SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20594
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended January 31, 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.) Combined Balance Sheets for January 31, 1997 and October
31, 1996;
b.) Combined Statements of Income and Undistributed Earnings
for Three Months Ended January 31,1997 and 1996;
c.) Combined Statements of Cash Flows for Three Months Ended
January 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 AND AFFILIATE
COMBINED BALANCE SHEETS
JANUARY 31, 1997 AND OCTOBER 31, 1996
(Unaudited)
January October
ASSETS 31, 1997 31, 1996
--------- --------
(In Thousands
of Dollars)
<S> <C> <C>
Real estate, at cost, net of accumulated
depreciation ................................... $61,631 $61,693
Equipment, at cost, net of accumulated
depreciation of $629,000 and $618,000 .......... 258 257
Cash ............................................... 468 243
Tenants' security accounts ......................... 996 999
Sundry receivables ................................. 462 555
Prepaid expenses and other assets .................. 957 1,209
Deferred charges, net .............................. 282 266
------- -------
Totals ................................... $65,054 $65,222
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages payable .............................. $33,786 $33,955
Note payable - bank .............................. 6,091 5,662
Accounts payable and accrued expenses .......... 327 347
Dividends payable .............................. 546 1,029
Tenants' security deposits ..................... 1,095 1,098
Deferred revenue ............................... 126 259
------- -------
Total liabilities ........................ 41,971 42,350
------- -------
Minority interest .................................. 2,935 2,888
------- -------
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 ......................... 834 670
------- -------
Total shareholders' equity ............... 20,148 19,984
------- -------
Totals .................................. $65,054 $65,222
======= =======
See Notes to Combined Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
COMBINED STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
(Unaudited)
INCOME 1997 1996
------ ---- ----
(In Thousands
of Dollars,
Except per
Share Amounts)
<S> <C> <C>
Rental revenue:
Rental income .............................. $ 3,102 $ 2,990
Real estate taxes reimbursed ............... 262 392
Common area maintenance reimbursed ......... 66 185
Sundry income .............................. 43 43
------- -------
Totals ................................. 3,473 3,610
------- -------
Rental expenses:
Operating expenses ......................... 731 798
Management fees .............................. 150 141
Real estate taxes .......................... 529 649
Interest ................................... 744 758
Depreciation ............................... 397 384
------- -------
Totals ................................. 2,551 2,730
------- -------
Income from rental operations .................. 922 880
------- -------
Other income (expense):
Interest income ............................ 1 4
Interest expense ........................... (118) (111)
General and administrative ................. (45) (55)
------- -------
Totals ................................. (162) (162)
------- -------
Income before minority interest ................ 760 718
Minority interest .............................. (47) (29)
------- -------
Income before state income taxes ............... 713 689
Provision for state income taxes ............... 3
------- -------
Net income ..................................... $ 710 $ 689
======= =======
Earnings per share ............................. $ .46 $ .44
======= =======
<PAGE>
<CAPTION>
COMBINED STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
(Unaudited)
(continued)
UNDISTRIBUTED EARNINGS 1997 1996
---------------------- ---- ----
(In Thousands
of Dollars,
Except per
Share Amounts)
<S> <C> <C>
Balance, beginning of period ................... $ 670 $ 675
Net income ..................................... 710 689
Less dividends ................................. (546) (546)
------- -------
Balance, end of period ......................... $ 834 $ 818
======= =======
Dividends per share ............................ $ .35 $ .35
======= =======
See Notes to Combined Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
(Unaudited)
1997 1996
------- -------
<S> <C> <C>
(In Thousands
of Dollars)
Operating activities:
Net income .......................................... $ 710 $ 689
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................... 414 404
Deferred revenue ................................ (133) (45)
Minority interest ................................. 47 29
Changes in operating assets and liabilities:
Tenants' security accounts ................... 3 (5)
Sundry receivables, prepaid expenses and other
assets .......................................... 155 (207)
Deferred charges ............................. 171 93
Accounts payable and accrued expenses ........ (20) 26
Tenants' security deposits ................... (3) 5
------- -------
Net cash provided by operating activities 1,344 989
------- -------
Investing activities - capital expenditures ............. (350) (197)
------- -------
Financing activities:
Dividends paid ...................................... (1,029) (1,154)
Proceeds from note payable - bank ................... 429 555
Repayment of mortgages .............................. (169) (155)
------- -------
Net cash used in financing activities .... (769) (754)
------- -------
Net increase in cash .................................... 225 38
Cash, beginning of period ............................... 243 533
------- -------
Cash, end of period ..................................... $ 468 $ 571
======= =======
Supplemental disclosure of cash flow data:
Interest paid ....................................... $ 862 $ 869
======= =======
Supplemental schedule of noncash financing activities:
Dividends declared but not paid amounted to $546,000 at January 31, 1997 and
1996.
