UNITED
STATES
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, 2006
o
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the
transition period from _____ to _____
Commission
File No. 1-12803
URSTADT
BIDDLE PROPERTIES INC.
(Exact
name of registrant as specified in its charter)
|
Maryland
|
04-2458042
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
|
321
Railroad Avenue, Greenwich, CT
|
06830
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code: (203)
863-8200
Securities
registered pursuant to Section 12(b) of the Act:
|
Name
of each exchange
|
|
|
Title
of each class
|
on
which registered
|
|
Common
Stock, par value $.01 per share
|
New
York Stock Exchange
|
|
Class
A Common Stock, par value $.01 per share
|
New
York Stock Exchange
|
|
8.50
% Series C Senior Cumulative Preferred Stock
|
New
York Stock Exchange
|
|
7.5
% Series D Senior Cumulative Preferred Stock
|
New
York Stock Exchange
|
|
Preferred
Share Purchase Rights
|
New
York Stock Exchange
|
1
|
Securities
registered pursuant to Section 12 (g) of the Act: None
|
|||
|
Indicate
by check mark if the Registrant is a well-known seasoned issuer,
as
defined in Rule 405 of the Securities Act.
|
|||
|
Yes
o
|
No
x
|
||
|
Indicate
by check mark if the Registrant is not required to file reports
pursuant
to Section 13 or 15 (d) of the Act.
|
|||
|
Yes
o
|
No
x
|
||
|
Indicate
by check mark whether the Registrant (1) has filed all reports
required to
be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934
during the preceding 12 months (or for such shorter period that
the
registrant was required to file such reports), and (2) has been
subject to
such filing requirements for the past 90 days.
|
|||
|
Yes
x
|
No
o
|
||
|
Indicate
by check mark if disclosure of delinquent filers pursuant to Item
405 of
Regulation S-K is not contained herein, and will not be contained,
to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. o
|
|||
|
Indicate
by check mark whether the Registrant is a large accelerated filer,
an
accelerated filer or a non-accelerated filer. See definition of
accelerated filer and non-accelerated filer in Rule 12b-2 of the
Exchange
Act (Check one):
|
|||
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
|
|
Indicate
by check mark whether the Registrant is a shell company (as defined
in
Rule 12b-2 of the Act).
|
|||
|
Yes
o
|
No
|
||
|
The
aggregate market value of the voting common stock held by non-affiliates
of the Registrant as of April 30, 2006 (price at which the common
equity
was last sold as of the last business day of the Registrant’s most
recently completed second fiscal quarter): Common Shares, par value
$.01
per share $54,504,000; Class A Common Shares, par value $.01 per
share
$297,913,000.
|
|||
|
Indicate
the number of shares outstanding of each of the Registrant's classes
of
Common Stock and Class A Common Stock, as of January 5, 2007 (latest
date
practicable): 7,741,241 Common Shares, par value $.01 per share,
and
18,875,080 Class A Common Shares, par value $.01 per
share.
|
|||
DOCUMENTS
INCORPORATED BY REFERENCE
Proxy
Statement for Annual Meeting of Stockholders to be held on March 8, 2007
(certain parts as indicated herein) (Part III).
2
TABLE
OF CONTENTS
|
Item
No.
|
Page
No.
|
|
|
PART
I
|
||
|
1.
|
4
|
|
|
1
A.
|
9
|
|
|
1
B.
|
13
|
|
|
2.
|
14
|
|
|
3.
|
15
|
|
|
4.
|
15
|
|
|
PART
II
|
||
|
5.
|
16
|
|
|
6.
|
18
|
|
|
7.
|
19
|
|
|
|
||
|
7
A.
|
26
|
|
|
8.
|
27
|
|
|
9.
|
27
|
|
|
9
A.
|
27
|
|
|
9
B.
|
30
|
|
|
PART
III
|
||
|
10.
|
30
|
|
|
11.
|
30
|
|
|
12.
|
31
|
|
|
13.
|
31
|
|
|
14.
|
31
|
|
|
PART
IV
|
||
|
15.
|
32
|
|
|
16.
|
59
|
|
3
PART
I
Forward-Looking
Statements
This
Annual Report on Form 10-K of Urstadt Biddle Properties Inc. (the “Company”)
contains certain forward-looking statements within the meaning of Section 27A
of
the Securities Act of 1933,as amended, and Section 21E of the Securities
Exchange Act of 1934,as amended. Such statements can generally be identified
by
such words as “anticipate”, “believe”, “can”, “continue”, “could”, “estimate”,
“expect”, “intend”, “may”, “plan”, “seek”, “should”, “will” or variations of
such words or other similar expressions and the negatives of such words. All
statements, other than statements of historical facts, included in this report
that address activities, events or developments that the Company expects,
believes or anticipates will or may occur in the future, including such matters
as future capital expenditures, dividends and acquisitions (including the amount
and nature thereof), expansion and other development trends of the real estate
industry, business strategies, expansion and growth of the Company’s operations
and other such matters are forward-looking statements. These statements are
based on certain assumptions and analyses made by the Company in light of its
experience and its perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate. Such
statements are inherently subject to risks, uncertainties and other factors,
many of which cannot be predicted with accuracy and some of which might not
even
be anticipated. Future events and actual results, performance or achievements,
financial and otherwise, may differ materially from the results, performance
or
achievements expressed or implied by the forward-looking statements. Risks,
uncertainties and other factors that might cause such differences, some of
which
could be material, include, but are not limited to economic and other market
conditions; financing risks, such as the inability to obtain debt or equity
financing on favorable terms; the level and volatility of interest rates;
financial stability of tenants; the inability of the Company’s properties to
generate revenue increases to offset expense increases; governmental approvals,
actions and initiatives; environmental/safety requirements; risks of real estate
acquisitions (including the failure of acquisitions to close); risks of
disposition strategies; as well as other risks identified in this Annual Report
on Form 10-K under Item 1A. Risk Factors and in the other reports filed by
the
Company with the Securities and Exchange Commission (the “SEC”).
Item
1. Business.
Organization
The
Company, a Maryland Corporation, is a real estate investment trust engaged
in
the acquisition, ownership and management of commercial real estate. The Company
was organized as an unincorporated business trust (the “Trust”) under the laws
of the Commonwealth of Massachusetts on July 7, 1969. In 1997, the shareholders
of the Trust approved a plan of reorganization of the Trust from a Massachusetts
business trust to a corporation organized in Maryland. The plan of
reorganization was effected by means of a merger of the Trust into the Company.
As a result of the plan of reorganization, the Trust was merged with and into
the Company, the separate existence of the Trust ceased, the Company was the
surviving entity in the merger and each issued and outstanding common share
of
beneficial interest of the Trust was converted into one share of Common Stock,
par value $.01 per share, of the Company.
Tax
Status - Qualification as a Real Estate Investment Trust
The
Company elected to be taxed as a real estate investment trust (“REIT”) under
Sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code")
beginning with its taxable year ended October 31, 1970. Pursuant to such
provisions of the Code, a REIT which distributes at least 90% of its real estate
investment trust taxable income to its shareholders each year and which meets
certain other conditions regarding the nature of its income and assets will
not
be taxed on that portion of its taxable income which is distributed to its
shareholders. Although the Company believes that it qualifies as a real estate
investment trust for federal income tax purposes, no assurance can be given
that
the Company will continue to qualify as a REIT.
Description
of Business
The
Company's sole business is the ownership of real estate investments, which
consist principally of investments in income-producing properties, with primary
emphasis on properties in the northeastern part of the United States with a
concentration in Fairfield County, Connecticut and Westchester and Putnam
Counties, New York. The Company's core properties consist principally of
neighborhood and community shopping centers. The remaining properties include
office buildings and industrial properties. The Company seeks to identify
desirable properties for acquisition, which it acquires in the normal course
of
business. In addition, the Company regularly reviews its portfolio and from
time
to time may sell certain of its properties.
The
Company intends to continue to invest substantially all of its assets in
income-producing real estate, with an emphasis on neighborhood and community
shopping centers, although the Company will retain the flexibility to invest
in
other types of real property. While the Company is not limited to any geographic
location, the Company's current strategy is to invest primarily in properties
located in the northeastern region of the United States with a concentration
in
Fairfield County, Connecticut and Westchester and Putnam Counties, New York.
At
October 31, 2006, the Company owned or had an equity interest in thirty-seven
properties comprised of neighborhood and community shopping centers, office
buildings and industrial facilities located in eight states throughout the
United States, containing a total of 3.7 million square feet of gross leasable
area. For a description of the Company's individual investments, see Item
2-Properties.
4
Investment
and Operating Strategy
The
Company's investment objective is to increase the cash flow and consequently
the
value of its properties. The Company seeks growth through (i) the strategic
re-tenanting, renovation and expansion of its existing properties, and (ii)
the
selective acquisition of income-producing properties, primarily neighborhood
and
community shopping centers, in its targeted geographic region. The Company
may
also invest in other types of real estate in the targeted geographic region.
For
a discussion of key elements of the Company’s growth strategies and operating
policies, see Item 7 - Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
The
Company invests in properties where cost effective renovation and expansion
programs, combined with effective leasing and operating strategies, can improve
the properties’ values and economic returns. Retail properties are typically
adaptable for varied tenant layouts and can be reconfigured to accommodate
new
tenants or the changing space needs of existing tenants. In determining whether
to proceed with a renovation or expansion, the Company considers both the cost
of such expansion or renovation and the increase in rent attributable to such
expansion or renovation. The Company believes that certain of its properties
provide opportunities for future renovation and expansion.
When
evaluating potential acquisitions, the Company considers such factors as (i)
economic, demographic, and regulatory conditions in the property’s local and
regional market; (ii) the location, construction quality, and design of the
property; (iii) the current and projected cash flow of the property and the
potential to increase cash flow; (iv) the potential for capital appreciation
of
the property; (v) the terms of tenant leases, including the relationship between
the property’s current rents and market rents and the ability to increase rents
upon lease rollover; (vi) the occupancy and demand by tenants for properties
of
a similar type in the market area; (vii) the potential to complete a strategic
renovation, expansion or re-tenanting of the property; (viii) the property’s
current expense structure and the potential to increase operating margins;
and
(ix) competition from comparable properties in the market area.
The
Company may from time to time enter into arrangements for the acquisition of
properties with unaffiliated property owners through the issuance of units
of
limited partnership interests in entities that the Company controls. These
units
may be redeemable for cash or for shares of the Company’s Common stock or Class
A Common stock. The Company believes that this acquisition method may permit
it
to acquire properties from property owners wishing to enter into tax-deferred
transactions.
The
Company is the general partner in a partnership that owns The Shoppes at
Eastchester in Eastchester, New York. The limited partner contributed the
property in exchange for Common, Class A and Preferred LP Units (partnership
units) and is entitled to preferential distributions of cash flow from the
property. The limited partner may exchange its Common and Class A Common LP
units with the Company in exchange for shares of the Company’s Common Stock and
Class A Common stock at any time on or prior to October 2007. However, the
Company, at its option, may elect to redeem the partnership units for cash.
The
limited partner may also put its Preferred LP units to the Company for a fixed
cash amount at any time prior to October 2007. The Company also has an option
to
redeem all of the partnership units for cash after October 2008. At October
31,
2006 there were 54,553 each of Common LP units, Class A Common LP units and
Preferred LP units outstanding.
Core
Properties
The
Company considers those properties that are directly managed by the Company,
concentrated in the retail sector and located close to the Company's
headquarters in Fairfield County, Connecticut, to be core properties. Of the
thirty-seven properties in the Company's portfolio, thirty-four properties
are
considered core properties consisting of twenty-nine retail properties and
five
office buildings (including the Company's executive headquarters). At October
31, 2006, these properties contained in the aggregate 3.2 million square feet
of
gross leasable area. The Company's core properties collectively had 501 tenants
providing a wide range of products and services. Tenants include regional
supermarkets, national and regional discount department stores, other local
retailers and office tenants. At October 31, 2006, the core properties were
97%
leased. The Company believes the core properties are adequately covered by
property and liability insurance.
A
substantial portion of the Company's operating lease income is derived from
tenants under leases with terms greater than one year. Certain of the leases
provide for the payment of fixed base rentals monthly in advance and for the
payment of a pro-rata share of the real estate taxes, insurance, utilities
and
common area maintenance expenses incurred in operating the
properties.
Two
of
the core properties in the Company’s portfolio are owned by partnerships in
which the Company is the sole general partner.
5
No
single
tenant comprised more than 6.3% of the total annual base rents of the Company’s
core properties. The following table sets out a schedule of our ten largest
tenants by percent of total annual base rent of our core properties as of
October 31, 2006.
|
Tenant
|
Number
of
Stores
|
%
of Total
Annual
Base Rent of
Core
Properties
|
|
Stop
& Shop Supermarket
|
3
|
6.3%
|
|
Bed,
Bath, and Beyond
|
2
|
2.7%
|
|
Staples
Inc.
|
3
|
2.4%
|
|
Toys
‘R’ Us
|
2
|
2.4%
|
|
Marshall’s
|
2
|
2.1%
|
|
ShopRite
Supermarkets
|
2
|
2.1%
|
|
Christmas
Tree Shops
|
1
|
1.8%
|
|
Big
Y Foods
|
1
|
1.8%
|
|
Borders
Inc
|
1
|
1.7%
|
|
The
Sports Authority
|
1
|
1.5%
|
|
24.8%
|
See
Item
2 Properties for a complete list of the Company’s core properties.
The
Company’s single largest real estate investment is its 90% interest in the
Ridgeway Shopping Center (“Ridgeway”). Ridgeway is located in Stamford,
Connecticut and was developed in the 1950’s and redeveloped in the mid 1990’s.
The property contains approximately 369,000 square feet of gross leasable space.
It is the dominant grocery anchored center and the largest non-mall shopping
center located in the City of Stamford, Fairfield County, Connecticut. For
the
year ended October 31, 2006, Ridgeway revenues represented approximately 14%
of
the Company’s total revenues and approximately 20% of the Company’s total assets
at October 31, 2006. As of October 31, 2006, Ridgeway was approximately 95%
leased. The property’s largest tenants (by base rent) are: The Stop & Shop
Supermarket Company,a division of Ahold (20%) Bed, Bath and Beyond (15%),
Marshall’s Inc., a division of the TJX Companies (10%), and L.A. Fitness
International, LLC, (10%). No other tenant accounts for more than 10% of
Ridgeway’s annual base rents.
The
following table sets out a schedule of the annual lease expirations for retail
leases at Ridgeway as of October 31, 2006 for each of the next ten years and
thereafter (assuming that no tenants exercise renewal or cancellation options
and that there are no tenant bankruptcies or other tenant
defaults):
|
Year
of
Expiration
|
Number
of
Leases
Expiring
|
Square
Footage
|
Minimum
Base
Rentals
|
Base
Rent (%)
|
|
2007
|
3
|
7,050
|
$284,000
|
2.02%
|
|
2008
|
9
|
50,516
|
1,392,000
|
14.45%
|
|
2009
|
2
|
4,646
|
184,000
|
1.33%
|
|
2010
|
3
|
36,415
|
654,000
|
10.42%
|
|
2011
|
2
|
4,440
|
153,000
|
1.27%
|
|
2012
|
5
|
23,917
|
712,000
|
6.84%
|
|
2013
|
3
|
51,976
|
1,491,000
|
14.87%
|
|
2014
|
3
|
5,758
|
195,000
|
1.65%
|
|
2015
|
3
|
7,635
|
246,000
|
2.18%
|
|
2016
|
1
|
72,000
|
1,717,000
|
20.60%
|
|
Thereafter
|
4
|
85,210
|
1,763,000
|
24.37%
|
|
Total
|
38
|
349,563
|
$8,791,000
|
100%
|
Non-Core
Properties
In
a
prior year, the Board of Directors of the Company expanded and refined the
strategic objectives of the Company to concentrate the real estate portfolio
into one of primarily retail properties located in the Northeast and authorized
the sale of the Company’s non-core properties in the normal course of business
over a period of several years given prevailing market conditions and the
characteristics of each property.
Through
this strategy, the Company seeks to update its property portfolio by disposing
of properties which have limited growth potential and redeploying capital into
properties in its target geographic region and product type where the Company’s
management skills may enhance property values. The Company may engage from
time
to time in like-kind property exchanges, which allow the Company to dispose
of
properties and redeploy proceeds in a tax efficient manner.
At
October 31, 2006, the Company's non-core properties consisted of one retail
property totaling 126,000 square feet and two industrial facilities with a
total
of 447,000 square feet of gross leasable area (“GLA.”) The non-core properties
collectively had 4 tenants and were 100% leased at October 31, 2006.
6
The
retail property, located in Tempe, Arizona, is leased to two tenants. The leases
obligate these tenants to pay all taxes, insurance, maintenance and other
operating costs on their portion of the property leased during the term of
the
lease.
The
two
industrial facilities consist of automobile and truck parts distribution
warehouses. The facilities are net leased to DaimlerChrysler Corporation under
long-term lease arrangements whereby the tenant pays all taxes, insurance,
maintenance and other operating costs of the property during the term of the
lease.
At
October 31, 2006, the Company also held one fixed rate mortgage note with a
net
book value of $1,361,000.
Financing
Strategy
The
Company intends to continue to finance acquisitions and property improvements
and/or expansions with the most advantageous sources of capital which it
believes are available to the Company at the time, and which may include the
sale of common or preferred equity through public offerings or private
placements, the incurrence of additional indebtedness through secured or
unsecured borrowings, investments in real estate joint ventures and the
reinvestment of proceeds from the disposition of assets. The Company’s financing
strategy is to maintain a strong and flexible financial position by (i)
maintaining a prudent level of leverage, and (ii) minimizing its exposure to
interest rate risk represented by floating rate debt.
Matters
Relating to the Real Estate Business
The
Company is subject to certain business risks arising in connection with owning
real estate which include, among others, (1) the bankruptcy or insolvency of,
or
a downturn in the business of, any of its major tenants, (2) the possibility
that such tenants will not renew their leases as they expire, (3) vacated anchor
space affecting an entire shopping center because of the loss of the departed
anchor tenant's customer drawing power, (4) risks relating to leverage,
including uncertainty that the Company will be able to refinance its
indebtedness, and the risk of higher interest rates, (5) potential liability
for
unknown or future environmental matters, and (6) the risk of uninsured losses.
Unfavorable economic conditions could also result in the inability of tenants
in
certain retail sectors to meet their lease obligations and otherwise could
adversely affect the Company's ability to attract and retain desirable tenants.
The Company believes that its shopping centers are relatively well positioned
to
withstand adverse economic conditions since they typically are anchored by
grocery stores, drug stores and discount department stores that offer day-to-day
necessities rather than luxury goods. For a discussion of various business
risks, see Item 1A. Risk Factors.
Compliance
with Governmental Regulations
The
Company, like others in the commercial real estate industry, is subject to
numerous environmental laws and regulations. Although potential liability could
exist for unknown or future environmental matters, the Company believes that
its
tenants are operating in accordance with current laws and regulations.
Competition
The
real
estate investment business is highly competitive. The Company competes for
real
estate investments with investors of all types, including domestic and foreign
corporations, financial institutions, other real estate investment trusts,
real
estate funds, individuals and privately owned companies. In addition, the
Company's properties are subject to local competitors from the surrounding
areas. The Company does not consider its real estate business to be seasonal
in
nature. The Company's shopping centers compete for tenants with other regional,
community or neighborhood shopping centers in the respective areas where Company
retail properties are located. The Company's office buildings compete for
tenants principally with office buildings throughout the respective areas in
which they are located. Leasing space to prospective tenants is generally
determined on the basis of, among other things, rental rates, location, and
physical quality of the property and availability of space.
Since
the
Company's industrial properties are net leased under long-term lease
arrangements that are not due to expire in the next twelve months, the Company
does not currently face any immediate competitive re-leasing pressures with
respect to such properties.
Property
Management
The
Company actively manages and supervises the operations and leasing at all of
its
core properties and one non-core property. The Company's remaining non-core
industrial properties are net leased to tenants under long-term lease
arrangements, whereby the tenant is obligated to manage the
property.
Employees
The
Company's executive offices are located at 321 Railroad Avenue, Greenwich,
Connecticut. It occupies approximately 5,000 square feet in a two-story office
building owned by the Company. The Company has 32 employees and believes that
its relationship with its employees is good.
7
Company
Website
All
of
the Company’s filings with the SEC, including the Company’s annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Exchange Act, are available free of charge at the Company’s website
at www.ubproperties.com as soon as reasonably practicable after the Company
electronically files such material with, or furnishes it to, the SEC. These
filings can also be accessed through the SEC’s website at www.sec.gov.
Alternatively, the Company will provide paper copies of its filings (excluding
exhibits) free of charge upon request to its shareholders or to anyone who
requests them.
Code
of Ethics and Whistleblower Policies
The
Company’s Board of Directors has adopted a Code of Ethics for Senior Financial
Officers that applies to the Company’s Chief Executive Officer, Chief Financial
Officer and Controller. The Board also adopted a Code of Business Conduct and
Ethics applicable to all employees as well as a “Whistleblower Policy”. The
Company will make paper copies of these documents available free of charge
upon
request to the Corporate Secretary of the Company.
Financial
Information About Industry Segments
The
Company operates in one industry segment, ownership of commercial real estate
properties, which are located principally in the northeastern United States.
The
Company does not distinguish its property operations for purposes of measuring
performance. Accordingly, the Company believes it has a single reportable
segment for disclosure purposes.
8
Item
1A. Risk Factors
Risks
related to our operations and properties
There
are risks relating to investments in real estate and the value of our property
interests depends on conditions beyond our control.
Real
property investments are illiquid and we may be unable to change our property
portfolio on a timely basis in response to changing market or economic
conditions. Yields from our properties depend on their net income and capital
appreciation. Real property income and capital appreciation may be adversely
affected by general and local economic conditions, neighborhood values,
competitive overbuilding, zoning laws, weather, casualty losses and other
factors beyond our control. Since substantially all of the Company’s income is
rental income from real property, the Company’s income and cash flow could be
adversely affected if a large tenant is, or a significant number of tenants
are,
unable to pay rent or if available space cannot be rented on favorable terms.
Operating
and other expenses of our properties, particularly significant expenses such
as
interest, real estate taxes and maintenance costs, generally do not decrease
when income decreases and, even if revenues increase, operating and other
expenses may increase faster than revenues.
Our
business strategy is mainly concentrated in one type of commercial property
and
in one geographic location. Our
primary investment focus is neighborhood and community shopping centers located
in the northeastern United States, with a concentration in Fairfield County,
Connecticut, and Westchester and Putnam Counties, New York. For the year ended
October 31, 2006, approximately 80% of our total revenues were from properties
located in these three counties. Various factors may adversely affect a shopping
center's profitability. These factors include circumstances that affect consumer
spending, such as general economic conditions, economic business cycles, rates
of employment, income growth, interest rates and general consumer sentiment.
These factors could have a more significant localized effect in the areas where
our core properties are concentrated. Changes to the real estate market in
our
focus areas, such as an increase in retail space or a decrease in demand for
shopping center properties, could adversely affect operating results. As a
result, we may be exposed to greater risks than if our investment focus was
based on more diversified types of properties and in more diversified geographic
areas.
In
addition, although we generally have invested between $5 million and $50 million
per property, we have no limit on the size of our investments. The Company’s
single largest real estate investment is its 90% interest in the Ridgeway
Shopping Center (“Ridgeway”) located in Stamford, Connecticut. For the year
ended October 31, 2006, Ridgeway revenues represented approximately 14% of
the
Company’s total revenues and approximately 20% of the Company’s total assets at
October 31, 2006. The loss of this center or a material decrease in revenues
from the center could have a material adverse effect on the
Company.
We
are dependent on anchor tenants in many of our retail
properties. Most
of
our retail properties are dependent on a major or anchor tenant, a few of which
lease
space
in more than one of our properties. If we are unable to renew any lease we
have
with the anchor tenant at one of these properties upon expiration of the current
lease, or to re-lease the space to another anchor tenant of similar or better
quality upon expiration of the current lease on similar or better terms, we
could experience material adverse consequences such as higher vacancy,
re-leasing on less favorable economic terms, reduced net income, reduced funds
from operations and reduced property values. Vacated anchor space also could
adversely affect an entire shopping center because of the loss of the departed
anchor tenant's customer drawing power. Loss of customer drawing power also
can
occur through the exercise of the right that some anchors have to vacate and
prevent re-tenanting by paying rent for the balance of the lease term. In
addition, vacated anchor space could, under certain circumstances, permit other
tenants to pay a reduced rent or terminate their leases at the affected
property, which could adversely affect the future income from such property.
There can be no assurance that our anchor tenants will renew their leases when
they expire or will be willing to renew on similar economic terms. See Item
1 -
Business - Core Properties in this Annual Report on Form 10-K for additional
information on our ten largest tenants by percent of total annual base rent
of
our core properties.
Similarly,
if one or more of our anchor tenants goes bankrupt, we could experience material
adverse consequences like those described above. Under bankruptcy law, tenants
have the right to reject their leases. In the event a tenant exercises this
right, the landlord generally may file a claim for lost rent equal to the
greater of either one year's rent (including tenant expense reimbursements)
or
15% of the rent remaining under the balance of the lease term, not to exceed
three years. Actual amounts to be received in satisfaction of those claims
will
be subject to the tenant's final plan of reorganization and the availability
of
funds to pay its creditors.
We
face potential difficulties or delays in renewing leases or re-leasing space.
We
derive
most of our income from rent received from our tenants. Although substantially
all of our properties currently have favorable occupancy rates, we cannot
predict that current tenants will renew their leases upon the expiration of
their terms. In addition, we cannot predict if current tenants might attempt
to
terminate their leases prior to the scheduled expiration of such leases. If
this
occurs, we may not be able to promptly locate qualified replacement tenants
and,
as a result, we would lose a source of revenue while remaining responsible
for
the payment of our obligations. Even if tenants decide to renew their leases,
the terms of renewals or new leases, including the cost of required renovations
or concessions to tenants, may be less favorable than current lease
terms.
In
some
cases, our tenant leases contain provisions giving the tenant the exclusive
right to sell particular types of merchandise or provide specific types of
services within the particular retail center, or limit the ability of other
tenants within the center to sell that merchandise or provide those services.
