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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO Section 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO Section 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File Number 1-12917
WELLSFORD REAL PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 13-3926898
(State of organization) (I.R.S. employer
identification number)
610 Fifth Avenue, New York, NY 10020
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 333-2300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
Common Stock
$.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months 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 definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting shares held by non-affiliates of
the registrant was approximately $233.6 million based on the closing price
on the American Stock Exchange for such shares on March 12, 1998.
The number of the Registrant's shares of Common Stock outstanding was
16,999,688 as of March 12, 1998 (including 339,806 shares of Class A Common
Stock).
Documents Incorporated By Reference
Portions of the Definitive Proxy Statement for the Annual Shareholders'
Meeting to be held May 28, 1998 are incorporated by reference into Part
III.
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TABLE OF CONTENTS
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Form
10-K
Item Report
No. Page
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PART I
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . .3
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 10
4. Submission of Matters to a Vote of Security-Holders. . . . 10
PART II
5. Market for Registrant's Common Equity
and Related Shareholder Matters . . . . . . . . . . . 11
6. Selected Consolidated Financial Data . . . . . . . . . . . 12
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 13
8. Consolidated Financial Statements and Supplementary Data . 17
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . 17
PART III
10. Directors and Executive Officers of the Registrant . . . . 18
11. Executive Compensation . . . . . . . . . . . . . . . . . . 18
12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . 18
13. Certain Relationships and Related Transactions . . . . . . 18
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . 19
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1997
and 1996. . . . . . . . . . . . . . . . . . . . . . .F-3
Consolidated Statements of Income for the Years Ended
December 31, 1997 and 1996. . . . . . . . . . . . . .F-4
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 1997 and
1996 and the Period from March 22, 1995 (Inception)
to December 31, 1995. . . . . . . . . . . . . . . . .F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996 and the Period from
March 22, 1995 (Inception) to December 31, 1995 . . .F-6
Notes to Consolidated Financial Statements . . . . . . . .F-7
FINANCIAL STATEMENTS SCHEDULE
III. Real Estate and Accumulated Depreciation . . . . . . . . .S-1
IV. Mortgage Loans on Real Estate. . . . . . . . . . . . . . .S-2
All other schedules have been omitted because the required information for
such other schedules is not present, is not present in amounts sufficient
to require submission of the schedule or is included in the consolidated
financial statements.
PART I
Item 1. Business.
Wellsford Real Properties, Inc. (and subsidiaries, collectively, the
"Company") was formed on January 8, 1997, as a corporate subsidiary of
Wellsford Residential Property Trust (the "Trust"). The Trust was formed
in 1992 as the successor to Wellsford Group Inc. (and affiliates) which was
formed in 1986. On May 30, 1997, the Trust merged (the "Merger") with
Equity Residential Properties Trust ("EQR"). Immediately prior to the
Merger, the Trust contributed certain of its assets to the Company and the
Company assumed certain liabilities of the Trust. Immediately after the
contribution of assets to the Company and immediately prior to the Merger,
the Trust distributed to its common shareholders all of the outstanding
shares of the Company owned by the Trust (the "Spin-off"). The common
shareholders of the Trust received 0.25 of a common share of the Company
for each common share of the Trust owned. Upon consummation of the Spin-
off and Merger, the Company had issued and outstanding approximately
4,547,771 shares of common stock and 339,806 shares of Class A common stock
that was issued to an affiliate of EQR. On June 2, 1997, the Company sold
12,000,000 shares of its common stock in a private placement (the "Private
Placement") to a group of institutional investors at $10.30 per share, the
Company's then book value per share.
The Company is a real estate merchant banking firm which acquires, develops
and operates real properties and invests in the debt and equity securities
of private and public real estate companies. The Company has established
three strategic business units ("SBUs") within which it intends to execute
its business plan: an SBU for commercial property investments which is held
in its 99.9% subsidiary, Wellsford Commercial Properties Trust ("WCPT"), an
SBU for debt and equity investments and an SBU for property development and
land investments. The Company currently has approximately 34 employees.
See the accompanying consolidated financial statements for certain
financial information regarding the Company's industry segments.
Commercial Property Investments - WCPT
The Company, through WCPT, seeks to acquire commercial properties below
replacement cost and operate and/or resell the properties after renovation,
redevelopment and/or repositioning. The Company believes that appropriate
well-located commercial properties which are currently underperforming can
be acquired on advantageous terms and repositioned with the expectation of
achieving returns which are greater than returns which could be achieved by
acquiring a stabilized property.
At the time of the Spin-off, the Company owned six commercial office
buildings, five of which were vacant, located in Northern New Jersey,
containing an aggregate of approximately 949,400 square feet and acquired
for an aggregate of approximately $47.6 million (the "WRP Commercial
Properties").
On August 28, 1997, the Company, through WCPT, in a joint venture with
WHWEL Real Estate Limited Partnership ("Whitehall"), an affiliate of
Goldman, Sachs & Co., formed a private real estate operating company,
Wellsford/Whitehall Properties, L.L.C. ("Wellsford Commercial"). Wellsford
Commercial's initial target markets include New York, New Jersey,
Connecticut and the Boston and Washington D.C. metropolitan areas. WCPT
manages Wellsford Commercial on a day-to-day basis, and certain major
decisions require the consent of both partners. WCPT intends to qualify as
a real estate investment trust ("REIT") and has a 50.1% interest in
Wellsford Commercial.
Wellsford Commercial owned and operated 13 office buildings containing
approximately 2.3 million square feet ("SF") of office space in New Jersey
and Washington, D.C. as of December 31, 1997 with an aggregate gross book
value of $212.9 million. These buildings consist of the WRP Commercial
Properties, which were contributed by the Company upon formation of
Wellsford Commercial, and 300 Atrium Drive, 400 Atrium Drive, 500 Atrium
Drive and 1275 K Street, which were contributed by Whitehall upon formation
of Wellsford Commercial, as well as 700 Atrium Drive and Mountain Heights
(two buildings) which were acquired in September and December 1997,
respectively, for $18.1 million and $29.1 million, respectively. In
addition, Wellsford Commercial purchased an industrial warehouse in New
Jersey in December 1997 for $7.1 million.
In January 1998, Wellsford Commercial executed an agreement to purchase an
80,000SF property for $5.4 million. The purchase may be completed by March
31, 1998, subject to certain contingencies.
In February 1998, Wellsford Commercial entered into an option agreement to
enter into a contribution agreement whereby a 972,000SF portfolio of
thirteen office buildings would be contributed to Wellsford Commercial for
$141.9 million, in the event certain lender approvals can be obtained.
In February 1998, Wellsford Commercial acquired a 65,000SF office building
in Boston, MA for $5.5 million ("15 Broad Street") and 19 acres of
undeveloped land in Somerset, NJ for $2.0 million ("600 Atrium Drive").
The Wellsford Commercial transactions described above were funded primarily
by capital contributions from the Company and Whitehall, by $48 million in
debt which encumbered certain of the properties contributed by Whitehall
(the "Atrium Loan") which was assumed by Wellsford Commercial, and by a
term loan agreement (the "WRP Loan") between the Company and Wellsford
Commercial.
The Atrium Loan bore interest at LIBOR +3% and was due on May 15, 2000.
Wellsford Commercial has an interest rate protection agreement which was
related to this loan which caps LIBOR at 7.69% on a notional balance of $64
million until June 15, 2000. The lender on this loan was Goldman Sachs
Mortgage Company. This loan was repaid in December 1997. The Company has
retained the interest rate protection agreement to hedge other floating
rate borrowings.
Pursuant to the WRP Loan, the Company has agreed to loan Wellsford
Commercial up to approximately $86.3 million bearing interest at LIBOR plus
3% until November 26, 1997 and at LIBOR plus 4% until maturity in May 1998.
As of December 31, 1997, approximately $4.3 million was outstanding under
the WRP Loan.
In December 1997, Wellsford Commercial obtained a $375 million loan
facility (the "Wellsford Commercial Bank Facility") from BankBoston and
Goldman Sachs Mortgage Company, consisting of a secured term loan facility
of up to $225 million and a secured revolving credit facility of up to $150
million. The term loan facility bears interest at LIBOR +1.6% and has a
term of four years; the revolving credit facility bears interest at LIBOR
+2.5% and has a term of three years, which may be renewed by Wellsford
Commercial for one additional year. As of December 31, 1997, approximately
$146.9 million was outstanding under the Wellsford Commercial Bank Facility
($107.9 million of which was under the term loan), the proceeds of which
were used primarily to repay amounts outstanding under the Atrium Loan and
the WRP Loan.
WCPT is entitled to incentive compensation equal to (a) 17.5% of available
cash after a return of capital to WCPT and Whitehall and a 17.5% return on
equity to each of them, and (b) 22.5% of available cash after a 22.5%
return on equity to WCPT and Whitehall. The Company and Whitehall have
committed to make additional equity contributions of $50 million each for
new acquisitions, capital needs, and working capital. Whitehall may
exchange the membership units it receives in Wellsford Commercial relating
to capital contributions in excess of an additional $25 million up to an
additional $50 million, for shares of the Company's common stock or, in the
Company's sole discretion, cash, based upon the price paid for such
membership units and the current market value of the Company's common
stock.
In connection with the transactions described above, the Company issued
warrants (the "Warrants") to Whitehall to purchase 4,132,230 shares of
common stock at an exercise price of $12.10 per share. The Warrants are
exercisable for five years for either, at the Company's option, shares of
the Company's common stock or cash. The exercise price for the Warrants is
payable in cash or, after August 28, 1999, either with cash or membership
units in Wellsford Commercial.
The Company has agreed with Whitehall to conduct its business and
activities relating to office properties (but not other types of commercial
properties) located in North America solely through its interest in
Wellsford Commercial except, in certain circumstances, where Wellsford
Commercial has declined the investment opportunity.
Debt and Equity Investments - dba Wellsford Capital Company
The Company makes loans that constitute, or will invest in, real estate-
related senior, junior or otherwise subordinated debt instruments, which
may be unsecured or secured by liens on real estate, interests therein or
the economic benefits thereof, and which have the potential for high yields
or returns more characteristic of equity ownership. These investments may
include debt that is acquired at a discount, mezzanine financing,
commercial mortgage-backed securities ("CMBS"), secured and unsecured lines
of credit, distressed loans, and loans previously made by foreign and other
financial institutions. The Company believes that there are opportunities
to acquire real estate debt securitized by the use of CMBS, especially in
the low or below investment grade tranches, at significant returns as a
result of inefficiencies in pricing, while utilizing management's real
estate expertise to analyze the underlying properties and thereby
effectively minimizing risk. At December 31, 1997, the Company had $105.6
million of debt investments which bore interest at an average yield of 4.4%
over LIBOR.
277 Park
The Company and BankBoston have provided an $80 million loan (the "277 Park
Loan") to entities which own substantially all of the equity interests (the
"Equity Interests") in the entity which owns a 52-story, approximately 1.75
million square foot gross leasable area, class A office building located in
New York City in mid-town Manhattan at 277 Park Avenue (the "277 Park
Property"). The Company and BankBoston have advanced $25 million and $55
million, respectively, pursuant to the 277 Park Loan. The 277 Park Loan is
secured primarily by a pledge of the Equity Interests owned by the
borrowers. The 277 Park Loan is subordinated to a 10-year $345 million
first mortgage loan (the "REMIC Loan") on the 277 Park Property, the
proceeds for which were obtained by the sale of investment grade rated
commercial mortgage pass-through certificates in a real estate mortgage
investment conduit. The notes representing the REMIC Loan bear interest at
different rates which equate to a weighted average interest rate of
approximately 7.67% per annum. The 277 Park Loan bears interest at the
rate of approximately 12% per annum for the first nine years of its term
and at a floating annual rate during the tenth year equal to LIBOR plus
5.15% or BankBoston base rate plus 5.15%, as elected by the borrowers. The
principal amount of the 277 Park Loan and all accrued interest will be
payable in May 2007; the REMIC Loan is also due in May 2007. The 277 Park
Loan is prepayable only in full and then only after the fifth year of the
loan and must be repaid if the REMIC Loan is repaid or the 277 Park
Property is sold. Any prepayment during the sixth through ninth years of
the loan must be accompanied by a yield maintenance payment.
The 277 Park Property is currently 100% leased to 33 tenants, including
Donaldson, Lufkin & Jenrette, Inc. which has leased approximately 47% of
the gross leasable area pursuant to a lease expiring in 2016.
The Abbey Company
On August 28, 1997, the Company and Morgan Guaranty Trust Company of New
York ("MGT") originated a $70 million secured credit facility the ("Abbey
Credit Facility") to affiliates of The Abbey Company, Inc. ("Abbey"), an
owner and operator of office, industrial, and retail properties in Southern
California.
The Abbey Credit Facility will be made available to Abbey until September
2000. Advances under the facility can be made for up to 80% of the value of
the borrowing base collateral which will initially consist of 10
properties, all cross-collateralized, totaling approximately 1.1 million
SF.
As of December 31, 1997, approximately $57.3 million had been advanced
under the Abbey Credit Facility ($28.6 million of which represented the
Company's 50% participation). Under the terms of its participation
agreement with MGT, the Company will fund a 50% junior participation on all
advances under the facility.
The Company is entitled to receive interest on its advances under the
facility at LIBOR plus 4%.
Cabot Industrial Trust
In December 1997, Wellsford Ventures, Inc. ("Ventures"), a wholly-owned
subsidiary of the Company, joined with Fleet Real Estate, Inc. ("FRE"), a
subsidiary of Fleet Financial Group, to issue an approximately $32.5
million subordinated credit facility (the "IPH Mezzanine Facility") to
Industrial Properties Holding, L.P. ("IPH"). Each of Ventures and FRE were
committed to advance up to 50% of the IPH Mezzanine Facility. IPH is a
single purpose entity which was formed to acquire six industrial properties
which were sold to Cabot Industrial Trust, a real estate investment trust,
in February 1998. As of December 31, 1997, approximately $19.6 million had
been advanced to IPH, of which Ventures had advanced approximately $9.8
million. The IPH Mezzanine Facility was repaid in February 1998, at which
time the Company received a total of $0.8 million in interest and fees.
Advances under the IPH Mezzanine Facility bore interest at an annual rate
of LIBOR plus 5%.
Woodlands
In December 1997, BankBoston, Morgan Stanley Senior Funding, Inc. and
certain other lenders made available to the owners and developers of a
master-planned residential community located north of Houston (the
"Woodlands Property"), loans in the aggregate principal amount of $369
million (the "Woodlands Loan"). The Woodlands Loan consists of a revolving
credit loan in the principal amount of $179 million (the "Revolving Loan"),
a secured term loan in the principal amount of $130 million (the "Secured
Loan"), and a second secured term loan in the principal amount of $60
million (the "Second Secured Loan"). The Company has advanced $15 million
pursuant to the Second Secured Loan. The Second Secured Loan is
subordinate to the Revolving Loan and the Secured Loan and bears interest
equal to LIBOR plus 4.40%. Interest on the Second Secured Loan is payable
monthly to the extent there is available cash after payment of interest on
the Revolving Loan and the Secured Loan and provided no event of default
has occurred under the Woodlands Loan. The principal amount of the
Woodlands Loan and all accrued interest thereon will be payable on July 31,
2000, with two, one-year extension options available.
