SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the Fiscal Year Ended October 31, 1995.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from _______ to _________
Commission File No. 2-27018.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
------------------------------------------------------
(exact name of registrant as specified in its charter)
New Jersey I.R.S. No. 22-1697095
- ------------------------------- ---------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization.) Identification No.)
505 Main Street, P.O. Box 667
Hackensack, New Jersey 07602
- ----------------------------- ----------
(Address of principal executive offices.) (Zip Code)
Registrant's telephone no., including area code: 201-488-6400
------------
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: None
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 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 [ ]
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of the
Registrant is approximately $20,413,118 based on the average bid and asked
prices of the Registrant's Certificates of Beneficial Interest as reported to
the Registrant by Janney Montgomery Scott, Inc. for the fourth calendar quarter
of 1995.
1,559,788 Certificates of Beneficial Interest were outstanding on December 31,
1995.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in this Form 10-K or any amendment to this Form 10-K.
[X]
<PAGE>
Exhibit Index on Pages
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of
Security Holders
PART II
Item 5. Market for Registrant's Common Stock
and Related Security Holder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operation
Item 8. Financial Statements and Supplementary
Data
Item 9. Changes in and Disagreements on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of
the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial
Owners and Management
Item 13. Certain Relationships and Related
Transactions
PART IV
Item 14. Exhibits, Financial Statements, Schedules
and Reports on Form 8-K
<PAGE>
PART I
ITEM 1. BUSINESS.
(A) GENERAL.
Registrant, First Real Estate Investment Trust of New Jersey, is an
unincorporated business trust organized in New Jersey pursuant to a Trust
Agreement dated November 1, 1961, as amended and restated as of November 7, 1983
(the "Declaration of Trust"). Registrant is an equity real estate investment
trust engaged in the business of acquiring and holding real estate including
shopping centers, apartment complexes and commercial properties. In addition,
the Registrant has purchased vacant land for future development. It is the
policy of Registrant to purchase real property for investment and not for resale
or turnover. The Registrant has operated in accordance with the above stated
general policy since its inception. In the future, the Registrant may purchase
additional properties on a joint venture basis in those situations where it can
maintain appropriate management control.
The Registrant has elected and conducts its operations in a manner
intended to comply with the requirements for qualification as a real estate
investment trust ("REIT") pursuant to the Real Estate Investment Act of 1960.
(Sections 856-860 of the Internal Revenue Code of 1986, hereinafter referred to
as the "Code"). Under the Code, a REIT which meets certain requirements is not
subject to federal income tax on that portion of its taxable income which is
distributed to its shareholders provided at least 95% of its REIT taxable
income, excluding any net capital gain, is so distributed.
Under its Declaration of Trust, the Registrant is permitted to invest
in a broad range of real estate investments and non-real estate investments,
including full or participating interests in securities, whether or not secured
by mortgages, rents and lease payments and the ownership of any other interests,
including equity interests, related to real property. The investment power
permits the Registrant to generate income of the types permitted to be received
by REITs under Section 856 of the Code. Registrant's Declaration of Trust
permits it to conduct its business operations without qualifying as a REIT.
Nevertheless, it is the Registrant's intention to continue to qualify as a REIT.
All of the Registrant's properties are managed by Hekemian & Co., Inc.
under a management and brokerage agreement dated December 20, 1961, as amended
by an Amendment dated May 8, 1963 (the "Management Contract").
<PAGE>
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
For the last three fiscal years, the Registrant's revenue and profits
from operations are as set forth in the Financial Statements annexed hereto.
(C) NARRATIVE DESCRIPTION OF BUSINESS.
(1)(i) General -- The principal activity of the Registrant is to
purchase real property, improved and unimproved, primarily for investment and
not for resale or turnover. The Registrant is formed as a REIT under the Code
which provides investors of the Registrant's shares the opportunity to
participate in diversified properties consisting, primarily, of income producing
apartment complexes and shopping centers.
The Registrant's real estate assets as of October 31, 1995, consisted
of 15 properties all of which are wholly owned together with a 40% interest in
Westwood Hills, a New Jersey limited liability company (the "LLC") which owns a
210 unit apartment complex in Westwood, New Jersey ("Westwood Hills").
The Registrant does not hold any mortgage note receivables.
The following table sets forth certain information concerning
Registrant's real estate and other investments as of October 31, 1995:
<TABLE>
<CAPTION>
Square Feet, Depreciated
Apartment Units Cost of
A) Real Estate No. of or Acreage of Buildings
Investments Properties Vacant Land and Equipment
- -------------- ---------- --------------- -------------
<S> <C> <C> <C>
Apartment
Properties 8 (1) 639 Units $43,070,000
Commercial
Property 1 4800 sq. ft. $ 14,000
Shopping
Centers 3 461,448 sq. ft. $23,400,000
Unimproved
Land 3 62.39 Acres (2) $ 2,452,000
</TABLE>
- --------
(1) Exclusive of Westwood Hills, see paragraph (B) set forth below.
(2) Includes unimproved land contiguous to Franklin Lakes Shopping Center.
<PAGE>
The Registrant's mortgage indebtedness as of October 31, 1995, for all
real estate investments owned by the Registrant (exclusive of Westwood Hills)
was $24,110,000 representing three mortgages, one on its property in Spring Lake
Heights which bears interest at 7.625% per annum and matures in April, 1999; a
second mortgage which is on the Westwood Shopping Center, Westwood, New Jersey
("Westwood Plaza") which mortgage matures in September, 2001 and bears interest
at the rate of 10% per annum; the third mortgage is secured by the Westridge
Square Shopping Center, Frederick, Maryland ("Westridge") and bears interest at
the rate of 9% per annum; this mortgage matures in August, 1997. (See, Liquidity
and Capital Reserves, sub-paragraph (d)i-iii at pp. 25-26 hereof).
The mortgages for Westwood Plaza and Westridge provide for substantial
balloon payments of principal due in September 2001 and August, 1997
respectively. The Registrant has made no provision to reserve cash to meet these
balloon payment obligations. (See, Liquidity and Capital Reserves, sub-paragraph
(d)i-iii at pp. 25-26 hereof). The Registrant intends to refinance each of the
shopping centers at the then prevailing terms and conditions which could be less
favorable then the present mortgage terms and conditions. (See "Leverage, No
Limitation and Debt; Possible Inability to Refinance Balloon Payments on
Mortgage Debt" at pages 10-12 hereof.)
The mortgage for Spring Lake Heights is self-liquidating so that in
April, 1999 there will be no balloon payment due.
<TABLE>
<CAPTION>
Depreciated
Investment No. of Cost of
No.of Held by Apartment Buildings
B)Other Investment Properties Registrant Units and Equipment
- ------------------ ---------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Westwood Hills,
New Jersey
limited liability 1 40% 210 $11,263,000
company
</TABLE>
Registrant purchased a 40% interest in Westwood Hills in June, 1994.
The Registrant is the managing member of Westwood Hills.
- ---------------------
<PAGE>
The LLC paid $14,500,000 for the 210 unit apartment complex and an
additional $889,000 in closing costs which included a realtor's commission of
$725,000. The portion of the realtor's commission paid to Hekemian & Co., Inc.
was $500,000 with the balance of $225,000 being paid to a third-party realtor.
The LLC invested a total of $4,980,000 in cash and financed the balance of the
purchase price by securing a first mortgage from United Jersey Bank of New
Jersey ("UJB") a member of UJB Financial Corp., the successor to United Jersey
Bank, Hackensack, New Jersey. The first mortgage received from UJB was in the
original amount of $9,520,000 (the "UJB Mortgage"). (See, Liquidity and Capital
Reserves, sub- paragraph (d)iv at p. 26 hereof and also "Item 13. Certain
Relationships and Related Transactions" at pp. 35-42).
The UJB Mortgage was refinanced by the LLC in September, 1995. A new
mortgage was secured from USG Annuity & Life Company in the amount of $10.5
million (the "USG Mortgage"). The USG Mortgage is for a term of seven (7) years
with a twenty-five (25) year payout; the interest rate is 7.80% per annum. As a
result of the refinancing of Westwood Hills approximately $1,000,000 was
distributed to all equity investors. The Registrant received a total of
approximately $400,000 as a result of the refinancing.
At the end of the seven (7) year term of the USG Mortgage, a
substantial balloon payment will be due in the amount of $9,230,965. The LLC has
made no provision to reserve cash to meet this balloon payment obligation. (See
Liquidity and Capital Reserves, sub-paragraph (d)iv at p. 26 hereof). The LLC
intends to refinance the apartment complex prior to the time the balloon payment
is due on the then prevailing terms and conditions which could be less favorable
then the present mortgage terms and conditions. (See "Leverage, No Limitation on
Debt; Possible Inability to Refinance Balloon Payments on Mortgage Debt" at
pages 10-12 hereof).
(ii) Line of Credit
All of the Registrant's existing properties, except all vacant land,
Westwood Plaza, Westridge and Westwood Hills are subject to a mortgage lien of
$20,000,000 which represents security for a line of credit with UJB (the "Line
of Credit"). The Line of Credit was secured in February, 1994.
In accordance with the provisions of Section 2.03 of the Line of Credit
agreement, and subject to a $20 million limitation on all advances, UJB will
make available to the Registrant up to a maximum of $7.5 million for general
business purposes and up to a maximum of $15 million, on an offering basis, for
the Registrant's acquisition of real estate and capital improvements. The real
estate acquisition advances are subject to certain limitations and requirements.
The Line of Credit expires on February 10, 1997 unless extended by
agreement of the parties or unless sooner terminated upon the occurrence of an
event of default or in accordance with the provisions of Sections 2.02(b) and
6.09 of the Line of Credit.
Pursuant to those sections, the Registrant must satisfy certain
financial requirements. Such tests include the maintenance of: (1) shareholders'
equity at a level of at least $18 million as of the end of each fiscal quarter;
(2) a debt to worth ratio of less than 4.0; (3) cash flow (net income plus
depreciation) in excess of $2.5 million for the preceding twelve months, as
determined at the end of each fiscal quarter; (4) a debt service coverage ratio
of 1.4 or greater. Section 6.09(e) of the Line of Credit prohibits the
Registrant from incurring any additional secured or unsecured indebtedness
(other than trade payables), except for the refinancing of existing mortgages,
for the acquisition of new income-producing property (but only where such debt
is on a non-recourse basis other than liability under environmental, fraud and
representation and warranty clauses) and for the expansion and/or renovation of
existing income-producing property.
The Registrant currently meets all of the standards set forth in the
Line of Credit and anticipates that it will continue to meet all such standards
in the future.
Advances under the Line of Credit up to and including $10 million in
the aggregate bear interest, at the election of the Registrant at either: (A)
UJB's variable Base Lending Rate, as announced from time to time; or (B) (i) the
average of LIBOR (the annual rate of interest at which United States Dollars
deposits are offered to prime banks in the London interbank market) on contracts
ending 1, 2, 3 or 6 months from the advance date, for the two (2) business days
preceding the advance date (round upward to the nearest whole multiple of 1/16
of 1% per annum) divided by (ii) a percentage equal to 100% less the stated
maximum rate of all reserves required to be maintained against "LIBOR Rate
Liabilities" as specified in Regulation D, (the "LIBOR Base"), plus (iii) 200
basis points (2%). Advances in excess of $10,000,000 will bear interest at the
UJB Base Lending Rate plus one half of one percent (1/2%) or at the LIBOR Base
plus 250 basis points (2.5%). At the closing, the Registrant elected to use the
LIBOR Base, plus 200 basis points, which then produced an interest rate of 5.88%
per annum. The principal balance due on the Line of Credit, as of October 31,
1995 was $5,168,860 with an applicable interest rate of 7.875%. The interest
rate, as of December 31, 1995, remained at 7.875%.
(2) During the fiscal year, the Registrant has not made a public
announcement concerning a new product or industry segment which would require
the investment of a material amount of the assets of the Registrant.
(3) Sources and availability of raw materials are not applicable to the
Registrant's business.
(4) Patents, trademarks, licenses, franchises and concessions are not
important to the business of the Registrant.
(5) Registrant's business is not seasonal.
(6) Working capital items are not applicable to the Registrant's
business.
(7) Management believes that the Registrant's business is not
materially dependent upon a single customer or a few customers. No single tenant
occupies more than 10% of the Registrant's holdings, except that the
Registrant's retail property, located in Glen Rock, New Jersey, is occupied by a
single tenant whose lease expires on January 31, 2000.
(8) Information concerning backlog is not material nor relevant to an
understanding of the Registrant's business.
