UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _______________ to _______________
Commission File Number 0-4258
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-1897375
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
125 Wyckoff Road, Eatontown, NJ 07724
(Address of Principal Executive Offices ) (Zip Code)
Registrant's telephone number, including area code: (732) 542-4927
Securities registered pursuant to Section 12(b) of the Act:
Title of each class ____ Name of each exchange on which registered ____
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Class A $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the 12 preceding months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation 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 Part III of this Form 10-K or any amendment of this
Form 10-K. X
The aggregate market value of voting stock held by non-
affiliates of the Registrant was $24,849,769 (based on 3,898,003
shares of common stock at the closing price of 6.375 per share)
on December 5, 1997.
There were 4,550,613 shares of common stock outstanding as of
December 5, 1997.
Documents Incorporated by Reference: Exhibits incorporated by
reference are listed in Part IV, Item (a) (3).
<PAGE>
PART I
ITEM 1 - BUSINESS
Monmouth Real Estate Investment Corporation (the Company) is
a corporation operating as a qualified real estate investment
trust under Sections 856-858 of the Internal Revenue Code.
Currently, the Company derives its income primarily from
real estate rental operations. The Company has approximately
1,287,000 square feet of property, of which approximately 282,000
square feet, or 22%, is leased to the Keebler Company; 148,000
square feet, or 12%, is leased to Belk Enterprises, Inc.; and
145,000 square feet, or 11%, is leased to Amway Corporation.
During 1997 and 1996, rental income and occupancy charges from
properties leased to these companies approximated 54% and 56%,
respectively, of total rental and occupancy charges.
At September 30, 1997, the Company had investments in
sixteen properties. (See Item 2 for detailed description of the
properties.) These properties are located in New Jersey, New
York, Pennsylvania, North Carolina, Mississippi, Massachusetts,
Kansas, Iowa, Missouri, Illinois and Virginia. All properties
are managed by a management company. Monsey, New York and
Monaca, Pennsylvania are not net-leased. The remaining
fourteen properties are all leased on a net basis.
The Company does not have an advisory contract. Its
properties are managed by the David Cronheim Management
Company under a management contract which is in effect on a
year to year basis. The David Cronheim Management Company
received $17,681, $17,825 and $10,540 in 1997, 1996 and 1995,
respectively, for the management of various properties. The
David Cronheim Company also received $46,188, $21,777 and
$11,877 in commissions in 1997, 1996 and 1995, respectively.
Page 2
<PAGE>
ITEM 1 - BUSINESS (CONT'D)
The Company competes with other investors in real estate
for attractive investment opportunities. These investors include
other "equity" real estate investment trusts, limited
partnerships, syndications and private investors, among others.
The Company has a flexible investment policy concentrating
its investments in the area of net-leased industrial properties.
The Company's strategy is to obtain a favorable yield spread
between the yield from the net-leased industrial properties and
mortgage interest costs. The Company continues to purchase
net-leased industrial properties, since management believes that
there is a potential for long-term capital appreciation through
investing in well-located industrial properties. There is the
risk that, on expiration of current leases, the properties can
become vacant or re-leased at lower rents. The results obtained
by the Company by re-leasing the properties will depend on the
market for industrial properties at that time. The Company will
also invest in the securities of other real estate investment
trusts (REITs) and may, from time to time, invest in mortgages. In
1998, the Company plans to acquire $15,000,000 of net-leased
industrial properties. The funds for these acquisitions may
come from the Company's available line of credit, other
bank borrowings and proceeds from the Dividend Reinvestment
and Stock Purchase Plan. To the extent that funds or appropriate
properties are not available, fewer acquisitions will be made.
Under New Jersey Environmental Laws, inspections of
the properties are made and certificates of compliance are
obtained upon the sale of property or upon a change of tenancy.
Therefore, there is no assurance that, in connection with
compliance with state environmental regulations, substantial
capital expenditures would not be incurred at the time the
Company desired to sell its properties or at the time of a change
of tenancy. Management is not aware of any material environmental
problems affecting the Company's properties.
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES
The Company operates as a real estate investment trust.
Its portfolio is primarily in equity holdings, some of which
have been long-term holdings carried on the financial statements
of the Company at depreciated cost. It is believed that their
current market values exceed both the original cost and the
depreciated cost. The following are photographs of the Company's
equity holdings at September 30, 1997, together with a brief
description of each. (See Item 14,Schedule III for additional
information on Real Estate and Accumulated Depreciation and Item
14, Note 7 of the Notes to the Financial Statements for a
discussion of encumbrances on these equity holdings).
Page 3
<PAGE>
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
(PICTURE OF PROPERTY)
SOMERSET, NEW JERSEY
The Company owns a two-thirds interest in this Somerset, New Jersey
shopping center. The remaining one-third interest is owned by D & E
Realty, an unrelated entity. All assets, liabilities, income and
expense are allocated to the owners based upon their respective
ownership percentages. The total rentable space in this shopping
center is approximately 42,800 square feet. In addition, 21,365
square feet of land was leased to Taco Bell, Inc. on which a free
standing restaurant was completed during 1993. This shopping
center was 100% occupied at September 30, 1997. Effective October 1,
1995, the main store was leased on a net-net basis. This lease
expires on September 30, 2000. The Company's portion of the annual
rental income on this facility was approximately $287,000.
(PICTURE OF PROPERTY)
RAMSEY, NEW JERSEY
Ramsey Industrial Park, located on E. Crescent Avenue in
Ramsey, New Jersey is a 42,719 square foot building leased on a net-
net basis to Bogen Photo, Inc. This lease was extended by agreement
to 2001. The current annual rental income is approximately $224,000.
Page 4
<PAGE>
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
(PICTURE OF PROPERTY)
MONSEY, NEW YORK
This steel and block building, located at 40 Robert Pitt
Drive, Monsey, New York, was purchased by the Company on September
30, 1980, for $1,025,000. The 55,000 square foot building includes
four warehouses of about 11,000 square feet each and 10,000 square
feet of offices in the front. The current annual rental income is
approximately $310,000. At September 30, 1997, this property was
87% occupied.
(PICTURE OF PROPERTY)
MONACA, PENNSYLVANIA
The Moor Industrial Park is located in Monaca, Pennsylvania.
It consists of approximately 292,000 feet of rentable space located
on 23 acres. The leases are all short term at relatively low rents.
The current annual rental income is approximately $399,000. At
September 30, 1997, this property was 64% occupied. This property
has 1,200 feet of undeveloped river frontage.
Page 5
<PAGE>
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
(PICTURE OF PROPERTY)
ORANGEBURG, NEW YORK
This 50,400 square foot warehouse facility, located in
Orangeburg, New York, was purchased by the Company on November 25,
1992 for a purchase price of $3,650,000. This warehouse facility is
leased to the Keebler Company on a net-net basis. The average
annual rental income over the term of the lease is approximately
$433,000. The lease expires on November 30, 2000.
(PICTURE OF PROPERTY)
SOUTH BRUNSWICK, NEW JERSEY
This 144,520 square foot building, located in South Brunswick,
New Jersey was purchased from Equitable Life Assurance Society for
$5,100,000 on March 30, 1993. It is occupied by Amway Corporation
as a distribution center on a 5-year lease which expired on June 30,
1997. Average annual income over the term of the lease was
approximately $595,000. Amway Corporation will occupy the building
until December, 1997 at a monthly rental of $162,585. Effective
January 1, 1998, the Company entered into a lease with McMaster Carr
Supply Co. This lease expires on December 31, 2000. Average annual
rental income over the term of the lease is $614,210.
Page 6
<PAGE>
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
(PICTURE OF PROPERTY)
GREENSBORO, NORTH CAROLINA
This 40,560 square foot distribution center is the second such
facility leased to the Keebler Company. It is located in
Greensboro, North Carolina and was purchased on April 15, 1993 for
$2,165,000. This net-net lease expires February 14, 2003. Annual
rental income is approximately $233,000.
(PICTURE OF PROPERTY)
JACKSON, MISSISSIPPI
This 26,340 square foot warehouse facility, located in Jackson
Mississippi was purchased July 30, 1993 for a purchase price of
$1,435,000. This is the third in a series of warehouses occupied by
the Keebler Company on a net-net lease. The average annual rental
income over the term of the lease is approximately $169,000. This
lease expires September 30, 2003. The Keebler Company has sub-
leased this facility.
Page 7
<PAGE>
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES ( CONT'D)
(PICTURE OF PROPERTY)
FRANKLIN, MASSACHUSETTS
This 84,376 square foot warehouse facility, located in Franklin,
Massachusetts was purchased on October 20, 1993 for a purchase price
of $4,700,000. This is the fourth of the acquisitions of Keebler
Company net-leased warehouses. The average annual rental income
over the term of the lease is approximately $516,000. This lease
expires on January 31, 2004.
(PICTURE OF PROPERTY)
WICHITA, KANSAS
This 44,136 square foot warehouse facility in Wichita, Kansas
was purchased on February 17, 1994 for a purchase price of
$1,765,000. This is the fifth of the acquisitions of Keebler Company
net-leased warehouses. The average annual rental income over the term
of the lease is approximately $195,000. This lease expires May 30, 2005.
Page 8
<PAGE>
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
(PICTURE OF PROPERTY)
URBANDALE, IOWA
This 36,150 square foot warehouse facility in Urbandale, Iowa
was purchased on March 31, 1994 for the purchase price of
$2,055,000. This is the sixth of the acquisitions of Keebler Company
net-leased warehouses. The average annual rental income over the
term of the lease is approximately $225,000. This lease expires
June 30, 2000. The Keebler Company has sub-leased this facility.
(PICTURE OF PROPERTY)
RICHLAND, MISSISSIPPI
This 36,000 square foot warehouse facility was purchased on
March 31, 1994 for the purchase price of $1,400,000. This facility
is 100% net-leased to the Federal Express Corporation for an annual
rental income of approximately $140,000 over the term of the lease.
