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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED] For the Fiscal Year Ended February 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED] For the transition period from ______ to ______.
0-17793 (Commission File Number)
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
(Exact name of registrant as specified in its governing instruments)
Delaware 13-3481443
(State or other jurisdiction I.R.S. Employer Identification No.)
of organization)
Wilder Richman Historic Corporation
599 W. Putnam Avenue
Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (203) 869-0900
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of each Class)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
- - -----------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate sales price of the units of limited partnership interest held by
non-affiliates of the Registrant is $19,280,000. There is currently no public
market for the units of limited partnership interest and, accordingly, such
figure does not represent the market value for the units.
Documents incorporated by reference:
The Prospectus of the Registrant, dated May 13, 1988 and filed pursuant to Rule
424(b)(iii) under the Securities Act of 1933, is incorporated by reference into
Parts I, II, and III of this Annual Report on Form 10-K.
PART I
Item 1. Business
General Development of Business
Registrant (also referred to as the "Partnership") is a limited partnership
which was formed under the Delaware Revised Uniform Limited Partnership Act
on October 15, 1987. The general partner of the Partnership is Wilder
Richman Historic Corporation, a Delaware corporation (the "General Partner"
or "WRHC").
Registrant was organized to acquire all of the limited partnership
interests in Dixon Mill Associates I (Phase One), Limited Partnership,
Dixon Mill Associates II (Phase Two), Limited Partnership, and Dixon Mill
Associates III (Phase Three), Limited Partnership, each of which is a New
Jersey limited partnership (individually "Dixon Mill I," "Dixon Mill II"
and "Dixon Mill III," respectively, and collectively the "Operating
Partnerships"). Each Operating Partnership owns one phase ("Phase") of an
aggregate 433-unit residential apartment complex (the "Complex") located in
Jersey City, New Jersey, that consists of buildings designated as certified
historic structures by the U.S. Department of the Interior. The Operating
Partnerships have constructed, substantially rehabilitated and are
operating the Complex. The rehabilitation of the Complex qualified for a
rehabilitation tax credit in 1988, 1989 and 1990. The general partner of
the Operating Partnerships is Dixon Venture Corp. (the "Operating General
Partner"), which is not an affiliate of the Partnership or WRHC.
Pursuant to the Partnership's prospectus dated May 13, 1988, (the
"Prospectus"), the Partnership offered $19,280,000 of units of limited
partnership interest in the Partnership (the "Units") at an offering price
of $24,100 per Unit. The Units were registered under the Securities Act of
1933 pursuant to a Registration Statement on Form S-11 (Registration No.
33-19646). The Prospectus is incorporated herein by reference.
The closing of the offering of Units (the "Offering") occurred on July 15,
1988. At such closing, 800 Units were sold, representing $19,280,000 in
gross proceeds. After payment of $674,800 of organization and offering
expenses, $674,800 in an origination fee and $1,349,600 of selling
commissions, the net proceeds available for investment were $16,580,800. Of
such net proceeds, $16,388,000 was allocated to the investment in the
Operating Partnerships, which included investments in guaranteed
investments contracts. The remainder of $192,800 was designated as working
capital to be used for operating expenses of the Partnership.
Financial Information About Industry Segments
Registrant is engaged solely in the business of owning a limited
partnership interest in each of the Operating Partnerships. A presentation
of information regarding industry segments is not applicable and would not
be material to an understanding of the Partnership's business taken as a
whole. See Item 8 below for a summary of Registrant's operations.
Working Capital Reserves
As of February 29, 1996, Registrant had working capital reserves of
approximately $616,000 inclusive of funds previously restricted for the
purpose of providing operating deficit loans to the Operating Partnerships
(in order to avoid default under their mortgages pursuant to their modified
mortgage documents) which were substantially invested in interest-bearing
deposits. See Item 7-"Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Competition
Information regarding competition, general risks, tax risks and partnership
risks is set forth under the heading "RISK FACTORS" at pp. 37 - 57 of the
Prospectus, which is incorporated herein by reference.
Compliance with Environmental Protection Provisions
In connection with the environmental cleanup responsibilities pertaining to
the Complex, the Operating General Partner submitted a declaration to the
State of New Jersey Department of Environmental Protection ("NJDEP")
stating that there remains no hazardous substances and wastes on the site.
In August, 1989, the Operating General Partner received notification from
NJDEP that the environmental
2
testing was complete and the Complex is in compliance with NJDEP
requirements. All costs incurred in connection with the review conducted by
NJDEP were borne by The Dixon Venture, an affiliate of the Operating
General Partner. Information regarding such environmental matters is set
forth under the heading "DESCRIPTION OF THE COMPLEX - Environmental
Matters" at pp. 87 - 92 of the Prospectus, which is incorporated herein by
reference.
Employees of Registrant
Registrant employs no personnel and incurs no payroll costs. An affiliate
of the General Partner employs individuals who perform accounting,
secretarial, transfer and other services on behalf of Registrant as are
necessary in the ordinary course of business. Such individuals also perform
similar services for other affiliates of the General Partner.
Tax Reform Act of 1986, Revenue Act of 1987, Technical and Miscellaneous
Revenue Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus
Budget Reconciliation Act of 1990, Tax Extension Act of 1991, Omnibus
Budget Reconciliation Act of 1993 and Uruguay Round Agreements Act
(collectively the "Tax Acts")
Registrant is organized as a limited partnership and is a pass through tax
entity which does not, itself, pay Federal income tax. However, the
partners of Registrant who are subject to Federal income tax may be
affected by the Tax Acts. Registrant will consider the effect of certain
aspects of the Tax Acts on the partners when making decisions regarding its
investment. Registrant does not anticipate that the Tax Acts will currently
have a material adverse impact on Registrant's business operations, capital
resources and plans or liquidity.
Item 2. Properties
The Complex consists of approximately 34 historic mill buildings built
between 1847 and 1932, all of which are certified historic structures that
have been converted and substantially rehabilitated into a 433 unit luxury
apartment complex that has received financing exempt from Federal income
taxation under Internal Revenue Code Section 103(b)(4)(A). As a consequence
of this tax exempt financing, the Operating Partnerships are required to
rent at least 15% of the dwelling units ("D.U.'s") in the Complex to
individuals or families of low or moderate income as determined under such
Code Section, currently based on their income not exceeding 80% of the
median income for the area as determined by the United States Department of
Housing and Urban Development ("HUD"). These income limits are subject to
increases pursuant to HUD guidelines. In the Complex, 68 studio and
efficiency D.U.'s and 17 one-bedroom D.U.'s are set aside for rental to low
or moderate income persons. There are no rent ceilings on those D.U.'s set
aside for low or moderate income persons. Because such tax exempt financing
consists of bonds sold in 1985, the 80% of median income limit is not
required to be adjusted based on family size as would be required under the
Tax Reform Act of 1986.
The Complex is located on a 4-acre site in Jersey City, New Jersey. In
addition, one new five-story building, approximately 20 feet by 50 feet,
was built on the site. The Complex is located in the Dixon Crucible
Redevelopment Area, an area so designated pursuant to a redevelopment plan
adopted in September, 1983 by ordinance of the City of Jersey City. The
actual development entails three Phases with each Phase owned by a separate
New Jersey limited partnership, respectively Dixon Mill I, Dixon Mill II
and Dixon Mill III. Phase I consists of seven industrial buildings which
have been rehabilitated to provide 134 apartment units, 55 underground and
77 surface parking spaces and approximately 1,550 square feet of commercial
space. Phase II consists of 11 industrial buildings which have been
rehabilitated to provide 191 apartment units and 62 underground and 124
surface parking spaces. Phase III consists of four industrial buildings
containing 108 apartment units, 35 underground and 73 surface parking
spaces and approximately 2,230 square feet of commercial space.
The Complex features gardens, elevated walkways and brick paved walkways.
The Complex also has its own electronic security system and a free shuttle
service to the Grove Street PATH station is being provided. In addition,
the residents of the Complex have access to a private fitness facility. The
Complex's commercial space is designated for retail stores and/or
professional offices.
