-----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, N95VQel/7T8DL1Uoy8JFery1hWAYSbXkF5Cor2aBAS07l5KwT95s9pE92I6GhysO G2Mtwcv4XVteLiwxxYRsmA== 0000914317-04-002560.txt : 20040629 0000914317-04-002560.hdr.sgml : 20040629 20040629165006 ACCESSION NUMBER: 0000914317-04-002560 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040430 FILED AS OF DATE: 20040629 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-25043 FILM NUMBER: 04889055 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/A 1 form10qa-61263_freit.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended April 30, 2004 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. |X| Yes |_| No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). |_| Yes |X| No As of June 21, 2004, there were 6,423,152 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 April 30, 2004 and October 31, 2003; b.) Condensed Consolidated Statements of Income, Comprehensive Income and Undistributed Earnings for the Six and Three Months Ended April 30, 2004 and 2003; c.) Condensed Consolidated Statements of Cash Flows for the Six Months Ended April 30, 2004 and 2003; 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 4: Submission of Matters to a Vote of Security Holders. Item 6: Exhibits and Reports on Form 8-K. Note: This Form 10Q/A has been filed to include Exhibits 31.1, 31.2, 32.1 - ---- and 32.2 omitted from original filing. Item 1: Financial Statements FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
April 30, October 31, 2004 2003 ---- ---- (Unaudited) (See Note 1) ----------- ------------ (In Thousands of Dollars) ------------------------- ASSETS Real estate, at cost, net of accumulated depreciation $ 161,049 $ 116,290 Real estate held for sale 14,238 14,426 Cash and cash equivalents 4,754 14,437 Tenants' security accounts 1,319 1,332 Sundry receivables 4,334 4,326 Prepaid expenses and other assets 3,455 2,183 Deferred charges, net 2,963 2,770 --------- --------- Totals $ 192,112 $ 155,764 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgages payable $ 144,621 $ 115,895 Mortgage applicable to real estate held for sale 10,782 10,872 Notes payable 8,200 Accounts payable and accrued expenses 1,307 1,604 Dividends payable 1,285 2,367 Tenants' security deposits 1,798 1,804 Deferred revenue 78 241 Interest rate swap contract 128 201 --------- --------- Total liabilities 168,199 132,984 --------- --------- Minority interest 564 640 --------- --------- Commitments and contingencies Shareholders' equity: Shares of beneficial interest without par value: 8,000,000 shares authorized; 6,423,152 and 6,311,152 shares issued and outstanding 20,694 19,854 Undistributed earnings 2,783 2,487 Accumulated other comprehensive loss (128) (201) --------- --------- Total shareholders' equity 23,349 22,140 --------- --------- Totals $ 192,112 $ 155,764 ========= =========
See Notes to Consolidated Financial Statements FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME, COMPREHENSIVE INCOME AND UNDISTRIBUTED EARNINGS SIX AND THREE MONTHS ENDED APRIL 30, 2004 AND 2003
Six Months Ended Three Months Ended ---------------------- ---------------------- April 30, April 30, ---------------------- ---------------------- 2004 2003 2004 2003 (In Thousands Of Dollars, Except Per Share Amounts) INCOME Revenue: Rental income $ 11,837 $ 10,316 $ 5,892 S 5,271 Reimbursements 2,067 1,871 1,175 959 Sundry income 65 80 28 42 ---------------------- ---------------------- Totals 13,969 12,267 7,095 6,272 ---------------------- ---------------------- Expenses: Operating expenses 3,014 2,723 1,580 1,464 Management fees 553 512 289 260 Real estate taxes 2,028 1,736 1,022 839 Depreciation 1,580 1,243 814 622 Minority interest 222 332 132 211 ---------------------- ---------------------- Totals 7,397 6,546 3,837 3,396 ---------------------- ---------------------- Operating income 6,572 5,721 3,258 2,876 Investment income 89 101 41 43 Interest expense including amortization of deferred financing costs (4,132) (3,552) (2,107) (1,771) ---------------------- ---------------------- Income from continuing operations 2,529 2,270 1,192 1,148 Discontinued operations 336 396 171 248 ---------------------- ---------------------- Net income $ 2,865 $ 2,666 $ 1,363 $ 1,396 ====================== ====================== Basic earnings per share: Continuing operations $ 0.40 $ 0.37 $ 0.19 $ 0.18 Discontinued operations 0.05 0.06 0.02 0.04 ---------------------- ---------------------- Net income $ 0.45 $ 0.43 $ 0.21 $ 0.22 ====================== ====================== Diluted earnings per share: Continuing operations $ 0.38 $ 0.35 $ 0.17 $ 0.17 Discontinued operations 0.05 0.06 0.03 0.04 ---------------------- ---------------------- Net income $ 0.43 $ 0.41 $ 0.20 $ 0.21 ====================== ====================== Weighted average shares outstanding: Basic 6,348 6,239 6,367 6,239 Diluted 6,732 6,553 6,943 6,569 COMPREHENSIVE INCOME Net Income $ 2,865 $ 2,666 $ 1,363 $ 1,396 Other comprehensive income (loss): Unrealized gain (loss) on interest rate swap contract 73 (308) 102 (72) ---------------------- ---------------------- Comprehensive income $ 2,938 $ 2,358 $ 1,465 $ 1,324 ====================== ====================== UNDISTRIBUTED EARNINGS Balance, beginning of period $ 2,487 $ 2,589 $ 2,705 $ 2,767 Net income 2,865 2,666 1,363 1,396 Less dividends (2,569) (2,183) (1,285) (1,091) ---------------------- ---------------------- Balance, end of period $ 2,783 $ 3,072 $ 2,783 $ 3,072 ====================== ====================== Dividends per share $ 0.40 $ 0.35 $ 0.20 $ 0.18 ====================== ======================
