URSTADT BIDDLE PROPERTIES INC - Annual Report: 2018 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2018
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 1-12803
URSTADT
BIDDLE PROPERTIES INC.
(Exact name of registrant as specified in its charter)
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Maryland
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04-2458042
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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321 Railroad Avenue, Greenwich, CT
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06830
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code: (203) 863-8200
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $.01 per share
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New York Stock Exchange
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Class A Common Stock, par value $.01 per share
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New York Stock Exchange
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6.75% Series G Cumulative Preferred Stock
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New York Stock Exchange
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6.25% Series H Cumulative Preferred Stock
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New York Stock Exchange
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Common Stock Rights to Purchase Preferred Shares
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New York Stock Exchange
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Class A Common Stock Rights to Purchase Preferred Shares
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New York Stock Exchange
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Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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Yes ☐
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No ☒
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Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act.
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Yes ☐
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No ☒
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Yes ☒
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No ☐
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Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ 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 the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ☒
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):
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Large accelerated filer ☐
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Accelerated filer ☒
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Non-accelerated filer ☐
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Smaller reporting company ☐
Emerging growth company ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Act).
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Yes ☐
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No ☒
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The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of April 30, 2018 (price
at which the common equity was last sold as of the last business day of the Registrant's most recently completed second fiscal quarter): Common Shares, par value $.01 per share, $38,575,941; Class A Common Shares, par value $.01 per share,
$581,567,658.
Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock and Class A Common Stock, as
of January 4, 2019 (latest date practicable): 9,959,206 Common Shares, par value $.01 per share, and 29,926,164 Class A Common Shares, par value $.01 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for Annual Meeting of Stockholders to be held on March 21, 2019 (certain parts as indicated herein) (Part
III).
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Item No.
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Page No.
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PART I
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1.
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1 | |
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1A.
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3 | |
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1B.
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7 | |
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2.
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8 | |
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3.
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10 | |
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4.
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10 | |
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PART II
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5.
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11 | |
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6.
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12 | |
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7.
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13 | |
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7A.
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20 | |
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8.
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21 | |
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9.
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21 | |
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9A.
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21 | |
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9B.
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24 | |
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PART III
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10.
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25 | |
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11.
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25 | |
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12.
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25 | |
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13.
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25 | |
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14.
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25 | |
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PART IV
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15.
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26 | |
| 53 |
PART I
Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K of Urstadt Biddle Properties Inc. (the "Company") contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements can be identified by the fact that they do not
relate strictly to historical or current facts or by such words as "anticipate", "believe", "can", "continue", "could", "estimate", "expect", "intend", "may", "plan", "seek", "should", "will" or variations of such words or other similar
expressions and the negatives of such words. All statements included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including such matters as future capital
expenditures, dividends and acquisitions (including the amount and nature thereof), business strategies, expansion and growth of our operations, expected leasing results and other such matters, are forward-looking statements. These statements are
based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate. Such statements are inherently
subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, performance or achievements, financial and otherwise, may differ
materially from the results, performance or achievements expressed or implied by the forward-looking statements. Risks, uncertainties and other factors that might cause such differences, some of which could be material, include, but are not
limited to:
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economic and other market conditions, including local real estate and market conditions, that could impact us,
our properties or the financial stability of our tenants;
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financing risks, such as the inability to obtain debt or equity financing on favorable terms, as well as the
level and volatility of interest rates;
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any difficulties in renewing leases, filling vacancies or negotiating improved lease terms;
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the inability of the Company's properties to generate revenue increases to offset expense increases;
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environmental risk and regulatory requirements;
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risks of real estate acquisitions and dispositions (including the failure of transactions to close);
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risks of operating properties through joint ventures that we do not fully control;
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risks related to our status as a real estate investment trust, including the application of complex federal
income tax regulations that are subject to change;
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as well as other risks identified in this Annual Report on Form 10-K under Item 1A. Risk Factors and in the
other reports filed by the Company with the Securities and Exchange Commission (the "SEC").
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Forward-looking statements speak only as of the date of this filing. Except as expressly required under federal
securities laws and the rules and regulations of the SEC, we do not undertake any obligation to update any forward-looking statements to reflect events or circumstances arising after the date of this filing, whether as a result of new information
or future events or otherwise. You should not place undue reliance on the forward-looking statements included in this filing or that may be made elsewhere from time to time by us, or on our behalf. All forward-looking statements attributable to us
are expressly qualified by these cautionary statements.
Organization
We are a real estate investment trust, organized as a Maryland corporation, engaged in the acquisition, ownership and
management of commercial real estate. We were organized as an unincorporated business trust (the “Trust”) under the laws of the Commonwealth of Massachusetts on July 7, 1969. In 1997, the shareholders of the Trust approved a plan of reorganization
of the Trust from a Massachusetts business trust to a Maryland corporation. As a result of the plan of reorganization, the Trust was merged with and into the Company, the separate existence of the Trust ceased, the Company was the surviving entity
in the merger and each issued and outstanding common share of beneficial interest of the Trust was converted into one share of Common Stock, par value $.01 per share, of the Company.
Tax Status – Qualification as a Real Estate Investment Trust
We elected to be taxed as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of
1986, as amended (the “Code”), beginning with our taxable year ended October 31, 1970. Pursuant to such provisions of the Code, a REIT that distributes at least 90% of its real estate investment trust taxable income to its shareholders each year
and meets certain other conditions regarding the nature of its income and assets will not be taxed on that portion of its taxable income that is distributed to its shareholders. Although we believe that we qualify as a real estate investment trust
for federal income tax purposes, no assurance can be given that we will continue to qualify as a REIT.
Description of Business
Our business is the ownership of real estate investments, which consist principally of investments in income-producing
properties, with primary emphasis on neighborhood and community shopping centers in the metropolitan New York tri-state area outside of the City of New York. We believe that our geographic focus allows us to take advantage of the strong
demographic profiles of the areas that surround the City of New York and the natural barriers to entry that such density and limitations on developable land provide. We also believe that our ability to directly operate and manage all of our
properties within the tri-state area reduces overhead costs and affords us efficiencies that a more dispersed portfolio would make difficult.
At October 31, 2018, the Company owned or had equity interests in 84 properties comprised of neighborhood and community
shopping centers, office buildings, single tenant retail or restaurant properties and office/retail mixed use properties located in four states, containing a total of 5.1 million square feet of gross leasable area (“GLA”). We seek to identify
desirable properties, typically neighborhood and community shopping centers, for acquisition, which we acquire in the normal course of business. In addition, we regularly review our portfolio and, from time to time, may sell certain of our
properties. For a description of the Company's properties and information about the carrying amount of the properties at October 31, 2018 and encumbrances, see Item 2. Properties and Schedule III located in Item 15.
We do not consider our real estate business to be seasonal in nature.
Growth Strategy
Our long-term growth strategy is to increase cash flow, and consequently the value of our properties, through strategic
re-leasing, renovations and expansions of our existing properties and selective acquisitions of income-producing properties, primarily neighborhood and community shopping centers, in our targeted geographic region. We may also invest in other
types of real estate in our targeted geographic region. Key elements of our growth strategy and operating objectives are to:
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•
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acquire quality neighborhood and community shopping centers in the northeastern part of the United States
with a concentration on properties in the metropolitan New York tri-state area outside of the City of New York, and unlock further value in these properties with selective enhancements to both the property and tenant mix, as well as
improvements to management and leasing fundamentals;
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selectively dispose of underperforming properties and re-deploy the proceeds into potentially higher
performing properties that meet our acquisition criteria;
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invest in our properties for the long-term through regular maintenance, periodic renovations and capital
improvements, enhancing their attractiveness to tenants and customers, as well as increasing their value;
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leverage opportunities to increase GLA at existing properties, through development of pad sites and
reconfiguring of existing square footage, to meet the needs of existing or new tenants;
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proactively manage our leasing strategy by aggressively marketing available GLA, renewing existing leases
with strong tenants, and replacing weak ones when necessary, with an eye towards securing leases that include regular or fixed contractual increases to minimum rents, replacing below-market-rent leases with increased market rents when
possible and further improving the quality of our tenant mix at our shopping centers;
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maintain strong working relationships with our tenants, particularly our anchor tenants;
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maintain a conservative capital structure with low leverage levels, ample liquidity and diverse sources of
capital; and
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control property operating and administrative costs.
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Our hope is to grow our assets through acquisitions by 5% to 10% per year on a dollar value basis, subject to the
availability of acquisitions that meet our investment parameters, although we cannot guarantee that investment properties meeting our investment specifications will be available to us.
Renovations, Expansions and Improvements
We invest in properties where cost effective renovation and expansion programs, combined with effective leasing and
operating strategies, can improve the properties’ values and economic returns. Retail properties are typically adaptable for varied tenant layouts and can be reconfigured to accommodate new tenants or the changing space needs of existing tenants.
We also seek to leverage existing shopping center assets through pad site development. In determining whether to proceed with a renovation, expansion or pad, we consider both the cost of such expansion or renovation and the increase in rent
attributable to such expansion or renovation. We believe that certain of our properties provide opportunities for future renovation and expansion. We generally do not engage in ground-up development projects.
We also seek to improve our properties in ways that provide additional ancillary revenue or value, while benefiting the
environment and communities in which we have a presence. For example, we have a robust alternative energy program, pursuant to which we have placed a number of solar panel installations on the roofs of our shopping centers. We are also in the
process of installing electric vehicle charging stations at a number of our properties, which we believe will not only benefit the environment but enhance customer experience at our shopping centers. Other initiatives include converting
incandescent and florescent lighting to LED at various properties and upgrading parking lot lighting systems to operate more efficiently. While we are committed to environmental responsibility, we also believe that these initiatives need to be
financially feasible and beneficial to the Company, which may require that these projects be completed over a period of time. The Company will continue to seek financially responsible opportunities to reduce our carbon footprint and lower our
energy usage, while improving the value of our properties.
Acquisitions and Dispositions
When evaluating potential acquisitions, we consider such factors as (i) economic, demographic, and regulatory conditions
in the property’s local and regional market; (ii) the location, construction quality, and design of the property; (iii) the current and projected cash flow of the property and the potential to increase cash flow; (iv) the potential for capital
appreciation of the property; (v) the terms of tenant leases, including the relationship between the property’s current rents and market rents and the ability to increase rents upon lease rollover; (vi) the occupancy and demand by tenants for
properties of a similar type in the market area; (vii) the potential to complete a strategic renovation, expansion or re-tenanting of the property; (viii) the property’s current expense structure and the potential to increase operating margins;
(ix) competition from comparable properties in the market area; and (x) vulnerability of the property's tenants to competition from e-commerce.
We may, from time to time, enter into arrangements for the acquisition of properties with property owners through the
issuance of non-managing member units or partnership units in these joint venture entities that we control, which we refer to as our DownREIT entities. The limited
partners and non-managing members of each of these joint ventures are entitled to receive annual or quarterly cash distributions payable from available cash of the joint venture. The limited partners and non-managing members of these joint
ventures have the right to require the Company to repurchase or redeem all or a portion of their limited partner or non-managing member interests for cash or Class A Common Stock of the Company, at our election, at prices and on terms set forth in
the partnership or operating agreements. We also have the right to redeem all or a portion of the limited partner and non-managing member interests for cash or Class A Common Stock of the Company, at our election, under certain circumstances, at
prices and on terms set forth in the partnership or operating agreements. We believe that this acquisition method may permit us to acquire properties from property owners wishing to enter into tax-deferred transactions.
From time to time, we selectively dispose of underperforming properties and re-deploy the proceeds into potentially
higher performing properties that meet our acquisition critria.
Leasing Results
At October 31, 2018, our properties collectively had 987 leases with tenants providing a wide range of products and
services. Tenants include regional supermarkets, national and regional discount department stores, other local retailers and office tenants. In addition, at our Yorktown, NY property, we have developed a portion of below grade space to a storage
facility which currently has 510 storage tenants. At October 31, 2018 the 77 consolidated properties were 93.2% leased and 91.7% occupied (see Results of Operations discussion in Item 7). At October 31, 2018, we had equity investments in seven
properties which we do not consolidate; those properties were 96.3% leased. We believe the properties are adequately covered by property and liability insurance.
A substantial portion of our operating lease income is derived from tenants under leases with terms greater than one
year. Most of the leases provide for the payment of monthly fixed base rentals and for the payment by the tenant of a pro-rata share of the real estate taxes, insurance, utilities and common area maintenance expenses incurred in operating the
properties.
For the fiscal year ended October 31, 2018, no single tenant comprised more than 7.9% of the total annual base rents of
our properties. The following table sets forth a schedule of our ten largest tenants by percent of total annual base rent of our properties to total annual base rent for the year ended October 31, 2018.
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Tenant
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Number
of Stores
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% of Total Annual
Base Rent of Properties
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Stop & Shop
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8
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7.9
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%
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CVS
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10
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4.9
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%
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The TJX Companies
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6
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3.5
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%
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Bed Bath & Beyond
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3
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3.0
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%
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Acme
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4
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2.5
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%
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ShopRite
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3
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1.8
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%
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BJ's
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2
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1.5
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%
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Staples
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3
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1.4
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%
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JP Morgan Chase
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8
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1.2
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%
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Kings Supermarkets
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2
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1.2
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%
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49
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28.9
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%
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See Item 2. Properties for a complete list of the Company’s properties.
The Company’s single largest real estate investment is its 100% ownership of the general and limited partnership
interests in the Ridgeway Shopping Center (“Ridgeway”).
Ridgeway is located in Stamford, Connecticut and was developed in the 1950s and redeveloped in the mid-1990s. The
property contains approximately 374,000 square feet of GLA. It is the dominant grocery-anchored center and the largest non-mall shopping center located in the City of Stamford, Fairfield County, Connecticut. For the year ended October 31, 2018,
Ridgeway revenues represented approximately 10.4% of the Company’s total revenues and its assets represented approximately 7.0% of the Company’s total assets at October 31, 2018. As of October 31, 2018, Ridgeway was 96% leased. The property’s
largest tenants (by base rent) are: The Stop & Shop Supermarket Company (20%), Bed, Bath & Beyond (14%) and Marshall’s Inc., a division of the TJX Companies (10%). No other tenant accounts for more than 10% of Ridgeway’s annual base
rents.
The following table sets forth a schedule of the annual lease expirations for retail leases at Ridgeway as of October
31, 2018 for each of the next ten years and thereafter (assuming that no tenants exercise renewal or cancellation options and that there are no tenant bankruptcies or other tenant defaults):
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Year of Expiration
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Number of
Leases Expiring
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Square Footage
of Expiring Leases
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Minimum
Base Rentals
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Percentage of
Total Annual
Base Rent that is
Represented by
the Expiring Leases
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2019
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6
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17,121
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$
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555,400
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5.1
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%
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2020
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3
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31,832
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565,700
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5.2
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%
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2021
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4
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43,925
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942,600
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8.7
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%
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2022
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3
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93,508
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3,038,600
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28.1
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%
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2023
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10
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102,991
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3,283,000
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30.3
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%
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2024
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-
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-
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-
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0.0
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%
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2025
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1
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15,000
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633,200
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5.9
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%
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2026
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2
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10,282
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363,700
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3.4
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%
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2027
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2
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4,964
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136,800
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1.3
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%
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2028
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3
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38,060
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1,300,900
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12.0
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%
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Thereafter
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-
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-
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-
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0.0
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%
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Total
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34
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357,683
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$
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10,819,900
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100
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%
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||||||||||
For further financial information about our only reportable operating segment, Ridgeway, see note 1 of our financial
statements in Item 8 included in this Annual Report on Form 10-K.
Financing Strategy
We intend to continue to finance acquisitions and property improvements and/or expansions with the most advantageous
sources of capital which we believe are available to us at the time, and which may include the sale of common or preferred equity through public offerings or private placements, the incurrence of additional indebtedness through secured or unsecured
borrowings, investments in real estate joint ventures and the reinvestment of proceeds from the disposition of assets. Our financing strategy is to maintain a strong and flexible financial position by (i) maintaining a prudent level of leverage,
and (ii) minimizing our exposure to interest rate risk represented by floating rate debt.
Compliance with Governmental Regulations
We, like others in the commercial real estate industry, are subject to numerous federal, state and local environmental
laws and regulations. We may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our properties, 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). These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances.
This liability may be imposed on us in connection with the activities of an operator of, or tenant at, the property. The cost of any required remediation, removal, fines or personal or property damages and our liability therefore could exceed the
value of the property and/or our aggregate assets. In addition, the presence of those substances, or the failure to properly dispose of or remove those substances, may adversely affect our ability to sell or rent that property or to borrow using
that property as collateral, which, in turn, would reduce our revenues and ability to make distributions.
Our existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with
Title III of the Americans with Disabilities Act of 1990. The requirements of this Act, or of other federal, state or local laws or regulations, also may change in the future and restrict further renovations of our properties with respect to
access for disabled persons. Future compliance with the Americans with Disabilities Act of 1990 and similar regulations may require expensive changes to the properties.
Competition
The real estate investment business is highly competitive. We compete for real estate investments with investors of all
types, including domestic and foreign corporations, financial institutions, other real estate investment trusts, real estate funds, individuals and privately owned companies. In addition, our properties are subject to local competition from the
surrounding areas. Our shopping centers compete for tenants with other regional, community or neighborhood shopping centers in the respective areas where our retail properties are located. In addition, the retail industry is seeing greater
competition from internet retailers who may not need to establish “brick and mortar” retail locations for their businesses. This reduces the demand for traditional retail space in shopping centers like ours and other grocery-anchored shopping
center properties. Our office buildings compete for tenants principally with office buildings throughout the respective areas in which they are located. Leasing decisions are generally determined by prospective tenants on the basis of, among
other things, rental rates, location, and the physical quality of the property and availability of space.
Property Management
We actively manage and supervise the operations and leasing of all of our properties.
Employees
Our executive offices are located at 321 Railroad Avenue, Greenwich, Connecticut. Urstadt Biddle Properties Inc. has 53
employees, all located at the Company’s executive offices. Subsidiaries of the Company also employ an additional 16 full-time and part-time employees at other locations and we believe our relationship with our employees is good.
Company Website
All of the Company’s filings with the SEC, including the Company’s annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge at the Company’s website at www.ubproperties.com as soon as reasonably
practicable after the Company electronically files such material with, or furnishes it to, the SEC. These filings can also be accessed through the SEC’s website at www.sec.gov.
Risks Related to our
Operations and Properties
There
are risks relating to investments in real estate and the value of our property interests depends on conditions beyond our control. Yields from our properties depend on their net income and capital appreciation. Real property income and
capital appreciation may be adversely affected by general and local economic conditions, neighborhood values, competitive overbuilding, zoning laws, weather, casualty losses and other factors beyond our control. Since substantially all of our
income is rental income from real property, our income and cash flow could be adversely affected if a large tenant is, or a significant number of tenants are, unable to pay rent or if available space cannot be rented on favorable terms.
Operating and other expenses of our properties, particularly significant expenses such as interest, real estate taxes
and maintenance costs, generally do not decrease when income decreases and, even if revenues increase, operating and other expenses may increase faster than revenues.
We
may be unable to sell properties when appropriate because real estate investments are illiquid. Real estate investments generally cannot be sold quickly. In addition, there are some limitations under federal income tax laws applicable to
real estate and to REITs in particular that may limit our ability to sell our assets. With respect to each of our six consolidated joint ventures, Ironbound, McLean, Orangeburg, UB High Ridge, Dumont and New City, which we refer to as our
DownREITs, we may not sell or transfer the contributed property through contractually agreed upon protection periods other than as part of a tax-deferred transaction under
the Code or if the conditions exist which would give us the right to call all of the non-managing member units or partnership units, as applicable, following the death or dissolution of certain non-managing members or, in connection with the
exercise of creditor's rights and remedies under the existing mortgage or any refinancing by the holder thereof (which will not constitute a violation of this restriction). Because of these market, regulatory and contractual conditions, we
may not be able to alter our portfolio promptly in response to changes in economic or other conditions. Our inability to respond quickly to adverse changes in the performance of our investments could have an adverse effect on our ability to meet
our obligations and make distributions to our stockholders.
Our
business strategy is mainly concentrated in one type of commercial property and in one geographic location. Our primary investment
focus is neighborhood and community shopping centers, with a concentration in the metropolitan New York tri-state area outside of the City of New York. For the year ended October 31, 2018, approximately 98.3% of our total revenues were from
properties located in this area. Various factors may adversely affect a shopping center's profitability. These factors include circumstances that affect consumer spending, such as general economic conditions, economic business cycles, rates of
employment, income growth, interest rates and general consumer sentiment, as well as weather patterns and natural disasters that could have a more significant localized effect in the areas where our properties are concentrated. Changes to the real
estate market in our focus areas, such as an increase in retail space or a decrease in demand for shopping center properties, could adversely affect operating results. As a result, we may be exposed to greater risks than if our investment focus
was based on more diversified types of properties and in more diversified geographic areas.
The Company's single largest real estate investment is its ownership of the Ridgeway Shopping Center ("Ridgeway")
located in Stamford, Connecticut. For the year ended October 31, 2018, Ridgeway revenues represented approximately 10.4% of the Company's total revenues and approximately 7.0% of the Company's total assets at October 31, 2018. The loss of
Ridgeway or a material decrease in revenues from Ridgeway could have a material adverse effect on the Company.
We
are dependent on anchor tenants in many of our retail properties. Most of our retail properties are dependent on a major or anchor
tenant, often a supermarket anchor. If we are unable to renew any lease we have with the anchor tenant at one of these properties upon expiration of the current lease on favorable terms, or to re-lease the space to another anchor tenant of similar
or better quality upon departure of an existing anchor tenant on similar or better terms, we could experience material adverse consequences with respect to such property such as higher vacancy, re-leasing on less favorable economic terms, reduced
net income, reduced funds from operations and reduced property values. Vacated anchor space also could adversely affect a property because of the loss of the departed anchor tenant's customer drawing power. Loss of customer drawing power also can
occur through the exercise of the right that some anchors have to vacate and prevent re-tenanting by paying rent for the balance of the lease term. In addition, vacated anchor space could, under certain circumstances, permit other tenants to pay a
reduced rent or terminate their leases at the affected property, which could adversely affect the future income from such property. There can be no assurance that our anchor tenants will renew their leases when they expire or will be willing to
renew on similar economic terms. See Item 1. Business in this Annual Report on Form 10-K for additional information on our ten largest tenants by percent of total annual base rent of our properties.
Similarly, if one or more of our anchor tenants goes bankrupt, we could experience material adverse consequences like
those described above. Under bankruptcy law, tenants have the right to reject their leases. In the event a tenant exercises this right, the landlord generally may file a claim for a portion of its unpaid and future lost rent. Actual amounts
received in satisfaction of those claims, however, are typically very limited and will be subject to the tenant's final plan of reorganization and the availability of funds to pay its creditors. In July 2015, The Great Atlantic and Pacific Tea
Company ("A&P"), an anchor at nine of our shopping centers, filed for bankruptcy, resulting in lost rent, vacancies of various duration at several of our shopping centers and other negative consequences. We can provide no assurance that we
will not experience similar bankruptcies by other anchor tenants. See Item 7. Management’s Discussion of Operations and Financial Condition in this Annual Report on Form 10-K for additional information.
We
face potential difficulties or delays in renewing leases or re-leasing space. We derive most of our income from rent received from our tenants. Although substantially all of our properties currently have favorable occupancy rates, we
cannot predict that current tenants will renew their leases upon expiration of their terms. In addition, current tenants could attempt to terminate their leases prior to the scheduled expiration of such leases or might have difficulty in
continuing to pay rent in full, if at all, in the event of a severe economic downturn. If this occurs, we may not be able to promptly locate qualified replacement tenants and, as a result, we would lose a source of revenue while remaining
responsible for the payment of our obligations. Even if tenants decide to renew their leases, the terms of renewals or new leases, including the cost of required renovations or concessions to tenants, may be less favorable than current lease
terms.
In some cases, our tenant leases contain provisions giving the tenant the exclusive right to sell particular types of
merchandise or provide specific types of services within the particular retail center, or limit the ability of other tenants within the center to sell that merchandise or provide those services. When re-leasing space after a vacancy in a center
with one of these tenants, such provisions may limit the number and types of prospective tenants for the vacant space. The failure to re-lease space or to re-lease space on satisfactory terms could adversely affect our results from operations.
Additionally, properties we may acquire in the future may not be fully leased and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with that property until the property is fully
leased. As a result, our net income, funds from operations and ability to pay dividends to stockholders could be adversely affected.
We
may acquire properties or acquire other real estate related companies, and this may create risks. We may acquire properties or acquire other real estate related companies when we believe that an acquisition is consistent with our
business strategies. We may not succeed in consummating desired acquisitions on time or within budget. When we do pursue a project or acquisition, we may not succeed in leasing newly acquired properties at rents sufficient to cover the costs of
acquisition and operations. Acquisitions in new markets or industries where we do not have the same level of market knowledge may result in poorer than anticipated performance. We may also abandon acquisition opportunities that management has begun
pursuing and consequently fail to recover expenses already incurred and will have devoted management’s time to a matter not consummated. Furthermore, our acquisitions of new properties or companies will expose us to the liabilities of those
properties or companies, some of which we may not be aware of at the time of the acquisition. In addition, redevelopment of our existing properties presents similar risks.
Newly acquired properties may have characteristics or deficiencies currently unknown to us that affect their value or
revenue potential. It is also possible that the operating performance of these properties may decline under our management. As we acquire additional properties, we will be subject to risks associated with managing new properties, including lease-up
and tenant retention. In addition, our ability to manage our growth effectively will require us to successfully integrate our new acquisitions into our existing management structure. We may not succeed with this integration or effectively manage
additional properties, particularly in secondary markets. Also, newly acquired properties may not perform as expected.
Competition may adversely affect our ability to acquire new properties. We compete for the
purchase of commercial property with many entities, including other publicly traded REITs and private equity funded entities. Many of our competitors have substantially greater financial resources than ours. In addition, our competitors may be
willing to accept lower returns on their investments. If we are unable to successfully compete for the properties we have targeted for acquisition, we may not be able to meet our growth and investment objectives. We may incur costs on
unsuccessful acquisitions that we will not be able to recover. The operating performance of our property acquisitions may also fall short of our expectations, which could adversely affect our financial performance.
Competition may limit our ability to generate sufficient income from tenants and may decrease the occupancy and rental rates for our properties. Our properties consist primarily of open-air
shopping centers and other retail properties. Our performance, therefore, is generally linked to economic conditions in the market for retail space. In the future, the market for retail space could be adversely affected by:
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weakness in the national, regional and local economies;
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the adverse financial condition of some large retailing companies;
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the impact of internet sales on the demand for retail space;
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ongoing consolidation in the retail sector; and
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the excess amount of retail space in a number of markets.
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In addition, numerous commercial developers and real estate companies compete with
us in seeking tenants for our existing properties. If our competitors offer space at rental rates below our current rates or the market rates, we may lose current or potential tenants to other properties in our markets and we may need to reduce
rental rates below our current rates in order to retain tenants upon expiration of their leases. Increased competition for tenants may require us to make tenant and/or capital improvements to properties beyond those that we would otherwise have
planned to make. As a result, our results of operations and cash flow may be adversely affected.
In addition, our tenants face increasing competition from internet commerce,
outlet malls, discount retailers, warehouse clubs and other sources which could hinder our ability to attract and retain tenants and/or cause us to reduce rents at our properties, which could have an adverse effect on our results of operations and
cash flows. We may fail to anticipate the effects of changes in consumer buying practices, particularly of growing online sales and the resulting retailing practices and space needs of our tenants or a general downturn in our tenant’s businesses,
which may cause tenants to close their stores or default in payment of rent.
Property ownership through joint ventures could limit our control of those investments, restrict our ability to operate and finance the property on our terms, and reduce their expected return. As
of October 31, 2018, we owned eight of our operating properties through consolidated joint ventures and seven through unconsolidated joint ventures. Our joint ventures, and joint ventures we may enter into in the future, may involve risks not
present with respect to our wholly-owned properties, including the following:
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We may share decision-making authority with our joint venture partners regarding certain major decisions
affecting the ownership or operation of the joint venture and the joint venture property, such as, but not limited to, (i) additional capital contribution requirements, (ii) obtaining, refinancing or paying off debt, and (iii) obtaining
consent prior to the sale or transfer of our interest in the joint venture to a third party, which may prevent us from taking actions that are opposed by our joint venture partners;
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Our joint venture partners may have business interests or goals with respect to the property that conflict
with our business interests and goals, which could increase the likelihood of disputes regarding the ownership, management or disposition of the property;
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Disputes may develop with our joint venture partners over decisions affecting the property or the joint
venture, which may result in litigation or arbitration that would increase our expenses and distract our officers from focusing their time and effort on our business, disrupt the day-to-day operations of the property such as by delaying
the implementation of important decisions until the conflict is resolved, and possibly force a sale of the property if the dispute cannot be resolved; and
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The activities of a joint venture could adversely affect our ability to qualify as a REIT.
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In addition, with respect to our six consolidated joint ventures, Ironbound, McLean, Orangeburg, UB
High Ridge, Dumont and New City, we have additional obligations to the limited partners and non-managing members and additional limitations on our activities with respect to those joint ventures. The limited partners and non-managing members of
each of these joint ventures are entitled to receive annual or quarterly cash distributions payable from available cash of the joint venture, with the Company required to provide such funds if the joint venture is unable to do so. The limited
partners and non-managing members of these joint ventures have the right to require the Company to repurchase all or a portion of their limited partner or non-managing member interests for cash or Class A Common Stock of the Company, at our
election, at prices and on terms set forth in the partnership or operating agreements. We also have the right to redeem all or a portion of the limited partner and non-managing member interests for cash or Class A Common Stock of the Company, at
our election, under certain circumstances, at prices and on terms set forth in the partnership or operating agreements. The right of these limited partners and non-managing members to put their equity interest to us could require us to expend
cash, or issue Class A Common Stock of the REIT, at a time or under circumstances that are not desirable to us.
