-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hg4NLSoDnyj6GO4pDBxRTHAzktQZ+QrxKCD04WLHGnYQNwM6eHRejmYJcLjv+tqy pvQyZ1saqI6aeJTF1Sakrg== 0000914317-03-002755.txt : 20030915 0000914317-03-002755.hdr.sgml : 20030915 20030915161203 ACCESSION NUMBER: 0000914317-03-002755 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030731 FILED AS OF DATE: 20030915 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY CENTRAL INDEX KEY: 0000036840 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 221697095 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25043 FILM NUMBER: 03895887 BUSINESS ADDRESS: STREET 1: 505 MAIN ST STREET 2: P O BOX 667 CITY: HACKENSACK STATE: NJ ZIP: 07602 BUSINESS PHONE: 2014886400 MAIL ADDRESS: STREET 1: P O BOX 667 STREET 2: 505 MAIN STREET CITY: HACKENSACK STATE: NJ ZIP: 07602 10-Q 1 form10q-54090_freit.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly period ended July 31, 2003 ------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________________ to __________________ Commission File No.: 2-27018 FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY ------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 22-1697095 ---------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 505 Main Street, P.O. Box 667, Hackensack, New Jersey 07602 --------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 201-488-6400 ------------ - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last 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. [XX] Yes [ ] No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [XX] No As of September 13, 2003 there were 3,155,576 shares of beneficial interest issued and outstanding. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY ------------------------------------------------ INDEX ----- Part I: Financial Information Item 1: Unaudited Condensed Consolidated Financial Statements. a.) Condensed Consolidated Balance Sheets as at July 31, 2003 and October 31, 2002; b.) Condensed Consolidated Statements of Income, Comprehensive Income and Undistributed Earnings for the Nine and Three Months Ended July 31, 2003 and 2002; c.) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended July 31, 2003 and 2002; d.) Notes to Condensed Consolidated Financial Statements. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 3: Quantitative and Qualitative Disclosures About Market Risk. Item 4: Controls and Procedures. Part II: Other Information Item 6: Exhibits and Reports on Form 8-K. Item 1: Financial Statements
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS July 31, October 31, 2003 2002 ---- ---- (Unaudited) (See Note 1) ----------- ------------ (In Thousands of Dollars) ------------------------- ASSETS ------ Real estate, at cost, net of accumulated depreciation $ 83,677 $ 74,687 Investment in affiliates -- 3,283 Cash & cash equivalents 7,234 11,930 Tenants' security accounts 823 788 Sundry receivables 3,293 2,555 Prepaid expenses and other assets 2,620 1,306 Deferred charges, net 1,884 1,166 -------- -------- Totals $ 99,531 $ 95,715 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Liabilities: Mortgages payable $ 70,238 $ 68,393 Accounts payable and accrued expenses 1,341 550 Dividends payable 1,104 2,090 Tenants' security deposits 1,204 1,122 Cash distributions in excess of investment in affiliates 452 -- Deferred Trustee's fees 438 228 Deferred revenue 406 332 Interest rate swap contract 152 -- -------- -------- Total liabilities 75,335 72,715 -------- -------- Minority interest 1,166 1,097 -------- -------- Commitments and contingencies Shareholders' equity: Shares of beneficial interest without par value: 4,000,000 shares authorized; 3,155,576 and 3,119,576 shares issued and outstanding respectively 19,854 19,314 Undistributed earnings 3,328 2,589 Accumulated other comprehensive loss (152) -- -------- -------- Total shareholders' equity 23,030 21,903 -------- -------- Totals $ 99,531 $ 95,715 ======== ========
See Notes to Consolidated Financial Statements
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME NINE AND THREE MONTHS ENDED JULY 31, 2003 AND 2002 Nine Months Three Months Ended July 31, Ended July 31, 2003 2002 2003 2002 ---- ---- ---- ---- (In Thousands of Dollars, Except Per Share Amounts) Revenue: Rental income $ 12,096 $ 11,801 $ 4,086 $ 3,995 Reimbursements 2,256 2,060 787 665 Equity in income (loss) of affiliates 113 197 (108) 88 Net investment Income 139 183 45 60 Sundry income 229 149 130 23 -------- -------- -------- -------- Totals 14,833 14,390 4,940 4,831 -------- -------- -------- -------- Expenses: Operating expenses 3,000 2,630 814 960 Management fees 616 594 295 199 Real estate taxes 1,872 1,781 697 598 Financing costs 3,505 3,661 1,167 1,220 Depreciation 1,601 1,609 534 538 Minority interest 184 89 52 (3) -------- -------- -------- -------- Totals 10,778 10,364 3,559 3,512 -------- -------- -------- -------- Income from continuing operations before state income taxes 4,055 4,026 1,381 1,319 Provision for state income taxes 15 15 7 5 -------- -------- -------- -------- Income from continuing operations 4,040 4,011 1,374 1,314 Discontinued operations -- (33) -- (10) -------- -------- -------- -------- Net Income $ 4,040 $ 3,978 $ 1,374 $ 1,304 ======== ======== ======== ======== - --------------------------------------------------------------------------------------------------------- Basic earnings (loss) per share: Earnings before discontinued operations $ 1.29 $ 1.29 $ 0.44 $ 0.42 Discontinued operations -- (0.01) -- (0.00) -------- -------- -------- ======== $ 1.29 $ 1.28 $ 0.44 $ 0.42 -------- -------- -------- -------- Diluted earnings (loss) per share: Earnings before discontinued operations $ 1.23 $ 1.26 $ 0.42 $ 0.41 Discontinued operations -- (0.01) -- (0.00) -------- -------- -------- ======== $ 1.23 $ 1.25 $ 0.42 $ 0.41 - --------------------------------------------------------------------------------------------------------- Basic