SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended January 31, 2001 Commission File No. 2-27018
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
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(exact name of registrant as specified in its charter)
New Jersey 22-1697095
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
505 Main Street, P.O. Box 667, Hackensack, New Jersey 07602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 201-488-6400
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_______________________________________________________________________________
Former name, former address and former fiscal year, if changed since last
report.
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 such filing
requirements for the past 90 days.
Yes XX No
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FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
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INDEX
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Part I: Financial Information
Item 1: Unaudited Condensed Consolidated Financial Statements
a.) Balance Sheets as at January 31, 2001 and October 31,
2000;
b.) Statements of Income, Comprehensive Income, and
Undistributed Earnings For the Three Months Ended
January 31, 2001 and 2000;
c.) Statements of Cash Flows for the Three Months Ended
January 31, 2001 and 2000;
d.) Notes to Consolidated Financial Statements.
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3: Quantitative and Qualitative Disclosures of Market Risk.
Part II: Other Information
Item 6. Exhibits and Reports on Form 8-K
Item 1: Financial Statements
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
January 31, October 31,
2001 2000
--------------- ----------------
(Unaudited) (See Note 1)
(In Thousands of Dollars)
ASSETS
Real estate and equipment, at cost, net of accumulated depreciation $77,663 $78,038
Investments in marketable securities 9,506 9,451
Cash & cash equivalents 2,259 2,925
Due from related party 1,087 1,066
Tenants' security accounts 776 766
Sundry receivables 2,028 1,794
Prepaid expenses and other assets 1,241 1,361
Deferred charges, net 1,346 1,380
--------------- ----------------
Totals $95,906 $96,781
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages payable $70,005 $70,214
Accounts payable and accrued expenses 836 854
Cash distributions in excess of earnings and investment in affiliate 386 352
Dividends payable 936 1,794
Tenants' security deposits 1,075 1,073
Deferred revenue 231 303
--------------- ----------------
Total liabilities 73,469 74,590
--------------- ----------------
Minority interest 1,057 1,047
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Commitments and contingencies
Shareholders' equity:
Shares of beneficial interest without par value; 1,790,000
shares authorized; 1,559,788 shares issued and outstanding 19,314 19,314
Undistributed earnings 2,060 1,879
Accumulated other comprehensive income (loss) 6 (49)
--------------- ----------------
Total shareholders' equity 21,380 21,144
--------------- ----------------
Totals $95,906 $96,781
=============== ================
See Notes to financial Statements
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME, COMPREHENSIVE INCOME
AND UNDISTRIBUTED EARNINGS
THREE MONTHS ENDED JANUARY 31, 2001 AND 2000
UNAUDITED
2001 2000
---- ----
(In Thousands of Dollars
Except Per Share Amounts)
-------------------------
INCOME
------
Revenue:
Rental income $ 3,869 $ 3,334
Reimbursements 656 476
Equity in income of affiliate 30 24
Investment income 218 254
Sundry income 45 50
----------------- ----------------
Totals 4,818 4,138
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Expenses:
Operating expenses 1,006 934
Management fees 175 153
Real estate taxes 579 511
Financing costs 1,378 1,150
Depreciation 548 432
Minority interest 10 0
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Totals 3,696 3,180
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Income before state income taxes 1,122 958
Provision for state income taxes 5 3
----------------- ----------------
Net income $ 1,117 $ 955
================= ================
Basic earnings per share $ 0.72 $ 0.61
================= ================
Basic weighted average shares outstanding 1,560 1,560
================= ================
COMPREHENSIVE INCOME
--------------------
Net income $ 1,117 $ 955
Other comprehensive income (loss)-unrealized gain (loss) on
marketable securities 55 (139)
----------------- ----------------
Comprehensive income $ 1,172 $ 816
================= ================
UNDISTRIBUTED EARNINGS
----------------------
Balance, beginning of period $ 1,879 $ 1,253
Net income 1,117 955
Less dividends (936) (780)
----------------- ----------------
Balance, end of period $ 2,060 $ 1,428
================= ================
Dividends per share $ 0.60 $ 0.50
================= ================
See Notes to Financial Statements
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JANUARY 31, 2001 AND 2000
UNAUDITED
2001 2000
---- ----
(In Thousands of Dollars)
Operating activities:
Net income $ 1,117 $ 955
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 601 473
Equity in income of affiliate (30) (24)
Deferred revenue (72) 15
Minority interest 10
Changes in operating assets and liabilities:
Tenants' security accounts (10) 17
Sundry receivables, prepaid expenses and other assets (154) (395)
Accounts payable and accrued expenses (18) (177)
Tenants' security deposits 2 (31)
----------------- -----------------
Net cash provided by operating activities 1,446 833
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Investing activities:
Capital expenditures (173) (184)
Distributions from affiliate 64 72
Acquisition deposit 0 (200)
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Net cash used in investing activities (109) (312)
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Financing activities:
Dividends paid (1,794) (1,638)
Repayment of mortgages (209) (194)
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Net cash used in financing activities (2,003) (1,832)
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Net decrease in cash and cash equivalents (666) (1,311)
Cash and cash equivalents, beginning of period 2,925 2,083
----------------- -----------------
Cash and cash equivalents, end of period $ 2,259 $ 772
================= =================
Supplemental disclosure of cash flow data:
Interest paid $ 1,347 $ 1,127
================= =================
Income taxes paid $ 5 $ 3
================= =================
Supplemental disclosure of noncash financing activities:
Dividends declared but not paid $ 936 $ 780
================= =================
See Notes to Financial Statements
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies:
First Real Estate Investment Trust of New Jersey (the "Trust")
was organized November 1, 1961 as a New Jersey Business Trust.
