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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, 2002
[ ] 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 $81,613,012(based on 11,759,800 shares of common
stock at the closing price of $6.94 per share) as of
December 19, 2002.
There were 12,829,110 shares of common stock outstanding as of
December 19, 2002.
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 2,986,000
square feet of property, of which approximately 944,000 square feet,
or 32%, is leased to Federal Express Corporation and subsidiaries and
approximately 301,000 square feet, or 10%, is leased to Keebler
Company. During 2002, 2001 and 2000 rental and occupancy charges
from properties leased to these companies approximated 52%, 55% and
52%, respectively, of total rental and occupancy charges.
At September 30, 2002, the Company had investments in thirty
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
$245,597, $220,521 and $199,432, in 2002, 2001, 2000 , respectively,
for the management of various properties.
The David Cronheim Company received $20,194, $26,708 and
$14,347 in lease brokerage commissions in 2002, 2001 and 2000,
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 2002, the Company purchased four net-leased industrial
properties for a total cost of approximately $31,400,000. In fiscal
2003, 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. Subsequent to year-
end, the Company has purchased one property which is leased to a FDX
subsidiary. This has resulted 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.
Risk Factors
Real Estate Industry Risks - The Company may be adversely
affected by general economic conditions and local real estate
conditions. When a lease expires, a tenant may elect not to renew it.
The Company may not be able to re-lease the property on similar terms,
or even at all.
Governmental Regulations - Local zoning and use laws,
environmental statutes and other governmental requirements may
restrict expansion, rehabilitation and reconstruction activities.
These regulations may prevent the Company from taking advantage of
economic opportunities. Legislation such as the Americans with
Disabilities Act may require the Company to modify its properties.
Future legislation may impose additional requirements. No prediction
can be made as to what requirements may be enacted or what changes may
be implemented to existing legislation.
Environmental Liability Risks - 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 own or operate
or have owned or operated. They may be liable to the government or to
third parties for property damage, investigation costs and cleanup
costs. Contamination may adversely affect the owner's ability to sell
or lease real estate or to borrow using the real estate as collateral.
There is no way of determining at this time the magnitude of any
potential liability to which the Company may be subject arising out of
unknown environmental conditions or violations with respect to the
properties it owns. Environmental laws today can impose liability on a
previous owner or operator of a property that owned or operated
Page 3
ITEM 1 - BUSINESS, (CONT'D.)
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 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.
Insurance Considerations - The Company generally maintains
insurance policies related to its business, including casualty,
general liability and other policies covering business operations,
employees and assets. The Company may be required to bear all losses
that are not adequately covered by insurance. Although management
believes that the Company's insurance programs are adequate, no
assurance can be given that the Company will not incur losses in
excess of its insurance coverage, or that the Company will be able to
obtain insurance in the future at acceptable levels and reasonable
cost.
Financing Risks - The Company finances a portion of its
investments through debt. This debt creates risks, including a)
rising interest rates on floating rate debt; b) failure to repay or
refinance existing debt as it matures, which may result in forced
disposition of assets on disadvantageous terms; c) refinancing terms
less favorable than the terms of the existing debt; and d) failure
to meet required payments of principal and/or interest.
Amendment of Business Policies - The Board of Directors
determines the growth, investment, financing, capitalization,
borrowing, REIT status, operating and distribution policies. Although
the Board of Directors has no present intention to amend or revise any
of these policies, these policies may be amended or revised without
notice to shareholders. Accordingly, shareholders may not have
control over changes in Company policies.
Qualification as a REIT - The Company intends to qualify as a
REIT. If it fails to do so, it will not be allowed to deduct
distributions to shareholders in computing taxable income and will be
subject to Federal and state income taxes, including any applicable
alternative minimum tax, at regular corporate rates. In addition, the
Company may be barred from qualification as a REIT for the four years
following disqualification. The additional tax incurred at regular
corporate rates would reduce significantly the cash flow available for
distribution to shareholders and for debt service. Furthermore, the
Company would no longer be required to make any distributions to
shareholders as a condition to REIT qualification. Any distributions
to shareholders that otherwise would have been subject to tax as a
capital gain dividend would be taxable as ordinary income to the
extent of the Company's current and accumulated earnings and profits.
Corporate distributees, however, may be eligible for the dividends
received deduction on the distributions, subject to limitations under
the Internal Revenue Code. To qualify as a REIT, the Company must
comply with certain highly technical and complex requirements.
Management cannot be certain that the Company has complied with these
requirements since there are few judicial and administrative
interpretations of these provisions. In addition, facts and
circumstances that may be beyond the Company's control may affect the
Company's ability to qualify as a REIT. No assurance can be given
that new legislation, regulations, administrative interpretations or
court decisions will not change the tax laws significantly with
respect to qualification as a REIT or with respect to the
Page 4
ITEM 1 - BUSINESS, (CONT'D.)
Federal income tax consequences of qualification. The Company intends
to qualify as a REIT. However, no assurance can be given that the
Company qualifies as a REIT or will remain qualified as a REIT.
Notwithstanding the Company's status as a REIT, the Company is subject
to various Federal, state and local taxes on income and property.
The Company will be taxed at regular corporate rates on any
undistributed taxable income, including undistributed net capital
gains. The Company may also have to pay some state income or
franchise taxes because not all states treat REITs in the same manner
as they are treated for Federal income tax purposes.
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, 2002. (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, 2002. The main
store lease expires on September 30, 2007. The Company's portion of
the annual gross rental income on this facility was approximately
$461,000.
RAMSEY, NEW JERSEY
Ramsey Industrial Park, located on E. Crescent Avenue in Ramsey,
New Jersey is a 42,719 square foot building 100% net-leased to Bogen
Photo,Inc. The average annual rental income over the term of the lease
is approximately $285,000. This lease expires September 30, 2006.
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 $460,000. At September 30, 2002, this
property was 74% occupied. This property has 1,200 feet of
undeveloped river frontage.
Page 5
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES, (CONT'D.)
ORANGEBURG, NEW YORK
This 50,400 square foot warehouse facility, located in
Orangeburg, New York, is 100% net-leased to Keebler Company. The
average annual rental income over the term of the lease, which expires
on December 31, 2003, is approximately $323,000.
SOUTH BRUNSWICK, NEW JERSEY
This 144,520 square foot warehouse facility, located in South
Brunswick, New Jersey, is 100% net-leased to McMaster Carr Supply Co.
This lease, including extensions, expires on December 31, 2004.
The average annual rental income over the term of the lease is
$723,000.
GREENSBORO, NORTH CAROLINA
This 40,560 square foot distribution center, located in
Greensboro, North Carolina is 100% net-leased to Keebler Company. This
lease has been extended to February 28, 2004. 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 100% 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 100% 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 100% net-leased to Keebler Company. The average annual
rental income over the term of the lease is approximately $223,000.
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 100% 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 6
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 expires June 30, 2006. The average annual rental income over
the term of the lease was approximately $398,000.
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.
Belk Enterprises, Inc. has vacated the premises but continues to honor
the lease.
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.
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.
Page 7
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES, (CONT'D.)
LIBERTY, MISSOURI
This 98,200 square foot warehouse facility, located in Liberty,
Missouri, is 100% net- leased to 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 assigned this lease to Lear Corporation.
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 TOWNSHIP, OHIO
This 85,508 square foot warehouse facility, located in Union
Township, 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 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.
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.
Page 8
ITEM 2 - DETAILED DESCRIPTION OF PROPERTIES, (CONT'D.)
NEWINGTON, CONNECTICUT
This 54,812 square foot warehouse facility, located in Newington,
Connecticut 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 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 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.
GRANITE CITY, ILLINOIS
This 184,800 square foot warehouse facility, located in Granite
City, Illinois, was purchased in fiscal 2002. This warehouse facility
is 100% net-leased to Anheuser-Busch, Inc. The average annual rental
over the term of the lease is approximately $1,147,000. This lease
expires May 31, 2011.
MONROE, NORTH CAROLINA
This 160,800 square foot warehouse facility, located in Monroe,
North Carolina was purchased in fiscal 2002. This warehouse facility
is 100% net-leased to Hughes Supply, Inc. The average annual rental
over the term of the lease is approximately $589,000. This lease
expires October 31, 2011.
WINSTON-SALEM, NORTH CAROLINA
This 106,507 square foot warehouse facility, located in Winston-
Salem, North Carolina was purchased in fiscal 2002. This warehouse
facility is 100% net-leased to Fed Ex Ground Package System, Inc., a
subsidiary of Federal Express Corporation. The average annual rental
over the term of the lease is approximately $637,000. This lease
expires December 31, 2011.
ELGIN, ILLINOIS
This 89,052 square foot warehouse facility, located in Elgin,
Illinois was purchased in fiscal 2002. This warehouse facility is
100% net-leased to Reynolds Metals Company, which merged with Alcoa,
Inc. The average annual rental over the term of the lease is
approximately $614,000. This lease expires January 31, 2012.
Page 9
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 2002.
Page 10
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:
2002 2001
Market Price Market Price
____________ ____________
Fiscal Fiscal
Qtr. High Low Distrib. Qtr. High Low Distrib.
First 7.18 6.00 $.145 First 5.188 4.750 $.145
Second 7.00 6.41 .145 Second 5.875 4.813 .145
Third 8.01 6.68 .145 Third 6.130 5.500 .145
Fourth 7.29 6.55 .145 Fourth 6.460 5.850 .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, 2002, the closing price was $6.99.
As of September 30, 2002, there were approximately 1,131
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 September 25, 2002 the Company declared a dividend of
$.145 per share to be paid on December 16, 2002 to shareholders of
record November 15, 2002.
Page 11
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, 2002. This table should be read
in conjunction with all of the financial statements and notes thereto
included elsewhere herein.
September 30,
2002 2001 2000 1999 1998
_______ ______ _______ _______ ________
Total Income $16,566,594 $12,908,204 $10,397,973 $ 8,751,219 $ 6,963,825
Total Expenses 11,913,073 8,785,150 6,897,207 6,214,993 4,493,595
Gains (Losses)
on Sales of
Assets-
Investment
Property (175,376) -0- 88,631 1,260,534 29,692
Net Income 4,478,145 4,123,054 3,589,397 3,796,760 2,499,922
Net Income
Per Share-
Basic and
Diluted .40 .43 .44 .57 .50
BALANCE SHEET DATA:
Total Assets $149,011,493 $119,433,470 $86,003,905 $79,424,958 $55,582,845
Long-Term
Obligations 73,518,365 56,748,555 33,780,968 33,182,307 24,436,941
Shareholders' 59,005,016 49,929,539 41,013,926 36,276,677 27,404,822
Equity
OTHER INFORMATION:
Average Number
Of Shares 11,177,294 9,504,806 8,078,877 6,627,344 4,997,775
Outstanding
Funds from
Operations* $ 7,594,618 $ 6,289,381 $ 5,292,384 $ 4,220,279 $ 3,647,345
Cash Dividends
Per Share .58 .58 .58 .5675 .53
*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 does 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 12
ITEM 6 - SELECTED FINANCIAL DATA, (CONT'D.)
