SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 31, 1997
[ ] 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
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(exact name of registrant as specified in its charter)
New Jersey 22-1697095
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code: 201-488-6400
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check 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, 1997 - $30,687,719
Number of Shares of Common Stock outstanding as of
December 31, 1997 - 1,559,788
DOCUMENTS INCORPORATED BY REFERENCE
(To the Extent Indicated Herein)
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1 GENERAL DEVELOPMENT OF BUSINESS
(A) Organization and Background
(B) Financial Information about Industry Segments
(C) Narrative Description of Business
(1) Principal Activity
(2) Investment Portfolio
(3) Sources of Capital Funds
(4) Patents, Trademarks
(5) Seasonability of Business
(6) Inventory
(7) Dependence on Single Tenant (Customer)
(8) Backlog
(9) Government Contracts
(10) Competitive Conditions
(11) Research and Development Activities
(12) Impact of Governmental Laws and Regulations
on Registrant's Business
(13) Employees
(D) Financial Information about Foreign and Domestic
Operations and Export Sales
ITEM 2 DESCRIPTION OF THE PROPERTY
(A) Portfolio of Investments
APARTMENT PROJECTS
SHOPPING CENTERS
COMMERCIAL PROPERTY
VACANT LAND
(B) Description of Mortgage Liens filed as against
Registrant's Investment Properties
(a) Properties owned by Registrant which secure
real property mortgages
(i) Spring Lake Heights, New Jersey
(ii) Westwood, New Jersey
(iii) Frederick, Maryland
(iv) Wayne, New Jersey
(v) Patchogue, New York
(b) Registrant's Line of Credit
(c) Westwood Hills, LLC
ITEM 3 LEGAL PROCEEDINGS
<PAGE>
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
ITEM 6 SELECTED FINANCIAL DATA
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(A) Liquidity and Capital Resources
Overview
Liquidity
Capital Resources
Results of Operation
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9 CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
(A) Identification of Trustees
(B) Identification of Executive Officers
(C) Identification of Certain Significant Employees
(D) Identification of Certain Significant Family
Relationships
(E) Business Experience
(F) Involvement in Certain Legal Proceedings
ITEM 11 EXECUTIVE COMPENSATION
(A) OFFICERS
(B) TRUSTEES
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
(A) Security Ownership of Certain Beneficial Owners
(B) Security Ownership of Management
(C) Pledged Securities
<PAGE>
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) Transactions with Management and others
(B) Certain Business Relationships
(C) Indebtedness of Management
(D) Transactions with Promoters
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON FORM 8-K
<PAGE>
PART I
ITEM 1 GENERAL DEVELOPMENT OF BUSINESS
(A) Organization and Background
Registrant, First Real Estate Investment Trust of New Jersey, is an
unincorporated business trust organized in New Jersey pursuant to a Trust
Agreement dated November 1, 1961, as amended and restated as of November 7, 1983
(the "Declaration of Trust"). Registrant is an equity real estate investment
trust engaged in the business of acquiring and holding real estate including
shopping centers, apartment complexes and commercial properties. In addition,
the Registrant has purchased vacant land for future development. It is the
policy of Registrant to purchase real property for investment and not for resale
or turnover. The Registrant has operated in accordance with the above stated
general policy since its inception. In the future, the Registrant may purchase
additional properties on a joint venture basis in those situations where it can
maintain appropriate management control. In addition, Registrant may, in the
future, seek to purchase properties and to develop properties utilizing an
increased level of financing from third party institutional sources than it has
in the past.
The Registrant has elected to conduct its operations in a manner
intended to comply with the requirements for qualification as a real estate
investment trust ("REIT") pursuant to the Real Estate Investment Act of 1960.
(Sections 856-860 of the Internal Revenue Code of 1986, hereinafter referred to
as the "Code"). Under the Code, a REIT which meets certain requirements is not
subject to federal income tax on that portion of its taxable income which is
distributed to its shareholders provided at least 95% of its REIT taxable
income, excluding any net capital gain, is distributed to its shareholders.
Under its Declaration of Trust, the Registrant is permitted to invest
in a broad range of real estate investments and non-real estate investments,
including full or participating interest in securities, whether or not secured
by mortgages, rents and lease payments and the ownership of any other interests,
including equity interests, related to real property. The Registrant's
investment charter permits the Registrant to generate income of the types
permitted to be received by REITs under Section 856 of the Code. Registrant's
Declaration of Trust permits it to conduct its business operations without
qualifying as a REIT. Nevertheless, it is the Registrant's intention to continue
to qualify as a REIT.
All of the Registrant's properties are managed by Hekemian & Co., Inc.
under a management and brokerage agreement dated December 20, 1961, as amended
by an Amendment dated May 8, 1963 (the "Management Contract").
(B) Financial Information about Industry Segments
The Registrant is engaged in one industry segment, the investment and
management of real property. The revenue and profits from the Registrant's
operations are as set forth in the Financial Statements annexed hereto.
(C) Narrative Description of Business
(1) Principal Activity. The principal activity of the Registrant is to
purchase real property, improved and unimproved, primarily for investment and
not for resale. The Registrant is currently qualified as a REIT under the Code
<PAGE>
which provides investors in the Registrant's shares with the opportunity to
participate in diversified properties consisting, at the present time, of income
producing apartment complexes and shopping centers. The Registrant does own
vacant property which yields no income.
(2) Investment Portfolio. The Registrant's real estate assets as of
October 31, 1997, consisted of 15 properties all of which are wholly owned by
the Registrant. On December 22, 1997 the Registrant also purchased a center
located in Patchogue, New York as described in footnote number 3 set forth
hereinafter.
In addition, the Registrant holds a forty (40%) percent interest in
Westwood Hills, a New Jersey Limited Liability Company (sometimes hereinafter
referred to as the "Westwood Hills, LLC" or the "LLC") which owns a 210 unit
apartment complex in Westwood, New Jersey (the "Westwood Hills Apartments").
(a) Real Property Investments. The following table sets forth certain
information concerning Registrant's real estate held as of October 31, 1997:
<TABLE>
<CAPTION>
Depreciated
Square Feet, Cost of
Apartment Units Buildings &
Real Estate No. of or Acreage Equipment
Investments Properties of Vacant Land (000's)
----------- ---------- -------------- -------
<S> <C> <C> <C>
Apartment
Properties 8(1) 639 Units $ 5,530
Commercial
Property 1 4,800 sq. ft. $ 25
Shopping
Centers 3 515,169 sq. ft.(2) $45,872
Shopping
Center 1(3) 63,932 sq. ft. $10,400
Unimproved
Land 3 56.53 Acres(4) $ 2,310
</TABLE>
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(1) Exclusive of Westwood Hills, LLC described in Item 1 C (2)(b) hereof.
(2) Includes a total of approximately 87,041 square feet at the Registrant's
shopping center located in Franklin Lakes, New Jersey. The shopping center
replaced a center with approximately 33,320 square feet of leasable space
which the Registrant owned since 1964.
The new center, now called "Franklin Crossing" was constructed during the
spring and summer of 1997. On August 1, 1997 the center's first tenant,
Grand Union, occupied approximately 41,160 square feet of lease space.
Grand Union commenced to pay rent in accord with its lease on October 12,
1997 when it opened for business to the public. The balance of the center's
leasable space is currently being offered for leasing to various third
parties. As of October 31, 1997, no space at the center, other than the
Grand Union space, was leased.
<PAGE>
(3) The Registrant purchased a center located in Patchogue, New York on
December 22, 1997 from an unrelated third party with approximately 63,932
square feet of leasable space all as more fully described in Item 1
(C)(d)(i) hereof at page 9. The center is hereinafter sometimes referred to
as Patchogue Plaza.
(4) Includes unimproved land contiguous to the Franklin Crossing Shopping
Center.
The Registrant's mortgage indebtedness, relating to the real property
investments described above, was approximately $24,429,000 as of October 31,
1997 consisting of three mortgages as described in Item 2 (B)(a) hereof at Pages
23 and 24.
Subsequent to October 31, 1997, the Registrant purchased the shopping
center in Patchogue, New York for a purchase price of $10,400,000. The
Registrant secured a mortgage of $7,500,000 in connection with the purchase. The
purchase of the Patchogue, New York shopping center is more fully described in
Item 1 (C)(d)(i) at page 9.
In addition, the Registrant secured a mortgage for its apartment
complex known as Berdan Court located in Wayne, New Jersey on December 16, 1997.
The new mortgage is in the principal amount of $11,100,000. The Berdan Court
complex had not been previously subject to a mortgage. The Registrant also
refinanced its shopping center located in Westwood, New Jersey known as the
"Westwood Plaza" during January, 1998. The new mortgage is in the principal
amount of $10,600,000; the existing mortgage was paid off, in full, in the
amount of $5,169,396.
The mortgages described above are more fully detailed in Item 2 (B)(a)
hereof at Pages 23 and 24 hereof.
(b) Investment in LLC. The following table sets forth certain
information concerning the Registrant's interest in the Westwood Hills, LLC.
<TABLE>
<CAPTION>
Depreciated
Investments Number of Cost of
Other Number of held by Apartment Buildings &
Investments Properties Registrant Units Equipment
----------- ---------- ---------- ----- ---------
(000's)
<S> <C> <C> <C> <C>
Westwood Hills,
New Jersey
Limited Liability
Company 1 40% 210 $14,696,000
</TABLE>
Registrant purchased a forty (40%) percent interest in Westwood Hills,
LLC in June, 1994.
<PAGE>
The LLC is subject to a mortgage in the amount of $10,500,000 having a
current principal balance, as of December 31, 1997, of approximately $10,192,000
as described in Item 2 (B)(c) at page 24 hereof.
The Registrant is the managing member of Westwood Hills, LLC.
(c) Other Investments. The Registrant does not hold any mortgage note
receivables.
The Registrant is engaged in no business other than as herein
described.
(d) New Investment and Development of Present Property.
(i) Purchase of a Shopping Center in Patchogue, New York
On December 22, 1997, the Registrant completed its purchase of a 63,932
square foot shopping center located in Patchogue, New York for $10,400,000
securing a purchase money mortgage in the amount of $7,500,000. The food center
is located on approximately 8.775 acres of land.
The food center is leased to Pathmark.
There are no tenants, other than Pathmark, located at the food center.
(ii) Development of Franklin Lakes Shopping Center
During the spring and summer of calendar year 1997 the Registrant
completed the construction of a new shopping center located on the property
which it has owned since 1964.
The new center is called "Franklin Crossing" and contains approximately
87,041 square feet of leasable space. The prior center contained approximately
33,320 square feet of leasable space.
The Grand Union has leased a total of approximately 41,160 square feet
of space in the center. Grand Union took possession of its space for tenant
fit-up in August, 1997. Grand Union commenced payment of rent on October 12,
1997 when it opened for business.
The Registrant is in the process of leasing the balance of the space at
Franklin Crossing to various third parties. As of October 31, 1997, however, no
space, other than the Grand Union space, was leased to third parties.
(3) Sources of Capital Funds
The Registrant relies upon its line of credit with Summit Bank, the
successor to United Jersey Bank ("UJB"), in the amount of $20 million as a
primary source of funds to meet operational and investment needs (the "Line of
Credit").
A $20 million line of credit was originally negotiated with UJB in July
of 1994. The maturity date of the Line of Credit has been extended to May 31,
1998 on a temporary basis. It is anticipated that the Line of Credit will be
extended on a long term basis to July 1, 2001 on or before July 1, 1998.
<PAGE>
In accordance with the provisions of Section 2.03 of the Line of Credit
and subject to a $20 million limitation on all advances, Summit Bank will make
available to the Registrant up to a maximum of $7.5 million for general business
purposes and up to a maximum of $15 million on an offering basis, for the
Registrant's acquisition of real estate and capital improvements. The real
estate acquisition advances are subject to certain limitations and requirements.
In accordance with Section 2.02(b) and Section 6.09 of the Line of
Credit, the Registrant must satisfy certain financial requirements. Such
financial requirements include the maintenance of (1) Shareholders' equity at a
level of at least $18 million as of the end of each fiscal quarter; (2) A
debt-to-worth ratio of less than 4.0; (3) Cash flow (net income plus
depreciation) in excess of $2.5 million for the preceding twelve months, as
determined at the end of each fiscal quarter; (4) A debt service coverage ratio
of 1.4 or greater. Section 6.09(e) of the Line of Credit prohibits the
Registrant from incurring any additional secured or unsecured indebtedness
(other than trade payables), except for the refinancing of existing mortgages,
the acquisition of new income-producing property (but only where such debt is on
a non-recourse basis other than liability under environmental, fraud and
representation and warranty clauses) and for the expansion and/or renovation of
existing income-producing property.
The Registrant currently meets all of the standards set forth in the
Line of Credit and anticipates that it will continue to meet all such standards
in the future.
