NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
1.
Summary of Significant
Accounting Policies
:
Description
of Business
First Hartford Corporation (the Company) was
incorporated in Maine in 1909 and is engaged in the purchase, development,
ownership, management and sale of real estate, all of which is considered the
“Real Estate Operation” segment. The Company has a second segment “Fee for
Service” in which the Company is engaged as a preferred developer for CVS and Cumberland
Farms (see Service Income to follow).
Principles
of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company, its wholly-owned subsidiaries, and all
other entities in which the Company has a controlling financial interest. The
latter includes those in which the Company has been determined to be the
primary beneficiary of a variable interest entity or otherwise meets certain
criteria as a sole general partner or managing member in accordance with the
consolidation guidance of the Financial Accounting Standards Board (FASB)
Accounting Standards Codification. As such, included in the consolidated
financial statements are the accounts of Rockland Place Apartments Limited
Partnership and Clarendon Hill Somerville Limited Partnership. The Company’s
ownership percentage in these variable interest entity partnerships is
nominal. All intercompany balances and transactions have been eliminated in
consolidation.
Estimates
The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities as of the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Financial
Statement Presentation
Because the Company is engaged in the development and
sale of real estate at various stages of construction, the operating cycle may
extend beyond one year. Accordingly, following the usual practice of the real
estate industry, the accompanying consolidated balance sheets are unclassified.
Statements of Cash Flows
For purposes of the statements of cash flows, the
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Revenue Recognition
Rental Income – Rental income is recognized on a straight-line basis
over the terms of the respective leases and consists of base rent and
reimbursements for certain costs such as real estate taxes, utilities,
insurance, common maintenance and other recoverable costs as provided in the
lease agreements. There are no contingent rents. If conditions of rent are not
met, certain tenants may have rights to pay percentage rent not to exceed
stated rent. Currently, there are a very limited number of tenants on
percentage rent.
Annual Report on Form 10-K
|
Page 38
|
First
Hartford Corporation
|
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
1.
Summary of Significant
Accounting Policies (continued)
:
Revenue
Recognition (concluded):
Service Income - The Company is party to preferred developer
agreements with CVS and Cumberland Farms. Under these agreements, the
Company’s fee for such services provided is recognized as earned when services,
as outlined in the development agreements, are provided. Fees earned related to
the development of pharmacy stores for CVS during the years ended April 30, 2017
and 2016 were $3,394,500 and $4,767,000, respectively. Fees earned for
Cumberland Farms during the years ended April 30, 2017 and 2016 were $1,445,000
and $1,531,250, respectively. These fees are included in service income in the
consolidated statements of income.
The Company also provides management and maintenance
services to others. Fees for such services provided are recognized in service
income as earned when services are provided.
Sales of Real Estate – The Company recognizes sales of
real estate as revenue upon the transfer of title and when substantially all
performance requisites have been fulfilled. For the years ended April 30, 2017
and 2016, the Company had sales of $34,373,493 and $21,100,182, respectively.
The cost of the property sold was $27,723,800 and $17,673,023 for 2017 and 2016,
respectively. None of the property sold was otherwise providing significant
ongoing cash flows to the Company.
Construction Income - The Company primarily develops
real estate for its own use. However, revenues from long-term projects built
for third parties are recognized on the percentage-of-completion method of
accounting based on costs incurred to date in relation to total actual costs
and estimated costs to complete. Revisions in costs and profit estimates are
reflected in operations during the accounting period in which the facts become
known. The Company provides for estimated losses on contracts in the year such
losses become known. There were no long-term construction projects or revenue
for the years ended April 30, 2017 and 2016.
Other
Receivables and Payables
Pursuant to the Company’s Preferred Developer
Agreement with CVS, the Company is obligated to fund allowable costs incurred
in connection with the identification and development of new retail pharmacy
stores for which it receives direct reimbursements from CVS. Payables for
allowable costs incurred in connection with these activities but not yet funded
were $4,363,317 and $7,478,581 as of April 30, 2017 and 2016 respectively, and
have been included as “other payables” in the consolidated balance sheets.
Related reimbursements due from CVS were $4,064,876 and $5,956,103 as of April
30, 2017 and 2016, respectively, and have been included in “other receivables”
in the consolidated balance sheets.
Cash and Cash Equivalents – Restricted
Cash and cash equivalents – restricted, consist of
funds received from CVS in connection with the Company’s Preferred Developer
Agreement. Such amounts are to be used for the payment of costs incurred by
the Company for the development and construction of CVS retail pharmacy stores.
The restricted cash also includes Tenant Security Deposits held by the VIEs.
Annual Report on Form 10-K
|
Page 39
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
1.
Summary of Significant
Accounting Policies (continued)
:
Developed Properties, Equipment and Tenant
Improvements
Developed properties, equipment and tenant
improvements are recorded at cost.
Depreciation and amortization are provided using the
straight-line method based on the following estimated useful lives.
Description
|
Years
|
Developed
properties
|
15 40
|
Equipment
|
3 10
|
Tenant improvements
|
Lesser of
improvement life
or lease term
|
Expenditures for major renewals and betterments, which
extend the useful lives of developed properties, equipment and tenant
improvements, are capitalized. Expenditures for maintenance and repairs are
charged to operations as incurred.
Property Under Construction
The Company capitalizes costs directly associated with
property under construction. Such costs include materials, construction labor
and payroll cost, allocation of salaries and payroll cost from direct
activities such as engineering, purchasing and legal and services provided by
subcontractors. Material carrying costs for property taxes, insurance and
interest are also capitalized during the period of active construction until
construction is substantially complete (see Note 3).
The Company capitalizes labor cost for direct work by
offsite staff on specific projects. In the year ended April 30, 2017, $52,500
was capitalized. In the year ended April 30, 2016, $131,028 was capitalized.
Property Held for Sale
The Company classifies property as “held for sale” if
management commits to sell the property
and actively markets the property to potential buyers at fair market value, the
property is available for immediate sale in its present condition subject only
to terms that are usual and customary for sales of such property, and the sale
is probable within one year.