SUMMARY OF OPERATIONS BY PROPERTY
FOR THE YEARS ENDED SEPTEMBER 30,
2002 2001 2000
_____ _____ _____
Net Rental Income (Loss):
Somerset, New Jersey $166,747 $ 70,716 $ 247,795
Ramsey, New Jersey 222,078 114,702 157,488
Monaca, Pennsylvania 102,897 145,484 187,031
Orangeburg, New York 161,000 155,249 220,767
South Brunswick, New Jersey 505,744 448,308 412,634
Greensboro, North Carolina 220,285 207,361 192,358
Jackson, Mississippi 88,510 78,996 72,937
Franklin, Massachusetts 330,752 307,996 278,733
Wichita, Kansas 67,243 53,132 31,117
Urbandale, Iowa 38,001 28,631 88,628
Richland, Mississippi 80,056 69,508 58,738
O'Fallon, Missouri 177,225 130,480 101,646
Virginia Beach, Virginia* (320,181) (56,485) 110,359
Fayetteville, North Carolina 119,903 107,017 89,158
Schaumburg, Illinois 130,583 105,769 80,094
Burr Ridge, Illinois 39,595 33,355 41,756
Romulus, Michigan 118,385 104,130 93,874
Liberty, Missouri 243,747 222,353 206,755
Omaha, Nebraska 145,288 126,956 113,526
Charlottesville, Virginia 116,247 105,075 94,450
Jacksonville, Florida 140,924 132,789 114,921
Union Township, Ohio 75,140 62,314 41,177
Richmond, Virginia 320,576 198,862 -0-
St. Joseph, Missouri 190,325 155,660 -0-
Newington, Connecticut 66,321 26,670 -0-
Cudahy, Wisconsin 88,637 35,275 -0-
Beltsville, Maryland 299,699 115,176 -0-
Granite City, Illinois 299,672 -0- -0-
Monroe, North Carolina 185,450 -0- -0-
Winston-Salem, North Carolina 123,007 -0- -0-
Elgin, Illinois 55,468 -0- -0-
__________ _________ _________
Net Rental Income 4,599,324 3,485,479 3,035,942
Net Investment and Other
Income 1,583,425 1,613,977 1,253,695
__________ _________ _________
TOTAL 6,182,749 5,099,456 4,289,637
General & Administrative
Expenses (1,529,228) (976,402) (788,871)
__________ _________ _________
Income Before (Loss) Gain
on Sale of Assets-
Investment Property 4,653,521 4,123,054 3,500,766
(Loss) Gain on Sale of
Assets-Investment Property (175,376) -0- 88,631
__________ _________ _________
NET INCOME $4,478,145 $4,123,054 $3,589,397
========= ========= =========
* Sold in May, 2002.
Page 13
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, 2002,
the Company's shareholders' equity increased to $59,005,016 as
compared to $49,929,539 in 2001 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 ten years, the Company purchased twenty-eight net-leased
warehouse facilities at an aggregate cost of approximately
$140,000,000.
The Company financed these purchases primarily through mortgages
on its acquisitions. The Company also has a secured $6,256,000 line
of credit of which approximately $1,680,000 was available at September
30, 2002. Interest is at Prime and is due monthly. This credit line
expires on November 29, 2003. The Company also has a note payable to
the seller for approximately $471,000 in connection with the purchase
of the St. Joseph, Missouri property.
The Company expects to make additional real estate investments
from time to time. In 2003, 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, 2002 totaled approximately
$5,728,000. During fiscal 2002, the Company's securities portfolio
increased by approximately $2,276,000 due to purchases of
approximately $5,707,000 and a change in the unrealized gain of
approximately $303,000 offset by sales of approximately $3,734,000.
Page 14
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 $6,792,043 in
2002 as compared to $4,785,236 in 2001.
At September 30, 2002, the Company had total liabilities of
$90,006,477 and total assets of $149,011,493. 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 2002, a total of $10,535,311 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 2002. It is
anticipated, although no assurances can be given, that a comparable
level of participation will continue in the Plan in fiscal 2003.
Therefore, the Company anticipates that the Plan will result in
further increased liquidity and capital resources in fiscal 2003.
During the year ended September 30, 2002, nine officers,
directors and key employees exercised their stock options and
purchased 255,000 shares for a total of $1,617,488. Of this amount,
225,000 shares, for a total of $1,439,363, were exercised through the
issuance of notes receivable from officers. These notes receivable
are at an interest rate of 5%, mature on April 30, 2012 and are
collateralized by the underlying common shares. As of September 30,
2002, the balance of these notes receivable was $1,350,001.
Results of Operations
The Company's activities primarily generate rental income. Net
income for the fiscal year ended September 30, 2002 was $4,478,145 as
compared to $4,123,054 in 2001 and $3,589,397 in 2000. 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, 2002 was $4,599,324 as compared
to $3,485,479 in 2001 and $3,035,942 in 2000. The following is a
discussion of the results of operations by location for 2002 as
compared to 2001 and 2001 as compared to 2000:
Somerset, New Jersey
Net rental income decreased during 2002 as compared to 2001
primarily as a result of the main tenant going out of business.
The space occupied by this tenant has been released under similar
terms. Net rental income increased during 2001 as compared to
2000 due to a decrease in snow removal.
Ramsey, New Jersey
Net rental income increased during 2002 as compared to 2001 due
to an extension of the lease at an increased rental rate. Net
rental income decreased during 2001 as compared to 2000 due to an
increase in repairs and maintenance.
Page 15
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (CONT'D.)
Monaca, Pennsylvania
Net rental income decreased during 2002 as compared to 2001
primarily as a result of an increase in insurance costs. Net
rental income decreased during 2001 as compared to 2000 primarily
as a result of an increase in insurance costs and bad debt
expense.
Orangeburg, New York
Net rental income remained relatively stable in 2002 as compared
to 2001. Net rental income decreased in 2001 as compared to 2000
due to a renegotiation of the lease.
South Brunswick, New Jersey
Net rental income increased in 2002 as compared to 2001 and 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. This lease has been further extended to
December 31, 2004.
Greensboro, North Carolina
Net rental income remained relatively stable in 2002 as compared
to 2001. Net rental income increased during 2001 as compared to
2000 due to an increase in the annual rent and to lower interest
charges.
Jackson, Mississippi
Net rental income remained relatively stable during 2002, 2001
and 2000.
Franklin, Massachusetts
Net rental income increased during 2002 as compared to 2001
primarily due to a decrease in interest expense. Net rental
income increased during 2001 as compared to 2000 primarily due to
a decrease in management fees allocated to this property.
Wichita, Kansas
Net rental income increased during 2002 as compared to 2001 and
2001 as compared to 2000 due to an increase in the annual rent
and to lower interest charges.
Urbandale, Iowa
Net rental income increased during 2002 as compared to 2001
primarily due to a decrease in interest expense. Net rental
income decreased during 2001 as compared to 2000 primarily due
to a decrease in rent from a new lease.
Richland, Mississippi
Net rental income remained relatively stable during 2002, 2001
and 2000.
O'Fallon, Missouri
Net rental income increased in 2002 and 2001 as compared to 2000
primarily due to lower interest costs on related borrowings
outstanding.
Page 16
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (CONT'D.)
Virginia Beach, Virginia
Net rental loss increased during 2002 as compared to 2001 as
compared to income during 2000 as a result of the expiration of
the lease. This property was sold on May 1, 2002 for a loss of
$175,376.
Fayetteville, North Carolina
Net rental income remained relatively stable in 2002 as compared
to 2001. Net rental income increased during 2001 as compared to
2000 primarily due to a decrease in management fees allocated to
this property.
Schaumburg, Illinois
Net rental income increased in 2002 as compared to 2001 due to a
decrease in interest costs. Net rental income increased in 2001
as compared to 2000 due to a decrease in management fees
allocated to this property.
Burr Ridge, Illinois
Net rental income remained relatively stable in 2002 as compared
to 2001. Net rental income decreased in 2001 as compared to 2000
due primarily to a decrease in tenant reimbursements in 2001.
Romulus, Michigan
Net rental income remained relatively stable during 2002, 2001
and 2000.
Liberty, Missouri
Net rental income remained relatively stable during 2002, 2001
and 2000.
Omaha, Nebraska
Net rental income remained relatively stable during 2002, 2001
and 2000.
Charlottesville, Virginia
Net rental income remained relatively stable during 2002, 2001
and 2000.
Jacksonville, Florida
Net rental income remained relatively stable during 2002, 2001
and 2000.
Union Township, Ohio
Net rental income remained relatively stable in 2002 as compared
to 2001. Net rental income increased during 2001 as compared to
2000 due to a full year's income and expenses.
Richmond, Virginia
Net rental income increased during 2002 as compared to 2001 due
to a full year's income and expenses. This warehouse facility
was acquired in November 2000.
Page 17
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (CONT'D.)
St. Joseph, Missouri
Net rental income increased during 2002 as compared to 2001 due
to a full year's income and expenses. This warehouse facility
was acquired in February 2001.
Newington, Connecticut
Net rental income increased during 2002 as compared to 2001 due
to a full year's income and expenses. This warehouse facility
was acquired in March 2001.
Cudahy, Wisconsin
Net rental income increased during 2002 as compared to 2001 due
to a full year's income and expenses. This warehouse facility
was acquired in April 2001.
Beltsville, Maryland
Net rental income increased during 2002 as compared to 2001 due
to a full year's income and expenses. This warehouse facility
was acquired in April 2001.
Granite City, Illinois
This warehouse facility was acquired in October 2001. It is net-
leased to Anheuser-Busch, Inc. The average monthly rental income
over the term of the lease is approximately $95,589.
Monroe, North Carolina
This warehouse facility was acquired in November 2001. It is net-
leased to Hughes Supply, Inc. The average monthly rental income
over the term of the lease is approximately $49,044.
Winston-Salem, North Carolina
This warehouse facility was acquired in January 2002. It is net-
leased to Fed Ex Ground Package System, a subsidiary of Federal
Express Corporation. The average monthly rental income over the
term of the lease is approximately $53,077.
Elgin, Illinois
This warehouse facility was acquired in April 2002. It is net-
leased to Reynolds Metals Company, which merged with Alcoa, Inc.
The average monthly rental income over the term of the lease is
approximately $51,198.
The Company also generated net investment and other income from
its investments in securities available for sale and Hollister '97,
LLC. These securities have an average dividend yield of approximately
9%. 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, decreased during 2002
as compared to 2001 due primarily to sales of securities available for
sale resulting in a decrease in dividend income and increased during
2001 as compared to 2000 primarily due to the purchases of securities
available for sale and to an increase in the gain on securities
available for sales transactions, net. Gain on securities available
for sales transactions, net amounted to $909,704, $632,492 and
$110,960 for 2002, 2001 and 2000, respectively.
