Exhibit 99.1
WILSHIRE ENTERPRISES, INC.
INVESTOR PRESENTATION
OCTOBER 2004
AMEX: WOC
SHERRY WILZIG IZAK: Good afternoon ladies and gentlemen. I am Sherry Wilzig
Izak, the Chairman and Chief Executive Officer of Wilshire Enterprises. On
behalf of the Board of Directors and the management team of Wilshire, I thank
you for joining us today for this investor presentation. The presentation is
designed to provide existing shareholders and potential investors with an
overview of the Company, its assets, and our business strategy to increase the
value of these assets.
FORWARD LOOKING STATEMENT
THE NON-HISTORICAL STATEMENTS IN THIS PRESS RELEASE ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO SEVERAL RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH
PROJECTIONS. SUCH RISKS AND UNCERTAINTIES INCLUDE UNCERTAINTIES INHERENT IN ANY
ATTEMPT TO IMPROVE BUSINESS OPERATIONS, PURCHASE OR SELL ONE OR MORE REAL ESTATE
PROPERTIES AT AN ACCEPTABLE PRICE, RISKS ASSOCIATED WITH SEEKING TO ACQUIRE AND
INTEGRATE OTHER COMPANIES OR SELL THE COMPANY, COMPETITION, THE SUBSTANTIAL
CAPITAL EXPENDITURES REQUIRED TO FUND THE COMPANY'S REAL ESTATE OPERATIONS,
MARKET AND ECONOMIC CHANGES IN AREAS WHERE THE COMPANY HOLDS REAL ESTATE
PROPERTIES, INTEREST RATE FLUCTUATIONS, THE POSSIBILITY THAT BUSINESS OR MARKET
FACTORS COULD CAUSE THE COMPANY TO VARY FROM ITS CURRENT PLANS, THE IMPACT OF
CHANGING ECONOMIC CONDITIONS, THE DIFFICULTIES INHERENT IN COMPLYING WITH
SECTION 404 OF THE SARBANES-OXLEY ACT, AND OTHER RISKS AND UNCERTAINTIES
DISCLOSED IN THE COMPANY'S 2003 FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.
IN THIS PRESENTATION, WE REFER TO THE TERM "NET OPERATING INCOME" OR "NOI" WITH
REFERENCE TO SPECIFIC REAL ESTATE ASSETS. NOI IS DEFINED AS REVENUE DERIVED FROM
SUCH ASSETS LESS PROPERTY RELATED EXPENSES RELATED TO SUCH ASSETS SUCH AS
UTILITIES, PROPERTY TAXES, PROPERTY INSURANCE AND PAYROLL (BUT EXCLUDES
DEPRECIATION).
FOR STOCKHOLDER INQUIRIES: PLEASE CONTACT DAN PRYOR AT 201-420-2796.
MS. IZAK: Prior to beginning the presentation, I am required to remind investors
that this presentation includes forward looking statements which are subject to
risks and uncertainties that could cause actual results to differ materially
from such projections. In addition, certain financial data discussed herein,
such as net operating income figures for the Company and the individual
properties, are unaudited.
2
AGENDA
I. COMPANY OVERVIEW
II. VALUE CREATION
III. FINANCIAL REVIEW
MS. IZAK: Our agenda today is to review the Company's business and operating
assets and to discuss certain opportunities to increase the value of these
assets. We will conclude with a brief financial discussion.
3
I. COMPANY OVERVIEW
4
COMPANY OVERVIEW
o WILSHIRE ENTERPRISES, INC. OWNS, MANAGES AND ACQUIRES REAL ESTATE AND
REAL ESTATE RELATED SECURITIES
o "CORE OPERATING ASSETS" INCLUDE 8 MULTIFAMILY PROPERTIES WITH 1,395
UNITS AND 3 COMMERCIAL PROPERTIES WITH A TOTAL OF 143,000 SQUARE FEET
o OTHER INVESTMENTS INCLUDE LAND, TRIPLE NET LEASES, MORTGAGE
RECEIVABLES, AND PROPERTIES HELD FOR SALE
MS. IZAK: Wilshire is in the business of owning, managing and acquiring real
estate and real estate related securities. We are primarily focused on
multi-family rental housing. We prefer to operate in select growth markets in
the United States with the objective of expanding our presence in this select
group of markets.
o We categorize as "Core Operating Assets" our properties that generate
attractive cash flow returns, have potential value appreciation and are
likely to be long-term investments. The Core Operating Assets currently
include 8 multifamily properties with 1,395 units and 3 commercial
properties totaling 143,000 SF.
o The other investments, that are not included in this core group, are a
diverse portfolio of real estate assets, some of which generate cash
flow, and all of which provide meaningful net asset value to
shareholders.
