-----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, SKGO4IoThVZrhehpJ659ltXp8Jak0JmX4mvrLILr/zPFwdXqypCh0aTSOpbIADH7 Gu6M72gL5Pd0uiEXQzj6NQ== 0000910643-98-000048.txt : 19980515 0000910643-98-000048.hdr.sgml : 19980515 ACCESSION NUMBER: 0000910643-98-000048 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 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: 10-Q SEC ACT: SEC FILE NUMBER: 001-12917 FILM NUMBER: 98620751 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 10-Q 1 WELLSFORD REAL PROPERTIES, INC. 10-Q ENDED 3/31/98 ============================================================================= SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 - ----------------------------------------------------------------------------- FORM 10-Q - ----------------------------------------------------------------------------- {X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 ------------------------------------------ OR { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to _________________ Commission file number 1-12917 ------------------------------------------ Wellsford Real Properties, Inc. - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 13-3926898 - ------------------------------------- -------------------------------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 610 Fifth Avenue, New York, NY 10020 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 333-2300 - ----------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----------- ------------ Number of shares of common stock, $.01 par value per share, outstanding as of May 14, 1997: 20,009,882. Number of shares of Class A common stock, $.01 par value per share, outstanding as of May 14, 1997: 339,806. ============================================================================= WELLSFORD REAL PROPERTIES, INC. FORM 10-Q - ----------------------------------------------------------------------------- INDEX - ----------------------------------------------------------------------------- Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997 3 Consolidated Statements of Income (unaudited) for the three months ended March 31, 1998 and 1997 4 Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 1998 and 1997 5 Notes to Consolidated Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION 15 SIGNATURES 16 WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, 1998 1997 ------------ ------------ ASSETS (Unaudited) Real estate assets, at cost: Land $ 14,499,000 $ 5,225,000 Buildings and improvements 88,734,832 36,338,624 --------------- -------------- 103,233,832 41,563,624 Less, accumulated depreciation (551,675) -- --------------- -------------- 102,682,157 41,563,624 Construction in progress 18,551,157 17,177,824 ---------------- -------------- 121,233,314 58,741,448 Notes receivable 86,891,271 105,631,611 Investment in joint ventures 48,660,489 44,779,563 ---------------- -------------- Total real estate assets 256,785,074 209,152,622 Cash and cash equivalents 34,097,698 29,895,212 Restricted cash 7,428,941 7,695,910 Prepaid and other assets 5,916,685 3,229,956 --------------- -------------- Total Assets $ 304,228,398 $ 249,973,700 =============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage notes payable $ 65,568,316 $ 49,255,000 Credit facility -- 7,500,000 Accrued expenses and other liabilities 13,264,716 9,763,109 --------------- -------------- Total Liabilities 78,833,032 66,518,109 --------------- -------------- Commitments and contingencies -- -- Minority interest 3,919,658 2,297,295 Shareholders' Equity: Common Stock, 197,650,000 shares authorized - 20,009,882 shares, $.01 par value per share, issued and out- standing at March 31, 1998 200,099 166,567 Class A Common Stock, 350,000 shares authorized - 339,806 shares, $.01 par value per share, issued and outstanding at March 31, 1998 3,398 3,398 Series A 8% Convertible Redeemable Preferred Stock, $.01 par value per share, 2,000,000 shares authorized, no shares issued and outstanding -- -- Paid in capital in excess of par value 219,709,747 179,721,827 Retained Earnings 3,418,807 1,941,518 Deferred compensation (641,250) (657,014) Treasury stock (81,015 shares) (1,215,093) -- --------------- -------------- Total Shareholders' Equity 221,475,708 181,158,296 --------------- -------------- Total Liabilities and Shareholders' Equity $ 304,228,398 $ 249,973,700 =============== ============== See accompanying notes. WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, -------------------------------------------- 1998 1997 ------------------- ---------------- REVENUE Rental income $ 2,490,990 $ -- Interest income 3,468,312 400,500 ------------ ------------ Total Revenue 5,959,302 400,500 ------------ ------------ EXPENSES Property operating and maintenance 463,455 -- Real estate taxes 247,081 -- Depreciation and amortization 622,654 -- Property management 73,659 -- Interest 891,663 -- General and administrative 1,182,503 -- ------------- ------------- Total Expenses 3,481,015 -- ------------- ------------- Income