The Trust is engaged in owning residential and commercial income
producing properties located primarily in New Jersey, Maryland
and New York.
The Trust has elected to be taxed as a Real Estate Investment
Trust under the provisions of Sections 856-860 of the Internal
Revenue Code, as amended. Accordingly, the Trust does not pay
Federal income tax on income whenever income distributed to
shareholders is equal to at least 95% of real estate investment
trust taxable income. Further, the Trust pays no Federal income
tax on capital gains distributed to shareholders.
Basis of presentation:
The accompanying condensed consolidated financial statements have
been prepared without audit, in accordance with accounting
principles generally accepted in the United States of America for
interim financial statements and pursuant to the rules of the
Securities and Exchange Commission. Accordingly, certain
information and footnotes required by accounting principles
generally accepted in the United States of America for complete
financial statements have been omitted. It is the opinion of
management that all adjustments considered necessary for a fair
presentation have been included, and that all such adjustments
are of a normal recurring nature.
The consolidated results of operations for the three months ended
January 31, 2001 are not necessarily indicative of the results to
be expected for the full year. The unaudited condensed
consolidated financial statements should be read in conjunction
with the consolidated financial statements and related notes
included in the Trust's Annual Report on Form 10-K for the year
ended October 31, 2000.
Earnings per share:
The Trust has presented "basic" earnings per share in the
accompanying condensed consolidated statements of income in
accordance with the provisions of Statement of Financial
Accounting Standards No. 128, Earnings per Share ("SFAS 128").
SFAS 128 also requires the presentation of "diluted" earnings per
share if the amount differs from basic earnings per share. Basic
earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding during each
period. The calculation of diluted earnings per share is similar
to that of basic earnings per share, except that the denominator
is increased to include the number of additional common shares
that would have been outstanding if all potentially dilutive
common shares, such as
those issuable upon the exercise of stock options and warrants,
were issued during the period. For the three months ended January
31, 2001 and 2000, diluted earnings per share have not been
presented because prices of all of the outstanding stock options
approximated the average fair market value and there were no
additional shares derived from the assumed exercise of stock
options and the application of the treasury stock method.
Basic earnings per share, based on the weighted average number of
shares outstanding during each period, are comprised of ordinary
income.
Principles of consolidation:
The condensed consolidated financial statements include the
accounts of the Trust and, subsequent of March 29, 2000, its 75%
owned subsidiary S and A Commercial Associates Limited
Partnership ("S and A"). The condensed consolidated financial
statements include 100% of S and A's assets, liabilities,
operations and cash flows with the 25% interest not owned by the
Trust reflected as "minority interest." All significant
intercompany accounts and transactions have been eliminated in
consolidation (see Note 2).
Note 2 - Investment in affiliates:
The Trust is a 40% member of Westwood Hills, LLC ("WHLLC"), a
limited liability company that is managed by Hekemian & Co., Inc.
("Hekemian"), a company which manages all of the Trust's
properties and in which one of the trustees of the Trust is the
chairman of the board. Certain other members of WHLLC are either
trustees of the Trust or their families or officers of Hekemian.
WHLLC owns a residential apartment complex located in Westwood,
New Jersey.