This lease expires on March 31, 2004.
Page 9
<PAGE>
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
(PICTURE OF PROPERTY)
O'FALLON MISSOURI
On October 13, 1994, the Company purchased a 102,135 square
foot warehouse facility in O'Fallon, Missouri. This warehouse
facility is 100% net-leased to PPG Industries, Inc. The purchase
price was $3,525,000. The average annual rental income over the
term of the lease is approximately $353,000. This lease expires
June 30, 2001.
(PICTURE OF PROPERTY)
VIRGINIA BEACH, VIRGINIA
On May 10, 1996, the Company purchased a 67,926 square foot
warehouse facility in Virginia Beach, Virginia for approximately
$2,500,000. This warehouse facility is 100% net leased to the
Raytheon Service Company. The annual rental income is approximately
$307,000. This lease expires February 28, 2001.
Page 10
<PAGE>
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
(PICTURE OF PROPERTY)
FAYETTEVILLE, NORTH CAROLINA
On May 27, 1997, the Company purchased a 148,000 square foot
warehouse facility in Fayetteville, North Carolina for approximately
$4,600,000. This warehouse facility is 100% net-leased to Belk
Enterprises, Inc. The annual rental income over the term of the
lease is approximately $473,000. This lease expires June 4, 2006.
(PICTURE OF PROPERTY)
SCHAUMBURG, ILLINOIS
On June 11, 1997, the Company purchased a 73,500 square foot
warehouse facility in Schaumburg, Illinois for approximately
$4,700,000. This warehouse facility is 100% net-leased to
Federal Express Corporation. The annual rental income over the
term of the lease is approximately $463,000. This lease expires
April 1, 2007.
Page 11
<PAGE>
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
(PICTURE OF PROPERTY)
TETERBORO, NEW JERSEY
On June 4, 1997, the Company invested $1,000,000 in a limited
liability company, Hollister `97, LLC, representing a 25% ownership
interest. The sole business of this LLC is the ownership and
operation of the Hollister Corporate Park in Teterboro, New Jersey.
Under the agreement, the Company is to receive a cumulative
preferred 11% annual return on its investment.
ITEM 3 - LEGAL PROCEEDINGS
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1997 to
a vote of security holders through the solicitation of proxies or
otherwise.
Page 12
<PAGE>
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The shares of Class A common stock of Monmouth Real Estate
Investment Corporation are traded on the National Association of
Securities Dealers Automated Quotation (NASDAQ symbol MNRTA). The
per share range of high and low market prices and distributions paid
to shareholders during each quarter of the last two years were as
follows:
1997 1996
Market Price Market Price
Fiscal Qtr. High Low Distrib. Fiscal Qtr. High Low Distrib.
First 6-5/8 5-1/4 $ .125 First 6 5-1/8 $ .125
Second 6-15/16 5-3/4 .125 Second 6-1/4 5-1/4 .125
Third 5-5/16 5-1/2 .13 Third 6-3/8 5-9/16 .125
Fourth 6-5/8 5-5/8 .13 Fourth 6 5-3/8 .125
______ ______
$ .51 $ .50
====== ======
The over-the-counter market quotations reflect the inter-dealer
prices, without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions.
On September 30, 1997, the closing price was 6-5/8.
As of September 30, 1997, there were approximately 938
shareholders of record who held shares of Class A common stock of
the Company.
It is the Company's intention to continue distributing
quarterly dividends. On September 23, 1997, the Company declared a
dividend of $.13 a share to be paid on December 15, 1997 to
shareholders of record November 17, 1997.
Page 13
<PAGE>
<TABLE>
<CAPTION>
ITEM 6 - SELECTED FINANCIAL DATA
September 30,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total Income $ 5,798,699 $ 4,607,434 $ 4,240,859 $ 3,870,841 $ 3,398,116
Total Expenses 3,965,002 3,233,584 3,293,692 2,856,210 2,134,666
Gains on Sales of Assets-
Investment Property 47,457 22,249 38,766 392,416 16,551
Net Income 1,881,154 1,396,099 985,933 1,407,047 1,280,001
Net Income Per Share .46 .39 .31 .49 .51
BALANCE SHEET DATA:
Total Assets $ 44,942,723 $ 32,538,076 $30,289,860 $29,234,128 $22,550,291
Long-Term
Obligations 20,498,016 14,197,529 14,522,503 13,681,614 7,708,382
Shareholders'
Equity 19,889,288 16,109,382 14,247,867 13,157,339 10,835,102
OTHER INFORMATION:
Average Number of Shares
Outstanding 4,047,759 3,584,364 3,212,064 2,878,951 2,536,034
Funds from
Operations* $ 2,821,902 $ 2,226,079 $ 1,730,871 $1,640,707 $ 1,632,022
Cash Dividends
Per Share .51 .50 .50 .50 .50
*Defined as net income, excluding gains (or losses) from sales of
assets, plus depreciation. Funds from Operations do not replace net
income determined in accordance with generally accepted accounting
principles (GAAP) as a measure of performance or net cash flows as a
measure of liquidity. Funds from Operations is not a GAAP measure
of operating performance and should be considered as a supplemental
measure of operating performance used by real estate investment
trusts.
Page 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM 6 - SELECTED FINANCIAL DATA (CONT'D)
SUMMARY OF OPERATIONS BY PROPERTY
FOR THE YEARS ENDED SEPTEMBER 30,
1997 1996 1995
<S> <C> <C> <C>
Net Rental Income
Somerset, New Jersey $ 238,494 $ 226,065 $ 58,814
Ramsey, New Jersey 183,459 177,242 180,301
Monaca, Pennsylvania 133,483 145,356 142,576
Monsey, New York 200,811 201,997 237,034
Orangeburg, New York 186,985 176,241 155,360
South Brunswick, New Jersey 656,756 280,857 157,965
Greensboro, North Carolina 32,362 30,621 28,994
Jackson, Mississippi 70,433 67,227 61,474
Franklin, Massachusetts 239,977 224,684 206,608
Wichita, Kansas 26,328 24,052 21,936
Urbandale, Iowa 99,184 92,834 83,855
Richland, Mississippi 48,818 44,260 38,843
O'Fallon, Missouri 74,447 63,508 84,769
Virginia Beach, Virginia 124,429 27,854 -0-
Fayetteville, North Carolina 5,953 -0- -0-
Schaumburg, Illinois 5,815 -0- -0-
_________ _________ _________
Net Rental Income 2,327,734 1,782,798 1,458,529
Net Interest and Other Income 129,871 125,812 59,757
_________ _________ _________
TOTAL 2,457,605 1,908,610 1,518,286
General & Administrative Expenses (623,908) (534,760) (571,119)
_________ _________ _________
Income Before Gains 1,833,697 1,373,850 947,167
Gain on Sale of Assets-
Investment Property 47,457 22,249 38,766
_________ _________ _________
NET INCOME $ 1,881,154 $ 1,396,099 $ 985,933
========= ========= =========
Page 15
</TABLE>
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Monmouth Real Estate Investment Corporation (the Company)
operates as a real estate investment trust deriving its income
primarily from real estate rental operations. At September 30,
1997, the Company's shareholders' equity increased to $19,889,288 as
compared to $16,109,382 in 1996.
The Company finances its purchases primarily through mortgages
on its acquisitions. The Company has a secured $1,000,000 line of
credit all of which was available at September 30, 1997. This
credit line expires on January 30, 1998. The Company also has a
$5,000,000 unsecured line of credit. Interest is at prime and is
due monthly. This line expires April 29, 2000. At September
30, 1997, the Company utilized $3,190,510 of this line of credit.
The Company's ability to generate cash adequate to meet its
needs is dependent primarily on income from its real estate
investments, the sale of real estate investments, collection of
mortgages receivable, refinancing of mortgage debt, leveraging of
real estate investments, availability of bank borrowings, proceeds
from the Dividend Reinvestment and Stock Purchase Plan, and access
to the capital markets. Purchases of new properties, payments of
expenses related to real estate operations, capital improvements
programs, debt service, management and professional fees, and
dividend requirements place demands on the Company's liquidity.
The Company intends to operate its existing properties from the
cash flow generated by the properties. However, the Company's
expenses are affected by various factors, including inflation.
Increases in operating expenses raise the breakeven point for a
property and, to the extent that they cannot be passed on through
higher rents, reduce the amount of available cash flow which can
adversely affect the market value of the property.
The Company's focus is on equity investments. During the past
five years, the Company purchased twelve net-leased warehouse
facilities at an aggregate cost of approximately $38,000,000. The
Company incurred a total of approximately $29,000,000 in debt
relating to these purchases.
The Company expects to make additional real estate investments
from time to time. In 1998, the Company plans to acquire
$15,000,000 of net-leased industrial properties. The funds for
these acquisitions may come from the Company's available line of
credit, other bank borrowings and proceeds from the Dividend
Reinvestment and Stock Purchase Plan. To the extent that funds or
appropriate properties are not available, fewer acquisitions will be
made.
Page 16
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
Funds generated are expected to be sufficient to meet debt
service requirements and capital expenditures of the Company.
Cash provided from operating activities amounted to $2,594,380
in 1997 as compared to $2,183,561 in 1996 and $2,267,039 in 1995.
At September 30, 1997, the Company had total liabilities of
$25,053,435 and total assets of $44,942,723. The Company believes
that it has the ability to meet its obligations and to generate
funds for new investments.
The Company has a Dividend Reinvestment and Stock Purchase
Plan. During 1997, a total of $3,586,238 in additional capital was
raised. The success of the Plan resulted in a substantial
improvement in the Company's liquidity and capital resources in
1997. It is anticipated that a comparable level of participation
will continue in the Plan in fiscal 1998. Therefore, the Company
anticipates that the Plan will result in further increased liquidity
and capital resources in 1998.
