United
States
Securities
And Exchange Commission
Washington,
DC 20549
Form
10-Q
x QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
quarterly period ended January 31, 2009
OR
o TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
transition period from _____to_____
Commission
File Number 1-12803
Urstadt Biddle Properties
Inc.
(Exact
Name of Registrant in its Charter)
Maryland
|
04-2458042
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
|
321 Railroad Avenue, Greenwich,
CT
|
06830
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code: (203) 863-8200
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
x No
o
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (Check one):
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
As of
March 6, 2009, the number of shares of the Registrant's classes of Common Stock
and Class A Common Stock was:
8,176,847
Common Shares, par value $.01 per share and 18,250,108 Class A Common Shares,
par value $.01 per share.
Index
|
|
|
Urstadt
Biddle Properties Inc.
|
|
|
|
Part
I. Financial Information
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item
2.
|
|
|
|
Item
3.
|
|
|
|
Item
4.
|
|
|
|
|
|
Part
II. Other Information
|
|
|
Item
1.
|
Legal
Proceedings
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
|
Item
6.
|
Exhibits
|
|
|
Signatures
|
URSTADT BIDDLE PROPERTIES
INC.
|
(In
thousands, except share data)
|
|
|
Jan
31,
|
|
|
Oct
31,
|
|
ASSETS
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
Real
Estate Investments:
|
|
|
|
|
|
|
Core properties – at
cost
|
|
$ |
564,423 |
|
|
$ |
566,889 |
|
Non-core properties – at
cost
|
|
|
1,383 |
|
|
|
1,383 |
|
|
|
|
565,806 |
|
|
|
568,272 |
|
Less: Accumulated
depreciation
|
|
|
(96,248 |
) |
|
|
(94,328 |
) |
|
|
|
469,558 |
|
|
|
473,944 |
|
Mortgage note
receivable
|
|
|
1,225 |
|
|
|
1,241 |
|
|
|
|
470,783 |
|
|
|
475,185 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
1,100 |
|
|
|
1,664 |
|
Restricted
cash
|
|
|
368 |
|
|
|
519 |
|
Marketable
securities
|
|
|
727 |
|
|
|
897 |
|
Tenant
receivables
|
|
|
19,345 |
|
|
|
17,782 |
|
Prepaid
expenses and other assets
|
|
|
8,204 |
|
|
|
5,603 |
|
Deferred
charges, net of accumulated amortization
|
|
|
4,166 |
|
|
|
4,467 |
|
Total Assets
|
|
$ |
504,693 |
|
|
$ |
506,117 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Unsecured revolving credit
line
|
|
$ |
5,100 |
|
|
$ |
5,100 |
|
Mortgage notes
payable
|
|
|
104,478 |
|
|
|
104,954 |
|
Accounts payable and accrued
expenses
|
|
|
3,116 |
|
|
|
606 |
|
Deferred compensation –
officers
|
|
|
317 |
|
|
|
1,074 |
|
Other
liabilities
|
|
|
7,917 |
|
|
|
8,513 |
|
Total
Liabilities
|
|
|
120,928 |
|
|
|
120,247 |
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
9,370 |
|
|
|
9,370 |
|
|
|
|
|
|
|
|
|
|
Redeemable
Preferred Stock, par value $.01 per share; issued and outstanding
2,800,000 shares
|
|
|
96,203 |
|
|
|
96,203 |
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity:
|
|
|
|
|
|
|
|
|
7.5% Series D Senior Cumulative
Preferred Stock (liquidation preference of $25 per share);
2,450,000 shares issued and
outstanding
|
|
|
61,250 |
|
|
|
61,250 |
|
Excess Stock, par value $.01
per share; 10,000,000 shares authorized;
none issued and
outstanding
|
|
|
- |
|
|
|
- |
|
Common Stock, par value $.01
per share; 30,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
8,176,847
and 7,990,120 shares issued and outstanding
|
|
|
82 |
|
|
|
80 |
|
Class A Common Stock, par value
$.01 per share; 40,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
18,249,108 and 18,208,118
shares issued and outstanding
|
|
|
182 |
|
|
|
183 |
|
Additional paid in
capital
|
|
|
258,847 |
|
|
|
258,235 |
|
Cumulative distributions in
excess of net income
|
|
|
(41,728 |
) |
|
|
(39,181 |
) |
Accumulated other comprehensive
income (loss)
|
|
|
(441 |
) |
|
|
(270 |
) |
Total Stockholders’
Equity
|
|
|
278,192 |
|
|
|
280,297 |
|
Total Liabilities and
Stockholders’ Equity
|
|
$ |
504,693 |
|
|
$ |
506,117 |
|
The accompanying notes to
consolidated financial statements are an integral part of these
statements.
CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED)
(In
thousands, except per share data)
|
|
Three
Months Ended
January 31,
|
|
|
|
2009
|
|
|
2008
|
|
Revenues
|
|
|
|
|
|
|
Base rents
|
|
$ |
15,543 |
|
|
$ |
14,742 |
|
Recoveries from
tenants
|
|
|
5,489 |
|
|
|
4,465 |
|
Lease termination
income
|
|
|
- |
|
|
|
58 |
|
Mortgage interest and
other
|
|
|
338 |
|
|
|
166 |
|
Total Revenues
|
|
|
21,370 |
|
|
|
19,431 |
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
Property
operating
|
|
|
3,421 |
|
|
|
3,063 |
|
Property taxes
|
|
|
3,389 |
|
|
|
2,825 |
|
Depreciation and
amortization
|
|
|
4,355 |
|
|
|
3,493 |
|
General and
administrative
|
|
|
1,618 |
|
|
|
1,484 |
|
Directors' fees and
expenses
|
|
|
88 |
|
|
|
75 |
|
Total Operating
Expenses
|
|
|
12,871 |
|
|
|
10,940 |
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
8,499 |
|
|
|
8,491 |
|
Non-Operating
Income (Expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,542 |
) |
|
|
(1,749 |
) |
Interest, dividends and other
investment income
|
|
|
37 |
|
|
|
95 |
|
Minority
interests
|
|
|
(115 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
6,879 |
|
|
|
6,828 |
|
Preferred stock
dividends
|
|
|
(3,273 |
) |
|
|
(2,336 |
) |
|
|
|
|
|
|
|
|
|
Net
Income Applicable to Common and Class A Common
Stockholders
|
|
$ |
3,606 |
|
|
$ |
4,492 |
|
|
|
|
|
|
|
|
|
|
Basic
Earnings Per Share:
|
|
|
|
|
|
|
|
|
Common
|
|
$ |
.13 |
|
|
$ |
.16 |
|
Class
A Common
|
|
$ |
.15 |
|
|
$ |
.18 |
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings Per Share:
|
|
|
|
|
|
|
|
|
Common
|
|
$ |
.13 |
|
|
$ |
.16 |
|
Class
A Common
|
|
$ |
.15 |
|
|
$ |
.18 |
|
|
|
|
|
|
|
|
|
|
Dividends
Per Share:
|
|
|
|
|
|
|
|
|
Common
|
|
$ |
.2175 |
|
|
$ |
.2150 |
|
Class A Common
|
|
$ |
.2400 |
|
|
$ |
.2375 |
|
The
accompanying notes to consolidated financial statements are an integral part of
these statements.