Summarized unaudited financial information of WHLLC as of January
31, 2001 and October 31, 2000, and for the three months ended
January 31, 2001 and 2000 is as follows:
January October
31, 31,
2001 2000
---------- ----------
(In Thousands of Dollars)
Balance sheet data:
Assets:
Real estate and equipment, net $13,881 $13,942
Other 684 756
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Total assets $14,565 $14,698
========== ==========
Liabilities and members' deficiency:
Liabilities:
Mortgage payable $15,139 $15,185
Other 394 398
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Totals 15,533 15,583
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Members' deficiency:
Trust (386) (352)
Others (582) (533)
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Totals (968) (885)
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Total liabilities and members' deficiency $14,565 $14,698
========== ==========
Three Month ended
January 31,
2001 2000
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(In Thousands of Dollars)
Income statement data:
Rental revenue $ 738 $ 696
Rental expenses 662 636
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Net income $ 76 $ 60
===== =====
On March 29, 2000, the Trust acquired 100% of S and A, whose
primary asset is a neighborhood shopping center in Olney,
Maryland. The shopping center contains approximately 98,800
square feet of gross leaseable area situated on approximately 13
acres of land. Approximately 11 acres of the land are subject to
a ground lease expiring in 2078, and approximately 2 acres are
owned in Fee simple.
The purchase price of S and A was approximately $15,648,000 of
which $4,728,000 was paid in cash and $10,920,000 was financed by
the proceeds of a mortgage. The Trust has agreed in principle to
sell a 25% interest in S and A, as of March 29, 2000, to a group
consisting principally of employees of Hekemian on the same basis
and cost to the Trust. The Trust advanced this group $1,016,000
towards the purchase price of S and A. The advance accrues
interest at 8.44% and amounted to approximately $21,000 during
the three months ended January 31, 2001. As of January 31, 2001,
the group owes an aggregate amount of $1,087,000. The receivable
and accrued interest are expected to be paid within the next
quarter.
The following unaudited pro forma information (in thousands of
dollars, except per share amounts) shows the results of
operations for the three months ended January 31, 2000 as though
S and A had been acquired at the beginning of fiscal 2000:
Revenue $4,587
Expenses 3,647
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Income before minority interest 940
Minority interest (9)
------
Net income $ 931
======
Earnings per share $ .60
======
The unaudited pro forma results include adjustments for
depreciation based on the purchase price, increased interest
expense and reduced net investment income related to assets
utilized to make the acquisition, and obligations incurred to
complete the transaction.
The unaudited pro forma results of operations set forth above are
not necessarily indicative of the results that would have
occurred had the acquisition been made at the beginning of fiscal
2000 or of future results of operations of the Trust's combined
properties.
Note 3 - Commitments and contingencies:
Leases:
Retail tenants:
The Trust leases retail space having a net book value of
approximately $70,074,000 at January 31, 2001 to tenants for
periods of up to twenty-five years. Most of the leases
contain clauses for reimbursement of real estate taxes,
maintenance, insurance and certain other operating expenses
of the properties. Minimum rental income (in thousands of
dollars) to be received from noncancelable operating leases
in years subsequent to January 31, 2001 are as follows:
Year Ending
January 31, Amount
------------ ---------
2002 $ 7,832
2003 7,657
2004 7,027
2005 6,294
2006 5,945
Thereafter 45,433
--------
Total $ 80,188
========
The above amounts assume that all leases which expire are
not renewed and, accordingly, neither minimal rentals nor
rentals from replacement tenants are included.
Minimum future rentals do not include contingent rentals,
which may be received under certain leases on the basis of
percentage of reported tenants' sales volume or increases in
Consumer Price Indices. Contingent rentals included in
income for the three months ended January 31, 2001 and 2000
were not material.
Residential tenants:
Lease terms for residential tenants are usually one year or
less.
Environmental concerns:
In accordance with applicable regulations, the Trust reported to
the New Jersey Department of Environmental Protection ("NJDEP")
that a historical discharge of hazardous material was discovered
in 1997 at the renovated Franklin Lakes shopping center (the
"Center").
In November 1999, the Trust received a no further action letter
from the NJDEP concerning the historical discharge at the Center.
However, the Trust is required to continue monitoring such
discharge, the cost of which will not be material.
