UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended October 31, 2020

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

For the transition period from _____ to _____

Commission File No. 1-12803

GRAPHIC

URSTADT BIDDLE PROPERTIES INC.
(Exact name of registrant as specified in its charter)

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

321 Railroad Avenue, Greenwich, CT
 
06830
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number, including area code: (203) 863-8200

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

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

Securities registered pursuant to Section 12 (g) of the Act:  None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act.
Yes
No 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes 
No

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company.  See definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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

The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of April 30, 2020 (price at which the common equity was last sold as of the last business day of the Registrant's most recently completed second fiscal quarter): Common Shares, par value $.01 per share, $25,177,380; Class A Common Shares, par value $.01 per share, $430,431,595.

Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock and Class A Common Stock, as of January 8, 2021 (latest date practicable): 10,179,502 Common Shares, par value $.01 per share, and 30,122,105 Class A Common Shares, par value $.01 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for Annual Meeting of Stockholders to be held on March 17, 2021 (certain parts as indicated herein) (Part III).




TABLE OF CONTENTS

Item No.
 
Page No.
 
PART I
 
     
1.
1
     
1A.
3
     
1B.
8
     
2.
9
     
3.
11
     
4.
11
     
 
PART II
 
     
5.
12
     
6.
13
     
7.
14
     
7A.
23
     
8.
24
     
9.
24
     
9A.
24
     
9B.
27
     
 
PART III
 
     
10.
28
     
11.
28
     
12.
28
     
13.
28
     
14.
28
     
 
PART IV
 
     
15.
29
     
16
57
     
 
58



PART I

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K of Urstadt Biddle Properties Inc. (the "Company") contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.  Such statements can generally be identified by such words as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” “should”, “will” or variations of such words or other similar expressions and the negatives of such words.  All statements included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including such matters as future capital expenditures, dividends and acquisitions (including the amount and nature thereof), business strategies, expansion and growth of our operations and other such matters, are forward-looking statements.  These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate.  Such statements are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.  Future events and actual results, performance or achievements, financial and otherwise, may differ materially from the results, performance or achievements expressed or implied by the forward-looking statements.  We caution not to place undue reliance upon any forward-looking statements, which speak only as of the date made. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based.

Important factors that we think could cause our actual results to differ materially from expected results are summarized below. One of the most significant factors, however, is the ongoing impact of the current outbreak of the novel coronavirus ("COVID-19"), on the U.S., regional and global economies, the U.S. retail market and the broader financial markets. The current outbreak of COVID-19 has also impacted, and is likely to continue to impact, directly or indirectly, many of the other important factors listed below.

New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In particular, it is difficult to fully assess the impact of COVID-19 at this time due to, among other factors, uncertainty regarding the severity and duration of the outbreak domestically and internationally, uncertainty regarding the effectiveness of federal, state and local governments’ efforts to contain the spread of COVID-19 and respond to its direct and indirect impact on the U.S. economy and economic activity, and the uncertainty regarding the efficacy and timing of vaccines and other medical responses to the pandemic.

Important factors, among others, that may affect our actual results include:

negative impacts from the continued spread of COVID-19, including on the U.S. or global economy or on our business, financial position or results of operations;

economic and other market conditions, including real estate and market conditions, that could impact us, our properties or the financial stability of our tenants;

consumer spending and confidence trends, as well as our ability to anticipate changes in consumer buying practices and the space needs of tenants;

our relationships with our tenants and their financial condition and liquidity;

any difficulties in renewing leases, filling vacancies or negotiating improved lease terms;

the inability of our properties to generate increased, or even sufficient, revenues to offset expenses, including amounts we are required to pay to municipalities for real estate taxes, payments for common area maintenance expenses at our properties and salaries for our management team and other employees;

the market value of our assets and the supply of, and demand for, retail real estate in which we invest;

risks of real estate acquisitions and dispositions, including our ability to identify and acquire retail real estate that meet our investment standards in our markets, as well as the potential failure of transactions to close;

risks of operating properties through joint ventures that we do not fully control;

financing risks, such as the inability to obtain debt or equity financing on favorable terms or the inability to comply with various financial covenants included in our Unsecured Revolving Credit Facility (the "Facility") or other debt instruments we currently have or may subsequently obtain, as well as the level and volatility of interest rates, which could impact the market price of our common stock and the cost of our borrowings;

environmental risk and regulatory requirements;

risks related to our status as a real estate investment trust, including the application of complex federal income tax regulations that are subject to change;

legislative and regulatory changes generally that may impact us or our tenants;

as well as other risks identified in this Annual Report on Form 10-K under Item 1A. Risk Factors and in the other reports filed by the Company with the Securities and Exchange Commission (the “SEC”).


Item 1.  Business.

Organization

We are a real estate investment trust, organized as a Maryland corporation, engaged in the acquisition, ownership and management of commercial real estate. We were organized as an unincorporated business trust (the “Trust”) under the laws of the Commonwealth of Massachusetts on July 7, 1969. In 1997, the shareholders of the Trust approved a plan of reorganization of the Trust from a Massachusetts business trust to a Maryland corporation.  As a result of the plan of reorganization, the Trust was merged with and into the Company, the separate existence of the Trust ceased, the Company was the surviving entity in the merger and each issued and outstanding common share of beneficial interest of the Trust was converted into one share of Common Stock, par value $.01 per share, of the Company.

Tax Status – Qualification as a Real Estate Investment Trust

We elected to be taxed as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with our taxable year ended October 31, 1970.  Pursuant to such provisions of the Code, a REIT that distributes at least 90% of its real estate investment trust taxable income to its shareholders each year and meets certain other conditions regarding the nature of its income and assets will not be taxed on that portion of its taxable income that is distributed to its shareholders.  Although we believe that we qualify as a real estate investment trust for federal income tax purposes, no assurance can be given that we will continue to qualify as a REIT.

Description of Business

Our business is the ownership of real estate investments, which consist principally of investments in income-producing properties, with primary emphasis on neighborhood and community shopping centers in the metropolitan New York tri-state area outside of the City of New York.  We believe that our geographic focus allows us to take advantage of the strong demographic profiles of the areas that surround the City of New York and the natural barriers to entry that such density and limitations on developable land provide.  We also believe that our ability to directly operate and manage all of our properties within the tri-state area reduces overhead costs and affords us efficiencies that a more dispersed portfolio would make difficult.

At October 31, 2020, the Company owned or had equity interests in 81 properties comprised of neighborhood and community shopping centers, office buildings, single tenant retail or restaurant properties and office/retail mixed use properties located in four states, containing a total of 5.3 million square feet of gross leasable area (“GLA”).  We seek to identify desirable properties, typically neighborhood and community shopping centers, for acquisition, which we acquire in the normal course of business.  In addition, we regularly review our portfolio and, from time to time, may sell certain of our properties.  For a description of the Company's properties and information about the carrying amount of the properties at October 31, 2020 and encumbrances, see Item 2. Properties and Schedule III located in Item 15.

We actively manage and supervise the operations and leasing of all of our properties. We also derive income from the management of 6 properties owned by third parties and in which we have no equity interest.

In addition to our business of owning and managing real estate, we are also involved in the beer, wine and spirits retail business, through our ownership of five subsidiary corporations formed as taxable REIT subsidiaries.  Each subsidiary corporation owns and operates a beer, wine and spirits retail store at one of our shopping centers.  To manage our operations, we have engaged an experienced third-party, retail beer, wine and spirits manager, which also owns many stores of its own.  Each of these stores occupies space at one of our shopping centers, fulfilling a strategic need for a beer, wine and spirits business at such shopping center.  These five stores are not currently providing material earnings in excess of what the Company would have earned from leasing the space to unrelated tenants at market rents.  However, these businesses are continuing to mature, and net sales and earnings may eventually become material to our financial position and net income.  Nevertheless, our primary business remains the ownership and management of real estate, and we expect that the beer, wine and spirts business will remain an ancillary aspect of our business model.  However, if the right opportunity presents itself, we may open additional beer, wine and spirits stores at other shopping centers if we determine that any such store would be a strategic fit for our overall business and the investment return analysis supports such a determination.

We derive other ancillary income from property related sources such as solar array installations and electrical vehicle charging stations.

Impact of COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic.  The COVID-19 pandemic has caused, and could continue to cause, significant disruptions to the U.S. and global economy, as well as significant volatility and negative pressure in the financial markets.  During the early days of the pandemic, the tri-state area surrounding New York City was particularly hard hit.  As a result, like many U.S. states and cities, the tri-state area composed of Connecticut, New York and New Jersey imposed rules and regulations intended to control the spread of COVID-19, such as instituting “shelter-in-place” and “social distancing” orders, which forced many businesses, including some of our tenants, to temporarily close, reduce their hours or significantly limit service for several months or more.  Since early summer, many (but not all) of these restrictions have been gradually lifted as the COVID-19 situation in the tri-state area has significantly improved, with most businesses now permitted to open at reduced capacity and under other limitations intended to control the spread of COVID-19.  The situation, however, has been evolving as we head deeper into the winter months.  See “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information.

Growth Strategy

We have a conservative capital structure, which includes permanent equity sources of Common Stock, Class A Common Stock and two series of perpetual preferred stock, which are only redeemable at our option.  In addition, we have mortgage debt secured by some of our properties.  We do not have any secured debt maturing until January of 2022.  Key elements of our growth strategies and operating policies are to:

maintain our focus on community and neighborhood shopping centers, anchored principally by regional supermarkets, pharmacy chains or wholesale clubs, which we believe can provide a more stable revenue flow even during difficult economic times because of the focus on food and other types of staple goods;

acquire quality neighborhood and community shopping centers in the northeastern part of the United States with a concentration on properties in the metropolitan tri-state area outside of the City of New York, and unlock further value in these properties with selective enhancements to both the property and tenant mix, as well as improvements to management and leasing fundamentals, with hopes to grow our assets through acquisitions subject to the availability of acquisitions that meet our investment parameters;

selectively dispose of underperforming properties and re-deploy the proceeds into potentially higher performing properties that meet our acquisition criteria;

invest in our properties for the long-term through regular maintenance, periodic renovations and capital improvements, enhancing their attractiveness to tenants and customers (e.g. curbside pick-up), as well as increasing their value;

leverage opportunities to increase GLA at existing properties, through development of pad sites and reconfiguring of existing square footage, to meet the needs of existing or new tenants;

proactively manage our leasing strategy by aggressively marketing available GLA, renewing existing leases with strong tenants, anticipating tenant weakness when necessary by pre-leasing their spaces and replacing below-market-rent leases with increased market rents, with an eye towards securing leases that include regular or fixed contractual increases to minimum rents;

improve and refine the quality of our tenant mix at our shopping centers;

maintain strong working relationships with our tenants, particularly our anchor tenants;

maintain a conservative capital structure with low leverage levels, ample liquidity and diverse sources of capital; and

control property operating and administrative costs.

Renovations, Expansions and Improvements

We invest in properties where cost effective renovation and expansion programs, combined with effective leasing and operating strategies, can improve the properties’ values and economic returns.  Retail properties are typically adaptable for varied tenant layouts and can be reconfigured to accommodate new tenants or the changing space needs of existing tenants.  We also seek to leverage existing shopping center assets through pad site development.  In determining whether to proceed with a renovation, expansion or pad, we consider both the cost of such expansion or renovation and the increase in rent attributable to such expansion or renovation.  We believe that certain of our properties provide opportunities for future renovation and expansion.  We generally do not engage in ground-up development projects.

Environmental Initiatives

We also seek to improve our properties in ways that provide additional ancillary revenue or value, while benefiting the environment and communities in which we have a presence.  For example, we have a robust alternative energy program, pursuant to which we have placed a number of solar panel installations on the roofs of our shopping centers and are working on additional installations.  We have also installed electric vehicle charging stations at a number of our properties, which we believe will not only benefit the environment but enhance customer experience at our shopping centers.  Other initiatives include converting incandescent and florescent lighting to LED at various properties and upgrading parking lot lighting systems to operate more efficiently.  While we are committed to environmental responsibility, we also believe that these initiatives need to be financially feasible and beneficial to the Company, which may require that these projects be completed over a period of time.  The Company will continue to seek financially responsible opportunities to reduce our carbon footprint and lower our energy usage, while improving the value of our properties.

Acquisitions and Dispositions

When evaluating potential acquisitions, we consider such factors as (i) economic, demographic, and regulatory conditions in the property’s local and regional market; (ii) the location, construction quality, and design of the property; (iii) the current and projected cash flow of the property and the potential to increase cash flow; (iv) the potential for capital appreciation of the property; (v) the terms of tenant leases, including the relationship between the property’s current rents and market rents and the ability to increase rents upon lease rollover; (vi) the occupancy and demand by tenants for properties of a similar type in the market area; (vii) the potential to complete a strategic renovation, expansion or re-tenanting of the property; (viii) the property’s current expense structure and the potential to increase operating margins; (ix) competition from comparable properties in the market area; and (x) vulnerability of the property's tenants to competition from e-commerce.

We may, from time to time, enter into arrangements for the acquisition of properties with property owners through the issuance of non-managing member units or partnership units in joint venture entities that we control, which we refer to as our DownREIT entities. The limited partners and non-managing members of each of these joint ventures are entitled to receive annual or quarterly cash distributions payable from available cash of the joint venture.  The limited partners and non-managing members of these joint ventures have the right to require the Company to repurchase or redeem all or a portion of their limited partner or non-managing member interests for cash or Class A Common Stock of the Company, at our election, at prices and on terms set forth in the partnership or operating agreements.  We also have the right to redeem all or a portion of the limited partner and non-managing member interests for cash or Class A Common Stock of the Company, at our election, under certain circumstances, at prices and on terms set forth in the partnership or operating agreements.   We believe that this acquisition method may permit us to acquire properties from property owners wishing to enter into tax-deferred transactions.

From time to time, we selectively dispose of underperforming properties and re-deploy the proceeds into potentially higher performing properties that meet our acquisition criteria.

Leasing Results

At October 31, 2020, our properties collectively had 987 leases with tenants providing a wide range of products and services.  Tenants include regional supermarkets, national and regional discount stores, other local retailers and office tenants.  In addition, at our Yorktown, NY property, we have developed a portion of below grade space to a storage facility which currently has 557 storage tenants.  At October 31, 2020, the 75 consolidated properties were 90.4% leased and 88.5% occupied (see Results of Operations discussion in Item 7).  At October 31, 2020, we had equity investments in six properties which we do not consolidate; those properties were 91.1% leased.  We believe the properties are adequately covered by property and liability insurance.

A substantial portion of our operating lease income is derived from tenants under leases with terms greater than one year.  Most of the leases provide for the payment of monthly fixed base rentals and for the payment by the tenant of a pro-rata share of the real estate taxes, insurance, utilities and common area maintenance expenses incurred in operating the properties.

For the fiscal year ended October 31, 2020, no single tenant comprised more than 8.2% of the total annual base rents of our properties. The following table sets forth a schedule of our ten largest tenants by percent of total annual base rent of our properties to total annual base rent for the year ended October 31, 2020.

Tenant
 
Number
of Stores
   
% of Total Annual
Base Rent of Properties
 
Stop & Shop
   
8
     
8.2
%
CVS
   
10
     
4.7
%
The TJX Companies
   
6
     
3.4
%
Bed Bath & Beyond
   
3
     
2.8
%
Acme
   
4
     
2.6
%
ShopRite
   
3
     
2.0
%
BJ's
   
3
     
1.6
%
Staples
   
3
     
1.4
%
Kings Supermarkets
   
2
     
1.2
%
Walgreens
   
4
     
1.1
%
     
46
     
29.0
%

See Item 2. Properties for a complete list of the Company’s properties.

The Company’s single largest real estate investment is its 100% ownership of the general and limited partnership interests in the Ridgeway Shopping Center (“Ridgeway”).

Ridgeway is located in Stamford, Connecticut and was developed in the 1950s and redeveloped in the mid-1990s. The property contains approximately 374,000 square feet of GLA.  It is the dominant grocery-anchored center and the largest non-mall shopping center located in the City of Stamford, Fairfield County, Connecticut. For the year ended October 31, 2020, Ridgeway revenues represented approximately 11.2% of the Company’s total revenues and its assets represented approximately 6.4% of the Company’s total assets at October 31, 2020. As of October 31, 2020, Ridgeway was 92% leased. The property’s largest tenants (by base rent) are:  The Stop & Shop Supermarket Company (20%), Bed, Bath & Beyond (14%) and Marshall’s Inc., a division of the TJX Companies (10%).  No other tenant accounts for more than 10% of Ridgeway’s annual base rents.

