UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ___________ to _____________
Commission File Number 0-4258
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-1897375
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3499 Route 9 North, Suite 3-C, Freehold, NJ 07728
(Address of Principal Executive Offices ) (Zip Code)
Registrant's telephone number, including area code:
(732)577-9997
Securities registered pursuant to Section 12(b)of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Class A $.01 par value
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the 12
preceding months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes X No
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment of this Form 10-K X .
The aggregate market value of voting stock held by non-
affiliates of the Registrant was $63,512,445 (based on
9,711,383 shares of common stock at the closing price of
$6.54 per share) as of December 7, 2001.
There were 10,474,468 shares of common stock
outstanding as of December 7, 2001.
Documents Incorporated by Reference: Exhibits
incorporated by reference are listed in Part IV, Item 14
(a) (3).
PART I
ITEM 1 - BUSINESS
Monmouth Real Estate Investment Corporation (the
Company) is a corporation operating as a qualified real
estate investment trust under Sections 856-858 of the
Internal Revenue Code.
Currently, the Company derives its income primarily
from real estate rental operations. The Company has
approximately 2,513,000 square feet of property, of which
approximately 838,000 square feet, or 33%, is leased to
Federal Express Corporation and approximately 301,000 square
feet, or 12%, is leased to Keebler Company. During 2001,
2000 and 1999 rental and occupancy charges from properties
leased to these companies approximated 55%, 52% and 49%,
respectively, of total rental and occupancy charges.
At September 30, 2001, the Company had investments in
twenty-seven properties. (See Item 2 for detailed
description of the properties.) These properties are
located in New Jersey, New York, Pennsylvania, North
Carolina, Mississippi, Massachusetts, Kansas, Iowa,
Missouri, Illinois, Michigan, Nebraska, Florida, Virginia,
Ohio, Connecticut, Wisconsin and Maryland. All properties
are managed by a management company. All properties are
leased on a net basis except Monaca, Pennsylvania.
The Company does not have an advisory contract. Its
properties are managed by Cronheim Management Services.
Effective August 1, 1998, the Company entered into a new
management contract with Cronheim Management Services.
Under this contract, Cronheim Management Services receives
3% of gross rental income on certain properties for
management fees. Cronheim Management Services provides sub-
agents as regional managers for the Company's properties and
compensates them out of this management fee. Cronheim
Management Services received $220,521, $199,432, and
$161,146 in 2001, 2000 and 1999, respectively, for the
management of various properties.
The David Cronheim Company received $26,708, $14,347,
and $136,229 in lease brokerage commissions in 2001, 2000
and 1999, respectively.
The Company competes with other investors in real
estate for attractive investment opportunities. These
investors include other "equity" real estate investment
trusts, limited partnerships, syndications and private
investors, among others.
The Company has a flexible investment policy
concentrating its investments in the area of net-leased
industrial properties. The Company's strategy is to obtain
a favorable yield spread between the yield from the net-
leased industrial properties and mortgage interest costs.
The Company continues to purchase net-leased industrial
properties, since management believes that there is a
potential for long-term capital appreciation through
investing in well-located industrial properties. There is
the risk that, on expiration of current leases, the
properties can become vacant or re-leased at lower rents.
The results obtained by the Company by re-leasing the
properties will depend on the market for industrial
properties at that time.
Page 2
ITEM 1 - BUSINESS (CONT'D)
The Company continues to invest in both debt and
equity securities of other real estate investment trusts
(REITs). The Company from time to time may purchase these
securities on margin when the interest and dividend yields
exceed the cost of the funds. Such securities are subject to
risk arising from adverse changes in market rates and
prices, primarily interest rate risk relating to debt
securities and equity price risk relating to equity
securities.
In fiscal 2001, the Company purchased five net-leased
industrial properties for a total cost of approximately
$39,000,000. In fiscal 2002, the Company anticipates
acquisitions of approximately $30,000,000. The funds for
these acquisitions may come from the Company's available
line of credit, other bank borrowings and proceeds from the
Dividend Reinvestment and Stock Purchase Plan. To the
extent that funds or appropriate properties are not
available, fewer acquisitions will be made.
The Company seeks to invest in well-located, modern
buildings leased to credit worthy tenants on long-term
leases. In management's opinion, newly built facilities
leased to Federal Express Corporation (FDX) or FDX
subsidiaries meet this criteria. The Company is considering
one property for purchase which is leased to FDX or FDX
subsidiaries. This will result in an additional
concentration of properties leased to FDX and FDX
subsidiaries. This is a risk factor that shareholders
should consider. FDX is a publicly-owned corporation and
information on its financial business operations is readily
available to the Company's shareholders. Because of the
contingent nature of contracts to purchase real property,
the Company announces acquisitions only on closing.
The Company faces possible environmental
liability issues. Current and former real estate owners and
operators may be required by law to investigate and clean up
hazardous substances released at the properties they owned
or operated. They may also be liable to the government or
to third parties for property damage, investigation costs
and cleanup costs. Contamination may affect adversely the
owner's ability to sell or lease real estate or to borrow
using the real estate as collateral.
The Company has no way of determining at this
time the magnitude of any potential liability to which it
may be subject arising out of unknown environmental
conditions or violations with respect to the properties it
formerly owned. Environmental laws today can impose
liability on a previous owner or operator of a property that
owned or operated the property at a time when hazardous or
toxic substances were disposed of, or released from, the
property. A conveyance of the property, therefore, does not
relieve the owner or operator from liability.
The Company is not currently aware of any
environmental liabilities relating to its properties which
would have a material adverse effect on its business,
assets, or results of operations. However, no assurance
can be given that environmental liabilities will not arise
in the future.
Page 3
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES
The Company operates as a real estate investment trust.
Its portfolio is primarily in real estate holdings, some of
which have been long-term holdings carried on the financial
statements of the Company at depreciated cost. It is
believed that their current market values exceed both the
original cost and the depreciated cost. The following is a
brief description of the Company's real estate holdings at
September 30, 2001. (See Item 14, Schedule III for
additional information on Real Estate and Accumulated
Depreciation and Item 14, Note 6 of the Notes to the
Financial Statements for a discussion of encumbrances on
these equity holdings).
SOMERSET, NEW JERSEY
The Company owns a two-thirds undivided interest in
this Somerset, New Jersey shopping center. The remaining
one-third interest is owned by D & E Realty, an unrelated
entity. All assets, liabilities, income and expense are
allocated to the owners based upon their respective
ownership percentages. The total rentable space in this
shopping center is approximately 42,800 square feet. In
addition, 21,365 square feet of land was leased to Taco
Bell, Inc. on which a freestanding restaurant was completed
during 1993. This shopping center was 97% occupied at
September 30, 2001. The main store lease expires on
September 30, 2005. The Company's portion of the annual
gross rental income on this facility was approximately
$314,000.
RAMSEY, NEW JERSEY
Ramsey Industrial Park, located on E. Crescent Avenue
in Ramsey, New Jersey is a 42,719 square foot building net-
leased to Bogen Photo, Inc. This lease expires on September
30, 2001. The current annual gross rental income is
approximately $224,000. This lease has been extended to
September 30, 2006 at an annual rent of $279,000.
MONACA, PENNSYLVANIA
The Moor Industrial Park is located in Monaca,
Pennsylvania. It consists of approximately 292,000 feet of
rentable space located on 23 acres. The leases are all
short term at relatively low rents compared to the Company's
other properties. The current annual gross rental income is
approximately $465,000. At September 30, 2001, this
property was 74% occupied. This property has 1,200 feet of
undeveloped river frontage.
ORANGEBURG, NEW YORK
This 50,400 square foot warehouse facility, located in
Orangeburg, New York, is net-leased to Keebler Company.
The average annual rental income over the term of the lease,
which expired on December 31, 2000, was approximately
$433,000. This lease has been extended to December 31, 2003
at an annualized rent of $323,000 per annum.
Page 4
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
SOUTH BRUNSWICK, NEW JERSEY
This 144,520 square foot warehouse facility, located in
South Brunswick, New Jersey, is net-leased to McMaster Carr
Supply Co. This lease expired on December 31, 2000. The
average annual rental income over the term of the lease was
$614,000. This lease has been extended to December 31,
2003 at an annualized rent of $705,000 per annum.
GREENSBORO, NORTH CAROLINA
This 40,560 square foot distribution center, located
in Greensboro, North Carolina is net-leased to Keebler
Company. This lease expires February 14, 2003. The
average annual rental income over the term of the lease is
approximately $233,000.
JACKSON, MISSISSIPPI
This 26,340 square foot warehouse facility, located in
Jackson, Mississippi, is net-leased to Keebler Company.
The average annual rental income over the term of the lease
is approximately $169,000. This lease expires September 30,
2003.
FRANKLIN, MASSACHUSETTS
This 84,376 square foot warehouse facility, located in
Franklin, Massachusetts, is net-leased to the Keebler
Company. The average annual rental income over the term of
the lease is approximately $516,000. This lease expires on
January 31, 2004.
WICHITA, KANSAS
This 44,136 square foot warehouse facility, located in
Wichita, Kansas, is net-leased to Keebler Company. The
average annual rental income over the term of the lease is
approximately $195,000. This lease expires May 30, 2005.
Keebler Company has sub-leased this facility.
URBANDALE, IOWA
This 36,150 square foot warehouse facility, located in
Urbandale, Iowa, is net-leased to the Glazers Distributors
of Iowa, Inc. The average annual rental income over the
term of the lease is approximately $127,000. This lease
expires June 30, 2003.
Page 5
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
RICHLAND, MISSISSIPPI
This 36,000 square foot warehouse facility, located in
Richland, Mississippi, is 100% net-leased to Federal Express
Corporation for an average annual rental income of
approximately $140,000 over the term of the lease. This
lease expires on March 31, 2004.
O'FALLON MISSOURI
This 102,135 square foot warehouse facility, located
in O'Fallon, Missouri, is 100% net-leased to PPG Industries,
Inc. This lease expired June 30, 2001. The average annual
rental income over the term of the lease was approximately
$353,000. This lease has been extended to June 30, 2006 at
an annualized rent of approximately $398,000 per annum.
VIRGINIA BEACH, VIRGINIA
This 67,926 square foot warehouse facility, located
in Virginia Beach, Virginia, was 100% net-leased to the
Raytheon Service Company. The annual rental income was
approximately $307,000. This lease expired February 28,
2001. This facility is currently vacant. Management
believes this property to be well situated and is actively
seeking new lease prospects.
FAYETTEVILLE, NORTH CAROLINA
This 148,000 square foot warehouse facility, located
in Fayetteville, North Carolina, is 100% net-leased to the
Belk Enterprises, Inc. The average annual rental income
over the term of the lease is approximately $473,000. This
lease expires June 4, 2006.
SCHAUMBURG, ILLINOIS
This 73,500 square foot warehouse facility, located in
Schaumburg, Illinois, is 100% net-leased to Federal Express
Corporation. The average annual rental income over the term
of the lease is approximately $463,000. This lease expires
April 1, 2007.
TETERBORO, NEW JERSEY
The Company is a partner in a limited liability
company, Hollister `97, LLC, representing a 25% ownership
interest. The sole business of this LLC is the ownership
and operation of the Hollister Corporate Park in Teterboro,
New Jersey. Under the agreement, the Company is to receive
a cumulative preferred 11% annual return on its investment.
BURR RIDGE, ILLINOIS
This 12,477 square foot warehouse facility, located in
Burr Ridge, Illinois, is 100% net-leased to the Sherwin-
Williams Company. The average annual rental income over the
term of the lease is $151,000. This lease expires on
October 31, 2009.
Page 6
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
ROMULUS, MICHIGAN
This 72,000 square foot warehouse facility, located in
Romulus, Michigan, is 100% net-leased to Federal Express
Corporation. The average annual rental over the term of the
lease is approximately $396,000. This lease expires on
November 30, 2007.
LIBERTY, MISSOURI
This 98,200 square foot warehouse facility, located in
Liberty, Missouri, is 100% net- leased to the Johnson
Controls, Inc. The average annual rental income over the
term of the lease is approximately $705,000. This lease
expires on December 18, 2007. Johnson Controls, Inc. has
sub-leased this facility.
OMAHA, NEBRASKA
This 88,140 square foot warehouse facility, located in
Omaha, Nebraska, is 100% net-leased to Federal Express
Corporation. The average annual rental income over the term
of the lease is approximately $516,000. This lease expires
October 31, 2008.
CHARLOTTESVILLE, VIRGINIA
This 49,900 square foot warehouse facility, located in
Charlottesville, Virginia, is 100% net-leased to Federal
Express Corporation. The average annual rental income over
the term of the lease is approximately $363,000. This lease
expires October 31, 2008.
JACKSONVILLE, FLORIDA
This 95,883 square foot warehouse facility, located in
Jacksonville, Florida, is 100% net-leased to Federal Express
Corporation. The average annual rental income over the term
of the lease is approximately $526,000. This lease expires
May 31, 2008.
UNION CITY, OHIO
This 85,508 square foot warehouse facility, located in
Union City, Ohio, is 100% net-leased to RPS Ground, a
subsidiary of Federal Express Corporation. The average
annual rental income over the term of the lease is
approximately $393,000. This lease expires August 1, 2009.
RICHMOND, VIRGINIA
This 112,799 square foot warehouse facility, located in
Richmond, Virginia was purchased in fiscal 2001. This
warehouse facility is 100% net-leased to Federal Express
Corporation. The average annual rental income over the term
of the lease is approximately $689,000. This lease expires
October 21, 2009.