The Woodlands Property, which is located 27 miles north of Houston's
Central Business District, is a master-planned community encompassing more
than 25,000 acres of land. The current population of the Woodlands
Property is in excess of 50,000 residents, and since opening in 1974, over
16,000 single-family homes have been constructed. When fully developed,
the project is expected to have a population exceeding 150,000 and over
37,000 single-family homes. The Woodlands Property is currently home to
more than 740 companies who employ over 17,000 people.
Park 80
In December 1997, the Company originated a $5.1 million loan bearing
interest at LIBOR plus 3% and maturing in March 1998 (the "Park 80 Loan").
The Park 80 Loan is secured by a mortgage on an 80,000SF mid-rise office
building in Saddlebrook, New Jersey.
Value Property Trust
On September 18, 1997, the Company and its subsidiary, Wellsford Capital
Corporation, entered into a definitive agreement with Value Property Trust
(NYSE: "VLP"), a real estate investment trust, pursuant to which the
Company acquired VLP in a merger transaction for cash and stock valued at
approximately $169 million.
Pursuant to the terms of the merger agreement, the Company paid to VLP
shareholders approximately $130 million in cash and issued an aggregate of
approximately 3.35 million shares of its common stock resulting in each VLP
shareholder receiving $11.58 in cash and 0.2984 common shares of the
Company for each share of VLP. VLP primarily owned 20 properties (with 2.1
million SF) and had approximately $60 million in net cash and a $6.2
million note receivable, which is due in July 1998, on the date of merger.
The portfolio is diversified both by property type and geographic location.
The acquisition, which is being accounted for as a purchase, was approved
by the VLP shareholders and completed in February 1998.
The Company contracted to sell, for $65 million, 13 of the VLP properties
to an affiliate of Whitehall ("Whitehall Property Buyer"). As of February
27, 1997, the Company had sold 12 of these properties for $60 million. The
Company intends to retain 7 properties at an average investment of
approximately $60/SF.
Clairborne Investors
In January 1998, the Company acquired a 49% interest in Creamer Realty
Consultants, a real estate advisory and consulting firm with offices in New
York City and Lexington, Kentucky, whose two principals are Frank G.
Creamer, Jr. and Michael J. Vitale, and formed Creamer Vitale Wellsford,
L.L.C. ("Creamer Vitale Wellsford").
Creamer Realty Consultants and Creamer Vitale Wellsford, together with
Prudential Real Estate Investors ("PREI"), a division of Prudential
Investment Corporation, have established the Clairborne Investors Mortgage
Investment Program to make opportunistic investments and to provide
liquidity to participants in large syndicated mortgage loan transactions.
The parties have agreed to contribute up to $150 million to fund
acquisitions approved by the parties, of which a subsidiary of the Company
will fund 10%. Creamer Vitale Wellsford will originate, co-invest, and
manage the investments of the program. Investments will be made through
individual limited partnerships for each PREI client.
The Company's original investment in Creamer Vitale Wellsford was $1.3
million of cash and 148,000 five-year warrants to purchase the Company's
common shares at $15.175 per share, valued at approximately $0.7 million.
Property Development and Land Investments - dba Wellsford Development
Company
The Company engages in selective development activities as opportunities
arise and when justified by expected returns. The Company believes that by
pursuing selective development activities it can achieve returns which are
greater than returns which could be achieved by acquiring stabilized
properties. Certain development activities may be conducted in joint
ventures with local developers who may bear the substantial portion of the
economic risks associated with the construction, development and initial
rent-up of properties. As part of its strategy, the Company may seek to
obtain bond financing from local governmental authorities which generally
bears interest at rates substantially below rates available from
conventional financing.
Palomino Park
From the time of the Spin-off, the Company has owned an approximate 80%
interest in Phases I, II and III of, and in options to acquire (at fixed
prices) and develop phases IV and V of, a 1,880-unit class A multifamily
development ("Palomino Park") in a suburb of Denver, Colorado. The
Company has a related $14.8 million tax exempt mortgage note payable which
requires interest only payments at a variable rate (currently approximately
4%) until it matures in December 2035 (the "Palomino Park Bonds"). The tax
exempt mortgage note payable is security for tax-exempt bonds, which are
backed by a letter of credit from a AAA rated financial institution. The
Company and an affiliate of EQR have guaranteed the reimbursement of the
financial institution in the event that the letter of credit is drawn upon
(the latter guarantee being the "EQR Enhancement").
In December 1997, Phase I, known as Blue Ridge, was completed at a cost of
approximately $41.5 million. At that time, the Company acquired the
remaining interest in Blue Ridge and the related construction loan was
repaid with the proceeds of a $34.5 million permanent loan (the "Blue Ridge
Loan") secured by a mortgage on Blue Ridge. The Blue Ridge Loan matures in
January 2008 and bears interest at a fixed rate of 6.92%. Principal
payments are based on a 30-year amortization schedule.
The Company has invested $16.9 million through December 31, 1997 on the
following multifamily development project, which is a phase of Palomino
Park:
Number Estimated
of Estimated Stabilization
Name Units Location Total Cost Date
- ---- ----- -------- ---------- -------------
Red Canyon 304 Denver $33.6 million First Qtr. 1999
This project is being developed pursuant to a fixed-price contract. The
Company is committed to purchase 100% of this project upon completion and
the achievement of certain occupancy levels, which is anticipated to occur
at the date disclosed above.
Red Canyon is owned by Red Canyon at Palomino Park LLC ("Phase II LLC"), a
limited liability company, the members of which are Wellsford Park
Highlands Corp. (99%), a majority owned and controlled subsidiary of the
Company, and Al Feld ("Feld") (1%). Feld is a Denver-based developer
specializing in the construction of luxury residential properties. Feld
has constructed over 3,000 units since 1984.
The construction loan on Red Canyon is for approximately $29.5 million,
matures on September 29, 1999 (with a 6-month extension at the option of
the Phase II LLC upon fulfillment of certain conditions), and bears
interest at LIBOR plus 1.65%. Feld has guaranteed repayment of this loan.
An affiliate of EQR has agreed to purchase the Phase II construction loan
when due (the "EQR Take-out Commitment"), assuming completion of
construction, if it is not satisfied by the Phase II LLC or by Feld
pursuant to his guarantee, for the lesser of the loan balance or the final
agreed upon budget.
In May 1997, the Company acquired the land for Phase III for approximately
$2.1 million.
Sonterra
From the time of the Spin-off, the Company has held a $17.8 million
mortgage due in July 1999 and bearing interest at 9% per annum (the
"Sonterra Mortgage") on, and option to purchase, a 344-unit class A
residential apartment complex ("Sonterra at Williams Centre") in Tucson,
Arizona.
In January 1998, the Company exercised its option and acquired Sonterra at
Williams Centre for approximately $20.5 million, including the
satisfaction of the Sonterra Mortgage. In February 1998, the Company
closed on $16.4 million of mortgage financing on this property, bearing
interest at 6.87% and having a term of 10 years.
Future Investments
The Company may in the future make equity investments in entities owned
and/or operated by unaffiliated parties and which engage in real estate-
related businesses and activities or businesses that service the real
estate industry. Some of the entities in which the Company may invest may
be start-up companies or companies in need of additional capital. The
Company may also manage and lease properties owned by it or in which it has
an equity or debt investment.
Item 2. Properties.
Wellsford Commercial owns the following commercial properties:
Year December 31,
Gross Area Constructed/ 1997
Property Location (square feet) Rehabilitated Occupancy
- -------- -------- ------------- ------------- ------------
Pointview (2 Wayne, NJ 560,000 1976 N/A*
buildings)
1700 Valley
Road Wayne, NJ 70,600 1979 N/A*
1800 Valley
Road Wayne, NJ 54,800 1980 100%
Greenbrook Greenbrook, NJ 201,000 1987 87%
Chatham Chatham, NJ 63,000 1972/1997 66%
300 Atrium
Drive Somerset, NJ 149,360 1983 77%
400 Atrium
Drive Somerset, NJ 354,670 1985 98%
500 Atrium
Drive Somerset, NJ 167,000 1984 83%
700 Atrium
Drive Somerset, NJ 176,300 1985 100%
1275 K Street Washington, DC 270,000 1983 81%
Mtn. Heights (2
buildings) Berkeley Hts, NJ 267,300 1968/1986 100% / N/A*
Estee Parsippany, NJ 167,000 1963/1977 N/A*
--------- ----------
TOTAL/AVERAGE 2,501,030 90%
========= ==========
* Building under renovation, not included in average.
All of the properties listed above are encumbered by the Wellsford
Commercial Bank Facility as of March 27, 1998.
In addition, the Company directly owned one multifamily apartment property
at December 31, 1997. Blue Ridge is a 456 unit property located in Denver,
Colorado, built in 1997, which had an occupancy rate of approximately 94%
at December 31, 1997 and is encumbered by the $34.5 million Blue Ridge
Loan.
For a description of the Company's investments in multifamily communities,
see "Item 1 - Business -- Property Development and Land Investments - dba
Wellsford Development Company".
Item 3. Legal Proceedings.
Neither the Company nor Wellsford Commercial are presently subject to any
material litigation nor, to the Company's knowledge, is any material
litigation threatened against the Company or Wellsford Commercial other
than routine litigation arising in the ordinary course of business and
which is expected to be covered by liability insurance.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters.
(A) Market Information
The Company's common shares are traded on the American Stock Exchange under
the symbol "WRP". The high and low sales prices for the common shares on
the American Stock Exchange and the dividends declared since the Company's
inception are as follows:
Common Shares
1997 High Low Dividends
- ---- ---- --- ---------
June 2 through June 30 $11.19 $10.50 N/A
3rd Quarter $16.13 $10.81 N/A
4th Quarter $17.25 $14.25 N/A
(B) Holders
The approximate number of holders of record of the common shares and Class
A common shares (collectively, "Common Shares" or " Common Stock") were 299
and 1, respectively, as of March 17, 1998. These holders represent the
interests of approximately 5500 beneficial shareholders.
Dividends
The Company paid no dividends during 1997. The Company does not plan to
distribute dividends for the foreseeable future, which will permit it to
accumulate, for reinvestment, cash flow from investments, disposition of
investments and other business activities.
Item 6. Selected Consolidated Financial Data.
The following table sets forth selected consolidated financial data for the
Company and should be read in conjunction with the consolidated financial
statements included elsewhere in this Form 10-K.
Prior to the Company's 1997 investments, the Company's operations consisted
of earning interest income on the Sonterra Mortgage (originated in July
1996) and the initial phase of construction development activity with
respect to Palomino Park.
Summary
Consolidated Statement of
Operations Data Year Ended December 31,
- -------------------------- -----------------------------------
(in thousands except per share data)
1997 1996
---- ----
Revenues $ 9,070 $ 757
Expenses (3,819) --
Income from joint venture 15 --
-------- -------
Income before taxes $ 5,266 $ 757
======== =======
Net income $ 3,053 $ 757
======== =======
Net income per
common share, basic and diluted $ 0.18 $ 0.04
======== =======
Weighted average number of
common shares outstanding 16,922 16,912
======== =======
Summary Consolidated
Balance Sheet Data December 31,
- -------------------------- ------------------------------------
(in thousands except per share data)
1997 1996 1995
---- ---- ----
Real estate $ 41,564 $ -- $ --
Notes receivable 105,632 17,800 --
Investment in joint venture 44,780 -- --
Total assets 249,974 44,760 18,369
Mortgage notes payable 49,255 14,755 14,755
Credit facility 7,500 -- --
Shareholders' equity 181,158 30,005 3,614
The earnings per share amounts conform with Statement of Financial
Accounting Standards No. 128 "Earnings per share". For further discussion
of earnings per share and the impact of Statement No. 128, see the notes to
the consolidated financial statements beginning on page F-7.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Overview
The following discussion should be read in conjunction with the "Selected
Consolidated Financial Data" and the Company's Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Form 10-K.
Results of Operations
Prior to the Company's 1997 investments, the Company's operations consisted
of earning interest income on the Sonterra Mortgage (originated in July
1996) and the initial phase of construction development activity with
respect to Palomino Park. Therefore, the increases in operating revenues
and expenses reflected in the financial statements are the result of the
acquisition of primarily all of the Company's operating assets during 1997.
The accompanying consolidated financial statements include the assets and
liabilities contributed to and assumed by the Company from the Trust, from
the time such assets and liabilities were acquired or incurred,
respectively, by the Trust. Such financial statements have been prepared
using the historical basis of the assets and liabilities and the historical
results of operations related to the Company's assets and liabilities.
Liquidity and Capital Resources
The Company expects to meet its short-term liquidity requirements generally
through its working capital and cash flow provided by operations. The
Company considers its ability to generate cash to be adequate and expects
it to continue to be adequate to meet operating requirements both in the
short and long terms.
The Company expects to meet its long-term liquidity requirements such as
refinancing mortgages, financing acquisitions and development, and
financing capital improvements by long-term borrowings, through the
issuance of debt and the offering of additional debt and equity securities.
The Company has (i) the commitment, until May 30, 2000, of an affiliate of
EQR to acquire at the Company's option up to $25 million of the Company's
Series A 8% Convertible Redeemable Preferred Stock ("Series A Preferred"),
each share of which is convertible into shares of common stock at a price
of $11.124 (the "EQR Preferred Commitment") and (ii) a $50 million two-year
line of credit (extendible for one year) from BankBoston, N.A. and Morgan
Guaranty Trust Company of New York (the "Line of Credit") which initially
bears interest at an annual rate equal to LIBOR plus 175 basis points. The
EQR Preferred Commitment is pledged as security for the Line of Credit. If
at May 30, 2000, the affiliate of EQR has purchased less than $25 million
of Series A Preferred, it has the right to purchase the remainder of the
$25 million not purchased prior to that time. As of December 31, 1997, $
7.5 million was outstanding under the Line of Credit.
With respect to its Palomino Park investment, the Company also has the
$14.8 million EQR Enhancement and the $29.5 million EQR Take-out
Commitment.
The Company's long-term debt matures as follows: $0.4 million in 1998, $7.9
million in 1999, $0.4 million in 2000, $0.4 million in 2001, $0.5 million
in 2002 and $47.2 million thereafter.
The Line of Credit contains various customary loan covenants and requires
the Company to maintain a ratio of total consolidated liabilities to total
consolidated assets of not more than 0.6 to 1, to maintain an overall debt
service coverage ratio of at least 1.5 to 1 and to meet certain minimum
borrowing base and equity level requirements. The facility also limits the
amount of undeveloped land the Company may hold.
For a discussion of the Company's development communities and related
capital commitments, see "Item 1. Business - Property Development and Land
Investments - dba Wellsford Development Company."
