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 March 31, 1999
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 33-82888C
WELLINGTON PROPERTIES TRUST
(Exact name of registrant as specified in its
charter)
Maryland
(State or other jurisdiction of incorporation)
39-6594066
(I.R.S. Employer Identification Number)
18650 West Corporate Drive, P.O. Box 0919,
Brookfield, Wisconsin 53008-0919
(Address of principal executive offices)
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. Yes X
No
As of March 31, 1999 1,351,625.27 shares of the
issuer's common stock were outstanding.
Transitional Small Business Disclosure Format(Check
one): Yes ;No X (Added by Exch Act Rel
No. 31905, eff 4/26/93.)
This report contains 17 pages. There is one
exhibit.
<PAGE>
WELLINGTON PROPERTIES TRUST
FORM 10QSB
For the Quarter Ended March 31, 1999
INDEX
PART I. Financial Information
Consolidated Balance Sheet -
March 31, 1999 and
March 31, 1998 (unaudited) Page 3
Consolidated Statement of Operations -
three months ended March 31, 1999
and March 31, 1998 (unaudited) Page 4
Consolidated Statement of Cash Flows -
three months ended March 31, 1999
and March 31, 1998 (unaudited) Page 5
Notes to Consolidated Financial
Statements Page 6
Management's Discussion and Analysis
or Plan of Operations Page 14
PART II. Other Information
Other Information Page 16
Exhibits and Reports on Form 8-K Page 17
Signatures Page 17
<PAGE>
<TABLE>
WELLINGTON PROPERTIES TRUST
CONSOLIDATED BALANCE SHEET
<CAPTION>
MARCH 31,
1999
(Unaudited)
<S> <C>
ASSETS
REAL ESTATE PROPERTY-AT COST
LAND $ 9,009,936
BUILDING 41,540,143
TENANT IMPROVMNTS 28,809
APPLIANCES AND EQUIP 950,459
51,529,347
ACCUMULATED
DEPRECIATION (2,025,219)
49,504,128
CASH 136,447
ACCOUNTS RECEIVABLE 14,429
I/C TRANSACTIONS WLPT --
PREPAID EXPENSES 128,771
PROPERTY TAX & OTHER 905,908
DEFERRED COST 1,748,255
ORG COSTS AND LOAN FEES
NET OF ACCUM AMORT 877,325
TOTAL ASSETS $53,315,263
LIABILITIES AND EQUITY
MORTGAGE LOANS PAYABLE $32,430,915
LINE OF CREDIT 200,000
RELATED PARTY PAYABLE 1,820,617
ACCRUED LIABILITIES 1,527,972
DEFERRED RENTAL REVENUE 79,300
DIVIDENDS/DISTRIB PAYABLE 727,286
TENANT SECURITY DEPOSITS 155,970
TOTAL LIABILITIES $36,942,061
MINORITY INTEREST IN
CONSOLIDATED SUBSIDIARY 12,074,499
EQUITY
COMMON SHARES -100,000,000
AUTHORIZED 1,351,625
SHARES ISSUED AND
OUTSTANDING RESPECTIVELY;
PAR VALUE $0.01 13,516
COMMON SHARE WARRANTS 1,510,000
PREF STOCK - 10,000,000
SHARES AUTHORIZED; NO
SHARES ISSUED OR OUTSTANDING;
PAR VALUE $0.01 --
WELLINGTON EQUITY --
ADDITIONAL PAID -
IN CAPITAL 7,558,074
DIVIDENDS PAID --
ACCUMULATED DEFICIT (4,782,887)
4,298,704
TOTAL LIABILITIES
AND EQUITY $53,315,263
</TABLE>
(SEE ACCOMPANYING NOTES)
<PAGE>
<TABLE>
WELLINGTON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE QUARTER ENDED
<CAPTION>
March 31, March 31,
1999 1998
<S> <C> <C>
REVENUES
RENTAL INCOME $1,658,218 $765,930
GAIN ON SALE OF ASSETS -- --
INTEREST AND OTHER 14,437 63
TOTAL REVENUE 1,672,655 765,993
EXPENSES
PROPERTY OPERATING
AND MAINTENANCE 355,859 198,098
ADVERTISING/PROMOTION 16,456 --
PROPERTY TAXES
AND INSURANCE 316,865 109,645
DEPRECIATION AND
AMORTIZATION 323,577 145,596
INTEREST EXPENSE 644,988 314,417
GENERAL AND
ADMINISTRATIVE 194,759 73,147
MANAGEMENT FEES 82,625 --
OTHER NONRECURRING -- --
TOTAL EXPENSES 1,935,129 840,904
NET INCOME(LOSS)
BEFORE MINORITY
INTEREST (262,474) (74,911)
LESS: MINORITY
INTEREST 173,075 --
NET INCOME (LOSS)
ALLOCATED TO COMMON
SHARES $(89,399) $(74,911)
LOSS PER COMMON SHARE- ($0.07) ($0.07)
BASIC AND DILUTED
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 1,349,552 1,138,919
</TABLE>
(SEE ACCOMPANYING NOTES)
<PAGE>
<TABLE>
WELLINGTON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE QUARTER ENDED
<CAPTION>
March 31, March 31,
1999 1998
<S> <C> <C>
CASH FLOW FOR OPERATING
ACTIVITIES:
NET INCOME (LOSS) ($ 89,399) (74,911)
ADJUSTMENTS TO RECONCILE
NET INCOME (LOSS)
TO NET CASH FLOW FROM
OPERATING ACTIVITIES:
GAIN ON SALE OF ASSETS -- --
DEPREC & AMORT 323,577 145,596
MINORITY INTEREST (173,075) --
CHANGES IN ASSETS AND LIAB:
DECREASE (INCREASE) IN A/R
& PREPAID ASSETS (77,628) 35,763
INCREASE (DECREASE) IN A/P
& ACCRUED LIABILITIES 151,602 (66,658)
INCREASE (DECREASE) IN A/P-
RELATED PARTY 65,228 3,732
INCREASE (DECREASE) IN
TENANT SECURITY DEPOSITS (402) 770
NET CASH FLOW FROM
OPERATING ACTIVITIES 199,903 44,293
CASH FLOWS FROM INVESTING
ACTIVITIES:
PROCEEDS ON SALE OF ASSETS -- --
PROPERTY & EQUIP ACQUISITION (51,645) (2,638)
DECREASE(INCREASE) IN DEFERRED
ACQUISITION COSTS -- --
OTHER -- --
NET CASH FLOW FROM
INVESTING ACTIVITIES (51,645) (2,638)
CASH FLOW FROM FINANCING
ACTIVITIES:
PROCEEDS FROM MORTGAGE
NOTE PAYABLE -- 2,313,715
PROCEEDS FROM RELATED
PARTY PAYABLE -- --
LOAN FEES -- --
PAYMENTS ON MTG NOTE (74,237)(2,344,065)
PAYMENTS ON LOC -- --
DIVIDENDS (152,247) (124,046)
DIVIDEND REIVESTMENT 51,251 --
REPURCHASE OF COMMON STOCK -- --
SALE OF COMMON STOCK 9,521 59,529
NET CASH FLOW FROM
FINANCING ACTIVITIES (165,712) (94,867)
NET INCREASE(DECREASE)
IN CASH (17,454) (53,211)
AT BEGINNING OF PERIOD 153,901 113,945
CASH AT END OF PERIOD $136,447 $ 60,734
</TABLE>
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
For the period January 1, 1999 through
March 31, 1999
(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"). The
Company, through its operating partnership,
Wellington Properties Investments LP ("WPI") a
Delaware limited partnership, owns three commercial
properties (collectively the "Properties"). It is
the intention of the Trust to continue to seek well
located properties for future acquisitions.
