SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20594
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended January 31, 1996 Commission File No. 2-48728
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
------------------------------------------------------
(exact name of registrant as specified in its charter)
New Jersey 22-1697095
- ------------------------------- -------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
505 Main Street, P.O. Box 667, Hackensack, New Jersey 07602
- -------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 201-488-6400
------------
-----------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
INDEX
Part I: Financial Information
Item 1: Financial Statements
a.) Combined Balance Sheets for January 31, 1996
and October 31, 1995;
b.) Combined Statements of Income and
Undistributed Earnings For Three Months Ended
January 31, 1996 and 1995;
c.) Combined Statements of Cash Flows for Three
Months Ended January 31, 1996 and 1995;
Item 2: Management's Discussion and Analysis of
Results of Operations and Financial Condition
Part II: Other Information
Item 5: Other Information
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
COMBINED BALANCE SHEETS
JANUARY 31, 1996 AND OCTOBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
January October
ASSETS 31, 1996 31, 1995
------ -------- --------
(In Thousands
of Dollars)
<S> <C> <C>
Real estate, at cost, net of accumulated
depreciation ..................................... $62,132 $62,324
Equipment, at cost, net of accumulated
depreciation of $568,000 and $553,000 ............ 229 224
Cash ................................................. 571 533
Tenants' security accounts ........................... 952 947
Sundry receivables ................................... 507 248
Prepaid expenses and other assets .................... 859 911
Deferred charges, net ................................ 235 348
------- -------
Totals ..................................... $65,485 $65,535
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Mortgages payable ................................ $34,443 $34,598
Note payable - bank ................................ 5,724 5,169
Accounts payable and accrued expenses ............ 387 361
Dividends payable ................................ 546 1,154
Tenants' security deposits ....................... 1,053 1,048
Deferred revenue ................................. 212 257
------- -------
Total liabilities .......................... 42,365 42,587
------- -------
Minority interest .................................... 2,988 2,959
------- -------
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 ........................... 818 675
------- -------
Total shareholders' equity ................. 20,132 19,989
------- -------
Totals .................................... $65,485 $65,535
======= =======
</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
THREE MONTHS ENDED JANUARY 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
INCOME 1996 1995
------ ------- -------
(In Thousands
of Dollars,
Except per
Share Amounts)
<S> <C> <C>
Rental revenue:
Rental income ................................ $ 2,990 $ 2,905
Real estate taxes reimbursed ................. 392 174
Common area maintenance reimbursed ........... 185 104
Sundry income ................................ 43 41
------- -------
Totals ................................... 3,610 3,224
------- -------
Rental expenses:
Operating expenses ........................... 798 703
Management fees ................................ 141 136
Real estate taxes ............................ 649 384
Interest ..................................... 758 767
Depreciation ................................. 384 375
------- -------
Totals ................................... 2,730 2,365
------- -------
Income from rental operations .................... 880 859
------- -------
Other income (expense):
Interest income .............................. 4 2
Interest expense ............................. (111) (91)
General and administrative ................... (55) (60)
------- -------
Totals ................................... (162) (149)
------- -------
Income before minority interest .................. 718 710
Minority interest ................................ (29) (24)
------- -------
Net income ....................................... $ 689 $ 686
======= =======
Earnings per share ............................... $ .44 $ .44
======= =======
</TABLE>
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
COMBINED STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS -- Continued
THREE MONTHS ENDED JANUARY 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
UNDISTRIBUTED EARNINGS 1996 1995
---------------------- ------- -------
(In Thousands
of Dollars,
Except per
Share Amounts)
<S> <C> <C>
Balance, beginning of period ..................... $ 675 $ 1,834
Net income ....................................... 689 686
Less dividends ................................... (546) (1,154)
------- -------
Balance, end of period ........................... $ 818 $ 1,366
======= =======
Dividends per share .............................. $ .35 $ .74
======= =======
</TABLE>
See Notes to Combined Financial Statements.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JANUARY 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Operating activities:
Net income ........................................... $ 689 $ 686
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .................... 404 397
Minority interest .................................. 29 24
Deferred revenue ................................. (45) 2
Changes in operating assets and liabilities:
Tenants' security accounts .................... (5) (15)
Sundry receivables, prepaid expenses and other
assets ........................................... (207) 119
Deferred charges .............................. 93 (64)
Accounts payable and accrued expenses ......... 26 (77)
Tenants' security deposits .................... 5 21
------- -------
Net cash provided by operating activities . 989 1,093
------- -------
Investing activities - capital expenditures .............. (197) (127)
------- -------
Financing activities:
Dividends paid ....................................... (1,154) (1,154)
Proceeds from note payable - bank .................... 555 504
Repayment of mortgages ............................... (155) (149)
------- -------
Net cash used in financing activities ..... (754) (799)
------- -------
Net increase in cash ..................................... 38 167
Cash, beginning of period ................................ 533 238
------- -------
Cash, end of period ...................................... $ 571 $ 405
======= =======
Supplemental disclosure of cash flow data:
Interest paid ........................................ $ 869 $ 858
======= =======
Supplemental schedule of noncash financing activities: Dividends declared but
not paid amounted to $546,000 at January 31, 1996.
