SECURITIES AND EXCHANGE COMMISSION
Washington, DC
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FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2002
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 0-17793
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Wilder Richman Historic Properties II, L.P.
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(Exact name of Registrant as specified in its charter)
Delaware 13-3481443
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
599 W. Putnam Avenue
Greenwich, Connecticut 06830
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (203) 869-0900
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 (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No____
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Part I - Financial Information
Table of Contents
Item 1. Financial Statements Page
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Balance Sheets as of May 31, 2002 (Unaudited) and
February 28, 2002 3
Statements of Operations for the three months
ended May 31, 2002 and 2001 (Unaudited) 4
Statements of Cash Flows for the three months
ended May 31, 2002 and 2001 (Unaudited) 5
Notes to Financial Statements as of May 31, 2002
(Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure about Market Risk 10
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
BALANCE SHEETS
May 31, 2002
(Unaudited) February 28, 2002
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ASSETS
Cash and cash equivalents $ 119,108 $ 119,417
Investments in operating partnerships 2,569,430 2,075,294
Other assets 10,907 10,779
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$ 2,699,445 $ 2,205,490
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LIABILITIES AND PARTNERS' EQUITY
Liabilities
Other liabilities $ 12,500 $ 10,000
Due to related parties 177,951 174,201
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190,451 184,201
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Partners' equity (deficit)
Partners' equity 2,541,167 2,053,462
Accumulated other comprehensive loss (32,173) (32,173)
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2,508,994 2,021,289
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$ 2,699,445 $ 2,205,490
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See notes to financial statements.
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 2002 AND 2001
(Unaudited)
2002 2001
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REVENUE
Interest $ 643 $ 1,771
EXPENSES
Operating 7,074 8,843
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Loss from operations (6,431) (7,072)
Equity in income of operating partnerships 494,136 117,562
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NET EARNINGS $ 487,705 $ 110,490
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NET EARNINGS PER UNIT OF LIMITED
PARTNERSHIP INTEREST
(800 units of limited partnership) $ 603.53 $ 136.39
========= =========
See notes to financial statements.
4
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MAY 31, 2002 AND 2001
(Unaudited)
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 487,705 $ 110,490
Adjustments to reconcile net earnings to net
cash used in operating activities
Equity in income of operating partnerships (494,136) (117,562)
(Increase) decrease in other assets (128) (696)
Increase in other liabilities 2,500
Increase in due to related parties 3,750 3,750
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Net cash used in operating activities (309) (4,018)
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Net decrease in cash and cash equivalents (309) (4,018)
Cash and cash equivalents at beginning of period 119,417 157,990
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Cash and cash equivalents at end of period $ 119,108 $ 153,972
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See notes to financial statements.
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2002
(Unaudited)
1. The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. They do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. The results of operations are impacted significantly by the
results of operations of the Operating Partnerships, which are provided on
an unaudited basis during interim periods. Accordingly, the accompanying
financial statements are dependent on such unaudited information. In the
opinion of the General Partner, the financial statements include all
adjustments necessary to reflect fairly the results of the interim periods
presented. All adjustments are of a normal recurring nature. No significant
events have occurred subsequent to February 28, 2002 and no material
contingencies exist which would require additional disclosures in the
report under Regulation S-X, Rule 10-01 paragraph A-5.
The results of operations for the three months ended May 31, 2002 are not
necessarily indicative of the results to be expected for the entire year.