The following table sets forth a schedule of the annual lease expirations for retail leases at Ridgeway as of October 31, 2020 for each of the next ten years and thereafter (assuming that no tenants exercise renewal or cancellation options and that there are no tenant bankruptcies or other tenant defaults):

Year of Expiration
 
Number of
Leases Expiring
   
Square Footage
of Expiring Leases
   
Minimum
Base Rentals
   
Percentage of
Total Annual
Base Rent that is
Represented by
the Expiring Leases
 
2021
   
6
     
51,087
   
$
1,107,000
     
9.9
%
2022
   
5
     
95,112
     
3,156,000
     
28.2
%
2023
   
9
     
83,159
     
2,858,000
     
25.5
%
2024
   
2
     
9,000
     
210,000
     
1.9
%
2025
   
3
     
61,832
     
1,790,000
     
16.0
%
2026
   
3
     
10,282
     
390,000
     
3.5
%
2027
   
3
     
6,341
     
214,000
     
1.9
%
2028
   
3
     
38,060
     
1,315,000
     
11.7
%
2029
   
2
     
4,000
     
89,000
     
0.8
%
2030
   
1
     
2,347
     
68,000
     
0.6
%
Thereafter
   
-
     
-
     
-
     
-
 
Total
   
37
     
361,220
   
$
11,197,000
     
100
%

For further financial information about our only reportable operating segment, Ridgeway, see note 1 of our financial statements in Item 8 included in this Annual Report on Form 10-K.

Financing Strategy

We intend to continue to finance acquisitions and property improvements and/or expansions with the most advantageous sources of capital which we believe are available to us at the time, and which may include the sale of common or preferred equity through public offerings or private placements, the incurrence of additional indebtedness through secured or unsecured borrowings, investments in real estate joint ventures and the reinvestment of proceeds from the disposition of assets.  Our financing strategy is to maintain a strong and flexible financial position by (i) maintaining a prudent level of leverage, and (ii) minimizing our exposure to interest rate risk represented by floating rate debt.

Compliance with Governmental Regulations

We, like others in the commercial real estate industry, are subject to numerous federal, state and local laws and regulations, including environmental laws and regulations.  We may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our properties, as well as certain other potential costs relating to hazardous or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property).  These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances.  This liability may be imposed on us in connection with the activities of an operator of, or tenant at, the property.  The cost of any required remediation, removal, fines or personal or property damages and our liability therefore could exceed the value of the property and/or our aggregate assets.  In addition, the presence of those substances, or the failure to properly dispose of or remove those substances, may adversely affect our ability to sell or rent that property or to borrow using that property as collateral, which, in turn, would reduce our revenues and ability to make distributions.

Our existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990.  The requirements of this Act, or of other federal, state or local laws or regulations, also may change in the future and restrict further renovations of our properties with respect to access for disabled persons. Future compliance with the Americans with Disabilities Act of 1990 and similar regulations may require expensive changes to the properties.

Competition

The real estate investment business is highly competitive. We compete for real estate investments with investors of all types, including domestic and foreign corporations, financial institutions, other real estate investment trusts, real estate funds, individuals and privately owned companies.  In addition, our properties are subject to local competition from the surrounding areas.  Our shopping centers compete for tenants with other regional, community or neighborhood shopping centers in the respective areas where our retail properties are located.  In addition, the retail industry is seeing greater competition from internet retailers who may not need to establish “brick and mortar” retail locations for their businesses. This may reduce the demand for traditional retail space in shopping centers like ours and other grocery-anchored shopping center properties.  Our few office buildings compete for tenants principally with office buildings throughout the respective areas in which they are located.  Leasing decisions are generally determined by prospective tenants on the basis of, among other things, rental rates, location, and the physical quality of the property and availability of space.

Human Capital

We believe that our employees are one of our greatest resources.  In order to attract and retain high performing individuals, we are committed to partnering with our employees to provide opportunities for their professional development and promote their well-being.  To that end, we have undertaken various initiatives, including the following:

providing department-specific training, access to online training seminars and opportunities to participate in industry conferences, as well as “Urstadtversity,” a company-wide training program that educates employees about various aspects of the real estate business through a regular speaker series;
introducing the next generation of real estate leaders through summer internship programs;
providing annual reviews and regular feedback to assist in employee development and providing opportunities for employees to provide suggestions to management and safely register complaints;
providing family leave, for example, for the birth or adoption of a child, as well as sick leave, that exceeds minimum regulatory requirements;
focusing on creating a workplace that values employee health and safety, and to that end providing expanded paid sick leave during the COVID-19 pandemic;
committing to the full inclusion of all qualified employees and applicants and providing equal employment opportunities to all persons, in accordance with the principles and requirements of the Equal Employment Opportunities Commission and the principles and requirements of the Americans with Disabilities Act; and
appreciating the many contributions of a diverse workforce, understanding that diverse backgrounds bring diverse perspectives, resulting in unique insights.
Our executive offices are located at 321 Railroad Avenue, Greenwich, Connecticut.  Urstadt Biddle Properties Inc. has 57 employees, all located at the Company’s executive offices.  Subsidiaries of the Company also employ an additional 38 full-time and part-time employees at other locations, and we believe our relationship with our employees is good.

Company Website

All of the Company’s filings with the SEC, including the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge at the Company’s website at www.ubproperties.com as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.  These filings can also be accessed through the SEC’s website at www.sec.gov.

Item 1A.  Risk Factors

Risks Related to COVID-19

The current pandemic of the novel coronavirus ("COVID-19") is expected to, and the future outbreak of other highly infectious or contagious diseases may, materially and adversely impact the businesses of many of our tenants and materially and adversely impact and disrupt our business, income, cash flow, results of operations, financial condition, liquidity, prospects and ability to service our debt obligations, and our ability to pay dividends and other distributions to our stockholders.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic.  The COVID-19 pandemic has caused, and could continue to cause, significant disruptions to the U.S. and global economy, as well as significant volatility and negative pressure in the financial markets.  During the early days of the pandemic, the tri-state area surrounding New York City was particularly hard hit.  As a result, like many U.S. states and cities, the tri-state area composed of Connecticut, New York and New Jersey imposed rules and regulations intended to control the spread of COVID-19, such as instituting “shelter-in-place” and “social distancing” orders, which forced many businesses to temporarily close, reduce their hours or significantly limit service for several months or more.  The COVID-19 outbreak and measures taken to prevent its spread have already resulted in significant negative economic impacts on many of our tenants, including inability to pay rent, and as a result, on our business.  It continues to have a significant impact on the larger U.S. and global economies as well, including a dramatic increase in national unemployment.

Since early summer, many (but not all) of these restrictions have been gradually lifted as the COVID-19 situation in the tri-state area has significantly improved, with most businesses now permitted to open at reduced capacity and under other limitations intended to control the spread of COVID-19.  While many of our tenants saw a surge in business during the initial weeks and months following re-opening, it is unclear whether this level of business activity is likely to be sustained, especially if the areas in which our properties are located experience a resurgence in COVID-19 cases and/or are subject to a re-imposition of previously lifted business restrictions.  As the tri-state area heads deeper into winter, it has been experiencing micro-clusters of heightened infections, which has led to the re-imposition of temporary restrictions in these targeted areas, although none of these re-imposed restrictions have thus far required businesses to completely shut down.  Also, not all tenants experienced the same level of recovery.  For a number of our tenants that operate service and retail businesses involving high contact interactions with their customers, the negative impact of COVID-19 on their business has been particularly severe and the recovery more difficult.

Many of our tenants also availed themselves of stimulus funds made available under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act”). A second COVID-19 federal stimulus package was enacted as part of the Consolidated Appropriations Act, 2021 (the "COVID Supplemental Appropriations Act") on December 27, 2020.  However, even with this additional stimulus, some businesses may be unable to continue.  A number of tenants have already filed for bankruptcy protection, failed to re-open after stay-at-home and similar restrictions were lifted, or indicated their inability to continue their business for the long-term.

Tenants that experience deteriorating financial conditions may be unwilling or unable to pay rent on a timely basis, or at all.  In some cases, we have deferred or abated tenants’ rent obligations, but may need to further restructure tenant rent obligations if their businesses continue to suffer.  We may be unable to fully collect on deferred rents as a result of the tenant’s deteriorating business condition.  In other cases, state, local, federal and industry-initiated efforts may also affect our ability to collect rent or enforce remedies for the failure to pay rent, including, among others, limitations, prohibitions and moratoriums on evicting tenants unwilling or unable to pay rent.  In the event of tenant nonpayment, default or bankruptcy, we may incur costs in protecting our investment and re-leasing our properties, and have limited ability to renew existing leases or sign new leases at projected rents.  We currently anticipate the above circumstances to negatively impact our revenues until a medical solution is achieved for COVID-19.

Moreover, the ongoing COVID-19 pandemic and continuing restrictions intended to prevent and mitigate its spread could have additional adverse effects on our business, including with regards to:

a deterioration in consumer sentiment and its impact on discretionary spending, which could negatively impact our tenants’ businesses;
negative public perception of the COVID-19 health risk, which may result in decreased foot traffic to our shopping centers and tenant businesses for an extended period of time;
an acceleration of changes in consumer behavior in favor of e-commerce, negatively impacting many of our tenants who rely heavily on their brick-and-mortar sales for profitability;
the inability of our tenants to meet their lease obligations or other obligations (including repayment of deferred rents) to us in full, or at all, or to otherwise seek modifications of such obligations or declare bankruptcy due to economic and business conditions, including high unemployment and reduced consumer discretionary spending;
the ability and willingness of new tenants to enter into leases during what is perceived to be uncertain times, the ability and willingness of our existing tenants to renew their leases upon expiration, and our ability to re-lease the properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to replace an existing tenant;
the failure of certain of our tenants to reopen, resulting in co-tenancy claims as a result of the failure to satisfy occupancy thresholds;
The unavailability of further stimulus funds or economic assistance beyond that provided under the COVID Supplemental Appropriations Act, the CARES Act and similar programs or the insufficiency of such funds to cover all of the tenant’s financial results, including rent;
disruptions to the supply chain or lack of employees available or willing to work due to perceptions of COVID-19 health risk that could make it difficult for our tenants to operate, as well as to pay rent;
the adverse impact of current economic conditions on the market value of our real estate portfolio and the resulting impact on our ability or desire to make strategic acquisitions or dispositions;
state, local or industry-initiated efforts, such as a rent freeze for tenants or a suspension of a landlord’s ability to enforce evictions, which may affect our ability to collect rent or enforce remedies for the failure to pay rent;
the scaling back or delay of a significant amount of planned capital expenditures, which could adversely affect the value of our properties;
severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which could make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities and repay liabilities on a timely basis;
our ability to draw on our credit facility or obtain additional indebtedness or pay down, refinance, restructure or extend our indebtedness as it becomes due, and the negative impact of reductions in rent on financial covenants on corporate and/or property-level debt; and
issues related to remote working, including increased cybersecurity risk and other technology and communication issues, although our offices re-opened in late May in accordance with state guidelines and upon implementation of appropriate safety measures;
the event that a significant number of our employees, particularly senior members of our management team, become unable to work as a result of health issues related to COVID-19; and
the continued volatility of the trading prices of our Common Stock and Class A Common Stock.

Our operating results depend, in large part, on the ability of our tenants to generate sufficient income to pay their rents in a timely manner. Therefore, we reduced our quarterly dividend on our Class A Common stock and Common stock in the third and fourth quarters when compared with pre-pandemic levels in an effort to preserve cash due to current economic uncertainty, and we may choose to do the same in the future. Additionally, we may in the future choose to pay distributions in our stock rather than solely in cash, which may result in our stockholders having a tax liability with respect to such distributions that exceeds the amount of cash received, if any.

The extent to which COVID-19, or any future pandemic or health crisis, impacts our business, operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity, duration of such pandemic, actions taken to contain the pandemic or mitigate its impact, and the progress of science and the medical community in addressing the health risks. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of COVID-19.  To the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K.

Risks Related to our Operations and Properties

There are risks relating to investments in real estate and the value of our property interests depends on conditions beyond our control.  Yields from our properties depend on their net income and capital appreciation.  Real property income and capital appreciation may be adversely affected by general and local economic conditions, neighborhood values, competitive overbuilding, zoning laws, weather, casualty losses and other factors beyond our control.  Since substantially all of our income is rental income from real property, our income and cash flow could be adversely affected if a large tenant is, or a significant number of tenants are, unable to pay rent or if available space cannot be rented on favorable terms.

Operating and other expenses of our properties, particularly significant expenses such as interest, real estate taxes and maintenance costs, generally do not decrease when income decreases and, even if revenues increase, operating and other expenses may increase faster than revenues.

We may be unable to sell properties when appropriate because real estate investments are illiquid.  Real estate investments generally cannot be sold quickly. In addition, there are some limitations under federal income tax laws applicable to real estate and to REITs in particular that may limit our ability to sell our assets. With respect to each of our five consolidated joint ventures, McLean, Orangeburg, High Ridge, Dumont and New City, which we refer to as our DownREITs, we may not sell or transfer the contributed property through contractually agreed upon protection periods other than as part of a tax-deferred transaction under the Code or if the conditions exist which would give us the right to call all of the non-managing member units or partnership units, as applicable, following the death or dissolution of certain non-managing members or, in connection with the exercise of creditor's rights and remedies under the existing mortgage or any refinancing by the holder thereof (which will not constitute a violation of this restriction).  Because of these market, regulatory and contractual conditions, we may not be able to alter our portfolio promptly in response to changes in economic or other conditions. Our inability to respond quickly to adverse changes in the performance of our investments could have an adverse effect on our ability to meet our obligations and make distributions to our stockholders.

Our business strategy is mainly concentrated in one type of commercial property and in one geographic location.  Our primary investment focus is neighborhood and community shopping centers, with a concentration in the metropolitan New York tri-state area outside of the City of New York.  For the year ended October 31, 2020, approximately 98.8% of our total revenues were from properties located in this area. Various factors may adversely affect a shopping center's profitability. These factors include circumstances that affect consumer spending, such as general economic conditions, economic business cycles, rates of employment, income growth, interest rates and general consumer sentiment. They also include weather patterns and natural disasters that could have a more significant localized effect in the areas where our properties are concentrated.  The occurrence of natural disasters or severe weather conditions can delay new development projects, increase investment costs to repair or replace damaged properties, increase operation costs, increase future property insurance costs, and negatively impact the tenant demand for lease space.  Changes to the real estate market in our focus areas, such as an increase in retail space or a decrease in demand for shopping center properties, could also adversely affect operating results.  As a result, we may be exposed to greater risks than if our investment focus was based on more diversified types of properties and in more diversified geographic areas.

The Company's single largest real estate investment is its ownership of the Ridgeway Shopping Center ("Ridgeway") located in Stamford, Connecticut.  For the year ended October 31, 2020, Ridgeway revenues represented approximately 11.2% of the Company's total revenues and approximately 6.4% of the Company's total assets at October 31, 2020.  The loss of Ridgeway or a material decrease in revenues from Ridgeway could have a material adverse effect on the Company.

We are dependent on anchor tenants in many of our retail properties.  Most of our retail properties are dependent on a major or anchor tenant, often a supermarket anchor.  If we are unable to renew any lease we have with the anchor tenant at one of these properties upon expiration of the current lease on favorable terms, or to re-lease the space to another anchor tenant of similar or better quality upon departure of an existing anchor tenant on similar or better terms, we could experience material adverse consequences with respect to such property such as higher vacancy, re-leasing on less favorable economic terms, reduced net income, reduced funds from operations and reduced property values.  Vacated anchor space also could adversely affect a property because of the loss of the departed anchor tenant's customer drawing power.  Loss of customer drawing power also can occur through the exercise of the right that some anchors have to vacate and prevent re-tenanting by paying rent for the balance of the lease term.  In addition, vacated anchor space could, under certain circumstances, permit other tenants to pay a reduced rent or terminate their leases at the affected property, which could adversely affect the future income from such property.  There can be no assurance that our anchor tenants will renew their leases when they expire or will be willing to renew on similar economic terms.  See Item 1. Business in this Annual Report on Form 10-K for additional information on our ten largest tenants by percent of total annual base rent of our properties.

Similarly, if one or more of our anchor tenants goes bankrupt, we could experience material adverse consequences like those described above.  Under bankruptcy law, tenants have the right to reject their leases.  In the event a tenant exercises this right, the landlord generally may file a claim for a portion of its unpaid and future lost rent.  Actual amounts received in satisfaction of those claims, however, are typically very limited and will be subject to the tenant's final plan of reorganization and the availability of funds to pay its creditors. We can provide no assurance that we will not experience impactful bankruptcies by anchor tenants in the future. See Item 7. Management’s Discussion of Operations and Financial Condition in this Annual Report on Form 10-K for additional information.

We face potential difficulties or delays in renewing leases or re-leasing space.  We derive most of our income from rent received from our tenants.  Although substantially all of our properties currently have favorable occupancy rates, we cannot predict that current tenants will renew their leases upon expiration of their terms.  In addition, current tenants could attempt to terminate their leases prior to the scheduled expiration of such leases or might have difficulty in continuing to pay rent in full, if at all, in the event of a severe economic downturn.  If this occurs, we may not be able to promptly locate qualified replacement tenants and, as a result, we would lose a source of revenue while remaining responsible for the payment of our obligations.  Even if tenants decide to renew their leases, the terms of renewals or new leases, including the cost of required renovations or concessions to tenants, may be less favorable than current lease terms.