3
As of December 31, 1995 and 1994, the occupancy and rental rates were as
follows:
December 31, 1995 December 31, 1994
Occupancy Rate 98% 97%
Monthly Rental Rates:
Studio $ 500 - $ 850 $ 575 - $ 775
One-Bedroom $ 525 - $1,400 $ 675 - $1,400
Two-Bedroom $ 600 - $1,500 $1,050 - $1,595
Three-Bedroom $1,400 - $1,950 $1,550 - $1,750
The rental rates reflect significant ranges because the apartments vary as
to size and floor plans (i.e., square footage, duplex, triplex, penthouse)
and due to the low-moderate tenant income restrictions for 15% to 20% of
the units resulting from the tax-exempt financing.
Item 3. Legal Proceedings
As of February 29, 1996, there were no material pending legal proceedings
to which Registrant or any of its affiliates was a party or to which any of
their property was subject except for the following:
The Operating Partnerships have been named as a third-party defendant in a
lawsuit between The Dixon Venture, the party who sold the Complex to the
Operating Partnerships, and the former owner, Joseph Dixon Crucible
Company, for indemnification for cost clean-up under the Comprehensive
Environmental Response Compensation and Liability Act of 1980. The
Operating General Partner believes that the Operating Partnerships have no
liability or no liability that is not adequately covered by an
indemnification from The Dixon Venture.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the limited partners of
Registrant during the fourth quarter of the fiscal year covered by this
report.
4
PART II
Item 5. Market for Registrant's Common Equity and Related Unit Matters
a) Market
There is no developed public market for the purchase and sale of Units and
Registrant does not anticipate that such a market will develop.
b) Holders
As of February 29, 1996, there were approximately 761 record holders of
Units holding an aggregate of 800 Units in the Partnership.
c) Distributions
The Agreement of Limited Partnership of the Registrant provides that cash
available for distribution, if any, be distributed annually to the partners
in specified proportions. As a result of the mortgage modification on June
11, 1992, certain cash flow restrictions have been placed on the Operating
Partnerships. See Item 7-"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 4 to the Dixon Mills
Financial Statements included herein.
Item 6. Selected Financial Data
Year Ended
February February February February February
29, 1996 28, 1995 28, 1994 28, 1993 29, 1992
Total revenues
(Interest income)$ 43,259 $ 30,858 $ 33,142 $ 41,658 $ 12,129
Equity in loss of
Operating
Partnerships $(745,393)* $ (873,701) $(1,372,573) $(2,202,328)$(2,062,302)
Net loss $(736,763) $ (875,499) $(1,380,924) $(2,305,745)$(2,240,162)
Net loss per unit
of limited
partnership unit $ (912) $ (1,083) $ (1,709) $ (2,853)$ (2,772)
At year end:
Total assets $3,870,763 $ 4,592,526 $ 5,453,025 $ 6,823,949 $ 9,196,927
* This amount is net of an extraordinary gain of $366,499 resulting from
the forgiveness of debt of the Operating Partnerships reflected in
Registrant's financial statements.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The operating results of the Complex for 1995 were comparable to 1994. On
June 11, 1992, the mortgages of the Operating Partnerships were modified
pursuant to agreements among Federal National Mortgage Association ("FNMA"
or the "Lender"), Chase Manhattan Bank, N.A. ("Chase") and the Operating
General Partner. The Partnership obtained the consent of the limited
partners to utilize the proceeds from the final distribution from the
guaranteed investment contracts to assist in modifying the mortgages. As a
result of the mortgage modification, the interest rate under the mortgages
decreased from approximately 9.6% to approximately 6.74%, thereby improving
the financial viability of the Complex. Recently, there has been new
construction of luxury multi-family housing in the vicinity consisting of
approximately 500 dwelling units. Such housing is in the initial lease-up
phase with asking rents that are substantially higher than rents currently
charged by the Complex. It has not been determined whether such new housing
will have a positive or negative impact on the Complex or its cash flow in
the future.
In connection with the mortgage modification, Chase and the Partnership
each advanced $277,500 to the Operating Partnerships to pay for certain
costs of the mortgage modification. In addition, in the event of future
operating deficits, Chase and the Partnership each provided a letter of
credit and cash of approximately $622,500, respectively (the "Operating
Deficit Escrows") for the purpose of providing FNMA the ability to make
pro-rata draws for debt service payments and other operating expenses to
5
the extent cash flow of the Operating Partnerships were insufficient to
make the required payments under the modified mortgages. The release of the
Operating Deficit Escrow was based upon the later of (i) the date on which
the Operating Partnerships satisfy the Lender as to the 110% debt service
coverage ratio requirements on the mortgages or (ii) January 1, 1996 (to
coincide with the expiration of Federal income tax recapture of the
rehabilitation credits). During April, 1995, the Operating General Partner
submitted to the Lender the operating statement of the Complex for 1994,
reflecting that the 1994 operations satisfied the 110% debt service
coverage ratio requirement. Such submission was reviewed by the Lender and
was approved in June, 1995. Although the outstanding Operating Deficit
Escrows total $582,287 as of December 31, 1995 as to each Chase and the
Partnership, the letters of credit were released by the Lender in January,
1996. Accordingly, the Partnership's balance sheet reflects no restricted
cash at February 29, 1996.
Chase and the Partnership each provided advances of $317,713 as of December
31, 1995, with aggregate interest of approximately $126,000 accrued thereon
by the Operating Partnerships. As of February 29, 1996, the Partnership
accrued interest receivable of $77,498 in connection with the advances
provided. However, the Operating General Partner entered into an agreement
with Chase on July 5, 1995 whereby Chase agreed to release the Operating
Partnerships from substantially all of the outstanding liabilities owed to
Chase in connection with outstanding advances and accrued interest thereon
(discussed above) in return for the release of its outstanding letter of
credit in January, 1996. Accordingly, the Operating Partnerships have
recorded the forgiveness of the outstanding debt and accrued interest as of
December 31, 1995 in the aggregate of $370,201 and have reflected such
forgiveness as an extraordinary gain on the statement of operations for the
year then ended.
Because of the outstanding advances, the Operating Partnerships are subject
to restrictions concerning cash flow distributions. Cash flow, if any,
generated subsequent to 1995 may be retained by the Operating Partnerships
or may be distributed at the discretion of management. If distributed, such
cash flow distributions must follow the priority of (i) accrued interest
owing to the Partnership and (ii) principal owing to the Partnership and
(iii) thereafter, pursuant to the terms of the Limited Partnership
Agreements of the Operating Partnerships. To the extent there are proceeds
from a future sale or refinancing of the Complex, the Partnership will
receive 100% of any such proceeds available for distribution until the 7%
cumulative preferred distribution has been achieved. Through December 1995,
the cumulative preferred distribution is approximately $6,723,000.
During 1994, the Operating Partnerships received a notification of an
increase in their annual real estate tax assessment from approximately
$425,000 per annum to approximately $780,000 per annum. The Operating
General Partner contested the amount of the increase and was successful in
having it reduced to approximately $535,000 per annum. As a result of the
original notification of increase, the Operating Partnerships paid real
estate taxes in excess of what was charged to operations (as a result of
the successful appeal). Accordingly, the balance sheet of the Operating
Partnerships reflects a real estate tax receivable of $208,442 as of
December 31, 1994, which amount was credited to the Complex by the taxing
jurisdiction in 1995.
Cash and cash equivalents of the Partnership increased during the year
ended February 29, 1996 by approximately $585,000 as a result of the
release of the restricted deposits of $582,287 and the payment of operating
expenses offset by interest received from deposits. Pursuant to the amended
limited partnership agreement, the released Operating Deficit Escrow of the
Partnership may be held or utilized for other Partnership purposes in the
discretion of the General Partner. Presently, the General Partner intends
for the Partnership to hold such funds. During the year ended February 29,
1996, the Partnership's investment in Operating Partnerships decreased by
$745,393 as a result of the equity in loss of Operating Partnerships, which
includes the forgiveness of debt on the Chase advances and accrued interest
of $370,201 discussed above.
The annual investor service fees are payable from the operations of the
Operating Partnerships and from reserves. As of February 29, 1996, due to
affiliates includes $110,000 of accrued investor service fees, which
includes the Partnership's expense for the last four fiscal periods and
$50,000 otherwise payable from the final distribution of the guaranteed
investment contracts in January, 1992.
Results of Operations
The Partnership's operating results are dependent upon the operations of
the Operating Partnerships and are significantly impacted by the policies
of the Operating Partnerships.