Advances under the Line of Credit up to and including $10 million in
the aggregate bear interest, at the election of the Registrant at either (a)
Summit Bank's variable Base Lending Rate, as announced from time to time; or (b)
(i) the average if LIBOR (the annual rate of interest at which United States
Dollars deposits are offered to prime banks in the London Interbank market) on
contracts ending 1, 2, 3 or 6 months from the advance date, for the two (2)
business days preceding the advance date (round upward to the near whole
multiple of 1/16 of 1% per annum) divided by (ii) a percentage equal to 100%
less than the stated maximum rate of all reserves required to be maintained
against "LIBOR Rate Liabilities" as specified in Regulation D, (the "LIBOR
Base"), plus (iii) 200 basis points 2%. Advances in excess of $10,000,000 will
bear interest at Summit Bank's Base Lending Rate plus one half of one percent
(1/2%) or at the LIBOR Based plus 250 basis points (2.5%). At the closing, the
Registrant elected to use the LIBOR Base, plus 200 basis points, which then
produced an interest rate of 5.88% per annum. The principal balance due on the
Line of Credit, as of October 31, 1997, was $11,429,000 with an applicable
interest rate of 7.875%. The interest rate, as of December 31, 1997, remained at
7.875%.
(4) Patents, Trademarks
The Registrant holds no patents, trademarks, licenses, franchises or
concessions, none of which are material to the business of the Registrant.
(5) Seasonability of Business
Registrant's business is not seasonal.
(6) Inventory
Registrant's business does not require the maintenance of inventory.
<PAGE>
(7) Dependence on Single Tenant (Customer)
The Registrant's business is not materially dependent upon a single
tenant or a few tenants which, in the aggregate amount equal 10 percent (10%) or
more of the Registrant's consolidated revenues.
The Registrant does hold two properties which are, however, occupied by
one tenant. Other properties including the shopping centers at Frederick,
Maryland, Franklin Lakes, New Jersey and Westwood, New Jersey have anchor
tenants who occupy a significant amount of space in each center. The dependence
upon anchor tenants is described in Item 1 (C) 10(b) at page 12 hereof.
Registrant owns a single tenant building located in Glen Rock, New
Jersey consisting of approximately 4,800 square feet of leasable space. The
tenant has exercised its right to terminate the lease as of January 31, 1998.
Registrant does not consider the Glen Rock holding to be significant in terms of
its total investment portfolio. Registrant is actively engaged in efforts to
secure a replacement tenant and anticipates that the space will be vacant as of
February 1, 1998.
Registrant purchased a shopping center located in Patchogue, New York
on December 22, 1997 with approximately 63,932 square feet of leasable space.
The center will be occupied by a single tenant, Pathmark, pursuant to a lease
with an initial term of twenty (20) years. In the event the Pathmark failed to
honor its lease, the Registrant is confident that a substitute food center could
be located within a reasonable period of time without a substantial risk that
Registrant will incur extraordinary costs to prepare the space for a new tenant.
(8) Backlog
Information concerning backlog is neither material nor relevant to an
understanding of the Registrant's business.
(9) Government Contracts
None of the Registrant's holdings are leased to either the Federal or
State Government or to any subdivision thereof.
(10) Competitive Conditions
The Registrant is subject to normal competition with other investors to
acquire real property and to profitably manage such property.
Numerous other REIT(s), banks, insurance companies and pension funds,
as well as corporate and individual developers and owners of real estate,
compete with the Registrant in seeking properties for acquisition and for
tenants. During the past several years, the Registrant has concentrated its
expansion efforts upon the acquisition of multi-family residential and shopping
center properties which are substantially larger than those real estate assets
the Registrant had historically sought to include in its portfolio. As a result,
the Registrant has encountered increasing competition for investment grade real
estate from other entities and persons which have investment objectives similar
to those of the Registrant. Such competitors may have significantly greater
financial resources, may derive funding from foreign and domestic sources and
may have larger staffs to find, evaluate and secure new properties.
<PAGE>
In addition, retailers at the Registrant's shopping centers face
increasing competition from discount shopping centers, outlet malls, sales
through catalogue offerings, discount shopping clubs, marketing through cable
and computer sources and telemarketing. In many markets, the trade areas of the
Registrant's shopping center properties overlap with the trade areas of other
centers. Renovations and expansions at those competing malls could negatively
affect the Registrant's shopping center properties by encouraging shoppers to
make their purchases at the expanded or renovated competing center. Increased
competition could adversely affect the viability of Registrant's tenants. New
retail real estate competition could be developed in the future in trade areas
that could adversely affect the revenues of the Registrant's shopping center
properties.
(a) General Factors Affecting Investment in Shopping Centers
and Apartment Complex Properties; Effect on Economic and
Real Estate Conditions
The revenues and value of shopping centers and apartment complex
properties may be adversely affected by a number of factors, including: the
national economic climate; the regional economic climate (which may be adversely
affected by plant closings, industry slowdowns and other local factors); local
real estate conditions (such as an oversupply of retail space or apartment
units); perceptions by retailers or shoppers of the security, safety,
convenience and attractiveness of the shopping center; perception by residential
tenants of the safety, convenience and attractiveness of an apartment building
or complex; the proximity and the number of competing shopping centers and
apartment complexes; the availability of recreational and other amenities and
the willingness and ability of the owner to provide capable management and
adequate maintenance. In addition, other factors may adversely affect the value
of a shopping center or apartment complex without necessarily affecting its
current revenues, including changes in government regulations, such as
limitations on hours of operation, changes in tax laws or rates and potential
environmental or other legal liabilities.
(b) Shopping Center Properties' Dependence on Anchor Stores
and Satellite Tenants
The Registrant's income and funds available for distribution would be
adversely affected if space in the Registrant's shopping center properties could
not be leased or if anchor store tenants or satellite tenants failed to meet
their lease obligations. The success of the Registrant's investment in the
shopping center properties is dependent upon the success of the tenants leasing
space therein. Unfavorable economic, demographic or competitive conditions may
adversely affect the financial condition of tenants and consequently, the lease
revenues and the value of the Registrant's investments in the shopping center
properties . If the sales of stores operating in the Registrant's shopping
center properties were to decline due to deteriorating economic conditions,
tenants may be unable to pay their base rents or meet other lease charges and
fees due Registrant. In addition, any percentage of sales provisions of a lease,
particularly food supermarkets, could be rendered moot. In the event of default
by a tenant, the Registrant might suffer a loss of rent and experience
extraordinary delays while incurring additional costs in enforcing its rights as
landlord.
<PAGE>
(c) Renewal of Leases and Reletting of Space
(i) There is no assurance that the Registrant will be able to retain
tenants in its shopping centers upon expiration of their leases. The Registrant
will be subject to the risks that, upon expiration of leases for space located
in the Registrant's shopping center properties, the premises may not be relet or
the terms of reletting (including the cost of concessions to tenants) may be
less favorable than current lease terms. If the Registrant were unable to
promptly relet all or a substantial portion of this space or if the rental rates
upon such reletting were significantly lower than expected rates, the
Registrant's net income and ability to make expected distribution to
shareholders may be adversely affected.
(ii) There are no leases which Registrant considers material or
significant in terms of any single property or Registrant's portfolio which
expire during fiscal year 1998.
(d) Illiquidity of Real Estate Investments; Possibility that
Value of the Registrant's Interests may be less than its
Investment
Equity real estate investments are relatively illiquid. Therefore, the
ability of the Registrant to vary its portfolio in response to changed economic,
market or other conditions is limited. Beyond general illiquidity, the
Registrant's interest in Westwood Hills, LLC is also subject to transfer
constraints imposed by the Operating Agreement for the Limited Liability Company
and by the fact there is a limited market for the Registrant's interest in the
Limited Liability Company. Transfer of Registrant's interest in the Westwood
Hills, LLC is further restricted by the fact that the interest in the Limited
Liability Company was not registered pursuant to any applicable Federal or State
Securities Laws.
If the Registrant were compelled to liquidate its real estate and its
holding in Westwood Hills, LLC, the value of such assets would also likely be
diminished if a sale of all or substantially all of the assets of the Registrant
was required in a limited time frame. The proceeds to the Registrant from the
sale of such assets might be less than the Registrant's current investment in
those assets.
(e) Inability to Obtain Financing
The Registrant may or may not be able to obtain financing for
improvements, capital expenditures, acquisitions, development of its properties
or expansion thereof on terms which are acceptable to the Registrant. In such
event, Registrant might elect to defer such projects rather than to proceed on
terms which are unfavorable.
(f) Leverage; No Limitation on Debt; Possible Inability to
Refinance Balloon Payments on Mortgage Debt
The Registrant has incurred and may continue to incur, indebtedness
(secured and unsecured) in furtherance of its activities. Except for
Registrant's vacant land, together with the shopping centers located in
Westwood, New Jersey and Frederick, Maryland, there is a blanket mortgage lien
covering all of the Registrant's apartment properties and retail/commercial
properties as a result of the Line of Credit with Summit Bank. (See Item 2(B)(b)
at Page 24 hereof). Neither the Declaration of Trust or any policy statement
formally adopted by the Board of Trustees limits either the total amount of
indebtedness or the specified percentage of indebtedness (based on the total
<PAGE>
capitalization of the Registrant) which may be incurred. The Board of Trustees
of the Registrant has decided to increase the level of debt which the Registrant
will sustain over the level of indebtedness in the past. As described in Item
1(C)(d) (i) at page 9 hereof, the Registrant completed the purchase of Patchogue
Plaza on December 22, 1997. The purchase was financed by the Registrant securing
a mortgage in the amount of $7,500,000. The mortgage is due January 1, 2005 and
bears interest at the rate of 7.375% Payments of principal and interest for the
mortgage was, however, calculated as if the mortgage had a twenty-five (25) year
term. As a result, on January 1, 2005 there will be a balloon payment due of
$6,559,253.80. In addition, the Registrant completed the construction of
Franklin Crossing increasing the leasable space at the center from approximately
33,320 square feet to approximately 87,041 square feet. The construction of
Franklin Crossing was accomplished, in part, by the Registrant drawing upon its
Line of Credit with Summit Bank.
The Registrant, on December 16, 1997, entered into a mortgage in the
amount of $11,100,000 from the Federal Home Loan Mortgage Corporation secured by
its apartment complex known as "Berdan Court" located in Wayne, New Jersey. The
mortgage has a term of twelve (12) years. The mortgage payments of principal and
interest were, however, calculated as if the mortgage had a term of thirty (30)
years. As a result, a balloon payment will be due at the time the mortgage
expires. The mortgage bears interest at the rate of 7.29% with monthly payments
of principal and interest of $76,022.95.
The Registrant on January 12, 1998, refinanced its shopping center
located in Westwood, New Jersey. The new mortgage is in the amount of
$10,600,000 with a term of fifteen (15) years and bears interest at the rate of
7.38%. At the time of the closing for the new mortgage the old mortgage was paid
off. The old mortgage had a principal balance of approximately $5,700,000 at the
time of the closing. Payments of principal and interest for the mortgage will be
calculated as if the mortgage had a term of thirty (30) years. As a result, a
balloon payment of $7,984,066.09 will be payable on the mortgage due date of
February 1, 2013.
As a result of the recent purchase of Patchogue Plaza and the above
described mortgage transactions, the Registrant will be more highly leveraged
than it has been in the past, resulting in an increased risk of default on the
obligations of the Registrant and in an increase in debt service requirements
that could adversely affect the financial condition and results of the
operations of the Registrant.
The Registrant may be required to borrow money and mortgage its
properties to fund any shortfall of cash necessary to meet the Code's
distribution requirements for the maintenance of REIT status. The resulting
interest expense and debt amortization with respect to any borrowings, including
borrowings under the Line of Credit could negatively affect the Registrant's
cash available for distribution. If the Registrant defaults on any loan secured
by a mortgage or mortgages on its property or properties, the lenders may
exercise their remedies, including foreclosure on such property or properties.
In that event, the Registrant could lose its investment in such property or
properties.
Payment obligations on mortgages and other indebtedness generally are
not reduced if the economic performance of any of the Registrant's properties
declines. If any such decline occurs, the Registrant's income and funds
available for distribution would be adversely affected.
<PAGE>
As discussed in Item 2 B at Pages 23-24, the Registrant has a series of
mortgages which will require balloon payment. The Registrant has not established
a cash reserve sinking fund and does not expect to have sufficient funds from
operations to make the balloon payments when due under the terms of the
mortgages for its shopping centers located in Frederick, Maryland, Westwood, New
Jersey and Patchogue Plaza or for Berdan Court described above.
In addition, Registrant holds a forty (40%) percent interest in the
Westwood Hills, LLC which owns the Westwood Hills Apartment Complex. The LLC
has, similarly, made no provision to reserve funds to pay the USG Mortgage when
its balloon payment is due in 2002. The Registrant and the LLC intend to
refinance such debt at or before maturity.
