affiliate of Goldman Sachs & Co.,
formed a private real estate operating company, Wellsford/Whitehall.
The Company had a 47.8% interest in Wellsford/Whitehall at March 31,
1999.
The accompanying consolidated financial statements include the assets
and liabilities contributed to and assumed by the Company from the
Trust, from the time such assets and liabilities were acquired or
incurred, respectively, by the Trust. Such financial statements have
been prepared using the historical basis of the assets and liabilities
and the historical results of operations related to the Company's assets
and liabilities.
The accompanying consolidated financial statements and related notes of
the Company have been prepared in accordance with generally accepted
accounting principles for interim financial reporting and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, certain information and footnote disclosures normally
included in financial statements prepared under generally accepted
accounting principles have been condensed or omitted pursuant to such
rule. In the opinion of management, all adjustments considered
necessary for a fair presentation of the Company's financial position,
results of operations and cash flows have been included and are of a
normal and recurring nature. These financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (continued)
2. Industry Segments and Recent Activities
Commercial Property Operations
The Company's commercial property operations segment consists of
Wellsford/Whitehall, which is accounted for on the equity method.
Wellsford/Whitehall had net real estate assets of $497.0 million, total
assets of $511.9 million, credit facility debt of $276.0 million,
mortgage debt of $67.9 million and equity of $159.3 million at March 31,
1999. During the three months ended March 31, 1999, Wellsford/Whitehall
earned $18.1 million in total revenues, primarily rental income, and
incurred $6.5 million of operating expenses, $6.4 million of interest
expense, $2.7 million of depreciation, and $1.6 million of general and
administrative expense, and had a gain on sale of $0.2 million,
resulting in net income of $1.1 million (before preferred dividends of
$0.3 million). As of March 31, 1999, Wellsford/Whitehall owned 35
properties containing approximately 4.6 million square feet ("SF"),
including approximately 1.4 million SF under renovation, located in the
New Jersey, Boston and Washington D.C. areas.
Debt and Equity Activities
At March 31, 1999, the Company had $99.3 million of debt investments
which bore interest at an average yield of approximately 5.2% over LIBOR
and had an average remaining term to maturity of 3.0 years.
In January 1999, the Company modified its existing $15 million
participation in a $100 million unsecured loan to extend the maturity
date from February 1999 to August 1999 and increase the interest rate
from 9.875% to 12%. A 1% loan fee was paid by the borrower upon
modification.
In January 1999, the Company acquired a parcel of land in Broomfield, CO
for approximately $7.2 million. In connection with this transaction,
the Company collected $0.4 million of consulting fees in 1998 and
expects to receive a minimum of $0.9 million in 1999. A third party has
an option to purchase this parcel of land for $7.2 million until June
30, 1999.
In January 1999, a wholly owned subsidiary of the Company obtained a $35
million secured loan facility (the "Wellsford Finance Bank Facility")
from BankBoston, N.A., which can potentially be increased to $50
million. The Wellsford Finance Bank Facility bears interest at LIBOR
+2.75% and has a term of 3 years. The Company immediately drew $35
million on this line, the proceeds of which were used (a) to repay the
$17 million balance of the Company's $50 million line of credit, and (b)
for working capital purposes. The Company is obligated to pay a fee
equal to one-quarter of one percent (0.25%) per annum on the average
daily amount of the unused portion of the Wellsford Finance Bank
Facility until maturity.
In March 1999, the Company made a $24.2 million contribution to its
joint venture ("Belford Capital") with the Liberty Hampshire Company,
L.L.C. This contribution was comprised of two of the Company's debt
investments, the $17.6 million DeBartolo Loan and the $8.0 million
outstanding balance of the Safeguard Loan, net of $1.4 million of cash
received back from Belford Capital. Belford Capital also assumed the
first $25.0 million of the Company's commitment to fund the Safeguard
Loan (including amounts advanced to date), while the Company retained
the remaining $20.0 million commitment.
