United States
Securities And Exchange Commission
Washington, DC 20549

Form 10-Q

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2021

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

graphic

URSTADT BIDDLE PROPERTIES INC.
(Exact Name of Registrant as Specified in its Charter)

Maryland
04-2458042
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer 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

N/A
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
         
Common Stock, par value $.01 per share
 
UBP
 
New York Stock Exchange
         
Class A Common Stock, par value $.01 per share
 
UBA
 
New York Stock Exchange
         
6.25% Series H Cumulative Preferred Stock
 
UBPPRH
 
New York Stock Exchange
         
5.875% Series K Cumulative Preferred Stock
 
UBPPRK
 
New York Stock Exchange
         
Common Stock Rights to Purchase Preferred Shares
 
N/A
 
New York Stock Exchange
         
Class A Common Stock Rights to Purchase Preferred Shares
 
N/A
 
New York Stock Exchange

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     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer 
   
Non-accelerated filer
Smaller reporting company
   
Emerging growth company
 
   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No

As of March 5, 2021 (latest date practicable), the number of shares of the Registrant's classes of Common Stock and Class A Common Stock outstanding was: 10,180,308 Common Shares, par value $.01 per share, and 30,100,161 Class A Common Shares, par value $.01 per share.






Index
 
Urstadt Biddle Properties Inc.
   
   
   
Part I. Financial Information
 
   
Item 1.
Financial Statements (Unaudited)
 
     
 
Consolidated Balance Sheets – January 31, 2021 (Unaudited) and October 31, 2020.
1
     
 
Consolidated Statements of Income (Unaudited) – Three months ended January 31, 2021 and 2020.
2
     
 
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) – Three months ended January 31, 2021 and 2020.
3
     
 
Consolidated Statements of Cash Flows (Unaudited) –   Three months ended January 31, 2021 and 2020.
4
     
 
Consolidated Statement of Stockholders' Equity (Unaudited) – Three months ended January 31, 2021 and 2020.
5
     
 
Notes to Consolidated Financial Statements.
7
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
19
     
Item 3.
Quantitative and Qualitative Disclosures about Market Risk.
27
     
Item 4.
Controls and Procedures.
28
     
     
Part II. Other Information
 
     
Item 1.
Legal Proceedings.
29
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
30
     
Item 6.
Exhibits.
31
     
Signatures
32



Index

URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

 
January 31, 2021
   
October 31, 2020
 
   
(Unaudited)
       
Assets
           
Real Estate Investments:
           
Real Estate– at cost
 
$
1,151,423
   
$
1,149,182
 
Less: Accumulated depreciation
   
(266,972
)
   
(261,325
)
     
884,451
     
887,857
 
Investments in and advances to unconsolidated joint ventures
   
29,050
     
28,679
 
     
913,501
     
916,536
 
                 
Cash and cash equivalents
   
37,115
     
40,795
 
Tenant receivables-net
   
24,596
     
25,954
 
Prepaid expenses and other assets
   
25,323
     
18,263
 
Deferred charges, net of accumulated amortization
   
8,467
     
8,631
 
Total Assets
 
$
1,009,002
   
$
1,010,179
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
Liabilities:
               
Revolving credit line
 
$
35,000
   
$
35,000
 
Mortgage notes payable and other loans
   
297,519
     
299,434
 
Accounts payable and accrued expenses
   
19,666
     
18,033
 
Deferred compensation – officers
   
37
     
20
 
Other liabilities
   
22,556
     
24,550
 
Total Liabilities
   
374,778
     
377,037
 
                 
Redeemable Noncontrolling Interests
   
66,592
     
62,071
 
                 
Commitments and Contingencies
   
     
 
                 
Stockholders’ Equity:
               
6.25% Series H Cumulative Preferred Stock (liquidation preference of $25 per share); 4,600,000 shares issued and outstanding
   
115,000
     
115,000
 
5.875% Series K Cumulative Preferred Stock (liquidation preference of $25 per share); 4,400,000 shares issued and outstanding
   
110,000
     
110,000
 
Excess Stock, par value $0.01 per share; 20,000,000 shares authorized; none issued and outstanding
   
-
     
-
 
Common Stock, par value $0.01 per share; 30,000,000 shares authorized; 10,180,308 and 10,073,652 shares issued and outstanding
   
103
     
102
 
Class A Common Stock, par value $0.01 per share; 100,000,000 shares authorized; 30,100,161 and 29,996,305 shares issued and outstanding
   
301
     
300
 
Additional paid in capital
   
526,721
     
526,027
 
Cumulative distributions in excess of net income
   
(170,543
)
   
(164,651
)
Accumulated other comprehensive loss
   
(13,950
)
   
(15,707
)
Total Stockholders' Equity
   
567,632
     
571,071
 
Total Liabilities and Stockholders' Equity
 
$
1,009,002
   
$
1,010,179
 

The accompanying notes to consolidated financial statements are an integral part of these statements.

1

Index
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)

 
Three Months Ended
January 31,
 
   
2021
   
2020
 
             
Revenues
           
Lease income
 
$
32,483
   
$
32,945
 
Lease termination
   
705
     
209
 
Other
   
1,089
     
1,194
 
Total Revenues
   
34,277
     
34,348
 
                 
Expenses
               
Property operating
   
6,314
     
5,929
 
Property taxes
   
5,861
     
5,810
 
Depreciation and amortization
   
7,518
     
7,135
 
General and administrative
   
2,644
     
2,777
 
Directors' fees and expenses
   
109
     
105
 
Total Operating Expenses
   
22,446
     
21,756
 
                 
Operating Income
   
11,831
     
12,592
 
                 
Non-Operating Income (Expense):
               
Interest expense
   
(3,392
)
   
(3,339
)
Equity in net income from unconsolidated joint ventures
   
350
     
513
 
Gain (loss) on sale of property
   
(28
)
   
(339
)
Interest, dividends and other investment income
   
43
     
94
 
Net Income
   
8,804
     
9,521
 
                 
Noncontrolling interests:
               
Net income attributable to noncontrolling interests
   
(912
)
   
(1,038
)
Net income attributable to Urstadt Biddle Properties Inc.
   
7,892
     
8,483
 
Preferred stock dividends
   
(3,413
)
   
(3,412
)
                 
Net Income Applicable to Common and Class A Common Stockholders
 
$
4,479
   
$
5,071
 
                 
Basic Earnings Per Share:
               
  Per Common Share:
 
$
0.11
   
$
0.12
 
  Per Class A Common Share:
 
$
0.12
   
$
0.14
 
                 
Diluted Earnings Per Share:
               
  Per Common Share:
 
$
0.11
   
$
0.12
 
  Per Class A Common Share:
 
$
0.12
   
$
0.13
 
                 
Dividends Per Share:
               
Common
 
$
0.125
   
$
0.25
 
Class A Common
 
$
0.14
   
$
0.28
 

The accompanying notes to consolidated financial statements are an integral part of these statements.

2

Index
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)

 
Three Months Ended
January 31,
 
   
2021
   
2020
 
             
Net Income
 
$
8,804
   
$
9,521
 
                 
Other comprehensive loss:
               
Change in unrealized losses on interest rate swaps
   
1,499
     
(929
)
Change in unrealized losses on interest rate swaps-equity investees
   
258
     
(83
)
                 
Total comprehensive income
   
10,561
     
8,509
 
Comprehensive income attributable to noncontrolling interests
   
(912
)
   
(1,038
)
                 
Total comprehensive income attributable to Urstadt Biddle Properties Inc.
   
9,649
     
7,471
 
Preferred stock dividends
   
(3,413
)
   
(3,412
)
                 
Total comprehensive income applicable to Common and Class A Common Stockholders
 
$
6,236
   
$
4,059
 

The accompanying notes to consolidated financial statements are an integral part of these statements.