Page 18
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (CONT'D.)
General and administrative expenses increased during 2002 and
2001 as compared to 2000 primarily as a result of increased personnel
costs due to additional employees. During 2002 the Company also
experienced an increase in franchise taxes, professional fees and
directors fees. The Company has been expanding its operations. Total
assets increased from approximately $86 million as of September 30,
2000 to approximately $149 million as of September 30, 2002.
Funds from operations (FFO), defined as net income, excluding
gains (or losses) from sales of depreciable assets, plus depreciation,
increased from $5,292,384 for the year ended September 30, 2000 to
$6,289,381 for the year ended September 30, 2001 to $7,594,618 for the
year ended September 30, 2002. 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 2002, the Company sold the warehouse facility in Virginia
Beach, VA for a net loss of $175,376. During 2000, the Company
recognized a deferred gain of $88,631 from the Howell Township, NJ
(land)installment sale.
Controls and Procedures
Within 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision of the Company's
Chief Executive Officer and Chief Financial Officer and with the
participation of the Company's management, including the effectiveness
of the design and operation of the Company's disclosure controls and
procedures pursuant to the Securities Exchange Act Rule 13a-14. Based
upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material
information relating to the Company required to be included in the
Company's periodic Securities and Exchange Commission filings. No
significant changes were made in the Company's internal controls or in
other factors that could significantly affect these controls
subsequent to the date of their evaluation.
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.
Page 19
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (CONT'D.)
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.
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.
The following table sets forth information as of September 30, 2002,
concerning the Company's debt obligations, including principal cash
flow by scheduled maturity, weighted average interest rates and
estimated fair value:
For the Years Ending September 30,
2003 2004 2005 Thereafter Total Fair Value
Long-Term
Debt:
Fixed
rate $-0- $2,117,056 $-0- $76,103,107 $78,220,163 $81,951,074
Average
interest
rate 7.07% 7.46% 7.45%
The Company also has approximately $5,000,000 in variable rate
debt due on November 29, 2003. This debt is a line of credit.
Additionally, the Company has $5,000,000 in variable rate debt due on
demand. This debt is primarily margin loans secured by marketable
securities. The interest rates on these loans range from 3.75% to
4.75% at September 30, 2002. The carrying value of the Company's
variable rate debt approximates fair value at September 30, 2002.
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 20
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 2002 12/31/01 03/31/02 06/30/02 09/30/02
Total Income $3,768,291 $4,082,895 $4,541,434 $4,173,974
Total Expenses 2,565,946 3,009,853 2,978,770 3,358,504
Net Income 1,202,345 1,073,042 1,387,289 815,469(1)
Net Income per
Share .12 .10 .12 .06
FISCAL 2001 12/31/00 3/31/01 6/30/01 9/30/01
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
(1) Decrease due primarily to an increase in professional
fees and insurance costs.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
Page 21
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the Directors and Executive Officers of
the Company as of September 30, 2002:
Present Position with
the Company; Business
Experience During Past Percent
Name; Age Five Years; Other Director Shares Of
Directorships Since Owned Stock (1)
__________ ______________________ ________ ______ ______
Ernest V. Treasurer (1968 to 1968 29,807(2) 0.25%
Bencivenga present) and Director.
(84) 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. Chew Controller (1991 to 1993 42,855 (3) 0.35%
(44) present) and Director.
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 42,832(4) 0.35%
Cronheim Law (1982 to present);
(47) Executive Vice President
(1989 to present) and
General Counsel (1983 to
present) of David
Cronheim Company.
Matthew I. Director. Attorney at 2000 25,620(5) .21%
Hirsch(43) Law (1985 to present);
Adjunct Professor of Law
(1993 to present),
Widener University
School of Law .
Page 22
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, (CONT'D.)
Present Position with
the Company; Business
Experience During Past Percent
Name; Age Five Years; Other Director Shares Of
Directorships Since Owned Stock (1)
__________ _____________________ _______ ______ ______
Charles P. Director. Investor; 1974 52,602(6) 0.43%
Kaempffer Director (1970 to
(65) 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 766,808(7) 6.25%
Landy present) and Director.
(69) Attorney at Law;
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 201,324(8) 1.66%
Landy Law (1985 to present);
(42) 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.
Cynthia J. Executive Vice 2002 5,660(9) 0.05%
Morgenstern President and Director.
(33) Vice President (1996 to
2001) Summit Bank,
Commercial Real Estate
Division.
John R. Director. Senior 2001 22,139(10) 0.18%
Sampson Portfolio Manager at
(48) Fox Asset Management,
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 23
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, (CONT'D.)
Present Position with
the Company; Business
Experience During Past Percent
Name; Age Five Years; Other Director Shares of
Directorships Since Owned Stock (1)
__________ _____________________ _______ ______ _____
Peter J. Director. Director of 2001 6,000(11) 0.05%
Weidhorn Real Estate
(55) Management/Acquisitions
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.
Directors and
Officers as a
Group 1,195,647(12) 9.74%
(1) Based on the number of Shares outstanding on September
30, 2002 which was 12,132,748 shares.
(2) Excludes 15,000 Shares issuable upon exercise of a
Stock Option, which Stock Option is not exercisable
until June 21, 2003.
(3) Includes (a) 33,141 Shares owned jointly with Ms.
Chew's husband; and (2) 9,714 Shares held in Ms. Chew's
401(k) Plan. Excludes 50,000 Shares issuable upon
exercise of a Stock Option, which Stock Option is not
exercisable until June 21, 2003.
(4) Excludes 15,000 Shares issuable upon exercise of a
Stock Option, which Stock Option is not exercisable
until June 21, 2003.
(5) Owned jointly with Mr. Hirsch's wife. Includes 5,000
Shares issuable upon exercise of a Stock Options.
Excludes 15,000 Shares issuable upon exercise of a
Stock Option, which Stock Option is not exercisable
until June 21, 2003.
(6) Includes 15,225 Shares owned by Mr. Kaempffer's wife;
(b) 1,080 Shares in joint name with Mrs. Kaempffer; and
(c) 1,425 Shares held in the Charles P. Kaempffer
Defined Benefit Pension Plan of which Mr. Kaempffer is
Trustee with power to vote. Excludes 15,000 Shares
issuable upon exercise of a Stock Option, which Stock
Option is not exercisable until June 21, 2003.
Page 24
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,(CONT'D.)
(7) Includes 77,530 Shares owned by Mr. Landy's wife; (b)
161,764 Shares held in the Landy & Landy Employees'
Profit Sharing Plan of which Mr. Landy is a Trustee with
power to vote; (c) 126,585 Shares held in the Landy &
Landy Employees' Pension Plan of which Mr. Landy is a
Trustee with power to vote; and (d) 60,000 Shares held
in the Eugene W. and Gloria Landy Family Foundation,
a charitable trust, of which Mr. Landy has power to
vote. Includes 130,000 shares issuable upon exercise
of Stock Options. Excludes 65,000 Shares issuable upon
exercise of a Stock Option, which Stock Option is not
exercisable until June 21, 2003.
(8) Includes 4,180 Shares owned by Mr. Landy's wife;
(b) 67,420 Shares held in custodial accounts for Mr.
Landy's minor children under the New Jersey Uniform
Transfer to Minors Act in which he disclaims any
beneficial interest but has power to vote; (c) 1,000
Shares held in the Samuel Landy Family Limited
Partnership and; (d) 27,287 Shares held in Mr. Landy's
401(k) Plan. Excludes 15,000 Shares issuable upon
exercise of a Stock Option, which Stock Option is not
exercisable until June 21, 2003.
(9) Includes 68 Shares held in Ms. Morgenstern's 401(k)
Plan. Excludes 50,000 Shares issuable upon exercise
of a Stock Option, which Stock Option is not exercisable
until June 21, 2003.
(10) Includes 2,000 Shares held in custodial accounts
for Mr. Sampson's minor children under the New Jersey
Uniform Gifts to Minors Act in which he disclaims any
beneficial interest but has power to vote. Includes
5,000 Shares issuable upon exercise of a Stock Option.
Excludes 15,000 Shares issuable upon exercise of a
Stock Option, which Stock Option is not exercisable
until June 21, 2003.
(11) Includes 5,000 Shares issuable upon exercise of a Stock
Option. Excludes 15,000 Shares issuable upon exercise
of a Stock Option, which Stock Option is not
exercisable until June 21, 2003.
(12) Excludes 686,394 Shares (5.66%) owned by United Mobile
Homes, Inc. Eugene W. Landy owns beneficially
approximately 13% of the shares of United Mobile Homes,
Inc.
Page 25
ITEM 11 - EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table shows compensation paid
or accrued by the Company for services rendered during 2002, 2001 and
2000 to the Chairman of the Board and President, and Executive Vice
President. 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 2002 $150,000 $30,000 $75,300 (1)
Chairman of the 2001 150,000 30,000 105,200 (1)
Board and President 2000 130,000 80,000 72,000 (1)
Cynthia Morgenstern 2002 $121,250 $8,462 $6,438 (2)
Executive Vice 2001 78,269 -0- -0-
President
(1) Represents Director's fees of $16,300, $8,700 and $5,500 for
2002, 2001 and 2000, respectively, paid to Mr. Landy; accrual for
pension and other benefits of $59,000, $49,000 and $34,000 for 2002,
2001 and 2000, respectively, in accordance with Mr. Landy's employment
contract; and legal fees of $-0-, $47,500 and $32,500 for 2002, 2001
and 2000, respectively.
(2) Represents Director's fees and discretionary contributions by the
Company to the Company's 401(k) Plan allocated to an account of the
named executive officer.
Stock Option Plan
The following table sets forth, for the executive officers named in
the Summary Compensation Table, information regarding individual
grants of stock options made during the year ended September 30, 2002:
Potential
Realized
Value at Assumed
Percent Annual
Granted Price Expira- Rates for Option
Options to Per tion Terms
Name Granted Employees Share Date 5% 10%
Eugene W. 65,000 17.8% $6.765 10/04/06 $190,900 $457,200
Landy 65,000 17.8% 7.13 6/21/10 221,300 530,000
Cynthia
Morgenstern 50,000 13.7% 7.13 6/21/10 170,200 407,700
Page 26
ITEM 11 - EXECUTIVE COMPENSATION, (CONT'D.)
The following table sets forth for the executive officers named
in the Summary Compensation Table, information regarding stock options
outstanding at September 30, 2002:
Value of
Unexercised
Options
Number of Unexercised At Year End
Shares Value Options at Year-End Exercisable/
Exercised Realized Exercisable/Unexercisable Unexercisable
_________ ________ _________________________ _____________
Eugene W.
Landy 150,000 65,000/130,000 $96,850/$14,625
Cynthia J.
