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, 1998 Commission File No. 2-48728
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
(exact name of registrant as specified in its charter)
New Jersey 22-1697095
- ------------------------------- -------------------
(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 [ X ] No [ ]
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
INDEX
Part I: Financial Information
Item 1: Financial Statements
a.) Combined Balance Sheets for January 31, 1998 and
October 31, 1997;
b.) Combined Statements of Income and Undistributed
Earnings For Three Months Ended January 31, 1998 and
1997;
c.) Combined Statements of Cash Flows for Three Months
Ended January 31, 1998 and 1997;
Item 2: Management's Discussion and Analysis of Results of Operations
and Financial Condition
Part II: Other Information
Item 6. Exhibits and Reports on Form 8-K
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the
attached financial statements and notes thereto, and the Registrant's audited
financial statements and notes thereto for Fiscal Year ended October 31, 1997.
Results of Operations
The earnings per share were $0.51 for the First Quarter 1998 as
compared to $0.46 per share for the First Quarter of 1997.
The increase in earnings per share was primarily due to the purchase of
the shopping center located in Patchogue, New York and the rental income
received from the Franklin Lakes, New Jersey shopping center which is in the
process of being leased to third parties.
Rental income increased from $2,486,000 for the First Quarter of 1997
to $2,915,000 for the First Quarter of 1998.
Financial Condition
The Registrant continues to generate cash sufficient to meet all of its
operational needs. Registrant does not anticipate that it will be required to
borrow funds to sustain the current dividend payment schedule of $0.35 per share
for each of the first three quarters of Fiscal Year 1998. The dividend of $0.40
per share was paid on March 16, 1998 to Shareholders of Record as of March 2,
1998.
The dividend payment of $0.40 per share represents a $0.05 per share
increase over the dividend payment for the first three quarters of fiscal year
1997.
Item 6. Exhibits and Reports on Form 8-K
The Registrant did not file any 8-K Reports during the First
Quarter 1998.
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 April 2, 1998
/s/ William R. DeLorenzo, Jr.
-----------------------------
(Signature)*
William R. DeLorenzo, Jr.
Executive Secretary and Treasurer
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*Print name and title of the signing officer under his signature.
SALES OF UNREGISTERED SECURITIES (DEBT OR EQUITY)
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
N O N E
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
BALANCE SHEETS
JANUARY 31, 1998 AND OCTOBER 31, 1997
(Unaudited)
January October
31, 1998 31, 1997
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ASSETS (In Thousands
of Dollars)
Real estate, at cost, net of accumulated depreciation ............... $65,220 $53,737
Equipment, at cost, net of accumulated depreciation of $665,000
and $657,000 .................................................... 179 184
Investment in affiliate ............................................. 1,861 1,905
Cash and cash equivalents ........................................... 433 228
Tenants' security accounts .......................................... 746 719
Sundry receivables .................................................. 372 280
Prepaid expenses and other assets ................................... 697 1,470
Deferred charges, net ............................................... 1,175 710
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Totals ................................................... $70,683 $59,233
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages payable ............................................... $48,356 $24,429
Note payable - bank ............................................. 11,429
Accounts payable and accrued expenses ........................... 363 409
Construction liabilities ........................................ 123 496
Dividends payable ............................................... 624 1,326
Tenants' security deposits ...................................... 938 905
Deferred revenue ................................................ 123 255
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Total liabilities ........................................ 50,527 39,249
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Commitments and contingencies
Shareholders' equity:
Shares of beneficial interest without par value; 1,560,000 shares
authorized;1,559,788 shares issued and outstanding .......... 19,314 19,314
Undistributed earnings .......................................... 842 670
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Total shareholders' equity ............................... 20,156 19,984
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Totals ................................................... $70,683 $59,233
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See Notes to Financial Statements.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
(Unaudited)
1998 1997
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INCOME (In Thousands
of Dollars,
Except per
Share Amounts)
Revenue:
Rental income ............................ $ 2,918 $ 2,486
Reimbursements ........................... 383 328
Equity in income of affiliate ............ 36 31
Sundry income ............................ 37 41
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Totals ............................... 3,374 2,886
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Expenses:
Operating expenses ....................... 724 645
Management fees .......................... 128 121
Real estate taxes ........................ 442 430
Interest ................................. 906 660
Depreciation ............................. 375 317
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Totals ............................... 2,575 2,173
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Income before state income taxes ............. 799 713
Provision for state income taxes ............. 3 3
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Net income ................................... $ 796 $ 710
======= =======
Earnings per share ........................... $ .51 $ .46
======= =======
UNDISTRIBUTED EARNINGS
Balance, beginning of period ................. $ 670 $ 670
Net income ................................... 796 710
Less dividends ............................... (624) (546)
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Balance, end of period ....................... $ 842 $ 834
======= =======
Dividends per share .......................... $ .40 $ .35
======= =======
See Notes to Financial Statements.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
(Unaudited)
1998 1997
-------- --------
(In Thousands
of Dollars)
Operating activities:
Net income ................................................... $ 796 $ 710
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ............................ 400 326
Deferred revenue ......................................... (132) (133)
Equity in income of affiliate ............................ (36) (31)
Changes in operating assets and liabilities:
Tenants' security accounts ............................ (27) 7
Sundry receivables, prepaid expenses and other assets . 681 339
Deferred charges ...................................... (33)
Accounts payable and accrued expenses ................. (46) (19)
Tenants' security deposits ............................ 33 (7)
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Net cash provided by operating activities ......... 1,669 1,159
-------- --------
Investing activities:
Capital expenditures ......................................... (4,726) (320)
Distributions from affiliate ................................. 80
-------- --------
Net cash used in investing activities ............. (4,646) (320)
-------- --------
Financing activities:
Dividends paid ............................................... (1,326) (1,029)
Proceeds (repayments) of note payable - bank ................. (11,429) 429
Net proceeds from mortgage refinancing ....................... 5,443
Proceeds from mortgage borrowings ............................ 11,100
Repayment of mortgages ....................................... (116) (131)
Deferred mortgage costs ...................................... (490)
-------- --------
Net cash provided by (used in) financing activities 3,182 (731)
-------- --------
Net increase in cash and cash equivalents ........................ 205 108
Cash and cash equivalents, beginning of period ................... 228 189
-------- --------
Cash and cash equivalents, end of period ......................... $ 433 $ 297
======== ========
Supplemental disclosure of cash flow data:
Interest paid ................................................ $ 906 $ 660
======== ========
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
(Unaudited)
Supplemental schedule of noncash financing activities:
Dividends declared but not paid amounted to $624,000 and $546,000 at January
31, 1998 and 1997, respectively.
During the three months ended January 31, 1998, the Trust completed its
acquisition of a 64,000 square foot commercial property in Patchogue, New
York for approximately $11,000,000, in part, with the proceeds of a
$7,500,000 mortgage.
See Notes to Financial Statements.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies:
Organization:
First Real Estate Investment Trust of New Jersey (the
"Trust") was organized on November 1, 1961 as a New Jersey
Business Trust. The Trust is engaged in owning residential
and commercial income producing properties located 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.
The Trust is subject to Federal income tax on undistributed
taxable income and capital gains. The Trust may make an
annual election under Section 858 of the Internal Revenue
Code to apply part of the regular dividends paid in each
respective subsequent year as a distribution for the
immediately preceding year.
Basis of presentation:
The financial information included herein as at January 31,
1998 and for the three months ended January 31, 1998 and
1997 is unaudited and, in the opinion of the Trust, reflects
all adjustments (which include only normal recurring
accruals) necessary for a fair presentation of the financial
position as of that date and the results of operations for
those periods. The information in the balance sheet as of
October 31, 1997 was derived from the Trust's audited annual
report for 1997.
Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assump-tions that affect certain
reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Investment in affiliate:
The Trust's 40% investment in Westwood Hills, LLC (the
"Affiliate") is accounted for using the equity method.
Cash and cash equivalents:
The Trust maintains its cash in bank deposit accounts which,
at times, may exceed Federally insured limits. The Trust
considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
At October 31, 1997, the Trust had no cash equivalents.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies (concluded):
Depreciation:
Real estate and equipment are depreciated on the
straight-line method by annual charges to operations
calculated to absorb costs of assets over their estimated
useful lives.
