FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly Report under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For Quarter Ended April 30, 2001 Commission File Number 1-12803
-------------- -------
URSTADT BIDDLE PROPERTIES INC.
(Exact Name of Registrant as Specified in Charter)
MARYLAND 04-2458042
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
321 Railroad Avenue, Greenwich, CT 06830
- ----------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 863-8200
The number of shares of Registrant's Common Stock and Class A Common Stock
outstanding as of the close of period covered by this report were: __6,234,396_
Common Shares, par value $.01 per share and __5,446,350_ Class A Common Shares,
par value $.01 per share
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
THE SEC FORM 10-Q, FILED HEREWITH, CONTAINS 18 PAGES, NUMBERED CONSECUTIVELY
FROM 1 TO 18 INCLUSIVE, OF WHICH THIS PAGE IS 1.
1
INDEX
URSTADT BIDDLE PROPERTIES INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets--April 30, 2001 and October 31,
2000.
Consolidated Statements of Income--Six months ended April 30,
2001 and 2000; Three months ended April 30, 2001 and 2000
Consolidated Statements of Cash Flows--Six months ended April
30, 2001 and 2000.
Consolidated Statements of Stockholders' Equity--Six months
ended April 30, 2001 and 2000.
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 about Market Risk.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
2
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
April 30 October 31
---------------- -----------------
ASSETS 2001 2000
---- ----
(Unaudited)
Real Estate Investments:
Properties owned-- at cost, net of accumulated depreciation $149,149 $146,851
Properties available for sale - at cost, net of accumulated
depreciation and recoveries 12,077 12,158
Investment in unconsolidated joint venture 8,673 9,167
Mortgage notes receivable 2,323 2,379
----- -----
172,222 170,555
Cash and cash equivalents 2,162 1,952
Interest and rent receivable 4,075 3,853
Deferred charges, net of accumulated amortization 3,270 2,824
Other assets 2,435 1,916
----- -----
$184,164 $181,100
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bank loans $ 3,000 $ -
Mortgage notes payable 51,547 51,903
Accounts payable and accrued expenses 2,345 1,222
Deferred officers' compensation 165 102
Other liabilities 2,001 2,090
----- -----
59,058 55,317
------ ------
Minority Interests 4,127 5,140
----- -----
Preferred Stock, par value $.01 per share; 20,000,000 shares authorized; 8.99%
Series B Senior Cumulative Preferred stock, (liquidation preference of
$100
per share); 350,000 shares issued and outstanding in 2001 and 2000 33,462 33,462
------ ------
Stockholders' Equity:
Excess stock, par value $.01 per share; 10,000,000 shares authorized;
none issued and outstanding - -
Common stock, par value $.01 per share; 30,000,000 shares authorized;
6,234,396 and 5,557,387 issued and outstanding shares in 2001 and 2000, respectively 62 55
Class A Common stock, par value $.01 per share; 40,000,000 shares authorized;
5,446,350 and 5,356,249 issued and outstanding shares in 2001 and 2000, respectively 54 54
Additional paid in capital 127,782 122,448
Cumulative distributions in excess of net income (35,087) (33,397)
Unamortized restricted stock compensation and notes receivable
from officers/stockholders (5,294) (1,979)
------- -------
87,517 87,181
------ ------
$184,164 $181,100
======== ========
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
3
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Six Months Ended Three Months Ended
April 30 April 30
------------------- --------------------
2001 2000 2001 2000
---- ---- ---- ----
Revenues:
Operating leases $16,668 $15,102 $8,540 $7,488
Financing leases 6 66 - 29
Interest and other 317 297 174 165
Equity in income of unconsolidated joint venture (8) 212 (12) 183
----- --- ---- ---
16,983 15,677 8,702 7,865
------ ------ ----- -----
Operating Expenses:
Property expenses 5,583 4,994 2,771 2,531
Interest 2,146 2,121 1,086 1,006
Depreciation and amortization 3,342 3,078 1,714 1,568
General and administrative expenses 1,404 1,380 709 608
Directors' fees and expenses 74 90 33 38
-- -- -- --
12,549 11,663 6,313 5,751
------ ------ ----- -----
Operating Income before Minority Interests 4,434 4,014 2,389 2,114
Minority Interests in Results of Consolidated Joint Ventures 226 225 113 112
--- --- --- ---
Operating Income 4,208 3,789 2,276 2,002
Gains on Sales of Real Estate Investments - 1,065 - 1,065
- ----- - -----
Net Income 4,208 4,854 2,276 3,067
Preferred Stock Dividends 1,573 1,573 787 787
----- ----- --- ---
Net Income Applicable to Common and Class A Common Stockholders $2,635 $3,281 $1,489 $2,280
====== ====== ====== ======
Basic Earnings Per Share:
Common $.23 $.30 $.13 $.21
==== ==== ==== ====
Class A Common $.25 $.33 $.14 $.23
==== ==== ==== ====
Weighted Average Number of Shares Outstanding:
Common 5,761 5,349 5,990 5,361
===== ===== ===== =====
Class A Common 5,184 5,054 5,198 5,074
===== ===== ===== =====
Diluted Earnings Per Share:
Common $.23 $.30 $.12 $.20
==== ==== ==== ====
Class A Common $.25 $.33 $.14 $.23
==== ==== ==== ====
Weighted Average Number of Shares Outstanding:
Common and Common Equivalent 5,887 5,422 6,143 5,432
===== ===== ===== =====
Class A Common and Class A Common Equivalent 5,622 5,517 5,593 5,535
===== ===== ===== =====
The accompanying notes to consolidated financial statements are an
integral part of these statements.