3

Index
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 
Three Months Ended
January 31,
 
   
2021
   
2020
 
Cash Flows from Operating Activities:
           
Net income
 
$
8,804
   
$
9,521
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
7,518
     
7,135
 
Straight-line rent adjustment
   
568
     
(62
)
Provision for tenant credit losses
   
1,654
     
343
 
(Gain)/loss on sale of property
   
28
     
339
 
Restricted stock compensation expense and other adjustments
   
986
     
1,047
 
Deferred compensation arrangement
   
17
     
(15
)
Equity in net (income) of unconsolidated joint ventures
   
(350
)
   
(513
)
Distributions of operating income from unconsolidated joint ventures
   
350
     
513
 
Changes in operating assets and liabilities:
               
Tenant receivables
   
(863
)
   
(1,368
)
Accounts payable and accrued expenses
   
3,134
     
1,767
 
Other assets and other liabilities, net
   
(7,216
)
   
(2,901
)
Net Cash Flow Provided by Operating Activities
   
14,630
     
15,806
 
                 
Cash Flows from Investing Activities:
               
Deposits on acquisition of real estate investment
   
-
     
(530
)
Return of deposits on acquisition of real estate investment
   
-
     
500
 
Proceeds from sale of property
   
2,738
     
3,721
 
Improvements to properties and deferred charges
   
(6,714
)
   
(5,895
)
Investment in note receivable
   
(2,203
)
   
-
 
Return of capital from unconsolidated joint ventures
   
-
     
265
 
Net Cash Flow (Used in) Investing Activities
   
(6,179
)
   
(1,939
)
                 
Cash Flows from Financing Activities:
               
Dividends paid -- Common and Class A Common Stock
   
(5,486
)
   
(10,915
)
Dividends paid -- Preferred Stock
   
(3,413
)
   
(3,951
)
Principal amortization repayments on mortgage notes payable
   
(1,666
)
   
(1,638
)
Acquisitions of noncontrolling interests
   
(364
)
   
(609
)
Distributions to noncontrolling interests
   
(912
)
   
(1,038
)
Payment of taxes on shares withheld for employee taxes
   
(320
)
   
(569
)
Redemption of preferred stock
   
-
     
(75,000
)
Net proceeds from the issuance of Common and Class A Common Stock
   
30
     
52
 
Net Cash Flow (Used in) Financing Activities
   
(12,131
)
   
(93,668
)
                 
Net Increase/(Decrease) In Cash and Cash Equivalents
   
(3,680
)
   
(79,801
)
Cash and Cash Equivalents at Beginning of Period
   
40,795
     
94,079
 
                 
Cash and Cash Equivalents at End of Period
 
$
37,115
   
$
14,278
 
                 
Supplemental Cash Flow Disclosures:
               
Interest Paid
 
$
3,428
   
$
3,264
 

The accompanying notes to consolidated financial statements are an integral part of these statements.

4

Index
URSTADT BIDDLE PROPERTIES INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)
Three Months Ended January 31, 2021 and 2020
(In thousands, except share and per share data)

 
Series H
Preferred
Stock
Issued
   
Series H
Preferred
Stock Amount
   
Series K
Preferred
Stock
Issued
   
Series K
Preferred
Stock
Amount
   
Common
Stock
Issued
   
Common
Stock
Amount
   
Class A
Common
Stock
Issued
   
Class A
Common
Stock
Amount
   
Additional
Paid In
Capital
   
Cumulative
Distributions
In Excess of
Net Income
   
Accumulated
Other
Comprehensive
Income (loss)
   
Total
Stockholders’
Equity
 
                                                                         
Balances - October 31, 2020
   
4,600,000
   
$
115,000
     
4,400,000
   
$
110,000
     
10,073,652
   
$
102
     
29,996,305
   
$
300
   
$
526,027
   
$
(164,651
)
 
$
(15,707
)
 
$
571,071
 
Net income applicable to Common and Class A common stockholders
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
4,479
     
-
     
4,479
 
Change in unrealized losses on interest rate swap
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
1,757
     
1,757
 
Cash dividends paid :
                                                                                               
Common stock ($0.125 per share)
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(1,272
)
   
-
     
(1,272
)
Class A common stock ($0.14 per share)
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(4,214
)
   
-
     
(4,214
)
Issuance of shares under dividend reinvestment plan
   
-
     
-
     
-
     
-
     
806
     
-
     
1,305
     
-
     
29
     
-
     
-
     
29
 
Shares issued under restricted stock plan
   
-
     
-
     
-
     
-
     
105,850
     
1
     
125,800
     
1
     
(2
)
   
-
     
-
     
-
 
Shares withheld for employee taxes
   
-
     
-
     
-
     
-
     
-
     
-
     
(23,249
)
   
-
     
(319
)
   
-
     
-
     
(319
)
Restricted stock compensation and other adjustments
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
986
     
-
     
-
     
986
 
Adjustments to redeemable noncontrolling interests
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(4,885
)
   
-
     
(4,885
)
Balances - January 31, 2021
   
4,600,000
   
$
115,000
     
4,400,000
   
$
110,000
     
10,180,308
   
$
103
     
30,100,161
   
$
301
   
$
526,721
   
$
(170,543
)
 
$
(13,950
)
 
$
567,632
 

5

Index


 
Series H
Preferred
Stock
Issued
   
Series H
Preferred
Stock Amount
   
Series K
Preferred
Stock
Issued
   
Series K
Preferred
Stock
Amount
   
Common
Stock
Issued
   
Common
Stock
Amount
   
Class A
Common
Stock
Issued
   
Class A
Common
Stock
Amount
   
Additional
Paid In
Capital
   
Cumulative
Distributions
In Excess of
Net Income
   
Accumulated
Other
Comprehensive
Income
   
Total
Stockholders’
Equity
 
                                                                         
Balances - October 31, 2019
   
4,600,000
   
$
115,000
     
4,400,000
   
$
110,000
     
9,963,751
   
$
101
     
29,893,241
   
$
299
   
$
520,988
   
$
(158,213
)
 
$
(8,451
)
 
$
579,724
 
Net income applicable to Common and Class A common stockholders
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
5,071
     
-
     
5,071
 
Change in unrealized losses on interest rate swap
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(1,012
)
   
(1,012
)
Cash dividends paid :
                                                                                               
Common stock ($0.25 per share)
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(2,517
)
   
-
     
(2,517
)
Class A common stock ($0.280 per share)
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(8,398
)
   
-
     
(8,398
)
Issuance of shares under dividend reinvestment plan
   
-
     
-
     
-
     
-
     
1,037
     
-
     
1,328
     
-
     
52
     
-
     
-
     
52
 
Shares issued under restricted stock plan
   
-
     
-
     
-
     
-
     
105,450
     
1
     
120,800
     
1
     
(2
)
   
-
     
-
     
-
 
Shares withheld for employee taxes
   
-
     
-
     
-
     
-
     
-
     
-
     
(23,873
)
   
-
     
(573
)
   
-
     
-
     
(573
)
Restricted stock compensation and other adjustments
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
1,051
     
-
     
-
     
1,051
 
Adjustments to redeemable noncontrolling interests
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
546
     
-
     
546
 
Balances - January 31, 2020
   
4,600,000
   
$
115,000
     
4,400,000
   
$
110,000
     
10,070,238
   
$
102
     
29,991,496
   
$
300
   
$
521,516
   
$
(163,511
)
 
$
(9,463
)
 
$
573,944
 

The accompanying notes to consolidated financial statements are an integral part of these statements
6

Index

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business
Urstadt Biddle Properties Inc. (“Company”), a Maryland Corporation, is a real estate investment trust ("REIT"), engaged in the acquisition, ownership and management of commercial real estate, primarily neighborhood and community shopping centers in the metropolitan tri-state area outside of the City of New York.  The Company's major tenants include supermarket chains and other retailers who sell basic necessities.  At January 31, 2021, the Company owned or had equity interests in 81 properties containing a total of 5.2 million square feet of Gross Leasable Area (“GLA”).