Revenue recognition:
Income from leases is recognized on a straight-line basis
regardless of when payment is due. Lease agreements between
the Trust and commercial tenants generally provide for
additional rentals based on such factors as percentage of
tenants' sales in excess of specified volumes, increases in
real estate taxes, Consumer Price Indices and common area
maintenance charges. These additional rentals are generally
included in income when reported to the Trust, when billed
to tenants or ratably over the appropriate period.
Deferred charges:
Deferred charges consist of mortgage costs and leasing
commissions. Deferred mortgage costs are amortized on the
straight-line method by annual charges to operations over
the terms of the mortgages. Deferred leasing commissions are
amortized on the straight-line method over the terms of the
applicable leases.
Advertising:
The Trust expenses the cost of advertising and promotions as
incurred. Advertising costs charged to operations amounted
to approximately $14,000 and $5,000 for the three months
ended January 31, 1998 and 1997, respectively.
Earnings per share:
Earnings per share are computed based on the weighted
average number of shares outstanding. The weighted average
number of shares outstanding was 1,559,788 for each of the
three month periods ended January 31, 1998 and 1997.
Reclassifications:
Certain amounts in the 1997 financial statements have been
reclassified to conform with the current presentation.
Note 2 - Investment in affiliate:
The Trust is a 40% member of the Affiliate, 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 the Affiliate are either trustees of
the Trust or their families or officers of Hekemian. The
Affiliate owns a residential apartment complex located in
Westwood, New Jersey.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 2 - Investment in affiliate (concluded):
Summarized financial information of the Affiliate as of January
31, 1998 and October 31, 1997 and for the three months ended
January 31, 1998 and 1997 is as follows:
January October
31, 1998 31, 1997
------- -------
(In Thousands
of Dollars)
Balance sheet data:
Assets:
Real estate and equipment, net ... $14,625 $14,696
Other ............................ 486 551
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Total assets ................. $15,111 $15,247
======= =======
Liabilities and equity:
Liabilities:
Mortgage payable ............... $10,151 $10,192
Other .......................... 311 295
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Totals ..................... 10,462 10,487
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Members' equity:
Trust .......................... 1,861 1,905
Others ......................... 2,788 2,855
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Totals ..................... 4,649 4,760
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Total liabilities and equity $15,111 $15,247
======= =======
Three Months
Ended
January 31,
-------------
1998 1997
---- ----
(In Thousands
of Dollars)
Income statement data:
Rental revenue ... $645 $619
Rental expenses .. 556 541
---- ----
Net income ....... $ 89 $ 78
==== ====
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 3 - Real estate:
Real estate consists of the following:
Range
of Estimated January October
Useful Lives 31, 1998 31, 1997
------------ -------- --------
(In Thousands
of Dollars)
Land $22,365 $20,244
Unimproved land 2,303 2,310
Apartment buildings 7-40 years 10,824 10,711
Commercial buildings and shopping
centers 15-50 years 39,136 30,328
Construction in progress 2,940 2,126
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77,568 65,719
Less accumulated depreciation 12,348 11,982
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Totals $65,220 $53,737
======= =======
Note 4 - Mortgages payable:
Mortgages payable consist of the following:
January October
31, 1998 31, 1997
-------- --------
(In Thousands
of Dollars)
Northern Life Insurance Cos. (A) $19,063 $19,123
Travelers Insurance (B) 5,181
National Realty Funding L.C. (B) 10,600
Summit Bank (C) 102 125
Summit Bank (D) 7,491
Federal Home Loan Mortgage Corporation (E) 11,100
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Totals $48,356 $24,429
======= =======
(A) The mortgage is payable in monthly installments of
$152,153 including interest at 8.31% through June
2007 at which time the outstanding balance is due.
