-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ic2qu+GESAPQN8ALf/PPJKS5xt3mIf7RWeNS1rSILBWwlwSU5irDwIgdwRyLTyCx Dy8FIRlpmL0Mj6dM4MZfMA== 0000914317-96-000008.txt : 19960202 0000914317-96-000008.hdr.sgml : 19960202 ACCESSION NUMBER: 0000914317-96-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951031 FILED AS OF DATE: 19960201 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY CENTRAL INDEX KEY: 0000036840 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 221697095 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 002-27018 FILM NUMBER: 96509684 BUSINESS ADDRESS: STREET 1: 505 MAIN ST STREET 2: P O BOX 667 CITY: HACKENSACK STATE: NJ ZIP: 07602 BUSINESS PHONE: 2014886400 MAIL ADDRESS: STREET 1: P O BOX 667 STREET 2: 505 MAIN STREET CITY: HACKENSACK STATE: NJ ZIP: 07602 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the Fiscal Year Ended October 31, 1995. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from _______ to _________ Commission File No. 2-27018. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY ------------------------------------------------------ (exact name of registrant as specified in its charter) New Jersey I.R.S. No. 22-1697095 - ------------------------------- --------------------- (State of other jurisdiction of (I.R.S. Employer incorporation or organization.) Identification No.) 505 Main Street, P.O. Box 667 Hackensack, New Jersey 07602 - ----------------------------- ---------- (Address of principal executive offices.) (Zip Code) Registrant's telephone no., including area code: 201-488-6400 ------------ Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check 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 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 [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant is approximately $20,413,118 based on the average bid and asked prices of the Registrant's Certificates of Beneficial Interest as reported to the Registrant by Janney Montgomery Scott, Inc. for the fourth calendar quarter of 1995. 1,559,788 Certificates of Beneficial Interest were outstanding on December 31, 1995. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in this Form 10-K or any amendment to this Form 10-K. [X] Exhibit Index on Pages TABLE OF CONTENTS PART I Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders PART II Item 5. Market for Registrant's Common Stock and Related Security Holder Matters Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements on Accounting and Financial Disclosure PART III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K PART I ITEM 1. BUSINESS. (A) GENERAL. Registrant, First Real Estate Investment Trust of New Jersey, is an unincorporated business trust organized in New Jersey pursuant to a Trust Agreement dated November 1, 1961, as amended and restated as of November 7, 1983 (the "Declaration of Trust"). Registrant is an equity real estate investment trust engaged in the business of acquiring and holding real estate including shopping centers, apartment complexes and commercial properties. In addition, the Registrant has purchased vacant land for future development. It is the policy of Registrant to purchase real property for investment and not for resale or turnover. The Registrant has operated in accordance with the above stated general policy since its inception. In the future, the Registrant may purchase additional properties on a joint venture basis in those situations where it can maintain appropriate management control. The Registrant has elected and conducts its operations in a manner intended to comply with the requirements for qualification as a real estate investment trust ("REIT") pursuant to the Real Estate Investment Act of 1960. (Sections 856-860 of the Internal Revenue Code of 1986, hereinafter referred to as the "Code"). Under the Code, a REIT which meets certain requirements is not subject to federal income tax on that portion of its taxable income which is distributed to its shareholders provided at least 95% of its REIT taxable income, excluding any net capital gain, is so distributed. Under its Declaration of Trust, the Registrant is permitted to invest in a broad range of real estate investments and non-real estate investments, including full or participating interests in securities, whether or not secured by mortgages, rents and lease payments and the ownership of any other interests, including equity interests, related to real property. The investment power permits the Registrant to generate income of the types permitted to be received by REITs under Section 856 of the Code. Registrant's Declaration of Trust permits it to conduct its business operations without qualifying as a REIT. Nevertheless, it is the Registrant's intention to continue to qualify as a REIT. All of the Registrant's properties are managed by Hekemian & Co., Inc. under a management and brokerage agreement dated December 20, 1961, as amended by an Amendment dated May 8, 1963 (the "Management Contract"). (B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. For the last three fiscal years, the Registrant's revenue and profits from operations are as set forth in the Financial Statements annexed hereto. (C) NARRATIVE DESCRIPTION OF BUSINESS. (1)(i) General -- The principal activity of the Registrant is to purchase real property, improved and unimproved, primarily for investment and not for resale or turnover. The Registrant is formed as a REIT under the Code which provides investors of the Registrant's shares the opportunity to participate in diversified properties consisting, primarily, of income producing apartment complexes and shopping centers. The Registrant's real estate assets as of October 31, 1995, consisted of 15 properties all of which are wholly owned together with a 40% interest in Westwood Hills, a New Jersey limited liability company (the "LLC") which owns a 210 unit apartment complex in Westwood, New Jersey ("Westwood Hills"). The Registrant does not hold any mortgage note receivables. The following table sets forth certain information concerning Registrant's real estate and other investments as of October 31, 1995:
Square Feet, Depreciated Apartment Units Cost of A) Real Estate No. of or Acreage of Buildings Investments Properties Vacant Land and Equipment - -------------- ---------- --------------- ------------- Apartment Properties 8 (1) 639 Units $43,070,000 Commercial Property 1 4800 sq. ft. $ 14,000 Shopping Centers 3 461,448 sq. ft. $23,400,000 Unimproved Land 3 62.39 Acres (2) $ 2,452,000
- -------- (1) Exclusive of Westwood Hills, see paragraph (B) set forth below. (2) Includes unimproved land contiguous to Franklin Lakes Shopping Center. The Registrant's mortgage indebtedness as of October 31, 1995, for all real estate investments owned by the Registrant (exclusive of Westwood Hills) was $24,110,000 representing three mortgages, one on its property in Spring Lake Heights which bears interest at 7.625% per annum and matures in April, 1999; a second mortgage which is on the Westwood Shopping Center, Westwood, New Jersey ("Westwood Plaza") which mortgage matures in September, 2001 and bears interest at the rate of 10% per annum; the third mortgage is secured by the Westridge Square Shopping Center, Frederick, Maryland ("Westridge") and bears interest at the rate of 9% per annum; this mortgage matures in August, 1997. (See, Liquidity and Capital Reserves, sub-paragraph (d)i-iii at pp. 25-26 hereof). The mortgages for Westwood Plaza and Westridge provide for substantial balloon payments of principal due in September 2001 and August, 1997 respectively. The Registrant has made no provision to reserve cash to meet these balloon payment obligations. (See, Liquidity and Capital Reserves, sub-paragraph (d)i-iii at pp. 25-26 hereof). The Registrant intends to refinance each of the shopping centers at the then prevailing terms and conditions which could be less favorable then the present mortgage terms and conditions. (See "Leverage, No Limitation and Debt; Possible Inability to Refinance Balloon Payments on Mortgage Debt" at pages 10-12 hereof.) The mortgage for Spring Lake Heights is self-liquidating so that in April, 1999 there will be no balloon payment due.
Depreciated Investment No. of Cost of No.of Held by Apartment Buildings B)Other Investment Properties Registrant Units and Equipment - ------------------ ---------- ---------- --------- ------------- Westwood Hills, New Jersey limited liability 1 40% 210 $11,263,000 company
Registrant purchased a 40% interest in Westwood Hills in June, 1994. The Registrant is the managing member of Westwood Hills. - --------------------- The LLC paid $14,500,000 for the 210 unit apartment complex and an additional $889,000 in closing costs which included a realtor's commission of $725,000. The portion of the realtor's commission paid to Hekemian & Co., Inc. was $500,000 with the balance of $225,000 being paid to a third-party realtor. The LLC invested a total of $4,980,000 in cash and financed the balance of the purchase price by securing a first mortgage from United Jersey Bank of New Jersey ("UJB") a member of UJB Financial Corp., the successor to United Jersey Bank, Hackensack, New Jersey. The first mortgage received from UJB was in the original amount of $9,520,000 (the "UJB Mortgage"). (See, Liquidity and Capital Reserves, sub- paragraph (d)iv at p. 26 hereof and also "Item 13. Certain Relationships and Related Transactions" at pp. 35-42). The UJB Mortgage was refinanced by the LLC in September, 1995. A new mortgage was secured from USG Annuity & Life Company in the amount of $10.5 million (the "USG Mortgage"). The USG Mortgage is for a term of seven (7) years with a twenty-five (25) year payout; the interest rate is 7.80% per annum. As a result of the refinancing of Westwood Hills approximately $1,000,000 was distributed to all equity investors. The Registrant received a total of approximately $400,000 as a result of the refinancing. At the end of the seven (7) year term of the USG Mortgage, a substantial balloon payment will be due in the amount of $9,230,965. The LLC has made no provision to reserve cash to meet this balloon payment obligation. (See Liquidity and Capital Reserves, sub-paragraph (d)iv at p. 26 hereof). The LLC intends to refinance the apartment complex prior to the time the balloon payment is due on the then prevailing terms and conditions which could be less favorable then the present mortgage terms and conditions. (See "Leverage, No Limitation on Debt; Possible Inability to Refinance Balloon Payments on Mortgage Debt" at pages 10-12 hereof). (ii) Line of Credit All of the Registrant's existing properties, except all vacant land, Westwood Plaza, Westridge and Westwood Hills are subject to a mortgage lien of $20,000,000 which represents security for a line of credit with UJB (the "Line of Credit"). The Line of Credit was secured in February, 1994. In accordance with the provisions of Section 2.03 of the Line of Credit agreement, and subject to a $20 million limitation on all advances, UJB will make available to the Registrant up to a maximum of $7.5 million for general business purposes and up to a maximum of $15 million, on an offering basis, for the Registrant's acquisition of real estate and capital improvements. The real estate acquisition advances are subject to certain limitations and requirements. The Line of Credit expires on February 10, 1997 unless extended by agreement of the parties or unless sooner terminated upon the occurrence of an event of default or in accordance with the provisions of Sections 2.02(b) and 6.09 of the Line of Credit. Pursuant to those sections, the Registrant must satisfy certain financial requirements. Such tests include the maintenance of: (1) shareholders' equity at a level of at least $18 million as of the end of each fiscal quarter; (2) a debt to worth ratio of less than 4.0; (3) cash flow (net income plus depreciation) in excess of $2.5 million for the preceding twelve months, as determined at the end of each fiscal quarter; (4) a debt service coverage ratio of 1.4 or greater. Section 6.09(e) of the Line of Credit prohibits the Registrant from incurring any additional secured or unsecured indebtedness (other than trade payables), except for the refinancing of existing mortgages, for the acquisition of new income-producing property (but only where such debt is on a non-recourse basis other than liability under environmental, fraud and representation and warranty clauses) and for the expansion and/or renovation of existing income-producing property. The Registrant currently meets all of the standards set forth in the Line of Credit and anticipates that it will continue to meet all such standards in the future. Advances under the Line of Credit up to and including $10 million in the aggregate bear interest, at the election of the Registrant at either: (A) UJB's variable Base Lending Rate, as announced from time to time; or (B) (i) the average of LIBOR (the annual rate of interest at which United States Dollars deposits are offered to prime banks in the London interbank market) on contracts ending 1, 2, 3 or 6 months from the advance date, for the two (2) business days preceding the advance date (round upward to the nearest whole multiple of 1/16 of 1% per annum) divided by (ii) a percentage equal to 100% less the stated maximum rate of all reserves required to be maintained against "LIBOR Rate Liabilities" as specified in Regulation D, (the "LIBOR Base"), plus (iii) 200 basis points (2%). Advances in excess of $10,000,000 will bear interest at the UJB Base Lending Rate plus one half of one percent (1/2%) or at the LIBOR Base plus 250 basis points (2.5%). At the closing, the Registrant elected to use the LIBOR Base, plus 200 basis points, which then produced an interest rate of 5.88% per annum. The principal balance due on the Line of Credit, as of October 31, 1995 was $5,168,860 with an applicable interest rate of 7.875%. The interest rate, as of December 31, 1995, remained at 7.875%. (2) During the fiscal year, the Registrant has not made a public announcement concerning a new product or industry segment which would require the investment of a material amount of the assets of the Registrant. (3) Sources and availability of raw materials are not applicable to the Registrant's business. (4) Patents, trademarks, licenses, franchises and concessions are not important to the business of the Registrant. (5) Registrant's business is not seasonal. (6) Working capital items are not applicable to the Registrant's business. (7) Management believes that the Registrant's business is not materially dependent upon a single customer or a few customers. No single tenant occupies more than 10% of the Registrant's holdings, except that the Registrant's retail property, located in Glen Rock, New Jersey, is occupied by a single tenant whose lease expires on January 31, 2000. (8) Information concerning backlog is not material nor relevant to an understanding of the Registrant's business. (9) Information concerning renegotiation of profits or termination of contracts at the election of the government is not material or relevant to an understanding of the Registrant's business. (10) The Registrant is subject to normal competition with other investors to acquire real property and to profitably manage such property. Numerous other REIT(s), banks, insurance companies and pension funds, as well as corporate and individual developers and owners of real estate, compete with the Registrant in seeking properties for acquisition, tenants and properties, leasing revenues and land for development. During the past several years, the Registrant has concentrated its expansion efforts upon the acquisition of multi-family residential and shopping center properties which are substantially larger than those real estate assets the Registrant had historically sought to include in its portfolio. As a result, the Registrant has encountered increasing competition for investment grade real estate from other entities and persons which have investment objectives similar to those of the Registrant. Such competitors may have significantly greater resources and financial revenues, may derive funding from foreign and domestic sources and may have larger staffs to find, evaluate and secure new properties. In addition, retailers at the Registrant's shopping centers face increasing competition from discount shopping centers, outlet malls, catalogues, discount shopping clubs and telemarketing. In many markets, the trade areas of the Registrant's shopping center properties overlap with the trade areas of other centers. Renovations and expansions at those competing malls could negatively affect the Registrant's shopping center properties by encouraging shoppers to make their purchases at the expanded or renovated competing center. Increased competition could adversely affect the Registrant's revenues. New retail real estate competition could be developed in the future in trade areas that could adversely affect the revenues of the Registrant's shopping center properties. General Factors Affecting Investment in Shopping Centers and Apartment Complex Properties; Effect on Economic and Real Estate Conditions The revenues and value of shopping centers and apartment complex properties may be adversely affected by a number of factors, including: the national economic climate; the regional economic climate (which may be adversely affected by plant closing, industry slowdowns and other local factors); local real estate conditions (such as an oversupply