1996
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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, 1996
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
<PAGE>
Indicate by check made 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 [ ]
Indicate by check mark, if disclosure of delinquent filers pursuant to Item 405
of Regulations 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 ]
Aggregate market value of the voting stock held by nonaffiliates
of the Registrant as of December 31, 1996 - $20,413,000
Number of Shares of Common Stock outstanding as of
December 31, 1996 - 1,559,788
DOCUMENTS INCORPORATED BY REFERENCE
(To the Extent Indicated Herein)
<PAGE>
10K/A
TABLE OF CONTENTS
PART II
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON FORM 8-K
1. Financial Statements (the attached Financial
Statements reflect a change in the accounting
method for Westwood Hills, L.L.C. to the
equity method rather than the consolidated
method)
(A) Financial Statements of Registrant:
(i) Report of Independent Public Accountant for
Registrant, J.H. Cohn, LLP
(ii) Balance Sheets as of October 31, 1996 and
1995
(iii) Statements of Income and Undistributed
Earnings Years ended October 31, 1996, 1995
and 1994
(iv) Statements of Cash Flows Years ended October
31, 1996, 1995 and 1994
(v) Notes to Financial Statements
(B) Financial Statements of Affiliate:
(i) Report of Independent Public Accountant for
Affiliate, J.H, Cohn, LLP
(ii) Balance Sheets as of October 31, 1996 and
1995
(iii) Statements of Income and Members' Equity
Years ended October 31, 1996, 1995 and 1994
(iv) Statements of Cash Flows Years ended October
31, 1996, 1995 and 1994
(v) Notes to Financial Statements
<PAGE>
2. Financial Statement Schedules.
(i) Short-Term Borrowings.
(ii) Supplementing Income Statement Information.
(iii) Real Estate and Accumulated Depreciation.
<PAGE>
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
As of or for the Year Ended October 31,
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(In Thousands of Dollars, Except
Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Operating data:
Rental revenue .......... $ 11,318 $ 11,038 $ 10,279 $ 9,948 $ 8,465
Rental expenses ......... 8,091 7,585 7,479 7,268 5,899
-------- -------- -------- -------- --------
Income from rental opera-
tions ............... 3,227 3,453 2,800 2,680 2,566
Other income ............ 99 86 56 4 136
-------- -------- -------- -------- --------
3,326 3,539 2,856 2,684 2,702
Other expenses .......... (664) (753) (473) (389) (264)
-------- -------- -------- -------- --------
Net income .............. $ 2,662 $ 2,786 $ 2,383 $ 2,295 $ 2,438
======== ======== ======== ======== ========
Balance sheet data:
Total assets ............ $ 51,674 $ 51,838 $ 52,398 $ 51,356 $ 50,064
======== ======== ======== ======== ========
Long-term obligations ... $ 23,609 $ 24,110 $ 24,564 $ 24,963 $ 25,341
======== ======== ======== ======== ========
Per share data:
Earnings per share ...... $ 1.71 $ 1.79 $ 1.53 $ 1.47 $ 1.56
======== ======== ======== ======== ========
Dividends per share ..... $ 1.71 $ 2.53 $ 1.62 $ 1.56 $ 1.765
======== ======== ======== ======== ========
</TABLE>
<PAGE>
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(A) Liquidity and Capital Resources.
(a) 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.
Rental revenues for the fiscal year ended October 31, 1996, were
$11,318,000.00 as compared to $11,038,000.00 for the same period in 1995. The
rental expenses increased to $8,091,000.00 for 1996 as compared to $7,585,000.00
for 1995.
The Registrant's net income for the fiscal year 1996 was $2,662,000.00
or $1.71 per share as compared to a net income of $2,786,000.00 for fiscal year
1995 or $1.79 per share.
As discussed in Note 1 of the Financial Statements which appear at Item
14 hereof the Registrant has changed its method of accounting for its investment
in the Westwood Hills, L.L.C. Prior to the date of this 10K/A, 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 retroactivity. As a result, the 1996
financial statements have been restated to reflect the foregoing accounting
change.
In addition, the Registrant will use the equity method of accounting
with respect to Westwood Hills, L.L.C. as of fiscal year 1997.
(b) Results of Operations.
1. Fiscal Year 1996.
The rental income for fiscal year ended October 31, 1996 was
$9,589,000.00 as compared with $9,503,000.00 for fiscal year 1995. The rental
income on a year to year basis was relatively flat reflecting the fact that
since 1995 the Registrant's properties have been almost fully rented with the
exception of the Franklin Lakes Shopping Center which is being allowed to move
to total vacancy pending the construction of a new center at the Registrant's
Franklin Lakes, New Jersey property.