weighted average shares outstanding 3,129 3,120 3,138 3,120 Diluted weighted average shares outstanding 3,283 3,181 3,290 3,215 - ---------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND UNDISTRIBUTED EARNINGS NINE AND THREE MONTHS ENDED JULY 31, 2003 AND 2002 Nine Months Three Months Ended July 31, Ended July 31, 2003 2002 2003 2002 ---- ---- ---- ---- (In Thousands of Dollars) COMPREHENSIVE INCOME -------------------- Net income $ 4,040 $ 3,978 $ 1,374 $ 1,304 Other comprehensive income (loss): Unrealized income(loss)on interest rate swap contract (152) 156 ------- ------- ------- ------- Comprehensive income $ 3,888 $ 3,978 $ 1,530 $ 1,304 ======= ======= ======= ======= UNDISTRIBUTED EARNINGS ---------------------- Balance, beginning of period $ 2,589 $ 2,274 $ 3,072 $ 3,076 Net income 4,040 3,978 1,374 1,304 Less dividends (3,301) (2,808) (1,118) (936) ------- ------- ------- ------- Balance, end of period $ 3,328 $ 3,444 $ 3,328 $ 3,444 ======= ======= ======= ======= Dividends per share $ 1.05 $ 0.90 $ 0.35 $ 0.30 ======= ======= ======= =======
See Notes to Consolidated Financial Statements
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED JULY 31, 2003 AND 2002 2003 2002 ---- ---- (In thousands of Dollars) ------------------------- Operating activities: Net Income $ 4,040 $ 3,978 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,783 1,838 Equity in income of affiliates (113) (197) Deferred revenue 74 195 Minority interest 184 89 Development costs written-off 190 Changes in operating assets and liabilities: Tenants' security accounts (35) (32) Sundry receivables, prepaid expenses and other assets (1,302) (873) Accounts payable and accrued expenses 1,001 (113) Deferred charges (900) (289) Tenants' security deposits 82 29 -------- -------- Net cash provided by operating activities 4,814 4,815 -------- -------- Investing activities: Capital expenditures (758) (415) Distributions from affiliate 3,848 80 Investment in mortgage loan (750) Marketable securities redeemed 500 Acquisition of Damascus Center (7,242) -------- -------- Net cash provided by(used in) investing activities (4,902) 165 -------- -------- Financing activities: Repayment of mortgages (746) (722) Proceeds from shares of beneficial interest issued 540 Dividends paid (4,287) (3,370) Distribution to minority interest (115) (237) -------- -------- Net cash used in financing activities (4,608) (4,329) -------- -------- Net increase (decrease) in cash and cash equivalents (4,696) 651 Cash and cash equivalents, beginning of period 11,930 13,187 -------- -------- Cash and cash equivalents, end of period $ 7,234 $ 13,838 ======== ======== Supplemental disclosure of cash flow data: Interest paid $ 3,412 $ 3,572 ======== ======== Income taxes paid $ 15 $ 15 ======== ======== Supplemental schedule of non-cash investing and financing activities: Dividends declared but not paid $ 1,104 $ 936 ======== ========
On July 31, 2003, Damascus Centre, LLC, an entity wholly owned by FREIT, acquired the 139,000 Sq. Ft. Damascus Shopping Center in Damascus, MD. The total acquisition cost of $9,833,000 was financed in part by the assumption of a $2,591,000 first mortgage. See Notes to Consolidated Financial Statements. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of presentation: The accompanying condensed consolidated financial statements have been prepared without audit, in accordance with accounting principles generally accepted in the United States of America for interim financial statements and pursuant to the rules of the Securities and Exchange Commission. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements have been omitted. It is the opinion of management that all adjustments considered necessary for a fair presentation have been included, and that all such adjustments are of a normal recurring nature. The consolidated results of operations for the nine and three months ended July 31, 2003 are not necessarily indicative of the results to be expected for the full year. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in FREIT's Annual Report on Form 10-K for the year ended October 31, 2002. Certain accounts in the 2002 financial statements have been reclassified to conform to the current presentation. Note 2 - Investment in Affiliates: Certain investments, where FREIT's ownership interest is 50% or less, but can exercise significant influence, are accounted for by the equity method. Under the equity method, the investment, originally recorded at cost, is adjusted to recognize FREIT's share of the net earnings or losses of the affiliates as they occur. These investments include: Ownership Interest -------- Westwood Hills, LLC 40% (owns a 210 unit apartment community in Westwood, NJ) Wayne PSC, LLC 40% (effective November 1, 2002 acquired the 323,000 +/- sq. ft. Preakness Shopping Center in Wayne, NJ) Summarized combined balance sheets as at July 31, 2003 and October 31, 2002, and income statement information for the nine and three months ended July 31, 2003 and 2002 of the above affiliates that are accounted for using the equity method are as follows: July 31, October 31, 2003 2002 ---- ---- (In thousands of dollars) Balance sheet data: Assets: Real estate and equipment, net $ 46,426 $ 13,673 Other 3,038 9,779 -------- -------- Total assets $ 49,464 $ 23,452 ======== ======== Liabilities and members' equity: Liabilities: Mortgage payable $ 49,946 $ 14,794 Other 651 455 -------- -------- Total liabilities 50,597 15,249 -------- -------- Members' equity (deficiency): Westwood Hills - deficiency (4,096) (797) Wayne PSC-equity 2,963 9,000 -------- -------- Total members' equity (deficiency) (1,133) 8,203 -------- -------- Total liabilities and members' equity $ 49,464 $ 23,452 ======== ======== FREIT - Investment in affiliates equity $ (452) $ 3,283 ======== ========
