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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
- --------------------------------------------------------------------------------
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 June 30, 1996
--------------------------------------------
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 1-11550
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Wellsford Residential Property Trust
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(Exact name of registrant as specified in its charter)
Maryland 13-3675988
- -------------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
610 Fifth Avenue, New York, NY 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)
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 common shares of beneficial interest, $.01 par value, outstanding as
of August 12, 1996: 17,045,406
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<PAGE>
WELLSFORD RESIDENTIAL PROPERTY TRUST
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
June 30, 1996 (unaudited)
and December 31, 1995 ...................................... 3
Consolidated Statements of Operations
(unaudited) for the three
and six months ended June 30, 1996 and 1995 ................ 4
Consolidated Statements of Cash Flows (unaudited) for
the six months ended June 30, 1996 and 1995 ................ 5
Notes to Consolidated Financial Statements (unaudited) ..... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................ 8
PART II. OTHER INFORMATION .......................................... 11
SIGNATURES ................................................. 12
2
<PAGE>
WELLSFORD RESIDENTIAL PROPERTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
------------ ------------
ASSETS (Unaudited)
Real estate assets, at cost:
Land ...................................... $107,724,296 $105,121,296
Buildings and improvements ................ 620,992,554 605,087,385
------------ ------------
728,716,850 710,208,681
Less, accumulated depreciation .......... (71,022,646) (58,490,833)
------------ ------------
657,694,204 651,717,848
Construction in progress .................. 38,535,183 26,189,876
------------ ------------
696,229,387 677,907,724
Cash and cash equivalents .................... 30,330,624 29,444,008
Restricted cash .............................. 11,376,242 12,916,328
Deferred financing costs ..................... 5,386,606 5,928,869
Prepaid and other assets ..................... 3,155,087 3,441,408
------------ ------------
Total Assets ................................. $746,477,946 $729,638,337
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Senior unsecured notes .................... $223,399,302 $223,306,778
Mortgage notes payable .................... 83,336,596 77,136,941
Unsecured credit facilities ............... 24,000,000 --
Accrued expenses and other liabilities .... 14,054,354 16,403,724
Dividends payable ......................... 11,401,220 11,310,053
Security deposits ......................... 3,073,755 3,122,229
------------ ------------
Total Liabilities ............................ 359,265,227 331,279,725
------------ ------------
Commitments and contingencies ................ -- --
Shareholders' Equity:
Shares of beneficial interest, 100,000,000
shares authorized - 3,999,800 Series A
Convertible Preferred Shares, $.01 par
value per share, liquidation preference
$25 per share, issued and
outstanding; ........................... 39,998 39,998
2,300,000 Series B Preferred Shares,
$.01 par value per share, liquidation
preference $25 per share, issued and
outstanding; ........................... 23,000 23,000
17,039,423 and 17,026,342 Common Shares,
$.01 par value per share, issued and
outstanding at June 30, 1996 and
December 31, 1995, respectively ........ 170,394 170,264
Paid in capital in excess of par value ....... 459,907,924 459,634,825
Distributions in excess of net income ........ (66,845,806) (55,284,084)
Deferred compensation and shareholder
loans receivable .......................... (6,082,791) (6,225,391)
------------ ------------
Total Shareholders' Equity ................... 387,212,719 398,358,612
------------ ------------
Total Liabilities and Shareholders' Equity ... $746,477,946 $729,638,337
============ ============
See accompanying notes.
3
<PAGE>
<TABLE>
WELLSFORD RESIDENTIAL PROPERTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUE
Rental income .................. $ 30,651,320 $ 31,089,346 $ 61,059,988 $ 62,316,989
Other income ................... 1,395,080 1,348,143 2,765,754 2,668,652
Interest income ................ 313,811 217,218 573,955 410,919
------------ ------------ ------------ ------------
Total Revenue ............... 32,360,211 32,654,707 64,399,697 65,396,560
------------ ------------ ------------ ------------
EXPENSES
Property operating and
maintenance ................. 10,181,613 9,795,596 19,903,778 19,470,216
Real estate taxes .............. 2,442,158 2,490,182 4,862,206 5,002,513
Depreciation and amortization .. 6,580,245 6,751,441 13,016,344 13,487,612
Property management ............ 1,134,717 1,283,351 2,372,257 2,552,305
Interest ....................... 5,645,454 7,042,038 11,162,684 14,193,901
General and administrative ..... 797,337 1,162,438 1,808,958 2,443,867
------------ ------------ ------------ ------------
Total Expenses .............. 26,781,524 28,525,046 53,126,227 57,150,414
------------ ------------ ------------ ------------
Gain on sale of communities ....... -- 678,618 -- 678,618
(Loss) on JV communities .......... (15,535) (110,994) (36,305) (229,020)
------------ ------------ ------------ ------------
Net income ........................ 5,563,152 4,697,285 11,237,165 8,695,744
Preferred dividends ............... 3,137,100 1,750,000 6,274,200 3,500,000
------------ ------------ ------------ ------------
Income (loss) available for
common shareholders ............ $ 2,426,052 $ 2,947,285 $ 4,962,965 $ 5,195,744
============ ============ ============ ============
Net income (loss) per common
share .......................... $ 0.14 $ 0.17 $ 0.29 $ 0.31
============ ============ ============ ============
Weighted average number of common
shares outstanding ............. 17,038,158 16,909,403 17,034,633 16,909,357
============ ============ ============ ============
Cash dividends declared per common
share .......................... $ 0.485 $ 0.480 $ 0.970 $ 0.960
============ ============ ============ ============
See accompanying notes.