5
INVESTMENT HIGHLIGHTS
o DIVERSIFIED REAL ESTATE PORTFOLIO IN GROWTH AREAS
o OPPORTUNITIES TO CREATE VALUE INCLUDING:
- PURSUING STRATEGIES TO INCREASE CASH FLOW
- SELLING ASSETS UNLIKELY TO ACHIEVE PREMIUM RETURNS
- CORPORATE TRANSACTIONS WITH WILSHIRE BEING ACQUIROR OR
ACQUIREE
- INVESTING IN MULTIFAMILY PROPERTIES
o APPROXIMATELY $30 MILLION IN AVAILABLE CASH AND MARKETABLE
SECURITIES(1)
o STRENGTHENED MANAGEMENT TEAM
1. AS OF JUNE 30, 2004 - ADJUSTED FOR ESTIMATE ON TAXES PAYABLE
RESULTING FROM THE 2004 SALE OF THE OIL AND GAS BUSINESSES
MS. IZAK: Now I would like to review the key investment highlights of the
Company:
o First, the real estate assets are located in demographic and
economic growth areas that include the sunbelt states of
Arizona, Texas and Florida and the State of New Jersey.
o Second, we believe that opportunities exist to increase the
net asset value of the Company including:
>> Increasing cash flow from the Core Operating Assets
>> Selling assets that are not meeting targeted cash
returns or are unlikely to provide meaningful net
asset value growth
>> Affecting business combinations in which Wilshire is
the acquiror or acquiree and an increase in
shareholder value is expected
>> And making prudent investments that are expected to
meet our cash flow requirements
o Third, the Company has a strong balance sheet with over $30
million in available cash and marketable securities. Your
management team is highly cognizant of being prudent stewards
of the Company's balance sheet.
o Finally, over the past five months we have strengthened the
management team at the corporate office with 5 new
professionals and we now total 6 professionals and two
assistants. I and the Board of Directors are extremely pleased
with the new management team and are highly confident in their
abilities to execute the business objectives being discussed
today.
o A key addition to Wilshire is Dan Pryor, the Company's
President and Chief Operating Officer, who I would now like to
introduce. As many of you know, Dan joined Wilshire in May
2004 after having served as an outside investment banking
advisor to this Company's Board of Directors. Dan's career
includes eight years of investment banking at Salomon Smith
Barney and Lehman Brothers and eight years in real estate
investment, management, development and marketing. We are very
pleased to have him with us at Wilshire.
o Before I let Dan continue, I do want to mention that we are
also extremely fortunate to have Seth Ugelow as our new Chief
Financial Officer. Seth brings a tremendous talent to the
Company and we welcome his addition. Now to you, Dan.
6
SUMMARY OF ASSETS
CORE OPERATING ASSETS ADDITIONAL CASH GENERATING ASSETS
------------------------- ------------------------------------
Sunrise Ridge Apts (AZ) The Wilshire Grand Hotel and Banquet
Biltmore Club Apts (AZ) Mortgage Receivables
Alpine Village Apts (NJ) The Rutherford Bank Facility
Wellington Apts (TX) Amboy Tower (Discontinued Ops.)
Royal Mall Plaza (AZ) Twelve Oaks (Pending Sale)
Summercreek Apts (TX)
Tempe Corporate (AZ)
Van Buren Apts (AZ) LAND
Galsworthy Arms Apts (NJ) ------------------------------------
Tamarac Office Plaza (FL) Alpine Village
Jefferson Gardens (NJ) Lake Hopatcong (Discontinued Ops.)
