SECURITIES AND EXCHANGE COMMISSION
Washington, DC
-------------------------
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 November 30, 2000
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 0-17793
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
---------------------- -----
(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 November 30, 2000 (Unaudited)
and February 29, 2000 3
Statements of Operations for the three and nine
month periods ended November 30, 2000 and 1999
(Unaudited) 4
Statements of Cash Flows for the nine months
ended November 30, 2000 and 1999 (Unaudited) 5
Notes to Financial Statements as of November 30, 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
November 30,
2000 February 29,
(Unaudited) 2000
---------- -----------
ASSETS
Cash and cash equivalents $ 172,142 $ 180,125
Investment in operating partnerships 717,408 1,321,566
Accrued interest receivable 10,083 9,988
----------- ------------
$ 899,633 $ 1,511,679
=========== ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Other liabilities $ 7,500 $ 10,000
Due to related parties 195,451 184,201
----------- ------------
202,951 194,201
----------- ------------
Partners' equity (deficit)
Limited partners 846,383 1,460,972
General partner (149,701) (143,494)
----------- ------------
696,682 1,317,478
----------- ------------
$ 899,633 $ 1,511,679
=========== ============
See notes to financial statements.
3
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<TABLE>
<CAPTION>
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
November 30, November 30, November 30, November 30,
2000 2000 1999 1999
------------ ------------ ------------ ------------
REVENUES
<S> <C> <C> <C> <C>
Interest $ 2,138 $ 9,067 $ 14,484 $ 38,499
EXPENSES
Operating 7,076 25,705 6,251 20,563
--------- --------- --------- ---------
Earnings (loss) from operations (4,938) (16,638) 8,233 17,936
--------- --------- --------- ---------
Equity in income (loss) of
operating partnerships (135,920) (175,046) 3,787 141,545
Extraordinary item - operating
partnership write-off of financing costs (429,112)
--------- --------- --------- ---------
Net earnings (loss) from operating
partnerships (135,920) (604,158) 3,787 141,545
--------- --------- --------- ---------
NET EARNINGS (LOSS) $(140,858) $(620,796) $ 12,020 $ 159,481
========= ========= ========= =========
NET EARNINGS (LOSS) PER UNIT
OF LIMITED PARTNERSHIP
INTEREST $ (174.31) $ (768.24) $ 14.87 $ 197.35
========= ========= ========= =========
</TABLE>
See notes to financial statements.
4
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<TABLE>
<CAPTION>
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED NOVEMBER 30, 2000 AND 1999
(Unaudited)
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings (loss) $ (620,796) $ 159,481
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities
Equity in loss (income) of operating partnerships 604,158 (141,545)
Decrease (increase) in accrued interest receivable (95) 140,083
Decrease in other liabilities (2,500) (2,500)
Increase in due to related parties 11,250 11,946
----------- -----------
Net cash provided by (used in) operating activities (7,983) 167,465
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Receipt on note receivable 317,713
-----------
Net cash provided by investing activities 317,713
-----------
Net increase (decrease) in cash and cash equivalents (7,983) 485,178
Cash and cash equivalents at beginning of period 180,125 663,495
----------- -----------
Cash and cash equivalents at end of period $ 172,142 $ 1,148,673
=========== ===========
</TABLE>
See notes to financial statements.
5
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 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, except as described below in Note 2 and in Part II,
Item 5.
The results of operations for the nine months ended November 30, 2000 are
not necessarily indicative of the results to be expected for the entire
year.
2. The investment in Operating Partnerships as of November 30, 2000 and
February 29, 2000 is as follows:
Amount paid to investee through February 29, 2000 $16,388,000
Accumulated cash distributions received 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 nine
months ended November 30, 2000 (604,158)
-----------
Balance, November 30, 2000 $ 717,408
===========
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 $898,000) and fund reserves for
capital improvements (approximately $1,528,000).
The new mortgage terms require monthly replacement reserve deposits of
$6,362.
