Wellsford Real Properties, Inc. Reports Third Quarter 2004 Results.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Wellsford Real Properties, Inc. (AMEX AMEX See: American Stock Exchange : WRP WRP Wetland Reserve Program WRP Workforce Recruitment Program WRP Workers Revolutionary Party WRP Windows Resource Protection (Microsoft Windows Vista) WRP Wetlands Restoration Program WRP Work Restriction Protection ) reported third quarter 2004 revenue of $8,253,519, and a net loss of $(12,677,924) or $(1.96) per basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. For the comparable quarter in 2003, WRP reported revenues of $14,911,884 and net income of $2,358,069 or $0.37 per basic and diluted share. For the nine months ended September 30, 2004, WRP reported revenues of $22,960,326 and a net loss of $(22,510,387) or $(3.48) per basic and diluted share. For the corresponding 2003 period, WRP reported revenue of $28,853,068 and net income of $1,801,912, or $0.28 per basic and diluted share. Third Quarter 2004 and Subsequent Activities Wellsford/Whitehall At September 30, 2004, WRP had a 35.21% equity interest in Wellsford/Whitehall, a private joint venture that owned and operated 17 properties (including 10 office properties, five net-leased retail properties and two land parcels) totaling approximately 1,773,000 square feet of improvements, primarily located in New Jersey. WRP's investment in Wellsford/Whitehall was approximately $12,050,000 at September 30, 2004. During July 2004, Wellsford/Whitehall completed a transaction whereby it transferred six of its Massachusetts properties (aggregating 891,000 square feet), which were subject to mortgage debt of $64,252,000 ("Nomura Loan") at June 30, 2004, along with related restricted cash balances aggregating $6,428,000, cash and certain other consideration to a newly formed partnership which includes the New England New England, name applied to the region comprising six states of the NE United States—Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. The region is thought to have been so named by Capt. family (the "Family") that owned an aggregate 7.45% equity interest in Wellsford/Whitehall, in redemption of the Family's equity interests in Wellsford/Whitehall. As a result of this transaction, Wellsford/Whitehall recorded a loss of approximately $4,306,000 during the three months ended September 30, 2004, of which WRP's share was approximately $1,403,000. WRP's equity interest in Wellsford/Whitehall was increased upon the redemption to 35.21% from 32.59% at December 31, 2003. The Family also agreed to eliminate an existing tax indemnity Recompense for loss, damage, or injuries; restitution or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. which Wellsford/Whitehall had to the Family's members. The economic effect of this tax indemnity restricted most asset sales through 2007 and required a minimum amount of non-recourse debt Non-Recourse Debt A loan that is secured by some sort of collateral, usually property. The issuer can seize the collateral if the borrower defaults. Notes: These types of projects are characterized by high capital expenditures, long loan periods, and uncertain revenue on Wellsford/Whitehall's balance sheet; such restrictions no longer remain. Wellsford/Whitehall had total assets of $184,299,000 and debt of $113,937,000 at September 30, 2004. At December 31, 2003, total assets and debt were $277,120,000 and $120,889,000, respectively. The aggregate portfolio occupancy was 54% at September 30, 2004 based upon 1,773,000 gross leasable square feet. Wellsford Capital Second Holding is a special purpose finance company in which WRP has an approximate 51% equity interest, or $14,586,000, at September 30, 2004. Second Holding had total investments of $1,337,360,000 at September 30, 2004, of which 94% were rated AAA AAA: see American Automobile Association. (Triple A) A common single-cell battery used in a myriad of electronic devices of all variety. Like its double A (AA) cousin, it provides 1.5 volts of DC power. When used in series, the voltage is multiplied. or AA by Standard & Poor's. Second Holding recorded a $13,230,000 impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge related to the write-down of one of its investments during the first quarter of 2004 to its deemed fair value as a result of an other than temporary decline in the market value of bonds and underlying aircraft collateral. This investment was sold by Second Holding during May 2004 and Second Holding recorded a recovery of the impairment charge of $300,000 during the second quarter of 2004. The net impact included in WRP's results related to this investment for the nine months ended September 30, 2004 was $6,606,000. The partners of Second Holding have agreed to cease making any distributions to all partners (including the partner who has a 35% income interest) until the impairment charge is recovered through future earnings. During the second quarter of 2004, the partner owning the 35% income interest informed management of Second Holding that it would not approve the purchase of any further investments, thereby under the