of retail space or apartment units); perceptions by retailers or shoppers of the security, safety, convenience and attractiveness of the shopping center; perception by residential tenants of the safety, convenience and attractiveness of an apartment building or complex; the proximity and the number of competing shopping centers and apartment complexes; the availability of recreational and other amenities and the willingness and ability of the owner to provide capable management and adequate maintenance. In addition, other factors may adversely affect the value of a shopping center or apartment complex without necessarily affecting its current revenues, including changes in governmental regulations, such as limitations on hours of operations, changes in tax laws or rates and potential environmental or other legal liabilities. Shopping Center Properties Dependence on Anchors Stores and Satellite Tenants The Registrant's income and funds available for distribution would be adversely affected if space in the Registrant's shopping center properties could not be leased or if anchor store tenants or satellite tenants failed to meet their lease obligations. The success of the Registrant's investment in the shopping center properties is dependent upon the success of the tenants leasing space therein and, to the extent that a tenant's performance under its lease has been guaranteed, on the guarantor of such lease. Unfavorable economic, demographic or competitive conditions may adversely affect the financial condition of tenants and/or guarantors, and, consequently, the lease revenues and the value of the Registrant's investments in the shopping center properties. If the sales of stores operating in the Registrant's shopping center properties were to decline due to deteriorating economic conditions, tenants may be unable to pay their base rents or meet other lease charges and fees due Registrant. In the event of default by a tenant, the Trust might suffer a loss of rent and experience extraordinary delays while incurring additional costs in enforcing its rights as landlord. Renewal of Leases and Reletting of Space There is no assurance that the Registrant will be able to retain tenants in its shopping centers upon expiration of their leases. The Registrant will be subject to the risks that, upon expiration of leases for space located in the Registrant's shopping center properties, the premises may not be relet or the terms of reletting (including the cost of concessions to tenants) may be less favorable than current lease terms. If the Registrant were unable to promptly relet all or a substantial portion of this space or if the rental rates upon such reletting were significantly lower than expected rates, the Registrant's net income and ability to make expected distributions to shareholders may be adversely affected. Illiquidity of Real Estate Investments; Possibility that Value of the Registrant's Interests may be less than its Investment Equity real estate investments are relatively illiquid. Therefore, the ability of the Registrant to vary its portfolio in response to changed economic, market or other conditions is limited. Beyond general illiquidity, the Registrant's interest in Westwood Hills is also subject to transfer constraints imposed by the LLC's Operating Agreement and by the fact there is no market for the Registrant's interest in the LLC which was not registered pursuant to any applicable Federal or State Securities Laws. If the Registrant were compelled to liquidate its real estate and LLC holding in the current market, the value of such assets would also likely be diminished if a sale of all or substantially all of the assets of the Registrant was required in a limited time frame. The proceeds to the Registrant from the sale of such assets might be less than the Registrant's current investment in those assets. Inability to Obtain Financing The Registrant may or may not be able to obtain financing for improvements, capital expenditures, acquisitions, development or expansions. If the Registrant is not able to obtain such financing, it will not be able to proceed with contemplated projects. Leverage; No Limitation on Debt; Possible Inability to Refinance Balloon Payments on Mortgage Debt The Registrant has incurred, and may continue to incur, indebtedness (secured and unsecured) in furtherance of its activities. Except for Registrant's vacant lands, there are mortgage liens covering all of the Registrant's apartment properties and retail/commercial properties as a result of the Line of Credit and, in several instances, specific properties are subject to additional first mortgages (see Item 1. Business. Narrative Description of Business at pp.3-16). Neither the Declaration of Trust or any policy statement formally adopted by the Board of Trustees limits either the total amount of indebtedness or the specified percentage of indebtedness (based on the total capitalization of the Registrant) which may be incurred. Accordingly, the Board of Trustees of the Registrant could change the current policies of the Registrant regarding indebtedness subject only to certain restrictions set forth in the Line of Credit (see Item 1. Business. Narrative Description of Business at pp. 3-16). If these policies were changed, the Registrant could become more highly leveraged, resulting in an increased risk of default on the obligations of the Registrant and in an increase in debt service requirements that could adversely affect the financial condition and results of the operations of the Registrant. The Registrant may be required to borrow money and mortgage its properties to fund any short fall of cash necessary to meet the Code's distribution requirements for the maintenance of REIT status. The resulting interest expense and debt amortization with respect to any borrowings, including borrowings under the Line of Credit could negatively affect the Registrant's cash available for distribution. If the Registrant defaults on any loan secured by a mortgage or mortgages on its property or properties, the lenders may exercise their remedies, including foreclosure on such property or properties. In that event, the Registrant could lose its investment in such property or properties. Payment obligations on mortgages and other indebtedness generally are not reduced if the economic performance of any of the Registrant's properties declines. If any such decline occurs, the Registrant's income and funds available for distribution would be adversely affected. As discussed in "Item 1. Business. Narrative Description of Business" at pages 3 through 16 hereof, the Registrant has not established a cash reserve sinking fund and does not expect to have sufficient funds from operations to make the balloon payments when due under the terms of the mortgages for Westwood Plaza or Westridge. In addition, Registrant holds a 40% interest in the LLC which owns Westwood Hills. The LLC has, similarly, made no provision to reserve funds to pay the USG Mortgage when its balloon payment is due in 2002. The Registrant and the LLC intend to refinance such debt at or before maturity. There can be no assurance, however, that the Registrant or the LLC will be able to refinance such indebtedness or to refinance the properties on terms which are as favorable as the current mortgages. An inability to make such balloon payments when due would permit the mortgage lender to foreclose on such properties, which would have a material adverse effect on the Registrant. In addition, interest rates on any debt issued to refinance such mortgage debt may be higher than the rates on the current mortgages, which could adversely affect funds from operations available for distribution. Realization of any of the foregoing contingencies could have a material adverse effect on the Registrant's net income and/or financial condition. The Registrant believes that a risk of mortgage default to be minimal, however, since it could draw upon its Line of Credit, issue additional shares of stock and mortgage other properties which are currently mortgage free to cover any refinance difficulties for the specific properties provided, however, UJB agreed to: (a) release of such property or (b) subordinate its Line of Credit to any such re-financing. (11) Registrant conducts no research activities relating to the development of new products. (12) In recent years, both federal and state governments have become increasingly concerned with the impact of real estate construction and development programs upon the environment. Environmental legislation affects the cost of selling real estate, the cost to develop real estate and the risks associated with purchasing real estate. Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under such property, as well as certain other potential costs relating to hazardous or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property). Such laws often impose such liability without regard to whether the owners knew of, or were responsible for, the presence or disposal of such substances. Such liability may be imposed on the owner in connection with the activities of an operator of, or tenant at, the property. The cost of any required remediation removal, fines or personal or property damages and the owner's liability therefore could exceed the value of the property and/or the aggregate assets of the owner. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral, which, in turn, would reduce the Registrant's revenues and ability to make distributions. A property can also be negatively impacted by either physical contamination or by virtue of an adverse effect upon value attributable to the migration of hazardous or toxic substances, or other contaminants that have or may have emanated from other properties. The full impact of these environmental laws on the Registrant's operations cannot be fully assessed at this time. Nevertheless, the Registrant is aware of the following environmental matters affecting its properties: (i) Vacant Land Located in Rockaway Township, N.J. The property located in Rockaway Township contains wetlands and associated transition areas. Pursuant to New Jersey law, transition areas may not be developed. The Registrant has not formally determined the full impact that the wetlands and associated transition areas will have on the development of the property, pursuant to applicable laws and regulations of New Jersey, however, it is believed that future development of the property will not be substantially restricted as a result of the presence of wetlands and the associated transition areas. The Registrant applied for a zoning change to permit the construction of a shopping center or other commercial development on the property in 1994. That application was denied. As a result, under current zoning the property can be developed for residential use only. The Registrant secured both Federal and State approvals to allow it to fill slightly less than one (1) acre of wetlands. The filling of the wetlands pursuant to said permit was completed during January, 1993. (ii) Vacant Land Located in South Brunswick, N.J. The Registrant has previously authorized the New Jersey Department of Environmental Protection ("NJDEP") to install monitoring wells on its vacant property located in South Brunswick, New Jersey. NJDEP advised the Registrant that its investigation related to whether the Registrant's property was contaminated as a result of the migration of environmentally sensitive materials from the J.I.S. Landfill located next to the Registrant's property. The J.I.S. Landfill has been placed on the National Priority List published pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("Superfund Law"). NJDEP has issued a report which concluded: (a) there was no evidence of any migration of hazardous substances or materials from the J.I.S. Landfill onto the Registrant's property; as a result, the Registrant's property is not included in any remediation plans; (b) the groundwater below the Registrant's property is contaminated and will be subject to clean-up activities pursuant to NJDEP oversight which will be conducted by NJDEP and/or the responsible parties identified in connection with the J.I.S. Landfill cleanup. The Registrant is not a responsible party for the groundwater cleanup. Since the Registrant's property is not dependent upon the groundwater as a water supply source and cleanup activities have been or will be conducted under NJDEP supervision, Registrant does not believe that the groundwater contamination has any negative impact on the value or potential use of its property. The Registrant retained J.H. Crow Company ("Crow"), an environmental consultant, to: (a) review all data supplied by NJDEP; and (b) recommend further such environmental studies as may be required to determine whether the site has sustained damage beyond groundwater contamination. The Registrant's environmental consultant conducted a soil sampling program at the Registrant's property. Based upon these studies, Crow has concluded that there was no evidence of soil contamination on the Registrant's property at levels which require remedial action. Crow has confirmed that the groundwater in the entire region has been contaminated as a result of the activities at the J.I.S. Landfill. The Registrant has constructed an earth berm on its property in order to prevent the overland flow of stormwater runoff (and potentially, hazardous substances) from the J.I.S. Landfill onto the Registrant's property pursuant to a recommendation received from Crow. The Registrant has never conducted any activities on the property other than leasing the land to third parties for farming purposes. As a result, the Registrant has not been named as a potentially responsible party under the Superfund Law. The Registrant expects that any required cleanup activity of the groundwater will be undertaken by responsible third parties or by NJDEP at no cost to the Registrant. (iii) Westwood Plaza Shopping Center, Westwood, N.J. This property is in a HUD Flood Hazard Zone and serves as a local flood retention basin for part of Westwood. The Registrant does not maintain flood insurance for the subject property. Any reconstruction of that portion of the property situated in the flood hazard zone is subject to regulations promulgated by NJDEP which may require extraordinary construction methods. (iv) Franklin Lakes Shopping Center, Franklin Lakes, N.J. This property contains wetlands and associated transition areas on its perimeter. The Registrant has secured a letter of interpretation from NJDEP which fixes the extent of both the wetlands and associated transition areas. Registrant has developed plans for the expansion of its shopping center taking into account both the wetlands and associated transition areas which will not materially affect Registrant's planned expansion of the shopping center. (See Management's Discussion and Analysis of Financial Condition and Results of Operations: Liquidity and Capital Resources, pp. 22-28). (v) Other. The State of New Jersey has adopted an underground fuel storage tank law and various regulations which impact upon the Registrant's responsibilities with respect to underground storage tanks maintained on its properties. The Registrant does have underground storage tanks located on two (2) of its properties used in connection with heating of apartment units. The Registrant periodically visually inspects the location of each underground storage tank for evidence of any spills or discharges. Based upon the foregoing, the Registrant knows of no underground storage tanks which are discharging material into the soil at the present time. Current state law does not require the Registrant to submit its underground storage tanks to tightness testing. The Registrant has conducted no such tests. The Registrant has not conducted environmental audits for any of its properties except for Westridge and Westwood Hills. Both of these two properties were purchased since 1992. (13) Registrant, as of October 31, 1995, has no full-time employees. The Registrant has eight (8) Trustees and one Executive Secretary/ Treasurer who are not full-time employees. Hekemian & Co., Inc. is employed by the Registrant as its managing agent, pursuant to the Management Contract. A number of Hekemian & Co. employees are actively engaged in the management of Registrant's properties pursuant to Hekemian & Co. Inc.'s duties as managing agent. Pursuant to the Management Contract the Registrant reimburses Hekemian & Co. for salaries, hospitalization, workmen's compensation insurance and payroll taxes for superintendents and other staff, including secretarial staff, for work associated with its properties. (D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES. Registrant does not engage in operations in foreign countries and it does not derive any portion of its sales or revenues from customers in foreign countries. ITEM 2. DESCRIPTION OF THE PROPERTY. The following chart sets forth the type of property, location, year acquired, the number of units or square feet, occupancy rate and the mortgage balance on the property as of October 31, 1995. In addition to the specific mortgages which may be indicated below, the Registrant's property, except all vacant land together with the shopping centers located in Westwood, New Jersey, Frederick, Maryland and the Registrant's 40% interest in the LLC which owns Westwood Hills, are subject to a lien from UJB for a line of credit in the face amount of $20 million. (A) APARTMENT PROJECTS.