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In
thousands)
|
|
Three Months Ended
|
|
|
|
January 31,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
6,879 |
|
|
$ |
6,828 |
|
Adjustments
to reconcile net income to net cash provided
|
|
|
|
|
|
|
|
|
by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
4,355 |
|
|
|
3,493 |
|
Straight-line rent
adjustment
|
|
|
(69 |
) |
|
|
(29 |
) |
Restricted stock compensation
expense and other adjustments
|
|
|
718 |
|
|
|
521 |
|
Deferred compensation
arrangement
|
|
|
(757 |
) |
|
|
(128 |
) |
Minority
interests
|
|
|
115 |
|
|
|
9 |
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
151 |
|
|
|
(170 |
) |
Tenant
receivables
|
|
|
(1,495 |
) |
|
|
(271 |
) |
Accounts payable and accrued
expenses
|
|
|
2,511 |
|
|
|
(343 |
) |
Other assets and other
liabilities, net
|
|
|
(4,314 |
) |
|
|
(3,302 |
) |
|
|
|
|
|
|
|
|
|
Net Cash Flow Provided by
Operating Activities
|
|
|
8,094 |
|
|
|
6,608 |
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Acquisition of real estate
investments
|
|
|
- |
|
|
|
(5,929 |
) |
Proceeds from sale of
property
|
|
|
925 |
|
|
|
- |
|
Deposits on acquisition of real
estate investments
|
|
|
1,100 |
|
|
|
(228 |
) |
Improvements to properties and
deferred charges
|
|
|
(578 |
) |
|
|
(1,652 |
) |
Distributions to limited partner
of joint venture
|
|
|
(115 |
) |
|
|
(9 |
) |
Payments received on mortgage
notes receivable
|
|
|
17 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
Net Cash Flow Provided by (Used
in) Investing Activities
|
|
|
1,349 |
|
|
|
(7,803 |
) |
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from revolving credit
line borrowings
|
|
|
- |
|
|
|
11,000 |
|
Dividends paid -- Common and
Class A Common Stock
|
|
|
(6,153 |
) |
|
|
(6,178 |
) |
Dividends paid -- Preferred
Stock
|
|
|
(3,273 |
) |
|
|
(2,336 |
) |
Principal repayments on mortgage
notes payable
|
|
|
(476 |
) |
|
|
(485 |
) |
Sales of additional shares of
Common and Class A Common Stock
|
|
|
250 |
|
|
|
214 |
|
Repurchase of shares of Class A
Common Stock
|
|
|
(355 |
) |
|
|
(2,475 |
) |
Repayment of officer note
receivable
|
|
|
- |
|
|
|
1,300 |
|
|
|
|
|
|
|
|
|
|
Net Cash Flow Provided by (Used
in) Financing Activities
|
|
|
(10,007 |
) |
|
|
1,040 |
|
|
|
|
|
|
|
|
|
|
Net
Decrease In Cash and Cash Equivalents
|
|
|
(564 |
) |
|
|
(155 |
) |
Cash
and Cash Equivalents at Beginning of Period
|
|
|
1,664 |
|
|
|
4,218 |
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents at End of Period
|
|
$ |
1,100 |
|
|
$ |
4,063 |
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Disclosures:
|
|
|
|
|
|
|
|
|
Interest Paid
|
|
$ |
1,542 |
|
|
$ |
1,677 |
|
The
accompanying notes to consolidated financial statements are an integral part of
these statements.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In
thousands, except shares and per share data)
|
|
7.5%
Series D
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Class A Common Stock
|
|
|
Paid
In
|
|
|
In
Excess of
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
|
Issued
|
|
|
Amount
|
|
|
Issued
|
|
|
Amount
|
|
|
Issued
|
|
|
Amount
|
|
|
Capital
|
|
|
Net Income
|
|
|
Income (loss)
|
|
|
Equity
|
|
Balances
– October 31, 2008
|
|
|
2,450,000 |
|
|
$ |
61,250 |
|
|
|
7,990,120 |
|
|
$ |
80 |
|
|
|
18,208,118 |
|
|
$ |
183 |
|
|
$ |
258,235 |
|
|
$ |
(39,181 |
) |
|
$ |
(270 |
) |
|
$ |
280,297 |
|
Comprehensive
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income applicable to Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Class A common
stockholders
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,606 |
|
|
|
- |
|
|
|
3,606 |
|
Change
in unrealized gains (losses) in marketable securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(171 |
) |
|
|
(171 |
) |
Total
comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,435 |
|
Cash
dividends paid :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($.2175 per
share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,775 |
) |
|
|
- |
|
|
|
(1,775 |
) |
Class A common stock ($.2400 per
share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,378 |
) |
|
|
- |
|
|
|
(4,378 |
) |
Issuance
of shares under dividend reinvestment plan
|
|
|
- |
|
|
|
- |
|
|
|
15,827 |
|
|
|
- |
|
|
|
3,690 |
|
|
|
- |
|
|
|
250 |
|
|
|
- |
|
|
|
- |
|
|
|
250 |
|
Shares
issued under restricted stock plan
|
|
|
- |
|
|
|
- |
|
|
|
170,900 |
|
|
|
2 |
|
|
|
63,200 |
|
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Restricted
stock compensation and other adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
718 |
|
|
|
- |
|
|
|
- |
|
|
|
718 |
|
Repurchases
of Class A common stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(25,900 |
) |
|
|
(1 |
) |
|
|
(354 |
) |
|
|
- |
|
|
|
- |
|
|
|
(355 |
) |
Balances
– January 31, 2009
|
|
|
2,450,000 |
|
|
$ |
61,250 |
|
|
|
8,176,847 |
|
|
$ |
82 |
|
|
|
18,249,108 |
|
|
$ |
182 |
|
|
$ |
258,847 |
|
|
$ |
(41,728 |
) |
|
$ |
(441 |
) |
|
$ |
278,192 |
|
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 real estate investment trust (“REIT”), is
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. Non-core properties include two
distribution service facilities. The Company's major tenants include
supermarket chains and other retailers who sell basic necessities. At
January 31, 2009, the Company owned or had interests in 43 properties containing
a total of 3.9 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 Emerging
Issues Task Force (“EITF”) Issue 04-5, “Determining Whether a General Partner,
or the General Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights.” The Company
has determined that such joint ventures should be consolidated into the
consolidated financial statements of the Company. All significant
intercompany transactions and balances have been eliminated in
consolidation.
The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Results of
operations for the three month period ended January 31, 2009 are not necessarily
indicative of the results that may be expected for the year ending October 31,
2009. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company’s annual report on Form 10-K for the fiscal year ended October 31,
2008.
The
preparation of financial statements 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 and the collectibility of tenant and mortgage notes
receivables. Actual results could differ from these
estimates. The balance sheet at October 31, 2008 has been derived
from audited financial statements at that date.
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 2009 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 FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes – an interpretation of SFAS No. 109” (“FIN No. 48”),
that 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. FIN No. 48 also provides guidance on
derecognition, 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 January 31, 2009. The Company records
interest and penalties relating to unrecognized tax benefits, if any, as
interest expense. As of January 31, 2009, the tax years 2005 through
and including 2008 remain open to examination by the Internal Revenue
Service. There are currently no federal tax examinations in
progress.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash and cash equivalents, mortgage notes receivable
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 retenanting the
space. The Company has no dependency upon any single
tenant.
Marketable
Securities
Marketable
securities consist of short-term investments and marketable equity
securities. Short-term investments (consisting of investments with
original maturities of greater than three months when purchased) and marketable
equity securities are carried at fair value. The Company has
classified marketable securities as available for sale. Unrealized
gains and losses on available for sale securities are recorded as other
comprehensive income in Stockholders’ Equity. There were no
sales of marketable securities during the three month periods ended January 31,
2009 and 2008.
As of
January 31, 2009, all of the Company’s marketable securities consisted of REIT
Common and Preferred Stocks. At January 31, 2009, the Company has
recorded a net unrealized loss on available for sale securities in the amount of
$441,000. For each of the securities in the Company’s portfolio with
unrealized losses, the Company reviews the underlying cause of the decline in
value and the estimated recovery period, as well as the severity and duration of
the decline and management’s estimate of fair value of the
security. In the Company’s evaluation, the Company considers its
ability and intent to hold these investments for a reasonable period of time
sufficient for the Company to recover its cost basis. The Company
deems these unrealized losses to be temporary. If and when the
Company deems the unrealized losses to be other than temporary, unrealized
losses will be realized and reclassified into earnings. The net
unrealized loss at January 31, 2009 is detailed below (In
thousands):
Description:
|
|
Fair
Market Value
|
|
|
Cost
Basis
|
|
|
Net
Unrealized Gain/(Loss)
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REIT
Common and Preferred Stocks
|
|
$ |
727 |
|
|
$ |
1,168 |
|
|
$ |
(441 |
) |
|
$ |
66 |
|
|
$ |
(507 |
) |
Comprehensive
Income
Comprehensive
income is comprised of net income and other comprehensive income (loss). Other
comprehensive income (loss) includes items that are otherwise recorded directly
in stockholders’ equity, such as unrealized gains or losses on marketable
securities. At January 31, 2009, other comprehensive income (loss)
consisted of net unrealized gain (losses) on marketable securities of
approximately ($441,000). Unrealized gains and losses included in
other comprehensive income will be reclassified into earnings as gains and
losses are realized.
Earnings
Per Share
The
Company calculates basic and diluted earnings per share in accordance with SFAS
No. 128, “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 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):
|
|
Three
Months Ended
|
|
|
|
January 31,
|
|
|
|
2009
|
|
|
2008
|
|
Numerator
|
|
|
|
|
|
|
Net
income applicable to common stockholders – basic
|
|
$ |
948 |
|
|
$ |
1,146 |
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
Stock awards
|
|
|
20 |
|
|
|
24 |
|
Net
income applicable to common stockholders – diluted
|
|
$ |
968 |
|
|
$ |
1,170 |
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Denominator
for basic EPS weighted average common shares
|
|
|
7,045 |
|
|
|
6,972 |
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
Restricted
stock and other awards
|
|
|
234 |
|
|
|
255 |
|
Denominator
for diluted EPS – weighted average common equivalent
shares
|
|
|
7,279 |
|
|
|
7,227 |
|
|
|
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
Net
income applicable to Class A common stockholders-basic
|
|
$ |
2,658 |
|
|
$ |
3,346 |
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
Stock awards
|
|
|
(20 |
) |
|
|
(24 |
) |
Net
income applicable to Class A common stockholders – diluted
|
|
$ |
2,638 |
|
|
$ |
3,322 |
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Denominator
for basic EPS – weighted average Class A common shares
|
|
|
17,911 |
|
|
|
18,431 |
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
Restricted stock and other
awards
|
|
|
84 |
|
|
|
154 |
|
Denominator
for diluted EPS – weighted average Class A common equivalent
shares
|
|
|
17,995 |
|
|
|
18,585 |
|
Segment
Reporting
The
Company operates in one industry segment, ownership of commercial real estate
properties which are located principally in the northeastern United
States. The Company does not distinguish its property operations for
purposes of measuring performance. Accordingly, the Company believes
it has a single reportable segment for disclosure purposes.
Stock-Based
Compensation
The
Company accounts for its stock-based compensation plans under FASB Statement No.
123R, “Share-Based Payment” (“SFAS No. 123R”), 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.
Recently
Issued Accounting Pronouncements
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities” (“SFAS No. 159”), which provides
companies with an option to report selected financial assets and liabilities at
fair value. SFAS No. 159 also establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and liabilities.
SFAS No. 159 does not affect any existing accounting literature that requires
certain assets and liabilities to be carried at fair value nor does it eliminate
disclosure requirements included in other accounting standards. The Company
adopted SFAS No. 159 effective November 1, 2008, and did not elect the
fair value option for any existing eligible items.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. SFAS No. 157 does not impose fair value
measurements on items not already accounted for at fair value; rather it
applies, with certain exceptions, to other accounting pronouncements that either
require or permit fair value measurements. Under SFAS No. 157, fair value
refers to the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants in the
principal or most advantageous market. The standard clarifies that fair value
should be based on the assumptions market participants would use when pricing
the asset or liability. In February 2008, the FASB issued Staff Position
No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS
157-2”), which delays the effective date of SFAS No. 157 for all
non-financial assets and liabilities, except those that are recognized or
disclosed at fair value in the Financial Statements on a recurring basis until
fiscal years beginning after November 15, 2008. The Company adopted the
provisions of SFAS No. 157 for assets and liabilities recognized at fair
value on a recurring basis effective November 1, 2008. The partial adoption of
SFAS No. 157 did not have a material impact on the Company’s Financial
Statements. See Note 6 for additional discussion of fair value
measurement.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements,” which, among other things, provides guidance
and establishes amended accounting and reporting standards for a parent
company’s noncontrolling interest in a subsidiary. The Company is
currently evaluating the impact of adopting the statement, which is effective
for fiscal years beginning on or after December 15, 2008.
In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS No.
141R”), which replaces SFAS No. 141 “Business Combinations.” SFAS No.
141R, among other things, establishes principles and requirements for how an
acquirer entity recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed (including intangibles)
and any noncontrolling interests in the acquired entity. The Company
is currently evaluating the impact of adopting the statement, which is effective
for fiscal years beginning on or after December 15, 2008.
(2) CORE
PROPERTIES
In
January 2009, the Company sold a 3,400 square foot vacant retail property
located in Eastchester, New York for a sales price of approximately $925,000.
This property was acquired by the Company in fiscal 2008 and there was no
significant gain or loss recorded on the sale. The property had no
operating activity and the Company will not report any discontinued operations
as required by SFAS No. 144, “Accounting for the Impairment or Disposal of Long
Lived Assets”.
Upon the
acquisition of real estate properties, the fair value of the real estate
purchased is allocated to the acquired tangible assets (consisting of land,
buildings and building improvements), and identified intangible assets and
liabilities (consisting of above-market and below-market leases and in-place
leases), in accordance with SFAS No. 141, “Business
Combinations”. The Company utilizes methods similar to those used by
independent appraisers in estimating the fair value of acquired assets and
liabilities. The fair value of the tangible assets of an acquired
property considers the value of the property “as-if-vacant”. The fair
value reflects the depreciated replacement cost of the asset. In
allocating purchase price to identified intangible assets and liabilities of an
acquired property, the value of above-market and below-market leases are
estimated based on the differences between (i) contractual rentals and the
estimated market rents over the applicable lease term discounted back to the
date of acquisition utilizing a discount rate adjusted for the credit risk
associated with the respective tenants and (ii) the estimated cost of acquiring
such leases giving effect to the Company’s history of providing tenant
improvements and paying leasing commissions, offset by a vacancy period during
which such space would be leased. The aggregate value of in-place
leases is measured by the excess of (i) the purchase price paid for a property
after adjusting existing in-place leases to market rental rates over (ii) the
estimated fair value of the property “as-if-vacant,” determined as set forth
above.
In August
2008, the Company acquired a 79,000 square foot shopping center in Litchfield
County, Connecticut (Veteran’s Plaza) for a purchase price of $10.4
million. The Company is currently in the process of analyzing the
fair value of in-place leases for the Veteran’s Plaza
property. Consequently, no value has yet been assigned to the
leases. Accordingly, the purchase price allocation is preliminary and
may be subject to change.
For the
three months ended January 31, 2009 and 2008 the net amortization of
above-market and below-market leases was approximately $27,000 and $54,000,
respectively, which amounts are included in base rents in the accompanying
consolidated statements of income.
The
Company is the general partner in two consolidated limited partnerships which
own shopping centers. The limited partnerships have defined
termination dates of December 31, 2097 and December 31, 2099,
respectively. The partners are entitled to receive an annual cash
preference payable from available cash of the partnerships. 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 the partnership, proceeds from the sale of partnership assets are to be
distributed in accordance with the respective partnership
interests. The partners are not obligated to make any additional
capital contributions to the partnership. The Company retains an
affiliate of one of the limited partners in one of the partnerships to provide
management and leasing services to the property at an annual fee equal to two
percent of rental income collected, as defined. The limited partner
interests in both partnerships are reflected in the accompanying consolidated
financial statements as Minority Interests.