terms of the operating agreement An operating agreement is an agreement among limited liability company ("LLC") members governing the LLC's business, and Member's financial and management rights and duties. No state requires an LLC to have an Operating agreement. preventing any future acquisitions of investments. During the third quarter of 2004, the partners evaluated alternatives available to Second Holding in addition to holding existing assets through respective maturities and then retiring related debt. As a consequence of not purchasing additional assets, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , fees to be earned and cash flows to be received by WRP from Second Holding will be reduced in the future. Total assets of Second Holding have decreased $488,655,000 to $1,415,264,000 and total debt has decreased $475,998,000 to $1,361,703,000 from December 31, 2004 to September 30, 2004. On November 5, 2004, WRP executed an agreement with an affiliate of The Liberty Hampshire Company, L.L.C. ("Liberty Hampshire") to purchase for $15,000,000 in cash WRP's 51.09% interest in Second Holding. Liberty Hampshire is a 10% partner in Second Holding. The agreement is subject to approval by WRP's Board of Directors and customary closing conditions. There is no assurance that such transaction will be completed. Since WRP was willing to entertain and execute an agreement at this price, and based upon the evaluation of other alternatives, WRP determined it is appropriate, under the accounting literature for equity method investees, to record a $9,000,000 impairment charge to the carrying amount of its investment in Second Holding at September 30, 2004, which amount is reflected in the three and nine month results. During April 2004, WRP sold the 421 Chestnut chestnut, name for any species of the genus Castanea, deciduous trees of the family Fagaceae (beech or oak family) widely distributed in the Northern Hemisphere. They are characterized by thin-shelled, sweet, edible nuts borne in a bristly bur. Street property for net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of approximately $2,700,000. This asset was the last remaining asset from WRP's 1998 acquisition of Value Property Trust. As a result of the sale, WRP reversed approximately $625,000 of previously recorded impairment reserves. During June 2004, WRP recognized approximately $184,000 of the balance of the proceeds which had been placed in escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. from the sale of its Keewaydin property in July 2003, as a result of the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of the contingency contingency n. an event that might not occur. period. This amount and the reversal of the impairment reserve were reflected in income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. during the second quarter of 2004 and the nine months ended September 30, 2004. On September 15, 2004, Clairborne Fordham (of which WRP has a 10% interest) executed an agreement with the owners of Fordham Tower obtaining title to the remaining unsold components of the project which included 18 unsold residential units, the 188 space parking garage and 12,000 square feet of retail space. No gain or loss was recognized by Clairborne Fordham or WRP as a result of the transfer. It is the intention of Clairborne Fordham to complete the orderly orderly /or·der·ly/ (or´der-le) an attendant in a hospital who works under the direction of a nurse. or·der·ly n. An attendant in a hospital. sell-out of these components. Wellsford Development At September 30, 2004, WRP had an 85.85% interest as managing owner in Palomino Palomino Colour type of horse distinguished by its cream, yellow, or gold coat and a white or silver mane. It is popular in pleasure and parade classes. Palominos may conform to the breed types of several light breeds, including the Arabian horse and the American Quarter Horse. Park, a five phase, 1,707 unit multifamily residential development in Highlands Ranch ranch, large farm devoted chiefly to raising and breeding cattle, horses, sheep, and goats. The cattle ranch was introduced from Latin America to Texas and the plains of the W United States and Canada. , a south suburb suburb, a community in an outlying section of a city or, more commonly, a nearby, politically separate municipality with social and economic ties to the central city. In the 20th cent. of Denver, Colorado. Three phases aggregating 1,184 units are completed and operational as rental property. A 264 unit fourth phase has been converted into condominiums. Sales commenced in February 2001 and through September 30, 2004, WRP sold 258 units. WRP is performing pre-development activities including pursuing construction financing for a 259 unit condominium condominium In modern property law, individual ownership of one dwelling unit within a multidwelling building. Unit owners have undivided ownership interest in the land and those portions of the building shared in common. project on the land for the remaining fifth phase. Physical occupancy for the Blue Ridge Blue Ridge, eastern range of the Appalachian Mts., extending south