(9) Information concerning renegotiation of profits or termination of
contracts at the election of the government is not material or relevant to an
understanding of the Registrant's business.
(10) The Registrant is subject to normal competition with other
investors to acquire real property and to profitably manage such property.
Numerous other REIT(s), banks, insurance companies and pension funds,
as well as corporate and individual developers and owners of real estate,
compete with the Registrant in seeking properties for acquisition, tenants and
properties, leasing revenues and land for development. During the past several
years, the Registrant has concentrated its expansion efforts upon the
acquisition of multi-family residential and shopping center properties which are
substantially larger than those real estate assets the Registrant had
historically sought to include in its portfolio. As a result, the Registrant has
encountered increasing competition for investment grade real estate from other
entities and persons which have investment objectives similar to those of the
Registrant. Such competitors may have significantly greater resources and
financial revenues, may derive funding from foreign and domestic sources and may
have larger staffs to find, evaluate and secure new properties.
In addition, retailers at the Registrant's shopping centers face
increasing competition from discount shopping centers, outlet malls, catalogues,
discount shopping clubs and telemarketing. In many markets, the trade areas of
the Registrant's shopping center properties overlap with the trade areas of
other centers. Renovations and expansions at those competing malls could
negatively affect the Registrant's shopping center properties by encouraging
shoppers to make their purchases at the expanded or renovated competing center.
Increased competition could adversely affect the Registrant's revenues. New
retail real estate competition could be developed in the future in trade areas
that could adversely affect the revenues of the Registrant's shopping center
properties.
General Factors Affecting Investment in Shopping Centers and
Apartment Complex Properties; Effect on Economic and Real
Estate Conditions
The revenues and value of shopping centers and apartment complex
properties may be adversely affected by a number of factors, including: the
national economic climate; the regional economic climate (which may be adversely
affected by plant closing, industry slowdowns and other local factors); local
real estate conditions (such as an oversupply of retail space or apartment
units); perceptions by retailers or shoppers of the security, safety,
convenience and attractiveness of the shopping center; perception by residential
tenants of the safety, convenience and attractiveness of an apartment building
or complex; the proximity and the number of competing shopping centers and
apartment complexes; the availability of recreational and other amenities and
the willingness and ability of the owner to provide capable management and
adequate maintenance. In addition, other factors may adversely affect the value
of a shopping center or apartment complex without necessarily affecting its
current revenues, including changes in governmental regulations, such as
limitations on hours of operations, changes in tax laws or rates and potential
environmental or other legal liabilities.
Shopping Center Properties Dependence on Anchors Stores and
Satellite Tenants
The Registrant's income and funds available for distribution would be
adversely affected if space in the Registrant's shopping center properties could
not be leased or if anchor store tenants or satellite tenants failed to meet
their lease obligations. The success of the Registrant's investment in the
shopping center properties is dependent upon the success of the tenants leasing
space therein and, to the extent that a tenant's performance under its lease has
been guaranteed, on the guarantor of such lease. Unfavorable economic,
demographic or competitive conditions may adversely affect the financial
condition of tenants and/or guarantors, and, consequently, the lease revenues
and the value of the Registrant's investments in the shopping center properties.
If the sales of stores operating in the Registrant's shopping center properties
were to decline due to deteriorating economic conditions, tenants may be unable
to pay their base rents or meet other lease charges and fees due Registrant. In
the event of default by a tenant, the Trust might suffer a loss of rent and
experience extraordinary delays while incurring additional costs in enforcing
its rights as landlord.
Renewal of Leases and Reletting of Space
There is no assurance that the Registrant will be able to retain
tenants in its shopping centers upon expiration of their leases. The Registrant
will be subject to the risks that, upon expiration of leases for space located
in the Registrant's shopping center properties, the premises may not be relet or
the terms of reletting (including the cost of concessions to tenants) may be
less favorable than current lease terms. If the Registrant were unable to
promptly relet all or a substantial portion of this space or if the rental rates
upon such reletting were significantly lower than expected rates, the
Registrant's net income and ability to make expected distributions to
shareholders may be adversely affected.
Illiquidity of Real Estate Investments; Possibility that Value of the
Registrant's Interests may be less than its Investment
Equity real estate investments are relatively illiquid. Therefore, the
ability of the Registrant to vary its portfolio in response to changed economic,
market or other conditions is limited. Beyond general illiquidity, the
Registrant's interest in Westwood Hills is also subject to transfer constraints
imposed by the LLC's Operating Agreement and by the fact there is no market for
the Registrant's interest in the LLC which was not registered pursuant to any
applicable Federal or State Securities Laws.
If the Registrant were compelled to liquidate its real estate and LLC
holding in the current market, the value of such assets would also likely be
diminished if a sale of all or substantially all of the assets of the Registrant
was required in a limited time frame. The proceeds to the Registrant from the
sale of such assets might be less than the Registrant's current investment in
those assets.
Inability to Obtain Financing
The Registrant may or may not be able to obtain financing for
improvements, capital expenditures, acquisitions, development or expansions. If
the Registrant is not able to obtain such financing, it will not be able to
proceed with contemplated projects.
Leverage; No Limitation on Debt; Possible Inability to
Refinance Balloon Payments on Mortgage Debt
The Registrant has incurred, and may continue to incur, indebtedness
(secured and unsecured) in furtherance of its activities. Except for
Registrant's vacant lands, there are mortgage liens covering all of the
Registrant's apartment properties and retail/commercial properties as a result
of the Line of Credit and, in several instances, specific properties are subject
to additional first mortgages (see Item 1. Business. Narrative Description of
Business at pp.3-16). Neither the Declaration of Trust or any policy statement
formally adopted by the Board of Trustees limits either the total amount of
indebtedness or the specified percentage of indebtedness (based on the total
capitalization of the Registrant) which may be incurred. Accordingly, the Board
of Trustees of the Registrant could change the current policies of the
Registrant regarding indebtedness subject only to certain restrictions set forth
in the Line of Credit (see Item 1. Business. Narrative Description of Business
at pp. 3-16). If these policies were changed, the Registrant could become more
highly leveraged, resulting in an increased risk of default on the obligations
of the Registrant and in an increase in debt service requirements that could
adversely affect the financial condition and results of the operations of the
Registrant.
The Registrant may be required to borrow money and mortgage its
properties to fund any short fall of cash necessary to meet the Code's
distribution requirements for the maintenance of REIT status. The resulting
interest expense and debt amortization with respect to any borrowings, including
borrowings under the Line of Credit could negatively affect the Registrant's
cash available for distribution. If the Registrant defaults on any loan secured
by a mortgage or mortgages on its property or properties, the lenders may
exercise their remedies, including foreclosure on such property or properties.
In that event, the Registrant could lose its investment in such property or
properties.
Payment obligations on mortgages and other indebtedness generally are
not reduced if the economic performance of any of the Registrant's properties
declines. If any such decline occurs, the Registrant's income and funds
available for distribution would be adversely affected.
As discussed in "Item 1. Business. Narrative Description of Business"
at pages 3 through 16 hereof, the Registrant has not established a cash reserve
sinking fund and does not expect to have sufficient funds from operations to
make the balloon payments when due under the terms of the mortgages for Westwood
Plaza or Westridge. In addition, Registrant holds a 40% interest in the LLC
which owns Westwood Hills. The LLC has, similarly, made no provision to reserve
funds to pay the USG Mortgage when its balloon payment is due in 2002. The
Registrant and the LLC intend to refinance such debt at or before maturity.
There can be no assurance, however, that the Registrant or the LLC will be able
to refinance such indebtedness or to refinance the properties on terms which are
as favorable as the current mortgages. An inability to make such balloon
payments when due would permit the mortgage lender to foreclose on such
properties, which would have a material adverse effect on the Registrant. In
addition, interest rates on any debt issued to refinance such mortgage debt may
be higher than the rates on the current mortgages, which could adversely affect
funds from operations available for distribution.
Realization of any of the foregoing contingencies could have a material
adverse effect on the Registrant's net income and/or financial condition. The
Registrant believes that a risk of mortgage default to be minimal, however,
since it could draw upon its Line of Credit, issue additional shares of stock
and mortgage other properties which are currently mortgage free to cover any
refinance difficulties for the specific properties provided, however, UJB agreed
to: (a) release of such property or (b) subordinate its Line of Credit to any
such re-financing.
(11) Registrant conducts no research activities relating to the
development of new products.
(12) In recent years, both federal and state governments have become
increasingly concerned with the impact of real estate construction and
development programs upon the environment. Environmental legislation affects the
cost of selling real estate, the cost to develop real estate and the risks
associated with purchasing real estate.
Under various federal, state and local environmental laws, statutes,
ordinances, rules and regulations, an owner of real property may be liable for
the costs of removal or remediation of certain hazardous or toxic substances at,
on, in or under such property, as well as certain other potential costs relating
to hazardous or toxic substances (including government fines and penalties and
damages for injuries to persons and adjacent property). Such laws often impose
such liability without regard to whether the owners knew of, or were responsible
for, the presence or disposal of such substances. Such liability may be imposed
on the owner in connection with the activities of an operator of, or tenant at,
the property. The cost of any required remediation removal, fines or personal or
property damages and the owner's liability therefore could exceed the value of
the property and/or the aggregate assets of the owner. In addition, the presence
of such substances, or the failure to properly dispose of or remediate such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral, which, in turn, would
reduce the Registrant's revenues and ability to make distributions.
A property can also be negatively impacted by either physical
contamination or by virtue of an adverse effect upon value attributable to the
migration of hazardous or toxic substances, or other contaminants that have or
may have emanated from other properties.
The full impact of these environmental laws on the Registrant's
operations cannot be fully assessed at this time. Nevertheless, the Registrant
is aware of the following environmental matters affecting its properties:
(i) Vacant Land Located in Rockaway Township, N.J.
The property located in Rockaway Township contains
wetlands and associated transition areas. Pursuant to New
Jersey law, transition areas may not be developed. The
Registrant has not formally determined the full impact that
the wetlands and associated transition areas will have on the
development of the property, pursuant to applicable laws and
regulations of New Jersey, however, it is believed that future
development of the property will not be substantially
restricted as a result of the presence of wetlands and the
associated transition areas.
The Registrant applied for a zoning change to permit
the construction of a shopping center or other commercial
development on the property in 1994. That application was
denied. As a result, under current zoning the property can be
developed for residential use only. The Registrant secured
both Federal and State approvals to allow it to fill slightly
less than one (1) acre of wetlands. The filling of the
wetlands pursuant to said permit was completed during January,
1993.
(ii) Vacant Land Located in South Brunswick, N.J.
The Registrant has previously authorized the New
Jersey Department of Environmental Protection ("NJDEP") to
install monitoring wells on its vacant property located in
South Brunswick, New Jersey. NJDEP advised the Registrant that
its investigation related to whether the Registrant's property
was contaminated as a result of the migration of
environmentally sensitive materials from the J.I.S. Landfill
located next to the Registrant's property. The J.I.S. Landfill
has been placed on the National Priority List published
pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("Superfund
Law").
NJDEP has issued a report which concluded: (a) there
was no evidence of any migration of hazardous substances or
materials from the J.I.S. Landfill onto the Registrant's
property; as a result, the Registrant's property is not
included in any remediation plans; (b) the groundwater below
the Registrant's property is contaminated and will be subject
to clean-up activities pursuant to NJDEP oversight which will
be conducted by NJDEP and/or the responsible parties
identified in connection with the J.I.S. Landfill cleanup. The
Registrant is not a responsible party for the groundwater
cleanup. Since the Registrant's property is not dependent upon
the groundwater as a water supply source and cleanup
activities have been or will be conducted under NJDEP
supervision, Registrant does not believe that the groundwater
contamination has any negative impact on the value or
potential use of its property.
The Registrant retained J.H. Crow Company ("Crow"),
an environmental consultant, to: (a) review all data supplied
by NJDEP; and (b) recommend further such environmental studies
as may be required to determine whether the site has sustained
damage beyond groundwater contamination. The Registrant's
environmental consultant conducted a soil sampling program at
the Registrant's property. Based upon these studies, Crow has
concluded that there was no evidence of soil contamination on
the Registrant's property at levels which require remedial
action.
Crow has confirmed that the groundwater in the entire
region has been contaminated as a result of the activities at
the J.I.S. Landfill.
The Registrant has constructed an earth berm on its
property in order to prevent the overland flow of stormwater
runoff (and potentially, hazardous substances) from the J.I.S.
Landfill onto the Registrant's property pursuant to a
recommendation received from Crow.