Nine Months Ended Three Months Ended July 31, July 31, --------------------- --------------------- 2003 2002 2003 2002 ---- ---- ---- ---- (In thousands of dollars) Income Statement Data: Rental revenue $ 5,912 $ 2,377 $ 1,931 $ 807 Real estate operating expenses (2,495) (845) (827) (240) ------- ------- ------- ------- Net operating Income 3,417 1,532 1,104 567 Financing costs, net (2,589)a (760) (1,193)a (253) Depreciation (546) (280) (182) (95) ------- ------- ------- ------- Net income(loss) $ 282 $ 492 $ (271) $ 219 ======= ======= ======= ======= FREIT-Equity in income(loss) $ 113 $ 197 $ (108) $ 88 ======= ======= ======= =======
a-2003 includes a one time charge of $457,000 for costs related to the re-finance of the Wayne PSC mortgage. On November 1, 2002, our newly formed 40% owned affiliate, Wayne PSC, LLC ("WPSC"), completed the acquisition of the 323,000 sq. ft. Preakness Shopping Center in Wayne, NJ. Total acquisition costs of $35.5 million (including a $1.3 million capital improvement reserve) were financed in part by a $26.5 million first mortgage loan, and by $9 million of equity contributions provided pro rata by the members of WPSC, with FREIT's contribution being $3.6 million. On June 30, 2003, WPSC re-financed its first mortgage with a new $32.5 million, 13-year mortgage loan bearing a fixed interest rate of 6.04%. FREIT received $2.4 million of the net re-finance proceeds as a distribution from WPSC. During January 2003, Westwood Hills placed a second mortgage in the amount of $3.4 million on its garden apartment property. The net proceeds of the second mortgage was distributed to its members, of which FREIT received approximately $1.4 million. Note 3 - Property acquisition: On July 31, 2003, Damascus Centre, LLC, an entity wholly owned by FREIT, acquired the Damascus Shopping Center ("Damascus") in Damascus, MD. The total acquisition cost of the shopping center of $9.8 million was financed in part by the assumption of an existing $2.6 million first mortgage loan and the balance of $7.2 million with cash. Note 4 - Earnings per share: FREIT has presented "basic" and "diluted" earnings per share in the accompanying statements of income in accordance with the provisions of Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"). Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding during each period. 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. In computing diluted earnings per share for each of the nine and three month periods ended July 31, 2003 and 2002, the assumed exercise of all of FREIT's outstanding stock options, adjusted for application of the treasury stock method, would have increased the weighted average number of shares outstanding as shown in the table below:
Nine Months Ended Three Months Ended July 31, July 31, ------------------------ ------------------------ 2003 2002 2003 2002 ---- ---- ---- ---- Basic weighted average shares outstanding 3,128,576 3,119,576 3,137,576 3,119,576 Shares arising from assumed exercise of stock options 153,929 61,403 152,429 95,106 Dilutive weighted average shares outstanding --------- --------- --------- --------- 3,282,505 3,180,979 3,290,005 3,214,682 ========= ========= ========= =========
Basic and diluted earnings per share, based on the weighted average number of shares outstanding during each period, are comprised of ordinary income. Page 10 Note 5- Equity incentive plan: On September 10, 1998, the Board of Trustees approved FREIT's Equity Incentive Plan (the "Plan") which was ratified by FREIT's shareholders on April 7, 1999, whereby up to 460,000 of FREIT's shares of beneficial interest may be granted to key personnel in the form of stock options, restricted share awards and other share-based awards. Upon ratification of the Plan on April 7,1999, FREIT issued 377,000 stock options which it had previously granted to key personnel on September 10, 1998. The fair value of the options on the date of grant was $15 per share. On May 23, 2003 options to purchase 36,000 shares of beneficial interest were exercised at a price of $15 per share. As of July 31, 2003 options for 341,000 shares of beneficial interest are outstanding and are exercisable through September 2008. In the opinion of management, if compensation cost for the stock options granted in 1999 had been determined based on the fair value of the options at the grant date under the provisions of SFAS 123 using the Black-Scholes option pricing model, FREIT's pro forma net income and pro forma basic net income per share arising from such computation would not have differed materially from the corresponding historical amounts. Note 6 - Segment information: SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", established 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: retail properties and residential properties. These reportable segments offer different products, have different types of customers, and are managed separately because each requires different operating strategies and management expertise. The retail segment contains nine separate properties and the residential segment contains eight properties. The accounting policies of the segments are the same as those described in Note 1 in FREIT's Annual Report on Form 10-K. The chief operating decision-making group of FREIT's retail segment, residential segment and corporate/other is comprised of the Board of Trustees. FREIT assesses and measures segment operating results based on net operating income ("NOI"). 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, and financing costs. NOI is not a measure of operating results or cash flows from operating activities as measured by accounting principles generally accepted in the United States of America, 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 for the nine and three months ended July 31, 2003 and 2002. Asset information is not reported since the Trust does not use this measure to assess performance.
