Filed 2026-01-29 · Period ending 2025-10-31 · 69,988 words · SEC EDGAR
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# FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. (FREVS) — 10-K
**Filed:** 2026-01-29
**Period ending:** 2025-10-31
**Accession:** 0001174947-26-000102
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/36840/000117494726000102/)
**Origin leaf:** b8ab796cb5b15e57d824a3235acaf331c27941b01e00f7549f0d2ee847a3c345
**Words:** 69,988
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**SECURITIES AND EXCHANGE
COMMISSION**
**Washington, D.C. 20549**
**FORM 10-K**
| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
**For the Fiscal Year Ended October 31, 2025**
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Commission File No. 000-25043
| FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. | |
| (Exact name of registrant as specified in its charter) | |
| Maryland | | 22-1697095 | |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | |
| | | | |
| 505 Main Street, Suite 400, Hackensack, New Jersey | | 07601 | |
| (Address of principal executive offices) | | (Zip Code) | |
**201-488-6400**
(Registrant's telephone number, including area
code)
Securities registered pursuant to Section 12(b)
of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |
| Common stock, par value $0.01 per share | FREVS | OTCPK | |
| Preferred Stock Purchase Rights (1) | | | |
Securities registered pursuant to Section 12(g)
of the Act:
Common stock, par value $0.01 per share
(Title of class)
|
(1) | Registered pursuant to Section 12 (b) of the Act pursuant to a form 8-A filed by the registrant on August 3, 2023. Until the Distribution
Date (as defined in the registrants Stockholder Rights Agreement dated July 31, 2023) the Preferred Stock Purchase Rights will
be transferred with and only with the shares of the registrants Common Stock to which the Preferred Stock Purchase Rights are attached. | |
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant
has led a report on and attestation to its managements assessment of the eectiveness of its internal control over
nancial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting rm
that prepared or issued its audit report.
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes No
Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See definitions of large accelerated filer, accelerated filer, smaller reporting company, and
emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer Accelerated Filer
Non-Accelerated Filer Smaller Reporting Company Emerging growth company
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. Yes No
1
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants
executive officers during the relevant recovery period pursuant to 240.10D-1(b). Yes No
The aggregate market value of the registrants
shares of common stock held by non-affiliates was approximately $100.1 million. Computation is based on the adjusted closing sales price
of such shares as quoted on the over-the-counter-market on April 30, 2025, the last business day of the registrants most recently
completed second quarter. As of January 29, 2026, the number of shares of common stock outstanding was 7,471,344.
2
**TABLE OF CONTENTS**
**FORM 10-K**
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PART I |
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Page No. | |
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Item 1 |
Business |
4 | |
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Item 1A |
Risk Factors |
11 | |
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Item 1B |
Unresolved Staff Comments |
14 | |
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Item 1C |
Cybersecurity |
14 | |
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Item 2 |
Properties |
15 | |
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Item 3 |
Legal Proceedings |
18 | |
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Item 4 |
Mine Safety Disclosures |
18 | |
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PART II |
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Item 5 |
Market for Registrants Common Equity,Related StockholderMatters and Issuer Purchases of Equity Securities |
19 | |
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Item 6 |
[Reserved] |
21 | |
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Item 7 |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
23 | |
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Item 7A |
Quantitative and Qualitative Disclosures About Market Risk |
41 | |
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Item 8 |
Financial Statements and Supplementary Data |
41 | |
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Item 9 |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
41 | |
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Item 9A |
Controls and Procedures |
42 | |
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Item 9B |
Other Information |
42 | |
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Item 9C |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
42 | |
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PART III |
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Item 10 |
Directors, Executive Officers and Corporate Governance |
43 | |
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Item 11 |
Executive Compensation |
47 | |
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Item 12 |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
57 | |
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Item 13 |
Certain Relationships and Related Party Transactions; Director Independence |
58 | |
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Item 14 |
Principal Accountant Fees and Services |
61 | |
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PART IV |
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Item 15 |
Exhibits, Financial Statement Schedules |
62 | |
****
3
**FORWARD-LOOKING STATEMENTS**
Certain information included in this Annual Report
contains or may contain 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). The registrant cautions
readers that forward-looking statements, including, without limitation, those relating to the registrants investment policies
and objectives; the financial performance of the registrant; the ability of the registrant to borrow and service its debt; the economic
and competitive conditions which affect the registrants business; the ability of the registrant to obtain the necessary governmental
approvals for the development, expansion or renovation of its properties, the impact of environmental conditions affecting the registrants
properties, and the registrants liquidity and capital resources, are subject to certain risks and uncertainties. Actual results
or outcomes may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and
factors, including, without limitation, the registrants future financial performance; the availability of capital; general market
conditions; national and local economic conditions, particularly long-term interest rates; federal, state and local governmental regulations
that affect the registrant; and the competitive environment in which the registrant operates, including, the availability of retail space
and residential apartment units in the areas where the registrants properties are located. In addition, the registrants
continued qualification as a real estate investment trust involves the application of highly technical and complex rules of the Internal
Revenue Code of 1986, as amended (the Internal Revenue Code). 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.
**PART I**
|
ITEM 1 |
BUSINESS | |
|
(a) |
General Business | |
First Real Estate Investment Trust of New Jersey
was organized on November 1, 1961 as a New Jersey Business Trust. On July 1, 2021, First Real Estate Investment Trust of New Jersey completed
the change of its form of organization from a New Jersey real estate investment trust (REIT) to a Maryland corporation (the
Reincorporation) which was approved by its stockholders at the annual meeting of stockholders held on May 6, 2021. The Reincorporation
changed the law applicable to First Real Estate Investment Trust of New Jerseys affairs from New Jersey law to Maryland law and
was accomplished by the merger of First Real Estate Investment Trust of New Jersey with and into its wholly owned subsidiary, First Real
Estate Investment Trust of New Jersey, Inc. (FREIT, Trust, us, we, our
or the Company), a Maryland corporation. As a result of the Reincorporation, the separate existence of First Real Estate
Investment Trust of New Jersey has ceased and FREIT has succeeded to all the business, properties, assets and liabilities of First Real
Estate Investment Trust of New Jersey. Holders of shares of beneficial interest in First Real Estate Investment Trust of New Jersey have
received one newly issued share of common stock of FREIT for each share of First Real Estate Investment Trust of New Jersey that they
own, without any action of stockholders required and all treasury stock held by First Real Estate Investment Trust of New Jersey was retired.
FREIT is organized and will continue to operate
in such a manner as to qualify for taxation as a REIT under the Internal Revenue Code of 1986, as amended, and its stock is traded on
the over-the counter market under the trading symbol FREVS. FREIT acquires, develops, constructs and holds real estate properties for
long-term investment and not for resale. FREITs long-range investment policy is to review and evaluate potential real estate investment
opportunities for acquisition that it believes will (i) complement its existing investment portfolio, (ii) generate increased income and
distributions to its stockholders, and (iii) increase the overall value of FREITs portfolio. FREITs investments may take
the form of wholly-owned fee interests, or if the circumstances warrant diversification of risk, ownership on a joint venture basis or
as tenants-in-common with other parties, including employees and affiliates of Hekemian & Co., Inc. (Hekemian & Co.),
FREITs managing agent (See Management Agreement). While our general investment policy is to hold and maintain properties
for the long-term, we may, from time-to-time, sell or trade certain properties in order to (i) obtain capital to be used to purchase,
develop or renovate other properties which we believe will provide a higher rate of return and increase the value of our investment portfolio,
and (ii) divest properties which we have determined or determine are no longer compatible with our growth strategies and investment objectives
for our real estate portfolio.
FREIT Website: All of FREITs Securities
and Exchange Commission filings for the past three years are available free of charge on FREITs website, which can be accessed
at http://www.freitnj.com.
**Fiscal Year 2025 Developments**
|
(i) |
FINANCINGS | |
|
(a) | On October 31, 2023, FREIT exercised its right, pursuant to the loan agreement, to extend the term of
its loan secured by the Westwood Plaza shopping center located in Westwood, New Jersey for one additional year from an initial maturity
date of February 1, 2024 to a new maturity date of February 1, 2025. The outstanding balance of this loan as of February 1, 2024 was approximately
$16,458,000, payable based on monthly installments of principal and interest of approximately $166,727, and bearing interest at a fixed
rate of 8.5%. Additionally, FREIT funded the interest reserve escrow account for this loan (Escrow) with an additional $112,556,
increasing the Escrow balance to $2,000,722, | |
4
which represented the annualized principal and interest payments for one (1) year under this
loan extension. Effective February 1, 2025, Valley National Bank extended this loan for 90 days from a maturity date of February 1, 2025
to a maturity date of May 1, 2025 under the same terms and conditions of the existing loan agreement.
Effective May 1, 2025, FREIT entered
into a loan extension and modification agreement with Valley National Bank and paid down this loan by approximately $5.7 million (including
deferred interest of approximately $0.2 million) bringing the loan balance to $10 million. Under the terms and conditions of this loan
extension and modification, the maturity date of this loan is extended for one year to May 1, 2026, the interest rate on the outstanding
debt is based on a fixed interest rate of 8.5% and monthly installments of principal and interest of approximately $107,978 are required.
The pay down of this loan will result in annual debt service savings of approximately $705,000. Additionally, the Escrow balance was reduced
from $2,000,722 to $1,295,739 resulting in a refund to FREIT of $704,983. This Escrow is held at Valley National Bank and in the event
of a default on this loan, the bank shall be permitted to use the proceeds from the Escrow to make monthly debt service payments on the
loan. (See Note 5 to FREITs consolidated financial statements for further details.)
|
(b) | On December 15, 2024, the mortgage secured by an apartment building located in Middletown, New York and
the corresponding interest rate swap contract on its underlying loan came due with no settlement of the swap contract due at maturity.
Effective December 15, 2024, FREIT Regency, LLC entered into a loan extension and modification agreement with the lender of this loan,
Provident Bank, with a then outstanding loan balance of approximately $13.9 million. Under the terms and conditions of this loan extension
and modification, the maturity date of this loan is extended for three years to December 15, 2027, the interest rate on the outstanding
debt is based on a fixed interest rate of 6.05% and monthly installments of principal and interest of approximately $84,521 are required.
(See Note 5 to FREITs consolidated financial statements for additional details.) | |
|
(c) | On August 1, 2025, the mortgage in the amount of $25,000,000, secured by
the Preakness Shopping Center located in Wayne, New Jersey, reached its maturity date. Wayne PSC, LLC is working with the current lender,
ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several extensions of the loans
maturity date while discussions are ongoing, with each extension made under the same
terms and conditions of the existing loan agreement. Wayne PSC, LLC continues to evaluate all options for refinancing or replacing the
loan. Management expects this loan to be further extended, however, until such time as a definitive agreement providing for a modification,
extension or replacement of this loan is entered into, there can be no assurance that such an agreement will be reached. (See Note 5 to
FREITs consolidated financial statements for additional details.) | |
|
(b) |
Financial Information about Segments | |
FREIT has determined that it has two reportable
segments: commercial properties and residential properties. These reportable segments offer different types of space, have different types
of tenants and are managed separately because each requires different operating strategies and management expertise. Segment information
for the three years ended October 31, 2025 is included in Note 13 Segment Information to FREITs consolidated financial
statements.
|
(c) |
Narrative Description of Business | |
FREIT was founded and organized for the principal
purpose of acquiring, developing, and owning a portfolio of diverse income producing real estate properties. FREITs developed properties
include residential apartment communities and commercial properties that consist of multi and single tenanted properties. Our properties
are located in New Jersey and New York. We also currently own approximately 7.37 acres of unimproved land in New Jersey. See *Item 2
Properties - Portfolio of Investments.*
FREIT elected to be taxed as a REIT under the
Internal Revenue Code. FREIT operates in such a manner as to qualify for taxation as a REIT in order to take advantage of certain favorable
tax aspects of the REIT structure. Generally, a REIT will not be subject to federal income taxes on that portion of its ordinary income
or capital gain that is currently distributed to its equity holders.
As an equity REIT, we have generally acquired
interests in income producing properties to be held as long-term investments. FREITs return on such investments is based on the
income generated by such properties mainly in the form of rents.
From time to time, FREIT has sold, and may sell
again in the future, certain of its properties in order to (i) obtain capital used or to be used to purchase, develop or renovate other
properties which we believe will provide a higher rate of return and increase the value of our investment portfolio, and (ii) divest properties
which FREIT has determined or determines are no longer compatible with our growth strategies and investment objectives for our real estate
portfolio. FREIT seeks to maximize stockholder value through strategic asset management and divestitures. In that regard, FREIT actively
evaluates credible acquisition proposals for its properties and explores all viable strategies.
We
do not hold any patents, registered trademarks, or licenses.
5
**Portfolio of Real Estate Investments**
At October 31, 2025, FREITs real estate
holdings included (i) six (6) multi-family apartment buildings or complexes containing a total of 792 apartment units, (ii) a 65% tenancy-in-common
undivided interest in the Pierre Towers property (See *Item 1 Investment in tenancy in common* of this Annual Report
for additional details), (iii) five (5) commercial properties containing a total of approximately 589,000 square feet of leasable space,
including one (1) one-acre parcel subject to a ground lease and (iv) three (3) parcels of undeveloped land consisting of approximately
7.37 acres in total. FREIT and itssubsidiaries own all such properties in fee simple. *See Item 2 Properties - Portfolio
of Investments* of this Annual Report for a description of FREITs separate investment properties and certain other pertinent
information with respect to such properties that is relevant to FREITs business.
**Investment inSubsidiaries**
The consolidated financial statements (See Note
1 to the Consolidated Financial Statements included in this Form 10-K) include the accounts of the following subsidiaries of FREIT:
Westwood Hills, LLC (Westwood Hills):
FREIT owns a 40% membership interest in Westwood Hills, which owns and operates a 210-unit residential apartment complex located in Westwood,
New Jersey.
Wayne PSC, LLC (Wayne PSC): FREIT
owns a 40% membership interest in Wayne PSC, which owns a 322,000 square foot shopping center located in Wayne, New Jersey.
FREIT Regency, LLC: FREIT owns a 100% membership
interest in FREIT Regency, LLC, which owns a 132-unit residential apartment complex located in Middletown, New York.
Station Place on Monmouth, LLC: FREIT owns a 100%
membership interest in Station Place on Monmouth, LLC, which owns a 45-unit residential apartment complex located in Red Bank, New Jersey.
Berdan Court, LLC: FREIT owns a 100% membership
interest in Berdan Court, LLC, which owns a 176-unit residential apartment complex located in Wayne, New Jersey.
Grande Rotunda, LLC (Grande Rotunda):
FREIT owns a 60% membership interest in Grande Rotunda, which owned the Rotunda Property sold in December 2021.
**Investment intenancy-in-common**
On February 28, 2020, FREIT reorganized its subsidiary
S and A Commercial Associates Limited Partnership (S&A) from a partnership into a tenancy-in-common form of ownership
(TIC). Prior to this reorganization, FREIT owned a 65% membership interest in S&A, which owned 100% of the Pierre Towers
property located in Hackensack, New Jersey through its 100% interest in Pierre Towers, LLC. Pursuant to the TIC agreement, FREIT ultimately
acquired a 65% undivided interest in the Pierre Towers property, a 266-unit residential apartment complex in Hackensack, New Jersey (which
was formerly owned by S&A). (See Note 3 to FREITs consolidated financial statements for further details.)
**Employees**
On October 31, 2025,
there were nineteen (19) full-time employees and three (3) part-time employees who work solely at the properties owned by FREIT and its
subsidiaries (including the Pierre TIC). The number of part-time employees varies seasonally.
Robert S. Hekemian, Jr., Chief Executive Officer
and President, Ronald J. Artinian, Chairman of the Board, Allan Tubin, Treasurer and Chief Financial Officer, and John A. Aiello, Esq.,
Secretary, are the executive officers of FREIT. FREIT does not retain the services of its executive officers on an exclusive basis, and
accordingly FREITs executive officers are permitted to engage in other business activities as all of their business activities
are not devoted to FREIT. Please see *Item 10 Directors, Executive Officers and Corporate Governance*, for
additional information about FREITs executive officers. Hekemian & Co. has been retained by FREIT to manage FREITs properties
and is responsible for recruiting, on behalf of FREIT, the personnel required to perform all services related to the operation of FREITs
properties. *See Management Agreement below.*
**Management Agreement**
On April 10, 2002, FREIT and Hekemian & Co.
executed a Management Agreement whereby Hekemian & Co. would continue as managing agent for FREIT. The Management Agreement automatically
renews for successive periods of two years unless either party gives not less than six (6) months prior notice to the other of non-renewal.
The term of the Management Agreement was renewed for a two-year term, which will expire on October 31, 2027. Hekemian & Co. currently
manages all the properties owned by FREIT and its affiliates. However, FREIT may retain other managing agents to manage properties acquired
after April 10, 2002 and to perform various other duties such as sales, acquisitions, and development with respect to any or all properties.
Hekemian & Co. does not serve as the exclusive property acquisition advisor to FREIT and is not required to offer potential acquisition
properties exclusively to FREIT before acquiring those properties for its own account. The Management Agreement includes a detailed schedule
of fees for those services, which Hekemian & Co. may be called upon to perform. The Management Agreement provides for a termination
fee (Termination Fee) in the event of a termination by FREIT without
6
cause and a termination fee of 2.5 times the Termination
Fee if the Management Agreement terminates following a merger or acquisition of FREIT.
Pursuant to the terms of the Management Agreement,
FREIT pays Hekemian & Co. fees and commissions as compensation for its services. From time to time, FREIT engages Hekemian &
Co., or certain affiliates of Hekemian & Co., to provide additional services, such as consulting services related to development,
property sales and financing activities of FREIT. Separate fee arrangements are negotiated between Hekemian & Co. and FREIT with
respect to such additional services. Employees of Hekemian & Co. own an interest in certain FREIT properties. (See Note 8 to FREITs
consolidated financial statements.)
Robert S. Hekemian, Jr., Chief Executive Officer,
President and a Director of FREIT, is the Chief Executive Officer of Hekemian & Co., and owns approximately 33.3% of all of the issued
and outstanding shares of Hekemian & Co. David Hekemian, a Director of FREIT, is the President of Hekemian & Co., and owns approximately
33.3% of all of the issued and outstanding shares of Hekemian & Co. Allan Tubin, Chief Financial Officer and Treasurer of FREIT, is
the Chief Financial Officer of Hekemian & Co.
**Real Estate Financing**
FREIT funds acquisition opportunities and the
development of its real estate properties largely through debt financing, including mortgage loans collateralized by certain of its properties.
At October 31, 2025, FREITs aggregate outstanding mortgage debt was $121.3 million, which bears a weighted average interest rate
of 5.34% and an average life of 1.6 years. See the tables in *Item 2, Properties - Portfolio of Investments* for the
outstanding mortgage balances at October 31, 2025 with respect to each of these properties.
FREIT is highly leveraged and will continue to
be for the foreseeable future. This level of indebtedness results in increased debt service requirements that could adversely affect
the financial condition and results of operations of FREIT. A number of FREITs mortgage loans are amortized over a period that
is longer than the terms of such loans; thereby requiring balloon payments at the expiration of the terms of such loans. FREIT has not
established a cash reserve sinking fund with respect to such obligations and at this time does not expect to have sufficient funds from
operations to make such balloon payments when due under the terms of such loans. FREIT and its subsidiaries expect to extend or refinance
such mortgage loans as they become due*.*See *Liquidity and Capital Resources*under Item 7.
FREIT is subject to the normal risks
associated with debt financing, including the risk that FREITs cash flow will be insufficient to meet required payments of
principal and interest; the risk that indebtedness on its properties will not be able to be renewed, repaid or refinanced when due;
or that the terms of any renewal or refinancing will not be as favorable as the terms of the indebtedness being replaced. If FREIT
were unable to refinance its indebtedness onacceptable terms, or at all, FREIT might be forced to dispose of one or more of
its properties on disadvantageous terms which might result in losses to FREIT. These losses could have a material adverse effect on
FREIT and its ability to make distributions to stockholders and to pay amounts due on its debt. If a property is mortgaged to secure
payment of indebtedness and FREIT is unable to meet mortgage payments, the mortgagee could foreclose upon the property, appoint a
receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of revenues and asset
value to FREIT. Further, payment obligations on FREITs mortgage loans will not be reduced if there is a decline in the
economic performance of any of FREITs properties. If any such decline in economic performance occurs, FREITs revenues,
earnings, and funds available for distribution to stockholders would be adversely affected.
Neither FREITs Amended and Restated Articles
of Incorporation, as amended, nor any policy statement formally adopted by the Board limits either the total amount of indebtedness or
the specified percentage of indebtedness (based on the total capitalization of FREIT), which may be incurred by FREIT. Accordingly, FREIT
may incur additional secured or unsecured indebtedness in the future in furtherance of its business activities, including, if or when
necessary, to refinance its existing debt. Future debt incurred by FREIT could bear interest at rates, which are higher than the rates
on FREITs existing debt. Future debt incurred by FREIT could also bear interest at a variable rate. Increases in interest rates
would increase FREITs variable interest costs (to the extent that the related indebtedness was not protected by interest rate protection
arrangements), which could have a material adverse effect on FREIT and its ability to make distributions to stockholders and to pay amounts
due on its debt or cause FREIT to be in default under its debt. Further, in the future, FREIT may not be able to, or may determine that
it is not able to, obtain financing for property acquisitions or for capital expenditures to develop or improve its properties on terms,
which are acceptable to FREIT. In such event, FREIT might elect to defer certain projects unless alternative sources of capital were available,
such as through an equity or debt offering by FREIT.
**Competitive Conditions**
FREIT is subject to normal competition with other
investors to acquire real property and profitably manage such property. Numerous other REITs, banks, insurance companies and pension funds,
as well as corporate and individual developers and owners of real estate, compete with FREIT in seeking properties for acquisition and
for tenants. Many of these competitors have significantly greater financial resources than FREIT.
In addition, retailers at FREIT's commercial properties
face increasing competition from online shopping, outlet malls and discount shopping clubs. In many markets, the trade areas of FREIT's
commercial properties overlap with the trade areas of
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other shopping centers. Renovations and expansions at those competing shopping centers
and malls could negatively affect FREIT's commercial properties by encouraging shoppers to make their purchases at such new, expanded
or renovated shopping centers and malls. Increased competition through these various sources could adversely affect the viability of FREIT's
tenants, and any new commercial real estate competition developed in the future could potentially have an adverse effect on the revenues
of and earnings from FREIT's commercial properties.
|
|
(A) |
General Factors Affecting Investment in Commercial and Apartment Properties; Effect of Economic and Real Estate Conditions | |
The revenues and value of FREITs commercial
and residential apartment properties may be adversely affected by a number of factors, including, without limitation, public health crises,
epidemics and pandemics; the national economic climate (including rising interest rates and inflation); the regional economic climate
(which may be adversely affected by plant closings, industry slow-downs and other local business factors); local real estate conditions
(such as an oversupply of retail space or apartment units); perceptions by retailers or shoppers of the security, safety, convenience
and attractiveness of a shopping center; perception by residential tenants of the safety, convenience and attractiveness of an apartment
building or complex; the proximity and the number of competing shopping centers and apartment complexes; the availability of recreational
and other amenities and the willingness and ability of the owner to provide capable management and adequate maintenance. In addition,
other factors may adversely affect the fair market value of a commercial property or apartment building or complex without necessarily
affecting the revenues, including changes in government regulations (such as limitations on development or on hours of operation), changes
in tax laws or rates and potential environmental or other legal liabilities.
|
|
(B) |
Commercial Shopping Center Properties' Dependence on Anchor Stores and Satellite Tenants | |
The success of FREIT's investment in its shopping
center properties is largely dependent upon the success of its tenants. Unfavorable economic, demographic, or competitive conditions may
adversely affect the financial condition of tenants and consequently the lease revenues from and the value of FREIT's investments in its
shopping center properties. If the sales of stores operating in FREIT's shopping center properties were to decline due to deteriorating
economic conditions, the tenants may be unable to pay their base rents or meet other lease charges and fees due to FREIT. In addition,
any lease provisions providing for additional rent based on a percentage of sales would not be operative in this economic environment.
In the event of default by a tenant, FREIT could suffer a loss of rent and experience extraordinary delays while incurring additional
costs in enforcing its rights under the lease, which FREIT may not be able to recapture.
FREIT believes that its revenues and earnings,
its ability to meet its debt obligations and its funds available for distribution to stockholders would be adversely affected if space
in FREIT's multi-store shopping center properties could not be leased or if anchor store tenants or satellite tenants failed to meet their
lease obligations. As of October 31, 2025, the following table lists the five (5) largest commercial tenants, which account for approximately
63.9% of FREITs leased commercial rental space and 49.3% of fixed commercial rents.
|
| |
| |
| |
| |
|
Tenant | |
Center | |
Sq. Ft. | |
% of Fixed Revenue (1) | |
|
Stop & Shop Supermarket Co. | |
Preakness | |
61,020 | |
13.2% | |
|
Stop & Shop Supermarket Co. | |
Franklin Crossing | |
48,673 | |
17.8% | |
|
TJ Maxx (2) | |
Westwood Plaza | |
28,480 | |
7.1% | |
|
T-Bowl, Inc. (3) | |
Preakness | |
27,195 | |
6.7% | |
|
CVS | |
Preakness | |
8,950 | |
4.5% | |
(1) This table represents annualized fixed rental income and does not include rent from tenants paying based on percentage rent.
(2) Pursuant to a co-tenancy
clause within FREIT's lease agreement with TJ Maxx, if for any period of more than 180 consecutive days from the date that Kmart is not
open for business, then the co-tenancy clause goes into effect for a one year period.During this time, TJ Maxx had the option
to either (a) pay rent equal to the lesser of either the monthly installment of minimum rent which otherwise would have been payable
for said month or 2% of Gross Sales for said month or (b) TJ Maxx could have terminated their lease.Effective March 28, 2024,
TJ Maxx elected the option to pay rent equal to the lesser of either the monthly installment of minimum rent which otherwise would have
been payable for said month or 2% of Gross Sales for said month.This co-tenancy period expired on March 27, 2025. Thus, the
7.1% of fixed revenue for TJ Maxx only includes fixed rental revenue recognized from March 28, 2025 through October 31, 2025 and does
not include percentage rent revenue recognized in the amount of approximately $116,000 from November 1, 2024 through March 27, 2025.
(3)Since the shutdown for several months in Fiscal 2020 due to the effects of the COVID-19 pandemic, this tenant has not paid full base rent and additional rent. Rental revenue for this tenant of approximately $279,000, $218,000 and $308,000 during the fiscal years ended October 31, 2025, 2024 and 2023, respectively, was not recognized as revenue in the respective year, as amounts were not deemed collectible.
8
|
|
(C) |
Renewal of Leases and Reletting of Space | |
There is no assurance that we will be able to
retain tenants at our commercial properties upon expiration of their leases. Upon expiration or termination of leases for space located
in FREIT's commercial properties, the premises may not be relet or the terms of reletting (including the cost of concessions to tenants)
may not be as favorable as lease terms for the terminated lease. If FREIT was unable to promptly relet all or a substantial portion of
this space or if the rental rates upon such reletting were significantly lower than current or expected rates, FREIT's revenues and earnings,
FREITs ability to service its debt, and FREITs ability to make distributions to its stockholders, could be adversely affected.
On June 24, 2023, the owner/operator of the 84,254
square foot Kmart store at our Westwood Plaza shopping center located in Westwood, New Jersey informed FREIT of its intent to
sublet its space to three unidentified retail tenants. The term of the lease for Kmart was due to expire on October 31, 2027 with two
5-year renewal options remaining. The lease agreement provided that base rent payments were fixed at $4.00 per square foot ($336,720 annually)
and additional rent for common area maintenance and insurance costs were based on an amount less than Kmarts pro rata share of
the shopping center. After reviewing the Kmart space, management determined that the space has a fair market rental rate of between $15
and $24 per square foot. While significant tenant and/or capital improvements will be necessary to fit-up this space for a new tenant
or tenants, the higher rent potentially realizable equates to annual revenues in excess of approximately $930,000 to $1,685,000. FREIT
believes potentially higher rent amounts, if achieved, will more than offset lost rent from Kmart and other tenants with co-tenancy clauses
and will only increase the overall value of the shopping center. Accordingly, on July 24, 2023, FREIT denied Kmarts request and
elected pursuant to the lease to terminate the Kmart lease effective October 19, 2023. Thus, FREIT now has full control of this space
instead of waiting another 14 years to renegotiate or re-lease this space at a higher market rent. For the fiscal year ended October 31,
2025 (Fiscal 2025) and for the fiscal year ended October 31, 2024 (Fiscal 2024), Westwood Plazas losses
of base rent from Kmarts lease (including rents paid per co-tenancy clause) were approximately $474,000 and $570,000, respectively.
As management is unable to predict the length of time it may take to re-lease this space, the Westwood Plaza shopping center will continue
to incur losses of annual base rent revenues of approximately $330,000 until such time as this space is re-leased. (See Note 16 to FREITs
consolidated financial statements for further details.)
There were no other material lease expirations
during Fiscal 2025 and Fiscal 2024.
|
|
(D) |
Illiquidity of Real Estate Investments; Possibility that Value of FREIT's Interests may be less than its Investment | |
Equity real estate investments are relatively
illiquid. Accordingly, the ability of FREIT to vary its portfolio in response to changing economic, market or other conditions is limited.
Also, FREIT's interests in itspartially owned subsidiaries are subject to transfer constraints imposed by the operating agreements,
which govern FREITs investment in these partially owned subsidiaries. Even without such restrictions on the transfer of its interests,
FREIT believes that there would be a limited market for its interests in these partially owned subsidiaries.
If FREIT had to liquidate all or substantially
all of its real estate holdings, the value of such assets would likely be diminished if a sale were required to be completed in a limited
time frame. The proceeds to FREIT from any such sale of the assets in FREITs real estate portfolio would therefore be less than
the fair market value of those assets.
**Impact of Governmental Laws and Regulations
on Registrant's Business**
FREITs properties are subject to various
federal, state and local laws, ordinances and regulations, including those relating to the environment and local rent control and zoning
ordinances.
|
|
(A) |
Environmental Matters | |
Both federal and state governments are concerned
with the impact of real estate construction and development programs upon the environment. Environmental legislation affects the cost
of selling real estate, the cost to develop real estate, and the risks associated with purchasing real estate.
Under various federal, state and local environmental
laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or remediation of
certain hazardous or toxic substances at, on, in or under such property, as well as certain other potential costs relating to hazardous
or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property). Such laws often
impose such liability without regard to whether the owners knew of, or were responsible for, the presence or disposal of such substances.
Such liability may be imposed on the owner in connection with the activities of any operator of, or tenant at, the property. The cost
of any required remediation, removal, fines or personal injury or property damages and the property owner's liability for same could exceed
the value of the property and/or the aggregate assets of the owner. In addition, the presence of such substances, or the failure to properly
dispose of or remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. If FREIT incurred any such liability, it could reduce FREIT's revenues and ability to make distributions to its
stockholders.
9
A property can also be negatively impacted by
either physical contamination or by virtue of an adverse effect upon value attributable to the migration of hazardous or toxic substances,
or other contaminants that have or may have emanated from other properties.
At this time, FREIT is aware of the following
environmental matters affecting its properties:
|
|
(i) |
Westwood Plaza Shopping Center, Westwood, NJ | |
This property is in a Flood Hazard Zone. FREIT
maintains flood insurance in the amount of $500,000 for the subject property, which is the maximum available under the Flood Program for
the property. Any reconstruction of that portion of the property situated in the flood hazard zone is subject to regulations promulgated
by the New Jersey Department of Environmental Protection ("NJDEP"), which could require extraordinary construction methods.
FREIT acquired the Westwood Plaza property in 1988, and the property has not experienced any flooding that gave rise to any claims under
FREITs flood insurance since the date of acquisition.
|
|
(ii) |
Other | |
a) The State of New Jersey has adopted an underground
fuel storage tank law and various regulations with respect to underground storage tanks.
FREIT no longer has underground storage tanks
on any of its properties.
During the fiscal year ended October 31, 2019,
FREIT conducted environmental audits for all of its properties. The environmental reports secured by FREIT have not revealed any environmental
conditions on its properties, which require any further remediation pursuant to any applicable federal or state law or regulation.
b) FREIT has determined that several of its properties
contain lead based paint (LBP). FREIT has obtained lead-free interior certifications with respect to all properties that
were found to contain LBP, certifying that such properties contain no LBP on the interior surfaces. FREIT believes that it complies with
all federal, state and local requirements as they pertain to LBP.
FREIT does not believe that the environmental
conditions described in subparagraphs (i) and (ii) above will have a material adverse effect upon the capital expenditures, revenues,
earnings, financial condition or competitive position of FREIT.
|
|
(B) |
Rent Control Ordinances | |
Each of the apartment buildings or complexes owned
by FREIT or an affiliate of FREIT, is subject to some form of rent control ordinance which limits the amount by which FREIT or an affiliate
of FREIT, can increase the rent for renewed leases, and in some cases, limits the amount of rent which FREIT or an affiliate of FREIT
can charge for vacated units, except for The Regency, Westwood Hills, The Boulders at Rockaway, and Station Place which are not subject
to any rent control law or regulation.
|
|
(C) |
Zoning Ordinances | |
Local zoning ordinances may prevent FREIT from
renovating, expanding or converting its existing properties for their highest and best use as determined by the Board. In Fiscal 2021,
Wayne PSC received approvals from the Township of Wayne to allow it to redevelop the site immediately behind the former Macys department
store to include 244 residential units with 37 units earmarked for affordable housing.
|
|
(D) |
Financial Information about Foreign and Domestic Operations and Export Sale | |
FREIT does not engage in operations in foreign
countries and it does not derive any portion of its revenues from customers in foreign countries.
10
|
ITEM 1A |
RISK FACTORS | |
Almost all of FREITs income and cash flow
are derived from the net rental income (revenues after expenses) from our properties. FREITs business and financial results are
affected by the following fundamental factors:
|
| public health crises, epidemics and pandemics; | |
|
| the national and regional economic climate; | |
|
| occupancy rates at the properties; | |
|
| tenant turnover rates; | |
|
| rental rates; | |
|
| operating expenses; | |
|
| tenant improvement and leasing costs; | |
|
| cost of and availability of capital; | |
|
| failure of banking institutions; | |
|
| failure of insurance carriers; | |
|
| new acquisitions and development projects; | |
|
| cybersecurity breaches; and | |
|
| changes in governmental regulations, real estate
tax rates and similar matters. | |
A negative or adverse quality change in the above
factors could potentially cause a detrimental effect on FREITs revenue, earnings and cash flow. If rental revenues decline, we
would expect to have less cash available to pay our indebtedness and distribute to our stockholders.
*Adverse impact resulting from the public
health crises, epidemics and pandemics:* FREIT is subject to risks related to the effects of public health crises, epidemics and
pandemics, including COVID-19. Such events could inhibit global, national and local economic activity; constrain our access to capital
and other sources of funding, which could adversely affect the availability and terms of future borrowings or refinancings; adversely
affect our residential tenants financial condition due to a sustained loss of income, which could affect their ability to pay rent;
adversely affect our commercial tenants financial condition by limiting foot traffic and staffing at their businesses, which could
affect their ability to pay rent and willingness to make new leasing commitments; reduce our cash flow, which could impact our ability
to pay dividends or to service our debt; temporarily or permanently reduce the demand for retail space; reduce the value of our real estate
assets, which may result in material non-cash impairment charges in future periods; and have other direct and indirect effects that are
difficult to predict. Such risks depend upon the nature and severity of the public health concern, as well as the extent and duration
of government-mandated orders and personal decisions to limit travel, economic activity and personal interaction, none of which can be
predicted with confidence.
*Adverse Changes in General Economic Climate*:
FREIT derives the majority of its revenues from renting apartments to individuals or families, and from retailers renting space at its
shopping centers. Over the past several years, there have been many factors aiding in economic growth in the United States such as: (a)
improvement in the housing market; (b) increased consumer confidence to push spending modestly higher; (c) improvements in private sector
employment; and (d) improved credit availability. However, there have been many factors impacting long-term economic growth, including,
without limitation: (i) continued political gridlock in the federal government; (ii) regulatory uncertainties; (iii) continued infrastructure
deterioration; (iv) increasing concerns regarding terrorism; (v) rising healthcare costs; (vi) the impact of trade policies and tariffs;
and (vii) rising energy, wages and consumer prices which previously resulted in an increase in inflation along with an increase in interest
rates.
FREIT receives a substantial portion of its operating
income as rent under long-term leases with commercial tenants. At any time, any of our commercial tenants could experience a downturn
in its business that might weaken its financial condition. These tenants might defer or fail to make rental payments when due, delay lease
commencement, voluntarily vacate the premises or declare bankruptcy, which could result in the termination of the tenants lease,
and could result in material losses to us and harm to our results of operations. Also, it might take time to terminate leases of underperforming
or nonperforming tenants and FREIT might incur costs to remove such tenants. In addition, if tenants are unable to comply with the terms
of their leases, FREIT might modify lease terms in ways that are less favorable to FREIT.
*Tenants unable to pay rent:* Financially
distressed tenants may be unable to pay rents and expense recovery charges, where applicable, and may default on their leases. Enforcing
FREITs rights as landlord could result in substantial costs and may not result in a full recovery of unpaid rent. If a tenant files
for bankruptcy, the tenants lease may be terminated. In each such instance FREITs income and cash flow would be negatively
impacted.
*Costs of re-renting space*: If tenants
fail to renew leases, fail to exercise renewal options, or terminate their leases early, the lost rents due to vacancy and the costs of
re-renting the space could prove costly to FREIT. In addition to cleaning and renovating the vacated space, we may be required to grant
concessions to a new tenant, and may incur leasing brokerage commissions. The lease terms to a new tenant may be less favorable than the
prior tenants lease terms, and will negatively impact FREITs income and cash flow and adversely affect FREITs ability
to pay mortgage debt and interest or make distributions to its stockholders.
11
*Inflation may adversely affect our financial
condition and results of operations:* Increased inflation could have a pronounced negative impact on FREITs operating and
administrative expenses, as these costs may increase at a higher rate than FREITs rents. While increases in most operating expenses
at FREITs commercial properties can be passed on to retail tenants, increases in expenses at its residential properties cannot
be passed on to residential tenants. Unreimbursed increased operating expenses may reduce cash flow available for payment of mortgage
debt and interest and for distributions to stockholders.
*Development and construction risks:*From time to time, FREIT engages in the development and construction of property. Development and construction activities are challenged
with the following risks, which may adversely affect FREITs cash flow:
|
| financing may not be available in the amounts
FREIT seeks, or may not be on favorable terms; | |
|
| long-term financing may not be available upon
completion of the construction; | |
|
| failure to complete construction on schedule
or within budget may increase debt service costs and construction costs; and | |
|
| abandoned project costs could result in an impairment
loss. | |
*Debt financing could adversely affect income
and cash flow:* FREIT relies on debt financing to fund its operations and development activities. To the extent third party debt
financing is not available on acceptable terms, FREITs operations and development and construction activities will be adversely
affected.
As of October 31, 2025, FREIT had approximately
$121.3 million of non-recourse fixed interest rate mortgage debt, and no non-recourse variable interest rate mortgage debt. These mortgages
are being repaid over periods (amortization schedules) that are longer than the terms of the mortgages. Accordingly, when the mortgages
become due (at various times), significant balloon payments (the unpaid principal amounts) will be required. FREIT expects to refinance
the individual mortgages with new mortgages or exercise extension options available to FREIT or its subsidiaries when their terms expire.
To this extent, FREIT has exposure to capital availability and interest rate risk. If interest rates, at the time any individual mortgage
note is due, are higher than the current fixed interest rate, higher debt service may be required and/or refinancing proceeds may be less
than the amount of the mortgage debt being retired. To the extent FREIT is unable to refinance its indebtedness on acceptable terms, FREIT
might need to dispose of one or more of its properties upon disadvantageous terms.
FREITs revolving $13 million credit line
(of which $13 million was available as of October 31, 2025), and several of its loan agreements require FREIT or its subsidiaries to meet
or maintain certain financial covenants that could restrict FREITs acquisition activities and result in a default on these loans
if FREIT fails to satisfy these covenants. (See Note 5 to FREITs consolidated financial statements.)
*Failure of banking and financing institutions:*
Banking and financing institutions such as insurance companies provide FREIT with credit lines and construction financing. The credit
lines available to FREIT may be used for a variety of business purposes, including general corporate purposes, acquisitions, construction,
and letters of credit. Construction financing enables FREIT to develop new properties, or renovate or expand existing properties. A failure
of the banking institution making credit lines available may render the line unavailable and adversely affect FREITs liquidity,
and negatively impact FREITs operations in a number of ways. A failure of a financial institution unable to fund its construction
financing obligations to FREIT may cause the construction to halt or be delayed. Substitute financing may be significantly more expensive,
and construction delays may subject FREIT to delivery penalties.
*Failure of insurance carriers:* FREITs
properties are insured against unforeseen liability claims, property damages, and other hazards. The insurance companies FREIT uses have
good ratings at the time the policies are put into effect. Substantially all of FREITs insurance coverage is provided by one carrier.