<PAGE>
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (continued)
Development and Land Operations
At March 31, 1999, the Company owned three multifamily properties,
totalling 1,104 units, and had one multifamily project under
development, containing 264 units.
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data By Industry Segment
(table in thousands)
Commercial Development
Property Debt and Equity and Land
Operations Activities Operations Other Consolidated
------------------- ------------------- ------------------- ------------------- -------------------
Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended
March 31, March 31, March 31, March 31, March 31,
------------------- ------------------- ------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income $ -- $ -- $ 1,408 $ 454 $ 2,933 $ 2,037 $ -- $ -- $ 4,341 $ 2,491
Interest income 1 -- 3,466 3,076 -- -- 143 391 3,610 3,467
-----------------------------------------------------------------------------------------------------------
Total Income 1 -- 4,874 3,530 2,933 2,037 143 391 7,951 5,958
-----------------------------------------------------------------------------------------------------------
Operating expense -- -- 670 204 774 580 -- -- 1,444 784
Depreciation and
amortization 44 -- 344 64 750 487 25 72 1,163 623
Interest -- -- 606 237 1,272 655 29 -- 1,907 892
General and
administrative -- -- 138 13 -- -- 837 1,169 975 1,182
-----------------------------------------------------------------------------------------------------------
Total Expenses 44 -- 1,758 518 2,796 1,722 891 1,241 5,489 3,481
-----------------------------------------------------------------------------------------------------------
Income from joint
ventures 428 187 589 79 -- -- -- -- 1,017 266
Minority interest -- -- -- (8) (8) (10) -- -- (8) (18)
-----------------------------------------------------------------------------------------------------------
Income (loss) before
taxes $ 385 $ 187 $ 3,705 $ 3,083 $ 129 $ 305 $ (748) $ (850) $ 3,471 $ 2,725
===========================================================================================================
Total Assets $73,248 $46,486 $193,928 $152,513 $119,445 $81,823 $16,583 $23,406 $403,204 $304,228
===========================================================================================================
/TABLE
<PAGE>
3. Earnings Per Share
Basic earnings per common share are computed based upon the weighted
average number of common shares outstanding during the period, including
Class A common shares.
Diluted earnings per common share for the three months ended March 31,
1999 and 1998 are based upon the increased number of common shares that
would be outstanding assuming the exercise of dilutive common share
options and warrants, under the treasury stock method as shown below.
Three Months Ended
March 31,
1999 1998
---- ----
Dilutive common
share options 22,980 317,127
Dilutive warrants -- 643,533
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. General
The Company is a real estate merchant banking firm headquartered in New
York City which acquires, develops, finances and operates real
properties and organizes and invests in private and public real estate
companies. The Company has established three strategic business units
("SBUs") within which it intends to execute its business plan: an SBU
for commercial property operations which is held in its subsidiary,
Wellsford/Whitehall, an SBU for debt and equity activities and an SBU
for property development and land operations.
Commercial Property Operations - Wellsford/Whitehall
The Company seeks to acquire commercial properties below replacement
cost and operate and/or resell the properties after renovation,
redevelopment and/or repositioning. The Company believes that
appropriate well-located commercial properties which are currently
underperforming can be acquired on advantageous terms and repositioned
with the expectation of achieving returns which are greater than returns
which could be achieved by acquiring a stabilized property.
Debt and Equity Activities - dba Wellsford Capital
The Company makes loans that constitute, or will invest in, real estate-
related senior, junior or otherwise subordinated debt instruments, which
may be unsecured or secured by liens on real estate, interests therein
or the economic benefits thereof, and which have the potential for high
yields or returns more characteristic of equity ownership. These
investments may include debt that is acquired at a discount, mezzanine
financing, commercial mortgage-backed securities ("CMBS"), secured and
unsecured lines of credit, distressed loans, and loans previously made
by foreign and other financial institutions. The Company believes that
there are opportunities to acquire real estate debt, especially in the
low or below investment grade tranches, at significant returns as a
result of inefficiencies in pricing, while utilizing management's real
estate expertise to analyze the underlying properties and thereby
effectively minimizing risk.