On June 2, 1997, the Company completed the Private Placement, which was
exempt from the registration requirements of the Securities Act of 1933, as
amended, under Regulation D thereof. Pursuant to a registration rights
agreement executed by the Company and the purchasers of such shares, the
Company has filed a shelf registration statement with the Securities and
Exchange Commission with respect to such shares. The proceeds of the
Private Placement of approximately $123.6 million have been applied to (a)
approximately $53 million to repay the Company's credit facility and other
debt on the date of the Private Placement, (b) $5 million to purchase a
portion of the 277 Park Loan, (c) approximately $7 million on renovations
and tenant fit-out for the WRP Commercial Properties, and (d) the balance
towards the investments described in "Item 1-Business" and towards working
capital.
Wellsford Commercial expects to meet its liquidity requirements, such as
financing renovations to its properties, with operating cash flow from its
properties, equity contributions from the owners of Wellsford Commercial,
and the Wellsford Commercial Bank Facility.
The net cash flow of the Company provided by operating activities increased
from $5.5 million for the year ended December 31, 1996 to $6.0 million for
the year ended December 31, 1997 and increased from $4.3 million for the
year ended December 31, 1995 to $5.5 million for the year ended December
31, 1996. These increases generally resulted from the acquisition of the
Company's investments as described above.
Investing activities of the Company used $156.9 million, $31.2 million and
$8.0 million during the years ended December 31, 1997, 1996 and 1995,
respectively. Investing activities consist primarily of the acquisition
and development of properties and the investments made in certain debt
instruments. The Company currently has one multifamily community under
development.
Financing activities of the Company provided $180.8 million, $25.6 million
and $3.6 million during the years ended December 31, 1997, 1996 and 1995,
respectively. The Spin-off, Private Placement, Blue Ridge Loan and Line of
Credit served as the primary sources of cash flow from financing
activities.
See the accompanying consolidated statements of cash flows included in the
consolidated financial statements for a reconciliation of the Company's
cash position for the years described therein.
Recurring Capital Expenditures
Regarding the Company's Blue Ridge (456 units) and Sonterra at Williams
Centre (344 units, acquired in January 1998) properties, the Company
expects to incur approximately $225 per unit in capital expenditures during
the year ending December 31, 1998.
Wellsford Commercial
Wellsford Commercial is currently involved in several projects to renovate,
expand or reposition certain of its properties. For the year ending
December 31, 1998, Wellsford Commercial expects to incur approximately
$29.1 million in connection with these projects.
In connection with its fully operating properties, Wellsford Commercial
expects to incur approximately $0.7 million of capital expenditures,
approximately $4.0 million of tenant improvement expenditures, and
approximately $1.8 million of leasing costs during the year ending December
31, 1998.
Inflation
Substantially all of Wellsford Commercial's office leases provide for
separate escalations of real estate taxes and operating expenses over a
base amount. In addition, many of the office leases provide for fixed base
rent increases or indexed escalations (based on the CPI or other measures).
The Company believes that inflationary increases in expenses will generally
be offset by the expense reimbursements and contractual rent increases
described above.
Over 70% of the Company's investments in debt securities, after the January
1998 repayment of the Sonterra Loan, bear interest at floating rates. As
such, the Company expects the rates of interest earned to increase in the
event of high inflation.
Year 2000
The Company has developed a plan to modify its information technology to
recognize the year 2000. The Company currently expects the project to be
substantially completed by early 1999 and to cost less than $0.1 million.
The Company does not expect this project to have a significant effect on
its operations. The timing and cost of this project will be closely
monitored and are based on management's best estimates. Actual results,
however, could differ from those anticipated. The Company also has
initiated discussions with its third-party property management companies to
ensure that those parties have appropriate plans to remediate Year 2000
issues that may impact the Company's operations. While the Company
believes its planning efforts are adequate to address its Year 2000
concerns, there can be no guarantee that the systems of other companies on
which the Company's systems and operations rely will be converted on a
timely basis and will not have a material effect on the Company.
Return on Equity Investments
The Company focuses on maximizing its return on the equity it invests
through the strategic acquisition and disposition of assets and the optimal
use of debt and other financing.
The Company's investment in the IPH Mezzanine Facility yielded an 82.5%
annualized pre-tax return on equity during the period it was outstanding;
the IPH Mezzanine Facility was repaid in February 1998. In total the
Company earned $0.8 million in interest and fees over the 37 days this $9.8
million investment was held.
The Company expects to earn an approximately 26% pre-tax return on equity
in 1998 on its approximately $3.3 million equity investment in the
approximately $41.5 million Blue Ridge property. The property is
encumbered by a $34.5 million mortgage bearing interest at 6.92% and by
$3.7 million of the Palomino Park Bonds.
The Company expects to earn an approximately 19.9% pre-tax return on equity
in 1998 on its approximately $4.1 million equity investment in the
approximately $20.5 million Sonterra property, which was acquired in
January 1998. The property is encumbered by a $16.4 million mortgage
bearing interest at 6.87%, which the Company closed in February 1998.
Wellsford Commercial expects to earn an approximately 46.1% pre-tax return
on equity in 1998 on its approximately $1.0 million equity investment in
the approximately $4.0 million 1800 Valley Road property. The property is
encumbered by approximately $3.0 million of the Wellsford Commercial Bank
Facility.
The Company believes that these returns represent the optimal use of equity
in the current real estate merchant banking environment and are indicative
of the ability of management to locate, acquire and/or develop
opportunistic investments. There can be no assurance, however, that the
Company's other investments will achieve similar returns. See "Risks
Associated with Forward-Looking Statements."
Risks Associated with Forward-Looking Statements.
This Form 10-K, together with other statements and information publicly
disseminated by the Company, contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors
include, among others, the following, which are discussed in greater detail
in the "Risk Factors" section of the Company's registration statement on
Form S-11 (file No. 333-32445) filed with the Securities and Exchange
Commission ("SEC") on July 30, 1997, as may be amended, which is
incorporated herein by reference: general economic and business conditions,
which will, among other things, affect demand for commercial and
residential properties, availability and credit worthiness of prospective
tenants, lease rents and the availability of financing; difficulty of
locating suitable investments; competition; risks of real estate
acquisition, development, construction and renovation; vacancies at
existing commercial properties; dependence on rental income from real
property; adverse consequences of debt financing; risks of investments in
debt instruments, including possible payment defaults and reductions in the
value of collateral; illiquidity of real estate investments; lack of prior
operating history; and other risks listed from time to time in the
Company's reports filed with the SEC. Therefore, actual results could
differ materially from those projected in such statements.
Item 8. Consolidated Financial Statements and Supplementary Data.
The response to this Item 8 is included as a separate section of this
annual report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The executive officers and directors of the Company, their ages and their
positions are as follows:
Name Age Positions and Offices Held
Jeffrey H. Lynford. . . . . . . . .50 . .Chairman of the Board, Secretary
and Director **
Edward Lowenthal. . . . . . . . . .53 . .President, Chief Executive Officer
and Director*
Gregory F. Hughes . . . . . . . . .34 . .Chief Financial Officer
David M. Strong . . . . . . . . . .39 . .Vice President for Development
Douglas Crocker II. . . . . . . . .57 . .Director**
Rodney F. Du Bois . . . . . . . . .62 . .Director*
Mark S. Germain . . . . . . . . . .47 . .Director**
Frank J. Hoenemeyer . . . . . . . .78 . .Director***
Frank J. Sixt . . . . . . . . . . .46 . .Director***
________________________
* Term expires 1998.
** Term expires 1999.
*** Term expires 2000.
The information contained in the sections captioned "Nominees for Election
as Directors", "Other Directors", "Executive Officers", and "Key Employees"
of the Company's definitive proxy statement for the 1998 annual meeting of
shareholders is incorporated herein by reference.
Item 11. Executive Compensation.
The information contained in the sections captioned "Executive
Compensation", "Compensation of Directors", "Board Committees", "Employment
Agreements", "1997 Management Incentive Plan", and "Rollover Stock Option
Plan" of the Company's definitive proxy statement for the 1998 annual
meeting of shareholders is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information contained in the section captioned "Security Ownership of
Certain Beneficial Owners and Management" of the Company's definitive proxy
statement for the 1998 annual meeting of shareholders is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information contained in the section captioned "Certain Transactions"
of the Company's definitive proxy statement for the 1998 annual meeting of
shareholders is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements
The following consolidated financial information is included as a
separate section of this annual report on Form 10-K:
Consolidated Balance Sheets as of December 31, 1997 and 1996.
Consolidated Statements of Income for the years ended
December 31, 1997 and 1996.
Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 1997 and 1996 and the Period from
March 22, 1995 (Inception) to December 31, 1995.
Consolidated Statements of Cash Flows for the years ended
December 31, 1997 and 1996 and the Period from March 22, 1995
(Inception) to December 31, 1995.
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
III. Real Estate and Accumulated Depreciation
IV. Mortgage Loans on Real Estate
All other schedules have been omitted because the required
information of such other schedules is not present, is not
present in amounts sufficient to require submission of the
schedule or is included in the consolidated financial statements.
(3) Exhibits
(a) Exhibit No. Description###
3.1 Articles of Amendment and Restatement of the Company.****
3.2 Articles Supplementary Classifying 335,000 Shares of Common
Stock as Class A Common Stock.****
3.3 Articles Supplementary Classifying 2,000,000 Shares of
Common Stock as Series A 8% Convertible Redeemable
Preferred Stock.****
3.4 Bylaws of the Company.****
4.1 Specimen certificate for Common Stock.***
4.2 Specimen certificate for Class A Common Stock.****
4.3 Specimen certificate for Series A 8% Convertible Redeemable
Preferred Stock.****
4.4 Warrant Agreement, dated as of August 28, 1997, between the
Company and United States Trust Company of New York, as
warrant agent, and Warrant Certificate No. 1 of the Company
for 5,000,000 Warrants registered in the name of WHWEL Real
Estate Limited Partnership.#
4.5 Registration Rights Agreement, dated as of February 23,
1998, among the Company and Franklin Mutual Advisors, Inc.
and Angelo Gordon & Co., L.P.
10.1 Operating Agreement of Red Canyon at Palomino Park LLC
between Wellsford Park Highlands Corp. and Al Feld, dated
as of April 17, 1996, relating to Red Canyon.*
10.2 First Amendment to Operating Agreement of Red Canyon at
Palomino Park LLC between Wellsford Park Highlands Corp.
and Al Feld, dated as of May 19, 1997, relating to Red
Canyon.****
10.3 Tri-Party Agreement by and among NationsBank of Texas,
N.A., Red Canyon at Palomino Park LLC, Wellsford Park
Highlands Corp., Wellsford Residential Property Trust, Al
Feld and The Feld Company, dated May 29, 1997, relating to
Red Canyon.****
10.4 Assignment and Assumption of Tri-Party Agreement by and
among Wellsford Residential Property Trust, ERP Operating
Limited Partnership, Red Canyon at Palomino Park LLC,
Wellsford Park Highlands Corp., The Feld Company, Al Feld
and Nationsbank of Texas, N.A. dated May 30, 1997, relating
to Red Canyon.****
10.5 Agreement and Acknowledgement Regarding Tri-Party Agreement
by and among Nationsbank of Texas, N.A., Red Canyon at
Palomino Park LLC, Wellsford Park Highlands Corp. and ERP
Operating Limited Partnership dated May 30, 1997, relating
to Red Canyon.****
10.6 Second Amended and Restated Vacant Land Purchase and Sale
Agreement between Mission Viejo Company and The Feld
Company dated March 23, 1995, as amended by First
Amendment, dated May 1, 1996, relating to the land
underlying Palomino Park.*
10.7 Trust Indenture, dated as of December 1, 1995, between
Palomino Park Public Improvements Corporation ("PPPIC") and
United States Trust Company of New York, as trustee,
securing Wellsford Residential Property Trust's Assessment
Lien Revenue Bonds Series 1995 - $14,755,000.**
10.8 Letter of Credit Reimbursement Agreement, dated as of
December 1, 1995, between PPPIC, Wellsford Residential
Property Trust and Dresdner Bank AG, New York Branch.**
10.9 First Amendment to Letter of Credit Reimbursement
Agreement, dated as of May 30, 1997, between PPPIC,
Wellsford Residential Property Trust, Dresdner Bank AG, New
York Branch and the Company.****
10.10 Amendment to Wellsford Reimbursement Agreement by and
between PPPIC, Wellsford Residential Property Trust and the
Company, dated as of May 30, 1997.****
10.11 Assignment and Assumption Agreement by and between
Wellsford Residential Property Trust and the Company, dated
as of May 30, 1997.****
10.12 Credit Enhancement Agreement by and between the Company and
ERP Operating Limited Partnership, dated as of May 30,
1997, relating to Palomino Park.****
10.13 Reimbursement and Indemnification Agreement by and among
the Company and ERP Operating Limited Partnership, dated as
of May 30, 1997, relating to Palomino Park.****
10.14 Guaranty by ERP Operating Limited Partnership for the
benefit of Dresdner Bank AG, New York Branch, dated as of
May 30, 1997, relating to Palomino Park.****
10.15 Amended and Restated Promissory Note of the Company to the
order of Dresdner Bank AG, New York Branch, dated May 30,
1997, relating to Palomino Park.****
10.16 Common Stock and Preferred Stock Purchase Agreement by and
between the Company and ERP Operating Limited Partnership
dated as of May 30, 1997.****
10.17 Registration Rights Agreement by and between the Company
and ERP Operating Limited Partnership dated as of May 30,
1997.****
10.18 Credit Agreement, dated as of April 25, 1997, between Park
Avenue Financing Company LLC, PAMC Co-Manager Inc., PAFC
Management, Inc., Stanley Stahl, The First National Bank of
Boston, the Company, Other Banks that may become parties to
the Agreement and The First National Bank of Boston, as
Agent, relating to 277 Park Avenue.**
10.19 Assignment of Member's Interest, dated as of April 25,
1997, by PAFC Management, Inc. and Stanley Stahl to The
First National Bank of Boston, relating to 277 Park Avenue
(relating to interests in the Park Avenue Financing
Company, LLC).**
10.20 Assignment of Member's Interest, dated as of April 25,
1997, by PAMC Co-Manager Inc. and Park Avenue Financing,
LLC to The First National Bank of Boston, relating to 277
Park Avenue (relating to interests in 277 Park Avenue,
LLC).**
10.21 Stock Pledge Agreement, dated as of April 25, 1997, by
Stanley Stahl to The First National Bank of Boston,
relating to 277 Park Avenue (relating to stock in Park
Avenue Management Corporation).**
10.22 Stock Pledge Agreement, dated as of April 25, 1997, by
Stanley Stahl to The First National Bank of Boston,
relating to 277 Park Avenue (relating to stock in PAMC Co-
Manager Inc.).**
10.23 Stock Pledge Agreement, dated as of April 25, 1997, by
Stanley Stahl to The First National Bank of Boston,
relating to 277 Park Avenue (relating to stock in PAFC
Management, Inc.).**
10.24 Conditional Guaranty of Payment and Performance, dated as
of April 25, 1997, by Stanley Stahl, relating to 277 Park
Avenue.**
10.25 Cash Collateral Account Security, Pledge and Assignment
Agreement, dated as of April 25, 1997, between 277 Park
Avenue, LLC, Park Avenue Management Corporation, Park
Avenue Financing Company LLC, PAMC Co-Manager Inc., Stanley
Stahl and The First National Bank of Boston, relating to
277 Park Avenue.**
10.26 Recognition Agreement, dated as of April 25, 1997, between
The First National Bank of Boston, the Company, Column
Financial, Inc., Park Avenue Financing Company LLC, PAMC
Co-Manager, Inc. and 277 Park Avenue, LLC, relating to 277
Park Avenue.**
10.27 Intercreditor Agreement, dated as of April 25, 1997,
between the Company and The First National Bank of Boston,
as Agent, relating to 277 Park Avenue.**
10.28 Assignment and Acceptance Agreement, dated June 19, 1997,
between BankBoston, N.A. (formerly known as The First
National Bank of Boston) ("BankBoston") and the Company,
relating to 277 Park Avenue.****
10.29 Revolving Credit Agreement by and among the Company,
BankBoston, Morgan Guaranty Trust Company of New York
("Morgan Guaranty"), other banks which may become parties
and BankBoston, as agent, and Morgan Guaranty, as co-agent
dated as of May 30, 1997.****
10.30 Agreement Regarding Common Stock and Preferred Stock
Purchase Agreement, dated as of May 30, 1997, among ERP
Operating Limited Partnership, the Company and BankBoston,
as agent.****
10.31 Assignment of Common Stock Agreements, dated as of May 30,
1997, between the Company and BankBoston, as agent.****
10.32 Collateral Assignment of Documents, Rights and Claims
(including Collateral Assignment of Deed of Trust,
Assignment of Leases and Rents, Security Agreement and
Fixture Filing), made as of May 30, 1997, by the Company to
BankBoston, as agent.****
10.33 Limited Liability Company Operating Agreement of
Wellsford/Whitehall Properties, L.L.C., dated as of
August 28, 1997.#
10.34 Amendment No. 1 to the Limited Liability Company Operating
Agreement of Wellsford/Whitehall Properties, L.L.C., dated
as of December 31, 1997.
