On February 28, 2020, FREIT Maryland 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 Maryland 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. Accordingly, FREIT Maryland consolidated the financial statements of S&A and its subsidiary to include 100% of the subsidiary’s assets, liabilities, operations and cash flows with the interest not owned by FREIT Maryland reflected as “noncontrolling interests in subsidiary” and all significant intercompany accounts and transactions were eliminated in consolidation.

Pursuant to the TIC agreement, FREIT Maryland 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”, FREIT Maryland’s investment in the TIC is accounted for under the equity method of accounting. While FREIT Maryland’s effective ownership percentage interest in the Pierre Towers property remained unchanged after the reorganization to a TIC, FREIT Maryland no longer had a controlling interest as the TIC was now under joint control. Since FREIT Maryland retained a noncontrolling financial interest in the TIC, and the deconsolidation of the subsidiary (as of February 28, 2020) was not the result of a nonreciprocal transfer to owners, FREIT Maryland recognized a gain in the amount of approximately $27.7 million in the accompanying condensed consolidated statements of operations for the nine months ended July 31, 2020. This gain was measured at the date of deconsolidation as the difference between the fair value of the investment in the TIC at the date the entity was deconsolidated and the carrying amount of the former subsidiary’s assets and liabilities.

FREIT Maryland’s investment in the TIC was approximately $19.4 million and $20.1 million at July 31, 2021 and October 31, 2020, respectively. For the nine and three months ended July 31, 2021, FREIT Maryland recognized a loss on investment in TIC of approximately $245,000 and $100,000, respectively, in the accompanying condensed consolidated statements of operations. For the nine and three months ended July 31, 2020, FREIT Maryland recognized a loss on investment in TIC of approximately $96,000 and $78,000, respectively, in the accompanying condensed consolidated statements of operations.

Hekemian & Co., Inc. (“Hekemian”) currently manages the Pierre Towers property based on a management agreement between the owners of the TIC and Hekemian dated as of February 28, 2020, which expires on February 28, 2022, and is automatically renewed for successive periods of one year unless either party gives not less than sixty (60) days prior notice of non-renewal. The management agreement requires the payment of management fees equal to 5% of rents collected. Management fees, charged to operations, were approximately $280,000 and $93,000 for the nine and three months ended July 31, 2021, respectively, and $150,000 for the period from February 28, 2020 through July 31, 2020 and $88,000 for the three months ended July 31, 2020. The Pierre Towers property also uses the resources of the Hekemian insurance department to secure various insurance coverages for its property. Hekemian is paid a commission for these services. Such commissions were charged to operations and amounted to approximately $47,000 and $37,000 for the nine and three months ended July 31, 2021, respectively, and $22,000 for both the period from February 28, 2020 through July 31, 2020 and for the three months ended July 31, 2020.

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The following table summarizes the balance sheets of the Pierre Towers property as of July 31, 2021 and October 31, 2020, accounted for by the equity method:

		July 31,		October 31,
		2021		2020
		(In Thousands of Dollars)

Real estate, net	$	78,533	$	80,041
Cash and cash equivalents		911		754
Tenants' security accounts		494		523
Receivables and other assets		545		468
Total assets	$	80,483	$	81,786

Mortgages payable, net of unamortized debt issuance costs	$	49,757	$	49,956
Accounts payable and accrued expenses		241		314
Tenants' security deposits		495		535
Deferred revenue		93		56
Equity		29,897		30,925
Total liabilities & equity	$	80,483	$	81,786

FREIT's investment in TIC (65% interest)	$	19,433	$	20,101

The following table summarizes the statements of operations of the Pierre Towers property for the nine and three months ended July 31, 2021, for the period from February 28, 2020 through July 31, 2020 and for the three months ended July 31, 2020, accounted for by the equity method:

			For the period from
	Nine Months Ended		February 28, 2020		Three Months Ended		Three Months Ended
	July 31, 2021		through July 31, 2020		July 31, 2021		July 31, 2020
		(In Thousands of Dollars)				(In Thousands of Dollars)

Revenue	$	5,674	$	3,106	$	1,900	$	1,864
Operating expenses		3,225		1,689		1,111		1,046
Depreciation		1,623		895		542		537
Operating income		826		522		247		281

Interest expense including amortization of deferred financing costs		1,203		669		401		401

Net loss	$	(377)	$	(147)	$	(154)	$	(120)

FREIT's loss on investment in TIC (65% interest)	$	(245)	$	(96)	$	(100)	$	(78)