COVID-19 Pandemic
On March 11, 2020, the novel coronavirus disease (“COVID-19”) was declared a pandemic (“COVID-19 pandemic”) by the World Health Organization as the disease spread throughout the world.  During March 2020, measures to prevent the spread of COVID-19 were initiated, primarily focused on social distancing practices.  The virus continued to spread among more populated cities and communities resulting in federal, state and local government agencies issuing regulatory orders enforcing social distancing and limiting group gatherings in order to further prevent the spread of COVID-19.  While laws vary by state, generally, businesses deemed essential to the public have been able to operate while non-essential businesses were initially not allowed to operate, but, in most instances, have now been allowed to operate at various operational levels. Grocery stores, pharmacies and wholesale clubs, which anchor properties that make up 84% of our GLA, are considered essential businesses and have remained open and operational to serve the residents of their communities throughout the entire pandemic.  Many restaurants are also considered essential, although social distancing and group gathering limitations generally prevent or limit dine-in activity, forcing them to evaluate alternate means of operations, such as outdoor dining, delivery and pick-up, or to elect to remain closed during this pandemic.  As of January 31, most non-essential businesses have also been permitted to operate, in some cases subject to modified operation procedures. The duration and severity of this pandemic are still uncertain and continue to evolve.

As done every reporting period, management assesses whether there are any indicators that the value of its real estate investments may be impaired and has concluded that none of its investment properties are impaired at January 31, 2021. However, the COVID-19 pandemic has significantly impacted many of the retail sectors in which the Company’s tenants operate and if the effects of the pandemic are prolonged, it could have a significant adverse impact to the underlying businesses of many of the Company’s tenants.  The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will continue to assess its asset portfolio for any impairment indicators. In addition, the extent to which the COVID-19 pandemic impacts the Company’s financial condition, results of operations and cash flows, in the near term, will depend on future developments, which are highly uncertain and cannot be predicted at this time.

Principles of Consolidation and Use of Estimates
The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and joint ventures in which the Company meets certain criteria in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation”. The Company has determined that such joint ventures should be consolidated into the consolidated financial statements of the Company. In accordance with ASC Topic 970-323 “Real Estate-General-Equity Method and Joint Ventures,” joint ventures that the Company does not control but otherwise exercises significant influence over, are accounted for under the equity method of accounting. See Note 4 for further discussion of the unconsolidated joint ventures. All significant intercompany transactions and balances have been eliminated in consolidation.

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Results of operations for the three months ended January 31, 2021 are not necessarily indicative of the results that may be expected for the year ending October 31, 2021. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended October 31, 2020.

The preparation of financial statements requires management to make estimates and assumptions that affect the disclosure of contingent assets and liabilities, the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods covered by the financial statements. The most significant assumptions and estimates relate to the valuation of real estate, depreciable lives, revenue recognition, fair value estimates, and the collectability of tenant receivables and other assets and liabilities.  Actual results could differ from these estimates.  The consolidated balance sheet at October 31, 2020 has been derived from audited financial statements at that date.

Federal Income Taxes
The Company has elected to be treated as a REIT under Sections 856-860 of the Internal Revenue Code ("Code"). Under those sections, a REIT that, among other things, distributes at least 90% of real estate trust taxable income and meets certain other qualifications prescribed by the Code will not be taxed on that portion of its taxable income that is distributed.  The Company believes it qualifies as a REIT and intends to distribute all of its taxable income for fiscal 2021 in accordance with the provisions of the Code. Accordingly, no provision has been made for Federal income taxes in the accompanying consolidated financial statements.

The Company follows the provisions of ASC Topic 740, “Income Taxes” that, among other things, defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  Based on its evaluation, the Company determined that it has no uncertain tax positions and no unrecognized tax benefits as of January 31, 2021. As of January 31, 2021, the fiscal tax years 2017 through and including 2020 remain open to examination by the Internal Revenue Service. There are currently no federal tax examinations in progress.

Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and tenant receivables. The Company places its cash and cash equivalents with high quality financial institutions and the balances at times could exceed federally insured limits. The Company performs ongoing credit evaluations of its tenants and may require certain tenants to provide security deposits or letters of credit. Though these security deposits and letters of credit are insufficient to meet the terminal value of a tenant’s lease obligation, they are a measure of good faith and a source of funds to offset the economic costs associated with lost rent and the costs associated with re-tenanting the space. The Company has no dependency upon any single tenant.

Marketable Securities
Marketable equity securities are carried at fair value based upon quoted market prices in active markets with changes in fair value recognized in net income.

Derivative Financial Instruments
The Company occasionally utilizes derivative financial instruments, such as interest rate swaps, to manage its exposure to fluctuations in interest rates. The Company has established policies and procedures for risk assessment, and the approval, reporting and monitoring of derivative financial instruments. Derivative financial instruments must be effective in reducing the Company’s interest rate risk exposure in order to qualify for hedge accounting. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income for each period until the derivative instrument matures or is settled. Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to-market with the changes in value included in net income. The Company has not entered into, and does not plan to enter into, derivative financial instruments for trading or speculative purposes. Additionally, the Company has a policy of entering into derivative contracts only with major financial institutions.

As of January 31, 2021, the Company believes it has no significant risk associated with non-performance of the financial institutions that are the counterparties to its derivative contracts.  At January 31, 2021, the Company had approximately $126.0 million in secured mortgage financings subject to interest rate swaps. Such interest rate swaps converted the LIBOR-based variable rates on the mortgage financings to an average fixed annual rate of 3.93% per annum. As of January 31, 2021 and October 31, 2020, the Company had a deferred liability of $11.8 million and $13.3 million, respectively (included in accounts payable and accrued expenses on the consolidated balance sheets), relating to the fair value of the Company’s interest rate swaps applicable to secured mortgages.

Charges and/or credits relating to the changes in fair values of such interest rate swaps are made to other comprehensive  income/(loss) as the swaps are deemed effective and are classified as a cash flow hedge.

Comprehensive Income (Loss)
Comprehensive income is comprised of net income applicable to Common and Class A Common stockholders and other comprehensive income (loss). Other comprehensive income (loss) includes items that are otherwise recorded directly in stockholders’ equity, such as unrealized gains and losses on interest rate swaps designated as cash flow hedges, including the Company's share from entities accounted for under the equity method of accounting. At January 31, 2021, accumulated other comprehensive loss consisted of net unrealized losses on interest rate swap agreements of $14.0 million, inclusive of the Company's share of accumulated comprehensive losses from joint ventures accounted for by the equity method of accounting.  At October 31, 2020, accumulated other comprehensive loss consisted of net unrealized losses on interest rate swap agreements of approximately $15.7 million, inclusive of the Company's share of accumulated comprehensive losses from joint ventures accounted for by the equity method of accounting. Unrealized gains and losses included in other comprehensive income/(loss) will be reclassified into earnings as gains and losses are realized.

