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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2003
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number 1-12803
URSTADT BIDDLE PROPERTIES INC.
(Exact Name of Registrant in its 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) (ZipCode)
Registrant's telephone number, including area code: (203) 863-8200
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
As of March 12, 2003, the number of shares outstanding of each of the
Registrant's classes of Common Stock and Class A Common Stock was: 6,741,308
Common Shares, par value $.01 per share and 18,510,617 Class A Common Shares,
par value $.01 per share
THE SEC FORM 10-Q, FILED HEREWITH, CONTAINS 18 PAGES, NUMBERED CONSECUTIVELY
FROM 1 TO 18 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--January 31, 2003 and October 31, 2002.
Consolidated Statements of Income--Three months ended January 31,
2003 and 2002.
Consolidated Statements of Cash Flows--Three months ended January
31, 2003 and 2002.
Consolidated Statements of Stockholders' Equity--Three months ended
January 31, 2003.
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
January 31, October 31,
ASSETS 2003 2002
---- ----
(unaudited)
Real Estate Investments:
Core properties-- at cost, net of accumulated depreciation $303,497 $252,711
Non-core properties - at cost, net of accumulated depreciation 11,738 11,944
Mortgage notes and other receivable 3,416 3,447
----- -----
318,651 268,102
Cash and cash equivalents 20,566 46,342
Restricted cash 514 514
Short-term investments - 25,145
Tenant receivables, net of allowances of $1,206 and $533 in 2003 and 2002, respectively 6,125 5,695
Deferred charges, net of accumulated amortization 3,486 3,294
Prepaid expenses and other assets 5,513 4,541
----- -----
Total Assets $354,855 $353,633
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $105,981 $106,429
Accounts payable and accrued expenses 2,385 1,021
Deferred officers' compensation 347 287
Other liabilities 5,422 4,218
----- -----
Total Liabilities 114,135 111,955
------- -------
Minority Interests 7,320 7,320
----- -----
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 shares issued and outstanding in 2003 and 2002 14,341 14,341
------ ------
Commitments and Contingencies
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;
6,741,308 and 6,578,572 issued and outstanding shares in 2003 and 2002,
respectively 67 66
Class A Common stock, par value $.01 per share; 40,000,000 shares authorized;
18,510,617 and 18,449,472 issued and outstanding shares in 2003 and 2002,
respectively 185 185
Additional paid in capital 257,027 254,266
Cumulative distributions in excess of net income (31,793) (30,487)
Unamortized restricted stock compensation and notes receivable
from officers/stockholders (6,427) (4,013)
------- -------
Total Stockholders' Equity 219,059 220,017
------- -------
Total Liabilities and Stockholders' Equity $354,855 $353,633
======== ========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
3
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three Months Ended January 31,
2003 2002
---- ----
Revenues:
Operating rents $13,320 $9,230
Lease termination income - 515
Interest and other 361 269
--- ---
13,681 10,014
------ ------
Operating Expenses:
Property expenses 3,974 2,876
Interest 2,035 918
Depreciation 2,230 1,668
Amortization 119 137
General and administrative expenses 985 755
Directors' fees and expenses 49 40
-- --
9,392 6,394
----- -----
Operating Income before Minority Interests 4,289 3,620
Minority Interests in Results of Consolidated Joint Ventures (92) (112)
---- -----
Net Income 4,197 3,508
Preferred Stock Dividends (337) (487)
Excess of Carrying Value over Cost to Repurchase Preferred Shares - 3,071
------ -----
Net Income Applicable to Common and Class A Common Stockholders $3,860 $6,092
====== ======
Basic Earnings per Share:
Common $.15 $.36
==== ====
Class A Common $.16 $.40
==== ====
Diluted Earnings Per Share:
Common $.15 $.35
==== ====
Class A Common $.16 $.38
==== ====
Dividends Paid Per Share:
Common $.19 $.185
==== =====
Class A Common $.21 $.205
==== =====
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)
Three Months Ended January 31,
2003 2002
Operating Activities:
Net income $4,197 $3,508
Adjustments to reconcile net income to net cash provided
By operating activities:
Depreciation and amortization 2,349 1,805
Compensation recognized relating to restricted stock 252 224
Increase in interest and rent receivable (430) (751)
Increase (decrease) in accounts payable and accrued expenses 395 (443)
Decrease (increase) in other assets and other liabilities, net 300 (1,017)
--- -------
Net Cash Provided by Operating Activities 7,063 3,326
----- -----
Investing Activities:
Acquisitions of properties (51,352) -
Sale (purchase) of short term investments 25,145 (1,000)
Payments to limited partners of unconsolidated joint venture - (600)
Improvements to properties and deferred charges (806) (502)
Payments received on mortgage notes and other receivables 29 14
------- -------
Net Cash Used in Investing Activities (26,984) (2,088)
-------- -------
Financing Activities:
Dividends paid - Common and Class A Common shares (5,166) (3,298)
Dividends paid - Preferred Stock (337) (487)
Sales of additional Common and Class A Common shares 96 6,168
Repurchase of preferred shares - (16,050)
Payments on mortgage notes payable (448) (227)
----- -----
Net Cash Used in Financing Activities (5,855) (13,894)
------- --------
Net Decrease In Cash and Cash Equivalents (25,776) (12,656)
Cash and Cash Equivalents at Beginning of Period 46,342 34,080
------ ------
Cash and Cash Equivalents at End of Period $20,566 $21,424
======= =======
Supplemental Cash Flow Disclosures
Interest Paid $2,035 $918
====== ====
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)
Common Stock Class A Common Stock Unamortized
------------ --------------- (Cumulative Restricted Stock
Outstanding Outstanding Additional Distributions Compensation
Number of Par Number of Par Paid In In Excess of and Notes
Shares Value Shares Value Capital Net Income) Receivable Total
Balance - October 31 2002 6,578,572 $66 18,449,472 $185 $254,266 $(30,487) $(4,013) $220,017
Net Income applicable to Common
and Class A Common stockholders - - - - - 3,860 - 3,860
Cash dividends paid :
Common Stock ($.19 per share) - - - - - (1,280) - (1,280)
Class A Common Stock ($.21
per share) - - - - - (3,886) - (3,886)
Sale of additional shares
under dividend reinvestment plan 3,236 - 4,945 - 96 - - 96
Shares issued under restricted
stock plan 159,500 1 56,200 - 2,665 - (2,666) -
Amortization of restricted stock
compensation - - - - - - 252 252
--------- --- ---------- ---- -------- --------- -------- --------
Balances - January 31, 2003 6,741,308 $67 18,510,617 $185 $257,027 $(31,793) $(6,427) $219,059
========= === ========== ==== ======== ========= ======== ========
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 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 January 31, 2003, the Company owned or had interests in
28 properties containing approximately 3.2 million 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 period ended January 31, 2003 are not
necessarily indicative of the results that may be expected for the year ending
October 31, 2003. 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, 2002.
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, 2002 has been derived from audited financial
statements at that date.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
Federal Income Taxes
The Company 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.
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.
7
The following table sets forth the reconciliation between basic and diluted EPS
(in thousands):
Three Months Ended
January
-------------------
2003 2002
---- ----
Numerator
Net income applicable to common stockholders - basic $914 $2,159
Effect of dilutive securities:
Operating partnership units 34 51
-- --
Net income applicable to common stockholders - diluted $948 $2,210
==== ======
Denominator
Denominator for basic EPS-weighted average common shares 6,232 6,002
Effect of dilutive securities:
Stock options and awards 227 311
Operating partnership units 55 55
-- --
Denominator for diluted EPS - weighted average common
equivalent shares 6,514 6,368
===== =====
Numerator
Net income applicable to Class A common Stockholders-basic $2,946 $3,933
Effect of dilutive securities:
Operating partnership units 58 61
-- --
Net income applicable to Class A common Stockholders - diluted $3,004 $3,994
====== ======
Denominator
Denominator for basic EPS - weighted average Class A common shares 18,170 9,870
Effect of dilutive securities:
Stock options and awards 190 207
Operating partnership units 310 310
--- ---
Denominator for diluted EPS - weighted average
Class A Common equivalent shares 18,670 10,387
====== ======
Segment Reporting
Company operates in one industry segment, ownership of commercial real estate
properties which are located principally 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.