Note 4 - Equity incentive plan:
On September 10, 1998, the Board of Trustees approved the Trust's
Equity Incentive Plan (the "Plan") which was ratified by the
Trust's shareholders on April 7, 1999, whereby up to 230,000 of
the Trust's shares of beneficial interest may be granted to key
personnel in the form of stock options, restricted share awards
and other share-based awards. In connection therewith, the Board
of Trustees approved an increase of 230,000 shares in the Trust's
number of authorized shares of beneficial interest. Key personnel
eligible for these awards include trustees, executive officers
and other persons or entities including, without limitation,
employees, consultants and employees of consultants, who are in a
position to make significant contributions to the success of the
Trust. Under the Plan, the exercise price of all options will be
the fair market value of the shares on the date of grant. The
consideration to be paid for restricted share and other
share-based awards shall be determined by the Board of Trustees,
with the amount not to exceed the fair market value of the shares
on the date of grant. The maximum term of any award granted may
not exceed ten years. The Board of Trustees will determine the
actual terms of each award.
Upon ratification of the Plan on April 7,1999, the Trust issued
188,500 stock options which it had previously granted to key
personnel on September 10, 1998. The fair value of the options on
the date of grant was $30 per share. The options, all of which
are outstanding at January 31, 2001, are exercisable through
September 2008.
In accordance with the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB
25"), the Trust will recognize compensation costs as a result of
the issuance of restricted share and other share-based awards
based on the excess, if any, of the fair value of the underlying
stock at the date of grant or award (or at an appropriate
subsequent measurement date) over the amount the recipient must
pay to acquire the stock. Therefore, the Trust will not be
required to recognize compensation expense as a result of any
grants of stock options, restricted share and other share-based
awards at an exercise price that is equivalent to or greater than
fair value. The Trust will also make pro forma disclosures, as
required by Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"), of net
income or loss as if a fair value based method of accounting for
stock options had been applied instead if such amounts differ
materially from the historical amounts.
In the opinion of management, if compensation cost for the stock
options granted in 1999 had been determined based on the fair
value of the options at the grant date under the provisions of
SFAS 123 using the Black-Scholes option pricing model and
assuming a risk-free interest rate of 5.25%, expected option
lives of ten years, expected volatility of 1% and expected
dividends of 7.13%, the Company's pro forma net income and pro
forma basic net income per share arising from such computation
would not have differed materially from the corresponding
historical amounts.
Note 5 - Deferred fee plan:
During the three months ended January 31, 2001, the Board of
Trustees adopted a deferred fee plan (the "Plan") for its
Officers and its Trustees. Pursuant to the Plan, any Officer or
Trustee may elect to defer receipt of any fees which would be due
them. The Trust has agreed to pay any participant in the Plan
("Participant"), interest on any deferred fee at the rate of nine
percent (9%) per annum, compounded quarterly. Any such deferred
fee is to be paid to Participants at the later of: (i) the
retirement age specified in the deferral election; (ii) actual
retirement; or (iii) upon cessation of a Participants duties as
an Officer or Trustee. The Plan provides that any such deferral
fee will be paid in a lump sum or in annual installments over a
period not to exceed 10 years, at the election of the
Participant. As of January 31, 2001, approximately $25,000 has
been deferred.
* * *
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The Registrant is an equity REIT that owns a portfolio of residential apartment
and retail properties. The Registrant's revenues consist primarily of fixed
rental income and additional rent in the form of expense reimbursements derived
from its income producing retail properties. The Registrant also receives income
from its 40% owned affiliate, Westwood Hills LLC ("Westwood Hills"), which owns
a residential apartment property. The Registrant's policy has been to acquire
real property for long-term investment.
The following discussion should be read in conjunction with the Registrant's
financial statements and related notes included elsewhere in this Form 10-Q and
its Annual Report on Form 10-K for the year ended October 31, 2000. Certain
statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" may constitute forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Although the Registrant believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, such statements
are subject to risks and uncertainties, including those discussed elsewhere in
this Form 10-Q, that could cause actual results to differ materially from those
projected.
Results of Operations:
Quarters ended January 31, 2001 and 2000
Revenues
For the quarter ended January 31, 2001 ("Current Quarter"), total revenues
increased $680,000 (16.4%) to $4,818,000 compared to the quarter ended January
31, 2000 ("Prior Quarter"). The revenue increase results from the following:
Increased revenues from real estate operations $ 710,000
Increase in Equity of Earnings of Affiliate 6,000
Decrease in Investment Income (36,000)
-----------
Net Increase $ 680,000
===========
Real Estate Operations: Revenues from real estate operations increased $710,000
- -----------------------
(18.4%), to $4,570,000 for the Current Quarter compared to $3,860,000 for the
Prior Quarter. The principal increase, $553,000, came from Olney Town Center
("Olney"), which was acquired on March 29, 2000, and not included in operations
for the Prior Quarter. Additionally, significant increases were recorded from
operations at the Franklin Crossing shopping center and from the Registrant's
residential properties.
