1185 Avenue of the Americas
New York, NY 10036
NEW YORK, August 8, 2006: Wellsford Real Properties, Inc. (AMEX:WRP) announced today that its net assets in liquidation at June 30, 2006 aggregated $55,844,106 or $8.63 per share based upon 6,471,179 common shares outstanding. Net assets in liquidation aggregated $56,569,414 or $8.74 per share at December 31, 2005 and $53,383,604 or $8.25 per share at March 31, 2006.
At June 30, 2006, WRP had total assets of $113,536,539 which was comprised primarily of real estate assets under development of $49,236,994, investments in joint ventures of $20,453,074, cash of $38,769,364 and restricted cash and investments of $3,050,473. Total liabilities and minority interests of $57,692,433 at June 30, 2006 was comprised of the reserve for estimated costs during the period of liquidation of $21,627,367, mortgage notes and construction loans payable of $24,422,172, the reserve for option cancellations of $2,241,846 and construction payables, other accruals and liabilities of $7,985,464.
The $725,308 decrease in net assets in liquidation from December 31, 2005 to June 30, 2006 is primarily attributable to the recording of a $4,226,938 provision upon the adoption by WRP's Board of Directors of modifications in the terms of WRP's stock option plans during the first quarter of 2006. The provision resulted from the modification during the first quarter of 2006 to allow for cash payments that would be made to option holders, at their election, as consideration for the cancellation of their options in the amount of the fair value of WRP's common stock in excess of the adjusted exercise prices of outstanding options as of March 31, 2006. This liability has been reduced by $1,317,505 ($0.21 per share) during the three months ended June 30, 2006 to reflect the decrease in the market price of WRP's common stock during such period. At each quarter end, an increase to WRP's stock price would result in a decline in net assets in liquidation, whereas a decline in the stock price (as occurred to the stock price from March 31, 2006 of $7.91 per share to June 30, 2006 of $7.07 per share) would increase WRP's net assets in liquidation. These decreases were offset by (i) the net increase in value of real estate assets under development of $1,353,297 which results primarily from changes in the net realizable value estimates including the shortening of the discount period due to the passage of time and sales of condominium units and homes and (ii) operating income of $830,848 which primarily represents interest income earned from cash and cash equivalents.
WRP had announced in November 2005 that its stockholders approved the Plan of Liquidation (the "Plan") at the annual meeting held on November 17, 2005. After the approval of the Plan by the stockholders, WRP completed the sale of its largest asset, the three residential rental phases of its Palomino Park project for $176,000,000. On December 14, 2005, WRP made an initial liquidating distribution of $14.00 per share, aggregating approximately $90,597,000, to its stockholders.
For all periods preceding stockholder approval of the Plan on November 17, 2005, WRP's financial statements are presented on the going concern basis of accounting. As required by generally accepted accounting principles, WRP adopted the liquidation basis of accounting as of the close of business on November 17, 2005. Under the liquidation basis of accounting, assets are stated at their estimated net realizable value and liabilities are stated at their estimated settlement amounts, which estimates will be periodically reviewed and adjusted as appropriate.
WRP reported revenues of $4,037,315 and $8,338,820 and net income of $2,969,122 and $178,160, or $0.46 and $0.03 per basic and diluted share for the three and six months ended June 30, 2005, respectively.
Remaining Activities, Assets and Investments
At June 30, 2006, WRP's remaining activities, assets and investments were comprised primarily of the following:
The Plan contemplates the orderly sale of each of WRP's remaining assets, which are either owned directly or through WRP's joint ventures, the collection of all outstanding loans from third parties, the orderly disposition or completion of construction of development properties, the discharge of all outstanding liabilities to third parties and, after the establishment of appropriate reserves, the distribution of all remaining cash to stockholders.
WRP currently contemplates that approximately 36 months after the approval of the Plan any remaining assets and liabilities would be transferred into a liquidating trust. The liquidating trust would continue in existence until all liabilities have been settled, all remaining assets have been sold and proceeds distributed and the appropriate statutory periods have lapsed.