See Notes to Combined Financial Statements.
</TABLE>
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies:
Organization:
First Real Estate Investment Trust of New Jersey (the
"Trust") was organized November 1, 1961 as a New Jersey
Business Trust. The Trust is engaged in owning
residential and commercial income producing properties
located primarily in New Jersey.
The Trust has elected to be taxed as a Real Estate
Investment Trust under the provisions of Sections 856-860
of the Internal Revenue Code, as amended. Accordingly,
the Trust does not pay Federal income tax on income
whenever income distributed to shareholders is equal to
at least 95% of real estate investment trust taxable
income. Further, the Trust pays no Federal income tax on
capital gains distributed to shareholders.
The Trust is subject to Federal income tax on
undistributed taxable income and capital gains. The Trust
may make an annual election under Section 858 of the
Internal Revenue Code to apply part of the regular
dividends paid in each respective subsequent year as a
distribution for the immediately preceding year.
Basis of presentation:
The combined financial information included herein as at
January 31, 1997 and for the three months ended January
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 combined financial position as of
that date and the combined results of operations for
those periods. The information in the combined balance
sheet as of October 31, 1996 was derived from the Trust's
audited annual report for 1996.
Principles of combination:
The combined financial statements include the accounts of
the Trust and Westwood Hills, LLC (the "Affiliate"),
which have been combined on the basis of common control.
The Affiliate is a limited liability company that is
40%-owned by the Trust and managed by Hekemian & Co.,
Inc. ("Hekemian"), a company which manages all of the
Trust's properties and in which one of the trustees of
the Trust is the chairman of the board. Certain other
members of the Affiliate are either trustees of the Trust
or their families or officers of Hekemian. The combined
financial statements include 100% of the Affiliate's
assets, liabilities, operations and cash flows with the
60% interest owned by the other members of the Affiliate
reflected as "minority interest." All significant
intercompany accounts and transactions have been
eliminated in combination.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies (continued):
Use of estimates:
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Cash:
The Trust and its Affiliate maintain their cash in bank
deposit accounts which, at times, may exceed Federally
insured limits. The Trust considers all highly liquid
debt instruments purchased with a maturity of three
months or less to be cash equivalents. At January 31,
1997 and Octo- ber 31, 1996, the Trust had no cash
equivalents.
Depreciation:
Real estate and equipment are depreciated on the
straight-line method by annual charges to operations
calculated to absorb costs of assets over their estimated
useful lives.
Revenue recognition:
Income from leases is recognized on a straight-line basis
regardless of when payment is due. Lease agreements
between the Trust and commercial tenants generally
provide for additional rentals based on such factors as
percentage of tenants' sales in excess of specified
volumes, increases in real estate taxes, Consumer Price
Indices and common area maintenance charges. These
additional rentals are generally included in income when
reported to the Trust, when billed to tenants or ratably
over the appropriate period.
Deferred charges:
Deferred charges consist of mortgage costs and leasing
commissions. Deferred mortgage costs are amortized on the
straight-line method by annual charges to operations over
the terms of the mortgages. Deferred leasing commissions
are amortized on the straight-line method over the terms
of the applicable leases.