Property Development and Land Operations - dba Wellsford Development
The Company engages in selective development activities as opportunities
arise and when justified by expected returns. The Company believes that
by pursuing selective development activities it can achieve returns
which are greater than returns which could be achieved by acquiring
stabilized properties. Certain development activities may be conducted
in joint ventures with local developers who may bear the substantial
portion of the economic risks associated with the construction,
development and initial rent-up of properties. As part of its strategy,
the Company may seek to issue tax-exempt bond financing authorized by
local governmental authorities which generally bears interest at rates
substantially below rates available from conventional financing.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The principal asset of the property development and land operations SBU
is an 80% interest in Palomino Park, an 1,800 unit class A multifamily
development located in a suburb of Denver, Colorado. The Company
currently has a gross investment of approximately $23.2 million at
March 31, 1999 in the following multifamily development project, which
is the third phase of Palomino Park, and related infrastructure costs:
Number Estimated Estimated
Name of Units Location Total Cost Stabilization Date
---- -------- --------- ---------- ------------------
Silver Mesa 264 Denver, CO $40.0 million Second Qtr. 2000
This project is being developed pursuant to a fixed-price contract. The
Company is committed to purchase 100% of this project upon completion,
which is anticipated to occur in the second quarter of 2000. In
addition, the Company is obligated to fund the first 20% of the
construction costs on this project as they are incurred.
Silver Mesa is owned by Silver Mesa at Palomino Park LLC ("Phase III
LLC"), a limited liability company, the members of which are Wellsford
Park Highlands Corp. (99%), a majority owned and controlled subsidiary
of the Company, and Al Feld ("Feld") (1%). Feld is a Denver-based
developer specializing in the construction of luxury residential
properties. Feld has constructed over 3,000 units since 1984.
The construction loan on Silver Mesa is for approximately $27.7 million,
matures in June 2001 (with a 6-month extension at the option of the
Phase III LLC upon fulfillment of certain conditions), and bears
interest at LIBOR +1.50%. Feld has guaranteed repayment of this loan.
Risks Associated with Forward-Looking Statements.
This Form 10-Q, together with other statements and information publicly
disseminated by the Company, contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company or industry results
to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following, which are discussed
in greater detail in the "Risk Factors" section of the Company's
registration statement on Form S-11 (file No. 333-32445) filed with the
Securities and Exchange Commission (the "Commission") on July 30, 1997,
as may be amended, which is incorporated herein by reference: general
economic and business conditions, which will, among other things, affect
demand for commercial and residential properties, availability and
credit worthiness of prospective tenants, lease rents and the
availability and cost of financing; difficulty of locating suitable
investments; competition; risks of real estate acquisition,
development, construction and renovation; vacancies at existing
commercial properties; dependence on rental income from real property;
adverse consequences of debt financing; risks of investments in debt
instruments, including possible payment defaults and reductions in the
value of collateral; risks associated with equity investments in and
with third parties; illiquidity of real estate investments; lack of
prior operating history; and other risks listed from time to time in the
Company's reports filed with the SEC. Therefore, actual results could
differ materially from those projected in such statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
2. Results of Operations
Comparison of the three months ended March 31, 1999 to the three months
ended March 31, 1998.
Capitalized terms used herein which are not defined elsewhere in this
Quarterly Report on Form 10-Q shall have the meanings ascribed to them
in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
Rental income increased by $1.9 million. This increase is primarily a
result of the acquisition of properties in connection with the VLP
Merger in February 1998 and the completion of Red Canyon (Phase II of
the Company's Palomino Park development) in November 1998.