6
Year Ended February 29, 1996
During the year ended February 29, 1996, the Partnership earned interest of
approximately $43,000 on restricted funds (discussed above), reserves, and
advances provided to the Operating Partnerships. During the year ended
February 29, 1996, interest earnings slightly increased compared to the
previous fiscal period due to the average increase of short-term interest
rates and a change in interest rates on the restricted deposits. The
Partnership's operating expenses (which include accrued investor service
fees of $15,000) were comparable during the years ended February 29, 1996
and February 28, 1995. The operating expenses of the Partnership are not
expected to vary significantly in the near future.
The 1995 operating results of the Operating Partnerships reflect positive
operations of approximately $63,000, which includes principal amortization
under the mortgages (approximately $208,000) and net deposits to required
escrows (approximately $154,000), and excludes accrued fees to affiliates
of the Operating General Partner and the General Partner (approximately
$164,000), amortization of deferred financing costs (approximately $43,000)
and accrued interest to Chase and the Partnership (approximately $21,000).
The occupancy fluctuated during 1995 while operating expenses increased
(primarily from increases in real estate taxes and insurance, and planned
improvements which were not funded from replacement reserves), resulting in
a decline in operating results compared to 1994.
The Operating Partnerships did not utilize the Operating Deficit Escrows or
replacement reserves during 1995. Although the results of operations are
stable, management continues to examine methods to stabilize healthy
occupancy rates while attempting modest increases in rental rates and to
closely monitor its operating costs. As of December 31, 1995, the occupancy
rate was approximately 98%. Although operations have significantly improved
since the mortgage modification in June, 1992, the future operating results
of the Complex will be extremely dependent on market conditions (including
the newly developed multi-family housing in the area, discussed above) and
therefore may be subject to significant volatility.
Year Ended February 28, 1995
During the year ended February 28, 1995, the Partnership earned interest of
approximately $31,000 on restricted funds (discussed above), reserves, and
advances provided to the Operating Partnerships. During the year ended
February 28, 1995, interest earnings slightly decreased compared to the
previous fiscal period due to the average decrease of interest-bearing
deposits and lower interest rates. The Partnership's operating expenses
(which include accrued investor service fees of $15,000) were comparable
during the years ended February 28, 1995 and 1994.
The 1994 operating results of the Operating Partnerships reflect positive
operations of approximately $438,000, which includes principal amortization
under the mortgages (approximately $140,000) and net deposits to required
escrows (approximately $106,000), and excludes accrued fees to affiliates
of the Operating General Partner and the General Partner (approximately
$150,000), amortization of deferred financing costs (approximately $43,000)
and accrued interest to Chase and the Partnership (approximately $41,000).
The improved occupancy during the second half of 1993 was maintained
throughout 1994 while operating expenses increased slightly, resulting in
improved operating results in 1994. The Operating Partnerships did not
utilize the Operating Deficit Escrows during 1994. As of December 31, 1994,
the occupancy rate was approximately 97%.
Year Ended February 28, 1994
During the year ended February 28, 1994, the Partnership earned interest of
approximately $33,000 on restricted funds (discussed above), reserves, and
advances provided to the Operating Partnerships. During the year ended
February 28, 1994, interest earnings decreased compared to the previous
fiscal period due to the average decrease of interest-bearing deposits and
lower interest rates. The Partnership's operating expenses (which include
accrued investor service fees of $15,000) decreased as a result of
incurring costs resulting from the mortgage modification (discussed above)
during the years ended February 1993 and 1992. Amortization expense
decreased during the year ended February 28, 1994 as a result of
organization costs becoming fully amortized during the year.
The 1993 operating results of the Operating Partnerships reflect positive
operations of approximately $95,000, which includes principal amortization
under the mortgages (approximately $82,000) and net deposits to required
escrows (approximately $41,000), and excludes accrued fees to affiliates of
the Operating General Partner and the General Partner (approximately
$185,000), amortization of deferred financing costs (approximately $43,000)
and accrued interest to Chase and the Partnership (approximately $41,000).
The operating results improved, compared to 1992, for several reasons.
Occupancy significantly improved during the second half of 1993 resulting
from management's efforts and a more active market during that time.
Interest expense declined as a result of having a full year at the lower
7
interest rate under the modified mortgages (compared to approximately seven
months in 1992). Operating expenses declined as a result of lower tenant
turnover, increased occupancy and management's efforts to reduce costs. The
Operating Partnerships did not utilize the Operating Deficit Escrows during
1993. As of December 31, 1993, the occupancy rate was approximately 93%.
Inflation
Inflation is not expected to have a material adverse impact on Registrant's
revenues during its period of equity ownership in the Operating
Partnerships.
Item 8. Financial Statements and Supplementary Data
The financial information required in response to this Item 8 is submitted
as part of Item 14(a) of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
8
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers.
The General Partner was incorporated in Delaware on November 24, 1986. As
described below, its principals have had significant experience in various
facets of the real estate business including the development of
multi-family rental housing. The directors and officers of the General
Partner, who have served as such since inception, are as follows:
Name Age Office
Richard Paul Richman 48 President and Director
Robert H. Wilder, Jr. 50 Executive Vice President,
Assistant Secretary, Treasurer
and Director.
Gina S. Scotti 40 Secretary
Richard Paul Richman, 48 years old, is President and Director of WRHC. Mr.
Richman graduated from the Columbia University Law School with a Juris
Doctor degree, the Columbia University Graduate School of Business
Administration with a Master of Business Administration degree and Syracuse
University with a Bachelor of Arts degree in Political Science. Mr. Richman
has over ten years of extensive experience in both the development and
management of residential properties. From 1973 until 1979, Mr. Richman
practiced corporate law in New York City with the law firm of Greenbaum,
Wolff & Ernst and then as a partner of Shipley, Richman & Nierenberg. For
over six years, Mr. Richman acted as a lawyer in connection with the
development, syndication and tax issues relating to real estate. Since
1988, Mr. Richman has been the President and sole stockholder of The
Richman Group, Inc. In recent years, Mr. Richman has devoted full time to
the syndication and development of real estate. Mr. Richman was a vice
president and shareholder of Related Housing Companies Incorporated, New
York, New York from 1978 until mid-1979 with responsibility for that
company's project acquisition and syndication activities. Mr. Richman has
been a member of the National Advisory Board of the Housing and Development
Reporter, a bi- weekly publication of the Bureau of National Affairs, Inc.,
a frequent speaker on real estate syndication, and a member of the New York
State Historic Credit Task Force, the National Leased Housing Association,
the Coalition to Preserve the Low-Income Tax Credit and the Minority
Developer Assistance Corporation (which was established by the New York
State Battery Park Commission).
Robert H. Wilder, Jr., 50 years old, is Executive Vice President, Secretary
and Treasurer and Director of WRHC. Mr. Wilder graduated from the
University of Michigan with a Bachelor of Arts degree in Economics and from
the Columbia University Graduate School of Business with a Master of
Business Administration degree. After graduation in 1968, Mr. Wilder joined
James D. Landauer Associates, Inc., a national real estate consulting firm,
where his account responsibilities included feasibility studies, market
analyses, land use studies, portfolio valuations and appraisals of
industrial, office, commercial and multi-family properties. From 1973 until
mid-1979, Mr. Wilder was executive vice president and shareholder of
Related Housing Companies Incorporated, New York, New York, and was
responsible for mortgage financing and construction loan placement and the
supervision of the development of the company's projects. Since 1988, Mr.
Wilder has been the President and sole shareholder of Wilder Property
Companies Inc. Mr. Wilder is also a licensed real estate broker in New York
and Connecticut.
Gina S. Scotti, 40 years old, is Secretary of WRHC. Ms. Scotti, a Vice
President and Secretary of the Richman Group, Inc. and Secretary of Wilder
Richman Corporation ("WRC"), joined WRC in 1984 as a special assistant to
the President, and has been the Director of Investor Services with
responsibility for all communications with investors since 1986.
9
Item 11. Executive Compensation
The Partnership is not required to pay the officers, directors or partners
of the General Partner any direct compensation, and no such compensation
was paid during the year ended February 29, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person or group is known by the Partnership to be the owner of record of
more than 5% of the outstanding units as of February 29, 1996.
Item 13. Certain Relationships and Related Transactions
The financial interests in Registrant of the General Partner and Special
Limited Partner are set forth under the heading "PROFITS, LOSSES and
DISTRIBUTIONS" at pp. 117 - 124 of the Prospectus, which is incorporated
herein by reference.