Morgenstern -0- N/A -0-/50,000 $-0-/-0-
Employment Agreements
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. 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.
Effective January 15, 2002, the Company and Cynthia J.
Morgenstern entered into a one year employment agreement under which
Ms. Morgenstern receives an annual base salary of $125,000 plus
bonuses and customary fringe benefits. In the event of disability,
her salary shall continue for a period of two years.
Other Information
The Directors received a fee of $1,000 for each Board Meeting
attended, and an additional fixed annual fee of $7,600 payable
quarterly. Effective April 1, 2002, the meeting fee was increased to
$1,500 and the fixed annual fee was increased to $10,000. Directors
appointed to house committees receive $150 for each meeting attended.
Those specific committees are Compensation Committee, Audit Committee
and Stock Option Committee.
Page 27
ITEM 11 - EXECUTIVE COMPENSATION, (CONT'D.)
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 $245,597 in 2002
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.
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.
Compensation Committee:
Daniel D. Cronheim
Matthew I. Hirsch
Page 28
ITEM 11 - EXECUTIVE COMPENSATION, (CONT'D.)
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
____ ___________ ______ _______
1997 100 100 100
1998 102 85 109
1999 97 78 139
2000 103 93 158
2001 138 106 116
2002 171 116 92
Page 29
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
On September 30, 2002, no person owned of record or was known by
the Company to own beneficially five or more percent of the shares of
the Company, except the following:
Name and Address Shares Owned Percent
Title of Class Of Beneficial Owner Beneficially Of Class
______________ ___________________ ____________ ________
Common Stock Eugene W. Landy
20 Tuxedo Road
Rumson, NJ 07760 636,808 5.25%
Common Stock United Mobile Homes,
Inc.
3499 Route 9, Suite
3-C Freehold, NJ
07728 686,394 5.66%
Common Stock Oakland Financial
Corp.
34200 Mound Road
Sterling Heights, MI
48310 706,042(1) 5.82%
(1) Based upon Amendment No. 1 to a Schedule 13D dated May 20, 2002
filed with the SEC by Oakland Financial Corporation ("Oakland"),
which indicates that Oakland shares voting and dispositive power
with respect to those Shares with Liberty Bell Agency, Inc.
("Liberty Bell") and Cherokee Insurance Company ("Cherokee"),
both of which are wholly-owned subsidiaries of Oakland. That
filing also indicates that Oakland owns 50,000 Shares, Liberty
Bell owns 438,148 Shares and Cherokee owns 217,894 Shares.
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 30
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 33
(ii) Balance Sheets as of September 30, 2002
and 2001 34
(iii) Statements of Income for the years ended
September 30, 2002, 2001 and 2000 35
(iv) Statements of Shareholders' Equity for the
years ended September 30, 2002, 2001 and
2000 36
(v) Statements of Cash Flows for the years
Ended September 30, 2002, 2001 and 2000 37
(vi) Notes to the Financial Statements 38-55
(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, 2002 56-58
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 31
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) Certificate of Amendment to the Certificate of Incorporation
dated May 9, 1995.
(iii) Certificate of Amendment to the Certificate of Incorporation
dated July 22, 1999.
(iv) Certificate of Amendment to the Certificate of Incorporation
dated April 26, 2002.
(v) By-laws of Monmouth Real Estate Investment Corporation.
(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.
(23) Consent of KPMG LLP
(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).
(99.1) Cetification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(99.2) Cetification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(99.3) Cetification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(99.4) Cetification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Reports on Form 8-K - None
Page 32
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, 2002 and 2001,
and the results of its operations and its cash flows for each of the
years in the three-year period ended September 30, 2002 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 18, 2002
Page 33
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
BALANCE SHEETS
AS OF SEPTEMBER 30,
ASSETS 2002 2001
Real Estate Investments:
Land $ 21,011,214 $ 18,295,814
Buildings, Improvements and
Equipment,
net of Accumulated Depreciation of
$13,869,844 and $11,268,700,
respectively 108,096,042 84,426,270
____________ ____________
Total Real Estate Investments 129,107,256 102,722,084
Cash and Cash Equivalents 693,572 147,579
Securities Available for Sale at
Fair Value 15,223,942 12,948,359
Interest and Other Receivables 909,234 847,130
Prepaid Expenses 37,674 53,257
Lease Costs - Net of Accumulated
Amortization 125,809 109,448
Investments in Hollister '97, LLC 900,399 900,399
Other Assets 2,013,607 1,705,214
____________ ____________
TOTAL ASSETS $ 149,011,493 $ 119,433,470
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage Notes Payable $ 78,220,163 $ 60,424,754
Loans Payable 10,775,467 8,204,961
Other Liabilities 1,010,847 874,216
____________ ____________
Total Liabilities 90,006,477 69,503,931
____________ ____________
Shareholders' Equity:
Common Stock - Class A -
$.01 Par Value, 16,000,000 Shares
Authorized; 12,132,748 and
10,264,728 Shares Issued and
Outstanding in 2002 and 2001,
respectively 121,327 102,647
Common Stock - Class B -
$.01 Par Value, 100,000 Shares
Authorized; No Shares Issued or
Outstanding -0- -0-
Additional Paid-in Capital 58,388,761 48,284,847
Accumulated Other Comprehensive Income 1,844,929 1,542,045
Loans to Officers, Directors and
Key Employees (1,350,001) -0-
Undistributed Income -0- -0-
____________ ____________
Total Shareholders' Equity 59,005,016 49,929,539
____________ ____________
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $ 149,011,493 $ 119,433,470
=========== ===========
See Accompanying Notes to the Financial Statements
Page 34
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30,
2002 2001 2000
INCOME:
Rental and Occupancy
Charges $14,519,670 $10,524,575 $ 8,559,004
Interest and Dividend
Income 1,137,220 1,751,137 1,728,009
Gain on Securities
Available for Sales
Transactions, Net 909,704 632,492 110,960
__________ __________ __________
TOTAL INCOME 16,566,594 12,908,204 10,397,973
__________ __________ __________
EXPENSES:
Interest Expense 6,059,415 4,590,757 3,334,861
Management Fees 245,597 220,521 199,432
Real Estate Taxes 365,641 239,828 463,770
Professional Fees 350,808 523,818 486,568
Operating Expenses 771,436 590,052 401,593
Office and General Expense 1,013,979 370,797 255,896
Director Fees 165,100 83,050 52,100
Depreciation 2,941,097 2,166,327 1,702,987
__________ __________ __________
TOTAL EXPENSES 11,913,073 8,785,150 6,897,207
__________ __________ __________
Income Before Gains 4,653,521 4,123,054 3,500,766
Loss) Gain on Sale
of Assets - Investment
Property (175,376) -0- 88,631
__________ __________ __________
NET INCOME $ 4,478,145 $ 4,123,054 $ 3,589,397
========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 11,177,294 9,504,806 8,078,877
========== ========== ==========
Diluted 11,196,388 9,506,644 8,078,877
========== ========== ==========
PER SHARE INFORMATION:
Income Before Gains $ .42 $ .43 $ .43
Loss (Gain) on Sale
of Assets - Investment
Property (.02) -0- .01
__________ __________ __________
NET INCOME - BASIC
AND DILUTED $ .40 $ .43 $ .44
========== ========== ==========
See Accompanying Notes to the Financial Statements
Page 35
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30,
Accumulated
Loans to Other
Officers, Compre-
Additional Directors Undistrib- hensive Compre-
Common Paid-In And Key uted Income hensive
Stock Capital Employees Income (Loss) Income
Balance
September
30, 1999 $ 75,096 $36,924,039 $ -0- $ -0- $(722,458)
Shares Issued
in connection
with the Dividend
Reinvestment and
Stock Purchase
Plan (1,198,311
shares) 11,984 5,722,605 -0- -0- -0-
Distributions -0- (1,116,471) -0- (3,589,397) -0-
Net Income -0- -0- -0- 3,589,397 -0- $3,589,397
Unrealized Net
Holding Losses on
Securities
Available for
Sale Net of
Reclassification
Adjustment -0- -0- -0- -0- 119,131 119,131
_______ ________ ________ ________ ________ ________
Balance September
30, 2000 87,080 41,530,173 -0- -0- (603,327)$3,708,528
=========
Shares Issued in
Connection with
the Dividend
Reinvestment and
Stock Purchase
Plan (1,556,768
shares) 15,567 8,164,278 -0- -0- -0-
Distributions -0- (1,409,604) -0- (4,123,054) -0-
Net Income -0- -0- -0- $4,123,054 -0- $4,123,054
Unrealized Net
Holding Gains
on Securities
Available for
Sale -0- -0- -0- -0- 2,145,372 2,145,372
________ ________ ________ ________ ________ ________
Balance September
30, 2001 102,647 48,284,847 -0- -0- 1,542,045 $6,268,426
=========
Shares Issued in
Connection with
the Dividend
Reinvestment and
Stock Purchase
Plan (1,613,020
shares) 16,130 10,519,181 -0- -0- -0-
Shares Issued
through the
Exercise
of Stock Options
(255,000 shares) 2,550 1,614,938 (1,439,363) -0- -0-
Distributions -0- (2,030,205) -0- (4,478,145) -0-
Payments on Loans
to Officers,
Directors and Key
Employees -0- -0- 89,362 -0- -0-
Net Income -0- -0- -0- 4,478,145 -0- $4,478,145
Unrealized Net
Holding Gains on
Securities
Available for
Sale Net of
Reclassification
Adjustment -0- -0- -0- -0- 302,884 302,884
________ ________ ________ ________ ________ ________
Balance September
30, 2002 $121,327 $58,388,761 $(1,350,001)$ -0- $1,844,929 $4,781,029
======= ========= ========= ======== ========= =========
See Accompanying Notes to the Financial Statements
Page 36
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30,
2002 2001 2000
____ ____ ____
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income $4,478,145 $ 4,123,054 $ 3,589,397
Noncash Items Included
in Net Income:
Depreciation 2,941,097 2,166,327 1,702,987
Amortization 187,323 141,479 143,155
Loss(Gains) on Sales
of Assets-Investment
Property 175,376 -0- (88,631)
Gains on Sales of
Securities (909,704) (632,492) (110,960)
Changes in:
Interest & Other
Receivables (62,104) (130,386) (158,396)
Prepaid Expenses 15,583 1,551 9,193
Other Assets and Lease
Costs (170,304) (895,772) (490,884)
Other Liabilities
136,631 11,475 (12,112)
__________ __________ __________
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 6,792,043 4,785,236 4,583,749
__________ __________ __________
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to Land,
Buildings And
Improvements (31,520,915) (38,994,718) (4,124,411)
Proceeds from Sale
of Assets-Investment
Property 2,019,270 -0- -0-
Distribution from Hollister
'97 LLC -0- 25,000 -0-
Collections on Installment
Sales -0- -0- 125,135
Purchase of Securities
Available for Sale (5,706,901) (828,963) (5,690,807)
Proceeds from Sale of
Securities Available
For Sale 4,643,905 7,497,270 1,406,805
__________ __________ __________
NET CASH USED IN INVESTING
ACTIVITIES (30,564,641) (32,301,411) (8,283,278)
__________ __________ __________
CASH FLOW FROM FINANCING
ACTIVITIES
Proceeds from Mortgages 23,350,000 27,220,000 3,000,000
Proceeds from Loans 16,070,530 17,243,367 6,508,288
Principal Payments on
Mortgages (5,554,591) (2,899,989) (2,133,016)
Principal Payments of Loans (13,500,024) (17,060,901) (5,432,831)
Financing Costs on Debt (341,772) -0- -0-
Proceeds from Issuance of
Class A Common Stock 8,271,484 6,308,324 4,127,898
Proceeds from Exercise of
Options 178,125 -0- -0-
Dividends Paid (4,244,523) (3,661,137) (3,099,177)
Payments on Loans to
Officers, Directors
and Key Employees 89,362 -0- -0-
__________ __________ __________
NET CASH PROVIDED FROM
FINANCING ACTIVITIES 24,318,591 27,149,664 2,971,162
__________ __________ __________
Net Increase (Decrease)in
Cash and Cash Equivalents 545,993 (366,511) (728,367)
Cash and Cash Equivalents
at Beginning of Year 147,579 514,090 1,242,457
__________ __________ __________
CASH AND CASH EQUIVALENTS $ 693,572 $ 147,579 $ 514,090
AT END OF YEAR
========== ========== ==========
See Accompanying Notes to the Financial Statements
Page 37
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
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,
2002 and 2001, rental properties consist of thirty and twenty-seven
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 38
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, 2002 and 2001 are all
classified as available-for-sale and are carried at fair value. Gains
or losses on the sale of securities are calculated based on the
specific identification method 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, NJ.