10.35 Term Loan Agreement between the Company and
Wellsford/Whitehall Properties, L.L.C. dated as of August
28, 1997.#
10.36 $61,699,440 Term Note A, dated August 28, 1997, payable to
the order of the Company by Wellsford/Whitehall Properties,
L.L.C.#
10.37 $17,093,750 Term Note B, dated September 25, 1997, payable
to the order of the Company by Wellsford/Whitehall
Properties, L.L.C.*****
10.38 Letter Agreement, dated as of August 28, 1997, between the
Company and WHWEL Real Estate Limited Partnership, relating
to warrants to be issued to WHWEL Real Estate Limited
Partnership.#
10.39 Revolving Credit Agreement, dated as of December 15, 1997,
among Wellsford/Whitehall Properties, L.L.C., as Borrower,
and BankBoston, N.A., Goldman Sachs Mortgage Company, and
Other Banks, as Banks, and BankBoston, N.A. as
Administrative Agent and Co-Arranger and Co-Syndication
Agent, and Goldman Sachs Mortgage Company, as Co-Arranger
and Co-Syndication Agent.
10.40 Term Loan Agreement, dated as of December 15, 1997, among
WEL/WH 1275 K Street L.L.C., as Borrower, and BankBoston,
N.A., Goldman Sachs Mortgage Company, and Other Banks, as
Banks, and BankBoston, N.A., as Administrative Agent and
Co-Arranger and Co-Syndication Agent, and Goldman Sachs
Mortgage Company, as Co-Arranger and Co-Syndication Agent.
10.41 Indemnity and Guaranty Agreement (Revolver), dated as of
December 15, 1997, by Wellsford Commercial Properties Trust
and WHWEL Real Estate Limited Partnership in favor of
BankBoston, N.A.
10.42 Indemnity Agreement Regarding Hazardous Materials
(Revolver), dated as of December 15, 1997, by
Wellsford/Whitehall Properties, L.L.C., Wellsford
Commercial Properties Trust and WHWEL Real Estate Limited
Partnership for the benefit of BankBoston, N.A.
10.43 Revolving Credit Agreement for $70 million, dated as of
August 28, 1997, between AP-Anaheim LLC, AP-Arlington LLC,
AP-Atlantic LLC, AP-Cityview LLC, AP-Farrell Ramon LLC, AP-
Palmdale LLC, AP-Redlands LLC, AP-Victoria LLC, AP-
Victorville LLC, and AP-Sierra LLC, each a California
limited liability company (collectively, the "Abbey
Affiliates"), as Borrower, and Morgan Guaranty Trust
Company of New York, as Lender.#
10.44 Loan Participation Agreement, dated as of August 28, 1997,
between Morgan Guaranty Trust Company of New York and the
Company.#
10.45 $70 million promissory note, dated August 28, 1997, payable
to the order of Morgan Guaranty Trust Company of New York
by the Abbey Affiliates.#
10.46 Purchase and Sale Agreement, dated as of September 18,
1997, among the Company, Wellsford Capital Corporation and
Whitehall Street Real Estate Limited Partnership VII.##
10.47 First Amended and Restated Master Credit Agreement, dated
December 30, 1997, effective as of July 31, 1997, among The
Woodlands Commercial Properties Company, L.P., The
Woodlands Land Development Company, L.P., and BankBoston,
N.A., Morgan Stanley Senior Funding, Inc., as Documentation
Agent, and Other Banks, and BankBoston, N.A., as Managing
Agent and Syndication Agent.
10.48 Intercreditor Agreement, dated December 30, 1997, effective
as of July 31, 1997, by and between BankBoston, N.A.,
Morgan Stanley Senior Funding, Inc. and the Other Lenders,
relating to Woodlands.
10.49 $4,186,991.87 Commercial Company Second Secured Term Loan
Note, dated December 30, 1997, payable to the order of the
Company by The Woodlands Commercial Properties Company,
L.P. and The Woodlands Land Development Company, L.P.
10.50 $10,813,008.13 Land Company Second Secured Term Loan Note,
dated December 30, 1997, payable to the order of the
Company by The Woodlands Land Development Company, L.P. and
The Woodlands Commercial Properties Company, L.P.
10.51 Program Agreement for Clairborne Investors Mortgage Program
between Creamer Realty Consultants and The Prudential
Investment Corporation, dated as of December 10, 1997.
10.52 Amended and Restated General Partnership Agreement of
Creamer Realty Consultants, dated as of January 1, 1998, by
and between Wellsford CRC Holding Corp. and FGC Realty
Consultants, Inc.
10.53 Limited Liability Company Agreement of Creamer Vitale
Wellsford, L.L.C., dated as of January 20, 1998, by and
between Wellsford CRC Holding Corp. and SX Advisors, LLC.
10.54 Loan Agreement, dated as of February 27, 1998 between
Wellsford Sonterra LLC, as Borrower, and Nationsbank, N.A.,
as Lender.
10.55 $16,400,000 Promissory Note, dated Februry 27, 1998 payable
to the order of Nationsbank, N.A. by Wellsford Sonterra,
L.L.C.
10.56 Deed of Trust, Assignment of Leases and Rents and Security
Agreement, dated February 27, 1998 by Wellsford Sonterra
LLC in favor of Nationsbank, N.A.
10.57 $34,500,000 Multifamily Note, dated December 24, 1997
payable to the order of GMAC Commercial Mortgage
Corporation by Park at Highlands LLC.
10.58 Multifamily Deed of Trust, Assignment of Rents and Security
Agreement, dated December 24, 1997, by Park at Highlands
LLC in favor of GMAC Commerical Mortgage Corporation.
10.59 1997 Management Incentive Plan of the Company.**
10.60 Rollover Stock Option Plan of the Company.**
10.61 Employment Agreement between the Company and Jeffrey H.
Lynford.****
10.62 Employment Agreement between the Company and Edward
Lowenthal.****
10.63 Employment Agreement between the Company and Gregory F.
Hughes.****
10.64 Employment Agreement between the Company and David M.
Strong.****
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
99.1 "Risk Factors" section of Amendment No. 2 to the Company's
Registration Statement on Form S-11 (file no. 333-32445),
as may be amended.#####
______________________________
* Previously filed as an exhibit to the Form 10 filed on April 23,
1997.
** Previously filed as an exhibit to the Form 10/A Amendment No. 1 filed
on May 21, 1997.
*** Previously filed as an exhibit to the Form 10/A Amendment No. 2 filed
on May 28, 1997.
**** Previously filed an exhibit to the Form S-11 filed on July 30, 1997.
***** Previously filed as an exhibit to Amendment No. 1 to Form S-11 filed
on November 14, 1997.
# Previously filed as an exhibit to the Form 8-K filed on September 11,
1997.
## Previously filed as an exhibit to the Form 8-K filed on September 23,
1997.
### Wellsford acquired its interest in a number of these documents by
assignment.
#### Previously filed as an exhibit to the Registration Statement on Form
S-4 filed on December 15, 1997.
##### Previously filed as part of Amendment No. 2 to the Registration
Statement on Form S-11 filed on December 3, 1997.
(b) During the last quarter of the period covered by this report, the
Company filed the following reports on Form 8-K:
Form 8-K dated September 11, 1997, and 8-K/A Amendments No. 1 and No.
2 thereto dated November 11, 1997, regarding the Company's joint
venture with Whitehall, the origination of the Abbey Credit Facility,
and the proposed merger with Value Property Trust.
Form 8-K dated September 23, 1997, regarding the execution of an
Agreement and Plan of Merger by the Company, Wellsford Capital
Corporation and Value Property Trust.
Form 8-K dated December 31, 1997, regarding the Company's
subsidiary's acquisition of the Mountain Heights property.
Form 8-K dated December 31, 1997, regarding the Company's acquisition
of the Sonterra at Williams Centre property.
(c) The following exhibits are filed as exhibits to this Form 10-K:
See Item 14 (a) (3) above.
(d) The following documents are filed as a part of this report:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Jeffrey H. Lynford
--------------------------
(Jeffrey H. Lynford)
Chairman of the Board, Secretary and Director
Dated: March 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Jeffrey H. Lynford Chairman of the Board March 27, 1998
- --------------------------- and Director
(Jeffrey H. Lynford)
/s/ Edward Lowenthal President, Chief Executive March 27, 1998
- --------------------------- Officer and Director
(Edward Lowenthal) (Principal Executive Officer)
/s/ Gregory F. Hughes Chief Financial Officer March 27, 1998
- --------------------------- (Principal Financial
(Gregory F. Hughes) and Accounting Officer)
/s/ Rodney F. Du Bois Director March 27, 1998
- ---------------------------
(Rodney F. Du Bois)
/s/ Mark S. Germain Director March 27, 1998
- ---------------------------
(Mark S. Germain)
/s/ Frank J. Hoenemeyer Director March 27, 1998
- ---------------------------
(Frank J. Hoenemeyer)
/s/ Frank J. Sixt Director March 27, 1998
- ---------------------------
(Frank J. Sixt)
/s/ Douglas Crocker II Director March 27, 1998
- ---------------------------
(Douglas Crocker II)
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No. in
Form 10-K
-----------
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996. . . . . F-3
Consolidated Statements of Income for the Years Ended
December 31, 1997 and 1996. . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Changes in Shareholders' Equity for
the Years Ended December 31, 1997 and 1996 and the Period
from March 22, 1995 (Inception) to December 31, 1995. . . . . . . . . F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996 and the Period from March 22, 1995
(Inception) to December 31, 1995. . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . F-7
FINANCIAL STATEMENT SCHEDULES
III - Real Estate and Accumulated Depreciation. . . . . . . . . . . . S-1
IV - Mortgage Loans on Real Estate. . . . . . . . . . . . . . . . . . S-2
All other schedules have been omitted because the required information for
such other schedules is not present, is not present in amounts sufficient
to require submission of the schedule or because the required information
is included in the consolidated financial statements.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
Wellsford Real Properties, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Wellsford
Real Properties, Inc. and subsidiaries (the "Company") as of December 31,
1997 and 1996, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the two years in the period
ended December 31, 1997, and the consolidated statements of shareholders'
equity and cash flows for the period from March 22, 1995 (the date the
assets were acquired and liabilities incurred) to December 31, 1995. Our
audits also included the financial statement schedules listed in the Index
at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules 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.
As described in Note 2, no operating revenues or expenses were incurred in
the period from March 22, 1995 through December 31, 1995. Accordingly, the
statement of income for the period ended December 31, 1995 has been
omitted.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Wellsford Real Properties, Inc. and subsidiaries at December
31, 1997 and 1996, and the consolidated results of their operations and
cash flows for the each of the two years in the period ended December 31,
1997, and their cash flows for the period from March 22, 1995 to December
31, 1995, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
New York, New York
February 23, 1998
except for the tenth through thirteenth
paragraphs of Note 12, as to which the date is
March 11, 1998
WELSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
----------------------------
1997 1996
------------ -----------
Real estate assets,
at cost - Note 10
Land $ 5,225,000 $ -
Buildings and improvements 36,338,624 -
------------ -----------
41,563,624 -
Less accumulated depreciation - -
------------ -----------
41,563,624 -
Construction in progress 17,177,824 21,306,000
------------ -----------
58,741,448 21,306,000
Notes receivable - Notes 4,5 and 10 105,631,611 17,800,000
Investment in joint venture - Note 10 44,779,563 -
------------ -----------
Total real estate assets 209,152,622 39,106,000
Cash and cash equivalents 29,895,212 -
Restricted cash - Note 3 7,695,910 5,520,000
Prepaid and other assets 3,229,956 134,000
------------ -----------
Total Assets $249,973,700 $44,760,000
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable - Note 5 $ 49,255,000 $14,755,000
Credit facility - Note 5 7,500,000 -
Accrued expenses and other liabilities 9,763,109 -
------------ -----------
Total Liabilities: 66,518,109 14,755,000
------------ -----------
Commitments and contingencies -
Notes 4, 5, 6, 7, 8, 9, 10 and 12 - -
Minority Interest - Note 10 2,297,295 -
Shareholders' Equity:
Series A 8% Convertible Redeemable
Preferred Stock, $.01 par value per
share, 2,000,000 authorized, no
shares issued and outstanding
at December 31, 1997 - -
Common Stock
197,650,000 shares authorized-
16,656,707 shares, $.01 par value
per share, issued and outstanding
at December 31, 1997 166,567 -
Class A Common Stock, 350,000 shares
authorized - 339,806 shares, $.01
per share, issued and outstanding
at December 31, 1997 3,398 -
Paid in capital in excess of
par value in 1997 179,721,827 29,248,000
Retained earnings 1,941,518 757,000
Deferred compensation - Note 7 (675,014) -
------------ -----------
Total Shareholders' Equity -
Notes 1 and 7 181,158,296 30,005,000
------------ -----------
Total Liabilities and
Shareholders' Equity $249,973,700 $44,760,000
============ ===========
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
-------------------------------
1997 1996
--------------- -------------
REVENUE
Rental income $ 1,291,354 $ -
Interest income 7,779,021 757,000
--------------- -------------
Total Revenue 9,070,375 757,000
--------------- -------------
EXPENSES
Property operating and maintenance 241,257 -
Real estate taxes 105,692 -
Depreciation and amortization 294,563 -
Property management 18,356 -
Interest - -
General and administrative 3,159,558 -
--------------- --------------
Total Expenses 3,819,426 -
Income from joint venture 15,135 -
--------------- --------------
Income before taxes 5,266,084 757,000
Income tax expense - Note 2 2,213,007 -
--------------- --------------
Net income $ 3,053,077 $ 757,000
=============== ==============
Net income per common share,
basic and diluted - Note 2 $ 0.18 $ 0.04
=============== ==============
Weighted average number of common
shares outstanding - Note 2 16,922,135 16,911,849
=============== ==============
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
THE PERIOD FROM MARCH 22, 1995 (INCEPTION) TO DECEMBER 31, 1995
Common Shares* Total
------------------ Paid-in Retained Deferred Shareholders'
Shares Amount Capital Earnings Compensation Equity
-------- -------- ------------- ------------ ------------- ------------
March 22, 1995
(Inception) - $ - $ - $ - $ - $ -
Equity contributions - - 3,614,000 - - 3,614,000
--------- --------- ------------- ------------ ------------- ------------
December 31, 1995 - - 3,614,000 - - 3,614,000
Equity contributions - - 25,634,000 - - 25,634,000
Net income - - - 757,000 - 757,000
--------- --------- ------------- ------------ ------------- -----------
December 31, 1996 - - 29,248,000 757,000 - 30,005,000
Equity contributions
prior to Spin-off-
Note 1 - - 19,310,633 - - 19,310,633
Net income prior to
Spin-off - Note 1 - - - 1,111,559 - 1,111,559
Spin-off - Note 1 4,887,577 48,875 1,819,684 (1,868,559) - -
Private offering of
common shares (net
of issuance costs)
- Note 7 12,000,000 120,000 121,574,562 - - 121,694,562
Issuance of Warrants
- Note 7 - - 6,198,345 - - 6,198,345
Director and officer
share grants 108,936 1,090 1,570,603 - (675,014) 896,679
Net income subsequent
to Spin-off - - - 1,941,518 - 1,941,518
----------- --------- ------------- ------------ ----------- ------------
December 31, 1997 16,996,513 $169,965 $179,721,827 $1,941,518 $(675,014) $181,158,296
=========== ========= ============= ============ =========== ============
*Includes 339,806 Class A Common Shares.