Deferred Expenses
Expenditures directly related to real estate under
consideration for development are deferred and included in deferred expenses in
the consolidated balance sheets. These costs include option payments,
attorney’s fees, architect and engineering fees, consultants, etc., but only to
the extent they are from outside sources. If development of the real estate
commences, all of the accumulated costs are reclassified to property under construction
in the consolidated balance sheets. If the project is later abandoned, all of
the accumulated costs are charged to expense.
Annual Report on Form 10-K
|
Page 40
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
1.
Summary of Significant
Accounting Policies (continued):
Deferred Expenses (concluded):
Leasing costs incurred, primarily commissions, are
capitalized for signed leases and included in deferred expenses in the
accompanying consolidated balance sheets. Such costs are amortized using the
straight-line method over the terms of the related leases. The unamortized
balance of such cost was $1,226,778 and $1,086,042 as of April 30, 2017 and 2016,
respectively.
Amortization expense for the next five years is
expected to be as follows:
Year Ending April 30,
|
2018
|
$238,625
|
2019
|
196,538
|
2020
|
131,934
|
2021
|
117,048
|
2022
|
106,033
|
Thereafter
|
436,600
|
Total
|
$1,226,778
|
Investment in Affiliated Entities
The Company has an investment in an affiliated limited
liability entity Dover Parkade, LLC, (“Dover”). The Company has a 50% interest
in Dover which owns a shopping center in Dover Township, NJ. The operating and
financial policies of Dover are not controlled by the Company. For years prior
to May 1, 2009, the Company was committed to provide funding to this equity
method investee. The Company’s investment was recorded at cost and
subsequently adjusted for its share of their net income and losses and distributions.
Through April 30, 2009, losses and distributions from Dover exceeded the
Company’s investment and the Company’s investment balance was reduced below $0
and recorded as a liability. Beginning May 1, 2009, distributions from Dover
have been credited to income and any additional losses have not been allowed to
further reduce the investment balance. The resulting carrying value of this
investment of ($1,328,909) as of April 30, 2017 and ($1,654,361) as of April
30, 2016 is included in other liabilities. The Company recorded equity in
earnings of unconsolidated subsidiaries of $685,452 and $666,851 for the years
ended April 30, 2017 and 2016, respectively, which includes distributions of
$360,000 in each year.
On October 4, 2011, the Company entered into a
partnership with a nonprofit entity which purchased a 99 year leasehold
interest in a 208 unit subsidized housing project in Claymont, Delaware. The
Company is a non-controlling .01% limited partner in the entity. The Company’s
investment is carried at cost of $100. A subsidiary of the Company is the
managing agent.
Annual Report on Form 10-K
|
Page 41
|
First
Hartford Corporation
|
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
1.
Summary of Significant
Accounting Policies (continued):
Fair
Value Measurements
Certain assets and liabilities are presented at fair
value on a recurring basis. In addition, fair values are disclosed for certain
other assets and liabilities. In all cases, fair value is determined using
valuation techniques based on a hierarchy of inputs. A summary of the
hierarchy follows:
-
Level 1 – Quoted prices in active
markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.
-
Level 2 – Quoted prices for identical assets and liabilities
in markets that are not active, quoted prices for similar assets and liabilities in
active markets or financial instruments for which significant observable inputs
are available, either directly or indirectly such as interest rates and yield
curves that are observable at commonly quoted intervals; and
-
Level 3 – Prices or valuations
that require inputs that are unobservable.
In certain cases, the inputs used to measure fair
value may fall into different levels of the fair value hierarchy. In such
cases, the level in the fair value hierarchy within which the fair value
measurement in its entirety falls has been determined based on the lowest level
input that is significant to the fair value measurement in its entirety. The
Company’s assessment of the significance of a particular input to the fair
value measurement in its entirety requires judgment, and considers factors
specific to the asset or liability.
The Company’s financial instruments include cash and
cash equivalents, accounts receivable, marketable securities, accounts payable,
accrued expenses and debt. The fair values of accounts receivable, accounts
payable and accrued expenses are estimated to approximate their carrying
amounts because of their relative short-term nature. In general, the carrying
amount of variable rate debt approximates its fair value. Further, the
carrying amount of fixed rate debt approximates fair value debt since the
interest rates on the debt approximates the Company’s current incremental
borrowing rate. Information about the fair values of marketable securities and
derivative liabilities is presented below.
Level
1
Marketable
Securities – Common and Preferred Stocks
The Company determines the appropriate classifications
of its investments in marketable debt and equity securities at the time of
purchase and re-evaluates such determinations at each balance sheet date. As
of April 30, 2017 and 2016, investments consist of equity securities, which are
classified as available for sale. Investments in marketable securities are
stated at fair value. Fair value for marketable securities is based on the
last sale of the period obtained from recognized stock exchanges (i.e. Level
1). Net unrealized holding gains and temporary losses on equity securities are
included as a separate component of the deficiency. Net unrealized gains of $112,813
as of April 30, 2017 and losses of $466,872 as of April 30, 2016 are included
in noncontrolling interests. Gains or losses on securities sold are based on
the specific identification method.
Annual Report on Form 10-K
|
Page 42
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
1.
Summary of Significant
Accounting Policies (continued):
Fair
Value Measurements (concluded):
Level 2
Derivative Instruments
The Company, through its 50% owned consolidated subsidiaries, has
entered into two separate floating-to-fixed interest rate swap agreements with
banks that expire in May 2025 and July 2031. The Company has determined that
these derivative instruments do not meet the requirements of hedge accounting
and have therefore recorded the change in fair value of these derivative
instruments through income in the consolidated statement of operations. The gain
/ (loss) on derivatives incurred during the years ended April 30, 2017 and 2016
totaled $2,669,416 and ($2,177,879), respectively, and the Company has recorded
a liability of $2,023,793 and $4,693,209 in the consolidated balance sheets,
which represents the fair value of the interest rate swaps as of April 30, 2017
and 2016, respectively.
