SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended July 31, 1997 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.) Balance Sheets for July 31, 1997 and
October 31, 1996;
b.) Statements of Income and Undistributed
Earnings for Nine and Three Months Ended
July 31, 1997 and 1996;
c.) Statements of Cash Flows for Nine Months
Ended July 31, 1997 and 1996;
Item 2: Management's Discussion and Analysis of
Results of Operations and Financial Condition
Part II: Other Information
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
BALANCE SHEETS
JULY 31, 1997 AND OCTOBER 31, 1996
(Unaudited)
July October
ASSETS 31, 1997 31, 1996
-------- --------
(In Thousands
of Dollars)
<S> <C> <C>
Real estate, at cost, net of accumulated
depreciation ................................... $52,565 $46,836
Equipment, at cost, net of accumulated
depreciation of $641,000 and $608,000 .......... 185 186
Investment in affiliate ............................ 1,930 1,924
Cash ............................................... 2,026 189
Tenants' security accounts ......................... 747 754
Sundry receivables ................................. 332 537
Prepaid expenses and other assets .................. 1,192 1,090
Deferred charges, net .............................. 355 158
------- -------
Totals ................................... $59,332 $51,674
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages payable .............................. $24,546 $23,609
Note payable - bank ............................ 10,383 5,662
Accounts payable and accrued expenses .......... 217 278
Construction liabilities ....................... 2,259
Dividends payable .............................. 546 1,029
Tenants' security deposits ..................... 875 853
Deferred revenue ............................... 259
------- -------
Total liabilities ........................ 38,826 31,690
------- -------
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 .......................... 1,192 670
------- -------
Total shareholders' equity ............... 20,506 19,984
------- -------
Totals .................................. $59,332 $51,674
======= =======
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
NINE AND THREE MONTHS ENDED JULY 31, 1997 AND 1996
(Unaudited)
Nine Months Three Months
Ended July 31, Ended July 31,
-------------------- --------------------
INCOME 1997 1996 1997 1996
(In Thousands of Dollars,
Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenue:
Rental income ............... $ 7,419 $ 7,209 $ 2,508 $ 2,421
Reimbursements .............. 1,060 1,188 375 326
Equity in income of affiliate 123 56 46 32
Sundry income ............... 110 130 28 29
------- ------- ------- -------
Totals ................ 8,712 8,583 2,957 2,808
------- ------- ------- -------
Expenses:
Operating expenses .......... 1,988 2,083 661 623
Management fees ............. 369 358 121 116
Real estate taxes ........... 1,258 1,294 419 423
Interest .................... 1,960 1,998 648 666
Depreciation ................ 978 960 332 323
------- ------- ------- -------
Totals ................ 6,553 6,693 2,181 2,151
------- ------- ------- -------
Net income ...................... $ 2,159 $ 1,890 $ 776 $ 657
======= ======= ======= =======
Earnings per share .............. $ 1.38 $ 1.21 $ .49 $ .42
======= ======= ======= =======
UNDISTRIBUTED EARNINGS
Balance, beginning of period .... $ 670 $ 675 $ 961 $ 816
Net income ...................... 2,159 1,890 776 657
Less dividends .................. (1,637) (1,638) (545) (546)
------- ------- ------- -------
Balance, end of period .......... $ 1,192 $ 927 $ 1,192 $ 927
======= ======= ======= =======
Dividends per share ............. $ 1.05 $ 1.05 $ .35 $ .35
======= ======= ======= =======
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 1997 AND 1996
(Unaudited)
1997 1996
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Operating activities:
Net income .......................................... $ 2,159 $ 1,890
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................... 1,005 1,014
Deferred revenue ................................ (259) 99
Equity in income of affiliate ................... (123) (56)
Changes in operating assets and liabilities:
Tenants' security accounts ................... 7 (24)
Sundry receivables, prepaid expenses and other
assets ...................................... 103 (1,206)
Deferred charges ............................. (36)
Accounts payable and accrued expenses ........ (61) 314
Tenants' security deposits ................... 22 21
------- -------
Net cash provided by operating activities 2,853 2,016
------- -------
Investing activities:
Capital expenditures ................................ (4,447) (570)
Distributions from affiliate ........................ 117 40
------- -------
Net cash used in investing activities .... (4,330) (530)
------- -------
Financing activities:
Dividends paid ...................................... (2,120) (2,246)
Proceeds from note payable - bank ................... 4,721 997
Net proceeds from mortgage refinancing .............. 1,314
Repayment of mortgages .............................. (377) (370)
Deferred mortgage costs ............................. (224)
------- -------
Net cash provided by (used in) financing
activities ............................... 3,314 (1,619)
------- -------
Net increase (decrease) in cash ......................... 1,837 (133)
Cash, beginning of period ............................... 189 465
------- -------
Cash, end of period ..................................... $ 2,026 $ 332
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 1997 AND 1996
(Unaudited)
1997 1996
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Supplemental disclosure of cash flow data:
Interest paid, net of capitalized interest of
$51,000 in 1997 ..................................... $ 1,961 $ 1,999
======= =======
Supplemental schedule of noncash investing and financing activities:
Dividends declared but not paid amounted to $546,000 at July 31, 1997 and
1996.
