10-K 1 form10k2019.htm FORM 10K 2019  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2019

☐ 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:

Title of each class
  
Trading Symbol
  
Name of each exchange on which registered
         
Common Stock, par value $.01 per share
  
UBP
  
New York Stock Exchange
         
Class A Common Stock, par value $.01 per share
  
UBA
  
New York Stock Exchange
         
6.25% Series H Cumulative Preferred Stock
  
UBPPRH
  
New York Stock Exchange
         
5.875% Series K Cumulative Preferred Stock
  
UBPPRK
  
New York Stock Exchange
         
Common Stock Rights to Purchase Preferred Shares
  
N/A
  
New York Stock Exchange
         
Class A Common Stock Rights to Purchase Preferred Shares
  
N/A
  
New York Stock Exchange

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 ☐
No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act.
Yes ☐
No ☒

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 ☒
No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company.  See definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☐
 
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes  ☐
No ☒

The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of April 30, 2019 (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, $39,319,509; Class A Common Shares, par value $.01 per share, $643,071,307.

Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock and Class A Common Stock, as of January 6, 2020 (latest date practicable): 10,069,201 Common Shares, par value $.01 per share, and 29,990,168 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 18, 2020 (certain parts as indicated herein) (Part III).

PART I

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K of Urstadt Biddle Properties Inc. (the "Company") contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.  These statements can be identified by the fact that they do not relate strictly to historical or current facts or by such words as "anticipate", "believe", "can", "continue", "could", "estimate", "expect", "intend", "may", "plan", "seek", "should", "will" or variations of such words or other similar expressions and the negatives of such words.  All statements included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including such matters as future capital expenditures, dividends and acquisitions (including the amount and nature thereof), business strategies, expansion and growth of our operations, expected leasing results and other such matters, are forward-looking statements.  These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate.  Such statements are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.  Future events and actual results, performance or achievements, financial and otherwise, may differ materially from the results, performance or achievements expressed or implied by the forward-looking statements.  Risks, uncertainties and other factors that might cause such differences, some of which could be material, include, but are not limited to:

●
economic and other market conditions, including local real estate and market conditions, that could impact us, our properties or the financial stability of our tenants;

●
financing risks, such as the inability to obtain debt or equity financing on favorable terms, as well as the level and volatility of interest rates;

●
any difficulties in renewing leases, filling vacancies or negotiating improved lease terms;

●
the inability of the Company's properties to generate revenue increases to offset expense increases;

●
environmental risk and regulatory requirements;

●
risks of real estate acquisitions and dispositions (including the failure of transactions to close);

●
risks of operating properties through joint ventures that we do not fully control;

●
risks related to our status as a real estate investment trust, including the application of complex federal income tax regulations that are subject to change;

●
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").

Forward-looking statements speak only as of the date of this filing.  Except as expressly required under federal securities laws and the rules and regulations of the SEC, we do not undertake any obligation to update any forward-looking statements to reflect events or circumstances arising after the date of this filing, whether as a result of new information or future events or otherwise. You should not place undue reliance on the forward-looking statements included in this filing or that may be made elsewhere from time to time by us, or on our behalf.  All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

Item 1.  Business.

Organization

We are a real estate investment trust, organized as a Maryland corporation, engaged in the acquisition, ownership and management of commercial real estate. We were organized as an unincorporated business trust (the “Trust”) under the laws of the Commonwealth of Massachusetts on July 7, 1969. In 1997, the shareholders of the Trust approved a plan of reorganization of the Trust from a Massachusetts business trust to a Maryland corporation.  As a result of the plan of reorganization, the Trust was merged with and into the Company, the separate existence of the Trust ceased, the Company was the surviving entity in the merger and each issued and outstanding common share of beneficial interest of the Trust was converted into one share of Common Stock, par value $.01 per share, of the Company.

Tax Status – Qualification as a Real Estate Investment Trust

We elected to be taxed as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with our taxable year ended October 31, 1970.  Pursuant to such provisions of the Code, a REIT that distributes at least 90% of its real estate investment trust taxable income to its shareholders each year and meets certain other conditions regarding the nature of its income and assets will not be taxed on that portion of its taxable income that is distributed to its shareholders.  Although we believe that we qualify as a real estate investment trust for federal income tax purposes, no assurance can be given that we will continue to qualify as a REIT.

Description of Business

Our business is the ownership of real estate investments, which consist principally of investments in income-producing properties, with primary emphasis on neighborhood and community shopping centers in the metropolitan New York tri-state area outside of the City of New York.  We believe that our geographic focus allows us to take advantage of the strong demographic profiles of the areas that surround the City of New York and the natural barriers to entry that such density and limitations on developable land provide.  We also believe that our ability to directly operate and manage all of our properties within the tri-state area reduces overhead costs and affords us efficiencies that a more dispersed portfolio would make difficult.

At October 31, 2019, the Company owned or had equity interests in 83 properties comprised of neighborhood and community shopping centers, office buildings, single tenant retail or restaurant properties and office/retail mixed use properties located in four states, containing a total of 5.3 million square feet of gross leasable area (“GLA”).  We seek to identify desirable properties, typically neighborhood and community shopping centers, for acquisition, which we acquire in the normal course of business.  In addition, we regularly review our portfolio and, from time to time, may sell certain of our properties.  For a description of the Company's properties and information about the carrying amount of the properties at October 31, 2019 and encumbrances, see Item 2. Properties and Schedule III located in Item 15.

We do not consider our real estate business to be seasonal in nature.

In addition to our business of owning and managing real estate, we are also involved in the beer, wine and spirits retail business, through our ownership of five subsidiary corporations formed as taxable REIT subsidiaries.  Each subsidiary corporation owns and operates a beer, wine and spirits retail store at one of our shopping centers.  To manage our operations, we have engaged an experienced third-party, retail beer, wine and spirits manager, which also owns many stores of its own.  Each of these stores occupies space at one of our shopping centers fulfilling a strategic need for a beer, wine and spirits business at such shopping center.  These five stores are currently not providing material earnings in excess of what the Company would have earned from leasing the space to unrelated tenants at market rents.  However, these businesses are continuing to mature, and net sales and earnings may eventually become material to our financial position and net income.  Nevertheless, our primary business remains the ownership and management of real estate, and we expect that the beer, wine and spirts business will remain an ancillary aspect of our business model.  However, if the right opportunity presents itself, we may open additional beer, wine and spirits stores at other shopping centers that we own, but only if we determine that such a business would be a strategic fit for that shopping center and the investment return analysis supports such a determination.

Growth Strategy

Our long-term growth strategy is to increase cash flow, and consequently the value of our properties, through strategic re-leasing, renovations and expansions of our existing properties and selective acquisitions of income-producing properties, primarily neighborhood and community shopping centers, in our targeted geographic region.  We may also invest in other types of real estate in our targeted geographic region. Key elements of our growth strategy and operating objectives are to:

●
acquire quality neighborhood and community shopping centers in the northeastern part of the United States with a concentration on properties in the metropolitan New York tri-state area outside of the City of New York, and unlock further value in these properties with selective enhancements to both the property and tenant mix, as well as improvements to management and leasing fundamentals;

●
selectively dispose of underperforming properties and re-deploy the proceeds into potentially higher performing properties that meet our acquisition criteria;

●
invest in our properties for the long-term through regular maintenance, periodic renovations and capital improvements, enhancing their attractiveness to tenants and customers, as well as increasing their value;

●
leverage opportunities to increase GLA at existing properties, through development of pad sites and reconfiguring of existing square footage, to meet the needs of existing or new tenants;

●
proactively manage our leasing strategy by aggressively marketing available GLA, renewing existing leases with strong tenants, and replacing weak ones when necessary, with an eye toward securing leases that include regular or fixed contractual increases to minimum rents, replacing below-market-rent leases with increased market rents when possible and further improving the quality of our tenant mix at our shopping centers;

●
maintain strong working relationships with our tenants, particularly our anchor tenants;

●
maintain a conservative capital structure with low leverage levels, ample liquidity and diverse sources of capital; and

●
control property operating and administrative costs.

Our hope is to grow our assets through acquisitions by 5% to 10% per year on a dollar value basis, subject to the availability of acquisitions that meet our investment parameters, although we cannot guarantee that investment properties meeting our investment specifications will be available to us.

Renovations, Expansions and Improvements

We invest in properties where cost effective renovation and expansion programs, combined with effective leasing and operating strategies, can improve the properties’ values and economic returns.  Retail properties are typically adaptable for varied tenant layouts and can be reconfigured to accommodate new tenants or the changing space needs of existing tenants.  We also seek to leverage existing shopping center assets through pad site development.  In determining whether to proceed with a renovation, expansion or pad, we consider both the cost of such expansion or renovation and the increase in rent attributable to such expansion or renovation.  We believe that certain of our properties provide opportunities for future renovation and expansion.  We generally do not engage in ground-up development projects.

We also seek to improve our properties in ways that provide additional ancillary revenue or value, while benefiting the environment and communities in which we have a presence.  For example, we have a robust alternative energy program, pursuant to which we have placed a number of solar panel installations on the roofs of our shopping centers and are working on additional installations.  We are also in the process of installing electric vehicle charging stations at a number of our properties, which we believe will not only benefit the environment but enhance customer experience at our shopping centers.  Other initiatives include converting incandescent and florescent lighting to LED at various properties and upgrading parking lot lighting systems to operate more efficiently.  While we are committed to environmental responsibility, we also believe that these initiatives need to be financially feasible and beneficial to the Company, which may require that these projects be completed over a period of time.  We will continue to seek financially responsible opportunities to reduce our carbon footprint and lower our energy usage, while improving the value of our properties.

Acquisitions and Dispositions

When evaluating potential acquisitions, we consider such factors as (i) economic, demographic, and regulatory conditions in the property’s local and regional market; (ii) the location, construction quality, and design of the property; (iii) the current and projected cash flow of the property and the potential to increase cash flow; (iv) the potential for capital appreciation of the property; (v) the terms of tenant leases, including the relationship between the property’s current rents and market rents and the ability to increase rents upon lease rollover; (vi) the occupancy and demand by tenants for properties of a similar type in the market area; (vii) the potential to complete a strategic renovation, expansion or re-tenanting of the property; (viii) the property’s current expense structure and the potential to increase operating margins; (ix) competition from comparable properties in the market area; and (x) vulnerability of the property's tenants to competition from e-commerce.

We may, from time to time, enter into arrangements for the acquisition of properties with property owners through the issuance of non-managing member units or partnership units in joint venture entities that we control, which we refer to as our DownREIT entities. The limited partners and non-managing members of each of these joint ventures are entitled to receive annual or quarterly cash distributions payable from available cash of the joint venture.  The limited partners and non-managing members of these joint ventures have the right to require the Company to repurchase or redeem all or a portion of their limited partner or non-managing member interests for cash or Class A Common Stock of the Company, at our election, at prices and on terms set forth in the partnership or operating agreements.  We also have the right to redeem all or a portion of the limited partner and non-managing member interests for cash or Class A Common Stock of the Company, at our election, under certain circumstances, at prices and on terms set forth in the partnership or operating agreements.   We believe that this acquisition method may permit us to acquire properties from property owners wishing to enter into tax-deferred transactions.

From time to time, we selectively dispose of underperforming properties and re-deploy the proceeds into potentially higher performing properties that meet our acquisition criteria.


Leasing Results

At October 31, 2019, our properties collectively had 1,009 leases with tenants providing a wide range of products and services.  Tenants include regional supermarkets, national and regional discount stores, other local retailers and office tenants.  In addition, at our Yorktown, NY property, we have developed a portion of below grade space to a storage facility which currently has 520 storage tenants.  At October 31, 2019, the 77 consolidated properties were 92.9% leased and 91.3% occupied (see Results of Operations discussion in Item 7).  At October 31, 2019, we had equity investments in six properties which we do not consolidate; those properties were 96.1% leased.  We believe the properties are adequately covered by property and liability insurance.

A substantial portion of our operating lease income is derived from tenants under leases with terms greater than one year.  Most of the leases provide for the payment of monthly fixed base rentals and for the payment by the tenant of a pro-rata share of the real estate taxes, insurance, utilities and common area maintenance expenses incurred in operating the properties.

For the fiscal year ended October 31, 2019, no single tenant comprised more than 8.2% of the total annual base rents of our properties. The following table sets forth a schedule of our ten largest tenants by percent of total annual base rent of our properties to total annual base rent for the year ended October 31, 2019.

Tenant
  
Number
of Stores
    
% of Total Annual
Base Rent of Properties
  
Stop & Shop
    
8
      
8.2
%
CVS
    
10
      
4.6
%
The TJX Companies
    
5
      
3.0
%
Acme
    
5
      
2.9
%
Bed Bath & Beyond
    
3
      
2.8
%
ShopRite
    
3
      
1.9
%
BJ's
    
3
      
1.6
%
Staples
    
3
      
1.4
%
Kings Supermarkets
    
2
      
1.2
%
Walgreens
    
4
      
1.1
%
     
46
      
28.7
%

See Item 2. Properties for a complete list of the Company’s properties.

The Company’s single largest real estate investment is its 100% ownership of the general and limited partnership interests in the Ridgeway Shopping Center (“Ridgeway”).

Ridgeway is located in Stamford, Connecticut and was developed in the 1950s and redeveloped in the mid-1990s. The property contains approximately 374,000 square feet of GLA.  It is the dominant grocery-anchored center and the largest non-mall shopping center located in the City of Stamford, Fairfield County, Connecticut. For the year ended October 31, 2019, Ridgeway revenues represented approximately 10.8% of the Company’s total revenues and its assets represented approximately 6.0% of the Company’s total assets at October 31, 2019. As of October 31, 2019, Ridgeway was 97% leased. The property’s largest tenants (by base rent) are:  The Stop & Shop Supermarket Company (20%), Bed, Bath & Beyond (14%) and Marshall’s Inc., a division of the TJX Companies (10%).  No other tenant accounts for more than 10% of Ridgeway’s annual base rents.

