10-Q: J.W. Mays Reports Q1 Loss Amid Revenue Decline, Rising Costs

J.W. Mays, Inc. reported a net loss of $334,027 for the first quarter of fiscal year 2026, a significant decline from a net income in the prior year, driven by decreased rental income and increased operating expenses.

Summary

• J.W. Mays, Inc. recorded a net loss of $334,027, or $(0.17) per share, for the three months ended October 31, 2025, compared to a net income of $26,657, or $0.01 per share, for the same period in 2024.
• Total revenues decreased to $5,251,414 from $5,539,129 in the prior year's comparable quarter, primarily due to tenant losses and rent concessions, partially offset by new leases.
• Real estate operating expenses increased to $4,077,513 from $3,750,139, mainly due to higher real estate taxes, insurance, maintenance, and a loss on fixed asset disposal.
• Administrative and general expenses decreased to $1,189,818 from $1,292,753, driven by lower legal and professional fees.
• Depreciation expense rose to $472,262 from $444,066 due to tenant improvements placed in service.
• Cash and cash equivalents increased to $2,188,982 as of October 31, 2025, from $748,597 as of July 31, 2025.
• Net cash provided by operating activities improved to $1,922,263 from $1,802,641 in the prior year's quarter.
• The company exercised a five-year option to extend the Jamaica Avenue at 169th Street property lease through May 31, 2040.
• New retail leases were secured in August 2025 at the Massapequa building (20,000 sq ft) and Jowein building (5,500 sq ft).
• A tenant occupying 31,438 sq ft at the Jowein building extended their lease to October 2026 and received a rent concession.
• A tenant at the 9 Bond Street building extended their lease to January 2028.

Sentiment

Score: 3

Explanation: The company reported a net loss, decreased revenues, and increased operating expenses compared to the prior year. While cash from operations improved and some new leases were secured, the overall financial performance is negative, and significant risks related to debt maturity and future financing needs are highlighted.

Positives

• Net cash provided by operating activities increased to $1,922,263 for the three months ended October 31, 2025, up from $1,802,641 in the prior year.
• Other income and interest expense improved significantly to $9,152 from a net expense of $(19,514) in the comparable prior period.
• Administrative and general expenses decreased by $102,935, primarily due to lower legal and professional fees.
• The company successfully secured several new leases and lease extensions, including a 20,000 square foot retail space in Massapequa and a 5,500 square foot retail space in Brooklyn.
• The Jamaica Avenue at 169th Street property lease was extended for five years through May 31, 2040, securing long-term occupancy for a significant asset.

Negatives

• The company reported a net loss of $334,027 for the quarter, a substantial decline from a net income of $26,657 in the same period last year.
• Total revenues decreased by $287,715, or approximately 5.2%, primarily due to tenant losses and rent concessions.
• Real estate operating expenses increased by $327,374, or approximately 8.7%, driven by higher real estate taxes, insurance, maintenance, and a loss on fixed asset disposal.
• Income (loss) from operations shifted from a positive $52,171 in the prior year to a loss of $(488,179) in the current quarter.
• Shareholders' equity decreased to $52,427,870 as of October 31, 2025, from $52,761,897 as of July 31, 2025.
• A significant portion of receivables (66.47%) and rental revenue (38.27%) are concentrated among a few tenants, posing a credit risk.

Risks

• Changes in the rate of economic growth and interest rates, both nationally and locally, could impact business performance.
• Existing indebtedness, including the potential for accelerated maturities on the Fishkill building mortgage, which has a balloon payment demand provision.
• The ability to obtain additional financing at reasonable costs and interest rates is not assured, especially for anticipated capital expenditures in fiscal year 2026.
• Changes in the financial condition of customers, particularly the concentration of receivables and revenue among a few key tenants, could lead to collectability issues.
• Changes in the regulatory environment and increasing local, state, and federal requirements and taxes could increase operational burdens.
• Lease cancellations and the loss of key tenants could significantly impact rental income.
• War, terrorist attacks, global, national, and local political unrest and protests could significantly impact buildings leased to tenants.
• The continued availability of insurance for various policies at reasonable rates is a concern.
• Outcomes of pending and future litigation could have an adverse effect on the company's financial statements.
• Increasing competition by other landlords and building management companies could affect occupancy rates and rental income.
• Compliance with loan covenants is critical to avoid default.
• Climate change could pose risks to properties and operations.
• Cybersecurity threats or incidents could disrupt operations and compromise data.
• Pandemics and related trends of office versus remote work practices could impact demand for commercial real estate.
• A contingent liability exists for the multi-employer pension plan upon withdrawal, the amount of which cannot be determined.
• Potential liability to create a condominium unit for the loading dock if 25 Elm Place, Brooklyn, New York, is sold, transferred, disposed of, or demolished, with an undetermined cost.