Advertising:
The Trust expenses the cost of advertising and promotions
as incurred. Advertising costs charged to operations
amounted to approximately $5,000 and $30,000 for the
three months ended January 31, 1997 and 1996,
respectively.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies (concluded):
Income taxes:
The Affiliate, with the consent of its members, elected
to be treated as a limited liability company under the
applicable sections of the Internal Revenue Code. Under
these sections, income or loss, in general, is allocated
to the members for inclusion in their individual income
tax returns. Accordingly, there is no provision for
income taxes applicable to the operations of the
Affiliate in the accompanying combined financial
statements.
Earnings per share:
Earnings per share are computed based on the weighted
average number of shares outstanding. The weighted
average number of shares outstanding was 1,559,788 for
each of the three month periods ended January 31, 1997
and 1996.
Note 2 - Real estate:
Real estate consists of the following:
<TABLE>
<CAPTION>
Range of
Estimated January October
Useful Lives 31, 1997 31, 1996
------------ -------- --------
(In Thousands
of Dollars)
<S> <C> <C> <C>
Land $21,631 $21,112
Unimproved land 2,240 2,472
Apartment buildings 7-40 years 22,162 21,909
Commercial buildings 25-31.5 years 58 58
Shopping centers 15-50 years 26,323 26,947
Construction in
progress 1,042 969
------- -------
73,456 73,467
Less accumulated depreciation
11,825 11,774
------- -------
Totals $61,631 $61,693
======= =======
</TABLE>
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 3 - Mortgages payable:
Mortgages payable consist of the following:
<TABLE>
<CAPTION>
January October
31, 1997 31, 1996
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
State Mutual Life Insurance Co. (A) $17,991 $18,068
Travelers Insurance (B) 5,286 5,319
USG Annuity (C) 10,308 10,346
Summit Bank (D) 201 222
------- -------
Totals $33,786 $33,955
======= =======
</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 $25,601,000.
(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 $11,832,000.
(C) Payable in monthly installments of $79,655
including interest at 7.8% through October 2002 at
which time the outstanding balance is due. The
mortgage is secured by an apartment complex in
Westwood, New Jersey having a net book value of
approximately $14,864,000.
(D) Payable in monthly installments of $8,555
including interest at 7.625% through March 1999 at
which time the outstanding balance is due. The
mortgage is secured by an apartment building in
Spring Lake, New Jersey having a net book value of
approximately $618,000. One of the directors of
the bank is a trustee of the Trust.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
Principal amounts (in thousands of dollars) due under the
above obligations in each of the five years subsequent to
January 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year Ending
January 31, Amount
----------- ------
<S> <C>
1998 $18,378
1999 421
2000 365
2001 386
2002 4,867
</TABLE>
The carrying amount of mortgages payable approximates fair
value at January 31, 1997.
Note 4 - 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 June 30, 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, an apartment
complex in Westwood, New Jersey, and any vacant land owned
by the Trust.
Note 5 - Commitments and contingencies:
Leases:
Commercial tenants:
The Trust leases commercial space having a net book
value of approximately $39,023,000 at January 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 January 31, 1997 are as follows:
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 5 - Commitments and contingencies:
Leases:
Commercial tenants: (continued)
<TABLE>
<CAPTION>
Year Ending
January 31, Amount
----------- ------
<S> <C>
1998 $ 3,696
1999 3,438
2000 3,015
2001 2,588
2002 2,340
Thereafter 9,624
-------
Total $24,701
=======
</TABLE>
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 Frank- lin Lakes, New Jersey
having a net book value of approximately $1,590,000
at January 31, 1997. 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 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
three months ended January 31, 1997 and 1996 were not
material.
Residential tenants:
Lease terms for residential tenants are usually one
year or less.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST
OF NEW JERSEY AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 5 - Commitments and contingencies (concluded):
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 contract to purchase the Patchogue center is
contingent upon the construction being completed during
the Spring of 1997.