Recently Issued Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. This Interpretation clarifies the application of
existing accounting pronouncements to certain entities in which equity investors
do not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. The provisions of
the Interpretation are effective for all variable interests in variable interest
entities created after January 31, 2003, and will apply to any existing variable
interests in variable interest entities no later than September 30, 2003. We do
not believe that this Interpretation will have a significant impact on our
financial statements.
2. CORE PROPERTIES
In December 2002, the Company acquired the Westchester Pavilion Shopping Center
in White Plains, New York, a 185,000 square foot property for $39.9 million in
an all cash transaction. The property is currently 100% leased. The Company also
acquired the Orange Meadows Shopping Center in Orange, Connecticut, a 78,000
square foot property for $11.3 million in an all cash transaction. The property
is currently 87% leased.
In connection with the purchase of the Orange Meadows property, the Company has
agreed to pay the seller on September 20, 2003 an additional amount pursuant to
an agreed formula but not less than $969,000 for leasing efforts for vacant
space at the property.
8
The Company intends to account for the acquisitions of the Westchester Pavilion
and Orange Meadows properties in accordance with SFAS 141 and 142. In this
connection, the Company is currently in the process of analyzing the fair value
of in-place leases; and, consequently, no value has yet been assigned to the
leases. Accordingly, the purchase price allocation is preliminary and may be
subject to change.
3. MORTGAGE NOTES PAYABLE AND LINES OF CREDIT
At January 31, 2003, the Company had ten non-recourse first mortgage notes
payable totaling $105,981,000 due in installments over various terms extending
to the 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 carrying value of approximately $169,400,000 as of January 31, 2003.
The Company has a secured revolving line of credit with a bank which allows for
borrowings up to $18.75 million. The agreement 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 agreement
requires the Company to maintain certain debt service coverage ratios during its
term and provides for a permanent reduction in the revolving credit loan amount
of $625,000 annually. The Company also has a $20 million unsecured line of
credit arrangement with the same bank. In January 2003, the line of credit was
extended until January 2004. Outstanding borrowings bear interest at prime rate
+ 1/2 or LIBOR + 2 1/2%. Extensions of credit under the arrangement are at the
bank's discretion and subject to the bank's satisfaction of certain conditions.
There were no borrowings outstanding under either line of credit at January 31,
2003.
4. PREFERRED STOCK
In November 2001, the Company repurchased 200,000 shares of its Series B
Preferred Stock for a purchase price of $16,050,000 in a negotiated transaction
with a holder of the preferred shares. The Company recorded the excess of the
carrying value over the cost to repurchase the preferred shares ($3,071,000) as
an increase to net income applicable to Common and Class A Common stockholders
in the accompanying consolidated statement of income for the three months ended
January 31, 2002.
5. STOCKHOLDERS EQUITY
The Company has a restricted stock plan for key employees and directors of the
Company. The plan authorizes grants as an incentive for future services 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, maybe awarded in any combination of Class A Common or Common Stock).
In January 2003, the Company awarded 56,200 shares of Class A Common stock and
159,500 shares of Common stock to participants in the Plan. The shares vest
between five and ten years after the date of grant. As of January 31, 2003, the
Company has awarded 509,500 shares of Common stock and 339,250 shares of Class A
Common Stock to participants in the plan (of which 13,250 shares each of Common
Stock and Class A Common Stock 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 being amortized to
expense over the vesting period.
9
6. PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information set forth below is based upon the
Company's historical consolidated statements of income for the three months
ended January 31, 2003 and 2002 adjusted to give effect to the acquisitions of
the Ridgeway Shopping Center, Westchester Pavilion and the Orange Meadows
Shopping Center and the issuance of 8,050,000 of Class A Common stock as though
these transactions were completed on November 1, 2001.
The pro forma financial information is presented for informational purposes only
and may not be indicative of what the actual results of operations would have
been had the transactions occurred as of November 1, 2001, nor does it purport
to represent the results of future operations. (Amounts in thousands, except per
share figures).