When re-leasing space after a vacancy by one of these tenants, such provisions
may limit the number and types of prospective tenants for vacant space. The
failure to re-lease space or to re-lease space on satisfactory terms could
adversely affect our results from operations. Additionally, properties we may
acquire in the future may not be fully leased and the cash flow from existing
operations may be insufficient to pay the operating expenses and debt service
associated with that property until the property is fully leased. As a result,
our net income, funds from operations and ability to pay dividends to
stockholders could be adversely affected.
9
Competition
may adversely affect acquisition of properties and leasing
operations. We
compete for the purchase of commercial property with many entities, including
other publicly traded REITs. Many of our competitors have substantially greater
financial resources than ours. In addition, our competitors may be willing
to
accept lower returns on their investments. If our competitors prevent us from
buying the properties that we have targeted for acquisition, we may not be
able
to meet our property acquisition and development goals. We may incur costs
on
unsuccessful acquisitions that we will not be able to recover. The operating
performance of our property acquisitions may also fall short of our
expectations, which could adversely affect our financial
performance.
If
our
competitors offer space at rental rates below our current rates or the market
rates, we may lose current or potential tenants to other properties in our
markets and we may need to reduce rental rates below our current rates in order
to retain tenants upon expiration of their leases. As a result, our results
of
operations and cash flow may be adversely affected. In addition, our tenants
face increasing competition from internet commerce, outlet malls, discount
retailers, warehouse clubs and other sources which could hinder our ability
to
attract and retain tenants and/or cause us to reduce rents at our
properties.
We
face risks associated with the use of debt to fund acquisitions and
developments, including refinancing risk. We
have
incurred, and expect to continue to incur, indebtedness to advance our
objectives. Our charter does not limit the amount of indebtedness we may incur,
although we may not exceed a debt to capitalization ratio (as such terms are
defined in the respective Articles Supplementary) of 0.55 to 1.00 without the
consent of our Series B and Series C preferred stockholders. Using debt to
acquire properties, whether with recourse to us generally or only with respect
to a particular property, creates an opportunity for increased net income,
but
at the same time creates risks. We use debt to fund investments only when we
believe it will enhance our risk-adjusted returns. However, we cannot be sure
that our use of leverage will prove to be beneficial. Moreover, when our debt
is
secured by our assets, we can lose those assets through foreclosure if we do
not
meet our debt service obligations. Incurring substantial debt may adversely
affect our business and operating results by:
| · |
requiring
us to use a substantial portion of our cash flow to pay interest,
which
reduces the amount available for distributions, acquisitions and
capital
expenditures;
|
| · |
making
us more vulnerable to economic and industry downturns and reducing
our
flexibility in response to changing business and economic
conditions;
|
| · |
requiring
us to agree to less favorable terms, including higher interest rates,
in
order to incur additional debt; and otherwise limiting our ability
to
borrow for operations, capital or to finance acquisitions in the
future.
|
Market
interest rates could adversely affect the share price of our stock and increase
the cost of refinancing debt. A
variety
of factors may influence the price of our common equities in the public trading
markets. We believe that investors generally perceive REITs as yield-driven
investments and compare the annual yield from dividends by REITs with yields
on
various other types of financial instruments. An increase in market interest
rates may lead purchasers of stock to seek a higher annual dividend rate from
other investments, which could adversely affect the market price of the shares.
In addition, we are subject to the risk that we will not be able to refinance
existing indebtedness on our properties. We anticipate that a portion of the
principal of our debt will not be repaid prior to maturity. Therefore, we likely
will need to refinance at least a portion of our outstanding debt as it matures.
A change in interest rates may increase the risk that we will not be able to
refinance existing debt or that the terms of any refinancing will not be as
favorable as the terms of the existing debt.
If
principal payments due at maturity cannot be refinanced, extended or repaid
with
proceeds from other sources, such as new equity capital or sales of properties,
our cash flow will not be sufficient to repay all maturing debt in years when
significant "balloon" payments come due. As a result, our ability to retain
properties or pay dividends to stockholders could be adversely affected and
we
may be forced to dispose of properties on unfavorable terms, which could
adversely affect our business and net income.
Construction
and renovation risks could adversely affect our
profitability. We
currently are renovating some of our properties and may in the future renovate
other properties, including tenant improvements
required under leases. Our renovation and related construction activities may
expose us to certain risks. We may incur renovation costs for a property which
exceed our original estimates due to increased costs for materials or labor
or
other costs that are unexpected. We also may be unable to complete renovation
of
a property on schedule, which could result in increased debt service expense
or
construction costs. Additionally, some tenants may have the right to terminate
their leases if a renovation project is not completed on time. The time frame
required to recoup our renovation and construction costs and to realize a return
on such costs can often be significant.
We
are dependent on key personnel. We
depend
on the services of our existing senior management to carry out our business
and
investment strategies. As we expand, we will continue to need to recruit and
retain qualified additional senior management. The loss of the services of
any
of our key management personnel or our inability to recruit and retain qualified
personnel in the future could have an adverse effect on our business and
financial results.
Uninsured
and underinsured losses may affect the value of, or return from, our property
interests. We
maintain comprehensive insurance on our properties, and the properties securing
our loans, in amounts which we believe are sufficient to permit replacement
of
the properties in the event of a total loss, subject to applicable deductibles.
There are certain types of losses, such as losses resulting from wars,
terrorism, earthquakes, floods, hurricanes or other acts of God that may be
uninsurable or not economically insurable. Should an uninsured loss or a loss
in
excess of insured limits occur, we could lose capital invested in a property,
as
well as the anticipated future revenues from a property, while remaining
obligated for any mortgage indebtedness or other financial obligations related
to the property. In addition, changes in building codes and ordinances,
environmental considerations and other factors might make it impracticable
for
us to use insurance proceeds to replace a damaged or destroyed property. If
any
of these or similar events occurs, it may reduce our return from an affected
property and the value of our investment.
10
Properties
with environmental problems may create liabilities for us.
Under
various federal, state and local environmental laws, statutes, ordinances,
rules
and regulations, as an owner of real property, we may be liable for the costs
of
removal or remediation of certain hazardous or toxic substances at, on, in
or
under our properties, as well as certain other potential costs relating to
hazardous or toxic substances (including government fines and penalties and
damages for injuries to persons and adjacent property). These laws may impose
liability without regard to whether we knew of, or were responsible for, the
presence or disposal of those substances. This liability may be imposed on
us in
connection with the activities of an operator of, or tenant at, the property.
The cost of any required remediation, removal, fines or personal or property
damages and our liability therefore could exceed the value of the property
and/or our aggregate assets. In addition, the presence of those substances,
or
the failure to properly dispose of or remove those substances, may adversely
affect our ability to sell or rent that property or to borrow using that
property as collateral, which, in turn, would reduce our revenues and ability
to
make distributions.
A
property can be adversely affected either through direct physical contamination
or as the result of hazardous or toxic substances or other contaminants that
have or may have emanated from other properties. Although our tenants are
primarily responsible for any environmental damages and claims related to the
leased premises, in the event of the bankruptcy or inability of any of our
tenants to satisfy any obligations with respect to the property leased to that
tenant, we may be required to satisfy such obligations. In addition, we may
be
held directly liable for any such damages or claims irrespective of the
provisions of any lease.
Prior
to
the acquisition of any property and from time to time thereafter, we obtain
Phase I environmental reports and, when warranted, Phase II environmental
reports concerning the Company’s properties. Based on these reports and on our
ongoing review of our properties, as of the date of this Annual Report on Form
10-K, management of the Company is not aware of any environmental condition
with
respect to any of our property interests that we believe would be reasonably
likely to have a material adverse effect on the Company. There can be no
assurance, however, that (a) the discovery of environmental conditions that
were
previously unknown, (b) changes in law, (c) the conduct of tenants or (d)
activities relating to properties in the vicinity of the Company’s properties,
will not expose the Company to material liability in the future. Changes in
laws
increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions
may
result in significant unanticipated expenditures or may otherwise adversely
affect the operations of our tenants, which could adversely affect our financial
condition and results of operations.
Risks
Related to our Organization and Structure
We
will be taxed as a regular corporation if we fail to maintain our REIT
status. Since
our
founding in 1969, we have operated, and intend to continue to operate, in a
manner that enables us to qualify as a REIT for federal income tax purposes.
However, the federal income tax laws governing REITs are complex. The
determination that we qualify as a REIT requires an analysis of various factual
matters and circumstances that may not be completely within our control. For
example, to qualify as a REIT, at least 95% of our gross income must come from
specific passive sources, such as rent, that are itemized in the REIT tax laws.
In addition, to qualify as a REIT, we cannot own specified amounts of debt
and
equity securities of some issuers. We also are required to distribute to our
stockholders at least 90% of our REIT taxable income (excluding capital gains)
each year. Our continued qualification as a REIT depends on our satisfaction
of
the asset, income, organizational, distribution and stockholder ownership
requirements of the Internal Revenue Code on a continuing basis. At any time,
new laws, interpretations or court decision may change the federal tax laws
or
the federal tax consequences of qualification as a REIT. If we fail to qualify
as a REIT in any taxable year and do not qualify for certain Internal Revenue
Code relief provisions, we will be subject to federal income tax, including
any
applicable alternative minimum tax, on our taxable income at regular corporate
rates. In addition, distributions to stockholders would not be deductible in
computing our taxable income. Corporate tax liability would reduce the amount
of
cash available for distribution to stockholders which, in turn, would reduce
the
market price of our stock. Unless entitled to relief under certain Internal
Revenue Code provisions, we also would be disqualified from taxation as a REIT
for the four taxable years following the year during which we ceased to qualify
as a REIT.
We
will pay federal taxes if we do not distribute 100% of our taxable
income. To
the
extent that we distribute less than 100% of our taxable income, we will be
subject to federal corporate income tax on our undistributed income. In
addition, we will incur a 4% nondeductible excise tax on the amount, if any,
by
which our distributions in any year are less than the sum of:
| · |
85%
of our ordinary income for that
year;
|
| · |
95%
of our capital gain net income for that year;
and
|
| · |
100%
of our undistributed taxable income from prior
years.
|
We
have
paid out, and intend to continue to pay out, our income to our stockholders
in a
manner intended to satisfy the distribution requirement and to avoid corporate
income tax and the 4% nondeductible excise tax. Differences in timing between
the recognition of income and the related cash receipts or the effect of
required debt amortization payments could require us to borrow money or sell
assets to pay out enough of our taxable income to satisfy the distribution
requirement and to avoid corporate income tax and the 4% excise tax in a
particular year.
Gain
on disposition of assets deemed held for sale in the ordinary course is subject
to 100% tax. If
we
sell any of our assets, the IRS may determine that the sale is a disposition
of
an asset held primarily for sale to customers in the ordinary course of a trade
or business. Gain from this kind of sale generally will be subject to a 100%
tax. Whether an asset is held "primarily for sale to customers in the ordinary
course of a trade or business" depends on the particular facts and circumstances
of the sale. Although we will attempt to comply with the terms of safe-harbor
provisions in the Internal Revenue Code prescribing when asset sales will not
be
so characterized, we cannot assure you that we will be able to do
so.
11
Our
ownership limitation may restrict business combination
opportunities.
To
qualify as a REIT under the Internal Revenue Code, no more than 50% in value
of
our outstanding capital stock may be owned, directly or indirectly, by five
or
fewer individuals during the last half of each taxable year. To preserve our
REIT qualification, our charter generally prohibits any person from owning
shares of any class with a value of more than 7.5% of the value of all of our
outstanding capital stock and provides that:
| · |
a
transfer that violates the limitation is
void;
|
| · |
shares
transferred to a stockholder in excess of the ownership limitation
are
automatically converted, by the terms of our charter, into shares
of
"Excess Stock;"
|
| · |
a
purported transferee gets no rights to the shares that violate the
limitation except the right to designate a transferee of the Excess
Stock
held in trust; and
|
| · |
the
Excess Stock will be held by us as trustee of a trust for the exclusive
benefit of future transferees to whom the shares of capital stock
ultimately will be transferred without violating the ownership
limitation.
|
We
may
also redeem Excess Stock at a price which may be less than the price paid by
a
stockholder. Pursuant to authority under our charter, our board of directors
has
determined that the ownership limitation does not apply to Mr. Charles J.
Urstadt, our Chairman and Chief Executive Officer, who beneficially owns
38.7% of
our
outstanding common stock and 1.4% of our outstanding Class A common stock as
of
the date of this Annual Report on Form 10-K. Such holdings represent
approximately 34.6% of our outstanding voting interests. In addition, our
directors and executive officers, as a group, hold approximately 52.0% of our
outstanding voting interests through their beneficial ownership of our common
stock and Class A common stock. The ownership limitation may discourage a
takeover or other transaction that our stockholders believe to be
desirable.
Certain
provisions in our charter and bylaws and Maryland law may prevent or delay
a
change of control or limit our stockholders from receiving a premium for their
shares. Among
the
provisions contained in our charter and bylaws and Maryland law are the
following:
| · |
Our
board of directors is divided into three classes, with directors
in each
class elected for three-year staggered
terms.
|
| · |
Our
directors may be removed only for cause upon the vote of the holders
of
two-thirds of the voting power of our common equity
securities.
|
| · |
Our
stockholders may call a special meeting of stockholders only if the
holders of a majority of the voting power of our common equity securities
request such a meeting in writing.
|
| · |
Any
consolidation, merger, share exchange or transfer of all or substantially
all of our assets must be approved by (a) a majority of our directors
who
are currently in office or who are approved or recommended by a majority
of our directors who are currently in office (the "Continuing Directors")
and (b) the holders of two-thirds of the voting power of our common
equity
securities.
|
| · |
Certain
provisions of our charter may only be amended by (a) a vote of a
majority
of our Continuing Directors and (b) the holders of two-thirds of
the
voting power of our common equity securities. These provisions relate
to
the election, classification and removal of directors, the ownership
limit
and the stockholder vote required for certain business combination
transactions.
|
| · |
The
number of directors may be increased or decreased by a vote of our
board
of directors.
|
In
addition, we are subject to various provisions of Maryland law that impose
restrictions and require affected persons to follow specified procedures with
respect to certain takeover offers and business combinations, including
combinations with persons who own 10% or more of our outstanding shares. These
provisions of Maryland law could delay, defer or prevent a transaction or a
change of control that our stockholders might deem to be in their best
interests. Furthermore, shares acquired in a control share acquisition have
no
voting rights, except to the extent approved by the affirmative vote of
two-thirds of all votes entitled to be cast on the matter, excluding all
interested shares. Under Maryland law, "control shares" are those which, when
aggregated with any other shares held by the acquiror, allow the acquiror to
exercise voting power within specified ranges. The control share provisions
of
Maryland law also could delay, defer or prevent a transaction or a change of
control which our stockholders might deem to be in their best interests. As
permitted by Maryland law, our charter and bylaws provide that the "control
shares" and "business combinations" provisions of Maryland law described above
will not apply to acquisitions of those shares by Mr. Charles J. Urstadt or
to
transactions between the Company and Mr. Urstadt or any of his affiliates.
Consequently, unless such exemptions are amended or repealed, we may in the
future enter into business combinations or other transactions with Mr. Urstadt
or any of his affiliates without complying with the requirements of Maryland
anti-takeover laws. In view of the common equity securities controlled by Mr.
Charles J. Urstadt, Mr. Urstadt may control a sufficient percentage of the
voting power of our common equity securities to effectively block approval
of
any proposal which requires a vote of our stockholders.
Our
stockholder rights plan could deter a change of
control. We
have
adopted a stockholder rights plan. This plan may deter a person or a group
from
acquiring more than 10% of the combined voting power of our outstanding shares
of common stock and Class A common stock because, after (i) the person or group
acquires more than 10% of the combined voting power of our outstanding common
stock and Class A common stock, or (ii) the commencement of a tender offer
or
exchange offer by any person (other than us, any one of our wholly owned
subsidiaries or any of our employee benefit plans, or certain exempt persons),
if, upon consummation of the tender offer or exchange offer, the person or
group
would beneficially own 30% or more of the combined voting power of our
outstanding shares of common stock and Class A common stock, all other
stockholders will have the right to purchase securities from us at a price
that
is less than their fair market value. This would substantially reduce the value
of the stock owned by the acquiring person. Our board of directors can prevent
the plan from operating by approving the transaction and redeeming the rights.
This gives our board of directors significant power to approve or disapprove
of
the efforts of a person or group to acquire a large interest in us. The rights
plan exempts acquisitions of common stock and Class A common stock by Mr.
Charles J. Urstadt, members of his family and certain of his affiliates.
12
Item
1B. Unresolved Staff Comments
Not
Applicable
13
Item
2.
Properties.
Core
Properties
The
following table sets forth information concerning each core property at October
31, 2006. Except as otherwise noted, all core properties are 100% owned by
the
Company.
|
Year
Renovated
|
Year
Completed
|
Year
Acquired
|
Gross
Leasable Sq
Feet
|
Acres
|
Number
of Tenants
|
%
Leased
|
Principal
Tenant
|
||
|
Retail
Properties:
|
|||||||||
|
Stamford,
CT (1)
|
1997
|
1950
|
2002
|
369,000
|
13.6
|
38
|
95%
|
Stop
& Shop Supermarket
|
|
|
Springfield,
MA
|
1996
|
1970
|
1970
|
326,000
|
26.0
|
31
|
96%
|
Big
Y Supermarket
|
|
|
Meriden,
CT
|
2001
|
1989
|
1993
|
316,000
|
29.2
|
26
|
100%
|
ShopRite
Supermarket
|
|
|
Stratford,
CT
|
1988
|
1978
|
2005
|
269,000
|
29.0
|
18
|
98%
|
Stop
& Shop Supermarket
|
|
|
Yorktown,
NY
|
1997
|
1973
|
2005
|
200,000
|
16.4
|
9
|
100%
|
Staples
|
|
|
Danbury,
CT
|
-
|
1989
|
1995
|
194,000
|
19.3
|
21
|
98%
|
Christmas
Tree Shops
|
|
|
White
Plains, NY
|
1994
|
1958
|
2003
|
185,000
|
3.5
|
10
|
100%
|
Toys
“R” Us
|
|
|
Ossining,
NY
|
2000
|
1978
|
1998
|
161,000
|
11.4
|
26
|
100%
|
Stop
& Shop Supermarket
|
|
|
Somers,
NY
|
-
|
2002
|
2003
|
135,000
|
26.0
|
27
|
100%
|
Home
Goods
|
|
|
Carmel,
NY
|
1999
|
1983
|
1995
|
129,000
|
19.0
|
17
|
99%
|
ShopRite
Supermarket
|
|
|
Wayne,
NJ
|
1992
|
1959
|
1992
|
102,000
|
9.0
|
44
|
99%
|
A&P
Supermarket
|
|
|
Newington,
NH
|
1994
|
1975
|
1979
|
102,000
|
14.3
|
7
|
97%
|
Linens
‘N Things
|
|
|
Darien,
CT
|
1992
|
1955
|
1998
|
95,000
|
9.5
|
19
|
100%
|
Shaw’s
Supermarket
|
|
|
Somers,
NY
|
-
|
1991
|
1999
|
78,000
|
10.8
|
32
|
94%
|
CVS
|
|
|
Orange,
CT
|
-
|
1990
|
2003
|
78,000
|
10.0
|
9
|
66%
|
Trader
Joe’s Supermarket
|
|
|
Eastchester,
NY (1)
|
2002
|
1978
|
1997
|
70,000
|
4.0
|
11
|
100%
|
Food
Emporium (Division of A&P)
|
|
|
Ridgefield,
CT
|
1999
|
1930
|
1998
|
51,000
|
2.1
|
43
|
93%
|
Chico’s
|
|
|
Rye,
NY (4 buildings)
|
-
|
Various
|
2004
|
40,000
|
1.0
|
23
|
98%
|
Cosi
|
|
|
Westport,
CT
|
-
|
1986
|
2003
|
39,000
|
3.0
|
10
|
100%
|
Pier
One Imports
|
|
|
Ossining,
NY
|
-
|
1975
|
2001
|
38,000
|
1.0
|
18
|
88%
|
Dress
Barn
|
|
|
Danbury,
CT
|
-
|
1988
|
2002
|
33,000
|
2.7
|
6
|
100%
|
Fortunoff,
Sleepys’
|
|
|
Ossining,
NY
|
2001
|
1981
|
1999
|
29,000
|
4.0
|
3
|
100%
|
Westchester
Community College
|
|
|
Pelham,
NY
|
-
|
1975
|
2006
|
26,000
|
1.0
|
9
|
100%
|
Gristede’s
Supermarket
|
|
|
Queens,
NY (2 buildings)
|
-
|
1960
|
2006
|
24,000
|
1.0
|
18
|
93%
|
Zaravshan,
Huntington Dental
|
|
|
Somers,
NY
|
-
|
1987
|
1992
|
19,000
|
4.9
|
12
|
100%
|
Putnam
County Savings Bank
|
|
|
Office
Properties:
|
|||||||||
|
Greenwich,
CT
(5
buildings)
|
-
|
various
|
various
|
59,000
|
2.8
|
14
|
89%
|
Greenwich
Hospital
|
|
|
3,167,000
|
501
|
||||||||
(1)
The
Company is the sole general partner in the partnership that owns this
property.
14
Non-Core
Properties
In
a
prior year, the Board of Directors of the Company expanded and refined the
strategic objectives of the Company to concentrate the real estate portfolio
into one of primarily retail properties located in the Northeast and authorized
the sale of the Company’s non-core properties in the normal course of business
over a period of several years given prevailing market conditions and the
characteristics of each property.
At
October 31, 2006, the Company's non-core properties consisted of one retail
property containing 126,000 square feet and two industrial facilities with
a
total of 447,000 square feet of GLA. The non-core properties collectively had
4
tenants and were 100% leased at October 31, 2006.
The
following table sets forth information concerning each non-core property at
October 31, 2006. The non-core properties are 100% owned by the
Company.
|
Location
|
Year
Renovated
|
Year
Completed
|
Year
Acquired
|
Rentable
Square
Feet
|
Acres
|
#
of Tenants
|
%
Leased
|
Principal
Tenant
|
|
Tempe,
AZ
|
2000
|
1970
|
1970
|
126,000
|
8.6
|
2
|
100%
|
Mervyn's,
Inc.
|
|
Dallas,
TX
|
1989
|
1970
|
1970
|
255,000
|
14.5
|
1
|
100%
|
DaimlerChrysler
Corporation
|
|
St.
Louis, MO
|
2000
|
1970
|
1970
|
192,000
|
16.0
|
1
|
100%
|
DaimlerChrysler
Corporation
|
|
573,000
|
4
|
|||||||
|
Total
Portfolio
|
3,740,000
|
505
|
Lease
Expirations - Total Portfolio
The
following table sets forth a summary schedule of the annual lease expirations
for the core and non-core properties for leases in place as of October 31,
2006,
assuming that none of the tenants exercise renewal or cancellation options,
if
any, at or prior to the scheduled expirations.
|
Year
of Lease Expiration
|
Number
of Leases
Expiring
|
Square
Footage of Expiring
Leases
|
Percentage
of Total
Leased
Square Feet
|
|
2007
(1)
|
121
|
375,000
|
10.35%
|
|
2008
|
55
|
387,000
|
10.69%
|
|
2009
|
62
|
387,000
|
10.70%
|
|
2010
|
49
|
272,000
|
7.52%
|
|
2011
|
53
|
447,000
|
12.36%
|
|
2012
|
44
|
545,000
|
15.06%
|
|
2013
|
25
|
127,000
|
3.51%
|
|
2014
|
28
|
106,000
|
2.93%
|
|
2015
|
27
|
199,000
|
5.51%
|
|
2016
|
19
|
229,000
|
6.32%
|
|
Thereafter
|
22
|
545,000
|
15.05%
|
|
Total
|
505
|
3,619,000
|
100.00%
|
| (1) |
Represents
lease expirations from November 1, 2006 to October 31, 2007 and
month-to-month leases.
|
Item
3 Legal
Proceedings.
In
the
ordinary course of business, the Company is involved in legal proceedings.
However, there are no material legal proceedings presently pending against
the
Company.
Item
4. Submission
of Matters to a Vote of Security Holders.
No
matter
was submitted to a vote of security holders during the fourth quarter of the
fiscal year ended October 31, 2006.
15
PART
II
Item
5. Market
for the Registrant's Common Equity, Related Shareholder Matters and Issuers
Purchases of Equity Securities.
(a)
Market Information
Shares
of
Common stock and Class A Common Stock of the Company are traded on the New
York
Stock Exchange under the symbols "UBP" and “UBA”, respectively. The following
table sets forth the high and low closing sales prices for the Company's Common
Stock and Class A Common Stock during the fiscal years ended October 31, 2006
and 2005 as reported on the New York Stock Exchange:
|
Fiscal
Year Ended
October
31, 2006
|
Fiscal
Year Ended
October
31, 2005
|
||||||||||||
|
|
|||||||||||||
| Common shares: |
Low
|
High
|
Low
|
High
|
|||||||||
|
First
Quarter
|
$
|
15.70
|
$
|
17.73
|
$
|
14.80
|
$
|
16.46
|
|||||
|
Second
Quarter
|
$
|
16.22
|
$
|
17.40
|
$
|
14.71
|
$
|
16.31
|
|||||
|
Third
Quarter
|
$
|
15.54
|
$
|
16.76
|
$
|
15.09
|
$
|
17.59
|
|||||
|
Fourth
Quarter
|
$
|
15.50
|
$
|
18.60
|
$
|
15.75
|
$
|
17.66
|
|||||
|
Fiscal
Year Ended
October
31, 2006
|
Fiscal
Year Ended
October
31, 2005
|
||||||||||||
|
|
|||||||||||||
|
Class
A Common shares:
|
Low
|
High
|
Low
|
High
|
|||||||||
|
First
Quarter
|
$
|
15.60
|
$
|
17.83
|
$
|
15.72
|
$
|
17.76
|
|||||
|
Second
Quarter
|
$
|
16.25
|
$
|
18.40
|
$
|
14.26
|
$
|
16.64
|
|||||
|
Third
Quarter
|
$
|
15.58
|
$
|
17.10
|
$
|
15.05
|
$
|
18.75
|
|||||
|
Fourth
Quarter
|
$
|
16.04
|
$
|
19.44
|
$
|
14.75
|
$
|
18.72
|
|||||
(b)
Approximate Number of Equity Security Holders
At
January 5, 2007 (latest date available), there were 1,189 shareholders of record
of the Company's Common Stock and 1,201 shareholders of record of the Class
A
Common stock.
