(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
||
N/A |
||||
N/A |
Large accelerated filer ☐ |
|
Non-accelerated filer ☐ |
Smaller reporting company |
Emerging growth company |
|
Urstadt Biddle Properties Inc. |
||
Part I. Financial Information |
||
Item 1. |
Financial Statements (Unaudited) |
|
1 |
||
2 |
||
3 |
||
4 |
||
5 |
||
7 |
||
Item 2. |
20 |
|
Item 3. |
28 |
|
Item 4. |
29 |
|
Part II. Other Information |
||
Item 1. |
30 |
|
Item 1A |
30 |
|
Item 2. |
31 |
|
Item 6. |
32 |
|
33 |
July 31, 2020 |
October 31, 2019 |
|||||||
(Unaudited) |
||||||||
Assets |
||||||||
Real Estate Investments: |
||||||||
Real Estate– at cost |
$ |
$ |
||||||
Less: Accumulated depreciation |
( |
) |
( |
) |
||||
Investments in and advances to unconsolidated joint ventures |
||||||||
Cash and cash equivalents |
||||||||
Tenant receivables |
||||||||
Prepaid expenses and other assets |
||||||||
Deferred charges, net of accumulated amortization |
||||||||
Total Assets |
$ |
$ |
||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Liabilities: |
||||||||
Revolving credit line |
$ |
$ |
||||||
Mortgage notes payable and other loans |
||||||||
Preferred stock called for redemption |
||||||||
Accounts payable and accrued expenses |
||||||||
Deferred compensation – officers |
||||||||
Other liabilities |
||||||||
Total Liabilities |
||||||||
Redeemable Noncontrolling Interests |
||||||||
Commitments and Contingencies |
||||||||
Stockholders’ Equity: |
||||||||
Excess Stock, par value $ |
||||||||
Common Stock, par value $ |
||||||||
Class A Common Stock, par value $ |
||||||||
Additional paid in capital |
||||||||
Cumulative distributions in excess of net income |
( |
) |
( |
) |
||||
Accumulated other comprehensive loss |
( |
) |
( |
) |
||||
Total Stockholders' Equity |
||||||||
Total Liabilities and Stockholders' Equity |
$ |
$ |
Nine Months Ended July 31, |
Three Months Ended July 31, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Revenues |
||||||||||||||||
Lease income |
$ |
$ |
$ |
$ |
||||||||||||
Lease termination |
||||||||||||||||
Other |
||||||||||||||||
Total Revenues |
||||||||||||||||
Expenses |
||||||||||||||||
Property operating |
||||||||||||||||
Property taxes |
||||||||||||||||
Depreciation and amortization |
||||||||||||||||
General and administrative |
||||||||||||||||
Directors' fees and expenses |
||||||||||||||||
Total Operating Expenses |
||||||||||||||||
Operating Income |
||||||||||||||||
Non-Operating Income (Expense): |
||||||||||||||||
Interest expense |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Equity in net income from unconsolidated joint ventures |
||||||||||||||||
Unrealized holding gains (losses) arising during the periods |
( |
) |
||||||||||||||
Gain on sale of marketable securities |
||||||||||||||||
Gain (loss) on sale of property |
( |
) |
||||||||||||||
Interest, dividends and other investment income |
||||||||||||||||
Net Income |
||||||||||||||||
Noncontrolling interests: |
||||||||||||||||
Net income attributable to noncontrolling interests |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Net income attributable to Urstadt Biddle Properties Inc. |
||||||||||||||||
Preferred stock dividends |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Net Income Applicable to Common and Class A Common Stockholders |
$ |
$ |
$ |
$ |
||||||||||||
Basic Earnings Per Share: |
||||||||||||||||
Per Common Share: |
$ |
$ |
$ |
$ |
||||||||||||
Per Class A Common Share: |
$ |
$ |
$ |
$ |
||||||||||||
Diluted Earnings Per Share: |
||||||||||||||||
Per Common Share: |
$ |
$ |
$ |
$ |
||||||||||||
Per Class A Common Share: |
$ |
$ |
$ |
$ |
||||||||||||
Dividends Per Share: |
||||||||||||||||
Common |
$ |
$ |
$ |
$ |
||||||||||||
Class A Common |
$ |
$ |
$ |
$ |
Nine Months Ended July 31, |
Three Months Ended July 31, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Net Income |
$ |
$ |
$ |
$ |
||||||||||||
Other comprehensive loss: |
||||||||||||||||
Change in unrealized losses on interest rate swaps |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Change in unrealized losses on interest rate swaps-equity investees |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Total comprehensive income (loss) |
||||||||||||||||
Comprehensive income attributable to noncontrolling interests |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Total comprehensive income (loss) attributable to Urstadt Biddle Properties Inc. |
||||||||||||||||
Preferred stock dividends |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Total comprehensive income (loss) applicable to Common and Class A Common Stockholders |
$ |
( |
) |
$ |
$ |
$ |
Nine Months Ended July 31, |
||||||||
2020 |
2019 |
|||||||
Cash Flows from Operating Activities: |
||||||||
Net income |
$ |
$ |
||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
||||||||
Straight-line rent adjustment |
( |
) |
( |
) |
||||
Provision for tenant credit losses |
||||||||
(Gain) on sale of marketable securities |
( |
) |
( |
) |
||||
(Gain)/loss on sale of property |
( |
) |
||||||
Restricted stock compensation expense and other adjustments |
||||||||
Deferred compensation arrangement |
( |
) |
( |
) |
||||
Equity in net (income) of unconsolidated joint ventures |
( |
) |
( |
) |
||||
Distributions of operating income from unconsolidated joint ventures |
||||||||
Changes in operating assets and liabilities: |
||||||||
Tenant receivables |
( |
) |
( |
) |
||||
Accounts payable and accrued expenses |
( |
) |
||||||
Other assets and other liabilities, net |
( |
) |
( |
) |
||||
Net Cash Flow Provided by Operating Activities |
||||||||
Cash Flows from Investing Activities: |
||||||||
Acquisitions of real estate investments |
( |
) |
||||||
Investments in and advances to unconsolidated joint ventures |
( |
) |
||||||
Deposits on acquisition of real estate investment |
( |
) |
||||||
Return of deposits on acquisition of real estate investment |
||||||||
Purchase of available for sale securities |
( |
) |
||||||
Proceeds from the sale of available for sale securities |
||||||||
Proceeds from sale of property |
||||||||
Improvements to properties and deferred charges |
( |
) |
( |
) |
||||
Return of capital from unconsolidated joint ventures |
||||||||
Net Cash Flow (Used in) Investing Activities |
( |
) |
( |
) |
||||
Cash Flows from Financing Activities: |
||||||||
Dividends paid -- Common and Class A Common Stock |
( |
) |
( |
) |
||||
Dividends paid -- Preferred Stock |
( |
) |
( |
) |
||||
Principal amortization repayments on mortgage notes payable |
( |
) |
( |
) |
||||
Proceeds from mortgage note payable and other loans |
||||||||
Repayment of mortgage note payable and other loans |
( |
) |
||||||
Repayment of revolving credit line borrowings |
( |
) |
||||||
Proceeds from revolving credit line borrowings |
||||||||
Acquisitions of noncontrolling interests |
( |
) |
( |
) |
||||
Distributions to noncontrolling interests |
( |
) |
( |
) |
||||
Payment of taxes on shares withheld for employee taxes |
( |
) |
( |
) |
||||
Redemption of preferred stock |
( |
) |
||||||
Net proceeds from the issuance of Common and Class A Common Stock |
||||||||
Net Cash Flow (Used in) Financing Activities |
( |
) |
( |
) |
||||
Net Increase/(Decrease) In Cash and Cash Equivalents |
( |
) |
( |
) |
||||
Cash and Cash Equivalents at Beginning of Period |
||||||||
Cash and Cash Equivalents at End of Period |
$ |
$ |
||||||
Supplemental Cash Flow Disclosures: |
||||||||
Interest Paid |
$ |
$ |
Series H Preferred Stock Issued |
Series H Preferred Stock Amount |
Series K Preferred Stock Issued |
Series K Preferred Stock Amount |
Common Stock Issued |
Common Stock Amount |
Class A Common Stock Issued |
Class A Common Stock Amount |
Additional Paid In Capital |
Cumulative Distributions In Excess of Net Income |
Accumulated Other Comprehensive Income (loss) |
Total Stockholders’ Equity |
|||||||||||||||||||||||||||||||||||||
Balances - October 31, 2019 |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||||||||||||||||||||||||
Net income applicable to Common and Class A common stockholders |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||
Change in unrealized income on interest rate swap |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||
Cash dividends paid : |
||||||||||||||||||||||||||||||||||||||||||||||||
Common stock ($ |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Class A common stock ($ |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Issuance of shares under dividend reinvestment plan |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||||||
Shares issued under restricted stock plan |
- |
- |
- |
- |
( |
) |
- |
- |
||||||||||||||||||||||||||||||||||||||||
Shares withheld for employee taxes |
- |
- |
- |
- |
- |
- |
( |
) |
- |
- |
( |
) |
||||||||||||||||||||||||||||||||||||
Forfeiture of restricted stock |
- |
- |
- |
- |
- |
- |
( |
) |
- |
- |
- |
|||||||||||||||||||||||||||||||||||||
Restricted stock compensation and other adjustments |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||
Adjustments to redeemable noncontrolling interests |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||
Balances - July 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
Series G Preferred Stock Issued |
Series G Preferred Stock Amount |
Series H Preferred Stock Issued |
Series H Preferred Stock Amount |
Common Stock Issued |
Common Stock Amount |
Class A Common Stock Issued |
Class A Common Stock Amount |
Additional Paid In Capital |
Cumulative Distributions In Excess of Net Income |
Accumulated Other Comprehensive Income |
Total Stockholders’ Equity |
|||||||||||||||||||||||||||||||||||||
Balances - October 31, 2018 |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
||||||||||||||||||||||||||||||||||||||
November 1, 2018 adoption of new accounting standard - See Note 1 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
|||||||||||||||||||||||||||||||||||||
Net income applicable to Common and Class A common stockholders |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||
Change in unrealized income on interest rate swap |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||
Cash dividends paid : |
||||||||||||||||||||||||||||||||||||||||||||||||
Common stock ($ |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Class A common stock ($ |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Issuance of shares under dividend reinvestment plan |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||||||
Shares issued under restricted stock plan |
- |
- |
- |
- |
( |
) |
- |
- |
||||||||||||||||||||||||||||||||||||||||
Shares withheld for employee taxes |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
- |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Forfeiture of restricted stock |
- |
- |
- |
- |
- |
- |
( |
) |
- |
- |
- |
|||||||||||||||||||||||||||||||||||||
Restricted stock compensation and other adjustments |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||
Adjustments to redeemable noncontrolling interests |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Balances - July 31, 2019 |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
Series H Preferred Stock Issued |
Series H Preferred Stock Amount |
Series K Preferred Stock Issued |
Series K Preferred Stock Amount |
Common Stock Issued |
Common Stock Amount |
Class A Common Stock Issued |
Class A Common Stock Amount |
Additional Paid In Capital |
Cumulative Distributions In Excess of Net Income |
Accumulated Other Comprehensive Income (loss) |
Total Stockholders’ Equity |
|||||||||||||||||||||||||||||||||||||
Balances - April 30, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||||||||||||||||||||||||
Net income applicable to Common and Class A common stockholders |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||
Change in unrealized income on interest rate swap |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||
Cash dividends paid : |
||||||||||||||||||||||||||||||||||||||||||||||||
Common stock ($ |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Class A common stock ($ |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Issuance of shares under dividend reinvestment plan |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||||||
Shares withheld for employee taxes |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||||
Forfeiture of restricted stock |
- |
- |
- |
- |
- |
- |
( |
) |
- |
- |
- |
|||||||||||||||||||||||||||||||||||||
Restricted stock compensation and other adjustments |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||
Adjustments to redeemable noncontrolling interests |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||
Balances - July 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
Series G Preferred Stock Issued |
Series G Preferred Stock Amount |
Series H Preferred Stock Issued |
Series H Preferred Stock Amount |
Common Stock Issued |
Common Stock Amount |
Class A Common Stock Issued |
Class A Common Stock Amount |
Additional Paid In Capital |
Cumulative Distributions In Excess of Net Income |
Accumulated Other Comprehensive Income |
Total Stockholders’ Equity |
|||||||||||||||||||||||||||||||||||||
Balances - April 30, 2019 |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
||||||||||||||||||||||||||||||||||||
Net income applicable to Common and Class A common stockholders |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||
Change in unrealized income on interest rate swap |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||||
Cash dividends paid : |
||||||||||||||||||||||||||||||||||||||||||||||||
Common stock ($ |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Class A common stock ($ |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Issuance of shares under dividend reinvestment plan |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||||||
Shares withheld for employee taxes |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|||||||||||||||||||||||||||||||||||||||
Forfeiture of restricted stock |
- |
- |
- |
- |
- |
- |
( |
) |
- |
- |
- |
|||||||||||||||||||||||||||||||||||||
Restricted stock compensation and other adjustments |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock |
- |
- |
- |
- |
- |
- |
- |
- |
||||||||||||||||||||||||||||||||||||||||
Adjustments to redeemable noncontrolling interests |
- |
- |
- |
- |
- |
- |
- |
- |
- |
( |
) |
- |
( |
) |
||||||||||||||||||||||||||||||||||
Balances - July 31, 2019 |
$ |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
• | Substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets; or |
• | The integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e. revenue generated before and after the transaction). |
• | The process includes an organized workforce (or includes an acquired contract that provides access to an organized workforce), that is skilled, knowledgeable, and experienced in performing the process; |
• | The process cannot be replaced without significant cost, effort, or delay; or |
• | The process is considered unique or scarce. |
Buildings |
|
Property Improvements |
|
Furniture/Fixtures |
|
Tenant Improvements |
Nine Months Ended July 31, |
Three Months Ended July 31, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Revenues |
$ |
$ |
$ |
$ |
||||||||||||
Property operating expense |
( |
) |
( |
) |
( |
) |
||||||||||
Depreciation and amortization |
( |
) |
( |
) |
( |
) |
||||||||||
Net Income (Loss) |
$ |
( |
) |
$ |
$ |
$ |
• | Package of practical expedients - applied to all leases, allowing the Company not to reassess (i) whether expired or existing contracts contain leases under the new definition of a lease, (ii) lease classification for expired or existing leases, and (iii) whether previously capitalized initial direct costs would qualify for capitalization under Topic 842; and |
• | Lessor separation and allocation practical expedient - the Company elected, as lessor, to aggregate non-lease components with the related lease component if certain conditions are met, and account for the combined component based on its predominant characteristic, which generally results in combining lease and non-lease components of its tenant lease contracts to a single line shown as lease income in the accompanying consolidated statements of income. |
Nine Months Ended July 31, |
Three Months Ended July 31, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Numerator |
||||||||||||||||
Net income applicable to common stockholders – basic |
$ |
$ |
$ |
$ |
||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Restricted stock awards |
||||||||||||||||
Net income applicable to common stockholders – diluted |
$ |
$ |
$ |
$ |
||||||||||||
Denominator |
||||||||||||||||
Denominator for basic EPS – weighted average common shares |
||||||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Restricted stock awards |
||||||||||||||||
Denominator for diluted EPS – weighted average common equivalent shares |
||||||||||||||||
Numerator |
||||||||||||||||
Net income applicable to Class A common stockholders-basic |
$ |
$ |
$ |
$ |
||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Restricted stock awards |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Net income applicable to Class A common stockholders – diluted |
$ |
$ |
$ |
$ |
||||||||||||
Denominator |
||||||||||||||||
Denominator for basic EPS – weighted average Class A common shares |
||||||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Restricted stock awards |
||||||||||||||||
Denominator for diluted EPS – weighted average Class A common equivalent shares |
Nine Months Ended July 31, |
Three Months Ended July 31, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Ridgeway Revenues |
% |
% |
% |
% |
||||||||||||
All Other Property Revenues |
% |
% |
% |
% |
||||||||||||
Consolidated Revenue |
% |
% |
% |
% |
July 31, 2020 |
October 31, 2019 |
|||||||
Ridgeway Assets |
% |
% |
||||||
All Other Property Assets |
% |
% |
||||||
Consolidated Assets (Note 1) |
% |
% |
July 31, 2020 |
October 31, 2019 |
|||||||
Ridgeway Percent Leased |
% |
% |
Nine Months Ended July 31, |
Three Months Ended July 31, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
The Stop & Shop Supermarket Company |
% |
% |
% |
% |
||||||||||||
Bed, Bath & Beyond |
% |
% |
% |
% |
||||||||||||
Marshall’s Inc. |
% |
% |
% |
% |
||||||||||||
All Other Tenants at Ridgeway (Note 2) |
% |
% |
% |
% |
||||||||||||
Total |
% |
% |
% |
% |
Income Statements (In Thousands): |
Nine Months Ended July 31, 2020 |
Three Months Ended July 31, 2020 |
||||||||||||||||||||||
Ridgeway |
All Other Operating Segments |
Total Consolidated |
Ridgeway |
All Other Operating Segments |
Total Consolidated |
|||||||||||||||||||
