SECURITIES AND EXCHANGE COMMISSION
Washington, DC
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FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
------- EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17793
Wilder Richman Historic Properties II, L.P.
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(Exact name of Registrant as specified in its charter)
Delaware 13-3481443
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
599 W. Putnam Avenue
Greenwich, Connecticut 06830
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (203) 869-0900
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 filing requirements
for the past 90 days.
Yes X No
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Part I - Financial Information
Table of Contents
Item 1. Financial Statements Page
-------------------- ----
Balance Sheets as of August 31, 2000 (Unaudited)
and February 29, 2000 3
Statements of Operations for the three and six month periods
ended August 31, 2000 and 1999 (Unaudited) 4
Statements of Cash Flows for the six months
ended August 31, 2000 and 1999 (Unaudited) 5
Notes to Financial Statements as of August 31, 2000 (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure about Market Risk 10
2
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, 2000
(Unaudited) February 29, 2000
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 170,829 $ 180,125
Investments in operating partnerships 853,328 1,321,566
Accrued interest receivable 10,084 9,988
----------- -----------
$ 1,034,241 $ 1,511,679
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Other liabilities $ 5,000 $ 10,000
Due to related parties 191,701 184,201
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196,701 194,201
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Partners' equity (deficit)
Limited partners 985,833 1,460,972
General partner (148,293) (143,494)
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837,540 1,317,478
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$ 1,034,241 $ 1,511,679
=========== ===========
</TABLE>
See notes to financial statements.
3
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
August 31, 2000 August 31, 2000 August 31, 1999 August 31, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES
Interest $ 3,430 $ 6,929 $ 13,650 $ 24,015
EXPENSES
Operating 11,445 18,629 7,300 14,312
--------- --------- --------- ---------
Income (loss) from operations (8,015) (11,700) 6,350 9,703
--------- --------- --------- ---------
Equity in income (loss) of operating
partnerships from operations (104,780) (39,126) 51,587 137,758
Extraordinary item - operating
partnership write-off of financing
costs (429,112) (429,112)
--------- --------- --------- ---------
Net income (loss) from operating
partnerships (533,892) (468,238) 51,587 137,758
--------- --------- --------- ---------
NET EARNINGS (LOSS) $(541,907) $(479,938) $ 57,937 $ 147,461
========= ========= ========= =========
NET EARNINGS (LOSS) PER UNIT
OF LIMITED PARTNERSHIP
INTEREST $ (670.61) $ (593.92) $ 71.69 $ 182.48
========= ========= ========= =========
</TABLE>
See notes to financial statements.
4
<PAGE>
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED AUGUST 31, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (479,938) $ 147,461
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities
Equity in loss (income) of operating partnerships 468,238 (137,758)
Decrease (increase) in accrued interest receivable (96) 140,083
Decrease in other liabilities (5,000) (5,000)
Increase in due to related parties 7,500 8,196
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Net cash provided by (used in) operating activities (9,296) 152,982
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CASH FLOWS FROM INVESTING ACTIVITIES
Receipt on note receivable 317,713
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Net cash provided by investing activities 317,713
-----------
Net increase (decrease) in cash and cash equivalents (9,296) 470,695
Cash and cash equivalents at beginning of period 180,125 663,495
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Cash and cash equivalents at end of period $ 170,829 $ 1,134,190
=========== ===========
</TABLE>
See notes to financial statements.
5
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
(Unaudited)
1. The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. They do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. The results of operations are impacted significantly by the
results of operations of the Operating Partnerships, which are provided on
an unaudited basis during interim periods. Accordingly, the accompanying
financial statements are dependent on such unaudited information. In the
opinion of the General Partner, the financial statements include all
adjustments necessary to reflect fairly the results of the interim periods
presented. All adjustments are of a normal recurring nature. No significant
events have occurred subsequent to February 29, 2000 and no material
contingencies exist which would require additional disclosures in the
report under Regulation S-X, Rule 10-01 paragraph A-5.
The results of operations for the six months ended August 31, 2000 are not
necessarily indicative of the results to be expected for the entire year.
2. The investments in Operating Partnerships as of August 31, 2000 and
February 29, 2000 are as follows:
Amount paid to investee through February 29, 2000 $ 16,388,000
Accumulated cash distributions from Operating
Partnerships through February 29, 2000 (3,180,441)
Equity in accumulated loss of Operating Partnerships
through February 29, 2000 (11,885,993)
------------
Balance, February 29, 2000 1,321,566
Equity in loss of operating partnerships for the
six monthsended June 30, 2000 (468,238)
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Balance, August 31, 2000 $ 853,328
============
6
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS - continued
AUGUST 31, 2000
(Unaudited)
Note 2 - Continued
The combined balance sheets of the Operating Partnerships as of June
30, 2000 and December 31, 1999 are as follows:
<TABLE>
<CAPTION>
June 30, 2000
(Unaudited) December 31, 1999
<S> <C> <C>
ASSETS
Land $ 1,150,473 $ 1,150,473
Buildings and equipment (net of accumulated depreciation
of $14,506,552 and 13,840,014, respectively) 38,538,491 39,205,029
Cash and cash equivalents 1,747,635 1,338,266
Deferred costs 897,800 449,912
Mortgage escrow deposits 1,117,099 1,199,642
Tenant security deposits 789,829 789,828
Capital improvement reserve 1,528,477
Other assets 146,266 76,687
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$ 45,916,070 $ 44,209,837
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgages payable $ 28,581,127 $ 26,249,814
Accounts payable and accrued expenses 292,454 159,007
Accrued interest 132,298 132,298
Tenant security deposits payable 789,828 789,828
Due to general partner and affiliates 998,965 1,284,524
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30,794,672 28,615,471
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Partners' equity
Wilder Richman Historic Properties II, L.P. 853,328 1,321,566
General partner 14,268,070 14,272,800
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15,121,398 15,594,366
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$ 45,916,070 $ 44,209,837
============ ============
</TABLE>
7
<PAGE>
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS - continued
AUGUST 31, 2000
(Unaudited)
Note 2 - Continued
The unaudited statements of the operations of the Operating
Partnerships for the six months ended June 30, 2000 and 1999 are as
follows:
<TABLE>
<CAPTION>
2000 1999
------------- ------------
<S> <C> <C>
REVENUE
Rent $ 3,492,375 $ 3,244,944
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3,492,375 3,244,944
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EXPENSES
Administrative 277,919 278,794
Operating 1,552,494 1,069,067
Management fees 107,884 95,011
Interest 927,061 913,341
Depreciation and amortization 666,538 688,355
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3,531,896 3,044,568
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Income (loss) before extraordinary item (39,521) 200,376
Extraordinary item - write-off of financing fees (433,447)
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NET EARNINGS (LOSS) $ (472,968) $ 200,376
============= ============
NET EARNINGS (LOSS) ALLOCATED TO
Wilder Richman Historic Properties II, L.P. $ (468,238) $ 137,758
General partner (4,730) 62,618
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$ (472,968) $ 200,376
============= ============
</TABLE>
3. Additional information, including the audited February 29, 2000
Financial Statements and the Summary of Significant Accounting
Policies, is included in the Partnership's Annual Report on Form 10-K
for the fiscal year ended February 29, 2000 on file with the Securities
and Exchange Commission.
8
<PAGE>
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Item 2 Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Liquidity and Capital Resources
As of August 31, 2000, Wilder Richman Historic Properties II, L.P. (the
"Partnership") experienced few changes in its financial condition as compared to
February 29, 2000, with the exception of the investment in the Operating
Partnerships resulting from the equity in loss of operating partnerships for the
six months ended June 30, 2000.
The Operating Partnerships' cash and cash equivalents as of June 30, 2000 have
increased by approximately $410,000 compared to December 31, 1999 while accounts
payable and accrued expenses have increased by approximately $133,000. The
replacement reserve account, which is controlled by the lender for the purpose
of funding needed repairs or capital improvements, has increased by
approximately $30,000 to approximately $896,000.