Page 7
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES (CONT'D)
ST. JOSEPH, MISSOURI
This 388,671 square foot warehouse facility, located in
St. Joseph, Missouri, was purchased in fiscal 2001 through
the assumption of a leasehold interest. This warehouse
facility is 100% net-leased to the Mead Corporation. The
average annual rental income over the term of the lease is
approximately $1,239,000. This lease expires November 30,
2015.
NEWINGTON, CONNECTICUT
This 54,812 square foot warehouse facility, located in
Newington, Connecticut, was purchased in fiscal 2001. This
warehouse facility is 100% net-leased to Keebler Company.
The average annual rental income over the term of the lease
is approximately $340,000. This lease expires February 28,
2011.
CUDAHY, WISCONSIN
This 114,123 square foot warehouse facility, located in
Cudahy, Wisconsin, was purchased in fiscal 2001. This
warehouse facility is 100% net-leased to Fed Ex Ground
Package System, Inc., a subsidiary of Federal Express
Corporation. The average annual rental income over the term
of the lease is approximately $572,000. This lease expires
March 31, 2011.
BELTSVILLE, MARYLAND
This 109,705 square foot warehouse facility, located in
Beltsville, Maryland, was purchased in fiscal 2001. This
warehouse facility is 100% net-leased to Fed Ex Ground
Package System, Inc., a subsidiary of Federal Express
Corporation. The average annual rental income over the term
of the lease is approximately $892,000. This lease expires
December 31, 2010.
Page 8
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of
2001.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The shares of Class A common stock of Monmouth Real
Estate Investment Corporation are traded on the National
Association of Securities Dealers Automated Quotation
(NASDAQ symbol MNRTA). The per share range of high and low
market prices and distributions paid to shareholders during
each quarter of the last two years were as follows:
2001 2000
Market Price Market Price
Fiscal Fiscal
Qtr. High Low Distrib Qtr. High Low Distrib
First 5.188 4.750 $.145 First 5.375 4.625 $.145
Second 5.875 4.813 .145 Second 5.188 4.500 .145
Third 6.130 5.500 .145 Third 5.375 4.563 .145
Fourth .145 Fourth 5.375 4.813 .145
_____ _____
$. 58 $ .58
=== ===
The over-the-counter market quotations reflect the inter-
dealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual
transactions.
On September 30, 2001, the closing price was $6.15.
As of September 30, 2001, there were approximately
1,091 shareholders of record who held shares of Class A
common stock of the Company.
It is the Company's intention to continue distributing
quarterly dividends. On October 3, 2001 the Company
declared a dividend of $.145 per share to be paid on
December 17, 2001 to shareholders of record November 15,
2001.
Page 9
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth selected financial and
other information for the Company as of and for each of the
years in the five year period ended September 30, 2001.
This table should be read in conjunction with all of the
financial statements and notes thereto included elsewhere
herein.
September 30,
2001 2000 1999 1998 1997
INCOME STATEMENT DATA:
Total
Income $ 12,908,204 $ 10,397,973 $ 8,751,219 $ 6,963,825 $ 5,798,699
Total
Expenses 8,785,150 6,897,207 6,214,993 4,493,595 3,965,002
Gains on
Sales of
Assets -
Investment
Property -0- 88,631 1,260,534 29,692 47,457
Net Income 4,123,054 3,589,397 3,796,760 2,499,922 1,881,154
Net Income
Per Share
Basic And
Diluted .43 .44 .57 .50 .46
BALANCE SHEET DATA:
Total
Assets $119,433,470 $86,003,905 $79,424,958 $ 55,582,845 $ 44,942,723
Long-Term
Obligations 56,748,555 33,780,968 33,182,307 24,436,941 20,498,016
Shareholders'
Equity 49,929,539 41,013,926 36,276,677 27,404,822 19,889,288
OTHER INFORMATION:
Average
Number Of
Shares
Outstanding 9,504,806 8,078,877 6,627,344 4,997,775 4,047,759
Funds from
Operations* $ 6,289,381 $ 5,292,384 $ 4,220,279 $ 3,647,345 $ 2,821,902
Cash
Dividends
Per Share .58 .58 .5675 .53 .51
*Defined as net income, excluding gains (or losses) from
sales of depreciable assets plus depreciation, plus
adjustments for unconsolidated partnerships ($84,601 for
1999). Includes gain on sale of land of $88,631 in 2000.
Funds from Operations do not replace net income determined
in accordance with generally accepted accounting principles
(GAAP) as a measure of performance or net cash flows as a
measure of liquidity. Funds from Operations is not a GAAP
measure of operating performance and should be considered as
a supplemental measure of operating performance used by real
estate investment trusts.
Page 10
ITEM 6 - SELECTED FINANCIAL DATA (CONT'D
SUMMARY OF OPERATIONS BY PROPERTY
FOR THE YEARS ENDED SEPTEMBER 30,
2001 2000 1999
Net Rental Income:
Somerset, New Jersey $ 270,716 $ 247,795 $ 257,143
Ramsey, New Jersey 114,702 157,488 165,994
Monaca, Pennsylvania 145,484 187,031 190,435
Monsey, New York -0- -0- 115,534
Orangeburg, New York 155,249 220,767 203,916
South Brunswick,
New Jersey 448,308 412,634 404,304
Greensboro,
North Carolina 207,361 192,358 182,442
Jackson, Mississippi 78,996 72,937 70,372
Franklin, Massachusetts 307,996 278,733 259,637
Wichita, Kansas 53,132 31,117 23,714
Urbandale, Iowa 28,631 88,628 110,817
Richland, Mississippi 69,508 58,738 51,872
O'Fallon, Missouri 130,480 101,646 85,811
Virginia Beach, Virginia (56,485) 110,359 107,227
Fayetteville,
North Carolina 107,017 89,158 93,972
Schaumburg, Illinois 105,769 80,094 64,422
Burr Ridge, Illinois 33,355 41,756 9,448
Romulus, Michigan 104,130 93,874 90,261
Liberty, Missouri 222,353 206,755 120,806
Omaha, Nebraska 126,956 113,526 121,793
Charlottesville, Virginia 105,075 94,450 77,251
Jacksonville, Florida 132,789 114,921 (18,300)
Union City, Ohio 62,314 41,177 -0-
Richmond, Virginia 198,862 -0- -0-
St. Joseph, Missouri 155,660 -0- -0-
Newington, Connecticut 26,670 -0- -0-
Cudahy, Wisconsin 35,275 -0- -0-
Beltsville, Maryland 115,176 -0- -0-
__________ ___________ __________
Net Rental Income 3,485,479 3,035,942 2,788,871
Net Investment and
Other Income 1,613,977 1,253,695 465,602
___________ ___________ __________
TOTAL 5,099,456 4,289,637 3,254,473
General & Administrative
Expenses (976,402) (788,871) (718,247)
___________ ___________ __________
Income Before Gains 4,123,054 3,500,766 2,536,226
Gain on Sale of Assets-
Investment Property -0- 88,631 1,260,534
___________ ___________ __________
NET INCOME $ 4,123,054 $ 3,589,397 $ 3,796,760
=========== =========== ==========
Page 11
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Monmouth Real Estate Investment Corporation (the
Company) operates as a real estate investment trust deriving
its income primarily from real estate rental operations. At
September 30, 2001, the Company's shareholders' equity
increased to $49,929,539 as compared to $41,013,926 in 2000
principally due to proceeds from the dividend reinvestment
and stock purchase plan.
The Company's ability to generate cash adequate to meet
its needs is dependent primarily on income from its real
estate investments, the sale of real estate investments and
securities, refinancing of mortgage debt, leveraging of
real estate investments, availability of bank borrowings,
proceeds from the Dividend Reinvestment and Stock Purchase
Plan, and access to the capital markets. Purchases of new
properties, payments of expenses related to real estate
operations, capital improvements programs, debt service,
management and professional fees, and dividend requirements
place demands on the Company's liquidity.
The Company intends to operate its existing properties
from the cash flows generated by the properties. However,
the Company's expenses are affected by various factors,
including inflation. Increases in operating expenses raise
the breakeven point for a property and, to the extent that
they cannot be passed on through higher rents, reduce the
amount of available cash flow which can adversely affect the
market value of the property.
The Company's focus is on real estate investments.
During the past nine years, the Company purchased twenty-
four net-leased warehouse facilities at an aggregate cost of
approximately $110,000,000.
The Company financed these purchases primarily through
mortgages on its acquisitions. The Company also has a
secured $6,345,000 line of credit of which approximately
$3,237,000 was available at September 30, 2001. Interest is
at Prime and is due monthly. This credit line expires on
November 29, 2002.
The Company expects to make additional real estate
investments from time to time. In 2002, the Company plans
to acquire approximately $30,000,000 of net-leased
industrial properties. The funds for these acquisitions may
come from the Company's available line of credit, other bank
borrowings and proceeds from the Dividend Reinvestment and
Stock Purchase Plan. To the extent that funds or
appropriate properties are not available, fewer acquisitions
will be made.
The Company also invests in debt and equity securities
of other REITs. The Company from time to time may purchase
these securities on margin. The margin loans at September
30, 2001 totalled approximately $4,389,000. During fiscal
2001, the Company's securities portfolio decreased by
approximately $3,900,000 due to sales of approximately
$6,900,000 offset by purchases of approximately $800,000 and
change in unrealized gain of approximately $2,200,000.
Page 12
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONT'D)
Funds generated are expected to be sufficient to meet
debt service requirements and capital expenditures of the
Company.
Cash provided from operating activities amounted to
$4,785,236 in 2001 as compared to $4,583,749 in 2000 and
$4,493,792 in 1999.
At September 30, 2001, the Company had total
liabilities of $69,503,931 and total assets of $119,433,470.
The Company believes that it has the ability to meet its
obligations and to generate funds for new investments.
The Company has a Dividend Reinvestment and Stock
Purchase Plan. During 2001, a total of $8,179,845 in
additional capital was raised. The success of the Plan has
resulted in a substantial improvement in the Company's
liquidity and capital resources in 2001. It is anticipated,
although no assurances can be given, that a comparable level
of participation will continue in the Plan in fiscal 2002.
Therefore, the Company anticipates that the Plan will result
in further increased liquidity and capital resources in
fiscal 2002.
Results of Operations
The Company's activities primarily generate rental
income. Net income for the fiscal year ended September 30,
2001 was $4,123,054 as compared to $3,589,397 in 2000 and
$3,796,760 in 1999. Net rental income, defined as rental
and occupancy charges reduced by direct operating expenses,
management fees, interest and depreciation, for the fiscal
year ended September 30, 2001 was $3,485,479 as compared to
$3,035,942 in 2000 and $2,788,871 in 1999. The following is
a discussion of the results of operations by location for
2001 as compared to 2000 and 2000 as compared to 1999:
Somerset, New Jersey
Net rental income increased during 2001 as compared to
2000 due to a decrease in snow removal costs. Net rental
income decreased during 2000 as compared to 1999 primarily
as a result of an increase in management fees.
Ramsey, New Jersey
Net rental income decreased during 2001 as compared to
2000 due to an increase in repairs and maintenance. Net
rental income decreased during 2000 as compared to 1999
primarily as a result of an increase in professional fees.
Monaca, Pennsylvania
Net rental income decreased during 2001 as compared to
2000 primarily as a result of an increase in insurance costs
and bad debt expense. Net rental income remained relatively
stable for 2000 as compared to 1999.
Page 13
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONT'D)
Monsey, New York
Due to the sale of the property in March, 1999, net
rental income decreased for 2001 and 2000 as compared to
1999.
Orangeburg, New York
Net rental income decreased in 2001 as compared to 2000
due to a renegotiation of the lease. The new average
monthly rental is $26,950. Net rental income increased in
2000 as compared to 1999 due to lower interest costs on
related borrowings outstanding.
South Brunswick, New Jersey
Net rental income increased in 2001 as compared to 2000
due to a lease extension to December 31, 2003 with McMaster
Carr Supply Co. The new average monthly rental is
approximately $59,000. Net rental income remained
relatively stable in 2000 as compared to 1999.
Greensboro, North Carolina
Net rental income increased during 2001 as compared to
2000 due to an increase in the annual rent and to lower
interest charges. Net rental income increased in 2000 as
compared to 1999 due to an increase in tenant
reimbursements.
Jackson, Mississippi
Net rental income remained relatively stable during
2001, 2000 and 1999.
Franklin, Massachusetts
Net rental income increased during 2001 as compared to
2000 primarily due to a decrease in management fees
allocated to this property. Net rental income increased
during 2000 as compared to 1999 primarily due to an increase
in tenant reimbursements.
Wichita, Kansas
Net rental income increased during 2001 as compared to
2000 due to an increase in the annual rent and to lower
interest charges. Net rental income remained relatively
stable in 2000 as compared to 1999.
Urbandale, Iowa
Net rental income decreased during 2001 and 2000 as
compared to 1999 primarily due to a decrease in rent from a
new lease.
Richland, Mississippi
Net rental income remained relatively stable during
2001, 2000 and 1999.
O'Fallon, Missouri
Net rental income increased in 2001 and 2000 as
compared to 1999 primarily due to lower interest costs on
related borrowings outstanding.
Page 14
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONT'D)
Virginia Beach, Virginia
Net rental income decreased during 2001 as compared to
2000 as a result of the expiration of the lease. This
facility is currently vacant. Net rental income remained
relatively stable in 2000 as compared to 1999.