Capital expenditures incurred but not paid aggregated $2,259,000 at July
31, 1997.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies:
Organization:
First Real Estate Investment Trust of New Jersey (the
"Trust") was organized 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 financial information included herein as at July 31,
1997 and for the nine and three months ended July 31,
1997 and 1996 is unaudited and, in the opinion of the
Trust, reflects all adjustments (which include only
normal recurring accruals) necessary for a fair
presentation of the financial position as of that date
and the results of operations for those periods. The
information in the balance sheet as of October 31, 1996
was derived from the Trust's audited annual report for
1996.
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.
Investment in Affiliate:
The Trust's 40% investment in Westwood Hills, LLC (the
"Affiliate") is accounted for using the equity method.
Cash:
The Trust maintains its cash in bank deposit accounts
which, at times, may exceed Federally insured limits. The
Trust considers all highly liquid debt instruments
purchased with a maturity of three months or less to be
cash equivalents. At July 31, 1997 and October 31, 1996,
the Trust had no cash equivalents.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies (concluded):
Depreciation:
Real estate and equipment are depreciated on the
straight-line method by annual charges to operations
calculated to absorb costs of assets over their estimated
useful lives.
Revenue recognition:
Income from leases is recognized on a straight-line basis
regardless of when payment is due. Lease agreements
between the Trust and commercial tenants generally
provide for additional rentals based on such factors as
percentage of tenants' sales in excess of specified
volumes, increases in real estate taxes, Consumer Price
Indices and common area maintenance charges. These
additional rentals are generally included in income when
reported to the Trust, when billed to tenants or ratably
over the appropriate period.
Deferred charges:
Deferred charges consist of mortgage costs and leasing
commissions. Deferred mortgage costs are amortized on the
straight-line method by annual charges to operations over
the terms of the mortgages. Deferred leasing commissions
are amortized on the straight-line method over the terms
of the applicable leases.
Advertising:
The Trust expenses the cost of advertising and promotions
as incurred. Advertising costs charged to operations
amounted to approximately $23,000 and $37,000 for the
nine months ended July 31, 1997 and 1996, respectively,
and approximately $7,000 for each of the three month
periods ended July 31, 1997 and 1996.
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 nine and three month periods ended July 31,
1997 and 1996.
Change in accounting policy:
The Trust has changed its method of accounting for its
investment in Affiliate. Previously, the accounts of the
Affiliate were combined with those of the Trust on the
basis of common control. However, in as much as the Trust
does not maintain unilateral control over the Affiliate,
the equity method of accounting for the investment is
deemed to be more appropriate. Accordingly, the
accompanying 1996 financial statements have been
restated. The restatement had no effect on shareholders'
equity, net income or earnings per share.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 2 - Investment in affiliate:
The Trust is a 40% member of the Affiliate, a limited
liability company that is managed by Hekemian & Co., Inc.
("Hekemian"), a company which manages all of the Trust's
properties and in which one of the trustees of the Trust is
the chairman of the board. Certain other members of the
Affiliate are either trustees of the Trust or their families
or officers of Hekemian. The Affiliate owns a residential
apartment complex located in Westwood, New Jersey.
Summarized financial information of the Affiliate as of July
31, 1997 and October 31, 1996 and for the nine and three
months ended July 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
July October
31, 1997 31, 1996
-------- --------
(In Thousands
of Dollars)
<S> <C> <C>
Balance sheet data:
Assets:
Real estate and equipment, net ............ $14,751 $14,928
Other ..................................... 560 544
------- -------
Total assets ........................ $15,311 $15,472
======= =======
Liabilities and equity:
Liabilities:
Mortgage payable ........................ $10,231 $10,346
Other ................................... 255 314
------- -------
Totals .............................. 10,486 10,660
------- -------
Members' equity:
Trust ................................... 1,930 1,924
Others .................................. 2,895 2,888
------- -------
Totals .............................. 4,825 4,812
------- -------
Total liabilities and equity ........ $15,311 $15,472
======= =======
</TABLE>
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 2 - Investment in affiliate: (concluded):
<TABLE>
<CAPTION>
Nine Months Three Months
Ended Ended
July 31, July 31,
------------------ ------------------
1997 1996 1997 1996
------ ------ ------ ------
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
Income statement data:
Rental revenue ............. $1,878 $1,750 $ 632 $ 594
Rental expenses ............ 1,570 1,610 515 514
------ ------ ------ ------
Net income ................. $ 308 $ 140 $ 117 $ 80
====== ====== ====== ======
</TABLE>
Note 3 - Real estate:
Real estate consists of the following:
<TABLE>
<CAPTION>
Range
of Estimated July October
Useful Lives 31, 1997 31, 1996
------------ -------- --------
(In Thousands
of Dollars)
<S> <C> <C> <C>
Land $17,782 $17,263
Unimproved land 2,258 2,472
Apartment buildings 7-40 years 10,634 10,170
Commercial buildings 25-31.5 years 58 58
Shopping centers 15-50 years 26,348 26,947
Construction in progress 7,140 969
------- -------
64,220 57,879
Less accumulated depreciation 11,655 11,043
------- -------
Totals $52,565 $46,836
======= =======
</TABLE>
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 4 - Mortgages payable:
Mortgages payable consist of the following:
<TABLE>
<CAPTION>
July October
31, 1997 31, 1996
-------- --------
(In Thousands
of Dollars)
<S> <C> <C>
Northern Life Insurance Cos. (A) ............... $19,181
State Mutual Life Insurance Co. (A) ............ $18,068
Travelers Insurance (B) ........................ 5,217 5,319
Summit Bank (C) ................................ 148 222
------- -------
Totals ..................................... $24,546 $23,609
======= =======
</TABLE>
(A) On June 30, 1997, the Trust repaid the existing mortgage on
the Frederick, Maryland shopping center utilizing proceeds
from a new mortgage in the amount of $19,200,000 with
Northern Life Insurance Cos. The new mortgage is payable in
monthly installments of $152,153 including interest at 8.31%
through June 2007 at which time the outstanding balance is
due. The mortgage is secured by a shopping center in
Frederick, Maryland having a net book value of approximately
$25,292,000.
(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 $11,738,000.
(C) 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 $579,000. 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
July 31, 1997 are as follows:
Year Ending
July 31, Amount
-------- ------
1998 $476
1999 487
2000 465
2001 509
2002 557
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Based on borrowing rates currently available to the Trust,
the carrying amount of mortgages payable approximates fair
value at July 31, 1997.
Note 5 - Note payable - bank:
Note payable - bank consists of borrowings under a
$20,000,000 revolving line of credit agreement with Summit
Bank which expires on October 31, 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 and any vacant
land owned by the Trust.
Note 6 - Commitments and contingencies:
Leases:
Commercial tenants:
The Trust leases commercial space having a net book
value of approximately $44,743,000 at July 31, 1997
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 July 31, 1997 are as follows:
Year Ending
July 31, Amount
-------- ------
1998 $ 3,993
1999 3,792
2000 3,387
2001 3,186
2002 2,808
Thereafter 13,652
-------
Total $30,818
=======
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 $7,688,000
at July 31, 1997. Management closed the shopping
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 6 - Commitments and contingencies: (concluded)
Leases:
Commercial tenants:
center on September 1, 1995 except for one tenant who
vacated the premises on November 1, 1996.
Commencement of a complete refurbishing of the
premises is currently in progress and it is expected
to be open for operations in the Fall of 1997. The
cost of refurbishing is currently anticipated to
approximate $10,000,000.
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
nine and three months ended July 31, 1997 and 1996
were not material.
Residential tenants:
Lease terms for residential tenants are usually one
year or less.
Acquisition:
The Trust has entered into a contract to purchase a
64,000 square foot shopping center to be constructed in
Patchogue, New York for approximately $11,400,000
including commissions and estimated professional fees.
The Trust anticipates to complete this acquisition in
September 1997.
Standby letters of credit:
At July 31, 1997, the Trust is obligated under
irrevocable standby letters of credit of approximately
$1,550,000 in connection with certain required land
improvements at the Franklin Lakes shopping center.
Note 7 - Management agreement:
The properties owned by the Trust are currently managed by
Hekemian. The management agreement requires fees equal to a
percentage of rents collected. Such fees were approximately
$369,000 and $358,000 for the nine months ended July 31,
1997 and 1996, respectively, and approximately $121,000 and
$116,000 for the three months ended July 31, 1997 and 1996,
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.
* * *
<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,
1996.
Results of Operations
The earnings per share from the Registrant's regular
operations were $0.49 for the Third Quarter of 1997 as compared to $0.42 per
share for the Third Quarter of 1996. The increase in the earnings is due to both
an increase in rental income and a decrease in operating expenses which allowed
Registrant to absorb an increase in real property taxes. The increase in rental
income was realized despite the closing of Franklin Lakes Shopping Center for
the purpose of razing all present structures and to erect an enlarged shopping
center at the site.
Registrant experienced an increase in the earnings per share
for the first nine months of 1997. The earnings per share were $1.38 in 1997 as
compared to $1.21 for the first nine months of 1996. The increase in rental
income was coupled with a decrease in operating expenses during the first nine
months of 1997 resulting in the improved earnings despite the closing of the
Franklin Lakes Shopping Center.
As described in the 8-K attached hereto as Item 6, the
Registrant has changed its method of accounting for its investment in the
Westwood Hills, L.L.C. Prior to the fiscal year 1997, the Registrant prepared
its Financial Statements on a consolidated basis. Since the Registrant does not,
however, maintain unilateral control over the Westwood Hills, L.L.C. it has been
determined that the equity method of accounting would be more appropriate. The
equity method was adopted retroactively. As a result, the 1996 financial
statements have been restated to reflect the foregoing accounting change. A
10K/A has been filed by the Registrant which reflects this change in the
accounting for Westwood Hills, L.L.C.
In addition, the Registrant will use the equity method of
accounting with respect to Westwood Hills, L.L.C. as of fiscal year 1997.
Financial Condition
The Registrant continues to generate cash sufficient to meet
all of its operational needs. Registrant does anticipate, however, that it will
borrow against its Line of Credit or secure one or more mortgages to generate
the funds required to construct the center in Franklin Lakes and to purchase the
center in Patchogue, New York as hereinafter described in Item 5 hereof.
<PAGE>
PART II. OTHER INFORMATION
Item 5. OTHER INFORMATION
A) Franklin Lakes Shopping Center, Franklin Lakes, New
Jersey
The Franklin Lakes Shopping Center is presently under
construction. The Registrant has, however, completed
the construction of the 42,000 square foot food store
which was turned over to its tenant for fit up work
on or about August 1, 1997. The food store presently
anticipates that it will complete all of its fit up
costs so that it is open for business on or about
October 15, 1997.
As a result, the Registrant expects to receive rent
for the food shopping center for approximately one
half-month during fiscal year 1997.
The balance of the shopping center, consisting of
approximately 46,000 square feet, will be completed
on or about January, 1998. The Registrant is in the
process of seeking tenants for this space.
B) Patchogue, New York
The Patchogue, New York shopping center was completed
during May, 1997. Under the purchase agreement with
the Registrant, the builder is responsible to
complete certain site work before Registrant is
required to close title. The builder has been
requested and is in the process of completing the
site work.
The food shopping market tenant has opened the store
for operations.
The Registrant anticipates that it will close title
to the Patchogue Shopping Center on or about October
1, 1997 upon completion by the builder of all site
work and final review of the structure before
acceptance by Registrant and a closing of title.
C) Line of Credit with Summit Bank
The Line of Credit with Summit Bank has been extended
through October 31, 1997. The Registrant and Summit
Bank are in the process of negotiating the formal
extension of the line of credit for a minimum period
of one (1) year.
<PAGE>
D) Mortgage on the Westridge Shopping Center, Frederick
Maryland ("Westridge Shopping Center")
The Registrant has closed a new mortgage for its
Westridge Shopping Center on June 30, 1997. At the
time of the mortgage closing, the prior mortgage was
paid off. The new mortgage is in the amount of $19.2
million. The term of the new mortgage is ten (10)
years with a twenty (20) year payout. The interest
rate for the new mortgage is 8.31%. The current
mortgage bears an interest rate of 9% with a
twenty-five (25) year payout.
Because of the decrease in the payout period from
twenty-five (25) years to twenty (20) years, the
Registrant's payments of principal and interest
increased from $160,924.00 under the prior mortgage
to $164,320,00 under the present mortgage despite the
decrease in the interest rate.
E) At the August 6, 1997 meeting of the Registrant's
Board of Trustees, the formation of Audit and
Executive Committees was authorized:
(a) The Audit Committee will consist of the
following members of the Registant's Board
of Trustees:
a) Donald W. Barney
b) Charles J. Dodge
c) Alan L. Aufzien
(b) The Executive Committee will consist of the
following members of the Registrant's Board
of Trustees:
a) Robert S. Hekemian
b) Donald W. Barney
c) Herbert C. Klein
d) Ronald J. Artinian
ITEM 6. Exhibits and Reports on Form 8-K
The Registrant filed the 8-K attached dated June 20,
1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of 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)
DATED: September 15, 1997
/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>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: June 20, 1997
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY
(Exact name of registrant as specified in its charter)
New Jersey 2-27018 22-1697095
- --------------------------------------------------------------------------------
(State or other (Commission File (I.R.S. Employer
jurisdiction of number) Identification
incorporation) Number)
505 Main Street, P.O. Box 667, Hackensack, New Jersey 07602
----------------------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 201-488-6400
<PAGE>
Item 5. Other Events
The Registrant has received a letter of comment from the Securities and
Exchange Commission (the "SEC") dated May 28, 1997, a copy of which is attached
to this 8-K under Item 7 (the "SEC Letter").
An amended 10K/A will be filed in response to the comments from the
SEC.
With respect to the SEC's comments set forth in the SEC Letter as to
Note 1, the Registrant has agreed to use the equity method of accounting for its
investment in the Westwood Hills, L.L.C. (the "LLC") for each accounting period
commencing with the first quarter fiscal year 1997 and to restate all financial
statements as they appeared in the 10-K filed for fiscal year 1996. Prior to the
change to the equity method, the Registrant had reported its investment in the
LLC on a consolidated basis.
As a consequence of changing the accounting for the LLC to the equity
method, the following is a summary of the significant changes which will occur:
1. The Combined Balance Sheets of the Registrant based upon the
consolidated method of accounting for the LLC shows that the Total Assets, Total
Liabilities, Minority Interest and Total Shareholder's Equity as of October 31,
1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Total Assets ....................... $65,222,000 $65,535,000
Total Liabilities .................. 42,350,000 42,587,000
Minority Interest .................. 2,888,000 2,959,000
Total Shareholders'
Equity ......................... 19,984,000 19,989,000
</TABLE>
2. As a result of the change to the equity method of accounting, the
Restated Balance Sheets of the Registrant will show that Total Assets, Total
Liabilities and Total Shareholders' Equity as of October 31, 1996 and 1995 will
be as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Total Assets ....................... $51,674,000 $51,838,000
Total Liabilities .................. 31,690,000 31,849,000
Total Shareholders'
Equity ......................... 19,984,000 19,989,000
</TABLE>
<PAGE>
3. The Combined Statements of Income and Undistributed Earnings for the
years ended October 31, 1996, 1995 and 1994, based upon the consolidated method
of accounting for the LLC, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Total Revenues ........ $13,678,000 $13,250,000 $11,162,000
Total Expenses ........ 10,218,000 9,592,000 8,235,000
Net Income ............ 2,662,000 2,786,000 2,383,000
Earnings per
share ........... $ 1.71 $ 1.79 $ 1.53
</TABLE>
4. As a result of the change to the equity method of accounting, the
Statements of Income and Undistributed Earnings for the years ended October 31,
1996, 1995 and 1994 will be as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Total Revenues ........ $11,318,000 $11,038,000 $10,279,000
Total Expenses ........ 8,091,000 7,585,000 7,479,000
Net Income ............ 2,662,000 2,786,000 2,383,000
Earnings per
share ........... $ 1.71 $ 1.79 $ 1.53
</TABLE>
5. The foregoing discussion is a summary based upon revised financial
statements which will be incorporated into the 10K/A to be filed by the
Registrant. Any interested parties should review all of the financial
information which will be set forth in the 10K/A.
