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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal
Year Ended February 28, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the
transition period from ______ to ______.
0-17793
(Commission File Number)
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
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(Exact name of registrant as specified in its governing instruments)
Delaware 13-3481443
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(State or other jurisdiction of organization) (I.R.S. Employer
Identification No.)
Wilder Richman Historic Corporation
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
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Securities registered pursuant to Section 12(b) of the Act:
None
- ----------------------------
(Title of each Class)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The aggregate sales price of the units of limited partnership interest held by
non-affiliates of the Registrant is $19,280,000. There is currently no public
market for the units of limited partnership interest and, accordingly, such
figure does not represent the market value for the units.
Documents incorporated by reference:
The Prospectus of the Registrant, dated May 13, 1988 and filed pursuant to Rule
424(b)(iii) under the Securities Act of 1933, is incorporated by reference into
Parts I, II and III of this Annual Report on Form 10-K.
PART I
Item 1. Business
General Development of Business
Registrant (also referred to as the "Partnership") is a limited partnership
which was formed under the Delaware Revised Uniform Limited Partnership Act on
October 15, 1987. The general partner of the Partnership is Wilder Richman
Historic Corporation, a Delaware corporation (the "General Partner" or "WRHC").
Registrant was organized to acquire all of the limited partnership
interests in Dixon Mill Associates I (Phase One), Limited Partnership, Dixon
Mill Associates II (Phase Two), Limited Partnership, and Dixon Mill Associates
III (Phase Three), Limited Partnership, each of which is a New Jersey limited
partnership (individually "Dixon Mill I," "Dixon Mill II" and "Dixon Mill III,"
respectively, and collectively the "Operating Partnerships"). Each Operating
Partnership owns one phase ("Phase") of an aggregate 433-unit residential
apartment complex (the "Complex") located in Jersey City, New Jersey, that
consists of buildings designated as certified historic structures by the U.S.
Department of the Interior. The Operating Partnerships have constructed,
substantially rehabilitated and are operating the Complex. The rehabilitation of
the Complex qualified for a rehabilitation tax credit in 1988, 1989 and 1990.
The general partner of the Operating Partnerships is Dixon Venture Corp. (the
"Operating General Partner"), which is not an affiliate of the Partnership or
WRHC.
Pursuant to the Partnership's prospectus dated May 13, 1988, (the
"Prospectus"), the Partnership offered $19,280,000 of units of limited
partnership interest in the Partnership (the "Units") at an offering price of
$24,100 per Unit. The Units were registered under the Securities Act of 1933
pursuant to a Registration Statement on Form S-11 (Registration No. 33-19646).
The Prospectus is incorporated herein by reference.
The closing of the offering of Units (the "Offering") occurred on July 15,
1988. At such closing, 800 Units were sold, representing $19,280,000 in gross
proceeds. After payment of $674,800 of organization and offering expenses,
$674,800 in an origination fee and $1,349,600 of selling commissions, the net
proceeds available for investment were $16,580,800. Of such net proceeds,
$16,388,000 was allocated to the investment in the Operating Partnerships, which
included investments in guaranteed investment contracts. The remainder of
$192,800 was designated as working capital to be used for operating expenses of
the Partnership.
Financial Information About Industry Segments
Registrant is engaged solely in the business of owning a limited
partnership interest in each of the Operating Partnerships. A presentation of
information regarding industry segments is not applicable and would not be
material to an understanding of the Partnership's business taken as a whole. See
Item 8 below for a summary of Registrant's operations.
Working Capital Reserves
As of February 28, 2001, Registrant had working capital reserves of
approximately $158,000, which were substantially invested in interest-bearing
deposits. See Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Competition
Information regarding competition, general risks, tax risks and partnership
risks is set forth under the heading "RISK FACTORS" at pages 37 - 57 of the
Prospectus.
Compliance with Environmental Protection Provisions
In connection with the environmental cleanup responsibilities pertaining to
the Complex, the Operating General Partner submitted a declaration to the State
of New Jersey Department of Environmental Protection ("NJDEP") stating that
there remains no hazardous substances and wastes on the site. In August 1989,
the Operating General Partner received notification from NJDEP that the
environmental testing was complete and the Complex was in compliance with NJDEP
requirements. All costs incurred in connection with the review conducted by
NJDEP were borne by The Dixon Venture, an affiliate of the Operating General
Partner. Information regarding such environmental matters is set forth under the
heading "DESCRIPTION OF THE COMPLEX - ENVIRONMENTAL MATTERS" at pages 87 - 92 of
the Prospectus, which is incorporated herein by reference.
Employees of Registrant
2
Registrant employs no personnel and incurs no payroll costs. An affiliate
of the General Partner employs individuals who perform accounting, secretarial,
transfer and other services on behalf of Registrant as are necessary in the
ordinary course of business. Such individuals also perform similar services for
other affiliates of the General Partner.
Tax Reform Act of 1986, Revenue Act of 1987, Technical and Miscellaneous
Revenue Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus
Budget Reconciliation Act of 1990, Tax Extension Act of 1991, Omnibus
Budget Reconciliation Act of 1993, Uruguay Round Agreements Act, Tax and
Trade Relief Extension Act of 1998 and Tax Relief Extension Act of 1999
(collectively the "Tax Acts")
Registrant is organized as a limited partnership and is a pass through tax
entity which does not, itself, pay Federal income tax. However, the partners of
Registrant who are subject to Federal income tax may be affected by the Tax
Acts. Registrant will consider the effect of certain aspects of the Tax Acts on
the partners when making decisions regarding its investment. Registrant does not
anticipate that the Tax Acts will currently have a material adverse impact on
Registrant's business operations, capital resources and plans or liquidity.
Item 2. Properties
The Complex consists of approximately 34 historic mill buildings built
between 1847 and 1932, all of which are certified historic structures that have
been converted and substantially rehabilitated into a 433 unit luxury apartment
complex that has received financing exempt from Federal income taxation under
Internal Revenue Code Section 103(b)(4)(A). As a consequence of this tax exempt
financing, the Operating Partnerships are required to rent at least 15% of the
dwelling units ("D.U.'s") in the Complex to individuals or families of low or
moderate income as determined under such Code Section, currently based on their
income not exceeding 80% of the median income for the area as determined by the
United States Department of Housing and Urban Development ("HUD"). These income
limits are subject to increases pursuant to HUD guidelines. In the Complex, 68
studio and efficiency D.U.'s and 17 one-bedroom D.U.'s are set aside for rental
to low or moderate income persons. There are no rent ceilings on those D.U.'s
set aside for low or moderate income persons. Because such tax exempt financing
consists of bonds sold in 1985, the 80% of median income limit is not required
to be adjusted based on family size as would be required under the Tax Reform
Act of 1986.
The Complex is located on a 4-acre site in Jersey City, New Jersey. In
addition, one new five-story building, approximately 20 feet by 50 feet, was
built on the site. The Complex is located in the Dixon Crucible Redevelopment
Area, an area so designated pursuant to a redevelopment plan adopted in
September 1983 by ordinance of the City of Jersey City. The actual development
entails three Phases with each Phase owned by a separate New Jersey limited
partnership, respectively Dixon Mill I, Dixon Mill II and Dixon Mill III. Phase
I consists of seven industrial buildings which have been rehabilitated to
provide 134 D.U.'s, 55 underground and 77 surface parking spaces and
approximately 1,550 square feet of commercial space. Phase II consists of 11
industrial buildings which have been rehabilitated to provide 191 D.U.'s and 62
underground and 124 surface parking spaces. Phase III consists of four
industrial buildings which have been rehabilitated to provide 108 D.U.'s, 35
underground and 73 surface parking spaces and approximately 2,230 square feet of
commercial space.
The Complex features gardens, elevated walkways and brick paved walkways.
The Complex also has its own electronic security system and a free shuttle
service to the Grove Street PATH station is being provided. In addition, the
residents of the Complex have access to a private fitness facility. The
Complex's commercial space is designated for retail stores and/or professional
offices.
3
As of December 31, 2000 and 1999, the occupancy and rental rates were as
follows:
December 31, 2000 December 31, 1999
Occupancy Rate 98% 98%
Monthly Rental Rates:
Studio $ 615 - $1,095 $ 589 - $1,044
One-Bedroom $ 779 - $1,771 $ 706 - $1,695
Two-Bedroom $ 1,365 - $2,239 $ 750 - $2,095
Three-Bedroom $ 1,890 - $2,595 $ 1,758 - $2,495
The rental rates reflect significant ranges because the apartments vary as
to size and floor plans (i.e., square footage, duplex, triplex, penthouse) and
due to the low-moderate tenant income restrictions for 15% to 20% of the D.U.'s
resulting from the tax-exempt financing described above.
Item 3. Legal Proceedings
Three complaints have been filed against the Operating Partnerships, among
others, by a former employee, a former part-time rental agent, and a
security person employed by a private non-affiliated security company which
provided service to the Property, alleging, among other things,
discrimination in connection with advancement, hiring and termination. The
Operating Partnerships are presently defending these matters. The Operating
General Partner cannot measure the potential liability, if any, at this
time.
Registrant is not aware of any other material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the limited partners of
Registrant during the fourth quarter of the fiscal year covered by this report.
4
PART II
Item 5. Market for Registrant's Common Equity and Related Unit Matters
a) Market
There is no developed public market for the purchase and sale of Units and
Registrant does not anticipate that such a market will develop.
b) Holders
As of February 28, 2001, there were approximately 742 record holders of Units
holding an aggregate of 800 Units in the Partnership.
c) Distributions
The Agreement of Limited Partnership of the Registrant provides that cash
available for distribution, if any, be distributed annually to the partners in
specified proportions. As a result of the mortgage modification on June 11,
1992, certain cash flow restrictions were placed on the Operating Partnerships.
Such restrictions no longer apply as a result of the refinancing in April 2001.
See Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 3 to the Dixon Mills Financial Statements
included herein.
Item 6. Selected Financial Data
Year End
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February February February February February
28, 2001 29, 2000 28, 1999 28, 1998 28, 1997
-------- -------- -------- -------- --------
Total revenues
(Interest income) $ 11,890 $ 54,009 $ 52,660 $ 55,276 $ 50,994
Equity in income (loss) of
investment in Operating
Partnerships $ 83,937(b) $ 128,830 $ (508,146)(a) $ (358,875) $ (799,980)
Net income (loss) $ 66,898 $ 146,652 $ (488,061) $ (333,793) $ (779,882)
Net income (loss) per unit of
limited partnership interest $ 83 $ 181 $ (604) $ (413) $ (965)
At year end:
Total assets $ 1,573,577 $ 1,511,679 $ 2,314,027 $ 2,787,088 $ 3,105,881
(a) Includes extraordinary loss of $321,753 in connection with litigation
settlement. See Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(b) Includes extraordinary loss of $304,842 in connection with refinancing of
mortgages of Operating Partnerships. See Management's Discussion and Analysis of
Financial Condition and Results of Operations.
5
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The operating results of the Complex for 2000 (before extraordinary
charges) were favorable compared to 1999. During 1992, the mortgages of the
Operating Partnerships were modified, resulting in an interest rate decrease
from approximately 9.6% to approximately 6.74%, thereby improving the financial
viability of the Complex. The Operating Partnerships again refinanced their
respective outstanding mortgage liabilities as of April 28, 2000. The total new
indebtedness in the amount of $28,600,000, for a term of 30 years, is 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 are 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 were
used to pay off the existing 1992 bonds (approximately $26,154,000), pay the
costs of the transaction (approximately $891,000), and fund reserves for capital
improvements (approximately $2,076,000, of which, approximately $903,000 was
transferred from the existing replacement reserve fund).
As a result of the refinancing and the funding of reserves for capital
improvements, the Operating General Partner intends to make approximately $1.6
million in capital improvements to the Complex. The planned improvements include
roof replacement, replacement of the fire/smoke alarm system, elevator repairs,
new entry doors and other repairs throughout the complex. As of December 31,
2000, the Operating Partnerships have undertaken approximately one-half of such
capital improvements.
Because of the reduction of the mortgage interest rate, there may be
greater potential for the Partnership to make cash distributions to the Limited
Partners on a regular basis. 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 and
market conditions, and therefore may be subject to significant volatility.
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, 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. To the extent there are net proceeds
from a future sale or refinancing of the Complex, the Partnership will receive
100% of any such proceeds available for distribution until the 7% cumulative
preferred distribution has been achieved. Through December 2000, the cumulative
preferred distribution is approximately $13,539,758. As of December 31, 2000,
the Operating Partnerships' balance in the replacement reserves account, which
is controlled by the Lender to be used for certain repairs or capital
improvements, was approximately $45,000 and the balance in the capital
improvement escrow was approximately $2,104,000.
As of December 31, 2000, the Operating Partnerships' net liquidity improved
compared to December 31, 1999. Cash and cash equivalents increased by
approximately $622,000 and mortgage escrow deposits, which includes the
replacement reserves and capital improvement escrow noted above, increased by
approximately $1,655,000. During the year ended February 28, 2001, the
Partnership's investment in Operating Partnerships increased by $83,937 as a
result of the equity in income of investment in Operating Partnerships.
The annual investor service fees are payable from the operations of the
Operating Partnerships and from reserves of the Partnership. As of February 28,
2001, due to affiliates reflected on the Partnership's balance sheet includes
$165,000 of accrued investor service fees.
Results of Operations
The Partnership's operating results are dependent upon the operating
results of the Operating Partnerships and are significantly impacted by the
policies of the Operating Partnerships. Registrant accounts for its investment
in Operating Partnerships in accordance with the equity method of accounting,
under which the investment is carried at cost and is adjusted for Registrant's
share of the Operating Partnerships' results of operations and by any cash
distributions received. Equity in loss of each investment in Operating
Partnership allocated to Registrant is recognized to the extent of Registrant's
investment balance in each Operating Partnership. Any equity in loss in excess
of Registrant's investment balance in an Operating Partnership is allocated to
other partners' capital in each such Operating Partnership. As a result, the
equity in loss of investment in Operating Partnerships is expected to decrease
as Registrant's investment balances in the respective Operating Partnerships
become zero.
6
Cumulative losses and cash distributions in excess of investment in
Operating Partnerships may result from a variety of circumstances, including the
Operating Partnerships' accounting policies, debt structure and operating
deficits, among other things. Accordingly, cumulative losses and cash
distributions in excess of the investment are not necessarily indicative of
adverse operating results of the Operating Partnerships.
Year Ended February 28, 2001
During the year ended February 28, 2001 the Partnership earned interest of
approximately $12,000 which was lower than the previous fiscal period as a
result of the distribution to limited partners at the end of the prior fiscal
period resulting in lower average cash balances. The Partnership's operating
expenses were comparable to the year ended February 29, 2000 and are not
expected to vary significantly in the near future. Registrant's equity in income
in Operating Partnerships does not include a 99% allocation of the income
reported by the Operating Partnerships due to the nonrecognition of previous
years' losses in excess of Registrant's investment in Dixon Mills I in
accordance with the equity method of accounting.
The Operating Partnerships reported net income from operations for the year
ended December 31, 2000 in the amount of approximately $623,000, inclusive of
depreciation and amortization of approximately $1,420,000. The Operating
Partnerships generated cash flow after required debt service payments and
required replacement reserve deposits of approximately $1,684,000 during 2000,
which considers principal amortization under the mortgages (approximately
$278,000) and net deposits to the replacement reserve (approximately $82,000),
but does not consider the planned capital improvements. Occupancy remained
consistently high throughout 2000, while management has steadily increased
rental rates, resulting in an increase in rental revenues of approximately
$524,000 compared to 1999. The Operating Partnerships did not utilize any
replacement reserves during 2000.
Although the results of operations have steadily improved, management
continues to examine methods to maintain healthy occupancy rates while steadily
increasing rental rates and to closely monitor its operating costs. In addition,
management is addressing the capital improvements to be conducted from the
proceeds from the refinancing. As of December 31, 2000, the occupancy rate was
approximately 98%. The future operating results of the Complex will be extremely
dependent on market conditions (which have been very strong but include newly
developed multi-family housing in the area) and the regional economy, and
therefore may be subject to significant volatility.
Year Ended February 29, 2000
During the year ended February 29, 2000 the Partnership earned interest of
approximately $54,000 which was comparable to the previous fiscal period. The
Partnership's operating expenses were comparable to the year ended February 28,
1999. Registrant's equity in income in Operating Partnerships does not include a
99% allocation of the income reported by the Operating Partnerships due to the
nonrecognition of previous years' losses in excess of Registrant's investment in
Dixon Mills I and II in accordance with the equity method of accounting.
The Operating Partnerships reported net income from operations for the year
ended December 31, 1999 in the amount of approximately $240,000, inclusive of
depreciation and amortization of approximately $1,386,000. The Operating
Partnerships generated cash flow after required debt service payments and
required replacement reserve deposits of approximately $1,293,000 during 1999,
which considers principal amortization under the mortgages (approximately
$272,000) and net deposits to the replacement reserve (approximately $65,000).
Occupancy remained consistently high throughout 1999, while management steadily
increased rental rates, resulting in an increase in rental revenues of
approximately $436,000 compared to 1998. The Operating Partnerships did not
utilize any replacement reserves during 1999. As of December 31, 1999, the
occupancy rate was approximately 98%.
Year Ended February 28, 1999
During the year ended February 28, 1999, the Partnership earned interest of
approximately $53,000 including approximately $21,000 of accrued interest on
advances provided to the Operating Partnerships. The Partnership's operating
expenses were comparable to the year ended February 28, 1998. Registrant's
equity in loss in Operating Partnerships does not include a 99% allocation of
the loss reported by the Operating Partnerships due to the nonrecognition of
losses in excess of Registrant's investment in Dixon Mills I and II in
accordance with the equity method of accounting.
The Operating Partnerships reported a net loss for the year ended December
31, 1998 in the amount of approximately $748,000, inclusive of depreciation and
amortization of approximately $1,377,000 and the extraordinary charge in
connection with the litigation settlement of $500,000. However, the Operating
Partnerships generated cash flow after required debt service payments and
7
required replacement reserve deposits of approximately $549,000 during 1998,
which considers principal amortization under the mortgages (approximately
$254,000) and net deposits to the replacement reserve (approximately $85,000),
and excludes the extraordinary charge and accrued interest to the Partnership
(approximately $21,000). Occupancy remained consistently high throughout 1998,
while management steadily increased rental rates, resulting in an improvement in
operating results compared to 1997. As of December 31, 1998, the occupancy rate
was approximately 96%. The Operating Partnerships did not utilize any
replacement reserves during 1998.
Inflation
Inflation is not expected to have a material adverse impact on Registrant's
revenues during its period of equity ownership in the Operating Partnerships
except as discussed below under Quantitative and Qualitative Disclosures About
Market Risk.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments. It requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. Adoption of SFAS No. 133 is not expected to have a material
impact on the Partnership`s financial presentation or disclosures.
Item 7A. Quantitative and Qualitative Disclosures 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 as
refinanced as of April 28, 2000. Although an interest rate cap has been
purchased, an increase in the low-floater interest rates of .25% would have an
annualized impact of approximately $70,000 on the Operating Partnerships'
results of operations.
Item 8. Financial Statements and Supplementary Data
The financial information required in response to this Item 8 is submitted
as part of Item 14(a) of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
8
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers.
The General Partner was incorporated in Delaware on November 24, 1986. As
described below, its principals have had significant experience in various
facets of the real estate business including the development of multi-family
rental housing. The directors and officers of the General Partner, who have
served as such since inception, are as follows:
Name Age Office
---- --- ------
Richard Paul Richman 53 President and Director
Robert H. Wilder, Jr. 55 Executive Vice President, Assistant
Secretary, Treasurer and Director.
Gina S. Scotti 44 Secretary
Richard Paul Richman, 53 years old, is President and Director of WRHC. Mr.
Richman graduated from the Columbia University Law School with a Juris Doctor
degree, the Columbia University Graduate School of Business Administration with
a Master of Business Administration degree and Syracuse University with a
Bachelor of Arts degree in Political Science. Mr. Richman has over ten years of
extensive experience in both the development and management of residential
properties. From 1973 until 1979, Mr. Richman practiced corporate law in New
York City with the law firm of Greenbaum, Wolff & Ernst and then as a partner of
Shipley, Richman & Nierenberg. For over six years, Mr. Richman acted as a lawyer
in connection with the development, syndication and tax issues relating to real
estate. Since 1988, Mr. Richman has been the President and majority stockholder
of The Richman Group, Inc. and is the managing partner of The Richman Group of
Connecticut, L.L.C. In recent years, Mr. Richman has devoted full time to the
syndication and development of real estate. Mr. Richman was a vice president and
shareholder of Related Housing Companies Incorporated, New York, New York from
1978 until mid-1979 with responsibility for that company's project acquisition
and syndication activities. Mr. Richman has been a member of the National
Advisory Board of the Housing and Development Reporter, a bi-weekly publication
of the Bureau of National Affairs, Inc., a frequent speaker on real estate
syndication, and a member of the New York State Historic Credit Task Force, the
National Leased Housing Association, the Coalition to Preserve the Low-Income
Tax Credit and the Minority Developer Assistance Corporation (which was
established by the New York State Battery Park Commission).
Robert H. Wilder, Jr., 55 years old, is Executive Vice President, Assistant
Secretary, Treasurer and Director of WRHC. Mr. Wilder graduated from the
University of Michigan with a Bachelor of Arts degree in Economics and from the
Columbia University Graduate School of Business with a Master of Business
Administration degree. After graduation in 1968, Mr. Wilder joined James D.
Landauer Associates, Inc., a national real estate consulting firm, where his
account responsibilities included feasibility studies, market analyses, land use
studies, portfolio valuations and appraisals of industrial, office, commercial
and multi-family properties. From 1973 until mid-1979, Mr. Wilder was executive
vice president and shareholder of Related Housing Companies Incorporated, New
York, New York, and was responsible for mortgage financing and construction loan
placement and the supervision of the development of the company's projects.
Since 1988, Mr. Wilder has been the President and sole shareholder of Wilder
Property Companies Inc. Mr. Wilder is also a licensed real estate broker in New
York and Connecticut.
Gina S. Scotti, 44 years old, is Secretary of WRHC. Ms. Scotti, a Vice
President and Secretary of The Richman Group, Inc. and Secretary of Wilder
Richman Corporation ("WRC"), joined WRC in 1984 as a special assistant to the
President, and has been the Director of Investor Services with responsibility
for communications with investors since 1986.
9
Item 11. Executive Compensation
The Partnership is not required to pay the officers, directors or partners
of the General Partner any direct compensation, and no such compensation was
paid during the year ended February 28, 2001.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person or group is known by the Partnership to be the owner of record of
more than 5% of the outstanding Units as of February 28, 2001.
Item 13. Certain Relationships and Related Transactions
The financial interests in Registrant of the General Partner and Special
Limited Partner are set forth under the heading "PROFITS, LOSSES and
DISTRIBUTIONS" at pages 117 - 124 of the Prospectus.
Transactions with Affiliates of Management
The General Partner and certain of its affiliates are entitled to receive
certain compensation, fees and reimbursement of expenses during the offering,
operational and termination or refinancing stages of the Partnership.
Wilder Richman Management Corporation ("WRMC"), an affiliate of the General
Partner, is a co-management agent of the Complex. In connection with these
services, WRMC earned management fees of $107,353 in 2000 and received payment
of $405,782, which includes fees accrued from prior years.