Fayetteville, North Carolina
Net rental income increased during 2001 as compared to
2000 primarily due to a decrease in management fees
allocated to this property. Net rental income remained
relatively stable in 2000 as compared to 1999.
Schaumburg, Illinois
Net rental income increased in 2001 as compared to 2000
due to a decrease in management fees allocated to this
property. Net rental income increased in 2000 as compared
to 1999 due to an increase in tenant reimbursements.
Burr Ridge, Illinois
Net rental income decreased in 2001 as compared to 2000
and increased in 2000 as compared to 1999 due primarily to
an increase in tenant reimbursements in 2000.
Romulus, Michigan
Net rental income remained relatively stable in 2001,
2000 and 1999.
Liberty, Missouri
Net rental income remained relatively stable in 2001 as
compared to 2000. Net rental income increased in 2000 as
compared to 1999 due to accelerated depreciation expense
recognized in 1999.
Omaha, Nebraska
Net rental income remained relatively stable during
2001, 2000 and 1999.
Charlottesville, Virginia
Net rental income remained relatively stable during
2001 as compared to 2000. Net rental income increased
during 2000 as compared to 1999 due to a full year's income
and expenses. This warehouse facility was acquired in
April, 1999.
Jacksonville, Florida
Net rental income remained relatively stable during
2001 as compared to 2000. Net rental income increased
during 2000 as compared to 1999 due to a full year's income
and expenses.
Union City, Ohio
Net rental income increased during 2001 as compared to
2000 due to a full year's income and expense. This
warehouse facility was acquired in February 2000.
Page 15
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION ANDRESULTS OF OPERATIONS (CONT'D)
Richmond, Virginia
This warehouse facility was acquired in November 2000.
It is net-leased to Federal Express Corporation. The
average monthly rental income over the term of the lease is
approximately $57,388.
St. Joseph, Missouri
This warehouse facility was acquired in February 2001.
It is net-leased to the Mead Corporation. The average
monthly rental income over the term of the lease is
approximately $103,218.
Newington, Connecticut
This warehouse facility was acquired in March 2001. It
is net-leased to Keebler Company. The average monthly
rental income over the term of the lease is approximately
$28,352.
Cudahy, Wisconsin
This warehouse facility was acquired in April 2001. It
is net-leased to Fed Ex Ground Package System, Inc., a
subsidiary of Federal Express Corporation. The average
monthly rental income over the term of the lease is
approximately $47,677.
Beltsville, Maryland
This warehouse facility was acquired in April 2001. It
is net-leased to Fed Ex Ground Package System, Inc., a
subsidiary of Federal Express Corporation. The average
monthly rental income over the of the lease is approximately
$74,303.
Page 16
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONT'D)
The Company also generated net investment and other
income from its investments in securities available for
sale, mortgages receivable and Hollister '97, LLC. Net
investment and other income, which include interest and
dividend income, gain on securities available for sales
transactions net, reduced by margin loan interest expense,
increased during 2001 and 2000 as compared to 1999 primarily
due to the purchases of securities available for sale and to
a gain of $110,960 on the sale of securities available for
sale during 2000. These securities have an average
dividend yield in excess of 10%.
General and administrative expenses increased during
2001 and 2000 as compared to 1999 primarily as a result of
increased personnel costs due to additional employees.
Funds from operations (FFO), defined as net income,
excluding gains (or losses) from sales of depreciable
assets, plus depreciation, plus adjustments for
unconsolidated partnerships ($-0-, $-0-, and $84,601 for
2001, 2000 and 1999, respectively), increased from
$4,220,279 for the year ended September 30, 1999 to
$5,292,384 for the year ended September 30, 2000 to
$6,289,381 for the year ended September 30, 2001. FFO does
not replace net income (determined in accordance with
generally accepted accounting principles) as a measure of
performance or net cash flows as a measure of liquidity.
FFO should be considered as a supplemental measure of
operating performance used by real estate investment trusts.
During 1999, the Company realized a gain of
approximately $1,240,000 on the sale of the Monsey, New York
property. The Company also recognized a deferred gain from
the Howell Township installment sale of approximately $-0-,
$88,631 and $20,000 for 2001, 2000 and 1999, respectively.
The gain increased in 2000 as the note was paid in full by
the purchaser of the property.
Safe Harbor Statement
This Form 10-K contains various "forward-looking
statements" within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934, and the Company
intends that such forward-looking statements be subject to
the safe harbors created thereby. The words "may", "will",
"expect", "believe", "anticipate", "should", "estimate", and
similar expressions identify forward-looking statements.
The forward-looking statements reflect the Company's current
views with respect to future events and finance performance,
but are based upon current assumptions regarding the
Company's operations, future results and prospects, and are
subject to many uncertainties and factors relating to the
Company's operations and business environment which may
cause the actual results of the Company to be materially
different from any future results expressed or implied by
such forward-looking statements.
Such factors include, but are not limited to, the
following: (i) changes in the general economic climate;
(ii) increased competition in the geographic areas in which
the Company operates; (iii) changes in government laws and
regulations; and (iv) the ability of the Company to
continue to identify, negotiate and acquire properties on
terms favorable to the Company. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements whether as a result of new information, future
events, or otherwise.
Page 17
ITEM 7a - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company is exposed to interest rate changes
primarily as a result of its line of credit and long-term
debt used to maintain liquidity and fund capital
expenditures and acquisitions of the Company's real estate
investment portfolio. The Company's interest rate risk
management objectives are to limit the impact of interest
rate changes on earnings and cash flows and to lower its
overall borrowing costs. To achieve its objectives, the
Company borrows primarily at fixed rates. At September 30,
2001, the Company had $54,963,043 of fixed rate mortgage
notes payable, with an average interest rate of 7.77%.
These mortgages are due over terms ranging from 2004 to 2021
(See Item 14, Note 6 of the Notes to the Financial
Statements for additional information). At September 30,
2001, the fair and carrying value of fixed rate mortgage
notes payable amounted to $56,313,559 and $54,963,043,
respectively. The Company also has $5,461,711 of variable
rate mortgage notes payable due in 2015. The interest rate
of this debt at September 30, 2001 was 4.44%. In addition,
the Company has approximately $8,000,000 in variable rate
debt due on demand. This debt is primarily margin loans
secured by marketable securities and a line of credit. The
interest rates on these loans range from 5.375% to 6% at
September 30, 2001. The carrying value of the Company's
variable rate debt approximates fair value at September 30,
2001.
The Company also invests in both debt and equity
securities of other REITs and is primarily exposed to equity
price risk from adverse changes in market rates and
conditions. All securities are classified as available for
sale and are carried at fair value. The Company has no
significant interest rate risk relating to debt securities
as they are short-term in nature.
Page 18
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed
in Part VI, Item 14 are incorporated herein by reference and
filed as part of this report.
The following is the Unaudited Selected Quarterly
Financial Data:
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED
FISCAL 2001 12/31/00 03/31/01 06/30/01 09/30/01
Total Income $2,785,002 $3,070,771 $3,510,196 $3,542,235
Total Expenses 1,647,242 2,225,187 2,398,355 2,514,366
Net Income 1,137,760 845,584 1,111,841 1,027,869
Net Income per
Share .13 .09 .11 .10
FISCAL 2000 12/31/99 3/31/00 6/30/00 9/30/00
Total Income $2,688,990 $2,553,413 $2,568,216 $2,587,354
Total Expenses 1,838,720 1,631,334 1,685,280 1,741,873
Gains on Sales of
Assets-Investment
Property 88,631 -0- -0- -0-
Net Income 938,901 922,079 882,936 845,481
Net Income Per
Share .12 .12 .11 .09
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
Page 19
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Present Position with
the Company; Business
Experience During Past Shares Percent
Nominee; Five Years; Other Director Owned Of
Age Directorships Since (1) Stock
Ernest V. Treasurer (1968 to 1968 12,969 0.12%
Bencivenga present) and Director.
(83) Financial Consultant
(1976 to present);
Treasurer and Director
(1961 to present) and
Secretary (1967 to
present) of Monmouth
Capital Corporation;
Director (1969 to
present) and
Secretary/Treasurer
(1984 to present) of
United Mobile Homes,
Inc.
Anna T. Controller (1991 to 1993 23,710 0.23%
Chew present) and Director. (2)
(43) Certified Public
Accountant; Controller
(1991 to present) and
Director (1994 to
present) of Monmouth
Capital Corporation;
Vice President and Chief
Financial Officer (1995
to present) and
Director (1994 to
present) of United
Mobile Homes, Inc.
Daniel D. Director. Attorney at 1989 25,748 0.25%
Cronheim Law (1982 to present);
(46) Executive Vice President
(1989 to present) and
General Counsel (1983 to
present) of David
Cronheim Company.
Matthew Director. Attorney at 2000 12,146 .12%
I.Hirsch Law (1985 to present);
(42) Adjunct Professor of Law
(1993 to present),
Widener University
School of Law.
Page 20
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(CONT'D)
Present Position with
the Company; Business
Experience During Past Shares Percent
Nominee; Five Years; Other Director Owned Of
Age Directorships Since (1) Stock
Charles P. Director. Investor; 1974 37,887 0.37 %
Kaempffer Director (1970 to (3)
(64) present) of Monmouth
Capital Corporation;
Director (1969 to
present) of United
Mobile Homes, Inc.; Vice
Chairman and Director
(1996 to present) of
Community Bank of New
Jersey.
Eugene W. President (1968 to 1968
Landy present) and Director. 469,865 4.58%
(68) Attorney at Law; (4)
President and Director
(1961 to present) of
Monmouth Capital
Corporation; Chairman of
the Board (1995 to
present), President
(1969 to 1995) and
Director (1969 to
present) of United
Mobile Homes, Inc.
Samuel A. Director. Attorney at 1989 165,188 1.61%
Landy Law (1987 to present); (5)
(41) President (1995 to
present), Vice President
(1991 to 1995) and
Director (1992 to
present) of United
Mobile Homes, Inc.;
Director (1994 to
present) of Monmouth
Capital Corporation.
John R. Senior Portfolio Manager 2001 14,572 0.14%
Sampson at Fox Asset Management, (6)
(47) Inc. (1998 to present);
Principal at Pharos
Management and Principia
Partners LLC (1995 to
1998) specializing in
fixed income consulting
and research for the
securities industry.
Page 21
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(CONT'D)
Present Position with
the Company; Business
Experience During Past Shares Percent
Nominee; Five Years; Other Director Owned Of
Age Directorships Since (1) Stock
Peter J. Director of Real Estate 2001 1,000 0.01%
Weidhorn Management/Acquisitions
(54) at Kushner Companies
(2000 to present);
Director (1994 to 1997)
of Monmouth Capital
Corporation; President
(1981 to 1998) of WNY
Management Corp.;
Chairman of the Board,
President and Director
(1998 to 2000) of WNY
Group, Inc.; Trustee and
former Chairman of the
Board of CentraState
Healthcare System;
Treasurer and Trustee of
the Union of American
Hebrew Congregations.
(1) Beneficial ownership, as defined herein, includes Class
A Common Stock as
to which a person has or shares voting and/or
investment power.
(2) Held jointly with Ms. Chew's husband; includes 7,685
shares held in Ms. Chew's 401 (k) Plan.
(3) Includes (a) 14,909 shares owned by Mr. Kaempffer's
wife; and (b) 1,080 shares in joint name with Mrs.
Kaempffer.
(4) Includes (a) 99,939 shares owned by Mr. Landy's wife;
(b) 161,764 shares held in the Landy & Landy, P.C.
Profit Sharing Plan, of which Mr. Landy is a Trustee
with power to vote; and (c) 126,585 shares held in the
Landy & Landy, P.C. Pension Plan, of which Mr. Landy is
a Trustee with power to vote. Excludes 40,655 shares
held by Mr. Landy's adult children, in which he
disclaims any beneficial interest.
(5) Includes (a) 4,415 shares owned by Mr. Landy's wife,
and (b) 53,451 shares held in custodial accounts for
Mr. Landy's minor children under the Uniform Gift to
Minors' Act in which he disclaims any beneficial
interest, but has power to vote and (c) 1,000 shares
held in the Samuel Landy Family Limited Partnership and
(d) 22,210 shares held in Mr. Landy's 401 (k) Plan.
(6) Includes 2,000 shares held in custodial accounts for
Mr. Sampson's minor children under the Uniform Gift to
Minor's Act in which he disclaims any beneficial
interest, but has power to vote.
The Directors as a class own 763,085 shares, which is
7.43% of the outstanding shares.
Page 22
ITEM 11 - EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table shows
compensation paid or accrued by the Company for services
rendered during 2001, 2000 and 1999 to the Chief Executive
Officer. There were no other executive officers whose
aggregate cash compensation exceeded $100,000:
Annual Compensation
Name and Principal Position Year Salary Bonus Other
Eugene W. Landy 2001 $150,000 $ 30,000 $105,200(1)
Chief Executive Officer 2000 130,000 80,000 72,000
1999 110,000 None 79,700
(1) Represents Director's fees of $8,700 paid to Mr.
Landy, legal fees of $47,500 paid to the firm of Eugene W.
Landy, and $49,000 accrual for pension and other benefits in
accordance with Mr. Landy's employment contract.
Stock Option Plan
There were no stock options granted to the executive
officer named in the Summary Compensation Table, during the
year ended September 30, 2001.
The following table sets forth for the executive
officer named in the Summary Compensation Table, information
regarding stock options outstanding at September 30, 2001:
Value of
Unexercised
Options
Number of Unexercised at Year-End
Shares Value Options at Year-End Exercisable/
Name Exercised Realized Exercisable/Unexercisable Unexercisable
Eugene W.