See Notes to Consolidated Financial Statements. FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED APRIL 30, 2004 AND 2003
2004 2003 ---- ---- (In Thousands of Dollars) Operating activities: Net income $ 2,865 $ 2,666 Adjustments to reconcile net income to net cash provided by operating activities (including discontinued operations): Depreciation 1,768 1,431 Amortization 190 171 Deferred revenue (163) (171) Minority interest 334 464 Changes in operating assets and liabilities: Tenants' security accounts 13 (16) Sundry receivables, prepaid expenses and other assets (1,663) (2,219) Accounts payable and accrued expenses (297) 70 Tenants' security deposits (6) 93 -------- -------- Net cash provided by operating activities 3,041 2,489 -------- -------- Investing activities: Capital expenditures (753) (344) Acquisition of real estate (16,003)(a) (6,782)(b) -------- -------- Net cash used by investing activities (16,756) (7,126) -------- -------- Financing activities: Repayment of mortgages (947) (870) Proceeds from notes and mortgage financing 8,200 3,400 Proceeds from exercise of stock options 840 Dividends paid (3,651) (3,181) Contributions by minority interest 5,400 Distribution to minority interest (410) (2,155) -------- -------- Net cash provided by financing activities 4,032 2,594 -------- -------- Net decrease in cash and cash equivalents (9,683) (2,043) Cash and cash equivalents, beginning of period 14,437 15,634 -------- -------- Cash and cash equivalents, end of period $ 4,754 $ 13,591 ======== ======== Supplemental disclosure of cash flow data: Interest paid $ 4,209 $ 3,641 ======== ======== Income taxes paid $ 15 $ 9 ======== ======== Dividends declared but not paid $ 1,285 $ 1,092 ======== ========
(a) In April 2004, S And A Commercial Associates LP, a 75% owned subsidiary of FREIT, completed the acquisition of a 269 unit high rise apartment building in Hackensack, NJ for approximately $45,586,000, in part with the proceeds of a $29,583,000 mortgage. (b) In November 2002, Wayne PSC, LLC, a 40% owned subsidiary of FREIT, completed the acquisition of a 323,000 sq. ft. shopping center in Wayne, NJ, for approximately $33,282,000, in part with the proceeds of a $26,500,000 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 six and three months ended April 30, 2004 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, 2003. Effects of recent accounting pronouncements: In December 2003, the FASB issued revised FIN 46, "Consolidation of Variable interest Entities, an interpretation of Accounting Research Bulletin No. 51." ("FIN 46R"). FIN 46R requires the consolidation of an entity in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity (variable interest entities, or "VIEs"). Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership or a majority voting interest in the entity. FIN 46R is applicable for financial statements of public entities that have interests in VIEs or potential VIEs referred to as special-purpose entities for periods ending after December 15, 2003. Applications by public entities for all other types of entities is required in financial statements for periods ending after March 15, 2004. In accordance with the definition of related parties as defined in paragraph 16 of FIN 46R and the guidance in paragraph 4h, it is the belief of the management of FREIT that FIN 46R is applicable to Westwood Hills, LLC and Wayne PSC, LLC, both 40% owned by FREIT. Because of this determination, FREIT has consolidated these two entities in addition to its 75% owned subsidiary, S And A Commercial Associates Limited Partnership ("SandA") and its wholly-owned subsidiary, Damascus Centre, LLC, commencing with the quarter ended April 30, 2004, and has restated it's Octobet 31, 2003 balance sheet and the prior periods reported in this Form 10-Q. The consolidation of these two entities did not have any impact on FREIT's equity, net income, or earnings per share. Reclassification: Certain accounts in the 2003 financial statements have been reclassified to conform to the current presentation. Note 2 - 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 and warrants, were issued during the period. In computing diluted earnings per share for each of the six and three month periods ended April 30, 2004 and 2003, 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. All shares and per share amounts have been restated for the two-for-one stock split which became effective March 31, 2004.