2. The investments in Operating Partnerships as of May 31, 2002
and February 28, 2002 are as follows:
Amount paid to investee through February 28, 2002 $ 16,388,000
Accumulated cash distributions from Operating Partnerships
through February 28, 2002 (3,180,441)
Equity in accumulated loss of Operating Partnerships
through February 28, 2002 (11,132,265)
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Balance, February 28, 2002 2,075,294
Equity in income of operating partnerships for the three
months ended May 31, 2002 494,136
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Balance, May 31, 2002 $ 2,569,430
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS - continued
MAY 31, 2002
(Unaudited)
Note 2 - continued
The combined balance sheets of the Operating Partnerships as of March 31,
2002 and December 31, 2001 are as follows:
March 31, 2002 December 31,
(Unaudited) 2001
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ASSETS
Land $ 1,150,473 $ 1,150,473
Buildings and equipment (net of accumulated
depreciation of $17,094,231 and $16,721,225,
respectively) 37,314,443 37,687,449
Cash and cash equivalents 2,618,696 2,018,814
Investment in bonds 1,404,723 1,348,817
Deferred costs 838,439 846,439
Mortgage escrow deposits 3,475,516 3,126,650
Tenant security deposits 870,595 870,216
Other assets 135,694 146,898
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$ 47,808,579 $ 47,195,756
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LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgages payable $ 28,600,000 $ 28,600,000
Accounts payable and accrued expenses 179,478 77,031
Accrued interest 14,902 14,902
Tenant security deposits payable 870,216 870,216
Due to general partner and affiliates 987,820 976,571
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30,652,416 30,538,720
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Partners' equity
Partners' equity 17,188,661 16,689,534
General partner (32,498) (32,498)
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17,156,163 16,657,036
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$ 47,808,579 $ 47,195,756
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS - continued
MAY 31, 2002
(Unaudited)
Note 2 - Continued
The unaudited statements of the operations of the Operating Partnerships
for the three months ended March 31, 2002 and 2001 are as follows:
2002 2001
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REVENUE
Rent $1,836,716 $1,851,119
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1,836,716 1,851,119
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EXPENSES
Administrative 114,452 140,777
Operating 633,922
827,730
Management fees 74,421 70,971
Interest 133,788 289,126
Depreciation and amortization 381,006 352,178
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1,337,589 1,680,782
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NET EARNINGS $ 499,127 $ 170,337
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NET EARNINGS ALLOCATED TO
Wilder Richman Historic Properties II,
L.P $ 494,136 $ 117,562
General partner 4,991 52,775
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$ 499,127 $ 170,337
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3. Additional information, including the audited February 28, 2002 Financial
Statements and the Summary of Significant Accounting Policies, is included
in the Partnership's Annual Report on Form 10-K for the fiscal year ended
February 28, 2002 on file with the Securities and Exchange Commission.
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Item 2 Management's Discussion and Analysis of Financial Conditions and
Results of Operations
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Liquidity and Capital Resources
As of May 31, 2002, Wilder Richman Historic Properties II, L.P. (the
"Partnership") experienced few changes in its financial condition as compared to
February 28, 2002, with the exception of the investment in the Operating
Partnerships resulting from the equity in income of operating partnerships for
the three months ended March 31, 2002.
The Operating Partnerships refinanced their respective outstanding mortgage
liabilities as of April 28, 2000 (the "Refinancing"). Prior to the Refinancing,
the annual fixed interest rate of the mortgage was approximately 6.74%. The
total new indebtedness in the amount of $28,600,000 for a term of 30 years was
provided by (a) variable-rate tax-exempt bonds in the amount of $26,435,000, and
(b) variable-rate taxable bonds in the amount of $2,165,000. The initial
interest rates on the tax-exempt and taxable bonds were 5.1% and 6.15%,
respectively. The Operating Partnerships purchased an interest cap which would
limit the interest rates to 6.97% for five years on the tax-exempt portion, and
9.15% for five and one-half years on the taxable portion. Proceeds from the new
bond issue enabled the Operating Partnerships to create a reserve for capital
improvements (approximately $1,365,000). In addition, the balance in the
replacement reserve at the date of the Refinancing (approximately $903,000) was
transferred to the capital improvement reserve.
As a result of the reduction of the mortgage interest rate, there may be greater
potential for the Operating Partnerships to generate cash flow. However, the
Partnership's ability to make distributions will depend on the level of interest
rates and future operating results of the Complex, which will be extremely
dependent on competition, market conditions and needed capital improvements and
repairs. Accordingly, there can be no assurance as to whether or not the
Partnership may be able to make distributions, nor the timing or amount of any
potential distributions to Limited Partners. The Operating General Partners and
the General Partner plan to periodically assess the possible resumption of cash
flow distributions, based on the results of operations, the physical condition
of the Property (see discussion below), the then current interest rates, and
local market conditions, among other things. To the extent cash flow is
generated by the Operating Partnerships, such cash flow may be retained by the
Operating Partnerships or may be distributed at the discretion of management,
pursuant to the terms of the limited partnership agreements of the Operating
Partnerships.
The Property is reporting cash flow for the three months ended March 31, 2002
(see Results of Operations, below) and the Operating Partnerships' cash and cash
equivalents and investment in bonds as of March 31, 2002 have increased by
approximately $655,000 compared to December 31, 2001, while accounts payable and
accrued expenses have increased by approximately $102,000. The capital
improvement escrow and replacement reserve accounts, which are controlled by the
lender for the purpose of funding planned capital improvements and needed
repairs are approximately $2,142,000 and $142,000, respectively as of March 31,
2002. The princpal reserve, which is controlled by the lender for purposes of
amortizing the debt, is approximately $607,000 as of March 31, 2002. Each of the
foregoing reserves and escrows are reflected in the Operating Partnerships'
balance sheet under the caption mortgage escrow deposits. Although the planned
improvements have been primarily funded from operating cash through March 31,
2002, the Operating General Partner has requested to have the funds transferred
to the operating account from the Capital Improvements Escrow. As of July 2002,
approximately $1,322,000 has been released from the Capital Improvements Escrow.
Because the rehabilitation of the Property was completed more than ten years
ago, management has been addressing the need for extensive capital improvements.
As a result of the Refinancing, significant capital improvements were scheduled
for the Complex throughout 2000 and 2001. The improvements that were
contemplated as part of the Refinancing include roof replacement, replacement of
the fire/smoke alarm system, elevator repairs, new entry doors and other repairs
throughout the Complex. In addition, the Operating General Partner has
identified other potential significant capital improvements and repairs
throughout the Complex, which it intends to address over the next few years.
Such capital improvements and repairs would significantly reduce the Operating
Partnerships' cash flow available for distribution. Furthermore, the local
rental market has softened due to the recent economic recession and the events
of September 11, 2001; as a result, the local competition has reduced their
rental rates. Management has implemented rental reductions and concessions in
order to maintain its position in the market, which will adversely affect cash
flow; such affect may be offset (or exacerbated) by changes in the low floater
mortgage interest rates. Depending on market conditions, rents may need to be
further adjusted.
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Item 2 Management's Discussion and Analysis of Financial Conditions and
Results of Operations
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As a result of the cumulative preferred return and the time that Units have been
held, the Partnership has agreed with the Operating General Partner to hire a
national brokerage and marketing firm to privately solicit offers to purchase
the Property from major apartment owners on a confidential basis in order to
determine the current market value of the Property. The Operating General
Partner and the Partnership believe it is appropriate to maintain a confidential
process since the public release of information could have a negative impact on
the operations of the Property. The Partnership and the Operating General
Partner intend to review such offers and then evaluate alternatives.
The Partnership's operating results are dependent upon the operating results of
the Operating Partnerships and are significantly impacted by the Operating
Partnerships' policies. The Partnership accounts for its investment in the
Operating Partnerships in accordance with the equity method of accounting, under
which the investment is carried at cost and is adjusted for the Partnership's
share of the Operating Partnerships' results of operations and by any cash
distributions received.
Results of Operations
For the three months ended May 31, 2002, the statement of operations of the
Partnership reflects net earnings of $487,705, which includes equity in income
of operating partnerships of $494,136. The Operating Partnerships reported net
earnings during the three months ended March 31, 2002 of $499,127, inclusive of
depreciation and amortization of $381,006. The Operating Partnerships generated
cash flow after required debt service payments and required replacement reserve
deposits during the three months ended March 31, 2002 of approximately $772,000,
which includes required deposits to the principal reserve under the mortgages
(approximately $89,000) and deposits to required escrows (approximately
$19,000). The Operating Partnerships' results of operations for the three months
ended March 31, 2002 reflect a significant reduction in interest expense
compared to the three months ended March 31, 2001 due to a decline in the
average low floater interest rates. In addition, the Operating Partnerships'
operating expenses are higher during the three months ended March 31, 2001 as a
result of recording all of the incurred planned improvements to the complex as
an expense in 2001. The average interest rates on the low floater bonds for the
three months ended March 31, 2002 were 1.11% for the tax exempt bonds and 1.95%
for the taxable bonds. The average occupancy for the three months ended March
31, 2002 was approximately 96%.
For the three months ended May 31, 2001, the statement of operations of the
Partnership reflects net earnings of $110,490, which includes equity in income
of operating partnerships of $117,562. The Operating Partnerships reported net
earnings during the three months ended March 31, 2001 of $170,337, inclusive of
depreciation and amortization of $352,178. The Operating Partnerships generated
cash flow after required debt service payments and required replacement reserve
deposits during the three months ended March 31, 2001 of approximately $428,000,
which includes required deposits to the debt service reserve under the mortgages
(approximately $76,000) and deposits to required escrows (approximately
$19,000). The average interest rates on the low floater bonds for the three
months ended March 31, 2001 were 3.93% for the tax exempt bonds and 6.4% for the
taxable bonds. The average occupancy for the three months ended March 31, 2001
was approximately 98%.
Item 3 Quantitative and Qualitative Disclosure About Market Risk
The Partnership has market risk sensitivity with regard to financial instruments
concerning potential interest rate fluctuations in connection with the low
floater rates associated with the Operating Partnerships' mortgages. Although an
interest rate cap has been purchased, a change in the low-floater interest rates
of .25% would have an annualized impact of approximately $70,000 on the
Operating Partnerships' results of operations.
10
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Part II - Other Information
Item 1. Legal Proceedings
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None
Item 2. Changes in Securities
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None
Item 3. Defaults Upon Senior Securities
--------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
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None
Item 5. Other Information
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None
11
Wilder Richman Historic Properties II, L.P.
Form 10-Q
May 31, 2002
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on it behalf by the
undersigned thereunto duly authorized.
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
By: Wilder Richman Historic Corporation
General Partner
Dated: July 15, 2002 /s/ Richard Paul Richman
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Richard Paul Richman
President and Chief Executive Officer
12