-----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, UIeiFRoiJa+pyMv6ghAp2nMnwxq3pnTPTMJSOx+J9Cfqd5lUaVlLxR93/BP23jzh q9LX4rmq8XJ39qa8AN88NQ== 0000914317-97-000436.txt : 19970918 0000914317-97-000436.hdr.sgml : 19970918 ACCESSION NUMBER: 0000914317-97-000436 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19970915 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-Q SEC ACT: SEC FILE NUMBER: 002-27018 FILM NUMBER: 97680599 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-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended July 31, 1997 Commission File No. 2-48728 FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY (exact name of registrant as specified in its charter) New Jersey 22-1697095 - ------------------------------- ------------------- (State or 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 number, including area code 201-488-6400 - -------------------------------------------------------------------------------- Former name,former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY INDEX Part I: Financial Information Item 1: Financial Statements a.) Balance Sheets for July 31, 1997 and October 31, 1996; b.) Statements of Income and Undistributed Earnings for Nine and Three Months Ended July 31, 1997 and 1996; c.) Statements of Cash Flows for Nine Months Ended July 31, 1997 and 1996; Item 2: Management's Discussion and Analysis of Results of Operations and Financial Condition Part II: Other Information Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY BALANCE SHEETS JULY 31, 1997 AND OCTOBER 31, 1996 (Unaudited) July October ASSETS 31, 1997 31, 1996 -------- -------- (In Thousands of Dollars) Real estate, at cost, net of accumulated depreciation ................................... $52,565 $46,836 Equipment, at cost, net of accumulated depreciation of $641,000 and $608,000 .......... 185 186 Investment in affiliate ............................ 1,930 1,924 Cash ............................................... 2,026 189 Tenants' security accounts ......................... 747 754 Sundry receivables ................................. 332 537 Prepaid expenses and other assets .................. 1,192 1,090 Deferred charges, net .............................. 355 158 ------- ------- Totals ................................... $59,332 $51,674 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgages payable .............................. $24,546 $23,609 Note payable - bank ............................ 10,383 5,662 Accounts payable and accrued expenses .......... 217 278 Construction liabilities ....................... 2,259 Dividends payable .............................. 546 1,029 Tenants' security deposits ..................... 875 853 Deferred revenue ............................... 259 ------- ------- Total liabilities ........................ 38,826 31,690 ------- ------- 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 .......................... 1,192 670 ------- ------- Total shareholders' equity ............... 20,506 19,984 ------- ------- Totals .................................. $59,332 $51,674 ======= ======= See Notes to Financial Statements.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY STATEMENTS OF INCOME AND UNDISTRIBUTED EARNINGS NINE AND THREE MONTHS ENDED JULY 31, 1997 AND 1996 (Unaudited) Nine Months Three Months Ended July 31, Ended July 31, -------------------- -------------------- INCOME 1997 1996 1997 1996 (In Thousands of Dollars, Except Per Share Amounts) Revenue: Rental income ............... $ 7,419 $ 7,209 $ 2,508 $ 2,421 Reimbursements .............. 1,060 1,188 375 326 Equity in income of affiliate 123 56 46 32 Sundry income ............... 110 130 28 29 ------- ------- ------- ------- Totals ................ 8,712 8,583 2,957 2,808 ------- ------- ------- ------- Expenses: Operating expenses .......... 1,988 2,083 661 623 Management fees ............. 369 358 121 116 Real estate taxes ........... 1,258 1,294 419 423 Interest .................... 1,960 1,998 648 666 Depreciation ................ 978 960 332 323 ------- ------- ------- ------- Totals ................ 6,553 6,693 2,181 2,151 ------- ------- ------- ------- Net income ...................... $ 2,159 $ 1,890 $ 776 $ 657 ======= ======= ======= ======= Earnings per share .............. $ 1.38 $ 1.21 $ .49 $ .42 ======= ======= ======= ======= UNDISTRIBUTED EARNINGS Balance, beginning of period .... $ 670 $ 675 $ 961 $ 816 Net income ...................... 2,159 1,890 776 657 Less dividends .................. (1,637) (1,638) (545) (546) ------- ------- ------- ------- Balance, end of period .......... $ 1,192 $ 927 $ 1,192 $ 927 ======= ======= ======= ======= Dividends per share ............. $ 1.05 $ 1.05 $ .35 $ .35 ======= ======= ======= ======= See Notes to Financial Statements.