The Registrant has never conducted any activities on
the property other than leasing the land to third parties for
farming purposes. As a result, the Registrant has not been
named as a potentially responsible party under the Superfund
Law. The Registrant expects that any required cleanup activity
of the groundwater will be undertaken by responsible third
parties or by NJDEP at no cost to the Registrant.
(iii) Westwood Plaza Shopping Center, Westwood, N.J.
This property is in a HUD Flood Hazard Zone and
serves as a local flood retention basin for part of Westwood.
The Registrant does not maintain flood insurance for the
subject property. Any reconstruction of that portion of the
property situated in the flood hazard zone is subject to
regulations promulgated by NJDEP which may require
extraordinary construction methods.
(iv) Franklin Lakes Shopping Center, Franklin Lakes, N.J.
This property contains wetlands and associated
transition areas on its perimeter. The Registrant has secured
a letter of interpretation from NJDEP which fixes the extent
of both the wetlands and associated transition areas.
Registrant has developed plans for the expansion of its
shopping center taking into account both the wetlands and
associated transition areas which will not materially affect
Registrant's planned expansion of the shopping center. (See
Management's Discussion and Analysis of Financial Condition
and Results of Operations: Liquidity and Capital Resources,
pp. 22-28).
(v) Other.
The State of New Jersey has adopted an underground
fuel storage tank law and various regulations which impact
upon the Registrant's responsibilities with respect to
underground storage tanks maintained on its properties. The
Registrant does have underground storage tanks located on two
(2) of its properties used in connection with heating of
apartment units.
The Registrant periodically visually inspects the
location of each underground storage tank for evidence of any
spills or discharges. Based upon the foregoing, the Registrant
knows of no underground storage tanks which are discharging
material into the soil at the present time. Current state law
does not require the Registrant to submit its underground
storage tanks to tightness testing. The Registrant has
conducted no such tests.
The Registrant has not conducted environmental audits
for any of its properties except for Westridge and Westwood
Hills. Both of these two properties were purchased since 1992.
(13) Registrant, as of October 31, 1995, has no full-time employees.
The Registrant has eight (8) Trustees and one Executive Secretary/ Treasurer who
are not full-time employees.
Hekemian & Co., Inc. is employed by the Registrant as its managing
agent, pursuant to the Management Contract. A number of Hekemian & Co. employees
are actively engaged in the management of Registrant's properties pursuant to
Hekemian & Co. Inc.'s duties as managing agent. Pursuant to the Management
Contract the Registrant reimburses Hekemian & Co. for salaries, hospitalization,
workmen's compensation insurance and payroll taxes for superintendents and other
staff, including secretarial staff, for work associated with its properties.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES.
Registrant does not engage in operations in foreign countries and it
does not derive any portion of its sales or revenues from customers in foreign
countries.
ITEM 2. DESCRIPTION OF THE PROPERTY.
The following chart sets forth the type of property, location, year
acquired, the number of units or square feet, occupancy rate and the mortgage
balance on the property as of October 31, 1995. In addition to the specific
mortgages which may be indicated below, the Registrant's property, except all
vacant land together with the shopping centers located in Westwood, New Jersey,
Frederick, Maryland and the Registrant's 40% interest in the LLC which owns
Westwood Hills, are subject to a lien from UJB for a line of credit in the face
amount of $20 million.
<PAGE>
(A) APARTMENT PROJECTS.
<TABLE>
<CAPTION>
Average Mortgage
Occupancy Balance or
Property and Year No. of Rate as of Bank Loan
Location Acquired Units(3) 10/31/95 (000's)
- ------------ -------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Lakewood Apts.
Lakewood, N.J. 1962 40 100% None
Palisades Manor
Palisades Pk., N.J. 1962 12 100% None
Grandview Apts.
Hasb. Hgts., N.J. 1964 20 100% None
Heights Manor
Spring Lake Hgts., N.J. 1971 79 99% $ 307,000
Hammel Gardens
Maywood, N.J. 1972 80 99% None
Sheridan Apts.
Camden, N.J. 1964 132 84% None
Steuben Arms
River Edge, N.J. 1975 100 96% None
Berdan Court
Wayne, N.J. 1965 176 95% None
Westwood Hills, LLC4 1994 210 98% $10,488,000
</TABLE>
The above listed apartment properties are subject to various rent
control ordinances summarized as follows:
- --------
(3) One unit in each apartment complex is utilized by a superintendent; as a
result, no rent is received for such unit.
(4) Registrant holds a 40% interest in the LLC which owns Westwood Hills.
<PAGE>
Rent Control Ordinance Summary
Wayne: (Berdan Court)
Renewals based on CPI figures given monthly by Township. Full vacancy
decontrol.
Hasbrouck
Heights: (Grandview Apartments)
Renewals based on a 5% yearly increase. Full vacancy decontrol.
Maywood: (Hammel Gardens)
Renewals based on a 4.25% yearly increase. Parity decontrol based on
highest rent for similar type apartment.
Spring Lake
Heights: (Heights Manor)
Renewals based on a 4.0% yearly increase. Full vacancy decontrol.
Lakewood: (Lakewood Apartments)
Renewals based on a 6.5% yearly increase.
Palisades
Park: (Palisades Manor)
All leases which are renewed may be increased by 4%. In addition,
Registrant may lease any unit which is vacated to a new tenant at the
higher of (a) the then current rent received for a similar unit or (b)
an increased rent based upon 4% above the last rent charged for such
unit.
Camden: (Sheridan Apartments)
Renewals based on Consumer Price Index with a maximum 6% yearly
increase. In the event of a vacancy, the landlord is permitted to
increase the rent of the vacant unit to the highest rent then being
charged in the apartment complex.
River Edge: (Steuben Arms)
Renewals based on a 4% yearly increase. Full vacancy decontrol.
Westwood:
No rent control is in effect.
<PAGE>
(B) SHOPPING CENTERS.
<TABLE>
<CAPTION>
Occupancy Mortgage
Shopping Year Square Rate as Balance or Bank
Centers Acquired Feet of 10/31/95 Loan (000's)
- -------- -------- ------ ----------- ---------------
<S> <C> <C> <C> <C>
Franklin
Lakes, N.J. 1966 33,320 0.0 (5) None
Westwood, N.J. 1988 173,854 100% $ 5,444
Frederick,
Maryland 1992 254,274 100% $18,359
</TABLE>
(C) VACANT LAND.
<TABLE>
<CAPTION>
Acreage Mortgage
for Balance
Location Acquired Current Use Parcel (000's)
- -------- -------- ----------- ------ --------
<S> <C> <C> <C> <C>
Franklin Lakes 1966 Contiguous to
Franklin Lakes
Shopping Center
(Planned for
future development) 15.76 None
Rockaway 1964/1993 None 22.00 None
South
Brunswick 1964 Leased as farmland,
qualifying for state
farmland assessment
tax treatment 33 None
</TABLE>
- --------
(5) The Franklin Lakes shopping center effectively closed for operations on or
about September 1, 1995. The Registrant has secured all approvals from
state, local and county governmental entities to demolish and construct a
new shopping center on the property, The construction is scheduled to
commence during the Spring of 1996 with a projected completion date of
January, 1997.
<TABLE>
<CAPTION>
Commercial Year Square Mortgage Balance or
Property Acquired Feet Tenant Bank Loan (000's)
- ---------- -------- ------ ------ -------------------
<S> <C> <C> <C> <C>
Glen Rock 1962 4800 1 Tenant, - 0 -
100% of
Property
</TABLE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
(a) Other than the condemnation proceeding described in paragraph (b)
hereof, there are no material pending legal proceedings other than ordinary
routine litigation incidental to the business, to which the Registrant is a
party or of which any of its properties is the subject.
There are no legal proceedings concerning environmental issues with
respect to any property owned by the Registrant. The Registrant has, however,
been concerned with the possibility that contamination material may have
migrated from an adjacent Superfund site onto the Registrant's property in South
Brunswick, New Jersey which is vacant land.
As discussed in "Item 1, Business" at pp. 3-16, Registrant has
determined that there is no contamination of the soil. The groundwater below the
property will, however, require remediation which will be performed under the
supervision of NJDEP at no cost to the Registrant.
The Registrant has not been involved in any court or administrative
proceedings with respect to this matter.
(b) In connection with the construction of Interstate Highway Route
287, the State of New Jersey, by the Commission of the Department of
Transportation, initiated condemnation proceedings in the Superior Court of New
Jersey, Law Division. The State took possession of approximately 0.6 of an acre
of the Registrant's Franklin Lakes Shopping Center property in Franklin Lakes,
New Jersey which is located on the perimeter of Registrant's property and which
will not materially affect the planned redevelopment of the shopping center.
The matter was settled by the Registrant and the State of New Jersey in
October, 1994. As a result of the settlement, the Registrant has received a
total of approximately $407,000, of which approximately $61,300 was received in
fiscal year 1989 and an additional amount of approximately $85,000 in fiscal
year 1986. The Registrant is responsible to pay certain legal costs which have
yet to be determined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during
the Registrant's fourth quarter.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS.
(A) The following tables set forth, for the periods indicated, the
highest and lowest bid and asked quotations in the over-the-counter market
NASDAQ Bulletin Board. It should be noted that over-the-counter quotations
reflect inter-dealer prices, without retail markup, markdown or commission, and
may not necessarily represent actual transactions. There is no established
public trading market, the trading is sporadic and in small volumes, all as set
forth below.
<TABLE>
<CAPTION>
Number of
Calendar Bid Prices Asked Prices Shares
Quarter High Low High Low Sold
- -------- ------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
1994
- ----
1st quarter ............ 23-1/2 23-l/2 24-l/2 24-1/8 2,545
2nd quarter ............ 23 23 24 23-7/8 3,812
3rd quarter ............ 23 23 24 24-1/2 2,050
4th quarter ............ 23 22 24 23 5,169
1995
- ----
1st quarter ............ 22 22 23-1/4 23 1,500
2nd quarter ............ 22 22 23 23 200
3rd quarter ............ 22 22 23 22-3/4 2,390
4th quarter ............ 22 21-1/4 23 22-3/4 9,165
</TABLE>
The source of the foregoing information is Janney Montgomery Scott,
Inc., members of New York and other principal exchanges, 505 Main
Street, Hackensack, New Jersey.
(B) There is one class of stock of beneficial interest with no par
value. A total of 1,559,788 shares of beneficial interest outstanding at the
close of Registrant's last fiscal year ended October 31, 1995. As of December
11, 1995, the Registrant's shares were held by 406 shareholders.
The computation of the number of holders of Registrant's shares of
beneficial interest was based upon a report of shareholders which was prepared
by the Registrant's transfer agent as of December 11, 1995.
<PAGE>
(C) A dividend of $1.62 per share was paid for the fiscal year ended
October 31, 1994. A dividend of $2.53 per share was paid for the fiscal year
ended October 31, 1995 which includes a $.74 dividend paid in December, 1994,
which dividend relates to fiscal year 1994 financial results. The dividends are
declared on a quarterly basis. On December 18, 1995, after the close of the
October 31, 1995 fiscal year, a dividend of $.74 per share was paid to all
shareholders.
ITEM 6. SELECTED FINANCIAL DATA.
As of or for the Year Ended October 31,
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating data:
Rental revenue $13,250 $11,162 $ 9,948 $ 8,465 $ 6,360
Rental expenses 9,592 8,235 7,268 5,899 3,888
------- ------- ------- ------- -------
Income from
rental operation 3,658 2,927 2,680 2,566 2,472
Other income 5 5 4 136 526
------- ------- ------- ------- -------
3,663 2,932 2,684 2,702 2,998
Other expenses (754) (473) (389) (264) (242)
Minority interest (123) (76) -- -- --
in Westwood Hills
Net income 2,786 2,383 2,383 2,438 2,756
===== ===== ===== ===== =====
Balance sheet data:
Total assets 65,535 65,613 51,356 50,064 29,096
====== ====== ====== ====== ======
Long term
obligations 34,598 34,019 24,963 25,341 6,412
====== ====== ====== ====== =====
Per share data (a):
Earnings per share $1.79 $1.53 $1.47 $1.56 $1.77
===== ===== ===== ===== =====
Dividends per share $2.53* $1.62 $1.56 $1.765 $1.92
===== ===== ===== ====== =====
</TABLE>
* The dividend shown for 1995 includes the dividend paid in December 1994 of
$.79 per share. This dividend was related to the earnings for fiscal year 1994
but which were not paid until December 1994 (during fiscal year 1995).
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
1. Liquidity and Capital Resources.
Overview
The following discussion should be read in conjunction with the
Registrant's Financial Statements and Notes thereto appearing elsewhere in this
Form 10-K. Such financial statements and information have been prepared to
reflect the historical operations and financial condition of the Registrant.