/TABLE
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from
March 22, 1995
For the years Ended December 31, to December 31,
-------------------------------------------------------------
1997 1996 1995
--------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,053,077 $ 757,000 $ -
Adjustments to reconcile net income
to net cash provided by operating
activities:
Income from joint venture (15,135) - -
Share grants 896,679 - -
Depreciation and amortization 294,563 - -
Decrease (increase) in assets
Restricted cash accounts (2,175,910) 4,894,000 4,341,000
Prepaid and other assets (3,164,296) (134,000) -
(Decrease) increase in liabilities
Accrued expenses and
other liabilities 7,116,138 - -
------------- ----------- -------------
Net cash provided by operating
activities 6,005,116 5,517,000 4,341,000
------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate assets (85,551,813) (13,351,000) (7,955,000)
Investments in joint ventures (13,955,069) - -
Investments in notes receivable (162,845,982) (17,800,000) -
Repayments of notes receivable 105,440,515 - -
------------- -------------------------------------
Net cash (used in)
investing activities (156,912,349) (31,151,000) (7,955,000)
------------- -------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Funding of restricted cash accounts - - (14,755,000)
Proceeds from mortgage notes payable 34,500,000 - 14,755,000
Proceeds from credit facilities 64,400,000 - -
Repayment of credit facilities (56,900,000) - -
Proceeds from bridge loan 6,000,000 - -
Repayment of bridge loan (6,000,000) - -
Equity contributions prior to
Spin-off 17,060,633 25,634,000 3,614,000
Equity contributions from
minority interest 47,250 - -
Proceeds from common shares 121,694,562 - -
-------------- ---------------------------------------
Net cash provided by financing
activities 180,802,445 25,634,000 3,614,000
-------------- --------------------------------------
Net increase (decrease) in cash
and cash equivalents 29,895,212 - -
Cash and cash equivalents,
beginning of year - - -
-------------- ---------------------------------------
Cash and cash equivalents,
end of year $ 29,895,212 $ - $ -
============== =======================================
SUPPLEMENTAL INFORMATION:
Cash paid during the year
for interest $ 1,506,508 $ 663,000 $ 335,000
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Properties contributed to
joint venture $ (54,332,555) $ - $ -
Debt contributed to joint venture $ 30,426,144 $ - $ -
Warrants issued in connection with
joint venture $ (6,198,345) $ - $ -
Other assets contributed to
joint venture $ (763,045) $ - $ -
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Business
Wellsford Real Properties, Inc. (and subsidiaries, collectively the
"Company") was formed on January 8, 1997, as a corporate subsidiary of
Wellsford Residential Property Trust (the "Trust"). The Trust was
formed in 1992 as the successor to Wellsford Group Inc. (and
affiliates) which was formed in 1986. On May 30, 1997, the Trust
merged (the "Merger") with Equity Residential Properties Trust
("EQR"). Immediately prior to the Merger, the Trust contributed
certain of its assets to the Company and the Company assumed certain
liabilities of the Trust. Immediately after the contribution of
assets to the Company and immediately prior to the Merger, the Trust
distributed to its common shareholders all the outstanding shares of
the Company owned by the Trust (the "Spin-off"). The common
shareholders of the Trust received 0.25 common share of the Company
for each common share of the Trust owned. Upon consummation of the
Spin-off and Merger, the Company had issued and outstanding
approximately 4,547,771 shares of common stock and 339,806 shares of
Class A common stock that was issued to an affiliate of EQR. On June
2, 1997, the Company sold 12,000,000 shares of its common stock in a
private placement (the "Private Placement") to a group of
institutional investors at $10.30 per share, the Company's then book
value per share (Note 7).
The Company is a real estate merchant banking firm which acquires,
develops and operates real properties and invests in the debt and
equity securities of private and public real estate companies. The
Company has established three strategic business units ("SBUs") within
which it intends to execute its business plan: an SBU for commercial
property investments which is held in its 99.9% subsidiary, Wellsford
Commercial Properties Trust ("WCPT"), an SBU for debt and equity
investments and an SBU for property development and land investments.
See Note 10 for additional information regarding the Company's
industry segments.
(2) Summary of Significant Accounting Policies
Principles of Consolidation and Financial Statement Presentation. The
accompanying consolidated financial statements include the accounts of
Wellsford Real Properties, Inc. and its majority-owned and controlled
subsidiaries. Investments in entities where the Company does not have
a controlling interest are accounted for under the equity method. All
significant inter-company accounts and transactions among Wellsford
Real Properties, Inc. and its subsidiaries have been eliminated in
consolidation.
The accompanying consolidated financial statements include the assets
and liabilities contributed to and assumed by the Company from the
Trust, from the time such assets and liabilities were acquired or
incurred, respectively, by the Trust. Such financial statements have
been prepared using the historical basis of the assets and liabilities
and the historical results of operations related to the Company's
assets and liabilities.
For the purpose of the Company, the assets were acquired and
liabilities incurred beginning on March 22, 1995. During the period
from March 22, 1995 through December 31, 1995 the Company was
principally involved in the initial phase of construction development
activities with no operating revenues or expenses incurred.
Accordingly, the income statement for the period ended December 31,
1995 has been omitted.
Income Recognition. Commercial properties are leased under operating
leases. Rental revenue is recognized on a straight-line basis over
the terms of the respective leases. Residential communities are leased
under operating leases with terms of generally one year or less.
Rental revenue is recognized monthly as it is earned.
Cash and Cash Equivalents. The Company considers all demand and money
market accounts and short term investments in government funds with an
original maturity of three months or less to be cash and cash
equivalents.
Real Estate and Depreciation. Costs directly related to the
acquisition and improvement of real estate are capitalized, including
all improvements identified during the underwriting of a property
acquisition. Ordinary repairs and maintenance are expensed as
incurred.
Tenant improvements and leasing commissions related to commercial
properties are capitalized and depreciated over the terms of the
related leases.
Depreciation is computed over the expected useful lives of depreciable
property on a straight line basis, principally 27.5 years for
residential buildings and improvements, 40 years for commercial
properties and 5 to 12 years for furnishings and equipment.
Depreciation expense was $0.3 million in 1997 and included $0.1
million of amortization of certain assets capitalized to the Company's
Investment in Joint Venture.
Statement of Financial Accounting Standard ("SFAS") 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of" requires that long-lived assets to be held and used be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
SFAS 121 has not had an impact on the Company's consolidated financial
statements.
Mortgage Note Receivable Impairment. The Company considers a note
impaired if, based on current information and events, it is probable
that all amounts due under the note agreement are not collectable.
Impairment is measured based upon the fair value of the underlying
collateral. No impairment has been recorded through December 31,
1997.
Share Based Compensation. SFAS 123 "Accounting for Stock-Based
Compensation" establishes a fair value based method of accounting for
share based compensation plans, including share options. The
disclosure requirements of SFAS 123 are effective for financial
statements for fiscal years beginning after December 15, 1995.
However, registrants may elect to continue accounting for share option
plans under Accounting Principles Board Opinion ("APB") 25, but are
required to provide pro forma net income and earnings per share
information "as if" the new fair value approach had been adopted (see
Note 8). Because the Company has elected to continue to account for
its share based compensation plans under APB 25, there has been no
impact on the Company's consolidated financial statements resulting
from SFAS 123.
Segment Reporting. Effective January 1, 1997, the Company adopted
SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 superseded SFAS 14 "Financial Reporting for
Segments of a Business Enterprise." SFAS 131 establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments
in interim financial reports. SFAS 131 also establishes standards for
related disclosures about products and services, geographic areas, and
major customers. The adoption of SFAS 131 did not affect results of
operations or financial position, but did affect the disclosure of
segment information. See note 10.
Income Taxes. The Company accounts for income taxes under SFAS 109
"Accounting for Income Taxes." Deferred income tax assets and
liabilities are determined based upon differences between financial
reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
The components of the income tax provision (benefit) are as follows:
Year Ended
December 31, 1997
-----------------
Current federal tax $ 1,776,595
Current state tax 456,838
Deferred federal tax (16,239)
Deferred state tax (4,187)
-----------
$ 2,213,007
============
The reconciliation of income tax computed at the U.S. federal
statutory rate to income tax expense is as follows:
Year Ended
December 31, 1997
-----------------
Amount Percent
------- -------
Tax at U.S. statutory rate $ 1,454,084 35.00%
State taxes, net of
federal benefit 374,711 9.02%
Non-deductible items 2,722 0.07%
Change in valuation
allowance 381,490 9.18%
------------ -------
$ 2,213,007 53.27%
============ =======
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's net deferred income
taxes are as follows:
Year Ended
December 31, 1997
-----------------
Deferred tax assets:
--------------------
Deferred compensation plan $ 3,021,641
Other 32,908
--------------
Subtotal deferred tax assets 3,054,549
Less: valuation allowance (2,361,603)
--------------
Total deferred tax assets 692,946
Deferred tax liabilities:
-------------------------
Built in gain on stock in deferred
compensation plan (660,037)
Other (12,483)
---------------
Total deferred tax liabilities (672,520)
Net deferred tax asset $ 20,426
==============
SFAS 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more
likely than not that some portion or all of the deferred tax assets
will not be realized. After consideration of all the evidence, both
positive and negative, management has determined that a $2,361,603
valuation allowance at December 31, 1997 is necessary to reduce the
deferred tax assets to the amount that will more likely than not be
realized.
Per Share Data. In 1997, SFAS 128 "Earnings per Share" was issued.
SFAS 128 replaced the calculation of primary and fully diluted
earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to
fully diluted earnings per share. All earnings per share amounts for
all periods have been presented to conform to the SFAS 128
requirements.
Earnings per common share are computed based upon the weighted average
number of common shares outstanding during the period, including Class
A common shares.
Diluted earnings per common share are based upon the increased number
of common shares that would be outstanding assuming the exercise of
dilutive common share options (169,264) and warrants (256,899), under
the treasury stock method.
The Company was a corporate subsidiary of the Trust prior to the Spin-
off. Earnings per share was calculated using the weighted average
number of shares outstanding assuming that the Spin-off and Private
Placement (Note 7) occurred on January 1, 1996.
Estimates. 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) Restricted Cash
Restricted cash primarily consists of retirement plan deposits and
debt service and construction reserve balances. At December 31, 1997
and 1996, retirement plan deposits amounted to $6,017,784 and $0,
respectively, and reserve balances amounted to $1,678,125 and
$5,520,000 respectively. Retirement plan deposits are made solely
by, and at the discretion of, the Company's officers who participate
in the plan.
(4) Notes Receivable
At December 31, 1997 and 1996, notes receivable consisted of the
following:
Stated Maturity
Note Interest Rate Date Payment Terms Balance December 31,
------------- -------- ------------- --------------------------
1997 1996
---- ----
277 Park Loan 12% 5/2007 Interest Only $ 25,000,000 $ --
Abbey Credit Facility LIBOR +4% 9/2000 Interest Only 28,626,650 --
IPH Mezzanine Facility LIBOR +5% 6/1998* Interest Only 9,821,036 --
Woodlands Loan LIBOR +4.4% 7/2000 Interest Only 15,000,000 --
Park 80 Loan LIBOR +3% 3/1998 Interest Only 5,100,000 --
WEL/WH Bridge Loan LIBOR +4% 2/1998 Interest Only 4,283,925 --
Sonterra Loan** 9% 7/1999** Interest Only 17,800,000 17,800,000
------------ ----------
$105,631,611 $17,800,000
=========== ===========
* Repaid in February 1998.
**Effectively repaid in January 1998 as part of the Sonterra
acquisition. See Note 12.
For additional information on the Company's notes receivable, see
Note 10.
(5) Debt
At December 31, 1997 and 1996, the Company's debt consisted of the
following:
Maturity Standard Balance
Debt Date Interest Rate ---------------------
- --------- -------- ------------- 12/31/97 12/31/96
-------- --------
(000s) (000s)
Line of Credit 5/1999 LIBOR +1.75% $ 7,500 $ --
Palomino Park (A) 12/2035 Variable (B) 14,755 14,755
Blue Ridge Mortgage 1/2008 6.92% (C) 34,500 --
-------- -------
$ 56,755 $14,755
======== =======
_____________________
(A) Mortgage secures tax exempt bonds.
(B) Rate approximates the Standard & Poor's / J.J. Kenney index for short-
term high grade tax-exempt bonds (currently approximately 4%).
(C) Principal payments are made based on a 30-year amortization schedule.
In December 1995, the Trust marketed and sold $14.8 million of tax-
exempt bonds to fund construction at Palomino Park. At December 31,
1997, $1.7 million of the bond proceeds were being held in escrow
pending their use for the funding of development. The bonds are
secured by a letter of credit from Dresdner Bank, AG, NY Branch
("Dresdner"). An affiliate of EQR has made its own credit available
to Dresdner in the form of a guaranty.
The Blue Ridge Mortgage is secured by the Blue Ridge property (Note
10).