Revenues |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Property Operating Expenses |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Interest Expense |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Depreciation and Amortization |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Net Income |
$ |
$ |
$ |
$ |
$ |
$ |
Income Statements (In Thousands): |
Nine Months Ended July 31, 2019 |
Three Months Ended July 31, 2019 |
||||||||||||||||||||||
Ridgeway |
All Other Operating Segments |
Total Consolidated |
Ridgeway |
All Other Operating Segments |
Total Consolidated |
|||||||||||||||||||
Revenues |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Property Operating Expenses |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Interest Expense |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Depreciation and Amortization |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Net Income |
$ |
$ |
$ |
$ |
$ |
$ |
July 31, 2020 |
October 31, 2019 |
|||||||
Beginning Balance |
$ |
$ |
||||||
Change in Redemption Value |
( |
) |
||||||
Partial Redemption of UB High Ridge Noncontrolling Interest |
( |
) |
( |
) |
||||
Partial Redemption of Dumont Noncontrolling Interest |
( |
) |
||||||
Partial Redemption of New City Noncontrolling Interest |
( |
) |
( |
) |
||||
Redemption of Ironbound Noncontrolling Interest |
( |
) |
||||||
Ending Balance |
$ |
$ |
July 31, 2020 |
October 31, 2019 |
|||||||
Chestnut Ridge Shopping Center ( |
$ |
$ |
||||||
Gateway Plaza ( |
||||||||
Putnam Plaza Shopping Center ( |
||||||||
Midway Shopping Center, L.P. ( |
||||||||
Applebee's at Riverhead ( |
||||||||
81 Pondfield Road Company ( |
||||||||
Total |
$ |
$ |
Nine Months Ended July 31, |
Three Months Ended July 31, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Operating lease income: |
||||||||||||||||
Fixed lease income (Base Rent) |
$ |
$ |
$ |
$ |
||||||||||||
Variable lease income (Recoverable Costs) |
||||||||||||||||
Other lease related income, net: |
||||||||||||||||
Above/below market rent amortization |
||||||||||||||||
Uncollectible amounts in lease income |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
ASC Topic 842 cash basis lease income reversal |
( |
) |
( |
) |
||||||||||||
Total lease income |
$ |
$ |
$ |
$ |
Fiscal Year Ending |
||||
2020 (a) |
$ |
|||
2021 |
||||
2022 |
||||
2023 |
||||
2024 |
||||
Thereafter |
||||
Total |
$ |
Common Shares |
Class A Common Shares |
|||||||||||||||
Non-vested Shares |
Shares |
Weighted-Average Grant-Date Fair Value |
Shares |
Weighted-Average Grant-Date Fair Value |
||||||||||||
Non-vested at October 31, 2019 |
$ |
$ |
||||||||||||||
Granted |
$ |
$ |
||||||||||||||
Vested |
( |
) |
$ |
( |
) |
$ |
||||||||||
Forfeited |
$ |
( |
) |
$ |
||||||||||||
Non-vested at July 31, 2020 |
$ |
$ |
• | Level 1- Quoted prices for identical instruments in active markets |
• | Level 2- Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant value drivers are observable |
• | Level 3- Valuations derived from valuation techniques in which significant value drivers are unobservable |
Fair Value Measurements at Reporting Date Using |
||||||||||||||||
Total |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||||||
July 31, 2020 |
||||||||||||||||
Liabilities: |
||||||||||||||||
Interest Rate Swap Agreement |
$ |
$ |
$ |
$ |
||||||||||||
Redeemable noncontrolling interests |
$ |
$ |
$ |
$ |
||||||||||||
October 31, 2019 |
||||||||||||||||
Liabilities: |
||||||||||||||||
Interest Rate Swap Agreement |
$ |
$ |
$ |
$ |
||||||||||||
Redeemable noncontrolling interests |
$ |
$ |
$ |
$ |
• | negative impacts from the continued spread of COVID-19, including on the U.S. or global economy or on our business, financial position or results of operations; |
• | economic and other market conditions, including real estate and market conditions, that could impact us, our properties or the financial stability of our tenants; |
• | consumer spending and confidence trends, as well as our ability to anticipate changes in consumer buying practices and the space needs of tenants; |
• | our relationships with our tenants and their financial condition and liquidity; |
• | any difficulties in renewing leases, filling vacancies or negotiating improved lease terms; |
• | the inability of our properties to generate increased, or even sufficient, revenues to offset expenses, including amounts we are required to pay to municipalities for real estate taxes, payments for common area maintenance expenses at our properties and salaries for our management team and other employees; |
• | the market value of our assets and the supply of, and demand for, retail real estate in which we invest; |
• | risks of real estate acquisitions and dispositions, including our ability to identify and acquire retail real estate that meet our investment standards in our markets, as well as the potential failure of transactions to close; |
• | risks of operating properties through joint ventures that we do not fully control; |
• | financing risks, such as the inability to obtain debt or equity financing on favorable terms or the inability to comply with various financial covenants included in our Unsecured Revolving Credit Facility (the "Facility") or other debt instruments we currently have or may subsequently obtain, as well as the level and volatility of interest rates, which could impact the market price of our common stock and the cost of our borrowings; |
• | environmental risk and regulatory requirements; |
• | 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; |
• | legislative and regulatory changes generally that may impact us or our tenants; |
• | as well as other risks identified in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019 under Item 1A. Risk Factors and in the other reports filed by the Company with the Securities and Exchange Commission (the “SEC”). |
• |
All of our 74 retail shopping centers, stand-alone restaurants and stand-alone bank branches are open and operating, with approximately 95.8% of our tenants (based on Annualized Base Rent ("ABR")) open and fully or partially operating and approximately 4.2% of our tenants currently closed. |
• |
All of our shopping centers include necessity-based tenants, with approximately 70.2% of our tenants (based on ABR) designated as “essential businesses” during the early stay-at-home period of the pandemic in the tri-state area or otherwise permitted to operate through curbside pick-up and other modified operating procedures in accordance with state guidelines. These essential businesses are 96.3% open based on ABR. |
• |
Approximately 84% of our GLA is located in properties anchored by grocery stores, pharmacies and wholesale clubs, 6% of our GLA is located in outdoor retail shopping centers adjacent to regional malls and 8% of our GLA is located in outdoor neighborhood convenience retail, with the remaining 2% of our GLA consisting of six suburban office buildings located in Greenwich, Connecticut and Bronxville, New York, three retail bank branches and one childcare center. All 6 suburban office buildings are open with some restrictions on capacity based on state mandates and all of the retail bank branches are open. |
• |
As of September 4, 2020, we have received payment of approximately 81%, 81% and 79% of lease income, consisting of contractual base rent (leases in place without consideration of any deferral or abatement agreements), common area maintenance reimbursement and real estate tax reimbursement billed for April 2020, the third quarter of fiscal 2020 and the month of August 2020, respectively, not including the application of any security deposits. |
• |
Similar to other retail landlords across the United States, we received a number of requests for rent relief from tenants, with most requests received during the early days of the pandemic when stay-at-home orders were in place and many businesses made to close, but we have continued to receive a smaller number of new requests even after businesses have re-opened, and in some cases, follow-on requests from tenants to whom we had already provided temporarily rent relief. We have been evaluating each request on a case-by-case basis to determine the best course of action, recognizing that in many cases some type of concession may be appropriate and beneficial to our long-term interests. Although each negotiation has been specific to that tenant, most of these concessions have been in the form of deferred rent for some portion of rents due in April through August, or longer, to be paid back over the later part of the lease, preferably within a period of one year or less. A much smaller portion of these concessions have been in the form of rent abatement. |
• |
We have received 406 rent relief requests from our approximately 900 tenants in our consolidated portfolio. Subsequently, approximately 110 of the 406 tenants withdrew their request for rent relief or paid their rent in full. These requests represent 45.3% of our ABR and 38.5% of our GLA. As of July 31, 2020, we had completed lease amendments with approximately 194 of the 406 tenants that had requested rent relief, representing deferments of approximately $2.6 million in lease income ($1.9 million of our third quarter lease income) or approximately 2.7% of our ABR and abatements of approximately $492,000 or approximately 0.5% of ABR. The weighted average payback period for the $2.6 million of deferred rents is 8.1 months. |
• | Along with our tenants and the communities we together serve, the health and safety of our employees is our top priority. We have adapted our operations to protect employees, including by implementing a work-from-home policy in March 2020, which worked seamlessly, with no disruption in our service to tenants and other business partners. On May 20, 2020, in response to a change in the State of Connecticut's mandates, we opened our office at less than 50% capacity, with employees encouraged to continue working from home when feasible consistent with business needs. We continue to closely monitor recommendations and mandates of federal, state and local governments and health authorities to ensure the safety of our own employees as well as our properties. |
• | We are in regular communication with our tenants, providing assistance in identifying local, state and federal resources that may be available to support their businesses and employees during the pandemic, including stimulus funds that may be available under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act”). We compiled a robust set of tenant materials explaining these and other programs, which have been posted to the tenant portal on our website, disseminated by e-mail to all of our tenants through the tenant portal of our general ledger system and communicated directly by telephone through our leasing agents. Each of our tenants was also assigned a leasing agent to whom the tenant can turn with questions and concerns during these uncertain times. |
• | In addition, we launched a program designating dedicated parking spots for curbside pick-up at our shopping centers for use by all tenants and their customers, assisted restaurant tenants in securing municipal approvals for outdoor seating, and are assisting tenants in many other ways to improve their business prospects. |
• | To enhance our liquidity position and maintain financial flexibility, we borrowed $35 million under our Facility during March and April 2020. |
• | At July 31, 2020, we had approximately $42.3 million in cash and cash equivalents on our consolidated balance sheet, and an additional $64 million available under our Facility (excluding the $50 million accordion feature). |
• | We do not have any unsecured debt maturing until August 2021. Additionally, we do not have any secured debt maturing until January 2022. All maturing secured debt is generally below a 55% loan-to-value ratio, and we believe we will be able to refinance that debt. Construction related to three large re-tenanting projects, two for grocery stores and one for a national junior anchor, was completed during the second quarter, which we expect will result in each of the tenants opening in the fourth quarter of fiscal 2020 or first quarter of fiscal 2021. Apart from the aforementioned three re-tenanting projects, we do not have any other material re-tenanting projects ongoing. |
• | We have taken proactive measures to manage costs, including reducing, where possible, our common area maintenance spending. We have one ongoing construction project at one of our properties, with approximately $5.5 million remaining to complete the project. Otherwise, only minimal construction is underway. Further, we expect that the only material capital expenditures at our properties in the near-term will be tenant improvements and/or other leasing costs associated with existing and new leases. We have redirected our acquisition department to help with lease negotiations. |
• | Although we continue to seek opportunities to acquire high-quality neighborhood and community shopping centers, we have temporarily redirected the executives in our acquisition department to help with lease negotiations. |
• | On March 27, 2020, the President of the United States signed into law the CARES Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer-side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. The Company has availed itself of some of the above benefits afforded by The CARES Act. |
• | On September 3, 2020, our Board of Directors declared a quarterly dividend of $0.125 per Common share and $0.14 per Class A Common share to be paid on October 16, 2020 to holders of record on October 2, 2020, reduced approximately 50% from second quarter dividends of $0.25 per Common share and $0.28 per Class A Common share but increased 100% from our third quarter dividends of $0.0625 per Common share and $0.07 per Class A Common Share. The announced dividend level will preserve approximately $5.5 million of cash in the fourth quarter when compared to our second quarter dividend levels. Given the reduction of operating cash flow and taxable income caused by tenants’ nonpayment of rent during the period from April through August 2020, the overall uncertainty of the COVID-19 pandemic’s near and potential long-term impact on our business, and the importance of preserving our liquidity position, among other considerations, the Board determined after careful consideration of all information available to them at the time that reducing the quarterly dividend, when compared with the pre-pandemic level, is in the best interests of stockholders. As part of this determination, however, the Board also considered that given the re-opening of many previously-closed businesses, the gradual lifting of restrictions on tenants’ business operations, the anticipated reduction in capital expenditures and the partial improvement in the Company’s cash flow and financial condition, among other factors, it would be appropriate to increase the dividend from levels paid in the third quarter. Based on the Company’s updated taxable income projections for the fiscal year ended 2020, it does not need to pay any further dividends in the fourth quarter to meet the distribution requirements necessary for it to continue qualifying as a REIT for U.S. federal income tax requirements. However, for the reasons stated above, the Board has chosen to do so. The Board declared the full contractual dividend on both our Series H and Series K Cumulative Preferred Stock, payable on October 30, 2020 to holders of record on October 16, 2020. Going forward, our Board of Directors will continue to evaluate our dividend policy. |
• | maintain our focus on community and neighborhood shopping centers, anchored principally by regional supermarkets, pharmacy chains or wholesale clubs, which we believe can provide a more stable revenue flow even during difficult economic times because of the focus on food and other types of staple goods; |
• | acquire quality neighborhood and community shopping centers in the northeastern part of the United States with a concentration on properties in the metropolitan 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, with hopes to grow our assets through acquisitions 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 (e.g. curbside pick up), 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 towards 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. |
• | On November 1, 2019, we redeemed all of the outstanding shares of our Series G Cumulative Preferred Stock for $25 per share with proceeds from our sale of our Series K Cumulative Preferred Stock in October 2019. The total redemption amount was $75 million. |
• | In December 2019, we closed on the sale of our property located in Bernardsville, NJ to an unrelated third party for a sale price of $2.7 million, pursuant to a contract we had entered into in August 2019, as that property no longer met our investment objectives. In accordance with ASC Topic 360-10-45, the property met all the criteria to be classified as held for sale in the fourth quarter of fiscal 2019, and accordingly we recorded a loss on property held for sale of $434,000, which loss was included in continuing operations in the consolidated statement of income for the year ended October 31, 2019. The amount of the loss represented the net carrying amount of the property over the fair value of the asset less estimated cost to sell. Upon completion of the sale in December 2019, we realized an additional loss on sale of property of $86,000, which loss is included in continuing operations in the consolidated statement of income for the nine months ended July 31, 2020. This loss has been added back to our Funds from Operations (“FFO”) as discussed below in this Item 2. |
• | In January 2020, we sold for $1.3 million a retail property located in Carmel, NY, as that property no longer met our investment objectives. In conjunction with the sale, we realized a loss on sale of property in the amount of $242,000, which loss is included in continuing operations in the consolidated statement of income for the nine months ended July 31, 2020. This loss has been added back to FFO as discussed below in this Item 2. |
• | In January 2020, we redeemed 2,250 units of UB New City I, LLC from the noncontrolling member. The total cash price paid for the redemption was $49,500. As a result of the redemption, our ownership percentage of New City increased to 79.7% from 78.2%. |
• | In January 2020, we redeemed 23,829 units of UB High Ridge, LLC from the noncontrolling member. The total cash price paid for the redemption was $560,000. As a result of the redemption, our ownership percentage of High Ridge increased to 14.2% from 13.3%. |