Financial failure of FREITs carriers may result in their inability to pay current and future claims. This inability to pay claims
may have an adverse impact on FREITs financial condition. In addition, a failure of a FREIT insurance carrier may cause FREITs
insurance renewal or replacement policy costs to increase.
*Real estate is a competitive business:*
FREIT is subject to normal competition with other investors to acquire real property and profitably manage such property. Numerous other
REITs, banks, insurance companies and pension funds, as well as corporate and individual developers and owners of real estate, compete
with FREIT in seeking properties for acquisition and for tenants. Many of these competitors have significantly greater financial resources
than FREIT. In addition, retailers at FREIT's commercial properties face increasing competition from online shopping, outlet malls and
discount shopping clubs. In many markets, the trade areas of FREIT's commercial properties overlap with the trade areas of other shopping
centers. Renovations and expansions at those competing shopping centers and malls could negatively affect FREIT's commercial properties
by encouraging shoppers to make their purchases at such new, expanded or renovated shopping centers and malls. Increased competition through
these various sources could adversely affect the viability of FREIT's tenants, and any new commercial real estate competition developed
in the future could potentially have an adverse effect on the revenues of and earnings from FREIT's commercial properties.
FREIT also faces competition with respect to its
residential properties based on a variety of factors, including perception by residential tenants of the safety, convenience and attractiveness
of an apartment building or complex; the proximity and the number of competing apartment complexes; the proximity of commercial shopping
centers; the availability of recreational and
12
other amenities and the willingness and ability of the owner to provide capable management
and adequate maintenance. Certain of these factors, such as the availability of amenities in the area surrounding a residential property,
are not within FREITs control.
*Illiquidity of real estate investment:*
Real estate investments are relatively difficult to buy and sell quickly. Accordingly, the ability of FREIT to diversify its portfolio
in response to changing economic, market or other conditions is limited. Also, FREITs interests in its partially owned subsidiaries
are subject to transfer constraints imposed under the operating agreements that govern FREITs investment in these partially owned
subsidiaries.
*Environmental problems may be costly:*
Both federal and state governments are concerned with the impact of real estate construction and development programs upon the environment.
Environmental legislation affects the cost of selling real estate, the cost to develop real estate, and the risks associated with purchasing
real estate.
Under various federal, state and local environmental
laws, statutes, ordinances, rules and regulations, an owner of real property may be liable for the costs of removal or remediation of
certain hazardous or toxic substances at, on, in or under such property, as well as certain other potential costs relating to hazardous
or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property). Such laws often
impose such liability without regard to whether the owners knew of, or were responsible for, the presence or disposal of such substances.
Such liability may be imposed on the owner in connection with the activities of any operator of, or tenant at the property. The cost of
any required remediation, removal, fines or personal injury or property damages and the property owner's liability for same could exceed
the value of the property and/or the aggregate assets of the owner. In addition, the presence of such substances, or the failure to properly
dispose of or remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. If FREIT incurred any such liability, it could reduce FREIT's revenues and ability to make distributions to its
stockholders. During the fiscal year ended October 31, 2019, FREIT conducted environmental audits for all of its properties. The environmental
reports secured by FREIT have not revealed any environmental conditions on its properties which require any further remediation pursuant
to any applicable federal or state law or regulations.
A property can also be negatively impacted by
either physical contamination or by virtue of an adverse effect upon value attributable to the migration of hazardous or toxic substances,
or other contaminants that have or may have emanated from other properties.
*Qualification as a REIT:* Since its
inception in 1961, FREIT has elected to qualify as a REIT for federal income tax purposes, and will continue to operate in such a manner
as to qualify as a REIT. In order to qualify as a REIT, we must satisfy a number of highly technical and complex provisions of the Internal
Revenue Code. Governmental legislation, new regulations, and administrative interpretations may significantly change the tax laws with
respect to the requirements for qualification as a REIT, or the federal income tax consequences of qualifying as a REIT. Although FREIT
intends to continue to operate in a manner to allow it to qualify as a REIT, future economic, market, legal, tax or other considerations
may cause it to revoke the REIT election or fail to qualify as a REIT. Such a revocation would subject FREITs income to federal
income tax at regular corporate rates, and failure to qualify as a REIT would eliminate the requirement that FREIT pay dividends to its
stockholders.
*Change of investment and operating policies:*
FREITs investment and operating policies, including indebtedness and dividends, are exclusively determined by the Board, and not
subject to stockholder approval.
*Cybersecurity Risks*: Our
business operations rely heavily on digital technologies and information systems which are maintained by our external manager, Hekemian
& Co., Inc. (Hekemian & Co.), and which are essential for our day-to-day activities and strategic initiatives. We
are exposed to various cybersecurity risks, including but not limited to:
|
| Data Breaches and Unauthorized Access: We collect,
process, and store significant amounts of sensitive data, including Personally Identifiable Information (PII) of our tenants and employees.
Unauthorized access to our systems could result in data breaches, leading to potential financial losses, reputational damage, and legal
liabilities. | |
|
| Cyber Attacks and Malware: We face the risk of
cyber attacks, including phishing, ransomware, and other forms of malware, which could disrupt Hekemian & Co.s operations,
compromise our data integrity, and result in significant remediation costs. | |
|
| Third-Party Vulnerabilities: Hekemian & Co.
relies on third-party vendors and service providers for various aspects of its operations. These third parties may also be vulnerable
to cyber threats, which could indirectly affect our business if their systems are compromised. | |
|
| Regulatory Compliance: We are subject to various
laws and regulations regarding data protection and cybersecurity. Non-compliance with these regulations could result in substantial fines,
penalties, and legal actions. | |
To mitigate these risks within the ever changing
IT environment, Hekemian & Co. has implemented cybersecurity policies that include regular risk assessments, advanced security technologies,
continuous monitoring and incident response plans. Despite these measures, we cannot guarantee that these efforts will be completely effective
in preventing cyber incidents. Any significant cybersecurity event could have a material adverse effect on our business, financial condition,
and results of operations.
13
|
ITEM 1B | UNRESOLVED STAFF COMMENTS | |
**None.**
|
ITEM 1C | CYBERSECURITY | |
Cybersecurity Risk Management, Strategy and
Governance
As a company externally managed by Hekemian &
Co., we rely on Hekemian & Co.s information technology (IT) systems. Hekemian & Co.s IT, communication
networks, system applications, accounting and financial reporting platforms and related systems are integral to the operation of FREITs
business. In its role as FREITs management company, Hekemian & Co. utilizes IT systems for financial analysis, management and
reporting, facilitation of operations, including monitoring and optimization of various building management systems, and for initiation,
generation and completion of residential and commercial leasing, internal communications, and various other aspects of FREITs business.
Hekemian & Co.s cybersecurity strategy
is focused on detection, protection, incident response, security risk management and mitigation, and resiliency of the cybersecurity infrastructure.
Hekemian & Co. evaluates, tests and updates various information security processes and policies designed to identify, assess and manage
material risks from cybersecurity threats to its critical computer networks, third-party hosted services, communications systems, hardware
and software, critical data, including confidential information that is proprietary, strategic or competitive in nature, as well as any
personally identifiable information related to FREITs residents, tenants and employees personal data.
Hekemian & Co.s cybersecurity risk
management relies on a multidisciplinary team, including its information technology team, legal advisors, executive management, and third-party
service providers to identify, assess, and manage cybersecurity threats and risks. Hekemian & Co.s Chief Technology Officer
(CTO) is responsible for managing the internal and external resources dedicated to cybersecurity. The CTO has been an integral
part of the implementation of resources used and the security around the technology implemented.
Hekemian & Co. identifies and assesses risks
from cybersecurity threats by monitoring and evaluating the cybersecurity threat environment and the risk profile of Hekemian & Co.
and FREIT. This multi-faceted approach to cybersecurity includes physical, administrative, and technical safeguards.
To operate its IT systems, Hekemian & Co.
engages certain third-party vendors to perform a variety of functions. Hekemian & Co. seeks to engage reliable, reputable service
providers. Depending upon the nature of the services and the sensitivity of the data that a third-party service provider processes, Hekemian
& Co.s vendor management procedures may include reviewing certain aspects of a vendors operations where possible.
Hekemian & Co.s IT Security Incident
Management Policy details the process and procedures to be followed in the event of a potential breach or a breach that occurred at a
third-party provider. Additionally, Hekemian & Co. maintains a cybersecurity insurance policy to mitigate certain risks associated
with cybersecurity incidents.
FREIT and Hekemian & Co. are not currently
aware of any risks from cybersecurity threats nor in the last fiscal year has FREIT or Hekemian & Co. had a previous cybersecurity
incident that in either case has materially affected or is reasonably likely to materially affect FREIT, its business strategy, results
of operations or financial condition. Any failure in or breach of operational or information security systems or those of our vendors
as a result of cyber attacks or other security incidents, could materially adversely impact our operations and financial position, including
disruption of our operations caused by an inability to access network systems, disclosure or misuse of confidential or proprietary information,
damage to our reputation, and/or potentially significant legal and/or financial liabilities and penalties.
FREITs Board of Directors considers cybersecurity
risk as part of its risk oversight function and has delegated to the Audit Committee oversight responsibility over the cybersecurity strategy
and risk management. The Audit Committee engages in regular discussions with executive management, including Hekemian & Co.s
CTO, regarding FREITs significant financial risk exposures and the measures implemented to monitor and control these risks, including
those that may result from material cybersecurity threats. The Audit Committee reports to FREITs Board of Directors regarding its
activities and cybersecurity matters as needed.
Refer to *Part 1, Item 1A, Risk Factors*
of this Form 10-K for a discussion of the risks to FREIT related to cybersecurity.
14
|
ITEM 2 | PROPERTIES | |
**Portfolio of Investments:**The
following tables set forth certain information relating to each of FREIT's real estate investments in addition to the specific mortgages
encumbering the properties.
|
Residential Apartment Properties as of October 31, 2025: |
|
|
| |
|
Property & Location |
Year
Acquired |
No.
of
Units |
Average Annual
Occupancy Rate for
the Year Ended
10/31/25 |
Average
Monthly Rent
per Unit @
10/31/25* |
Average
Monthly Rent
per Unit @
10/31/24* |
Mortgage
Balance ($000)
@ 10/31/25 |
Depreciated
Cost of
Land, Buildings &
Equipment ($000)
@ 10/31/25 | |
|
|
|
|
|
|
|
|
| |
|
Berdan Court (1) |
1965 |
176 |
95.9% |
$2,431 |
$2,338 |
$28,190 |
$1,310 | |
|
Wayne, NJ |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Regency Club |
2014 |
132 |
97.5% |
$2,245 |
$2,111 |
$13,754 (4) |
$16,315 | |
|
Middletown, NY |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Steuben Arms |
1975 |
100 |
97.3% |
$2,059 |
$2,010 |
$8,715 (5) |
$821 | |
|
River Edge, NJ |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Westwood Hills (2) |
1994 |
210 |
96.3% |
$2,596 |
$2,536 |
$24,803 |
$7,567 | |
|
Westwood, NJ |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Boulders |
2006 |
129 |
96.6% |
$2,709 |
$2,594 |
None |
$13,194 | |
|
Rockaway, NJ |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Station Place (3) |
2017 |
45 |
97.2% |
$3,420 |
$3,478 |
$11,030 |
$17,488 | |
|
Red Bank, NJ |
|
|
|
|
|
|
| |
* Average monthly rent
per unit excludes the impact of rent concessions and abatements.
(1) Berdan Court is 100% owned by Berdan Court, LLC, which is 100% owned by FREIT.
(2) FREIT owns a 40% equity interest in Westwood Hills, LLC, which owns 100% of the Westwood Hills property.
(3) Station Place is 100% owned by Station Place on Monmouth, LLC, which is 100% owned by FREIT.
(4) On December 15, 2024, the mortgage and the corresponding interest rate swap contract on its underlying loan came due with no settlement of the swap contract due at maturity. Effective December 15, 2024, FREIT Regency, LLC entered into a loan extension and modification agreement with the lender of this loan, Provident Bank, with a then outstanding loan balance of approximately $13.9 million. Under the terms and conditions of this loan extension and modification, the maturity date of this loan is extended for three years to December 15, 2027, the interest rate on the outstanding debt is based on a fixed interest rate of 6.05% and monthly installments of principal and interest of approximately $84,521 are required. See Note 5 to FREITs consolidated financial statements for additional details.
(5) On December 1, 2023, the mortgage came due. Provident Bank extended the initial maturity date of this loan for a 90-day period with a maturity date of March 1, 2024 and further extended this loan for another 60-day period with a new maturity date of June 1, 2024, based on the same terms and conditions of the existing loan agreement. On May 1, 2024, FREIT entered into a loan extension and modification agreement with Provident Bank, effective June 1, 2024, with a then outstanding loan balance of approximately $8.9 million. Under the terms and conditions of this loan extension and modification, the maturity date of this loan is extended for three years to May 31, 2027, requires monthly installments of principal and interest of approximately $58,016 and is based on a fixed interest rate of 6.75%. See Note 5 to FREIT's consolidated financial statements for further details.
15
|
Commercial Properties as of October 31, 2025: |
|
|
|
| |
|
Property & Location |
Year
Acquired |
Leasable
Space-
Approximate
Sq.Ft. |
Average Annual
Occupancy Rate for
the Year Ended
10/31/25 |
Average
Annualized
Rent per Sq. Ft.
@ 10/31/25* |
Average
Annualized
Rent per Sq. Ft.
@ 10/31/24* |
Mortgage
Balance ($000)
@ 10/31/25 |
Depreciated
Cost of Land,
Buildings &
Equipment
($000)
@ 10/31/25 | |
|
|
|
|
|
|
|
|
| |
|
Glen Rock, NJ |
1962 |
4,672 |
100.0% |
$21.53 |
$22.01 |
None (1) |
$39 | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Franklin Crossing |
1966 (2) |
87,659 |
96.8% |
$23.31 |
$22.70 |
None (1) |
$5,731 | |
|
Franklin Lakes, NJ |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Westwood Plaza |
1988 |
174,275 |
29.1% |
$19.45 |
$16.21 |
$9,808 (4) |
$7,217 | |
|
Westwood, NJ |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Preakness Center (3) |
2002 |
322,142 |
44.7% |
$14.85 |
$15.45 |
$25,000 (5) |
$20,591 | |
|
Wayne, NJ |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
Rockaway, NJ |
1964/1963 |
1 Acre |
100.0% |
N/A |
N/A |
None |
$114 | |
|
|
|
Land lease |
|
|
|
|
| |
* Average annualized rent
per sq. ft. includes the impact of straight-line rent adjustments.
(1) These properties are security for draws against FREIT's line of credit.(See Note 5 to FREITs consolidated financial statements for additional details.)
(2) The original 33,000 sq. ft. shopping center was replaced with a new 87,659 sq. ft. center that opened in October 1997.
(3) FREIT owns a 40% equity interest in Wayne PSC, LLC, that owns the center.
(4) On October 31, 2023, FREIT exercised its right, pursuant to the loan agreement, to extend the term of its loan for one additional year from an initial maturity date of February 1, 2024 to a new maturity date of February 1, 2025. The outstanding balance of this loan as of February 1, 2024 was approximately $16,458,000, payable based on monthly installments of principal and interest of approximately $166,727, and bearing interest at a fixed rate of 8.5%.Additionally, FREIT funded the interest reserve escrow account for this loan (Escrow) with an additional $112,556, increasing the Escrow balance to $2,000,722, which represented the annualized principal and interest payments for one (1) year under this loan extension. Effective February 1, 2025, Valley National Bank extended this loan for 90 days from a maturity date of February 1, 2025 to a maturity date of May 1, 2025 under the same terms and conditions of the existing loan agreement. Effective May 1, 2025, FREIT entered into a loan extension and modification agreement with Valley National Bank and paid down this loan by approximately $5.7 million (including deferred interest of approximately $0.2 million) bringing the loan balance to $10 million. Under the terms and conditions of this loan extension and modification, the maturity date of this loan is extended for one year to May 1, 2026, the interest rate on the outstanding debt is based on a fixed interest rate of 8.5% and monthly installments of principal and interest of approximately $107,978 are required. The pay down of this loan will result in annual debt service savings of approximately $705,000. Additionally, the Escrow balance was reduced from $2,000,722 to $1,295,739 resulting in a refund to FREIT of $704,983. This Escrow is held at Valley National Bank and in the event of a default on this loan, the bank shall be permitted to use the proceeds from the Escrow to make monthly debt service payments on the loan. (See Note 5 to FREITs consolidated financial statements for further details.)
(5) On August 1, 2025, the mortgage in the amount of $25,000,000, secured by
the Preakness Shopping Center located in Wayne, New Jersey, reached its maturity date. Wayne PSC, LLC is working with the current lender,
ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several extensions of the loans
maturity date while discussions are ongoing, with each extension made under the same
terms and conditions of the existing loan agreement. Wayne PSC, LLC continues to evaluate all options for refinancing or replacing the
loan. Management expects this loan to be further extended, however, until such time as a definitive agreement providing for a modification,
extension or replacement of this loan is entered into, there can be no assurance that such an agreement will be reached. (See Note 5 to
FREITs consolidated financial statements for additional details.)
16
**Supplemental Segment Information:**
|
Commercial lease expirations at October 31, 2025 assuming none of the tenants exercise renewal options: | |
|
| |
| |
| |
| |
Annual Rent of Expiring Leases | | |
|
Year Ending | |
Number of | |
Expiring Leases | |
Percent of | |
| | |
| | |
|
October 31, | |
Expiring Leases | |
Sq. Ft. | |
Commercial Sq. Ft. | |
Total | | |
Per Sq. Ft. | | |
|
| |
| |
| |
| |
| | |
| | |
|
Month to month | |
7 | |
34,801 | |
12.8% | |
$ | 550,815 | | |
$ | 15.83 | | |
|
2026 | |
9 | |
17,688 | |
6.5% | |
$ | 387,273 | | |
$ | 21.89 | | |
|
2027 | |
14 | |
83,927 | |
30.8% | |
$ | 1,846,088 | | |
$ | 22.00 | | |
|
2028 | |
4 | |
6,858 | |
2.5% | |
$ | 200,962 | | |
$ | 29.30 | | |
|
2029 | |
2 | |
4,786 | |
1.8% | |
$ | 134,620 | | |
$ | 28.13 | | |
|
2030 | |
5 | |
9,680 | |
3.5% | |
$ | 316,517 | | |
$ | 32.70 | | |
|
2031 | |
4 | |
95,943 | |
35.2% | |
$ | 1,258,809 | | |
$ | 13.12 | | |
|
2032 | |
2 | |
4,249 | |
1.6% | |
$ | 104,196 | | |
$ | 24.52 | | |
|
2033 | |
4 | |
13,176 | |
4.8% | |
$ | 416,856 | | |
$ | 31.64 | | |
|
2034 | |
1 | |
1,737 | |
0.6% | |
$ | 49,678 | | |
$ | 28.60 | | |
**Vacant Land as of October 31, 2025:**
|
Vacant Land |
|
|
Permitted Use Per |
Acreage Per | |
|
Location (1) |
Acquired |
Current Use |
Local Zoning Laws |
Parcel | |
|
Franklin Lakes, NJ |
1966 |
None |
Residential |
4.27 | |
|
Wayne, NJ |
2002 |
None |
Commercial |
2.1 | |
|
Rockaway, NJ |
1964 |
None |
Residential |
1.0 | |
*(1)All
of the above land is unencumbered, except as noted elsewhere.*
FREIT believes that it has a diversified portfolio
of residential andcommercial properties. FREIT does not derive 10% or greater of its total consolidated revenue from any single
lease agreement.
In Fiscal 2025, FREIT had two (2) properties that
contributed over 15% of FREITs total consolidated revenue: within the residential segment, the Westwood Hills property and the
Berdan Court property, which accounted for 20.2% and 15.9%, respectively, of total consolidated revenue. In Fiscal 2024, FREIT had two
(2) properties that contributed over 15% of FREITs total consolidated revenue: within the residential segment, the Westwood Hills
property and the Berdan Court property, which accounted for 19.2% and 16%, respectively, of total consolidated revenue. For the fiscal
year ended October 31, 2023, FREIT had two (2) properties that contributed over 15% of FREITs total consolidated revenue: within
the residential segment, the Westwood Hills property and the Berdan Court property, which accounted for 18.4% and 15.1%, respectively,
of total consolidated revenue.
Although FREITs general investment policy
is to hold properties as long-term investments, FREIT could selectively sell certain properties if it determines that any such sale is
in FREITs and its stockholders best interests. With respect to FREITs future acquisition and development activities,
FREIT will evaluate various real estate opportunities, which FREIT believes would increase FREITs revenues and earnings, as well
as complement and increase the overall value of FREITs existing investment portfolio.
Except for the TD Bank branch located in Rockaway,
New Jersey, all of FREITs and its subsidiaries commercial properties have multiple tenants.
17
As of October 31, 2025, FREIT and its subsidiaries
commercial properties have five (5) anchor/major tenants, which account for approximately 63.9% of the space leased. The balance of the
space is leased to forty-seven (47) satellite tenants. The following table lists the anchor/major tenants at each center and the number
of satellite tenants:
|
|
|
|
|
No. of | |
|
Commercial Property |
Net Leasable |
|
Additional/Satellite | |
|
Shopping Center (SC) |
Space |
Anchor/Major Tenants |
Tenants | |
|
|
|
|
|
| |
|
Franklin Crossing |
(SC) |
87,659 |
Stop & Shop Supermarket Co. |
19 | |
|
Franklin Lakes, NJ |
|
|
|
| |
|
Westwood Plaza |
(SC) |
174,275 |
TJ Maxx |
9 | |
|
Westwood, NJ |
|
|
|
| |
|
Preakness Center (1) |
(SC) |
322,142 |
Stop & Shop Supermarket Co. |
17 | |
|
Wayne, NJ |
|
|
CVS |
| |
|
|
|
|
T-Bowl, Inc. (2) |
| |
|
|
|
|
|
| |
|
Glen Rock, NJ |
(SC) |
4,672 |
|
2 | |
(1) FREIT has a 40% interest in this property.
(2) See Renewal
of leases and Reletting of Space for additional details.
With respect to most of FREITs commercial
properties, lease terms range from five (5) years to twenty-five (25) years with options, which if exercised would extend the terms of
such leases. The lease agreements generally provide for reimbursement of real estate taxes, maintenance, insurance and certain other operating
expenses of the properties. During the last three (3) completed fiscal years, occupancy at FREITs commercial properties averaged
54.5%, which represents the actual physical occupancy rate (based upon possession and use of leased space). The higher vacancy
rate is primarily driven by the elevated vacancy rates at the Westwood Plaza and Preakness Shopping centers.
Leases for FREITs apartment buildings and
complexes are usually one to two years in duration. Even though the residential units are leased on a short-term basis, FREIT has averaged,
during the last three (3) completed fiscal years, a 96.5% occupancy rate with respect to FREITs available apartment units.
FREIT does not believe that any seasonal factors
materially affect FREITs business operations and the leasing of its commercial and apartment properties.
FREIT believes that its properties are covered
by adequate fire and property insurance provided by reputable companies and with commercially reasonable deductibles and limits.
|
ITEM 3 |
LEGAL PROCEEDINGS | |
There are no material pending legal proceedings
to which FREIT is a party, or of which any of its properties is the subject. There is, however, ordinary and routine litigation involving
FREIT's business including various tenancy and related matters. Except for the environmental conditions involving remediation disclosed
in *Item 1(c) Narrative Description of Business - Impact of Governmental Laws and Regulations on Registrants Business;
Environmental Matters*, there are no legal proceedings concerning environmental issues with respect to any property owned by
FREIT.
|
ITEM 4 |
MINE SAFETY DISCLOSURES | |
Not applicable.
18
**PART II**
|
ITEM 5 |
MARKET FOR FREIT'S COMMON EQUITY, RELATED SECURITY HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | |
****
**Reincorporation**
First Real Estate Investment Trust of New Jersey
was organized on November 1, 1961 as a New Jersey Business Trust. On July 1, 2021, First Real Estate Investment Trust of New Jersey completed
the change of its form of organization from a New Jersey real estate investment trust to a Maryland corporation (the Reincorporation)
which was approved by its stockholders at the annual meeting of stockholders held on May 6, 2021. The Reincorporation changed the law
applicable to First Real Estate Investment Trust of New Jerseys affairs from New Jersey law to Maryland law and was accomplished
by the merger of First Real Estate Investment Trust of New Jersey with and into its wholly owned subsidiary, First Real Estate Investment
Trust of New Jersey, Inc. (FREIT, Trust, us, we, our or the Company),
a Maryland corporation. As a result of the Reincorporation, the separate existence of First Real Estate Investment Trust of New Jersey
has ceased and FREIT has succeeded to all the business, properties, assets and liabilities of First Real Estate Investment Trust of New
Jersey. Holders of shares of beneficial interest in First Real Estate Investment Trust of New Jersey have received one newly issued share
of common stock of FREIT for each share of First Real Estate Investment Trust of New Jersey that they own, without any action of stockholders
required and all treasury stock held by First Real Estate Investment Trust of New Jersey was retired. FREIT is organized and will continue
to operate in such a manner as to qualify for taxation as a REIT under the Internal Revenue Code of 1986, as amended, and its stock is
traded on the over-the-counter market under the trading symbol FREVS.
**Shares**
FREIT has the authority to issue 25,000,000 shares,
consisting of 20,000,000 shares of common stock with a par value of $0.01 per share and 5,000,000 shares of preferred stock with a par
value of $0.01 per share. FREITs only authorized, issued and outstanding class of equity is common stock (Shares).
As of January 29, 2026, there were approximately 500 holders of record of the Shares.
The Shares are traded in the over-the-counter
market through use of the OTC Pink Market (the OTC Pink) provided by the Financial Industry Regulatory Authority, Inc. (FINRA).
FREIT does not believe that an active United States public trading market exists for the Shares since historically only small volumes
of the Shares are traded on a sporadic basis. The following table sets forth, at the end of the periods indicated, the Bid and Asked quotations
for the Shares on the OTC Pink.
|
| |
Bid | | |
Asked | | |
|
Fiscal Year Ended October 31, 2025 | |
| | | |
| | | |
|
First Quarter | |
$ | 17.00 | | |
$ | 17.50 | | |
|
Second Quarter | |
$ | 16.79 | | |
$ | 16.99 | | |
|
Third Quarter | |
$ | 14.14 | | |
$ | 15.00 | | |
|
Fourth Quarter | |
$ | 13.15 | | |
$ | 13.40 | | |
|
| |
Bid | | |
Asked | | |
|
Fiscal Year Ended October 31, 2024 | |
| | | |
| | | |
|
First Quarter | |
$ | 15.65 | | |
$ | 16.50 | | |
|
Second Quarter | |
$ | 14.96 | | |
$ | 16.74 | | |
|
Third Quarter | |
$ | 17.75 | | |
$ | 17.95 | | |
|
Fourth Quarter | |
$ | 17.21 | | |
$ | 18.00 | | |
The bid quotations set forth above for the Shares
reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions. The
source of the bid and asked quotations is Bloomberg.
**Stockholder Rights Plan**
On July 28, 2023, FREITs Board adopted
a stockholder rights plan, as set forth in the Stockholder Rights Agreement, dated July 31, 2023, between the Company and Computershare
Trust Company, N.A., as Rights Agent (the Rights Agreement). Pursuant to the terms of the Rights Agreement, the Board declared
a dividend distribution of one Preferred Stock Purchase Right (a Right) for each outstanding share of common stock, par
value $0.01 per share, of the Company (the Common Stock) to stockholders of record as of the close of business on August
11, 2023 (the Record Date). In addition, one Right will automatically attach to each share of Common Stock issued between
the Record Date and the Distribution Date (as hereinafter defined). Each Right entitles the registered holder thereof to purchase from
the Company a unit consisting of one ten-thousandth of a share (a Unit) of Series A Junior Participating Cumulative Preferred
Stock, par value $0.01 per share, of the Company (the Preferred Stock) at a cash exercise price of $95.00 per Unit (the
Exercise Price), subject to adjustment, under certain conditions specified in the Rights Agreement.
Initially, the Rights are not exercisable and
are attached to and trade with all shares of Common Stock outstanding as of, and issued subsequent to, the Record Date. The Rights will
separate from the Common Stock and will become exercisable upon the
19
earlier of (i) the close of business on the tenth calendar day following
the first public announcement that a person or group of affiliated or associated persons (an Acquiring Person) has acquired
beneficial ownership of 10% or more of the outstanding shares of Common Stock, other than as a result of repurchases of stock by the
Company or certain inadvertent actions by a stockholder (the date of said announcement being referred to as the Stock Acquisition
Date), or (ii) the close of business on the tenth business day (or such later day as the Board of Directors may determine) following
the commencement of a tender offer or exchange offer that could result upon its consummation in a person or group becoming an Acquiring
Person (the earlier of such dates being herein referred to as the Distribution Date). The Rights are not exercisable until
the Distribution Date and will expire at the close of business on July 31, 2026, unless previously redeemed or exchanged by the Company.
**Dividends**
The holders of Shares are entitled to receive
distributions as may be declared by the FREIT Board of Directors (Board). Dividends may be declared from time to time by
the Board and may be paid in cash, property, or Shares. The Boards present policy is to distribute annually at least ninety percent
(90%) of FREITs REIT taxable income as dividends to the holders of Shares in order to qualify as a REIT for federal income tax
purposes. Distributions are made on a quarterly basis. For Fiscal 2025, 2024 and 2023, FREIT paid/declared an annual dividend of $0.36
per share, $0.85 per share and $0.45 per share, respectively. See Item 7, *Managements Discussion and Analysis of Financial
Condition and Results of Operations - Distributions to Stockholders.*
**Securities Authorized for Issuance under Equity Compensation Plans**
See Item 12, *Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters*.
20
|
ITEM 6 |
[RESERVED] | |
|
BALANCE SHEET DATA: | |
| | |
| | |
| | |
| | |
| | |
|
As At October 31, | |
2025 | | |
2024 | | |
2023 | | |
2022 | | |
2021 | | |
|
| |
(In Thousands) | | |
|
Total assets | |
$ | 149,874 | | |
$ | 162,264 | | |
$ | 159,115 | | |
$ | 178,649 | | |
$ | 346,105 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Mortgage loans | |
$ | 121,300 | | |
$ | 128,871 | | |
$ | 138,179 | | |
$ | 139,217 | | |
$ | 301,276 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Common equity | |
$ | 34,039 | | |
$ | 33,363 | | |
$ | 24,516 | | |
$ | 25,909 | | |
$ | 36,573 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Basic | |
| 7,469 | | |
| 7,455 | | |
| 7,441 | | |
| 7,055 | | |
| 7,019 | | |
|
Diluted | |
| 7,469 | | |
| 7,459 | | |
| 7,447 | | |
| 7,132 | | |
| 7,022 | | |
|
INCOME STATEMENT DATA: | |
| | |
| | |
| | |
| | |
| | |
|
Years Ended October 31, | |
2025 | | |
2024 | | |
2023 | | |
2022 | | |
2021 | | |
|
| |
(In Thousands of Dollars, Except Per Share Amounts) | | |
|
Revenue from real estate operations | |
$ | 29,317 | | |
$ | 28,678 | | |
$ | 28,344 | | |
$ | 31,271 | | |
$ | 50,291 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Expenses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Real estate operating expenses | |
| 14,250 | | |
| 13,745 | | |
| 13,754 | | |
| 15,281 | | |
| 22,294 | | |
|
General and administrative expenses | |
| 2,892 | | |
| 4,419 | | |
| 4,243 | | |
| 5,003 | | |
| 5,195 | | |
|
Depreciation | |
| 2,965 | | |
| 2,981 | | |
| 2,944 | | |
| 3,995 | | |
| 9,300 | | |
|
Total expenses | |
| 20,107 | | |
| 21,145 | | |
| 20,941 | | |
| 24,279 | | |
| 36,789 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Investment income | |
| 1,351 | | |
| 1,560 | | |
| 1,013 | | |
| 358 | | |
| 116 | | |
|
Litigation settlement, net of fees | |
| | | |
| 15,673 | | |
| | | |
| | | |
| | | |
|
Net (loss) gain on sale of Maryland properties | |
| | | |
| (356 | ) | |
| (1,003 | ) | |
| 68,771 | | |
| | | |
|
Net realized gain on Wayne PSC interest rate swap termination | |
| | | |
| | | |
| | | |
| 1,415 | | |
| | | |
|
Loss on investment in tenancy-in-common | |
| (135 | ) | |
| (170 | ) | |
| (271 | ) | |
| (228 | ) | |
| (295 | ) | |
|
Interest expense including amortization of deferred financing
costs | |
| (7,280 | ) | |
| (7,307 | ) | |
| (7,717 | ) | |
| (8,064 | ) | |
| (12,276 | ) | |
|
Net income (loss) | |
| 3,146 | | |
| 16,933 | | |
| (575 | ) | |
| 69,244 | | |
| 1,047 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net loss (income) attributable to noncontrolling interests in subsidiaries | |
| 363 | | |
| (1,081 | ) | |
| 1,335 | | |
| (23,252 | ) | |
| (120 | ) | |
|
Net income attributable to common equity | |
$ | 3,509 | | |
$ | 15,852 | | |
$ | 760 | | |
$ | 45,992 | | |
$ | 927 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Earnings per share - basic | |
$ | 0.47 | | |
$ | 2.13 | | |
$ | 0.10 | | |
$ | 6.52 | | |
$ | 0.13 | | |
|
Earnings per share - diluted | |
$ | 0.47 | | |
$ | 2.13 | | |
$ | 0.10 | | |
$ | 6.45 | | |
$ | 0.13 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Cash dividends declared per common share | |
$ | 0.36 | | |
$ | 0.85 | | |
$ | 0.45 | | |
$ | 9.20 | | |
$ | 0.25 | | |
21
*
22
|
ITEM 7 |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS | |
|
Cautionary Statement Identifying Important
Factors That Could Cause FREITs Actual Results to Differ From Those Projected in Forward Looking Statements.
Readers of this discussion are advised
that the discussion should be read in conjunction with the consolidated financial statements of FREIT (including related notes thereto)
appearing elsewhere in this Form 10-K. Certain statements in this discussion may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect FREITs current
expectations and are based on estimates, projections, beliefs, data, methods and assumptions of management of FREIT at the time of
such statements regarding future results of operations, economic performance, financial condition and achievements of FREIT, and
do not relate strictly to historical or current facts. These forward-looking statements are identified through the use of words such
as believe, expect, anticipate, intend, plan, estimate,
or words of similar meaning. Forward-looking statements involve risks and uncertainties in predicting future results and conditions.
Although FREIT believes that the expectations
reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties,
which may cause the actual results to differ materially from those projected. Such factors include, but are not limited to the following:
general economic and business conditions, including the purchase of retail products over the Internet, which will, among other things,
affect demand for rental space, the availability of prospective tenants, lease rents, the financial condition of tenants and the default
rate on leases, operating and administrative expenses and the availability of financing; adverse changes in FREITs real estate
markets, including, among other things, competition with other real estate owners, competition confronted by tenants at FREITs
commercial properties, governmental actions and initiatives; environmental/safety requirements; and risks of real estate development
and acquisitions. The risks with respect to the development of real estate include: increased construction costs, inability to obtain
construction financing, or unfavorable terms of financing that may be available, unforeseen construction delays and the failure to complete
construction within budget.
| |
**OVERVIEW**
FREIT is an equity real estate investment trust
("REIT") that is self-administered and externally managed. FREIT owns a portfolio of residential apartment and commercial properties.
FREITs revenues consist primarily of rental income and other related revenues from its residential and commercial properties and
additional rents derived from operating commercial properties. FREITs properties are primarily located in northern New Jersey and
New York.
The economic and financial environment:*
The U.S. unemployment and inflation rates have risen from 4.1% and 2.6% in October 2024 to 4.4% and 3.0% in October 2025, reflecting a
cooling labor market and persistent price pressures. Inflation has been driven partly by tariff-related cost increases, which have raised
prices for goods such as apparel and durable goods, while services inflation remains elevated. Mortgage rates, though still high compared
to pre-2022 levels, have eased from their January peak of about 7% to roughly 6.0% to 6.3% for 30-year fixed rate loans, improving affordability
slightly. Economic growth has been uneven: real GDP contracted by 0.6% in the first quarter of 2025 but rebounded to 3.8% in the second
quarter of 2025, supported by consumer spending and reduced imports, though forecasts point to slower growth near 1.7% to 1.9% for the
full year. During the latter portion of 2025, the Federal Reserve cut its policy rate three timesfrom 4.5% to 3.75%, marking the
first reductions since December 2024, in response to labor market softening and tariff uncertainty.
*Residential Properties:* Our residential
portfolio continues to generate positive cash flow. While average rents on turned units and existing renewals remain generally stable
across much of the portfolio, we are seeing a modest but noticeable easing in market strength compared to prior quarters. This stability
should meaningfully contribute to FREITs income over time but it is uncertain what impact elevated interest rates and tariffs may
have on these properties over the next year.
*Commercial Properties:* While the
Franklin Crossing and Glen Rock shopping centers continue to maintain higher occupancies and stronger net operating incomes, the vacancy
rates at the Westwood Plaza and Preakness shopping centers remain elevated. Management, along with third-party advisors, is actively working
to attract quality tenants and explore redevelopment options to revitalize these spaces. Additionally, the elevated interest rates and
uncertainty around tariffs could have an adverse impact on the operating and financial performance of our existing commercial tenants.
*Debt Financing Availability:* Financing
has been available to FREIT and its affiliates. Certain recent refinancings and loan modifications/extensions have been at higher interest
rates and for shorter terms. In accordance with certain loan agreements, FREIT may be required to meet or maintain certain financial covenants
throughout the term of the loan. (See Note 5 to FREITs consolidated financial statements for additional details.)
On October 31, 2023, FREIT exercised its right,
pursuant to the loan agreement, to extend the term of its loan secured by the Westwood Plaza shopping center located in Westwood, New
Jersey for one additional year from an initial maturity date of February 1, 2024 to a new maturity date of February 1, 2025. The outstanding
balance of this loan as of February 1, 2024 was approximately $16,458,000, payable based on monthly installments of principal and interest
of approximately $166,727, and
23
bearing interest at a fixed rate of 8.5%. Additionally, FREIT funded the interest reserve escrow account
for this loan (Escrow) with an additional $112,556, increasing the Escrow balance to $2,000,722, which represented the annualized
principal and interest payments for one (1) year under this loan extension. Effective February 1, 2025, Valley National Bank extended
this loan for 90 days from a maturity date of February 1, 2025 to a maturity date of May 1, 2025 under the same terms and conditions of
the existing loan agreement.
Effective May 1, 2025, FREIT entered into a loan
extension and modification agreement with Valley National Bank and paid down this loan by approximately $5.7 million (including deferred
interest of approximately $0.2 million) bringing the loan balance to $10 million. Under the terms and conditions of this loan extension
and modification, the maturity date of this loan is extended for one year to May 1, 2026, the interest rate on the outstanding debt is
based on a fixed interest rate of 8.5% and monthly installments of principal and interest of approximately $107,978 are required. The
pay down of this loan will result in annual debt service savings of approximately $705,000. Additionally, the Escrow balance was reduced
from $2,000,722 to $1,295,739 resulting in a refund to FREIT of $704,983. This Escrow is held at Valley National Bank and in the event
of a default on this loan, the bank shall be permitted to use the proceeds from the Escrow to make monthly debt service payments on the
loan. (See Note 5 to FREITs consolidated financial statements for further details.)
On December 15, 2024, the mortgage secured by
an apartment building located in Middletown, New York and the corresponding interest rate swap contract on its underlying loan came due
with no settlement of the swap contract due at maturity. Effective December 15, 2024, FREIT Regency, LLC entered into a loan extension
and modification agreement with the lender of this loan, Provident Bank, with a then outstanding loan balance of approximately $13.9 million.
Under the terms and conditions of this loan extension and modification, the maturity date of this loan is extended for three years to
December 15, 2027, the interest rate on the outstanding debt is based on a fixed interest rate of 6.05% and monthly installments of principal
and interest of approximately $84,521 are required. (See Note 5 to FREITs consolidated financial statements for additional details.)
On August 1, 2025, the mortgage in the amount of $25,000,000, secured by
the Preakness Shopping Center located in Wayne, New Jersey, reached its maturity date. Wayne PSC, LLC is working with the current lender,
ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several extensions of the loans
maturity date while discussions are ongoing, with each extension made under the same
terms and conditions of the existing loan agreement. Wayne PSC, LLC continues to evaluate all options for refinancing or replacing the
loan. Management expects this loan to be further extended, however, until such time as a definitive agreement providing for a modification,
extension or replacement of this loan is entered into, there can be no assurance that such an agreement will be reached. (See Note 5 to
FREITs consolidated financial statements for additional details.)
FREITs revolving line of credit provided
by Provident Bank was renewed for a three-year term ending on October 31, 2026. Draws against the credit line can be used for working
capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREITs Franklin Crossing
Shopping Center located in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is $13 million
and the interest rate on the amount outstanding will be based on a floating interest rate of prime minus 25 basis points with a floor
of 6.75%. As of October 31, 2025 and 2024, there was no amount outstanding and $13 million was available under the line of credit. (See
Note 5 to FREITs consolidated financial statements for additional details.)