In addition, the partnership agreement or operating agreements with our partners in Ironbound,
McLean, Orangeburg, UB High Ridge, Dumont and New City include certain restrictions on our ability to sell the property and to pay off the mortgage debt on these properties before their maturity, although refinancings are generally permitted.
These restrictions could prevent us from taking advantage of favorable interest rate environments and limit our ability to best manage the debt on these properties.
Although
we have historically used moderate levels of leverage, if we employed higher levels of leverage, it would result in increased risk of default on our obligations and in an increase in debt service requirements, which could adversely affect our
financial condition and results of operations and our ability to pay dividends and make distributions. In addition, the viability of the interest rate hedges we use is subject to the strength of the counterparties. We have incurred, and
expect to continue to incur, indebtedness to advance our objectives. The only restrictions on the amount of indebtedness we may incur are certain contractual restrictions and financial covenants contained in our unsecured revolving credit
agreement. Accordingly, we could become more highly leveraged, resulting in increased risk of default on our financial obligations and in an increase in debt service requirements. This, in turn, could adversely affect our financial condition,
results of operations and our ability to make distributions.
Using debt to acquire properties, whether with recourse to us generally or only with respect to a particular property,
creates an opportunity for increased return on our investment, but at the same time creates risks. Our goal is to use debt to fund investments only when we believe it will enhance our risk-adjusted returns. However, we cannot be sure that our use
of leverage will prove to be beneficial. Moreover, when our debt is secured by our assets, we can lose those assets through foreclosure if we do not meet our debt service obligations. Incurring substantial debt may adversely affect our business
and operating results by:
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requiring us to use a substantial portion of our cash flow to pay
interest and principal, which reduces the amount available for distributions, acquisitions and capital expenditures;
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making us more vulnerable to economic and industry downturns and reducing
our flexibility to respond to changing business and economic conditions;
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requiring us to agree to less favorable terms, including higher interest
rates, in order to incur additional debt, and otherwise limiting our ability to borrow for operations, working capital or to finance acquisitions in the future; or
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limiting our flexibility in conducting our business, which may place us
at a disadvantage compared to competitors with less debt or debt with less restrictive terms.
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In addition, variable rate debt exposes us to changes in interest rates. Interest
expense on our variable rate debt as of October 31, 2018 would increase by $286,000 annually for a 1% per annum increase in interest rates. This exposure would increase if we seek additional variable rate financing based on pricing and other
commercial and financial terms. We enter into interest rate hedging transactions, including interest rate swaps. There can be no guarantee that the future financial condition of these counterparties will enable them to fulfill their obligations
under these agreements.
We are obligated to comply with financial and other covenants in our debt that could restrict our operating activities, and failure to comply could result in defaults that accelerate the payment under our
debt. Our mortgage notes payable contain customary covenants for such agreements including, among others, provisions:
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restricting our ability to assign or further encumber the properties
securing the debt; and
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restricting our ability to enter into certain new leases or to amend or
modify certain existing leases without obtaining consent of the lenders.
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Our unsecured revolving credit agreement contains financial and other covenants
which may limit our ability, without our lenders' consent, to engage in operating or financial activities that we may believe desirable. Our unsecured revolving credit facility contains, among others, provisions restricting our ability to:
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permit unsecured debt to exceed $400 million;
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create certain liens;
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increase our overall secured and unsecured borrowing beyond certain levels;
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consolidate, merge or sell all or substantially all of our assets;
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permit secured debt to be more than 40% of gross asset value, as defined in
the agreement; and
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permit unsecured indebtedness excluding preferred stock to exceed, 60% of eligible real estate asset value as defined in the agreement.
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In addition, covenants included in our unsecured revolving credit facility (i)
limit the amount of debt we may incur, excluding preferred stock, as a percentage of gross asset value, as defined in the agreement, to less than 60% (leverage ratio), (ii) require earnings before interest, taxes, depreciation and amortization to
be at least 150% of fixed charges, (iii) require net operating income from unencumbered properties to be at least 200% of unsecured interest expenses, (iv) require not more than 15% of gross asset value and unencumbered asset pool, each term as
defined in the agreement, to be attributable to the Company's pro rata share of the value of unencumbered properties owned by non-wholly owned subsidiaries or unconsolidated joint ventures, and (v) require at least 10 unencumbered properties in the
unencumbered asset pool, with at least 10 properties owned by the company or a wholly-owned subsidiary.
If we were to breach any of our debt covenants and did not cure the breach within
any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan. As a result, a default under our debt
covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares.
We
may be required to incur additional debt to qualify as a REIT. As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income. We are subject to income tax on amounts of undistributed taxable
income and net capital gain. In addition, we would be subject to a 4% excise tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and aggregate undistributed income from prior
years. We intend to make distributions to shareholders to comply with the Code’s distribution provisions and to avoid federal income and excise tax. We may need to borrow funds to meet our distribution requirements because:
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our income may not be matched by our related expenses at the time the income is considered received for
purposes of determining taxable income; and
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non-deductible capital expenditures, creation of reserves, or debt service requirements may reduce available
cash but not taxable income.
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In these circumstances, we might have to borrow funds on terms we might otherwise find unfavorable and we may have to
borrow funds even if our management believes the market conditions make borrowing financially unattractive. Current tax law also allows us to pay a portion of our distributions in shares instead of cash.
Our ability to grow will be limited if we cannot obtain additional capital. Our growth strategy includes the redevelopment of properties we already own and the acquisition of additional
properties. We are required to distribute to our stockholders at least 90% of our taxable income each year to continue to qualify as a REIT for federal income tax purposes. Accordingly, in addition to our undistributed operating cash flow, we
rely upon the availability of debt or equity capital to fund our growth, which financing may or may not be available on favorable terms or at all. The debt could include mortgage loans from third parties or the sale of debt securities. Equity
capital could include our common stock or preferred stock. Additional financing, refinancing or other capital may not be available in the amounts we desire or on favorable terms.
Our access to debt or equity capital depends on a number of factors, including the
general state of the capital markets, the markets perception of our growth potential, our ability to pay dividends, and our current and potential future earnings. Depending on the outcome of these factors, we could experience delay or difficulty
in implementing our growth strategy on satisfactory terms, or be unable to implement this strategy.
We
cannot assure you we will continue to pay dividends at historical rates. Our ability to continue to pay dividends on our shares of Class A Common stock or Common stock at historical rates or to increase our dividend rate, and our ability
to pay preferred share dividends will depend on a number of factors, including, among others, the following:
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our financial condition and results of future operations;
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the performance of lease terms by tenants;
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the terms of our loan covenants;
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payment obligations on debt; and
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our ability to acquire, finance or redevelop and lease additional properties at attractive rates.
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If we do not maintain or increase the dividend on our common shares, it could have an adverse effect on the market price
of our shares of Class A Common Stock or Common Stock and other securities. Any preferred shares we may offer may have a fixed dividend rate that would not increase with any increases in the dividend rate of our common shares. Conversely, payment
of dividends on our common shares may be subject to payment in full of the dividends on any preferred shares and payment of interest on any debt securities we may offer.
Market interest rates could adversely affect the share price of our stock and increase the cost of refinancing debt. A variety of factors may influence the price of our common equities in the
public trading markets. We believe that investors generally perceive REITs as yield-driven investments and compare the annual yield from dividends by REITs with yields on various other types of financial instruments. An increase in market
interest rates may lead purchasers of stock to seek a higher annual dividend rate from other investments, which could adversely affect the market price of the stock. In addition, we are subject to the risk that we will not be able to refinance
existing indebtedness on our properties. We anticipate that a portion of the principal of our debt will not be repaid prior to maturity. Therefore, we likely will need to refinance at least a portion of our outstanding debt as it matures. A
change in interest rates may increase the risk that we will not be able to refinance existing debt or that the terms of any refinancing will not be as favorable as the terms of the existing debt.
If principal payments due at maturity cannot be refinanced, extended or repaid with
proceeds from other sources, such as new equity capital or sales of properties, our cash flow will not be sufficient to repay all maturing debt in years when significant “balloon” payments come due. As a result, our ability to retain properties or
pay dividends to stockholders could be adversely affected and we may be forced to dispose of properties on unfavorable terms, which could adversely affect our business and net income.
Construction and renovation risks could adversely affect our profitability. We currently are
renovating some of our properties and may in the future renovate other properties, including tenant improvements required under leases. Our renovation and related construction activities may expose us to certain risks. We may incur renovation
costs for a property which exceed our original estimates due to increased costs for materials or labor or other costs that are unexpected. We also may be unable to complete renovation of a property on schedule, which could result in increased debt
service expense or construction costs. Additionally, some tenants may have the right to terminate their leases if a renovation project is not completed on time. The time frame required to recoup our renovation and construction costs and to
realize a return on such costs can often be significant.
We are dependent on key personnel. We depend on the services of our existing senior management
to carry out our business and investment strategies. We do not have employment agreements with any of our existing senior management. As we expand, we may continue to need to recruit and retain qualified additional senior management. The loss of
the services of any of our key management personnel or our inability to recruit and retain qualified personnel in the future could have an adverse effect on our business and financial results.
Uninsured and underinsured losses may affect the value of, or return from, our property interests. We
maintain insurance on our properties, including the properties securing our loans, in amounts which we believe are sufficient to permit replacement of the properties in the event of a total loss, subject to applicable deductibles. There are
certain types of losses, such as losses resulting from wars, terrorism, earthquakes, floods, hurricanes or other acts of God that may be uninsurable or not economically insurable. Should an uninsured loss or a loss in excess of insured limits
occur, we could lose capital invested in a property, as well as the anticipated future revenues from a property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. In addition, changes
in building codes and ordinances, environmental considerations and other factors might make it impracticable for us to use insurance proceeds to replace a damaged or destroyed property. If any of these or similar events occur, it may reduce our
return from an affected property and the value of our investment.
Properties with environmental problems may create liabilities for us. Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, as an owner of real
property, we may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our properties, 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). A property can be adversely affected either through direct physical contamination or as the result of hazardous or toxic substances or other contaminants that have or
may have emanated from other properties. These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances. This liability may be imposed on us in connection with the
activities of an operator of, or tenant at, the property. The cost of any required remediation, removal, fines or personal or property damages and our liability therefore could exceed the value of the property and/or our aggregate assets. In
addition, the presence of those substances, or the failure to properly dispose of or remove those substances, may adversely affect our ability to sell or rent that property or to borrow using that property as collateral, which, in turn, would
reduce our revenues and ability to make distributions.
Prior to the acquisition of any property and from time to time thereafter, we
obtain Phase I environmental reports, and, when deemed warranted, Phase II environmental reports concerning the Company's properties. There can be no assurance, however, that (i) the discovery of environmental conditions that were previously
unknown, (ii) changes in law, (iii) the conduct of tenants or neighboring property owner, or (iv) activities relating to properties in the vicinity of the Company's properties, will not expose the Company to material liability in the future.
Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely
affect the operations of our tenants, which could adversely affect our financial condition and results of operations.
We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business disruptions. We rely extensively on computer systems to process transactions and
manage our business, and our business is at risk from and may be impacted by cybersecurity attacks. These could include attempts to gain unauthorized access to our data and computer systems. Attacks can be both individual and/or highly organized
attempts organized by very sophisticated hacking organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include password encryption, frequent password change events, firewall detection systems, anti-virus
software and frequent backups; however, there is no guarantee such efforts will be successful in preventing a cyber-attack. A cybersecurity attack could compromise the confidential information of our employees, tenants and vendors. A successful
attack could disrupt and otherwise adversely affect our business operations and financial prospects, damage our reputation and involve significant legal and/or financial liabilities and penalties, including through lawsuits by third-parties.
The
Americans with Disabilities Act of 1990 could require us to take remedial steps with respect to existing or newly acquired properties. Our
existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990. Investigation of a property may reveal non-compliance with this Act. The
requirements of this Act, or of other federal, state or local laws or regulations, also may change in the future and restrict further renovations of our properties with respect to access for disabled persons. Future compliance with this Act may
require expensive changes to the properties.
Risks Related to our Organization and Structure
We will be taxed as a regular corporation if we fail to maintain our REIT status. Since our
founding in 1969, we have operated, and intend to continue to operate, in a manner that enables us to qualify as a REIT for federal income tax purposes. However, the federal income tax laws governing REITs are complex. The determination that we
qualify as a REIT requires an analysis of various factual matters and circumstances that may not be completely within our control. For example, to qualify as a REIT, at least 95% of our gross income must come from specific passive sources, such as
rent, that are itemized in the REIT tax laws. In addition, to qualify as a REIT, we cannot own specified amounts of debt and equity securities of some issuers. We also are required to distribute to our stockholders at least 90% of our REIT
taxable income (excluding capital gains) each year. Our continued qualification as a REIT depends on our satisfaction of the asset, income, organizational, distribution and stockholder ownership requirements of the Internal Revenue Code on a
continuing basis. At any time, new laws, interpretations or court decisions may change the federal tax laws or the federal tax consequences of qualification as a REIT. If we fail to qualify as a REIT in any taxable year and do not qualify for
certain Internal Revenue Code relief provisions, we will be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. In addition, distributions to stockholders would not be
deductible in computing our taxable income. Corporate tax liability would reduce the amount of cash available for distribution to stockholders which, in turn, would reduce the market price of our stock. Unless entitled to relief under certain
Internal Revenue Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT.
We will pay federal taxes if we do not distribute 100% of our taxable income. To the extent
that we distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in
any year are less than the sum of:
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85% of our ordinary income for that year;
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95% of our capital gain net income for that year; and
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100% of our undistributed taxable income from prior years.
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We have paid out, and intend to continue to pay out, our income to our
stockholders in a manner intended to satisfy the distribution requirement and to avoid corporate income tax and the 4% nondeductible excise tax. Differences in timing between the recognition of income and the related cash receipts or the effect of
required debt amortization payments could require us to borrow money or sell assets to pay out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year.
Gain on disposition of assets deemed held for sale in the ordinary course of business is subject to 100% tax. If we sell any of our assets, the IRS may determine that the sale is a disposition of an asset held primarily for sale to customers in the ordinary course of a trade or business. Gain from this kind of sale generally will be
subject to a 100% tax. Whether an asset is held "primarily for sale to customers in the ordinary course of a trade or business" depends on the particular facts and circumstances of the sale. Although we will attempt to comply with the terms of
safe-harbor provisions in the Internal Revenue Code prescribing when asset sales will not be so characterized, we cannot assure you that we will be able to do so.
U.S. federal tax reform legislation could affect REITs generally, the geographic markets in which we operate, our stock and our results of operations, both positively and negatively in ways that are
difficult to anticipate. The U.S. Congress has passed sweeping tax reform legislation that has made significant changes to corporate and individual tax rates and the calculation of taxes, as well as international tax rules for U.S.
domestic corporations. As a REIT, we are generally not required to pay federal taxes otherwise applicable to regular corporations if we comply with the various tax regulations governing REITs. Stockholders, however, are generally required to pay
taxes on REIT dividends. Tax reform legislation has affected the way in which dividends paid on our stock are taxed by the holder of that stock and could impact our stock price or how stockholders and potential investors view an investment in
REITs. In addition, while certain elements of tax reform legislation would not impact us directly as a REIT, they could impact the geographic markets in which we operate, the tenants that populate our shopping centers and the customers who
frequent our properties in ways, both positive and negative, that are difficult to anticipate.
Our ownership limitation may restrict
business combination opportunities.
To qualify as a REIT under the Internal Revenue Code, no more than 50% in value of
our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals during the last half of each taxable year. To preserve our REIT qualification, our charter generally prohibits any person from owning shares of any
class with a value of more than 7.5% of the value of all of our outstanding capital stock and provides that:
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a transfer that violates the limitation is void;
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shares transferred to a stockholder in excess of the ownership
limitation are automatically converted, by the terms of our charter, into shares of "Excess Stock"
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a purported transferee receives no rights to the shares that violate the
limitation except the right to designate a transferee of the Excess Stock held in trust; and
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the Excess Stock will be held by us as trustee of a trust for the
exclusive benefit of future transferees to whom the shares of capital stock ultimately will be transferred without violating the ownership limitation.
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We may also redeem Excess Stock at a price which may be less than the price paid
by a stockholder. Pursuant to authority under our charter, our Board of Directors has determined that the ownership limitation does not apply to Mr. Charles J. Urstadt, our Chairman, who, as of October 31, 2018, beneficially owns 46.0% of our outstanding Common Stock and 0.6% of our outstanding Class A Common Stock or to Mr. Willing L. Biddle, our CEO, who beneficially owns 30.7%
of our outstanding Common Stock and 0.2% of our outstanding Class A Common Stock. Such holdings represent approximately 66.7% of our outstanding voting interests. Together as a group Messrs. Urstadt, Biddle, and the other directors and executive
officers hold approximately 67.2% of our outstanding voting interests through their beneficial ownership of our Common Stock and Class A Common Stock. The ownership limitation may delay or discourage someone from taking control of us, even though
a change of control might involve a premium price for our stockholders or might otherwise be in their best interest.
Certain provisions in our charter and bylaws and Maryland law may prevent or delay a change of control or limit our stockholders from receiving a premium for their shares. Among the provisions contained in our charter and bylaws and Maryland law are the following:
|
•
|
Our Board of Directors is divided into three classes, with directors in
each class elected for three-year staggered terms.
|
|
•
|
Our directors may be removed only for cause upon the vote of the holders
of two-thirds of the voting power of our common equity securities.
|
|
•
|
Our stockholders may call a special meeting of stockholders only if the
holders of a majority of the voting power of our common equity securities request such a meeting in writing.
|
|
•
|
Any consolidation, merger, share exchange or transfer of all or
substantially all of our assets must be approved by (i) a majority of our directors who are currently in office or who are approved or recommended by a majority of our directors who are currently in office (the "Continuing Directors") and
(ii) the affirmative vote of holders of our stock representing a majority of all votes entitled to be cast on the matter.
|
|
•
|
Certain provisions of our charter may only be amended by (i) a vote of a
majority of our Continuing Directors and (ii) the affirmative vote of holders of our stock representing a majority of all votes entitled to be cast on the matter.
|
|
•
|
The number of directors may be increased or decreased by a vote of our
Board of Directors.
|
In addition, we are subject to various provisions of Maryland law that impose
restrictions and require affected persons to follow specified procedures with respect to certain takeover offers and business combinations, including combinations with persons who own 10% or more of our outstanding shares. These provisions of
Maryland law could delay, defer or prevent a transaction or a change of control that our stockholders might deem to be in their best interests. As permitted by Maryland law, our charter provides that the “business combination” provisions of
Maryland law described above will not apply to acquisitions of shares by Mr. Charles J. Urstadt, and our Board of Directors has determined that the provisions will not apply to Mr. Willing L. Biddle, or to Mr. Urstadt’s or Mr. Biddle’s spouses and
descendants and any of their affiliates. Consequently, unless such exemptions are amended or repealed, we may in the future enter into business combinations or other transactions with Mr. Urstadt, Mr. Biddle or any of their respective affiliates
without complying with the requirements of the Maryland business combination statute. Furthermore, shares acquired in a control share acquisition have no voting rights, except to the extent approved by the affirmative vote of two-thirds of all
votes entitled to be cast on the matter, excluding all interested shares. Under Maryland law, "control shares" are those which, when aggregated with any other shares held by the acquiror, allow the acquiror to exercise voting power within
specified ranges. The control share provisions of Maryland law also could delay, defer or prevent a transaction or a change of control which our stockholders might deem to be in their best interests. As permitted by Maryland law, our bylaws
provide that the "control shares" provisions of Maryland law described above will not apply to acquisitions of our stock. As permitted by Maryland law, our Board of Directors has exclusive power to amend the bylaws and the board could elect to
make acquisitions of our stock subject to the “control shares” provisions of Maryland law as to any or all of our stockholders. In view of the common equity securities controlled by Messrs. Urstadt and Biddle, either may control a sufficient
percentage of the voting power of our common equity securities to effectively block approval of any proposal which requires a vote of our stockholders.
Our stockholder rights plan could deter a change of control. We have adopted a stockholder
rights plan. This plan may deter a person or a group from acquiring more than 10% of the combined voting power of our outstanding shares of Common Stock and Class A Common Stock because, after (i) the person or group acquires more than 10% of the
total combined voting power of our outstanding Common Stock and Class A Common Stock, or (ii) the commencement of a tender offer or exchange offer by any person (other than us, any one of our wholly owned subsidiaries or any of our employee benefit
plans, or certain exempt persons), if, upon consummation of the tender offer or exchange offer, the person or group would beneficially own 30% or more of the combined voting power of our outstanding Common Stock and Class A Common Stock, number of
outstanding Common Stock, or the number of outstanding Class A Common Stock, and upon satisfaction of certain other conditions, all other stockholders will have the right to purchase Common Stock and Class A Common Stock of the Company having a value equal to two times the exercise price of the right. This would substantially reduce the value of the stock owned by the acquiring person. Our board of
directors can prevent the plan from operating by approving the transaction and redeeming the rights. This gives our board of directors significant power to approve or disapprove of the efforts of a person or group to acquire a large interest in
us. The rights plan exempts acquisitions of Common Stock and Class A Common Stock by Mr. Charles J. Urstadt, Willing L. Biddle, members of their families and certain of their affiliates.
The
concentration of our stock ownership or voting power limits our stockholders’ ability to influence corporate matters. Each share of our Common Stock entitles the holder to one vote. Each share of our Class A Common Stock entitles the
holder to 1/20 of one vote per share. Each share of Common Stock and Class A Common Stock have identical rights with respect to dividends except that each share of Class A Common Stock will receive not less than 110% of the regular quarterly
dividends paid on each share of Common Stock. As of October 31, 2018, Charles J. Urstadt, our Chairman, and Willing L. Biddle, our President and Chief Executive Officer, beneficially owned approximately 19.6% of our outstanding Common Stock and
Class A Common Stock, which together represented approximately 66.7% of the voting power of our outstanding common stock. Messrs. Urstadt and Biddle therefore have significant influence over management and affairs and over all matters requiring
stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. This concentrated control limits or restricts our
stockholders’ ability to influence corporate matters.
Properties
The following table sets forth information concerning each property at October 31, 2018. Except as otherwise noted, all
properties are 100% owned by the Company.
|
Retail Properties:
|
Year Renovated
|
Year Completed
|
Year Acquired
|
Gross Leasable Sq Feet
|
Acres
|
Number of Tenants
|
% Leased
|
Principal Tenant
|
|
Stamford, CT
|
1997
|
1950
|
2002
|
374,000
|
13.6
|
34
|
96%
|
Stop & Shop
|
|
Stratford, CT
|
1988
|
1978
|
2005
|
278,000
|
29.0
|
20
|
100%
|
Stop & Shop, BJ's
|
|
Scarsdale, NY (1)
|
2004
|
1958
|
2010
|
250,000
|
14.0
|
26
|
97%
|
ShopRite
|
|
New Milford, CT
|
2002
|
1972
|
2010
|
235,000
|
20.0
|
13
|
98%
|
Walmart
|
|
Riverhead, NY (2)
|
-
|
2014
|
2014
|
198,000
|
20.7
|
4
|
100%
|
Walmart
|
|
Danbury, CT
|
-
|
1989
|
1995
|
194,000
|
19.3
|
18
|
98%
|
Christmas Tree Shops
|
|
Carmel, NY (3)
|
2006
|
1971
|
2010
|
189,000
|
22.0
|
35
|
95%
|
Tops Markets
|
|
Ossining, NY
|
2000
|
1978
|
1998
|
137,000
|
11.4
|
25
|
99%
|
Stop & Shop
|
|
Somers, NY
|
-
|
2002
|
2003
|
135,000
|
26.0
|
29
|
96%
|
Home Goods
|
|
Midland Park, NJ
|
1999
|
1970
|
2015
|
130,000
|
7.9
|
29
|
97%
|
Kings Supermarket
|
|
Carmel, NY
|
1999
|
1983
|
1995
|
129,000
|
19.0
|
17
|
96%
|
ShopRite
|
|
Pompton Lakes, NJ
|
2000
|
1965
|
2015
|
125,000
|
12.0
|
17
|
47%
|
Planet Fitness
|
|
Yorktown, NY
|
1997
|
1973
|
2005
|
121,000
|
16.4
|
12
|
88%
|
Staples
|
|
New Providence, NJ
|
2010
|
1965
|
2013
|
109,000
|
7.8
|
27
|
100%
|
Acme Markets
|
|
Newark, NJ (4)
|
-
|
1995
|
2008
|
108,000
|
8.4
|
13
|
95%
|
Seabra Supermarket
|
|
Wayne, NJ
|
1992
|
1959
|
1992
|
102,000
|
9.0
|
41
|
98%
|
Whole Foods Market
|
|
Newington, NH
|
1994
|
1975
|
1979
|
102,000
|
14.3
|
8
|
97%
|
JoAnns Fabrics
|
|
Darien, CT
|
1992
|
1955
|
1998
|
96,000
|
9.5
|
23
|
99%
|
Stop & Shop
|
|
Emerson, NJ
|
2013
|
1981
|
2007
|
93,000
|
7.0
|
11
|
83%
|
ShopRite
|
|
Stamford, CT (8)
|
2013
|
1963 & 1968
|
2017
|
87,000
|
6.7
|
27
|
100%
|
Trader Joes
|
|
New Milford, CT
|
-
|
1966
|
2008
|
81,000
|
7.6
|
5
|
92%
|
Big Y
|
|
Somers, NY
|
-
|
1991
|
1999
|
80,000
|
10.8
|
29
|
91%
|
CVS
|
|
Montvale, NJ (2)
|
2010
|
1965
|
2013
|
79,000
|
9.9
|
11
|
89%
|
The Fresh Market
|
|
Orange, CT
|
-
|
1990
|
2003
|
78,000
|
10.0
|
12
|
96%
|
Trader Joes
|
|
Kinnelon, NJ
|
2015
|
1961
|
2015
|
77,000
|
7.5
|
12
|
98%
|
Marshalls
|
|
Orangeburg, NY (5)
|
2014
|
1966
|
2012
|
74,000
|
10.6
|
27
|
87%
|
CVS
|
|
Dumont, NJ (9)
|
-
|
1992
|
2017
|
74,000
|
5.5
|
33
|
99%
|
Stop & Shop
|
|
Stamford, CT
|
2000
|
1970
|
2016
|
72,000
|
9.7
|
14
|
94%
|
ShopRite (Grade A)
|
|
New Milford, CT
|
-
|
2003
|
2011
|
72,000
|
8.8
|
11
|
93%
|
TJ Max
|
|
Eastchester, NY
|
2013
|
1978
|
1997
|
70,000
|
4.0
|
13
|
100%
|
Acme Markets
|
|
Boonton, NJ
|
2016
|
1999
|
2014
|
63,000
|
5.4
|
10
|
100%
|
Acme Markets
|
|
Ridgefield, CT
|
1999
|
1930
|
1998
|
62,000
|
3.0
|
40
|
92%
|
Keller Williams
|
|
Fairfield, CT
|
-
|
1995
|
2011
|
62,000
|
7.0
|
3
|
100%
|
Marshalls
|
|
Bloomfield, NJ
|
2016
|
1977
|
2014
|
59,000
|
5.1
|
9
|
96%
|
Superfresh Supermarket
|
|
Yonkers, NY (7)
|
-
|
1982
|
2014
|
58,000
|
5.0
|
13
|
100%
|
Acme Markets
|
|
Cos Cob, CT
|
2008
|
1986
|
2014
|
48,000
|
1.1
|
35
|
100%
|
CVS
|
|
Briarcliff Manor, NY
|
2014
|
1975
|
2001
|
47,000
|
1.0
|
17
|
92%
|
CVS
|
|
Wyckoff, NJ
|
2014
|
1971
|
2015
|
43,000
|
5.2
|
15
|
92%
|
Walgreens
|
|
Westport, CT
|
-
|
1986
|
2003
|
40,000
|
3.0
|
8
|
55%
|
Rio Bravo Restaurant
|
|
Old Greenwich, CT
|
-
|
1976
|
2014
|
39,000
|
1.4
|
14
|
95%
|
Kings Supermarket
|
|
Rye, NY
|
-
|
Various
|
2004
|
39,000
|
1.0
|
20
|
84%
|
A&S Deli
|
|
Derby, CT
|
-
|
2014
|
2017
|
39,000
|
5.3
|
6
|
91%
|
Aldi Supermarket
|
|
Passaic, NJ
|
2016
|
1974
|
2017
|
37,000
|
2.9
|
3
|
16%
|
Valley National Bank
|
|
Danbury, CT
|
2012
|
1988
|
2002
|
33,000
|
2.7
|
6
|
100%
|
Buffalo Wild Wings
|
|
Bethel, CT
|
1967
|
1957
|
2014
|
31,000
|
4.0
|
7
|
95%
|
Rite Aid
|
|
Ossining, NY
|
2001
|
1981
|
1999
|
29,000
|
4.0
|
3
|
88%
|
Westchester Community College
|
|
Katonah, NY
|
1986
|
Various
|
2010
|
28,000
|
1.7
|
27
|
93%
|
Katonah Pharmacy
|
|
Stamford, CT
|
1995
|
1960
|
2016
|
27,000
|
1.1
|
7
|
100%
|
Federal Express
|
|
Waldwick, NJ
|
-
|
1953
|
2017
|
27,000
|
1.8
|
11
|
100%
|
United States Post Office
|
|
Yonkers, NY
|
1992
|
1955
|
2018
|
27,000
|
2.7
|
16
|
100%
|
AutoZone
|
|
Harrison, NY
|
-
|
1970
|
2015
|
26,000
|
1.6
|
12
|
97%
|
Key Foods
|
|
Pelham, NY
|
2014
|
1975
|
2006
|
25,000
|
1.0
|
9
|
100%
|
Manor Market
|
|
Spring Valley, NY (2)
|
-
|
1950
|
2013
|
24,000
|
1.6
|
11
|
94%
|
Spring Valley Foods
|
|
Eastchester, NY
|
2014
|
1963
|
2012
|
24,000
|
2.1
|
5
|
100%
|
CVS
|
|
Ridgefield, CT
|
-
|
1960
|
2018
|
24,000
|
2.7
|
8
|
85%
|
Asian Fushion Restaurant
|
|
Waldwick, NJ
|
-
|
1961
|
2008
|
20,000
|
1.8
|
1
|
100%
|
Rite Aid
|
|
Somers, NY
|
-
|
1987
|
1992
|
19,000
|
4.9
|
12
|
100%
|
Putnam County Savings Bank
|
|
Cos Cob, CT
|
1970
|
1947
|
2013
|
15,000
|
0.9
|
11
|
100%
|
Jos. A Bank
|
|
Various (6)
|
-
|
Various
|
2013
|
15,000
|
3.0
|
4
|
75%
|
Restaurants
|
|
Riverhead, NY (2)
|
-
|
2000
|
2014
|
13,000
|
2.7
|
3
|
100%
|
Applebee's
|
|
Monroe, CT
|
-
|
2005
|
2007
|
10,000
|
2.0
|
6
|
100%
|
Starbucks
|
|
Greenwich, CT
|
-
|
1961
|
2013
|
10,000
|
0.8
|
6
|
100%
|
Cava Mezza Grill
|
|
Old Greenwich, CT (8)
|
2001
|
1941
|
2017
|
8,000
|
0.8
|
1
|
100%
|
CVS
|
|
Fort Lee, NJ
|
-
|
1967
|
2015
|
7,000
|
0.4
|
1
|
100%
|
H-Mart
|
|
Office Properties & Banks Branches
|
||||||||
|
Greenwich, CT
|
-
|
Various
|
Various
|
58,000
|
2.8
|
16
|
82%
|
UBP
|
|
Bronxville & Yonkers
|
-
|
1960
|
2008 & 2009
|
19,000
|
0.7
|
4
|
100%
|
Peoples Bank , Chase Bank
|
|
Bernardsville, NJ
|
-
|
1970
|
2013
|
14,000
|
1.1
|
8
|
83%
|
Lab Corp
|
|
Chester, NJ
|
-
|
1950
|
2013
|
9,000
|
2.0
|
1
|
100%
|
Kinder Care
|
|
Stamford, CT (8)
|
2012
|
1960
|
2017
|
4,000
|
0.5
|
1
|
100%
|
Chase Bank
|
|
New City, NY (10)
|
-
|
1973
|
2018
|
3,000
|
1.0
|
1
|
100%
|
Putnam County Savings Bank
|
|
5,134,000
|
477.2
|
987
|
(1) Two wholly owned subsidiaries of the Company own an 11.642% economic ownership interest in the property. The Company
accounts for this joint venture under the equity method of accounting and does not consolidate the entity owning the property.
(2) A wholly owned subsidiary of the Company has a 50% tenant in common interest in the property. The Company accounts for
this joint venture under the equity method of accounting and does not consolidate its interest in the property.
(3) A wholly owned subsidiary of the Company has a 66.67% tenant in common interest in the property. The Company accounts
for this joint venture under the equity method of accounting and does not consolidate its interest in the property.
(4) A wholly owned subsidiary of the Company is the sole general partner of a partnership that owns this property (84%
ownership interest)
(5) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this
property (44.1% ownership interest)
(6) The Company owns five separate free standing properties, two of which are occupied 100% by a Friendly's Restaurant and
two by other restaurant's. The properties are located in New York, New Jersey and Connecticut.
(7) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this
property (53.0% ownership interest)
(8) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this
property (10.9% ownership interest)
(9) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this
property (31.4% ownership interest)
(10) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this
property (75.3% ownership interest)
Lease Expirations –
Total Portfolio
The following table sets forth a summary schedule of the annual lease expirations for the consolidated properties for
leases in place as of October 31, 2018, assuming that none of the tenants exercise renewal or cancellation options, if any, at or prior to the scheduled expirations.
|
Year of Expiration
|
Number of
Leases Expiring
|
Square Footage
of Expiring Leases
|
Minimum Base Rents
|
Percentage of Total
Annual Base Rent
that is Represented
by the Expiring Leases
|
||||||||||||
|
2019 (1)
|
216
|
503,614
|
$
|
12,045,700
|
13
|
%
|
||||||||||
|
2020
|
106
|
385,825
|
9,628,300
|
10
|
%
|
|||||||||||
|
2021
|
124
|
354,565
|
10,302,600
|
11
|
%
|
|||||||||||
|
2022
|
113
|
647,533
|
15,286,500
|
16
|
%
|
|||||||||||
|
2023
|
86
|
552,192
|
14,367,200
|
15
|
%
|
|||||||||||
|
2024
|
50
|
230,776
|
6,298,400
|
6
|
%
|
|||||||||||
|
2025
|
43
|
237,522
|
5,484,900
|
6
|
%
|
|||||||||||
|
2026
|
35
|
136,487
|
3,895,400
|
4
|
%
|
|||||||||||
|
2027
|
40
|
163,662
|
4,158,600
|
4
|
%
|
|||||||||||
|
2028
|
36
|
243,352
|
5,460,200
|
6
|
%
|
|||||||||||
|
Thereafter
|
36
|
483,744
|
8,551,200
|
9
|
%
|
|||||||||||
|
885
|
3,939,272
|
$
|
95,479,000
|
100
|
%
|
|||||||||||
| (1) |
Represents lease expirations from November 1, 2018 to October 31, 2019 and month-to-month leases.
|
In the ordinary course of business, the Company is involved in legal proceedings. There are no material legal
proceedings presently pending against the Company.
PART II
Market Information
Shares of Common Stock and Class A Common Stock of the Company are traded on the New York Stock Exchange under the
symbols "UBP" and "UBA," respectively.
Holders
At December 31, 2018 (latest date practicable), there were 570 shareholders of record of the Company's Common Stock and
610 shareholders of record of the Class A Common Stock.
Each share of Common Stock entitles the holder to one vote. Each share of Class A Common Stock entitles the holder to
1/20 of one vote per share. Each share of Common Stock and Class A Common Stock have identical rights with respect to dividends except that each share of Class A Common Stock will receive not less than 110% of the regular quarterly dividends paid
on each share of Common Stock.
Purchases of Equity Securities By the Issuer and Affiliated Purchasers
The Board of Directors of the Company has approved a share repurchase program ("Program") for the repurchase of up to
2,000,000 shares, in the aggregate, of Common Stock, Class A Common Stock and Series G Cumulative Preferred Stock in open market transactions. For the three month period ended October 31, 2018, the Company did not repurchase shares of any class of
stock under the Program.
(In thousands, except per share data)
|
Year Ended October 31,
|
||||||||||||||||||||
|
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||||
|
Balance Sheet Data:
|
||||||||||||||||||||
|
Total Assets
|
$
|
1,008,233
|
$
|
996,713
|
$
|
931,324
|
$
|
861,075
|
$
|
819,005
|
||||||||||
|
Revolving Credit Lines and Unsecured Term Loan
|
$
|
28,595
|
$
|
4,000
|
$
|
8,000
|
$
|
22,750
|
$
|
40,550
|
||||||||||
|
Mortgage Notes Payable and Other Loans
|
$
|
293,801
|
$
|
297,071
|
$
|
273,016
|
$
|
260,457
|
$
|
205,147
|
||||||||||
|
Preferred Stock Called For Redemption
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
61,250
|
||||||||||
|
Operating Data:
|
||||||||||||||||||||
|
Total Revenues
|
$
|
135,352
|
$
|
123,560
|
$
|
116,792
|
$
|
115,312
|
$
|
102,328
|
||||||||||
|
Total Expenses and payments to noncontrolling interests
|
$
|
100,320
|
$
|
91,774
|
$
|
85,337
|
$
|
88,594
|
$
|
75,927
|
||||||||||
|
Income from Continuing Operations before Discontinued Operations
|
$
|
42,183
|
$
|
55,432
|
$
|
34,605
|
$
|
50,212
|
$
|
53,091
|
||||||||||
|
Per Share Data:
|
||||||||||||||||||||
|
Net Income from Continuing Operations - Basic:
|
||||||||||||||||||||
|
Class A Common Stock
|
$
|
0.68
|
$
|
0.92
|
$
|
0.57
|
$
|
1.04
|
$
|
1.22
|
||||||||||
|
Common Stock
|
$
|
0.61
|
$
|
0.82
|
$
|
0.50
|
$
|
0.92
|
$
|
1.09
|
||||||||||
|
Net Income from Continuing Operations - Diluted:
|
||||||||||||||||||||
|
Class A Common Stock
|
$
|
0.67
|
$
|
0.90
|
$
|
0.56
|
$
|
1.02
|
$
|
1.19
|
||||||||||
|
Common Stock
|
$
|
0.60
|
$
|
0.80
|
$
|
0.49
|
$
|
0.90
|
$
|
1.06
|
||||||||||
|
Cash Dividends Paid on:
|
||||||||||||||||||||
|
Class A Common Stock
|
$
|
1.08
|
$
|
1.06
|
$
|
1.04
|
$
|
1.02
|
$
|
1.01
|
||||||||||
|
Common Stock
|
$
|
0.96
|
$
|
0.94
|
$
|
0.92
|
$
|
0.90
|
$
|
0.90
|
||||||||||
|
Other Data:
|
||||||||||||||||||||
|
Net Cash Flow Provided by (Used in):
|
||||||||||||||||||||
|
Operating Activities
|
$
|
71,584
|
$
|
62,995
|
$
|
62,081
|
$
|
53,041
|
$
|
52,519
|
||||||||||
|
Investing Activities
|
$
|
(26,476
|
)
|
$
|
16,262
|
$
|
(82,072
|
)
|
$
|
(106,975
|
)
|
$
|
(56,228
|
)
|
||||||
|
Financing Activities
|
$
|
(43,497
|
)
|
$
|
(77,854
|
)
|
$
|
20,639
|
$
|
(12,472
|
)
|
$
|
73,793
|
|||||||
|
Funds from Operations (1)
|
$
|
55,171
|
$
|
43,203
|
$
|
43,603
|
$
|
38,056
|
$
|
33,032
|
||||||||||
| (1) |
The Company has adopted the definition of Funds from Operations (FFO) suggested by the National Association of Real Estate Investment Trusts (NAREIT) and
defines FFO as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of properties plus real estate related depreciation and amortization and after adjustments for
unconsolidated joint ventures. For a reconciliation of net income and FFO, see Management's Discussion and Analysis of Financial Condition and Results of Operations on page 13.
FFO does not represent cash flows from operating activities in accordance with generally accepted accounting principles and should not be considered an alternative to net income as an indicator of the Company's operating performance.
The Company considers FFO a meaningful, additional measure of operating performance because it primarily excludes the assumption that the value of its real estate assets diminishes predictably over time and industry analysts have
accepted it as a performance measure. FFO is presented to assist investors in analyzing the performance of the Company. It is helpful as it excludes various items included in net income that are not indicative of the Company's
operating performance. However, comparison of the Company's presentation of FFO, using the NAREIT definition, to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application
of the NAREIT definition used by such REITs. For a further discussion of FFO, see Management's Discussion and Analysis of Financial Condition and Results of Operations on page 13.
|
The following discussion should be read in conjunction with the consolidated financial statements of the Company and the notes
thereto included elsewhere in this report, the “Special Note Regarding Forward-Looking Statements” in Part I and “Item 1A. Risk Factors.”
Executive Summary
Overview
We are a fully integrated, self-administered real estate company that has elected to be a REIT for federal income tax
purposes, engaged in the acquisition, ownership and management of commercial real estate, primarily neighborhood and community shopping centers, with a concentration in the metropolitan New York tri-state area outside of the City of New York. Other
real estate assets include office properties, single tenant retail or restaurant properties and office/retail mixed use properties. Our major tenants include supermarket chains and other retailers who sell basic necessities.
At October 31, 2018, we owned or had equity interests in 84 properties, which include equity interests we own in six
consolidated joint ventures and seven unconsolidated joint ventures, containing a total of 5.1 million square feet of Gross Leasable Area (“GLA”). Of the properties owned by wholly-owned subsidiaries or joint venture entities that we
consolidate, approximately 93.2% was leased (92.7% at October 31, 2017). Of the properties owned by unconsolidated joint ventures, approximately 96.3% was leased (97.7% at October 31, 2017).
We have paid quarterly dividends to our shareholders continuously since our founding in 1969 and have increased the
level of dividend payments to our shareholders for 24 consecutive years.
We derive substantially all of our revenues from rents and operating expense reimbursements received pursuant to
long-term leases and focus our investment activities on community and neighborhood shopping centers, anchored principally by regional supermarket or pharmacy chains. We believe that because consumers need to purchase food and other types of staple
goods and services generally available at supermarket or pharmacy-anchored shopping centers, the nature of our investments provides for relatively stable revenue flows even during difficult economic times.
We have a conservative capital structure, which includes permanent equity sources of Common Stock, Class A Common Stock
and two series of perpetual preferred stock, which is only redeemable at our option. In addition, we have mortgage debt. We have one $3.2 million mortgage maturing in October 2019, which we believe could easily be refinanced if we so choose or
repaid with available cash. Two other mortgages for properties we consolidate and one secured mortgage for a property we have an equity investment in but do not consolidate had mortgages that mature in fiscal 2019. Those mortgage notes have been
refinanced or we have entered into agreements to refinance them. For further information please see the Financing Strategy section of this Item 7 below. Thereafter, we do not have any additional secured debt maturing until January of 2022.
We focus on increasing cash flow, and consequently the value of our properties, and seek continued growth through
strategic re-leasing, renovations and expansions of our existing properties and selective acquisitions of income-producing properties. Key elements of our growth strategies and operating policies are to:
|
•
|
acquire quality neighborhood and community shopping centers in the northeastern part of the United States with
a concentration on properties in the metropolitan New York tri-state area outside of the City of New York, and unlock further value in these properties with selective enhancements to both the property and tenant mix, as well as
improvements to management and leasing fundamentals. Our hope is to grow our assets through acquisitions by 5% to 10% per year on a dollar value basis subject to the availability of acquisitions that meet our investment parameters;
|
|
•
|
selectively dispose of underperforming properties and re-deploy the proceeds into potentially higher
performing properties that meet our acquisition criteria;
|
|
•
|
invest in our properties for the long term through regular maintenance, periodic renovations and capital
improvements, enhancing their attractiveness to tenants and customers, as well as increasing their value;
|
|
•
|
leverage opportunities to increase GLA at existing properties, through development of pad sites and
reconfiguring of existing square footage, to meet the needs of existing or new tenants;
|
|
•
|
proactively manage our leasing strategy by aggressively marketing available GLA, renewing existing leases with
strong tenants, and replacing weak ones when necessary, with an eye towards securing leases that include regular or fixed contractual increases to minimum rents, replacing below-market-rent leases with increased market rents when possible
and further improving the quality of our tenant mix at our shopping centers;
|
|
•
|
maintain strong working relationships with our tenants, particularly our anchor tenants;
|
|
•
|
maintain a conservative capital structure with low debt levels; and
|
|
•
|
control property operating and administrative costs.
|
Highlights of Fiscal 2018; Recent Developments
Set forth below are highlights of our recent property acquisitions, other investments, property dispositions and
financings:
|
•
|
In October 2017, we purchased a promissory note secured by a mortgage on 470 Main Street in Ridgefield, CT
(“470 Main”), which comprises part of the Yankee Ridge retail and office mixed-use property. The note was purchased from the existing lender. In January 2018, we completed foreclosure of the mortgage and became the owner of 470 Main.
Total consideration paid for the note, including costs, totaled $3.1 million. 470 Main is a 24,200 square foot building with ground and first floor retail and second floor office space. We funded the note purchase with available cash.
|
|
•
|
In March 2018, we purchased for $13.1 million a 27,000 square foot shopping center located in Yonkers, NY. We
funded the acquisition with available cash, the issuance of unsecured notes payable to the seller (See Note 4 of our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K), and borrowings on our Unsecured
Revolving Credit Facility (“Facility”).
|
|
•
|
In June 2018, the Company purchased a 75.3% equity interest in a joint venture, UB New City I, LLC, in which
the Company is the managing member. The Company's initial investment was $2.4 million. New City owns a single tenant retail real estate property located in New City, NY, which is leased to a savings bank. In addition, New City rents
certain parking spaces on the property to the owner of an adjacent grocery-anchored shopping center. The property was contributed to the new entity by the former owners who received units of ownership of New City equal to the value of
contributed property. The New City operating agreement provides for the non-managing member to receive an annual cash distribution, currently equal to 5.00% of his invested capital.
|
|
•
|
In August and October 2018, three of the non-managing members in our consolidated joint venture, UB High
Ridge, LLC (“High Ridge”) put, in the aggregate, 17,695 Series A units and 34,219 Series B units of High Ridge to us pursuant to the terms of the High Ridge operating agreement. The total cash redemption amount equaled $1.2 million. As
a result, our ownership percentage of High Ridge increased from 8.8% at inception to 10.9% after the redemptions. The redemptions were funded with available cash.
|
|
•
|
In October 2018, we entered into a purchase and sale agreement to purchase a 177,000 square foot
grocery-anchored shopping center for $12 million located in Putnam County, NY, for which we deposited $1 million with the seller. In addition, we anticipate having to invest an additional $6 million to $8 million for capital improvements
and for re-tenanting at the property. At October 31, 2018, the property was approximately 73% leased. We closed on the purchase in December 2018, funding the purchase with available cash and borrowings on our Facility. We intend to
fund the additional investment of $6 million to $8 million with a combination of available cash, borrowings on our Facility and by potentially placing a mortgage on the property.
|
|
•
|
In October 2018, we entered into a commitment to refinance our existing $15 million mortgage secured by our
Darien, CT shopping center on March 18, 2019, the first day the Darien mortgage can be repaid without penalty. The new mortgage will be in the amount of $25 million, have a term of ten years and will require payments of principal and
interest at the rate of LIBOR plus 1.65%. Concurrent with the commitment, we also entered into an interest rate swap with the new lender, which will convert the variable interest rate (based on LIBOR) to a fixed rate of 4.815% per
annum. The fixed interest rate on the existing mortgage is currently 6.55%.
|
|
•
|
In October 2018, we entered into a commitment to refinance our existing $9.2 million mortgage secured by our
Newark, NJ shopping center. We anticipate the refinancing will take place in March 2019, the first month the current mortgage can be repaid without penalty. The new mortgage will be in the amount of $10 million and has a term of ten
years and requires payments of principal and interest at the fixed rate of 4.63%, which is a reduction from the existing fixed interest rate of 6.15%.
|
Known Trends; Outlook
We believe that shopping center REITs face opportunities and challenges that are both common to and unique from other
REITs and real estate companies. As a shopping center REIT, we are focused on certain challenges that are unique to the retail industry. In particular, we recognize the challenges presented by e-commerce to brick-and-mortar retail
establishments, including our tenants. However, we believe that because consumers prefer to purchase food and other staple goods and services available at supermarkets in person, the nature of our properties makes them less vulnerable to the
encroachment of e-commerce than other properties whose tenants may more directly compete with the internet. Moreover, we believe the nature of our properties makes them less susceptible to economic downturns than other retail properties whose
anchor tenants are not supermarkets or other staple goods providers. We note, however, that many prospective in-line tenants are seeking smaller spaces than in the past, as a result, in part, of internet encroachment on their brick-and-mortar
business. When feasible, we actively work to place tenants that are less susceptible to internet encroachment, such as restaurants, fitness centers, healthcare and personal services. We continue to be sensitive to these considerations when we
establish the tenant mix at our shopping centers, and believe that our strategy of focusing on supermarket anchors is a strong one.
In the metropolitan tri-state area outside of New York City, demographics (income, density, etc.) remain strong and
opportunities for new development, as well as acquisitions, are competitive, with high barriers to entry. We believe that this will remain the case for the foreseeable future, and have focused our growth strategy accordingly.
As a REIT, we are susceptible to changes in interest rates, the lending environment, the availability of capital markets
and the general economy. For example, we believe that we are entering an increased interest rate environment, which could negatively impact the attractiveness of REIT stock to investors and our borrowing activities. It is also possible, however,
that higher interest rates could signal a stronger economy, resulting in greater spending by consumers. The impact of such changes are difficult to predict.
In December 2017, the U.S. Congress passed sweeping tax reform legislation that
made significant changes to corporate and individual tax rates and the calculation of taxes, as well as international tax rules for U.S. domestic corporations. As a REIT, we are generally not required to pay federal taxes otherwise applicable to
regular corporations if we comply with the various tax regulations governing REITs. Stockholders, however, are generally required to pay taxes on REIT dividends. Tax reform legislation would affect the way in which dividends paid on our stock are
taxed by the holder of that stock and could impact our stock price or how stockholders and potential investors view an investment in REITs. In addition, while certain elements of tax reform legislation would not impact us directly as a REIT, they
could impact the geographic markets in which we operate, the tenants that populate our shopping centers and the customers who frequent our properties in ways, both positive and negative, that are difficult to anticipate.
Leasing
Rollovers
For the fiscal year 2018, we signed leases for a total of 707,000 square feet of predominantly retail space in our
consolidated portfolio. New leases for vacant spaces were signed for 210,000 square feet at an average rental decrease of 11.7% on a cash basis, excluding 16,400 square feet of new leases for which there was no prior rent history available. The
rental decrease for new lease space in fiscal 2018 was predominantly related to a 63,000 square foot supermarket lease in our Newark, NJ property, which was leased at a rental rate 30% below the prior occupied lease rate (see Significant Events
with Impacts on Leasing section below). Renewals for 480,000 square feet of space previously occupied were signed at an average rental increase of 6.5% on a cash basis.
Tenant improvements and leasing commissions averaged $60.85 per square foot for new leases and $16.57 per square foot
for renewals for the fiscal year ended 2018. The average term for new leases was 5.7 years and the average term for renewal leases was 4 years.
The rental increases/decreases associated with new and renewal leases generally include all leases signed in arms-length
transactions reflecting market leverage between landlords and tenants. The comparison between average rent for expiring leases and new leases is determined by including minimum rent paid on the expiring lease and minimum rent to be paid on the new
lease in the first year. In some instances, management exercises judgment as to how to most effectively reflect the comparability of spaces reported in this calculation. The change in rental income on comparable space leases is impacted by numerous
factors including current market rates, location, individual tenant creditworthiness, use of space, market conditions when the expiring lease was signed, the age of the expiring lease, capital investment made in the space and the specific lease
structure. Tenant improvements include the total dollars committed for the improvement (fit-out) of a space as it relates to a specific lease but may also include base building costs (i.e. expansion, escalators or new entrances) that are required
to make the space leasable. Incentives (if applicable) include amounts paid to tenants as an inducement to sign a lease that do not represent building improvements.
The leases signed in 2018 generally become effective over the following one to two years. There is risk, however, that
some new tenants will not ultimately take possession of their space and that tenants for both new and renewal leases may not pay all of their contractual rent due to operating, financial or other reasons.
In 2019, we believe our leasing volume will be in-line with our historical averages with overall positive increases in
rental income for renewal leases and flat to slightly positive increases for new leases. However, changes in rental income associated with individual signed leases on comparable spaces may be positive or negative, and we can provide no assurance
that the rents on new leases will continue to increase at the above described levels, if at all.
Significant Events with Impacts on Leasing
In July 2015, one of our largest tenants, A&P, filed a voluntary petition under chapter 11 of title 11 of the United
States Bankruptcy Code (the “Bankruptcy Code”). Subsequently, A&P determined that it would be liquidating the company. Prior to A&P filing for bankruptcy, A&P leased and occupied nine spaces totaling 365,000 square feet in our
portfolio. The bankruptcy process relating to our nine spaces is complete, with eight of the nine A&P leases having been assumed by new operators in the bankruptcy process or re-leased by us to new operators. The remaining lease, located in
our Pompton Lakes shopping center, totaling 63,000 square feet, was rejected by A&P in bankruptcy, and we are continuing to market that space for re-lease. In July 2017, one other 36,000 square foot space formerly occupied by A&P that we
had released to a local grocery operator became vacant, as that operator failed to perform under its lease and was evicted. We have signed a lease with Whole Foods Market for this location, and we are hopeful that we can deliver the space to the
lessee in early fiscal 2019. The lease required us to obtain municipal approvals, among other things, for a small 2,000 square foot expansion of the shopping center to accommodate the new tenant. We received these municipal approvals in the
fourth quarter of fiscal 2018 and have included this space as leased beginning in this fourth quarter of fiscal 2018. In February 2018, Tops Markets, LLC filed a voluntary petition under chapter 11 of title 11 of the Bankruptcy Code. Tops Markets
is a tenant at a property owned by an unconsolidated joint venture in which we have a 66.67% ownership interest. The space is 61,000 square feet and the lease runs through 2026. In September 2018, Tops Markets assumed the lease and continues to
perform under its lease pursuant to its terms. In May 2018, the grocery tenant occupying 30,600 square feet at our Passaic, NJ property went vacant, the tenant was evicted, and the lease was terminated. We are currently marketing this space for
lease. As a result of the eviction and lease termination, the intangible assets and liabilities related to that lease were charged to income/expense in the third quarter of fiscal 2018. As a result we increased base rent on the consolidated
income statement by $745,000 in the fiscal year ended October 31, 2018 and we increased amortization expense by $443,000 in the fiscal year ended October 31, 2018.
In April 2018, we reached agreement with the grocery tenant at our Newark, NJ property to terminate its 63,000 square
foot lease in exchange for a $3.7 million lease termination payment, which we received and recorded as revenue in the fiscal year ended October 31, 2018. Also in April 2018, we leased that same space to a new grocery store operator who took
possession in May 2018. While the rental rate on the new lease is 30% less than the rental rate on the terminated lease, we hope that part of this decreased rental rate will be recaptured with the receipt of percentage rent in subsequent years as
the store matures and its sales increase. The new lease required no tenant improvements or tenant allowances.
In 2017, Toys R’ Us and Babies R’ Us (“Toys”) filed a voluntary petition under chapter 11 of title 11 of the United States Bankruptcy Code (the “Bankruptcy Code”). Subsequently, Toys determined that it would be liquidating the company. Toys ground leased 65,700 square feet of space
in our Danbury, CT shopping center. In August 2018, this lease was purchased out of bankruptcy from Toys and assumed by a new owner. The base lease rate for the 65,700 square foot space is $0 for the duration of the lease, and we did
not have any other leases with Toys R’ Us or Babies R’ Us, so the Company’s cash flow was not impacted by the bankruptcy of Toys R’ Us and Babies R’ Us. As of the date of this report, we have not been informed by the new owner of the lease which
operator will occupy the space.
Impact of Inflation on Leasing
Our long-term leases contain provisions to mitigate the adverse impact of inflation on our operating results. Such
provisions include clauses entitling us to receive (a) scheduled base rent increases and (b) percentage rents based upon tenants’ gross sales, which generally increase as prices rise. In addition, many of our non-anchor leases are for terms of less
than ten years, which permits us to seek increases in rents upon renewal at then current market rates if rents provided in the expiring leases are below then existing market rates. Most of our leases require tenants to pay a share of operating
expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.
Critical Accounting Policies
Critical accounting policies are those that are both important to the presentation of the Company’s financial condition
and results of operations and require management’s most difficult, complex or subjective judgments. For a further discussion about the Company's critical accounting policies, please see Note 1 to our consolidated financial statements included in
Item 8 of this Annual Report on Form 10-K.
Liquidity and Capital Resources
Overview
At October 31, 2018, we had cash and cash equivalents of $10.3 million, compared to $8.7 million at October 31, 2017.
Our sources of liquidity and capital resources include operating cash flow from real estate operations, proceeds from bank borrowings and long-term mortgage debt, capital financings and sales of real estate investments. Substantially all of our
revenues are derived from rents paid under existing leases, which means that our operating cash flow depends on the ability of our tenants to make rental payments. In fiscal 2018, 2017 and 2016, net cash flow provided by operations amounted to
$71.6 million, $63.0 million and $62.1 million, respectively.
Our short-term liquidity requirements consist primarily of normal recurring operating expenses and capital expenditures,
debt service, management and professional fees, and regular dividends paid to our Common and Class A Common stockholders, which we expect to continue. Cash dividends paid on Common and Class A Common stock for the years ended October 31, 2018 and
2017 totaled $41.6 million and $40.6 million, respectively. Historically, we have met short-term liquidity requirements, which is defined as a rolling twelve month period, primarily by generating net cash from the operation of our properties. We
believe that our net cash provided by operations will continue to be sufficient to fund our short-term liquidity requirements, including payment of dividends necessary to maintain our federal income tax REIT status.
Our long-term liquidity requirements consist primarily of obligations under our long-term debt, dividends paid to our
preferred stockholders, capital expenditures and capital required for acquisitions. In addition, the limited partners and non-managing members of our six consolidated joint venture entities, UB Ironbound, L.P., UB McLean, LLC, UB Orangeburg, LLC, High Ridge, UB Dumont I, LLC and UB New City I, LLC, have the right to require the Company to repurchase all or a portion of their limited partner or
non-managing member interests at prices and on terms as set forth in the governing agreements. See Note 5 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Historically, we have financed the foregoing
requirements through operating cash flow, borrowings under our Facility, debt refinancings, new debt, equity offerings and other capital market transactions, and/or the disposition of under-performing assets, with a focus on keeping our leverage
low. We expect to continue doing so in the future. We cannot assure you, however, that these sources will always be available to us when needed, or on the terms we desire.
Capital Expenditures
We invest in our existing properties and regularly make capital expenditures in the ordinary course of business to
maintain our properties. We believe that such expenditures enhance the competitiveness of our properties. In fiscal 2018, we paid approximately $8.2 million for property improvements, tenant improvements and leasing commission costs (approximately
$5.3 million representing property improvements and approximately $2.9 million related to new tenant space improvements, leasing costs and capital improvements as a result of new tenant spaces). The amount of these expenditures can vary
significantly depending on tenant negotiations, market conditions and rental rates. We expect to incur approximately $5.0 million predominantly for anticipated capital improvements and leasing costs related to new tenant leases and property
improvements during fiscal 2019. These expenditures are expected to be funded from operating cash flows, bank borrowings or other financing sources.