Results of Operations
Rental revenues for the fiscal year ended October 31, 1995 were
$13,250,000 as compared to $11,162,000 for the same period in 1994. The rental
expenses increased to $9,592,000 for 1995 as compared to $8,235,000 for 1994.
The Registrant's net income for the fiscal year 1995 was $2,786,000 or
$1.79 per share as compared to a net income of $2,383,000 for fiscal year 1994
or $1.53 per share.
The increase in rental income was primarily due to the fact Westwood
Hills was owned by the Registrant for a full year in 1995. The Registrant's
interest in Westwood Hills was purchased in June of 1994.
In addition, the Registrant was able to secure various rent increases
for most of its apartment properties while maintaining occupancy rates at or
near historical highs. Additional space was also rented at Westridge during
1995.
Liquidity and Capital Resources
(a) Cash flows from operations, debt financing and the sale of Trust
Shares have been the principal sources of capital used to fund the Registrant's
property acquisitions and expansion.
The Registrant has a $20 million line of credit from UJB that may be
used to finance the acquisition or development of additional properties and for
general business purposes. Borrowings under the Line of Credit bear interest:
(i) at a variable fluctuating rate equal to UJB's Base Lending Rate or at the
LIBOR Base, plus 200 basis points (2.0%) on all borrowings up to $10,000,000;
and (ii) at UJB's Base Lending Rate, plus one half of one percent (1/2%), or at
the LIBOR Base, plus 250 basis points (2.5%) on all borrowings in excess of
$10,000,000. At October 31, 1995, the sum of $5,168,860 was outstanding under
the Line of Credit.
The Registrant may seek, under certain circumstances, to obtain funds
through additional equity offerings and/or debt financing (other than the Line
of Credit), such as purchase money financing from the sellers of real estate or
mortgage loans from institutions. Such funds may be used in connection with the
acquisition of additional properties, the renovation or expansion of existing
properties or, as necessary, to meet the distribution requirements for REITs
under the Code. The availability and terms of any such equity offering will
depend upon market and other conditions. There can be no assurance that such
additional equity capital will be available on terms acceptable to the
Registrant. Economic conditions and prevailing banking standards have generally
restricted the availability of debt financing, particularly in connection with
mortgage loans for real estate acquisitions. The Registrant is unable to project
in a definitive manner what impact such economic conditions and prevailing
banking standards will have on the Registrant's ability to finance new
acquisitions.
The Registrant continues to make capital improvements to, primarily,
its apartment properties as it determines to be appropriate, including new
roofs, windows and kitchens. The short term impact of such capital outlays will
be to depress the Registrant's then 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 additional
capital expenditures except with respect to the re-development of the Franklin
Lakes Shopping Center (the "F.L. Shopping Center"). The Registrant does intend
to demolish the F.L. Shopping Center which consists of approximately 33,320
square feet of leasable space and to construct a new center with approximately
88,000 square feet of leasable space (hereinafter sometimes referred to as "New
Center"). Except for two tenants, the F.L. Shopping Center has been effectively
closed since September 1, 1995.
A supermarket chain has agreed, in principle, to lease approximately
42,000 square feet of space at the New Center. All governmental approvals have
been secured to permit the construction of the New Center. The Registrant
anticipates that it will commence construction of the new shopping center during
the Spring of 1996. Construction will take approximately nine (9) months during
which time the property will generate no income. The Registrant realized
approximately $91,300 in income during fiscal year 1995 from the F.L. Shopping
Center and approximately $166,000 in income during the fiscal year 1994. The
loss of income for the construction period will be approximately $.11 per share
on an annual basis. In addition to the loss in income from the F.L. Shopping
Center, Registrant will continue to pay expenses related to the ownership of the
real property while the New Center is under construction. These expenses will
include real property taxes, insurance and depreciation charges. Also, once
construction commences, Registrant will bear certain costs related to the
construction of the New Center such as Construction costs, interest for the
construction mortgage, and fees due third parties.
The Registrant anticipates that it will secure a mortgage from a third
party lender in the amount of approximately $6.0 million to provide the
necessary funding for the construction of the New Center.
(b) Under the terms of the Leases relating to the shopping
center/retail properties, the tenants are responsible for various operating
expenses and real estate taxes. As a result of these arrangements, the
Registrant does not believe it will be responsible for any major expenses in
connection with such properties during the lease term of any tenant. The
Registrant anticipates entering into similar leases with respect to properties.
After the lease term, or in the event a tenant is unable to meet is obligations,
the Registrant anticipates that any expenditures it might become responsible for
in maintaining the properties will be funded by cash from operations and, in the
case of major expenditures, possibly by borrowings. To the extent that
expenditures or significant borrowings are required, the Registrant's cash
available for distribution and liquidity may be adversely affected.
(c) Registrant may also seek purchase money financing or institutional
financing, other than the line of credit, to finance any new acquisitions. As of
December 31, 1995 institutional money is available at relatively reasonable
rates. The Registrant may, as a result, seek to raise additional monies for
investment purposes, subject to the restrictions of the Line of Credit by
securing mortgage financing on one or more of its properties. In addition,
Registrant may seek to refinance one or more of its properties where mortgage
financing is currently in place.
(d) i) Registrant's mortgage on its shopping center property in
Westwood, New Jersey has a principal balance as of October 31, 1995, of
$5,444,000. The mortgage is payable to Aetna Life Insurance Company ("Aetna").
The monthly interest and principal payments are $55,287 including interest at
10% per annum. The mortgage is due in September, 2001. At that time, there will
be a balloon payment of $4,506,109 due Aetna. The Registrant has made no
provision to reserve cash to pay this indebtedness when it matures.
(ii) Registrant's mortgage on its apartment project in Spring Lake
Heights, New Jersey has a principal of $307,000 as of October 31, 1995. The
mortgage is payable to UJB and is self-liquidating; there is no balloon payment
at its due date. This loan is payable in monthly installments of $8,555
including interest at 7.625% per annum through March, 1999.
(iii) Registrant's mortgage on its shopping center property in
Frederick, Maryland, has a principal balance as of October 31, 1995 of
$18,359,000. The mortgage is payable to State Mutual Life Insurance Company of
America. The interest and principal payments are $160,925 including interest at
9% per annum. The mortgage is due in August, 1997. At that time, there will be a
balloon payment of $17,993,111 due State Mutual. The Registrant has made no
provision to reserve cash to pay this indebtedness when it matures.
(iv) Registrant holds a 40% interest in the LLC which owns Westwood
Hills. As described at "other Investment" page 5 hereof, the LLC has secured a
mortgage on Westwood Hills in the face amount of $10,500,000. The mortgage is
payable to USG. The monthly interest and principal payments are $79,654.51
including interest at 7.8% per annum. The mortgage matures in October of 2002.
At that time, there will be a balloon payment of $9,230,965 due USG. The LLC has
made no provision to reserve cash to pay this indebtedness when it matures.
(v) See "Item 1. Business. Leverage; No Limitation on Debt; Possible
Inability to Refinance Balloon Payments on Mortgage Debt" at pp. 10-11 hereof.
(e) The Registrant anticipates that adequate cash will be available to
fund its operating and administrative expenses, continuing debt service
obligations and the payment of distributions in accordance with REIT
requirements.
Capital Strategy
Since its inception in 1961, the Registrant has elected to be treated
as a REIT for Federal income tax purposes. The Registrant anticipates making
distributions to its stockholders from operating cash flows, which are expected
to increase from future growth in rental revenues and other sources. Although
cash used to make distributions reduces amounts available for capital
investment, the Registrant generally intends to distribute not less than 95% of
net income.
Although the Registrant receives most of its rental payments on a
monthly basis, it intends to make regular quarterly dividend payment
distributions. The funds accumulated for dividend distributions may be invested
by the Registrant in short-term marketable instruments.
Dividend Reinvestment and Share Purchase Plan
The Registrant filed a prospectus with the Securities and Exchange
Commission to provide for Dividend Reinvestment and Share Purchase Plan (the
"Plan"). The Plan has been withdrawn. The Plan would have provided an
opportunity for its shareholders to purchase additional shares, through
automatic reinvestment of dividends or additional voluntary cash investments,
without paying any service fees, brokerage commissions or other charges.
Economic Conditions
(a) As of January 1, 1996, the Registrant has observed that the
economic climate in the Mid-Atlantic states has shown improvement over that
which was experienced in 1989 to 1993 period. Nevertheless, any substantial rise
in interest rates over current rates may have the effect of again depressing the
economic conditions which could result in the inability of some existing tenants
of the Trust to meet their lease obligations and could otherwise adversely
affect the Trust's ability to attract or retain tenants.
Management believes that any inflation will have a positive impact for
the long-term potential appreciation of the Registrant's shopping centers and
apartment complexes. The majority of the Trust's shopping centers contain
provisions designed to mitigate the short-term adverse impact of inflation. Such
provisions include clauses enabling the Registrant to receive percentage rents
which generally increase as prices rise, and/or escalation clauses which are
typically related to increases in the consumer price index or similar inflation
indices. Most of the Registrant's leases require the tenant to pay its pro rata
share of costs and expenses associated with the ongoing operation of the
property, including, but not limited to, real property taxes and assessments,
repairs and maintenance, and insurance, thereby reducing the Registrant's
exposure to increases in operating costs and expenses resulting from inflation.
However, inflation may have a negative impact on some of the
Registrant's other operating items. Interest, and general and administrative
expenses, may be adversely affected by inflation as these specified costs could
increase at a rate higher than rents. Also, for tenant leases with stated rent
increases inflation may have a negative effect as the stated increases in these
leases could be lower than the increase in inflation at any given time.
Inflation may have a materially adverse effect upon the net income of
the Registrant's apartment complexes, particularly those located in
municipalities which have enacted rent control or rent levelling ordinances.
Such ordinances typically limit the amount of the annual rental increase a
tenant will be obligated to pay upon renewal of the tenant's lease. To the
extent that an operating cost increases or only allows such recoupment pursuant
to an application and approval process (with consequent regulatory and
implementation delays), the Registrant's net income from the operation of its
apartment complexes could be eroded by inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements in accordance with the provisions of Regulation
S-K are annexed hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
There are no matters of disagreement on accounting and financial
disclosures as between the Registrant and J.H. Cohn & Company required to be
reported pursuant to Regulation S-K. There has not been in either of the past
two years an adverse opinion or disclaimer of opinion, nor was any opinion
qualified or modified as to uncertainty, audit scope or accounting principles.
Since December of 1991, J.H. Cohn & Company has acted as the
Registrant's principal accountants and auditors. Prior to that time, J.L.
Hochberg & Co. was the Registrant's principal accountant and auditor. J.L.
Hochberg & Co. resigned as principal accountants for the Registrant in December,
1991.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
(A) IDENTIFICATION OF TRUSTEES.
<TABLE>
<CAPTION>
Expiration
Name Served Since Date of Term Age
- ---- ------------ ------------ ---
<S> <C> <C> <C>
Robert S. Hekemian 1980 May, 1996 64
Donald W. Barney 1981 May, 1998 54
<CAPTION>
Expiration
Name Served Since Date of Term Age
- ---- ------------ ------------ ---
<S> <C> <C> <C>
John B. Voskian, MD 1968 May, 1996 71
Herbert C. Klein 1961 May, 1997 65
Nicholas A. Laganella 1969 May, 1997 77
Charles J. Dodge 1990 May, 1996 52
Alan L. Aufzien 1992 May, 1998 66
Ronald J. Artinian 1992 May, 1998 47
</TABLE>
(B) IDENTIFICATION OF EXECUTIVE OFFICERS.
<TABLE>
<CAPTION>
Name Served Since Position
- ---- ------------ --------
<S> <C> <C>
Robert S. Hekemian 1991 Chairman of the Board
John B. Voskian, MD 1968 Secretary
Donald W. Barney 1993 President
William R. DeLorenzo, Jr. 1974 Executive Secretary
and Treasurer
</TABLE>
All of the Officers of the Registrant serve at the pleasure of the Board of
Trustees.
The Officers devote the following approximate portions of their business
activities to the Trust:
Mr. Hekemian . . . . . . . 10%
Mr. Barney . . . . . . . . 5%
Mr. Voskian . . . . . . . Less than 5%
Mr. DeLorenzo . . . . . . 10%
<PAGE>
(C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES.
Registrant has no employees. Hekemian & Co., Inc. serves as
the managing agent for the Registrant and manages all of its
properties. Hekemian & Co. retains the services of a number of
individuals who work on a full or part time basis in connection
with Registrant's properties. The Registrant reimburses Hekemian
& Co. for certain expenses related to such employees. (See Item 1,
C(13) at pp. 15-16 hereof).