(c)
Dividends Declared on Common Stock and Class A Common Stock and Tax
Status
The
following tables set forth the dividends declared per Common share and Class
A
Common share and tax status for Federal income tax purposes of the dividends
paid during the fiscal years ended October 31, 2006 and 2005:
|
Dividends
Paid Per:
|
Common
Share
|
Class
A Common Share
|
|||||||||||||||||
|
Dividend
Payment Date
|
Gross
Dividend Paid
Per Share
|
Ordinary
Income
|
Non
taxable Portion
|
Gross
Dividend Paid
Per Share
|
Ordinary
Income
|
Non
taxable Portion
|
|||||||||||||
|
January
20, 2006
|
$
|
.2025
|
$
|
.166
|
$
|
.0365
|
$
|
.225
|
$
|
.184
|
$
|
.041
|
|||||||
|
April
21, 2006
|
$
|
.2025
|
$
|
.166
|
$
|
.0365
|
$
|
.225
|
$
|
.184
|
$
|
.041
|
|||||||
|
July
21, 2006
|
$
|
.2025
|
$
|
.166
|
$
|
.0365
|
$
|
.225
|
$
|
.184
|
$
|
.041
|
|||||||
|
October
20, 2006
|
$
|
.2025
|
$
|
.166
|
$
|
.0365
|
$
|
.225
|
$
|
.184
|
$
|
.041
|
|||||||
|
$
|
.81
|
$
|
.664
|
$
|
.146
|
$
|
.90
|
$
|
.736
|
$
|
.164
|
||||||||
|
Dividends
Paid Per:
|
Common
Share
|
Class
A Common Share
|
|||||||||||||||||
|
Dividend
Payment Date
|
Gross
Dividend Paid
Per Share
|
Ordinary
Income
|
Non
taxable Portion
|
Gross
Dividend Paid
Per Share
|
Ordinary
Income
|
Non
taxable Portion
|
|||||||||||||
|
January
17, 2005
|
$
|
.20
|
$
|
.171
|
$
|
.029
|
$
|
.22
|
$
|
.188
|
$
|
.032
|
|||||||
|
April
15, 2005
|
$
|
.20
|
$
|
.171
|
$
|
.029
|
$
|
.22
|
$
|
.188
|
$
|
.032
|
|||||||
|
July
15, 2005
|
$
|
.20
|
$
|
.171
|
$
|
.029
|
$
|
.22
|
$
|
.188
|
$
|
.032
|
|||||||
|
October
21, 2005
|
$
|
.20
|
$
|
.171
|
$
|
.029
|
$
|
.22
|
$
|
.188
|
$
|
.032
|
|||||||
|
$
|
.80
|
$
|
.684
|
$
|
.116
|
$
|
.88
|
$
|
.752
|
$
|
.128
|
||||||||
The
Company has paid quarterly dividends since it commenced operations as a real
estate investment trust in 1969. During the fiscal year ended October 31, 2006,
the Company made distributions to stockholders aggregating $0.81 per Common
share and $0.90 per Class A Common share. On December 13, 2006, the Company’s
Board of Directors approved the payment of a quarterly dividend payable January
19, 2007 to stockholders of record on January 5, 2007. The quarterly dividend
rates were declared in the amounts of $0.2075 per Common share and $0.23 per
Class A Common share.
16
Although
the Company intends to continue to declare quarterly dividends on its Common
shares and Class A Common shares, no assurances can be made as to the amounts
of
any future dividends. The declaration of any future dividends by the Company
is
within the discretion of the Board of Directors and will be dependent upon,
among other things, the earnings, financial condition and capital requirements
of the Company, as well as any other factors deemed relevant by the Board of
Directors. Two principal factors in determining the amounts of dividends are
(i) the requirement of the Internal Revenue Code that a real estate
investment trust distribute to shareholders at least 90% of its real estate
investment trust taxable income, and (ii) the amount of the Company's
available cash.
Each
share of Common Stock entitles the holder to one vote. Each share of Class
A
Common Stock entitles the holder to 1/20 of one vote per share. Each share
of
Common Stock and Class A Common Stock have identical rights with respect to
dividends except that each share of Class A Common Stock will receive not less
than 110% of the regular quarterly dividends paid on each share of Common Stock.
The
Company has a Dividend Reinvestment and Share Purchase Plan (“DRIP”) that allows
shareholders to acquire additional shares of Common Stock and Class A Common
Stock by automatically reinvesting dividends. Shares are acquired pursuant
to
the DRIP at a price equal to the higher of 95% of the market price of such
shares on the dividend payment date or 100% of the average of the daily high
and
low sales prices for the five trading days ending on the day of purchase without
payment of any brokerage commission or service charge. As of October 31, 2006,
940,293 shares of Common Stock and 155,970 shares of Class A Common Stock have
been issued under the DRIP.
(d) Recent
Sales of Unregistered Securities
None
(e) Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
In
fiscal
2005, the Company’s Board of Directors approved a share repurchase program
(“Program”) of up to 500,000 shares, in the aggregate, of the Company’s Common
Stock and Class A Common Stock. The Program does not have a specific expiration
date and may be discontinued at any time. There were no purchases of shares
of
either Common Stock or Class A Common Stock under the Program during any month
in the fiscal year ended October 31, 2006 and there is no assurance that the
Company will repurchase the full amount of shares authorized. Any combination
of
either shares of Common Stock or Class A Common Stock not exceeding 455,000
shares, in the aggregate, may yet be purchased under the Program.
17
Item
6. Selected
Financial Data.
(In
thousands, except per share data)
|
Year
Ended October 31,
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
|
Balance
Sheet Data:
|
||||||||||||||||
|
Total
Assets
|
$
|
451,350
|
$
|
464,439
|
$
|
394,917
|
$
|
392,639
|
$
|
353,562
|
||||||
|
Mortgage
Notes Payable
|
$
|
104,341
|
$
|
111,786
|
$
|
107,443
|
$
|
104,588
|
$
|
106,429
|
||||||
|
Redeemable
Preferred Stock
|
$
|
52,747
|
$
|
52,747
|
$
|
52,747
|
$
|
52,747
|
$
|
14,341
|
||||||
|
Operating
Data:
|
||||||||||||||||
|
Total
Revenues
|
$
|
73,249
|
$
|
69,233
|
$
|
61,393
|
$
|
55,779
|
$
|
38,924
|
||||||
|
Total
Expenses and Minority Interest
|
$
|
49,167
|
$
|
46,468
|
$
|
39,911
|
$
|
37,531
|
$
|
26,602
|
||||||
|
Income
from Continuing Operations before Discontinued Operations
|
$
|
25,032
|
$
|
23,496
|
$
|
21,969
|
$
|
18,771
|
$
|
13,205
|
||||||
|
Per
Share Data:
|
||||||||||||||||
|
Net
Income from Continuing Operations - Basic:
|
||||||||||||||||
|
Class
A Common Stock
|
$
|
.65
|
$
|
.68
|
$
|
.71
|
$
|
.67
|
$
|
.82
|
||||||
|
Common
Stock
|
$
|
.58
|
$
|
.62
|
$
|
.65
|
$
|
.61
|
$
|
.73
|
||||||
|
Net
Income from Continuing Operations - Diluted:
|
||||||||||||||||
|
Class
A Common Stock
|
$
|
.63
|
$
|
.66
|
$
|
.71
|
$
|
.66
|
$
|
.80
|
||||||
|
Common
Stock
|
$
|
.57
|
$
|
.60
|
$
|
.64
|
$
|
.60
|
$
|
.71
|
||||||
|
Cash
Dividends on:
|
||||||||||||||||
|
Class
A Common Stock
|
$
|
.90
|
$
|
.88
|
$
|
.86
|
$
|
.84
|
$
|
.82
|
||||||
|
Common
Stock
|
$
|
.81
|
$
|
.80
|
$
|
.78
|
$
|
.76
|
$
|
.74
|
||||||
|
Total
|
$
|
1.71
|
$
|
1.68
|
$
|
1.64
|
$
|
1.60
|
$
|
1.56
|
||||||
|
Other
Data:
(In
thousands)
|
||||||||||||||||
|
Year
Ended October 31,
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
|
Net
Cash Flow Provided by (Used in):
|
||||||||||||||||
|
Operating
Activities
|
$
|
35,429
|
$
|
35,505
|
$
|
30,744
|
$
|
31,176
|
$
|
18,532
|
||||||
|
Investing
Activities
|
$
|
(20,129
|
)
|
$
|
(61,348
|
)
|
$
|
(2,416
|
)
|
$
|
(69,818
|
)
|
$
|
(64,960
|
)
|
|
|
Financing
Activities
|
$
|
(38,994
|
)
|
$
|
26,397
|
$
|
(24,837
|
)
|
$
|
14,749
|
$
|
59,023
|
||||
|
Funds
from Operations (Note 1)
|
$
|
28,848
|
$
|
29,355
|
$
|
29,813
|
$
|
27,964
|
$
|
24,144
|
||||||
Note
1 :
The
Company has adopted the definition of Funds from Operations (FFO) suggested
by
the National Association of Real Estate Investment Trusts (NAREIT) and defines
FFO as net income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from sales of properties plus real
estate related depreciation and amortization and after adjustments for
unconsolidated joint ventures. For a reconciliation of net income and FFO,
see
Management’s Discussion and Analysis on page 19. FFO does not represent
cash flows from operating activities in accordance with generally accepted
accounting principles and should not be considered an alternative to net income
as an indicator of the Company’s operating performance. The Company considers
FFO a meaningful, additional measure of operating performance because it
primarily excludes the assumption that the value of its real estate assets
diminishes predictably over time and industry analysts have accepted it as
a
performance measure. FFO is presented to assist investors in analyzing the
performance of the Company. It is helpful as it excludes various items included
in net income that are not indicative of the Company’s operating performance.
However, comparison of the Company’s presentation of FFO, using the NAREIT
definition, to similarly titled measures for other REITs may not necessarily
be
meaningful due to possible differences in the application of the NAREIT
definition used by such REITs. For a further discussion of FFO, see Management’s
Discussion and Analysis on page 19.
18
Item
7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
The
following discussion should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto included elsewhere
in
this report.
Forward
Looking Statements
This
Item
7 contains certain forward-looking statements that within the meaning of Section
27A of the Securities Act, as amended, and Section 21E of the Exchange Act.
All
statements, other than statements of historical facts, included in this Item
7
that address activities, events or developments that the Company expects,
believes or anticipates will or may occur in the future, including such matters
as future capital expenditures, dividends and acquisitions (including the amount
and nature thereof), business strategies, expansion and growth of the Company’s
operations and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company
in
light of its experience and its perception of historical trends, current
conditions, expected future developments and other factors it believes are
appropriate. Such statements are subject to a number of assumptions, risks
and
uncertainties, general economic and business conditions, the business
opportunities that may be presented to and pursued by the Company, changes
in
laws or regulations and other factors, many of which are beyond the control
of
the Company. Many of these risks are discussed in Item 1A. Risk Factors. Any
such statements are not guarantees of future performance and actual results
or
developments may differ materially from those anticipated in the forward-looking
statements.
Executive
Summary
The
Company, a REIT, is a fully integrated, self-administered real estate company,
engaged in the acquisition, ownership and management of commercial real estate,
primarily neighborhood and community shopping centers in the northeastern part
of the United States. Other real estate assets include office and industrial
properties. The Company’s major tenants include supermarket chains and other
retailers who sell basic necessities. At October 31, 2006, the Company owned
or
had controlling interests in 37 properties containing a total of 3.7 million
square feet of GLA of which approximately 97% was leased.
The
Company derives substantially all of its revenues from rents and operating
expense reimbursements received pursuant to long-term leases and focuses its
investment activities on community and neighborhood shopping centers, anchored
principally by regional supermarket chains. The Company believes, because of
the
need of consumers to purchase food and other staple goods and services generally
available at supermarket-anchored shopping centers, that the nature of its
investments provide for relatively stable revenue flows even during difficult
economic times. Primarily as a result of recent property acquisitions, the
Company’s financial data shows increases in total revenues and expenses from
period to period.
The
Company focuses on increasing cash flow, and consequently the value of its
properties, and seeks continued growth through strategic re-leasing, renovations
and expansion of its existing properties and selective acquisition of income
producing properties, primarily neighborhood and community shopping centers
in
the northeastern part of the United States.
Key
elements of the Company’s growth strategies and operating policies are
to:
| § |
Acquire
neighborhood and community shopping centers in the northeastern part
of
the United States with a concentration in Fairfield County, Connecticut,
and Westchester and Putnam Counties, New
York
|
| § |
Hold
core properties for long-term investment and enhance their value
through
regular maintenance, periodic renovation and capital
improvement
|
| § |
Selectively
dispose of non-core and underperforming properties and re-deploy
the
proceeds into properties located in the northeast
region
|
| § |
Increase
property values by aggressively marketing available GLA and renewing
existing leases
|
| § |
Renovate,
reconfigure or expand existing properties to meet the needs of existing
or
new tenants
|
| § |
Negotiate
and sign leases which provide for regular or fixed contractual increases
to minimum rents
|
| § |
Control
property operating and administrative
costs
|
Critical
Accounting Policies
Critical
accounting policies are those that are both important to the presentation of
the
Company’s financial condition and results of operations and require management’s
most difficult, complex or subjective judgments. Set forth below is a summary
of
the accounting policies that management believes are critical to the preparation
of the consolidated financial statements. This summary should be read in
conjunction with the more complete discussion of the Company’s accounting
policies included in Note 1 to the consolidated financial statements of the
Company.
Revenue
Recognition
The
Company records base rents on a straight-line basis over the term of each lease.
The excess of rents recognized over amounts contractually due pursuant to the
underlying leases is included in tenant receivables on the accompanying balance
sheets. Most leases contain provisions that require tenants to reimburse a
pro-rata share of real estate taxes and certain common area expenses.
Adjustments
are also made throughout the year to tenant receivables and the related cost
recovery income based upon the Company’s best estimate of the final amounts to
be billed and collected.
19
Allowance
for Doubtful Accounts
The
allowance for doubtful accounts is established based on a quarterly analysis
of
the risk of loss on specific accounts. The analysis places particular emphasis
on past-due accounts and considers information such as the nature and age of
the
receivables, the payment history of the tenants or other debtors, the financial
condition of the tenants and any guarantors and management’s assessment of their
ability to meet their lease obligations, the basis for any disputes and the
status of related negotiations, among other things. Management’s estimates of
the required allowance is subject to revision as these factors change and is
sensitive to the effects of economic and market conditions on tenants,
particularly those at retail properties. Estimates are used to establish
reimbursements from tenants for common area maintenance, real estate tax and
insurance costs. The Company analyzes the balance of its estimated accounts
receivable for real estate taxes, common area maintenance and insurance for
each
of its properties by comparing actual recoveries versus actual expenses and
any
actual write-offs. Based on its analysis, the Company may record an additional
amount in its allowance for doubtful accounts related to these items.
It
is
also the Company’s policy to maintain an allowance of approximately 10% of the
deferred straight-line rents receivable balance for future tenant credit losses.
Real
Estate
Land,
buildings, property improvements, furniture/fixtures and tenant improvements
are
recorded at cost. Expenditures for maintenance and repairs are charged to
operations as incurred. Renovations and/or replacements, which improve or extend
the life of the asset, are capitalized and depreciated over their estimated
useful lives.
The
amounts to be capitalized as a result of an acquisition and the periods over
which the assets are depreciated or amortized are determined based on estimates
as to fair value and the allocation of various costs to the individual assets.
The Company allocates the cost of an acquisition based upon the estimated fair
value of the net assets acquired. The Company also estimates the fair value
of
intangibles related to its acquisitions. The valuation of the fair value of
intangibles involves estimates related to market conditions, probability of
lease renewals and the current market value of in-place leases. This market
value is determined by considering factors such as the tenant’s industry,
location within the property and competition in the specific region in which
the
property operates. Differences in the amount attributed to the intangible assets
can be significant based upon the assumptions made in calculating these
estimates.
The
Company is required to make subjective assessments as to the useful life of
its
properties for purposes of determining the amount of depreciation. These
assessments have a direct impact on the Company’s net income.
Properties
are depreciated using the straight-line method over the estimated useful lives
of the assets. The estimated useful lives are as follows:
|
Buildings
|
30-40
years
|
|
Property
Improvements
|
10-20
years
|
|
Furniture/Fixtures
|
3-10
years
|
|
Tenant
Improvements
|
Shorter
of lease term or their useful life
|
Asset
Impairment
On
a
periodic basis, management assesses whether there are any indicators that the
value of the real estate properties may be impaired. A property value is
considered impaired when management’s estimate of current and projected
operating cash flows (undiscounted and without interest) of the property over
its remaining useful life is less than the net carrying value of the property.
Such cash flow projections consider factors such as expected future operating
income, trends and prospects, as well as the effects of demand, competition
and
other factors. To the extent impairment has occurred, the loss is measured
as
the excess of the net carrying amount of the property over the fair value of
the
asset. Changes in estimated future cash flows due to changes in the Company’s
plans or market and economic conditions could result in recognition of
impairment losses which could be substantial. Management does not believe that
the value of any of its rental properties is impaired at October 31, 2006.
Liquidity
and Capital Resources
At
October 31, 2006, the Company had unrestricted cash and cash equivalents of
$2.8
million compared to $26.5 million at October 31, 2005. The Company's sources
of
liquidity and capital resources include its cash and cash equivalents, proceeds
from bank borrowings and long-term mortgage debt, capital financings and sales
of real estate investments. Payments of expenses related to real estate
operations, debt service, management and professional fees, and dividend
requirements place demands on the Company's short-term liquidity.
Cash
Flows
The
Company expects to meet its short-term liquidity requirements primarily by
generating net cash from the operations of its properties. The Company believes
that its net cash provided by operations will be sufficient to fund its
short-term liquidity requirements for fiscal 2007 and to meet its dividend
requirements necessary to maintain its REIT status. In fiscal 2006, 2005 and
2004, net cash flow provided by operations amounted to $35.4 million, $35.5
million and $30.7 million, respectively. Cash dividends paid on common and
preferred shares increased to $32.4 million in fiscal 2006 compared to $29.4
million in fiscal 2005 and $26.3 million in fiscal 2004.
20
The
Company expects to continue paying regular dividends to its stockholders. These
dividends will be paid from operating cash flows which are expected to increase
due to property acquisitions and growth in operating income in the existing
portfolio and from other sources. The Company derives substantially all of
its
revenues from base rents under existing leases at its properties. The Company’s
operating cash flow therefore depends on the rents that it is able to charge
to
its
tenants,
and the ability of its tenants to make rental payments. The Company believes
that the nature of the properties in which it typically invests ― primarily
grocery-anchored neighborhood and community shopping centers ― provides a more
stable revenue
flow in
uncertain economic times, in that consumers still need to purchase basic staples
and convenience items. However, even in the geographic areas in which the
Company owns properties, general economic downturns may adversely impact the
ability of the Company’s tenants to make lease payments and the Company’s
ability to re-lease space as leases expire. In either of these cases, the
Company’s cash flow could be adversely affected.
Net
Cash Flows from:
Operating
Activities
Net
cash
flows provided by operating activities amounted to $35.4 million in fiscal
2006,
compared to $35.5 million in fiscal 2005 and $30.7 million in fiscal 2004.
The
changes in operating cash flows were primarily due to increases in the net
operating results generated from the Company’s properties and operating cash
flows from new properties acquired during those periods. Operating cash flows
included $814,000 in fiscal 2005 and $2,051,000 in fiscal 2004 from discontinued
operations.
Investing
Activities
Net
cash
flows used in investing activities were $20.1 million in fiscal 2006, $61.3
million in fiscal 2005 and $2.4 million in fiscal 2004. The net cash flows
in
each of these years were principally due to the acquisition of properties
consistent with the Company’s strategic plan to acquire properties in the
northeast. The Company acquired three retail properties in fiscal 2006, two
shopping centers in fiscal 2005 and four retail properties in fiscal 2004.
In
fiscal 2005, the Company sold two properties. Sale proceeds were used to
purchase properties in the northeast. In fiscal 2004, the Company sold
investments in marketable investments to purchase real estate properties. The
Company also invests in its properties and regularly pays for capital
expenditures for property improvements, tenant costs and leasing
commissions.
Financing
Activities
Net
cash
flows used in financing activities in fiscal 2006 and fiscal 2004 were $39.0
million and $24.8 million, respectively. Net cash flows provided by financing
activities in fiscal 2005 were $26.4 million and reflect net proceeds of $59.4
million received from sales of preferred stock in that year. Net cash flows
used
in financing activities in each of the fiscal years 2006, 2005 and 2004 reflect
distributions to its shareholders each year of $32.4 million in fiscal 2006,
$29.4 million in fiscal 2005 and $26.3 million in fiscal 2004.
Capital
Resources
The
Company expects to fund its long-term liquidity requirements such as property
acquisitions, repayment of indebtedness and capital expenditures through other
long-term indebtedness (including indebtedness assumed in acquisitions),
proceeds from sales of properties and/or the issuance of equity securities.
The
Company believes that these sources of capital will continue to be available
to
it in the future to fund its long-term capital needs; however, there are certain
factors that may have a material adverse effect on its access to capital
sources. The Company’s ability to incur additional debt is dependent upon its
existing leverage, the value of its unencumbered assets and borrowing
limitations imposed by existing lenders. The Company’s ability to raise funds
through sales of equity securities is dependent on, among other things, general
market conditions for REITs, market perceptions about the Company and its stock
price in the market. The Company’s ability to sell properties in the future to
raise cash will be dependent upon market conditions at the time of sale.
Financings
and Debt
In
fiscal
2005, the Company sold 2,450,000 shares of 7.5% Series D Senior Cumulative
Preferred Stock (“Series D Preferred Stock”) in a public offering for net
proceeds of $59.4 million. The proceeds were used to repay outstanding credit
line indebtedness and to complete the purchase of certain properties acquired
in
fiscal 2005 and fiscal 2006.
The
Company is exposed to interest rate risk primarily through its borrowing
activities. There is inherent rollover risk for borrowings as they mature and
are renewed at current market rates. The extent of this risk is not quantifiable
or predictable because of the variability of future interest rates and the
Company’s future financing requirements. At October 31, 2006, the Company did
not have any variable rate debt outstanding.
Mortgage
notes payable of $104.3 million consist of fixed rate mortgage loan indebtedness
with a weighted average interest rate of 7.27% at October 31, 2006. The mortgage
loans are secured by sixteen properties with a net book value of $177.7 million
and have fixed rates of interest ranging from 5.75% to 7.83%. In May 2006,
the
Company fully repaid a mortgage note in the principal amount of $4.975 million.
The Company may refinance its mortgage loans, at or prior to scheduled maturity,
through replacement mortgage loans. The ability to do so, however, is dependent
upon various factors, including the income level of the properties, interest
rates and credit conditions within the commercial real estate market.
Accordingly, there can be no assurance that such refinancings can be achieved.
21
At
October 31, 2006, the Company had a secured revolving credit facility with
a
commercial bank (the “Secured Credit Facility”) which provides for borrowings of
up to $30 million. The Secured Credit Facility expires in April 2008 and is
collateralized by first mortgage liens on two of the Company’s properties.
Interest on outstanding borrowings is at prime + 1/2% or LIBOR + 1.5%. The
Secured Credit Facility requires the Company to maintain certain debt service
coverage ratios during its term. The Company pays an annual fee of 0.25% on
the
unused portion of the Secured Credit Facility. The Secured Credit Facility
is
available to fund acquisitions, capital expenditures, mortgage repayments,
working capital and other general corporate purposes. During fiscal 2006 the
Company borrowed and repaid $3 million under the secured credit line. There
were
no borrowings outstanding on October 31, 2006. The Company also had a $30
million unsecured line of credit (“Unsecured Credit Line”) arrangement with the
same bank. During 2006, the Company terminated the Unsecured Credit Line. There
were no borrowings outstanding on this credit line.
Contractual
Obligations
The
Company’s contractual payment obligations as of October 31, 2006, were as
follows (amounts in thousands):
|
Payments
Due by Period
|
||||||||||||||||||||||
|
Total
|
2007
|
2008
|
2009
|
2010
|
2011
|
Thereafter
|
||||||||||||||||
|
Mortgage
notes payable
|
$
|
104,341
|
$
|
11,640
|
$
|
61,255
|
$
|
17,787
|
$
|
5,499
|
$
|
4,244
|
$
|
3,916
|
||||||||
|
Tenant
obligations*
|
283
|
283
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
|
Total
Contractual Obligations
|
$
|
104,624
|
$
|
11,923
|
$
|
61,255
|
$
|
17,787
|
$
|
5,499
|
$
|
4,244
|
$
|
3,916
|
||||||||
*Committed
tenant-related obligations based on executed leases as of October 31, 2006.
The
Company has various standing or renewable service contracts with vendors related
to its property management. In addition, the Company also has certain other
utility contracts entered into in the ordinary course of business which may
extend beyond one year, which vary based on usage. These contracts include
terms
that provide for cancellation with insignificant or no cancellation penalties.
Contract terms are generally one year or less.
Off-Balance
Sheet Arrangements
During
the years ended October 31, 2006 and 2005, the Company did not have any material
off-balance sheet arrangements.
Capital
Expenditures
The
Company invests in its existing properties and regularly incurs capital
expenditures in the ordinary course of business to maintain its properties.
The
Company believes that such expenditures enhance the competitiveness of its
properties. In the year ended October 31, 2006, the Company incurred
approximately $5.4 million for capital expenditures for property improvements,
tenant improvements and leasing commissions. The amounts of these expenditures
can vary significantly depending on tenant negotiations, market conditions
and
rental rates. The Company expects to incur additional amounts for anticipated
capital improvements and leasing costs in fiscal 2007. These expenditures are
expected to be funded from operating cash flows or borrowings.
Acquisitions
The
Company seeks to acquire properties which are primarily shopping centers located
in the northeastern part of the United States with a concentration in Fairfield
County, Connecticut and Westchester and Putnam Counties, New York.