As noted above, WRP's net assets in liquidation aggregated $55,844,106, or $8.63 per share on June 30, 2006. This amount presents development projects at estimated net realizable values after giving effect to the present value discounting of estimated net proceeds there from. All other assets are presented at estimated net realizable value on an undiscounted basis. The amount also includes reserves for future estimated general and administrative expenses and other costs and for cash payments on outstanding stock options during the liquidation. There can be no assurance that these estimated values will be realized or that future expenses and other costs will not be greater than recorded estimated amounts. Such amount should not be taken as an indication of the timing or amount of future distributions to be made by WRP.
The timing and amount of interim liquidating distributions (if any) and the final liquidating distribution will depend on the timing and amount of proceeds WRP will receive upon the sale of the remaining assets and the extent to which reserves for current or future liabilities are required. Accordingly, there can be no assurance that there will be any liquidating distributions prior to a final liquidating distribution.
WRP is a company in liquidation. WRP was originally formed to operate as a real estate merchant banking firm to acquire, develop, finance and operate real properties and invest in private and public real estate companies. WRP's remaining primary operating activities are the development, construction and sale of three residential projects.
This press release, together with other statements and information publicly disseminated by WRP, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of WRP or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following, which are discussed in greater detail in the "Risk Factors" section of WRP's Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 16, 2006 and the registration statement on Form S-8 filed with the SEC on June 7, 2006: general and local economic and business conditions; future valuation adjustments as a result of possible declines in the expected values and cash flows of residential development projects and investments or changes in the intent with regards to such projects and investments; competition; risks of real estate development, construction and renovation including construction delays and cost overruns; inability to comply with zoning and other laws and obtain governmental approvals; the risk of inflation in development costs (including construction materials); the availability of insurance coverages; the inability to obtain or replace construction financing for development projects; adverse consequences of debt financing including, without limitation, the necessity of future financings to repay maturing debt obligations; inability to meet financial and valuation covenants contained in loan agreements; inability to repay financings; exposure to variable rate based financings; risk of foreclosure on collateral; risks of leverage; risks associated with equity investments in and with third parties; risks associated with our reliance on joint venture partners including, but not limited to, the inability to obtain consent from partners for certain business decisions, the potential risk that our partners may become bankrupt, have economic or other business interests and objectives which may be inconsistent with those of WRP and our partners being in a position to take action contrary to our interests; inability and/or unwillingness of partners to provide their share of any future capital requirements; availability and cost of financing; interest rate risks; demand by prospective buyers of condominiums and single family homes; inability to realize gains from sales of condominiums and single family homes; lower than anticipated sales prices; inability to close on sales of properties; the risks of seasonality and increasing interest rates on WRP's ability to sell condominium units and single family homes; increases in energy costs, construction materials and interest rates could adversely impact our home building business as homes become more expensive to build and profit margins could deteriorate; inability to raise sale prices to maintain profit margins; the negative impact from a continuing rise in energy costs and interest rates on our marketing efforts and the ability for buyers to afford our homes at any price level, which could result in the inability to meet targeted sales prices or cause sales price reductions; environmental risks; inability of Reis to be sold at all or for the amount of proceeds used by WRP in valuing Reis, or on terms that are favorable to WRP; the Board could abandon the Plan; failure to achieve proceeds from the sales of assets to meet the estimate of total distributions to stockholders under the Plan; the uncertainty as to the timing of sales of assets and the impact on the timing of distributions to stockholders; illiquidity of real estate assets and joint venture investments; increases in expenses which would negatively impact the amount of distributions pursuant to the Plan; unknown claims and liabilities which would negatively impact the amount of distributions pursuant to the Plan; the uncertainty as to the ultimate liability for option cancellations and its effect on reported net assets in liquidation as such amount is impacted by the decisions of the option holders and changes in WRP's market price for its common stock; the sale of undeveloped land, rather than the construction and sale, in the normal course of business, of single family homes or condominium units which would negatively impact the amount of distributions pursuant to the Plan; the inability to utilize all of WRP's Federal net operating loss carryforwards; and other risks listed from time to time in WRP's reports filed with the SEC. Therefore, actual results could differ materially from those projected in such statements.
Mark P. Cantaluppi
Wellsford Real Properties, Inc.
Vice President, Chief Financial Officer