Similar to other retail landlords across the United States, we received a number of requests for rent relief from tenants, with most requests received during the early days of the pandemic when stay-at-home orders were in place and many businesses were required to close. We continued to receive a smaller number of new requests even after businesses began to re-open, and in some cases, follow-on requests from tenants to whom we had already provided rent relief, but these requests are beginning to taper off and no new requests from tenants who had not previously requested rent relief were received during the quarter ended April 30, 2021. We have been evaluatingevaluated each request on a case-by-case basis to determine the best course of action, recognizing that in many cases some type of concession may be appropriate and beneficial to our long-term interests. In evaluating these requests, we have been consideringconsidered 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, our assessment of the tenant’s long-term viability, the difficultdifficulty or ease with which the tenant could be replaced, and other factors. Although each negotiation has been specific to that tenant, most of these concessions have been in the form of deferred rent for some portion of rents due in April through December 2020 or longer, to be paid back over the later part of the lease, preferably within a period of one year or less. In addition, someSome of these concessions have been in the form of rent abatements for some portion of tenant rents due in April 2020 through December 2020 or longer.
We believe our strategy of focusing on community and neighborhood shopping centers, anchored principally by regional supermarkets, pharmacy chains or wholesale clubs, is beinghas been validated during the COVID-19 pandemic. We believe the nature of our properties makes them less susceptible to economic downturns than other retail properties whose anchor tenants do not supply basic necessities. During normal conditions, we believe that consumers generally prefer to purchase food and other staple goods and services in person, and even during the COVID-19 pandemic our supermarkets, pharmacies and wholesale clubs have been posting strong in-person sales. Moreover, most of our grocery stores have also implemented or expanded curbside pick-up or partnered with delivery services to cater to the needs of their customers during the COVID-19 pandemic.
We recognize, however, that the pandemic may have accelerated a movement towards e-commerce that may be challenging for weaker tenants that lack an omni-channel sales or micro-fulfillment strategy. We launched a program designating dedicated parking spots for curbside pick-up and are assisting tenants in many other ways to help them quickly adapt to these changing circumstances. Many tenants have adapted to the new business environment through use of our curbside pick-up program, and early industry data seems to indicate that micro-fulfillment from retailers with physical locations may be a new competitive alternative to e-commerce. It is too early to know which tenants will or will not be successful in making any changes that may be necessary. It is also too early to determine whether these changes in consumer behavior are temporary or reflect long-term changes.
Moreover, due toWhile we have seen substantial improvement in general business conditions, the current disruptions inpandemic is still ongoing, with existing and new variants making the economy and our marketplace as a result of the COVID-19 pandemic and resulting changes to the short-term and possibly even long-term landscape for brick-and-mortar retail, we anticipate that it will be moresituation difficult to actively pursuepredict. Moreover, challenges presented by inflation, labor shortages and achieve certain elements ofsupply chain disruptions could present continued or new challenges for our growth strategy. For example, it could be more difficult for us to acquire or sell properties in fiscal 2021 (or possibly beyond), as it may be difficult to correctly value a property given changing circumstances. Additionally, parties may be unwilling to enter into transactions during such uncertainty. However, as the COVID-19 pandemic eases and the economy improves, some commercial properties are starting to trade in the marketplace.tenants. We may also be less willing to enter into developments or capital improvements that require large amounts of upfront capital if the expected return is perceived as delayed or uncertain. While we believe we still maintain a conservative capital structure and low debt levels, particularly relative to our peers, our profile may evolve based on changing needs.
While it appears that the COVID-19 pandemic has begun to ease in the U.S. and businesses are in the early stages of recovery, we expect that our rent collections willcould continue to be below our tenants’ contractual rent obligations during the early stages of suchthis business recovery and potentially beyond. We will continue to accrue rental revenue during the deferral period, except for tenants for which revenue recognition was converted to cash basis accounting in accordance with ASC Topic 842. However, we anticipate that some tenants eventually will be unable to pay amounts due, and we will incur losses against our rent receivables. The extent andreceivables, the timing of the recognition of such losses will depend on future developments occurring after April 2021, which are highly uncertain and cannot be predicted. Rental income collections and rent relief requests to date mayis not be indicative of collections or requests in any future period.predictable.
We continue to have active discussions with existing and potential new tenants for new and renewed leases. With significant progress made in vaccinating the U.S. public, the resulting decline in COVID-19 cases, and the early signs of business improvement as operating restrictions are relaxed and individuals begin returning to pre-pandemic activities, we have observed a marked increase in leasing activity, including interest from potential new tenants and tenants interested in renewing their leases. However, our tenants and other businesses are in the early stages of a potential recovery and many of them may still face an uncertain future. As a result, we may continue to experience higher than typical vacancy rates, take longer to fill vacancies and suffer potentially lower rental rates until the recovery becomes more robust.
As a REIT, we are susceptible to changes in interest rates, the lending environment, the availability of capital markets and the general economy. The impacts of any changes are difficult to predict, particularly during the course of the current COVID-19 pandemic.
Transaction Highlights of Fiscal 2021;2022; Recent Developments
Set forth below are highlights of our recent property acquisitions, potential acquisitions under contract, other investments, property dispositions and financings:
In September 2021, we entered into a purchase and sale agreement to sell our property located in Chester, NJ to an unrelated third party for a sale price of $1.96 million as that property no longer met our investment objectives. In accordance with ASC Topic 360-10-45, the property met all the criteria to be classified as held for sale in the fourth quarter of fiscal 2021, and accordingly the Company recorded a loss on property held for sale of $342,000, which loss was included in continuing operations in the consolidated statement of income for the year ended October 31, 2021. This loss has been added back to our FFO as discussed below in this Item 2. The amount of the loss represented the net carrying amount of the property over the fair value of the asset less estimated cost to sell. In December 2020,2021, the Chester Property sale was completed and we realized an additional loss on sale of property of $8,000, which loss is included in continuing operations in the consolidated statement of income for the three months ended January 31, 2022.
In November 2021, we redeemed 17,99559,819 units of UB High Ridge, LLC from a noncontrolling member.members. The total cash price paid for the redemption was $364,000.redemptions were $1.4 million. As a result of the redemption,redemptions, our ownership percentage of High Ridge increased to 17.0%26.9% from 16.3%.24.6% at October 31, 2021.
In MarchDecember 2021, we refinanced our existing $6.5 million first mortgage payable secured by our Boonton, NJ property. The new mortgage has a principal balance of $11 million and requires payments of principal and interest at a fixed interest rate of 3.45%. The new mortgage matures in November 2031.
In February 2022, we sold one freeone-free standing restaurant retail property located in Hillsdale,Bloomfield, NJ, as that property no longer met our investment objectives. The property was sold for $1.3$1.8 million and we recorded a gain on sale of property the six month and three month periods ended April 30, 2021 in the amount of $435,000.
In March 2021, we entered into a purchase and sale agreement to sell our property located in Newington, NH, to an unrelated third party for a sale price of $13.4 million, as that property no longer met our investment objectives. We anticipate the sale will close sometime later in fiscal 2021. When and if the sale closes, we anticipate that we will record a gain on sale of the property in our second quarter of fiscal 2022 in the approximate amount of $11.9 million.$550,000.
In March 2021,February 2022, we refinanced our Facility, increasingexisting $22.8 million first mortgage secured by our Stratford, CT property. The new mortgage has a principal balance of $35.0 million, has a term of 10 years, and requires payments of principal and interest at a variable rate based on the borrowing capacitySecured Overnight Financing Rate (“SOFR”), plus an applicable spread. Concurrent with entering into the mortgage, we entered into an interest rate swap agreement with the lender as the counterparty, which converts the variable rate based on SOFR to $125 million and extending the maturity date to March 29, 2024 with a one-year extension at our option. Please see note 2 in our financial statements included in Item 1 for more information.fixed rate of interest totaling 3.0525% per annum.
In April 2021,February 2022, we redeemed 178,804 units of UB High Ridge, LLC frompurchased, for $33.6 million, a noncontrolling member. The total186,000 square foot grocery-anchored shopping center located in Shelton, CT. We funded the purchase price with available cash price paid for the redemption was $4.2 million. Asand a result of the redemption,$20 million borrowing on our ownership percentage of High Ridge increased to 23.7% from 17.0%.Facility.
Leasing
With significant progress made in vaccinating the U.S. public and signs of business improvement, we have observed a marked increase in leasing activity, including interest from potential new tenants and tenants interested in renewing their leases. However, some of our tenants are in the early stages of a potential recovery. Moreover, challenges presented by inflation, labor shortages and supply chain disruptions could present continued or new challenges for our tenants. As a result, we may continue to experience higher than typical vacancy rates, take longer to fill vacancies and suffer potentially lower rental rates until the recovery becomes more robust.
For the sixthree months ended April 30, 2021,January 31, 2022, we signed leases for a total of 424,000231,000 square feet of retail space in our consolidated portfolio. New leases for vacant spaces were signed for 51,00046,000 square feet at an average rental decrease of 13.5%4.9% on a cash basis. Renewals for 373,000185,000 square feet of space previously occupied were signed at an average rental decreaseincrease of 2.2%2.6% on a cash basis.
Tenant improvements and leasing commissions averaged $26.08$45.89 per square foot for new leases for the sixthree months ended April 30, 2021.January 31, 2022. We did not pay any significant tenant improvements and leasing commissions on renewal leases for the sixthree months ended April 30, 2021.January 31, 2022. The average term for new leases was 65 years and the average term for renewal leases was 34 years.