Three Months Ended January 31,
2003 2002
---- ----
Pro forma revenues: $14,838 $14,673
Pro forma net income applicable to Common
and Class A Common Stockholders: $4,348 $7,257
Pro forma basic shares outstanding:
Common and Common Equivalent 6,232 6,002
===== =====
Class A Common and Class A Common Equivalent 18,170 17,920
====== ======
Pro forma diluted shares outstanding:
Common and Common Equivalent 6,514 6,368
===== =====
Class A Common and Class A Common Equivalent 18,670 18,437
====== ======
Pro forma earnings per share:
Basic:
Common $0.17 $0.28
===== =====
Class A Common $0.18 $0.31
===== =====
Diluted:
Common $0.16 $0.27
===== =====
Class A Common $0.18 $0.30
===== =====
7. SUBSEQUENT EVENT, COMMITMENT AND CONTINGENCIES
On February 12, 2003, the Company acquired a 40,000 square foot shopping center
in Westport, Connecticut for a cash purchase price of approximately $10.1
million.
The Company has contracted to purchase a retail property containing 129,000
square feet for a purchase price of approximately $22 million.
In the normal course of business, from time to time, the Company is involved in
legal actions relating to the ownership and operations of its properties. In
management's opinion, the liabilities, if any that may ultimately result from
such legal actions are not expected to have a material adverse effect on the
consolidated financial position, results of operations or liquidity of the
Company.
10
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
General
Urstadt Biddle Properties Inc. (Company), a real estate investment trust (REIT),
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 real estate assets include office
and retail buildings and industrial properties. The Company's major tenants
include supermarket chains and other retailers who sell basic necessities. At
January 31, 2003, the Company owned or had interest in 28 properties containing
a total of 3.2 million square feet of leasable area.
This report includes certain statements that may be deemed to be
"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. All statements, other than statements of historical facts, included
in this report that address activities, events or developments that the Company
expects, believes or anticipates will or may occur in the future, including such
matters as future capital expenditures, dividends and acquisitions (including
the amount and nature thereof), expansion and other development trends of the
real estate industry, business strategies, expansion and growth of the Company's
operations and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company in
light of its experience and its perception of historical trends, current
conditions, expected future developments and other factors it believes are
appropriate. Such statements are subject to a number of assumptions, risks and
uncertainties, general economic and business conditions, the business
opportunities that may be presented to and pursued by the Company, changes in
laws or regulations and other factors, many of which are beyond the control of
the Company. Any such statements are not guarantees of future performance and
actual results or developments may differ materially from those anticipated in
the forward-looking statements.
Sources of Capital
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. 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 expects to meet its short-term liquidity requirements
primarily by generating net cash from the operations of its properties. The
Company believes that its net cash provided by operations will be sufficient to
fund its short-term liquidity requirements for fiscal 2003 and to meet its
dividend requirements necessary to maintain its REIT status. For the three
months ended January 31, 2003 and 2002, net cash provided by operations amounted
to $7.1 million and $3.3 million, respectively. Dividends paid to stockholders
of the Company in the comparable periods amounted to $5.5 million and $3.8
million, respectively. The Company derives substantially all of its revenues
from tenants under existing leases at its properties. The Company's operating
cash flow therefore depends on the rents that it is able to charge to its
tenants, and the ability of its tenants to make rental payments. The Company
believes that the nature of the properties in which it typically invests -
primarily grocery-anchored neighborhood and community shopping centers -
provides a more stable revenue flow in uncertain economic times, in that
consumers still need to purchase basic staples and convenience items. However,
even in the geographic areas in which the Company owns properties, general
economic downturns may adversely impact the ability of the Company's tenants to
make lease payments and the Company's ability to re-lease space as leases
expire. In either of these cases, the Company's cash flow could be adversely
affected.
11
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 non-core properties and/or the issuance of
equity securities. The Company believes that these sources of capital will
continue to be available to it in the future to fund its long-term capital
needs; however, there are certain factors that may have a material adverse
effect on its access to capital sources. The Company's ability to incur
additional debt is dependent upon its existing leverage, the value of its
unencumbered assets and borrowing limitations imposed by existing lenders. The
Company's ability to raise funds through sales of equity securities is dependent
on, among other things, general market conditions for REITs, market perceptions
about the Company and its stock price in the market. The Company's ability to
sell properties in the future to raise cash will be dependent upon market
conditions at the time of sale.