Nine Months Ended Three Months Ended July 31, July 31, 2003 2002 2003 2002 ---- ---- ---- ---- (in thousands of dollars) Real estate revenue: Retail $ 9,527 $ 9,020 $ 3,297 $ 2,997 Residential 4,922 4,727 1,669 1,609 -------- -------- -------- -------- Totals 14,449 13,747 4,966 4,606 -------- -------- -------- -------- Real estate operating expenses: Retail 2,992 2,854 1,035 1,090 Residential 2,067 1,820 680 542 -------- -------- -------- -------- Totals 5,059 4,674 1,715 1,632 -------- -------- -------- -------- Net operating income: ` Retail 6,535 6,166 2,262 1,907 Residential 2,855 2,907 989 1,067 -------- -------- -------- -------- Totals $ 9,390 $ 9,073 $ 3,251 $ 2,974 ======== ======== ======== ======== Recurring capital improvements: Residential $ 265 $ 209 $ 98 $ 84 ======== ======== ======== ======== Reconciliation to consolidated net income: Segment NOI $ 9,390 $ 9,073 $ 3,251 $ 2,974 Deferred rents - straight-lining 132 266 37 80 Net investment income 139 183 45 60 Equity in income(loss) of affiliates 113 197 (108) 88 General and administrative expenses (444) (349) (98) (133) Depreciation (1,601) (1,609) (534) (538) Discontinued operations -- (33) -- (10) Financing costs (3,505) (3,661) (1,167) (1,220) Minority interest (184) (89) (52) 3 -------- -------- -------- -------- Net Income $ 4,040 $ 3,978 $ 1,374 $ 1,304 ======== ======== ======== ========
Note 7 - Interest Rate Swap Contract: During November 2002, FREIT negotiated to lower the fixed interest rate on a first mortgage secured by its Patchogue, NY property and was offered a lower, floating interest rate by the lender. To reduce the impact of interest rate fluctuations, FREIT entered into an interest rate swap. In accordance with SFAS 133, FREIT recorded a liability for the net present value of the increase in interest cost over the remaining terms of the debt of $152,000 at July 31, 2003. Such amount is included in comprehensive income. Note 8- Discontinued operations: On August 9, 2002, FREIT sold the Sheridan Apartments in Camden, NJ for cash of $1,050,000 and recognized a gain of approximately $475,000. FREIT had owned and operated the property since 1964. Summarized operating results included in discontinued operations in the accompanying consolidated statements of income for the nine and three months ended July 31, 2002 is as follows (in thousands): | Nine Months Ended Three Months Ended | July 31, 2002 July 31, 2002 | ------------- ------------- Revenue | $ 511 $ 183 Expenses | (544) (193) | ----- ----- Net Income (Loss) | $ (33) ($ 10) | ===== ----- Note 9- Subsequent event: On August 20, 2003 FREIT placed add-on second mortgages on three of its residential properties. The mortgages aggregated approximately $7 million bearing an average fixed interest rate of 5.2%. The mortgages are due co-terminus with the underlying first mortgage loans. FREIT received net financing proceeds of approximately $6.9 million. * * * Management's Discussion and Analysis of Financial Condition and Results of Operations. ================================================================================ Cautionary Statement Identifying Important Factors That Could Cause FREIT's 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 unaudited condensed consolidated financial statements of FREIT (including related notes thereto) appearing elsewhere in this Form 10-Q, and the consolidated financial statements included in FREIT's most recently filed 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 FREIT's current expectations regarding future results of operations, economic performance, financial condition and achievements of FREIT, and do not relate strictly to historical or current facts. FREIT has tried, wherever possible, to identify these forward-looking statements by using words such as "believe," "expect," "anticipate," "intend, " "plan," " estimate," or words of similar meaning. 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, which will, among other things, affect demand for rental space, the availability of prospective tenants, lease rents and the availability of financing; adverse changes in FREIT's real estate markets, including, among other things, competition with other real estate owners, risks of real estate development and acquisitions; governmental actions and initiatives; and environmental/safety requirements. ================================================================================ Overview FREIT is an equity real estate investment trust ("REIT") that owns a portfolio of residential apartment and retail properties. Our revenues consist primarily of fixed rental income from both our residential and retail properties, and additional rent in the form of expense reimbursements derived from our income producing retail properties. We also receive income from our 40% owned affiliate, Westwood Hills, LLC ("Westwood Hills") that owns a residential apartment property, and beginning in fiscal 2003, income from our 40% owned affiliate Wayne PSC, LLC ("WaynePSC") that owns the Preakness shopping center. Our policy has been to acquire real property for long-term investment. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES The Securities and Exchange Commission ("SEC") recently issued 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 and outlined in Note 1 to our Consolidated Financial Statements included in our annual report on Form 10-K, have been applied consistently as at July 31, 2003 and October 31, 2002, and for the nine and three months ended July 31, 2003 and 2002. 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 collectibility. If we incorrectly determine the collectibility of revenue, our net income and assets could be overstated. Valuation of Long-Lived Assets: We periodically assess the carrying value of long-lived assets whenever we determine that events or changes in circumstances indicate that their carrying amount 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 flows 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. In October 2001, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires the reporting of discontinued operations to include components of an entity that have either been disposed of or are classified as held for sale. FREIT has adopted SFAS No. 144. On August 9, 2002 FREIT sold its Camden, NJ property. FREIT has reclassified the net income (loss) from the operation of the property as Discontinued Operations for all periods presented. The adoption of SFAS No. 144 did not have an impact on net income, but only impacted the presentation of this property within the consolidated statements of income. We believe that net income from continuing operations (which excludes the operations of the Camden property) is the most significant element of net income. Accordingly, all references and comparisons refer to income from continuing operations unless otherwise stated. All references to per share amounts are on a diluted basis (unless otherwise indicated) and refer to earnings per share from continuing operations. Results of Operations: Nine months and Quarters Ended July 31, 2003 and 2002 Summary Income Statement & Component Data