In
January 2007, the Company acquired a retail property containing approximately
10,000 square feet of GLA for a purchase price of $3.7 million. The Company
financed the purchase price from available cash.
In
March
2006, the Company acquired three retail properties totaling 50,000 square feet
of GLA at an aggregate purchase price of $16.6 million.
In
fiscal
2005, the Company purchased Staples Plaza, a 200,000 square foot shopping center
in Yorktown, New York for $28.5 million, including the assumption of a first
mortgage loan. The Company also purchased The
Dock,
a 269,000 square feet of GLA shopping center located in Stratford, Connecticut
for $51.1 million.
In
fiscal
2004, the Company acquired four retail properties totaling 40,000 square feet
of
GLA for $11.0 million. In connection with the acquisition of three of the
properties, the Company assumed mortgage loans totaling $4.7
million.
22
Sales
of Properties
In
fiscal
2005, the Company sold its Farmingdale, New York property for a sale price
of
$9.75 million. The proceeds were used to complete the acquisition of The Dock.
The Company recorded a gain on the sale of approximately $5.6 million. The
Company also sold an office building in Southfield, Michigan for a sale price
of
$9.2 million and recorded a gain on the sale of $1.4 million.
Non-Core
Properties
In
a
prior year, the Company's Board of Directors expanded and refined the strategic
objectives of the Company to refocus its real estate portfolio into one of
self-managed retail properties located in the northeast and authorized the
sale
of the Company’s non-core properties in the normal course of business over a
period of several years. The non-core properties consist of two distribution
service facilities and one retail property (all of which are located outside
of
the northeast region of the United States). The Company intends to sell its
non-core properties as opportunities become available. The Company’s ability to
generate cash from asset sales is dependent upon market conditions and will
be
limited if market conditions make such sales unattractive. There were no sales
of non-core properties in fiscal 2006. At October 31, 2006, the three remaining
non-core properties have a net book value of approximately $2.6
million.
Funds
from Operations
The
Company considers Funds from Operations (“FFO”) to be an additional measure of
an equity REIT’s operating performance. The Company reports FFO in addition to
its net income applicable to common stockholders and net cash provided by
operating activities. Management has adopted the definition suggested by The
National Association of Real Estate Investment Trusts (“NAREIT”) and defines FFO
to mean net income (computed in accordance with generally accepted accounting
principles (“GAAP”) excluding gains or losses from sales of property, plus real
estate related depreciation and amortization and after adjustments for
unconsolidated joint ventures.
Management
considers FFO a meaningful, additional measure of operating performance because
it primarily excludes the assumption that the value of its real estate assets
diminishes predictably over time and industry analysts have accepted it as
a
performance measure. FFO is presented to assist investors in analyzing the
performance of the Company. It is helpful as it excludes various items included
in net income that are not indicative of the Company’s operating performance,
such as gains (or losses) from sales of property and deprecation and
amortization.
However,
FFO:
| § |
does
not represent cash flows from operating activities in accordance
with GAAP
(which, unlike FFO, generally reflects all cash effects of transactions
and other events in the determination of net income); and
|
| § |
should
not be considered an alternative to net income as an indication of
the
Company’s performance.
|
FFO,
as
defined by us may not be comparable to similarly titled items reported by other
real estate investment trusts due to possible differences in the application
of
the NAREIT definition used by such REITs. The table below provides a
reconciliation of net income applicable to Common and Class A Common
Stockholders in accordance with GAAP to FFO for each of the three years in
the
period ended October 31, 2006 (amounts in thousands).
|
Year
Ended October 31,
|
||||||||||
|
2006
|
2005
|
2004
|
||||||||
|
Net
Income Applicable to Common and Class A Common
Stockholders
|
$
|
15,690
|
$
|
23,976
|
$
|
18,566
|
||||
|
Plus:
Real property depreciation
|
10,151
|
9,164
|
8,082
|
|||||||
|
Amortization
of tenant improvements and allowances
|
2,450
|
2,325
|
1,962
|
|||||||
|
Amortization
of deferred leasing costs
|
557
|
565
|
497
|
|||||||
|
Depreciation
and amortization on discontinued operations
|
-
|
345
|
706
|
|||||||
|
Less:
Gains on sales of properties
|
-
|
(7,020
|
)
|
-
|
||||||
|
Funds
from Operations Applicable to Common and Class A Common Stockholders
|
$
|
28,848
|
$
|
29,355
|
$
|
29,813
|
||||
|
Net
Cash Provided by (Used in):
|
||||||||||
|
Operating
Activities
|
$
|
35,429
|
$
|
35,505
|
$
|
30,744
|
||||
|
Investing
Activities
|
$
|
(20,129
|
)
|
$
|
(61,348
|
)
|
$
|
(2,416
|
)
|
|
|
Financing
Activities
|
$
|
(38,994
|
)
|
$
|
26,397
|
$
|
(24,837
|
)
|
||
FFO
amounted to $28.8 million in fiscal 2006 compared to $29.4 million in fiscal
2005. The decrease in FFO in fiscal 2006 reflects an increase in operating
income from properties owned during the period and recent property acquisitions
offset by an increase in preferred stock dividends paid on the recently issued
Series D Preferred Stock and the temporary investment of the remaining proceeds
of the Series D Preferred stock sale into lower yielding short term investments.
See discussion which follows.
23
Results
of Operations
Fiscal
2006 vs. Fiscal 2005
The
following information summarizes the Company’s results of operations for the
year ended October 31, 2006 and 2005 (amounts in thousands):
|
Year
Ended
|
|||||||||||||||||||
|
October
31,
|
Change
Attributable to:
|
||||||||||||||||||
|
Revenues
|
2006
|
2005
|
Increase
(Decrease)
|
%
Change
|
Property
Acquisitions
|
Properties
Held In
Both Periods
|
|||||||||||||
|
Base
rents
|
$
|
55,737
|
$
|
52,149
|
$
|
3,588
|
6.9
|
%
|
$
|
3,215
|
$
|
373
|
|||||||
|
Recoveries
from tenants
|
17,029
|
16,506
|
523
|
3.2
|
%
|
706
|
(183
|
)
|
|||||||||||
|
Expenses
|
|||||||||||||||||||
|
Property
operating
|
11,919
|
10,915
|
1,004
|
9.2
|
%
|
570
|
434
|
||||||||||||
|
Property
taxes
|
10,298
|
9,245
|
1,053
|
11.4
|
%
|
740
|
313
|
||||||||||||
|
Interest
|
8,287
|
8,502
|
(215
|
)
|
(2.5
|
%)
|
322
|
(537
|
)
|
||||||||||
|
Depreciation
and amortization
|
13,243
|
12,054
|
1,189
|
9.9
|
%
|
774
|
415
|
||||||||||||
|
General
and administrative
|
4,981
|
5,155
|
(174
|
)
|
(3.4
|
%)
|
n/a
|
n/a
|
|||||||||||
Property
Acquisitions:
The
increase in revenues, property operating and property tax expenses in fiscal
2006 was largely the result of property acquisitions completed in fiscal 2006
and 2005. The Company acquired two properties totaling 469,000 square feet
of
GLA in fiscal 2005 and three properties totaling 50,000 square feet of GLA
in
fiscal 2006.
In
connection with one acquisition in fiscal 2005, the Company assumed an $8.5
million first mortgage loan that increased interest expense in fiscal 2006
by
$322,000.
Properties
Held in Both Periods:
Revenues
Base
rents from properties held in both periods increased $373,000 in fiscal 2006
compared to fiscal 2005. The increase in base rents from new leases and lease
renewals signed during fiscal 2006 was impacted by an increase in unexpected
tenant vacancies during the same period that lowered revenues by approximately
$500,000. At October 31, 2006, the overall leased percentage of the Company’s
core properties was 97%, a decline of 1% from a year ago. The Company executed
new leases or renewed leases comprising 297,000 square feet of GLA during fiscal
2006.
Recoveries
from tenants from properties held in both periods (which represent
reimbursements from tenants for operating expenses and property taxes) decreased
$183,000 in fiscal 2006 compared to the prior year due to slightly lower
occupancy levels during fiscal 2006 which reduced the Company’s overall
reimbursement recoveries by approximately $100,000.
The
Company’s single largest real estate investment is the Ridgeway Shopping Center
located in Stamford, Connecticut (which is owned by a consolidated joint venture
in which the Company has a 90% controlling interest). Ridgeway’s revenues
represented approximately $10.3 million or 14% of total revenues in fiscal
2006
compared to $10.6 million or 15.1% in fiscal 2005. At October 31, 2006, the
property was 95% leased . No other property in the Company’s portfolio comprised
more than 10% of the Company’s consolidated revenues in fiscal
2006.
Mortgage
interest and other income in fiscal 2006 includes a gain of $102,000 from the
repayment of a mortgage note receivable during the year.
Interest,
dividends and other investment income increased by $219,000 in fiscal 2006
from
higher rates of return earned on marketable securities and short-term
investments during the period. Other investment income also includes gains
on
sales of marketable securities of $122,000 in fiscal 2006 compared to $70,000
in
fiscal 2005.
Expenses
Property
operating expenses for properties held in both periods increased by $434,000
in
fiscal 2006 from an increase in certain property expense categories,
particularly repairs and maintenance and utility expenses, that increased this
component of expenses by approximately $800,000 in fiscal 2006. The increase
in
expenses in fiscal 2006 was offset by a decrease of approximately $300,000
in
insurance and snow removal costs from fiscal 2005.
24
Property
taxes for properties held in both periods increased by $313,000 or 3% in fiscal
2006 from higher real estate tax assessment rates at the Company’s
properties.
Interest
expense for properties held in both periods decreased $537,000 in fiscal 2006
principally from the repayment of mortgage notes payable and bank credit line
borrowings in fiscal 2005 that were repaid later in the year.
Depreciation
and amortization expense from properties held in both periods increased $415,000
in fiscal 2006, principally from the write off of unamortized tenant improvement
costs of $319,000 related to several tenants that vacated the properties during
the year.
General
and administrative expenses (“G&A”) decreased by $174,000 in fiscal 2006
primarily from lower professional fees incurred in fiscal 2006 in connection
with the Company’s internal controls assessment required by Section 404 of
Sarbanes-Oxley Act which decreased G&A by $443,000 in 2006. The decrease in
G&A was offset by higher employee compensation costs which increased this
component of expense by $415,000 this year.
Fiscal
2005 vs. Fiscal 2004
Revenues
Rental
revenues from base rents increased 11.4% to $52.1 million in fiscal 2005, as
compared to $46.8 million in fiscal 2004. The net change in rentals resulted
primarily from: (i) the additional base rents from properties acquired during
2005 and 2004 which increased base rents incrementally by $4.7 million in fiscal
2005 and (ii) an increase of $631,000 from new leasing and renewals of expiring
leases at the Company’s core properties and generally at higher base rental
rates compared to the expiring rental rates. During fiscal 2005, the Company
leased or renewed 222,000 square feet of GLA at its core properties compared
to
284,000 square feet in fiscal 2004. The Company also extended a triple net
lease
on its 255,000 square foot industrial property in Dallas Texas for an additional
five year term at approximately the same effective rent as the existing lease
on
the property. At October 31, 2005, the Company’s core properties were 98%
leased, a decrease of less than 1% from the end of fiscal 2004.
Recoveries
from tenants (which represent reimbursements from tenants for property operating
expenses and property taxes) increased 20.9% to $16.5 million in fiscal 2005
compared to $13.7 million in fiscal 2004. The increase in recoveries from
tenants is attributable to new properties in fiscal 2005 (which increased this
component of revenue by $1.7 million) and an additional $1.2 million from
properties owned in both years from higher operating expenses and real estate
tax expenses in fiscal 2005 at most of the properties and higher overall tenant
recovery rates on operating expenses and real estate taxes.
The
Company recorded lease termination payments in satisfaction of former tenant
lease obligations of $253,000 in fiscal 2005, compared to $577,000 in 2004.
Fiscal 2004’s amounts included a payment of $312,000 received in settlement of a
tenant bankruptcy.
Interest,
dividends and other income increased by $244,000 in fiscal 2005 from an increase
in the amount of short-term investments outstanding during the year higher
investment yields. This component of income also includes gains on sales of
securities which totaled $70,000 in fiscal 2005.
Expenses
Property
operating expenses increased to $10.9 million or 18.1% in fiscal 2005 compared
to $9.2 million in fiscal 2004. The increase in operating expenses reflected
the
incremental expense from property acquisitions which added additional operating
expenses of $1.1 million in fiscal 2005. Operating expenses for properties
owned
in both periods increased by $626,000 from higher snow removal and repairs
and
maintenance costs.
Property
taxes increased 15.2% to $9.2 million in fiscal 2005 from $8.0 million in fiscal
2004. Property taxes from recently acquired properties increased this component
of expenses by $884,000 in fiscal 2005. Property taxes for properties owned
in
both periods increased by $336,000 from higher real estate tax assessment rates
at several of the Company’s properties during the year.
Interest
expense increased $389,000 in fiscal 2005 principally from the addition of
mortgage notes payable assumed in connection with the acquisition of Staples
Plaza (in fiscal 2005) and Rye Properties (in fiscal 2004). Interest expense
also increased in fiscal 2005 from short-term borrowings of $19.5 million on
the
Company’s revolving credit lines. Borrowings of $17.5 million were used to
complete the acquisition of a property earlier in the year. The borrowings
were
fully repaid during the second quarter of fiscal 2005.
Depreciation
and amortization expense increased by $1.5 million in fiscal 2005. The increase
is principally from property acquisitions in that year which increased this
component of expense by $1.1 million in fiscal 2005.
General
and administrative expenses increased by $1.7 million in fiscal 2005 from higher
compensation costs from an increase in the number of employees of the Company
and higher stock compensation charges, which increased compensation by
approximately $600,000 in fiscal 2005; a charge of approximately $300,000 to
record a deferred compensation arrangement at fair value; and approximately
$678,000 in accounting fees incurred in connection with the Company’s internal
controls assessment required by Section 404 of the Sarbanes-Oxley
Act.
25
Adoption
of a New Accounting Pronouncement
Prior
to
November 1, 2005, the Company accounted for its stock based compensation plans
under the recognition and measurement provisions of APB Opinion No. 25,
“Accounting
for Stock Issued to Employees”
(“APB
No. 25”), and related Interpretations, as permitted by FASB Statement No. 123,
“Accounting
for Stock-Based Compensation.” Effective
November 1, 2005, the Company adopted the fair value recognition provisions
of
FASB Statement No.123(R), “Share-Based
Payment,”
(“SFAS
No.123R”), using the modified-prospective-transition method. Under that
transition method, compensation cost recognized in fiscal 2006, for all
share-based payments granted subsequent to November 1, 2005, is based on the
grant-date fair value of the stock grants estimated in accordance with the
provisions of SFAS No. 123R.
Prior
to
November 1, 2005, the grant date fair value of nonvested restricted stock awards
was expensed over the explicit vesting periods. Such awards also provided for
continued vesting after retirement. Upon adoption of SFAS No. 123R, the Company
changed its policy for recognizing compensation expense for restricted stock
awards to the earlier of the explicit vesting period or the date a participant
first becomes eligible for retirement. For nonvested restricted stock awards
granted prior to the adoption of SFAS No.123R, the Company will continue to
recognize compensation expense over the explicit vesting periods and accelerate
any remaining unrecognized compensation cost when a participant actually
retires.
Consistent
with the provisions of APB No. 25, the Company recorded the fair value of
nonvested restricted stock grants and an offsetting deferred compensation amount
within stockholders’ equity. Under SFAS No.123R an equity instrument is not
considered to be issued until the instrument vests. The Company reversed $8.2
million of restricted stock compensation and additional paid in capital included
in stockholders’ equity as of November 1, 2005 representing the nonvested
portions of restricted stock grants awarded prior to the effective date of
SFAS
No.123R, resulting in no net impact on the balance of total stockholders’
equity. As of October 31, 2006, there was $10.1 million of restricted stock
compensation related to nonvested restricted stock grants awarded under the
Plan. The remaining unamortized stock compensation is expected to be recognized
over a weighted average period of 8 years. For the years ended October 31,
2006,
2005 and 2004 amounts charged to compensation expense totaled $2,007,000,
$1,617,000 and $1,322,000 respectively.
Discontinued
Operations
There
were no sales of properties during 2006 or properties held for sale at October
31, 2006. Accordingly, there were no operating properties that were considered
discontinued operations in fiscal 2006.
During
fiscal 2005, the Company sold a shopping center in Farmingdale, New York for
$9.75 million and an office building in Southfield, Michigan for $9.175 million.
The shopping center was classified as a property held for sale at the end of
fiscal 2004. Accordingly, the operating results for these properties were
classified as discontinued operations in the accompanying consolidated
statements of income for the two years ended October 31, 2005. In connection
with the sales of the properties, the Company recorded gains on sales of
properties of $7.0 million in fiscal 2005.
Revenues
from discontinued operations were $1.7 million and $4.1 million for the years
ended October 31, 2005 and 2004, respectively.
Inflation
The
Company’s long-term leases contain provisions to mitigate the adverse impact of
inflation on its operating results. Such provisions include clauses entitling
the Company to receive (a) scheduled base rent increases and (b) percentage
rents based upon tenants’ gross sales, which generally increase as prices rise.
In addition, many of the Company’s non-anchor leases are for terms of less than
ten years, which permits the Company to seek increases in rents upon renewal
at
then current market rates if rents provided in the expiring leases are below
then existing market rates. Most of the Company’s leases require tenants to pay
a share of operating expenses, including common area maintenance, real estate
taxes, insurance and utilities, thereby reducing the Company’s exposure to
increases in costs and operating expenses resulting from inflation.
Environmental
Matters
Based
upon management’s ongoing review of its properties, management is not aware of
any environmental condition with respect to any of the Company’s properties that
would be reasonably likely to have a material adverse effect on the Company.
There can be no assurance, however, that (a) the discovery of environmental
conditions, which were previously unknown, (b) changes in law, (c) the conduct
of tenants or (d) activities relating to properties in the vicinity of the
Company’s properties, will not expose the Company to material liability in the
future. Changes in laws increasing the potential liability for environmental
conditions existing on properties or increasing the restrictions on discharges
or other conditions may result in significant unanticipated expenditures or
may
otherwise adversely affect the operations of the Company’s tenants, which would
adversely affect the Company’s financial condition and results of operations.
Item
7A. Quantitative
and Qualitative Disclosures about Market Risk
The
Company is exposed to interest rate risk primarily through its borrowing
activities. There is inherent rollover risk for borrowings as they mature and
are renewed at current market rates. The extent of this risk is not quantifiable
or predictable because of the variability of future interest rates and the
Company’s future financing requirements.
26
The
following table sets forth the Company’s long term debt obligations by principal
cash payments and maturity dates, weighted average fixed interest rates and
estimated fair value at October 31, 2006 (amounts in thousands, except weighted
average interest rate):
|
For
the years ended October 31,
|
|||||||||||||||||||||||||
|
2007
|
2008
|
2009
|
2010
|
2011
|
Thereafter
|
Total
|
Estimated
Fair
Value
|
||||||||||||||||||
|
Mortgage
notes payable
|
$
|
11,640
|
$
|
61,255
|
$
|
17,787
|
$
|
5,499
|
$
|
4,244
|
$
|
3,916
|
$
|
104,341
|
$
|
105,599
|
|||||||||
|
Weighted
average interest rate for debt maturing
|
7.55
|
%
|
7.30
|
%
|
7.06
|
%
|
7.78
|
%
|
7.25
|
%
|
6.58
|
%
|
|||||||||||||
During
the year ended October 31, 2006, the weighted average interest rate on variable
rate debt outstanding during the period was approximately 6.9%. A hypothetical
increase of 1% in interest rates would have had an immaterial effect on the
Company’s interest expense. At October 31, 2006, the Company had no outstanding
variable rate debt.
The
Company believes that its weighted average interest rate of 7.3% on its fixed
rate mortgage note debt is not materially different from current market interest
rates for debt instruments with similar risks and maturities.
The
Company has not planned, and does not plan, to enter into any derivative
financial instruments for trading or speculative purposes.
Item
8. Financial
Statements and Supplementary Data.
The
consolidated financial statements required by this Item, together with the
reports of the Company's independent registered public accounting firms thereon
and the supplementary financial information required by this Item are included
under Item 15 of this Annual Report.
Item
9. Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.
On
January 24, 2006, the Audit Committee of the Company’s Board of
Directors agreed,
by resolution, to end the engagement of Ernst & Young LLP (“Ernst &
Young”) as the Company’s independent registered public accounting firm as of the
completion of the audit for the year ended October 31, 2005.
Ernst
& Young’s reports on the Company’s consolidated financial statements as of
and for the fiscal years ended October 31, 2005 and 2004 did not contain an
adverse opinion or disclaimer of opinion, and were not qualified or modified
as
to uncertainty, audit scope, or accounting principles.
In
connection with the audits of the Company’s consolidated financial statements
for each of the fiscal years ended October 31, 2005 and 2004, there were no
disagreements with Ernst & Young on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope and procedures;
which disagreements, if not resolved to the satisfaction of Ernst & Young,
would have caused them to make reference to the matter in their report. In
addition, there were no reportable events as defined in Item 304 (a) (1) (v)
of
Regulation S-K.
The
Company requested Ernst & Young to furnish it a letter addressed to the
Securities and Exchange Commission stating whether it agrees with the above
statements. A copy of that letter, dated January 27, 2006 was filed as Exhibit
16.1 to Form
8-K
filed on January 27, 2006.
Effective
January 24, 2006, the Audit Committee of the Company engaged PKF, Certified
Public Accountants, A Professional Corporation (“PKF”) as the Company’s new
independent registered public accounting firm to audit the Company’s
consolidated financial statements as of and for the year ended October 31,
2006.
Item
9A. Controls
and Procedures.
At
the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer,
of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon
that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective. During
the
fourth quarter of 2006, there were no changes in the Company's internal control
over financial reporting that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial
reporting.
27
(a)
Management’s
Report on Internal Control over Financial Reporting
Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as such term is defined in Rules 13a-15(f)
and
15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal
control over financial reporting is a process designed by, or under the
supervision of, the Company’s Chief Executive Officer and Chief Financial
Officer and effected by the Company’s Board of Directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance
with generally accepted accounting principles.
The
Company’s internal control over financial reporting included policies and
procedures that: relate to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of
assets of the Company; provide reasonable assurance of the recording of all
transactions necessary to permit the preparation of the Company’s consolidated
financial statements in accordance with generally accepted accounting principles
and the proper authorization of receipts and expenditures in accordance with
authorization of the Company’s management and directors; and provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on
the Company’s consolidated financial statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projection of any evaluation of
effectiveness to future periods is subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.
Management
assessed the effectiveness of the Company’s internal control over financial
reporting as of October 31, 2006. In making this assessment, management used
the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control - Integrated Framework. Based on its
assessment, management determined that the Company’s internal control over
financial reporting was effective as of October 31, 2006.
PKF,
Certified Public Accountants, A Professional Corporation, an independent
registered public accounting firm that audited and reported on the Company’s
2006 consolidated financial statements included in this annual report, also
audited management’s assessment of the effectiveness of the Company’s internal
control over financial reporting as of October 31, 2006.
28
(b)
Report of Independent Registered Public Accounting Firm
The
Board
of Directors and Stockholders of Urstadt Biddle Properties Inc.
We
have
audited management’s assessment, included in the accompanying Management’s
Report on Internal Control over Financial Reporting, that Urstadt Biddle
Properties Inc. maintained effective internal control over financial reporting
as of October 31, 2006, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (the “COSO criteria”). Urstadt Biddle Properties
Inc.’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion
on
management’s assessment and an opinion on the effectiveness of the Company’s
internal control over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management’s assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, (3) receipts and expenditures of
the
company are being made only in accordance with authorizations of management
and
directors of the company; and (4) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the consolidated
financial statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In
our
opinion, management’s assessment that Urstadt Biddle Properties Inc. maintained
effective internal control over financial reporting as of October 31, 2006,
is fairly stated, in all material respects, based on the COSO criteria. Also,
in
our opinion, Urstadt Biddle Properties Inc. maintained, in all material
respects, effective internal control over financial reporting as of
October 31, 2006 based on the COSO criteria.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet of Urstadt
Biddle Properties Inc. as of October 31, 2006, and the related consolidated
statements of income, stockholders’ equity, and cash flows for the year then
ended and our report dated January 11, 2007 expressed an unqualified opinion
thereon.
|
New
York, New York
|
/s/
PKF
|
|
January
11, 2007
|
Certified
Public Accountants
|
|
A
Professional Corporation
|
29
Item
9B. Other
Information.
Not
applicable.
PART
III
Item
10. Directors
and Executive Officers of the Registrant.
The
Company will file its definitive Proxy Statement for its Annual Meeting of
Stockholders to be held on March 8, 2007 within the period required under the
applicable rules of the Securities and Exchange Commission. The additional
information required by this Item is included under the captions "ELECTION
OF
DIRECTORS" and “COMPENSATION AND TRANSACTIONS WITH MANAGEMENT AND OTHERS” of
such Proxy Statement and is incorporated herein by reference.
Executive
Officers of the Registrant.
The
following sets forth certain information regarding the executive officers of
the
Company:
|
Name
|
Age
|
Offices
Held
|
|
Charles
J. Urstadt
|
78
|
Chairman
(since 1986) and Chief Executive Officer (since September 1989);
Mr.
Urstadt has been a Director since 1975.
|
|
Willing
L. Biddle
|
45
|
President
and Chief Operating Officer (since December 1996); Executive Vice
President (March 1996 to December 1996); Senior Vice President -
Management (June 1995 to March 1996); Vice President - Retail (April
1993
to June 1995).
|
|
James
R. Moore
|
58
|
Executive
Vice President and Chief Financial Officer (since March 1996); Senior
Vice
President and Chief Financial Officer (1989 to 1996); Treasurer (since
December 1987); Secretary (1987 to 1999); Vice President-Finance
and
Administration (1987 to 1989).
|
|
Raymond
P. Argila
|
58
|
Senior
Vice President and Co-Counsel (since June 1990).
|
|
Thomas
D. Myers
|
55
|
Senior
Vice President, Co-Counsel and Secretary (since March 2006); Senior
Vice
President (since 2003); Secretary (since 2000); Vice President
(1995-2003); Associate Counsel
(1995-2006).
|
The
Directors elect officers of the Company annually.