Landy -0- N/A 215,000 / -0- $42,250/$42,250
Employment Agreement
On December 9, 1994, the Company and Eugene W. Landy
entered into an Employment Agreement under which Mr. Landy
receives an annual base compensation of $150,000 (as
amended) plus bonuses and customary fringe benefits,
including health insurance and five weeks vacation.
Additionally, there will be bonuses voted by the Board of
Directors. The Employment Agreement is terminable by either
party at any time, subject to certain notice requirements.
Page 23
ITEM 11 - EXECUTIVE COMPENSATION (CONT'D)
On severance of employment for any reason, Mr. Landy
will receive severance of $300,000, payable $100,000 on
severance and $100,000 on the first and second anniversaries
of severance. In the event of disability, Mr. Landy's
compensation shall continue for a period of three years,
payable monthly. On retirement, Mr. Landy shall receive a
pension of $40,000 a year for ten years, payable in monthly
installments. In the event of death, Mr. Landy's designated
beneficiary shall receive $300,000, $150,000 thirty days
after death and the balance one year after death. The
Employment agreement terminated December 31, 2000, and was
automatically renewed and extended for successive one-year
periods.
Other Information
The Directors received a fee of $1,000 for each Board
Meeting attended, and an additional fixed annual fee of
$3,800 payable quarterly. Effective April 1, 2001, the
fixed annual fee was increased to $7,600. Directors
appointed to house committees receive $150 for each meeting
attended. Those specific committees are Compensation
Committee, Audit Committee and Stock Option Committee.
Except for specific agreements, the Company has no
retirement plan in effect for Officers, Directors or
employees and, at present, has no intention of instituting
such a plan.
Cronheim Management Services received the sum of
$220,521 in 2001 for management fees. Effective August 1,
1998, the Company entered into a new management contract
with Cronheim Management Services. Under this contract,
Cronheim Management Services receives 3% of gross rental
income on certain properties for management fees. Cronheim
Management Services provides sub-agents as regional managers
for the Company's properties and compensates them out of
this management fee. Management believes that the aforesaid
fees are no more than what the Company would pay for
comparable services elsewhere.
Report of Board of Directors on Executive Compensation
Overview and Philosophy
The Company has a Compensation Committee consisting of
two independent outside Directors. This Committee is
responsible for making recommendations to the Board of
Directors concerning compensation. The Compensation
Committee takes into consideration three major factors in
setting compensation.
The first consideration is the overall performance of
the Company. The Board believes that the financial
interests of the executive officers should be aligned with
the success of the Company and the financial interests of
its shareholders. Increases in funds from operations, the
enhancement of the Company's equity portfolio, and the
success of the Dividend Reinvestment and Stock Purchase Plan
all contribute to increases in stock prices, thereby
maximizing shareholders' return.
Page 24
ITEM 11 - EXECUTIVE COMPENSATION (CONT'D)
Overview and Philosophy (Cont'd)
The second consideration is the individual achievements
made by each officer. The Company is a small real estate
investment trust (REIT). The Board of Directors is aware of
the contributions made by each officer and makes an
evaluation of individual performance based on their own
familiarity with the officer.
The final criteria in setting compensation is
comparable wages in the industry. In this regard, the REIT
industry maintains excellent statistics.
Evaluation
The Company's funds from operations continue to
increase. The Committee reviewed the growth of the Company
and progress made by Eugene W. Landy, Chief Executive
Officer. Mr. Landy is under an employment agreement with
the Company. His base compensation under this contract was
increased in 2001 to $150,000 per year. In fiscal 2001,
Mr. Landy was also paid a total bonus of $30,000.
Comparative Stock Performance
The following line graph compares the total return
of the Company's common stock for the last five fiscal years
to the NAREIT All REIT Total Return Index, published by the
National Association of Real Estate Investment Trusts
(NAREIT), and the S&P 500 Index for the same period. The
total return reflects stock price appreciation and dividend
reinvestment for all three comparative indices. The
information herein has been obtained from sources believed
to be reliable, but neither its accuracy nor its
completeness is guaranteed.
Monmouth
Real
Estate
Investment
Year Corporation NAREIT S&P 500
1996 100 100 100
1997 128 140 140
1998 131 119 153
1999 125 109 196
2000 132 130 222
2001 177 148 163
Page 25
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
On September 30, 2001, no person owned of record or was
known by the Company to own beneficially five or more
percent of the shares of the Company.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Certain relationships and related party transactions
are incorporated herein by reference to Item 14 (a) (1) (vi)
Note 9 of the Notes to the Financial Statements - Related
Party Transactions.
Page 26
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
PAGE(S)
(a) (1) The following Financial Statements are
filed as part of this report:
(i) Independent Auditors' Report 29
(ii) Balance Sheets as of September 30, 2001
and 2000 30
(iii) Statements of Income for the years ended
September 30, 2001, 2000 and 1999 31
(iii) Statements of Shareholders' Equity for
the years ended September 30, 2001, 2000
and 1999 32
(iv) Statements of Cash Flows for the years
ended September 30, 2001, 2000 and 1999 33
(vi) Notes to the Financial Statements 34 - 49
(a) (2) The following Financial Statement
Schedule is filed as part of this report:
(i) Schedule III - Real Estate and Accumulated
Depreciation as of September 30, 2001 50-52
All other schedules are omitted for the reason that they are
not required, are not applicable, or the required
information is set forth in the financial statements or
notes hereto.
Page 27
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) (3) Exhibits
(3) Articles of Incorporation and By-Laws
(i) Reference is hereby made to the Certificate of
Incorporation of Monmouth Real Estate
Investment Corporation filed with the
Securities and Exchange Commission on April,
13, 1999 on Form S-4 (Registration No. 33-34103).
(ii) Reference is hereby made to the By-laws of
Monmouth Real Estate Investment
Corporation filed with the Securities and Exchange
Commission on April 3, 1990 on Form S-4
(Registration No. 33-34103).
(10) Material Contracts
(i) Employment Agreement with Mr. Eugene W. Landy
dated December 9, 1994 is incorporated by reference
to that filed with the Company's Form 10-K filed with
the Securities and Exchange Commission on December 28,
1994.
(ii) Employment Agreement with Mr. Ernest V. Bencivenga
dated November 9, 1993 is incorporated by reference
to that filed with the Company's Form 10-K filed
with the Securities and Exchange Commission on
December 28, 1994.
(28) Additional Exhibits
Reference is hereby made to the Agreement and Plan of
Merger dated April 23, 1990 by and between Monmouth Real
Estate Investment Trust and Monmouth Real Estate
Investment Corporation filed with the Securities
and Exchange Commission on April 3, 1990 on Form S-4
(Registration No. 33-34103).
Report on Form 8-K
On July 11, 2000, the Company filed a report on Form 8-K
to announce the appointment of Matthew I. Hirsch to the
Board of Directors. The total number of Directors was
increased to nine.
Page 28
Independent Auditors' Report
The Board of Directors and Shareholders
Monmouth Real Estate Investment Corporation:
We have audited the financial statements of Monmouth Real
Estate Investment Corporation as listed in the accompanying
index. In connection with our audits of the financial
statements, we also have audited the financial statement
schedule as listed in the accompanying index. These
financial statements and financial statement schedule are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of
America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Monmouth Real Estate Investment Corporation as
of September 30, 2001 and 2000, and the results of its
operations and its cash flows for each of the years in the
three-year period ended September 30, 2001 in conformity
with accounting principles generally accepted in the United
States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents
fairly, in all material respects, the information set forth
therein.
/s/ KPMG LLP
Short Hills, New Jersey
December 14, 2001
Page 29
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
BALANCE SHEETS
AS OF SEPTEMBER 30,
ASSETS 2001 2000
Real Estate Investments:
Land $ 18,295,814 $ 11,745,814
Buildings, Improvements and
Equipment, Net of Accumulated
Depreciation of $11,268,700 and
$9,102,373, respectively 84,426,270 54,147,879
___________ __________
Total Real Estate Investments 102,722,084 65,893,693
Cash and Cash Equivalents 147,579 514,090
Securities Available for
Sale at Fair Value 12,948,359 16,838,802
Interest and Other Receivables 847,130 716,744
Prepaid Expenses 53,257 54,808
Lease Costs - Net of Accumulated
Amortization 109,448 79,367
Investments in Hollister '97, LLC 900,399 925,399
Other Assets 1,705,214 981,002
____________ __________
TOTAL ASSETS $ 119,433,470 $ 86,003,905
============ ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
Mortgage Notes Payable $ 60,424,754 $ 36,104,743
Loans Payable 8,204,961 8,022,495
Other Liabilities 874,216 862,741
___________ __________
Total Liabilities 69,503,931 44,989,979
___________ __________
Shareholders' Equity:
Common Stock - Class A - $.01 Par
Value, 16,000,000 Shares
Authorized; 10,264,728 and
8,707,960 Shares Issued and
Outstanding in 2001 and 2000,
respectively 102,647 87,080
Common Stock - Class B - $.01 Par
Value,100,000 Shares Authorized;
No Shares Issued or Outstanding -0- -0-
Additional Paid-in Capital 48,284,847 41,530,173
Accumulated Other Comprehensive
Income (Loss) 1,542,045 (603,327)
Undistributed Income -0- -0-
___________ __________
Total Shareholders' Equity 49,929,539 41,013,926
___________ __________
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $ 119,433,470 $ 86,003,905
=========== ==========
See Accompanying Notes to the Financial Statements
Page 30
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30,
2001 2000 1999
INCOME:
Rental and Occupancy Charges $ 10,524,575 $ 8,559,004 $ 7,982,324
Interest and Dividend Income 1,751,137 1,728,009 768,895
Gain on Securities Available
for Sales Transactions, Net 632,492 110,960 -0-
__________ __________ _________
TOTAL INCOME 12,908,204 10,397,973 8,751,219
__________ __________ _________
EXPENSES:
Interest Expense 4,590,757 3,334,861 2,607,520
Management Fees 220,521 199,432 161,146
Real Estate Taxes 239,828 463,770 696,637
Professional Fees 523,818 486,568 383,269
Operating Expenses 590,052 401,593 428,699
Office and General Expense 370,797 255,896 309,170
Director Fees 83,050 52,100 29,100
Depreciation 2,166,327 1,702,987 1,599,452
_________ _________ _________
TOTAL EXPENSES 8,785,150 6,897,207 6,214,993
_________ _________ _________
Income Before Gains 4,123,054 3,500,766 2,536,226
Gains on Sale of Assets -
Investment Property -0- 88,631 1,260,534
_________ _________ _________
NET INCOME $ 4,123,054 $ 3,589,397 $ 3,796,760
========= ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 9,504,806 8,078,877 6,627,344
========= ========= =========
Diluted 9,506,644 8,078,877 6,627,344
========= ========= =========
PER SHARE INFORMATION:
Income Before Gains $ .43 $ .43 $ .38
Gains on Sale of Assets -
Investment Property -0- .01 .19
_________ _________ ________
NET INCOME - BASIC AND
DILUTED $ .43 $ .44 $ .57
========= ========= ========
See Accompanying Notes to the Financial Statements
Page 31
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30,
Additional
Common Stock Paid-In
Number Amount Capital
Balance
September 30, 1998 5,703,544 $ 57,035 $27,375,711
Shares Issued in
Connection with
the Dividend
Reinvestment
And Stock
Purchase Plan 1,806,105 18,061 9,560,306
Distributions -0- -0- (11,978)
Net Income -0- -0- -0-
Unrealized Net
Holding Losses on
Securities
Available for Sale
Net of Reclass-
Ification
Adjustment -0- -0- -0-
_________ ________ __________
Balance
September 30, 1999 7,509,649 75,096 36,924,039
Shares Issued in
connection with
the Dividend
Reinvestment and
Stock Purchase
Plan 1,198,311 11,984 5,722,605
Distributions -0- -0- (1,116,471)
Net Income -0- -0- -0-
Unrealized Net
Holding Gains
on Securities
Available for
Sale -0- -0- -0-
_________ ________ __________
Balance
September 30, 2000 8,707,960 87,080 41,530,173
Shares Issued in
Connection with
the Dividend
Reinvestment
and Stock
Purchase Plan 1,556,768 15,567 8,164,278
Distributions -0- -0- (1,409,604)
Net Income -0- -0- -0-
Unrealized Net
Holding Gains
on Securities
Available for
Sale Net Of
Reclassici-
cation Adjustment
-0- -0- -0-
_________ ________ __________
Balance
September 30, 2001 10,264,728 $102,647 $48,284,847
========= ======== ==========
See Accompanying Notes to the Financial Statements
Page 32A
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30,
Accumulated
Other
Undistributed Comprehensive Comprehensive
Income Income (Loss) Income
Balance
September 30, 1998 $ -0- $ (27,924)
Shares Issued in
connection with
the Dividend
Reinvestment
And Stock
Purchase Plan -0- -0-
Distributions (3,796,760) -0-
Net Income 3,796,760 -0- $ 3,796,760
Unrealized Net
Holding Losses
On Securities
Available for
Sale Net of
Reclassifi-
cation Adjust-
ment -0- (694,534) (694,534)
_________ _________ _________
Balance
September 30, 1999 -0- (722,458) $ 3,102,226
==========
Shares Issued in
connection with
the Dividend
Reinvestment
And Stock
Purchase Plan -0- -0-
Distributions (3,589,397) -0-
Net Income 3,589,397 -0- $ 3,589,397
Unrealized Net
Holding Gains
on Securities
Available for
Sale -0- 119,131 119,131
_________ __________ _________
Balance
September 30, 2000 -0- (603,327) $ 3,708,528
Shares Issued in
connection with
the Dividend
Reinvestment
And Stock
Purchase Plan -0- -0-
Distributions (4,123,054) -0-
Net Income 4,123,054 -0- $ 4,123,054
Unrealized Net
Holding Gains
On Securities
Available for
Sale Net of
Reclassifi-
cation Adjust-
ment -0- 2,145,372 2,145,372
_________ __________ __________
Balance
September 30, 2001 $ -0- $1,542,045 $ 6,268,426
========== ========== ===========
See Accompanying Notes to the Financial Statements
Page 32B
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30,
2001 2000 1999
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income $ 4,123,054 $ 3,589,397 $ 3,796,760
Noncash Items Included in
Net Income:
Depreciation 2,166,327 1,702,987 1,599,452
Amortization 141,479 143,155 106,082
Gains on Sales of Assets-
Investment Property -0- (88,631) (1,260,534)
Gains on Sales of Securities (632,492) (110,960) -0-
Changes In:
Interest & Other Receivables (130,386) (158,396) 39,375
Prepaid Expenses 1,551 9,193 66,910
Other Assets and Lease Costs (895,772) (490,884) 54,913
Other Liabilities 11,475 (12,112) 90,834
_________ _________ __________
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 4,785,236 4,583,749 4,493,792
_________ _________ __________
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to Land, Buildings
and Improvements (38,994,718) (4,124,411) (13,212,959)
Distribution from
Hollister'97, LLC 25,000 -0- 84,601
Collections on Installment
Sales -0- 125,135 28,528
Purchase of Securities
Available for Sale (828,963) (5,690,807) (10,968,743)
Proceeds from Sale of
Securities Available for Sale 7,497,270 1,406,805 -0-
__________ __________ __________
NET CASH USED IN INVESTING
ACTIVITIES (32,301,411) (8,283,278) (24,068,573)
_________ __________ __________
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from Mortgages 27,220,000 3,000,000 10,968,470
Proceeds from Loans 17,243,367 6,508,288 13,616,656
Principal Payments of
Mortgages (2,899,989) (2,133,016) (1,680,493)
Principal Payments of Loans (17,060,901) (5,432,831) (8,005,000)
Proceeds from Issuance of
Class A Common Stock 6,308,324 4,127,898 8,190,962
Dividends Paid (3,661,137) (3,099,177) (2,421,333)
_________ __________ __________
NET CASH PROVIDED FROM
FINANCING ACTIVITIES 27,149,664 2,971,162 20,669,262
_________ _________ __________
Net (Decrease) Increase in Cash
and Cash Equivalents (366,511) (728,367) 1,094,481
Cash and Cash Equivalents at
Beginning of Year 514,090 1,242,457 147,976
__________ _________ __________
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 147,579 $ 514,090 $ 1,242,457
========= ========== ===========
See Accompanying Notes to the Financial Statements
Page 33
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
Monmouth Real Estate Investment Corporation (the
Company) operates as a real estate investment trust deriving
its income primarily from real estate rental operations. As
of September 30, 2001 and 2000, rental properties consist
twenty-seven and twenty-two commercial holdings,
respectively, These properties are located in New Jersey,
New York, Pennsylvania, North Carolina, Mississippi,
Massachusetts, Kansas, Iowa, Missouri, Illinois, Michigan,
Nebraska, Florida, Virginia, Ohio, Connecticut, Wisconsin
and Maryland.