In some cases, our tenant leases contain provisions giving the tenant the exclusive right to sell particular types of merchandise or provide specific types of services within the particular retail center, or limit the ability of other tenants within the center to sell that merchandise or provide those services.  When re-leasing space after a vacancy in a center with one of these tenants, such provisions may limit the number and types of prospective tenants for the vacant space.  The failure to re-lease space or to re-lease space on satisfactory terms could adversely affect our results from operations.  Additionally, properties we may acquire in the future may not be fully leased and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with that property until the property is fully leased. As a result, our net income, funds from operations and ability to pay dividends to stockholders could be adversely affected.

We may acquire properties or acquire other real estate related companies, and this may create risks.  We may acquire properties or acquire other real estate related companies when we believe that an acquisition is consistent with our business strategies. We may not succeed in consummating desired acquisitions on time or within budget. When we do pursue a project or acquisition, we may not succeed in leasing newly acquired properties at rents sufficient to cover the costs of acquisition and operations. Acquisitions in new markets or industries where we do not have the same level of market knowledge may result in poorer than anticipated performance. We may also abandon acquisition opportunities that management has begun pursuing and consequently fail to recover expenses already incurred and will have devoted management’s time to a matter not consummated. Furthermore, our acquisitions of new properties or companies will expose us to the liabilities of those properties or companies, some of which we may not be aware of at the time of the acquisition. In addition, redevelopment of our existing properties presents similar risks.

Newly acquired properties may have characteristics or deficiencies currently unknown to us that affect their value or revenue potential. It is also possible that the operating performance of these properties may decline under our management. As we acquire additional properties, we will be subject to risks associated with managing new properties, including lease-up and tenant retention. In addition, our ability to manage our growth effectively will require us to successfully integrate our new acquisitions into our existing management structure. We may not succeed with this integration or effectively manage additional properties, particularly in secondary markets. Also, newly acquired properties may not perform as expected.

Competition may adversely affect our ability to acquire new properties.  We compete for the purchase of commercial property with many entities, including other publicly traded REITs and private equity funded entities.  Many of our competitors have substantially greater financial resources than ours.  In addition, our competitors may be willing to accept lower returns on their investments.  If we are unable to successfully compete for the properties we have targeted for acquisition, we may not be able to meet our growth and investment objectives.  We may incur costs on unsuccessful acquisitions that we will not be able to recover.  The operating performance of our property acquisitions may also fall short of our expectations, which could adversely affect our financial performance.

Competition may limit our ability to generate sufficient income from tenants and may decrease the occupancy and rental rates for our properties. Our properties consist primarily of open-air shopping centers and other retail properties.  Our performance, therefore, is generally linked to economic conditions in the market for retail space.  In the future, the market for retail space could be adversely affected by:

           weakness in the national, regional and local economies;
           the adverse financial condition of some large retailing companies;
           the impact of internet sales on the demand for retail space;
           ongoing consolidation in the retail sector; and
           the excess amount of retail space in a number of markets.

In addition, numerous commercial developers and real estate companies compete with us in seeking tenants for our existing properties.  If our competitors offer space at rental rates below our current rates or the market rates, we may lose current or potential tenants to other properties in our markets and we may need to reduce rental rates below our current rates in order to retain tenants upon expiration of their leases.  Increased competition for tenants may require us to make tenant and/or capital improvements to properties beyond those that we would otherwise have planned to make.  As a result, our results of operations and cash flow may be adversely affected.

In addition, our tenants face increasing competition from internet commerce, outlet malls, discount retailers, warehouse clubs and other sources which could hinder our ability to attract and retain tenants and/or cause us to reduce rents at our properties, which could have an adverse effect on our results of operations and cash flows.  We may fail to anticipate the effects of changes in consumer buying practices, particularly of growing online sales and the resulting retailing practices and space needs of our tenants or a general downturn in our tenant’s businesses, which may cause tenants to close their stores or default in payment of rent.

Property ownership through joint ventures could limit our control of those investments, restrict our ability to operate and finance the property on our terms, and reduce their expected return.  As of October 31, 2020, we owned five of our operating properties through consolidated joint ventures and six through unconsolidated joint ventures. Our joint ventures, and joint ventures we may enter into in the future, may involve risks not present with respect to our wholly-owned properties, including the following:

We may share decision-making authority with our joint venture partners regarding certain major decisions affecting the ownership or operation of the joint venture and the joint venture property, such as, but not limited to, (i) additional capital contribution requirements, (ii) obtaining, refinancing or paying off debt, and (iii) obtaining consent prior to the sale or transfer of our interest in the joint venture to a third party, which may prevent us from taking actions that are opposed by our joint venture partners;
Our joint venture partners may have business interests or goals with respect to the property that conflict with our business interests and goals, which could increase the likelihood of disputes regarding the ownership, management or disposition of the property;
Disputes may develop with our joint venture partners over decisions affecting the property or the joint venture, which may result in litigation or arbitration that would increase our expenses and distract our officers from focusing their time and effort on our business, disrupt the day-to-day operations of the property such as by delaying the implementation of important decisions until the conflict is resolved, and possibly force a sale of the property if the dispute cannot be resolved; and
The activities of a joint venture could adversely affect our ability to qualify as a REIT.

In addition, with respect to our five consolidated joint ventures, McLean, Orangeburg, High Ridge, Dumont and New City, we have additional obligations to the limited partners and non-managing members and additional limitations on our activities with respect to those joint ventures.  The limited partners and non-managing members of each of these joint ventures are entitled to receive annual or quarterly cash distributions payable from available cash of the joint venture, with the Company required to provide such funds if the joint venture is unable to do so.  The limited partners and non-managing members of these joint ventures have the right to require the Company to repurchase all or a portion of their limited partner or non-managing member interests for cash or Class A Common Stock of the Company, at our election, at prices and on terms set forth in the partnership or operating agreements.  We also have the right to redeem all or a portion of the limited partner and non-managing member interests for cash or Class A Common Stock of the Company, at our election, under certain circumstances, at prices and on terms set forth in the partnership or operating agreements.  The right of these limited partners and non-managing members to put their equity interest to us could require us to expend cash, or issue Class A Common Stock of the REIT, at a time or under circumstances that are not desirable to us.

In addition, the partnership agreement or operating agreements with our partners in McLean, Orangeburg, UB High Ridge, Dumont and New City include certain restrictions on our ability to sell the property and to pay off the mortgage debt on these properties before their maturity, although refinancings are generally permitted.  These restrictions could prevent us from taking advantage of favorable interest rate environments and limit our ability to best manage the debt on these properties.

Although we have historically used moderate levels of leverage, if we employed higher levels of leverage, it would result in increased risk of default on our obligations and in an increase in debt service requirements, which could adversely affect our financial condition and results of operations and our ability to pay dividends and make distributions. In addition, the viability of the interest rate hedges we use is subject to the strength of the counterparties.  We have incurred, and expect to continue to incur, indebtedness to advance our objectives. The only restrictions on the amount of indebtedness we may incur are certain contractual restrictions and financial covenants contained in our unsecured revolving credit agreement. Accordingly, we could become more highly leveraged, resulting in increased risk of default on our financial obligations and in an increase in debt service requirements. This, in turn, could adversely affect our financial condition, results of operations and our ability to make distributions.

Using debt to acquire properties, whether with recourse to us generally or only with respect to a particular property, creates an opportunity for increased return on our investment, but at the same time creates risks.  Our goal is to use debt to fund investments only when we believe it will enhance our risk-adjusted returns.  However, we cannot be sure that our use of leverage will prove to be beneficial.  Moreover, when our debt is secured by our assets, we can lose those assets through foreclosure if we do not meet our debt service obligations.  Incurring substantial debt may adversely affect our business and operating results by:

requiring us to use a substantial portion of our cash flow to pay interest and principal, which reduces the amount available for distributions, acquisitions and capital expenditures;
making us more vulnerable to economic and industry downturns and reducing our flexibility to respond to changing business and economic conditions;
requiring us to agree to less favorable terms, including higher interest rates, in order to incur additional debt, and otherwise limiting our ability to borrow for operations, working capital or to finance acquisitions in the future; or
limiting our flexibility in conducting our business, which may place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms.

In addition, variable rate debt exposes us to changes in interest rates.  As of October 31, 2020, we had an outstanding balance of $35 million on our Unsecured Revolving Credit Facility ("Facility").   If interest rates were to rise, it would increase the amount of interest expense that we would have to pay.  This exposure would increase if we seek additional variable rate financing based on pricing and other commercial and financial terms.  In addition, we enter into interest rate hedging transactions, including interest rate swaps. There can be no guarantee that the future financial condition of these counterparties will enable them to fulfill their obligations under these agreements.

We may be adversely affected by changes in LIBOR reporting practices, the method by which LIBOR is determined or the use of alternative reference rates.  As of October 31, 2020, we had approximately $126.6 million of mortgage notes outstanding that are indexed to the London Interbank Offered Rate (“LIBOR”). All of these mortgages are subject to interest rate swaps that convert the floating rates in the notes to a fixed interest rate. 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 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. The Alternative Reference Rates Committee ("ARRC"), a steering committee comprised of large U.S. financial institutions, has proposed replacing USD-LIBOR with a new index calculated by short-term repurchase agreements - the Secured Overnight Financing Rate ("SOFR").  At this time, no consensus exists as to what rate or rates may become accepted alternatives to LIBOR, and it is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published or supported before or after 2021 or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere. Such developments and any other legal or regulatory changes in the method by which LIBOR is determined or the transition from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase or decrease in LIBOR, a delay in the publication of LIBOR, and changes in the rules or methodologies in LIBOR, which may discourage market participants from continuing to administer or to participate in LIBOR’s determination and, in certain situations, could result in LIBOR no longer being determined and published. If a published U.S. dollar LIBOR rate is unavailable after 2021 or June 2023, as applicable, the interest rates on our mortgage notes, which is indexed to LIBOR will be determined using various alternative methods, any of which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on such debt if U.S. dollar LIBOR was available in its current form. Further, the same costs and risks that may lead to the unavailability of U.S. dollar LIBOR may make one or more of the alternative methods impossible or impracticable to determine. Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition, operating results and cash flows.

We are obligated to comply with financial and other covenants in our debt that could restrict our operating activities, and failure to comply could result in defaults that accelerate the payment under our debt.  Our mortgage notes payable contain customary covenants for such agreements including, among others, provisions:

restricting our ability to assign or further encumber the properties securing the debt; and
restricting our ability to enter into certain new leases or to amend or modify certain existing leases without obtaining consent of the lenders.

Our unsecured revolving credit agreement contains financial and other covenants which may limit our ability, without our lenders' consent, to engage in operating or financial activities that we may believe desirable.  Our unsecured revolving credit facility contains, among others, provisions restricting our ability to:

permit unsecured debt to exceed $400 million;
create certain liens;
increase our overall secured and unsecured borrowing beyond certain levels;
consolidate, merge or sell all or substantially all of our assets;
permit secured debt to be more than 40% of gross asset value, as defined in the agreement; and
permit unsecured indebtedness, excluding preferred stock, to exceed 60% of eligible real estate asset value as defined in the agreement.

In addition, covenants included in our unsecured revolving credit facility (i) limit the amount of debt we may incur, excluding preferred stock, as a percentage of gross asset value, as defined in the agreement, to less than 60% (leverage ratio), (ii) require earnings before interest, taxes, depreciation and amortization to be at least 150% of fixed charges, (iii) require net operating income from unencumbered properties to be at least 200% of unsecured interest expenses, (iv) require not more than 15% of gross asset value and unencumbered asset pool, each term as defined in the agreement, to 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 (v) require at least 10 unencumbered properties in the unencumbered asset pool, with at least 10 properties owned by the company or a wholly-owned subsidiary.

If we were to breach any of our debt covenants and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan.  As a result, a default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares.

We may be required to incur additional debt to qualify as a REIT.  As a REIT, we must generally make annual distributions to shareholders of at least 90% of our taxable income. We are subject to income tax on amounts of undistributed taxable income and net capital gain. In addition, we would be subject to a 4% excise tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and aggregate undistributed income from prior years. We intend to make distributions to shareholders to comply with the Code’s distribution provisions and to avoid federal income and excise tax. We may need to borrow funds to meet our distribution requirements because:

our income may not be matched by our related expenses at the time the income is considered received for purposes of determining taxable income; and
non-deductible capital expenditures, creation of reserves, or debt service requirements may reduce available cash but not taxable income.

In these circumstances, we might have to borrow funds on terms we might otherwise find unfavorable and we may have to borrow funds even if our management believes the market conditions make borrowing financially unattractive. Current tax law also allows us to pay a portion of our distributions in shares instead of cash.

Our ability to grow will be limited if we cannot obtain additional capital.  Our growth strategy includes the redevelopment of properties we already own and the acquisition of additional properties.  We are required to distribute to our stockholders at least 90% of our taxable income each year to continue to qualify as a REIT for federal income tax purposes.  Accordingly, in addition to our undistributed operating cash flow, we rely upon the availability of debt or equity capital to fund our growth, which financing may or may not be available on favorable terms or at all.  The debt could include mortgage loans from third parties or the sale of debt securities.  Equity capital could include our common stock or preferred stock.  Additional financing, refinancing or other capital may not be available in the amounts we desire or on favorable terms.

Our access to debt or equity capital depends on a number of factors, including the general state of the capital markets, the markets perception of our growth potential, our ability to pay dividends, and our current and potential future earnings.  Depending on the outcome of these factors, we could experience delay or difficulty in implementing our growth strategy on satisfactory terms, or be unable to implement this strategy.

We cannot assure you we will continue to pay dividends at historical rates.  Our ability to continue to pay dividends on our shares of Class A Common stock or Common stock at historical rates or to increase our dividend rate, and our ability to pay preferred share dividends will depend on a number of factors, including, among others, the following:

our financial condition and results of future operations;
the performance of lease terms by tenants;
the terms of our loan covenants;
payment obligations on debt; and
our ability to acquire, finance or redevelop and lease additional properties at attractive rates.

If we do not maintain or increase the dividend on our common shares, it could have an adverse effect on the market price of our shares of Class A Common Stock or Common Stock and other securities. Any preferred shares we may offer may have a fixed dividend rate that would not increase with any increases in the dividend rate of our common shares. Conversely, payment of dividends on our common shares may be subject to payment in full of the dividends on any preferred shares and payment of interest on any debt securities we may offer.

Market interest rates could adversely affect the share price of our stock and increase the cost of refinancing debt.  A variety of factors may influence the price of our common and preferred equities in the public trading markets.  We believe that investors generally perceive REITs as yield-driven investments and compare the annual yield from dividends by REITs with yields on various other types of financial instruments.  An increase in market interest rates may lead purchasers of stock to seek a higher annual dividend rate from other investments, which could adversely affect the market price of the stock.  In addition, we are subject to the risk that we will not be able to refinance existing indebtedness on our properties.  We anticipate that a portion of the principal of our debt will not be repaid prior to maturity.  Therefore, we likely will need to refinance at least a portion of our outstanding debt as it matures.  A change in interest rates may increase the risk that we will not be able to refinance existing debt or that the terms of any refinancing will not be as favorable as the terms of the existing debt.

If principal payments due at maturity cannot be refinanced, extended or repaid with proceeds from other sources, such as new equity capital or sales of properties, our cash flow will not be sufficient to repay all maturing debt in years when significant “balloon” payments come due.  As a result, our ability to retain properties or pay dividends to stockholders could be adversely affected and we may be forced to dispose of properties on unfavorable terms, which could adversely affect our business and net income.

Construction and renovation risks could adversely affect our profitability. We currently are renovating some of our properties and may in the future renovate other properties, including tenant improvements required under leases.  Our renovation and related construction activities may expose us to certain risks.  We may incur renovation costs for a property which exceed our original estimates due to increased costs for materials or labor or other costs that are unexpected.  We also may be unable to complete renovation of a property on schedule, which could result in increased debt service expense or construction costs.  Additionally, some tenants may have the right to terminate their leases if a renovation project is not completed on time.  The time frame required to recoup our renovation and construction costs and to realize a return on such costs can often be significant.

We are dependent on key personnel.  We depend on the services of our existing senior management to carry out our business and investment strategies.  We do not have employment agreements with any of our existing senior management.  As we expand, we may continue to need to recruit and retain qualified additional senior management.  The loss of the services of any of our key management personnel or our inability to recruit and retain qualified personnel in the future could have an adverse effect on our business and financial results.

Our insurance coverage on our properties may be inadequate.  We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire, flood, earthquake, and rental loss. All of these policies contain coverage limitations. We believe these coverages are of the types and amounts customarily obtained for or by an owner of similar types of real property assets located in the areas where our properties are located. We intend to obtain similar insurance coverage on subsequently acquired properties.