• | In March and April 2020, we borrowed an aggregate $35 million on our Facility to fund capital improvements and for general corporate purposes. |
• | In June 2020, we redeemed 6,750 units of UB New City I, LLC from the noncontrolling member. The total cash price paid for the redemption was $148,500. As a result of the redemption, our ownership percentage of New City increased to 84.3% from 79.7%. |
Nine months ended |
Change Attributable to |
|||||||||||||||||||||||
July 31, |
Increase |
Property |
Properties Held In |
|||||||||||||||||||||
Revenues |
2020 |
2019 |
(Decrease) |
% Change |
Acquisitions/Sales |
Both Periods (Note 1) |
||||||||||||||||||
Base rents |
$ |
75,013 |
$ |
75,122 |
$ |
(109 |
) |
(0.1 |
)% |
$ |
(256 |
) |
$ |
147 |
||||||||||
Recoveries from tenants |
21,166 |
24,664 |
(3,498 |
) |
(14.2 |
)% |
47 |
(3,545 |
) |
|||||||||||||||
Uncollectible amounts in lease income |
(3,490 |
) |
(719 |
) |
(2,771 |
) |
385.4 |
% |
- |
(2,771 |
) |
|||||||||||||
ASC Topic 842 cash basis lease income reversal |
(2,686 |
) |
- |
(2,686 |
) |
100.0 |
% |
(9 |
) |
(2,677 |
) |
|||||||||||||
Lease termination |
460 |
194 |
266 |
137.1 |
% |
- |
266 |
|||||||||||||||||
Other income |
3,964 |
3,504 |
460 |
13.1 |
% |
(25 |
) |
485 |
||||||||||||||||
Operating Expenses |
||||||||||||||||||||||||
Property operating |
15,085 |
16,855 |
(1,770 |
) |
(10.5 |
)% |
(155 |
) |
(1,615 |
) |
||||||||||||||
Property taxes |
17,615 |
17,603 |
12 |
0.1 |
% |
(51 |
) |
63 |
||||||||||||||||
Depreciation and amortization |
21,587 |
20,928 |
659 |
3.1 |
% |
(87 |
) |
746 |
||||||||||||||||
General and administrative |
8,495 |
7,149 |
1,346 |
18.8 |
% |
n/a |
n/a |
|||||||||||||||||
Non-Operating Income/Expense |
||||||||||||||||||||||||
Interest expense |
10,123 |
10,607 |
(484 |
) |
(4.6 |
)% |
306 |
(790 |
) |
|||||||||||||||
Interest, dividends, and other investment income |
359 |
228 |
131 |
57.5 |
% |
n/a |
n/a |
Three Months Ended |
Change Attributable to |
|||||||||||||||||||||||
July 31, |
Increase |
Property |
Properties Held In |
|||||||||||||||||||||
Revenues |
2020 |
2019 |
(Decrease) |
% Change |
Acquisitions/Sales |
Both Periods (Note 1) |
||||||||||||||||||
Base rents |
$ |
24,130 |
$ |
24,841 |
$ |
(711 |
) |
(2.9 |
)% |
$ |
(119 |
) |
$ |
(592 |
) |
|||||||||
Recoveries from tenants |
7,056 |
7,839 |
(783 |
) |
(10.0 |
)% |
77 |
(860 |
) |
|||||||||||||||
Uncollectible amounts in lease income |
(1,645 |
) |
(223 |
) |
(1,422 |
) |
637.7 |
% |
- |
(1,422 |
) |
|||||||||||||
ASC Topic 842 cash basis lease income reversal |
(2,686 |
) |
- |
(2,686 |
) |
100.0 |
% |
22 |
(2,708 |
) |
||||||||||||||
Lease termination income |
112 |
177 |
(65 |
) |
(36.7 |
)% |
- |
(65 |
) |
|||||||||||||||
Other income |
1,832 |
1,758 |
74 |
4.2 |
% |
(20 |
) |
94 |
||||||||||||||||
Operating Expenses |
||||||||||||||||||||||||
Property operating |
4,355 |
5,020 |
(665 |
) |
(13.2 |
)% |
(97 |
) |
(568 |
) |
||||||||||||||
Property taxes |
5,897 |
5,885 |
12 |
0.2 |
% |
(36 |
) |
48 |
||||||||||||||||
Depreciation and amortization |
7,304 |
7,002 |
302 |
4.3 |
% |
(18 |
) |
320 |
||||||||||||||||
General and administrative |
2,111 |
2,230 |
(119 |
) |
(5.3 |
)% |
n/a |
n/a |
||||||||||||||||
Non-Operating Income/Expense |
||||||||||||||||||||||||
Interest expense |
3,475 |
3,497 |
(22 |
) |
(0.6 |
)% |
74 |
(96 |
) |
|||||||||||||||
Interest, dividends, and other investment income |
27 |
44 |
(17 |
) |
(38.6 |
)% |
n/a |
n/a |
● | 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. |
Reconciliation of Net Income Available to Common and Class A Common Stockholders To Funds From Operations: |
Nine months ended |
Three Months Ended |
||||||||||||||
July 31, |
July 31, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Net Income Applicable to Common and Class A Common Stockholders |
$ |
$9,446 |
$ |
$18,922 |
$ |
$1,576 |
$ |
$7,270 |
||||||||
Real property depreciation |
16,994 |
16,930 |
5,658 |
5,597 |
||||||||||||
Amortization of tenant improvements and allowances |
3,245 |
2,706 |
1,170 |
974 |
||||||||||||
Amortization of deferred leasing costs |
1,279 |
1,223 |
451 |
411 |
||||||||||||
Depreciation and amortization on unconsolidated joint ventures |
1,122 |
1,129 |
375 |
376 |
||||||||||||
(Gain)/loss on sale of property |
328 |
(409 |
) |
- |
(409 |
) |
||||||||||
Loss on sale of property in unconsolidated joint venture |
- |
457 |
- |
- |
||||||||||||
Funds from Operations Applicable to Common and Class A Common Stockholders |
$ |
$32,414 |
$ |
$40,958 |
$ |
$9,230 |
$ |
$14,219 |
• |
An increase in uncollectable amounts in lease income of $2.8 million. This increase was the result of an increase in our assessment of the collectability of existing non-credit small shop tenants' receivables given the on-going COVID-19 pandemic. Many non-credit small shop tenants' businesses were deemed non-essential by the states where they operate and were forced to close for a portion of our third quarter until states loosened their restrictions and allowed almost all, of our tenants to re-open, although some with operational restrictions. Our assessment was based on the premise that as we emerge from the COVID-19 pandemic, our non-credit small shop tenants will need to use most of their resources to re-establish their business footing, and any existing accounts receivable attributable to those tenants would most likely be uncollectable. |
• |
An increase in the write off of lease income in the third quarter for tenants in our portfolio whose future lease payments were deemed to be not probable of collection, requiring us under GAAP to convert revenue recognition for those tenants to cash-basis accounting. This caused a write off of previously billed but unpaid lease income of $1.8 million and the reversal of accrued straight-line rents receivable for these aforementioned tenants of $910,000. |
• |
A net $3.0 million decrease in variable lease income (cost recovery income) related to the COVID-19 pandemic. In the second quarter and continuing into the third quarter of fiscal 2020, in response to the on-going COVID-19 pandemic, we lowered our percentage of recovery at most of our properties as a result of our assessment that many of our non-credit small shop tenants will have difficulty paying the amounts required under their leases as a result of the COVID 19 pandemic. This assessment was based on the fact that many smaller tenants' businesses were deemed non-essential by the states where they operate and forced to close. |
• |
A decrease in variable lease income (cost recovery income) related to an over-accrual adjustment in recoveries from tenants for real estate taxes in the first quarter of fiscal 2020 versus an under-accrual adjustment in recoveries from tenants for real estate taxes in the first quarter of fiscal 2019, which when combined, resulted in a negative variance in the first nine months of fiscal 2020 when compared to the same period of fiscal 2019. |
• |
A net increase in general and administrative expenses of $1.4 million, predominantly related to an increase in compensation and benefits expense for the accelerated vesting of restricted stock grant value upon the death of our former Chairman Emeritus in the second quarter of fiscal 2020. |
• |
A net increase in preferred stock dividends of $1.0 million as a result of issuing a new series of preferred stock in fiscal 2019 and redeeming an existing series. The new series has a principal value $35 million higher than the redeemed series, which increased preferred stock dividends by $1.5 million. The new series has a lower coupon rate of 5.875% versus 6.75% on the redeemed series, which reduced preferred stock dividends by $492,000. |
• |
A $266,000 increase in lease termination income in the first nine months of fiscal 2020 when compared with the corresponding prior period. |
• |
A $484,000 decrease in interest expense as a result of fully repaying our Facility in the fourth quarter of fiscal 2019 with proceeds from our new series of preferred stock. |
• |
An increase in uncollectable amounts in lease income of $1.4 million. This increase was the result of an increase in our assessment of the collectability of existing non-credit small shop tenants' receivables given the on-going COVID-19 pandemic. Many non-credit small shop tenants’ businesses were deemed non-essential by the states where they operate and forced to close for a portion of our third quarter until states loosened their restrictions and allowed almost all, of our tenants to re-open, although some with operational restrictions. Our assessment was based on the premise that as we emerge from the COVID-19 pandemic, our non-credit small shop tenants will need to use most of their resources to re-establish their business footing, and any existing accounts receivable attributable to these tenants would most likely be uncollectable. |
• |
An increase in the write off of lease income in the third quarter for tenants in our portfolio whose future lease payments were deemed to be not probable of collection, requiring us under GAAP to convert revenue recognition for those tenants to cash-basis accounting. This caused a write off of previously billed but unpaid lease income of $1.8 million and the reversal of accrued straight-line rents receivable for these aforementioned tenants of $910,000. |
• |
A net decrease in base rents predominantly caused by the vacating of Modell's, a tenant at our Ridgeway shopping center in Stamford, CT, as a result of that tenant filing for bankruptcy. |
• |
A net $783,000 decrease in variable lease income (cost recovery income) related to the COVID-19 pandemic. In the third quarter of fiscal 2020, in response to the on-going COVID-19 pandemic, we lowered our percentage of recovery at most of our properties as a result of our assessment that many of our non-credit small shop tenants will have difficulty paying the full amounts required under their leases as a result of the COVID 19 pandemic. This assessment was based on the fact that many smaller tenants’ businesses were deemed non-essential by the states where they operate and forced to close. |
• |
A net increase in preferred stock dividends of $349,000 as a result of issuing a new series of preferred stock in fiscal 2019 and redeeming an existing series. The new series has a principal value $35 million higher than the redeemed series, which increased preferred stock dividends by $514,000. The new series has a lower coupon rate of 5.875% versus 6.75% on the redeemed series, which reduced preferred stock dividends by $164,000. |
• | a 66.67% equity interest in the Putnam Plaza Shopping Center, |
• | an 11.792% equity interest in 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% interest in a suburban office building with ground level retail. |
Principal Balance |
Fixed Interest |
||||||||||||
Joint Venture Description |
Location |
Original Balance |
At July 31, 2020 |
Rate Per Annum |
Maturity Date |
||||||||
Midway Shopping Center |
Scarsdale, NY |
$ |
32,000 |
$ |
25,900 |
4.80% |
Dec-2027 |
||||||
Putnam Plaza Shopping Center |
Carmel, NY |
$ |
18,900 |
$ |
18,400 |
4.81% |
Oct-2028 |
||||||
Gateway Plaza |
Riverhead, NY |
$ |
14,000 |
$ |
11,700 |
4.18% |
Feb-2024 |
||||||
Applebee's Plaza |
Riverhead, NY |
$ |
2,300 |
$ |
1,900 |
3.38% |
Aug-2026 |
• | a deterioration in consumer sentiment and its impact on discretionary spending, which could negatively impact our tenants’ businesses; |
• | negative public perception of the COVID-19 health risk, which may result in decreased foot traffic to our shopping centers and tenant businesses for an extended period of time; |
• | an acceleration of changes in consumer behavior in favor of e-commerce, negatively impacting many of our tenants who rely heavily on their brick-and-mortar sales for profitability; |
• | the inability of our tenants to meet their lease obligations or other obligations (including repayment of deferred rents) to us in full, or at all, or to otherwise seek modifications of such obligations or declare bankruptcy due to economic and business conditions, including high unemployment and reduced consumer discretionary spending; |
• | the ability and willingness of new tenants to enter into leases during what is perceived to be uncertain times, the ability and willingness of our existing tenants to renew their leases upon expiration, and our ability to re-lease the properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to replace an existing tenant; |
• | the failure of certain of our tenants to reopen, resulting in co-tenancy claims as a result of the failure to satisfy occupancy thresholds; |
• | the unavailability of further stimulus funds or economic assistance beyond that provided under The CARES Act and similar programs or the insufficiency of such funds to cover all of the tenant’s financial needs, including rent; |
• | disruptions to the supply chain or lack of employees available or willing to work due to perceptions of COVID-19 health risk that could make it difficult for our tenants to operate, as well as to pay rent; |
• | the adverse impact of current economic conditions on the market value of our real estate portfolio and the resulting impact on our ability or desire to make strategic acquisitions or dispositions; |
• | state, local or industry-initiated efforts, such as a rent freeze for tenants or a suspension of a landlord’s ability to enforce evictions, which may affect our ability to collect rent or enforce remedies for the failure to pay rent; |
• | the scaling back or delay of a significant amount of planned capital expenditures, which could adversely affect the value of our properties; |
• | severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which could make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities and repay liabilities on a timely basis; |
• | our ability to draw on our credit facility or obtain additional indebtedness or pay down, refinance, restructure or extend our indebtedness as it becomes due, and the negative impact of reductions in rent on financial covenants on corporate and/or property-level debt; and |
• | issues related to remote working, including increased cybersecurity risk and other technology and communication issues, although our offices re-opened in late May in accordance with state guidelines and upon implementation of appropriate safety measures; |
• | the event that a significant number of our employees, particularly senior members of our management team, become unable to work as a result of health issues related to COVID-19; and |
• | the continued volatility of the trading prices of our Common Stock and Class A Common Stock. |
101.INS |
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
URSTADT BIDDLE PROPERTIES INC. |
|
(Registrant) |
|
By: /s/ Willing L. Biddle |
|
Willing L. Biddle |
|
Chief Executive Officer |
|
(Principal Executive Officer) |
|
By: /s/ John T. Hayes |
|
John T. Hayes |
|
Senior Vice President & |
|
Chief Financial Officer |
|
(Principal Financial Officer |
|
Dated: September 8, 2020 |
and Principal Accounting Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended July 31, 2020 of Urstadt Biddle Properties Inc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on our evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: September 8, 2020 | /s/ Willing L. Biddle |
Willing L. Biddle | |
President and | |
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended July 31, 2020 of Urstadt Biddle Properties Inc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on our evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: September 8, 2020 | /s/ John T. Hayes |
John T. Hayes | |
Senior Vice President and | |
Chief Financial Officer |
1. | The Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 2020 (the "Form 10-Q") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and |
2. | Information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | September 8, 2020 | /s/ Willing L. Biddle |
Willing L. Biddle | ||
President and | ||
Chief Executive Officer | ||
Dated: | September 8, 2020 | /s/ John T. Hayes |
John T. Hayes | ||
Senior Vice President and | ||
Chief Financial Officer |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2020 |
Jul. 31, 2019 |
Jul. 31, 2020 |
Jul. 31, 2019 |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract] | ||||
Net Income | $ 5,923 | $ 11,427 | $ 22,684 | $ 31,405 |
Other comprehensive loss: | ||||
Change in unrealized losses on interest rate swaps | (864) | (4,422) | (8,965) | (10,731) |
Change in unrealized losses on interest rate swaps-equity investees | (83) | (561) | (1,030) | (1,350) |
Total comprehensive income (loss) | 4,976 | 6,444 | 12,689 | 19,324 |
Comprehensive income attributable to noncontrolling interests | (935) | (1,094) | (3,001) | (3,295) |
Total comprehensive income (loss) attributable to Urstadt Biddle Properties Inc. | 4,041 | 5,350 | 9,688 | 16,029 |
Preferred Stock Dividends | (3,412) | (3,063) | (10,237) | (9,188) |
Total comprehensive income (loss) applicable to Common and Class A Common Stockholders | $ 629 | $ 2,287 | $ (549) | $ 6,841 |
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) (Parenthetical) - $ / shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2020 |
Jul. 31, 2019 |
Jul. 31, 2020 |
Jul. 31, 2019 |
|
Common Stock [Member] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Common stock, dividends per share declared (in dollars per share) | $ 0.0625 | $ 0.245 | $ 0.5625 | $ 0.735 |
Class A Common Stock [Member] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Common stock, dividends per share declared (in dollars per share) | 0.07 | 0.275 | 0.63 | 0.825 |
Common Stock [Member] | Common Stock [Member] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Common stock, dividends per share declared (in dollars per share) | 0.0625 | 0.245 | 0.5625 | 0.735 |
Common Stock [Member] | Class A Common Stock [Member] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Common stock, dividends per share declared (in dollars per share) | $ 0.07 | $ 0.275 | $ 0.63 | $ 0.825 |
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
(1) ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Urstadt Biddle Properties Inc. (“Company”), a Maryland Corporation, is a real estate investment trust ("REIT"), engaged in the acquisition, ownership and management of commercial real estate, primarily neighborhood and community shopping centers in the metropolitan tri-state area outside of the City of New York. The Company's major tenants include supermarket chains and other retailers who sell basic necessities. At July 31, 2020, the Company owned or had equity interests in 81 properties containing a total of 5.3 million square feet of Gross Leasable Area (“GLA”).