</TABLE>
4
<PAGE>
WELLSFORD RESIDENTIAL PROPERTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
------------ ------------
Net income .................................... $ 11,237,165 $ 8,695,744
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization .............. 13,342,737 15,080,494
Amortization of deferred
compensation and shareholder
loans receivable ........................ 142,600 259,961
(Gain) loss on sale of communities ......... -- (678,618)
Decrease (increase) in assets
Escrow cash ............................. 143,257 1,069,211
Debt service reserve .................... 1,396,829 (562,617)
Rent receivables ........................ (295,235) 232,722
Prepaid and other assets ................ 292,975 (216,825)
(Decrease) increase in liabilities
Accounts payable ........................ (1,032,419) 626,891
Accrued expenses and other
liabilities .......................... (1,316,951) (1,881,957)
Security deposits ....................... (48,474) 19,235
------------ ------------
Net cash provided by operating
activities .............................. 23,862,484 22,644,241
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of real estate
assets ..................................... -- 16,746,566
Investment in real estate assets .............. (19,453,476) (11,566,030)
------------ ------------
Net cash provided by (used in) investing
activities .............................. (19,453,476) 5,180,536
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage notes payable .......... -- 794,971
Net proceeds from senior unsecured
notes ...................................... -- 99,396,000
Net proceeds (payment) from credit
facilities ................................. 24,000,000 (59,500,000)
Payment of deferred financing costs ........... (78,034) (3,063,430)
Principal payments on mortgage notes .......... (5,009,867) (31,135,578)
Distributions to shareholders ................. (22,707,720) (19,225,659)
Net proceeds from dividend
reinvestment plan .......................... 263,760 9,248
Net proceeds from exercise of options ......... 9,469 --
------------ ------------
Net cash provided by (used in) financing
activities .............................. (3,522,392) (12,724,448)
------------ ------------
Net (decrease) in cash and cash
equivalents ................................ 886,616 15,100,329
Cash and cash equivalents, beginning
of period .................................. 29,444,008 13,152,692
------------ ------------
Cash and cash equivalents, end of period ...... $ 30,330,624 $ 28,253,021
============ ============
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest ...... $ 11,475,404 $ 9,738,141
Second quarter dividends declared ............. $ 11,401,220 $ 9,866,671
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Cost of assets acquired ....................... $ 30,653,476 $ --
Net cash paid ................................. (19,453,476) --
------------ ------------
Purchase money and other mortgage
notes assumed .............................. $ 11,200,000 $ --
============ ============
Net sales price of assets sold ................ $ -- $ 29,311,566
Net cash received ............................. -- (16,746,566)
------------ ------------
Note receivable ............................... $ -- $ 12,565,000
============ ============
See accompanying notes.
5
<PAGE>
WELLSFORD RESIDENTIAL PROPERTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
Wellsford Residential Property Trust and Subsidiaries (the "Company") is a
fully integrated and self administered equity real estate investment trust
("REIT") engaged in the acquisition, development and operation of
multifamily communities located in the Southwest and Pacific Northwest
regions of the United States. At June 30, 1996, the Company owned 75
multifamily communities containing 18,576 units.
The accompanying 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, 1995.
2. Real Estate Investments
In July 1996, the Company originated a $17.9 million mortgage on a 344
unit, newly constructed community in Tucson, Arizona known as Sonterra at
Williams Centre (the "Sonterra Mortgage"). The Sonterra Mortgage bears
interest at 9% per annum, matures in June 1999 and provides the Company
with the exclusive option to purchase the community for $20.5 million
through December 1997 and $21 million until December 1998.
In May 1996, the Company purchased a parcel of land in Denver, Colorado
for $2.1 million. The land is located contiguous to the Company's Blue
Ridge development and will represent the second phase of the Company's
Palomino Park project.