Standby letters of credit:
At January 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 6 - Management agreement:
The properties owned by the Trust and the Affiliate are
currently managed by Hekemian. The management agreement
requires fees equal to a percentage of rents collected. Such
fees were approximately $150,000 and $141,000 for the three
months ended January 31, 1997 and 1996, respectively.
Note 7 - Earnings per share:
Earnings per share, based on the weighted average number of
shares outstanding during each period, are comprised of
ordinary income.
* * *
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the
attached financial statements and notes thereto, and the Registrant's audited
financial statements and notes thereto for Fiscal Year ended October 31, 1996.
Results of Operations
The earnings per share were $0.46 for the First Quarter 1997 as
compared to $0.44 per share for the First Quarter of 1996.
The increase in earnings was realized despite the fact the Franklin
Lakes Shopping Center, as discussed in Part II, Item 5 hereinafter, was closed
for operations in the fall of 1996.
Rental income increased from $2,990,000 for the First Quarter of 1996
to $3,102,000 for the First Quarter of 1997. The increase in income from rental
operations, which was $922,000 for the First Quarter 1997 and $880,000 for the
same period in 1996, was due to a decrease in operating expenses and real estate
taxes. The decrease in operating expenses was due, in large part, to a mild
winter in 1996-1997 as compared with the prior fiscal year resulting in
diminished heating and snow removal costs.
Financial Condition
The Registrant continues to generate cash sufficient to meet all of its
operational needs. Registrant does not anticipate that it will be required to
borrow funds to sustain the current dividend payment schedule of $0.35 per share
for each of the first three quarters of Fiscal Year 1997.
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
A) Franklin Lakes, New Jersey Shopping Center (the
"Franklin Lakes Center"
The Registrant closed the Franklin Lakes Center in
December, 1996. Demolition of the Center was completed
during January, 1997.
The Registrant is in the process of negotiating
contracts with third party contractors for the
construction of a new center containing approximately
88,000 square feet of leasable space. The Registrant
anticipates that construction will begin prior to March
1, 1997 and that the new center will be operational
before January 1, 1998.
The Registrant authorized the payment of the following
fees to Hekemian & Co., Inc., its managing agents:
a) $125,000 in consideration for all work completed
in securing governmental approvals in connection
with the new center;
b) $150,000 in consideration for the planning,
coordination and oversight in connection with the
construction of the new center.
In addition, Registrant has agreed to negotiate an
agreement pursuant to which Hekemian & Co., Inc. will be
paid a fee for negotiating all leases for the new
center.
B) Patchogue, New York Shopping Center (the "Patchogue
Center")
The Registrant anticipates that the Patchogue Center
will be completed by May 1, 1997. As a result, it
expects to close title for the center on or about June
1, 1997.
The Registrant authorized the payment of a fee in the
amount of $390,000 to Hekemian & Co., Inc. for all work
which it performed in the acquisition and the monitoring
of construction of the Patchogue Center.
C) Line of Credit with Summit Bank
The Line of Credit with Summit Bank was extended for a
six month interim period. The Registrant expects that
the Line of Credit will be extended for a period of one
or two years based at the end of the interim period.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
The Registrant did not file any 8-K Reports during the First
Quarter 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 thereunto duly authorized.
FIRST REAL ESTATE INVESTMENT
TRUST OF NEW JERSEY
(Registrant)
Date April 1, 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>
SALES OF UNREGISTERED SECURITIES (DEBT OR EQUITY)
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
N O N E
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 468
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 74,343
<DEPRECIATION> 12,454
<TOTAL-ASSETS> 65,054
<CURRENT-LIABILITIES> 0
<BONDS> 39,877
0
0
<COMMON> 19,314
<OTHER-SE> 834
<TOTAL-LIABILITY-AND-EQUITY> 65,054
<SALES> 0
<TOTAL-REVENUES> 3,473
<CGS> 0
<TOTAL-COSTS> 2,551
<OTHER-EXPENSES> 209
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 713
<INCOME-TAX> 3
<INCOME-CONTINUING> 710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 710
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
