-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EKsaSlDLJTmWQxHAaY4/1b4Vba5kQtGP9aRIos+6qA9FrOxPx7b5jjDObV6FlOpM PRdZSKf6xguAp5nf6gcMRw== 0000910643-97-000173.txt : 19980102 0000910643-97-000173.hdr.sgml : 19980102 ACCESSION NUMBER: 0000910643-97-000173 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971231 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLSFORD REAL PROPERTIES INC CENTRAL INDEX KEY: 0001038222 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133926898 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12917 FILM NUMBER: 97747554 BUSINESS ADDRESS: STREET 1: 610 FIFTH AVENUE SEVENTH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2123332300 MAIL ADDRESS: STREET 1: 610 FIFTH AVENUE SEVENTH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) December 31, 1997 (December 31, 1997) Wellsford Real Properties, Inc. - ---------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) 1-12917 13-3926898 - --------------------------------- ------------------------------------ (Commission File Number) (IRS Employer Identification No.) Maryland - ---------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 610 Fifth Avenue, New York, New York 10020 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 333-2300 - ----------------------------------------------------------------------------- (Registrant's telephone number, including area code) Item 2. Acquisition or Disposition of Assets As of December 31, 1997, Wellsford Real Properties, Inc. (the "Company") believes that it is probable that it will acquire the property known as Sonterra within approximately two weeks for approximately $20.5 million based on an extension expected to be granted with respect to the option described below. The Company currently owns an option to acquire Sonterra, a 344 unit Class A multifamily apartment complex located in Tucson, Arizona, construction of which was completed in June 1996, free and clear of all mortgages and other material liens for approximately $20.5 million through December 31, 1997 and for approximately $21 million if the sale is consummated during 1998. The Company also holds a $17.8 million mortgage loan (the "Sonterra Loan") made to the owner of Sonterra. The Sonterra Loan was originated in July 1996 and the principal amount thereof is due on July 1, 1999. Until the maturity date, the borrower is to pay interest only, monthly, at the rate of 9% per annum. The loan is non-recourse and repayment of the loan is secured by a first mortgage on Sonterra and by a personal guaranty of an individual affiliated with the owner. Under certain circumstances, prepayment of the loan is subject to a prepayment premium equal to 5% of the principal amount of the loan. Item 7. Financial Statements, Proforma Financial Information and Exhibits (a) Financial Statements The Sonterra Financial Statements: Independent Accountants' Report of Ernst & Young LLP dated December 19, 1997. Combined Statements of Revenues and Certain Expenses for the year ended December 31, 1996 (audited) and nine months ended September 30, 1997 (unaudited). Pro Forma Consolidated Income Statement for the Nine Months Ended September 30, 1997 (unaudited) and related footnotes. Pro Forma Consolidated Income Statement for the Year Ended December 31, 1996 (unaudited) and related footnotes. Pro Forma Consolidated Balance Sheet for September 30, 1997 (unaudited) and related footnotes. (b) Exhibits None SIGNATURES 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 hereunto duly authorized. Wellsford Real Properties, Inc. ------------------------------------ (Registrant) Date: December 31, 1997 By: /s/Gregory F. Hughes -------------------------------- Gregory F. Hughes Chief Financial Officer Statements of Revenues and Certain Expenses Sonterra at Williams Centre Year Ended December 31, 1996 with Report of Independent Auditors Statements of Revenue and Certain Expenses Sonterra at Williams Centre Year Ended December 31, 1996 Contents Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . .1 Statements of Revenues and Certain Expenses. . . . . . . . . . . . . . . . .2 Notes to Statements of Revenues and Certain Expenses . . . . . . . . . . . .3 Report of Independent Auditors Board of Directors and Stockholders Wellsford Real Properties, Inc. We have audited the statement of revenues and certain expenses of the property known as Sonterra at Williams Centre (the "Property"), to be acquired by Wellsford Real Properties, Inc., as described in Note 1, for the year ended December 31, 1996. This financial statement is the responsibility of the Property's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in