J.W. Mays, Inc. Form 10-Q Summary
Business Context and Reporting Period
J.W. Mays, Inc. is a commercial real estate company that owns and leases commercial properties and also leases properties from third parties for subleasing. This unaudited Form 10-Q covers the three and nine months ended April 30, 2024, within the fiscal year ending July 31, 2024. The company had 2,015,780 common shares outstanding as of June 13, 2024.
Financial Performance and Position
| Metric | Three Months Ended April 30, 2024 | Three Months Ended April 30, 2023 | Nine Months Ended April 30, 2024 | Nine Months Ended April 30, 2023 |
|---|---|---|---|---|
| Rental revenue | $5.36 million | $5.56 million | $16.10 million | $17.17 million |
| Income (loss) from operations | $(0.16) million | $(0.02) million | $(0.54) million | $0.34 million |
| Net income (loss) | $(0.08) million | $(0.04) million | $(0.38) million | $0.07 million |
| Basic and diluted EPS | $(0.04) | $(0.02) | $(0.19) | $0.03 |
| Cash provided by operating activities | Not separately provided | Not separately provided | $2.85 million | $3.26 million |
Revenue declined approximately 3.6% for the quarter and 6.2% for the nine-month period. The quarterly operating margin was approximately negative 2.9%, compared with negative 0.4% in the prior-year quarter. The nine-month operating margin was approximately negative 3.3%, compared with positive 2.0% in the prior-year period. The quarterly net margin was approximately negative 1.6%, compared with negative 0.7%; the nine-month net margin was approximately negative 2.3%, compared with positive 0.4%.
At April 30, 2024, total assets were $90.43 million, including $48.18 million of net property and equipment, $1.17 million of cash and cash equivalents, $1.04 million of restricted cash, and $2.15 million of marketable securities. Total liabilities were $37.50 million and shareholders’ equity was $52.93 million.
Mortgage debt was $4.20 million net of deferred financing costs. The mortgages bear fixed interest rates of 4.375% and 3.98%, with final payment dates in December 2024 and April 2025. The company separately reported fixed-rate debt of $4.22 million for market-risk disclosure. Operating lease liabilities were $25.62 million, with undiscounted future lease payments of $33.66 million.
Total liquidity, defined by management as cash and cash equivalents plus marketable securities, was $3.32 million at April 30, 2024. Including restricted cash, cash, cash equivalents and restricted cash totaled $2.21 million.
Material Changes Versus the Prior Comparable Period
- Rental revenue decreased by $0.20 million, or approximately 3.6%, in the quarter and by $1.07 million, or approximately 6.2%, for the nine months.
- Management attributed the revenue decline primarily to a tenant that terminated its lease effective March 31, 2023, and lower rent from a seasonal tenant occupying less space.
- Quarterly net loss increased to $84,880 from $39,160. Nine-month results changed from net income of $65,095 to a net loss of $375,483.
- Real estate operating expenses declined modestly, while nine-month administrative and general expenses increased slightly due primarily to higher legal and professional fees and lower bad-debt recoveries.
- Net interest expense and investment-related losses were substantially lower for the nine months. The period included a $149,260 realized gain on marketable securities, partially offset by a $119,284 unrealized loss.
- Operating cash flow decreased to $2.85 million from $3.26 million. Capital expenditures increased to $2.06 million from $0.99 million, while mortgage repayments were $0.98 million.
- Cash, cash equivalents and restricted cash decreased by $5,853 during the nine months, compared with an increase of $1.28 million in the prior-year period.
Outlook, Commentary, Risks and Unusual Items
Management expects to incur approximately $2 million of additional capital expenditures during the twelve months ending April 30, 2025, primarily for tenant improvements and property work. Management believes available liquidity and operating cash flow will be sufficient for obligations over the next twelve months, but also plans to seek an additional line of credit from affiliated entity Weinstein Enterprises, Inc., if needed.
Recent leasing activity included renewals, extensions and new leases at properties in Jamaica, Fishkill and Brooklyn. Planned or ongoing tenant improvements include projects with estimated costs of approximately $1.0 million, $1.3 million and $0.1 million, among others. One tenant reduced its Circleville, Ohio premises, resulting in an annual rent reduction of approximately $37,000.
- Liquidity and financing depend on commercial real estate conditions, interest rates, inflation, real estate tax assessments, credit availability, tenant financial condition and lease cancellations.
- Two mortgages mature in December 2024 and April 2025, creating near-term refinancing or repayment considerations.
- Three tenants represented approximately 53% of receivables, and two tenants represented approximately 27% of rental revenue.
- The company has material operating lease obligations and related-party leases with Weinstein Enterprises, principally owned by the Chairman of the Board of both entities.
- The United Food and Commercial Workers Local 888 Pension Fund is in critical and declining status. The company’s potential withdrawal liability cannot be determined, although management has not decided to withdraw.
- Various lawsuits and claims are pending, but management believes their resolution will not materially affect the financial statements.
- If the company sells, transfers, disposes of or demolishes 25 Elm Place, it may be required to create a condominium unit for a loading dock; the cost has not been determined.
- The filing states that disclosure controls were effective and that there were no material changes in internal control over financial reporting.
Important Facts for Investors to Verify
- Occupancy, renewal, termination and rent-commencement status for major tenants, particularly the tenant loss cited as the primary revenue decline.
- Availability and terms of refinancing or repayment for the mortgages maturing in 2024 and 2025.
- Whether operating cash flow and the $3.32 million of stated liquidity can fund the estimated $2 million of additional capital expenditures and other obligations.
- Progress, final costs and expected returns from tenant improvement projects and new leases.
- Concentration of rental revenue and receivables among major tenants and the recoverability of receivables.
- Terms and governance implications of any proposed affiliated-company line of credit and related-party leases.
- Potential exposure from the critical-and-declining multi-employer pension plan, pending litigation and the 25 Elm Place contingency.