There can be no assurance, however, that the Registrant or the Westwood
Hills, LLC will be able to refinance such indebtedness or to refinance the
properties on terms which are as favorable as the current mortgages. An
inability to make such balloon payments when due would permit the mortgage
lender to foreclose on such properties, which could have a material adverse
effect on the Registrant. Registrant is confident, however, based upon the
Registrant's financial resources and assets and the present market conditions,
that it will be able to refinance such indebtedness on terms which are
satisfactory. In addition, interest rates on any debt issued to refinance such
mortgage debt may be higher than the rates on the current mortgages, which could
adversely affect funds from operations available for distribution.
In addition, the Line of Credit which the Registrant depends upon to
provide financing is currently scheduled to expire on May 31, 1998. In the
event, the Line of Credit was not extended beyond May 31, 1998, the Registrant
would seek to secure a new funding source by: (a) securing an alternate Line of
Credit; (b) securing a substantial amount of capital through private or
institution sources whether secured or unsecured; or (c) secure additional
capital through a stock offering.
Realization of any of the foregoing contingencies could have a material
adverse impact on the Registrant's net income and financial condition. The
Registrant believes that a risk of mortgage default to be minimal. The
Registrant has the ability to draw upon its Line of Credit or, in the
alternative, to mortgage other properties which are currently not burdened with
a mortgage to raise additional capital. The Registrant would, however, be
required to secure the consent of Summit Bank to: (a) release of such property
from the lien filed to secure the Line of Credit or (b) subordinate its Line of
Credit to any such refinancing. In addition, the Registrant could, after
compliance with applicable Federal and State securities law, issue additional
shares of stock or debt instruments to raise additional capital.
(11) Research and Development Activities
Registrant conducts no research activities relating to the development
of new products.
(12) Impact of Governmental Laws and Regulations on
Registrant's Business
In recent years, both federal and state governments have become
increasingly concerned with the impact of real estate construction and
development programs upon the environment. Environmental legislation affects the
cost of selling real estate, the cost to develop real estate and the risks
associated with purchasing real estate.
<PAGE>
Under various federal, state and local environmental laws, statutes,
ordinances, rules and regulations, an owner of real property may be liable for
the costs of removal or remediation of certain hazardous or toxic substances at,
on, in or under such property, as well as certain other potential costs relating
to hazardous or toxic substances (including government fines and penalties and
damages for injuries to persons and adjacent property). Such laws often impose
such liability without regard to whether the owners knew of, or were responsible
for, the presence or disposal of such substances. Such liability may be imposed
on the owner in connection with the activities of any operator of, or tenant at,
the property. The cost of any required remediation removal, fines or personal or
property damages and the owner's liability therefore could exceed the value of
the property and/or the aggregate assets of the owner. In addition, the presence
of such substances, or the failure to properly dispose of or remediate such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral, which, in turn, would
reduce the Registrant's revenues and ability to make distributions.
A property can also be negatively impacted by either physical
contamination or by virtue of an adverse effect upon value attributable to the
migration of hazardous or toxic substances, or other contaminants that have or
may have emanated from other properties.
The full impact of these environmental laws on the Registrant's
operations cannot be fully assessed at this time. Nevertheless, the Registrant
is aware of the following environmental matters affecting its properties:
(a) Vacant Land Located in Rockaway Township, N.J.
The property located in Rockaway Township contains wetlands and
associated transition areas. Pursuant to New Jersey law, transition areas may
not be developed. The Registrant has not formally determined the full impact
that the wetlands and associated transition areas will have on the development
of the property, pursuant to applicable laws and regulations of New Jersey.
However, it is believed that future development of the property will not be
substantially restricted as a result of the presence of wetlands and the
associated transition areas.
Under the current zoning ordinances, the property can be developed for
residential use only. Registrant has no present plan to develop the property.
Any development would be subject to all then applicable governmental rules and
regulations.
(b) Vacant Land Located in South Brunswick, N.J.
The Registrant owns thirty-three (33) acres of land located in South
Brunswick, New Jersey which is presently leased to third parties for farm
purposes (the "South Brunswick Property").
The South Brunswick Property is situated adjacent to the J.I.S.
Landfill (the "Landfill") which is listed on the National Priority List for
cleanup activities under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980. The Landfill has been the subject of both State and
Federal environmental cleanup efforts. Registrant has verified that there is no
present evidence that the South Brunswick Property has been negatively impacted
by the migration of contaminants from the Landfill. The groundwater below the
South Brunswick Property is, however, the subject of State supervised cleanup
efforts.
<PAGE>
The Registrant does not believe that future development of the South
Brunswick Property will be limited by the cleanup effort since the groundwater
is not the source of drinking water at the site. Any development would, however,
be subject to an environmental audit which would include an inquiry into the
level of pesticides present because of its current farm use. No such
environmental audit has been conducted.
(c) Westwood Plaza Shopping Center, Westwood, N.J.
This property is in a HUD Flood Hazard Zone and serves as a local flood
retention basin for part of Westwood. The Registrant does not maintain flood
insurance for the subject property. Any reconstruction of that portion of the
property situated in the flood hazard zone is subject to regulations promulgated
by the New Jersey Department of Environmental Protection ("NJDEP") which may
require extraordinary construction methods.
(d) Franklin Crossing, Franklin Lakes, N.J.
The new Franklin Crossing Shopping Center (the "Center") was completed
during the summer of 1997. The Grand Union has occupied its store since August
1, 1997 and has been open to the public since October 12, 1997.
Except for the completion of a 3,000 square foot out building which
will be leased to a bank and various landscaping work, the bulk of the
construction and other improvements have been completed.
A historical discharge of hazardous materials was recently discovered
at the Center and said discharge has been reported to the New Jersey Department
of Environmental Protection ("NJDEP") in accordance with applicable regulations.
The Registrant anticipates, at the present time, that: (a) the
historical discharge will have no significant impact upon the operations at the
Center; (b) the discharge materials appear to be isolated; (c) it will be
required to monitor the discharge; and (d) that the cost of the investigation
and monitoring will not be material.
The Registrant intends to obtain a Classification Exception Area for
groundwater use restriction from the NJDEP pursuant to its Memorandum of
Agreement Program after completion of its environmental study of the historical
discharge.
(e) Other
The State of New Jersey has adopted an underground fuel storage tank
law and various regulations which impact upon the Registrant's responsibilities
with respect to underground storage tanks maintained on its properties. The
Registrant does have underground storage tanks located on two (2) of its
properties used in connection with heating of apartment units.
The Registrant periodically visually inspects the location of each
underground storage tank for evidence of any spills or discharges. Based upon
the foregoing, the Registrant knows of no underground storage tanks which are
discharging material into the soil at the present time. Current state law does
not require the Registrant to submit its underground storage tanks to tightness
testing. The Registrant has conducted no such tests.
<PAGE>
The Registrant has not conducted environmental audits for any of its
properties except for its shopping centers located in Frederick, Maryland,
Patchogue, New York and Franklin Lakes, New Jersey. In addition, an
environmental audit was completed in connection with the refinancing for both
Berdan Court and Westwood Plaza. Westwood Hills, LLC did conduct a full
environmental audit prior to its purchase of the Westwood Hills Apartment
Complex.
(13) Employees
Registrant, as of October 31, 1997, has no full-time employees. The
Registrant has eight (8) Trustees and one (1) Executive Secretary/Treasurer who
are not full-time employees.
Hekemian & Co., Inc. ("Hekemian & Co.") is employed by the Registrant
as its managing agent, pursuant to the Management Contract. A number of Hekemian
& Co. employees are actively engaged in the management of Registrant's
properties pursuant to Hekemian & Co., Inc.'s duties as managing agent. In
addition, Hekemian & Co. employs various superintendents and other personnel who
perform various services at the Registrant's properties. Pursuant to the
Management Contract the Registrant reimburses Hekemian & Co. for salaries,
hospitalization, workmen's compensation insurance and payroll taxes for
superintendents and other staff, including secretarial staff, for work
associated with its properties.
Except as noted in subparagraph (d) above, all of the environmental
reports secured by the Registrant have revealed no environmental condition on
its properties which require remediation pursuant to any applicable State or
Federal law or regulation.
(D) Financial Information about Foreign and Domestic Operations
and Export Sales
Registrant does not engage in operations in foreign countries and it
does not derive any portion of its sales or revenues from customers in foreign
countries.
<PAGE>
ITEM 2 DESCRIPTION OF THE PROPERTY
(A) Portfolio of Investments
The following chart sets certain information relating to each of the
Registrant's investments. In addition to the specific mortgages which may be
indicated below, the Registrant's properties, except all vacant land together
with the shopping centers located in Westwood, New Jersey and Frederick,
Maryland and the Registrant's 40% interest in Westwood Hills, LLC are subject to
a lien from Summit Bank for the Line of Credit in the face amount of $25
million.
<TABLE>
<CAPTION>
APARTMENT PROJECTS: AS of October 31, 1997
Mortgage
Balance
Property and Year No. of Occupancy
Location Acquired Units Rate (000's)
- -------- -------- ----- ---- -------
<S> <C> <C> <C> <C>
Lakewood Apts.
Lakewood, N.J. 1962 40 87.5% None
Palisades Manor
Palisades Pk., N.J. 1962 12 91.7% None
Grandview Apts.
Hasbrouck Heights,
N.J. 1964 20 80.0% None
Heights Manor
Spring Lake Heights,
N.J. 1971 79 97.5% $125
Hammel Gardens 1972 80 93.8% None
Maywood, N.J.
Sheridan Apts.
Camden, N.J. 1964 132 89.4% None
Steuben Arms
River Edge, N.J. 1975 100 98.0% None
Berdan Court
Wayne, N.J. 1965 176 96.0% None(1)
Westwood Hills,
LLC(2) 1994 210 98.1% $10,192
</TABLE>
- --------
(1) On December 16, 1997, the Registrant closed on a mortgage in the amount of
$11,100,000 which was secured by Berdan Court all as described in Item 2
(B)(a)(iv) at page 23.
(2) Registrant holds a forty (40%) percent interest in the Westwood Hills, LLC.
<PAGE>
The above listed apartment properties are subject to various rent
control ordinances summarized as follows:
Rent Control Ordinance Summary
Wayne: (Berdan Court)
Renewals based on CPI figures given monthly by Township which
have averaged approximately 2.5% on an annual basis. Full
vacancy decontrol.
Hasbrouck
Heights: (Grandview Apartments)
Renewals based on five (5%) percent annual increase. Full
vacancy decontrol.
Maywood: (Hammel Gardens)
Renewals based on a 4.25% annual increase. Partial decontrol
based on highest rent for similar type apartment.
Spring Lake
Heights: (Heights Manor)
Renewals based on a 4.5% annual increase. Full vacancy
decontrol.
Lakewood: (Lakewood Apartments)
Renewals based on a 6.5% annual increase.
Palisades
Park: (Palisades Manor)
All leases which are renewed may be increased by four (4%)
percent on an annual basis. In addition, Registrant may lease
any unit which is vacated to a new tenant at the higher of (a)
the then current rent received for a similar unit; or (b) an
increased rent based upon four (4%) percent above the last
rent charged for such unit.
Camden: (Sheridan Apartments)
Renewals based on Consumer Price Index with a maximum six (6%)
percent annual increase. The permitted increase for 1997 was
2.2%. In the event of a vacancy, the Landlord is permitted to
increase the rent of the vacant unit to the highest rent then
being charged in the apartment complex.
River
Edge: (Steuben Arms)
Renewals based on a four (4%) percent annual increase. Full
vacancy decontrol.
Westwood: No rent control is in effect.
<PAGE>
<TABLE>
<CAPTION>
SHOPPING CENTERS: As of October 31, 1997
Mortgage
Approximate Balance or
Property and Year Square Occupancy Bank Loan
Location Acquired Feet Rate (000's)
- -------- -------- ---- ---- -------
<S> <C> <C> <C> <C>
Franklin Lakes,
N.J. 1966 87,041 47.3%(3) None
Westwood, N.J. 1988 173,854 97.8% $ 5,181
Frederick,
Maryland 1992 256,620 100% $19,123
Patchogue,
New York 1997 63,932 100%(4) $ 7,500
<CAPTION>
COMMERCIAL PROPERTY
Mortgage
Balance or
Commercial Year Square Bank Loan
Location Acquired Feet Tenant (000's)
- -------- -------- ---- ------ -------
<S> <C> <C> <C> <C>
Glen Rock 1962 4800 1 Tenant, None
100% of
Property
</TABLE>
- -------------
(3) The Franklin Lakes Shopping Center was effectively closed for operations on
or about November 1, 1996. The construction of the new Center was completed
in August, 1997. The new Center contains approximately 87,041 square feet
of leasable space. Grand Union occupied approximately 41,160 square feet as
of August 1, 1997.
The Registrant is actively engaged in an effort to secure tenants for the
balance of the Center's space. As of October 31, 1997 no space at the
Center was leased except for the Grand Union space.
