EX-1 2 ex1.htm EXHIBIT 1 ex1.htm


Exhibit 1


HACKENSACK, NJ,  June 9, 2008 – First Real Estate Investment Trust (“FREIT”) announced its operating results for the six and three months ended April 30, 2008. The results of operations for the six and three months are not necessarily indicative of future operating results.

RESULTS OF OPERATIONS
 
Real Estate revenue for the six months ended April 30, 2008 (“Current Six Months”) increased 3.2% to $20,706,000 compared to $20,055,000 for the six months ended April 30, 2007 (“Prior Six Months”). Real Estate revenue for the three months ended April 30, 2008 (“Current Quarter”) increased 3.0% to $10,249,000 compared to $9,948,000 for the three months ended April 30, 2007 (“Prior Year’s Quarter”).  The increase in real estate revenues was principally attributable to FREIT’s residential operations, primarily at The Boulders and The Pierre Towers, which accounted for 58% and 56% of the increase for the current six and three month periods, respectively.
 
Net income for the Current Six Months was $2,640,000 ($0.38 diluted) compared to $1,977,000 ($0.29 diluted) for the Prior Six Months. Net income for the Current Quarter was $1,237,000 ($0.18 diluted) compared to $1,131,000 ($0.16 diluted) for the Prior Year’s Quarter. Refer to the schedule below for a detailed analysis of the major changes that impacted revenue and net income for the six and three months ended April 30, 2008 and 2007:
 
   
Six Months Ended April 30,
    
Three Months Ended April 30,
  
   
2008
    
 2007*
    
Change
    
2008
    
 2007*
    
Change
  
   
(in thousands, except per share)
    
(in thousands, except per share)
  
Real estate revenues:
                                        
  Commercial properties
   $ 11,179     $ 11,000     $ 179     $ 5,484     $ 5,406     $ 78  
  Residential properties
     9,527       9,055       472       4,765       4,542       223  
      Total real estate revenues
     20,706       20,055       651       10,249       9,948       301  
                                                 
Operating expenses:
                                                
  Real estate operations
     8,682       8,431       251       4,245       4,065       180  
  General and administrative
     810       803       7       420       413       7  
  Depreciation
     2,674       2,649       25       1,336       1,346       (10 )
      Total operating expenses
     12,166       11,883       283       6,001       5,824       177  
                                                 
      Operating income
     8,540       8,172       368       4,248       4,124       124  
                                                 
Investment income
     313       225       88       154       138       16  
                                                 
  Financing costs
     (5,818 )     (6,088 )     270       (2,885 )     (3,045 )     160  
  Minority interest in earnings of subsidiaries
     (395 )     (258 )     (137 )     (280 )     (120 )     (160 )
  Distribution to certain minority interests
     -       (150 )     150       -       -       -  
Income from continuing operations
     2,640       1,901       739       1,237       1,097       140  
Income from discontinued operations
     -       76       (76 )     -       34       (34 )
Net income
   $ 2,640     $ 1,977     $ 663     $ 1,237     $ 1,131     $ 106  
                                                 
Basic earnings per share:
                                                
  Continuing operations
   $ 0.39     $ 0.28     $ 0.11     $ 0.18     $ 0.16     $ 0.02  
  Discontinued operations
   $ -     $ 0.01     $ (0.01 )   $ -     $ 0.01     $ (0.01 )
Net income
   $ 0.39     $ 0.29     $ 0.10     $ 0.18     $ 0.17     $ 0.01  
                                                 
Diluted earnings per share:
                                                
  Continuing operations
   $ 0.38     $ 0.28     $ 0.10     $ 0.18     $ 0.15     $ 0.03  
  Discontinued operations
   $ -     $ 0.01     $ (0.01 )   $ -     $ 0.01     $ (0.01 )
Net income
   $ 0.38     $ 0.29     $ 0.09     $ 0.18     $ 0.16     $ 0.02  
                                                 
Weighted average shares outstanding:
                                                
  Basic
     6,781       6,751               6,799       6,751          
  Diluted
     6,894       6,916               6,911       6,915          
                                                 
* Restated to reflect reclassification of discontinued operations.
                                  