Montville (Sold)
Schalk Station (Discontinued Ops.)
West Orange (Discontinued Ops.)
DAN PRYOR: Good afternoon. It is my pleasure to be speaking before you today.
Since I have joined the Company to serve as your President and Chief Operating
Officer, I have talked with numerous shareholders and always appreciate the
opportunity to discuss the Company's merits and business strategy. Today's
presentation is intended to reach a broader audience and we hope you find it
useful in your evaluation of the Company.
The Company's investment assets are summarized on this page and will be
discussed in detail in subsequent pages.
o As part of our strategic planning, we categorize the Company's
investments as titled on this slide: Core Operating Assets;
Additional Cash Generating Assets; and Land
o The bulk of the Company's cash flow is being generated by the
Core Operating Assets listed on the left side of the page.
o The assets listed on the right side of the page provide
meaningful net asset value to shareholders but low returns as
measured by cash flow. It is the goal of your management team
to improve the asset portfolio where ever possible with
actions resulting in cash or new assets that generate
attractive cash flow returns.
7
CORE OPERATING ASSETS
[Graph Omitted]
UNAUDITED
NOI
----------
PROPERTY (LOCATION) SIZE 2003
- ------------------------- -------------- ----------
Sunrise Ridge Apts (AZ) 340 Units $1,102,889
Biltmore Club Apts (AZ) 378 Units 930,897
Alpine Village Apts (NJ) 132 Units 588,090
Wellington Apts (TX) 228 Units 425,617
Royal Mall Plaza (AZ) 65,691 sq. ft. 389,725
Summercreek Apts (TX) 180 Units 366,076
Tempe Corporate (AZ) 50,700 sq. ft. 352,005
Van Buren Apts (AZ) 70 Units 212,752
Galsworthy Arms Apts (NJ) 45 Condos 184,405
Tamarac Office Plaza (FL) 26,990 sq. ft. 128,331
Jefferson Gardens (NJ) 22 Condos 117,209
----------
$4,797,995
NOTE: SEE SUBSEQUENT DISCUSSION ON VALUATION OF CONDOMINIUM UNITS
MR. PRYOR: The Company's Core Operating Assets generated $4.8 million in net
operating income (or "NOI") in 2003. We believe that based on investments made
into these properties currently and over the past 18 months, they are well
positioned to improve in profitability. As the chart on the right illustrates,
the net operating income in total is geographically diversified.
o Our internal valuation analyses on these properties are
typically based on cash flow and take into account our belief
that nearly all of the properties have strong locations and
the potential for improved cash flows as will be discussed
later in the presentation.
o We note that certain properties, such as the condominiums, are
not valued by your management team based on cash flow but
rather by the potential sale price if we sell the units
individually. More on this later.
8
LAND PARCELS
NAME DESCRIPTION COMMENTS
- ---------------- ------------------------------------------------------ -----------------------------------------
Alpine Village o 17 acre contiguous land parcel adjacent to the Currently evaluating expansion of Alpine
company's 132-unit complex, Alpine Village Village
Lake Hopatcong o 1.8 acres on two contiguous parcels on Lake Recent contract for sale at $640,000
Hopatcong zoned for commercial use expired
Montville - SOLD o 14.9 acre parcel in New Jersey Sold on 8/25/2004 for $1.0 million in
gross proceeds
Schalk Station o 36 acre parcel in New Brunswick, NJ zoned for Contract for sale at $3.5 million.
commercial use Closing expected December 30, 2004
West Orange o 0.6 acre on three contiguous parcels in West Listed for sale at $550,000
Orange, New Jersey near high-traffic intersection
and affluent Livingston, New Jersey
MR. PRYOR: The Company's land assets currently include three parcels held as
Discontinued Operations and one parcel being evaluated for development as an
expansion of the Company's successful Alpine Village Apartment complex. As
noted, the Company recently sold its Montville land parcel for $1.0 million in
gross proceeds.