Average Mortgage Occupancy Balance or Property and Year No. of Rate as of Bank Loan Location Acquired Units(3) 10/31/95 (000's) - ------------ -------- -------- ---------- ---------- Lakewood Apts. Lakewood, N.J. 1962 40 100% None Palisades Manor Palisades Pk., N.J. 1962 12 100% None Grandview Apts. Hasb. Hgts., N.J. 1964 20 100% None Heights Manor Spring Lake Hgts., N.J. 1971 79 99% $ 307,000 Hammel Gardens Maywood, N.J. 1972 80 99% None Sheridan Apts. Camden, N.J. 1964 132 84% None Steuben Arms River Edge, N.J. 1975 100 96% None Berdan Court Wayne, N.J. 1965 176 95% None Westwood Hills, LLC4 1994 210 98% $10,488,000
The above listed apartment properties are subject to various rent control ordinances summarized as follows: - -------- (3) One unit in each apartment complex is utilized by a superintendent; as a result, no rent is received for such unit. (4) Registrant holds a 40% interest in the LLC which owns Westwood Hills. Rent Control Ordinance Summary Wayne: (Berdan Court) Renewals based on CPI figures given monthly by Township. Full vacancy decontrol. Hasbrouck Heights: (Grandview Apartments) Renewals based on a 5% yearly increase. Full vacancy decontrol. Maywood: (Hammel Gardens) Renewals based on a 4.25% yearly increase. Parity decontrol based on highest rent for similar type apartment. Spring Lake Heights: (Heights Manor) Renewals based on a 4.0% yearly increase. Full vacancy decontrol. Lakewood: (Lakewood Apartments) Renewals based on a 6.5% yearly increase. Palisades Park: (Palisades Manor) All leases which are renewed may be increased by 4%. In addition, Registrant may lease any unit which is vacated to a new tenant at the higher of (a) the then current rent received for a similar unit or (b) an increased rent based upon 4% above the last rent charged for such unit. Camden: (Sheridan Apartments) Renewals based on Consumer Price Index with a maximum 6% yearly increase. In the event of a vacancy, the landlord is permitted to increase the rent of the vacant unit to the highest rent then being charged in the apartment complex. River Edge: (Steuben Arms) Renewals based on a 4% yearly increase. Full vacancy decontrol. Westwood: No rent control is in effect. (B) SHOPPING CENTERS.
Occupancy Mortgage Shopping Year Square Rate as Balance or Bank Centers Acquired Feet of 10/31/95 Loan (000's) - -------- -------- ------ ----------- --------------- Franklin Lakes, N.J. 1966 33,320 0.0 (5) None Westwood, N.J. 1988 173,854 100% $ 5,444 Frederick, Maryland 1992 254,274 100% $18,359
(C) VACANT LAND.
Acreage Mortgage for Balance Location Acquired Current Use Parcel (000's) - -------- -------- ----------- ------ -------- Franklin Lakes 1966 Contiguous to Franklin Lakes Shopping Center (Planned for future development) 15.76 None Rockaway 1964/1993 None 22.00 None South Brunswick 1964 Leased as farmland, qualifying for state farmland assessment tax treatment 33 None
- -------- (5) The Franklin Lakes shopping center effectively closed for operations on or about September 1, 1995. The Registrant has secured all approvals from state, local and county governmental entities to demolish and construct a new shopping center on the property, The construction is scheduled to commence during the Spring of 1996 with a projected completion date of January, 1997.
Commercial Year Square Mortgage Balance or Property Acquired Feet Tenant Bank Loan (000's) - ---------- -------- ------ ------ ------------------- Glen Rock 1962 4800 1 Tenant, - 0 - 100% of Property
ITEM 3. LEGAL PROCEEDINGS. (a) Other than the condemnation proceeding described in paragraph (b) hereof, there are no material pending legal proceedings other than ordinary routine litigation incidental to the business, to which the Registrant is a party or of which any of its properties is the subject. There are no legal proceedings concerning environmental issues with respect to any property owned by the Registrant. The Registrant has, however, been concerned with the possibility that contamination material may have migrated from an adjacent Superfund site onto the Registrant's property in South Brunswick, New Jersey which is vacant land. As discussed in "Item 1, Business" at pp. 3-16, Registrant has determined that there is no contamination of the soil. The groundwater below the property will, however, require remediation which will be performed under the supervision of NJDEP at no cost to the Registrant. The Registrant has not been involved in any court or administrative proceedings with respect to this matter. (b) In connection with the construction of Interstate Highway Route 287, the State of New Jersey, by the Commission of the Department of Transportation, initiated condemnation proceedings in the Superior Court of New Jersey, Law Division. The State took possession of approximately 0.6 of an acre of the Registrant's Franklin Lakes Shopping Center property in Franklin Lakes, New Jersey which is located on the perimeter of Registrant's property and which will not materially affect the planned redevelopment of the shopping center. The matter was settled by the Registrant and the State of New Jersey in October, 1994. As a result of the settlement, the Registrant has received a total of approximately $407,000, of which approximately $61,300 was received in fiscal year 1989 and an additional amount of approximately $85,000 in fiscal year 1986. The Registrant is responsible to pay certain legal costs which have yet to be determined. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the Registrant's fourth quarter. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. (A) The following tables set forth, for the periods indicated, the highest and lowest bid and asked quotations in the over-the-counter market NASDAQ Bulletin Board. It should be noted that over-the-counter quotations reflect inter-dealer prices, without retail markup, markdown or commission, and may not necessarily represent actual transactions. There is no established public trading market, the trading is sporadic and in small volumes, all as set forth below.
Number of Calendar Bid Prices Asked Prices Shares Quarter High Low High Low Sold - -------- ------ ------ ----- ------ ----- 1994 - ---- 1st quarter ............ 23-1/2 23-l/2 24-l/2 24-1/8 2,545 2nd quarter ............ 23 23 24 23-7/8 3,812 3rd quarter ............ 23 23 24 24-1/2 2,050 4th quarter ............ 23 22 24 23 5,169 1995 - ---- 1st quarter ............ 22 22 23-1/4 23 1,500 2nd quarter ............ 22 22 23 23 200 3rd quarter ............ 22 22 23 22-3/4 2,390 4th quarter ............ 22 21-1/4 23 22-3/4 9,165
The source of the foregoing information is Janney Montgomery Scott, Inc., members of New York and other principal exchanges, 505 Main Street, Hackensack, New Jersey. (B) There is one class of stock of beneficial interest with no par value. A total of 1,559,788 shares of beneficial interest outstanding at the close of Registrant's last fiscal year ended October 31, 1995. As of December 11, 1995, the Registrant's shares were held by 406 shareholders. The computation of the number of holders of Registrant's shares of beneficial interest was based upon a report of shareholders which was prepared by the Registrant's transfer agent as of December 11, 1995. (C) A dividend of $1.62 per share was paid for the fiscal year ended October 31, 1994. A dividend of $2.53 per share was paid for the fiscal year ended October 31, 1995 which includes a $.74 dividend paid in December, 1994, which dividend relates to fiscal year 1994 financial results. The dividends are declared on a quarterly basis. On December 18, 1995, after the close of the October 31, 1995 fiscal year, a dividend of $.74 per share was paid to all shareholders. ITEM 6. SELECTED FINANCIAL DATA. As of or for the Year Ended October 31,
1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- Operating data: Rental revenue $13,250 $11,162 $ 9,948 $ 8,465 $ 6,360 Rental expenses 9,592 8,235 7,268 5,899 3,888 ------- ------- ------- ------- Income from rental operation 3,658 2,927 2,680 2,566 2,472 Other income 5 5 4 136 526 ------- ------- ------- ------- 3,663 2,932 2,684 2,702 2,998 Other expenses (754) (473) (389) (264) (242) Minority interest (123) (76) -- -- -- in Westwood Hills Net income 2,786 2,383 2,383 2,438 2,756 ===== ===== ===== ===== ===== Balance sheet data: Total assets 65,535 65,613 51,356 50,064 29,096 ====== ====== ====== ====== ====== Long term obligations 34,598 34,019 24,963 25,341 6,412 ====== ====== ====== ====== ===== Per share data (a): Earnings per share $1.79 $1.53 $1.47 $1.56 $1.77 ===== ===== ===== ===== ===== Dividends per share $2.53* $1.62 $1.56 $1.765 $1.92 ===== ===== ===== ====== =====
* The dividend shown for 1995 includes the dividend paid in December 1994 of $.79 per share. This dividend was related to the earnings for fiscal year 1994 but which were not paid until December 1994 (during fiscal year 1995). ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 1. Liquidity and Capital Resources. Overview The following discussion should be read in conjunction with the Registrant's Financial Statements and Notes thereto appearing elsewhere in this Form 10-K. Such financial statements and information have been prepared to reflect the historical operations and financial condition of the Registrant. Results of Operations Rental revenues for the fiscal year ended October 31, 1995 were $13,250,000 as compared to $11,162,000 for the same period in 1994. The rental expenses increased to $9,592,000 for 1995 as compared to $8,235,000 for 1994. The Registrant's net income for the fiscal year 1995 was $2,786,000 or $1.79 per share as compared to a net income of $2,383,000 for fiscal year 1994 or $1.53 per share. The increase in rental income was primarily due to the fact Westwood Hills was owned by the Registrant for a full year in 1995. The Registrant's interest in Westwood Hills was purchased in June of 1994. In addition, the Registrant was able to secure various rent increases for most of its apartment properties while maintaining occupancy rates at or near historical highs. Additional space was also rented at Westridge during 1995. Liquidity and Capital Resources (a) Cash flows from operations, debt financing and the sale of Trust Shares have been the principal sources of capital used to fund the Registrant's property acquisitions and expansion. The Registrant has a $20 million line of credit from UJB that may be used to finance the acquisition or development of additional properties and for general business purposes. Borrowings under the Line of Credit bear interest: (i) at a variable fluctuating rate equal to UJB's Base Lending Rate or at the LIBOR Base, plus 200 basis points (2.0%) on all borrowings up to $10,000,000; and (ii) at UJB's Base Lending Rate, plus one half of one percent (1/2%), or at the LIBOR Base, plus 250 basis points (2.5%) on all borrowings in excess of $10,000,000. At October 31, 1995, the sum of $5,168,860 was outstanding under the Line of Credit. The Registrant may seek, under certain circumstances, to obtain funds through additional equity offerings and/or debt financing (other than the Line of Credit), such as purchase money financing from the sellers of real estate or mortgage loans from institutions. Such funds may be used in connection with the acquisition of additional properties, the renovation or expansion of existing properties or, as necessary, to meet the distribution requirements for REITs under the Code. The availability and terms of any such equity offering will depend upon market and other conditions. There can be no assurance that such additional equity capital will be available on terms acceptable to the Registrant. Economic conditions and prevailing banking standards have generally restricted