The following table sets forth a schedule of the annual lease expirations for retail leases at Ridgeway as of October 31, 2019 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
of Expiring Leases
    
Minimum
Base Rentals
    
Percentage of
Total Annual
Base Rent that is
Represented by
the Expiring Leases
  
2020
    
5
      
11,372
    
$
403,000
      
3.7
%
2021
    
3
      
43,925
      
943,500
      
8.6
%
2022
    
4
      
94,284
      
3,112,400
      
28.4
%
2023
    
9
      
83,159
      
2,854,400
      
26.0
%
2024
    
1
      
9,000
      
204,100
      
1.9
%
2025
    
3
      
61,832
      
1,554,100
      
14.2
%
2026
    
3
      
10,282
      
361,800
      
3.3
%
2027
    
2
      
4,964
      
138,100
      
1.2
%
2028
    
3
      
38,060
      
1,306,400
      
11.9
%
2029
    
1
      
4,000
      
88,000
      
0.8
%
Thereafter
    
-
      
-
      
-
      
-
  
Total
    
34
      
360,878
    
$
10,965,800
      
100
%

For further financial information about our only reportable operating segment, Ridgeway, see note 1 of our financial statements in Item 8 included in this Annual Report on Form 10-K.

Financing Strategy

We intend to continue to finance acquisitions and property improvements and/or expansions with the most advantageous sources of capital which we believe are available to us at the time, and which may include the sale of common or preferred equity through public offerings or private placements, the incurrence of additional indebtedness through secured or unsecured borrowings, investments in real estate joint ventures and the reinvestment of proceeds from the disposition of assets.  Our financing strategy is to maintain a strong and flexible financial position by (i) maintaining a prudent level of leverage, and (ii) minimizing our exposure to interest rate risk represented by floating rate debt.

Compliance with Governmental Regulations

We, like others in the commercial real estate industry, are subject to numerous federal, state and local environmental laws and regulations.  We may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our properties, as well as certain other potential costs relating to hazardous or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property).  These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances.  This liability may be imposed on us in connection with the activities of an operator of, or tenant at, the property.  The cost of any required remediation, removal, fines or personal or property damages and our liability therefore could exceed the value of the property and/or our aggregate assets.  In addition, the presence of those substances, or the failure to properly dispose of or remove those substances, may adversely affect our ability to sell or rent that property or to borrow using that property as collateral, which, in turn, would reduce our revenues and ability to make distributions.

Our existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990.  The requirements of this Act, or of other federal, state or local laws or regulations, also may change in the future and restrict further renovations of our properties with respect to access for disabled persons. Future compliance with the Americans with Disabilities Act of 1990 and similar regulations may require expensive changes to the properties.

Competition

The real estate investment business is highly competitive.  We compete for real estate investments with investors of all types, including domestic and foreign corporations, financial institutions, other real estate investment trusts, real estate funds, individuals and privately owned companies.  In addition, our properties are subject to local competition from the surrounding areas.  Our shopping centers compete for tenants with other regional, community or neighborhood shopping centers in the respective areas where our retail properties are located.  In addition, the retail industry is seeing greater competition from internet retailers who may not need to establish “brick and mortar” retail locations for their businesses. This reduces the demand for traditional retail space in shopping centers like ours and other grocery-anchored shopping center properties.  Our office buildings compete for tenants principally with office buildings throughout the respective areas in which they are located.  Leasing decisions are generally determined by prospective tenants on the basis of, among other things, rental rates, location, and the physical quality of the property and availability of space.

Property Management

We actively manage and supervise the operations and leasing of all of our properties.

Employees

Our executive offices are located at 321 Railroad Avenue, Greenwich, Connecticut.  Urstadt Biddle Properties Inc. has 57 employees, all located at the Company’s executive offices.  Subsidiaries of the Company also employ an additional 48 full-time and part-time employees at other locations and we believe our relationship with our employees is good.

Company Website

All of the Company’s filings with the SEC, including the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge at the Company’s website at www.ubproperties.com as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.  These filings can also be accessed through the SEC’s website at www.sec.gov.


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.  Yields from our properties depend on their net income and capital appreciation.  Real property income and capital appreciation may be adversely affected by general and local economic conditions, neighborhood values, competitive overbuilding, zoning laws, weather, casualty losses and other factors beyond our control.  Since substantially all of our income is rental income from real property, our income and cash flow could be adversely affected if a large tenant is, or a significant number of tenants are, unable to pay rent or if available space cannot be rented on favorable terms.

Operating and other expenses of our properties, particularly significant expenses such as interest, real estate taxes and maintenance costs, generally do not decrease when income decreases and, even if revenues increase, operating and other expenses may increase faster than revenues.

We may be unable to sell properties when appropriate because real estate investments are illiquid.  Real estate investments generally cannot be sold quickly. In addition, there are some limitations under federal income tax laws applicable to real estate and to REITs in particular that may limit our ability to sell our assets. With respect to each of our five consolidated joint ventures, McLean, Orangeburg, UB High Ridge, Dumont and New City, which we refer to as our DownREITs, we may not sell or transfer the contributed property through contractually agreed upon protection periods other than as part of a tax-deferred transaction under the Code or if the conditions exist which would give us the right to call all of the non-managing member units or partnership units, as applicable, following the death or dissolution of certain non-managing members or, in connection with the exercise of creditor's rights and remedies under the existing mortgage or any refinancing by the holder thereof (which will not constitute a violation of this restriction).  Because of these market, regulatory and contractual conditions, we may not be able to alter our portfolio promptly in response to changes in economic or other conditions. Our inability to respond quickly to adverse changes in the performance of our investments could have an adverse effect on our ability to meet our obligations and make distributions to our stockholders.

Our business strategy is mainly concentrated in one type of commercial property and in one geographic location.  Our primary investment focus is neighborhood and community shopping centers, with a concentration in the metropolitan New York tri-state area outside of the City of New York.  For the year ended October 31, 2019, approximately 98.7% of our total revenues were from properties located in this area. Various factors may adversely affect a shopping center's profitability.  These factors include circumstances that affect consumer spending, such as general economic conditions, economic business cycles, rates of employment, income growth, interest rates and general consumer sentiment. They also include weather patterns and natural disasters that could have a more significant localized effect in the areas where our properties are concentrated.  The occurrence of natural disasters or severe weather conditions can delay new development projects, increase investment costs to repair or replace damaged properties, increase operation costs, increase future property insurance costs, and negatively impact the tenant demand for lease space.  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 also adversely affect operating results.  As a result, we may be exposed to greater risks than if our investment focus was based on more diversified types of properties and in more diversified geographic areas.

The Company's single largest real estate investment is its ownership of the Ridgeway Shopping Center ("Ridgeway") located in Stamford, Connecticut.  For the year ended October 31, 2019, Ridgeway revenues represented approximately 10.8% of the Company's total revenues and approximately 6.0% of the Company's total assets at October 31, 2019.  The loss of Ridgeway or a material decrease in revenues from Ridgeway could have a material adverse effect on the Company.

We are dependent on anchor tenants in many of our retail properties.  Most of our retail properties are dependent on a major or anchor tenant, often a supermarket anchor.  If we are unable to renew any lease we have with the anchor tenant at one of these properties upon expiration of the current lease on favorable terms, or to re-lease the space to another anchor tenant of similar or better quality upon departure of an existing anchor tenant on similar or better terms, we could experience material adverse consequences with respect to such property such as higher vacancy, re-leasing on less favorable economic terms, reduced net income, reduced funds from operations and reduced property values.  Vacated anchor space also could adversely affect a property because of the loss of the departed anchor tenant's customer drawing power.  Loss of customer drawing power also can occur through the exercise of the right that some anchors have to vacate and prevent re-tenanting by paying rent for the balance of the lease term.  In addition, vacated anchor space could, under certain circumstances, permit other tenants to pay a reduced rent or terminate their leases at the affected property, which could adversely affect the future income from such property.  There can be no assurance that our anchor tenants will renew their leases when they expire or will be willing to renew on similar economic terms.  See Item 1. Business in this Annual Report on Form 10-K for additional information on our ten largest tenants by percent of total annual base rent of our properties.

Similarly, if one or more of our anchor tenants goes bankrupt, we could experience material adverse consequences like those described above.  Under bankruptcy law, tenants have the right to reject their leases.  In the event a tenant exercises this right, the landlord generally may file a claim for a portion of its unpaid and future lost rent.  Actual amounts received in satisfaction of those claims, however, are typically very limited and will be subject to the tenant's final plan of reorganization and the availability of funds to pay its creditors. We can provide no assurance that we will not experience impactful bankruptcies by anchor tenants in the future. See Item 7. Management’s Discussion of Operations and Financial Condition in this Annual Report on Form 10-K for additional information.

We face potential difficulties or delays in renewing leases or re-leasing space.  We derive most of our income from rent received from our tenants.  Although substantially all of our properties currently have favorable occupancy rates, we cannot predict that current tenants will renew their leases upon expiration of their terms.  In addition, current tenants could attempt to terminate their leases prior to the scheduled expiration of such leases or might have difficulty in continuing to pay rent in full, if at all, in the event of a severe economic downturn.  If this occurs, we may not be able to promptly locate qualified replacement tenants and, as a result, we would lose a source of revenue while remaining responsible for the payment of our obligations.  Even if tenants decide to renew their leases, the terms of renewals or new leases, including the cost of required renovations or concessions to tenants, may be less favorable than current lease terms.

In some cases, our tenant leases contain provisions giving the tenant the exclusive right to sell particular types of merchandise or provide specific types of services within the particular retail center, or limit the ability of other tenants within the center to sell that merchandise or provide those services.  When re-leasing space after a vacancy in a center with one of these tenants, such provisions may limit the number and types of prospective tenants for the vacant space.  The failure to re-lease space or to re-lease space on satisfactory terms could adversely affect our results from operations.  Additionally, properties we may acquire in the future may not be fully leased and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with that property until the property is fully leased. As a result, our net income, funds from operations and ability to pay dividends to stockholders could be adversely affected.

We may acquire properties or acquire other real estate related companies, and this may create risks.  We may acquire properties or acquire other real estate related companies when we believe that an acquisition is consistent with our business strategies. We may not succeed in consummating desired acquisitions on time or within budget. When we do pursue a project or acquisition, we may not succeed in leasing newly acquired properties at rents sufficient to cover the costs of acquisition and operations. Acquisitions in new markets or industries where we do not have the same level of market knowledge may result in poorer than anticipated performance. We may also abandon acquisition opportunities that management has begun pursuing and consequently fail to recover expenses already incurred and will have devoted management’s time to a matter not consummated. Furthermore, our acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware of at the time of the acquisition. In addition, redevelopment of our existing properties presents similar risks.

Newly acquired properties may have characteristics or deficiencies currently unknown to us that affect their value or revenue potential. It is also possible that the operating performance of these properties may decline under our management. As we acquire additional properties, we will be subject to risks associated with managing new properties, including lease-up and tenant retention. In addition, our ability to manage our growth effectively will require us to successfully integrate our new acquisitions into our existing management structure. We may not succeed with this integration or effectively manage additional properties, particularly in secondary markets. Also, newly acquired properties may not perform as expected.

Competition may adversely affect our ability to acquire new properties.  We compete for the purchase of commercial property with many entities, including other publicly traded REITs and private equity funded entities.  Many of our competitors have substantially greater financial resources than ours.  In addition, our competitors may be willing to accept lower returns on their investments.  If we are unable to successfully compete for the properties we have targeted for acquisition, we may not be able to meet our growth and investment objectives.  We may incur costs on unsuccessful acquisitions that we will not be able to recover.  The operating performance of our property acquisitions may also fall short of our expectations, which could adversely affect our financial performance.

Competition may limit our ability to generate sufficient income from tenants and may decrease the occupancy and rental rates for our properties. Our properties consist primarily of open-air shopping centers and other retail properties.  Our performance, therefore, is generally linked to economic conditions in the market for retail space.  In the future, the market for retail space could be adversely affected by:

●  weakness in the national, regional and local economies;
●  the adverse financial condition of some large retailing companies;
●  the impact of internet sales on the demand for retail space;
●  ongoing consolidation in the retail sector; and
●  the excess amount of retail space in a number of markets.

In addition, numerous commercial developers and real estate companies compete with us in seeking tenants for our existing properties.  If our competitors offer space at rental rates below our current rates or the market rates, we may lose current or potential tenants to other properties in our markets and we may need to reduce rental rates below our current rates in order to retain tenants upon expiration of their leases.  Increased competition for tenants may require us to make tenant and/or capital improvements to properties beyond those that we would otherwise have planned to make.  As a result, our results of operations and cash flow may be adversely affected.

In addition, our tenants face increasing competition from internet commerce, outlet malls, discount retailers, warehouse clubs and other sources which could hinder our ability to attract and retain tenants and/or cause us to reduce rents at our properties, which could have an adverse effect on our results of operations and cash flows.  We may fail to anticipate the effects of changes in consumer buying practices, particularly of growing online sales and the resulting retailing practices and space needs of our tenants or a general downturn in our tenant’s businesses, which may cause tenants to close their stores or default in payment of rent.


Property ownership through joint ventures could limit our control of those investments, restrict our ability to operate and finance the property on our terms, and reduce their expected return.  As of October 31, 2019, we owned five of our operating properties through consolidated joint ventures and six through unconsolidated joint ventures. Our joint ventures, and joint ventures we may enter into in the future, may involve risks not present with respect to our wholly-owned properties, including the following:

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We may share decision-making authority with our joint venture partners regarding certain major decisions affecting the ownership or operation of the joint venture and the joint venture property, such as, but not limited to, (i) additional capital contribution requirements, (ii) obtaining, refinancing or paying off debt, and (iii) obtaining consent prior to the sale or transfer of our interest in the joint venture to a third party, which may prevent us from taking actions that are opposed by our joint venture partners;
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Our joint venture partners may have business interests or goals with respect to the property that conflict with our business interests and goals, which could increase the likelihood of disputes regarding the ownership, management or disposition of the property;
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Disputes may develop with our joint venture partners over decisions affecting the property or the joint venture, which may result in litigation or arbitration that would increase our expenses and distract our officers from focusing their time and effort on our business, disrupt the day-to-day operations of the property such as by delaying the implementation of important decisions until the conflict is resolved, and possibly force a sale of the property if the dispute cannot be resolved; and
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The activities of a joint venture could adversely affect our ability to qualify as a REIT.