The rental income increase of approximately 2.8%, on a year to year
comparison basis, was due to the Registrant's policy to raise rents whenever
possible consistent with market conditions while maintaining its vacancy factor
at an acceptable level.
While operating expenses were $2,381,000.00 for fiscal year 1996 when
compared to $2,132,000.00 for fiscal year 1995, the increases were principally
due to increased snow removal costs of approximately $163,000.00 and utility
costs of approximately $41,000.00. These costs reflect the severe winter of
1995-1996 in the Northeast which was an unusual event.
<PAGE>
In addition to the foregoing, the Registrant has been in the process of
closing the existing Franklin Lakes Shopping Center. As a result, during the
past several quarters, leases were not renewed and leasable space was left
vacant. The existing center has been closed as of November 1, 1996. The income
for the center was $29,635 for fiscal year 1996 as compared to $91,300 for
fiscal year 1995.
During the demolition and construction of the new Franklin Lakes
Shopping Center the costs of construction, including all interest on any
construction loan and real property taxes, will be incurred by the Registrant.
In accordance with generally accepted accounting principles, the costs will be
capitalized. As a result, Registrant's expenses during fiscal year 1997 will,
except for the period of time after October 31, 1996 (the last day of fiscal
year 1996) to the first day of construction (sometime during January or
February, 1997 weather permitting) will not be reflected in its expenses for
fiscal year 1997. The effect of the foregoing is that while expenses are being
incurred from a cash point of view, the items which would ordinarily be expenses
will be capitalized for fiscal year 1997.
Real Estate Taxes increased $232,000.00 or 15.4% in 1996. Approximately
91.4% of the increase in real estate taxes is due from commercial properties
which taxes are reimbursed by commercial tenants. While real estate taxes are
beginning to level off after the assessment increases of 1994, the Registrant is
vigorously appealing the increased assessments that resulted in the higher
taxes.
Registrant also took various write-offs in fiscal year 1996 for accrued
rent together with other matters.
The Registrant believes that while expenses have increased at a faster
rate than rental revenue for the years 1994 through 1996 such increases do not
represent an irreversible trend. As Registrant's commercial property becomes
vacant, Registrant expects to be in a position to re-lease the space for higher
rentals than presently being realized. In addition, both the new center being
constructed in Franklin Lakes, New Jersey and the Patchogue Shopping Center are
expected to make positive contributions to the Registrant's net income once they
are open for business.
2. Fiscal Year 1995.
The Registrant's net income for fiscal year 1995 was $2,786,000.00 or
$1.79 per share as compared to $2,383,000.00 for fiscal year 1994 or $1.53 per
share.
Rental income for the fiscal year ended October 31, 1995 increased
$491,000.00 or 5.4%, to $9,503,000.00 from $9,012,000.00 for the prior fiscal
year ended October 31, 1994. Adjusting out Franklin Lakes, commercial Rental
Income increased 8.7%, reflecting the leasing in the prior fiscal year, of
vacant commercial space. Rental income from residential properties increased
approximately 5%, reflecting higher rental rates than in the previous fiscal
year.
Real estate tax reimbursements increased $272,000.00 or 42%,
representing higher real estate tax expense charges at commercial properties.
Operating expenses for the fiscal year ended October 31, 1995 declined
$139,000.00 or 6.1%, reflecting lower snow removal costs and utility cost.
<PAGE>
(c) Liquidity and Capital Resources. Cash flows from operations, debt
financing and the sale of Registrant's 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 Summit Bank 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 Summit Bank's Base Lending
Rate or at the LIBOR Based, plus 200 basis points (2.0%) on all borrowings up to
$10,000,000; and (ii) at Summit'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, 1996, the sum of
$5,662,000.00 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 redevelopment of the Franklin
Lakes Shopping Center and the purchase of the Patchogue Shopping Center
described in detail at Item 1(C)(d)(i) and (ii) at Pages 7 and 8 hereof.
<PAGE>
i. Short Term Liquidity. The cash flow from operations has
been sufficient to meet all current operational needs of the Registrant.
