UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25074
WELLINGTON PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 39-6594066
(State or other jurisdiction of incorporation) I.R.S. Employer Identification
Number)
18650 West Corporate Drive, P.O. Box 0919, Brookfield, Wisconsin 53008-0919
(Address of principal executive offices) (zip code)
Issuer's telephone number: 414-792-8900 Fax number: 414-792-8930
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to the filing requirements for the past 90 days. YesX No
As of June 30, 1998 728,038 shares of the issuer's common stock were
outstanding.
Transitional Small Business Disclosure Format(Check one): Yes ;NoX (Added by
Exch Act Rel No. 31905, eff 4/26/93.)
This report contains 13 pages. There is one exhibit.
<PAGE>
WELLINGTON PROPERTIES TRUST
FORM 10QSB
For the Quarter Ended June 30, 1998
INDEX
PART I. Financial Information:
Consolidated Balance Sheet - June 30, 1998 Page 3
Consolidated Statement of Operations -
six months ended June 30, 1998 (unaudited) Page 4
Consolidated Statement of Cash Flows -
six months ended June 30, 1998 (unaudited) Page 5
Notes to Financial Statements Page 6
Management's Discussion and Analysis or
Plan of Operations Page 11
PART II. Other Information
Other Information Page 12
Exhibits and Reports on Form 8-K Page 12
Signatures Page 13
<PAGE>
<TABLE>
WELLINGTON PROPERTIES TRUST
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
ASSETS
<CAPTION>
JUNE 30, JUNE 30,
1998 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
RENTAL PROPERTY - AT COST
LAND $2,793,582 $ 2,775,878
BUILDING 16,674,817 16,674,817
APPLIANCES AND EQUIPMENT 879,131 804,777
20,347,530 20,255,472
ACCUMULATED DEPRECIATION (1,383,807) (844,163)
NET PROPERTY AND EQUIPMENT 18,963,722 19,411,308
CASH (31,652) 91,363
PREPAID EXPENSES 340,028 161,103
LAND CONTRACT RECEIVABLE 0 1,500,000
OTHER 16,803 34,825
ORGANIZATION COSTS NET OF ACCUMULATED
AMORTIZATION 629,670 250,997
954,848 2,038,288
TOTAL ASSETS $19,918,571 $21,449,596
LIABILITIES AND EQUITY
MORTGAGE NOTE PAYABLE $15,840,075 $16,865,209
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 689,836 601,167
ACCOUNTS PAYABLE - RELATED PARTY 61,256 17,955
TENANT SECURITY DEPOSITS 126,768 123,546
TOTAL LIABILITIES $16,717,936 $17,607,877
EQUITY
COMMON STOCK - 100,070,000 AUTHORIZED
728,038 SHARES ISSUED AND
OUTSTANDING, RESPECTIVELY; PAR VALUE
$0.01 7,311 6,991
PREFERRED STOCK - 500,000 SHARES AUTHORIZED;
NO SHARES ISSUED OR OUTSTANDING; PAR
VALUE $0.01 0 0
ADDITIONAL PAID - IN CAPITAL 6,382,414 6,126,979
EXCESS OF PURCHASE PRICE OVER
AFFILIATES'S BASIS IN PROPERTY ACQUIRED 0 0
DIVIDENDS PAID (1,656,487) (1,154,154)
ACCUMULATED DEFICIT (1,532,602) (1,138,097)
3,200,635 3,841,719
TOTAL LIABILITIES AND EQUITY $19,918,571 $21,449,596
</TABLE>
(SEE ACCOMPANYING NOTES)
<PAGE>
<TABLE>
WELLINGTON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE QUARTER ENDED
<CAPTION>
JUNE 30, YTD JUNE 30, YTD
1998 1998 1997 1997
<S> <C> <C> <C> <C>
REVENUES $750,581 $1,516,511 $752,821 $1,560,380
RENTAL INCOME
INTEREST INCOME AND OTHER 210 273 192,654 192,908
TOTAL REVENUE 750,791 1,516,784 945,476 1,753,288
EXPENSES
PROPERTY OPERATING AND
MAINTENANCE 172,025 370,123 175,976 359,531
REAL ESTATE TAXES AND
INSURANCE 109,645 219,290 105,242 219,066
DEPRECIATION AND AMORTIZATION 148,283 293,879 153,940 305,131
INTEREST EXPENSE 319,511 633,928 352,823 760,782
GENERAL AND ADMINISTRATIVE 74,599 147,746 66,199 138,032
TOTAL EXPENSES 824,062 1,664,966 854,181 1,782,542
NET OPERATING INCOME/(LOSS) (73,271) (148,182) 91,295 (29,254)
LOSS PER COMMON SHARE:
NET LOSS ($0.10) ($0.20) $0.13 ($0.04)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 723,027 723,027 696,642 696,642
</TABLE>
(SEE ACCOMPANYING NOTES)
<PAGE>
<TABLE>
WELLINGTON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE QUARTER ENDED
<CAPTION>