In April 1996, the Company, through a wholly-owned subsidiary, acquired
Marks West, a multifamily community containing 280 units located in
Denver, Colorado, for approximately $18 million including the estimated
cost for certain capital improvements. The acquisition was funded from
cash on hand and $11.2 million of tax-exempt bond financing. The bonds are
collateralized by a non-recourse first mortgage on Marks West, bear
interest at a rate which approximates the Standard & Poor's/J.J. Kenny
index for short-term high grade tax-exempt bonds, and mature in December
1997. The community's operations have been combined with those of The
Marks, an existing community located contiguous to Marks West.
3. Capitalization
During the second quarter of 1996, the Company drew $24.0 million on its
unsecured credit facility with The First National Bank of Boston (the
"Bank of Boston Credit Facility") to purchase a parcel of land, fund the
Sonterra Mortgage and fund certain developments.
6
<PAGE>
WELLSFORD RESIDENTIAL PROPERTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In January 1996, the Company prepaid it's $4.9 million mortgage on the
community known as Parkwood East from cash on hand. This mortgage bore
interest at 9.625% and would have matured March 1996.
In June 1996, the Company's Board of Trustees approved a stock repurchase
plan which authorizes the Company to repurchase up to two million common
shares.
4. Earnings Per Share
Net income per share was calculated using the weighted average number of
shares outstanding of 17,034,633 and 16,909,357 for the six months ended
June 30, 1996 and 1995, respectively. The Company declared a common
dividend of $0.485 per common share, a Series A preferred dividend of
$0.4375 per share, and a Series B preferred dividend of $0.603125 per
share on June 19, 1996 payable to shareholders of record on June 29, 1996.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. General
The Company's operations consist of acquiring, developing and operating
residential multifamily communities located in the Southwest and Pacific
Northwest regions of the United States. At June 30, 1996, the Company
owned 75 multifamily communities containing 18,576 units.
Decreases in revenues and expenses in the periods compared below were due
primarily to the dispositions of seven communities containing a total of
2,245 units during 1995 (the "Disposition Communities"), offset by the
acquisition of one community in April 1996. Certain comparisons between
periods have been made on an actual basis as well as on a weighted average
per unit basis, a technique which adjusts for certain increases in
existing communities and increases or decreases related to the acquisition
or disposition of communities.
The Company currently has the following four development projects on which
it has spent $38.1 million through June 30, 1996:
Number Estimated Estimated
Name of Units Location Total Cost Completion Date
----------------- -------- -------- -------------- ---------------
Summit 150 Seattle $ 16.0 million December 1996
Seeley Lake III 182 Tacoma 8.9 million October 1996
Bear Creek Run II 216 Denver 18.8 million October 1996
Blue Ridge 456 Denver 42.5 million October 1997
----- --------------
1,004 $ 86.2 million
===== ==============
Two of these projects, Blue Ridge and Bear Creek Run II, are being
developed pursuant to fixed-price contracts. The Company is committed to
purchase 100% of these projects upon completion and the achievement of
certain occupancy levels, which is anticipated to occur at the dates
disclosed above.
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 statements are based on current expectations which involve a
number of risk factors and uncertainties, including, but not limited to,
risks associated with the acquisition, construction and development of
multifamily communities, including the risk of an over-supply of apartment
units or a reduction in the demand for such units, risks associated with
construction and lease-up delays, budget over-runs, risks that the
Company's acquisition and development communities will fail to perform as
expected, financing risks, such as the availability of debt or equity
financing in the future and the risk of increasing costs of such
financing, as well as 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.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
2. Results of Operations
Comparison of the six months ended June 30, 1996 to the six months ended
June 30, 1995
--------------------------------------------------------------------------
Rental income decreased by $1.3 million or 2%. $3.5 million of decrease
represents 1995 rental income from the Disposition Communities, which is
offset by $0.5 million of rental income from the community acquired in
1996 and by occupancy and rental rate increases on other communities. On a
per unit basis, rental income increased from $3,080 to $3,329 or 8% due
primarily to increases in rental rates and dispositions of communities
with lower per unit rents than the currently owned communities. Revenues
for the 75 communities which were owned during the first six months of
1995 and 1996 increased by 3%. Average occupancy increased from 93.7%
to 94.7%. Occupancy for the 75 communities owned during the first six
months of both 1995 and 1996 increased from 94.0% to 94.7%.
Other income increased by $0.1 million or 4%. On a per unit basis, other
income increased from $132 to $151 or 14%, due primarily to increases in
lease cancellation fees related to residents leaving to acquire homes.
Interest income increased by $0.2 million due primarily to interest income
from a mortgage originated by the Company.
As a result of the above changes, total revenues decreased from $65.4
million to $64.4 million or 2%. On a per unit basis, total revenue
increased from $3,232 to $3,511 (or from $539 to $585 per unit per month)
or 9%.