(D) IDENTIFICATION OF CERTAIN SIGNIFICANT FAMILY RELATIONSHIPS.
Mr. Hekemian is the brother-in-law of Dr. Voskian. Mr. Barney
was formerly the brother-in-law of Mr. DeLorenzo. There are no
other family relationships between any other Trustees or Executive
Officers.
(E) BUSINESS EXPERIENCE.
(1) Robert S. Hekemian - Mr. Hekemian is Chairman of the Board of
Hekemian & Co., Inc., a real estate brokerage firm. He is a director of United
Jersey Bank of New Jersey ("UJB"), a member of UJB Financial Corp. United Jersey
Bank of New Jersey is a banking institution with principal offices in Princeton,
New Jersey. He is also a director, partner and/or officer of numerous private
real estate corporations and partnerships. He has been active in real estate for
over forty-two (42) years.
(2) Donald W. Barney - Mr. Barney is Vice President and Treasurer of
Union Camp Corporation, a Virginia corporation with executive offices in Wayne,
New Jersey; director of Ramapo Bank, a New Jersey financial institution located
in Wayne, New Jersey. Mr. Barney is also a partner and director of several real
estate investment companies, partnerships, and corporations.
(3) Dr. John B. Voskian - Dr. Voskian is a physician. He is also a
director and an officer of a number of private real estate companies. Dr.
Voskian is not currently practicing medicine.
(4) Herbert C. Klein - Mr. Klein is a senior member of the law firm of
Hannoch Weisman located in Roseland, New Jersey. Mr. Klein's practice is devoted
to trial practice, real estate and corporate matters. Mr. Klein is a former
member of the United States House of Representatives serving the 8th
Congressional District of New Jersey from January, 1992 until January, 1995. Mr.
Klein was formerly a member of the law firm of Klein Chapman. He is a director
of Security Indemnity Insurance Company (a New Jersey financial institution), a
former member of the New Jersey legislature, a member of the Bars of New Jersey
and the District of Columbia, an attorney since 1956, and a member of the Board
of Trustees of Rutgers University.
(5) Nicholas A. Laganella - Mr. Laganella is the President of P.T. & L.
Construction Company and a real estate investor on his own account.
(6) Charles J. Dodge - Mr. Dodge is the Chief Executive Officer of
Cronheim Mortgage Co. Mr. Dodge is also a partner in a real property development
company and is a real estate investor on his own account.
(7) Alan L. Aufzien - Mr. Aufzien is Chairman and Chief Executive
Officer, Meadowlands Basketball Association, t/a New Jersey Nets (Member of the
National Basketball Association), Director of The First New York Bank For
Business, Chairman of New York Harbour Associates which is a real estate
developer, Treasurer and Partner of Capital Formation Associates, a group of
venture capital investors and operators, Chairman of RAL International, Ltd. and
is active in various civic and business organizations.
(8) Ronald J. Artinian - Mr. Artinian is the Senior Managing Director,
National Sales Office at Smith Barney, investment advisors and is also a member
of the Board of Directors of Smith, Barney.
(9) William R. DeLorenzo, Jr. - Mr. DeLorenzo is an attorney in private
practice as a principal in the firm of Wiss & Cooke, P.C. His law office is
located in Hackensack, New Jersey. Mr. DeLorenzo is the former Chairman of the
New Jersey Commission on Capital Budget and Planning.
Directorships - Messrs. Klein, Hekemian, Laganella, Barney, Aufzien and
Artinian are Directors of closely held corporations and partnerships that own
real estate.
(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
No Trustee or Officer of the Registrant has been the subject of a
petition in bankruptcy, criminal proceeding or order of a Court or governmental
agency barring him from participating in any commodities trading, security
transactions, type of business practice or any other practice set forth in
Section 229.401 subparagraph (f) of Regulation S-K.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
Set forth below is a Summary Compensation Table for each of the
Registrant's Officers and Trustees for the past three fiscal years:
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Name and $ Executive
Office Held Year Salary Committee Fee(2)
- ----------- ---- ------ -------------
<S> <C> <C> <C>
A) Officers
1995 5,000 800
Robert S. Hekemian, 1994 3,800 None
Chairman 1993 3,800 None
President 1992(3) 3,800 None
1995 5,000 800
Donald W. Barney, 1994 3,800 None
President 1993(6) 1,900 None
1995 None 800
Herbert C. Klein, 1994 None None
President 1993 None None
1992(4) 3,800 None
1995 None None
John B. Voskian, 1994 None None
Secretary 1993 None None
1992 None None
1995 10,500 1,600
William R 1994 9,300 None
DeLorenzo, Jr 1993 9,300 400
Executive Secretary 1992 9,300 None
and Treasurer
</TABLE>
The Registrant has determined to compensate all Trustees for fiscal
1996 at the same base rate as in 1995 except that each Trustee or the Executive
Secretary who attends regular or special meetings of the Board of Trustees shall
continue to receive an additional sum of $400.00 for each meeting with no
maximum instead of the $1,600 limit which existed for 1995. Registrant will pay
to each Trustee who attends a site visit to inspect a property being reviewed
for purchase, a fee of $400 together with actual out-of-pocket expenses.
<PAGE>
<TABLE>
<CAPTION>
Name and $ Executive
Office Held Year Salary Committee Fee(2)
- ----------- ---- ------ -------------
<S> <C> <C> <C>
B) Trustees
Robert S. Hekemian 1995 5,500 1,600
1994 5,500 None
1993 5,500 400
1992 5,500 None
Donald W. Barney 1995 5,500 1,600
1994 5,500 None
1993 5,500 400
1992 5,500 None
John B. Voskian 1995 5,500 1,200
1994 5,500 None
1993 5,500 None
1992 5,500 None
Herbert C. Klein 1995 4,583.33 1,600
1994 None None
1993 None None
1992 5,500 None
Nicholas A. Laganella 1995 5,500 1,200
1994 5,500 None
1993 5,500 None
1992 5,500 None
Charles J. Dodge 1995 5,500 1,200
1994 5,500 None
1993 5,500 None
1992 5,500 None
Ronald J. Artinian 1995 5,500 2,400
1994 5,500 None
1993 5,500 400
1992 2,750(5) None
Alan L. Aufzien 1995 5,500 1,200
1994 5,500 400
1993 5,500 None
1992 2,750(5) None
</TABLE>
The fee to be paid to the Chairman, President, and Treasurer will
continue at the rate of $5,000.00 for fiscal year 1996. The fee was increased
from $3,800.00 effective for fiscal year 1995.
<PAGE>
(1) No Officer or Trustee of the Registrant:
a) has any stock options to purchase stock of the Registrant;
b) receives any perquisites or other personal benefits, security or
property; and
c) is entitled to any long-term compensation of any kind from the
Registrant.
(2) Registrant maintains an investment committee which includes a majority of
the Trustees and the Executive Secretary as a non-voting attendee. Members
of the investment committee and the Executive Secretary received $400 for
each meeting attended.
There was one meeting of the investment committee during fiscal 1993.
(3) Mr. Robert S. Hekemian was elected Chairman of the Board in 1991. Prior to
that time, he had served the Registrant as President.
(4) Mr. Herbert C. Klein was elected President of the Registrant in 1991. Prior
to that time, he had not served the Registrant as an Officer. Mr. Klein had,
however, served as a Trustee prior to 1991. Mr. Klein has resigned as
President of the Registrant effective December 31, 1992 upon election to the
United States House of Representatives for the term ending January 4, 1995.
Mr. Klein did not receive any compensation from the Registrant for his
service as a Trustee during his two year term as a U.S. Congressman.
(5) Messrs. Artinian and Aufzien were elected to the Board of Trustees in May,
1992 and have been paid a partial fee for their services in that position by
the Registrant based upon the standard annual fee paid to all Trustees of
$5,500.
(6) Mr. Barney was elected President of the Registrant on May 24, 1993.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(A) No single person owns of record or beneficially five (5) percent or
more of the shares of beneficial interest of the Registrant.
<PAGE>
<TABLE>
<CAPTION>
(B) (1) (2) (3)
Title of Class Amount Beneficially Owned % of Class
- -------------- ------------------------- ----------
<S> <C> <C>
Shares of beneficial 631,919 40.5%
interest no par. All
Trustees and Officers
and their families as
a group (1) of record
and beneficial
</TABLE>
(C) Registrant knows of no pledge of securities of the Registrant, the
operation of the terms of which may at a subsequent date result in a change in
control of the Registrant.
(D) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
<TABLE>
<CAPTION>
Amount and
Name of Nature of
Beneficial Beneficial % of
Title of Class Owner Owner Class
- -------------- ---------- ---------- -----
<S> <C> <C> <C>
Shares of
beneficial
interest no par Robert S. Hekemian 208,182 13.35
Shares of
beneficial
interest no par Donald W. Barney 122,235 7.84
Shares of
beneficial
interest no par John B. Voskian 109,536 7.02
Shares of
beneficial
interest no par Herbert C. Klein 62,332 4.0
Shares of
beneficial
interest no par Nicholas A. Laganella 3,625 0.23
<PAGE>
<CAPTION>
Amount and
Name of Nature of
Beneficial Beneficial % of
Title of Class Owner Owner Class
- -------------- ---------- ---------- -----
<S> <C> <C> <C>
Shares of
beneficial
interest no par Charles J. Dodge 500 0.03
Shares of
beneficial
interest no par Ronald J. Artinian 108,239 6.94
Shares of
beneficial
interest no par Alan L. Aufzien 1,500 .09
Shares of
beneficial
interest no par Wm. R. DeLorenzo, Jr. 15,770 1.01
</TABLE>
- --------------
(1) No single person owns 5 percent of the shares. Includes spouses, parents,
children, siblings, mothers and father-in-law, sons and daughters-in-law,
and brothers and sisters-in-laws.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(A) TRANSACTIONS WITH MANAGEMENT AND OTHERS.
(i) Hekemian & Co., Inc. serves as the managing agent for the
Registrant's properties and as a consultant to the Registrant. Robert
S. Hekemian serves as Chairman of the Board of Hekemian & Co., Inc. and
is also a shareholder. The following family members of Mr. Hekemian are
Officers of Hekemian in the position set forth opposite their names.
Samuel P. Hekemian - President
Robert S. Hekemian, Jr. - Executive Vice President
Bryan S. Hekemian - Vice-President and Secretary
David B. Hekemian - Vice-President and Treasurer
Serge Krikorian - Vice-President Insurance Department
Mr. Hekemian also serves on the Board of Directors of UJB
which holds a first mortgage on the Registrant's property located in Spring Lake
Heights as more fully described in Item 1, Page 5 hereof and has issued the Line
of Credit described at pages 6-7.
Hekemian & Co., Inc. received a consulting fee of $850,000 in
fiscal 1992 in connection with the purchase of Westridge and for other
consulting services performed from 1988 through 1992. In 1993, Hekemian & Co.,
Inc. was paid a commission of $63,125 in connection with the purchase of
additional property located in Rockaway, New Jersey.
Hekemian & Co., Inc. was paid a fee of $500,000 in connection
with the purchase Westwood Hills, LLC. The Registrant's share of the fee paid to
Hekemian & Co., Inc. was $200,000 (40% interest in the LLC x $500,000).
<PAGE>
(ii) The law firm of Hannoch Weisman was retained by the
Registrant during the fiscal year to furnish legal services. Herbert C. Klein, a
Trustee, is a member of the law firm.
(iii) The law firm of Wiss & Cooke, P.C. was retained by the
Registrant during the fiscal year to furnish legal services. William R.
DeLorenzo, Jr., the Executive Secretary and Treasurer is a member of the law
firm.
(iv) In connection with the refinancing of the Westwood Hills,
LLC mortgage with USG Annuity & Life Company the Registrant loaned to the LLC
$40,000. The LLC repaid the $40,000 together with interest calculated at the
rate of 10.0% per annum on a per diem basis on September 14, 1995 when the
mortgage closed. In addition, Hekemian & Co. was paid a fee of $52,500 for its
services in connection with securing the USG Mortgage.
(B) CERTAIN BUSINESS RELATIONSHIPS.
On June 2, 1994, the Registrant purchased a forty (40%) percent
interest in Westwood Hills, a New Jersey Limited Liability Company (the "LLC"),
which is the owner of a 210 unit apartment complex located in Westwood, Bergen
County, New Jersey (the "Westwood Hills").