Use of Estimates
In preparing the financial statements, management is
required to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual
results could differ from these estimates.
Buildings, Improvements and Equipment
Buildings, improvements and equipment are stated at the
lower of depreciated cost or net realizable value.
Depreciation is computed based on the straight-line method
over the estimated useful lives of the assets utilizing a
half-year convention in the year of purchase. These lives
range from 5 to 40 years. The Company accounts for its
undivided interest in the Somerset property based upon its
pro rata share of assets, liabilities, revenues and
expenses. If there is an event or change in circumstances
that indicates that the basis of an investment property may
not be recoverable, management assesses the possible
impairment of value through evaluation of the estimated
future cash flows of the property, on an undiscounted basis,
as compared to the property's current carrying value. A
property's carrying value would be adjusted to fair value,
if necessary, to reflect an impairment in the value of the
property.
Cash Equivalents
Cash equivalents consist of money market funds.
Investment in Hollister `97, LLC
The Company's 25% investment in Hollister `97, LLC is
accounted for under the equity method. Under the equity
method, the initial investment is recorded at cost. The
carrying amount of the investment is increased or decreased
to reflect the Company's share of income or loss and is also
reduced to reflect any dividends received. An unrelated New
Jersey limited partnership owns the remaining 75%.
Page 34
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT"D)
Securities Available for Sale
The Company classifies its securities among three
categories: Held-to-maturity, trading and available-for-
sale.
The Company's securities at September 30, 2001 and
2000 are all classified as available-for-sale and are
carried at fair value. Gains or losses on the sale of
securities are based on identifiable cost and are accounted
for on a trade date basis. Unrealized holding gains and
losses are excluded from earnings and reported as a separate
component of Shareholders' Equity until realized.
A decline in the market value of any security below
cost that is deemed to be other than temporary results in a
reduction in the carrying amount to fair value. Any
impairment would be charged to earnings and a new cost basis
for the security established.
Revenue Recognition
Rental income from tenants with leases having scheduled
rental increases are recognized on a straight-line basis
over the term of the lease.
Gains and Deferred Gains on Installment Sales
Gains on the sale of real estate investments are
recognized by the full accrual method when the criteria for
the method are met. Generally, the criteria are met when
the profit on a given sale is determinable, and the seller
is not obliged to perform significant activities after the
sale to earn the profit. Alternatively, when the foregoing
criteria are not met, the Company recognizes gains by the
installment method. During fiscal 2000, the Company fully
realized $88,631 relating to the deferred gain from the 1986
sale of property located in Howell Township.
Net Income Per Share
Basic net income per share is calculated by dividing
net income by the weighted-average number of common shares
outstanding during the period (9,504,806, 8,078,877 and
6,627,344 in 2001, 2000 and 1999, respectively). Diluted
net income per share is calculated by dividing net income by
the weighted-average number of common shares outstanding
plus the weighted-average number of net shares that would be
issued upon exercise of stock options pursuant to the
treasury stock method (9,506,644, 8,078,877 and 6,627,344 in
2001, 2000 and 1999, respectively). Options in the amount
of 1,838, -0- and -0- are included in the diluted weighted
average shares outstanding for 2001, 2000 and 1999,
respectively.
Page 35
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Stock Option Plan
The Company's stock option plan is accounted for under
the intrinsic value based method as prescribed by Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees". As such, compensation expense would
be recorded on the date of grant only if the current market
price on the underlying stock exceeds the exercise price.
Included in Note 8 to these Financial Statements are the pro
forma disclosures required by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which assumes the fair value based method of
accounting had been adopted.
Income Tax
The Company has elected to be taxed as a Real Estate
Investment Trust (REIT) under Sections 856-858 of the
Internal Revenue Code. The Company will not be taxed on the
portion of its income which is distributed to shareholders,
provided it distributes at least 95% (90% effective for the
year ending September 30, 2002) of its taxable income, has
at least 75% of its assets in real estate investments and
meets certain other requirements for qualification as a
REIT.
Comprehensive Income
Comprehensive income is divided into net income and
other comprehensive income. Other comprehensive income
includes items that are otherwise recorded directly in
equity, such as unrealized gains or losses on securities
available for sale.
Reclassifications
Certain amounts in the financial statements for the
prior years have been reclassified to conform to the
statement presentation for the current year.
NOTE 2 - REAL ESTATE INVESTMENTS
The following is a summary of the cost and
accumulated depreciation of the Company's land,
buildings, improvements and equipment at September 30, 2001
and 2000:
Buildings,
Improvements, Accumulated
September 30, Land And Equipment Depreciation
2001
NEW JERSEY:
Ramsey Industrial $ 52,639 $ 1,354,151 $ 658,565
Building
Shopping 55,182 1,118,418 845,780
Somerset(1) Center
South Industrial 1,128,000 4,145,361 1,147,672
Brunswick Building
PENNSYLVANIA:
Monaca Industrial 330,773 1,946,451 1,172,888
Park
Page 36
NOTE 2 - REAL ESTATE INVESTMENTS (CONT'D)
Buildings,
Improvements, Accumulated
September 30, 2001 (Cont'd) Land And Equipment Depreciation
NEW YORK:
Orangeburg Industrial $ 694,720 $ 2,977,372 $ 838,967
Building
NORTH CAROLINA:
Industrial 172,000 4,467,885 515,508
Fayetteville Building
Greensboro Industrial 327,100 1,853,700 497,990
Building
MISSISSIPPI:
Jackson Industrial 218,000 1,234,586 323,592
Building
Richland Industrial 211,000 1,195,000 229,799
Building
MASSACHUSETTS:
Franklin Industrial 566,000 4,148,000 797,661
Building
KANSAS:
Wichita Industrial 268,000 1,518,000 291,929
Building
IOWA:
Urbandale Industrial 310,000 1,758,000 338,063
Building
MISSOURI:
Liberty Industrial 723,000 6,510,546 584,212
Building
O'Fallon Industrial 264,000 3,302,000 550,183
Building
St. Joseph Industrial 800,000 11,753,964 150,686
Building
VIRGINIA:
Industrial 1,170,000 2,845,000 182,370
Charlottesville Building
Richmond Industrial 1,160,000 6,413,305 82,819
Building
Virginia Industrial 384,600 2,150,000 303,193
Beach Building
ILLINOIS:
Burr Ridge Industrial 270,000 1,236,599 110,928
Building
Schaumburg Industrial 1,039,800 3,694,321 426,249
Building
MICHIGAN:
Romulus Industrial 531,000 3,665,961 329,038
Building
FLORIDA:
Industrial 1,165,000 4,668,080 299,221
Jacksonville Building
NEBRASKA:
Omaha Industrial 1,170,000 4,425,500 283,675
Building
OHIO:
Union City Industrial 695,000 3,342,000 128,608
Building
CONNECTICUT:
Newington Industrial 410,000 2,961,000 37,960
Building
WISCONSIN:
Cudahy Industrial 980,000 5,050,997 64,754
Building
MARYLAND:
Beltsville Industrial 3,200,000 5,958,773 76,390
Building
________ ________ ________
Total at
September 30, 2001 $ 18,295,814 $ 95,694,970 $ 11,268,700
========== ========== ==========
(1) This represents the Company's 2/3 undivided interest in
the property.
Page 37
NOTE 2 - REAL ESTATE INVESTMENTS (CONT'D
Buildings,
Improvements, Accumulated
September 30, 2000 Land And Equipment Depreciation
NEW JERSEY:
Ramsey Industrial $ 52,639 $ 1,175,214 $ 615,515
Building
Shopping 55,182 1,118,418 806,245
Somerset(1) Center
South Industrial 1,128,000 4,133,461 1,005,431
Brunswick Building
PENNSYLVANIA:
Monaca Industrial 330,773 1,842,687 1,092,522
Park
NEW YORK:
Orangeburg Industrial 694,720 2,977,372 744,435
Building
NORTH CAROLINA:
Industrial 172,000 4,467,885 400,949
Fayetteville Building
Greensboro Industrial 327,100 1,853,700 439,104
Building
MISSISSIPPI:
Jackson Industrial 218,000 1,234,586 283,869
Building
Richland Industrial 211,000 1,195,000 199,159
Building
MASSACHUSETTS:
Franklin Industrial 566,000 4,148,000 691,306
Building
KANSAS:
Wichita Industrial 268,000 1,518,000 253,008
Building
IOWA:
Urbandale Industrial 310,000 1,758,000 292,988
Building
MISSOURI:
Liberty Industrial 723,000 6,510,546 417,282
Building
O'Fallon Industrial 264,000 3,302,000 465,520
Building
VIRGINIA:
Industrial 1,170,000 2,845,000 109,422
Charlottesville Building
Virginia Industrial 384,600 2,150,000 248,067
Beach Building
ILLINOIS:
Burr Ridge Industrial 270,000 1,236,599 79,222
Building
Schaumburg Industrial 1,039,800 3,694,321 331,527
Building
MICHIGAN:
Romulus Industrial 531,000 3,653,883 234,145
Building
FLORIDA:
Industrial 1,165,000 4,668,080 179,533
Jacksonville Building
NEBRASKA:
Omaha Industrial 1,170,000 4,425,500 170,205
Building
OHIO:
Union City Industrial 695,000 3,342,000 42,919
Building
__________ __________ _________
Total at
September 30, 2000 $11,745,814 $63,250,252 $ 9,102,373
========== ========== =========
(1) This represents the Company's 2/3 undivided interest in
the property.
Page 38
NOTE 3 - ACQUISITIONS
Fiscal 2001
On November 14, 2000, the Company purchased a 112,799
square foot warehouse facility in Richmond, Virginia from
Regional Development Co., Inc., an unrelated entity. This
warehouse facility is 100% net leased to Federal Express
Corporation. The purchase price, including closing costs,
was approximately $7,565,000. The Company used
approximately $1,806,000 of its Revolving Credit Line with
Fleet Bank (formerly Summit Bank) and obtained a mortgage of
$5,650,000. This mortgage is payable at a variable interest
rate of 1.80% over LIBOR and matures December 1, 2015.