Transactions with Affiliates of Management
The General Partner and certain of its affiliates are entitled to receive
certain compensation, fees and reimbursement of expenses during the
offering, operational and termination or refinancing stages of the
Partnership.
Wilder Richman Management Corporation ("WRMC"), an affiliate of the General
Partner, became a co-management agent of the Complex on July 1, 1992. In
connection with these services, WRMC earned management fees of $76,641 in
1995, of which $42,461 was accrued.
Richman Asset Management, LLC., an affiliate of the General Partner, earned
compensation in the amount of $60,000 in 1995 for its performance in
connection with investor services for the Partnership and the Operating
Partnerships, all of which was accrued.
Indebtedness of Management
No officer or director of the General Partner or any affiliate of the
foregoing was indebted to Registrant at any time during the years ended
February 29, 1996 and February 28, 1995.
10
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a) Financial Statements
(i) The list of Financial Statements of Registrant appears on
page F-1.
(ii) The list of Financial Statements of the Operating
Partnerships appears on page F-15.
(3) Exhibits:
(3A) Certificate of Limited Partnership of Wilder Richman
Historic Properties II, L.P., as filed with the Secretary
of State of Delaware on October 15, 1987;*
(3B) Form of Agreement of Limited Partnership of Wilder Richman
Historic Properties II, L.P. (attached to Prospectus as
Exhibit A);
(4) Form of Subscription Agreement (attached to Prospectus as
Exhibit B);
(10A) Previously executed and filed Certificate of Limited
Partnership and Agreement and Amended and Restated
Certificate of Limited Partnership of (x) Dixon Mill
Associates I (Phase One), Limited Partnership, (y) Dixon
Mill Associates II (Phase Two), Limited Partnership and
(z) Dixon Mill Associates III (Phase Three), Limited
Partnership;*
(10B) Form of Amended and Restated Agreement and Certificate of
Limited Partnership of the Dixon Mill Partnerships:
(1) Dixon Mill Associates I (Phase One), Limited
Partnership Amended and Restated Agreement and
Certificate of Limited Partnership;**
(2) Dixon Mill Associates II (Phase Two), Limited
Partnership Amended and Restated Agreement and
Certificate of Limited Partnership;** and
(3) Dixon Mill Associates III (Phase Three), Limited
Partnership Amended and Restated Agreement and
Certificate of Limited Partnership;**
(10C) Dixon Mill Complex Financing Documents;*
(10D) Administrative Consent Order with New Jersey Department of
Environmental Protection ("NJDEP") and NJDEP Non-
Applicability Letter as to Dixon Mill Partnerships;*
(10E) Master Services Agreement, dated June 18, 1986, between
Varick Construction Corp. and IT Corporation;*
(10F) Documents related to Dixon Mill Complex historic
certification;*
(10G) Form of Operating Deficit Guarantee Agreement;*
11
(10H) Form of Repurchase Agreement;**
(10I) Form of Investor Services Agreement;**
(10J) Form of Escrow Agreement among Wilder Richman Historic
Properties II, L.P., Wilder Richman Historic Corporation,
Shearson Lehman Hutton Inc. and FirsTier Bank, N.A., as
escrow agent;**
(10K) Form of Financial Development Consulting Agreement between
Wilder Richman Corporation and the Operating Partnerships;**
(10L) Form of Annuity Issuance Agreement between Wilder Richman
Historic Properties II, L.P. and the Issuer;**
(10M) Form of Guaranteed Investment Contract Escrow Agreement
among Wilder Richman Historic Properties II, L.P., the
Dixon Mill Partnerships and the escrow agent;**
(10N) Form of Assignment between the Dixon Mill Partnership, as
Assignor, and Wilder Richman Historic Properties II, L.P.,
as Assignee;**
(10O) Form of Letter from The Dixon Venture to Wilder Richman
Historic Properties II, L.P. and the Dixon Mill
Partnerships, as to The Dixon Venture's agreement to bear
all costs of compliance with the New Jersey Environmental
Cleanup Responsibility Act;**
(10P) Amendment No. 1 to Agreement of Limited Partnership ***
(10Q) Reinstatement and Modification Agreement; ***
(10R) Operating Deficit Escrow Agreement; ***
(10S) Priority Operating Deficit Escrow Agreement; ***
(10T) Amended and Restated Achievement Escrow Agreement; ***
(10U) Default Avoiding Loan Agreement; ***
(10V) Management Agreement; ***
(10W) Chase Note; ***
(10X) Letter of Intent to Reinstate and Modify the Mortgages. ****
(27) Financial Data Schedule
* Incorporated by Reference to Registrant's Form S-11 Registration
Statement as filed with the Securities and Exchange Commission
on January 15, 1988.
** Incorporated by Reference to Amendment No.1 to Registrant's Form S-11
Registration Statement as filed with the Securities and Exchange
Commission on May 9, 1988.
*** Submitted as exhibit to Form 10-K for the fiscal year ended February 29,
1992.
**** Incorporated by Reference to Proxy dated March 23, 1992.
b) Reports on Form 8-K
None.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 31st day
of May, 1996.
Wilder Richman Historic Properties II, L.P.
By: Wilder Richman Historic Corporation,
General Partner
By: /s/ Richard Paul Richman
Richard Paul Richman
President and Director
By: /s/ Robert H. Wilder, Jr.
Robert H. Wilder, Jr.
Executive Vice President and
Director
13
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
FINANCIAL STATEMENTS FOR THE
YEARS ENDED FEBRUARY 29, 1996,
FEBRUARY 28, 1995 AND 1994
AND INDEPENDENT AUDITORS' REPORT
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Financial Statements for the
Years Ended February 29, 1996, February 28, 1995 and 1994
and Independent Auditors' Report
C O N T E N T S
Page
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS:
Balance sheets F-3
Statements of operations F-4
Statements of partners' equity F-5
Statements of cash flows F-6
Notes to financial statements F-7 - F-14
F-1
INDEPENDENT AUDITORS' REPORT
Partners
Wilder Richman Historic Properties II, L.P.
Greenwich, Connecticut
We have audited the accompanying balance sheets of Wilder Richman Historic
Properties II, L.P. as of February 29, 1996 and February 28, 1995, and the
related statements of operations, partners' equity and cash flows for the
years ended February 29, 1996 and February 28, 1995 and 1994. These
financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits 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 statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. 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 audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wilder Richman Historic
Properties II, L.P. as of February 29, 1996 and February 28, 1995 and the
results of its operations, changes in partners' equity and cash flows for
the years ended February 29, 1996, February 28, 1995 and 1994 in conformity
with generally accepted accounting principles.