The
Company has adopted a code of ethics that applies to the chief executive officer
and senior financial officers. In the event of any amendment to, or waiver
from,
the code of ethics, the Company will promptly disclose the amendment or waiver
as required by law or regulation of the SEC on Form 8-K.
Item
11. Executive
Compensation.
The
Company will file its definitive Proxy Statement for its Annual Meeting of
Stockholders to be held on March 8, 2007 within the period required under the
applicable rules of the Securities and Exchange Commission. The information
required by this Item is included under the caption "ELECTION OF DIRECTORS” and
“COMPENSATION AND TRANSACTIONS WITH MANAGEMENT AND OTHERS” of such Proxy
Statement and is incorporated herein by reference.
30
Item
12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The
Company will file its definitive Proxy Statement for its Annual Meeting of
Stockholders to be held on March 8, 2007 within the period required under the
applicable rules of the Securities and Exchange Commission. The information
required by this Item is included under the caption “ELECTION OF DIRECTORS -
Security Ownership of Certain Beneficial Owners and Management” and
“COMPENSATION AND TRANSACTIONS WITH MANAGEMENT AND OTHERS - Equity Compensation
Plan Information” of such Proxy Statement and is incorporated herein by
reference.
Item
13. Certain
Relationships and Related Transactions.
The
Company will file its definitive Proxy Statement for its Annual Meeting of
Stockholders to be held on March 8, 2007 within the period required under the
applicable rules of the Securities and Exchange Commission. The information
required by this Item is included under the caption “ELECTION OF DIRECTORS” and
“COMPENSATION AND TRANSACTIONS WITH MANAGEMENT AND OTHERS” of such Proxy
Statement and is incorporated herein by reference.
Item
14. Principal
Accountant Fees and Services.
The
Company will file its definitive Proxy Statement for its Annual meeting of
Stockholders to be held on March 8, 2007
within
the period required under the applicable rules of the Securities and Exchange
Commission.
The
information required by this Item is included under the caption “FEES BILLED BY
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM” of such Proxy Statement and is
incorporated herein by reference.
31
PART
IV
|
Item
15. Exhibits
and Financial Statement Schedules
|
||
|
A.
|
Index
to Financial Statements and Financial Statement
Schedules
|
|
|
1.
Financial Statements
|
||
|
The
consolidated financial statements listed in the accompanying
index to
financial statements on Page 37 are filed as part of this Annual
Report.
|
||
|
2.
Financial Statement Schedules --
|
||
|
The
financial statement schedules required by this Item are filed
with this
report and are listed in the accompanying index to financial
statements on
Page 37 All other financial statement schedules are not
applicable.
|
||
|
B.
|
Exhibits.
|
|
|
Listed
below are all Exhibits filed as part of this report. Certain
Exhibits are
incorporated by reference to documents previously filed by
the Company
with the SEC pursuant to Rule 12b-32 under the Securities
Exchange Act of
1934, as amended.
|
||
|
Exhibit
|
||
|
(3).
|
Articles
of Incorporation and By-laws
|
|
|
3.1
|
(a)
Amended
Articles of Incorporation of the Company (incorporated by
reference to
Exhibit C of Amendment No. 1 to Registrant's Statement on
Form S-4 (SEC
File No. 333-19113)).
|
|
|
(b)
Articles Supplementary of the Company (incorporated by reference
to Annex
A of Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated
August 3, 1998 (SEC File No. 001-12803)).
|
||
|
(c)
Articles Supplementary of the Company (incorporated by reference
to
Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated January
8, 1998 (SEC File No. 001-12803)).
|
||
|
(d)
Articles Supplementary of the Company (incorporated by reference
to
Exhibit A of Exhibit 4.1 of the Registrant’s Current Report on Form 8-K
dated March 12, 1998 (SEC File No. 001-12803)).
|
||
|
(e)Articles
Supplementary of the Company (incorporated by reference to
Exhibit A of
Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated March 12,
1998 (SEC File No. 001-12803)).
|
||
|
(f)
Articles
Supplementary of the Company (incorporated by reference to
Exhibit 4.2 of
the Registrant's Registration Statement on Form S-3 (SEC
File No.
333-107803)).
|
||
|
(g)
Articles
Supplementary of the Company (incorporated by reference to
Exhibit 4.1 of
the Registrant’s Current Report
on Form 8-K dated April 11, 2005 (SEC File No.
001-12803)).
|
||
|
(h)
Certificate
of Correction to the Articles Supplementary of the Company
(incorporated
by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K
dated May 3, 2005 (SEC File No. 001-12803)).
|
||
|
(i)
Articles
Supplementary of the Company (incorporated by reference to
Exhibit 4.1 of
the Registrant’s Current Report
on Form 8-K dated June 7, 2005 (SEC File No.
001-12803)).
|
||
|
3.2
|
By-laws
of the Company (incorporated by reference to Exhibit D of
Amendment No. 1
to Registrant's Registration Statement on Form S-4 (SEC File
No.
333-19113).
|
|
32
|
(4)
|
Instruments
Defining the Rights of Security Holders, Including Indentures.
|
|
|
4.1
|
Common
Stock: See Exhibits 3.1 (a)-(i) hereto.
|
|
|
4.2
|
Series
B Preferred Shares: See Exhibits 3.1 (a)-(i), 10.13 - 10.15,
10.17 and
10.22 hereto.
|
|
|
4.3
|
Series
C Preferred Shares: See Exhibits 3.1 (a)-(i) and 10.23
hereto.
|
|
|
4.4
|
Series
D Preferred Shares: See Exhibits 3.1 (a)-(i).
|
|
|
4.5
|
Series
A Preferred Share Purchase Rights: See Exhibits 3.1 (a)-(i),
10.3 and
10.16
hereto.
|
|
33
|
(10)
|
Material
Contracts.
|
|
|
10.1
|
Form
of Indemnification Agreement entered into between the Registrant
and each
of its Directors and for future use with Directors and officers
of the
Company (incorporated herein by reference to Exhibit 10.1 of
the
Registrant's Annual Report on Form 10-K for the year ended
October 31,
1989 (SEC File No. 001-12803)). 1
|
|
|
10.2
|
Amended
and Restated Change of Control Agreement between the Registrant
and James
R. Moore dated November 15, 1990 (incorporated herein by reference
to
Exhibit 10.3 of the Registrant's Annual Report on Form 10-K
for the year
ended October 31, 1990 (SEC File No. 001-12803)). 1
|
|
|
10.3
|
Amended
and Restated Rights Agreement between the Company and The Bank
of New
York, as Rights Agent, dated as of July 31, 1998 (incorporated
herein by
reference to Exhibit 10-1 of the Registrant's Current Report
on Form 8-K
dated November 5, 1998 (SEC File No. 001-12803)).
|
|
|
10.4
|
Agreement
dated December 19, 1991 between the Registrant and Raymond
P. Argila
amending the Change of Control Agreement dated as of June 12,
1990 between
the Registrant and Raymond P. Argila (incorporated herein by
reference to
Exhibit 10.6.1 of the Registrant's Annual Report on Form 10-K
for the year
ended October 31, 1991 (SEC File No. 001-12803)). 1
|
|
|
10.5
|
Change
of Control Agreement dated as of December 20, 1990 between
the Registrant
and Charles J. Urstadt (incorporated herein by reference to
Exhibit 10.8
of the Registr-ant's Annual Report on Form 10-K for the year
ended October
31, 1990 (SEC File No. 001-12803)). 1
|
|
|
10.6
|
Amended
and Restated HRE Properties Stock Option Plan (incorporated
herein by
reference to Exhibit 10.8 of the Registrant's Annual Report
on Form 10-K
for the year ended October 31, 1991 (SEC File No. 001-12803)). 1
|
|
|
10.6.1
|
Amendments
to HRE Properties Stock Option Plan dated June 9, 1993 (incorporated
by
reference to Exhibit 10.6.1 of the Registrant's Annual Report
on Form 10-K
for the year ended October 31, 1995 (SEC File No. 001-12803)). 1
|
|
|
10.6.2
|
Form
of Supplemental Agreement with Stock Option Plan Participants
(non-statutory options) (incorporated by reference to Exhibit
10.6.2 of
the Registrant’s Annual Report on Form 10-K for the year ended October 31,
1998 (SEC File No. 001-12803)).
1
|
|
|
10.7
|
Amended
and Restated Dividend Reinvestment and Share Purchase Plan
(incorporated
herein by reference to the Registrant’s Registration Statement on Form S-3
(See File No. 333-64381).
|
|
|
10.8
|
Amended
and Restated Change of Control Agreement dated as of November
6, 1996
between the Registrant and Willing L. Biddle (incorporated
by reference to
Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K for the year
ended October 31, 1996 (SEC File No. 001-12803)). 1
|
|
|
10.10
|
Restricted
Stock Plan (incorporated by reference to Exhibit B of Amendment
No. 1 to
Registrant’s Registration Statement on Form S-4 (SEC File No.
333-19113)). 1
|
|
|
10.10.1
|
Form
of Supplemental Agreement with Restricted Stockholders (incorporated
by
reference to Exhibit 10.6.2 of the Registrant’s Annual Report on Form 10-K
for the year ended October 31, 1998 (SEC File No. 001-12803)).
|
|
|
10.11
|
Excess
Benefit and Deferred Compensation Plan (incorporated by reference
to
Exhibit 10.10 of the Registrant’s Annual Report on Form 10-K for the year
ended October 31, 1998 (SEC File No. 001-12803)).
1
|
|
|
10.12
|
Purchase
and Sale Agreement, dated September 9, 1998, by and between
Goodwives
Center Limited Partnership, as seller, and UB Darien, Inc.,
a wholly owned
subsidiary of the Registrant, as purchaser (incorporated by
reference to
Exhibit 10 of the Registrant’s Current Report on Form 8-K dated September
23, 1998 (SEC File No. 001-12803)).
|
|
|
10.13
|
Subscription
Agreement, dated January 8, 1998, by and among the Company
and the Initial
Purchasers (incorporated by reference to Exhibit 4.2 of the
Registrant’s
Current Report on Form 8-K dated January 8, 1998 (SEC File
No.
001-12803)).
|
|
|
10.14
|
Registration
Rights Agreement, dated January 8, 1998, by and among the Company
and the
Initial Purchasers (incorporated by reference to Exhibit 4.3
of the
Registrant’s Current Report on Form 8-K dated January 8, 1998 (SEC File
No.
001-12803)).
|
|
34
|
10.15
|
Waiver
and Amendment of Registration Rights Agreement, dated as of April
16,
1999, by and among the Company and the Initial Purchasers (incorporated
by
reference to Exhibit 10.15 of the Registrant’s Annual Report on Form 10-K
for the year ended October 31, 1999 (SEC
File No. 001-12803)).
|
|
|
10.16
|
Amendment
to Shareholder Rights Agreement dated as of September 22, 1999
between the
Company and the Rights Agent (incorporated by reference to Exhibit
10.18
of the Registrant’s Annual Report on Form 10-K for the year ended October
31, 1999 (SEC
File No. 001-12803)).
|
|
|
10.17
|
Waiver
and Amendment of Registration Rights Agreement dated as of September
14,
2001 by and among the Company and the Initial Purchasers (incorporated
by
reference to Exhibit 10.17 of the Registrant’s Annual Report on Form 10-K
for the year ended October 31, 2001 (SEC
File No. 001-12803)).
|
|
|
10.18
|
Amended
and Restated Restricted Stock Award Plan effective December 9,
1999
(incorporated by reference to Exhibit 10.18 of the Registrant’s Annual
Report on Form 10-K for the year ended October 31, 2000 (SEC
File No. 001-12803)).
1
|
|
|
10.19
|
Amended
and Restated Stock Option Plan adopted June 28, 2000 (incorporated
by
reference to Exhibit 10.19 of the Registrant’s Annual Report on Form 10-K
for the year ended October 31, 2000 (SEC
File No. 001-12803)).
1
|
|
|
10.20
|
Promissory
Note and Stock Pledge Agreement dated July 3, 2002 by Willing L.
Biddle in
favor of the Registrant (incorporated by reference to Exhibit 10.20
of the
Registrant’s Annual Report on Form 10-K for the year ended October 31,
2002 (SEC
File No. 001-12803)).
1
|
|
|
10.21
|
Amended
and Restated Restricted Stock Award Plan effective December 12,
2001 as
approved by the Registrant’s stockholders on March 13, 2002 (incorporated
by reference to Exhibit 10.21 of the Registrant’s Annual Report on Form
10-K for the year ended October 31, 2002).
1
|
|
|
10.22
|
Amended
and Restated Restricted Stock Award Plan effective December 12,
2001 as
approved by the Registrant’s stockholders on March 13, 2002 (incorporated
by reference to Exhibit 10.21 of the Registrant’s Annual Report on Form
10-K for the year ended October 31, 2002).
|
|
|
10.23
|
Registration
Rights Agreement dated as of May 29, 2003 by and between the Company
and
Ferris, Baker Watts, Incorporated (incorporated by reference to
Exhibit
4.1 of the Registrant's Registration Statement on Form S-3 (SEC
File No.
333-107803)).
1
|
|
|
10.24
|
Amended
and Restated Restricted Stock Award Plan as approved by the Company’s
stockholders on March 10, 2004 (incorporated by reference to Exhibit
10.24
of the Registrant’s Annual Report on Form 10-K for the year ended October
31, 2004 (SEC File No. 001-12803)).
|
|
|
10.24.1
|
Form
of Restricted Stock Award Agreement with Restricted Stock Plan
Participants (Non-Employee Directors)
effective as
of November 1, 2006.
1
|
|
|
10.24.2
|
Form
of Restricted Stock Award Agreement with Restricted Stock Plan
Participants (Employee Directors) effective as of November 1, 2006.
1
|
|
|
10.24.3
|
Form
of Restricted Stock Award Agreement with Restricted Stock Plan
Participants (Employees) effective as of November 1, 2006.
1
|
|
|
10.25
|
Excess
Benefit and Deferred Compensation Plan effective as of January
1, 2005
(incorporated by reference to Exhibit 10.25 of the Registrant’s Annual
Report on Form 10-K for the year ended October 31, 2004 (SEC File
No.
001-12803)).
|
|
|
10.26
|
Purchase
and Sale Agreement between UB Railside, LLC and The Dock, Incorporated
(incorporated by reference to Exhibit 10.1 of the Registrant’s Current
Report on Form 8-K/A dated March 11, 2005 (SEC File No.
001-12803)).
|
|
35
|
10.27
|
Purchase
and Sale Agreement between UB Dockside, LLC and The Dock, Incorporated
(incorporated by reference to Exhibit 10.2 of the Registrant’s Current
Report on Form 8-K/A dated March 11, 2005 (SEC File No.
001-12803)).
|
|
|
10.28
|
Underwriting
Agreement between Urstadt Biddle Properties Inc. and Deutsche
Bank
Securities, Inc., dated April 7, 2005 (incorporated by reference
to
Exhibit 1.1 of the Registrant’s Current Report on Form 8-K dated April 11,
2005 (SEC File No. 001-12803)).
|
|
|
10.29
|
Underwriting
Agreement between Urstadt Biddle Properties Inc. and Deutsche
Bank
Securities, Inc., dated April 29, 2005 (incorporated by reference
to
Exhibit 1.1 of the Registrant’s Current Report on Form 8-K dated May 3,
2005 (SEC File No. 001-12803)).
|
|
|
10.30
|
Underwriting
Agreement between Urstadt Biddle Properties Inc. and Deutsche
Bank
Securities, Inc., dated June 2, 2005 (incorporated by reference
to Exhibit
1.1 of the Registrant’s Current Report on Form 8-K dated June 7, 2005 (SEC
File No. 001-12803)).
|
|
|
1
Management contract, compensatory plan or arrangement.
|
||
|
(14)
|
Code
of Ethics for Chief Executive Officer and Senior Financial Officers
(incorporated by reference to Exhibit 14 of the Registrant’s Annual Report
on Form 10-K for the year ended October 31, 2003 (SEC File No.
001-12803)).
|
|
|
(21)
|
Subsidiaries.
|
|
|
21.1
|
List
of Company's subsidiaries
|
|
|
(23)
|
Consents
of Experts.
|
|
|
23.1
|
Consent
of PKF, Certified Public Accountants, A Professional
Corporation
|
|
|
23.2
|
Consent
of Ernst & Young LLP
|
|
|
(31.1)
|
Certification
pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934, as
amended, signed and dated by Charles J. Urstadt.
|
|
|
(31.2)
|
Certification
pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934, as
amended, signed and dated by James R. Moore.
|
|
|
(32)
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to section
906 of
the Sarbanes-Oxley Act of 2002, signed and dated by Charles J.
Urstadt and
James R. Moore.
|
|
36
|
URSTADT
BIDDLE PROPERTIES INC.
|
||
|
Item
15A.
|
INDEX
TO FINANCIAL STATEMENTS AND
FINANCIAL
STATEMENT SCHEDULES
|
Page
|
|
Consolidated
Balance Sheets at October 31, 2006 and 2005
|
38
|
|
|
Consolidated
Statements of Income for each of the three years in the period
ended
October 31, 2006
|
39
|
|
|
Consolidated
Statements of Cash Flows for each of the three years in the period
ended
October 31, 2006
|
40
|
|
|
Consolidated
Statements of Stockholders' Equity for each of the three years
in the
period ended October 31, 2006
|
41
|
|
|
Notes
to Consolidated Financial Statements
|
42
|
|
|
Reports
of Independent Registered Public Accounting Firms
|
54-55
|
|
|
Schedules
|
||
|
III
|
Real
Estate and Accumulated Depreciation - October 31, 2006
|
56
|
|
IV
|
Mortgage
Loans on Real Estate - October 31, 2006
|
58
|
|
All
other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore
have been
omitted.
|
||
37
URSTADT
BIDDLE PROPERTIES INC.
CONSOLIDATED
BALANCE SHEETS
(In
thousands, except share data)
|
October
31,
|
|||||||
|
ASSETS
|
2006
|
2005
|
|||||
|
Real
Estate Investments:
|
|||||||
|
Core
properties - at cost
|
$
|
489,160
|
$
|
468,444
|
|||
|
Non-core
properties - at cost
|
6,383
|
6,383
|
|||||
|
495,543
|
474,827
|
||||||
|
Less:
Accumulated depreciation
|
(77,258
|
)
|
(65,253
|
)
|
|||
|
418,285
|
409,574
|
||||||
|
Mortgage
notes receivable
|
1,361
|
2,024
|
|||||
|
419,646
|
411,598
|
||||||
|
Cash
and cash equivalents
|
2,800
|
26,494
|
|||||
|
Restricted
cash
|
589
|
1,200
|
|||||
|
Marketable
securities
|
2,011
|
2,453
|
|||||
|
Tenant
receivables
|
17,176
|
14,442
|
|||||
|
Prepaid
expenses and other assets
|
4,484
|
4,526
|
|||||
|
Deferred
charges, net of accumulated amortization
|
4,644
|
3,726
|
|||||
|
Total
Assets
|
$
|
451,350
|
$
|
464,439
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
|
Liabilities:
|
|||||||
|
Mortgage
notes payable
|
$
|
104,341
|
$
|
111,786
|
|||
|
Accounts
payable and accrued expenses
|
1,785
|
3,991
|
|||||
|
Deferred
compensation - officers
|
1,200
|
1,051
|
|||||
|
Other
liabilities
|
5,503
|
4,699
|
|||||
|
Total
Liabilities
|
112,829
|
121,527
|
|||||
|
Minority
interests
|
5,318
|
5,318
|
|||||
|
Redeemable
Preferred Stock, par value $.01 per share;
|
|||||||
|
8.99%
Series B Senior Cumulative Preferred Stock, (liquidation preference
of
$100 per share);
150,000 shares issued and outstanding
|
14,341
|
14,341
|
|||||
|
8.50%
Series C Senior Cumulative Preferred Stock, (liquidation preference
of
$100 per share);
400,000 shares issued and outstanding
|
38,406
|
38,406
|
|||||
|
Total
Preferred Stock
|
52,747
|
52,747
|
|||||
|
Commitments
and Contingencies
|
|||||||
|
Stockholders’
Equity:
|
|||||||
|
7.5%
Series D Senior Cumulative Preferred Stock (liquidation preference
of $25
per share);
2,450,000
shares issued and outstanding
|
61,250
|
61,250
|
|||||
|
Excess
Stock, par value $.01 per share; 10,000,000 shares
authorized;
none
issued and outstanding
|
-
|
-
|
|||||
|
Common
Stock, par value $.01 per share; 30,000,000 shares
authorized;
|
|||||||
|
7,635,441
and 7,429,331 shares issued and outstanding
|
76
|
74
|
|||||
|
Class
A Common Stock, par value $.01 per share; 40,000,000 shares
authorized;
|
|||||||
|
18,804,781
and 18,705,800 shares issued and outstanding
|
188
|
187
|
|||||
|
Additional
paid in capital
|
262,024
|
267,365
|
|||||
|
Cumulative
distributions in excess of net income
|
(42,400
|
)
|
(35,007
|
)
|
|||
|
Accumulated
other comprehensive income
|
618
|
499
|
|||||
|
Unamortized
restricted stock compensation
|
-
|
(8,221
|
)
|
||||
|
Officer
note receivable
|
(1,300
|
)
|
(1,300
|
)
|
|||
|
Total
Stockholders’ Equity
|
280,456
|
284,847
|
|||||
|
Total
Liabilities and Stockholders’ Equity
|
$
|
451,350
|
$
|
464,439
|
|||
The
accompanying notes to consolidated financial statements are an integral part
of
these statements.
38
URSTADT
BIDDLE PROPERTIES INC.
CONSOLIDATED
STATEMENTS OF INCOME
(In
thousands, except per share data)
|
Year
Ended October 31,
|
||||||||||
|
2006
|
2005
|
2004
|
||||||||
|
Revenues
|
||||||||||
|
Base
rents
|
$
|
55,737
|
$
|
52,149
|
$
|
46,824
|
||||
|
Recoveries
from tenants
|
17,029
|
16,506
|
13,654
|
|||||||
|
Lease
termination income
|
75
|
253
|
577
|
|||||||
|
Mortgage
interest and other
|
408
|
325
|
338
|
|||||||
|
73,249
|
69,233
|
61,393
|
||||||||
|
Expenses
|
||||||||||
|
Property
operating
|
11,919
|
10,915
|
9,242
|
|||||||
|
Property
taxes
|
10,298
|
9,245
|
8,025
|
|||||||
|
Depreciation
and amortization
|
13,243
|
12,054
|
10,541
|
|||||||
|
General
and administrative
|
4,981
|
5,155
|
3,416
|
|||||||
|
Directors'
fees and expenses
|
250
|
258
|
207
|
|||||||
|
40,691
|
37,627
|
31,431
|
||||||||
|
Operating
Income
|
32,558
|
31,606
|
29,962
|
|||||||
|
Non-Operating
Income (Expense):
|
||||||||||
|
Interest
expense
|
(8,287
|
)
|
(8,502
|
)
|
(8,113
|
)
|
||||
|
Interest,
dividends and other investment income
|
950
|
731
|
487
|
|||||||
|
Minority
interests
|
(189
|
)
|
(339
|
)
|
(367
|
)
|
||||
|
Income
from Continuing Operations before Discontinued
Operations
|
25,032
|
23,496
|
21,969
|
|||||||
|
Discontinued
Operations:
|
||||||||||
|
Income
from discontinued operations
|
-
|
469
|
1,346
|
|||||||
|
Gains
on sales of properties
|
-
|
7,020
|
-
|
|||||||
|
Income
from Discontinued Operations
|
-
|
7,489
|
1,346
|
|||||||
|
Net
Income
|
25,032
|
30,985
|
23,315
|
|||||||
|
Preferred
stock dividends
|
(9,342
|
)
|
(7,009
|
)
|
(4,749
|
)
|
||||
|
Net
Income Applicable to Common and Class A Common
Stockholders
|
$
|
15,690
|
$
|
23,976
|
$
|
18,566
|
||||
|
Basic
earnings per share:
|
||||||||||
|
Per
Common Share:
|
||||||||||
|
Income
from continuing operations
|
$
|
.58
|
$
|
.62
|
$
|
.65
|
||||
|
Income
from discontinued operations
|
$
|
-
|
$
|
.28
|
$
|
.05
|
||||
|
Net
Income Applicable to Common Stockholders
|
$
|
.58
|
$
|
.90
|
$
|
.70
|
||||
|
Per
Class A Common Share:
|
||||||||||
|
Income
from continuing operations
|
$
|
.65
|
$
|
.68
|
$
|
.71
|
||||
|
Income
from discontinued operations
|
$
|
-
|
$
|
.31
|
$
|
.06
|
||||
|
Net
Income Applicable to Class A Common Stockholders
|
$
|
.65
|
$
|
.99
|
$
|
.77
|
||||
|
Diluted
earnings per share:
|
||||||||||
|
Per
Common Share:
|
||||||||||
|
Income
from continuing operations
|
$
|
.57
|
$
|
.60
|
$
|
.64
|
||||
|
Income
from discontinued operations
|
$
|
-
|
$
|
.27
|
$
|
.05
|
||||
|
Net
Income Applicable to Common Stockholders
|
$
|
.57
|
$
|
.87
|
$
|
.69
|
||||
|
Per
Class A Common Share:
|
||||||||||
|
Income
from continuing operations
|
$
|
.63
|
$
|
.66
|
$
|
.71
|
||||
|
Income
from discontinued operations
|
$
|
-
|
$
|
.30
|
$
|
.05
|
||||
|
Net
Income Applicable to Class A Common Stockholders
|
$
|
.63
|
$
|
.96
|
$
|
.76
|
||||
|
Dividends
per share:
|
||||||||||
|
Common
|
$
|
.81
|
$
|
.80
|
$
|
.78
|
||||
|
Class
A Common
|
$
|
.90
|
$
|
.88
|
$
|
.86
|
||||
The
accompanying notes to consolidated financial statements are an integral part
of
these statements.