The rental increases/decreases associated with new and renewal leases generally include all leases signed in arms-length transactions reflecting market leverage between landlords and tenants during the period. The comparison between average rent for expiring leases and new leases is determined by including minimum rent paid on the expiring lease and minimum rent to be paid on the new lease in the first year. In some instances, management exercises judgment as to how to most effectively reflect the comparability of spaces reported in this calculation. The change in rental income on comparable space leases is impacted by numerous factors including current market rates, location, individual tenant creditworthiness, use of space, market conditions when the expiring lease was signed, the age of the expiring lease, capital investment made in the space and the specific lease structure. Tenant improvements include the total dollars committed for the improvement (fit-out) of a space as it relates to a specific lease but may also include base building costs (i.e. expansion, escalators or new entrances) that are required to make the space leasable. Incentives (if applicable) include amounts paid to tenants as an inducement to sign a lease that do not represent building improvements.
The leases signed in 20212022 generally become effective over the following one to two years. There is risk that some new tenants will not ultimately take possession of their space and that tenants for both new and renewal leases may not pay all of their contractual rent due to operating, financing or other reasons.
In the past, we had seen overall positive increases in rental income for renewal leases, but since the outbreak of the COVID-19 pandemic and the resulting regulatory restrictions on business operations, we have experienced average rental income decreases that exceed historic norms. Moreover, notwithstanding the significant progress made in vaccinating the U.S. public, the resulting decline in COVID-19 cases, and the early signs of business improvement as operating restrictions are relaxed and individuals begin returning to pre-pandemic activities, the long-term prospects of some of our tenants and the overall economic recovery is still uncertain. Therefore, our average rental rates on renewal and new leases may continue to suffer.
Significant Leasing Events
In 2017, Toys R’ Us and Babies R’ Us (“Toys”) filed a voluntary petition under chapter 11 of title 11 of the United States Bankruptcy Code, and subsequently liquidated the company. Toys ground leased 65,700 square feet of space at our Danbury, CT shopping center. In August 2018, this lease was purchased out of bankruptcy from Toys and assumed by a new owner. The base lease rate for the 65,700 square foot space was and remains at $0 for the duration of the lease, and we did not have any other leases with Toys, so our cash flow was not impacted by the bankruptcy of Toys. As of the date of this report, the ground lease has been subsequently sold to a national retailer, Ocean State Job Lot, who is operating a store in approximately 45,000 square feet of the 65,700 square feet covered by the lease.
Impact of Inflation on Leasing
Our long-term leases contain provisions to mitigate the adverse impact of inflation on our operating results. Such provisions include clauses entitling us to receive (a) scheduled base rent increases and (b) percentage rents based upon tenants’ gross sales, which could increase as prices rise. In addition, many of our non-anchor leases are for terms of less than ten years, which permits us 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 our leases require tenants to pay a share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.
Critical Accounting Estimates
Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation and uncertainty and are reasonably likely to have a material impact on the financial condition or results of operations of the Company and require management’s most difficult, complex or subjective judgments. Our most significant accounting estimates are as follows:
Valuation of investment properties
Determining the amount of our allowance for doubtful accounts
Valuation of investment propertiesInvestment Properties
At each reporting period management must assess whether the value of any of its investment properties are impaired. The judgement of impairment is subjective and requires management to make assumptions about future cash flows of an investment property and to consider other factors. The estimation of these factors has a direct effect on valuation of investment properties and consequently net income. As of April 30, 2021,January 31, 2022, management does not believe that any of our investment properties are impaired based on information available to us at April 30, 2021. In the future, almost any level of impairment would be material to our net income.January 31, 2022.
Revenue Recognition
Our main source of revenue is lease income from our tenants to whom we lease space at our 8078 shopping centers. The COVID-19 pandemic has caused distress for many of our tenants as some of those tenant businesses were forced to close early in the pandemic, and although most have been allowed to re-open and operate, manysome categories of tenants like restaurants and fitness/gyms are operating at reduced capacity or operational efficiency.have been slower to recover. As a result, we have many tenants who have had difficulty paying all of their contractually obligated rents and we have reached agreements with many of them to defer or abate portions of the contractual rents due under their leases with the Company. In accordance with ASC Topic 842, where appropriate, we will continue to accrue rental revenue during the deferral period, except for tenants for which revenue recognition was converted to cash basis accounting in accordance with ASC Topic 842. However, we anticipate that some tenants eventually will be unable to pay amounts due, and we will incur losses against our rent receivables, which would reduce lease income. The extent and timing of the recognition of such losses will depend on future developments, which are highly uncertain and cannot be predicted and these future losses could be material.
Allowance for doubtful accountsDoubtful Accounts
GAAP requires us to bill our tenants based on the terms in their leases and to record lease income on a straight-line basis. When a tenant does not pay a billed amount due under their lease, it becomes a tenant account receivable, or an asset of the Company. GAAP requires that receivables, like most assets, be recorded at their realizable value. Each reporting period we analyze our tenant accounts receivable, and based on the information available to management at the time, and record an allowance for doubtful accountaccounts for any unpaid tenant receivable that we believe is uncollectable. This analysis is subjective and the conclusions reached have a direct impact on net income. As of April 30, 2021,January 31, 2022, the portion of our billed but unpaid tenant receivables, excluding straight-line rent receivables that we believe are collectable, amounts to $2.2$2.4 million.
For a further discussion of our accounting estimates and critical accounting policies, please see Note 1 in our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q and Note 1 in our consolidated financial statements included in Item 8 of our October 31, 2020 Annual Report on From 10-K.10-Q.
Liquidity and Capital Resources
Overview
At April 30, 2021,January 31, 2022, we had cash and cash equivalents of $38.4$24.6 million, compared to $40.8$24.1 million at October 31, 2020.2021. Our sources of liquidity and capital resources include operating cash flows from real estate operations, proceeds from bank borrowings and long-term mortgage debt, capital financings and sales of real estate investments. Substantially all of our revenues are derived from rents paid under existing leases, which means that our operating cash flow depends on the ability of our tenants to make rental payments. As a result of state mandates forcing many non-essential businesses to close or restricting store operations to help prevent the spread of COVID-19, many of our tenants are suffering. Please see the "Impact of COVID-19" section earlier in this Item 2 for more information. For the sixthree months ended April 30,January 31, 2022 and 2021, and 2020, net cash flows from operating activities amounted to $34.6$13.5 million and $30.7$14.6 million, respectively.
Our short-term liquidity requirements consist primarily of normal recurring operating expenses and capital expenditures, debt service, management and professional fees, cash distributions to certain limited partners and non-managing members of our consolidated joint ventures, and regular dividends paid to our Common and Class A Common stockholders. Cash dividends paid on Common and Class A Common stock for the sixthree months endedApril 30, January 31, 2022 and 2021 and 2020 totaled $11.0$9.3 million and $21.8$5.5 million, respectively. Historically, we have met short-term liquidity requirements, which is defined as a rolling twelve month period, primarily by generating net cash from the operation of our properties.As a result of the COVID-19 pandemic, we have made a number of concessions in the form of deferred rents and rent abatements, as more extensively discussed under the "Impact of COVID-19" section earlier in this Item 2. To the extent rent deferral arrangements remain collectible, it will reduce operating cash flow in the near term but most likely increase operating cash flow in future periods. This process is ongoing.
During the first two quarters of fiscal 2021, the Board of Directors declared and the Company paid quarterly dividends that were reduced from pre-pandemic levels, as more extensively discussed under the "Impact“Impact of COVID-19"COVID-19” section earlier in this Item 2. Subsequent to the end of the second quarter, the Board of Directors has increased our Common and Class A Common stock dividends when compared to the reduced dividends that have been paid during the pandemic. In December 2021, the Board of Directors further increased the annualized dividend by $0.03 per Common and Class A Common share beginning with our January 2022 dividend, which was paid on January 14, 2022. Future determinations regarding quarterly dividends will impact the Company's short-term liquidity requirements.
We are alsoIn December 2021 and February 2022, we generated $16.0 million in contract to sell our last non-corenet proceeds from refinancing two secured non-recourse first mortgages that were maturing.
In February 2022, we purchased for $33.6 million, a 186,000 square foot grocery-anchored shopping center located in Newington, NH forShelton, CT. We funded the purchase price with available cash predominantly generated from the aforementioned mortgage refinancings and a sale price of $13.4 million.$20 million borrowing on our Facility.
Our long-term liquidity requirements consist primarily of obligations under our long-term debt, dividends paid to our preferred stockholders, capital expenditures and capital required for acquisitions. In addition, the limited partners and non-managing members of our five consolidated joint venture entities, McLean Plaza Associates, LLC, UB Orangeburg, LLC, UB High Ridge, LLC, UB Dumont I, LLC and UB New City I, LLC, have the right to require us to repurchase all or a portion of their limited partner or non-managing member interests at prices and on terms as set forth in the governing agreements. See Note 3 to the consolidated financial statements included in Item 1 of this Report on Form 10-Q. Historically, we have financed the foregoing requirements through operating cash flow, borrowings under our Facility, debt refinancings, new debt, equity offerings and other capital market transactions, and/or the disposition of under-performing assets, with a focus on keeping our debt level low. We expect to continue doing so in the future. We cannot assure you, however, that these sources will always be available to us when needed, or on the terms we desire.