The availability of insurance coverage may decrease and the prices for insurance may increase as a consequence of significant losses incurred by the insurance industry and other factors outside our control. As a result, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts and toxic mold, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Also, due to inflation, changes in codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed. Further, we may be unable to collect insurance proceeds if our insurers are unable to pay or contest a claim. Events such as these could adversely affect our results of operations and our ability to meet our obligations, including distributions to our shareholders.

Properties with environmental problems may create liabilities for us.  Under various federal, state and local environmental laws, statutes, ordinances, rules and regulations, as an owner of real property, we may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our properties, as well as certain other potential costs relating to hazardous or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property).  A property can be adversely affected either through direct physical contamination or as the result of hazardous or toxic substances or other contaminants that have or may have emanated from other properties.  These laws may impose liability without regard to whether we knew of, or were responsible for, the presence or disposal of those substances.  This liability may be imposed on us in connection with the activities of an operator of, or tenant at, the property.  The cost of any required remediation, removal, fines or personal or property damages and our liability therefore could exceed the value of the property and/or our aggregate assets.  In addition, the presence of those substances, or the failure to properly dispose of or remove those substances, may adversely affect our ability to sell or rent that property or to borrow using that property as collateral, which, in turn, would reduce our revenues and ability to make distributions.

Prior to the acquisition of any property and from time to time thereafter, we obtain Phase I environmental reports, and, when deemed warranted, Phase II environmental reports concerning the Company's properties.  There can be no assurance, however, that (i) the discovery of environmental conditions that were previously unknown, (ii) changes in law, (iii) the conduct of tenants or neighboring property owner, or (iv) activities relating to properties in the vicinity of the Company's properties, will not expose the Company to material liability in the future.  Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of our tenants, which could adversely affect our financial condition and results of operations.

We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business disruptions.  We rely extensively on computer systems to process transactions and manage our business, and our business is at risk from and may be impacted by cybersecurity attacks. These could include attempts to gain unauthorized access to our data and computer systems. Attacks can be both individual and/or highly organized attempts organized by very sophisticated hacking organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include password encryption, frequent password change events, firewall detection systems, anti-virus software and frequent backups; however, there is no guarantee such efforts will be successful in preventing a cyber-attack. A cybersecurity attack could compromise the confidential information of our employees, tenants and vendors. A successful attack could disrupt and otherwise adversely affect our business operations and financial prospects, damage our reputation and involve significant legal and/or financial liabilities and penalties, including through lawsuits by third-parties.

The Americans with Disabilities Act of 1990 could require us to take remedial steps with respect to existing or newly acquired properties Our existing properties, as well as properties we may acquire, as commercial facilities, are required to comply with Title III of the Americans with Disabilities Act of 1990. Investigation of a property may reveal non-compliance with this Act. The requirements of this Act, or of other federal, state or local laws or regulations, also may change in the future and restrict further renovations of our properties with respect to access for disabled persons. Future compliance with this Act may require expensive changes to the properties.

Risks Related to our Organization and Structure

We will be taxed as a regular corporation if we fail to maintain our REIT status.  Since our founding in 1969, we have operated, and intend to continue to operate, in a manner that enables us to qualify as a REIT for federal income tax purposes.  However, the federal income tax laws governing REITs are complex.  The determination that we qualify as a REIT requires an analysis of various factual matters and circumstances that may not be completely within our control.  For example, to qualify as a REIT, at least 95% of our gross income must come from specific passive sources, such as rent, that are itemized in the REIT tax laws.  In addition, to qualify as a REIT, we cannot own specified amounts of debt and equity securities of some issuers.  We also are required to distribute to our stockholders at least 90% of our REIT taxable income (excluding capital gains) each year. Our continued qualification as a REIT depends on our satisfaction of the asset, income, organizational, distribution and stockholder ownership requirements of the Internal Revenue Code on a continuing basis. At any time, new laws, interpretations or court decisions may change the federal tax laws or the federal tax consequences of qualification as a REIT.  If we fail to qualify as a REIT in any taxable year and do not qualify for certain Internal Revenue Code relief provisions, we will be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates.  In addition, distributions to stockholders would not be deductible in computing our taxable income.  Corporate tax liability would reduce the amount of cash available for distribution to stockholders which, in turn, would reduce the market price of our stock.  Unless entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT.

We will pay federal taxes if we do not distribute 100% of our taxable income.  To the extent that we distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income.  In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any year are less than the sum of:

85% of our ordinary income for that year;
95% of our capital gain net income for that year; and
100% of our undistributed taxable income from prior years.

We have paid out, and intend to continue to pay out, our income to our stockholders in a manner intended to satisfy the distribution requirement and to avoid corporate income tax and the 4% nondeductible excise tax.  Differences in timing between the recognition of income and the related cash receipts or the effect of required debt amortization payments could require us to borrow money or sell assets to pay out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year.

Gain on disposition of assets deemed held for sale in the ordinary course of business is subject to 100% tax.  If we sell any of our assets, the IRS may determine that the sale is a disposition of an asset held primarily for sale to customers in the ordinary course of a trade or business.  Gain from this kind of sale generally will be subject to a 100% tax.  Whether an asset is held "primarily for sale to customers in the ordinary course of a trade or business" depends on the particular facts and circumstances of the sale.  Although we will attempt to comply with the terms of safe-harbor provisions in the Internal Revenue Code prescribing when asset sales will not be so characterized, we cannot assure you that we will be able to do so.

Our ownership limitation may restrict business combination opportunities.
To qualify as a REIT under the Internal Revenue Code, no more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals during the last half of each taxable year.  To preserve our REIT qualification, our charter generally prohibits any person from owning shares of any class with a value of more than 7.5% of the value of all of our outstanding capital stock and provides that:

a transfer that violates the limitation is void;
shares transferred to a stockholder in excess of the ownership limitation are automatically converted, by the terms of our charter, into shares of "Excess Stock;"
a purported transferee receives no rights to the shares that violate the limitation except the right to designate a transferee of the Excess Stock held in trust; and
the Excess Stock will be held by us as trustee of a trust for the exclusive benefit of future transferees to whom the shares of capital stock ultimately will be transferred without violating the ownership limitation.

We may also redeem Excess Stock at a price which may be less than the price paid by a stockholder.  Pursuant to authority under our charter, our board of directors has determined that the ownership limit does not apply to any shares of our stock beneficially owned by Elinor F. Urstadt (spouse of late Mr. Charles J. Urstadt, the Company’s former Chairman Emeritus), Willing L. Biddle (President & Chief Executive Officer), Catherine U. Biddle (director and spouse of Willing L. Biddle), Elinor P. Biddle (non-executive employee and daughter of Mr. & Mrs. Biddle), Dana C. Biddle (daughter of Mr. & Mrs. Biddle) and Charles D. Urstadt (son of Mr. & Mrs. Urstadt and brother of Mrs. Biddle) (together, the “Urstadt and Biddle Family Members”), but only to the extent that the aggregate value of all such stock does not exceed nineteen and ninety one-hundredth percent (19.9%) of the value of all of the company’s outstanding common stock, Class A common stock and preferred stock at any date of determination, unless at least two of the Urstadt and Biddle Family Members would separately be considered as among the five largest shareholders (which for this purpose requires ownership of at least 7.5%) based on value of shares (and determined after applying the ownership rules in Sections 542, 544 and 856(h) of the Code), in which case the maximum aggregate value of all shares of our stock beneficially owned by the Urstadt and Biddle Family Members is increased to twenty-seven percent (27.00%).  Together, the Urstadt and Biddle Family Members hold approximately 67.6% of our outstanding voting interests through their beneficial ownership of our Common Stock and Class A Common Stock. Directors and executive officers of the Company, excluding any Urstadt and Biddle Family Member, hold approximately 0.2%.  The ownership limitation may delay or discourage someone from taking control of us, even though a change of control might involve a premium price for our stockholders or might otherwise be in their best interest.

Certain provisions in our charter and bylaws and Maryland law may prevent or delay a change of control or limit our stockholders from receiving a premium for their shares.  Among the provisions contained in our charter and bylaws and Maryland law are the following:

Our Board of Directors is divided into three classes, with directors in each class elected for three-year staggered terms.
Our directors may be removed only for cause upon the vote of the holders of two-thirds of the voting power of our common equity securities.
Our stockholders may call a special meeting of stockholders only if the holders of a majority of the voting power of our common equity securities request such a meeting in writing.
Any consolidation, merger, share exchange or transfer of all or substantially all of our assets must be approved by (i) a majority of our directors who are currently in office or who are approved or recommended by a majority of our directors who are currently in office (the "Continuing Directors") and (ii) the affirmative vote of holders of our stock representing a majority of all votes entitled to be cast on the matter.
Certain provisions of our charter may only be amended by (i) a vote of a majority of our Continuing Directors and (ii) the affirmative vote of holders of our stock representing a majority of all votes entitled to be cast on the matter.
The number of directors may be increased or decreased by a vote of our Board of Directors.

In addition, we are subject to various provisions of Maryland law that impose restrictions and require affected persons to follow specified procedures with respect to certain takeover offers and business combinations, including combinations with persons who own 10% or more of our outstanding shares.  These provisions of Maryland law could delay, defer or prevent a transaction or a change of control that our stockholders might deem to be in their best interests.  As permitted by Maryland law, our charter provides that the “business combination” provisions of Maryland law described above do not apply to acquisitions of shares by the late Charles J. Urstadt, and our Board of Directors has determined that the provisions do not apply to Willing L. Biddle, or to Willing L. Biddle’s or the late Charles J. Urstadt’s spouses and descendants and any of their affiliates.  Consequently, unless such exemptions are amended or repealed, we may in the future enter into business combinations or other transactions with Mr. Willing L. Biddle or any of Mr. Willing L. Biddle’s or the late Mr. Charles J. Urstadt’s respective affiliates without complying with the requirements of the Maryland business combination statute.  Furthermore, shares acquired in a control share acquisition have no voting rights, except to the extent approved by the affirmative vote of two-thirds of all votes entitled to be cast on the matter, excluding all interested shares.  Under Maryland law, "control shares" are those which, when aggregated with any other shares held by the acquiror, allow the acquiror to exercise voting power within specified ranges.  The control share provisions of Maryland law also could delay, defer or prevent a transaction or a change of control which our stockholders might deem to be in their best interests.  As permitted by Maryland law, our bylaws provide that the "control shares" provisions of Maryland law described above will not apply to acquisitions of our stock.  As permitted by Maryland law, our Board of Directors has exclusive power to amend the bylaws and the board could elect to make acquisitions of our stock subject to the “control shares” provisions of Maryland law as to any or all of our stockholders. In view of the common equity securities controlled by Elinor F. Urstadt, for herself and in her capacity as the executor of Charles J. Urstadt’s estate, and Willing L. Biddle, either may control a sufficient percentage of the voting power of our common equity securities to effectively block approval of any proposal which requires a vote of our stockholders.

Our stockholder rights plan could deter a change of control.  We have adopted a stockholder rights plan.  This plan may deter a person or a group from acquiring more than 10% of the combined voting power of our outstanding shares of Common Stock and Class A Common Stock because, after (i) the person or group acquires more than 10% of the total combined voting power of our outstanding Common Stock and Class A Common Stock, or (ii) the commencement of a tender offer or exchange offer by any person (other than us, any one of our wholly owned subsidiaries or any of our employee benefit plans, or certain exempt persons), if, upon consummation of the tender offer or exchange offer, the person or group would beneficially own 30% or more of the combined voting power of our outstanding Common Stock and Class A Common Stock, number of outstanding Common Stock, or the number of outstanding Class A Common Stock, and upon satisfaction of certain other conditions, all other stockholders will have the right to purchase Common Stock and Class A Common Stock of the Company having a value equal to two times the exercise price of the right.  This would substantially reduce the value of the stock owned by the acquiring person.  Our board of directors can prevent the plan from operating by approving the transaction and redeeming the rights.  This gives our board of directors significant power to approve or disapprove of the efforts of a person or group to acquire a large interest in us.  The rights plan exempts acquisitions of Common Stock and Class A Common Stock by Willing L. Biddle, as well as members of Willing L. Biddle’s and the late Charles J. Urstadt’s families and certain of their affiliates.

The concentration of our stock ownership or voting power limits our stockholders’ ability to influence corporate matters.  Each share of our Common Stock entitles the holder to one vote.  Each share of our Class A Common Stock entitles the holder to 1/20 of one vote per share.  Each share of Common Stock and Class A Common Stock have identical rights with respect to dividends except that each share of Class A Common Stock will receive not less than 110% of the regular quarterly dividends paid on each share of Common Stock.  As of October 31, 2020, Elinor F. Urstadt, for herself and in her capacity as the executor of Charles J. Urstadt’s estate and Willing L. Biddle, our President and Chief Executive Officer, beneficially owned approximately 19.9% of the value of our outstanding Common Stock and Class A Common Stock, which together represented approximately 67.2% of the voting power of our outstanding common stock.  They therefore have significant influence over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future. This concentrated control limits or restricts our stockholders’ ability to influence corporate matters.

Item 1B.  Unresolved Staff Comments.

None.


Item 2.  Properties.

Properties

The following table sets forth information concerning each property at October 31, 2020.  Except as otherwise noted, all properties are 100% owned by the Company.

Retail Properties:
Year Renovated
Year Completed
Year Acquired
Gross Leasable Sq Feet
Acres
Number of Tenants
% Leased
Principal Tenant
Stamford, CT
1997
1950
2002
374,000
13.6
38
92%
Stop & Shop
Stratford, CT
1988
1978
2005
279,000
29.0
21
99%
Stop & Shop, BJ's
Scarsdale, NY (1)
2004
1958
2010
242,000
14.0
25
96%
ShopRite
New Milford, CT
2002
1972
2010
235,000
20.0
13
99%
Walmart
Riverhead, NY (2)
2014
2014
198,000
20.7
4
100%
Walmart
Danbury, CT
1989
1995
194,000
19.3
18
96%
Christmas Tree Shops
Carmel, NY (3)
2006
1971
2010
189,000
22.0
31
88%
Tops Markets
Brewster, NY
1998
1977
2019
176,000
23.0
25
73%
Acme Supermarket
Carmel, NY
1999
1983
1995
145,000
19.0
16
93%
ShopRite
Ossining, NY
2000
1978
1998
137,000
11.4
30
100%
Stop & Shop
Somers, NY
2002
2003
135,000
26.0
30
96%
Home Goods
Midland Park, NJ
1999
1970
2015
130,000
7.9
26
89%
Kings Supermarket
Pompton Lakes, NJ
2000
1965
2015
125,000
12.0
16
46%
Planet Fitness
Yorktown, NY
1997
1973
2005
121,000
16.4
14
83%
Staples
New Providence, NJ
2010
1965
2013
109,000
7.8
27
100%
Acme Markets
Newark, NJ
1995
2008
108,000
8.4
13
100%
Seabra Supermarket
Wayne, NJ
1992
1959
1992
105,000
9.0
43
94%
Whole Foods Market
Newington, NH
1994
1975
1979
102,000
14.3
5
81%
JoAnns Fabrics/Savers
Darien, CT
1992
1955
1998
96,000
9.5
24
99%
Stop & Shop
Emerson, NJ
2013
1981
2007
93,000
7.0
11
80%
ShopRite
Stamford, CT (7)
2013
1963 & 1968
2017
87,000
6.7
26
98%
Trader Joes
New Milford, CT
1966
2008
81,000
7.6
6
92%
Big Y
Somers, NY
1991
1999
80,000
10.8
34
99%
CVS
Montvale, NJ (2)
2010
1965
2013
77,000
9.9
12
58%
The Fresh Market
Orange, CT
1990
2003
77,000
10.0
12
92%
Trader Joes/TJ Maxx
Kinnelon, NJ
2015
1961
2015
76,000
7.5
13
100%
Marshalls
Orangeburg, NY (4)
2014
1966
2012
74,000
10.6
26
85%
CVS
Dumont, NJ (8)
1992
2017
74,000
5.5
31
97%
Stop & Shop
Stamford, CT
2000
1970
2016
74,000
9.7
16
98%
ShopRite (Grade A)
New Milford, CT
2003
2011
72,000
8.8
8
51%
Staples
Eastchester, NY
2013
1978
1997
70,000
4.0
12
100%
DeCicco's Market
Boonton, NJ
2016
1999
2014
63,000
5.4
10
100%
Acme Markets
Ridgefield, CT
1999
1930
1998
62,000
3.0
40
92%
Keller Williams
Fairfield, CT
1995
2011
62,000
7.0
3
100%
Marshalls
Bloomfield, NJ
2016
1977
2014
59,000
5.1
10
96%
Superfresh Supermarket
Yonkers, NY (6)
1982
2014
58,000
5.0
14
95%
Acme Markets
Cos Cob, CT
2008
1986
2014
48,000
1.1
28
90%
CVS
Briarcliff Manor, NY
2014
1975
2001
47,000
1.0
18
96%
CVS
Wyckoff, NJ
2014
1971
2015
43,000
5.2
15
96%
Walgreens
Westport, CT
1986
2003
40,000
3.0
6
27%
Julian's Pizza Kitchen & Bar
Old Greenwich, CT
1976
2014
39,000
1.4
12
92%
Kings Supermarket
Rye, NY
Various
2004
39,000
1.0
22
100%
A&S Deli
Derby, CT
2014
2017
39,000
5.3
6
94%
Aldi Supermarket
Passaic, NJ
2016
1974
2017
37,000
2.9
5
73%
Dollar Tree/Family Dollar
Danbury, CT
2012
1988
2002
33,000
2.7
5
91%
Buffalo Wild Wings
Bethel, CT
1967
1957
2014
31,000
4.0
7
55%
Rite Aid
Ossining, NY
2001
1981
1999
29,000
4.0
4
88%
Westchester Community College
Katonah, NY
1986
Various
2010
28,000
1.7
24
59%
Squires
Stamford, CT
1995
1960
2016
27,000
1.1
7
92%
Federal Express
Waldwick, NJ
1953
2017
27,000
1.8
10
95%
United States Post Office
Yonkers, NY
1992
1955
2018
27,000
2.7
16
100%
AutoZone
Harrison, NY
1970
2015
26,000
1.6
12
93%
Key Foods
Pelham, NY
2014
1975
2006
25,000
1.0
9
100%
Manor Market
Eastchester, NY
2014
1963
2012
24,000
2.1
4
91%
CVS
Ridgefield, CT
1960
2018
23,000
2.7
12
97%
Asian Fusion Restaurant
Waldwick, NJ
1961
2008
20,000
1.8
1
100%
Rite Aid
Somers, NY
1987
1992
19,000
4.9
10
78%
Putnam County Savings Bank
Cos Cob, CT
1970
1947
2013
15,000
0.9
10
73%
AT&T Wireless
Riverhead, NY (2)
2000
2014
13,000
2.7
3
100%
Applebee's
Various (5)
Various
2013
11,000
3.0
4
100%
Restaurants
Greenwich, CT
1961
2013
10,000
0.8
6
100%
Wells Fargo Bank
Old Greenwich, CT (7)
2001
1941
2017
8,000
0.8
1
100%
CVS
Fort Lee, NJ
1967
2015
7,000
0.4
1
100%
H-Mart
Office Properties & Banks Branches
               