from joint ventures 265,866 -- ------------- ------------- Income before minority interest 2,744,153 400,500 Minority interest (18,864) -- ------------- ------------- Income before taxes 2,725,289 400,500 Income tax expense 1,248,000 -- ------------- ------------- Net income $ 1,477,289 $ 400,500 ============= ============= Net income per common share, basic $ 0.08 $ 0.02 ============= ============= Net income per common share, diluted $ 0.08 $ 0.02 ============= ============= Weighted average number of common shares outstanding 18,376,910 16,911,849 ============= ============= See accompanying notes. WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, -------------------------------------------- 1998 1997 ------------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,477,289 $ 401,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 660,923 -- Income from joint ventures (265,866) -- Decrease (increase) in assets Restricted cash (984,124) 2,322,000 Prepaid and other assets (2,717,768) -- (Decrease) increase in liabilities Accrued expenses and other liabilities 3,429,423 -- ---------------- ------------- Net cash provided by operating activities 1,635,877 2,723,000 ---------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in real estate assets (87,775,709) (26,500,000) Investment in notes receivable (2,233,751) -- Investment in joint ventures (2,909,505) -- Repayments from notes receivable 27,653,521 -- Proceeds from sale of real estate assets 59,018,737 -- ---------------- -------------- Net cash provided by (used in) investing activities (6,246,707) (26,500,000) ---------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from credit facility 48,000,000 -- Repayment of credit facility (55,500,000) -- Proceeds from mortgage notes payable 16,400,000 -- Repayment of mortgage notes payable (86,684) -- Issuance of note payable to Trust -- 21,611,000 Equity contributions -- 2,166,000 --------------- ------------- Net cash provided by (used in) financing activities 8,813,316 23,777,000 --------------- ------------- Net (increase) in cash and cash equivalents 4,202,486 -- Cash and cash equivalents, beginning of period 29,895,212 -- ---------------- -------------- Cash and cash equivalents, end of period $ 34,097,698 $ -- ================ ============== SUPPLEMENTAL INFORMATION: Cash paid during the period for interest $ 903,728 $ 343,000 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Shares issued in connection with acquisition of commercial office properties and notes receivable $(39,362,500) $ (2,250,000) Warrants issued in connection with acquistion of joint venture investment $ (750,000) $ -- See accompanying notes. WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. General Wellsford Real Properties, Inc. (the "Company") was formed on January 8, 1997, as a corporate subsidiary of Wellsford Residential Property Trust (the "Trust"). On May 30, 1997, the Trust merged (the "Merger") with Equity Residential Properties Trust ("EQR"). Immediately prior to the Merger, the Trust contributed certain of its assets to the Company and the Company assumed certain liabilities of the Trust. Immediately after the contribution of assets to the Company and immediately prior to the Merger, the Trust distributed to its common shareholders all the outstanding shares of the Company owned by the Trust (the "Spin-off"). On June 2, 1997, the Company sold 12,000,000 shares of its common stock in a private placement (the "Private Placement") to a group of institutional investors at $10.30 per share, the Company's then book value per share. The Company is a real estate merchant banking firm which acquires, develops and operates real properties and invests in the debt and equity securities of private and public real estate companies. The Company has established three strategic business units ("SBUs") within which it intends to execute its business plan: an SBU for commercial property operations which is held in its 99.9% subsidiary, Wellsford Commercial Properties Trust ("WCPT"), an SBU for debt and equity activities and an SBU for property development and land operations. On August 28, 1997, the Company, through WCPT, in a joint venture with WHWEL Real Estate Limited Partnership ("Whitehall"), an affiliate of Goldman, Sachs & Co., formed a private real estate operating company, Wellsford/Whitehall Properties, L.L.C. ("Wellsford Commercial"). The accompanying consolidated financial statements include the assets and liabilities contributed to and assumed by the Company from the Trust, from the time such assets and liabilities were acquired or incurred, respectively, by the Trust. Such financial statements have been prepared using the historical basis of the assets and liabilities and the historical results of operations related to the Company's assets and liabilities. The accompanying consolidated financial statements and related notes of the Company have been prepared in accordance with generally accepted accounting principles for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles have been condensed or omitted pursuant to such rule. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows have been included and are of a normal and recurring nature. These financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 2. Industry Segments and Recent Activities Commercial Property Operations The Company's commercial property operations segment consists of Wellsford Commercial, which is accounted for on the equity method. Wellsford Commercial had net real estate assets of $236.8 million, total assets of $250.9 `million, term loans and credit facility debt of $162.2 million and equity of $80.8 million at March 31, 1998. During the quarter ended March 31, 1998, Wellsford Commercial earned $8.0 million in total revenues, primarily rental income, and incurred $3.2 million of operating expenses, $2.7 million of interest expense, $1.1 million of depreciation, and $0.6 million of general and administrative expense, resulting in net income of $0.4 million. On February 12, 1998, Wellsford Commercial entered into an option agreement to enter into a contribution agreement whereby a 972,000 square foot ("SF") portfolio of thirteen office buildings would be contributed to Wellsford Commercial for $146.9 million. In April 1998, Wellsford Commercial exercised its option to enter into the contribution agreement. On February 20, 1998, Wellsford Commercial acquired a 65,000SF office building in Boston, MA for $5.5 million ("15 Broad Street") and 19 acres of undeveloped land in Somerset, NJ for $2.0 million ("600 Atrium Drive"), which is adjacent to four buildings currently owned by Wellsford Commercial. In March 1998, Wellsford Commercial purchased an 80,000SF property for approximately $5.4 million. Debt and Equity Activities In January 1998, the Company acquired a 49% interest in Creamer Realty Consultants, a real estate advisory and consulting firm, and formed Creamer Vitale Wellsford, L.L.C. ("Creamer Vitale Wellsford"). Creamer Realty Consultants and Creamer Vitale Wellsford, together with Prudential Real Estate Investors ("PREI"), a division of Prudential Investment Corporation, have established the Clairborne Investors Mortgage Investment Program to make opportunistic investments and to provide liquidity to participants in large syndicated mortgage loan transactions. The parties have agreed to contribute up to $150 million to fund acquisitions approved by the parties, of which a subsidiary of the Company will fund 10%. Creamer Vitale Wellsford will originate, co- invest, and manage the investments of the program. The Company's original investment in these entities was $1.3 million of cash and 148,000 five-year warrants to purchase the Company's common shares at $15.175 per share, valued at approximately $0.7 million. On February 27, 1998, the Company completed the previously announced merger (the "VLP Merger") with Value Property Trust ("VLP") for total consideration of approximately $169 million. Thirteen of the twenty VLP properties, which were under contract to an affiliate of Whitehall, were subsequently sold for an aggregate of approximately $64 million. Approximately $4.7 million of the purchase price was recorded as a net deferred tax asset reflecting the value of VLP's net operating loss carryforwards. $48 million was drawn on the Company's credit facility to finance the VLP Merger, which was subsequently repaid primarily from the proceeds of the mortgage on Sonterra at Williams Centre (see below) and cash received from VLP. In December 1997, a subsidiary of the Company joined with Fleet Real Estate Inc. to advance $19.6 million under a subordinated credit facility to Industrial Properties Holding, L.P. On February 5, 1998, the Company's $9.8 million portion of this loan was repaid, at which time the Company received a total of $0.8 million in interest and fees. Land and Development Operations In January 1998, the Company acquired Sonterra at Williams Centre, a 344-unit class A residential complex in Tucson, Arizona for approximately $20.5 million. The Company had previously held a $17.8 million mortgage on the property. On February 26, 1998, the Company obtained a $16.4 million mortgage on Sonterra at Williams Centre, bearing interest at 6.87% and having a term of 10 years and principal payments based on a 30 year amortization schedule. Other In January 1998, the $7.5 million then outstanding on the Company's credit facility was repaid. On March 11, 1998, the Company issued additional options to purchase common shares of the Company to two of its officers. Each of the two officers received 100,000 options with an exercise price of $17.50 per share and 100,000 options with an exercise price of $20.00 per share. The options have a term of 10 years and vest, in equal amounts, over five years.