9
MORTGAGE RECEIVABLES
o Mortgage receivables of $1,317,000 as of June 30, 2004
o Security for both mortgages is a first lien on 131 condominium units in
two contiguous high-rise buildings in Jersey City, New Jersey. The
buildings have doorman services and views of the Manhattan skyline
o The Company has right to receive proceeds from sale of the underlying
condominium units
- In the first six months of 2004, the Company received proceeds
of $1,263,000 from the sale of 12 units
MR. PRYOR: As itemized on the Company's balance sheet, the Company holds a
mortgage receivable of $1.3 million as of June 30, 2004 secured by 131
condominium units located at an attractive property in Jersey City, New Jersey.
The Company receives interest payments and proceeds from the sale of the
underlying units.
10
RUTHERFORD BANK FACILITY
o Bank branch triple-net leased to North Fork Savings Bank with annual
base rent of $110,000
o Wilshire has a "put option" requiring tenant to purchase land and
improvements for $1.4 million which is enforceable at any time until
September 30, 2007
o The property is located on a prime location on a corner in the shopping
district of Rutherford, New Jersey, an attractive, stable community
MR. PRYOR: The Company's Rutherford Bank Facility is triple-net leased to North
Fork Savings Bank. The Company receives annual rent of $110,000 and has a "put
option" requiring the tenant to purchase this investment for $1.4 million. The
Company does not envision exercising this option in the foreseeable future.
11
THE WILSHIRE GRAND HOTEL / BANQUET
PROPERTY DESCRIPTION SUMMARY TERMS OF LEASE
- --------------------------------------------------- -----------------------------------------------------
o 89-room boutique hotel and 50,000 square o 25-year, triple net leases for each of the
foot banquet facility located in highly hotel and banquet facility expiring in 2028.
affluent N.J. area Leases provide the Lessee with two 5-year
extension periods
o After Lessee invested approximately $12
million in renovations, hotel business o Cumulative base rents in 2005-2009 period
opened in August 2003 and banquet facility are expected to be approximately $2.1
completed in June 2004 million, before additional rent premium
payments, if any
MR. PRYOR: The Company is the lessor on a triple net basis for an 89-room
boutique hotel and 50,000 square foot banquet facility located in the vicinity
of highly affluent New Jersey communities. After the lessee invested over $12
million into renovating the property, the hotel opened in August of 2003 and the
banquet facility in June 2004.
o While this business is still in the early stages of development, and
certain amenities and functions have yet to be completed, we believe
that the Company's triple net leases have reasonably expected cash
flows in base rents of approximately $2.1 million to be paid over the
next five years. The lease does allow for rent premiums to Wilshire
based on the sales volume at the hotel.
o The Company is currently reviewing its alternatives for this investment
but cannot comment about potential actions, if any.
12
REAL ESTATE INVESTMENT SUMMARY
PORTFOLIO COMMENTS
- ----------------------------- ---------------------------------------------------
Core Operating Assets: 2003 NOI of $4.8 million; identifying opportunities
to increase cash flow
Land Portfolio: Approximately 56 acres on 4 parcels
Mortgage Receivables: $1.3 million current value
The Rutherford Bank Facility: "Put option" in 2007 for $1.4 million
Pending Sale Properties: To be monetized: 72-unit multifamily property;
75,000 sq. ft. office building; and
3 land parcels (included above)
The Wilshire Grand Hotel: Triple net leased to hotel operator
MR. PRYOR: In summary, the Company's investments include the Core Operating
Assets, which we believe to have meaningful opportunities to increase cash flow,
and other investments, which offer situations to generate additional cash and /
or increase the net asset value of the Company.
13
II. VALUE CREATION
MR. PRYOR: Now we would like to discuss the value creation strategies your
management team currently has for the Company.
14
VALUE CREATION STRATEGY
o INCREASE CASH FLOW FROM OPERATIONS
o UNLOCK VALUE BY MONETIZING OR REPOSITIONING ASSETS TO INCREASE NET
ASSET VALUE OF COMPANY
o CREATE SHAREHOLDER VALUE VIA MERGER OR PURCHASE CORPORATE TRANSACTIONS
WITH WILSHIRE AS ACQUIRER OR ACQUIREE
o INVEST IN ASSETS TO ENHANCE FINANCIAL RETURNS AND NET ASSET VALUE OF
COMPANY
MR. PRYOR: Our primary objectives are to improve the Company's cash flow
performance, to unlock value in select assets, to pursue merger or stock
purchase discussions and, lastly, to invest prudently in multi-family
properties. We believe that if we pursue these objectives, we can increase the
net asset value of the Company.
