J.W. Mays, Inc. 2018 Form 10-K Summary
Business Context and Reporting Period
J.W. Mays, Inc. is a commercial real estate operating company founded in 1924 and headquartered in Brooklyn, New York. The filing covers the fiscal year ended July 31, 2018. The company operated approximately 1.45 million square feet across commercial properties in New York and Ohio and had 30 employees.
The company’s properties are generally leased to retail, office, restaurant, warehouse and distribution tenants. Two tenants at the Fulton Street property accounted for 33.42% and 15.06% of rentable square footage, respectively.
Financial Metrics and Liquidity
- Fixed-rate debt at July 31, 2018 was $5.47 million. The company stated that its debt structure does not expose it to interest-rate market risk, and it does not use derivative financial instruments.
- The filing text does not provide clear values for fiscal 2018 revenue, net income, operating cash flow, free cash flow, total cash, current assets, current liabilities, net debt, or profit margins. These amounts are incorporated by reference to the 2018 Annual Report to Shareholders.
- No dividends were declared and no shares were repurchased during fiscal 2018 or fiscal 2017.
- Occupancy at July 31, 2018 was reported at 75.26% for Fulton Street, 84.22% for the Jowein building, 79.99% for Jamaica, 47.39% for Fishkill, 100% for Levittown, 90.63% for Massapequa and 99.04% for Circleville.
- Reported annual contractual rent for the principal properties included $7.90 million at Fulton Street, $4.13 million at the Jowein building and $5.28 million at Jamaica. These property-level amounts are not presented as consolidated revenue.
Material Changes Versus the Prior Comparable Period
- Fulton Street occupancy declined from 75.59% in fiscal 2017 to 75.26% in fiscal 2018.
- Jowein building occupancy increased from 77.53% to 84.22%.
- Jamaica occupancy declined from 80.50% to 79.99%.
- Fishkill occupancy remained 47.39%, with approximately 100,000 square feet still available for lease.
- Massapequa occupancy increased from 85.01% to 90.63% after the company leased 20,000 square feet to a restaurant; rent was expected to commence in late 2018.
- Circleville occupancy remained 99.04%, and the company extended an existing 84,000-square-foot warehouse lease through October 31, 2021.
- A 2,000-square-foot Jamaica office tenant vacated in September 2017, but the space was re-let in July 2018.
- A Fulton Street office tenant occupying 3,080 square feet notified the company that it intended to vacate in October 2018, resulting in an expected annual rent loss of $112,000.
- The company reoccupied the Livingston Street premises in October 2017 following construction-related temporary vacancy under a lease amendment.
Guidance, Outlook, Risks and Unusual Items
- No formal earnings, revenue, occupancy or capital-spending guidance is provided in the filing.
- Management intends to negotiate lease renewals as they become due, subject to tenants maintaining adequate financial condition. Management also plans to renovate vacant space when future leases are executed, but provides no assurance that such leases will be obtained.
- Key risks include economic downturns, tenant financial weakness, lease expirations, availability and cost of financing, rising property fit-out costs, insurance availability, governmental and environmental regulation, climate change, cybersecurity, terrorism and interest-rate volatility affecting investments.
- The company has a controlling shareholder group and overlapping management relationships with its largest shareholder, creating potential conflicts of interest. The company states that a majority-independent board and other controls mitigate these concerns.
- The company is pursuing recovery of a $376,467 contractor deposit related to defective Fishkill roof and construction work. Contractors and subcontractors have asserted claims of approximately $700,000. The company recorded $279,213 of operating expense in fiscal 2016 and an additional $141,132 in October 2016; the latter amount was ordered paid, plus interest, in a September 2017 judgment. Further court decisions were pending at filing.
- If the company sells, transfers, disposes of or demolishes 25 Elm Place, it may have to create a condominium unit for a loading dock. The cost and necessity could not be determined.
- Management reported effective disclosure controls and internal control over financial reporting, with no material weaknesses or significant deficiencies identified. The independent auditor did not provide an internal-control attestation because the company is a smaller reporting company.
Most Important Facts for Investors to Verify
- Obtain the incorporated 2018 Annual Report to verify consolidated revenue, net income, operating cash flow, cash balances, total liabilities, debt maturities and profitability ratios.
- Reconcile property-level contractual rent and occupancy statistics to consolidated rental revenue and assess exposure to major tenants and upcoming lease expirations.
- Evaluate the Fishkill vacancy, planned renovation costs and the unresolved contractor litigation, including possible additional damages or recovery of the deposit.
- Review related-party transactions and governance arrangements involving the controlling shareholder and shared executive personnel.
- Confirm the terms, amortization and remaining obligations associated with the $3.5 million Livingston Street lease-amendment payment.
- Assess the company’s ability to finance future property improvements and manage its $5.47 million fixed-rate debt without dividend or equity-market support.