Capital Expenditures
We invest in our existing properties and regularly make capital expenditures in the ordinary course of business to maintain our properties. We believe that such expenditures enhance the competitiveness of our properties. For the sixthree months ended April 30, 2021,January 31, 2022, we paid approximately $11.6$3.0 million for property improvements, tenant improvements and leasing commission costs ($4.61.4 million representing property improvements, $4.8$0.8 million in property improvements related to our Stratford project and Pompton Lakes, NJ self-storage project (see paragraphparagraphs below) and approximately $2.2$0.9 million related to new tenant space improvements, leasing costs and capital improvements as a result of new tenant spaces). The amount of these expenditures can vary significantly depending on tenant negotiations, market conditions and rental rates. We expect to incur approximately $2.7$9.0 million for anticipated capital improvements, tenant improvements/allowances and leasing costs related to new tenant leases and property improvements during the remainder of fiscal 20212022 and fiscal 2022.2023. This amount is inclusive of commitments for the Stratford, CT developmentand Pompton Lakes, NJ developments discussed directly below. These expenditures are expected to be funded from operating cash flows, bank borrowings or other financing sources. The above amounts do not include
We have begun construction of a potential new self-storage developmentfacility at our Pompton Lakes, NJ property. The cost forOur investment in this development is still in the planning stages but the anticipated cost is estimated to be $7 million, which will be funded with available cash or borrowings on our Facility.
We are currently in the process of developing 3.4 acres of recently-acquired land adjacent to a shopping center we own in Stratford, CT. We arebuilt one pad-site building that is leased to two retail chains and will be building another pad-site buildings totalingbuilding once we receive approvals to move a cell tower to an alternate site on our property. These two pad sites total approximately 5,200 square feet, which are pre-leased to national retail chains, andfeet. In addition, we built a recently opened self-storage facility of approximately 131,000 square feet, which will beis managed for us by a national self-storage company. We anticipateThe total project cost of the total development cost will becompleted pad site and the completed self-storage facility was approximately $18.6$18.8 million (excluding land cost), of which we have already funded $18.3 million as of April 30, 2021 and. We plan on funding the balancedevelopment cost for the second pad site with available cash, borrowings on our Facility or other sources, as more fully described earlier in this Item 2. We have completed the construction of one of the retail pads and the self-storage building as of April 30, 2021. The storage building is approximately 25.8%49.0% leased as of April 30, 2021.January 31, 2022.
Financing Strategy, Unsecured Revolving Credit Facility and other Financing Transactions
Our strategy is to maintain a conservative capital structure with low leverage levels by commercial real estate standards. Mortgage notes payable and other loans of $295.8$299.0 million consist of $1.7 million in variable rate debt with an interest rate of 5.09% as of April 30, 2021January 31, 2022 and $294.1$297.3 million in fixed-rate mortgage loans with a weighted average interest rate of 4.1%4.0% at April 30, 2021.January 31, 2022. The mortgages are secured by 24 properties with a net book value of $514$506 million and have fixed rates of interest ranging from 3.5%3.4% to 4.9%. The $1.7 million in variable rate debt is unsecured. We may refinance our mortgage loans, at or prior to scheduled maturity, through replacement mortgage loans. 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 re-financings can be achieved. At April 30, 2021,January 31, 2022, we had 5048 properties in our consolidated portfolio that were unencumbered by mortgages.
Included in the mortgage notes discussed above, we have eight promissory notes secured by properties we consolidate and three promissory notes secured by properties in joint ventures that we do not consolidate. The interest rate on these 11 notes is based on some variation of the London Interbank Offered Rate (“LIBOR”) plus some amount of credit spread. In addition, on the day these notes were executed by us, we entered into derivative interest rate swap contracts, the counterparty of which was either the lender on the aforementioned promissory notes or an affiliate of that lender. These swap contracts are in accordance with the International Swaps and Derivatives Association, Inc ("ISDA"). These swap contracts convert the variable interest rate in the notes, which are based on LIBOR, to a fixed rate of interest for the life of each note. In July 2017, the United Kingdom regulator that regulates LIBOR announced its intention to phase out LIBOR rates by the end of 2021. However, the ICE Benchmark Administration, in its capacity as administrator of USD LIBOR, has announced that it intends to extendextended publication of USD LIBOR (other than one-week and two-month tenors) by 18 months to June 2023. Notwithstanding this possible extension, a joint statement by key regulatory authorities calls on banks to cease entering into new contracts that use USD LIBOR as a reference rate by no later than December 31, 2021. At some point, all contracts, including our 11 promissory notes and 11 swap contracts that use LIBOR, will no longer have the reference rate available and the reference rate will need to be replaced. We have good working relationships with all of our lenders to our notes, who are also the counterparties to our swap contracts. All indications we have received from our lenders and counterparties is that their goal is to have the replacement reference rate under the notes match the replacement rates in the swaps. If this were to happen, we believe there would be no material effect on our financial position or results of operations. However, because this will be the first time any of the reference rates for our promissory notes or swap contracts will stop being published, we cannot be sure how the replacement rate event will conclude. Until we have more clarity from our lenders and counterparties on how they plan on dealing with this replacement rate event, we cannot be certain of the impact on the Company. See “Item 3. Quantitative and Qualitative Disclosures about Market Risk” included in this Report on Form 10-Q for additional information on our interest rate risk.
We currently maintain a ratio of total debt to total assets below 33.0%30.6% and a fixed charge coverage ratio of over 2.93.5 to 1 (excluding preferred stock dividends), which we believe will allow us to obtain additional secured mortgage loans or other types of borrowings, if necessary. We own 5048 properties in our consolidated portfolio that are not encumbered by secured mortgage debt. At April 30, 2021,January 31, 2022, we had borrowing capacity of $89.3$124.2 million on our Facility (exclusive of the accordion feature discussed in the following paragraph). Our Facility includes financial covenants that limit, among other things, our ability to incur unsecured and secured indebtedness. See Note 2 in our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information on these and other restrictions.
Until it was terminated on March 30, 2021, we hadWe currently have a $100$125 million unsecured revolving credit facility with a syndicate of three banks led by The Bank of New York Mellon, as administrative agent. The syndicate also included Wells Fargo Bank N.A. and Bank of Montreal (co-syndication agents). The Facility gavegives us the option, under certain conditions, to increase the Facility's borrowing capacity up $150 million (subject to lender approval). The maturity date of the Facility was August 23, 2021.
On March 30, 2021, we refinanced our existing Facility with the same syndicate of three banks led by The Bank of New York Mellon, as administrative agent, increasing the capacity to $125 million from $100 million, with the ability under certain conditions to additionally increase the capacity to $175 million (subject to lender approval). The maturity date of the new Facility is March 29, 2024, with a one-yearone year extension at our option. 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 our option of either the Eurodollar rate plus 1.45% to 2.20% or The Bank of New York's Prime Lending RateYork Mellon's prime lending rate plus 0.45% to 1.20% based on consolidated total indebtedness, as defined. We pay a quarterly commitment fee on the unused commitment amount of 0.15% to 0.25% based on outstanding borrowings during the year. Our ability to borrow under the Facility is subject to ourits compliance with the covenants and other restrictions on an ongoing basis. The principal financial covenants limit theour level of secured and unsecured indebtedness, we can incur, including preferred stock, and additionally requires us to maintain certain debt coverage ratios. We were in compliance with such covenants at January 31, 2022. The Facility includes market standard provisions for determining the benchmark replacement rate for LIBOR.
The Facility contains representations and financial and other affirmative and negative covenants usual and customary for this type of agreement. So long as any amounts remain outstanding or unpaid under the Facility, we must satisfy certain financial covenants:
unsecured indebtedness may not exceed $400 million;
secured indebtedness may not exceed 40% of gross asset value, as determined under the Facility;
total secured and unsecured indebtedness, excluding preferred stock, may not be more than 60% of gross asset value;
total secured and unsecured indebtedness, plus preferred stock, may not be more than 70% of gross asset value;
unsecured indebtedness may not exceed 60% of the eligible real asset value of unencumbered properties in the unencumbered asset pool as defined under the Facility;
earnings before interest, taxes, depreciation and amortization must be at least 175% of fixed charges, which exclude preferred stock dividends;
the net operating income from unencumbered properties must be 200% of unsecured interest expenses;
not more than 25% of the gross asset value and unencumbered asset pool may be attributable to the Company's pro rata share of the value of unencumbered properties owned by non-wholly owned subsidiaries or unconsolidated joint ventures; and
the number of un-mortgaged properties in the unencumbered asset pool must be at least 10 and at least 10 properties must be owned by the Company wasor a wholly owned subsidiary.
For purposes of these covenants, eligible real estate value is calculated as the sum of the Company's properties annualized net operating income for the prior four fiscal quarters capitalized at 6.75% and the purchase price of any eligible real estate asset acquired during the prior four fiscal quarters. Gross asset value is calculated as the sum of eligible real estate value, the Company's pro rata share of eligible real estate value of eligible joint venture assets, cash and cash equivalents, marketable securities, the book value of the Company's construction projects and the Company's pro rata share of the book value of construction projects owned by unconsolidated joint ventures, and eligible mortgages and trade receivables, as defined in compliance with such covenants at April 30, 2021.the agreement.
At April 30, 2021,January 31, 2022, we had $35.0 million inno borrowings outstanding on our Facility.
Net Cash Flows from:
Operating Activities
Net cash flows provided by operating activities amounted to $34.6 million for the six months ended April 30, 2021 compared to $30.7 million in the comparable period of fiscal 2020. The net increase in operating cash flows when compared with the corresponding prior period was primarily related to an increase of lease income related to the collection of rents that were deferred in fiscal 2020.
Investing Activities
Net cash flows used in investing activities amounted to $9.1 million for the six months ended April 30, 2021 compared to $15.3 million in the comparable period of fiscal 2020. The decrease in net cash flows used in investing activities in the six months ended April 30, 2021 when compared to the corresponding prior period was the result of our purchase of $7.0 million of marketable securities in the first six months of fiscal 2020. The total decrease was offset by investing in a note receivable in the amount of $2.2 million in the first six months of fiscal 2021.