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY STATEMENTS OF CASH FLOWS NINE MONTHS ENDED JULY 31, 1997 AND 1996 (Unaudited) 1997 1996 ------- ------- (In Thousands of Dollars) Operating activities: Net income .......................................... $ 2,159 $ 1,890 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................... 1,005 1,014 Deferred revenue ................................ (259) 99 Equity in income of affiliate ................... (123) (56) Changes in operating assets and liabilities: Tenants' security accounts ................... 7 (24) Sundry receivables, prepaid expenses and other assets ...................................... 103 (1,206) Deferred charges ............................. (36) Accounts payable and accrued expenses ........ (61) 314 Tenants' security deposits ................... 22 21 ------- ------- Net cash provided by operating activities 2,853 2,016 ------- ------- Investing activities: Capital expenditures ................................ (4,447) (570) Distributions from affiliate ........................ 117 40 ------- ------- Net cash used in investing activities .... (4,330) (530) ------- ------- Financing activities: Dividends paid ...................................... (2,120) (2,246) Proceeds from note payable - bank ................... 4,721 997 Net proceeds from mortgage refinancing .............. 1,314 Repayment of mortgages .............................. (377) (370) Deferred mortgage costs ............................. (224) ------- ------- Net cash provided by (used in) financing activities ............................... 3,314 (1,619) ------- ------- Net increase (decrease) in cash ......................... 1,837 (133) Cash, beginning of period ............................... 189 465 ------- ------- Cash, end of period ..................................... $ 2,026 $ 332 ======= =======
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY STATEMENTS OF CASH FLOWS NINE MONTHS ENDED JULY 31, 1997 AND 1996 (Unaudited) 1997 1996 ------- ------- (In Thousands of Dollars) Supplemental disclosure of cash flow data: Interest paid, net of capitalized interest of $51,000 in 1997 ..................................... $ 1,961 $ 1,999 ======= ======= Supplemental schedule of noncash investing and financing activities: Dividends declared but not paid amounted to $546,000 at July 31, 1997 and 1996. Capital expenditures incurred but not paid aggregated $2,259,000 at July 31, 1997. See Notes to Financial Statements.
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY NOTES TO 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 is engaged in owning residential and commercial income producing properties located primarily in New Jersey. 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. Basis of presentation: The financial information included herein as at July 31, 1997 and for the nine and three months ended July 31, 1997 and 1996 is unaudited and, in the opinion of the Trust, reflects all adjustments (which include only normal recurring accruals) necessary for a fair presentation of the financial position as of that date and the results of operations for those periods. The information in the balance sheet as of October 31, 1996 was derived from the Trust's audited annual report for 1996. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Investment in Affiliate: The Trust's 40% investment in Westwood Hills, LLC (the "Affiliate") is accounted for using the equity method. Cash: The Trust maintains its 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 July 31, 1997 and October 31, 1996, the Trust had no cash equivalents. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY NOTES TO FINANCIAL STATEMENTS Note 1 - Organization and significant accounting policies (concluded): 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. Advertising: The Trust expenses the cost of advertising and promotions as incurred. Advertising costs charged to operations amounted to approximately $23,000 and $37,000 for the nine months ended July 31, 1997 and 1996, respectively, and approximately $7,000 for each of the three month periods ended July 31, 1997 and 1996. 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 nine and three month periods ended July 31, 1997 and 1996. Change in accounting policy: The Trust has changed its method of accounting for its investment in Affiliate. Previously, the accounts of the Affiliate were combined with those of the Trust on the basis of common control. However, in as much as the Trust does not maintain unilateral control over the Affiliate, the equity method of accounting for the investment is deemed to be more appropriate. Accordingly, the accompanying 1996 financial statements have been restated. The restatement had no effect on shareholders' equity, net income or earnings per share. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY NOTES TO FINANCIAL STATEMENTS Note 2 - Investment in affiliate: The Trust is a 40% member of the Affiliate, a limited liability company that is 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 Affiliate owns a residential apartment complex located in Westwood, New Jersey. Summarized financial information of the Affiliate as of July 31, 1997 and October 31, 1996 and for the nine and three months ended July 31, 1997 and 1996 is as follows:
July October 31, 1997 31, 1996 -------- -------- (In Thousands of Dollars) Balance sheet data: Assets: Real estate and equipment, net ............ $14,751 $14,928 Other ..................................... 560 544 ------- ------- Total assets ........................ $15,311 $15,472 ======= ======= Liabilities and equity: Liabilities: Mortgage payable ........................ $10,231 $10,346 Other ................................... 255 314 ------- ------- Totals .............................. 10,486 10,660 ------- ------- Members' equity: Trust ................................... 1,930 1,924 Others .................................. 2,895 2,888 ------- ------- Totals .............................. 4,825 4,812 ------- ------- Total liabilities and equity ........ $15,311 $15,472 ======= =======
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY NOTES TO FINANCIAL STATEMENTS Note 2 - Investment in affiliate: (concluded):
Nine Months Three Months Ended Ended July 31, July 31, ------------------ ------------------ 1997 1996 1997 1996 ------ ------ ------ ------ (In Thousands of Dollars) Income statement data: Rental revenue ............. $1,878 $1,750 $ 632 $ 594 Rental expenses ............ 1,570 1,610 515 514 ------ ------ ------ ------ Net income ................. $ 308 $ 140 $ 117 $ 80 ====== ====== ====== ======
Note 3 - Real estate: Real estate consists of the following:
Range of Estimated July October Useful Lives 31, 1997 31, 1996 ------------ -------- -------- (In Thousands of Dollars) Land $17,782 $17,263 Unimproved land 2,258 2,472 Apartment buildings 7-40 years 10,634 10,170 Commercial buildings 25-31.5 years 58 58 Shopping centers 15-50 years 26,348 26,947 Construction in progress 7,140 969 ------- ------- 64,220 57,879 Less accumulated depreciation 11,655 11,043 ------- ------- Totals $52,565 $46,836 ======= =======
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY NOTES TO FINANCIAL STATEMENTS Note 4 - Mortgages payable: Mortgages payable consist of the following:
July October 31, 1997 31, 1996 -------- -------- (In Thousands of Dollars) Northern Life Insurance Cos. (A) ............... $19,181 State Mutual Life Insurance Co. (A) ............ $18,068 Travelers Insurance (B) ........................ 5,217 5,319 Summit Bank (C) ................................ 148 222 ------- ------- Totals ..................................... $24,546 $23,609 ======= =======
(A) On June 30, 1997, the Trust repaid the existing mortgage on the Frederick, Maryland shopping center utilizing proceeds from a new mortgage in the amount of $19,200,000 with Northern Life Insurance Cos. The new mortgage is payable in monthly installments of $152,153 including interest at 8.31% through June 2007 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 $25,292,000. (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 $11,738,000. (C) 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 $579,000. 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 July 31, 1997 are as follows: Year Ending July 31, Amount -------- ------ 1998 $476 1999 487 2000 465 2001 509 2002 557 FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY NOTES TO FINANCIAL STATEMENTS Based on borrowing rates currently available to the Trust, the carrying amount of mortgages payable approximates fair value at July 31, 1997. Note 5 - Note payable - bank: Note payable - bank consists of borrowings under a $20,000,000 revolving line of credit agreement with Summit Bank which expires on October 31, 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 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 $44,743,000 at July 31, 1997 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 July 31, 1997 are as follows: Year Ending July 31, Amount -------- ------ 1998 $ 3,993 1999 3,792 2000 3,387 2001 3,186 2002 2,808 Thereafter 13,652 ------- Total $30,818 ======= 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 $7,688,000 at July 31, 1997. Management closed the shopping FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY NOTES TO FINANCIAL STATEMENTS Note 6 - Commitments and contingencies: (concluded) Leases: Commercial tenants: center on September 1, 1995 except for one tenant who vacated the premises on November 1, 1996. Commencement of a complete refurbishing of the premises is currently in progress and it is expected to be open for operations in the Fall of 1997. The cost of refurbishing is currently anticipated to approximate $10,000,000. 