(4) The Registrant purchased the Patchogue, New York Center on December 22,
1997; the Center is occupied by a single tenant, Pathmark, all as described
in Item 1 (C)(d)(i) at page 9.
<PAGE>
<TABLE>
<CAPTION>
VACANT LAND
Mortgage
Acreage Balance or
Property and Current for Bank Loan
Location Acquired Use Parcel (000's)
- -------- -------- --- ------ -------
<S> <C> <C> <C> <C>
Franklin Lakes 1966 Contiguous
to Franklin
Lakes Shop-
ping Center
(Planned for
future
development) 4.27 None
Rockaway 1964/1963 None 19.26 None
South Brunswick 1964 Leased as
farmland
qualifying
for state
farmland
assessment
tax treatment 33 None
</TABLE>
<PAGE>
(B) Description of Mortgage Liens filed as against Registrant's
Investment Properties
The Registrant has borrowed funds from various third party
institutional lenders which are secured by its investment properties, as
follows:
(a) Properties owned by Registrant which secure real property
mortgages.
The Registrant, as of October 31, 1997, owed a total of approximately
$24,429,000 which indebtedness was secured by the following described mortgages:
(i) Spring Lake Heights, New Jersey. Spring Lake Heights is a
seventy-nine (79) unit apartment complex which secures a first mortgage
having a principal due as of October 31, 1997 of $125,000. The mortgage
is held by Summit Bank, the successor in interest to UJB. The mortgage
is self-liquidating and shall be paid, in full, as of April 1999. The
mortgage bears interest at the rate of 7.0%.
(ii) Westwood, New Jersey. The Westwood, New Jersey property is a
shopping center with approximately 173,854 square feet of leasable
space.
The shopping center is used to secure a current mortgage with a
principal balance of approximately $5,169,396 as of January 1, 1998
with interest at the rate of 10% per annum. The monthly principal and
interest payments of the mortgage are $55,287.01.
(iii) Frederick, Maryland. The Frederick, Maryland property is a
shopping center with approximately 256,620 square feet of leasable
square feet.
On June 30, 1997, the Registrant secured a new mortgage for the center
in the amount of $19,200,000. The mortgage bears interest at the rate
of 8.31% and has a term of ten (10) years. The mortgage is being
amortized, however, as if it was a twenty-five (25) year mortgage.
As a result, there will be a substantial balloon payment due, of
$15,670,963 on July 1, 2007.
The prior mortgage was in the amount of $17,885,847 at the time the
present mortgage was secured. The prior mortgage was paid, in full, as
of June 30, 1997.
In addition, the following mortgages were secured after October 31,
1997:
(iv) Wayne, New Jersey. The Wayne, New Jersey property consists of a
176 unit apartment complex known as "Berdan Court". The Registrant
entered into a new mortgage in the amount of $11,100,000 with the
Federal Home Loan Bank on December 16, 1997. The mortgage bears
interest at the rate of 7.29% and has a term of twelve (12) years. The
payment schedule has been fixed as if the mortgage had a term of thirty
(30) years. As a result, there will be a balloon payment due when the
mortgage is due in the amount of $9,151,965.07.
<PAGE>
(v) Patchogue, New York. As described in Item 1 (C)(d)(i), the
Registrant purchased a shopping center in Patchogue, New York on
December 22, 1997 for a purchase price of $10,400,000. The purchase was
financed, in part, by the Registrant securing a purchase money mortgage
in the amount of $7,500,000. The mortgage bears interest at the rate of
7.375% and is due on January 1, 2005. The mortgage is being amortized,
however, as if it was a twenty-five (25) year mortgage. As a result,
there will be a substantial balloon payment due of $6,559,253.80 on
July 1, 2005.
(vi) Westwood, New Jersey. The Registrant closed on a new mortgage in
the principal amount of $10,600,000 which will bear interest at the
rate of 7.38% on January 12, 1998. The mortgage will be for a term of
fifteen (15) years with payments being based upon a thirty (30) year
payment schedule. As a result, a balloon payment of $7,984,066.09 will
be due on the mortgage's due date. The monthly payments of principal
and interest will be $73,247.69.
(b) Registrant's Line of Credit
The Registrant has a $20 million Line of Credit with Summit Bank (See
Item 1 C (3) at Pages 9 and 10 hereof). The Line of Credit is secured by a
blanket mortgage lien filed as against all of the Registrant's developed
properties except the Spring Lake Heights, New Jersey, Westwood, New Jersey and
Frederick, Maryland properties which support individual mortgages described
above. In addition, Summit Bank's mortgage lien has not been filed as against
any of the vacant property held by the Registrant in Rockaway, New Jersey and
South Brunswick, New Jersey.
(c) Westwood Hills, LLC
The Registrant holds a forty (40%) percent interest in Westwood Hills,
a New Jersey Limited Liability Company (the "LLC") which owns a 210 unit
apartment complex located in Westwood, New Jersey.
The Westwood Hills, LLC purchased the Westwood Hills Apartment Complex
in 1994 for a purchase price of $15,389,000 including closing costs. At the time
of the purchase, the LLC secured a short term mortgage in the amount of
$9,520,000 from United Jersey Bank.
In September 1995 Westwood Hills, LLC refinanced Westwood Hills
Apartment Complex. A new mortgage in the amount of $10,500,000 was secured from
USG Annuity (the "USG Mortgage"). The USG Mortgage is for a term of seven (7)
years with a twenty-five (25) year payment, the interest rate is 7.80% per
annum. The principal balance of the mortgage is $10,192,000 as of December 31,
1997.
At the end of the seven (7) year term of the USG Mortgage, a
substantial balloon payment will be due in the amount of $9,230,965. The LLC has
made no provision to reserve cash to meet this balloon payment obligation. (See,
Item 7 Liquidity and Capital Resources). Westwood Hills, LLC intends to
refinance the apartment complex prior to the time the balloon payment is due on
the then prevailing terms and conditions which could be less than favorable than
the present mortgage terms and conditions.
<PAGE>
ITEM 3 LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Registrant
is a party of which any of its properties is the subject. There is, however,
ordinary and routine litigation involving the Registrant's business including
various tenancy and related matters.
There are no legal proceedings concerning environmental issues with
respect to any property owned by the Registrant.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during
the Registrant's fourth quarter of fiscal year 1997.
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS.
(A) The following tables set forth, for the periods indicated, are the highest
and lowest bid and asked quotations in the over-the-counter market NASDAQ
Bulletin Board. It should be noted that over-the-counter quotations reflect
inter-dealer prices, without retail markup, markdown or commission and may not
necessarily represent actual transactions. There is no established public
trading market, the trading is sporadic and in small volumes, all as set forth
below.
<TABLE>
<CAPTION>
Number of
Calendar Bid Prices Asked Prices Shares
Quarter High Low High Low Sold
- ------- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C>
1997
1st Quarter 21.875 21.50 22.75 22.50 8,700
2nd Quarter 22.75 22.25 24.00 23.50 10,720
3rd Quarter 24.50 24.00 25.50 25.00 2,900
4th Quarter 25.125 25.0125 26.50 25.50 20,700
<CAPTION>
Calendar Bid Prices Asked Prices Shares
Quarter High Low High Low Sold
- ------- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C>
1996
1st Quarter 22.00 22.00 23.00 22.75 4,400
2nd Quarter 22.00 21.50 23.00 22.50 600
3rd Quarter 21.50 19.00 22.50 22.00 2,400
4th Quarter 21.875 21.50 22.50 22.00 6,200
</TABLE>
<PAGE>
The source of the foregoing is Janney Montgomery Scott, Inc., members
of New York and other principal exchanges, 505 Main Street, Hackensack, New
Jersey.
(B) There is one class of stock of beneficial interest with no par value. A
total of 1,559,788. shares of beneficial interest outstanding at the close of
Registrant's last fiscal year ended October 31, 1997. As of December 31, 1997,
the Registrant's shares were held by 375 Shareholders.
The computation of the number of holders of Registrant's shares of
beneficial interest was based upon a report of shareholders which was prepared
by the Registrant's transfer agent as of December 31, 1997.
<PAGE>
ITEM 6 SELECTED FINANCIAL DATA
As of or for the Year Ended October 31:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------- ------ ------ ------- -------
(In Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Operating data:
Revenue $11,698 $11,417 $11,124 $10,335 $ 9,952
Expenses 8,735 8,755 8,338 7,952 7,657
------- ------ ------ ------- -------
Net income $ 2,963 $ 2,662 $ 2,786 $ 2,383 $ 2,295
======= ======= ======= ======= =======
Balance sheet
data:
Total Assets $59,233 $51,674 $51,838 $52,398 $51,356
======= ======= ======= ======= =======
Long-term
obligations $24,429 $23,609 $24,110 $24,564 $24,963
======= ======= ======= ======= =======
Per share
data:
Earnings
per share $ 1.90 $ 1.71 $ 1.79 $ 1.53 $ 1.47
======= ======= ======= ======= =======
Dividends
per share $ 1.90 $ 1.71 $ 2.53 $ 1.62 $ 1.56
======= ======= ======= ======= =======
</TABLE>
All of the financial data set forth above has been stated for 1997 and restated
for years 1993-1996 using the equity method of accounting for Westwood Hills,
LLC all as hereinafter set forth in Item 7 (A) at page 27.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(A) Liquidity.
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.
Total revenues for the fiscal year ended October 31, 1997, were
$11,698,000 as compared to $11,417,000 for the same period in 1996. The total
expenses decreased from $8,743,000 in 1996 to $8,723,000 for 1997.
<PAGE>
The Registrant's net income for the fiscal year 1997 was $2,963,000 or
$1.90 per share as compared to a net income of $2,662,000 for fiscal year 1996
or $1.71 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 filing by the Registrant of a 10K/A
on June 24, 1997, the Registrant had prepared its Financial Statements with
respect to Westwood Hills, L.L.C. on a consolidated basis. Since the Registrant
does not, however, maintain unilateral control over the Westwood Hills, L.L.C.
it was determined that the equity method of accounting would be more
appropriate. The equity method was adopted retroactively. As a result, the
1993-1996 financial statements have been restated to reflect the foregoing
accounting change.
The Registrant has used the equity method of accounting with respect to
Westwood Hills, L.L.C. for fiscal year 1997.
Cash flow from operations together with, debt financing secured by real
property mortgages and the Line of Credit have been the principal sources of
cash used to fund the Registrant's operations over the last three (3) years.
The cash flow from operations has been sufficient to meet all current
operational needs of the Registrant.
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 mortgage
obligations. 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.
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.
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, 1997, the sum of $11,429,000
was outstanding under the Line of Credit.
<PAGE>
Since October 31, 1997, and the receipt of mortgage funds from both
Berdan Court, Wayne, New Jersey and Westwood Plaza, Westwood, New Jersey
described at Item II(B), (a) (iv) and (vi), page 23-24, the Line of Credit has
been paid down to $1,549,610 as of January 22, 1998.
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.
As described in Item 2(B)(a)(iii) at page 23, the Registrant refinanced
its Frederick, Maryland shopping center in June, 1997. In addition, Registrant
refinanced the Westwood, New Jersey shopping center on January 12, 1998 as
described in Item 2(B)(a)(vi) at page 24. The Registrant also secured a mortgage
for its apartment complex in Wayne, New Jersey, which property had not
previously been mortgaged, on December 16, 1997.
On December 22, 1997, the Registrant purchased a shopping center in
Patchogue, New York financed, in part, by securing a purchase money mortgage in
the amount of $7.5 million.
The Registrant anticipates that the increased mortgage debt described
above will be met, in part, by the new revenues which will be realized from
Patchogue Plaza. As the Franklin Lakes Shopping Center is leased to third
parties, the center will also offset the increased monthly mortgage obligations
due to the refinancing of the Westwood, New Jersey Shopping Center and the new
mortgage secured for Berdan Court. As of January 22, 1998, the Registrant has
used the mortgage proceeds realized from the refinancing of the Westwood, New
Jersey Shopping Center of approximately $5,000,000 to reduce the outstanding
balance on the Line of Credit which existed as of October 31, 1997 as described
above.
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.
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 reconstruction of the Franklin
Lakes Shopping Center as described in Item 1(C)(d)(i) and (ii) at page 9 hereof.
As of December 31, 1997 institutional money is available at relatively
<PAGE>
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.
Capital Resources.
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.
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, 1997, result in increased costs of operations; and (b) permanent mortgage
financing. Any increase in mortgage interest rates would necessarily increase
the costs of operations during fiscal 1998.
Subject to compliance with Federal and State Securities Laws, the
Registrant has the ability to issue additional shares of stock or debt
instruments to raise additional capital. Registrant does not anticipate that it
will be required to raise additional capital at the present time.
Results of Operations.
1. Fiscal Year 1997.
The rental income for fiscal year ended October 31, 1997 was $9,982,000
as compared to $9,589,000 for fiscal year 1996.
The rental income increase realized 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.
Total expenses were $8,723,000 for fiscal year 1997 when compared to
$8,743,000 for fiscal year 1996.