Nevertheless, the commitment made by the Registrant to demolish and erect the
new Franklin Lakes Shopping Center and to purchase the Patchogue Shopping Center
will require the Registrant to secure a permanent mortgage for each of the
properties representing approximately seventy-five (75%) of the costs to
purchase the Patchogue Shopping Center and to construct the new Franklin Lakes
Shopping Center. The balance of the funds required will be secured from the Line
of Credit. The cash flow from operations will not be sufficient to fund the
purchase of the Patchogue Shopping Center or to meet the cash requirements for
the construction of the new Franklin Lakes Shopping Center.
ii. Long Term Liquidity. The Registrant anticipates that the
cash flow from operations after the purchase of the Patchogue Shopping Center
and construction of the new Franklin Lakes Shopping Center will be more than
sufficient to meet the new mortgagee obligations for each project. Registrant
also expects that the cash flow from operations will permit the Registrant to
pay down the Line of Credit over a period of time.
iii. 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 the
properties. After the lease term or in the event a tenant is unable to meet its
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.
iv. Registrant may also seek purchase money financing or
institutional financing, other than the Line of Credit, to finance any new
acquisitions in addition to the Patchogue Shopping Center and the renovation of
the Franklin Lakes Shopping Center as described in Item 1(c)(d)(i)(ii) at pages
7 and 8 hereof. As of December 31, 1996, 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.
<PAGE>
(d) 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.
(e) Economic Conditions
The Registrant anticipates that the U.S. Mid-Atlantic states will
continue to experience moderate growth with limited inflation. Continued
economic strength in the employment market should allow the Registrant to
realize its current occupancy rates for its apartments with a sound support base
for its shopping center operations.
Any sustained inflation may, however, negatively impact Registrant in
at least two areas: (a) its Line of Credit is based upon a floating rate of
interest which would, if increased over the 7.875% interest rate as of December
31, 1996, result in increased costs of operations; and (b) Registrant will be
seeking two permanent mortgages to finance the purchase of the Patchogue
Shopping Center and to replace the present mortgage for its Frederick, Maryland
Shopping Center which is due as of August 1, 1997. In addition, Registrant will
also seek a construction and then a permanent mortgage for the new Franklin
Lakes Shopping Center. Any increase in mortgage interest rates would necessarily
increase the costs of operations during fiscal 1997.
<PAGE>
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.
(A) Financial Statements of Registrant:
(i) Report of Independent Public Accountant for
Registrant, J.H. Cohn, LLP
(ii) Balance Sheets as of October 31, 1996 and
1995
(iii) Statements of Income and Undistributed
Earnings Years ended October 31, 1996, 1995
and 1994
(iv) Statements for Cash Flows Years ended
October 31, 1996, 1995 and 1994
(v) Notes to Financial Statements
(B) Financial Statements of Affiliate:
(i) Report of Independent Public Accountant for
Affiliate, J.H. Cohn, LLP
(ii) Balance Sheets as of October 31, 1996 and
1995
(iii) Statements of Income and Members' Equity
Years ended October 31, 1996, 1995 and 1994
(iv) Statements of Cash Flows Years ended October
31, 1996, 1995 and 1994
(v) Notes to Financial Statements
2. Financial Statement Schedules.
(i) Short-Term Borrowings.
(ii) Supplementing Income Statement Information.
(iii) Real Estate and Accumulated Depreciation.
<PAGE>
(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, 1996.
(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 the 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. (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.
Exhibit 24 - Report of J.H. Cohn, LLP 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 and the Power of Attorney contained in the Registrant's 10-K filed
on January 30, 1997, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DATED: June 24, 1997 First Real Estate Investment Trust of New Jersey
By: /s/Robert S. Hekemian
------------------------------------
Robert S. Hekemian,
Chairman of the Board and Chief
Executive Officer
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES (ITEMS 8 AND 14(a))
(A) FINANCIAL STATEMENTS OF REGISTRANT:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
BALANCE SHEETS
OCTOBER 31, 1996 AND 1995
STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
NOTES TO FINANCIAL STATEMENTS
(B) FINANCIAL STATEMENTS OF AFFILIATE:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
BALANCE SHEETS
OCTOBER 31, 1996 AND 1995
STATEMENTS OF INCOME AND MEMBERS' EQUITY
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
NOTES TO FINANCIAL STATEMENTS
(C) 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 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 balance sheets of FIRST REAL ESTATE INVESTMENT
TRUST OF NEW JERSEY as of October 31, 1996 and 1995, and the related statements
of income and undistributed earnings and cash flows for each of the three years
in the period ended October 31, 1996. 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 financial statements referred to above present fairly, in
all material respects, the financial position of First Real Estate Investment
Trust of New Jersey as of October 31, 1996 and 1995, and its results of
operations and cash flows for each of the three years in the period ended
October 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the accompanying financial
statements have been restated to reflect a change in the method of accounting
for the Trust's investment in affiliate.
Our audits referred to above included the information in Schedules IX, X and XI
which present fairly, when read in conjunction with the financial statements,
the information required to be set forth therein.