the availability of debt financing, particularly in connection with mortgage loans for real estate acquisitions. The Registrant is unable to project in a definitive manner what impact such economic conditions and prevailing banking standards will have on the Registrant's ability to finance new acquisitions. The Registrant continues to make capital improvements to, primarily, its apartment properties as it determines to be appropriate, including new roofs, windows and kitchens. The short term impact of such capital outlays will be to depress the Registrant's then current cash flow. The Registrant is now experiencing the benefits of these expenditures by preserving the physical integrity of its properties and securing increased rentals. Other than the apartment rehabilitation program described above, the Registrant has made no commitments, and has no understandings, for additional capital expenditures except with respect to the re-development of the Franklin Lakes Shopping Center (the "F.L. Shopping Center"). The Registrant does intend to demolish the F.L. Shopping Center which consists of approximately 33,320 square feet of leasable space and to construct a new center with approximately 88,000 square feet of leasable space (hereinafter sometimes referred to as "New Center"). Except for two tenants, the F.L. Shopping Center has been effectively closed since September 1, 1995. A supermarket chain has agreed, in principle, to lease approximately 42,000 square feet of space at the New Center. All governmental approvals have been secured to permit the construction of the New Center. The Registrant anticipates that it will commence construction of the new shopping center during the Spring of 1996. Construction will take approximately nine (9) months during which time the property will generate no income. The Registrant realized approximately $91,300 in income during fiscal year 1995 from the F.L. Shopping Center and approximately $166,000 in income during the fiscal year 1994. The loss of income for the construction period will be approximately $.11 per share on an annual basis. In addition to the loss in income from the F.L. Shopping Center, Registrant will continue to pay expenses related to the ownership of the real property while the New Center is under construction. These expenses will include real property taxes, insurance and depreciation charges. Also, once construction commences, Registrant will bear certain costs related to the construction of the New Center such as Construction costs, interest for the construction mortgage, and fees due third parties. The Registrant anticipates that it will secure a mortgage from a third party lender in the amount of approximately $6.0 million to provide the necessary funding for the construction of the New Center. (b) Under the terms of the Leases relating to the shopping center/retail properties, the tenants are responsible for various operating expenses and real estate taxes. As a result of these arrangements, the Registrant does not believe it will be responsible for any major expenses in connection with such properties during the lease term of any tenant. The Registrant anticipates entering into similar leases with respect to properties. After the lease term, or in the event a tenant is unable to meet is obligations, the Registrant anticipates that any expenditures it might become responsible for in maintaining the properties will be funded by cash from operations and, in the case of major expenditures, possibly by borrowings. To the extent that expenditures or significant borrowings are required, the Registrant's cash available for distribution and liquidity may be adversely affected. (c) Registrant may also seek purchase money financing or institutional financing, other than the line of credit, to finance any new acquisitions. As of December 31, 1995 institutional money is available at relatively reasonable rates. The Registrant may, as a result, seek to raise additional monies for investment purposes, subject to the restrictions of the Line of Credit by securing mortgage financing on one or more of its properties. In addition, Registrant may seek to refinance one or more of its properties where mortgage financing is currently in place. (d) i) Registrant's mortgage on its shopping center property in Westwood, New Jersey has a principal balance as of October 31, 1995, of $5,444,000. The mortgage is payable to Aetna Life Insurance Company ("Aetna"). The monthly interest and principal payments are $55,287 including interest at 10% per annum. The mortgage is due in September, 2001. At that time, there will be a balloon payment of $4,506,109 due Aetna. The Registrant has made no provision to reserve cash to pay this indebtedness when it matures. (ii) Registrant's mortgage on its apartment project in Spring Lake Heights, New Jersey has a principal of $307,000 as of October 31, 1995. The mortgage is payable to UJB and is self-liquidating; there is no balloon payment at its due date. This loan is payable in monthly installments of $8,555 including interest at 7.625% per annum through March, 1999. (iii) Registrant's mortgage on its shopping center property in Frederick, Maryland, has a principal balance as of October 31, 1995 of $18,359,000. The mortgage is payable to State Mutual Life Insurance Company of America. The interest and principal payments are $160,925 including interest at 9% per annum. The mortgage is due in August, 1997. At that time, there will be a balloon payment of $17,993,111 due State Mutual. The Registrant has made no provision to reserve cash to pay this indebtedness when it matures. (iv) Registrant holds a 40% interest in the LLC which owns Westwood Hills. As described at "other Investment" page 5 hereof, the LLC has secured a mortgage on Westwood Hills in the face amount of $10,500,000. The mortgage is payable to USG. The monthly interest and principal payments are $79,654.51 including interest at 7.8% per annum. The mortgage matures in October of 2002. At that time, there will be a balloon payment of $9,230,965 due USG. The LLC has made no provision to reserve cash to pay this indebtedness when it matures. (v) See "Item 1. Business. Leverage; No Limitation on Debt; Possible Inability to Refinance Balloon Payments on Mortgage Debt" at pp. 10-11 hereof. (e) The Registrant anticipates that adequate cash will be available to fund its operating and administrative expenses, continuing debt service obligations and the payment of distributions in accordance with REIT requirements. Capital Strategy Since its inception in 1961, the Registrant has elected to be treated as a REIT for Federal income tax purposes. The Registrant anticipates making distributions to its stockholders from operating cash flows, which are expected to increase from future growth in rental revenues and other sources. Although cash used to make distributions reduces amounts available for capital investment, the Registrant generally intends to distribute not less than 95% of net income. Although the Registrant receives most of its rental payments on a monthly basis, it intends to make regular quarterly dividend payment distributions. The funds accumulated for dividend distributions may be invested by the Registrant in short-term marketable instruments. Dividend Reinvestment and Share Purchase Plan The Registrant filed a prospectus with the Securities and Exchange Commission to provide for Dividend Reinvestment and Share Purchase Plan (the "Plan"). The Plan has been withdrawn. The Plan would have provided an opportunity for its shareholders to purchase additional shares, through automatic reinvestment of dividends or additional voluntary cash investments, without paying any service fees, brokerage commissions or other charges. Economic Conditions (a) As of January 1, 1996, the Registrant has observed that the economic climate in the Mid-Atlantic states has shown improvement over that which was experienced in 1989 to 1993 period. Nevertheless, any substantial rise in interest rates over current rates may have the effect of again depressing the economic conditions which could result in the inability of some existing tenants of the Trust to meet their lease obligations and could otherwise adversely affect the Trust's ability to attract or retain tenants. Management believes that any inflation will have a positive impact for the long-term potential appreciation of the Registrant's shopping centers and apartment complexes. The majority of the Trust's shopping centers contain provisions designed to mitigate the short-term adverse impact of inflation. Such provisions include clauses enabling the Registrant to receive percentage rents which generally increase as prices rise, and/or escalation clauses which are typically related to increases in the consumer price index or similar inflation indices. Most of the Registrant's leases require the tenant to pay its pro rata share of costs and expenses associated with the ongoing operation of the property, including, but not limited to, real property taxes and assessments, repairs and maintenance, and insurance, thereby reducing the Registrant's exposure to increases in operating costs and expenses resulting from inflation. However, inflation may have a negative impact on some of the Registrant's other operating items. Interest, and general and administrative expenses, may be adversely affected by inflation as these specified costs could increase at a rate higher than rents. Also, for tenant leases with stated rent increases inflation may have a negative effect as the stated increases in these leases could be lower than the increase in inflation at any given time. Inflation may have a materially adverse effect upon the net income of the Registrant's apartment complexes, particularly those located in municipalities which have enacted rent control or rent levelling ordinances. Such ordinances typically limit the amount of the annual rental increase a tenant will be obligated to pay upon renewal of the tenant's lease. To the extent that an operating cost increases or only allows such recoupment pursuant to an application and approval process (with consequent regulatory and implementation delays), the Registrant's net income from the operation of its apartment complexes could be eroded by inflation. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Financial statements in accordance with the provisions of Regulation S-K are annexed hereto. ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There are no matters of disagreement on accounting and financial disclosures as between the Registrant and J.H. Cohn & Company required to be reported pursuant to Regulation S-K. There has not been in either of the past two years an adverse opinion or disclaimer of opinion, nor was any opinion qualified or modified as to uncertainty, audit scope or accounting principles. Since December of 1991, J.H. Cohn & Company has acted as the Registrant's principal accountants and auditors. Prior to that time, J.L. Hochberg & Co. was the Registrant's principal accountant and auditor. J.L. Hochberg & Co. resigned as principal accountants for the Registrant in December, 1991. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT. (A) IDENTIFICATION OF TRUSTEES.
Expiration Name Served Since Date of Term Age - ---- ------------ ------------ --- Robert S. Hekemian 1980 May, 1996 64 Donald W. Barney 1981 May, 1998 54 Expiration Name Served Since Date of Term Age - ---- ------------ ------------ --- John B. Voskian, MD 1968 May, 1996 71 Herbert C. Klein 1961 May, 1997 65 Nicholas A. Laganella 1969 May, 1997 77 Charles J. Dodge 1990 May, 1996 52 Alan L. Aufzien 1992 May, 1998 66 Ronald J. Artinian 1992 May, 1998 47
(B) IDENTIFICATION OF EXECUTIVE OFFICERS.