(3) MORTGAGE
NOTES PAYABLE AND BANK LINES OF CREDIT
The
Company has a $50 million Unsecured Revolving Credit Agreement (the “Facility”)
with The Bank of New York Mellon and Wells Fargo Bank N.A. The
Facility gives the Company the option, under certain conditions, to
increase the Facility’s borrowing capacity up to $100 million. The
maturity date of the Facility is February 11, 2011 with two one year extensions
at the Company’s option. Borrowings under the Facility can be used
for, among other things, acquisitions, working capital, capital expenditures,
repayment of other indebtedness and the issuance of letters of credit (up to $10
million). Borrowings will bear interest at the Company’s option of
Eurodollar plus 0.85% or The Bank of New York Mellon’s prime lending rate plus
0.50%. The Company will pay an annual fee on the unused commitment
amount of up to 0.175% 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.
In April
2008, borrowings under the Facility were used to refinance an existing mortgage
note payable, which was secured by the Company’s Staples property in the amount
of $7.9 million. In conjunction with that transaction, the mortgage
was assigned to the lender of the Facility and as a result the $7.9 million
outstanding balance on the Facility is shown as a mortgage note payable on the
accompanying January 31, 2009 consolidated balance sheet. Interest on
outstanding borrowings under the Facility is currently accruing at approximately
1.35% per annum.
The
Company also has a Secured Revolving Credit Facility with the Bank of New York
Mellon (the “Secured Credit Facility”). The Secured Credit Facility
provides for borrowings of up to $30 million. The maturity date of
the Facility is April 15, 2011 and is collateralized by first mortgage liens on
two of the Company’s properties. Interest on outstanding borrowings
is at prime plus 0.50% or the Eurodollar rate plus 1.75%. The Secured
Credit Facility requires the Company to maintain certain debt service coverage
ratios during its term. The Company pays an annual fee of 0.25% on
the unused portion of the Secured Credit Facility. The Secured Credit
Facility is available to fund acquisitions, capital expenditures, mortgage
repayments, working capital and other general corporate purposes.
(4)
REDEEMABLE PREFERRED STOCK
The
Company is authorized to issue up to 20,000,000 shares of Preferred
Stock. At January 31, 2009, the Company had issued and outstanding
400,000 shares of Series C Senior Cumulative Preferred Stock (Series C Preferred
Stock), 2,450,000 shares of Series D Senior Cumulative Preferred Stock (Series D
Preferred Stock) (see Note 5) and 2,400,000 shares of Series E Senior Cumulative
Preferred Stock (Series E Preferred Stock).
The
following table sets forth the details of the Company’s redeemable preferred
stock as of January 31, 2009 and October 31, 2008 (amounts in thousands, except
share data):
|
|
January
31,
2009
|
|
|
October
31,
2008
|
|
8.50%
Series C Senior Cumulative Preferred Stock; liquidation preference of $100
per share; issued and outstanding 400,000
shares
|
|
$ |
38,406 |
|
|
$ |
38,406 |
|
8.50%
Series E Senior Cumulative Preferred Stock; liquidation preference of $25
per share; issued and outstanding 2,400,000
shares
|
|
|
57,797 |
|
|
|
57,797 |
|
Total Redeemable Preferred
Stock
|
|
$ |
96,203 |
|
|
$ |
96,203 |
|
The
Series E Preferred Stock and Series C Preferred Stock have no stated maturity,
are not subject to any sinking fund or mandatory redemption and are not
convertible into other securities or property of the
Company. Commencing May 2010 (Series C Preferred Stock) and March
2013 (Series E Preferred Stock), the Company, at its option, may redeem the
preferred stock issues, in whole or in part, at a redemption price equal to the
liquidation preference per share, plus all accrued and unpaid
dividends.
Upon a
change in control of the Company (as defined), each holder of Series C Preferred
Stock and Series E Preferred Stock has the right, at such holder’s option, to
require the Company to repurchase all or any part of such holder’s stock for
cash at a repurchase price equal to the liquidation preference per share plus
all accrued and unpaid dividends.
The
Series C Preferred Stock and Series E Preferred Stock contain covenants that
require the Company to maintain certain financial coverages relating to fixed
charge and capitalization ratios. Shares of both Preferred Stock
series are non-voting; however, under certain circumstances (relating to
non-payment of dividends or failure to comply with the financial covenants) the
preferred stockholders will be entitled to elect two directors. The
Company was in compliance with such covenants at January 31, 2009.
As the
holders of the Series C Preferred Stock and Series E Preferred Stock only have a
contingent right to require the Company to repurchase all or part of such
holders shares upon a change of control of the Company (as defined), the Series
C Preferred Stock and Series E Preferred Stock are classified as redeemable
equity instruments as a change in control is not certain to occur.
(5)
STOCKHOLDERS’ EQUITY
Restricted
Stock Plan
The
Company has a restricted stock plan for key employees and directors of the
Company. The restricted stock plan (“Plan”) provides for the grant of
up to 2,350,000 shares of the Company’s common equity consisting of 350,000
Common shares, 350,000 Class A Common shares and 1,650,000 shares which, at
the discretion of the Company’s compensation committee, may be awarded in any
combination of Class A Common shares or Common shares.
Prior to
November 1, 2005, the grant date fair value of nonvested restricted stock awards
was expensed over the explicit stock award vesting periods. Such
awards provided for continued vesting after retirement. Upon adoption
of SFAS No. 123R, the Company changed its policy for recognizing compensation
expense for restricted stock awards to the earlier of the explicit vesting
period or the date a participant first becomes eligible for
retirement. For nonvested restricted stock awards granted prior to
the adoption of SFAS No. 123R, the Company continues to recognize compensation
expense over the explicit vesting periods and accelerates any remaining
unrecognized compensation cost when a participant actually retires.
Had
compensation expense for nonvested restricted stock awards issued prior to the
adoption of SFAS 123R been determined based on the date a participant first
becomes eligible for retirement, restricted stock compensation would have
decreased in the three months ended January 31, 2009 and 2008 by approximately
$63,000 and $106,000, respectively.
In
January 2009, the Company awarded 170,900 shares of Common Stock and 63,200
shares of Class A Common Stock to participants in the Plan. The grant
date fair value of restricted stock grants awarded to participants in 2009 was
approximately $3.4 million.
A summary
of the status of the Company’s non vested Common and Class A Common shares as of
January 31, 2009, and changes during the three months ended January 31, 2009 are
presented below:
|
|
Common
Shares
|
|
|
Class A Common Shares
|
|
Non vested
Shares
|
|
Shares
|
|
|
Weighted-Average
Grant-Date Fair Value
|
|
|
Shares
|
|
|
Weighted-Average
Grant-Date Fair Value
|
|
Non-vested
at November 1, 2008
|
|
|
961,750 |
|
|
$ |
14.54 |
|
|
|
321,200 |
|
|
$ |
14.21 |
|
Granted
|
|
|
170,900 |
|
|
$ |
14.23 |
|
|
|
63,200 |
|
|
$ |
15.50 |
|
Vested
|
|
|
(37,200 |
) |
|
$ |
7.91 |
|
|
|
(44,700 |
) |
|
$ |
9.11 |
|
Forfeited
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Non-vested
at January 31, 2009
|
|
|
1,095,450 |
|
|
$ |
14.72 |
|
|
|
339,700 |
|
|
$ |
15.13 |
|
As of
January 31, 2009, there was $13.9 million of unamortized restricted stock
compensation related to nonvested restricted stock grants awarded under the
Plan. The remaining unamortized expense is expected to be recognized
over a weighted average period of 5.94 years. For the three months
ended January 31, 2009 and 2008 amounts charged to compensation expense totaled
$596,000 and $521,000, respectively.
