J.W. Mays, Inc. 2014 Form 10-K Summary
Business Context and Reporting Period
J.W. Mays, Inc. is a New York commercial real estate operating company founded in 1924. It owns or leases retail, office, warehouse, and other commercial properties primarily in New York, with one property in Ohio. The filing covers the fiscal year ended July 31, 2014. The company had 29 employees, and approximately 24% were covered by a union agreement expiring November 30, 2016.
Financial Metrics and Capital Structure
- The filing incorporates the consolidated financial statements and management’s discussion from the 2014 Annual Report to Shareholders; the supplied filing text does not provide clear values for total revenue, net income, operating cash flow, margins, cash and cash equivalents, or current liquidity.
- Fixed-rate debt was $6,421,335 at July 31, 2014. The company reported no derivative financial instruments and stated that fixed-rate debt limits exposure to interest-rate changes.
- Real estate gross carrying value was $82,092,994, with accumulated depreciation of $34,773,376. Real estate improvements during fiscal 2014 totaled $3,545,527.
- Property-level federal tax-basis net carrying values disclosed for selected properties included $13,905,557 for Fulton/Bond Street, $6,949,494 for the Jowein Building, $8,995,933 for Jamaica, $2,605,953 for Fishkill, and $1,475,747 for Circleville.
- No dividends were declared and no shares were repurchased during fiscal 2014. Approximately 2,015,780 common shares were outstanding as of September 5, 2014.
- The common stock traded between $25.00 and $67.14 during the fiscal year, based on the quarterly high and low prices reported in the filing.
Material Changes Versus the Prior Comparable Period
- Occupancy improved at several properties, including Fulton/Bond Street from 74.73% to 76.21%, Jowein Building from 61.45% to 70.49%, Fishkill from no reported occupancy to 29.62%, and Circleville from 72.41% to 78.36%. Jamaica declined from 80.30% to 75.41%, while Massapequa declined from 100.00% to 98.75%.
- The company leased approximately 100,000 square feet at Fishkill in October 2013; occupancy began in November 2013 and rent began in March 2014. Construction and related property work cost approximately $1,847,431.
- At Jamaica, two retail tenants vacated or failed to renew, causing approximately $540,000 of annualized rental income loss. The company subsequently executed replacement leases for the spaces, with rent commencement in May and August 2014; management stated that replacement rents would exceed prior rents.
- An office tenant vacated approximately 7,401 square feet at Nine Bond Street in June 2014, reducing annual rental income by approximately $100,000.
- A restaurant tenant vacated approximately 14.99% of the Massapequa property in June 2014, reducing annual rental income by approximately $200,000. The company was seeking a replacement tenant.
- The company completed a 10,000-square-foot office lease project at Nine Bond Street. Construction cost $1,283,188, brokerage commissions were $247,830, and relocation of the company’s offices cost $556,868. These projects were funded from operating funds.
- Under a June 2014 lease amendment, the company agreed to temporarily vacate certain Brooklyn truck-bay and garage premises. It received $2,250,000 immediately and recorded the remaining $1,250,000 due June 16, 2015 as a receivable. The total $3,500,000 consideration was recorded as deferred revenue to be amortized over an expected 36-month vacation period.
- Gross real estate investment increased from $78,547,467 at July 31, 2013 to $82,092,994 at July 31, 2014. Accumulated depreciation increased from $33,097,163 to $34,773,376.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- The company did not provide quantitative earnings, revenue, occupancy, or capital-expenditure guidance in the supplied filing text.
- Management intends to negotiate lease renewals as they mature and renovate vacant areas when future leases are executed, but provided no assurance that leases or renovations will occur.
- Key operating risks include economic downturns, tenant financial weakness, vacancy and leasing costs, availability and cost of financing, insurance availability, governmental regulation, environmental liabilities associated with older properties, climate change, terrorism, cybersecurity, and loss of key personnel.
- Two tenants represented more than 10% of rentable space at the Fulton/Bond Street property, and several tenants represented more than 10% of rentable space at Jamaica, creating tenant-concentration exposure.
- A controlling shareholder group may have interests that differ from those of public shareholders. The company and its largest shareholder share a chief executive officer and certain management personnel, although the board has a majority of independent directors.
- The company is pursuing litigation against a contractor seeking return of a $376,467 roof-replacement deposit and damages. Management could not predict the outcome.
- Various other lawsuits and claims were pending, but management believed they would not materially adversely affect the consolidated financial statements.
- 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 related cost was not determinable.
- Management concluded that disclosure controls and internal control over financial reporting were effective as of July 31, 2014. The independent auditor did not provide an internal-control attestation because the company qualified as a smaller reporting company.
Important Facts for Investors to Verify
- Retrieve the incorporated 2014 Annual Report to Shareholders for revenue, net income, cash flow, balance-sheet liquidity, debt maturities, interest expense, and margin data not included clearly in the supplied Form 10-K text.
- Assess the sustainability of occupancy and rental income after the Jamaica, Massapequa, Fulton/Bond Street, and other tenant changes.
- Verify the accounting treatment and cash collection of the $3,500,000 Brooklyn lease-amendment consideration, including the $1,250,000 receivable.
- Review debt terms, mortgage maturities, covenant requirements, and the company’s capacity to finance tenant improvements and property renovations.
- Evaluate tenant concentration, lease-expiration schedules, vacant square footage, and renewal risks across the portfolio.
- Monitor the contractor litigation involving the $376,467 deposit and any environmental, property, or related-party matters.
- Review related-party transactions and governance arrangements involving the controlling shareholder group and shared executives.