Asset Impairment
On a periodic basis, management assesses whether there are any indicators that the value of its real estate investments may be impaired.  A property value is considered impaired when management’s estimate of current and projected operating cash flows (undiscounted and without interest) of the property over its remaining useful life is less than the net carrying value of the property.  Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors.  To the extent impairment has occurred, the loss is measured as the excess of the net carrying amount of the property over the fair value of the asset.  Changes in estimated future cash flows due to changes in the Company’s plans or market and economic conditions could result in recognition of impairment losses which could be substantial.  As of January 31, 2021, management does not believe that the value of any of its real estate investments is impaired. However, as described above, the COVID-19 pandemic has significantly impacted many of the retail sectors in which the Company’s tenants operate and if the effects of the pandemic are prolonged, it could have a significant adverse impact to the underlying businesses of many of the Company’s tenants.  The Company will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will continue to assess its asset portfolio for any impairment indicators.
7

Index



Acquisitions of Real Estate Investments, Capitalization Policy and Depreciation

Acquisition of Real Estate Investments:
The Company evaluates each acquisition of real estate or in-substance real estate (including equity interests in entities that predominantly hold real estate assets) to determine if the integrated set of assets and activities acquired meet the definition of a business and need to be accounted for as a business combination. If either of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:

Substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets; or

The integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e. revenue generated before and after the transaction).

An acquired process is considered substantive if:

The process includes an organized workforce (or includes an acquired contract that provides access to an organized workforce), that is skilled, knowledgeable, and experienced in performing the process;

The process cannot be replaced without significant cost, effort, or delay; or

The process is considered unique or scarce.

Generally, the Company expects that acquisitions of real estate or in-substance real estate will not meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e. land, buildings, and related intangible assets) or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay.

Acquisitions of real estate and in-substance real estate that do not meet the definition of a business are accounted for as asset acquisitions. The accounting model for asset acquisitions is similar to the accounting model for business combinations except that the acquisition consideration (including acquisition costs) is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. As a result, asset acquisitions do not result in the recognition of goodwill or a bargain purchase gain. The relative fair values used to allocate the cost of an asset acquisition are determined using the same methodologies and assumptions as the Company utilizes to determine fair value in a business combination.

The value of tangible assets acquired is based upon our estimation of value on an “as if vacant” basis. The value of acquired in-place leases includes the estimated costs during the hypothetical lease-up period and other costs that would have been incurred in the execution of similar leases under the market conditions at the acquisition date of the acquired in-place lease. We assess the fair value of tangible and intangible assets based on numerous factors, including estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors, including the historical operating results, known trends, and market/economic conditions that may affect the property.

The values of acquired above and below-market leases, which are included in prepaid expenses and other assets and other liabilities, respectively, are amortized over the terms of the related leases and recognized as either an increase (for below-market leases) or a decrease (for above-market leases) to rental revenue. The values of acquired in-place leases are classified in other assets in the accompanying consolidated balance sheets and amortized over the remaining terms of the related leases.

Capitalization Policy:
Land, buildings, property improvements, furniture/fixtures and tenant improvements are recorded at cost. Expenditures for maintenance and repairs are charged to operations as incurred. Renovations and/or replacements, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.

Depreciation:
The Company is required to make subjective assessments as to the useful life of its properties for purposes of determining the amount of depreciation. These assessments have a direct impact on the Company’s net income.

Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

Buildings
30-40 years
Property Improvements
10-20 years
Furniture/Fixtures
3-10 years
Tenant Improvements
Shorter of lease term or their useful life

Sale of Investment Property and Property Held for Sale
The Company reports properties that are either disposed of or are classified as held for sale in continuing operations in the consolidated statement of income if the removal, or anticipated removal, of the asset(s) from the reporting entity does not represent a strategic shift that has or will have a major effect on an entity's operations and financial results when disposed of.
8

Index


Lease Income, Revenue Recognition and Tenant Receivables
Lease Income:

The Company accounts for lease income in accordance with ASC Topic 842 "Leases".

The Company's existing leases are generally classified as operating leases. However, certain longer-term leases (both lessee and lessor leases) may be classified as direct financing or sales type leases, which may result in selling profit and an accelerated pattern of earnings recognition.

The Company leases space to tenants under agreements with varying terms that generally provide for fixed payments of base rent, with designated increases over the term of the lease. Some of the lease agreements contain provisions that provide for additional rents based on tenants' sales volume ("percentage rent"). Percentage rents are recognized when the tenants achieve the specified targets as defined in their lease agreements. Additionally, most all lease agreements contain provisions for reimbursement of the tenants' share of actual real estate taxes, insurance and Common Area Maintenance ("CAM") costs (collectively, "Recoverable Costs") incurred.

Lease terms generally range from 1 to 5 years for tenant spaces under 10,000 square feet (“Shop Space”) and in excess of 5 years for spaces greater than 10,000 square feet (“Anchor Spaces”). Many leases also provide the option for the tenants to extend their lease sbeyond the initial term of the lease. If the tenants do not exercise renewal options and the leases mature, the tenants must relinquish their space so it can be leased to a new tenant, which generally involves some level of cost to prepare the space for re-leasing. These costs are capitalized and depreciated over the shorter of the life of the subsequent lease or the life of the improvement.

CAM is a non-lease component of the lease contract under ASC Topic 842, and therefore would be accounted for under ASC Topic 606, Revenue from Contracts with Customers, and presented separate from lease income in the accompanying consolidated statements of income, based on an allocation of the overall contract price, which is not necessarily the amount that would be billable to the tenants for CAM reimbursements per the terms of the lease contract. As the timing and pattern of providing the CAM service to the tenant is the same as the timing and pattern of the tenants' use of the underlying lease asset, the Company, in accordance with ASC Topic 842, combines CAM with the remaining lease components, along with tenants' reimbursement of real estate taxes and insurance, and recognize them together as lease income in the accompanying consolidated statements of income.

Lease income for operating leases with fixed payment terms is recognized on a straight-line basis over the expected term of the lease for all leases for which collectability is considered probable at the commencement date. At lease commencement, the Company expects that collectability is probable for all of its leases due to the Company’s credit checks on tenants and other creditworthiness analysis undertaken before entering into a new lease; therefore, income from all operating leases is initially recognized on a straight-line basis.  Lease income each period is reduced by amounts considered uncollectable on a lease-by-lease basis, with any changes in collectability assessments recognized as a current period adjustment to lease income. For operating leases in which collectability of lease income is not considered probable, lease income is recognized on a cash basis and all previously recognized uncollectable lease income, including straight-line rental income, is reversed in the period in which the lease income is determined not to be probable of collection.

The Company, as a lessor, may only defer as initial direct costs the incremental costs of a tenant operating lease that would not have been incurred if the lease had not been obtained. These costs generally include third party broker payments, which are capitalized to deferred costs in the accompanying consolidated balance sheets and amortized over the expected term of the lease to depreciation and amortization expense in the accompanying consolidated statements of income.