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued) (table in thousands) Commercial Land and Property Debt and Equity Development Operations Activities Operations Other Consolidated ------------------- ------------------- ------------------- ------------------- ------------------- Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended March 31, March 31, March 31, March 31, March 31, ------------------- ------------------- ------------------- ------------------- ------------------- 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Rental Income $ -- $ -- $ 454 $ -- $ 2,037 $ -- $ -- $ -- $ 2,491 $ -- Interest Income -- -- 3,076 -- -- 401 391 -- 3,467 401 ----------------------------------------------------------------------------------------------------------- Total Income -- -- 3,530 -- 2,037 401 391 -- 5,958 401 ----------------------------------------------------------------------------------------------------------- Operating Expense -- -- 204 -- 580 -- -- -- 784 -- Depreciation and amortization -- -- 64 -- 487 -- 72 -- 623 -- Interest -- -- 237 -- 655 -- -- -- 892 -- General and administrative -- -- 13 -- -- -- 1,169 -- 1,182 -- ----------------------------------------------------------------------------------------------------------- Total Expenses -- -- 518 -- 1,722 -- 1,241 -- 3,481 -- ----------------------------------------------------------------------------------------------------------- Income from joint ventures 187 -- 79 -- -- -- -- -- 266 -- Minority interest -- -- (8) -- (10) -- -- -- (18) -- ----------------------------------------------------------------------------------------------------------- Income (loss) before taxes $ 187 $ -- $ 3,083 $ -- $ 305 $ 401 $ (850) $ -- $ 2,725 $ 401 =========================================================================================================== Total Assets $46,486 $23,861 $152,513 $ -- $81,823 $45,077 $23,406 $ -- $304,228 $68,938 =========================================================================================================== /TABLE 3. Earnings Per Share In 1997, Financial Accounting Standards Board Statement ("SFAS") No. 128 "Earnings per Share" was issued. SFAS 128 replaced the calculation of primary and fully diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to fully diluted earnings per share. All earnings per share amounts for all periods have been presented to conform to the SFAS 128 requirements. Basic earnings per common share are computed based upon the weighted average number of common shares outstanding during the period, including Class A common shares. Diluted earnings per common share for the three months ended March 31, 1998 are based upon the increased number of common shares that would be outstanding assuming the exercise of dilutive common share options (317,127) and warrants (643,533), under the treasury stock method. Diluted earnings per common share for the three months ended March 31, 1997 are equal to basic earnings per common share. The Company was a corporate subsidiary of the Trust prior to the Spin- off. Earnings per share was calculated using the weighted average number of shares outstanding assuming that the Spin-off and the Company's $123.6 million June 1997 private placement of common shares occurred on January 1, 1997. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1. General The Company is a real estate merchant banking firm which acquires, develops and operates real properties and invests in the debt and equity securities of private and public real estate companies. The Company has established three strategic business units ("SBUs") within which it intends to execute its business plan: an SBU for commercial property operations which is held in its 99.9% subsidiary, Wellsford Commercial Properties Trust ("WCPT"), an SBU for debt and equity activities and an SBU for property development and land operations. Commercial Property Operations - WCPT The Company, through WCPT, seeks to acquire commercial properties below replacement cost and operate and/or resell the properties after renovation, redevelopment and/or repositioning. The Company believes that appropriate well-located commercial properties which are currently underperforming can be acquired on advantageous terms and repositioned with the expectation of achieving returns which are greater than returns which could be achieved by acquiring a stabilized property. Debt and Equity Activities - dba Wellsford Capital Company The Company makes loans that constitute, or will invest in, real estate- related senior, junior or otherwise subordinated debt instruments, which may be unsecured or secured by liens on real estate, interests therein or the economic benefits thereof, and which have the potential for high yields or returns more characteristic of equity ownership. These investments may include debt that is acquired at a discount, mezzanine financing, commercial mortgage-backed securities ("CMBS"), secured and unsecured lines of credit, distressed loans, and loans previously made by foreign and other financial institutions. The Company believes that there are opportunities to acquire real estate debt, especially in the low or below investment grade tranches, at significant