6
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS - continued
NOVEMBER 30, 2000
(Unaudited)
2. (Continued)
The combined balance sheets of the Operating Partnerships as of
September 30, 2000 and December 31, 1999 are as follows:
<TABLE>
<CAPTION>
September 30, 2000
(Unaudited) December 31, 1999
----------- -----------------
ASSETS
<S> <C> <C>
Land $ 1,150,473 $ 1,150,473
Buildings and equipment (net of accumulated depreciation
of $14,839,821 and $13,840,014) 38,205,222 39,205,029
Cash and cash equivalents 1,856,615 1,338,266
Tenant accounts receivable 172,326
Deferred costs 897,440 449,912
Mortgage escrow deposits 1,198,947 1,199,642
Tenant security deposits 789,829 789,828
Capital improvement reserve 1,528,477
Prepaid expenses and other assets 1,714 76,687
----------- -----------
$45,801,043 $44,209,837
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgages payable $28,581,127 $26,249,814
Accounts payable and accrued expenses 311,539 159,007
Accrued interest 132,298 132,298
Tenant security deposits payable 789,828 789,828
Due to general partner and affiliates 1,002,147 1,284,524
----------- -----------
30,816,939 28,615,471
----------- -----------
Partners' equity
Wilder Richman Historic Properties II, L.P. 717,408 1,321,566
General partner 14,266,696 14,272,800
----------- -----------
14,984,104 15,594,366
----------- -----------
$45,801,043 $44,209,837
=========== ===========
</TABLE>
7
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS - continued
NOVEMBER 30, 2000
(Unaudited)
2. (Continued)
The unaudited statements of operations of the Operating Partnerships
for the nine months ended September 30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
REVENUE
<S> <C> <C>
Rent $ 5,307,507 $ 4,903,940
----------- -----------
5,307,507 4,903,940
----------- -----------
EXPENSES
Administrative 520,012 390,320
Operating 2,502,877 1,765,433
Management fees 178,326 144,171
Interest 1,266,474 1,365,593
Depreciation and amortization 1,016,632 1,032,533
----------- -----------
5,484,321 4,698,050
----------- -----------
Income (loss) before extraordinary item (176,814) 205,890
Extraordinary item - write-off of financing fees (433,447)
----------- -----------
NET EARNINGS (LOSS) $ (610,261) $ 205,890
=========== ===========
NET EARNINGS (LOSS) ALLOCATED TO
Wilder Richman Historic Properties II, L.P. $ (604,158) $ 141,545
General Partner (6,103) 64,345
----------- -----------
$ (610,261) $ 205,890
=========== ===========
</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.
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 November 30, 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
nine months ended September 30, 2000.
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The Operating Partnerships' cash and cash equivalents as of September 30, 2000
have increased by approximately $518,000 compared to December 31, 1999 while
accounts payable and accrued expenses have increased by approximately $153,000.
The replacement reserve account, which is controlled by the lender for the
purpose of funding needed repairs or capital improvements, has increased by
approximately $50,000 to approximately $916,000. Tenants accounts receivable has
increased as a result of a dispute with a commercial tenant. Such tenant is
reportedly depositing its monthly rent into an escrow to be paid pending the
resolution of the matter.
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 and purchase the interest rate
cap (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.
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Item 2 Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Results of Operations
For the nine months ended November 30, 2000, the statement of operations of the
Partnership reflects a net loss of $620,796, which includes equity in loss of
operating partnerships of $604,158. The Operating Partnerships reported a net
loss during the nine months ended September 30, 2000 of $610,261, which includes
depreciation and amortization of approximately $1,017,000, non capitalized
planned maintenance expenditures of approximately $530,000 and the write-off of
unamortized financing fees resulting from the recent refinancing of
approximately $433,000. The Operating Partnerships
9
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generated cash flow from operations after required debt service payments and
required replacement reserve deposits during the nine months ended September 30,
2000 of approximately $520,000, which includes principal amortization under the
mortgages (approximately $166,000) and deposits to required escrows
(approximately $50,000 for replacement reserves and approximately $103,000 for a
principal reserve for the second mortgage, which principal is paid
semi-annually). The Partnership's interest revenue declined compared to the nine
months ended November 30, 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 or the
capital improvement reserve during the nine months ended September 30, 2000.
For the nine months ended November 30, 1999, the statement of operations of the
Partnership reflects net earnings of $159,481, which includes equity in income
of operating partnerships of $141,545. Nonrecognition of income of the
Partnership's investment in Dixon Mills Phase I during the nine months ended
November 30, 1999 was approximately $62,000 in accordance with the equity method
of accounting. The Operating Partnerships reported net earnings during the nine
months ended September 30, 1999 of $205,890, inclusive of depreciation and
amortization of $1,032,533. The Operating Partnerships generated cash flow after
required debt service payments and required replacement reserve deposits during
the nine months ended September 30, 1999 of approximately $978,000, which
includes principal amortization under the mortgages (approximately $202,000) and
deposits to required escrows (approximately $58,000). The Operating Partnerships
did not utilize any replacement reserves during the nine months ended September
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 nine months ended
September 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.
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. No adjustment has been made to the
10
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accompanying financial statements for the potential outcome of
these uncertainties.
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 $898,000) and fund
reserves for capital improvements (approximately $1,528,000).
The new mortgage terms require monthly replacement reserve
deposits of $6,362.
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: January 18, 2001 /s/ Richard Paul Richman
----------------------------------------
Richard Paul Richman
President and Chief Executive Officer
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