The LLC purchased Westwood Hills on June 2, 1994, pursuant to a
Contract of Sale dated February 9, 1994, as amended, immediately prior to the
Registrant's purchase of its interest in the LLC. The LLC does not own any
property other than Westwood Hills.
Pursuant to the terms of an operating agreement, the Registrant will be
the managing member of the LLC. The Registrant has retained Hekemian & Co., Inc.
who will serve as the managing agent for Westwood Hills.
The LLC purchased Westwood Hills from an unrelated third party for a
purchase price of $14,500,000 or $69,048 per unit. The LLC, in order to purchase
the apartment complex, invested a total of $4,980,000. The balance of the
purchase price, or $9,520,000 was financed by a mortgage from UJB.
The Registrant's share of the cash portion was $1,992,000 which was
secured by drawing down on its open line of credit with UJB.
The mortgage loan with UJB was refinanced with USG Annuity & Life
Company in the face amount of $10.5 million (the "USG Mortgage"). The USG
Mortgage is for a seven (7) year term with a twenty-five (25)year payout. As a
result, a substantial balloon payment will be due at the expiration of the
mortgage term. The LLC has not and has no plan to establish a cash reserve in
order to be in the position to make the balloon payment when it is due. Instead,
the LLC intends to refinance the property at the then current mortgage terms and
conditions which may be less favorable then the terms and conditions of the USG
Mortgage.
The USG Mortgage bears interest at the rate of 7.80% per annum.
Prior to the acquisition of its interest in the LLC, Registrant was
advised that a Phase I audit was completed for the Apartment Complex which was
acceptable.
<PAGE>
Several trustees and members of their families as well as one current
and one former employee of Registrant's managing agent, Hekemian & Co., Inc.
also acquired interests in the LLC as limited members all as set forth below. As
a result of the investment by several trustees, counsel for Registrant advised
and, as a result the Board of Trustees of the Registrant revised Section 7.5 of
the Amended and Restated Declaration of Trust. As originally framed, Section 7.5
did not deal with the issue of the Registrant's participation in a partnership,
joint venture, limited liability company, or other form of business organization
or entity in which a trustee has a direct or indirect interest. Therefore,
Section 7.5 was revised to provide that a trustee with a direct or indirect
interest in the business organization or entity may vote on the proposal to buy
or acquire the interest. The trustee, however, must first disclose to the other
trustees, in writing, the nature of the extent of the interest. In acquiring its
interest in the LLC, all trustees did vote affirmatively to purchase the
Apartment Complex throughout its investment in the LLC and all interested and
disinterested trustees voted affirmatively after full disclosure of the contract
together with independent counsel reviewing the operating agreement for the LLC.
Robert S. Hekemian, is a member of the Board of Directors of UJB which
granted the original mortgage to the LLC. In addition, Robert S. Hekemian serves
as Chairman of the Board of the Registrant.
Hekemian & Co., Inc. acted as real estate broker for the acquisition of
the Apartment Complex by the LLC. The LLC paid Hekemian & Co. a commission of
$500,000 and $225,000 to a third party broker.
The interests sold by the LLC to third parties, including the
Registrant, were not registered to either the Securities Exchange Act of 1933 or
with the New Jersey Bureau of Securities. As a result, the Registrant's interest
cannot be freely transferred. There is no current market for the Registrant's
interest in the LLC; the Registrant does not anticipate that a market will exist
for its interest in the future.
<PAGE>
The interest of each of the members of the LLC are as follows:
<TABLE>
<CAPTION>
POSITION RELATIONSHIP INITIAL
WITH PERCENTAGE WITH A CAPITAL
NAME TRUST OF INTEREST TRUSTEE CONTRIBUTION
- ---- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Ronald J. Artinian Trustee 2.0% N/A $122,000.00
5 Bristol Drive
Manhasset, NY 11030
Nicholas J. Aynilian None 0.75% Son-in-law $ 45,750.00
& Elizabeth Ann Aynilian and daughter
Trustees for the Elizabeth of Serge
Ann Aynilian Irrevocable Krikorian,
Trust, Dated 1/1/91 Vice-President
477 Colonial Road Hekemian & Co.,
Ridgewood, NJ 07450 and niece of
Robert S.
Hekemian, Trustee
Donald W. Barney Trustee 4.0% N/A $244,000.00
815 Pond Brook Road
Franklin Lakes, NJ 07417
Katherine A. Gambino None 1.0% Daughter of $ 61,000.00
11 Todd Lane John Voskian,
Old Tappan, NJ 07675 Trustee, and
niece of Robert
S. Hekemian, Trustee
Bryan S. Hekemian None 7.0% Son of $427,000.00
7 Normandy Court Robert S.
Ho-Ho-Kus, NJ 07423 Hekemian, Trustee
and Vice-
President of
Hekemian & Co.
Lisa Jann Hekemian None 5.0% Daughter of $305,000.00
47 Oxford Drive Robert S.
Tenafly, NJ 07670 Hekemian, Trustee
<PAGE>
<CAPTION>
POSITION RELATIONSHIP INITIAL
WITH PERCENTAGE WITH A CAPITAL
NAME TRUST OF INTEREST TRUSTEE CONTRIBUTION
- ---- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
David B. Hekemian None 7.0% Son of $427,000.00
7 Normandy Court Robert S.
Ho-Ho-Kus, NJ 07423 Hekemian, Trustee
and Vice-President
of Hekemian & Co.
Robert S. Hekemian Trustee 0.8% N/A $ 48,800.00
47 Oxford Drive
Tenafly, NJ 07670
Robert S. Hekemian,Jr. None 7.0% Son of $427,000.00
380 Prospect Avenue Robert S.
Hackensack, NJ 07601 Hekemian, Trustee
and Executive
Vice-President of
Hekemian & Co.
Robert Hekemian & None 1.5% Beneficiary $ 91,500.00
Ann Krikorian, of Trust is
Trustees F/B/O son of Samuel
Jeffrey John Hekemian Hekemian,
U.A.D. 1/24/78 President of
505 Main Street Hekemian & Co.,
Hackensack, NJ 0760l and nephew of
Robert S. Hekemian,
Trustee
Robert Hekemian & None 1.5% Beneficiary $ 91,500.00
Ann Krikorian, of Trust is
Trustees F/B/O son of Samuel
Mark Steven Hekemian Hekemian,
U.A.D. 12/10/85 President of
505 Main Street Hekemian & Co.
Hackensack, NJ 0760l and nephew of
Robert S. Hekemian,
Trustee
Robert Hekemian & N/A 1.5% Beneficiary $ 91,500.00
Ann Krikorian, of Trustee is
Trustees F/B/O son of Samuel
Peter Samuel Hekemian Hekemian,
U.A.D. 11/24/76 President of
505 Main Street Hekemian & Co.
Hackensack, NJ 0760l and nephew of
Robert S. Hekemian,
Trustee
<PAGE>
<CAPTION>
POSITION RELATIONSHIP INITIAL
WITH PERCENTAGE WITH A CAPITAL
NAME TRUST OF INTEREST TRUSTEE CONTRIBUTION
- ---- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Robert Hekemian & None 1.5% Beneficiary $ 91,500.00
Ann Krikorian, of Trust is
Trustees F/B/O son of Samuel
Richard Edward Hekemian Hekemian,
U.A.D. 9/1/83 President of
505 Main Street Hekemian & Co.
Hackensack, NJ 0760l and nephew of
Robert S. Hekemian,
Trustee
Samuel P. Hekemian None 0.7% President of $ 42,700.00
692 East Drive Hekemian & Co.
Oradell, NJ 07649 and brother of
Robert S. Hekemian, Trustee
Albert A. Kapigian None 1.0% None $ 61,000.00
39 Kira Lane
Ridgewood, NJ 07450
Shirlee Kerbeykian None 1.5% Wife of $ 91,500.00
156 Churchill Road Edward Kerbeykian
Tenafly, NJ 07670 Senior
Vice-President
of Hekemian & Co.
Ronald F. Kistner None 0.5% Employee of $ 30,500.00
75 Oak Grove Avenue Hekemian & Co.
Hasbrouck Heights,
NJ 07604
Herbert C. Klein Trustee 1.5% N/A $ 91,500.00
34 Lenox Avenue
Clifton, NJ 07015
Krieger Family Trust None 1.5% Jacqueline $ 91,500.00
Jacqueline Klein, Trustee Klein is the
P.O. Box 1758 wife of Herbert
Clifton, NJ 07012 C. Klein, Trustee
Aimee Nicole Krikorian None 0.75% Daughter of $ 45,750.00
& Elizabeth Ann Aynilian Serge Krikorian
Trustees for the Aimee Nicole Vice-President of
Krikorian Irrevocable Trust Hekemian & Co. and
Dated 1/1/92 niece of Robert S.
168 Nancy Lane Hekemian, Trustee
Wyckoff, NJ 07481
<PAGE>
<CAPTION>
POSITION RELATIONSHIP INITIAL
WITH PERCENTAGE WITH A CAPITAL
NAME TRUST OF INTEREST TRUSTEE CONTRIBUTION
- ---- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Douglas Diran Krikorian None 0.75% Son of $ 45,750.00
& Elizabeth Ann Aynilian Serge Krikorian
Trustees for the Douglas Diran Vice-President of
Krikorian Irrevocable Trust Hekemian & Co. and
Dated 1/1/92 nephew of Robert S.
168 Nancy Lane Hekemian, Trustee
Wyckoff, NJ 07481
Gregory Serge Krikorian None 0.75% Son of $ 45,750.00
& Elizabeth Ann Aynilian Serge Krikorian
Trustees for the Gregory Serge Vice-President of
Krikorian Irrevocable Trust Hekemian & Co. and
Dated 1/1/92 nephew of Robert S.
168 Nancy Lane Hekemian, Trustee
Wyckoff, NJ 07481
Henri & Leonara Nazarian None 5.0% None $305,000.00
Ave. Mostinck 76
1150 Bruxelles, Belgique
Thomas A. Newton None 0.5% Former $ 30,500.00
497 Sussex Road Controller of
Wood Ridge, NJ 07075 Hekemian & Co.
Stephanie H. Reckler None 2.0% None $122,000.00
885 Park Avenue
New York, NY 10021
Michael J. Voskian None 1.0% Son of John $ 61,000.00
639 Briarwood Court Voskian,
Oradell, NJ 07649 Trustee and
nephew of
Robert S.
Hekemian, Trustee
Victoria A. Voskian None 1.0% Daughter of $ 61,000.00
716 Soldier Hill Road John Voskian,
Oradell, NJ 07649 Trustee and
niece of
Robert S.
Hekemian, Trustee
TOTAL ................................................60.0% $3,660,000.00
N/A - Not applicable
</TABLE>
<PAGE>
WESTWOOD HILLS, LLC
MANAGING MEMBER
<TABLE>
<CAPTION>
INITIAL CAPITAL
NAME PERCENTAGE OF INTEREST CONTRIBUTION
- ---- ---------------------- -------------
<S> <C> <C>
First Real Estate 40% $2,440,000.00
Investment Trust of
New Jersey, c/o
Hekemian & Co., Inc.
505 Main Street
P.O. Box 667
Hackensack, NJ 07602
</TABLE>
(C) INDEBTEDNESS OF MANAGEMENT.
Not applicable.
(B) TRANSACTIONS WITH PROMOTERS.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON
FORM 8-K.
(A) List of all documents to be filed as a part of this 10-K Report:
1) Financial Statements
(i) Report of Independent Public Accountant for
Registrant, J.H. Cohn & Company, Inc.
(ii) Combined Balance Sheets as of October 31, 1995
and 1994.
(iii) Combined Statements of Income and Undistributed Earnings Years ended
October 31, 1995, 1994 and 1993.
(iv) Combined Statements for Cash Flows Years ended
October 31, 1995, 1994 and 1993.
(v) Notes to Combined Financial Statements.
2) Financial Statement Schedules.
(ix) Short-Term Borrowings.
(x) Supplementary Income Statement Information.
(xi) Real Estate and Accumulated Depreciation.
B) Reports on Form 8-K
No report on Form 8-K was filed by the Registrant during the last
quarter of the fiscal year ending October 31, 1995.
C) Exhibits required pursuant to Item 601 of Regulation S-K
Exhibit 3 - Amended and Restated Declaration of Trust, dated November
7, 1983 which was submitted as part of Registrant's 10-K for 1991, as
amended which Exhibit is incorporated by reference; amendment dated May
31, 1994 to paragraphs 3.5 and 7.5, which was submitted as part of
Registrant's 10-K for 1994 is incorporated by reference.