COVID-19 Pandemic
On March 11, 2020, the novel coronavirus disease (“COVID-19”) was declared a pandemic (“COVID-19 pandemic”) by the World Health Organization as the disease spread throughout the world. During March 2020, measures to prevent the spread of COVID-19 were initiated, primarily focused on social distancing practices. The virus continued to spread among more populated cities and communities resulting in federal, state and local government agencies issuing regulatory orders enforcing social distancing and limiting group gatherings in order to further prevent the spread of COVID-19. While laws vary by state, generally, businesses deemed essential to the public have been able to operate while non-essential businesses were initially not allowed to operate, but, in most instances, have now been allowed to operate at various operational levels. Grocery stores, pharmacies and wholesale clubs, which anchor properties that make up 84% of our GLA, are considered essential businesses and have remained open and operational to serve the residents of their communities throughout the entire pandemic. Many restaurants are also considered essential, although the social distancing and group gathering limitations generally prevent dine-in activity, forcing them to evaluate alternate means of operations, such as delivery and pick-up, or to elect to remain closed during this pandemic. As of July 31, most non-essential businesses have also been permitted to operate, in some cases subject to modified operation procedures. The duration and severity of this pandemic are still uncertain and continue to evolve.
Management cannot, at this point, estimate ultimate losses related to the COVID-19 pandemic, and accordingly no property impairment charges were reflected in the Company’s Consolidated Statements of Income related to this matter. The COVID-19 pandemic, however, has significantly impacted many of the retail sectors in which the Company’s tenants operate and if the effects of the pandemic are prolonged, it could have a significant adverse impact to the underlying businesses of many of the Company’s tenants. The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will continue to assess its asset portfolio for any impairment indicators. In addition, the extent to which the COVID-19 pandemic impacts the Company’s financial condition, results of operations and cash flows, in the near term, will depend on future developments, which are highly uncertain and cannot be predicted at this time. The Company will continue to monitor its portfolio for any material or adverse effects resulting from the COVID-19 pandemic. See Note 9 in the Notes to the Company’s Consolidated Financial Statements for additional discussion.
Principles of Consolidation and Use of Estimates
The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and joint ventures in which the Company meets certain criteria in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation”. The Company has determined that such joint ventures should be consolidated into the consolidated financial statements of the Company. In accordance with ASC Topic 970-323 “Real Estate-General-Equity Method and Joint Ventures,” joint ventures that the Company does not control but otherwise exercises significant influence over, are accounted for under the equity method of accounting. See Note 4 for further discussion of the unconsolidated joint ventures. All significant intercompany transactions and balances have been eliminated in consolidation.
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the three and nine months ended July 31, 2020 are not necessarily indicative of the results that may be expected for the year ending October 31, 2020. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended October 31, 2019.
The preparation of financial statements requires management to make estimates and assumptions that affect the disclosure of contingent assets and liabilities, the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods covered by the financial statements. The most significant assumptions and estimates relate to the valuation of real estate, depreciable lives, revenue recognition, fair value estimates, and the collectability of tenant receivables and other assets and liabilities. Actual results could differ from these estimates. The consolidated balance sheet at October 31, 2019 has been derived from audited financial statements at that date.
Federal Income Taxes
The Company has elected to be treated as a REIT under Sections 856-860 of the Internal Revenue Code ("Code"). Under those sections, a REIT that, among other things, distributes at least 90% of real estate trust taxable income and meets certain other qualifications prescribed by the Code will not be taxed on that portion of its taxable income that is distributed. The Company believes it qualifies as a REIT and intends to distribute all of its taxable income for fiscal 2020 in accordance with the provisions of the Code. Accordingly, no provision has been made for Federal income taxes in the accompanying consolidated financial statements.
The Company follows the provisions of ASC Topic 740, “Income Taxes” that, among other things, defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Based on its evaluation, the Company determined that it has no uncertain tax positions and no unrecognized tax benefits as of July 31, 2020. As of July 31, 2020, the fiscal tax years 2017 through and including 2019 remain open to examination by the Internal Revenue Service. There are currently no federal tax examinations in progress.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and tenant receivables. The Company places its cash and cash equivalents with high quality financial institutions and the balances at times could exceed federally insured limits. The Company performs ongoing credit evaluations of its tenants and may require certain tenants to provide security deposits or letters of credit. Though these security deposits and letters of credit are insufficient to meet the terminal value of a tenant’s lease obligation, they are a measure of good faith and a source of funds to offset the economic costs associated with lost rent and the costs associated with re-tenanting the space. The Company has no dependency upon any single tenant.
Marketable Securities
Marketable equity securities are carried at fair value based upon quoted market prices in active markets with changes in fair value recognized in net income. In March 2020, the Company purchased REIT securities in the amount of $7 million. In May 2020, the Company sold all of its REIT securities for $7.3 million and realized a gain on sale of $258,000, which is included in the consolidated statement of income for the nine and three months ended July 31, 2020.
Derivative Financial Instruments
The Company occasionally utilizes derivative financial instruments, such as interest rate swaps, to manage its exposure to fluctuations in interest rates. The Company has established policies and procedures for risk assessment, and the approval, reporting and monitoring of derivative financial instruments. Derivative financial instruments must be effective in reducing the Company’s interest rate risk exposure in order to qualify for hedge accounting. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income for each period until the derivative instrument matures or is settled. Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to-market with the changes in value included in net income. The Company has not entered into, and does not plan to enter into, derivative financial instruments for trading or speculative purposes. Additionally, the Company has a policy of entering into derivative contracts only with major financial institutions.
As of July 31, 2020, the Company believes it has no significant risk associated with non-performance of the financial institutions that are the counterparties to its derivative contracts. At July 31, 2020, the Company had approximately $127.3 million in secured mortgage financings subject to interest rate swaps. Such interest rate swaps converted the LIBOR-based variable rates on the mortgage financings to an average fixed annual rate of 3.93% per annum. As of July 31, 2020 and October 31, 2019, the Company had a deferred liability of $15.7 million and $6.8 million, respectively (included in accounts payable and accrued expenses on the consolidated balance sheets), relating to the fair value of the Company’s interest rate swaps applicable to secured mortgages.
Charges and/or credits relating to the changes in fair values of such interest rate swaps are made to other comprehensive income/(loss) as the swaps are deemed effective and are classified as a cash flow hedge.
Comprehensive Income (Loss)
Comprehensive income is comprised of net income applicable to Common and Class A Common stockholders and other comprehensive income (loss). Other comprehensive income (loss) includes items that are otherwise recorded directly in stockholders’ equity, such as unrealized gains and losses on interest rate swaps designated as cash flow hedges, including the Company's share from entities accounted for under the equity method of accounting. At July 31, 2020, accumulated other comprehensive loss consisted of net unrealized losses on interest rate swap agreements of $18.4 million, inclusive of the Company's share of accumulated comprehensive losses from joint ventures accounted for by the equity method of accounting. At October 31, 2019, accumulated other comprehensive loss consisted of net unrealized losses on interest rate swap agreements of approximately $8.5 million, inclusive of the Company's share of accumulated comprehensive losses from joint ventures accounted for by the equity method of accounting. Unrealized gains and losses included in other comprehensive income/(loss) will be reclassified into earnings as gains and losses are realized.
Asset Impairment
On a periodic basis, management assesses whether there are any indicators that the value of its real estate investments may be impaired. A property value is considered impaired when management’s estimate of current and projected operating cash flows (undiscounted and without interest) of the property over its remaining useful life is less than the net carrying value of the property. Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred, the loss is measured as the excess of the net carrying amount of the property over the fair value of the asset. Changes in estimated future cash flows due to changes in the Company’s plans or market and economic conditions could result in recognition of impairment losses which could be substantial. As described above, the COVID-19 pandemic has had a broad impact on the global and U.S. economies. Management cannot, at this point, estimate the current impact related to the COVID-19 pandemic on the fair value of the Company's real estate assets, and as of July 31, 2020, management does not believe that the value of any of its real estate investments is impaired.
Acquisitions of Real Estate Investments, Capitalization Policy and Depreciation
Acquisition of Real Estate Investments:
The Company evaluates each acquisition of real estate or in-substance real estate (including equity interests in entities that predominantly hold real estate assets) to determine if the integrated set of assets and activities acquired meet the definition of a business and need to be accounted for as a business combination. If either of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:
An acquired process is considered substantive if:
Generally, the Company expects that acquisitions of real estate or in-substance real estate will not meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets) or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay.
Acquisitions of real estate and in-substance real estate that do not meet the definition of a business are accounted for as asset acquisitions. The accounting model for asset acquisitions is similar to the accounting model for business combinations except that the acquisition consideration (including acquisition costs) is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. As a result, asset acquisitions do not result in the recognition of goodwill or a bargain purchase gain. The relative fair values used to allocate the cost of an asset acquisition are determined using the same methodologies and assumptions as the Company utilizes to determine fair value in a business combination.
The value of tangible assets acquired is based upon our estimation of value on an “as if vacant” basis. The value of acquired in-place leases includes the estimated costs during the hypothetical lease-up period and other costs that would have been incurred in the execution of similar leases under the market conditions at the acquisition date of the acquired in-place lease. We assess the fair value of tangible and intangible assets based on numerous factors, including estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including the historical operating results, known trends, and market/economic conditions that may affect the property.
The values of acquired above and below-market leases, which are included in prepaid expenses and other assets and other liabilities, respectively, are amortized over the terms of the related leases and recognized as either an increase (for below-market leases) or a decrease (for above-market leases) to rental revenue. The values of acquired in-place leases are classified in other assets in the accompanying consolidated balance sheets and amortized over the remaining terms of the related leases.
Capitalization Policy:
Land, buildings, property improvements, furniture/fixtures and tenant improvements are recorded at cost. Expenditures for maintenance and repairs are charged to operations as incurred. Renovations and/or replacements, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.
Depreciation:
The Company is required to make subjective assessments as to the useful life of its properties for purposes of determining the amount of depreciation. These assessments have a direct impact on the Company’s net income.
Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:
Sale of Investment Property and Property Held for Sale
The Company reports properties that are either disposed of or are classified as held for sale in continuing operations in the consolidated statement of income if the removal, or anticipated removal, of the asset(s) from the reporting entity does not represent a strategic shift that has or will have a major effect on an entity's operations and financial results when disposed of.
In August 2019, the Company entered into a purchase and sale agreement to sell its property located in Bernardsville, NJ (the "Bernardsville Property"), to an unrelated third party for a sale price of $2.7 million as that property no longer met its investment objectives. In accordance with ASC Topic 360-10-45, the property met all the criteria to be classified as held for sale in the fourth quarter of fiscal 2019, and accordingly the Company recorded a loss on property held for sale of $434,000, which loss was included in continuing operations in the consolidated statement of income for the year ended October 31, 2019. The amount of the loss represented the net carrying amount of the property over the fair value of the asset less estimated cost to sell. The net book value of the Bernardsville Property was insignificant to financial statement presentation and as a result the Company did not include the asset as held for sale on its consolidated balance sheet at October 31, 2019. In December 2019 (fiscal 2020), the Bernardsville Property sale was completed and the Company realized an additional loss on sale of property of $86,000, which loss is included in continuing operations in the consolidated statement of income for the nine months ended July 31, 2020.
In January 2020, the Company sold for $1.3 million its retail property located in Carmel, NY (the "Carmel Property"), as that property no longer met the Company's investment objectives. In conjunction with the sale, the Company realized a loss on sale of the Carmel property in the amount of $242,000, which loss is included in continuing operations in the consolidated statement of income for the nine months ended July 31, 2020.
The operating results of the Bernardsville and Carmel Properties, which are included in continuing operations is as follows (amounts in thousands):
Lease Income, Revenue Recognition and Tenant Receivables
Lease Income:
The Company leases space to tenants under agreements with varying terms that generally provide for fixed payments of base rent, with designated increases over the term of the lease. Some of the lease agreements contain provisions that provide for additional rents based on tenants' sales volume ("percentage rent"). Percentage rents are recognized when the tenants achieve the specified targets as defined in their lease agreements. Additionally, most all lease agreements contain provisions for reimbursement of the tenants' share of actual real estate taxes, insurance and Common Area Maintenance ("CAM") costs (collectively, "Recoverable Costs") incurred.
Lease terms generally range from 1 to 5 years for tenant spaces under 10,000 square feet (“Shop Space”) and in excess of 5 years for spaces greater than 10,000 square feet (“Anchor Spaces”). Many leases also provide the option for the tenants to extend their lease beyond the initial term of the lease. If the tenants do not exercise renewal options and the leases mature, the tenants must relinquish their space so it can be leased to a new tenant, which generally involves some level of cost to prepare the space for re-leasing. These costs are capitalized and depreciated over the shorter of the life of the subsequent lease or the life of the improvement.
On November 1, 2019, the Company adopted the new accounting guidance in ASC Topic 842, Leases, including all related Accounting Standard Updates (“ASU's”). The Company elected to use the modified retrospective transition method provided in ASU 2018-11 (the "adoption date method"). Under this method, the effective date of November 1, 2019 is the date of initial application. In connection with the adoption of ASC Topic 842, the Company elected a package of practical expedients, transition options, and accounting policy elections as follows:
The Company's existing leases were not re-evaluated and continue to be classified as operating leases, as per the practical expedient package elected above. New and modified leases will now require evaluation of specific classification criteria, which, based on the customary terms of the Company's leases, should continue to be classified as operating leases. However, certain longer-term leases (both lessee and lessor leases) may be classified as direct financing or sales type leases, which may result in selling profit and an accelerated pattern of earnings recognition.
CAM is a non-lease component of the lease contract under ASC Topic 842, and therefore would be accounted for under ASC Topic 606, Revenue from Contracts with Customers, and presented separate from lease income in the accompanying consolidated statements of income, based on an allocation of the overall contract price, which is not necessarily the amount that would be billable to the tenants for CAM reimbursements per the terms of the lease contract. As the timing and pattern of providing the CAM service to the tenant is the same as the timing and pattern of the tenants' use of the underlying lease asset, the Company elected, as part of the package of practical expedients, to combine CAM with the remaining lease components, along with tenants' reimbursement of real estate taxes and insurance, and recognize them together as lease income in the accompanying Statements of Income.
Lease income for operating leases with fixed payment terms is recognized on a straight-line basis over the expected term of the lease for all leases for which collectability is considered probable at the commencement date. At lease commencement, the Company expects that collectability is probable for all of its leases due to the Company’s credit checks on tenants and other creditworthiness analysis undertaken before entering into a new lease; therefore, income from all operating leases is initially recognized on a straight-line basis. Lease income each period is reduced by amounts considered uncollectible on a lease-by-lease basis, with any changes in collectability assessments recognized as a current period adjustment to lease income. For operating leases in which collectability of lease income is not considered probable, lease income is recognized on a cash basis and all previously recognized uncollectible lease income, including straight-line rental income, is reversed in the period in which the lease income is determined not to be probable of collection.
ASC Topic 842 also changes the treatment of leasing costs, such that non-contingent internal leasing and legal costs associated with leasing activities can no longer be capitalized. The Company, as a lessor, may only defer as initial direct costs the incremental costs of a tenant operating lease that would not have been incurred if the lease had not been obtained. These costs generally include third party broker payments, which are capitalized to deferred costs in the accompanying consolidated balance sheets and amortized over the expected term of the lease to depreciation and amortization expense in the accompanying consolidated statements of income.
