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
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.
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.
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.
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.
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.
PART II
Item 5.
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.
Item 6. Selected Financial Data
(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.
Item 7.
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.
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
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.
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.
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.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
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.
Item 11.
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.
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.
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.
PART IV
Item 14.
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.
(ii) The list of Financial Statements of the Operating Partnerships appears on page.
(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;**
(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.
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
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
FINANCIAL STATEMENTS:
Balance sheets
Statements of operations
Statements of partners' equity
Statements of cash flows
Notes to financial statements -
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
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
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF OPERATIONS
See notes to financial statements
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28,1999
See notes to financial statements
WILDER RICHMAN HISTORIC PROPERTIES II, L.P.
STATEMENTS OF CASH FLOWS
See notes to financial statement
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.
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:
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.
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.
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:
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.
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:
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.
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
COMBINED FINANCIAL STATEMENTS:
Combined balance sheets
Combined statements of operations
Combined statements of partners' equity
Combined statements of cash flows
Notes to combined financial statements -
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
DIXON MILLS ASSOCIATES
COMBINED BALANCE SHEETS
See notes to combined financial statements
DIXON MILLS ASSOCIATES
COMBINED STATEMENTS OF OPERATIONS
See notes to combined financial statements
DIXON MILLS ASSOCIATES
COMBINED STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
See notes to combined financial statements
DIXON MILLS ASSOCIATES
COMBINED STATEMENTS OF CASH FLOWS
See notes to combined financial statements
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.
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.
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.
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.
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.