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 16, 1997)
Wellsford Real Properties, Inc.
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(Exact name of registrant as specified in its charter)
1-12917 13-3926898
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(Commission File Number) (IRS Employer Identification No.)
Maryland
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(State or other jurisdiction of incorporation)
610 Fifth Avenue, New York, New York 10020
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(Address of principal executive offices)
(Zip Code)
(212) 333-2300
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(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets
On December 16, 1997, Wellsford/Whitehall Properties, L.L.C. (the
"Purchaser"), a 50.1% subsidiary of Wellsford Commercial Properties Trust,
which is a 99.9% subsidiary of Wellsford Real Properties, Inc. (the
"Company"), acquired Mountain Heights Office Center ("Mountain Heights"),
located in Berkeley Heights, N.J. Mountain Heights is comprised of an
approximately 175,300 square foot building that is currently 100% occupied
and an approximately 109,800 square foot building that is currently vacant.
The Purchaser paid $29.1 million for Mountain Heights, $26.3 million of which
was funded through temporary financing with the proceeds of a loan from the
Company which pays interest at LIBOR plus 4% and is due in January 1998.
Permanent financing is expected to be secured on or about December 31, 1997.
Item 7. Financial Statements, Proforma Financial Information and Exhibits
(a) Financial Statements
The Mountain Heights 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.
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(Registrant)
Date: December 31, 1997 By: /s/Gregory F. Hughes
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Gregory F. Hughes
Chief Financial Officer
Statements of Revenues and
Certain Expenses
Mountain Heights Office Center
Year Ended December 31, 1996
with Report of Independent Auditors
Statements of Revenue and Certain Expenses
Mountain Heights Office Center
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 Mountain Heights Office Center (the "Property"), acquired
by Wellsford/Whitehall Properties, L.L.C., as described in Note 1, for the
year ended December 31, 1996. This financial statement is the responsibility
of the Wellsford/Whitehall Properties, L.L.C. 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 Mountain Heights
Office Center 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
Mountain Heights Office Center
Statements of Revenues and Certain Expenses
(in thousands)
(Note 1)
Nine
Months Year
Ended Ended
September December
30, 1997 31, 1996
----------- ----------
(unaudited)
Revenues:
Base Rents $ 2,677 $ 2,858
Tenant escalations and reimbursements 118 178
--------------------------
Total revenues 2,795 3,036
--------------------------
Certain Expenses:
Property operating expenses 769 1,061
Real estate taxes 356 516
Management fees 44 58
--------------------------
Total certain expenses 1,169 1,635
--------------------------
Revenues in excess of certain expenses $ 1,626 $ 1,401
==========================
See accompanying notes.
Mountain Heights Office Center
Notes to Statements of Revenues and Certain Expenses
For the Year Ended December 31, 1996
1. Basis of Presentation
Presented herein is the statements of revenues and certain expenses related
to the operations of two office buildings, Mountain Heights Office Center
(the "Property"), located in Berkeley Heights, New Jersey. The Property is
comprised of a 100% leased building and an unoccupied building to be
renovated. The Property was acquired by Wellsford/Whitehall Properties,
L.L.C. ("Wellsford Office") on December 16, 1997 from California State
Teachers Retirement Systems ("CalSters"). Wellsford Real Properties, Inc.
has a 50.1% interest in Wellsford Office.
The accompanying financial statements have 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 statements exclude certain expenses that may not be comparable to
those expected to be incurred by Wellsford Office 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.
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 statement 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.
2. Lease and Revenue Recognition
The Property is being leased to tenants under operating leases with leases
expiring at various dates over the next nine years. Minimum rental income is
generally recognized on a straight-line basis over the term of the lease. The
excess of amounts so recognized over amounts due pursuant to the underlying
leases amounted to approximately $257,000, for the year ended December 31,
1996. The lease agreements generally contain provisions which provide for
reimbursement of real estate taxes and operating expenses over base year
amounts, as well as fixed increases in rent.
3. Management and Leasing Agreements
During 1996 the Property was managed and leased by Compass Management and
Leasing, Inc.
Mountain Heights Office Center
Notes to Statements of Revenues and Certain Expenses (continued)
4. Property Operating Expenses
Property operating expenses for the year ended December 31, 1996 include
approximately $30,000 for insurance, $389,000 for utilities, $65,000 in
general and administrative expenses, $451,000 in repair and maintenance
costs, and $126,000 for payroll costs.
5. Significant Tenants
Five tenants accounted for approximately 19%, 11%, 9%, 9%, and 8% of the 1996
base rents on a straight line basis, respectively.
Wellsford Real Properties, Inc.