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. To
date three of the properties have been acquired and
it is likely that a majority of the remaining
properties will not be acquired.
On March 4, 1999 the Company exchanged its interest
in a Real Estate sale contract to purchase the
Highlander Apartments for an 8% interest in the
Highlander Acquisition Company, LLC. The
Highlander is a 154 unit apartment community in Des
Moines, Iowa.
A summary of the significant accounting policies
applied in the preparation of the accompanying
financial statements follows:
1. Principles of Consolidation-
The consolidated financial statements include
all the accounts of Wellington Properties Trust,
its wholly-owned subsidiaries, Maple Grove
Apartment Homes, Inc. and Lake Pointe Apartment
Homes, Inc. and WPI. Because the Trust controls
WPI, the Trust has consolidated the accounts of WPI
with the Trust. Minority interest consists of
limited partnership interests in WPI. All intercompany
accounts and transactions have been eliminated in the
preparation of the consolidated financial statements.
2. Real Estate Property-
Real Estate 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 seven-year
estimated life for appliances and equipment.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1999 through
March 31, 1999
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.
3. Financial Instruments-
The carrying amount of financial instruments at
March 31, 1999 approximates fair value.
4. Deferred Costs-
The Trust has incurred costs in connection with the
potential purchase of properties by WPI. These
costs, which total approximately $1,748,000 as of
March 31, 1999 consist primarily of legal and
accounting fees and warrant costs and are expected
to be allocated among the properties purchased and
capitalized as part of the cost of the property.
5. Revenue Recognition-
Rental income attributable to leases is recorded
when due from tenants and interest income is
recorded on an accrual basis.
6. 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, 1996. 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.
7. Loss Per Share-
Net loss per share is computed based on the
weighted average number of shares of common shares
outstanding for the period. Common share
equivalents to include outstanding warrants and
stock options, are not included in diluted earnings
per share as they would be anti-dilutive.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1999 through
March 31, 1999
NOTE B - ACQUISITION OF PROPERTIES
On November 20, 1998, the Trust through WPI,
acquired two office properties and one light
industrial property in the Minneapolis, Minnesota
metropolitan area. The combined purchase price of
such properties totaled approximately $30.8
million, excluding closing costs. Such purchase
price was funded through the issuance of an
aggregate of 2,557,707 limited partnership units
("Units") in WPI (valued at $5.37 per Unit, or an
aggregate value of approximately $13.7 million) and
the assumption of certain third-party indebtedness
of approximately $17.1 million secured by such
properties. The Units are exchangeable, under
certain circumstances, on a one-for-one basis for
common shares of beneficial interest, $.01 par
value per share from and after the one-year
anniversary of the date of issuance.
The following represents certain pro forma
information for the quarter ended March 31,
1998 as if these properties were
acquired effective January 1, 1998.
Total revenue $1,750,000
Net loss before minority
interest in net loss of
consolidated subsidiary $(108,000)
Net loss allocated to
common shares $ (37,000)
Net loss per common
share-basic and diluted $ (0.03)
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1999 through
March 31, 1999
NOTE C - MORTGAGE NOTES PAYABLE AND OTHER FINANCING
Maple Grove-
The mortgage payable with respect to Maple Grove is
collateralized by Maple Grove and an assignment of
rents and had a principal balance as of March 31,
1999 of $12,709,840.72. 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.
Lake Pointe-
As of March 31, 1999, Wellington Properties Trust
was liable on a mortgage note payable of
$2,728,188.42. 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.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1999 through
March 31, 1999
Thresher Square East-
The financing consists of Commercial Development
Revenue Refunding Bonds - Series 1996A issued by
the City of Minneapolis, Minnesota; interest
payable semi-annually at variable rates ranging
from 5.25% to 7.25%; principal payable annually on
or before May 1 in amounts ranging from $140,000 to
$395,000 with a final payment due May 1, 2015;
collateralized by a letter of credit, the Thresher
Square East Office Complex, equipment and an
assignment of rents. As of March 31, 1999 the
principal balance was $4,095,000.00.