April 17, 1996
New York, New York
F-2
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
BALANCE SHEETS
February 29, February 28,
A S S E T S 1996 1995
INVESTMENTS IN OPERATING PARTNERSHIPS
(Notes 2, 3, 4 and 7) $2,859,737 $3,605,130
CASH AND CASH EQUIVALENTS (Note 2) 615,815 30,836
RESTRICTED CASH (Note 3) 582,287
NOTE RECEIVABLE (Note 3) 317,713 317,713
ACCRUED INTEREST RECEIVABLE (Note 3) 77,498 56,560
$3,870,763 $4,592,526
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Other liabilities $ 10,000 $ 10,000
Due to related parties (Note 4) 124,201 109,201
134,201 119,201
COMMITMENTS AND CONTINGENCIES (Notes 3 and 7)
PARTNERS' EQUITY (Notes 2 and 5):
Limited partners' equity 3,865,505 4,594,900
General partner's deficit (128,943) (121,575)
3,736,562 4,473,325
$3,870,763 $4,592,526
See notes to financial statements
F-3
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF OPERATIONS
Year ended
February 29, February 28,
1996 1995 1994
Revenues:
Interest income $ 43,259 $ 30,858 $ 33,142
Expenses:
Operating 34,629 32,656 36,993
Amortization 4,500
Total expenses 34,629 32,656 41,493
Income (loss) from operations 8,630 (1,798) (8,351)
Equity in loss of Operating
Partnerships before extraordinary
item (1,111,892) (873,701) (1,372,573)
Net loss before extraordinary item (1,103,262) (875,499) (1,380,924)
Extraordinary item - Equity in
forgiveness of debt of Operating
Partnerships (Note 3) 366,499
NET LOSS $ (736,763) $ (875,499) $(1,380,924)
Net loss attributable to:
Limited partners $ (729,395) $ (866,744) $(1,367,115)
General partner (7,368) (8,755) (13,809)
$ (736,763) $ (875,499) $(1,380,924)
Net loss per unit of limited
partnership interest before
extraordinary item (800 units) (1,365) (1,083) (1,709)
Extraordinary item 453
Net loss per unit of limited
partnership interest $ (912) $ (1,083) $ (1,709)
See notes to financial statements
F-4
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1995 AND 1994
Limited General
Total partners partner
Partners' equity (deficit),
March 1, 1993 $6,729,748 $6,828,759 $ (99,011)
Net loss, year ended February 28,
1994 (1,380,924) (1,367,115) (13,809)
Partners' equity (deficit),
February 28, 1994 5,348,824 5,461,644 (112,820)
Net loss, year ended February 28,
1995 (875,499) (866,744) (8,755)
Partners' equity (deficit),
February 28, 1995 4,473,325 4,594,900 (121,575)
Net loss, year ended February 29,
1996 (736,763) (729,395) (7,368)
Partners' equity (deficit),
February 29, 1996 $3,736,562 $3,865,505 $ (128,943)
Limited partnership units
outstanding at February 29, 1996,
February 28, 1995 and 1994 800
See notes to financial statements
F-5
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF CASH FLOWS
Year ended
February 29, February 28,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (736,763) $ (875,499) $(1,380,924)
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Amortization 4,500
Equity in loss of Operating
Partnerships 745,393 873,701 1,372,573
Changes in assets and liabilities:
Decrease in restricted cash 582,287
Increase in accrued interest
receivable (20,938) (20,938) (20,938)
Decrease in other liabilities (5,000)
Increase in due to related
parties 15,000 15,000 15,000
Total adjustments 1,321,742 867,763 1,366,135
Net cash provided by (used
in) operating activities 584,979 (7,736) (14,789)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 584,979 (7,736) (14,789)
CASH AND CASH EQUIVALENTS, beginning of
year 30,836 38,572 53,361
CASH AND CASH EQUIVALENTS, end of year $ 615,815 $ 30,836 $ 38,572
See notes to financial statements
F-6
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1995 AND 1994
1. ORGANIZATION
Wilder Richman Historic Properties II, L.P. (the "Partnership") was formed
under the Delaware Revised Uniform Limited Partnership Act on October 15,
1987 to acquire all of the limited partnership interest in Dixon Mill
Associates I (Phase One), Limited Partnership ("Dixon Mill I"), Dixon Mill
Associates II (Phase Two), Limited Partnership ("Dixon Mill II") and Dixon
Mill Associates III (Phase Three), Limited Partnership ("Dixon Mill III")
(together herein referred to as the "Operating Partnerships") which,
collectively, constructed, rehabilitated and own and operate a 433-unit
apartment complex (the "Complex") located in Jersey City, New Jersey.
Wilder Richman Historic Corporation (the "General Partner") is the General
Partner of the Partnership. The general partner of the Operating
Partnerships is Dixon Venture Corp. (the "Operating General Partner").
The Partnership filed a Form S-11 registration statement with the
Securities and Exchange Commission, which became effective May 9, 1988,
covering an offering (the "Offering") of 800 limited partnership units at
$24,100 per unit.
On July 15, 1988, the Partnership admitted 754 limited partners
representing 800 units of limited partnership interest (the "Closing") for
$19,280,000 in cash and notes. Immediately following the Closing, the
Partnership acquired a 99% limited partnership interest in the Operating
Partnerships. The capital contribution paid by the Partnership for its
limited partnership interest was $16,388,000 in cash and notes.
2. SIGNIFICANT ACCOUNTING POLICIES
Financial statements
The financial statements of the Partnership are prepared on the accrual
basis of accounting and include only those assets, liabilities and results
of operations related to the business of the Partnership.
Investments in Operating Partnerships
The Partnership accounts for its investment in the Operating Partnerships
on the equity method of accounting. Under the equity method of accounting,
the investment cost is adjusted by the Partnership's share of the Operating
Partnerships' results of operations and by distributions received or
accrued. The statements of operations includes the Partnership's equity in
the earnings of the Operating Partnerships on a calendar year basis.
Syndication costs
Syndication costs of $2,639,200 were charged against limited partners'
capital upon the closing of the public offering, in accordance with
prevalent industry practice.
F-7
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1995 AND 1994
Intangible assets
Intangible assets represent organization costs which were amortized on a
straight-line basis over 60 months. These costs were fully amortized during
the fiscal year ending February 28, 1994.
Income taxes
No provisions have been made for federal, state and local income taxes, as
they are the personal responsibility of the partners.
Cash equivalents
For purposes of the statements of cash flows, the Partnership considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Fiscal year
The Partnership's fiscal year ends on the last day in February.
Basis of presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. INVESTMENTS IN OPERATING PARTNERSHIPS
The Investments in Operating Partnerships are as follows:
Dixon Dixon Dixon
Mill I Mill II Mill III Total
Balance, March 1, 1993 $1,196,040 $2,365,740 $2,289,624 $5,851,404
Equity in loss of
Operating Partnerships (392,982) (626,317) (353,274) (1,372,573)
Balance, February 28, 1994 803,058 1,739,423 1,936,350 4,478,831
Equity in loss of
Operating Partnerships (255,941) (394,712) (223,048) (873,701)
Balance, February 28, 1995 547,117 1,344,711 1,713,302 3,605,130
Equity in loss of
Operating Partnerships (269,033) (365,973) (110,387) (745,393)
Balance, February 29, 1996 $ 278,084 $ 978,738 $1,602,915 $2,859,737
F-8
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1995 AND 1994
The combined balance sheets of the Operating Partnerships at December 31,
1995 and 1994 are shown below.
December 31,
1995 1994
Assets:
Land $ 1,150,473 $ 1,150,473
Buildings (net of accumulated
depreciation of $8,549,669 and
$7,229,966 in 1995 and
1994, respectively) 44,059,457 45,379,160
Cash and cash equivalents 80,531 164,855
Deferred costs 624,448 668,082
Mortgage escrow deposits 848,818 357,272
Tenant security deposits 601,984 490,882
Other assets 71,098 37,094
Real estate tax receivable 208,442
Total assets $47,436,809 $48,456,260
Liabilities:
Mortgages payable $27,237,789 $27,446,018
Notes payable 317,713 635,427
Accounts payable and accrued
expenses 135,598 118,439
Accrued interest payable 210,804 243,752
Tenants' security deposits
payable 601,984 490,882
Due to general partner and
affiliates 1,481,595 1,317,494
Total liabilities 29,985,483 30,252,012
Partners' equity:
Wilder Richman Historic
Properties II, L.P. 2,859,737 3,605,130
General partner 14,591,589 14,599,118
Total partners' equity 17,451,326 18,204,248
Total liabilities and
partners' equity $47,436,809 $48,456,260
F-9
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1995 AND 1994
The combined statements of operations of the Operating Partnerships for the
years ended December 31, 1995, 1994 and 1993 are as follows:
Year ended
December 31,
1995 1994 1993
Revenues:
Rent $ 5,196,552 $ 5,148,859 $ 4,578,099
Interest 11,419 5,267 2,010
5,207,971 5,154,126 4,580,109
Expenses:
Administrative 972,779 879,316 844,475
Operating 1,978,650 1,756,166 1,706,790
Management fees 153,281 151,435 140,085
3,104,710 2,786,917 2,691,350
Income before interest,
depreciation and amortization,
and extraordinary item 2,103,261 2,367,209 1,888,759
Interest 1,863,047 1,880,529 1,897,835
Depreciation and amortization 1,363,337 1,369,206 1,377,361
3,226,384 3,249,735 3,275,196
Loss before extraordinary item (1,123,123) (882,526) (1,386,437)
Extraordinary item - forgiveness
of debt 370,201
NET LOSS $ (752,922) $ (882,526) $(1,386,437)
Loss before extraordinary item
allocated to Wilder Richman
Historic Properties II, L.P. $(1,111,892) $ (873,701) $(1,372,573)
Extraordinary item 366,499
Net loss allocated to Wilder Richman
Historic Properties II, L.P. $ (745,393) $ (873,701) $(1,372,573)
Loss before extraordinary item
allocated to Dixon Venture Corp. $ (11,231) $ (8,825) $ (13,864)
Extraordinary item 3,702
Net loss allocated to Dixon Venture
Corp. $ (7,529) $ (8,825) $ (13,864)
F-10
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1995 AND 1994
In connection with the modification of the mortgages of the Operating
Partnerships on June 11, 1992, the Partnership provided (i) an advance of
$300,000 to assist in covering costs associated with such modification and
(ii) a letter of credit to Federal National Mortgage Association ("FNMA"),
the lender, in the amount of $600,000. Such letter of credit was provided
to assist in covering future operating shortfalls, if any, of the Operating
Partnerships in order to avoid default under their respective mortgage
obligations. The term of the letter of credit was the later of (i) January
1, 1996 or (ii) the ability of the operating Partnerships to operate at a
debt service coverage ratio of 1.10 for a twelve month period. Such
condition was satisfied for the twelve-month period ended December 31,
1994; accordingly, the Partnership's letter of credit was released on
January 1, 1996. As of February 28, 1995, the outstanding balance of the
letter of credit was $582,287 and was fully collateralized by interest
bearing deposits which are reflected as restricted cash on the balance
sheet. The Partnership provided an advance of $17,713 during 1992 to cover
operating shortfalls pursuant to the terms of the mortgage modification.