Form 8-K of Wellsford Real Properties, Inc. and is not intended to be a complete presentation of the Property's revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of Sonterra at Williams Centre as described in Note 1 for the year ended December 31, 1996, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP New York, New York December 19, 1997 Sonterra at Williams Centre Statements of Revenues and Certain Expenses (in thousands) (Note 1) Nine Months Year Ended Ended September December 30, 1997 31, 1996 ----------- ---------- (unaudited) Revenues: Rental income $ 1,787 $ 1,677 Miscellaneous income 89 89 -------------------------- Total revenues 1,876 1,766 -------------------------- Certain Expenses: Property operating and maintenance expenses 385 512 Real estate taxes 143 45 Management fees 64 87 -------------------------- Total certain expenses 592 644 -------------------------- Revenues in excess of certain expenses $ 1,284 $ 1,122 ========================== See accompanying notes. Sonterra at Williams Centre Notes to Statements of Revenues and Certain Expenses For the year Ended December 31, 1996 1. Business The accompanying statements of revenues and certain expenses relates to the operations of the property known as Sonterra at Williams Centre (the "Property"). The Property is a 344 unit multifamily apartment complex located in Tucson, Arizona, currently owned by Specified Properties VIII, L.P. Wellsford Real Properties, Inc. owns an option to acquire the Property and intends to acquire the Property on or about January 15, 1998. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statement has been prepared in accordance with the applicable rules and regulations of the Securities and Exchange Commission for the acquisition of real estate properties. Accordingly, the financial statement excludes certain expenses that may not be comparable to those expected to be incurred by Wellsford Real Properties, Inc. in the proposed future operations of the Property. Expenses excluded consist of interest, depreciation and general and administrative expenses not directly related to the future operations. Construction was completed on the Property, consisting of several buildings, during June 1996. Accordingly, in accordance with Statement of Financial Accounting Standards No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, the accompanying statement of revenues and certain expenses reflects the rental revenues and expenses related to the buildings which comprise the Property from the time each building was substantially completed and held available for occupancy. Expenses incurred prior to that time have been capitalized. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The statement of revenues and certain expenses for the nine months ended September 30, 1997 is unaudited; however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the statement of revenues and certain expenses for this interim period have been included. The results of interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. Sonterra at Williams Centre Notes to Statements of Revenues and Certain Expenses (continued) 2. Summary of Significant Accounting Policies (continued) Revenue Recognition Rental income attributable to leases is recognized on a straight-line basis over the term of the leases, which are generally for one year. 3. Management and Leasing Agreements The Property is managed and leased by Lexford Properties, Inc. which, since July 1, 1996, provides property management services at the rate of 3.25% of gross cash receipts. Prior to July 1, 1996, such services were provided at a monthly amount of $9,000. 4. Property Operating Expenses Property operating expenses for the year ended December 31, 1996 include approximately $26,000 for insurance, $80,000 for utilities, $62,000 in general and administrative expenses, $88,000 in repair and maintenance costs, and $256,000 for payroll costs. Wellsford Real Properties, Inc. Pro Forma Consolidated Income Statement Nine Months Ended September 30, 1997 (In thousands except per share data) (Unaudited) Sonterra Pro Forma Historical Adjustments Pro Forma ---------- ----------- --------- REVENUE Rental income $ 1,260 $ 1,876 (A) $ 3,136 Interest income 4,125 (1,202) (B) 2,923 Joint venture income 160 160 ---------- --------- ---------- Total Revenue 5,545 674 6,219 EXPENSES Property operating and maintenance 241 385 (A) 626 Real estate taxes 106 143 (A) 249 General and administrative 1,521 1,521 Depreciation 221 475 (C) 696 Property management 18 64 (A) 82 ---------- --------- ---------- Total Expenses 2,107 