At January 31, 2003, the Company had cash and cash equivalents of $20.6 million
compared to $46.3 million at October 31, 2002. The Company also had $25.1
million in liquid short-term investments at October 31, 2002. The Company's cash
positions and short-term investments reflect the temporary investment of the
remaining net proceeds received from the sales of the Company's Class A Common
shares during fiscal 2002.
Financings
At January 31, 2003, the Company had a $18.75 million secured revolving credit
facility with a bank which expires in fiscal 2005 and a conditional $20 million
unsecured revolving line of credit with the same bank. In January 2003, the
unsecured credit line was extended on the same terms as the expiring arrangement
for an additional one year period. The unsecured credit line expires in January
2004. Both revolving credit lines are available to finance future acquisitions,
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 bank's satisfaction
of certain conditions. There were no borrowings during the period under either
credit line and there were no outstanding borrowings on either line of credit at
January 31, 2003.
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.
At January 31, 2003, the Company's contractual obligations for borrowings are as
follows:
Payments Due by Period Amount
Less than 1 year $ 1,392,000
1 to 3 years $ 4,124,000
4 to 5 years $20,153,000
After 5 years $80,312,000
Borrowings consist of $105,981,000 of fixed rate mortgage loan indebtedness with
a weighted average interest rate of 7.53% at January 31, 2003. The mortgage
loans are secured by fourteen properties and have fixed rates of interest
ranging from 6.29% to 8.375%. The Company may refinance certain of these
borrowings, at or prior to maturity, through new mortgage loans on real estate.
The ability to do so, however, is dependent upon various factors, including the
income level of the properties, interest rates and credit conditions within the
commercial real estate market. Accordingly, there can be no assurance that such
refinancings can be achieved.
12
Capital Expenditures
The Company invests in its existing properties and regularly incurs capital
expenditures in the ordinary course of business to maintain its properties. The
Company believes that such expenditures enhance the competitiveness of its
properties. During the first quarter of fiscal 2003, the Company spent
approximately $806,000 for capital expenditures including $713,000 related to
tenant allowances and commissions in connection with the Company's leasing
activities. The amounts of these expenditures can vary significantly depending
on tenant negotiations, market conditions and rental rates. The Company has
budgeted an additional $2.5 million for known capital improvement and leasing
costs in the balance of fiscal 2003. These expenditures are generally funded
from operating cash flows or borrowings.
Acquisitions and Sales
In December 2002, the Company acquired the Westchester Pavilion Shopping Center
in White Plains, New York, a 185,000 square foot property for $39.9 million in
an all cash transaction. The property is currently 100% leased. The Company also
acquired the Orange Meadows Shopping Center in Orange, Connecticut, a 78,000
square foot property for $11.3 million in an all cash transaction. The property
is currently 87% leased. In February 2003, the Company acquired the Greens
Farms Plaza in Westport, Connecticut, a 40,000 square foot property for
$10.1 mllion in an all cash transaction. The property is 100% leased.
The Company has also contracted to acquire a shopping center for a purchase
price of approximately $22 million. The property is located in the Company's
preferred geographic area of Westchester County, New York. The transaction is
expected to close in fiscal 2003.
In a prior year, the Company's Board of Directors expanded and refined the
strategic objectives of the Company to refocus its real estate portfolio into
one of 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. The Company intends to sell the
non-core properties as opportunities become available. The Company has
selectively effected asset sales to generate cash proceeds over the last several
years. The Company's ability to generate cash from asset sales is dependent upon
market conditions and will necessarily be limited if market conditions make such
sales unattractive. At January 31, 2003, the remaining non-core properties total
four properties with a net book value of approximately $12 million and consist
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). There were no sales of properties in the first quarter of fiscal 2003.
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 debt restructuring 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 indication of the Company's operating performance or for cash flows as a
measure of liquidity or 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 three months ended January 31, 2003 and 2002 (amounts in
thousands).