Share
Repurchase Program
In a
prior year, the Board of Directors of the Company approved a share repurchase
program (“Program”) for the repurchase of up to 500,000 shares of Common Stock
and Class A Common Stock in the aggregate. On March 6, 2008, the
Board of Directors amended the Program to allow the Company to repurchase up to
1,000,000 shares of Common and Class A Common stock in the
aggregate. In December 2008, the Board of Directors further amended
the Program to allow the Company to repurchase up to 1,500,000 shares of Common
and Class A Common stock in the aggregate. In addition, the Board of
Directors amended the Program to allow the Company to repurchase shares of the
Company’s Series C and Series D Senior Cumulative Preferred Stock (Preferred
Stock) in open-market transactions. As of January 31, 2009, the
Company had repurchased 3,600 shares of Common Stock and 711,778 shares of Class
A Common Stock under the Program, (including 25,900 shares of Class A Common
Stock that were repurchased at an average price of $13.65 during the three month
period ended January 31, 2009).
Preferred
Stock
The
Series D Preferred Stock has no maturity and is not convertible into any other
security of the Company and is redeemable at the Company’s option on or after
April 12, 2010 at a price of $25.00 per share plus accrued and unpaid
dividends.
(6)
FAIR VALUE MEASUREMENTS
On
November 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements
for financial assets and liabilities recognized at fair value on a recurring
basis. The Company measures certain financial assets at fair value on a
recurring basis, including marketable equity and debt securities classified as
available for sale securities. The fair value of these financial assets was
determined using the following inputs at January 31, 2009:
|
|
|
|
|
Fair Value Measurements at Reporting Date
Using
|
|
|
|
Total
|
|
|
Quoted
Prices in Active Markets for Identical Assets
(Level 1)
|
|
|
Significant
Other Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
for Sale Securities
|
|
$ |
727,000 |
|
|
$ |
727,000 |
|
|
$ |
- |
|
|
$ |
- |
|
(7) 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
January 31, 2009, the Company had commitments of approximately $533,000 for
tenant related obligations.
(8) SUBSEQUENT
EVENTS
On March
5, 2009, the Board of Directors of the Company declared cash dividends of $.2175
for each share of Common Stock and $.24 for each share of Class A Common
Stock. The dividends are payable on April 17, 2009.
In March
2009, the Company borrowed approximately $12.0 million on its unsecured
revolving credit facility. The proceeds from the borrowing were used
to repay an existing first mortgage payable secured by one of the Company’s
properties in the amount of $12.1 million.
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.
Forward
Looking Statements
This Item
2 includes certain statements that may be deemed to be “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical facts,
included in this Item 2 that address activities, events or developments that the
Company expects, believes or anticipates 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 the Company’s operations and other such matters are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions, expected future developments and other
factors it believes are appropriate. Such statements are subject to a number of
assumptions, risks and uncertainties including, among other things, general
economic and business conditions, the business opportunities that may be
presented to and pursued by the Company, changes in laws or regulations and
other factors, many of which are beyond the control of the Company. For a
discussion of some of these factors, see the risk factors set forth in “Item
1A Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal
year ended October 31, 2008. Any forward-looking statements are not
guarantees of future performance and actual results or developments may differ
materially from those anticipated in the forward-looking
statements.
Executive
Summary
The
Company, a REIT, is a fully integrated, self-administered real estate company,
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. Other real estate assets include office and industrial
properties. The Company’s major tenants include supermarket chains and other
retailers who sell basic necessities. At January 31, 2009, the Company owned or
had interests in 43 properties containing a total of 3.9 million square feet of
GLA of which approximately 92% was leased.
The
Company derives substantially all of its revenues from rents and operating
expense reimbursements received pursuant to long-term leases and focuses its
investment activities on community and neighborhood shopping centers, anchored
principally by regional supermarket chains. The Company believes,
because of the need of consumers to purchase food and other staple goods and
services generally available at supermarket-anchored shopping centers, that the
nature of its investments provide for relatively stable revenue flows even
during difficult economic times. The Company is experiencing and, in
the remainder of fiscal 2009, expects that it will continue to experience
increased vacancy rates at some of its shopping centers and a lengthening in the
time required for releasing of vacant space, as the current economic downturn
continues to negatively affect retail companies. However, the Company
believes it is well positioned to weather these
difficulties. Notwithstanding the increase in vacancy rates at
various properties, approximately 92% of the Company’s portfolio remains
leased. The Company has a strong capital structure with, by industry
standards, a small amount of debt maturing in the next 12 months that the
Company believes it can refinance or repay with available cash or borrowings
under its credit facilities. The Company expects to continue to
explore acquisition opportunities that might present themselves during this
economic downturn consistent with its business strategy.
Primarily
as a result of recent property acquisitions, the Company’s financial data shows
increases in total revenues and expenses from period to period.
The
Company focuses on increasing cash flow, and consequently the value of its
properties, and seeks continued growth through strategic re-leasing, renovations
and expansion of its existing properties and selective acquisition of income
producing properties, primarily neighborhood and community shopping centers in
the northeastern part of the United States.
Key
elements of the Company’s growth strategies and operating policies are
to:
§
|
Acquire
neighborhood and community shopping centers in the northeastern part of
the United States with a concentration in Fairfield County, Connecticut;
Westchester and Putnam Counties, New York; and Bergen County, New
Jersey
|
§
|
Hold
core properties for long-term investment and enhance their value through
regular maintenance, periodic renovation and capital
improvement
|
§
|
Selectively
dispose of non-core and underperforming properties and re-deploy the
proceeds into properties located in the northeast
region
|
§
|
Increase
property values by aggressively marketing available GLA and renewing
existing leases
|
§
|
Renovate,
reconfigure or expand existing properties to meet the needs of existing or
new tenants
|
§
|
Negotiate
and sign leases which provide for regular or fixed contractual increases
to minimum rents
|
§
|
Control
property operating and administrative
costs
|
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. Set forth
below is a summary of the accounting policies that management believes are
critical to the preparation of the consolidated financial
statements. This summary should be read in conjunction with the more
complete discussion of the Company’s accounting policies included in Note 1 to
the consolidated financial statements of the Company for the year ended October
31, 2008 included in the Company’s Annual Report on Form 10-K for the year ended
October 31, 2008.
Revenue
Recognition
Revenues
from operating leases include revenues from core properties and non-core
properties. 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.
The
Company records base rents on a straight-line basis over the term of each lease.
The excess of rents recognized over amounts contractually due pursuant to the
underlying leases is included in tenant receivables on the accompanying balance
sheets. Most leases contain provisions that require tenants to reimburse a
pro-rata share of real estate taxes and certain common area
expenses. Adjustments are also made throughout the year to
tenant receivables and the related cost recovery income based upon the Company’s
best estimate of the final amounts to be billed and collected.
Allowance
for Doubtful Accounts
The
allowance for doubtful accounts is established based on a quarterly analysis of
the risk of loss on specific accounts. The analysis places particular emphasis
on past-due accounts and considers information such as the nature and age of the
receivables, the payment history of the tenants or other debtors, the financial
condition of the tenants and any guarantors and management’s assessment of their
ability to meet their lease obligations, the basis for any disputes and the
status of related negotiations, among other things. Management’s estimates of
the required allowance is subject to revision as these factors change and is
sensitive to the effects of economic and market conditions on tenants,
particularly those at retail properties. Estimates are used to
establish reimbursements from tenants for common area maintenance, real estate
tax and insurance costs. The Company analyzes the balance of its
estimated accounts receivable for real estate taxes, common area maintenance and
insurance for each of its properties by comparing actual recoveries versus
actual expenses and any actual write-offs. Based on its analysis, the
Company may record an additional amount in its allowance for doubtful accounts
related to these items. For the three month periods ended January 31,
2009 and 2008 the Company increased its allowance for doubtful accounts by
$118,000 and $47,000, respectively. It is also the Company’s policy
to maintain an allowance of approximately 10% of the deferred straight-line
rents receivable balance for future tenant credit losses.
