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) August 6, 1998
(June 10, 1998)
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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 5. Other Events
On June 10, 1998, Wellsford Real Properties, Inc.'s unconsolidated
subsidiary, Wellsford/Whitehall Properties, L.L.C. ("Wellsford Office")
purchased from New Boston Shattuck Limited Partnership, a Massachusetts
limited partnership, a 63,000 square foot office building known as Shattuck
Office Center located in Andover, MA for approximately $7.4 million.
Subsequent to the transaction, Wellsford Office merged with and into
Wellsford/Whitehall Holdings, L.L.C., its wholly-owned subsidiary ("WWH").
As a result of the merger, Shattuck Office Center is now owned by WWH.
On June 26, 1998, WWH purchased from 180/188 Mt. Airy Road, L.L.C., a
Delaware limited liability company, two office buildings totaling 100,000
square feet known as 180/188 Mt. Airy Road located in Basking Ridge, NJ for
approximately $15.0 million.
Both acquisitions were financed with borrowings under the Company's bank
credit facilities.
Refer to Item 7 for financial statements relating to the acquisitions.
Item 7. Financial Statements, Proforma Financial Information and Exhibits
(a) Financial Statements
Shattuck Office Center Financial Statements:
Independent Auditors' Report of Ernst & Young LLP dated
June 17, 1998.
Combined Statements of Revenues and Certain Expenses for the
three months ended March 31, 1998 (unaudited) and for the
year ended December 31, 1997.
180/188 Mt. Airy Road Financial Statements:
Independent Auditors' Report of Ernst & Young LLP dated
June 15, 1998.
Combined Statements of Revenue and Certain Expenses for the
three months ended March 31, 1998 (unaudited) and for the
year ended December 31, 1997.
(b) Pro Forma Financial Information
Wellsford Real Properties, Inc. and Subsidiaries Pro Forma
Financial Statements:
Pro Forma Consolidated Income Statement for the
Three Months Ended March 31, 1998 (unaudited) and related
footnotes.
Pro Forma Consolidated Income Statement for the Year
Ended December 31, 1997 (unaudited) and related footnotes.
Pro Forma Consolidated Balance Sheet as of
March 31, 1998 (unaudited) and related footnotes.
(c) Exhibits
23.1 Consent of Ernst & Young LLP dated August 3, 1998, relating to
Shattuck Office Center.
23.2 Consent of Ernst & Young LLP dated August 3, 1998, relating to
180/188 Mt. Airy Road.
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 August 6, 1998 By: /s/ Gregory F. Hughes
---------------------------
Gregory F. Hughes
Chief Financial Officer
Statement of Revenues
and Certain Expenses
Shattuck Office Center
Year Ended December 31, 1997
with Report of Independent Auditors
Shattuck Office Center
Statement of Revenues and Certain Expenses
Year Ended December 31, 1997
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 Shattuck Office Center ("Shattuck"), acquired by
Wellsford/Whitehall Properties, L.L.C., as described in Note 1, for the year
ended December 31, 1997. 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
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 Shattuck'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 Shattuck as
described in Note 1 for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
June 17, 1998
Shattuck Office Center
Statements of Revenues and Certain Expenses
(Note 1)
Three months
ended Year ended
March 31, 1998 December 31, 1997
-----------------------------------
(unaudited)
Revenues:
Base rents $260,585 $963,583
Tenant escalations and reimbursements 24,062 112,083
Other income 7,000 2,171
--------------------------------
Total revenues 291,647 1,077,837
--------------------------------
Certain expenses:
Property operating expenses 75,196 339,256
Real estate taxes 26,601 112,352
Management fees 12,146 52,046
--------------------------------
Total certain expenses 113,943 503,654
--------------------------------
Revenues in excess of certain expenses $177,704 $574,183
================================
See accompanying notes.
Shattuck Office Center
Notes to Statements of Revenues and Certain Expenses
Year Ended December 31, 1997
1. Basis of Presentation
Presented herein are the statements of revenues and certain expenses related
to the operations of the commercial real estate property located in Andover,
Massachusetts, known as Shattuck Office Center ("Shattuck"). Shattuck was
acquired by Wellsford/Whitehall Properties, L.L.C. ("Wellsford Office") on
June 10, 1998 from New Boston Shattuck Limited Partnership ("NB Shattuck
L.P."). Wellsford Real Properties, Inc. owns an approximate 47.5% interest in
Wellsford Office.