returns as a result of inefficiencies in pricing, while utilizing management's real estate expertise to analyze the underlying properties and thereby effectively minimizing risk. Property Development and Land Operations - dba Wellsford Development Company The Company engages in selective development activities as opportunities arise and when justified by expected returns. The Company believes that by pursuing selective development activities it can achieve returns which are greater than returns which could be achieved by acquiring stabilized properties. Certain development activities may be conducted in joint ventures with local developers who may bear the substantial portion of the economic risks associated with the construction, development and initial rent-up of properties. As part of its strategy, the Company may seek to obtain bond financing from local governmental authorities which generally bears interest at rates substantially below rates available from conventional financing. The principal asset of the property development and land operations SBU is an 80% interest in Palomino Park, a 1,880 unit class A multifamily development in a suburb of Denver, Colorado. The Company currently has invested $18.6 million through March 31, 1998 in the following multifamily development project, which is the second phase of Palomino Park: Number Estimated Estimated Name of Units Location Total Cost Stabilization Date ---- -------- -------- ---------- ------------------ Red Canyon 304 Denver $33.6 million First Qtr. 1999 This project is being developed pursuant to a fixed-price contract. The Company is committed to purchase 100% of this project upon completion and the achievement of certain occupancy levels, which is anticipated to occur at the date disclosed above. Red Canyon is owned by Red Canyon at Palomino Park LLC ("Phase II LLC"), a limited liability company, the members of which are Wellsford Park Highlands Corp. (99%), a majority owned and controlled subsidiary of the Company, and Al Feld ("Feld") (1%). Feld is a Denver-based developer specializing in the construction of luxury residential properties. Feld has constructed over 3,000 units since 1984. The construction loan on Red Canyon is for approximately $29.5 million, matures on September 29, 1999 (with a 6-month extension at the option of the Phase II LLC upon fulfillment of certain conditions), and bears interest at LIBOR plus 1.65%. Feld has guaranteed repayment of this loan. An affiliate of EQR has agreed to purchase the Phase II construction loan when due (the "EQR Take-out Commitment"), assuming completion of construction, if it is not satisfied by the Phase II LLC or by Feld pursuant to his guarantee, for the lesser of the loan balance or the final agreed upon budget. Risks Associated with Forward-Looking Statements. This Form 10-Q, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following, which are discussed in greater detail in the "Risk Factors" section of the Company's registration statement on Form S-11 (file No. 333-32445) filed with the Securities and Exchange Commission on July 30, 1997, as may be amended, which is incorporated herein by reference: general economic and business conditions, which will, among other things, affect demand for commercial and residential properties, availability and credit worthiness of prospective tenants, lease rents and the availability of financing; difficulty of locating suitable investments; competition; risks of real estate acquisition, development, construction and renovation; vacancies at existing commercial properties; dependence on rental income from real property; adverse consequences of debt financing; risks of investments in debt instruments, including possible payment defaults and reductions in the value of collateral; illiquidity of real estate investments; lack of prior operating history; and other risks listed from time to time in the Company's reports filed with the SEC. Therefore, actual results could differ materially from those projected in such statements. 2.Results of Operations Comparison of the three months ended March 31, 1998 to the three months ended March 31, 1997. Prior to the Company's 1997 investments, the Company's operations consisted of earning interest income on the Sonterra Mortgage (originated in July 1996) and the initial phase of construction development activity with respect to Palomino Park. Therefore, the increase in operating revenues and expenses reflected in the financial statements is a result of the acquisition of primarily all of the Company's operating assets subsequent to March 31, 1997. 