In May 1997, the Company obtained a $50 million two-year line of
credit (extendable for one year) from BankBoston, N.A. and Morgan
Guaranty Trust Company of New York (the "Line of Credit"). The Line
of Credit is secured by the EQR Preferred Commitment (Note 7) and the
277 Park Loan. The Company is obligated to pay a fee equal to one-
quarter of one percent (0.25%) per annum on the average daily amount
of the unused portion of the Line of Credit until maturity.
The Line of Credit contains various customary loan covenants and
requires the Company to maintain a ratio of total consolidated
liabilities to total consolidated assets of not more than 0.6 to 1, to
maintain an overall debt service coverage ratio of at least 1.5 to 1
and to meet certain minimum borrowing base and equity level
requirements. The Line of Credit also limits the amount of
undeveloped land the Company may hold.
The Company's long-term debt matures as follows: $0.4 million in
1998, $7.9 million in 1999, $0.4 million in 2000, $0.4 million in
2001, $0.5 million in 2002 and $47.2 million thereafter. The $7.5
million balance of the Line of Credit was repaid in January 1998.
The Company capitalizes interest related to buildings under
construction and renovation to the extent such assets qualify for
capitalization. Total interest capitalized during the years ended
December 31, 1997, 1996 and 1995 was $1.7 million, $0.7 million, and
$0.3 million, respectively.
The fair market value of the fixed rate mortgage notes, estimated by
discounting cash flows and adjusting the results for subjective
factors including loan to value ratios, approximates the carrying
amount of the mortgage notes. The fair market value of the variable
rate credit facility is considered to be the carrying amount.
(6) Transactions With Affiliates
In February 1997, the contracts to purchase the WRP Commercial
Properties (Note 10) were transferred to the Company by an entity
("Commercial Partnership") of which Messrs. Lynford and Lowenthal and
the wife of Mark Germain (a director of the Company) are owners, for
218,447 shares of common stock having an aggregate value of
approximately $2.25 million and the Company's agreement to repay a
$1.0 million advance used for the down payment on one of the WRP
Commercial Properties. Upon liquidation of Commercial Partnership,
Mr. Lynford, Mr. Lowenthal and the wife of Mark Germain each received
approximately 16.4%, 16.4% and 13.8%, respectively, of the shares of
common stock issued to Commercial Partnership. The aggregate purchase
price for these commercial properties paid by the Company was
approximately $47.6 million, including the approximately $2.25 million
referred to above.
On May 30, 1997, the Company made short-term loans to Messrs. Lynford
and Lowenthal in the amounts of $590,000 and $119,000, respectively.
The proceeds of these loans, which were repaid on July 1, 1997, were
used to satisfy certain withholding tax obligations.
The Company received approximately $2.1 million in interest income and
$0.1 million in management fees ($0.3 million annually) during 1997
from Wellsford Commercial (Note 10).
(7) Shareholders' Equity
On June 2, 1997, the Company completed the Private Placement. The
Company has filed a shelf registration statement with the Securities
and Exchange Commission with respect to such shares. The proceeds of
the Private Placement of approximately $123.6 million have been
applied to (a) approximately $53 million to repay the Company's Line
of Credit and other debt on the date of the Private Placement, (b) $5
million to purchase a portion of the 277 Park Loan, and (c) the
balance towards the investments described in Note 10 and working
capital.
The Line of Credit (Note 5) is secured by an affiliate of EQR's
commitment, until May 30, 2000, to acquire at the Company's option up
to $25 million of the Company's Series A 8% Convertible Redeemable
Preferred Stock ("Series A Preferred"), each share of which is
convertible into shares of common stock at a price of $11.124 (the
"EQR Preferred Commitment"). If at May 30, 2000, the affiliate of EQR
has purchased less than $25 million of Series A Preferred, it has the
right to purchase the remainder of the $25 million not purchased prior
to that time.
Three of the Company's executive officers each received a grant of
14,286 restricted common shares, of which an aggregate of 28,572
shares were issued to the Company's noqualified deferred compensation
plan. Twenty percent (20%) of each executive officer's restricted
common shares vest on each anniversary date of the grant (December 5,
1997) over a 5-year period provided that the executive officer is
still employed by the Company (otherwise, any unvested restricted
common shares will be redeemed by the Company at $.01 per share).
Based upon the market price on the date of grant of $15.75 per common
share, the restricted common shares granted to each of the executive
officers had a market value of $225,000. The total deferred
compensation is included in "Deferred Compensation" and "General and
Administrative Expense" on the Company's consolidated financial
statements.
Two of the Company's executive officers each received a grant of
19,048 common shares, which were issued to the Company's nonqualified
deferred compensation plan. Based upon the market price on the date
of grant of $15.75 per common share, the common shares granted to each
of the executive officers had a market value of approximately
$300,000.
The Company has Warrants outstanding to issue 4,132,230 shares of
common stock (see Note 10).
The Company did not distribute any dividends during 1997.
(8) Share Option Plan
The Company has adopted certain incentive plans for the purpose of
attracting and retaining the Company's directors, officers and
employees. The Company has established share option and management
incentive plans (the "Incentive Plans") which reserved 3,076,235
common shares for issuance under the Incentive Plans. Options granted
under the Incentive Plans expire ten years from the date of grant and
generally contain the right to receive reload options under certain
conditions. At December 31, 1997, 115,545 of the Company's
outstanding options are exercisable. Options outstanding for the
period ended December 31, 1997, which have a weighted average vesting
period of approximately 3.7 years, are as follows:
Issued in 1997 as replacement options for Trust options
(exercise prices between $6.67 and $10.30 per share,
weighted average fair value of $5.19 per share) 1,326,235
Issued in 1997 (exercise prices between $10.30 and $15.81
per share, weighted average fair value of
$7.31 per share) 1,622,375
Exercised in 1997 --
Forfeited in 1997 (1,000)
Expired in 1997 --
---------
December 31, 1997 (weighted average exercise
price of $12.20) 2,947,610
=========
Pursuant to SFAS 123, described in Note 2, the pro forma 1997 net
income available to common shareholders as if the fair value approach
to accounting for share-based compensation had been applied would be
$2.5 million or $0.14 per common share, basic and diluted. The fair
values of the options used in calculating these amounts were
calculated using the Black-Scholes option pricing model and the
following assumptions: (i) a risk-free interest rate of between
5.84% and 6.27%, depending on the data available on the date of grant,
(ii) an expected life of 10 years, and (iii) an expected volatility
between 20% and 29%, depending on the data available on the date of
grant. The Black-Scholes option pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option pricing
models require the input of highly subjective assumptions including
the expected share price volatility. Because the Company's employee
share options have characteristics significantly different from those
of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee share
options.
(9) Commitments and Contingencies
The Company has entered into employment agreements with four of its
officers. Such agreements are for terms which expire between 1999
and 2002, and provide for aggregate annual fixed payments of
approximately $1.0 million, $1.0 million and $0.6 million in 1997,
1998 and 1999 through 2002, respectively.
As a commercial real estate owner, the Company is subject to potential
environmental costs. At this point in time, management of the Company
is not aware of any environmental concerns that would have a material
adverse effect on the Company's financial position or future results
of operations.
In 1997 the Company adopted a defined contribution savings plan
pursuant to Section 401 of the Internal Revenue Code. Under such a
plan there are no prior service costs. All employees are eligible to
participate in the plan after one year of service. Employer
contributions are made based on a discretionary amount
determined by the Company's management. Employer contributions, if
any, are based upon the amount contributed by an employee. During
1997, the Company made contributions of approximately $4,000.
(10) Segment Information
Wellsford/ | Commercial Debt and Land and
Whitehall | Property Equity Development
Properties, L.L.C.* | Investments Investments Investments Other Consolidated
------------------- | ----------- ----------- ----------- ----- ------------
December 31, 1997 (000s) |
- ----------------------- |
|
Real estate, net $ 218,846 | $ - $ - $ 58,741 $ - $ 58,741
Notes receivable - | - 87,832 17,800 - 105,632
Investment in joint venture - | 44,780 - - - 44,780
Cash and cash equivalents 2,878 | - - - 29,896 29,896
Other assets 7,311 | - 1,313 3,040 6,572 10,925
---------- | --------- -------- --------- -------- ---------
Total assets $ 229,035 | $ 44,780 $ 89,145 $ 79,581 $ 36,468 $ 249,974
========== | ========= ======== ========= ======== =========
Mortgage notes payable $ 4,284 | $ - $ - $ 49,255 $ - $ 49,255
Credit facilities 146,909 | - - 7,500 - 7,500
Accrued expenses and |
other liabilities 3,717 | - - 1,838 7,925 9,763
Minority interest - | - - 2,297 - 2,297
Equity 74,125 | 44,780 89,145 18,691 28,543 181,159
---------- | --------- -------- --------- -------- ---------
Total liabilities and equity $ 229,035 | $ 44,780 $ 89,145 $ 79,581 $ 36,468 $ 249,974
========== | ========= ======== ========= ======== =========
Year Ended December 31, 1997 (000s)
- ----------------------------------
Rental income $ 8,504 | $ 1,291 $ - $ - $ - $ 1,291
Interest income 24 | - 5,002 1,602 1,175 7,779
---------- | --------- -------- --------- -------- ---------
Total income 8,528 | 1,291 5,002 1,602 1,175 9,070
---------- | --------- -------- --------- -------- ---------
|
Operating expenses 3,494 | 365 - - - 365
Depreciation and amortization 1,220 | 188 - - 106 294
Interest 2,949 | - - - - -
General and administrative 835 | - - - 3,160 3,160
---------- | --------- -------- --------- -------- ---------
Total expenses 8,498 | 553 - - 3,266 3,819
---------- | --------- -------- --------- -------- ---------
|
Income from joint venture - | 15 - - - 15
---------- | --------- -------- --------- -------- ---------
Income (loss) before taxes 30 | 753 5,002 1,602 (2,091) 5,266
Income tax expense - | 269 2,535 493 (1,084) 2,213
---------- | --------- -------- --------- -------- ---------
Net income (loss) $ 30 | $ 484 $ 2,467 $ 1,109 $ (1,007) $ 3,053
========== | ========= ======== ========= ======== =========
* The Company accounts for its 50.1% investment in this joint venture
under the equity method. This investment is held in the Company's
"Commercial Property Investments" segment.
(10) Segment Information (continued)
Commercial Property Investments - WCPT
At the time of the Spin-off, the Company owned six commercial office
buildings, five of which were vacant at that time, located in Northern
New Jersey, containing an aggregate of approximately 949,400 square
feet and acquired for an aggregate of approximately $47.6 million (the
"WRP Commercial Properties").
On August 28, 1997, the Company, through its subsidiary Wellsford
Commercial Properties Trust ("WCPT"), in a joint venture with WHWEL
Real Estate Limited Partnership ("Whitehall"), an affiliate of
Goldman, Sachs & Co., formed a private real estate operating company,
Wellsford/Whitehall Properties, L.L.C. ("Wellsford Commercial"). WCPT
manages Wellsford Commercial on a day-to-day basis, and certain major
decisions require the consent of both partners. WCPT intends to
qualify as a real estate investment trust ("REIT") and has a 50.1%
interest in Wellsford Commercial.
Wellsford Commercial owned and operated 13 office buildings containing
approximately 2.3 million square feet ("SF") of office space in New
Jersey and Washington, D.C. as of December 31, 1997 with an aggregate
gross book value of $212.9 million. These buildings consist of the
WRP Commercial Properties, which were contributed by the Company upon
formation of Wellsford Commercial, and 300 Atrium Drive, 400 Atrium
Drive, 500 Atrium Drive and 1275 K Street, which were contributed by
Whitehall upon formation of Wellsford Commercial, as well as 700
Atrium Drive and Mountain Heights (two buildings) which were acquired
in September and December 1997, respectively, for $18.1 million and
$29.1 million, respectively. In addition, Wellsford Commercial
purchased an industrial warehouse in New Jersey in December 1997 for
$7.1 million.
The Wellsford Commercial transactions described above were funded
primarily by capital contributions from the Company and Whitehall, by
$48 million in debt which encumbered certain of the properties
contributed by Whitehall (the "Atrium Loan") which was assumed by
Wellsford Commercial, and by a term loan agreement (the "WRP Loan")
between the Company and Wellsford Commercial.
The Atrium Loan bore interest at LIBOR +3% and was due on May 15,
2000. Wellsford Commercial has an interest rate protection agreement
which was related to this loan which caps LIBOR at 7.69% on a notional
balance of $64 million until June 15, 2000. The lender on this loan
was Goldman Sachs Mortgage Company. This loan was repaid in December
1997. The Company has retained the interest rate protection agreement
to hedge other floating rate borrowings.
Pursuant to the WRP Loan, the Company has agreed to loan Wellsford
Commercial up to approximately $86.3 million bearing interest at LIBOR
plus 3% until November 26, 1997 and at LIBOR plus 4% until maturity on
February 25, 1998. As of December 31, 1997, approximately $4.3
million was outstanding under the WRP Loan.
In December 1997, Wellsford Commercial obtained a $375 million loan
facility (the "Wellsford Commercial Bank Facility") from BankBoston
and Goldman Sachs Mortgage Company, consisting of a secured term loan
facility of up to $225 million and a secured revolving credit facility
of up to $150 million. The term loan facility bears interest at LIBOR
+1.6% and has a term of four years; the revolving credit facility
bears interest at LIBOR +2.5% and has a term of three years, which may
be renewed by Wellsford Commercial for one additional year.
As of December 31, 1997, approximately $146.9 million was outstanding
under the Wellsford Commercial Bank Facility ($107.9 million of which
was under the term loan), the proceeds of which were used primarily to
repay amounts outstanding under the Atrium Loan and the WRP Loan.
WCPT is entitled to incentive compensation equal to (a) 17.5% of
available cash after a return of capital to WCPT and Whitehall and a
17.5% return on equity to each of them, and (b) 22.5% of available
cash after a 22.5% return on equity to WCPT and Whitehall. The
Company and Whitehall have committed to make additional equity
contributions of $50 million each for new acquisitions, capital needs,
and working capital. Whitehall may exchange the membership units it
receives in Wellsford Commercial relating to capital contributions in
excess of an additional $25 million up to an additional $50 million,
for shares of the Company's common stock or, in the Company's sole
discretion, cash, based upon the price paid for such membership units
and the current market value of the Company's common stock.
In connection with the transactions described above, the Company
issued warrants (the "Warrants") to Whitehall to purchase 4,132,230
shares of common stock at an exercise price of $12.10 per share. The
Warrants are exercisable for five years for either, at the Company's
option, shares of the Company's common stock or cash. The exercise
price for the Warrants is payable in cash or, after August 28, 1999,
either with cash or membership units in Wellsford Commercial.
The Company has agreed with Whitehall to conduct its business and
activities relating to office properties (but not other types of
commercial properties) located in North America solely through its
interest in Wellsford Commercial except, in certain circumstances,
where Wellsford Commercial has declined the investment opportunity.
Debt and Equity Investments
At December 31, 1997, the Company had $105.6 million of debt
investments which bore interest at an average yield of 4.4% over
LIBOR.