4
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Six Months Ended April 30,
2001 2000
---- ----
Operating Activities:
Net income $4,208 $4,854
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,342 3,078
Compensation expense relating to restricted stock 374 305
Recovery of investment in properties owned
subject to financing leases 291 674
Equity in income of unconsolidated joint venture 8 (212)
Gains on sales of real estate investments - (1,065)
(Increase) in interest and rent receivable (223) (536)
Increase in accounts payable and accrued expenses 1,124 638
(Increase) in other assets and other liabilities, net (414) (991)
----- -----
Net Cash Provided by Operating Activities 8,710 6,745
----- -----
Investing Activities:
Acquisition of minority interest (1,013) -
Deposits on acquisitions (150) -
Improvements to properties and deferred charges (6,277) (1,046)
Investment in unconsolidated joint venture (264) (228)
Distributions received from unconsolidated joint venture 750 700
Payments received on mortgage notes receivable 56 59
Net proceeds from sales of properties - 1,620
- -----
Net Cash (Used in) Provided by Investing Activities (6,898) 1,105
------- -----
Financing Activities:
Sales of additional Common and Class A Common shares 1,652 1,311
Payments on mortgage notes payable and bank loans (2,306) (7,522)
Proceeds from mortgage notes payable and bank loans 4,950 6,500
Dividends paid on Common and Class A Common shares (4,325) (3,860)
Dividends paid on Preferred Stock (1,573) (1,573)
Purchases of Common and Class A Common shares - (1,488)
- -------
Net Cash (Used in) Financing Activities (1,602) (6,632)
------- -------
Net Increase In Cash and Cash Equivalents 210 1,218
Cash and Cash Equivalents at Beginning of Period 1,952 2,758
----- -----
Cash and Cash Equivalents at End of Period $2,162 $3,976
====== ======
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands,
except shares and per share data)
Unamortized
Restricted
Common Stock Class A Common Stock (Cumulative Stock
Outstanding Outstanding Additional Distributions Compensation &
Number of Par Number of Par Paid In In Excess of Officer Notes
Shares Value Shares Value Capital Net Income) Receivable Total
------ ----- ------ ----- ------- ----------- ---------- -----
Balances - October 31, 1999 5,531,845 $55 5,184,039 $52 $120,964 $(31,127) $(1,907) $88,037
Net Income Applicable to Common and
Class A Common stockholders - - - - - 3,281 - 3,281
Cash dividends paid :
Common Stock ($.35 per share) - - - - - (1,880) - (1,880)
Class A Common Stock ($.39
per share) - - - - - (1,980) - (1,980)
Sales of additional shares 29,400 - 123,400 1 1,159 - - 1,160
Sales of additional shares
under dividend reinvestment plan 9,720 - 9,972 - 152 - - 152
Shares issued under restricted stock 47,500 1 47,500 1 688 - (690) -
plan
Amortization of restricted stock
compensation - - - - - - 305 305
Purchases of shares (80,200) (1) (121,700) (2) (1,485) - - (1,488)
-------- --- --------- --- ------- -- --- -------
Balances - April 30, 2000 5,538,265 $55 5,243,211 $52 $121,478 $(31,706) $(2,292) $87,587
========= === ========= === ======== ========= ======== =======
Balances - October 31, 2000 5,557,387 $55 5,356,249 $54 $122,448 $(33,397) $(1,979) $87,181
Net Income Applicable to Common and
Class A Common stockholders - - - - - 2,635 - 2,635
Cash dividends paid :
Common Stock ($.36 per share) - - - - - (2,199) - (2,199)
Class A Common Stock ($.40 per share) - - - - - (2,126) - (2,126)
Sales of additional shares 200,000 2 5,000 - 1,433 - - 1,435
Sales of additional shares
under dividend reinvestment plan 10,009 - 12,242 - 172 - - 172
Shares issued under restricted stock plan 48,000 - 48,000 - 686 - (686) -
Shares issued upon exercise of
stock options 419,000 5 24,859 - 3,043 - - 3,048
Amortization of restricted stock
compensation - - - - - - 374 374
Note from officer for purchase of
common shares under stock option plan - - - - - - (3,003) (3,003)
--------- --- --------- ---- -------- ------- -------- -------
Balances - April 30, 2001 6,234,396 $62 5,446,350 $54 $127,782 $(35,087) $(5,294) $87,517
========= === ========= === ======== ========= ======== =======
The accompanying notes to consolidated financial statements are an integral part
of these statements.