Financing Strategy, Unsecured Revolving Credit Facility and other Financing Transactions
Our strategy is to maintain a conservative capital structure with low leverage levels by commercial real estate
standards. Mortgage notes payable and other loans of $293.8 million consist of $1.7 million in variable rate debt with an interest rate of 4.91% as of October 31, 2018 and $292.1 million in fixed-rate mortgage loan and unsecured note indebtedness
with a weighted average interest rate of 4.19% at October 31, 2018. The mortgages are secured by 26 properties with a net book value of $558 million and have fixed rates of interest ranging from 3.5% to 6.6%. The $1.7 million in variable rate
debt is unsecured. We may refinance our mortgage loans, at or prior to scheduled maturity, through replacement mortgage loans. The ability to do so, however, is dependent upon various factors, including the income level of the properties,
interest rates and credit conditions within the commercial real estate market. Accordingly, there can be no assurance that such re-financings can be achieved.
In addition, at October 31, 2018, we had $28.6 million of variable-rate debt consisting of draws on our Facility (see
below) that was not fixed through an interest rate swap or otherwise. See “Item 7.A. Quantitative and Qualitative Disclosures about Market Risk” included in this Annual Report on Form 10-K for additional information on our interest rate risk.
We currently maintain a ratio of total debt to total assets below 35% and a fixed charge coverage ratio of over 3.62 to
1 (excluding preferred stock dividends), which we believe will allow us to obtain additional secured mortgage loans or other types of borrowings, if necessary. We own 51 properties in our consolidated portfolio that are not encumbered by secured
mortgage debt. At October 31, 2018, we had borrowing capacity of $70.8 million on our Facility. Our Facility includes financial covenants that limit, among other things, our ability to incur unsecured and secured indebtedness. See Note 4 to our
consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information on these and other restrictions.
Unsecured Revolving Credit Facility and Other Property Financings
We have a $100 million unsecured revolving credit facility with a syndicate of three banks, BNY Mellon, BMO and Wells
Fargo N.A. with the ability under certain conditions to additionally increase the capacity to $150 million, subject to lender approval. The maturity date of the Facility is August 23, 2020 with a one-year extension at our option. Borrowings under
the Facility can be used for general corporate purposes and the issuance of up to $10 million of letters of credit. Borrowings will bear interest at our option of Eurodollar rate plus 1.35% to 1.95% or BNY Mellon's prime lending rate plus 0.35% to
0.95%, based on consolidated indebtedness, as defined. We pay a quarterly commitment fee on the unused commitment amount of 0.15% to 0.25% per annum, based on outstanding borrowings during the year. As of October 31, 2018, $70.8 million was
available to be drawn on the Facility. Our ability to borrow under the Facility is subject to our compliance with the covenants and other restrictions on an ongoing basis. As discussed above, the principal financial covenants limit our level of
secured and unsecured indebtedness and additionally require us to maintain certain debt coverage ratios. We were in compliance with such covenants at October 31, 2018.
During the year ended October 31, 2018, we borrowed $33.6 million on our Facility for property acquisitions, to fund capital improvements to our properties and for general corporate purposes. For the year ended October 31, 2018 we repaid $9 million of borrowings on our Facility
with available cash.
See Note 4 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a further
description of mortgage financing transactions in fiscal 2018.
Net Cash Flows from Operating Activities
Increase from fiscal 2017 to 2018:
The increase in operating cash flows was primarily due to our properties generating additional operating income in the fiscal year ended October 31, 2018 when compared with the corresponding prior period. This additional operating income was
predominantly from properties acquired in fiscal 2017 and fiscal 2018 and lease termination income of $3.8 million received in fiscal 2018 versus $2.4 million in fiscal 2017.
Increase from fiscal 2016 to 2017:
The increase in operating cash flows was primarily due to our generating additional operating income for the year ended
October 31, 2017 from properties acquired in fiscal 2016 and 2017 and the receipt of a lease termination payment in the amount of $2.1 million from a former tenant whose lease was terminated in July 2017 offset by an increase in tenant receivables
in fiscal 2017 when compared with fiscal 2016.
Net Cash Flows from Investing Activities
Decrease from fiscal 2017 to 2018:
The decrease in net cash flows used in investing activities in fiscal 2018 when
compared to fiscal 2017 was the result of our selling two properties in fiscal 2017, which generated proceeds of $45.3 million. We did not sell any properties in fiscal
2018. In addition, we had provided $13.5 million in mortgage financing to a shopping center we did not own in fiscal 2016. That loan was repaid to us in fiscal 2017. This net increase in cash used in investing activities was offset by
expending $23.7 million less on property acquisitions in fiscal 2018 when compared with the corresponding prior period.
Increase from fiscal 2016 to 2017:
The increase in net cash flows provided by investing activities in fiscal 2017 when compared to fiscal 2016 was the
result of the Company selling its White Plains, NY property and a single tenant property located in Fairfield, CT in fiscal 2017 and generating net proceeds of $45.3 million on those sales. In addition, we expended $11.8 million less for
improvements to our investment properties in fiscal 2017 when compared to fiscal 2016. This increase was further accentuated by our acquiring four properties and investing in two joint ventures, which we consolidate, that acquired four properties
in fiscal 2017 for a total equity investment of $30.6 million as compared with fiscal 2016, during which we acquired two investment properties requiring $58.7 million of equity capital. The increase was further bolstered by the repayment of our
one mortgage note receivable by the borrower in the amount of $13.5 million in fiscal 2017. This note was funded in fiscal 2016.
We regularly make capital investments in our properties for property improvements, tenant improvements costs and leasing
commissions.
Net Cash Flows from Financing Activities
Cash generated:
Fiscal 2018: (Total $43.8 million)
•Proceeds from revolving credit line borrowings in the
amount of $33.6 million.
•Procceds from mortage financing of $10 million
Fiscal 2017: (Total $213.5 million)
•Proceeds from mortgage note payable in the amount of $50
million.
•Proceeds from revolving credit line borrowings in the
amount of $52 million.
•Proceeds from the issuance of Series H Preferred Stock
in the amount of $111.3 million.
Fiscal 2016: (Total $159.5 million)
• Proceeds from issuance of Class A Common Stock in the
amount of $73.7 million.
•Proceeds from revolving credit line borrowings in the
amount of $52.0 million.
•Proceeds from mortgage financings in the amount of $33.7
million.
Cash used:
Fiscal 2018: (Total $87.3 million)
•Dividends to shareholders in the amount of $53.9
million.
•Repayment of mortgage notes payable in the amount of
$24.1 million.
• Repayment of revolving credit line borrowings in the
amount of $9 million.
Fiscal 2017: (Total $291.4 million)
•Dividends to shareholders in the amount of $55.6
million.
•Repayment of mortgage notes payable in the amount of
$43.7 million.
•Repayment of revolving credit line borrowings in the
amount of $56 million.
•Redemption of preferred stock in the amount of $129.4
million.
Fiscal 2016: (Total $138.9 million)
•Dividends to shareholders in the amount of $51.4
million.
•Repayment of mortgage notes payable in the amount of
$20.7 million.
•Repayment of revolving credit line borrowings in the
amount of $66.8 million.
Results of Operations
Fiscal 2018 vs.
Fiscal 2017
The following information summarizes our results of operations for the years ended October 31, 2018 and 2017 (amounts in
thousands):
|
Year Ended October 31,
|
Change Attributable to:
|
|||||||||||||||||||||||
|
Revenues
|
2018
|
2017
|
Increase
(Decrease)
|
%
Change
|
Property
Acquisitions/Sales
|
Properties Held in
Both Periods (Note 1)
|
||||||||||||||||||
|
Base rents
|
$
|
95,902
|
$
|
88,383
|
$
|
7,519
|
8.5
|
%
|
$
|
5,624
|
$
|
1,895
|
||||||||||||
|
Recoveries from tenants
|
31,144
|
28,676
|
2,468
|
8.6
|
%
|
1,444
|
1,024
|
|||||||||||||||||
|
Lease termination
|
3,795
|
2,432
|
1,363
|
56.0
|
%
|
(2,148
|
)
|
3,511
|
||||||||||||||||
|
Other income
|
4,511
|
4,069
|
442
|
10.9
|
%
|
(198
|
)
|
640
|
||||||||||||||||
|
Operating Expenses
|
||||||||||||||||||||||||
|
Property operating
|
22,009
|
20,074
|
1,935
|
9.6
|
%
|
1,133
|
802
|
|||||||||||||||||
|
Property taxes
|
21,167
|
19,621
|
1,546
|
7.9
|
%
|
833
|
713
|
|||||||||||||||||
|
Depreciation and amortization
|
28,324
|
26,512
|
1,812
|
6.8
|
%
|
1,895
|
(83
|
)
|
||||||||||||||||
|
General and administrative
|
9,223
|
9,183
|
40
|
0.4
|
%
|
n/a
|
n/a
|
|||||||||||||||||
|
Non-Operating Income/Expense
|
||||||||||||||||||||||||
|
Interest expense
|
13,678
|
12,981
|
697
|
5.4
|
%
|
646
|
51
|
|||||||||||||||||
|
Interest, dividends, and other investment income
|
350
|
356
|
(6
|
)
|
-1.7
|
%
|
n/a
|
n/a
|
||||||||||||||||
Note 1 – Properties held in both periods includes only properties owned for the entire periods of
2018 and 2017 and for interest expense the amount also includes parent company interest expense. All other properties are included in the property acquisition/sales column. There are no properties excluded from the analysis.
Revenues
Base rents increased by 8.5% to $95.9 million in fiscal 2018, as compared with $88.4 million in the comparable period of
2017. The increase in base rents and the changes in other income statement line items were attributable to:
Property Acquisitions and Properties Sold:
In fiscal 2017, we purchased four properties totaling 114,700 square feet of GLA, invested in two joint ventures that
own four properties totaling 173,600 square feet, whose operations we consolidate, and sold two properties totaling 203,800 square feet. In fiscal 2018, we purchased three properties totaling 53,700 square feet. These properties accounted for all
of the revenue and expense changes attributable to property acquisitions and sales in fiscal year ended October 31, 2018 when compared with fiscal 2017.
Properties Held in Both Periods:
Revenues
Base Rents
The increase in base rents for properties owned in both periods was predominantly attributable to new leasing activity
at several properties held in both periods that created a positive variance in base rents. This positive variance in base rents was accentuated by our writing off $633,000 in accrued straight-line rent in the third quarter of fiscal 2017 relating
to a tenant who had occupied a 36,000 square foot grocery space at our Valley Ridge property. This tenant failed to perform under its lease, and the lease was terminated in the third quarter of fiscal 2017. See “Significant Events with Impact on
Leasing” in this Item 7.
In fiscal 2018, the Company leased or renewed approximately 707,000 square feet (or approximately 16% of total
consolidated property leasable area). At October 31, 2018, the Company’s consolidated properties were approximately 93.2% leased (92.7% leased at October 31, 2017).
Tenant Recoveries
For the year ended October 31, 2018, recoveries from tenants for properties owned in both periods, which represents
reimbursements from tenants for operating expenses and property taxes, increased by $1.0 million. This increase was the result of increases in both property operating expenses and property tax expense in the consolidated portfolio for properties
owned in fiscal 2018 when compared with the corresponding prior period. The increases in property operating expenses were related to increased costs for snow removal, roof repairs and parking lot repairs at our properties, and the increases in
property tax expenses were related to increases in property tax assessments.
Lease Termination Income
In April 2018, we reached agreement with the grocery tenant at our Newark, NJ property to terminate its 63,000 square
foot lease in exchange for a one-time $3.7 million lease termination payment, which we received and recorded as revenue in the fiscal year ended October 31, 2018. Also, in March 2018, we leased that same space to a new grocery store operator who
took possession in May 2018. While the rental rate on the new lease is 30% less than the rental rate on the terminated lease, we hope that part of this decreased rental rate will be recaptured with the receipt of percentage rent in subsequent
years as the store matures and its sales increase. The new lease required no tenant improvement allowances or landlord work.
Expenses
Property operating expenses for properties owned in both fiscal year 2018 and 2017 increased by $802,000. This increase
was predominantly the result of increased costs for snow removal, roof repairs and parking lot repairs at our properties.
Real estate taxes for properties owned in both fiscal year 2018 and 2017 increased by $713,000 as a result of normal tax
assessment increases at some of our properties.
Interest expense for properties owned in both fiscal year 2018 and 2017 increased by $51,000 as a result of an increase
in corporate interest expense on the Company’s unsecured revolving credit facility as a result of having more principal outstanding in fiscal 2018 versus fiscal 2017. This increase was partially offset by the recapitalizing of our largest mortgage,
which is secured by our Ridgeway Shopping Center, after the second quarter of fiscal 2017. The Ridgeway interest rate was reduced from 5.52% to 3.398%, which caused a reduction of interest expense, this reduction was partially offset by the
Company increasing the principal outstanding on the mortgage from $44 million to $50 million.
Depreciation and amortization expense for properties owned in both fiscal year 2018 and 2017 was relatively unchanged in
fiscal 2018 when compared with fiscal 2017.
General and Administrative Expenses
General and administrative expense for the year ended October 31, 2018, when compared with the year ended October 31,
2017 was relatively unchanged.
Fiscal 2017 vs.
Fiscal 2016
The following information summarizes our results of operations for the years ended October 31, 2017 and 2016 (amounts in
thousands):
|
Year Ended October 31,
|
Change Attributable to:
|
|||||||||||||||||||||||
|
Revenues
|
2017
|
2016
|
Increase
(Decrease)
|
%
Change
|
Property
Acquisitions/Sales
|
Properties Held in
Both Periods (Note 2)
|
||||||||||||||||||
|
Base rents
|
$
|
88,383
|
$
|
87,172
|
$
|
1,211
|
1.4
|
%
|
$
|
1,539
|
$
|
(328
|
)
|
|||||||||||
|
Recoveries from tenants
|
28,676
|
25,788
|
2,888
|
11.2
|
%
|
1,950
|
938
|
|||||||||||||||||
|
Lease termination
|
2,432
|
619
|
1,813
|
292.9
|
%
|
2,148
|
(335
|
)
|
||||||||||||||||
|
Other income
|
4,069
|
3,213
|
856
|
26.6
|
%
|
155
|
701
|
|||||||||||||||||
|
Operating Expenses
|
||||||||||||||||||||||||
|
Property operating
|
20,074
|
18,717
|
1,357
|
7.3
|
%
|
720
|
637
|
|||||||||||||||||
|
Property taxes
|
19,621
|
18,548
|
1,073
|
5.8
|
%
|
641
|
432
|
|||||||||||||||||
|
Depreciation and amortization
|
26,512
|
23,025
|
3,487
|
15.1
|
%
|
2,302
|
1,185
|
|||||||||||||||||
|
General and administrative
|
9,183
|
9,284
|
(101
|
)
|
(1.1
|
)%
|
n/a
|
n/a
|
||||||||||||||||
|
Non-Operating Income/Expense
|
||||||||||||||||||||||||
|
Interest expense
|
12,981
|
12,983
|
(2
|
)
|
0.0
|
%
|
1,098
|
(1,100
|
)
|
|||||||||||||||
|
Interest, dividends, and other investment income
|
356
|
242
|
114
|
47.1
|
%
|
n/a
|
n/a
|
|||||||||||||||||
Note 2 – Properties held in both periods includes only properties owned for the entire periods of
2017 and 2016 and for interest expense the amount also includes parent company interest expense. All other properties are included in the property acquisition/sales column. There are no properties excluded from the analysis.
Revenues
Base rents increased by 1.4% to $88.4 million in fiscal 2017, as compared with $87.2 million in the comparable period of
2016. The increase in base rents and the changes in other income statement line items were attributable to:
Property Acquisitions and Properties Sold:
In fiscal 2017, the Company purchased four properties totaling 114,700 square feet of GLA, invested in two joint
ventures that own four properties totaling 173,600 square feet, whose operations we consolidate, and sold two properties totaling 203,800 square feet. In fiscal 2016, the Company purchased two properties totaling 101,400 square feet. These
properties accounted for all of the revenue and expense changes attributable to property acquisitions and sales in year ended October 31, 2017 when compared with fiscal 2016.
Properties Held in Both Periods:
Revenues
Base Rent
The decrease in base rents for properties owned in both periods was caused predominantly by a slight reduction in the
percentage of the portfolio that was leased in fiscal 2017 when compared with fiscal 2016.
In fiscal 2017, the Company leased or renewed approximately 650,000 square feet (or approximately 15.0% of total
consolidated property leasable area). At October 31, 2017, the Company’s consolidated properties were approximately 92.7% leased (93.3% leased at October 31, 2016).
Tenant Recoveries
For the year ended October 31, 2017, recoveries from tenants for properties owned in both periods (which represent
reimbursements from tenants for operating expenses and property taxes) increased by $938,000. This increase was a result of an increase in both property operating expenses and property tax expense in the consolidated portfolio for properties owned
for the entire periods of fiscal 2017 and 2016, along with an increase in leased rate at some properties which increased the rate at which the Company could bill operating expenses to tenants in fiscal 2017 versus fiscal 2016.
Expenses
Property operating expenses for properties owned in both fiscal year 2017 and 2016 increased by $637,000. This increase
was predominantly as a result of an increase in snow removal costs at our properties.
Real estate taxes for properties owned in both fiscal year 2017 and 2016 increased by $432,000 as a result of normal tax
assessment increases at some of our properties.
Interest expense for properties owned in both fiscal year 2017 and 2016 decreased by $1.1 million as a result of the
refinancing of our largest mortgage in July 2017. In July 2017 we refinanced our mortgage loan secured by our Stamford, CT property and although the principal increased from $44 million to $50 million, the interest rate was reduced from 5.52% to
3.398% per annum. In addition, we repaid our mortgage at our Bloomfield, NJ property after the second quarter of fiscal 2016. In addition, the reduction was accentuated by normal recurring amortization payments on our portfolio of mortgages,
which reduces interest expense in fiscal 2017 when compared with fiscal 2016 for the same mortgages.
Depreciation and amortization expense for properties owned in both fiscal year 2017 and 2016 increased by $1.2 million
as a result of an increase in capital improvements on properties held in both periods in fiscal 2016 and 2017.
General and Administrative Expenses
General and administrative expense for the year ended October 31, 2017, when compared with the year ended October 31,
2016 decreased by $101,000, as a result of a decrease in restricted stock amortization, which reduces compensation expense and a reduction in professional fees offset by increased compensation expense for additional staffing at the Company and
increased bonus compensation for our employees in fiscal 2017 when compared with fiscal 2016.
Funds from Operations
We consider Funds from Operations (“FFO”) to be an additional measure of our operating performance. We report FFO in
addition to net income applicable to common stockholders and net cash provided by operating activities. Management has adopted the definition suggested by The National Association of Real Estate Investment Trusts (“NAREIT”) and defines FFO to mean
net income (computed in accordance with GAAP) excluding gains or losses from sales of property, plus real estate-related depreciation and amortization and after adjustments for unconsolidated joint ventures.
Management considers FFO a meaningful, additional measure of operating performance because it primarily excludes the
assumption that the value of our real estate assets diminishes predictably over time and industry analysts have accepted it as a performance measure. FFO is presented to assist investors in analyzing our performance. It is helpful as it excludes
various items included in net income that are not indicative of our operating performance, such as gains (or losses) from sales of property and depreciation and amortization. However, FFO:
|
•
|
does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally
reflects all cash effects of transactions and other events in the determination of net income); and
|
|
•
|
should not be considered an alternative to net income as an indication of our performance.
|
FFO as defined by us may not be comparable to similarly titled items reported by other real estate investment trusts due
to possible differences in the application of the NAREIT definition used by such REITs. The table below provides a reconciliation of net income applicable to Common and Class A Common Stockholders in accordance with GAAP to FFO for each of the
three years in the period ended October 31, 2018, 2017 and 2016 (amounts in thousands):
|
Year Ended October 31,
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Net Income Applicable to Common and Class A Common Stockholders
|
$
|
25,217
|
$
|
33,898
|
$
|
19,436
|
||||||
|
Real property depreciation
|
22,139
|
20,505
|
18,866
|
|||||||||
|
Amortization of tenant improvements and allowances
|
4,039
|
4,448
|
3,517
|
|||||||||
|
Amortization of deferred leasing costs
|
2,057
|
1,468
|
557
|
|||||||||
|
Depreciation and amortization on unconsolidated joint ventures
|
1,719
|
1,618
|
1,589
|
|||||||||
|
(Gain)/loss on sale of properties
|
-
|
(18,734
|
)
|
(362
|
)
|
|||||||
|
Funds from Operations Applicable to Common and Class A Common Stockholders
|
$
|
55,171
|
$
|
43,203
|
$
|
43,603
|
||||||
FFO amounted to $55.2 million in fiscal 2018, compared to $43.2 million in fiscal 2017 and $43.6 million in fiscal 2016.
The net increase in FFO in fiscal 2018 when compared with fiscal 2017 was predominantly attributable, among other
things, to: (i) the additional net income generated from properties acquired in fiscal 2017 and fiscal 2018; (ii) a decrease in preferred stock dividends of $2.7 million
as a result of redeeming our Series F preferred stock in October 2017 and replacing it with Series H preferred stock, which has a lower dividend rate and a smaller issuance amount by $14.4 million; and (iii) $3.8 million in lease termination
income in the second quarter of fiscal 2018 for a tenant that terminated its lease with us early versus $2.4 million in lease termination income in fiscal 2017 for a tenant that terminated its lease with us early. This increase was partially
offset by (iv) a $548,000 decrease in interest income generated as a result of the one mortgage receivable we had outstanding for most of fiscal 2017, which was repaid in October 2017.
The net decrease in FFO in fiscal 2017 when compared with fiscal 2016 was predominantly attributable, among other things
to; (a) $4.1 million in preferred stock redemption charges in fiscal 2017 related to the company redeeming its Series F preferred stock in October 2017, there were no preferred stock redemption charges in fiscal 2016. This decrease was offset by
(b) the additional net income generated from properties acquired in the second half of fiscal 2016 and properties acquired in fiscal 2017; (c) a reduction in the charge for bad debt expense in the amount of $578,000 in fiscal 2017 versus fiscal
2016; (d) interest income generated from a $13.5 million mortgage originated in the fourth quarter of fiscal 2016, which was not repaid until October of fiscal 2017; (e) a $1.8 million increase in lease termination income in fiscal 2017 versus
fiscal 2016 related to the lease termination of the only lease at our Fairfield, CT property in the third quarter of fiscal 2017; and (f) a $412,000 reduction in acquisition costs in fiscal 2017 versus fiscal 2016 as a result of an accounting
change that became effective for us on the first day of fiscal 2017 which changes how costs related to investment property acquisitions are accounted for.
Off-Balance Sheet Arrangements
We have seven off-balance sheet investments in real property through unconsolidated joint ventures:
|
•
|
a 66.67% equity interest in the Putnam Plaza Shopping Center,
|
|
•
|
an 11.642% equity interest in the Midway Shopping Center L.P.,
|
|
•
|
a 50% equity interest in the Chestnut Ridge Shopping Center and Plaza 59 Shopping Centers,
|
|
•
|
a 50% equity interest in the Gateway Plaza shopping center and the Riverhead Applebee’s Plaza, and
|
|
•
|
a 20% economic interest in a partnership that owns a suburban office building with ground level retail.
|
These unconsolidated joint ventures are accounted for under the equity method of accounting, as we have the ability to
exercise significant influence over, but not control of, the operating and financial decisions of these investments. Our off-balance sheet arrangements are more fully discussed in Note 6 to our consolidated financial statements included in Item 8
of this Annual Report on Form 10-K. Although we have not guaranteed the debt of these joint ventures, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g. guarantees against fraud, misrepresentation and
bankruptcy) on certain loans of the joint ventures. The below table details information about the outstanding non-recourse mortgage financings on our unconsolidated joint ventures (amounts in thousands):
|
|
Principal Balance
|
|||||||||||||
|
Joint Venture Description
|
Location
|
Original Balance
|
At October 31, 2018
|
Fixed Interest Rate Per Annum
|
Maturity Date
|
|||||||||
|
Midway Shopping Center
|
Scarsdale, NY
|
$
|
32,000
|
$
|
27,538
|
4.80
|
%
|
Dec-2027
|
||||||
|
Putnam Plaza Shopping Center
|
Carmel, NY
|
$
|
18,900
|
$
|
18,900
|
4.81
|
%
|
Oct-2028
|
||||||
|
Gateway Plaza
|
Riverhead, NY
|
$
|
14,000
|
$
|
12,373
|
4.18
|
%
|
Feb-2024
|
||||||
|
Applebee's Plaza
|
Riverhead, NY
|
$
|
1,300
|
$
|
1,005
|
5.98
|
%
|
Aug-2026
|
||||||
|
Applebee's Plaza
|
Riverhead, NY
|
$
|
1,000
|
$
|
887
|
3.38
|
%
|
Aug-2026
|
||||||
In October 2018, the mortgage secured by the Putnam Plaza property above was refinanced. The new loan has a term of ten
years and requires payments of principal and interest at the rate of LIBOR plus 1.65%. Concurrent with the refinancing, the owners of Putnam plaza entered into an interest rate swap agreement that is conterminous with the maturity of the
mortgage. The interest rate swap agreement converts the variable interest rate on the note to a fixed interest rate of 4.81%.
Contractual Obligations
Our contractual payment obligations as of October 31, 2018 were as follows (amounts in thousands):
|
Payments Due by Period
|
||||||||||||||||||||||||||||
|
Total
|
2019
|
2020
|
2021
|
2022
|
2023
|
Thereafter
|
||||||||||||||||||||||
|
Mortgage notes payable and other loans
|
$
|
293,801
|
$
|
33,241
|
$
|
6,032
|
$
|
6,391
|
$
|
55,067
|
$
|
5,269
|
$
|
187,801
|
||||||||||||||
|
Interest on mortgage notes payable
|
62,814
|
11,857
|
10,636
|
10,276
|
9,068
|
7,619
|
13,358
|
|||||||||||||||||||||
|
Revolving credit lines
|
28,595
|
-
|
-
|
-
|
28,595
|
-
|
-
|
|||||||||||||||||||||
|
Property acquisitions
|
12,000
|
12,000
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
|
Tenant obligations*
|
4,993
|
4,993
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
|
Total Contractual Obligations
|
$
|
402,203
|
$
|
62,091
|
$
|
16,668
|
$
|
16,667
|
$
|
92,730
|
$
|
12,888
|
$
|
201,159
|
||||||||||||||
*Committed tenant-related obligations based on executed leases as of October 31, 2018.
We have various standing or renewable service contracts with vendors related to property management. In addition, we also
have certain other utility contracts entered into in the ordinary course of business which may extend beyond one year, which vary based on usage. These contracts include terms that provide for cancellation with insignificant or no cancellation
penalties. Contract terms are generally one year or less.
We are exposed to interest rate risk primarily through our borrowing activities, which include fixed-rate mortgage debt and, in
limited circumstances, variable rate debt. As of October 31, 2018, we had total mortgage debt and other notes payable of $293.8 million, $292.1 million for which interest was based on fixed-rate, inclusive of variable rate mortgages that have been
swapped to fixed interest rates using interest rate swap derivatives contracts and $1.7 million of which interest was based on a variable rate (see below).
Our fixed-rate debt presents inherent rollover risk for borrowings as they mature and are renewed at current market
rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and our future financing requirements.
To reduce our exposure to interest rate risk on variable-rate debt, we use interest rate swap
agreements, for example, to convert some of our variable-rate debt to fixed-rate debt. As of October 31, 2018, we had seven open derivative financial instruments. These interest rate swaps are cross collateralized with mortgages on properties in
Rye, NY, Ossining, NY, Yonkers, NY, Orangeburg, NY, Stamford, CT, Greenwich CT and Dumont, NJ. The Rye swaps expire in October 2019, the Ossining swap expires in October 2024, the Yonkers swap expires in November 2024, the Orangeburg swap expires
in October 2024, the Stamford swap expires in July 2027, the Greenwich swaps expire in October 2026 and the Dumont, NJ swap expires in 2027, in each case concurrent with the maturity of the respective mortgages. All of the aforementioned
derivatives contracts are adjusted to fair market value at each reporting period. We have concluded that all of the aforementioned derivatives contracts are effective cash flow hedges as defined in ASC Topic 815. We are required to evaluate the
effectiveness at inception and at each reporting date. As a result of the aforementioned derivatives contracts being effective cash flow hedges all changes in fair market value are recorded directly to stockholders equity in accumulated
comprehensive income and have no effect on our earnings.
At October 31, 2018, we had $28.6 million of borrowings outstanding on our Facility, which bears
interest at Libor plus 1.35%. If interest rates were to rise 1%, our interest expense as a result of the variable rate borrowing on the Facility would increase by $286,000 per annum.
In addition, we purchased a property in March of fiscal 2018 and financed a portion of the purchase
price with unsecured notes held by the seller of the property. The unsecured notes require the payment of interest only. $1.5 million of the notes bear interest at a fixed rate of 5.05% and $1.7 million of the notes bear interest at a variable
rate of interest based on the level of our Class A Common stock dividend, currently 4.91% as of October 31, 2018. If the level of our Class A Common dividend rises, it will increase the interest rate on the $1.7 million in notes.