15
I. IMPROVE FINANCIAL PERFORMANCE
THE COMPANY BELIEVES THAT THE FINANCIAL PERFORMANCE OF THE CORE OPERATING ASSETS
IS LIKELY TO IMPROVE DUE TO VARIOUS FACTORS, INCLUDING:
o A TWO YEAR MAJOR CAPITAL IMPROVEMENT PROGRAM IS NEARLY COMPLETED. AS A
RESULT, MANAGEMENT BELIEVES THE PROPERTIES ARE MORE COMPETITIVE AND
WELL POSITIONED FOR REVENUE INCREASES
o SIGNIFICANT INCENTIVES WILL BE ESTABLISHED FOR PROPERTY MANAGERS TO
INCREASE PROFITABILITY OF PROPERTIES
o A STRENGTHENING IN THE ECONOMY IS LIKELY TO IMPROVE MULTIFAMILY
INDUSTRY ECONOMICS
MR. PRYOR: We believe that the Core Operating Assets are well positioned for
improving financial performance due to a two-year major capital improvement
program that is enhancing the competitiveness of the properties and due to new
strategies to optimize profitability.
16
I. IMPROVE FINANCIAL PERFORMANCE
NUMEROUS UPGRADES HAVE OR WILL BE IMPLEMENTED TO STRENGTHEN COMPETITIVENESS OF
PROPERTIES.
RECENT EXAMPLES INCLUDE:
o SUMMERCREEK: RESURFACING TENNIS COURT, LANDSCAPING, PAVING OF PARKING
LOT, NEW EXERCISE ROOM (SOON)
o WELLINGTON ESTATES: NEW ROOFS, NEW COVERED PARKING, LANDSCAPING
o TEMPE CORPORATE: RENOVATED BATHROOMS, ENTRANCEWAYS AND HALLWAYS;
PAINTED EXTERIOR OF BUILDING
CAPITAL EXPENDITURES FOR CORE OPERATING ASSETS (UNAUDITED)
----------------------------------------------------------
2000 2001 2002 2003 2004 BUDGET
---- ---- ---- ---- -----------
$1,172,033 $ 1,071,642 $1,056,451 $1,621,345 $1,500,000
MANAGEMENT BELIEVES THAT IN 2005 CAPITAL EXPENDITURE FOR THESE ASSETS WILL BE IN
THE RANGE OF $1.0 MILLION TO $1.2 MILLION
MR. PRYOR: As summarized in the chart, the Company increased its capital
expenditures significantly over the past two years with the intention of
strengthening the competitiveness of select properties. We are mindful of
creating appealing and distinctive experiences at our properties to attract and
retain tenants. Recent investments have focused on common spaces such as
community rooms and exercise facilities. We believe that capital expenditures
for the Core Operating Assets will be similar to that experienced in the 2000 -
2002 time period.
17
I. IMPROVE FINANCIAL PERFORMANCE
IMPLEMENTING INAUGURAL "PROFIT SHARE" BONUS PROGRAM WITH PROPERTY MANAGERS IN 4Q
2004
o BONUSES PAID ON INCREMENTAL NOI GROWTH IN THE QUARTER ENDED DECEMBER
31, 2004 AS COMPARED TO THE PREVIOUS QUARTER
- HALF OF BONUS PAID IN CASH AND HALF OF BONUS "BANKED" TO BE
PAID ONLY IF SUBSEQUENT THREE-MONTH PERIOD ACHIEVES REQUIRED
GROWTH TARGET
o PROFIT SHARE PROGRAM EXPECTED TO RUN FOR TWELVE MONTHS AT SELECT
PROPERTIES
MR. PRYOR: We have begun a profit share bonus program with property managers to
create financial incentives to improve the profitability of the properties.