Pro Forma Consolidated Income Statement
Nine Months Ended September 30, 1997
(In thousands except per share data)
(Unaudited)
Mountain
Heights
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUE
Rental income $ 1,260 $ 1,260
Interest income 4,125 89 (A) 4,214
Joint venture income 160 (176) (B) (16)
---------- -------- ---------
Total Revenue 5,545 (87) 5,458
---------- -------- ---------
EXPENSES
Property operating and
maintenance 241 241
Real estate taxes 106 106
General and administrative 1,521 1,521
Depreciation 221 221
Property management 18 18
---------- --------- ----------
Total Expenses 2,107 0 2,107
---------- --------- ----------
Income before income taxes 3,438 (87) 3,351
Provision for income taxes 1,003 (38) 965 (C)
---------- --------- ----------
Net income $ 2,435 ($ 49) $ 2,386
========== ========= ==========
Net income per common share $ 0.14 $ 0.14
========== ==========
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 interest income on the net $1.3 million bridge loan draw by
Wellsford/Whitehall Properties, L.L.C. to fund the purchase of Mountain
Heights, for nine months at 9% (LIBOR + 3%).
(B) Represents nine months of operations of Mountain Heights as follows:
(In thousands)
Mountain Heights 1,626 Represents historical operating
revenues and expenses of this
asset for the nine months ended
September 30, 1997.
Depreciation expense (464) Represents depreciation on
Mountain Heights for nine months
utilizing a 40 year estimated
useful life.
Interest exp. - term loan (1,425) Represents interest on a $25.0
million draw on the
Wellsford/Whitehall Properties,
L.L.C. term loan for nine months
at 7.6% (LIBOR + 1.6%)
Interest exp. - Company
bridge loan (89) Represents interest on the net
$1.3 million Company bridge loan
draw to fund Mountain Heights,
for nine months at 9% (LIBOR +
3%)
________
(352)
Company interest through
WCPT 50.10%
________
($176)
========
(C) 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)
Mountain
Heights
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUE
Rental income $ 0
Interest income $ 757 $ 119 (A) 876
Joint venture income (620) (B) (620)
---------- --------- ----------
Total Revenue 757 (501) 256
---------- --------- ----------
EXPENSES
Property operating and
maintenance 0
Real estate taxes 0
General and administrative 0
Depreciation 0
Property management 0
---------- --------- ----------
Total Expenses 0 0 0
---------- --------- ----------
Income before income taxes 757 (501) 256
Provision for income taxes (221) (221)(C)
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Net income $ 757 ($ 280) $ 477
========== ========= ==========
Wellsford Real Properties, Inc.
Notes to Pro Forma Consolidated Income Statement
Year Ended December 31, 1996
(Unaudited)
(A) Represents interest income on the net $1.3 million bridge loan draw by
Wellsford/Whitehall Properties, L.L.C. to fund the purchase of Mountain
Heights, for one year at 9% (LIBOR + 3%).
(B) Represents one year of operations of Mountain Heights as follows:
(In thousands)
Mountain Heights 1,401 Represents historical operating
revenues and expenses of this
asset for the year ended December
31, 1996.
Depreciation expense (619) Represents depreciation on
Mountain Heights for one year
utilizing a 40 year estimated
useful life.
Interest exp. - term loan (1,900) Represents interest on a $25.0
million draw on the
Wellsford/Whitehall Properties,
L.L.C. term loan for one year at
7.6% (LIBOR + 1.6%)
Interest exp. - Company
bridge loan (119) Represents interest on the net
$1.3 million Company bridge loan
draw to fund Mountain Heights,
for one year at 9% (LIBOR + 3%)
________
(1,237)
Company interest through
WCPT 50.10%
________
($620)
========
(C) 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)
Mountain
Heights
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
ASSETS
Real estate assets, at cost:
Land $ 0 $ 0
Buildings and improvements 0
---------- --------- ----------
Less, accumulated
depreciation 0 0 0
---------- --------- ----------
0 0 0
Construction in process 21,864 21,864
---------- --------- ----------
21,864 0 21,864
Notes receivable 145,880 26,325 (A) 147,205
(25,000) (C)
Investment in joint venture 32,425 1,403 (B) 33,828
--------- ------- -------
Total real estate assets 200,169 2,728 202,897
Cash and cash equivalents 5,533 (26,325) (A) 2,805
(1,403) (B)
25,000 (C)
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
outstanding 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 a draw on the Company's bridge loan to Wellsford/Whitehall
Properties, L.L.C. to fund the purchase of Mountain Heights.
(B) Represents funding of the Company's capital contribution to
Wellsford/Whitehall Properties, L.L.C. for the purchase of Mountain
Heights.
(C) Represents repayment of a portion of the Company bridge loan using
proceeds from a draw on the Wellsford/Whitehall Properties, L.L.C. term
loan.