There was no change to operating income as a result of the adoption of ASC Topic 842 and related ASU's.
COVID-19 Pandemic
Beginning in March 2020, many of the Company's properties were, and continue to be, negatively impacted by the COVID-19 pandemic, as state governments mandated the closure of non-essential businesses to prevent the spread of COVID-19, forcing many of our tenants’ businesses to close or reduce operations. As a result, 406 of approximately 900 tenants in the Company's consolidated portfolio, representing 1.6 million square feet and approximately 45.3% of the Company's annualized base rent, have asked for some type of rent deferral or concession. Subsequently, approximately 110 of the 406 tenants withdrew their request for rent relief or paid their rent in full. The Company has, and will continue to evaluate each request on a case-by-case basis to determine an appropriate course of action, recognizing that in many cases some type of concession may be appropriate and beneficial to the long-term interests of the Company. In evaluating these requests, the Company has been and will continue to consider many factors, including the tenant's financial strength, the tenant's operating history, potential co-tenancy impacts, the tenant's contribution to the shopping center in which it operates, the Company's assessment of the tenant's long-term viability, the difficulty or ease with which the tenant could be replaced, and other factors. Each negotiation will be specific to the tenant making the request. The primary strategy of the Company is that most of these concessions will be in the form of deferred rent for some portion of rents due in April through August 2020 to be paid over a later part of the lease, preferably within a period of one year or less, but in some instances the Company determined that it was more appropriate to abate some portion of base rents for some tenants between April and August. As of July 31, 2020, the Company has completed 194 lease modifications, consisting of base rent deferrals totaling $2.6 million and rent abatements totaling $492,000 as of July 31, 2020. Approximately 41 rent deferrals or abatements have been completed subsequent to July 31, 2020, which deferred $393,000 of base rents and abated $259,000 of base rents. The Company has increased its uncollectable amounts in lease income for the nine and three months ended July 31, 2020 for tenants it felt were affected by the COVID-19 pandemic (see note 5).
In April 2020, in response to the COVID-19 Pandemic, the FASB staff issued guidance that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842, as if enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the lease contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each lease contract to determine whether enforceable rights and obligations for concessions exist in the lease contract and may elect to apply or not apply the lease modification guidance in Topic 842 to those contracts.
This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. The FASB staff expects that reasonable judgment will be exercised in making those determinations.
Most concessions will provide a deferral of payments with no substantive changes to the consideration in the original lease contract. A deferral affects the timing, but the amount of the consideration is substantially the same as that required by the original lease contract. The FASB staff expects that there will be multiple ways to account for those deferrals, none of which the staff believes are preferable over others. The Company has made the election not to analyze each lease contract, and believes that, based on FASB guidance, the appropriate way to account for the concessions as described above is to account for such concessions as if no change to the lease contracts were made. Under that accounting, a lessor would increase its lease receivable (straight-line rents receivable) and would continue to recognize income during the deferral period, assuming that the collectability of the future rents under the lease contract are considered collectable. If it is determined that the future rents of any lease contract are not collectable, the Company would treat that lease contract on a cash basis as defined in ASC Topic 842.
When collection of substantially all lease payments during the lease term is not considered probable, total lease revenue is limited to the lesser of revenue recognized under accrual accounting or cash received. Determining the probability of collection of substantially all lease payments during a lease term requires significant judgment. This determination is impacted by numerous factors, including our assessment of the tenant’s credit worthiness, economic conditions, tenant sales productivity in that location, historical experience with the tenant and tenants operating in the same industry, future prospects for the tenant and the industry in which it operates, and the length of the lease term. If leases currently classified as probable are subsequently reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off with a corresponding decrease in lease income.
The Company anticipates that its variable lease income represented by the reimbursement of CAM and real estate taxes will not be materially affected for most national tenants and tenants with higher levels of credit and balance sheet resources. For smaller local tenants and tenants with fewer resources, the Company has reduced its accruals for CAM and real estate taxes in anticipation of potentially having to reduce the amounts billed to these tenants at the end of calendar 2020. This has had the effect of reducing this portion of lease income for the nine and three months ended July 31, 2020.
Revenue Recognition
In those instances in which the Company funds tenant improvements and the improvements are deemed to be owned by the Company, revenue recognition on operating leases will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant. When the Company determines that the tenant allowances are lease incentives, the Company commences revenue recognition when possession or control of the space is turned over to the tenant for tenant work to begin.
Lease termination amounts are recognized in operating revenues when there is a signed termination agreement, all of the conditions of the agreement have been met, the tenant is no longer occupying the property and the termination consideration is probable of collection. Lease termination amounts are paid by tenants who want to terminate their lease obligations before the end of the contractual term of the lease by agreement with the Company. There is no way of predicting or forecasting the timing or amounts of future lease termination fees. Interest income is recognized as it is earned. Gains or losses on disposition of properties are recorded when the criteria for recognizing such gains or losses under U.S. GAAP have been met.
Percentage rent is recognized when a specific tenant’s sales breakpoint is achieved.
Tenant Receivables
The actions taken by federal, state and local governments to mitigate the spread of COVID-19, initially by ordering closures of non-essential businesses and ordering residents to generally stay at home, and subsequent phased re-openings have resulted in many of our tenants temporarily or even permanently closing their businesses, and for some, it had impacted their ability to pay rent.
As a result, in accordance with ASC Topic 842, we revised our collectability assumptions for many of our tenants that were most significantly impacted by COVID-19. Accordingly, during the three months ended July 31, 2020, we recognized collectability related adjustments totaling $4.3 million. This amount includes changes in our collectability assessments for certain tenants in our portfolio from probable to not probable, which requires that revenue recognition for those tenants be converted to cash basis accounting with previously uncollected billed rents reversed in the current period. This resulted in a reduction of lease income for the three months ended July 31, 2020 in the amount of $1.8 million related to tenants whose assessment of collectability was changed from probable to not probable. In addition, the Company wrote-off $910,000 of previously recorded straight-line rent receivables related to tenants whose assessment of collectability was changed from probable to not probable. As of July 31, 2020, the revenue from approximately 6.4% of our tenants (based on total commercial leases) is being recognized on a cash basis.
At July 31, 2020 and October 31, 2019, $21,332,000 and $19,395,000, respectively, have been recognized as straight-line rents receivable (representing the current cumulative rents recognized prior to when billed and collectible as provided by the terms of the leases), all of which is included in tenant receivables in the accompanying consolidated financial statements.
The Company provides an allowance for doubtful accounts against the portion of tenant receivables that is estimated to be uncollectible. Such allowances are reviewed periodically. At July 31, 2020 and October 31, 2019, tenant receivables in the accompanying consolidated balance sheets are shown net of allowances for doubtful accounts of $8,309,000 and $5,454,000, respectively. Included in the aforementioned allowance for doubtful accounts is an amount for future tenant credit losses of approximately 10% of the deferred straight-line rents receivable which is estimated to be uncollectible.
Earnings Per Share
The Company calculates basic and diluted earnings per share in accordance with the provisions of ASC Topic 260, “Earnings Per Share.” Basic earnings per share (“EPS”) excludes the impact of dilutive shares and is computed by dividing net income applicable to Common and Class A Common stockholders by the weighted average number of Common shares and Class A Common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue Common shares or Class A Common shares were exercised or converted into Common shares or Class A Common shares and then shared in the earnings of the Company. Since the cash dividends declared on the Company’s Class A Common stock are higher than the dividends declared on the Common Stock, basic and diluted EPS have been calculated using the “two-class” method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to the weighted average of the dividends declared, outstanding shares per class and participation rights in undistributed earnings.
The following table sets forth the reconciliation between basic and diluted EPS (in thousands):
Segment Reporting
The Company's primary business is the ownership, management, and redevelopment of retail properties. The Company reviews operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. The Company evaluates financial performance using property operating income, which consists of base rental income and tenant reimbursement income, less rental expenses and real estate taxes. Only one of the Company’s properties, located in Stamford, CT (“Ridgeway”), is considered significant as its revenue is in excess of 10% of the Company’s consolidated total revenues and accordingly is a reportable segment. The Company has aggregated the remainder of its properties as they share similar long-term economic characteristics and have other similarities including the fact that they are operated using consistent business strategies, are typically located in the same major metropolitan area, and have similar tenant mixes.
Ridgeway is located in Stamford, Connecticut and was developed in the 1950’s and redeveloped in the mid 1990’s. 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.
Segment information about Ridgeway as required by ASC Topic 280 is included below:
Note 1 - Ridgeway did not have any significant expenditures for additions to long lived assets in the three and nine months ended July 31, 2020 or the year ended October 31, 2019.
Ridgeway Significant Tenants (Percentage of Base Rent Billed):
Note 2 - No other tenant accounts for more than 10% of Ridgeway’s annual base rents in any of the periods presented. Percentages are calculated as a ratio of the tenants' base rent divided by total base rent of Ridgeway.
Stock-Based Compensation
The Company accounts for its stock-based compensation plans under the provisions of ASC Topic 718, “Stock Compensation”, which requires that compensation expense be recognized, based on the fair value of the stock awards less estimated forfeitures. The fair value of stock awards is equal to the fair value of the Company’s stock on the grant date. The Company recognizes compensation expense for its stock awards by amortizing the fair value of stock awards over the requisite service periods of such awards. In certain cases as defined in the participant agreements, the vesting of stock awards can be accelerated, which will result in the Company charging to compensation expense the remaining unamortized restricted stock compensation related to those stock awards.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period’s presentation.
New Accounting Standards
In February 2016, the FASB issued ASU 2016-02, "Leases", ASU 2018-10 "Codification improvements to Topic 842, leases", ASU 2018-11 "Leases", and ASU 2018-20 "Leases, Narrow Scope Improvements for Lessors", together ASC Topic 842 - Leases. ASC Topic 842 significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lessee model, eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases requiring significantly more leasing related costs to be expensed upfront. The Company adopted ASC Topic 842 on November 1, 2019, the first day of its fiscal year 2020. The Company has elected to apply the transition provisions of ASC Topic 842 at the beginning of the period of adoption, and therefore, the Company has not retrospectively adjusted prior periods presented. The Company elected to apply certain adoption related practical expedients for all leases that commenced prior to the effective date. These practical expedients include not reassessing whether any expired or existing contracts are or contain leases; not reassessing the lease classification for any expired or existing leases; and not reassessing initial direct costs for any existing leases. The adoption of this standard did not have a material effect on our financial statements or disclosures therein. See Lease Income, Revenue Recognition and Tenant Receivables earlier in Note 1 for a more detailed explanation of the adoption.
In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848).” ASU No. 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the three months ended April 30, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
The Company has evaluated all other new ASUs issued by FASB, and has concluded that these updates do not have a material effect on the Company's consolidated financial statements as of July 31, 2020.
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UNSECURED REVOLVING CREDIT FACILITY |
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UNSECURED REVOLVING CREDIT FACILITY [Abstract] | |
UNSECURED REVOLVING CREDIT FACILITY |
(2) UNSECURED REVOLVING CREDIT FACILITY
The Company has a $100 million unsecured revolving credit facility (the "Facility") with a syndicate of three banks led by The Bank of New York Mellon, as administrative agent. The syndicate also includes Wells Fargo Bank N.A. and Bank of Montreal (co-syndication agents). The Facility gives the Company the option, under certain conditions, to increase the Facility’s borrowing capacity up to $150 million (subject to lender approval). The maturity date of the Facility is August 23, 2021. Borrowings under the Facility can be used for general corporate purposes and the issuance of letters of credit (up to $10 million). Borrowings will bear interest at the Company’s option of Eurodollar rate plus 1.35% to 1.95% or The Bank of New York Mellon's prime lending rate plus 0.35% to 0.95%, based on consolidated indebtedness. The Company pays a quarterly fee on the unused commitment amount of 0.15% to 0.25% per annum based on outstanding borrowings during the year. The Facility contains certain representations, financial and other covenants typical for this type of facility. The Company's ability to borrow under the Facility is subject to our compliance with the covenants and other restrictions included in the Facility on an ongoing basis. The principal financial covenants limit the Company's level of secured and unsecured indebtedness and additionally require the Company to maintain certain debt coverage ratios. The Company was in compliance with such covenants at July 31, 2020.
During the nine months ended July 31, 2020, the Company borrowed $35.0 million on its Facility to fund capital improvements and for general corporate purposes.
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CONSOLIDATED JOINT VENTURES AND REDEEMABLE NONCONTROLLING INTERESTS |
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CONSOLIDATED JOINT VENTURES AND REDEEMABLE NONCONTROLLING INTERESTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED JOINT VENTURES AND REDEEMABLE NONCONTROLLING INTERESTS |
(3) CONSOLIDATED JOINT VENTURES AND REDEEMABLE NONCONTROLLING INTERESTS
The Company has an investment in five joint ventures, UB Orangeburg, LLC ("Orangeburg"), McLean Plaza Associates, LLC ("McLean"), UB Dumont I, LLC ("Dumont") and UB New City I, LLC ("New City"), each of which owns a commercial retail property, and UB High Ridge, LLC ("UB High Ridge"), which owns three commercial real estate properties. The Company has evaluated its investment in these five joint ventures and has concluded that these joint ventures are fully controlled by the Company and that the presumption of control is not offset by any rights of any of the limited partners or non-controlling members in these ventures and that the joint ventures should be consolidated into the consolidated financial statements of the Company in accordance with ASC Topic 810 "Consolidation". The Company’s investment in these consolidated joint ventures is more fully described below:
Orangeburg
The Company, through a wholly-owned subsidiary, is the managing member and owns a 44.6% interest in Orangeburg, which owns a CVS-anchored shopping center. The other member (non-managing) of Orangeburg is the prior owner of the contributed property who, in exchange for contributing the net assets of the property, received units of Orangeburg equal to the value of the contributed property less the value of the assigned first mortgage payable. The Orangeburg operating agreement provides for the non-managing member to receive a quarterly cash distribution equal to the regular quarterly cash distribution declared by the Company for one share of the Company’s Class A Common stock, which amount is attributable to each unit of Orangeburg ownership. The quarterly cash distribution is paid from available cash, as defined, of Orangeburg. The balance of available cash, if any, is fully distributable to the Company. Upon liquidation, proceeds from the sale of Orangeburg assets are to be distributed in accordance with the operating agreement. The non-managing member is not obligated to make any additional capital contributions to the partnership. Orangeburg has a defined termination date of December 31, 2097. Since purchasing this property, the Company has made additional investments in the amount of $6.8 million in Orangeburg, and as a result, as of July 31, 2020 the Company's ownership percentage has increased to 44.6% from approximately 2.92% at inception.
McLean Plaza
The Company, through a wholly-owned subsidiary, is the managing member and owns a 53% interest in McLean, which owns an Acme grocery-anchored shopping center. The McLean operating agreement provides for the non-managing members to receive a fixed annual cash distribution equal to 5.05% of their invested capital. The annual cash distribution is paid from available cash, as defined, of McLean. The balance of available cash, if any, is fully distributable to the Company. Upon liquidation, proceeds from the sale of McLean assets are to be distributed in accordance with the operating agreement. The non-managing members are not obligated to make any additional capital contributions to the entity.
UB High Ridge
The Company is the managing member and owns a 16.3% interest in UB High Ridge, LLC. The Company's initial investment was $5.5 million, and the Company has purchased additional interests from non-managing members totaling $3.2 million and contributed $1.5 million in additional equity to the venture through July 31, 2020. UB High Ridge, either directly or through a wholly-owned subsidiary, owns three commercial real estate properties, High Ridge Shopping Center, a grocery-anchored shopping center ("High Ridge"), and two single tenant commercial retail properties, one leased to JP Morgan Chase and one leased to CVS. Two properties are located in Stamford, CT and one property is located in Greenwich, CT. High Ridge is a shopping center anchored by a Trader Joe's grocery store. The properties were contributed to the new entities by the former owners who received units of ownership of UB High Ridge equal to the value of properties contributed less liabilities assumed. The UB High Ridge operating agreement provides for the non-managing members to receive an annual cash distribution, currently equal to 5.50% of their invested capital.