1,067 3,174 ---------- --------- ---------- Income before income taxes 3,438 (393) 3,045 Provision for income taxes 1,003 (173) 830 (D) ---------- -------- --------- Net income $ 2,435 ($ 220) $ 2,215 ========== ========= ========== Net income per common share $ 0.14 $ 0.13 ========== ========== Weighted average common shares outstanding 16,912 16,912 ========== ========== Wellsford Real Properties, Inc. Notes to Pro Forma Consolidated Income Statement Nine Months Ended September 30, 1997 (Unaudited) (A) Represents historical operating revenues and expenses of the Sonterra property for the nine months ended September 30, 1997. (B) Represents the reversal of interest income from the $17.8 Sonterra Loan at 9% for nine months. (C) Represents depreciation on the Sonterra property for nine months utilizing a 27.5 year estimated useful life. (D) Represents the Company's estimated provision for federal and state income taxes at rates of 35% and 14%, respectively. Wellsford Real Properties, Inc. Pro Forma Consolidated Income Statement Year Ended December 31, 1996 (In thousands except per share data) (Unaudited) Sonterra Pro Forma Historical Adjustments Pro Forma ---------- ----------- --------- REVENUE Rental income $ 1,766 (A) $ 1,766 Interest income $ 757 (757) (B) 0 Joint venture income 0 ---------- --------- ---------- Total Revenue 757 1,009 1,766 ---------- --------- ---------- EXPENSES Property operating and maintenance 512 (A) 512 Real estate taxes 45 (A) 45 General and administrative 0 Depreciation 634 (C) 634 Property management 87 (A) 87 ----------- --------- ---------- Total Expenses 0 1,278 1,278 ----------- --------- ---------- Income before income taxes 757 (269) 488 Provision for income taxes (119) (119)(D) ----------- --------- ---------- Net income $ 757 ($ 150) $ 607 =========== ========= ========== Wellsford Real Properties, Inc. Notes to Pro Forma Consolidated Income Statement Year Ended December 31, 1996 (Unaudited) (A) Represents historical operating revenues and expenses of the Sonterra property for the year ended December 31, 1996. (B) Represents the reversal of interest income from the $17.8 Sonterra Loan at 9% for the period it was outstanding. (C) Represents depreciation on the Sonterra property for one year utilizing a 27.5 year estimated useful life. (D) Represents the Company's estimated provision for federal and state income taxes at rates of 35% and 14%, respectively. Wellsford Real Properties, Inc. Pro Forma Consolidated Balance Sheet September 30, 1997 (In thousands) (Unaudited) Sonterra Pro Forma Historical Adjustments Pro Forma ---------- ----------- --------- ASSETS Real estate assets, at cost: Land $ 0 $ 3,075 $ 3,075 Buildings and improvements 17,425 17,425 ---------- --------- ---------- 0 20,500 (A) 20,500 Less, accumulated depreciation 0 ---------- --------- ---------- 0 20,500 20,500 Construction in process 21,864 21,864 ---------- --------- ---------- 21,864 20,500 42,364 Notes receivable 145,880 (17,800) (A) 128,080 Investment in joint venture 32,425 32,425 ---------- --------- ---------- Total real estate assets 200,169 2,700 202,869 Cash and cash equivalents 5,533 (2,700) (A) 2,833 Restricted cash 6,717 6,717 Other assets 1,983 1,983 ---------- --------- ---------- Total Assets $ 214,402 $ 0 $ 214,402 ========== ========= ========== LIABILITIES AND EQUITY Liabilities: Tax exempt mortgage note payable $ 14,755 $ 14,755 Credit facility 10,000 10,000 Other liabilities 6,667 6,667 ---------- --------- ---------- Total Liabilities 31,422 0 31,422 ---------- --------- ---------- Commitments and contingencies - - - Minority Interest 3,092 3,092 Equity: Common Stock, 197,650,000 shares authorized - 16,572,043 shares, $.01 par value per share, issued and outstanding as adjusted 166 166 Class A Common Stock, 350,000 shares authorized - 339,806 shares, $.01 par value per share, issued and outstand- ing as adjusted 3 3 Series A 8% Convertible Redeemable Preferred Stock, 2,000,000 shares authorized - no shares, $.01 par value per share, issued and outstanding - - Paid in capital in excess of par value 178,288 178,288 Retained earnings 1,431 1,431 ---------- --------- ---------- Total Equity 179,888 0 179,888 ---------- --------- ---------- Total Liabilities and Equity $ 214,402 $ 0 $ 214,402 ========== ========= ========== Wellsford Real Properties, Inc. Notes to Pro Forma Consolidated Balance Sheet September 30, 1997 (In thousands) (Unaudited) (A) Represents the purchase of the Sonterra property for $20.5 million utilizing the Sonterra Loan balance of $17.8 million and $2.7 million of cash. -----END PRIVACY-ENHANCED MESSAGE-----