COVID-19 Pandemic

Beginning in March 2020, many of the Company's properties were, and continue to be, negatively impacted by the COVID-19 pandemic, as state governments mandated restrictions on the operation of non-essential businesses to prevent the spread of COVID-19, forcing many of our tenants’ businesses to close or reduce operations.  As a result, 401 of approximately 870 tenants in the Company's consolidated portfolio, representing 1.6 million square feet and approximately 44.7% of the Company's annualized base rent, have asked for some type of rent deferral or concession.  Subsequently, approximately 116 of the 401 tenants withdrew their requests for rent relief or paid their rent in full. The Company has evaluated, and will continue to evaluate any requests on a case-by-case basis to determine an appropriate course of action, recognizing that in many cases some type of concession may be appropriate and beneficial to the long-term interests of the Company.  In evaluating these requests, the Company has been considering, and will continue to consider, many factors, including the tenant's financial strength, the tenant's operating history, potential co-tenancy impacts, the tenant's contribution to the shopping center in which it operates, the Company's assessment of the tenant's long-term viability, the difficulty or ease with which the tenant could be replaced and other factors. Each negotiation is specific to the tenant making the request.  The primary strategy of the Company is that most of these concessions will be in the form of deferred rent for some portion of rents due for the months of April 2020 through December 2020 or potentially for a portion of fiscal 2021, to be paid over a later part of the lease, preferably within a period of one year or less. In some instances, however, the Company determined that it was more appropriate to abate some portion of base rents for the months of April 2020 through December 2020, or potentially for a portion of fiscal 2021 and for one tenant, through fiscal 2023. From the onset of COVID-19 through January 31, 2021, the Company has completed 266 lease modifications, consisting of base rent deferrals totaling $3.8 million and rent abatements totaling $3.4 million. Included in the aforementioned amounts were the rent deferrals and abatements completed in the three months ended January 31, 2021, amounting to  32 rent deferrals or abatements, which deferred $399,000 of base rents and abated $2.0  million of base rents. The $2.0 million in rent abatements completed in the three months ended January 31, 2021 included $1.0 million in base rents due for periods after January 31, 2021.

In April 2020, in response to the COVID-19 Pandemic, the FASB staff issued guidance that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842, as if enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the lease contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each lease contract to determine whether enforceable rights and obligations for concessions exist in the lease contract and may elect to apply or not apply the lease modification guidance in Topic 842 to those contracts.

This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. The FASB staff expects that reasonable judgment will be exercised in making those determinations.

Most concessions will provide a deferral of payments with no substantive changes to the consideration in the original lease contract. A deferral affects the timing, but the amount of the consideration is substantially the same as that required by the original lease contract. The FASB staff expects that there will be multiple ways to account for those deferrals, none of which the staff believes are preferable over others. The Company has made the election not to analyze each lease contract, and believes that, based on FASB guidance, the appropriate way to account for the concessions as described above is to account for such concessions as if no change to the lease contracts were made. Under that accounting, a lessor would increase its lease receivable (straight-line rents receivable) and would continue to recognize income during the deferral period, assuming that the collectability of the future rents under the lease contract are considered collectable.  If it is determined that the future rents of any lease contract are not collectable, the Company would treat that lease contract on a cash basis as defined in ASC Topic 842.

When collection of substantially all lease payments during the lease term is not considered probable, total lease revenue is limited to the lesser of revenue recognized under accrual accounting or cash received. Determining the probability of collection of substantially all lease payments during a lease term requires significant judgment. This determination is impacted by numerous factors, including our assessment of the tenant’s credit worthiness, economic conditions, tenant sales productivity in that location, historical experience with the tenant and tenants operating in the same industry, future prospects for the tenant and the industry in which it operates, and the length of the lease term. If leases currently classified as probable are subsequently reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off with a corresponding decrease in lease income.

Revenue Recognition

In those instances in which the Company funds tenant improvements and the improvements are deemed to be owned by the Company, revenue recognition on operating leases will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant. When the Company determines that the tenant allowances are lease incentives, the Company commences revenue recognition when possession or control of the space is turned over to the tenant for tenant work to begin.

Lease termination amounts are recognized in operating revenues when there is a signed termination agreement, all of the conditions of the agreement have been met, the tenant is no longer occupying the property and the termination consideration is probable of collection. Lease termination amounts are paid by tenants who want to terminate their lease obligations before the end of the contractual term of the lease by agreement with the Company. There is no way of predicting or forecasting the timing or amounts of future lease termination fees. Interest income is recognized as it is earned. Gains or losses on disposition of properties are recorded when the criteria for recognizing such gains or losses under U.S. GAAP have been met.

Percentage rent is recognized when a specific tenant’s sales breakpoint is achieved.

Tenant Receivables

The actions taken by federal, state and local governments to mitigate the spread of COVID-19, initially by ordering closures of non-essential businesses and ordering residents to generally stay at home, and subsequent phased re-openings have resulted in many of our tenants temporarily or even permanently closing their businesses, and for some, it had impacted their ability to pay rent.

As a result, in accordance with ASC Topic 842, we revised our collectability assumptions for many of our tenants that were most significantly impacted by COVID-19. During the three months ended January 31, 2021, we recognized collectability related adjustments totaling $1.7 million. This amount includes changes in our collectability assessments for certain tenants in our portfolio from probable to not probable, which requires that revenue recognition for those tenants be converted to cash basis accounting, with previously uncollected billed rents reversed in the current period.  This resulted in a reduction of lease income for the three months ended January 31, 2021 in the amount of $999,000 related to tenants whose assessment of collectability was changed from probable to not probable, either in a prior period or in the current period. In addition, the Company wrote-off $441,000 of previously recorded straight-line rent receivables related to tenants whose assessment of collectability was changed from probable to not probable in the three months ended January 31, 2021.  As of January 31, 2021, the revenue from approximately 9.2% of our tenants (based on total commercial leases) is being recognized on a cash basis.
 
At January 31, 2021 and October 31, 2020, $21,699,000 and $22,330,000, respectively, have been recognized as straight-line rents receivable (representing the current cumulative rents recognized prior to when billed and collectable as provided by the terms of the leases), all of which is included in tenant receivables in the accompanying consolidated financial statements.

The Company provides an allowance for doubtful accounts against the portion of tenant receivables that is estimated to be uncollectable.  Such allowances are reviewed periodically.  At January 31, 2021 and October 31, 2020, tenant receivables in the accompanying consolidated balance sheets are shown net of allowances for doubtful accounts of $8,582,000 and $8,769,000, respectively.  Included in the aforementioned allowance for doubtful accounts is an amount for future tenant credit losses of approximately 10% of the deferred straight-line rents receivable which is estimated to be uncollectable.
9

Index


Earnings Per Share
The Company calculates basic and diluted earnings per share in accordance with the provisions of ASC Topic 260, “Earnings Per Share.” Basic earnings per share (“EPS”) excludes the impact of dilutive shares and is computed by dividing net income applicable to Common and Class A Common stockholders by the weighted average number of Common shares and Class A Common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue Common shares or Class A Common shares were exercised or converted into Common shares or Class A Common shares and then shared in the earnings of the Company. Since the cash dividends declared on the Company’s Class A Common stock are higher than the dividends declared on the Common Stock, basic and diluted EPS have been calculated using the “two-class” method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to the weighted average of the dividends declared, outstanding shares per class and participation rights in undistributed earnings.

The following table sets forth the reconciliation between basic and diluted EPS (in thousands):

 
Three Months Ended
January 31,
 
   
2021
   
2020
 
Numerator
           
Net income applicable to common stockholders – basic
 
$
977
   
$
1,082
 
Effect of dilutive securities:
               
Restricted stock awards
   
12
     
41
 
Net income applicable to common stockholders – diluted
 
$
989
   
$
1,123
 
                 
Denominator
               
Denominator for basic EPS – weighted average common shares
   
9,250
     
8,968
 
Effect of dilutive securities:
               
Restricted stock awards
   
143
     
479
 
Denominator for diluted EPS – weighted average common equivalent shares
   
9,393
     
9,447
 
                 
Numerator
               
Net income applicable to Class A common stockholders-basic
 
$
3,502
   
$
3,989
 
Effect of dilutive securities:
               
Restricted stock awards
   
(12
)
   
(41
)
Net income applicable to Class A common stockholders – diluted
 
$
3,490
   
$
3,948
 
                 
Denominator
               
Denominator for basic EPS – weighted average Class A common shares
   
29,590
     
29,508
 
Effect of dilutive securities:
               
Restricted stock awards
   
-
     
140
 
Denominator for diluted EPS – weighted average Class A common equivalent shares
   
29,590
     
29,648
 

Segment Reporting
The Company's primary business is the ownership, management, and redevelopment of retail properties. The Company reviews operating and financial information for each property on an individual basis and therefore, each property represents an individual operating segment. The Company evaluates financial performance using property operating income, which consists of base rental income and tenant reimbursement income, less rental expenses and real estate taxes. Only one of the Company’s properties, located in Stamford, CT (“Ridgeway”), is considered significant as its revenue is in excess of 10% of the Company’s consolidated total revenues and accordingly is a reportable segment. The Company has aggregated the remainder of its properties as they share similar long-term economic characteristics and have other similarities including the fact that they are operated using consistent business strategies, are typically located in the same major metropolitan area, and have similar tenant mixes.