6
URSTADT BIDDLE PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Business
Urstadt Biddle Properties Inc., (the "Company") is a Maryland corporation that
has qualified as a real estate investment trust (REIT) under the Internal
Revenue Code, as amended. A REIT, among other things, that distributes at least
95% of its real estate trust taxable income will not be taxed on that portion of
its taxable income which is distributed. The Company believes it qualifies and
intends to continue to qualify as a REIT. The Company is engaged in the
acquisition, ownership and management of commercial real estate, primarily
neighborhood and community shopping centers in the northeastern part of the
United States. Other assets include office and retail buildings and industrial
properties. The Company's major tenants include supermarket chains and other
retailers who sell basic necessities. As of April 30, 2001, the Company owned 22
properties containing a total of 3.2 million gross leasable square feet.
Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of the Company, its wholly-owned subsidiaries, and joint ventures in
which the Company has the ability to control the affairs of the venture. All
significant intercompany transactions and balances have been eliminated. The
Company's investment in an unconsolidated joint venture in which it does not
exercise control is accounted for by the equity method of accounting. The
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Results of operations for the six-month period ended April 30, 2001 are not
necessarily indicative of the results that may be expected for the year ending
October 31, 2001. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended October 31, 2000.
The preparation of financial statements requires management to make use of
estimates and assumptions that affect amounts reported in the financial
statements as well as certain disclosures. Actual results could differ from
those estimates.
Income Recognition
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition ("SAB No. 101"), to provide
guidance on the recognition, presentation and disclosure of revenue in financial
statements. Specifically, SAB No. 101, among other things, provides guidance on
lessors' accounting for contingent rent. SAB No. 101 did not require the Company
to change existing revenue recognition policies and therefore had no impact on
the Company's financial position or results of operations.
7
Earnings Per Share
Basic EPS excludes the impact of dilutive shares and is computed by dividing net
income applicable to Common and Class A Common stockholders by the weighted
number of Common shares and Class A Common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue Common shares or Class A Common shares were exercised
or converted into Common shares or Class A Common shares and then shared in the
earnings of the Company. Since the cash dividends declared on the Company's
Class A Common stock are higher than the dividends declared on the Common Stock,
basic and diluted EPS have been calculated using the "two-class" method. The
two-class method is an earnings allocation formula that determines earnings per
share for each class of common stock according to the weighted average of the
dividends declared, outstanding shares per class and participation rights in
undistributed earnings.