3. Liquidity and Capital Resources The Company expects to meet its short-term liquidity requirements generally through its working capital and cash flow provided by operations. The Company considers its ability to generate cash to be adequate and expects it to continue to be adequate to meet operating requirements both in the short and long terms. The Company expects to meet its long-term liquidity requirements such as refinancing mortgages, financing acquisitions and development, and financing capital improvements by long-term borrowings, through the issuance of debt and the offering of additional debt and equity securities. The Company has (i) the commitment, until May 30, 2000, of an affiliate of EQR to acquire at the Company's option up to $25 million of the Company's Series A 8% Convertible Redeemable Preferred Stock ("Series A Preferred"), each share of which is convertible into shares of common stock at a price of $11.124 (the "EQR Preferred Commitment") and (ii) a $50 million two-year line of credit (extendible for one year) from BankBoston, N.A. and Morgan Guaranty Trust Company of New York (the "Line of Credit") which initially bears interest at an annual rate equal to LIBOR plus 175 basis points. The EQR Preferred Commitment is pledged as security for the Line of Credit. If at May 30, 2000, the affiliate of EQR has purchased less than $25 million of Series A Preferred, it has the right to purchase the remainder of the $25 million not purchased prior to that time. As of March 31, 1998, no balance was outstanding under the Line of Credit. Creamer Realty Consultants and Creamer Vitale Wellsford, together with Prudential Real Estate Investors ("PREI"), a division of Prudential Investment Corporation, have established the Clairborne Investors Mortgage Investment Program to make opportunistic investments and to provide liquidity to participants in large syndicated mortgage loan transactions. The parties have agreed to contribute up to $150 million to fund acquisitions approved by the parties, of which a subsidiary of the Company will fund 10%. Creamer Vitale Wellsford will originate, co- invest, and manage the investments of the program. Wellsford Commercial has a $375 million loan facility (the "Wellsford Commercial Bank Facility") from BankBoston and Goldman Sachs Mortgage Company, consisting of a secured term loan facility of up to $225 million and a secured revolving credit facility of up to $150 million. The term loan facility bears interest at LIBOR +1.6% and has a term of four years; the revolving credit facility bears interest at LIBOR +2.5% and has a term of three years, which may be renewed by Wellsford Commercial for one additional year. As of March 31, 1998, approximately $162.2 million was outstanding under the Wellsford Commercial Bank Facility ($107.9 million of which was under the term loan). PART II. OTHER INFORMATION Item 1: Legal Proceedings - Not Applicable. Item 2: Changes in Securities The following table is a summary of certain information relating to all securities of the Company sold by the Company during the period covered by this report that were not registered under the Securities Act (the "Private Placements"): Persons or Class Type of Date Amount of of Persons to Securities of Securities Whom Securities Sold Sale Sold Sold Consideration ---------- ------- ---------- -------------------- ------------- Warrants 1/20/98 148,000(1) Frank G. Creamer, Jr. (2) Michael J. Vitale (1) In connection with the Company's investment in Creamer Realty Consultants, the Company issued 74,000 warrants to each of Frank G. Creamer, Jr. and Michael J. Vitale to purchase shares of Common Stock at an exercise price of approximately $15.175 per share. The Warrants are exercisable for five years. (2) In consideration for the Company's acquisition of a 49% interest in Creamer Realty Consultants. The Company conducted the Private Placements pursuant to Section 4(2) of the Securities Act. There was no underwriter involved in the Private Placements. Item 3: Defaults upon Senior Securities - Not Applicable. Item 4: Submission of Matters to a Vote of Security Holders - Not Applicable. Item 5: Other Information - Not Applicable. Item 6: Exhibits and Reports on Form 8-K (a) Exhibits filed with this Form 10-Q: 27.1 Financial Data Schedule (EDGAR Filing Only) (b) Reports on Form 8-K filed by the registrant during its fiscal quarter ended March 31, 1998: - Form 8-K filed January 8, 1998, relating to participation by a subsidiary of the Company in a subordinated credit facility. - Form 8-K filed January 15, 1998, relating to the Company's completed development of Blue Ridge at Palomino Park. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WELLSFORD REAL PROPERTIES, INC. By:/s/ Jeffrey H. Lynford __________________________________________________ Jeffrey H. Lynford, Chairman of the Board /s/ Gregory F. Hughes, __________________________________________________ Gregory F. Hughes, Chief Financial Officer Dated: May 14, 1998 EX-27 2
5 This Schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of operations and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1997 MAR-31-1998 41,526,639 0 86,891,271 0 0 47,443,324 121,784,989 (551,675) 304,228,398 13,264,716 65,568,316 203,497 0 0 221,272,211 304,228,398 0 6,225,168 0 1,406,849 1,182,503 0 891,663 2,725,289 1,248,000 1,477,289 0 0 0 1,477,289 0.08 0.08
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