J.W. MAYS, INC.
J.W. Mays, Inc. (the “Company” or “Registrant”) with executive offices at 9 Bond Street, Brooklyn, New York 11201, operates a number of commercial real estate properties, which are described in Item 2 “Properties”. The Company’s business was founded in 1924 and incorporated under the laws of the State of New York on July 6, 1927. The Company discontinued its department store business which operated under the name of “MAYS”, in the year ended July 31, 1989, and has continued the leasing of real estate. The Company has no foreign operations. The Company employs approximately 29 employees and has a contract, expiring November 30, 2007, with a union covering rates of pay, hours of employment and other conditions of employment for approximately 24% of its employees. The Company intends to renew the union contract on a timely basis. The Company considers that its labor relations with its employees and union are good. Cautionary Statement Regarding Forward-Looking Statements This Annual Report on Form 10-K may contain forward-looking statements which include assumptions about future market conditions, operations and financial results. These statements are based on current expectations and are subject to risks and uncertainties. They are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company’s actual results, performance or achievements in the future could differ significantly from the results, performance or achievements discussed or implied in such forward-looking statements herein and in prior Securities and Exchange Commission filings by the Company. The Company assumes no obligation to update these forward-looking statements or to advise of changes in the assumptions on which they were based. Factors that could cause or contribute to such differences include, but are not limited to, changes in the competitive environment of the Company, general economic and business conditions, industry trends, changes in government rules and regulations and environmental rules and regulations. Statements concerning interest rates and other financial instrument fair values and their estimated contribution to the Company’s future results of operations are based upon market information as of a specific date. This market information is often a function of significant judgment and estimation. Further, market interest rates are subject to significant volatility. Risks Relating to Ownership Structure The controlling shareholder group may be able to vote its shares in favor of its interests that may not always coincide with the interests of shareholders not part of such group. This risk may be counter-balanced to a degree by the actions of the Board of Directors whose composition is made up of a majority of independent directors. The controlling shareholder group includes a corporation that owns a significant percentage of the Company’s common stock and which does business with the Company, as further described in the Notes to the Consolidated Financial Statements. In theory, this could result in a conflict of interest; nevertheless, the Company and its largest shareholder have put in place some controls to reduce the effects of any perceived conflict of interest. Certain conflicts of interest may be perceived by the relationship between the Company and its largest shareholder. Both entities use the same outside auditors and other professionals, both entities have the same Chief Executive Officer, and certain management personnel work for both entities. Nevertheless, the Company’s Board of Directors is composed of a majority of independent directors. As recently as 2005, in a case involving both entities, the Delaware Supreme Court in connection with an attempt to obtain books and records of the Company through a proceeding against the Company’s significant shareholder, held that the actions of the Company’s Board were proper. 1
Risks Related to Our Business We are a part of the communities in which we do business. Accordingly, like other businesses in our communities, we are subject to the following risks:
Risks Related to Real Estate Operations Our investment in property development may be limited by increasing costs required to “fit up” property to be leased to tenants. Also, as the cost of fitting up properties increases, we may be required to wait and forsake opportunities that would be revenue producing until such time that we obtain the necessary financing of such ventures. This risk may be mitigated by our obtaining of lines of credit and other financing vehicles, although such have significant limitations on the amounts that may be borrowed at any point in time. We also may be subject to environmental liability as an owner or operator of properties. Many of our properties are old and when we need to fit up a property for a new tenant, we may find materials and the like that could be deemed to contain hazardous elements requiring remediation or encapsulation. There are also risks associated with non-renewals of leases by the Company’s landlords and the loss of major tenants. The Company is trying to mitigate the latter by leasing our properties to multiple tenants where applicable in order to diversify the tenant base. Risks Related to our Investments Excess cash and cash equivalents may be invested from time to time. We seek to earn rates of return that will help us finance our business operations. These investments may be subject to significant uncertainties and may not be successful for many reasons, including, but not limited to the following:
Risk Factors Summary These are some of the “Risk Factors” that could affect the Company’s business. The Company endeavors to take actions and do business in a way that reduces these “Risk Factors” or, at least, takes them into account when conducting its business. Nevertheless, some of these “Risk Factors” cannot be avoided so that the Company must also take actions and do business that negates the adverse effects that these may have on the ongoing business of the Company. 2
The table below sets forth certain information as to each of the properties currently operated by the Company:
Properties leased are under long-term leases for varying periods, the longest of which extends to 2073, and in most instances renewal options are included. Reference is made to Note 5 to the Consolidated Financial Statements contained in the 2007 Annual Report to Shareholders, incorporated herein by reference. The properties owned which are held subject to mortgage are the Brooklyn Bond Street building, the Jowein building, the Jamaica building and the Fishkill property. 1. Brooklyn, New York—Fulton Street at Bond Street 13% of the property is leased by the Company under six separate leases. Expiration dates are as follows: 4/30/2011 (1 lease); 6/30/2011 (1 lease); 12/8/2013 (1 lease) which lease has two thirty-year renewal options through 12/8/2073; 4/30/2021 (2 leases) which leases previously had expiration dates of April 30, 2011 and were extended for an additional ten years; and 4/30/31 (1 lease) which lease previously had an expiration date of April 30, 2011 and was extended for an additional twenty years. The Company is adding two new elevators to its lobby at 9 Bond Street. The work is anticipated to be completed in the fiscal year 2008. There are plans to renovate vacant space for office use upon the execution of future leases to tenants, although no assurances can be made as to when or if such leases will be entered into. The property is currently leased to nineteen tenants of which fourteen are retail tenants and five occupy office space. One tenant occupies in excess of 10% of the rentable square footage (26.11%). This tenant sub- leases to a flea market, department store, shoe store, fast food restaurant and various other retail shops. The lease expires April 30, 2011 with no renewal options. Approximately 110,000 square feet of the building are available for lease. 3
As of July 31, 2007 the federal tax basis is $20,687,226 with accumulated depreciation of $7,078,976 for a net carrying value of $13,608,250. The lives taken for depreciation vary between 18-40 years and the methods used are the straight-line and the declining balance. The real estate taxes for this property are $1,000,606 per year and the rate used is averaged at $12.222 per $100 of assessed valuation. 2. Brooklyn, New York—Jowein building, Fulton St. & Elm Place Approximately 47% of the property is owned and 53% is leased. The leases with two landlords expire on April 30, 2010. There are no renewal options. There are plans to renovate vacant space for office use upon the execution of future leases to tenants, although no assurances can be made as to when or if such leases will be entered into. The property is currently leased to nineteen tenants of which seven are retail stores, two are fast food restaurants and ten leases are for office space. Approximately 150,000 square feet of the building are available for lease.
As of July 31, 2007 the federal tax basis is $15,778,619 with accumulated depreciation of $7,210,373 for a net carrying value of $8,568,246. The lives taken for depreciation vary between 18-40 years and the methods used are the straight-line and the declining balance. The real estate taxes for this property are $1,435,676 per year and the rate used is averaged at $11.778 per $100 of assessed valuation. 3. Jamaica, New York—Jamaica Avenue at 169th Street The building is owned and the land is leased from an affiliated company. The lease expires July 31, 2027. The property is currently leased to eleven tenants: six are retail tenants and five for office space. Three tenants each occupy in excess of 10% of the rentable square footage: a major retail store occupies 15.86%; and two tenants occupy office space—one occupies 14.23% and the other 11.07% of the rentable space. Approximately 27,000 square feet of the building are available for lease. There are plans to renovate vacant space for office use upon the execution of future leases to tenants, although no assurances can be made as to when or if such leases will be entered into. 4
As of July 31, 2007 the federal tax basis is $18,074,336 with accumulated depreciation of $7,991,551 for a net carrying value of $10,082,785. The lives taken for depreciation vary between 18-40 years and the methods used are the straight-line and the declining balance. The real estate taxes for this property are $360,720 per year and the rate used is averaged at $12.124 per $100 of assessed valuation. 4. Fishkill, New York—Route 9 at Interstate Highway 84 The Company owns the entire property. There are plans to renovate vacant space to tenants upon the execution of future leases to tenants, although no assurances can be made as to when or if such leases will be entered into. There are approximately 203,000 square feet of the building available for lease.
As of July 31, 2007 the federal tax basis is $9,608,448 with accumulated depreciation of $7,174,511 for a net carrying value of $2,433,937. The lives taken for depreciation vary between 18-40 years and the methods used are the straight-line and the declining balance. The real estate taxes for this property are $130,127 per year and the rate used is averaged at $4.30 per $100 of assessed valuation. 5. Levittown, New York—Hempstead Turnpike The Company owns the entire property. In October 2006, the Company entered into a lease agreement with a restaurant. The restaurant will construct a new building. The tenant expects to open the restaurant in fiscal 2008.