The following table sets forth the reconciliation between basic and diluted EPS
(in thousands):
Six Months Ended Three Months Ended
April 30, April 30,
2001 2000 2001 2000
---- ---- ---- ----
Numerator
Net income applicable to Common stockholders - basic $1,318 $1,597 $758 $1,110
Effect of dilutive securities:
Operating partnership units 14 4 1 (10)
------ ------ ---- ------
Net income applicable to Common Stockholders - diluted $1,332 $1,601 $759 $1,100
====== ====== ==== ======
Denominator
Denominator for basic EPS-weighted average Common shares 5,761 5,349 5,990 5,361
Effect of dilutive securities:
Stock options and awards 126 73 153 71
--- -- --- --
Denominator for diluted EPS - weighted average Common equivalent shares 5,887 5,422 6,143 5,432
===== ===== ===== =====
Numerator
Net income applicable to Class A Common stockholders - basic $1,317 $1,684 $731 $1,170
Effect of dilutive securities:
Operating partnership units 110 134 54 78
------ ------ ---- ------
Net income applicable to Class A Common stockholders - diluted $1,427 $1,818 $785 $1,248
====== ====== ==== ======
Denominator
Denominator for basic EPS - weighted average Class A Common shares 5,184 5,054 5,198 5,074
Effect of dilutive securities:
Stock options and awards 112 80 140 78
Operating partnership units 326 383 255 383
----- ----- ----- -----
Denominator for diluted EPS - weighted average Class A Common equivalent shares 5,622 5,517 5,593 5,535
===== ===== ===== =====
The weighted average Common equivalent shares and Class A Common equivalent
shares for the six month and three month periods ended April 30, 2001 and 2000
each exclude 54,553 shares. These shares were not included in the calculation of
diluted EPS because the effect would be anti-dilutive.
8
Derivative Instruments and Hedging Activities
The Company adopted the provisions of Financial Accounting Standards Board,
Statement # 133, "Accounting for Derivative Instruments and Hedging Activities"
in the first quarter of fiscal 2001. The statement generally requires that all
derivative instruments be reflected in the financial statements at their
estimated fair value. The Company does not generally enter into derivative
contracts for either investment or hedging purposes and accordingly there was no
effect on the Company's financial position or results of operations as a result
of the adoption of this statement.
2. PROPERTIES AVAILABLE FOR SALE
On February 28, 2001, the Company sold its tire distribution facility comprising
476,000 square feet to the property's sole tenant for $100,000, an amount which
equaled the property's net book carrying amount at the date of sale. The
property was sold pursuant to a purchase option contained in the tenant's lease
on the property.
3. MORTGAGE NOTES PAYABLE AND LINES OF CREDIT
During the first quarter, the Company repaid a mortgage note payable in the
outstanding principal amount of $1,950,000 which was secured by the BiCounty
Shopping Center in Farmingdale, New York. The mortgage matured in January 2001.
The mortgage was repaid from proceeds advanced under the Company's outstanding
$20 million secured revolving credit loan. At April 30, 2001, the Company had
outstanding borrowings of $13.8 million outstanding under the secured revolving
credit line. Outstanding borrowings bear interest at an average annual rate of
6.68%.
The Company also has an unsecured line of credit arrangement with a bank which
was increased to $15 million from $10 million in December 2000. In January,
2001, the Company borrowed $3 million under such line of credit. The line of
credit expires in fiscal 2002 and outstanding borrowings bear interest at LIBOR
+ 2.5%. Any further extensions of credit under the arrangement are at the bank's
discretion and subject to the bank's satisfaction of certain conditions.
Interest on outstanding borrowings on the unsecured line of credit bear interest
at an average annual rate of 7.94%.
In May 2001, the Company borrowed an additional $2.5 million under the unsecured
line of credit. The proceeds were used to fund Tenant improvement costs.
4. MINORITY INTERESTS
The Company is the general partner in Scarborough Associates LP, a consolidated
joint venture that owns the Arcadian Shopping Center in Briarcliff, New York. In
a prior year, the limited partners contributed the property in exchange for
operating partnership units (OPU's) of Scarborough Associates LP. The OPU's are
exchangeable into an equivalent number of shares of the Company's Class A Common
Stock or cash, at the option of the Company after a certain period of years or
upon the occurrence of certain events. In February 2001, the Company redeemed
127,548 OPU's for approximately $1.0 million, an amount equal to the stated Unit
Price, as defined in the partnership agreement. The limited partners interest in
the partnership is reflected in the accompanying consolidated financial
statements as Minority Interest.
9
5. STOCKHOLDER'S EQUITY
On January 5, 2001, the Company sold 200,000 shares of Common Stock and 5,000
shares of Class A Common Stock for total cash proceeds of $1.435 million in a
private placement with two entities controlled by an officer of the Company.
In January 2001, an officer of the Company exercised certain non-qualified stock
options to purchase 419,000 shares of Common Stock and 19,000 shares of Class A
Common Stock at various exercise prices ranging from $6.81 per share to $7.71per
share. The officer signed a promissory note in the amount of $3,003,000 to the
Company to purchase the shares. The promissory note bears interest at a fixed
rate of 6.9%, is due in 2011 and is secured by the shares issued upon exercise
of the stock options. The note is shown as a reduction in stockholders equity as
"notes receivable from officers/stockholders". The exercise of the stock options
and the issuance of the note receivable from officer represent non cash
financing activities and are therefore not included in the accompanying 2001
Consolidated Statement of Cash Flows.
