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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly Report under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For Quarter Ended July 31, 2002 Commission File Number 1-12803
------------- -------
URSTADT BIDDLE PROPERTIES INC.
(Exact Name of Registrant as Specified in Charter)
MARYLAND 04-2458042
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
321 Railroad Avenue, Greenwich, CT 06830
- ----------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 863-8200
The number of shares of Registrant's Common Stock and Class A Common Stock
outstanding as of the close of the period covered by this report were: 6,571,999
Common Shares, par value $.01 per share and 17,391,750 Class A Common Shares,
par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
THE SEC FORM 10-Q, FILED HEREWITH, CONTAINS 21 PAGES, NUMBERED CONSECUTIVELY
FROM 1 TO 21 INCLUSIVE, OF WHICH THIS PAGE IS 1.
1
INDEX
URSTADT BIDDLE PROPERTIES INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets--July 31, 2002 and October 31, 2001
Consolidated Statements of Income--Nine months ended July 31,
2002 and 2001; Three months ended July 31, 2002 and 2001
Consolidated Statements of Cash Flows--Nine months ended July
31, 2002 and 2001.
Consolidated Statements of Stockholders' Equity--Nine months
ended July 31, 2002.
Notes to Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
CERTIFICATIONS
2
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
July 31 October 31
2002 2001
---- ----
ASSETS (unaudited)
Real Estate Investments:
Core properties-- at cost, net of accumulated depreciation $253,818 $160,152
Non-core properties - at cost, net of accumulated depreciation 12,031 11,039
Mortgage notes receivable 3,465 3,507
----- -----
269,314 174,698
Cash and cash equivalents 44,593 34,080
Short term investments 15,014 -
Interest and rent receivable, net of allowances
of $964 and $411 in 2002 and 2001 respectively 5,105 3,826
Deferred charges, net of accumulated amortization 3,373 3,477
Prepaid expenses and other assets 4,574 2,271
----- -----
$341,973 $218,352
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $106,868 $47,115
Accounts payable and accrued expenses 2,243 2,670
Deferred officers' compensation 284 230
Other liabilities 4,035 4,142
----- -----
113,430 54,157
------- ------
Minority Interests 7,320 4,365
----- -----
Preferred Stock, par value $.01 per share; 20,000,000 shares authorized; 8.99%
Series B Senior Cumulative Preferred stock, (liquidation preference of $100
per share); 150,000 and 350,000 shares issued and outstanding in 2002 and 2001 14,341 33,462
------ ------
Stockholders' Equity:
Excess stock, par value $.01 per share; 10,000,000 shares authorized;
none issued and outstanding - -
Common stock, par value $.01 per share; 30,000,000 shares authorized;
6,571,999 and 6,242,139 issued and outstanding shares in 2002 and 2001, respectively 66 62
Class A Common stock, par value $.01 per share; 40,000,000 shares authorized;
17,391,750 and 9,600,019 issued and outstanding shares in 2002 and 2001, respectively 174 96
Additional paid in capital 243,396 162,763
Cumulative distributions in excess of net income (29,487) (31,654)
Unamortized restricted stock compensation and officers notes receivable (7,267) (4,899)
------- -------
206,882 126,368
------- -------
$341,973 $218,352
======== ========
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
3
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Nine Months Ended Three Months Ended
July 31 July 31
-------- --------
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Operating leases $29,592 $25,279 $10,673 $8,611
Lease termination income 765 1,137 250 1,137
Interest and other 851 550 300 235
--- --- --- ---
31,208 26,966 11,223 9,983
------ ------ ------ -----
Operating Expenses:
Property expenses 9,150 8,430 3.354 2,847
Interest 3,530 3,269 1,650 1,123
Depreciation and amortization 5,784 5,429 2,161 2,087
General and administrative expenses 2,136 1,984 626 580
Directors' fees and expenses 133 103 47 29
--- --- -- --
20,733 19,215 7,838 6,666
------ ------ ----- -----
Operating Income before Minority Interests 10,475 7,751 3,385 3,317
Minority Interests in Results of Consolidated Joint Ventures 304 332 90 106
--- --- -- ---
Net Income 10,171 7,419 3,295 3,211
Preferred Stock Dividends (1,161) (2,360) (337) (787)
Excess of Repurchase of Preferred Stock 3,071 - - -
----- ------ ------ ------
Net Income Applicable to Common and Class A Common
Stockholders $12,081 $5,059 $2,958 $2,424
======= ====== ====== ======
Basic Earnings per Share:
Common $.67 $.44 $.15 $.21
==== ==== ==== ====
Class A Common $.75 $.48 $.17 $.23
==== ==== ==== ====
Weighted Average Number of Shares Outstanding:
Common 6,039 5,840 6,093 5,995
===== ===== ===== =====
Class A Common 10,765 5,192 12,312 5,208
====== ===== ====== =====
Diluted Earnings Per Share:
Common $.65 $.43 $.15 $.20
==== ==== ==== ====
Class A Common $.72 $.47 $.16 $.22
==== ==== ==== ====
Weighted Average Number of Shares Outstanding:
Common and Common Equivalent 6,397 5,984 6,452 6,176
===== ===== ===== =====
Class A Common and Class A Common Equivalent 11,281 5,618 12,838 5,611
====== ===== ====== =====
Dividends Paid Per Share:
Common $.555 $.54 $.185 $.18
===== ==== ===== ====
Class A Common $.615 $.60 $.205 $.20
===== ==== ===== ====
The accompanying notes to consolidated financial statements are an
integral part of these statements.