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 (11,177,294, 9,504,806 and 8,078,877 in 2002, 2001 and 2000,
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
(11,196,388, 9,506,644 and 8,078,877 in 2002, 2001 and 2000,
respectively). Options in the amount of 19,094, 1,838 and -0- are
included in the diluted weighted average shares outstanding for 2002,
2001 and 2000, respectively.
Page 39
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 7 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 90% 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 comprised of 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, 2002 and 2001:
Buildings,
Improvements, Accumulated
September 30, 2002 Land And Equipment Depreciation
__________________ ____ _____________ ____________
NEW JERSEY:
Ramsey Industrial
Building $ 52,639 $ 1,358,148 $ 701,621
Somerset(1) Shopping
Center 55,182 1,148,906 889,384
South Industrial
Brunswick Building 1,128,000 4,190,598 1,290,001
PENNSYLVANIA:
Monaca Industrial
Park 330,773 2,100,605 1,269,546
Page 40
NOTE 2 - REAL ESTATE INVESTMENTS, (CONT'D.)
Buildings,
Improvements, Accumulated
September 30, 2002 (Cont'd) Land And Equipment Depreciation
____________ ______________ ________ _____________ ____________
NEW YORK:
Orangeburg Industrial
Building $ 694,720 $ 2,977,372 $ 933,503
NORTH CAROLINA:
Fayetteville Industrial
Building 172,000 4,467,885 630,060
Greensboro Industrial
Building 327,100 1,853,700 556,873
Monroe Industrial
Building 500,000 4,981,022 63,857
Winston-Salem Industrial
Building 980,000 5,610,000 71,920
MISSISSIPPI:
Jackson Industrial
Building 218,000 1,234,586 363,312
Richland Industrial
Building 211,000 1,195,000 260,447
MASSACHUSETTS:
Franklin Industrial
Building 566,000 4,148,000 904,017
KANSAS:
Wichita Industrial
Building 268,000 1,518,000 330,850
IOWA:
Urbandale Industrial
Building 310,000 1,760,736 383,138
MISSOURI:
Liberty Industrial
Building 723,000 6,510,546 751,144
O'Fallon Industrial
Building 264,000 3,309,000 634,846
St. Joseph Industrial
Building 800,000 11,753,964 452,054
VIRGINIA:
Charlottesville
Industrial
Building 1,170,000 2,845,000 255,318
Richmond Industrial
Building 1,160,000 6,413,305 247,255
ILLINOIS:
Burr Ridge Industrial
Building 270,000 1,236,599 142,632
Schaumburg Industrial
Building 1,039,800 3,694,321 520,977
Granite City Industrial
Building 340,000 12,054,175 154,535
Elgin Industrial
Building 1,280,000 5,529,488 70,888
MICHIGAN:
Romulus Industrial
Building 531,000 3,665,961 423,934
FLORIDA:
Jacksonville Industrial
Building 1,165,000 4,668,080 418,909
NEBRASKA:
Omaha Industrial
Building 1,170,000 4,425,500 397,147
OHIO:
Union Township
Industrial
Building 695,000 3,342,000 214,288
CONNECTICUT:
Newington Industrial
Building 410,000 2,961,000 113,884
WISCONSIN:
Cudahy Industrial
Building 980,000 5,053,615 194,328
MARYLAND:
Beltsville Industrial
Building 3,200,000 5,958,773 229,175
_________ _________ _________
Total at
September 30, 2002 $21,011,214 $121,965,885 $13,869,843
========== ========== ==========
(1) This represents the Company's 2/3 undivided interest in the
property.
Page 41
NOTE 2 - REAL ESTATE INVESTMENTS, (CONT'D.)
Buildings,
Improvements, Accumulated
September 30, 2001 Land And Equipment Depreciation
______________________________ ________ _____________ ____________
NEW JERSEY:
Ramsey Industrial
Building $ 52,639 $1,354,151 $ 658,565
Somerset(1) Shopping
Center 55,182 1,118,418 845,780
South Industrial
Brunswick Building 1,128,000 4,145,361 1,147,672
PENNSYLVANIA:
Monaca Industrial
Park 330,773 1,946,451 1,172,888
NEW YORK:
Orangeburg Industrial
Building 694,720 2,977,372 838,967
NORTH CAROLINA:
Fayetteville Industrial
Building 172,000 4,467,885 515,508
Greensboro Industrial
Building 327,100 1,853,700 497,990
MISSISSIPPI:
Jackson Industrial
Building 218,000 1,234,586 323,592
Richland Industrial
Building 211,000 1,195,000 229,799
MASSACHUSETTS:
Franklin Industrial
Building 566,000 4,148,000 797,661
KANSAS:
Wichita Industrial
Building 268,000 1,518,000 291,929
IOWA:
Urbandale Industrial
Building 310,000 1,758,000 338,063
MISSOURI:
Liberty Industrial
Building 723,000 6,510,546 584,212
O'Fallon Industrial
Building 264,000 3,302,000 550,183
St. Joseph Industrial
Building 800,000 11,753,964 150,686
VIRGINIA:
Charlottesville
Industrial
Building 1,170,000 2,845,000 182,370
Richmond Industrial
Building 1,160,000 6,413,305 82,819
Virginia Beach Industrial
Building 384,600 2,150,000 303,193
ILLINOIS:
Burr Ridge Industrial
Building 270,000 1,236,599 110,928
Schaumburg Industrial
Building 1,039,800 3,694,321 426,249
MICHIGAN:
Romulus Industrial
Building 531,000 3,665,961 329,038
FLORIDA:
Jacksonville Industrial
Building 1,165,000 4,668,080 299,221
NEBRASKA:
Omaha Industrial
Building 1,170,000 4,425,500 283,675
OHIO:
Union Township
Industrial
Building 695,000 3,342,000 128,608
CONNECTICUT
Newington Industrial
Building 410,000 2,961,000 37,960
WISCONSIN
Cudahy Industrial
Building 980,000 5,050,997 64,754
MARYLAND
Beltsville Industrial
Building 3,200,000 5,958,773 76,390
_________ _________ _________
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 42
NOTE 3 - ACQUISITIONS AND DISPOSITIONS
Fiscal 2002
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. To fund this purchase, the Company used
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. To fund this purchase, the Company used
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.
On January 31, 2002, the Company purchased a 106,507 square foot
warehouse facility in Winston-Salem, North Carolina. This warehouse
facility is 100% net-leased to Fed Ex Ground Package System, a
subsidiary of Federal Express Corporation. The purchase price was
approximately $6,700,000. To fund this purchase, the Company used
approximately $200,000 in cash, used approximately $1,700,000 of its
credit line with Fleet Bank and obtained a mortgage of approximately
$4,800,000. This mortgage payable is at an interest rate of 7.1% and
is due February 1, 2012.
On April 8, 2002, the Company purchased a 89,052 square feet
warehouse facility located in Elgin, Illinois from Jones Elgin, LLC,
and unrelated entity. This warehouse facility is 100% net leased to
Reynolds Metals Company, which merged with Alcoa, Inc. The purchase
price, including closing costs, was approximately $6,800,000. The
Company used approximately $100,000 in cash, $1,700,000 of its
Revolving Credit line with Fleet Bank and obtained a mortgage of
$5,000,000. This mortgage is payable at a rate of 6.97% and matures
on May 1, 2017.
On May 1, 2002, the Company sold the warehouse facility in
Virginia Beach, VA. The net proceeds from this sale was $2,019,270
resulting in a net loss of $175,376.
Page 43
NOTE 3 - ACQUISITIONS AND DISPOSITIONS, (CONT'D.)
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 $7,600,000. The Company used
approximately $100,000 in cash, used approximately $1,800,000 of its
Revolving Credit Line with Fleet Bank (formerly Summit Bank) and
obtained a mortgage of approximately $5,700,000. This mortgage is
payable at a variable interest rate of 1.80% over LIBOR and matures
December 1, 2015. This mortgage was converted to a fixed rate of 6.12%
during 2002.
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 used approximately $100,000 in cash, borrowed approximately
$800,000 against its security portfolio with Prudential Securities
and obtained a mortgage of approximately $2,500,000. 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 used approximately
$100,000 in cash, borrowed approximately $1,700,000 against its
security portfolio with Prudential Securities and obtained a mortgage
of approximately $4,300,000 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 used approximately $400,000 in
cash, borrowed approximately $2,800,000 against its security portfolio
with Prudential Securities and obtained a mortgage of approximately
$6,000,000 at an interest rate of 7.53% which matures on May 1, 2016.
Page 44
NOTE 4 - SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
The Company has approximately 2,986,000 square feet of property,
of which approximately 944,000 square feet or 32% is leased to Federal
Express Corporation and subsidiaries and approximately 301,000 square
feet, or 10%, is leased to Keebler Company. Rental and occupancy
charges from Federal Express Corporation and subsidiaries totaled
approximately $5,662,000, $4,113,000 and $2,891,000 years ended
September 30, 2002, 2001 and 2000, respectively. Rental and
occupancy charges from Keebler Company totaled approximately
$1,853,000, $1,702,000 and $1,578,000 for the years ended September
30, 2002, 2001 and 2000. During 2002, 2001 and 2000, rental income
and occupancy charges from properties leased to these companies
approximated 52%, 55%, 52% 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, 2002, 2001 and
2000 amounted to $915,904, $1,534,255 and $1,484,646, respectively.