Six Months Ended Three Months Ended April 30, April 30, ---------------------- ---------------------- 2004 2003 2004 2003 ---- ---- ---- ---- Basic weighted average shares outstanding 6,348,485 6,239,152 6,367,152 6,239,152 Shares arising from assumed exercise of stock options 383,853 314,148 575,779 329,730 Dilutive weighted average shares --------- --------- --------- --------- outstanding 6,732,338 6,553,300 6,942,931 6,568,882 ========= ========= ========= =========
Basic and diluted earnings per share, based on the weighted average number of shares outstanding during each period, are comprised of ordinary income. Note 3- Equity incentive plan: All references to the amount of stock options granted, option price, fair value, or shares exercised have been adjusted to reflect the March 31, 2004 two-for-one stock split. 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 920,000 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 754,000 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 $7.50 per share. During May 2003, options to purchase 72,000 shares at $7.50 per share were exercised, and on February 24, 2004, options to purchase 112,000 shares were exercised at $7.50 per share. The remaining options for 570,000 shares are all outstanding at April 30, 2004, and are exercisable through September 2008. In the opinion of management, if compensation costs 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 4- 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 seven separate properties and the residential segment contains nine 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 six and three months ended April 30, 2004 and 2003. Asset information is not reported since FREIT does not use this measure to assess performance.
Six Months Ended Three Months Ended April 30, April 30, 2004 2003 2004 2003 ---- ---- ---- ---- (in thousands of dollars) Real estate revenue: Retail (a) $ 8,571 $ 7,265 $ 4,260 $ 3,756 Residential 5,243 4,865 2,754 2,447 -------- -------- -------- -------- Totals 13,814 12,130 7,014 6,203 -------- -------- -------- -------- Real estate operating expenses: Retail 2,931 2,582 1,477 1,334 Residential 2,331 2,043 1,262 973 -------- -------- -------- -------- Totals 5,262 4,625 2,739 2,307 -------- -------- -------- -------- Net operating income: Retail 5,640 4,683 2,783 2,422 Residential 2,912 2,822 1,492 1,474 -------- -------- -------- -------- Totals $ 8,552 $ 7,505 $ 4,275 $ 3,896 ======== ======== ======== ======== Recurring capital improvements: Residential $ 202 $ 197 $ 92 $ 80 ======== ======== ======== ======== Reconciliation to consolidated net income: Segment NOI $ 8,552 $ 7,505 $ 4,275 $ 3,896 Deferred rents - straight-lining 155 138 80 68 Net investment income 89 101 41 43 General and administrative expenses (333) (347) (151) (255) Depreciation (1,580) (1,243) (814) (622) Discontinued operations 336 396 171 248 Financing costs (4,132) (3,552) (2,107) (1,771) Minority interest (222) (332) (132) (211) -------- -------- -------- -------- Net income $ 2,865 $ 2,666 $ 1,363 $ 1,396 ======== ======== ======== ========
(a) A Tenant in FREIT's Westridge Square shopping center and FREIT have entered into a lease termination agreement whereby Tenant paid FREIT a lump sum payment of approximately $1.8 million ($750,000 as a rent termination payment for past and future rent payments and $1,035,000 for repairing and refurbishing space vacated by Tenant) to terminate the lease. The mortgage lender has agreed to the termination agreement and has entered into an escrow agreement with FREIT whereby the entire lump sum payment made by the Tenant has been deposited in an interest bearing escrow account held for the benefit of the mortgage lender. Up to $750,000 will be disbursed to FREIT (a) in monthly installments of $31,595 over approximately twenty four (24) months, or (b) the balance of the un-disbursed $750,000 will be disbursed to FREIT once the mortgage lender is provided with a Certificate of Occupancy ("C of O") covering all of the space vacated by the Tenant. The balance of the lease termination payment of approximately $1 million representing a Tenant Improvement ("TI") Reserve, will be disbursed to FREIT in $250,000 increments as comparable amounts of TI's are incurred, or in full at the earlier of when a C of O is obtained and the space vacated by the Tenant leased and re-occupied, or when the mortgage loan has been re-paid. Approximately $300,000, representing the difference between the $750,000 rent termination payment and rents already accrued, was included in revenues for the first quarter of fiscal 2004. Note 5 - Acquisition and Discontinued Operations: SAndA has entered into a contract for the sale of the Olney Town Center ("OTC") in Olney, Maryland. The sale price for the property is $28.2 million. The property was acquired in April 2000 for approximately $15.5 million. The purchaser has concluded it's due diligence review and is expected to close on the purchase