4
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Nine Months Ended
July 31,
2002 2001
---- ----
Operating Activities:
Net income $10,171 $7,419
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,784 5,429
Compensation expense relating to issuance of grants of restricted stock 705 573
Recovery of investment in properties owned subject to financing leases - 191
Equity income of unconsolidated joint venture - 22
(Increase) in interest and rent receivable (1,278) (1,332)
(Decrease) increase in accounts payable and accrued expenses (427) 1,386
(Increase) in other assets and other liabilities, net (2,170) (303)
------- -----
Net Cash Provided by Operating Activities 12,785 13,385
------ ------
Investing Activities:
Acquisition of minority interests (1,258) (1,013)
Increase in short term investments (15,014) -
Acquisitions of properties (34,478) (5,606)
Improvements to properties and deferred charges (2,141) (9,222)
Investment in unconsolidated joint venture - (392)
Distributions received from unconsolidated joint venture - 1,000
Distributions to limited partners of unconsolidated joint venture (600) -
Payments received on mortgage notes receivable 43 58
Net proceed from sales of properties 275 100
-------- --------
Net Cash Used in Investing Activities (53,173) (15,075)
-------- --------
Financing Activities:
Borrowings on revolving credit lines 16,000 16,450
Repayments of revolving credit lines (16,000) -
Sales of additional Common and Class A Common shares 77,642 1,736
Repurchase of preferred shares (16,050) -
Proceeds from mortgage notes payable 1,200 -
Payments on mortgage notes payable (816) (6,682)
Dividends paid - Common and Class A Common shares (9,914) (6,627)
Dividends paid - Preferred Stock (1,161) (2,360)
------- -------
Net Cash Provided by Financing Activities 50,901 2,517
------ -----
Net Increase In Cash and Cash Equivalents 10,513 827
Cash and Cash Equivalents at Beginning of Period 34,080 1,952
------ -----
Cash and Cash Equivalents at End of Period $44,593 $2,779
======= ======
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands,
except shares and per share data)
Unamortized
Common Stock Class A Common Stock Restricted
------------ -------------------- (Cumulative Stock
Outstanding Outstanding Additional Distributions Compensation
Number of Par Number of Par Paid In In Excess and Notes
Shares Value Shares Value Capital of Net Income) Receivable Total
------ ----- ------ ----- ------ --------- ---------- -----
Balances - October 31, 2001 6,242,139 $62 9,600,019 $96 $162,763 $(31,654) $(4,899) $126,368
Net Income Applicable to Common and
Class A Common stockholders - - - - - 12,081 - 12,081
Cash dividends paid :
Common Stock ($.555 per share) - - - - - (3,534) - (3,534)
Class A Common Stock ($.615 per share) - - - - - (6,380) - (6,380)
Sales of Class A Common shares - - 7,699,222 78 77,106 - - 77,184
Sales of shares under dividend
reinvestment plan 10,723 - 14,772 - 272 - - 272
Shares granted under restricted stock plan 110,375 2 43,425 - 1,577 - (1,579) -
Amortization of restricted stock
compensation - - - - - - 705 705
Notes from officers upon exercise of stock
options - - - - - - (1,494) (1,494)
Exercise of stock options 208,762 2 34,312 - 1,678 - - 1,680
------- - ------ ---- -------- --------- -------- --------
Balances - July 31, 2002 6,571,999 $66 17,391,750 $174 $243,396 $(29,487) $(7,267) $206,882
========= === ========== ==== ======== ========= ======== ========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
6
URSTADT BIDDLE PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Business
Urstadt Biddle Properties Inc., (the "Company") is a Maryland corporation that
has elected to be treated as a real estate investment trust (REIT) under the
Internal Revenue Code, as amended. A REIT, that among other things, distributes
at least 90% of its REIT taxable income will not be taxed on that portion of its
taxable income which is distributed. The Company believes it qualifies and
intends to continue to qualify as a REIT. The Company is engaged in the
acquisition, ownership and management of commercial real estate, primarily
neighborhood and community shopping centers in the northeastern part of the
United States. Other assets include office and retail buildings and industrial
properties. The Company's major tenants include supermarket chains and other
retailers who sell basic necessities. As of July 31, 2002, the Company owned 26
properties containing a total of 2.9 million gross leasable square feet.
Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of the Company, its wholly-owned subsidiaries, and joint ventures in
which the Company has the ability to control the affairs of the venture. All
significant intercompany transactions and balances have been eliminated. The
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Results of operations for the three-month and nine-month periods ended July 31,
2002 are not necessarily indicative of the results that may be expected for the
year ending October 31, 2002. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Company's annual report on Form 10-K for the fiscal year ended October 31,
2001. The preparation of financial statements requires management to make use of
estimates and assumptions that affect amounts reported in the financial
statements as well as certain disclosures. Actual results could differ from
those estimates.
The balance sheet at October 31, 2001 has been derived from the audited
financial statements at that date.
Short-Term Investments
Short-term investments consists of investments with an original maturity of
greater than three months, are carried at fair value (which approximates cost),
and at July 31, 2002 consists principally of shares of a mutual fund, which
invests primarily in fixed income securities with an average duration of between
three and thirteen months.
7
Earnings Per Share
Basic EPS excludes the impact of dilutive shares and is computed by dividing net
income applicable to Common and Class A Common stockholders by the weighted
number of Common shares and Class A Common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue Common shares or Class A Common shares were exercised
or converted into Common shares or Class A Common shares and then shared in the
earnings of the Company. Since the cash dividends declared on the Company's
Class A Common stock are higher than the dividends declared on the Common Stock,
basic and diluted EPS have been calculated using the "two-class" method. The
two-class method is an earnings allocation formula that determines earnings per
share for each class of common stock according to the weighted average of the
dividends declared, outstanding shares per class and participation rights in
undistributed earnings.
The following table sets forth the reconciliation between basic and diluted EPS
(in thousands):
Nine Months Three Months
July 31, July 31,
2002 2001 2002 2001
---- ---- ---- ----
Numerator
Net income applicable to Common stockholders - basic $4,061 $2,546 $913 $1,233
Effect of dilutive securities:
Operating partnership units 120 13 37 (5)
------ ------ ---- ------
Net income applicable to Common Stockholders - diluted $4,181 $2,559 $950 $1,228
====== ====== ==== ======
Denominator
Denominator for basic EPS-weighted average Common shares 6,039 5,840 6,093 5,995
Effect of dilutive securities:
Stock options and awards 303 144 304 181
Operating partnership units 55 - 55 -
----- ----- ----- -----
Denominator for diluted EPS - weighted average Common equivalent shares 6,397 5,984 6,452 6,176
===== ===== ===== =====
Numerator
Net income applicable to Class A Common stockholders - basic $8,020 $2,513 $2,045 $1,191
Effect of dilutive securities:
Operating partnership units 152 155 53 50
------ ------ ------ ------
Net income applicable to Class A Common stockholders - diluted $8,172 $2,668 $2,098 $1,241
====== ====== ====== ======
Denominator
Denominator for basic EPS - weighted average Class A Common shares 10,765 5,192 12,312 5,208
Effect of dilutive securities:
Stock options and awards 206 124 216 148
Operating partnership units 310 302 310 255
------ ----- ------ -----
Denominator for diluted EPS - weighted average Class A Common equivalent shares 11,281 5,618 12,838 5,611
====== ===== ====== =====
The weighted average Common equivalent shares and Class A Common equivalent
shares for the three-month and nine-month periods ended July 31, 2001 each
exclude 54,553 shares. These shares were not included in the calculation of
diluted EPS because the effect would be anti-dilutive. These operating
partnership units represent minority interests in the joint ventures which are
exchangeable into either Common shares or Class A Common shares of the Company.
8
New Accounting Pronouncement
In 2001, the Financial Accounting Standards Board issued Statement No. 144
"Accounting for the Impairment or Disposal of Long Lived Assets" which updates
and clarifies the accounting and reporting for the impairment of assets held in
use and be disposed of. The Statement, among other things, will require the
Company to classify the operations and cash flow of properties to be disposed of
as discontinued operations. The Company expects to adopt the provisions of the
Statement in fiscal 2003, and does not expect the Statement to have a material
impact on the Company's financial position or results of operations.