</TABLE>
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 is engaged in owning
residential and commercial income producing properties
located primarily in New Jersey.
The Trust has elected to be taxed as a Real Estate
Investment Trust under the provisions of Sections 856-860
of the Internal Revenue Code, as amended. Accordingly,
the Trust does not pay Federal income tax on income
whenever income distributed to shareholders is equal to
at least 95% of real estate investment trust taxable
income. Further, the Trust pays no Federal income tax on
capital gains distributed to shareholders.
The Trust is subject to Federal income tax on
undistributed taxable income and capital gains. The Trust
may make an annual election under Section 858 of the
Internal Revenue Code to apply part of the regular
dividends paid in each respective subsequent year as a
distribution for the immediately preceding year.
Basis of presentation:
The combined financial information included herein as at
January 31, 1996 and for the three months ended January
31, 1996 and 1995 is unaudited and, in the opinion of the
Trust, reflects all adjustments (which include only
normal recurring accruals) necessary for a fair
presentation of the combined financial position as of
that date and the combined results of operations for
those periods. The information in the combined balance
sheet as of October 31, 1995 was derived from the Trust's
audited annual report for 1995.
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.
<PAGE>
Use of estimates:
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
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 January 31,
1996 and October 31, 1995, the Trust had no cash
equivalents.
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.
<PAGE>
Earnings per share:
Earnings per share are computed based on the weighted
average number of shares outstanding. The weighted
average number of shares outstanding was 1,559,788 for
each of the three month periods ended January 31, 1996
and 1995.
Note 2 - Real estate:
Real estate consists of the following:
<TABLE>
<CAPTION>
Range of
Estimated January October
Useful Lives 31, 1996 31, 1995
------------ -------- --------
(In Thousands
of Dollars)
<S> <C> <C> <C>
Land $21,112 $21,112
Unimproved land 2,459 2,452
Apartment buildings 7-40 years 21,479 21,333
Commercial buildings 25-31.5 years 58 58
Shopping centers 15-50 years 26,876 26,859
Construction in
progress 714 714
------- -------
72,698 72,528
Less accumulated de-
preciation 10,566 10,204
------- -------
Totals $62,132 $62,324
======= =======
</TABLE>
Note 3 - Mortgages payable:
Mortgages payable consist of the following:
<TABLE>
<CAPTION>
January October
31, 1996 31, 1995
-------- --------
(In Thousands
of Dollars)
<S> <C> <C>
State Mutual Life Assurance Company
of America (A) ................................. $18,288 $18,359
Aetna Life Insurance Company (B) ................. 5,414 5,444
USG Annuity & Life Company (C) ................... 10,454 10,488
United Jersey Bank (D) ........................... 287 307
------- -------
Totals ....................................... $34,443 $34,598
======= =======
</TABLE>
<PAGE>
(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 $26,227,000.
(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 $12,000,000.
(C) Payable in monthly installments of $79,655
including interest at 7.8% through October 2002 at
which time the outstanding balance is due. The
mortgage is secured by an apartment complex in
Westwood, New Jersey having a net book value of
approximately $15,066,000.
(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 $660,000. One of the directors of
the bank is a trustee of the Trust.
Principal amounts (in thousands of dollars) due under the
above obligations in each of the five years subsequent to
January 31, 1996 are as follows:
Year Ending
January 31, Amount
----------- ------
1997 $ 654
1998 18,380
1999 424
2000 371
2001 389
Based on borrowing rates for mortgages with similar terms,
the fair value of the mortgage debt is approximately
$33,423,000 at January 31, 1996.
<PAGE>
Note 4 - 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.