Investment Income: Investment income during the Current Quarter was derived
- -------------------
principally from three major sources:
1. Government agency bonds ........ $9,506,000 Fixed Interest
2. Institutional Money Market...... $1,975,000 Variable Interest
3. Related Party................... $1,016,000 Fixed Interest
The decline in Investment Income of $36,000 results primarily from the sale of
approximately $5 million of Government Agency Bonds, the proceeds of which were
used to acquire the Olney Town Center during March 2000. This interest decline
was partially offset by interest earned on the amount due from related party.
Earnings From 40% Owned Affiliate: Earnings at the Trust's affiliate which owns
- ----------------------------------
a 210 unit garden apartment community in Westwood, NJ, increased 26.7% for the
Current Quarter over the Prior Quarter. This increase resulted in the increase
in the Trust's Equity in income of affiliate.
On a historical cost basis, the Trust's investment in its affiliate (Westwood
Hills, LLC) is carried on the Trust's balance sheet as a liability (negative
basis) of $386,000. This represents the cumulative amounts of cash flow
distributions and mortgage re-financings proceeds distributed to the Trust in
excess of the Trust's investment
Expenses:
Total expenses before state income taxes increased 16.2% to $3,696,000 for the
Current Quarter compared to $3,180,000 for the Prior Quarter. Substantially, all
of the increase is attributable to expenses at Olney, which was not included in
the Prior Quarter - See Table below (in thousands of dollars):
EXPENSE COMPARISON Quarter Ended
1/31/01
--------------------------------- Quarter
Without Ended
Consolidated Olney Olney 1/31/00 Change
------------ ----- ----- ------- ------
Operating Expenses $ 1,006 $ 109 $ 897 $ 934 $(37)
Management Fees 175 13 162 153 9
Real Estate Taxes 579 50 529 511 18
Financing Costs 1,378 243 1,135 1,150 (15)
Depreciation 548 94 454 432 22
Minority interest 10 10 - -
------------ ----- ------ ------- ------
$ 3,696 $ 519 $3,177 $3,180 $ (3)
============ ===== ====== ======= ======
While Utility and Snow Removal cost increases did materialize, they were offset
by reductions in other operating expenses, including a 29% reduction in the
Trust's General Administrative expenses.
Net Income:
For the Current Quarter Net Income increased $162,000 (17%) to $1,117,000 from
$955,000 for the Prior Quarter. The changes that affected Net Income are
summarized in the following table (in thousands):
Real estate Operations $ 387
Income from Affiliate 6
Investment income (36)
Financing costs (228)
General Administrative 33
------
$ 162
======
Real Estate Operations: Earnings from real estate operations (before financing
- ------------------------
costs) increased $387,000 (19.9%) during the Current Quarter over the Prior
Quarter. This increase resulted from increased earnings at the Trust's
residential properties due to rent increases out pacing expenses. Earnings at
the Trust's retail properties increased primarily from the inclusion during the
Current Quarter of Olney's operations (see above), and from increased
profitability at the Trust's Franklin Crossing shopping center in Franklin
Lakes, NJ.
Grand Union Bankruptcy: As previously reported, the Registrant has two Grand
Union supermarkets, one at Franklin Crossing (Franklin Lakes, NJ), and one at
Westwood Plaza (Westwood, NJ). The leases for these supermarkets are about to be
acquired from Grand Union by C&S Wholesaler Inc. ("C&S"). C&S will then sell the
leases to The Stop & Shop Supermarket Company ("Stop & Shop"). Stop & Shop
operates 274 superstores and supermarkets in Connecticut, Massachusetts, New
Jersey, New York, and Rhode Island. Stop & Shop has notified the Trust that the
Franklin Crossing supermarket will be converted to, and operated as a Stop &
Shop. As of this date, the Trust has received no notification as to Stop &
Shop's intentions with the lease at the Westwood Plaza Shopping Center. How
these transactions will affect the short-term operations of the centers where
these supermarkets are located cannot be measured at this time.
Income from Affiliate: See Revenues above.
- ----------------------
Investment Income: See Revenues above.