Interest income for the years ended September 30, 2002, 2001 and 2000
amounted to $221,316, $216,882 and $243,363, respectively.
Page 45
NOTE 5 - SECURITIES AVAILABLE FOR SALE (CONT'D)
The following is a summary of Securities Available for Sale at September 30,
2002 and 2001:
2002
Shares/
$ Amount Cost Market
Debt Securities:
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 1,914,000 $ 1,884,333 $ 1,949,889
__________ __________
Total Debt Securities 1,884,333 1,949,889
__________ __________
Equity Securities:
Preferred Stock:
Alexandria Real Estate 9.50% Sr A 1,000 19,870 26,470
Apartment Inv. 8.75% Class D Cum 1,000 18,120 24,260
Apartment Inv. ser H 1,000 20,582 25,030
Apartment Inv. CI R 10% 3,000 80,250 78,450
Archstone Smith 8.75% 2,000 51,491 53,800
Associated Estates Realty Corp
DEP SHS REPSTG 1/10 SH
9.75% CL A CUM Redeem 1,000 18,063 24,900
CBL&Assoc 8.75%PRB 4,000 202,100 210,600
Colonial Propertys 8.75% 2,500 63,475 62,575
Commercial NetLease SR A 1,000 26,248 26,000
Cresent R/E 6.75% Sr A Conv -0- -0- -0-
Crown American 11% Ser 10,000 458,810 555,000
Developers Div. 9.44% -0- -0- -0-
Developers Div. Dep Shs CL F 2,000 49,762 50,600
Developers Div CL C 8.375% 4,200 105,290 105,000
Developers Div Cl D 9.68% 1,100 28,204 27,621
Equity Inns 9.50%SrA cum 11,400 210,007 269,724
Equity Office Trust 8.625% SR C cum 1,600 33,117 41,664
Equity Office Trust 8.98% -0- -0- -0-
Equity Res. Ppts 9.125% 3,000 63,923 80,790
Felcor Lodging 1.95% PFD 1,000 15,350 21,200
Felcor Lodging 9% B 18,000 410,096 439,200
First In Rlty 8.75% Sr B cum -0- -0- -0-
Glenborough R/E 7.75% Sr A Conv 3,000 52,311 66,300
G&L Realty 10.25% Sr A Cum -0- -0- -0-
Gleimcher Realty 9.25% B 9,000 204,116 224,460
HRPT 0.875% PFD SR A 5,500 145,660 143,000
HRPT 8.75% SR B 12,000 299,880 298,440
Healthcare Dep Shrs 8.60% 2,000 50,164 50,000
Healthcare Pro.8.70% SR B 4,000 72,667 102,400
Healthcare Pro.Ser A 7.875% 10,500 189,749 265,860
Healthcare 8.875% 2,000 51,400 49,900
Highwoods Pro 8% Sr D 1,000 17,245 23,550
Hospitality Ppts 9.50% 7,000 129,983 182,700
Host Marriott 10% CL C 1,000 25,600 25,170
Inkeepers USA 8.625% 4,000 98,924 93,000
Instar 8% Sr D 11,500 166,641 271,400
Instar 9.20 Sr C 2,500 44,288 62,675
Instar 9.375 B -0- -0- -0-
JDN Realty 9 3/8 28,100 609,208 706,434
Kimco Realty 8.375% 9,100 218,224 231,140
Kimco Realty 7.75% A -0- -0- -0-
Page 46A
2001
Shares/
$ Amount Cost Market
Debt Securities:
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 100.00 794,000 $ 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
Apartment Inv. CI R 10% -0- -0- -0-
Archstone Smith 8.75% -0- -0- -0-
Associated Estates Realty Corp
DEP SHS REPSTG 1/10 SH
9.75% CL A CUM Redeem 24,200 440,535 605,000
CBL&Assoc 8.75%PRB -0- -0- -0-
Colonial Propertys 8.75% -0- -0- -0-
Commercial NetLease SR A -0- -0- -0-
Cresent 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
Developers Div. Dep Shs CL F -0- -0- -0-
Developers Div CL C 8.375% -0- -0- -0-
Developers Div Cl D 9.68% -0- -0- -0-
Equity Inns 9.50%SrA cum 10,400 176,543 200,096
Equity Office Trust 8.625% SR C cum 1,600 33,117 40,320
Equity Office Trust 8.98% 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
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
HRPT 0.875% PFD SR A -0- -0- -0-
HRPT 8.75% SR B -0- -0- -0-
Healthcare Dep Shrs 8.60% -0- -0- -0-
Healthcare Pro.8.70% SR B 4,000 72,667 100,400
Healthcare Pro.Ser A 7.875% 13,700 247,157 328,800
Healthcare 8.875% -0- -0- -0-
Highwoods Pro 8% Sr D 1,000 17,245 22,010
Hospitality Ppts 9.50% 7,000 129,983 168,560
Host Marriott 10% CL C -0- -0- -0-
Inkeepers USA 8.625% -0- -0- -0-
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
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
Page 46B
NOTE 5 - SECURITIES AVAILABLE FOR SALE (CONT'D)
2002
Shares/
$ Amount Cost Market
Kramont Sr D 9.50% 34,500 $ 743,817 $ 871,125
Lasalle Hotel 10.25% SR A 6,000 153,000 151,200
Mid Amer 8.875% 4,000 92,670 100,000
Mid Amer Sr A 9.50% 6,000 119,584 152,400
New Plan Excel 8 5/8% 18,000 443,077 450,900
New Plan Execl 8.50% A -0- -0- -0-
Parkway Properties 8.75% Sr A 8,000 205,600 203,600
Post Properties 7.625% 1,000 23,440 23,010
Prime Group 9% B -0- -0- -0-
Prime Retail Inc SRA 10.50% 1,000 15,433 5,200
Prime Retail Inc SRB 8.50% 8,000 26,720 21,600
Reckson Assoc 7.625% 1,000 18,707 23,700
Sizeler PFD B 9.75% 1,000 25,000 26,100
Sovran Self Stor 9.85 Sr B 2,000 39,115 52,800
SNH Capital 10.125% 1,000 26,460 25,790
Thornburg Mtg. 9.68% Sr A 2,000 40,740 53,800
United Dominion Realty Trust 9.25%
SRA Cum. Redeemable -0- -0- -0-
Vornado 8.5% PFD 6,000 119,393 151,800
Winston Hotels Sr A 9,25% 4,000 92,842 89,000
__________ __________
Total Preferred Stock 6,436,414 7,321,338
Common Stock: __________ __________
Assoc. Estates Realty -0- -0- -0-
Banyan Strategic Realty Trust -0- -0- -0-
BNP Residential 18,000 192,595 176,400
Centertrust Retail Prop 28,500 135,120 165,300
Crown American Realty Trust 41,000 324,564 376,790
Eastgroup Properties -0- -0- -0-
Five Star Quality Care Inc 540 4,050 621
Getty Realty Corp -New 5,000 94,076 95,400
HPRT Properties 64,000 470,835 528,000
Health Care Properties -0- -0- -0-
Humphrey Hospility 5,000 16,028 10,750
IRT Properties 26,500 256,864 311,375
JDN Realty 545 -0- 6,584
Lasalle Hotel Prop 1,000 12,394 12,000
Mid Atlantic Realty Trust 11,000 117,259 176,990
Monmouth Capital Corporation 32,280 113,653 122,665
New Plan Realty 45,731 776,616 843,280
Pan Pacific Retail Props -0- -0- -0-
Penn R/E Trust 17,000 330,960 437,920
RFS Hotel Investors 1,000 10,769 10,070
Senior Housing 6,000 73,891 67,320
Sizeler Property Inv. 105,500 894,676 1,061,330
Trizec Ppts Inc 10,000 132,775 113,500
United Mobile Homes 100,200 1,050,221 1,327,644
Urstadt biddle Properties -A -0- -0- -0-
Urstadt biddle Properties 9,500 50,920 108,775
__________ __________
Total Common Stock 5,058,266 5,952,714
__________ __________
Total Equity Securities 11,494,680 13,274,052
__________ __________
Total Securities Available for Sale $ 13,379,013 $ 15,223,941
========== ==========
Page 47A
2001
Shares/
$ Amount Cost Market
Kramont Sr D 9.50% 19,500 $ 360,338 $ 442,650
Lasalle Hotel 10.25% SR A -0- -0- -0-
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
Parkway Properties 8.75% Sr A -0- -0- -0-
Post Properties 7.625% -0- -0- -0-
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
Sizeler PFD B 9.75% -0- -0- -0-
Sovran Self Stor 9.85 Sr B 2,000 39,115 50,900
SNH Capital 10.125% -0- -0- -0-
Thornburg Mtg. 9.68% Sr A 2,000 40,740 51,100
United Dominion Realty Trust 9.25%
SRA Cum. Redeemable -0- -0- -0-
Vornado 8.5% PFD 7,000 139,291 175,560
Winston Hotels Sr A 9,25% -0- -0- -0-
__________ __________
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
Five Star Quality Care Inc -0- -0- -0-
Getty Realty Corp -New -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
JDN Realty -0- -0- -0-
Lasalle Hotel Prop 2,000 24,952 18,480
Mid Atlantic Realty Trust 21,000 228,381 294,000
Monmouth Capital Corporation -0- -0- -0-
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
Senior Housing -0- -0- -0-
Sizeler Property Inv. 105,500 894,676 931,565
Trizec Ppts 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
__________ __________
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 47B
NOTE 6 - MORTGAGE NOTES AND LOANS PAYABLE
The following is a summary of the mortgage notes
payable at September 30, 2002 and 2001:
Fixed Fiscal Balance Balance
Property Rate Maturity 9/30/02 9/30/01
Orangeburg, NY 7% 2004 $ 677,351 $ 969,114
Jackson, MS 8.5% 2008 433,634 488,743
Franklin, MA 7% 2004 771,137 1,103,298
Wichita, KS 10.25% 2016 1,104,099 1,139,043
Urbandale, IA 7% 2004 353,642 512,790
Richland, MS 7.5% 2004 314,919 414,303
O'Fallon, MO 8.5% 2008 1,310,326 1,508,079
Virginia Beach, VA 8.5% 2021 -0- 1,381,495
Fayetteville, NC 7.8% 2006 2,923,508 3,036,730
Schaumburg, IL 8.48% 2012 2,734,241 2,907,418
Burr Ridge, IL 8% 2014 937,527 984,701
Romulus, MI 7.56% 2013 2,295,913 2,429,434
Liberty, MO 7.065% 2013 3,900,105 4,144,992
Omaha, NE 7.15% 2014 3,443,297 3,635,919
Charlottesville, VA 6.90% 2014 2,368,604 2,495,162
Jacksonville, FL 6.92% 2017 3,621,281 3,790,172
Union Township, OH 8.25% 2015 2,708,147 2,828,528
Richmond, VA 6.12% 2016 5,193,920 5,461,711
St. Joseph, MO 8.12% 2016 8,338,783 8,669,233
Newington, CT 8.1% 2016 2,335,074 2,426,827
Cudahy, WI 8.15% 2016 4,032,368 4,188,569
Beltsville, MD 7.53% 2016 5,676,839 5,908,493
Granite City, IL 7.11% 2017 9,163,601 -0-
Monroe, NC 7.11% 2017 3,920,014 -0-
Winston Salem, NC 7.10% 2012 4,725,650 -0-
Elgin, IL 6.97% 2017 4,936,183 -0-
__________ __________
Total Mortgage
Notes Payable $78,220,163 $60,424,754
========== ==========
Page 48
NOTE 6 - MORTGAGE NOTES AND LOANS PAYABLE, (CONT'D.)