The following table sets forth the Company’s long-term debt obligations by principal cash payments and maturity dates,
weighted average fixed interest rates and estimated fair value at October 31, 2018 (amounts in thousands, except weighted average interest rate):
|
For the Fiscal Year Ended October 31,
|
||||||||||||||||||||||||||||||||
|
2019
|
2020
|
2021
|
2022
|
2023
|
Thereafter
|
Total
|
Estimated Fair Value
|
|||||||||||||||||||||||||
|
Mortgage notes payable and other loans
|
$
|
33,241
|
$
|
6,032
|
$
|
6,391
|
$
|
55,067
|
$
|
5,269
|
$
|
187,801
|
$
|
293,801
|
$
|
280,563
|
||||||||||||||||
|
Weighted average interest rate for debt maturing
|
6.11
|
%
|
n/a
|
n/a
|
4.42
|
%
|
n/a
|
3.88
|
%
|
4.19
|
%
|
|||||||||||||||||||||
The consolidated financial statements required by this Item, together with the reports of the Company's independent
registered public accounting firm thereon and the supplementary financial information required by this Item, are included under Item 15 of this Annual Report.
There were no changes in, or any disagreements with, the Company's independent registered public accounting firm on
accounting principles and practices or financial disclosure during the years ended October 31, 2018 and 2017.
At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with
the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange
Act Rule 13a-15(e). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. During the fourth quarter of 2018, there were no changes in the
Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
(a) Management's Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control over financial reporting is a process designed by, or under the supervision of, the Company's Chief
Executive Officer and Chief Financial Officer and effected by the Company's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements in accordance with generally accepted accounting principles.
The Company's internal control over financial reporting includes policies and procedures that: relate to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company; provide reasonable assurance of the recording of all transactions necessary to permit the preparation of the Company's
consolidated financial statements in accordance with generally accepted accounting principles and the proper authorization of receipts and expenditures in accordance with authorization of the Company's management and directors; and provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management assessed the effectiveness of the Company's internal control over financial reporting as of October 31, 2018.
In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control – Integrated Framework (2013). Based on its assessment, management determined
that the Company's internal control over financial reporting was effective as of October 31, 2018. The Company's independent registered public accounting firm, PKF O'Connor Davies, LLP has audited the effectiveness of the Company's internal
control over financial reporting, as indicated in their attestation report which is included in (b) below.
(b) Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Urstadt Biddle Properties Inc.
Opinion on Internal Control over Financial Reporting
We have audited Urstadt Biddle Properties Inc.’s (the “Company”) internal control over financial reporting as of October
31, 2018, based on criteria established in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2018, based on criteria established in Internal Control–Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of October 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended
October 31, 2018, and our report dated January 10, 2019, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
| /s/ PKF O'Connor Davies, LLP |
|
January 10, 2019
|
|
New York, New York
|
PART III
The Company will file its definitive Proxy Statement for its Annual Meeting of Stockholders to be held on March 21, 2019
within the period required under the applicable rules of the SEC. The additional information required by this Item is included under the captions “Election of Directors”, “Information Concerning Continuing Directors and Executive Officers”,
“Corporate Governance and Board Matters”, “Section 16(a) Beneficial Ownership Reporting Compliance” and other information included in the Proxy Statement and is incorporated herein by reference.
The Company has adopted a Code of Ethics for Senior Financial Officers (the “Code of Ethics”) that is available at the
Investors/Governance/Governance Documents section of our website at www.ubproperties.com. A copy of the Code of Ethics is available in print, free of charge, to stockholders upon request to us at the following address:
Attention: Corporate Secretary
321 Railroad Avenue
Greenwich, CT 06830
We intend to satisfy the disclosure requirements under the Securities and Exchange Act of 1934, as amended, regarding an
amendment to or waiver from a provision of our Code of Ethics by posting such information on our web site.
The Company will file its definitive Proxy Statement for its Annual Meeting of Stockholders to be held on March 21, 2019 within the
period required under the applicable rules of the SEC. The information required by this Item is included under the captions “Compensation Discussion and Analysis”, “Executive Compensation”, “Director Compensation”, “Compensation Committee Interlocks
and Insider Participation” and “Compensation Committee Report”, and as part of the executive compensation and director related compensation tables and other information included in the Proxy Statement, and is incorporated herein by reference.
The Company will file its definitive Proxy Statement for its Annual Meeting of Stockholders to be held on March 21, 2019
within the period required under the applicable rules of the SEC. The information required by this Item is included under the captions, “Equity Compensation Plans”, “Security Ownership of Certain Beneficial Owners and Management” and other
information included in the Proxy Statement and is incorporated herein by reference.
The Company will file its definitive Proxy Statement for its Annual Meeting of Stockholders to be held on March 21, 2019
within the period required under the applicable rules of the SEC. The information required by this Item is included under the captions “Corporate Governance and Board Matters”, “Certain Relationships and Related Party Transactions” and other
information included in the Proxy Statement and is incorporated herein by reference.
The Company will file its definitive Proxy Statement for its Annual Meeting of Stockholders to be held on March 21, 2019
within the period required under the applicable rules of the SEC. The information required by this Item is included under the caption “Fees Billed by Independent Registered Public Accounting Firm” of such Proxy Statement and is incorporated herein
by reference.
PART IV
A. Index to Financial Statements and Financial Statement Schedules
1. Financial Statements
The consolidated financial statements listed in the accompanying index to financial statements on
Page 27 are filed as part of this Annual Report.
2. Financial Statement Schedules --
The financial statement schedules required by this Item is filed with this report and are listed in
the accompanying index to financial statements on Page 27. All other financial statement schedules are not applicable.
B. Exhibits.
Listed below are all Exhibits filed as part of this report. Certain Exhibits are incorporated by reference to documents
previously filed by the Company with the SEC pursuant to Rule 12b-32 under the Securities Exchange Act of 1934, as amended.
Exhibit
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
|
|
|
4.1
|
Common Stock: See Exhibits 3.1 (a)-(o) hereto.
|
|
|
|
|
4.2
|
|
|
|
|
|
4.3
|
Series G Preferred Shares: See Exhibits 3.1 (a)-(o) hereto.
|
|
4.4
|
Series H Preferred Shares: See Exhibits 3.1 (a)-(0) hereto.
|
|
4.5
|
Series I Preferred Shares: See Exhibits 3.1 (a)-(o) hereto.
|
|
4.6
|
Series J Preferred Shares: See Exhibits 3.1 (a)-(o) hereto.
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
10.5
|
|
|
10.6
|
|
|
|
|
|
10.7
|
|
|
|
|
|
10.8
|
|
|
|
|
|
10.9
|
|
|
10.10
|
|
|
|
|
|
10.11
|
|
|
|
|
|
10.12
|
|
|
|
|
|
10.13
|
|
|
10.14
|
|
|
21
|
|
|
|
|
|
23
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32
|
|
|
|
|
|
101
|
| # |
Management contract, compensation plan arrangement.
|
| * |
Filed herewith.
|
| ** |
Furnished herewith.
|
|
URSTADT BIDDLE PROPERTIES INC.
|
||
|
Item 15.
|
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
|
Page
|
|
28
|
||
|
29
|
||
|
30
|
||
| 31 | ||
| 32 | ||
| 33 | ||
| 49 | ||
|
Schedules
|
||
|
III
|
50 | |
|
IV
|
52 |
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
URSTADT BIDDLE PROPERTIES INC.
(In thousands, except share data)
|
October 31, 2018
|
October 31, 2017
|
|||||||
|
ASSETS
|
||||||||
|
Real Estate Investments:
|
||||||||
|
Real Estate – at cost
|
$
|
1,118,075
|
$
|
1,090,402
|
||||
|
Less: Accumulated depreciation
|
(218,653
|
)
|
(195,020
|
)
|
||||
|
899,422
|
895,382
|
|||||||
|
Investments in and advances to unconsolidated joint ventures
|
37,434
|
38,049
|
||||||
|
936,856
|
933,431
|
|||||||
|
Cash and cash equivalents
|
10,285
|
8,674
|
||||||
|
Restricted cash
|
2,540
|
2,306
|
||||||
|
Marketable securities
|
5,567
|
-
|
||||||
|
Tenant receivables
|
22,607
|
19,632
|
||||||
|
Prepaid expenses and other assets
|
19,927
|
20,803
|
||||||
|
Deferred charges, net of accumulated amortization
|
10,451
|
11,867
|
||||||
|
Total Assets
|
$
|
1,008,233
|
$
|
996,713
|
||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
|
Liabilities:
|
||||||||
|
Revolving credit lines
|
$
|
28,595
|
$
|
4,000
|
||||
|
Mortgage notes payable and other loans
|
293,801
|
297,071
|
||||||
|
Accounts payable and accrued expenses
|
3,900
|
4,200
|
||||||
|
Deferred compensation – officers
|
72
|
96
|
||||||
|
Other liabilities
|
21,466
|
22,755
|
||||||
|
Total Liabilities
|
347,834
|
328,122
|
||||||
|
Redeemable Noncontrolling Interests
|
78,258
|
81,361
|
||||||
|
Commitments and Contingencies
|
||||||||
|
Stockholders' Equity:
|
||||||||
|
6.75% Series G Cumulative Preferred Stock (liquidation preference of $25 per share); 3,000,000 shares issued and
outstanding
|
75,000
|
75,000
|
||||||
|
6.25% Series H Cumulative Preferred Stock (liquidation preference of $25 per share); 4,600,000 shares issued and
outstanding
|
115,000
|
115,000
|
||||||
|
Excess Stock, par value $0.01 per share; 20,000,000 shares authorized; none issued and outstanding
|
-
|
-
|
||||||
|
Common Stock, par value $0.01 per share; 30,000,000 shares authorized; 9,822,006 and 9,664,778 shares issued and
outstanding
|
99
|
97
|
||||||
|
Class A Common Stock, par value $0.01 per share; 100,000,000 shares authorized; 29,814,814 and 29,728,744 shares
issued and outstanding
|
298
|
297
|
||||||
|
Additional paid in capital
|
518,136
|
514,217
|
||||||
|
Cumulative distributions in excess of net income
|
(133,858
|
)
|
(120,123
|
)
|
||||
|
Accumulated other comprehensive income
|
7,466
|
2,742
|
||||||
|
Total Stockholders' Equity
|
582,141
|
587,230
|
||||||
|
Total Liabilities and Stockholders' Equity
|
$
|
1,008,233
|
$
|
996,713
|
||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
URSTADT BIDDLE PROPERTIES INC.
(In thousands, except per share data)
|
Year Ended October 31,
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Revenues
|
||||||||||||
|
Base rents
|
$
|
95,902
|
$
|
88,383
|
$
|
87,172
|
||||||
|
Recoveries from tenants
|
31,144
|
28,676
|
25,788
|
|||||||||
|
Lease termination
|
3,795
|
2,432
|
619
|
|||||||||
|
Other
|
4,511
|
4,069
|
3,213
|
|||||||||
|
Total Revenues
|
135,352
|
123,560
|
116,792
|
|||||||||
|
Expenses
|
||||||||||||
|
Property operating
|
22,009
|
20,074
|
18,717
|
|||||||||
|
Property taxes
|
21,167
|
19,621
|
18,548
|
|||||||||
|
Depreciation and amortization
|
28,324
|
26,512
|
23,025
|
|||||||||
|
General and administrative
|
9,223
|
9,183
|
9,284
|
|||||||||
|
Provision for tenant credit losses
|
859
|
583
|
1,161
|
|||||||||
|
Acquisition costs
|
-
|
-
|
412
|
|||||||||
|
Directors' fees and expenses
|
344
|
321
|
318
|
|||||||||
|
Total Operating Expenses
|
81,926
|
76,294
|
71,465
|
|||||||||
|
Operating Income
|
53,426
|
47,266
|
45,327
|
|||||||||
|
Non-Operating Income (Expense):
|
||||||||||||
|
Interest expense
|
(13,678
|
)
|
(12,981
|
)
|
(12,983
|
)
|
||||||
|
Equity in net income from unconsolidated joint ventures
|
2,085
|
2,057
|
2,019
|
|||||||||
|
Interest, dividends and other investment income
|
350
|
356
|
242
|
|||||||||
|
Gain on sale of properties
|
-
|
18,734
|
-
|
|||||||||
|
Net Income
|
42,183
|
55,432
|
34,605
|
|||||||||
|
Noncontrolling interests:
|
||||||||||||
|
Net income attributable to noncontrolling interests
|
(4,716
|
)
|
(2,499
|
)
|
(889
|
)
|
||||||
|
Net income attributable to Urstadt Biddle Properties Inc.
|
37,467
|
52,933
|
33,716
|
|||||||||
|
Preferred stock dividends
|
(12,250
|
)
|
(14,960
|
)
|
(14,280
|
)
|
||||||
|
Redemption of preferred stock
|
-
|
(4,075
|
)
|
-
|
||||||||
|
Net Income Applicable to Common and Class A Common Stockholders
|
$
|
25,217
|
$
|
33,898
|
$
|
19,436
|
||||||
|
Basic Earnings Per Share:
|
||||||||||||
|
Per Common Share
|
$
|
0.61
|
$
|
0.82
|
$
|
0.50
|
||||||
|
Per Class A Common Share
|
$
|
0.68
|
$
|
0.92
|
$
|
0.57
|
||||||
|
Diluted Earnings Per Share:
|
||||||||||||
|
Per Common Share
|
$
|
0.60
|
$
|
0.80
|
$
|
0.49
|
||||||
|
Per Class A Common Share
|
$
|
0.67
|
$
|
0.90
|
$
|
0.56
|
||||||
The accompanying notes to consolidated financial statements are an integral part
of these statements.
URSTADT BIDDLE PROPERTIES INC.
(In thousands)
|
Year Ended October 31,
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Net Income
|
$
|
42,183
|
$
|
55,432
|
$
|
34,605
|
||||||
|
Other comprehensive income:
|
||||||||||||
|
Change in unrealized gain on marketable equity securities
|
569
|
-
|
-
|
|||||||||
|
Change in unrealized gain (loss) on interest rate swaps
|
4,155
|
4,045
|
(73
|
)
|
||||||||
|
Total comprehensive income
|
46,907
|
59,477
|
34,532
|
|||||||||
|
Comprehensive income attributable to noncontrolling interests
|
(4,716
|
)
|
(2,499
|
)
|
(889
|
)
|
||||||
|
Total comprehensive income attributable to Urstadt Biddle Properties Inc.
|
42,191
|
56,978
|
33,643
|
|||||||||
|
Preferred stock dividends
|
(12,250
|
)
|
(14,960
|
)
|
(14,280
|
)
|
||||||
|
Redemption of preferred stock
|
-
|
(4,075
|
)
|
-
|
||||||||
|
Total comprehensive income applicable to Common and Class A Stockholders
|
$
|
29,941
|
$
|
37,943
|
$
|
19,363
|
||||||
The accompanying notes to consolidated financial statements are an integral part
of these statements.
URSTADT BIDDLE PROPERTIES INC.
(In thousands)
|
Year Ended October 31,
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Cash Flows from Operating Activities:
|
||||||||||||
|
Net income
|
$
|
42,183
|
$
|
55,432
|
$
|
34,605
|
||||||
|
Adjustments to reconcile net income to net cash provided
|
||||||||||||
|
by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
28,324
|
26,512
|
23,025
|
|||||||||
|
Straight-line rent adjustment
|
(957
|
)
|
(507
|
)
|
(1,902
|
)
|
||||||
|
Provisions for tenant credit losses
|
859
|
583
|
1,161
|
|||||||||
|
Restricted stock compensation expense and other adjustments
|
4,085
|
3,956
|
4,442
|
|||||||||
|
Deferred compensation arrangement
|
(24
|
)
|
(35
|
)
|
(26
|
)
|
||||||
|
Gain on sale of properties
|
-
|
(18,734
|
)
|
-
|
||||||||
|
Equity in net (income) of unconsolidated joint ventures
|
(2,085
|
)
|
(2,057
|
)
|
(2,019
|
)
|
||||||
|
Distributions of operating income from unconsolidated joint ventures
|
2,085
|
2,057
|
2,019
|
|||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Tenant receivables
|
(956
|
)
|
(825
|
)
|
4,203
|
|||||||
|
Accounts payable and accrued expenses
|
161
|
3,635
|
1,464
|
|||||||||
|
Other assets and other liabilities, net
|
(1,857
|
)
|
(6,740
|
)
|
(5,057
|
)
|
||||||
|
Restricted Cash
|
(234
|
)
|
(282
|
)
|
166
|
|||||||
|
Net Cash Flow Provided by Operating Activities
|
71,584
|
62,995
|
62,081
|
|||||||||
|
Cash Flows from Investing Activities:
|
||||||||||||
|
Acquisitions of real estate investments
|
(6,910
|
)
|
(30,599
|
)
|
(58,737
|
)
|
||||||
|
Investments in and advances to unconsolidated joint ventures
|
-
|
(158
|
)
|
(700
|
)
|
|||||||
|
Acquisitions of noncontrolling interests
|
(1,220
|
)
|
-
|
-
|
||||||||
|
Investment in mortgage note
|
-
|
-
|
(13,500
|
)
|
||||||||
|
Repayment of mortgage note
|
-
|
13,500
|
-
|
|||||||||
|
Deposits on acquisition of real estate investments
|
(1,000
|
)
|
(715
|
)
|
(750
|
)
|
||||||
|
Returns of deposits on real estate investments
|
-
|
500
|
640
|
|||||||||
|
Improvements to properties and deferred charges
|
(8,184
|
)
|
(9,676
|
)
|
(21,462
|
)
|
||||||
|
Net proceeds from sale of properties
|
-
|
45,438
|
-
|
|||||||||
|
Deposits received on sale of property
|
-
|
-
|
11,900
|
|||||||||
|
Purchases of securities available for sale
|
(4,999
|
)
|
-
|
-
|
||||||||
|
Distributions to noncontrolling interests
|
(4,716
|
)
|
(2,499
|
)
|
(889
|
)
|
||||||
|
Return of capital from unconsolidated joint ventures
|
553
|
471
|
1,426
|
|||||||||
|
Net Cash Flow Provided by (Used in) Investing Activities
|
(26,476
|
)
|
16,262
|
(82,072
|
)
|
|||||||
|
Cash Flows from Financing Activities:
|
||||||||||||
|
Dividends paid -- Common and Class A Common Stock
|
(41,626
|
)
|
(40,596
|
)
|
(37,092
|
)
|
||||||
|
Dividends paid -- Preferred Stock
|
(12,250
|
)
|
(14,960
|
)
|
(14,280
|
)
|
||||||
|
Amortization payments on mortgage notes payable
|
(6,427
|
)
|
(6,776
|
)
|
(20,744
|
)
|
||||||
|
Proceeds from mortgage note payable and other loans
|
10,000
|
50,000
|
33,663
|
|||||||||
|
Repayment of mortgage notes payable and other loans
|
(17,624
|
)
|
(43,675
|
)
|
-
|
|||||||
|
Proceeds from revolving credit line borrowings
|
33,595
|
52,000
|
52,000
|
|||||||||
|
Sales of additional shares of Common and Class A Common Stock
|
196
|
200
|
73,842
|
|||||||||
|
Repayments on revolving credit line borrowings
|
(9,000
|
)
|
(56,000
|
)
|
(66,750
|
)
|
||||||
|
Repurchase of shares of Class A Common Stock
|
(120
|
)
|
-
|
-
|
||||||||
|
Shares withheld for employee taxes
|
(241
|
)
|
-
|
-
|
||||||||
|
Net proceeds from issuance of Preferred Stock
|
-
|
111,328
|
-
|
|||||||||
|
Redemption of preferred stock including restricted cash
|
-
|
(129,375
|
)
|
-
|
||||||||
|
Net Cash Flow Provided by (Used in) Financing Activities
|
(43,497
|
)
|
(77,854
|
)
|
20,639
|
|||||||
|
Net Increase In Cash and Cash Equivalents
|
1,611
|
1,403
|
648
|
|||||||||
|
Cash and Cash Equivalents at Beginning of Year
|
8,674
|
7,271
|
6,623
|
|||||||||
|
Cash and Cash Equivalents at End of Year
|
$
|
10,285
|
$
|
8,674
|
$
|
7,271
|
||||||
The accompanying notes to consolidated financial statements
are an integral part of these statements
URSTADT BIDDLE PROPERTIES INC.
(In thousands, except shares and per share data)
|
7.125%
Series F
Preferred
Stock
Issued
|
7.125%
Series F
Preferred
Stock
Amount
|
6.75%
Series G
Preferred
Stock
Issued
|
6.75%
Series G
Preferred
Stock
Amount
|
6.25% Series H Preferred Stock Issued
|
6.25% Series H Preferred Stock Amount
|
Common
Stock
Issued
|
Common
Stock
Amount
|
Class A
Common
Stock
Issued
|
Class A
Common
Stock
Amount
|
Additional
Paid In
Capital
|
Cumulative
Distributions
In Excess of
Net Income
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total
Stockholders
Equity
|
|||||||||||||||||||||||||||||||||||||||||||
|
Balances - October 31, 2015
|
5,175,000
|
$
|
129,375
|
3,000,000
|
$
|
75,000
|
-
|
$
|
-
|
9,350,885
|
$
|
94
|
26,370,216
|
$
|
264
|
$
|
431,411
|
$
|
(94,136
|
)
|
$
|
(1,230
|
)
|
$
|
540,778
|
|||||||||||||||||||||||||||||||
|
Net income applicable to Common and Class A common stockholders
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
19,436
|
-
|
19,436
|
||||||||||||||||||||||||||||||||||||||||||
|
Change in unrealized (loss) on interest rate swap
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(73
|
)
|
(73
|
)
|
||||||||||||||||||||||||||||||||||||||||
|
Cash dividends paid :
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Common stock ($0.92 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(8,745
|
)
|
-
|
(8,745
|
)
|
||||||||||||||||||||||||||||||||||||||||
|
Class A common stock ($1.04 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(28,348
|
)
|
-
|
(28,348
|
)
|
||||||||||||||||||||||||||||||||||||||||
|
Issuance of shares under dividend reinvestment plan
|
-
|
-
|
-
|
-
|
-
|
-
|
4,988
|
-
|
5,854
|
-
|
219
|
-
|
-
|
219
|
||||||||||||||||||||||||||||||||||||||||||
|
Shares issued under restricted stock plan
|
-
|
-
|
-
|
-
|
-
|
-
|
152,100
|
2
|
95,600
|
1
|
(3
|
)
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||||||||||
|
Forfeiture of restricted stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(650
|
)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||||||||||
|
Issuance of Class A Common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3,162,500
|
31
|
73,623
|
-
|
-
|
73,654
|
||||||||||||||||||||||||||||||||||||||||||
|
Restricted stock compensation and other adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4,410
|
-
|
-
|
4,410
|
||||||||||||||||||||||||||||||||||||||||||
|
Adjustments to redeemable noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(2,298
|
)
|
-
|
(2,298
|
)
|
||||||||||||||||||||||||||||||||||||||||
|
Balances - October 31, 2016
|
5,175,000
|
129,375
|
3,000,000
|
75,000
|
-
|
-
|
9,507,973
|
96
|
29,633,520
|
296
|
509,660
|
(114,091
|
)
|
(1,303
|
)
|
599,033
|
||||||||||||||||||||||||||||||||||||||||
|
Net income applicable to Common and Class A common stockholders
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
33,898
|
-
|
33,898
|
||||||||||||||||||||||||||||||||||||||||||
|
Change in unrealized gain (loss) on interest rate swap
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4,045
|
4,045
|
||||||||||||||||||||||||||||||||||||||||||
|
Cash dividends paid :
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Common stock ($0.94 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(9,082
|
)
|
-
|
(9,082
|
)
|
||||||||||||||||||||||||||||||||||||||||
|
Class A common stock ($1.06 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(31,514
|
)
|
-
|
(31,514
|
)
|
||||||||||||||||||||||||||||||||||||||||
|
Issuance of shares under dividend reinvestment plan
|
-
|
-
|
-
|
-
|
-
|
-
|
4,705
|
-
|
5,399
|
-
|
200
|
-
|
-
|
200
|
||||||||||||||||||||||||||||||||||||||||||
|
Shares issued under restricted stock plan
|
-
|
-
|
-
|
-
|
-
|
-
|
152,100
|
1
|
96,225
|
1
|
(2
|
)
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||||||||||
|
Forfeiture of restricted stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(6,400
|
)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||||||||||
|
Issuance of Series H Preferred Stock
|
-
|
-
|
-
|
-
|
4,600,000
|
115,000
|
-
|
-
|
-
|
-
|
(3,672
|
)
|
-
|
-
|
111,328
|
|||||||||||||||||||||||||||||||||||||||||
|
Redemption of Series F Preferred Stock
|
(5,175,000
|
)
|
(129,375
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4,075
|
-
|
-
|
(125,300
|
)
|
|||||||||||||||||||||||||||||||||||||||
|
Restricted stock compensation and other adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3,956
|
-
|
-
|
3,956
|
||||||||||||||||||||||||||||||||||||||||||
|
Adjustments to redeemable noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
666
|
-
|
666
|
||||||||||||||||||||||||||||||||||||||||||
|
Balances - October 31, 2017
|
-
|
-
|
3,000,000
|
75,000
|
4,600,000
|
115,000
|
9,664,778
|
97
|
29,728,744
|
297
|
514,217
|
(120,123
|
)
|
2,742
|
587,230
|
|||||||||||||||||||||||||||||||||||||||||
|
Net income applicable to Common and Class A common stockholders
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
25,217
|
-
|
25,217
|
||||||||||||||||||||||||||||||||||||||||||
|
Change in unrealized gains on marketable securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
569
|
569
|
||||||||||||||||||||||||||||||||||||||||||
|
Change in unrealized gains on interest rate swap
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4,155
|
4,155
|
||||||||||||||||||||||||||||||||||||||||||
|
Cash dividends paid :
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Common stock ($0.96 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(9,426
|
)
|
-
|
(9,426
|
)
|
||||||||||||||||||||||||||||||||||||||||
|
Class A common stock ($1.08 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(32,200
|
)
|
-
|
(32,200
|
)
|
||||||||||||||||||||||||||||||||||||||||
|
Issuance of shares under dividend reinvestment plan
|
-
|
-
|
-
|
-
|
-
|
-
|
4,528
|
-
|
5,766
|
-
|
197
|
-
|
-
|
197
|
||||||||||||||||||||||||||||||||||||||||||
|
Shares issued under restricted stock plan
|
-
|
-
|
-
|
-
|
-
|
-
|
152,700
|
2
|
102,800
|
1
|
(3
|
)
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||||||||||
|
Shares withheld for employee taxes
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(10,886
|
)
|
-
|
(240
|
)
|
-
|
-
|
(240
|
)
|
|||||||||||||||||||||||||||||||||||||||
|
Forfeiture of restricted stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,950
|
)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||||||||||
|
Restricted stock compensation and other adjustments
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4,085
|
-
|
-
|
4,085
|
||||||||||||||||||||||||||||||||||||||||||
|
Repurchase of Class A Common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(6,660
|
)
|
-
|
(120
|
)
|
-
|
-
|
(120
|
)
|
|||||||||||||||||||||||||||||||||||||||
|
Adjustments to redeemable noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2,674
|
-
|
2,674
|
||||||||||||||||||||||||||||||||||||||||||
|
Balances - October 31, 2018
|
-
|
$
|
-
|
3,000,000
|
$
|
75,000
|
4,600,000
|
$
|
115,000
|
9,822,006
|
$
|
99
|
29,814,814
|
$
|
298
|
$
|
518,136
|
$
|
(133,858
|
)
|
$
|
7,466
|
$
|
582,141
|
||||||||||||||||||||||||||||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
(1) ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Urstadt Biddle Properties Inc. (“Company”), a Maryland Corporation, is a real estate investment trust (REIT), engaged in
the acquisition, ownership and management of commercial real estate, primarily neighborhood and community shopping centers in the northeastern part of the United States with a concentration in the metropolitan New York tri-state area outside of the
City of New York. The Company's major tenants include supermarket chains and other retailers who sell basic necessities. At October 31, 2018, the Company owned or had equity interests in 84 properties containing a total of 5.1 million square feet
of gross leasable area ("GLA").
Principles of Consolidation and Use of Estimates
The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries,
and joint ventures in which the Company meets certain criteria of a sole general partner in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 810, "Consolidation." The Company has
determined that such joint ventures should be consolidated into the consolidated financial statements of the Company. In accordance with ASC Topic 970-323 "Real Estate-General-Equity Method and Joint Ventures" joint ventures that the Company does
not control but otherwise exercises significant influence in, are accounted for under the equity method of accounting. See Note 6 for further discussion of the unconsolidated joint ventures. All significant intercompany transactions and balances
have been eliminated in consolidation.
The accompanying financial statements are prepared on the accrual basis in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the disclosure of contingent assets and liabilities, the
reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods covered by the financial statements. The most significant assumptions and estimates relate to
the valuation of real estate, depreciable lives, revenue recognition, fair value measurements and the collectability of tenant receivables. Actual results could differ from these estimates.
Federal Income Taxes
The Company has elected to be treated as a real estate investment trust under Sections 856-860 of the Internal Revenue
Code ("Code"). Under those sections, a REIT that, among other things, distributes at least 90% of real estate trust taxable income and meets certain other qualifications prescribed by the Code will not be taxed on that portion of its taxable income
that is distributed. The Company believes it qualifies as a REIT and intends to distribute all of its taxable income for fiscal 2018 in accordance with the provisions of the Code. Accordingly, no provision has been made for Federal income taxes in
the accompanying consolidated financial statements.
The Company follows the provisions of ASC Topic 740, “Income Taxes,” that, among other things, defines a recognition
threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. Based on its evaluation, the Company determined that it has no uncertain tax positions and no unrecognized tax benefits as of October 31, 2018. As of October 31, 2018, the
fiscal tax years 2014 through and including 2017 remain open to examination by the Internal Revenue Service. There are currently no federal tax examinations in progress.
Acquisitions of Real Estate Investments and Capitalization Policy
Acquisition of Real Estate Investments:
The Company evaluates each acquisition of real estate or in-substance real estate (including equity interests in
entities that predominantly hold real estate assets) to determine if the integrated set of assets and activities acquired meet the definition of a business and need to be accounted as a business combination. If either of the following criteria is
met, the integrated set of assets and activities acquired would not qualify as a business:
• Substantially all of the fair value of the gross assets acquired is
concentrated in either a single identifiable asset or a group of similar identifiable assets; or
• The integrated set of assets and activities is lacking, at a minimum, an
input and a substantive process that together significantly contribute to the ability to create outputs (i.e. revenue generated before and after the transaction).