Thresher Square West-
The financing consists of Commercial Development
Revenue Refunding Bonds - dated October 1, 1992
issued by the City of Minneapolis, Minnesota;
interest payable semi-annually at variable rates
ranging from 6.50% to 7.60%; principal payable
annually on or before June 1 in amounts ranging
from $170,000 to $375,000 with a final payment due
June 1, 2010; collateralized by a letter of credit,
the Thresher Square West Office Complex and an
assignment of rents and security agreement. As of
March 31, 1999 the principal balance was
$3,135,000.
Cold Springs-
The financing consists of a note payable to Bremer
Bank, N.A. in monthly installments of $51,518
including interest at a variable rate (effective
rate of 8.75% at March 31, 1999) with a final
balloon payment due on October 1, 2000;
collateralized by the Cold Springs Office Complex
and fixtures. As of March 31, 1999 the principal
balance was $5,563,823.22.
Additionally there is a note payable to Bremer
Business Financial Corp., interest payments due
monthly at a variable interest rate (effective rate
of 10.75% at March 31, 1999) with principal balance
due on September 30, 2000; collateralized by the
Cold Springs Office Complex and fixtures. As of
March 31, 1999 the principal balance was
$1,875,000.00.
Nicollet VI-
The financing consists of a 7.000% mortgage note
payable to GMAC Commercial Mortgage Corporation in
monthly installments of $15,635 including interest;
final balloon payment due February 1, 2008;
collateralized by the Nicollet Business Campus VI
Complex and an assignment of rents and security
agreement. As of March 31, 1999 the principal
balance was $2,324,062.91.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1999 through
March 31, 1999
The aggregate maturities on the mortgage notes payable at
March 31, 1999 and for the five years thereafter are as follows:
<TABLE>
<CAPTION>
Lake Maple Thresher
Pointe Grove East
<S> <C> <C> <C>
1999 16,788 90,415 140,000
2000 24,350 129,386 145,000
2001 26,900 140,258 155,000
2002 29,048 152,042 165,000
2003 31,367 164,817 175,000
there-
after 2,599,736 12,032,922 3,315,000
TOTAL 2,728,188 12,709,841 4,095,000
</TABLE>
<TABLE>
<CAPTION>
Thresher Cold Nicollet
West Springs VI Total
<S> <C> <C> <C> <C>
1999 170,000 65,276 19,140 501,619
2000 185,000 7,373,547 27,130 7,884,414
2001 200,000 29,091 551,249
2002 215,000 31,194 592,185
2003 230,000 33,450 634,634
there-
after 2,135,000 2,184,057 22,266,714
TOTAL 3,135,000 7,438,823 2,324,063 32,430,915
</TABLE>
Line of Credit-
During 1998, 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 June 30,
1999. The interest rate is at .5% above the bank's
reference rate (effective rate at March 31, 1999 of 8.75%).
At March 31, 1999, the outstanding balance was $200,000.
The line of credit is collateralized by the guarantee of WMC.
NOTE D - EQUITY
During 1998, the Trust entered into agreements with
American Real Estate Equities, LLC (AREE) and Wellington
Management Corporation (WMC). Pursuant to the agreements
the Trust entered into transactions with AREE and WMC
related to issuance of warrants, issuance of Common shares
and contribution agreements for various properties (note B).
The Trust issued warrants to acquire up to 791,667
Common Shares to each of AREE and WMC. The Warrants will
become exercisable one year after the date of issuance
(November 16, 1999) and will be exercisable for a nine-year
period thereafter, at an exercise price of $5.37 per Common
Share with respect to 395,833 Warrants held by each of AREE
and WMC, $6.47 per Common Share with respect to 197,917 Warrants
held by each of AREE and WMC, $7.74 per Common Share with
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1999 through
March 31, 1999
respect to 118,750 Warrants held by each of AREE and
WMC and $9.32 per Common Share with respect to 79,167
Warrants held by each of AREE and WMC. A value of $0.954
per warrant (based on a modified Black Scholes calculation)
for a total of $1,510,000 has been recognized at March 31, 1999.