 
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SEGMENT INFORMATION
 
The following table sets forth comparative net operating income ("NOI") data for FREIT’s real estate segments and reconciles the NOI to consolidated net income for the Current Six Months and Current Quarter, as compared to the prior year’s comparable periods:
                                                             
   
Commercial
    
Residential
    
Combined
  
   
Six Months Ended
                
Six Months Ended
                
Six Months Ended
  
   
April 30,
    
Increase (Decrease)
    
April 30,
    
Increase (Decrease)
    
April 30,
  
   
2008
    
2007
    
 $
      
%
    
2008
       2007*    
 $
      
%
    
2008
    
  2007*
  
   
($ in thousands)
                  
($ in thousands)
                  
($ in thousands)
  
Rental income
   $ 8,486     $ 8,262     $ 224       2.7%     $ 9,438     $ 8,974     $ 464       5.2%     $ 17,924     $ 17,236  
Reimbursements
     2,456       2,373       83       3.5%       -       -       -               2,456       2,373  
Other
     97       100       (3 )     -3.0%       89       81       8       9.9%       186       181  
Total revenue
     11,039       10,735       304       2.8%       9,527       9,055       472       5.2%       20,566       19,790  
                                                                                 
Operating expenses
     4,412       4,303       109       2.5%       4,270       4,128       142       3.4%       8,682       8,431  
Net operating income
   $ 6,627     $ 6,432     $ 195       3.0%     $ 5,257     $ 4,927     $ 330       6.7%       11,884       11,359  
Average
                                                                                
Occupancy %
     90.0%       89.7%               0.3%       95.2%       94.3%               0.9%                  
                                                                                 
                          Reconciliation to consolidated net income:                          
                           
Deferred rents - straight lining
                       92       114  
                           
Amortization of acquired leases
                       48       151  
                           
Net investment income
                               313       225  
                           
General and administrative expenses
               (810 )     (803 )
                           
Depreciation
                               (2,674 )     (2,649 )
                           
Financing costs
                               (5,818 )     (6,088 )
                           
Distributions to certain minority interests
               -       (150 )
                           
Minority interest
                               (395 )     (258 )
                           
Income from continuing operations
               2,640       1,901  
                           
Income from discontinued operations
               -       76  
                                   
Net income
                     $ 2,640     $ 1,977  
                                                                                 
   
Commercial
    
Residential
    
Combined
  
   
Three Months Ended
                    
Three Months Ended
                    
Three Months Ended
  
   
April 30,
    
Increase (Decrease)
    
April 30,
    
Increase (Decrease)
    
April 30,
  
   
2008
    
2007
    
  $
      
%
    
2008
    
  2007*
    
 $ 
      
%
    
2008
    
  2007*
  
   
($ in thousands)
                    
($ in thousands)
                    
($ in thousands)
  
Rental income
   $ 4,292     $ 4,126     $ 166       4.0%     $ 4,723     $ 4,521     $ 202       4.5%     $ 9,015     $ 8,647  
Reimbursements
     1,071       1,089       (18 )     -1.7%       -       -       -               1,071       1,089  
Other
     52       57       (5 )     -8.8%       42       21       21       100.0%       94       78  
Total revenue
     5,415       5,272       143       2.7%       4,765       4,542       223       4.9%       10,180       9,814  
                                                                                 
Operating expenses
     2,121       2,138       (17 )     -0.8%       2,124       1,927       197       10.2%       4,245       4,065  
Net operating income
   $ 3,294     $ 3,134     $ 160       5.1%     $ 2,641     $ 2,615     $ 26       1.0%       5,935       5,749  
Average
                                                                                
Occupancy %
     90.7%       89.9%               0.8%       94.7%       94.7%               0.0%                  
                                                                                 
                          Reconciliation to consolidated net income:                          
                           
Deferred rents - straight lining
                       45       59  
                           
Amortization of acquired leases
                       24       75  
                           
Net investment income
                               154       138  
                           
General and administrative expenses
               (420 )     (413 )
                           
Depreciation
                               (1,336 )     (1,346 )
                           
Financing costs
                               (2,885 )     (3,045 )
                           
Minority interest
                               (280 )     (120 )
                           
Income from continuing operations
               1,237       1,097  
                           
Income from discontinued operations
               -       34  
                                   
Net income
                     $ 1,237     $ 1,131  
* Restated to reflect reclassification of discontinued operations.
                                                  
 
NOI is based on operating revenue and expenses directly associated with the operations of the real estate properties, but excludes deferred rents (straight lining), lease amortization, 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.