UB Dumont I, LLC
The Company is the managing member and owns a 36.4% interest in UB Dumont I, LLC. The Company's initial investment was $3.9 million, and the Company has purchased additional interests totaling $630,000 through July 31, 2020. Dumont owns a retail and residential real estate property, which retail portion is anchored by a Stop & Shop grocery store. The property is located in Dumont, NJ. The property was contributed to the new entity by the former owners who received units of ownership of Dumont equal to the value of contributed property less liabilities assumed. The Dumont operating agreement provides for the non-managing members to receive an annual cash distribution, currently equal to 5.1% of their invested capital.
UB New City I, LLC
The Company is the managing member and owns a 84.3% equity interest in a joint venture, UB New City I, LLC. The Company's initial investment was $2.4 million, and the Company has purchased additional interests totaling $289,300 through July 31, 2020. New City owns a single tenant retail real estate property located in New City, NY, which is leased to a savings bank. In addition, New City rents certain parking spaces on the property to the owner of an adjacent grocery-anchored shopping center. The property was contributed to the new entity by the former owners who received units of ownership of New City equal to the value of contributed property. The New City operating agreement provides for the non-managing member to receive an annual cash distribution, currently equal to 5.00% of his invested capital.
Noncontrolling Interests
The Company accounts for noncontrolling interests in accordance with ASC Topic 810, “Consolidation.” Because the limited partners or noncontrolling members in Orangeburg, McLean, UB High Ridge, Dumont and New City have the right to require the Company to redeem all or a part of their limited partnership or limited liability company units for cash, or at the option of the Company shares of its Class A Common stock, at prices as defined in the governing agreements, the Company reports the noncontrolling interests in the consolidated joint ventures in the mezzanine section, outside of permanent equity, of the consolidated balance sheets at redemption value which approximates fair value. The value of the Orangeburg, McLean, and a portion of the UB High Ridge and Dumont redemptions are based solely on the price of the Company’s Class A Common stock on the date of redemption. For the nine months ended July 31, 2020 and 2019, the Company increased/(decreased) the carrying value of the noncontrolling interests by $(14.2) million and $1.8 million, respectively, with the corresponding adjustment recorded in stockholders’ equity.
The following table sets forth the details of the Company's redeemable non-controlling interests for the nine months ended July 31, 2020 and the fiscal year ended October 31, 2019 (amounts in thousands):
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INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES |
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INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES |
(4) INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES
At July 31, 2020 and October 31, 2019 investments in and advances to unconsolidated joint ventures consisted of the following (with the Company’s ownership percentage in parentheses) (amounts in thousands):
Chestnut Ridge Shopping Center
The Company, through a wholly-owned subsidiary, owns a 50% undivided tenancy-in-common interest in the 76,000 square foot Chestnut Ridge Shopping Center located in Montvale, New Jersey (“Chestnut”), which is anchored by a Fresh Market grocery store.
Gateway Plaza and Applebee's at Riverhead
The Company, through two wholly-owned subsidiaries, owns a 50% undivided tenancy-in-common interest in the Gateway Plaza Shopping Center ("Gateway") and Applebee's at Riverhead ("Applebee's"). Both properties are located in Riverhead, New York. Gateway, a 198,500 square foot shopping center, is anchored by a 168,000 square foot Walmart, which also has 27,000 square feet of in-line space that is leased and a 3,500 square foot outparcel that is leased. Applebee's has a 5,400 square foot free-standing Applebee’s restaurant and a 7,200 square foot pad site that is leased.
Gateway is subject to an $11.7 million non-recourse first mortgage. The mortgage matures on March 1, 2024 and requires payments of principal and interest at a fixed rate of interest of 4.2% per annum.
Midway Shopping Center, L.P.
The Company, through a wholly-owned subsidiary, owns an 11.79% equity interest in Midway Shopping Center L.P. (“Midway”), which owns a 247,000 square foot ShopRite-anchored shopping center in Westchester County, New York. Although the Company only has an approximate 12% equity interest in Midway, it controls 25% of the voting power of Midway and as such, has determined that it exercises significant influence over the financial and operating decisions of Midway and accounts for its investment in Midway under the equity method of accounting.
The Company has allocated the $7.4 million excess of the carrying amount of its investment in and advances to Midway over the Company’s share of Midway’s net book value to real property and is amortizing the difference over the property’s estimated useful life of 39 years.
Midway is subject to a non-recourse first mortgage in the amount of $25.9 million. The loan requires payments of principal and interest at the rate of 4.80% per annum and will mature in
.Putnam Plaza Shopping Center
The Company, through a wholly-owned subsidiary, owns a 66.67% (noncontrolling) undivided tenancy-in-common interest in the 189,000 square foot Tops-anchored Putnam Plaza Shopping Center (“Putnam Plaza”) located in Carmel, New York.
Putnam Plaza is subject to a non-recourse first mortgage payable in the amount of $18.4 million. The mortgage requires monthly payments of principal and interest at a fixed rate of 4.81% and will mature in
.81 Pondfield Road Company
The Company’s other investment in an unconsolidated joint venture is a 20% interest in a retail and office building in Westchester County, New York.
Equity Method of Accounting
The Company accounts for the above investments under the equity method of accounting since it exercises significant influence, but does not control the joint ventures. The other venturers in the joint ventures have substantial participation rights in the financial decisions and operation of the ventures or properties, which preclude the Company from consolidating the investments. The Company has evaluated its investment in the joint ventures and has concluded that the joint ventures are not VIE's. Under the equity method of accounting, the initial investment is recorded at cost as an investment in unconsolidated joint venture, and subsequently adjusted for equity in net income (loss) and cash contributions and distributions from the venture. Any difference between the carrying amount of the investment on the Company’s balance sheet and the underlying equity in net assets of the venture is evaluated for impairment at each reporting period.
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LEASES |
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LEASES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES |
(5) LEASES
Lessor Accounting
The Company's Lease income is comprised of both fixed and variable income, as follows:
Fixed lease income includes stated amounts per the lease contract, which are primarily related to base rent. Income for these amounts is recognized on a straight line basis for all leases for which collectability is considered probable at the commencement date of the lease. For operating leases in which collectability of the lease income is not considered probable, lease income is recognized on a cash basis and all previously recognized uncollectible lease income, including straight-line lease income is reversed in the period in which the lease income is determined not to be probable of collection.
Variable lease income includes recoveries from tenants, which represents amounts that tenants are contractually obligated to reimburse the Company for the tenants’ portion of Recoverable Costs. Generally the Company’s leases provide for the tenants to reimburse the Company for Recoverable Costs based on the tenants’ share of the actual costs incurred in proportion to the tenants’ share of leased space in the property.
The following table provides a disaggregation of lease income recognized during the nine and three months ended July 31, 2020 and 2019, under ASC Topic 842, Leases, as either fixed or variable lease income based on the criteria specified in ASC Topic 842 (In thousands):
Future minimum rents under non-cancelable operating leases for the next five years and thereafter, excluding variable lease payments, are as follows (In thousands):
(a) The future minimum rental income for fiscal 2020 includes amounts due between August 1, 2020 through October 31, 2020.
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STOCKHOLDERS' EQUITY |
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STOCKHOLDERS' EQUITY [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY |
(6) STOCKHOLDERS’ EQUITY
Authorized Stock
The Company's Charter authorizes 200,000,000 shares of stock. The total number of shares of authorized stock consists of 100,000,000 shares of Class A Common Stock, 30,000,000 shares of Common Stock, 50,000,000 shares of Preferred Stock, and 20,000,000 shares of Excess Stock.
Restricted Stock Plan
The Company has a Restricted Stock Plan, as amended (the "Plan") that provides a form of equity compensation for employees of the Company. The Plan, which is administered by the Company's compensation committee, authorizes grants of up to an aggregate of 5,500,000 shares of the Company’s common equity consisting of 350,000 Common shares, 350,000 Class A Common shares and 4,800,000 shares, which at the discretion of the compensation committee, may be awarded in any combination of Class A Common shares or Common shares.
During the nine months ended July 31, 2020, the Company awarded 105,450 shares of Common Stock and 120,800 shares of Class A Common Stock to participants in the Plan. The grant date fair value of restricted stock grants awarded to participants in 2020 was approximately $5.0 million.
A summary of the status of the Company’s non-vested Common and Class A Common shares as of July 31, 2020, and changes during the nine months ended July 31, 2020 is presented below:
As of July 31, 2020, there was $13.7 million of unamortized restricted stock compensation related to non-vested restricted stock grants awarded under the Plan. The remaining unamortized expense is expected to be recognized over a weighted average period of 4.9 years. For the nine months ended July 31, 2020 and 2019, amounts charged to compensation expense totaled $4,518,000 and $3,191,000, respectively. For the three months ended July 31, 2020 and 2019, amounts charged to compensation expense totaled $1,003,000 and $1,077,000, respectively. The nine months ended July 31, 2020 amount charged to compensation expense includes $1.4 million related to the accelerated vesting of previously unamortized restricted stock compensation as the result of the death of our Chairman Emeritus, Charles J. Urstadt, in March 2020.
Share Repurchase Program
The Board of Directors of the Company has approved a share repurchase program (“Current Repurchase 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.
The Company has repurchased 195,413 shares of Class A Common Stock under the Current Repurchase Program. From the inception of all repurchase programs, the Company has repurchased 4,600 shares of Common Stock and 919,991 shares of Class A Common Stock.
Preferred Stock
The 6.25% Series H Senior Cumulative Preferred Stock ("Series H Preferred Stock") is non-voting, has no stated maturity and is redeemable for cash at $25.00 per share at the Company's option on or after September 18, 2022. The holders of our Series H Preferred Stock have general preference rights with respect to liquidation and quarterly distributions. Except under certain conditions, holders of the Series H Preferred Stock will not be entitled to vote on most matters. In the event of a cumulative arrearage equal to six quarterly dividends, holders of Series H Preferred Stock, together with all of the Company's other series of preferred stock (voting as a single class without regard to series) will have the right to elect two additional members to serve on the Company's Board of Directors until the arrearage has been cured. Upon the occurrence of a Change of Control, as defined in the Company's Articles of Incorporation, the holders of the Series H Preferred Stock will have the right to convert all or part of the shares of Series H Preferred Stock held by such holders on the applicable conversion date into a number of the Company's shares of Class A common stock. Underwriting commissions and costs incurred in connection with the sale of the Series H Preferred Stock are reflected as a reduction of additional paid in capital.
The 5.875% Series K Senior Cumulative Preferred Stock ("Series K Preferred Stock") is non-voting, has no stated maturity and is redeemable for cash at $25.00 per share at the Company's option on or after October 1, 2024. The holders of our Series K Preferred Stock have general preference rights with respect to liquidation and quarterly distributions. Except under certain conditions, holders of the Series K Preferred Stock will not be entitled to vote on most matters. In the event of a cumulative arrearage equal to six quarterly dividends, holders of Series K Preferred Stock, together with all of the Company's other series of preferred stock (voting as a single class without regard to series) will have the right to elect two additional members to serve on the Company's Board of Directors until the arrearage has been cured. Upon the occurrence of a Change of Control, as defined in the Company's Articles of Incorporation, the holders of the Series K Preferred Stock will have the right to convert all or part of the shares of Series K Preferred Stock held by such holders on the applicable conversion date into a number of the Company's shares of Class A common stock. Underwriting commissions and costs incurred in connection with the sale of the Series K Preferred Stock are reflected as a reduction of additional paid in capital.
On November 1, 2019, we redeemed all of the outstanding shares of our Series G Cumulative Preferred Stock for $25.00 per share with proceeds from our sale of our Series K Cumulative Preferred Stock in October 2019. The total redemption amount was $75 million.
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FAIR VALUE MEASUREMENTS |
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FAIR VALUE MEASUREMENTS |
(7) FAIR VALUE MEASUREMENTS
ASC Topic 820, “Fair Value Measurements and Disclosures” defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants.
ASC Topic 820’s valuation techniques are based on observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:
The Company calculates the fair value of the redeemable noncontrolling interests based on either quoted market prices on national exchanges for those interests based on the Company's Class A Common stock (level 1), contractual redemption prices per share as stated in governing agreements (level 2) or unobservable inputs considering the assumptions that market participants would make in pricing the obligations (level 3). The level 3 inputs used include an estimate of the fair value of the cash flow generated by the limited partnership or limited liability company in which the investor owns the joint venture units capitalized at prevailing market rates for properties with similar characteristics or located in similar areas.
The fair values of interest rate swaps are determined using widely accepted valuation techniques, including discounted cash flow analysis, on the expected cash flows of each derivative. The analysis reflects the contractual terms of the swaps, including the period to maturity, and uses observable market-based inputs, including interest rate curves (“significant other observable inputs”). The fair value calculation also includes an amount for risk of non-performance using “significant unobservable inputs” such as estimates of current credit spreads to evaluate the likelihood of default. The Company has concluded, as of October 31, 2019 and July 31, 2020, that the fair value associated with the “significant unobservable inputs” relating to the Company’s risk of non-performance was insignificant to the overall fair value of the interest rate swap agreements and, as a result, the Company has determined that the relevant inputs for purposes of calculating the fair value of the interest rate swap agreements, in their entirety, were based upon “significant other observable inputs”.
The Company measures its redeemable noncontrolling interests and interest rate swap derivatives at fair value on a recurring basis. The fair value of these financial assets and liabilities was determined using the following inputs (amount in thousands):
Fair market value measurements based upon Level 3 inputs changed (in thousands) from $2,768 at October 31, 2018 to $546 at October 31, 2019 as a result of a redemption of noncontrolling interest in Ironbound in August of fiscal 2019 in the amount of $2,700 and a $478 increase in the redemption value of the Company’s noncontrolling interest in Ironbound in accordance with the application of ASC Topic 810.
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COMMITMENTS AND CONTINGENCIES |
9 Months Ended |
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Jul. 31, 2020 | |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
COMMITMENTS AND CONTINGENCIES |
(8) COMMITMENTS AND CONTINGENCIES
In the normal course of business, from time to time, the Company is involved in legal actions relating to the ownership and operations of its properties. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. At July 31, 2020, the Company had commitments of approximately $8.9 million for capital improvements to its properties and tenant-related obligations.
During and subsequent to the third quarter fiscal 2020, the world has continued to be impacted by the COVID-19 pandemic. It has created significant economic uncertainty and volatility. The extent to which the COVID-19 pandemic continues to impact the Company’s business, operations and financial results will depend on numerous evolving factors that the Company is not able to predict at this time, including the duration and scope of the pandemic, governmental, business and individual actions that have been and continue to be taken in response to the pandemic, the impact on economic activity from the pandemic and actions taken in response, the effect on the Company’s tenants and their businesses, the ability of tenants to make their rental payments and any additional closures of tenants’ businesses. Any of these events could materially adversely impact the Company’s business, financial condition, results of operations or stock price.
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SUBSEQUENT EVENTS |
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Jul. 31, 2020 | |
SUBSEQUENT EVENTS [Abstract] | |
SUBSEQUENT EVENTS |
(9) SUBSEQUENT EVENTS
On September 3, 2020, the Board of Directors of the Company declared cash dividends of $0.1250 for each share of Common Stock and $0.14 for each share of Class A Common Stock. The dividends are payable on October 16, 2020 to stockholders of record on October 2, 2020.
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ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation |
The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and joint ventures in which the Company meets certain criteria in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation”. The Company has determined that such joint ventures should be consolidated into the consolidated financial statements of the Company. In accordance with ASC Topic 970-323 “Real Estate-General-Equity Method and Joint Ventures,” joint ventures that the Company does not control but otherwise exercises significant influence over, are accounted for under the equity method of accounting. See Note 4 for further discussion of the unconsolidated joint ventures. All significant intercompany transactions and balances have been eliminated in consolidation.
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Basis of Accounting |
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the three and nine months ended July 31, 2020 are not necessarily indicative of the results that may be expected for the year ending October 31, 2020. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended October 31, 2019.
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Use of Estimates |
The preparation of financial statements requires management to make estimates and assumptions that affect the disclosure of contingent assets and liabilities, the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods covered by the financial statements. The most significant assumptions and estimates relate to the valuation of real estate, depreciable lives, revenue recognition, fair value estimates, and the collectability of tenant receivables and other assets and liabilities. Actual results could differ from these estimates. The consolidated balance sheet at October 31, 2019 has been derived from audited financial statements at that date.