from S Pa. to N Ga.; highest mountains in the E United States. Mt. Mitchell, 6,684 ft (2,037 m) high, is the tallest peak. Beginning with a narrow ridge in the north, c. , Red Canyon and Green River rental phases aggregated 91% and 88% at September 30, 2004 and December 31, 2003, respectively, however, significant rental concessions continue to be given to tenants. WRP sold 20 Silver Mesa condominium units for gross proceeds of $4,408,000 during the quarter ended September 30, 2004 and 27 units for gross proceeds of $5,980,000 in the comparable 2003 period. For the nine months ended September 30, 2004, WRP sold 49 Silver Mesa units for gross proceeds of $11,352,000 and 43 units for gross proceeds of $9,637,000 for the comparable 2003 period. WRP has a 95% interest as managing member of a venture to construct and sell 100 single family homes in East Lyme, Connecticut East Lyme is a town in New London County, Connecticut, United States. The population was 18,118 at the 2000 census. The latitude of East Lyme is 41.353N. The longitude is -72.23W. Geography According to the United States Census Bureau, the town has a total area of 108. ("East Lyme East Lyme (līm), town (1990 est. pop. 14,000), New London co., SE Conn., on Long Island Sound; settled c.1660, inc. 1839. The town has diversified light industry. Its many colonial buildings include the restored Thomas Lee House (c.1660). "). After initially purchasing the land for $6,200,000 in June 2004, WRP executed an agreement with a homebuilder (the "Homebuilder") who will construct and sell the homes for this project and will be a 5% partner in the project along with receiving other consideration. WRP is in the process of obtaining financing for East Lyme from a major financial institution and is expecting to start construction during the fourth quarter of 2004. A commitment letter for the financing was signed in October 2004. Corporate Commenting on the activities of the third quarter, Mr. Jeffrey Lynford, Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , stated "WRP has continued to sell assets, retire debt and accumulate Accumulate Broker/analyst recommendation that could mean slightly different things depending on the broker/analyst. In general, it means to increase the number of shares of a particular security over the near term, but not to liquidate other parts of the portfolio to buy a security cash. Since the beginning of the year we have sold 49 condominiums at our Palomino Park project (leaving only six unsold units at this time), an office building in Philadelphia, transferred six office properties aggregating 891,000 square feet situated in suburban Boston (and $64 million of debt associated with these properties) to a third partner in the Wellsford/Whitehall Group, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control in redemption of its interest in the venture, reduced the total assets of our Second Holding venture by an estimated $500 million (or 26 percent) from $1.9 billion at December 31, 2004 to $1.4 billion at September 30, 2004 and executed an agreement to sell our Second Holding interest for $15,000,000 in cash. Concurrently, we have been focusing our efforts on residential development by planning for the construction of 259 for-sale condominium units at our Palomino Park project. This will be the fifth and final phase of our signature rental and condominium community located in a suburb of Denver, Colorado. Also, we have acquired land in East Lyme, Connecticut for the construction of 100 single family homes. The virtue of developing for-sale housing is that the resulting federal taxes on profits, potentially generated by these activities, may be reduced by applying a portion of our unused net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. carry-forwards, which at this time approximate $55 million. Lastly, we are looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. additional ways to utilize or monetize Monetize 1. To convert into money. 2. To convert from securities into currency that can be used to purchase goods and services. Notes: For example, you'll often hear Internet marketers talk about "monetizing website visitors. this tax asset." Wellsford Real Properties, Inc. is a real estate merchant banking firm organized in 1997 and headquartered in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. which acquires, develops, finances and operates real estate properties and organizes and invests in private and public real estate companies. This press release, together with other statements and information publicly disseminated disseminated /dis·sem·i·nat·ed/ (-sem´i-nat?ed) scattered; distributed over a considerable area. dis·sem·i·nat·ed adj. Spread over a large area of a body, a tissue, or an organ. by WRP, contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , 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 WRP 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 WRP's registration statement on Form S-3 (file No. 333-73874) filed with the Securities and Exchange Commission ("SEC") on December 14, 2001, as may be amended, which is incorporated herein by reference: general and local economic and business conditions, which will, among other things, affect demand by tenants for commercial and residential properties, availability and credit worthiness of prospective tenants, lease rents and the availability and cost of financing; future impairment charges as a result of possible continuing declines in the expected values Expected value The weighted average of a probability distribution. Also known as the mean value. and cash flows of owned properties and investments or changes in the intent with regards to such properties and investments; competition; risks of real estate acquisition, development, construction and renovation including construction delays and cost overruns Noun 1. cost overrun - excess of cost over budget; "the cost overrun necessitated an additional allocation of funds in the budget" cost - the total spent for goods or services including money and time and labor ; inability to comply with zoning and other laws; vacancies at commercial and multifamily properties; dependence on rental income Noun 1. rental income - income received from rental properties income - the financial gain (earned or unearned) accruing over a given period of time from real property; the risk of inflation in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , including, but not limited to, energy, water and insurance; the availability of insurance coverages; the inability to obtain construction financing for its development projects; adverse consequences of debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay including, without limitation, the necessity of future financings to repay maturing debt obligations; inability to meet financial and valuation covenants contained in loan agreements; inability to repay financings; risk of foreclosure foreclosure Legal proceeding by which a borrower's rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. on collateral; risks of investments in debt instruments, including possible payment defaults and reductions in the value of collateral; uncertainties pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to debt investments, including scheduled interest payments, the ultimate repayment of principal, adequate insurance coverages, the ability of insurers to pay claims and effects of changes in ratings from rating agencies; risks associated with the ability to renew or obtain necessary credit enhancements Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing from third parties; risks of subordinate loans; risks of leverage; inability to find appropriate investment and development opportunities; risks associated with equity investments in and with third parties; inability to complete the sale of our interest in Second Holding to an affiliate of one of our partners in Second Holding; risks associated with our reliance on joint venture partners including, but not limited to, the inability to obtain consent from partners for certain business decisions, reliance on partners who are solely responsible for the books, records and financial statements of such ventures, the potential risk that our partners may become bankrupt BANKRUPT. A person who has done, or suffered some act to be done, which is by law declared an act of bankruptcy; in such case he may be declared a bankrupt. 2. It is proper to notice that there is much difference between a bankrupt and an insolvent. , have economic or other business interests and objectives which may be inconsistent with those of WRP and our partners being in a position to take action contrary to our instructions or requests; inability and/or unwillingness of partners to provide their share of any future capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. ; availability and cost of financing; interest rate risks; demand by prospective buyers of condominium, residential and commercial properties; the uncertainties regarding the Buy/Sell Agreement between WRP and Whitehall with respect to the Wellsford/Whitehall venture including, but not limited to, whether either partner will exercise their rights there under, the timing of such exercise, and the inability by the ultimate purchaser to meet the financial terms of such transaction; inability to realize gains from the real estate assets held for sale; lower than anticipated sales prices; inability to close on sales of properties; illiquidity of real estate investments; the risks of seasonality and increasing interest rates on WRP's ability to sell condominium units and single family "for sale" housing; environmental risks; uncertainties as to what decisions and transactions may result from WRP's current assessment of its strategic business alternatives, which may include, but not be limited to, a recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. , acquisitions, dispositions of assets, a liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy , the sale or merger of WRP and alternatives that would keep WRP independent; and other risks listed from time to time in WRP's reports filed with the SEC. Therefore, actual results could differ materially from those projected in such statements.
Wellsford Real Properties, Inc.