Greenwich, CT
Various
Various
58,000
2.8
18
100%
UBP
Bronxville & Yonkers
1960
2008 & 2009
19,000
0.7
5
100%
Peoples Bank , Chase Bank
Chester, NJ
1950
2013
9,000
2.0
-
0%
Vacant
Stamford, CT (7)
2012
1960
2017
4,000
0.5
1
100%
Chase Bank
New City, NY (9)
1973
2018
3,000
1.0
2
100%
Putnam County Savings Bank
       
5,267,000
495.5
987
   

(1) Two wholly owned subsidiaries of the Company own an 11.7917% economic ownership interest in the property. The Company accounts for this joint venture under the equity method of accounting and does not consolidate the entity owning the property.
(2) A wholly owned subsidiary of the Company has a 50% tenant in common interest in the property. The Company accounts for this joint venture under the equity method of accounting and does not consolidate its interest in the property.
(3) A wholly owned subsidiary of the Company has a 66.67% tenant in common interest in the property. The Company accounts for this joint venture under the equity method of accounting and does not consolidate its interest in the property.
(4) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this property (44.6% ownership interest).
(5) The Company owns four separate free standing properties, two of which are occupied 100% by a Friendly's Restaurant and two by other restaurants. The properties are located in New York, New Jersey and Connecticut.
(6) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this property (53.0% ownership interest).
(7) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this property (16.3% ownership interest).
(8) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this property (36.4% ownership interest).
(9) A wholly owned subsidiary of the Company is the sole managing member of a limited liability company that owns this property (84.3% ownership interest).


Lease Expirations – Total Portfolio

The following table sets forth a summary schedule of the annual lease expirations for the consolidated properties for leases in place as of October 31, 2020, assuming that none of the tenants exercise renewal or cancellation options, if any, at or prior to the scheduled expirations.

Year of Expiration
 
Number of
Leases Expiring
   
Square Footage
of Expiring Leases
   
Minimum Base Rents
   
Percentage of Total
Annual Base Rent
that is Represented
by the Expiring Leases
 
2021 (1)
   
245
     
466,252
   
$
12,757,000
     
13
%
2022
   
136
     
688,156
     
16,548,000
     
17
%
2023
   
109
     
565,243
     
14,992,000
     
15
%
2024
   
86
     
318,546
     
9,280,000
     
9
%
2025
   
84
     
489,521
     
12,019,000
     
12
%
2026
   
52
     
219,433
     
6,054,000
     
6
%
2027
   
42
     
169,597
     
4,402,000
     
4
%
2028
   
43
     
251,249
     
5,772,000
     
6
%
2029
   
46
     
234,495
     
5,500,000
     
6
%
2030
   
33
     
155,955
     
3,360,000
     
3
%
Thereafter
   
36
     
525,130
     
8,835,000
     
9
%
     
912
     
4,083,577
   
$
99,519,000
     
100
%

(1)
Represents lease expirations from November 1, 2020 to October 31, 2021 and month-to-month leases.


Item 3.  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 4.   Mine Safety Disclosures.

Not Applicable

PART II

Item 5.  Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

Market Information

Shares of Common Stock and Class A Common Stock of the Company are traded on the New York Stock Exchange under the symbols "UBP" and "UBA," respectively.

Holders

At December 31, 2020 (latest date practicable), there were 519 shareholders of record of the Company's Common Stock and 585 shareholders of record of the Class A Common Stock.

Although the Company intends to continue to declare quarterly dividends on its Common shares and Class A Common shares, no assurances can be made as to the amounts of any future dividends.  The declaration of any future dividends by the Company is within the discretion of the Board of Directors and will be dependent upon, among other things, the earnings, financial condition and capital requirements of the Company, as well as any other factors deemed relevant by the Board of Directors.  Two principal factors in determining the amounts of dividends are (i) the requirement of the Internal Revenue Code that a real estate investment trust distribute to shareholders at least 90% of its real estate investment trust taxable income, and (ii) the amount of the Company's available cash. For more information please see Item 7 included in this Annual Report on Form 10-K.

Each share of Common Stock entitles the holder to one vote.  Each share of Class A Common Stock entitles the holder to 1/20 of one vote per share.  Each share of Common Stock and Class A Common Stock have identical rights with respect to dividends except that each share of Class A Common Stock will receive not less than 110% of the regular quarterly dividends paid on each share of Common Stock.

Purchases of Equity Securities By the Issuer and Affiliated Purchasers

The Board of Directors of the Company has approved a share repurchase program ("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.  For the three and twelve month periods ending October 31, 2020, the Company did not repurchase shares of any class of stock under the Program.  The Company has repurchased 195,413 shares of Class A Common Stock since the inception the Program.

Item 6.  Selected Financial Data.
(In thousands, except per share data)

 
Year Ended October 31,
 
   
2020
   
2019
   
2018
   
2017
   
2016
 
Balance Sheet Data:
                             
Total Assets
 
$
1,010,179
   
$
1,072,304
   
$
1,008,233
   
$
996,713
   
$
931,324
 
                                         
Revolving Credit Line
 
$
35,000
   
$
-
   
$
28,595
   
$
4,000
   
$
8,000
 
                                         
Mortgage Notes Payable and Other Loans
 
$
299,434
   
$
306,606
   
$
293,801
   
$
297,071
   
$
273,016
 
                                         
Preferred Stock Called For Redemption
 
$
-
   
$
75,000
   
$
-
   
$
-
   
$
-
 
                                         
Operating Data:
                                       
Total Revenues
 
$
126,745
   
$
136,882
   
$
134,722
   
$
123,191
   
$
115,814
 
                                         
Total Expenses and payments to noncontrolling interests
 
$
100,604
   
$
101,630
   
$
99,690
   
$
91,404
   
$
84,359
 
                                         
Net Income
 
$
26,070
   
$
41,613
   
$
42,183
   
$
55,432
   
$
34,605
 
                                         
Per Share Data:
                                       
Net Income from Continuing Operations - Basic:
                                       
Class A Common Stock
 
$
0.23
   
$
0.59
   
$
0.68
   
$
0.92
   
$
0.57
 
Common Stock
 
$
0.20
   
$
0.53
   
$
0.61
   
$
0.82
   
$
0.50
 
                                         
Net Income from Continuing Operations - Diluted:
                                       
Class A Common Stock
 
$
0.22
   
$
0.58
   
$
0.67
   
$
0.90
   
$
0.56
 
Common Stock
 
$
0.20
   
$
0.52
   
$
0.60
   
$
0.80
   
$
0.49
 
                                         
Cash Dividends Paid on:
                                       
Class A Common Stock
 
$
0.77
   
$
1.10
   
$
1.08
   
$
1.06
   
$
1.04
 
Common Stock
 
$
0.69
   
$
0.98
   
$
0.96
   
$
0.94
   
$
0.92
 
                                         
Other Data:
                                       
                                         
Net Cash Flow Provided by (Used in):
                                       
Operating Activities
 
$
61,883
   
$
72,317
   
$
71,584
   
$
62,995
   
$
62,081
 
                                         
Investing Activities
 
$
(18,820
)
 
$
(14,739
)
 
$
(20,540
)
 
$
18,761
   
$
(82,072
)
                                         
Financing  Activities
 
$
(96,347
)
 
$
26,216
   
$
(49,433
)
 
$
(80,353
)
 
$
20,639
 
                                         
Funds from Operations (1)
 
$
45,172
   
$
51,955
   
$
55,171
   
$
43,203
   
$
43,603
 

(1)
The Company has adopted the definition of Funds from Operations (FFO) suggested by the National Association of Real Estate Investment Trusts (NAREIT) and defines FFO as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of properties plus real estate related depreciation and amortization and after adjustments for unconsolidated joint ventures.  For a reconciliation of net income and FFO, see Management's Discussion and Analysis of Financial Condition and Results of Operations on page 14.  FFO does not represent cash flows from operating activities in accordance with generally accepted accounting principles and should not be considered an alternative to net income as an indicator of the Company's operating performance.  The Company considers FFO a meaningful, additional measure of operating performance because it primarily excludes the assumption that the value of its 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 the performance of the Company.  It is helpful as it excludes various items included in net income that are not indicative of the Company's operating performance.  However, comparison of the Company's presentation of FFO, using the NAREIT definition, to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.  For a further discussion of FFO, see Management's Discussion and Analysis of Financial Condition and Results of Operations on page 14.


Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements of the Company and the notes thereto included elsewhere in this report, the “Special Note Regarding Forward-Looking Statements” in Part I and “Item 1A. Risk Factors.”

Executive Summary

Overview

We are a fully integrated, self-administered real estate company that has elected to be a Real Estate Investment Trust ("REIT") for federal income tax purposes, engaged in the acquisition, ownership and management of commercial real estate, primarily neighborhood and community shopping centers, anchored by supermarkets, pharmacy/drug-stores and wholesale clubs, with a concentration in the metropolitan tri-state area outside of the City of New York. Other real estate assets include office properties, single tenant retail or restaurant properties and office/retail mixed-use properties.  Our major tenants include supermarket chains and other retailers who sell basic necessities.

At October 31, 2020, we owned or had equity interests in 81 properties, which include equity interests we own in five consolidated joint ventures and six unconsolidated joint ventures, containing a total of 5.3 million square feet of Gross Leasable Area (“GLA”).    Of the properties owned by wholly-owned subsidiaries or joint venture entities that we consolidate, approximately 90.4% was leased (92.9% at October 31, 2019).  Of the properties owned by unconsolidated joint ventures, approximately 91.1% was leased (96.1% at October 31, 2019).

We have paid quarterly dividends to our shareholders continuously since our founding in 1969.

Impact of COVID-19

The following discussion is intended to provide stockholders with certain information regarding the impacts of the COVID-19 pandemic on our business and management’s efforts to respond to those impacts. Unless otherwise specified, the statistical and other information regarding our property portfolio and tenants are estimates based on information available to us as of December 10, 2020. As a result of the rapid development, fluidity and uncertainty surrounding this situation, we expect that such statistical and other information will change going forward, potentially significantly, and may not be indicative of the actual impact of the COVID-19 pandemic on our business, operations, cash flows and financial condition for fiscal 2021 and future periods.

The spread of COVID-19 is having a significant impact on the global economy, the U.S. economy, the economies of the local markets throughout the northeast region in which our properties are located, and the broader financial markets. Nearly every industry has been impacted directly or indirectly, and the U.S. retail market has come under severe pressure due to numerous factors, including preventive measures taken by local, state and federal authorities to alleviate the public health crisis, such as mandatory business closures, quarantines, restrictions on travel and “shelter-in-place” or “stay-at-home” orders.  During the early part of the pandemic, these containment measures, as implemented by the tri-state area of Connecticut, New York and New Jersey, generally permitted businesses designated as “essential” to remain open, although limiting the operations of different categories of our tenants to varying degrees.  Since early summer, many (but not all) of these restrictions have been gradually lifted as the COVID-19 situation in the tri-state area significantly improved, with most businesses now permitted to open at reduced capacity and under other limitations intended to control the spread of COVID-19.  The situation, however, has been evolving as we head deeper into the winter months.

Moreover, not all tenants have been impacted in the same way or to the same degree by the pandemic and the measures adopted to control the spread of COVID-19.   For example, grocery stores, pharmacies and wholesale clubs have been permitted to remain fully open throughout the pandemic and have generally performed well given their focus on food and necessities.  Many restaurants have also been considered essential, although social distancing and group gathering limitations have generally prevented or limited dine-in activity, forcing them to evaluate alternate means of operations, such as outdoor dining, delivery and pick-up.  The large majority of our restaurant tenants are fast casual, rather than full-service restaurants.  For a number of our tenants that operate businesses involving high contact interactions with their customers, such as spas and salons, the negative impact of COVID-19 on their business has been more severe and the recovery more difficult.  Gyms and fitness tenants have experienced varying results. Dry cleaners have also suffered as a result of many workers continuing to work from home.  The following additional information reflects the impact of COVID-19 on our portfolio and tenants:

All 74 of our shopping centers or free-standing, net-leased retail bank or restaurant properties are open and operating, with 99.1% of our total tenants open and operating based on Annualized Base Rent (“ABR”).

All of our shopping centers include necessity-based tenants, with approximately 71.4% of our tenants (based on ABR) designated as “essential businesses” during the early stay-at-home period of the pandemic in the tri-state area or otherwise permitted to operate through curbside pick-up and other modified operating procedures in accordance with state guidelines.  These essential businesses are 99.0% open based on ABR.

Approximately 84% of our GLA is located in properties anchored by grocery stores, pharmacies and wholesale clubs, 6% of our GLA is located in outdoor retail shopping centers adjacent to regional malls and 8% of our GLA is located in outdoor neighborhood convenience retail, with the remaining 2% of our GLA consisting of six suburban office buildings located in Greenwich, Connecticut and Bronxville, New York, three retail bank branches and one childcare center.  All six suburban office buildings are open with some restrictions on capacity based on state mandates and all of the retail bank branches are open.

As of December 10, 2020, we have received payment of approximately 86.0%, 83.3% and 89.8% of lease income, consisting of contractual base rent (leases in place without consideration of any deferral or abatement agreements), common area maintenance reimbursement and real estate tax reimbursement billed, respectively, for April 2020 through October 2020, the third quarter (May through July) of fiscal 2020 and the fourth quarter (August through October) of fiscal 2020, not including the application of any security deposits.

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, but we have continued to receive a smaller number of new requests even after businesses have re-opened, and in some cases, follow-on requests from tenants to whom we had already provided temporarily rent relief.  We have been evaluating 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 considering 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 difficult 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, some of these concessions have been in the form of rent abatements for some portion of tenant rents due in April through December or longer.

As of October 31, 2020, we had received 396 rent relief requests from our approximately 900 tenants in our consolidated portfolio. Subsequently, approximately 118 of the 396 tenants withdrew their request for rent relief or paid their rent in full. These remaining requests represent 35.0% of our ABR. As of October 31, 2020, we had completed lease amendments with approximately 234 of the tenants that had requested rent relief, representing deferments of approximately $3.4 million in lease income ($854,000 of our fourth quarter lease income) or approximately 3.5% of our ABR and abatements of approximately $1.4 million in lease income ($934,000 of our fourth quarter lease income) or approximately 1.4% of ABR. The weighted average payback period for the $3.4 million of deferred rents is 8.5 months.

Each reporting period we must make estimates as to the collectability of our tenants’ accounts receivable related to base rent, straight-line rent, expense reimbursements and other revenues. Management analyzes accounts receivable by considering tenant creditworthiness, current economic trends, including the impact of the COVID-19 pandemic on tenants’ businesses, and changes in tenants’ payment patterns when evaluating the adequacy of the allowance for doubtful accounts.  As a result of this analysis, we have increased our allowance for doubtful accounts by $426,000 and $3.9 million in the three and twelve months ended October 31, 2020, respectively.  For the year ended October 31, 2020, this increase of $3.9 million represented approximately 4.0% of ABR.  Management has every intention of collecting as much of our billed rents, to the extent feasible, regardless of the requirement under Generally Accepted Accounting Principles ("GAAP") to reserve for uncollectable accounts.  In addition, the GAAP accounting standard governing leases requires, among other things, that if 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 any straight-line rental receivables would need to be reversed in the period that the collectability assessment is changed to not probable.  As a result of analyzing our entire tenant base, in the fiscal year ended October 31, 2020, we determined that 64 tenants’ future lease payments were no longer probable of collection (7.1% of our approximate 900 tenants) and, as a result of this assessment, in the three and twelve months ended October 31, 2020 we reversed previously billed lease income in the amount of $551,000 and $2.3 million, respectively.  For the year ended October 31, 2020, this $2.3 million represented approximately 2.4% of ABR.  In addition, as a result of this assessment, we reversed $179,000 and $1.1 million in the three and twelve months ended October 31, 2020, respectively, of accrued straight-line rent receivables related to these 64 tenants.  For the year ended October 31, 2020, this $1.1 million represented approximately 1.1% of ABR.  Both of these reversals, totaling $730,000 and $3.4 million in the three and twelve months ended October 31, 2020, respectively, result in a direct reduction of lease income on our consolidated income statement.

Each reporting period management assesses whether there are any indicators that the value of its real estate investments may be impaired and has concluded that none of its investment properties are impaired at October 31, 2020. The COVID-19 pandemic has however, significantly impacted many of the retail sectors in which our tenants operate, and if the effects of the pandemic are prolonged, it could have a significant adverse impact on the underlying industries of many of our tenants.  We will continue to monitor the economic, financial, and social conditions resulting from the COVID-19 pandemic and will assess our real estate asset portfolio for any impairment indicators as required under GAAP. If we determine that any of our real estate assets are impaired, we would be required to take impairment charges and such amounts could be material. See Footnote 1 to the Notes to the Company’s Consolidated Financial Statements for additional discussion regarding impairment charges.

Actions Taken in Response to COVID-19

We have taken a number of proactive measures to maintain the strength of our business and manage the impact of COVID-19 on our operations and liquidity, including the following:

Along with our tenants and the communities we together serve, the health and safety of our employees is our top priority. We have adapted our operations to protect employees, including by implementing a work-from-home policy in March 2020, which worked seamlessly with no disruption in our service to tenants and other business partners.  On May 20, 2020, in response to a change in the State of Connecticut's mandates, we re-opened our office at less than 50% capacity, with employees encouraged to continue working from home when feasible consistent with business needs.  We continue to closely monitor the recommendations and mandates of federal, state and local governments and health authorities to ensure the safety of our own employees as well as our properties.

We are in regular communication with our tenants,  providing assistance in identifying local, state and federal resources that may be available to support their businesses and employees during the pandemic, including stimulus funds that may be available under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act”).  We compiled a robust set of tenant materials explaining these and other programs, which have been posted to the tenant portal on our website, disseminated by e-mail to all of our tenants through the tenant portal of our general ledger system and communicated directly by telephone through our leasing agents.  Each of our tenants was also assigned a leasing agent to whom the tenant can turn with questions and concerns during these uncertain times.

In addition, we launched a program designating dedicated parking spots for curbside pick-up at our shopping centers for use by all tenants and their customers, assisted restaurant tenants in securing municipal approvals for outdoor seating, and are assisting tenants in many other ways to improve their business prospects.

To enhance our liquidity position and maintain financial flexibility, we borrowed $35 million under our Unsecured Revolving Credit Facility ("Facility") during March and April 2020 to fund capital improvements and for general corporate purposes.

At October 31, 2020, we had $40.8 million in cash and cash equivalents on our consolidated balance sheet, and an additional $64 million available under our Facility (excluding the $50 million accordion feature).

We do not have any unsecured debt maturing until August 2021. Additionally, we do not have any secured debt maturing until January 2022.  All maturing secured debt is generally below a 55% loan-to-value ratio, and we believe we will be able to refinance that debt. Construction related to three large re-tenanting projects, two for grocery stores and one for a national junior anchor, was completed during the second quarter and all three tenants are open and operating as of the date of this report.  We do not have any other material re-tenanting projects ongoing.

We have taken proactive measures to manage costs, including reducing, where possible, our common area maintenance spending. We have one ongoing construction project at one of our properties, with approximately $4.3 million remaining to complete the project.  Otherwise, only minimal construction is underway.  Further, we expect that the only material capital expenditures at our properties in the near term will be tenant improvements and/or other leasing costs associated with existing and new leases.

Although we continue to seek opportunities to acquire high-quality neighborhood and community shopping centers, we have temporarily redirected the executives in our acquisition department to help with lease negotiations.

On March 27, 2020, the President of the United States signed into law the CARES Act.  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer-side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.  The Company has availed itself of some of the above benefits afforded by the CARES Act (other than what are commonly referred to as PPP loans).

On December 27, 2020, a second COVID-19 federal stimulus package was enacted as part of the Consolidated Appropriations Act, 2021 (the "COVID Supplemental Appropriations Act").  Among other things, the COVID Supplemental Appropriations Act will enhance various support features of the previously enacted CARES Act, increase unemployment payments and extend the time frame for unemployment benefits, and re-implement a modified version of the Paycheck Protection Program for small businesses and eligible non-profits.  As with the CARES Act, the Company has disseminated information about the COVID Supplemental Appropriations Act to our tenants through our website and general ledger system.

On December 15, 2020, our Board of Directors declared a quarterly dividend of $0.125 per Common share and $0.14 per Class A Common share to be paid on January 15, 2021 to holders of record on January 5, 2021, reduced approximately 50% from pre-pandemic dividend levels of $0.25 per Common share and $0.28 per Class A Common share.  The announced dividend level will preserve approximately $5.5 million of cash in the first quarter of fiscal 2021 when compared to our pre-pandemic dividend levels.  Given the reduction of operating cash flow and taxable income caused by tenants’ nonpayment of rent during the period from April through December 2020, the overall uncertainty of the COVID-19 pandemic’s near and potential long-term impact on our business, and the importance of preserving our liquidity position, among other considerations, the Board determined after careful consideration of all information available to them at the time that reducing the quarterly dividend, when compared with the pre-pandemic level, is in the best interests of stockholders. Based on the Company’s updated taxable income projections for the fiscal year ending 2021, we will most likely need to pay dividends over the remainder of the fiscal year at higher levels in order to meet the distribution requirements necessary for it to continue qualifying as a REIT for U.S. federal income tax requirements.  The Board may determine that the increased level would be more appropriate towards the latter part of fiscal 2021 once, hopefully, a vaccine has become widely disseminated, the pandemic has begun to wane and the economy and our properties have returned to some normalcy.  We cannot, however, be certain as to the level or timing of any such dividend increase.  The Board declared the full contractual dividend on both our Series H and Series K Cumulative Preferred Stock, payable on January 29, 2021, to holders of record on January 15, 2021. Going forward, our Board of Directors will continue to evaluate our dividend policy.

We derive revenues primarily from rents and reimbursement payments received from tenants under leases at our properties. Our operating results therefore depend materially on the ability of our tenants to make required rental payments. The extent to which the COVID-19 pandemic impacts the businesses of our tenants, and therefore our operations and financial condition, will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the COVID-19 pandemic, the actions taken to contain the COVID-19 pandemic or mitigate its impact, and the direct and indirect economic effects of the COVID-19 pandemic and such mitigation measures, among others. See “Risk Factors.”

Strategy, Challenges and Outlook

We have a conservative capital structure, which includes permanent equity sources of Common Stock, Class A Common Stock and two series of perpetual preferred stock, which are only redeemable at our option.  In addition, we have mortgage debt secured by some of our properties.  As mentioned earlier, we do not have any secured debt maturing until January of 2022.

Key elements of our growth strategies and operating policies are to:

maintain our focus on community and neighborhood shopping centers, anchored principally by regional supermarkets, pharmacy chains or wholesale clubs, which we believe can provide a more stable revenue flow even during difficult economic times because of the focus on food and other types of staple goods;

acquire quality neighborhood and community shopping centers in the northeastern part of the United States with a concentration on properties in the metropolitan tri-state area outside of the City of New York, and unlock further value in these properties with selective enhancements to both the property and tenant mix, as well as improvements to management and leasing fundamentals, with hopes to grow our assets through acquisitions subject to the availability of acquisitions that meet our investment parameters;

selectively dispose of underperforming properties and re-deploy the proceeds into potentially higher performing properties that meet our acquisition criteria;

invest in our properties for the long term through regular maintenance, periodic renovations and capital improvements, enhancing their attractiveness to tenants and customers (e.g. curbside pick-up), as well as increasing their value;

leverage opportunities to increase GLA at existing properties, through development of pad sites and reconfiguring of existing square footage, to meet the needs of existing or new tenants;

proactively manage our leasing strategy by aggressively marketing available GLA, renewing existing leases with strong tenants, anticipating tenant weakness when necessary by pre-leasing their spaces and replacing below-market-rent leases with increased market rents, with an eye towards securing leases that include regular or fixed contractual increases to minimum rents;

improve and refine the quality of our tenant mix at our shopping centers;

maintain strong working relationships with our tenants, particularly our anchor tenants;

maintain a conservative capital structure with low debt levels; and

control property operating and administrative costs.

We believe our strategy of focusing on community and neighborhood shopping centers, anchored principally by regional supermarkets, pharmacy chains or wholesale clubs, is being 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 this 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 to the current disruptions in 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 more difficult to actively pursue and achieve certain elements of our growth strategy.  For example, it will likely be more difficult for us to acquire or sell properties in fiscal 2021 (or possibly beyond), as it may be difficult to value a property correctly given changing circumstances. Additionally, parties may be unwilling to enter into transactions during such uncertainty.  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.  We choose to borrow $35 million under our Facility during March and April 2020 to enhance our liquidity position and maintain financial flexibility, which is an approach consistent with many of our peers.  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.

We expect that our rent collections will continue to be below our tenants’ contractual rent obligations at least for as long as governmental orders require non-essential businesses to restrict business operations and individuals to adhere to social distancing policies, or potentially until a medical solution is achieved for COVID-19. 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 and timing of the recognition of such losses will depend on future developments, which are highly uncertain and cannot be predicted. April through November 2020 rental income collections and rent relief requests to date may not be indicative of collections or requests in any future period.

We continue to have active discussions with existing and potential new tenants for new and renewed leases. However, the uncertainty relating to the COVID-19 pandemic has slowed the pace of leasing activity and could result in higher vacancy rates than we otherwise would have experienced, a longer amount of time to fill vacancies and potentially lower rental rates.

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.

Highlights of Fiscal 2020; Recent Developments

Set forth below are highlights of our recent property acquisitions, other investments, property dispositions and financings:

On November 1, 2019, we redeemed all of the outstanding shares of our Series G Cumulative Preferred Stock for $25 per share with proceeds from our sale of our Series K Cumulative Preferred Stock in October 2019.  The total redemption amount was $75 million.

In December 2019, we closed on the sale of our property located in Bernardsville, NJ to an unrelated third party for a sale price of $2.7 million, pursuant to a contract we had entered into in August 2019, as that property no longer met our investment objectives. In accordance with GAAP, the property met all the criteria to be classified as held for sale in the fourth quarter of fiscal 2019, and, accordingly, we recorded a loss on property held for sale of $434,000, which loss was included in continuing operations in the consolidated statement of income for the year ended October 31, 2019. 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.  Upon completion of the sale in December 2019, we realized an additional loss on sale of property of $86,000, which loss is included in continuing operations in the consolidated statement of income for the year ended October 31, 2020. This loss has been added back to our Funds from Operations (“FFO”) as discussed below in this Item 7.

In January 2020, we sold for $1.3 million a retail property located in Carmel, NY, as that property no longer met our investment objectives.  In conjunction with the sale, we realized a loss on sale of property in the amount of $242,000, which loss is included in continuing operations in the consolidated statement of income for the year ended October 31, 2020. This loss has been added back to FFO as discussed below in this Item 7.

In January 2020, we redeemed 2,250 units of UB New City I, LLC from the noncontrolling member.  The total cash price paid for the redemption was $49,500.  As a result of the redemption, our ownership percentage of New City increased to 79.7% from 78.2%.

In January 2020, we redeemed 23,829 units of UB High Ridge, LLC from the noncontrolling member.  The total cash price paid for the redemption was $560,000.  As a result of the redemption, our ownership percentage of High Ridge increased to 14.2% from 13.3%.

In March and April 2020, we borrowed an aggregate $35 million on our Facility to fund capital improvements and for general corporate purposes.

In June 2020, we redeemed 6,750 units of UB New City I, LLC from the noncontrolling member.  The total cash price paid for the redemption was $148,500.  As a result of the redemption, our ownership percentage of New City increased to 84.3% from 79.7%.

In December 2020 (fiscal 2021), we closed on the sale of a 29,000 square foot portion of our property, which was recently converted into a condominium, located in Pompton Lakes, NJ to Lidl, a national grocery store company, for a sale price of $2.8 million.  We had entered into a purchase and sale agreement in January 2020, subject to various conditions.  In accordance with GAAP, that portion of the property met all the criteria to be classified as held for sale in September of fiscal 2020, and accordingly, we recorded a loss on property held for sale of $5.7 million, which loss is included in continuing operations in the consolidated statement of income for the year ended October 31, 2020. The amount of the loss represented the net carrying amount of that portion of the property over the fair value of that portion of the property, less the estimated cost to sell. This loss has been added back to our FFO as discussed below in this Item 7. Lidl will operate a grocery store on its portion of the property.  The 29,000 square foot portion of the property sold was approximately half of a vacant space that was previously leased and occupied by A&P.  A&P went bankrupt several years ago and the space had remained vacant.  In considering many options for the use of this space, we determined that the best course of action for the Company to maximize the value of the space was to sell this portion of the property to a leading grocery store company and to re-develop the balance of the 63,000 square foot space into 4,000 square feet of additional retail and a 50,000 square foot self-storage facility, which will be managed by Extra Space Storage.  The square footage of the self-storage facility reflects the intended vertical expansion of our retained space. We believe that once completed and leased, the self-storage facility will add approximately $7 million in value to the shopping center over and above our development costs.

Leasing
Rollovers

For the fiscal year 2020, we signed leases for a total of 405,000 square feet of predominantly retail space in our consolidated portfolio.  New leases for vacant spaces were signed for 63,000 square feet at an average rental decrease of 10.8% on a cash basis, excluding 5,400 square feet of new leases for which there was no prior rent history available.  Renewals for 342,000 square feet of space previously occupied were signed at an average rental increase of 1.5% on a cash basis.

Tenant improvements and leasing commissions averaged $29 per square foot for new leases and $0.45 per square foot for renewals for the fiscal year ended 2020. The average term for new leases was 4 years and the average term for renewal leases was 4 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 2020 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.

Traditionally, we have seen overall positive increases in rental income for renewal leases. With the uncertainty of the COVID-19 pandemic and the many unknown factors that we, our tenants and the commercial real estate industry face from the pandemic, it is difficult to predict leasing trends for new leases into the near future.

Significant Events with Impacts on Leasing

In March 2020, we delivered two spaces to Dollar Tree and Family Dollar, to replace a grocery tenant that had previously occupied a 30,600 square foot space at our Passaic, NJ property.  We signed new leases with these tenants in May 2019 for a large portion of the original 30,600 square foot space. Both of these stores are now open.

In April 2020, we delivered a 26,800 square foot junior anchor space at the Orange Meadows Shopping Center to the TJX Companies, Inc., which will operate a TJ Maxx store that is expected to open in March of 2021.  The space was delivered pursuant to a lease we signed in January 2019.

In January 2020, we delivered a 40,000 square foot grocery-store space at the Valley Ridge Shopping Center to Whole Foods Market, which opened in September 2020.  The space was delivered pursuant to a lease we signed in April 2018.

In December 2019, we delivered a 30,000 square foot grocery-store space at one of our Eastchester, NY properties to DeCicco’s Supermarket, which opened in October 2020.  The space was delivered pursuant to a lease we signed in August 2017.

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 new owner of this ground lease has informed us that they are selling the lease to a national retailer, however the transaction has not closed yet.

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 generally 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 Policies

Critical accounting policies are those that are both important to the presentation of the Company’s financial condition and results of operations and require management’s most difficult, complex or subjective judgments.  For a further discussion about the Company's critical accounting policies, please see Note 1 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

Liquidity and Capital Resources

Overview

At October 31, 2020, we had cash and cash equivalents of $40.8 million (see below), compared to $94.1 million at October 31, 2019.  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 7 for more information. In fiscal 2020, 2019 and 2018, net cash flow provided by operations amounted to $61.9 million, $72.3 million and $71.6 million, respectively.

On November 1, 2019, we redeemed all 3,000,000 outstanding shares of our 6.75% Series G Cumulative Preferred Stock for $25 per share, which included all accrued and unpaid dividends.  The total amount of the redemption amounted to $75 million.  The redemption was funded with proceeds from our recently completed sale of 4,400,000 shares of 5.875% Series K Cumulative preferred stock.  We issued the Series K shares on October 1, 2019 and raised proceeds of $106.5 million.

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 fiscal years ended October 31, 2020, 2019 and 2018 totaled $30.0 million, $42.6 million and $41.6 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 7.  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. 

On December 15, 2020, our Board of Directors declared a quarterly dividend of $0.125 per Common share and $0.14 per Class A Common share to be paid on January 15, 2021 to holders of record on January 5, 2021, reduced approximately 50% from pre-pandemic levels.  The announced dividend level will preserve approximately $5.5 million of cash in the first quarter of fiscal 2021 when compared to our pre-pandemic dividend levels.  The Board declared the full contractual dividend on both our Series H and Series K Cumulative Preferred Stock, payable on January 29, 2021 to holders of record on January 15, 2021. Going forward, our Board of Directors will continue to evaluate our dividend policy and adjust the levels accordingly based on their assessment of how the pandemic is affecting the cash flow of the Company and the level of distributions required to allow the Company to continue to qualify as a REIT for Federal Income tax purposes.

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 5 to the financial statements included in Item 8 of this Report on Annual Report on Form 10-K.  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 fiscal year ended October 31, 2020, we paid approximately $22.3 million for property improvements, tenant improvements and leasing commission costs ($1.9 million representing property improvements, $11.3 million in property improvements related to our Stratford project (see paragraph below) and approximately $9.1 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 $7.6 million for anticipated capital improvements, tenant improvements/allowances and leasing costs related to new tenant leases and property improvements during fiscal 2021.  This amount is inclusive of commitments for the Stratford, CT development discussed directly below.  These expenditures are expected to be funded from operating cash flows, bank borrowings or other financing sources.  As a result of the ongoing COVID-19 pandemic, we have suspended all significant capital improvement projects other than the completion of our Stratford, CT project discussed below.

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 completed one pad-site building totaling approximately 3,200 square feet, which is 75% leased to Chipotle, and a self-storage facility of approximately 131,000 square feet, which will be managed for us by Extra Space Storage. In addition, we will be building a second pad site, which is leased to a national restaurant company but construction has not begun while we complete a billboard relocation on the site. We anticipate the total development cost will be approximately $18.2 million (excluding land acquisition cost), of which we have already funded $13.4 million as of October 31, 2020 and plan on funding the balance with available cash, borrowings on our Facility or other sources, as more fully described earlier in this Item 7. 

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 $299.4 million primarily consist of $1.7 million in variable rate debt with an interest rate of 5.0%  as of October 31, 2020 and $297.7 million in fixed-rate mortgage loan and unsecured note indebtedness with a weighted average interest rate of 4.1% at October 31, 2020.  The mortgages are secured by 24 properties with a net book value of $540 million and have fixed rates of interest ranging from 3.5% 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.

In addition, from time to time we have amounts outstanding on our Facility (see below) that are not fixed through an interest rate swap or otherwise. See “Item 7.A. Quantitative and Qualitative Disclosures about Market Risk” included in this Annual Report on Form 10-K for additional information on our interest rate risk.  At October 31, 2020, we had $35 million outstanding on our Facility.

We currently maintain a ratio of total debt to total assets below 33% and a fixed charge coverage ratio of over 3.28 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 51 properties in our consolidated portfolio that are not encumbered by secured mortgage debt.  At October 31, 2020, we had borrowing capacity of $64 million on our Facility.  Our Facility includes financial covenants that limit, among other things, our ability to incur unsecured and secured indebtedness.  See Note 4 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information on these and other restrictions.

Unsecured Revolving Credit Facility and Other Property Financings

We have a $100 million unsecured revolving credit facility with a syndicate of three banks, BNY Mellon, Bank of Montreal and Wells Fargo N.A. with the ability under certain conditions to additionally increase the capacity to $150 million, subject to lender approval.  The maturity date of the Facility is August 23, 2021.  Borrowings under the Facility can be used for general corporate purposes and the issuance of up to $10 million of letters of credit.  Borrowings will bear interest at our option of Eurodollar rate plus 1.35% to 1.95% or BNY Mellon's prime lending rate plus 0.35% to 0.95%, based on consolidated indebtedness, as defined.  We pay a quarterly commitment fee on the unused commitment amount of 0.15% to 0.25% per annum, based on outstanding borrowings during the year.  As of October 31, 2020, we had $35 million in outstanding borrowings on the Facility.  Our ability to borrow under the Facility is subject to our compliance with the covenants and other restrictions on an ongoing basis.  As discussed above, the principal financial covenants limit our level of secured and unsecured indebtedness and additionally require us to maintain certain debt coverage ratios.  We were in compliance with such covenants at October 31, 2020.  We are currently in the process of working on an extension of our revolver, which we hope to complete in our first or second quarter of fiscal 2021.

During the year ended October 31, 2020, we borrowed $35 million on our Facility to fund capital improvements to our properties and for general corporate purposes.

See Note 4 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a further description of mortgage financing transactions in fiscal 2020 and 2019.

Net Cash Flows from Operating Activities

Variance from fiscal 2019 to 2020:

The decrease in operating cash flows when compared with the corresponding prior period was primarily related to an increase in our tenant accounts receivable, or a reduction of lease income related to the impact of the COVID-19 pandemic and increase in other assets offset by an increase in accounts payable and accrued expenses.

Variance from fiscal 2018 to 2019:

The increase in operating cash flows was primarily due to our properties generating additional operating income in the fiscal year ended October 31, 2019 when compared with the corresponding prior period.  This additional operating income was predominantly from properties acquired in fiscal 2018 and fiscal 2019 offset by a decrease in lease termination income of $3.6 million in fiscal 2019 when compared with fiscal 2018.  In fiscal 2018 one of our grocery store tenants paid us $3.7 million to terminate its lease early.

Net Cash Flows from Investing Activities

Variance from 2019 to 2020:

The increase in net cash flows used in investing activities in the year ended October 31, 2020 when compared to the corresponding prior period was the result of one of our unconsolidated joint ventures selling a property in fiscal 2019 and distributing our share of the sales proceeds to us in the amount of $6.0 million.  The increase was further accentuated by our investing an additional $3.7 million in our properties in fiscal 2020 when compared with fiscal 2019.  In addition, we generated $5.7 million less in net proceeds from the purchase and sale of marketable securities in fiscal 2020 when compared to the corresponding period of fiscal 2019. This net increase was offset by our purchasing one property in fiscal 2019 for $11.8 million.  We did not purchase any properties in fiscal 2020.

Variance from 2018 to 2019:

The decrease in net cash flows used in investing activities in fiscal 2019 when compared to fiscal 2018 was the result of selling our marketable security portfolio in the second quarter of fiscal 2019 and realizing proceeds on that sale of $6 million.  The marketable securities were purchased in the first half of fiscal 2018.  These transactions created an $11 million positive variance in cash flows from investing activities in fiscal 2019 when compared with the corresponding prior period. In addition, the decrease in cash flows used in investing activities was the result of one of our unconsolidated joint ventures selling a property it owned in the second quarter of fiscal 2019 and distributing $5 million in sales proceeds to us.  In addition, this decrease in net cash used by investing activities was the result of us selling one property in fiscal 2019 that provided $3.4 million in sales proceeds versus having no property sales in the corresponding prior period.  This decrease in net cash used by investing activities was partially offset by us acquiring one property for $12 million in fiscal 2019 versus purchasing three properties in fiscal 2018 that required $6.8 million in equity and expending $10.5 million more for improvements to properties and deferred charges in fiscal 2019 versus the corresponding prior period.

We regularly make capital investments in our properties for property improvements, tenant improvements costs and leasing commissions.

Net Cash Flows from Financing Activities

Cash generated:

Fiscal 2020: (Total $35.2 million)
Proceeds from revolving credit line borrowings in the amount of $35.0 million.

Fiscal 2019: (Total $178.9 million)
Proceeds from revolving credit line borrowings in the amount of $25.5 million.
Proceeds from mortgage financing of $47 million.
Proceeds from the issuance of a new series of preferred stock totaling $106.2 million.

Fiscal 2018: (Total $43.8 million)
Proceeds from revolving credit line borrowings in the amount of $33.6 million.
Proceeds from mortgage financing of $10 million.

Cash used:

Fiscal 2020: (Total $131.5 million)
Dividends to shareholders in the amount of $44.2 million.
Repayment of mortgage notes payable in the amount of $7.1 million.
Acquisitions of noncontrolling interests in the amount of $3.9 million.
Redemption of preferred stock series in the amount of $75.0 million.

Fiscal 2019: (Total $152.7 million)
Dividends to shareholders in the amount of $55.4 million.
Repayment of mortgage notes payable in the amount of $33.4 million.
Repayment of revolving credit line borrowings in the amount of $54.1 million.
Additional acquisitions and distributions to noncontrolling interests of $9.5 million.

Fiscal 2018: (Total $87.3 million)
Dividends to shareholders in the amount of $53.9 million.
Repayment of mortgage notes payable in the amount of $24.1 million.
Repayment of revolving credit line borrowings in the amount of $9 million.


Results of Operations

Fiscal 2020 vs. Fiscal 2019

The following information summarizes our results of operations for the years ended October 31, 2020 and 2019 (amounts in thousands):

 
Year Ended October 31,
               
Change Attributable to:
 
Revenues
 
2020
   
2019
   
Increase
(Decrease)
   
%
Change
   
Property
Acquisitions/Sales
   
Properties Held in
Both Periods (Note 1)
 
Base rents
 
$
99,387
   
$
100,459
   
$
(1,072
)
   
(1.1
)%
 
$
(351
)
 
$
(721
)
Recoveries from tenants
   
28,889
     
32,784
     
(3,895
)
   
(11.9
)%
   
(9
)
   
(3,886
)
Uncollectable amounts in lease income
   
(3,916
)
   
(956
)
   
2,960
     
309.6
%
   
-
     
2,960
 
ASC Topic 842 cash basis lease income reversal
   
(3,419
)
   
-
     
(3,419
)
   
(100.0
)%
   
(9
)
   
(3,410
)
Lease termination
   
705
     
221
     
484
     
219.0
%
   
-
     
484
 
Other income
   
5,099
     
4,374
     
725
     
16.6
%
   
(241
)
   
966
 
                                                 
Operating Expenses
                                               
Property operating
   
19,542
     
22,151
     
(2,609
)
   
(11.8
)%
   
(264
)
   
(2,345
)
Property taxes
   
23,464
     
23,363
     
101
     
0.4
%
   
(74
)
   
175
 
Depreciation and amortization
   
29,187
     
27,930
     
1,257
     
4.5
%
   
(99
)
   
1,356
 
General and administrative
   
10,643
     
9,405
     
1,238
     
13.2
%
   
n/a
     
n/a
 
                                                 
Non-Operating Income/Expense
                                               
Interest expense
   
13,508
     
14,102
     
(594
)
   
(4.2
)%
   
303
     
(897
)
Interest, dividends, and other investment income
   
398
     
403
     
(5
)
   
(1.2
)%
   
n/a
     
n/a
 

Note 1 – Properties held in both periods includes only properties owned for the entire periods of 2020 and 2019 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 1.1% to $99.4 million for the fiscal year ended October 31, 2020 as compared with $100.5 million in the comparable period of 2019.  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 fiscal 2019, we purchased one property totaling 177,000 square feet, and sold one property totaling 10,100 square feet.  In fiscal 2020, we sold two properties totaling 18,100 square feet.  These properties accounted for all of the revenue and expense changes attributable to property acquisitions and sales in the year ended October 31, 2020 when compared with fiscal 2019.

Properties Held in Both Periods:

Revenues

Base Rent
The net decrease in base rents for the fiscal year ended October 31, 2020, when compared to the corresponding prior period was predominantly caused by a decrease in base rent revenue at seven properties related to tenant vacancies.  The most significant of these vacancies were the vacating of TJ Maxx at our New Milford, CT property, the vacancy of two tenants at our Bethel, CT property, the vacancy of three tenants at our Cos Cob, CT property, the vacancy of two tenants at our Orange, CT property, the vacancy of five tenants at our Katonah, NY property and the vacancy caused by the bankruptcy of Modell's at our Ridgeway shopping center in Stamford, CT. In addition, base rent decreased as a result of providing a rent reduction for the grocery store tenant at our Bloomfield, NJ property.  This net decrease was partially offset by an increase in base rents at most properties related to normal base rent increases provided for in our leases, new leasing at some properties and base rent revenue related to two new grocery store leases and one junior anchor lease for which rental recognition began in fiscal 2020.  The new grocery tenants are Whole Foods at our Valley Ridge shopping center in Wayne, NJ and DeCicco's at our Eastchester, NY property.  The new junior anchor tenant is TJX at our property located in Orange, CT.

In fiscal 2020, we leased or renewed approximately 405,000 square feet (or approximately 8.9% of total GLA).  At October 31, 2020, the Company’s consolidated properties were 90.4% leased (92.9% leased at October 31, 2019).

Tenant Recoveries
For the fiscal year ended October 31, 2020, recoveries from tenants (which represent reimbursements from tenants for operating expenses and property taxes) decreased by a net $3.9 million when compared with the corresponding prior period. The decrease was the result of having lower common area maintenance expenses in fiscal 2020 when compared with fiscal 2019.  This decrease was caused by significantly lower snow removal costs in the winter of 2020 when compared with the winter of 2019.  In addition, throughout our third and fourth quarters of fiscal 2020, in response to the COVID-19 pandemic we made a conscious effort to reduce common area maintenance costs at our shopping centers to help reduce the overall tenant reimbursement rents charged to our tenants.  In addition, the reduction was caused by a negative variance relating to reconciliation of the accruals for real estate tax recoveries billed to tenants in the first half of fiscal 2019 and 2020.  The decrease was further accentuated by accruing a lower percentage of recovery at most of our properties as a result of our assessment that many of our smaller local tenants will have difficulty paying the full amounts required under their leases as a result of the COVID-19 pandemic.  This assessment was based on the fact that many smaller tenants' businesses were deemed non-essential by the states where they operate and were forced to close for a portion of fiscal 2020.  These net decreases were offset by increased tax assessments at our other properties held in both periods, which increases the amount of tax due and the amount billed back to tenants for those billings.

Uncollectable Amounts in Lease Income
In the fiscal year ended October 31, 2020, uncollectable amounts in lease income increased by $3.0 million when compared to fiscal 2019.  This increase was predominantly the result of our assessment of the collectability of existing non-credit small shop tenants' receivables given the on-going COVID-19 pandemic.  Many 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 fiscal 2020.  Our assessment was based on the premise that as we emerge from the COVID-19 pandemic, our non-credit small shop tenants will need to use most of their resources to re-establish their business footing and any existing accounts receivable attributable to these tenants would most likely be uncollectable.

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 analyzing our entire tenant base, we determined that as a result of the COVID-19 pandemic 64 tenants' future lease payments were no longer probable of collection (7.1% of our approximate 900 tenants), and as a result of this assessment in fiscal 2020, we reversed $2.3 million of previously billed lease income that was uncollected, which represented 2.4% of our ABR.  In addition, as a result of this assessment, we reversed $1.1 million of accrued straight-line rent receivables related to these 64 tenants, which equated to an additional 1.1% of our ABR. These reductions are a direct reduction of lease income in fiscal 2020.

Expenses

Property Operating
In the fiscal year ended October 31, 2020, property operating expenses decreased by $2.3 million as a result of a large decrease in snow removal costs and parking lot repairs in fiscal 2020 when compared with fiscal 2019 and an overall reduction of other common area maintenance expenses as a result of COVID-19 pandemic as discussed above.

Property Taxes
In the fiscal year ended October 31, 2020, property tax expense was relatively unchanged when compared with the corresponding prior period.  In the first half of fiscal 2020, one of our properties received a large real estate tax expense reduction as a result of a successful tax reduction proceeding. This decrease was offset by increased tax assessments at our other properties held in both periods, which increased the amount of tax due.

Interest
In fiscal year ended October 31, 2020, interest expense decreased by $897,000 when compared with the corresponding prior period, as a result of a reduction in interest expense related to our Facility.  In October 2019, we used a portion of the proceeds from a new series of preferred stock to repay all amounts outstanding on our Facility.  In addition, the decrease was caused by our repayment of a mortgage secured by our Rye, NY properties at the end of fiscal 2019 with available cash, which reduced interest expense by $183,000.