The mortgage is secured by a shopping center in
Frederick, Maryland having a net book value of
approximately $24,977,000.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 4 - Mortgages payable (concluded):
(B) On January 9, 1998, the Trust repaid the existing
mortgage on the Westwood, New Jersey shopping center
utilizing proceeds from a new mortgage in the amount
of $10,600,000 with National Realty Funding L.C. The
new mortgage is payable in monthly installments of
$73,248 including interest at 7.38% through February
2013 at which time the outstanding balance is due.
The mortgage is secured by a shopping center in
Westwood, New Jersey having a net book value of
approximately $11,650,000.
(C) Payable in monthly installments of $8,555 including
interest at 7.625% through March 1999. The mortgage
is secured by an apartment building in Spring Lake,
New Jersey having a net book value of approximately
$563,000. One of the directors of the bank is a
trustee of the Trust.
(D) Payable in monthly installments of $54,816 including
interest at 7.375% through January 2005 at which time
the outstanding balance is due. The mortgage is
secured by a commercial building in Patchogue, New
York having a net book value of approximately
$10,897,000.
(E) Payable in monthly installments of $76,023 including
interest at 7.29% through July 2010 at which time the
outstanding balance is due. The mortgage is secured
by an apartment building in Wayne, New Jersey having
a net book value of approximately $1,620,000.
Principal amounts (in thousands of dollars) due under the above
obligations in each of the five years subsequent to January 31,
1998 are as follows:
Year Ending
January 31, Amount
----------- ------
1999 $666
2000 616
2001 663
2002 716
2003 774
Based on borrowing rates currently available to the Trust, the
carrying amount of mortgages payable approximates fair value at
January 31, 1998.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 5 - Note payable - bank:
At October 31, 1997, note payable - bank consisted of borrowings
under a revolving line of credit agreement with Summit Bank
which expires on April 30, 1998. Maximum borrowings under the
agreement were $12,300,000 and $20,000,000 at January 31, 1998
and October 31, 1997, respectively. The first $10,000,000 of
borrowings under the line of credit bear interest at either the
prime rate or the LIBOR rate plus 200 basis points. Any excess
borrowings bear interest at either the prime rate plus .5% or
the LIBOR rate plus 250 basis points. Outstanding borrowings are
secured by all of the Trust's properties except the shopping
centers located in Frederick, Maryland and Westwood, New Jersey,
commercial property in Patchogue, New York, an apartment
building in Wayne, New Jersey, and any vacant land owned by the
Trust. There were no outstanding borrowings under the agreement
at January 31, 1998.
Note 6 - Commitments and contingencies:
Leases:
Commercial tenants:
The Trust leases commercial space having a net book value
of approximately $57,381,000 at January 31, 1998 to
tenants for periods of up to twenty 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, 1998
are as follows:
Year Ending
January 31, Amount
----------- --------
1999 $ 5,851
2000 5,536
2001 5,202
2002 4,957
2003 4,625
Thereafter 51,514
--------
Total $ 77,685
========
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 each of the three months ended January 31, 1998
and 1997 were not material.
Residential tenants:
Lease terms for residential tenants are usually one year
or less.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 6 - Commitments and contingencies (concluded):
Standby letters of credit:
At January 31, 1998, the Trust was obligated under
irrevocable standby letters of credit of approximately
$1,550,000 in connection with certain required land
improvements at the Franklin Lakes shopping center. In
February 1998, such amount was reduced to $100,000.
Environmental concerns:
In accordance with applicable regulations, the Trust
reported to the New Jersey Department of Environmental
Protection that a discharge of hazardous material was
recently discovered at the newly renovated Franklin Crossing
Shopping Center (the "Center").
At present, the discharge material appears to be isolated
and management believes there will be no significant effect
on the operations of the Center.
In connection therewith, the Trust is required to
investigate and monitor such discharge, the cost of which
will not be material.
Note 7 - Management agreement and related party transactions:
The properties owned by the Trust are currently managed by
Hekemian. The management agreement requires fees equal to a
percentage of rents collected. Such fees were approximately
$128,000 and $121,000 for the three months ended January 31,
1998 and 1997, respectively.
Note 8 - Earnings per share:
Earnings per share, based on the weighted average number of
shares outstanding during each period, are comprised of ordinary
income.
* * *