In March 1998, in connection with the refinancing
of debt, the Trust entered into an agreement with
Credit Suisse First Boston Mortgage Capital LLC
which provides for the granting of warrants to
purchase 47,500 Common Share on any date through
March 5, 2008 at a price of $3.949 per share. The
warrants were not exercised during the period ended
March 31, 1999.
The Trust has a stock option plan (the "Old Plan")
which provides for the granting of share options to
officers, trustees and employees at a price
determined by a formula in the Plan agreement.
There are 54,387 options outstanding as of March
31, 1999. There were no options exercised under
the plan during the period ending March 31, 1999.
In November 1998, the Trust's shareholders approved
a Share Option Plan (the "New Plan")which provides
for the granting of share options to officers,
trustees and employees at a price determined by a
formula in the Plan agreement. The options are
exercisable over a period of time determined by the
Plan Committee, but no longer than ten years after
the date they are granted. Compensation resulting
from the share options is initially measured at the
grant date based on fair market value of the
shares. The Plan was adopted as of November 16,
1998, and there are no options outstanding as of
March 31, 1999.
NOTE E - COMMON SHARES
On March 24, 1999 the Company split its outstanding
Common Shares on a 4.75 for 3 basis. As of March
31, 1999 there were 1,351,625.27 Common Shares
outstanding.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1999 through
March 31, 1999
NOTE F - RELATED PARTY TRANSACTIONS-
Reimbursement of Certain Expenses by Related
Parties-
WPI is in negotiations with AREE regarding
the reimbursement by WPI to AREE of certain
expenses incurred by AREE in the potential
acquisition of properties and certain
administrative expenses. The accompanying
consolidated financial statements reflect all
expenses incurred by AREE on behalf of WPI in
connection with the acquisitions, with a
corresponding liability to AREE totaling
$1,504,423. In the event that the negotiations
result in reimbursement of certain expenses at a
later date, that recovery will then be reflected in
the financial statements.
In connection with the negotiation by the Trust of
the contribution agreement between AREE and WPI, a
$240,000 advance was paid to WMC by AREE for the
benefit of WPI. This amount was reflected as an
advance to related party in accompanying financial
statements, with a related liability recorded due
to AREE. Under the terms of the contribution
agreement, the advance was to be repaid to AREE in
the event certain transactions closed before December 31, 1998.
In connection with the negotiations discussed
above, WMC management has stated that the advance
from WPI represents reimbursement from WPI for
services rendered by WMC in the organization of WPI
and the acquisition of properties. WMC management
has stated that it does not intend to reimburse WPI
for the $240,000 advance. Due to the uncertainty
of the collectibility of this advance, the entire
amount has been reserved as uncollectible.
Management Fees-
The Trust has entered into Property Management Agreements
with WMC Realty, Inc. (WRI), a wholly-owned subsidiary
of Wellington Management Corporation (WMC), an
affiliate of the Trust in which Arnold Leas (Chairman
of the Board of Trustees) is President and Chief
Executive Officer, and Hoyt Properties, Inc. (Hoyt), an entity
controlled by Steve Hoyt (a trustee of the Trust)
to serve as Property Managers of properties owned
by the Trust. The Property Managers will manage
the day to day operations of properties owned by
the Trust and will receive a management fee for
this service. Management fees for the period
January 1, 1999 through March 31, 1999 were
$82,625.
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 1999.
In addition, the Advisor is entitled to receive an
Incentive Advisory Fee equal to 10% of teh 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. No
Incentive Advisory Fees have been paid during 1999.
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 casue, by either party, on 60
days written notice and by the Trust for cause
immediately upon written notice.