On February 6, 2001, the Company assumed Butler Real
Estate, Inc.'s leasehold interest in a 388,671 square foot
warehouse facility in St. Joseph, Missouri for a total of
$12,490,000. This lease was between Butler Real Estate,
Inc. (Butler), an unrelated entity, and the City of St.
Joseph, Missouri (the City). The Company paid $3,140,000 to
Butler, issued a note for $500,000 to Butler and entered
into a new lease with the City for the remainder. The lease
obligation with the City amounts to $1,022,273 per year for
15 years which equates to $8,850,000 payable at 8.12%. The
note to Butler is also payable at 8.12% over 15 years. This
warehouse facility is 100% subleased to Mead Corporation on
a net-lease for 15 years at $1,238,621 per year based upon
amortization of the total rental payments for scheduled rent
over the remaining lease term. At the end of the lease
term, the Company may purchase the warehouse facility from
the City for $100. The Company has accounted for this
transaction as a purchase.
On March 5, 2001, the Company purchased a 54,812 square
foot warehouse facility in Newington, Connecticut from
Butler. This warehouse facility is 100% net-leased to
Keebler Company. The purchase price, including closing
costs, was approximately $3,400,000. The Company borrowed
approximately $770,000 against its security portfolio with
Prudential Securities and obtained a mortgage of $2,470,000.
This mortgage is payable at the rate of 8.1% and matures May
1, 2016.
On April 23, 2001, the Company purchased a 114,123
square foot warehouse facility in Cudahy, Wisconsin from
Jones Development Company, L.L.C., an unrelated entity.
This warehouse facility is 100% net leased to Fed Ex Ground
Package System, Inc., a subsidiary of Federal Express
Corporation. The purchase price, including closing costs
was approximately $6,100,000. The Company borrowed
approximately $1,700,000 against its security portfolio with
Prudential Securities and obtained a mortgage of $4,250,000
at a rate of 8.15% which matures May 1, 2016.
On April 24, 2001, the Company purchased a 109,705
square foot warehouse facility in Beltsville, Maryland from
Scannell Properties #19, L.L.C., an unrelated entity. This
warehouse facility is 100% net leased to Fed Ex Ground
package System, Inc., a subsidiary of Federal Express
Corporation. The purchase price, including closing costs,
was approximately, $9,200,000. The Company borrowed
$2,800,000 against its security portfolio with Prudential
Securities and obtained a mortgage in the amount of
$6,000,000 at an interest rate of 7.53% which matures on May
1, 2016.
Page 39
NOTE 3 - ACQUISITIONS (CONT'D)
Fiscal 2000
On February 18, 2000, the Company purchased an 85,508
square foot warehouse facility in Union City, Ohio. This
warehouse facility is 100% net-leased to RPS Ground, a
subsidiary of Federal Express Corporation. The total
purchase price, including closing costs, was approximately
$4,037,000. The Company paid approximately $150,000 in
cash, used approximately $890,000 of its credit line with
Summit Bank and obtained a mortgage for $3,000,000. This
mortgage payable is at an interest rate of 8.25% and is due
March 1, 2015.
NOTE 4 - SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
The Company has approximately 2,513,000 square feet of
property, of which approximately 838,000 square feet or 33%
is leased to Federal Express Corporation and approximately
301,000 square feet, or 12%, is leased to Keebler Company.
Rental and occupancy charges from Federal Express
Corporation and subsidiaries totaled approximately
$4,113,000, $2,891,000 and $2,070,000 for the years ended
September 30, 2001, 2000 and 1999, respectively. Rental and
occupancy charges from Keebler Company totaled approximately
$1,702,000, $1,578,000 and $1,800,000 for the years ended
September 30, 2001, 2000 and 1999. During 2001, 2000 and
1999, rental income and occupancy charges from properties
leased to these companies approximated 55%, 52% and 49% of
total rental and occupancy charges, respectively.
NOTE 5 - SECURITIES AVAILABLE FOR SALE
During the year ended September 30, 2001, the Company
realized a loss of $226,842 due to a writedown to fair value
of securities available for sale which was considered other
than temporarily impaired. This loss is included in the
gain on securities available for sales transaction, net.
Dividend income for the years ended September 30, 2001,
2000 and 1999 amounted to $1,534,255, $1,484,646 and
$626,657, respectively. Interest income for the years ended
September 30, 2001, 2000 and 1999 amounted to $216,882,
$243,363 and $142,238, respectively.
Page 40
2001
Shares/ Cost Market
$ Amount
Debt Securities:
Center Trust Inc. Subordinated
R/PR CVRO JJ 7.5 01/15/2001
DTD 12/27/93 -0- $ -0- $ -0-
Sizeler Property Investors
Convertible Subordinated SBJ
to SPL RDMPT RO JJ 8.000
07/15/2003 DTD 5/13/93
Callable 07/15/99 at 100.00 739,395 778,119
_________ _________
Total Debt Securities 739,395 778,119
_________ _________
Equity Securities:
Preferred Stock:
Alexandria Real Estate 9.50% Sr A 1,000 19,870 26,200
Apartment Inv. 8.75% Class D Cum 1,000 18,120 23,700
Apartment Inv. ser H 1,000 20,582 24,350
Associated Estates Realty Corp
DEP SHS REPSTG 1/10 SH
9.75% CL A CUM Redeem 24,200 440,535 605,000
Avalonbay Communities 8% Sr D
CUM SR -0- -0- -0-
Camden Pro Tr 2.25 Ser A -0- -0- -0-
Crescent R/E 6.75% Sr A Conv 2,000 28,783 37,720
Crown American 11% Ser 23,000 1,054,915 1,163,800
Developers Div. 9.44% 3,000 59,822 75,000
Equity Inns 9.50%SrA cum 10,400 176,543 200,096
Equity Office Trust 8.625%
SRC cum 1,600 33,117 40,320
Equity Office Trust 8.98% A 1,000 21,995 25,450
Equity Res. Ppts 9.125% 3,000 63,923 78,420
Felcor Lodging 1.95% PFD 1,000 15,350 18,360
Felcor Lodging 9% B 5,500 97,694 115,225
First In Rlty 8.75% Sr B cum 6,000 117,714 147,600
First Union Real Estate Equity &
Mortgage Inv.-Conv 8.40% Ser A -0- -0- -0-
First Washington Realty Trust Inc
Part Conv. Ser A 9.75% -0- -0- -0-
Glenborough R/E 7.75% Sr A Conv 2,000 29,803 38,480
G&L Realty 10.25% Sr A Cum 1,000 16,620 18,900
Gleimcher Realty 9.25% B 3,000 52,360 67,200
Healthcare Pro.8.70% SR B 4,000 72,667 100,400
Healthcare Pro.Ser A 7.875% 13,700 247,157 328,800
Highwoods Pro 8% Sr D 1,000 17,245 22,010
Hospitality Ppts 9.50% 7,000 129,983 168,560
Instar 8% Sr D 11,500 166,641 243,800
Instar 9.20 Sr C 2,500 44,288 62,750
Instar 9.375 B 7,000 124,921 175,000
Jameson Inns 1.70% SrA -0- -0- -0-
JDN Realty 9 3/8 22,100 463,513 491,725
Kimco Realty 8.375% 2,000 38,240 49,300
Kimco Realty 7.75% A 1,000 18,620 24,180
Kranzco Sr D 9.50% 19,500 360,338 442,650
Page 41A
2000
Shares/
$ Amount Cost Market
Debt Securities:
Center Trust Inc.
Subordinated R/PR CVRO JJ
7.5 01/15/2001 DTD 12/27/93 250,000 $ 237,708 $ 243,750
Sizeler Property Investors
Convertible Subordinated
SBJ to SPL RDMPT RO JJ
8.00 07/15/2003 DTD 5/13/93
Callable 07/15/99 at 100.00 869,000 809,238 777,755
_________ _________
Total Debt Securities 1,046,946 1,021,505
_________ _________
Equity Securities:
Preferred Stock:
Alexandria Real Estate 9.50% Sr A 1,000 19,870 23,625
Apartment Inv. 8.75% Class D Cum 1,000 18,120 21,125
Apartment Inv. ser H 1,000 20,582 22,375
Associated Estates Realty Corp
DEP SHS REPSTG 1/10 SH -0- -0- -0-
9.75% CL A CUM Redeem 29,200 531,585 569,400
Avalonbay Communities 8% Sr D
CUM SR 2,000 34,428 44,000
Camden Pro Tr 2.25 Ser A 1,000 22,120 24,938
Crescent R/E 6.75% Sr A Conv 2,000 28,783 32,626
Crown American 11% Ser 24,000 1,104,215 924,000
Developers Div. 9.44% 3,000 59,822 68,625
Equity Inns 9.50%SrA cum 10,400 176,543 172,255
Equity Office Trust 8.625% SR
C cum 1,600 33,117 39,400
Equity Office Trust 8.98% A 1,000 21,995 24,688
Equity Res. Ppts 9.125% 3,000 63,923 74,064
Felcor Lodging 1.95% PFD 1,000 15,350 19,000
Felcor Lodging 9% B 5,500 97,694 108,625
First In Rlty 8.75% Sr B cum 6,000 117,714 137,250
First Union Real Estate Equity
& Mortgage Inv.-Conv 8.40% Ser A 18,000 381,810 382,500
First Washington Realty Trust Inc
Part Conv. Ser A 9.75% 5,000 129,438 161,250
Glenborough R/E 7.75% Sr A Conv 2,000 29,803 34,000
G&L Realty 10.25% Sr A Cum 1,000 16,620 14,938
Gleimcher Realty 9.25% B 3,000 52,360 56,625
Healthcare Pro.8.70% SR B 4,000 72,667 83,252
Healthcare Pro.Ser A 7.875% 5,700 102,572 111,863
Highwoods Pro 8% Sr D 1,000 17,245 20,313
Hospitality Ppts 9.50% 7,000 129,983 160,125
Instar 8% Sr D 6,000 85,638 96,378
Instar 9.20 Sr C 2,500 44,288 44,845
Instar 9.375 B 7,000 124,921 133,875
Jameson Inns 1.70% SrA 5,000 52,750 58,750
JDN Realty 9 3/8 13,100 260,608 274,288
Kimco Realty 8.375% 2,000 38,240 47,000
Kimco Realty 7.75% A 1,000 18,620 21,250
Kranzco Sr D 9.50% 19,500 360,338 335,166
Page 41B
NOTE 5 - SECURITIES AVAILABLE FOR SALE (CONT'D)
Shares/
$ Amount Cost Market
Mid Amer 8.875% 1,000 $ 16,620 $ 23,820
Mid Amer Sr A 9.50% 7,000 139,515 174,020
New Plan Excel 8 5/8% 2,000 39,959 49,400
New Plan Execl 8.50% A 3,000 64,355 77,850
Prime Group 9% B 1,000 12,622 17,450
Prime Retail Inc SRA 10.50% 1,000 15,433 6,100
Prime Retail Inc SRB 8.50% 8,000 26,720 18,000
Reckson Assoc 7.625% 1,000 18,707 23,000
Sovran Self Stor 9.85 Sr B 2,000 39,115 50,900
Thornburg Mtg. 9.68% Sr A 2,000 40,740 51,100
United Dominion Realty Trust
9.25% SRA Cum. Redeemable -0- -0- -0-
United Dominion 8.60% SRB Cum -0- -0- -0-
Vornado 8.5% PFD 7,000 139,291 175,560
_________ _________
Total Preferred Stock 4,504,436 5,482,196
_________ _________
Common Stock:
Assoc. Estates Realty 35,000 396,088 336,000
Banyan Strategic Realty Trust -0- -0- -0-
BNP Residential 31,000 331,825 310,000
Centertrust Retail Prop 18,500 72,520 71,410
Crown American Realty Trust 87,300 235,564 220,100
Eastgroup Properties 7,000 132,023 153,300
First Industrial Realty Trust -0- -0- -0-
First Washington Realty Trust -0- -0- -0-
HPRT Properties 54,000 381,879 439,560
Health Care Properties 7,800 177,550 299,910
Humphrey Hospility 1,000 7,064 2,510
IRT Properties 26,500 256,864 286,200
Lasalle Hotel Prop 2,000 24,952 18,480
Mid Atlantic Realty Trust 21,000 228,381 294,000
New Plan Realty 32,000 516,103 547,200
Pan Pacific Retail Props 12,710 239,335 334,909
Penn R/E Trust 20,000 389,340 425,000
RFS Hotel Investors 21,000 261,199 217,350
Sizeler Property Inv. 105,500 894,676 931,565
United Dominion Realty Trust
Inc -0- -0- -0-
United Mobile Homes 142,200 1,418,778 1,578,420
Urstadt biddle Properties -A 5,500 45,722 51,700
Urstadt biddle Properties 19,500 152,620 170,430
Weingarten Realty Inv.