Level 3
Debt
A VIE of the Company assumed a third mortgage note
with Massachusetts Housing Finance Agency (MHFA) on November 1, 2006, having a
balance of $18,315,482. The note bears interest at the rate of 5.36% per annum.
The VIE has the right to purchase the note upon maturity for the fair value of
the note as determined by an appraiser. The mortgage loan was recorded at its
estimated fair value on the date of acquisition. The fair value of the third
mortgage note has been determined based on the fair value of the property on
the acquisition date less the primary loan balances. As of April 30, 2017, the
carrying amount of the loan was $1,828,910.
There were no gross realized and
unrealized gains and losses on Level 3 assets and liabilities for the years
ended April 30, 2017 and 2016.
The Company recognizes transfers between levels within
the hierarchy as of the beginning of the reporting period. There have been no
significant transfers between levels within the hierarchy for the years ended
April 30, 2017 and 2016.
Long-Lived Assets
Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that their carrying amount might
not be recovered.
Income Taxes
Deferred income taxes are provided on the differences
between the financial statement and income tax bases of assets and liabilities
and on net operating loss carryforwards using the enacted tax rates.
A valuation allowance would be provided for deferred
income tax assets for which realization is not likely in the near term.
Annual Report on Form 10-K
|
Page 43
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
1.
Summary of Significant
Accounting Policies (continued):
Income Taxes (concluded):
As of April 30, 2017 and 2016, the Company has no
significant uncertain income tax positions. The Company recognizes interest
and penalties on any uncertain income tax positions as a component of income
tax expense. During the years ended April 30, 2017 and 2016, the Company did
not recognize any interest or penalties related to unrecognized tax benefits.
The statute of limitations is three years unless there
is fraud or substantial understatement of income. Therefore, tax returns beginning
with fiscal year 2014 are open to examination by Federal, local and state
authorities.
Stock Compensation
Share-based compensation cost is measured at the grant
date, based on the calculated fair value of the award, and is recognized as an
expense over the employee’s requisite service period (generally the vesting
period of the equity grant).
Earnings (loss) per share (EPS)
Basic earnings (loss) per share amounts are determined
using the weighted-average outstanding common shares for the year. Diluted
earnings (loss) per share amounts include the weighted-average outstanding
common shares as well as potentially dilutive common stock options and warrants
using the “treasury stock” method. There were no options outstanding at April
30, 2017 or April 30, 2016.
New Accounting Pronouncements
In May 2014, the FASB issued a standard on revenue
recognition providing a single, comprehensive revenue recognition model for all
contracts with customers. The revenue standard is based on the principle that
revenue should be recognized to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration of which the
entity expects to be entitled in exchanged for those goods or services. The
standard is effective beginning January 1, 2017, with no early adoption
permitted. The amendments may be applied retrospectively to each prior period
presented or retrospectively with the cumulative effect recognized as of the
date of initial application. We are currently evaluating the adoption method
options and the impact of the new guidance on our consolidated financial
statements.
In February 2015, the FASB issued a standard that
amends the current consolidation guidance. The amendments affect both the
variable interest entity (VIE) and voting interest entity (VOE) consolidation
models. The changes are extensive and apply to all companies. The need to
assess an entity under the different consolidation model may change previous consolidation
conclusions. The standard is effective in fiscal periods beginning after
December 15, 2015 with early adoption permitted. The Company has evaluated the
impact of the new guidance on its consolidated financial statements and
concluded that it has no impact on its consolidated financial statements.
Annual Report on Form 10-K
|
Page 44
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
1.
Summary of Significant
Accounting Policies (concluded):
New Accounting Pronouncements (concluded):
In February 2016, the FASB issued Accounting
Standards Update (ASU) No. 2016-02, Leases, (Topic 842), which is intended
to improve financial reporting around leasing transactions. The ASU affects all
companies and other organizations that engage in lease transactions (both
lessee and lessor) that lease assets such as real estate and manufacturing
equipment. This ASU will require organizations that lease assets—referred to as
“leases”—to recognize on the balance sheet the assets and liabilities for the
rights and obligations created by those leases. ASU No. 2016-02 is
effective for fiscal years and interim periods within those years beginning
January 1, 2019. The Company is in process of assessing the impact of the
adoption of ASU No. 2016-02 on its financial position, results of
operations and cash flows.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts
and Cash Payments. The ASU provides guidance on how certain cash receipts and
cash payments are to be presented and classified in the statement of cash
flows. For public entities, ASU 2016-15 is effective for fiscal years beginning
after December 15, 2017, and interim periods within those fiscal years. Early
adoption is permitted. The Company is currently evaluating the potential impact
of adopting this guidance on its consolidated financial statements.
2.
Consolidated Variable
Interest Entities
The Company’s consolidated financial statements
include the accounts of Rockland Place Apartments Limited Partnership
(“Rockland”), Clarendon Hill Somerville Limited Partnership (“Clarendon”) and
Trolley Barn Associates, LLC (“Trolley Barn”). The Company has consolidated
Rockland, Clarendon and Trolley Barn based on the express legal rights and
obligations provided to it by the underlying partnership agreements and its
control of their business activity.
Connolly and Partners, LLC (75% owned by the Company)
has a .01% ownership interest in and is a general partner of Rockland.
Connolly and Partners, LLC also owns 49% of Clarendon Hill Somerville, LLC
which owns .01% of and is the general partner of Clarendon. Trolley Barn is
50% owned by the Company.
Rockland owns and operates a rental housing project
consisting of 204 units located in Rockland, Massachusetts. Clarendon owns and
operates a 501 unit apartment complex in Somerville, Massachusetts. Both
projects were renovated and are managed by the Company. Renovation costs were
financed with loans from MHFA, subsidies from U.S. Department of Housing and
Urban Development (HUD) and limited partner capital contributions.
Each building of the projects qualifies for low-income
housing credits pursuant to Internal Revenue Code Section 42 (“Section 42”),
which regulates the use of the projects as to occupant eligibility and unit
gross rent, among other requirements. Each building of the projects must meet
the provisions of these regulations during each of fifteen consecutive years in
order to remain qualified to receive the credits. In addition, Rockland and
Clarendon have executed an Extended Low-Income Housing Agreement, which
requires the utilization of each project pursuant to Section 42 through the compliance
period, even if Rockland or Clarendon disposes of the project.