2. CORE PROPERTIES
In June 2002, UB Stamford, LP, a newly formed limited partnership in which the
Company has a 90% general partner interest, acquired a 360,000 square foot
shopping center in Fairfield County, Connecticut for a total purchase price of
$89.99 million, including transaction costs of $708,000 and the assumption of an
existing first mortgage loan on the property of $57,369,000 at a fixed interest
rate of 7.54%. The partnership agreement provides for the partners to receive an
annual cash preference from available cash of the partnership. Any unpaid
preferences accumulate and are paid from future available cash, if any. The
limited partners' cash preferences are paid after the general partner's
preferences are satisfied. The balance of available cash, if any, is distributed
in accordance with the respective partners' interests. Upon liquidation,
proceeds from the sale of partnership assets are to be distributed in accordance
with the respective partners' interests. The partners are not obligated to make
any additional capital contributions to the partnership. The Company has
retained an affiliate of one of the limited partners to provide management and
leasing services to the property at an annual fee of $125,000 for a period of
five years ending in June 2007. The affiliate also signed a promissory note for
$130,000 at 8% per annum. The note was fully repaid in August 2002.
The assumption of the first mortgage loan represents a non-cash financing
activity and is therefore not included in the accompanying 2002 consolidated
statement of cash flows. The limited partners' interests in the partnership are
reflected in the accompanying consolidated financial statements as Minority
Interests.
In March 2002, the Company acquired a shopping center in Danbury, Connecticut
for $7.0 million subject to a first mortgage loan of $2.0 million at a fixed
interest rate of 8.375%. The assumption of the first mortgage represents a
non-cash financing activity and is therefore not included in the accompanying
2002 consolidated statement of cash flows.
In February 2002, the Company sold undeveloped land, located adjacent to its
Carmel, New York shopping center. The Company received net proceeds of $269,000
and recorded a loss on the sale of $6,200.
3. NON- CORE PROPERTIES
In a prior year, the Company's Board of Directors authorized a plan to sell
certain properties of the Company over a period of several years (the "non-core"
properties). At July 31, 2002, the non-core properties consist of two
distribution and service properties, one office building and one retail property
located outside the Northeast region of the United States.
9
On April 30, 2002, the Company, which held an 85% general partner interest in
the office building, acquired the remaining 15% partnership interest at a cost
of $1.25 million.
4. MORTGAGE NOTES PAYABLE AND LINES OF CREDIT
At July 31, 2002, the Company had ten non-recourse mortgage notes payable
totaling $106,868,000 due in installments over various terms extending to fiscal
year 2011 at fixed rates of interest ranging from 6.29% to 8.375%. The mortgage
notes payable are collateralized by real estate investments having a net
depreciated book value of approximately $171 million as of July 31, 2002.
The Company has a $19.375 million secured revolving credit loan agreement with a
bank which expires in October 2005 and is secured by first mortgage liens on two
properties. Interest on outstanding borrowings is at a variable rate of prime +
1/2% or LIBOR + 1.5%. The Company also has a conditional $20 million unsecured
line of credit arrangement with the same bank. The unsecured line of credit
expires in fiscal 2003 and outstanding borrowings bear interest at the prime +
1/2% or LIBOR + 2 1/2%. Extensions of credit on the unsecured credit line
arrangement are at the bank's discretion and subject to the bank's evaluation of
certain conditions. There were no borrowings outstanding under either
arrangement at July 31, 2002. The Company pays annual fees of 1/4% on the unused
portions of the secured and unsecured credit line arrangements.
5. PREFERRED STOCK
In November 2001, the Company repurchased 200,000 shares of its outstanding 8.99
% Series B Cumulative Preferred Stock for a purchase price of $16,050,000 in a
negotiated transaction with a preferred stockholder. The repurchased shares had
a net carrying value of $19,121,000. In connection with this transaction, the
Company recorded the excess of the carrying value over the purchase price as an
increase in net income applicable to Common and Class A Common stockholders.
6. STOCKHOLDER'S EQUITY
In July 2002, the Company completed a secondary offering of 7,000,000 shares of
its Class A Common stock in an underwritten public offering. The net proceeds to
the Company (after deducting underwriting fees and expenses) were $71,115,000.
The Company also granted the underwriters an option to purchase up to 1,050,000
additional shares of Class A Common stock to cover over-allotments. In August
2002, the underwriters exercised the full amount of the option that resulted in
additional net proceeds to the Company of $10,844,000.
In October 2001, the Company completed a secondary offering of 4,800,000 shares
of its Class A Common stock in an underwritten public offering. In connection
with the offering, the Company granted the underwriters an option to purchase up
to 720,000 additional shares of Class A Common stock to cover over-allotments.