Ridgeway is located in Stamford, Connecticut and was developed in the 1950’s and redeveloped in the mid 1990’s. The property contains approximately 374,000 square feet of GLA.  It is the dominant grocery-anchored center and the largest non-mall shopping center located in the City of Stamford, Fairfield County, Connecticut.

Segment information about Ridgeway as required by ASC Topic 280 is included below:

 
Three Months Ended
January 31,
 
   
2021
   
2020
 
Ridgeway Revenues
   
10.0
%
   
11.1
%
All Other Property Revenues
   
90.0
%
   
88.9
%
Consolidated Revenue
   
100.0
%
   
100.0
%

 
January 31,
2021
   
October 31,
2020
 
Ridgeway Assets
   
6.3
%
   
6.4
%
All Other Property Assets
   
93.7
%
   
93.6
%
Consolidated Assets (Note 1)
   
100.0
%
   
100.0
%

Note 1 - Ridgeway did not have any significant expenditures for additions to long lived assets in the three months ended January 31, 2021 or the year ended October 31, 2020.

 
January 31,
2021
   
October 31,
2020
 
Ridgeway Percent Leased
   
92
%
   
92
%

Ridgeway Significant Tenants by Annual Base Rents
 
Three Months Ended
January 31,
 
   
2021
   
2020
 
The Stop & Shop Supermarket Company
   
21
%
   
20
%
Bed, Bath & Beyond
   
15
%
   
14
%
Marshall’s Inc., a division of the TJX Companies
   
11
%
   
10
%
All Other Tenants at Ridgeway (Note 2)
   
53
%
   
56
%
Total
   
100
%
   
100
%

Note 2 - No other tenant accounts for more than 10% of Ridgeway’s annual base rents in any of the periods presented. Percentages are calculated as a ratio of the tenants' base rent divided by total base rent of Ridgeway.

Income Statement (In Thousands):
 
Three Months Ended
January 31, 2021
 
   
Ridgeway
   
All Other
Operating Segments
   
Total Consolidated
 
Revenues
 
$
3,461
   
$
30,816
   
$
34,277
 
Operating Expenses and Property Taxes
 
$
1,154
   
$
11,021
   
$
12,175
 
Interest Expense
 
$
428
   
$
2,964
   
$
3,392
 
Depreciation and Amortization
 
$
580
   
$
6,938
   
$
7,518
 
Net Income
 
$
1,299
   
$
7,505
   
$
8,804
 

Income Statement (In Thousands):
 
Three Months Ended
January 31, 2020
 
   
Ridgeway
   
All Other
Operating Segments
   
Total Consolidated
 
Revenues
 
$
3,823
   
$
30,525
   
$
34,348
 
Operating Expenses and Property Taxes
 
$
1,130
   
$
10,609
   
$
11,739
 
Interest Expense
 
$
428
   
$
2,911
   
$
3,339
 
Depreciation and Amortization
 
$
587
   
$
6,548
   
$
7,135
 
Net Income
 
$
1,678
   
$
7,843
   
$
9,521
 

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Index

Stock-Based Compensation
The Company accounts for its stock-based compensation plans under the provisions of ASC Topic 718, “Stock Compensation”, which requires that compensation expense be recognized, based on the fair value of the stock awards less estimated forfeitures. The fair value of stock awards is equal to the fair value of the Company’s stock on the grant date.  The Company recognizes compensation expense for its stock awards by amortizing the fair value of stock awards over the requisite service periods of such awards.  In certain cases as defined in the participant agreements, the vesting of stock awards can be accelerated, which will result in the Company charging to compensation expense the remaining unamortized restricted stock compensation related to those stock awards.

Reclassifications
Certain prior period amounts have been reclassified to conform to the current period’s presentation.

New Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848).” ASU No. 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the three months ended April 30, 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

The Company has evaluated all other new ASUs issued by FASB, and has concluded that these updates do not have a material effect on the Company's consolidated financial statements as of January 31, 2021.
11

Index


(2) UNSECURED REVOLVING CREDIT FACILITY

The Company has a $100 million unsecured revolving credit facility (the "Facility") with a syndicate of three banks led by The Bank of New York Mellon, as administrative agent. The syndicate also includes Wells Fargo Bank N.A. and Bank of Montreal (co-syndication agents).  The Facility gives the Company the option, under certain conditions, to increase the Facility’s borrowing capacity up to $150 million (subject to lender approval). The maturity date of the Facility is August 23, 2021. Borrowings under the Facility can be used for general corporate purposes and the issuance of letters of credit (up to $10 million). Borrowings will bear interest at the Company’s option of Eurodollar rate plus 1.35% to 1.95% or The Bank of New York Mellon's prime lending rate plus 0.35% to 0.95%, based on consolidated indebtedness. The Company pays a quarterly fee on the unused commitment amount of 0.15% to 0.25% per annum based on outstanding borrowings during the year. The Facility contains certain representations, financial and other covenants typical for this type of facility. The Company's ability to borrow under the Facility is subject to our compliance with the covenants and other restrictions included in the Facility on an ongoing basis. The principal financial covenants limit the Company's level of secured and unsecured indebtedness and additionally require the Company to maintain certain debt coverage ratios. The Company was in compliance with such covenants at January 31, 2021.

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Index

(3) CONSOLIDATED JOINT VENTURES AND REDEEMABLE NONCONTROLLING INTERESTS

The Company has an investment in five joint ventures, UB Orangeburg, LLC ("Orangeburg"), McLean Plaza Associates, LLC ("McLean"), UB Dumont I, LLC ("Dumont") and UB New City I, LLC ("New City"), each of which owns a commercial retail property, and UB High Ridge, LLC ("High Ridge"), which owns three commercial real estate properties.  The Company has evaluated its investment in these five joint ventures and has concluded that these joint ventures are fully controlled by the Company and that the presumption of control is not offset by any rights of any of the limited partners or non-controlling members in these ventures and that the joint ventures should be consolidated into the consolidated financial statements of the Company in accordance with ASC Topic 810 "Consolidation".  The Company’s investment in these consolidated joint ventures is more fully described below:

Orangeburg

The Company, through a wholly-owned subsidiary, is the managing member and owns a 44.6% interest in Orangeburg, which owns a CVS-anchored shopping center. The other member (non-managing) of Orangeburg is the prior owner of the contributed property who, in exchange for contributing the net assets of the property, received units of Orangeburg equal to the value of the contributed property less the value of the assigned first mortgage payable. The Orangeburg operating agreement provides for the non-managing member to receive a quarterly cash distribution equal to the regular quarterly cash distribution declared by the Company for one share of the Company’s Class A Common stock, which amount is attributable to each unit of Orangeburg ownership. The quarterly cash distribution is paid from available cash, as defined, of Orangeburg. The balance of available cash, if any, is fully distributable to the Company. Upon liquidation, proceeds from the sale of Orangeburg assets are to be distributed in accordance with the operating agreement. The non-managing member is not obligated to make any additional capital contributions to the partnership. Orangeburg has a defined termination date of December 31, 2097.  Since purchasing this property, the Company has made additional investments in the amount of $6.8 million in Orangeburg, and as a result, as of January 31, 2021 the Company's ownership percentage has increased to 44.6% from approximately 2.92% at inception.