Results of Operations
The Company's activities primarily generate rental income. Net
income for the fiscal year ended September 30, 1997 was $1,881,154
as compared to $1,396,099 in 1996 and $985,933 in 1995. Net rental
income for the fiscal year ended September 30, 1997 was $2,327,734
as compared to $1,782,798 in 1996 and $1,458,529 in 1995. The
following is a discussion of the results of operations by location
for 1997 as compared to 1996 and 1996 as compared to 1995:
Somerset, New Jersey
During 1997, net rental income remained relatively stable.
During 1996, net rental income increased due to the main store
being occupied for the full year, whereas in 1995 it was vacant
for part of the year. This shopping center was 100% occupied
at September 30, 1997.
Ramsey, New Jersey
Net rental income remained relatively stable for 1997 and 1996.
Monaca, Pennsylvania
Net rental income remained relatively stable for 1997 and 1996.
Monsey, New York
Net rental income remained relatively stable for 1997 and 1996.
Orangeburg, New York
Net rental income remained relatively stable during 1997 and 1996.
Page 17
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
South Brunswick, New Jersey
Net rental income increased during 1997 due to a lease extension from
July 1, 1997 to December 31, 1997 at a monthly rental of $162,585.
The previous monthly rental was $54,195. Net rental income increased
$123,000 during 1996. This increase was a result of a decrease in
interest expense due to principal repayments.
Greensboro, North Carolina
Net rental income remained relatively stable during 1997 and 1996.
Jackson, Mississippi
Net rental income remained relatively stable during 1997 and 1996.
Franklin, Massachusetts
Net rental income remained relatively stable during 1997 and 1996.
Wichita, Kansas
Net rental income remained relatively stable during 1997 and 1996.
Urbandale, Iowa
Net rental income remained relatively stable during 1997 and 1996.
Richland, Mississippi
Net rental income remained relatively stable during 1997 and 1996.
O'Fallon, Missouri
This warehouse facility was acquired during 1995. Net rental income
remained stable for 1997. Net rental income decreased during 1996 due
to an increase in depreciation expense over 1995's half year convention.
Virginia Beach, Virginia
This warehouse facility was acquired during 1996. It is net-leased to
Raytheon Service Company. Average monthly rental income over the term
of the lease is $25,555. During 1997, rental income increased due to
a full year's income.
Fayetteville, North Carolina
This warehouse facility was acquired during 1997. It is net-leased to
Belk Enterprises, Inc. Average monthly rental income over the term
of the lease is $39,411.
Schaumburg, Illinois
This warehouse facility was acquired during 1997. It is net-leased to
Federal Express Corporation. Average monthly rental income over the
term of the lease is $38,517.
Page 18
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONT'D)
The Company also generated net interest and other income from its
investments in securities available for sale, which are subject to general
market price risks, mortgages receivable and Hollister`97, LLC. Net
interest and other income remained relatively stable during 1997. The
increase in 1996 was primarily due to a gain of $66,933 on the sale of
securities available for sale.
General and administrative expenses increased during 1997
primarily as a result of increased professional fees. General and
administrative expenses remained relatively stable during 1996.
The Company recognized a deferred gain from the Howell Township
installment sale of approximately $47,000, $22,000 and $39,000 for
1997, 1996 and 1995, respectively.
Page 19
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in Part
VI, Item 14 are incorporated herein by reference and filed as part
of this report.
The following is the Unaudited Selected Quarterly Financial Data:
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
FISCAL 1997 12/31/96 3/31/97 6/30/97 9/30/97
- ------------------------------------------------------------------------------
Total Income $1,297,931 $1,299,347 $1,330,086 $1,871,335
Total Expenses 992,888 897,481 973,674 1,100,959
Gains on Sales of
Assets-Investment
Property 6,000 6,000 6,000 29,457
Net Income 311,043 407,866 362,412 799,833
Net Income per Share .08 .10 .09 .19
- ------------------------------------------------------------------------------
THREE MONTHS ENDED
- ------------------------------------------------------------------------------
FISCAL 1996 12/31/95 3/31/96 6/30/96 9/30/96
- ------------------------------------------------------------------------------
Total Income $1,131,759 $1,129,264 $1,148,182 $1,198,229
Total Expenses 780,174 864,534 816,225 772,651
Gains on Sales of
Assets-Investment
Property 6,000 6,000 6,000 4,249
Net Income 357,585 270,730 337,957 429,827
Net Income per Share .10 .08 .09 .12
</TABLE>
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Page 20
<PAGE>
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Principal Occupation Director Shares Percent
Name, Age and Title Past Five Years Since Owned(1) of Stock
Ernest V. Bencivenga Financial Consultant; 1968 8,529 0.19%
(79) Treasurer and Director (1961
Treasurer and Director to present) and Secretary (1967
to present) of Monmouth Capital
Corporation; Director (1969 to
present) and Secretary/Treasurer
(1984 to present) of United
Mobile Homes, Inc.
Anna T. Chew Certified Public Accountant; 1993 6,972(2) 0.16%
(39) Controller (1991 to present) and
Controller and Director (1994 to present) of
Director Monmouth Capital Corporation;
Vice President (1995 to present),
Director (1994 to present), and
Chief Financial Officer (1991
to present) of United Mobile
Homes, Inc.
Daniel D. Cronheim Attorney at Law, Daniel D. 1989 17,058 0.39%
(43) Cronheim, Esq. (1982 to present);
Director Executive Vice President (1989
to present) and General Counsel
(1983 to present), of David
Cronheim Company.
Boniface DeBlasio Chairman of the Board 1968 10,788 0.24%
(76) (1968 to present) and Director
Director (1961 to present) of Monmouth
Capital Corporation.
Ara K. Hovnanian President (1988 to present) 1989 41 ---
(38) and Director (1981 to present)
Director of Hovnanian Enterprises, Inc.,
a publicly-owned company
specializing in the construction
of housing.
Charles P. Kaempffer Investor; Director (1970 1974 36,188(3) 0.82%
(60) to present) of Monmouth Capital
Director Corporation; Director (1969 to
present) of United Mobile
Homes, Inc.
Page 21
<PAGE>
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONT'D)
Principal Occupation Director Shares Percent
Name, Age and Title Past Five Years Since Owned(1) of Stock
Eugene W. Landy Attorney at Law, Landy and 1968 344,099(4) 7.78%
(64) Landy; President and Director
President, CEO (1961 to present) of Monmouth
and Director Capital Corporation; Chairman
of the Board (1995 to present)
Director (1969 to present) and
President (1969 to 1996) of
United Mobile Homes, Inc.
Samuel A. Landy Attorney at Law (1987 to 1989 110,066(5) 2.75%
(36) present Landy and Landy;
Director President (1995 to present),
Director (1991 to present), and
Vice President (1991 to 1995) of
United Mobile Homes, Inc.;
Director (1994 to present) of
Monmouth Capital Corporation.
W. Dunham Morey Certified Public Accountant, 1968 51,095(6) 1.16%
(75) W. Dunham Morey, CPA;
Director Director (1961 to present) of
Monmouth Capital Corporation.
Robert G. Sampson Investor; Director (1963 to 1968 67,774(7) 1.53%
(72) present) of Monmouth Capital
Director Corporation; Director (1969 to
present) of United Mobile Homes,
Inc.; Director (1972 to 1993)
of United Jersey Bank, N.A.
(formerly Franklin State Bank);
General Partner (1983 to
present) of Sampco, Ltd., an
investment group.
Page 22
<PAGE>
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONT'D)
(1) Beneficial ownership, as defined herein, includes Class A Common Stock
as to which a person has or shares voting and/or investment power.
(2) Held jointly with Ms. Chew's husband; includes 1,181 shares
held in Ms. Chew's 401 (k) Plan.
(3) Includes (a) 13,630 shares owned by Mr. Kaempffer's wife; and (b) 1,080
shares in joint name with Mrs. Kaempffer.
(4) Includes (a) 67,777 shares owned by Mr. Landy's wife; (b) 165,541 shares
held in the Landy & Landy, P.C. Profit Sharing Plan, of which Mr. Landy
is a Trustee with power to vote; and (c) 88,738 shares held in the Landy
& Landy, P.C. Pension Plan, of which Mr. Landy is a Trustee with power
to vote. Excludes 35,882 shares held by Mr. Landy's adult children, in
which he disclaims any beneficial interest.
(5) Includes (a) 2,953 shares owned by Mr. Landy's wife, and (b) 21,252
shares held in custodial accounts for Mr. Landy's minor children under
the Uniform Gift to Minors'Act in which he disclaims any beneficial
interest, but has power to vote, and (c) 9,001 shares held in
Mr. Landy's 401 (k) Plan.
(6) Includes 12,524 shares owned by Mr. Morey's wife.
(7) Includes 6,000 shares held by Sampco, Ltd. in which he has a
beneficial interest.
The Directors as a class own 652,610 shares, which is 15% of
the outstanding shares.
Page 23
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table shows compensation
paid or accrued by the Company for services rendered during 1997,
1996 and 1995 to the Chief Executive Officer. There were no other
executive officers whose aggregate cash compensation exceeded
$100,000:
Annual Compensation
Name and Principal Position Year Salary Bonus Other
Eugene W. Landy 1997 None $50,000 $250,700(1)
Chief Executive Officer 1996 None None 173,203
1995 None None 162,445
(1) Represents Director's fees of $3,200 paid to Mr. Landy,
management fees of $110,000, legal fees of $28,500 paid to the firm
of Landy & Landy and $109,000 accrual for pension and other benefits
in accordance with Mr. Landy's employment contract.
