URSTADT BIDDLE PROPERTIES INC

Beginning in March 2020, many of the Company's properties were, and continue to be, negatively impacted by the COVID-19 pandemic, as state governments mandated the closure of non-essential businesses to prevent the spread of COVID-19, forcing many of our tenants’ businesses to close or reduce operations.  As a result,  approximately 339 of 900 tenants in the Company's consolidated portfolio, representing 1.4 million square feet and approximately 37.7% of the Company's annualized base rent, have asked for some type of rent deferral or concession.  The Company is evaluating each request on a case-by-case basis to determine an appropriate course of action, recognizing that in many cases some type of concession may be appropriate and beneficial to the long-term interests of the Company.  In evaluating these requests, the Company is considering many factors, including the tenant's financial strength, the tenant's operating history, potential co-tenancy impacts, the tenant's contribution to the shopping center in which it operates, the Company's assessment of the tenant's long-term viability, the difficulty or ease with which the tenant could be replaced, and other factors. Although each negotiation will be specific to that tenant, it is the Company’s intention that most of these concessions will be in the form of deferred rent for some portion of rents due in April through June to be paid over a later part of the lease, preferably within a period of one to two years or less. As of April 30, 2020, the Company has completed 12 lease modifications, and many other modifications are in progress. The Company has increased its uncollectable amounts in lease income for the six and three months ended April 30, 2020 for tenants it felt were affected by the COVID-19 pandemic (see note 5).

In April 2020, in response to the COVID-19 Pandemic, the FASB staff issued guidance that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842 as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the lease contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each lease contract to determine whether enforceable rights and obligations for concessions exist in the lease contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts.

This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. The FASB staff expects that reasonable judgment will be exercised in making those determinations.
  Most concessions will provide a deferral of payments with no substantive changes to the consideration in the original lease contract. A deferral affects the timing, but the amount of the consideration is substantially the same as that required by the original lease contract. The FASB staff expects that there will be multiple ways to account for those deferrals, none of which the staff believes are preferable over others. The Company has made this election to not analyze each lease contract, and believes that, based on FASB guidance, the appropriate way to account for the concessions as described above is to account for them as if no change to the lease contracts were made. Under that accounting, a lessor would increase its lease receivable (straight-line rents receivable) and would continue to recognize income during the deferral period, assuming that the collectability of the future rents under the lease contract are considered collectable.  If it is determined that the future rents of any lease contract are not collectable, the Company would treat that lease contract on a cash basis as defined in ASC Topic 842.

Our short-term liquidity requirements consist primarily of normal recurring operating expenses and capital expenditures, debt service, management and professional fees, cash distributions to certain limited partners and non-managing members of our consolidated joint ventures, and regular dividends paid to our Common and Class A Common stockholders.  Cash dividends paid on Common and Class A Common stock for the six months ended April 30, 2020 and 2019 totaled $21.8 million and $21.3 million, respectively.  Historically, we have met short-term liquidity requirements, which is defined as a rolling twelve month period, primarily by generating net cash from the operation of our properties.   As a result of the COVID-19 pandemic that has forced the states where our properties are located to close or restrict the operations of certain businesses, many of our tenants are suffering and some of these tenants have not paid their April or May 2020 billed rents.  We are evaluating each request on a case-by-case basis to determine the best course of action, recognizing that in many cases some type of concession may be appropriate and beneficial to our long-term interests.  In evaluating these requests, we are considering many factors, including the tenant's financial strength, the tenant's operating history, potential co-tenancy impacts, the tenant's contribution to the shopping center in which it operates, our assessment of the tenant's long-term viability, the difficulty or ease with which the tenant could be replaced, and other factors. Although each negotiation will be specific to that tenant, it is our intention that most of these concessions will be in the form of deferred rent for some portion of rents due in April through June to be paid over a later part of the lease, preferably within a period of one to two years or less.  This will reduce operating cash flow in the near term but most likely increase operating cash flow in future periods.  This process is just beginning and will take several months to complete.  Please see the "Impact of COVID-19" section earlier in this Item 2 for more information.

On June 5, 2020, our Board of Directors declared a quarterly dividend of $0.0625 per Common share and $0.07 per Class A Common share to be paid on July 17, 2020 to holders of record on July 3, 2020, reduced approximately 75% from second quarter dividends of $0.25 per Common share and $0.28 per Class A Common share, which will preserve approximately $8.2 million of cash in the third quarter.  Given the reduction of operating cash flow and taxable income caused by tenants’ nonpayment of rent during the period from April through June 2020, the overall uncertainty of the COVID-19 pandemic’s near and potential long-term impact on our business, and the importance of preserving our liquidity position, among other considerations, the Board determined that reducing the quarterly dividend is in the best interests of stockholders after careful consideration of all information available to them at the time.  Going forward, our Board of Directors will continue to evaluate our dividend policy.  One of the many factors that will impact the Board’s determinations regarding future dividend payments are federal tax regulations applicable to REITs that require REITs to distribute at least 90% of its taxable income to stockholders.   Because any undistributed taxable income is subject to federal taxation, most REITs, including the Company, typically choose to distribute 100% of its taxable income, but are not required to do so. In addition to monitoring the ongoing COVID-19 situation, we will carefully monitor our REIT status and adjust our dividends, if necessary, to satisfy REIT distribution requirements and allow us to continue qualifying as a REIT for U.S. federal income tax requirements.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. COVID-19 has caused, and could continue to cause, significant disruptions to the U.S. and global economy and has contributed to significant volatility and negative pressure in the financial markets.  The tri-state area surrounding New York City has been particularly hard hit by COVID-19.  The global impact of the COVID-19 outbreak has been rapidly evolving and many U.S. states and cities, including where we own properties, have imposed measures intended to control its spread, such as instituting “shelter-in-place” or “social distancing” rules and restrictions on the types of businesses that may continue to operate.  The COVID-19 outbreak and measures taken to prevent its spread have already resulted in significant negative economic impacts on many of our tenants and our business, as well as the larger U.S. and global economies, including a dramatic increase in national unemployment.  A number of our tenants operate service and retail businesses that require in-person interactions with their customers to generate revenues, and the spread of COVID-19 has decreased customers’ willingness to frequent, and mandated “shelter-in-place” or “social distancing” orders have prevented customers from frequenting, some of our tenants’ businesses.  Even if such orders are lifted, customer traffic may continue to be adversely impacted.  As a result of these government mandated orders and customer sentiment, many of our tenants have been forced to temporarily close their stores, reduce hours or significantly limit service.