Richman Asset Management, Inc. an affiliate of the General Partner, earned
compensation in the amount of $60,000 in 2001 for its performance in connection
with investor services for the Partnership and the Operating Partnerships and
received payment of $65,000, which includes accrued fees.
Indebtedness of Management
No officer or director of the General Partner or any affiliate of the
foregoing was indebted to Registrant at any time during the years ended February
28, 2001 and February 29, 2000.
10
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a) Financial Statements
(i) The list of Financial Statements of Registrant appears on page F-1.
(ii) The list of Financial Statements of the Operating Partnerships
appears on page F-15.
(3) Exhibits:
(3A) Certificate of Limited Partnership of Wilder Richman Historic
Properties II, L.P., as filed with the Secretary of State of
Delaware on October 15, 1987;*
(3B) Form of Agreement of Limited Partnership of Wilder Richman Historic
Properties II, L.P. (attached to Prospectus as Exhibit A);
(4) Form of Subscription Agreement (attached to Prospectus as Exhibit
B);
(10A) Previously executed and filed Certificate of Limited Partnership
and Amended and Restated Certificate of Limited Partnership of (x)
Dixon Mill Associates I (Phase One), Limited Partnership, (y) Dixon
Mill Associates II (Phase Two), Limited Partnership and (z) Dixon
Mill Associates III (Phase Three), Limited Partnership;*
(10B) Form of Amended and Restated Agreement and Certificate of Limited
Partnership of the Dixon Mill Partnerships:
(1) Dixon Mill Associates I (Phase One), Limited Partnership
Amended and Restated Agreement and Certificate of Limited
Partnership;**
(2) Dixon Mill Associates II (Phase Two), Limited Partnership
Amended and Restated Agreement and Certificate of Limited
Partnership;** and
(3) Dixon Mill Associates III (Phase Three), Limited Partnership
Amended and Restated Agreement and Certificate of Limited
Partnership;**
(10C) Dixon Mill Complex Financing Documents;*
(10D) Administrative Consent Order with New Jersey Department of
Environmental Protection ("NJDEP") and NJDEP Non-Applicability
Letter as to Dixon Mill Partnerships;*
(10E) Master Services Agreement, dated June 18, 1986, between Varick
Construction Corp. and IT Corporation;*
(10F) Documents related to Dixon Mill Complex historic certification;*
(10G) Form of Operating Deficit Guarantee Agreement;*
(10H) Form of Repurchase Agreement;**
(10I) Form of Investor Services Agreement;**
(10J) Form of Escrow Agreement among Wilder Richman Historic Properties
II, L.P., Wilder Richman Historic Corporation, Shearson Lehman
Hutton Inc. and FirsTier Bank, N.A., as escrow agent;**
11
(10K) Form of Financial Development Consulting Agreement between Wilder
Richman Corporation and the Operating Partnerships;**
(10L) Form of Annuity Issuance Agreement between Wilder Richman Historic
Properties II, L.P. and the Issuer;**
(10M) Form of Guaranteed Investment Contract Escrow Agreement among
Wilder Richman Historic Properties II, L.P., the Dixon Mill
Partnerships and the escrow agent;**
(10N) Form of Assignment between the Dixon Mill Partnership, as Assignor,
and Wilder Richman Historic Properties II, L.P., as Assignee;**
(10O) Form of Letter from The Dixon Venture to Wilder Richman Historic
Properties II, L.P. and the Dixon Mill Partnerships, as to The
Dixon Venture's agreement to bear all costs of compliance with the
New Jersey Environmental Cleanup Responsibility Act;**
(10P) Amendment No. 1 to Agreement of Limited Partnership; ***
(10Q) Reinstatement and Modification Agreement; ***
(10R) Operating Deficit Escrow Agreement; ***
(10S) Priority Operating Deficit Escrow Agreement; ***
(10T) Amended and Restated Achievement Escrow Agreement; ***
(10U) Default Avoiding Loan Agreement; ***
(10V) Management Agreement; ***
(10W) Chase Note; ***
(10X) Letter of Intent to Reinstate and Modify the Mortgages; ****
* Incorporated by Reference to Registrant's Form S-11 Registration Statement
as filed with the Securities and Exchange Commission on January 15, 1988.
** Incorporated by Reference to Amendment No.1 to Registrant's Form S-11
Registration Statement as filed with the Securities and Exchange Commission
on May 9, 1988.
*** Submitted as exhibit to Form 10-K for the fiscal year ended February 29,
1992.
**** Incorporated by Reference to Proxy dated March 23, 1992.
b) Reports on Form 8-K
None.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 15th day of June,
2001.
Wilder Richman Historic Properties II, L.P.
By: Wilder Richman Historic Corporation, General Partner
By: /s/ Richard Paul Richman
------------------------
Richard Paul Richman
President and Director
By: /s/ Robert H. Wilder, Jr.
-------------------------
Robert H. Wilder, Jr.
Executive Vice President and Director
13
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
FINANCIAL STATEMENTS FOR THE
YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
AND INDEPENDENT AUDITORS' REPORT
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Financial Statements for the
Years Ended February 28, 2001, February 29, 2000 and February 28, 1999
----------------------------------------------------------------------
and Independent Auditors' Report
C O N T E N T S
Page
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS:
Balance sheets F-3
Statements of operations F-4
Statements of partners' equity F-5
Statements of cash flows F-6
Notes to financial statements F-7 - F-13
F-1
INDEPENDENT AUDITORS' REPORT
Partners
Wilder Richman Historic Properties II, L.P.
Greenwich, Connecticut
We have audited the accompanying balance sheets of Wilder Richman Historic
Properties II, L.P. as of February 28, 2001 and February 29, 2000, and the
related statements of operations, partners' equity, and cash flows for the years
ended February 28, 2001, February 29, 2000 and February 28, 1999. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wilder Richman Historic
Properties II, L.P. as of February 28, 2001 and February 29, 2000 and the
results of its operations, changes in partners' equity and cash flows for the
years ended February 28, 2001, February 29, 2000 and February 28, 1999 in
conformity with generally accepted accounting principles.
/s/ Rosenberg, Neuwirth & Kuchner
Certified Public Accountants, P.C.