In November 2001, the underwriters exercised an option for 699,222 shares that
resulted in additional net proceeds to the Company of $6,069,000.
In July 2002 and January 2002, officers of the Company exercised stock options
to purchase 193,000 shares of common stock and 24,500 shares of Class A Common
stock respectively at various exercise prices ranging from $6.81 per share to
$7.71 per share. The officers signed full recourse promissory notes in favor of
the Company to purchase the shares. The notes are due in fiscal 2012 and are at
fixed rates of interest of 6.78% and 7.11%, respectively. The shares have been
10
pledged as additional collateral for the notes. The notes are shown as a
reduction in stockholders' equity as "notes receivable from
officers/stockholders". The exercise of the stock options and notes from
officers represent non-cash financing activities and are therefore not included
in the accompanying 2002 consolidated statement of cash flows.
The Company has a restricted stock plan for key employees and directors of the
Company. The plan, which was amended in fiscal 2002, authorizes the grants of
restricted stock of up to 1,050,000 shares (350,000 shares each of Class A
Common stock and Common stock and 350,000 shares which, at the discretion of the
Company's compensation committee, may be awarded in any combination of Common
Stock or Class A Common Stock). In fiscal 2002, awards of 43,425 shares of Class
A Common stock and 110,375 shares of Common stock were made to participants in
the plan. The shares vest after five years. As of July 31, 2002, 350,000 shares
of Common stock and 186,300 shares of Class A Common Stock have been awarded to
participants in the plan of which 4,000 shares of Common Stock and 4,000 shares
of Class A Common Stock shares awarded through July 31, 2002 are vested.
Dividends on vested and non-vested shares are paid as declared. The market value
of shares awarded has been recorded as unamortized restricted stock compensation
and is shown as a separate component of stockholders' equity. Unamortized
restricted stock compensation is being amortized to expense over the respective
vesting periods.
PRO FORMA FINANCIAL INFORMATION
As discussed in Note 2, a limited partnership in which the Company is a 90%
general partner acquired a shopping center for $89.99 million. The pro forma
financial information set forth below is based upon the Company's historical
consolidated statements of income for the nine months ended July 31, 2002 and
2001, adjusted to give effect to this transaction as though it was completed on
November 1, 2000.
The pro forma financial information is presented for informational purposes
only and may not be indicative of what actual results of operations would have
been had the transaction occurred as of November 1, 2000, nor does it purport to
represent the results of future operations. (Amounts in thousands, except per
share figures).
Nine Months Ended July 31,
2002 2001
Pro forma revenues: $36,934 $34,447
Pro forma net income applicable to Common
and Class A Common Stockholders: $12,192 $5,356
Pro forma earnings per share:
Basic:
Common $0.68 $0.46
Class A Common $0.75 $0.51
Diluted:
Common $0.66 $0.45
Class A Common $0.73 $0.50
11
8. SEGMENT REPORTING
The Company operates in one industry segment, ownership of commercial real
estate properties. As of July 31, 2002, the Company owned 26 properties
primarily located in the northeastern United States. Management reviews
operating and financial data for each property separately and independently from
all other properties when making resource allocation decisions and measuring
performance. No single tenant accounts for 10% or more of rental revenue.
9. COMMITMENT
In August 2002, the Company contracted to purchase a shopping center located in
Fairfield County, Connecticut for $10.25 million.
12
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements
This quarterly report on Form 10-Q, together with other statements and
information publicly disseminated by the Company contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Company intends such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 and include this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe the Company's
future plans, strategies and expectations, are generally identifiable by use of
the words "believe," "expect," "intend," "anticipate," "estimate," or "project"
rely on forward-looking statements since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond the Company's
control and which could materially affect actual results, performances or
achievements. Factors which may cause actual results to differ materially from
current expectations are described in the Company's filings with the Securities
and Exchange Commission from time to time and include, but are not limited to,
(i) general economic and local real estate conditions, (ii) financing risks,
such as the inability to obtain equity or debt financing on favorable terms,
(iii) changes in governmental laws and regulations, (iv) the level and
volatility of interest rates, (v) the availability of suitable acquisition
opportunities and (vi) increases in operating costs. Accordingly , there is no
assurance that the Company's expectations will be realized.