In addition, with respect to our five consolidated joint ventures, McLean, Orangeburg, UB High Ridge, Dumont and New City, we have additional obligations to the limited partners and non-managing members and additional limitations on our activities with respect to those joint ventures.  The limited partners and non-managing members of each of these joint ventures are entitled to receive annual or quarterly cash distributions payable from available cash of the joint venture, with the Company required to provide such funds if the joint venture is unable to do so.  The limited partners and non-managing members of these joint ventures have the right to require the Company to repurchase all or a portion of their limited partner or non-managing member interests for cash or Class A Common Stock of the Company, at our election, at prices and on terms set forth in the partnership or operating agreements.  We also have the right to redeem all or a portion of the limited partner and non-managing member interests for cash or Class A Common Stock of the Company, at our election, under certain circumstances, at prices and on terms set forth in the partnership or operating agreements.  The right of these limited partners and non-managing members to put their equity interest to us could require us to expend cash, or issue Class A Common Stock of the REIT, at a time or under circumstances that are not desirable to us.

In addition, the partnership agreement or operating agreements with our partners in McLean, Orangeburg, UB High Ridge, Dumont and New City include certain restrictions on our ability to sell the property and to pay off the mortgage debt on these properties before their maturity, although refinancings are generally permitted.  These restrictions could prevent us from taking advantage of favorable interest rate environments and limit our ability to best manage the debt on these properties.

Although we have historically used moderate levels of leverage, if we employed higher levels of leverage, it would result in increased risk of default on our obligations and in an increase in debt service requirements, which could adversely affect our financial condition and results of operations and our ability to pay dividends and make distributions. In addition, the viability of the interest rate hedges we use is subject to the strength of the counterparties.  We have incurred, and expect to continue to incur, indebtedness to advance our objectives. The only restrictions on the amount of indebtedness we may incur are certain contractual restrictions and financial covenants contained in our unsecured revolving credit agreement. Accordingly, we could become more highly leveraged, resulting in increased risk of default on our financial obligations and in an increase in debt service requirements. This, in turn, could adversely affect our financial condition, results of operations and our ability to make distributions.

Using debt to acquire properties, whether with recourse to us generally or only with respect to a particular property, creates an opportunity for increased return on our investment, but at the same time creates risks.  Our goal is to use debt to fund investments only when we believe it will enhance our risk-adjusted returns.  However, we cannot be sure that our use of leverage will prove to be beneficial.  Moreover, when our debt is secured by our assets, we can lose those assets through foreclosure if we do not meet our debt service obligations.  Incurring substantial debt may adversely affect our business and operating results by:

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requiring us to use a substantial portion of our cash flow to pay interest and principal, which reduces the amount available for distributions, acquisitions and capital expenditures;
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making us more vulnerable to economic and industry downturns and reducing our flexibility to respond to changing business and economic conditions;
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requiring us to agree to less favorable terms, including higher interest rates, in order to incur additional debt, and otherwise limiting our ability to borrow for operations, working capital or to finance acquisitions in the future; or
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limiting our flexibility in conducting our business, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms.

In addition, variable rate debt exposes us to changes in interest rates.  We currently do not have any outstanding balance on our Unsecured Revolving Credit Facility ("Facility") but if we did and if interest rates were to rise it would increase the amount of interest expense that we would have to pay.  This exposure would increase if we seek additional variable rate financing based on pricing and other commercial and financial terms.  In addition, we enter into interest rate hedging transactions, including interest rate swaps. There can be no guarantee that the future financial condition of these counterparties will enable them to fulfill their obligations under these agreements.

We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined or the use of alternative reference rates.  As of October 31, 2019, we had approximately $129.1 million of mortgage notes outstanding that are indexed to the London Interbank Offered Rate (“LIBOR”). In July 2017, the United Kingdom regulator that regulates LIBOR announced its intention to phase out LIBOR rates by the end of 2021.  The Alternative Reference Rates Committee ("ARRC"), a steering committee comprised of large U.S. financial institutions, has proposed replacing USD-LIBOR with a new index calculated by short-term repurchase agreements - the Secured Overnight Financing Rate ("SOFR").  At this time, no consensus exists as to what rate or rates may become accepted alternatives to LIBOR, and it is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published or supported before or after 2021 or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere. Such developments and any other legal or regulatory changes in the method by which LIBOR is determined or the transition from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase or decrease in LIBOR, a delay in the publication of LIBOR, and changes in the rules or methodologies in LIBOR, which may discourage market participants from continuing to administer or to participate in LIBOR’s determination and, in certain situations, could result in LIBOR no longer being determined and published. If a published U.S. dollar LIBOR rate is unavailable after 2021, the interest rates on our mortgage notes, which is indexed to LIBOR will be determined using various alternative methods, any of which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on such debt if U.S. dollar LIBOR was available in its current form. Further, the same costs and risks that may lead to the unavailability of U.S. dollar LIBOR may make one or more of the alternative methods impossible or impracticable to determine. Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition, operating results and cash flows.

We are obligated to comply with financial and other covenants in our debt that could restrict our operating activities, and failure to comply could result in defaults that accelerate the payment under our debt.  Our mortgage notes payable contain customary covenants for such agreements including, among others, provisions:

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restricting our ability to assign or further encumber the properties securing the debt; and
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restricting our ability to enter into certain new leases or to amend or modify certain existing leases without obtaining consent of the lenders.

Our unsecured revolving credit agreement contains financial and other covenants which may limit our ability, without our lenders' consent, to engage in operating or financial activities that we may believe desirable.  Our unsecured revolving credit facility contains, among others, provisions restricting our ability to:

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permit unsecured debt to exceed $400 million;
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create certain liens;
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increase our overall secured and unsecured borrowing beyond certain levels;
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consolidate, merge or sell all or substantially all of our assets;
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permit secured debt to be more than 40% of gross asset value, as defined in the agreement; and

● permit unsecured indebtedness, excluding preferred stock, to exceed 60% of eligible real estate asset value as defined in the agreement.

In addition, covenants included in our unsecured revolving credit facility (i) limit the amount of debt we may incur, excluding preferred stock, as a percentage of gross asset value, as defined in the agreement, to less than 60% (leverage ratio), (ii) require earnings before interest, taxes, depreciation and amortization to be at least 150% of fixed charges, (iii) require net operating income from unencumbered properties to be at least 200% of unsecured interest expenses, (iv) require not more than 15% of gross asset value and unencumbered asset pool, each term as defined in the agreement, to be attributable to the Company's pro rata share of the value of unencumbered properties owned by non-wholly owned subsidiaries or unconsolidated joint ventures, and (v) require at least 10 unencumbered properties in the unencumbered asset pool, with at least 10 properties owned by the company or a wholly-owned subsidiary.

If we were to breach any of our debt covenants and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan.  As a result, a default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares.


We may be required to incur additional debt to qualify as a REIT.  As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income. We are subject to income tax on amounts of undistributed taxable income and net capital gain. In addition, we would be subject to a 4% excise tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and aggregate undistributed income from prior years. We intend to make distributions to shareholders to comply with the Code’s distribution provisions and to avoid federal income and excise tax. We may need to borrow funds to meet our distribution requirements because:

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our income may not be matched by our related expenses at the time the income is considered received for purposes of determining taxable income; and
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non-deductible capital expenditures, creation of reserves, or debt service requirements may reduce available cash but not taxable income.

In these circumstances, we might have to borrow funds on terms we might otherwise find unfavorable and we may have to borrow funds even if our management believes the market conditions make borrowing financially unattractive. Current tax law also allows us to pay a portion of our distributions in shares instead of cash.

Our ability to grow will be limited if we cannot obtain additional capital.  Our growth strategy includes the redevelopment of properties we already own and the acquisition of additional properties.  We are required to distribute to our stockholders at least 90% of our taxable income each year to continue to qualify as a REIT for federal income tax purposes.  Accordingly, in addition to our undistributed operating cash flow, we rely upon the availability of debt or equity capital to fund our growth, which financing may or may not be available on favorable terms or at all.  The debt could include mortgage loans from third parties or the sale of debt securities.  Equity capital could include our common stock or preferred stock.  Additional financing, refinancing or other capital may not be available in the amounts we desire or on favorable terms.

Our access to debt or equity capital depends on a number of factors, including the general state of the capital markets, the markets perception of our growth potential, our ability to pay dividends, and our current and potential future earnings.  Depending on the outcome of these factors, we could experience delay or difficulty in implementing our growth strategy on satisfactory terms, or be unable to implement this strategy.

We cannot assure you we will continue to pay dividends at historical rates.  Our ability to continue to pay dividends on our shares of Class A Common stock or Common stock at historical rates or to increase our dividend rate, and our ability to pay preferred share dividends will depend on a number of factors, including, among others, the following:

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our financial condition and results of future operations;
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the performance of lease terms by tenants;
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the terms of our loan covenants;
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payment obligations on debt; and
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our ability to acquire, finance or redevelop and lease additional properties at attractive rates.

If we do not maintain or increase the dividend on our common shares, it could have an adverse effect on the market price of our shares of Class A Common Stock or Common Stock and other securities. Any preferred shares we may offer may have a fixed dividend rate that would not increase with any increases in the dividend rate of our common shares. Conversely, payment of dividends on our common shares may be subject to payment in full of the dividends on any preferred shares and payment of interest on any debt securities we may offer.

Market interest rates could adversely affect the share price of our stock and increase the cost of refinancing debt.  A variety of factors may influence the price of our common and preferred equities in the public trading markets.  We believe that investors generally perceive REITs as yield-driven investments and compare the annual yield from dividends by REITs with yields on various other types of financial instruments.  An increase in market interest rates may lead purchasers of stock to seek a higher annual dividend rate from other investments, which could adversely affect the market price of the stock.  In addition, we are subject to the risk that we will not be able to refinance existing indebtedness on our properties.  We anticipate that a portion of the principal of our debt will not be repaid prior to maturity.  Therefore, we likely will need to refinance at least a portion of our outstanding debt as it matures.  A change in interest rates may increase the risk that we will not be able to refinance existing debt or that the terms of any refinancing will not be as favorable as the terms of the existing debt.

If principal payments due at maturity cannot be refinanced, extended or repaid with proceeds from other sources, such as new equity capital or sales of properties, our cash flow will not be sufficient to repay all maturing debt in years when significant “balloon” payments come due.  As a result, our ability to retain properties or pay dividends to stockholders could be adversely affected and we may be forced to dispose of properties on unfavorable terms, which could adversely affect our business and net income.

Construction and renovation risks could adversely affect our profitability. We currently are renovating some of our properties and may in the future renovate other properties, including tenant improvements required under leases.  Our renovation and related construction activities may expose us to certain risks.  We may incur renovation costs for a property which exceed our original estimates due to increased costs for materials or labor or other costs that are unexpected.  We also may be unable to complete renovation of a property on schedule, which could result in increased debt service expense or construction costs.  Additionally, some tenants may have the right to terminate their leases if a renovation project is not completed on time.  The time frame required to recoup our renovation and construction costs and to realize a return on such costs can often be significant.

We are dependent on key personnel.  We depend on the services of our existing senior management to carry out our business and investment strategies.  We do not have employment agreements with any of our existing senior management.  As we expand, we may continue to need to recruit and retain qualified additional senior management.  The loss of the services of any of our key management personnel or our inability to recruit and retain qualified personnel in the future could have an adverse effect on our business and financial results.

Our insurance coverage on our properties may be inadequate.  We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire, flood, earthquake, and rental loss. All of these policies contain coverage limitations. We believe these coverages are of the types and amounts customarily obtained for or by an owner of similar types of real property assets located in the areas where our properties are located. We intend to obtain similar insurance coverage on subsequently acquired properties.

The availability of insurance coverage may decrease and the prices for insurance may increase as a consequence of significant losses incurred by the insurance industry and other factors outside our control. As a result, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts and toxic mold, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Also, due to inflation, changes in codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed. Further, we may be unable to collect insurance proceeds if our insurers are unable to pay or contest a claim. Events such as these could adversely affect our results of operations and our ability to meet our obligations, including distributions to our shareholders.

Properties with environmental problems may create liabilities for us.  Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, as an owner of real property, we may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our properties, as well as certain other potential costs relating to hazardous or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property).  A property can be adversely affected either through direct physical contamination or as the result of hazardous or toxic substances or other contaminants that have or may have emanated from other properties.  These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances.  This liability may be imposed on us in connection with the activities of an operator of, or tenant at, the property.  The cost of any required remediation, removal, fines or personal or property damages and our liability therefore could exceed the value of the property and/or our aggregate assets.  In addition, the presence of those substances, or the failure to properly dispose of or remove those substances, may adversely affect our ability to sell or rent that property or to borrow using that property as collateral, which, in turn, would reduce our revenues and ability to make distributions.

Prior to the acquisition of any property and from time to time thereafter, we obtain Phase I environmental reports, and, when deemed warranted, Phase II environmental reports concerning the Company's properties.  There can be no assurance, however, that (i) the discovery of environmental conditions that were previously unknown, (ii) changes in law, (iii) the conduct of tenants or neighboring property owner, or (iv) activities relating to properties in the vicinity of the Company's properties, will not expose the Company to material liability in the future.  Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of our tenants, which could adversely affect our financial condition and results of operations.

We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business disruptions.  We rely extensively on computer systems to process transactions and manage our business, and our business is at risk from and may be impacted by cybersecurity attacks. These could include attempts to gain unauthorized access to our data and computer systems. Attacks can be both individual and/or highly organized attempts organized by very sophisticated hacking organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include password encryption, frequent password change events, firewall detection systems, anti-virus software and frequent backups; however, there is no guarantee such efforts will be successful in preventing a cyber-attack. A cybersecurity attack could compromise the confidential information of our employees, tenants and vendors. A successful attack could disrupt and otherwise adversely affect our business operations and financial prospects, damage our reputation and involve significant legal and/or financial liabilities and penalties, including through lawsuits by third-parties.

The Americans with Disabilities Act of 1990 could require us to take remedial steps with respect to existing or newly acquired properties.  Our existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990. Investigation of a property may reveal non-compliance with this Act. The requirements of this Act, or of other federal, state or local laws or regulations, also may change in the future and restrict further renovations of our properties with respect to access for disabled persons. Future compliance with this Act may require expensive changes to the properties.


