EX-99.1 2 ex99-1.htm EXHIBIT 99.1 ex99-1.htm
Exhibit 1


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HACKENSACK, NJ,     May 21, 2009 – First Real Estate Investment Trust (“FREIT”) announced its operating results for the six and three-month periods ended April 30, 2009. 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, 2009 (“Current Six Months”) increased 3.0% to $21,319,000 compared to $20,706,000 for the six months ended April 30, 2008 (“Prior Six Months”). Real Estate revenue for the three months ended April 30, 2009 (“Current Quarter”) increased 3.1% to $10,570,000 compared to $10,249,000 for the three months ended April 30, 2008 (“Prior Year’s Quarter”).
 
Net income for the Current Six Months was $2,606,000 ($0.38 diluted) compared to $2,640,000 ($0.38 diluted) for the Prior Six Months. Net income for the Current Quarter was $1,085,000 ($0.16 diluted) compared to $1,237,000 ($0.18 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, 2009 and 2008:
 
   
Six Months Ended April 30,
    
Three Months Ended April 30,
  
   
2009
    
2008
    
Change
    
2009
    
2008
    
Change
  
   
(in thousands, except per share)
    
(in thousands, except per share)
  
Real estate revenues:
                                    
  Commercial properties
   $ 11,577     $ 11,179     $ 398     $ 5,719     $ 5,484     $ 235  
  Residential properties
     9,742       9,527       215       4,851       4,765       86  
      Total real estate revenues
     21,319       20,706       613       10,570       10,249       321  
                                                 
Operating expenses:
                                                
  Real estate operations
     8,987       8,682       305       4,646       4,245       401  
  General and administrative
     880       810       70       466       420       46  
  Depreciation
     2,937       2,674       263       1,463       1,336       127  
      Total operating expenses
     12,804       12,166       638       6,575       6,001       574  
                                                 
      Operating income
     8,515       8,540       (25 )     3,995       4,248       (253 )
                                                 
Investment income
     130       313       (183 )     51       154       (103 )
                                                 
  Financing costs
     (5,381 )     (5,818 )     437       (2,666 )     (2,885 )     219  
  Minority interest in earnings of subsidiaries
     (658 )     (395 )     (263 )     (295 )     (280 )     (15 )
                                                 
Net income
     2,606       2,640       (34 )     1,085       1,237       (152 )
                                                 
Earnings per share:
                                                
  Basic
   $ 0.38     $ 0.39     $ (0.01 )   $ 0.16     $ 0.18     $ (0.02 )
  Diluted
   $ 0.38     $ 0.38     $ -     $ 0.16     $ 0.18     $ (0.02 )
                                                 
Weighted average shares outstanding:
                                                
  Basic
     6,945       6,781               6,942       6,799          
  Diluted
     6,945       6,894               6,942       6,911          



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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:
Six Months Ended April 30:
                                                        
   
Commercial
  
Residential
  
Combined
  
   
Six Months Ended
                
Six Months Ended
                
Six Months Ended
  
   
April 30,
    
Increase (Decrease)
  
April 30,
    
Increase (Decrease)
  
April 30,
  
   
2009
    
2008
    
$
    
%
  
2009
    
2008
    
$
    
%
  
2009
    
2008
  
   
($ in thousands)
      
($ in thousands)
      
($ in thousands)
  
Rental income
   $ 8,746     $ 8,486     $ 260       3.1 %   $ 9,559     $ 9,438     $ 121       1.3 %   $ 18,305     $ 17,924  
Reimbursements
     2,641       2,456       185       7.5 %     -       -       -               2,641       2,456  
Other
     104     97       7       7.2 %     183       89       94       105.6 %     287       186  
Total revenue
     11,491       11,039       452       4.1 %     9,742       9,527       215       2.3 %     21,233       20,566  
                                                                                 
Operating expenses
     4,721       4,412       309       7.0 %     4,266       4,270       (4 )     -0.1 %     8,987       8,682  
Net operating income
   $ 6,770     $ 6,627     $ 143       2.2 %   $ 5,476     $ 5,257     $ 219       4.2 %     12,246       11,884  
Average
                                                                                
Occupancy %
     89.7 %     90.0 %             -0.3 %     93.3 %     95.2 %             -1.9 %                
                                                                                 
                           
Reconciliation to consolidated net income:
                          
                           
Deferred rents - straight lining
                       104       92  
                           
Amortization of acquired leases
                       (18 )     48  
                           
Net investment income
                       130       313  
                           
General and administrative expenses
               (880 )     (810 )
                           
Depreciation
                               (2,937 )     (2,674 )
                           
Financing costs
                               (5,381 )     (5,818 )
                           
Minority interest
                               (658 )     (395 )
                                   
Net income
                     $ 2,606     $ 2,640  
                                                                                 
                                                                                 
Three Months Ended April 30:
                                                                          
   
Commercial
  
Residential
  
Combined
  
   
Three Months Ended
  
 
            
Three Months Ended
  
 
            