The Company has a Restricted Stock Plan (Plan) which provides for the grant of
restricted stock awards to key employees and directors of the Company. The Plan,
as amended, allows for restricted stock awards of up 350,000 shares each of
Class A Common stock and Common stock. During the six months ended April 30,
2001, the Company awarded 48,000 shares each of Class A Common stock and Common
stock (47,500 shares each of Class A Common stock and Common stock in fiscal
2000) to participants in the Plan as an incentive for future services. The
shares vest after five years. Dividends on vested and non-vested shares are paid
as declared. The market value of shares awarded has been recorded as unamortized
restricted stock compensation and is shown as a separate component of
stockholder's equity. Unamortized restricted stock compensation is being
amortized to expense over the five year vesting period.
6. SEGMENT REPORTING
For financial reporting purposes, the Company has grouped its real estate
investments into two segments: equity investments and mortgage loans. Equity
investments are managed separately from mortgage loans as they require a
different operating strategy and management approach. The Company assesses and
measures operating results for each of its segments, based on net operating
income. For equity investments, net operating income is calculated as rental
revenues of the property less its rental expenses (such as common area expenses,
property taxes, insurance, etc.) and, for mortgage loans, net operating income
consists of interest income less direct expenses, if any.
The revenues, net operating income and assets for each of the reportable
segments are summarized in the following tables for the six month and three
month periods ended April 30, 2001 and 2000. Non-segment assets include cash and
cash equivalents, interest receivable, and other assets. The non-segment
revenues consist principally of interest income on temporary investments. The
accounting policies of the segments are the same as those described in Note1.
(In thousands)
10
All Equity Mortgage Non
Three Months Ended April 30, Properties Loans Segment Total
- -----------------------------------------------------------------------------------------------------------
2001
Total Revenues $ 8,547 $ 74 $ 81 $ 8,702
========= ======= ======= ========
Net Operating Income $ 5,663 $ 74 $ 81 $ 5,818
========= ======= ======= ========
Total Assets $ 181,229 $ 2,323 $ 612 $ 184,164
========== ========= ======= =========
2000
Total Revenues $ 7,700 $ 95 $ 70 $ 7,865
========= ======= ======= ========
Net Operating Income $ 5,056 $ 95 $ 70 $ 5,221
========= ======= ======= ========
Total Assets $ 175,317 $ 4,741 $ 2,748 $ 182,806
========== ========= ======== =========
All Equity Mortgage Non
Six Months Ended April 30, Properties Loans Segment Total
- -----------------------------------------------------------------------------------------------------------
2001
Total Revenues $ 16,700 $ 155 $ 128 $ 16,983
========= ======== ======= ========
Net Operating Income $ 10,891 $ 155 $ 128 $ 11,174
========= ======== ======= ========
Total Assets $ 181,229 $ 2,323 $ 612 $ 184,164
========== ========= ======= =========
2000
Total Revenues $ 15,380 $ 180 $ 117 $ 15,677
========= ======== ======= ========
Net Operating Income $ 10,161 $ 180 $ 117 $ 10,458
========= ======== ======= ========
Total Assets $ 175,317 $ 4,741 $ 2,748 $ 182,806
========== ========= ======== =========
The reconciliation to net income for the combined segments and for the Company
is as follows:
Six Months Three Months
Ended April 30, Ended April 30,
2001 2000 2001 2000
----- ----- ----- ----
Net operating income from reportable segments $ 11,174 $ 10,458 $ 5,818 $ 5,221
--------- --------- --------- --------
Additions:
Gain on sale of real estate - 1,065 - 1,065
--- ----- --- -----
Total Additions - 1,065 - 1,065
Deductions:
Interest Expense 2,146 2,121 1,086 1,006
Depreciation and amortization 3,342 3,078 1,714 1,568
General and administrative expenses 1,478 1,470 742 645
----- ----- ---- ----
Total Deductions 6,966 6,669 3,542 3,219
----- ----- ----- -----
Net Income 4,208 4,854 2,276 3,067
Preferred Stock Dividends (1,573) (1,573) (787) (787)
Net Income applicable to Common and Class A ------ ----- ----- -----
Common Stockholders $ 2,635 $ 3,281 $ 1,489 $ 2,280
========= ======== ========= ========
11
7. SUBSEQUENT EVENT AND COMMITMENT
Countryside Square Limited Partnership, an unconsolidated joint venture in which
the Company is the general partner, has contracted to sell the Countryside
Square shopping center, which is owned by the partnership, for $16.0 million.