Risks Related to our Organization and Structure

We will be taxed as a regular corporation if we fail to maintain our REIT status.  Since our founding in 1969, we have operated, and intend to continue to operate, in a manner that enables us to qualify as a REIT for federal income tax purposes.  However, the federal income tax laws governing REITs are complex.  The determination that we qualify as a REIT requires an analysis of various factual matters and circumstances that may not be completely within our control.  For example, to qualify as a REIT, at least 95% of our gross income must come from specific passive sources, such as rent, that are itemized in the REIT tax laws.  In addition, to qualify as a REIT, we cannot own specified amounts of debt and equity securities of some issuers.  We also are required to distribute to our stockholders at least 90% of our REIT taxable income (excluding capital gains) each year. Our continued qualification as a REIT depends on our satisfaction of the asset, income, organizational, distribution and stockholder ownership requirements of the Internal Revenue Code on a continuing basis. At any time, new laws, interpretations or court decisions may change the federal tax laws or the federal tax consequences of qualification as a REIT.  If we fail to qualify as a REIT in any taxable year and do not qualify for certain Internal Revenue Code relief provisions, we will be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates.  In addition, distributions to stockholders would not be deductible in computing our taxable income.  Corporate tax liability would reduce the amount of cash available for distribution to stockholders which, in turn, would reduce the market price of our stock.  Unless entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT.

We will pay federal taxes if we do not distribute 100% of our taxable income.  To the extent that we distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income.  In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any year are less than the sum of:

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85% of our ordinary income for that year;
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95% of our capital gain net income for that year; and
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100% of our undistributed taxable income from prior years.

We have paid out, and intend to continue to pay out, our income to our stockholders in a manner intended to satisfy the distribution requirement and to avoid corporate income tax and the 4% nondeductible excise tax.  Differences in timing between the recognition of income and the related cash receipts or the effect of required debt amortization payments could require us to borrow money or sell assets to pay out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year.

Gain on disposition of assets deemed held for sale in the ordinary course of business is subject to 100% tax.  If we sell any of our assets, the IRS may determine that the sale is a disposition of an asset held primarily for sale to customers in the ordinary course of a trade or business.  Gain from this kind of sale generally will be subject to a 100% tax.  Whether an asset is held "primarily for sale to customers in the ordinary course of a trade or business" depends on the particular facts and circumstances of the sale.  Although we will attempt to comply with the terms of safe-harbor provisions in the Internal Revenue Code prescribing when asset sales will not be so characterized, we cannot assure you that we will be able to do so.

U.S. federal tax reform legislation now and in the future could affect REITs, both positively and negatively, in ways that are difficult to anticipate.  The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”), signed into law on December 22, 2017, represents sweeping tax reform legislation that makes significant changes to corporate and individual tax rates and the calculation of taxes.  While the 2017 Tax Act has not had a significant direct impact on us thus far, it may impact us indirectly as our tenants and the jurisdictions in which we do business as well as the overall investment thesis for REITs may be impacted both positively and negatively in ways that are difficult to predict. Additionally, the overall impact of the 2017 Tax Act depends on future interpretations and regulations that may be issued by federal tax authorities, as well as changes in state and local taxation in response to the 2017 Tax Act, and it is possible that such future interpretations, regulations and other changes could adversely impact us.

Our ownership limitation may restrict business combination opportunities.
To qualify as a REIT under the Internal Revenue Code, no more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals during the last half of each taxable year.  To preserve our REIT qualification, our charter generally prohibits any person from owning shares of any class with a value of more than 7.5% of the value of all of our outstanding capital stock and provides that:

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a transfer that violates the limitation is void;
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shares transferred to a stockholder in excess of the ownership limitation are automatically converted, by the terms of our charter, into shares of "Excess Stock;"
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a purported transferee receives no rights to the shares that violate the limitation except the right to designate a transferee of the Excess Stock held in trust; and
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the Excess Stock will be held by us as trustee of a trust for the exclusive benefit of future transferees to whom the shares of capital stock ultimately will be transferred without violating the ownership limitation.

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 former Chairman, who, as of October 31, 2019, beneficially owns 45.6% of our outstanding Common Stock and 0.6% of our outstanding Class A Common Stock or to Mr. Willing L. Biddle, our CEO, who beneficially owns 31.3% of our outstanding Common Stock and 0.2% of our outstanding Class A Common Stock.  Such holdings represent approximately 67.0% of our outstanding voting interests.  Together as a group Messrs. Urstadt, Biddle, and the other directors and executive officers hold approximately 67.5% of our outstanding voting interests through their beneficial ownership of our Common Stock and Class A Common Stock.  The ownership limitation may delay or discourage someone from taking control of us, even though a change of control might involve a premium price for our stockholders or might otherwise be in their best interest.

Certain provisions in our charter and bylaws and Maryland law may prevent or delay a change of control or limit our stockholders from receiving a premium for their shares.  Among the provisions contained in our charter and bylaws and Maryland law are the following:

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Our Board of Directors is divided into three classes, with directors in each class elected for three-year staggered terms.
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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.
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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.
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Any consolidation, merger, share exchange or transfer of all or substantially all of our assets must be approved by (i) a majority of our directors who are currently in office or who are approved or recommended by a majority of our directors who are currently in office (the "Continuing Directors") and (ii) the affirmative vote of holders of our stock representing a majority of all votes entitled to be cast on the matter.
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Certain provisions of our charter may only be amended by (i) a vote of a majority of our Continuing Directors and (ii) the affirmative vote of holders of our stock representing a majority of all votes entitled to be cast on the matter.
●
The number of directors may be increased or decreased by a vote of our Board of Directors.

In addition, we are subject to various provisions of Maryland law that impose restrictions and require affected persons to follow specified procedures with respect to certain takeover offers and business combinations, including combinations with persons who own 10% or more of our outstanding shares.  These provisions of Maryland law could delay, defer or prevent a transaction or a change of control that our stockholders might deem to be in their best interests.  As permitted by Maryland law, our charter provides that the “business combination” provisions of Maryland law described above will not apply to acquisitions of shares by Mr. Charles J. Urstadt, and our Board of Directors has determined that the provisions will not apply to Mr. Willing L. Biddle, or to Mr. Urstadt’s or Mr. Biddle’s spouses and descendants and any of their affiliates.  Consequently, unless such exemptions are amended or repealed, we may in the future enter into business combinations or other transactions with Mr. Urstadt, Mr. Biddle or any of their respective affiliates without complying with the requirements of the Maryland business combination statute.  Furthermore, shares acquired in a control share acquisition have no voting rights, except to the extent approved by the affirmative vote of two-thirds of all votes entitled to be cast on the matter, excluding all interested shares.  Under Maryland law, "control shares" are those which, when aggregated with any other shares held by the acquiror, allow the acquiror to exercise voting power within specified ranges.  The control share provisions of Maryland law also could delay, defer or prevent a transaction or a change of control which our stockholders might deem to be in their best interests.  As permitted by Maryland law, our bylaws provide that the "control shares" provisions of Maryland law described above will not apply to acquisitions of our stock.  As permitted by Maryland law, our Board of Directors has exclusive power to amend the bylaws and the board could elect to make acquisitions of our stock subject to the “control shares” provisions of Maryland law as to any or all of our stockholders. In view of the common equity securities controlled by Messrs. Urstadt and Biddle, either may control a sufficient percentage of the voting power of our common equity securities to effectively block approval of any proposal which requires a vote of our stockholders.

Our stockholder rights plan could deter a change of control.  We have adopted a stockholder rights plan.  This plan may deter a person or a group from acquiring more than 10% of the combined voting power of our outstanding shares of Common Stock and Class A Common Stock because, after (i) the person or group acquires more than 10% of the total combined voting power of our outstanding Common Stock and Class A Common Stock, or (ii) the commencement of a tender offer or exchange offer by any person (other than us, any one of our wholly owned subsidiaries or any of our employee benefit plans, or certain exempt persons), if, upon consummation of the tender offer or exchange offer, the person or group would beneficially own 30% or more of the combined voting power of our outstanding Common Stock and Class A Common Stock, number of outstanding Common Stock, or the number of outstanding Class A Common Stock, and upon satisfaction of certain other conditions, all other stockholders will have the right to purchase Common Stock and Class A Common Stock of the Company having a value equal to two times the exercise price of the right.  This would substantially reduce the value of the stock owned by the acquiring person.  Our board of directors can prevent the plan from operating by approving the transaction and redeeming the rights.  This gives our board of directors significant power to approve or disapprove of the efforts of a person or group to acquire a large interest in us.  The rights plan exempts acquisitions of Common Stock and Class A Common Stock by Mr. Charles J. Urstadt, Willing L. Biddle, members of their families and certain of their affiliates.

The concentration of our stock ownership or voting power limits our stockholders’ ability to influence corporate matters.  Each share of our Common Stock entitles the holder to one vote.  Each share of our Class A Common Stock entitles the holder to 1/20 of one vote per share.  Each share of Common Stock and Class A Common Stock have identical rights with respect to dividends except that each share of Class A Common Stock will receive not less than 110% of the regular quarterly dividends paid on each share of Common Stock.  As of October 31, 2019, Charles J. Urstadt, our former Chairman, and Willing L. Biddle, our President and Chief Executive Officer, beneficially owned approximately 19.8% of the value of our outstanding Common Stock and Class A Common Stock, which together represented approximately 67.0% of the voting power of our outstanding common stock.  Messrs. Urstadt and Biddle therefore have significant influence over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. This concentrated control limits or restricts our stockholders’ ability to influence corporate matters.


Item 1B.  Unresolved Staff Comments.

None.


Item 2.  Properties.

Properties

The following table sets forth information concerning each property at October 31, 2019.  Except as otherwise noted, all properties are 100% owned by the Company.

Retail Properties:
Year Renovated
Year Completed
Year Acquired
Gross Leasable Sq Feet
Acres
Number of Tenants
% Leased
Principal Tenant
Stamford, CT
1997
1950
2002
374,000
13.6
34
97%
Stop & Shop
Stratford, CT
1988
1978
2005
278,000
29.0
21
100%
Stop & Shop, BJ's
Scarsdale, NY (1)
2004
1958
2010
250,000
14.0
25
98%
ShopRite
New Milford, CT
2002
1972
2010
235,000
20.0
13
98%
Walmart
Riverhead, NY (2)
-
2014
2014
198,000
20.7
4
100%
Walmart
Danbury, CT
-
1989
1995
194,000
19.3
18
99%
Christmas Tree Shops
Carmel, NY (3)
2006
1971
2010
189,000
22.0
32
93%
Tops Markets
Brewster, NY
1998
1977
2019
177,000
23.0
27
72%
Acme Markets
Carmel, NY
1999
1983
1995
145,000
19.0
14
92%
ShopRite
Ossining, NY
2000
1978
1998
137,000
11.4
28
100%
Stop & Shop
Somers, NY
-
2002
2003
135,000
26.0
30
97%
Home Goods
Midland Park, NJ
1999
1970
2015
130,000
7.9
29
97%
Kings Supermarket
Pompton Lakes, NJ
2000
1965
2015
125,000
12.0
16
46%
Planet Fitness
Yorktown, NY
1997
1973
2005
121,000
16.4
13
99%
Staples
New Providence, NJ
2010
1965
2013
109,000
7.8
27
100%
Acme Markets
Newark, NJ
-
1995
2008
108,000
8.4
14
100%
Seabra Supermarket
Wayne, NJ
1992
1959
1992
102,000
9.0
44
97%
Whole Foods Market
Newington, NH
1994
1975
1979
102,000
14.3
6
90%
JoAnns Fabrics
Darien, CT
1992
1955
1998
96,000
9.5
24
100%
Stop & Shop
Emerson, NJ
2013
1981
2007
93,000
7.0
11
80%
ShopRite
Stamford, CT (7)
2013
1963 & 1968
2017
87,000
6.7
26
99%
Trader Joes
New Milford, CT
-
1966
2008
81,000
7.6
4
92%
Big Y
Somers, NY
-
1991
1999
80,000
10.8
32
96%
CVS
Montvale, NJ (2)
2010
1965
2013
79,000
9.9
13
89%
The Fresh Market
Orange, CT
-
1990
2003
78,000
10.0
11
91%
Trader Joes
Kinnelon, NJ
2015
1961
2015
77,000
7.5
13
100%
Marshalls
Orangeburg, NY (4)
2014
1966
2012
74,000
10.6
28
87%
CVS
Dumont, NJ (8)
-
1992
2017
74,000
5.5
31
97%
Stop & Shop
Stamford, CT
2000
1970
2016
72,000
9.7
14
92%
ShopRite (Grade A)
New Milford, CT
-
2003
2011
72,000
8.8
9
56%
TJ Maxx
Eastchester, NY
2013
1978
1997
70,000
4.0
13
100%
DeCicco's Market
Boonton, NJ
2016
1999
2014
63,000
5.4
10
100%
Acme Markets
Ridgefield, CT
1999
1930
1998
62,000
3.0
38
92%
Keller Williams
Fairfield, CT
-
1995
2011
62,000
7.0
3
100%
Marshalls
Bloomfield, NJ
2016
1977
2014
59,000
5.1
10
96%
Superfresh Supermarket
Yonkers, NY (6)
-
1982
2014
58,000
5.0
13
100%
Acme Markets
Cos Cob, CT
2008
1986
2014
48,000
1.1
36
97%
CVS
Briarcliff Manor, NY
2014
1975
2001
47,000
1.0
19
94%
CVS
Wyckoff, NJ
2014
1971
2015
43,000
5.2
15
97%
Walgreens
Westport, CT
-
1986
2003
40,000
3.0
6
38%
Rio Bravo Restaurant
Old Greenwich, CT
-
1976
2014
39,000
1.4
16
96%
Kings Supermarket
Rye, NY
-
Various
2004
39,000
1.0
22
100%
A&S Deli
Derby, CT
-
2014
2017
39,000
5.3
6
94%
Aldi Supermarket
Passaic, NJ
2016
1974
2017
37,000
2.9
3
73%
Dollar Tree/Family Dollar
Danbury, CT
2012
1988
2002
33,000
2.7
6
91%
Buffalo Wild Wings
Bethel, CT
1967
1957
2014
31,000
4.0
9
100%
Rite Aid
Ossining, NY
2001
1981
1999
29,000
4.0
4
88%
Westchester Community College
Katonah, NY
1986
Various
2010
28,000
1.7
25
71%
Squires Family Clothing and Footwear
Stamford, CT
1995
1960
2016
27,000
1.1
7
100%
Federal Express
Waldwick, NJ
-
1953
2017
27,000
1.8
11
100%
United States Post Office
Yonkers, NY
1992
1955
2018
27,000
2.7
16
100%
AutoZone
Harrison, NY
-
1970
2015
26,000
1.6
12
100%
Key Foods
Pelham, NY
2014
1975
2006
25,000
1.0
9
100%
Manor Market
Eastchester, NY
2014
1963
2012
24,000
2.1
5
100%
CVS
Ridgefield, CT
-
1960
2018
24,000
2.7
12
96%
Asian Fusion Restaurant
Waldwick, NJ
-
1961
2008
20,000
1.8
1
100%
Rite Aid
Somers, NY
-
1987
1992
19,000
4.9
12
100%
Putnam County Savings Bank
Cos Cob, CT
1970
1947
2013
15,000
0.9
11
100%
Jos. A Bank
Various (5)
-
Various
2013
15,000
3.0
4
76%
Restaurants
Riverhead, NY (2)
-
2000
2014
13,000
2.7
3
100%
Applebee's
Greenwich, CT
-
1961
2013
10,000
0.8
6
100%
Wells Fargo Bank
Old Greenwich, CT (7)
2001
1941
2017
8,000
0.8
1
100%
CVS
Fort Lee, NJ
-
1967
2015
7,000
0.4
1
100%
H-Mart
Office Properties & Banks Branches
                
Greenwich, CT
-
Various
Various
58,000
2.8
17
97%
UBP
Bronxville & Yonkers
-
1960
2008 & 2009
19,000
0.7
4
100%
Peoples Bank , Chase Bank
Bernardsville, NJ
-
1970
2013
14,000
1.1
9
100%
Lab Corp
Chester, NJ
-
1950
2013
9,000
2.0
1
100%
Kinder Care
Stamford, CT (7)
2012
1960
2017
4,000
0.5
1
100%
Chase Bank
New City, NY (9)
-
1973
2018
3,000
1.0
1
100%
Putnam County Savings Bank
       
5,293,000
496.6
1,009
    

(1) Two wholly owned subsidiaries of the Company own an 11.7917% economic ownership interest in the property.  The Company accounts for this joint venture under the equity method of accounting and does not consolidate the entity owning the property.
(2) A wholly owned subsidiary of the Company has a 50% tenant in common interest in the property. The Company accounts for this joint venture under the equity method of accounting and does not consolidate its interest in the property.
(3) A wholly owned subsidiary of the Company has a 66.67% tenant in common interest in the property. The Company accounts for this joint venture under the equity method of accounting and does not consolidate its interest in the property.
(4) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this property (43.8% ownership interest)
(5) The Company owns five separate free standing properties, two of which are occupied 100% by a Friendly's Restaurant and two by other restaurants. The properties are located in New York, New Jersey and Connecticut.
(6) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this property (53.0% ownership interest)
(7) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this property (13.3% ownership interest)
(8) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this property (36.4% ownership interest)
(9) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this property (78.1% ownership interest)


Lease Expirations – Total Portfolio

The following table sets forth a summary schedule of the annual lease expirations for the consolidated properties for leases in place as of October 31, 2019, assuming that none of the tenants exercise renewal or cancellation options, if any, at or prior to the scheduled expirations.

Year of Expiration
  
Number of
Leases Expiring
    
Square Footage
of Expiring Leases
    
Minimum Base Rents
    
Percentage of Total
Annual Base Rent
that is Represented
by the Expiring Leases
  
2020 (1)
    
224
      
413,774
    
$
10,896,300
      
11
%
2021
    
125
      
378,655
      
10,478,400
      
11
%
2022
    
130
      
682,055
      
16,454,700
      
16
%
2023
    
102
      
585,166
      
15,188,000
      
15
%
2024
    
84
      
326,826
      
9,290,800
      
9
%
2025
    
58
      
399,138
      
8,883,400
      
9
%
2026
    
43
      
152,229
      
4,095,800
      
4
%
2027
    
42
      
169,300
      
4,189,100
      
4
%
2028
    
43
      
257,493
      
5,880,500
      
6
%
2029
    
41
      
234,061
      
5,504,400
      
6
%
Thereafter
    
40
      
524,316
      
9,051,200
      
9
%
     
932
      
4,123,013
    
$
99,912,600
      
100
%

(1)
Represents lease expirations from November 1, 2019 to October 31, 2020 and month-to-month leases.


Item 3.  Legal Proceedings.

In the ordinary course of business, the Company is involved in legal proceedings. There are no material legal proceedings presently pending against the Company.

Item 4.   Mine Safety Disclosures.

Not Applicable

PART II

Item 5.  Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

Market Information

Shares of Common Stock and Class A Common Stock of the Company are traded on the New York Stock Exchange under the symbols "UBP" and "UBA," respectively.

Holders

At December 31, 2019 (latest date practicable), there were 535 shareholders of record of the Company's Common Stock and 593 shareholders of record of the Class A Common Stock.

Each share of Common Stock entitles the holder to one vote.  Each share of Class A Common Stock entitles the holder to 1/20 of one vote per share.  Each share of Common Stock and Class A Common Stock have identical rights with respect to dividends except that each share of Class A Common Stock will receive not less than 110% of the regular quarterly dividends paid on each share of Common Stock.

Purchases of Equity Securities By the Issuer and Affiliated Purchasers

The Board of Directors of the Company has approved a share repurchase program ("Program") for the repurchase of up to 2,000,000 shares, in the aggregate, of Common Stock and Class A Common Stock in open market transactions.  For the three month period ended October 31, 2019, the Company did not repurchase shares of any class of stock under the Program.  The Company has repurchased 195,413 shares of Class A Common Stock under the Program.


Item 6.  Selected Financial Data.
(In thousands, except per share data)

   
Year Ended October 31,
  
   
2019
    
2018
    
2017
    
2016
    
2015
  
Balance Sheet Data:
                              
Total Assets
  
$
1,072,304
    
$
1,008,233
    
$
996,713
    
$
931,324
    
$
861,075
  
                                         
Revolving Credit Line
  
$
-
    
$
28,595
    
$
4,000
    
$
8,000
    
$
22,750
  
                                         
Mortgage Notes Payable and Other Loans
  
$
306,606
    
$
293,801
    
$
297,071
    
$
273,016
    
$
260,457
  
                                         
Preferred Stock Called For Redemption
  
$
75,000
    
$
-
    
$
-
    
$
-
    
$
-
  
                                         
Operating Data:
                                        
Total Revenues
  
$
137,585
    
$
135,352
    
$
123,560
    
$
116,792
    
$
115,312
  
                                         
Total Expenses and payments to noncontrolling interests
  
$
102,333
    
$
100,320
    
$
91,774
    
$
85,337
    
$
88,594
  
                                         
Net Income
  
$
41,613
    
$
42,183
    
$
55,432
    
$
34,605
    
$
50,212
  
                                         
Per Share Data:
                                        
Net Income from Continuing Operations - Basic:
                                        
Class A Common Stock
  
$
0.59
    
$
0.68
    
$
0.92
    
$
0.57
    
$
1.04
  
Common Stock
  
$
0.53
    
$
0.61
    
$
0.82
    
$
0.50
    
$
0.92
  
                                         
Net Income from Continuing Operations - Diluted:
                                        
Class A Common Stock
  
$
0.58
    
$
0.67
    
$
0.90
    
$
0.56
    
$
1.02
  
Common Stock
  
$
0.52
    
$
0.60
    
$
0.80
    
$
0.49
    
$
0.90
  
                                         
Cash Dividends Paid on:
                                        
Class A Common Stock
  
$
1.10
    
$
1.08
    
$
1.06
    
$
1.04
    
$
1.02
  
Common Stock
  
$
0.98
    
$
0.96
    
$
0.94
    
$
0.92
    
$
0.90
  
                                         
Other Data:
                                        
                                         
Net Cash Flow Provided by (Used in):
                                        
Operating Activities
  
$
72,317
    
$
71,584
    
$
62,995
    
$
62,081
    
$
53,041
  
                                         
Investing Activities
  
$
(14,739
)
  
$
(20,540
)
  
$
18,761
    
$
(82,072
)
  
$
(106,975
)
                                         
Financing  Activities
  
$
26,216
    
$
(49,433
)
  
$
(80,353
)
  
$
20,639
    
$
(12,472
)
                                         
Funds from Operations (1)
  
$
51,955
    
$
55,171
    
$
43,203
    
$
43,603
    
$
38,056
  

(1)
The Company has adopted the definition of Funds from Operations (FFO) suggested by the National Association of Real Estate Investment Trusts (NAREIT) and defines FFO as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of properties plus real estate related depreciation and amortization and after adjustments for unconsolidated joint ventures.  For a reconciliation of net income and FFO, see Management's Discussion and Analysis of Financial Condition and Results of Operations on page 13.  FFO does not represent cash flows from operating activities in accordance with generally accepted accounting principles and should not be considered an alternative to net income as an indicator of the Company's operating performance.  The Company considers FFO a meaningful, additional measure of operating performance because it primarily excludes the assumption that the value of its real estate assets diminishes predictably over time and industry analysts have accepted it as a performance measure.  FFO is presented to assist investors in analyzing the performance of the Company.  It is helpful as it excludes various items included in net income that are not indicative of the Company's operating performance.  However, comparison of the Company's presentation of FFO, using the NAREIT definition, to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.  For a further discussion of FFO, see Management's Discussion and Analysis of Financial Condition and Results of Operations on page 13.


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, the “Special Note Regarding Forward-Looking Statements” in Part I and “Item 1A. Risk Factors.”

Executive Summary

Overview

We are a fully integrated, self-administered real estate company that has elected to be a REIT for federal income tax purposes, engaged in the acquisition, ownership and management of commercial real estate, primarily neighborhood and community shopping centers, with a concentration in the metropolitan New York tri-state area outside of the City of New York. Other real estate assets include office properties, single tenant retail or restaurant properties and office/retail mixed use properties.  Our major tenants include supermarket chains and other retailers who sell basic necessities.

At October 31, 2019, we owned or had equity interests in 83 properties, which include equity interests we own in five consolidated joint ventures and six unconsolidated joint ventures, containing a total of 5.3 million square feet of Gross Leasable Area (“GLA”).    Of the properties owned by wholly-owned subsidiaries or joint venture entities that we consolidate, approximately 92.9% was leased (93.2% at October 31, 2018).  Of the properties owned by unconsolidated joint ventures, approximately 96.1% was leased (96.3% at October 31, 2018).

We have paid quarterly dividends to our shareholders continuously since our founding in 1969 and have increased the level of dividend payments to our shareholders for 26 consecutive years.

We derive substantially all of our revenues from rents and operating expense reimbursements received pursuant to long-term leases and focus our investment activities on community and neighborhood shopping centers, anchored principally by regional supermarket or pharmacy chains.  We believe that because consumers need to purchase food and other types of staple goods and services generally available at supermarket or pharmacy-anchored shopping centers, the nature of our investments provides for relatively stable revenue flows even during difficult economic times.

We have a conservative capital structure, which includes permanent equity sources of Common Stock, Class A Common Stock and as of October 31, 2019, three series of perpetual preferred stock, which is only redeemable at our option.  We redeemed our Series G preferred stock on November 1, 2019.  In addition, we have mortgage debt secured by some of our properties.  We do not have any secured debt maturing until January of 2022.

We focus on increasing cash flow, and consequently the value of our properties, and seek continued growth through strategic re-leasing, renovations and expansions of our existing properties and selective acquisitions of income-producing properties.  Key elements of our growth strategies and operating policies are to:

●
acquire quality neighborhood and community shopping centers in the northeastern part of the United States with a concentration on properties in the metropolitan New York tri-state area outside of the City of New York, and unlock further value in these properties with selective enhancements to both the property and tenant mix, as well as improvements to management and leasing fundamentals.  Our hope is to grow our assets through acquisitions by 5% to 10% per year on a dollar value basis subject to the availability of acquisitions that meet our investment parameters;

●
selectively dispose of underperforming properties and re-deploy the proceeds into potentially higher performing properties that meet our acquisition criteria;

●
invest in our properties for the long term through regular maintenance, periodic renovations and capital improvements, enhancing their attractiveness to tenants and customers, as well as increasing their value;

●
leverage opportunities to increase GLA at existing properties, through development of pad sites and reconfiguring of existing square footage, to meet the needs of existing or new tenants;

●
proactively manage our leasing strategy by aggressively marketing available GLA, renewing existing leases with strong tenants, and replacing weak ones when necessary, with an eye toward securing leases that include regular or fixed contractual increases to minimum rents, replacing below-market-rent leases with increased market rents when possible and further improving the quality of our tenant mix at our shopping centers;

●
maintain strong working relationships with our tenants, particularly our anchor tenants;

●
maintain a conservative capital structure with low debt levels; and

●
control property operating and administrative costs.

Highlights of Fiscal 2019; Recent Developments

Set forth below are highlights of our recent property acquisitions, other investments, property dispositions and financings:

●
In December 2018, we purchased the Lakeview Plaza Shopping Center for $12 million, exclusive of closing costs.  Lakeview is a 177,000 square foot grocery-anchored shopping center located in Brewster, NY.  When we purchased the property, we anticipated having to invest up to $8 million for capital improvements and for re-tenanting at the property.  We purchased the property with available cash and a borrowing on our Unsecured Revolving Credit Facility (“Facility”).  As of the date of this report, we have expended approximately $5.4 million of the $8 million anticipated additional investment.

●
In March 2019, we completed the refinancing of our $14.9 million mortgage secured by our Darien, CT shopping center.  The new mortgage principal balance is $25 million, and the note has a term of ten years and requires payments of principal and interest at the rate of LIBOR plus 1.65%.  We also entered into an interest rate swap with the new lender, which converts the variable interest rate (based on LIBOR) to a fixed rate of 4.815% per annum.  The fixed interest rate on the refinanced mortgage was 6.55%.

●
In March 2019, we completed the refinancing of our existing $9.1 million mortgage secured by our Newark, NJ shopping center.  The new mortgage principal balance is $10 million, and the note has a term of ten years and requires payments of principal and interest at the fixed rate of 4.63%, which is a reduction from the fixed interest rate of 6.15% on the refinanced mortgage.

●
In March 2019, we sold Plaza 59, a commercial real estate property located in Spring Valley, NY of which we owned a 50% undivided tenancy-in-common interest, which we accounted for under the equity method of accounting.  The total loss on sale was $924,000, of which our 50% share was $462,000.  This resulted in our equity in net income from Plaza 59 being reduced by $462,000.  This loss has been added back to our Funds from Operations (“FFO”) as discussed below in this Item 7.

●
In June 2019, we placed a first mortgage on our Brewster, NY property.  The new mortgage has a principal balance of $12.0 million, has a term of 10 years and requires payments of principal and interest at the rate of LIBOR plus 1.75%.  Concurrent with entering into the mortgage, we also entered into an interest rate swap contract with the new lender, which converts the variable interest rate (based on LIBOR) to a fixed rate of 3.6325% per annum.

●
In June 2019, we sold our Starbucks Plaza Shopping Center located in Monroe, CT as that property did not meet our stated investment objective of owning grocery or pharmacy-anchored shopping centers in the suburban communities that surround New York City.  The property was acquired by us in 2007, and we sold the property for $3.65 million and realized a gain on sale of $416,000. This gain is not included in our Funds from Operations (“FFO”) as discussed below in this Item 7.

●
In June 2019, we redeemed 4,150 units of UB New City I, LLC (“New City”) from the noncontrolling member.  The total cash price paid for the redemption was $91,000.  As a result of the redemption, our ownership percentage of New City increased to 78.2% from 75.3%.

●
In June 2019 and August 2019, we redeemed 62,696 units of UB High Ridge, LLC (“High Ridge”) from the noncontrolling member.  The total cash price paid for the redemption was $1.4 million.  As a result of the redemption, our ownership percentage of High Ridge increased to 13.3% from 10.9%.

●
In August 2019, we redeemed for $3 million the remaining 16% limited partnership interest in UB Ironbound, LP ("Ironbound").  Ironbound owns a grocery-anchored shopping center located in Newark, NJ.  After the redemption, we own 100% of the limited partnership, through two wholly-owned subsidiaries.

●
In October 2019, we completed the public offering of 4,400,000 shares of 5.875% Series K Cumulative Preferred Stock at a price of $25 per share for net proceeds of $106.5 million after underwriting discounts but before offering expenses.

●
On October 1, 2019, we issued a notice of our intent to redeem, on November 1, 2019, all of the outstanding shares of our Series G Cumulative Preferred Stock for $25 per share, which includes all unpaid dividends.  The total redemption amount was $75 million. As a result of our redemption notice, we recognized a charge of $2.4 million on our consolidated statement of income for the fiscal year ended October 31, 2019, which represents the difference between redemption value of the stock and carrying value net of original deferred stock issuance costs.

Known Trends; Outlook

We believe that shopping center REITs face opportunities and challenges that are both common to and unique from other REITs and real estate companies.     As a shopping center REIT, we are focused on certain challenges that are unique to the retail industry.  In particular, we recognize the challenges presented by e-commerce to brick-and-mortar retail establishments, including our tenants. However, we believe that because consumers prefer to purchase food and other staple goods and services available at supermarkets in person, the nature of our properties makes them less vulnerable to the encroachment of e-commerce than other properties whose tenants may more directly compete with the internet.   Moreover, we believe the nature of our properties makes them less susceptible to economic downturns than other retail properties whose anchor tenants are not supermarkets or other staple goods providers.  We note, however, that many prospective in-line tenants are seeking smaller spaces than in the past, as a result, in part, of internet encroachment on their brick-and-mortar business.   When feasible, we actively work to place tenants that are less susceptible to internet encroachment, such as restaurants, fitness centers, healthcare and personal services.  We continue to be sensitive to these considerations when we establish the tenant mix at our shopping centers, and believe that our strategy of focusing on supermarket anchors is a strong one.

In the metropolitan tri-state area outside of New York City, demographics (income, density, etc.) remain strong and opportunities for new development, as well as acquisitions, are competitive, with high barriers to entry.  We believe that this will remain the case for the foreseeable future, and have focused our growth strategy accordingly.

As a REIT, we are susceptible to changes in interest rates, the lending environment, the availability of capital markets and the general economy.  The impact of such changes are difficult to predict.


Leasing

Rollovers

For the fiscal year 2019, we signed leases for a total of 676,000 square feet of predominantly retail space in our consolidated portfolio.  New leases for vacant spaces were signed for 179,000 square feet at an average rental increase of 1.3% on a cash basis, excluding 2,500 square feet of new leases for which there was no prior rent history available.  Renewals for 494,000 square feet of space previously occupied were signed at an average rental increase of 1.4% on a cash basis.

Tenant improvements and leasing commissions averaged $36 per square foot for new leases and $1.58 per square foot for renewals for the fiscal year ended 2019. The average term for new leases was 6 years and the average term for renewal leases was 4 years.

The rental increases/decreases associated with new and renewal leases generally include all leases signed in arms-length transactions reflecting market leverage between landlords and tenants.  The comparison between average rent for expiring leases and new leases is determined by including minimum rent paid on the expiring lease and minimum rent to be paid on the new lease in the first year. In some instances, management exercises judgment as to how to most effectively reflect the comparability of spaces reported in this calculation. The change in rental income on comparable space leases is impacted by numerous factors including current market rates, location, individual tenant creditworthiness, use of space, market conditions when the expiring lease was signed, the age of the expiring lease, capital investment made in the space and the specific lease structure. Tenant improvements include the total dollars committed for the improvement (fit-out) of a space as it relates to a specific lease but may also include base building costs (i.e. expansion, escalators or new entrances) that are required to make the space leasable.  Incentives (if applicable) include amounts paid to tenants as an inducement to sign a lease that do not represent building improvements.

The leases signed in 2019 generally become effective over the following one to two years. There is risk, however, that some new tenants will not ultimately take possession of their space and that tenants for both new and renewal leases may not pay all of their contractual rent due to operating, financial or other reasons.

In 2020, we believe our leasing volume will be in-line with our historical averages with overall positive increases in rental income for renewal leases and a range of positive 5% to negative 5% for new leases, although that is difficult to predict because it depends on the many factors that can influence the variance. However, changes in rental income associated with individual signed leases on comparable spaces may be positive or negative, and we can provide no assurance that the rents on new leases will continue to increase at the above described levels, if at all.

Significant Events with Impacts on Leasing

Since the 2015 bankruptcy of A&P, its former grocery store space at our Pompton Lakes shopping center, totaling 63,000 square feet, has remained vacant.  We are continuing to market that space for re-lease and are considering other redevelopment options at that shopping center.  In July 2018, one other 36,000 square foot space formerly occupied by A&P that we had released to a local grocery operator became vacant, as that operator failed to perform under its lease and was evicted.  We have signed a lease with Whole Foods Market for this location, and we expect to deliver the space to the lessee early in 2020.

In May 2018, the grocery tenant occupying 30,600 square feet at our Passaic, NJ property went vacant, the tenant was evicted, and the lease was terminated.  In May 2019, we signed two leases to re-lease a large portion of this space at a rental rate that is 12% below the rent we received from the prior grocery tenant.

In March 2018, we reached agreement with the grocery tenant at our Newark, NJ property to terminate its 63,000 square foot lease in exchange for a $3.7 million lease termination payment, which was recorded as revenue in the second quarter of fiscal year ended October 31, 2018.  Also, in April 2018, we leased that same space to a new grocery store operator which took possession in May 2018.  While the rental rate on the new lease is 30% less than the rental rate on the terminated lease, we hope that part of this decreased rental rate will be recaptured with the receipt of percentage rent in subsequent years as the store matures and its sales increase.  The new lease required no tenant improvements or tenant allowances.

In 2017, Toys R’ Us and Babies R’ Us (“Toys”) filed a voluntary petition under chapter 11 of title 11 of the United States Bankruptcy Code.  Subsequently, Toys determined that it would be liquidating the company.  Toys ground leased 65,700 square feet of space at our Danbury, CT shopping center.  In August 2018, this lease was purchased out of bankruptcy from Toys and assumed by a new owner.  The base lease rate for the 65,700 square foot space was and remains at $0 for the duration of the lease, and we did not have any other leases with Toys R’ Us or Babies R’ Us, so our cash flow was not impacted by the bankruptcy of Toys R’ Us and Babies R’ Us.  As of the date of this report, we have not been informed by the new owner of the lease which operator will occupy the space.

In the fourth quarter of fiscal 2019, we leased a 29,800 square foot grocery store space located in our Eastchester, NY property to a new operator at a rental rate that is 120% higher than the rent the prior grocery store operator was paying.

Impact of Inflation on Leasing

Our long-term leases contain provisions to mitigate the adverse impact of inflation on our operating results. Such provisions include clauses entitling us to receive (a) scheduled base rent increases and (b) percentage rents based upon tenants’ gross sales, which generally increase as prices rise. In addition, many of our non-anchor leases are for terms of less than ten years, which permits us to seek increases in rents upon renewal at then current market rates if rents provided in the expiring leases are below then existing market rates. Most of our leases require tenants to pay a share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.

Critical Accounting Policies

Critical accounting policies are those that are both important to the presentation of the Company’s financial condition and results of operations and require management’s most difficult, complex or subjective judgments.  For a further discussion about the Company's critical accounting policies, please see Note 1 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.


Liquidity and Capital Resources

Overview

At October 31, 2019, we had cash and cash equivalents of $94.1 million (see below), compared to $10.3 million at October 31, 2018.  Our sources of liquidity and capital resources include operating cash flow from real estate operations, proceeds from bank borrowings and long-term mortgage debt, capital financings and sales of real estate investments.  Substantially all of our revenues are derived from rents paid under existing leases, which means that our operating cash flow depends on the ability of our tenants to make rental payments.  In fiscal 2019, 2018 and 2017, net cash flow provided by operations amounted to $72.3 million, $71.6 million and $63.0 million, respectively.

On November 1, 2019, we redeemed all 3,000,000 outstanding shares of our 6.75% Series G Cumulative Preferred Stock for $25 per share, which included all accrued and unpaid dividends.  The total amount of the redemption amounted to $75 million.  The redemption was funded with proceeds from our recently completed sale of 4,400,000 shares of 5.875% Series K Cumulative preferred stock.  We issued the Series K shares on October 1, 2019 and raised proceeds of $106.5 million.

Our short-term liquidity requirements consist primarily of normal recurring operating expenses and capital expenditures, debt service, management and professional fees, and regular dividends paid to our Common and Class A Common stockholders, which we expect to continue.  Cash dividends paid on Common and Class A Common stock for the years ended October 31, 2019 and 2018 totaled $42.6 million and $41.6 million, respectively.  Historically, we have met short-term liquidity requirements, which is defined as a rolling twelve-month period, primarily by generating net cash from the operation of our properties.   We believe that our net cash provided by operations will continue to be sufficient to fund our short-term liquidity requirements, including payment of dividends necessary to maintain our federal income tax REIT status.

Our long-term liquidity requirements consist primarily of obligations under our long-term debt, dividends paid to our preferred stockholders, capital expenditures and capital required for acquisitions.  In addition, the limited partners and non-managing members of our five consolidated joint venture entities, UB McLean, LLC, UB Orangeburg, LLC, UB High Ridge, LLC, UB Dumont I, LLC and UB New City I, LLC, have the right to require the Company to repurchase all or a portion of their limited partner or non-managing member interests at prices and on terms as set forth in the governing agreements.  See Note 5 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.  Historically, we have financed the foregoing requirements through operating cash flow, borrowings under our Facility, debt refinancings, new debt, equity offerings and other capital market transactions, and/or the disposition of under-performing assets, with a focus on keeping our leverage low.  We expect to continue doing so in the future.  We cannot assure you, however, that these sources will always be available to us when needed, or on the terms we desire.

Capital Expenditures

We invest in our existing properties and regularly make capital expenditures in the ordinary course of business to maintain our properties. We believe that such expenditures enhance the competitiveness of our properties. In fiscal 2019, we paid approximately $18.7 million for land improvements, property improvements, tenant improvements and leasing commission costs (approximately $5.2 million representing land improvements (see Highlights of Fiscal 2019 earlier in this Item 7 for more information on our purchase of Lakeview), $6.8 million representing property improvements and approximately $6.7 million related to new tenant space improvements, leasing costs and capital improvements as a result of new tenant spaces).  The amount of these expenditures can vary significantly depending on tenant negotiations, market conditions and rental rates.  We expect to incur approximately $8.6 million predominantly for anticipated capital improvements and leasing costs related to new tenant leases and property improvements during fiscal 2020.  These expenditures are expected to be funded from operating cash flows, bank borrowings or other financing sources.

We are currently in the process of developing 3.4 acres of recently-acquired land adjacent to a shopping center we own in Stratford, CT.  We are building two pad site buildings totaling approximately 5,260 square feet, which are pre-leased to national restaurant chains and a self-storage facility of approximately 131,000 square feet, which will be managed for us by a national self-storage company. We anticipate the total development cost will be approximately $15 million over the next two years, which we plan on funding with available cash, by borrowing on our Facility or by using other sources of equity as more fully described earlier in this Item 7.  We expect to complete the construction of one of the retail pads and the self-storage building in the fall of 2020.

Financing Strategy, Unsecured Revolving Credit Facility and Other Financing Transactions

Our strategy is to maintain a conservative capital structure with low leverage levels by commercial real estate standards.  Mortgage notes payable and other loans of $306.6 million primarily consist of $1.7 million in variable rate debt with an interest rate of 5.0%  as of October 31, 2019 and $303.4 million in fixed-rate mortgage loan and unsecured note indebtedness with a weighted average interest rate of 4.1% at October 31, 2019.  The mortgages are secured by 24 properties with a net book value of $559 million and have fixed rates of interest ranging from 3.5% to 4.9%.  The $1.7 million in variable rate debt is unsecured.  We may refinance our mortgage loans, at or prior to scheduled maturity, through replacement mortgage loans.  The ability to do so, however, is dependent upon various factors, including the income level of the properties, interest rates and credit conditions within the commercial real estate market. Accordingly, there can be no assurance that such re-financings can be achieved.