The Operating Partnerships refinanced their respective outstanding mortgage
liabilities as of April 28, 2000 under the $27,545,000 Jersey City Redevelopment
Agency Multifamily Housing Revenue Bonds, Series 1992 (Fannie Mae Pass-through
Certificate Program/Dixon Mill Apartments Project). Prior to the refinancing,
the annual fixed interest rate of the mortgage was approximately 6.74%. The
total new indebtedness in the amount of $28,600,000 for a term of 30 years is
provided by (a) variable-rate tax-exempt bonds in the amount of $26,435,000, and
(b) variable-rate taxable bonds in the amount of $2,165,000. The initial
interest rates on the tax-exempt and taxable bonds are 5.1% and 6.15%,
respectively. The Operating Partnerships purchased an interest cap which would
limit the interest rates to 6.97% for five years on the tax-exempt portion, and
9.15% for five and one-half years on the taxable portion. Proceeds from the new
bond issue were used to pay off the existing 1992 bonds (approximately
$26,435,000), pay the costs of the transaction (approximately $898,000) and fund
reserves for capital improvements (approximately $1,528,000).
Because the property has been in operation for approximately ten years,
management is addressing the need for extensive capital improvements. As a
result of the refinancing and the funding of reserves for capital improvements,
the Operating General Partner intends to make approximately $1.6 million in
capital improvements to the Complex over the next twelve months. The planned
improvements include roof replacement, replacement of the fire/smoke alarm
system, elevator repairs, new entry doors and other repairs throughout the
complex. In addition, the Operating General Partner is considering, but has not
approved, creating an on-site health club facility out of an unused building
that would otherwise have to be repaired or torn down in the foreseeable future.
This cost is not included in the capital improvements discussed above.
Because of the reduction of the mortgage interest rate, there may be greater
potential for the Partnership to make cash distributions to the Limited Partners
on a regular basis. However, the Partnership's ability to make distributions
will depend on the level of interest rates and future operating results of the
Complex, which will be extremely dependent on competition and market conditions,
and therefore may be subject to significant volatility. Accordingly, there can
be no assurance as to whether or not the Partnership may be able to make
distributions, nor the timing or amount of any potential distributions to
Limited Partners. The Operating General Partner and the General Partner plan to
periodically assess the feasibility of cash flow distributions based on the
results of operations, the physical condition of the Property, the then current
interest rates, and local market conditions, among other things.
The Partnership's operating results are dependent upon the operating results of
the Operating Partnerships and are significantly impacted by the Operating
Partnerships' policies. The Partnership accounts for its investment in the
Operating Partnerships in accordance with the equity method of accounting, under
which the investment is carried at cost and is adjusted for the Partnership's
share of the Operating Partnerships' results of operations and by any cash
distributions received. Equity in loss of each investment in Operating
Partnership allocated to the Partnership is recognized to the extent of the
Partnership's investment balance in each Operating Partnership. Any equity in
loss in excess of the Partnership's investment balance in an Operating
Partnership is allocated to other partners' capital in any Operating
Partnership. As a result, the equity in loss of investment in operating
partnerships is expected to decrease as the Partnership's investment balances in
the respective Operating Partnerships become zero. However, the combined
statements of operations of the Operating Partnerships reflected in Note 2 to
the Partnership's financial statements include the operating results of all
Operating Partnerships, regardless of the Partnership's investment balances.
9
<PAGE>
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Item 2 Management's Discussion and Analysis of Financial Conditions and Results
of Operations (continued)
Results of Operations
For the six months ended August 31, 2000, the statement of operations of the
Partnership reflects a net loss of $479,938, which includes equity in loss of
operating partnerships of $468,238. The Operating Partnerships reported a net
loss during the six months ended June 30, 2000 of $472,968, which includes
depreciation and amortization of approximately $667,000, non capitalized planned
maintenance expenditures of approximately $264,000 and the write-off of
unamortized financing fees resulting from the recent refinancing of
approximately $433,000. The Operating Partnerships generated cash flow from
operations after required debt service payments and required replacement reserve
deposits during the six months ended June 30, 2000 of approximately $502,000,
which includes principal amortization under the mortgages (approximately
$95,000) and deposits to required escrows (approximately $30,000). The Operating
Partnerships' results of operations were not significantly affected by the
refinancing, as it took place during the second quarter of operations. The
Partnership's interest revenue declined compared to the six months ended August
31, 1999 as a result of (i) making a distribution to limited partners of
approximately $964,000 in the fourth fiscal quarter of the year ended February
29, 2000 and (ii) the repayment of the note by the Operating Partnerships in the
first fiscal quarter of the year ended February 29, 2000. The Operating
Partnerships did not utilize any replacement reserves during the six months
ended June 30, 2000.