Interest income increased by $0.1 million. This increase is primarily a
result of the acquisition of approximately $76.1 million in notes
receivable during the period from January 1998 through March 1999 offset
by the disposition of $82.7 million of notes receivable during this
period ($25.6 million of which was disposed on March 30, 1999-see Notes
to Consolidated Financial Statements).
Property operating and maintenance expense, real estate tax expense,
depreciation and amortization, and property management expense increased
by $0.4 million, $0.2 million, $0.5 million, and $0.1 million,
respectively. These increases are a result of the factors which
affected rental income, as described above.
Interest expense increased by $1.0 million as a result of the issuance
of substantially all of the Company's debt other than the Palomino Park
Bonds and the Blue Ridge Loan subsequent to December 31, 1997. Interest
on the Palomino Park Bonds was capitalized to the Company's Palomino
Park development.
General and administrative expense decreased by $0.2 million. This
decrease is a result of an increased allocation of such costs to
Wellsford/Whitehall and a decline in accrued compensation.
Income from joint ventures increased by $0.8 million. This increase is
a result of the growth of the Wellsford/Whitehall joint venture since
January 1998, the Creamer Vitale Wellsford joint venture transaction in
January 1998 and the Liberty Hampshire joint venture transaction in July
1998.
Minority interest is a result of EQR's 20% interest in the Company's
Palomino Park development, as well as certain limited partnership
interests (aggregating approximately 10%) in one of the Company's
commercial office properties acquired in the VLP Merger. These limited
partnership interests were bought out by the Company in October 1998.
The income tax provision decreased $0.4 million primarily as a result of
the effects of the utilization of the net operating loss carry forwards
acquired in the VLP Merger.
3. Liquidity and Capital Resources
The Company expects to meet its short-term liquidity requirements
generally through its working capital and cash flow provided by
operations. The Company considers its ability to generate cash to be
adequate and expects it to continue to be adequate to meet operating
requirements both in the short and long terms.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company expects to meet its long-term liquidity requirements such as
refinancing mortgages, financing acquisitions and development, and
financing capital improvements by long-term borrowings, through the
issuance of debt and the offering of additional debt and equity
securities.
The Company has (i) the commitment, until May 30, 2000, of an affiliate
of EQR to acquire at the Company's option up to $25 million of the
Company's Series A 8% Convertible Redeemable Preferred Stock ("Series A
Preferred"), each share of which is convertible into shares of the
Company's common stock at a price of $11.124 (the "EQR Preferred
Commitment") and (ii) a $50 million two-year line of credit from
BankBoston, N.A. and Morgan Guaranty Trust Company of New York (the "WRP
Bank Facility") which initially bears interest at an annual rate equal
to LIBOR +1.75%. The EQR Preferred Commitment is pledged as security
for the WRP Bank Facility. If at May 30, 2000, the affiliate of EQR has
purchased less than $25 million of Series A Preferred, it has the right
to purchase the remainder of the $25 million not purchased prior to that
time. As of March 31, 1999, no balance was outstanding under the WRP
Bank Facility.
Wellsford/Whitehall has a $375 million loan facility (the
"Wellsford/Whitehall Bank Facility") from BankBoston, N.A. and Goldman
Sachs Mortgage Company, consisting of a senior secured credit facility
of up to $300 million and a secured mezzanine facility of up to $75
million. The senior facility bears interest at LIBOR +1.65%; the
mezzanine facility bears interest at LIBOR +3.2%. As of March 31, 1999,
approximately $276.0 million was outstanding under the
Wellsford/Whitehall Bank Facility ($207.1 million of which was under the
senior facility). Both facilities mature on December 15, 2000 and are
extendable for one year by Wellsford/Whitehall.
Year 2000
The Company has developed a plan to modify its information technology,
primarily its accounting software, to recognize the year 2000. The
Company currently expects the project to be substantially complete by
the end of the second quarter of 1999 at a cost of less than $0.1
million which will be funded from operations, including costs incurred
to date. The Company does not expect this project to have a significant
effect on its operations. The timing and cost of this project will be
closely monitored and are based on management's best estimates. Actual
results, however, could differ from those anticipated.