Each project’s low-income
housing credits are contingent on its ability to maintain compliance with
applicable sections of Section 42. Failure to maintain compliance with
occupant eligibility, and/or unit gross rent, or to correct noncompliance
within a specified time period could result in recapture of previously taken
tax credits plus interest. In addition, such potential noncompliance may
result in an adjustment to the capital contributed by the investment limited
partner.
Annual Report on Form 10-K
|
Page 45
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
2.
Consolidated Variable
Interest Entities (concluded):
Rockland has an agreement with the Rockland Housing
Authority whereby the Housing Authority has the option to purchase the
property, after the 15-year tax credit compliant period on January 1, 2024,
from Rockland. The option price is based on a specified formula in the
agreement.
Clarendon has an agreement with the 51% owner of
Clarendon Hill Somerville, LLC, Clarendon Hill Towers Tenant Association, LLC
(“CHTTA”), whereby CHTTA has an option to purchase the property after the 15
year tax credit compliance period from the partnership. The option price is
the greater of:
a.
Outstanding debt and taxes, or
b.
Fair market value of the property
The assets at April 30, 2017 and 2016 of the
consolidated VIEs (Rockland and Clarendon) that can be used only to settle
their obligations and the liabilities for which creditors (or beneficial
interest holders) do not have recourse to the general credit of the Company are
shown parenthetically in the line items of the consolidated balance sheets.
A summary of the assets and liabilities of Rockland
and Clarendon included in the Company’s consolidated balance sheets as follows:
|
April 30,
|
|
2017
|
|
2016
|
|
|
|
|
Real estate and equipment, net
|
$66,732,664
|
|
$65,735,521
|
Other assets
|
13,417,929
|
|
8,195,007
|
Total assets
|
80,150,593
|
|
73,930,528
|
|
|
|
|
Intercompany profit elimination
|
(2,719,143)
|
|
(2,863,451)
|
Consolidated
|
$77,431,450
|
|
$71,067,077
|
|
|
|
|
Mortgages and other notes payable
|
$64,728,200
|
|
$57,132,998
|
Other liabilities
|
4,179,842
|
|
4,471,413
|
Total liabilities
|
$68,908,042
|
|
$61,604,411
|
Substantially all assets of Rockland and Clarendon are
pledged as collateral for its debt. The recourse of the holders of the
mortgages and other notes payable is limited to the assets of Rockland and
Clarendon. Combined revenues for Rockland and Clarendon were $12,171,608 for
the year ended April 30, 2017 and $12,117,191 for the year ended April 30, 2016.
The combined net loss for Rockland and Clarendon was $843,327 for the year
ended April 30, 2017 and $390,055 for the year ended April 30, 2016. Since the
Company’s ownership interest in both entities is
nominal, substantially all of such losses are allocated to the noncontrolling
interests in the consolidated financial statements.
Trolley Barn’s only asset is approximately seven acres
of land in Cranston, RI with a carrying value of $391,905.
Annual Report on Form 10-K
|
Page 46
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
3.
Construction Loans,
Mortgages, Notes Payable, and Lines of Credit:
Information about the Company’s debt follows:
|
2017
|
|
2016
|
|
|
|
|
Construction loans and mortgages
payable with interest rates ranging from zero to 7.25% at April 30, 2017 and
2016 and maturities at various dates through 2056.
|
$222,692,946
|
|
$217,151,132
|
|
|
|
|
Notes payable with interest rates
ranging from zero to 4.40% at April 30, 2017 and 2016 and
maturities ranging from 2030 to 2050.
|
1,704,697
|
|
1,744,697
|
|
|
|
|
Lines of credit with interest rates
ranging from 3.98% to 4.25% at April 30, 2017
and maturities ranging from 2018 to
2020.
|
6,400,000
|
|
2,652,091
|
|
|
|
|
|
230,797,643
|
|
221,547,920
|
|
|
|
|
Less deferred debt issuance costs
|
(3,067,098)
|
|
(1,837,083)
|
|
|
|
|
|
$227,730,545
|
|
$219,710,837
|
As of April 30, 2017 and 2016, $162,217 and $420,906
of interest was capitalized.
Aggregate principal payments due on the above debt for
each of the years succeeding April 30, 2017 are as follows:
Year Ending April 30,
|
|
|
2018
|
$32,602,471
|
2019
|
8,885,776
|
2020
|
7,116,034
|
2021
|
5,862,559
|
2022
|
6,628,223
|
Thereafter
|
|
|
|
Substantially all real estate owned is pledged as
collateral for construction and mortgage loans.
Refinancings:
Rockland Place Apartments LP – Refinance:
On June 3, 2016, Rockland Place Apartments LP
executed a First Mortgage Note payable with the Massachusetts Housing Finance
Agency in the amount of $14,300,000. The note is nonrecourse, has a 40-year
term and requires monthly payments of principal and interest of $54,628. The
interest rate is fixed at 3.41%. The proceeds of the note were used to repay
its bridge mortgage note with a principal balance of $591,174, its Fourth
Mortgage Note with a principal balance of $500,000, and it’s Flexible Subsidy Capital
Improvement Loan with a principal balance of $4,268,539. The proceeds also
funded closing costs and certain escrows that are being used to redevelop the
complex.
Annual Report on Form 10-K
|
Page 47
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
3.
Construction Loans,
Mortgages, Notes Payable, and Lines of Credit (continued):
Edinburg, TX - Refinance:
On September 7, 2016, the Company partially
refinanced its loans on its shopping center property in Edinburg, TX. The new
loan with Goldman Sachs is for $32,500,000 and is secured by the shopping
center. Proceeds from this new loan were used to pay off $31,030,767 of
existing debt with Protective Life and to establish a $1,100,000 Earnout
Reserve Account (ERA), with the balance used to fund escrows and pay closing
costs. The remainder of the existing debt of $15,926,740 is secured by vacant
land of approximately 50 acres attached to the shopping center. The $1,100,000
ERA will be returned to the Company if, within two years, it can provide
evidence that two significant named tenants have renewed their lease options
for an additional five years (or the Company has entered into Approved
Substitute Lease(s) for same) and the Earnout Debt Yield (EDY), as defined, is
equal to or greater than 8.30%. If the Company fails to do so, a minimum of
$1,000,000 of the ERA will be used to reduce the principal balance of the loan
and up to $100,000 will be used to pay the applicable yield maintenance
premium. The loan has a 30 year amortization and duration of 10 years (i.e.,
maturity date of September 6, 2026) with an interest rate of 4.604%. For the
first year, interest only is paid monthly; beginning in October 2017, principal
and interest are paid monthly. Prepayment of the loan is generally
prohibited. The Company receives income directly to its operating account
unless a “trigger event” occurs in which case the cash goes into a lockbox
account controlled by the lender. Basic “trigger events” include:
-
Failure to
maintain a 12 month-rolling Debt-Service Coverage Ratio (DSCR), as defined, of
1.1:1.0,
-
Failure to
maintain a market-based Net Worth, as defined, of $20,000,000,
-
Failure to
maintain Liquid Assets, as defined, of $2,000,000,
-
Loan default,
-
Various Rollover
Trigger Events, which include certain significant named tenants vacating,
terminating or not renewing their leases, or filing for bankruptcy and not
replaced with an Approved Substitute Lease, as defined.
In addition, if a significant named tenant goes dark,
vacates, or is not in occupancy of substantially all of its current space, the
Company would have to deposit either a $2,000,000 reserve or letter of credit
with the lender until such time as agreed upon lease conditions being met.
With respect to the remaining balance of $15,926,740
from the original loans with Protective Life now secured by vacant land of
approximately 50 acres directly adjacent to the shopping center, the Company
and the lender agreed that once the Company repays $2,000,000 of the balance,
the interest rate on the remaining balance will be reduced from 5.0% to 4.0%. This
repayment was made on April 28, 2017. The lender has also agreed that if the Company pays off the entire loan by September 6, 2017,
its 50% Additional Interest Agreement (AIA) rights will terminate. This
remaining loan is personally guaranteed by the Chairman of the Company.
New Orleans, LA – Refinance
: On November 18, 2016, the Company refinanced one of
its construction loans on its shopping center property in New Orleans, LA. The
construction loan, which had a principal balance of $7,301,803, was replaced by
a mortgage loan of $7,436,745. The new mortgage loan has an interest rate of
One Month ICE LIBOR, as defined, plus 2.50% and an initial maturity date of
November 18, 2017 with an option to extend the maturity to November 18, 2018 at
an interest rate of 5.0% if it meets certain requirements. The loan is
interest-only until November 18, 2017; if the loan is extended an additional
year, principal payments will be made using a 25-year amortization.
Annual Report on Form 10-K
|
Page 48
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
3.
Construction Loans,
Mortgages, Notes Payable, and Lines of Credit (concluded):
Lubbock, TX – Refinance
: On November 21, 2016, the Company refinanced its
mortgage loan on its shopping center in Lubbock, TX. The new mortgage loan has
a principal balance of $13,750,000, which was used to pay off the previous
mortgage loan balance of $10,837,300, pay a defeasance premium of $432,776, pay
closing costs, and fund escrows. The new mortgage loan has an interest rate of
4.974%, monthly payments of $76,540 based on a 27.5-year amortization, and a
ten year term expiring on December 6, 2026. Prepayment is not permitted until
six months before the maturity date.
Construction Loans:
Austin, TX – Financing:
On February 28, 2017, the Company modified an
existing line of credit loan to $4,000,000 of which up to $1,600,000 is
available to finance construction of a building on a parcel of land it owns in
Austin, TX. This loan has an interest rate of 1.50% plus the Prime Rate, as
defined, with a Floor Rate of 5.00% and has a maturity date of December 27,
2017 with an option to extend for six months if certain criteria are met.
Edinburg, TX – Financing
: On April 28, 2017, the Company obtained a $2,750,000
construction loan to finance construction of a restaurant at its Edinburg, TX
property. The Company had an equity requirement of $2,716,000, of which
$2,000,000 was used to repay Protective Life against their remaining loan to
release the lot the restaurant is being constructed on. The initial
construction draw was for $1,092,857 with another $1,657,143 available to draw
as construction is completed. The interest rate on the loan is the Prime Rate per Wall Street Journal plus 1.00% with a
floor of 4.75% and a ceiling of 7.00%. The monthly loan payments are interest
only for the first six months then convert to monthly principal and interest
payments calculated using a 20 year amortization period with a final balloon
payment due on April 25, 2024.
Lines of Credit:
On July 30, 2015, the Company obtained a credit line
with a regional bank. This $2,760,000 line of credit is used from time to
time primarily to fund initial investments related to development
opportunities. The interest rate on these loans is 3.00% plus One Month ICE
LIBOR rate up to maturity date (i.e., twelve months from issuance of proceeds)
and 12.0% thereafter. As of April 30, 2017, the Company had borrowings of $2,650,000
against this credit line.
On December 7, 2015, the Company entered into a
$2,000,000 revolving demand loan agreement (“line of credit”) with a regional
bank. The interest rate on this loan is Wall Street Journal Prime, with a
floor of 3.25%. The loan is unsecured and there are no guarantors. Interest
is to be paid monthly; principal is to be repaid within twelve
months or on demand, at the bank’s discretion. There are no prepayment penalties.
This line of credit is used from time to time primarily to fund initial
investments related to development opportunities. As of April 30, 2017, the
Company had borrowings of $2,000,000 against this credit line.
