SECURITIES AND EXCHANGE COMMISSION
Washington, DC
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FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2002
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________ to___________
Commission file number 0-17793
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Wilder Richman Historic Properties II, L.P.
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(Exact name of Registrant as specified in its charter)
Delaware 13-3481443
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
599 W. Putnam Avenue
Greenwich, Connecticut 06830
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (203) 869-0900
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No____
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Part I - Financial Information
Table of Contents
Item 1. Financial Statements Page
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Balance Sheets as of August 31, 2002 (Unaudited) and February 28, 2002 3
Statements of Operations for the three and six month periods
ended August 31, 2002 and 2001 (Unaudited) 4
Statements of Cash Flows for the six months
ended August 31, 2002 and 2001 (Unaudited) 5
Notes to Financial Statements as of August 31, 2002 (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
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Condition and Results of Operations 9
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Item 3. Quantitative and Qualitative Disclosure about Market Risk 10
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
BALANCE SHEETS
August 31, 2002
(Unaudited) February 28, 2002
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ASSETS
Cash and cash equivalents $ 104,472 $ 119,417
Investments in operating partnerships 2,806,028 2,075,294
Other assets 11,035 10,779
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$ 2,921,535 $ 2,205,490
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LIABILITIES AND PARTNERS' EQUITY
Liabilities
Other liabilities $ 3,875 $ 10,000
Due to related parties 181,702 174,201
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185,577 184,201
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Partners' equity (deficit)
Partners' equity 2,735,958 2,053,462
Accumulated other comprehensive loss (32,173)
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2,735,958 2,021,289
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$ 2,921,535 $ 2,205,490
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See notes to financial statements.
3
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
August 31, 2002 August 31, 2002 August 31, 2001 August 31, 2001
--------------- --------------- --------------- ---------------
REVENUES
Interest $ 612 $ 1,255 $ 1,373 $ 3,144
EXPENSES
Operating 10,246 17,320 7,066 15,909
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Loss from operations (9,634) (16,065) (5,693) (12,765)
Equity in income (loss) of
operating partnerships 236,598 730,734 (43,733) 73,829
--------- --------- --------- ---------
NET EARNINGS (LOSS) $ 226,964 $ 714,669 $ (49,426) $ 61,064
========= ========= ========= =========
NET EARNINGS (LOSS) PER UNIT
OF LIMITED PARTNERSHIP
INTEREST $ 280.87 $ 884.40 $ (61.16) $ 75.57
========= ========= ========= =========
See notes to financial statements.
4
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED AUGUST 31, 2002 AND 2001
(Unaudited)
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 714,669 $ 61,064
Adjustments to reconcile net earnings to net
cash used in operating activities
Equity in income of operating partnerships (730,734) (73,829)
Increase in other assets (255) (696)
Decrease in other liabilities (6,125)
Increase in due to related parties 7,500 7,500
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Net cash used in operating activities (14,945) (5,961)
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Net decrease in cash and cash equivalents (14,945) (5,961)
Cash and cash equivalents at beginning of period 119,417 157,990
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Cash and cash equivalents at end of period $ 104,472 $ 152,029
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See notes to financial statements.
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2002
(Unaudited)
1. The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America for interim financial information. They do not include
all information and footnotes required by accounting principles
generally accepted in the United States of America for complete
financial statements. The results of operations are impacted
significantly by the results of operations of the Operating
Partnerships, which are provided on an unaudited basis during interim
periods. Accordingly, the accompanying financial statements are
dependent on such unaudited information. In the opinion of the General
Partner, the financial statements include all adjustments necessary to
reflect fairly the results of the interim periods presented. All
adjustments are of a normal recurring nature. No significant events have
occurred subsequent to February 28, 2002 and no material contingencies
exist which would require additional disclosures in the report under
Regulation S-X, Rule 10-01 paragraph A-5.
