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, 1997
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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 1-11550
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Wellsford Residential Property Trust
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(Exact name of registrant as specified in its charter)
Maryland
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(State or other jurisdiction of incorporation or organization)
13-3675988
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(IRS Employer Identification No.)
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
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Number of common shares of beneficial interest, $.01 par value, outstanding
as of May 9, 1997: 17,246,897.
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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 March 31, 1997
(unaudited)and December 31, 1996 3
Consolidated Statements of Operations(unaudited)for the
three months ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows(unaudited)for the
three months ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION 9
SIGNATURES 10
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<TABLE>
<CAPTION>
Wellsford Residential Property Trust and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
1997 1996
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(Unaudited)
ASSETS
<S> <C> <C>
Real estate assets, at cost:
Land .............................................................................. $ 114,275,557 $ 114,214,888
Buildings and improvements ........................................................ 660,081,262 659,153,965
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774,356,819 773,368,853
Less, accumulated depreciation ................................................. (90,733,339) (83,965,956)
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683,623,480 689,402,897
Construction in progress .......................................................... 48,781,059 22,210,933
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732,404,539 711,613,830
Cash and cash equivalents ............................................................ 29,371,713 10,811,505
Restricted cash ...................................................................... 5,774,702 7,666,598
Mortgage note receivable ............................................................. 17,800,000 17,800,000
Deferred financing costs ............................................................. 5,168,974 5,400,787
Prepaid and other assets ............................................................. 6,941,017 2,995,854
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Total Assets ......................................................................... $ 797,460,945 $ 756,288,574
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Senior unsecured notes ............................................................ $ 248,545,888 $ 248,495,847
Mortgage notes payable ............................................................ 82,673,731 82,730,831
Unsecured credit facilities ....................................................... 63,575,000 18,075,000
Accrued expenses and other liabilities ............................................ 13,085,625 15,617,516
Dividends payable ................................................................. 11,495,180 11,433,547
Security deposits ................................................................. 3,234,835 3,249,607
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Total Liabilities .................................................................... 422,610,259 379,602,348
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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
17,233,152 and 17,101,812 Common Shares,
$.01 par value per share, issued and outstanding at
March 31, 1997 and December 31, 1996, respectively ............................. 172,332 171,018
Paid in capital in excess of par value ............................................ 464,955,263 461,290,031
Distributions in excess of net income ............................................. (83,786,781) (78,284,695)
Deferred compensation and shareholder loans receivable ............................ (6,553,126) (6,553,126)
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Total Shareholders' Equity ........................................................... 374,850,686 376,686,226
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Total Liabilities and Shareholders' Equity ........................................... $ 797,460,945 $ 756,288,574
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</TABLE>
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<TABLE>
<CAPTION>
Wellsford Residential Property Trust and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31,
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1997 1996
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REVENUE
<S> <C> <C>
Rental income .................... $ 32,608,636 $ 30,408,668
Other income ..................... 1,498,821 1,370,674
Interest income .................. 544,299 260,144
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Total Revenue ................. 34,651,756 32,039,486
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EXPENSES
Property operating and maintenance 10,543,184 9,722,165
Real estate taxes ................ 2,512,444 2,420,048
Depreciation and amortization .... 7,026,142 6,436,099
Property management .............. 1,129,391 1,237,540
Interest ......................... 6,589,512 5,517,230
General and administrative ....... 857,988 1,011,621
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Total Expenses ................ 28,658,661 26,344,703
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(Loss) on JV communities ............ -- (20,770)
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Net income .......................... 5,993,095 5,674,013
Preferred dividends ................. 3,137,100 3,137,100
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Income (loss) available for
common shareholders .............. $ 2,855,995 $ 2,536,913
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Net income (loss) per common share .. $ 0.17 0.15
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Weighted average number of common
shares outstanding ............... 17,150,966 17,031,108
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Cash dividends declared per common
share ............................ $ 0.485 $ 0.485
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See accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
Wellsford Residential Property Trust and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
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CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
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<S> <C> <C>
Net income .................................................................... $5,993,095 $5,674,013
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization .............................................. 7,234,536 6,594,497
Amortization of deferred compensation and
shareholder loans receivable ............................................... -- 140,050
Decrease (increase) in assets
Escrow cash ............................................................. (68,439) 43,123
Debt service reserve .................................................... 1,960,335 391,106
Rent receivables ........................................................ (313,183) 11,401
Prepaid and other assets ................................................ (3,683,104) 68,721
(Decrease) increase in liabilities
Accounts payable ........................................................ (175,843) (453,567)
Accrued expenses and other liabilities .................................. (2,356,048) (3,753,763)
Security deposits ....................................................... (14,772) (41,260)
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Net cash provided by operating activities .................................. 8,576,577 8,674,321
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate assets .............................................. (27,558,092) (4,585,341)
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Net cash provided by (used in) investing activities ........................ (27,558,092) (4,585,341)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage notes payable .......................................... -- --
Proceeds (payment) from credit facilities ..................................... 45,500,000 --
Payment of deferred financing costs ........................................... (129,333) (59,046)
Principal payments on mortgage notes .......................................... (61,942) (4,968,568)
Distributions to shareholders ................................................. (11,433,547) (11,310,053)
Proceeds from dividend reinvestment plan ...................................... 573,151 121,598
Proceeds from exercise of options ............................................. 3,093,394 --
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Net cash provided by (used in) financing activities ........................ 37,541,723 (16,216,069)
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Net (decrease) in cash and cash equivalents ................................... 18,560,208 (12,127,089)
Cash and cash equivalents, beginning of period ................................ 10,811,505 29,444,008
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Cash and cash equivalents, end of period ...................................... $ 29,371,713 $ 17,316,919
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SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest ...................................... $ 10,914,113 $ 9,900,073
First quarter dividends declared .............................................. $ 11,495,180 $ 11,397,667
See accompanying notes.
</TABLE>
<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") principally engaged in the acquisition, development and operation
of multifamily communities located in the Southwest and Pacific Northwest
regions of the United States. At March 31, 1997, the Company owned 72
multifamily communities containing 19,004 units and four commercial office
buildings comprising 750,400 square feet. In addition, the Company has two
multifamily communities under development, comprising 760 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, 1996.
2. Merger and Recent Development
The Company has entered into an Agreement and Plan of Merger, dated
as of January 16, 1997 (the "Agreement"), with Equity Residential
Properties Trust("EQR"). The Agreement provides for the exchange of all of
the outstanding common shares of the Company for common shares of the
surviving trust, at an exchange ratio of 0.625 common shares of the
surviving trust for each common share of the Company (the "Merger").
Immediately prior to the Merger, and subject to the satisfaction or waiver
of all conditions thereto, the Company will contribute certain of its
assets, including the Commercial Properties (as defined below), and
certain of its liabilities to its subsidiary, WRP Newco (as defined below)
and distribute to its common shareholders, on a pro rata basis, all of the
shares it owns in WRP Newco (the "Spin Off").
In contemplation of the Merger and Spin Off, the Company has acquired five
commercial office properties (the "Commercial Properties") for $47.6
million in aggregate, has closed on four of the properties during the
first quarter of 1997 and one in April 1997 and has acquired a $20 million
portion of an $80 millon subordinated mezzanine real estate loan bearing
interest at approximately 12% per annum. The aggregate purchase price
for the Commercial Properties includes approximately $2.25 million in
value of common shares of Wellsford Real Properties, Inc. ("WRP Newco") to
be issued to an entity in consideration for the assignment of the purchase
contracts entered into by such entity. Upon liquidation of such entity,
each of the Chairman of the Board and President of the Company, Messrs.
Lynford and Lowenthal, will receive approximately 16.4% of such shares,
and the wife of Mark Germain, a trustee of the Company, will receive
approximately 13.8% of such shares. Each are owners of such entity. The
four commercial properties acquired during the first quarter are currently
vacant and undergoing renovations and are included in the construction
in progress balance at March 31, 1997.
The Merger is subject to the approval of the common shareholders of both
EQR and the Company.
3. Earnings Per Share
Net income per share was calculated using the weighted average number of
shares outstanding of 17,150,966 and 17,031,108 for the three months ended
March 31, 1997 and 1996, 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 March 12, 1997 payable to shareholders of record on March 25,
1997.
<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 March 31, 1997, the Company
owned 72 multifamily communities containing 19,004 units and four
commercial office buildings comprising 750,400 square feet. In addition,
the Company has two multifamily communities under development, comprising
760 units, and purchased one commercial office building in April 1997,
comprising 190,000 square feet.