JUNE 30, YTD JUNE 30, YTD
1998 1998 1998 1998
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS ($73,270) ($148,181) 91,295 ($29,254)
ADJUSTMENTS TO RECONCILE
NET LOSS TO NET CASH
PROVIDED BY OPERATING
ACTIVITIES:
GAIN ON SALE 0 0 (182,649) (182,649)
DEPRECIATION AND
AMORTIZATION 148,283 293,879 153,940 305,131
CHANGES IN ASSETS AND
LIABILITIES, NET OF
EFFECT OF ASSETS AND
LIABILITIES ASSUMED
PREPAID EXPENSES (131,761) (95,998) 162,113 163,667
ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES 53,235 (13,423) (131,306) (194,093)
ACCOUNTS PAYABLE -
RELATED PARTY 38,151 41,883 (124,304) (187,573)
TENANT SECURITY DEPOSITS 4,538 5,308 (12,615) (7,384)
112,446 231,649 (134,821) (102,901)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 39,176 83,468 (43,526) (132,155)
CASH FLOWS USED BY INVESTING
ACTIVITIES
PROCEEDS ON SALE OF ASSETS 0 0 1,917,227 1,917,227
OTHER 0 0 (1,500,000) (1,500,000)
APPLICANCES AND EQUIPMENT
ACQUISITION (38,168) (40,806) (18,374) (35,665)
(38,168) (40,806) 398,854 381,562
CASH FLOWS FROM FINANCING
ACTIVITIES:
REPAYMENTS ON MORTGAGE NOTE
PAYABLE (32,115)(2,376,180)(12,867,815)(13,544,545)
MORTGAGE NOTE PAYABLE 0 2,750,000 12,900,700 13,572,547
ISSUANCE OF COMMON STOCK 64,758 124,287 44,216 115,870
DIVIDENDS PAID (126,035) (250,081) (147,033) (292,543)
LOAN FEES 0 (436,285) (208,079) (208,079)
NET CASH PROVIDED BY
FINANCING ACTIVITIES (93,392) (188,259) (278,011) (356,750)
NET INCREASE IN CASH (92,384) (145,597) 77,316 (107,343)
CASH AT BEGINNING OF PERIOD 60,733 113,945 14,048 198,706
CASH AT END OF PERIOD (31,651) (31,652) 91,364 91,363
</TABLE>
<TABLE>
WELLINGTON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
PERIOD ENDED PERIOD ENDED
JUNE 30, 1998 JUNE 30, 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES
RENTAL INCOME $1,516,511 $1,560,380
INTEREST INCOME AND OTHER 273 192,908
TOTAL REVENUE $1,516,784 1,753,288
EXPENSES
PROPERTY OPERATING AND
MAINTENANCE 370,123 359,531
REAL ESTATE TAXES AND
INSURANCE 219,290 219,066
DEPRECIATION AND AMORTIZATION 293,879 305,131
INTEREST EXPENSE 633,928 760,782
GENERAL AND ADMINISTRATIVE 147,746 138,032
TOTAL EXPENSES $1,664,965 $1,782,542
NET OPERATING INCOME/(LOSS) ($148,181) ($29,254)
LOSS PER COMMON SHARE:
NET LOSS ($0.20) ($0.04)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 723,027 696,642
</TABLE>
(SEE ACCOMPANYING NOTES)
<PAGE>
<TABLE>
WELLINGTON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE PERIOD FROM JANUARY 1, THROUGH JUNE 30,
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
NET LOSS ($148,181) ($29,254)
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
GAIN ON SALE 0 (182,649)
DEPRECIATION AND AMORTIZATION 293,879 305,131
CHANGES IN ASSETS AND LIABILITIES
NET OF EFFECT OF ASSETS AND
LIABILITIES ASSUMED
PREPAID EXPENSES (95,998) 163,667
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES (13,423) (194,093)
ACCOUNTS PAYABLE - RELATED PARTY 41,883 (187,573)
TENANT SECURITY DEPOSITS 5,308 (7,384)
231,648 (102,901)
NET CASH PROVIDED BY OPERATING
ACTIVITIES 83,468 (132,155)
CASH FLOWS USED BY INVESTING ACTIVITIES:
PROCEEDS ON SALE OF ASSETS 0 1,917,227
LAND CONTRACT RECEIVABLE 0 (1,500,000)
APPLIANCE AND EQUIPMENT ACQUISITION (40,806) (35,665)
(40,806) 381,562
CASH FLOWS FROM FINANCING ACTIVITIES:
REPAYMENTS ON MORTGAGE NOTE PAYABLE (2,376,180) (13,544,545)
PROCEEDS FROM MORTGAGE NOTE PAYABLE 2,750,000 13,364,469
ISSUANCE OF COMMON STOCK 124,287 115,870
DIVIDENDS PAID (250,081) (292,543)
LOAN FEES (436,285) 0
NET CASH PROVIDED BY
FINANCING ACTIVITIES (188,258) (356,750)
NET INCREASE IN CASH (145,597) (107,343)
CASH AT BEGINNING OF PERIOD 113,945 198,706
CASH AT END OF PERIOD (31,652) 91,363
</TABLE>
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
For the period January 1, 1998 through June 30, 1998
(Unaudited)