May 25, 2001
New York, New York
F-2
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
BALANCE SHEETS
February 28, February 29,
A S S E T S 2001 2000
----------- ----------- -----------
INVESTMENTS IN OPERATING PARTNERSHIPS
(Notes 2, 3, 4 and 7) $ 1,405,503 $ 1,321,566
CASH AND CASH EQUIVALENTS (Note 2) 157,990 180,125
OTHER ASSETS 10,084 9,988
----------- -----------
$ 1,573,577 $ 1,511,679
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Other liabilities $ 10,000 $ 10,000
Due to related parties (Note 4) 179,201 184,201
----------- -----------
189,201 194,201
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 3)
PARTNERS' EQUITY (Note 5):
Limited partners' equity 1,527,201 1,460,972
General partner's deficit (142,825) (143,494)
----------- -----------
1,384,376 1,317,478
----------- -----------
$ 1,573,577 $ 1,511,679
=========== ===========
See notes to financial statements
F-3
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF OPERATIONS
Year Ended
------------------------------------------
February 28, February 29, February 28,
2001 2000 1999
----------- ---------- -----------
Revenues:
Interest income $ 11,890 $ 54,009 $ 52,660
Expenses:
Operating 28,929 36,187 32,575
----------- ---------- -----------
Income (loss) from operations (17,039) 17,822 20,085
----------- ---------- -----------
Equity in income (loss) of Operating Partnerships
from operations 388,779 128,830 (186,393)
Extraordinary item - operating partnership
Litigation settlement - - (321,753)
Write-off of unamortized deferred costs (304,842) - -
----------- ---------- -----------
Net income (loss) from operating partnerships 83,937 128,830 (508,146)
----------- ---------- -----------
NET INCOME (LOSS) $ 66,898 $ 146,652 $ (488,061)
=========== =========== ===========
Net income (loss) attributable to:
Limited partners $ 66,229 $ 145,185 $ (483,180)
General partner 669 1,467 (4,881)
$ 66,898 $ 146,652 $ (488,061)
Net income (loss) per unit of limited
partnership interest $ 83 $ 181 $ (604)
=========== =========== ===========
See notes to financial statements
F-4
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28,1999
Limited General
Total partners partner
------------- ------------ ------------
Partners' equity (deficit), March 1, 1998 $ 2,622,887 $ 2,762,967 $ (140,080)
Net loss, year ended February 28, 1999 (488,061) (483,180) (4,881)
------------- ------------ ------------
Partners' equity (deficit), February 28, 1999 2,134,826 2,279,787 (144,961)
Distribution (964,000) (964,000) -
Net income, year ended February 29, 2000 146,652 145,185 1,467
-------------- ------------- -------------
Partners equity (deficit) February 29, 2000 1,317,478 1,460,972 (143,494)
Net income, year ended February 28, 2001 66,898 66,229 669
-------------- ------------- --------------
Partners' equity (deficit) February 28, 2001 $ 1,384,376 $ 1,527,201 $ (142,825)
============== ============= ==============
Limited partnership units outstanding at February 28,
2001, February 29, 2000 and February 28, 1999 800
==============
See notes to financial statements
F-5
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF CASH FLOWS
Year Ended
------------------------------------------------
February 28, February 29, February 28,
2001 2000 1999
----------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 66,898 $ 146,652 $(488,061)
----------- ---------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Equity in (income) loss of Operating Partnerships (83,937) (128,830) 508,146
Changes in assets and liabilities:
Decrease (increase) in accrued interest receivable - 140,083 (20,823)
Increase in other assets (96) (9,988) -
Increase in due to related parties (5,000) 15,000 15,000
----------- ---------- -----------
Total adjustments (89,033) 16,265 502,323
----------- ---------- -----------
Net cash provided by (used in) operating activities (22,135) 162,917 14,262
------------ ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners - (964,000) -
----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Receipt of note receivable - 317,713 -
----------- ---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (22,135) (483,370) 14,262
CASH AND CASH EQUIVALENTS, beginning of year 180,125 663,495 649,233
----------- ---------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 157,990 $ 180,125 $ 663,495
=========== ========== ===========
See notes to financial statement
F-6
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
1. ORGANIZATION
Wilder Richman Historic Properties II, L.P. (the "Partnership") was formed
under the Delaware Revised Uniform Limited Partnership Act on October 15,
1987 to acquire all of the limited partnership interest in Dixon Mill
Associates I (Phase One), Limited Partnership ("Dixon Mill I"), Dixon Mill
Associates II (Phase Two), Limited Partnership ("Dixon Mill II") and Dixon
Mill Associates III (Phase Three), Limited Partnership ("Dixon Mill III")
(together herein referred to as the "Operating Partnerships") which,
collectively, constructed, rehabilitated and own and operate a 433-unit
apartment complex (the "Complex") located in Jersey City, New Jersey.
Wilder Richman Historic Corporation (the "General Partner") is the General
Partner of the Partnership. The general partner of the Operating
Partnerships is Dixon Venture Corp. (the "Operating General Partner").
The Partnership filed a Form S-11 registration statement with the
Securities and Exchange Commission, which became effective May 9, 1988,
covering an offering (the "Offering") of 800 limited partnership units at
$24,100 per unit.
On July 15, 1988, the Partnership admitted 754 limited partners
representing 800 units of limited partnership interest (the "Closing") for
$19,280,000 in cash and notes. Immediately following the Closing, the
Partnership acquired a 99% limited partnership interest in the Operating
Partnerships. The Partnership acquired its limited partnership interest
for $16,388,000 which was paid in installments.
2. SIGNIFICANT ACCOUNTING POLICIES
Financial statements
The financial statements of the Partnership are prepared on the accrual
basis of accounting and include only those assets, liabilities and results
of operations related to the business of the Partnership.
Investments in Operating Partnerships
The Partnership accounts for its investment in the Operating Partnerships
on the equity method of accounting. Under the equity method of accounting,
the investment cost is adjusted by the Partnership's share of the
Operating Partnerships' results of operations, which are limited to the
respective investment balances and by distributions received or accrued.
The statements of operations include the Partnership's equity in the
earnings (loss) of the Operating Partnerships on a calendar year basis.
Income taxes
No provisions have been made for federal, state and local income taxes, as
they are the personal responsibility of the partners.
Cash and cash equivalents
The Partnership considers all highly liquid debt instruments purchased
with an original maturity of three months or less at the date of
acquisition to be cash equivalents. Cash and cash equivalents are recorded
at cost, which approximates fair value.
F-7
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fiscal year
The Partnership's fiscal year ends on the last day in February.
Use of 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.
Recently issued accounting standard
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No.133,
"Accounting for Derivative Instruments and Hedging Activities." The
Partnership is required to adopt SFAS No. 133 for the year ending February
28, 2002. SFAS No. 133 establishes methods of accounting for
derivative financial instruments and hedging activities related to
those instruments as well as other hedging activities. The Partnership
currently holds no derivative financial instruments and does not
currently engage in hedging activities. The adoption of SFAS No. 133
is not expected to have any material impact on the Partnership's
financial position or results or operations.
3. INVESTMENTS IN OPERATING PARTNERSHIPS
The Investments in Operating Partnerships are as follows:
Dixon Dixon Dixon
Mill I Mill II Mill III Total
-------------- ----------- ----------- -----------
Balance, March 1,1998 $ - $ 362,954 $ 1,337,928 $ 1,700,882
Equity in loss of Operating Partnerships - (362,954) (145,192) (508,146)
-------------- ----------- ----------- -----------
Balance, February 28, 1999 - - 1,192,736 1,192,736
Equity in income of Operating Partnerships - 33,326 95,504 128,830
-------------- ----------- ----------- -----------
Balance, February 29, 2000 - 33,326 1,288,240 1,321,566
Equity in income of Operating Partnerships - 2,520 81,417 83,937
-------------- ----------- ----------- -----------
Balance, February 28, 2001 $ - $ 35,846 $ 1,369,657 $ 1,405,503
============== =========== =========== ===========
In accordance with the Operating Partnership Agreement, income and
losses are to be allocated 1% and 99% to the Operating General Partner
and the Partnership, respectively. Losses are not allocable to the
Partnership if the losses reduce its equity basis below zero. Losses
in excess of the Partnership's investment are allocated to the Operating
General Partner.
Accordingly, the Operating Partnerships did not allocate 99% of the income
reported in 2000 and 1999 to the Partnership due to the non-allocation
of previous years' losses in excess of the Partnership's investment.
F-8
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28,1999
3. INVESTMENTS IN OPERATING PARTNERSHIPS (CONTINUED)
The combined balance sheets of the Operating Partnerships at December 31,
2000 and 1999 are shown below.