39
URSTADT
BIDDLE PROPERTIES INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
thousands)
|
Year
Ended October 31,
|
||||||||||
|
2006
|
2005
|
2004
|
||||||||
|
Cash
Flows from Operating Activities:
|
||||||||||
|
Net
income
|
$
|
25,032
|
$
|
30,985
|
$
|
23,315
|
||||
|
Adjustments
to reconcile net income to net cash provided
|
||||||||||
|
by
operating activities:
|
||||||||||
|
Depreciation
and amortization from continuing operations
|
13,243
|
12,054
|
10,541
|
|||||||
|
Discontinued
operations
|
-
|
(469
|
)
|
(1,345
|
)
|
|||||
|
Straight-line
rent adjustments
|
(1,227
|
)
|
(1,313
|
)
|
(1,464
|
)
|
||||
|
Restricted
stock compensation expense
|
2,007
|
1,617
|
1,322
|
|||||||
|
Change
in value of deferred compensation arrangement
|
71
|
305
|
-
|
|||||||
|
Gains
on sale of properties
|
-
|
(7,020
|
)
|
-
|
||||||
|
Gain
on repayment of mortgage note receivable
|
(102
|
)
|
-
|
-
|
||||||
|
Minority
interests
|
189
|
339
|
367
|
|||||||
|
Increase
in tenant receivables
|
(1,507
|
)
|
(1,605
|
)
|
(1,244
|
)
|
||||
|
Decrease
in accounts payable and accrued expenses
|
(2,391
|
)
|
(151
|
)
|
(1,226
|
)
|
||||
|
Decrease
(increase) in other assets and other liabilities, net
|
116
|
(35
|
)
|
(1,487
|
)
|
|||||
|
Increase
in restricted cash
|
(2
|
)
|
(16
|
)
|
(86
|
)
|
||||
|
Net
Cash Flow Provided by Continuing Operating Activities
|
35,429
|
34,691
|
28,693
|
|||||||
|
Operating
Cash from Discontinued Operations
|
-
|
814
|
2,051
|
|||||||
|
Net
Cash Flow Provided by Operating Activities
|
35,429
|
35,505
|
30,744
|
|||||||
|
Cash
Flows from Investing Activities:
|
||||||||||
|
Sales
of marketable securities
|
561
|
255
|
7,323
|
|||||||
|
Acquisitions
of real estate investments
|
(16,628
|
)
|
(71,710
|
)
|
(6,625
|
)
|
||||
|
Acquisition
of limited partner interests in consolidated joint venture
|
-
|
(2,078
|
)
|
-
|
||||||
|
Improvements
to properties and deferred charges
|
(5,251
|
)
|
(5,319
|
)
|
(2,822
|
)
|
||||
|
Net
proceeds from sales of properties
|
-
|
17,758
|
-
|
|||||||
|
Distributions
to limited partners of consolidated joint ventures
|
(189
|
)
|
(339
|
)
|
(367
|
)
|
||||
|
Payments
received on mortgage notes receivable
|
765
|
85
|
75
|
|||||||
|
Refund
of escrow funds
|
613
|
-
|
-
|
|||||||
|
Net
Cash Flow Used in Investing Activities
|
(20,129
|
)
|
(61,348
|
)
|
(2,416
|
)
|
||||
|
Cash
Flows from Financing Activities:
|
||||||||||
|
Proceeds
from revolving credit line borrowings
|
3,000
|
19,500
|
-
|
|||||||
|
Repayments
on revolving credit line borrowings
|
(3,000
|
)
|
(19,500
|
)
|
-
|
|||||
|
Net
proceeds from issuance of Series D Preferred stock
|
-
|
59,380
|
-
|
|||||||
|
Sales
of additional shares of Common and Class A Common Stock
|
876
|
1,287
|
3,141
|
|||||||
|
Principal
repayments on mortgage notes payable
|
(7,445
|
)
|
(4,173
|
)
|
(1,826
|
)
|
||||
|
Dividends
paid - Common and Class A Common Stock
|
(23,083
|
)
|
(22,402
|
)
|
(21,536
|
)
|
||||
|
Dividends
paid - Preferred Stock
|
(9,342
|
)
|
(7,009
|
)
|
(4,749
|
)
|
||||
|
Repurchase
of shares of Common and Class A Common Stock
|
-
|
(686
|
)
|
-
|
||||||
|
Repayment
of officer note receivable
|
-
|
-
|
133
|
|||||||
|
Net
Cash Flow (Used In) Provided by Financing
Activities
|
(38,994
|
)
|
26,397
|
(24,837
|
)
|
|||||
|
Net
(Decrease) Increase In Cash and Cash Equivalents
|
(23,694
|
)
|
554
|
3,491
|
||||||
|
Cash
and Cash Equivalents at Beginning of Year
|
26,494
|
25,940
|
22,449
|
|||||||
|
Cash
and Cash Equivalents at End of Year
|
$
|
2,800
|
$
|
26,494
|
$
|
25,940
|
||||
The
accompanying notes to consolidated financial statements are an integral part
of
these statement.
40
URSTADT
BIDDLE PROPERTIES INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
(In
thousands, except shares and per share data)
|
7.5%
Series D
Preferred
Stock
|
Common
Stock
|
Class
A Common Stock
|
Additional
Paid In Capital
|
Cumulative
Distributions In Excess of Net
Income
|
Accumulated
Other
Comprehensive
Income
|
Unamortized
Restricted
Stock
Compensation
and
Officer Note
Receivable
|
Total
Stockholders’
Equity
|
|||||||||||||||||||||||||||
|
Issued
|
Amount
|
Issued
|
Amount
|
Issued
|
Amount
|
|||||||||||||||||||||||||||||
|
Balances
- October 31, 2003
|
-
|
$
|
-
|
6,817,771
|
$
|
68
|
18,548,453
|
$
|
185
|
$
|
258,296
|
$
|
(33,611
|
)
|
$
|
-
|
$
|
(5,262
|
)
|
$
|
219,676
|
|||||||||||||
|
Comprehensive
Income:
|
||||||||||||||||||||||||||||||||||
|
Net
income applicable to Common
|
||||||||||||||||||||||||||||||||||
|
and
Class A common stockholders
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
18,566
|
-
|
-
|
18,566
|
|||||||||||||||||||||||
|
Unrealized
gains in marketable securities
|
472
|
-
|
472
|
|||||||||||||||||||||||||||||||
|
Total
comprehensive Income
|
19,038
|
|||||||||||||||||||||||||||||||||
|
Cash
dividends paid :
|
||||||||||||||||||||||||||||||||||
|
Common
stock ($.78 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,516
|
)
|
-
|
-
|
(5,516
|
)
|
|||||||||||||||||||||
|
Class
A common stock ($.86 per share)
|
(16,020
|
)
|
-
|
-
|
(16,020
|
)
|
||||||||||||||||||||||||||||
|
Issuance
of shares under dividend reinvestment plan
|
-
|
-
|
181,720
|
2
|
18,306
|
-
|
2,843
|
-
|
-
|
-
|
2,845
|
|||||||||||||||||||||||
|
Shares
issued under restricted stock plan
|
-
|
-
|
175,500
|
2
|
58,625
|
1
|
3,245
|
-
|
-
|
(3,248
|
)
|
-
|
||||||||||||||||||||||
|
Amortization
of restricted stock compensation
|
-
|
-
|
1,322
|
1,322
|
||||||||||||||||||||||||||||||
|
Exercise
of stock options
|
-
|
-
|
15,000
|
-
|
23,624
|
-
|
296
|
-
|
-
|
-
|
296
|
|||||||||||||||||||||||
|
Repayment
of notes receivable from officers
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
133
|
133
|
|||||||||||||||||||||||
|
Balances
- October 31, 2004
|
-
|
-
|
7,189,991
|
72
|
18,649,008
|
186
|
264,680
|
(36,581
|
)
|
472
|
(7,055
|
)
|
221,774
|
|||||||||||||||||||||
|
Comprehensive
Income:
|
||||||||||||||||||||||||||||||||||
|
Net
income applicable to Common
|
||||||||||||||||||||||||||||||||||
|
and
Class A common stockholders
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
23,976
|
-
|
-
|
23,976
|
|||||||||||||||||||||||
|
Change
in unrealized gains in marketable securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
27
|
-
|
27
|
|||||||||||||||||||||||
|
Total
comprehensive income
|
24,003
|
|||||||||||||||||||||||||||||||||
|
Cash
dividends paid :
|
||||||||||||||||||||||||||||||||||
|
Common
stock ($.80 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,918
|
)
|
-
|
-
|
(5,918
|
)
|
|||||||||||||||||||||
|
Class
A common stock ($.88 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(16,484
|
)
|
-
|
-
|
(16,484
|
)
|
|||||||||||||||||||||
|
Issuance
of shares under
|
||||||||||||||||||||||||||||||||||
|
dividend
reinvestment plan
|
-
|
-
|
59,390
|
-
|
15,767
|
-
|
1,186
|
-
|
-
|
-
|
1,186
|
|||||||||||||||||||||||
|
Shares
issued under restricted stock plan
|
-
|
-
|
175,800
|
2
|
75,675
|
1
|
4,080
|
-
|
(4,083
|
)
|
-
|
|||||||||||||||||||||||
|
Amortization
of restricted stock
|
||||||||||||||||||||||||||||||||||
|
compensation
and other adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
(125
|
)
|
-
|
-
|
1,617
|
1,492
|
||||||||||||||||||||||
|
Exercise
of stock options
|
-
|
-
|
7,750
|
-
|
6,750
|
-
|
100
|
-
|
-
|
-
|
100
|
|||||||||||||||||||||||
|
Repurchases
of Common and Class A Common shares
|
-
|
-
|
(3,600
|
)
|
-
|
(41,400
|
)
|
-
|
(686
|
)
|
(686
|
)
|
||||||||||||||||||||||
|
Issuance
of Series D Preferred Stock
|
2,450,000
|
61,250
|
-
|
-
|
-
|
-
|
(1,870
|
)
|
-
|
-
|
-
|
59,380
|
||||||||||||||||||||||
|
Balances
- October 31, 2005
|
2,450,000
|
61,250
|
7,429,331
|
74
|
18,705,800
|
187
|
267,365
|
(35,007
|
)
|
499
|
(9,521
|
)
|
284,847
|
|||||||||||||||||||||
|
Reversal
of unamortized stock compensation upon adoption of SFAS No.
123R
|
-
|
-
|
-
|
-
|
-
|
-
|
(8,221
|
)
|
-
|
-
|
8,221
|
-
|
||||||||||||||||||||||
|
Comprehensive
Income:
|
||||||||||||||||||||||||||||||||||
|
Net
income applicable to Common
|
||||||||||||||||||||||||||||||||||
|
and
Class A common stockholders
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
15,690
|
-
|
-
|
15,690
|
|||||||||||||||||||||||
|
Change
in unrealized gains in marketable securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
119
|
-
|
119
|
|||||||||||||||||||||||
|
Total
comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
15,809
|
|||||||||||||||||||||||
|
Cash
dividends paid :
|
||||||||||||||||||||||||||||||||||
|
Common
stock ($0.81 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(6,168
|
)
|
-
|
-
|
(6,168
|
)
|
|||||||||||||||||||||
|
Class
A common stock ($0.90 per share)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(16,915
|
)
|
-
|
-
|
(16,915
|
)
|
|||||||||||||||||||||
|
Issuance
of shares under dividend
|
||||||||||||||||||||||||||||||||||
|
reinvestment
plan
|
-
|
-
|
30,810
|
-
|
15,431
|
-
|
769
|
-
|
-
|
-
|
769
|
|||||||||||||||||||||||
|
Exercise
of stock options
|
-
|
-
|
9,500
|
-
|
4,500
|
-
|
107
|
-
|
-
|
-
|
107
|
|||||||||||||||||||||||
|
Shares
issued under restricted stock plan
|
-
|
-
|
165,800
|
2
|
79,050
|
1
|
(3
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||
|
Restricted
stock compensation
|
-
|
-
|
-
|
-
|
-
|
-
|
2,007
|
-
|
-
|
-
|
2,007
|
|||||||||||||||||||||||
|
Balances
- October 31, 2006
|
2,450,000
|
$
|
61,250
|
7,635,441
|
$
|
76
|
18,804,781
|
$
|
188
|
$
|
262,024
|
$
|
(42,400
|
)
|
$
|
618
|
$
|
(1,300
|
)
|
$
|
280,456
|
|||||||||||||
The
accompanying notes to consolidated financial statements are an integral part
of
these statements
41
Urstadt
Biddle Properties Inc
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
October
31, 2006
(1)
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Business
Urstadt
Biddle Properties Inc. (“Company”), a real estate investment trust (“REIT”), is
engaged in the acquisition, ownership and management of commercial real estate,
primarily neighborhood and community shopping centers in the northeastern part
of the United States. Other assets include office and industrial properties.
The
Company's major tenants include supermarket chains and other retailers who
sell
basic necessities. At October 31, 2006, the Company owned or had interests
in 37
properties containing a total of 3.7 million square feet of leasable area.
Principles
of Consolidation and Use of Estimates
The
consolidated financial statements include the accounts of the Company, its
wholly owned subsidiaries, and joint ventures in which the Company meets certain
criteria of a sole general partner in accordance with Emerging Issues Task
Force
(“EITF”) Issue 04-5, “Investor’s Accounting for an Investment in a Limited
Partnership when the Investor is the Sole General Partner and the Limited
Partners Have Certain Rights.” The joint ventures are consolidated into the
consolidated financial statements of the Company. All significant intercompany
transactions and balances have been eliminated in consolidation.
The
accompanying financial statements are prepared on the accrual basis in
accordance with accounting principles generally accepted in the United States
(“GAAP”). The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the disclosure
of contingent assets and liabilities, the reported amounts of assets and
liabilities at the date of the financial statements, and the reported amounts
of
revenue and expenses during the periods covered by the financial statements.
The
most significant assumptions and estimates relate to the valuation of real
estate, depreciable lives, revenue recognition and the collectibility of tenant
and notes receivable. Actual results could differ from these
estimates.
Reclassifications
Certain
prior period amounts have been reclassified to conform to the current year
presentation.
Federal
Income Taxes
The
Company has elected to be treated as a REIT under Sections 856-860 of the
Internal Revenue Code (Code). Under those sections, a REIT that among other
things, distributes at least 90% of real estate trust taxable income and meets
certain other qualifications prescribed by the Code will not be taxed on that
portion of its taxable income that is distributed. The Company believes it
qualifies as a REIT and has distributed all of its taxable income for the fiscal
years through 2006 in accordance with the provisions of the Code. Accordingly,
no provision has been made for Federal income taxes in the accompanying
consolidated financial statements.
Real
Estate Investments
All
capitalizable costs related to the improvement or replacement of real estate
properties are capitalized. Additions, renovations and improvements that enhance
and/or extend the useful life of a property are also capitalized. Expenditures
for ordinary maintenance, repairs and improvements that do not materially
prolong the normal useful life of an asset are charged to operations as
incurred.
Upon
the
acquisition of real estate, the Company assesses the fair value of acquired
tangible assets such as land, buildings and tenant improvements, intangible
assets such as above and below market leases, acquired-in place leases and
other
identified intangible assets and assumed liabilities in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 141 “Business
Combinations.” The Company allocates the purchase price to the acquired assets
and assumed liabilities based on their relative fair values. The Company
assesses and considers fair value based on estimated cash flow projections
that
utilize appropriate discount and/or capitalization rates, as well as available
market information. The fair value of the tangible assets of an acquired
property considers the value of the property as if it were vacant.
Above
and
below market leases acquired are recorded at their fair value. The capitalized
above-market lease values are amortized as a reduction of rental revenue over
the remaining term of the respective leases and the capitalized below-market
lease values are amortized as an increase to rental revenue over the remaining
term of the respective leases. The value of in-place leases is based on the
Company’s evaluation of the specific characteristics of each tenant’s lease.
Factors considered include estimates of carrying costs during expected lease-up
periods, current market conditions, and costs to execute similar leases. The
value of in-place leases are amortized over the remaining term of the respective
leases. If a tenant vacates its space prior to its contractual expiration date,
any unamortized balance of their related intangible asset is
expensed.
42
Depreciation
and Amortization
The
Company uses the straight-line method for depreciation and amortization. Core
and non-core properties are depreciated over the estimated useful lives of
the
properties, which range from 30 to 40 years. Property improvements are
depreciated over the estimated useful lives that range from 10 to 20 years.
Furniture and fixtures are depreciated over the estimated useful lives that
range from 3 to 10 years. Tenant improvements are amortized over the shorter
of
the life of the related leases or their useful life.
Property
Held for Sale
The
Company has adopted the provisions of Statement of Financial Accounting
Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets” (“SFAS No. 144”). SFAS No. 144 requires, among other things, that the
assets and liabilities and the results of operations of the Company’s properties
that have been sold or otherwise qualify as held for sale be classified as
discontinued operations and presented separately in the Company’s consolidated
financial statements. The Company classifies properties as held for sale that
are under contract for sale and are expected to be sold within the next twelve
months.
Deferred
Charges
Deferred
charges consist principally of leasing commissions (which are amortized ratably
over the life of the tenant leases) and financing fees (which are amortized
over
the terms of the respective agreements). Deferred charges in the accompanying
consolidated balance sheets are shown at cost, net of accumulated amortization
of $2,595,000 and $2,292,000 as of October 31, 2006 and 2005,
respectively.
Asset
Impairment
The
Company reviews long-lived assets for impairment whenever events or changes
in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the asset to aggregate future net cash
flows (undiscounted and without interest) expected to be generated by the asset.
If such assets are considered impaired, the impairment to be recognized is
measured by the amount by which the carrying amounts of the assets exceed the
fair value.
Revenue
Recognition
Revenues
from operating leases include revenues from core properties and non-core
properties. Rental income is generally recognized based on the terms of leases
entered into with tenants. In those instances in which the Company funds tenant
improvements and the improvements are deemed to be owned by the Company, revenue
recognition will commence when the improvements are substantially completed
and
possession or control of the space is turned over to the tenant. When the
Company determines that the tenant allowances are lease incentives, the Company
commences revenue recognition when possession or control of the space is turned
over to the tenant for tenant work to begin. Minimum rental income from leases
with scheduled rent increases is recognized on a straight-line basis over the
lease term. At October 31, 2006 and 2005, approximately $9,278,000 and
$8,051,000 has been recognized as straight-line rents receivable (representing
the current net cumulative rents recognized prior to when billed and collectible
as provided by the terms of the leases), all of which is included in tenant
receivables in the accompanying consolidated financial statements. Percentage
rent is recognized when a specific tenant’s sales breakpoint is achieved.
Property operating expense recoveries from tenants of common area maintenance,
real estate taxes and other recoverable costs are recognized in the period
the
related expenses are incurred. Lease incentives are amortized as a reduction
of
rental revenue over the respective tenant lease terms. Lease termination amounts
received by the Company from its tenants are recognized as income in the period
received. Interest income is recognized as it is earned. Gains or losses on
disposition of properties are recorded when the criteria for recognizing such
gains or losses under generally accepted accounting principles have been
met.
The
Company provides an allowance for doubtful accounts against the portion of
tenant receivables (including an allowance for future tenant credit losses
of
approximately 10% of the deferred straight-line rents receivable) which is
estimated to be uncollectible. Such allowances are reviewed periodically. At
October 31, 2006 and 2005, tenant receivables in the accompanying consolidated
balance sheets are shown net of allowances for doubtful accounts of $1,561,000
and $1,409,000 respectively. During the years ended October 31, 2006, 2005
and
2004, the Company provided $200,000, $90,000 and $68,000, respectively, for
uncollectible amounts.
Cash
Equivalents
Cash
and
cash equivalents consist of cash in banks and short-term investments with
original maturities of less than three months.
Restricted
Cash
Restricted
cash consists of those tenant security deposits and replacement and other
reserves required by agreement with certain of the Company’s mortgage lenders
for property level capital requirements which are required to be held in
separate bank accounts.
Marketable
Securities
Marketable
securities consist of short-term investments and marketable equity securities.
Short-term investments (consisting of investments with original maturities
of
greater than three months when purchased) and marketable equity securities
are
carried at fair value. The Company has classified marketable securities as
available for sale. Unrealized gains and losses on available for sale securities
are recorded as other comprehensive income in Stockholders’ Equity. For the
years ended October 31, 2006 and 2005, gains on sales of marketable securities,
determined based on specific identification amounted to $122,000 and $70,000
(none in fiscal 2004).
43
Comprehensive
Income
Comprehensive
income is comprised of net income and other comprehensive income (loss). Other
comprehensive income (loss) includes items that are otherwise recorded directly
in stockholders’ equity, such as unrealized gains or losses on marketable
securities. At October 31, 2006 and 2005, other comprehensive income consists
of
net unrealized gains on marketable securities of $618,000 and $499,000,
respectively. Unrealized gains included in other comprehensive income will
be
reclassified into earnings as gains are realized.
Fair
Value of Financial Instruments
The
carrying values of cash and cash equivalents, restricted cash, tenant
receivables, prepaid expenses and other assets, accounts payable, accrued
expenses and other liabilities are reasonable estimates of their fair values
because of the short term nature of these instruments.
The
estimated fair value of mortgage notes receivable collateralized by real
property is based on discounting the future cash flows at a year-end risk
adjusted lending rate that the Company would utilize for loans of similar risk
and duration. At October 31, 2006 and 2005, the estimated aggregate fair value
of the mortgage notes receivable was $1,093,000 and $1,962,000,
respectively.
The
estimated fair value of mortgage notes payable was $105,600,000 and $114,500,000
at October 31, 2006 and 2005, respectively. The estimated fair value of mortgage
notes payable is based on discounting the future cash flows at a year-end risk
adjusted borrowing rate currently available to the Company for issuance of
debt
with similar terms and remaining maturities.
Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date and current
estimates of fair value may differ significantly from the amounts presented
herein.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash and cash equivalents, and tenant receivables.
The
Company places its cash and cash equivalents in excess of insured amounts with
high quality financial institutions. The Company performs ongoing credit
evaluations of its tenants and may require certain tenants to provide security
deposits or letters of credit. Though these security deposits and letters of
credit are insufficient to meet the terminal value of a tenant’s lease
obligation, they are a measure of good faith and a source of funds to offset
the
economic costs associated with lost rent and the costs associated with
retenanting the space. There is no dependence upon any single
tenant.
Earnings
Per Share
The
Company calculates basic and diluted earnings per share in accordance with
SFAS
No. 128, “Earnings Per Share.” Basic earnings per share (“EPS”) excludes the
impact of dilutive shares and is computed by dividing net income applicable
to
Common and Class A Common stockholders by the weighted average number of Common
shares and Class A Common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue Common shares or Class A Common shares were exercised or
converted into Common shares or Class A Common shares and then shared in the
earnings of the Company. Since the cash dividends declared on the Company’s
Class A Common stock are higher than the dividends declared on the Common Stock,
basic and diluted EPS have been calculated using the “two-class” method. The
two-class method is an earnings allocation formula that determines earnings
per
share for each class of common stock according to the weighted average of the
dividends declared, outstanding shares per class and participation rights in
undistributed earnings.
44
The
following table sets forth the reconciliation between basic and diluted EPS
(in
thousands):
|
2006
|
2005
|
2004
|
||||||||
|
Numerator
|
||||||||||
|
Net
income applicable to common stockholders - basic
|
$
|
3,871
|
$
|
5,902
|
$
|
4,488
|
||||
|
Effect
of dilutive securities:
|
||||||||||
|
Operating
partnership units
|
220
|
281
|
192
|
|||||||
|
Net
income applicable to common stockholders - diluted
|
$
|
4,091
|
$
|
6,183
|
$
|
4,680
|
||||
|
Denominator
|
||||||||||
|
Denominator
for basic EPS-weighted average common shares
|
6,662
|
6,566
|
6,414
|
|||||||
|
Effect
of dilutive securities:
|
||||||||||
|
Stock
options and awards
|
482
|
446
|
351
|
|||||||
|
Operating
partnership units
|
55
|
55
|
55
|
|||||||
|
Denominator
for diluted EPS - weighted average common equivalent
shares
|
7,199
|
7,067
|
6,820
|
|||||||
|
Numerator
|
||||||||||
|
Net
income applicable to Class A common stockholders - basic
|
$
|
11,819
|
$
|
18,074
|
$
|
14,078
|
||||
|
Effect
of dilutive securities:
|
||||||||||
|
Operating
partnership units
|
-
|
58
|
175
|
|||||||
|
Net
income applicable to Class A common stockholders - diluted
|
$
|
11,819
|
$
|
18,132
|
$
|
14,253
|
||||
|
Denominator
|
||||||||||
|
Denominator
for basic EPS - weighted average Class A common shares
|
18,312
|
18,280
|
18,248
|
|||||||
|
Effect
of dilutive securities:
|
||||||||||
|
Stock
options and awards
|
306
|
314
|
278
|
|||||||
|
Operating
partnership units
|
55
|
246
|
310
|
|||||||
|
Denominator
for diluted EPS - weighted average Class A common
|
||||||||||
|
equivalent
shares
|
18,673
|
18,840
|
18,836
|
Stock
Based Compensation
Prior
to
November 1, 2005, the Company accounted for its stock based compensation plans
under the recognition and measurement provisions of APB Opinion No. 25,
“Accounting
for Stock Issued to Employees”
(“APB
No.25”) , and related Interpretations, as permitted by FASB Statement No. 123,
“Accounting
for Stock-Based Compensation.” Effective
November 1, 2005, the Company adopted the fair value recognition provisions
of
FASB Statement No. 123R, “Share-Based Payment” (“SFAS No. 123R”) , using the
modified-prospective-transition method. Under that transition method,
compensation expense is recognized for all share-based payments granted
subsequent to November 1, 2005, based on the fair value of the stock awards
less
estimate forfeitures in accordance with the provisions of SFAS No. 123R. The
fair value of stock awards is equal to the fair value of the Company’s stock on
the grant date.
Segment
Reporting
The
Company operates in one industry segment, ownership of commercial real estate
properties which are located principally in the northeastern United States.
The
Company does not distinguish its property operations for purposes of measuring
performance. Accordingly, the Company believes it has a single reportable
segment for disclosure purposes.
Recently
Issued Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurement. This statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007. The Company is
currently evaluating the effect of this statement.