We regularly make capital investments in our properties for improvements, and pursuant to our obligations for tenant improvements and leasing commissions.
Financing Activities
The $47.8 million decrease in net cash flows used by financing activities for the six months ended April 30, 2021 when compared to the corresponding prior period was predominantly the result of the redemption of our Series G preferred stock for $75 million in the first six months of fiscal 2020. In addition, for the first six months of fiscal 2021 when compared to corresponding prior period,February 2022, we paid $10.9 million less in dividends on our Common and Class A Common stock in response to a loss of cash flow caused by the effects of the COVID-19 pandemic. This decrease was offset by our borrowing $35borrowed $20 million on ourthe Facility in the first six months of fiscal 2020. We did not have any borrowing activity on our Facility in the first six months of fiscal 2021.
Results of Operations
The following information summarizes our results of operations for the six months and three months ended April 30, 2021 and 2020 (amounts in thousands):
| | Six months ended | | | | | | Change Attributable to | |
| | April 30, | | | Increase | | | | | | Property | | | Properties Held In | |
Revenues | | 2021 | | | 2020 | | | (Decrease) | | | % Change | | | Acquisitions/Sales | | | Both Periods (Note 1) | |
Base rents | | $ | 48,757 | | | $ | 50,883 | | | $ | (2,126 | ) | | | (4.2 | )% | | $ | 112 | | | $ | (2,238 | ) |
Recoveries from tenants | | | 18,792 | | | | 14,110 | | | | 4,682 | | | | 33.2 | % | | | 33 | | | | 4,649 | |
Uncollectable amounts in lease income | | | (1,379 | ) | | | (1,845 | ) | | | 466 | | | | (25.3 | )% | | | - | | | | 466 | |
ASC Topic 842 cash basis lease income reversal | | | (1,892 | ) | | | - | | | | (1,892 | ) | | | 100.0 | % | | | - | | | | (1,892 | ) |
Lease termination | | | 705 | | | | 348 | | | | 357 | | | | 102.6 | % | | | - | | | | 357 | |
Other income | | | 2,220 | | | | 2,132 | | | | 88 | | | | 4.1 | % | | | (16 | ) | | | 104 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating Expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Property operating | | | 12,449 | | | | 10,730 | | | | 1,719 | | | | 16.0 | % | | | 25 | | | | 1,694 | |
Property taxes | | | 11,776 | | | | 11,718 | | | | 58 | | | | 0.5 | % | | | 22 | | | | 36 | |
Depreciation and amortization | | | 14,710 | | | | 14,283 | | | | 427 | | | | 3.0 | % | | | 182 | | | | 245 | |
General and administrative | | | 4,737 | | | | 6,384 | | | | (1,647 | ) | | | (25.8 | )% | | | n/a | | | | n/a | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-Operating Income/Expense | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | 6,733 | | | | 6,648 | | | | 85 | | | | 1.3 | % | | | - | | | | 85 | |
Interest, dividends, and other investment income | | | 96 | | | | 332 | | | | (236 | ) | | | (71.1 | )% | | | n/a | | | | n/a | |
| | Three Months Ended | | | | | | Change Attributable to | |
| | April 30, | | | Increase | | | | | | Property | | | Properties Held In | |
Revenues | | 2021 | | | 2020 | | | (Decrease) | | | % Change | | | Acquisitions/Sales | | | Both Periods (Note 1) | |
Base rents | | $ | 24,598 | | | $ | 25,591 | | | $ | (993 | ) | | $ | (3.9 | )% | | $ | 46 | | | $ | (1,039 | ) |
Recoveries from tenants | | | 8,814 | | | | 6,115 | | | | 2,699 | | | | 44.1 | % | | | 33 | | | | 2,666 | |
Uncollectible amounts in lease income | | | (724 | ) | | | (1,503 | ) | | | 779 | | | | (51.8 | )% | | | - | | | | 779 | |
ASC Topic 842 cash basis lease income reversal | | | (893 | ) | | | - | | | | (893 | ) | | | 100.0 | % | | | - | | | | (893 | ) |
Lease termination income | | | - | | | | 139 | | | | (139 | ) | | | (100.0 | )% | | | - | | | | (139 | ) |
Other income | | | 1,131 | | | | 938 | | | | 193 | | | | 20.6 | % | | | 8 | | | | 185 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating Expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Property operating | | | 6,135 | | | | 4,801 | | | | 1,334 | | | | 27.8 | % | | | 32 | | | | 1,302 | |
Property taxes | | | 5,915 | | | | 5,908 | | | | 7 | | | | 0.1 | % | | | 23 | | | | (16 | ) |
Depreciation and amortization | | | 7,192 | | | | 7,148 | | | | 44 | | | | 0.6 | % | | | 106 | | | | (62 | ) |
General and administrative | | | 2,093 | | | | 3,607 | | | | (1,514 | ) | | | (42.0 | )% | | | n/a | | | | n/a | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-Operating Income/Expense | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | 3,341 | | | | 3,309 | | | | 32 | | | | 1.0 | % | | | - | | | | 32 | |
Interest, dividends, and other investment income | | | 53 | | | | 238 | | | | (185 | ) | | | (77.7 | )% | | | n/a | | | | n/a | |
Note 1 – Properties held in both periods includes only properties owned for the entire periods of 2021 and 2020 and for interest expense the amount also includes parent company interest expense. All other properties are included in the property acquisition/sales column. There are no properties excluded from the analysis.
Base rents decreased by 4.2% to $48.8 million for the six month period ended April 30, 2021 as compared with $50.9 million in the comparable period of 2020. Base rents decreased by 3.9% to $24.6 million for the three months ended April 30, 2021 as compared with $25.6 million in the comparable period of 2020. The change in base rent and the changes in other income statement line items analyzed in the table above were attributable to:
Property Acquisitions and Properties Sold:
In the first six months of fiscal 2020, we sold two properties totaling 18,100 square feet. In the second quarter of fiscal 2021 we sold one property totaling 2,500 square feet. These properties accounted for all of the revenue and expense changes attributable to property acquisitions and sales in the six months ended April 30, 2021 when compared with fiscal 2020.
Properties Held in Both Periods:
Revenues
Base Rent
The net decrease in base rents for the six month and three month periods ended April 30, 2021, when compared to the corresponding prior period, was predominantly caused by a reduction of $1.3 million and $814,000 in the six months and three months ended April 30, 2021, respectively, for a reversal of straight-line rents for tenants whose revenue recognition was switched to cash-basis accounting in accordance with ASC Topic 842. There was no such reversal in the six months or three months ended April 30, 2020. In addition, the reduction of base rents was caused by a decrease in occupancy rates in the six months and three months ended April 30, 2021 when compared with the corresponding prior periods, predominantly related to the vacancies at 8 properties.
In the first six months of fiscal 2021, we leased or renewed approximately 424,000 square feet (or approximately 9.4% of total GLA). At April 30, 2021, the Company’s consolidated properties were 90.1% leased (90.4% leased at October 31, 2020).
Tenant Recoveries
In the six month and three month periods ended April 30, 2021, recoveries from tenants (which represent reimbursements from tenants for operating expenses and property taxes) increased by a net $4.6 million and $2.7 million, respectively when compared with the corresponding prior period.
The increase in tenant recoveries was the result of having higher common area maintenance expenses in the six months and three months of fiscal 2021 when compared with the corresponding prior periods related to snow removal and parking lot repairs. In addition, we completed the 2020 annual reconciliations for both common area maintenance and real estate taxes in the first half of fiscal 2021 and those reconciliations resulted in us billing our tenants more than we had anticipated and accrued for in the prior period, which increased tenant reimbursement income in the first half of fiscal 2021.
Uncollectable Amounts in Lease Income
In the six month and three month periods endedApril 30, 2021, uncollectable amounts in lease income decreased by $466,000 and $779,000, respectively. In the second quarter of fiscal 2020, we significantly increased our uncollectable amounts in lease income based on our assessment of the collectability of existing non-credit small shop tenants' receivables given the on-set of the COVID-19 pandemic in March 2020. A number of non-credit small shop tenants' businesses were deemed non-essential by the states where they operate and were forced to close forfund a portion of the second and third quarterspurchase of fiscal 2020. This placed stress on our small shop tenants and made it difficult for manya property acquisition (see Transaction Highlights of them to pay their rents when due. Our assessment was that any billed but unpaid rents would likely be uncollectable. During the first six months ended April 30, 2021, many of our tenants saw early signs of business improvement as regulatory restrictions were relaxed and individuals began returning to pre-pandemic activities following significant progress madeFiscal 2022; Recent Developments above in vaccinating the U.S. public and the resulting decline in COVID-19 cases. As a result, the uncollectable amounts in lease income has been declining.this Item 2).
ASC Topic 842 Cash Basis Lease Income Reversals
The Company adopted ASC Topic 842 "Leases" at the beginning of fiscal 2020. ASC Topic 842 requires amongst other things, that if the collectability of a specific tenant’s future lease payments as contracted are not probable of collection, revenue recognition for that tenant must be converted to cash-basis accounting and be limited to the lesser of the amount billed or collected from that tenant, and in addition, any straight-line rental receivables would need to be reversed in the period that the collectability assessment changed to not probable. As a result of continuing to analyze our entire tenant base, we have determined that as a result of the COVID-19 pandemic, 89 tenants' future lease payments are no longer probable of collection (10.3% of our approximate 863 tenants), including 9 tenants who were converted to cash-basis accounting in this second quarter of fiscal 2021. As a result of this assessment in the six month and three month periods ended April 30, 2021, we reversed $1.3 million and $814,000, respectively, of lease income, consisting of billed but uncollected lease income for all 89 tenants, and prior billed but uncollected accounts receivable related to the 9 tenants converted to cash-basis accounting in the second quarter of fiscal 2021. This reduction is a direct reduction of lease income in the consolidated statement of income for the six months and three months ended April 30, 2021. We did not have any reversal of lease income for tenants converted to cash basis accounting in the six months and three months ended April 30, 2020.