This report may contain 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 Age of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of indicating such intent.
Forward-looking statements that are based on certain assumptions, and describe
future plans, strategies and expectations of the Company, are generally
identifiable by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project," or similar expressions. The Comany's ability to predict
results or the actual effect of future prospects of the Company include, but
are not limited to, changes in itnerest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, includig policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the Company's portfolio of finance
receivables, the ability of the Company to obtain debt or other finaning,
competition, demand for financial services in the Company's market area
and accounting principles, policies and guidelines. These risks and
uncertainties should be consdiered in evaluating forward-looking statements
and undue realiance should not be placed on such statements. Further
information concerning the Company and its business, including additional
factors that could materially affect the Company's financial results, is
included in other Company filings with the Securities and Exchange
Commission.
NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Wellington Properties Trust (Trust) is a real estate investment trust organized
in the state of Maryland. It was formed on March 15, 1994 to acquire, develop,
own and operate investment real estate. The Trust's year end is December 31.
During the quarter covered by this report, the Trust owned a 72 unit apartment
complex in Schofield, Wisconsin acquired on January 5, 1996 ("Lake Pointe") and
a property in Madison, Wisconsin with 304 apartments ("Maple Grove")
(collectively the "Properties"). The Trust has two contracts pending to
purchase 144 units and 156 units in Des Moines, Iowa. The closing is expected
to occur in September 1998. It is the intention of the Trust to continue to
seek well located properties for future acquistions.
A summary of the significant accounting policies applied in the preparation of
the accompanying financial statements follows:
1. Rental Property
Rental property is recorded at cost, less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets. The Properties use a 40-year estimated life for buildings
and a ten-year estimated life for appliances and equipment. Expenditures for
ordinary maintenance and repairs are expensed to operations as incurred and
significant renovations and improvements that improve and/or extend the useful
life of the asset are capitalized and depreciated over their estimated useful
life. Initial direct leasing costs are expensed as incurred and such expense
approximates the deferral and amortization of initial direct leasing costs over
the lease terms.
2. Organization Costs
The costs incurred in connection with the formation of the Trust are being
amortized on a straight-line basis over a period of five years.
3. Financial Investments
Financial investments consisting of cash and mortgage notes payable are
recorded at cost, which approximates fair market value.
4. Revenue Recognition
Rental income attributable to leases is recorded when due from tenants and
interest income is recorded on an accrual basis.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1998 through June 30, 1998
NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
5. Income Taxes
The Trust made an election to be taxed as a REIT under Sections 856 through 860
of the Internal Revenue Code of 1986, as amended, commencing with its taxable
year ending December 31, 1995. The Trust qualifies for taxation as a REIT, and
as such generally will not be subject to Federal income tax if it distributes
at least 95% of its REIT taxable income (excluding capital gains) to its
shareholders.
6. Loss Per Share
Net loss per share is computed based on the weighted average number of shares
of common stock outstanding for the period.
NOTE B - RELATED PARTY TRANSACTIONS
Acquisition of Forest Downs
Forest Downs was acquired by Wellington Management Corporation on May 19, 1993,
as an operating property. On March 31, 1994, Wellington Management Corporation
sold Forest Downs to the Trust at a cost of $1,890,000. On April 10, 1997, the
Trust sold Forest Downs for $2,000,000.
Arnold K. Leas, who was the sole stockholder of the Trust prior to the stock
offering discussed in Note E and is President and Chairman of the Board of
Trustees of the Trust and is the President/CEO and a Director of Wellington
Management Corporation (WMC). WMC Realty Inc. (Realty) and Wellington
Investment Services Corp. (WISC) are wholly-owned subsidiaries of Wellington
Management Corporation.
Due to the common control, the Trust's basis in Forest Downs was the same as
WMC's basis. The historical cost basis of the assets purchased from WMC,
including accumulated depreciation of $40,055, are reflected on the balance
sheet of the Trust. The $152,615 excess of the purchase price over WMC's basis
has been recorded as a reduction of stockholders' equity.
Acquisition of Lake Pointe
On January 5, 1996, Wellington Properties Trust purchased the apartment
complex from a related party, Wellington Realty Income Limited Partnership
90-1, for $3,600,000.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1998 through June 30, 1998
NOTE B - RELATED PARTY TRASACTIONS - Continued
The Trust assumed the mortgage note payable on the property of $1,856,760
(note C), and issued 167,166 shares of common stock of the Trust to
Wellington Realty Income Limited Partnership 90-1 for a $1,671,660 reduction
in the cash amount due.
Issuance of Stock
WMC was issued 70,000 shares of common stock of the Trust. In consideration
thereof, WMC has: 1) assigned, to the Trust, its rights in a certain
Acquisition Property Contract related to the purchase of a 292 unit apartment
complex, known as Maple Grove, located in Madison, Wisconsin; 2) assigned, to
the Trust, its rights in a certain Option Agreement (which rights have expired);
and 3) agreed to reduce its note receivable from the Trust, by $300,000.
Management Fees
The Trust has entered into a Property Management Agreement with Realty to serve
as the Property Manager of properties owned by the Trust. The Property Manager
will manage the day to day operations of properties owned by the Trust, and
will receive a management fee equal to 5% of the gross rental receipts
collected in connection with the operation of each property. Management fees
for the period January 1, 1998 through June 30, 1998 were 74,514.32.
Advisor Fees
On August 2, 1994, the Trust contracted to retain WMC to serve as Advisor to
the Trust. In payment for these services, the Advisor receives a fee equal to
5% of the gross proceeds of the public stock offering, which terminated October
1995. No advisor fees have been paid during 1997 or 1998.
In addition, the Advisor is entitled to receive an Incentive Advisory Fee equal
to 10% of the realized gain with respect to each sale or refinancing of property
owned by the Trust. In the event a property is sold at a loss, no Incentive
Advisory Fees will be paid until the amount of the loss has been offset by
gains from other sales. In addition, the Advisor is entitled to recover
certain expenses including travel, legal, accounting, and insurance. Fees for
services, such as legal and accounting, provided by the Advisor's employees,
in the opinion of the Advisor, may not exceed fees that would have been charged
by independent third parties. The initial term of the agreement ended on
December 31, 1995 and was renewed automatically each year. The agreement may
be terminated without cause, by either party, on 60 days written notice and by
the Trust for cause immediately upon written notice.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For period January 1, 1998 through June 30, 1998
NOTE B - RELATED PARTY TRANSACTIONS - Continued
Commission
WISC is entitled to receive a commission of 5% of the proceeds of the common
stock of the Trust that it sells. Commissions paid to WISC for the year ended
December 31, 1995 were $179,720.25 and for the period January 1, 1996 through
December 31, 1996 were $8,224.96. No Commissions have been paid in 1997 or
1998.
