MAYS

Business Context and Reporting Period

Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Six months ended January 31, 2008 (Unaudited)
Business Overview: The Company operates as a real estate enterprise, managing properties in Brooklyn, Jamaica, Levittown, and Fishkill, New York. It discontinued its retail department store segment in 1989.

Key Financial Metrics

Note: Total Debt calculated as Long-Term Debt ($13,143,924) plus Current portion of mortgages ($990,881).

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased by approximately $505,000 (7.5%) compared to the prior six-month period. This was driven by leasing to five additional tenants, partially offset by a tenant vacancy in Brooklyn in July 2007.
• Expense Increases:
  • Real Estate Operating Expenses: Increased to $4,538,801 from $4,202,702 due to higher rental, utility, maintenance, and lease commission costs.
  • Administrative Expenses: Rose significantly to $1,850,890 from $1,427,268, driven by payroll, insurance, legal fees, pension costs, and a bad debt expense related to a tenant vacancy at the Jowein building.
• Net Loss Widening: The net loss increased by approximately $94,000 year-over-year, primarily due to the rise in operating and administrative expenses outpacing revenue growth.
• Cash Flow Deterioration: Cash used by operating activities increased significantly to $1.34 million from $170,000 in the prior period, largely due to a $1.46 million decrease in income taxes payable and a reduction in accrued liabilities.

Outlook, Risks, and Management Commentary

• Tenant Vacancies and Leasing:
  • Levitz Home Furnishings: A major tenant (Levitz) filed for Chapter 11 bankruptcy and vacated the Jowein building in January 2008, representing an annual rental loss of approximately $800,000. The Company re-leased the space in March 2008 at slightly less than half the previous rent.
  • Brooklyn Vacancy: A 22,192 sq. ft. office space vacated in July 2007, resulting in an estimated annual loss of $470,000. The Company is actively seeking new tenants.
  • New Leases: A restaurant lease at Levittown is expected to offset previous losses. A new tenant for 15,900 sq. ft. at the Jowein building will commence rent in March 2008.
• Capital Projects: The Company is undertaking significant capital improvements, including two new elevators at the Bond Street building (estimated cost $1.1 million, partially financed) and HVAC upgrades at the Jamaica building (estimated cost $900,000).
• Legal Contingencies: The Company is involved in litigation regarding a termination notice for its tenancy in a portion of the Jowein building. A preliminary injunction was granted in May 2007 preventing eviction, but the outcome remains uncertain.
• Liquidity: Management considers current working capital and borrowing capabilities adequate. Cash balances decreased by approximately $4.1 million during the period due to operating outflows and capital expenditures.

Investor Verification Checklist

• Levitz Replacement Rent: Verify the actual rent collected from the new tenant replacing Levitz to confirm the "slightly less than half" estimate and its impact on future cash flows.
• Brooklyn Vacancy Status: Confirm the current status of the 22,192 sq. ft. vacancy in Brooklyn and any new lease agreements signed since the filing date.
• Related Party Rent: Review the final determination of the rent expense paid to the affiliated landlord for the Jamaica property, as the current amount is an estimate subject to arbitration.
• Capital Expenditure Funding: Verify the funding sources for the $900,000 HVAC project and the remaining $250,000 of the elevator project not covered by the bank loan.
• Legal Resolution: Monitor the status of the lawsuit regarding the Jowein building tenancy termination notice.