Principal on the foregoing debt is scheduled to be paid as
follows:
Year Ending September 30, 2003 $ 4,701,798
2004 5,191,911
2005 4,466,733
2006 7,118,714
2007 4,949,916
Thereafter 51,791,091
___________
$78,220,163
===========
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
$6,256,000 due primarily to the sale of the warehouse facility in
Monsey, New York during 1999 and is now secured by a mortgage on the
South Brunswick Industrial Building. This line of credit expires on
November 29, 2003. As of September 30, 2002, approximately
$4,576,000 is outstanding and approximately $1,680,000 is available.
Margin Loans
During fiscal 2002, the Company purchased securities on margin.
The margin loans are at 3.75% and 4.25% and are due on demand. At
September 30, 2002 and 2001, the margin loans amounted to
approximately $5,728,000 and $4,389,000, respectively and are
collateralized by the Company's securities portfolio. The Company
must maintain a coverage ratio of approximately 50%.
Other
In connection with the purchase of the St. Joseph, Missouri
property, the Company issued a $500,000 note to Butler at an interest
rate of 8.12% due February 29, 2016. The balance of this note at
September 30, 2002 was approximately $471,000.
NOTE 7 - STOCK OPTION PLAN
On April 24, 1997, the shareholders approved and ratified the
Company's 1997 Stock Option Plan (the Plan) authorizing the grant to
officers, directors and key employees options to purchase up to
750,000 shares of common stock. On April 25, 2002, the shareholders
approved an increase to the number of shares of common stock under the
Plan to 1,500,000 shares. 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.
Page 49
NOTE 7 - STOCK OPTION PLAN, (CONT'D.)
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:
2002 2001 2000
____ ____ ____
Net As Reported $4,478,145 $4,123,054 $3,589,397
Income Pro Forma 4,457,305 4,109,069 3,578,672
Net As Reported
Income - Basic
and Diluted $.40 $.43 $.44
Per Share Pro Forma
- Basic
and Diluted .40 .43 .44
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 2002, 2001 and 2000;
dividend yield of 8% in 2002 and 9% in 2001 and 2000; expected
volatility of 13% in 2002 and 25% in 2001 and 2000%; risk-free
interest rate of 3.4% in 2002, 4.75% in 2001 and 6% in 2000, and
expected lives of five years.
During the year ended September 30, 2002, nine officers,
directors and key employees exercised their stock options and
purchased 255,000 shares for a total of $1,617,488. Of this amount,
225,000 shares, for a total of $1,439,363, were exercised through the
issuance of notes receivable from officers. These notes receivable
are at an interest rate of 5%, mature on April 30, 2012 and are
collateralized by the underlying common shares. As of September 30,
2002, the balance of these notes receivable was $1,350,001.
A summary of the status of the Company's stock option plan as of
September 30, 2002, 2001 and 2000 is as follows:
2002 2001 2000
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
______ ________ ______ ________ ______ ________
Outstanding
at beginning
of year 385,000 $6.19 385,000 $6.20 320,000 $6.34
Granted 365,000 7.06 15,000 5.65 65,000 5.50
Exercised (255,000) 6.34 -0- -0- -0- -0-
Expired (30,000) 5.94 (15,000) 5.94 -0- -0-
_________ ________ _____
Outstanding
at end of
year 465,000 6.80 385,000 6.19 385,000 6.20
======= ======= =======
Exercisable
at end of
year 100,000 370,000 320,000
======= ======= =======
Weighted-
average
fair Value
of options
granted
during the
year .12 .54 .33
Page 50
NOTE 7 - STOCK OPTION PLAN, (CONT'D.)
The following is a summary of stock options outstanding as of
September 30, 2002:
Date of Number of Number of Option Expiration
Grant Grants Shares Price Date
_____ _____ _____ _____ _____
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
10/4/01 1 65,000 6.765 10/4/06
6/21/02 15 300,000 7.13 6/21/10
_______
465,000
=======
As of September 30, 2002, there were 780,000 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, 2002 are scheduled as follows:
2003 - $14,403,000; 2004 - $13,052,000; 2005 - $11,946,000; 2006
- - $11,461,000; 2007 - $10,333,000; thereafter - $33,110,000.
NOTE 9 - RELATED PARTY TRANSACTIONS
Eugene W. Landy received $16,300, $8,700 and $5,500 for the years
ended September 30, 2002, 2001 and 2000 as Director. The firm of
Eugene W. Landy received $-0-, $47,500, and $32,500 during the years
ended 2002, 2001 and 2000, respectively, as legal fees. An accrual of
$59,000, $49,000 and $34,000 was made during the years ended September
30, 2002, 2001 and 2000, respectively, for pension and other benefits
in accordance with Mr. Landy's employment agreement. Additionally,
the Board of Directors has granted to Mr. Landy loans totaling
$1,312,501 at interest rates ranging from 5% to 7% and maturity dates
ranging from 2003 to 2012. 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.
Page 51
NOTE 9 - RELATED PARTY TRANSACTIONS, (CONT'D.)
Effective January 15, 2002, the Company and Cynthia J.
Morgenstern entered into a one year employment agreement under which
Ms. Morgenstern receives an annual base salary of $125,000 plus
bonuses and customary fringe benefits. In the event of disability,
her salary shall continue for a period of two years.
Cronheim Management Services received the sum of $245,597,
$220,521 and $199,432 for management fees during the years ended
2002, 2001 and 2000, 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 $20,194, $26,708
and $14,347 in lease brokerage commissions in 2002, 2001 and 2000,
respectively. Daniel Cronheim received $16,300, $8,700 and $5,650 for
Director and Committee fees in 2002, 2001 and 2000, 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 90% 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 2002, 2001 and 2000, since it intends to or has
distributed all of its annual income.
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.
Page 52
NOTE 11 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN, (CONT'D.)
Amounts received, including dividend reinvestment of $2,263,827
and $1,871,521 in 2002 and 2001, respectively, and shares issued in
connection with the Plan for the years ended September 30, 2002 and
2001 were as follows:
2002 2001
____ ____
Amounts Received $10,535,311 $8,179,845
Shares Issued 1,613,020 1,556,768
NOTE 12 - DISTRIBUTIONS
The following cash distributions were paid to shareholders during
the years ended September 30, 2002 and 2001:
2002 2001
____ ____
Quarter Ended Amount Per Share Amount Per Share
_____________ ______ _________ ______ _________
December 31 $1,519,885 $.145 $1,290,979 $.145
March 31 1,587,414 .145 1,364,374 .145
June 30 1,683,029 .145 1,413,499 .145
September 30 1,718,022 .145 1,463,806 .145
__________ __________ __________ _______
$6,508,350 $.58 $5,532,658 $ .58
========== ========= ========== ==========
On September 25, 2002, the Company declared a dividend
of $ .145 per share to be paid on December 16, 2002 to shareholders of
record November 15, 2002.
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.
Page 53
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS, (CONT'D.)
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, 2002, 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 $81,951,074 and $78,220,163, respectively. At
September 30, 2001, the fair value and carrying value of fixed rate
mortgage notes payable amounted to $56,313,559 and $54,963,043,
respectively.
NOTE 14 - CASH FLOW AND COMPREHENSIVE INCOME INFORMATION
Cash paid during the years ended September 30, 2002, 2001 and
2000, for interest is $6,030,744, $4,590,757 and $3,334,861,
respectively.
During 2002, 2001 and 2000, the Company had $2,263,827,
$1,871,521 and $1,606,691, respectively, of dividends which were
reinvested that required no cash transfers.
The following are the reclassification adjustments related to
securities available for sale included in Other Comprehensive Income
(Loss):
2002 2001 2000
Unrealized holding gains
arising during the year $1,212,588 $2,777,864 $ 230,091
Less: reclassifcation
adjustment for gains
realized in income (909,704) (632,492) (110,960)
________ ________ ________
Net unrealized gains $302,884 $2,145,372 $119,131
========= ========= =========
NOTE 15 - SUBSEQUENT EVENTS
On November 6, 2002, the Company purchased a 288,211 square foot
manufacturing and warehouse facility in Tolleson, Arizona from Centex
Industrial Buckeye I, LLC, an unrelated entity. This warehouse
facility is 100% net leased to Western Container Corporation, which
manufactures plastic bottles for Coca-Cola soft drink products. The
lease is guaranteed by Coca-Cola Enterprises. The purchase price was
approximately $14,800,000. The Company paid approximately $550,000 in
cash, borrowed approximately $2,200,000 against its security portfolio
with Prudential Securities, used approximately $1,100,000 of its
revolving line of credit with Fleet Bank and obtained a mortgage of
approximately $10,950,000. This mortgage payable is at an interest
rate of 5.8% and is due November 1, 2012.
Page 54
NOTE 15 - SUBSEQUENT EVENTS, (CONT'D.)
On November 21, 2002, the Company purchased a 90,020 square foot
warehouse facility in Ft. Myers, Florida from Jones Development
Company, LLC, 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 was approximately
$4,400,000. The Company paid approximately $100,000 in cash, used
approximately $1,100,000 of its revolving line of credit with Fleet
Bank and obtained a mortgage of approximately $3,200,000. This
mortgage payable is at an interest rate of 6.33% and is due November
1, 2012. The property acquired is commercial rental property and will
continue to be used as such.