Exhibit 10 - Material Contracts -
(i) December 20, 1961 Management Agreement between the
Registrant and Hekemian & Co., Inc. (formerly known as S. Hekemian &
Co., Inc.), a copy of which was filed as Exhibit 10 with Registration
Statement - 2-19609, which Exhibit is incorporated by reference.
(ii) Amendment to Management Agreement dated May 8, 1963 which
was filed as Exhibit 20 with Registration Statement 2- 48728, which
Exhibit is hereby incorporated by reference.
Exhibit 24
Report of J.H. Cohn & Company as the Independent Public Accountants of
the Registrant is included in the Financial Statements, attached hereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: January 31, 1996 First Real Estate Investment Trust of
New Jersey
By: /s/ Robert S. Hekemian,
---------------------------------
Robert S. Hekemian,
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert S. Hekemian his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Annual Report, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
/s/Robert S. Hekemian January 31, 1996
- ------------------------------------
Robert S. Hekemian
Chairman of the Board
Chief Executive Officer and Trustee
(Principal Executive Officer)
/s/Donald Barney January 31, 1996
- ------------------------------------
Donald Barney
Trustee and President
/s/John B. Voskian January 31, 1996
- ------------------------------------
John B. Voskian
Trustee and Secretary
/s/Herbert C. Klein January 31, 1996
- ------------------------------------
Herbert C. Klein
Trustee
/s/Charles J. Dodge January 31, 1996
- ------------------------------------
Charles J. Dodge
Trustee
/s/Nicholas A. Laganella January 31, 1996
- ------------------------------------
Nicholas A. Laganella
Trustee
/s/William R. DeLorenzo, Jr. January 31, 1996
- ------------------------------------
William R. DeLorenzo, Jr.
Executive Secretary and Treasurer
(Principal Financial and Accounting
Officer)
<PAGE>
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
As of or for the Year Ended October 31,
------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(In Thousands of Dollars, Except
Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Operating data:
Rental revenue $13,250 $11,162 $ 9,948 $ 8,465 $ 6,360
Rental expenses 9,592 8,235 7,268 5,899 3,888
------- ------- ------- ------- -------
Income from rental operations 3,658 2,927 2,680 2,566 2,472
Other income 5 5 4 136 526
------- ------- ------- ------- -------
3,663 2,932 2,684 2,702 2,998
Other expenses (754) (473) (389) (264) (242)
Minority interest (123) (76)
------- ------- ------- ------- -------
Net income $ 2,786 $ 2,383 $ 2,295 $ 2,438 $ 2,756
======= ======= ======= ======= =======
Balance sheet data:
Total assets $65,535 $65,613 $51,356 $50,064 $29,096
======= ======= ======= ======= =======
Long-term obligations $34,598 $34,019 $24,963 $25,341 $ 6,412
======= ======= ======= ======= =======
Per share data:
Earnings per share $ 1.79 $ 1.53 $ 1.47 $ 1.56 $ 1.77
======= ======= ======= ======= =======
Dividends per share $ 2.53 $ 1.62 $ 1.56 $ 1.765 $ 1.92
======= ======= ======= ======= =======
</TABLE>
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
INDEX TO COMBINED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES (ITEMS 8 AND 14(a))
(A) COMBINED FINANCIAL STATEMENTS:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
BALANCE SHEETS
OCTOBER 31, 1995 AND 1994
STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
NOTES TO FINANCIAL STATEMENTS
(B) FINANCIAL STATEMENT SCHEDULES:
IX - SHORT-TERM BORROWINGS
X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is given in
the combined financial statements or notes thereto.
* * *
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders
First Real Estate Investment
Trust of New Jersey
We have audited the accompanying combined balance sheets of FIRST REAL ESTATE
INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE as of October 31, 1995 and 1994,
and the related combined statements of income and undistributed earnings and
cash flows for each of the three years in the period ended October 31, 1995.
These financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of First Real Estate
Investment Trust of New Jersey and Affiliate as of October 31, 1995 and 1994,
and their results of operations and cash flows for each of the three years in
the period ended October 31, 1995, in conformity with generally accepted
accounting principles.
Our audits referred to above included the information in Schedules IX, X and XI
which present fairly, when read in conjunction with the combined financial
statements, the information required to be set forth therein.
J. H. COHN & COMPANY
Roseland, New Jersey
November 29, 1995
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
COMBINED BALANCE SHEETS
OCTOBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Real estate, at cost, net of accumulated
depreciation ................................. $62,324 $63,176
Equipment, at cost, net of accumulated
depreciation of $553,000 and $491,000 ........ 224 214
Cash ............................................. 533 238
Tenants' security accounts ....................... 947 867
Sundry receivables ............................... 248 325
Prepaid expenses and other assets ................ 911 601
Deferred charges, net ............................ 348 192
------- -------
Totals ................................. $65,535 $65,613
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Mortgages payable ............................ $34,598 $34,019
Note payable - bank .......................... 5,169 5,428
Accounts payable and accrued expenses ........ 361 344
Dividends payable ............................ 1,154
Tenants' security deposits ................... 1,048 964
Deferred revenue ............................. 257 214
------- -------
Total liabilities ...................... 42,587 40,969
------- -------
Minority interest ................................ 2,959 3,496
------- -------
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 ....................... 675 1,834
------- -------
Total shareholders' equity ................... 19,989 21,148
------- -------
Totals ................................ $65,535 $65,613
======= =======
</TABLE>
See Notes to Combined Financial Statements.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
COMBINED STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
INCOME 1995 1994 1993
------ -------- -------- --------
(In Thousands of Dollars,
Except per Share Amounts)
<S> <C> <C> <C>
Rental revenue:
Rental income .......................... $ 11,700 $ 9,890 $ 8,804
Real estate taxes reimbursed ........... 914 642 611
Common area maintenance reimbursed ..... 466 472 384
Sundry income .......................... 170 158 149
-------- -------- --------
Totals ............................. 13,250 11,162 9,948
-------- -------- --------
Rental expenses:
Operating expenses ..................... 2,636 2,482 2,106
Management fees ........................ 556 479 443
Real estate taxes ...................... 1,790 1,375 1,231
Interest ............................... 3,074 2,582 2,316
Depreciation ........................... 1,536 1,317 1,172
-------- -------- --------
Totals ............................. 9,592 8,235 7,268
-------- -------- --------
Income from rental operations .............. 3,658 2,927 2,680
-------- -------- --------
Other income (expense):
Interest income ........................ 5 5 4
Interest expense ....................... (503) (279) (194)
General and administrative ............. (245) (185) (187)
-------- -------- --------
Totals ............................. (743) (459) (377)
-------- -------- --------
Income before minority interest ............ 2,915 2,468 2,303
Minority interest .......................... 123 76
-------- -------- --------
Income before state income taxes ........... 2,792 2,392 2,303
Provision for state income taxes ........... 6 9 8
-------- -------- --------
Net income ................................. $ 2,786 $ 2,383 $ 2,295
======== ======== ========
Earnings per share ......................... $ 1.79 $ 1.53 $ 1.47
======== ======== ========
</TABLE>
(Continued)
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
COMBINED STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS (Continued)
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
UNDISTRIBUTED EARNINGS 1995 1994 1993
---------------------- -------- -------- --------
(In Thousands of Dollars,
Except per Share Amounts)
<S> <C> <C> <C>
Balance, beginning of year ................. $ 1,834 $ 1,978 $ 2,116
Net income ................................. 2,786 2,383 2,295
Less dividends ............................. (3,945) (2,527) (2,433)
-------- -------- --------
Balance, end of year ....................... $ 675 $ 1,834 $ 1,978
======== ======== ========
Dividends paid per share ................... $ 2.53 $ 1.62 $ 1.56
======== ======== ========
</TABLE>
See Notes to Combined Financial Statements.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(In Thousands of Dollars)
<S> <C> <C> <C>
Operating activities:
Net income ..................................... $ 2,786 $ 2,383 $ 2,295
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .............. 1,608 1,362 1,254
Deferred revenue ........................... 43 85 14
Minority interest .......................... 123 76
Changes in operating assets and liabilities:
Tenants' security accounts .............. (80) (193) (32)
Sundry receivables, prepaid expenses
and other assets ...................... (461) (229) (177)
Accounts payable and accrued expenses ... 17 101 26
Tenants' security deposits .............. 84 197 50
Other liabilities ....................... (42) 18
------- ------- -------
Net cash provided by operating
activities ........................ 4,120 3,740 3,448
------- ------- -------
Investing activities:
Capital expenditures ........................... (694) (6,330) (1,979)
Restricted cash ................................ 138
------- ------- -------
Net cash used in investing activities (694) (6,330) (1,841)
------- ------- -------
Financing activities:
Dividends paid ................................. (2,791) (2,527) (2,433)
Minority interest contribution ................... 3,660
Minority interest distribution ................. (660) (240)
Deferred charges ............................... (37)
Proceeds from note payable - bank .............. 2,791 7,884 1,700
Repayment of note payable - bank ............... (3,050) (6,376)
Mortgage proceeds .............................. 1,175
Repayment of mortgages ......................... (596) (464) (378)
------- ------- -------
Net cash provided by (used in)
financing activities .............. (3,131) 1,900 (1,111)
------- ------- -------
</TABLE>
(Continued)
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS (Continued)
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(In Thousands of Dollars)
<S> <C> <C> <C>
Net increase (decrease) in cash .................... 295 (690) 496
Cash, beginning of year ............................ 238 928 432
------- ------- -------
Cash, end of year .................................. $ 533 $ 238 $ 928
======= ======= =======
Supplemental disclosure of cash flow data:
Interest paid .................................. $ 3,360 $ 2,872 $ 2,499
======= ======= =======
Income taxes paid .............................. $ 7 $ 7 $ 9
======= ======= =======
</TABLE>
Supplemental schedule of noncash investing and financing activities:
During fiscal 1994, the Affiliate financed the purchase of real estate with
mortgage proceeds of $9,520,000 (see Note 2). During fiscal 1995, the
outstanding mortgage balance of approximately $9,325,000 was repaid using
proceeds of a new mortgage (see Note 4). Dividends declared but not paid
amounted to $1,154,000 at October 31, 1995.
See Notes to Combined Financial Statements.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies:
Organization:
First Real Estate Investment Trust of New Jersey (the
"Trust") was organized November 1, 1961 as a New Jersey
Business Trust.
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. For
fiscal 1995, 1994 and 1993, the Trust made such an
election.
Principles of combination:
The combined financial statements include the accounts of
the Trust and Westwood Hills, LLC (the "Affiliate"),
which have been combined on the basis of common control.
The Affiliate is a limited liability company that is
40%-owned by the Trust and 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 combined
financial statements include 100% of the Affiliate's
assets, liabilities, operations and cash flows with the
60% interest owned by the other members of the Affiliate
reflected as "minority interest." All significant
intercompany accounts and transactions have been
eliminated in combination.
Cash:
The Trust and its Affiliate maintain their 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,
1995 and 1994, the Trust had no cash equivalents.
<PAGE>
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.
Income taxes:
The Affiliate, with the consent of its members, elected
to be treated as a limited liability company under the
applicable sections of the Internal Revenue Code. Under
these sections, income or loss, in general, is allocated
to the members for inclusion in their individual income
tax returns. Accordingly, there is no provision for
income taxes applicable to the operations of the
Affiliate in the accompanying combined financial
statements.
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 years in the period ended October 31,
1995.
Reclassifications:
Certain accounts in the 1994 and 1993 combined financial
statements have been reclassified to conform to 1995
presentations.
<PAGE>
Note 2 - Acquisition:
During May 1994, the Trust became a 40% member of the
Affiliate, a newly formed limited liability company.
On June 2, 1994, the Affiliate consummated the purchase of
Westwood Properties, a residential apartment complex located
in Westwood, New Jersey (the "Apartment Complex"). The cost
of the Apartment Complex was approximately $15,389,000 of
which $5,869,000 was paid in cash and $9,520,000 was
financed by the proceeds of a mortgage.
The acquisition was accounted for as a purchase and,
accordingly, the Apartment Complex's operations have been
included in the accompanying 1995 and 1994 combined
statements of income since the date of acquisition. Of the
total cost of the acquisition (including related acquisition
expenses), $3,849,000 was allocated to land and $11,540,000
to buildings and improvements. In connection with the
acquisition, the Affiliate paid Hekemian a $500,000 real
estate commission, which amount is included in the cost of
the Apartment Complex.