Nine Months Ended Quarter Ended July 31, Increase July 31, Increase ---------------------- --------------------- 2003 2002 (Decrease) 2003 2002 (Decrease) ---- ---- ---------- ---- ---- ---------- Revenue ($000) Real estate operations $ 14,581 $ 14,010 $ 571 $ 5,003 $ 4,683 $ 320 Equity in income (loss) of affiliates 113 197 (84) (108) 88 (196) Net investment income 139 183 (44) 45 60 (15) -------- -------- -------- -------- -------- -------- Total revenue 14,833 14,390 443 4,940 4,831 109 -------- -------- -------- -------- -------- -------- Expenses Real estate operations 6,842 6,369 473 2,301 2,170 131 Financing costs 3,505 3,661 (156) 1,167 1,220 (53) Gen'l & administrative expenses 446 349 97 98 127 (29) -------- -------- -------- -------- -------- -------- Total expenses 10,793 10,379 414 3,566 3,517 49 -------- -------- -------- -------- -------- -------- Income from continuing operations 4,040 4,011 29 1,374 1,314 60 Discontinued Operations (33) 33 (10) 10 -------- -------- -------- -------- -------- -------- Net Income $ 4,040 $ 3,978 $ 62 $ 1,374 $ 1,304 $ 70 ======== ======== ======== ======== ======== ========
Revenue for the quarter ended July 31, 2003 ("Current Quarter") increased 2.3% to $4,940,000 from $4,831,000 for the prior year's quarter ended July 31, 2002 ("Prior Year's Quarter"). Income from continuing operations for the Current Quarter increased 4.6% to $1,374,000 from $1,314,000 for the Prior Year's Quarter. Income from continuing operations for the nine months ended July 31, 2003 ("Current Nine Months") was $4,040,000 on revenue of $14,833,000. This compares to income from continuing operations for the nine months ended July 31, 2002 ("Prior Year's Nine Months") of $4,011,000 on revenue of $14,390,000. The consolidated results of operations for the nine and three months ended July 31, 2003 are not necessarily indicative of the results to be expected for the full year. REAL ESTATE OPERATIONS: NOI as used in this discussion reflects operating revenue and expenses directly associated with the operations of the real estate properties, but excludes straight lining of rents, depreciation and financing costs (See Note 5 to the condensed consolidated financial statements). RETAIL SEGMENT: FREIT's retail properties during the current reporting periods consisted of six (6) properties (excluding the Damascus shopping center acquired on July 31,2003). totaling approximately 686,000 sq. ft. Four are multi-tenanted shopping centers and two are single tenanted stores. Their operations are summarized below:
Retail Segment Nine Months Ended Three Months Ended July 31, July 31, 2003 2002 2003 2002 ---- ---- ---- ---- (in thousands of dollars) Revenues Minimum & Percentage Rents $7,099 $6,871 $2,402 $2,330 Reimbursements 2,422 2,060 894 665 Other 6 89 1 2 ------ ------ ------ ------ Total Revenues 9,527 9,020 3,297 2,997 ------ ------ ------ ------ Operating Expenses 2,992 2,854 1,035 1,090 ------ ------ ------ ------ Net operating income $6,535 $6,166 $2,262 $1,907 ====== ====== ====== ====== Average Occupancy % 93.0% 97.1% 92.9% 96.7% ====== ====== ====== ======
Minimum and percentage rents at FREIT's retail properties increased 3.3% and 3.1% during the Current Nine Months and Current Quarter respectively compared to the comparable prior periods. The increase in rents resulted from increased base rents, and rents from tenant's that were not in occupancy for the full quarter last year. The increase in reimbursements is principally the result of higher expenses that are passed through to tenants, plus back billings of reimbursable expenses. These revenue increases have occurred even though overall occupancy has fallen - see below. After adjusting 2002 costs for $190,000 of costs related to the expansion project abandoned at our Olney property, operating expenses increased 12% and 15% for the Current Nine Months and Current Quarter respectively. These increases are principally winter related resulting in higher snow removal and utility costs during our first two fiscal quarters, and higher landscaping and clean-up costs during the third quarter. In February 2003, without any notice, a major tenant in one of our shopping centers closed their store and ceased paying rent and additional rent, and is in default of both monetary and non-monetary provisions of their lease. Annual rent and other charges from this tenant approximate $480,000 per year. A lease termination agreement has been reached with the tenant whereby the tenant will pay FREIT $1.7 million to terminate the lease. As of the date of this report we await approval of this termination agreement by the mortgage lender on the property. During May 2003, at our Westwood Plaza Shopping Center/ Westwood, N.J., TJMaxx took occupancy of the space vacated by Stop and Shop and began paying rent. Acquisition of Damascus Shopping Center. On July 31, 2003, Damascus Centre, LLC, an entity wholly owned by FREIT, acquired the Damascus Shopping Center in Damascus, MD. The Shopping Center is situated on 13 acres, and contains approximately 139,000 SF of retail and office space. A Safeway supermarket is the anchor tenant. The total acquisition costs of $10.3 million were financed in part by the assumption of an existing $2.6 million first mortgage loan and the balance of $7.7 Million with equity capital. Included in the acquisition costs is an amount paid to an existing tenant to terminate its lease as of December 31, 2003. FREIT is considering offering an interest in this investment to a joint venture partner owned by employees of Hekemian & Co., Inc., FREIT's managing agent. FREIT plans to demolish the existing buildings, with the exception of the freestanding McDonald's restaurant. The construction of a Shopping Center of approximately 145,000 SF is planned, of which 58,000 SF is expected to be occupied by a new, prototype Safeway Supermarket. A smaller building will be constructed on an out parcel, which will accommodate the office tenants as well as some smaller, retail space. This plan to construct a new center is subject to obtaining all approvals and building permits from the various governing authorities. If all approvals are obtained, total development costs are estimated at approximately $13 million. Construction is not expected to begin before January 2005. During the holding period until construction begins, the center is not expected to make a significant contribution to FREIT's earnings or cash flow. Since the center was acquired on July 31, 2003, no operations of the center are included in our results of operations for the nine months ended July 31, 2003. RESIDENTIAL SEGMENT: FREIT operates seven (7) multi-family apartment communities totaling 507 apartment units. The NOI of our residential properties is summarized below.