Three Months Ended January 31,
2003 2002
---- ----
Net Income Applicable to Common and Class A Common Stockholders $3,860 $6,092
Plus: Real property depreciation 1,729 1,132
Amortization of tenant improvements and allowances 501 536
Amortization of deferred leasing costs 119 137
Minority Interest 91 45
Less: Excess of carrying value over cost to repurchase preferred shares - (3,071)
------ -------
Funds from Operations (Diluted) $6,300 $4,871
====== ======
Net Cash Provided by Operating Activities $7,063 $3,326
====== ======
Net Cash Used in Investing Activities $(26,984) $(2,088)
========= ========
Net Cash Used in Financing Activities $(5,855) $(13,894)
======== =========
13
Results of Operations
Revenues
Revenues from operating leases increased 44.3% to $13.3 million in the first
quarter of fiscal 2003 compared to $9.2 million in the comparable quarter of
fiscal 2002. The increase in operating lease revenues resulted from additional
rental revenues from new properties acquired and leasing of previously vacant
space at the Company's core properties. Since the first quarter of fiscal 2002,
the Company has acquired four properties containing 661,000 square feet of
leasable space. Rents from recently acquired properties increased operating
lease income by approximately $3.4 million in the first quarter of fiscal 2003.
At January 31, 2003, the overall leasing levels at the Company's properties were
96% compared to 98% leased at the end of the first quarter of fiscal 2002. The
decrease in leased percentage resulted from the loss of a tenant occupying
94,000 square feet at the Company's office property in Southfield, Michigan who
re-leased 32,400 square feet of its previously occupied space. During the first
quarter of fiscal 2003, the Company leased or renewed approximately 147,000
square feet of space. The Company's total property occupancy levels were
unchanged from the end of the last fiscal year.
Lease termination income of $515,000 in the first quarter of fiscal 2002
represents a lease cancellation payment from a tenant who terminated its lease
during the year. The vacant space was subsequently re-leased during the year.
Interest income increased from the temporary investment of the cash proceeds
from the sale of the Company's Class A shares in fiscal 2002 into short-term
investments.
Expenses
Total expenses increased to $9.4 million from $6.4 million in the first quarter
of fiscal 2002. Property operating expenses increased to $4.0 million from $2.9
million in the year ago quarter principally from the incremental expense of
recently acquired properties which increased property expenses by $945,000 in
the first quarter of fiscal 2003. Property operating expenses for properties
owned in the first quarter of fiscal 2003 and 2002 increased by $152,000 from
higher property taxes, insurance costs and snow removal expenses.
Interest expense increased principally from new mortgage loans totaling $59.6
million assumed in connection with property acquisitions completed in fiscal
2002.
Depreciation expense increased by $562,000 principally due to the additional
expense incurred from recent property acquisitions.
General and administrative expenses increased to $985,000 in the first quarter
of fiscal 2003 as compared to $755,000 in the comparable quarter. The increase
is due primarily to higher compensation costs.
In the first quarter of fiscal 2002, the Company repurchased 200,000 shares of
its Series B Preferred Stock for a purchase price of $16,050,000 in a negotiated
transaction with a holder of the preferred shares. The Company has recorded the
excess of the carrying value over the cost to repurchase the preferred shares of
$3,071,000 as an increase in net income applicable to Common and Class A Common
stockholders.
Application of Critical Accounting Policies
Critical accounting policies are those that are both important to the
presentation of the Company's financial condition and results of operations and
require management's most difficult, complex or subjective judgments. The
Company's 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. Management's estimates
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 is included in tenant receivables 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.
14
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 January 31, 2003.
Inflation
The Company's long-term leases contain provisions to mitigate the adverse impact
of inflation on its operating results. Such provisions include clauses entitling
the Company to receive (i) scheduled base rent increases and (ii) percentage
rents based upon tenants' gross sales, which generally increase as prices rise.
In addition, many of the Company's non-anchor leases are for terms of less than
ten years, which permits the Company to seek increases in rents upon renewal at
then current market rates if rents provided in the expiring leases are below
then existing market rates. Most of the Company's leases require tenants to pay
a share of operating expenses, including common area maintenance, real estate
taxes, insurance and utilities, thereby reducing the Company's expose to
increases in costs and operating expenses resulting from inflation.