December 31,
---------------------------------
2000 1999
----------- -----------
Assets:
Land $ 1,150,473 $ 1,150,473
Buildings (net of accumulated depreciation
of $15,245,400 and $13,840,014 in 2000 and
1999, respectively) 38,655,465 39,205,029
Cash and cash equivalents 1,959,906 1,338,266
Deferred costs 876,139 449,912
Mortgage escrow deposits 2,854,409 1,199,642
Tenant security deposits 852,014 789,828
Other assets 92,372 76,687
----------- -----------
Total assets $46,440,778 $44,209,837
=========== ===========
Liabilities:
Mortgages payable $28,600,000 $26,249,814
Accounts payable and accrued expenses 199,935 159,007
Accrued interest payable 45,040 132,298
Tenants' security deposits payable 852,014 789,828
Due to general partner and affiliates 976,571 1,284,524
----------- -----------
Total liabilities 30,673,560 28,615,471
----------- -----------
Partners' equity:
Wilder Richman Historic Properties II, L.P. 1,405,503 1,321,566
General partner 14,361,715 14,272,800
----------- -----------
Total partners' equity 15,767,218 15,594,366
----------- -----------
Total liabilities and partners' equity $46,440,778 $44,209,837
=========== ===========
F-9
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28,1999
3. INVESTMENTS IN OPERATING PARTNERSHIPS (CONTINUED)
The combined statements of operations of the Operating Partnerships for the
years ended December 31, 2000, 1999 and 1998 are as follows:
Year ended December 31,
2000 1999 1998
----------- ----------- -----------
Revenues:
Rent $ 7,043,881 $ 6,519,761 $ 6,083,567
Interest 98,318 82,374 56,291
----------- ----------- -----------
7,142,199 6,602,135 6,139,858
----------- ----------- -----------
Expenses:
Administrative 1,116,592 993,470 997,976
Operating 2,472,392 2,009,050 2,018,481
Management fees 261,828 189,194 178,610
Interest 1,248,387 1,784,654 1,816,393
Depreciation and amortization 1,420,236 1,386,082 1,376,710
----------- ----------- -----------
6,519,435 6,362,450 6,388,170
----------- ----------- -----------
Income (loss) before extraordinary item 622,764 239,685 (248,312)
Extraordinary item:
Litigation settlement - - (500,000)
Write-off of unamortized deferred costs (449,912) - -
----------- ----------- -----------
NET INCOME (LOSS) $ 172,852 $ 239,685 $ (748,312)
=========== =========== ===========
Income (loss) before extraordinary item allocated to
-----------
Wilder Richman Historic Properties II, L.P. $ 388,779 $ 128,830 $ (186,393)
Extraordinary items (304,842) - (321,753)
----------- ----------- -----------
Net income (loss) allocated to Wilder Richman Historic
Properties II, L.P. $ 83,937 $ 128,830 $ (508,146)
=========== =========== ===========
Income (loss) before extraordinary items allocated to
Dixon Venture Corp. $ 233,985 $ 110,855 $ (61,919)
Extraordinary items (145,070) - (178,247)
----------- ----------- -----------
Net income (loss) allocated to Dixon Venture Corp. $ 88,915 $ 110,855 $ (240,166)
=========== =========== ===========
F-10
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28,1999
4. RELATED PARTY TRANSACTIONS
An annual investor services fee is payable to an affiliate of the General
Partner in the amount of $15,000 from the Partnership and each of the
Operating Partnerships. At February 28, 2001 and February 29, 2000, due to
related parties includes $165,000 and $170,000, respectively of investor
services fees payable from the Partnership.
At February 28, 2001 and February 29, 2000, due to related parties includes
$9,846 due to the Operating Partnerships.
An affiliate of the General Partner is the co-management agent of the
properties owned by the Operating Partnerships. The affiliated management
agent earned $107,353 and $82,678 in the years ended December 31, 2000 and
1999, respectively and $405,782 was paid in 2000 and $76,329 was paid in
1999.
5. PARTNERS' EQUITY
The General Partner, the special limited partner and the investor limited
partners were allocated 1%, .01% and 98.99%, respectively, of income and
losses.
Distributions
Cash flow of the Partnership available annually for distribution after
payment of Partnership expenses will be distributed 98.99% to the investor
limited partners, .01% to the special limited partner and 1.00% to the
General Partner.
Net cash proceeds resulting from a sale or refinancing by the Operating
Partnerships, to the extent available (after the discharge of debts and
obligations of the Operating Partnerships and the Partnership, including
outstanding loans from partners or affiliates), will be distributed
generally as follows:
- 98.99% to the investor limited partners, .01% to the special limited
partner and 1.00% to the General Partner, until the investor
limited partners have received an amount equal to their adjusted
contributions;
- 98.99% to the investor limited partners, .01% to the special limited
partner and 1.00% to the General Partner, until the investor
limited partners have received an amount equal to the accrued
cumulative, non-compounded rate of 7% per annum (see Note 7).
- The balance of adjusted capital contributions of the General Partner
and special limited partner, and
- The balance, if any, 97.99% to the investor limited partners, .01% to
the special limited partner and 2.00% to the General Partner.
F-11
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28,1999
6. TAXABLE LOSS
A reconciliation of the financial statement loss of the Partnership for
the years ended February 28, 2001, February 29, 2000 and February 28, 1998
to the net loss as shown on the tax returns for the years ended December
31, 2000, 1999 and 1998 is as follows:
Year ended
December 31,
----------------------------------------------
2000 1999 1998
----------- ----------- -----------
Financial statement income (loss) for the year ended February 28, 2001,
February 29, 2000 and
February 28, 1999, respectively $ 66,898 $ 146,652 $ (488,061)
Less transactions occurring during January 1 to end of February of
respective periods:
Interest income (298) (6,739) 677
Fees to related party not deductible
under Internal Revenue Code Section 267 (5,000) 15,000 15,000
----------- ----------- -----------
61,600 154,913 (472,384)
Financial statement to tax return difference arising from investments in
Operating Partnerships:
Adjustment due to non-allocation of income (loss) in
excess of limited partners investment 87,186 108,458 (59,436)
Fees to related party not deductible under
Internal Revenue Code Section 267 (274,417) (720,068) 186,720
Litigation settlement - (495,000) 321,753
Excess of depreciation expense of the operating
partnerships for income tax purposes over
financial reporting purposes (1,167,704) (1,194,853) (1,193,954)
----------- ----------- -----------
Taxable loss $(1,293,335) $(2,146,550) $(1,217,301)
=========== =========== ===========
F-12
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28,1999
7. COMMITMENTS AND CONTINGENCIES
Preferred return
Pursuant to the Partnership Agreement, the investor limited partners are
entitled to an annual preferred return in the amount of 7% of the investor
limited partners' adjusted contributions outstanding from time to time,
subject to cash flow available for distribution (including lender
restrictions). As of December 31, 2000, the cumulative preferred amount
due from the Operating Partnerships is $13,539,758. Any cumulative
shortfall not recovered out of future cash flow distributions will be
payable from sale or refinancing proceeds, to the extent available.
F-13
DIXON MILLS ASSOCIATES
COMBINED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
AND INDEPENDENT AUDITORS' REPORT
DIXON MILLS ASSOCIATES
Combined Financial Statements for the
Years Ended December 31, 2000, 1999 and 1998
and Independent Auditors' Report
C O N T E N T S
Page
INDEPENDENT AUDITORS' REPORT F-16
COMBINED FINANCIAL STATEMENTS:
Combined balance sheets F-17
Combined statements of operations F-18
Combined statements of partners' equity F-19
Combined statements of cash flows F-20
Notes to combined financial statements F-21 - F-25
F-15
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Dixon Venture Corp.
Secaucus, New Jersey
and
Partners
Wilder Richman Historic Properties II, LP
Greenwich, Connecticut
We have audited the accompanying combined balance sheets of Dixon Mills
Associates as of December 31, 2000 and 1999, and the related statements of
operations, partners' equity and cash flows for the years ended December 31,
2000, 1999 and 1998. These financial statements are the responsibility of the
Partnerships' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dixon Mills Associates as of
December 31, 2000 and 1999, and the results of its operations, changes in
partners' equity and cash flows for the years ended December 31, 2000, 1999 and
1998 in conformity with generally accepted accounting principles.
/s/ Rosenberg, Neuwirth & Kuchner
Certified Public Accountants, P.C.