Future Outlook

The company anticipates incurring an additional $1.9 million in capital expenditures over the next twelve months ending October 31, 2026, and expects to need additional financing in fiscal year 2026 for these expenditures. There is no assurance that the company will be successful in securing additional financing when needed. The company's liquidity is dependent on evolving local and macroeconomic commercial real estate markets, overall economy, fluctuating interest rates, inflation, remote work trends, and city/state regulations.

Management Comments

• The decrease in the 2025 three months was primarily due to increase in real estate operating expenses combined with loss of tenants and rent concessions granted; partially offset by several new leases.
• We believe our sources of liquidity described above will be sufficient to meet our obligations over the next 12 months.
• The company maintains a positive relationship with the bank and remains in full compliance with terms of the loan provisions regarding the Fishkill building mortgage.

Industry Context

The commercial real estate sector continues to face challenges from evolving macroeconomic conditions, fluctuating interest rates, inflation, and the ongoing impact of remote work trends. J.W. Mays' performance reflects these broader industry headwinds, particularly the pressure on rental income and the increase in operating costs like real estate taxes and insurance. While some new leases were secured, the overall revenue decline and net loss suggest a difficult operating environment, consistent with a cautious outlook for certain segments of the commercial real estate market.

Corporate Governance

Legal Proceedings

• The company is subject to various legal proceedings, claims, and litigation arising in the ordinary course of business operations, including contractual disputes and third-party personal injury claims.
• Management believes the resolution of these matters will not have a material adverse effect on the company's Consolidated Financial Statements.
• A contingent liability exists if 25 Elm Place, Brooklyn, New York, is sold, transferred, disposed of, or demolished, potentially requiring the creation of a condominium unit for the loading dock, with an undetermined cost.

Related Party Transactions

• The company has three operating leases with Weinstein Enterprises, Inc., an affiliated company principally owned by the Chairman of the Board of Directors.
• These leases include properties at Jamaica Avenue at 169th Street, 504-506 Fulton Street, and 508 Fulton Street.
• In August 2025, the company exercised a five-year option to extend the Jamaica Avenue at 169th Street lease through May 31, 2040.
• In December 2024, the affiliated Landlord purchased the 508 Fulton Street property, and the company began making rent payments to this Landlord starting January 2025.
• Rent payments to the related party for the three months ended October 31, 2025, totaled $261,072, with corresponding rent expense of $356,845.

Stakeholder Impact

• Shareholders: Experienced a net loss and a decrease in shareholders' equity, potentially impacting stock value and future returns. The significant mortgage balloon payment risk could affect long-term stability.
• Tenants: Some tenants received rent concessions, while others secured lease extensions, indicating a mixed impact depending on individual lease terms and negotiations.
• Employees: Contributions to the noncontributory Money Purchase Plan and union-sponsored multi-employer pension and health benefit plans continue, indicating stable employee benefits.
• Creditors: The mortgage payable has a balloon payment demand provision, which could impact the company's short-term liquidity and ability to meet obligations if the bank demands repayment.

Next Steps

• Incur an additional $1.9 million in capital expenditures over the next twelve months ending October 31, 2026.
• Seek additional financing in fiscal year 2026 to fund anticipated capital expenditures.
• Continue to evaluate the effect of new accounting pronouncements (ASU 2024-03 and ASU 2023-09) on consolidated financial statements and disclosures.
• Negotiate the union sponsored multi-employer pension fund's rehabilitation plan, which expired November 30, 2025.

Key Dates

Recommendation

The company reported a net loss and declining revenues, which are significant negative indicators. However, cash flow from operations improved, and the company successfully secured new leases and extensions, demonstrating ongoing business activity. The major concern is the callable mortgage with a balloon payment provision, which introduces significant uncertainty regarding liquidity and future financing. Given the mixed financial results and the substantial, but currently unexercised, debt risk, a 'hold' recommendation is appropriate. Investors should monitor the company's ability to manage its debt obligations and secure future financing for capital expenditures, as well as trends in rental income and operating expenses.

Keywords

Commercial Real Estate, Property Management, Rental Income, Operating Expenses, Net Loss, SEC Filing, 10-Q, Lease Extensions, Tenant Improvements, Mortgage Payable, Liquidity, Capital Expenditures, New York Real Estate