In addition, from time to time we have amounts outstanding on our Facility (see below) that arenot fixed through an interest rate swap or otherwise. See “Item 7.A. Quantitative and Qualitative Disclosures about Market Risk” included in this Annual Report on Form 10-K for additional information on our interest rate risk.  At October 31, 2019, we had no draws outstanding on our Facility.

We currently maintain a ratio of total debt to total assets below 29% and a fixed charge coverage ratio of over 3.49 to 1 (excluding preferred stock dividends), which we believe will allow us to obtain additional secured mortgage loans or other types of borrowings, if necessary.  We own 53 properties in our consolidated portfolio that are not encumbered by secured mortgage debt.  At October 31, 2019, we had borrowing capacity of $99 million on our Facility.  Our Facility includes financial covenants that limit, among other things, our ability to incur unsecured and secured indebtedness.  See Note 4 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information on these and other restrictions.

Unsecured Revolving Credit Facility and Other Property Financings

We have a $100 million unsecured revolving credit facility with a syndicate of three banks, BNY Mellon, BMO and Wells Fargo N.A. with the ability under certain conditions to additionally increase the capacity to $150 million, subject to lender approval.  The maturity date of the Facility is August 23, 2020 with a one-year extension at our option.  Borrowings under the Facility can be used for general corporate purposes and the issuance of up to $10 million of letters of credit.  Borrowings will bear interest at our option of Eurodollar rate plus 1.35% to 1.95% or BNY Mellon's prime lending rate plus 0.35% to 0.95%, based on consolidated indebtedness, as defined.  We pay a quarterly commitment fee on the unused commitment amount of 0.15% to 0.25% per annum, based on outstanding borrowings during the year.  As of October 31, 2019, we had no outstanding borrowings on the Facility.  Our ability to borrow under the Facility is subject to our compliance with the covenants and other restrictions on an ongoing basis.  As discussed above, the principal financial covenants limit our level of secured and unsecured indebtedness and additionally require us to maintain certain debt coverage ratios.  We were in compliance with such covenants at October 31, 2019.

During the year ended October 31, 2019, we borrowed $25.5 million on our Facility for property acquisitions, to fund capital improvements to our properties and for general corporate purposes. For the year ended October 31, 2019, we repaid $54.1 million of borrowings on our Facility with available cash, proceeds from mortgage financings, proceeds from investment property sales and proceeds from the issuance of a new Series of preferred stock.

See Note 4 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a further description of mortgage financing transactions in fiscal 2019.

Net Cash Flows from Operating Activities

Increase from fiscal 2018 to 2019:

The increase in operating cash flows was primarily due to our properties generating additional operating income in the fiscal year ended October 31, 2019 when compared with the corresponding prior period.  This additional operating income was predominantly from properties acquired in fiscal 2018 and fiscal 2019 offset by a decrease in lease termination income of $3.6 million in fiscal 2019 when compared with fiscal 2018.  In fiscal 2018 one of our grocery store tenants paid us $3.7 million to terminate its lease early.

Increase from fiscal 2017 to 2018:

The increase in operating cash flows was primarily due to our properties generating additional operating income in the fiscal year ended October 31, 2018 when compared with the corresponding prior period.  This additional operating income was predominantly from properties acquired in fiscal 2017 and fiscal 2018 and lease termination income of $3.8 million received in fiscal 2018 versus $2.4 million in fiscal 2017.

Net Cash Flows from Investing Activities

Decrease from fiscal 2018 to 2019:

The decrease in net cash flows used in investing activities in fiscal 2019 when compared to fiscal 2018 was the result of selling our marketable security portfolio in the second quarter of fiscal 2019 and realizing proceeds on that sale of $6 million.  The marketable securities were purchased in the first half of fiscal 2018.  These transactions created an $11 million positive variance in cash flows from investing activities in fiscal 2019 when compared with the corresponding prior period. In addition, the decrease in cash flows used in investing activities was the result of one of our unconsolidated joint ventures selling a property it owned in the second quarter of fiscal 2019 and distributing $5 million in sales proceeds to us.  In addition, this decrease in net cash used by investing activities was the result of us selling one property in fiscal 2019 that provided $3.4 million in sales proceeds versus having no property sales in the corresponding prior period.  This decrease in net cash used by investing activities was partially offset by us acquiring one property for $12 million in fiscal 2019 versus purchasing three properties in fiscal 2018 that required $6.8 million in equity and expending $10.5 million more for improvements to properties and deferred charges in fiscal 2019 versus the corresponding prior period.

Increase from fiscal 2017 to 2018:

The increase in net cash flows used in investing activities in fiscal 2018 when compared to net cash provided by investing activities in fiscal 2017 was the result of our selling two properties in fiscal 2017, which generated proceeds of $45.3 million.  We did not sell any properties in fiscal 2018.  In addition, we had provided $13.5 million in mortgage financing to a shopping center we did not own in fiscal 2016.  That loan was repaid to us in fiscal 2017.  This net increase in cash used in investing activities was offset by expending $23.7 million less on property acquisitions in fiscal 2018 when compared with the corresponding prior period.

We regularly make capital investments in our properties for property improvements, tenant improvements costs and leasing commissions.

Net Cash Flows from Financing Activities

Cash generated:

Fiscal 2019: (Total $178.9 million)
●
Proceeds from revolving credit line borrowings in the amount of $25.5 million.
●
Proceeds from mortgage financing of $47 million.
 
●
Proceeds from the issuance of a new series of preferred stock totaling $106.2 million.

Fiscal 2018: (Total $43.8 million)
●
Proceeds from revolving credit line borrowings in the amount of $33.6 million.
●
Proceeds from mortgage financing of $10 million.

Fiscal 2017: (Total $213.5 million)
●
Proceeds from mortgage note payable in the amount of $50 million.
●
Proceeds from revolving credit line borrowings in the amount of $52 million.
●
Proceeds from the issuance of Series H Preferred Stock in the amount of $111.3 million.

Cash used:

Fiscal 2019: (Total $152.7 million)
●
Dividends to shareholders in the amount of $55.4 million.
●
Repayment of mortgage notes payable in the amount of $33.4 million.
●
Repayment of revolving credit line borrowings in the amount of $54.1 million.
 
●
Additional acquisitions and distributions to noncontrolling interests of $9.5 million.

Fiscal 2018: (Total $87.3 million)
●
Dividends to shareholders in the amount of $53.9 million.
●
Repayment of mortgage notes payable in the amount of $24.1 million.
●
Repayment of revolving credit line borrowings in the amount of $9 million.

Fiscal 2017: (Total $291.4 million)
●
Dividends to shareholders in the amount of $55.6 million.
●
Repayment of mortgage notes payable in the amount of $43.7 million.
●
Repayment of revolving credit line borrowings in the amount of $56 million.
●
Redemption of preferred stock in the amount of $129.4 million.


Results of Operations

Fiscal 2019 vs. Fiscal 2018

The following information summarizes our results of operations for the years ended October 31, 2019 and 2018 (amounts in thousands):

   
Year Ended October 31,
                
Change Attributable to:
  
Revenues
  
2019
    
2018
    
Increase
(Decrease)
    
%
Change
    
Property
Acquisitions/Sales
    
Properties Held in
Both Periods (Note 1)
  
Base rents
  
$
99,270
    
$
95,902
    
$
3,368
      
3.5
%
  
$
2,816
    
$
552
  
Recoveries from tenants
    
32,784
      
31,144
      
1,640
      
5.3
%
    
1,091
      
549
  
Lease termination
    
221
      
3,795
      
(3,574
)
    
-94.2
%
    
-
      
(3,574
)
Other income
    
5,310
      
4,511
      
799
      
17.7
%
    
270
      
529
  
                                                 
Operating Expenses
                                                
Property operating
    
21,901
      
22,009
      
(108
)
    
-0.5
%
    
990
      
(1,098
)
Property taxes
    
23,363
      
21,167
      
2,196
      
10.4
%
    
820
      
1,376
  
Depreciation and amortization
    
27,927
      
28,324
      
(397
)
    
-1.4
%
    
412
      
(809
)
General and administrative
    
9,405
      
9,223
      
182
      
2.0
%
    
n/a
      
n/a
  
                                                 
Non-Operating Income/Expense
                                                
Interest expense
    
14,102
      
13,678
      
424
      
3.1
%
    
213
      
211
  
Interest, dividends, and other investment income
    
403
      
350
      
53
      
15.1
%
    
n/a
      
n/a
  

Note 1 – Properties held in both periods includes only properties owned for the entire periods of 2019 and 2018 and for interest expense the amount also includes parent company interest expense.  All other properties are included in the property acquisition/sales column.  There are no properties excluded from the analysis.

Revenues

Base rents increased by 3.5% to $99.3 million in fiscal 2019, as compared with $95.9 million in the comparable period of 2018.  The increase in base rents and the changes in other income statement line items were attributable to:

Property Acquisitions and Properties Sold:

In fiscal 2018, we purchased three properties totaling 53,700 square feet of GLA.  In fiscal 2019, we purchased one property totaling 177,000 square feet and sold one property totaling 10,100 square feet.  These properties accounted for all of the revenue and expense changes attributable to property acquisitions and sales in the fiscal year ended 2019 when compared with fiscal 2018.

Properties Held in Both Periods:

Revenues

Base Rent
The net increase in base rents for the fiscal year ended 2019 when compared to the corresponding prior period, was predominantly caused by positive leasing activity at several properties held in both periods accentuated by a lease renewal with a grocery-store tenant at a significantly higher rent than the expiring period rent, both of which created a positive variance in base rent.

In fiscal 2019, we leased or renewed approximately 676,000 square feet (or approximately 14.8% of total consolidated property leasable area).  At October 31, 2019, the Company’s consolidated properties were 92.9% leased (93.2% leased at October 31, 2018).

Tenant Recoveries
In the fiscal year ended 2019, recoveries from tenants (which represent reimbursements from tenants for operating expenses and property taxes) increased by $549,000 when compared with the corresponding prior period. This increase was a result of an increase in property tax expense caused by an increase in property tax assessments predominantly related to properties the Company owns in Stamford, CT.  This increase was partially offset by a decrease in property operating expenses mostly related to a decrease in snow removal costs at our properties owned in both periods.

Lease Termination Income
In April 2018, we reached agreement with the grocery tenant at our Newark, NJ property to terminate its 63,000 square foot lease in exchange for a one-time $3.7 million lease termination payment, which we received and recorded as revenue in the second quarter of fiscal 2018.  Also in March 2018, we leased that same space to a new grocery store operator who took possession in May 2018.  While the rental rate on the new lease is 30% less than the rental rate on the terminated lease, we hope that part of this decreased rental rate will be recaptured with the receipt of percentage rent in subsequent years as the store matures and its sales increase.  The new lease required no tenant improvement allowance.

Expenses

Property Operating
In fiscal year ended October 31, 2019, property operating expenses decreased by $1.1 million when compared with the corresponding prior periods, predominantly as a result of a decrease in snow removal costs at our properties owned in both periods.

Property Taxes
In the fiscal year ended October 31, 2019 property taxes increased by $1.4 million when compared with the corresponding prior period, as a result of an increase in property tax assessments for a number of our properties owned in both periods, specifically those located in Stamford, CT.

Interest
In the fiscal year ended October 31, 2019 interest expense increased by a net $211,000 when compared with the corresponding prior period as a result of the Company having a larger balance drawn on its Facility for a large portion of fiscal 2019 when compared with the corresponding prior periods, offset by mortgage refinancings at lower interest rates than the refinanced mortgage notes.

Depreciation and Amortization
In the fiscal year ended October 31, 2019, depreciation and amortization decreased by $809,000 when compared with the prior period primarily as a result of increased ASC Topic 805 amortization expense for lease intangibles in fiscal year ended October 31, 2018 for a tenant who vacated the property and whose lease was terminated.

General and Administrative Expenses
General and administrative expense was relatively unchanged in the fiscal year ended October 31, 2019 when compared with the corresponding prior period.


Fiscal 2018 vs. Fiscal 2017

The following information summarizes our results of operations for the years ended October 31, 2018 and 2017 (amounts in thousands):

   
Year Ended October 31,
                
Change Attributable to:
  
Revenues
  
2018
    
2017
    
Increase
(Decrease)
    
%
Change
    
Property
Acquisitions/Sales
    
Properties Held in
Both Periods (Note 2)
  
Base rents
  
$
95,902
    
$
88,383
    
$
7,519
      
8.5
%
  
$
5,624
    
$
1,895
  
Recoveries from tenants
    
31,144
      
28,676
      
2,468
      
8.6
%
    
1,444
      
1,024
  
Lease termination
    
3,795
      
2,432
      
1,363
      
56.0
%
    
(2,148
)
    
3,511
  
Other income
    
4,511
      
4,069
      
442
      
10.9
%
    
(198
)
    
640
  
                                                 
Operating Expenses
                                                
Property operating
    
22,009
      
20,074
      
1,935
      
9.6
%
    
1,133
      
802
  
Property taxes
    
21,167
      
19,621
      
1,546
      
7.9
%
    
833
      
713
  
Depreciation and amortization
    
28,324
      
26,512
      
1,812
      
6.8
%
    
1,895
      
(83
)
General and administrative
    
9,223
      
9,183
      
40
      
0.4
%
    
n/a
      
n/a
  
                                                 
Non-Operating Income/Expense
                                                
Interest expense
    
13,678
      
12,981
      
697
      
5.4
%
    
646
      
51
  
Interest, dividends, and other investment income
    
350
      
356
      
(6
)
    
-1.7
%
    
n/a
      
n/a
  

Note 2 – Properties held in both periods includes only properties owned for the entire periods of 2018 and 2017 and for interest expense the amount also includes parent company interest expense.  All other properties are included in the property acquisition/sales column.  There are no properties excluded from the analysis.