Stock Option Plan
The following table sets forth, for the executive officer named
in the Summary Compensation Table, information regarding individual
grants of stock options made during the year ended September 30,
1997:
Potential Realized
% of Total Price Value at Assumed
Options Granted to Per Expiration Annual Rates for
Name Granted Employees Share Date 5% 10%
Eugene W. Landy 150,000 50% $6.5625 4/30/02 $152,310 $449,985
The following table sets forth for the executive officer named
in the Summary Compensation Table, information regarding stock
options outstanding at September 30, 1997:
Value of
Unexercised
Options
Number of Unexercised at Year-End
Shares Value Options at Year-End Exercisable/
Name Exercised Realized Exercisable/Unexercisable Unexercisable
Eugene W. Landy -0- N/A -0- 150,000 $-0- / $9,375
Employment Agreement
On December 9, 1994, the Company and Eugene W. Landy entered
into an Employment Agreement under which Mr. Landy receives an
annual base compensation (management fee) of $110,000 (as amended)
plus bonuses and customary fringe benefits, including health
insurance and five weeks vacation. Additionally, there will be
bonuses voted by the Board of Directors. The Employment Agreement
is terminable by either party at any time, subject to certain notice
requirements.
Page 24
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION (CONT'D)
On severance of employment for any reason, Mr. Landy will
receive severance of $300,000, payable $100,000 on severance and
$100,000 on the first and second anniversaries of severance.
In the event of disability, Mr. Landy's compensation shall
continue for a period of three years, payable monthly.
On retirement, Mr. Landy shall receive a pension of $40,000 a
year for ten years, payable in monthly installments.
In the event of death, Mr. Landy's designated beneficiary shall
receive $300,000, $150,000 thirty days after death and the balance
one year after death.
The Employment agreement terminates December 31, 1999.
Thereafter, the term of the Employment Agreement shall be
automatically renewed and extended for successive one-year periods.
Other Information
The Directors received a fee of $800 for each Board Meeting
attended.
Except for specific agreements, the Company has no retirement
plan in effect for Officers, Directors or employees and, at present,
has no intention of instituting such a plan.
Cronheim Management Company received the sum of $17,681 in 1997
for management fees. David Cronheim Company received $26,510 in
1997 for commissions. These totals are based on amounts paid or
accrued during the fiscal year. Management believes that the
aforesaid fees are no more than what the Company would pay for
comparable services elsewhere.
Report of Board of Directors on Executive Compensation
Overview and Philosophy
The Company has a Compensation Committee consisting of two
independent outside Directors. This Committee is responsible for
making recommendations to the Board of Directors concerning
compensation. The Compensation Committee takes into consideration
three major factors in setting compensation.
The first consideration is the overall performance of the
Company. The Board believes that the financial interests of the
executive officers should be aligned with the success of the Company
and the financial interests of its shareholders. Increases in funds
from operations, the enhancement of the Company's equity portfolio,
and the success of the Dividend Reinvestment and Stock Purchase Plan
all contribute to increases in stock prices, thereby maximizing
shareholders' return.
The second consideration is the individual achievements made by
each officer. The Company is a small real estate investment trust
(REIT). The Board of Directors is aware of the contributions made
by each officer and makes an evaluation of individual performance
based on their own familiarity with the officer.
Page 25
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION (CONT'D)
Overview and Philosophy (Cont'd)
The final criteria in setting compensation is comparable wages
in the industry. In this regard, the REIT industry maintains
excellent statistics.
Evaluation
The Company's funds from operations continue to increase. The
Committee reviewed the progress made by Eugene W. Landy, Chief
Executive Officer, in shifting the Company's focus from mortgage
loans to equity properties. The Committee also noted that Mr.
Landy's current compensation was less than the average salary
received by Chief Executive Officers of other REIT's. His base
compensation under this contract was increased to $110,000 per year.
The Committee has also decided to grant Mr. Landy a bonus of $50,000
in 1997.
Comparative Stock Performance
The following line graph compares the total return of the
Company's common stock for the last five fiscal years to the NAREIT
All REIT Total Return Index, published by the National Association
of Real Estate Investment Trusts (NAREIT), and the S&P 500 Index
for the same period. The total return reflects stock price
appreciation and dividend reinvestment for all three comparative
indices. The information herein has been obtained from sources
believed to be reliable, but neither its accuracy nor its
completeness is guaranteed.
Monmouth Real
Year Estate Corporation NAREIT S&P 500
1992 100 100 100
1993 127 113 131
1994 124 117 125
1995 120 152 140
1996 136 183 168
1997 170 257 234
Page 26
<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On September 30, 1997, no person owned of record or was known
by the Company to own beneficially more than five percent of the
shares of the Corporation, except as follows:
Amount and Nature
Title of Name and Address of Beneficial Percent
Class of Beneficial Owner Ownership of Class
Class A Eugene W. Landy 344,099 7.78%
Common 20 Tuxedo Road
Stock Rumson, NJ 07760
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Certain relationships and related party transactions are
incorporated herein by reference to Item 14 and Note 10 of the Notes
to the Financial Statements - Related Party Transactions.
Page 27
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PAGE(S)
(a) (1) The following Financial Statements are filed as part
of this report:
(i) Independent Auditors' Report 30
(ii) Balance Sheets as of September 30, 1997 and 1996 31
(iii) Statements of Income for the years ended
September 30, 1997, 1996 and 1995 32
(iv) Statements of Shareholders' Equity for the years
ended September 30, 1997, 1996 and 1995 33
(v) Statements of Cash Flows for the years ended
September 30, 1997, 1996 and 1995 34
(vi) Notes to the Financial Statements 35 - 48
(a) (2) The following Financial Statement Schedule is filed
as part of this report:
(i) Schedule III - Real Estate and Accumulated
Depreciation as of September 30, 1997 49 - 51
Page 28
<PAGE>
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON ON FORM 8-K
(a) (3) Exhibits
(3) Articles of Incorporation and By-Laws
(i) Reference is hereby made to the Certificate of
Incorporation of Monmouth Real Estate Investment
Corporation filed with the Securities and Exchange
Commission on April 13, 1990 on Form S-4
(Registration No. 33-34103).
(ii) Reference is hereby made to the By-laws of Monmouth
Real Estate Investment Corporation filed with the
Securities and Exchange Commission on April 3, 1990 on
Form S-4 (Registration No. 33-34103).
(10) Material Contracts
(i) Employment Agreement with Mr. Eugene W. Landy dated
December 9, 1994 is incorporated by reference to that
filed with the Company's Form 10-K filed with the
Securities and Exchange Commission on December 28, 1994.
(ii) Employment Agreement with Mr. Ernest V. Bencivenga dated
November 9, 1993 is incorporated by reference to that
filed with the Company's Form 10-K filed with the
Securities and Exchange Commission on December 28, 1994.
(28) Additional Exhibits
Reference is hereby made to the Agreement and Plan of Merger
dated April 23, 1990 by and between Monmouth Real Estate
Investment Trust and Monmouth Real Estate Investment
Corporation filed with the Securities and Exchange Commission
on April 3, 1990 on Form S-4 (Registration No. 33-34103).
