J.W. Mays, Inc. — Form 10-Q Summary
Business Context and Reporting Period
J.W. Mays, Inc. is a New York-based real estate company that leases office and retail space in commercial buildings. This unaudited Form 10-Q covers the three and six months ended January 31, 2022, within the fiscal year ending July 31, 2022. The company had 2,015,780 common shares outstanding as of March 10, 2022.
Key Financial Metrics
| Metric | Three Months Ended Jan. 31, 2022 | Three Months Ended Jan. 31, 2021 | Six Months Ended Jan. 31, 2022 | Six Months Ended Jan. 31, 2021 |
|---|---|---|---|---|
| Rental income | $5.33 million | $5.05 million | $10.41 million | $9.88 million |
| Loss from operations | $(0.21) million | $(0.33) million | $(0.62) million | $(0.69) million |
| Net loss | $(0.20) million | $(0.05) million | $(0.59) million | $(0.47) million |
| Loss per share | $(0.10) | $(0.02) | $(0.29) | $(0.23) |
| Cash provided by operating activities | Not separately provided | Not separately provided | $0.80 million | $0.13 million |
Derived margins for the six-month period were approximately (5.9%) operating and (5.6%) net. For the quarter, operating margin was approximately (4.0%) and net margin was approximately (3.7%).
- Total assets were $95.1 million at January 31, 2022, compared with $97.5 million at July 31, 2021.
- Cash and cash equivalents were $1.15 million; restricted cash was $0.89 million, for total cash, cash equivalents and restricted cash of $2.04 million.
- Marketable securities were $3.44 million, down from $3.90 million at July 31, 2021.
- Net property and equipment was $48.0 million.
- Mortgages payable, net of deferred financing costs, were $6.95 million. Management reported fixed-rate debt of $7.06 million for market-risk purposes.
- Total liabilities were $41.6 million and shareholders’ equity was $53.5 million.
- There were no dividends during either comparable period.
Material Changes Versus the Prior Comparable Period
- Six-month rental income increased 5.3% to $10.41 million, primarily from five new tenants and higher rents from existing tenants.
- Six-month net loss increased to $586,580 from $469,531. The principal adverse factor was a $236,738 decrease in the fair value of marketable securities, compared with a $24,015 increase in the prior-year period.
- Six-month real estate operating expenses increased to $7.30 million from $7.17 million, while administrative and general expenses increased to $2.82 million from $2.51 million.
- Bad debt expense increased to $219,350 from $74,000. The allowance for uncollectible receivables rose to $404,000 from $318,000 at July 31, 2021.
- Operating cash flow improved to $797,650 from $134,984, despite the higher net loss, partly because of noncash depreciation, amortization and marketable-securities adjustments.
- Capital expenditures were $871,988, compared with $1.49 million in the prior-year period. The company continued work at its Fishkill, New York property, including elevator modernization expected to be completed in May 2022.
- Cash used in financing activities was $592,124, primarily for mortgage payments, compared with $566,567 in the prior-year period.
Guidance, Outlook, Risks and Unusual Items
- The company provided no quantitative earnings, revenue or occupancy guidance.
- Management stated that the continuing COVID-19 pandemic caused late tenant payments, rent deferrals and volatility in equity-investment values. Future effects remain unknown and could include lower rental income, reduced occupancy, higher credit losses and lower operating cash flow.
- Five tenants represented approximately 66% of receivables, and two tenants represented approximately 29% of rental revenue for the six months ended January 31, 2022, creating tenant-concentration risk.
- A 5,350-square-foot retail tenant exercised an option to terminate its Nine Bond Street lease effective May 31, 2022. Management estimates the resulting annual rental-income reduction at approximately $320,000.
- Rent commenced for several recently leased spaces, including a 23,000-square-foot office tenant at the Jowein building in January 2022. Related renovations and brokerage commissions approximated $625,000 and $979,000, respectively.
- The company has fixed-rate mortgage debt and does not use derivative instruments; management therefore considers exposure to interest-rate changes limited.
- Various lawsuits and claims are pending, but management believes their resolution will not materially affect the financial statements. A potential obligation to create a condominium unit at 25 Elm Place remains unresolved if the property is sold, transferred, disposed of or demolished.
- The company has a contingent withdrawal liability related to a multi-employer pension plan that cannot currently be determined. The applicable union contract expires November 30, 2022.
- Two operating leases are with an affiliate principally owned by the chairman of both companies. Rent payments under these leases totaled $493,628 for the six months, and related rent expense was $933,938.
- Management and the chief financial and executive officers concluded that disclosure controls were effective as of January 31, 2022, with no material changes to internal control over financial reporting.
Important Facts for Investors to Verify
- Tenant collections, occupancy and the adequacy of the $404,000 allowance for uncollectible receivables as COVID-19 effects continue.
- The timing and cost of Fishkill elevator modernization and other capital projects.
- The effect of the May 2022 lease termination and the company’s ability to re-lease the space.
- The composition, valuation volatility and future gains or losses from the $3.44 million marketable-securities portfolio.
- Mortgage maturities in December 2024 and April 2025, remaining debt-service requirements and available liquidity.
- Potential exposure from pending litigation, the 25 Elm Place condominium contingency and the multi-employer pension plan.
- Terms and governance considerations relating to the affiliate leases.