An acquired process is considered substantive if:
• The process includes an organized workforce (or includes an acquired
contract that provides access to an organized workforce), that is skilled, knowledgeable, and experienced in performing the process;
• The process cannot be replaced without significant cost, effort, or delay; or
• The process is considered unique or scarce.
Generally, the Company expects that acquisitions of real estate or in-substance real estate will not meet the definition
of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets) or because the acquisition does not include a
substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay.
Acquisitions of real estate and in-substance real estate which do not meet the definition of a business are accounted
for as asset acquisitions. The accounting model for asset acquisitions is similar to the accounting model for business combinations except that the acquisition consideration (including acquisition costs) is allocated to the individual assets
acquired and liabilities assumed on a relative fair value basis. As a result, asset acquisitions do not result in the recognition of goodwill or a bargain purchase gain. The relative fair values used to allocate the cost of an asset acquisition are
determined using the same methodologies and assumptions as the Company utilizes to determine fair value in a business combination.
The value of tangible assets acquired is based upon our estimation of value on an “as if vacant” basis. The value of
acquired in-place leases includes the estimated costs during the hypothetical lease-up period and other costs that would have been incurred in the execution of similar leases under the market conditions at the acquisition date of the acquired
in-place lease. We assess the fair value of tangible and intangible assets based on numerous factors, including estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates
of future cash flows are based on a number of factors, including the historical operating results, known trends, and market/economic conditions that may affect the property.
The values of acquired above and below-market leases, which are included in prepaid expenses and other assets and other
liabilities, respectively, are amortized over the terms of the related leases and recognized as either an increase (for below-market leases) or a decrease (for above-market leases) to rental revenue. The values of acquired in-place leases are
classified in other assets in the accompanying consolidated balance sheets and amortized over the remaining terms of the related leases.
Capitalization Policy:
Land, buildings, property improvements, furniture/fixtures and tenant improvements are recorded at cost. Expenditures
for maintenance and repairs are charged to operations as incurred. Renovations and/or replacements, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.
Depreciation and Amortization
The Company uses the straight-line method for depreciation and amortization. Real estate investment properties are
depreciated over the estimated useful lives of the properties, which range from 30 to 40 years. Property improvements are depreciated over the estimated useful lives that range from 10 to 20 years. Furniture and fixtures are depreciated over the
estimated useful lives that range from 3 to 10 years. Tenant improvements are amortized over the shorter of the life of the related leases or their useful life.
Sale of Investment Property and Property Held for Sale
The Company reports properties that are either disposed of or are classified as held for sale in continuing operations
in the consolidated statement of income if the removal, or anticipated removal, of the asset(s) from the reporting entity does not represent a strategic shift that has or will have a major effect on an entity's operations and financial results when
disposed of.
In March 2017, the Company sold for $56.6 million its property located in White Plains, NY, as that property no longer
met the Company's investment objectives. In conjunction with the sale, the Company realized a gain on sale of property in the amount of $19.5 million, which is included in continuing operations in the consolidated statement of income for the year
ended October 31, 2017.
In July 2017, the Company sold for $1.2 million its property located in Fairfield, CT (the "Fairfield Property"), which
it purchased in the second quarter of fiscal 2017. In conjunction with the sale the Company realized a loss on sale of property in the amount of $729,000, which is included in continuing operations in the consolidated statement of income for the
year ended October 31, 2017.
The combined operating results of the White Plains Property and Fairfield Property, which are included in continuing operations, were
as follows (amounts in thousands):
|
Year Ended October 31,
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Revenues
|
$
|
-
|
$
|
2,279
|
$
|
5,604
|
||||||
|
Property operating expense
|
-
|
(331
|
)
|
(1,330
|
)
|
|||||||
|
Depreciation and amortization
|
-
|
(90
|
)
|
(476
|
)
|
|||||||
|
Net Income (loss)
|
$
|
-
|
$
|
1,858
|
$
|
3,798
|
||||||
Deferred Charges
Deferred charges consist principally of leasing commissions (which are amortized ratably over the life of the tenant
leases). Deferred charges in the accompanying consolidated balance sheets are shown at cost, net of accumulated amortization of $4,901,000 and $4,279,000 as of October 31, 2018 and 2017, respectively.
Asset Impairment
On a periodic basis, management assesses whether there are any indicators that the value of its real estate investments
may be impaired. A property value is considered impaired when management’s estimate of current and projected operating cash flows (undiscounted and without interest) of the property over its remaining useful life is less than the net carrying
value of the property. Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred, the loss is
measured as the excess of the net carrying amount of the property over the fair value of the asset. Changes in estimated future cash flows due to changes in the Company’s plans or market and economic conditions could result in recognition of
impairment losses which could be substantial. Management does not believe that the value of any of its real estate investments is impaired at October 31, 2018.
Revenue Recognition
Our leases with tenants are classified as operating leases. Rental income is generally recognized based on the terms of
leases entered into with tenants. In those instances in which the Company funds tenant improvements and the improvements are deemed to be owned by the Company, revenue recognition will commence when the improvements are substantially completed and
possession or control of the space is turned over to the tenant. When the Company determines that the tenant allowances are lease incentives, the Company commences revenue recognition when possession or control of the space is turned over to the
tenant for tenant work to begin. Minimum rental income from leases with scheduled rent increases is recognized on a straight-line basis over the lease term. At October 31, 2018 and 2017, approximately $18,375,000 and $17,349,000, respectively, has
been recognized as straight-line rents receivable (representing the current net cumulative rents recognized prior to when billed and collectible as provided by the terms of the leases), all of which is included in tenant receivables in the
accompanying consolidated financial statements. Percentage rent is recognized when a specific tenant's sales breakpoint is achieved. Property operating expense recoveries from tenants of common area maintenance, real estate taxes and other
recoverable costs are recognized in the period the related expenses are incurred. Lease incentives are amortized as a reduction of rental revenue over the respective tenant lease terms. Lease termination amounts are recognized in operating revenues
when there is a signed termination agreement, all of the conditions of the agreement have been met, the tenant is no longer occupying the property and the termination consideration is probable of collection. Lease termination amounts are paid by
tenants who want to terminate their lease obligations before the end of the contractual term of the lease by agreement with the Company. There is no way of predicting or forecasting the timing or amounts of future lease termination fees. Interest
income is recognized as it is earned. Gains or losses on disposition of properties are recorded when the criteria for recognizing such gains or losses under GAAP have been met.
In April 2018, the Company entered into a lease termination agreement with a tenant at its Ferry Plaza property located
in Newark, NJ. The agreement provided that the tenant pay the Company $3.7 million in exchange for the tenant to be released from all future obligations under its lease. The Company received payment in April 2018 and has recorded the payment
received as lease termination income in its consolidated statements of income for the fiscal year ended October 31, 2018, as the payment met all of the revenue recognition conditions under U.S. GAAP.
In July 2017, the Company entered into a lease termination agreement with the single tenant of its property located in
Fairfield, CT, which was purchased in the second quarter of fiscal 2017, so the Company could sell the property vacant. The agreement provided that the tenant pay the Company $3.2 million in exchange for the tenant to be released from all future
obligations under its lease. The Company received payment in July 2017 and has recorded the payment received as lease termination income in its consolidated statements of income for the year ended October 31, 2017, as the payment met all of the
revenue recognition conditions under U.S. GAAP. In addition, when the aforementioned property was acquired, the Company allocated $1.2 million of the consideration paid to acquire the asset to this over-market lease (see note 3). As a result of
this termination, the Company wrote-off the remaining $1.2 million asset as a reduction of lease termination income for the year ended October 31, 2017.
The Company provides an allowance for doubtful accounts against the portion of tenant receivables (including an
allowance for future tenant credit losses of approximately 10% of the deferred straight-line rents receivable) which is estimated to be uncollectible. Such allowances are reviewed periodically. At October 31, 2018 and 2017, tenant receivables in
the accompanying consolidated balance sheets are shown net of allowances for doubtful accounts of $4,800,000 and $4,543,000, respectively.
Cash Equivalents
Cash and cash equivalents consist of cash in banks and short-term investments with original maturities of less than
three months.
Restricted Cash
Restricted cash consists of those tenant security deposits and replacement and other reserves required by agreement with
certain of the Company’s mortgage lenders for property level capital requirements that are required to be held in separate bank accounts.
Marketable Securities
Marketable equity securities are carried at fair value based upon quoted market prices in active markets. The Company
has classified its marketable securities as available for sale. Unrealized holding gains and losses are excluded from earnings and reported as a separate component of stockholders’ equity until realized. The change in the unrealized net holding
gains (losses) is reflected as comprehensive income (Loss).
In February and March 2018, the Company purchased approximately $5.0 million of REIT securities with available cash.
The Company individually reviews and evaluates its marketable securities for impairment on a quarterly basis or when
events or circumstances occur. The Company considers, among other things, credit aspects of the issuer, amount of decline in fair value over cost and length of time in a continuous loss position. The Company normally holds REIT securities on a
long-term basis and has the ability and intent to hold securities to recovery. If a decline in fair value is determined to be other than temporary, an impairment charge is recognized in earnings and the cost basis of the individual security is
written down to fair value as the new cost basis. As of October 31, 2018, the Company's investment in REIT securities consists of an investment in one issuer and the aggregate fair value of the Company's investment is above the Company's cost.
The unrealized gain at October 31, 2018 and October 31, 2017 is detailed below (in thousands):
|
Fair Market
Value
|
Cost Basis
|
Unrealized
Gain/(Loss)
|
Gross
Unrealized
Gains
|
Gross
Unrealized
(Loss)
|
||||||||||||||||
|
October 31, 2018
|
||||||||||||||||||||
|
REIT Securities
|
$
|
5,567
|
$
|
4,998
|
$
|
569
|
$
|
569
|
$
|
-
|
||||||||||
|
October 31, 2017
|
||||||||||||||||||||
|
REIT Securities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||
Derivative Financial Instruments
The Company occasionally utilizes derivative financial instruments, such as interest rate swaps, to manage its exposure
to fluctuations in interest rates. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instruments. Derivative financial instruments must be effective in
reducing the Company's interest rate risk exposure in order to qualify for hedge accounting. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the
instrument are marked-to-market with changes in value included in net income for each period until the derivative instrument matures or is settled. Any derivative instrument used for risk management that does not meet the hedging criteria is
marked-to-market with the changes in value included in net income. The Company has not entered into, and does not plan to enter into, derivative financial instruments for trading or speculative purposes. Additionally, the Company has a policy of
entering into derivative contracts only with major financial institutions.
As of October 31, 2018, the Company believes it has no significant risk associated with non-performance of the financial
institutions that are the counterparty to its derivative contracts. At October 31, 2018, the Company had approximately $97.7 million in secured mortgage financings subject to interest rate swaps. Such interest rate swaps converted the LIBOR-based
variable rates on the mortgage financings to a fixed annual rate of 3.74% per annum. As of October 31, 2018 and 2017, the Company had a deferred liability of $114,000 and $574,000, respectively (included in accounts payable and accrued expenses
on the consolidated balance sheets) and a deferred asset of $7,011,000 and $3,316,000, respectively (included in prepaid expenses and other assets on the consolidated balance sheets) relating to the fair value of the Company’s interest rate swaps
applicable to secured mortgages.
Charges and/or credits relating to the changes in fair values of such interest rate swap are made to other comprehensive
(loss) as the swap is deemed effective and is classified as a cash flow hedge.
Comprehensive Income
Comprehensive income is comprised of net income applicable to Common and Class A Common stockholders and other
comprehensive income (loss). Other comprehensive income (loss) includes items that are otherwise recorded directly in stockholders’ equity, such as unrealized gains/(losses) on marketable securities classified as available-for-sale and unrealized
gains and losses on interest rate swaps designated as cash flow hedges. At October 31, 2018, accumulated other comprehensive income consisted of net unrealized gains on marketable securities classified as available for sale of $569,000 and net
unrealized gains on interest rate swap agreements of $6.9 million. At October 31, 2017, accumulated other comprehensive income consisted of net unrealized gains on interest rate swap agreements of approximately $2.7 million. Unrealized gains and
losses included in other comprehensive income/(loss) will be reclassified into earnings as gains and losses are realized.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash
and cash equivalents, and tenant receivables. The Company places its cash and cash equivalents in excess of insured amounts with high quality financial institutions. The Company performs ongoing credit evaluations of its tenants and may require
certain tenants to provide security deposits or letters of credit. Though these security deposits and letters of credit are insufficient to meet the terminal value of a tenant's lease obligation, they are a measure of good faith and a source of
funds to offset the economic costs associated with lost rent and the costs associated with re-tenanting the space. There is no dependence upon any single tenant.
Earnings Per Share
The Company calculates basic and diluted earnings per share in accordance with the provisions of ASC Topic 260,
"Earnings Per Share." Basic earnings per share ("EPS") excludes the impact of dilutive shares and is computed by dividing net income applicable to Common and Class A Common stockholders by the weighted average number of Common shares and Class A
Common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue Common shares or Class A Common shares were exercised or converted into Common shares or Class A Common
shares and then shared in the earnings of the Company. Since the cash dividends declared on the Company's Class A Common stock are higher than the dividends declared on the Common Stock, basic and diluted EPS have been calculated using the
"two-class" method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to the weighted average of the dividends declared, outstanding shares per class and participation
rights in undistributed earnings.
The following table sets forth the reconciliation between basic and diluted EPS (in thousands):
|
Year Ended October 31,
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Numerator
|
||||||||||||
|
Net income applicable to common stockholders – basic
|
$
|
5,173
|
$
|
6,857
|
$
|
4,142
|
||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Restricted stock awards
|
259
|
376
|
236
|
|||||||||
|
Net income applicable to common stockholders – diluted
|
$
|
5,432
|
$
|
7,233
|
$
|
4,378
|
||||||
|
Denominator
|
||||||||||||
|
Denominator for basic EPS-weighted average common shares
|
8,517
|
8,383
|
8,241
|
|||||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Restricted stock awards
|
597
|
643
|
669
|
|||||||||
|
Denominator for diluted EPS – weighted average common equivalent shares
|
9,114
|
9,026
|
8,910
|
|||||||||
|
Numerator
|
||||||||||||
|
Net income applicable to Class A common stockholders – basic
|
$
|
20,044
|
$
|
27,041
|
$
|
15,294
|
||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Restricted stock awards
|
(259
|
)
|
(376
|
)
|
(236
|
)
|
||||||
|
Net income applicable to Class A common stockholders – diluted
|
$
|
19,785
|
$
|
26,665
|
$
|
15,058
|
||||||
|
Denominator
|
||||||||||||
|
Denominator for basic EPS – weighted average Class A common shares
|
29,335
|
29,317
|
26,921
|
|||||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Restricted stock awards
|
178
|
186
|
191
|
|||||||||
|
Denominator for diluted EPS – weighted average Class A common equivalent
shares
|
29,513
|
29,503
|
27,112
|
|||||||||
Stock-Based Compensation
The Company accounts for its stock-based compensation plans under the provisions of ASC Topic 718, “Stock Compensation”,
which requires that compensation expense be recognized, based on the fair value of the stock awards less estimated forfeitures. The fair value of stock awards is equal to the fair value of the Company’s stock on the grant date. The Company
recognizes compensation expense for its stock awards by amortizing the fair value of stock awards over the requisite service periods of such awards.
Segment Reporting
The Company's primary business is the ownership, management, and redevelopment of retail properties. The Company reviews
operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. The Company evaluates financial performance using property operating income, which consists of
base rental income and tenant reimbursement income, less rental expenses and real estate taxes. Only one of the Company’s properties, located in Stamford, CT (“Ridgeway”), is considered significant as its revenue is in excess of 10% of the
Company’s consolidated total revenues and accordingly is a reportable segment. The Company has aggregated the remainder of our properties as they share similar long-term economic characteristics and have other similarities including the fact that
they are operated using consistent business strategies, are typically located in the same major metropolitan area, and have similar tenant mixes.
Ridgeway is located in Stamford, Connecticut and was developed in the 1950’s and redeveloped in the mid 1990’s. The
property contains approximately 374,000 square feet of GLA. It is the dominant grocery-anchored center and the largest non-mall shopping center located in the City of Stamford, Fairfield County, Connecticut.
Segment information about Ridgeway as required by ASC Topic 280 is included below:
|
Year Ended October 31,
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Ridgeway Revenues
|
10.4
|
%
|
11.2
|
%
|
11.3
|
%
|
||||||
|
All Other Property Revenues
|
89.6
|
%
|
88.8
|
%
|
88.7
|
%
|
||||||
|
Consolidated Revenue
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||
|
Year Ended October 31,
|
||||||||
|
2018
|
2017
|
|||||||
|
Ridgeway Assets
|
7.0
|
%
|
7.2
|
%
|
||||
|
All Other Property Assets
|
93.0
|
%
|
92.8
|
%
|
||||
|
Consolidated Assets (Note 1)
|
100.0
|
%
|
100.0
|
%
|
||||
Note 1- Ridgeway did not have any significant expenditures for additions to long lived assets in any of the fiscal years
ended October 31, 2018, 2017 and 2016.
|
Year Ended October 31,
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Ridgeway Percent Leased
|
96
|
%
|
96
|
%
|
98
|
%
|
||||||
|
Ridgeway
Significant Tenants (by base rent):
|
Year Ended October 31,
|
|||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
The Stop & Shop Supermarket Company
|
20
|
%
|
19
|
%
|
19
|
%
|
||||||
|
Bed, Bath & Beyond
|
14
|
%
|
14
|
%
|
14
|
%
|
||||||
|
Marshall’s Inc., a division of the TJX Companies
|
10
|
%
|
11
|
%
|
11
|
%
|
||||||
|
All Other Tenants at Ridgeway (Note 2)
|
56
|
%
|
56
|
%
|
56
|
%
|
||||||
|
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||
Note 2 - No other tenant accounts for more than 10% of Ridgeway’s annual base rents in any of the three years
presented. Percentages are calculated as a ratio of the tenants' base rent divided by total base rent of Ridgeway.
|
Year Ended October 31, 2018
|
||||||||||||
|
Income Statement (In Thousands):
|
Ridgeway
|
All Other
Operating Segments
|
Total Consolidated
|
|||||||||
|
Revenues
|
$
|
14,015
|
$
|
121,337
|
$
|
135,352
|
||||||
|
Operating Expenses
|
$
|
4,094
|
$
|
39,082
|
$
|
43,176
|
||||||
|
Interest Expense
|
$
|
1,869
|
$
|
11,809
|
$
|
13,678
|
||||||
|
Depreciation and Amortization
|
$
|
2,616
|
$
|
25,708
|
$
|
28,324
|
||||||
|
Income from Continuing Operations
|
$
|
5,436
|
$
|
36,747
|
$
|
42,183
|
||||||
|
Year Ended October 31, 2017
|
||||||||||||
|
Ridgeway
|
All Other
Operating Segments
|
Total Consolidated
|
||||||||||
|
Revenues
|
$
|
13,832
|
$
|
109,728
|
$
|
123,560
|
||||||
|
Operating Expenses
|
$
|
3,809
|
$
|
35,886
|
$
|
39,695
|
||||||
|
Interest Expense
|
$
|
2,034
|
$
|
10,947
|
$
|
12,981
|
||||||
|
Depreciation and Amortization
|
$
|
3,016
|
$
|
23,496
|
$
|
26,512
|
||||||
|
Income from Continuing Operations
|
$
|
4,973
|
$
|
31,725
|
$
|
36,698
|
||||||
|
Year Ended October 31, 2016
|
||||||||||||
|
Ridgeway
|
All Other
Operating Segments
|
Total Consolidated
|
||||||||||
|
Revenues
|
$
|
13,192
|
$
|
103,600
|
$
|
116,792
|
||||||
|
Operating Expenses
|
$
|
3,649
|
$
|
33,616
|
$
|
37,265
|
||||||
|
Interest Expense
|
$
|
2,487
|
$
|
10,496
|
$
|
12,983
|
||||||
|
Depreciation and Amortization
|
$
|
2,468
|
$
|
20,557
|
$
|
23,025
|
||||||
|
Income from Continuing Operations
|
$
|
4,588
|
$
|
30,017
|
$
|
34,605
|
||||||
Reclassification
Certain fiscal 2016 and 2017 amounts have been reclassified to conform to current period presentation.
New Accounting Standards
In May 2014, the FASB issued Accounting Standards Update ("ASU") ASU 2014-09, “Revenue from Contracts with Customers
(Topic 606)” (“ASU 2014-09”). The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition
guidance, including industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. In applying ASU 2014-09, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 applies to all contracts with customers except
those that are within the scope of other topics in the FASB’s ASC. ASU 2014-09 is effective for annual reporting periods (including interim periods within that reporting period) beginning after December 15, 2016 and shall be applied using either a
full retrospective or modified retrospective approach. Early application is not permitted. In August 2015, FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09 for all public companies for all annual periods beginning after
December 15, 2017 with early adoption permitted only as of annual reporting periods beginning after December 31, 2016, including interim periods within the reporting period. In March 2016, the FASB issued ASU 2016-08 as an amendment to ASU
2014-09, the amendment clarifies how to identify the unit of accounting for the principal versus agent evaluation, how to apply the control principle to certain types of arrangements, such as service transaction, and reframed the indicators in the
guidance to focus on evidence that an entity is acting as a principal rather than as an agent. The Company completed its assessment on the potential impact that the adoption of ASU 2014-09 and ASU 2016-08 will have on its consolidated financial
statements and has determined that no adjustment is needed upon adoption of the new accounting standard. The majority of our revenue falls outside of the scope of this
guidance.
In February 2016, the FASB issued ASU 2016-02, "Leases." ASU 2016-02 significantly changes the accounting for leases by
requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lessee model,
eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases requiring significantly more leasing related costs to be expensed upfront. ASU 2016-02 is
effective for the Company in the first quarter of fiscal 2020, and we are currently assessing the impact this standard will have on the Company's consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial
Assets and Financial Liabilities”. ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair
value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial
liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for
financial instruments measured at amortized cost. These changes become effective for the Company’s fiscal year beginning November 1, 2018. The most significant change for the Company will be the accounting for the Company’s investments in
marketable securities classified as available for sale, which are currently carried at fair value with unrealized gains and losses being excluded from earnings and reported as a separate component of stockholders’ equity until realized with the
change in net unrealized gains and losses being reflected as comprehensive income (loss). Under ASU 2016-01, beginning November 1, 2018, these marketable securities will continue to be measured at fair value, however, the changes in net unrealized
holding gains and losses will be recognized through net income. The adjustment to the opening balance of distributions in excess of net income in Stockholder's equity on November 1, 2018, using the modified retrospective approach, will be a
decrease in the amount of $569,000.
The Company has evaluated all other new ASU's issued by FASB, and has concluded that these updates do not have a
material effect on the Company's consolidated financial statements as of October 31, 2018.
(2) REAL ESTATE INVESTMENTS
The Company's investments in real estate, net of depreciation, were composed of the following at October 31, 2018 and 2017 (in
thousands):
|
Consolidated
Investment Properties
|
Unconsolidated
Joint Ventures
|
2018
Totals
|
2017
Totals
|
|||||||||||||
|
Retail
|
$
|
889,243
|
$
|
37,434
|
$
|
926,677
|
$
|
923,118
|
||||||||
|
Office
|
10,179
|
-
|
10,179
|
10,313
|
||||||||||||
|
$
|
899,422
|
$
|
37,434
|
$
|
936,856
|
$
|
933,431
|
|||||||||
The Company's investments at October 31, 2018 consisted of equity interests in 84 properties. The 84 properties are located in
various regions throughout the northeastern part of the United States with a concentration in the metropolitan New York tri-state area outside of the City of New York. The Company's primary investment focus is neighborhood and community shopping
centers located in the region just described. Since a significant concentration of the Company's properties are in the northeast, market changes in this region could have an effect on the Company's leasing efforts and ultimately its overall results
of operations.
(3) INVESTMENT PROPERTIES
The components of the properties consolidated in the financial statements are as follows (in thousands):
|
October 31,
|
||||||||
|
2018
|
2017
|
|||||||
|
Land
|
$
|
231,660
|
$
|
218,501
|
||||
|
Buildings and improvements
|
886,415
|
871,901
|
||||||
|
1,118,075
|
1,090,402
|
|||||||
|
Accumulated depreciation
|
(218,653
|
)
|
(195,020
|
)
|
||||
|
$
|
899,422
|
$
|
895,382
|
|||||
Space at the Company's properties is generally leased to various individual tenants under short and intermediate-term leases which are
accounted for as operating leases.
Minimum rental payments on non-cancelable operating leases for the Company's consolidated properties totaling $550.9
million become due as follows (in millions): 2019 - $91.0; 2020 - $82.3; 2021 - $73.1; 2022 - $62.5; 2023 - $46.5; and thereafter – $195.5.
Certain of the Company's leases provide for the payment of additional rent based on a percentage of the tenant's
revenues. Such additional percentage rents are included in operating lease income and were less than 1.00% of consolidated revenues in each of the three years ended October 31, 2018.
Significant Investment Property Transactions
In October 2017, the Company purchased a promissory note secured by a mortgage on 470 Main Street in Ridgefield, CT
(“470 Main”), which comprises part of the Yankee Ridge retail and office mixed-use property. The note was purchased from the existing lender. In January 2018, the Company completed foreclosure of the mortgage and became the owner of 470 Main.
Total consideration paid for the note, including costs, totaled $3.1 million. 470 Main is a 24,200 square foot building with ground and first floor retail and second floor office space. The Company funded the note purchase with available cash.
In March 2018, the Company, through a wholly-owned subsidiary, purchased for $13.1 million a 27,000 square foot shopping
center located in Yonkers, NY ("Tanglewood"). The Company funded the purchase with available cash, borrowings on its unsecured revolving credit facility and the issuance of $11.0 million in unsecured promissory notes to the seller (see note 4).
The Company accounted for the purchase of 470 Main, Tanglewood and a property acquired through a joint venture, which
the Company consolidates (see note 5), as asset acquisitions and allocated the total consideration transferred for the acquisitions, including transaction costs, to the individual assets and liabilities acquired on a relative fair value basis.
The financial information set forth below summarizes the Company’s purchase price allocation for the properties acquired during the
fiscal year ended October 31, 2018 (in thousands).
|
470 Main
|
Tanglewood
|
New City
|
||||||||||
|
Assets:
|
||||||||||||
|
Land
|
$
|
293
|
$
|
7,525
|
$
|
2,498
|
||||||
|
Building and improvements
|
$
|
2,786
|
$
|
5,920
|
$
|
632
|
||||||
|
In-place leases
|
$
|
68
|
$
|
147
|
$
|
38
|
||||||
|
Above market leases
|
$
|
25
|
$
|
81
|
$
|
-
|
||||||
|
Liabilities:
|
||||||||||||
|
In-place leases
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Below Market Leases
|
$
|
43
|
$
|
396
|
$
|
-
|
||||||
The value of above and below market leases are amortized as a reduction/increase to base rental revenue over the term of the
respective leases. The value of in-place leases described above are amortized as an expense over the terms of the respective leases.
For the fiscal year ended October 31, 2018, 2017 and 2016, the net amortization of above-market and below-market leases
was approximately $1,209,000, $223,000 and $157,000, respectively, which is included in base rents in the accompanying consolidated statements of income.
In Fiscal 2018, the Company incurred costs of approximately $8.2 million related to capital improvements and leasing
costs to its properties.
(4) MORTGAGE NOTES PAYABLE, BANK LINES OF CREDIT AND OTHER LOANS
At October 31, 2018, the Company has mortgage notes payable and other loans that are due in installments over various
periods to fiscal 2031. The mortgage loans bear interest at rates ranging from 3.5% to 6.6% and are collateralized by real estate investments having a net carrying value of approximately $558.2 million.
Combined aggregate principal maturities of mortgage notes payable during the next five years and thereafter are as follows (in
thousands):
|
Principal
Repayments
|
Scheduled
Amortization
|
Total
|
||||||||||
|
2019
|
$
|
26,880
|
$
|
6,362
|
$
|
33,242
|
||||||
|
2020
|
-
|
6,031
|
6,031
|
|||||||||
|
2021
|
-
|
6,391
|
6,391
|
|||||||||
|
2022
|
49,486
|
5,581
|
55,067
|
|||||||||
|
2023
|
-
|
5,269
|
5,269
|
|||||||||
|
Thereafter
|
181,579
|
6,222
|
187,801
|
|||||||||
|
$
|
257,945
|
$
|
35,856
|
$
|
293,801
|
|||||||
The Company has a $100 million unsecured revolving credit facility with a syndicate of three banks led by The Bank of New York Mellon,
as administrative agent. The syndicate also includes Wells Fargo Bank N.A. and Bank of Montreal (co-syndication agent). The Facility gives the Company the option, under certain conditions, to increase the Facility’s borrowing capacity up to $150
million (subject to lender approval). The maturity date of the Facility is August 23, 2020 with a one-year extension at the Company’s option. Borrowings under the Facility can be used for general corporate purposes and the issuance of letters of
credit (up to $10 million). Borrowings will bear interest at the Company’s option of Eurodollar rate plus 1.35% to 1.95% or The Bank of New York Mellon's prime lending rate plus 0.35% to 0.95% based on consolidated indebtedness, as defined. The
Company pays a quarterly fee on the unused commitment amount of 0.15% to 0.25% per annum based on outstanding borrowings during the year. The Facility contains certain representations, financial and other covenants typical for this type of facility.
The Company's ability to borrow under the Facility is subject to its compliance with the covenants and other restrictions on an ongoing basis. The principal financial
covenants limit the Company's level of secured and unsecured indebtedness and additionally require the Company to maintain certain debt coverage ratios. The Company was in compliance with such covenants at October 31, 2018.
As of October 31, 2018, $71 million was available to be drawn on the Facility.