The Registrant completed the construction of its new shopping center
located in Franklin Lakes, New Jersey on or about August 1, 1997. The new center
will be known as "Franklin Crossing" and consists of approximately 87,041 square
feet of leasable space. The old center contained approximately 33,320 square
feet of leasable space.
Grand Union has leased approximately 41,160 square feet of the total
space available at Franklin Crossing. The Grand Union opened for operations on
October 12, 1997. Grand Union's lease payments commenced on that date.
The Registrant is in the process of leasing the balance of the space at
Franklin Crossing to third parties.
<PAGE>
During the demolition and construction of the new Franklin Lakes
Shopping Center various costs were incurred by the Registrant. In accordance
with generally accepted accounting principles, the costs of construction were
capitalized except that expenses incurred after October 31, 1996 through
December 31, 1996 were not capitalized. 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 decreased from $1,739,000 in 1996 to $1,692,000 in
1997. The Registrant continues to vigorously appeal real estate assessments
where appropriate in an effort to assure that its properties are fairly assessed
for real estate tax purposes.
The Registrant expenses had increased at a faster rate than rental
revenue for the years 1994 through 1996. Registrant anticipates that the
increase in expense will moderate as evidenced by the decrease in the total
expenses for fiscal year 1997.
2. Fiscal Year 1996.
The Registrant's net income for fiscal year 1997 was $2,963,000 or
$1.90 per share as compared to $2,662,000 for fiscal year 1996 or $1.71 per
share.
The financial results for 1996 were depressed due to several factors.
First, the Franklin Lakes Shopping Center was in the process of being closed for
construction of the new center. As a result, Registrant did not renew leases as
they expired. The old center was, as a practical matter, closed for the last
quarter of 1996. Second, operating expenses experienced a significant increase
due to increased snow removal costs. Third, a number of properties sustained
increases in real property tax.
3. Fiscal Year 1995.
The Registrant's net income for fiscal year 1995 was $2,786,000 or
$1.79 per share as compared to $2,662,000 for fiscal year 1996 or $1.71 per
share.
In 1995 the Registrant was operating its Franklin Lakes Shopping Center
at near full occupancy. In 1996, however, leases for its tenants at Franklin
Lakes were not renewed based upon the anticipated closing of the existing center
and the construction of Franklin Crossing. As a result of the foregoing, the net
income during 1996 was depressed. It is anticipated that the financial results
will improve as Franklin Crossing is rented to third parties. In addition, it is
anticipated that the acquisition of Patchogue Plaza in December, 1997 will have
a positive impact on the Registrant's financial results for fiscal year 1998.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements in accordance with the provisions of Regulation
S-K are annexed hereto.
<PAGE>
ITEM 9 CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
There are no matters of disagreement on accounting and financial
disclosures as between the Registrant and J.H. Cohn, LLP required to be reported
pursuant to Regulation S-K. There has not been in either of the past two years
an adverse opinion or disclaimer of opinion, nor was any opinion qualified or
modified as to uncertainty, audit scope or accounting principles.
J.H. Cohn, LLP has acted as the Registrant's principal accountants and
auditors since December of 1991.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
(A) Identification of Trustees
<TABLE>
<CAPTION>
Expiration
Name Served Since Date of Term Age
- ---- ------------ ------------ ---
<S> <C> <C> <C>
Robert S. Hekemian 1980 May, 1999 66
Donald W. Barney 1981 May, 1998 56
John B. Voskian, MD 1968 May, 1999 73
Herbert C. Klein 1961 May, 2000 67
Nicholas A. Laganella 1969 May, 2000 79
Charles J. Dodge 1990 May, 1999 54
Alan L. Aufzien 1992 May, 1998 68
Ronald J. Artinian 1992 May, 1998 49
</TABLE>
(B) Identification of Executive Officers
<TABLE>
<CAPTION>
Name Served Since Position
- ---- ------------ --------
<S> <C> <C>
Robert S. Hekemian 1991 Chairman of the Board
John B. Voskian, MD 1968 Secretary
Donald W. Barney 1993 President
William R. DeLorenzo, Jr. 1974 Executive Secty./Treasurer
</TABLE>
All of the Officers of the Registrant serve at the pleasure of the
Board of Trustees.
The Officers devote the following proximate portions of their business
activities to the Trust:
Mr. Hekemian.........................10%
Mr. Barney...........................5%
Dr. Voskian..........................Less than 5%
Mr. DeLorenzo........................5%
<PAGE>
(C) Identification of Certain Significant Employees
Registrant has no employees. Hekemian & Co. serves as the managing
agent for the Registrant and manages all of its properties. Hekemian & Co.
retains the services of a number of individuals who work on a full or part time
basis in connection with Registrant's properties. The Registrant reimburses
Hekemian & Co. for certain expenses related to such employees.
(D) Identification of Certain Significant Family Relationships
Mr. Hekemian is the brother-in-law of Dr. Voskian. Mr. Barney was
formerly the brother-in-law of Mr. DeLorenzo. There are no other family
relationships between any other Trustees or Executive Officers.
(E) Business Experience
(1) Robert S. Hekemian - Mr. Hekemian is the Chief Executive Officer
and Chairman of the Board of Hekemian & Co. a real estate brokerage firm. He is
a director of Summit Bank. Summit Bank is a banking institution with principal
offices in Princeton, New Jersey. He is also a director, partner and/or officer
of numerous private real estate corporations and partnerships. He has been
active in real estate for over forty-two (42) years.
(2) Donald W. Barney - Mr. Barney is Vice President and Treasurer of
Union Camp Corporation, a Virginia corporation with executive offices in Wayne,
New Jersey; director of Ramapo Financial Corp. a Bank holding company located in
Wayne, New Jersey. Mr. Barney is also a partner and director of several real
estate investment companies, partnerships and corporations.
(3) Dr. John B. Voskian - Dr. Voskian is a physician. He is also a
director and an officer of a number of private real estate companies. Dr.
Voskian is not currently practicing medicine.
(4) Herbert C. Klein - Mr. Klein is a director of the law firm of
Hannoch Weisman located in Roseland, New Jersey and Washington, D.C. Mr. Klein's
practice is devoted to real estate, corporate matters and government relations.
Mr. Klein is a former member of the United States House of Representatives for
the 8th Congressional District of New Jersey. Mr. Klein was formerly a member of
the law firm of Klein Chapman. Mr. Klein is also a former member of the New
Jersey legislature. He is a member of the Bars of New Jersey and the District of
Columbia, an attorney since 1956. He is a former member of the Board of Trustees
of Rutgers University.
Mr. Klein is a partner in Capital Formation Associates, a group of
venture capital investors. Mr. Klein is active in various civic, charitable and
business organizations.
Mr. Klein is also a director and partner in a number of private real
estate companies.
(5) Nicholas A. Laganella - Mr. Laganella is the President of P.T. & L.
Construction Company and a real estate investor on his own account.
(6) Charles J. Dodge - Mr. Dodge is the Chief Executive Officer of
Cronheim Mortgage Co. Mr. Dodge is also a partner in a real property development
company and is a real estate investor on his own account.
<PAGE>
(7) Alan L. Aufzien - Mr. Aufzien is a principal partner, Meadowlands
Basketball Association, t/a New Jersey Nets (Member of the National Basketball
Association), Chairman of New York Harbour Associates which is a real estate
developer, Treasurer and Partner of Capital Formation Associates, a group of
venture capital investors and operators, Chairman of Ral International, Ltd. and
is active in various civic and business organizations.
Mr. Aufzien is also a director of Rent A Wreck of America which is a
public corporation traded on the NASDAQ exchange.
(8) Ronald J. Artinian - Mr. Artinian was the Managing Director,
National Sales Manager at Smith Barney, Inc. as of October 31, 1997. Since that
date, however, he has retired from his position at Smith Barney in order to
pursue personal and other business interests.
(9) William R. DeLorenzo, Jr. - Mr. DeLorenzo is an attorney in private
practice as of counsel to the firm of Nowell Amoroso, P.A. His law office is
located in Hackensack, New Jersey. Mr. DeLorenzo is the former Chairman of the
New Jersey Commission on Capital Budget and Planning.
Directorships - Messrs. Klein, Hekemian, Laganella, Barney, Aufzien and
Artinian are Directors of closely held corporations and partnerships that own
real estate.
(F) Involvement in Certain Legal Proceedings
No Trustee or Officer of the Registrant has been the subject of a
petition in bankruptcy, criminal proceeding or order of a Court or governmental
agency barring him from participating in any commodities trading, security
transactions, type of business practice or any other practice set forth in
Section 229.401 subparagraph (f) of Regulation S-K.
<PAGE>
ITEM 11 EXECUTIVE COMPENSATION.
Set forth below is a Summary Compensation Table for each of the Registrant's
Officers and Trustees for the past five (5) fiscal years:
<TABLE>
<CAPTION>
Name and Fees Executive (1)
Office Held Year $ Committee Fee
- ----------- ---- ---- -------------
<S> <C> <C> <C>
A) OFFICERS
Robert S. Hekemian, 1997 5,000 None
Chairman 1996 5,000 None
President 1995 5,000 None
1994 3,800 None
1993 3,800 None
Donald W. Barney, 1997 5,000 None
President 1996 5,000 None
1995 5,000 None
1994 3,800 None
1993 1,900 None
Herbert C. Klein, 1997 None None
President 1996 None None
1995 None None
1994 None None
1993 None None
John B. Voskian, 1997 None None
Secretary 1996 None None
1995 None None
1994 None None
1993 None None
William R. DeLorenzo, Jr., 1997 10,500 6,400
Executive Secretary 1996 10,500 2,800
and Treasurer 1995 10,500 1,600
1994 9,300 None
1993 9,300 400
</TABLE>
- --------
1 Mr. DeLorenzo is not a Trustee. As the Executive Secretary and
Treasurer, he is a non-voting member of the Executive Committee and
received fees as set forth. The Trustee fees appear under the Trustee
listing, subparagraph B hereof.
The Registrant has determined that the base fee for all Trustees for
fiscal 1998 will be $5000 per year, the same fee as in 1997. In addition,
however, each of the Trustees and the Executive Secretary who attends regular or
special meetings of the Board of Trustees shall receive an additional sum of
$500 for each meeting attended. Registrant will also pay to each Trustee or the
Executive Secretary who attends a site visit to inspect a property being
reviewed, a fee of $500 together with actual and reasonable out-of-pocket
expenses.
<PAGE>
<TABLE>
<CAPTION>
Name and Fees
Office Held Year $ Committee Fee
- ----------- ---- ----- -------------
<S> <C> <C> <C>
B) TRUSTEES
Robert S. Hekemian 1997 5,500 6,000
1996 5,500 3,200
1995 5,500 1,600
1994 5,500 None
1993 5,500 400
Donald W. Barney 1997 5,500 6,800
1996 5,500 2,800
1995 5,500 1,600
1994 5,500 None
1993 5,500 400
John B. Voskian 1997 5,500 1,600
1996 5,500 2,400
1995 5,500 1,200
1994 5,500 None
1993 5,500 None
Herbert C. Klein 1997 5,500 6,800
1996 5,500 3,200
1995 4,583.33 1,600
1994 None None
1993 None None
Nicholas A. Laganella 1997 5,500 2,800
1996 5,500 2,000
1995 5,500 1,200
1994 5,500 None
1993 5,500 None
Charles J. Dodge 1997 5,500 3,200
1996 5,500 2,800
1995 5,500 1,200
1994 5,500 None
1993 5,500 None
Ronald J. Artinian 1997 5,500 5,600
1996 5,500 2,800
1995 5,500 2,400
1994 5,500 None
1993 5,500 400
Alan L. Aufzien 1997 5,500 6,400
1996 5,500 2,800
1995 5,500 1,200
1994 5,500 400
1993 5,500 None
</TABLE>
<PAGE>
The fee to be paid to the Chairman, President and Treasurer will
continue at the rate of $5,000.00 for fiscal year 1998.
No Officer or Trustee of the Registrant:
a) has any stock options to purchase stock of the
Registrant;
b) receives any prerequisites or other personal benefits,
security or property; and
c) is entitled to any long-term compensation of any kind
from the Registrant.
Registrant maintains an Executive Committee which consists of four (4)
Trustees and the Executive Secretary as a non-voting attendee. Members of the
executive committee and the Executive Secretary receive a fee of $500 for each
meeting attended except that the Chairman of the Executive Committee receives a
fee of $600.
Registrant maintains as Audit Committee which consists of three (3)
members of the Board of Trustees and the Executive Secretary as a non-voting
attendee. Members of the Audit Committee and the Executive Secretary receive a
$500 fee for each meeting attended except that the Chairman of the Executive
Committee receives a fee of $600.
Robert S. Hekemian was elected Chairman of the Board in 1991. Prior to
that time, he had served the Registrant as President.
Herbert C. Klein was elected President of the Registrant in 1991. Prior
to that time, he had not served the Registrant as an Officer. Mr. Klein had,
however, served as a Trustee prior to 1991. Mr. Klein had resigned as President
of the Registrant effective December 31, 1992 upon election to the United States
House of Representatives for the term ending January 4, 1995. Mr. Klein did not
receive any compensation from the Registrant for his service as a Trustee during
his two-year term as a U.S. Congressman.
Messrs. Artinian and Aufzien were elected to the Board of Trustees in
May, 1992. They were paid a partial fee for their services in that position by
the Registrant based upon the standard annual fee paid to all Trustees of
$5,500.
Donald W. Barney was elected President of the Registrant on May 24,
1993.
<PAGE>
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
<TABLE>
<CAPTION>
Amount of Shares
(A) Title of Class Beneficially Owned Percent of Class
-------------- ------------------ ----------------
<S> <C> <C>
Shares of beneficial 338,388.25 21.70%
interest held by the
Trustees and Officers
together with members
of their families who
are less than 21 years
of age
<CAPTION>
(B) Security Ownership of Management
Name of
Beneficial Amount of Percent of
Title of Class Owner Shares Owned Class
-------------- ----- ------------ -----
<S> <C> <C> <C>
Shares of beneficial
interest no par Robert S. Hekemian 5,095 0.33%
Shares of beneficial
interest no par Donald W. Barney 40,981 2.63%
Shares of beneficial
interest no par John B. Voskian 7,754 0.50%
Shares of beneficial
interest no par Herbert C. Klein 48,190 3.09%
Shares of beneficial
interest no par Nicholas A. Laganella 3,625 0.23%
Shares of beneficial
interest no par Charles J. Dodge 500 0.032%
Shares of beneficial
interest no par Ronald J. Artinian 73,267 4.58%
Shares of beneficial
interest no par Alan L. Aufzien 1,500 0.10%
Shares of beneficial
interest no par Wm. R. DeLorenzo, Jr. 3,563 0.228%
</TABLE>
The above listed shares includes only shares held in the name of the
Trustee or Officer.
(C) Registrant knows of no pledge of securities of the Registrant, the operation
of the terms of which may at a subsequent date result in a change in control of
the Registrant.
<PAGE>
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(A) Transactions with Management and others
(i) Hekemian & Co. serves as the managing agent for the Registrant's
properties and as a consultant to the Registrant. Robert S. Hekemian serves as
Chairman of the Board of Hekemian & Co., Inc. and is also a shareholder. The
following family members of Mr. Hekemian are Officers of Hekemian & Co. in the
position set forth opposite their names.
Samuel P. Hekemian - President
Robert S. Hekemian, Jr. - Executive Vice President
Bryan S. Hekemian - Vice-President and Secretary
David B. Hekemian - Vice-President and Treasurer
Serge Krikorian - Vice-President Insurance Department
Samuel Hekemian is the brother of Robert S. Hekemian. Robert S.
Hekemian, Jr., Bryan S. Hekemian and David B. Hekemian are the sons of Robert S.
Hekemian. Serge Krikorian is the brother-in-law of Robert S. Hekemian and Samuel
P. Hekemian.
Mr. Hekemian also serves on the Board of Directors of Summit Bank,
which holds a first mortgage on the Registrant's property located in Spring Lake
Heights as more fully described in Item 2 (B)(a)(i) at Page 23 hereof and has
issued the Line of Credit described in Item 1 (C) (3) at Pages 9 - 10 hereof.
(B) Certain Business Relationships
(i) On June 2, 1994, the Registrant purchased a forty (40%) percent
interest in Westwood Hills, LLC which is the owner of Westwood Hills Apartments.
The Westwood Hills, LLC purchased the apartment complex on June 2,
1994, pursuant to a Contract of Sale dated February 9, 1994, as amended,
immediately prior to the Registrant's purchase of its interest in the LLC. The
LLC does not own any property other than Westwood Hills Apartments.
Pursuant to the terms of an operating agreement, the Registrant is the
managing member of the LLC. The Registrant has retained Hekemian & Co. who is
currently serving as the managing agent for Westwood Hills, LLC.
The interests sold by the LLC to third parties, including the
Registrant, were not registered pursuant to either the Securities Exchange Act
of 1933 or with the New Jersey Bureau of Securities. As a result, the
Registrant's interest cannot be freely transferred. There is no current market
for the Registrant's interest in the LLC; the Registrant does not anticipate
that a market will exist for its interest in the future.
<PAGE>
The interest of each of the members of the LLC which includes certain
Trustees, their families and employees of Hekemian & Co. are as follows:
<TABLE>
<CAPTION>
Position Percentage Relationship Initial
With of With A Capital
Name Trust Interest Trustee Contribution
- ---- ----- -------- ------- ------------
<S> <C> <C> <C> <C>
Ronald J. Artinian Trustee 2.0% N/A $ 122,000.00
Nicholas J. Aynilian & None 0.75% Son-in-law $ 45,750.00
Elizabeth Ann Aynilian and daughter
Trustees for the Elizabeth of Serge
Ann Aynilian Irrevocable Krikorian,
Trust, Dated 1/1/91 Vice-President
Hekemian & Co.,
and niece of
Robert S.
Hekemian, Trustee
Donald W. Barney Trustee 4.0% N/A $ 244,000.00
Katherine A. Gambino None 1.0% Daughter of $ 61,000.00
John Voskian,
Trustee, and
niece of Robert
S. Hekemian, Trustee
Bryan S. Hekemian None 7.0% Son of Robert $ 427,000.00
S. Hekemian,
Trustee and Vice-
President of
Hekemian & Co.
Lisa Jann Hekemian None 5.0% Daughter of $ 305,000.00
Robert S.
Hekemian, Trustee
David B. Hekemian None 7.0% Son of Robert $ 427,000.00
S. Hekemian,
Trustee and Vice-
President of
Hekemian & Co.
Robert S. Hekemian Trustee 0.8% N/A $ 48,800.00
Robert S. Hekemian, Jr. None 7.0% Son of Robert $ 427,000.00
S. Hekemian,
Trustee and
Executive Vice-
President of
Hekemian & Co.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Position Percentage Relationship Initial
With of With A Capital
Name Trust Interest Trustee Contribution
- ---- ----- -------- ------- ------------
<S> <C> <C> <C> <C>
Robert Hekemian None 1.5% Beneficiary of $ 91,500.00
& Ann Krikorian, Trust is son of
Trustees f/b/o Samuel Hekemian,
Jeffrey John Hekemian President of
U.A.D. 1/24/78 Hekemian & Co.
and nephew of
Robert S. Hekemian,
Trustee
Robert Hekemian None 1.5% Beneficiary of $ 91,500.00
& Ann Krikorian, Trust is son of
Trustees f/b/o Samuel Hekemian,
Mark Steven Hekemian President of
U.A.D. 12/10/85 Hekemian & Co.
and nephew of
Robert S. Hekemian,
Trustee
Robert Hekemian None 1.5% Beneficiary of $ 91,500.00
& Ann Krikorian, Trust is son of
Trustees f/b/o Samuel Hekemian,
Peter Samuel Hekemian President of
U.A.D. 11/24/76 Hekemian & Co.
and nephew of
Robert S. Hekemian,
Trustee
Robert Hekemian None 1.5% Beneficiary of $ 91,500.00
& Ann Krikorian, Trust is son of
Trustees f/b/o Samuel Hekemian,
Richard Edward Hekemian President of
U.A.D. 9/1/83 Hekemian & Co.
and nephew of
Robert S. Hekemian,
Trustee
Samuel P. Hekemian None 0.7% President of $ 42,700.00
Hekemian & Co.
and brother of
Robert S. Hekemian,
Trustee
Albert A. Kapigian None 1.0% None $ 61,000.00
Shirlee Kerbeykian None 1.5% Wife of Edward $ 91,500.00
Kerbeykian, Senior
Vice-President of
Hekemian & Co.
Ronald F. Kistner None 0.5% Employee of $ 30,500.00
Hekemian & Co.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Position Percentage Relationship Initial
With of With A Capital
Name Trust Interest Trustee Contribution
- ---- ----- -------- ------- ------------
<S> <C> <C> <C> <C>
Herbert C. Klein Trustee 1.5% N/A $ 91,500.00
Krieger Family Trust None 1.5% Jacqueline Klein $ 91,500.00
Jacqueline Klein, Trustee is the wife of
Herbert C. Klein,
Trustee
Aimee Nicole Krikorian & None 0.75% Daughter of Serge $ 45,750.00
Elizabeth Ann Krikorian Krikorian, Vice-
Trustees for the Aimee Nicole President of
Krikorian Irrevocable Trust Hekemian & Co. and
Dated 1/1/92 niece of Robert S.
Hekemian, Trustee
Douglas Diran Krikorian None 0.75% Son of Serge $ 45,750.00
& Elizabeth Ann Aynilian Krikorian, Vice-
Trustees for the Douglas President of
Diran Krikorian Irrevocable Hekemian & Co. and
Trust Dated 1/1/92 nephew of Robert S.
Hekemian, Trustee
Gregory Serge Krikorian None 0.75% Son of Serge $ 45,750.00
& Elizabeth Ann Aynilian Krikorian, Vice-
Trustees for the Gregory President of
Serge Krikorian Irrevoc- Hekemian & Co. and
able Trust Dated 1/1/92 nephew of Robert S.
Hekemian, Trustee
Henri & Leonara Nazarian None 5.0% None $ 305,000.00
Thomas A. Newton None 0.5% Former Controller $ 30,500.00
of Hekemian & Co.
Stephanie H. Reckler None 2.0% None $ 122,000.00
Michael J. Voskian None 1.0% Son of John $ 61,000.00
Voskian, Trustee
and nephew of
Robert S. Hekemian,
Trustee
Victoria A. Voskian None 1.0% Daughter of John $ 61,000.00
Voskian, Trustee
and niece of
Robert S. Hekemian, Trustee
TOTAL 60.0% $3,660,000.00
==== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WESTWOOD HILLS, LLC
MANAGING MEMBER
INITIAL CAPITAL
NAME PERCENTAGE OF INTEREST CONTRIBUTION
- ---- ---------------------- ------------
<S> <C> <C>
First Real Estate 40% $2,440,000.00
Investment Trust of
New Jersey, c/o
Hekemian & Co., Inc.
505 Main Street
P.O. Box 667
Hackensack, NJ 07602
</TABLE>
(ii) Hekemian & Co. has provided various services to the Registrant in
connection with the business of the Trust during fiscal year 1997. The
management contract provides that Hekemian & Co. is paid fees based upon the
rent collected. Such fees were approximately $495,000.00, $476,000.00 and
$470,000.00 in 1997, 1996 and 1995, respectively. In addition, Registrant paid
Hekemian & Co. fees and commissions in connection with the development and
leasing of Franklin Crossing in the amount of approximately $375,000.00 in 1997.
Included in the 1997 fees of $495,000 that the Registrant paid to Hekemian &
Co., is a fee of $54,000 paid in connection with the refinancing of Westridge
Shopping Center, Frederick, Maryland.
Registrant has reached an agreement with Hekemian & Co. to pay fees in
connection with the purchase, construction oversight and financing of the
Patchogue Plaza in the amount of $444,341.50. In addition, Registrant has agreed
to pay additional fees in connection with the anticipated refinancing of the
Westwood Shopping Center in the amount of $52,750 and the financing of Berdan
Court in Wayne, New Jersey in the amount of $54,000. The above-referenced fees
will be paid during fiscal year 1998.
(iii) The Cronheim Mortgage Co. acted as a mortgage broker in
connection with the Registrants refinancing of the Westridge Shopping Center
located in Frederick, Maryland. The mortgage closing was completed on June 30,
1997. The new mortgage was in the amount of $19,200,000. The Cronheim Mortgage
Co. was paid a fee of $144,000 in connection with the said mortgage. The
Cronheim Mortgage Co. paid $72,000 of the fee to a co-broker.
In addition, Cronhiem Mortgage Co. is also acting as a mortgage broker
in connection with the anticipated refinancing of the Westwood Plaza, Westwood,
NJ. Registrant has reached an agreement to pay Cronheim Mortgage a fee of
$53,000 when the mortgage for Westwood Plaza closes.
Mr. Charles J. Dodge, a Trustee, is the Chief Executive Officer of
Cronheim Mortgage Co.
(iv) The law firm of Hannoch Weisman was retained by the Registrant
during the fiscal year to furnish legal services. Herbert C. Klein, a Trustee,
is a director of the law firm. The total fees paid to Hannoch Weisman in fiscal
year 1997 was $23,184.55.
<PAGE>
Hannoch Weisman has also been retained by the Registrant, as its
counsel, in connection with the purchase of the Patchogue Plaza and the
renovation of the Franklin Lakes Shopping Center, as well as, the refinancing of
Westwood Plaza and the financing for Berdan Court. No final fees have been
determined by the Board, as of the date hereof, for the above referenced work.
It is expected, however, that the fees to be paid to Hannoch Weisman in
connection with the above described work will exceed $60,000.
(v) The law firm of Nowell Amoroso, P.A. was not retained by the
Registrant during the fiscal year to furnish legal services, except to prepare
the 10-K for fiscal year 1997 together with the 10K/A and 8K filed June 1997.
William R. DeLorenzo, Jr., the Executive Secretary and Treasurer, is of Counsel
to the law firm. A fee of $2,000 will be paid to Nowell Amoroso, P.A. in
connection with the preparation of the 10-K for fiscal year 1997. Nowell Amoroso
was paid a total of $4,772.27 in 1997 for all work described herein.
(vi) Robert S. Hekemian and his brother Samuel P. Hekemian hold 95% of
the stock in Hekemian & Co., Marilyn Voskian and Ann Krikorian each hold 2-1/2%
of the stock in Hekemian & Co., which is the remaining 5%. A dispute has arisen
between Robert S. Hekemian and Samuel P. Hekemian concerning their succession in
Hekemian & Co. Litigation has been undertaken concerning various issues between
Robert S. Hekemian and Samuel P. Hekemian which has not been resolved as of
December 31, 1997. Registrant believes that Hekemian & Co. or its successor in
the event this dispute is not resolved amicably, will appropriately service all
of its management needs without interruption.
(C) Indebtedness of Management
Registrant has not loaned any monies to any Trustee, Officer, nominee
for Trustee or any members of the immediate family of any Trustee, nominee or
officer.
(D) Transactions with Promoters
Not applicable.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) List of all documents to be filed as a part of this 10-K Report:
1. Financial Statements.
(i) Report of Independent Public Accountant for Registrant,
J.H. Cohn, LLP
(ii) Combined Balance Sheets as of October 31, 1997 and 1996
(iii) Combined Statements of Income and Undistributed Earnings
Years ended October 31, 1997, 1996 and 1995
(iv) Combined Statements for Cash Flows Years ended October
31, 1997, 1996 and 1995
(v) Notes to Combined Financial Statements
<PAGE>
2. Financial Statement Schedules.
(i) Short-Term Borrowings.
(ii) Supplementing Income Statement Information.
(iii) Real Estate and Accumulated Depreciation.
(B) Reports on Form 8-K:
No report on Form 8-K was filed by the Registrant during the last
quarter of the fiscal year ending October 31, 1997.
A form 8-K was, however, filed on June 23, 1997 copies of which are
attached.
(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, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: January 29, 1998 First Real Estate Investment
Trust of New Jersey
By: /s/Robert S. Hekemian
---------------------
Robert S. Hekemian,
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert S. Hekemian his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Annual Report, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/Robert S. Hekemian DATED: January 29, 1998
- ---------------------
Robert S. Hekemian, Chairman of
the Board, Chief Executive
Officer and Trustee
(Principal Executive Officer)
/s/Donald W. Barney DATED: January 29, 1998
- -------------------
Donald W. Barney, Trustee and
President
/s/John B. Voskian DATED: January 29, 1998
- ------------------
John B. Voskian, Trustee and
Secretary
<PAGE>
/s/Herbert C. Klein DATED: January 29, 1998
- -------------------
Herbert C. Klein, Trustee
/s/Charles J. Dodge DATED: January 29, 1998
- -------------------
Charles J. Dodge, Trustee
/s/Nicholas A. Laganella DATED: January 29, 1998
- ------------------------
Nicholas A. Laganella, Trustee
/s/Ronald J. Artinian DATED: January 29, 1998
- ---------------------
Ronald J. Artinian, Trustee
/s/William R. DeLorenzo, Jr. DATED: January 29, 1998
- ----------------------------
William R. DeLorenzo, Jr.
Executive Secretary and
Treasurer (Principal Financial
and Accounting 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, 1997 AND 1996
STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
NOTES TO FINANCIAL STATEMENTS
(B) FINANCIAL STATEMENTS OF AFFILIATE:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
BALANCE SHEETS
OCTOBER 31, 1997 AND 1996
STATEMENTS OF INCOME AND MEMBERS' EQUITY
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
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, 1997 and 1996, and the related statements
of income and undistributed earnings and cash flows for each of the three years
in the period ended October 31, 1997. 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, 1997 and 1996, and its results of
operations and cash flows for each of the three years in the period ended
October 31, 1997, in conformity with generally accepted accounting principles.
Our audits referred to above included the information in Schedules IX, X and XI
which present fairly, when read in conjunction with the financial statements,
the information required to be set forth therein.
/s/J. H. COHN
-------------
J. H. COHN LLP
Roseland, New Jersey
November 14, 1997
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
BALANCE SHEETS
OCTOBER 31, 1997 AND 1996
ASSETS 1997 1996
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Real estate, at cost, net of accumulated
depreciation ................................... $53,737 $46,836
Equipment, at cost, net of accumulated
depreciation of $657,000 and $608,000 .......... 184 186
Investment in affiliate ............................ 1,905 1,924
Cash ............................................... 228 189
Tenants' security accounts ......................... 719 754
Sundry receivables ................................. 280 537
Prepaid expenses and other assets .................. 1,470 1,090
Deferred charges, net .............................. 710 158
------- -------
Totals ................................... $59,233 $51,674
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages payable .............................. $24,429 $23,609
Note payable - bank .............................. 11,429 5,662
Accounts payable and accrued expenses .......... 409 278
Construction liabilities ....................... 496
Dividends payable .............................. 1,326 1,029
Tenants' security deposits ..................... 905 853
Deferred revenue ............................... 255 259
------- -------
Total liabilities ........................ 39,249 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 ......................... 670 670
------- -------
Total shareholders' equity ............... 19,984 19,984
------- -------
Totals .................................. $59,233 $51,674
======= =======
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
INCOME 1997 1996 1995
-------- -------- --------
(In Thousands of Dollars,
Except per Share Amounts)
<S> <C> <C> <C>
Revenue:
Rental income .................... $ 9,982 $ 9,589 $ 9,503
Reimbursements ................... 1,433 1,568 1,380
Equity in income of affiliate .... 139 92 81
Sundry income .................... 144 168 160
-------- -------- --------
Totals ....................... 11,698 11,417 11,124
-------- -------- --------
Expenses:
Operating expenses ............... 2,628 2,568 2,377
Management fees .................. 495 476 470
Real estate taxes ................ 1,692 1,739 1,507
Interest ......................... 2,589 2,665 2,744
Depreciation ..................... 1,319 1,295 1,234
-------- -------- --------
Totals ....................... 8,723 8,743 8,332
-------- -------- --------
Income before state income taxes ..... 2,975 2,674 2,792
Provision for state income taxes ..... 12 12 6
-------- -------- --------
Net income ........................... $ 2,963 $ 2,662 $ 2,786
======== ======== ========
Earnings per share ................... $ 1.90 $ 1.71 $ 1.79
======== ======== ========
UNDISTRIBUTED EARNINGS
Balance, beginning of year ........... $ 670 $ 675 $ 1,834
Net income ........................... 2,963 2,662 2,786
Less dividends ....................... (2,963) (2,667) (3,945)
-------- -------- --------
Balance, end of year ................. $ 670 $ 670 $ 675
======== ======== ========
Dividends per share .................. $ 1.90 $ 1.71 $ 2.53
======== ======== ========
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
1997 1996 1995
------- ------- -------
(In Thousands of Dollars)
<S> <C> <C> <C>
Operating activities:
Net income ..................................... $ 2,963 $ 2,662 $ 2,786
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .............. 1,356 1,333 1,306
Equity in income of affiliate .............. (139) (92) (81)
Deferred revenue ............................. (4) 2 43
Changes in operating assets and liabilities:
Tenants' security accounts .............. 35 (28) (47)
Sundry receivables, prepaid expenses
and other assets ...................... (712) (585) (215)
Accounts payable and accrued expenses ... 131 (54) 65
Tenants' security deposits .............. 52 26 51
------- ------- -------
Net cash provided by operating
activities ........................ 3,682 3,264 3,908
------- ------- -------
Investing activities:
Capital expenditures ........................... (7,723) (880) (590)
Distributions from affiliate ................... 160 140 440
------- ------- -------
Net cash used in investing activities (7,563) (740) (150)
------- ------- -------
Financing activities:
Dividends paid ................................. (2,667) (2,792) (2,791)
Proceeds from note payable - bank .............. 7,817 3,339 2,791
Net proceeds from mortgage refinancing ......... 1,314
Repayment of note payable - bank ............... (2,050) (2,846) (3,050)
Repayment of mortgages ......................... (494) (501) (454)
------- ------- -------
Net cash provided by (used in)
financing activities ................... 3,920 (2,800) (3,504)
------- ------- -------
Net increase (decrease) in cash .................... 39 (276) 254
Cash, beginning of year ............................ 189 465 211
------- ------- -------
Cash, end of year .................................. $ 228 $ 189 $ 465
======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
(continued)
1997 1996 1995
------- ------- -------
(In Thousands of Dollars)
<S> <C> <C> <C>
Supplemental disclosure of cash flow data:
Interest paid, net of capitalized interest
of $158,385 in 1997 ............................ $ 2,589 $ 2,883 $ 2,528
======= ======= =======
Income taxes paid .............................. $ 12 $ 8 $ 7
======= ======= =======
Supplemental schedule of noncash investing
and financing activities:
Dividends declared, not paid ................... $ 1,326 $ 1,029 $ 1,154
======= ======= =======
Capital expenditures incurred, not paid ........ $ 496
=======
</TABLE>
See Notes to Financial Statements.
<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 in New Jersey and Maryland.
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 1997, 1996 and 1995, 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, 1997 and 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.
<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 $33,000, $49,000 and $27,000 in
1997, 1996 and 1995, 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,
1997.
Reclassifications:
Certain amounts in the 1996 and 1995 financial statements
have been reclassified to conform with the current
presentation.
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.
("Heke- mian"), 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.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 2 - Investment in affiliate (concluded):
Summarized financial information of the Affiliate as of
Octo- ber 31, 1997 and 1996 and for each of the three years
in the period ended October 31, 1997 is as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Balance sheet data:
Assets:
Real estate and equipment, net ... $14,696 $14,928
Other ............................ 551 544
------- -------
Total assets ............... $15,247 $15,472
======= =======
Liabilities and equity:
Liabilities:
Mortgage payable ............... $10,192 $10,346
Other .......................... 295 314
------- -------
Totals ..................... 10,487 10,660
------- -------
Members' equity:
Trust .......................... 1,905 1,924
Others ......................... 2,855 2,888
------- -------
Totals ..................... 4,760 4,812
------- -------
Total liabilities and equity $15,247 $15,472
======= =======
<CAPTION>
1997 1996 1995
------ ------ ------
(In Thousands of Dollars)
Income statement data:
<S> <C> <C> <C>
Rental revenue ... $2,497 $2,360 $2,212
Rental expenses .. 2,149 2,130 2,008
------ ------ ------
Net income ....... $ 348 $ 230 $ 204
====== ====== ======
</TABLE>
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 3 - Real estate:
Real estate consists of the following:
<TABLE>
<CAPTION>
Range
of Estimated
Useful Lives 1997 1996
------------ ---- ----
(In Thousands
of Dollars)
<S> <C> <C> <C>
Land $20,244 $17,263
Unimproved land 2,310 2,472
Apartment buildings 7 - 40 years 10,711 10,170
Commercial buildings 25 - 31.5 years 58 58
Shopping centers 15 - 50 years 30,270 26,947
Construction in progress 2,126 969
------- -------
65,719 57,879
Less accumulated depreciation 11,982 11,043
------- -------
Totals $53,737 $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>
1997 1996
------ -------
(In Thousands
of Dollars)
<S> <C> <C>
Northern Life Insurance Cos. (A) $19,123
State Mutual Life Insurance Co. (A) $18,068
Travelers Insurance (B) 5,181 5,319
Summit Bank (C) 125 222
------- -------
Totals $24,429 $23,609
======= =======
</TABLE>
(A) On June 30, 1997, the Trust repaid the existing
mort- gage 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
$25,134,000.
(B) Payable in monthly installments of $55,287
including interest at 10% through February 2003 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 $11,695,000.
(C) Payable in monthly installments of $8,555
including interest at 7.625% through March 1999.
The mortgage is secured by an apartment building
in Spring Lake, New Jersey having a net book value
of approximately $566,000. One of the directors of
the bank is a trustee of the Trust.
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Principal amounts (in thousands of dollars) due under the
above obligations in each of the five years subsequent to
October 31, 1997 are as follows:
Year Ending
October 31, Amount
----------- ------
1998 $494
1999 464
2000 476
2001 520
2002 569
Based on borrowing rates currently available to the Trust,
the carrying amount of mortgages payable approximates fair
value at October 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 April 30, 1998. 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 $45,898,000 at October 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 October 31, 1997 are as follows:
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
Note 6 - Commitments and contingencies (continued):
NOTES TO FINANCIAL STATEMENTS
Year Ending
October 31, Amount
----------- ------
1998 $ 4,739
1999 4,513
2000 4,140
2001 3,936
2002 3,504
Thereafter 26,976
-------
Total $47,808
=======
The above amounts assume that all leases which expire
are not renewed and, accordingly, neither minimal
rentals nor rentals from replacement tenants are
included.