Increases in revenues and expenses in the periods compared below were due
primarily to the acquisition (development) of four communities containing
a total of 828 units during 1996 (the "Acquisition Communities"), offset
by the disposition of two communities containing a total of 120 units in
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 two multifamily development
projects on which it has spent $ 24.0 million through March 31, 1997:
Number Estimated Estimated
Name of Units Location Total Cost Completion Date
Red Canyon 304 Denver $33.6 million Fourth Qtr. 1998
Blue Ridge 456 Denver 42.5 million Fourth Qtr. 1997
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760 $76.1 million
=== ============
These projects 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.
In addition, all of the commercial office buildings purchased by the
Company are undergoing renovations and are included in the construction in
progress balance at March 31, 1997.
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.
2. Results of Operations
Comparison of the three months ended March 31, 1997 to the three months
ended March 31, 1996.
Rental income increased by $2.2 million or 7%. $1.8 million of this
increase represents rental income from the Acquisition Communities. On a
per unit basis, rental income increased from $1,669 to $1,716 or 3% due
primarily to increases in rental rates. Revenues for the 68 communities
which were owned during the first three months of 1996 and 1997 increased
by 2%. Occupancy for the 68 communities owned during the first three
months of both 1996 and 1997 decreased from 95.0% to 94.9%.
Other income increased by $0.1 million or 9%. This increase primarily
represents other income from the Acquisition Communities. On a per unit
basis, other income increased from $75 to $79 or 5%.
Interest income increased by $0.3 million due primarily to the Company's
$17.8 mortgage note receivable originated in July 1996.
As a result of the above changes, total revenues increased from $32.0
million to $34.7 million or 8%. On a per unit basis, total revenue
increased from $1,758 to $1,823 (or from $586 to $608 per unit per month)
or 4%.
Property operating and maintenance expenses increased by $0.8 million or
8%. $0.3 million of this increase represents property operating and
maintenance expenses from the Acquisition Communities. On a per unit
basis, these expenses increased from $534 to $555 or 4%.
Real estate taxes increased by $0.1 million or 4%. This increase is
primarily attributable to the Acquisition Communities. On a per unit
basis, real estate taxes decreased from $133 to $132 or 1% due primarily
to decreases in assessed values in certain cities.
Property management expense decreased by $0.1 million or 1%. $0.1 million
of increase represents property management expense related to the
Acquisition Communities, which is offset by the lower costs described
below. On a per unit basis, property management expense decreased from $68
to $59 or 13% due primarily to lower costs associated with the
internalization of the Company's property management services, which were
previously contracted out to third parties.
Interest expense increased by $1.1 million or 19%. This increase is
primarily the result of the purchase of the Acquisition Communities.
General and administrative expenses decreased by $0.2 million. On a per
unit basis, this expense decreased from $56 to $45 or 19%.
Depreciation and amortization increased by $0.6 million or 9% due
primarily to the acquisition 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 March 31, 1997, $63.6 million was outstanding on the Bank of Boston
Credit Facility leaving $86.4 million undrawn. During April 1997, an
additional $20.0 million was drawn to fund the Company's investment in a
real estate loan, leaving $66.4 million undrawn. The Bank of Boston
Credit Facility may be used for financing acquisitions, development,
capital expenditures, repayment of indebtedness and working capital
purposes.
<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 - Not Applicable.
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) Reports on Form 8-K filed by the registrant during
its fiscal quarter ended March 31, 1997:
- Form 8-K filed January 16, 1997 relating to the
Merger.
- Form 8-K filed February 3, 1997 relating to the
purchase of certain of the Commercial Properties.
<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
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Jeffrey H. Lynford, Chairman of the Board
/s/ Gregory F. Hughes
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Gregory F. Hughes, Vice President and Chief Financial Officer
Dated: May 9, 1997
<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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 35,146,415
<SECURITIES> 0
<RECEIVABLES> 1,171,896
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,087,432
<PP&E> 823,137,878
<DEPRECIATION> (90,733,339)
<TOTAL-ASSETS> 797,460,945
<CURRENT-LIABILITIES> 27,815,640
<BONDS> 394,794,619
0
62,998
<COMMON> 172,332
<OTHER-SE> 374,615,356
<TOTAL-LIABILITY-AND-EQUITY> 797,460,945
<SALES> 0
<TOTAL-REVENUES> 34,651,756
<CGS> 0
<TOTAL-COSTS> 15,043,007
<OTHER-EXPENSES> 7,026,142
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,589,512
<INCOME-PRETAX> 5,993,095
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,993,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,993,095
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