The Company will record its proportionate share of the gain upon the sale of the
property and dissolution of the joint venture.
In November 2000, the Company entered into a Purchase Agreement to acquire an
office property in Greenwich, Connecticut (the "Property") for a purchase price
of $2,375,000. In May 2001, pursuant to the safe harbor provisions for reverse
like-kind exchange requirements necessary to qualify for tax-deferred treatment
under Section 1031 of the Internal Revenue Code, the Property was conveyed to a
sole member limited liability company controlled by an unrelated title insurance
company (the "LLC") until such time as the Company completes the sale of one of
its currently owned properties (the "Relinquished Property"). The Company
assigned its interest in the Purchase Agreement to the LLC. Pursuant to an
Exchange Agreement between the Company and the LLC (the "Exchange Agreement"),
the LLC acts as the accommodation titleholder, as defined, of the Property. The
Exchange Agreement, provides among other things, for the Company to loan the net
purchase price of the Property to the LLC to complete the purchase of the
Property. The loan, in the amount of $2,325,979, is secured by a mortgage on the
Property. The loan is payable monthly with interest only at 9% per annum and is
due on November 4, 2001. The LLC has net leased the Property to the Company for
lease payments equal to the debt service due on the mortgage each month. The
Exchange Agreement also provides that on the earlier of the closing of the sale
of the Relinquished Property or November 4, 2001, and at the election of the
Company, the sole member of the LLC will either assign its interest in the LLC
to the Company or convey the Property directly to the Company.
12
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward Looking Statements
This quarterly report on Form 10-Q, together with other statements and
information publicly disseminated by the Company contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Company intends such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 and include this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe the Company's
future plans, strategies and expectations, are generally identifiable by use of
the words "believe," "expect," "intend," "anticipate," "estimate," or "project"
rely on forward-looking statements since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond the Company's
control and which could materially affect actual results, performances or
achievements. Factors which may cause actual results to differ materially from
current expectations include, but are not limited to, (i) general economic and
local real estate conditions, (ii) financing risks, such as the inability to
obtain equity or debt financing on favorable terms, (iii) changes in
governmental laws and regulations, (iv) the level and volatility of interest
rates, (v) the availability of suitable acquisition opportunities and (vi)
increases in operating costs. Accordingly , there is no assurance that the
Company's expectations will be realized.
Liquidity and Capital Resources
The Company's liquidity and capital resources include its cash and cash
equivalents, proceeds from bank borrowings and long-term mortgage debt, capital
financings and sales of real estate investments. The Company expects to meet its
short-term liquidity requirements primarily by generating net cash from the
operations of its properties. Payments of expenses related to real estate
operations, debt service, management and professional fees, and dividend
requirements place demands on the Company's short-term liquidity. The Company
believes that its net cash provided by operations is sufficient to fund its
short-term liquidity needs in the near term. The Company expects to meet its
long-term liquidity requirements such as property acquisitions, debt maturities
and capital improvements through long-term secured indebtedness, proceeds from
sales of real estate investments and/or the issuance of additional equity
securities.
At April 30, 2001, the Company had cash and cash equivalents of $2.1 million
compared to $2.0 million at October 31 2000. The Company also has a $20 million
secured revolving credit facility with a bank which expires in fiscal 2005. The
facility is secured by first mortgage liens on two retail properties having a
net book value of $28.9 million. The Company also has a $15 million unsecured
line of credit with the same bank which expires in fiscal 2002. The credit lines
are available to finance the acquisition, management or development of
commercial real estate, refinance indebtness and for working capital purposes.
Extensions of credit under the unsecured credit line are at the bank's
discretion and subject to the bank's satisfaction of certain conditions. In
January 2001, the Company utilized proceeds from the secured revolving credit
line to repay a mortgage note payable in the outstanding amount of $1.95 million
which matured. At April 30, 2001, long-term debt consists of mortgage notes
payable totaling $51.5 million including borrowings of $13.8 million outstanding
under the secured revolving credit facility. The Company also had $3 million
outstanding on the unsecured credit line at April 30, 2001. Borrowings from the
unsecured credit line in fiscal 2001were used to fund tenant improvement costs.
