PART I
FORWARD-LOOKING STATEMENTS
Certain information included in this Annual Report contains or may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Historical results and trends should not be taken as indicative of future operations. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," "prospects," or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; legislative or regulatory changes, including changes to laws governing the taxation of real estate investment trusts ("REITs"); availability of capital; interest rates; our ability to service our debt; competition; supply and demand for operating properties in our current and proposed market areas; generally accepted accounting principles; and policies and guidelines applicable to REITs; and litigation. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Although we believe the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved. The forward-looking statements are made as of the date of this Annual Report, and the Registrant assumes no obligation to update the forward-looking statements or to update the reasons actual results could differ from those projected in such forward-looking statements.
ITEM 1. BUSINESS
Introduction
The use of the words "we", "us", or "our" refers to GTJ REIT, Inc., a Maryland corporation, and its subsidiaries, except where the context otherwise requires.
We were incorporated in Maryland on June 23, 2006 to engage in any lawful act or activity including, without limitation or obligation, qualifying as a real estate investment trust ("REIT"), under Sections 856 through 860, or any successor sections of the Internal Revenue Code of 1986, as amended (the "Code"), for which corporations may be organized under Maryland General Corporation Law. We have focused primarily on the ownership and management of commercial real estate located in New York City and also have one property located in Farmington, Connecticut. In addition, we provided, through our taxable REIT subsidiaries, outdoor maintenance and shelter cleaning services to outdoor advertising companies and government agencies in New York, New Jersey, Arizona and California, as well as electrical construction services to a broad range of commercial, industrial, institutional, and governmental customers in New York, and operated and managed a parking garage facility located in New York City.
On March 29, 2007, we commenced operations upon the completion of the Reorganization described below. Effective July 1, 2007, we elected to be treated as a REIT under the Code, and elected December 31st as our fiscal year end. Additionally, in connection with the Tax Relief Extension Act of 1999 ("RMA"), we are permitted to participate in activities outside the normal operations of the REIT so long as these activities are conducted in entities which elect to be treated as taxable subsidiaries under the Code subject to certain limitations.
On July 24, 2006, we entered into an Agreement and Plan of Merger (the "Agreement") with Triboro Coach Corp., a New York corporation ("Triboro"); Jamaica Central Railways, Inc., a New York corporation ("Jamaica"); Green Bus Lines, Inc., a New York corporation ("Green" and together with Triboro and Jamaica, collectively referred to as the "Bus Companies" and each referred to as a "Bus Company"); Triboro Acquisition, Inc., a New York corporation ("Triboro Acquisition"); Jamaica Acquisition, Inc., a New York corporation ("Jamaica Acquisition"); and Green Acquisition, Inc., a New York corporation ("Green Acquisition" and together with Jamaica Acquisition and Triboro Acquisition collectively referred to as the "Acquisition Subsidiaries" and each referred to as an "Acquisition Subsidiary"). The transactions contemplated under the Agreement closed on March 29, 2007. The effect of the merger transactions was to complete a
reorganization ("Reorganization") of the ownership of the Bus Companies into GTJ REIT, Inc. with the surviving entities of the merger of the Bus Companies and the Acquisition Subsidiaries becoming wholly-owned subsidiaries and the former shareholders of the Bus Companies becoming stockholders in the Company.
Under the terms of the Agreement, each issued and outstanding share of common stock of each of the Bus Companies immediately prior to the effective date of the mergers, was converted into the right to receive the following shares of our common stock:
At the time of the Reorganization, the Bus Companies, including their subsidiaries, owned a total of six rentable parcels of real property (all on a triple net basis), four of which are currently leased to the City of New York, one of which is currently leased to a commercial tenant, and one of which a portion is currently leased to a commercial tenant and the remainder, which was utilized by the Company's discontinued paratransit business, is currently available for lease. There was an additional property of negligible size which is not rentable. At December 31, 2011, we owned seven properties containing a total of approximately 561,000 square feet of leasable area.
Prior to the Reorganization, the Bus Companies and their subsidiaries, collectively, operated a group of outdoor maintenance businesses and the discontinued paratransit business, which was acquired as part of the Reorganization. Additionally, we have an insurance subsidiary, which used to insure the former bus company operations, in which we are in the process of transferring the assets and liabilities to a liquidating trust. In 2009, we expanded our operations to include electrical construction services, and in 2010, began operating and managing a parking garage facility.
On July 25, 2011, our Board of Directors (the "Board") voted to divest substantially all of our taxable REIT subsidiaries and on November 7, 2011 voted to divest our parking garage operations. Following the completion of the divestiture, our plan is to continue focusing on the growth and expansion of our real estate operations.
On December 27, 2011, MetroClean Express Corp. and Shelter Clean Inc. entered into an asset purchase agreement with Triangle Services, Inc. (the "Purchaser") for the sale of substantially all of the assets and business of MetroClean Express Corp. and Shelter Clean Inc. to the Purchaser. On January 12, 2012, the sale was completed. Additionally, on January 12, 2012, Shelter Clean of Arizona, Inc. entered into a certain Bill of Sale and Assignment and Assumption Agreement for the sale of certain assets and the business of Shelter Clean of Arizona, Inc. to a wholly-owned subsidiary of the Purchaser.
On November 15, 2011, in accordance with our lease term, we gave notice to our landlord of our intention to terminate our lease early, and on February 1, 2012, we exited the parking business.
Description of REIT Business
Our REIT business consists of the acquisition, ownership, and management of real properties. We currently own seven parcels of real property, each of which are described in further detail in the "Portfolio of Real Properties" section. We intend to further expand our real property portfolio beyond these seven parcels.
Investing in Real Properties
We seek to acquire quality real properties at favorable prices. We believe that quality tenants seek well-managed properties that offer superior and dependable services, particularly in competitive markets. We believe that a critical success factor in property acquisition lies in possessing the flexibility to move quickly when an opportunity presents itself.
We intend to acquire fee ownership of real properties, but may also enter into joint venture arrangements. We seek to maximize current and long-term net income and the value of our assets. Our policy is to acquire assets where we believe opportunities exist for reasonable investment returns.
Decisions relating to the purchase or sale of properties are made by our Board of Directors. Our Board of Directors is responsible for monitoring the administrative procedures, investment operations, and performance of our company to ensure our policies are carried out. Our Board of Directors oversees our investment policies to determine that our policies are in the best interests of our stockholders. Stockholders have no voting rights with respect to implementing our investment objectives and policies, all of which are the responsibility of our Board of Directors and may be changed at any time.
Types of Investments
We intend to invest primarily in quality real properties. To the extent it is in the interests of our stockholders, we will seek to invest in a diversified portfolio of real properties within our geographic area that will satisfy our primary investment objectives of providing our stockholders with stable cash flow, preservation of capital, and growth of income and principal, without taking undue risk. Because a significant factor in the valuation of income-producing real property is the potential for future income, we anticipate that the majority of properties we acquire will have both the potential for growth in value and the ability to provide cash distributions to stockholders.
We intend to acquire properties with financing from mortgage or other debt or may acquire properties subject to existing indebtedness. We may also acquire properties for shares of our common stock. We do not intend to incur aggregate indebtedness in excess of 75% of the gross fair value of our real properties. Fair value will be determined by an independent certified appraiser or in a similar manner as the fair determination at the time of purchase satisfactory to our Board of Directors.
Considerations Related to Potential Real Property Acquisitions
The following are some of the material considerations which we evaluate in relation to potential acquisitions of real property: