UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10QSB/A No. 1
Amendment
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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 September 30, 1998 734,179 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 September 30, 1998
INDEX
PART I. Financial Information:
Consolidated Balance Sheet - September 30, 1998 and Page 3
September 30, 1997 (unaudited)
Consolidated Statement of Operations - three months and
nine months ended September 30, 1998 and September 30, 1997 Page 4
(unaudited)
Consolidated Statement of Cash Flows -
nine months ended September 30, 1998 and September 30, 1997 Page 5
(unaudited)
Notes to Consolidated 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
SEPTEMBER 30, 1998
ASSETS
<CAPTION>
SEPT 30, SEPT 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 909,178 837,050
20,377,577 20,287,745
ACCUMULATED DEPRECIATION (1,519,337) (977,180)
NET PROPERTY AND EQUIPMENT 18,858,240 19,310,565
CASH 29,602 74,954
PREPAID EXPENSES 328,062 249,977
LAND CONTRACT RECEIVABLE 0 0
OTHER 17,845 33,931
ORGANIZATION COSTS & LOAN COSTS NET OF ACCUMULATED
AMORTIZATION 616,917 230,218
992,427 589,080
TOTAL ASSETS $19,850,667 $19,899,645
LIABILITIES AND EQUITY
MORTGAGE NOTE PAYABLE $15,807,306 $15,422,902
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 605,009 670,141
ACCOUNTS PAYABLE - RELATED PARTY 136,962 23,081
TENANT SECURITY DEPOSITS 121,089 120,286
TOTAL LIABILITIES $16,670,366 $16,236,410
EQUITY
COMMON STOCK - 100,070,000 AUTHORIZED
734,179 SHARES ISSUED AND
OUTSTANDING, RESPECTIVELY; PAR VALUE
$0.01 7,372 7,060
PREFERRED STOCK - 500,000 SHARES AUTHORIZED;
NO SHARES ISSUED OR OUTSTANDING; PAR
VALUE $0.01 0 0
ADDITIONAL PAID - IN CAPITAL 6,441,859 6,195,947
DIVIDENDS PAID (1,656,487) (1,278,999)
ACCUMULATED DEFICIT (1,612,443) (1,260,773)
3,180,301 3,663,235
TOTAL LIABILITIES AND EQUITY $19,850,667 $19,899,645
</TABLE>
(SEE ACCOMPANYING NOTES)
<PAGE>
<TABLE>
WELLINGTON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE QUARTER ENDED
<CAPTION>
SEPT 30, YTD SEPT 30, YTD
1998 1998 1997 1997
<S> <C> <C> <C> <C>
REVENUES
RENTAL INCOME $779,030 $2,295,541 $681,625 $2,242,005
INTEREST INCOME AND OTHER 160 433 16,322 209,230
TOTAL REVENUE 779,190 2,295,974 697,947 2,451,235
EXPENSES
PROPERTY OPERATING AND
MAINTENANCE 177,298 547,422 190,676 550,207
REAL ESTATE TAXES AND
INSURANCE 115,138 334,428 105,969 325,035
DEPRECIATION AND AMORTIZATION 148,281 442,161 148,796 453,927
INTEREST EXPENSE 318,931 952,859 312,435 1,073,217
GENERAL AND ADMINISTRATIVE 99,379 247,125 62,749 200,781
TOTAL EXPENSES 859,027 2,523,995 820,625 2,603,167
NET OPERATING INCOME/(LOSS) (79,837) (228,021) (122,678) (151,932)
LOSS PER COMMON SHARE:
NET LOSS ($0.11) ($0.31) ($0.18) ($0.22)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 733,156 726,403 703,403 696,642
</TABLE>
(SEE ACCOMPANYING NOTES)
<PAGE>
<TABLE>
WELLINGTON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE QUARTER ENDED
<CAPTION>
SEPT 30, YTD SEPT 30, YTD
1998 1998 1997 1997
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS ($79,837) ($228,021) (122,678) (151,932)
ADJUSTMENTS TO RECONCILE
NET LOSS TO NET CASH
PROVIDED BY OPERATING
ACTIVITIES:
GAIN ON SALE 0 0 0 (182,649)
DEPRECIATION AND
AMORTIZATION 148,278 442,161 148,797 453,928
CHANGES IN ASSETS AND
LIABILITIES, NET OF
EFFECT OF ASSETS AND
LIABILITIES ASSUMED
PREPAID EXPENSES 10,923 (85,077) (82,474) 81,193
TENANT SECURITY DEPOSITS 13,052 (371) 92,132 (101,961)
ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES (12,726) 29,157 (380) (187,953)
ACCOUNTS PAYABLE-RELATED 112,280 117,590 (3,260) (10,644)
PARTY
271,807 503,460 154,815 51,914
NET CASH PROVIDED BY
OPERATING ACTIVITIES 191,970 275,439 32,137 (100,018)
CASH FLOWS USED BY INVESTING
ACTIVITIES
PROCEEDS ON SALE OF ASSETS 0 0 0 1,917,227
OTHER 0 0 1,500,000 0
APPLICANCES AND EQUIPMENT
ACQUISITION (30,047) (70,853) (27,273) (62,938)
NET CASH PROVIDED BY
INVESTING ACTIVITIES (30,047) (70,853) 1,472,727 1,854,289
CASH FLOWS FROM FINANCING
ACTIVITIES:
REPAYMENTS ON MORTGAGE NOTE
PAYABLE (32,769) (2,408,949) (1,510,731)(15,055,276)
MORTGAGE NOTE PAYABLE 0 2,750,000 68,423 13,640,971
ISSUANCE OF COMMON STOCK 59,506 183,794 69,037 184,907
DIVIDENDS PAID (127,407) (377,489) (148,003) (440,546)
LOAN FEES 0 (436,285) 0 (208,079)
NET CASH PROVIDED BY
FINANCING ACTIVITIES (100,670) (288,929) (1,521,274) (1,878,023)
NET INCREASE IN CASH 61,253 (84,343) (16,410) (123,752)
CASH AT BEGINNING OF PERIOD (31,651) 113,945 91,364 198,706
CASH AT END OF PERIOD 29,602 29,602 74,954 74,954
</TABLE>
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
For the period January 1, 1998 through September 30, 1998
(Unaudited)
NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Wellington Properties Trust ("Trust" or "Company") 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
one contract pending to purchase 156 units in Des Moines, Iowa. The closing
is expected to occur in the last quarter of 1998.) It is the intention of
the Trust to continue to seek well located properties for future acquistions.
Additionally the Company, through its operating partnership, has entered into
contribution agreements with respect to 31 properties with a purchase price of
approximately $190 million. As of September 30, 1998, the Company was
negotiating a credit facility with BT Alex Brown to finance the acquisitions.
The Company has formed an operating partnership to acquire the 31 properties
and issue operating partnership units, which units are, upon certain
circumstances, convertible into common shares of the Company. The portfolio
has been identified and is described in the Proxy Statement for the Special
Meeting of Shareholders to be held on November 16, 1998.
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 September 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 selling price 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, was 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 September 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 common shares 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
In 1994, WMC was issued 70,000 common shares 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. Such
note has been repaid.
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 September 30, 1998 were $140,016.50.
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 offering of common shares, 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 has been 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 September 30, 1998
NOTE B - RELATED PARTY TRANSACTIONS - Continued
Commission
WISC is entitled to receive a commission of 5% of the proceeds of the common
shares 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%. The property was sold in April 1997 and the mortgage was repaid.
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 Sept 30, 1998
Lake Pointe
As of September 30, 1998, Wellington Properties Trust was liable on a mortgage
note payable of $2,740,157.63. The note requires monthly payments of $19,417.06
including interest at 7.6%. The mortgage is due March 2008 and is secured by
Lake Pointe and an assignment of rents.
The aggregate maturities on the mortgage notes payable at December 31, 1998 and
for the five years thereafter 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
TOTAL 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 September 30, 1998 of 9%). At September 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 September 30, 1998
NOTE E - COMMON SHARES
As of September 30, 1998 there were 734,179 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 contact 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 3, 1998. The note bears interest at
9% per annum and matures on December 31, 1998. Interest accrues until the
maturity date. The Company was unable to close on September 30, 1998 and the
contract was terminated. The earnest money was retained by the seller. The
seller has indicated a willingness to reinstate the contract upon the payment
of additional earnest moeny.
On June 6, 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. Properties
will be conveyed to the Company pursuant to a Master Contribution Agreement
dated July 6, 1998, as amended. The Company has formed an Operating
Partnership to fund a portion of the purchase price with the issuance of
limited partnership interests in the Operating Partnership (in which the
Company will be the sole general partner), which interest will be convertible,
under certain circumstances, to Common Shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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 Act 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 indicated such intent. Forward-
looking statements that are based on certain assumptions, and describe future
plans, stategies and expectations of the Company, are generally identifiable by
use of the words "believe", "expect", "intend", "anticipate", "estimate",
"project", or similar expressions. The Company's ability to predict results or
the actual effect of future prospects of the Company include, but are not
limited to, changes in interest rates, general economic conditions, legislative/
regulatory changes, monetary and fiscal policies of the U.S. Government,
including policies of the U.S. Treasury and the Federal Reserve Board, the
ability of the Company to obtain debt or other financing, competition, demand
for rental property in the Company's markets and accounting principles,
policies and guidelines. These risks and uncertainties should be considered 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.
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 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 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 a contract to purchase 156 units in Des Moines, Iowa.
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 Company 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 Sept 30, 1998
Current Operations
Rental revenues for the quarter period ended September 30, 1998 are greater
than 1997 due to the stabilization of Maple Grove, while rental revenues for
the nine months ended September 30, 1998 are less than the comparable period
in 1997. Year to date rental revenues for 1997 include Forest Downs. 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 5% in 1998 over the first nine
months of 1997. As the Madison, Wisconsin 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 95.7% and Lake Pointe
was 98.1%.
Interest expense decreased significantly for the 9 months ended September 30,
1998 from 1997 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 significant expenditures with respect to prospective acquisitions.
At September 30, 1998 the Company had earnest money deposits of $70,000 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
except with respect to $50,000 deposit forfeited under the Park Forest
contract.
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.
Due to the extraordinary expenses associated with the AREE transaction the
Company has deferred payment of the third quarter dividend until the closing of
the transaction.
Year 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
The Company has updated its current information systems and believes them to be
year 2000 compliant. The Company intends to review any and all purchases in
this regard to ensure year 2000 compliance. The Company does not believe
that the impact of the recognition of the year 2000 by its information and
operating technology systems will have a material adverse effect on the
Company's financial condition and results of operations.
There can be no assurance that there will not be any year 2000-related operating
problems or unanticipated expenditures that will arise with the Company's
computer systems and software, whether existing or newly acquired, or that the
systems of other companies on which the Company's systems rely will be timely
converted and would not have an adverse effect on the Company's systems.
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
The Company has called a special meeting of its common shareholders to be held
on November 16, 1998 at 9:00 a.m. at the offices of the Company. The purpose
of the meeting is to consider several proposals including:
1. Approval of a transaction (the "Transaction") the principal components of
which are as follows: (a) Wellington Properties Investments, L.P., a Delaware
limited partnership in which the Company is the sole general partner (the
"Operating Partnership"), or one or more of the Operating Partnership's wholly
owned subsidiaries will acquire 31 office and light industrial properties in
exchange for the issuance of 9,860,838 partnership units that will be
exchangeable, under certain circumstances, on a one-for-one basis, for Common
Shares, par value $0.01 per share (the "Common Shares") of the Company; (b) the
Company will issue warrants to acquire up to 1,000,000 Common Shares; (c) the
Company will issue 105,263 Common Shares; (d) the Company will enter into a
credit facility; (e) the Company will pay to WMC a cash termination fee of
approximately $1.6 million, and the advisory agreement between the Company
and WMC will be terminated; (f) the Company will enter into employment
agreement with Duane H. Lund and Robert F. Rice to serve as the Company's
Chief Executive Officer and President, respectively; (g) if elected pursuant
to the third proposal described below, Steven B. Hoyt and Paul T. Lambert
will become Trustees of the Company; and (h) the Company will enter
into property management agreements with various persons and entities with
respect to the day-to-day operations and leasing of the properties to be
acquired;
2. Approval of certain amendments to the Company's Declaration of Trust,
including classification of the Board of Trustees, which amendments are set
forth in Articles of Amendment and Restatement that shall take effect only
upon consummation of the initial closing in connection with the Transaction;
3. Election of Steven B. Hoyt and Paul T. Lambert to the Board of Trustees
of the Company for terms to expire in 2000 and 2001 respectively and to extend
the term of Arnold K. Leas as Chairman of the Board until 2001 and to extend
the term of Robert P. Ripp until 2000. Peter Ogden and Gerald Sobczak shall
remain unchanged;
4. Approval of adoption of the Wellington Properties Trust 1998 Share Option
Plan; and
5. Transaction of such other business as may properly be brought before the
Special Meeting.
ITEM 5. OTHER INFORMATION
At its meeting on September 23, 1998, the Board of Trustees voted to
pay a dividend to Common Shareholders with respect to the quarter ended
September 30, 1998 of $.1750 per share. The Board also voted to defer payment
until the closing of the transaction with AREE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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 undersiged, thereunto duly
authorized.
Wellington Properties Trust
By: \S\Robert F. Rice
Robert F. Rice, President
Date: January 21, 1999 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 29,602
<SECURITIES> 0
<RECEIVABLES> 17,845
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 992,427
<PP&E> 20,377,577
<DEPRECIATION> 1,519,337
<TOTAL-ASSETS> 19,850,667
<CURRENT-LIABILITIES> 863,060
<BONDS> 0
0
0
<COMMON> 7,372
<OTHER-SE> 3,172,930
<TOTAL-LIABILITY-AND-EQUITY> 19,850,667
<SALES> 0
<TOTAL-REVENUES> 779,190
<CGS> 0
<TOTAL-COSTS> 540,097
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 318,931
<INCOME-PRETAX> (79,838)
<INCOME-TAX> 0
<INCOME-CONTINUING> (79,838)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (79,838)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> 0
</TABLE>