- ------------------
Financing Costs: This increase is principally attributable to the debt service
- ----------------
incurred to acquire Olney. See Expense Comparison Table above.
General Administrative: Reduced Trustee's fee, professional fees, and corporate
- -----------------------
overhead resulted in the Current Quarter's reductions.
Funds From Operations ("FFO")
FFO is considered by many as a standard measurement of a REIT's performance. The
Registrant computes FFO as follows (in thousands of dollars):
Quarter Ended
---------------------------------
1/31/01 1/31/00
--------------- --------------
Net Income $ 1,117 $ 955
Depreciation - Real Estate 548 432
Amortization of Deferred Mortgage Costs 32 23
Deferred Rents (107) (93)
Capital Improvements - Apartments (100) (60)
Other 36 22
--------------- -------------
Funds From Operations $ 1,526 $ 1,279
=============== =============
FFO does not represent cash generated from operating activities in accordance
with generally accepted accounting principles ("GAAP"), and therefore should not
be considered a substitute for net income as a measure of results of operations
or for cash flow from operations as a measure of liquidity. Additionally, the
application and calculation of FFO by certain other REITs may vary materially
from that of the Registrant, and therefore the Registrant's FFO and the FFO of
other REITs may not be directly comparable.
Liquidity and Capital Resources
At January 31, 2001, the Registrant's cash, cash equivalents and marketable
securities totaled $11,765,000 compared to $12,376,000 at October 31, 2000.
These funds and the funds generated from operations are available for property
acquisitions.
At January 31, 2001, the Registrant's aggregate outstanding mortgage debt was
approximately $70 million. Approximately $59.1 million bears a fixed weighted
average interest cost of 7.59%, and an average life of 8.87 years. Approximately
$10.9 million of mortgage debt bears an interest rate equal to 175 basis points
over LIBOR and resets every 90 days. The Registrant anticipates that the cash
flow from operations will be more than sufficient to meet the Registrant's
operational needs and mortgage obligations. As a result of the long-term fixed
rate financing, the Registrant believes that its exposure to market risk
relating to interest rate risk is not material.
The Registrant has invested approximately $9.5 million in short-to-intermediate
fixed rate Government Agency Bonds. These bonds yield a weighted average
interest of 6.489% and have a weighted maturity of 26.7 months. Since the market
value of these bonds are interest rate sensitive, a sale of all or a portion of
these bonds prior to maturity in a high interest rate environment, may result in
a loss to the Registrant (See Investment Income above).
The Registrant makes capital improvements to its properties when it deems such
improvements to be necessary or appropriate. The short-term impact of such
capital outlays will be to depress the Registrant's current cash flow. The
Registrant is now experiencing the benefits of these expenditures by preserving
the physical integrity of its properties and securing increased rentals. Other
than the apartment rehabilitation program described above, the Registrant has
made no commitments and has no understandings for any material capital
expenditure during fiscal 2001 other than in the ordinary course of business.
Dividends
For the quarter ended January 31, 2001, the Registrant has declared a dividend
of $.60 per share payable on March 16, 2001 to share holders of record on March
2, 2001. This compares to a $.50 per share dividend paid for the quarter ended
January 31, 2000.
Inflation
The Registrant anticipates that the U.S. Mid-Atlantic States will continue to
experience moderate growth with limited inflation. Any sustained inflation may,
however, negatively impact the Registrant in at least two areas: (i) the
interest costs of the Registrant's LIBOR based mortgage and on any new mortgage
financing; and (ii) higher real estate operating costs, especially in those
areas where such costs are not chargeable to commercial tenants.
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Liquidity and Capital Resources" above.
Part II: Other Information
Item 6. Exhibits and Reports of Form 8-K
A) On December 15, 2001, the Registrant filed a Report on Form 8-K,
which is incorporated herein by reference. The Form 8-K reported
the Registrant's results or operations for the twelve and three
months ended October 31, 2000 and included a copy of Registrant's
press release.
B) Exhibit 10. Deferred Fee Plan (for Officers and/or Trustees) and
Amendment No. I to the Plan.
SIGNATURES
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.
FIRST REAL ESTATE INVESTMENT
TRUST OF NEW JERSEY
----------------------------
(Registrant)
Date: March 7, 2001
/s/ William R. DeLorenzo, Jr.
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(Signature)*
William R. DeLorenzo, Jr.
Executive Secretary and Treasurer
*Print name and title of the signing officer under his signature.