contract on June 22, 2004. S and A will utilize part of the selling price to repay the approximate $11 million first mortgage on the property. The operations of the Olney Town Center are being classified as Discontinued Operations. For financial statement proposes SAndA will recognize a gain of approximately $13 million when the sale closes. On April 16, 2004, SAndA closed on the purchase of The Pierre apartments. The Pierre is a 269-unit luxury high-rise apartment building located in Hackensack, N.J. The contract purchase price for The Pierre was approximately $44 million. This amount, together with estimated transaction costs of approximately $2 million, resulted in total acquisition costs of approximately $46 million. The acquisition costs were financed in part by a mortgage loan in the approximate amount of $29.6 million and the balance of approximately $16.4 million in cash. FREIT provided 75% of the cash required with the balance of approximately $4.2 million provided, in the form of a note, by the 25% minority owners of SAndA. The net proceeds from the OTC sale after the repayment of the first mortgage are expected to repay FREIT and the 25% minority owners for their advances made to acquire The Pierre. If the sale of OTC is completed, SAndA intends to structure the sale of OTC and the purchase of The Pierre in a manor that would qualify as a like kind exchange of real estate pursuant to Section 1031 of the Internal Revenue Code, and result in a deferral for income tax purposes of the realization of gain on the sale of OTC. The following Unaudited pro forma information shows the results of operations for six and three months ended April 30, 2004 and 2003 for FREIT and Subsidiaries as though The Pierre had been acquired at the beginning of fiscal 2003:
Six Months Ended Three Months Ended April 30, April 30, 2004 2003 2004 2003 ---- ---- ---- ---- (In Thousands of Dollars, Except Per Share Amounts) Revenues $ 16,268 $ 14,788 $ 8,066 $ 7,535 Net expenses 13,384 12,234 6,637 6,212 -------------------- ------------------- Income (loss) before minority interest 2,884 2,554 1,429 1,323 Minority interest (266) (320) (191) (202) -------------------- ------------------- Net income from continuing operations $ 2,618 $ 2,234 $ 1,238 $ 1,121 ==================== ==================== Earnings Per Share: Basic $ 0.41 $ 0.36 $ 0.19 $ 0.18 Diluted $ 0.39 $ 0.34 $ 0.18 $ 0.17
The Unaudited pro forma results include adjustments for depreciation based on the purchase price and increased interest expense based on the mortgage placed on the property at the acquisition date. The Unaudited pro forma results of operations set forth above are not necessarily indicative of the results that would have occurred had the acquisition been made at the beginning of fiscal 2003 or of future results of operations of FREIT's combined properties. The acquisition price for The Pierre, including closing costs, was approximately $45,852,000. Based on estimated values in the area, the acquisition costs have been preliminarily allocated 70% to the building ($32,096,000) and 30% to the underlying land ($13,756,000). Item 2: 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 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. Starting in fiscal 2003, we also receive income from our 40% owned affiliate Wayne PSC, L.L.C. ("WaynePCS") that owns the Preakness shopping center. Our policy has been to acquire real property for long-term investment. Effects of recent accounting pronouncements: In December 2003, the FASB issued revised FIN 46, "Consolidation of Variable interest Entities, an interpretation of Accounting Research Bulletin No. 51." ("FIN 46R"). FIN 46R requires the consolidation of an entity in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity (variable interest entities, or "VIEs"). Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership or a majority voting interest in the entity. FIN 46R is applicable for financial statements of public entities that have interests in VIEs or potential VIEs referred to as special-purpose entities for periods ending after December 31, 2003. Applications by public entities for all other types of entities is required in financial statements for periods ending after March 15, 2004. In accordance with the definition of related parties as defined in paragraph 16 of FIN 46R and the guidance in paragraph 4h, it is the belief of the management of FREIT that FIN 46R is applicable to Westwood Hills, LLC and Wayne PSC, LLC, both 40% owned by FREIT. Because of this determination, FREIT has consolidated these two entities in addition to its 75% owned subsidiary, S And A Commercial Associates Limited Partnership ("SAndA") and its wholly-owned subsidiary, Damascus Centre, LLC, commencing with the quarter ended April 30, 2004, and has restated its October 31, 2003 balance sheet and the prior periods reported in this Form 10-Q. The consolidation of these two entities did not have any impact on FREIT's equity, net income, or earnings per share. 