Report on Form 8-K
None
Page 29
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Monmouth Real Estate Investment Corporation:
We have audited the financial statements of Monmouth Real Estate
Investment Corporation as listed in the accompanying index. In
connection with our audits of the financial statements, we also have
audited the financial statement schedule as listed in the
accompanying index. These financial statements and financial
statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule 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 Monmouth
Real Estate Investment Corporation as of September 30, 1997 and
1996, and the results of its operations and its cash flows for each
of the years in the three-year period ended September 30, 1997 in
conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
Short Hills, New Jersey
November 21, 1997
Page 30
<PAGE>
<TABLE>
<CAPTION>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
BALANCE SHEETS
AS OF SEPTEMBER 30,
ASSETS 1997 1996
<S> <C> <C>
Real Estate Investments:
Land $ 6,141,724 $ 4,929,924
Buildings, Improvements and Equipment,
net of Accumulated Depreciation of
$5,482,527 and $4,494,322, respectively 32,606,220 25,294,699
Mortgage Loans Receivable 195,583 262,585
__________ __________
Total Real Estate Investments 38,943,527 30,487,208
Cash and Cash Equivalents 269,291 244,394
Securities Available for Sale at Fair Value 3,250,147 607,975
Interest and Other Receivables 542,177 552,091
Prepaid Expenses 125,498 123,669
Lease Costs - Net of Accumulated Amortization 100,602 55,347
Investments in Hollister '97, LLC 1,010,000 -0-
Other Assets 701,481 467,392
__________ __________
TOTAL ASSETS $ 44,942,723 $ 32,538,076
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage Notes Payable $ 21,079,238 $ 15,216,610
Loans Payable 3,190,510 500,000
Deferred Gains - Installment Sales 138,532 185,989
Other Liabilities 645,155 526,095
__________ __________
Total Liabilities 25,053,435 16,428,694
__________ __________
Shareholders' Equity:
Common Stock - Class A - $.01 Par Value,
8,000,000 Shares Authorized; 4,421,847
and 3,800,924 Shares Issues and Outstanding
in 1997 and 1996, respectively 44,218 38,009
Common Stock - Class B - $.01 Par Value, 100,000
Shares Authorized, No Shares Issued or Outstanding -0- -0-
Additional Paid-in Capital 19,450,137 16,044,359
Unrealized Holding Gains on Securities
Available for Sale 394,933 27,014
__________ __________
Total Shareholders' Equity 19,889,288 16,109,382
__________ __________
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 44,942,723 $ 32,538,076
========== ==========
See Accompanying Notes to the Financial Statements
Page 31
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30,
1997 1996 1995
INCOME:
<S> <C> <C> <C>
Rental and Occupancy Charges $ 5,354,301 $ 4,474,279 $ 4,168,549
Interest and Other Income 444,398 133,155 72,310
_________ _________ _________
TOTAL INCOME 5,798,699 4,607,434 4,240,859
_________ _________ _________
EXPENSES:
Interest Expense 1,711,466 1,252,180 1,372,596
Management Fees 17,681 17,825 10,540
Real Estate Taxes 295,830 268,594 214,527
Professional Fees 419,854 342,417 314,335
Operating Expenses 319,883 302,752 340,204
Office and General Expense 181,083 166,287 229,386
Director Fees 31,000 31,300 28,400
Depreciation 988,205 852,229 783,704
_________ _________ _________
TOTAL EXPENSES 3,965,002 3,233,584 3,293,692
_________ _________ _________
Income Before Gains 1,833,697 1,373,850 947,167
Gains on Sale of Assets -
Investment Property 47,457 22,249 38,766
_________ _________ _________
NET INCOME $ 1,881,154 $ 1,396,099 $ 985,933
========= ========= =========
PER SHARE INFORMATION:
Average Number of Shares
Outstanding 4,047,759 3,584,364 3,212,064
Income Before Gains $ .45 $ .38 $ .30
Gains on Sale of Assets -
Investment Property .01 .01 .01
_____ _____ _____
NET INCOME $ .46 $ .39 $ .31
===== ===== =====
See Accompanying Notes to the Financial Statements
Page 32
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30,
Unrealized
Holding
Gains on
Additional Undis- Securities
Common Stock Paid-In tributed Available
Number Amount Capital Income for Sale
<S> <C> <C> <C> <C> <C>
Balance September 30, 1994 3,066,002 $30,660 $12,796,784 $ 329,895 $ -0-
Shares Issued in connection
with the Dividend Reinvestment
and Stock Purchase Plan 326,043 3,260 1,647,314 -0- -0-
Distributions -0- -0- (288,891)(1,315,828) -0-
Net Income -0- -0- -0- 985,933 -0-
Unrealized Holding Gains on
Securities Available for Sale -0- -0- -0- -0- 58,740
_________ ______ __________ _________ ______
Balance September 30, 1995 3,392,045 33,920 14,155,207 -0- 58,740
Shares Issued in connection
with the Dividend Reinvestment
and Stock Purchase Plan 408,879 4,089 2,288,380 -0- -0-
Distributions -0- -0- (399,228)(1,396,099) -0-
Net Income -0- -0- -0- 1,396,099 -0-
Unrealized Holding Gains on
Securities Available for Sale -0- -0- -0- -0- (31,726)
_________ ______ __________ _________ ______
Balance September 30, 1996 3,800,924 38,009 16,044,359 -0- 27,014
Shares Issued in connection
with the Dividend Reinvestment
and Stock Purchase Plan 620,923 6,209 3,580,029 -0- -0-
Distributions -0- -0- (174,251)(1,881,154) -0-
Net Income -0- -0- -0- 1,881,154 -0-
Unrealized Holding Gains on
Securities Available for Sale -0- -0- -0- -0- 367,919
_________ ______ __________ _________ _______
Balance September 30, 1997 4,421,847 $44,218 $19,450,137 $ -0- $394,933
========= ====== ========== ========= =======
See Accompanying Notes to the Financial Statements
Page 33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30,
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,881,154 $ 1,396,099 $ 985,933
Noncash Items Included in
Net Income:
Depreciation 988,205 852,229 783,704
Amortization 36,861 73,122 160,449
Gains on Sales of Assets-
Investment Property (47,457) (22,249) (38,766)
Gains on Sales of Securities (75,323) (66,933) -0-
Changes In:
Interest & Other Receivables 9,914 29,156 (142,887)
Prepaid Expenses (1,829) (8,854) (209)
Other Assets and Lease Costs (316,205) (224,910) 520,096
Other Liabilities 119,060 155,901 (1,281)
__________ __________ __________
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 2,594,380 2,183,561 2,267,039
__________ __________ __________
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Land, Buildings
and Improvements (9,511,526) (2,565,059) (3,683,098)
Investment in Hollister '97, LLC (1,010,000) -0- -0-
Collections on Installment Sales 67,002 31,412 54,732
Purchase of Securities Available
for Sale (2,778,904) (514,380) -0-
Proceeds from Sale of Securities
Available for Sale 579,974 214,650 -0-
__________ __________ __________
NET CASH USED IN
INVESTING ACTIVITIES (12,653,454) (2,833,377) (3,628,366)
__________ __________ __________
NET CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Mortgages 6,930,776 1,500,000 2,500,000
Proceeds from Loans 9,390,510 500,000 -0-
Principal Payments of Mortgages (1,068,148) (1,746,951) (2,494,749)
Principal Payments of Loans (6,700,000) -0- -0-
Proceeds from Issuance of
Class A Common Stock 2,677,007 1,512,604 897,115
Dividends Paid (1,146,174) (1,015,462) (851,260)
__________ __________ __________
NET CASH PROVIDED FROM
FINANCING ACTIVITIES 10,083,971 750,191 51,106
__________ __________ __________
Net Increase (Decrease) in Cash 24,897 100,375 (1,310,221)
Cash and Cash Equivalents
at Beginning of Year 244,394 144,019 1,454,240
__________ __________ __________
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 269,291 $ 244,394 $ 144,019
========== ========== ==========
See Accompanying Notes to the Financial Statements
Page 34
</TABLE>
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
Monmouth Real Estate Investment Corporation (the Company)
operates as a real estate investment trust deriving its income
primarily from real estate rental operations. As of September 30,
1997 and 1996, rental properties consist of sixteen and fourteen
commercial holdings, respectively, These properties are located in
New Jersey, New York, Pennsylvania, North Carolina, Mississippi,
Massachusetts, Kansas, Iowa, Missouri, Illinois and Virginia.
Use of Estimates
In preparing the financial statements, management is required
to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from these
estimates.
Buildings, Improvements and Equipment
Buildings, improvements and equipment are stated at the lower
of depreciated cost or net realizable value. Depreciation is
computed based on the straight-line method over the estimated useful
lives of the assets. These lives range from 5 to 40 years. The
Company accounts for its undivided interest in the Somerset property
based upon its pro rata share of assets, liabilities, revenues and
expenses. If there is an event or change in circumstances that
indicates that the basis of an investment property may not be
recoverable, management assesses the possible impairment of value
through evaluation of the estimated future cash flows of the
property, on an undiscounted basis, as compared to the property's
current carrying value. A property's carrying value would be
adjusted, if necessary, to reflect an impairment in the value of
the property.
Revenue Recognition
Rental income from tenants with leases having scheduled rental
increases are recognized on a straight-line basis over the term of
the lease.
Gains and Deferred Gains on Installment Sales
Gains on the sale of real estate investments are recognized by
the full accrual method when the criteria for the method are met.
Generally, the criteria are met when the profit on a given sale is
determinable, and the seller is not obliged to perform significant
activities after the sale to earn the profit. Alternatively, when
the foregoing criteria are not met, the Company recognizes gains by
the installment method. At September 30, 1997 and 1996, there was
one deferred gain related to the 1986 sale of property located in
Howell Township in the amount of $138,532 and $185,989, respectively.
Page 35
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Securities Available for Sale
The Company classifies its securities among three categories:
Held-to-maturity, trading and available-for-sale.
The Company's securities at September 30, 1997 and 1996 are
all classified as available-for-sale and are carried at fair value.
Gains or losses on the sale of securities are based on identifiable
cost and are accounted for on a trade date basis. Unrealized
holding gains and losses are excluded from earnings and reported as
a separate component of Shareholders' Equity until realized.
Cash Equivalents
Cash equivalents consist of money market funds.
Investment in Hollister `97, LLC
The Company's 25% investment in Hollister `97, LLC is accounted
for under the equity method. Under the equity method, the initial
investment is recorded at cost. The carrying amount of the
investment is increased or decreased to reflect the Company's share
of income or loss and is also reduced to reflect any dividends
received. An unrelated New Jersey limited partnership owns the
remaining 75%.
Earnings Per Share
Net income per share is computed using the weighted average
number of shares outstanding, adjusted for the exercise, or
potential exercise, of any dilutive outstanding stock options (See
Note 8).
Income Tax
The Company has elected to be taxed as a Real Estate Investment
Trust (REIT) under Sections 856-858 of the Internal Revenue Code.
The Company will not be taxed on the portion of its income which is
distributed to shareholders, provided it distributes at least 95% of
its taxable income, has at least 75% of its assets in real estate
investments and meets certain other requirements for qualification
as a REIT.
Page 36
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Stock Option Plan
Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation", permits entities to
recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123
also allows entities to continue to apply the provisions of
Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants
made as if the fairvalue-based method defined in SFAS No. 123 has
been applied. The Company has elected to apply the provisions of APB
Opinion No. 25 and record compensation expense on the date of the
grant only if the current market price of the underlying stock
exceeded the exercise price. The Company will also provide the pro
forma disclosure provisions of SFAS No. 123.
Reclassifications
Certain amounts in the financial statements for the prior years
have been reclassified to conform to the statement presentation for
the current year.
NOTE 2 - MORTGAGE LOANS RECEIVABLE
The following is a summary of the mortgage loans receivable at
September 30, 1997 and 1996:
Rate Maturity 9/30/97 9/30/96
Bonim Associates, Inc.
Howell Township Property 9% 1999 $195,583 $262,585
The original amount of the mortgage receivable with Bonim Associates,
Inc. was $514,000.