Termination Fees-
In connection with the purchase of properties by
WPI, the Trust terminated the advisory agreement
with WMC on November 20, 1998. The termination
fee, payable to WMC, is determined by taking 1% of
the first $150,000,000 of the aggregate gross
purchase price for properties acquired by WPI plus
.25% of the aggregate gross purchase price for
properties acquired in excess of $150,000,000.
Termination fees paid to WMC, which are expensed
as incurred, amounted to $0 for the period ended
March 31, 1999.
NOTE G - OPERATING LEASES
The Trust and its subsidiaries lease residential and
commercial space to individual and corporate tenants.
These leases expire at various times through 2005.
The following is a schedule by year of minimum operating
lease receipts under such operating leases.
<TABLE>
<S> <C>
Year
1999 $3,733,271
2000 2,197,655
2001 1,923,698
2002 995,421
2003 426,689
Thereafter 358,477
$9,635,211
</TABLE>
One of the commercial properties has one primary tenant who
leases 55% of the property's rentable square footage. The
future minimum operating lease receipts from this tenant
represent approximately 19% of the above total.
<PAGE>
WELLINGTON PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the period January 1, 1999 through
March 31, 1999
NOTE H - SUBSEQUENT EVENTS
None.
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,
strategies 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 reliance
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), three commercial
properties (Thresher Square, Cold Springs and
Nicollet VI) and an 8% interest in the Highlander
Acquisition Company, LLC. 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
<PAGE>
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.
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.
During 1998 the Company entered into agreements
with AREE under which AREE was to contribute 31
properties to the operating partnership. To date
four properties have been contributed. It is
unlikely that all 27 of the remaining properties
will be contributed.
Current Operations-
Rental revenues for the quarter period ended March
31, 1999 are substantially greater than 1998 due to
the acquisition of the Commercial Properties.
Adjusting for the Commercial Properties, revenues
at Lake Pointe and Maple Grove decreased
approximately 1% in 1999 over the first three
months of 1998. The Madison, Wisconsin rental
market was somewhat soft during the quarter causing
the decrease. Occupancy for the period at Maple
Grove was 91.7% and Lake Pointe was 98.5%.
Similarly property expenses increased for the
quarter over 1998 due to the acquisition of the
Commercial Properties. Adjusting for the
Commercial Properties, operating expenses increased
<PAGE>
approximately 8% over the first 3 months of 1998.
General and administrative expense increased
approximately 166% over the first quarter of 1998
because the Company hired 3 full time employees and
opened a Minneapolis office.
Liquidity-
The Company has met its operating obligations during the period.
In 1998 the Company incurred 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 first
quarter dividend until implementation of its business plan.
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 upgraded its current information
systems 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
affect 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 did not submit any matters to
Shareholders during the quarter ended March 31,
1999.
<PAGE>
ITEM 5. OTHER INFORMATION
At its meeting on March 30, 1999, the Board of
Trustees voted to pay a dividend to Common
Shareholders with respect to the quarter ended
March 31, 1999 of $.11 per share. The Board also
voted to defer payment until implementation of its
business plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
EXHIBIT INDEX
FINANCIAL DATA SCHEDULE EX-27
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\Robert F. Rice
Robert F. Rice
President
Date: May 14, 1999
By: \S\Garret T. Nakama
Garret T. 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-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 136,477
<SECURITIES> 0
<RECEIVABLES> 14,429
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 51,529,347
<DEPRECIATION> 2,025,219
<TOTAL-ASSETS> 54,315,263
<CURRENT-LIABILITIES> 2,489,735
<BONDS> 0
0
0
<COMMON> 13,516
<OTHER-SE> 5,863,795
<TOTAL-LIABILITY-AND-EQUITY> 54,315,263
<SALES> 0
<TOTAL-REVENUES> 1,672,655
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,290,141
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 644,988
<INCOME-PRETAX> (262,474)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,399)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