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, 1997 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 Trust anticipates to complete the acquisition in the
first quarter of fiscal 1998.
Standby letters of credit:
At October 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.
Environmental concerns:
In accordance with applicable regulations, the Trust
reported to the New Jersey Department of Environmental
Protection that a discharge of hazardous material was
recently discovered at the newly renovated Franklin
Crossing Shopping Center (the "Center").
<PAGE>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
Note 6 - Commitments and contingencies (concluded):
At present, the discharge material appears to be isolated
and management believes there will be no significant
effect on the operations of the Center.
In connection therewith, the Trust is required to
investigate and monitor such discharge, the cost of which
will not be material.
Note 7 - Management agreement and related party transactions:
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
$495,000, $476,000 and $470,000 in 1997, 1996 and 1995,
respectively. In addition, Hekemian has charged the Trust
fees and commissions in connection with the development and
leasing of the shopping center in Franklin Lakes, New
Jersey. Such fees and commissions amounted to approximately
$375,000 in 1997.
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>
1997:
Note payable -
bank $11,429 7.75% $11,429 $7,703 7.7%
======= ==== ======= ====== ===
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%
======= ==== ======= ====== ===
</TABLE>
(A) See Note 5 of notes to financial statements.
(B) Calculated using average monthly loan balances and actual interest expense.
<TABLE>
<CAPTION>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In Thousands of Dollars)
Column A Column B
-------- --------
Charged to Costs
Item (A) and Expenses
---------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs $ 269 $ 252 $ 219
====== ====== ======
Real estate taxes $1,691 $1,739 $1,507
====== ====== ======
</TABLE>
(A) Amounts for other items were less than 1% of revenue in all years.
<PAGE>
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
As of or for the Year Ended October 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(In Thousands of Dollars, Except
Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Operating data:
Revenue ............. $11,698 $11,417 $11,124 $10,335 $ 9,952
Expenses ............ 8,735 8,755 8,338 7,952 7,657
------- ------- ------- ------- -------
Net income .......... $ 2,963 $ 2,662 $ 2,786 $ 2,383 $ 2,295
======= ======= ======= ======= =======
Balance sheet data:
Total assets ........ $59,233 $51,674 $51,838 $52,398 $51,356
======= ======= ======= ======= =======
Long-term obligations $24,429 $23,609 $24,110 $24,564 $24,963
======= ======= ======= ======= =======
Per share data:
Earnings per share .. $ 1.90 $ 1.71 $ 1.79 $ 1.53 $ 1.47
======= ======= ======= ======= =======
Dividends per share . $ 1.90 $ 1.71 $ 2.53 $ 1.62 $ 1.56
======= ======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
OCTOBER 31, 1997
(In Thousands of Dollars)
Column A Column B Column C Column D
-------- -------- -------- --------
Costs
Capitalized
Initial Cost Subsequent
to Company to Acquisition
------------------------- --------------------------------------
Buildings
Encum- and Improve- Carrying
Description brances Land Improvements Land ments Costs
----------- ------- ---- ------------ ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Garden apartments:
Sheridan Apts.,
Camden, NJ ............ $ 117 $ 360 $ 911
Grandview Apts.,
Hasbrouck Heights, NJ . 22 180 193
Lakewood Apts.,
Lakewood, NJ .......... 11 396 169
Hammel Gardens,
Maywood, NJ ........... 313 728 642
Palisades Manor,
Palisades Park, NJ .... 12 81 80
Steuben Arms,
River Edge, NJ ........ 364 1,773 372
Heights Manor,
Spring Lake Heights, NJ $ 125 109 974 323
Berdan Court,
Wayne, NJ ............. 250 2,206 1,323
Commercial property:
Glen Rock, NJ ........... 12 36 22
Shopping centers:
Franklin Lakes
Shopping Center,
Franklin Lakes, NJ .... 29 $ 2,981 6,038
Westridge Shopping
Center, Frederick,
MD .................... 19,123 9,135 19,159 338
Westwood Shopping
Center, Westwood,
NJ .................... 5,181 6,889 6,416 445
Vacant land:
Franklin Lakes, NJ ...... 224 $ (168)
Rockaway, NJ ............ 1,683 $ 398
South Brunswick, NJ ..... 80 93
-------- -------- -------- -------- -------- --------
Totals ............... $ 24,429 $ 19,250 $ 32,309 $ 2,813 $ 10,856 $ 491
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
OCTOBER 31, 1997
(In Thousands of Dollars)
(continued)
Column E Column F Column G Column H Column I
-------- -------- -------- -------- --------
Gross Amount at Which
Carried at Close of Period
-------------------------------- Life on
Buildings Which
and Accumulated Date of Date Depreciation
Land Improvements Total(1) Depreciation Construction Acquired is Computed
---- ------------ -------- ------------------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Garden apartments:
Sheridan Apts.,
Camden, NJ ............ $ 117 $ 1,271 $ 1,388 $ 696 1950 1964 7-40 years
Grandview Apts.,
Hasbrouck Heights, NJ . 22 373 395 235 1925 1964 7-40 years
Lakewood Apts.,
Lakewood, NJ .......... 11 565 576 423 1960 1962 7-40 years
Hammel Gardens,
Maywood, NJ ........... 313 1,370 1,683 725 1949 1972 7-40 years
Palisades Manor,
Palisades Park, NJ .... 12 161 173 111 1935/70 1962 7-40 years
Steuben Arms,
River Edge, NJ ........ 364 2,145 2,509 1,135 1966 1975 7-40 years
Heights Manor,
Spring Lake Heights, NJ 109 1,297 1,406 840 1967 1971 7-40 years
Berdan Court,
Wayne, NJ ............. 250 3,529 3,779 2,214 1964 1965 7-40 years
Commercial property:
Glen Rock, NJ ........... 12 58 70 45 1940 1962 10-31.5 years
Shopping centers:
Franklin Lakes
Shopping Center,
Franklin Lakes, NJ .... 3,010 6,038 9,048 5 1963/75/97 1966 10-50 years
Westridge Shopping
Center, Frederick,
MD .................... 9,135 19,497 28,632 3,498 1986 1992 15-31.5 years
Westwood Shopping
Center, Westwood,
NJ .................... 6,889 6,861 13,750 2,055 1981 1988 15-31.5 years
Vacant land:
Franklin Lakes, NJ ...... 56 56 1966/93
Rockaway, NJ ............ 2,081 2,081 1964/92/93
South Brunswick, NJ ..... 173 173 1964
-------- -------- -------- --------
Totals ............... $ 22,554 $ 43,165 $ 65,719 $ 11,982
======== ======== ======== ========
</TABLE>
(1) Aggregate cost is the same for Federal income tax purposes.
<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, 1997 and 1996, and the related statements of income and members'
equity and cash flows for each of the three years in the period ended October
31, 1997. 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, 1997 and 1996, and its results of operations and cash flows for each
of the three years in the period ended October 31, 1997, in conformity with
generally accepted accounting principles.
J. H. COHN LLP
Roseland, New Jersey
November 14, 1997
<PAGE>
<TABLE>
<CAPTION>
WESTWOOD HILLS, LLC
(A New Jersey Limited Liability Company)
BALANCE SHEETS
OCTOBER 31, 1997 AND 1996
ASSETS 1997 1996
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Real estate, at cost, net of accumulated
depreciation of $1,044,000 and $731,000 ........ $14,611 $14,857
Equipment, at cost, net of accumulated
depreciation of $22,000 and $10,000 ............ 85 71
Cash ............................................... 107 54
Tenants' security accounts ......................... 256 245
Sundry receivables ................................. 18
Prepaid expenses and other assets .................. 112 119
Deferred charges, net .............................. 76 108
------- -------
Totals ..................................... $15,247 $15,472
======= =======
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Mortgage payable ............................... $10,192 $10,346
Accounts payable and accrued expenses .......... 27 69
Tenants' security deposits ..................... 268 245
------- -------
Total liabilities .......................... 10,487 10,660
Members' equity .................................... 4,760 4,812
------- -------
Totals ..................................... $15,247 $15,472
======= =======
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
WESTWOOD HILLS, LLC
(A New Jersey Limited Liability Company)
STATEMENTS OF INCOME AND MEMBERS' EQUITY
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
INCOME 1997 1996 1995
------- ------- -------
(In Thousands of Dollars)
<S> <C> <C> <C>
Revenue:
Rental income .................... $ 2,479 $ 2,343 $ 2,197
Sundry income .................... 18 17 15
------- ------- -------
Totals ....................... 2,497 2,360 2,212
------- ------- -------
Expenses:
Operating expenses ............... 546 547 505
Management fees .................. 123 105 86
Real estate taxes ................ 352 350 283
Interest ......................... 802 813 832
Depreciation ..................... 326 315 302
------- ------- -------
Totals ....................... 2,149 2,130 2,008
------- ------- -------
Net income ........................... 348 230 204
MEMBERS' EQUITY
Balance, beginning of year ........... 4,812 4,931 5,827
Less distributions ................... (400) (349) (1,100)
------- ------- -------
Balance, end of year ................. $ 4,760 $ 4,812 $ 4,931
======= ======= =======
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
WESTWOOD HILLS, LLC
(A New Jersey Limited Liability Company)
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
1997 1996 1995
------- ------- -------
(In Thousands of Dollars)
<S> <C> <C> <C>
Operating activities:
Net income ..................................... $ 348 $ 230 $ 204
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .............. 358 349 302
Changes in operating assets and liabilities:
Tenants' security accounts .............. (11) (24) (33)
Sundry receivables and prepaid expenses . 25 (11) (246)
Accounts payable and accrued expenses ... (42) 40 (48)
Tenants' security deposits .............. 23 24 33
------- ------- -------
Net cash provided by operating
activities .......................... 701 608 212
------- ------- -------
Investing activities - capital expenditures ........ (94) (131) (104)
------- ------- -------
Financing activities:
Distributions paid ............................. (400) (349) (1,100)
Mortgage proceeds .............................. 1,175
Repayment of mortgage .......................... (154) (142) (142)
------- ------- -------
Net cash used in financing activities . (554) (491) (67)
------- ------- -------
Net increase (decrease) in cash .................... 53 (14) 41
Cash, beginning of year ............................ 54 68 27
------- ------- -------
Cash, end of year .................................. $ 107 $ 54 $ 68
======= ======= =======
Supplemental disclosure of cash flow data:
Interest paid .................................. $ 802 $ 813 $ 832
======= ======= =======
</TABLE>
Supplemental schedule of noncash investing and financing activities: 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.
<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, 1997 and 1996, 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 - Real estate:
Real estate consists of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
(In Thousands
of Dollars)
<S> <C> <C>
Land ........................ $ 3,849 $ 3,849
Apartment buildings ......... 11,806 11,739
------- -------
15,655 15,588
Less accumulated depreciation 1,044 731
------- -------
Totals .................... $14,611 $14,857
======= =======
</TABLE>
Note 3 - 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, 1997 are as follows:
Year Ending
October 31, Amount
----------- ------
1998 $167
1999 180
2000 195
2001 211
2002 228
Based on borrowing rates currently available to the Company,
the carrying amount of the mortgage approximates fair value
at October 31, 1997.
Note 4 - 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 $123,000,
$105,000 and $86,000 in 1997, 1996 and 1995, respectively.
* * *
<PAGE>
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:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Real estate:
Balance, beginning of year .............. $ 57,879 $ 57,035 $ 56,465
Additions:
Building and improvements ........... 8,002 824 577
Carrying costs ...................... (162) 20 (7)
-------- -------- --------
Balance, end of year .................... $ 65,719 $ 57,879 $ 57,035
======== ======== ========
Accumulated depreciation:
Balance, beginning of year .............. $ 11,043 $ 9,780 $ 8,584
Additions - charged to operating expenses 1,277 1,263 1,196
Deletions ............................... (338)
Balance, end of year .................... $ 11,982 $ 11,043 $ 9,780
======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 228,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 66,560,000
<DEPRECIATION> 12,639,000
<TOTAL-ASSETS> 59,133,000
<CURRENT-LIABILITIES> 0
<BONDS> 35,858,000
0
0
<COMMON> 19,314,000
<OTHER-SE> 670,000
<TOTAL-LIABILITY-AND-EQUITY> 59,233,000
<SALES> 0
<TOTAL-REVENUES> 11,698,000
<CGS> 0
<TOTAL-COSTS> 8,723,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,975,000
<INCOME-TAX> 12,000
<INCOME-CONTINUING> 2,963,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,963,000
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
</TABLE>
