MAYS J W INC annual report, FY2019

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J.W. Mays, Inc. — Fiscal 2019 Form 10-K Summary

Business Context and Reporting Period

J.W. Mays, Inc. operates commercial real estate properties, primarily in New York, with one property in Ohio. The filing covers the fiscal year ended July 31, 2019; it is an annual report rather than a standalone fourth-quarter filing. The company had 29 employees and approximately 2.0 million square feet of described property interests across eight locations.

Financial Metrics and Operating Profile

  • The Form 10-K incorporates the consolidated income statement, balance sheet, cash flow statement and notes from the 2019 Annual Report to Shareholders, but those financial statements are not included in the provided filing text. Clear values for revenue, net income, operating cash flow, margins, total assets, debt, cash and liquidity are therefore not available here.
  • Reported annual gross rent for the principal Brooklyn, Jamaica, Levittown and Circleville properties totaled approximately $18.8 million based on the property schedules. The schedules are not a substitute for consolidated rental revenue.
  • Occupancy at July 31, 2019 was approximately 75.65% at Fulton Street/Bond Street, 85.14% at the Jowein building, 80.50% at Jamaica, 45.42% at Fishkill, 100% at Levittown, 85.01% at Massapequa and 99.10% at Circleville.
  • Real estate taxes reported for the individual properties totaled approximately $4.0 million annually, excluding properties for which comparable tax information was not clearly provided.
  • No dividends were declared and no shares were repurchased during fiscal 2019 or fiscal 2018.
  • The company’s common stock traded on Nasdaq under the symbol MAYS. Approximately 2,015,780 shares were outstanding as of September 9, 2019.

Material Changes Versus the Prior Comparable Period

  • Fishkill occupancy declined to 45.42% from 47.39% in the prior listed period. A retail tenant reduced its leased area from 99,992 to 90,000 square feet and gave notice in July 2019 to terminate effective October 30, 2019, producing an estimated annual rent loss of approximately $250,000.
  • The company leased 47,000 square feet at Fishkill to a community college for 15 years. Renovation costs were estimated at $3.2 million, with approximately $216,000 of brokerage commissions; occupancy and rent commencement were expected in June 2020.
  • At Massapequa, a 20,000-square-foot restaurant lease was terminated in April 2019 for nonpayment of rent. The space was re-leased in August 2019, with rent expected to commence in September 2020.
  • At Fulton Street/Bond Street, a medical tenant was expected to commence rent in October 2019 following approximately $329,000 of renovations and $216,000 of brokerage commissions.
  • After year-end, in August 2019, a 23,603-square-foot tenant vacated the Jowein building, with an estimated annual rent loss of approximately $814,000. In September 2019, a retail tenant surrendered approximately 22,000 square feet at Fulton Street/Bond Street, with an estimated annual rent loss of approximately $965,000.
  • The company settled Fishkill construction-related litigation in November 2018 for $635,000, paid in full on November 6, 2018.

Guidance, Outlook, Risks and Unusual Items

  • No formal financial guidance was provided in the filing text. Management stated that it intends to negotiate lease renewals as they become due, subject to tenants maintaining adequate financial condition.
  • Management identified risks from economic downturns, tenant financial weakness, increasing fit-up costs, limited financing availability, insurance costs, regulation, environmental liabilities, climate change, cybersecurity and continued growth of online retail.
  • Several properties have significant vacant space, particularly Fishkill, where approximately 156,000 square feet was available, and Jamaica, where approximately 23,000 square feet was available.
  • The company has related-party exposure: the Jamaica property is leased from an affiliated company, and the company shares its chief executive officer and certain personnel with a significant shareholder. A majority-independent board is described as a mitigating control.
  • The filing states that various other lawsuits and claims are pending, but management does not expect their resolution to have a material adverse effect. A potential obligation to create a condominium unit for a loading dock at 25 Elm Place could arise if the property is sold, transferred, disposed of or demolished; the cost cannot currently be determined.
  • Management concluded that disclosure controls and internal control over financial reporting were effective as of July 31, 2019, with no reported significant deficiencies or material weaknesses. As a smaller reporting company, the company was exempt from an independent auditor attestation under Section 404(b).

Most Important Facts to Verify

  1. Obtain the incorporated 2019 Annual Report financial statements to verify consolidated revenue, net income, cash flow, debt, cash, liquidity, rental income concentration and depreciation.
  2. Assess the financial impact and timing of the post-year-end tenant vacancies at the Jowein and Fulton Street/Bond Street properties.
  3. Verify the funding, capitalized costs and expected rent commencement for the $3.2 million Fishkill renovation and the Fulton Street medical-facility improvements.
  4. Review related-party lease terms and transactions involving the affiliated Jamaica landlord and significant shareholder.
  5. Evaluate lease-expiration concentration, occupancy trends and tenant concentration, especially at Fulton Street/Bond Street and Jamaica.
  6. Review the full legal-proceedings and commitments disclosures for unresolved claims, environmental exposure and the potential 25 Elm Place condominium obligation.