Financial Highlights
(unaudited)
For the Three Months For the Nine Months
Consolidated Ended September 30, Ended September 30,
Statements of ------------------------- ------------------------
Operations 2004 2003 2004 2003
----------------- ------------- ----------- ------------ -----------
REVENUES
Rental revenue $ 3,330,548 $ 3,377,304 $ 10,107,727 $10,883,629
Revenue from sales
of residential
units 4,408,154 5,980,221 11,352,348 9,637,360
Interest revenue 307,325 5,310,401 798,023 7,209,551
Fee revenue 207,492 243,958 702,228 1,122,528
------------ ----------- ------------ -----------
Total revenues 8,253,519 14,911,884 22,960,326 28,853,068
------------ ----------- ------------ -----------
COSTS AND EXPENSES
Cost of sales of
residential units 3,614,456 5,070,294 9,384,829 8,251,025
Property operating
and maintenance 1,239,490 1,406,083 3,517,197 3,689,070
Real estate taxes 350,696 338,745 1,078,341 1,044,711
Depreciation and
amortization 1,183,195 1,209,475 3,458,914 4,644,296
Property management 71,032 67,869 237,084 219,156
Interest:
Mortgage notes
payable 1,478,903 1,663,247 4,767,074 4,916,993
Junior
subordinated
debentures 524,954 -- 1,574,861 --
General and
administrative 2,143,520 1,452,835 5,742,346 4,377,913
------------ ----------- ------------ -----------
Total costs and
expenses 10,606,246 11,208,548 29,760,646 27,143,164
------------ ----------- ------------ -----------
(Loss) income from
joint ventures (10,277,532) 461,114 (16,383,563) 2,871,015
------------ ----------- ------------ -----------
(Loss) income before
minority interest,
income taxes, accrued
distributions and
amortization of costs
on Convertible Trust
Preferred Securities
and discontinued
operations (12,630,259) 4,164,450 (23,183,883) 4,580,919
Minority interest
(expense) benefit (3,665) 16,137 40,182 57,486
------------ ----------- ------------ -----------
(Loss) income before
income taxes, accrued
distributions and
amortization of costs
on Convertible Trust
Preferred Securities
and discontinued
operations (12,633,924) 4,180,587 (23,143,701) 4,638,405
Income tax expense 44,000 1,615,000 143,000 1,829,000
------------ ----------- ------------ -----------
(Loss) income before
accrued distributions
and amortization of
costs on Convertible
Trust Preferred
Securities and
discontinued
operations (12,677,924) 2,565,587 (23,286,701) 2,809,405
------------ ----------- ------------ -----------
Accrued distributions
and amortization of
costs on Convertible
Trust Preferred
Securities, net of
income tax benefit
of $330,000 and
$540,000 in the
respective 2003
periods -- 194,954 -- 1,034,861
------------ ----------- ------------ -----------
(Loss) income from
continuing
operations (12,677,924) 2,370,633 (23,286,701) 1,774,544
(Loss) income from
discontinued
operations, net of
income tax expense
of $--, $4,000,
$17,000 and $14,000,
respectively -- (12,564) 776,314 27,368
------------ ----------- ------------ -----------
Net (loss) income $(12,677,924)$ 2,358,069 $(22,510,387)$ 1,801,912
============ =========== ============ ===========
Per share amounts,
basic and diluted:
(Loss) income from
continuing
operations $ (1.96)$ 0.37 $ (3.60)$ 0.28
------------ ----------- ------------ -----------
Income from
discontinued
operations -- -- 0.12 --
------------ ----------- ------------ -----------
Net (loss) income $ (1.96)$ 0.37 $ (3.48)$ 0.28
============ =========== ============ ===========
Weighted average
number of common
shares outstanding:
Basic 6,460,770 6,455,074 6,459,352 6,453,643
============ =========== ============ ===========
Diluted 6,460,770 6,456,818 6,459,352 6,454,424
============ =========== ============ ===========
Wellsford Real Properties, Inc.
Financial Highlights
(continued)
Summary of Consolidated Balance September 30, December 31,
Sheet Data 2004 2003
-------------------------------- -------------- --------------
(unaudited) (audited)
Real estate assets, net $ 129,178,093 $ 130,582,477
Note receivable $ 2,064,000 $ 3,096,000
Asset held for sale $ -- $ 2,334,535
Investment in joint ventures $ 36,399,739 $ 53,759,723
Cash and cash equivalents $ 52,009,987 $ 55,377,515
Investments in U.S. Government
securities $ 30,057,037 $ 27,516,211
Total assets $ 263,163,699 $ 285,827,126
Mortgage notes payable $ 108,401,881 $ 109,504,562
Junior subordinated debentures $ 25,775,000 $ --
Convertible Trust Preferred Securities $ -- $ 25,000,000
Total shareholders' equity $ 108,897,726 $ 131,274,044
Other information:
Common shares outstanding 6,460,770 6,455,994
Book value per share (unaudited) $ 16.86 $ 20.33
Enterprise assets (unaudited) $1,836,028,000 $2,423,020,000
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