Shares Beneficial Interest -0- -0- -0-
Western Properties Trust
Shares Beneficial Interest -0- -0- -0-
_________ _________
Total Common Stock
6,162,483 6,688,044
_________ _________
Total Equity Securities 10,666,919 12,170,240
_________ _________
Total Securities Available
for Sale $11,406,314 $12,948,359
==========
========== ==========
Page 42A
NOTE 5 - SECURITIES AVAILABLE FOR SALE (CONT'D)
Shares/
$ Amount Cost Market
Mid Amer 8.875% 1,000 $ 16,620 $ 19,188
Mid Amer Sr A 9.50% 7,000 139,515 145,691
New Plan Excel 8 5/8% 2,000 39,959 45,000
New Plan Execl 8.50% A 1,000 20,745 20,875
Prime Group 9% B 3,000 50,618 54,750
Prime Retail Inc SRA 10.50% 1,000 15,433 6,938
Prime Retail Inc SRB 8.50% 8,000 122,658 28,450
Reckson Assoc 7.625% 1,000 18,707 23,375
Sovran Self Stor 9.85 Sr B 2,000 39,115 43,000
Thornburg Mtg. 9.68% Sr A 2,000 40,740 41,750
United Dominion Realty Trust
9.25% -0- -0- -0-
SRA Cum. Redeemable 18,000 405,751 445,500
United Dominion 8.60% SRB Cum 5,200 93,640 120,578
Vornado 8.5% PFD 7,000 139,291 157,500
_________ _________
Total Preferred Stock 5,426,554 5,495,009
_________ _________
Common Stock:
Assoc. Estates Realty 90,000 1,018,467 725,670
Banyan Strategic Realty Trust 29,000 140,714 172,202
BNP Residential 50,775 543,615 431,588
Centertrust Retail Prop 18,500 203,424 111,000
Crown American Realty Trust 87,300 608,833 529,300
Eastgroup Properties 7,000 132,023 155,750
First Industrial Realty Trust 15,000 382,086 461,250
First Washington Realty Trust 20,000 432,552 507,500
HPRT Properties 44,000 300,577 308,000
Health Care Properties 7,800 177,550 231,075
Humphrey Hospility 1,000 7,064 7,813
IRT Properties 26,500 256,864 231,875
Lasalle Hotel Prop 2,000 24,952 30,250
Mid Atlantic Realty Trust 21,000 228,381 248,073
New Plan Realty 27,000 448,315 369,576
Pan Pacific Retail Props 5,000 101,506 133,750
Penn R/E Trust 56,000 1,089,900 976,528
RFS Hotel Investors 21,000 261,199 265,125
Sizeler Property Inv. 100,500 851,984 766,313
United Dominion Realty Trust Inc 153,000 1,665,045 1,663,947
United Mobile Homes 142,200 1,418,778 1,324,309
Urstadt biddle Properties -A 5,500 45,722 38,191
Urstadt biddle Properties 19,500 152,620 135,406
Weingarten Realty Inv.
Shares Beneficial Interest 3,000 120,375 122,250
Western Properties Trust
Shares Beneficial Interest 30,500 356,083 375,547
_________ _________
Total Common Stock
10,968,629 10,322,288
_________ _________
Total Equity Securities
16,395,183 15,817,297
_________ _________
Total Securities Available
for Sale $17,442,129 $16,838,802
========= =========
Page 42B
NOTE 6 - MORTGAGE NOTES AND LOANS PAYABLE
The following is a summary of the mortgage notes
payable at September 30, 2001 and 2000:
Fixed Fiscal Balance Balance
Property Rate Maturity 9/30/01 9/30/00
Orangeburg, NY 7% 2004 $969,114 $1,241,206
Jackson, MS 8.5% 2008 488,743 539,347
Franklin, MA 7% 2004 1,103,298 1,413,066
Wichita, KS 10.25% 2016 1,139,043 1,170,596
Urbandale, IA 7% 2004 512,790 661,209
Richland, MS 7.5% 2004 414,303 506,529
O'Fallon, MO 8.5% 2007 1,508,079 1,689,773
Virginia Beach,VA 8.5% 2021 1,381,495 1,409,010
Fayetteville, NC 7.8% 2006 3,036,730 3,141,482
Schaumburg, IL 8.48% 2012 2,907,418 3,066,563
Burr Ridge, IL 8% 2014 984,701 1,023,685
Romulus, MI 7.56% 2013 2,429,434 2,553,263
Liberty, MO 7.065% 2013 4,144,992 4,373,211
Omaha, NE 7.15% 2014 3,635,919 3,815,288
Charlottesville,VA 6.90% 2014 2,495,162 2,613,305
Jacksonville, FL 6.92% 2017 3,790,172 3,947,802
Union City, OH 8.25% 2015 2,828,528 2,939,408
Richmond, VA Libor +
1.8% 2015 5,461,711 -0-
St. Joseph, MO 8.12% 2016 8,669,233 -0-
Newington, CT 8.1% 2016 2,426,827 -0-
Cudahy WI 8.15% 2016 4,188,569 -0-
Beltsville, MD 7.53% 2016 5,908,493 -0-
__________ __________
Total Mortgage
Notes Payable $60,424,754 $36,104,743
========== ===========
Principal on the foregoing debt is scheduled to be paid
as follows:
Year Ending September 30, 2002 $ 3,676,199
2003 3,951,900
2004 4,378,030
2005 3,583,907
2006 7,084,120
Thereafter 37,750,598
__________
$ 60,424,754
==========
Page 43
NOTE 6 - MORTGAGE NOTES AND LOANS PAYABLE (CONT'D)
Line of Credit
The Company had an $8,000,000 line of credit with Fleet
Bank at an interest rate of prime. This line of credit was
reduced to $6,345,000 during 1999 due to the sale of the
warehouse facility in Monsey, New York and is now secured by
a second mortgage on the South Brunswick Industrial
Building. This line of credit expires on November 29,
2002. As of September 30, 2001, approximately $3,108,000
is outstanding and approximately $3,237,000 is available.
Margin Loans
During fiscal 2001, the Company purchased securities on
margin. The margin loans are at 5.375% and 5.625% and are
due on demand. At September 30, 2001 and 2000, the margin
loans amounted to approximately $4,389,000 and $4,914,000,
respectively and are collateralized by the Company's
securities portfolio. The Company must maintain a coverage
ratio of approximately 50%.
NOTE 7 - STOCK OPTION PLAN
On April 24, 1997, the shareholders approved and
ratified the Company's 1997 Stock Option Plan authorizing
the grant to officers, directors and key employees options
to purchase up to 750,000 shares of common stock. Options
may be granted any time up to December 31, 2006. No option
shall be available for exercise beyond ten years. All
options are exercisable after one year from the date of
grant. The option price shall not be below the fair market
value at date of grant. Canceled or expired options are
added back to the "pool" of shares available under the Plan.
The Company elected to follow APB Opinion No. 25 in
accounting for its stock option plan, and accordingly, no
compensation cost has been recognized. Had compensation
cost been determined consistent with SFAS No. 123, the
Company's net income and earnings per share would have been
reduced to the pro forma amounts as follows:
2001 2000 1999
Net Income As reported $4,123,054 $3,589,397 $3,796,760
Pro forma 4,109,069 3,578,672 3,787,777
Net Income As reported -
Per share Basic and Diluted $.43 $.44 $.57
Pro forma -
Basic and Diluted $.43 .44 .57
The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for
grants in 2001, 2000 and 1999; dividend yield of 9%;
expected volatility of 25%; risk-free interest rate of 4.75%
in 2001 and 6% in 2000 and 1999, and expected lives of five
years.
Page 44
NOTE 7 - STOCK OPTION PLAN (CONT'D)
A summary of the status of the Company's stock option
plan as of September 30, 2001, 2000 and 1999 is as follows:
2001 2000 1999
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding
atbeginning
of year 385,000 $6.20 320,000 $ 6.34 320,000 $ 6.34
Granted 15,000 5.65 65,000 5.50 -0- -0-
Exercised -0- -0- -0- -0- -0- -0-
Expired (15,000) 5.94 -0- -0- -0- -0-
________ _______ _______
Outstanding
at end of
year 385,000 6.19 385,000 6.20 320,000 6.34
======== ======= =======
Exercisable
at end of
year 370,000 320,000 320,000
======= ======= =======
Weighted-
average
fair
value of
options
granted
during the
year .54 .33 -0-
====== ====== ======
The following is a summary of stock options outstanding
as of September 30, 2001:
Date of Number of Number of Option Expiration
Grant Grants Shares Price Date
4/30/97 9 120,000 $5.9375 4/30/02
4/30/97 2 165,000 6.5625 4/30/02
4/30/98 2 20,000 7.25 4/30/03
4/12/00 1 65,000 5.50 4/12/05
3/6/01 1 5,000 5.25 3/6/06
6/20/01 2 10,000 5.85 6/20/06
As of September 30, 2001, there were 365,000 shares
available for grant under this plan.
NOTE 8 - INCOME FROM LEASES
The Company derives income primarily from operating
leases on its commercial properties. In general, these
leases are written for periods up to ten years with various
provisions for renewal. These leases generally contain
clauses for reimbursement (or direct payment) of real estate
taxes, maintenance, insurance and certain other operating
expenses of the properties. Minimum rents due under
noncancellable leases at September 30, 2001 are scheduled as
follows: 2002 - $11,306,000; 2003 - $11,034,000; 2004 -
$9,341,000; 2005 - $8,736,000; 2006 - $8,222,000;
thereafter - $27,982,000.
Page 45
NOTE 9 - RELATED PARTY TRANSACTIONS
Eugene W. Landy received $8,700, $5,500 and $3,200 for
the years ended September 30, 2001, 2000 and 1999 as
Director. The firm of Eugene W. Landy received $47,500,
$32,500, and $17,500 during the years ended 2001, 2000 and
1999, respectively, as legal fees. An accrual of $49,000,
$34,000 and $59,000 was made during the years ended
September 30, 2001, 2000 and 1999, respectively, for pension
and other benefits in accordance with Mr. Landy's employment
agreement. Additionally, the Board of Directors has granted
to Mr. Landy a loan of $100,000 at an interest rate of 10%
due May 23, 2002. Principal and accrued interest is payable
at maturity. In fiscal 2001, Mr. Landy was also paid a
bonus of $30,000.
On December 9, 1994, the Company and Eugene W. Landy
entered into an Employment Agreement under which, on
severance of employment for any reason, Mr. Landy will
receive severance of $300,000 payable $100,000 on severance
and $100,000 on the first and second anniversaries of
severance. In the event of disability, Mr. Landy's
compensation shall continue for a period of three years,
payable monthly. On retirement, Mr. Landy shall receive a
pension of $40,000 a year for ten years, payable in monthly
installments. In the event of death, Mr. Landy's designated
beneficiary shall receive $300,000, $150,000 thirty days
after death, and the balance one year after death. The
Employment Agreement terminated December 31, 2000 and was
automatically renewed and extended for successive one-year
periods.
Cronheim Management Services received the sum of
$220,521, $199,432 and $161,146 for management fees during
the years ended 2001, 2000 and 1999, respectively.
Effective August 1, 1998, the Company entered into a new
management contract with Cronheim Management Services.
Under this contract, Cronheim Management Services receives
3% of gross rental income on certain properties for
management fees. The David Cronheim Company received
$26,708, $14,347 and $136,229 in lease brokerage
commissions in 2001, 2000 and 1999, respectively. Daniel
Cronheim received $8,700, $5,650 and $2,400 for Director and
Committee fees in 2001, 2000 and 1999, respectively.
NOTE 10 - TAXES
Income Tax
The Company has elected to be taxed as a Real Estate
Investment Trust under the applicable provisions of the
Internal Revenue Code and the comparable New Jersey
Statutes. Under such provisions, the Company will not be
taxed on that portion of its taxable income distributed
currently to shareholders, provided that at least 95% (90%
effective for the year ending September 30, 2002) of its
taxable income is distributed. As the Company has and
intends to continue to distribute all of its income
currently, no provision has been made for income taxes.
Federal Excise Tax
The Company does not have an excise tax liability for
the calendar years 2001, 2000 and 1999, since it intends to
or has distributed all of its annual income.
Page 46
NOTE 11 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company implemented a dividend reinvestment and
stock purchase plan (the "Plan") effective December 15,
1987. Under the terms of the Plan and subsequent
offerings, shareholders who participate may reinvest all or
part of their dividends in additional shares of the Company
at approximately 95% of market price. According to the
terms of the Plan, shareholders may also purchase additional
shares, at approximately 95% of market price by making
optional cash payments monthly.
Amounts received, including dividend reinvestment of
$1,871,521, $1,606,691 in 2001 and 2000, respectively, and
shares issued in connection with the Plan for the years
ended September 30, 2001 and 2000 were as follows:
2001 2000
Amounts Received $8,179,845 $5,734,589
Shares Issued 1,556,768 1,198,311
NOTE 12 - DISTRIBUTIONS
The following cash distributions were paid to
shareholders during the years ended September 30, 2001 and
2000:
2001 2000
Quarter Ended Amount Per Share Amount Per Share
December 31 $1,290,979 $ . 145 $1,111,424 $ .145
March 31 1,364,374 . 145 1,160,858 .145
June 30 1,413,499 . 145 1,189,703 .145
September 30 1,463,806 . 145 1,243,883 .145
_________ _____ _________ ____
$5,532,658 $ . 58 $4,705,868 $ . 58
========= ===== ========= ====
On October 3, 2001, the Company declared a dividend of
$ .145 per share to be paid on December 17, 2001 to
shareholders of record November 15, 2001.
Page 47
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose certain information
about fair values of financial instruments, as defined in
Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments."
Limitations
Estimates of fair value are made at a specific point in
time based upon where available, relevant market prices and
information about the financial instrument. Such estimates
do not include any premium or discount that could result
from offering for sale at one time the Company's entire
holdings of a particular financial instrument. For a
portion of the Company's financial instruments, no quoted
market value exists. Therefore, estimates of fair value are
necessarily based on a number of significant assumptions
(many of which involve events outside the control of
management). Such assumptions include assessments of
current economic conditions, perceived risks associated with
these financial instruments and their counterparties, future
expected loss experience and other factors. Given the
uncertainties surrounding these assumptions, the reported
fair values represent estimates only and, therefore, cannot
be compared to the historical accounting model. Use of
different assumptions or methodologies is likely to result
in significantly different fair value estimates.