 
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COMMERCIAL SEGMENT
 
FREIT’s commercial properties consist of ten (10) properties totaling approximately 1,127,000 sq. ft. of retail space and 138,000 sq. ft. of office space.  Seven (7) are multi-tenanted retail or office centers, and one is a single tenanted store. In addition, FREIT has two parcels of leased land, from which it receives rental income. One from a tenant who has built and operates a bank branch on land FREIT owns in Rockaway, NJ. The other is from a tenant who intends to build and operate a bank branch on land FREIT owns in Rochelle Park, NJ.
 
As indicated in the above Segment information table, revenue from FREIT’s commercial segment for the Current Six Months and Current Quarter increased by 2.8% and 2.7%, respectively, over the comparable prior year’s periods. NOI for the Current Six Months and Current Quarter increased by 3.0% and 5.1%, over the comparable prior year’s periods. The favorable increase in both revenue and NOI was primarily attributable to our land in Rochelle Park, purchased in September 2007, which was generating revenue for the full Current Six Month period. However, the current year increases in both revenues and NOI were adversely affected by the anticipated planned renovation at our Damascus Shopping Center property located in Damascus, MD (the “Damascus Center”), which caused a temporary decline in occupancy levels at the Damascus Center. Average occupancy rates for FREIT’s commercial segment for the Current Six Months was at 94.7%, exclusive of the Damascus Center, compared to 93.8% for the prior year’s period. As a result of this renovation, temporary declines in both revenue and NOI were experienced at the Damascus Center of $61,000 and $50,000, respectively for the Current Six Month period. (See discussion below).
 
The impact of the Damascus renovation on the six and three month results of the commercial segment is reflected in the following table:
 
     
Six Months Ended April 30,
  
     
2008
    
2007
  
     
Commercial
          
Same
    
Commercial
          
Same
  
$(000)
  
Properties
    
Damascus
    
Properties
    
Properties
    
Damascus
    
Properties
  
Revenues
     $ 11,039     $ 354     $ 10,685     $ 10,735     $ 415     $ 10,320  
                                                     
Expenses
       4,412       208       4,204       4,303       219       4,084  
                                                     
NOI
     $ 6,627     $ 146     $ 6,481     $ 6,432     $ 196     $ 6,236  
                                                     
       
Three Months Ended April 30,
  
       
2008
    
2007
  
       
Commercial
            
Same
    
Commercial
            
Same
  
$(000)
  
Properties
    
Damascus
    
Properties
    
Properties
    
Damascus
    
Properties
  
Revenues
     $ 5,415     $ 202     $ 5,213     $ 5,272     $ 216     $ 5,056  
                                                     
Expenses
       2,121       110       2,011       2,138       131       2,007  
                                                     
NOI
     $ 3,294     $ 92     $ 3,202     $ 3,134     $ 85     $ 3,049  
 
DEVELOPMENT ACTIVITIES
 
A modernization and expansion is underway at our Damascus Center in Damascus, MD (owned by our 70% owned affiliate, Damascus Centre, LLC). Total construction costs are expected to approximate $21.9 million.  Building plans for Phase I have been approved and construction on Phase I began in June 2007 with completion expected no later than June 2008. Phase I construction costs will approximate $4 - $4.5 million of which approximately $4.2 million has already been expended. On February 12, 2008, Damascus Centre, LLC closed on a $27.3 million construction loan that is available to fund already expended and future construction costs.  This loan will be drawn upon as needed. As of April 30, 2008, Damascus drew down $4.2 million from this loan to cover construction costs. Because of this expansion, leases for certain tenants have been allowed to expire and not renewed. This has caused occupancy to decline, on a temporary basis, during the construction phase.
 