Residential Segment Nine Months Ended Three Months Ended July 31, July 31, 2003 2002 2003 2002 ---- ---- ---- ---- (in thousands of dollars) Revenues Rents $4,865 $4,667 $1,647 $1,588 Other 57 60 22 21 ------ ------ ------ ------ Total Revenues 4,922 4,727 1,669 1,609 ------ ------ ------ ------ Operating Expenses 2,067 1,820 680 542 ------ ------ ------ ------ Net operating income $2,855 $2,907 $ 989 $1,067 ====== ====== ====== ====== Average Occupancy % 96.7% 96.4% 97.5% 96.8% ====== ====== ====== ====== Recurring capital improvements $ 265 $ 209 $ 98 $ 84 ====== ====== ====== ======
Residential revenue has increased 4.1% and 3.7% for the Current Nine Months and Current Quarter respectively compared to the comparable prior periods. Higher monthly rents, in spite of scattered concessions were the principal reason for the increase. Revenue is principally composed of monthly apartment rental income. Total apartment rental income is a factor of occupancy and monthly apartment rents. For instance, at rental rates and occupancy levels at July 31, 2003, a 1% increase or decrease in average occupancy will cause an annual $67,000 increase or reduction in revenues, while a 1% increase or decrease in rental rates will cause an annual $66,100 increase or decrease in annual revenues. Average occupancy of 97.5% during the Current Quarter was an increase over the Prior Year's Quarter. The Current Quarter's average occupancy was also higher than FREIT's prior quarter ended April 30, 2003, raising the Current Nine Months occupancy levels to 96.7%, higher than the Prior Year's Nine Month occupancy level. During the Current Nine Months and Current Quarter operating expenses increased 13.6% and 25.5% respectively over prior year's comparable periods. As a percentage of revenue, operating expenses for the Current Nine Months were 42.0% of revenue compared to 38.5% for the Prior Year's Nine Months period. Increases in snow removal and utility costs, because of the recent severe winter, which we experienced, in addition to increased landscaping costs and apartment fix-up costs were the principal reasons for the expense increase. Because revenue increases were not sufficient to cover the increased costs, NOI from our residential properties fell 1.8% from year earlier levels. We feel that the firming occupancy, coupled with elimination of concessions, will, in future periods, result in operating results that exceed prior periods. EQUITY IN INCOME OF AFFILIATES Prior to October 31, 2002, FREIT shared in the earnings of its 40% owned affiliate, Westwood Hills which owns a 210 unit apartment community in Westwood, NJ. Effective November 1, 2002, FREIT also shares in the earnings of its 40% owned affiliate, Wayne PSC, which purchased the 323,000 sq. ft. Preakness Shopping Center in Wayne, NJ, on November 1, 2002. The following table summarizes the operations at these affiliates:
Nine Months Ended Three Months Ended July 31, July 31, -------------------------- ------------------------- Income Statement Data: 2003 2002 2003 2002 ---- ---- ---- ---- (In thousands of dollars) Rental revenue Westwood Hills $ 2,431 $ 2,377 $ 819 $ 807 Wayne PSC 3,481 -- 1,112 -- ------- ------- ------- ------- Total revenue 5,912 2,377 1,931 807 Real estate operating expenses Westwood Hills 1,251 1,125 405 335 Wayne PSC 1,790 -- 604 -- ------- ------- ------- ------- Total real estate expenses 3,041 1,125 1,009 335 ------- ------- ------- ------- Income before financing costs Westwood Hills 1,180 1,252 414 472 Wayne PSC 1,691 -- 508 -- ------- ------- ------- ------- Total income before financing costs 2,871 1,252 922 472 Financing costs Westwood Hills 881 760 303 253 Wayne PSC 1,708(a) -- 890(a) -- ------- ------- ------- ------- Total financing costs 2,589 760 1,193 253 ------- ------- ------- ------- Net income (loss) Westwood Hills 299 492 111 219 Wayne PSC (17) -- (382) -- ------- ------- ------- ------- Net income(loss) $ 282 $ 492 $ (271) $ 219 ======= ======= ======= ======= FREIT's share of net income(loss) $ 113 $ 197 $ (108) $ 88 ======= ======= ======= ======= Occupancy: Westwood Hills 96.0% 97.2% 96.0% 97.8% ------- ------- ------- ------- Wayne PSC 91.1% 97.0% ------- -------
a- 2003 includes a one-time charge of $457,000 in costs related to the re-finance of the Wayne PSC mortgage. Net income at Westwood Hills fell 39.2% to $299,000 for the Current Nine Months from $492,000 for the Prior Year's Nine Months. The reduction results from two factors: 1) while revenues increased 2.3% over last year, the increase was insufficient to cover the 11.2% increase in expenses directly related to the severity of the recent winter and, 2) the financing costs related to the $3.4 million second mortgage added in January 2003. FREIT received, as a distribution, approximately $1.4 million of the net financing proceeds. The cost of this financing will be to add approximately $212,000 of financing costs to Westwood Hills operations in fiscal 2003. While FREIT bears 40% of this additional financing cost,we feel this cost will be offset by the income FREIT will ultimately earn from investing its $1.4 million distribution. On November 1, 2002, Wayne PSC closed on the acquisition of the Preakness Shopping Center. Income before financing costs was $1,691,000 and $508,000 for the Current Nine Months and Current Quarter respectively. Earnings, however, were burdened by one-time re-financing costs (see below) of $457,000 that resulted in a net loss of $17,000 for the Current Nine Months and a loss of $382,000 for the Current Quarter. FREIT shares in 40% of these losses. On June 30, 2003 Wayne PSC refinanced its original $26.5 million first mortgage with a new $32.5 million mortgage loan. The term of the new loan will be for thirteen (13) years, with interest fixed at 6.04 %, and the loan will require interest only payments for the first three years and thereafter be amortized over a 25-year life. FREIT received $2.4 million of the net refinance proceeds as a distribution from Wayne PSC. Because there is no amortization of the new loan over the first 36 months, debt service will be less than under the original loan during this period. We feel