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 nine and three months ended July 31, 1997 and 1996 were not material. Residential tenants: Lease terms for residential tenants are usually one year or less. Acquisition: The Trust has entered into a contract to purchase a 64,000 square foot shopping center to be constructed in Patchogue, New York for approximately $11,400,000 including commissions and estimated professional fees. The Trust anticipates to complete this acquisition in September 1997. Standby letters of credit: At July 31, 1997, the Trust is obligated under irrevocable standby letters of credit of approximately $1,550,000 in connection with certain required land improvements at the Franklin Lakes shopping center. Note 7 - Management agreement: The properties owned by the Trust are currently managed by Hekemian. The management agreement requires fees equal to a percentage of rents collected. Such fees were approximately $369,000 and $358,000 for the nine months ended July 31, 1997 and 1996, respectively, and approximately $121,000 and $116,000 for the three months ended July 31, 1997 and 1996, 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. * * * ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion should be read in conjunction with the attached financial statements and notes thereto, and the Registrant's audited financial statements and notes thereto for Fiscal Year ended October 31, 1996. Results of Operations The earnings per share from the Registrant's regular operations were $0.49 for the Third Quarter of 1997 as compared to $0.42 per share for the Third Quarter of 1996. The increase in the earnings is due to both an increase in rental income and a decrease in operating expenses which allowed Registrant to absorb an increase in real property taxes. The increase in rental income was realized despite the closing of Franklin Lakes Shopping Center for the purpose of razing all present structures and to erect an enlarged shopping center at the site. Registrant experienced an increase in the earnings per share for the first nine months of 1997. The earnings per share were $1.38 in 1997 as compared to $1.21 for the first nine months of 1996. The increase in rental income was coupled with a decrease in operating expenses during the first nine months of 1997 resulting in the improved earnings despite the closing of the Franklin Lakes Shopping Center. As described in the 8-K attached hereto as Item 6, the Registrant has changed its method of accounting for its investment in the Westwood Hills, L.L.C. Prior to the fiscal year 1997, the Registrant prepared its Financial Statements on a consolidated basis. Since the Registrant does not, however, maintain unilateral control over the Westwood Hills, L.L.C. it has been determined that the equity method of accounting would be more appropriate. The equity method was adopted retroactively. As a result, the 1996 financial statements have been restated to reflect the foregoing accounting change. A 10K/A has been filed by the Registrant which reflects this change in the accounting for Westwood Hills, L.L.C. In addition, the Registrant will use the equity method of accounting with respect to Westwood Hills, L.L.C. as of fiscal year 1997. Financial Condition The Registrant continues to generate cash sufficient to meet all of its operational needs. Registrant does anticipate, however, that it will borrow against its Line of Credit or secure one or more mortgages to generate the funds required to construct the center in Franklin Lakes and to purchase the center in Patchogue, New York as hereinafter described in Item 5 hereof. PART II. OTHER INFORMATION Item 5. OTHER INFORMATION A) Franklin Lakes Shopping Center, Franklin Lakes, New Jersey The Franklin Lakes Shopping Center is presently under construction. The Registrant has, however, completed the construction of the 42,000 square foot food store which was turned over to its tenant for fit up work on or about August 1, 1997. The food store presently anticipates that it will complete all of its fit up costs so that it is open for business on or about October 15, 1997. As a result, the Registrant expects to receive rent for the food shopping center for approximately one half-month during fiscal year 1997. The balance of the shopping center, consisting of approximately 46,000 square feet, will be completed on or about January, 1998. The Registrant is in the process of seeking tenants for this space. B) Patchogue, New York The Patchogue, New York shopping center was completed during May, 1997. Under the purchase agreement with the Registrant, the builder is responsible to complete certain site work before