In May, 2001, the Company borrowed an additional $2.5 million from the unsecured
credit line to finance the acquisitions of real property.
13
During fiscal 2001, the Company completed the sale of additional shares of
Common Stock and Class A Common Stock in a private placement issue with two
entities controlled by an officer of the Company. The Company realized $1.435
million in cash proceeds from the equity offering.
The Company is the sole general partner in a consolidated joint venture that
owns the Arcadian Shopping Center in Briarcliff, New York. In a prior year, the
limited partners contributed the property in exchange for operating partnership
units (OPU's) in the venture. The OPU's are exchangeable into an equivalent
number of shares of the Company's Class A Common Stock or cash, at the option of
the Company after a certain period of years or upon the occurrence of certain
events. In February 2001, pursuant to notice from a limited partner, the Company
redeemed for cash 127,548 OPU's for $1.1 million.
In a prior year, the Board of Directors expanded and refined the strategic
objectives of the Company to refocus its real estate portfolio into one of
self-managed retail properties located in the Northeast and authorized a plan to
sell the non-core properties of the Company in the normal course of business
over a period of several years. The non-core properties comprise all of the
Company's distribution and service facilities, and certain of its office and
retail properties and undeveloped land located outside of the Northeast region
of the United States. In February 2001, pursuant to the terms of its lease,
Firestone, Inc., a tenant at the property, exercised an option to purchase the
Company's tire distribution facility in Albany, Georgia at a price of $100,000,
an amount which equaled the property's net book carrying amount.
Countryside Square Limited Partnership, an unconsolidated joint venture in which
the Company is the sole general partner, has contracted to sell the Countryside
Square Shopping Center in Clearwater, Florida for proceeds of $16 million. Upon
closing, the transaction will result in a gain to the joint venture and
ultimately to the Company.
The Company expects to make real estate investments periodically. The Company
also invests in its existing properties and, during the first half of fiscal
2001, spent approximately $6.3 million to complete tenant improvements and
related tenant allowances in connection with the Company's recent leasing
activities. The Company expects to spend approximately $4.0 million to complete
its leasing related costs in the second half of fiscal 2001.
Funds from Operations
The Company considers Funds From Operations (FFO) to be an appropriate
supplemental financial measure of an equity REIT's operating performance since
such measure does not recognize depreciation and amortization of real estate
assets as reductions of income from operations.
14
The National Association of Real Estate Investment Trusts (NAREIT) defines FFO
as net income (computed in accordance with generally accepted accounting
principles (GAAP)) plus depreciation and amortization excluding gains (or
losses) from sales of property and after adjustments for unconsolidated joint
ventures. The Company considers recoveries of investments in properties subject
to finance leases to be analogous to amortization for purposes of calculating
FFO. FFO does not represent cash flows from operations as defined by GAAP and
should not be considered a substitute for net income as an indicator of the
Company's operating performance, or for cash flows as a measure of liquidity or
of its dividend paying capacity. Furthermore, FFO as disclosed by other REITs
may not be comparable to the Company's calculation of FFO. The table below
provides a reconciliation of net income in accordance with GAAP to FFO as
calculated under the current NAREIT guidelines for the six month periods ended
April 30, 2001 and 2000 (amounts in thousands):
Six months ended April 30
2001 2000
---- ----
Net Income Applicable to Common and Class A Common Stockholders $2,635 $3,281
Plus: Real property depreciation 2,183 2,140
Amortization of tenant improvements and tenant allowances 859 595
Amortization of deferred leasing costs 290 281
Recoveries of investments in properties subject to finance leases 91 483
Adjustments for unconsolidated joint venture 319 198
Less: Gains on sales of real estate investments - (1,065)
- -------
Funds from Operations $6,377 $5,913
====== ======
Results of Operations
Revenues
Revenues from operating leases increased 14% to $8.5 million for the three
months ended April 30, 2001, as compared with $7.5 million for the corresponding
three month period in fiscal 2000. For the six months ended April 30, 2001
revenues from rental properties increased 10.4% to $16.7 million as compared
with $15.1 million in the corresponding six month period in fiscal 2000. The
increase in operating lease revenues results from, among other things, new
leasing of previously vacant space, higher tenant base rent renewal rates at
certain of the Company's properties, higher recoveries of property operating,
real estate taxes and other recoverable costs and the reclassification of rents
received from properties previously accounted for under the finance lease method
of accounting (see below).