February 28, 2001
New York, New York
F-16
DIXON MILLS ASSOCIATES
COMBINED BALANCE SHEETS
December 31,
-----------------------------
A S S E T S 2000 1999
----------- ------------ -------------
LAND (Notes 2 and 5) $ 1,150,473 $ 1,150,473
BUILDINGS (net of accumulated depreciation
of $15,245,400 and $13,840,014 in 2000 and 1999,
respectively) (Notes 2 and 5) 38,655,465 39,205,029
CASH AND CASH EQUIVALENTS (Note 2) 1,959,906 1,338,266
DEFERRED COSTS (Notes 2 and 5) 876,139 449,912
MORTGAGE ESCROW DEPOSITS (Note 5) 2,854,409 1,199,642
TENANT SECURITY DEPOSITS 852,014 789,828
OTHER ASSETS 92,372 76,687
------------ -------------
$ 46,440,778 $ 44,209,837
============ ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Mortgages payable (Note 5) $ 28,600,000 $ 26,249,814
Accounts payable and accrued expenses 199,935 159,007
Accrued interest payable (Note 5) 45,040 132,298
Tenants' security deposits payable 852,014 789,828
Due to general partner and affiliates (Note 4) 976,571 1,284,524
------------ -------------
30,673,560 28,615,471
------------ -------------
COMMITMENTS AND CONTINGENCIES (Note 6)
PARTNERS' EQUITY (Note 3):
WILDER RICHMAN HISTORIC
PROPERTIES II, L.P., LIMITED PARTNER 1,405,503 1,321,566
DIXON VENTURE CORP., GENERAL PARTNER 14,361,715 14,272,800
------------ -------------
15,767,218 15,594,366
------------ ------------
$ 46,440,778 $ 44,209,837
============ ============
See notes to combined financial statements
F-17
DIXON MILLS ASSOCIATES
COMBINED STATEMENTS OF OPERATIONS
Year ended
December 31,
--------------------------------------------
2000 1999 1998
----------- ----------- -----------
Revenues:
Rent $ 7,043,881 $ 6,519,761 $ 6,083,567
Interest 98,318 82,374 56,291
----------- ----------- -----------
7,142,199 6,602,135 6,139,858
----------- ----------- -----------
Expenses:
Administrative 1,116,592 993,470 997,976
Operating 2,472,392 2,009,050 2,018,481
Management fees (Note 4) 261,828 189,194 178,610
Interest (Note 5) 1,248,387 1,784,654 1,816,393
Depreciation and amortization 1,420,236 1,386,082 1,376,710
----------- ----------- -----------
6,519,435 6,362,450 6,388,170
----------- ----------- -----------
Income (loss) before extraordinary item 622,764 239,685 (248,312)
Extraordinary item:
Litigation settlement (Note 7) - - (500,000)
Write-off of unamortized deferred costs (Notes 5 and 7) (449,912) - -
----------- ----------- -----------
NET INCOME (LOSS) $ 172,852 $ 239,685 $ (748,312)
=========== =========== ===========
Income (loss) before extraordinary item allocated to
Wilder Richman Historic Properties II, L.P. $ 388,779 $ 128,830 $ (186,393)
Extraordinary items (304,842) - (321,753)
----------- ----------- ------------
Net income (loss) allocated to Wilder Richman Historic
Properties II, L.P. $ 83,937 $ 128,830 $ (508,146)
=========== =========== ============
Income (loss) before extraordinary item allocated to
Dixon Venture Corp. $ 233,985 $ 110,855 $ (61,919)
Extraordinary items (145,070) - (178,247)
----------- ----------- -----------
Net income (loss) allocated to Dixon Venture Corp.$ 88,915 $ 110,855 $ (240,166)
=========== =========== ============
See notes to combined financial statements
F-18
DIXON MILLS ASSOCIATES
COMBINED STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Limited General
Total partner partner
------------ ------------ ------------
Partners' equity, January 1, 1998 $ 16,102,993 $ 1,700,882 $ 14,402,111
Net loss, year ended December 31, 1998 (748,312) (508,146) (240,166)
------------ ------------ ------------
Partners' equity, December 31, 1998 15,354,681 1,192,736 14,161,945
Net income, year ended December 31, 1999 239,685 128,830 110,855
------------ ------------ ------------
Partners' equity, December 31, 1999 15,594,366 1,321,566 14,272,800
Net income, year ended December 31, 2000 172,852 83,937 88,915
------------ ------------ ------------
Partners' equity, December 31, 2000 $ 15,767,218 $ 1,405,503 $ 14,361,715
============ ============ ============
See notes to combined financial statements
F-19
DIXON MILLS ASSOCIATES
COMBINED STATEMENTS OF CASH FLOWS
Year ended December 31,
---------------------------------------------------
2000 1999 1998
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 172,852 $ 239,685 $ (748,312)
------------ ------------ ------------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,420,236 1,386,082 1,376,710
Write-off of unamortized deferred costs - extraordinary 449,912 - -
Change in assets:
Increase in mortgage escrow deposits (34,210) (64,903) (67,005)
Increase in tenant security deposits (62,186) (64,656) (55,487)
Increase in other assets (15,685) (40,093) (2,551)
Change in liabilities:
Increase (decrease) in accounts payable
and accrued expenses 40,928 (517,705) 539,628
Increase (decrease) in accrued interest payable (87,258) (136,841) 19,405
Increase in tenants security deposits payable 62,186 64,656 55,487
Increase (decrease) in due to general partner and affiliates (307,953) (744,431) 188,606
------------ ------------ ------------
Total adjustments 1,465,970 (117,891) 2,054,793
------------ ------------ ------------
Net cash provided by operating activities 1,638,822 121,794 1,306,481
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (855,822) (144,485) (260,594)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of mortgages payable (26,249,814) (272,332) (254,748)
Payment of note payable - (317,713) -
Proceeds of mortgage financing 28,600,000 - -
Payments to principal reserve fund (182,499) - -
Deposits into mortgage escrow accounts at refinancing (1,438,058) - -
Payment of deferred costs (890,989) - -
------------ ------------
Net cash used in financing activities (161,360) (590,045) (254,748)
------------ ------------ ------------
INCREASE (DECREASE) IN CASH 621,640 (612,736) 791,139
CASH AND CASH EQUIVALENTS,
beginning of year 1,338,266 1,951,002 1,159,863
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
end of year $ 1,959,906 $ 1,338,266 $ 1,951,002
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during year for interest $ 1,335,645 $ 1,921,495 $ 1,796,988
============ ============ ============
See notes to combined financial statements
F-20
DIXON MILLS ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
1. COMBINATION AND ORGANIZATION
The combined financial statements include the accounts of Dixon Mill
Associates I (Phase One), Limited Partnership ("DM I"), Dixon Mill
Associates II, (Phase Two), Limited Partnership ("DM II") and Dixon Mill
Associates III, (Phase Three), Limited Partnership ("DM III") after
elimination of all significant intercompany balances and transactions.
Combined financial statements are presented as the Operating Partnerships
are under common control, ownership, and management.
Description of the business
The partnerships are collectively known as "Dixon Mills Associates" or the
"Operating Partnerships", each of which owns one phase of an aggregate 433
units of residential apartments located in Jersey City, New Jersey, that
consist of buildings that are designated as "certified historic structures"
by the U.S. Department of the Interior. The Operating Partnerships have
constructed, rehabilitated, and own and operate the complex. In accordance
with the tax exempt financing of the complex, the Operating Partnerships are
required to rent 15% to 20% of the apartment units to individuals of low or
moderate income.
On July 15, 1988, the Operating Partnerships transferred their 99% limited
partnership interests to Wilder Richman Historic Properties II, L.P. (the
"Limited Partner") in connection with that limited partnership's public
offering. The remaining 1% interest remained with the Operating General
Partner, Dixon Venture Corp. ("DVC").
2. SIGNIFICANT ACCOUNTING POLICIES
Financial statements
The financial statements of the Operating Partnerships are prepared on the
accrual basis of accounting and include only those assets, liabilities and
results of operations related to the business of the Operating Partnerships.
Land and buildings
Land and buildings are stated at lower of cost or net realizable value,
("NRV"), which is the net cash flow necessary to recover costs exclusive of
debt service. Depreciation on buildings is computed on the straight-line
method. The depreciable life assigned is 40 years for the real property.
Income taxes
No provisions have been made for federal, state and local income taxes, as
they are the responsibility of the partners.
The partners of the Operating Partnerships were entitled to a 25% historic
rehabilitation tax credit on eligible costs as a reduction of their tax
liabilities. In addition, the tax basis of the property has been reduced by
one-half of the historic rehabilitation tax credit for income tax purposes
only.