In
September 2006, the Securities and Exchange Commission (“SEC”) issued Staff
Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (“SAB 108”), which provides guidance on how registrants should
quantify financial statement misstatements. SAB 108 provides for the
quantification of the impact of correcting all misstatements, including the
effects of prior year misstatements, on the current year financial statements.
If a misstatement is material to the current year financial statements, the
prior year financial statements should also be corrected, even though immaterial
to the prior year financial statements. Corrections to prior year financial
statements for immaterial errors would not require previously filed reports
to
be amended; such corrections would be made in the current period filings. SAB
108 is effective for fiscal years ending after November 15, 2006. The impact
of
adopting SAB 108 is not expected to have a material effect on the Company’s
financial statements.
In
July
2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
in
Income Taxes - an interpretation of FASB Statement No. 109, Accounting for
Income Taxes (“FIN 48”), regarding accounting for and disclosure of uncertain
tax positions. This guidance seeks to reduce the diversity in practice
associated with certain aspects of the recognition and measurement related
to
accounting for income taxes. This interpretation is effective for fiscal years
beginning after December 15, 2006. The Company does not expect the adoption
of
FIN 48 to have a material effect on the Company’s financial
statements.
45
In
May
2005, the FASB issued SFAS No. 154 “Accounting Changes and Error Corrections”
(“SFAS No. 154”), which replaces Accounting Principles Board Opinion No. 20,
“Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim
Financial Statements.” SFAS No. 154 changes the requirements for the accounting
for and reporting of a change in accounting principles. It requires
retrospective application to prior periods’ financial statements of changes in
accounting principle, unless it is impracticable to determine either the
period-specific effects of the change or the cumulative effect of the change.
This Statement is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005.
(2)
REAL ESTATE INVESTMENTS
The
Company’s investments in real estate, net of depreciation, were composed of the
following at October 31, 2006 and 2005 (in thousands):
|
Core
Properties
|
Non-Core
Properties
|
Mortgage
Notes Receivable
|
2006
Totals
|
2005
Totals
|
||||||||||||
|
Retail
|
$
|
407,969
|
$
|
1,717
|
$
|
1,361
|
$
|
411,047
|
$
|
402,620
|
||||||
|
Office
|
7,391
|
-
|
-
|
7,391
|
7,550
|
|||||||||||
|
Industrial
|
-
|
904
|
-
|
904
|
1,124
|
|||||||||||
|
Undeveloped
Land
|
304
|
-
|
-
|
304
|
304
|
|||||||||||
|
$
|
415,664
|
$
|
2,621
|
$
|
1,361
|
$
|
419,646
|
$
|
411,598
|
|||||||
The
Company’s investments at October 31, 2006,
consisted of equity interests in 37 properties, which are located in various
regions throughout the United States and one mortgage note receivable. The
Company’s primary investment focus is neighborhood and community shopping
centers located in the northeastern United States. These properties are
considered core properties of the Company. The remaining properties are located
outside of the northeastern United States and are considered non-core
properties. Since a significant concentration of the Company’s properties are in
the northeast, market changes in this region could have an effect on the
Company’s leasing efforts and ultimately its overall results of operations. The
following is a summary of the geographic locations of the Company’s investments
at October 31, 2006 and 2005 (in thousands):
|
2006
|
2005
|
||||||
|
Northeast
|
$
|
415,664
|
$
|
407,184
|
|||
|
Midwest
|
602
|
696
|
|||||
|
Southwest
|
3,380
|
3,718
|
|||||
|
$
|
419,646
|
$
|
411,598
|
||||
(3)
CORE PROPERTIES
The
components of core properties were as follows (in thousands):
|
2006
|
2005
|
||||||
|
Land
|
$
|
90,532
|
$
|
87,066
|
|||
|
Buildings
and improvements
|
398,628
|
381,378
|
|||||
|
489,160
|
468,444
|
||||||
|
Accumulated
depreciation
|
(73,496
|
)
|
(61,872
|
)
|
|||
|
$
|
415,664
|
$
|
406,572
|
||||
Space
at
the Company’s core properties is generally leased to various individual tenants
under short and intermediate term leases which are accounted for as operating
leases.
Minimum
rental payments on non-cancelable operating leases totaling $328,876,000 become
due as follows: 2007 -$51,866,000; 2008 - $46,161,000; 2009 - $40,998,000;
2010
- $36,104,000; 2011 - $30,989,000 and thereafter - $122,758,000.
Certain
of the Company’s leases provide for the payment of additional rent based on a
percentage of the tenant’s revenues. Such additional percentage rents are
included in operating lease income and were less than 1% of consolidated
revenues in each of the three years ended October 31, 2006.
In
June
2006, the Company made a payment of $1.5 million to a tenant at its Towne Centre
at Somers Shopping Center in exchange for the tenant’s agreement to terminate
its lease. The termination permitted the Company to enter into a new lease
with
an unrelated tenant for the vacated space. The Company accounts for the
termination payment as a lease incentive and amortizes the payment over the
new
lease term of twenty years.
Owned
Properties
In
March
2006, the Company acquired three retail properties totaling 50,000 square feet
of gross leasable space (“GLA”) located in Pelham, New York and Queens, New York
(“Pelham Properties”). The three properties were acquired for an aggregate
purchase price of $16.6 million.
46
In
fiscal
2005, the Company acquired The Dock Shopping Center (“The Dock”) (269,000 square
feet of GLA) , for $51.1 million and Staples Plaza (“Staples Plaza”) (200,000
square feet of GLA) for a purchase price of $28.5 million, including the
assumption of a first mortgage loan at its estimated fair value of $8.5 million.
The assumption of the mortgage loan represents a non-cash financing activity
and
is therefore not included in the accompanying 2005 consolidated statement of
cash flows.
In
fiscal
2004, the Company acquired four retail properties (“Rye Properties”) totaling
40,000 square feet of GLA for total consideration of $11.0 million including
the
assumption of three mortgage loans at their estimated fair values totaling
$4.7
million. The assumption of the mortgage loans represent non-cash financing
activities and are therefore not included in the accompanying 2004 consolidated
statement of cash flows.
Upon
the
acquisition of real estate properties, the fair value of the real estate
purchased is allocated to the acquired tangible assets, (consisting of land,
buildings and building improvements) and identified intangible assets and
liabilities (consisting of above-market and below-market leases and in-place
leases), in accordance with SFAS No. 141 “Business Combinations”. The Company
utilizes methods similar to those used by independent appraisers in estimating
the fair value of acquired assets and liabilities. The fair value of the
tangible assets of an acquired property considers the value of the property
“as-if-vacant”. The fair value reflects the depreciated replacement cost of the
asset. In allocating purchase price to identified intangible assets and
liabilities of an acquired property, the value of above-market and below-market
leases are estimated based on the differences between (i) contractual rentals
and the estimated market rents over the applicable lease term discounted back
to
the date of acquisition utilizing a discount rate adjusted for the credit risk
associated with the respective tenants and (ii) the estimated cost of acquiring
such leases giving effect to the Company’s history of providing tenant
improvements and paying leasing commissions, offset by a vacancy period during
which such space would be leased. The aggregate value of in-place leases is
measured by the excess of (i) the purchase price paid for a property after
adjusting existing in-place leases to market rental rates over (ii) the
estimated fair value of the property “as-if-vacant,” determined as set forth
above. The above-market and below-market lease intangibles are amortized to
rental income over the remaining non-cancelable terms of the respective leases.
If a lease were to be terminated prior to its stated expiration, all unamortized
amounts relating to the lease would be immediately recognized in
operations.
During
fiscal 2006, the Company completed its evaluation of the acquired leases at
Staples Plaza and the Pelham Properties. As a result of its evaluations, the
Company has allocated a total of $770,000 to a liability associated with the
net
fair value assigned to the acquired leases at the properties, which amount
represents a non-cash investing activity and is therefore not included in the
accompanying 2006 consolidated statement of cash flows.
For
the
years ended October 31, 2006, 2005 and 2004 the net amortization of above-market
and below-market leases amounted to $211,000, $449,000 and $20,000,
respectively, which amounts are included in base rents in the accompanying
consolidated statements of income.
In
fiscal
2006, the Company incurred costs of approximately $5.4 million related to
capital improvements to its properties and leasing costs.
Consolidated
Joint Ventures
The
Company is the general partner in a partnership that owns The Shoppes at
Eastchester in Eastchester, New York. The limited partner contributed the
property in exchange for Common, Class A and Preferred LP Units (partnership
units) and is entitled to preferential distributions of cash flow from the
property. The limited partner may exchange its Common and Class A Common LP
units with the Company in exchange for shares of the Company’s Common Stock and
Class A Common stock at any time on or prior to October 2007. However, the
Company, at its option, may elect to redeem the partnership units for cash.
The
limited partner may also put its Preferred LP units to the Company for a fixed
cash amount at any time prior to October 2007. The Company also has an option
to
redeem all of the partnership units for cash after October 2008. At October
31,
2006 there were 54,553 each of Common LP units, Class A Common LP units and
Preferred LP units outstanding.
The
Company is the general partner in a partnership that owns the Ridgeway Shopping
Center in Stamford, Connecticut. The partners are entitled to receive an annual
cash preference payable from available cash of the partnership. Any unpaid
preferences accumulate and are paid from future available cash, if any. The
limited partners’ cash preferences are paid after the general partner’s
preferences are satisfied. The balance of available cash, if any, is distributed
in accordance with the respective partners’ interests. Upon liquidation,
proceeds from the sale of partnership assets are to be distributed in accordance
with the respective partners’ interests. The partners are not obligated to make
any additional capital contributions to the partnership. The Company has
retained an affiliate of one of the limited partners to provide management
and
leasing services to the property at an annual fee of $125,000 for a period
ending in June 2007.
In
May
2003, the FASB
issued SFAS No. 150 “Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity” (“SFAS No. 150”). The SFAS No.
150 establishes standards for classifying and measuring as liabilities certain
financial instruments that embody obligations of the issuer and have
characteristics of both liabilities and equity. The FASB deferred the
classification and measurement provisions of SFAS No. 150 that apply to certain
mandatory redeemable non-controlling interests. This deferral is expected to
remain in effect while these provisions are further evaluated by the FASB.
The
Company has one finite life joint venture which contains a mandatory redeemable
non-controlling interest. At October 31, 2006 the estimated fair value of the
minority interest was approximately $3.3 million. The joint venture has a
termination date of December 31, 2097.
The
limited partner interests are reflected in the accompanying consolidated
financial statements as Minority Interests.
47
(4)
NON-CORE PROPERTIES
At
October 31, 2006, the non-core properties consist of two industrial properties
and one retail property located outside of the Northeast region of the United
States. The Board of Directors has authorized management, subject to its
approval of any contract for sale, to sell the non-core properties of the
Company over a period of several years in furtherance of the Company’s
objectives to focus on northeast properties.
The
components of non-core properties were as follows (in thousands):
|
2006
|
2005
|
||||||
|
Land
|
$
|
943
|
$
|
943
|
|||
|
Buildings
and improvements
|
5,440
|
5,440
|
|||||
|
6,383
|
6,383
|
||||||
|
Accumulated
depreciation
|
(3,762
|
)
|
(3,381
|
)
|
|||
|
$
|
2,621
|
$
|
3,002
|
||||
Minimum
rental payments on non-cancelable operating leases of the non-core properties
totaling $11,227,000 become due as follows:
2007
-
$2,468,000; 2008 - $2,311,000; 2009 - $2,027,000; 2010 - $2,027,000; 2011
-
$1,422,000 and thereafter $972,000.
(5)
DISCONTINUED OPERATIONS
In
fiscal
2005, the Company sold its retail property in Farmingdale, New York for a sales
price of $9.75 million and an office building in Southfield, Michigan for a
sales price of $9.2 million. The Company recorded aggregate gains on the sales
of $7.0 million in fiscal 2005.
The
operating results for the two properties sold in fiscal 2005 have been
classified as discontinued operations in the accompanying consolidated financial
statements for fiscal 2005 and fiscal 2004. Revenues from discontinued
operations were $1.7 million and $4.1 million for the years ended October 31,
2005, and 2004, respectively.
(6)
MORTGAGE NOTES RECEIVABLE
At
October 31, 2006 mortgage notes receivable consisted of one fixed rate mortgage
with a contractual interest rate of 9%. The mortgage note is secured by a retail
property. Interest is recognized on the effective yield method. The mortgage
note is recorded at a discounted amount which reflects the market interest
rate
at the time of acceptance of the note. At October 31, 2006 the unamortized
discount was $168,000.
In
January 2006, a mortgage note receivable in the principal amount of $707,000
was
fully paid by the borrower. Upon repayment of the note, the Company recorded
a
gain on the repayment of $102,000, which amount is included in other income
in
the accompanying consolidated statement of income in the year ended October
31,
2006.
At
October 31, 2006, principal payments on the remaining mortgage note receivable
becomes due as follows: 2007 - $82,000; 2008 - $90,000; 2009 - $98,000; 2010
-
$108,000; 2011 - $118,000 and thereafter - $1,033,000.
(7)
MORTGAGE NOTES PAYABLE AND BANK LINES OF CREDIT
At
October 31, 2006, mortgage notes payable are due in installments over various
periods to fiscal 2012 at effective rates of interest ranging from 5.75% to
7.83% and are collateralized by real estate investments having a net carrying
value of $177,696,000.
Combined
aggregate principal maturities of mortgages notes payable during the next five
years and thereafter are as follows: (in thousands)
|
Scheduled
Amortization
|
Principal
Repayments
|
Total
|
||||||||
|
2007
|
$
|
2,529
|
$
|
9,111
|
$
|
11,640
|
||||
|
2008
|
1,269
|
59,986
|
61,255
|
|||||||
|
2009
|
680
|
17,107
|
17,787
|
|||||||
|
2010
|
344
|
5,155
|
5,499
|
|||||||
|
2011
|
301
|
3,943
|
4,244
|
|||||||
|
Thereafter
|
131
|
3,785
|
3,916
|
|||||||
|
$
|
5,254
|
$
|
99,087
|
$
|
104,341
|
|||||
At
October 31, 2006, the Company had a secured revolving credit facility with
a
commercial bank (the “Secured Credit Facility”) which provides for borrowings of
up to $30 million. The Secured Credit Facility expires in April 2008 and is
collateralized by first mortgage liens on two of the Company’s properties.
Interest on outstanding borrowings is at prime + 1/2% or LIBOR + 1.5%. The
Secured Credit Facility requires the Company to maintain certain debt service
coverage ratios during its term. The Company pays an annual fee of 0.25% on
the
unused portion of the Secured Credit Facility. The Secured Credit Facility
is
available to fund acquisitions, capital expenditures, mortgage repayments,
working capital and other general corporate purposes.
48
During
fiscal 2006 the Company borrowed and repaid $3 million under the secured credit
line. There were no borrowings outstanding on October 31, 2006.
The
Company also had a $30 million unsecured line of credit (“Unsecured Credit
Line”) arrangement with the same bank. During 2006, the Company terminated the
Unsecured Credit Line. There were no borrowings outstanding on this credit
line
during the year.
Interest
paid in the years ended October 31, 2006, 2005, and 2004 was approximately
$8.5
million, $8.5 million and $8.1 million , respectively.
(8)
REDEEMABLE PREFERRED STOCK
The
8.99%
Series B Senior Cumulative Preferred Stock (“Series B Preferred Stock”) and
8.50% Series C Senior Cumulative Preferred Stock (“Series C Preferred Stock”)
have no stated maturity, are not subject to any sinking fund or mandatory
redemption and are not convertible into other securities or property of the
Company. Commencing
May 2008 (Series B Preferred Stock) and May 2010 (Series C Preferred Stock),
the
Company, at its option, may redeem the preferred stock issues, in whole or
in
part, at a redemption price of $100 per share, plus all accrued dividends.
Upon
a change in control of the Company (as defined), each holder of Series B
Preferred Stock and Series C Preferred Stock has the right, at such holder’s
option, to require the Company to repurchase all or any part of such holder’s
stock for cash at a repurchase price of $100 per share, plus all accrued and
unpaid dividends.
As
the
holders of the Series B Preferred Stock and Series C Preferred Stock only have
a
contingent right to require the Company to repurchase all or part of such
holders’ shares upon a change of control of the Company (as defined), the Series
B Preferred Stock and Series C Preferred Stock are classified as redeemable
equity instruments since a change in control is not certain to occur.
The
Series B Preferred Stock and Series C Preferred Stock contain covenants that
require the Company to maintain certain financial coverages relating to fixed
charge and capitalization ratios. Shares of both Preferred Stock series are
non-voting; however, under certain circumstances (relating to non-payment of
dividends or failure to comply with the financial covenants) the preferred
stockholders will be entitled to elect two directors. The Company was in
compliance with such covenants at October 31, 2006 and 2005.
The
Company is authorized to issue up to 20,000,000 shares of Preferred Stock.
At
October 31, 2006 and 2005, the Company had issued and outstanding 150,000 shares
of Series B Preferred Stock, 400,000 shares of Series C Preferred Stock and
2,450,000 shares of Series D Senior Cumulative Preferred Stock (Series D
Preferred Stock) (see Note 9).
(9)
STOCKHOLDERS’ EQUITY
The
Series D Preferred stock has no maturity and is not convertible into any other
security of the Company. The Series D Preferred Stock is redeemable at the
Company’s option on or after April 12, 2010 at a price of $25.00 per share plus
accrued and unpaid dividends. Underwriting commissions and costs incurred in
connection with the sale of the Series D Preferred Stock are reflected as a
reduction of additional paid in capital.
The
Class
A Common Stock entitles the holder to 1/20 of one vote per share. The Common
Stock entitles the holder to one vote per share. Each share of Common Stock
and
Class A Common Stock have identical rights with respect to dividends except
that
each share of Class A Common Stock will receive not less than 110% of the
regular quarterly dividends paid on each share of Common Stock.
The
Company has a Dividend Reinvestment and Share Purchase Plan as amended (the
“DRIP”), that permits stockholders to acquire additional shares of Common Stock
and Class A Common Stock by automatically reinvesting dividends. During fiscal
2006, the Company issued 30,810 shares of Common Stock and 15,431 shares of
Class A Common Stock (59,390 shares of Common Stock and 15,767 shares of Class
A
Common Stock in fiscal 2005) through the DRIP. As of October 31, 2006, there
remained 209,707 shares of common stock and 494,030 shares of Class A common
stock available for issuance under the DRIP.
The
Company has a stockholder rights agreement that expires on November 12, 2008.
The rights are not currently exercisable. When they are exercisable, the holder
will be entitled to purchase from the Company one one-hundredth of a share
of a
newly-established Series A Participating Preferred Stock at a price of $65
per
one one-hundredth of a preferred share, subject to certain adjustments. The
distribution date for the rights will occur 10 days after a person or group
either acquires or obtains the right to acquire 10% (“Acquiring Person”) or more
of the combined voting power of the Company’s Common Shares, or announces an
offer, the consummation of which would result in such person or group owning
30%
or more of the then outstanding Common Shares. Thereafter, shareholders other
than the Acquiring Person will be entitled to purchase original common shares
of
the Company having a value equal to two times the exercise price of the
right.
If
the
Company is involved in a merger or other business combination at any time after
the rights become exercisable, and the Company is not the surviving corporation
or 50% or more of the Company assets are sold or transferred, the rights
agreement provides that the holder other than the Acquiring Person will be
entitled to purchase a number of shares of common stock of the acquiring company
having a value equal to two times the exercise price of each right.
49
The
Company’s articles of incorporation provide that if any person acquires more
than 7.5% of the aggregate value of all outstanding stock, except, among other
reasons, as approved by the Board of Directors, such shares in excess of this
limit automatically shall be exchanged for an equal number of shares of Excess
Stock. Excess Stock has limited rights, may not be voted and is not entitled
to
any dividends.
In
fiscal
2005, the Board of Directors of the Company approved a stock repurchase program
for the repurchase of up to 500,000 shares of Common Stock and Class A common
stock in the aggregate. As of October 31, 2006,
the
Company had repurchased 3,600 shares of Common Stock and 41,400 shares of Class
A Common Stock. There were no repurchases of shares during fiscal
2006.
(10)
STOCK COMPENSATION AND OTHER BENEFIT PLANS
Restricted
Stock Plan
The
Company has a restricted stock plan (the “Plan”) for key employees and directors
of the Company. The Plan, as amended, permits the grant of up to 2,000,000
shares of the Company’s common equity consisting of 350,000 Common shares,
350,000 Class A Common shares and 1,300,000 shares, which at the discretion
of
the Company’s compensation committee, may be awarded in any combination of Class
A Common shares or Common shares.
Prior
to
November 1, 2005, the grant date fair value of nonvested restricted stock awards
was expensed over the explicit vesting periods. Such awards provided for
continued vesting after retirement. Upon adoption of SFAS No. 123R, the Company
changed its policy for recognizing compensation expense for restricted stock
awards to the earlier of the explicit vesting period or the date a participant
first becomes eligible for retirement. For nonvested restricted stock awards
granted prior to the adoption of SFAS No.123R, the Company will continue to
recognize compensation expense over the explicit vesting periods and accelerate
any remaining unrecognized compensation cost when a participant actually
retires.
Consistent
with the provisions of APB No.25, the Company recorded the fair value of
nonvested restricted stock grants and an offsetting unamortized restricted
stock
compensation amount within stockholders equity. Under SFAS No.123R an equity
instrument is not considered to be issued until the instrument vests.
Accordingly, the Company reversed $8,221,000 of unamortized restricted stock
compensation and additional paid in capital included in stockholders’ equity as
of November 1, 2005 representing the nonvested portions of restricted stock
grants awarded prior to the effective date of SFAS No.123R resulting in no
net
impact on the balance of total stockholders’ equity.
In
January 2006, the Company awarded 165,800 shares of Common Stock and 79,050
shares of Class A Common Stock to participants in the Plan. The grant date
fair
value of restricted stock grants awarded to participants was $3.9 million.
As of
October 31, 2006, there remained a total of $10.1 million of unrecognized
restricted stock compensation related to nonvested restricted stock grants
awarded under the Plan. Restricted stock compensation is expected to be expensed
over a remaining weighted average period of 8 years. For the years ended October
31, 2006, 2005, and 2004 amounts charged to compensation expense totaled
$2,007,000, $1,617,000 and $1,322,000 respectively. Had compensation expense
for
nonvested restricted stock awards issued prior to November 1, 2005 been
determined based on the date a participant first becomes eligible for
retirement, the Company’s income from continuing operations in the three year
period ended October 31, 2006 would have been as follows (amounts in thousands,
except per share):
|
Year
Ended October 31,
|
||||||||||
|
2006
|
2005
|
2004
|
||||||||
|
Income
from continuing operations, as reported
|
$
|
15,690
|
$
|
16,487
|
$
|
17,220
|
||||
|
Adjustment
to compensation expense had SFAS No. 123R been adopted prior to November
1, 2005
|
551
|
(732
|
)
|
(718
|
)
|
|||||
|
Pro
forma income from continuing operations
|
$
|
16,241
|
$
|
15,755
|
$
|
16,502
|
||||
|
Pro
forma earnings per share from continuing operations:
|
||||||||||
|
Basic:
|
||||||||||
|
Common
share
|
$
|
.60
|
$
|
.59
|
$
|
.62
|
||||
|
Class
A Common share
|
$
|
.67
|
$
|
.65
|
$
|
.69
|
||||
|
Diluted:
|
||||||||||
|
Common
share
|
$
|
.59
|
$
|
.58
|
$
|
.61
|
||||
|
Class
A Common share
|
$
|
.65
|
$
|
.64
|
$
|
.67
|
||||
50
A
summary
of the status of the Company’s nonvested restricted stock awards as of October
31, 2006, and changes during the year ended October 31, 2006 are presented
below:
|
Common
Shares
|
Class
A Common Shares
|
||||||||||||
|
Shares
|
Weighted-Average
Grant Date Fair
Value
|
Shares
|
Weighted-Average
Grant Date Fair
Value
|
||||||||||
|
Nonvested
at November 1, 2005
|
823,175
|
$
|
12.19
|
435,925
|
$
|
11.16
|
|||||||
|
Granted
|
165,800
|
$
|
15.90
|
79,050
|
$
|
16.42
|
|||||||
|
Vested
|
(49,000
|
)
|
$
|
7.06
|
(49,000
|
)
|
$
|
7.25
|
|||||
|
Nonvested
at October 31, 2006
|
939,975
|
$
|
13.10
|
465,975
|
$
|
12.46
|
|||||||
Stock
Option Plan
The
Company also has a stock option plan whereby shares of
Common
Stock and Class A Common Stock were reserved for issuance to key employees
and
Directors of the Company. Options are granted at fair market value on the date
of the grant, have a duration of ten years from the date of grant, and vest
over
a maximum period of four years from the date of grant. There were no grants
of
stock options in each of the three years ended October 31, 2006. At October
31,
2006, there were outstanding stock options to purchase 7,898 shares of Common
Stock and 7,859 shares of Class A Common Stock and all stock options granted
by
the Company were fully vested; as such, future years will not reflect any
option-related compensation expense under SFAS No. 123R unless additional stock
options are granted. As of October 31, 2006 options to purchase 2,406 shares
of
Class A Common Stock (and no shares of Common Stock) were available for future
grant.
In
December 2006, the Board of Directors approved the termination of the stock
option plan.