15
Revenues from direct financing leases decreased in the six month and three month
periods ended April 30, 2001 as compared to the corresponding periods in fiscal
2000 as the initial terms of the related leases expired. Three of the Company's
properties were accounted for under direct finance lease method in accordance
with the provisions of FAS Statement # 13 "Accounting for Leases". One of the
properties was sold to its sole tenant who exercised a purchase option contained
in the lease upon expiration of the lease. Leases for the remaining two
properties were negotiated and renewed with each of the respective property's
tenants. The new leases are accounted for as operating leases. Revenues from
operating leases increased by $379,000 and $233,000 in the six-month and
three-month periods ended April 30, 2001 as compared to the corresponding
periods in fiscal 2000 as a result of the reclassification of rents received
from these properties.
The Company's core properties contain more than 1.7 million square feet of gross
leasable area and were 96% leased in the aggregate at April 30, 2001, unchanged
from the end of the last fiscal year. The Company leased or renewed 171,000
square feet of gross leaseable area in the first six months of fiscal 2001
compared to 109,000 square feet of space in the comparable period a year ago.
Expenses
Total expenses, including depreciation and amortization, increased 9.8% to $6.3
million in the second quarter of fiscal 2001 compared to $5.8 million in the
same period last year. For the six months ended April 30, 2001 total expenses
increased 7.5% to $12.5 million from $11.7 million for the comparable period in
fiscal 2000. The largest expense category is Property Expenses of the real
estate properties. The increase in property expenses resulted principally from
increased snow removal expenses and higher property taxes at certain of the
Company's core properties in fiscal 2001.
Interest expense increased in the six month and three month period ended April
30, 2001 from borrowings on the Company's unsecured and secured revolving credit
lines. The increases were offset from lower interest costs on refinanced bank
loans totaling $6.5 million in fiscal 2000.
Depreciation and amortization increased in the six month and three month periods
ended April 30, 2001 from approximately $13 million of capital improvements,
tenant allowances and deferred leasing costs during fiscal 2000 and the first
six months of fiscal 2001 and from properties acquired in fiscal 2000.
16
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate risk primarily through its borrowing
activities. There is inherent rollover risk for borrowings as they mature and
are renewed at current market rates. The extent of this risk is not quantifiable
or predictable because of the variability of future interest rates and the
Company's future financing requirements.
As of April 30, 2001, the Company had approximately $16.8 million of variable
rate debt outstanding under its secured and unsecured lines of credit
arrangements. The interest rate risk related to the secured line of credit can
be mitigated by electing a fixed rate interest option at any time prior to the
last year of the credit agreement which expires in 2005. During the six month
periods ended April 30, 2001 and 2000, the average variable rate indebtedness
outstanding during such periods had combined weighted average interest rates of
8.2% and 7.6% respectively. Had the weighted average interest rate been 100
basis points higher, the Company's net income would have been lower by
approximately $74,000 and $62,000 in the six month and approximately $42,000 and
$30,000 in the three month periods ended 2001 and 2000, respectively.
The Company has not, and does not plan to, enter into any derivative financial
instruments for trading or speculative purposes. As of April 30, 2001 the
Company had no other material exposure to market risk.
17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not presently involved in any litigation, nor
to its knowledge is any litigation threatened against the
Company or its subsidiaries, that in management's opinion,
would result in any material adverse affect on the Company's
ownership, management or operation of its properties, or
which is not covered by the Company's liability insurance.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
In connection with the Annual Meeting of Stockholders held on
March 14, 2001, stockholders were asked to vote with respect
to the election of three Directors (Class I) to serve for
three years.
A total of 5,892,524 votes were cast regarding the election
of Directors as follows:
Director For Withheld
Willing L. Biddle 5,833,512 59,012
E. Virgil Conway 5,830,363 62,161
Charles D. Urstadt 5,833,549 58,975
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K
There were no reports on Form 8-K filed with the Securities
and Exchange Commission during the Registrant's fiscal quarter
ended April 30, 2001.
S I G N A T U R E S
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.
URSTADT BIDDLE PROPERTIES INC.
------------------------------
(Registrant)
By /s/ Charles J. Urstadt
Charles J. Urstadt
Chairman and
Chief Executive Officer
By: /s/ James R. Moore
James R. Moore
Executive Vice President/
Chief Financial Officer
(Principal Financial Officer
Dated: June 14, 2001 and Principal Accounting Officer)