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Federal Income Taxes |
Federal Income Taxes
The Company has elected to be treated as a REIT under Sections 856-860 of the Internal Revenue Code ("Code"). Under those sections, a REIT that, among other things, distributes at least 90% of real estate trust taxable income and meets certain other qualifications prescribed by the Code will not be taxed on that portion of its taxable income that is distributed. The Company believes it qualifies as a REIT and intends to distribute all of its taxable income for fiscal 2020 in accordance with the provisions of the Code. Accordingly, no provision has been made for Federal income taxes in the accompanying consolidated financial statements.
The Company follows the provisions of ASC Topic 740, “Income Taxes” that, among other things, defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Based on its evaluation, the Company determined that it has no uncertain tax positions and no unrecognized tax benefits as of July 31, 2020. As of July 31, 2020, the fiscal tax years 2017 through and including 2019 remain open to examination by the Internal Revenue Service. There are currently no federal tax examinations in progress.
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Concentration of Credit Risk |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and tenant receivables. The Company places its cash and cash equivalents with high quality financial institutions and the balances at times could exceed federally insured limits. The Company performs ongoing credit evaluations of its tenants and may require certain tenants to provide security deposits or letters of credit. Though these security deposits and letters of credit are insufficient to meet the terminal value of a tenant’s lease obligation, they are a measure of good faith and a source of funds to offset the economic costs associated with lost rent and the costs associated with re-tenanting the space. The Company has no dependency upon any single tenant.
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Marketable Securities |
Marketable Securities
Marketable equity securities are carried at fair value based upon quoted market prices in active markets with changes in fair value recognized in net income. In March 2020, the Company purchased REIT securities in the amount of $7 million. In May 2020, the Company sold all of its REIT securities for $7.3 million and realized a gain on sale of $258,000, which is included in the consolidated statement of income for the nine and three months ended July 31, 2020.
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Derivative Financial Instruments |
Derivative Financial Instruments
The Company occasionally utilizes derivative financial instruments, such as interest rate swaps, to manage its exposure to fluctuations in interest rates. The Company has established policies and procedures for risk assessment, and the approval, reporting and monitoring of derivative financial instruments. Derivative financial instruments must be effective in reducing the Company’s interest rate risk exposure in order to qualify for hedge accounting. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income for each period until the derivative instrument matures or is settled. Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to-market with the changes in value included in net income. The Company has not entered into, and does not plan to enter into, derivative financial instruments for trading or speculative purposes. Additionally, the Company has a policy of entering into derivative contracts only with major financial institutions.
As of July 31, 2020, the Company believes it has no significant risk associated with non-performance of the financial institutions that are the counterparties to its derivative contracts. At July 31, 2020, the Company had approximately $127.3 million in secured mortgage financings subject to interest rate swaps. Such interest rate swaps converted the LIBOR-based variable rates on the mortgage financings to an average fixed annual rate of 3.93% per annum. As of July 31, 2020 and October 31, 2019, the Company had a deferred liability of $15.7 million and $6.8 million, respectively (included in accounts payable and accrued expenses on the consolidated balance sheets), relating to the fair value of the Company’s interest rate swaps applicable to secured mortgages.
Charges and/or credits relating to the changes in fair values of such interest rate swaps are made to other comprehensive income/(loss) as the swaps are deemed effective and are classified as a cash flow hedge.
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Comprehensive Income |
Comprehensive Income (Loss)
Comprehensive income is comprised of net income applicable to Common and Class A Common stockholders and other comprehensive income (loss). Other comprehensive income (loss) includes items that are otherwise recorded directly in stockholders’ equity, such as unrealized gains and losses on interest rate swaps designated as cash flow hedges, including the Company's share from entities accounted for under the equity method of accounting. At July 31, 2020, accumulated other comprehensive loss consisted of net unrealized losses on interest rate swap agreements of $18.4 million, inclusive of the Company's share of accumulated comprehensive losses from joint ventures accounted for by the equity method of accounting. At October 31, 2019, accumulated other comprehensive loss consisted of net unrealized losses on interest rate swap agreements of approximately $8.5 million, inclusive of the Company's share of accumulated comprehensive losses from joint ventures accounted for by the equity method of accounting. Unrealized gains and losses included in other comprehensive income/(loss) will be reclassified into earnings as gains and losses are realized.
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Asset Impairment |
Asset Impairment
On a periodic basis, management assesses whether there are any indicators that the value of its real estate investments may be impaired. A property value is considered impaired when management’s estimate of current and projected operating cash flows (undiscounted and without interest) of the property over its remaining useful life is less than the net carrying value of the property. Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. To the extent impairment has occurred, the loss is measured as the excess of the net carrying amount of the property over the fair value of the asset. Changes in estimated future cash flows due to changes in the Company’s plans or market and economic conditions could result in recognition of impairment losses which could be substantial. As described above, the COVID-19 pandemic has had a broad impact on the global and U.S. economies. Management cannot, at this point, estimate the current impact related to the COVID-19 pandemic on the fair value of the Company's real estate assets, and as of July 31, 2020, management does not believe that the value of any of its real estate investments is impaired.
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Acquisition of Real Estate, Capitalization Policy and Depreciation |
Acquisitions of Real Estate Investments, Capitalization Policy and Depreciation
Acquisition of Real Estate Investments:
The Company evaluates each acquisition of real estate or in-substance real estate (including equity interests in entities that predominantly hold real estate assets) to determine if the integrated set of assets and activities acquired meet the definition of a business and need to be accounted for as a business combination. If either of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:
An acquired process is considered substantive if:
Generally, the Company expects that acquisitions of real estate or in-substance real estate will not meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets) or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay.
Acquisitions of real estate and in-substance real estate that do not meet the definition of a business are accounted for as asset acquisitions. The accounting model for asset acquisitions is similar to the accounting model for business combinations except that the acquisition consideration (including acquisition costs) is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. As a result, asset acquisitions do not result in the recognition of goodwill or a bargain purchase gain. The relative fair values used to allocate the cost of an asset acquisition are determined using the same methodologies and assumptions as the Company utilizes to determine fair value in a business combination.
The value of tangible assets acquired is based upon our estimation of value on an “as if vacant” basis. The value of acquired in-place leases includes the estimated costs during the hypothetical lease-up period and other costs that would have been incurred in the execution of similar leases under the market conditions at the acquisition date of the acquired in-place lease. We assess the fair value of tangible and intangible assets based on numerous factors, including estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including the historical operating results, known trends, and market/economic conditions that may affect the property.
The values of acquired above and below-market leases, which are included in prepaid expenses and other assets and other liabilities, respectively, are amortized over the terms of the related leases and recognized as either an increase (for below-market leases) or a decrease (for above-market leases) to rental revenue. The values of acquired in-place leases are classified in other assets in the accompanying consolidated balance sheets and amortized over the remaining terms of the related leases.
Capitalization Policy:
Land, buildings, property improvements, furniture/fixtures and tenant improvements are recorded at cost. Expenditures for maintenance and repairs are charged to operations as incurred. Renovations and/or replacements, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.
Depreciation:
The Company is required to make subjective assessments as to the useful life of its properties for purposes of determining the amount of depreciation. These assessments have a direct impact on the Company’s net income.
Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:
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Property Held for Sale |
Sale of Investment Property and Property Held for Sale
The Company reports properties that are either disposed of or are classified as held for sale in continuing operations in the consolidated statement of income if the removal, or anticipated removal, of the asset(s) from the reporting entity does not represent a strategic shift that has or will have a major effect on an entity's operations and financial results when disposed of.
In August 2019, the Company entered into a purchase and sale agreement to sell its property located in Bernardsville, NJ (the "Bernardsville Property"), to an unrelated third party for a sale price of $2.7 million as that property no longer met its investment objectives. In accordance with ASC Topic 360-10-45, the property met all the criteria to be classified as held for sale in the fourth quarter of fiscal 2019, and accordingly the Company recorded a loss on property held for sale of $434,000, which loss was included in continuing operations in the consolidated statement of income for the year ended October 31, 2019. The amount of the loss represented the net carrying amount of the property over the fair value of the asset less estimated cost to sell. The net book value of the Bernardsville Property was insignificant to financial statement presentation and as a result the Company did not include the asset as held for sale on its consolidated balance sheet at October 31, 2019. In December 2019 (fiscal 2020), the Bernardsville Property sale was completed and the Company realized an additional loss on sale of property of $86,000, which loss is included in continuing operations in the consolidated statement of income for the nine months ended July 31, 2020.
In January 2020, the Company sold for $1.3 million its retail property located in Carmel, NY (the "Carmel Property"), as that property no longer met the Company's investment objectives. In conjunction with the sale, the Company realized a loss on sale of the Carmel property in the amount of $242,000, which loss is included in continuing operations in the consolidated statement of income for the nine months ended July 31, 2020.
The operating results of the Bernardsville and Carmel Properties, which are included in continuing operations is as follows (amounts in thousands):
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Revenue Recognition |
Lease Income, Revenue Recognition and Tenant Receivables
Lease Income:
The Company leases space to tenants under agreements with varying terms that generally provide for fixed payments of base rent, with designated increases over the term of the lease. Some of the lease agreements contain provisions that provide for additional rents based on tenants' sales volume ("percentage rent"). Percentage rents are recognized when the tenants achieve the specified targets as defined in their lease agreements. Additionally, most all lease agreements contain provisions for reimbursement of the tenants' share of actual real estate taxes, insurance and Common Area Maintenance ("CAM") costs (collectively, "Recoverable Costs") incurred.
Lease terms generally range from 1 to 5 years for tenant spaces under 10,000 square feet (“Shop Space”) and in excess of 5 years for spaces greater than 10,000 square feet (“Anchor Spaces”). Many leases also provide the option for the tenants to extend their lease beyond the initial term of the lease. If the tenants do not exercise renewal options and the leases mature, the tenants must relinquish their space so it can be leased to a new tenant, which generally involves some level of cost to prepare the space for re-leasing. These costs are capitalized and depreciated over the shorter of the life of the subsequent lease or the life of the improvement.
On November 1, 2019, the Company adopted the new accounting guidance in ASC Topic 842, Leases, including all related Accounting Standard Updates (“ASU's”). The Company elected to use the modified retrospective transition method provided in ASU 2018-11 (the "adoption date method"). Under this method, the effective date of November 1, 2019 is the date of initial application. In connection with the adoption of ASC Topic 842, the Company elected a package of practical expedients, transition options, and accounting policy elections as follows:
The Company's existing leases were not re-evaluated and continue to be classified as operating leases, as per the practical expedient package elected above. New and modified leases will now require evaluation of specific classification criteria, which, based on the customary terms of the Company's leases, should continue to be classified as operating leases. However, certain longer-term leases (both lessee and lessor leases) may be classified as direct financing or sales type leases, which may result in selling profit and an accelerated pattern of earnings recognition.
CAM is a non-lease component of the lease contract under ASC Topic 842, and therefore would be accounted for under ASC Topic 606, Revenue from Contracts with Customers, and presented separate from lease income in the accompanying consolidated statements of income, based on an allocation of the overall contract price, which is not necessarily the amount that would be billable to the tenants for CAM reimbursements per the terms of the lease contract. As the timing and pattern of providing the CAM service to the tenant is the same as the timing and pattern of the tenants' use of the underlying lease asset, the Company elected, as part of the package of practical expedients, to combine CAM with the remaining lease components, along with tenants' reimbursement of real estate taxes and insurance, and recognize them together as lease income in the accompanying Statements of Income.
Lease income for operating leases with fixed payment terms is recognized on a straight-line basis over the expected term of the lease for all leases for which collectability is considered probable at the commencement date. At lease commencement, the Company expects that collectability is probable for all of its leases due to the Company’s credit checks on tenants and other creditworthiness analysis undertaken before entering into a new lease; therefore, income from all operating leases is initially recognized on a straight-line basis. Lease income each period is reduced by amounts considered uncollectible on a lease-by-lease basis, with any changes in collectability assessments recognized as a current period adjustment to lease income. For operating leases in which collectability of lease income is not considered probable, lease income is recognized on a cash basis and all previously recognized uncollectible lease income, including straight-line rental income, is reversed in the period in which the lease income is determined not to be probable of collection.
ASC Topic 842 also changes the treatment of leasing costs, such that non-contingent internal leasing and legal costs associated with leasing activities can no longer be capitalized. The Company, as a lessor, may only defer as initial direct costs the incremental costs of a tenant operating lease that would not have been incurred if the lease had not been obtained. These costs generally include third party broker payments, which are capitalized to deferred costs in the accompanying consolidated balance sheets and amortized over the expected term of the lease to depreciation and amortization expense in the accompanying consolidated statements of income.
There was no change to operating income as a result of the adoption of ASC Topic 842 and related ASU's.
COVID-19 Pandemic
Beginning in March 2020, many of the Company's properties were, and continue to be, negatively impacted by the COVID-19 pandemic, as state governments mandated the closure of non-essential businesses to prevent the spread of COVID-19, forcing many of our tenants’ businesses to close or reduce operations. As a result, 406 of approximately 900 tenants in the Company's consolidated portfolio, representing 1.6 million square feet and approximately 45.3% of the Company's annualized base rent, have asked for some type of rent deferral or concession. Subsequently, approximately 110 of the 406 tenants withdrew their request for rent relief or paid their rent in full. The Company has, and will continue to evaluate each request on a case-by-case basis to determine an appropriate course of action, recognizing that in many cases some type of concession may be appropriate and beneficial to the long-term interests of the Company. In evaluating these requests, the Company has been and will continue to consider many factors, including the tenant's financial strength, the tenant's operating history, potential co-tenancy impacts, the tenant's contribution to the shopping center in which it operates, the Company's assessment of the tenant's long-term viability, the difficulty or ease with which the tenant could be replaced, and other factors. Each negotiation will be specific to the tenant making the request. The primary strategy of the Company is that most of these concessions will be in the form of deferred rent for some portion of rents due in April through August 2020 to be paid over a later part of the lease, preferably within a period of one year or less, but in some instances the Company determined that it was more appropriate to abate some portion of base rents for some tenants between April and August. As of July 31, 2020, the Company has completed 194 lease modifications, consisting of base rent deferrals totaling $2.6 million and rent abatements totaling $492,000 as of July 31, 2020. Approximately 41 rent deferrals or abatements have been completed subsequent to July 31, 2020, which deferred $393,000 of base rents and abated $259,000 of base rents. The Company has increased its uncollectable amounts in lease income for the nine and three months ended July 31, 2020 for tenants it felt were affected by the COVID-19 pandemic (see note 5).
In April 2020, in response to the COVID-19 Pandemic, the FASB staff issued guidance that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842, as if enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the lease contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each lease contract to determine whether enforceable rights and obligations for concessions exist in the lease contract and may elect to apply or not apply the lease modification guidance in Topic 842 to those contracts.
This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. The FASB staff expects that reasonable judgment will be exercised in making those determinations.
Most concessions will provide a deferral of payments with no substantive changes to the consideration in the original lease contract. A deferral affects the timing, but the amount of the consideration is substantially the same as that required by the original lease contract. The FASB staff expects that there will be multiple ways to account for those deferrals, none of which the staff believes are preferable over others. The Company has made the election not to analyze each lease contract, and believes that, based on FASB guidance, the appropriate way to account for the concessions as described above is to account for such concessions as if no change to the lease contracts were made. Under that accounting, a lessor would increase its lease receivable (straight-line rents receivable) and would continue to recognize income during the deferral period, assuming that the collectability of the future rents under the lease contract are considered collectable. If it is determined that the future rents of any lease contract are not collectable, the Company would treat that lease contract on a cash basis as defined in ASC Topic 842.
When collection of substantially all lease payments during the lease term is not considered probable, total lease revenue is limited to the lesser of revenue recognized under accrual accounting or cash received. Determining the probability of collection of substantially all lease payments during a lease term requires significant judgment. This determination is impacted by numerous factors, including our assessment of the tenant’s credit worthiness, economic conditions, tenant sales productivity in that location, historical experience with the tenant and tenants operating in the same industry, future prospects for the tenant and the industry in which it operates, and the length of the lease term. If leases currently classified as probable are subsequently reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off with a corresponding decrease in lease income.