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, for the year ended October 31, 2003, have been applied consistently as at April 30, 2004 and October 31, 2003, and for the six and three months ended April 30, 2004 and 2003. 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. Real Estate: Real estate is carried at cost, net of accumulated depreciation. As at April 30, 2004 FREIT's carrying amount of its real estate, net of depreciation is $175.2 million. Maintenance and repairs are charged to operations as incurred. Depreciation requires an estimate by management of the useful life of each property and improvement as well as an allocation of the costs associated with a property to its various components. If FREIT does not allocate these costs appropriately or incorrectly estimates the useful lives of its real estate depreciation expense may be misstated. When we acquire real estate assets, we assess the fair value of the acquired assets (in accordance with Statements of Financial Accounting Standards ("SFAS") No. 141 and 142) and allocate the purchase price to the asset's components - land, building, leases, etc. - based on these assessments. FREIT assesses fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Initial valuation assessments are subject to change until such information is finalized no later than six months from the acquisition date. 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 June 22, 2004 FREIT is expected to close on the sale of its Olney Town Center ("OTC") property in Olney, Maryland. Accordingly, FREIT has reclassified the net income from the operations 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 feel that income form continuing operations (which excludes the operations of OTC) 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 have been restated for the March 31, 2004 two-for-one stock split. Results of Operations: Six and Three Months Ended April 30, 2004 and 2003 Revenue for the six months ended April 30, 2004 ("Current Six Months") increased 13.9% to $13,969,000 compared to $12,267,000 for the six months ended April 30, 2003 ("Prior Year's Six Months"). Revenue for the quarter ended April 30, 2004 ("Current Quarter") increased 13.1% to $7,095,000 compared to $6,272,000 for the quarter ended April 30, 2003 ("Prior Year's Quarter"). Income from continuing operations increased 11.4% to $2,529,000 during the Current Six Months compared to $2,270,000 for the Prior Year's Six Months. Income from continuing operations for the Current Quarter increased to $1,192,000 compared to $ 1,148,000 for the Prior Year's Quarter. The Current Six Months revenue and net income include a one-time item of $308,000 representing a gain from a lease termination payment made by a former tenant of FREIT (see discussion below). The consolidated results of operations for the six and three months ended April 30, 2004 are not necessarily indicative of the results to be expected for the full year. SEGMENT INFORMATION The following table sets forth comparative operating data for FREIT's real estate segments from continuing operations:
Six Months Ended Three Months Ended April 30, April 30, --------------------------------- -------------------------------- Increase Increase 2004 2003 (Decrease) 2004 2003 (Decrease) ---- ---- ---------- ---- ---- ---------- (in thousands of dollars) ------------------------- Retail Properties: Rental income: Same properties $ 8,067 $ 7,265 $ 802 $ 4,011 $ 3,756 $ 255 New properties 504 504 249 249 -------------------------------- ------------------------------- Total revenues 8,571 7,265 1,306 4,260 3,756 504 -------------------------------- ------------------------------- Operating expenses: Same properties 2,736 2,582 154 1,346 1,334 12 New properties 195 195 131 131 -------------------------------- ------------------------------- Total expenses 2,931 2,582 349 1,477 1,334 143 -------------------------------- ------------------------------- Net operating income: Same properties 5,331 4,683 648 2,665 2,422 243 New properties 309 -- 309 118 -- 118 -------------------------------- ------------------------------- Total Retail NOI $ 5,640 $ 4,683 $ 957 $ 2,783 $ 2,422 $ 361 ================================ =============================== Residential properties: Rental income: Same properties $ 4,963 4,865 98 2,474 2,447 27 New properties 280 280 280 280 -------------------------------- ------------------------------- Total revenues 5,243 4,865 378 2,754 2,447 307 -------------------------------- ------------------------------- Operating expenses: Same properties 2,212 2,043 169 1,143 973 170 New properties 119 119 119 119 -------------------------------- ------------------------------- Total expenses 2,331 2,043 288 1,262 973 289 -------------------------------- ------------------------------- Net operating income: Same properties 2,751 2,822 (71) 1,331 1,474 (143) New properties 161 -- 161 161 -- 161 -------------------------------- ------------------------------- Total Residential NOI $ 2,912 $ 2,822 $ 90 $ 1,492 $ 1,474 $ 18 ================================ =============================== Combined real estate NOI $ 8,552 $ 7,505 $ 4,275 $ 3,896 Reconciliation to consolidated net income: Deferred rents 155 138 80 68 Net investment income 89 101 41 43 Administrative expenses (333) (347) (151) (255) Depreciation (1,580) (1,243) (814) (622) Discontinued operations 336 396 171 248 Financing costs (4,132) (3,552) (2,107) (1,771) Minority interests (222) (332) (132) (211) ------------------- ------------------- Net income $ 2,865 $ 2,666 $ 1,363 $ 1,396 =================== ===================