that the benefits of locking in attractive long-term interest rates, coupled with the income potential from investing the cash received in the future real estate acquisitions, outweighs the financing costs incurred. FINANCING COSTS Financing Costs for the Current Nine Months and Current Quarter decreased 4.3% respectively from the comparable prior period levels. The decrease is principally attributable to reduced interest costs resulting from lower mortgage balances from normal loan amortization and because of FREIT's $10.9 million floating rate mortgage (Olney) benefiting from the lower interest rate environment this year compared to last year. Nine Months Ended Three Months Ended July 31, July 31, ---------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- (thousands of dollars) Fixed rate mortgages $3,198 $3,342 $1,056 $1,109 Floating rate mortgage 266 310 83 107 Other 41 9 28 4 ------ ------ ------ ------ $3,505 $3,661 $1,167 $1,220 ====== ====== ====== ====== Interest Rate Swap Contract To reduce interest rate volatility, FREIT uses "pay fixed, receive floating" interest rate swaps to convert floating interest rates to fixed interest rates over the terms of certain loans. We enter into these swap contracts with a Counterparty that is usually a high-quality commercial bank. In essence, we agree to pay our Counterparty a fixed rate of interest on a dollar amount of notional principal (which corresponds to our mortgage debt) over a term equal to the terms of the mortgage note. Our Counterparty, in return, agrees to pay us a short-term rate of interest - generally LIBOR - on that same notional amount over the same term as our mortgage note. FAS 133 requires us to mark-to-market fixed pay interest rate swaps. 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. These gains or losses will not affect our income statement. Changes in the fair value of these swap contracts will be reported in earnings of other comprehensive income and appear in the equity section of our balance sheet. This gain or loss represents the economic consequence of liquidating our fixed rate swap contracts and replacing them with like-duration funding at current market rates, something we'd likely never do. GENERAL ADMINISTRATIVE EXPENSES Our G & A expenses for the Current Nine Months increased by $97,000 over the prior year's comparable period. The increase was due to increases in FREIT's officers and Trustee's fees. LIQUIDITY AND CAPITAL RESOURCES Our financial condition remains strong. Below are the cash flows provided by (used in) operating, investing, and financing activities: ------------------------------------ For The Nine Months Ended July 31, ------------------------------------ 2003 2002 ---- ---- (Amounts in thousands) Operating activities $ 4,814 $ 4,815 ============= =============== Investing activities $ (4,902) $ 165 ============= =============== Financing activities* $ (4,608) $ (4,329) ============= =============== * Including dividends paid of $4,287,000 and $3,370,000 respectively. --------------------------------------------------------------------- We expect that cash provided by operating activities will be adequate to cover mandatory debt service payments, recurring capital improvements and dividends necessary to retain qualification as a REIT (90% of taxable income). As at July 31, 2003, we had cash and cash equivalents totaling $7.2 million compared to $11.9 million at October 31, 2002. This reduction principally results from utilizing $7.7 million to purchase the Damascus Shopping Center property, off-set by FREIT receiving distributions from its affiliates of $3.8 million, generated from mortgage financings. As previously reported, we are planning the construction of 129 apartment rental units in Rockaway, NJ., and the reconstruction of our Damascus Shopping Center. The total capital required for these projects is estimated at $13.8 million and $13 million respectively. We expect to finance these costs, in part, from construction and mortgage financing and, in part, from funds available in our institutional money market investment. At July 31, 2003 FREIT's aggregate outstanding mortgage debt was $70.2 million. Approximately $59.4 million bears a fixed weighted average interest rate of 7.422%, and an average life of approximately 7.9 years. Approximately $10.9 million of mortgage debt bears an interest rate equal to 175 basis points over LIBOR and resets at our option every 30, 60 or 90 days. This mortgage note, which was due at the end of March 2003, has been extended for two, three month periods to allow for the time necessary to complete the documentation of a permanent mortgage extension. The due date of the loan will be extended to June 2006, with interest to reset Page 21 monthly at 200 basis points over the one-month LIBOR. Monthly amortization payments to be fixed at $15,000. At our option we can, at any time, enter into an interest rate swap and fix the interest rate. Our mortgages are subject to amortization schedules that are longer than the term of the mortgages. As such, balloon payments for all mortgage debt will be required as follows (including the variable rate mortgage at the proposed terms): Fiscal Year $ Millions ----------- ---------- 2006 $ 10.0 2007 $ 15.7 2008 $ 5.9 2010 $ 9.2 2013 $ 8.0 2014 $ 9.4 The first mortgages secured by our affiliates' properties are also subject to amortization schedules that are longer than the terms of the mortgages. As such, balloon payments on our affiliates mortgages will be required as follows: $ Millions ---------- 2012 $ 24.5 2014 $ 13.8 The following table shows the estimated fair value and carrying value of our long-term debt at July 31, 2003 and October 31, 2002: July 31, October 31, (In Millions) 2003 2002 ------------- ---- ---- Fair Value $75.6 $73.5 Carrying Value $70.2 $68.4 Fair values are estimated based on market interest rates at July 31, 2003 and October 31, 2002 and on discounted cash flow analysis. Changes in assumptions or estimation methods may significantly affect these fair value estimates. FREIT expects to re-finance the individual mortgages with new mortgages when their terms expire. To this extent we have exposure to interest rate risk on our fixed rate debt obligations. 