Real
Estate
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.
The
amounts to be capitalized as a result of an acquisition and the periods over
which the assets are depreciated or amortized are determined based on estimates
as to fair value and the allocation of various costs to the individual
assets. The Company allocates the cost of an acquisition based upon
the estimated fair value of the net assets acquired. The Company also
estimates the fair value of intangibles related to its
acquisitions. The valuation of the fair value of intangibles involves
estimates related to market conditions, probability of lease renewals and the
current market value of in-place leases. This market value is
determined by considering factors such as the tenant’s industry, location within
the property and competition in the specific region in which the property
operates. Differences in the amount attributed to the intangible
assets can be significant based upon the assumptions made in calculating these
estimates.
The
Company is required to make subjective assessments as to the useful life of its
properties for purposes of determining the amount of
depreciation. These assessments have a direct impact on the Company’s
net income.
Properties
are depreciated using the straight-line method over the estimated useful lives
of the assets. The estimated useful lives are as
follows:
Buildings
|
30-40
years
|
Property
Improvements
|
10-20
years
|
Furniture/Fixtures
|
3-10
years
|
Tenant
Improvements
|
Shorter
of lease term or their useful life
|
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 January 31, 2009.
Liquidity
and Capital Resources
At
January 31, 2009, the Company had unrestricted cash and cash equivalents of $1.1
million compared to $1.7 million at October 31, 2008. The Company's
sources of liquidity and capital resources include its cash and cash
equivalents, proceeds from bank borrowings and long-term mortgage debt, capital
financings and sales of real estate investments. Payments of expenses related to
real estate operations, debt service, management and professional fees, and
dividend requirements place demands on the Company's short-term
liquidity.
Cash
Flows
The
Company expects to meet its short-term liquidity requirements primarily by
generating net cash from the operations of its properties. The
Company believes that its net cash provided by operations will be sufficient to
fund its short-term liquidity requirements for the balance of fiscal 2009 and to
meet its dividend requirements necessary to maintain its REIT
status.
The
Company expects to continue paying regular dividends to its
stockholders. These dividends will be paid from operating cash flows
which are expected to increase due to property acquisitions and growth in
operating income in the existing portfolio and from other sources. The Company
derives substantially all of its revenues from rents under existing leases at
its properties. The Company’s operating cash flow therefore depends on the rents
that it is able to charge to its tenants, and the ability of its tenants to make
rental payments. The Company believes that the nature of the properties in which
it typically invests
― primarily grocery-anchored neighborhood and community shopping centers ―
provides a more stable revenue flow in uncertain economic times, in that
consumers still need to purchase basic staples and convenience items. However,
even in the geographic areas in which the Company owns properties,
general economic downturns may adversely impact the ability of the Company’s
tenants to make lease payments and the Company’s ability to re-lease space as
leases expire. In either of these cases, the Company’s cash flow could be
adversely affected.
Net
Cash Flows from:
Operating
Activities
Net cash
flows provided by operating activities amounted to $8.1 million in the three
months ended January 31, 2009, compared to $6.6 million in the comparable period
of fiscal 2008. The net increase in operating cash flows was a result of an
increase in the net operating results of the Company’s properties owned during
both periods and recently acquired properties in fiscal 2008.
Investing
Activities
Net cash
flows provided by investing activities amounted to $1.3 million in the first
quarter of fiscal 2009 and net cash flows used by investing activities amounted
to $7.8 million in the comparable period of 2008. The net increase in cash flows
in the three month period ended January 31, 2009 was primarily the result of the
sale of one of the Company’s properties for $925,000 and the return of two
contract deposits in the combined amount of $1.1 million relating to two
acquisition opportunities that the Company choose not to pursue; offset by
improvements to properties and deferred charges of $578,000.
Net cash
flows for the three month period ended January 31, 2008 was principally due to
the acquisition of properties consistent with the Company’s strategic plan to
acquire properties in the northeast. The Company acquired one
property in the amount of $5.9 million in the first quarter of fiscal 2008 and
also incurred $1.7 million for improvements to properties and deferred charges
and placed deposits on two properties totaling $228,000.
The
Company invests in its properties and regularly pays for capital expenditures
for property improvements, tenant costs and leasing commissions.
Financing
Activities
Net cash
flows used in financing activities amounted to $10.0 million in the first of
quarter of fiscal 2009 and net cash flows provided by financing activities
amounted to $1.0 million in the comparable period of fiscal 2008. Net cash flows
used by financing activities in the first quarter of fiscal 2009 were
predominantly the result of dividends to shareholders in the amount of $9.4
million.
Net cash
flows provided by financing activities in the first quarter of fiscal 2008 was
the net result of the Company borrowing $11.0 million under its secured
revolving line of credit, which amounts were fully repaid during fiscal 2008,
offset by quarterly distributions paid to shareholders in the amount of $8.5
million. The increase in dividends in the first quarter of fiscal
2009 when compared with 2008 reflects dividends paid on a new issue of preferred
stock sold in the second quarter of fiscal 2008.
Capital
Resources
The
Company expects to fund its long-term liquidity requirements such as property
acquisitions, repayment of indebtedness and capital expenditures through other
long-term indebtedness (including indebtedness assumed in acquisitions),
borrowings on its unsecured and secured credit facilities, proceeds from sales
of properties and/or the issuance of equity securities. The Company believes
that these sources of capital will continue to be available to it in the future
to fund its long-term capital needs; however, there are certain factors that may
have a material adverse effect on its access to capital sources. The Company’s
ability to incur additional debt is dependent upon its existing leverage, the
value of its unencumbered assets and borrowing limitations imposed by existing
lenders. The Company’s ability to raise funds through sales of equity securities
is dependent on, among other things, general market conditions for REITs, market
perceptions about the Company and its stock price in the market. The Company’s
ability to sell properties in the future to raise cash will be dependent upon
market conditions at the time of sale.
Financings
and Debt
The
Company is exposed to interest rate risk primarily through its borrowing
activities. There is 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 the
Company’s future financing requirements. Mortgage notes
payable of $104.5 million consist principally of fixed rate mortgage loan
indebtedness with a weighted average interest rate of 6.1% at January 31, 2009.
The mortgage loans with fixed interest rates are secured by 11 properties with a
net book value of $190 million and have fixed rates of interest ranging from
5.1% to 7.8%. The Company has one variable rate mortgage loan in the
amount of $7.9 million for which interest is currently accruing at approximately
1.35%. The Company made principal payments of $476,000 in the three
months ended January 31, 2009 compared to $485,000 in the comparable period of
fiscal 2008. The Company may refinance its 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
refinancings can be achieved.
The
Company has a $50 Million Unsecured Revolving Credit Agreement (the “Unsecured
Facility”) with The Bank of New York Mellon and Wells Fargo Bank N.A. The
agreement gives the Company the option, under certain conditions, to increase
the Facility’s borrowing capacity up to $100 million. The maturity
date of the Unsecured Facility is February 11, 2011 with two one year extensions
at the Company’s option. Borrowings under the Unsecured Facility can
be used for, among other things, acquisitions, working capital, capital
expenditures, repayment of other indebtedness and the issuance of letters of
credit (up to $10 million). Borrowings will bear interest at the
Company’s option of Eurodollar plus 0.85% or The Bank of New York Mellon’s prime
lending rate plus 0.50%. The Company pays an annual fee on the unused
commitment amount of up to 0.175% based on outstanding borrowings during the
year. The Unsecured Facility contains certain representations, financial
and other covenants typical for this type of facility. The Company’s
ability to borrow under the Unsecured 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. As of January 31, 2009, the Company was in
compliance with such covenants on the Secured Facility discussed below and
Unsecured Facility.