The above table details the comparative net operating income ("NOI") for FREIT's Retail and Residential Segments, and reconciles the combined NOI to consolidated net income. 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. FREIT assesses and measures segment operating results based on NOI. NOI is not a measure of operating results or cash flow as measured by generally accepted accounting principles, 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. RETAIL SEGMENT FREIT's retail properties for continuing operations consist of seven (7) properties totaling approximately 1,050,000 sq. ft. Six are multi-tenanted retail centers and one is a single tenanted store. As indicated in the above table, revenues from our retail segment for the Current Six Months are up by $1,306,000 (18%) and NOI is up $957,000 (20.4%) to $5,640,000. Revenue and net operating income includes a one-time item of $308,000 representing the gain from a lease termination payment made by a former tenant located at FREIT's Westridge Square shopping center. FREIT and the tenant entered into a lease termination agreement whereby Tenant paid FREIT a lump sum payment of approximately $1.8 million ($750,000 as a rent termination payment for past and future rent payments and $1,035,000 for repairing and refurbishing space vacated by Tenant). The tenant made the payment in February 2004. The mortgage lender has agreed to the termination agreement and has entered into an escrow agreement with FREIT whereby the entire lump sum payment made by the Tenant has been deposited in an interest bearing escrow account held for the benefit of the mortgage lender. Up to $750,000 will be disbursed to FREIT in monthly installments of $31,595 over approximately twenty four (24) months, or the balance of the un-disbursed $750,000 will be disbursed to FREIT once the mortgage lender is provided with a Certificate of Occupancy ("C of O") covering all of the space vacated by the Tenant. The balance of the lease termination payment of approximately $1 million representing a Tenant Improvement ("TI") Reserve, will be disbursed to FREIT in $250,000 increments as comparable amounts of TI's are incurred, or in full at the earlier of when a C of O is obtained and the space vacated by the Tenant leased and re-occupied, when the mortgage loan has been re-paid. The former tenant's total rent and expense reimbursements aggregated approximately $488,000 per year. Revenues and NOI from same properties (those properties included in the Current Six Months and the Prior Year's Six Months), excluding the one-time lease termination income, were up 6.8% and 7.3% respectively for the Current Six Months over the Prior Year's Six Months. Operating expenses for the same properties increased 6% during the Current Six Months compared to the Prior Year's Six Months. ASSET SALE: SAndA has entered into a contract for the sale of the Olney Town Center ("OTC") in Olney, Maryland. The sale price for the property is $28.2 million. The property was acquired in April 2000 for approximately $15.5 million. The purchaser has concluded its due diligence review and is expected to close on the purchase contract on June 22, 2004. SAndA will recognize a gain of approximately $13 million from the sale. SAndA will utilize part of the selling price to repay the approximate $11 million first mortgage on the property. The operations of OTC are being classified as Discontinued Operations. The net proceeds from the OTC sale after the repayment of the first mortgage are expected to repay FREIT and the 25% minority owners for their advances made to acquire The Pierre. (See below). RESIDENTIAL SEGMENT FREIT operates nine (9) multi-family apartment communities totaling 986 apartment units. The NOI of our residential properties is summarized in the above table. On April 16, 2004, SAndA closed on the purchase of The Pierre apartments. The Pierre is a 269-unit high-rise apartment building located in Hackensack, N.J. The contract purchase price for The Pierre was approximately $44 million. This amount, together with estimated transaction costs of approximately $2 million, resulted in total acquisition costs of approximately $46.0 million. The acquisition costs were financed in part by a mortgage loan in the approximate amount of $29.6 million and the