During the fiscal years ended October 31,
2018 and 2017, the Company borrowed $33.6 million and $52 million, respectively, on its Facility to fund capital improvements to our properties, property acquisitions and for general corporate purposes. During the fiscal years ended October 31, 2018 and 2017, the Company re-paid $9.0 million and $56.0 million, respectively, on its Facility with available cash.
In March 2018, the Company through a wholly-owned subsidiary, purchased Tanglewood for $13.1 million (see note 3). A
portion of the purchase price was funded by issuing $11 million of unsecured promissory notes payable to the seller of the property, consisting of three tranches. In May 2018, the short-term notes tranche in the amount of $7.8 million was repaid
with borrowings on the Company's Facility. The remaining balance of the notes is included in mortgage notes payable and other loans on the Company's consolidated balance sheet at $3.2 million. Each tranche requires payments of interest only.
The terms of the remaining notes are detailed below:
|
Principal Amount
(in thousands)
|
Interest Rate
|
Interest
Payment Terms
|
Maturity Date
|
||||||||
|
Long Term A
|
$
|
1,650
|
4.91
|
%
|
(a)
|
Quarterly
|
March 29, 2030
|
||||
|
Long Term B
|
1,513
|
5.05
|
%
|
(b)
|
Quarterly
|
March 29, 2030
|
|||||
|
$
|
3,163
|
||||||||||
| (a) |
Interest rate is variable and based on the level of the Company's dividend declared on the Company's Class A Common stock, divided by $22 per Class A Share.
|
| (b) |
Interest rate is fixed.
|
In October 2018, we entered into a commitment to refinance our existing $15.0 million mortgage secured by our Darien, CT shopping
center on March 18, 2019, the first day the current Darien mortgage can be repaid without penalty. The new mortgage will be in the amount of $25.0 million and will have a term of ten years and will require payment of principal and interest at the
rate of LIBOR plus 1.65%. Concurrent with entering into the commitment, we also entered into an interest rate swap contract with the new lender, which will convert the variable interest rate (based on LIBOR) to a fixed rate of 4.815% per annum. The
fixed interest rate on the existing mortgage is currently 6.55%.
Also in October 2018, we entered into a commitment to refinance our existing $9.2 million mortgage secured by our
Newark, NJ shopping center. We anticipate the refinancing will take place in March 2019, the first month the current mortgage can be repaid without penalty. The new mortgage will be in the amount of $10.0 million and will have a term of ten years
and will require payment of principal and interest at the fixed rate of 4.63%. The fixed interest rate on the existing mortgage is currently 6.15%.
Interest paid in the years ended October 31, 2018, 2017, and 2016 was approximately $13.4 million, $12.9 million and
$13.1 million, respectively.
(5) CONSOLIDATED JOINT VENTURES AND REDEEMABLE NONCONTROLLING INTERESTS
The Company has an investment in six joint ventures, UB Ironbound, LP (“Ironbound”), UB Orangeburg, LLC ("Orangeburg"),
McLean Plaza Associates, LLC ("McLean"), UB Dumont I, LLC ("Dumont") and UB New City, LLC, each of which owns a commercial retail property, and UB High Ridge, LLC ("UB High Ridge"), which owns three commercial real estate properties. The Company
has evaluated its investment in these six joint ventures and has concluded that these joint ventures are fully controlled by the Company and that the presumption of control is not offset by any rights of any of the limited partners or
non-controlling members in these ventures and that the joint ventures should be consolidated into the consolidated financial statements of the Company in accordance with ASC Topic 810 "Consolidation". The Company’s investment in these consolidated
joint ventures is more fully described below:
Ironbound (Ferry Plaza)
The Company, through a wholly-owned subsidiary, is the general partner and owns 84% of one consolidated limited
partnership, Ironbound, which owns a grocery-anchored shopping center.
The Ironbound limited partnership has a defined termination date of December 31, 2097. The partners in Ironbound are
entitled to receive an annual cash preference payable from available cash of the partnership. Any unpaid preferences accumulate and are paid from future cash, if any. The balance of available cash, if any, is distributed in accordance with the
respective partner’s interests. Upon liquidation of Ironbound, proceeds from the sale of partnership assets are to be distributed in accordance with the respective partnership interests. The limited partners are not obligated to make any additional
capital contributions to the partnership.
Orangeburg
The Company, through a wholly-owned subsidiary, is the managing member and owns a 44.1% interest in Orangeburg, which
owns a drug store-anchored shopping center. The other member (non-managing) of Orangeburg is the prior owner of the contributed property who, in exchange for contributing the net assets of the property, received units of Orangeburg equal to the
value of the contributed property less the value of the assigned first mortgage payable. The Orangeburg operating agreement provides for the non-managing member to receive an annual cash distribution equal to the regular quarterly cash distribution
declared by the Company for one share of the Company’s Class A Common stock, which amount is attributable to each unit of Orangeburg ownership. The annual cash distribution is paid from available cash, as defined, of Orangeburg. The balance of
available cash, if any, is fully distributable to the Company. Upon liquidation, proceeds from the sale of Orangeburg assets are to be distributed in accordance with the operating agreement. The non-managing member is not obligated to make any
additional capital contributions to the partnership. Orangeburg has a defined termination date of December 31, 2097. Since purchasing this property, the Company has made additional investments in the amount of $6.6 million in Orangeburg and as a
result as of October 31, 2018 its ownership percentage has increased to 44.1% from approximately 2.92% at inception.
McLean Plaza
The Company, through a wholly-owned subsidiary, is the managing member and owns a 53% interest in McLean Plaza
Associates, LLC, a limited liability company ("McLean"), which owns a grocery-anchored shopping center. The McLean operating agreement provides for the non-managing members to receive a fixed annual cash distribution equal to 5.05% of their
invested capital. The annual cash distribution is paid from available cash, as defined, of McLean. The balance of available cash, if any, is fully distributable to the Company. Upon liquidation, proceeds from the sale of McLean assets are to be
distributed in accordance with the operating agreement. The non-managing members are not obligated to make any additional capital contributions to the entity.
UB High Ridge
The Company acquired an 8.80% interest in UB High Ridge, LLC ("UB High Ridge") for a net investment of $5.5 million. UB
High Ridge owns three commercial real estate properties, High Ridge Shopping Center, a grocery-anchored shopping center, ("High Ridge") and two single tenant commercial retail properties, one leased to JP Morgan Chase ("Chase Property") and one
leased to CVS ("CVS Property"). Two of the properties are located in Stamford, CT and one in Greenwich, CT. High Ridge is a grocery-anchored shopping center anchored by a Trader Joes grocery store. The properties were contributed to the new
entities by the former owners who received units of ownership of UB High Ridge equal to the value of properties contributed less liabilities assumed. The UB High Ridge operating agreement provides for the non-managing members to receive an annual
cash distribution, currently equal to 5.46% of their invested capital. During the fiscal year ended October 31, 2018, the Company redeemed 51,914 units of non-managing members for a total amount of $1.2 million. The Company's ownership percentage
increased to 10.9% from 8.8% at inception.
UB Dumont I, LLC
In August 2017, the Company acquired a 31.4% interest in UB Dumont I, LLC ("Dumont") for a net investment of $3.9
million. Dumont owns a retail and residential real estate property, which retail portion is anchored by a Stop and Shop grocery store. The property is located in Dumont, NJ. The property was contributed to the new entity by the former owners who
received units of ownership of Dumont equal to the value of contributed property less liabilities assumed. The Dumont operating agreement provides for the non-managing members to receive an annual cash distribution, currently equal to 5.05% of
their invested capital.
UB New City I, LLC
In June 2018, the Company purchased a 75.3% equity interest in a joint venture, UB New City I, LLC ("New City"), in
which the Company is the managing member. The Company's initial investment was $2.4 million. New City owns a single tenant retail real estate property located in New City, NY, which is leased to a Savings Bank. In addition, New City rents
certain parking spaces on the property to the owner of an adjacent grocery-anchored shopping center. The property was contributed to the new entity by the former owners who received units of ownership of New City equal to the value of contributed
property. The New City operating agreement provides for the non-managing member to receive an annual cash distribution, currently equal to 5.00% of his invested capital.
Noncontrolling interests:
The Company accounts for noncontrolling interests in accordance with ASC Topic 810, “Consolidation.” Because the limited
partners or noncontrolling members in Ironbound, Orangeburg, McLean, UB High Ridge, Dumont and New City have the right to require the Company to redeem all or a part of their limited partnership or limited liability company units for cash, or at
the option of the Company shares of its Class A Common stock, at prices as defined in the governing agreements, the Company reports the noncontrolling interests in the consolidated joint ventures in the mezzanine section, outside of permanent
equity, of the consolidated balance sheets at redemption value which approximates fair value. The value of the Orangeburg, McLean and a portion of the UB High Ridge and Dumont redemptions are based solely on the price of the Company’s Class A
Common stock on the date of redemption. For the years ended October 31, 2018 and 2017, the Company adjusted the carrying value of the non-controlling interests by
$(2,674,000) and $(666,000), respectively, with the corresponding adjustment recorded in stockholders' equity.
The following table sets forth the details of the Company's redeemable non-controlling interests (amounts in thousands):
|
October 31,
|
||||||||
|
2018
|
2017
|
|||||||
|
Beginning Balance
|
$
|
81,361
|
$
|
18,253
|
||||
|
Initial UB High Ridge Noncontrolling Interest-Net
|
-
|
55,217
|
||||||
|
Initial Dumont Noncontrolling Interest-Net
|
-
|
8,557
|
||||||
|
Initial New City Noncontrolling Interest-Net
|
791
|
-
|
||||||
|
Redemption of UB High Ridge Noncontrolling Interest
|
(1,220
|
)
|
-
|
|||||
|
Change in Redemption Value
|
(2,674
|
)
|
(666
|
)
|
||||
|
Ending Balance
|
$
|
78,258
|
$
|
81,361
|
||||
(6) INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES
At October 31, 2018 and 2017, investments in and advances to unconsolidated joint ventures consisted of the following (with the
Company's ownership percentage in parentheses) (amounts in thousands):
|
October 31,
|
||||||||
|
2018
|
2017
|
|||||||
|
Chestnut Ridge and Plaza 59 Shopping Centers (50.0%)
|
$
|
17,702
|
$
|
18,032
|
||||
|
Gateway Plaza (50%)
|
6,680
|
6,873
|
||||||
|
Putnam Plaza Shopping Center (66.67%)
|
5,978
|
5,968
|
||||||
|
Midway Shopping Center, L.P. (11.642%)
|
4,509
|
4,639
|
||||||
|
Applebee's at Riverhead (50%)
|
1,842
|
1,814
|
||||||
|
81 Pondfield Road Company (20%)
|
723
|
723
|
||||||
|
Total
|
$
|
37,434
|
$
|
38,049
|
||||
Chestnut Ridge and Plaza 59 Shopping Centers
The Company, through two wholly owned subsidiaries, owns a 50% undivided tenancy-in-common equity interest in the 76,000
square foot Chestnut Ridge Shopping Center located in Montvale, New Jersey (“Chestnut”), which is anchored by a Fresh Market grocery store, and the 24,000 square foot Plaza 59 Shopping Center located in Spring Valley, New York (“Plaza 59”), which
is anchored by a local grocer.
Gateway Plaza and Applebee's at
Riverhead
The Company, through two wholly owned subsidiaries, owns a 50% undivided tenancy-in-common equity interest in the
Gateway Plaza Shopping Center ("Gateway") and Applebee's at Riverhead ("Applebee's"). Both properties are located in Riverhead, New York (together the “Riverhead Properties”). Gateway, a 198,500 square foot shopping center anchored by a 168,000 square foot Walmart which also has 27,000 square feet of in-line space that is partially leased and a 3,500 square foot outparcel that is leased. Applebee's has
a 5,400 square foot free standing Applebee’s restaurant with a 7,200 square foot pad site that is leased.
Gateway is subject to a $12.4 million non-recourse first mortgage. The mortgage matures on March 1, 2024 and requires
payments of principal and interest at a fixed rate of interest of 4.2% per annum.
Putnam Plaza Shopping Center
The Company, through a wholly owned subsidiary, owns a 66.67% undivided tenancy-in-common equity interest in the 189,000
square foot Putnam Plaza Shopping Center (“Putnam Plaza”), which is anchored by a Tops grocery store.
Putnam Plaza has a first mortgage payable in the amount of $18.9 million. The mortgage requires monthly payments of
principal and interest at a fixed rate of 4.81% and will mature in 2028.
Midway Shopping Center, L.P.
The Company, through a wholly owned subsidiary, owns an 11.642% equity interest in Midway Shopping Center L.P.
(“Midway”), which owns a 247,000 square foot grocery-anchored shopping center in Westchester County, New York. Although the Company only has an 11.642% equity interest in Midway, it controls 25% of the voting power of Midway, and as such, has
determined that it exercises significant influence over the financial and operating decisions of Midway but does not control the venture and accounts for its investment in Midway under the equity method of accounting.
The Company has allocated the $7.4 million excess of the carrying amount of its investment in and advances to Midway
over the Company's share of Midway's net book value to real property and is amortizing the difference over the property's estimated useful life of 39 years.
Midway currently has a non-recourse first mortgage payable in the amount of $27.6 million. The loan requires payments of
principal and interest at the rate of 4.80% per annum and will mature in 2027.
81 Pondfield Road Company
The Company's other investment in an unconsolidated joint venture is a 20% economic interest in a partnership which owns
a retail and office building in Westchester County, New York.
The Company accounts for the above investments under the equity method of accounting since it exercises significant
influence, but does not control the joint ventures. The other venturers in the joint ventures have substantial participation rights in the financial decisions and operation of the ventures or properties, which preclude the Company from
consolidating the investments. The Company has evaluated its investment in the joint ventures and has concluded that the joint ventures are not VIE's. Under the equity method of accounting the initial investment is recorded at cost as an investment
in unconsolidated joint venture, and subsequently adjusted for equity in net income (loss) and cash contributions and distributions from the venture. Any difference between the carrying amount of the investment on the Company’s balance sheet and
the underlying equity in net assets of the venture is evaluated for impairment at each reporting period.
(7) STOCKHOLDERS' EQUITY
Authorized Stock
The Company's Charter authorizes up to 200,000,000 shares of various classes of stock. The total number of shares of
authorized stock consists of 100,000,000 shares of Class A Common Stock, 30,000,000 shares of Common Stock, 50,000,000 shares of Preferred Stock, and 20,000,000 shares of Excess Stock.
Preferred Stock
The 6.75% Series G Senior Cumulative Preferred Stock ("Series G Preferred Stock") is non-voting, has no stated maturity
and is redeemable for cash at $25 per share at the Company's option on or after October 28, 2019. The holders of our Series G Preferred Stock have general preference rights with respect to liquidation and quarterly distributions. Except under
certain conditions, holders of the Series G Preferred Stock will not be entitled to vote on most matters. In the event of a cumulative arrearage equal to six quarterly
dividends, holders of Series G Preferred Stock, together with all of the Company's other Series of preferred stock (voting as a single class without regard to series) will have the right to elect two additional members to serve on the Company's
Board of Directors until the arrearage has been cured. Upon the occurrence of a Change of Control, as defined in the Company's Articles Supplementary to the Charter, the holders of the Series G Preferred Stock will have the right to convert all
or part of the shares of Series G Preferred Stock held by such holders on the applicable conversion date into a number of the Company's shares of Class A Common stock. Underwriting commissions and costs incurred in connection with the sale of the
Series G Preferred Stock are reflected as a reduction of additional paid in capital.
The 6.25% Series H Senior Cumulative Preferred Stock (the "Series H Preferred
Stock") is nonvoting, have no stated maturity and is redeemable for cash at $25 per share at the Company's option on or after September 18, 2022. The holders of our Series H Preferred Stock have general preference rights with respect to liquidation
and quarterly distributions. Except under certain conditions, holders of the Series H Preferred Stock will not be entitled to vote on most matters. In the event of a
cumulative arrearage equal to six quarterly dividends, holders of Series H Preferred Stock, together with all of the Company's other Series of preferred stock (voting as a single class without regard to series) will have the right to elect
two additional members to serve on the Company's Board of Directors until the arrearage has been cured. Upon the occurrence of a Change of Control, as defined in the Company's Articles of Incorporation, the holder of the Series H Preferred Stock
will have the right to convert all or part of the shares of Series H Preferred Stock held by such holder on the applicable conversion date into a number of the Company's shares of Class A common stock. Underwriting commissions and costs incurred in connection with the sale of the Series H Preferred Stock are reflected as a reduction of additional paid in capital.
In October 2017, we redeemed all of the outstanding shares of our $25 Series F Cumulative Preferred Stock with a
liquidation preference of $25 per share. As a result we recognized a charge of $4.1 million on our consolidated statement of income for the fiscal year ended October 31, 2017, which represents the difference between redemption value and carrying
value net of original deferred issuance costs.
Common Stock
The Class A Common Stock entitles the holder to 1/20 of one vote per share. The Common Stock entitles the holder to one
vote per share. Each share of Common Stock and Class A Common Stock have identical rights with respect to dividends except that each share of Class A Common Stock will receive not less than 110% of the regular quarterly dividends paid on each share
of Common Stock.
The following tables set forth the dividends declared per Common share and Class A Common share and tax status for Federal income tax
purposes of the dividends paid during the fiscal years ended October 31, 2018 and 2017:
|
Common Shares
|
Class A Common Shares
|
|||||||||||||||||||||||||||||||
|
Dividend Payment Date
|
Gross Dividend
Paid Per Share
|
Ordinary Income
|
Capital Gain
|
Non-Taxable Portion
|
Gross Dividend
Paid Per Share
|
Ordinary Income
|
Capital Gain
|
Non-Taxable Portion
|
||||||||||||||||||||||||
|
January 19, 2018
|
$
|
0.24
|
$
|
0.1614
|
$
|
0.0038
|
$
|
0.0748
|
$
|
0.27
|
$
|
0.182
|
$
|
0.004
|
$
|
0.084
|
||||||||||||||||
|
April 16, 2018
|
$
|
0.24
|
$
|
0.1614
|
$
|
0.0038
|
$
|
0.0748
|
$
|
0.27
|
$
|
0.182
|
$
|
0.004
|
$
|
0.084
|
||||||||||||||||
|
July 20, 2018
|
$
|
0.24
|
$
|
0.1614
|
$
|
0.0038
|
$
|
0.0748
|
$
|
0.27
|
$
|
0.182
|
$
|
0.004
|
$
|
0.084
|
||||||||||||||||
|
October 19, 2018
|
$
|
0.24
|
$
|
0.1614
|
$
|
0.0038
|
$
|
0.0748
|
$
|
0.27
|
$
|
0.182
|
$
|
0.004
|
$
|
0.084
|
||||||||||||||||
|
$
|
0.96
|
$
|
0.6456
|
$
|
0.0152
|
$
|
0.2992
|
$
|
1.08
|
$
|
0.728
|
$
|
0.016
|
$
|
0.336
|
|||||||||||||||||
|
Common Shares
|
Class A Common Shares
|
|||||||||||||||||||||||||||||||
|
Dividend Payment Date
|
Gross Dividend
Paid Per Share
|
Ordinary Income
|
Capital Gain
|
Non-Taxable Portion
|
Gross Dividend
Paid Per Share
|
Ordinary Income
|
Capital Gain
|
Non-Taxable Portion
|
||||||||||||||||||||||||
|
January 20, 2017
|
$
|
0.235
|
$
|
0.14
|
$
|
0.02075
|
$
|
0.07425
|
$
|
0.265
|
$
|
0.158
|
$
|
0.02325
|
$
|
0.08375
|
||||||||||||||||
|
April 17, 2017
|
$
|
0.235
|
$
|
0.14
|
$
|
0.02075
|
$
|
0.07425
|
$
|
0.265
|
$
|
0.158
|
$
|
0.02325
|
$
|
0.08375
|
||||||||||||||||
|
July 17, 2017
|
$
|
0.235
|
$
|
0.14
|
$
|
0.02075
|
$
|
0.07425
|
$
|
0.265
|
$
|
0.158
|
$
|
0.02325
|
$
|
0.08375
|
||||||||||||||||
|
October 20, 2017
|
$
|
0.235
|
$
|
0.14
|
$
|
0.02075
|
$
|
0.07425
|
$
|
0.265
|
$
|
0.158
|
$
|
0.02325
|
$
|
0.08375
|
||||||||||||||||
|
$
|
0.94
|
$
|
0.56
|
$
|
0.083
|
$
|
0.297
|
$
|
1.06
|
$
|
0.632
|
$
|
0.093
|
$
|
0.335
|
|||||||||||||||||
The Company has a Dividend Reinvestment and Share Purchase Plan (as amended, the "DRIP"), that permits stockholders to acquire
additional shares of Common Stock and Class A Common Stock by automatically reinvesting dividends. During fiscal 2018, the Company issued 4,528 shares of Common Stock and 5,766 shares of Class A Common Stock (4,705 shares of Common Stock and 5,399
shares of Class A Common Stock in fiscal 2017) through the DRIP. As of October 31, 2018, there remained 338,406 shares of Common Stock and 393,150 shares of Class A Common Stock available for issuance under the DRIP.
The Company has adopted a stockholder
rights plan, pursuant to which each holder of Common Stock received a Common Stock right and each holder of Class A Common Stock received a Class A Common Stock right. The rights are not exercisable until the Distribution Date and will expire
on November 11, 2028, unless earlier redeemed by the Company. If the rights become exercisable, each holder of a Common Stock right will be entitled to purchase from the Company one one hundredth of a share of Series I Participating Preferred
Stock, and each holder of a Class A Common Stock right will be entitled to purchase from the Company one one hundredth of a share of Series J Participating Preferred Stock, in each case, at a price of $85, subject to adjustment. The
“Distribution Date” will be the earlier to occur of the close of business on the tenth business day following: (a) a public announcement that an acquiring person has acquired beneficial ownership of 10% or more of the total combined
voting power of the outstanding Common Stock and Class A Common Stock, or (b) the commencement of a tender offer or exchange offer that would result in the beneficial ownership of 30% or more of the combined voting power of the outstanding Common
Stock and Class A Common Stock, number of outstanding Common Stock, or the number of outstanding Class A Common Stock. Thereafter, if certain events occur, holders of
Common Stock and Class A Common Stock, other than the acquiring person, will be entitled to purchase shares of Common Stock and Class A Common Stock, respectively, of the Company having a value equal to 2 times the exercise price of the right.
The Company's articles of incorporation provide that if any person acquires more than 7.5% of the aggregate value of all
outstanding stock, except, among other reasons, as approved by the Board of Directors, such shares in excess of this limit automatically will be exchanged for an equal number of shares of Excess Stock. Excess Stock has limited rights, may not be
voted and is not entitled to any dividends.
Stock Repurchase
The Board of Directors of the Company has approved a share repurchase program (“Current Repurchase Program”) for the
repurchase of up to 2,000,000 shares, in the aggregate, of Common stock, Class A Common stock and Series G Cumulative Preferred stock and Series H Cumulative Preferred stock in open market transactions.
For the year ended October 31, 2018, the Company repurchased an additional 6,660 shares of Class A Common Stock at the
average price per Class A Common share of $17.94 under the Current Repurchase Program. The Company has repurchased 195,413 shares of Class A Common Stock under the Current Repurchase Program. From the inception of all repurchase programs, the
Company has repurchased 4,600 shares of Common Stock and 919,991 shares of Class A Common Stock.
(8) STOCK COMPENSATION AND OTHER BENEFIT PLANS
Restricted Stock Plan
The Company has a Restricted Stock Plan that provides a form of equity compensation for employees of the Company. The
Plan, which is administered by the Company's compensation committee, authorizes grants of up to an aggregate of 4,500,000 shares of the Company’s common equity consisting of 350,000 Common shares, 350,000 Class A Common shares and 3,800,000 shares,
which at the discretion of the compensation committee, may be awarded in any combination of Class A Common shares or Common shares.
In fiscal 2018, the Company awarded 152,700 shares of Common Stock and 102,800 shares of Class A Common Stock to
participants in the Plan. The grant date fair value of restricted stock grants awarded to participants in 2018 was approximately $5.0 million. As of October 31, 2018, there was $14.0 million of unamortized restricted stock compensation related to
non-vested restricted stock grants awarded under the Plan. The remaining unamortized expense is expected to be recognized over a weighted average period of 4.6 years. For the years ended October 31, 2018, 2017 and 2016, amounts charged to
compensation expense totaled $4,394,000, $4,156,000 and $4,426,000, respectively.
A summary of the status of the Company's non-vested restricted stock awards as of October 31, 2018, and changes during the year ended
October 31, 2018 is presented below:
|
Common Shares
|
Class A Common Shares
|
|||||||||||||||
|
Shares
|
Weighted-Average
Grant Date Fair Value
|
Shares
|
Weighted-Average
Grant Date Fair Value
|
|||||||||||||
|
Non-vested at October 31, 2017
|
1,274,150
|
$
|
17.02
|
412,275
|
$
|
20.60
|
||||||||||
|
Granted
|
152,700
|
$
|
17.70
|
102,800
|
$
|
22.10
|
||||||||||
|
Vested
|
(170,950
|
)
|
$
|
15.78
|
(57,200
|
)
|
$
|
18.07
|
||||||||
|
Forfeited
|
-
|
$
|
-
|
(4,950
|
)
|
$
|
22.06
|
|||||||||
|
Non-vested at October 31, 2018
|
1,255,900
|
$
|
17.22
|
452,925
|
$
|
21.13
|
||||||||||
Profit Sharing and Savings Plan
The Company has a profit sharing and savings plan (the "401K Plan"), which permits eligible employees to defer a portion
of their compensation in accordance with the Internal Revenue Code. Under the 401K Plan, the Company made contributions on behalf of eligible employees. The Company made contributions to the 401K Plan of approximately $220,000, $208,000 and
$187,000 in each of the three years ended October 31, 2018, 2017 and 2016, respectively. The Company also has an Excess Benefit and Deferred Compensation Plan that allows eligible employees to defer benefits in excess of amounts provided under the
Company's 401K Plan and a portion of the employee's current compensation.
(9) FAIR VALUE MEASUREMENTS
ASC Topic 820, "Fair Value Measurements and Disclosures," defines fair value as the price that would be received to sell
an asset, or paid to transfer a liability, in an orderly transaction between market participants.
ASC Topic 820's valuation techniques are based on observable or unobservable inputs. Observable inputs reflect market
data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair value hierarchy:
| • |
Level 1- Quoted prices for identical instruments in active markets
|
| • |
Level 2- Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and
model-derived valuations in which significant value drivers are observable
|
| • |
Level 3- Valuations derived from valuation techniques in which significant value drivers are unobservable
|
Marketable debt and equity securities are valued based on quoted market prices on national exchanges.
The Company calculates the fair value of the redeemable noncontrolling interests based on either quoted market prices on
national exchanges for those interests based on the Company's Class A Common Stock or unobservable inputs considering the assumptions that market participants would make in pricing the obligations. The inputs used include an estimate of the fair
value of the cash flow generated by the limited partnership or limited liability company in which the investor owns the joint venture units capitalized at prevailing market rates for properties with similar characteristics or located in similar
areas.
The fair values of interest rate swaps are determined using widely accepted valuation techniques, including discounted
cash flow analysis, on the expected cash flows of each derivative. The analysis reflects the contractual terms of the swaps, including the period to maturity, and uses observable market-based inputs, including interest rate curves ("significant
other observable inputs.") The fair value calculation also includes an amount for risk of non-performance using "significant unobservable inputs" such as estimates of current credit spreads to evaluate the likelihood of default. The Company has
concluded, as of October 31, 2018 and 2017, that the fair value associated with the "significant unobservable inputs" relating to the Company's risk of non-performance was insignificant to the overall fair value of the interest rate swap agreements
and, as a result, the Company has determined that the relevant inputs for purposes of calculating the fair value of the interest rate swap agreements, in their entirety, were based upon "significant other observable inputs".
The Company measures its marketable debt and equity securities, redeemable noncontrolling interests and interest rate swap derivatives
at fair value on a recurring basis. The fair value of these financial assets and liabilities was determined using the following inputs at October 31, 2018 and 2017 (amounts in thousands):
|
Fiscal Year Ended October 31, 2018
|
Total
|
Quoted Prices in Active
Markets for Identical Assets
(Level 1)
|
Significant Other
Observable Inputs
(Level 2)
|
Significant
Unobservable Inputs
(Level 3)
|
||||||||||||
|
Assets:
|
||||||||||||||||
|
Interest Rate Swap Agreements
|
$
|
7,011
|
$
|
-
|
$
|
7,011
|
$
|
-
|
||||||||
|
Available for sale securities
|
$
|
5,567
|
$
|
5,567
|
$
|
-
|
$
|
-
|
||||||||
|
Liabilities:
|
||||||||||||||||
|
Interest Rate Swap Agreements
|
$
|
114
|
$
|
-
|
$
|
114
|
$
|
-
|
||||||||
|
Redeemable noncontrolling interests
|
$
|
78,258
|
$
|
22,131
|
$
|
53,359
|
$
|
2,768
|
||||||||
|
Fiscal Year Ended October 31, 2017
|
||||||||||||||||
|
Assets:
|
||||||||||||||||
|
Interest Rate Swap Agreements
|
$
|
3,316
|
$
|
-
|
$
|
3,316
|
$
|
-
|
||||||||
|
Liabilities:
|
||||||||||||||||
|
Interest Rate Swap Agreements
|
$
|
574
|
$
|
-
|
$
|
574
|
$
|
-
|
||||||||
|
Redeemable noncontrolling interests
|
$
|
81,361
|
$
|
23,709
|
$
|
53,788
|
$
|
3,864
|
||||||||
Fair market value measurements based upon Level 3 inputs changed (in thousands) from $3,846 at November 1, 2016 to $3,864 at October
31, 2017 as a result of a $18 increase in the redemption value of the Company's noncontrolling interest in Ironbound in accordance with the application of ASC Topic 810. Fair market value measurements based upon Level 3 inputs changed from $3,864 at
November 1, 2017 to $2,768 at October 31, 2018 as a result of a $(1,096) decrease in the redemption value of the Company's noncontrolling interest in Ironbound in accordance with the application of ASC Topic 810.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, restricted cash, mortgage note receivable, tenant receivables, prepaid
expenses, other assets, accounts payable and accrued expenses, are reasonable estimates of their fair values because of the short-term nature of these instruments. The carrying value of the Facility is deemed to be at fair value since the
outstanding debt is directly tied to monthly LIBOR contracts. Mortgage notes payable that were assumed in property acquisitions were recorded at their fair value at the time they were assumed.