A
summary
of stock option transactions during the three years ended October 31,
2006
is as
follows:
|
Year
ended October 31
|
2006
|
2005
|
2004
|
||||||||||||||||
|
Common
Stock:
|
Number
of
Shares
|
Weighted
Average Exercise Prices
|
Number
of
Shares
|
Weighted
Average Exercise Prices
|
Number
of
Shares
|
Weighted
Average
Exercise
Prices
|
|||||||||||||
|
Balance
at beginning of period
|
17,398
|
$
|
8.05
|
25,148
|
$
|
7.70
|
55,876
|
$
|
7.62
|
||||||||||
|
Granted
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
|
Exercised
|
(9,500
|
)
|
$
|
7.66
|
(7,750
|
)
|
$
|
6.91
|
(15,000
|
)
|
$
|
7.29
|
|||||||
|
Canceled/Forfeited
|
-
|
-
|
-
|
-
|
(15,728
|
)
|
$
|
7.27
|
|||||||||||
|
Balance
at end of period
|
7,898
|
$
|
8.52
|
17,398
|
$
|
8.05
|
25,148
|
$
|
7.70
|
||||||||||
|
Exercisable
|
7,898
|
17,398
|
25,148
|
||||||||||||||||
|
Class
A Common Stock:
|
|||||||||||||||||||
|
Balance
at beginning of period
|
12,359
|
$
|
8.34
|
19,109
|
$
|
7.85
|
42,733
|
$
|
7.83
|
||||||||||
|
Granted
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
|
Exercised
|
(4,500
|
)
|
$
|
7.71
|
(6,750
|
)
|
$
|
6.95
|
(23,624
|
)
|
$
|
7.93
|
|||||||
|
Canceled/Forfeited
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
|
Balance
at end of period
|
7,859
|
$
|
8.69
|
12,359
|
$
|
8.34
|
19,109
|
$
|
7.85
|
||||||||||
|
Exercisable
|
7,859
|
12,359
|
19,109
|
||||||||||||||||
At
October 31, 2006, exercise prices of shares of Common Stock and Class A Common
Stock under option ranged from $7.69 to $9.03, for the Common Stock and $8.19
to
$9.09, for the Class A Common Stock. For both classes of stock, option
expiration dates range from April 2007 through April 2009 and the weighted
average remaining contractual life of these options is one year.
In
connection with the exercise of stock options in a prior year, an officer of
the
Company executed a full recourse promissory note equal to the purchase price
of
the shares. At October 31, 2006 and 2005, the outstanding balance of the
officer’s note receivable totaled $1,300,000. The outstanding note matures in
2012 and bears interest at 6.78%. The shares are pledged as additional
collateral for the note. Interest is payable quarterly.
Profit
Sharing and Savings Plan
The
Company has a profit sharing and savings plan (the “401K Plan”), which permits
all eligible employees to defer a portion of their compensation in accordance
with the Internal Revenue Code. Under the 401K Plan, the Company may make
discretionary contributions on behalf of eligible employees. For the years
ended
October 31, 2006, 2005 and 2004, the Company made contributions to the 401K
Plan
of $149,000, $135,000 and $127,000 respectively. The Company also has an Excess
Benefits and Deferred Compensation Plan that allows eligible employees to defer
benefits in excess of amounts provided under the Company’s 401K Plan and a
portion of the employee’s current compensation.
51
(11)
COMMITMENTS AND CONTINGENCIES
In
the
normal course of business, from time to time, the Company is involved in legal
actions relating to the ownership and operations of its properties. In
management’s opinion, the liabilities, if any, that ultimately may result from
such legal actions are not expected to have a material adverse effect on the
consolidated financial position, results of operations or liquidity of the
Company.
At
October 31, 2006, the Company had commitments of approximately $283,000 for
tenant related obligations.
The
Company has outstanding letters of credit of $144,658 which expire in December
2007.
(12) PRO
FORMA FINANCIAL INFORMATION (UNAUDITED)
The
unaudited pro forma financial information set forth below is based upon the
Company’s historical consolidated statements of income for the years ended
October 31, 2005 and 2004 adjusted to give effect to the acquisitions completed
in fiscal 2005 (see Note 3), and the issuance of shares of Series D Preferred
Stock in fiscal 2005 as though these transactions were completed on November
1,
2003.
The
pro
forma financial information is presented for informational purposes only and
may
not be indicative of what the actual results of operations would have been
had
the transactions occurred as of the beginning of the year nor does it purport
to
represent the results of future operations. (Amounts in thousands, except per
share figures).
|
Years
Ended October 31,
|
|||||||
|
2005
|
2004
|
||||||
|
Pro
forma revenues
|
$
|
72,140
|
$
|
69,984
|
|||
|
Pro
forma income from continuing operations
|
$
|
24,843
|
$
|
25,828
|
|||
|
Pro
forma income from continuing operations applicable to Common and
Class A
Common stockholders:
|
$
|
16,599
|
$
|
18,266
|
|||
|
Pro
forma basic shares outstanding:
|
|||||||
|
Common
and Common Equivalent
|
6,566
|
6,414
|
|||||
|
Class
A Common and Class A Common Equivalent
|
18,280
|
18,248
|
|||||
|
Pro
forma diluted shares outstanding:
|
|||||||
|
Common
and Common Equivalent
|
7,067
|
6,820
|
|||||
|
Class
A Common and Class A Common Equivalent
|
18,840
|
18,836
|
|||||
|
Pro
forma earnings per share from continuing operations:
|
|||||||
|
Basic:
|
|||||||
|
Common
|
$
|
.62
|
$
|
.69
|
|||
|
Class
A Common
|
$
|
.68
|
$
|
.76
|
|||
|
Diluted:
|
|||||||
|
Common
|
$
|
.61
|
$
|
.68
|
|||
|
Class
A Common
|
$
|
.67
|
$
|
.74
|
|||
52
(13)
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The
unaudited quarterly results of operations for the years ended October 31, 2006
and 2005 are as follows (in thousands, except per share data):
|
Year
Ended October 31, 2006
|
Year
Ended October 31, 2005
|
||||||||||||||||||||||||
|
Quarter
Ended
|
Quarter
Ended
|
||||||||||||||||||||||||
|
Jan
31
|
Apr
30
|
July
31
|
Oct
31
|
Jan
31
|
Apr
30
|
July
31
|
Oct
31
|
||||||||||||||||||
|
Revenues
|
$
|
18,653
|
$
|
18,485
|
$
|
17,982
|
$
|
18,129
|
$
|
16,436
|
$
|
17,878
|
$
|
17,149
|
$
|
17,770
|
|||||||||
|
Income
from Continuing Operations
|
$
|
6,470
|
$
|
6,094
|
$
|
5,882
|
$
|
6,586
|
$
|
5,624
|
$
|
6,021
|
$
|
5,737
|
$
|
6,114
|
|||||||||
|
Net
Income
|
$
|
6,470
|
$
|
6,094
|
$
|
5,882
|
$
|
6,586
|
$
|
11,473
|
$
|
6,112
|
$
|
7,286
|
$
|
6,114
|
|||||||||
|
Preferred
Stock Dividends
|
(2,336
|
)
|
(2,335
|
)
|
(2,336
|
)
|
(2,335
|
)
|
(1,187
|
)
|
(1,286
|
)
|
(2,200
|
)
|
(2,336
|
)
|
|||||||||
|
Net
Income Applicable to Common and Class A Common Stockholders
(1)
|
$
|
4,134
|
$
|
3,759
|
$
|
3,546
|
$
|
4,251
|
$
|
10,286
|
$
|
4,826
|
$
|
5,086
|
$
|
3,778
|
|||||||||
|
Per
Share Data:
|
|||||||||||||||||||||||||
|
Net
Income from Continuing Operations- Basic:
|
|||||||||||||||||||||||||
|
Class
A Common Stock
|
$
|
.15
|
$
|
.14
|
$
|
.13
|
$
|
.16
|
$
|
.19
|
$
|
.20
|
$
|
.15
|
$
|
.14
|
|||||||||
|
Common
Stock
|
$
|
.17
|
$
|
.15
|
$
|
.15
|
$
|
.18
|
$
|
.18
|
$
|
.18
|
$
|
.13
|
$
|
.13
|
|||||||||
|
Net
Income from Continuing Operations- Diluted:
|
|||||||||||||||||||||||||
|
Class
A Common Stock
|
$
|
.15
|
$
|
.14
|
$
|
.13
|
$
|
.15
|
$
|
.19
|
$
|
.19
|
$
|
.14
|
$
|
.14
|
|||||||||
|
Common
Stock
|
$
|
.17
|
$
|
.15
|
$
|
.14
|
$
|
.17
|
$
|
.17
|
$
|
.18
|
$
|
.13
|
$
|
.12
|
|||||||||
| (1) |
Includes
gains on sales of properties of $5.6 million and $1.4 million in
the
quarters ended January 31, 2005 and July 31, 2005, respectively.
|
(14)
SUBSEQUENT EVENTS
On
December 13, 2006, the Board of Directors of the Company declared cash dividends
of $0.2075 for each share of Common Stock and $0.23 for each share of Class
A
Common Stock. The dividends are payable on January 19, 2007 to stockholders
of
record on January 5, 2007. The Board of Directors also ratified the actions
of
the Company’s compensation committee authorizing the awards of 105,800 shares of
Common Stock and 70,300 shares of Class A Common Stock to certain key officers
and directors of the Company on January 2, 2007 pursuant to the Company’s
restricted stock plan. The fair value of the shares awarded totaling $3.2
million will be charged to expense over the respective vesting
periods.
On
December 13, 2006, the Board of Directors of the Company terminated the
Company’s stock option plan. All outstanding unexercised options granted under
the plan will remain outstanding and exercisable in accordance with their
terms.
In
January 2007, the Company acquired a retail property containing approximately
10,000 square feet of GLA for a cash purchase price of $3.7 million.
53
Report
of Independent Registered Public Accounting Firm
The
Board
of Directors and Stockholders of Urstadt Biddle Properties Inc.
We
have
audited the accompanying consolidated balance sheet of Urstadt Biddle Properties
Inc. (the “Company”) as of October 31, 2005 and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
two
years in the period ended October 31, 2005. These financial statements are
the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Urstadt Biddle
Properties Inc. at October 31, 2005, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
October 31, 2005, in conformity with U.S. generally accepted accounting
principles.
|
New
York, New York
|
/s/
Ernst & Young LLP
|
|
January
12, 2006
|
|
54
Report
of Independent Registered Public Accounting Firm
The
Board
of Directors and Stockholders of Urstadt Biddle Properties Inc.
We
have
audited the accompanying consolidated balance sheet of Urstadt Biddle Properties
Inc. (the “Company”) as of October 31, 2006 and the related consolidated
statements of income, stockholders' equity, and cash flows for the year ended
October 31, 2006. Our audit also included the financial statement schedules
listed in the Index at Item 15(a). These financial statements and schedules
are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedules based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 audit provides a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Urstadt Biddle
Properties Inc. at October 31, 2006, and the consolidated results of its
operations and its cash flows for the year ended October 31, 2006, in conformity
with U.S. generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Urstadt Biddle Properties
Inc.’s internal control over financial reporting as of October 31, 2006 based on
criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated January 11, 2007 expressed an unqualified opinion thereon.
|
New
York, New York
|
/s/
PKF
|
|
January
11, 2007
|
Certified
Public Accountants
|
|
A
Professional Corporation
|
55
|
OCTOBER
31, 2006
|
|||||||||||||||||
|
SCHEDULE
III - REAL ESTATE AND ACCUMULATED DEPRECIATION
|
|||||||||||||||||
|
(In
thousands)
|
|||||||||||||||||
|
COL.
A
|
COL.
B
|
COL.
C
|
COL.
D
|
COL.
E
|
COL.
F
|
COL.
G/H
|
COL.
I
|
||||||||||
|
Life
on which
depreciation
for
building
and
improvements
in latest
income
statement is
computed
(Note (c))
|
|||||||||||||||||
|
Cost
Capitalized
Subsequent
to
Acquisition
|
|||||||||||||||||
|
Initial
Cost to Company
|
Amount
at which Carried at Close of Period
|
||||||||||||||||
|
Building
&
Improvements
|
Building
&
Improvements
|
Building
&
Improvements
|
Accumulated
Depreciation
(Note
(b))
|
Date
Constructed/
Acquired
|
|||||||||||||
|
Description
and
|
|||||||||||||||||
|
Location
|
|
Encumbrances
|
|
Land
|
Land
|
Land
|
Total
(a)
|
|
|||||||||
|
Real
Estate Subject to Operating Leases (Note (a)):
|
|||||||||||||||||
|
Office
Buildings:
|
|||||||||||||||||
|
Greenwich,
CT
|
**
|
$708
|
$1,641
|
$-
|
$36
|
$708
|
$1,677
|
$2,385
|
$236
|
2001
|
31.5
|
||||||
|
Greenwich,
CT
|
**
|
488
|
1,139
|
-
|
61
|
488
|
1,200
|
1,688
|
206
|
2000
|
31.5
|
||||||
|
Greenwich,
CT
|
**
|
570
|
2,359
|
-
|
180
|
570
|
2,539
|
3,109
|
545
|
1998
|
31.5
|
||||||
|
Greenwich,
CT
|
**
|
199
|
795
|
-
|
96
|
199
|
891
|
1,090
|
309
|
1993
|
31.5
|
||||||
|
Greenwich,
CT
|
**
|
111
|
444
|
-
|
-
|
111
|
444
|
555
|
141
|
1994
|
31.5
|
||||||
|
5,436
|
|
2,076
|
6,378
|
|
-
|
373
|
2,076
|
6,751
|
8,827
|
1,437
|
|||||||
|
Shopping
Centers:
|
|||||||||||||||||
|
Somers,
NY
|
-
|
4,318
|
17,268
|
-
|
481
|
4,318
|
17,749
|
22,067
|
1,558
|
2003
|
39.0
|
||||||
|
Stratford,
CT
|
-
|
10,173
|
40,794
|
-
|
77
|
10,173
|
40,871
|
51,044
|
1,917
|
2005
|
39.0
|
||||||
|
Yorktown
Heigths, NY
|
8,143
|
5,786
|
23,221
|
-
|
5,786
|
23,221
|
29,007
|
793
|
2005
|
39.0
|
|||||||
|
Westport,
CT
|
-
|
2,076
|
8,305
|
-
|
187
|
2,076
|
8,492
|
10,568
|
829
|
2003
|
39.0
|
||||||
|
White
Plains, NY
|
-
|
8,065
|
32,258
|
-
|
2,852
|
8,065
|
35,110
|
43,175
|
3,470
|
2003
|
39.0
|
||||||
|
Queens,NY
|
-
|
951
|
3,802
|
-
|
-
|
951
|
3,802
|
4,753
|
55
|
2006
|
39.0
|
||||||
|
Queens,NY
|
-
|
826
|
3,304
|
-
|
-
|
826
|
3,304
|
4,130
|
46
|
2006
|
39.0
|
||||||
|
Pelham,NY
|
-
|
1,691
|
6,843
|
-
|
-
|
1,691
|
6,843
|
8,534
|
101
|
2006
|
39.0
|
||||||
|
Rye,
NY
|
-
|
909
|
3,637
|
-
|
38
|
909
|
3,675
|
4,584
|
231
|
2004
|
39.0
|
||||||
|
Rye,
NY
|
1,862
|
483
|
1,930
|
-
|
-
|
483
|
1,930
|
2,413
|
124
|
2004
|
39.0
|
||||||
|
Rye,
NY
|
847
|
239
|
958
|
-
|
-
|
239
|
958
|
1,197
|
61
|
2004
|
39.0
|
||||||
|
Rye,
NY
|
1,908
|
695
|
2,782
|
-
|
-
|
695
|
2,782
|
3,477
|
177
|
2004
|
39.0
|
||||||
|
Orange,
CT
|
-
|
2,321
|
10,564
|
-
|
94
|
2,321
|
10,658
|
12,979
|
1,056
|
2003
|
39.0
|
||||||
|
Stamford,
CT
|
53,502
|
17,965
|
71,859
|
-
|
4,817
|
17,965
|
76,676
|
94,641
|
8,434
|
2002
|
39.0
|
||||||
|
Danbury,
CT
|
-
|
2,459
|
4,566
|
-
|
491
|
2,459
|
5,057
|
7,516
|
610
|
2002
|
39.0
|
||||||
|
Ossining,
NY
|
3,648
|
2,222
|
5,185
|
-
|
23
|
2,222
|
5,208
|
7,430
|
707
|
2001
|
40.0
|
||||||
|
Somers,
NY
|
5,711
|
1,834
|
7,383
|
-
|
338
|
1,834
|
7,721
|
9,555
|
1,691
|
1999
|
31.5
|
||||||
|
Ossining,
NY
|
-
|
2,300
|
9,708
|
15
|
2,587
|
2,315
|
12,295
|
14,610
|
2,423
|
1998
|
40.0
|
||||||
|
Ridgefield,
CT
|
-
|
900
|
3,793
|
-
|
678
|
900
|
4,471
|
5,371
|
1,106
|
1998
|
40.0
|
||||||
|
Darien,
CT
|
12,972
|
4,260
|
17,192
|
-
|
763
|
4,260
|
17,955
|
22,215
|
3,842
|
1998
|
40.0
|
||||||
|
Eastchester,
NY
|
4,153
|
1,500
|
6,128
|
-
|
718
|
1,500
|
6,846
|
8,346
|
1,495
|
1997
|
31.0
|
||||||
|
Tempe,
AZ
|
-
|
493
|
2,284
|
-
|
1,379
|
493
|
3,663
|
4,156
|
2,439
|
1970
|
40.0
|
||||||
|
Danbury,
CT
|
-
|
3,850
|
15,811
|
-
|
4,358
|
3,850
|
20,169
|
24,019
|
6,040
|
1995
|
31.5
|
||||||
|
Carmel,
NY
|
4,564
|
1,488
|
5,973
|
-
|
1,772
|
1,488
|
7,745
|
9,233
|
2,351
|
1995
|
31.5
|
||||||
|
Meriden,
CT
|
-
|
5,000
|
20,309
|
-
|
6,561
|
5,000
|
26,870
|
31,870
|
11,448
|
1993
|
31.5
|
||||||
|
Somers,
NY
|
1,595
|
821
|
2,600
|
-
|
-
|
821
|
2,600
|
3,421
|
953
|
1992
|
31.5
|
||||||
|
Wayne,
NJ
|
-
|
2,492
|
9,966
|
-
|
458
|
2,492
|
10,424
|
12,916
|
3,702
|
1992
|
31.0
|
||||||
|
Newington,
NH
|
-
|
728
|
1,997
|
-
|
3,429
|
728
|
5,426
|
6,154
|
3,499
|
1979
|
40.0
|
||||||
|
Springfield,
MA
|
-
|
|
1,372
|
3,656
|
|
337
|
15,503
|
1,709
|
19,159
|
20,868
|
11,660
|
1970
|
40.0
|
||||
|
98,905
|
|
88,217
|
344,076
|
|
352
|
47,604
|
88,569
|
391,680
|
480,249
|
72,818
|
|||||||
|
Industrial
Distribution Center
|
|||||||||||||||||
|
Dallas,
TX
|
-
|
218
|
844
|
-
|
-
|
218
|
844
|
1,062
|
759
|
1970
|
40.0
|
||||||
|
St.
Louis, MO
|
-
|
|
232
|
933
|
|
-
|
-
|
232
|
933
|
1,165
|
564
|
1970
|
40.0
|
||||
|
450
|
1,777 | - | - | 450 | 1,777 | 2,227 | 1,323 | ||||||||||
|
Mixed
Use Facility: Retail/Office:
|
|||||||||||||||||
|
Ossining,
NY
|
-
|
380
|
1,531
|
-
|
2,329
|
380
|
3,860
|
4,240
|
1,680
|
1999
|
40.0
|
||||||
|
-
|
|
380
|
1,531
|
|
-
|
2,329
|
380
|
3,860
|
4,240
|
1,680
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Total
|
$104,341
|
|
$91,123
|
$353,762
|
|
$352
|
$50,306
|
$91,475
|
$404,068
|
$495,543
|
$77,258
|
||||||
|
*
Properties secure a $30 million secured revolving credit line.
At October
31, 2006 there were no outstanding borrowings.
|
|||||||||||||||||
|
**Properties
are cross collateralized for a mortgage in the amount of $5,436
at October
31, 2006.
|
|||||||||||||||||
56
URSTADT
BIDDLE PROPERTIES INC.
OCTOBER
31, 2006
SCHEDULE
III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
(In
thousands)
|
Year
Ended October 31
|
||||||||||
|
NOTES:
|
2006
|
2005
|
2004
|
|||||||
|
(a)
RECONCILIATION OF REAL ESTATE -
OWNED
SUBJECT TO OPERATING LEASES
|
||||||||||
|
Balance
at beginning of year
|
$
|
474,827
|
$
|
402,558
|
$
|
396,117
|
||||
|
Property
improvements during the year
|
3,915
|
6,810
|
2,248
|
|||||||
|
Properties
acquired during the year
|
17,398
|
80,301
|
11,221
|
|||||||
|
Property
reclassed to property held for sale
|
---
|
---
|
(5,327
|
)
|
||||||
|
Properties
sold during the year (f)
|
---
|
(14,238
|
)
|
---
|
||||||
|
Property
assets fully written off
|
(597
|
)
|
(604
|
)
|
(1,701
|
)
|
||||
|
Balance
at end of year
|
$
|
495,543
|
$
|
474,827
|
$
|
402,558
|
||||
|
(b)
RECONCILIATION OF ACCUMULATED DEPRECIATION
|
||||||||||
|
Balance
at beginning of year
|
$
|
65,253
|
$
|
61,389
|
$
|
53,982
|
||||
|
Provision
during the year charged to income
|
12,602
|
11,735
|
10,669
|
|||||||
|
Property
sold during the year (f)
|
---
|
(7,267
|
)
|
---
|
||||||
|
Property
reclassed to property held for sale
|
---
|
---
|
(1,561
|
)
|
||||||
|
Property
assets fully written off
|
(597
|
)
|
(604
|
)
|
(1,701
|
)
|
||||
|
Balance
at end of year
|
$
|
77,258
|
$
|
65,253
|
$
|
61,389
|
||||
|
(c)
Tenant improvement costs are depreciated over the life of the related
leases, which range from 5 to 20 years.
|
||||||||||
|
(d)
The aggregate cost basis for Federal income tax purposes at October
31,
2006 is $512,819.
|
||||||||||
|
(e)
The depreciation provision represents the expense calculated on real
property only.
|
||||||||||
|
(f)
Properties sold during fiscal year ended October 31, 2005 exclude
property
reclassified to held for
sale during fiscal year ended October 31,
2004
|
||||||||||
|
URSTADT
BIDDLE PROPERTIES INC.
|
||||||
|
OCTOBER
31, 2006
|
||||||
|
SCHEDULE
IV - MORTGAGE LOANS ON REAL ESTATE
|
||||||
|
(In
thousands)
|
||||||
|
COL.
A
|
COL.
B
|
COL.
C
|
COL.
D
|
COL.
E
|
COL.
F
|
|
|
Interest
Rate
|
Final
Maturity
Date
|
Remaining
Face
Amount
of
Mortgages
(Note (b))
(In
Thousands)
|
Carrying
Amount
of
Mortgage (Note (a))
(In
Thousands)
|
|||
|
Description
|
Coupon
|
Effective
|
Periodic
Payment Terms
|
|||
|
FIRST
MORTGAGE LOANS ON BUSINESS PROPERTIES (Notes (c) and
(d)):
|
||||||
|
Retail
Store:
|
||||||
|
Riverside,
CA
|
9%
|
12%
|
15-Jan-13
|
Payable
in quarterly installments of Principal and Interest of $54
|
1,529
|
1,361
|
|
TOTAL
MORTGAGE LOANS ON REAL ESTATE
|
$1,529
|
$1,361
|
||||
|
URSTADT
BIDDLE PROPERTIES INC.
|
|||
|
OCTOBER
31, 2006
|
|||
|
SCHEDULE
IV - MORTGAGE LOANS ON REAL ESTATE (Continued)
|
|||
|
NOTES
TO SCHEDULE IV
|
|||
|
(In
thousands)
|
|||
|
Year
Ended October 31
|
|||
|
(a)
Reconciliation of Mortgage Loans on Real Estate
|
|||
|
2006
|
2005
|
2004
|
|
|
(a)
Balance at beginning of period:
|
$2,024
|
$
2,109
|
$2,184
|
|
Deductions
during the current period:
|
|||
|
Collections
of principal and amortization of discounts
|
(663)
|
(85)
|
(75)
|
|
|
|||
|
Balance
at end of period:
|
$1,361
|
$2,024
|
$2,109
|
|
(b)
The aggregate cost basis for Federal income tax purposes is equal
to the
face amount of the mortgages.
|
|||
|
(c)
At October 31, 2006 no mortgage loans were delinquent in payment
of
currently due principal or interest.
|
|||
|
(d)
There are no prior liens for any of the Mortgage Loans on Real
Estate.
|
|||
58
Item
16. Signatures
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by
the undersigned thereunto duly authorized.
|
URSTADT
BIDDLE PROPERTIES INC.
|
|
|
(Registrant)
|
|
|
/s/
Charles J. Urstadt
|
|
|
Charles
J. Urstadt
|
|
|
Chairman
and Chief Executive Officer
|
|
|
/s/
James R. Moore
|
|
|
James
R. Moore
|
|
|
Executive
Vice President and Chief Financial Officer
|
|
|
(Principal
Financial Officer
|
|
|
Dated:
January 12, 2007
|
and
Principal Accounting Officer)
|
59
Pursuant
to the requirements of the Securities Exchange Act of 1934, the following
persons on behalf of the Registrant and in the capacities and on the date
indicated have signed this Report below.
|
/s/
Charles J. Urstadt
Charles
J. Urstadt
Chairman
and Director
(Principal
Executive Officer)
|
January
11, 2007
|
|
|
|
|
/s/
Willing L. Biddle
Willing
L. Biddle
President
and Director
|
January
11, 2007
|
|
|
|
|
/s/
James R. Moore
James
R. Moore
Executive
Vice President & Chief Financial Officer
(Principal
Financial Officer
and
Principal Accounting Officer)
|
January
11, 2007
|
|
|
|
|
/s/
E. Virgil Conway
E.
Virgil Conway
Director
|
January
11, 2007
|
|
|
|
|
/s/
Robert R. Douglass
Robert
R. Douglass
Director
|
January
11, 2007
|
|
|
|
|
/s/
Peter Herrick
Peter
Herrick
Director
|
January
11, 2007
|
|
|
|
|
/s/
George H.C. Lawrence
George
H. C. Lawrence
Director
|
January
11, 2007
|
|
|
|
|
/s/
Robert J. Mueller
Robert
J. Mueller
Director
|
January
11, 2007
|
|
|
|
|
/s/
Charles D. Urstadt
Charles
D. Urstadt
Director
|
January
11, 2007
|
|
|
|
|
/s/
George J. Vojta
George
J. Vojta
Director
|
January
11, 2007
|
60