/s/J. H. Cohn LLP
-----------------
J. H. COHN LLP
Roseland, New Jersey
December 3, 1996
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
BALANCE SHEETS
OCTOBER 31, 1996 AND 1995
ASSETS 1996 1995
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Real estate, at cost, net of accumulated
depreciation ................................... $46,836 $47,255
Equipment, at cost, net of accumulated
depreciation of $608,000 and $551,000 .......... 186 181
Investment in affiliate ............................ 1,924 1,972
Cash ............................................... 189 465
Tenants' security accounts ......................... 754 726
Sundry receivables ................................. 537 247
Prepaid expenses and other assets .................. 1,090 786
Deferred charges, net .............................. 158 206
------- -------
Totals ................................... $51,674 $51,838
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages payable .............................. $23,609 $24,110
Note payable - bank ............................ 5,662 5,169
Accounts payable and accrued expenses .......... 278 332
Dividends payable .............................. 1,029 1,154
Tenants' security deposits ..................... 853 827
Deferred revenue ............................... 259 257
------- -------
Total liabilities ........................ 31,690 31,849
------- -------
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 ......................... 670 675
------- -------
Total shareholders' equity ............... 19,984 19,989
------- -------
Totals .................................. $51,674 $51,838
======= =======
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
INCOME 1996 1995 1994
-------- -------- --------
(In Thousands of Dollars,
Except per Share Amounts)
<S> <C> <C> <C>
Rental revenue:
Rental income .................... $ 9,589 $ 9,503 $ 9,012
Real estate taxes reimbursed ..... 1,126 914 642
Common area maintenance reimbursed 442 466 472
Sundry income .................... 161 155 153
-------- -------- --------
Totals ....................... 11,318 11,038 10,279
-------- -------- --------
Rental expenses:
Operating expenses ............... 2,381 2,132 2,271
Management fees .................. 476 470 451
Real estate taxes ................ 1,739 1,507 1,284
Interest ......................... 2,200 2,242 2,281
Depreciation ..................... 1,295 1,234 1,192
-------- -------- --------
Totals ....................... 8,091 7,585 7,479
-------- -------- --------
Income from rental operations ........ 3,227 3,453 2,800
-------- -------- --------
Other income (expense):
Equity in income of affiliate .... 92 81 51
Interest income .................. 7 5 5
Interest expense ................. (465) (502) (279)
General and administrative ....... (187) (245) (185)
-------- -------- --------
Totals ....................... (553) (661) (408)
-------- -------- --------
Income before state income taxes ..... 2,674 2,792 2,392
Provision for state income taxes ..... 12 6 9
-------- -------- --------
Net income ........................... $ 2,662 $ 2,786 $ 2,383
======== ======== ========
Earnings per share ................... $ 1.71 $ 1.79 $ 1.53
======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
(continued)
1996 1995 1994
-------- -------- --------
(In Thousands of Dollars,
Except per Share Amounts)
<S> <C> <C> <C>
UNDISTRIBUTED EARNINGS
Balance, beginning of year ........... $ 675 $ 1,834 $ 1,978
Net income ........................... 2,662 2,786 2,383
Less dividends ....................... (2,667) (3,945) (2,527)
-------- -------- --------
Balance, end of year ................. $ 670 $ 675 $ 1,834
======== ======== ========
Dividends paid per share ............. $ 1.71 $ 2.53 $ 1.62
======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
1996 1995 1994
------- ------- -------
(In Thousands of Dollars)
<S> <C> <C> <C>
Operating activities:
Net income ..................................... $ 2,662 $ 2,786 $ 2,383
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .............. 1,333 1,306 1,237
Equity in income of affiliate .............. (92) (81) (51)
Deferred revenue ........................... 2 43 85
Changes in operating assets and liabilities:
Tenants' security accounts .............. (28) (47) (5)
Sundry receivables, prepaid expenses
and other assets ...................... (585) (215) (206)
Accounts payable and accrued expenses ... (54) 65 24
Tenants' security deposits .............. 26 51 9
Other liabilities ....................... (42)
------- ------- -------
Net cash provided by operating
activities ........................ 3,264 3,908 3,434
------- ------- -------
Investing activities:
Capital expenditures ........................... (880) (590) (416)
Investment in affiliate ........................ (2,440)
Distributions from affiliate ................... 140 440 160
------- ------- -------
Net cash used in investing activities (740) (150) (2,696)
------- ------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
(continued)
1996 1995 1994
------- ------- -------
(In Thousands of Dollars)
<S> <C> <C> <C>
Financing activities:
Dividends paid ................................. (2,792) (2,791) (2,527)
Deferred charges ............................... (37)
Proceeds from note payable - bank .............. 3,339 2,791 7,884
Repayment of note payable - bank ............... (2,846) (3,050) (6,376)
Repayment of mortgages ......................... (501) (454) (399)
------- ------- -------
Net cash used in financing activities (2,800) (3,504) (1,455)
------- ------- -------
Net increase (decrease) in cash .................... (276) 254 (717)
Cash, beginning of year ............................ 465 211 928
------- ------- -------
Cash, end of year .................................. $ 189 $ 465 $ 211
======= ======= =======
Supplemental disclosure of cash flow data:
Interest paid .................................. $ 2,883 $ 2,528 $ 2,571
======= ======= =======
Income taxes paid .............................. $ 8 $ 7 $ 7
======= ======= =======
Supplemental schedule of noncash investing and financing activities:
Dividends declared but not paid amounted to $1,029,000 and $1,154,000 at October
31, 1996 and 1995, respectively.
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. For
fiscal 1996, 1995 and 1994, the Trust made such an
election.
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 October 31, 1996 and 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.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies (concluded):
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 $49,000, $27,000 and $21,000 in
1996, 1995 and 1994, respectively.
Earnings per share:
Earnings per share are computed based on the weighted
average number of shares outstanding. The weighted
average number of shares outstanding was 1,559,788 for
each of the three years in the period ended October 31,
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 financial statements have been restated. The
effect of the restatement was to reduce both total assets
and total liabilities by $13,548,000 and $13,697,000 at
October 31, 1996 and 1995, respectively, and reduce
income from rental operations by $233,000, $205,000 and
$127,000 for the years ended October 31, 1996, 1995 and
1994, respectively. 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:
During May 1994, the Trust became a 40% member of the
Affiliate, a newly formed 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.
On June 2, 1994, the Affiliate consummated the purchase of
Westwood Properties, a residential apartment complex located
in Westwood, New Jersey.
Summarized financial information of the Affiliate as of
October 31, 1996 and 1995 and for each of the three years in
the period ended October 31, 1996 is as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Balance sheet data:
Assets:
Real estate and equipment, net ............ $14,928 $15,112
Other ..................................... 544 557
------- -------
Total assets ........................ $15,472 $15,669
======= =======
Liabilities and equity:
Liabilities:
Mortgage payable ........................ $10,346 $10,488
Other ................................... 314 250
------- -------
Totals .............................. 10,660 10,738
------- -------
Members' equity:
Trust ................................... 1,924 1,972
Others .................................. 2,888 2,959
------- -------
Totals .............................. 4,812 4,931
------- -------
Total liabilities and equity ........ $15,472 $15,669
======= =======
</TABLE>
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(In Thousands of Dollars)
<S> <C> <C> <C>
Income statement data:
Rental revenue ...................... $2,360 $2,212 $ 883
Rental expenses ..................... 2,127 2,007 756
------ ------ ------
Income from rental operations ....... 233 205 127
Other expenses ...................... 3 1
------ ------ ------
Net income .......................... $ 230 $ 204 $ 127
====== ====== ======
</TABLE>
Note 3 - Real estate:
Real estate consists of the following:
<TABLE>
<CAPTION>
Range
of Estimated
Useful Lives 1996 1995
------------ ---- ----
(In Thousands
of Dollars)
<S> <C> <C> <C>
Land $17,263 $17,263
Unimproved land 2,472 2,452
Apartment buildings 7-40 years 10,170 9,689
Commercial buildings 25-31.5 years 58 58
Shopping centers 15-50 years 26,947 26,859
Construction in progress 969 714
------- -------
57,879 57,035
Less accumulated depreciation 11,043 9,780
------- -------
Totals $46,836 $47,255
======= =======
</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>
1996 1995
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
State Mutual Life Insurance Co. (A) $18,068 $18,359
Travelers Insurance (B) 5,319 5,444
Summit Bank (C) 222 307
------- -------
Totals $23,609 $24,110
======= =======
</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 $25,755,000.
(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 $11,890,000.
(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 $627,000. 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
October 31, 1996 are as follows:
Year Ending
October 31, Amount
----------- ------
1997 $18,295
1998 248
1999 208
2000 185
2001 4,673
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 4 - Mortgages payable (concluded):
Based on borrowing rates currently available to the Trust,
the carrying amount of mortgages payable approximates fair
value at October 31, 1996.