Expenses
Property Operating
In the six month and three month periods ended April 30, 2021, property operating expenses increased by $1.7 million and $1.3 million, respectively, as a result of having higher common area maintenance expenses in the six months and three months of fiscal 2021 when compared with the corresponding prior periods related to snow removal and parking lot repairs.
Property Taxes
In the six month and three month periods ended April 30, 2021, property tax expense was relatively unchanged when compared with the corresponding prior period.
Interest
In the six month and three month periods ended April 30, 2021, interest expense was relatively unchanged when compared with the corresponding prior period.
Depreciation and Amortization
In the six month period ended April 30, 2021, depreciation and amortization increased by $245,000 when compared with the prior period, primarily as a result of a write-off of tenant improvements related to a tenant that vacated six locations in our portfolio in fiscal 2021 and increased depreciation for tenant improvements for two large grocery store re-tenanting projects at our Eastchester, NY and Wayne, NJ properties after the first quarter of fiscal 2020. Depreciation and amortization was relatively unchanged for the three months ended April 30, 2021 when compared with the corresponding prior period.
General and Administrative Expenses
In the six month and three month periods endedApril 30, 2021, general and administrative expenses decreased by $1.6 million and $1.5 million, respectively, when compared with the corresponding prior period, predominantly related to a decrease in compensation and benefits expense. The decrease was the result of accelerated vesting of restricted stock grant value upon the death of our former Chairman Emeritus in the second quarter of fiscal 2020.
Funds from Operations
We consider Funds from Operations (“FFO”) to be an additional measure of our operating performance. We report FFO in addition to net income applicable to common stockholders and net cash provided by operating activities. Management has adopted the definition suggested by The National Association of Real Estate Investment Trusts (“NAREIT”) and defines FFO to mean net income (computed in accordance with GAAP) excluding gains or losses from sales of property, plus real estate-related depreciation and amortization and after adjustments for unconsolidated joint ventures.
Management considers FFO to be a meaningful, additional measure of operating performance because it primarily excludes the assumption that the value of our real estate assets diminishes predictably over time and industry analysts have accepted it as a performance measure. FFO is presented to assist investors in analyzing our performance. It is helpful as it excludes various items included in net income that are not indicative of our operating performance, such as gains (or losses) from sales of property and depreciation and amortization. However, FFO:
does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income); and
should not be considered an alternative to net income as an indication of our performance.
FFO as defined by us may not be comparable to similarly titled items reported by other real estate investment trusts due to possible differences in the application of the NAREIT definition used by such REITs. The table below provides a reconciliation of net income applicable to Common and Class A Common stockholders in accordance with GAAP to FFO for the six months and three months ended April 30, 2021 and 2020 (amounts in thousands):
Reconciliation of Net Income Available to Common and Class A Common Stockholders To Funds From Operations: | | Six months ended | | | Three Months Ended | |
| | April 30, | | | April 30, | |
| | 2021 | | | 2020 | | | 2021 | | | 2020 | |
Net Income Applicable to Common and Class A Common Stockholders | | $ | $9,100 | | | $ | $7,870 | | | $ | $4,621 | | | $ | $2,799 | |
| | | | | | | | | | | | | | | | |
Real property depreciation | | | 11,461 | | | | 11,336 | | | | 5,759 | | | | 5,665 | |
Amortization of tenant improvements and allowances | | | 2,352 | | | | 2,075 | | | | 1,037 | | | | 1,039 | |
Amortization of deferred leasing costs | | | 846 | | | | 828 | | | | 370 | | | | 421 | |
Depreciation and amortization on unconsolidated joint ventures | | | 750 | | | | 747 | | | | 375 | | | | 374 | |
(Gain)/loss on sale of property | | | (406 | ) | | | 328 | | | | (434 | ) | | | (11 | ) |
| | | | | | | | | | | | | | | | |
Funds from Operations Applicable to Common and Class A Common Stockholders | | $ | $24,103 | | | $ | $23,184 | | | $ | $11,728 | | | $ | $10,287 | |
FFO amounted to $24.1 million in the six months ended April 30, 2021 compared to $23.2 million in the comparable period of fiscal 2020. The net increase in FFO is attributable, among other things to:
Increases:
An increase in variable lease income (cost recovery income) related to an under-accrual adjustment in recoveries from tenants for real estate taxes and common area maintenance in the first six months of fiscal 2021, which resulted in a positive variance in the first half of fiscal 2021 when compared to the same period of fiscal 2020.
A $357,000 increase in lease termination income in the first six months of fiscal 2021 when compared with the corresponding prior period as a result of one tenant who occupied multiple spaces in our portfolio ceasing operations and buying out the remaining terms of their leases.
• | A net decrease in general and administrative expenses of $1.6 million, predominantly related to a decrease in compensation and benefits expense in the six months ended April 30, 2021 when compared to the corresponding prior period. The decrease was the result of accelerated vesting of restricted stock grant value upon the death of our former Chairman Emeritus in the second quarter of fiscal 2020.
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• | A decrease in uncollectable amounts in lease income of $466,000. In the second quarter of fiscal 2020, we significantly increased our uncollectable amounts in lease income based on our assessment of the collectability of existing non-credit small shop tenants' receivables given the on-set of the COVID-19 pandemic in March 2020. A number of non-credit small shop tenants' businesses were deemed non-essential by the states where they operate and were forced to close for a portion of the second and third quarters of fiscal 2020. This placed stress on our small shop tenants and made it difficult for many of them to pay their rents when due. Our assessment was that any billed but unpaid rents for such tenants would likely be uncollectable. During the first six months ended April 30, 2021, many of our tenants saw early signs of business improvement as regulatory restrictions were relaxed and individuals began returning to pre-pandemic activities following significant progress made in vaccinating the U.S. public and the resulting decline in COVID-19 cases. As a result, the uncollectable amounts in lease income has been declining.
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• | A decrease of $229,000 in net income to noncontrolling interests. This decrease was caused by our redemption of noncontrolling units in the second half of fiscal 2020 and first half of fiscal 2021. In addition, distributions decreased to noncontrolling unit owners whose distributions per unit were based on the dividend rate of our Class A Common stock, which was significantly reduced in the six months ended April 30, 2021 when compared to the corresponding prior period.
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Decreases:
A decrease in lease income related to additional vacancies in the portfolio in the first six months of 2021, predominantly at 8 properties. In addition, the vacancy rate increased at our six unconsolidated joint venture properties in the six months ended April 30, 2021 when compared to the first six months of fiscal 2020. This reduced the amount of equity in earnings we record for those joint ventures.
• | An increase in the write-off of lease income in the first six months of 2021 for tenants in our portfolio whose future lease payments were deemed to be not probable of collection, requiring us under GAAP to convert revenue recognition for those tenants to cash-basis accounting. This caused a write-off of lease income in the six months endedApril 30, 2021 of $1.9 million, which consisted of the reversal of billed but uncollected lease income for all 89 tenants converted to cash-basis accounting and the write-off of accounts receivable related to the 9 tenants converted to cash-basis accounting in the second quarter of fiscal 2021. There were no such reversals in the six month periods ended April 30, 2020. In addition, we reversed accrued straight-line rents receivable for tenants converted to cash basis in the six months ended April 30, 2021 of $1.3 million. There were no such reversals of lease income in the six months endedApril 30,2020.
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FFO amounted to $11.7 million in the three months ended April 30, 2021 compared to $10.3 million in the comparable period of fiscal 2020. The net increase in FFO is attributable, among other things to:
Increases:
An increase in variable lease income (cost recovery income) related to an under-accrual adjustment in recoveries from tenants for common area maintenance in the second quarter of fiscal 2021, which resulted in a positive variance in the second quarter of fiscal 2021 when compared to the same period of fiscal 2020.
• | A net decrease in general and administrative expenses of $1.5 million, predominantly related to a decrease in compensation and benefits expense in the second quarter of fiscal 2021 when compared to the corresponding prior period. The decrease was the result of accelerated vesting of restricted stock grant value upon the death of our former Chairman Emeritus in the second quarter of fiscal 2020.
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• | A decrease in uncollectable amounts in lease income of $779,000. In the second quarter of fiscal 2020, we significantly increased our uncollectable amounts in lease income based on our assessment of the collectability of existing non-credit small shop tenants' receivables given the on-set of the COVID-19 pandemic in March 2020. A number of non-credit small shop tenants' businesses were deemed non-essential by the states where they operate and were forced to close for a portion of the second and third quarters of fiscal 2020. This placed stress on our small shop tenants and made it difficult for many of them to pay their rents when due. Our assessment was that any billed but unpaid rents for such tenants would likely be uncollectable. During the first six months ended April 30, 2021, many of our tenants saw early signs of business improvement as regulatory restrictions were relaxed and individuals began returning to pre-pandemic activities following significant progress made in vaccinating the U.S. public and the resulting decline in COVID-19 cases. As a result, the uncollectable amounts in lease income has been declining.
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A decrease of $103,000 in net income to noncontrolling interests. This decrease was caused by our redemption of noncontrolling units in the second half of fiscal 2020 and first half of fiscal 2021. In addition, distributions decreased to noncontrolling unit owners whose distributions per unit were based on the dividend rate of our Class A Common stock, which was significantly reduced in the second quarter of fiscal 2021 when compared to the corresponding prior period.