Name Served Since Position - ---- ------------ -------- Robert S. Hekemian 1991 Chairman of the Board John B. Voskian, MD 1968 Secretary Donald W. Barney 1993 President William R. DeLorenzo, Jr. 1974 Executive Secretary and Treasurer
All of the Officers of the Registrant serve at the pleasure of the Board of Trustees. The Officers devote the following approximate portions of their business activities to the Trust: Mr. Hekemian . . . . . . . 10% Mr. Barney . . . . . . . . 5% Mr. Voskian . . . . . . . Less than 5% Mr. DeLorenzo . . . . . . 10% (C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES. Registrant has no employees. Hekemian & Co., Inc. serves as the managing agent for the Registrant and manages all of its properties. Hekemian & Co. retains the services of a number of individuals who work on a full or part time basis in connection with Registrant's properties. The Registrant reimburses Hekemian & Co. for certain expenses related to such employees. (See Item 1, C(13) at pp. 15-16 hereof). (D) IDENTIFICATION OF CERTAIN SIGNIFICANT FAMILY RELATIONSHIPS. Mr. Hekemian is the brother-in-law of Dr. Voskian. Mr. Barney was formerly the brother-in-law of Mr. DeLorenzo. There are no other family relationships between any other Trustees or Executive Officers. (E) BUSINESS EXPERIENCE. (1) Robert S. Hekemian - Mr. Hekemian is Chairman of the Board of Hekemian & Co., Inc., a real estate brokerage firm. He is a director of United Jersey Bank of New Jersey ("UJB"), a member of UJB Financial Corp. United Jersey Bank of New Jersey is a banking institution with principal offices in Princeton, New Jersey. He is also a director, partner and/or officer of numerous private real estate corporations and partnerships. He has been active in real estate for over forty-two (42) years. (2) Donald W. Barney - Mr. Barney is Vice President and Treasurer of Union Camp Corporation, a Virginia corporation with executive offices in Wayne, New Jersey; director of Ramapo Bank, a New Jersey financial institution located in Wayne, New Jersey. Mr. Barney is also a partner and director of several real estate investment companies, partnerships, and corporations. (3) Dr. John B. Voskian - Dr. Voskian is a physician. He is also a director and an officer of a number of private real estate companies. Dr. Voskian is not currently practicing medicine. (4) Herbert C. Klein - Mr. Klein is a senior member of the law firm of Hannoch Weisman located in Roseland, New Jersey. Mr. Klein's practice is devoted to trial practice, real estate and corporate matters. Mr. Klein is a former member of the United States House of Representatives serving the 8th Congressional District of New Jersey from January, 1992 until January, 1995. Mr. Klein was formerly a member of the law firm of Klein Chapman. He is a director of Security Indemnity Insurance Company (a New Jersey financial institution), a former member of the New Jersey legislature, a member of the Bars of New Jersey and the District of Columbia, an attorney since 1956, and a member of the Board of Trustees of Rutgers University. (5) Nicholas A. Laganella - Mr. Laganella is the President of P.T. & L. Construction Company and a real estate investor on his own account. (6) Charles J. Dodge - Mr. Dodge is the Chief Executive Officer of Cronheim Mortgage Co. Mr. Dodge is also a partner in a real property development company and is a real estate investor on his own account. (7) Alan L. Aufzien - Mr. Aufzien is Chairman and Chief Executive Officer, Meadowlands Basketball Association, t/a New Jersey Nets (Member of the National Basketball Association), Director of The First New York Bank For Business, Chairman of New York Harbour Associates which is a real estate developer, Treasurer and Partner of Capital Formation Associates, a group of venture capital investors and operators, Chairman of RAL International, Ltd. and is active in various civic and business organizations. (8) Ronald J. Artinian - Mr. Artinian is the Senior Managing Director, National Sales Office at Smith Barney, investment advisors and is also a member of the Board of Directors of Smith, Barney. (9) William R. DeLorenzo, Jr. - Mr. DeLorenzo is an attorney in private practice as a principal in the firm of Wiss & Cooke, P.C. His law office is located in Hackensack, New Jersey. Mr. DeLorenzo is the former Chairman of the New Jersey Commission on Capital Budget and Planning. Directorships - Messrs. Klein, Hekemian, Laganella, Barney, Aufzien and Artinian are Directors of closely held corporations and partnerships that own real estate. (F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS. No Trustee or Officer of the Registrant has been the subject of a petition in bankruptcy, criminal proceeding or order of a Court or governmental agency barring him from participating in any commodities trading, security transactions, type of business practice or any other practice set forth in Section 229.401 subparagraph (f) of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION. Set forth below is a Summary Compensation Table for each of the Registrant's Officers and Trustees for the past three fiscal years: Summary Compensation Table (1)
Name and $ Executive Office Held Year Salary Committee Fee(2) - ----------- ---- ------ ------------- A) Officers 1995 5,000 800 Robert S. Hekemian, 1994 3,800 None Chairman 1993 3,800 None President 1992(3) 3,800 None 1995 5,000 800 Donald W. Barney, 1994 3,800 None President 1993(6) 1,900 None 1995 None 800 Herbert C. Klein, 1994 None None President 1993 None None 1992(4) 3,800 None 1995 None None John B. Voskian, 1994 None None Secretary 1993 None None 1992 None None 1995 10,500 1,600 William R 1994 9,300 None DeLorenzo, Jr 1993 9,300 400 Executive Secretary 1992 9,300 None and Treasurer
The Registrant has determined to compensate all Trustees for fiscal 1996 at the same base rate as in 1995 except that each Trustee or the Executive Secretary who attends regular or special meetings of the Board of Trustees shall continue to receive an additional sum of $400.00 for each meeting with no maximum instead of the $1,600 limit which existed for 1995. Registrant will pay to each Trustee who attends a site visit to inspect a property being reviewed for purchase, a fee of $400 together with actual out-of-pocket expenses.
Name and $ Executive Office Held Year Salary Committee Fee(2) - ----------- ---- ------ ------------- B) Trustees Robert S. Hekemian 1995 5,500 1,600 1994 5,500 None 1993 5,500 400 1992 5,500 None Donald W. Barney 1995 5,500 1,600 1994 5,500 None 1993 5,500 400 1992 5,500 None John B. Voskian 1995 5,500 1,200 1994 5,500 None 1993 5,500 None 1992 5,500 None Herbert C. Klein 1995 4,583.33 1,600 1994 None None 1993 None None 1992 5,500 None Nicholas A. Laganella 1995 5,500 1,200 1994 5,500 None 1993 5,500 None 1992 5,500 None Charles J. Dodge 1995 5,500 1,200 1994 5,500 None 1993 5,500 None 1992 5,500 None Ronald J. Artinian 1995 5,500 2,400 1994 5,500 None 1993 5,500 400 1992 2,750(5) None Alan L. Aufzien 1995 5,500 1,200 1994 5,500 400 1993 5,500 None 1992 2,750(5) None
The fee to be paid to the Chairman, President, and Treasurer will continue at the rate of $5,000.00 for fiscal year 1996. The fee was increased from $3,800.00 effective for fiscal year 1995. (1) No Officer or Trustee of the Registrant: a) has any stock options to purchase stock of the Registrant; b) receives any perquisites or other personal benefits, security or property; and c) is entitled to any long-term compensation of any kind from the Registrant. (2) Registrant maintains an investment committee which includes a majority of the Trustees and the Executive Secretary as a non-voting attendee. Members of the investment committee and the Executive Secretary received $400 for each meeting attended. There was one meeting of the investment committee during fiscal 1993. (3) Mr. Robert S. Hekemian was elected Chairman of the Board in 1991. Prior to that time, he had served the Registrant as President. (4) Mr. Herbert C. Klein was elected President of the Registrant in 1991. Prior to that time, he had not served the Registrant as an Officer. Mr. Klein had, however, served as a Trustee prior to 1991. Mr. Klein has resigned as President of the Registrant effective December 31, 1992 upon election to the United States House of Representatives for the term ending January 4, 1995. Mr. Klein did not receive any compensation from the Registrant for his service as a Trustee during his two year term as a U.S. Congressman. (5) Messrs. Artinian and Aufzien were elected to the Board of Trustees in May, 1992 and have been paid a partial fee for their services in that position by the Registrant based upon the standard annual fee paid to all Trustees of $5,500. (6) Mr. Barney was elected President of the Registrant on May 24, 1993. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. (A) No single person owns of record or beneficially five (5) percent or more of the shares of beneficial interest of the Registrant.
(B) (1) (2) (3) Title of Class Amount Beneficially Owned % of Class - -------------- ------------------------- ---------- Shares of beneficial 631,919 40.5% interest no par. All Trustees and Officers and their families as a group (1) of record and beneficial
(C) Registrant knows of no pledge of securities of the Registrant, the operation of the terms of which may at a subsequent date result in a change in control of the Registrant. (D) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Amount and Name of Nature of Beneficial Beneficial % of Title of Class Owner Owner Class - -------------- ---------- ---------- ----- Shares of beneficial interest no par Robert S. Hekemian 208,182 13.35 Shares of beneficial interest no par Donald W. Barney 122,235 7.84 Shares of beneficial interest no par John B. Voskian 109,536 7.02 Shares of beneficial interest no par Herbert C. Klein 62,332 4.0 Shares of beneficial interest no par Nicholas A. Laganella 3,625 0.23 Amount and Name of Nature of Beneficial Beneficial % of Title of Class Owner Owner Class - -------------- ---------- ---------- ----- Shares of beneficial interest no par Charles J. Dodge 500 0.03 Shares of beneficial interest no par Ronald J. Artinian 108,239 6.94 Shares of beneficial interest no par Alan L. Aufzien 1,500 .09 Shares of beneficial interest no par Wm. R. DeLorenzo, Jr. 15,770 1.01
- -------------- (1) No single person owns 5 percent of the shares. Includes spouses, parents, children, siblings, mothers and father-in-law, sons and daughters-in-law, and brothers and sisters-in-laws. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. (A) TRANSACTIONS WITH MANAGEMENT AND OTHERS. (i) Hekemian & Co., Inc. serves as the managing agent for the Registrant's properties and as a consultant to the Registrant. Robert S. Hekemian serves as Chairman of the Board of Hekemian & Co., Inc. and is also a shareholder. The following family members of Mr. Hekemian are Officers of Hekemian in the position set forth opposite their names. Samuel P. Hekemian - President Robert S. Hekemian, Jr. - Executive Vice President Bryan S. Hekemian - Vice-President and Secretary David B. Hekemian - Vice-President and Treasurer Serge Krikorian - Vice-President Insurance Department Mr. Hekemian also serves on the Board of Directors of UJB which holds a first mortgage on the Registrant's property located in Spring Lake Heights as more fully described in Item 1, Page 5 hereof and has issued the Line of Credit described at pages 6-7. Hekemian & Co., Inc. received a consulting fee of $850,000 in fiscal 1992 in connection with the purchase of Westridge and for other consulting services performed from 1988 through 1992. In 1993, Hekemian & Co., Inc. was paid a commission of $63,125 in connection with the purchase of additional property located in Rockaway, New Jersey. Hekemian & Co., Inc. was paid a fee of $500,000 in connection with the purchase Westwood Hills, LLC. The Registrant's share of the fee paid to Hekemian & Co., Inc. was $200,000 (40% interest in the LLC x $500,000). (ii) The law firm of Hannoch Weisman was retained by the Registrant during the fiscal year to furnish legal services. Herbert C. Klein, a Trustee, is a member of the law firm. (iii) The law firm of Wiss & Cooke, P.C. was retained by the Registrant during the fiscal year to furnish legal services. William R. DeLorenzo, Jr., the Executive Secretary and Treasurer is a member of the law firm. (iv) In connection with the refinancing of the Westwood Hills, LLC mortgage with USG Annuity & Life Company the Registrant loaned to the LLC $40,000. The LLC repaid the $40,000 together with interest calculated at the rate of 10.0% per annum on a per diem basis on September 14, 1995 when the mortgage closed. In addition, Hekemian & Co. was paid a fee of $52,500 for its services in connection with securing the USG Mortgage. (B) CERTAIN BUSINESS RELATIONSHIPS. On June 2, 1994, the Registrant purchased a forty (40%) percent interest in Westwood Hills, a New Jersey Limited Liability Company (the "LLC"), which is the owner of a 210 unit apartment complex located in Westwood, Bergen County, New Jersey (the "Westwood Hills"). The LLC purchased Westwood Hills on June 2, 1994, pursuant to a Contract of Sale dated February 9, 1994, as amended, immediately prior to the Registrant's purchase of its interest in the LLC. The LLC does not own any property other than Westwood Hills. Pursuant to the terms of an operating agreement, the Registrant will be the managing member of the LLC. The Registrant has retained Hekemian & Co., Inc. who will serve as the managing agent for Westwood Hills. The LLC purchased Westwood Hills from an unrelated third party for a purchase price of $14,500,000 or $69,048 per unit. The LLC, in order to purchase the apartment complex, invested a total of $4,980,000. The balance of the purchase price, or $9,520,000 