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 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 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 $38,956,000 at October 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 October 31, 1996 are as follows:
Year Ending
October 31, Amount
----------- ------
1997 $ 3,598
1998 3,274
1999 2,961
2000 2,448
2001 2,269
Thereafter 10,892
-------
Total $25,442
=======
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 6 - Commitments and contingencies (concluded):
Leases (concluded):
Commercial tenants (concluded):
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 $1,286,000
at October 31, 1996. Management closed the shopping
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 scheduled to begin during January or
February 1997 and it is expected to be open for
operations in the Fall of 1997. The cost of the
refurbishing, which has been put out for bid, is
currently anticipated to approximate $10,000,000.
Rental revenue derived from the shopping center was
approximately $140,000, $207,000 and $310,000 in
fiscal 1996, 1995 and 1994, respectively, and income
from rental operations was approximately $30,000,
$91,000 and $166,000, 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, 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 $11,000,000
including commissions and estimated professional fees.
The contract to purchase the Patchogue center is
contingent upon the construction being completed during
January 1997.
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
$476,000, $470,000 and $451,000 in 1996, 1995 and 1994,
respectively.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
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>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
SCHEDULE IX - SHORT-TERM BORROWINGS
(In Thousands of Dollars)
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>
1996:
Note payable -
bank $5,662 7.98% $6,362 $5,683 8.2%
====== ==== ====== ====== ===
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%
====== ==== ====== ====== ===
(A) See Note 5 of notes to financial statements.
(B) Calculated using average monthly loan balances and actual interest
expense.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In Thousands of Dollars)
Column A Column B
-------- --------
Charged to Costs
Item (A) and Expenses
------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs ........... $ 252 $ 219 $ 331
====== ====== ======
Real estate taxes ................. $1,739 $1,507 $1,283
====== ====== ======
(A) Amounts for other items were less than 1% of revenue in all years.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
OCTOBER 31, 1996
(In Thousands of Dollars)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Capitalized
Initial Cost Subsequent Gross Amount at Which
to Company to Acquisition Carried at Close of Period
Buildings Buildings
Encum- and Carrying and
Description brances Land Improvements Improvements Costs Land Improvements Total(1)
----------- ------- ---- ------------ ------------ ----- ---- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Garden apartments:
Sheridan Apts.,
Camden, NJ ......................... $ 117 $ 360 $ 849 $ 117 $ 1,209 $ 1,326
Grandview Apts.,
Hasbrouck Heights, NJ .............. 22 180 175 22 355 377
Lakewood Apts.,
Lakewood, NJ ....................... 11 396 155 11 551 562
Hammel Gardens,
Maywood, NJ ........................ 313 728 622 313 1,350 1,663
Palisades Manor,
Palisades Park, NJ ................. 12 81 80 12 161 173
Steuben Arms,
River Edge, NJ ..................... 364 1,773 329 364 2,102 2,466
Heights Manor, Spring
Lake Heights, NJ ................... $ 222 109 974 301 109 1,275 1,384
Berdan Court, Wayne, NJ................ 250 2,206 961 250 3,167 3,417
Commercial property:
Glen Rock, NJ .......................... 12 36 22 12 58 70
Shopping centers:
Franklin Lakes
Shopping Center,
Franklin Lakes, NJ ................. 29 380 1,214 29 1,594 1,623
Westridge Shopping
Center, Frederick, MD ................ 18,068 9,135 19,159 336 9,135 19,495 28,630
Westwood Shopping
Center, Westwood, NJ ............... 5,319 6,889 6,416 411 6,889 6,827 13,716
Vacant land:
Franklin Lakes, NJ ....................... 224 $ 8 232 232
Rockaway, NJ ........................... 1,683 384 2,067 2,067
South Brunswick, NJ .................... 80 93 173 173
------- ------- ------- ------- ------- ------- ------- -------
Totals .......................... $23,609 $19,250 $32,689 $ 5,455 $ 485 $19,735 $38,144 $57,879
======= ======= ======= ======= ======= ======= ======= =======
<PAGE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
OCTOBER 31, 1996
(In Thousands of Dollars)
(continued)
Column F Column G Column H Column I
-------- -------- -------- --------
Which
Accumulated Date of Date Depreciation
Description Depreciation Construction Acquired is Computed
----------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
Garden apartments:
Sheridan Apts.,
Camden, NJ .............. $ 629 1950 1964 7-40 years
Grandview Apts.,
Hasbrouck Heights, NJ ... 218 1925 1964 7-40 years
Lakewood Apts.,
Lakewood, NJ ............ 405 1960 1962 7-40 years
Hammel Gardens, May-
Maywood, NJ ............. 676 1949 1972 7-40 years
Palisades Manor,