Page 37
<PAGE>
<TABLE>
<CAPTION>
NOTE 3 - REAL ESTATE INVESTMENTS
The following is a summary of the cost and accumulated
depreciation of the Company's property and equipment at September 30, 1997
and 1996:
Buildings,
Improvements, Accumulated
September 30, 1997 Land and Equipment Depreciation
<S> <C> <C> <C>
NEW JERSEY:
Ramsey Industrial Building $ 52,639 $ 1,130,214 $ 524,520
Somerset(1) Shopping Center 55,182 1,065,995 689,158
Eatontown Admin. Office -0- 7,517 1,505
South Brunswick Industrial Building 1,128,000 4,087,400 589,403
PENNSYLVANIA:
Monaca Industrial Park 330,773 1,757,322 852,695
NEW YORK:
Monsey Industrial Building 119,910 1,742,521 764,803
Orangeburg Industrial Building 694,720 2,977,372 460,839
NORTH CAROLINA:
Greensboro Industrial Building 327,100 1,853,700 262,450
Fayetteville Industrial Building 172,000 4,467,885 57,278
MISSISSIPPI:
Jackson Industrial Building 218,000 1,233,500 164,809
Richland Industrial Building 211,000 1,195,000 107,239
MASSACHUSETTS:
Franklin Industrial Building 566,000 4,148,000 372,241
KANSAS:
Wichita Industrial Building 268,000 1,518,000 136,244
IOWA:
Urbandale Industrial Building 310,000 1,758,000 157,763
MISSOURI:
O'Fallon Industrial Building 264,000 3,302,000 211,530
VIRGINIA:
Virginia Beach Industrial Building 384,600 2,150,000 82,689
ILLINOIS:
Schaumburg Industrial Building 1,039,800 3,694,321 47,361
_________ __________ _________
Total at September 30, 1997 $ 6,141,724 $ 38,088,747 $ 5,482,527
========= ========== =========
(1) This represents the Company's 2/3 undivided interest in the
property.
Page 38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOTE 3 - REAL ESTATE INVESTMENTS (CONT'D)
Buildings,
Improvements, Accumulated
September 30, 1996 Land and Equipment Depreciation
<S> <C> <C> <C>
NEW JERSEY:
Ramsey Industrial Building $ 52,639 $ 1,123,839 $ 496,432
Somerset(1) Shopping Center 55,182 1,062,395 648,406
South Brunswick Industrial Building 1,128,000 4,087,400 459,633
PENNSYLVANIA:
Monaca Industrial Park 330,773 1,672,262 779,931
NEW YORK:
Monsey Industrial Building 119,910 1,707,553 707,476
Orangeburg Industrial Building 694,720 2,977,372 366,307
NORTH CAROLINA:
Greensboro Industrial Building 327,100 1,853,700 203,565
MISSISSIPPI:
Jackson Industrial Building 218,000 1,233,500 125,645
Richland Industrial Building 211,000 1,195,000 76,600
MASSACHUSETTS:
Franklin Industrial Building 566,000 4,148,000 265,886
KANSAS:
Wichita Industrial Building 268,000 1,518,000 97,322
IOWA:
Urbandale Industrial Building 310,000 1,758,000 112,688
MISSOURI:
O'Fallon Industrial Building 264,000 3,302,000 126,867
VIRGINIA:
Virginia Beach Industrial Building 384,600 2,150,000 27,564
_________ __________ _________
Total at September 30, 1996 $ 4,929,924 $ 29,789,021 $ 4,494,322
========= ========== =========
(1) This represents the Company's 2/3 undivided interest in the
property.
Page 39
</TABLE>
<PAGE>
NOTE 4 - ACQUISITIONS
On May 27, 1997, the Company purchased a 148,000 foot warehouse
facility in Fayetteville, North Carolina. This warehouse facility is
100% net-leased to Belk Enterprises, Inc. The total price,
including closing costs, was $4,639,885. The Company assumed an
existing mortgage of approximately $3,400,000. This mortgage
payable is at an interest rate of 7.8% and is due August 1, 2006.
The Company also utilized $1,100,000 of its revolving credit line
with Summit Bank.
On June 4, 1997, the Company invested $1,000,000 in a limited
liability company, Hollister `97, LLC, representing a 25% ownership
interest. The sole business of this LLC is the ownership and
operation of the Hollister Corporate Park in Teterboro, New Jersey.
Under the agreement, the Company is to receive a cumulative
preferred 11% annual return on its investment.
On June 11, 1997, the Company purchased a 73,500 square foot
warehouse facility in Schaumburg, Illinois. The warehouse facility
is 100% net-leased to Federal Express Corporation. The total
purchase price, including closing costs, was $4,734,121. The
Company entered into a mortgage loan for $3,500,000. This mortgage
payable is at an interest rate of 8.48% and is due July 1, 2012.
The Company also utilized approximately $1,100,000 of its revolving
credit line with Summit Bank.
On May 10, 1996, the Company purchased a 67,926 square foot
warehouse facility in Virginia Beach, Virginia. This warehouse
facility is 100% net-leased to the Raytheon Service Company
(Raytheon). The total purchase price, including closing costs was
$2,534,600. The Company entered into a $1,500,000 mortgage loan
with Life Savings Bank at an interest rate of 8.4% (subject to an
adjustment after five years based on the US Treasury Index, plus
2.5%) which matures on June 1, 2021. The Company also used
$1,000,000 of its line of credit with Summit Bank.
Page 40
<PAGE>
NOTE 5 - SECURITIES AVAILABLE FOR SALE
The following is a summary of securities available for sale at
September 30, 1997 and 1996:
1997 1996
Market
Market
Description Cost Value
Cost
Value
Sizeler Property Investors Convert.
Subordinated Debentures-2003 $ 612,160 $ 648,930 $ 91,033 $ 88,500
Alexander Haagen Properties, Inc.
Ser A Convert. Subordinated
Debentures-2001 329,552 350,438 -0- -0-
Pacific Gulf Properties, Inc. Convert.
Subordinated Debenture-2001 50,999 60,000 -0- -0-
MidAtlantic Realty Corp. Conv.
Subordinated Debenture-2003 95,352 120,000 -0- -0-
First Union Real Estate Equity & Subord.
Convert. Deb. Mortgage Inv.-2003 240,459 257,188 -0- -0-
Oasis Residential Inc. (OASPRA) 252,089 263,750 -0- -0-
Bradley Real Estate Inc. (BTR) 33,200 42,000 -0- -0-
Western Inv.REIT Share Ben.Int.(WIR) 25,450 27,000 -0- -0-
PA Real Estate Investment (PEI) 108,227 126,250 -0- -0-
IRT Property Company (IRT) 19,240 25,500 -0- -0-
HRE Properties (HRE) 242,282 294,450 205,528 219,600
MGI Properties (MGI) 72,850 100,500 122,125 131,250
Mid America Realty Inv.Inc.(MDI) 444,280 531,250 162,275 168,625
Sizeler Properties
Investors, Inc.(SIZ) 300,874 370,015 -0- -0-
Alexander Haagen
Properties, Inc.(ACH) 28,200 32,876 -0- -0-
_________ _________ _______ _______
Total $2,855,214 $3,250,147 $580,961 $607,975
========= ========= ======= =======
During the fiscal years ended September 30, 1997, 1996 and
1995, gains on sales of securities amounted to $75,323, $66,933 and
$-0-, respectively, which has been included in Other Income. Gross
unrealized gains at September 30, 1997 and 1996 were $394,933 and
$27,014, respectively, with no unrealized losses.
NOTE 6 - SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
The Company has approximately 1,287,000 square feet of property
of which approximately 282,000 square feet, or 22%, is leased to
Keebler, approximately 148,000 square feet, or 12%, is leased to
Belk Enterprises and approximately 145,000 square feet, or 11%, is
leased to Amway Corporation at September 30, 1997. Rental and
occupancy charges from Keebler totaled approximately $1,773,000,
$1,773,000 and $1,772,000, respectively, for the years ended
September 30, 1997, 1996 and 1995, respectively. Rental and
occupancy charges from the Amway Corporation totaled approximately
$933,748 for the year ended September 30, 1997 and $595,000 for each
of the years ended September 30, 1996 and 1995. Rental and
occupancy charges from Belk Distributors Inc. totaled $181,426 for
year end September 30, 1997. During 1997, 1996 and 1995, rental
income and occupancy charges from properties leased to these
companies approximated 54%, 56% and 57% of total rental and
occupancy charges, respectively.
Page 41
<PAGE>
NOTE 7 - MORTGAGE NOTES PAYABLE
The following is a summary of the mortgages payable at
September 30, 1997 and 1996:
Fiscal Balance
Mortgage Rate Maturity 9/30/97 9/30/96
Industrial Building
Orangeburg, New York 7% 2004 $ 1,952,286 $ 2,158,097
Industrial Building
South Brunswick, NJ P+1% 1998 1,295,000 1,470,000
Industrial Building
Jackson, Mississippi 8.5% 2008 667,882 703,964
Industrial Building
Greensboro, N.Carolina 10% 1998 1,381,238 1,400,043
Industrial Building
Franklin, Massachusetts 7% 2004 2,222,602 2,456,910
Industrial Building
Wichita, Kansas 10.25% 2016 1,248,045 1,269,021
Industrial Building
Urbandale, Iowa 7% 2004 1,058,740 1,170,352
Industrial Building
Richland, Mississippi 7.5% 2004 745,220 813,606
Industrial Building
O'Fallon, Missouri 8.5% 2007 2,151,014 2,280,493
Industrial Building
Virginia Beach, VA 8.50% 2021 1,475,468 1,494,124
Industrial Building
Fayetteville, NC 7.8% 2006 3,411,024 -0-
Industrial Building
Schaumburg, IL 8.48% 2012 3,470,719 -0-
__________ __________
Total Mortgage Notes Receivable $21,079,238 $15,216,610
========== ==========
Page 42
<PAGE>
NOTE 7 - MORTGAGE NOTES PAYABLE (CONT'D)
Principal on the foregoing debt is scheduled to be paid as follows:
Year Ending September 30, 1998 $ 3,771,732
1999 1,181,801
2000 1,274,979
2001 1,375,583
2002 1,484,213
Thereafter 11,990,930
__________
$21,079,238
==========
Lines of Credit
The Company has a $1,000,000 line of credit with Summit at an
interest rate of prime plus 1%. This line of credit is secured by a
second mortgage on the South Brunswick Industrial Building which
expires on January 30, 1998. As of September 30, 1997, this was
fully available.