The results of operations for the six months ended August 31, 2002 are
not necessarily indicative of the results to be expected for the entire
year.
2. The investments in Operating Partnerships as of August 31, 2002 and February 28, 2002
are as follows:
Amount paid to investee through February 28, 2002 $ 16,388,000
Accumulated cash distributions from Operating Partnerships
through February 28, 2002 (3,180,441)
Equity in accumulated loss of Operating Partnerships
through February 28, 2002 (11,132,265)
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Balance, February 28, 2002 2,075,294
Equity in income of operating partnerships for the six months
ended August 31, 2002 730,734
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Balance, August 31, 2002 $ 2,806,028
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS - continued
AUGUST 31, 2002
(Unaudited)
Note 2 - continued
The combined balance sheets of the Operating Partnerships as of August
31, 2002 and December 31, 2001 are as follows:
August 31, 2002 December 31,
(Unaudited) 2001
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ASSETS
Land $ 1,150,473 $ 1,150,473
Buildings and equipment
(net of accumulated depreciation
of $17,467,238 and $16,721,225,
respectively) 36,941,925 37,687,449
Cash and cash equivalents 5,873,423 2,018,814
Investment in bonds 1,348,817
Deferred costs 830,439 846,439
Mortgage escrow deposits 2,132,198 3,126,650
Tenant security deposits 871,779 870,216
Other assets 153,127 146,898
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$ 47,953,364 $ 47,195,756
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LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgages payable $ 28,600,000 $ 28,600,000
Accounts payable and accrued expenses 74,025 77,031
Accrued interest 14,902 14,902
Tenant security deposits payable 870,216 870,216
Due to general partner and affiliates 999,070 976,571
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30,558,213 30,538,720
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Partners' equity
Partners' equity 17,395,151 16,689,534
General partner (32,498)
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17,395,151 16,657,036
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$ 47,953,364 $ 47,195,756
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
NOTES TO FINANCIAL STATEMENTS - continued
AUGUST 31, 2002
(Unaudited)
Note 2 - Continued
The unaudited statements of the operations of the Operating Partnerships
for the six months ended June 30, 2002 and 2001 are as follows:
2002 2001
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Revenue
Rent $3,693,179 $3,734,361
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3,693,179 3,734,361
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Expenses
Administrative 299,882 555,463
Operating 1,455,836 1,641,302
Management fees 148,842 145,545
Interest 288,491 581,818
Depreciation and amortization 762,013 702,955
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2,955,064 3,627,083
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Net EARNINGS $ 738,115 $ 107,278
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Net EARNINGS allocated to
Wilder Richman Historic Properties II, L.P. $ 730,734 $ 73,829
General partner 7,381 33,449
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$ 738,115 $ 107,278
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3. Additional information, including the audited February 28, 2002
Financial Statements and the Summary of Significant Accounting Policies,
is included in the Partnership's Annual Report on Form 10-K for the
fiscal year ended February 28, 2002 on file with the Securities and
Exchange Commission.
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Item 2 Management's Discussion and Analysis of Financial Conditions
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and Results of Operations
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Liquidity and Capital Resources
As of August 31, 2002, Wilder Richman Historic Properties II, L.P. (the
"Partnership") experienced few changes in its financial condition as compared to
February 28, 2002, with the exception of the investment in the Operating
Partnerships resulting from the equity in income of operating partnerships for
the six months ended June 30, 2002.
The Operating Partnerships refinanced their respective outstanding mortgage
liabilities as of April 28, 2000 (the "Refinancing"). Prior to the Refinancing,
the annual fixed interest rate of the mortgage was approximately 6.74%. The
total new indebtedness in the amount of $28,600,000 for a term of 30 years was
provided by (a) variable-rate tax-exempt bonds in the amount of $26,435,000, and
(b) variable-rate taxable bonds in the amount of $2,165,000. The initial
interest rates on the tax-exempt and taxable bonds were 5.1% and 6.15%,
respectively. The Operating Partnerships purchased an interest cap which would
limit the interest rates to 6.97% for five years on the tax-exempt portion, and
9.15% for five and one-half years on the taxable portion. Proceeds from the new
bond issue enabled the Operating Partnerships to create a reserve for capital
improvements (approximately $1,365,000). In addition, the balance in the
replacement reserve at the date of the Refinancing (approximately $903,000) was
transferred to the capital improvement reserve.