Development plans and studies for the expansion and renovation of our Rotunda property in Baltimore, MD (owned by our 60% owned affiliate Grande Rotunda, LLC) continues. The Rotunda property, on an 11.5-acre site, currently consists of an office building containing 138,000 sq. ft. of office space and 78,000 sq. ft. of retail space on the lower floor of the main building. The building plans incorporate an expansion of approximately 180,500 sq ft. of retail space, approximately 302 residential rental apartments, 56 condominium units and 120 hotel rooms, and structured parking. These development costs are expected to approximate $145 million. City Planning Board approval has been received, and construction is expected to start during calendar 2008.

 
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RESIDENTIAL SEGMENT
 
FREIT operates nine (9) multi-family apartment communities totaling 1,075 apartment units. As indicated in the table above, revenue from our residential segment for the Current Six Months increased 5.2% to $9,527,000 and NOI for the same period is also up 6.7% to $5,257,000. For the Current Quarter, revenue increased 4.9% to $4,765,000 and NOI is also up slightly by 1.0% to $2,641,000. The primary reason for the increase was higher occupancy levels, specifically at The Boulders and The Pierre Towers, which continue to be strong contributors to FREIT’s residential operations, accounting for 81% of the increase in revenue and 88% of the increase in NOI for the Current Six Months.
 
Revenues from FREIT’s residential properties continue to increase. Average occupancy rates for the Current Six Months increased to 95.2%, compared to 94.3% for the Prior Six Months. The occupancy level at The Boulders was in excess of 96% at the end of April 2008, and averaged 94.7% during the Current Six Month period.
 
FUNDS FROM OPERATIONS (“FFO”)
 
Many consider FFO as the standard measurement of a REIT’s performance. We compute FFO as follows:

Funds From Operations ("FFO")
                        
     
Six Months Ended
    
Three Months Ended
  
     
April 30,
    
April 30,
  
     
2008
    
 2007*
    
2008
    
 2007*
  
     
($ in thousands, except per share amounts)
  
                               
Net income
     $ 2,640     $ 1,977     $ 1,237     $ 1,131  
Depreciation
       2,674       2,649       1,336       1,346  
Amortization of deferred mortgage costs
     141       132       68       67  
Deferred rents (Straight lining)
     92       (114 )     45       (59 )
Amortization of acquired leases
     (48 )     (151 )     (24 )     (75 )
Capital Improvements - Apartments
     (258 )     (239 )     (118 )     (65 )
Discontinued operations
     -       (76 )     -       (34 )
Minority interests:
                                
Equity in earnings of affiliates
     395       408       280       120  
Distributions to minority interests
     (595 )     (387 )     (268 )     (87 )
                                   
 
FFO
   $ 5,041     $ 4,199     $ 2,556     $ 2,344  
                                   
 
 Per Share - Basic
   $ 0.74     $ 0.62     $ 0.38     $ 0.35  
 
 Per Share - Diluted
   $ 0.73     $ 0.61     $ 0.37     $ 0.34  
                                   
 
Weighted Average Shares Outstanding:
          
 
 Basic
     6,781       6,751       6,799       6,751  
 
 Diluted
     6,894       6,916       6,911       6,915  
                                   
* Restated to reflect reclassification of discontinued operations.
  
 
FFO does not represent cash generated from operating activities in accordance with accounting principles generally accepted in the United States of America, and therefore should not be considered a substitute for net income as a measure of results of operations or for cash flow from operations as a measure of liquidity. Additionally, the application and calculation of FFO by certain other REITs may vary materially from that of FREIT’s, and therefore FREIT’s FFO and the FFO of other REITs may not be directly comparable.

 

 
4
 


DIVIDENDS
 
The second quarter dividend of $0.30 per share is payable on June 17, 2008 to shareholders of record on June 3, 2008.
 
The statements in this report that relate to future earnings or performance are forward-looking. Actual results might differ materially and be adversely affected by such factors as longer than anticipated lease-up periods or the inability of tenants to pay increased rents. Additional information about these factors is contained in the Trust’s filings with the SEC including the Trust’s most recent filed report on Form 10-K and Form 10-Q.
 
First Real Estate Investment Trust is a publicly traded (over-the-counter – symbol FREVS) REIT organized in 1961. It has approximately $243 million (historical cost basis) of assets. Its portfolio of residential and commercial properties extends from Eastern L.I. to Maryland, with the largest concentration in Northern New Jersey.
 

 
For additional information contact Shareholder Relations at (201) 488-6400
 
 
 
 
 
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