NOTE C - MORTGAGE NOTES PAYABLE AND OTHER FINANCING
Forest Downs
The mortgage note payable at December 31, 1994 was collateralized by Forest
Downs and an assignment of rents agreement. The interest rate was fixed at 8%
until June 1, 1998, at which time it may be adjusted semi-annually to 3% over
the monthly average cost of funds for SAIF insurance institutions from the
Federal Home Loan Bank of Chicago 7th District, but never more than 12% nor
less than 6%.
Maple Grove
The mortgage payable with respect to Maple Grove is collateralized by Maple
Grove and an assignment of rents. The interest rate is fixed at 8.095%.
Payments are due in monthly installments of principal and interest of $95,516.53
with a final Balloon payment due June 1, 2004.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1998 through June 30, 1998
Lake Pointe
As of March 30, 1998, Wellington Properties Trust was liable on a mortgage
note payable of $2,750,000. The note requires monthly payments of $19,417.06
including interest at 7.6%. The mortgage is due March 2008 and is secured by
the rental property and an assignment of rents.
The aggregate maturities on the mortgage note payable for the five years and
thereafter following December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Lake Maple Total
Pointe Grove
<S> <C> <C> <C>
1998 15,488.08 110,106.41 125,594.49
1999 23,110.97 119,357.77 142,468.74
2000 24,956.04 129,386.45 154,342.49
2001 26,948.43 140,257.76 167,206.19
2002 29,099.88 152,042.49 181,142.37
thereafter 2,630,396.60 12,197,738.86 14,828,135.46
2,750,000.00 12,848,889.74 15,598,889.74
</TABLE>
Line of Credit
During 1996, the Trust obtained a line of credit for $300,000 with Milwaukee
Western Bank. Interest-only payments are due monthly with the principal due on
December 31, 1998. The interest rate is at .5% above the bank's reference
rate (effective rate at June 31, 1998 of 9%). At June 30, 1998, the
outstanding balance was $300,000. The line of credit is collateralized by
the guarantee of WMC.
NOTE D - COMMITMENTS
None
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1998 through June 30, 1998
NOTE E - COMMON STOCK
As of
June 30, 1998 there were 728,038 Common Shares outstanding.
NOTE F - SUBSEQUENT EVENTS
On February 16, 1998 the Company entered into a contract to purchase Park
Forest Apartments in Des Moines, Iowa ("Park Forest") for $3,850,000. Park
Forest is a 144 unit apartment community. The contract provided that the
transaction would close on June 30, 1998 but was amended to allow for closing
on September 30, 1998. In consideration for the extension of the closing date
the Company agreed to deposit an additional $40,000 of earnest money and
increased the purchase price to $3,880,000. The Company did not have sufficient
cash available to make the additional earnest money deposit and therefore
borrowed $40,000 from American Real Estate Equities, LLC ("AREE") pursuant to
a promissory note dated August _______, 1998. The note bears interest a 9% per
annum and matures on December 31, 1998. Interest accrues until the maturity
date.
On June 4, 1998 the Company entered into an agreement in principal with
AREE to acquire a portfolio of properties to be defined and agreed to by the
parties. The minimum value of such portfolio is to be $150,000,000. The
Company has agreed to form an Operating Partnership and to fund a portion of
the purchase price with OP Units convertible to Common Stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Background
The Company marketed the Common Shares until October 25, 1995 and as offering
proceeds were available it acquired investment real estate. To date the
Company has acquired 410 apartment units located in three properties (Forest
Downs, Lake Pointe and Maple Grove). On April 10, 1997, the Trust sold Forest
Downs for $2,000,000.
On May 1, 1995 the Company acquired 172 apartment units at Maple Grove. The
property was 96.5% occupied on that date. On June 30, 1995 the Company
acquired an additional 36 units at Maple Grove. On October 2, 1995 it acquired
an additional 24 units at Maple Grove, plus land and plans for an additional 60
units. Construction of the final 60 units at Maple Grove was completed on
approximately August 31, 1996. On December 30, 1996 the Company acquired the
final 12 units at Maple Grove for $792,000. The Company used available cash and
the proceeds of a line of credit from Milwaukee Western Bank to purchase the
property.
The Company acquired Lake Pointe Apartments in January 1996 by an assumption of
debt and issuance of its stock to the owners. Lake Pointe consists of 72 units.
Until October 25, 1995, the Company offered its Common Shares to the public.