Item 7: Financial Statements and Exhibits.
1. Letter from the SEC dated May 28, 1997.
<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 hereunto duly authorized.
FREIT
By: /s/Robert S. Hekemian
---------------------
Robert S. Hekemian
Chairman of the Board
DATED: June 20, 1997
<PAGE>
[GRAPHIC-DIVISION OF CORPORATION FINANCE LOGO]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Stop 7-2 May 28, 1997
Mr. Robert S. Hekemian, Chief Executive Officer
Hekemian & Co., Inc.
505 Main Street, P.O. Box 667
Hackensack, New Jersey 07602
Re: First Real Estate Investment Trust of New Jersey
Form 10K for the fiscal year ended October 31, 1996
Filed on January 30, 1997
File Number: 2-27018
Form 10Q for the quarter ended January 31, 1997
Filed on April 1, 1997
File Number: 2-48728
Dear Mr. Hekemian:
The staff has reviewed only the portions of this filing related to the
financial statements and management's discussion and analysis and has the
following accounting comments.
Form 10K
- --------
Management's Discussion and Analysis of Financial Condition and
- ---------------------------------------------------------------
Results of Operations
- ---------------------
Expand this section to include a discussion of the 1995 amounts in comparison
with 1994 amounts in accordance with Item 303 of Regulation S-X.
Revise this section to state whether the known trend of rental expenses which
are growing at a faster rate than rental revenue is expected to continue.
Describe management's plans to address this trend.
Note 4. Mortgages Payable
- -------------------------
Revise this note to include the disclosures required by FASB 107.
<PAGE>
Mr. Robert S. Hekemian
May 28, 1997
Page 2
Note 1. Accounting Policies
- ---------------------------
Revise this note to explain the basis for the consolidation of Westwood Hills
LLC. Unless the registrant can demonstrate that it unilaterally controls the
LLC, revise the financial statements to use the equity method of accounting for
the investment in the LLC and include separate financial statements of the LLC
pursuant to Rule 3-09 of Regulation S-X. See, generally, SOP 78-9.
Form 10Q
- --------
Note 3. Mortgages Payable
- -------------------------
Expand the filing to include a disclosure which describes the registrant's
current efforts to obtain alternative financing in order to pay off the State
Mutual Life Insurance Co. mortgage obligation prior to its August 1, 1997
maturity. See Item 303 of Regulation S-X.
The supplemental information which has been requested above should either be
submitted by June 9, 1997, or the staff should be advised by that date when such
information will be forthcoming.
In the event compliance with the above comments is not deemed
appropriate by the registrant, the basis therefore should be provided to the
staff in a supplemental letter as promptly as possible.
Questions regarding the above accounting comments may be directed to
Allen E. Webb at (202) 942-1868 or Hugh Miller III, the Assistant Chief
Accountant at (202) 942-1962 and questions on other disclosure issues may be
directed to Paula Dubberly, the Assistant Director, at (202) 942-1960.
Sincerely,
/s/ Hugh Miller III
-------------------
Hugh Miller III
Assistant Chief Accountant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 2,026,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 65,046,000
<DEPRECIATION> (12,296,000)
<TOTAL-ASSETS> 59,332,000
<CURRENT-LIABILITIES> 0
<BONDS> 24,546,000
0
0
<COMMON> 19,314,000
<OTHER-SE> 1,192,000
<TOTAL-LIABILITY-AND-EQUITY> 59,332,000
<SALES> 0
<TOTAL-REVENUES> 8,712,000
<CGS> 0
<TOTAL-COSTS> 6,553,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,159,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,159,000
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.38
</TABLE>