Depreciation and Amortization
In the fiscal year ended October 31, 2020, depreciation and amortization increased by $1.4 million when compared with the prior period, primarily as a result of a write-off of tenant improvements related to tenants that vacated our Danbury, CT, Newington, NH, Derby, CT and Stamford, CT properties in fiscal 2020 and increased depreciation for tenant improvements for large re-tenanting projects at our Orange, CT and Wayne, NJ properties.

General and Administrative Expenses
In the fiscal year ended October 31, 2020, general and administrative expenses increased by $1.2 million when compared with the corresponding prior period, primarily as a result of an increase of $1.4 million in restricted stock compensation expense in the second quarter of fiscal 2020 for the accelerated vesting of the grant value of restricted stock for our former Chairman Emeritus when he passed away in the second quarter of fiscal 2020. 


Fiscal 2019 vs. Fiscal 2018

The following information summarizes our results of operations for the years ended October 31, 2019 and 2018 (amounts in thousands):

 
Year Ended October 31,
               
Change Attributable to:
 
Revenues
 
2019
   
2018
   
Increase
(Decrease)
   
%
Change
   
Property
Acquisitions/Sales
   
Properties Held in
Both Periods (Note 2)
 
Base rents
 
$
100,459
   
$
96,943
   
$
3,516
     
3.6
%
 
$
2,816
   
$
700
 
Recoveries from tenants
   
32,784
     
31,144
     
1,640
     
5.3
%
   
1,091
     
549
 
Uncollectable amounts in lease income
   
(956
)
   
(857
)
   
(99
)
   
11.6
%
   
-
     
(99
)
Lease termination
   
221
     
3,795
     
(3,574
)
   
(94.2
)%
   
-
     
(3,574
)
Other income
   
4,374
     
3,697
     
677
     
18.3
%
   
270
     
407
 
                                                 
Operating Expenses
                                               
Property operating
   
22,151
     
22,235
     
(84
)
   
(0.4
)%
   
990
     
(1,074
)
Property taxes
   
23,363
     
21,167
     
2,196
     
10.4
%
   
820
     
1,376
 
Depreciation and amortization
   
27,930
     
28,327
     
(397
)
   
(1.4
)%
   
412
     
(809
)
General and administrative
   
9,405
     
9,223
     
182
     
2.0
%
   
n/a
     
n/a
 
                                                 
Non-Operating Income/Expense
                                               
Interest expense
   
14,102
     
13,678
     
424
     
3.1
%
   
213
     
211
 
Interest, dividends, and other investment income
   
403
     
350
     
53
     
15.1
%
   
n/a
     
n/a
 

Note 2 – Properties held in both periods includes only properties owned for the entire periods of 2019 and 2018 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 3.6% to $100.5 million in fiscal 2019, as compared with $96.9 million in the comparable period of 2018.  The increase in base rents and the changes in other income statement line items were attributable to:

Property Acquisitions and Properties Sold:
In fiscal 2018, we purchased three properties totaling 53,700 square feet of GLA.  In fiscal 2019, we purchased one property totaling 177,000 square feet and sold one property totaling 10,100 square feet.  These properties accounted for all of the revenue and expense changes attributable to property acquisitions and sales in the fiscal year ended 2019 when compared with fiscal 2018.

Properties Held in Both Periods:

Revenues

Base Rent
The net increase in base rents for the fiscal year ended 2019 when compared to the corresponding prior period, was predominantly caused by positive leasing activity at several properties held in both periods accentuated by a lease renewal with a grocery-store tenant at a significantly higher rent than the expiring period rent, both of which created a positive variance in base rent.

In fiscal 2019, we leased or renewed approximately 676,000 square feet (or approximately 14.8% of total consolidated property leasable area).  At October 31, 2019, the Company’s consolidated properties were 92.9% leased (93.2% leased at October 31, 2018).

Tenant Recoveries
In the fiscal year ended 2019, recoveries from tenants (which represent reimbursements from tenants for operating expenses and property taxes) increased by $549,000 when compared with the corresponding prior period. This increase was a result of an increase in property tax expense caused by an increase in property tax assessments predominantly related to properties the Company owns in Stamford, CT.  This increase was partially offset by a decrease in property operating expenses mostly related to a decrease in snow removal costs at our properties owned in both periods.

Lease Termination Income
In April 2018, we reached agreement with the grocery tenant at our Newark, NJ property to terminate its 63,000 square foot lease in exchange for a one-time $3.7 million lease termination payment, which we received and recorded as revenue in the second quarter of fiscal 2018.  Also in March 2018, we leased that same space to a new grocery store operator who took possession in May 2018.  While the rental rate on the new lease is 30% less than the rental rate on the terminated lease, we hope that part of this decreased rental rate will be recaptured with the receipt of percentage rent in subsequent years as the store matures and its sales increase.  The new lease required no tenant improvement allowance.

Expenses

Property Operating
In the fiscal year ended October 31, 2019, property operating expenses decreased by $1.1 million when compared with the corresponding prior period, predominantly as a result of a decrease in snow removal costs at our properties owned in both periods.

Property Taxes
In the fiscal year ended October 31, 2019, property taxes increased by $1.4 million when compared with the corresponding prior period, as a result of an increase in property tax assessments for a number of our properties owned in both periods, specifically those located in Stamford, CT.

Interest
In the fiscal year ended October 31, 2019, interest expense increased by a net $211,000 when compared with the corresponding prior period as a result of the Company having a larger balance drawn on its Facility for a large portion of fiscal 2019 when compared with the corresponding prior periods, offset by mortgage refinancings at lower interest rates than the refinanced mortgage notes.

Depreciation and Amortization
In the fiscal year ended October 31, 2019, depreciation and amortization decreased by $809,000 when compared with the prior period primarily as a result of increased ASC Topic 805 amortization expense for lease intangibles in fiscal year ended October 31, 2018 for a tenant who vacated the property and whose lease was terminated.

General and Administrative Expenses
General and administrative expense was relatively unchanged in the fiscal year ended October 31, 2019 when compared with the corresponding prior period.


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 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 each of the three years in the period ended October 31, 2020, 2019 and 2018 (amounts in thousands):

 
Year Ended October 31,
 
   
2020
   
2019
   
2018
 
                   
Net Income Applicable to Common and Class A Common Stockholders
 
$
8,533
   
$
22,128
   
$
25,217
 
                         
Real property depreciation
   
22,662
     
22,668
     
22,139
 
Amortization of tenant improvements and allowances
   
4,694
     
3,521
     
4,039
 
Amortization of deferred leasing costs
   
1,737
     
1,652
     
2,057
 
Depreciation and amortization on unconsolidated joint ventures
   
1,499
     
1,505
     
1,719
 
(Gain)/loss on sale of properties
   
6,047
     
19
     
-
 
Loss on sale of property of unconsolidated joint venture
   
-
     
462
     
-
 
                         
Funds from Operations Applicable to Common and Class A Common Stockholders
 
$
45,172
   
$
51,955
   
$
55,171
 
                         

FFO amounted to $45.2 million in fiscal 2020 compared to $52.0 million in fiscal 2019 and $55.2 million in fiscal 2018.

The net decrease in FFO in fiscal 2020 when compared with fiscal 2019 was predominantly attributable, among other things, to:

Decreases:
A net decrease in base rents for the fiscal year ended October 31, 2020, when compared to the corresponding prior period caused by a decrease in base rent revenue at seven properties related to tenant vacancies offset by an increase in base rents at most properties related to normal base rent increases provided for in our leases, new leasing at some properties and base rent revenue related to two new grocery store leases and one junior anchor lease for which rental recognition began in fiscal 2020.  Please see operating expense variance explanations earlier in this Item 7.
An increase in uncollectable amounts in lease income of $3.0 million.  This increase was the result of our assessment of the collectability of existing non-credit small shop tenants' receivables given the ongoing COVID-19 pandemic.  Many 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 our fiscal year, until states loosened their restrictions and allowed almost all businesses to re-open, although some with operational restrictions.  Our assessment was based on the premise that as we emerge from the COVID-19 pandemic, our non-credit, small shop tenants will need to use most of their resources to re-establish their business footing, and any existing accounts receivable attributable to those tenants would most likely be uncollectable.
An increase in the write-off of lease income 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 previously billed but unpaid lease income of $2.3 million and the reversal of accrued straight-line rents receivable for these aforementioned tenants of $1.1 million.
A decrease in variable lease income (cost recovery income) related to the COVID-19 pandemic.  In fiscal 2020, we lowered our percentage of recovery at most of our properties as a result of our assessment that many of our non-credit, small shop tenants will have difficulty paying the amounts required under their leases as a result of the COVID 19 pandemic.  This assessment was based on the fact that many smaller tenants' businesses were deemed non-essential by the states where they operate and temporarily forced to close.
A decrease in variable lease income (cost recovery income) related to an over-accrual adjustment in recoveries from tenants for real estate taxes in the first quarter of fiscal 2020 versus an under-accrual adjustment in recoveries from tenants for real estate taxes in the first quarter of fiscal 2019, which when combined, resulted in a negative variance in the first nine months of fiscal 2020 when compared to the same period of fiscal 2019.
A net increase in general and administrative expenses of $1.4 million, predominantly related to an increase in compensation and benefits expense for the accelerated vesting of restricted stock grant value upon the death of our former Chairman Emeritus in the second quarter of fiscal 2020.
A net increase in preferred stock dividends of $861,000 as a result of issuing a new series of preferred stock in fiscal 2019 and redeeming an existing series.  The new series has a principal value $35 million higher than the redeemed series which increased preferred stock dividends by $1.5 million, which included one month of dividends in fiscal 2019 and a full year in fiscal 2020.  The new series has a lower coupon rate of 5.875% versus 6.75% on the redeemed series, which reduced preferred stock dividends by $656,000 in fiscal 2020 when compared with fiscal 2019.

Increases:
A $484,000 increase in lease termination income in fiscal 2020 when compared with the corresponding prior period.
A $594,000 decrease in interest expense as a result of fully repaying our Facility in the fourth quarter of fiscal 2019 with proceeds from our new series of preferred stock.
A $446,000 decrease in payments to noncontrolling interests as a result of redeeming units valued at $768,000 in fiscal 2020 and a reduction in the amount of distributions to noncontrolling interests for distributions based on the reduced dividend on our Class A Common stock.
In fiscal 2019 we issued notice of redemption of our Series G preferred stock and realized preferred stock redemption charges of $2.4 million.

The net decrease in FFO in fiscal 2019 when compared with fiscal 2018 was predominantly attributable, among other things, to:

Decreases:
The receipt of a $3.7 million one-time lease termination payment in the second quarter of fiscal 2018 from a grocery store tenant that wanted to terminate its lease early.
An increase of $725,000 in base rent in the third quarter of fiscal 2018 related to the amortization of a below market rent in accordance with ASC Topic 805 for a grocery store tenant who was evicted and whose lease was terminated at our Passaic property.
An increase in interest expense as a result of having a greater amount outstanding on our Facility in the fiscal year ended 2019 when compared with the corresponding prior periods.
$2.4 million in preferred stock redemption charges relating to our calling our Series G preferred stock for redemption on October 1, 2019.
An increase of $539,000 in preferred stock dividends as a result of having a new series of preferred stock outstanding for the month of October 2019.  We redeemed our Series G preferred stock on November 1, 2019.

Increases:
$403,000 gain on sale of marketable securities in fiscal 2019 when we sold all of our marketable securities.
Additional net income generated from properties acquired in fiscal 2018 and fiscal 2019.
Additional net income generated from increased base rent revenue for our existing properties, specifically related to a property where the grocery store tenant renewed its lease at a significantly higher rent than the current rent.



Off-Balance Sheet Arrangements

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 the 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% economic interest in a partnership that owns 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 6 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.  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
          
Joint Venture Description
Location
 
Original Balance
   
At October 31, 2020
   
Fixed Interest Rate Per Annum
 
Maturity Date
Midway Shopping Center
Scarsdale, NY
 
$
32,000
   
$
25,700
     
4.80
%
Dec-2027
Putnam Plaza Shopping Center
Carmel, NY
 
$
18,900
   
$
18,300
     
4.81
%
Oct-2028
Gateway Plaza
Riverhead, NY
 
$
14,000
   
$
11,600
     
4.18
%
Feb-2024
Applebee's Plaza
Riverhead, NY
 
$
2,300
   
$
1,800
     
3.38
%
Aug-2026

Contractual Obligations

Our contractual payment obligations as of October 31, 2020 were as follows (amounts in thousands):

 
Payments Due by Period
 
   
Total
   
2021
   
2022
   
2023
   
2024
   
2025
   
Thereafter
 
Mortgage notes payable and other loans
 
$
299,434
   
$
7,252
   
$
55,986
   
$
6,233
   
$
25,000
   
$
86,295
   
$
118,668
 
Interest on mortgage notes payable
   
66,652
     
13,043
     
11,775
     
10,281
     
8,832
     
6,252
     
16,469
 
Capital improvements to properties*
   
7,649
     
7,649
     
-
     
-
     
-
     
-
     
-
 
Total Contractual Obligations
 
$
373,735
   
$
27,944
   
$
67,761
   
$
16,514
   
$
33,832
   
$
92,547
   
$
135,137
 

*Includes committed tenant-related obligations based on executed leases as of October 31, 2020.

We have various standing or renewable service contracts with vendors related to property management. In addition, we also have certain other utility contracts entered into in the ordinary course of business which may extend beyond one year, which vary based on usage.  These contracts include terms that provide for cancellation with insignificant or no cancellation penalties.  Contract terms are generally one year or less.


Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

We are exposed to interest rate risk primarily through our borrowing activities, which include fixed-rate mortgage debt and, in limited circumstances, variable rate debt.  As of October 31, 2020, we had total mortgage debt and other notes payable of $299.4 million,  $297.7 million for which interest was based on fixed-rate, inclusive of variable rate mortgages that have been swapped to fixed interest rates using interest rate swap derivatives contracts, and $1.7 million of which interest was based on a variable rate (see below).

Our fixed-rate debt presents 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 October 31, 2020, we had eight 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 August 2024, the Yonkers swap expires in November 2024, the Orangeburg swap expires in October 2024, the Brewster swap expires in July 2029, the Stamford swap expires in July 2027, the Greenwich swaps expire in October 2026, the Darien swap expires in April 2029 and the Dumont, NJ swap expires in August 2028, 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 of our annual report on Form 10-K for more information.

At October 31, 2020, we had $35.0 million outstanding on our Facility, which bears interest at LIBOR plus 1.35%.  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% annum.

In addition, we purchased a property in March of fiscal 2018 and financed a portion of the purchase price with unsecured notes held by the seller of the property.  The unsecured notes require the payment of interest only.  $1.5 million of the notes bear interest at a fixed rate of 5.05% and $1.7 million of the notes bear interest at a variable rate of interest based on the level of our Class A Common stock dividend, currently 2.88% as of October 31, 2020.  If the level of our Class A Common dividend rises, it will increase the interest rate on the $1.7 million in notes.

The following table sets forth the Company’s long-term debt obligations by principal cash payments and maturity dates, weighted average fixed interest rates and estimated fair value at October 31, 2020 (amounts in thousands, except weighted average interest rate):

For the Fiscal Year Ended October 31,
             
 
2021
 
2022
 
2023
 
2024
 
2025
 
Thereafter
 
Total
 
Estimated Fair Value
 
Mortgage notes payable and other loans
 
$
7,252
   
$
55,986
   
$
6,233
   
$
25,000
   
$
86,295
   
$
118,668
   
$
299,434
   
$
316,483
 
                                                                 
Weighted average interest rate for debt maturing
   
n/a
     
4.42
%
   
n/a
     
4.14
%
   
3.95
%
   
4.00
%
   
4.07
%
       


Item 8.  Financial Statements and Supplementary Data.

The consolidated financial statements required by this Item, together with the reports of the Company's independent registered public accounting firm thereon and the supplementary financial information required by this Item 8 are included under Item 15 of this Annual Report.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

There were no changes in, or any disagreements with, the Company's independent registered public accounting firm on accounting principles and practices or financial disclosure during the years ended October 31, 2020 and 2019.

Item 9A.  Controls and Procedures.

At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e).  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. During the fourth quarter of 2020, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


(a) Management's Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.  The Company's internal control over financial reporting is a process designed by, or under the supervision of, the Company's Chief Executive Officer and Chief Financial Officer and effected by the Company's Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.

The Company's internal control over financial reporting includes policies and procedures that: relate to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company; provide reasonable assurance of the recording of all transactions necessary to permit the preparation of the Company's consolidated financial statements in accordance with generally accepted accounting principles and the proper authorization of receipts and expenditures in accordance with authorization of the Company's management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of October 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control – Integrated Framework (2013).  Based on its assessment, management determined that the Company's internal control over financial reporting was effective as of October 31, 2020.  The Company's independent registered public accounting firm, PKF O'Connor Davies, LLP has audited the effectiveness of the Company's internal control over financial reporting, as indicated in their attestation report which is included in (b) below.


(b) Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Urstadt Biddle Properties Inc.
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