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 re-financing proceeds may be less than the amount of mortgage debt being retired. For example, a one percent interest rate increase would reduce the Fair Value of our debt by $3.1 million, and a one percent decrease would increase the Fair Value by $3.3 million. Additionally, we have exposure on our floating rate debt. A one percent change in rates, up or down, will decrease or increase income and cash flow by approximately $109,000. We believe that the values of our properties will be adequate to command re-financing proceeds equal to, or higher than the mortgage debt to be re-financed. We continually review our debt levels to determine if additional debt can prudentially be utilized for property acquisition additions to our real estate portfolio that will increase income and cash flow to shareholders. To create additional liquidity and lock in favorable long-term interest rates we continue to take advantage of the Freddie Mac second mortgage program. This program allows add-ons to existing Freddie Mac first mortgages to the extent justified by increased values and cash flows. On August 20, 2003 FREIT placed add-on second mortgages on three of its residential properties. The second mortgage loans aggregated approximately $7 million bearing an average fixed rate of 5.2%. The due dates of the second mortgage loans are co-terminus with the underlying first mortgage loans. FREIT received net financing proceeds of approximately $6.9 million. FREIT also has the ability to draw, if needed, against it $14 million, two-year revolving line of credit. To date, no draws have been made against this credit line. INFLATION Inflation can impact the financial performance of FREIT in various ways. Our retail 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 normally for a one-year term, which may allow us to seek increased rents as leases renew or when new tenants are obtained. Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See "Liquidity and Capital Resources" above. Item 4: Controls and Procedures As of the end of the period covered by this quarterly report on form 10-Q, we carried out an evaluation of the effectiveness of the design and operation of FREIT's disclosure controls and procedures. This evaluation was carried out under the supervision and with participation of FREIT's management, including FREIT's Chairman and Chief Executive Officer and Chief Financial Officer, who concluded that FREIT's disclosure controls and procedures are effective. During FREIT's last fiscal quater, there have been no change in FREIT's internal control over financial reporting that has materialy affected, or is reasonably likely to materialy affect, FREIT's internal control over financial reporting. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in FREIT's reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in FREIT's reports filed under the Exchange Act is accumulated and communicated to management, including FREIT's Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. Part II Other Information Item 6. Exhibits and Reports on Form 8-K During the third quarter ended July 31, 2003, the following reports on Form 8-K were filed with the SEC: Form 8-K (Item 5. Other Events), date of earliest event reported June 17, 2003 FREIT reported to its shareholders its operating results for the six months and three months ended April 30, 2003. Exhibit Index Exhibit 31.1 Section 302 Certification of Chief Executive Officer Exhibit 31.2 Section 302 Certification of Chief Financial Officer Exhibit 31.1 Certification of Chief Executive Officer to 18 U.S.C. 1350 Exhibit 31.2 Certification of Chief Financial Officer to 18 U.S.C. 1350 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant 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 ------------------- (Registrant) Date: September 15, 2003 /s/ Robert S. Hekemian ---------------------- (Signature) Robert S. Hekemian. Chairman of the Board and Chief Executive Officer /s/ Donald W. Barney -------------------- (Signature) Donald W. Barney President, Treasurer and Chief Financial Officer (Principal Financial/Accounting Officer) EX-31.1 3 exhibit31-1.txt EXHIBIT 31.1 CERTIFICATION I, Robert S. Hekemian, certify that: 1. I have reviewed this report on Form 10-Q of First Real Estate Investment Trust of New Jersey; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 15, 2003 /S/ Robert S. Hekemian ------------------------------- Robert S. Hekemian Chairman of the Board and Chief Executive Officer EX-31.2 4 exhibit31-2.txt EXHIBIT 31.2 CERTIFICATION I, Donald W. Barney, certify that: 1. I have reviewed this report on Form 10-Q of First Real Estate Investment Trust of New Jersey; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 15, 2003 /S/Donald W. Barney ------------------------------- Donald W. Barney, President, Treasurer and Chief Financial Officer EX-32.1 5 exhibit32-1.txt EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of First Real Estate Investment Trust of New Jersey (the "Company") on Form 10-Q for the period ended July 31, 2003 (the "Report"), I, Robert S. Hekemian, Chairman of the Board and Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: 1. the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. 78m(a) or 78o(d), and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: September 15, 2003 /s/ Robert S. Hekemian ----------------------- Robert S. Hekemian Chairman of the Board and Chief Executive Officer EX-32.2 6 exhibit32-2.txt EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of First Real Estate Investment Trust of New Jersey (the "Company") on Form 10-Q for the period ended July 31, 2003 (the "Report"), I, Donald W. Barney, President, Treasurer and Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: 1. the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. 78m(a) or 78o(d), and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: September 15, 2003 /s/ Donald W. Barney ------------------------------ Donald W. Barney President, Treasurer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----