On April 19, 2017, the Company entered into a
$2,000,000 unsecured line of credit with a regional bank. Terms of the line of
credit are as follows:
Term:
|
3 years
|
Rate:
|
LIBOR + 3.25%
|
Fee:
|
0.50% (One Time)
|
Unused Fee:
|
0.25% annually on the unused line
|
Guarantee:
|
Full guarantee by the Chairman of the
Company (Individual)
|
Deposits:
|
Must maintain a minimum of $500,000 at
bank
|
Other:
|
Each funding request to be at the sole
discretion of the bank and only to acquire credit tenanted properties.
|
Clean Up:
|
Borrower to be out of debt once each
year for at least 30 days.
|
As of April 30, 2017, the Company had borrowings of $1,750,000
against this credit line.
Annual Report on Form 10-K
|
Page 49
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
4.
Pledge of Stock in
Subsidiaries:
For an extended period of time the Company was unable
to obtain financing (secured or unsecured) without the personal guarantees of
the Chairman of the Company. To some degree, the Company has recently been
able to obtain financing without a guarantee, but generally guarantees continue
to be a necessary component to some construction loans. In the past, the
Company has provided pledges of the stock of its subsidiaries to the Chairman
of the Company as protection from personal losses due to his guarantees. These
pledges are expected to stay in place until the guarantees are eliminated.
The Chairman of the Company has guaranteed the
following outstanding amounts at April 30, 2017:
Mortgage loan – Edinburg, TX
|
$13,926,740
|
Mortgage loan – Manchester, CT
(Company HQ)
|
$206,356
|
Land loan – Buda, TX
|
$1,505,000
|
Land loan – Austin, TX
|
$2,500,000
|
Land loan – Cedar Park, TX
|
$1,365,000
|
Line of credit – Regional bank
|
$1,750,000
|
In the event that the Chairman is called upon to pay
on any of the above guarantees, the Company would become liable to him.
5.
Related Party
Transactions:
Included in amounts due from related parties and
affiliates is $-0- and $157,288 at April 30, 2017 and 2016 relating to funds
borrowed from Hartford Lubbock Limited Partnership by Green Manor Corporation,
which owns Journal Publishing and owns 98.01% of Hartford Lubbock Limited
Partnership. These funds were borrowed some years ago (prior to consolidation).
The Chairman of the Company and his wife are the owners of Green Manor
Corporation.
Included in amounts due from related parties and
affiliates is $150,000 and $-0- at April 30, 2017 and 2016 relating to funds
provided to a member of Cranston Brewery, LLC by Cranston/BVT Associates, LP, a
50% owned subsidiary of the Company. Cranston Brewery LLC owns the other 50%
of Cranston/BVT Associates, LP.
Included in amounts due to
related parties and affiliates is $518,813 and $502,091 payable to Cranston
Brewery LLC at April 30, 2017 and 2016, respectively. Cranston Brewery LLC is
an affiliate but not owned by the Company. The amount due represents its
funding of operations of Trolley Barn Associates (50%). The Company’s advances
to Trolley Barn Associates were eliminated in consolidation.
Included in amounts due to related parties and
affiliates is $80,000 and $80,000 payable to New Folly Brook Commons, LLC at
April 30, 2017 and 2016, respectively. New Folly Brook Commons, LLC is owned by
the Chairman of the Company. The amount due represents the remaining balance
for condominiums sold by New Folly Brook Commons, LLC to a subsidiary of the
Company.
Included in amounts due to related parties and
affiliates is $-0- and $20,000 payable to the Chairman of the Company at April
30, 2017 and 2016, respectively. The amount due represents a short-term loan
to Hartford Lubbock Limited Partnership.
Annual Report on Form 10-K
|
Page 50
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
6.
Employee Retirement
Plan:
The Company had a SIMPLE IRA through December 31,
2015. This plan was replaced by a 401(k) Plan on January 1, 2016. Under this
plan, all employees over 18 years of age, working at least 30 hours weekly are
eligible to participate. Participants are eligible to defer earnings to the
extent of IRS regulations. The Company matches up to 4% of each participating
employee’s annual salary (was 3% under the SIMPLE IRA). Pension expense was $174,417
and $132,643 for the years ended April 30, 2017 and 2016, respectively.
7.
Income Taxes:
The provision (benefit) for income taxes consists of:
|
2017
|
|
2016
|
|
|
|
|
Current Federal income taxes
|
$49,999
|
|
$80,000
|
Current State income taxes
|
350,313
|
|
180,915
|
Deferred Federal income taxes
|
1,265,977
|
|
551,708
|
Deferred State income taxes
|
193,652
|
|
119,524
|
|
$1,859,941
|
|
$932,147
|
|
|
|
|
The components of the net deferred
income tax asset follow:
|
|
|
|
|
|
|
Tax effect of net operating loss
carry-forwards
|
$449,642
|
|
$1,426,572
|
Basis in fixed assets
|
250,042
|
|
368,442
|
AMT credits
|
311,917
|
|
261,054
|
Rent receivable
|
(381,301)
|
|
-0-
|
Other
|
40,847
|
|
74,708
|
Subtotal
|
671,147
|
|
2,130,776
|
Less: Valuation allowance
|
-0-
|
|
-0-
|
|
$671,147
|
|
$2,130,776
|
A reconciliation of the
provision (benefit) for income taxes with amounts determined by applying the
statutory U.S. Federal income tax rate before income taxes is as follows:
|
2017
|
|
2016
|
|
|
|
|
Federal statutory rate (34%)
|
$2,155,367
|
|
$875,682
|
State tax – net of Federal effect
|
350,313
|
|
180,915
|
Losses (income) attributable to noncontrolling
interests in pass-through entities
|
(506,988)
|
|
42,343
|
Other
|
(138,751)
|
|
(166,793)
|
Provision (benefit) for income taxes
|
$1,859,941
|
|
$932,147
|
Annual Report on Form 10-K
|
Page 51
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
8.
Leases:
The Company leases commercial and residential real
estate to tenants under various operating leases expiring through 2042.
Minimum future rentals to be received on
non-cancellable commercial real estate leases as of April 30, 2017 are as
follows:
Year Ending April 30,
|
|
|
2018
|
$13,271,438
|
2019
|
12,174,840
|
2020
|
9,457,993
|
2021
|
8,478,983
|
2022
|
6,909,247
|
Thereafter
|
|
Total
|
|
9.
