SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 11, 1997
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 0-4258 22-1897375
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
125 Wyckoff Road, Eatontown, NJ 07724
(Address of principal executive offices)
Registrant's telephone number, including area code (732) 542-4927
(Former name or former address, if changed since last report.)
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Item 5. Other Events.
On August 6, 1996, Monmouth Real Estate
Investment Corporation (Registrant) entered into a contract
to purchase a 73,500 square foot warehouse facility to be
built in Schaumburg, Illinois from SK Properties I, LLC,
an unrelated entity. This purchase was completed on
June 11, 1997. The warehouse facility is 100% net leased
to Federal Express Corporation. The purchase price was
approximately $4,700,000. Monmouth Real Estate Investment
Corporation paid approximately $100,000 in cash, used
approximately $1,100,000 of its revolving line of credit
with Summit Bank and obtained a mortgage of approximately
$3,500,000. This mortgage payable is at an interest rate
of 8.48% and is due July 1, 2012. The property acquired is
commercial rental property and will continue to be used
as such.
The following are the material factors to be considered
in assessing the property:
* Description of Property - The property acquired
is a 73,500 square foot warehouse facility located at
1270 North Wilkening Road, Schaumburg, Illinois.
* Occupancy Rate and Number of Tenants - The
commercial rental property acquired was constructed in 1997.
Commencing April 1, 1997, the property was 100% occupied
under a 10-year net lease agreement with Federal Express
Corporation. This net lease agreement provides that
operating expenses, including property taxes, insurance,
landscaping, utilities and repairs in the ordinary course
of business, be borne by the tenant.
* Principal Business of Tenant - Federal Express
Corporation uses this property as a distribution facility.
Registrant believes that Federal Express Corporation will
continue to use this property as such.
* Principal Provisions of Lease - The following
are the principal provisions of the lease:
Term Monthly Rent
4/1/97-3/31/02 $ 36,393
4/1/02-3/31/07 40,570
At the end of the lease term, the tenant has two (5)
year options to renew at the prevailing market rent.
The Seller assigned the lease to Registrant.
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* Basis of Acquired Property for Depreciation - The
basis for depreciation is the purchase price of
the property. Approximately 78% of the purchase price
is attributable to building and improvements, which will
be depreciated over a 39 year life on a straight-line
basis (Modified Accelerated Recovery System). The residual
is attributable to land.
* Anticipated Capital Improvements - The Registrant
does not anticipate any significant capital improvements
during the term of the lease described above.
* Insurance Coverage - Insurance on the property is
paid for by the tenant. In the opinion of the Registrant,
this coverage is adequate.
Registrant knows of no other material factors relating
to the property acquired other that those discussed in this
Form 8-K.
The following is pro forma financial information.
The impact of the property acquired to the financial
statements of the Registrant is as follows:
ADJUSTMENTS TO STATEMENT OF INCOME
Rental and Occupancy Charges - Increase of $462,000
based upon amortization of total rental payments for
scheduled rent over the remaining lease term.
Interest Expense - Increase of $386,000 based upon a
mortgage of $3,500,000 at 8.48% interest and total
monthly principal and interest payments of $34,425, and
a revolving line of credit balance increase of $1,100,000
at prime (currently 8.5%).
Depreciation Expense - Increase of $94,000 based upon 78% of the
purchase price being attributed to building and improvements,
and straight-line depreciation over a 39 year life.
Net Income - Decrease of $18,000 (rental and occupancy
charges less interest expense and depreciation expense).
The effect of cash made available by operations will be
an increase of $76,000 (net income plus depreciation).
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ADJUSTMENTS TO THE BALANCE SHEET AT DATE OF PURCHASE
Cash and Cash Equivalents - Decrease of $100,000, the amount of
cash used for the purchase.
Land and Buildings, Improvements and Equipment - Increase of
$4,700,000, based on the purchase price.
Notes Payable - Increase of $1,100,000, the amount used on the
revolving line of credit.
Mortgage Notes Payable - Increase of $3,500,000, the amount of
the mortgage on the acquired property.
Registrant knows of no other financial statement item which would
be materially affected by the acquired property.
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SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto
duly authorized.
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
/s/ Eugene W. Landy
EUGENE W. LANDY
President
Date June 20, 1997
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