Any such advances bear interest at 6.5% per annum and are guaranteed by
principals of the Operating General Partner to the extent that such sums
would have otherwise been advanced pursuant to their operating deficit
guarantee obligation. Outstanding advances as of February 29, 1996 and
February 28, 1995 amounted to $317,713 with accrued interest thereon of
$77,498 and $56,560 at February 29, 1996 and February 28, 1995,
respectively. The outstanding advances and accrued interest are reflected
in Notes Payable and Accrued Interest Payable in the combined balance sheet
of the Operating Partnerships presented above.
4. RELATED PARTY TRANSACTIONS
An annual investor services fee is payable to an affiliate of the general
partner of the Partnership in the amount of $15,000 from the Partnership
and each of the Operating Partnerships. At February 29, 1996 and February
28, 1995, due to related parties includes $110,000 and $95,000,
respectively of Investor Services fees payable from the Partnership and the
Operating Partnerships.
At February 29, 1996 and February 28, 1995, due to related parties also
includes $9,846 due to the Operating Partnerships.
An affiliate of the General Partner is the co-management agent of the
properties owned by the Operating Partnerships. Pursuant to the management
agreement such management fees are not to exceed 1.5% of annual gross
operating revenues of the Complex. The affiliated management agent earned
$76,641 and $75,717 in the years ended December 31, 1995 and 1994,
respectively of which $35,004 was paid in 1995 and 1994.
F-11
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1995 AND 1994
5. PARTNERS' EQUITY
The general partner, the special limited partner and the limited partners
were allocated 1%, .01% and 98.99%, respectively, of the losses.
Distributions
Cash flow of the Partnership available annually for distribution after
payment of Partnership expenses will be distributed 98.99% to the investor
limited partners, .01% to the special limited partner and 1.00% to the
General Partner. The Guaranteed Investment Contracts invested in by the
Operating Partnerships were purchased to assure the Partnership sufficient
cash flow to make a 5% distribution to the investor limited partners
through December 31, 1991 subject to the terms of the mortgage modification
of the Operating Partnerships (see Notes 3 and 7). After 1991, the ability
to distribute cash flow is dependent on the operations of the Operating
Partnerships. Distributions for year ended February 28, 1992 were withheld
pursuant to a solicitation statement authorizing that such funds may
otherwise be utilized to assist in refinancing of the properties, which
occurred June 11, 1992.
Net cash proceeds resulting from a sale or refinancing by the Operating
Partnerships, to the extent available (after the discharge of debts and
obligations of the Operating Partnerships and the Partnership, including
outstanding loans from partners or affiliates), will be distributed
generally as follows:
- 98.99% to the investor limited partners, .01% to the special limited
partner and 1.00% to the General Partner, until the investor
limited partners have received an amount equal to their adjusted
contributions;
- 98.99% to the investor limited partners, .01% to the special limited
partner and 1.00% to the General Partner, until the investor limited
partners have received an amount equal to the accrued cumulative, non-
compounded rate of 7% per annum (see Note 7).
- The balance of adjusted capital contributions of the General Partner and
special limited partner, and
- The balance, if any, 97.99% to the investor limited partners, .01% to
the special limited partner and 2.00% to the General Partner.
F-12
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1995 AND 1994
6. TAXABLE LOSS
A reconciliation of the financial statement loss of the Partnership for the
years ended February 29, 1996, February 28, 1995 and 1994 to the net loss
as shown on the tax returns for the years ended December 31, 1995, 1994 and
1993 is as follows:
Year ended
December 31,
1995 1994 1993
Financial statement loss as of
February 29, 1996, February 28,
1995 and 1994, respectively $ (736,763) $ (875,499) $(1,380,924)
Less transactions occurring during
January 1 to end of February of
respective periods:
Interest income (1,362) (1,237) (1,419)
Operating expenses, including
fees not deductible under
Internal Revenue Code Section
267 15,000 15,000 15,000
(723,125) (861,736) (1,367,343)
Financial statement to tax
return difference arising from
investments in Operating
Partnerships:
Forgiveness of debt (366,499)
Excess of depreciation for income
tax purposes over financial
reporting purposes (817,582) (1,110,420) (1,148,674)
Taxable loss $(1,907,206) $(1,972,156) $(2,516,017)
F-13
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1995 AND 1994
7. COMMITMENTS AND CONTINGENCIES
Preferred return
Pursuant to the limited partnership agreement of the Partnership (the
"Partnership Agreement"), the investor limited partners are to receive a
minimum annual distribution (the "Minimum Distribution") equal to five
percent of gross proceeds from the Closing of the Offering. Such Minimum
Distribution period expired for calendar years beginning after December 31,
1991. The Minimum Distribution through December 31, 1990 was provided from
proceeds of guaranteed investment contracts which were acquired by the
Operating Partnerships. The proceeds from the guaranteed investment
contracts for the year ended December 31, 1991 were not distributed to the
investor limited partners pursuant to a solicitation statement in
connection with the modification of the mortgages of the operating
partnerships (see Note 5).
Pursuant to the Partnership Agreement, the investor limited partners are
entitled to an annual preferred return in the amount of 7% of the investor
limited partners' adjusted contributions outstanding from time to time,
subject to cash flow available for distribution (including lender
restrictions). To date, the Operating Partnerships have provided
distributions only to the extent of proceeds generated from the guaranteed
investment contracts (see Note 5). As of December 31, 1995, the cumulative
preferred amount due from the Operating Partnerships is $6,723,313. Any
cumulative shortfall not recovered out of future cash flow distributions
will be payable from sale or refinancing proceeds, to the extent available.
F-14
DIXON MILLS ASSOCIATES
COMBINED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
AND INDEPENDENT AUDITORS' REPORT
DIXON MILLS ASSOCIATES
Combined Financial Statements for the
Years Ended December 31, 1995, 1994 and 1993
and Independent Auditors' Report
C O N T E N T S
Page
INDEPENDENT AUDITORS' REPORT F-17
COMBINED FINANCIAL STATEMENTS:
Combined balance sheets F-18
Combined statements of operations F-19
Combined statements of partners' equity F-20
Combined statements of cash flows F-21
Notes to combined financial statements F-22 - F-27
F-16
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Dixon Venture Corp.
Secaucus, New Jersey
and
Partners
Wilder Richman Historic Properties II, LP
Greenwich, Connecticut
We have audited the accompanying combined balance sheets of Dixon Mills
Associates as of December 31, 1995 and 1994, and the related statements of
operations, partners' equity and cash flows for the years ended December
31, 1995, 1994 and 1993. These financial statements are the responsibility
of the Partnerships' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits 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 statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. 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 audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dixon Mills Associates,
as of December 31, 1995 and 1994, and the results of its operations,
changes in partners' equity and cash flows for the years ended December 31,
1995, 1994 and 1993 in conformity with generally accepted accounting
principles.
February 27, 1996
New York, New York
F-17
DIXON MILLS ASSOCIATES
COMBINED BALANCE SHEETS
December 31,
A S S E T S 1995 1994
LAND (Notes 2 and 6) $ 1,150,473 $ 1,150,473
BUILDINGS (net of accumulated depreciation
of $8,549,669 and $7,229,966 in 1995 and 1994,
respectively) (Notes 2 and 6) 44,059,457 45,379,160
CASH AND CASH EQUIVALENTS (Note 2) 80,531 164,855
DEFERRED COSTS (Note 2) 624,448 668,082
MORTGAGE ESCROW DEPOSITS 848,818 357,272
TENANT SECURITY DEPOSITS 601,984 490,882
OTHER ASSETS 71,098 37,094
REAL ESTATE TAX RECEIVABLE (Note 3) - 208,442
$47,436,809 $48,456,260
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Mortgages payable (Note 6) $27,237,789 $27,446,018
Notes payable (Note 7) 317,713 635,427
Accounts payable and accrued expenses 135,598 118,439
Accrued interest payable (Notes 6 and 7) 210,804 243,752
Tenants' security deposits payable 601,984 490,882
Due to general partner and
affiliates (Notes 5 and 7) 1,481,595 1,317,494
29,985,483 30,252,012
COMMITMENTS AND CONTINGENCIES (Note 8)
PARTNERS' EQUITY (Note 4):
WILDER RICHMAN HISTORIC
PROPERTIES II, L.P., LIMITED PARTNER 2,859,737 3,605,130
DIXON VENTURE CORP., GENERAL PARTNER 14,591,589 14,599,118
17,451,326 18,204,248
$47,436,809 $48,456,260
See notes to combined financial statements
F-18
DIXON MILLS ASSOCIATES
COMBINED STATEMENTS OF OPERATIONS
Year ended
December 31,
1995 1994 1993
Revenues:
Rent $ 5,196,552 $ 5,148,859 $ 4,578,099
Interest 11,419 5,267 2,010
5,207,971 5,154,126 4,580,109
Expenses:
Administrative 972,779 879,316 844,475
Operating 1,978,650 1,756,166 1,706,790
Management fees (Note 5) 153,281 151,435 140,085
3,104,710 2,786,917 2,691,350
Income before interest, depreciation
and amortization, and extraordinary
item 2,103,261 2,367,209 1,888,759
Interest (Notes 6 and 7) 1,863,047 1,880,529 1,897,835
Depreciation and amortization 1,363,337 1,369,206 1,377,361
3,226,384 3,249,735 3,275,196
Loss before extraordinary item (1,123,123) (882,526) (1,386,437)
Extraordinary item - forgiveness
of debt (Note 7) 370,201 - -
NET LOSS $ (752,922) $ (882,526) $(1,386,437)
Loss before extraordinary item
allocated to Wilder Richman Historic
Properties II, L.P. $(1,111,892) $ (873,701) $(1,372,573)
Extraordinary item 366,499 - -
Net loss allocated to Wilder Richman
Historic Properties II, L.P. $ (745,393) $ (873,701) $(1,372,573)
Loss before extraordinary item
allocated to Dixon Venture Corp. $ (11,231) $ (8,825) $ (13,864)
Extraordinary item 3,702 - -
Net loss allocated to Dixon Venture
Corp. $ (7,529) $ (8,825) $ (13,864)
See notes to combined financial statements
F-19
DIXON MILLS ASSOCIATES
COMBINED STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Limited General
Total partner partner
Partners' equity, January 1, 1993 $20,473,211 $ 5,851,404 $14,621,807
Net loss, year ended December 31,
1993 (1,386,437) (1,372,573) (13,864)
Partners' equity, December 31, 1993 19,086,774 4,478,831 14,607,943
Net loss, year ended December 31,
1994 (882,526) (873,701) (8,825)
Partners' equity, December 31, 1994 18,204,248 3,605,130 14,599,118
Net loss, year ended December 31,
1995 (752,922) (745,393) (7,529)
Partners' equity, December 31, 1995 $17,451,326 $ 2,859,737 $14,591,589
See notes to combined financial statements
F-20
DIXON MILLS ASSOCIATES
COMBINED STATEMENTS OF CASH FLOWS
Year ended
December 31,
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (752,922) $ (882,526) $(1,386,437)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 1,363,337 1,369,206 1,377,361
Forgiveness of debt - note payable (317,714) - -
Change in assets:
Increase in mortgage escrow deposits (491,546) (117,796) (66,109)
Increase in tenant security deposits (111,102) (52,277) (67,446)
Decrease (increase) in other assets (34,004) 33,761 (1,421)
Decrease (increase) real estate tax
receivable 208,442 (208,442) -
Change in liabilities:
Increase (decrease) in accounts payable
and accrued expenses 17,159 (83,727) (29,635)
(Decrease) increase in accrued interest
payable (32,948) 25,367 41,303
Increase in tenants security deposit 111,102 52,277 67,446
Increase in due to General Partner
and affiliates 164,101 161,436 185,085
Total adjustments 876,827 1,179,805 1,506,584
Net cash provided by
operating activities 123,905 297,279 120,147
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets - (35,826) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of mortgages payable (208,229) (139,796) (81,648)
INCREASE (DECREASE) IN CASH (84,324) 121,657 38,499
CASH, beginning of year 164,855 43,198 4,699
CASH, end of year $ 80,531 $ 164,855 $ 43,198
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during year for interest $ 1,843,507 $ 1,855,162 $ 1,856,532
See notes to combined financial statements
F-21
DIXON MILLS ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. COMBINATION AND ORGANIZATION
The combined financial statements include the accounts of Dixon Mill
Associates I (Phase One), Limited Partnership ("DM I"), Dixon Mill
Associates II, (Phase Two), Limited Partnership ("DM II") and Dixon Mill
Associates III, (Phase Three), Limited Partnership ("DM III") after
elimination of all significant intercompany balances and transactions.
Description of the business
The partnerships are one of three limited partnerships collectively
known as "Dixon Mills Associates" or the "Operating Partnerships", each of
which owns one phase of an aggregate 433 units of residential apartments
located in Jersey City, New Jersey, that consist of buildings that are
designated as "certified historic structures" by the U.S. Department of the
Interior. The Operating Partnerships have constructed, rehabilitated, and
own and operate the complex. In accordance with the tax exempt financing of
the complex, the Operating Partnerships are required to rent 15% to 20% of
the apartment units to individuals of low or moderate income.
On July 15, 1988, the Operating Partnerships transferred their 99%
limited partnership interests to Wilder Richman Historic Properties II,
L.P. (the "Limited Partner") in connection with that limited partnership's
public offering. The remaining 1% interest remained with the Operating
General Partner, Dixon Venture Corp. ("DVC")
2. SIGNIFICANT ACCOUNTING POLICIES
Financial statements
The financial statements of the Operating Partnerships are prepared on
the accrual basis of accounting and include only those assets, liabilities
and results of operations related to the business of the Operating
Partnerships.
Land and buildings
Land and buildings are stated at lower of cost or net realizable value,
("NRV"). NRV is the net cash flow necessary to recover costs exclusive
of debt service. Depreciation on buildings is computed on the straight-
line method. The depreciable lives assigned is 40 years for the real
property.
F-22
Income taxes
No provisions have been made for federal, state and local income taxes, as
they are the responsibility of the partners.
The partners of the Operating Partnerships were entitled to a 25% historic
rehabilitation tax credit on eligible costs as a reduction of their tax
liabilities. In addition, the tax basis of the property has been reduced by
one-half of the historic rehabilitation tax credit for income tax purposes
only.
Cash equivalents
For purposes of the statements of cash flows, the Operating Partnerships
consider all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
Deferred costs
Deferred costs represent costs incurred during the mortgage refinancing
(Note 7) and are being amortized over the term of the mortgages using the
straight line method.
Basis of presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. REAL ESTATE TAX RECEIVABLE
The City of Jersey City assessed a real estate tax in 1994 for 1994-95
which was contested by the Operating Partnerships. The financial statements
at December 31, 1994 included a real estate tax receivable in the amount of
$208,442, relating to taxes paid in 1994, which amount was abated and
credited against 1995 tax charges.
F-23
4. PARTNERS' EQUITY
The general partner and the Limited Partner were allocated 1% and 99%,
respectively, of the losses in accordance with the Partnership agreement.