Investments in
Affiliates:
Summarized
financial and other information for the Company’s investment in Dover Parkade
LLC (Dover) follows:
Dover – New Jersey:
As of and for the years ended April 30,
Company ownership – 50%
|
2017
|
2016
|
|
|
|
Assets
|
$11,811,029
|
$12,365,300
|
Liabilities
|
19,068,557
|
19,553,732
|
Members’ deficit
|
(7,257,528)
|
(7,188,432)
|
Revenue
|
2,700,169
|
2,708,632
|
Operating expenses
|
1,224,837
|
1,255,426
|
Non-operating expense, net
|
(824,428)
|
(839,504)
|
Net income (loss)
|
650,904
|
613,702
|
Dover’s major tenant is Stop & Shop, which
provided 56% and 53% of the total revenue in the years ended April 30, 2017 and
2016, respectively, under a lease that expires on June 30, 2026.
10.
Concentrations of Credit
Risk:
The Company’s financial instruments that are subject
to concentrations of credit risk consist of cash and cash equivalents,
marketable securities, and accounts, notes and other receivables.
The Company places its cash deposits, including
investments in certificates of deposit, with various financial institutions.
Bank deposits may be in excess of current Federal depository insurance limits.
The Company manages exposure to counterparty credit risk through specific
minimum credit standards, diversification of counterparties and procedures to
monitor its credit risk concentrations.
Annual Report on Form 10-K
|
Page 52
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
10.
Concentrations of Credit
Risk (concluded):
The Company has one customer which accounts for more
than 10% of the Company’s revenue in both 2017 and 2016.
The Company assesses the financial strength of its
tenants prior to executing leases and typically requires a security deposit and
prepayment of rent. The Company establishes an allowance for doubtful accounts
receivable based upon factors surrounding the credit risk of specific tenants,
historical trends and other information.
The Company assesses the financial strength of CVS
prior to incurring costs in connection with the development of CVS pharmacy
stores. Based on historical experience and other information, no allowance for
doubtful accounts related to these receivables is considered necessary by
management as of April 30, 2017 or 2016.
11.
Segment Information:
The factors used by the Company to identify reportable
segments include differences in products and services and segregated operations
within the Company. The first segment, “Real Estate Operations” participates in
the purchase, development, management, ownership and the sale of real estate.
Within its second segment, “Fee for Service”, the Company provides preferred
developer services to CVS and Cumberland Farms Inc. in certain geographic areas.
Summary financial information for the two reportable segments is as follows:
|
2017
|
|
2016
|
Revenues:
|
|
|
|
Real Estate Operations
|
$70,830,796
|
|
$55,565,262
|
Fee for Service
|
4,839,500
|
|
6,298,250
|
Total
|
$75,670,296
|
|
$61,863,512
|
|
|
|
|
Operating Cost and Expense:
|
|
|
|
Real Estate Operations
|
$47,901,941
|
|
$38,496,837
|
Fee for
Service
|
5,011,262
|
|
5,695,793
|
Administrative Expenses
|
9,078,059
|
|
7,141,236
|
Total
|
$61,991,262
|
|
$51,333,866
|
|
|
|
|
All costs
after administrative expenses are cost of the real estate operation.
The only assets in the balance sheet belonging to the
Fee for Service segment is restricted cash of $129,651 in 2017 and $1,664,214
in 2016 and receivables of $4,262,302 in 2017 and $6,389,867 in 2016.
12.
Deferred Compensation Plan:
On December 1, 2014, the Company adopted a Deferred
Bonus Plan that awarded six key employees an annual payment of $21,667 each for
three years. All of the six employees have satisfied the vesting requirements
and received the first two payments in August 2015 and 2016. The total expense
recorded for this bonus was $390,000.
Annual Report on Form 10-K
|
Page 53
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
13.
Gain on Voluntary Foreclosure:
Putnam, CT – Transfer to Lender:
On November 1, 2014, a payment was due for the
mortgage of the shopping center in Putnam, CT in the amount of approximately
$4,700,000. The rentable space of the shopping center is 57,529 square feet,
46% of which was leased to one store. That store informed the Company that
they were not renewing their lease, which expired on January 31, 2015, and, as a
result, the Company found it impossible to refinance the mortgage without
finding a replacement tenant. Therefore, on June 5, 2015, the Company agreed
to transfer title of the property to the lender. The Company recognized a gain
since the mortgage was non-recourse and was in excess of the book value.
Pre-tax income for this shopping center was $-0- and $44,645 for the years
ended April 30, 2017 and 2016, respectively.
14.
Purchases of Real Estate:
Buda, TX - Land Purchases
: On April 29, 2016, the Company purchased a parcel of
land in Buda, TX adjacent to another parcel owned by the Company for $686,167
including closing costs. On May 13, 2016, the Company purchased three
additional parcels of land adjacent to these parcels for $1,051,034 including
closing costs. These purchases were financed by a new land loan of $1,505,000
with the balance funded by working capital. Key terms of the loan are as
follows:
Loan Amount:
|
$1,505,000
|
Maturity Date:
|
September 24,
2017
|
Interest Rate:
|
The lower of a)
the Prime Rate per Wall Street Journal plus 1.00% or b) 4.25%.
|
Payments:
|
Interest only
payable monthly. At maturity, outstanding principal plus any
accrued interest will be payable.
|
Guarantors:
|
Both the Company
(Corporate) and Chairman of the Company (Individual).
|
Austin, TX – Land Purchase
: On December 19, 2016, the Company purchased a parcel
of land in Austin, TX for $3,732,223. This
purchase, along with related closing costs, was financed by an existing line of
credit of $1,250,000 and a new land loan of $2,500,000. This land is being
held for potential future development. Key terms of the loan are as follows:
Loan Amount:
|
$2,500,000
|
Maturity Date:
|
December 19,
2018
|
Interest Rate:
|
The greater of
a) the Prime Rate per Wall Street Journal plus 0.75% or b) 4.25%.
|
Payments:
|
Interest only
payable monthly. At maturity, outstanding principal plus any
accrued interest will be payable.
|
Guarantors:
|
Both
the Company (Corporate) and Chairman of the Company (Individual).
|
Annual Report on Form 10-K
|
Page 54
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
14.