The Company anticipates that its variable lease income represented by the reimbursement of CAM and real estate taxes will not be materially affected for most national tenants and tenants with higher levels of credit and balance sheet resources. For smaller local tenants and tenants with fewer resources, the Company has reduced its accruals for CAM and real estate taxes in anticipation of potentially having to reduce the amounts billed to these tenants at the end of calendar 2020. This has had the effect of reducing this portion of lease income for the nine and three months ended July 31, 2020.
Revenue Recognition
In those instances in which the Company funds tenant improvements and the improvements are deemed to be owned by the Company, revenue recognition on operating leases will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant. When the Company determines that the tenant allowances are lease incentives, the Company commences revenue recognition when possession or control of the space is turned over to the tenant for tenant work to begin.
Lease termination amounts are recognized in operating revenues when there is a signed termination agreement, all of the conditions of the agreement have been met, the tenant is no longer occupying the property and the termination consideration is probable of collection. Lease termination amounts are paid by tenants who want to terminate their lease obligations before the end of the contractual term of the lease by agreement with the Company. There is no way of predicting or forecasting the timing or amounts of future lease termination fees. Interest income is recognized as it is earned. Gains or losses on disposition of properties are recorded when the criteria for recognizing such gains or losses under U.S. GAAP have been met.
Percentage rent is recognized when a specific tenant’s sales breakpoint is achieved.
Tenant Receivables
The actions taken by federal, state and local governments to mitigate the spread of COVID-19, initially by ordering closures of non-essential businesses and ordering residents to generally stay at home, and subsequent phased re-openings have resulted in many of our tenants temporarily or even permanently closing their businesses, and for some, it had impacted their ability to pay rent.
As a result, in accordance with ASC Topic 842, we revised our collectability assumptions for many of our tenants that were most significantly impacted by COVID-19. Accordingly, during the three months ended July 31, 2020, we recognized collectability related adjustments totaling $4.3 million. This amount includes changes in our collectability assessments for certain tenants in our portfolio from probable to not probable, which requires that revenue recognition for those tenants be converted to cash basis accounting with previously uncollected billed rents reversed in the current period. This resulted in a reduction of lease income for the three months ended July 31, 2020 in the amount of $1.8 million related to tenants whose assessment of collectability was changed from probable to not probable. In addition, the Company wrote-off $910,000 of previously recorded straight-line rent receivables related to tenants whose assessment of collectability was changed from probable to not probable. As of July 31, 2020, the revenue from approximately 6.4% of our tenants (based on total commercial leases) is being recognized on a cash basis.
At July 31, 2020 and October 31, 2019, $21,332,000 and $19,395,000, respectively, have been recognized as straight-line rents receivable (representing the current cumulative rents recognized prior to when billed and collectible as provided by the terms of the leases), all of which is included in tenant receivables in the accompanying consolidated financial statements.
The Company provides an allowance for doubtful accounts against the portion of tenant receivables that is estimated to be uncollectible. Such allowances are reviewed periodically. At July 31, 2020 and October 31, 2019, tenant receivables in the accompanying consolidated balance sheets are shown net of allowances for doubtful accounts of $8,309,000 and $5,454,000, respectively. Included in the aforementioned allowance for doubtful accounts is an amount for future tenant credit losses of approximately 10% of the deferred straight-line rents receivable which is estimated to be uncollectible.
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Earnings Per Share |
Earnings Per Share
The Company calculates basic and diluted earnings per share in accordance with the provisions of ASC Topic 260, “Earnings Per Share.” Basic earnings per share (“EPS”) excludes the impact of dilutive shares and is computed by dividing net income applicable to Common and Class A Common stockholders by the weighted average number of Common shares and Class A Common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue Common shares or Class A Common shares were exercised or converted into Common shares or Class A Common shares and then shared in the earnings of the Company. Since the cash dividends declared on the Company’s Class A Common stock are higher than the dividends declared on the Common Stock, basic and diluted EPS have been calculated using the “two-class” method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to the weighted average of the dividends declared, outstanding shares per class and participation rights in undistributed earnings.
The following table sets forth the reconciliation between basic and diluted EPS (in thousands):
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Segment Reporting |
Segment Reporting
The Company's primary business is the ownership, management, and redevelopment of retail properties. The Company reviews operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. The Company evaluates financial performance using property operating income, which consists of base rental income and tenant reimbursement income, less rental expenses and real estate taxes. Only one of the Company’s properties, located in Stamford, CT (“Ridgeway”), is considered significant as its revenue is in excess of 10% of the Company’s consolidated total revenues and accordingly is a reportable segment. The Company has aggregated the remainder of its properties as they share similar long-term economic characteristics and have other similarities including the fact that they are operated using consistent business strategies, are typically located in the same major metropolitan area, and have similar tenant mixes.
Ridgeway is located in Stamford, Connecticut and was developed in the 1950’s and redeveloped in the mid 1990’s. 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.
Segment information about Ridgeway as required by ASC Topic 280 is included below:
Note 1 - Ridgeway did not have any significant expenditures for additions to long lived assets in the three and nine months ended July 31, 2020 or the year ended October 31, 2019.
Ridgeway Significant Tenants (Percentage of Base Rent Billed):
Note 2 - No other tenant accounts for more than 10% of Ridgeway’s annual base rents in any of the periods presented. Percentages are calculated as a ratio of the tenants' base rent divided by total base rent of Ridgeway.
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Stock-Based Compensation |
Stock-Based Compensation
The Company accounts for its stock-based compensation plans under the provisions of ASC Topic 718, “Stock Compensation”, which requires that compensation expense be recognized, based on the fair value of the stock awards less estimated forfeitures. The fair value of stock awards is equal to the fair value of the Company’s stock on the grant date. The Company recognizes compensation expense for its stock awards by amortizing the fair value of stock awards over the requisite service periods of such awards. In certain cases as defined in the participant agreements, the vesting of stock awards can be accelerated, which will result in the Company charging to compensation expense the remaining unamortized restricted stock compensation related to those stock awards.
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Reclassification |
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period’s presentation.
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New Accounting Standards |
New Accounting Standards
In February 2016, the FASB issued ASU 2016-02, "Leases", ASU 2018-10 "Codification improvements to Topic 842, leases", ASU 2018-11 "Leases", and ASU 2018-20 "Leases, Narrow Scope Improvements for Lessors", together ASC Topic 842 - Leases. ASC Topic 842 significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to conform lessor accounting with the lessee model, eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases requiring significantly more leasing related costs to be expensed upfront. The Company adopted ASC Topic 842 on November 1, 2019, the first day of its fiscal year 2020. The Company has elected to apply the transition provisions of ASC Topic 842 at the beginning of the period of adoption, and therefore, the Company has not retrospectively adjusted prior periods presented. The Company elected to apply certain adoption related practical expedients for all leases that commenced prior to the effective date. These practical expedients include not reassessing whether any expired or existing contracts are or contain leases; not reassessing the lease classification for any expired or existing leases; and not reassessing initial direct costs for any existing leases. The adoption of this standard did not have a material effect on our financial statements or disclosures therein. See Lease Income, Revenue Recognition and Tenant Receivables earlier in Note 1 for a more detailed explanation of the adoption.
In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848).” ASU No. 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the three months ended April 30, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
The Company has evaluated all other new ASUs issued by FASB, and has concluded that these updates do not have a material effect on the Company's consolidated financial statements as of July 31, 2020.
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ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment, Estimated Useful Lives |
Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:
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Property Held for Sale |
The operating results of the Bernardsville and Carmel Properties, which are included in continuing operations is as follows (amounts in thousands):
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Reconciliation between Basic and Diluted EPS |
The following table sets forth the reconciliation between basic and diluted EPS (in thousands):
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Major Customers by Reporting Segments |
Note 1 - Ridgeway did not have any significant expenditures for additions to long lived assets in the three and nine months ended July 31, 2020 or the year ended October 31, 2019.
Ridgeway Significant Tenants (Percentage of Base Rent Billed):
Note 2 - No other tenant accounts for more than 10% of Ridgeway’s annual base rents in any of the periods presented. Percentages are calculated as a ratio of the tenants' base rent divided by total base rent of Ridgeway.
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Segment Reporting Information by Segment |
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CONSOLIDATED JOINT VENTURES AND REDEEMABLE NONCONTROLLING INTERESTS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED JOINT VENTURES AND REDEEMABLE NONCONTROLLING INTERESTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable Non-controlling Interests |
The following table sets forth the details of the Company's redeemable non-controlling interests for the nine months ended July 31, 2020 and the fiscal year ended October 31, 2019 (amounts in thousands):
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INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in and Advances to Unconsolidated Joint Ventures |
At July 31, 2020 and October 31, 2019 investments in and advances to unconsolidated joint ventures consisted of the following (with the Company’s ownership percentage in parentheses) (amounts in thousands):
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LEASES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Lease Income Recognized |
The following table provides a disaggregation of lease income recognized during the nine and three months ended July 31, 2020 and 2019, under ASC Topic 842, Leases, as either fixed or variable lease income based on the criteria specified in ASC Topic 842 (In thousands):
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Future Minimum Rents under Non-Cancelable Operating Leases |
Future minimum rents under non-cancelable operating leases for the next five years and thereafter, excluding variable lease payments, are as follows (In thousands):
(a) The future minimum rental income for fiscal 2020 includes amounts due between August 1, 2020 through October 31, 2020.
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STOCKHOLDERS' EQUITY (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-vested Common and Class A Common Shares |
A summary of the status of the Company’s non-vested Common and Class A Common shares as of July 31, 2020, and changes during the nine months ended July 31, 2020 is presented below:
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FAIR VALUE MEASUREMENTS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Assets and Liabilities |
The Company measures its redeemable noncontrolling interests and interest rate swap derivatives at fair value on a recurring basis. The fair value of these financial assets and liabilities was determined using the following inputs (amount in thousands):
|
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Business (Details) ft² in Millions |
Jul. 31, 2020
ft²
Property
|
---|---|
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Number of properties the Company owned or had equity interest in | Property | 81 |
Gross leasable area of properties the Company owned or had equity interest in | ft² | 5.3 |
Percentage of gross leasable area for essential businesses | 84.00% |
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Federal Income Taxes (Details) |
9 Months Ended |
---|---|
Jul. 31, 2020 | |
Federal Income Taxes [Abstract] | |
Minimum real estate trust taxable income required to be distributed for REIT to be nontaxable | 90.00% |
Minimum [Member] | |
Federal Income Taxes [Abstract] | |
Tax years remaining open to examination by Internal Revenue Service | 2017 |
Maximum [Member] | |
Federal Income Taxes [Abstract] | |
Tax years remaining open to examination by Internal Revenue Service | 2019 |
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Marketable Securities (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|---|
May 31, 2020 |
Mar. 31, 2020 |
Jul. 31, 2020 |
Jul. 31, 2019 |
Jul. 31, 2020 |
Jul. 31, 2019 |
|
Marketable Securities [Abstract] | ||||||
Proceeds from Sale of Available-for-sale Securities | $ 7,300,000 | $ 7,240,000 | $ 5,970,000 | |||
Marketable Securities, Realized Gain (Loss) | $ 258,000 | $ 258,000 | $ 0 | $ 258,000 | $ 403,000 | |
REIT Securities [Member] | ||||||
Marketable Securities [Abstract] | ||||||
Purchase of marketable securities | $ 7,000,000 |
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Derivative Financial Instruments (Details) - Interest Rate Swap [Member] - Mortgage Loan [Member] - USD ($) $ in Millions |
Jul. 31, 2020 |
Oct. 31, 2019 |
---|---|---|
Derivative Financial Instruments [Abstract] | ||
Mortgage loans subject to interest rate swap | $ 127.3 | |
Average fixed annual rate on interest rate swap | 3.93% | |
Deferred liabilities relating to fair value of interest rate swap | $ 15.7 | $ 6.8 |
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Comprehensive Income (Details) - USD ($) $ in Millions |
Jul. 31, 2020 |
Oct. 31, 2019 |
---|---|---|
Comprehensive Income [Abstract] | ||
Net unrealized gains (losses) on interest rate swap agreements included in accumulated other comprehensive income | $ (18.4) | $ (8.5) |
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Depreciation (Details) |
9 Months Ended |
---|---|
Jul. 31, 2020 | |
Buildings [Member] | Minimum [Member] | |
Depreciation [Abstract] | |
Estimated useful life | 30 years |
Buildings [Member] | Maximum [Member] | |
Depreciation [Abstract] | |
Estimated useful life | 40 years |
Property Improvements [Member] | Minimum [Member] | |
Depreciation [Abstract] | |
Estimated useful life | 10 years |
Property Improvements [Member] | Maximum [Member] | |
Depreciation [Abstract] | |
Estimated useful life | 20 years |
Furniture/Fixtures [Member] | Minimum [Member] | |
Depreciation [Abstract] | |
Estimated useful life | 3 years |
Furniture/Fixtures [Member] | Maximum [Member] | |
Depreciation [Abstract] | |
Estimated useful life | 10 years |
Tenant Improvements [Member] | |
Depreciation [Abstract] | |
Estimated useful life | Shorter of lease term or their useful life |
ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Segment Reporting - Income Statements (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2020 |
Jul. 31, 2019 |
Jul. 31, 2020 |
Jul. 31, 2019 |
|
Income Statements [Abstract] | ||||
Revenues | $ 28,799 | $ 34,392 | $ 94,427 | $ 102,765 |
Property Operating Expenses | 10,252 | 10,905 | 32,700 | 34,458 |
Interest Expense | 3,475 | 3,497 | 10,123 | 10,607 |
Depreciation and Amortization | 7,304 | 7,002 | 21,587 | 20,928 |
Net Income | 5,923 | 11,427 | 22,684 | 31,405 |
Ridgeway [Member] | ||||
Income Statements [Abstract] | ||||
Revenues | 3,195 | 3,744 | 10,580 | 11,146 |
Property Operating Expenses | 1,063 | 1,043 | 3,281 | 3,243 |
Interest Expense | 415 | 424 | 1,256 | 1,278 |
Depreciation and Amortization | 714 | 582 | 1,911 | 1,768 |
Net Income | 1,003 | 1,695 | 4,132 | 4,857 |
All Other Operating Segments [Member] | ||||
Income Statements [Abstract] | ||||
Revenues | 25,604 | 30,648 | 83,847 | 91,619 |
Property Operating Expenses | 9,189 | 9,862 | 29,419 | 31,215 |
Interest Expense | 3,060 | 3,073 | 8,867 | 9,329 |
Depreciation and Amortization | 6,590 | 6,420 | 19,676 | 19,160 |
Net Income | $ 4,920 | $ 9,732 | $ 18,552 | $ 26,548 |
LEASES (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Jul. 31, 2020 |
Jul. 31, 2019 |
Jul. 31, 2020 |
Jul. 31, 2019 |
|||
Operating lease income [Abstract] | ||||||
Fixed lease income (Base Rent) | $ 23,957 | $ 24,684 | $ 74,490 | $ 74,674 | ||
Variable lease income (Cost Recoveries) | 7,056 | 7,839 | 21,166 | 24,664 | ||
Other lease related income, net [Abstract] | ||||||
Above/below market rent amortization | 173 | 157 | 523 | 448 | ||
Uncollectible amounts in lease income | (1,645) | (223) | (3,490) | (719) | ||
Reduction in lease income for ASC Topic 842 cash-basis conversion | (2,686) | 0 | (2,686) | 0 | ||
Total lease income | 26,855 | $ 32,457 | 90,003 | $ 99,067 | ||
Future Minimum Rents under Non-Cancelable Operating Leases [Abstract] | ||||||
2020 | [1] | 24,253 | 24,253 | |||
2021 | 94,534 | 94,534 | ||||
2022 | 81,384 | 81,384 | ||||
2023 | 54,679 | 54,679 | ||||
2024 | 43,358 | 43,358 | ||||
Thereafter | 192,037 | 192,037 | ||||
Total | $ 490,245 | $ 490,245 | ||||
|
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions |
9 Months Ended |
---|---|
Jul. 31, 2020
USD ($)
| |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
Commitments for capital improvements to properties and tenant related obligations | $ 8.9 |
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