The proceeds of the offering were used: (i) to reduce existing debt; (ii) to
acquire additional properties; and (iii) to establish reserves as deemed
appropriate.
With Maple Grove having achieved substantial stabilized occupancy, Management
is aggressively pursuing additional acquisition opportunities. There are
ongoing negotiations with respect to several properties and the Company has
entered into two contracts to purchase 144 units and 156 units in Des Moines,
Iowa, subject to due diligence. Management has negotiated a credit facility to
be used to fund acquisitions with a major finanical institution. The credit
facility makes approximately $14,250,000 available to the Trust to acquire
additional properties.
On May 6, 1997 the Company obtained permanent financing with respect to Maple
Grove in the amount of $12,900,700. The loan provides for monthly payments of
principal and interest based on a 30 year amortization schedule with a Balloon
at the end of the seventh year. Interest is fixed at 8.095% per annum for the
term of the loan.
On March 5, 1998 the Trust completed the refinancing of Lake Pointe for
$2,750,000 with interest fixed at 7.6% per annum for 10 years. A balloon
payment will be due on March 11, 2008. Monthly payments of principal and
interest of $19,417.06 are based on a 30 year amortization schedule.
The proceeds from the sale of Forest Downs were used to retire the first
mortgage with respect to Forest Downs and to reduce the line of credit with
Milwaukee Western Bank and various accrued payables.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1998 through June 30, 1998
Current Operations
Rental revenues for the period are less than 1997. Forest Downs was sold April
10, 1997 and therefore revenues for the first quarter of 1997 included Forest
Downs. Adjusting for Forest Downs, revenues at Lake Pointe and Maple Grove
increased approximately 2% in 1998 over the first six months of 1997. As the
Madison market tightens and fewer rental concessions are granted to new
tenants revenues are expected to continue to increase. Occupancy for the period
at Maple Grove was 95.4% and Lake Pointe was 98.3%.
Interest expense decreased significantly between 1997 and 1998 due to (i) the
sale of Forest Downs and (ii) the refinancing of Maple Grove.
Liquidity
The Company has met its operating obligations during the period but has incurred
extraordinary expense with respect to prospective acquisitions. At June 30,
1998 the Company had earnest money deposits of $30,000 plus an additional
$30,000 of due diligence fees. Cash demands were such that Wellington
Management Corporation advanced approximately $40,000 to the Company in July
1998. It is anticipated that upon closing of the acquisitions the Company will
receive a credit for earnest money and prepaid due diligence fees.
In order to extend the closing date with respect to one of the Iowa properties
the Company had to agree to deposit an additional $40,000 of earnest money. The
funds were provided by a loan from AREE. It is anticipated that the loan will
be repaid upon closing of the acquisition of the property or closing of the
acquisition of the AREE portfolio.
The Company is also incurring extraordinary expense with respect to the AREE
acquisition and anticipates that additional borrowing or equity funding may be
necessary to meet such obligations. Additional borrowing should not be
necessary to meet operating requirements.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
At its regular meeting on June 18, 1998, the Board of Trustees voted to pay
a dividend to Common Shareholders with respect to the quarter ended June
30, 1998 of $.1750 per share.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There was one report on Form 8-K filed on June 30, 1998 during the quarter.
EXHIBIT INDEX
FINANCIAL DATA SCHEDULE EX-27
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Wellington Properties Trust
By: \S\Arnold K. Leas
Arnold K. Leas, President
Date: August 7, 1998 By: \S\Garret Nakama
Garret Nakama
Chief Financial Officer
Signing on behalf of the registrant and as principal financial and accounting
officer.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> (31,652)
<SECURITIES> 0
<RECEIVABLES> 16,803
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 954,848
<PP&E> 20,347,530
<DEPRECIATION> 1,383,807
<TOTAL-ASSETS> 19,918,571
<CURRENT-LIABILITIES> 929,152
<BONDS> 0
0
0
<COMMON> 7,311
<OTHER-SE> 3,193,324
<TOTAL-LIABILITY-AND-EQUITY> 19,918,571
<SALES> 0
<TOTAL-REVENUES> 750,791
<CGS> 0
<TOTAL-COSTS> 504,551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 319,511
<INCOME-PRETAX> (73,271)
<INCOME-TAX> 0
<INCOME-CONTINUING> (73,271)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (148,181)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