Decreases:
A decrease in lease income related to additional vacancies in the portfolio in the three months ended April 30, 2021 when compared to the corresponding prior period, predominantly at 8 properties. In addition, the vacancy rate increased at our six unconsolidated joint venture properties in the three months ended April 30, 2021 when compared to the corresponding prior period. This reduced the amount of equity in earnings we record for those joint ventures.
• | An increase in the write-off of lease income in the three months ended April 30, 2021 when compared to the corresponding prior period. This increase was related to tenants in our portfolio whose future lease payments were deemed to be not probable of collection, requiring us under GAAP to convert revenue recognition for those tenants to cash-basis accounting. This caused a write-off of lease income in the amount of $893,000, which consisted of the reversal of billed but uncollected lease income for all 89 tenants converted to cash-basis accounting and the write-off of accounts receivable related to the 9 tenants converted to cash-basis accounting in the second quarter of fiscal 2021. There were no such reversals in the three months ended April 30, 2020. In addition, we reversed accrued straight-line rents receivable for these aforementioned 9 tenants in the three months ended April 30, 2021 of $814,000. There were no such reversals of lease income in the three months ended April 30, 2020.
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Off-Balance Sheet ArrangementsUnconsolidated Joint Venture Debt
We have six off-balance sheet investments in real property through unconsolidated joint ventures:
a 66.67% equity interest in the Putnam Plaza Shopping Center,
an 11.792% equity interest in Midway Shopping Center, L.P.,
a 50% equity interest in the Chestnut Ridge Shopping Center,
a 50% equity interest in the Gateway Plaza shopping center and the Riverhead Applebee’s Plaza, and
a 20% interest in a suburban office building with ground level retail.
These unconsolidated joint ventures are accounted for under the equity method of accounting, as we have the ability to exercise significant influence over, but not control of, the operating and financial decisions of these investments. Our off-balance sheet arrangements are more fully discussed in Note 4, “Investments in and Advances to Unconsolidated Joint Ventures” in our financial statements in Item 1 of this Quarterly Report on Form 10-Q. Although we have not guaranteed the debt of these joint ventures, we have agreed to customary environmental indemnifications and nonrecourse carve-outs (e.g. guarantees against fraud, misrepresentation and bankruptcy) on certain loans of the joint ventures. The below table details information about the outstanding non-recourse mortgage financings on our unconsolidated joint ventures (amounts in thousands):
| | | | Principal Balance | | Fixed Interest | | | | | | Principal Balance | | Fixed Interest | | |
Joint Venture Description | | Location | | Original Balance | | At April 30, 2021 | | Rate Per Annum | | Maturity Date | | Location | | Original Balance | | At January 31, 2022 | | Rate Per Annum | | Maturity Date |
Midway Shopping Center | | Scarsdale, NY | | $ | 32,000 | | $ | 25,200 | | | 4.80% | | Dec-2027 | | Scarsdale, NY | | $ | 32,000 | | $ | 25,000 | | | 4.80% | | Dec-2027 |
Putnam Plaza Shopping Center | | Carmel, NY | | $ | 18,900 | | $ | 18,200 | | | 4.81% | | Oct-2028 | | Carmel, NY | | $ | 18,900 | | $ | 18,100 | | | 4.81% | | Oct-2028 |
Gateway Plaza | | Riverhead, NY | | $ | 14,000 | | $ | 11,400 | | | 4.18% | | Feb-2024 | | Riverhead, NY | | $ | 14,000 | | $ | 11,300 | | | 4.18% | | Feb-2024 |
Applebee's Plaza | | Riverhead, NY | | $ | 2,300 | | $ | 1,800 | | | 3.38% | | Aug-2026 | | Riverhead, NY | | $ | 2,300 | | $ | 1,801 | | | 3.38% | | Aug-2026 |
Net Cash Flows from:
Operating Activities
Net cash flows provided by operating activities amounted to $13.5 million for the three months ended January 31, 2022 compared to $14.6 million in the comparable period of fiscal 2021. The net decrease in operating cash flows when compared with the corresponding prior period was primarily related to an increase of variable lease income (cost recovery income) for an under accrual adjustment in the first quarter of fiscal 2021 which increased variable lease income in the first quarter of fiscal 2021, which creates a negative variance in the first quarter of fiscal 2022. In addition, a decrease in lease termination income in the first quarter of fiscal 2022 when compared with the first quarter of fiscal 2021 predominantly related to a tenant who occupied multiple spaces in our portfolio that closed their stores and paid a large termination payment to us in the first quarter of fiscal 2021.
Investing Activities
Net cash flows used by investing activities amounted to $234,000 for the three months ended January 31, 2022 compared to $6.2 million in the comparable period of fiscal 2021. The decrease in net cash flows used by investing activities in the three months ended January 31, 2022 when compared to the corresponding prior period was the result of expending $3.7 million less on property improvements in the first three months of fiscal 2022 when compared with the corresponding prior period and making a $2.2 million investment in a note receivable in the first three months of fiscal 2021.
We regularly make capital investments in our properties for improvements, and pursuant to our obligations for tenant improvements and leasing commissions.
Financing Activities
The $643,000 increase in net cash flows used by financing activities for the three months ended January 31, 2022 when compared to the corresponding prior period was predominantly the result of paying $3.8 million more in common stock dividends in the first quarter of fiscal 2022 when compared to the corresponding prior period as the effect of the pandemic lessened on our company and our cash flow improved. In addition, we redeemed $1 million more in noncontrolling units from members of one of our consolidated joint ventures in the first three months of fiscal 2022 when compared to the corresponding prior period. This decrease was offset by generating $4.5 million in mortgage proceeds in the first quarter of fiscal 2022 when we refinanced our mortgage on our Boonton, NJ property.
Environmental Matters
Based on management's ongoing review of its properties, management is not aware of any environmental condition with respect to any of our properties that would be reasonably likely to have a material adverse effect on us. There can be no assurance, however, that (a) the discovery of environmental conditions that were previously unknown, (b) changes in law, (c) the conduct of tenants or (d) activities relating to properties in the vicinity of our properties, will not expose us 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 our tenants, which could adversely affect our financial condition and results of operations.
Results of Operations
The following information summarizes our results of operations for the three months ended January 31, 2022 and 2021 (amounts in thousands):
| | Three Months Ended | | | | | | Change Attributable to | |
| | January 31, | | | Increase | | | | | | Property | | | Properties Held In | |
Revenues | | 2022 | | | 2021 | | | (Decrease) | | | % Change | | | Acquisitions/Sales | | | Both Periods (Note 1) | |
Base rents | | $ | 25,014 | | | $ | 24,159 | | | $ | 855 | | | | 3.5 | % | | $ | (341 | ) | | $ | 1,196 | |
Recoveries from tenants | | | 9,274 | | | | 9,978 | | | | (704 | ) | | | (7.1 | )% | | | (127 | ) | | | (577 | ) |
Uncollectable amounts in lease income | | | (114 | ) | | | (655 | ) | | | 541 | | | | (82.6 | )% | | | - | | | | 541 | |
ASC Topic 842 cash basis lease income reversal (including straight-line rent) | | | (87 | ) | | | (999 | ) | | | 912 | | | | (91.3 | )% | | | - | | | | 912 | |
Total lease income | | | 34,087 | | | | 32,483 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Lease termination | | | 28 | | | | 705 | | | | (677 | ) | | | (96.0 | )% | | | - | | | | (677 | ) |
Other income | | | 1,440 | | | | 1,089 | | | | 351 | | | | 32.2 | % | | | (7 | ) | | | 358 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating Expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Property operating | | | 7,002 | | | | 6,314 | | | | 688 | | | | 10.9 | % | | | (84 | ) | | | 772 | |
Property taxes | | | 5,923 | | | | 5,861 | | | | 62 | | | | 1.1 | % | | | (25 | ) | | | 87 | |
Depreciation and amortization | | | 7,144 | | | | 7,519 | | | | (375 | ) | | | (5.0 | )% | | | (34 | ) | | | (341 | ) |
General and administrative | | | 2,680 | | | | 2,644 | | | | 36 | | | | 1.4 | % | | | n/a | | | | n/a | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-Operating Income/Expense | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense | | | 3,302 | | | | 3,392 | | | | (90 | ) | | | (2.7 | )% | | | - | | | | (90 | ) |
Interest, dividends, and other investment income | | | 55 | | | | 43 | | | | 12 | | | | 27.9 | % | | | n/a | | | | n/a | |
Note 1 – Properties held in both periods includes only properties owned for the entire periods of 2022 and 2021 and for interest expense the amount also includes parent company interest expense. All other properties are included in the property acquisition/sales column. There are no properties excluded from the analysis.
Base rents increased by 3.5% to $25.0 million for the three months ended January 31, 2022 as compared with $24.2 million in the corresponding period of 2021. The change in base rent and the changes in other income statement line items analyzed in the table above were attributable to:
Property Acquisitions and Properties Sold:
In the first three months of fiscal 2022, we sold one property totaling 9,100 square feet. In fiscal 2021, we sold two properties totaling 105,000 square feet. These properties accounted for all of the revenue and expense changes attributable to property acquisitions and sales in the three months ended January 31, 2022 when compared with the corresponding period in fiscal 2021.
Properties Held in Both Periods:
Revenues
Base Rent
For properties held in both periods, base rent for the three month period ended January 31, 2022, increased by $1.2 million, when compared with the corresponding prior period. This increase was primarily a result of new leasing completed after the first quarter of fiscal 2021 predominantly at three properties.
In the first three months of fiscal 2022, we leased or renewed approximately 231,000 square feet (or approximately 5.2% of total GLA). At January 31, 2022, our consolidated properties were 92.6% leased (91.9% leased at October 31, 2021).
Tenant Recoveries
In the three month period ended January 31, 2022, recoveries from tenants (which represent reimbursements from tenants for operating expenses and property taxes) decreased by a net $577,000, when compared with the corresponding prior period.
The decrease in tenant recoveries was the result of an under accrual adjustment in the first quarter of fiscal 2021. We completed the 2020 annual reconciliations for both common area maintenance and real estate taxes in the first quarter of fiscal 2021 and those reconciliations resulted in us billing our tenants more than we had anticipated and accrued for in the prior period, which increased tenant reimbursement income in the first quarter of fiscal 2021, and caused a negative variance in the first quarter of fiscal 2022.
Uncollectable Amounts in Lease Income
In the three month period endedJanuary 31, 2022, uncollectable amounts in lease income decreased by $541,000. In the second quarter of fiscal 2020, we significantly increased our uncollectable amounts in lease income based on our assessment of the collectability of existing non-credit small shop tenants' receivables given the on-set of the COVID-19 pandemic in March 2020. A number of non-credit small shop tenants' businesses were deemed non-essential by the states in which they operate and forced to close for a portion of the second and third quarters of fiscal 2020. This placed stress on our small shop tenants and made it difficult for many of them to pay their rents when due. This stress continued through our first quarter of fiscal 2021. Our assessment was that any billed but unpaid rents would likely be uncollectable. During the three months ended January 31, 2022, many of our tenants continued to see signs of business improvement as regulatory restrictions continued to relax and individuals continued to return to pre-pandemic activities. As a result, the uncollectable amounts in lease income declined during such period when compared with the corresponding period of the prior year.
ASC Topic 842 Cash Basis Lease Income Reversals
We adopted ASC Topic 842 "Leases" at the beginning of fiscal 2020. ASC Topic 842 requires, among other things, that if the collectability of a specific tenant’s future lease payments as contracted are not probable of collection, revenue recognition for that tenant must be converted to cash-basis accounting and be limited to the lesser of the amount billed or collected from that tenant. In addition, any straight-line rental receivables would need to be reversed in the period that the collectability assessment changed to not probable. As a result of continuing to analyze our entire tenant base, we determined that as a result of the COVID-19 pandemic, 89 tenants' future lease payments were no longer probable of collection. All such tenants were converted to cash basis after our second quarter of fiscal 2020 and prior to our third quarter of fiscal 2021. As of January 31, 2022, 28 of these 89 tenants are no longer tenants in the Company's properties. During the fourth quarter of fiscal 2021, we restored 13 of the original 89 tenants to accrual-basis revenue recognition, and we restored an additional 3 tenants to accrual-basis accounting in the three months ended January 31, 2022. The tenants that were restored to accrual-basis accounting had paid all of their billed rents for six consecutive months and had no significant unpaid billings outstanding when restored to accrual-basis accounting. As a result of the restoration of the 3 tenants, we recorded $24,000 in straight-line rent in the three months endedJanuary 31, 2022. As of January 31, 2022, 45 tenants continue to be accounted for on a cash basis, or approximately 5.6% of our tenants. Many of our cash-basis tenants are now paying a larger portion of their billed rents, which results in an increase in revenue recognition for those tenants accounted for on a cash basis when compared with the corresponding period of the prior year.
Expenses
Property Operating
In the three month period ended January 31, 2022, property operating expenses increased by $772,000. This was primarily a result of having higher common area maintenance expenses in the three months of fiscal 2022 when compared with the corresponding prior period related to snow removal, environmental remediation costs and management costs.
Property Taxes
In the three month period ended January 31, 2022, property tax expenses were relatively unchanged when compared with the corresponding prior period.
Interest
In the three month period ended January 31, 2022, interest expenses were relatively unchanged when compared with the corresponding prior period.
Depreciation and Amortization
In the three month period ended January 31, 2022, depreciation and amortization decreased by $341,000 when compared with the corresponding prior period. This decrease was the result of a write-off of tenant improvements related to a tenant that vacated six locations in our portfolio in the first quarter of fiscal 2021.
General and Administrative Expenses
In the three month period ended January 31, 2022, general and administrative expenses were relatively unchanged when compared with the corresponding prior period.
Funds from Operations
We consider FFO to be an additional measure of our operating performance. We report FFO in addition to net income applicable to common stockholders and net cash provided by operating activities. Management has adopted the definition suggested by The National Association of Real Estate Investment Trusts (“NAREIT”) and defines FFO to mean net income (computed in accordance with GAAP), excluding gains or losses from sales of property, plus real estate-related depreciation and amortization and after adjustments for unconsolidated joint ventures.
Management considers FFO to be a meaningful, additional measure of operating performance because it primarily excludes the assumption that the value of the company’s real estate assets diminishes predictably over time, and industry analysts have accepted FFO as a performance measure. FFO is presented to assist investors in analyzing the performance of the company. It is helpful as it excludes various items included in net income that are not indicative of our operating performance, such as gains (or losses) from sales of property and depreciation and amortization. However, FFO:
does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income); and
should not be considered an alternative to net income as an indication of our performance.
FFO as defined by us may not be comparable to similarly titled items reported by other real estate investment trusts due to possible differences in the application of the NAREIT definition used by such REITs. The table below provides a reconciliation of net income applicable to Common and Class A Common stockholders in accordance with GAAP to FFO for the three months ended January 31, 2022 and 2021 (amounts in thousands):
Reconciliation of Net Income Available to Common and Class A Common Stockholders To Funds From Operations: | | Three Months Ended | |
| | January 31, | |
| | 2022 | | | 2021 | |
Net Income Applicable to Common and Class A Common Stockholders | | $ | 5,397 | | | $ | 4,479 | |
| | | | | | | | |
Real property depreciation | | | 5,738 | | | | 5,702 | |
Amortization of tenant improvements and allowances | | | 991 | | | | 1,315 | |
Amortization of deferred leasing costs | | | 397 | | | | 476 | |
Depreciation and amortization on unconsolidated joint ventures | | | 375 | | | | 375 | |
(Gain)/loss on sale of property | | | (2 | ) | | | 28 | |
| | | | | | | | |
Funds from Operations Applicable to Common and Class A Common Stockholders | | $ | 12,896 | | | $ | 12,375 | |
FFO amounted to $12.9 million in the three months ended January 31, 2022 compared to $12.4 million in the corresponding period of fiscal 2021. The net increase in FFO is attributable, among other things to:
Increases:
An increase in base rent for new leasing in the portfolio after the first quarter of fiscal 2021 predominantly at three properties.
• | A decrease in uncollectable amounts in lease income of $542,000 in the three months ended January 31, 2022, when compared with the corresponding prior period. We significantly increased our uncollectable amounts in lease income based on our assessment of the collectability of existing non-credit small shop tenants' receivables given the onset of the COVID-19 pandemic in March 2020. A number of non-credit small shop tenants' businesses were deemed non-essential by the states in which they operate and forced to close for a portion of the second and third quarters of fiscal 2020. This placed stress on our small shop tenants and made it difficult for many of them to pay their rents when due. This stress continued through our first quarter of fiscal 2021. Our assessment was that any billed but unpaid rents would likely be uncollectable. During the three months ended January 31, 2022, many of our tenants continued to see signs of business improvement as regulatory restrictions continued to relax and individuals continued to return to pre-pandemic activities. As a result, the uncollectable amounts in lease income declined during such period when compared with the corresponding period of the prior year. |
We adopted ASC Topic 842 "Leases" at the beginning of fiscal 2020. ASC Topic 842 requires, among other things, that if the collectability of a specific tenant’s future lease payments as contracted are not probable of collection, revenue recognition for that tenant must be converted to cash-basis accounting and be limited to the lesser of the amount billed or collected from that tenant. In addition, any straight-line rental receivables would need to be reversed in the period that the collectability assessment changed to not probable. As a result of continuing to analyze our entire tenant base, we determined that as a result of the COVID-19 pandemic, 89 tenants' future lease payments were no longer probable of collection. All such tenants were converted to cash basis after our second quarter of fiscal 2020 and prior to our third quarter of fiscal 2021. As of January 31, 2022, 28 of these 89 tenants are no longer tenants in the Company's properties. During the fourth quarter of fiscal 2021, we restored 13 of the original 89 tenants to accrual-basis revenue recognition, and we restored an additional 3 tenants to accrual-basis accounting in the three months ended January 31, 2022. The tenants that were restored to accrual-basis accounting had paid all of their billed rents for six consecutive months and had no significant unpaid billings outstanding when restored to accrual-basis accounting. As a result of the restoration of the 3 tenants, we recorded $24,000 in straight-line rent in the three months ended January 31, 2022. As of January 31, 2022, 45 tenants continue to be accounted for on a cash basis, or approximately 5.6% of our tenants. Many of our cash-basis tenants are now paying a larger portion of their billed rents, which results in an increase in revenue recognition for those tenants accounted for on a cash basis when compared with the corresponding period of the prior year.
Decreases:
A $677,000 decrease in lease termination income in the first quarter of fiscal 2022, when compared with the corresponding prior period, primarily as a result of a multi-site lease buyout in the first quarter of fiscal 2021 from one tenant that had occupied multiple spaces in our portfolio.
A decrease in variable lease income (cost recovery income) related to an under-accrual adjustment in recoveries from tenants for real estate taxes and common area maintenance in the first quarter of fiscal 2021, which increased revenue in the first quarter of fiscal 2021 and caused a negative variance in the first quarter of fiscal 2022.