McLean

The Company, through a wholly-owned subsidiary, is the managing member and owns a 53% interest in McLean, which owns an Acme grocery-anchored shopping center. The McLean operating agreement provides for the non-managing members to receive a fixed annual cash distribution equal to 5.05% of their invested capital.  The annual cash distribution is paid from available cash, as defined, of McLean. The balance of available cash, if any, is fully distributable to the Company. Upon liquidation, proceeds from the sale of McLean assets are to be distributed in accordance with the operating agreement. The non-managing members are not obligated to make any additional capital contributions to the entity.

High Ridge

The Company is the managing member and owns a 17.0% interest in High Ridge.  The Company's initial investment was $5.5 million, and the Company has purchased additional interests from non-managing members totaling $3.6 million and contributed $1.5 million in additional equity to the venture through January 31, 2021.  High Ridge, either directly or through a wholly-owned subsidiary, owns three commercial real estate properties, High Ridge Shopping Center, a grocery-anchored shopping center ("High Ridge Center"), and two single tenant commercial retail properties, one leased to JP Morgan Chase and one leased to CVS.  Two properties are located in Stamford, CT and one property is located in Greenwich, CT.  High Ridge Center is a shopping center anchored by a Trader Joe's grocery store.  The properties were contributed to the new entities by the former owners who received units of ownership of High Ridge equal to the value of properties contributed less liabilities assumed.  The High Ridge operating agreement provides for the non-managing members to receive an annual cash distribution, currently equal to 4.76% of their invested capital.

Dumont

The Company is the managing member and owns a 36.4% interest in Dumont.  The Company's initial investment was $3.9 million, and the Company has purchased additional interests totaling $630,000 through January 31, 2021.  Dumont owns a retail and residential real estate property, which retail portion is anchored by a Stop & Shop grocery store.  The property is located in Dumont, NJ.  The property was contributed to the new entity by the former owners who received units of ownership of Dumont equal to the value of contributed property less liabilities assumed.   The Dumont operating agreement provides for the non-managing members to receive an annual cash distribution, currently equal to 5.0% of their invested capital.

New City

The Company is the managing member and owns a 84.3% equity interest in a joint venture, New City.  The Company's initial investment was $2.4 million, and the Company has purchased additional interests totaling $289,300 through January 31, 2021.  New City owns a single tenant retail real estate property located in New City, NY, which is leased to a savings bank.  In addition, New City rents certain parking spaces on the property to the owner of an adjacent grocery-anchored shopping center.  The property was contributed to the new entity by the former owners who received units of ownership of New City equal to the value of contributed property.   The New City operating agreement provides for the non-managing member to receive an annual cash distribution, currently equal to 5.00% of his invested capital.

Noncontrolling Interests

The Company accounts for noncontrolling interests in accordance with ASC Topic 810, “Consolidation.” Because the limited partners or noncontrolling members in Orangeburg, McLean, High Ridge, Dumont and New City have the right to require the Company to redeem all or a part of their limited partnership or limited liability company units for cash, or at the option of the Company shares of its Class A Common stock, at prices as defined in the governing agreements, the Company reports the noncontrolling interests in the consolidated joint ventures in the mezzanine section, outside of permanent equity, of the consolidated balance sheets at redemption value which approximates fair value. The value of the Orangeburg, McLean, and a portion of the High Ridge and Dumont redemptions are based solely on the price of the Company’s Class A Common stock on the date of redemption.   For the three months ended January 31, 2021 and 2020, the Company increased/(decreased) the carrying value of the noncontrolling interests by $4.9 million and $(546,000), respectively, with the corresponding adjustment recorded in stockholders’ equity.

The following table sets forth the details of the Company's redeemable non-controlling interests for the three months ended January 31, 2021 and the fiscal year ended October 31, 2020 (amounts in thousands):

 
January 31, 2021
   
October 31, 2020
 
Beginning Balance
 
$
62,071
   
$
77,876
 
Change in Redemption Value
   
4,885
     
(15,047
)
Partial Redemption of High Ridge Noncontrolling Interest
   
(364
)
   
(560
)
Partial Redemption of New City Noncontrolling Interest
   
-
     
(198
)
                 
Ending Balance
 
$
66,592
   
$
62,071
 

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Index

(4) INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES

At January 31, 2021 and October 31, 2020 investments in and advances to unconsolidated joint ventures consisted of the following (with the Company’s ownership percentage in parentheses) (amounts in thousands):

 
January 31, 2021
   
October 31, 2020
 
Chestnut Ridge Shopping Center (50%)
 
$
12,377
   
$
12,252
 
Gateway Plaza (50%)
   
6,853
     
6,929
 
Putnam Plaza Shopping Center (66.67%)
   
2,977
     
2,599
 
Midway Shopping Center, L.P. (11.79%)
   
4,169
     
4,233
 
Applebee's at Riverhead (50%)
   
1,951
     
1,943
 
81 Pondfield Road Company (20%)
   
723
     
723
 
Total
 
$
29,050
   
$
28,679
 

Chestnut Ridge Shopping Center

The Company, through a wholly-owned subsidiary, owns a 50% undivided tenancy-in-common interest in the 76,000 square foot Chestnut Ridge Shopping Center located in Montvale, New Jersey (“Chestnut”), which is anchored by a Fresh Market grocery store.

Gateway Plaza and Applebee's at Riverhead

The Company, through two wholly-owned subsidiaries, owns a 50% undivided tenancy-in-common interest in the Gateway Plaza Shopping Center ("Gateway") and Applebee's at Riverhead ("Applebee's").  Both properties are located in Riverhead, New York. Gateway, a 198,500 square foot shopping center, is anchored by a 168,000 square foot Walmart, which also has 27,000 square feet of in-line space that is leased and a 3,500 square foot outparcel that is leased.  Applebee's has a 5,400 square foot free-standing Applebee’s restaurant and a 7,200 square foot pad site that is leased.

Gateway is subject to an $11.5 million non-recourse first mortgage.  The mortgage matures on March 1, 2024 and requires payments of principal and interest at a fixed rate of interest of 4.2% per annum.

Midway Shopping Center, L.P.

The Company, through a wholly-owned subsidiary, owns an 11.79% equity interest in Midway Shopping Center L.P. (“Midway”), which owns a 247,000 square foot ShopRite-anchored shopping center in Westchester County, New York. Although the Company only has an approximate 12% equity interest in Midway, it controls 25% of the voting power of Midway and as such, has determined that it exercises significant influence over the financial and operating decisions of Midway and accounts for its investment in Midway under the equity method of accounting.

The Company has allocated the $7.4 million excess of the carrying amount of its investment in and advances to Midway over the Company’s share of Midway’s net book value to real property and is amortizing the difference over the property’s estimated useful life of 39 years.

Midway is subject to a non-recourse first mortgage in the amount of $25.5 million.  The loan requires payments of principal and interest at the rate of 4.80% per annum and will mature in 2027.

Putnam Plaza Shopping Center

The Company, through a wholly-owned subsidiary, owns a 66.67% (noncontrolling) undivided tenancy-in-common interest in the 189,000 square foot Tops-anchored Putnam Plaza Shopping Center (“Putnam Plaza”) located in Carmel, New York.

Putnam Plaza is subject to a non-recourse first mortgage payable in the amount of $18.3 million.  The mortgage requires monthly payments of principal and interest at a fixed rate of 4.81% and will mature in 2028.