The accompanying financial statement has been prepared in accordance with
applicable rules and regulations of the Securities and Exchange Commission
for the acquisition of real estate property. Accordingly, the financial
statement excludes certain expenses that may not be comparable to those
expected to be incurred by Wellsford Office in the proposed future operations
of Shattuck. Expenses excluded consist of interest, depreciation,
amortization, 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 statements and accompanying
notes. Actual results could differ from those estimates.
The statement of revenues and certain expenses for the three months ended
March 31, 1998 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
Shattuck is being leased to tenants under operating leases. Minimum rental
income is generally recognized on a straight-line basis over the term of the
lease. Amounts recognized on a straight-line basis for the year ended
December 31, 1997 did not differ materially from amounts due pursuant to the
underlying leases. The lease agreements generally contain provisions which
provide for reimbursements of real estate taxes and operating expenses over
base year amounts, as well as fixed increases in rent.
Shattuck Office Center
Notes to Statements of Revenues and Certain Expenses (continued)
3. Related Party Transactions
During 1997, Shattuck was managed by New Boston Management Services, Inc.
("NBMS"), an affiliate of New Boston Fund, Inc. ("NBF"). NBF is the general
partner of NB Shattuck L.P. and asset manager of Shattuck. NBMS provides
property management services at a rate of 3.5% of gross revenue, as defined,
collected. NBF provides asset management services to Shattuck at a rate of
1.5% of gross revenue, as defined, collected.
In addition, NBF and its affiliates provide construction management and
leasing services to Shattuck. Construction management services are provided
to Shattuck at a rate of 6% of the cost of certain tenant and capital
improvements.
4. Property Operating Expenses
Property operating expenses for the year ended December 31, 1997 include
approximately $158,000 for utilities, $119,000 in repair and maintenance
costs, $39,000 for payroll costs, $15,000 for security costs, and $8,000 for
general and administrative expenses.
5. Significant Tenants
Four tenants accounted for approximately 33%, 17%, 14%, and 11% of the 1997
base rents on a straight line basis, respectively.
6. Tenants' Leases
Shattuck is a multi-tenant office building with leases expiring at various
dates over the next six years. Minimum future fixed base rents under
noncancelable leases as of December 31, 1997 are as follows:
Year ending December 31:
1998 $1,009,000
1999 933,000
2000 684,000
2001 512,000
2002 369,000
Thereafter 195,000
-----------
$3,702,000
===========
Statements of Revenue
and Certain Expenses
180/188 Mt. Airy Road
For the three months ended March 31, 1998
(unaudited) and the year ended December 31, 1997
180/188 Mt. Airy Road
Statements of Revenue and Certain Expenses
For the three months ended March 31, 1998 (unaudited)
and the year ended December 31, 1997
Contents
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . .1
Statements of Revenue and Certain Expenses . . . . . . . . . . . . . . . . .2
Notes to Statements of Revenues and Certain Expenses . . . . . . . . . . . .3
Report of Independent Auditors
Board of Directors of
Wellsford Real Properties, Inc.
We have audited the statement of revenue and certain expenses of 180/188 Mt.
Airy Road (the "Property") for the year ended December 31, 1997. The
statement of revenue and certain expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on the
statement of revenue and certain expenses 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 statement of revenue and
certain expenses is free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the statement of revenue and certain expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement
of revenue and certain expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenue 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
revenue and expenses.
In our opinion, the statement of revenue and certain expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses, as described in Note 2, of the Property for the year ended December
31, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
June 15, 1998
180/188 Mt. Airy Road
Statements of Revenue and Certain Expenses
(all dollars rounded to nearest 00s)
Three months
ended Year ended
March 31, 1998 December 31,
(unaudited) 1997
-------------------------------
Revenue
Office rental $386,700 $1,927,700
Escalation and other 28,500 221,100
-------------------------------
Total revenue 415,200 2,148,800
Expenses
Utilities 69,300 270,000
Repair and maintenance 22,200 118,200
Real estate taxes 47,000 182,600
Property management 13,200 59,800
Other property operating 42,800 187,000
-------------------------------
Total expenses 194,500 817,600
-------------------------------
Revenue in excess of certain expenses $220,700 $1,331,200
===============================
See accompanying notes.