Purchases of Real Estate
(continued):
Brentwood, NY – Land Purchase:
On December 23, 2016, the Company purchased a parcel
of land in Brentwood, NY for $5,000,000, which along with closing costs was
financed by a new acquisition mortgage loan of $5,000,000 and working capital.
The Company is going to build a single entity build-to-suit on this land. This
construction will be financed by a building mortgage loan of $4,775,000 and a
project mortgage loan of $875,000. The total amount of these three loans is
$10,650,000. Key terms of the loans are
as follows:
Loan Amount:
|
$10,650,000
|
Maturity Date:
|
December
1, 2027
|
Interest Rate:
|
One month LIBOR,
as defined, plus 2.75% through December 1, 2017 (the Construction
Phase); thereafter, one month LIBOR plus 1.95% (the Permanent Phase).
|
Payments:
|
Interest only
payable monthly during the Construction Phase. Thereafter, principal and
interest payable monthly using a 30-year amortization.
|
Guarantor:
|
The Company
(Corporate).
|
Prepayment Penalties:
|
Prior to
December 1, 2017, 0.50% of the principal balance prepaid; from January
1, 2018 December 1, 2019, 1.00% of the principal balance prepaid.
|
St. Louis, MO – Property Purchase
: On January 20, 2017, the Company purchased a
property with a single retail tenant in St. Louis, MO for $5,900,000. The
Company plans to resell it by the end of the calendar year. This purchase,
along with closing costs, was financed with a new loan of $5,120,000, advances
from one of the Company’s line of credit of $1,000,000, and working capital of
$324,768. Key terms of the loan are as follows:
Loan Amount:
|
$5,120,000
|
Maturity Date:
|
October 20, 2017
|
Interest Rate:
|
One month LIBOR, as defined, plus 2.20%.
|
Payments:
|
Interest only payable monthly.
|
Cedar Park, TX – Property Purchase
: On March 29, 2017, the Company purchased a property
with a single retail tenant in Cedar Park, TX for $1,625,000 including closing
costs. The Company plans to resell it by the end of the fiscal year ending
April 30, 2018. This purchase was financed with proceeds from a new loan of
$1,365,000 and working capital of $260,000. Key terms of the loan are as
follows:
Loan Amount:
|
$1,365,000
|
Maturity Date:
|
March 29, 2022
|
Interest Rate:
|
The greater of a) the Prime Rate per
Wall Street Journal plus 0.75% or b) 4.50%.
|
Payments:
|
Interest only payable monthly through
September 2017, followed by monthly principal and interest payments
using a 25 year amortization period with a final balloon payment at
maturity.
|
Guarantors:
|
Both the Company (Corporate) and
Chairman of the Company (Individual).
|
Annual Report on Form 10-K
|
Page 55
|
First
Hartford Corporation
|
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED APRIL 30, 2017 AND 2016
15.
Subsequent Events:
The Company has evaluated for subsequent events
through July 31, 2017, the date the financial statements were issued.
Houston, TX – Land Purchase
: On May 12, 2017, the Company completed its purchase
of a parcel of land in Houston, TX for $8,583,235 including closing costs.
This purchase was financed with proceeds from a construction loan of
$5,158,210, utilization of the Company’s lines of credit of $2,400,000, and
working capital of $1,025,025. Key terms of the construction loan are as
follows:
Loan Amount:
|
$8,600,000
|
Maturity Date:
|
November 15,
2018
|
Interest Rate:
|
2.50% plus One
Month ICE LIBOR rate, as defined, up to maturity date and 12.0%
thereafter.
|
Payments:
|
Interest only
payable monthly with principal due at maturity.
|
Guarantee:
|
The Company
(Corporate).
|
St. Louis, MO – Sale of Property:
On May 30, 2017, the Company sold its single-tenant property
in St. Louis, MO for $6,800,000 (cost of approximately $6,567,000). A loan
with a balance of $5,120,000 and a credit line of $1,000,000 were paid off with
the proceeds.
New Orleans, LA – Sale
of Property:
On June 7, 2017, the
Company sold a parcel of its property with a single-tenant build-to-suit in New
Orleans, LA for $11,350,000 (cost of approximately $9,007,000). A loan with a
balance of $7,436,745 was paid off with the proceeds. The Company continues to
hold the parcel of the property that includes the shopping center.
Austin, TX – Sale of Property:
On June 15, 2017, the Company sold its single-tenant
property in Austin, TX for $3,210,000 (cost of approximately $2,944,000). A
loan with a balance of $1,102,899 was paid off with the proceeds.
New Orleans, LA – Refinance
: On June 30, 2017, the Company refinanced its
construction loan on its shopping center property in New Orleans, LA. The construction
loan, which had a principal balance of $5,568,910, was replaced by a mortgage
loan of $8,565,000. The new mortgage loan has an interest rate of 4.75%. The
loan is interest-only until July 1, 2020; thereafter, monthly payments of
$44,576 inclusive of principal and interest are due and payable until the
maturity date of July 1, 2027, at which time the remaining principal balance
must be repaid in full.
[End of Financial Statements and Notes thereto. ]
Annual Report on Form 10-K
|
Page 56
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First
Hartford Corporation
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S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated:
July 31, 2017
FIRST
HARTFORD CORPORATION
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By
:
/s/ Neil H. Ellis
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Neil
H. Ellis
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Chairman
of the Board and
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Chief
Executive Officer
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Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
July 31, 2017
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/s/ Neil H.
Ellis
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Neil
H. Ellis
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Chairman
of the Board and
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Chief
Executive Officer
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(Principal
Executive Officer)
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July 31, 2017
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/s/ Eric J.
Harrington
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Eric
J. Harrington
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Chief
Financial Officer and
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Treasurer
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(Principal
Financial and Accounting Officer)
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