F-21
DIXON MILLS ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and cash equivalents
The Operating Partnerships consider all highly liquid debt instruments
purchased with an original maturity of three months or less at the date of
acquisition to be cash equivalents. Cash and cash equivalents are recorded
at cost, which approximates fair value.
Deferred costs
Deferred costs represent costs incurred in connection with the mortgages
(Note 5) and are being amortized over the term of the mortgages using the
straight line method.
Use of 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.
Recently issued accounting standard
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The Operating Partnerships
are required to adopt SFAS No. 133 for the year ending December 31, 2002.
SFAS No. 133 establishes methods of accounting for derivative financial
instruments and hedging activities related to those instruments as well as
other hedging activities. The Operating Partnerships currently hold no
derivative financial instruments and do not currently engage in hedging
activities. The adoption of SFAS No. 133 is not expected to have any
material impact on the Operating Partnerships' financial position or results
of operations.
3. PARTNERS' EQUITY
In accordance with the Partnership agreement, income and losses are to be
allocated 1% and 99% to the general partner and the Limited Partner,
respectively. Any equity in loss in excess of the Limited Partner's
investment balance in an operating partnership is allocated to the General
Partner.
The Operating Partnerships did not allocate 99% of the income reported in
2000 to the Limited Partner due to the non-allocation of previous years'
losses in excess of the Limited Partner's investment in Dixon Mills I & II
in accordance with the equity method of accounting.
Distributions
The partnership agreements of the Operating Partnerships provide that cash
flow from operations will be distributed 99% to the Limited Partner and 1%
to the Operating General Partner until the Limited Partner has received a 7%
preferred return (the "Preference Amount") on their initial capital
contributions. The balance, if any, would be distributed 75% to the Limited
Partner and 25% to the Operating General Partner. Any cumulative shortfall
not recovered out of subsequent cash flow distributions will be payable from
sale or refinancing proceeds, to the extent available. The cumulative
preferred amount due to the Limited Partner at December 31, 2000 is
$13,539,758. There is no assurance that all or a portion of such amount will
be paid, and no amount has been accrued.
F-22
DIXON MILLS ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
3. PARTNERS' EQUITY (CONTINUED)
Net cash proceeds resulting from a sale or refinancing, to the extent
available (after the discharge of debts and obligations of the Partnership,
including outstanding loans from partners or affiliates), will be
distributed generally as follows:
- 99% to the Limited Partner and 1% to the Operating General Partner,
until the Limited Partner has received an amount equal to its adjusted
contributions.
- 99% to the Limited Partner and 1% to the Operating General Partner,
until the Limited Partner has received an amount equal to the unpaid
cumulative Preference Amount.
- The balance of adjusted capital contributions of the General Partner.
- The balance, if any, 75% to the Limited Partner and 25% to the Operating
General Partner.
4. RELATED PARTY TRANSACTIONS
DVC has complete authority, management and control of the Operating
Partnerships. The Operating Partnerships, in the normal course of business,
have transactions with the Operating General Partner and affiliates.
Included in the balance sheets are the following items:
Due to (from):
2000 1999
----------- -----------
Morris Property Management $ - $ 9,524
Morris Realty (5,259) (5,259)
DVC 936,830 936,830
Wilder Richman Management Corporation - 298,429
Richman Asset Management, Inc. 45,000 45,000
----------- -----------
$ 976,571 $ 1,284,524
=========== ===========
The Operating Partnerships incurred annual property management fees to
Wilder Richman Management Corp. ("WRMC"), an affiliate of the Limited
Partner, in the amount of $107,353 in 2000, $82,678 in 1999 and $78,444 in
1998. WRMC received payments of $405,782 and $76,329 in 2000 and 1999,
respectively. In addition, property management fees of $154,475, $106,516
and $100,166 were incurred in 2000, 1999 and 1998, respectively to Morris
Property Management, an affiliate of the General Partner. Morris Property
Management received payments of $163,999 in 2000 and $632,296 in 1999 for
accrued management fees.
The Operating Partnerships incurred investor service fees of $45,000 to
Richman Asset Management, Inc., an affiliate of the Limited Partner in 2000,
1999 and 1998 and paid Richman Asset Management, Inc. $45,000 in 2000 and
$270,000 in 1999 for accrued investor service fees.
F-23
DIXON MILLS ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
5. MORTGAGES PAYABLE
On June 11, 1992, the Jersey City Redevelopment Agency provided mortgage
financing for the Operating Partnerships through the issuance of tax-exempt
Bonds (the "Bonds") guaranteed and secured by the Federal National Mortgage
Association ("FNMA") mortgage pass-through certificate ("FNMA Certificate").
The FNMA Certificate in turn was secured by mortgages given by Dixon
Operating Partnerships in the amount of $27,545,000.
The Operating Partnerships refinanced their respective mortgage liabilities
under the $27,545,000 Jersey City Redevelopment Agency Multifamily Housing
Revenue Bonds, Series 1992 (Fannie Mae pass-through Certificate
Program/Dixon Mill Apartments Project as of April 28, 2000). The total new
indebtedness in the amount of $28,600,000 for a term of 30 years is 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 Operating
Partnerships have 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.
The mortgage proceeds retired the old mortgage ($26,154,723), funded
reserves for capital improvements (approximately $1,173,000), and covered
the costs of the transaction ($890,989). The capital improvements account
was established to pay for significant planned improvements (roof
replacement, smoke/fire alarm systems, elevator repairs and other repairs
throughout the complex) to be undertaken within approximately twelve months
of the refinancing.
Monthly mortgage principal payments are deposited into a principal reserve
fund ($182,499 is included in mortgage escrow deposits on the combined
balance sheet as of December 31, 2000). Such escrow is to be used for
redemption of the underlying bonds, at which time the mortgage loan is
amortized. At December 31, 2000 the scheduled principal reserve fund
payments are as follows:
2001 335,871
2002 367,277
2003 401,620
2004 439,174
2005 473,018
Thereafter 26,400,541
--------------
$28,417,501
==============
The new mortgage terms require monthly payments of $6,326 to the replacement
reserve. The replacement reserve shall be used exclusively to pay for
certain repairs or replacements, subject to the approval of the lender. The
balance in this account was $44,729 and $826,685 at December 31, 2000 and
1999, respectively. The balance in the replacement reserve account of
$903,456 at the time of the refinancing in April 2000 was transferred to the
capital improvements account. At December 31, 2000, the balance in the
capital improvements account was $2,103,949. The replacement reserve and the
capital improvements account are included in mortgage escrow deposits in the
accompanying combined balance sheets.
F-24
DIXON MILLS ASSOCIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
6. COMMITMENTS AND CONTINGENCIES
Three complaints have been filed against the Operating Partnerships, among
others, by a former employee, a former part-time rental agent, and a
security person employed by a private non-affiliated security company which
provided service to the Property, alleging, among other things,
discrimination in connection with advancement, hiring and termination. The
Operating Partnerships are presently defending these matters. The Operating
General Partner cannot measure the potential liability, if any, at this
time.
7. EXTRAORDINARY ITEMS
Write-off of Unamortized Deferred Costs - 2000
As a result of the mortgage refinancing (see Note 5), unamortized deferred
costs of $449,912 reflected on the Operating Partnerships' balance sheet as
of December 31, 1999 were written off and are reflected in the accompanying
combined statement of operations for the year ended December 31, 2000.
Litigation Settlement - 1998
A civil complaint was filed in a prior year by an employee of the Operating
Partnerships against the Operating Partnerships and another employee. A
separate similar suit was initiated subsequently by a related party of the
corporate general partner against the same employee defendant, who is no
longer employed by the Operating Partnerships. The aforementioned related
party's settlement was in the amount of $244,000. The aggregate settlement
of $500,000, including legal fees, is reflected in the accompanying combined
statement of operations for the year ended December 31, 1998.
F-25