277 Park
The Company and BankBoston have provided an $80 million loan (the "277
Park Loan") to entities which own substantially all of the equity
interests (the "Equity Interests") in the entity which owns a 52-
story, approximately 1.75 million square foot gross leasable area,
class A office building located in New York City in mid-town Manhattan
at 277 Park Avenue (the "277 Park Property"). The Company has
advanced $25 million pursuant to the 277 Park Loan. The 277 Park Loan
is secured primarily by a pledge of the Equity Interests owned by the
borrowers. The 277 Park Loan is subordinated to a 10-year $345
million first mortgage loan (the "REMIC Loan") on the 277 Park
Property. The notes representing the REMIC Loan bear interest at
different rates which equate to a weighted average interest rate of
approximately 7.67% per annum. The 277 Park Loan bears interest at
the rate of approximately 12% per annum for the first nine years of
its term and at a floating annual rate during the tenth year equal to
LIBOR plus 5.15% or the BankBoston base rate plus 5.15%, as elected by
the borrowers. The principal amount of the 277 Park Loan and all
accrued interest will be payable in May 2007; the REMIC Loan is also
due in May 2007. The 277 Park Loan is prepayable only in full and
then only after the fifth year of the loan and must be repaid if the
REMIC Loan is repaid or the 277 Park Property is sold. Any prepayment
during the sixth through ninth years of the loan must be accompanied
by a yield maintenance payment.
The Abbey Company
On August 28, 1997, the Company and Morgan Guaranty Trust Company of
New York ("MGT") originated a $70 million secured credit facility (the
"Abbey Credit Facility") to affiliates of The Abbey Company, Inc.
("Abbey").
The Abbey Credit Facility will be made available to Abbey until
September 2000. Advances under the facility can be made for up to 80%
of the value of the borrowing base collateral which will initially
consist of 10 properties, all cross-collateralized, totaling
approximately 1.1 million SF.
As of December 31, 1997, approximately $28.6 million had been advanced
by the Company under the Abbey Credit Facility. Under the terms of
its participation agreement with MGT, the Company will fund a 50%
junior participation on all advances under the facility.
The Company is entitled to receive interest on its advances under the
facility at LIBOR plus 4%.
IPH Mezzanine Facility
In December 1997, Wellsford Ventures, Inc. ("Ventures"), a wholly-
owned subsidiary of the Company, joined with Fleet Real Estate, Inc.
("FRE"), a subsidiary of Fleet Financial Group, to issue an
approximately $32.5 million subordinated credit facility (the "IPH
Mezzanine Facility") to Industrial Properties Holding, L.P. ("IPH").
Each of Ventures and FRE were committed to advance up to 50% of the
IPH Mezzanine Facility. As of December 31, 1997, approximately $9.8
million had been advanced by Ventures to IPH. The IPH Mezzanine
Facility was repaid in February 1998, at which time the Company
received a total of $0.8 million in interest and fees. Advances under
the IPH Mezzanine Facility bore interest at an annual rate of LIBOR
plus 5%.
Woodlands
In December 1997, BankBoston, Morgan Stanley Senior Funding, Inc. and
certain other lenders made available to the owners and developers of a
25,000 acre master-planned residential community located north of
Houston (the "Woodlands Property"), loans in the aggregate principal
amount of $369 million (the "Woodlands Loan"). The Woodlands Loan
consists of a revolving credit loan in the principal amount of $179
million (the "Revolving Loan"), a secured term loan in the principal
amount of $130 million (the "Secured Loan"), and a second secured term
loan in the principal amount of $60 million (the "Second Secured
Loan"). The Company has advanced $15 million pursuant to the Second
Secured Loan. The Second Secured Loan is subordinate to the Revolving
Loan and the Secured Loan and bears interest equal to LIBOR plus
4.40%. Interest on the Second Secured Loan is payable monthly to the
extent there is available cash after payment of interest on the
Revolving Loan and the Secured Loan and provided no event of default
has occurred under the Woodlands Loan. The principal amount of the
Woodlands Loan and all accrued interest thereon will be payable on
July 31, 2000, with two, one-year extension options available.
Park 80
In December 1997, the Company originated a $5.1 million loan bearing
interest at LIBOR plus 3% and maturing in March 1998 (the "Park 80
Loan"). The Park 80 Loan is secured by a mortgage on an 80,000SF mid-
rise office building in Saddlebrook, New Jersey.
Value Property Trust
On September 18, 1997, the Company and its subsidiary, Wellsford
Capital Corporation, entered into a definitive agreement with Value
Property Trust (NYSE: "VLP"), a real estate investment trust, pursuant
to which the Company acquired VLP in a merger transaction for cash and
stock valued at approximately $169 million.
Pursuant to the terms of the merger agreement, the Company agreed to
pay to VLP shareholders approximately $130 million in cash and issue
an aggregate of approximately 3.35 million shares of its common stock
resulting in each VLP shareholder receiving $11.58 in cash and 0.2984
common shares of the Company for each share of VLP. VLP primarily
owns 20 properties (with 2.1 million SF, the "VLP Properties") and has
approximately $60 million in net cash and a $6.2 million note
receivable, which is due in July 1998. The portfolio is diversified
both by property type and geographic location.
The acquisition, which is being accounted for as a purchase, was
approved by the VLP shareholders on February 20, 1998 and is expected
to be completed in February 1998 (see Note 12).
The Company has contracted to sell, for $65 million, 13 of the VLP
Properties to an affiliate of Whitehall ("Whitehall Property Buyer").
The Company intends to retain 7 properties.
(10) Segment Information (continued)
Property Development and Land Investments
Palomino Park
From the time of the Spin-off, the Company has owned an approximate
80% interest in Phases I, II and III of, and in options to acquire (at
fixed prices) and develop phases IV and V of, a 1,880-unit class A
multifamily development ("Palomino Park") in a suburb of Denver,
Colorado. The Company has a related $14.8 million tax exempt mortgage
note payable which requires interest only payments at a variable rate
(currently approximately 4%) until it matures in December 2035 (the
"Palomino Park Bonds"). The tax exempt mortgage note payable is
security for tax-exempt bonds, which are backed by a letter of credit
from a AAA rated financial institution. The Company and an affiliate
of EQR have guaranteed the reimbursement of the financial institution
in the event that the letter of credit is drawn upon (the latter
guarantee being the "EQR Enhancement").
In December 1997, Phase I, known as Blue Ridge, was completed at a
cost of approximately $41.5 million. At that time, the Company
acquired the remaining interest in Blue Ridge and the related
construction loan was repaid with the proceeds of a $34.5 million
permanent loan (the "Blue Ridge Loan") secured by a mortgage on Blue
Ridge. The Blue Ridge Loan matures in January 2008 and bears interest
at a fixed rate of 6.92%. Principal payments are based on a 30-year
amortization schedule.
The Company has invested $16.9 million through December 31, 1997 on
one multifamily development project, Red Canyon, which is a phase of
Palomino Park consisting of 304 units. This project is being
developed pursuant to a fixed-price contract. The Company is
committed to purchase 100% of this project upon completion and the
achievement of certain occupancy levels. Red Canyon is owned by Red
Canyon at Palomino Park LLC ("Phase II LLC"), a limited liability
company, the members of which are Wellsford Park Highlands, Corp.
(99%), a majority owned and controlled subsidiary of the Company, and
Al Feld ("Feld") (1%).
In May 1997, the Company acquired the land for Phase III for
approximately $2.1 million.
Sonterra
From the time of the Spin-off, the Company has held a $17.8 million
mortgage due in July 1999 and bearing interest at 9% per annum (the
"Sonterra Mortgage") on, and option to purchase, a 344-unit class A
residential apartment complex ("Sonterra at Williams Centre") in
Tucson, Arizona.
In January 1998, the Company exercised its option and acquired
Sonterra at Williams Centre for approximately $20.5 million.
(11) Summarized Consolidated Quarterly Information (Unaudited)
Summarized consolidated quarterly financial information for the years
ended December 31, 1997 and 1996 is as follows:
Three Months Ended (Unaudited)
-----------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
1997
- ----------------
Revenue $ 400,500 $ 1,775,359 $ 3,369,120 $ 3,540,531
Expenses -- 475,728 1,631,215 1,712,483
Income before ----------- ----------- ----------- -----------
taxes 400,500 1,299,631 1,737,905 1,828,048
Income tax
expense -- 284,000 719,000 1,210,007
----------- ----------- ----------- -----------
Net income
available for
common
shareholders $ 400,500 $ 1,015,631 $ 1,018,905 $ 618,041
=========== =========== =========== ===========
Net income
per common
share, basic* $ 0.02 $ 0.06 $ 0.06 $ 0.04
=========== =========== =========== ===========
Net income
per common
share, diluted* $ 0.02 $ 0.06 $ 0.06 $ 0.03
=========== =========== =========== ===========
Weighted average
number of
common shares
outstanding 16,911,849 16,911,849 16,911,849 16,935,776
=========== =========== =========== ===========
Three Months Ended (Unaudited)
-----------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
1996
- ----------------
Revenue $ -- $ -- $ 356,500 $ 400,500
Expenses -- -- -- --
----------- ----------- ----------- -----------
Income before
taxes -- -- 356,500 400,500
Income tax
expense -- -- -- --
----------- ----------- ----------- -----------
Net income
available for
common
shareholders $ -- $ -- $ 356,500 $ 400,500
=========== =========== =========== ===========
Net income per
common share,
basic* $ 0.00 $ 0.00 $ 0.02 $ 0.02
=========== =========== =========== ===========
Net income per
common share,
diluted* $ 0.00 $ 0.00 $ 0.02 $ 0.02
=========== =========== =========== ===========
Weighted average
number of
common shares
outstanding 16,911,849 16,911,849 16,911,849 16,911,849
=========== =========== =========== ===========
All earnings per share amounts conform with SFAS 128 requirements (Note 2).
_________________
* Aggregate quarterly earnings per share amounts may not equal annual
amounts presented elsewhere in these consolidated financial statements
due to rounding differences.
(12) Subsequent Events
In January 1998, the Company acquired Sonterra at Williams Centre, a
344-unit class A residential complex in Tuscon, Arizona. The
approximate $20.5 million purchase price was paid using the $17.8
million due on the Sonterra Loan (Note 4), which previously encumbered
the property, and cash.
In January 1998, the Company acquired a 49% interest in Creamer Realty
Consultants general partnership, a real estate advisory and consulting
firm with offices in New York City and Lexington, Kentucky, whose two
principals are Frank G. Creamer, Jr. and Michael J. Vitale, and formed
Creamer Vitale Wellsford, L.L.C. ("Creamer Vitale Wellsford").
Creamer Realty Consultants and Creamer Vitale Wellsford, together with
Prudential Real Estate Investors ("PREI"), a division of Prudential
Investment Corporation, have established the Clairborne Investors
Mortgage Investment Program to make opportunistic investments and to
provide liquidity to participants in large syndicated mortgage loan
transactions. The parties have agreed to contribute up to $150
million to fund acquisitions approved by the parties, of which a
subsidiary of the Company will fund 10%. Creamer Vitale Wellsford
will originate, co-invest, and manage the investments of the program.
The Company's original investment in Creamer Vitale Wellsford was $1.3
million in cash and 148,000 five-year warrants to purchase the
Company's common shares at $15.175 per share valued at approximately
$0.7 million.
In January 1998, the $7.5 million outstanding balance on the Line of
Credit was repaid.
In January 1998, Wellsford Commercial executed an agreement to
purchase an 80,000 SF property for $5.4 million. The purchase may be
completed by March 31, 1998, subject to certain contingencies.
On February 5, 1998, the $9.8 million IPH Mezzanine Facility (Note 4)
was repaid, at which time the Company received a total of $0.8 million
in interest and fees.
On February 12, 1998, Wellsford Commercial entered into an option
agreement to enter into a contribution agreement whereby a 972,000SF
portfolio of thirteen office buildings would be contributed to
Wellsford Commercial for $141.9 million, in the event certain lender
approvals can be obtained.
On February 20, 1998, Wellsford Commercial acquired a 65,000SF office
building in Boston, MA for $5.5 million ("15 Broad Street") and 19
acres of undeveloped land in Somerset, NJ for $2.0 million ("600
Atrium Drive").
On February 25, 1998, the Company and Wellsford Commercial agreed to a
3-month extension of the WEL/WH Bridge Loan (Note 4).
On February 26, 1998, the Company closed on $16.4 million of mortgage
financing on Sonterra at Williams Centre, bearing interest at 6.87%
and having a term of 10 years.
On February 27, 1998, the Company completed the merger with VLP (Note
10) and sold 12 of the 13 VLP Properties under contract to Whitehall
Property Buyer for an aggregate of approximately $60 million.
On March 11, 1998, the Company issued additional options to purchase
common shares of the Company to two of its officers. Each of the two
officers received 100,000 options with an exercise price of $17.50 per
share and 100,000 options with an exercise price of $20.00 per share.
The options have a term of 10 years and vest, in equal amounts, over
five years.
Schedule III
December 31, 1997 (thousands)
---------------------------------------------
Cost
Initial Cost Capitalized
---------------------------- Subsequent
Date Year # of Bldgs & To
Property Name Acquired Location Built Units Land Improve Total Acquisition
- ------------------------- -------- ---------- ----- ----- ------ -------- -------- -----------
Blue Ridge - Garden Apts. 12/97 Denver, CO 1997 456 $5,225 $36,339 $41,564 $0
--- ------ ------- ------- --
Total 456 $5,225 $36,339 $41,564 $0
December 31, 1997 (thousands)
---------------------------------------------------------------
Total Cost (A) Total Cost
----------------------- Net Of
Bldgs & Accum Accumulated
Property Name Land Improve Total Depr Depreciation Encumbrances
- ------------------------- ------- ------- ----- ----- ------------ ------------
Blue Ridge - Garden Apts. $5,225 $36,339 $41,564 $0 $41,564 $34,500
------ ------- ------- -- ------- -------
$5,225 $36,339 $41,564 $0 $41,564 $34,500
(A) The aggregate cost for federal income tax purposes is equal
to the total cost in this schedule.
Schedule IV
December 31, 1997 (thousands)
--------------------------------------------
Total
Principal
Subject To
Maturity Payment Prior Face Carrying Delinquent
Note Receivable Interest Rate Date Terms Liens Amount Amount(A) Payments
- ---------------------- ------------- --------- ------------- -------- --------- --------- -----------
277 Park Loan 12.00% 5/07 Interest Only $345,000 $25,000 $25,000 $0
Abbey Credit Facility LIBOR + 4% 9/00 Interest Only $0 $28,627(D) $28,627 $0
IPH Mezzanine Facility LIBOR + 5% (B) Interest Only $31,980 $9,821 $9,821 $0
Woodlands Loan LIBOR + 4.4% 7/00(C) Interest Only $309,000 $15,000 $15,000 $0
Park 80 Loan LIBOR + 3% 3/98 Interest Only $0 $5,100 $5,100 $0
WEL/WH JV bridge loan LIBOR + 4% 5/98 Interest Only $0 $4,284 $4,284 $0
Sonterra Loan 9.00% (B) Interest Only $0 $17,800 $17,800 $0
------- -------- -------- --
Total $685,980 $105,632 $105,632 $0
(A) The aggregate carrying amount for federal income tax purposes is
equal to the total carrying amount reflected in this schedule.