Registrant is required to close title. The builder has been requested and is in the process of completing the site work. The food shopping market tenant has opened the store for operations. The Registrant anticipates that it will close title to the Patchogue Shopping Center on or about October 1, 1997 upon completion by the builder of all site work and final review of the structure before acceptance by Registrant and a closing of title. C) Line of Credit with Summit Bank The Line of Credit with Summit Bank has been extended through October 31, 1997. The Registrant and Summit Bank are in the process of negotiating the formal extension of the line of credit for a minimum period of one (1) year. D) Mortgage on the Westridge Shopping Center, Frederick Maryland ("Westridge Shopping Center") The Registrant has closed a new mortgage for its Westridge Shopping Center on June 30, 1997. At the time of the mortgage closing, the prior mortgage was paid off. The new mortgage is in the amount of $19.2 million. The term of the new mortgage is ten (10) years with a twenty (20) year payout. The interest rate for the new mortgage is 8.31%. The current mortgage bears an interest rate of 9% with a twenty-five (25) year payout. Because of the decrease in the payout period from twenty-five (25) years to twenty (20) years, the Registrant's payments of principal and interest increased from $160,924.00 under the prior mortgage to $164,320,00 under the present mortgage despite the decrease in the interest rate. E) At the August 6, 1997 meeting of the Registrant's Board of Trustees, the formation of Audit and Executive Committees was authorized: (a) The Audit Committee will consist of the following members of the Registant's Board of Trustees: a) Donald W. Barney b) Charles J. Dodge c) Alan L. Aufzien (b) The Executive Committee will consist of the following members of the Registrant's Board of Trustees: a) Robert S. Hekemian b) Donald W. Barney c) Herbert C. Klein d) Ronald J. Artinian ITEM 6. Exhibits and Reports on Form 8-K The Registrant filed the 8-K attached dated June 20, 1997. SIGNATURES Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. First Real Estate Investment Trust of New Jersey (Registrant) DATED: September 15, 1997 /s/ William R. DeLorenzo, Jr. ----------------------------- (Signature)* William R. DeLorenzo, Jr. Executive Secretary and Treasurer - --------------------- *Print name and title of the signing officer under his signature SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: June 20, 1997 FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY (Exact name of registrant as specified in its charter) New Jersey 2-27018 22-1697095 - -------------------------------------------------------------------------------- (State or other (Commission File (I.R.S. Employer jurisdiction of number) Identification incorporation) Number) 505 Main Street, P.O. Box 667, Hackensack, New Jersey 07602 ----------------------------------------------------- ---------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code 201-488-6400 Item 5. Other Events The Registrant has received a letter of comment from the Securities and Exchange Commission (the "SEC") dated May 28, 1997, a copy of which is attached to this 8-K under Item 7 (the "SEC Letter"). An amended 10K/A will be filed in response to the comments from the SEC. With respect to the SEC's comments set forth in the SEC Letter as to Note 1, the Registrant has agreed to use the equity method of accounting for its investment in the Westwood Hills, L.L.C. (the "LLC") for each accounting period commencing with the first quarter fiscal year 1997 and to restate all financial statements as they appeared in the 10-K filed for fiscal year 1996. Prior to the change to the equity method, the Registrant had reported its investment in the LLC on a consolidated basis. As a consequence of changing the accounting for the LLC to the equity method, the following is a summary of the significant changes which will occur: 1. The Combined Balance Sheets of the Registrant based upon the consolidated method of accounting for the LLC shows that the Total Assets, Total Liabilities, Minority Interest and Total Shareholder's Equity as of October 31, 1996 and 1995 were as follows:
1996 1995 ----------- ----------- Total Assets ....................... $65,222,000 $65,535,000 Total Liabilities .................. 42,350,000 42,587,000 Minority Interest .................. 2,888,000 2,959,000 Total Shareholders' Equity ......................... 19,984,000 19,989,000
2. As a result of the change to the equity method of accounting, the Restated Balance Sheets of the Registrant will show that Total Assets, Total Liabilities and Total Shareholders' Equity as of October 31, 1996 and 1995 will be as follows:
1996 1995 ----------- ----------- Total Assets ....................... $51,674,000 $51,838,000 Total Liabilities .................. 31,690,000 31,849,000 Total Shareholders' Equity ......................... 19,984,000 19,989,000
3. The Combined Statements of Income and Undistributed Earnings for the years ended October 31, 1996, 1995 and 1994, based upon the consolidated method of accounting for the LLC, were as follows:
1996 1995 1994 ----------- ----------- ----------- Total Revenues ........ $13,678,000 $13,250,000 $11,162,000 Total Expenses ........ 10,218,000 9,592,000 8,235,000 Net Income ............ 2,662,000 2,786,000 2,383,000 Earnings per share ........... $ 1.71 $ 1.79 $ 1.53
4. As a result of the change to the equity method of accounting, the Statements of Income and Undistributed Earnings for the years ended October 31, 1996, 1995 and 1994 will be as follows:
1996 1995 1994 ----------- ----------- ----------- Total Revenues ........ $11,318,000 $11,038,000 $10,279,000 Total Expenses ........ 8,091,000 7,585,000 7,479,000 Net Income ............ 2,662,000 2,786,000 2,383,000 Earnings per share ........... $ 1.71 $ 1.79 $ 1.53
5. The foregoing discussion is a summary based upon revised financial statements which will be incorporated into the 10K/A to be filed by the Registrant. Any interested parties should review all of the financial information which will be set forth in the 10K/A. Item 7: Financial Statements and Exhibits. 1. Letter from the SEC dated May 28, 1997. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FREIT By: /s/Robert S. Hekemian --------------------- Robert S. Hekemian Chairman of the Board DATED: June 20, 1997 [GRAPHIC-DIVISION OF CORPORATION FINANCE LOGO] UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Stop 7-2 May 28, 1997 Mr. Robert S. Hekemian, Chief Executive Officer Hekemian & Co., Inc. 505 Main Street, P.O. Box 667 Hackensack, New Jersey 07602 Re: First Real Estate Investment Trust of New Jersey Form 10K for the fiscal year ended October 31, 1996 Filed on January 30, 1997 File Number: 2-27018 Form 10Q for the quarter ended January 31, 1997 Filed on April 1, 1997 File Number: 2-48728 Dear Mr. Hekemian: The staff has reviewed only the portions of this filing related to the financial statements and management's discussion and analysis and has the following accounting comments. Form 10K - -------- Management's Discussion and Analysis of Financial Condition and - --------------------------------------------------------------- Results of Operations - --------------------- Expand this section to include a discussion of the 1995 amounts in comparison with 1994 amounts in accordance with Item 303 of Regulation S-X. Revise this section to state whether the known trend of rental expenses which are growing at a faster rate than rental revenue is expected to continue. Describe management's plans to address this trend. Note 4. Mortgages Payable - ------------------------- Revise this note to include the disclosures required by FASB 107. Mr. Robert S. Hekemian May 28, 1997 Page 2 Note 1. Accounting Policies - --------------------------- Revise this note to explain the basis for the consolidation of Westwood Hills LLC. Unless the registrant can demonstrate that it unilaterally controls the LLC, revise the financial statements to use the equity method of accounting for the investment in the LLC and include separate financial statements of the LLC pursuant to Rule 3-09 of Regulation S-X. See, generally, SOP 78-9. Form 10Q - -------- Note 3. Mortgages Payable - ------------------------- Expand the filing to include a disclosure which describes the registrant's current efforts to obtain alternative financing in order to pay off the State Mutual Life Insurance Co. mortgage obligation prior to its August 1, 1997 maturity. See Item 303 of Regulation S-X. The supplemental information which has been requested above should either be submitted by June 9, 1997, or the staff should be advised by that date when such information will be forthcoming. In the event compliance with the above comments is not deemed appropriate by the registrant, the basis therefore should be provided to the staff in a supplemental letter as promptly as possible. Questions regarding the above accounting comments may be directed to Allen E. Webb at (202) 942-1868 or Hugh Miller III, the Assistant Chief Accountant at (202) 942-1962 and questions on other disclosure issues may be directed to Paula Dubberly, the Assistant Director, at (202) 942-1960. Sincerely, /s/ Hugh Miller III ------------------- Hugh Miller III Assistant Chief Accountant EX-27 2
5 9-MOS OCT-31-1997 JUL-31-1997 2,026,000 0 0 0 0 0 65,046,000 (12,296,000) 59,332,000 0 24,546,000 0 0 19,314,000 1,192,000 59,332,000 0 8,712,000 0 6,553,000 0 0 0 2,159,000 0 0 0 0 0 2,159,000 1.38 1.38
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