180/188 Mt. Airy Road
Notes to Statements of Revenue and Certain Expenses
Year Ended December 31, 1997
1. Business
The accompanying statements of revenue and certain expenses relate to the
operations of 180/188 Mt. Airy Road (the "Property"), which consists of two
commercial office buildings and an adjacent single family residence located
in Somerset County, New Jersey. The Property had a total of nine tenants at
December 31, 1997, three of which account for approximately sixty-nine
percent of the rental revenue for the Property for the year ended December
31, 1997.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying statements of revenue and certain expenses were 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. The statements are not representative of the actual operations of the
Property for the periods presented nor indicative of future operations, as
certain expenses, primarily depreciation, amortization and interest, have
been excluded.
Revenue Recognition
Rental income is recognized as income in the period earned. Certain leases
of the Property provide for tenant occupancy during periods for which no rent
is due or where minimum rent payments increase during the term of the lease.
The Property records rental income for the full term of each lease on a
straight-line basis.
Use of Estimates
The preparation of the statements of revenue and certain expenses 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.
3. Property Management Fees
The Property is managed and leased by an affiliate of the current owner at a
rate of 3% of defined gross cash receipts.
180/188 Mt. Airy Road
Notes to Statements of Revenue
and Certain Expenses (continued)
4. Rentals
The Property has leases expiring at various dates over the next forty-five
years. Minimum future rentals to be received under non-cancelable leases
executed as of March 31, 1998, exclusive of tenant reimbursements and
contingent rentals, are as follows:
Period ending December 31:
1998 $1,149,000
1999 1,515,900
2000 1,210,100
2001 717,100
2002 571,200
Thereafter 670,000
----------
$5,833,300
==========
The leases generally provide for tenants to share in increases in operating
expenses and real estate taxes in excess of specified base amounts.
5. Interim Period (Unaudited)
The unaudited statement of revenue and certain expenses for the three months
ended March 31, 1998 has been prepared in accordance with generally accepted
accounting principles for interim financial information. In the opinion of
management, all adjustments of a normal recurring nature considered necessary
for a fair presentation have been included. Operating results for the period
from January 1, 1998 to March 31, 1998 are not necessarily indicative of
future operating results.
Wellsford Real Properties, Inc.
Pro Forma Consolidated Income Statement
Three Months Ended March 31, 1998
(In thousands except per share data)
(Unaudited)
Shattuck/
Mt. Airy
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUE
Rental income $2,491 $2,491
Interest income 3,468 (37) (A) 3,431
Joint Venture income 266 (38) (B) 228
------------------------ ---------
Total Revenue 6,225 (75) 6,150
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EXPENSES
Property operating and maint. 463 463
Real estate taxes 247 247
General and administrative 1,183 1,183
Depreciation 622 622
Interest 892 892
Property management 74 74
------------------------ ---------
Total Expenses 3,481 0 3,481
------------------------ ---------
Minority Interest (19) (19)
------------------------ ---------
Income before income taxes 2,725 (75) 2,650
Provision for income taxes 1,248 (33) (C) 1,215
------------------------ ---------
Net income $1,477 ($42) $1,435
======================== =========
Net income per common
share, basic and diluted $0.08 $0.08
============= =========
Weighted average common
shares outstanding 18,377 18,377
============= =========
Wellsford Real Properties, Inc.
Notes to Pro Forma Consolidated Income Statement
Three Months Ended March 31, 1998
(Unaudited)
(A) Represents three months of interest income on the cash contributed in
connection with the acquisition of 180/188 Mt. Airy Road and Shattuck
Office Center.
(B) Represents three months of operations of 180/188 Mt. Airy Road and
Shattuck Office Center as follows:
(In thousands)
180/188 Mt. Airy Road $221 Represents historical
operating revenues and
expenses of this asset for
the three months ended March
31, 1998.
Shattuck Office Center 178 Represents historical
operating revenues and
expenses of this asset for
the three months ended March
31, 1998.
Depreciation expense (119) Represents depreciation for
three months utilizing a 40
year estimated useful life.
Interest expense - BOB (359) Represents interest on the
$18.2 million draws on the
BOB term loan and revolver
for three months at
approximately 7.9% (LIBOR +
an average of 1.9%).
--------
(79)
Company interest 47.50%
--------
($38)
========
(C) Represents the Company's estimated provision for federal
and state income taxes at rates of 35% and 15%, respectively.
Wellsford Real Properties, Inc.