Liquidity and Capital Resources
The Company's sources of liquidity and capital resources include its cash and
cash equivalents, proceeds from bank borrowings and long-term mortgage debt,
capital financings and sales of real estate investments. The Company expects to
meet its short-term liquidity requirements primarily by generating net cash from
the operations of its properties. Payments of expenses related to real estate
operations, debt service, management and professional fees, and dividend
requirements place demands on the Company's short-term liquidity. The Company
believes that its net cash provided by operations is sufficient to fund its
short-term liquidity requirements for fiscal 2002. The Company expects to fund
its long-term liquidity requirements such as property acquisitions, repayment of
indebtedness and capital expenditures through other long-term indebtedness
(including indebtedness assumed in acquisitions), proceeds from sales of real
estate investments and/or the issuance of equity securities.
We believe our net cash provided by operations will be sufficient to allow us to
meet our dividend requirements necessary to continue to qualify us as a REIT. In
the first nine months of fiscal 2002, the Company paid $11.1 million in
dividends to our stockholders compared to $9.0 million for the same period in
fiscal 2001. During the comparable periods of fiscal 2002 and 2001 our net cash
provided by operations were $12.8 million and $13.4 million, respectively.
13
At July 31, 2002, the Company had cash and cash equivalents of $44.6 million
compared to $34.1 million at October 31 2001. The Company's cash positions
reflect the temporary investment in cash and cash equivalents of a portion of
the net proceeds realized from the sales of additional Class A Common shares in
two public secondary stock offerings (see below).
In July 2002, the Company completed a secondary offering of 7,000,000 shares of
its Class A Common stock in an underwritten public offering. The net proceeds to
the Company (after deducting underwriting fees and expenses) were $71,115,000.
The Company also granted the underwriters an option to purchase up to 1,050,000
additional shares of Class A Common stock to cover over-allotments. In August
2002, the underwriters exercised the full amount of the option that resulted in
additional net proceeds to the Company of $10,844,000.
In October 2001, the Company also completed a secondary offering of 4,800,000
shares of its Class A Common stock in an underwritten public offering. The net
proceeds to the Company were $41.1 million and in November 2001, the
underwriters exercised an option for 699,222 shares which resulted in additional
net proceeds to the Company of $6.1 million. The Company used the aggregate net
proceeds of this offering during fiscal 2002 to complete the acquisitions of two
properties (see below), repay outstanding credit line debt and repurchase
200,000 shares of its outstanding 8.99% Series B Cumulative Preferred Stock.
The Company has a $19.375 million secured revolving credit loan agreement with a
bank which expires in fiscal 2005 and a conditional $20 million unsecured
revolving line of credit with the same bank which expires in fiscal 2003. The
revolving credit lines are available to finance the acquisition, management
and/or development of commercial real estate, refinance indebtedness and for
working capital purposes. Extensions of credit under the unsecured credit line
are at the bank's discretion and subject to the satisfaction of certain
conditions. In fiscal 2002, the Company borrowed $16 million on the secured
credit line to complete the acquisition of the Stamford, Connecticut property
(see below). Such borrowings were fully repaid from proceeds of the stock sale
in July 2002. There were no outstanding borrowings on either line of credit at
July 31, 2002.
In a prior year, the Board of Directors expanded and refined the strategic
objectives of the Company to refocus its real estate portfolio on the
self-managed retail properties located in the Northeast and authorized a plan to
sell the non-core properties of the Company in the normal course of business
over a period of several years. At July 31, 2002, the non-core properties
comprise four properties with a net book value of $12 million and consists of
two distribution service facilities, one office building and one retail property
(all of which are located outside of the northeast region of the United States).
None of the properties are currently being offered for sale.
In April 2002, the Company, which held an 85% general partner interest in a
consolidated joint venture that owned the non-core office building acquired the
remaining 15% partnership interest at a cost of $1.25 million.
14
The Company expects to make real estate investments periodically. In March 2002,
the Company purchased a neighborhood shopping center in Danbury, Connecticut for
$7.0 million subject to a first mortgage loan of $2.0 million. In June 2002, a
newly formed partnership in which the Company has a 90% general partner
interest, acquired a community shopping center in Stamford, Connecticut for
$89.99 million, including transaction costs of $708,000 and the assumption of a
$57.4 million first mortgage loan at a fixed rate of interest of 7.54%. The
balance of the purchase price was funded with available cash of approximately
$13.4 million and borrowings of $16 million under the Company's secured
revolving credit line. In August 2002, the Company contracted to acquire a
shopping center in Fairfield County, Connecticut for a purchase price of $10.25
million. The transaction is expected to be completed by the end of the current
fiscal year. The Company is in discussions with the owners of other properties
to make additional real estate investments, however no assurance can be given
that any such discussion will result in an acquisition. The Company also invests
in its existing properties and, in the first nine months of fiscal 2002,
incurred approximately $2.1 million for capital improvements to the properties
and tenant improvements and allowances in connection with the Company's core
property leasing activities. The Company expects to spend approximately $3
million to complete its known leasing related costs during the next six month
period.