Bonuses will be paid on incremental NOI growth comparing the results of the
quarter to the previous quarter. Property managers will increase their take home
pay if they improve the profitability of the properties they manage. We will
carefully monitor the results and full realization of the profit share to the
property manager requires that the subsequent quarter also achieves the required
profitability target. The profit share bonus program is expected to run for
twelve months and is intended to drive revenue growth as well as expense
reductions at select properties.
18
II. "UNLOCK VALUE"
WILSHIRE IS CURRENTLY EVALUATING OPPORTUNITIES TO INCREASE NET ASSET VALUE
PROPERTY SELECT OPPORTUNITIES
- ---------------------- --------------------------------------------------
Galsworthy Arms Apts. POTENTIAL TO SELL A FEW OF THE 34 1-BR AND 11 2-BR
(Long Branch, NJ) CONDOMINIUMS AT INITIAL PRICES OF $175K AND $235K.
POTENTIAL GROSS VALUE OVER $8.5 MILLION
Jefferson Garden Apts. POTENTIAL TO SELL A FEW OF THE 18 1-BR AND 4 2-BR
(Jefferson, NJ) CONDOMINIUMS AT INITIAL PRICES OF $100K AND $130K.
POTENTIAL GROSS VALUE OVER $2.3 MILLION
Alpine Village 17.5 ACRES SUITED FOR EXPANSION; PERMITS TO BE
(Sussex, NJ) EVALUATED TO POTENTIALLY INCREASE VALUE OF THE LAND
AND EXPAND THIS SUCCESSFUL 132-UNIT MULTIFAMILY
PROPERTY
MR. PRYOR: We would like to briefly summarize a few opportunities we have
identified to potentially increase the net asset value of the Company.
o We believe that our condominium units, particularly those at Galsworthy
Arms which are located a few blocks from the beach in Long Branch, New
Jersey can be sold individually at a value well beyond the value
attributable to cash flows. While we are currently improving the
building exteriors and landscaping at Galsworthy Arms, we envision
selling a few of these units after significant interior upgrades to
establish value. These two condominium investments have the potential
of generating over $10.8 million in gross asset value from properties
that only contributed approximately $302,000 of NOI in 2003.
o Adjacent to our Alpine Village property is a 17.5 acre land parcel
suited for expansion. We are evaluating obtaining water and sewer
permits and other prerequisites to developing the property to increase
the value of this land and the adjacent Alpine Village property. The
Company does not intend to develop the property itself.
19
II. "UNLOCK VALUE"
WILSHIRE IS CURRENTLY EVALUATING OPPORTUNITIES TO INCREASE CASH FLOW
PROPERTY SELECT OPPORTUNITIES
- ---------------------- --------------------------------------------------
Royal Mall Plaza SIGNIFICANT POTENTIAL TO INCREASE REVENUES, NOI AND
(Mesa, AZ) NET ASSET VALUE OF PROPERTY. WILSHIRE RECENTLY HIRED
LEASING AGENTS AND IS EVALUATING CONDOMINIUM
CONVERSION OF THE MEDICAL BUILDINGS
Tempe Corporate SIGNIFICANT POTENTIAL TO INCREASE REVENUE AND CASH
(Tempe, AZ) FLOW. RECENTLY HIRED LEASING AGENTS AND ARE CURRENTLY
UPGRADING THE BUILDING WHICH HAS SOLID LOCATION AND
COMMERCIAL APPEAL
MR. PRYOR: Royal Mall Plaza and Tempe Corporate Center are two examples of
opportunities to improve cash flow at the property level. Royal Mall is a 66,000
SF shopping plaza with retail space and separate buildings occupied by
healthcare industry tenants. Tempe Corporate is an 51,000 SF office building
with a good location near a limited access freeway in Tempe. We have hired
leasing agents to assist us in increasing the occupancy levels and are
completing capital improvements to enhance these properties. We are also
exploring condominium conversion of the medical buildings at Royal Mall Plaza or
establishing a separate land parcel for these buildings to potentially increase
the valuation of this property. We believe at this time that we can improve the
cash flows and the net asset value of both these properties. While the two
buildings generated $742,000 in combined NOI in 2003, we believe this
performance can be meaningfully improved.