As a result of the reduction of the mortgage interest rate, there may be greater
potential for the Operating Partnerships to generate cash flow. However, the
Partnership's ability to make distributions will depend on the level of interest
rates and future operating results of the Complex, which will be extremely
dependent on competition, market conditions and needed capital improvements and
repairs. Accordingly, there can be no assurance as to whether or not the
Partnership may be able to make distributions, nor the timing or amount of any
potential distributions to Limited Partners. The Operating General Partners and
the General Partner plan to periodically assess the possible resumption of cash
flow distributions, based on the results of operations, the physical condition
of the Property (see discussion below), the then current interest rates, and
local market conditions, among other things. To the extent cash flow is
generated by the Operating Partnerships, such cash flow may be retained by the
Operating Partnerships or may be distributed at the discretion of management,
pursuant to the terms of the limited partnership agreements of the Operating
Partnerships.
The Property is reporting cash flow for the six months ended June 30, 2002 (see
Results of Operations, below) and the Operating Partnerships' cash and cash
equivalents and investment in bonds as of June 30, 2002 have increased by
approximately $2,505,000 compared to December 31, 2001, while accounts payable
and accrued expenses have decreased by approximately $3,000. The increase of
$2,505,000 noted above is inclusive of draws from the capital improvement
reserve of $1,322,000, which relates to capital improvements funded from
operations during 2000 and 2001. The capital improvement escrow and replacement
reserve accounts, which are controlled by the lender for the purpose of funding
planned capital improvements and needed repairs, are approximately $820,000 and
$160,000, respectively, as of June 30, 2002. The principal reserve, which is
controlled by the lender for purposes of paying off the debt, is approximately
$697,000 as of June 30, 2002. Each of the foregoing reserves and escrows are
reflected in the Operating Partnerships' balance sheet under the caption
mortgage escrow deposits.
Because the rehabilitation of the Property was completed more than ten years
ago, management has been addressing the need for extensive capital improvements.
As a result of the Refinancing, significant capital improvements were scheduled
for the Complex throughout 2000 and 2001. The improvements that were
contemplated as part of the Refinancing include roof replacement, replacement of
the fire/smoke alarm system, elevator repairs, new entry doors and other repairs
throughout the Complex. In addition, the Operating General Partner has
identified other potential significant capital improvements and repairs
throughout the Complex, which it intends to address over the next few years.
Such capital improvements and repairs would significantly reduce the Operating
Partnerships' cash flow available for distribution. Furthermore, the local
rental market has softened due to the recent economic recession and the events
of September 11, 2001; as a result, the local competition has reduced their
rental rates. Management has implemented rental reductions and concessions in
order to maintain its position in the market, which will adversely affect cash
flow; such affect may be offset (or exacerbated) by changes in the low floater
mortgage interest rates. Depending on market conditions, rents may need to be
further adjusted.
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WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Item 2 Management's Discussion and Analysis of Financial Conditions
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and Results of Operations (continued)
-------------------------------------
As a result of the cumulative preferred return and the time that Units have been
held, the Partnership has agreed with the Operating General Partner to hire a
national brokerage and marketing firm to privately solicit offers to purchase
the Property from major apartment owners on a confidential basis in order to
determine the current market value of the Property. The Operating General
Partner and the Partnership believe it is appropriate to maintain a confidential
process since the public release of information could have a negative impact on
the operations of the Property. The Partnership and the Operating General
Partner intend to review such offers and then evaluate alternatives. The
Partnership anticipates having feedback with respect to the marketing efforts
before the year end, and plans to include such information in its next quarterly
report.