was financed by a mortgage from UJB. The Registrant's share of the cash portion was $1,992,000 which was secured by drawing down on its open line of credit with UJB. The mortgage loan with UJB was refinanced with USG Annuity & Life Company in the face amount of $10.5 million (the "USG Mortgage"). The USG Mortgage is for a seven (7) year term with a twenty-five (25)year payout. As a result, a substantial balloon payment will be due at the expiration of the mortgage term. The LLC has not and has no plan to establish a cash reserve in order to be in the position to make the balloon payment when it is due. Instead, the LLC intends to refinance the property at the then current mortgage terms and conditions which may be less favorable then the terms and conditions of the USG Mortgage. The USG Mortgage bears interest at the rate of 7.80% per annum. Prior to the acquisition of its interest in the LLC, Registrant was advised that a Phase I audit was completed for the Apartment Complex which was acceptable. Several trustees and members of their families as well as one current and one former employee of Registrant's managing agent, Hekemian & Co., Inc. also acquired interests in the LLC as limited members all as set forth below. As a result of the investment by several trustees, counsel for Registrant advised and, as a result the Board of Trustees of the Registrant revised Section 7.5 of the Amended and Restated Declaration of Trust. As originally framed, Section 7.5 did not deal with the issue of the Registrant's participation in a partnership, joint venture, limited liability company, or other form of business organization or entity in which a trustee has a direct or indirect interest. Therefore, Section 7.5 was revised to provide that a trustee with a direct or indirect interest in the business organization or entity may vote on the proposal to buy or acquire the interest. The trustee, however, must first disclose to the other trustees, in writing, the nature of the extent of the interest. In acquiring its interest in the LLC, all trustees did vote affirmatively to purchase the Apartment Complex throughout its investment in the LLC and all interested and disinterested trustees voted affirmatively after full disclosure of the contract together with independent counsel reviewing the operating agreement for the LLC. Robert S. Hekemian, is a member of the Board of Directors of UJB which granted the original mortgage to the LLC. In addition, Robert S. Hekemian serves as Chairman of the Board of the Registrant. Hekemian & Co., Inc. acted as real estate broker for the acquisition of the Apartment Complex by the LLC. The LLC paid Hekemian & Co. a commission of $500,000 and $225,000 to a third party broker. The interests sold by the LLC to third parties, including the Registrant, were not registered to either the Securities Exchange Act of 1933 or with the New Jersey Bureau of Securities. As a result, the Registrant's interest cannot be freely transferred. There is no current market for the Registrant's interest in the LLC; the Registrant does not anticipate that a market will exist for its interest in the future. The interest of each of the members of the LLC are as follows:
POSITION RELATIONSHIP INITIAL WITH PERCENTAGE WITH A CAPITAL NAME TRUST OF INTEREST TRUSTEE CONTRIBUTION - ---- -------- ----------- ------------ ------------ Ronald J. Artinian Trustee 2.0% N/A $122,000.00 5 Bristol Drive Manhasset, NY 11030 Nicholas J. Aynilian None 0.75% Son-in-law $ 45,750.00 & Elizabeth Ann Aynilian and daughter Trustees for the Elizabeth of Serge Ann Aynilian Irrevocable Krikorian, Trust, Dated 1/1/91 Vice-President 477 Colonial Road Hekemian & Co., Ridgewood, NJ 07450 and niece of Robert S. Hekemian, Trustee Donald W. Barney Trustee 4.0% N/A $244,000.00 815 Pond Brook Road Franklin Lakes, NJ 07417 Katherine A. Gambino None 1.0% Daughter of $ 61,000.00 11 Todd Lane John Voskian, Old Tappan, NJ 07675 Trustee, and niece of Robert S. Hekemian, Trustee Bryan S. Hekemian None 7.0% Son of $427,000.00 7 Normandy Court Robert S. Ho-Ho-Kus, NJ 07423 Hekemian, Trustee and Vice- President of Hekemian & Co. Lisa Jann Hekemian None 5.0% Daughter of $305,000.00 47 Oxford Drive Robert S. Tenafly, NJ 07670 Hekemian, Trustee POSITION RELATIONSHIP INITIAL WITH PERCENTAGE WITH A CAPITAL NAME TRUST OF INTEREST TRUSTEE CONTRIBUTION - ---- -------- ----------- ------------ ------------ David B. Hekemian None 7.0% Son of $427,000.00 7 Normandy Court Robert S. Ho-Ho-Kus, NJ 07423 Hekemian, Trustee and Vice-President of Hekemian & Co. Robert S. Hekemian Trustee 0.8% N/A $ 48,800.00 47 Oxford Drive Tenafly, NJ 07670 Robert S. Hekemian,Jr. None 7.0% Son of $427,000.00 380 Prospect Avenue Robert S. Hackensack, NJ 07601 Hekemian, Trustee and Executive Vice-President of Hekemian & Co. Robert Hekemian & None 1.5% Beneficiary $ 91,500.00 Ann Krikorian, of Trust is Trustees F/B/O son of Samuel Jeffrey John Hekemian Hekemian, U.A.D. 1/24/78 President of 505 Main Street Hekemian & Co., Hackensack, NJ 0760l and nephew of Robert S. Hekemian, Trustee Robert Hekemian & None 1.5% Beneficiary $ 91,500.00 Ann Krikorian, of Trust is Trustees F/B/O son of Samuel Mark Steven Hekemian Hekemian, U.A.D. 12/10/85 President of 505 Main Street Hekemian & Co. Hackensack, NJ 0760l and nephew of Robert S. Hekemian, Trustee Robert Hekemian & N/A 1.5% Beneficiary $ 91,500.00 Ann Krikorian, of Trustee is Trustees F/B/O son of Samuel Peter Samuel Hekemian Hekemian, U.A.D. 11/24/76 President of 505 Main Street Hekemian & Co. Hackensack, NJ 0760l and nephew of Robert S. Hekemian, Trustee POSITION RELATIONSHIP INITIAL WITH PERCENTAGE WITH A CAPITAL NAME TRUST OF INTEREST TRUSTEE CONTRIBUTION - ---- -------- ----------- ------------ ------------ Robert Hekemian & None 1.5% Beneficiary $ 91,500.00 Ann Krikorian, of Trust is Trustees F/B/O son of Samuel Richard Edward Hekemian Hekemian, U.A.D. 9/1/83 President of 505 Main Street Hekemian & Co. Hackensack, NJ 0760l and nephew of Robert S. Hekemian, Trustee Samuel P. Hekemian None 0.7% President of $ 42,700.00 692 East Drive Hekemian & Co. Oradell, NJ 07649 and brother of Robert S. Hekemian, Trustee Albert A. Kapigian None 1.0% None $ 61,000.00 39 Kira Lane Ridgewood, NJ 07450 Shirlee Kerbeykian None 1.5% Wife of $ 91,500.00 156 Churchill Road Edward Kerbeykian Tenafly, NJ 07670 Senior Vice-President of Hekemian & Co. Ronald F. Kistner None 0.5% Employee of $ 30,500.00 75 Oak Grove Avenue Hekemian & Co. Hasbrouck Heights, NJ 07604 Herbert C. Klein Trustee 1.5% N/A $ 91,500.00 34 Lenox Avenue Clifton, NJ 07015 Krieger Family Trust None 1.5% Jacqueline $ 91,500.00 Jacqueline Klein, Trustee Klein is the P.O. Box 1758 wife of Herbert Clifton, NJ 07012 C. Klein, Trustee Aimee Nicole Krikorian None 0.75% Daughter of $ 45,750.00 & Elizabeth Ann Aynilian Serge Krikorian Trustees for the Aimee Nicole Vice-President of Krikorian Irrevocable Trust Hekemian & Co. and Dated 1/1/92 niece of Robert S. 168 Nancy Lane Hekemian, Trustee Wyckoff, NJ 07481 POSITION RELATIONSHIP INITIAL WITH PERCENTAGE WITH A CAPITAL NAME TRUST OF INTEREST TRUSTEE CONTRIBUTION - ---- -------- ----------- ------------ ------------ Douglas Diran Krikorian None 0.75% Son of $ 45,750.00 & Elizabeth Ann Aynilian Serge Krikorian Trustees for the Douglas Diran Vice-President of Krikorian Irrevocable Trust Hekemian & Co. and Dated 1/1/92 nephew of Robert S. 168 Nancy Lane Hekemian, Trustee Wyckoff, NJ 07481 Gregory Serge Krikorian None 0.75% Son of $ 45,750.00 & Elizabeth Ann Aynilian Serge Krikorian Trustees for the Gregory Serge Vice-President of Krikorian Irrevocable Trust Hekemian & Co. and Dated 1/1/92 nephew of Robert S. 168 Nancy Lane Hekemian, Trustee Wyckoff, NJ 07481 Henri & Leonara Nazarian None 5.0% None $305,000.00 Ave. Mostinck 76 1150 Bruxelles, Belgique Thomas A. Newton None 0.5% Former $ 30,500.00 497 Sussex Road Controller of Wood Ridge, NJ 07075 Hekemian & Co. Stephanie H. Reckler None 2.0% None $122,000.00 885 Park Avenue New York, NY 10021 Michael J. Voskian None 1.0% Son of John $ 61,000.00 639 Briarwood Court Voskian, Oradell, NJ 07649 Trustee and nephew of Robert S. Hekemian, Trustee Victoria A. Voskian None 1.0% Daughter of $ 61,000.00 716 Soldier Hill Road John Voskian, Oradell, NJ 07649 Trustee and niece of Robert S. Hekemian, Trustee TOTAL ................................................60.0% $3,660,000.00 N/A - Not applicable
WESTWOOD HILLS, LLC MANAGING MEMBER
INITIAL CAPITAL NAME PERCENTAGE OF INTEREST CONTRIBUTION - ---- ---------------------- ------------- First Real Estate 40% $2,440,000.00 Investment Trust of New Jersey, c/o Hekemian & Co., Inc. 505 Main Street P.O. Box 667 Hackensack, NJ 07602
(C) INDEBTEDNESS OF MANAGEMENT. Not applicable. (B) TRANSACTIONS WITH PROMOTERS. Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K. (A) List of all documents to be filed as a part of this 10-K Report: 1) Financial Statements (i) Report of Independent Public Accountant for Registrant, J.H. Cohn & Company, Inc. (ii) Combined Balance Sheets as of October 31, 1995 and 1994. (iii) Combined Statements of Income and Undistributed Earnings Years ended October 31, 1995, 1994 and 1993. (iv) Combined Statements for Cash Flows Years ended October 31, 1995, 1994 and 1993. (v) Notes to Combined Financial Statements. 2) Financial Statement Schedules. (ix) Short-Term Borrowings. (x) Supplementary Income Statement Information. (xi) Real Estate and Accumulated Depreciation. B) Reports on Form 8-K No report on Form 8-K was filed by the Registrant during the last quarter of the fiscal year ending October 31, 1995. C) Exhibits required pursuant to Item 601 of Regulation S-K Exhibit 3 - Amended and Restated Declaration of Trust, dated November 7, 1983 which was submitted as part of Registrant's 10-K for 1991, as amended which Exhibit is incorporated by reference; amendment dated May 31, 1994 to paragraphs 3.5 and 7.5, which was submitted as part of Registrant's 10-K for 1994 is incorporated by reference. Exhibit 10 - Material Contracts - (i) December 20, 1961 Management Agreement between the Registrant and Hekemian & Co., Inc. (formerly known as S. Hekemian & Co., Inc.), a copy of which was filed as Exhibit 10 with Registration Statement - 2-19609, which Exhibit is incorporated by reference. (ii) Amendment to Management Agreement dated May 8, 1963 which was filed as Exhibit 20 with Registration Statement 2- 48728, which Exhibit is hereby incorporated by reference. Exhibit 24 Report of J.H. Cohn & Company as the Independent Public Accountants of the Registrant is included in the Financial Statements, attached hereto. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: January 31, 1996 First Real Estate Investment Trust of New Jersey By: /s/ Robert S. Hekemian, --------------------------------- Robert S. Hekemian, Chairman of the Board and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert S. Hekemian his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: /s/Robert S. Hekemian January 31, 1996 - ------------------------------------ Robert S. Hekemian Chairman of the Board Chief Executive Officer and Trustee (Principal Executive Officer) /s/Donald Barney January 31, 1996 - ------------------------------------ Donald Barney Trustee and President /s/John B. Voskian January 31, 1996 - ------------------------------------ John B. Voskian Trustee and Secretary /s/Herbert C. Klein January 31, 1996 - ------------------------------------ Herbert C. Klein Trustee /s/Charles J. Dodge January 31, 1996 - ------------------------------------ Charles J. Dodge Trustee /s/Nicholas A. Laganella January 31, 1996 - ------------------------------------ Nicholas A. Laganella Trustee /s/William R. DeLorenzo, Jr. January 31, 1996 - ------------------------------------ William R. DeLorenzo, Jr. Executive Secretary and Treasurer (Principal Financial and Accounting Officer) Item 6. SELECTED FINANCIAL DATA
As of or for the Year Ended October 31, ------------------------------------------------------ 1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- (In Thousands of Dollars, Except Per Share Amounts) Operating data: Rental revenue $13,250 $11,162 $ 9,948 $ 8,465 $ 6,360 Rental expenses 9,592 8,235 7,268 5,899 3,888 ------- ------- ------- ------- ------- Income from rental operations 3,658 2,927 2,680 2,566 2,472 Other income 5 5 4 136 526 ------- ------- ------- ------- ------- 3,663 2,932 2,684 2,702 2,998 Other expenses (754) (473) (389) (264) (242) Minority interest (123) (76) ------- ------- ------- ------- ------- Net income $ 2,786 $ 2,383 $ 2,295 $ 2,438 $ 2,756 ======= ======= ======= ======= ======= Balance sheet data: Total assets $65,535 $65,613 $51,356 $50,064 $29,096 ======= ======= ======= ======= ======= Long-term obligations $34,598 $34,019 $24,963 $25,341 $ 6,412 ======= ======= ======= ======= ======= Per share data: Earnings per share $ 1.79 $ 1.53 $ 1.47 $ 1.56 $ 1.77 ======= ======= ======= ======= ======= Dividends per share $ 2.53 $ 1.62 $ 1.56 $ 1.765 $ 1.92 ======= ======= ======= ======= =======