20
II. "UNLOCK VALUE" - PENDING SALE PROPERTIES
The Company is planning to divest select properties that are not likely to
result in near term value creation
PROPERTY SALE PRICE STATUS / COMMENTS
- -------------------------- ---------- ---------------------------------------------------
Montville (Land) - SOLD $1,000,000 o Closed on 8/25/2004. The land was unencumbered.
Schalk Station (Land) $3,950,000 o Closing expected to occur by December 30, 2004
Twelve Oaks (Multi-family) TBD o Listed for sale at $2,300,000
Amboy Tower (Office) TBD o Marketed for sale at $4,000,000.
Lake Hopatcong (Land) TBD o Contract for sale at $640,000 recently expired
West Orange (Land) TBD o Listed for sale at $550,000
MR. PRYOR: Listed on this page are the properties that are currently being
carried as Discontinued Operations. We intend to optimize valuations for the
properties being sold including, if necessary, holding onto the properties until
an appropriate selling opportunity is created. Of course, we cannot guarantee
that we will be able to sell the properties for the prices that we have listed
on this slide.
o We believe that the end result of transforming an eclectic grouping of
real estate assets into an optimized higher quality portfolio is likely
to create a higher net asset value of the Company.
21
III. PURSUE MERGER DISCUSSIONS
The Company believes that it is part of its ongoing business strategy to
initiate or entertain corporate transaction discussions, such as acquiring other
companies for cash and/or stock, or selling / merging the Company for cash or
stock.
MR. PRYOR: As stated on the slide, the Company believes that it is part of its
ongoing business strategy to initiate or entertain corporate transaction
discussions, such as acquiring other companies for cash and/or stock, or
selling/merging the Company for cash or stock. We cannot comment currently on
any actions that have or may occur regarding a possible business combination.
o We believe that the Company's cash and marketable securities enhance
the possibility of consummating a corporate transaction whether we are
the acquirer or aquiree. Importantly, one of several key objectives of
our acquisition strategy is to position the Company to pay a
potentially recurring dividend.
o We would expect that any negotiations that may take place will remain
confidential until public disclosure is appropriate. Our Board is
prepared to consider both purchase and sale transactions. At this
juncture, no decision has been made that would commit the Company to
either approach.
22
IV. INVEST IN ASSETS
o The company intends to selectively acquire real estate assets that
offer attractive financial returns
o In general, we seek:
- Multifamily properties with greater than 200 units
- Located in states where we currently have assets under
management
MR. PRYOR: The Company is actively looking to invest in real estate assets that
offer attractive financial returns. We are targeting multi-family properties
which offer substantial cash flow and are located in states in which we or our
contracted property management company currently has operations. We are also
evaluating niche categories of the multi-family housing market such as
restricted age housing for independent living that offer potentially enhanced
cash flow returns and improved predictability in revenues.
23
III. FINANCIAL REVIEW
24
CONSOLIDATED STATEMENTS OF OPERATIONS
6MOS. ENDED
2003 06/30/04
----------- ----------
REVENUES $12,137,000 $5,941,000
COST AND EXPENSES 12,029,000 5,222,000
INCOME FROM OPERATIONS 108,000 719,000
NET INCOME (LOSS) FROM CONTINUING OPERATIONS 908,000 (106,000)
FUNDS FROM CONTINUING OPERATIONS (1) (358,074) 894,000
(1) Funds from continuing operations ("FFO") = Net income from Continuing
Operations plus Depreciation from Real Estate Operations ("Depreciation") less
Gain on Sale of Securities and Insurance Proceeds. FFO is a commonly used
measurement in the real estate industry. However, FFO is not a measure of
operating results or cash flows as measured by generally accepted accounting
principles and is not necessarily indicative of cash available to fund cash
needs and should not be considered an alternative to cash flows as a measure of
liquidity. FFO in 2003 = Net Income of $0.9 million plus Depreciation of $2.4
million less Gain on sale of Securities and Insurance Proceeds of $3.6 million.
FFO for the six months ended June 30, 2004 = Net (Loss) of ($0.1) million plus
Depreciation of $1.0 million.