Palisades Park, NJ ...... 104 1935/70 1962 7-40 years
Steuben Arms,
River Edge, NJ .......... 1,065 1966 1975 7-40 years
Heights Manor, Spring
Lake Heights, NJ ........ 791 1967 1971 7-40 years
Berdan Court, Wayne, NJ ..... 2,072 1964 1965 7-40 years
Commercial property:
Glen Rock, NJ ............... 45 1940 1962 10-31.5 years
Shopping centers:
Franklin Lakes
Shopping Center,
Franklin Lakes, NJ ...... 337 1963/75 1966 10-50 years
Westridge Shopping
Center, Frederick, MD.... 2,875 1986 1992 15-31.5 years
Westwood Shopping
Center, Westwood, NJ .... 1,826 1981 1988 15-31.5 years
Vacant land:
Franklin Lakes, NJ .......... 1966/93
Rockaway, NJ ................ 1964/92/93
South Brunswick, NJ ......... 1964
-------
Totals ............... $11,043
=======
(1) Aggregate cost is the same for Federal income tax purposes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
(In Thousands of Dollars)
Reconciliation of real estate and accumulated depreciation:
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Real estate:
Balance, beginning of year .............. $ 57,035 $ 56,465 $ 56,080
Additions:
Building and improvements ........... 824 577 357
Carrying costs ...................... 20 (7) 28
-------- -------- --------
Balance, end of year .................... $ 57,879 $ 57,035 $ 56,465
======== ======== ========
Accumulated depreciation:
Balance, beginning of year .............. $ 9,780 $ 8,584 $ 7,433
Additions - charged to operating expenses 1,263 1,196 1,151
-------- -------- --------
Balance, end of year .................... $ 11,043 $ 9,780 $ 8,584
======== ======== ========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members
Westwood Hills, LLC
We have audited the accompanying balance sheets of WESTWOOD HILLS, LLC as of
October 31, 1996 and 1995, and the related statements of income and members'
equity and cash flows for each of the three years in the period ended October
31, 1996. These financial statements are the responsibility of the Company'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 financial statements referred to above present fairly, in
all material respects, the financial position of Westwood Hills, LLC as of
October 31, 1996 and 1995, and its results of operations and cash flows for each
of the three years in the period ended October 31, 1996, in conformity with
generally accepted accounting principles.
/s/J. H. Cohn LLP
----------------
J. H. COHN LLP
Roseland, New Jersey
December 3, 1996
<PAGE>
<TABLE>
<CAPTION>
WESTWOOD HILLS, LLC
(A New Jersey Limited Liability Company)
BALANCE SHEETS
OCTOBER 31, 1996 AND 1995
ASSETS 1996 1995
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Real estate, at cost, net of accumulated
depreciation of $731,000 and $424,000 ........ $14,857 $15,069
Equipment, at cost, net of accumulated
depreciation of $10,000 and $2,000 ........... 71 43
Cash ............................................. 54 68
Tenants' security accounts ....................... 245 221
Sundry receivables ............................... 18 1
Prepaid expenses and other assets ................ 119 125
Deferred charges, net ............................ 108 142
------- -------
Totals ................................. $15,472 $15,669
======= =======
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Mortgage payable ............................. $10,346 $10,488
Accounts payable and accrued expenses ........ 69 29
Tenants' security deposits ................... 245 221
------- -------
Total liabilities ...................... 10,660 10,738
Members' equity .................................. 4,812 4,931
------- -------
Totals ................................ $15,472 $15,669
======= =======
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WESTWOOD HILLS, LLC
(A New Jersey Limited Liability Company)
STATEMENTS OF INCOME AND MEMBERS' EQUITY
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
INCOME 1996 1995 1994
------- ------- -------
(In Thousands of Dollars)
<S> <C> <C> <C>
Rental revenue:
Rental income .................... $ 2,343 $ 2,197 $ 878
Sundry income .................... 17 15 5
------- ------- -------
Totals ....................... 2,360 2,212 883
------- ------- -------
Rental expenses:
Operating expenses ............... 544 504 211
Management fees .................. 105 86 28
Real estate taxes ................ 350 283 91
Interest ......................... 813 832 301
Depreciation ..................... 315 302 125
------- ------- -------
Totals ....................... 2,127 2,007 756
------- ------- -------
Income from rental operations ........ 233 205 127
Other expenses ....................... 3 1
------- ------- -------
Net income ........................... 230 204 127
MEMBERS' EQUITY
Balance, beginning of year ........... 4,931 5,827 --
Contributions ........................ 6,100
Less distributions ................... (349) (1,100) (400)
------- ------- -------
Balance, end of year ................. $ 4,812 $ 4,931 $ 5,827
======= ======= =======
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WESTWOOD HILLS, LLC
(A New Jersey Limited Liability Company)
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
1996 1995 1994
------- ------- -------
(In Thousands of Dollars)
<S> <C> <C> <C>
Operating activities:
Net income ..................................... $ 230 $ 204 $ 127
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .............. 349 302 125
Changes in operating assets and liabilities:
Tenants' security accounts .............. (24) (33) (188)
Sundry receivables and prepaid expenses . (11) (246) (23)
Accounts payable and accrued expenses ... 40 (48) 77
Tenants' security deposits .............. 24 33 188
------- ------- -------
Net cash provided by operating
activities ........................ 608 212 306
------- ------- -------
Investing activities - capital expenditures ........ (131) (104) (5,914)
------- ------- -------
Financing activities:
Members' contributions ........................... 6,100
Distributions paid ............................. (349) (1,100) (400)
Mortgage proceeds .............................. 1,175
Repayment of mortgage .......................... (142) (142) (65)
------- ------- -------
Net cash provided by (used in)
financing activities .............. (491) (67) 5,635
------- ------- -------
Net increase (decrease) in cash .................... (14) 41 27
Cash, beginning of year ............................ 68 27 --
------- ------- -------
Cash, end of year .................................. $ 54 $ 68 $ 27
======= ======= =======
Supplemental disclosure of cash flow data:
Interest paid .................................. $ 813 $ 832 $ 301
======= ======= =======
Supplemental schedule of noncash investing and financing activities: During
fiscal 1994, the Company 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 Notes to Financial Statements.
</TABLE>
<PAGE>
WESTWOOD HILLS, LLC
(A New Jersey Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies:
Organization:
Westwood Hills, LLC (the "Company") was formed in May
1994 as a New Jersey limited liability company for the
purpose of acquiring a residential apartment complex in
Westwood, New Jersey. The Company is 40%-owned by First
Real Estate Investment Trust of New Jersey (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 Company are
either trustees of the Trust or their families or
officers of Hekemian.
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 Company maintains its cash in bank deposit accounts
which, at times, may exceed Federally insured limits. The
Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be
cash equivalents. At October 31, 1996 and 1995, the
Company 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 ranging from 7 to 40 years.
Deferred charges:
Deferred charges consist of mortgage costs which are
amortized on the straight-line method by annual charges
to operations over the term of the mortgage.
Advertising:
The Company expenses the cost of advertising and
promotions as incurred. Advertising costs charged to
operations were not material.
Income taxes:
The Company, 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 in the accompanying financial statements.
<PAGE>
WESTWOOD HILLS, LLC
(A New Jersey Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
Note 2 - Acquisition:
On June 2, 1994, the Company 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.
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 Company paid Hekemian a $500,000
real estate commission, which amount is included in the cost
of the Apartment Complex.
Note 3 - Real estate:
Real estate consists of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Land ....................................... $ 3,849 $ 3,849
Apartment buildings ........................ 11,739 11,644
------- -------
15,588 15,493
Less accumulated depreciation .............. 731 424
------- -------
Totals ................................... $14,857 $15,069
======= =======
</TABLE>
Note 4 - Mortgage payable:
The mortgage 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 mortgage is secured
by the Apartment Complex.
Principal amounts (in thousands of dollars) due under the
above obligation in each of the five years subsequent to
October 31, 1996 are as follows:
Year Ending
October 31, Amount
----------- ------
1997 $153
1998 166
1999 179
2000 194
2001 209
<PAGE>
WESTWOOD HILLS, LLC
(A New Jersey Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
Note 4 - Mortgage payable (concluded):
Based on borrowing rates currently available to the Company,
the carrying amount of the mortgage approximates fair value
at October 31, 1996.
Note 5 - Management agreement:
The Apartment Complex is currently managed by Hekemian. The
management agreement requires fees equal to a percentage of
rents collected. Such fees were approximately $105,000,
$86,000 and $28,000 in 1996, 1995 and 1994, respectively.
* * *
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 189,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 58,673,000
<DEPRECIATION> (11,651,000)
<TOTAL-ASSETS> 51,674,000
<CURRENT-LIABILITIES> 0
<BONDS> 23,609,000
0
0
<COMMON> 19,314,000
<OTHER-SE> 670,000
<TOTAL-LIABILITY-AND-EQUITY> 51,634
<SALES> 0
<TOTAL-REVENUES> 11,417,000
<CGS> 0
<TOTAL-COSTS> (8,091,000)
<OTHER-EXPENSES> (652,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,674,000
<INCOME-TAX> (12,000)
<INCOME-CONTINUING> 2,662,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,662,000
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.71
</TABLE>