Pro Forma Consolidated Income Statement
Year Ended December 31, 1997
(In thousands except per share data)
(Unaudited)
Shattuck/
Mt. Airy
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUE
Rental income $1,292 $1,292
Interest income 7,779 (150) (A) 7,629
Joint Venture income 15 (3) (B) 12
------------------------ ---------
Total Revenue 9,086 (153) 8,933
------------------------ ---------
EXPENSES
Property operating and maint. 241 241
Real estate taxes 106 106
General and administrative 3,160 3,160
Depreciation 295 295
Interest 0 0
Property management 18 18
------------------------ ---------
Total Expenses 3,820 0 3,820
------------------------ ---------
Income before income taxes 5,266 (153) 5,113
Provision for income taxes 2,213 (69) (C) 2,144
------------------------ ---------
Net income $3,053 ($84) $2,969
======================== =========
Net income per common
share, basic and diluted $0.18 $0.18
============ =========
Weighted average common
shares outstanding 16,922 16,922
============ =========
Wellsford Real Properties, Inc.
Notes to Pro Forma Consolidated Income Statement
Year Ended December 31, 1997
(Unaudited)
(A) Represents one year of interest income on the cash contributed in
connection with the acquisition of 180/188 Mt. Airy Road and Shattuck
Office Center.
(B) Represents one year of operations of 180/188 Mt. Airy Road and Shattuck
Office Center as follows:
(In thousands)
180/188 Mt. Airy Road $1,331 Represents historical operating
revenues and expenses of this
asset for the year ended
December 31, 1997.
Shattuck Office Center 574 Represents historical operating
revenues and expenses of this
asset for the year ended
December 31, 1997.
Depreciation expense (476) Represents depreciation for one
year utilizing a 40 year
estimated useful life.
Interest expense - BOB (1,436) Represents interest on the
$18.2 million draws on the BOB
term loan and revolver for one
year at approximately 7.9%
(LIBOR + an average of 1.9%).
--------
(7)
Company interest 47.50%
--------
($3)
========
(C) Represents the Company's estimated provision for federal
and state income taxes at rates of 35% and 15%, respectively.
Wellsford Real Properties, Inc.
Pro Forma Consolidated Balance Sheet
March 31, 1998
(In thousands)
(Unaudited)
Shattuck/
Mt. Airy
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
ASSETS
Real estate assets, at cost:
Land $14,499 $14,499
Buildings and improvements 88,735 88,735
---------------------- ---------
103,234 0 103,234
Less, accumulated
depreciation (552) (552)
---------------------- ---------
102,682 0 102,682
Construction in process 18,551 18,551
---------------------- ---------
121,233 0 121,233
Notes receivable 86,891 86,891
Investment in joint venture 48,660 3,740 (A) 52,400
---------------------- ---------
Total real estate assets 256,784 3,740 260,524
Cash and cash equivalents 34,098 (3,740)(A) 30,358
Restricted cash 7,429 7,429
Other assets 5,917 5,917
---------------------- ---------
Total Assets $304,228 $0 $304,228
====================== =========
LIABILITIES AND EQUITY
Liabilities:
Mortgages payable $65,568 $65,568
Credit facility 0 0
Other liabilities 13,265 13,265
---------------------- ---------
Total Liabilities 78,833 $0 78,833
---------------------- ---------
Commitments and contingencies -- -- --
Minority Interest 3,919 3,919
Equity:
Series A 8% Convertible Redeemable
Preferred Stock, 2,000,000 shares
authorized - no shares, $.01 par
value per share, issued and
outstanding -- --
Common Stock, 197,650,000 shares
authorized - 20,009,822 shares,
$.01 par value per share, issued
and outstanding 200 200
Class A Common Stock, 350,000
shares authorized - 339,806
shares, $.01 par value per share,
issued and outstanding 3 3
Paid in capital in excess of
par value 219,710 219,710
Retained earnings 3,419 3,419
Deferred Compensation (641) (641)
Treasury Stock (81,015 shares) (1,215) (1,215)
---------------------- ---------
Total Equity 221,476 0 221,476
---------------------- ---------
Total Liabilities and Equity $304,228 $0 $304,228
====================== =========
Wellsford Real Properties, Inc.
Notes to Pro Forma Consolidated Balance Sheet
March 31, 1998
(In thousands)
(Unaudited)
(A) Represents the Company's capital contribution in connection with the
acquisition of 180/188 Mt. Airy Road and Shattuck Office Center.
EXHIBIT INDEX
23.1 Consent of Ernst & Young LLP dated August 3, 1998, relating to Shattuck
Office Center.
23.2 Consent of Ernst & Young LLP dated August 3, 1998, relating to 180/188
Mt. Airy Road.