Three Months Ended
  
   
April 30,
    
Increase (Decrease)
  
April 30,
    
Increase (Decrease)
  
April 30,
  
   
2009
    
2008
    
$
    
%
  
2009
    
2008
    
$
    
%
  
2009
    
2008
  
   
($ in thousands)
        
($ in thousands)
        
($ in thousands)
  
Rental income
   $ 4,387     $ 4,292     $ 95       2.2 %   $ 4,769     $ 4,723     $ 46       1.0 %   $ 9,156     $ 9,015  
Reimbursements
     1,236       1,071       165       15.4 %     -       -       -               1,236       1,071  
Other
     52     52     -     0.0 %     82     42     40     95.2 %     134       94  
Total revenue
     5,675       5,415       260       4.8 %     4,851       4,765       86       1.8 %     10,526       10,180  
                                                                                 
Operating expenses
     2,414       2,121       293       13.8 %     2,232       2,124       108       5.1 %     4,646       4,245  
Net operating income
   $ 3,261     $ 3,294     $ (33 )     -1.0 %   $ 2,619     $ 2,641     $ (22 )     -0.8 %     5,880       5,935  
Average
                                                                                
Occupancy %
     90.4 %     90.7 %             -0.3 %     92.6 %     94.7 %             -2.1 %                
                                                                                 
                           
Reconciliation to consolidated net income:
                          
                           
Deferred rents - straight lining
                       53       45  
                           
Amortization of acquired leases
                       (9 )     24  
                           
Net investment income
                       51       154  
                           
General and administrative expenses
               (466 )     (420 )
                           
Depreciation
                               (1,463 )     (1,336 )
                           
Financing costs
                               (2,666 )     (2,885 )
                           
Minority interest
                               (295 )     (280 )
                                   
Net income
                     $ 1,085     $ 1,237  
 
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, financing costs and other non-operating activity. 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.
 
Both our commercial and residential business segments remain profitable. Still, the modest revenue growth, especially during the Current Quarter, failed to outpace the increase in operating expenses, causing combined NOI to be slightly under the Prior Year’s Quarter. The current recession has also impacted FREIT as described below.
 
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COMMERCIAL SEGMENT
The current economic recession has reduced consumer spending, resulting in declining sales and lower profitability to some of our commercial tenants.  As a result, some tenants have closed their business; some have been put on relaxed payment plans, and some are seeking outright rent relief. Delinquencies have risen, causing us to prudently increase our allowance for doubtful accounts. To date our tenant fall-out has been minor as average occupancy has declined only 0.3%, however, we may experience additional fall-out of some smaller tenants, and if the recession is prolonged, some larger tenants.  We expect re-leasing of vacated space to take longer and, generally at lower rents that reflect current economic conditions. We expect our revenues at our commercial properties to be flat or slightly lower during fiscal 2009 than during fiscal 2008.
 
RESIDENTIAL SEGMENT
While average occupancy at our residential properties for the Current Six Months is at 93.3%, the effects of the economic recession are being felt. Year-to-date, occupancy has fallen 1.9% compared to the Prior Six Months, and declined 2.1% during the Current Quarter compared to the Prior Year’s Quarter. These declines are attributable to the higher than normal unemployment in our areas of operation. Additionally, we are experiencing rent reductions, a higher number of move-outs, and higher than usual incidences of delinquencies of rental payments. As with our commercial segment, we have prudently increased our allowances for doubtful accounts. We expect these trends to continue through fiscal 2009 and result in residential revenues that are flat or slightly lower than during fiscal 2008.

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,
  
     
2009
    
2008
    
2009
    
2008
  
     
($ in thousands)
    
($ in thousands)
  
                           
Net income
     $ 2,606     $ 2,640     $ 1,085     $ 1,237  
Depreciation
       2,937       2,674       1,463       1,336  
Amortization of deferred mortgage costs
     118       141       59       68  
Deferred rents (Straight lining)
     (104 )     (92 )     (53 )     (45 )
Amortization of acquired leases
     18       (48 )     9       (24 )
Capital Improvements - Apartments
     (106 )     (258 )     (27 )     (118 )
Minority interests:
                                
Equity in earnings of affiliates
     658       395       295       280  
Distributions to minority interests
     (563 )     (595 )     (443 )     (268 )
                                   
 
FFO
   $ 5,564     $ 4,857     $ 2,388     $ 2,466  
                                   
 
 Per Share - Basic
   $ 0.80     $ 0.72     $ 0.34     $ 0.36  
 
 Per Share - Diluted
   $ 0.80     $ 0.70     $ 0.34     $ 0.36  
                                   
 
Weighted Average Shares Outstanding:
          
 
 Basic
     6,945       6,781       6,942       6,799  
 
 Diluted
     6,945       6,894       6,942       6,911  
 
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.

DIVIDENDS
 
The second quarter dividend of $0.30 per share is payable on June 12, 2009 to shareholders of record on June 2, 2009.

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 $242 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
 
Visit us on the web:  www.freitnj.com

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