balance of approximately $16.4 million in cash. FREIT provided 75% of the cash required with the balance, of approximately $4.2 million provided in the form of a note, provided by the 25% minority owners of SandA. The Pierre has been included in operations for fifteen days of April 2004 and had no material impact on FREIT's operations. Residential revenue for Same Properties for the Current Six Months and Current Quarter increased modestly by 2 % and 1.1% respectively over the prior year's comparable periods. These increases were insufficient to cover the increases in expenses during the same periods. While apartment rental increases are holding, average occupancy during the Current Quarter fell to 93.7% compared to an average occupancy of 96.7% during the Prior Year's Quarter. FINANCING COSTS Financing costs are summarized as follows: Six Months Ended Three Months Ended April 30, April 30, ------------------- ------------------- 2004 2003 2004 2003 (In thousands of Dollars) Fixed rate mortgages: 1st Mortgages: Existing $ 3,543 $ 3,375 $ 1,781 $ 1,666 New Damascus 115 57 Pierre 71 71 2nd Mortgages 284 76 138 52 Other 25 13 13 8 ------------------- ------------------- Total interest expense 4,038 3,464 2,060 1,726 Amortization of deferred mortgage costs 94 88 47 45 ------------------- ------------------- Total financing costs from continuing operations $ 4,132 $ 3,552 $ 2,107 $ 1,771 =================== =================== Financing Costs for the Current Six Months and Current Quarter increased by $580,000 and $336,000 respectively over the prior year's comparable periods. The increases are principally attributable to the mortgages from the newly acquired Damascus and Pierre properties, the approximate $5.5 million increase in the first mortgage on the Preakness property, and from the interest costs relating to the second mortgages placed on several of FREIT's residential properties. LIQUIDITY AND CAPITAL RESOURCES Our financial condition remains strong. Net Cash Provided By Operating Activities was $3.0 million for the Current Six Months compared to $2.5 million for the Prior Year's Six Months. 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 April 30, 2004, we had cash and cash equivalents totaling $4.8 million. During April 2004 FREIT utilized approximately $8 million of its cash and cash equivalents and drew down approximately $4 million from its line of credit to fund its portion of the purchase Price of the Pierre. It is expected that these funds will be recouped from the sale of the Olney Town Center. As previously reported, we are planning the construction of 129 apartment rental units in Rockaway, NJ. The total capital required for this project is estimated at $13.8 million. 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 April 30, 2004 FREIT's aggregate outstanding mortgage debt was $155.4 million. Approximately $144.6 million bears a fixed weighted average interest rate of 6.4%, and an average life of approximately 8.3 years. Approximately $10.8 million of mortgage debt secured by the Olney Town Center (real estate being held for sale) 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 is due at the end of March 2008. The fixed rate 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: Fiscal Year $ Millions ----------- ---------- 2007 $ 15.7 2008 $ 16.8 2010 $ 9.2 2013 $ 8.0 2014 $ 23.2 2016 $ 24.5 2019 $ 24.4 The following table shows the estimated fair value and carrying value of our long-term debt at April 30, 2004 and October 31, 2003: April 30, October 31, (In Millions) 2004 2003 ------------- ---- ---- Fair Value $158 $132 Carrying Value $155 $127 Fair values are estimated based on market interest rates at April 30, 2004 and October 31, 2003 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, at April 30, 2004 a one percent interest rate increase would reduce the Fair Value of our debt by $9.2 million, and a one percent decrease would increase the Fair Value by $10.1 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. 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 would likely never do. FREIT had a variable interest rate mortgage securing its Patchogue, NY property. To reduce interest rate fluctuations, during 2002, FREIT entered into an interest rate swap contract. This rate swap contract effectively converted variable interest rate payments to fixed interest rate payments. The contract was initially based on a notional amount of approximately $6,769,000 ($6,657,000 at April 30, 2004). FREIT has the following derivative-related risks with its swap contract: 1) early termination risk, and 2) Counterparty credit risk. Early Termination Risk: If FREIT wants to terminate its swap contract before maturity, it has to 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 swap's parties. If current variable interest rates are below FREIT's fixed interest rate payments, this could be costly. At April 30, 2004, FREIT's liability for early termination would be $128,000. This amount has been included in comprehensive income. Conversely, if interest rates rise above FREIT's fixed interest payments and FREIT wished early termination, FREIT would realize a gain on termination. Counterparty Credit Risk: Each party to a swap contract bears the risk that its Counterparty will default on its obligation to make a periodic payment. FREIT reduces this risk by entering swap contracts only with major financial institutions that are experienced market makers in the derivatives market. FREIT also has the ability to draw, if needed, against its $14 million, two-year revolving line of credit. To date FREIT has drawn approximately $4 million against this line, which was used for the acquisition of The Pierre. 