Revenues

Base rents increased by 8.5% to $95.9 million in fiscal 2018, as compared with $88.4 million in the comparable period of 2017.  The increase in base rents and the changes in other income statement line items were attributable to:

Property Acquisitions and Properties Sold:

In fiscal 2017, we purchased four properties totaling 114,700 square feet of GLA, invested in two joint ventures that own four properties totaling 173,600 square feet, whose operations we consolidate, and sold two properties totaling 203,800 square feet.  In fiscal 2018, we purchased three properties totaling 53,700 square feet.  These properties accounted for all of the revenue and expense changes attributable to property acquisitions and sales in fiscal year ended October 31, 2018 when compared with fiscal 2017.

Properties Held in Both Periods:

Revenues

Base Rents
The increase in base rents for properties owned in both periods was predominantly attributable to new leasing activity at several properties held in both periods that created a positive variance in base rents.  This positive variance in base rents was accentuated by our writing off $633,000 in accrued straight-line rent in the third quarter of fiscal 2017 relating to a tenant who had occupied a 36,000 square foot grocery space at our Valley Ridge property.  This tenant failed to perform under its lease, and the lease was terminated in the third quarter of fiscal 2017.

In fiscal 2018, the Company leased or renewed approximately 707,000 square feet (or approximately 16% of total consolidated property leasable area).  At October 31, 2018, the Company’s consolidated properties were approximately 93.2% leased (92.7% leased at October 31, 2017).

Tenant Recoveries
For the year ended October 31, 2018, recoveries from tenants for properties owned in both periods, which represents reimbursements from tenants for operating expenses and property taxes, increased by $1.0 million.  This increase was the result of increases in both property operating expenses and property tax expense in the consolidated portfolio for properties owned in fiscal 2018 when compared with the corresponding prior period.  The increases in property operating expenses were related to increased costs for snow removal, roof repairs and parking lot repairs at our properties, and the increases in property tax expenses were related to increases in property tax assessments.

Lease Termination Income
In April 2018, we reached agreement with the grocery tenant at our Newark, NJ property to terminate its 63,000 square foot lease in exchange for a one-time $3.7 million lease termination payment, which we received and recorded as revenue in the fiscal year ended October 31, 2018.  Also, in March 2018, we leased that same space to a new grocery store operator who took possession in May 2018.  While the rental rate on the new lease is 30% less than the rental rate on the terminated lease, we hope that part of this decreased rental rate will be recaptured with the receipt of percentage rent in subsequent years as the store matures and its sales increase.  The new lease required no tenant improvement allowances or landlord work.

Expenses

Property operating expenses for properties owned in both fiscal year 2018 and 2017 increased by $802,000.  This increase was predominantly the result of increased costs for snow removal, roof repairs and parking lot repairs at our properties.

Real estate taxes for properties owned in both fiscal year 2018 and 2017 increased by $713,000 as a result of normal tax assessment increases at some of our properties.

Interest expense for properties owned in both fiscal year 2018 and 2017 increased by $51,000 as a result of an increase in corporate interest expense on the Company’s Facility as a result of having more principal outstanding in fiscal 2018 versus fiscal 2017. This increase was partially offset by the recapitalizing of our largest mortgage, which is secured by our Ridgeway Shopping Center, after the second quarter of fiscal 2017.  The Ridgeway interest rate was reduced from 5.52% to 3.398%, which caused a reduction of interest expense, this reduction was partially offset by the Company increasing the principal outstanding on the mortgage from $44 million to $50 million.

Depreciation and amortization expense for properties owned in both fiscal year 2018 and 2017 was relatively unchanged in fiscal 2018 when compared with fiscal 2017.

General and Administrative Expenses

General and administrative expense for the year ended October 31, 2018, when compared with the year ended October 31, 2017 was relatively unchanged.


Funds from Operations

We consider Funds from Operations (“FFO”) to be an additional measure of our operating performance.  We report FFO in addition to net income applicable to common stockholders and net cash provided by operating activities.  Management has adopted the definition suggested by The National Association of Real Estate Investment Trusts (“NAREIT”) and defines FFO to mean net income (computed in accordance with GAAP) excluding gains or losses from sales of property, plus real estate-related depreciation and amortization and after adjustments for unconsolidated joint ventures.

Management considers FFO a meaningful, additional measure of operating performance because it primarily excludes the assumption that the value of our real estate assets diminishes predictably over time and industry analysts have accepted it as a performance measure.  FFO is presented to assist investors in analyzing our performance.  It is helpful as it excludes various items included in net income that are not indicative of our operating performance, such as gains (or losses) from sales of property and depreciation and amortization.  However, FFO:

●
does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income); and

●
should not be considered an alternative to net income as an indication of our performance.

FFO as defined by us may not be comparable to similarly titled items reported by other real estate investment trusts due to possible differences in the application of the NAREIT definition used by such REITs.  The table below provides a reconciliation of net income applicable to Common and Class A Common Stockholders in accordance with GAAP to FFO for each of the three years in the period ended October 31, 2019, 2018 and 2017 (amounts in thousands):

   
Year Ended October 31,
  
   
2019
    
2018
    
2017
  
                   
Net Income Applicable to Common and Class A Common Stockholders
  
$
22,128
    
$
25,217
    
$
33,898
  
                         
Real property depreciation
    
22,668
      
22,139
      
20,505
  
Amortization of tenant improvements and allowances
    
3,521
      
4,039
      
4,448
  
Amortization of deferred leasing costs
    
1,652
      
2,057
      
1,468
  
Depreciation and amortization on unconsolidated joint ventures
    
1,505
      
1,719
      
1,618
  
(Gain)/loss on sale of properties
    
19
      
-
      
(18,734
)
Loss on sale of property of unconsolidated joint venture
    
462
      
-
      
-
  
                         
Funds from Operations Applicable to Common and Class A Common Stockholders
  
$
51,955
    
$
55,171
    
$
43,203
  
                         

FFO amounted to $52.0 million in fiscal 2019 compared to $55.2 million in fiscal 2018 and $43.2 million in fiscal 2017.

The net decrease in FFO in fiscal 2019 when compared with fiscal 2018 was predominantly attributable, among other things, to: (i)  the receipt of a $3.7 million one-time lease termination payment in the second quarter of fiscal 2018 from a grocery store tenant who wanted to terminate its lease early (see Significant Events with an Impact on Leasing section earlier in this Item 7); (ii) an increase of $725,000 in base rent in the third quarter of fiscal 2018 related to the amortization of a below market rent in accordance with ASC Topic 805 for a grocery store tenant who was evicted and whose lease was terminated at our Passaic property and (iii) an increase in interest expense as a result of having more outstanding on our Facility in the fiscal year ended 2019 when compared with the corresponding prior periods; (iv) $2.4 million in preferred stock redemption charges relating to our calling our Series G preferred stock for redemption on October 1, 2019; (v) an increase of $539,000 in preferred stock dividends as a result of having a new series of preferred stock outstanding for the month of October 2019.  We redeemed our Series G preferred stock on November 1, 2019; offset by (vi) a $403,000 gain on sale of marketable securities in the fiscal 2019 when we sold all of our marketable securities; (vii) the additional net income generated from properties acquired in fiscal 2018 and fiscal 2019; (viii) additional net income generated from increased base rent revenue for our existing properties, specifically related to a property where the grocery store tenant renewed its lease at a significantly higher rent than the current rent.

The net increase in FFO in fiscal 2018 when compared with fiscal 2017 was predominantly attributable, among other things, to: (i) the additional net income generated from properties acquired in fiscal 2017 and fiscal 2018; (ii) a decrease in preferred stock dividends of $2.7 million as a result of redeeming our Series F preferred stock in October 2017 and replacing it with Series H preferred stock, which has a lower dividend rate and a smaller issuance amount by $14.4 million; and (iii) $3.7 million in lease termination income in the second quarter of fiscal 2018 for a tenant that terminated its lease with us early versus $2.4 million in lease termination income in fiscal 2017 for a tenant that terminated its lease with us early.  This increase was partially offset by (iv) a $548,000 decrease in interest income generated as a result of the one mortgage receivable we had outstanding for most of fiscal 2017, which was repaid in October 2017.


Off-Balance Sheet Arrangements

We have six off-balance sheet investments in real property through unconsolidated joint ventures:

●
a 66.67% equity interest in the Putnam Plaza Shopping Center,

●
an 11.792% equity interest in the Midway Shopping Center L.P.,

●
a 50% equity interest in the Chestnut Ridge Shopping Center,

●
a 50% equity interest in the Gateway Plaza shopping center and the Riverhead Applebee’s Plaza, and

●
a 20% economic interest in a partnership that owns a suburban office building with ground level retail.

These unconsolidated joint ventures are accounted for under the equity method of accounting, as we have the ability to exercise significant influence over, but not control of, the operating and financial decisions of these investments.  Our off-balance sheet arrangements are more fully discussed in Note 6 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.  Although we have not guaranteed the debt of these joint ventures, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g. guarantees against fraud, misrepresentation and bankruptcy) on certain loans of the joint ventures.  The below table details information about the outstanding non-recourse mortgage financings on our unconsolidated joint ventures (amounts in thousands):

       
Principal Balance
            
Joint Venture Description
Location
  
Original Balance
    
At October 31, 2019
    
Fixed Interest Rate Per Annum
  
Maturity Date
Midway Shopping Center
Scarsdale, NY
  
$
32,000
    
$
26,600
      
4.80
%
Dec-2027
Putnam Plaza Shopping Center
Carmel, NY
  
$
18,900
    
$
18,600
      
4.81
%
Oct-2028
Gateway Plaza
Riverhead, NY
  
$
14,000
    
$
12,000
      
4.18
%
Feb-2024
Applebee's Plaza
Riverhead, NY
  
$
2,300
    
$
1,900
      
3.38
%
Aug-2026

Contractual Obligations

Our contractual payment obligations as of October 31, 2019 were as follows (amounts in thousands):

   
Payments Due by Period
  
   
Total
    
2020
    
2021
    
2022
    
2023
    
2024
    
Thereafter
  
Mortgage notes payable and other loans
  
$
306,606
    
$
6,917
    
$
7,321
    
$
56,056
    
$
6,305
    
$
12,369
    
$
217,638
  
Interest on mortgage notes payable
    
98,079
      
13,417
      
13,012
      
11,745
      
10,248
      
10,061
      
39,596
  
Capital improvements to properties*
    
8,597
      
8,597
      
-
      
-
      
-
      
-
      
-
  
Total Contractual Obligations
  
$
413,282
    
$
28,931
    
$
20,333
    
$
67,801
    
$
16,553
    
$
22,430
    
$
257,234
  

*Includes committed tenant-related obligations based on executed leases as of October 31, 2019.

We have various standing or renewable service contracts with vendors related to property management. In addition, we also have certain other utility contracts entered into in the ordinary course of business which may extend beyond one year, which vary based on usage.  These contracts include terms that provide for cancellation with insignificant or no cancellation penalties.  Contract terms are generally one year or less.


Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

We are exposed to interest rate risk primarily through our borrowing activities, which include fixed-rate mortgage debt and, in limited circumstances, variable rate debt.  As of October 31, 2019, we had total mortgage debt and other notes payable of $306.6 million,  $304.9 million for which interest was based on fixed-rate, inclusive of variable rate mortgages that have been swapped to fixed interest rates using interest rate swap derivatives contracts, and $1.7 million of which interest was based on a variable rate (see below).

Our fixed-rate debt presents inherent rollover risk for borrowings as they mature and are renewed at current market rates.  The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and our future financing requirements.
To reduce our exposure to interest rate risk on variable-rate debt, we use interest rate swap agreements, for example, to convert some of our variable-rate debt to fixed-rate debt.  As of October 31, 2019, we had eight open derivative financial instruments.  These interest rate swaps are cross collateralized with mortgages on properties in Ossining, NY, Yonkers, NY, Orangeburg, NY, Brewster, NY, Stamford, CT, Greenwich CT, Darien, CT and Dumont, NJ.  The Ossining swap expires in August 2024, the Yonkers swap expires in November 2024, the Orangeburg swap expires in October 2024, the Brewster swap expires in July 2029, the Stamford swap expires in July 2027, the Greenwich swaps expire in October 2026, the Darien swap expires in April 2029 and the Dumont, NJ swap expires in August 2028, in each case concurrent with the maturity of the respective mortgages.  All of the aforementioned derivatives contracts are adjusted to fair market value at each reporting period.  We have concluded that all of the aforementioned derivatives contracts are effective cash flow hedges as defined in ASC Topic 815.  We are required to evaluate the effectiveness at inception and at each reporting date.  As a result of the aforementioned derivatives contracts being effective cash flow hedges all changes in fair market value are recorded directly to stockholders equity in accumulated comprehensive income and have no effect on our earnings.

All indications are that the LIBOR reference rate will no longer be published beginning on or around the year 2021.  We have good working relationships with each of the lenders to our notes, who are also the counterparties to our swap contracts.  We understand from our lenders and counterparties that their goal is to have the replacement reference rate under the notes match the replacement rates in the swaps.  If this were achieved, we believe there would be no effect on our financial position or results of operations.  However, because this will be the first time any of our promissory notes or the reference rates in our swap contracts will cease to be published, we cannot be sure how the replacement rate event will conclude.  Until we have more clarity from our lenders and counterparties, we cannot be certain of the impact on the Company. See “We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined or the use of alternative reference rates” under Item 1A of this annual report on Form 10-K. 
At October 31, 2019, we had no borrowings outstanding on our Facility, which bears interest at LIBOR plus 1.35%.  If interest rates were to rise 1%, our interest expense as a result of the variable rate would increase by any amount outstanding multiplied by 1% annum.
In addition, we purchased a property in March of fiscal 2018 and financed a portion of the purchase price with unsecured notes held by the seller of the property.  The unsecured notes require the payment of interest only.  $1.5 million of the notes bear interest at a fixed rate of 5.05% and $1.7 million of the notes bear interest at a variable rate of interest based on the level of our Class A Common stock dividend, currently 5.00% as of October 31, 2019.  If the level of our Class A Common dividend rises, it will increase the interest rate on the $1.7 million in notes.

The following table sets forth the Company’s long-term debt obligations by principal cash payments and maturity dates, weighted average fixed interest rates and estimated fair value at October 31, 2019 (amounts in thousands, except weighted average interest rate):

 
For the Fiscal Year Ended October 31,
              
 
2020
  
2021
  
2022
  
2023
  
2024
  
Thereafter
  
Total
  
Estimated Fair Value
  
Mortgage notes payable and other loans
  
$
6,917
    
$