The estimated fair value of mortgage notes payable and other loans was approximately $281 million and $296 million at
October 31, 2018 and October 31, 2017, respectively. The estimated fair value of mortgage notes payable is based on discounting the future cash flows at a year-end risk adjusted borrowing rates currently available to the Company for issuance of
debt with similar terms and remaining maturities. These fair value measurements fall within level 2 of the fair value hierarchy.
Although management is not aware of any factors that would significantly affect the estimated fair value amounts from
October 31, 2017, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.
(10) COMMITMENTS AND CONTINGENCIES
In the normal course of business, from time to time, the Company is involved in legal actions relating to the ownership
and operations of its properties. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on the consolidated financial position, results of operations
or liquidity of the Company.
At October 31, 2018, the Company had commitments of approximately $5.0 million for tenant-related obligations.
(11) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited quarterly results of operations for the years ended October 31, 2018 and 2017 are as follows (in thousands, except per
share data):
|
Year Ended October 31, 2018
|
Year Ended October 31, 2017
|
|||||||||||||||||||||||||||||||
|
Quarter Ended
|
Quarter Ended
|
|||||||||||||||||||||||||||||||
|
Jan 31
|
Apr 30
|
Jul 31
|
Oct 31
|
Jan 31
|
Apr 30
|
Jul 31
|
Oct 31
|
|||||||||||||||||||||||||
|
Revenues
|
$
|
32,995
|
$
|
37,005
|
$
|
32,809
|
$
|
32,543
|
$
|
29,202
|
$
|
30,024
|
$
|
32,020
|
$
|
32,313
|
||||||||||||||||
|
Income from Continuing Operations
|
$
|
9,079
|
$
|
14,022
|
$
|
9,780
|
$
|
9,302
|
$
|
7,204
|
$
|
27,919
|
$
|
10,613
|
$
|
9,696
|
||||||||||||||||
|
Net Income Attributable to Urstadt Biddle Properties Inc.
|
$
|
7,984
|
$
|
12,660
|
$
|
8,642
|
$
|
8,181
|
$
|
6,982
|
$
|
27,672
|
$
|
9,631
|
$
|
8,648
|
||||||||||||||||
|
Preferred Stock Dividends
|
(3,063
|
)
|
(3,062
|
)
|
(3,063
|
)
|
(3,062
|
)
|
(3,570
|
)
|
(3,571
|
)
|
(3,570
|
)
|
(4,249
|
)
|
||||||||||||||||
|
Redemption of Preferred Stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,075
|
)
|
|||||||||||||||||||||||
|
Net Income Applicable to Common and Class A Common Stockholders
|
$
|
4,921
|
$
|
9,598
|
$
|
5,579
|
$
|
5,119
|
$
|
3,412
|
$
|
24,101
|
$
|
6,061
|
$
|
324
|
||||||||||||||||
|
Per Share Data:
|
||||||||||||||||||||||||||||||||
|
Basic:
|
||||||||||||||||||||||||||||||||
|
Class A Common Stock
|
$
|
0.13
|
$
|
0.26
|
$
|
0.15
|
$
|
0.14
|
$
|
0.09
|
$
|
0.66
|
$
|
0.16
|
$
|
0.01
|
||||||||||||||||
|
Common Stock
|
$
|
0.12
|
$
|
0.23
|
$
|
0.13
|
$
|
0.12
|
$
|
0.08
|
$
|
0.58
|
$
|
0.15
|
$
|
0.01
|
||||||||||||||||
|
Diluted:
|
||||||||||||||||||||||||||||||||
|
Class A Common Stock
|
$
|
0.13
|
$
|
0.25
|
$
|
0.15
|
$
|
0.14
|
$
|
0.09
|
$
|
0.64
|
$
|
0.16
|
$
|
0.01
|
||||||||||||||||
|
Common Stock
|
$
|
0.12
|
$
|
0.23
|
$
|
0.13
|
$
|
0.12
|
$
|
0.08
|
$
|
0.57
|
$
|
0.14
|
$
|
0.01
|
||||||||||||||||
Amounts may not equal full year results due to rounding.
Certain prior period amounts are reclassified to correspond to current period presentation.
(12) SUBSEQUENT EVENTS
In December 2018, the Company purchased the Lakeview Plaza Shopping Center ("Lakeview") for $12.0 million. Lakeview is
a 177,000 square foot grocery-anchored Shopping Center located in Putnam County, NY. In addition, the Company anticipates having to invest up to $8.0 million for capital improvements and for re-tenanting at the property. The Company funded the
purchase with available cash and borrowings on our Facility. The Company intends to fund the additional investment of up to $8.0 million with a combination of available cash, borrowings on our Facility and by potentially placing a mortgage on the
property.
On December 12, 2018, the Board of Directors of the Company declared cash dividends of $0.245 for each share of Common
Stock and $0.275 for each share of Class A Common Stock. The dividends are payable on January 18, 2019 to stockholders of record on January 4, 2019. The Board of Directors also ratified the actions of the Company’s compensation committee
authorizing awards of 137,200 shares of Common Stock and 111,450 shares of Class A Common Stock to certain officers, directors and employees of the Company effective January 2, 2019, pursuant to the Company’s restricted stock plan. The fair value
of the shares awarded totaling $4.2 million will be charged to expense over the requisite service periods (see note 1).
The Board of Directors and Shareholders of Urstadt Biddle Properties Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Urstadt Biddle Properties Inc. (the “Company”) as of
October 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended October 31, 2018, and the related notes and schedules listed in
the Index at Item 15(A)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October
31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of October 31, 2018, based on criteria established in Internal
Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated January 10, 2019, expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2006.
| /s/ PKF O'Connor Davies, LLP |
| January 10, 2019 |
|
New York, New York
|
URSTADT BIDDLE PROPERTIES INC.
October 31, 2018
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(In thousands)
|
COL. A
|
COL. B
|
COL. C
|
COL. D
|
COL. E
|
COL. F
|
COL. G/H
|
COL. I
|
|||||||||||||||||||||||||||||||||||||
|
Initial Cost to Company
|
Cost Capitalized Subsequent to Acquisition
|
Amount at which Carried at Close of Period
|
||||||||||||||||||||||||||||||||||||||||||
|
Description and Location
|
Encumbrances
|
Land
|
Building &
Improvements
|
Land
|
Building &
Improvements
|
Land
|
Building &
Improvements
|
Totals
|
Accumulated
Depreciation (b)
|
Date Constructed/
Acquired
|
Life on which
depreciation for
building and
improvements
in latest income
statement is
computed (c)
|
|||||||||||||||||||||||||||||||||
|
Real Estate Subject to Operating Leases (a):
|
||||||||||||||||||||||||||||||||||||||||||||
|
Office Buildings:
|
||||||||||||||||||||||||||||||||||||||||||||
|
Greenwich, CT
|
$
|
-
|
$
|
708
|
$
|
1,641
|
$
|
-
|
$
|
262
|
$
|
708
|
$
|
1,903
|
$
|
2,611
|
$
|
802
|
2001
|
31.5
|
||||||||||||||||||||||||
|
Greenwich, CT
|
-
|
488
|
1,139
|
-
|
622
|
488
|
1,761
|
2,249
|
663
|
2000
|
31.5
|
|||||||||||||||||||||||||||||||||
|
Greenwich, CT
|
-
|
570
|
2,359
|
-
|
879
|
570
|
3,238
|
3,808
|
1,585
|
1998
|
31.5
|
|||||||||||||||||||||||||||||||||
|
Greenwich, CT
|
-
|
199
|
795
|
-
|
544
|
199
|
1,339
|
1,538
|
625
|
1993
|
31.5
|
|||||||||||||||||||||||||||||||||
|
Greenwich, CT
|
-
|
111
|
444
|
-
|
309
|
111
|
753
|
864
|
351
|
1994
|
31.5
|
|||||||||||||||||||||||||||||||||
|
Bernardsville, NJ
|
-
|
721
|
2,880
|
(25
|
)
|
26
|
696
|
2,906
|
3,602
|
464
|
2012
|
39
|
||||||||||||||||||||||||||||||||
|
-
|
2,797
|
9,258
|
(25
|
)
|
2,642
|
2,772
|
11,900
|
14,672
|
4,490
|
|||||||||||||||||||||||||||||||||||
|
Retail Properties:
|
||||||||||||||||||||||||||||||||||||||||||||
|
Bronxville, NY
|
-
|
60
|
239
|
95
|
776
|
155
|
1,015
|
1,170
|
243
|
2009
|
39
|
|||||||||||||||||||||||||||||||||
|
Yonkers, NY
|
-
|
30
|
121
|
183
|
734
|
213
|
855
|
1,068
|
198
|
2009
|
39
|
|||||||||||||||||||||||||||||||||
|
Yonkers, NY
|
-
|
30
|
121
|
85
|
341
|
115
|
462
|
577
|
107
|
2009
|
39
|
|||||||||||||||||||||||||||||||||
|
New Milford, CT
|
-
|
2,114
|
8,456
|
71
|
546
|
2,185
|
9,002
|
11,187
|
2,408
|
2008
|
39
|
|||||||||||||||||||||||||||||||||
|
New Milford, CT
|
39
|
4,492
|
17,967
|
166
|
3,305
|
4,658
|
21,272
|
25,930
|
4,539
|
2010
|
39
|
|||||||||||||||||||||||||||||||||
|
Newark, NJ
|
10,084
|
5,252
|
21,023
|
-
|
1,540
|
5,252
|
22,563
|
27,815
|
6,268
|
2008
|
39
|
|||||||||||||||||||||||||||||||||
|
Waldwick, NJ
|
-
|
1,266
|
5,064
|
-
|
-
|
1,266
|
5,064
|
6,330
|
1,417
|
2007
|
39
|
|||||||||||||||||||||||||||||||||
|
Emerson NJ
|
412
|
3,633
|
14,531
|
-
|
1,659
|
3,633
|
16,190
|
19,823
|
4,917
|
2007
|
39
|
|||||||||||||||||||||||||||||||||
|
Monroe, CT
|
-
|
765
|
3,060
|
-
|
135
|
765
|
3,195
|
3,960
|
960
|
2007
|
39
|
|||||||||||||||||||||||||||||||||
|
Pelham, NY
|
-
|
1,694
|
6,843
|
-
|
149
|
1,694
|
6,992
|
8,686
|
2,212
|
2006
|
39
|
|||||||||||||||||||||||||||||||||
|
Stratford, CT
|
25,101
|
10,173
|
40,794
|
2,743
|
11,715
|
12,916
|
52,509
|
65,425
|
19,732
|
2005
|
39
|
|||||||||||||||||||||||||||||||||
|
Yorktown Heights, NY
|
-
|
5,786
|
23,221
|
-
|
12,063
|
5,786
|
35,284
|
41,070
|
9,335
|
2005
|
39
|
|||||||||||||||||||||||||||||||||
|
Rye, NY
|
-
|
909
|
3,637
|
-
|
381
|
909
|
4,018
|
4,927
|
1,496
|
2004
|
39
|
|||||||||||||||||||||||||||||||||
|
Rye, NY
|
1,286
|
483
|
1,930
|
-
|
117
|
483
|
2,047
|
2,530
|
725
|
2004
|
39
|
|||||||||||||||||||||||||||||||||
|
Rye, NY
|
580
|
239
|
958
|
-
|
87
|
239
|
1,045
|
1,284
|
439
|
2004
|
39
|
|||||||||||||||||||||||||||||||||
|
Rye, NY
|
1,315
|
695
|
2,782
|
-
|
20
|
695
|
2,802
|
3,497
|
1,041
|
2004
|
39
|
|||||||||||||||||||||||||||||||||
|
Somers, NY
|
-
|
4,318
|
17,268
|
-
|
272
|
4,318
|
17,540
|
21,858
|
6,858
|
2003
|
39
|
|||||||||||||||||||||||||||||||||
|
Westport, CT
|
10
|
2,076
|
8,305
|
-
|
367
|
2,076
|
8,672
|
10,748
|
3,546
|
2003
|
39
|
|||||||||||||||||||||||||||||||||
|
Orange, CT
|
-
|
2,320
|
10,564
|
-
|
826
|
2,320
|
11,390
|
13,710
|
4,609
|
2003
|
39
|
|||||||||||||||||||||||||||||||||
|
Stamford, CT
|
48,449
|
17,964
|
71,859
|
-
|
7,205
|
17,964
|
79,064
|
97,028
|
35,089
|
2002
|
39
|
|||||||||||||||||||||||||||||||||
|
Danbury, CT
|
-
|
2,459
|
4,566
|
-
|
1,342
|
2,459
|
5,908
|
8,367
|
2,812
|
2002
|
39
|
|||||||||||||||||||||||||||||||||
|
Briarcliff, NY
|
-
|
2,222
|
5,185
|
1,234
|
8,629
|
3,456
|
13,814
|
17,270
|
3,332
|
2001
|
40
|
|||||||||||||||||||||||||||||||||
|
Somers, NY
|
-
|
1,833
|
7,383
|
-
|
2,890
|
1,833
|
10,273
|
12,106
|
4,951
|
1999
|
31.5
|
|||||||||||||||||||||||||||||||||
|
Briarcliff, NY
|
-
|
380
|
1,531
|
-
|
135
|
380
|
1,666
|
2,046
|
845
|
1999
|
40
|
|||||||||||||||||||||||||||||||||
|
Briarcliff, NY
|
14,905
|
2,300
|
9,708
|
2
|
3,384
|
2,302
|
13,092
|
15,394
|
6,680
|
1998
|
40
|
|||||||||||||||||||||||||||||||||
|
Ridgefield, CT
|
-
|
900
|
3,793
|
291
|
2,973
|
1,191
|
6,766
|
7,957
|
2,360
|
1998
|
40
|
|||||||||||||||||||||||||||||||||
|
Darien, CT
|
15,043
|
4,260
|
17,192
|
-
|
977
|
4,260
|
18,169
|
22,429
|
9,232
|
1998
|
40
|
|||||||||||||||||||||||||||||||||
|
Eastchester, NY
|
-
|
1,500
|
6,128
|
-
|
2,662
|
1,500
|
8,790
|
10,290
|
4,229
|
1997
|
31
|
|||||||||||||||||||||||||||||||||
|
Danbury, CT
|
24
|
3,850
|
15,811
|
-
|
4,676
|
3,850
|
20,487
|
24,337
|
12,823
|
1995
|
31.5
|
|||||||||||||||||||||||||||||||||
|
Carmel, NY
|
-
|
1,488
|
5,973
|
-
|
923
|
1,488
|
6,896
|
8,384
|
4,120
|
1995
|
31.5
|
|||||||||||||||||||||||||||||||||
|
Somers, NY
|
-
|
821
|
2,600
|
-
|
606
|
821
|
3,206
|
4,027
|
1,760
|
1992
|
31.5
|
|||||||||||||||||||||||||||||||||
|
Wayne, NJ
|
-
|
2,492
|
9,966
|
-
|
2,696
|
2,492
|
12,662
|
15,154
|
7,259
|
1992
|
31
|
|||||||||||||||||||||||||||||||||
|
Newington, NH
|
-
|
728
|
1,997
|
-
|
975
|
728
|
2,972
|
3,700
|
2,496
|
1979
|
40
|
|||||||||||||||||||||||||||||||||
|
Katonah, NY
|
-
|
1,704
|
6,816
|
-
|
108
|
1,704
|
6,924
|
8,628
|
1,583
|
2010
|
39
|
|||||||||||||||||||||||||||||||||
|
Fairfield, CT
|
-
|
3,393
|
13,574
|
153
|
1,234
|
3,546
|
14,808
|
18,354
|
2,666
|
2011
|
39
|
|||||||||||||||||||||||||||||||||
|
New Milford, CT
|
-
|
2,168
|
8,672
|
-
|
49
|
2,168
|
8,721
|
10,889
|
1,692
|
2011
|
39
|
|||||||||||||||||||||||||||||||||
|
Eastchester, NY
|
-
|
1,800
|
7,200
|
78
|
478
|
1,878
|
7,678
|
9,556
|
1,362
|
2012
|
39
|
|||||||||||||||||||||||||||||||||
|
Orangetown, NY
|
6,027
|
3,200
|
12,800
|
30
|
7,624
|
3,230
|
20,424
|
23,654
|
2,704
|
2012
|
39
|
|||||||||||||||||||||||||||||||||
|
Greenwich, CT
|
4,602
|
1,600
|
6,401
|
28
|
733
|
1,628
|
7,134
|
8,762
|
1,082
|
2013
|
39
|
|||||||||||||||||||||||||||||||||
|
Various
|
-
|
1,134
|
4,928
|
80
|
(61
|
)
|
1,214
|
4,867
|
6,081
|
705
|
2013
|
39
|
||||||||||||||||||||||||||||||||
|
Greenwich, CT
|
5,740
|
1,998
|
7,994
|
53
|
283
|
2,051
|
8,277
|
10,328
|
1,155
|
2013
|
39
|
|||||||||||||||||||||||||||||||||
|
New Providence, NJ
|
18,372
|
6,970
|
27,880
|
463
|
2,977
|
7,433
|
30,857
|
38,290
|
4,463
|
2013
|
39
|
|||||||||||||||||||||||||||||||||
|
Chester, NJ
|
-
|
570
|
2,280
|
(34
|
)
|
(73
|
)
|
536
|
2,207
|
2,743
|
352
|
2012
|
39
|
|||||||||||||||||||||||||||||||
|
Bethel, CT
|
-
|
1,800
|
7,200
|
(18
|
)
|
(74
|
)
|
1,782
|
7,126
|
8,908
|
884
|
2014
|
39
|
|||||||||||||||||||||||||||||||
|
Bloomfield, NJ
|
-
|
2,201
|
8,804
|
218
|
1,764
|
2,419
|
10,568
|
12,987
|
1,243
|
2014
|
39
|
|||||||||||||||||||||||||||||||||
|
Boonton, NJ
|
7,108
|
3,670
|
14,680
|
14
|
184
|
3,684
|
14,864
|
18,548
|
1,839
|
2014
|
39
|
|||||||||||||||||||||||||||||||||
|
Yonkers, NY
|
5,000
|
3,060
|
12,240
|
333
|
1,331
|
3,393
|
13,571
|
16,964
|
1,402
|
2014
|
39
|
|||||||||||||||||||||||||||||||||
|
Greenwich, CT
|
7,721
|
3,223
|
12,893
|
6
|
244
|
3,229
|
13,137
|
16,366
|
1,369
|
2014
|
40
|
|||||||||||||||||||||||||||||||||
|
Greenwich, CT
|
14,988
|
6,257
|
25,029
|
27
|
660
|
6,284
|
25,689
|
31,973
|
2,665
|
2014
|
40
|
|||||||||||||||||||||||||||||||||
|
Midland Park, NJ
|
20,241
|
8,740
|
34,960
|
(44
|
)
|
496
|
8,696
|
35,456
|
44,152
|
3,576
|
2015
|
39
|
||||||||||||||||||||||||||||||||
|
Pompton Lakes, NJ
|
19,119
|
8,140
|
32,560
|
33
|
447
|
8,173
|
33,007
|
41,180
|
3,338
|
2015
|
39
|
|||||||||||||||||||||||||||||||||
|
Wyckoff, NJ
|
8,035
|
3,490
|
13,960
|
17
|
139
|
3,507
|
14,099
|
17,606
|
1,413
|
2015
|
39
|
|||||||||||||||||||||||||||||||||
|
Kinnelon, NJ
|
10,695
|
4,540
|
18,160
|
(28
|
)
|
3,898
|
4,512
|
22,058
|
26,570
|
2,792
|
2015
|
39
|
||||||||||||||||||||||||||||||||
|
Fort Lee, NJ
|
-
|
798
|
3,192
|
(14
|
)
|
(55
|
)
|
784
|
3,137
|
3,921
|
275
|
2015
|
39
|
|||||||||||||||||||||||||||||||
|
Harrison, NY
|
-
|
2,000
|
8,000
|
(10
|
)
|
1,313
|
1,990
|
9,313
|
11,303
|
688
|
2015
|
39
|
||||||||||||||||||||||||||||||||
|
Stamford, CT
|
21,663
|
12,686
|
32,620
|
-
|
218
|
12,686
|
32,838
|
45,524
|
1,963
|
2016
|
39
|
|||||||||||||||||||||||||||||||||
|
Stamford, CT
|
-
|
3,691
|
9,491
|
-
|
86
|
3,691
|
9,577
|
13,268
|
510
|
2016
|
39
|
|||||||||||||||||||||||||||||||||
|
Derby, CT
|
-
|
651
|
7,652
|
-
|
186
|
651
|
7,838
|
8,489
|
364
|
2017
|
39
|
|||||||||||||||||||||||||||||||||
|
Passaic, NJ
|
3,419
|
2,039
|
5,616
|
1
|
3
|
2,040
|
5,619
|
7,659
|
228
|
2017
|
39
|
|||||||||||||||||||||||||||||||||
|
Stamford, CT
|
9,644
|
17,178
|
43,677
|
-
|
366
|
17,178
|
44,043
|
61,221
|
1,798
|
2017
|
39
|
|||||||||||||||||||||||||||||||||
|
Stamford, CT
|
-
|
2,376
|
1,458
|
-
|
-
|
2,376
|
1,458
|
3,834
|
59
|
2017
|
39
|
|||||||||||||||||||||||||||||||||
|
Stamford, CT
|
1,174
|
2,295
|
2,700
|
-
|
7
|
2,295
|
2,707
|
5,002
|
110
|
2017
|
39
|
|||||||||||||||||||||||||||||||||
|
Waldwick, NJ
|
-
|
2,761
|
5,571
|
1
|
158
|
2,762
|
5,729
|
8,491
|
182
|
2017
|
39
|
|||||||||||||||||||||||||||||||||
|
Dumont, NJ
|
9,842
|
6,646
|
15,341
|
3
|
19
|
6,649
|
15,360
|
22,009
|
492
|
2017
|
39
|
|||||||||||||||||||||||||||||||||
|
Ridgefield, CT
|
-
|
293
|
2,786
|
-
|
219
|
293
|
3,005
|
3,298
|
61
|
2018
|
39
|
|||||||||||||||||||||||||||||||||
|
Yonkers, NY
|
-
|
7,525
|
5,920
|
1
|
184
|
7,526
|
6,104
|
13,630
|
103
|
2018
|
39
|
|||||||||||||||||||||||||||||||||
|
New City, NY
|
-
|
2,492
|
631
|
6
|
2
|
2,498
|
633
|
3,131
|
7
|
2018
|
39
|
|||||||||||||||||||||||||||||||||
|
290,638
|
222,621
|
774,262
|
6,267
|
100,253
|
228,888
|
874,515
|
1,103,403
|
214,163
|
||||||||||||||||||||||||||||||||||||
|
Total
|
$
|
290,638
|
$
|
225,418
|
$
|
783,520
|
$
|
6,242
|
$
|
102,895
|
$
|
231,660
|
$
|
886,415
|
$
|
1,118,075
|
$
|
218,653
|
||||||||||||||||||||||||||
URSTADT BIDDLE PROPERTIES INC.
October 31, 2018
(In thousands)
|
Year Ended October 31,
|
||||||||||||
|
NOTES:
|
2018
|
2017
|
2016
|
|||||||||
|
(a) RECONCILIATION OF REAL ESTATE-OWNED SUBJECT TO
OPERATING LEASES
|
||||||||||||
|
Balance at beginning of year
|
$
|
1,090,402
|
$
|
1,016,838
|
$
|
941,690
|
||||||
|
Property improvements during the year
|
7,781
|
9,326
|
18,666
|
|||||||||
|
Properties acquired during the year
|
22,517
|
119,403
|
58,737
|
|||||||||
|
Properties sold during the year
|
-
|
(52,122
|
)
|
0
|
||||||||
|
Property assets fully depreciated and written off
|
(2,625
|
)
|
(3,043
|
)
|
(2,255
|
)
|
||||||
|
Balance at end of year (e)
|
$
|
1,118,075
|
$
|
1,090,402
|
$
|
1,016,838
|
||||||
|
(b) RECONCILIATION OF ACCUMULATED DEPRECIATION
|
||||||||||||
|
Balance at beginning of year
|
$
|
195,020
|
$
|
186,098
|
$
|
165,660
|
||||||
|
Provision during the year charged to income (d)
|
26,258
|
25,058
|
22,693
|
|||||||||
|
Property sold during the year
|
-
|
(13,093
|
)
|
0
|
||||||||
|
Property assets fully depreciated and written off
|
(2,625
|
)
|
(3,043
|
)
|
(2,255
|
)
|
||||||
|
Balance at end of year
|
$
|
218,653
|
$
|
195,020
|
$
|
186,098
|
||||||
| (c) |
Tenant improvement costs are depreciated over the life of the related leases, which range from 5 to 20 years.
|
| (d) |
The depreciation provision represents the expense calculated on real property only.
|
| (e) |
The aggregate cost for Federal Income Tax purposes for real estate subject to operating leases was approximately $703 million at October 31, 2018.
|
URSTADT BIDDLE PROPERTIES INC.
OCTOBER 31, 2018
(In thousands)
FIRST MORTGAGE LOANS ON BUSINESS PROPERTIES (c) and (d):
|
COL. A
|
COL. B
|
COL. C
|
COL. D
|
COL. E
|
COL. F
|
|||||||||||||
|
Description
|
Interest Rate
|
Final Maturity Date
|
Periodic Payment Terms
|
Remaining
Face Amount of
Mortgages (b)
|
Carrying
Amount of
Mortgages (a)
|
|||||||||||||
|
Coupon
|
Effective
|
|||||||||||||||||
|
Retail Property:
|
||||||||||||||||||
|
Rockland County, NY
|
3.779
|
%
|
3.779
|
%
|
October 10, 2017
|
Interest Only - Monthly
|
$
|
-
|
$
|
-
|
||||||||
|
TOTAL MORTGAGE
LOANS ON REAL ESTATE
|
$
|
-
|
$
|
-
|
||||||||||||||
Interest is one month LIBOR plus 3.25% per annum.
Loan was repaid in October 2017.
NOTES TO SCHEDULE IV
| (a) |
Reconciliation of Mortgage Loans on Real Estate
|
|
Year Ended October 31,
|
||||||||||||
|
2018
|
2017
|
2016
|
||||||||||
|
Balance at beginning of period:
|
$
|
-
|
$
|
13,500
|
$
|
-
|
||||||
|
Additions during period:
|
||||||||||||
|
New mortgage loans
|
-
|
-
|
13,500
|
|||||||||
|
Deductions during the current period:
|
||||||||||||
|
Collections of principal and amortization of discounts
|
-
|
(13,500
|
)
|
-
|
||||||||
|
Balance at end of period:
|
$
|
-
|
$
|
-
|
$
|
13,500
|
||||||
| (b) |
The aggregate cost basis for Federal income tax purposes is equal to the face amount of the mortgages
|
| (c) |
At October 31, 2018, no mortgage loans were delinquent in payment of currently due principal or interest.
|
| (d) |
There are no prior liens for any of the mortgage loans on real estate.
|
Pursuant to the requirements of Section 13 or 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.
|
URSTADT BIDDLE PROPERTIES INC.
|
||
|
(Registrant)
|
||
|
Dated: January 11, 2019
|
/s/ Willing L. Biddle
|
|
|
Willing L. Biddle
|
||
|
President and Chief Executive Officer
|
||
|
Dated: January 11, 2019
|
/s/ John T. Hayes
|
|
|
John T. Hayes
|
||
|
Senior Vice President and Chief Financial Officer
|
||
|
(Principal Financial Officer and Principal Accounting Officer)
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of the Registrant
and in the capacities and on the date indicated have signed this Report below.
|
/s/ Charles D. Urstadt
|
January 11, 2019
|
|
|
Charles D. Urstadt
|
||
|
Chairman and Director
|
||
|
/s/ Willing L. Biddle
|
January 11, 2019
|
|
|
Willing L. Biddle
|
||
|
President, Chief Executive Officer and Director
|
||
|
(Principal Executive Officer)
|
||
|
/s/ John T. Hayes
|
January 11, 2019
|
|
|
John T. Hayes
|
||
|
Senior Vice President & Chief Financial Officer
|
||
|
(Principal Financial Officer and Principal Accounting Officer)
|
||
|
/s/ Kevin J. Bannon
|
January 11, 2019
|
|
|
Kevin J. Bannon
|
||
|
Director
|
||
|
/s/ Catherine U. Biddle
|
January 11, 2019
|
|
|
Catherine U. Biddle
|
||
|
Director
|
||
|
/s/ Richard Grellier
|
January 11, 2019
|
|
|
Richard Grellier
|
||
|
Director
|
||
|
/s/ George H.C. Lawrence
|
January 11, 2019
|
|
|
George H. C. Lawrence
|
||
|
Director
|
||
|
/s/ Robert J. Mueller
|
January 11, 2019
|
|
|
Robert J. Mueller
|
||
|
Director
|
||
|
/s/ Charles J. Urstadt
|
January 11, 2019
|
|
|
Charles J. Urstadt
|
||
|
Chairman Emeritus and Director
|
||
|
/s/ Bryan O. Colley
|
January 11, 2019
|
|
|
Bryan O. Colley
|
||
|
Director
|
||
|
/s/ Noble Carpenter
|
January 11, 2019
|
|
|
Noble Carpenter
|
||
|
Director
|
54