81 Pondfield Road Company

The Company’s other investment in an unconsolidated joint venture is a 20% interest in a retail and office building in Westchester County, New York.

Equity Method of Accounting

The Company accounts for the above investments under the equity method of accounting since it exercises significant influence, but does not control the joint ventures.  The other venturers in the joint ventures have substantial participation rights in the financial decisions and operation of the ventures or properties, which preclude the Company from consolidating the investments. The Company has evaluated its investment in the joint ventures and has concluded that the joint ventures are not VIE's. Under the equity method of accounting, the initial investment is recorded at cost as an investment in unconsolidated joint venture, and subsequently adjusted for equity in net income (loss) and cash contributions and distributions from the venture. Any difference between the carrying amount of the investment on the Company’s balance sheet and the underlying equity in net assets of the venture is evaluated for impairment at each reporting period.
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Index


(5) LEASES

Lessor Accounting

The Company's Lease income is comprised of both fixed and variable income, as follows:

Fixed lease income includes stated amounts per the lease contract, which are primarily related to base rent. Income for these amounts is recognized on a straight line basis.

Variable lease income includes recoveries from tenants, which represents amounts that tenants are contractually obligated to reimburse the Company for the tenants’ portion of Recoverable Costs.  Generally the Company’s leases provide for the tenants to reimburse the Company for Recoverable Costs based on the tenants’ share of the actual costs incurred in proportion to the tenants’ share of leased space in the property.

The following table provides a disaggregation of lease income recognized during the three months ended January 31, 2021, under ASC Topic 842, Leases, as either fixed or variable lease income based on the criteria specified in ASC Topic 842 (In thousands):

 
Three Months Ended
January 31,
 
   
2021
   
2020
 
Operating lease income:
           
Fixed lease income (Base Rent)
 
$
24,064
   
$
25,115
 
Variable lease income (Cost Recoveries)
   
9,978
     
7,995
 
Other lease related income, net:
               
Above/below market rent amortization
   
95
     
177
 
Uncollectable amounts in lease income
   
(655
)
   
(342
)
ASC Topic 842 cash basis lease income reversal
   
(999
)
   
-
 
Total lease income
 
$
32,483
   
$
32,945
 

Future minimum rents under non-cancelable operating leases for the next five years and thereafter, excluding variable lease payments, are as follows (In thousands):

Fiscal Year Ending
     
2021 (a)
 
$
71,814
 
2022
   
83,356
 
2023
   
67,821
 
2024
   
57,492
 
2025
   
46,509
 
Thereafter
   
204,238
 
Total
 
$
531,230
 

(a) The future minimum rental income for fiscal 2021 includes amounts due between February 1, 2021 through October 31, 2021.

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Index

(6)  STOCKHOLDERS’ EQUITY

Authorized Stock
The Company's Charter authorizes 200,000,000 shares of stock.  The total number of shares of authorized stock consists of 100,000,000 shares of Class A Common Stock, 30,000,000 shares of Common Stock, 50,000,000 shares of Preferred Stock, and 20,000,000 shares of Excess Stock.

Restricted Stock Plan
The Company has a Restricted Stock Plan, as amended (the "Plan") that provides a form of equity compensation for employees of the Company.  The Plan, which is administered by the Company's compensation committee, authorizes grants of up to an aggregate of 5,500,000 shares of the Company’s common equity consisting of 350,000 Common shares, 350,000 Class A Common shares and 4,800,000 shares, which at the discretion of the compensation committee, may be awarded in any combination of Class A Common shares or Common shares.

During the three months ended January 31, 2021, the Company awarded 105,850 shares of Common Stock and 125,800 shares of Class A Common Stock to participants in the Plan.  The grant date fair value of restricted stock grants awarded to participants in 2021 was approximately $3.0 million.

A summary of the status of the Company’s non-vested Common and Class A Common shares as of January 31, 2021, and changes during the three months ended January 31, 2021 is presented below:

 
Common Shares
   
Class A Common Shares
 
Non-vested Shares
 
Shares
   
Weighted-Average
Grant-Date
Fair Value
   
Shares
   
Weighted-Average
Grant-Date
Fair Value
 
Non-vested at October 31, 2020
   
924,550
   
$
17.69
     
490,950
   
$
21.56
 
Granted
   
105,850
   
$
11.68
     
125,800
   
$
13.75
 
Vested
   
(102,600
)
 
$
17.06
     
(91,800
)
 
$
19.14
 
Forfeited
   
-
   
$
-
     
-
   
$
-
 
Non-vested at January 31, 2021
   
927,800
   
$
17.08
     
524,950
   
$
20.11
 

As of January 31, 2021, there was $14.6 million of unamortized restricted stock compensation related to non-vested restricted stock grants awarded under the Plan.  The remaining unamortized expense is expected to be recognized over a weighted average period of 5.0 years.  For the three months ended January 31, 2021 and 2020, amounts charged to compensation expense totaled $985,000 and $1,047,000, respectively.

Share Repurchase Program
The Board of Directors of the Company has approved a share repurchase program (“Current Repurchase Program”) for the repurchase of up to 2,000,000 shares, in the aggregate, of Common stock and Class A Common stock in open market transactions.

The Company has repurchased 195,413 shares of Class A Common Stock under the Current Repurchase Program.  From the inception of all repurchase programs, the Company has repurchased 4,600 shares of Common Stock and 919,991 shares of Class A Common Stock.

Preferred Stock
The 6.25% Series H Senior Cumulative Preferred Stock ("Series H Preferred Stock") is non-voting, has no stated maturity and is redeemable for cash at $25.00 per share at the Company's option on or after September 18, 2022. The holders of our Series H Preferred Stock have general preference rights with respect to liquidation and quarterly distributions. Except under certain conditions, holders of the Series H Preferred Stock will not be entitled to vote on most matters. In the event of a cumulative arrearage equal to six quarterly dividends, holders of Series H Preferred Stock, together with all of the Company's other series of preferred stock (voting as a single class without regard to series) will have the right to elect two additional members to serve on the Company's Board of Directors until the arrearage has been cured. Upon the occurrence of a Change of Control, as defined in the Company's Articles of Incorporation, the holders of the Series H Preferred Stock will have the right to convert all or part of the shares of Series H Preferred Stock held by such holders on the applicable conversion date into a number of the Company's shares of Class A common stock. Underwriting commissions and costs incurred in connection with the sale of the Series H Preferred Stock are reflected as a reduction of additional paid in capital.

The 5.875% Series K Senior Cumulative Preferred Stock ("Series K Preferred Stock") is non-voting, has no stated maturity and is redeemable for cash at $25.00 per share at the Company's option on or after October 1, 2024. The holders of our Series K Preferred Stock have general preference rights with respect to liquidation and quarterly distributions. Except under certain conditions, holders of the Series K Preferred Stock will not be entitled to vote on most matters. In the event of a cumulative arrearage equal to six quarterly dividends, holders of Series K Preferred Stock, together with all of the Company's other series of preferred stock (voting as a single class without regard to series) will have the right to elect two additional members to serve on the Company's Board of Directors until the arrearage has been cured. Upon the occurrence of a Change of Control, as defined in the Company's Articles of Incorporation, the holders of the Series K Preferred Stock will have the right to convert all or part of the shares of Series K Preferred Stock held by such holders on the applicable conversion date into a number of the Company's shares of Class A common stock. Underwriting commissions and costs incurred in connection with the sale of the Series K Preferred Stock are reflected as a reduction of additional paid in capital.

On November 1, 2019, we redeemed all of the outstanding shares of our Series G Cumulative Preferred Stock for $25.00 per share with proceeds from our sale of our Series K Cumulative Preferred Stock in October 2019.  The total redemption amount was $75 million.

16

Index