Page 55
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
SEPTEMBER 30, 2002
Column A Column B Column C Column D
________ ________ __________________________ ________
Capitalization
Buildings and Subsequent to
Description Encumbrances Land Improvements Acquisition
___________ __________ __________ ___________ ___________
Shopping Center
Somerset, NJ $ -0- $ 55,182 $ 637,097 $ 511,809
Industrial Building
Ramsey, NJ -0- 52,639 291,500 1,066,648
Monaca, PA -0- 330,773 878,081 1,203,303
Orangeburg, NY 677,351 694,720 2,977,372 -0-
South Brunswick, NJ -0- 1,128,000 4,087,400 103,198
Greensboro, NC -0- 327,100 1,853,700 -0-
Jackson, MS 433,634 218,000 1,233,500 1,086
Franklin , MA 771,137 566,000 4,148,000 -0-
Witchita, KS 1,104,099 268,000 1,518,000 -0-
Urbandale, IO 353,642 310,000 1,758,000 2,736
Richland, MS 314,919 211,000 1,195,000 -0-
O'Fallon, MO 1,310,326 264,000 3,302,000 7,000
Fayetteville, NC 2,923,508 172,000 4,467,885 -0-
Schaumburg, IL 2,734,241 1,039,800 3,694,321 -0-
Burr Ridge, IL 937,527 270,000 1,236,599 -0-
Romulus, MI 2,295,913 531,000 3,653,883 12,078
Liberty, MO 3,900,105 723,000 6,510,546 -0-
Omaha, NE 3,443,297 1,170,000 4,425,500 -0-
Charlottesville, VA 2,368,604 1,170,000 2,845,000 -0-
Jacksonville, FL 3,621,281 1,165,000 4,668,080 -0-
Union Township, OH 2,708,147 695,000 3,342,000 -0-
Richmond, VA 5,193,920 1,160,000 6,413,305 -0-
St. Joseph, MO 8,338,783 800,000 11,753,964 -0-
Newington, CT 2,335,074 410,000 2,961,000 -0-
Cudahy, WI 4,032,368 980,000 5,050,997 2,618
Beltsville, MD 5,676,839 3,200,000 5,958,773 -0-
Granite City, IL 9,163,601 340,000 12,054,175 -0-
Monroe, NC 3,920,014 500,000 4,981,022 -0-
Winston-Salem, NC 4,725,650 980,000 5,610,000 -0-
Elgin, IL 4,936,183 1,280,000 5,529,488 -0-
__________ __________ __________ __________
$ 78,220,163 $ 21,011,214 $ 119,036,188 $ 2,910,476
========== ========== ========== ==========
*Buildings and improvements reacquired in 1986.
Page 56A
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
SEPTEMBER 30, 2002
Column A Column E (1)(2)
________ ___________________________________________
Gross Amount at Which Carried
September 30, 2002
Description Land Bldg & Imp Total
___________ ________ __________ __________
Shopping Center
Somerset, NJ $ 55,182 $ 1,148,906 $ 1,204,088
Industrial Building
Ramsey, NJ 52,639 1,358,148 1,410,787
Monaca, PA 330,773 2,081,384 2,412,157
Orangeburg, NY 694,720 2,977,372 3,672,092
South Brunswick, NJ 1,128,000 4,190,598 5,318,598
Greensboro, NC 327,100 1,853,700 2,180,800
Jackson, MS 218,000 1,234,586 1,452,586
Franklin , MA 566,000 4,148,000 4,714,000
Witchita, KS 268,000 1,518,000 1,786,000
Urbandale, IO 310,000 1,760,736 2,070,736
Richland, MS 211,000 1,195,000 1,406,000
O'Fallon, MO 264,000 3,309,000 3,573,000
Fayetteville, NC 172,000 4,467,885 4,639,885
Schaumburg, IL 1,039,800 3,694,321 4,734,121
Burr Ridge, IL 270,000 1,236,599 1,506,599
Romulus, MI 531,000 3,665,961 4,196,961
Liberty, MO 723,000 6,510,546 7,233,546
Omaha, NE 1,170,000 4,425,500 5,595,500
Charlottesville, VA 1,170,000 2,845,000 4,015,000
Jacksonville, FL 1,165,000 4,668,080 5,833,080
Union Township, OH 695,000 3,342,000 4,037,000
Richmond, VA 1,160,000 6,413,305 7,573,305
St. Joseph, MO 800,000 11,753,964 12,553,964
Newington, CT 410,000 2,961,000 3,371,000
Cudahy, WI 980,000 5,053,615 6,033,615
Beltsville, MD 3,200,000 5,958,773 9,158,773
Granite City, IL 340,000 12,054,175 12,394,175
Monroe, NC 500,000 4,981,022 5,481,022
Winston-Salem, NC 980,000 5,610,000 6,590,000
Elgin, IL 1,280,000 5,529,488 6,809,488
__________ __________ __________
$ 21,011,214 $ 121,946,664 $ 142,957,878
========== ========== ==========
*Buildings and improvements reacquired in 1986.
Page 56B
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
SEPTEMBER 30, 2002
Column A Column F Column G Column H Column I
________ ________ ________ ________ ________
Accumulated Date of
Deprecia- Construc- Date Depreciable
Description tion tion Acquired Life
___________ _________ ________ ________ ________
Shopping Center
Somerset, NJ $ 889,384 1970 1970 10-33
Industrial Building
Ramsey, NJ 701,621 1969 1969 7-40
Monaca, PA 1,269,547 1977 1977* 5-31.5
Orangeburg, NY 933,503 1990 1993 31.5
South Brunswick, NJ 1,290,001 1974 1993 31.5
Greensboro, NC 556,873 1988 1993 31.5
Jackson, MS 363,312 1988 1993 39
Franklin , MA 904,017 1991 1994 39
Witchita, KS 330,850 1995 1994 39
Urbandale, IO 383,138 1985 1994 39
Richland, MS 260,447 1986 1994 39
O'Fallon, MO 634,846 1989 1994 39
Fayetteville, NC 630,060 1996 1997 39
Schaumburg, IL 520,977 1997 1997 39
Burr Ridge, IL 142,632 1997 1997 39
Romulus, MI 423,934 1998 1998 39
Liberty, MO 751,144 1997 1998 39
Omaha, NE 397,147 1999 1999 39
Charlottesville, VA 255,318 1998 1999 39
Jacksonville, FL 418,909 1998 1999 39
Union Township, OH 214,288 1999 2000 39
Richmond, VA 247,255 2000 2001 39
St. Joseph, MO 452,054 2000 2001 39
Newington, CT 113,884 2001 2001 39
Cudahy, WI 194,328 2001 2001 39
Beltsville, MD 229,175 2000 2001 39
Granite City, IL 154,535 2001 2001 39
Monroe, NC 63,857 2001 2001 39
Winston-Salem, NC 71,920 2001 2002 39
Elgin, IL 70,888 2002 2002 39
__________
$ 13,869,844
==========
*Buildings and improvements reacquired in 1986.
Page 56c
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION, (CONT'D.)
(1) Reconciliation
REAL ESTATE INVESTMENTS
_______________________
9/30/02 9/30/01 9/30/00
_________ _________ _________
Balance-Beginning
of Year $ 113,971,563 $ 74,996,066 $ 70,871,655
__________ __________ __________
Additions:
Acquisitions 31,274,685 38,688,039 4,037,000
Improvements 246,230 287,458 87,411
__________ __________ __________
Total Additions
31,520,915 38,975,497 4,124,411
__________ __________ __________
Sales (2,534,600) -0- -0-
__________ __________ __________
Balance-End of Year $ 142,957,878 $ 113,971,563 $ 74,996,066
========== ========== ==========
ACCUMULATED DEPRECIATION
_________________________
9/30/02 9/30/01 9/30/00
__________ __________ __________
Balance-Beginning
of Year $ 11,268,700 $ 9,102,373 $ 7,399,386
Depreciation 2,941,097 2,166,327 1,702,987
Sales (339,954) -0- -0-
__________ __________ __________
Balance-End of Year $ 13,869,844 $ 11,268,700 $ 9,102,373
========== ========== ==========
Page 57
MONMOUTH REAL ESTATE INVESTMENT CORPORATION
NOTES TO SCHEDULE III
SEPTEMBER 30,
(1) Reconciliation
2002 2001 2000
____ ____ ____
Balance - Beginning
of Year $ 113,971,563 $ 74,996,066 $ 70,871,655
____________ ____________ ____________
Additions:
Ramsey, NJ 3,997 178,937 -0-
Somerset, NJ 30,488 -0- 52,423
Monaca, PA 154,154 84,543 22,014
Orangeburg, NY -0- -0- -0-
South Brunswick, NJ 45,237 11,900 12,974
Greensboro, NC -0- -0- -0-
Jackson, MS -0- -0- -0-
Franklin, MA -0- -0- -0-
Wichita, KA -0- -0- -0-
Urbandale, IA 2,736 -0- -0-
Richland, MS -0- -0- -0-
O'Fallon, MO 7,000 -0- -0-
Fayetteville, NC -0- -0- -0-
Schaumburg, IL -0- -0- -0-
Burr Ridge, IL -0- -0- -0-
Romulus, MI -0- 12,078 -0-
Liberty, MO -0- -0- -0-
Omaha, NE -0- -0- -0-
Charlottesville, VA -0- -0- -0-
Jacksonville, FL -0- -0- -0-
Union Township, OH -0- -0- 4,037,000
Richmond, VA -0- 7,573,305 -0-
St. Joseph, MO -0- 12,553,964 -0-
Newington, CT -0- 3,371,000 -0-
Cudahy, WI 2,618 6,030,997 -0-
Beltsville, MD -0- 9,158,773 -0-
Granite City, IL 12,394,175 -0- -0-
Monroe, NC 5,481,022 -0- -0-
Winston Salem, NC 6,590,000 -0- -0-
Elgin, IL 6,809,488 -0- -0-
__________ __________ __________
Total Additions 31,520,915 38,975,497 4,124,411
__________ __________ __________
Sales:
Virginia Beach, VA (2,534,600) -0- -0-
__________ __________ __________
Balance - End of
Year $ 142,957,878 $ 113,971,563 $ 74,996,066
========== ========== ==========
(2) The aggregate cost for Federal tax purposes
approximates historical cost.
Page 58
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 19, 2002 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 19, 2002 By: /s/ Eugene W. Landy
Eugene W. Landy, President and
Director
Date: December 19, 2002 By: /s/ Ernest V. Bencivenga
Ernest V. Bencivenga, Treasurer and
Director
Date: December 19, 2002 By: /s/ Anna T. Chew
Anna T. Chew, Controller and
Director
Date: December 19, 2002 By: /s/ Daniel D. Cronheim
Daniel D. Cronheim, Director
Date: December 19, 2002 By: /s/ Matthew I. Hirsch
Matthew I. Hirsch, Director
Date: December 19, 2002 By: /s/ Charles P. Kaempffer
Charles P. Kaempffer, Director
Date: December 19, 2002 By: /s/ Samuel A. Landy
Samuel A. Landy, Director
Date: December 19, 2002 By: /s/ Cynthia J.Morgenstern
Cynthia J. Morgenstern
Vice President and Director
Date: December 19, 2002 By: /s/ John R. Sampson
John R. Sampson, Director
Date: December 19, 2002 By: /s/ Peter J. Weidhorn
Peter J. Weidhorn, Director
Page 59