*Operating Cash Flow:* FREIT expects
that cash provided by operating activities and cash reserves will be adequate to cover mandatory debt service payments (including payments
of interest, but excluding balloon payments, which are expected to be refinanced and/or extended), real estate taxes, recurring capital
improvements at its properties and other needs to maintain its status as a REIT for at least a period of one year from the date of filing
of this annual report on Form 10-K.
24
**SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES**
Pursuant to the SEC disclosure guidance for "Critical
Accounting Policies," the SEC defines Critical Accounting Policies as those that require the application of management's most difficult,
subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain
and may change in subsequent periods.
Our discussion and analysis of our financial condition
and results of operations are based upon our consolidated financial statements, the preparation of which takes into account estimates
based on judgments and assumptions that affect certain amounts and disclosures. Accordingly, actual results could differ from these estimates.
The accounting policies and estimates used, which are outlined in Note 1 to our Consolidated Financial Statements which is presented elsewhere
in this Form 10-K, have been applied consistently as of October 31, 2025 and 2024, and for the fiscal years ended October 31, 2025, 2024
and 2023. We believe that the following accounting policies or estimates require the application of management's most difficult, subjective,
or complex judgments.
Revenue Recognition: Base rents, additional rents
based on tenants' sales volume and reimbursement of the tenants' share of certain operating expenses are generally recognized when due
from tenants. The straight-line basis is used to recognize base rents under leases if they provide for varying rents over the lease terms.
Straight-line rents represent unbilled rents receivable to the extent straight-line rents exceed current rents billed in accordance with
lease agreements. Before FREIT can recognize revenue, it is required to assess, among other things, its collectability.
Valuation of Long-Lived Assets: FREIT assesses
the carrying value of long-lived assets periodically, or whenever events or changes in circumstances indicate that the carrying amounts
of certain assets may not be recoverable. When FREIT determines that the carrying value of long-lived assets may be impaired, the measurement
of any impairment is based on a projected discounted cash flow method determined by FREIT's management. While we believe that our discounted
cash flow methods are reasonable, different assumptions regarding such cash flows may significantly affect the measurement of impairment.
Real Estate Development Costs: It is FREITs
policy to capitalize pre-development costs, which generally include legal and professional fees and other directly related third-party
costs. Real estate taxes and interest costs incurred during the development and construction phases are also capitalized. FREIT ceases
capitalization of these costs when the project or portion thereof becomes operational, or when construction has been postponed. In the
event of postponement, capitalization of these costs will recommence once construction on the project resumes.
See Note 1 to FREITs consolidated financial
statements for recently issued accounting standards.
25
**Results of Operations:**
**Fiscal Years Ended October 31, 2025 and 2024**
Summary revenues and net income for the fiscal
years ended October 31, 2025 (Fiscal 2025) and October 31, 2024 (Fiscal 2024) are as follows:
|
| |
Years Ended October 31, | | |
|
| |
2025 | | |
2024 | | |
Change | | |
|
| |
(in thousands, except per share amounts) | | |
|
Real estate revenues: | |
| | | |
| | | |
| | | |
|
Commercial properties | |
$ | 7,541 | | |
$ | 7,777 | | |
$ | (236 | ) | |
|
Residential properties | |
| 21,776 | | |
| 20,901 | | |
| 875 | | |
|
Total real estate revenues | |
| 29,317 | | |
| 28,678 | | |
| 639 | | |
|
| |
| | | |
| | | |
| | | |
|
Operating expenses: | |
| | | |
| | | |
| | | |
|
Real estate operating expenses | |
| 14,250 | | |
| 13,745 | | |
| 505 | | |
|
General and administrative expenses | |
| 2,892 | | |
| 4,419 | | |
| (1,527 | ) | |
|
Depreciation | |
| 2,965 | | |
| 2,981 | | |
| (16 | ) | |
|
Total operating expenses | |
| 20,107 | | |
| 21,145 | | |
| (1,038 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Investment income | |
| 1,351 | | |
| 1,560 | | |
| (209 | ) | |
|
Net loss on sale of Maryland properties | |
| | | |
| (356 | ) | |
| 356 | | |
|
Litigation settlement, net of fees | |
| | | |
| 15,673 | | |
| (15,673 | ) | |
|
Loss on investment in tenancy-in-common | |
| (135 | ) | |
| (170 | ) | |
| 35 | | |
|
Financing costs | |
| (7,280 | ) | |
| (7,307 | ) | |
| 27 | | |
|
Net income | |
| 3,146 | | |
| 16,933 | | |
| (13,787 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Net loss (income) attributable to noncontrolling interests in subsidiaries | |
| 363 | | |
| (1,081 | ) | |
| 1,444 | | |
|
Net income attributable to common equity | |
$ | 3,509 | | |
$ | 15,852 | | |
$ | (12,343 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Earnings per share: | |
| | | |
| | | |
| | | |
|
Basic and diluted | |
$ | 0.47 | | |
$ | 2.13 | | |
$ | (1.66 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
|
Basic | |
| 7,469 | | |
| 7,455 | | |
| | | |
|
Diluted | |
| 7,469 | | |
| 7,459 | | |
| | | |
Real estate revenue for Fiscal 2025 increased
2.2% to $29,317,000 compared to $28,678,000 for Fiscal 2024. The increase in revenue for Fiscal 2025 of approximately $650,000 was attributable
to an increase from the residential segment of approximately $900,000 driven primarily by an increase in base rents across most properties
while the average occupancy increased slightly from 96.1% in Fiscal 2024 to 96.6% in Fiscal 2025 offset by a decrease from the commercial
segment of approximately $250,000. The decline in the commercial segment was primarily driven by the following: (a) a decline in revenue
of approximately $350,000 at the Preakness shopping center attributed to a decline in the average occupancy from 46.3% in Fiscal 2024
to 44.7% in Fiscal 2025; (b) a decline in revenue of approximately $200,000 at the Westwood Plaza shopping center attributed to a $150,000
real estate tax refund received in Fiscal 2024 and a $125,000 decrease in revenue resulting from the decline in the average occupancy
from 34.8% in Fiscal 2024 to 29.1% in Fiscal 2025; offset by a $75,000 increase in revenue attributed to the expiration of TJ Maxxs
one-year co-tenancy clause in March 2025. This decline in revenue at the Preakness and Westwood Plaza shopping centers was offset by the
following: (a) an increase of approximately $150,000 at the Franklin Crossing shopping center primarily resulting from an increase in
revenue from common area maintenance charges due to an increase in reimbursable costs in Fiscal 2025 while the average occupancy declined
slightly from 97.2% in Fiscal 2024 to 96.8% in Fiscal 2025; and (b) an increase of approximately $150,000 as a result of amounts received
from the bankruptcy proceedings related to a former tenant, Cobb Theatre, at the Rotunda property located in Maryland and sold in a prior
year.
Net income attributable to common equity (net
income-common equity) for Fiscal 2025 was $3,509,000 ($0.47 per share basic and diluted), compared to $15,852,000 ($2.13 per share
basic and diluted) for Fiscal 2024.
26
The schedule below provides a non-GAAP detailed
analysis of the major changes that impacted net income-common equity for Fiscal 2025 and Fiscal 2024:
|
NON-GAAP NET INCOME COMPONENTS | |
| | |
| | |
| | |
|
| |
Years Ended October 31, | | |
|
| |
2025 | | |
2024 | | |
Change | | |
|
| |
(In Thousands) | | |
|
Income from real estate operations: | |
| | | |
| | | |
| | | |
|
Commercial properties | |
$ | 2,446 | | |
$ | 2,951 | | |
$ | (505 | ) | |
|
Residential properties | |
| 12,621 | | |
| 11,982 | | |
| 639 | | |
|
Total income from real estate operations | |
| 15,067 | | |
| 14,933 | | |
| 134 | | |
|
| |
| | | |
| | | |
| | | |
|
Financing costs: | |
| | | |
| | | |
| | | |
|
Fixed rate mortgages | |
| (6,821 | ) | |
| (6,783 | ) | |
| (38 | ) | |
|
Mortgage cost amortization | |
| (459 | ) | |
| (524 | ) | |
| 65 | | |
|
Total financing costs | |
| (7,280 | ) | |
| (7,307 | ) | |
| 27 | | |
|
| |
| | | |
| | | |
| | | |
|
Investment income | |
| 1,351 | | |
| 1,560 | | |
| (209 | ) | |
|
| |
| | | |
| | | |
| | | |
|
General & administrative expenses: | |
| | | |
| | | |
| | | |
|
Accounting fees | |
| (411 | ) | |
| (495 | ) | |
| 84 | | |
|
Legal and professional fees | |
| (387 | ) | |
| (1,070 | ) | |
| 683 | | |
|
Directors fees | |
| (1,326 | ) | |
| (1,328 | ) | |
| 2 | | |
|
Stock compensation expense | |
| | | |
| (1 | ) | |
| 1 | | |
|
Corporate expenses | |
| (768 | ) | |
| (1,525 | ) | |
| 757 | | |
|
Total general & administrative expenses | |
| (2,892 | ) | |
| (4,419 | ) | |
| 1,527 | | |
|
| |
| | | |
| | | |
| | | |
|
Depreciation | |
| (2,965 | ) | |
| (2,981 | ) | |
| 16 | | |
|
Loss on investment in tenancy-in-common | |
| (135 | ) | |
| (170 | ) | |
| 35 | | |
|
Adjusted net income | |
| 3,146 | | |
| 1,616 | | |
| 1,530 | | |
|
| |
| | | |
| | | |
| | | |
|
Net loss on sale of Maryland properties | |
| | | |
| (356 | ) | |
| 356 | | |
|
Litigation settlement, net of fees | |
| | | |
| 15,673 | | |
| (15,673 | ) | |
|
Net income | |
| 3,146 | | |
| 16,933 | | |
| (13,787 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Net loss (income) attributable to noncontrolling
interests in subsidiaries | |
| 363 | | |
| (1,081 | ) | |
| 1,444 | | |
|
Net income attributable to common equity | |
$ | 3,509 | | |
$ | 15,852 | | |
$ | (12,343 | ) | |
Adjusted net income for Fiscal 2025 was $3,146,000
($0.42 per share basic and diluted) compared to $1,616,000 ($0.22 per share basic and diluted) for Fiscal 2024. Adjusted net income is
a non-GAAP measure, which management believes is a useful and meaningful gauge to investors of our operating performance, since it excludes
the impact of unusual and infrequent items specifically: the litigation settlement, net of fees and a net loss on sale of Maryland Properties.
The increase in adjusted net income for Fiscal
2025 of approximately $1,550,000 was primarily driven by the following: (a) a decline in general and administrative expenses of approximately
$1,550,000 driven by a decrease in corporate expenses of approximately $750,000 related to costs incurred in Fiscal 2024 for work performed
for the Company by a financial advisory firm and a decline in legal and professional expenses of approximately $700,000 due to the settlement
of the Sinatra litigation in Fiscal 2024; (b) an increase in revenue of approximately $650,000 (FREITs share is approximately $550,000);
offset by (c) an increase in insurance costs of approximately $300,000 (FREITs share is approximately $200,000); (d) an increase
in repairs and maintenance costs of approximately $200,000 (FREITs share is approximately $250,000); and (e) a decrease in investment
income of approximately $200,000 (FREITs share is approximately $150,000) primarily attributed to lower interest rates in Fiscal
2025.
(Refer to the segment disclosure below for a more
detailed discussion of the financial performance of FREITs commercial and residential segments.)
27
**SEGMENT INFORMATION**
The following table sets forth comparative net
operating income ("NOI") data for FREITs real estate segments and reconciles the NOI to consolidated net income-common
equity for Fiscal 2025, as compared to Fiscal 2024 (See below for definition of NOI):
|
| |
Commercial | |
Residential | |
Combined | |
|
| |
Years Ended | |
| |
| |
Years Ended | |
| |
| |
Years Ended | |
|
| |
October 31, | |
Increase (Decrease) | |
October 31, | |
Increase (Decrease) | |
October 31, | |
|
| |
2025 | |
2024 | |
$ | |
% | |
2025 | |
2024 | |
$ | |
% | |
2025 | |
2024 | |
|
| |
(In Thousands) | |
| |
(In Thousands) | |
| |
(In Thousands) | |
|
Rental income | |
$ | 5,599 | | |
$ | 5,731 | | |
$ | (132 | ) | |
| -2.3% | | |
$ | 21,412 | | |
$ | 20,578 | | |
$ | 834 | | |
| 4.1% | | |
$ | 27,011 | | |
$ | 26,309 | | |
|
Reimbursements | |
| 1,878 | | |
| 1,903 | | |
| (25 | ) | |
| -1.3% | | |
| (1 | ) | |
| (16 | ) | |
| 15 | | |
| 93.8% | | |
| 1,877 | | |
| 1,887 | | |
|
Other | |
| 164 | | |
| 261 | | |
| (97 | ) | |
| -37.2% | | |
| 365 | | |
| 339 | | |
| 26 | | |
| 7.7% | | |
| 529 | | |
| 600 | | |
|
Total revenue | |
| 7,641 | | |
| 7,895 | | |
| (254 | ) | |
| -3.2% | | |
| 21,776 | | |
| 20,901 | | |
| 875 | | |
| 4.2% | | |
| 29,417 | | |
| 28,796 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Operating expenses | |
| 5,095 | | |
| 4,826 | | |
| 269 | | |
| 5.6% | | |
| 9,155 | | |
| 8,919 | | |
| 236 | | |
| 2.6% | | |
| 14,250 | | |
| 13,745 | | |
|
Net operating income | |
$ | 2,546 | | |
$ | 3,069 | | |
$ | (523 | ) | |
| -17.0% | | |
$ | 12,621 | | |
$ | 11,982 | | |
$ | 639 | | |
| 5.3% | | |
| 15,167 | | |
| 15,051 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Average Occupancy % | |
| 48.3% | | |
| 50.9% | | |
| | | |
| -2.6% | | |
| 96.6% | | |
| 96.1% | | |
| | | |
| 0.5% | | |
| | | |
| | | |
|
|
Reconciliation to consolidated net income-common equity: | |
| |
| |
|
|
Deferred rents - straight lining | |
| (100 | ) | |
| (118 | ) | |
|
|
Investment income | |
| 1,351 | | |
| 1,560 | | |
|
|
Loss on investment in tenancy-in-common | |
| (135 | ) | |
| (170 | ) | |
|
|
General and administrative expenses | |
| (2,892 | ) | |
| (4,419 | ) | |
|
|
Depreciation | |
| (2,965 | ) | |
| (2,981 | ) | |
|
|
Net loss on sale of Maryland properties | |
| | | |
| (356 | ) | |
|
|
Litigation settlement, net of fees | |
| | | |
| 15,673 | | |
|
|
Financing costs | |
| (7,280 | ) | |
| (7,307 | ) | |
|
|
Net income | |
| 3,146 | | |
| 16,933 | | |
|
|
Net loss (income) attributable to noncontrolling interests in subsidiaries | |
| 363 | | |
| (1,081 | ) | |
|
|
Net income attributable to common equity | |
$ | 3,509 | | |
$ | 15,852 | | |
NOI is based on operating revenue and expenses
directly associated with the operations of the real estate properties, but excludes deferred rents (straight lining), depreciation, financing
costs and other items. FREIT assesses and measures segment operating results based on NOI.
Same Property NOI: FREIT considers same property
net operating income (Same Property NOI) to be a useful supplemental non-GAAP measure of its operating performance. FREIT
defines same property within both the commercial and residential segments to be those properties that FREIT has owned and operated for
both the current and prior periods presented, excluding those properties that FREIT acquired, sold or redeveloped during those periods.
Any newly acquired property that has been in operation for less than a year, any property that is undergoing a major redevelopment but
may still be in operation at less than full capacity, and/or any property that has been sold or deconsolidated is not considered same
property.
NOI and Same Property NOI are non-GAAP financial
measures and are not measures of operating results or cash flow as measured by GAAP, and are not necessarily indicative of cash available
to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity.
**COMMERCIAL SEGMENT**
The commercial segment contains five (5) separate
properties. Four of these properties are multi-tenanted retail centers and one is single tenanted on land located in Rockaway, New Jersey
owned by FREIT from which it receives monthly rental income from a tenant which has built and operates a bank branch on the land.
As indicated in the table above under the caption
Segment Information, total revenue and NOI from FREITs commercial segment for Fiscal 2025 decreased by 3.2% and 17%, respectively,
as compared to Fiscal 2024. Average occupancy for all commercial properties for Fiscal 2025 decreased by 2.6% as compared to Fiscal 2024.
The decline in revenue for Fiscal 2025
of approximately $250,000 was primarily driven by the following: (a) a decline in revenue of approximately $350,000 at the Preakness shopping
center attributed to a decline in the average occupancy from 46.3% in Fiscal 2024 to 44.7% in Fiscal 2025; (b) a decline in revenue of
approximately $200,000 at the Westwood Plaza shopping center attributed to a $150,000 real estate tax refund received in Fiscal 2024 and
a $125,000 decrease in revenue resulting from the decline in the average occupancy from 34.8% in Fiscal 2024 to 29.1% in Fiscal 2025;
offset by a $75,000 increase in revenue attributed to the expiration of TJ Maxxs one-year co-tenancy clause in March 2025. This
decline in revenue at the Preakness and Westwood Plaza shopping centers was offset by the following: (a) an increase of approximately
$150,000 at the Franklin Crossing shopping center primarily resulting from an increase in revenue from common area maintenance charges
due to an increase in the reimbursable costs in Fiscal 2025 while the average occupancy declined slightly from 97.2% in Fiscal 2025 to
96.8% in Fiscal 2024; and (b) an increase of approximately $150,000 as a result of amounts received from the bankruptcy proceedings related
to a former tenant, Cobb Theatre, at the Rotunda property located in Maryland and sold in a prior year.
28
The decline in NOI for Fiscal 2025 of
approximately $500,000 was primarily attributed to a decline in revenue of approximately $250,000 and an increase in insurance costs of
approximately $250,000 due to increased policy costs in Fiscal 2025.
Same Property Operating Results: FREITs
commercial segment currently contains five (5) same properties. (See definition of same property under Segment Information above.) The
Rotunda Property, the Westridge Square Property and the Damascus Property were excluded from same property results for all periods presented
because these properties were sold in Fiscal 2022. Same property revenue and NOI for Fiscal 2025 decreased by 4.6% and 21.9%, respectively,
as compared to Fiscal 2024. The changes resulted from the factors discussed in the immediately preceding paragraph.
Leasing: The following table reflects leasing
activity at FREITs commercial properties for comparable leases (leases executed for spaces in which there was a tenant at some
point during the previous twelve-month period) and non-comparable leases for Fiscal 2025.
|
RETAIL: | |
Number of
Leases | | |
Lease Area
(Sq. Ft.) | | |
Weighted
Average
Lease Rate
(per Sq. Ft.) | | |
Weighted
Average Prior
Lease Rate
(per Sq. Ft.) | | |
% Increase
(Decrease) | | |
Tenant
Improvement
Allowance
(per Sq. Ft.)
(a) | | |
Lease
Commissions
(per Sq. Ft.)
(a) | | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Comparable leases (b) | |
| 12 | | |
| 119,396 | | |
$ | 18.77 | | |
$ | 18.24 | | |
| 2.9% | | |
$ | | | |
$ | 0.15 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Non-comparable leases | |
| 2 | | |
| 4,873 | | |
$ | 20.44 | | |
| N/A | | |
| N/A | | |
$ | | | |
$ | 1.02 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Total leasing activity | |
| 14 | | |
| 124,269 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
(a) These leasing costs are presented as annualized costs per square foot and are allocated uniformly over the lease term.
(b) This includes new tenant leases and/or modifications/extensions/renewals of existing tenant leases.
**RESIDENTIAL SEGMENT**
FREIT currently operates six (6) multi-family
apartment buildings or complexes totaling 792 apartment units, excluding the Pierre Towers property, which was converted to a TIC (see
Note 3 to FREITs consolidated financial statements).
As indicated in the table above under the caption
Segment Information, total revenue and NOI from FREITs residential segment for Fiscal 2025 increased by 4.2% and 5.3%, respectively,
as compared to Fiscal 2024. Average occupancy for all residential properties for Fiscal 2025 increased by 0.5% as compared to Fiscal 2024.
The increase in revenue for Fiscal 2025 of approximately
$900,000 was primarily attributable an increase in base rents across most properties while the average occupancy increased slightly from
96.1% in Fiscal 2024 to 96.6% in Fiscal 2025. The increase in NOI of approximately $650,000 was primarily attributed to the increase in
revenue of approximately $900,000 offset by an increase in repairs and maintenance expense of approximately $100,000 and an increase in
operating expenses of approximately $100,000 resulting from an increase in snow removal and landscaping costs in Fiscal 2025.
Same Property Operating Results: FREITs
residential segment currently contains six (6) same properties. (See definition of same property under Segment Information above.) Since
all of FREITs residential properties are considered same properties in the current fiscal year, refer to the preceding paragraph
for discussion of changes in same property results.
FREITs residential revenue is principally
composed of monthly apartment rental income. Total rental income is a factor of occupancy and monthly apartment rents. Monthly average
residential rents at the end of Fiscal 2025 and Fiscal 2024 were $2,414 and $2,320, respectively. A 1% decline in annual average occupancy,
or a 1% decline in average rents from current levels, results in an annual revenue decline of approximately $229,000 and $217,000, respectively.
Capital expenditures: FREIT tends to spend more
in any given year on maintenance and capital improvements at its residential properties which were constructed more than 25 years ago
(Steuben Arms, Berdan Court and Westwood Hills properties) than on its newer properties (Boulders, Regency and Station Place properties).
Funds for these capital projects are available from cash flow from the property's operations and cash reserves.
29
**INTEREST EXPENSE INCLUDING AMORTIZATION OF DEFERRED FINANCING COSTS
(NET FINANCING COSTS)**
|
| |
Years Ended October 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
(In Thousands of Dollars) | | |
|
Fixed rate mortgages (a): | |
| | | |
| | | |
|
1st Mortgages | |
| | | |
| | | |
|
Existing | |
$ | 6,821 | | |
$ | 6,783 | | |
|
New | |
| | | |
| | | |
|
Total gross financing costs | |
| 6,821 | | |
| 6,783 | | |
|
Amortization of mortgage costs | |
| 459 | | |
| 524 | | |
|
Total net financing costs | |
$ | 7,280 | | |
$ | 7,307 | | |
(a) Includes the effect of interest rate swap contracts which effectively convert the floating interest rate to a fixed interest rate over the term of the loan.
Total net financing costs for Fiscal 2025 decreased
slightly by approximately $27,000 or 0.4%, compared to Fiscal 2024 which was primarily attributable to the following: (a) a decrease of
approximately $225,000 resulting from the $5.7 million pay down of the loan on the Westwood Plaza shopping center in May 2025; and (b)
a decrease of approximately $100,000 resulting from the pay-off of the loan on the Boulders property in January 2024; offset by (c) an
increase of approximately $270,000 resulting from the increase in the interest rate from 3.75% to 6.05% due to the extension and modification
of the loan on the Regency property in December 2024; and (d) an increase of approximately $100,000 resulting from the increase in the
interest rate from 4.54% to 6.75% due to the extension and modification of the loan on the Steuben Arms property in June 2024.
**INVESTMENT INCOME**
Investment income for Fiscal 2025 was $1,351,000
as compared to $1,560,000 for Fiscal 2024. Investment income is principally derived from interest earned from cash on deposit in institutional
money market funds and short-term U.S. treasury securities. The decrease in investment income was primarily driven by lower interest rates
in Fiscal 2025.
**GENERAL AND ADMINISTRATIVE EXPENSES (G&A)**
G&A expense for Fiscal 2025 was $2,892,000
as compared to $4,419,000 for Fiscal 2024. The primary components of G&A are legal and professional fees, directors fees, corporate
expenses and accounting/auditing fees. The decline in G&A of approximately $1,550,000 was driven by a decrease in corporate expenses
of approximately $750,000 related to costs incurred in Fiscal 2024 for work performed for the Company by a financial advisory firm and
a decline in legal and professional expenses of approximately $700,000 due to the settlement of the Sinatra litigation in Fiscal 2024.
**DEPRECIATION**
Depreciation expense from operations for Fiscal
2025 was $2,965,000 as compared to $2,981,000 for Fiscal 2024.
30
**Results of Operations:**
**Fiscal Years Ended October 31, 2024 and 2023**
Summary revenues and net income for Fiscal 2024
and for the fiscal year ended October 31, 2023 (Fiscal 2023) are as follows:
|
| |
Years Ended October 31, | | |
|
| |
2024 | | |
2023 | | |
Change | | |
|
| |
(in thousands, except per share amounts) | | |
|
Real estate revenues: | |
| | | |
| | | |
| | | |
|
Commercial properties | |
$ | 7,777 | | |
$ | 8,689 | | |
$ | (912 | ) | |
|
Residential properties | |
| 20,901 | | |
| 19,655 | | |
| 1,246 | | |
|
Total real estate revenues | |
| 28,678 | | |
| 28,344 | | |
| 334 | | |
|
| |
| | | |
| | | |
| | | |
|
Operating expenses: | |
| | | |
| | | |
| | | |
|
Real estate operating expenses | |
| 13,745 | | |
| 13,754 | | |
| (9 | ) | |
|
General and administrative expenses | |
| 4,419 | | |
| 4,243 | | |
| 176 | | |
|
Depreciation | |
| 2,981 | | |
| 2,944 | | |
| 37 | | |
|
Total operating expenses | |
| 21,145 | | |
| 20,941 | | |
| 204 | | |
|
| |
| | | |
| | | |
| | | |
|
Investment income | |
| 1,560 | | |
| 1,013 | | |
| 547 | | |
|
Net loss on sale of Maryland properties | |
| (356 | ) | |
| (1,003 | ) | |
| 647 | | |
|
Litigation settlement, net of fees | |
| 15,673 | | |
| | | |
| 15,673 | | |
|
Loss on investment in tenancy-in-common | |
| (170 | ) | |
| (271 | ) | |
| 101 | | |
|
Financing costs | |
| (7,307 | ) | |
| (7,717 | ) | |
| 410 | | |
|
Net income (loss) | |
| 16,933 | | |
| (575 | ) | |
| 17,508 | | |
|
| |
| | | |
| | | |
| | | |
|
Net (income) loss attributable to noncontrolling interests in subsidiaries | |
| (1,081 | ) | |
| 1,335 | | |
| (2,416 | ) | |
|
Net income attributable to common equity | |
$ | 15,852 | | |
$ | 760 | | |
$ | 15,092 | | |
|
| |
| | | |
| | | |
| | | |
|
Earnings per share: | |
| | | |
| | | |
| | | |
|
Basic and diluted | |
$ | 2.13 | | |
$ | 0.10 | | |
$ | 2.03 | | |
|
| |
| | | |
| | | |
| | | |
|
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
|
Basic | |
| 7,455 | | |
| 7,441 | | |
| | | |
|
Diluted | |
| 7,459 | | |
| 7,447 | | |
| | | |
Real estate revenue for Fiscal 2024 increased
1.2% to $28,678,000 compared to $28,344,000 for Fiscal 2023. The increase in revenue was primarily attributable to the following: (a)
an increase from the residential segment of approximately $1,200,000 driven by an increase in base rents across most properties while
the average occupancy rate declined slightly from 96.8% in Fiscal 2023 to 96.1% in Fiscal 2024; offset by (b) a decrease from the commercial
segment of approximately $900,000 primarily driven by a decline in revenue of approximately $1,100,000 at the Westwood Plaza Shopping
Center resulting from Kmart vacating its space in October 2023 offset by an increase in revenue of approximately $100,000 attributed to
the increase in occupancy at the Franklin Crossing Shopping Center from 94.8% in Fiscal 2023 to 97.2% in Fiscal 2024 and an increase in
revenue of approximately $100,000 attributed to a lease termination fee received from European Wax at the Wayne Preakness Shopping Center
in Fiscal 2024.
Net income attributable to common equity (net
income-common equity) for Fiscal 2024 was $15,852,000 ($2.13 per share basic and diluted), compared to $760,000 ($0.10 per share
basic and diluted) for Fiscal 2023.
31
The schedule below provides a non-GAAP detailed
analysis of the major changes that impacted net income-common equity for Fiscal 2024 and Fiscal 2023:
|
NON-GAAP NET INCOME COMPONENTS | |
| | |
| | |
| | |
|
| |
Years Ended October 31, | | |
|
| |
2024 | | |
2023 | | |
Change | | |
|
| |
(In Thousands) | | |
|
Income from real estate operations: | |
| | | |
| | | |
| | | |
|
Commercial properties | |
$ | 2,951 | | |
$ | 3,609 | | |
$ | (658 | ) | |
|
Residential properties | |
| 11,982 | | |
| 10,981 | | |
| 1,001 | | |
|
Total income from real estate operations | |
| 14,933 | | |
| 14,590 | | |
| 343 | | |
|
| |
| | | |
| | | |
| | | |
|
Financing costs: | |
| | | |
| | | |
| | | |
|
Fixed rate mortgages | |
| (6,783 | ) | |
| (5,529 | ) | |
| (1,254 | ) | |
|
Floating rate mortgages | |
| | | |
| (1,653 | ) | |
| 1,653 | | |
|
Other - Corporate interest | |
| | | |
| (26 | ) | |
| 26 | | |
|
Mortgage cost amortization | |
| (524 | ) | |
| (509 | ) | |
| (15 | ) | |
|
Total financing costs | |
| (7,307 | ) | |
| (7,717 | ) | |
| 410 | | |
|
| |
| | | |
| | | |
| | | |
|
Investment income | |
| 1,560 | | |
| 1,013 | | |
| 547 | | |
|
| |
| | | |
| | | |
| | | |
|
General & administrative expenses: | |
| | | |
| | | |
| | | |
|
Accounting fees | |
| (495 | ) | |
| (519 | ) | |
| 24 | | |
|
Legal and professional fees | |
| (1,070 | ) | |
| (1,133 | ) | |
| 63 | | |
|
Directors fees | |
| (1,328 | ) | |
| (1,277 | ) | |
| (51 | ) | |
|
Stock compensation expense | |
| (1 | ) | |
| (11 | ) | |
| 10 | | |
|
Corporate expenses | |
| (1,525 | ) | |
| (1,303 | ) | |
| (222 | ) | |
|
Total general & administrative expenses | |
| (4,419 | ) | |
| (4,243 | ) | |
| (176 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Depreciation | |
| (2,981 | ) | |
| (2,944 | ) | |
| (37 | ) | |
|
Loss on investment in tenancy-in-common | |
| (170 | ) | |
| (271 | ) | |
| 101 | | |
|
Adjusted net income | |
| 1,616 | | |
| 428 | | |
| 1,188 | | |
|
| |
| | | |
| | | |
| | | |
|
Net loss on sale of Maryland properties | |
| (356 | ) | |
| (1,003 | ) | |
| 647 | | |
|
Litigation settlement, net of fees | |
| 15,673 | | |
| | | |
| 15,673 | | |
|
Net income (loss) | |
| 16,933 | | |
| (575 | ) | |
| 17,508 | | |
|
| |
| | | |
| | | |
| | | |
|
Net (income) loss attributable to noncontrolling interests in subsidiaries | |
| (1,081 | ) | |
| 1,335 | | |
| (2,416 | ) | |
|
Net income attributable to common equity | |
$ | 15,852 | | |
$ | 760 | | |
$ | 15,092 | | |
Adjusted net income for Fiscal 2024 was $1,616,000
($0.22 per share basic and diluted) compared to $428,000 ($0.06 per share basic and diluted) for Fiscal 2023. Adjusted net income is a
non-GAAP measure, which management believes is a useful and meaningful gauge to investors of our operating performance, since it excludes
the impact of unusual and infrequent items specifically: the litigation settlement, net of fees; a net loss on sale of Maryland Properties.
The increase in adjusted net income for Fiscal
2024 was primarily driven by the following: (a) an increase in investment income of approximately $547,000 resulting from higher interest
rates in Fiscal 2024; (b) a decline in net interest expense of approximately $410,000 (FREITs share is approximately $187,000)
primarily attributed to the refinancing of the loan on the Westwood Hills property in the prior years period from a variable interest
rate of approximately 9.21% (at the time of the refinancing) to a fixed interest rate of 6.05%; (c) an increase in revenue of approximately
$334,000 (FREITs share is approximately $138,000) as described elsewhere herein; (d) a decline in repairs and maintenance expense
related to the commercial segment of approximately $165,000; (e) a decline in payroll expense related to the commercial segment of approximately
$123,000 (FREITs share is approximately $73,000) primarily attributed to the completion in early Fiscal 2024 of the majority of
the tenant fit-ups at the Rotunda property; (f) an increase in income from investment in TIC of approximately $101,000; offset by (g)
an increase in general and administrative expenses (G&A) of approximately $176,000 driven by an increase in corporate
expenses of approximately $222,000 primarily related to work performed for the Company by a financial advisory firm in Fiscal 2024; and
(h) an increase in total operating expenses related to the residential segment of approximately
32
$245,000 (FREITs share is approximately
$238,000) primarily attributed to an increase in real estate tax expense and insurance costs.
(Refer to the segment disclosure below for a more
detailed discussion of the financial performance of FREITs commercial and residential segments.)
**SEGMENT INFORMATION**
The following table sets forth comparative net
operating income ("NOI") data for FREITs real estate segments and reconciles the NOI to consolidated net income-common
equity for Fiscal 2024, as compared to Fiscal 2023 (See below for definition of NOI):
|
| |
Commercial | |
Residential | |
Combined | |
|
| |
Years Ended | |
| |
| |
Years Ended | |
| |
| |
Years Ended | |
|
| |
October 31, | |
Increase (Decrease) | |
October 31, | |
Increase (Decrease) | |
October 31, | |
|
| |
2024 | |
2023 | |
$ | |
% | |
2024 | |
2023 | |
$ | |
% | |
2024 | |
2023 | |
|
| |
(In Thousands) | |
| |
(In Thousands) | |
| |
(In Thousands) | |
|
Rental income | |
$ | 5,731 | | |
$ | 6,319 | | |
$ | (588 | ) | |
| -9.3% | | |
$ | 20,578 | | |
$ | 19,303 | | |
$ | 1,275 | | |
| 6.6% | | |
$ | 26,309 | | |
$ | 25,622 | | |
|
Reimbursements | |
| 1,903 | | |
| 2,356 | | |
| (453 | ) | |
| -19.2% | | |
| (16 | ) | |
| 1 | | |
| (17 | ) | |
| -1700.0% | | |
| 1,887 | | |
| 2,357 | | |
|
Other | |
| 261 | | |
| 114 | | |
| 147 | | |
| 128.9% | | |
| 339 | | |
| 351 | | |
| (12 | ) | |
| -3.4% | | |
| 600 | | |
| 465 | | |
|
Total revenue | |
| 7,895 | | |
| 8,789 | | |
| (894 | ) | |
| -10.2% | | |
| 20,901 | | |
| 19,655 | | |
| 1,246 | | |
| 6.3% | | |
| 28,796 | | |
| 28,444 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Operating expenses | |
| 4,826 | | |
| 5,080 | | |
| (254 | ) | |
| -5.0% | | |
| 8,919 | | |
| 8,674 | | |
| 245 | | |
| 2.8% | | |
| 13,745 | | |
| 13,754 | | |
|
Net operating income | |
$ | 3,069 | | |
$ | 3,709 | | |
$ | (640 | ) | |
| -17.3% | | |
$ | 11,982 | | |
$ | 10,981 | | |
$ | 1,001 | | |
| 9.1% | | |
| 15,051 | | |
| 14,690 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Average Occupancy % | |
| 50.9% | | |
| 64.4% | | |
| | | |
| -13.5% | | |
| 96.1% | | |
| 96.8% | | |
| | | |
| -0.7% | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
|
Reconciliation to consolidated net income-common equity: | |
| | |
| | |
|
|
Deferred rents - straight lining | |
| (118 | ) | |
| (100 | ) | |
|
|
Investment income | |
| 1,560 | | |
| 1,013 | | |
|
|
Loss on investment in tenancy-in-common | |
| (170 | ) | |
| (271 | ) | |
|
|
General and administrative expenses | |
| (4,419 | ) | |
| (4,243 | ) | |
|
|
Depreciation | |
| (2,981 | ) | |
| (2,944 | ) | |
|
|
Net loss on sale of Maryland properties | |
| (356 | ) | |
| (1,003 | ) | |
|
|
Litigation settlement, net of fees | |
| 15,673 | | |
| | | |
|
|
Financing costs | |
| (7,307 | ) | |
| (7,717 | ) | |
|
|
Net income (loss) | |
| 16,933 | | |
| (575 | ) | |
|
|
Net (income) loss attributable to noncontrolling interests in subsidiaries | |
| (1,081 | ) | |
| 1,335 | | |
|
|
Net income attributable to common equity | |
$ | 15,852 | | |
$ | 760 | | |
NOI is based on operating revenue and expenses
directly associated with the operations of the real estate properties, but excludes deferred rents (straight lining), depreciation, financing
costs and other items. FREIT assesses and measures segment operating results based on NOI.
Same Property NOI: FREIT considers same property
net operating income (Same Property NOI) to be a useful supplemental non-GAAP measure of its operating performance. FREIT
defines same property within both the commercial and residential segments to be those properties that FREIT has owned and operated for
both the current and prior periods presented, excluding those properties that FREIT acquired, sold or redeveloped during those periods.
Any newly acquired property that has been in operation for less than a year, any property that is undergoing a major redevelopment but
may still be in operation at less than full capacity, and/or any property that has been sold or deconsolidated is not considered same
property.
NOI and Same Property NOI are non-GAAP financial
measures and are not measures of operating results or cash flow as measured by GAAP, and are not necessarily indicative of cash available
to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity.
**COMMERCIAL SEGMENT**
The commercial segment contains five (5) separate
properties. Four of these properties are multi-tenanted retail centers and one is single tenanted on land located in Rockaway, New Jersey
owned by FREIT from which it receives monthly rental income from a tenant which has built and operates a bank branch on the land.
As indicated in the table above under the caption
Segment Information, total revenue and NOI from FREITs commercial segment for Fiscal 2024 decreased by 10.2% and 17.3%, respectively,
as compared to Fiscal 2023. Average occupancy for all commercial properties for Fiscal 2024 decreased by 13.5% as compared to Fiscal 2023.
The decline in revenue for Fiscal 2024
was primarily driven by the decline in revenue of approximately $1,100,000 at the Westwood Plaza Shopping Center attributed to Kmart vacating
its space in October 2023 offset by an increase in revenue of approximately $100,000 attributed to the increase in occupancy at the Franklin
Crossing Shopping Center from 94.8% in Fiscal 2023 to 97.2% in Fiscal 2024 and an increase in revenue of approximately $100,000 attributed
to a lease termination fee received from European Wax at the Wayne Preakness Shopping Center in Fiscal 2024. The decrease in NOI for Fiscal
2024 was primarily attributable to the decline in revenue of approximately $894,000 offset by a decline in repairs and
33
maintenance expense
of approximately $165,000 and a decline in payroll expense of approximately $123,000 primarily attributed to the completion in early Fiscal
2024 of the majority of the tenant fit-ups at the Rotunda property.
Same Property Operating Results: FREITs
commercial segment currently contains five (5) same properties. (See definition of same property under Segment Information above.) The
Rotunda Property, the Westridge Square Property and the Damascus Property were excluded from same property results for all periods presented
because these properties were sold in Fiscal 2022. Same property revenue and NOI for Fiscal 2024 decreased by 9.5% and 19.9%, respectively,
as compared to Fiscal 2023. The changes resulted from the factors discussed in the immediately preceding paragraph.
Leasing: The following table reflects leasing
activity at FREITs commercial properties for comparable leases (leases executed for spaces in which there was a tenant at some
point during the previous twelve-month period) and non-comparable leases for Fiscal 2024.
|
RETAIL: | |
Number of
Leases | | |
Lease Area
(Sq. Ft.) | | |
Weighted
Average
Lease Rate
(per Sq. Ft.) | | |
Weighted
Average Prior
Lease Rate
(per Sq. Ft.) | | |
% Increase
(Decrease) | | |
Tenant
Improvement
Allowance
(per Sq. Ft.)
(a) | | |
Lease
Commissions
(per Sq. Ft.)
(a) | | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Comparable leases (b) | |
8 | | |
17,164 | | |
$ |
28.17 | | |
$ |
28.43 | | |
-0.9% | | |
$ |
| | |
$ |
0.68 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Non-comparable leases | |
| | | |
| | | |
$ | | | |
| N/A | | |
| N/A | | |
$ | | | |
$ | | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Total leasing activity | |
| 8 | | |
| 17,164 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
(a) These leasing costs are presented as annualized costs per square foot and are allocated uniformly over the lease term.
(b) This includes new
tenant leases and/or modifications/extensions/renewals of existing tenant leases.
**RESIDENTIAL SEGMENT**
FREIT currently operates six (6) multi-family
apartment buildings or complexes totaling 792 apartment units, excluding the Pierre Towers property, which was converted to a TIC (see
Note 3 to FREITs consolidated financial statements).
As indicated in the table above under the caption
Segment Information, total revenue and NOI from FREITs residential segment for Fiscal 2024 increased by 6.3% and 9.1%, respectively,
as compared to Fiscal 2023. Average occupancy for all residential properties for Fiscal 2024 decreased by 0.7% as compared to Fiscal 2023.