Distributions
The partnership agreements of the Operating Partnerships provide that cash
flow from operations will be distributed 99% to the Limited Partner and 1%
to the Operating General Partner until the Limited Partner has received a
7% preferred return (the "Preference Amount") on their initial capital
contributions. The balance, if any, would be distributed 75% to the limited
partner and 25% to the Operating General Partner. For years ending through
December 31, 1991, any insufficient cash flow (shortfall) from operations
and/or distributions from the guaranteed investment contracts to make
distributions equal to the Preference Amount will be paid at sale or
refinancing to the extent proceeds are available and after payment of all
debt service and outstanding loans payable (Note 7). If in any year after
1992 cash flow distributions are less than the Preference Amount, such
shortfalls will increase the amount that is distributable 99% to the
limited partner and 1% to the general partner in any subsequent year before
the ratio in which distributions of cash flow are shared at 75% for the
Limited Partner and 25% for the Operating General Partner. Any cumulative
shortfall not recovered out of subsequent cash flow distributions will be
payable from sale or refinancing proceeds, to the extent available. To
date, the Operating Partnerships have provided distributions only to the
extent of proceeds generated from the guaranteed investment contracts
discussed above. The cumulative preferred amount due to the limited
partners at December 31, 1995 is $6,723,313.
Distributions of annual net cash flow are subject to the provisions of the
notes payable (Note 7).
Net cash proceeds resulting from a sale or refinancing, to the extent
available (after the discharge of debts and obligations of the Partnership,
including outstanding loans from partners or affiliates), will be
distributed generally as follows:
- 99% to the Limited Partner and 1% to the Operating General Partner, until
the Limited Partner has received an amount equal to its adjusted
contributions.
- 99% to the Limited Partner and 1% to the Operating General Partner, until
the Limited Partner has received an amount equal to the accrued cumulative
Preference Amount.
- The balance of adjusted capital contributions of the General Partner.
- The balance, if any, 75% to the Limited Partnership and 25% to the
Operating General Partner.
F-24
5. RELATED PARTY TRANSACTIONS
DVC has complete authority, management and control of the Operating
Partnerships. The Operating Partnerships, in the normal course of business,
have transactions with related parties. Included in the balance sheet are
the following items:
Due to(from):
1995 1994
Morris Property Management $ 222,400 $ 145,760
Morris Realty (5,259) (5,259)
DVC 936,830 936,830
Wilder Richman Management Corporation 192,624 150,163
RG Housing Advisors, Inc. 90,000 90,000
Richman Asset Management, LLC 45,000 -
$1,481,595 $1,317,494
The Operating Partnerships incurred annual management fees to Wilder
Richman Management Corp. "WRMC", an affiliate of the Limited Partner, in
the amount of $76,641 in 1995, $75,717 in 1994 and $70,043 in 1993. $35,004
was paid in 1995 and 1994.
In addition, management fees of $76,640, $75,718 and $70,042 were incurred
in 1995, 1994 and 1993, respectively to Morris Property Management.
The Operating Partnerships incurred investor service fees of $45,000 to
Richman Asset Management, LLC in 1995 and $45,000 to RG Housing Advisors,
Inc., in 1994 and 1993. Both companies are affiliates of the Limited
Partner.
6. MORTGAGES PAYABLE
On June 11, 1992, the Jersey City Redevelopment Agency provided mortgage
financing for the Operating Partnerships through the issuance of tax-exempt
Bonds (the "Bonds") guaranteed and secured by the Federal National Mortgage
Association ("FNMA") mortgage pass-through certificate ("FNMA
Certificate"). The FNMA Certificate in turn was secured by mortgages in the
amount of $27,545,000 (collectively, the "Mortgages") and letters of credit
of $4,260,000 (the "Letters of Credit") issued by Chase Manhattan Bank
("Chase"). The Letters of Credit were secured by an additional mortgage in
the same amount and the personal guarantees of certain principals of DVC.
The Mortgages provided that the Letters of Credit would remain until the
Operating Partnerships meet certain debt service ratio tests as defined in
the Mortgages (the "Debt Service Test"). The Debt Service Test was met and
the letters of credit were released in June, 1995.
F-25
The Mortgages require monthly payments of interest and principal, except
that the first 24 installments through June 1994 did not include principal.
The interest rate on the Mortgages is 6.74% with a 7.448% constant.
Principal amortization is based on a thirty-five year payment schedule. The
Mortgages mature as follows:
1996 $ 222,706
1997 238,188
1998 254,748
1999 262,586
2000 290,713
Thereafter 25,968,848
$27,237,789
The Mortgages are callable for payment on May 1, 2000, extendable by FNMA
until May 1, 2010. The maximum bond remarket rate is 8% pursuant to the
bond trust indenture dated May 1, 1992 between the Jersey City
Redevelopment Agency and United Jersey Bank.
The Mortgages require monthly payments to a replacement reserve
("Replacement Reserve") account as follows:
June 1995 - May 1996 $14,583
June 1996 - May 1997 16,667
June 1997 - May 2012 5,400
The Replacement Reserve shall be used exclusively to pay for certain
repairs or replacements, subject to the approval of FNMA. The balance in
this account was $317,751 and $156,697 at December 31, 1995 and 1994,
respectively.
FNMA provided the Operating Partnerships with a mortgage loan for closing
costs evidenced by a second note in the amount of $163,000 (the "Second
Note") and secured by a second mortgage. The Second Note was retired,
evenly, without interest, over a 24-month term ending in June 1994.
7. NOTES PAYABLE
Chase Manhattan Bank Chase advanced $277,500 to the Operating Partnerships
for costs associated with the Mortgages, bearing interest at 6.50% with a
maturity of May 1, 2000. Payments of principal and interest could not
commence sooner than January 1, 1996 depending on, among other things, cash
flow generated by the Operating Partnerships. In addition, Chase provided
FNMA with cash and letter of credit in the amount of $622,500 (the "Chase
Operating Deficit Escrows") to provide assistance in the event the
Operating Partnerships experience future operating deficits. Any amounts
drawn on the Chase Operating Deficit Escrows also bore interest of 6.50%.
Any and all advances provided by Chase were secured by the second mortgage
(Note 6).
In addition by an agreement with Chase dated July 5, 1995, to the extent
that the $600,000 letter of credit issued to FNMA was released, the Chase
note and any accrued and unpaid interest would be forgiven. In January
1996, pursuant to the Operating Deficit Escrow Agreement, FNMA released the
Chase letter of credit. As a result of the full release of the Chase
Operating Deficit Escrow, the note payable of $317,714 and accrued interest
of $52,487 was written down to zero and is reflected as a forgiveness of
debt in the accompanying statements of operations.
F-26
Limited Partner
The Limited Partner also advanced $277,500 in connection with the Mortgages
which bear interest at 6.50%. Payments of principal and interest could
commence no sooner than January 1, 1996 depending on, among other things,
cash flow generated by the Operating Partnerships. The principal balance
and unpaid interest become due upon a sale or refinancing of the property.
In addition, the Limited Partner provided FNMA with a letter of credit and
cash in the amount of $622,500 (the "Limited Partner Operating Deficit
Escrow") to provide assistance in the event the Operating Partnerships
experience future operating deficits. Pursuant to the Operating Deficit
Escrow Agreement, FNMA released the letter of credit in January 1996. Any
amount drawn on the Limited Partner Operating Deficit Escrow bore interest
at 6.50%. To the extent the Operating Partnerships make distributions of
net cash flow, all such net cash flow with respect to the applicable
distribution periods must be paid to the Limited Partner until the amounts
outstanding to the Limited Partner are satisfied.
Total advances provided by the Limited Partner as of December 31, 1995
amount to $317,713 and accrued interest of approximately $73,000 and
$52,000 as of December 31, 1995 and 1994, respectively. This note is
secured by the personal guarantees of certain principals of DVC to the
extent such amounts were advanced before February 1, 1994.
8. COMMITMENTS AND CONTINGENCIES
The Operating Partnerships have been named as a third party defendant in a
lawsuit between The Dixon Venture, the party who sold the Premises to the
Operating Partnerships and the former owner, Joseph Dixon Crucible Company
for indemnification for cost clean-up under the Comprehensive Environmental
Response Compensation and Liability Act of 1980. The Operating General
Partner believes that the Operating Partnerships have no liability or no
liability that is not adequately covered by an indemnification from The
Dixon Venture.
F-27