The
Company also has a secured revolving credit facility with a commercial bank (the
“Secured Facility”) which provides for borrowings of up to $30
million. The maturity date of the Secured Facility is April 15,
2011. The Secured Facility is collateralized by first mortgage liens
on two of the Company’s properties. Interest on outstanding
borrowings is at prime plus 0.50% or Eurodollar plus 1.75%. The
Secured Facility requires the Company to maintain certain debt service coverage
ratios during its term. The Company pays an annual fee of 0.25% on
the unused portion of the Secured Facility. The Secured Facility is
available to fund acquisitions, capital expenditures, mortgage repayments,
working capital and other general corporate purposes.
At
January 31, 2009 the Company has approximately $67.0 million available to be
drawn down under its two revolving credit facilities.
The
Company has various standing or renewable service contracts with vendors related
to its property management. In addition, the Company also has 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.
Off-Balance
Sheet Arrangements
During
the three month periods ended January 31, 2009 and 2008, the Company did not
have any material off-balance sheet arrangements.
Capital
Expenditures
The
Company invests in its existing properties and regularly incurs capital
expenditures in the ordinary course of business to maintain its properties. The
Company believes that such expenditures enhance the competitiveness of its
properties. In the three months ended January 31, 2009, the Company paid
approximately $578,000 for property improvements, tenant improvement and leasing
commission costs. The amounts of these expenditures can vary significantly
depending on tenant negotiations, market conditions and rental
rates. The Company expects to incur approximately $1,800,000 for
anticipated capital improvements and leasing costs during the balance of fiscal
2009. These expenditures are expected to be funded from operating cash flows or
bank borrowings.
Acquisitions
and Significant Property Transactions
The
Company seeks to acquire properties which are primarily grocery anchored
shopping centers located in the northeastern part of the United States with a
concentration in Fairfield County, Connecticut, Westchester and Putnam Counties,
New York and Bergen County, New Jersey.
In
January 2009, the Company sold a 3,400 square foot vacant retail property
located in Eastchester, New York for a sales price of approximately $925,000.
This property was acquired by the Company in fiscal 2008 and there was no
significant gain or loss recorded on the sale. The property had no
operating activity and the Company will not report any discontinued operations
as required by SFAS No. 144 “Accounting for the Impairment or Disposal of Long
Lived Assets”.
Non-Core
Properties
In a
prior year, the Company's Board of Directors expanded and refined the strategic
objectives of the Company to refocus its real estate portfolio into one of
self-managed retail properties located in the northeast and authorized the sale
of the Company’s non-core properties in the normal course of business over a
period of several years. The Company’s current non-core properties
consist of two distribution service facilities (both of which are located
outside of the northeast region of the United States).
The
Company intends to sell these two remaining non-core properties as
opportunities become available. The Company’s ability to generate
cash from asset sales is dependent upon market conditions and will be limited if
market conditions make such sales unattractive. At January 31, 2009,
the two remaining non-core properties have a net book value of approximately
$610,000.
Funds
from Operations
The
Company considers Funds from Operations (“FFO”) to be an additional measure of
an equity REIT’s operating performance. The Company reports FFO in
addition to its 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 generally accepted accounting principles (“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 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, such as gains (or losses) from sales of
property and deprecation 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 the
Company’s 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 the three months ended January
31, 2009 and 2008 (amounts in thousands).
|
|
Three
Months Ended January 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Net
Income Applicable to Common and Class A Common
Stockholders
|
|
$ |
3,606 |
|
|
$ |
4,492 |
|
|
|
|
|
|
|
|
|
|
Plus: Real
property depreciation
|
|
|
2,830 |
|
|
|
2,677 |
|
Amortization of tenant
improvements and allowances
|
|
|
1,163 |
|
|
|
655 |
|
Amortization of deferred
leasing costs
|
|
|
302 |
|
|
|
142 |
|
Funds
from Operations Applicable to Common and Class A Common
Stockholders
|
|
$ |
7,901 |
|
|
$ |
7,966 |
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by (Used in):
|
|
|
|
|
|
|
|
|
Operating
Activities
|
|
$ |
8,094 |
|
|
$ |
6,608 |
|
Investing
Activities
|
|
$ |
1,349 |
|
|
$ |
(7,803 |
) |
Financing
Activities
|
|
$ |
(10,007 |
) |
|
$ |
1,040 |
|
FFO
amounted to $7.9 million in the first quarter of fiscal 2009 compared to $8.0
million in the first quarter of fiscal 2008. The net decrease
in FFO is attributable, among other things, to: a) a decrease in the
occupancy percentage at some of the Company’s core properties and b) an increase
in preferred stock dividends in the first quarter of fiscal 2009 as a result of
the Company’s $60 million preferred stock sale in the second quarter of fiscal
2008, offset by: c) an increase in operating results at
some of the Company’s properties as a result of property acquisitions in the
second and third quarter of fiscal 2008 and increased tenant reimbursable
billings for some of the Company’s properties and d) a decrease in interest
expense as a result of re-paying two existing mortgages in fiscal 2008 with
proceeds from the Company’s unsecured line of credit at a lower rate of
interest. See more detailed explanations which follow.
Results
of Operations
The
following information summarizes the Company’s results of operations for the
three month periods ended January 31, 2009 and 2008 (amounts in
thousands):
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
|
|
|
Change Attributable to:
|
|
Revenues
|
|
2009
|
|
|
2008
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
Property
Acquisitions
|
|
|
Properties
Held
In Both Periods
|
|
Base
rents
|
|
$ |
15,543 |
|
|
$ |
14,742 |
|
|
$ |
801 |
|
|
|
5.4 |
|
|
$ |
744 |
|
|
$ |
57 |
|
Recoveries
from tenants
|
|
|
5,489 |
|
|
|
4,465 |
|
|
|
1,024 |
|
|
|
22.9 |
|
|
|
146 |
|
|
|
878 |
|
Mortgage
interest and other
|
|
|
338 |
|
|
|
166 |
|
|
|
172 |
|
|
|
103.6 |
|
|
|
51 |
|
|
|
121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
operating expenses
|
|
|
3,421 |
|
|
|
3,063 |
|
|
|
358 |
|
|
|
11.7 |
|
|
|
164 |
|
|
|
194 |
|
Property
taxes
|
|
|
3,389 |
|
|
|
2,825 |
|
|
|
564 |
|
|
|
20.0 |
|
|
|
165 |
|
|
|
399 |
|
Depreciation
and amortization
|
|
|
4,355 |
|
|
|
3,493 |
|
|
|
862 |
|
|
|
24.7 |
|
|
|
211 |
|
|
|
651 |
|
General
and administrative expenses
|
|
|
1,618 |
|
|
|
1,484 |
|
|
|
134 |
|
|
|
9.0 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income/Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
1,542 |
|
|
|
1,749 |
|
|
|
(207 |
) |
|
|
(11.8 |
) |
|
|
241 |
|
|
|
(448 |
) |
Interest,
dividends and other investment income
|
|
|
37 |
|
|
|
95 |
|
|
|
(58 |
) |
|
|
(61.1 |
) |
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
Base
rents increased by 5.4% to $15.5 million for the three month period ended
January 31, 2009 as compared with $14.7 million in the comparable period of
2008. The increase in base rentals during each period was
attributable to:
Property
Acquisitions:
During
fiscal 2008 the Company purchased or acquired interests in four properties
totaling 205,500 square feet of GLA. These properties accounted for
all of the revenue and expense changes attributable to property acquisitions
during the three month period ended January 31, 2009.
Properties Held in Both
Periods:
The
increase in base rents for properties held during the three month periods ended
January 31, 2009 compared to the same period in fiscal 2008, reflects an
increase in rental rates for in place leases over the period offset by an
increase in vacancies occurring in fiscal 2008 at several of the Company’s core
properties. For the first three months of fiscal 2009, the Company
leased or renewed approximately 191,000 square feet (or approximately 4.9% of
total property leasable area). At January 31, 2009 the Company’s core
properties were approximately 91% leased. Overall core property
occupancy decreased to 90% at January 31, 2009 from 94% at January 31,
2008.
In the
three month period ended January 31, 2009, recoveries from tenants for
properties owned in both periods (which represents reimbursements from tenants
for operating expenses and property taxes) increased by $878,000 compared to the
same period in fiscal 2008. This increase was a result of an increase in
property tax expense for properties held in both periods caused by increased
assessments and municipal tax rate increases on certain
properties. In addition, the increase was further caused by increases
in the amount billed to tenants for increased operating expenses
including snow removal and maintenance costs in the first quarter of fiscal 2009
when compared to the same period in the prior year.
Interest,
dividends and other investment income decreased by $58,000 in the three month
period ended January 31, 2009 compared to the same period in
2008. This decrease is a result of the use of available cash in 2008
primarily for property acquisitions as well as the repurchase of Class A Common
Stock under the Company’s Stock Repurchase Plan.
Expenses
Operating
expenses for properties held in both periods increased $194,000 in the three
months ended January 31, 2009, compared to the same period a year ago primarily
as a result of increased snow removal and maintenance costs.
Property
taxes for properties held in both periods increased 14% during the three month
period ended January 31, 2009 compared to the same period a year ago as a result
of increased assessments and municipal tax rates on certain
properties.
Interest
expense decreased $448,000 in the three months ended January 31, 2009 compared
to the same period in fiscal 2008 as a result of scheduled principal payments on
mortgage notes, and the repayment of $12.9 million in mortgage notes payable in
fiscal 2008.
Depreciation
and amortization expense from properties held in both periods increased $651,000
during the three month period ended January 31, 2009 compared to the same period
a year ago as a result of depreciation on $24 million in acquisitions in fiscal
2008 and a full quarter of depreciation for the $8.7 million in property
improvements made in fiscal 2008 and the acceleration of depreciation and
amortization on tenant improvements and deferred leasing
charges related to two lease terminations in the first quarter of
fiscal 2009.
General
and administrative expenses increased by 9% for the three month period ended
January 31, 2009 compared to the same period in fiscal 2008, primarily due to an
increase in legal and professional fees in the first three months of fiscal 2009
when compared with the comparable period of fiscal 2008.
Inflation
The
Company’s long-term leases contain provisions to mitigate the adverse impact of
inflation on its operating results. Such provisions include clauses entitling
the Company 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 the Company’s non-anchor leases are for terms of less than
ten years, which permits the Company 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 the Company’s leases require tenants to pay
a share of operating expenses, including common area maintenance, real estate
taxes, insurance and utilities, thereby reducing the Company’s exposure to
increases in costs and operating expenses resulting from inflation.
Environmental
Matters
Based
upon management’s ongoing review of its properties, management is not aware of
any environmental condition with respect to any of the Company’s properties that
would be reasonably likely to have a material adverse effect on the Company.
There can be no assurance, however, that (a) the discovery of environmental
conditions, which were previously unknown, (b) changes in law, (c) the conduct
of tenants or (d) 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 the Company’s tenants, which would
adversely affect the Company’s financial condition and results of
operations.
Market
risk is the exposure to loss resulting from changes in interest rates, foreign
currency exchange rates, commodity prices and equity prices. The
primary market risk to which we are exposed is interest rate risk, which is
sensitive to many factors, including governmental monetary and tax policies,
domestic and international economic and political considerations and other
factors that are beyond the Company’s control.
Interest
Rate Risk
The
Company is exposed to interest rate risk primarily through its borrowing
activities. There is 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 the Company’s future financing requirements.
As of
January 31, 2009, the Company had $13.0 million in outstanding variable rate
debt. The Company does not enter into any derivative financial
instrument transactions for speculative or trading purposes. The
Company believes that its weighted average interest rate of 6.1% on its fixed
rate debt is not materially different from current fair market interest rates
for debt instruments with similar risks and maturities.
Evaluation
of Disclosure Controls and Procedures
The
Company’s Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Company’s disclosure controls and procedures (as defined in
Rules 13 a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of
the end of the period covered by this report. Based on such
evaluation, the Company’s Chief Executive Officer and Chief Financial Officer
have concluded that, as of the end of such period, the Company’s disclosure
controls and procedures are effective.
Changes
in Internal Controls
During
the quarter ended January 31, 2009, 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.
Item
1.
Legal
Proceedings
The
Company is not involved in any litigation, nor to its knowledge is any
litigation threatened against the Company or its subsidiaries, that in
management’s opinion, would result in a material adverse effect on the Company’s
ownership, management or operation of its properties, or which is not covered by
the Company’s liability insurance.
Item
2. Unregistered Sales of Equity
Securities and Use of Proceeds
In a
prior year, the Board of Directors of the Company approved a share repurchase
program (“Program”) for the repurchase of up to 500,000 shares of Common Stock
and Class A Common Stock in the aggregate. On March 6, 2008, the
Board of Directors amended the Program to allow the Company to repurchase up to
1,000,000 shares of Common and Class A Common Stock in the
aggregate. In December 2008, the Board of Directors further amended
the Program to allow the Company to repurchase up to 1,500,000 shares of Common
and Class A Common Stock in the aggregate. In addition the Board of
Directors amended the Program to allow the Company to repurchase shares of the
Company’s Series C and Series D Senior Cumulative Preferred Stock (Preferred
Stock) in open market transactions.
The
following table sets forth the shares repurchased by the Company during the
three month period ended January 31, 2009 under the Program:
Period
|
Total
Number
of
Shares
Purchased
|
Average
Price
Per
Share
Purchased
|
Total
Number
Shares
Re-
purchased
as
Part
of Publicly
Announced
Plan
or
Program
|
Maximum
Number
of
Shares
That
May
be
Purchased
Under
the Plan
or Program
|
November
1, 2008-November 30, 2008
|
25,900
|
$13.65
|
25,900
|
784,622
|
December
1, 2008-December 31, 2008
|
-
|
-
|
-
|
784,622
|
January
1, 2009-January 31, 2009
|
-
|
-
|
-
|
784,622
|
Exhibits
31.1
Certification of the Chief Executive Officer of Urstadt Biddle Properties Inc.
pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.
31.2
Certification of the Chief Financial Officer of Urstadt Biddle Properties Inc.
pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.
32
Certification of the Chief Executive Officer and Chief Financial Officer of
Urstadt Biddle Properties Inc. pursuant to Section 906 of Sarbanes-Oxley Act of
2002.
S
I G N A T U R E S
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
Urstadt Biddle Properties
Inc.
|
|
(Registrant)
|
|
|
|
By: /s/ Charles J.
Urstadt
|
|
Charles
J. Urstadt
|
|
Chairman
and
|
|
Chief
Executive Officer
|
|
|
|
By: /s/ John T.
Hayes
|
|
John
T. Hayes
|
|
Senior
Vice President and
Chief
Financial Officer
|
|
(Principal
Financial Officer and
|
Dated: March
10, 2009
|
Principal
Accounting Officer)
|
EXHIBIT
INDEX
Exhibit
No.
31.1
|
Certification
of the Chief Executive Officer of Urstadt Biddle Properties Inc. pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.
|
|
|
31.2
|
Certification
of the Chief Financial Officer of Urstadt Biddle Properties Inc. pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.
|
|
|
32
|
Certification
of the Chief Executive Officer and Chief Financial Officer of Urstadt
Biddle Properties Inc. pursuant to Section 906 of Sarbanes-Oxley Act of
2002
|