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Monmouth Real Estate Investment Corp. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: December 12, 2012 05:07PM
Monmouth Real Estate Investment Corp. (MNRTA) filed Annual Report for the period ended 2012-09-30.
Highlight of Business Operations:The Companys revenue primarily consists of rental and reimbursement revenue from the ownership of industrial rental property. Rental and reimbursement revenue increased $2,347,286, or 5%, for the year ended September 30, 2012 as compared to the year ended September 30, 2011. Total expenses (excluding other income and expense) increased $2,055,560, or 8%, for the year ended September 30, 2012 as compared to the year ended September 30, 2011. The increases were due mainly to the revenue and expenses relating to the property acquisitions made during fiscal 2012 and an increase in general and administrative expenses of $764,275, which is mainly due to an increase in compensation expense of approximately $533,000.
Lease termination income is recognized in operating revenues when there is a signed termination agreement, all of the conditions of the agreement have been met, the tenant is no longer occupying the property and the termination consideration is probable of collection. Lease termination amounts are paid by tenants who want to terminate their lease obligations before the end of the contractual term of the lease by agreement with the Company. In March 2012, the Company received $3,222,283 in lease termination income on its property in St. Joseph, MO. The Company also received reimbursement of $79,353 for real estate taxes and utilities. Additionally, if the Company does not re-lease or sell the entire property before November 30, 2012, the tenant will pay to the Company additional rent from September 1, 2012 through November 30, 2012 in the amount of $111,113 per month (pro-rated for any area/time leased). On May 8, 2012, the Company entered into a 5-year lease agreement with Woodstream Corp. for approximately 256,000 square feet (representing approximately 66% of the space) at the Companys 388,671 square foot facility in St. Joseph, MO. Rent commenced on September 1, 2012 and the annual rental income is $896,000 ($3.50 per square foot). This lease expires on September 30, 2017. In December 2012, the Company expects to receive $113,784 in lease termination income representing approximately 34% of the additional rent from September 1, 2012 through November 30, 2012 for the portion of the space that was not re-leased.
The Company also invests in debt and equity securities of other REITs as a proxy for real estate when suitable acquisitions are not available, for liquidity, and for additional income. The Company from time to time may purchase these securities on margin when there is an adequate yield spread. During fiscal 2012, the Companys securities portfolio increased $17,420,114, primarily due to purchases of $32,718,667 which was offset by sales of securities with a cost of $18,314,327 and an increase in the unrealized gain of $3,015,774. The Company recognized gains on sales of securities of $6,044,065 in addition to earning interest and dividend income of $3,358,674 during fiscal 2012. The margin loan balance was $-0- and $5,860,950 as of September 30, 2012 and 2011, respectively.