Note 5 - Commitments and contingencies:
Leases:
Commercial tenants:
The Trust leases commercial space having a net book
value of approximately $39,270,000 at January 31,
1996 to tenants for periods of up to twenty years.
Most of the leases contain clauses for reimbursement
of real estate taxes, maintenance, insurance and
certain other operating expenses of the properties.
Minimum rental income (in thousands of dollars) to be
received from noncancelable operating leases in years
subsequent to January 31, 1996 are as follows:
Year Ending
January 31, Amount
----------- -------
1997 $ 3,953
1998 3,455
1999 3,073
2000 2,591
2001 2,201
Thereafter 9,384
-------
Total $24,657
=======
<PAGE>
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 $1,043,000
at January 31, 1996. 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 second quarter of fiscal 1996, is
currently anticipated to approximate $6,000,000.
Rental revenue derived from the shopping center was
approximately $37,000 and $69,000 for the three
months ended January 31, 1996 and 1995, respectively,
and income (loss) from rental operations was
approximately $(1,000) and $34,000, 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 months ended January 31, 1996 and 1995 were not
material.
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.
<PAGE>
Note 6 - 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 $141,000 and $136,000 for the three
months ended January 31, 1996 and 1995, respectively.
Note 7 - Earnings per share:
Earnings per share, based on the weighted average number of
shares outstanding during each period, are comprised of
ordinary income.
* * *
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion should be read in conjunction with
the attached financial statements and notes thereto, and the Registrant's
audited financial statements and notes thereto for Fiscal Year Ended October 31,
1994.
Results of Operations
The earnings per share for the First Quarter 1996 were $0.44
which matched the earnings for the First Quarter of 1995. Management had
anticipated that the earnings for the First Quarter of 1996 would be less than
the $0.44 per share due to the closing of the Franklin Lakes Shopping Center,
Franklin Lakes, New Jersey (the "Center") in anticipation of its demolishment
and construction of the new Center. In addition, the weather in the Northeast
region of the United States has been colder than normal with record amounts of
snowfall. The cold weather will result in elevated heating costs. The record
snowfall will result in additional snow removal costs. Management anticipates
that a portion of the increased heating and snow removal costs will be reflected
in the Second Quarter of 1996.
Management continues to anticipate that earnings for Fiscal
Year 1996 will be below the results of 1995 because of the factors outlined
above. Management had anticipated that the closing of the Center would result in
earnings being diminished by approximately $0.11 per share. As the renovations
to the Center proceed, Management will continue to monitor its current
projections and make any appropriate revisions.
Financial Condition
The Registrant continues to generate cash sufficient to meet
all of its regular operational needs. The Registrant does anticipate, however,
that it will borrow against its Line of Credit or secure a mortgage to generate
the funds required to renovate the Center.
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information.
The Registrant has secured all governmental approvals required
in connection with the planned demolishment of the Center and the construction
of a new Center with approximately 88,000 square feet of leasable space.
As previously reported, the Registrant does not plan to begin
its work on the Center until leases are in place for one or more anchor stores
and suitable financing is arranged. As of the date hereof, neither condition has
been met. As a result, construction may not begin until late Spring or early
Summer of calendar year 1996. If that delay should be realized, the new Center
may not be open for operations until sometime during the first calendar quarter
of 1997. In such event, the Registrant's earnings may be diminished by more than
the current projection of $0.11 per share as discussed in Item 2.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST REAL ESTATE INVESTMENT
TRUST OF NEW JERSEY
(Registrant)
Date March 22, 1996
/s/ William R. DeLorenzo, Jr.
-----------------------------
(Signature)*
William R. DeLorenzo, Jr.
Executive Secretary and Treasurer
- ---------------
*Print name and title of the signing officer under his signature.
<PAGE>
SALES OF UNREGISTERED SECURITIES (DEBT OR EQUITY)
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
N O N E
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JAN-31-1996
<CASH> 571
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 73,495
<DEPRECIATION> 11,134
<TOTAL-ASSETS> 65,485
<CURRENT-LIABILITIES> 0
<BONDS> 40,167
0
0
<COMMON> 19,314
<OTHER-SE> 818
<TOTAL-LIABILITY-AND-EQUITY> 65,485
<SALES> 0
<TOTAL-REVENUES> 3,610
<CGS> 0
<TOTAL-COSTS> 2,730
<OTHER-EXPENSES> 191
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 689
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 689
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