The following unaudited proforma information (in thousands
of dollars, except per share amounts) shows the results of
operations for the years ended October 31, 1994 and 1993 as
though the Apartment Complex had been acquired at the
beginning of fiscal 1993:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Rental revenue ............................. $ 12,398 $ 12,067
Rental expenses ............................ (9,293) (9,082)
-------- --------
Income from rental operations .............. 3,105 2,985
Other expenses, net ........................ (542) (521)
Minority interest .......................... (180) (180)
Provision for income taxes ................. (8) (8)
-------- --------
Net income ................................. $ 2,375 $ 2,276
======== ========
Earnings per share ......................... $ 1.52 $ 1.46
======== ========
</TABLE>
In addition to combining the historical results of
operations of the Apartment Complex and the Trust, the
unaudited proforma results include adjustments for
depreciation based on the Affiliate's purchase price,
reduced interest income and increased interest expense
related to cash paid and obligations incurred to complete
the transaction.
<PAGE>
The unaudited proforma results of operations set forth above
are based on information furnished by the Trust's
management. Such proforma information is not necessarily
indicative of the results that would have occurred had the
acquisition been made at the beginning of fiscal 1993 or of
future results of operations of the combined properties.
Note 3 - Real estate:
Real estate consists of the following:
<TABLE>
<CAPTION>
Range
of Estimated
Useful Lives 1995 1994
-------------- ------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Land $21,112 $21,112
Unimproved land 2,452 2,459
Apartment buildings 7-40 years 21,333 20,749
Commercial buildings 25-31.5 years 58 58
Shopping centers 15-50 years 26,859 26,769
Construction in progress 714 737
------- -------
72,528 71,884
Less accumulated depreciation 10,204 8,708
------- -------
Totals $62,324 $63,176
======= =======
</TABLE>
<PAGE>
Note 4 - Mortgages payable:
Mortgages payable consist of the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
State Mutual Life Assurance Company
of America (A) ................................. $18,359 $18,624
Aetna Life Insurance Company (B) ................. 5,444 5,557
USG Annuity & Life Company (C) ................... 10,488
United Jersey Bank (C) ........................... 9,455
United Jersey Bank (D) ........................... 307 383
------- -------
Totals ....................................... $34,598 $34,019
======= =======
</TABLE>
(A) Payable in monthly installments of $160,925
including interest at 9% through August 1997 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 $26,355,000.
(B) Payable in monthly installments of $55,287
including interest at 10% through September 2001
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 $12,051,000.
(C) At October 31, 1994, the mortgage was payable in
month- ly installments of $12,989 plus interest at
a variable rate through June 2000 at which time
the outstanding balance was due. During 1995, the
mortgage was repaid using proceeds of a new
mortgage in the amount of $10,500,000 which is
payable in monthly installments of $79,655
including interest at 7.8% through October 2002 at
which time the outstanding balance is due. The
mort- gage is secured by the Apartment Complex in
Westwood, New Jersey having a net book value of
approximately $15,112,000.
(D) Payable in monthly installments of $8,555
including interest at 7.625% through March 1999 at
which time the outstanding balance is due. The
mortgage is secured by an apartment building in
Spring Lake, New Jersey having a net book value of
approximately $673,000. One of the directors of
the bank is a trustee of the Trust.
<PAGE>
Principal amounts (in thousands of dollars) due under the
above obligations in each of the five years subsequent to
October 31, 1995 are as follows:
Year Ending
October 31, Amount
----------- -------
1996 $ 639
1997 18,448
1998 414
1999 387
2000 379
Note 5 - Note payable - bank:
Note payable - bank consists of borrowings under a
$20,000,000 revolving line of credit agreement with United
Jersey Bank which expires on February 10, 1997. 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 1/2% 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, the Apartment
Complex in Westwood, New Jersey, and any vacant land owned
by the Trust.
<PAGE>
Note 6 - Commitments and contingencies:
Leases:
Commercial tenants:
The Trust leases commercial space having a net book
value of approximately $39,453,000 at October 31,
1995 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 October 31, 1995 are as follows:
Year Ending
October 31, Amount
----------- -------
1996 $ 4,034
1997 3,588
1998 3,168
1999 2,720
2000 2,268
Thereafter 11,501
------
Total $27,279
=======
The above amounts assume that all leases which expire
are not renewed and, accordingly, neither minimal
rentals nor rentals from replacement tenants are
included. In addition, the above amounts do not
include any future minimum rentals to be received for
the shopping center in Franklin Lakes, New Jersey
having a net book value of approximately $1,047,000
at October 31, 1995. Except for two tenants,
management closed the shopping center on September 1,
1995. Commencement of a complete refurbishing of the
premises is scheduled to begin during the Spring of
1996 and will take approximately nine months. The
cost of the refurbishing, which will be put out for
bid in the first quarter of fiscal 1996, is currently
anticipated to approximate $6,000,000. Rental revenue
derived from the shopping center was approximately
$207,000, $310,000 and $349,000 in fiscal 1995, 1994
and 1993, respectively, and income from rental
operations was approximately $91,000, $166,000 and
$212,000, respectively.
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 years in the period ended October 31, 1995 were
not material.
<PAGE>
Residential tenants:
Lease terms for residential tenants are usually one
year or less.
Environmental concerns:
A landfill which is considered a superfund site is
located next to a vacant parcel of land which is
owned by the Trust. The New Jersey Department of
Environmental Protection and Energy ("NJDEP") had
advised the Trust that it was investigating the
property for contamination as a result of the
migration of environmentally sensitive materials from
the landfill. In August 1994, the Trust was advised
that, although the soil had not been environmentally
impaired and a clean-up of the property would not be
required, the NJDEP did determine that the
groundwater in the area of the landfill, including
below the Trust's property, is contaminated as a
result of the activity at the landfill. Accordingly,
the NJDEP is currently in the process of enforcing
remediation of the groundwater by the responsible
parties. As the Trust is not a responsible party,
management anticipates that it will bear no liability
for the cost of the groundwater remediation.
Note 7 - Management agreement:
The properties owned by the Trust and the Affiliate are
currently managed by Hekemian. The management agreement
requires fees equal to a percentage of rents collected. Such
fees were approximately $556,000, $479,000 and $443,000 in
1995, 1994 and 1993, 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.
Note 9 - Shares of beneficial interest:
On February 28, 1995, the Trustees tentatively approved an
increase of 750,000 authorized shares of beneficial interest
concurrent with the commencement of a proposed dividend
reinvestment plan (the "Plan"). The Plan, however, has
subsequently been withdrawn.
* * *
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
SCHEDULE IX - SHORT-TERM BORROWINGS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Maximum Average
Amount Amount Weighted
Out- Out- Average
Category of Balance Weighted standing standing Interest
Aggregate at Average During During Rate
Short-Term End of Interest the the During the
Borrowings (A) Period Rate Period Period Period (B)
------ ---- ------ ------ ----------
<S> <C> <C> <C> <C> <C>
1995:
Note payable -
bank $5,169 8.09% $6,582 $5,585 7.9%
====== ==== ====== ====== ===
1994:
Note payable -
bank $5,428 5.97% $5,728 $4,505 6.2%
====== ==== ====== ====== ===
1993:
Note payable -
bank $3,920 6.0% $3,920 $3,413 6.0%
====== ==== ====== ====== ===
</TABLE>
- ---------------
(A) See Note 5 of notes to combined financial statements.
(B) Calculated using average monthly loan balances and actual interest expense.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B
-------- --------
Charged to Costs
Item (A) and Expenses
----------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs $ 243 $ 345 $ 271
====== ====== ======
Real estate taxes $1,790 $1,375 $1,231
====== ====== ======
</TABLE>
(A) Amounts for other items were less than 1% of revenue in all years.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
OCTOBER 31, 1995
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Costs
Capitalized
Initial Cost Subsequent
to Company to Acquisition
------------------------- ---------------------------
Buildings
Encum- and Carrying
Description brances Land Improvements Improvements Costs
----------- ------- ---- ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Garden apartments:
Sheridan Apts.,
Camden, NJ $ 117 $ 360 $ 680
Grandview Apts., Has-
brouck Heights, NJ 22 180 150
Lakewood Apts., Lake-
wood, NJ 11 396 127
Hammel Gardens, May-
wood, NJ 313 728 583
Palisades Manor,
Palisades Park, NJ 12 81 76
Steuben Arms, River
Edge, NJ 364 1,773 308
Heights Manor, Spring
Lake Heights, NJ $ 307 109 974 291
Berdan Court, Wayne NJ 250 2,206 776
Westwood Hills,
Westwood, NJ 10,488 3,849 11,540 104
Commercial property:
Glen Rock, NJ 12 36 22
Shopping centers:
Franklin Lakes
Shopping Center,
Franklin Lakes, NJ 29 380 959
Westridge Shopping
Center, Frederick, MD 18,359 9,135 19,159 314
Westwood Shopping
Center, Westwood, NJ 5,444 6,889 6,416 345
Vacant land:
Franklin Lakes, NJ 224 $ 8
Rockaway, NJ 1,683 352
South Brunswick, NJ 80 105
------- ------- ------- ------ ----
Totals $34,598 $23,099 $44,229 $4,735 $465
======= ======= ======= ====== ====
</TABLE>
(Continued)
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
OCTOBER 31, 1995
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Column E Column F Column G Column H Column I
-------- ------------ ------------- -------- -----------
Gross Amount at Which
Carried at Close of Period
-------------------------------------
Buildings Which De-
and Accumulated Date of Date preciation
Description Land Improvements Total(1) Depreciation Construction Acquired is Computed
----------- ------- ------------ -------- ------------ ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Garden apartments:
Sheridan Apts.,
Camden, NJ $ 117 $ 1,040 $ 1,157 $ 569 1950 1964 7-40 years
Grandview Apts., Has-
brouck Heights, NJ 22 330 352 203 1925 1964 7-40 years
Lakewood Apts., Lake-
wood, NJ 11 523 534 387 1960 1962 7-40 years
Hammel Gardens, May-
wood, NJ 313 1,311 1,624 628 1949 1972 7-40 years
Palisades Manor,
Palisades Park, NJ 12 157 169 96 1935/70 1962 7-40 years
Steuben Arms, River
Edge, NJ 364 2,081 2,445 996 1966 1975 7-40 years
Heights Manor, Spring
Lake Heights, NJ 109 1,265 1,374 739 1967 1971 7-40 years
Berdan Court, Wayne NJ 250 2,982 3,232 1,945 1964 1965 7-40 years
Westwood Hills,
Westwood, NJ 3,849 11,644 15,493 424 1966 1994 7-40 years
Commercial property:
Glen Rock, NJ 12 58 70 44 1940 1962 10-31.5 years
Shopping centers:
Franklin Lakes
Shopping Center,
Franklin Lakes, NJ 29 1,339 1,368 321 1963/75 1966 10-50 years
Westridge Shopping
Center, Frederick, MD 9,135 19,473 28,608 2,253 1986 1992 15-31.5 years
Westwood Shopping
Center, Westwood, NJ 6,889 6,761 13,650 1,599 1981 1988 15-31.5 years
Vacant land:
Franklin Lakes, NJ 232 232 1966/93
Rockaway, NJ 2,035 2,035 1964/92/93
South Brunswick, NJ 185 185 1964
------- ------- ------- -------
Totals $23,564 $48,964 $72,528 $10,204
======= ======= ======= =======
</TABLE>
(1) Aggregate cost is the same for Federal income tax purposes.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
(In Thousands of Dollars)
Reconciliation of real estate and accumulated depreciation:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Real estate:
Balance, beginning of year $ 71,884 $ 56,080 $ 54,019
Additions:
Land 3,849
Building and improvements 691 11,927 523
Vacant land 1,516
Carrying costs (7) 28 22
Deductions - write-off of fully depre-
ciated assets (40)
-------- -------- --------
Balance, end of year $ 72,528 $ 71,884 $ 56,080
======== ======== ========
Accumulated depreciation:
Balance, beginning of year $ 8,708 $ 7,433 $ 6,298
Additions - charged to operating expenses 1,536 1,275 1,135
Deductions - write-off of fully depre-
ciated assets (40)
-------- -------- --------
Balance, end of year $ 10,204 $ 8,708 $ 7,433
======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 533,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 72,528,000
<DEPRECIATION> 10,204,000
<TOTAL-ASSETS> 65,535,000
<CURRENT-LIABILITIES> 0
<BONDS> 39,767,000
0
0
<COMMON> 19,314,000
<OTHER-SE> 675,000
<TOTAL-LIABILITY-AND-EQUITY> 65,535,000
<SALES> 0
<TOTAL-REVENUES> 13,250,000
<CGS> 0
<TOTAL-COSTS> 9,952,000
<OTHER-EXPENSES> 866,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,792,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,792,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,786,000
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.79
</TABLE>