A $474,000 increase in management costs related to additional staff bonus and compensation in the first quarter of fiscal 2022, when compared to the corresponding prior period.
Same Property Net Operating Income
We present Same Property Net Operating Income ("Same Property NOI"), which is a non-GAAP financial measure. Same Property NOI excludes from Net Operating Income (“NOI”) properties that have not been owned for the full periods presented. The most directly comparable GAAP financial measure to NOI is operating income. To calculate NOI, operating income is adjusted to add back depreciation and amortization, general and administrative expense, interest expense, amortization of above and below-market lease intangibles and to exclude straight-line rent adjustments, interest, dividends and other investment income, equity in net income of unconsolidated joint ventures, and gain/loss on sale of operating properties.
We use Same Property NOI internally as a performance measure, and we believe Same Property NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. Our management also uses Same Property NOI to evaluate property level performance and to make decisions about resource allocations. Further, we believe Same Property NOI is useful to investors as a performance measure because, when compared across periods, Same Property NOI reflects the impact on operations from trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from income from continuing operations. Same Property NOI excludes certain components from net income attributable to Urstadt Biddle Properties Inc. in order to provide results that are more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. Same Property NOI presented by us may not be comparable to Same Property NOI reported by other REITs that define Same Property NOI differently.
| | | | | Three Months Ended January 31, |
| | | | | 2022 | 2021 | % Change |
Same Property Operating Results: | | | | | | | |
| | | | | | | |
Number of Properties (Note 1) | | | | | 74 | |
| | | | | | | |
Revenue (Note 2) | | | | | | | |
Base Rent (Note 3) | | | | | $24,583 | $24,210 | 1.5% |
Uncollectable amounts in lease income | | | | | (113) | (654) | (82.7)% |
ASC Topic 842 cash-basis lease income reversal-same property | | | | | (59) | (999) | (94.1)% |
Recoveries from tenants | | | | | 9,274 | 9,851 | (5.9)% |
Other property income | | | | | 336 | 48 | 600.0% |
| | | | | 34,021 | 32,456 | 4.8% |
| | | | | | | |
Expenses | | | | | | | |
Property operating | | | | | 3,806 | 3,801 | 0.1% |
Property taxes | | | | | 5,913 | 5,830 | 1.4% |
Other non-recoverable operating expenses | | | | | 497 | 399 | 24.6% |
| | | | | 10,216 | 10,030 | 1.9% |
| | | | | | | |
Same Property Net Operating Income | | | | | $23,805 | $22,426 | 6.1% |
| | | | | | | |
Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure: | | | | | | | |
| | | | | | | |
Other reconciling items: | | | | | | | |
Other non same-property net operating income | | | | | (4) | 399 | |
Other Interest income | | | | | 125 | 108 | |
Other Dividend Income | | | | | - | - | |
Consolidated lease termination income | | | | | 28 | 704 | |
Consolidated amortization of above and below market leases | | | | | 174 | 110 | |
Consolidated straight line rent income | | | | | 5 | (568) | |
Equity in net income of unconsolidated joint ventures | | | | | 267 | 350 | |
Taxable REIT subsidiary income/(loss) | | | | | 186 | 380 | |
Solar income/(loss) | | | | | (211) | (154) | |
Storage income/(loss) | | | | | 526 | 253 | |
Unrealized holding gains arising during the periods | | | | | - | - | |
Gain on sale of marketable securities | | | | | - | - | |
Interest expense | | | | | (3,302) | (3,392) | |
General and administrative expenses | | | | | (2,680) | (2,644) | |
Uncollectable amounts in lease income | | | | | (113) | (654) | |
Uncollectable amounts in lease income - same property | | | | | 113 | 654 | |
ASC Topic 842 cash-basis lease income reversal | | | | | (87) | (999) | |
ASC Topic 842 cash-basis lease income reversal-same property | | | | | 59 | 999 | |
Directors fees and expenses | | | | | (107) | (109) | |
Depreciation and amortization | | | | | (7,144) | (7,518) | |
Adjustment for intercompany expenses and other | | | | | (1,921) | (1,513) | |
| | | | | | | |
Total other -net | | | | | (14,086) | (13,594) | |
Income from continuing operations | | | | | 9,719 | 8,832 | 10.0% |
Gain (loss) on sale of real estate | | | | | 2 | (28) | |
Net income | | | | | 9,721 | 8,804 | 10.4% |
Net income attributable to noncontrolling interests | | | | | (911) | (912) | |
Net income attributable to Urstadt Biddle Properties Inc. | | | | | $8,810 | $7,892 | 11.6% |
| | | | | | | |
| | | | | | | |
Same Property Operating Expense Ratio (Note 4) | | | | | 95.4% | 102.3% | (6.9)% |
Note 1 - Includes only properties owned for the entire period of both periods presented.
Note 2 - Excludes straight line rent, above/below market lease rent, lease termination income.
Note 3 - Base rents for the three months ended January 31, 2022 and 2021 are reduced by approximately $51,000 and $400,000, respectively, in rents that were deferred and approximately $23,000 and $1.0 million, respectively, in rents that were abated because of COVID-19. Base rents for the three months ended January 31, 2022 and 2021, are increased by approximately $287,000 and $695,000, respectively, in COVID-19 deferred rents that were billed and collected in those periods.
Note 4 -Represents the percentage of property operating expense and real estate tax.
Item 3
. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to interest rate risk primarily through our borrowing activities, which predominantly include fixed-rate mortgage debt and, in limited circumstances, variable rate debt. As of April 30, 2021,January 31, 2022, we had total mortgage debt of $294.1$297.3 million, of which 100% was fixed-rate, inclusive of variable rate mortgages that have been swapped to fixed interest rates using interest rate swap derivatives contracts.
For our fixed-rate debt, 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 our future financing requirements.
To reduce our exposure to interest rate risk on variable-rate debt, we use interest rate swap agreements, for example, to convert some of our variable-rate debt to fixed-rate debt. As of April 30, 2021,January 31, 2022, we had nine open derivative financial instruments. These interest rate swaps are cross collateralized with mortgages on properties in Ossining, NY, Yonkers, NY, Orangeburg, NY, Brewster, NY, Stamford, CT, Greenwich CT, Darien, CT and Dumont, NJ. The Ossining swap expires in October 2024, the Yonkers swap expires in November 2024, the Orangeburg swap expires in October 2024, the Brewster swap expires in June 2029, the Stamford swap expires in July 2027, the Greenwich swaps expire in October 2026, the Darien swap expires in March 2028, and the Dumont, NJ swap expires in August 2027, in each case concurrent with the maturity of the respective mortgages. All of the aforementioned derivatives contracts are adjusted to fair market value at each reporting period. We have concluded that all of the aforementioned derivatives contracts are effective cash flow hedges as defined in ASC Topic 815. We are required to evaluate the effectiveness at inception and at each reporting date. As a result of the aforementioned derivatives contracts being effective cash flow hedges, all changes in fair market value are recorded directly to stockholders equity in accumulated comprehensive income and have no effect on our earnings.
Under existing guidance, the publication of the LIBOR reference rate was to be discontinued beginning on or around the end of 2021. However, the ICE Benchmark Administration, in its capacity as administrator of USD LIBOR, has announced that it intends to extend publication of USD LIBOR (other than one-week and two-month tenors) by 18 months to June 2023. Notwithstanding this possible extension, a joint statement by key regulatory authorities calls on banks to cease entering into new contracts that use USD LIBOR as a reference rate by no later than December 31, 2021. We have good working relationships with each of the lenders to our notes, who are also the counterparties to our swap contracts. We understand from our lenders and counterparties that their goal is to have the replacement reference rate under the notes match the replacement rates in the swaps. If this were achieved, we believe there would be no effect on our financial position or results of operations. However, because this will be the first time any of the reference rates for our promissory notes or our swap contracts will cease to be published, we cannot be sure how the replacement rate event will conclude. Until we have more clarity from our lenders and counterparties, we cannot be certain of the impact on the Company. See “We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined or the use of alternative reference rates” under Item 1A ofin our annual reportOctober 31, 2021 Annual Report on Form 10-K for more information.
At April 30, 2021,January 31, 2022, we had $35 million inno outstanding borrowings outstanding on our Facility, which bears interest at Libor plus 1.45%. If interest rates were to rise 1%, our interest expense as a result of the variable rate would increase by any amount outstanding multiplied by 1% per annum.
Item 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective.
Changes in Internal Controls
During the quarter ended April 30, 2021,January 31, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
In the ordinary course of business, the Company is involved in legal proceedings. There are no material legal proceedings presently pending against the Company.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
InFollowing on its initial December 2013 authorization, in June 2017, our Board of Directors approvedre-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. We have repurchased 195,413 shares of Class A Common Stock under theThe Current Repurchase Program. From the inception of all repurchase programs, we have repurchased 4,600 shares of Common Stock and 919,991 shares of Class A Common Stock. Program was announced on June 9, 2017. For the three monthsmonth period ended April 30, 2021,January 31, 2022, the Company did not repurchase any stock under the Current Repurchase Program.
FromIn addition, from time to time, we could be deemed to have repurchased shares as a result of shares withheld for tax purposes upon a stock compensation related vesting event.
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101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
# | Management contract, compensation plan arrangement. |
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/ Willing L. Biddle | |
| Willing L. Biddle | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| | |
| By: /s/ John T. Hayes | |
| John T. Hayes | |
| Senior Vice President & | |
| Chief Financial Officer | |
| (Principal Financial Officer | |
Dated: June 7, 2021March 11, 2022 | and Principal Accounting Officer | |