The fair value of cash and cash equivalents
approximates their current carrying amounts since all such
items are short-term in nature. The fair value of
securities available for sale is based upon quoted market
values. The fair value of variable rate mortgage notes
payable and loans payable approximate their current carrying
amounts since such amounts payable are at approximately a
weighted-average current market rate of interest. At
September 30, 2001, the fair value (estimated based upon
expected cash outflows discounted at current market rates)
and carrying value of fixed rate mortgage notes payable
amounted to $56,313,559 and $54,963,043, respectively. At
September 30, 2000, the fair value of fixed rate mortgage
notes payable approximate their current carrying amounts
since such amounts payable are at approximately a weighted-
average current market rate of interest.
NOTE 14 - CASH FLOW AND COMPREHENSIVE INCOME INFORMATION
Cash paid during the years ended September 30, 2001,
2000 and 1999, for interest is $4,590,757, $3,334,861 and
$2,607,520, respectively.
During 2001, 2000 and 1999, the Company had $1,871,521,
$1,606,691 and $1,387,405, respectively, of dividends which
were reinvested that required no cash transfers.
During 1999, proceeds from the sale of investment
property totaling $2,265,632 were directly paid into an
escrow account and required no cash transfers by the
Company. These proceeds were used to purchase investment
property.
Page 48
NOTE 14 - CASH FLOW AND COMPREHENSIVE INCOME INFORMATION
(CONT'D)
The following are the reclassification adjustments
related to securities available for sale included in Other
Comprehensive Income (Loss):
2001 2000 1999
Unrealized holding gains
(losses) arising during
the year $2,777,864 $ 230,091 $(694,534)
Less: reclassification
Adjustment for gains
realized in income (632,492) (110,960) -0-
_________ ________ ________
Net unrealized gains
(losses) $2,145,372 $ 119,131 $ (695,534)
========= ======== ========
NOTE 15 - SUBSEQUENT EVENTS
On October 12, 2001, the Company purchased a 184,800
square foot warehouse facility in Granite City, Illinois.
This warehouse facility is 100% net-leased to Anheuser-
Busch, Inc. The purchase price was approximately
$12,400,000. The Company paid approximately $100,000 in
cash, borrowed approximately $1,000,000 against its security
portfolio with Prudential Securities, used approximately
$1,800,000 of its credit line with Fleet Bank and obtained a
mortgage of approximately $9,500,000. This mortgage payable
is at an interest rate of 7.11% and is due November 1, 2016.
On November 2, 2001, the Company purchased a 160,000
square foot warehouse facility in Monroe, North Carolina.
This warehouse facility is 100% net-leased to Hughes Supply
Inc. The purchase price was approximately $5,500,000. The
Company paid approximately $100,000 in cash, used
approximately $1,300,000 of its credit line with Fleet Bank
and obtained a mortgage of approximately $4,100,000. This
mortgage payable is at an interest rate of 7.11% and is due
December 1, 2016.
Page 49
Column A Column B Column C Column D
Buildings, Capitalization
Improvements Subsequent to
Description Encumbrances Land & Equipment Acquisition
Shopping Center:
Somerset, NJ $ -0- $ 55,182 $ 637,097 $ 481,321
Industrial
Buildings:
Ramsey, NJ -0- 52,639 291,500 1,062,651
Monaca, PA -0- 330,773 878,081 1,049,149
Orangeburg,NY 969,114 694,720 2,977,372 -0-
South
Brunswick, NJ -0- 1,128,000 4,087,400 57,961
Greensboro, NC -0- 327,100 1,853,700 -0-
Jackson, MS 488,743 218,000 1,233,500 1,086
Franklin , MA 1,103,298 566,000 4,148,000 -0-
Witchita, KS 1,139,043 268,000 1,518,000 -0-
Urbandale, IA 512,790 310,000 1,758,000 -0-
Richland,MS 414,303 211,000 1,195,000 -0-
O'Fallon, MO 1,508,079 264,000 3,302,000 -0-
Virginia
Beach, VA 1,381,495 384,600 2,150,000 -0-
Fayetteville,
NC 3,036,730 172,000 4,467,885 -0-
Schaumburg, IL 2,907,418 1,039,800 3,694,321 -0-
Burr Ridge, IL 984,701 270,000 1,236,599 -0-
Romulus, MI 2,429,434 531,000 3,653,883 12,078
Liberty, MO 4,144,992 723,000 6,510,546 -0-
Omaha, NE 3,635,919 1,170,000 4,425,500 -0-
Charlottes-
ville, VA 2,495,162 1,170,000 2,845,000 -0-
Jacksonville,
FL 3,790,172 1,165,000 4,668,080 -0-
Union City, OH 2,828,528 695,000 3,342,000 -0-
Richmond, VA 5,461,711 1,160,000 6,413,305 -0-
St. Joseph, MO 8,669,233 800,000 11,753,964 -0-
Newington, CT 2,426,827 410,000 2,961,000 -0-
Cudahy, WI 4,188,569 980,000 5,050,997 -0-
Beltsville, MD 5,908,493 3,200,000 5,958,773 -0-
__________ __________ __________ __________
$60,424,754 $18,295,814 $ 93,011,503 $ 2,664,246
========== ========== ========== ==========
*Buildings and improvements reacquired in 1986.
Page 50 A
Column A Column E (1) (2) Column F
Gross Amount at Which Carried Accumulated
September 30, 2001 Depreciation 30,2001 tion
Description Land Bldg & Imp Total
Shopping Center:
Somerset, NJ $ 55,182 $ 1,118,418 $ 1,173,600 $ 845,780
Industrial
Buildings:
Ramsey, NJ 52,639 1,354,151 1,406,790 658,565
Monaca, PA 330,773 1,927,230 2,258,003 1,172,888
Orangeburg, NY 694,720 2,977,372 3,672,092 838,967
South
Brunswick, NJ 1,128,000 4,145,361 5,273,361 1,147,672
Greensboro, NC 327,100 1,853,700 2,180,800 497,990
Jackson, MS 218,000 1,234,586 1,452,586 323,592
Franklin , MA 566,000 4,148,000 4,714,000 797,661
Witchita, KS 268,000 1,518,000 1,786,000 291,929
Urbandale, IA 310,000 1,758,000 2,068,000 338,063
Richland,MS 211,000 1,195,000 1,406,000 229,799
O'Fallon, MO 264,000 3,302,000 3,566,000 550,183
Virginia
Beach, VA 384,600 2,150,000 2,534,600 303,193
Fayetteville,
NC 172,000 4,467,885 4,639,885 515,508
Schaumburg, IL 1,039,800 3,694,321 4,734,121 426,249
Burr Ridge, IL 270,000 1,236,599 1,506,599 110,928
Romulus, MI 531,000 3,665,961 4,196,961 329,038
Liberty, MO 723,000 6,510,546 7,233,546 584,212
Omaha, NE 1,170,000 4,425,500 5,595,500 283,675
Charlottes-
ville, VA 1,170,000 2,845,000 4,015,000 182,370
Jacksonville,
FL 1,165,000 4,668,080 5,833,080 299,221
Union City, OH 695,000 3,342,000 4,037,000 128,608
Richmond, VA 1,160,000 6,413,305 7,573,305 82,819
St. Joseph, MO 800,000 11,753,964 12,553,964 150,686
Newington, CT 410,000 2,961,000 3,371,000 37,960
Cudahy, WI 980,000 5,050,997 6,030,997 64,754
Beltsville, MD 3,200,000 5,958,773 9,158,773 76,390
__________ __________ __________ __________
18,295,814 $ 95,675,749 $ 113,971,563 $ 11,268,700
========== ========== ========== ==========
*Buildings and improvements reacquired in 1986.
Page 50 B
Column A Column G Column H Column I
Date of
Construc- Date Depreciable
Description tion Acquired Life
Shopping Center:
Somerset, NJ 1970 1970 10-33
Industrial Buildings:
Ramsey, NJ 1969 1969 7-40
Monaca, PA 1977 1977* 5-31.5
Orangeburg, NY 1990 1993 31.5
South Brunswick, NJ 1974 1993 31.5
Greensboro, NC 1988 1993 31.5
Jackson, MS 1988 1993 39
Franklin , MA 1,991 1994 39
Witchita, KS 1,975 1994 39
Urbandale, IA 1985 1994 39
Richland,MS 1986 1994 39
O'Fallon, MO 1,989 1,994 39
Virginia Beach, VA 1,976 1,996 39
Fayetteville, NC 1,996 1,997 39
Schaumburg, IL 1,997 1,997 39
Burr Ridge, IL 1,997 1,997 39
Romulus, MI 1,998 1,998 39
Liberty, MO 1,997 1,998 39
Omaha, NE 1,999 1,999 39
Charlottesville, VA 1,998 1,999 39
Jacksonville, FL 1,998 1,999 39
Union City, OH 1,999 2,000 39
Richmond, VA 2,000 2,001 39
St. Joseph, MO 2,000 2,001 39
Newington, CT 2,001 2,001 39
Cudahy, WI 2,001 2,001 39
Beltsville, MD 2,000 2,001 39
*Buildings and improvements reacquired in 1986.
Page 50 C
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONT'D)
(1) Reconciliation
REAL ESTATE INVESTMENTS
9/30/01 9/30/00 9/30/99
Balance-Beginning
of Year $74,996,066 $70,871,655 $57,270,562
Additions: ___________ ___________ ____________
Acquisitions 38,688,039 4,037,000 15,443,582
Improvements 287,458 87,411 35,009
__________ __________ __________
Total Additions 38,975,497 4,124,411 15,478,591
__________ __________ __________
Sales -0- -0- (1,877,498)
Balance-End of $113,971,563 $74,996,066 $70,871,655
Year
========== ========= =========
ACCUMULATED DEPRECIATION
9/30/01 9/30/00 9/30/99
Balance-Beginning
of Year $9,102,373 $7,399,386 $6,656,634
Depreciation 2,166,327 1,702,987 1,594,945
Sales -0- -0- (852,193)
__________ __________ __________
Balance-End of $11,268,700 $9,102,373 $7,399,386
Year
========= ======== ========
Page 51
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
NOTES TO SCHEDULE III
SEPTEMBER 30,
(1) Reconciliation
2001 2000 1999
Balance - Beginning
of Year $74,996,066 $70,871,655 $57,270,562
__________ __________ __________
Additions:
Ramsey, NJ 178,937 -0- -0-
Somerset, NJ -0- 52,423 -0-
Monaca, PA 84,543 22,014 23,147
Monsey, NY -0- -0- -0-
Orangeburg, NY -0- -0- -0-
South Brunswick, NJ 11,900 12,974 -0-
Greensboro, NC -0- -0- -0-
Jackson, MS -0- -0- 1,086
Franklin, MA -0- -0- -0-
Wichita, KA -0- -0- -0-
Urbandale, IA -0- -0- -0-
Richland, MS -0- -0- -0-
O'Fallon, MO -0- -0- -0-
Virginia Beach, VA -0- -0- -0-
Fayetteville, NC -0- -0- -0-
Schaumburg, IL -0- -0- -0-
Burr Ridge, IL -0- -0- 3,349
Romulus, MI 12,078 -0- 3,883
Liberty, MO -0- -0- 3,546
Omaha, NE -0- -0- 5,595,500
Charlottesville, VA -0- -0- 4,015,000
Jacksonville, FL -0- -0- 5,833,080
Union City, OH -0- 4,037,000 -0-
Richmond, VA 7,573,305 -0- -0-
St. Joseph, MO 12,553,964 -0- -0-
Newington, CT 3,371,000 -0- -0-
Cudahy, WI 6,030,997 -0- -0-
Beltsville, MD 9,158,773 -0- -0-
__________ __________ __________
Total Additions 38,975,497 4,124,411 15,478,591
__________ __________ __________
Sales:
Monsey, New York -0- -0- (1,877,498)
__________ __________ __________
Balance -
End of Year $113,971,563 $74,996,066 $70,871,655
=========== ========== ==========
(2) The aggregate cost for Federal tax purposes
approximates historical cost.
Page 52
SIGNATURES
Pursuant to the requirements of Section 13 of 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: December 21, 2001 By: /s/ Eugene W. Landy
Eugene W. Landy, President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed by the following
persons on behalf of the Registrant and in the capacities
and on the dates indicated.
Date: December 21, 2001 By: /s/ Eugene W. Landy
Eugene W. Landy, President
and Director
Date: December 21, 2001 By: /s/ Ernest V. Bencivenga
Ernest V. Bencivenga,
Treasurer and Director
Date: December 21, 2001 By: /s/ Anna T. Chew
Anna T. Chew, Controller
and Director
Date: December 21, 2001 By: /s/ Daniel D. Cronheim
Daniel D. Cronheim, Director
Date: December 21, 2001 By: /s/ Matthew I. Hirsch
Matthew I. Hirsch, Director
Date: December 21, 2001 By: /s/ Charles P. Kaempffer
Charles P. Kaempffer, Director
Date: December 21, 2001 By: /s/ Samuel A. Landy
Samuel A. Landy, Director
Date: December 21, 2001 By: /s/ John R. Sampson
John R. Sampson, Director
Date: December 21, 2001 By: /s/ Peter J. Weidhorn
Peter J. Weidhorn, Director
Page 53