The Company also has an unsecured $5,000,000 line of credit at
an interest rate of Prime which expires on April 17, 2000. At
September 30, 1997, the Company had utilized $3,190,510 of this
line of credit.
NOTE 8 - STOCK OPTION PLAN
On April 24, 1997, the shareholders approved and ratified the
Company's 1997 Stock Option Plan authorizing the grant to officers,
directors and key employees options to purchase up to 750,000 shares
of common stock. Options may be granted any time up to December 31,
2006. No option shall be available for exercise beyond ten years.
All options are exercisable after one year from the date of grant.
The option price shall not be below the fair market value at date of
grant. Canceled or expired options are added back to the "pool" of
shares available under the Plan.
The Company elected to follow APB Opinion No. 25 in accounting
for its stock option plans, and accordingly, no compensation cost
has been recognized. Had compensation cost been determined
consistent with SFAS No. 123, the Company's net income and earnings
per share would have been reduced to the pro forma amounts as follows:
1997
Net Income As reported $1,881,154
Pro forma 1,865,941
Net Income Per share As reported $ .46
Pro forma .46
Page 43
<PAGE>
NOTE 8 - STOCK OPTIONS PLAN (CONT'D)
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1997:
dividend yield of 9 percent; expected volatility of 25 percent; risk-
free interest rates of 6.5 percent; and expected lives of five years.
A summary of the status of the Company's stock option plan as
of September 30, 1997 are as follows:
Weighted-
Average
Exercise
Shares Price
Outstanding at beginning of year -0- $ -0-
Granted 300,000 6.28
Exercised -0- -0-
_______
Outstanding at end of year 300,000
=======
Options exercisable at end of year -0-
=======
Weighted-average fair value of
options granted during the year .61
======
The following is a summary of stock options outstanding as of
September 30, 1997:
Date of Number of Number of Option Expiration
Grant Grants Shares Price Date
04/30/97 10 135,000 $5.9375 04/30/02
04/30/97 2 165,000 6.5625 04/30/02
As of September 30, 1997, there were 450,000 shares available
for grant under this plan.
NOTE 9 - INCOME FROM LEASES
The Company derives income primarily from operating leases on
its commercial properties. In general, these leases are written for
periods up to ten years with various provisions for renewal. These
leases generally contain clauses for reimbursement (or direct
payment) of real estate taxes, maintenance, insurance and certain
other operating expenses of the properties. Minimum rents due under
noncancellable leases at September 30, 1997 are scheduled as
follows: 1998 - $5,351,000; 1999 - $4,735,000; 2000 - $4,667,000;
2001 $3,221,000; thereafter - $8,614,000.
Page 44
<PAGE>
NOTE 10 - RELATED PARTY TRANSACTIONS
Eugene W. Landy received $3,200, $3,200 and $2,800 during the
years ended 1997, 1996 and 1995, respectively, as Director. The
firm of Landy & Landy received $138,500, $111,003 and $100,645
during the years ended 1997, 1996 and 1995, respectively, as
management and legal fees. An accrual of $109, 000 was made in
1997, and $59,000 in 1996 and 1995 for pension and other benefits in
accordance with Mr. Landy's employment contract. Additionally, the
Board of Directors has granted to Mr. Landy a loan of $100,000 at an
interest rate of 10% due May 23, 1998. Principal and accrued
interest is payable at maturity.
On December 9, 1994, the Company and Eugene W. Landy entered
into an Employment Agreement under which, on severance of employment
for any reason, Mr. Landy will receive severance of $300,000 payable
$100,000 on severance and $100,000 on the first and second
anniversaries of severance.
In the event of disability, Mr. Landy's compensation shall
continue for a period of three years, payable monthly.
On retirement, Mr. Landy shall receive a pension of $40,000 a
year for ten years, payable in monthly installments.
In the event of death, Mr. Landy's designated beneficiary shall
receive $300,000; $150,000 thirty days after death, and the balance
one year after death.
The Employment Agreement terminates December 31, 1999.
Thereafter, the term of the Employment Agreement shall be
automatically renewed and extended for successive one-year periods.
The Employment Agreement is terminable by either party at any time,
subject to certain notice requirements.
Cronheim Management Company received the sum of $17,681,
$17,825 and $10,540 for management fees during the years ended 1997,
1996 and 1995, respectively. David Cronheim Company received
$46,188, $21,777 and $11,877 in commissions in 1997, 1996 and 1995,
respectively. Daniel Cronheim received $3,200, $3,350 and $2,800 for
Director and Committee fees in 1997, 1996 and 1995, respectively.
NOTE 11 - TAXES
Income Tax
The Company has elected to be taxed as a Real Estate Investment
Trust under the applicable provisions of the Internal Revenue Code
and the comparable New Jersey Statutes. Under such provisions, the
Company will not be taxed on that portion of its taxable income
distributed currently to shareholders, provided that at least 95% of
its taxable income is distributed. As the Company intends to
distribute all of its income currently, no provision has been made
for income taxes.
Federal Excise Tax
The Company does not have an excise tax liability for the
calendar years 1997, 1996 and 1995, since it intends to or has
distributed all of its annual income.
Page 45
<PAGE>
NOTE 12 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company implemented a dividend reinvestment and stock
purchase plan (the "Plan") effective December 15, 1987. Under the
terms of the Plan, and subsequent offerings, shareholders who
participate may reinvest all or part of their dividends in
additional shares of the Company at approximately 95% of market
price. According to the terms of the Plan, shareholders may also
purchase additional shares, at approximately 95% of market price by
making optional cash payments monthly.
Amounts received, including dividend reinvestment of $909,231
and $779, 865 in 1997 and 1996, respectively, and shares issued in
connection with the Plan for the years ended September 30, 1997 and
1996 were as follows:
1997 1996
Amounts Received* $3,586,238 $2,292,469
Shares Issued 620,923 408,879
*These amounts are net of the 5% discount under the Plan. The total
discount amounted to $145,623 and $79,889 during the fiscal year
ended September 30, 1997 and 1996, respectively.
NOTE 13 - DISTRIBUTIONS
The following cash distributions were paid to shareholders
during the years ended September 30, 1997 and 1996:
1997 1996
Quarter Ended Amount Per Share Amount Per Share
December 31 $ 484,069 $.125 $ 431,342 $.125
March 31 492,511 .125 441,807 .125
June 30 516,490 .130 455,637 .125
September 30 562,335 .130 466,541 .125
_________ ____ _________ ____
$2,055,405 $ .51 $1,795,327 $ .50
========= ==== ========= ====
The above amounts do not include discounts under the Dividend
Reinvestment and Stock Purchase Plan.
On September 25, 1997, the Company declared a dividend of $0.13
to be paid on December 15,1997 to shareholders of record November 17, 1997.
Page 46
<PAGE>
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose certain information about
fair values of financial instruments, as defined in Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments."
Limitations
Estimates of fair value are made at a specific point in time
based upon where available, relevant market prices and information
about the financial instrument. Such estimates do not include any
premium or discount that could result from offering for sale at one
time the Company's entire holdings of a particular financial
instrument. For a portion of the Company's financial instruments,
no quoted market value exists. Therefore, estimates of fair value
are necessarily based on a number of significant assumptions (many
of which involve events outside the control of management). Such
assumptions include assessments of current economic conditions,
perceived risks associated with these financial instruments and
their counterparties, future expected loss experience and other
factors. Given the uncertainties surrounding these assumptions, the
reported fair values represent estimates only and, therefore, cannot
be compared to the historical accounting model. Use of different
assumptions or methodologies is likely to result in significantly
different fair value estimates.
The fair value of cash and cash equivalents and mortgage loans
receivable approximates their current carrying amounts since all
such items are short-term in nature. The fair value of securities
available for sale is based upon quoted market values. The fair
value of mortgage notes payable and loans payable approximate their
current carrying amounts since such amounts payable are at a
weighted-average current market rate of interest.
NOTE 15 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (Statement 128). Statement 128 supersedes APB
Opinion No. 15, "Earnings Per Share", and specifies the computation,
presentation, and disclosure requirements for earnings per share
(EPS) for entities with publicly held common stock or potential
common stock. Statement 128 replaces Primary EPS and Fully Diluted
EPS with Basic EPS and Diluted EPS, respectively. Statement 128 also
requires dual presentation of Basic and Diluted EPS on the face of the
income statement for entities with complex capital structures and a
reconciliation of the information utilized to calculate Basic EPS to
that used to calculate Diluted EPS. Statement 128 is effective for
financial statement periods ending after December 15, 1997. Earlier
application is not permitted. After adoption, all prior period EPS
is required to be restated to conform with Statement 128.
The adoption of Statement 128 is not expected to have a significant
impact on EPS, as currently reported.
In June 1997, FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (Statement 130).
Statement 130 established standards for reporting and display of
comprehensive income and its components in a full set of general
purpose financial statements. Under Statement 130, comprehensive
income is divided into net income and other comprehensive income.
Other comprehensive income includes items previously recorded
directly in equity, such as
Page 47
NOTE 15 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONT'D)
unrealized gains or losses on securities available for sale.
Statement 130 is effective for interim and annual periods beginning
after December 15, 1997. Comparative financial statements provided
for earlier periods are required to be reclassified to reflect
application of the provisions of the Statement.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (Statement 131). Statement 131 established
standards for the way public business enterprises are to report
information about operating segments in annual financial statements
and requires those enterprises to report selected financial
information about operating segments in interim financial reports to
shareholders. Statement 131 is effective for financial statements
for periods beginning after December 15, 1997. The adoption of
Statement 131 is not expected to have a significant impact on the
disclosures in the financial statements of the Company.