Funds from Operations
The Company considers Funds From Operations ("FFO") to be one supplemental
financial measure of an equity REIT's operating performance. FFO is calculated
as net income (computed in accordance with generally accepted accounting
principles (GAAP)) plus depreciation and amortization, excluding gains (or
losses) from sales of property, and after adjustments for unconsolidated joint
ventures. FFO does not represent cash flows from operations as defined by GAAP
and should not be considered an alternative to net income as an indicator of the
Company's operating performance or for cash flows as a measure of liquidity or
of its dividend paying capacity. Furthermore, FFO as disclosed by other REITs
may not be comparable to the Company's calculation of FFO. The table below
provides a reconciliation of net income in accordance with GAAP to FFO for the
nine month periods ended July 31, 2002 and 2001 (amounts in thousands):
Nine months ended July 31,
2002 2001
---- ----
Net Income Applicable to Common and Class A Common Stockholders $12,081 $5,059
Plus: Real property depreciation 3,741 3,299
Amortization of tenant improvements and allowances 1,645 1,651
Amortization of deferred leasing costs 398 464
Recoveries of investments in properties subject to finance leases - 91
Adjustments for unconsolidated joint venture - 473
Less: Excess of repurchase of Preferred Stock (3,071) -
------- -------
Funds from Operations $14,794 $11,037
======= =======
15
Results of Operations
Revenues
Revenues from operating leases increased 17.1% to $29.6 million for the nine
months ended July 31, 2002 as compared to $25.3 million in the corresponding
nine-month period in fiscal 2001. For the three months ended July 31, 2002
revenues from operating leases increased 23.9% to $10.7 million as compared to
$8.6 million in the corresponding period in fiscal 2001. The increase in
operating lease revenues in the nine-month period results principally from new
leasing of previously vacant space at the core retail properties and additional
rental revenues from properties acquired during fiscal 2002 and 2001. For the
nine-month and three-month periods ended July 31, 2002, operating rents from
recently acquired properties increased operating lease income by $2,809,000 and
$2,041,000 respectively. At July 31, 2002, the Company's core properties were
96% leased. In January 2002, one tenant occupying 115,390 square feet at one of
the Company's shopping centers vacated its leased space but has continued to pay
rent in accordance with the terms of its lease through July 31, 2002. The
Company is actively seeking to find a replacement tenant for the vacant space.
The Company's non-core properties were 92% leased at July 31, 2002. A lease for
94,000 square feet at the Company's non-core office property expired in April
2002. The Company has subsequently re-leased 32,456 square feet of the vacant
space and is currently marketing the remaining 62,000 square feet vacant space.
During the nine-month periods ended July 31, 2002 and 2001 the Company recorded
lease cancellation payments of $765,000 and $1,137,000 respectively received
from tenants who terminated their leases during the periods.
Interest income increased in the nine-month and three-month periods ended July
31, 2002 from the comparable periods in fiscal 2001 from the temporary
investment in short-term cash and marketable securities of the proceeds from the
public stock offerings and a $1.2 million mortgage note (interest at 12.5% per
annum) received in connection with the sale of property in September 2001.
Expenses
Total expenses, including depreciation and amortization, increased 7.9% and
17.6% to $20.7 million and $7.8 million in the nine-month and three-month
periods ended July 31, 2002, respectively compared to $19.2 million and $6.7
million in the same periods last year. The increase in property expenses
resulted principally from the incremental expense of recently acquired
properties, which increased property expenses by $746,000 and $494,000 in the
nine-month and three-month periods ended July 31, 2002, respectively. Property
expenses for properties owned during both periods were generally unchanged.
Interest expense in the nine-month and three-month periods ended July 31, 2002
increased as a result of mortgage loans totaling $59.4 million assumed in
connection with recent acquisitions (see above). Interest expense also reflects
the repayment of a) $17 million in outstanding bank credit line borrowings and
b) $6 million of mortgage notes payable in fiscal 2001.
16
Depreciation and amortization increased $355,000 and $74,000 in the nine-month
and three-month periods ended July 31, 2002 compared to the same periods in
fiscal 2001 from total expenditures of $13.8 million for capital improvements,
tenant allowances and leasing costs of the Company's properties during the
period and the acquisition of new properties.
In November 2001, the Company repurchased 200,000 shares of its outstanding
Preferred Stock at a cost of $16,050,000. The Company recorded the excess of the
carrying value over the purchase price as an increase in net income.