(B) The IPH Mezzanine Facility was repaid in February 1998; the
Sonterra Loan was repaid in January 1998.
(C) Two one-year extension options are available to the borrower.
(D) The maximum balance of the Company's 50% portion of this
facility is $35 million.
EXHIBIT INDEX
Exhibit No. Description###
3.1 Articles of Amendment and Restatement of the Company.****
3.2 Articles Supplementary Classifying 335,000 Shares of Common
Stock as Class A Common Stock.****
3.3 Articles Supplementary Classifying 2,000,000 Shares of Common
Stock as Series A 8% Convertible Redeemable Preferred
Stock.****
3.4 Bylaws of the Company.****
4.1 Specimen certificate for Common Stock.***
4.2 Specimen certificate for Class A Common Stock.****
4.3 Specimen certificate for Series A 8% Convertible Redeemable
Preferred Stock.****
4.4 Warrant Agreement, dated as of August 28, 1997, between the
Company and United States Trust Company of New York, as
warrant agent, and Warrant Certificate No. 1 of the Company for
5,000,000 Warrants registered in the name of WHWEL Real Estate
Limited Partnership.#
4.5 Registration Rights Agreement, dated as of February 23, 1998,
among the Company and Franklin Mutual Advisors, Inc. and Angelo
Gordon & Co., L.P.
10.1 Operating Agreement of Red Canyon at Palomino Park LLC between
Wellsford Park Highlands Corp. and Al Feld, dated as of April
17, 1996, relating to Red Canyon.*
10.2 First Amendment to Operating Agreement of Red Canyon at
Palomino Park LLC between Wellsford Park Highlands Corp. and Al
Feld, dated as of May 19, 1997, relating to Red Canyon.****
10.3 Tri-Party Agreement by and among NationsBank of Texas, N.A.,
Red Canyon at Palomino Park LLC, Wellsford Park Highlands
Corp., Wellsford Residential Property Trust, Al Feld and The
Feld Company, dated May 29, 1997, relating to Red Canyon.****
10.4 Assignment and Assumption of Tri-Party Agreement by and among
Wellsford Residential Property Trust, ERP Operating Limited
Partnership, Red Canyon at Palomino Park LLC, Wellsford Park
Highlands Corp., The Feld Company, Al Feld and Nationsbank of
Texas, N.A. dated May 30, 1997, relating to Red Canyon.****
10.5 Agreement and Acknowledgement Regarding Tri-Party Agreement by
and among Nationsbank of Texas, N.A., Red Canyon at Palomino
Park LLC, Wellsford Park Highlands Corp. and ERP Operating
Limited Partnership dated May 30, 1997, relating to Red
Canyon.****
10.6 Second Amended and Restated Vacant Land Purchase and Sale
Agreement between Mission Viejo Company and The Feld Company
dated March 23, 1995, as amended by First Amendment, dated May
1, 1996, relating to the land underlying Palomino Park.*
10.7 Trust Indenture, dated as of December 1, 1995, between Palomino
Park Public Improvements Corporation ("PPPIC") and United
States Trust Company of New York, as trustee, securing
Wellsford Residential Property Trust's Assessment Lien Revenue
Bonds Series 1995 - $14,755,000.**
10.8 Letter of Credit Reimbursement Agreement, dated as of December
1, 1995, between PPPIC, Wellsford Residential Property Trust
and Dresdner Bank AG, New York Branch.**
10.9 First Amendment to Letter of Credit Reimbursement Agreement,
dated as of May 30, 1997, between PPPIC, Wellsford Residential
Property Trust, Dresdner Bank AG, New York Branch and the
Company.****
10.10 Amendment to Wellsford Reimbursement Agreement by and between
PPPIC, Wellsford Residential Property Trust and the Company,
dated as of May 30, 1997.****
10.11 Assignment and Assumption Agreement by and between Wellsford
Residential Property Trust and the Company, dated as of May 30,
1997.****
10.12 Credit Enhancement Agreement by and between the Company and ERP
Operating Limited Partnership, dated as of May 30, 1997,
relating to Palomino Park.****
10.13 Reimbursement and Indemnification Agreement by and among the
Company and ERP Operating Limited Partnership, dated as of May
30, 1997, relating to Palomino Park.****
10.14 Guaranty by ERP Operating Limited Partnership for the benefit
of Dresdner Bank AG, New York Branch, dated as of May 30, 1997,
relating to Palomino Park.****
10.15 Amended and Restated Promissory Note of the Company to the
order of Dresdner Bank AG, New York Branch, dated May 30, 1997,
relating to Palomino Park.****
10.16 Common Stock and Preferred Stock Purchase Agreement by and
between the Company and ERP Operating Limited Partnership dated
as of May 30, 1997.****
10.17 Registration Rights Agreement by and between the Company and
ERP Operating Limited Partnership dated as of May 30, 1997.****
10.18 Credit Agreement, dated as of April 25, 1997, between Park
Avenue Financing Company LLC, PAMC Co-Manager Inc., PAFC
Management, Inc., Stanley Stahl, The First National Bank of
Boston, the Company, Other Banks that may become parties to the
Agreement and The First National Bank of Boston, as Agent,
relating to 277 Park Avenue.**
10.19 Assignment of Member's Interest, dated as of April 25, 1997, by
PAFC Management, Inc. and Stanley Stahl to The First National
Bank of Boston, relating to 277 Park Avenue (relating to
interests in the Park Avenue Financing Company, LLC).**
10.20 Assignment of Member's Interest, dated as of April 25, 1997, by
PAMC Co-Manager Inc. and Park Avenue Financing, LLC to The
First National Bank of Boston, relating to 277 Park Avenue
(relating to interests in 277 Park Avenue, LLC).**
10.21 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277
Park Avenue (relating to stock in Park Avenue Management
Corporation).**
10.22 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277
Park Avenue (relating to stock in PAMC Co-Manager Inc.).**
10.23 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277
Park Avenue (relating to stock in PAFC Management, Inc.).**
10.24 Conditional Guaranty of Payment and Performance, dated as of
April 25, 1997, by Stanley Stahl, relating to 277 Park
Avenue.**
10.25 Cash Collateral Account Security, Pledge and Assignment
Agreement, dated as of April 25, 1997, between 277 Park Avenue,
LLC, Park Avenue Management Corporation, Park Avenue Financing
Company LLC, PAMC Co-Manager Inc., Stanley Stahl and The First
National Bank of Boston, relating to 277 Park Avenue.**
10.26 Recognition Agreement, dated as of April 25, 1997, between The
First National Bank of Boston, the Company, Column Financial,
Inc., Park Avenue Financing Company LLC, PAMC Co-Manager, Inc.
and 277 Park Avenue, LLC, relating to 277 Park Avenue.**
10.27 Intercreditor Agreement, dated as of April 25, 1997, between
the Company and The First National Bank of Boston, as Agent,
relating to 277 Park Avenue.**
10.28 Assignment and Acceptance Agreement, dated June 19, 1997,
between BankBoston, N.A. (formerly known as The First National
Bank of Boston) ("BankBoston") and the Company, relating to 277
Park Avenue.****
10.29 Revolving Credit Agreement by and among the Company,
BankBoston, Morgan Guaranty Trust Company of New York ("Morgan
Guaranty"), other banks which may become parties and
BankBoston, as agent, and Morgan Guaranty, as co-agent dated as
of May 30, 1997.****
10.30 Agreement Regarding Common Stock and Preferred Stock Purchase
Agreement, dated as of May 30, 1997, among ERP Operating
Limited Partnership, the Company and BankBoston, as agent.****
10.31 Assignment of Common Stock Agreements, dated as of May 30,
1997, between the Company and BankBoston, as agent.****
10.32 Collateral Assignment of Documents, Rights and Claims
(including Collateral Assignment of Deed of Trust, Assignment
of Leases and Rents, Security Agreement and Fixture Filing),
made as of May 30, 1997, by the Company to BankBoston, as
agent.****
10.33 Limited Liability Company Operating Agreement of
Wellsford/Whitehall Properties, L.L.C., dated as of August 28,
1997.#
10.34 Amendment No. 1 to the Limited Liability Company Operating
Agreement of Wellsford/Whitehall Properties, L.L.C., dated as
of December 31, 1997.
10.35 Term Loan Agreement between the Company and Wellsford/Whitehall
Properties, L.L.C. dated as of August 28, 1997.#
10.36 $61,699,440 Term Note A, dated August 28, 1997, payable to the
order of the Company by Wellsford/Whitehall Properties, L.L.C.#
10.37 $17,093,750 Term Note B, dated September 25, 1997, payable to
the order of the Company by Wellsford/Whitehall Properties,
L.L.C.*****
10.38 Letter Agreement, dated as of August 28, 1997, between the
Company and WHWEL Real Estate Limited Partnership, relating to
warrants to be issued to WHWEL Real Estate Limited
Partnership.#
10.39 Revolving Credit Agreement, dated as of December 15, 1997,
among Wellsford/Whitehall Properties, L.L.C., as Borrower, and
BankBoston, N.A., Goldman Sachs Mortgage Company, and Other
Banks, as Banks, and BankBoston, N.A. as Administrative Agent
and Co-Arranger and Co-Syndication Agent, and Goldman Sachs
Mortgage Company, as Co-Arranger and Co-Syndication Agent.
10.40 Term Loan Agreement, dated as of December 15, 1997, among
WEL/WH 1275 K Street L.L.C., as Borrower, and BankBoston, N.A.,
Goldman Sachs Mortgage Company, and Other Banks, as Banks, and
BankBoston, N.A., as Administrative Agent and Co-Arranger and
Co-Syndication Agent, and Goldman Sachs Mortgage Company, as
Co-Arranger and Co-Syndication Agent.
10.41 Indemnity and Guaranty Agreement (Revolver), dated as of
December 15, 1997, by Wellsford Commercial Properties Trust and
WHWEL Real Estate Limited Partnership in favor of BankBoston,
N.A.
10.42 Indemnity Agreement Regarding Hazardous Materials (Revolver),
dated as of December 15, 1997, by Wellsford/Whitehall
Properties, L.L.C., Wellsford Commercial Properties Trust and
WHWEL Real Estate Limited Partnership for the benefit of
BankBoston, N.A.
10.43 Revolving Credit Agreement for $70 million, dated as of August
28, 1997, between AP-Anaheim LLC, AP-Arlington LLC, AP-Atlantic
LLC, AP-Cityview LLC, AP-Farrell Ramon LLC, AP-Palmdale LLC,
AP-Redlands LLC, AP-Victoria LLC, AP-Victorville LLC, and AP-
Sierra LLC, each a California limited liability company
(collectively, the "Abbey Affiliates"), as Borrower, and Morgan
Guaranty Trust Company of New York, as Lender.#
10.44 Loan Participation Agreement, dated as of August 28, 1997,
between Morgan Guaranty Trust Company of New York and the
Company.#
10.45 $70 million promissory note, dated August 28, 1997, payable to
the order of Morgan Guaranty Trust Company of New York by the
Abbey Affiliates.#
10.46 Purchase and Sale Agreement, dated as of September 18, 1997,
among the Company, Wellsford Capital Corporation and Whitehall
Street Real Estate Limited Partnership VII.##
10.47 First Amended and Restated Master Credit Agreement, dated
December 30, 1997, effective as of July 31, 1997, among The
Woodlands Commercial Properties Company, L.P., The Woodlands
Land Development Company, L.P., and BankBoston, N.A., Morgan
Stanley Senior Funding, Inc., as Documentation Agent, and Other
Banks, and BankBoston, N.A., as Managing Agent and Syndication
Agent.
10.48 Intercreditor Agreement, dated December 30, 1997, effective as
of July 31, 1997, by and between BankBoston, N.A., Morgan
Stanley Senior Funding, Inc. and the Other Lenders, relating to
Woodlands.
10.49 $4,186,991.87 Commercial Company Second Secured Term Loan Note,
dated December 30, 1997, payable to the order of the Company by
The Woodlands Commercial Properties Company, L.P. and The
Woodlands Land Development Company, L.P.
10.50 $10,813,008.13 Land Company Second Secured Term Loan Note,
dated December 30, 1997, payable to the order of the Company by
The Woodlands Land Development Company, L.P. and The Woodlands
Commercial Properties Company, L.P.
10.51 Program Agreement for Clairborne Investors Mortgage Program
between Creamer Realty Consultants and The Prudential
Investment Corporation, dated as of December 10, 1997.
10.52 Amended and Restated General Partnership Agreement of Creamer
Realty Consultants, dated as of January 1, 1998, by and between
Wellsford CRC Holding Corp. and FGC Realty Consultants, Inc.
10.53 Limited Liability Company Agreement of Creamer Vitale
Wellsford, L.L.C., dated as of January 20, 1998, by and between
Wellsford CRC Holding Corp. and SX Advisors, LLC.
10.54 Loan Agreement, dated as of February 27, 1998 between Wellsford
Sonterra LLC, as Borrower, and Nationsbank, N.A., as Lender.
10.55 $16,400,000 Promissory Note, dated February 27, 1998 payable to
the order of Nationsbank, N.A.. by Wellsford Sonterra, L.L.C.
10.56 Deed of Trust, Assignment of Leases and Rents and Security
Agreement, dated February 27, 1998 by Wellsford Sonterra LLC in
favor of Nationsbank, N.A.
10.57 $34,500,000 Multifamily Note, dated December 24, 1997 payable
to the order of GMAC Commercial Mortgage Corporation by Park at
Highlands LLC.
10.58 Multifamily Deed of Trust, Assignment of Rents and Security
Agreement, dated December 24, 1997, by Park at Highlands LLC in
favor of GMAC Commerical Mortgage Corporation.
10.59 1997 Management Incentive Plan of the Company.**
10.60 Rollover Stock Option Plan of the Company.**
10.61 Employment Agreement between the Company and Jeffrey H.
Lynford.****
10.62 Employment Agreement between the Company and Edward
Lowenthal.****
10.63 Employment Agreement between the Company and Gregory F.
Hughes.****
10.64 Employment Agreement between the Company and David M.
Strong.****
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
99.1 "Risk Factors" section of Amendment No. 2 to the Company's
Registration Statement on Form S-11 (file no. 333-32445), as
may be amended.#####
______________________________
* Previously filed as an exhibit to the Form 10 filed on April 23,
1997.
** Previously filed as an exhibit to the Form 10/A Amendment No. 1 filed
on May 21, 1997.
*** Previously filed as an exhibit to the Form 10/A Amendment No. 2 filed
on May 28, 1997.
**** Previously filed an exhibit to the Form S-11 filed on July 30, 1997.
***** Previously filed as an exhibit to Amendment No. 1 to Form S-11 filed
on November 14, 1997.
# Previously filed as an exhibit to the Form 8-K filed on September 11,
1997.
## Previously filed as an exhibit to the Form 8-K filed on September 23,
1997.
### Wellsford acquired its interest in a number of these documents by
assignment.
#### Previously filed as an exhibit to the Registration Statement on Form
S-4 filed on December 15, 1997.
##### Previously filed as part of Amendment No. 2 to the Registration
Statement on Form S-11 filed on December 3, 1997.