NOTE 16 - CASH FLOW INFORMATION
Cash paid during the years ended September 30, 1997, 1996 and
1995, for interest is $1,711,466, $1,252,180 and $1,372,596, respectively.
During 1997, 1996 and 1995, the Company had $909,231, $779, 865
and $753,459, respectively, of dividends which were reinvested that
required no cash transfers.
In 1997 and 1996, equity securities available for sale is shown
at fair value pursuant to the 1995 adoption of SFAS 115. The
resultant portfolio increases of $394,933 and $27,014, respectively,
relating to unrealized holding gains are shown as a separate
component of shareholders' equity.
Page 48
<PAGE>
Column A Column B Column C Column D
________ ________ ___________________ ________
Initial Cost
___________________
Buildings, Capitalization
Improvements Subsequent to
Description Encumbrances Land & Equipment Acquisition
___________ ____________ ____ ___________ ___________
Industrial Building
Ramsey, NJ $ -0- $ 52,639 $ 291,500 $ 838,714
Shopping Center
Somerset, NJ -0- 55,182 637,097 428,898
Industrial Building
Monaca, PA -0- 330,773 878,081 879,241
Industrial Building
Monsey, NY -0- 119,910 908,473 834,048
Industrial Building
Orangeburg, NY 1,952,286 694,720 2,977,372 -0-
Industrial Building
South Brunswick,NJ 1,295,000 1,128,000 4,087,400 -0-
Industrial Building
Greensboro, NC 1,381,238 327,100 1,853,700 -0-
Industrial Building
Jackson, MS 667,882 218,000 1,233,500 -0-
Industrial Building
Franklin, MA 2,222,602 566,000 4,148,000 -0-
Industrial Building
Wichita, KS 1,248,045 268,000 1,518,000 -0-
Industrial Building
Urbandale, IO 1,058,740 310,000 1,758,000 -0-
Industrial Building
Richland, MS 745,220 211,000 1,195,000 -0-
Industrial Building
O'Fallon, MO 2,151,014 264,000 3,302,000 -0-
Industrial Building
Virginia Beach, VA 1,475,468 384,600 2,150,000 -0-
Industrial Building
Fayetteville, NC 3,411,024 172,000 4,467,885 -0-
Industrial Building
Schaumburg, IL 3,470,719 1,039,800 3,694,321 -0-
__________ _________ __________ _________
$ 21,079,238 $ 6,141,724 $ 35,100,329 $ 2,980,901
========== ========= ========== =========
Page 49A
<PAGE>
Column A Column E(1)(2) Column F
________ ______________________________________ ________
Gross Amount at Which Carried
September 30, 1997
Accumulated
Description Land Bldg, Equip & Imp Total Depreciation
___________ ____ _________________ _____ ____________
Industrial Building
Ramsey, NJ $ 52,639 $ 1,130,214 $ 1,182,853 $ 524,520
Shopping Center
Somerset, NJ 55,182 1,065,995 1,121,177 689,158
Industrial Building
Monaca, PA 330,773 1,757,322 2,088,095 852,695
Industrial Building
Monsey, NY 119,910 1,742,521 1,862,431 764,803
Industrial Building
Orangeburg, NY 694,720 2,977,372 3,672,092 460,839
Industrial Building
South Brunswick,NJ 1,128,000 4,087,400 5,215,400 589,403
Industrial Building
Greensboro, NC 327,100 1,853,700 2,180,800 262,450
Industrial Building
Jackson, MS 218,000 1,233,500 1,451,500 164,809
Industrial Building
Franklin, MA 566,000 4,148,000 4,714,000 372,241
Industrial Building
Wichita, KS 268,000 1,518,000 1,786,000 136,244
Industrial Building
Urbandale, IO 310,000 1,758,000 2,068,000 157,763
Industrial Building
Richland, MS 211,000 1,195,000 1,406,000 107,239
Industrial Building
O'Fallon, MO 264,000 3,302,000 3,566,000 211,530
Industrial Building
Virginia Beach, VA 384,600 2,150,000 2,534,600 82,689
Industrial Building
Fayetteville, NC 172,000 4,467,885 4,639,885 57,278
Industrial Building
Schaumburg, IL 1,039,800 3,694,321 4,734,121 47,361
_________ __________ __________ _________
$6,141,724 $38,081,230 $44,222,954 $5,481,022
========= ========== ========== =========
Page 49B
<PAGE>
Column A Column G Column H Column I
________ ________ ________ ________
Date of Date Depreciable
Description Construction Acquired Life
___________ ____________ ________ ___________
Industrial Building
Ramsey, NJ 1969 1969 7-40
Shopping Center
Somerset, NJ 1970 1970 10-33
Industrial Building
Monaca, PA 1977 1977* 5-31.5
Industrial Building
Monsey, NY 1965 1980 30-31.5
Industrial Building
Orangeburg, NY 1990 1993 31.5
Industrial Building
South Brunswick, NJ 1974 1993 31.5
Industrial Building
Greensboro, NC 1988 1993 31.5
Industrial Building
Jackson, MS 1988 1993 39
Industrial Building
Franklin, MA 1969 1994 39
Industrial Building
Wichita, KS 1974 1994 39
Industrial Building
Urbandale, IO 1985 1994 39
Industrial Building
Richland, MS 1986 1994 39
Industrial Building
O'Fallon, MO 1989 1994 39
Industrial Building
Virginia Beach, VA 1976 1996 39
Industrial Building
Fayetteville, NC 1996 1997 39
Industrial Building
Schaumburg, IL 1997 1997 39
*Buildings and Improvements reacquired in 1986.
Page 49C
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONT'D)
(1) Reconciliation
FIXED ASSETS 9/30/97 9/30/96 9/30/95
Balance-Beginning of Year $34,718,945 $32,153,886 $28,470,788
__________ __________ __________
Additions:
Acquisitions 9,374,006 2,534,600 3,566,000
Improvements 130,003 30,459 117,098
__________ __________ __________
Total Additions 9,504,009 2,565,059 3,683,098
__________ __________ __________
Balance-End of Year (1) $44,222,954 $34,718,945 $32,153,886
========== ========== ==========
ACCUMULATED DEPRECIATION
9/30/97 9/30/96 9/30/95
Balance-Beginning of Year $4,494,322 $3,642,542 $2,859,285
Depreciation 986,700 851,780 783,257
_________ _________ _________
Balance-End of Year $5,481,022 $4,494,322 $3,642,542
========= ========= =========
Page 50
<PAGE>
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
NOTES TO SCHEDULE III
SEPTEMBER 30,
(1) Reconciliation
1997 1996 1995
Balance - Beginning of Year $34,718,945 $32,153,886 $28,470,788
__________ __________ __________
Additions:
Ramsey, New Jersey 6,375 -0- 81,953
Somerset, New Jersey 3,600 -0- 10,784
Monaca, Pennsylvania 85,060 4,725 21,361
Monsey, New York 34,968 25,734 3,000
Orangeburg, New York -0- -0- -0-
South Brunswick, New Jersey -0- -0- -0-
Greensboro, North Carolina -0- -0- -0-
Jackson, Mississippi -0- -0- -0-
Franklin, Massachusetts -0- -0- -0-
Wichita, Kansas -0- -0- -0-
Urbandale, Iowa -0- -0- -0-
Richland, Mississippi -0- -0- -0-
O'Fallon, Missouri -0- -0- 3,566,000
Virginia Beach, Virginia -0- 2,534,600 -0-
Fayetteville, North Carolina 4,639,885 -0- -0-
Schaumburg, Illinois 4,734,121 -0- -0-
__________ __________ __________
Total Additions 9,504,009 2,565,059 3,683,098
__________ __________ __________
$44,222,954 $34,718,945 $32,153,886
========== ========== ==========
(2) The aggregate cost for Federal tax purposes approximates
historical cost.
Page 51
SIGNATURES
Pursuant to the requirements of Section 13 of 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: December 9, 1997 By: /s/ Eugene W. Landy
Eugene W. Landy, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: December 9, 1997 By: /s/ Eugene W. Landy
Eugene W. Landy, President and Director
Date: December 9, 1997 By: /s/ Ernest V. Bencivenga
Ernest V. Bencivenga, Treasurer
and Director
Date: December 9, 1997 By: /s/ Anna T. Chew
Anna T. Chew, Controller and Director
Date: December 9, 1997 By: /s/ Daniel D. Cronheim
Daniel D. Cronheim, Director
Date: December 9, 1997 By: /s/ Boniface DeBlasio
Boniface DeBlasio, Director
Date: December 9, 1997 By: /s/ Ara K. Hovnanian
Ara K. Hovnanian, Director
Date: December 9, 1997 By: /s/ Charles P. Kaempffer
Charles P. Kaempffer, Director
Date: December 9, 1997 By: /s/ Samuel A. Landy
Samuel A. Landy, Director
Date: December 9, 1997 By: /s/ W. Dunham Morey
W. Dunham Morey, Director
Date: December 9, 1997 By: /s/ Robert G. Sampson
Robert G. Sampson, Director
Page 52
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MONMOUTH REAL ESTATE INVESTMENT CORPORATION AS OF
AND FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 269,291
<SECURITIES> 3,250,147
<RECEIVABLES> 542,177
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,187,113
<PP&E> 44,230,471
<DEPRECIATION> 5,482,527
<TOTAL-ASSETS> 44,942,723
<CURRENT-LIABILITIES> 645,155
<BONDS> 21,079,238
0
0
<COMMON> 44,218
<OTHER-SE> 19,845,070
<TOTAL-LIABILITY-AND-EQUITY> 44,942,723
<SALES> 0
<TOTAL-REVENUES> 5,846,156
<CGS> 0
<TOTAL-COSTS> 633,394
<OTHER-EXPENSES> 1,620,142
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,711,466
<INCOME-PRETAX> 1,881,154
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,881,154
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,881,154
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