Critical Accounting Policies
Critical accounting policies are those that are both important to the
presentation of our financial condition and results of operations and require
management's most difficult, complex or subjective judgements. Our critical
accounting policies are those applicable to the evaluation of the collectibility
of accounts and notes receivable and the evaluation of impairment of long-term
assets.
The allowance for doubtful accounts and notes receivable is established based on
quarterly analysis of the risk of loss on specific accounts. The analysis places
particular emphasis on past-due accounts and considers information such as the
nature and age of the receivables, the payment history of the tenants or other
debtors, the financial condition of the tenants and management's assessment of
their ability to meet their lease obligations, the basis for any disputes and
the status of related negotiations, among other things. Our estimate of the
required allowance is subject to revision as these factors change and is
sensitive to the effects of economic and market conditions on tenants,
particularly those at retail centers.
Rental revenue is recognized on a straight-line basis over the term of the
lease. The excess of rents recognized over amounts contractually due pursuant to
the underlying leases are included in interest and rent receivable on the
accompanying balance sheets. It is the Company's policy to maintain an allowance
for future tenant credit losses of approximately 10% of the deferred straight
line rent receivable balance.
On a periodic basis, management assesses whether there are any indicators that
the value of the real estate properties and mortgage notes receivable may be
impaired. To the extent impairment has occurred, the loss is measured as the
excess of the carrying amount of the property over the fair value of the asset.
Management does not believe that the value of any of its rental properties or
mortgage notes receivable is impaired at July 31, 2002.
17
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate risk primarily through its borrowing
activities. There is inherent rollover risk for borrowings as they mature and
are renewed at current market rates. The extent of this risk is not quantifiable
or predictable because of the variability of future interest rates and the
Company's future financing requirements.
As of July 31, 2002, the Company had no outstanding borrowings under its secured
and unsecured line of credit arrangements. During the nine month periods ended
July 31, 2002 and 2001, the average variable rate indebtedness outstanding
during such periods had a combined weighted average interest rate of 3.38% and
7.5%. Had the weighted average interest rate been 100 basis points higher, the
Company's net income would have been lower by approximately $12,000 and $123,000
in the nine-month period and by approximately $12,000 and $52,000 in the
three-month periods ended 2002 and 2001, respectively.
The Company has not, and does not plan to, enter into any derivative financial
instruments for trading or speculative purposes. As of July 31, 2002 the Company
had no other material exposure to market risk.
18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not presently involved in any litigation, nor
to its knowledge is any litigation threatened against the
Company or its subsidiaries, that in management's opinion,
would result in any material adverse affect on the Company's
ownership, management or operation of its properties, or
which is not covered by the Company's liability insurance.
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K
The Registrant filed the following Reports on Form 8-K with
the Commission:
1) A current report on Form 8-K dated June 7, 2002. Such
report referred under Item 2 to the acquisition of a
commercial shopping center property for a purchase price of
$89,989,000 on June 7, 2002.
2) A current report on Form 8-K dated June 27, 2002. Such
report referred under Item 5 to the issuance of 7,000,000
shares of Class A Common Stock pursuant to an underwritten
offering under the Company's Shelf registration statement on
Form S-3 (file number 333-84774), as amended which was
declared effective on June 12, 2002.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
URSTADT BIDDLE PROPERTIES INC.
(Registrant)
By: /s/ Charles J. Urstadt
Charles J. Urstadt
Chairman and
Chief Executive Officer
By: /s/ James R. Moore
James R. Moore
Executive Vice President/
Chief Financial Officer
(Principal Financial Officer
Dated: September 13, 2002 and Principal Accounting Officer)
19
CERTIFICATION
I, Charles J. Urstadt, certify that:
1. I have reviewed this quarterly report on Form 10-Q
for the quarter ended July 31, 2002 of Urstadt
Biddle Properties Inc.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or
omit to state a material fact necessary to make the
statements made, in light of the circumstances under
which such statements were made, not misleading with
respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements and
other financial information included in this
quarterly report, fairly present in all material
respects the financial condition, results of
operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly
report.
Date: September 13, 2002
/s/ Charles J. Urstadt
-------------------------
Charles J. Urstadt
Chairman &
Chief Executive Officer
20
CERTIFICATION
I, James R. Moore, certify that:
1. I have reviewed this quarterly report on Form 10-Q
for the quarter ended July 31, 2002 of Urstadt
Biddle Properties Inc.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or
omit to state a material fact necessary to make the
statements made, in light of the circumstances under
which such statements were made, not misleading with
respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements and
other financial information included in this
quarterly report, fairly present in all material
respects the financial condition, results of
operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly
report.
Date: September 13, 2002 /s/ James R. Moore
------------------------
James R. Moore
Executive Vice President &
Chief Financial Officer
21