Property operating and maintenance expenses increased by $0.4 million or
2% primarily as a result of increased turnover costs and repair and
maintenance costs. This increase is net of $1.6 million of decrease
which represents 1995 property operating and maintenance expenses from the
Disposition Communities. On a per unit basis, these expenses increased
from $962 to $1,085 or 13% due primarily to the sale of communities having
lower per unit operating costs than the currently owned communities.
Real estate taxes decreased by $0.1 million or 3%. $0.2 million of
decrease represents 1995 real estate taxes on the Disposition Communities.
On a per unit basis, real estate taxes increased from $247 to $265 or 7%
due primarily to increases in assessed values in certain cities.
Property management expense decreased by $0.2 million or 7%. This decrease
represents 1995 property management expense related to the Disposition
Communities. On a per unit basis, property management expense increased
from $126 to $129 or 3% due primarily to the sale of communities having
lower per unit management expenses than the currently owned communities.
Interest expense decreased by $3.0 million or 21%. This decrease is
primarily the result of reduced interest due to the repayment of debt from
the proceeds of the Series B Preferred Shares and from the sales of the
Disposition Communities during 1995.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
General and administrative expenses decreased by $0.6 million. On a per
unit basis, this expense decreased from $121 to $99 or 18%. This decrease
is primarily the result of decreased compensation for certain executive
officers.
Depreciation and amortization decreased by $0.5 million or 3% due
primarily to the disposition of communities.
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 and shareholder distributions in accordance with REIT
requirements both in the short and long terms.
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 a $150 million unsecured revolving credit facility from
The First National Bank of Boston (the "Bank of Boston Credit Facility").
At June 30, 1996, $24 million was outstanding on the Bank of Boston Credit
Facility leaving $126 million undrawn. The Bank of Boston Credit Facility
may be used for financing acquisitions, development, capital expenditures,
repayment of indebtedness and working capital purposes.
10
<PAGE>
PART II.
OTHER INFORMATION
Item 1:Legal Proceedings - Not Applicable.
Item 2:Changes in Securities - Not Applicable.
Item 3:Defaults upon Senior Securities - Not Applicable.
Item 4:Submission of Matters to a Vote of Security Holders:
On May 16, 1996, the Company held its annual meeting of
shareholders. A total of 15,309,129 common shares,
representing approximately 89.9% of the 17,032,097 common
shares outstanding and entitled to vote as of the record date
(March 28, 1996) were represented in person or by proxy vote
and constituted a quorum.
At the meeting, Frank J. Hoenemeyer, Frank J. Sixt and Larry
W. Wells were re-elected to terms expiring at the 1999
annual meeting of shareholders. Each of the re-elected
trustees received the affirmative vote of at least
15,129,057 common shares representing approximately 98.8% of
the shares voted. The terms of the five other trustees,
Jeffrey H. Lynford, Edward Lowenthal, Daniel M. Kelley,
Rodney F. Du Bois and Mark S. Germain, continued after the
meeting.
The shareholders also ratified the appointment of Ernst &
Young LLP (successor through merger of Kenneth Leventhal and
Company) as the Company's independent public accountants for
the fiscal year ending December 31, 1996 by the affirmative
vote of 15,255,382 common shares. 18,160 common shares voted
against the proposal and 35,587 common shares were voted as
abstentions.
Item 5:Other Information - Not Applicable.
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) No report on Form 8-K was filed by the
registrant during its fiscal quarter ended
June 30, 1996.
11
<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.
WELLSFORD RESIDENTIAL PROPERTY TRUST
By: /s/ Jeffrey H. Lynford
------------------------------------------
Chairman of the Board
/s/ Gregory F. Hughes
------------------------------------------
Vice President and Chief Financial Officer
Dated: August 12, 1996
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted
from the consolidated balance sheets and consolidated statements of
operations and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000892291
<NAME> Wellsford Residential Property Trust
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 41,706,866
<SECURITIES> 0
<RECEIVABLES> 743,779
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,861,953
<PP&E> 767,252,033
<DEPRECIATION> 71,022,646
<TOTAL-ASSETS> 746,477,946
<CURRENT-LIABILITIES> 28,529,329
<BONDS> 330,735,898
0
62,998
<COMMON> 170,394
<OTHER-SE> 386,979,327
<TOTAL-LIABILITY-AND-EQUITY> 746,477,946
<SALES> 0
<TOTAL-REVENUES> 64,399,697
<CGS> 0
<TOTAL-COSTS> 27,138,241
<OTHER-EXPENSES> 13,052,649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,162,684
<INCOME-PRETAX> 11,237,165
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,237,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,237,165
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