For the six months ended August 31, 1999, the statement of operations of the
Partnership reflects net earnings of $147,461, which includes equity in income
of operating partnerships of $137,758. Nonrecognition of income of the
Partnership's investment in Dixon Mills Phase I during the six months ended
August 31, 1999 was approximately $61,000 in accordance with the equity method
of accounting. The Operating Partnerships reported net earnings during the six
months ended June 30, 1999 of $200,376, inclusive of depreciation and
amortization of $688,355. The Operating Partnerships generated cash flow after
required debt service payments and required replacement reserve deposits during
the six months ended June 30, 1999 of approximately $717,000, which includes
principal amortization under the mortgages (approximately $134,000) and deposits
to required escrows (approximately $38,000). The Operating Partnerships did not
utilize any replacement reserves during the six months ended June 30, 1999.
Although the Operating Partnerships are operating above breakeven, management is
continuing to examine methods to maintain high occupancy rates while steadily
increasing rents and economizing operations. There has been ongoing new
construction of luxury multi-housing in the vicinity of the Dixon Mill Complex
(the "Complex"). Such housing includes asking rents that are comparable and
higher than rents currently charged by the Complex. Although the Complex has not
been adversely impacted by the new competition, it cannot be readily determined
whether such new housing will have a positive or negative impact on the Complex
or its cash flow in the future. The ability to continue to perform at recent
levels will be dependent on the ability to lease units as lease terms expire on
a month to month basis. The average occupancy for the six months ended June 30,
2000 and 1999 was approximately 98%. The future operating results of the Complex
will be extremely dependent on competition and market conditions and therefore
may be subject to significant volatility.
Year 2000 Compliance
The Partnership successfully completed a program to ensure Year 2000 readiness.
As a result, the Partnership had no Year 2000 problems that affected its
business, results of operations or financial condition.
Item 3 Quantitative and Qualitative Disclosure About Market Risk
The Partnership has market risk sensitivity with regard to financial instruments
concerning interest rate fluctuations in connection with the low-floater
interest rates associated with the Operating Partnerships' mortgages as
refinanced as of April 28, 2000 (see discussion above). Although an interest
rate cap was purchased, an increase in the low-floater rates could have a
material adverse impact on the Partnership's results of operations.
10
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Part II - Other Information
Item 1. Legal Proceedings.
Although Registrant is not involved in any legal proceedings, the
Operating Partnerships are involved in three complaints which have
been filed with the Equal Employment Opportunity Commission
("EEOC") against the Operating Partnerships, among others, by a
former employee, a former part-time rental agent, and a security
person employed by a private non-affiliated security company which
provided service to the Property, alleging, among other things,
discrimination in connection with advancement, hiring and
termination. The Operating Partnerships intend to vigorously
defend these matters. Although two of the claims have been
dismissed by the EEOC, the plaintiffs currently have the right to
file an appeal within ninety days of notification. No such appeals
have been filed to date. The Operating General Partner cannot
measure the potential liability, if any, at this time.
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
The Operating Partnerships refinanced their respective outstanding
mortgage liabilities under the $27,545,000 Jersey City
Redevelopment Agency Multifamily Housing Revenue Bonds, Series
1992 (Fannie Mae pass-through Certificate Program/Dixon Mill
Apartments Project) as of April 28, 2000. The total new
indebtedness in the amount of $28,600,000 for a term of 30 years
is provided by (a) variable-rate tax-exempt bonds in the amount of
$26,435,000 and (b) variable-rate taxable bonds in the amount of
$2,165,000. The Operating Partnerships have purchased an interest
cap which would limit the interest rates to 6.97% for five years
on the tax-exempt portion, and 9.15% for five and one-half years
on the taxable portion. Proceeds from the new bond issue were used
to pay off the existing 1992 bonds (approximately $26,435,000),
pay the costs of the transaction (approximately $800,000) and fund
reserves for capital improvements (approximately $1,365,000).
The new mortgage terms require monthly payments of $6,362 to a
replacement reserve.
11
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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 thereunto duly authorized.
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
By: Wilder Richman Historic Corporation
General Partner
Dated: October 24, 2000 /s/ Richard Paul Richman
----------------------------------------
Richard Paul Richman
President and Chief Executive Officer
12