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 at 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. There has been no change in FREIT's internal control over financial reporting that occurred during FREIT's last fiscal quarter that has materially affected, or is reasonably likely to material 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 4: Submission of Matters to a Vote of Security Holders. The following matter was submitted to a vote of security holders at FREIT's 2004 Annual Meeting of Shareholders held on April 7, 2004: The shareholders re-elected Mr. Donald W. Barney to serve as a Trustee for a two (2) year term, and Messrs. Ronald J. Artinian and Alan L. Aufzien were re-elected to serve a Trustees for three (3) year terms. The balloting for election was as follows: % Of OUTSTANDING ON VOTES NOMINEE VOTES FOR RECORD DATE WITHHELD ------- --------- ----------- -------- Donald W. Barney 2,860,773 90.7% 5,016 Ronald J. Artinian 2,865,789 90.8% -- Alan L. Aufzien 2,865,789 90.8% -- Item 6. Exhibits and Reports on Form 8-K During the second quarter ended April 30, 2004, the following reports on Form 8-K were filed with the SEC: (a) On February 6, 2004, FREIT filed a report on Form 8-K announcing it had entered into a contract to purchase an apartment property in Northern New Jersey. (b) On March 9, 2004, FREIT filed a report on Form 8-K announcing the declaration of a two-for-one share split. (c) On March 12, 2004, FREIT filed a report on Form 8-K announcing its operating results for the quarter ended January 31, 2004. A copy of the press release was attached. (d) On April 12, 2004, FREIT filed a report on Form 8-K announcing its subsidiary, SAndA Commercial Associates limited Partnership ("SAndA"), had entered into a contract for the sale of the Olney Town Center, Olney, MD; and that SAndA had entered into a contract to purchase The Pierre apartment community in Hackensack, NJ. Exhibit Index Exhibit 31.1 Section 302 Certification of Chief Executive Officer Exhibit 31.2 Section 302 Certification of Chief Financial Officer Exhibit 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 Exhibit 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 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: June 29, 2004 /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 2 ex31-1.txt EXHIBIT 31.1 CERTIFICATION I, Robert S. Hekemian, certify that: 1. I have reviewed this report on Form 10-Q/A 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(s) 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(s) 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: June 29, 2004 /s/ Robert S. Hekemian ---------------------- Robert S. Hekemian Chairman of the Board and Chief Executive Officer EX-31.2 3 ex31-2.txt EXHIBIT 31.2 CERTIFICATION I, Donald W. Barney, certify that: 1. I have reviewed this report on Form 10-Q/A 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(s) 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(s) 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: June 29, 2004 /s/ Donald W. Barney -------------------- Donald W. Barney President, Treasurer and Chief Financial Officer EX-32.1 4 ex32-1.txt EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 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/A for the quarter ended April 30, 2004 (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.ss. 1350, as adopted pursuant to ss. 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. ss. 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. Date: June 29, 2004 /s/ Robert S. Hekemian ---------------------- Robert S. Hekemian Chairman of the Board and Chief Executive Officer EX-32.2 5 ex32-2.txt EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 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/A for the quarter ended April 30, 2004 (the "Report"), I, Donald W. Barney, President, Treasurer and Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C.ss. 1350, as adopted pursuant to ss. 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. ss. 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. Date: June 29, 2004 /s/ Donald W. Barney -------------------- Donald W. Barney President, Treasurer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----