The increase in revenue for Fiscal 2024 was primarily
attributable to an increase in base rents across most properties while the average occupancy rate declined slightly from 96.8% in Fiscal
2023 to 96.1% in Fiscal 2024. The increase in NOI for Fiscal 2024 was primarily attributed to the increase in revenue of approximately
$1,246,000 offset by an increase in total operating expenses of approximately $245,000 primarily attributed to an increase in real estate
tax expense and insurance costs.
Same Property Operating Results: FREITs
residential segment currently contains six (6) same properties. (See definition of same property under Segment Information above.) Since
all of FREITs residential properties are considered same properties in the current fiscal year, refer to the preceding paragraph
for discussion of changes in same property results.
FREITs residential revenue is principally
composed of monthly apartment rental income. Total rental income is a factor of occupancy and monthly apartment rents. Monthly average
residential rents at the end of Fiscal 2024 and Fiscal 2023 were $2,320 and $2,214, respectively. A 1% decline in annual average occupancy,
or a 1% decline in average rents from current levels, results in an annual revenue decline of approximately $220,000 and $211,000, respectively.
Capital expenditures: FREIT tends to spend more
in any given year on maintenance and capital improvements at its residential properties which were constructed more than 25 years ago
(Steuben Arms, Berdan Court and Westwood Hills properties) than on its newer properties (Boulders, Regency and Station Place properties).
Funds for these capital projects are available from cash flow from the property's operations and cash reserves.
34
**INTEREST EXPENSE INCLUDING AMORTIZATION OF DEFERRED FINANCING COSTS
(NET FINANCING COSTS)**
|
| |
Years Ended October 31, | | |
|
| |
2024 | | |
2023 | | |
|
| |
(In Thousands of Dollars) | | |
|
Fixed rate mortgages (a): | |
| | | |
| | | |
|
1st Mortgages | |
| | | |
| | | |
|
Existing | |
$ | 6,783 | | |
$ | 5,148 | | |
|
New | |
| | | |
| 381 | | |
|
Variable rate mortgages: | |
| | | |
| | | |
|
1st Mortgages | |
| | | |
| | | |
|
Existing | |
| | | |
| 1,653 | | |
|
New | |
| | | |
| | | |
|
Other - Corporate interest | |
| | | |
| 26 | | |
|
Total gross financing costs | |
| 6,783 | | |
| 7,208 | | |
|
Amortization of mortgage costs | |
| 524 | | |
| 509 | | |
|
Total net financing costs | |
$ | 7,307 | | |
$ | 7,717 | | |
(a) Includes the effect of interest rate swap contracts which effectively convert the floating interest rate to a fixed interest rate over the term of the loan.
Total net financing costs for Fiscal 2024 decreased
by approximately $410,000 or 5.3%, compared to Fiscal 2023 which was primarily attributable to the following: (a) a decrease of approximately
$372,000 attributed to the refinancing of the loan on the Westwood Hills property in August 2023 from a $25 million variable interest
rate loan with an interest rate of approximately 9.21% (at the time of the refinancing) to a $25.5 million fixed interest rate loan with
an interest rate of 6.05%; (b) a decrease of approximately $279,000 resulting from the pay-off of the loan on the Boulders property in
January 2024; offset by (c) an increase of approximately $201,000 attributed to the extension and modification of the loan on the Westwood
Plaza Shopping Center modified effective February 2023 from a fixed interest rate of 4.75% to 7.5% and further extended effective February
2024 from a fixed interest rate of 7.5% to 8.5%.
**INVESTMENT INCOME**
Investment income for Fiscal 2024 was $1,560,000
as compared to $1,013,000 for Fiscal 2023. Investment income is principally derived from interest earned from cash on deposit in institutional
money market funds and short-term U.S. treasury securities. The increase in investment income was primarily driven by higher interest
rates in Fiscal 2024.
**GENERAL AND ADMINISTRATIVE EXPENSES (G&A)**
G&A expense for Fiscal 2024 was $4,419,000
as compared to $4,243,000 for Fiscal 2023. The primary components of G&A are legal and professional fees, directors fees, corporate
expenses and accounting/auditing fees. The increase in G&A for Fiscal 2024 was driven by an increase in corporate expenses of approximately
$222,000 primarily related to work performed for the Company by a financial advisory firm in Fiscal 2024.
**DEPRECIATION**
Depreciation expense from operations for Fiscal
2024 was $2,981,000 as compared to $2,944,000 for Fiscal 2023.
35
**LIQUIDITY AND CAPITAL RESOURCES**
Net cash provided by operating activities was
$6,248,000 for Fiscal 2025 compared to $20,163,000 for Fiscal 2024. FREIT expects that cash provided by operating activities and cash
reserves will be adequate to cover mandatory debt service payments (including payments of interest, but excluding balloon payments, which
are expected to be refinanced and/or extended), real estate taxes, dividends, recurring capital improvements at its properties and other
needs to maintain its status as a REIT for at least a period of one year from the date of filing of this annual report on Form 10-K.
As of October 31, 2025, FREIT had cash, cash equivalents
and restricted cash totaling $21,528,000, compared to $19,223,000 at October 31, 2024. The increase in cash, cash equivalents and restricted
cash in Fiscal 2025 of approximately $2,305,000 was primarily attributable to $11,543,000 in net cash provided by investing activities
and $6,248,000 in net cash provided by operating activities offset by $15,486,000 in net cash used in financing activities. The change
in cash, cash equivalents and restricted cash was primarily attributed to the following: (a) the purchase of investments in U.S. Treasury
securities of approximately $48,184,000; (b) repayment of mortgages of approximately $7,349,000 (which includes the pay down of the loan
on the Westwood Plaza shopping center); (c) dividends paid in excess of cash provided by operating activities of approximately $919,000;
(d) distributions to noncontrolling interests in subsidiaries of approximately $794,000; and (e) payments made toward capital improvements
on existing properties of approximately $759,000; offset by (f) proceeds received from maturities of U.S. Treasury securities of approximately
$60,082,000; and (g) a distribution from the investment in Pierre TIC of approximately $455,000.
Credit Line: FREITs revolving line of credit
provided by the Provident Bank was renewed for a three-year term expiring on October 31, 2026. Draws against the credit line can be used
for working capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREITs Franklin
Crossing Shopping Center located in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is
$13 million and the interest rate on the amount outstanding is based on a floating interest rate of prime minus 25 basis points with a
floor of 6.75%. As of October 31, 2025, there was no amount outstanding and $13 million was available under the line of credit. (See Note
5 to FREITs consolidated financial statements for additional details.)
Dividend: On October 8, 2025, the Board of Directors
of FREIT declared a dividend in the fourth quarter of Fiscal 2025 of $0.10 per share on the common stock of FREIT based on FREITs
operating results for the full fiscal year, which was paid on December 15, 2025 to holders of record of said shares at the close of business
on December 1, 2025. This brings total dividends declared for Fiscal 2025 to $0.36 per share on the common stock of FREIT. The Board of
Directors will continue to evaluate the dividend on a quarterly basis and there can be no assurance that dividends will be declared for
any future period. In addition, the amount of the dividend declared on October 8, 2025 is not necessarily indicative of the amount of
any dividends that may be declared in the future.
As of October 31, 2025, FREITs aggregate
outstanding mortgage debt was $121.3 million, which bears a weighted average interest rate of 5.34% and an average life of approximately
1.6 years. FREITs mortgages are subject to amortization schedules that are longer than the terms of the mortgages. As such, balloon
payments (unpaid principal amounts at mortgage due date) for all mortgage debt will be required as follows:
|
Fiscal Year |
|
2026 |
2027 |
2028 |
2029 | |
|
($ in millions) |
|
|
|
|
| |
|
Mortgage "Balloon" Payments |
|
$59.1 (A) |
$8.6 |
$23.8 |
$26.0 | |
Includes the following:
|
|
(A) |
The loan on the Preakness shopping center located
in Wayne, New Jersey in the amount of $25 million which had a maturity date of August 1, 2025. Wayne PSC is working with the current
lender, ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several extensions of
this loans maturity date while discussions are ongoing, with each extension
made under the same terms and conditions of the existing loan agreement. Wayne PSC, LLC continues to evaluate all options for
refinancing or replacing the loan. Management expects this loan to be further extended, however, until such time as a definitive
agreement providing for a modification, extension or replacement of this loan is entered into, there can be no assurance that such
an agreement will be reached. (See Note 5 to FREIT's consolidated financial statements for additional details.) | |
36
The following table shows the estimated fair value
and carrying value of FREITs long-term debt, net at October 31, 2025 and 2024:
|
($ in Millions) |
|
October 31, 2025 |
|
October 31, 2024 | |
|
|
|
|
|
| |
|
Fair Value |
|
$118.4 |
|
$124.7 | |
|
|
|
|
|
| |
|
Carrying Value, Net |
$120.8 |
|
$128.1 | |
Fair values are estimated based on market interest
rates at the end of each fiscal year and on a discounted cash flow analysis. Changes in assumptions or estimation methods may significantly
affect these fair value estimates. The fair value is based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative
guidance).
FREIT expects to refinance the individual mortgages
with new mortgages or exercise extension options when their terms expire. To this extent, FREIT has exposure to interest rate risk. If
interest rates, at the time any individual mortgage note is due, are higher than the current fixed interest rate, higher debt service
may be required, and/or refinancing proceeds may be less than the amount of mortgage debt being retired. For example, at October 31, 2025,
a 1% interest rate increase would reduce the fair value of FREITs debt by $1.8 million, and a 1% decrease would increase the fair
value by $1.9 million.
On October 31, 2023, FREIT exercised its right,
pursuant to the loan agreement, to extend the term of its loan secured by the Westwood Plaza shopping center located in Westwood, New
Jersey for one additional year from an initial maturity date of February 1, 2024 to a new maturity date of February 1, 2025. The outstanding
balance of this loan as of February 1, 2024 was approximately $16,458,000, payable based on monthly installments of principal and interest
of approximately $166,727, and bearing interest at a fixed rate of 8.5%. Additionally, FREIT funded the interest reserve escrow account
for this loan (Escrow) with an additional $112,556, increasing the Escrow balance to $2,000,722, which represented the annualized
principal and interest payments for one (1) year under this loan extension. Effective February 1, 2025, Valley National Bank extended
this loan for 90 days from a maturity date of February 1, 2025 to a maturity date of May 1, 2025 under the same terms and conditions of
the existing loan agreement.
Effective May 1, 2025, FREIT entered into a loan
extension and modification agreement with Valley National Bank and paid down this loan by approximately $5.7 million (including deferred
interest of approximately $0.2 million) bringing the loan balance to $10 million. Under the terms and conditions of this loan extension
and modification, the maturity date of this loan is extended for one year to May 1, 2026, the interest rate on the outstanding debt is
based on a fixed interest rate of 8.5% and monthly installments of principal and interest of approximately $107,978 are required. The
pay down of this loan will result in annual debt service savings of approximately $705,000. Additionally, the Escrow balance was reduced
from $2,000,722 to $1,295,739 resulting in a refund to FREIT of $704,983. This Escrow is held at Valley National Bank and in the event
of a default on this loan, the bank shall be permitted to use the proceeds from the Escrow to make monthly debt service payments on the
loan. (See Note 5 to FREITs consolidated financial statements for further details.)
On October 31, 2023, FREIT exercised its right,
pursuant to the loan agreement, to extend the term of its $7.5 million loan on its property located in Rockaway, New Jersey, for an additional
one year from an initial maturity date of January 1, 2024 to a new maturity date of January 1, 2025. The loan extension would have been
based on a fixed interest rate of approximately 7.44%. On January 11, 2024, FREIT used cash on hand to fully repay this loan with a balance
of $7.5 million. This has resulted in annual debt service savings of approximately $558,000. (See Note 5 to FREITs consolidated
financial statements for further details.)
On December 1, 2023, the mortgage secured by an
apartment building located in River Edge, New Jersey came due. Provident Bank extended the initial maturity date of this loan for a 90-day
period with a maturity date of March 1, 2024 and further extended this loan for another 60-day period with a new maturity date of June
1, 2024, based on the same terms and conditions of the existing loan agreement. On May 1, 2024, FREIT entered into a loan extension and
modification agreement with Provident Bank, effective June 1, 2024, with a then outstanding loan balance of approximately $8.9 million.
Under the terms and conditions of this loan extension and modification, the maturity date of this loan is extended for three years to
May 31, 2027, the interest rate on the outstanding debt is based on a fixed interest rate of 6.75% and monthly installments of principal
and interest of approximately $58,016 are required. (See Note 5 to FREITs consolidated financial statements for further details.)
On December 15, 2024, the mortgage secured by
an apartment building located in Middletown, New York and the corresponding interest rate swap contract on its underlying loan came due
with no settlement of the swap contract due at maturity. Effective December 15, 2024, FREIT Regency, LLC entered into a loan extension
and modification agreement with the lender of this loan, Provident Bank, with a then outstanding loan balance of approximately $13.9 million.
Under the terms and conditions of this loan extension and modification, the maturity date of this loan is extended for three years to
December 15, 2027, the interest rate on the outstanding debt is based on a fixed interest rate of 6.05% and monthly installments of principal
and interest of approximately $84,521 are required. (See Note 5 to FREITs consolidated financial statements for additional details.)
37
On August 1, 2025, the mortgage in the amount of $25,000,000, secured by
the Preakness Shopping Center located in Wayne, New Jersey, reached its maturity date. Wayne PSC, LLC is working with the current lender,
ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several extensions of the loans
maturity date while discussions are ongoing, with each extension made under the same
terms and conditions of the existing loan agreement. Wayne PSC, LLC continues to evaluate all options for refinancing or replacing the
loan. Management expects this loan to be further extended, however, until such time as a definitive agreement providing for a modification,
extension or replacement of this loan is entered into, there can be no assurance that such an agreement will be reached. (See Note 5 to
FREITs consolidated financial statements for additional details.)
Interest rate swap contracts: To reduce interest
rate volatility, FREIT uses a pay fixed, receive floating interest rate swap to convert floating interest rates to fixed
interest rates over the term of a certain loan. FREIT enters into an interest rate swap contract with a counterparty that is usually a
high-quality commercial bank. In essence, FREIT agrees to pay its counterparty a fixed rate of interest on a dollar amount of notional
principal (which generally corresponds to FREITs mortgage debt) over a term equal to the term of the mortgage notes. FREITs
counterparty, in return, agrees to pay FREIT a short-term rate of interest - generally SOFR (Secured Overnight Financing Rate)
- on that same notional amount over the same term as the mortgage notes.
FREIT has a variable interest rate loan secured
by its Station Place property. To reduce interest rate fluctuations, FREIT entered into an interest rate swap contract for this loan,
which effectively converted variable interest rate payments to fixed interest rate payments. The interest rate swap contract was based
on a notional amount of approximately $12,350,000 ($11,030,000 at October 31, 2025). FREIT had a variable interest rate loan secured by
its Regency property. On December 15, 2024, the Regency loan and its corresponding interest rate swap contract matured with no settlement
due at maturity. (See Note 6 to FREITs consolidated financial statements for further details.)
In accordance with ASU 2017-12, *Targeted
Improvements to Accounting for Hedging Activities to Accounting Standards Codification Topic 815, Derivatives and Hedging ("ASC 815")*,
FREIT marks-to-market its interest rate swap contract. As the floating interest rate varies from time-to-time over the term of the contract,
the value of the contract will change upward or downward. If the floating rate is higher than the fixed rate, the value of the contract
goes up and there is a gain and an asset. If the floating rate is less than the fixed rate, there is a loss and a liability. The interest
rate swap contract is accounted for as a cash flow hedge with the corresponding gain or loss on this contract not affecting FREITs
consolidated statement of income; changes in the fair value of this cash flow hedge will be reported in other comprehensive income (loss)
and appear in the equity section of the consolidated balance sheet. This gain or loss represents the economic consequence of liquidating
fixed interest rate swap and replacing it with like-duration funding at current market rates, something we would likely never do. Periodic
cash settlements of this contract will be accounted for as an adjustment to interest expense.
FREIT has the following derivative-related risks
with its interest rate swap contract (contract): 1) early termination risk, and 2) counterparty credit risk.
*Early Termination Risk*: If FREIT
wants to terminate its contract before maturity, it would be bought out or terminated at market value; i.e., the difference in the present
value of the anticipated net cash flows from each of the contracts parties. If current variable interest rates are significantly
below FREITs fixed interest rate payments, this could be costly. Conversely, if interest rates rise above FREITs fixed interest
payments and FREIT elected early termination, FREIT would realize a gain on termination. At October 31, 2025, the contract for Station
Place was in FREITs favor. If FREIT had terminated this contract at that date, it would have realized a gain of approximately $210,000
for the Station Place swap, which amount has been included in FREITs consolidated balance sheet as of October 31, 2025. The change
in the fair value for the contract (gain or loss) during such period has been included in comprehensive income and for the fiscal years
ended October 31, 2025, 2024 and 2023, FREIT recorded an unrealized loss of approximately $296,000, $830,000 and $73,000, respectively,
in the consolidated statements of comprehensive income.
*Counterparty Credit Risk*: Each
party to a contract bears the risk that its counterparty will default on its obligation to make a periodic payment. FREIT reduces this
risk by entering into a contract only with major financial institutions that are experienced market makers in the derivatives market.
38
FREITs
total contractual obligations under its line of credit and mortgage loans in place as of October 31, 2025 are as follows:
|
CONTRACTUAL OBLIGATIONS-PRINCIPAL | |
| | |
|
(in thousands of dollars) | |
| | |
|
| |
Within | | |
2 - 3 | | |
4 - 5 | | |
|
| |
Total | | |
One Year | | |
Years | | |
Years | | |
|
Long-Term Debt | |
| | | |
| | | |
| | | |
| | | |
|
Annual Amortization | |
$ | 3,779 | | |
$ | 1,493 | | |
$ | 1,771 | | |
$ | 515 | | |
|
Balloon Payments | |
| 117,521 | | |
| 59,125 | (A) | |
| 32,405 | | |
| 25,991 | | |
|
Total Long-Term Debt | |
$ | 121,300 | | |
$ | 60,618 | | |
$ | 34,176 | | |
$ | 26,506 | | |
|
|
(A) |
Includes the following: |
|
|
|
(1) |
The loan on the Preakness shopping center located
in Wayne, New Jersey in the amount of $25 million which had a maturity date of August 1, 2025. Wayne PSC is working with the current
lender, ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several extensions of
this loans maturity date while discussions are ongoing, with each extension
made under the same terms and conditions of the existing loan agreement. Wayne PSC, LLC continues to evaluate all options for
refinancing or replacing the loan. Management expects this loan to be further extended, however, until such time as a definitive
agreement providing for a modification, extension or replacement of this loan is entered into, there can be no assurance that such
an agreement will be reached. (See Note 5 to FREIT's consolidated financial statements for additional details.) | |
FREITs annual estimated cash requirements
related to interest on its line of credit and mortgage loans in place as of October 31, 2025 are as follows:
|
INTEREST OBLIGATIONS | |
| | |
| | |
| | |
| | |
|
(in thousands of dollars) | |
| | |
| | |
| | |
| | |
|
| |
Within | | |
2 - 3 | | |
4 - 5 | | |
|
| |
Total | | |
One Year | | |
Years | | |
Years | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Interest on Fixed Rate Debt | |
$ | 9,428 | | |
$ | 4,651 | | |
$ | 3,912 | | |
$ | 865 | | |
39
**ADJUSTED FUNDS FROM OPERATIONS**
Funds From Operations (FFO) is a
non-GAAP measure defined by the National Association of Real Estate Investment Trusts (NAREIT). FREIT does not include distributions
from equity/debt/capital gain sources in its computation of FFO. Although many consider FFO as the standard measurement of a REITs
performance, FREIT modified the NAREIT computation of FFO to include other adjustments to GAAP net income that are not considered by management
to be the primary drivers of its decision making process. These adjustments to GAAP net income are straight-line rents and recurring capital
improvements on FREITs residential apartments. The modified FFO computation is referred to as Adjusted Funds From Operations (AFFO).
FREIT believes that AFFO is a superior measure of its operating performance. FREIT computes FFO and AFFO as follows:
|
| |
| | |
| | |
|
| |
Years Ended October 31, | | |
|
| |
2025 | | |
2024 | | |
2023 | | |
|
| |
(In Thousands, Except Per Share) | | |
|
Funds From Operations ("FFO") (a) | |
| | | |
| | | |
| | | |
|
Net income (loss) | |
$ | 3,146 | | |
$ | 16,933 | | |
$ | (575 | ) | |
|
Depreciation of consolidated properties | |
| 2,965 | | |
| 2,981 | | |
| 2,944 | | |
|
Amortization of deferred leasing costs | |
| 90 | | |
| 123 | | |
| 103 | | |
|
Distributions to non-controlling interests | |
| (630 | )(b) | |
| (1,620 | )(c) | |
| (240 | )(d) | |
|
Net loss on sale of Maryland properties | |
| | | |
| 356 | | |
| 1,003 | | |
|
Litigation settlement, net of fees | |
| | | |
| (15,673 | ) | |
| | | |
|
Adjustment to loss in investment in tenancy-in-common for depreciation | |
| 1,476 | | |
| 1,453 | | |
| 1,438 | | |
|
| |
| | | |
| | | |
| | | |
|
FFO | |
$ | 7,047 | | |
$ | 4,553 | | |
$ | 4,673 | | |
|
| |
| | | |
| | | |
| | | |
|
Per Share - Basic and Diluted | |
$ | 0.94 | | |
$ | 0.61 | | |
$ | 0.63 | | |
|
| |
| | | |
| | | |
| | | |
|
(a) As prescribed by NAREIT.
(b) FFO excludes the additional distribution of proceeds to non-controlling interests in the amount of approximately $0.2 million related to the sale of the Rotunda and Damascus properties located in Maryland in a prior year. See Note 2 to FREIT's consolidated financial statements for further details.
(c) FFO excludes the additional distribution of proceeds to non-controlling interests in the amount of approximately $0.6 million related to the sale of the Rotunda property located in Maryland in a prior year. See Note 2 to FREIT's consolidated financial statements for further details.
(d) FFO excludes the additional distribution of proceeds to non-controlling interests in the amount of approximately $3.3 million related to the sale of the Damascus and Rotunda properties located in Maryland in a prior year. See Note 2 to FREIT's consolidated financial statements for further details. | |
|
| |
| | | |
| | | |
| | | |
|
Adjusted Funds From Operations ("AFFO") | |
| | |
| | |
| | |
|
FFO | |
$ | 7,047 | | |
$ | 4,553 | | |
$ | 4,673 | | |
|
Deferred rents (Straight lining) | |
| 100 | | |
| 118 | | |
| 100 | | |
|
Capital Improvements - Apartments | |
| (502 | ) | |
| (1,154 | ) | |
| (532 | ) | |
|
AFFO | |
$ | 6,645 | | |
$ | 3,517 | | |
$ | 4,241 | | |
|
| |
| | | |
| | | |
| | | |
|
Per Share - Basic and Diluted | |
$ | 0.89 | | |
$ | 0.47 | | |
$ | 0.57 | | |
|
| |
| | | |
| | | |
| | | |
|
Weighted Average Shares Outstanding: | |
| | | |
| | | |
| | | |
|
Basic | |
| 7,469 | | |
| 7,455 | | |
| 7,441 | | |
|
Diluted | |
| 7,469 | | |
| 7,459 | | |
| 7,447 | | |
FFO and AFFO do not represent cash generated from
operating activities in accordance with GAAP, and therefore should not be considered a substitute for net income as a measure of results
of operations or for cash flow from operations as a measure of liquidity. Additionally, the application and calculation of FFO and AFFO
by certain other REITs may vary materially from that of FREIT, and therefore FREITs FFO and AFFO may not be directly comparable
to those of other REITs.
40
**DISTRIBUTIONS TO STOCKHOLDERS**
Since its inception in 1961, FREIT has elected
to be treated as a REIT for federal income tax purposes. In order to qualify as a REIT, FREIT must satisfy a number of highly technical
and complex operational requirements of the Internal Revenue Code, including a requirement that FREIT must distribute to its stockholders
at least 90% of its REIT taxable income. Although cash used to make distributions reduces amounts available for capital investment, FREIT
generally intends to distribute not less than the minimum of REIT taxable income necessary to satisfy the applicable REIT requirement
as set forth in the Internal Revenue Code. With respect to the Jobs and Growth Tax Relief Reconciliation Act of 2003, the reduction of
the tax rate on dividends does not apply to FREIT dividends other than capital gains dividends, which are subject to capital gains rates.
FREITs policy is to pass on at least 90% of its ordinary taxable income to stockholders. FREITs taxable income is untaxed
at the FREIT level to the extent distributed to stockholders. FREITs dividends of ordinary taxable income will be taxed as ordinary
income to its stockholders and FREITs capital gains dividends will be taxed as capital gains to its stockholders. FREITs
Board evaluates the dividend to be declared/paid (if any) on a quarterly basis.
The following tables list the quarterly dividends
declared for the three most recent fiscal years and the dividends as a percentage of taxable income for those periods.
|
| |
Fiscal Years Ended October 31, | | |
|
| |
2025 | | |
2024 | | |
2023 | | |
|
First Quarter | |
$ | 0.08 | | |
$ | 0.05 | | |
$ | 0.05 | | |
|
Second Quarter | |
$ | 0.08 | | |
$ | 0.05 | | |
$ | 0.05 | | |
|
Third Quarter | |
$ | 0.10 | | |
$ | 0.05 | | |
$ | 0.30 | | |
|
Fourth Quarter | |
$ | 0.10 | | |
$ | 0.70 | | |
$ | 0.05 | | |
|
Total For Year | |
$ | 0.36 | | |
$ | 0.85 | | |
$ | 0.45 | | |
|
| |
| | |
(in thousands of dollars) | | |
Dividends | |
|
Fiscal | |
Per | | |
Total | | |
Ordinary | | |
Capital Gain | | |
Taxable | | |
as a % of | |
|
Year | |
Share | | |
Dividends | | |
Income-Tax Basis | | |
Income-Tax Basis | | |
Income | | |
Taxable Income | |
|
2025 | |
$ | 0.36 | | |
$ | 2,690 | | |
$ | 2,690 | * | |
$ | | * | |
$ | 2,690 | * | |
100.0% | |
|
2024 | |
$ | 0.85 | | |
$ | 6,343 | | |
$ | 6,045 | | |
$ | 298 | | |
$ | 6,343 | | |
100.0% | |
|
2023 | |
$ | 0.45 | | |
$ | 3,520 | | |
$ | | | |
$ | 928 | | |
$ | 928 | | |
379.3% | |
|
*Estimated | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
**INFLATION**
Inflation can impact the financial performance
of FREIT in various ways. FREITscommercial tenant leases normally provide that the tenants bear all or a portion of most
operating expenses, which can reduce the impact of inflationary increases on FREIT. Apartment leases are generally for a one-year term,
which may allow FREIT to seek increased rents as leases renew or when new tenants are obtained, subject to prevailing market conditions.
|
ITEM 7A |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |
See
*Liquidity and Capital Resources* and *Segment Information* in Item 7 above.
|
ITEM 8 |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | |
The consolidated financial statements and supplementary
data of FREIT are submitted as a separate section of this Form 10-K. See "*Index to Consolidated Financial Statements*"
on page 62 of this Form 10-K.
|
ITEM 9 |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | |
None.
41
|
ITEM 9A |
|
CONTROLS AND PROCEDURES | |
At the end of the period covered by this report,
we carried out an evaluation of the effectiveness of the design and operation of FREITs disclosure controls and procedures. This
evaluation was carried out under the supervision and with participation of FREITs management, including FREITs Chief Executive
Officer and Chief Financial Officer, who concluded that FREITs disclosure controls and procedures are effective as of October 31,
2025. There have been no significant changes in FREITs internal controls or in other factors that could significantly affect internal
controls subsequent to the date we carried out our evaluation.
Disclosure controls and procedures are controls
and other procedures that are designed to ensure that information required to be disclosed in FREITs reports filed or submitted
under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SECs rules and
forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed in FREITs reports filed under the Exchange Act is accumulated and communicated to management, including FREITs
Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
*Managements Annual Report on Internal
Control Over Financial Reporting* FREITs management, under the supervision of FREITs Chief Executive Officer
and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined
in Rule 13a-15(f) or 15d-15(f) under the Exchange Act). Management evaluated the effectiveness of FREITs internal control over
financial reporting based on the framework in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that evaluation, management has concluded that FREITs internal control over
financial reporting was effective as of October 31, 2025.
*Changes in Internal Control Over Financial
Reporting* FREITs management, with the participation of FREITs Chief Executive Officer and Chief Financial Officer,
has evaluated whether any change in FREITs internal control over financial reporting occurred during the fourth quarter of Fiscal
2025. Based on that evaluation, management concluded that there has been no change in FREITs internal control over financial reporting
during the fourth quarter of Fiscal 2025 that has materially affected, or is reasonably likely to materially affect, FREITs internal
control over financial reporting.
|
ITEM 9B |
OTHER INFORMATION | |
None.
|
ITEM 9C |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | |
Not applicable.
42
**PART III**
|
ITEM 10 |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | |
****
**Executive Officers and Directors**
The executive officers and directors of FREIT are as follows:
|
Name |
Age |
Position(s) | |
|
Robert S. Hekemian, Jr. |
66 |
Chief Executive Officer, President and Director | |
|
Ronald J. Artinian |
77 |
Chairman of the Board and Director | |
|
David F. McBride, Esq. |
78 |
Director | |
|
John A. Aiello, Esq. |
76 |
Secretary and Director | |
|
Justin F. Meng |
47 |
Director | |
|
David B. Hekemian |
59 |
Director | |
|
Richard J. Aslanian |
65 |
Director | |
|
Allan Tubin |
87 |
Chief Financial Officer and Treasurer | |
There are no family relationships among the members
of the FREIT Board of Directors (the Board) and the executive officers, except that Robert S. Hekemian, Jr., Chief Executive
Officer, President and a director of FREIT, and David B. Hekemian, a director of FREIT, are siblings and the sons of the late Robert S.
Hekemian, FREITs former Chairman and Chief Executive Officer and the former Chairman and Chief Executive Officer of Hekemian &
Co., Inc., FREITs managing agent (Hekemian & Co.).
During the past five years, none of the directors
or executive officers of FREIT have served as directors of any company with a class of securities registered pursuant to Section 12 of
the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company
under the Investment Company Act of 1940, as amended.
Each of the executive officers of FREIT serves
in his office(s) until such time as his successor is elected and qualified.
**Biographical Information**
**Robert S. Hekemian, Jr.**has served
as a director since 2007, and he was appointed as Chief Executive Officer of FREIT in April 2018 following the retirement of the late
Robert S. Hekemian as Chairman and Chief Executive Officer of FREIT. Mr. Hekemian was additionally appointed to the office of President
of FREIT in February 2019. Mr. Hekemians current term as a member of the Board is scheduled to expire at the 2026 annual meeting
of FREITs stockholders and his term as President and Chief Executive Officer will expire at such time as his successor qualifies
and is appointed. Mr. Hekemian has been involved in real estate activities for over 40 years, including property management, leasing,
mortgage financing, construction and acquisitions of multifamily residential and commercial properties located throughout the Northeast
and Mid-Atlantic regions of the United States. He has served as Chief Executive Officer of Hekemian & Co. since 2021. From 2004 to
2020, Mr. Hekemian served as President and Chief Operating Officer of Hekemian & Co. From 1983 to 2003, Mr. Hekemian served as Executive
Vice President of Hekemian & Co. Mr. Hekemian is principally responsible for identifying real estate acquisitions and evaluating the
performance of the real estate properties managed by Hekemian & Co. with a view toward strategic decision making. Mr. Hekemian formerly
served on the Board of Oritani Bank and was Chair of the Loan Committee. Mr. Hekemian is a member of the Board of Governors, Hackensack
University Medical Center and a former director of the Hackensack University Medical Center Foundation. He formerly served on the Board
of the New York Philharmonic and was the former Chairman of the Bergen County Community College Foundation. Mr. Hekemian was appointed
Condemnation Commissioner by the State of New Jersey and has served on various corporate and charitable committees. He is a Board Member
of the Meridian School of Medicine and Chairs the Student Affairs Committee. Mr. Hekemian earned a Bachelor of Science in Business Administration
from American University and graduated as a MIT Sloan Fellow from the MIT Sloan School with a Master of Science in Management.
**Ronald J. Artinian**has served as a
director since 1992, and he was appointed as Chairman of FREIT in April 2018 following the retirement of the late Robert S. Hekemian as
Chairman and Chief Executive Officer of FREIT. Mr. Artinians current term as a member of the Board is scheduled to expire at the
2028 annual meeting of FREITs stockholders and his term as Chairman will expire at such time as his successor qualifies and is
appointed. Mr. Artinian worked in the financial services industry for 26 years, including with Smith Barney, Inc. from 1989 to 1998, where
Mr. Artinian held positions as an Executive Vice President,
43
Managing Director and National Sales Manager. Mr. Artinian retired from Smith
Barney in January 1998 in order to pursue other business interests as a private investor. Mr. Artinian joined the board of The Reserve,
a money market fund, in 2007 and served as lead independent director from March 2009 through December 2016. Mr. Artinian earned a Bachelor
of Arts in English from the University of Pennsylvania and a Master of Business Administration from the University of Pennsylvania, Wharton
School.
**David F. McBride, Esq.**has served
as a director since 2007. His current term as a member of the Board is scheduled to expire at the 2026 annual meeting of FREITs
stockholders. Mr. McBride has over 45 years of diversified real estate experience. He is the Chief Executive Officer of McBride Enterprises,
Inc., a family-owned real estate company started in 1898. Mr. McBride was responsible for the development of numerous office and industrial
properties, as well as residential projects in northern New Jersey. He also oversaw the operations of his familys general construction
company, the Alpert P. Schmidt Construction Company, civil engineering firm, Urban Planning and Engineering Company, and commercial brokerage
firm, McBride Corporate Real Estate. Mr. McBride was also instrumental in forming the Keystone Property Trust (NYSE) in 1998 and served
as Chairman of its board until its sale to ProLogis (NYSE) in 2004. Mr. McBride has also been a Partner in and is presently Of Counsel
to the law firm of Harwood Lloyd, LLC, specializing in real estate matters. From 1998 to 2014, Mr. McBride has also served as the Chairman
and President of the Mountain Club Inc., t/a The High Mountain Golf Club. Mr. McBride also served on the Advisory Board of the McDonough
School of Business at Georgetown University from 2008 to 2018. Mr. McBride earned a Bachelor of Arts in Economics from Georgetown University
and a Juris Doctor from the Georgetown University Law School.
**John A. Aiello, Esq.**has served as
the Secretary of FREIT since 2003 and as a director of the Board since December 2015. His current term as a member of the Board is scheduled
to expire at the 2027 annual meeting of FREITs stockholders. Mr. Aiello is an officer and shareholder of the law firm of Giordano,
Halleran & Ciesla, P.C., where he has practiced law for 51 years. He is Chairman of the law firms Corporate and Securities
practice group and concentrates his practice on corporate and securities law matters, including mergers and acquisitions and various corporate
finance transactions. See the section entitled Certain Relationships and Related Party Transactions; Director Independence.
Mr. Aiello is an emeritus member and former Chairman of the Board of Directors of the Business Law Section of the New Jersey State Bar
Association and a former member of the Board of Directors of the New Jersey chapter of the Association for Corporate Growth, a non-profit
organization of professionals and business leaders in the middle market mergers and acquisitions space. Mr. Aiello is also a member of
the Advisory Board of the Leon Hess School of Business of Monmouth University. Mr. Aiello graduated cum laude with a Bachelor of Science
in Finance from the University of Pennsylvania, Wharton School and earned a Juris Doctor degree from the Georgetown University Law School.
**Justin F. Meng**has served as a
director sinceFebruary 2016. His current term as a member of the Board is scheduled to expire at the 2028 annual meeting
of FREITs stockholders. Mr. Meng has 25+ years of investment experience across real estate, public markets and alternative
asset management. He is currently Senior Vice President, Head of Investor Relations at Prologis, Inc. a real estate
logistics company where he is responsible for managing relationships with buy-side investors and sell-side analysts, leading
the companys quarterly earnings process, and working with senior leadership on investor-focused strategies and
communications. Before joining Prologis in 2024, Mr. Meng was co-founder and managing partner of V3 Capital Management L.P., a
boutique investment firm focused on publicly traded REITs, from 2011 to 2023. In that role, Mr. Meng led a team of professionals
engaged in raising capital and managing investments for V3 partnerships. Prior to that, he served as partner and head of REIT
Research at High Rise Capital Management. Mr. Meng began his career at J.P. Morgan Asset Management, where he worked in the Real
Estate and Fixed Income divisions. Mr. Meng earned a Bachelor of Science in Mechanical Engineering from Brown University and a
Master of Science in Real Estate Development from New York University. He also completed the Stanford Executive Program and the
Stanford Graduate School of Businesss. Mr. Meng is a CFA charter-holder.
**David B. Hekemian**has served as a
director since April 2018. His current term as a member of the Board is scheduled to expire at the 2027 annual meeting of FREITs
stockholders. Mr. Hekemian has served as a commercial real estate executive at Hekemian & Co. for over 30 years, holding positions
of increasing responsibilities throughout his tenure at the company focused on strategic business and investment planning, retail development
and leasing, asset profitability management and lender negotiations. He has served as President of Hekemian & Co. since 2021. From
1996 to 2020, Mr. Hekemian served as Principal/Broker-Salesperson, Director of Commercial Brokerage and as a member of Hekemian &
Co.s Executive Committee. From 1988 to 1992 he served as Property Manager, and from 1992 to 1996 he served as Vice President-Salesperson
of Hekemian & Co. Mr. Hekemian is a member of the Armenian Missionary Association of America, where he served as Assistant Treasurer
and a member of the Budget and Finance Committee from 1998 to 2007 and as Co-Chairman of the Investment Committee from 1996 to 2009, which
included oversight and management of a $100 million equity and fixed income portfolio. Mr. Hekemian is also a member of the Council for
the Borough of Saddle River, NJ. Mr. Hekemian earned a Bachelor of Science in Finance from Boston College.
44
**Richard J. Aslanian**has served as
a director since April 2018. His current term as a member of the Board is scheduled to expire at the 2027 annual meeting of FREITs
stockholders. Mr. Aslanian is the Co-Founder of Welcome Home Brands, LLC, a distributor of imported paper and plastic bakeware products
that services cruise lines, hotels, casinos and food service companies. He co-founded Welcome Home Brands, LLC in 2010. From 2007 to
2009 Mr. Aslanian was the Chief Executive Officer, sole Managing Member and founder of Blue Ram Capital Management, LLC, which managed
an investment partnership of public equities in developed markets. In 2006, Mr. Aslanian retired from Goldman Sachs & Co. as a Managing
Director after having been with the firm since 1991, during which time he was co-head of one of the most prominent wealth management
teams of the firm. From 1985 to 1991 Mr. Aslanian was an attorney at the law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP
where he concentrated his practice on corporate and tax matters and public and private mergers and acquisitions. Mr. Aslanian established
the Richard J. Aslanian Scholarship Fund, an endowed scholarship, at the University of Pennsylvania, and has served on the boards of
several charitable organizations, including the Partnership for Inner-City Education, the Harrison Educational Foundation and the Armenian
Church Endowment Fund. Mr. Aslanian graduated summa cum laude with a Bachelor of Arts in Economics from the University of Pennsylvania
and graduated from the Columbia University School of Law with honors as a Harlan Fiske Stone Scholar in each of the three years of law
school.
**Allan Tubin**was appointed as Chief
Financial Officer and Treasurer of FREIT in February 2019. Mr. Tubin is the Chief Financial Officer of Hekemian & Co. As Chief Financial
Officer of Hekemian & Co., Mr. Tubin is responsible for corporate and project finance, budgeting and tax planning, accounting, and
SEC compliance for FREIT. He is a member of Hekemian & Co.s Acquisitions and Development Due Diligence Team, where he is responsible
for financial forecasting and modeling. Mr. Tubin has over 25 years experience in real estate finance. Prior to joining Hekemian
& Co. in 1996, he served as the Chief Financial Officer for the international real estate activities of the investment bank Donaldson,
Lufkin & Jenrette, and served as a certified public accountant with Ernst & Young. Mr. Tubin earned a Bachelor of Business Administration
from Pace University.
**Section 16(a) Beneficial Ownership Reporting
Compliance**
Section 16(a) of the Exchange Act requires FREITs
executive officers and directors, and persons who own more than 10% of the Shares, to file reports of ownership and changes in ownership
on Forms 3, 4 and 5 with the Securities and Exchange Commission (the SEC). Executive officers, directors and stockholders
holding more than 10% of the Shares are required by SEC regulation to furnish FREIT with copies of all Forms 3, 4 and 5 they file. Based
solely on FREITs review of the copies of such forms it has received, FREIT believes that all of its directors, executive officers
and stockholders holding more than 10% complied with all filing requirements applicable to them with respect to reports required to be
filed by Section 16(a) of the Exchange Act during Fiscal 2025, except for a Form 4 for David F. McBride with respect to three sale transactions,
which has been filed with the SEC.
**Insider Trading Policy**
We have adopted insider trading policies and procedures
applicable to our directors, officers and employees as well as directors, officers and employees of our Managing Agent, Hekemian &
Co., Inc., that we believe are designed to assure compliance with insider trading laws, rules and regulations.
Our insider trading policy prohibits our directors,
officers and employees and related persons and directors, officers and employees of Hekemian & Co., Inc. from trading in securities
of FREIT while in possession of material, non-public information. The policy also prohibits our directors, officers and employees from
disclosing material, non-public information relating to FREIT or any other public company to others who may trade on the basis of such
information.
In addition, our insider trading policy requires
that our directors and officers and directors and officers of Hekemian & Co., Inc. only transact in FREIT shares during an open window
period, which is defined in our insider trading policy.
A copy of FREITs Insider Trading Policy
is filed as Exhibit 10.21 to this Form 10-K.
None of our officers or directors adjusted, modified
or terminated a Rule 10b-5 trading plan or a non-Rule 10b-5-1 trading plan as defined in Item 408 of Regulation S-K during
the three months ended October 31, 2025.
**Code of Ethics**
FREIT has adopted a Code of Ethics that is applicable
to all directors, executive officers and management employees of FREIT, including, without limitation, FREITs principal executive
and senior financial officers. The Audit Committee is charged with administering and interpreting the Code of Ethics. The Code of Ethics
is available on FREITs website atwww.freitnj.comunder the About Us tab.
45
**Audit Committee**
The current members of the Audit Committee of
the Board are Ronald J. Artinian, David F. McBride and Richard J. Aslanian. Ronald J. Artinian serves as the Chairman of the Audit Committee.
Each member of the Audit Committee satisfies the audit committee qualifications under the NASDAQ Listing Rules and is independent, as
independence for audit committee members is defined in the NASDAQ Listing Rules, and they each meet the independence requirements of Exchange
Act Rule 10A-3(b)(1).
The Audit Committee held five (5) meetings during
Fiscal 2025. The Audit Committee selects the independent registered public accounting firm (the Independent Auditors) to
audit the books and accounts of FREIT. In addition, the Audit Committee reviews and pre-approves the scope and costs of all services (including
non-audit services) provided by the Independent Auditors. The Audit Committee also monitors the effectiveness of the audit effort and
financial reporting and inquires into the adequacy of FREITs financial and operating controls and oversees FREITs risk management
and cybersecurity strategy.
Based on its review of the criteria of an Audit
Committee Financial Expert under the rules of the SEC, the Board does not believe that any of the members of FREITs Audit Committee
qualify as an Audit Committee Financial Expert.
Each of Ronald J. Artinian, David F. McBride and
Richard J. Aslanian has made significant contributions and provided valuable service to FREIT and its stockholders as members of the Audit
Committee. The Board believes that each of Mr. Artinian, Mr. McBride and Mr. Aslanian has demonstrated that he is capable of (i) understanding
accounting principles generally accepted in the United States of America (GAAP), (ii) assessing the general application
of GAAP principles in connection with the accounting for estimates, accruals and reserves, (iii) understanding financial statements and
analyzing and evaluating FREITs financial statements, (iv) understanding internal controls and procedures for financial reporting,
and (v) understanding audit committee functions, all of which are attributes of an Audit Committee Financial Expert under the rules of
the SEC. Given the business experience and acumen of Mr. Artinian, Mr. McBride and Mr. Aslanian, the Board believes that each of them
is qualified to carry out all duties and responsibilities of FREITs Audit Committee. However, Mr. Artinian, Mr. McBride and Mr.
Aslanian have not acquired these attributes through the specific experience that is required for qualification as an Audit Committee Financial
Expert under the rules of the SEC, such as experience serving as, or experience actively supervising, a principal financial officer, principal
accounting officer, controller, public accountant or auditor, or experience overseeing or assessing the performance of companies or public
accountants with respect to the preparation, auditing or evaluation of financial statements. Therefore, the Board does not believe that
any of its current members meets all of the requirements under the SEC rules for qualification as an Audit Committee Financial Expert.
The Board believes that Allan Tubin, FREITs
Chief Financial Officer and Treasurer, meets all of the requirements under the rules of the SEC for qualification as an Audit Committee
Financial Expert. However, Mr. Tubin is not a director of FREIT and would not meet the requirements for qualification as an independent
director under the NASDAQ Listing Rules due to the fact that Mr. Tubin is an executive officer of FREIT and an executive officer
of Hekemian & Co. As Chief Financial Officer of FREIT, Mr. Tubin will make the certifications required under the Sarbanes-Oxley Act
of 2002 and the related rules adopted by the SEC with respect to (i) FREITs financial statements and other financial information
included in periodic reports filed with the SEC, (ii) FREITs disclosure controls and procedures regarding the disclosure to the
certifying officers of material information relating to FREIT, and (iii) FREITs internal controls and the adequacy of the design
and operation of such internal controls. As a certifying officer of FREIT, Mr. Tubin will meet with and make reports to the Audit Committee
with respect to the items which are the subject matter of his certifications.
Based on the foregoing, the Board believes that
the Audit Committee functions effectively and properly performs and discharges its duties, and the Board does not believe that it is necessary
at this time to actively search for an outside person to serve on the Board who would qualify as an Audit Committee Financial Expert.
On the basis of these reviews and discussions,
the Audit Committee recommended to the Board of Directors that the Trusts audited financial statements be included in the Trusts
Annual Report on Form 10-K for the fiscal year ended October 31, 2025, for filing with the SEC.
Submitted by:
Ronald J. Artinian, Chairman
Richard J. Aslanian
David F. McBride
46
|
ITEM 11 |
EXECUTIVE COMPENSATION | |
FREIT is externally managed by Hekemian &
Co. Robert S. Hekemian, Jr., Chief Executive Officer, President and a director of FREIT, and David B. Hekemian, a director of FREIT, each
holds a 33.3% equity interest in Hekemian & Co. The balance of the equity interests in Hekemian & Co. is held by other members
of the Hekemian family. As compensation for its management services, FREIT pays Hekemian & Co. management and other fees pursuant
to a Management Agreement between FREIT and Hekemian & Co. In addition, as an incentive to the employees of Hekemian & Co. (including
members of the Hekemian family) to identify and provide real estate investment opportunities for FREIT, FREIT has previously advanced
to such employees who are investors in certain joint venture projects, a portion of the equity capital required to be contributed by them
to such joint ventures. These secured loan amounts (including accrued interest) were repaid to FREIT with no outstanding balance remaining
of principal or interest. The Management Agreement and these other incentives are more particularly described in Certain Relationships
and Related Party Transactions; Director Independence below.
In view of FREITs external management structure,
FREIT does not employ executive officers on a full-time basis. The following Compensation Discussion and Analysis presents information
regarding FREITs compensation policies and programs and the compensation of FREITs executive officers.
**Compensation Discussion and Analysis**
*Overview*
FREITs compensation program is designed
to properly compensate the executive officers commensurate with the duties and services that they are employed to perform for FREIT, to
reward their dedication, hard work and success and align their interests with the long-term interests of FREIT. The Compensation Committee
reviews the compensation paid to the executive officers in consideration of these objectives and makes recommendations to the Board regarding
its determinations. The various factors considered by the Compensation Committee in reaching its determinations concerning the compensation
of the executive officers are discussed under Fiscal 2025 Compensation below.
*Recovery of Erroneously Awarded Compensation*
The Board has adopted a policy that provides that,
in the event that FREIT is required to prepare an accounting restatement due to FREITs material non-compliance with any financial
reporting requirement, FREIT will require the reimbursement, cancellation or forfeiture, as the case may be and to the fullest extent
permitted by applicable law, of any incentive-based compensation paid to any current or former executive officer during the three-year
period preceding such restatement that was based on the erroneous data and that was paid in excess of the compensation that would have
been paid to the executive officer based on the accounting restatement. FREIT will disclose any incentive-based compensation paid to any
executive officer that is based on any measure of financial performance or any other financial information in FREITs proxy statement
for the annual meeting of stockholders and as required by the rules and regulations of the SEC.
As discussed under Elements of Executive
Compensation below, FREIT did not pay any incentive-based compensation to any of the executive officers during the fiscal year
ended October 31, 2025.
*Hedging Policy*
It is the policy of FREIT that no employee or
director of FREIT may purchase any financial instruments that are designed to hedge or offset any decrease in the market value of FREITs
Shares that (i) were previously awarded, or acquired pursuant to the exercise of any option granted, to an employee or director by FREIT
as part of the compensation of such employee or director or (ii) otherwise held, directly or indirectly, by an employee or director, which
financial instruments will include, without limitation, puts, calls, straddles, equity swaps and any other derivative security that is
directly linked to the Shares.
**Elements of Executive Compensation**
There are three elements to the compensation of
the executive officers of FREIT: (1) base salary; (2) the Equity Incentive Plan; and (3) the Amended and Restated Deferred Fee Plan (the
Deferred Fee Plan). The Compensation Committee and the Board believe that base salary and the Equity Incentive Plan allow
FREIT to accomplish its objectives of properly compensating the executive officers for their services to FREIT, rewarding the dedication,
hard work and success of executive officers and aligning the interests of executive officers with the long-term interests of FREIT. The
Deferred Fee Plan was terminated on November 3, 2022.
Except for base salary, benefits under the Equity
Incentive Plan and Deferred Fee Plan, and fees and equity compensation paid to the executive officers for their service as directors,
FREIT does not pay any other compensation or benefits to its executive
47
officers, whether it be in the form of bonus, long-term incentive
compensation, perquisites, rights, warrants, convertible securities, performance units, performance shares or other similar instruments.
The Deferred Fee Plan has been terminated and the Equity Incentive Plan is the only employee benefit plan maintained by FREIT.There
are no employment contracts between FREIT and any of the executive officers, nor is there any compensatory plan or arrangement between
FREIT and any of the executive officers pursuant to which an executive officer would receive payments as the result of his resignation
or retirement as an executive officer, or any other event resulting in the termination of his relationship with FREIT as an executive
officer, or as a result of a change in control of FREIT. FREITs Equity Incentive Plan provides that in the event of (i) a change
in control as such term is defined in the Equity Incentive Plan, or (ii) a sale of all or substantially all of the assets of the
Trust, other than a sale of assets to a subsidiary or other affiliated entity of the Trust, all outstanding options granted under the
Equity Incentive Plan shall become exercisable (to the extent not already exercisable) immediately before or contemporaneously with the
occurrence of such change in control or sale, and each outstanding restricted share award granted under the Equity Incentive Plan shall
immediately become free of all restrictions, conditions and forfeiture provisions.
As of October 31, 2025, there were no unexercised
options collectively held by the Executive Officers and Directors of the Trust that were outstanding. Additional information with respect
to outstanding stock options is set forth in the Outstanding Equity Awards at Fiscal Year-End table below.
Robert S. Hekemian, Jr., Chief Executive Officer,
President and a director of FREIT, is the Chief Executive Officer of Hekemian & Co. David B. Hekemian, a director of FREIT, is the
President of Hekemian & Co. Pursuant to the terms of the Management Agreement between Hekemian & Co. and FREIT, Hekemian &
Co. is entitled to receive a termination fee from FREIT under certain circumstances, including the non-renewal of the Management Agreement
by FREIT, termination of the Management Agreement by FREIT without cause, or termination of the Management Agreement by FREIT following
an acquisition of FREIT. See Certain Relationships and Related Party Transactions; Director Independence below.
*Equity Incentive Plan*
FREIT originally adopted the Equity Incentive
Plan in 1999 upon the approval of the Board and the stockholders. In 2007, the Board and stockholders approved amendments to the Equity
Incentive Plan to (a) increase the number of Shares reserved for issuance thereunder by 300,000 Shares and (b) extend the term of the
Equity Incentive Plan from September 10, 2008 to September 10, 2018. In 2018, the Board and stockholders approved further amendments to
the Equity Incentive Plan to (a) increase the number of Shares reserved for issuance thereunder by an additional 300,000 Shares and (b)
further extend the term of the Equity Incentive Plan from September 10, 2018 to September 10, 2028.
The purpose of the Equity Incentive Plan is to
allow FREIT to retain the services of individuals who have made, and/or who are expected to make, significant contributions to the business
of FREIT and its subsidiaries, to align such persons interests with the long-term interests of FREIT, and to reward hard work,
dedication and success by providing such individuals with an opportunity to acquire Shares of FREIT or receive other Share-based awards.
Eligible participants include executive officers, directors and consultants of FREIT, including employees of Hekemian & Co.
The Board administers the Equity Incentive Plan,
with the full and exclusive power to interpret the plan, to adopt rules, regulations and guidelines relating to the plan, to grant waivers
of restrictions under the plan and to make all of the determinations necessary for the administration of the plan. The Boards authority
to administer the Equity Incentive Plan includes the authority, within the limits set forth in the plan, to determine the persons to whom
awards may be granted, determine the number of Shares to be covered by each award, establish the terms, conditions and provisions of the
awards to be granted, and establish restrictions on the awards or subsequently waive any such restriction or permit any such restriction
to lapse.
The exercise price of options granted under the
Equity Incentive Plan will be equal to the Fair Market Value (as defined in the Equity Incentive Plan) of the Shares on the date of the
grant of the options. For any other form of award, the consideration, if any, to be paid in exchange for the award will be determined
by the Board, but in no event will such consideration be greater than the Fair Market Value of the Shares on the date of grant. The Equity
Incentive Plan provides for adjustments to the exercise price of options in certain circumstances. The term of awards will be determined
by the Board, but shall not exceed 10 years from the date of grant. Awards will vest in accordance with terms fixed by the Board, and
vesting of awards may accelerate upon the occurrence of certain events, including a change in control (as defined in the
Equity Incentive Plan), sale of all or substantially all of the Trusts assets, or the death, Retirement (as defined in the Equity
Incentive Plan) or disability of the participant.
The Board may terminate, modify or amend the Equity
Incentive Plan at any time, provided that any modification or amendment that increases the number of Shares reserved for issuance thereunder
is subject to the approval of FREITs stockholders, and any termination, modification or amendment that adversely affects the terms
of any outstanding awards is subject to the consent of the holders thereof.
48
The Board has charged the Compensation Committee
with the responsibility of making recommendations to the Board with respect to grants of awards under the Equity Incentive Plan to eligible
participants. While the Equity Incentive Plan provides that options to acquire Shares will be the principal form of award under the plan,
the plan also provides for grants of restricted Share awards and other Share-based awards.
On March 9, 2023, the Compensation Committee recommended
to the Board and the Board approved that for services rendered and to be rendered in 2023, in lieu of cash compensation in the amount
of $20,000, each director was awarded shares of Common Stock, $0.01 par value, (the Shares) in FREIT. Based on the closing
price of FREITs Shares on March 9, 2023 of $15.50 per Share, the Board approved an award of 1,290 Shares of FREIT to each director
serving on FREITs Board. As such, 1,290 Shares were issued to each director on March 9, 2023 and upon issuance were deemed fully
paid and non-assessable.
On March 22, 2024, the Compensation Committee
recommended to the Board and the Board approved that for services rendered and to be rendered in 2024, in lieu of cash compensation in
the amount of $20,000, each director was awarded Shares in FREIT. Based on the closing price of FREITs Shares on March 22, 2024
of $16.25 per Share, the Board approved an award of 1,230 Shares of FREIT to each director serving on FREITs Board. As such, 1,230
Shares were issued to each director on March 22, 2024 and upon issuance were deemed fully paid and non-assessable.
On February 20, 2025, the Compensation Committee
recommended to the Board and the Board approved that for services rendered and to be rendered in Fiscal 2025, in lieu of cash compensation
in the amount of $20,000, each director was awarded Shares in FREIT. Based on the closing price of FREITs Shares on February 21,
2025 of $16.76 per Share, the Board approved an award of 1,193 Shares of FREIT to each director serving on FREITs Board. As such,
1,193 Shares were issued to each director on February 20, 2025 and upon issuance were deemed fully paid and non-assessable.
Upon recommendation of the Compensation Committee
of the Board, FREIT has granted options with respect to or made awards of its stock under the FREIT Equity Incentive Plan from time to
time over the years. The Compensation Committee and the Board review compensation to directors and executive officers periodically. In
the past several years, the review of compensation has been undertaken in the second quarter of FREITs fiscal year. In March of
each of the prior three fiscal years, stock awards were made to members of the Board under the Equity Incentive Plan as a component of
annual compensation for services rendered, and no other stock awards or stock options were granted during FREITs fiscal years ended
October 31, 2025, 2024 and 2023.
The timing or terms of any grant of options or
award of stock has not been affected by or dependent upon the existence of material nonpublic information nor has FREIT timed the disclosure
of material non-public information for the purpose of affecting the value of equity-based compensation.
*Amended and Restated Deferred Fee Plan*
Effective November 1, 2000, the Board adopted
the Deferred Fee Plan, which was intended to provide a benefit to executive officers and directors who made, and/or who were expected
to continue to make, significant contributions to the long-term success of FREIT. An election to defer compensation was required to be
made prior to the calendar year for which it would be effective, and was irrevocable with respect to the calendar year to which it applies.The
Deferred Fee Plan was amended and restated effective December 31, 2008, and further amended and restated effective November 1, 2014.
The original purpose of the Deferred Fee Plan
was to provide executive officers and directors with a long-term savings opportunity. Prior to the amendments to the Deferred Fee Plan
that went into effect as of November 1, 2014, the Deferred Fee Plan permitted any executive officer or director to elect to defer receipt
of any compensation, including executive officer salary, director annual retainer fees, meeting attendance fees, and property site inspection
fees, and the rate of interest payable on any amounts deferred was fixed at 9% per annum, compounded quarterly.
The amendments to the Deferred Fee Plan that went
into effect as of November 1, 2014 shifted the purpose of the Deferred Fee Plan from a long-term savings vehicle for eligible participants
to an opportunity for eligible participants to increase their equity position in FREIT. As amended and restated effective November 1,
2014, the Deferred Fee Plan no longer permitted directors who were also executive officers of FREIT to defer amounts payable to them as
salary for their services as executive officers. Participants in the Deferred Fee Plan were only permitted to defer amounts payable to
them for their service as directors. In addition, from and after November 1, 2014, amounts deferred, together with the interest accrued
on a participants entire balance, were converted on the last day of each calendar quarter into share units that are equivalent
to Shares (Share Units), and credited to the participants account. Amounts deferred under the Deferred Fee Plan were
converted into Share Units on a quarterly basis, on the last day of each calendar quarter. The number of Share Units to be credited with
respect to amounts deferred during a calendar quarter was determined by the closing price of the Shares on the trading day immediately
preceding the last day of such calendar quarter. The participants existing balances as of October 31, 2014 were preserved in the
form of cash and were not converted into Share Units, although the interest that accrued on such existing balances from and after November
1, 2014
49
was converted into Share Units. As of November 1, 2014, the interest rate on participants cash balances under the Deferred
Fee Plan was changed from 9% per annum to the average interest rate on ten-year Treasury bonds plus 150 basis points. In the event that
any cash dividend was paid by FREIT with respect to the Shares, each participant was credited with a number of Share Units equal to (x)
the amount of the cash dividend paid with respect to one Share, (y) multiplied by the total number of Share Units credited to a participants
account as of the record date for the dividend, (z) divided by the fair market value of one Share on the trading day immediately preceding
the payment date of the dividend. In the event that any dividend was paid with respect to the Shares in Shares, each participant was credited
with a number of Share Units equal to the number of full Shares that such participant would have received had the participant been the
owner, on the record date for the dividend, of a number of Shares equal to the number of Share Units credited to the participants
account.
The Deferred Fee Plan provided that a participants
deferred benefits under the Deferred Fee Plan would be paid to the participant at either: (i) the retirement age specified by the participant
in the deferral election; (ii) actual retirement of the participant; (iii) upon the earlier cessation of duties as a director of FREIT
prior to retirement; or (iv) upon a change in control of FREIT as defined in the Deferred Fee Plan.On the payment date, FREIT
was obligated to issue to the participant a number of Shares equal to the number of Share Units credited to the participants account,
and to pay to the participant amounts maintained in the participants account as of October 31, 2014 as cash, in either a lump sum
or in a number of substantially equal annual installments over a period not to exceed 10 years, at the election of the participant, except
if a participant elected to receive payment upon the occurrence of a change in control, in which case all such amounts would be payable
in a lump sum.FREIT did not create a cash sinking fund for amounts deferred pursuant to the Deferred Fee Plan that would not
be payable in Shares.As a result, any participant who elected to participate in the Deferred Fee Plan was an unsecured creditor
of FREIT with respect to any amounts deferred thereunder.The Deferred Fee Plan provided that it could be amended, suspended
or terminated by resolution of the Board at any time and from time to time, provided, that no amendment, suspension or termination operated
to adversely affect the plan benefits accrued or available for any participant.
On November 4, 2021 (the Adoption Date),
the Board approved the termination of the Deferred Fee Plan resulting in the termination of the deferral of fees on December 31, 2021
with any subsequent fees earned by a participant being paid in cash. Consistent with the termination of the Deferred Fee Plan, payment
related to each participants cash account (in the form of a cash lump sum payment) and share unit account (in the form of the issuance
of common stock) (collectively the Deferred Fee Plan Termination Payment), was made to each participant no earlier than
twelve (12) months and one day after, and no later than twenty-four (24) months, after the Adoption Date. Any interest earned on the participants
cash account along with dividends (if any) earned on share units, continued to accrue in share units on each participants account
until final payment was made.
On January 20, 2023, in accordance with the Deferred
Fee Plan Termination Payment, total payments related to the cash accounts of all participants of approximately $2,317,000 (consisting
of approximately $1,366,000 of cumulative fees and approximately $951,000 of accrued interest) which had been deferred as of November
1, 2014, was paid in full to each respective participant with no remaining balance due. Additionally, payment related to each participants
share unit account was made in the form of the issuance of stock to each respective participant resulting in the issuance of 274,509 shares
of common stock for each of the 274,509 vested share units. There were no remaining vested share units to be paid in the form of the issuance
of stock.
**Fiscal 2025 Compensation**
With respect to compensation for the fiscal year
ended October 31, 2023, the Compensation Committee recommended to the Board that effective March 9, 2023 the base salary paid to Robert
S. Hekemian, Jr. for his service as Chief Executive Officer of FREIT be increased to $600,000 per year from $500,000 per year and the
base salary paid to Allan Tubin as Chief Financial Officer and Treasurer of FREIT be increased to $45,000 per year from $40,000 per year,
the base salary paid to John A. Aiello as Secretary of FREIT be increased to $50,000 per year from $40,000 per year, and that there be
no adjustment to the compensation paid to Ronald J. Artinian as the Chairman of the Board of FREIT.
With respect to compensation for the fiscal years
ending October 31, 2024 and 2025, the Compensation Committee recommended to the Board and the Board approved that there be no increases
or other adjustments in the compensation paid to the executive officers of FREIT or FREITs Chairman of the Board for services provided
in their capacity as executive officers or as Chairman of the Board of FREIT, respectively.
The Compensation Committee considers the following
factors, among other things, in the course of its review of the compensation for the executive officers: (a) compensation paid by other
real estate investment trusts, both as a component of operating expenses and to ensure that FREITs compensation levels are competitive
in the industry; (b) the duties and responsibilities of the executive officers and the value of the services provided by them; (c) FREITs
operating results and financial condition, as well as the condition and prospects of the residential and commercial real estate markets;
and (d) the results of the most recent stockholder advisory vote to approve the compensation of the executive officers, which was conducted
at the 2023 annual meeting of FREITs stockholders.
50
The Compensation Committee reviews compensation
paid by other real estate investment trusts in the most general way in view of the fact that unlike many other real estate investment
trusts, FREIT is externally managed. Therefore, FREIT does not retain the services of its executive officers on a full-time, exclusive
basis, and the executive officers do not spend full time in their respective positions or devote all of their business activities to FREIT.
The Compensation Committee and the Board take these considerations into account when determining the compensation to be paid to FREITs
executive officers, and the compensation paid to the executive officers reflects what the Compensation Committee and the Board believe
to be fair and reasonable compensation for the services that the executive officers provide to FREIT and their commitment to serve as
executive officers of FREIT under these circumstances. The Compensation Committee and the Board also consider the size and scope of FREITs
business and operations as reflected on its balance sheet and income statement in relationship to other real estate investment trusts.
As required by the rules and regulations of the
SEC, at the 2023 annual meeting of stockholders, the stockholders were asked to approve an advisory resolution approving the compensation
of the executive officers as disclosed and described in the Compensation Discussion and Analysis and the compensation tables and narratives
contained in FREITs proxy statement used in connection with the annual meeting. The advisory resolution received the approval of
approximately 74.6% of the votes cast on this proposal. The Compensation Committee and the Board concluded from the strong approval of
the advisory resolution that the stockholders believe that FREITs compensation policies and the compensation paid to the executive
officers are appropriate and reflective of FREITs objectives of aligning the interests of the executive officers with the long-term
interests of FREIT. In accordance with the rules and regulations of the SEC, and based on the results of the vote by the stockholders
at the 2023 annual meeting of stockholders on the frequency of such vote, the advisory vote by the stockholders to approve the compensation
of the executive officers will occur again at the 2026 annual meeting of stockholders.
**Risk Management**
The Compensation Committee does not believe that
FREITs executive compensation program gives rise to any risks that are reasonably likely to have a material adverse effect on FREIT.
Executive officers are compensated on a fixed salary basis and have not been awarded any bonuses or other compensation that might encourage
the taking of unnecessary or excessive risks that threaten the long-term value of FREIT. In addition, the Compensation Committee and the
Board have utilized, and may continue to utilize, the Equity Incentive Plan to align the interests of the directors and executive officers
with the long-term interests of FREIT and the stockholders through grants of stock options and other equity-based awards, thereby giving
the directors and executive officers additional incentives to protect the long-term value of FREIT.
**Executive Compensation and Financial Performance**
As discussed above, the executive officers of
FREIT are compensated primarily on a fixed salary basis and have not been awarded any incentive-based cash bonuses, and the compensation
paid to the executive officers is not specifically dependent upon any particular measure of financial performance. However, the Compensation
Committee considers, in general terms, both the overall financial performance and condition of FREIT and FREITs long-term prospects
in the Committees determination of appropriate levels of executive salary, among other factors and considerations discussed under
Fiscal 2025 Compensation above.
**Chief Executive Officer Compensation and Employee
Compensation**
The table below sets forth comparative information
regarding (A) the total compensation of the Chief Executive Officer for the fiscal year ended October 31, 2025, (B) the median of the
total compensation of all other employees of FREIT, not including the Chief Executive Officer, for the fiscal year ended October 31, 2025,
and (C) the ratio of the Chief Executive Officers total compensation to the median of the total compensation of all other employees
(other than the Chief Executive Officer). As of October 31, 2025, excluding the Chief Executive Officer, FREIT had twenty-five (25) employees,
which was composed of nineteen (19) full-time employees (including the Pierre TIC), three (3) part-time and seasonal employees, and three
(3) executive officers.
|
Chief Executive Officer compensation (A) |
$680,000 | |
|
Median compensation of all employees (not including Chief Executive Officer) (B) |
$53,952 | |
|
Ratio of (A) to (B) |
12.60 | |
****
51
**Compensation Committee Interlocks and Insider
Participation**
For the fiscal year ended October 31, 2025, David
F. McBride, Justin F. Meng and Richard J. Aslanian served on the Compensation Committee of the Board, with Mr. McBride serving as the
Chairman of the Committee. None of the members of the Compensation Committee served as an executive officer or employee of FREIT at any
time during the fiscal year ended October 31, 2025 nor have any of them ever served as an executive officer of FREIT in any prior year.
**Compensation Committee Report**
The Compensation Committee has discussed and reviewed
the foregoing Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation Committee
recommended to the Board that the Compensation Discussion and Analysis be included in this Form 10K report.
|
Submitted by: |
David F. McBride, Chairman | |
|
|
Justin F. Meng | |
|
|
Richard J. Aslanian | |
****
52
**SUMMARY COMPENSATION TABLE**
The following table sets forth information concerning
the compensation of all of the named executive officers of FREIT (the Executive Officers) as of October 31, 2025, 2024 and
2023 for services in all capacities to FREIT for the 2025, 2024 and 2023 fiscal years, respectively. With respect to all compensation,
the term paid will mean actually paid or deferred.
|
Name and
Principal
Position (1) |
Year |
Salary ($)(2) |
Bonus
($) |
Stock
Awards
($)(3) |
Option
Awards
($) |
Non-Equity
Incentive Plan
Compensation
($) |
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($) |
All Other
Compensation
($) |
Total ($) | |
|
Robert S.
Hekemian, Jr.,
President and
Chief Executive
Officer |
2025 |
$600,000 |
$ |
$20,000 |
$ |
$ |
$ |
$60,000 |
$680,000 | |
|
2024 |
$600,000 |
$ |
$20,000 |
$ |
$ |
$ |
$60,000 |
$680,000 | |
|
2023 |
$564,888 (4) |
$ |
$20,000 |
$ |
$ |
$ |
$58,756 (5) |
$643,644 | |
|
Allan Tubin,
Treasurer and
Chief Financial
Officer |
2025 |
$45,000 |
$ |
$ |
$ |
$ |
$ |
$ |
$45,000 | |
|
2024 |
$45,000 |
$ |
$ |
$ |
$ |
$ |
$ |
$45,000 | |
|
2023 |
$43,244 (4) |
$ |
$ |
$ |
$ |
$ |
$ |
$43,244 | |
|
John A. Aiello, Esq.,
Secretary |
2025 |
$50,000 |
$ |
$20,000 |
$ |
$ |
$ |
$60,000 |
$130,000 (7) | |
|
2024 |
$50,000 |
$ |
$20,000 |
$ |
$ |
$ |
$60,000 |
$130,000 (7) | |
|
2023 |
$46,489 (4) |
$ |
$20,000 |
$ |
$ |
$ |
$60,222 (6) |
$126,711 (7) | |
|
(1) | Represents the positions held by each Executive Officer for the fiscal years ended October 31, 2025, 2024
and 2023. | |
|
(2) | Represents payment to the Executive Officers for their services as Executive Officers of FREIT. | |
|
(3) | On March 9, 2023, in accordance with FREITs Equity Incentive Plan, the Compensation Committee recommended
to the Board and the Board approved that for services rendered and to be rendered in Fiscal 2023, in lieu of cash compensation in the
amount of $20,000, each director was awarded Shares in FREIT. Based on the closing price of FREITs Shares on March 9, 2023 of $15.50
per Share, the Board approved an award of 1,290 Shares of FREIT to each director serving on FREITs Board. As such, 1,290 Shares
were issued to each director on March 9, 2023 and upon issuance were deemed fully paid and non-assessable. | |
On March 22, 2024, the Compensation
Committee recommended to the Board and the Board approved that for services rendered and to be rendered in 2024, in lieu of cash compensation
in the amount of $20,000, each director was awarded Shares in FREIT. Based on the closing price of FREITs Shares on March 22, 2024
of $16.25 per Share, the Board approved an award of 1,230 Shares of FREIT to each director serving on FREITs Board. As such, 1,230
Shares were issued to each director on March 22, 2024 and upon issuance were deemed fully paid and non-assessable.
On February 20, 2025, the Compensation
Committee recommended to the Board and the Board approved that for services rendered and to be rendered in Fiscal 2025, in lieu of cash
compensation in the amount of $20,000, each director was awarded Shares in FREIT. Based on the closing price of FREITs Shares on
February 21, 2025 of $16.76 per Share, the Board approved an award of 1,193 Shares of FREIT to each director serving on FREITs
Board. As such, 1,193 Shares were issued to each director on February 20, 2025 and upon issuance were deemed fully paid and non-assessable.
|
(4) | On March 9, 2023, with respect to compensation for the fiscal year ended October 31, 2023, the Compensation
Committee recommended to the Board and the Board approved that the base salary paid to Robert S. Hekemian, Jr. for his service as Chief
Executive Officer of FREIT be increased to $600,000 per year from $500,000 per year, the base salary paid to Allan Tubin as Chief Financial
Officer and Treasurer of FREIT be increased to $45,000 per year from $40,000 per year and the base salary paid to John A. Aiello as Secretary
of FREIT be increased to $50,000 per year from $40,000 per year. The increased amounts were paid on a prorated basis for Fiscal 2023. | |
|
(5) | Of this amount: $3,034 represents accrued interest earned in the fiscal year ended October 31, 2023 on
amounts previously deferred by Robert S. Hekemian, Jr. under the terms of the Deferred Fee Plan, pursuant to which payment of accrued
interest is deferred until such time that the deferred fees are paid to Mr. Hekemian; and $55,722 represents | |
|
|
53
|
| annual retainer fees, meeting
fees and other fees paid to Mr. Hekemian in the fiscal year ended October 31, 2023 as consideration for his service on the Board and,
if applicable, its committees. Pursuant to the amendments to the Deferred Fee Plan that became effective on November 1, 2014, the aggregate
amount of $3,034 deferred for the fiscal year ended October 31, 2023 converted into an aggregate of 186 Share Units. See Amended
and Restated Deferred Fee Plan above. | |
|
(6) | For the period from November 1, 2023 through March 9, 2023, the Secretary was entitled to receive: (i)
meeting attendance fees in the amount of $1,500 for each meeting of the Board and its committees attended, $1,000 for each meeting participated
in by teleconference; and (ii) property site inspection fees in the amount of $1,000 for each site inspection attended and reimbursement
of all reasonable and verified out-of-pocket expenses incurred in connection with the site visit. | |
|
(7) | Mr. Aiello is an officer and shareholder in the law firm of Giordano, Halleran & Ciesla, P.C. During
the fiscal years ended October 31, 2025, 2024 and 2023, Mr. Aiello paid to the law firm the retainer and meeting fees he received in connection
with his services as Secretary of FREIT during the fiscal years ended October 31, 2025, 2024 and 2023. | |
**Securities Authorized for Issuance under Equity Compensation Plans**
The number of stock options outstanding under
the Equity Incentive Plan, the weighted-average exercise price of the outstanding options and the number of securities remaining available
for issuance, as of October 31, 2025 were as follows:
**EQUITY COMPENSATION PLAN TABLE**
|
Plan Category | |
Number of securities
to be Issued upon
Exercise of
Outstanding Options,
Warrants and Rights
(a) | |
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b) | |
Number of Securities
Remaining Available
for Future Issuance
under Equity
Compensation Plans
(Excluding Securities
Reflected in
Column (a))
(c) | |
|
Equity compensation plans approved by stockholders (1) (2) | |
| | | |
| | | |
| 419,709 | | |
|
| |
| | | |
| | | |
| | | |
|
Equity compensation plans not approved by stockholders | |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
Total | |
| | | |
| | | |
| 419,709 | | |
|
(1) | FREIT currently has no equity compensation plans other than the Equity Incentive Plan described under
Compensation Discussion and Analysis above. | |
|
(2) | In Fiscal 2025, the Compensation Committee recommended to the Board and the Board approved, an award to
each member of the Board under the FREIT Equity Incentive Plan of shares of FREIT Common Stock, $.01 par value, having a value of $20,000. | |
54
**OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END**
|
|
Option Awards |
Stock Awards | |
|
Name |
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable |
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable |
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) |
Option
Exercise
Price ($) |
Option
Expiration
Date |
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#) |
Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested
($) |
Equity
Incentive
Plan
Awards:
Number of
Unexercised
Shares,
Units or
Other
Rights That
Have Not
Vested (#) |
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
($) | |
|
Robert S.
Hekemian, Jr. |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Allan Tubin |
|
|
|
|
|
|
|
|
| |
|
John A. Aiello, Esq. |
|
|
|
|
|
|
|
|
| |
**Director Compensation**
For the fiscal year ended October 31, 2025, each
director of the Board was entitled to receive (a)an award under the FREIT Equity Incentive Plan of shares of FREIT Common Stock,
$.01 par value, having a value of $20,000, in lieu of cash compensation (which resulted in the issuance of 1,193 Shares to each director);
(b) an annual retainer fee of $60,000 per year; and (c) an annual retainer to each member of the Nominating, Audit and Compensation Committees
of the Board in the amount of $2,500. The Chairman of the Board, the Audit Committee and the Compensation Committee were entitled to receive
an additional annual retainer in the amount of $30,000, $15,000 and $10,000, respectively.
For the fiscal year ended October 31, 2025, FREIT
paid an aggregate of $460,516 of annual retainer fees to the directors in cash and $140,000 in stock awards for their services to the
Board and its committees.
55
**FISCAL 2025 DIRECTOR COMPENSATION (1)**
|
Name |
Paid and
Deferred Fees
Earned ($) |
Stock Awards
($)(2) |
Option
Awards
($) |
Non-Equity
Incentive Plan
Compensation
($) |
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($) |
All Other
Compensation($) |
Total($) | |
|
Ronald J.
Artinian |
$75,516 (3) |
$20,000 |
$ |
$ |
$ |
$ |
$95,516 (3) | |
|
David F.
McBride |
$75,000 |
$20,000 |
$ |
$ |
$ |
$ |
$95,000 | |
|
Justin F. Meng |
$63,016 |
$20,000 |
$ |
$ |
$ |
$ |
$83,016 | |
|
David B.
Hekemian |
$60,000 |
$20,000 |
$ |
$ |
$ |
$ |
$80,000 | |
|
Richard J.
Aslanian |
$66,984 |
$20,000 |
$ |
$ |
$ |
$ |
$86,984 | |
|
(1) | See the Summary Compensation Table above for information regarding compensation paid to each of Robert
S. Hekemian, Jr. and John A. Aiello during the fiscal year ended October 31, 2025 in connection with their positions as directors. | |
|
(2) | On February 20, 2025, in accordance with FREITs Equity Incentive Plan, the Compensation Committee
recommended to the Board and the Board approved that for services rendered and to be rendered in Fiscal 2025, in lieu of cash compensation
in the amount of $20,000, each director was awarded Shares in FREIT. Based on the closing price of FREITs Shares on February 21,
2025 of $16.76 per Share, the Board approved an award of 1,193 Shares of FREIT to each director serving on FREITs Board. As such,
1,193 Shares were issued to each director on February 20, 2025 and upon issuance were deemed fully paid and non-assessable. | |
|
(3) | Does not include annual retainer of $30,000 paid to Mr. Artinian in cash in his capacity as Chairman of
the Board. | |
56
|
ITEM 12 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | |
The following
table sets forth certain information regarding the beneficial ownership of Shares for (i) each person who is a beneficial owner of 5%
or more of FREITs outstanding Shares, (ii) each of FREITs directors and executive officers and (iii) all of FREITs
directors and executive officers as a group, each as of January 29, 2026 unless otherwise indicated in the table below.
**Amount and Nature of Beneficial Ownership**
|
Name of Beneficial Owner (1) | |
(A)
Aggregate
Number of Shares
Beneficially Owned (2) | | |
(B)
Number of Shares
Acquirable within
60 Days | | |
(C)
Aggregate Number of Shares Deemed to be Beneficially Owned (Column A plus
Column B) | | |
(D)
Percent
of Class (3) | | |
|
Ronald J. Artinian (4) | |
| 543,030 | (5) | |
| | | |
| 543,030 | (5) | |
| 7.3% | | |
|
David F. McBride, Esq. (4) | |
| 72,511 | (6) | |
| | | |
| 72,511 | (6) | |
| * | | |
|
Robert S. Hekemian, Jr. (4)(7) | |
| 413,401 | (8) | |
| | | |
| 413,401 | (8) | |
| 5.5% | | |
|
John A. Aiello, Esq. (4)(7) | |
| 27,713 | | |
| | | |
| 27,713 | | |
| * | | |
|
Justin F. Meng (4) | |
| 71,663 | (9) | |
| | | |
| 71,663 | (9) | |
| * | | |
|
David B. Hekemian (4) | |
| 509,034 | (10) | |
| | | |
| 509,034 | (10) | |
| 6.8% | | |
|
Richard J. Aslanian (4) | |
| 54,193 | | |
| | | |
| 54,193 | | |
| * | | |
|
Allan Tubin (7) | |
| 13,662 | | |
| | | |
| 13,662 | | |
| * | | |
|
All directors and executive officers as a group (8 persons)
(5)(6)(8)(9)(10)(11) | |
| 1,557,891 | (11) | |
| | | |
| 1,557,891 | (11) | |
| 20.9% | | |
* Shares beneficially
owned do not exceed 1% of FREITs issued and outstanding Shares.
|
|
(1) |
All directors and executive officers listed in this table, with the exception of John A. Aiello, maintain a mailing address at 505 Main Street, Suite 400, Hackensack, New Jersey 07601. John A. Aiello maintains a mailing address at 125 Half Mile Road, Suite 300, Red Bank, New Jersey 07701. | |
|
|
(2) |
Except as otherwise indicated, all of the Shares are held beneficially and of record. | |
|
|
(3) |
Based on 7,471,344 Shares outstanding as of January 29, 2026. | |
|
|
(4) |
A director of FREIT. | |
|
|
(5) |
Includes 52,504 Shares held in Individual Retirement Accounts for the benefit of Mr. Artinian. Includes an aggregate of 383,388 shares pledged as collateral with two banking institutions to secure certain personal indebtedness. | |
|
|
(6) |
Includes 4,000 Shares held by Mr. McBrides wife. | |
|
|
(7) |
An executive officer of FREIT. | |
|
|
(8) |
Includes (i) an aggregate of 147,316 Shares which are held by certain partnerships and limited liability companies in which Mr. Hekemian is a partner or member, (ii) 9,238 Shares which are held in trust by Mr. Hekemian for the benefit of his children, (iii) an aggregate of 11,000 Shares which are held in certain trusts for the benefit of Mr. Hekemians nephews and of which Mr. Hekemian is trustee, and (iv) 78,917 shares pledged as collateral with a banking institution | |
|
|
57
|
|
|
to secure indebtedness of an entity affiliated with Mr. Hekemian. Also includes 25,458 Shares held in a trust of which Mr. Hekemian is a beneficiary. Mr. Hekemian disclaims beneficial ownership of the foregoing Shares held in partnerships, limited liability companies and trusts except to the extent of his pecuniary interest in such partnerships, limited liability companies and trusts. | |
|
|
(9) |
Includes 2,400 Shares held by Mr. Mengs wife, with respect to which Mr. Meng disclaims beneficial ownership. | |
|
|
(10) |
Includes (i) an aggregate of 147,316 Shares which are held by certain partnerships and limited liability companies in which Mr. Hekemian is a partner or member, (ii) an aggregate of 22,506 Shares which are held in certain trusts for the benefit of Mr. Hekemians nephews and niece and of which Mr. Hekemian is a trustee, (iii) 25,470 Shares held in a trust of which Mr. Hekemian is a beneficiary, (iv) an aggregate of 88,940 Shares held by the Robert and Mary Jane Hekemian Foundation, Inc. of which Mr. Hekemian is the Vice President/Treasurer, (v) 6,000 Shares held in trust by Mr. Hekemian for the benefit of his children, and (vi) 84,916 shares pledged as collateral with a banking institution to secure indebtedness of an entity affiliated with Mr. Hekemian. Mr. Hekemian disclaims beneficial ownership of the foregoing Shares held in partnerships, limited liability companies and trusts except to the extent of his pecuniary interest in such partnerships, limited liability companies and trusts. Also includes 2,750 Shares held by Mr. Hekemians wife, with respect to which Mr. Hekemian disclaims beneficial ownership. | |
|
|
(11) |
Robert S. Hekemian, Jr. and David B. Hekemian are both deemed to be the beneficial owner of 147,316 Shares held by certain partnerships and limited liability companies in which each of them is a partner or member. Therefore, the total number of Shares beneficially owned by all executive officers and directors as a group, which includes both Robert S. Hekemian, Jr. and David B. Hekemian, is not merely the aggregate of the beneficial ownership of each executive officer and director, since calculating the aggregate number of Shares beneficially owned by all executive officers and directors as a group on that basis would result in the 147,316 Shares of which both Robert S. Hekemian, Jr. and David B. Hekemian are deemed the beneficial owner being double-counted. As disclosed above, Robert S. Hekemian, Jr. and David B. Hekemian disclaim beneficial ownership of the 147,316 Shares except to the extent of their respective pecuniary interests in the partnerships and limited liability companies that hold such Shares. | |
|
ITEM 13 |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS; DIRECTOR INDEPENDENCE | |
Of the seven members of the Board, Ronald J. Artinian,
David F. McBride, Justin F. Meng and Richard J. Aslanian qualify as independent directors in accordance with the applicable
NASDAQ Listing Rules and SEC rules. Each of the directors serving on committees of the Board: (Nominating Committee for 2025 Annual Meeting
of Stockholders- David F. McBride and Richard J. Aslanian); (Compensation Committee-David F. McBride, Justin F. Meng and Richard J. Aslanian);
and (Audit Committee-Ronald J. Artinian, David F. McBride and Richard J. Aslanian) qualifies as an independent director
in accordance with the applicable NASDAQ Listing Rules and SEC rules.
The Board has adopted a written charter for the
Audit Committee (see Audit Committee under Item 10 above) whereby the Audit Committee oversees and evaluates all related
party transactions proposed to be entered into by FREIT. Further, FREIT has adopted a Code of Ethics applicable to all directors, executive
officers and management employees of FREIT (see Code of Ethics under Item 10 above), which Code of Ethics promotes the honest
and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.
Robert S. Hekemian, Jr., President and Chief Executive
Officer of FREIT and a director of FREIT, and David B. Hekemian, a director of FREIT, are shareholders of Hekemian & Co. Robert S.
Hekemian, Jr. and David B. Hekemian each holds a 33.3% equity interest in Hekemian & Co. The balance of the equity interest in Hekemian
& Co. is held by other members of the Hekemian family, including Bryan S. Hekemian. Robert S. Hekemian, Jr. serves as the Chief Executive
Officer of Hekemian & Co.; David B. Hekemian serves as the President of Hekemian & Co.; and Bryan S. Hekemian serves as the Chief
Operating Officer of Hekemian & Co.
On April 10, 2002, FREIT and Hekemian & Co.
entered into a Management Agreement replacing the Management Agreement dated December 20, 1961, as extended. The term of the Management
Agreement automatically renews for periods of two years unless either party gives at least six months prior notice to the other of non-renewal.
The term of the Management Agreement was renewed for a two-year term, which will expire on October 31, 2027. FREIT may terminate the Management
Agreement (i) without cause upon one years prior written notice, (ii) for cause if Hekemian & Co. has not cured an event of
default within 30 days of receipt of notice of termination from FREIT, or (iii) in the event of an acquisition of FREIT where FREIT ceases
to effectively exist as an operating entity. The Management Agreement provides for a termination fee (Termination Fee) in
the
58
event of a termination by FREIT without cause and a termination fee of 2.5 times the Termination Fee if the Management Agreement terminates
following a merger or acquisition of FREIT.
Under the Management Agreement, Hekemian &
Co. serves as managing agent for FREITs properties, which FREIT owned on November 1, 2001. FREIT may retain Hekemian & Co.
or other managing agents to manage its properties acquired after November 1, 2001 and to perform various other duties such as sales, acquisitions,
and development with respect to any or all of FREITs properties. Hekemian & Co. currently manages all properties owned by FREIT
and its affiliates. Hekemian & Co. is not the exclusive advisor for FREIT to locate and recommend investments deemed suitable for
FREIT, and it is not required to offer potential acquisition properties exclusively to FREIT before acquiring those properties for Hekemian
& Co.s own account or for others, including shareholders and employees of Hekemian & Co.
Pursuant to the terms of the Management Agreement,
FREIT pays Hekemian & Co. certain basic management fees, mortgage origination fees, administrative fees, other miscellaneous fees
and leasing commissions as compensation for its services. The Management Agreement includes a detailed schedule of such fees and commissions
for those services, which the managing agent may be called upon to perform. During the fiscal year ended October 31, 2025, FREIT incurred
to Hekemian & Co. management and other fees in the approximate aggregate amount of $1,905,000, which includes management fees of approximately
$1,427,000 described in more detail below, and mortgage, leasing and other fees in the approximate amount of $478,000. Included in other
fees for the fiscal year ended October 31, 2025 are commissions payable to Hekemian & Co. for the following: $35,000 for the modification
and extension of the loan on the Regency property; and $25,000 for the extension of the loan on the Westwood Plaza property.
FREIT also uses the resources of Hekemian &
Co.s insurance department to secure insurance coverage for its properties and subsidiaries. Hekemian & Co. is paid a commission
for these services, which amounted to approximately $212,000 in the fiscal year ended October 31, 2025.
From time to time, FREIT engages Hekemian &
Co., or certain affiliates of Hekemian & Co., to provide certain additional services, such as consulting services related to development
and financing activities of FREIT. Separate fee arrangements are negotiated between FREIT and Hekemian & Co. with respect to such
services. FREIT also reimburses Hekemian & Co. certain operating expenses, such as payroll and insurance costs, incurred on behalf
of FREIT.
FREITs real estate investments may be in
the form of wholly owned fee interests or, if the circumstances warrant, joint venture interests or as tenants-in-common. FREIT will make
certain real estate investments through joint ventures with other parties from time to time in order to diversify risk. FREIT will also
consider investing in real estate that requires development or that involves particular risk through joint ventures in order to meet FREITs
investment objectives. In furtherance of these objectives, FREIT has invested in joint ventures with employees and affiliates of Hekemian
& Co. and with directors of FREIT, as described below.
FREIT owns a 60% equity interest in, and is
the managing member of, Grande Rotunda, which was the owner of the Rotunda property. Rotunda 100, LLC (Rotunda 100),
owns a 40% equity interest in Grande Rotunda. Robert S. Hekemian, Jr., Chief Executive Officer, President and a director of FREIT
and a shareholder and officer of Hekemian & Co.; David B. Hekemian, a director of FREIT and a shareholder and officer of
Hekemian & Co.; Allan Tubin, the Chief Financial Officer and Treasurer of FREIT and an officer of Hekemian & Co.; certain
other members of the immediate family of the late Robert S. Hekemian, the former Chairman and Chief Executive Officer of and
consultant to FREIT and a former shareholder and former officer of Hekemian & Co. and other employees of Hekemian & Co. have
majority managing control of Rotunda 100. On December 30, 2021, the Rotunda Property was sold and the net sales proceeds were
distributed to the equity owners in Grande Rotunda.
During the fiscal year ended October 31, 2025,
Grande Rotunda paid Hekemian & Co. approximately $7,000 in management fees, which is included in the $1,427,000 of management fees
paid by FREIT to Hekemian & Co. during the fiscal year ended October 31, 2025 mentioned above. Grande Rotunda did not pay Hekemian
& Co. leasing commissions during the fiscal year ended October 31, 2025.
FREIT owns a 40% membership interest in Westwood
Hills, LLC (Westwood Hills), which is the owner of a 210-unit residential apartment complex located in Westwood, New Jersey.
In addition, an aggregate of 35% of the membership interests in Westwood Hills is beneficially owned by: Robert S. Hekemian, Jr., the
Chief Executive Officer, President and a director of FREIT and a shareholder and officer of Hekemian & Co.; Ronald J. Artinian, the
Chairman and a director of FREIT; David B. Hekemian, a director of FREIT and a shareholder and officer of Hekemian & Co.; the Estate
of Robert S. Hekemian, the former Chairman and Chief Executive Officer of and consultant to FREIT and a former shareholder and former
officer of Hekemian & Co.; members of Hekemian family; and two former directors of FREIT. Pursuant to the terms of an operating agreement,
FREIT is the managing member of Westwood Hills. Hekemian & Co. currently serves as the managing agent for Westwood Hills. During the
fiscal year ended October 31, 2025, Westwood Hills paid Hekemian & Co. approximately $304,000 in management
59
fees, which is included
in the $1,427,000 of management fees paid by FREIT to Hekemian & Co. during the fiscal year ended October 31, 2025 mentioned above.
FREIT owns a 40% equity interest in Wayne PSC
and H-TPKE, LLC (H-TPKE), owns a 60% equity interest in Wayne PSC. In addition, an aggregate of approximately 73% of the
membership interests in H-TPKE is controlled by: Robert S. Hekemian, Jr., the Chief Executive Officer, President and a director of FREIT
and a shareholder and officer of Hekemian & Co.; David B. Hekemian, a director of FREIT and a shareholder and officer of Hekemian
& Co.; the late Robert S. Hekemian, the former Chairman and Chief Executive Officer and consultant to FREIT and a former shareholder
and former officer of Hekemian & Co.; members of the families of Robert S. Hekemian, Jr., David B. Hekemian and the late Robert S.
Hekemian; and other employees of Hekemian & Co. FREIT is the managing member of Wayne PSC. Wayne PSC owns a 322,000 square foot shopping
center located in Wayne, New Jersey, known as the Preakness Shopping Center. Hekemian & Co. is the managing agent for the Preakness
Shopping Center. During the fiscal year ended October 31, 2025, Wayne PSC paid Hekemian & Co. approximately $126,000 in management
fees, which is included in the $1,427,000 of management fees paid by FREIT to Hekemian & Co. during the fiscal year ended October
31, 2025 mentioned above. Pursuant to the terms of the Management Agreement, Wayne PSC paid Hekemian & Co. leasing commissions in
the aggregate amount of approximately $6,000 with respect to leasing activity at the Preakness Shopping Center, which is included in the
$478,000 of mortgage, leasing and other fees paid to Hekemian & Co. mentioned above during the fiscal year ended October 31, 2025.
On February 28, 2020, FREIT reorganized S&A
from a partnership into a TIC. Prior to this reorganization, FREIT owned a 65% partnership interest in S&A, which owned 100% of the
Pierre Towers property located in Hackensack, New Jersey through its 100% interest in Pierre Towers, LLC. Accordingly, FREIT consolidated
the financial statements of S&A and its subsidiary to include 100% of the subsidiarys assets, liabilities, operations and cash
flows with the interest not owned by FREIT reflected as noncontrolling interests in subsidiary and all significant intercompany
accounts and transactions were eliminated in consolidation.
Pursuant to the TIC agreement, FREIT ultimately
acquired a 65% undivided interest in the Pierre Towers property, which was formerly owned by S&A. Based on the guidance of Accounting
Standards Codification 810, *Consolidation*, FREITs investment in the TIC, is accounted for under the equity
method of accounting. While FREITs effective ownership percentage interest in the Pierre Towers property remains unchanged after
the reorganization to a TIC, FREIT no longer has a controlling interest as the TIC is now under joint control. The remaining 35% undivided
interest in the Pierre Towers property is owned by Robert S. Hekemian, Jr., the Chief Executive Officer, President and a director of
FREIT and a shareholder and officer of Hekemian & Co.; David B. Hekemian, a director of FREIT and a shareholder and officer of Hekemian
& Co.; Allan Tubin, the Chief Financial Officer and Treasurer of FREIT and an officer of Hekemian & Co.; and certain members
of the immediate family of the late Robert S. Hekemian, the former Chairman, Chief Executive Officer and consultant to FREIT and a former
shareholder and officer of Hekemian & Co. In February 2005, and in accordance with its investment policy regarding risk diversification,
FREIT allowed the minority owners of the former S&A partnership to make a cash contribution to the former S&A partnership of
approximately $1.3 million to increase their ownership interest in the former S&A partnership from approximately 25% to 35%, which
approximated market value at the time of the investment. On April 15, 2004, the former S&A partnership purchased The Pierre Towers,
a residential apartment complex located in Hackensack, New Jersey. During the fiscal year ended October 31, 2025, the Pierre Towers TIC
paid Hekemian & Co. approximately $446,000 in management fees. Additionally, the Pierre Towers TIC also uses the resources of the
Hekemian & Co. insurance department to secure various insurance coverages for the Pierre Towers property. The Pierre Towers TIC paid
approximately $67,000 for such insurance services for the fiscal year ended October 31, 2025.
Robert S. Hekemian, Jr., the Chief Executive Officer,
President and a director of FREIT and a shareholder and officer of Hekemian & Co., was a director of Oritani Financial Corp. and its
subsidiary, Oritani Bank, until Oritani Financial was merged into Valley National Bank in December 2019. FREIT is a party to a commercial
mortgage loan with Valley National Bank. The original principal amount of this mortgage was $22,750,000 based on a fixed interest rate
of 4.75% and secured by FREITs Westwood Plaza property matured on February 1, 2023. Effective February 1, 2023, FREIT entered into
a loan extension and modification agreement with Valley National Bank on this loan with a then outstanding balance of approximately $16,864,361.
Under the terms and conditions of this loan extension and modification, the maturity date of the loan was extended for a term of one (1)
year from February 1, 2023 to February 1, 2024 and was based on a fixed interest rate of 7.5% with the option of FREIT to extend for one
additional year from the extended maturity date, subject to certain provisions of the loan agreement. On October 31, 2023, FREIT exercised
its right, pursuant to the loan agreement, to extend the term of this loan for one additional year from an initial maturity date of February
1, 2024 to a new maturity date of February 1, 2025. This loan extension was based on a fixed interest rate of 8.5%. Effective February
1, 2025, FREIT extended the term of this loan for 90 days to May 1, 2025 under the same terms and conditions of the then existing loan
agreement. Effective May 1, 2025, FREIT entered into a loan extension and modification agreement with Valley National Bank and paid down
this loan by approximately $5.7 million (including deferred interest of approximately $0.2 million) bringing the loan balance to $10 million.
Under the terms and conditions of this loan extension and modification, the maturity date of this loan is extended for one year to May
1, 2026 and
60
the interest rate on the outstanding debt is based on a fixed interest rate of 8.5%. The original mortgage loan and subsequent
modifications and extensions were negotiated at arms length and was on standard terms.
FREIT retained the law firm of Giordano, Halleran
& Ciesla, P.C. during the fiscal year ended October 31, 2025 to furnish legal services. John A. Aiello, a director and Secretary of
FREIT, is an officer and shareholder in the law firm. During the fiscal year ended October 31, 2025, Giordano, Halleran & Ciesla,
P.C. received approximately $181,600 in fees from FREIT and its affiliates for its services. In addition, Mr. Aiello paid to the law firm
the amount of $50,000, representing retainer fees, which Mr. Aiello received in connection with his services as the Secretary of FREIT
during the fiscal year ended October 31, 2025.
|
ITEM 14 |
PRINCIPAL ACCOUNTANT FEES AND SERVICES | |
****
**Audit Fees**
Audit fees billed by EisnerAmper LLP to FREIT
totaled $383,000 for the fiscal year ended October 31, 2025 for professional services rendered in connection with the audits of FREITs
consolidated financial statements and reviews of the quarterly reports on Form 10-Q for the fiscal year ended October 31, 2025. Audit
fees billed by EisnerAmper LLP to FREIT totaled $400,000 for the fiscal year ended October 31, 2024 for professional services rendered
in connection with the audits of FREITs consolidated financial statements and reviews of the quarterly reports on Form 10-Q for
the fiscal year ended October 31, 2024.
**Audit-Related Fees**
EisnerAmper LLP did not bill FREIT, and FREIT
did not pay, for any audit-related fees during the fiscal years ended October 31, 2025 and 2024.
**Tax Fees**
In the fiscal year ended October 31, 2025, EisnerAmper
LLP billed FREIT $34,000 for the preparation of FREITs 2024 tax return. In the fiscal year ended October 31, 2024, EisnerAmper
LLP billed FREIT $41,000 for the preparation of FREITs 2023 tax return.
**All Other Fees**
EisnerAmper LLP did not bill FREIT, and FREIT
did not pay, for any other services during the fiscal years ended October 31, 2025 and 2024.
**Policy on Pre-Approval of Audit and Permissible
Non-Audit Services**
All audit and non-audit services provided by
FREITs independent registered public accounting firm and the fees associated therewith are pre-approved by the Audit Committee
in accordance with the written charter of the Audit Committee adopted by the Board. The Audit Committee gives due consideration to the
potential impact of all non-audit services on auditor independence. The engagement of EisnerAmper LLP, which was pre-approved by the
Audit Committee, did not make use of the de minimis exception for pre-approval contained in the rules of the SEC that permit limited
engagements for non-audit services involving amounts under a specified threshold.
61
**PART IV**
|
ITEM 15: |
EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES | |
| (a) Financial Statements: | Page | |
| | | |
| (i) Report of Independent Registered Public Accounting Firm (PCAOB 274) | 64-65 | |
| | | |
| (ii) Consolidated Balance Sheets as of October 31, 2025 and 2024 | 66 | |
| | | |
| (iii) Consolidated Statements of Income for the fiscal years ended October 31, 2025, 2024 and 2023 | 67 | |
| | | |
| (iv) Consolidated Statements of Comprehensive Income for the fiscal years ended October 31, 2025, 2024 and 2023 | 68 | |
| | | |
| (v) Consolidated Statements of Equity for the fiscal years ended October 31, 2025, 2024 and 2023 | 69 | |
| | | |
| (vi) Consolidated Statements of Cash Flows for the fiscal years ended October 31, 2025, 2024 and 2023 | 70 | |
| | | |
| (vii) Notes to Consolidated Financial Statements | 71 | |
| | | |
| (b) Financial Statement Schedule: | | |
| | | |
| (i) III - Real Estate and Accumulated Depreciation | 87-88 | |
| | | |
| (c) Exhibits: | | |
| | | |
| See Index to Exhibits. | 89 | |
62
**SIGNATURES**
In accordance with Section 13 or 15(d) of the
Securities Exchange Act of 1934, FREIT has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
First Real Estate Investment Trust of New Jersey, Inc. |
| |
|
|
|
|
| |
|
|
|
|
| |
|
Dated: January 29, 2026 |
|
By:/s/ Robert S. Hekemian, Jr. |
| |
|
|
|
Robert S. Hekemian, Jr.
President and Chief Executive Officer
(Principal Executive Officer) |
| |
|
|
|
|
| |
|
|
|
By:/s/ Allan Tubin |
| |
|
|
|
Allan Tubin
Chief Financial Officer and Treasurer
(Principal Financial/Accounting Officer) |
| |
KNOW ALL MEN BY THESE PRESENTS, that each person
whose signature appears below constitutes and appoints each of Robert S. Hekemian, Jr. and Allan Tubin his true and lawful attorney-in-fact
and agent for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on
Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents and purposes as they might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
In accordance with Section 13 or 15(d)
of the Exchange Act, the Registrant has caused this report to be signed by the following persons in the capacities and on the dates stated.
****
|
Signatures |
Title |
Date | |
|
/s/ Robert
S. Hekemian, Jr. |
President, Chief Executive Officer |
January 29, 2026 | |
|
Robert S. Hekemian, Jr. |
(Principal Executive Officer) and
Director |
| |
|
/s/ Allan
Tubin |
Chief Financial Officer and |
January 29, 2026 | |
|
Allan Tubin |
Treasurer (Principal Financial /
Accounting Officer) |
| |
|
/s/ Ronald
J. Artinian |
Chairman of the Board and Director |
January 29, 2026 | |
|
Ronald J. Artinian |
|
| |
|
/s/ David
F. McBride |
Director |
January 29, 2026 | |
|
David F. McBride |
|
| |
|
/s/ John
A. Aiello |
Director |
January 29, 2026 | |
|
John A. Aiello |
|
| |
|
/s/ Justin
F. Meng |
Director |
January 29, 2026 | |
|
Justin F. Meng |
|
| |
|
/s/ David
B. Hekemian |
Director |
January 29, 2026 | |
|
David B. Hekemian |
|
| |
|
/s/ Richard
J. Aslanian |
Director |
January 29, 2026 | |
|
Richard J. Aslanian |
|
| |
63
**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM**
To the Board of Directors and Stockholders of
First Real Estate Investment Trust of New Jersey,
Inc.
**Opinion on the Financial Statements**
We have audited the accompanying consolidated
balance sheets of First Real Estate Investment Trust of New Jersey, Inc. and Subsidiaries (the Company) as of October 31,
2025 and 2024, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in
the three-year period ended October 31, 2025, and the related notes and the financial statement schedule identified in Item 15 (collectively
referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects,
the consolidated financial position of the Company as of October 31, 2025 and 2024, and the consolidated results of their operations and
their cash flows for each of the years in the three-year period ended October 31, 2025, in conformity with accounting principles generally
accepted in the United States of America.
**Basis for Opinion**
These financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
**Critical Audit Matter**
The critical audit matter communicated below is
a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the
audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on
the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion
on the critical audit matter or on the accounts or disclosures to which it relates.
As of October 31, 2025, the Company had real estate,
net of accumulated depreciation (including construction in progress), of approximately $90.4 million. As more fully described in Note
1 to the financial statements, the Company evaluates its real estate for impairment whenever events or changes in circumstances indicate
that the undiscounted cash flows estimated to be generated by such assets may be less than their carrying value and, accordingly, all
or a portion of such carrying value may not be recoverable. When it is determined that the carrying value of an asset is not recoverable,
an impairment loss is then calculated by comparing the fair value of the asset to its carrying amount. Estimates of undiscounted cash
flows or fair value are sensitive to changes in assumptions and judgements, the outcome of which could vary significantly.
We identified the impairment evaluation for the
Companys commercial properties (including construction in progress), having a net book value of approximately $33.7 million, as
a critical audit matter due to significant judgment by management in identifying indicators of impairment and in the estimated recoverability
of these properties. This in turn led to a high degree of auditor judgment, subjectivity, and audit effort in performing procedures to
evaluate the reasonableness of management's
64
significant estimates and assumptions related to future operating income, holding periods,
capitalization rates and residual values.
Addressing the matter involved performing procedures
and evaluating audit evidence, in connection with forming our overall opinion on the financial statements. We obtained an understanding
and evaluated the design of controls over the Companys impairment evaluation. Our procedures included, among others, assessing
the methodologies applied, identifying the existence of any triggering events, comparing the recoverability analysis to the carrying value
by property and evaluating the reasonableness of significant estimates and assumptions including future operating income, holding periods,
capitalization rates and residual values, and considered if they were reasonable considering the past and current performance of the property
and if consistent with evidence obtained in other areas of the audit. We tested the completeness and accuracy of the underlying data used
by management in its evaluation. We held discussions with management about the current status of the commercial properties to understand
how managements significant estimates and assumptions were developed considering potential future market conditions. In addition,
we evaluated the mathematical accuracy of the calculations included in the Companys evaluation.
/s/ EisnerAmper LLP
We have served as the Companys auditor
since 2006.
EISNERAMPER LLP
New York, New York
January 29, 2026
65
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
| |
October 31, | | |
October 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
(In Thousands, Except Share and Per Share Amounts) | | |
|
ASSETS | |
| | |
| | |
|
| |
| | |
| | |
|
Real estate, at cost, net of accumulated depreciation | |
$ | 89,419 | | |
$ | 91,862 | | |
|
Construction in progress | |
| 968 | | |
| 944 | | |
|
Cash and cash equivalents | |
| 17,926 | | |
| 14,914 | | |
|
Investment in U.S. Treasury securities available-for-sale | |
| 18,174 | | |
| 29,259 | | |
|
Investment in tenancy-in-common | |
| 16,922 | | |
| 17,512 | | |
|
Tenants' security accounts | |
| 833 | | |
| 913 | | |
|
Receivables arising from straight-lining of rents | |
| 472 | | |
| 572 | | |
|
Accounts receivable, net of allowance for doubtful accounts of $258 and $272 as of October 31, 2025 and 2024, respectively | |
| 201 | | |
| 498 | | |
|
Prepaid expenses and other assets | |
| 4,511 | | |
| 5,007 | | |
|
Deferred charges, net | |
| 238 | | |
| 277 | | |
|
Interest rate swap contracts | |
| 210 | | |
| 506 | | |
|
Total Assets | |
$ | 149,874 | | |
$ | 162,264 | | |
|
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
LIABILITIES AND EQUITY | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Liabilities: | |
| | | |
| | | |
|
Mortgages payable, including deferred interest of $0 and $222 as of October 31, 2025 and 2024, respectively | |
$ | 121,300 | | |
$ | 128,871 | | |
|
Less unamortized debt issuance costs | |
| 516 | | |
| 799 | | |
|
Mortgages payable, net | |
| 120,784 | | |
| 128,072 | | |
|
| |
| | | |
| | | |
|
Accounts payable and accrued expenses | |
| 665 | | |
| 857 | | |
|
Dividends payable | |
| 747 | | |
| 5,224 | | |
|
Tenants' security deposits | |
| 1,132 | | |
| 1,205 | | |
|
Deferred revenue | |
| 843 | | |
| 722 | | |
|
Total Liabilities | |
| 124,171 | | |
| 136,080 | | |
|
| |
| | | |
| | | |
|
Commitments and contingencies (Note 7) | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Common Equity: | |
| | | |
| | | |
|
Preferred stock with par value of $0.01 per share: 5,000,000 and 0 shares authorized and issued, respectively | |
| | | |
| | | |
|
Common stock with par value of $0.01 per share: 20,000,000 shares authorized; 7,471,344 and 7,462,993 shares issued at October 31, 2025 and 2024, respectively | |
| 75 | | |
| 75 | | |
|
Additional paid-in-capital | |
| 32,393 | | |
| 32,253 | | |
|
Retained earnings | |
| 1,360 | | |
| 541 | | |
|
Accumulated other comprehensive income | |
| 211 | | |
| 494 | | |
|
Total Common Equity | |
| 34,039 | | |
| 33,363 | | |
|
Noncontrolling interests in subsidiaries | |
| (8,336 | ) | |
| (7,179 | ) | |
|
Total Equity | |
| 25,703 | | |
| 26,184 | | |
|
Total Liabilities and Equity | |
$ | 149,874 | | |
$ | 162,264 | | |
See Notes to Consolidated Financial Statements.
66
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF INCOME
|
| |
Years Ended October 31, | | |
|
| |
2025 | | |
2024 | | |
2023 | | |
|
| |
(In Thousands, Except Per
Share Amounts) | | |
|
Revenue: | |
| | | |
| | | |
| | | |
|
Rental income | |
$ | 26,911 | | |
$ | 26,191 | | |
$ | 25,522 | | |
|
Reimbursements | |
| 1,877 | | |
| 1,887 | | |
| 2,357 | | |
|
Sundry income | |
| 529 | | |
| 600 | | |
| 465 | | |
|
Total revenue | |
| 29,317 | | |
| 28,678 | | |
| 28,344 | | |
|
| |
| | | |
| | | |
| | | |
|
Expenses: | |
| | | |
| | | |
| | | |
|
Operating expenses | |
| 9,782 | | |
| 10,821 | | |
| 10,764 | | |
|
Management fees | |
| 1,427 | | |
| 1,351 | | |
| 1,342 | | |
|
Real estate taxes | |
| 5,933 | | |
| 5,992 | | |
| 5,891 | | |
|
Depreciation | |
| 2,965 | | |
| 2,981 | | |
| 2,944 | | |
|
Total expenses | |
| 20,107 | | |
| 21,145 | | |
| 20,941 | | |
|
| |
| | | |
| | | |
| | | |
|
Investment income | |
| 1,351 | | |
| 1,560 | | |
| 1,013 | | |
|
Net loss on sale of Maryland properties | |
| | | |
| (356 | ) | |
| (1,003 | ) | |
|
Litigation settlement, net of fees | |
| | | |
| 15,673 | | |
| | | |
|
Loss on investment in tenancy-in-common | |
| (135 | ) | |
| (170 | ) | |
| (271 | ) | |
|
Interest expense including amortization of deferred financing costs | |
| (7,280 | ) | |
| (7,307 | ) | |
| (7,717 | ) | |
|
Net income (loss) | |
| 3,146 | | |
| 16,933 | | |
| (575 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Net loss (income) attributable to noncontrolling interests in subsidiaries | |
| 363 | | |
| (1,081 | ) | |
| 1,335 | | |
|
| |
| | | |
| | | |
| | | |
|
Net income attributable to common equity | |
$ | 3,509 | | |
$ | 15,852 | | |
$ | 760 | | |
|
| |
| | | |
| | | |
| | | |
|
Earnings per share: | |
| | | |
| | | |
| | | |
|
Basic and diluted | |
$ | 0.47 | | |
$ | 2.13 | | |
$ | 0.10 | | |
|
| |
| | | |
| | | |
| | | |
|
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
|
Basic | |
| 7,469 | | |
| 7,455 | | |
| 7,441 | | |
|
Diluted | |
| 7,469 | | |
| 7,459 | | |
| 7,447 | | |
See Notes to Consolidated
Financial Statements.
67
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
|
| |
Years Ended October 31, | | |
|
| |
2025 | | |
2024 | | |
2023 | | |
|
| |
(In Thousands of Dollars) | | |
|
| |
| | |
| | |
| | |
|
Net income (loss) | |
$ | 3,146 | | |
$ | 16,933 | | |
$ | (575 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Other comprehensive income (loss) : | |
| | | |
| | | |
| | | |
|
Unrealized (loss) gain on interest swap contracts before reclassifications | |
| (41 | ) | |
| (82 | ) | |
| 547 | | |
|
Amount reclassified from accumulated other comprehensive income to interest expense | |
| (255 | ) | |
| (748 | ) | |
| (620 | ) | |
|
Net unrealized loss on interest rate swap contracts | |
| (296 | ) | |
| (830 | ) | |
| (73 | ) | |
|
Unrealized gain (loss) on U.S. Treasury securities available-for-sale before reclassifications | |
| 13 | | |
| (15 | ) | |
| | | |
|
Amount reclassified from accumulated other comprehensive income to
investment income | |
| | | |
| 3 | | |
| | | |
|
Net unrealized gain (loss) on U.S. Treasury securities available-for-sale | |
| 13 | | |
| (12 | ) | |
| | | |
|
Comprehensive income (loss) | |
| 2,863 | | |
| 16,091 | | |
| (648 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Comprehensive loss (income) attributable to noncontrolling interests in subsidiaries | |
| 363 | | |
| (1,081 | ) | |
| 1,335 | | |
|
| |
| | | |
| | | |
| | | |
|
Comprehensive income attributable to common equity | |
$ | 3,226 | | |
$ | 15,010 | | |
$ | 687 | | |
See Notes to Consolidated Financial Statements.
68
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF EQUITY
|
| |
Common Stock | | |
| | |
(Accumulated | | |
Accumulated | | |
| | |
| | |
| | |
|
| |
Shares | | |
Amount | | |
Additional
Paid-In-
Capital | | |
Deficit)
Retained
Earnings | | |
Other
Comprehensive
Income | | |
Total
Common
Equity | | |
Noncontrolling
Interests in
Subsidiaries | | |
Total Equity | | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Balance at October 31, 2022 | |
| 7,321 | | |
$ | 73 | | |
$ | 30,635 | | |
$ | (6,208 | ) | |
$ | 1,409 | | |
$ | 25,909 | | |
$ | (1,170 | ) | |
$ | 24,739 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Stock based compensation expense | |
| | | |
| | | |
| 11 | | |
| | | |
| | | |
| 11 | | |
| | | |
| 11 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Vested share units granted to directors | |
| 2 | | |
| | | |
| 26 | | |
| | | |
| | | |
| 26 | | |
| | | |
| 26 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Stock awards granted to directors | |
| 9 | | |
| | | |
| 140 | | |
| | | |
| | | |
| 140 | | |
| | | |
| 140 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Stock options exercised | |
| 118 | | |
| 1 | | |
| 1,262 | | |
| | | |
| | | |
| 1,263 | | |
| | | |
| 1,263 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Distributions to noncontrolling interests in subsidiaries | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (3,535 | ) | |
| (3,535 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net income (loss) | |
| | | |
| | | |
| | | |
| 760 | | |
| | | |
| 760 | | |
| (1,335 | ) | |
| (575 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Dividends declared | |
| | | |
| | | |
| | | |
| (3,520 | ) | |
| | | |
| (3,520 | ) | |
| | | |
| (3,520 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net unrealized loss on interest rate swap contracts | |
| | | |
| | | |
| | | |
| | | |
| (73 | ) | |
| (73 | ) | |
| | | |
| (73 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Balance at October 31, 2023 | |
| 7,450 | | |
| 74 | | |
| 32,074 | | |
| (8,968 | ) | |
| 1,336 | | |
| 24,516 | | |
| (6,040 | ) | |
| 18,476 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Stock based compensation expense | |
| | | |
| | | |
| 1 | | |
| | | |
| | | |
| 1 | | |
| | | |
| 1 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Stock awards granted to directors | |
| 8 | | |
| 1 | | |
| 140 | | |
| | | |
| | | |
| 141 | | |
| | | |
| 141 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Stock options exercised | |
| 5 | | |
| | | |
| 38 | | |
| | | |
| | | |
| 38 | | |
| | | |
| 38 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Distributions to noncontrolling interests in subsidiaries | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (2,220 | ) | |
| (2,220 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net income | |
| | | |
| | | |
| | | |
| 15,852 | | |
| | | |
| 15,852 | | |
| 1,081 | | |
| 16,933 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Dividends declared | |
| | | |
| | | |
| | | |
| (6,343 | ) | |
| | | |
| (6,343 | ) | |
| | | |
| (6,343 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net unrealized loss on interest rate swap contracts | |
| | | |
| | | |
| | | |
| | | |
| (830 | ) | |
| (830 | ) | |
| | | |
| (830 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net unrealized loss on investment in U.S. treasury securities available-for-sale | |
| | | |
| | | |
| | | |
| | | |
| (12 | ) | |
| (12 | ) | |
| | | |
| (12 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Balance at October 31, 2024 | |
| 7,463 | | |
| 75 | | |
| 32,253 | | |
| 541 | | |
| 494 | | |
| 33,363 | | |
| (7,179 | ) | |
| 26,184 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Stock awards granted to directors | |
| 8 | | |
| | | |
| 140 | | |
| | | |
| | | |
| 140 | | |
| | | |
| 140 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Distributions to noncontrolling interests in subsidiaries | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (794 | ) | |
| (794 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net income (loss) | |
| | | |
| | | |
| | | |
| 3,509 | | |
| | | |
| 3,509 | | |
| (363 | ) | |
| 3,146 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Dividends declared | |
| | | |
| | | |
| | | |
| (2,690 | ) | |
| | | |
| (2,690 | ) | |
| | | |
| (2,690 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net unrealized loss on interest rate swap contracts | |
| | | |
| | | |
| | | |
| | | |
| (296 | ) | |
| (296 | ) | |
| | | |
| (296 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net unrealized gain on investment in U.S. treasury securities available-for-sale | |
| | | |
| | | |
| | | |
| | | |
| 13 | | |
| 13 | | |
| | | |
| 13 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Balance at October 31, 2025 | |
| 7,471 | | |
$ | 75 | | |
$ | 32,393 | | |
$ | 1,360 | | |
$ | 211 | | |
$ | 34,039 | | |
$ | (8,336 | ) | |
$ | 25,703 | | |
See Notes to Consolidated Financial Statements.
69
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CASH FLOWS
|
| |
Years Ended October 31, | | |
|
| |
2025 | | |
2024 | | |
2023 | | |
|
| |
(In Thousands of Dollars) | | |
|
Operating activities: | |
| | | |
| | | |
| | | |
|
Net income (loss) | |
$ | 3,146 | | |
$ | 16,933 | | |
$ | (575 | ) | |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |
| | | |
| | | |
| | | |
|
Net loss on sale of Maryland properties | |
| | | |
| 356 | | |
| 1,003 | | |
|
Depreciation | |
| 2,965 | | |
| 2,981 | | |
| 2,944 | | |
|
Amortization | |
| 549 | | |
| 647 | | |
| 612 | | |
|
Stock based compensation expense | |
| | | |
| 1 | | |
| 11 | | |
|
Directors fees and related interest paid in stock units | |
| | | |
| | | |
| 26 | | |
|
Stock awards granted to directors | |
| 140 | | |
| 141 | | |
| 140 | | |
|
Loss on investment in tenancy-in-common | |
| 135 | | |
| 170 | | |
| 271 | | |
|
Deferred rents - straight line rent | |
| 100 | | |
| 118 | | |
| 100 | | |
|
Bad debt expense | |
| 107 | | |
| 116 | | |
| 16 | | |
|
Accreted interest on investment in U.S. Treasury securities | |
| (800 | ) | |
| (801 | ) | |
| (353 | ) | |
|
Changes in operating assets and liabilities: | |
| | | |
| | | |
| | | |
|
Tenants' security accounts | |
| (73 | ) | |
| (57 | ) | |
| (23 | ) | |
|
Accounts receivable, prepaid expenses and other assets | |
| 59 | | |
| (48 | ) | |
| 152 | | |
|
Accounts payable, accrued expenses
and deferred director compensation payable | |
| 21 | | |
| (448 | ) | |
| (1,954 | ) | |
|
Deferred revenue | |
| 121 | | |
| 54 | | |
| 311 | | |
|
Deferred interest on mortgage | |
| (222 | ) | |
| | | |
| | | |
|
Net cash provided by operating activities | |
| 6,248 | | |
| 20,163 | | |
| 2,681 | | |
|
Investing activities: | |
| | | |
| | | |
| | | |
|
Cash outlays from sale of Maryland properties, net | |
| | | |
| (356 | ) | |
| (1,003 | ) | |
|
Purchase of U.S. Treasury securities | |
| (48,184 | ) | |
| (45,663 | ) | |
| (38,444 | ) | |
|
Proceeds from maturities of U.S. Treasury securities | |
| 60,082 | | |
| 40,786 | | |
| 15,204 | | |
|
Capital improvements - existing properties | |
| (759 | ) | |
| (1,242 | ) | |
| (1,290 | ) | |
|
Deferred leasing costs | |
| (51 | ) | |
| (89 | ) | |
| (170 | ) | |
|
Distribution from investment in tenancy-in-common | |
| 455 | | |
| 455 | | |
| 390 | | |
|
Net cash provided by(used in) investing activities | |
| 11,543 | | |
| (6,109 | ) | |
| (25,313 | ) | |
|
Financing activities: | |
| | | |
| | | |
| | | |
|
Repayment of mortgages | |
| (7,349 | ) | |
| (9,308 | ) | |
| (26,538 | ) | |
|
Proceeds from mortgage loan refinancings | |
| | | |
| | | |
| 25,500 | | |
|
Proceeds from exercise of stock options | |
| | | |
| 38 | | |
| 1,263 | | |
|
Deferred financing costs | |
| (176 | ) | |
| (206 | ) | |
| (481 | ) | |
|
Dividends paid | |
| (7,167 | ) | |
| (1,491 | ) | |
| (13,721 | ) | |
|
Distributions to noncontrolling interests in subsidiaries | |
| (794 | ) | |
| (2,220 | ) | |
| (3,535 | ) | |
|
Net cash used in financing activities | |
| (15,486 | ) | |
| (13,187 | ) | |
| (17,512 | ) | |
|
Net increase (decrease) in cash, cash equivalents and restricted cash | |
| 2,305 | | |
| 867 | | |
| (40,144 | ) | |
|
Cash, cash equivalents and restricted cash, beginning of year | |
| 19,223 | | |
| 18,356 | | |
| 58,500 | | |
|
Cash, cash equivalents and restricted cash, end of year | |
$ | 21,528 | | |
$ | 19,223 | | |
$ | 18,356 | | |
|
| |
| | | |
| | | |
| | | |
|
Supplemental disclosure of cash flow data: | |
| | | |
| | | |
| | | |
|
Interest paid | |
$ | 7,044 | | |
$ | 6,783 | | |
$ | 7,182 | | |
|
Supplemental schedule of non cash activities: | |
| | | |
| | | |
| | | |
|
Investing activities: | |
| | | |
| | | |
| | | |
|
Accrued capital expenditures, construction costs and pre-development costs | |
$ | 27 | | |
$ | 237 | | |
$ | 210 | | |
|
Financing activities: | |
| | | |
| | | |
| | | |
|
Dividends declared but not paid | |
$ | 747 | | |
$ | 5,224 | | |
$ | 372 | | |
|
| |
| | | |
| | | |
| | | |
|
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets: | |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
Cash and cash equivalents | |
$ | 17,926 | | |
$ | 14,914 | | |
$ | 13,217 | | |
|
Tenants' security accounts | |
| 833 | | |
| 913 | | |
| 962 | | |
|
Funds held in post-closing escrow | |
| | | |
| | | |
| 883 | | |
|
Mortgage escrows (included in prepaid expenses and other assets) | |
| 2,769 | | |
| 3,396 | | |
| 3,294 | | |
|
Total cash, cash equivalents and restricted cash | |
$ | 21,528 | | |
$ | 19,223 | | |
$ | 18,356 | | |
See Notes to Consolidated Financial Statements.
70
**FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY,
INC. AND SUBSIDIARIES**
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting
policies:
Organization:
First Real Estate Investment Trust of
New Jersey was organized on November 1, 1961 as a New Jersey Business Trust. On July 1, 2021, First Real Estate Investment Trust of New
Jersey completed the change of its form of organization from a New Jersey real estate investment trust to a Maryland corporation (the
Reincorporation) which was approved by its stockholders at the annual meeting of stockholders held on May 6, 2021. The Reincorporation
changed the law applicable to First Real Estate Investment Trust of New Jerseys affairs from New Jersey law to Maryland law and
was accomplished by the merger of First Real Estate Investment Trust of New Jersey with and into its wholly owned subsidiary, First Real
Estate Investment Trust of New Jersey, Inc. (FREIT, Trust, us, we, our
or the Company), a Maryland corporation. As a result of the Reincorporation, the separate existence of First Real Estate
Investment Trust of New Jersey has ceased and FREIT has succeeded to all the business, properties, assets and liabilities of First Real
Estate Investment Trust of New Jersey. Holders of shares of beneficial interest in First Real Estate Investment Trust of New Jersey have
received one newly issued share of common stock of FREIT for each share of First Real Estate Investment Trust of New Jersey that they
own, without any action of stockholders required and all treasury stock held by First Real Estate Investment Trust of New Jersey was retired.
FREIT is engaged in owning residential
and commercial income producing properties located in New Jersey and New York. FREIT has elected to be taxed as a Real Estate Investment
Trust for federal income tax purposes under the provisions of Sections 856-860 of the Internal Revenue Code, as amended. Accordingly,
FREIT intends to distribute at least 90% of its ordinary taxable income (to maintain its status as a REIT) to its stockholders as dividends.
Further, FREIT pays no federal income tax on capital gains and ordinary income distributed to stockholders. FREIT is subject to federal
income tax on undistributed taxable income and capital gains. FREIT may make an annual election under Section 858 of the Internal Revenue
Code to apply part of the regular dividends paid in each respective subsequent year as a distribution for the immediately preceding year.
Recently issued accounting standards:
In November 2023, the Financial Accounting
Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2023-07, *Segment Reporting (Topic
280): Improvements to Reportable Segment Disclosures* (ASU 2023-07) to improve reportable segment disclosure requirements,
primarily through enhanced disclosure about significant segment expenses. The Company adopted this standard in Fiscal 2025 with no significant
impact on its financial statement disclosures.
In December 2023, the FASB issued ASU
2023-09, *Income Taxes (Topic 740): Improvements to Income Tax Disclosures* (ASU 2023-09). ASU 2023-09
requires entities to disclose additional information with respect to the effective tax rate reconciliation and to disclose the disaggregation
by jurisdiction of income tax expense and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.
We are currently evaluating the impact of ASU 2023-09 on our consolidated financial statements.
In November 2024, the FASB issued ASU
2024-03, *Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation
of Income Statement Expenses* (ASU 2024-03), and in January 2025, the FASB issued ASU 2025-01, *Income
Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date*
("ASU 2025-01"). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well
as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified
by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after
December 15, 2027, with early adoption permitted. We are currently evaluating the impact of these standards on our consolidated financial
statements.
Principles of consolidation:
The consolidated financial statements
include the accounts of FREIT and the following subsidiaries in which FREIT has a controlling financial interest, including two LLCs in
which FREIT is the managing member with a 40% ownership interest and is considered the primary beneficiary:
| Subsidiary | | % Ownership | | Year Acquired/Organized | | |
| Westwood Hills, LLC | | | 40% | | | 1994 | | |
| Wayne PSC, LLC | | | 40% | | | 2002 | | |
| Grande Rotunda, LLC | | | 60% | | | 2005 | | |
| FREIT Regency, LLC | | | 100% | | | 2014 | | |
| Station Place on Monmouth, LLC | | | 100% | | | 2017 | | |
| Berdan Court, LLC | | | 100% | | | 2019 | | |
71
The consolidated financial statements
include 100% of each subsidiarys assets, liabilities, operations and cash flows, with the interests not owned by FREIT reflected
as "noncontrolling interests in subsidiaries. All significant intercompany accounts and transactions have been eliminated
in consolidation.
Investment in tenancy-in-common:
On February 28, 2020, FREIT reorganized
its subsidiary S and A Commercial Associates Limited Partnership (S&A) from a partnership into a tenancy-in-common form
of ownership (TIC). Prior to this reorganization, FREIT owned a 65% partnership interest in S&A, which owned 100% of
the Pierre Towers property located in Hackensack, New Jersey through its 100% interest in Pierre Towers, LLC. Accordingly, FREIT consolidated
the financial statements of S&A and its subsidiary to include 100% of the subsidiarys assets, liabilities, operations and cash
flows with the interest not owned by FREIT reflected as noncontrolling interests in subsidiary and all significant intercompany
accounts and transactions were eliminated in consolidation.
Pursuant to the TIC agreement, FREIT
has a 65% undivided interest in the Pierre Towers property. Based on the guidance of Accounting Standards Codification (ASC)
810, *Consolidation*, FREITs investment in the TIC is accounted for under the equity method of accounting. FREIT
does not have a controlling interest as the TIC is under joint control. (See Note 3)
Use of estimates:
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at 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.
Cash and cash equivalents:
Financial instruments that potentially
subject FREIT to concentrations of credit risk consist primarily of cash and cash equivalents. FREIT considers all highly liquid investments
purchased with an original maturity of three months or less to be cash equivalents. FREIT maintains its cash and cash equivalents in bank
and other accounts, the balances of which, at times, may exceed federally insured limits.
Investments in U.S. Treasury
securities:
FREIT invests in short-term Treasury
bills and Treasury notes (collectively Treasury securities) issued by the U.S. Treasury Department and backed by the U.S.
Government. Treasury bills yield no interest, are issued at a discount to the redemption price and pay interest at maturity based on the
discount to the redemption price. Treasury notes are similar to Treasury bills except they generally have a longer maturity (between two
and ten years) and pay interest semi-annually. We classify investments in the U.S. Treasury securities with maturities greater than 90
days as available-for-sale investments. We use quoted market prices to determine the fair value of these investments. (See Note 6)
Real estate development
costs:
It is FREITs policy to capitalize
pre-development costs, which generally include legal and other professional fees and other directly related third-party costs. Real estate
taxes and interest costs incurred during the development and construction phases are also capitalized. FREIT ceases capitalization of
these costs when the project or portion thereof becomes operational, or when construction has been postponed. In the event of a postponement,
capitalization of these costs will recommence once construction on the project resumes.
Depreciation:
Real estate and equipment are depreciated
on the straight-line method by annual charges to operations calculated to absorb costs of assets over their estimated useful lives.
Impairment of long-lived
assets:
Impairment losses on long-lived assets,
such as real estate and equipment, are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated
to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be
recoverable. Impairment losses are then measured by comparing the fair value of assets to their carrying amounts. There were no impairments
of long-lived assets for the fiscal years ended October 31, 2025, 2024 and 2023.
Deferred charges:
Deferred charges consist primarily of
leasing commissions, which are amortized on the straight-line method over the terms of the applicable leases.
Debt issuance costs:
Debt issuance costs are amortized on
the straight-line method (which approximates the effective interest method) by annual charges to income over the terms of the mortgages.
Amortization of such costs is included in interest expense and approximated $459,000, $524,000 and $509,000 in the fiscal year ended October
31, 2025 (Fiscal 2025), 2024
72
(Fiscal 2024) and 2023 (Fiscal 2023), respectively. Unamortized
debt issuance costs are a direct deduction from mortgages payable on the consolidated balance sheets.
Revenue recognition:
Income from leases is recognized on
a straight-line basis regardless of when payment is due. Lease agreements between FREIT and commercial tenants generally provide for additional
rentals and reimbursements for their proportionate share of real estate taxes, insurance, common area maintenance charges and may include
percentage of tenants' sales in excess of specified volumes. Percentage rents are generally included in income when reported to FREIT
when earned, or ratably over the appropriate period.
Interest rate swap contracts:
FREIT utilizes derivative financial
instruments to reduce interest rate risk. FREIT does not hold or issue derivative financial instruments for trading purposes. FREIT recognizes
all derivatives as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. Changes
in fair value of those instruments, which qualify as cash flow hedges, are reported in other comprehensive income. (See Note 6)
Advertising:
FREIT expenses the cost of advertising
and promotions as incurred. Advertising costs charged to operations amounted to approximately $281,000, $308,000 and $287,000 in Fiscal
2025, 2024 and 2023, respectively.
Stock-based compensation:
FREIT has a stock-based compensation
plan that was approved by FREITs Board of Directors (the Board), and ratified by FREITs stockholders. Stock
based awards are accounted for based on their grant-date fair value. (See Note 10)
Note 2 Maryland property dispositions:
On November 22, 2021, certain affiliates
(the Maryland Sellers) of FREIT entered into a Purchase and Sale Agreement (the Maryland Purchase and Sale Agreement)
with MCB Acquisition Company, LLC (the Maryland Purchaser), a third party, pursuant to which the Maryland Sellers agreed
to sell three properties to the Maryland Purchaser. The properties consisted of retail and office space and a residential apartment community
owned by Grande Rotunda, LLC (the Rotunda Property), a shopping center owned by Damascus Centre, LLC (the Damascus
Property), and a shopping center owned by WestFREIT Corp. (the Westridge Square Property). FREIT owned 100% of its
subsidiary, WestFREIT Corp. (WestFREIT), a 60% interest in Grande Rotunda, LLC (Grande Rotunda), the joint
venture that owned the Rotunda Property, and a 70% interest in Damascus Centre, LLC (Damascus Centre), the joint venture
that owned the Damascus Property.
The sale of the Maryland Properties
having a total net book value of $172.3 million (as adjusted) was consummated by the Maryland Sellers and the Maryland Purchaser for a
purchase price of $248,750,269, after giving effect to the $15,526,731 escrow deposit (the Maryland Purchaser Escrow Payment).
This sale resulted in net proceeds of approximately $58.7 million, after payment of related mortgage debt in the amount of $155.8 million
and the corresponding swap breakage fees of approximately $213,000 related to the early termination of the interest rate swap contracts
on the Damascus Property loan, payment of loans (including interest) to each of the equity owners in Grande Rotunda in the amount of approximately
$31 million and certain transactional expenses and transfer taxes including brokerage fees due to Hekemian & Co. of approximately
$6.4 million (see Note 8 for additional details). As of October 31, 2025, approximately $7,087,000 of the Maryland Purchaser Escrow Payment
was released from escrow to the Maryland Sellers with no remaining funds held in post-closing escrow for rents anticipated to be released.
The escrow and related gain on sale were reduced by approximately $0.4 million and $1 million for the fiscal years ended October 31, 2024
and 2023, respectively, due to a change in estimate related to a change in the timing of anticipated rent commencement dates for certain
tenants, which reduced the escrowed funds released. The sale of the Maryland Properties resulted in a net gain of approximately $67.4
million (as adjusted) (FREITs share was approximately $44.8 million) which included approximately $7.1 million of proceeds released
from funds held in escrow, a write-off of the straight-line rent receivable of approximately $2.9 million and a write-off of unamortized
lease commissions of approximately $1.7 million.
As the disposal of the Maryland Properties
did not represent a strategic shift that would have a major impact on FREITs operations or financial results, the properties
operations were not reflected as discontinued operations in the accompanying consolidated financial statements.
Note 3 Investment in tenancy-in-common:
Pursuant to the TIC agreement, FREIT
has a 65% undivided interest in the Pierre Towers property. Based on the guidance of ASC 810, *Consolidation*, FREITs
investment in the TIC is accounted for under the equity method of accounting.
73
FREITs investment in the TIC
was approximately $16.9 million and $17.5 million at October 31, 2025 and 2024, respectively. For the fiscal years ended October 31, 2025,
2024 and 2023, FREIT recognized a loss on investment in TIC of approximately $135,000, $170,000 and $271,000, respectively, in the accompanying
consolidated statements of income. Additionally, because the Pierre Towers property was part of the original portfolio sale to Sinatra
Properties, LLC (Sinatra), approximately $166,000 in expenses were reimbursed to FREIT in the fiscal year ended October
31, 2024 in connection with the terminated Sinatra transaction (See Note 14).
Hekemian & Co., Inc. (Hekemian
& Co.) manages the Pierre Towers property pursuant to a management agreement between the owners of the TIC and Hekemian &
Co. dated as of February 28, 2020, which renews for successive one (1) year terms unless either party gives written notice of termination
to the other party at least sixty (60) days prior to the end of the then-current term. The management agreement was renewed for a one
(1) year term expiring on February 28, 2027.
The management agreement requires the
payment of management fees equal to 5% of rents collected. Management fees, charged to operations, were approximately $446,000, $425,000
and $418,000 for the fiscal years ended October 31, 2025, 2024 and 2023, respectively. Hekemian & Co. management fees outstanding
at October 31, 2025 and 2024 were approximately $49,600 and $35,700, respectively. The Pierre Towers property also uses the resources
of the Hekemian & Co. insurance department to secure various insurance coverages for its property. Hekemian & Co. is paid a commission
for these services. Such commissions were charged to operations and amounted to approximately $67,000, $55,000 and $51,000 for the fiscal
years ended October 31, 2025, 2024 and 2023, respectively.
The following table summarizes the balance
sheets of the Pierre Towers property as of October 31, 2025 and 2024, accounted for by the equity method:
|
| |
October 31, | |
October 31, | |
|
| |
2025 | |
2024 | |
|
| |
(In Thousands of Dollars) | |
|
| |
| |
| |
|
Real estate, net | |
$ | 71,928 | | |
$ | 72,707 | | |
|
Cash and cash equivalents | |
| 335 | | |
| 1,442 | | |
|
Tenants' security accounts | |
| 563 | | |
| 528 | | |
|
Receivables and other assets | |
| 575 | | |
| 556 | | |
|
Total assets | |
$ | 73,401 | | |
$ | 75,233 | | |
|
| |
| | | |
| | | |
|
Mortgages payable, net of unamortized debt issuance costs | |
$ | 46,173 | | |
$ | 47,362 | | |
|
Accounts payable and accrued expenses | |
| 480 | | |
| 229 | | |
|
Tenants' security deposits | |
| 562 | | |
| 529 | | |
|
Deferred revenue | |
| 152 | | |
| 172 | | |
|
Equity | |
| 26,034 | | |
| 26,941 | | |
|
Total liabilities & equity | |
$ | 73,401 | | |
$ | 75,233 | | |
|
| |
| | | |
| | | |
|
FREIT's investment in TIC (65% interest) | |
$ | 16,922 | | |
$ | 17,512 | | |
The following table summarizes the statements
of operations of the Pierre Towers property for the fiscal years ended October 31, 2025, 2024 and 2023, accounted for by the equity method:
|
| |
Years Ended October 31, | | |
|
| |
2025 | | |
2024 | | |
2023 | | |
|
| |
(In Thousands of Dollars) | | |
|
| |
| | |
| | |
| | |
|
Revenue | |
$ | 8,669 | | |
$ | 8,591 | | |
$ | 8,278 | | |
|
Operating expenses | |
| (5,141 | ) | |
| (4,977 | ) | |
| (4,893 | ) | |
|
Depreciation | |
| (2,270 | ) | |
| (2,235 | ) | |
| (2,212 | ) | |
|
Operating income | |
| 1,258 | | |
| 1,379 | | |
| 1,173 | | |
|
| |
| | | |
| | | |
| | | |
|
Interest income | |
| 56 | | |
| 82 | | |
| | | |
|
Sinatra expenses due to FREIT | |
| | | |
| (166 | ) | |
| | | |
|
Interest expense including amortization of deferred financing costs | |
| (1,521 | ) | |
| (1,556 | ) | |
| (1,590 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Net loss | |
$ | (207 | ) | |
$ | (261 | ) | |
$ | (417 | ) | |
|
| |
| | | |
| | | |
| | | |
|
FREIT's loss on investment in TIC (65% interest) | |
$ | (135 | ) | |
$ | (170 | ) | |
$ | (271 | ) | |
74
Note 4 - Real estate:
Real estate consists of the following:
|
| |
Range of | |
| | |
| | |
|
| |
Estimated | |
October 31, | | |
|
| |
Useful Lives | |
2025 | | |
2024 | | |
|
| |
| |
(In Thousands of Dollars) | | |
|
Land | |
| |
$ | 40,813 | | |
$ | 40,813 | | |
|
Unimproved land | |
| |
| 405 | | |
| 405 | | |
|
Apartment buildings | |
7-40 years | |
| 70,928 | | |
| 70,686 | | |
|
Commercial buildings/shopping centers | |
5-40 years | |
| 42,633 | | |
| 42,695 | | |
|
Equipment/furniture | |
5-15 years | |
| 2,388 | | |
| 2,311 | | |
|
Total real estate, gross | |
| |
| 157,167 | | |
| 156,910 | | |
|
Less: accumulated depreciation | |
| |
| 67,748 | | |
| 65,048 | | |
|
Total real estate, net | |
| |
$ | 89,419 | | |
$ | 91,862 | | |
Note 5 Mortgages payable
and line of credit:
|
| |
October 31, 2025 | |
October 31, 2024 | |
|
| |
Principal (Including
Deferred Interest) | |
Unamortized
Debt Issuance
Costs | |
Principal (Including
Deferred Interest) | |
Unamortized
Debt Issuance
Costs | |
|
| |
(In Thousands of Dollars) | |
(In Thousands of Dollars) | |
|
Westwood, NJ (A) | |
$ | 9,808 | | |
$ | 31 | | |
$ | 15,995 | | |
$ | 9 | | |
|
Wayne, NJ (B) | |
| 28,190 | | |
| 185 | | |
| 28,728 | | |
| 234 | | |
|
River Edge, NJ (C) | |
| 8,715 | | |
| 33 | | |
| 8,811 | | |
| 55 | | |
|
Red Bank, NJ (D) | |
| 11,030 | | |
| 33 | | |
| 11,281 | | |
| 48 | | |
|
Wayne, NJ (E) | |
| 25,000 | | |
| 10 | | |
| 25,000 | | |
| 118 | | |
|
Middletown, NY (F) | |
| 13,754 | | |
| 64 | | |
| 13,920 | | |
| 5 | | |
|
Westwood, NJ (G) | |
| 24,803 | | |
| 120 | | |
| 25,136 | | |
| 263 | | |
|
Total fixed rate | |
| 121,300 | | |
| 476 | | |
| 128,871 | | |
| 732 | | |
|
Line of credit - Provident Bank (H) | |
| | | |
| 40 | | |
| | | |
| 67 | | |
|
Total variable rate | |
| | | |
| 40 | | |
| | | |
| 67 | | |
|
Total | |
$ | 121,300 | | |
$ | 516 | | |
$ | 128,871 | | |
$ | 799 | | |
|
(A) | On January 14, 2013, FREIT refinanced its Westwood Plaza mortgage loan in the amount of $8 million, with
a new mortgage loan held by Valley National Bank in the amount of $22,750,000, which was payable in monthly installments of $129,702 including
interest at 4.75% through February 1, 2023 at which time the outstanding balance was due. | |
Effective February 1, 2023, FREIT entered
into a loan extension and modification agreement with Valley National Bank on this loan with a then outstanding balance of $16,864,361.
Under the terms and conditions of this loan extension and modification, the maturity date of the loan was extended for a term of one (1)
year from February 1, 2023 to February 1, 2024 with the option of FREIT to extend for one additional year from the extended maturity date,
subject to certain provisions of the loan agreement. The loan was based on a fixed interest rate of 7.5% and was payable based on monthly
installments of principal and interest of approximately $157,347. Additionally, FREIT funded an interest reserve escrow account (Escrow)
at closing representing the annualized principal and interest payments for one (1) year, amounting to approximately $1,888,166. On October
31, 2023, FREIT exercised its right, pursuant to the loan agreement, to extend the term of this loan for one additional year from an initial
maturity date of February 1, 2024 to a new maturity date of February 1, 2025. The outstanding balance of this loan as of February 1, 2024
was approximately $16,458,000, payable based on monthly installments of principal and interest of approximately $166,727, and bearing
interest at a fixed rate of 8.5%. Additionally, FREIT funded the Escrow with an additional $112,556, increasing the Escrow balance to
$2,000,722, which represented the annualized principal and interest payments for one (1) year under this loan extension.
Effective February 1, 2025, Valley National
Bank extended this loan for 90 days from a maturity date of February 1, 2025 to a maturity date of May 1, 2025 under the same terms and
conditions of the then existing loan agreement. Effective May 1, 2025, FREIT entered into a loan extension and modification agreement
with Valley National Bank and paid down this loan by approximately $5.7 million (including deferred interest of approximately $0.2 million)
bringing the loan balance to $10 million. Under the terms and conditions of this loan extension and modification, the maturity
75
date of
this loan is extended for one year to May 1, 2026, the interest rate on the outstanding debt is based on a fixed interest rate of 8.5%
and monthly installments of principal and interest of approximately $107,978 are required. Additionally, the Escrow balance was reduced
from $2,000,722 to $1,295,739 resulting in a refund to FREIT of $704,983. This Escrow is held at Valley National Bank and in the event
of a default on this loan, the bank shall be permitted to use the proceeds from the Escrow to make monthly debt service payments on the
loan.
The mortgage is secured by a retail building
located in Westwood, New Jersey having a net book value of approximately $7,217,000 as of October 31, 2025 including approximately $246,000
classified as construction in progress.
As a result of the negative impact of the COVID-19 pandemic
at this property, FREIT was granted debt payment relief from the lender in the form of deferral of principal and interest payments for
a three-month period which ended June 30, 2020, resulting in total deferred payments of approximately $390,000, of which approximately
$222,000 related to deferred interest. These deferred payments were included in the mortgages payable on the consolidated balance sheet
as of October 31, 2024 and was paid in full in May 2025 as part of the loan extension and modification agreement with Valley National
Bank.
|
(B) | On August 26, 2019, Berdan Court, LLC (Berdan Court), refinanced its $17 million loan with
a new lender in the amount of $28,815,000. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate
of 6.09% to a fixed rate of 3.54% and (ii) net refinancing proceeds of approximately $11.6 million, which could be used for capital expenditures
and general corporate purposes. The loan was interest-only for the first five years of the term with monthly installments of approximately
$85,004 each month through September 1, 2024. Thereafter, monthly installments of principal plus interest totaling approximately $130,036
are required each month until September 1, 2029 at which time the unpaid balance is due. | |
The mortgage is secured by an apartment building located in
Wayne, New Jersey having a net book value of approximately $1,310,000 as of October 31, 2025.
|
(C) | On November 19, 2013, FREIT refinanced mortgage
loans with a new mortgage loan in the amount of $11,200,000 payable in monthly installments of $57,456 including interest at 4.54% through
December 1, 2023 at which time the outstanding balance was due. Provident Bank extended the initial maturity date of this loan for a 90-day
period from December 1, 2023 to March 1, 2024 and further extended this loan for another 60-day period with a new maturity date of June
1, 2024, based on the same terms and conditions of the existing loan agreement. | |
On May 1, 2024, FREIT entered into a loan
extension and modification agreement with Provident Bank, effective June 1, 2024, with a then outstanding loan balance of approximately
$8.9 million. Under the terms and conditions of this loan extension and modification, the maturity date of this loan is extended for three
years to May 31, 2027, the interest rate on the outstanding debt is based on a fixed interest rate of 6.75% and monthly installments of
principal and interest of approximately $58,016 are required.
The mortgage is secured by an apartment building located in
River Edge, New Jersey having a net book value of approximately $821,000 as of October 31, 2025.
|
(D) | On December 7, 2017, Station Place on Monmouth, LLC (Station Place)
closed on a mortgage loan in the amount of $12,350,000 held by Provident Bank to purchase the Station Place property located in Red Bank,
New Jersey. Interest-only payments were required each month for the first two years of the term and thereafter, principal payments plus
accrued interest were required each month through maturity. The loan bears a floating interest rate equal to 180 basis points over the
one-month SOFR with a maturity date of December 15, 2027. In order to minimize interest rate volatility during the term of the loan, Station
Place entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 4.35%
over the term of the loan. (See Note 6 for additional information relating to the interest rate swap contract.) | |
The mortgage is secured by an apartment building located
in Red Bank, New Jersey having a net book value of approximately $17,488,000 as of October 31, 2025.
|
(E) | On July 22, 2022, Wayne PSC, LLC (Wayne PSC) refinanced its $22.1 million loan (inclusive
of deferred interest of approximately $136,000), which would have matured on October 1, 2026, with a new loan held by ConnectOne Bank
in the amount of $25,000,000. This loan was interest-only based on a fixed interest rate of 5% and had a term of three years with a maturity
date of August 1, 2025. Additionally, an interest reserve escrow was established at closing representing twelve months of interest of
$1,250,000, which could be used to pay monthly interest on this loan with a requirement to replenish the escrow account back to $1,250,000
when the balance in the escrow account was reduced to three months of interest. This refinancing resulted in (i) annual debt service savings
of approximately $340,000 due to interest-only payments; (ii) an increase in the interest rate from a fixed interest rate of 3.625% to
a fixed interest rate of 5%; and (iii) net refinancing proceeds of approximately $1.1 million which can be used for capital expenditures
and general corporate purposes. As part of the refinancing, Wayne PSC terminated the interest rate swap contract on the underlying loan
resulting in a realized gain on the swap breakage of approximately $1.4 million, which was recorded as a realized gain on the accompanying
consolidated statement of income for the fiscal year ended October 31, 2022. | |
76
On August 1, 2025, the mortgage in the amount of $25,000,000, secured by
the Preakness Shopping Center located in Wayne, New Jersey, reached its maturity date. Wayne PSC, LLC is working with the current lender,
ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several extensions of the loans
maturity date while discussions are ongoing, with each extension made under the same
terms and conditions of the existing loan agreement. Wayne PSC, LLC continues to evaluate all options for refinancing or replacing the
loan. Management expects this loan to be further extended, however, until such time as a definitive agreement providing for a modification,
extension or replacement of this loan is entered into, there can be no assurance that such an agreement will be reached.
The mortgage is secured by a shopping center located in Wayne,
New Jersey having a net book value of approximately $20,591,000 as of October 31, 2025 including approximately $722,000 classified as
construction in progress. As of October 31, 2025, the interest reserve escrow account has a balance of approximately $405,000.
|
(F) | On December 29, 2014, FREIT Regency, LLC (Regency) closed on a $16.2 million mortgage loan
with Provident Bank. The loan was based on a floating interest rate equal to 125 basis points over the one-month SOFR and had a maturity
date of December 15, 2024. Interest-only payments were required each month through December 15, 2017 and thereafter, principal payments
of $27,807 (plus accrued interest) were required each month through maturity. In order to minimize interest rate volatility during the
term of the loan, Regency entered into an interest rate swap contract that, in effect, converted the floating interest rate to a fixed
interest rate of 3.75% over the term of the loan. (See Note 6 for additional information relating to the interest rate swap contract.) | |
On December 15, 2024, the mortgage and
the corresponding interest rate swap contract on its underlying loan came due with no settlement of the swap contract due at maturity.
Effective December 15, 2024, FREIT Regency, LLC entered into a loan extension and modification agreement with the lender of this loan,
Provident Bank, with a then outstanding loan balance of approximately $13.9 million. Under the terms and conditions of this loan extension
and modification, the maturity date of this loan is extended for three years to December 15, 2027, the interest rate on the outstanding
debt is based on a fixed interest rate of 6.05% and monthly installments of principal and interest of approximately $84,521 are required.
The mortgage is secured by an apartment complex located in
Middletown, New York having a net book value of $16,315,000 as of October 31, 2025.
|
(G) | On August 3, 2023, Westwood Hills refinanced
its $25,000,000 loan (which would have matured on October 1, 2023) with a new loan held by Minnesota Life Insurance Company in the amount
of $25,500,000. This loan is based on a fixed interest rate of 6.05%, provides for monthly payments of principal and interest of $153,706
and has a term of three years with a maturity date of September 1, 2026. This refinancing resulted in a decrease in the interest rate
from a variable interest rate of approximately 9.21% (at the time of the refinancing) to a fixed interest rate of 6.05% and annual debt
service savings of approximately $535,000. | |
The mortgage is secured by an apartment building located in
Westwood, New Jersey having a net book value of approximately $7,567,000 as of October 31, 2025.
|
(H) | FREITs revolving line of credit provided by Provident Bank was renewed
for a three-year term ending on October 31, 2026. Draws against the credit line can be used for working capital needs and standby letters
of credit. Draws against the credit line are secured by mortgages on FREITs Franklin Crossing Shopping Center located in Franklin
Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is $13 million and the interest rate on the amount
outstanding will be based on a floating interest rate of prime minus 25 basis points with a floor of 6.75%. As of October 31, 2025 and
2024, there was no amount outstanding and $13 million was available under the line of credit. | |
Certain of the Companys mortgage loans
and the line of credit contain financial covenants. The Company was in compliance with all of its financial covenants as of October 31,
2025.
While FREIT intends to renew or refinance
its debt obligations as they become due, there can be no assurance that it will be successful or, if successful, that the new terms will
be similar to the terms of its existing debt obligations or as favorable.
77
Fair value of long-term debt:
The following table shows the estimated
fair value and carrying value of FREITs long-term debt, net at October 31, 2025 and 2024:
|
|
|
October 31, |
|
October 31, | |
|
($ in Millions) |
|
2025 |
|
2024 | |
|
Fair Value |
|
$118.4 |
|
$124.7 | |
|
|
|
|
|
| |
|
Carrying Value, Net |
$120.8 |
|
$128.1 | |
Fair values are estimated based on market
interest rates at the end of each fiscal year and on a discounted cash flow analysis. Changes in assumptions or estimation methods may
significantly affect these fair value estimates. The fair value is based on observable inputs (level 2 in the fair value hierarchy as
provided by authoritative guidance).
Principal amounts (in thousands of dollars) due
under the above obligations in each of the five years subsequent to October 31, 2025 are as follows:
|
Year
Ending October 31, |
|
Amount |
| |
|
2026 |
|
$ |
60,618 |
(a) | |
|
2027 |
|
$ |
9,655 |
| |
|
2028 |
|
$ |
24,521 |
| |
|
2029 |
|
$ |
26,506 |
| |
|
2030 |
|
$ |
- |
| |
**
|
(a) | This includes the loan on the Preakness shopping center located in Wayne, New Jersey in the amount of $25 million, which had a maturity date of August 1, 2025. Wayne PSC is working with the current lender, ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several extensions of this loans maturity date while discussions are ongoing, with each extension made under the same terms and conditions of the existing loan agreement. Wayne PSC, LLC continues to evaluate all options for refinancing or replacing the loan. Management expects this loan to be further extended, however, until such time as a definitive agreement providing for a modification, extension or replacement of this loan is entered into, there can be no assurance that such an agreement will be reached. | |
Note 6
Fair value measurements:
Financial assets that are measured at
fair value on our consolidated balance sheets consist of (i) investments in U.S. Treasury securities (classified as available for sale)
and (ii) interest rate swap contracts.
In accordance with ASC Topic 320*,
Investments Debt Securities*, FREIT is accounting for the investments in U.S. Treasury securities classified
as available for sale in the amount of approximately $18,174,000 and $29,259,000 as of October 31, 2025 and 2024, respectively, at fair
value. Since these available for sale securities are being issued at a discount, the discount is being accreted over the term of the U.S.
Treasury securities and recognized as investment income on the consolidated statements of income and reflected as accreted interest in
the consolidated statements of cash flows. For the fiscal years ended October 31, 2025, 2024, and 2023 this amounted to approximately
$800,000, $801,000, and $353,000, respectively. Any changes in the value of these securities are recorded as an unrealized gain or loss
in other comprehensive income (loss). Upon sale, the realized gain or loss related to these investments is recognized in investment income
in the consolidated statements of income. For the fiscal years ended October 31, 2025 and 2024, FREIT recorded an unrealized gain of approximately
$13,000 and loss of approximately $12,000, respectively, in the consolidated statement of comprehensive income representing the change
in the fair value of these available for sale investments in U.S. Treasury securities during such period. For the fiscal year ended October
31, 2023, there was no unrealized gain or loss recorded for the available for sale investments in U.S. Treasury securities. The fair values
are based on quoted market prices (level 1 in the fair value hierarchy as provided by authoritative guidance).
In accordance with *Accounting
Standards Codification Topic 815, Derivatives and Hedging ("ASC 815")*, FREIT has been accounting for the Regency
and Station Place interest rate swap contracts as cash flow hedges marking these contracts to market, taking into account present interest
rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss on the swaps in comprehensive
income. On December 15, 2024, the
78
Regency loan and its corresponding interest rate swap contract matured with no settlement due at maturity.
(See Note 5 for further details.)
For the fiscal years ended October 31,
2025, 2024 and 2023, FREIT recorded an unrealized loss of approximately $296,000, $830,000 and $73,000, respectively, in the consolidated
statement of comprehensive income representing the change in the fair value of these cash flow hedges during such period. As of October
31, 2025, there was an asset of approximately $210,000 for the Station Place swap. As of October 31, 2024, there was an asset of approximately
$54,000 for the Regency swap and $452,000 for the Station Place swap. The fair values are based on observable inputs (level 2 in the fair
value hierarchy as provided by authoritative guidance).
Note 7 - Commitments and contingencies:
Leases
Commercialtenants:
FREIT leases commercial space having
a net book value of approximately $33.7 million at October 31, 2025 to tenants for periods of up to twenty-five years. Most of the leases
contain clauses for reimbursement of real estate taxes, maintenance, insurance and certain other operating expenses of the properties.
Fixed lease income under our commercial operating leases generally includes fixed minimum lease consideration, which is accrued on a straight-line
basis over the terms of the leases. Variable lease income includes consideration based on sales, as well as reimbursements for real estate
taxes, maintenance, insurance and certain other operating expenses of the properties.
Minimum fixed lease consideration (in
thousands of dollars) under non-cancellable tenant operating leases for each of the next five years and thereafter, excluding variable
lease consideration and rents from tenants for which collectability is deemed to be constrained, subsequent to October 31, 2025, is as
follows:
|
Year Ending
October 31, |
|
Amount |
| |
|
2026 |
|
$ |
5,189 |
| |
|
2027 |
|
|
4,178 |
| |
|
2028 |
|
|
3,116 |
| |
|
2029 |
|
|
2,875 |
| |
|
2030 |
|
|
2,693 |
| |
|
Thereafter |
|
|
2,795 |
| |
|
Total |
|
$ |
20,846 |
| |
The above amounts assume that all leases
that expire are not renewed and, accordingly, neither month-to-month nor rentals from replacement tenants are included.
Minimum future rentals do not include
contingent rentals, which may be received under certain leases based on the percentage of reported tenants' sales volume. Rental income
that is contingent on future events is not included in income until the contingency is resolved. Contingent rentals included in income
for each of the yearsin the three-year period ended October 31, 2025 were not material.
Residential tenants:
Lease terms for residential tenants
are usually one to two years.
Environmental concerns
The Westwood Plaza Shopping Center property
is in a Flood Hazard Zone. FREIT maintains flood insurance in the amount of $500,000 for the subject property, which is the maximum available
under the Flood Program for the property. Any reconstruction of that portion of the property situated in the flood hazard zone is subject
to regulations promulgated by the New Jersey Department of Environmental Protection ("NJDEP"), which could require extraordinary
construction methods. FREIT acquired the Westwood Plaza property in 1988, and the property has not experienced any flooding that gave
rise to any claims under FREITs flood insurance in this time period.
Note 8 - Management agreement, fees and transactions with related party:
On April 10, 2002, FREIT and Hekemian
& Co. executed a management agreement dated as of November 1, 2001 (Management Agreement) whereby Hekemian & Co.
would continue as the managing agent for FREIT. The Management Agreement expires on October 31, 2027 and is automatically renewed for
successive periods of two years unless either party gives not less than six (6) months prior notice of non-renewal.
Hekemian & Co. currently manages
all of the properties owned by FREIT and its affiliates. However, FREIT may retain other managing agents to manage properties acquired
after April 10, 2002 and to perform various other duties such as sales, acquisitions, and development with respect to any or all properties.
Hekemian & Co. does not serve as the exclusive property acquisition advisor to FREIT and is not required to offer potential acquisition
properties
79
exclusively to FREIT before acquiring those properties for its own account. The Management Agreement includes a detailed schedule
of fees for those services, which Hekemian & Co. may be called upon to perform.
The Management Agreement provides for
a termination fee (Termination Fee) in the event of a termination by FREIT without cause and a termination fee of 2.5 times
the Termination Fee if the Management Agreement terminates following a merger or acquisition of FREIT.
The Management Agreement requires the
payment of management fees equal to 4% to 5% of rents collected. Such fees charged to operations were approximately $1,427,000, $1,351,000,
and $1,342,000 in Fiscal 2025, 2024 and 2023, respectively. In addition, the Management Agreement provides for the payment to Hekemian
& Co. of leasing commissions, as well as the reimbursement of certain operating expenses, such as payroll and insurance costs, incurred
on behalf of FREIT. Such commissions and reimbursements amounted to approximately $418,000, $563,000 and $825,000 in Fiscal 2025, 2024
and 2023, respectively. Total Hekemian & Co. management fees outstanding at October 31, 2025 and 2024 were approximately $152,000
and $116,000, respectively, and included in accounts payable on the accompanying consolidated balance sheets. FREIT also uses the resources
of the Hekemian & Co. insurance department to secure various insurance coverages for its properties and subsidiaries. Hekemian &
Co. is paid a commission for these services. Such commissions charged to operations were approximately $212,000, $177,000 and $166,000
in Fiscal 2025, 2024 and 2023, respectively.
From time to time, FREIT engages Hekemian
& Co., or certain affiliates of Hekemian & Co., to provide additional services, such as consulting services related to development,
property sales and financing activities of FREIT. Separate fee arrangements are negotiated between Hekemian & Co. and FREIT with respect
to such additional services. Such fees incurred during Fiscal 2025, 2024 and 2023 were approximately $60,000, $89,000 and $307,000, respectively.
Fees incurred during Fiscal 2025 related to commissions to Hekemian & Co. for the following: $35,000 for the modification and extension
of the loan on the Regency property; and $25,000 for the extension of the loan on the Westwood Plaza property. Fees incurred during Fiscal
2024 related to commissions to Hekemian & Co. for the following: $32,500 for the renewal of FREITs line of credit; $22,400
for the modification and extension of the loan on the Steuben Arms property; $21,100 for the extension of the loan on the Westwood Plaza
property; and $13,400 for the additional proceeds received from the post-closing rent escrow for the sale of the Rotunda Property. Fees
incurred during Fiscal 2023 related to commissions to Hekemian & Co. for the following: $129,000 for the additional proceeds received
from the post-closing rent escrow for the sale of the Rotunda Property; $20,000 for the additional proceeds received from the post-closing
rent escrow for the sale of the Westridge Square Property; $10,000 for the additional proceeds received from the post-closing rent escrow
for the sale of the Damascus Property; $127,500 for refinancing of the loan on the Westwood Hills property; and $21,000 for the modification
and extension of the loan on the Westwood Plaza property. The commissions related to the sale of the Rotunda Property, the Damascus Property
and the Westridge Square Property were charged against the gain on sale of the Maryland Properties (see Note 2) in the accompanying consolidated
statements of income for the fiscal years ended October 31, 2025, 2024 and 2023. The commissions for the renewal of FREITs line
of credit and the modification/extension/refinancing of loans were accounted for as deferred mortgage costs and included in the unamortized
debt issuance costs in the accompanying consolidated balance sheets as of October 31, 2025 and 2024.
In connection with the litigation settlement
proceeds received in the third quarter of Fiscal 2024, FREITs Board of Directors approved payment of a litigation management fee
in the amount of $750,000 to Hekemian & Co. for its work performed related to this litigation over the past four years. Additionally,
approximately $2.6 million, comprising $4.5 million of the settlement income less litigation and certain transaction expenses totaling
approximately $1.9 million, was allocated to Westwood Hills, LLC. This allocation was based on the pro-rata share of the contracted sales
prices between the companies. Of the net amount, approximately $1 million is FREITs share based on its 40% ownership of Westwood
Hills, LLC. (See Note 6 for additional details.)
Robert S. Hekemian, Jr., Chief Executive
Officer, President and a Director of FREIT, is the Chief Executive Officer of Hekemian & Co. David B. Hekemian, a Director of FREIT,
is the President of Hekemian & Co. Allan Tubin, Chief Financial Officer and Treasurer of FREIT, is the Chief Financial Officer of
Hekemian & Co. Director fee expense and/or executive compensation (including interest and stock awards) incurred by FREIT for Fiscal
2025, 2024 and 2023 was approximately $680,000, $680,000 and $644,000, respectively, for Robert S. Hekemian, Jr., $45,000, $45,000 and
$43,000, respectively, for Allan Tubin and $80,000, $80,000 and $76,000, respectively, for David Hekemian. (See Notes 10 and 11 to FREITs
consolidated financial statements). Such costs are included within operating expenses on the accompanying consolidated statements of income.
Note 9 - Income taxes:
FREIT has elected to be treated as a
REIT for federal income tax purposes and as such intends to distribute at least 90% of its ordinary taxable income (to maintain its status
as a REIT) to its stockholders as dividends for the fiscal year ended October 31, 2025. For the fiscal year ended October 31, 2024, FREIT
has distributed 100% of its ordinary taxable income and 100% of its capital gain to its stockholders as dividends. For the fiscal year
ended October 31,
80
2023, there was no taxable income and FREIT distributed 100% of its capital gain to its stockholders as dividends. Accordingly,
no provision for federal or state income taxes was recorded in FREITs consolidated financial statements for the fiscal years ended
October 31, 2025, 2024 and 2023.
As of October 31, 2025, FREIT had no
material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended October 31, 2022 remain open
to examination by the major taxing jurisdictions.
Note 10 - Equity
Incentive Plan:
On September 10, 1998, the Board approved
FREIT's Equity Incentive Plan (the "Plan") which was ratified by FREIT's stockholders on April 7, 1999, whereby up to 920,000
of FREIT's shares (adjusted for stock splits) may be granted to key personnel in the form of stock options, restricted share awards and
other share-based awards. In connection therewith, the Board approved an increase of 920,000 shares in FREIT's number of authorized shares.
Key personnel eligible for these awards include directors, executive officers and other persons or entities including, without limitation,
employees, consultants and employees of consultants, who are in a position to make significant contributions to the success of FREIT.
Under the Plan, the exercise price of all options will be the fair market value of the shares on the date of grant. The consideration
to be paid for restricted share and other share-based awards shall be determined by the Board, with the amount not to exceed the fair
market value of the shares on the date of grant. The maximum term of any award granted may not exceed ten years. The Board will determine
the actual terms of each award.
On April 4, 2007, FREIT stockholders
approved amendments to the Plan as follows: (a) reserving an additional 300,000 shares for issuance under the Plan; and (b) extending
the term of the Plan until September 10, 2018. On April 5, 2018, FREIT stockholders approved amendments to the Plan to (a) increase the
number of shares reserved for issuance thereunder by an additional 300,000 shares and (b) further extended the term of the Plan from September
10, 2018 to September 10, 2028.
On March 9, 2023, in accordance with
the Plan, the Compensation Committee recommended to the Board and the Board approved that for services rendered and to be rendered in
Fiscal 2023, in lieu of cash compensation in the amount of $20,000, each director was awarded shares of Common Stock, $0.01 par value,
(the Shares) in FREIT. Based on the closing price of FREITs Shares on March 9, 2023 of $15.50 per Share, the Board
approved an award of 1,290 Shares of FREIT to each director serving on FREITs Board. As such, 1,290 Shares were issued to each
director on March 9, 2023 and upon issuance were deemed fully paid and non-assessable.
On March 22, 2024, in accordance with
the Plan, the Compensation Committee recommended to the Board and the Board approved that for services rendered and to be rendered in
Fiscal 2024, in lieu of cash compensation in the amount of $20,000, each director was awarded Shares in FREIT. Based on the closing price
of FREITs Shares on March 22, 2024 of $16.25 per Share, the Board approved an award of 1,230 Shares of FREIT to each director serving
on FREITs Board. As such, 1,230 Shares were issued to each director on March 22, 2024 and upon issuance were deemed fully paid
and non-assessable.
On February 20, 2025, in accordance
with the Plan, the Compensation Committee recommended to the Board and the Board approved
that for services rendered and to be rendered in Fiscal 2025, in lieu of cash compensation in the amount of $20,000, each director was
awarded Shares in FREIT. Based on the closing price of FREITs Shares on February 21, 2025 of $16.76 per Share, the Board approved
an award of 1,193 Shares of FREIT to each director serving on FREITs Board. As such, 1,193 Shares were issued to each director
on February 20, 2025 and upon issuance were deemed fully paid and non-assessable.
As of October 31, 2025, 419,709 shares
are available for issuance under the Plan.
For Fiscal 2025, 2024 and 2023, compensation
expense related to stock options vested amounted to approximately $0, $1,000 and $11,000, respectively. On September 3, 2024, the 3,640
options granted on September 4, 2014 expired unexercised. In Fiscal 2024 and 2023, 4,800 and 117,700, respectively, options were exercised
for an aggregate amount of approximately $37,900 and $1.3 million, respectively. As of October 31, 2025, all options have been fully
vested and exercised with no remaining compensation cost to be recognized.
81
The following table summarizes stock
option activity for Fiscal 2024 and 2023:
|
| |
Year Ended October 31, | |
Year Ended October 31, | |
|
| |
2024 | |
2023 | |
|
| |
No. of Options | |
Weighted Average | |
No. of Options | |
Weighted Average | |
|
| |
Outstanding | |
Exercise Price | |
Outstanding | |
Exercise Price | |
|
Options outstanding at beginning of year | |
| 8,440 | | |
$ | 9.21 | | |
| 126,140 | | |
$ | 10.64 | | |
|
Options granted during year | |
| | | |
| | | |
| | | |
| | | |
|
Options forfeited/cancelled during year | |
| (3,640 | ) | |
| (10.95 | ) | |
| | | |
| | | |
|
Options exercised during year | |
| (4,800 | ) | |
| (7.90 | ) | |
| (117,700 | ) | |
| (10.74 | ) | |
|
Options outstanding at end of year | |
| | | |
$ | | | |
| 8,440 | | |
$ | 9.21 | | |
|
Options vested and expected to vest | |
| | | |
| | | |
| 8,290 | | |
| | | |
|
Options exercisable at end of year | |
| | | |
| | | |
| 7,440 | | |
| | | |
Note 11
Termination of Deferred Fee Plan:
During Fiscal 2001, the Board adopted
a deferred fee plan for its officers and directors, which was amended and restated in Fiscal 2009 to make the deferred fee plan compliant
with Section 409A of the Internal Revenue Code and the regulations promulgated thereunder (the "Deferred Fee Plan"). Pursuant
to the Deferred Fee Plan, any officer or director might elect to defer receipt of any fees that would be due to them. These fees included
annual retainer and meeting attendance fees as determined by the Board. Prior to the amendments to the Deferred Fee Plan that went into
effect November 1, 2014 (described in the following paragraph), amounts deferred under the Deferred Fee Plan accrued interest at a rate
of 9% per annum, compounded quarterly. Any such deferred fee was to be paid to the participants at the later of: (i) the retirement age
specified in the deferral election; (ii) actual retirement; or (iii) upon cessation of a participant's duties as an officer or director.
On September 4, 2014, the Board approved
amendments, effective November 1, 2014, to the FREIT Deferred Fee Plan for its executive officers and directors, one of which provided
for the issuance of share units payable in FREIT shares in respect of (i) deferred amounts of all director fees on a prospective basis;
(ii) interest on director fees deferred prior to November 1, 2014 (payable at a floating rate, adjusted quarterly, based on the average
10-year Treasury Bond interest rate plus 150 basis points); and (iii) dividends payable in respect of share units allocated to participants
in the Deferred Fee Plan as a result of deferrals described above. The number of share units credited to a participants account
was determined by the closing price of FREIT shares on the date as set forth in the Deferred Fee Plan. The Deferred Fee Plan, as amended,
provided that cumulative fees together with accrued interest deferred as of November 1, 2014 would be paid in a lump sum or in annual
installments over a period not to exceed 10 years, at the election of the participant.
On November 4, 2021 (the Adoption
Date), the Board approved the termination of the Deferred Fee Plan resulting in the termination of the deferral of fees on December
31, 2021 with any subsequent fees earned by a participant being paid in cash. Consistent with the termination of the Deferred Fee Plan,
payment related to each participants cash account (in the form of a cash lump sum payment) and share unit account (in the form
of the issuance of common stock) (collectively the Deferred Fee Plan Termination Payment), was made to each participant
no earlier than twelve (12) months and one day after, and no later than twenty-four (24) months, after the Adoption Date. Any interest
earned on the participants cash account along with dividends (if any) earned on share units, continued to accrue in share units
on each participants account until final payment was made.
On January 20, 2023, in accordance with
the Deferred Fee Plan Termination Payment, total payments related to the cash accounts of all participants of approximately $2,317,000
(consisting of approximately $1,366,000 of cumulative fees and approximately $951,000 of accrued interest) which had been deferred as
of November 1, 2014, was paid in full to each respective participant with no remaining balance due. Additionally, payment related to each
participants share unit account was made in the form of the issuance of stock to each respective participant resulting in the issuance
of 274,509 shares of common stock for each of the 274,509 vested share units. There were no remaining vested share units to be paid in
the form of the issuance of stock.
For the fiscal year ended October 31,
2023, the aggregate amounts of deferred director fees together with related interest and dividends were approximately $26,500, which have
been paid through the issuance of 1,630 vested FREIT share units based on the closing price of FREIT shares on the dates as set forth
in the Deferred Fee Plan. For the fiscal year ended October 31, 2023, FREIT has charged as expense approximately $26,500, representing
deferred director fees and interest, and the balance of approximately $0, representing dividends payable in respect of share units allocated
to Plan participants, has been charged to equity.
82
Note 12 - Dividends and earnings per share:
The Board declared dividends of approximately
$2,690,000 ($0.36 per share), $6,343,000 ($0.85 per share) and $3,520,000 ($0.45 per share), respectively, to stockholders of record during
Fiscal 2025, 2024 and 2023.
Basic earnings per share is calculated
by dividing net income attributable to common equity (numerator) by the weighted average number of shares and vested share units (See
Note 11) outstanding during each period (denominator). The calculation of diluted earnings per share is similar to that of basic earnings
per share, except that the denominator is increased to include the number of additional shares that would have been outstanding if all
potentially dilutive shares, such as those issuable upon the exercise of stock options, were issued during the period using the Treasury
Stock method. Under the Treasury Stock method, the assumption is that the proceeds received upon exercise of the options, including the
unrecognized stock option compensation expense attributable to future services, are used to repurchase FREITs stock at the average
market price during the period, thereby increasing the number of shares to be added in computing diluted earnings per share.
For Fiscal 2025, only basic earnings
per share is presented since there are no outstanding stock options or other diluted securities. For Fiscal 2024, the outstanding stock
options increased the average dilutive shares outstanding by approximately 4,000 shares with no impact on earnings per share. For Fiscal
2023, the outstanding stock options increased the average dilutive shares outstanding by approximately 6,000 shares with no impact on
earnings per share. There were no anti-dilutive shares for the fiscal years ended October 31, 2024 and 2023. Anti-dilutive shares consisted
of out-of-the money stock options under the Equity Incentive Plan (see Note 10).
Note 13 - Segment
information:
ASC 280-10, "*Disclosures about
Segments of an Enterprise and Related Information*", establishes standards for reporting financial information about operating
segments in interim and annual financial reports and provides for a "management approach" in identifying the reportable segments.
FREIT has determined that it has two reportable segments: commercial properties and residential properties. These reportable segments
offer different types of space, have different types of tenants and are managed separately because each requires different operating strategies
and management expertise.
The commercial segment is comprised
of five (5) properties and the residential segment is comprised of six (6) properties during the fiscal years ended October 31, 2025,
2024 and 2023.
The accounting policies of the segments
are the same as those described in Note 1. The chief operating and decision-making group responsible for oversight and strategic decisions
of FREIT's commercial segment, residential segment and corporate/other is comprised of FREITs Board.
FREIT, through its chief operating and
decision making group, assesses and measures segment operating results based on net operating income ("NOI"). NOI, a standard
used by real estate professionals, is based on operating revenue and expenses directly associated with the operations of the real estate
properties, but excludes: deferred rents (straight lining), depreciation, financing costs and other items. NOI is not a measure of operating
results or cash flows from operating activities as measured by U.S. GAAP, and is not necessarily indicative of cash available to fund
cash needs and should not be considered an alternative to cash flows as a measure of liquidity.
Real estate rental revenue, operating
expenses, NOI and recurring capital improvements for the reportable segments are summarized below and reconciled to consolidated net income
attributable to common equity for each of the years in the three-year period ended October 31, 2025. Asset information is not reported
since FREIT does not use this measure to assess performance.
83
|
| |
| |
| |
|
|
Years Ended October 31, | |
|
| |
2025 | |
2024 | |
2023 | |
|
| |
(In Thousands of Dollars) | |
|
Real estate rental revenue: | |
| | | |
| | | |
| | | |
|
Commercial | |
$ | 7,641 | | |
$ | 7,895 | | |
$ | 8,789 | | |
|
Residential | |
| 21,776 | | |
| 20,901 | | |
| 19,655 | | |
|
Total real estate rental revenue | |
| 29,417 | | |
| 28,796 | | |
| 28,444 | | |
|
| |
| | | |
| | | |
| | | |
|
Real estate operating expenses: | |
| | | |
| | | |
| | | |
|
Commercial | |
| 5,095 | | |
| 4,826 | | |
| 5,080 | | |
|
Residential | |
| 9,155 | | |
| 8,919 | | |
| 8,674 | | |
|
Total real estate operating expenses | |
| 14,250 | | |
| 13,745 | | |
| 13,754 | | |
|
| |
| | | |
| | | |
| | | |
|
Net operating income: | |
| | | |
| | | |
| | | |
|
Commercial | |
| 2,546 | | |
| 3,069 | | |
| 3,709 | | |
|
Residential | |
| 12,621 | | |
| 11,982 | | |
| 10,981 | | |
|
Total net operating income | |
$ | 15,167 | | |
$ | 15,051 | | |
$ | 14,690 | | |
|
| |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
Recurring capital improvements - residential | |
$ | (502 | ) | |
$ | (1,154 | ) | |
$ | (532 | ) | |
|
| |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
Reconciliation to consolidated net income attributable to common equity: | |
| | | |
| | | |
| | | |
|
Segment NOI | |
$ | 15,167 | | |
$ | 15,051 | | |
$ | 14,690 | | |
|
Deferred rents - straight lining | |
| (100 | ) | |
| (118 | ) | |
| (100 | ) | |
|
Investment income | |
| 1,351 | | |
| 1,560 | | |
| 1,013 | | |
|
Net loss on sale of Maryland properties | |
| | | |
| (356 | ) | |
| (1,003 | ) | |
|
Litigation settlement, net of fees | |
| | | |
| 15,673 | | |
| | | |
|
Loss on investment in tenancy-in-common | |
| (135 | ) | |
| (170 | ) | |
| (271 | ) | |
|
General and administrative expenses | |
| (2,892 | ) | |
| (4,419 | ) | |
| (4,243 | ) | |
|
Depreciation | |
| (2,965 | ) | |
| (2,981 | ) | |
| (2,944 | ) | |
|
Financing costs | |
| (7,280 | ) | |
| (7,307 | ) | |
| (7,717 | ) | |
|
Net income (loss) | |
| 3,146 | | |
| 16,933 | | |
| (575 | ) | |
|
Net loss (income) attributable tononcontrolling interests in subsidiaries | |
| 363 | | |
| (1,081 | ) | |
| 1,335 | | |
|
Net income attributable to common equity | |
$ | 3,509 | | |
$ | 15,852 | | |
$ | 760 | | |
Note 14 - Termination
of Purchase and Sale Agreement:
As FREIT previously reported, on June
26, 2024, a settlement was reached between FREIT and certain of its affiliates and Sinatra Properties, LLC (Sinatra) and
Kushner Companies, LLC, (collectively the Kushner Parties) regarding previously reported ongoing litigation. The litigation
involved a dispute between the parties related to a purchase and sale agreement entered into on January 14, 2020. All settlement payments
have been received by FREIT and its affiliates.
Legal costs attributed to the legal
proceeding between FREIT and certain of its affiliates and Sinatra have been incurred in the amount of approximately $1,000, $883,000
and $966,000 for the fiscal years ended October 31, 2025, 2024 and 2023, respectively. These costs are included in operating expenses
on the consolidated statements of income.
The litigation settlement, offset by
certain adjustments and additional expenses, was included as income in Litigation settlement, net of fees on the accompanying
consolidated statements of income for the fiscal year ended October 31, 2024. The settlement triggered the following items:
|
| A transaction break-up fee due to the originating third party broker of approximately $605,000 and a four-year
litigation management fee of $750,000 due to Hekemian & Co., Inc. | |
|
| Reimbursement of costs in connection with this transaction of $166,000 due to FREIT from the Pierre TIC. | |
|
| Approximately $2.6 million of the litigation settlement, net of fees, comprising $4.5 million of the gross
settlement income, less litigation and certain transaction expenses totaling approximately $1.9 million, was allocated to Westwood Hills,
LLC. This allocation was based on the pro-rata share of the contracted sales prices among the selling companies. Of the net amount, approximately
$1 million was FREITs share based on its 40% ownership of Westwood Hills, LLC. | |
84
Note 15 Stockholder Rights Plan:
On July 28, 2023, FREITs Board
adopted a stockholder rights plan, as set forth in the Stockholder Rights Agreement, dated July 31, 2023, between the Company and Computershare
Trust Company, N.A., as Rights Agent (the Rights Agreement). Pursuant to the terms of the Rights Agreement, the Board declared
a dividend distribution of one Preferred Stock Purchase Right (a Right) for each outstanding share of common stock, par
value $0.01 per share, of the Company (the Common Stock) to stockholders of record as of the close of business on August
11, 2023 (the Record Date). In addition, one Right will automatically attach to each share of Common Stock issued between
the Record Date and the Distribution Date (as hereinafter defined). Each Right entitles the registered holder thereof to purchase from
the Company a unit consisting of one ten-thousandth of a share (a Unit) of Series A Junior Participating Cumulative Preferred
Stock, par value $0.01 per share, of the Company (the Preferred Stock) at a cash exercise price of $95.00 per Unit (the
Exercise Price), subject to adjustment, under certain conditions specified in the Rights Agreement.
Initially, the Rights are not exercisable
and are attached to and trade with all shares of Common Stock outstanding as of, and issued subsequent to, the Record Date. The Rights
will separate from the Common Stock and will become exercisable upon the earlier of (i) the close of business on the tenth calendar day
following the first public announcement that a person or group of affiliated or associated persons (an Acquiring Person)
has acquired beneficial ownership of 10% or more of the outstanding shares of Common Stock, other than as a result of repurchases of stock
by the Company or certain inadvertent actions by a stockholder (the date of said announcement being referred to as the Stock Acquisition
Date), or (ii) the close of business on the tenth business day (or such later day as the Board of Directors may determine) following
the commencement of a tender offer or exchange offer that could result upon its consummation in a person or group becoming an Acquiring
Person (the earlier of such dates being herein referred to as the Distribution Date). The Rights are not exercisable until
the Distribution Date and will expire at the close of business on July 31, 2026, unless previously redeemed or exchanged by the Company.
Note 16 Kmart lease termination:
On June 24, 2023, the owner/operator
of the 84,254 square foot Kmart store at our Westwood Plaza shopping center located in Westwood, New Jersey informed FREIT of
its intent to sublet its space to three unidentified retail tenants. The term of the lease for Kmart was due to expire on October 31,
2027 with two 5-year renewal options remaining. The lease agreement provided that base rent payments were fixed at $4.00 per square foot
($336,720 annually) and additional rent for common area maintenance and insurance costs were based on an amount less than Kmarts
pro rata share of the shopping center. While significant tenant and/or capital improvements will be necessary to fit-up this space for
a new tenant or tenants, FREIT believes potentially higher rent amounts, if achieved, will more than offset lost rent from Kmart and other
tenants with co-tenancy clauses and will only increase the overall value of the shopping center. Accordingly, on July 24, 2023, FREIT
denied Kmarts request and elected pursuant to the lease to terminate the Kmart lease effective October 19, 2023. Thus, FREIT now
has full control of this space instead of waiting another 14 years to renegotiate or re-lease this space at a higher market rent. In Fiscal
2025 and 2024, Westwood Plazas losses of base rent from Kmarts lease (including rents paid per co-tenancy clause) were approximately
$474,000 and 570,000, respectively.
85
Note 17- Selected quarterly financial data (unaudited):
The following summary represents the
results of operations for each quarter for the fiscal years ended October 31, 2025 and 2024 (in thousands, except per share amounts):
|
2025: | |
Quarter Ended | | |
Year Ended | | |
|
| |
January 31, | | |
April 30, | | |
July 31, | | |
October 31, | | |
October 31, | | |
|
| |
| | |
| | |
| | |
| | |
| | |
|
Revenue | |
$ | 7,269 | | |
$ | 7,258 | | |
$ | 7,244 | | |
$ | 7,546 | | |
$ | 29,317 | | |
|
Expenses, net | |
| 6,768 | | |
| 6,477 | | |
| 6,505 | | |
| 6,421 | | |
| 26,171 | | |
|
Net income | |
| 501 | | |
| 781 | | |
| 739 | | |
| 1,125 | | |
| 3,146 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net loss (income) attributable to noncontrolling interests in subsidiaries | |
| 113 | | |
| 113 | | |
| 140 | | |
| (3 | ) | |
| 363 | | |
|
Net income attributable to common equity | |
$ | 614 | | |
$ | 894 | | |
$ | 879 | | |
$ | 1,122 | | |
$ | 3,509 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Earnings per share - basic and diluted | |
$ | 0.08 | | |
$ | 0.12 | | |
$ | 0.12 | | |
$ | 0.15 | | |
$ | 0.47 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Dividends declared per share | |
$ | 0.08 | | |
$ | 0.08 | | |
$ | 0.10 | | |
$ | 0.10 | | |
$ | 0.36 | | |
|
2024: | |
Quarter Ended | | |
Year Ended | | |
|
| |
January 31, | | |
April 30, | | |
July 31, | | |
October 31, | | |
October 31, | | |
|
| |
| | |
| | |
| | |
| | |
| | |
|
Revenue | |
$ | 6,999 | | |
$ | 7,275 | | |
$ | 7,147 | | |
$ | 7,257 | | |
$ | 28,678 | | |
|
Expenses, net | |
| 7,665 | | |
| 6,876 | | |
| (9,188 | )(a) | |
| 6,392 | | |
| 11,745 | | |
|
Net (loss) income | |
| (666 | ) | |
| 399 | | |
| 16,335 | | |
| 865 | | |
| 16,933 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net loss (income) attributable to noncontrolling interests in subsidiaries | |
| 154 | | |
| 134 | | |
| (1,544 | ) | |
| 175 | | |
| (1,081 | ) | |
|
Net (loss) income attributable to common equity | |
$ | (512 | ) | |
$ | 533 | | |
$ | 14,791 | | |
$ | 1,040 | | |
$ | 15,852 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
(Loss) earnings per share - basic and diluted | |
$ | (0.07 | ) | |
$ | 0.07 | | |
$ | 1.98 | (a) | |
$ | 0.15 | | |
$ | 2.13 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Dividends declared per share | |
$ | 0.05 | | |
$ | 0.05 | | |
$ | 0.05 | | |
$ | 0.70 | | |
$ | 0.85 | | |
(a) Includes $15.7
million in litigation settlement, net of fees (FREIT's share is approximately $14.1 million - $1.89 per share basic and diluted).
86
**FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY,
INC. AND SUBSIDIARIES**
**SCHEDULE III REAL ESTATE AND ACCUMULATED
DEPRECIATION**
**OCTOBER 31, 2025**
**(In Thousands of Dollars)**
|
Column A | |
Column B | | |
Column C | | |
Column D | | |
Column E | | |
Column F | | |
Column G | |
Column H | |
Column I | |
|
| |
| | |
Initial Cost | | |
Costs Capitalized | | |
Gross Amount at Which | | |
| | |
| |
| |
| |
|
| |
| | |
to Company | | |
Subsequent to Acquisition | | |
Carried at Close of Period | | |
| | |
| |
| |
| |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
Life on | |
|
| |
| | |
| | |
Buildings | | |
| | |
| | |
| | |
| | |
Buildings | | |
| | |
| | |
| |
| |
Which | |
|
| |
Encum- | | |
| | |
and | | |
| | |
Improve- | | |
Carrying | | |
| | |
and | | |
| | |
Accumulated | | |
Date of | |
Date | |
Depreciation | |
|
Description | |
brances | | |
Land | | |
Improvements | | |
Land | | |
ments | | |
Costs | | |
Land | | |
Improvements | | |
Total (1) | | |
Depreciation | | |
Construction | |
Acquired | |
is Computed | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
| |
|
Residential Properties: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| |
| |
|
Steuben Arms - River Edge, NJ | |
$ | 8,715 | | |
$ | 364 | | |
$ | 1,773 | | |
$ | | | |
$ | 1,867 | | |
| | | |
$ | 364 | | |
$ | 3,640 | | |
$ | 4,004 | | |
$ | 3,183 | | |
1966 | |
1975 | |
7-40 years | |
|
Berdan Court - Wayne, NJ | |
| 28,190 | | |
| 250 | | |
| 2,206 | | |
| | | |
| 5,356 | | |
| | | |
| 250 | | |
| 7,562 | | |
| 7,812 | | |
| 6,502 | | |
1964 | |
1965 | |
7-40 years | |
|
Westwood Hills - Westwood, NJ | |
| 24,803 | | |
| 3,849 | | |
| 11,546 | | |
| | | |
| 3,999 | | |
| | | |
| 3,849 | | |
| 15,545 | | |
| 19,394 | | |
| 11,827 | | |
1965-70 | |
1994 | |
7-39 years | |
|
Boulders - Rockaway, NJ | |
| | | |
| 1,632 | | |
| | | |
| 3,386 | | |
| 16,543 | | |
| | | |
| 5,018 | | |
| 16,543 | | |
| 21,561 | | |
| 8,418 | | |
2005-2006 | |
1963/1964 | |
7-40 years | |
|
Regency Club - Middletown, NY | |
| 13,754 | | |
| 2,833 | | |
| 17,792 | | |
| | | |
| 1,369 | | |
| | | |
| 2,833 | | |
| 19,161 | | |
| 21,994 | | |
| 5,679 | | |
2003 | |
2014 | |
7-40 years | |
|
Station Place - Red Bank, NJ | |
| 11,030 | | |
| 8,793 | | |
| 10,757 | | |
| | | |
| 83 | | |
| | | |
| 8,793 | | |
| 10,840 | | |
| 19,633 | | |
| 2,145 | | |
2015 | |
2017 | |
7-40 years | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| |
| |
|
Commercial Properties: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| |
| |
|
Franklin Crossing - Franklin Lakes, NJ | |
| | | |
| 29 | | |
| | | |
| 3,382 | | |
| 7,647 | | |
| | | |
| 3,411 | | |
| 7,647 | | |
| 11,058 | | |
| 5,395 | | |
1963/75/97 | |
1966 | |
5-39.5 years | |
|
Glen Rock, NJ | |
| | | |
| 12 | | |
| 36 | | |
| | | |
| 164 | | |
| | | |
| 12 | | |
| 200 | | |
| 212 | | |
| 173 | | |
1940 | |
1962 | |
5-25 years | |
|
Westwood Plaza - Westwood, NJ | |
| 9,808 | | |
| 6,889 | | |
| 6,416 | | |
| | | |
| 2,543 | | |
| | | |
| 6,889 | | |
| 8,959 | | |
| 15,848 | | |
| 8,631 | | |
1981 | |
1988 | |
5-31.5 years | |
|
Preakness S/C - Wayne, NJ | |
| 25,000 | | |
| 9,280 | | |
| 24,217 | | |
| | | |
| 2,603 | | |
| | | |
| 9,280 | | |
| 26,820 | | |
| 36,100 | | |
| 15,795 | | |
1955/89/00 | |
2002 | |
5-39.5 years | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| |
| |
|
Land Leased: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| |
| |
|
Rockaway, NJ | |
| | | |
| 114 | | |
| | | |
| | | |
| | | |
| | | |
| 114 | | |
| | | |
| 114 | | |
| | | |
| |
1963/1964 | |
| |
|
Vacant Land: | |
| | | |
| | | |
| | | |
| ` | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| |
| |
|
Franklin Lakes, NJ | |
| | | |
| 224 | | |
| | | |
| (156 | ) | |
| | | |
| | | |
| 68 | | |
| | | |
| 68 | | |
| | | |
| |
1966/93 | |
| |
|
Wayne, NJ | |
| | | |
| 286 | | |
| | | |
| | | |
| | | |
| | | |
| 286 | | |
| | | |
| 286 | | |
| | | |
| |
2002 | |
| |
|
Rockaway, NJ | |
| | | |
| 51 | | |
| | | |
| | | |
| | | |
| | | |
| 51 | | |
| | | |
| 51 | | |
| | | |
| |
1963/1964 | |
| |
|
| |
$ | 121,300 | | |
$ | 34,606 | | |
$ | 74,743 | | |
$ | 6,612 | | |
$ | 42,174 | | |
$ | | | |
$ | 41,218 | | |
$ | 116,917 | | |
$ | 158,135 | | |
$ | 67,748 | | |
| |
| |
| |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
| |
| |
(1) Total cost for each property is the same for federal income tax purposes, with the exception of the Regency Club and Station Place whose cost for federal income tax purposes is approximately $13.9 million and $4.2 million, respectively.
87
**FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY,
INC. AND SUBSIDIARIES**
**SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION**
**(In Thousands of Dollars)**
Reconciliation of Real Estate and Accumulated
Depreciation:
|
| |
2025 | | |
2024 | | |
2023 | | |
|
| |
| | |
| | |
| | |
|
Real estate: | |
| | | |
| | | |
| | | |
|
Balance, Beginning of year | |
$ | 157,854 | | |
$ | 156,859 | | |
$ | 156,223 | | |
|
| |
| | | |
| | | |
| | | |
|
Additions - Buildings and improvements | |
| 546 | | |
| 1,272 | | |
| 896 | | |
|
| |
| | | |
| | | |
| | | |
|
Disposals - Buildings and improvements | |
| (265 | ) | |
| (277 | ) | |
| (260 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Balance, end of year | |
$ | 158,135 | | |
$ | 157,854 | | |
$ | 156,859 | | |
|
| |
| | | |
| | | |
| | | |
|
Accumulated depreciation: | |
| | | |
| | | |
| | | |
|
Balance, Beginning of year | |
$ | 65,048 | | |
$ | 62,344 | | |
$ | 59,660 | | |
|
| |
| | | |
| | | |
| | | |
|
Additions - Charged to operating expenses | |
| 2,965 | | |
| 2,981 | | |
| 2,944 | | |
|
| |
| | | |
| | | |
| | | |
|
Disposals - Buildings and improvements | |
| (265 | ) | |
| (277 | ) | |
| (260 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Balance, end of year | |
$ | 67,748 | | |
$ | 65,048 | | |
$ | 62,344 | | |
88
****
**FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY,
INC. (FREIT)**
**EXHIBIT INDEX**
|
Exhibit
No. |
|
| |
|
3.1 |
|
Articles of Amendment and Restatement of First Real Estate Investment Trust of New Jersey, Inc. (Incorporated by reference to Appendix A to FREITs Registration Statement on Form S-4/A filed on March 26, 2021.) | |
|
3.2 |
|
Bylaws of First Real Estate Investment Trust of New Jersey, Inc. (Incorporated by reference to Appendix B to FREITs Registration Statement on Form S-4A filed on March 26, 2021.) | |
|
4 |
|
Form of Specimen Share Certificate, Beneficial Interest in FREIT. | |
|
4.1 |
|
Stockholder Rights Plan dated July 31, 2023, by and between FREIT and Computershare Trust Company, N.A., as Rights Agent (Incorporated by reference to Exhibit 4.1 to FREITs Form 8-K filed on August 3, 2023). | |
|
10.1 |
|
Management Agreement dated April 10, 2002, by and between FREIT and Hekemian & Co., Inc. (Incorporated by reference to Exhibit 10.1 to FREITs Form 10-K for the fiscal year ended October 31, 2009 and filed with the SEC on January 14, 2010) | |
|
10.2 |
|
Indemnification Agreements by Damascus 100, LLC and Rotunda 100, LLC to FREIT. (Incorporated by reference to Exhibits 10.1 and 10.2, respectively, to FREITs 10-Q for the quarter ended April 30, 2008 and filed with the SEC on June 9, 2008) | |
|
10.3 |
|
Notes from Hekemian & Co., Inc. employees relative to their investments in
each of Grande Rotunda, LLC and Damascus Centre, LLC and the related documents (pledge and security agreements and
amendments).(Incorporated by reference to Exhibits
10.3.1, 10.3.2, 10.3.3, 10.3.4, 10.3.5, 10.3.6, 10.3.7, 10.3.8, 10.3.9, 10.3.10, 10.3.11, 10.3.12, 10.3.13, 10.3.14, 10.3.15, 10.4.1, 10.4.2, 10.4.3, 10.4.4, 10.4.5, 10.4.6, 10.4.7, 10.4.8, 10.4.9
and 10.4.10,
respectively, to FREITs 10-Q for the quarter ended April 30, 2008 and filed with the SEC on June 9, 2008) | |
|
10.4 |
|
Agency Agreement dated August 13, 2008 between Damascus Centre, LLC and Hekemian Development Resources, LLC. (Incorporated by reference to Exhibit 10.1 to FREITs 10-Q for the quarter ended July 31, 2008 and filed with the SEC on September 9, 2008) | |
|
10.5 |
|
Agency Agreement dated November 10, 2009 between Grande Rotunda, LLC and Hekemian Development Resources, LLC. (Incorporated by reference to Exhibit 10.1 to FREITs Form 10-Q for the quarter ended April 30, 2010 and filed with the SEC on June 9, 2010) | |
|
10.6 |
|
Amendment
No. 1 to Agency Agreement dated as of July 24, 2012 between Grande Rotunda, LLC and Hekemian Resources Development, LLC.
(Incorporated by reference to Exhibit 10.6 to FREITs Form 10-K for the fiscal year ended October 31, 2013 and filed with the
SEC on January 14, 2014) | |
|
10.7 |
|
Line of Credit Note in the principal amount of $18 million executed by FREIT as Borrower, and delivered to Provident Bank, as Lender, in connection with the Credit Facility provided by Provident Bank to FREIT. (Incorporated by reference to Exhibit 10.6 to FREITs Form 10-K for the fiscal year ended October 31, 2009 and filed with the SEC on January 14, 2010) | |
|
10.8 |
|
Amended and Restated Deferred Fee Plan, adopted as of October 31, 2014. (Incorporated by reference to Exhibit 10.8 to FREITs Form 10-K for the year ended October 31, 2014 and filed with the SEC on January 14, 2015) | |
|
10.9 |
|
Amendment No.2 to Amended and Restated Deferred Fee Plan, adopted May 7, 2015. (Incorporated by reference to Exhibit 10.1 to FREITs Form 10-Q for the quarter ended July 31, 2015 and filed with the SEC on September 9, 2015) | |
|
10.10 |
|
Property Management Agreement dated February 28, 2020 between Pierre Towers LLC and Hekemian & Co. Inc. (Incorporated by reference to Exhibit 10.10 to FREITs Form 10-K for the fiscal year ended October 31, 2020 and filed with the SEC on January 29, 2021) | |
|
10.11 |
|
Line of Credit Note in the principal amount of $13 million executed by FREIT as Borrower, and delivered to Provident Bank, as Lender, in connection with the Credit Facility provided by Provident Bank to FREIT. (Incorporated by reference to Exhibit 10.11 to FREITs Form 10-K for the fiscal year ended October 31, 2021 and filed with the SEC on January 28, 2022) | |
|
10.12 |
|
Purchase and Sale Agreement dated November 22, 2021 by and among WestFREIT Corp., Damascus Centre, LLC and Grande Rotunda, LLC as Sellers and MCB Acquisition Company LLC as Purchaser. (Incorporated by | |
89
|
|
|
reference to Exhibit 10.12 to FREITs Form 10-K for the fiscal year ended October 31, 2021 and filed with the SEC on January 28, 2022) | |
|
10.13 |
|
First Amendment to Purchase and Sale Agreement dated December 22, 2021 by and among WestFREIT Corp., Damascus Centre, LLC and Grande Rotunda, LLC as Sellers and MCB Acquisition Company LLC as Purchaser. (Incorporated by reference to Exhibit 10.13 to FREITs Form 10-K for the fiscal year ended October 31, 2021 and filed with the SEC on January 28, 2022) | |
|
10.14 |
|
Second Amendment to Purchase and Sale Agreement dated December 23, 2021 by and among WestFREIT Corp., Damascus Centre, LLC and Grande Rotunda, LLC as Sellers and MCB Acquisition Company LLC as Purchaser. (Incorporated by reference to Exhibit 10.14 to FREITs Form 10-K for the fiscal year ended October 31, 2021 and filed with the SEC on January 28, 2022) | |
|
10.15 |
|
Third Amendment to Purchase and Sale Agreement dated December 28, 2021 by and among WestFREIT Corp., Damascus Centre, LLC and Grande Rotunda, LLC as Sellers and MCB Acquisition Company LLC as Purchaser. (Incorporated by reference to Exhibit 10.15 to FREITs Form 10-K for the fiscal year ended October 31, 2021 and filed with the SEC on January 28, 2022) | |
|
10.16 |
|
Fourth Amendment to Purchase and Sale Agreement dated December 30, 2021 by and among WestFREIT Corp., Damascus Centre, LLC and Grande Rotunda, LLC as Sellers and MCB Acquisition Company LLC as Purchaser. (Incorporated by reference to Exhibit 10.16 to FREITs Form 10-K for the fiscal year ended October 31, 2021 and filed with the SEC on January 28, 2022) | |
|
10.17 |
|
Fifth Amendment to Purchase and Sale Agreement dated January 7, 2022 by and among WestFREIT Corp., Damascus Centre, LLC and Grande Rotunda, LLC as Sellers and MCB Acquisition Company LLC as Purchaser. (Incorporated by reference to Exhibit 10.17 to FREITs Form 10-K for the fiscal year ended October 31, 2021 and filed with the SEC on January 28, 2022) | |
|
10.18 |
|
First Amendment to Management Agreement dated January 14, 2020, by and between FREIT and Hekemian & Company, Inc. (Incorporated by reference to Exhibit 10.2 to FREITs Form 8-K filed on January 15, 2020). | |
|
10.19 |
|
Second Amendment to Management Agreement dated March 9, 2023, by and between FREIT and Hekemian & Company, Inc. (Incorporated by reference to Exhibit 10.1 to FREITs Form 10-Q for the quarter ended January 31, 2023). | |
|
10.20 |
|
FREIT Compensation Recoupment Policy (Incorporated by reference to Exhibit 10.20 to FREITs Form 10-K for the fiscal year ended October 31, 2024 and filed with the SEC on January 29, 2025) | |
|
10.21 |
|
FREIT Insider Trading Policy (Incorporated by reference to Exhibit 10.21 to FREITs Form 10-K for the fiscal year ended October 31, 2024 and filed with the SEC on January 29, 2025) | |
|
21 |
|
Subsidiaries of FREIT | |
|
23.1 |
|
Consent of EisnerAmper LLP | |
|
31.1 |
|
Rule 13a-14(a) - Certification of Chief Executive Officer | |
|
31.2 |
|
Rule 13a-14(a) - Certification of Chief Financial Officer | |
|
32.1 |
|
Section 1350 Certification of Chief Executive Officer | |
|
32.2 |
|
Section 1350 Certification of Chief Financial Officer | |
|
101 |
|
The following materials from FREITs annual report on Form 10-K for the fiscal year ended October 31, 2025, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) consolidated balance sheets; (ii) consolidated statements of income; (iii) consolidated statements of comprehensive income; (iv) consolidated statements of equity; (v) consolidated statements of cash flows; and (vi) notes to consolidated financial statements. | |
* FREIT will furnish a copy of any exhibit not included herewith upon
request and upon payment of FREITs reasonable expenses in furnishing such exhibit.
90