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE INDEX TO COMBINED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (ITEMS 8 AND 14(a)) (A) COMBINED FINANCIAL STATEMENTS: REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS BALANCE SHEETS OCTOBER 31, 1995 AND 1994 STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993 STATEMENTS OF CASH FLOWS YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993 NOTES TO FINANCIAL STATEMENTS (B) FINANCIAL STATEMENT SCHEDULES: IX - SHORT-TERM BORROWINGS X - SUPPLEMENTARY INCOME STATEMENT INFORMATION XI - REAL ESTATE AND ACCUMULATED DEPRECIATION Other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the combined financial statements or notes thereto. * * * REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Trustees and Shareholders First Real Estate Investment Trust of New Jersey We have audited the accompanying combined balance sheets of FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE as of October 31, 1995 and 1994, and the related combined statements of income and undistributed earnings and cash flows for each of the three years in the period ended October 31, 1995. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of First Real Estate Investment Trust of New Jersey and Affiliate as of October 31, 1995 and 1994, and their results of operations and cash flows for each of the three years in the period ended October 31, 1995, in conformity with generally accepted accounting principles. Our audits referred to above included the information in Schedules IX, X and XI which present fairly, when read in conjunction with the combined financial statements, the information required to be set forth therein. J. H. COHN & COMPANY Roseland, New Jersey November 29, 1995 FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE COMBINED BALANCE SHEETS OCTOBER 31, 1995 AND 1994
ASSETS 1995 1994 ------ ------- ------- (In Thousands of Dollars) Real estate, at cost, net of accumulated depreciation ................................. $62,324 $63,176 Equipment, at cost, net of accumulated depreciation of $553,000 and $491,000 ........ 224 214 Cash ............................................. 533 238 Tenants' security accounts ....................... 947 867 Sundry receivables ............................... 248 325 Prepaid expenses and other assets ................ 911 601 Deferred charges, net ............................ 348 192 ------- ------- Totals ................................. $65,535 $65,613 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Liabilities: Mortgages payable ............................ $34,598 $34,019 Note payable - bank .......................... 5,169 5,428 Accounts payable and accrued expenses ........ 361 344 Dividends payable ............................ 1,154 Tenants' security deposits ................... 1,048 964 Deferred revenue ............................. 257 214 ------- ------- Total liabilities ...................... 42,587 40,969 ------- ------- Minority interest ................................ 2,959 3,496 ------- ------- Commitments and contingencies Shareholders' equity: Shares of beneficial interest without par value; 1,560,000 shares authorized; 1,559,788 shares issued and outstanding .... 19,314 19,314 Undistributed earnings ....................... 675 1,834 ------- ------- Total shareholders' equity ................... 19,989 21,148 ------- ------- Totals ................................ $65,535 $65,613 ======= =======
See Notes to Combined Financial Statements. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE COMBINED STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
INCOME 1995 1994 1993 ------ -------- -------- -------- (In Thousands of Dollars, Except per Share Amounts) Rental revenue: Rental income .......................... $ 11,700 $ 9,890 $ 8,804 Real estate taxes reimbursed ........... 914 642 611 Common area maintenance reimbursed ..... 466 472 384 Sundry income .......................... 170 158 149 -------- -------- -------- Totals ............................. 13,250 11,162 9,948 -------- -------- -------- Rental expenses: Operating expenses ..................... 2,636 2,482 2,106 Management fees ........................ 556 479 443 Real estate taxes ...................... 1,790 1,375 1,231 Interest ............................... 3,074 2,582 2,316 Depreciation ........................... 1,536 1,317 1,172 -------- -------- -------- Totals ............................. 9,592 8,235 7,268 -------- -------- -------- Income from rental operations .............. 3,658 2,927 2,680 -------- -------- -------- Other income (expense): Interest income ........................ 5 5 4 Interest expense ....................... (503) (279) (194) General and administrative ............. (245) (185) (187) -------- -------- -------- Totals ............................. (743) (459) (377) -------- -------- -------- Income before minority interest ............ 2,915 2,468 2,303 Minority interest .......................... 123 76 -------- -------- -------- Income before state income taxes ........... 2,792 2,392 2,303 Provision for state income taxes ........... 6 9 8 -------- -------- -------- Net income ................................. $ 2,786 $ 2,383 $ 2,295 ======== ======== ======== Earnings per share ......................... $ 1.79 $ 1.53 $ 1.47 ======== ======== ========
(Continued) FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE COMBINED STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS (Continued) YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
UNDISTRIBUTED EARNINGS 1995 1994 1993 ---------------------- -------- -------- -------- (In Thousands of Dollars, Except per Share Amounts) Balance, beginning of year ................. $ 1,834 $ 1,978 $ 2,116 Net income ................................. 2,786 2,383 2,295 Less dividends ............................. (3,945) (2,527) (2,433) -------- -------- -------- Balance, end of year ....................... $ 675 $ 1,834 $ 1,978 ======== ======== ======== Dividends paid per share ................... $ 2.53 $ 1.62 $ 1.56 ======== ======== ========
See Notes to Combined Financial Statements. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
1995 1994 1993 ------- ------- ------- (In Thousands of Dollars) Operating activities: Net income ..................................... $ 2,786 $ 2,383 $ 2,295 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .............. 1,608 1,362 1,254 Deferred revenue ........................... 43 85 14 Minority interest .......................... 123 76 Changes in operating assets and liabilities: Tenants' security accounts .............. (80) (193) (32) Sundry receivables, prepaid expenses and other assets ...................... (461) (229) (177) Accounts payable and accrued expenses ... 17 101 26 Tenants' security deposits .............. 84 197 50 Other liabilities ....................... (42) 18 ------- ------- ------- Net cash provided by operating activities ........................ 4,120 3,740 3,448 ------- ------- ------- Investing activities: Capital expenditures ........................... (694) (6,330) (1,979) Restricted cash ................................ 138 ------- ------- ------- Net cash used in investing activities (694) (6,330) (1,841) ------- ------- ------- Financing activities: Dividends paid ................................. (2,791) (2,527) (2,433) Minority interest contribution ................... 3,660 Minority interest distribution ................. (660) (240) Deferred charges ............................... (37) Proceeds from note payable - bank .............. 2,791 7,884 1,700 Repayment of note payable - bank ............... (3,050) (6,376) Mortgage proceeds .............................. 1,175 Repayment of mortgages ......................... (596) (464) (378) ------- ------- ------- Net cash provided by (used in) financing activities .............. (3,131) 1,900 (1,111) ------- ------- -------
(Continued) FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE COMBINED STATEMENTS OF CASH FLOWS (Continued) YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
1995 1994 1993 ------- ------- ------- (In Thousands of Dollars) Net increase (decrease) in cash .................... 295 (690) 496 Cash, beginning of year ............................ 238 928 432 ------- ------- ------- Cash, end of year .................................. $ 533 $ 238 $ 928 ======= ======= ======= Supplemental disclosure of cash flow data: Interest paid .................................. $ 3,360 $ 2,872 $ 2,499 ======= ======= ======= Income taxes paid .............................. $ 7 $ 7 $ 9 ======= ======= =======
Supplemental schedule of noncash investing and financing activities: During fiscal 1994, the Affiliate financed the purchase of real estate with mortgage proceeds of $9,520,000 (see Note 2). During fiscal 1995, the outstanding mortgage balance of approximately $9,325,000 was repaid using proceeds of a new mortgage (see Note 4). Dividends declared but not paid amounted to $1,154,000 at October 31, 1995. See Notes to Combined Financial Statements. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE NOTES TO COMBINED FINANCIAL STATEMENTS Note 1 - Organization and significant accounting policies: Organization: First Real Estate Investment Trust of New Jersey (the "Trust") was organized November 1, 1961 as a New Jersey Business Trust. The Trust has elected to be taxed as a Real Estate Investment Trust under the provisions of Sections 856-860 of the Internal Revenue Code, as amended. Accordingly, the Trust does not pay Federal income tax on income whenever income distributed to shareholders is equal to at least 95% of real estate investment trust taxable income. Further, the Trust pays no Federal income tax on capital gains distributed to shareholders. The Trust is subject to Federal income tax on undistributed taxable income and capital gains. The Trust may make an annual election under Section 858 of the Internal Revenue Code to apply part of the regular dividends paid in each respective subsequent year as a distribution for the immediately preceding year. For fiscal 1995, 1994 and 1993, the Trust made such an election. Principles of combination: The combined financial statements include the accounts of the Trust and Westwood Hills, LLC (the "Affiliate"), which have been combined on the basis of common control. The Affiliate is a limited liability company that is 40%-owned by the Trust and managed by Hekemian & Co., Inc. ("Hekemian"), a company which manages all of the Trust's properties and in which one of the trustees of the Trust is the chairman of the board. Certain other members of the Affiliate are either trustees of the Trust or their families or officers of Hekemian. The combined financial statements include 100% of the Affiliate's assets, liabilities, operations and cash flows with the 60% interest owned by the other members of the Affiliate reflected as "minority interest." All significant intercompany accounts and transactions have been eliminated in combination. Cash: The Trust and its Affiliate maintain their cash in bank deposit accounts which, at times, may exceed Federally insured limits. The Trust considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. At October 31, 1995 and 1994, the Trust had no cash equivalents. Depreciation: Real estate and equipment are depreciated on the straight-line method by annual charges to operations calculated to absorb costs of assets over their estimated useful lives. Revenue recognition: Income from leases is recognized on a straight-line basis regardless of when payment is due. Lease agreements between the Trust and commercial tenants generally provide for additional rentals based on such factors as percentage of tenants' sales in excess of specified volumes, increases in real estate taxes, Consumer Price Indices and common area maintenance charges. These additional rentals are generally included in income when reported to the Trust, when billed to tenants or ratably over the appropriate period. Deferred charges: Deferred charges consist of mortgage costs and leasing commissions. Deferred mortgage costs are amortized on the straight-line method by annual charges to operations over the terms of the mortgages. Deferred leasing commissions are amortized on the straight-line method over the terms of the applicable leases. Income taxes: The Affiliate, with the consent of its members, elected to be treated as a limited liability company under the applicable sections of the Internal Revenue Code. Under these sections, income or loss, in general, is allocated to the members for inclusion in their individual income tax returns. Accordingly, there is no provision for income taxes applicable to the operations of the Affiliate in the accompanying combined financial statements. Earnings per share: Earnings per share are computed based on the weighted average number of shares outstanding. The weighted average number of shares outstanding was 1,559,788 for each of the three years in the period ended October 31, 1995. Reclassifications: Certain accounts in the 1994 and 1993 combined financial statements have been reclassified to conform to 1995 presentations. Note 2 - Acquisition: During May 1994, the Trust became a 40% member of the Affiliate, a newly formed limited liability company. On June 2, 1994, the Affiliate consummated the purchase of Westwood Properties, a residential apartment complex located in Westwood, New Jersey (the "Apartment Complex"). The cost of the Apartment Complex was approximately $15,389,000 of which $5,869,000 was paid in cash and $9,520,000 was financed by the proceeds of a mortgage. The acquisition was accounted for as a purchase and, accordingly, the Apartment Complex's operations have been included in the accompanying 1995 and 1994 combined statements of income since the date of acquisition. Of the total cost of the acquisition (including related acquisition expenses), $3,849,000 was allocated to land and $11,540,000 to buildings and improvements. In connection with the acquisition, the Affiliate paid Hekemian a $500,000 real estate commission, which amount is included in the cost of the Apartment Complex. The following unaudited proforma information (in thousands of dollars, except per share amounts) shows the results of operations for the years ended October 31, 1994 and 1993 as though the Apartment Complex had been acquired at the beginning of fiscal 1993:
1994 1993 -------- -------- Rental revenue ............................. $ 12,398 $ 12,067 Rental expenses ............................ (9,293) (9,082) -------- -------- Income from rental operations .............. 3,105 2,985 Other expenses, net ........................ (542) (521) Minority interest .......................... (180) (180) Provision for income taxes ................. (8) (8) -------- -------- Net income ................................. $ 2,375 $ 2,276 ======== ======== Earnings per share ......................... $ 1.52 $ 1.46 ======== ========
In addition to combining the historical results of operations of the Apartment Complex and the Trust, the unaudited proforma results include adjustments for depreciation based on the Affiliate's purchase price, reduced interest income and increased interest expense related to cash paid and obligations incurred to complete the transaction. The unaudited proforma results of operations set forth above are based on information furnished by the Trust's management. Such proforma information is not necessarily indicative of the results that would have occurred had the acquisition been made at the beginning of fiscal 1993 or of future results of operations of the combined properties. Note 3 - Real estate: Real estate consists of the following:
Range of Estimated Useful Lives 1995 1994 -------------- ------- ------- (In Thousands of Dollars) Land $21,112 $21,112 Unimproved land 2,452 2,459 Apartment buildings 7-40 years 21,333 20,749 Commercial buildings 25-31.5 years 58 58 Shopping centers 15-50 years 26,859 26,769 Construction in progress 714 737 ------- ------- 72,528 71,884 Less accumulated depreciation 10,204 8,708 ------- ------- Totals $62,324 $63,176 ======= =======
Note 4 - Mortgages payable: Mortgages payable consist of the following:
1995 1994 ------- ------- (In Thousands of Dollars) State Mutual Life Assurance Company of America (A) ................................. $18,359 $18,624 Aetna Life Insurance Company (B) ................. 5,444 5,557 USG Annuity & Life Company (C) ................... 10,488 United Jersey Bank (C) ........................... 9,455 United Jersey Bank (D) ........................... 307 383 ------- ------- Totals ....................................... $34,598 $34,019 ======= =======
(A) Payable in monthly installments of $160,925 including interest at 9% through August 1997 at which time the outstanding balance is due. The mortgage is secured by a shopping center in Frederick, Maryland having a net book value of approximately $26,355,000. (B) Payable in monthly installments of $55,287 including interest at 10% through September 2001 at which time the outstanding balance is due. The mortgage is secured by a shopping center in Westwood, New Jersey having a net book value of approximately $12,051,000. (C) At October 31, 1994, the mortgage was payable in month- ly installments of $12,989 plus interest at a variable rate through June 2000 at which time the outstanding balance was due. During 1995, the mortgage was repaid using proceeds of a new mortgage in the amount of $10,500,000 which is payable in monthly installments of $79,655 including interest at 7.8% through October 2002 at which time the outstanding balance is due. The mort- gage is secured by the Apartment Complex in Westwood, New Jersey having a net book value of approximately $15,112,000. (D) Payable in monthly installments of $8,555 including interest at 7.625% through March 1999 at which time the outstanding balance is due. The mortgage is secured by an apartment building in Spring Lake, New Jersey having a net book value of approximately $673,000. One of the directors of the bank is a trustee of the Trust. Principal amounts (in thousands of dollars) due under the above obligations in each of the five years subsequent to October 31, 1995 are as follows: Year Ending October 31, Amount ----------- ------- 1996 $ 639 1997 18,448 1998 414 1999 387 2000 379 Note 5 - Note payable - bank: Note payable - bank consists of borrowings under a $20,000,000 revolving line of credit agreement with United Jersey Bank which expires on February 10, 1997. The first $10,000,000 of borrowings under the line of credit bear interest at either the prime rate or the LIBOR rate plus 200 basis points. Any excess borrowings bear interest at either the prime rate plus 1/2% or the LIBOR rate plus 250 basis points. Outstanding borrowings are secured by all of the Trust's properties except the shopping centers located in Frederick, Maryland and Westwood, New Jersey, the Apartment Complex in Westwood, New Jersey, and any vacant land owned by the Trust. Note 6 - Commitments and contingencies: Leases: Commercial tenants: The Trust leases commercial space having a net book value of approximately $39,453,000 at October 31, 1995 to tenants for periods of up to twenty years. Most of the leases contain clauses for reimbursement of real estate taxes, maintenance, insurance and certain other operating expenses of the properties. Minimum rental income (in thousands of dollars) to be received from noncancelable operating leases in years subsequent to October 31, 1995 are as follows: Year Ending October 31, Amount ----------- ------- 1996 $ 4,034 1997 3,588 1998 3,168 1999 2,720 2000 2,268 Thereafter 11,501 ------ Total $27,279 ======= The above amounts assume that all leases which expire are not renewed and, accordingly, neither minimal rentals nor rentals from replacement tenants are included. In addition, the above amounts do not include any future minimum rentals to be received for the shopping center in Franklin Lakes, New Jersey having a net book value of approximately $1,047,000 at October 31, 1995. Except for two tenants, management closed the shopping center on September 1, 1995. Commencement of a complete refurbishing of the premises is scheduled to begin during the Spring of 1996 and will take approximately nine months. The cost of the refurbishing, which will be put out for bid in the first quarter of fiscal 1996, is currently anticipated to approximate $6,000,000. Rental revenue derived from the shopping center was approximately $207,000, $310,000 and $349,000 in fiscal 1995, 1994 and 1993, respectively, and income from rental operations was approximately $91,000, $166,000 and $212,000, respectively. Minimum future rentals do not include contingent rentals which may be received under certain leases on the basis of percentage of reported tenants' sales volume or increases in Consumer Price Indices. Contingent rentals included in income for each of the three years in the period ended October 31, 1995 were not material. Residential tenants: Lease terms for residential tenants are usually one year or less. Environmental concerns: A landfill which is considered a superfund site is located next to a vacant parcel of land which is owned by the Trust. The New Jersey Department of Environmental Protection and Energy ("NJDEP") had advised the Trust that it was investigating the property for contamination as a result of the migration of environmentally sensitive materials from the landfill. In August 1994, the Trust was advised that, although the soil had not been environmentally impaired and a clean-up of the property would not be required, the NJDEP did determine that the groundwater in the area of the landfill, including below the Trust's property, is contaminated as a result of the activity at the landfill. Accordingly, the NJDEP is currently in the process of enforcing remediation of the groundwater by the responsible parties. As the Trust is not a responsible party, management anticipates that it will bear no liability for the cost of the groundwater remediation. Note 7 - Management agreement: The properties owned by the Trust and the Affiliate are currently managed by Hekemian. The management agreement requires fees equal to a percentage of rents collected. Such fees were approximately $556,000, $479,000 and $443,000 in 1995, 1994 and 1993, respectively. Note 8 - Earnings per share: Earnings per share, based on the weighted average number of shares outstanding during each period, are comprised of ordinary income. Note 9 - Shares of beneficial interest: On February 28, 1995, the Trustees tentatively approved an increase of 750,000 authorized shares of beneficial interest concurrent with the commencement of a proposed dividend reinvestment plan (the "Plan"). The Plan, however, has subsequently been withdrawn. * * * FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE SCHEDULE IX - SHORT-TERM BORROWINGS (In Thousands of Dollars)
Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Maximum Average Amount Amount Weighted Out- Out- Average Category of Balance Weighted standing standing Interest Aggregate at Average During During Rate Short-Term End of Interest the the During the Borrowings (A) Period Rate Period Period Period (B) ------ ---- ------ ------ ---------- 1995: Note payable - bank $5,169 8.09% $6,582 $5,585 7.9% ====== ==== ====== ====== === 1994: Note payable - bank $5,428 5.97% $5,728 $4,505 6.2% ====== ==== ====== ====== === 1993: Note payable - bank $3,920 6.0% $3,920 $3,413 6.0% ====== ==== ====== ====== ===
- --------------- (A) See Note 5 of notes to combined financial statements. (B) Calculated using average monthly loan balances and actual interest expense. SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION (In Thousands of Dollars)
Column A Column B -------- -------- Charged to Costs Item (A) and Expenses ---------------------------------- 1995 1994 1993 ------ ------ ------ Maintenance and repairs $ 243 $ 345 $ 271 ====== ====== ====== Real estate taxes $1,790 $1,375 $1,231 ====== ====== ======
(A) Amounts for other items were less than 1% of revenue in all years. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION OCTOBER 31, 1995 (In Thousands of Dollars)
Column A Column B Column C Column D -------- -------- -------- -------- Costs Capitalized Initial Cost Subsequent to Company to Acquisition ------------------------- --------------------------- Buildings Encum- and Carrying Description brances Land Improvements Improvements Costs ----------- ------- ---- ------------ ------------ -------- Garden apartments: Sheridan Apts., Camden, NJ $ 117 $ 360 $ 680 Grandview Apts., Has- brouck Heights, NJ 22 180 150 Lakewood Apts., Lake- wood, NJ 11 396 127 Hammel Gardens, May- wood, NJ 313 728 583 Palisades Manor, Palisades Park, NJ 12 81 76 Steuben Arms, River Edge, NJ 364 1,773 308 Heights Manor, Spring Lake Heights, NJ $ 307 109 974 291 Berdan Court, Wayne NJ 250 2,206 776 Westwood Hills, Westwood, NJ 10,488 3,849 11,540 104 Commercial property: Glen Rock, NJ 12 36 22 Shopping centers: Franklin Lakes Shopping Center, Franklin Lakes, NJ 29 380 959 Westridge Shopping Center, Frederick, MD 18,359 9,135 19,159 314 Westwood Shopping Center, Westwood, NJ 5,444 6,889 6,416 345 Vacant land: Franklin Lakes, NJ 224 $ 8 Rockaway, NJ 1,683 352 South Brunswick, NJ 80 105 ------- ------- ------- ------ ---- Totals $34,598 $23,099 $44,229 $4,735 $465 ======= ======= ======= ====== ====
(Continued) FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) OCTOBER 31, 1995 (In Thousands of Dollars)
Column E Column F Column G Column H Column I -------- ------------ ------------- -------- ----------- Gross Amount at Which Carried at Close of Period ------------------------------------- Buildings Which De- and Accumulated Date of Date preciation Description Land Improvements Total(1) Depreciation Construction Acquired is Computed ----------- ------- ------------ -------- ------------ ------------- -------- ----------- Garden apartments: Sheridan Apts., Camden, NJ $ 117 $ 1,040 $ 1,157 $ 569 1950 1964 7-40 years Grandview Apts., Has- brouck Heights, NJ 22 330 352 203 1925 1964 7-40 years Lakewood Apts., Lake- wood, NJ 11 523 534 387 1960 1962 7-40 years Hammel Gardens, May- wood, NJ 313 1,311 1,624 628 1949 1972 7-40 years Palisades Manor, Palisades Park, NJ 12 157 169 96 1935/70 1962 7-40 years Steuben Arms, River Edge, NJ 364 2,081 2,445 996 1966 1975 7-40 years Heights Manor, Spring Lake Heights, NJ 109 1,265 1,374 739 1967 1971 7-40 years Berdan Court, Wayne NJ 250 2,982 3,232 1,945 1964 1965 7-40 years Westwood Hills, Westwood, NJ 3,849 11,644 15,493 424 1966 1994 7-40 years Commercial property: Glen Rock, NJ 12 58 70 44 1940 1962 10-31.5 years Shopping centers: Franklin Lakes Shopping Center, Franklin Lakes, NJ 29 1,339 1,368 321 1963/75 1966 10-50 years Westridge Shopping Center, Frederick, MD 9,135 19,473 28,608 2,253 1986 1992 15-31.5 years Westwood Shopping Center, Westwood, NJ 6,889 6,761 13,650 1,599 1981 1988 15-31.5 years Vacant land: Franklin Lakes, NJ 232 232 1966/93 Rockaway, NJ 2,035 2,035 1964/92/93 South Brunswick, NJ 185 185 1964 ------- ------- ------- ------- Totals $23,564 $48,964 $72,528 $10,204 ======= ======= ======= =======
(1) Aggregate cost is the same for Federal income tax purposes. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND AFFILIATE SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION (In Thousands of Dollars) Reconciliation of real estate and accumulated depreciation:
1995 1994 1993 -------- -------- -------- Real estate: Balance, beginning of year $ 71,884 $ 56,080 $ 54,019 Additions: Land 3,849 Building and improvements 691 11,927 523 Vacant land 1,516 Carrying costs (7) 28 22 Deductions - write-off of fully depre- ciated assets (40) -------- -------- -------- Balance, end of year $ 72,528 $ 71,884 $ 56,080 ======== ======== ======== Accumulated depreciation: Balance, beginning of year $ 8,708 $ 7,433 $ 6,298 Additions - charged to operating expenses 1,536 1,275 1,135 Deductions - write-off of fully depre- ciated assets (40) -------- -------- -------- Balance, end of year $ 10,204 $ 8,708 $ 7,433 ======== ======== ========
EX-27 2
5 YEAR OCT-31-1995 OCT-31-1995 533,000 0 0 0 0 0 72,528,000 10,204,000 65,535,000 0 39,767,000 0 0 19,314,000 675,000 65,535,000 0 13,250,000 0 9,952,000 866,000 0 0 2,792,000 0 2,792,000 0 0 0 2,786,000 1.79 1.79
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