Environmental Matters
Based upon management's ongoing review of its Properties, management is not
aware of any environmental condition with respect to any of the Company's
properties which would be reasonably likely to have a material adverse effect on
the Company. There can be no assurance, however, that (i) the discovery of
environmental conditions, which were previously unknown, (ii) changes in law,
(iii) the conduct of tenants or (iv) activities relating to properties in the
vicinity of the Company's properties, will not expose the Company to material
liability in the future. Changes in laws increasing the potential liability for
environmental conditions existing on properties or increasing the restrictions
on discharges or other conditions may result in significant unanticipated
expenditures or may otherwise adversely affect the operations of the Company's
tenants, which would adversely affect the Company's financial condition and
results of operations.
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.
During the three months period ended January 31, 2003 and 2002, the Company has
no outstanding borrowings under either of its secured or unsecured lines of
credit arrangements.
The Company has not, and does not plan to, enter into any derivative financial
instruments for trading or speculative purposes. As of January 31, 2003 the
Company had no other material exposure to market risk.
Item 4 CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on their evaluation as of a date within 90 days of the filing date of this
Quarterly Report on Form 10-Q, the Company's principal executive officer and
principal financial officer have concluded that its disclosure and controls
procedures (as defined in Rules 13a-14 (c) and 15d-14 (c) under the Exchange
Act) are effective to ensure that information required to be disclosed by us in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms.
Changes in Internal Controls
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect those controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not 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 a 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
(a) Exhibits:
99.1 Certification by the Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification by the Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
During the three months ended January 31, 2003, the Registrant
filed with the Commission:
(1) A Current Report on Form 8-K dated December 9, 2002. Such
report referred under Item 5 to a press release published
by the Company on December 9, 2002 announcing an agreement
to acquire a Shopping Center for approximately $41
million.
(2) A Current Report on Form 8-K dated December 24, 2002. Such
report referred under Item 2 to the purchase of the
Westchester Pavilion Shopping Center, White Plains, New
York on December 23, 2002 for a purchase price of
$39,900,000 (exclusive of estimated closing costs, fees
and other expenses of approximately $130,000).
(3) Amendment No. #1 to the Current Report on Form 8-K/A dated
January 29,2003. Such report referred under Item 2 to the
purchase of the Westchester Pavilion Shopping Center and
under Item 7 to the financial statements, proforma
information and exhibits required thereto.
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: March 14, 2003 and Principal Accounting Officer)
16
Certification
I, Charles J. Urstadt, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended
January 31, 2003 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;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and
procedures to ensure that material
information relating to the registrant,
including its consolidated subsidiaries, is
made known to us by others within those
entities, particularly during the period in
which this quarterly report is being
prepared;
b) evaluated the effectiveness of the
registrant's disclosure controls and
procedures as of a date within 90 days
before the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our
conclusions about the effectiveness of the
disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design
or operation of internal controls which
could adversely affect the registrant's
ability to record, process, summarize and
report financial data and have identified
for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that
involves management or other employees who
have a significant role in the registrant's
internal controls;
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 14, 2003
/s/ Charles J. Urstadt
-------------------------
Charles J. Urstadt
Chairman and
Chief Executive Officer
17
Certification
I, James R. Moore, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended
January 31, 2003 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;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and
procedures to ensure that material
information relating to the registrant,
including its consolidated subsidiaries, is
made known to us by others within those
entities, particularly during the period in
which this quarterly report is being
prepared;
b) evaluated the effectiveness of the
registrant's disclosure controls and
procedures as of a date within 90 days
before the filing date of this quarterly
report(the "Evaluation Date"); and
c) presented in this quarterly report our
conclusions about the effectiveness of the
disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design
or operation of internal controls which
could adversely affect the registrant's
ability to record, process, summarize and
report financial data and have identified
for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that
involves management or other employees who
have a significant role in the registrant's
internal controls;
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 14, 2003
/s/ James R. Moore
-------------------------
James R. Moore
Executive Vice President and
Chief Financial Officer
18