The Partnership's operating results are dependent upon the operating results of
the Operating Partnerships and are significantly impacted by the Operating
Partnerships' policies. The Partnership accounts for its investment in the
Operating Partnerships in accordance with the equity method of accounting, under
which the investment is carried at cost and is adjusted for the Partnership's
share of the Operating Partnerships' results of operations and by any cash
distributions received.
Results of Operations
For the six months ended August 31, 2002, the statement of operations of the
Partnership reflects net earnings of $714,669, which includes equity in income
of operating partnerships of $730,734. The Operating Partnerships reported net
earnings during the six months ended June 30, 2002 of $738,115, inclusive of
depreciation and amortization expense of $762,013. The Operating Partnerships
generated cash flow after required debt service payments and required
replacement reserve deposits during the six months ended June 30, 2002 of
approximately $1,277,000, which includes required deposits to the principal
reserve under the mortgages (approximately $180,000) and deposits to required
escrows (approximately $38,000). The Operating Partnerships' results of
operations for the six months ended June 30, 2002 reflect a significant
reduction in interest expense compared to the six months ended June 30, 2001 due
to a decline in the average low floater interest rates. The average interest
rates on the low floater bonds for the six months ended June 30, 2002 were 1.23%
for the tax exempt bonds and 1.96% for the taxable bonds. The average occupancy
for the six months ended June 30, 2002 was approximately 98%.
For the six months ended August 31, 2001, the statement of operations of the
Partnership reflects net earnings of $61,064, which includes equity in income of
operating partnerships of $73,829. The Operating Partnerships reported net
earnings during the six months ended June 30, 2001 of $107,278, which includes
depreciation and amortization expense of $702,955, and non capitalized planned
maintenance expenditures of approximately $349,000. The Operating Partnerships
generated cash flow from operations after required debt service payments and
required replacement reserve deposits during the six months ended June 30, 2001
of approximately $562,000, which includes principal reserve deposits under the
mortgages (approximately $164,000) and deposits to required escrows
(approximately $38,000). The Operating Partnerships' results of operations for
the six months ended June 30, 2001 include the settlement of previously pending
litigation matters in the aggregate amount of $150,000, including plaintiffs'
legal fees, plus the Operating Partnerships' legal fees. The Operating
Partnerships' results of operations for the six months ended June 30, 2001 were
enhanced by the April 2000 refinancing, as interest expense declined by
approximately $345,000 compared to the six months ended June 30, 2000. The
average interest rates on the low floater bonds for the six months ended June
30, 2001 were 3.77% for the tax exempt bonds and 5.63% for the taxable bonds.
Item 3 Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
The Partnership has market risk sensitivity with regard to financial instruments
concerning potential interest rate fluctuations in connection with the low
floater rates associated with the Operating Partnerships' mortgages. Although an
interest rate cap has been purchased, a change in the low-floater interest rates
of .25% would have an annualized impact of approximately $70,000 on the
Operating Partnerships' results of operations.
10
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
Part II - Other Information
Item 1. Legal Proceedings
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The Partnership is not aware of any material legal proceedings.
Item 2. Changes in Securities
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None
Item 3. Defaults Upon Senior Securities
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None
Item 4. Submission of Matters to a Vote of Security Holders
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None
Item 5. Other Information
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None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
Exhibit 99.1 Certification of Chief Executive Officer
Exhibit 99.2 Certification of Chief Financial Officer
b. Reports on Form 8-K
None
11
Wilder Richman Historic Properties II, L.P.
Form 10-Q
August 31, 2002
Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
By: Wilder Richman Historic Corporation
General Partner
Dated: October 15, 2002 /s/ Richard Paul Richman
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Richard Paul Richman
President and Chief Executive Officer
12