The Company also has initiated discussions with its third-party property
management companies (the "Managers") to ensure that those parties have
appropriate plans to allay any year 2000 issues that may impact the
Company's operations. These issues would include both
accounting/management software and non-information technology ("IT")
systems such as fire safety, security and elevator systems.
Wellsford/Whitehall has completed its analysis of such systems and has
determined that no material adverse consequences will likely result
from its year 2000 issues. Wellsford Capital and Wellsford Development
have initiated such analysis, which is expected to be completed by the
end of the second quarter of 1999. Under the most reasonably likely
worst case scenario, wherein the Managers fail to update their software
and non-IT systems, the Company has the ability to convert its
accounting and management systems to a spreadsheet-based system on a
temporary basis and to utilize its building engineers to manually
override any non-IT systems which fail. While the Company believes its
planning efforts are adequate to address its year 2000 concerns, there
can be no guarantee that the systems of other companies on which the
Company's systems and operations rely, primarily its banks, payroll
processing company, creditors, and debtors, will be converted on a
timely basis and will not have a material effect on the Company.
<PAGE>
QUANTITATIVE AND QUALITATIVE
DISCLOSURE OF MARKET RISK
In January 1999, the Company modified its existing $15 million participation
in a $100 million unsecured loan to extend the maturity date from February
1999 to August 1999 and increase the interest rate from 9.875% to 12%. A 1%
loan fee was paid by the borrower upon modification.
In January 1999, a wholly owned subsidiary of the Company obtained a $35
million secured loan facility (the "Wellsford Finance Bank Facility") from
BankBoston, N.A., which can potentially be increased to $50 million. The
Wellsford Finance Bank Facility bears interest at LIBOR +2.75% and has a term
of 3 years. The Company is obligated to pay a fee equal to one-quarter of
one percent (0.25%) per annum on the average daily amount of the unused
portion of the Wellsford Finance Bank Facility until maturity.
Such transactions were conducted under market conditions and fall within the
parameters of the Company's strategy for managing its market risk.
<PAGE>
<PAGE>
PART II.
OTHER INFORMATION
Item 1: Legal Proceedings - None.
Item 2: Changes in Securities - None.
Item 3: Defaults upon Senior Securities - None.
Item 4: Submission of Matters to a Vote of Security Holders - None.
Item 5: Other Information
- None.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits filed with this Form 10-Q:
27.1 Financial Data Schedule (EDGAR Filing Only)
(b) Reports on Form 8-K filed by the registrant during
its fiscal quarter ended March 31, 1999:
- None.
<PAGE>
<PAGE>
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 thereunto duly authorized.
Dated: May 14, 1999
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Jeffrey H. Lynford
_________________________________________
Jeffrey H. Lynford, Chairman of the Board
/s/ Gregory F. Hughes
_________________________________________
Gregory F. Hughes, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This Schedule contains summary financial information extracted from
the consolidated balance sheets and consolidated statements of operation and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 22,087,769
<SECURITIES> 0
<RECEIVABLES> 99,315,649
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 34,133,556
<PP&E> 164,723,671
<DEPRECIATION> (3,725,550)
<TOTAL-ASSETS> 403,203,537
<CURRENT-LIABILITIES> 9,781,714
<BONDS> 154,945,129
<COMMON> 207,504
0
0
<OTHER-SE> 234,059,341
<TOTAL-LIABILITY-AND-EQUITY> 403,203,537
<SALES> 0
<TOTAL-REVENUES> 8,968,461
<CGS> 0
<TOTAL-COSTS> 2,607,781
<OTHER-EXPENSES> 974,907
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,906,652
<INCOME-PRETAX> 3,471,249
<INCOME-TAX> 863,000
<INCOME-CONTINUING> 2,608,249
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,608,249
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