MR. PRYOR: The Company's Income from Operations and Funds from Continuing
Operations have increased during 2004. The six months ended June 30, 2004
generated $719,000 in Income from Operations versus $108,000 in the previous
year. Your management team is focused on minimizing corporate expenses where
possible while identifying opportunities to increase Funds from Operations and
Cash Flow from Operations.
25
SUMMARIZED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2004
(UNAUDITED)
-------------
ASSET
CURRENT ASSETS
Cash and marketable securities $39,399,000
Total current assets 41,059,000
NONCURRENT ASSETS
Mortgage notes receivable 1,317,000
Other assets 8,693,000
PROPERTY AND EQUIPMENT
Real Estate properties 53,136,000
Real estate properties held for sale 7,868,000
-----------
61,004,000
Less:
Accumulated depreciation and amortization 15,315,000
Accumulated depreciation, depletion and amortization-Property held for sale 657,000
-----------
$45,032,000
-----------
TOTAL ASSETS $88,233,000
-----------
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Current portion of long term debt $ 674,000
Total current liabilities 9,453,000
NONCURRENT LIABILITIES
Long-term debt, less current portion 45,089,000
Total noncurrent liabilities 59,647,000
TOTAL SHAREHOLDERS' EQUITY 28,586,000
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $88,233,000
-----------
MR. PRYOR: As of June 30, 2004, the Company's balance sheet included $39.4
million in Cash and Marketable Securities and $45.8 million in Total Debt. Net
Debt, defined as Total Debt less Cash and Marketable Securities is approximately
$6.3 million.
o As disclosed in the Form 10Q filed with the S.E.C. for the second
quarter of 2004, the Company estimates it will pay approximately $8.0
million in taxes resulting from the sale of its oil and gas businesses.
Subsequent to June 30, 2004 the Company received $1.0 million in gross
proceeds from the sale of its Montville land.
o The Company's net book value of its real estate is approximately $45.0
million as of June 30, 2004. This relatively low value in comparison to
market value of the properties as estimated by your management team
creates meaningful tax implications when evaluating selling or
liquidating a substantial portion of the Company's assets.
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VALUE CREATION STRATEGY
I. IMPROVE THE FINANCIAL PERFORMANCE AND OPERATIONAL
COMPETITIVENESS OF THE CORE OPERATING ASSETS
II. "UNLOCK VALUE" TO INCREASE NET ASSET VALUE OF THE COMPANY
III. INITIATE OR ENTERTAIN ACQUISITION OR DIVESTITURE DISCUSSIONS
IV. INVEST SELECTIVELY IN MULTIFAMILY PROPERTIES (OR OTHER REAL
ESTATE ASSETS)
ALL ACTIONS INTENDED TO INCREASE SHAREHOLDER VALUE IN CAPITAL
MARKETS OR FUTURE SALE TRANSACTION
MS. IZAK: Thank you Dan for your presentation of the Company's assets and its
business strategy. To recap, I would like to reemphasize the key objectives
established by the management team and approved by the Board of Directors. These
are:
I. Continue to improve the financial performance and operational
competitiveness of the Core Operating Assets
II. Increase the net asset value of the Company by "unlocking
hidden value". This effort is a continuation of previously
announced plans to unlock value such as that we've
accomplished through the divestiture of the Company's oil and
gas business.
III. As I have said on previous occasions, our Board remains
flexible: it will consider proposals for the purchase of other
businesses and for the sale of our entire business
IV. And invest selectively in multifamily or multifamily related
assets.
o While we do not currently know if we will be acquired
or will acquirer another company, we do know that we
do not intend to maintain the status quo. We believe
that the Company's cash and marketable securities
enhance the possibility of us consummating a
corporate transaction whether we are the acquirer or
aquiree. Clearly, all actions planned by your
management team are intended to increase shareholder
value in the capital markets or if a future sale of
the Company were to occur.
o I am excited about the new management team currently
in place at Wilshire and look forward to delivering
on the objectives discussed today. Again, we thank
you for joining us today and we look forward to
reporting our progress to you during the ensuing
months.
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