As of July 31, 2007 the federal tax basis is $298,860 with accumulated depreciation of $274,800 for a net carrying value of $24,060. The lives taken for depreciation vary between 18-40 years and the methods used are the straight-line and the declining balance. The real estate taxes for this property are $135,451 per year and the rate used is averaged at $737.15 per $100 of assessed valuation. 5
6. Massapequa, New York—Sunrise Highway The Company is the prime tenant of this leasehold. The lease expires May 14, 2009 and there is one renewal option. There are no present plans for additional improvements of this property. The entire leasehold is currently sub-leased to two tenants; one, to a gasoline service station and the other for use as a bank. Each of these tenants occupies in excess of 10% of the rentable square footage. The gasoline service station sub- lease expires April 29, 2009 with no renewal options. The sub-sub-lease to the bank expires May 14, 2009 with one renewal option, which was exercised in May 2007.
The real estate taxes for this property are $142,271 per year and the rate used is averaged at $732.15 per $100 of assessed valuation. The Company does not own this property. Improvements to the property, if any, are made by tenants. 7. Circleville, Ohio—Tarlton Road The Company owns the entire property. There are plans to renovate vacant space to tenants upon the execution of future leases to tenants, although no assurances can be made as to when or if such leases will be entered into. The property is currently leased to one tenant. The tenant is a manufacturer and uses these premises as a warehouse and distribution facility. The lease expired September 30, 2002. An extension and modification of lease for the entire premises was executed for a three-year period to September 30, 2005. A further extension and modification of lease agreement was executed for a five year period, with a right to cancel after three years, for 75,000 square feet to November 11, 2010. There are approximately 118,000 square feet of the building available for lease.
As of July 31, 2007 the federal tax basis is $4,388,456 with accumulated depreciation of $2,037,495 for a net carrying value of $2,350,961. The lives taken for depreciation vary between 18-40 years and the methods used are the straight-line and the declining balance. The real estate taxes for this property are $71,453 per year and the rate used is averaged at $3.88 per $100 of assessed valuation. 8. Brooklyn, New York—Livingston Street The City of New York through its Economic Development Administration constructed a municipal garage at Livingston Street opposite the Company’s Brooklyn properties. The Company has a long-term lease with the City of New York and another landlord expiring in 2013 with renewal options, the last of which expires 2073, under which: (1) Such garage, available to the public, provides truck bays and passage facilities through a tunnel, both for the exclusive use of the Company, to the structure referred to in (2) below. The truck bays, passage facilities and tunnel, totaling approximately 17,000 square feet, are included in the lease from the City of New York and another landlord referred to in the preceding paragraph. (2) The Company constructed a building of six stories and basement on a 20 x 75-foot plot (acquired and made available by the City of New York and leased to the Company for a term 6
expiring in 2013 with renewal options, the last of which expires in 2073). The plot is adjacent to and connected with the Company’s Brooklyn properties. In the opinion of management, all of the Company’s properties are adequately covered by insurance. See Note 10 to the Consolidated Financial Statements contained in the 2007 Annual Report to Shareholders, which information is incorporated herein by reference, for information concerning the tenants, the rental income from which equals 10% or more of the Company’s rental income. There are various lawsuits and claims pending against the Company. It is the opinion of management that the resolution of these matters will not have a material adverse effect on the Company’s Consolidated Financial Statements. In response to a termination notice that the Company received concerning its tenancy in a portion of the Jowein building, Brooklyn, New York, on April 25, 2007, the Company filed a lawsuit against its landlords in New York State Supreme Court, Kings County. In the lawsuit, the Company seeks a judgment declaring that the landlords’ termination notice was improperly issued and that the Company is not required to correct or cure the purported defaults cited in the termination notice. In addition, the Company seeks an order temporarily, preliminarily and permanently enjoining the landlords from taking any action to terminate the lease or otherwise interfere with the Company’s possession of the premises. On May 16, 2007, the New York State Supreme Court granted the Company’s motion for preliminary injunctive relief and enjoined the landlords, during the pendency of this action, from taking any action to evict the Company, terminate the Company’s lease which is scheduled to expire on April 30, 2010, and/or commencing summary action adverse to the Company’s rights or otherwise disturb the Company’s possession of the premises. The landlords have answered the complaint denying the allegations and asserting counterclaims against the Company relating to the premises. Discovery is ongoing. Management of the Company is unable to predict the outcome of this matter or whether the Company will be required to expend significant amounts of money in order to correct any of the purported defaults. Item 4. Submission of Matters to a Vote of Security Holders. During the fourth quarter of the fiscal year covered by this report, no matter was submitted to a vote of security holders of the Company. 7
Executive Officers of the Registrant The following information is furnished with respect to each Executive Officer of the Registrant (each of whose position is reviewed annually but each of whom has a three-year employment agreement, effective August 1, 2005), whose present term of office will expire upon the election and qualifications of his successor:
| ||||||||||||||||||||||||||||
Mays Jw, Inc - Recent Material Event |