Mortgages, notes payable and credit line

12 Months Ended

Oct. 31, 2011

Mortgages Notes Payable And Credit Line

Mortgages, notes payable and credit line

Note 4 – Mortgages, notes payable and credit line: 

	October 31,
	2011		2010
	(In Thousands of Dollars)
Frederick, MD (A)	$	22,000	$	22,000
Rockaway, NJ (B)		19,197		19,546
Westwood, NJ (C)		8,307		8,563
Spring Lake Heights, NJ (D)		2,911		2,999
Patchogue, NY (E)		5,713		5,798
Wayne, NJ (F)		19,501		19,739
River Edge, NJ (G):
First mortgage		4,235		4,363
Second mortgage		1,617		1,674
Maywood, NJ (H):
First mortgage		3,073		3,165
Second mortgage		1,147		1,187
Westwood, NJ (I)		23,144		23,500
Wayne, NJ (J)		28,482		29,220
Hackensack, NJ (K)		32,901		33,410
Total fixed rate mortgage loans		172,228		175,164
Baltimore, MD (L)		19,290		19,420
Damascus, MD - Construction Loan (M)		11,757		10,020
Total  mortgages and notes payable	$	203,275	$	204,604

(A)	Payable in monthly installments of interest only computed over the actual number of days in the elapsed monthly interest period at the rate of 5.55% through May 2017 at which time the outstanding balance is due. The mortgage is secured by a retail building in Frederick, Maryland having a net book value of approximately $18,190,000 as of October 31, 2011.
(B)	Payable in monthly installments of $115,850 including interest at 5.37% through February 2022 at which time the outstanding balance is due. The mortgage is secured by a residential building in Rockaway, New Jersey having a net book value of approximately $18,444,000 as of October 31, 2011.
(C)	Payable in monthly installments of $73,248 including interest at 7.38% through February 2013 at which time the outstanding balance is due. The mortgage is secured by a retail building in Westwood, New Jersey having a net book value of approximately $9,299,000 as of October 31, 2011.
(D)	Payable in monthly installments of $23,875 including interest at 6.70% through December 2013 at which time the outstanding balance is due. The mortgage is secured by an apartment building in Spring Lake Heights, New Jersey having a net book value of approximately $424,000 as of October 31, 2011.
(E)	Payable in monthly installments of $36,457 including interest at 6.125%, through March 2018 at which time the outstanding balance is due. Under the terms of the mortgage loan agreement, FREIT can request, during the term of the loan, additional fundings that will bring the outstanding principal balance up to 75% of loan-to-value (percentage of mortgage loan to total appraised value of property securing the loan). The mortgage is secured by a retail building in Patchogue, New York having a net book value of approximately $7,823,000 as of October 31, 2011.
(F)	Payable in monthly installments of $121,100 including interest at 6.09%, through September 1, 2019 at which time the outstanding balance is due. The mortgage is secured by an apartment building in Wayne, New Jersey having a net book value of approximately $1,345,000 as of October 31, 2011.

(G)	The first mortgage is payable in monthly installments of $34,862 including interest at 6.75% through December 2013 at which time the outstanding balance is due. The second mortgage is payable in monthly installments of $12,318 including interest at 5.53% through December 2013 at which time the outstanding balance is due. The mortgages are secured by an apartment building in River Edge, New Jersey having a net book value of approximately $1,092,000 as of October 31, 2011.
(H)	The first mortgage is payable in monthly installments of $25,295 including interest at 6.75% through December 2013 at which time the outstanding balance is due. The second mortgage is payable in monthly installments of $8,739 including interest at 5.53% through December 2013 at which time the outstanding balance is due. The mortgages are secured by an apartment building in Maywood, New Jersey having a net book value of approximately $678,000 as of October 31, 2011.
(I)	On October 20, 2010, Westwood Hills, LLC refinanced the mortgage loans secured by its Westwood Hills apartment property in Westwood, NJ, with a new mortgage for $23.5 million. The refinanced mortgages had outstanding principal balances that aggregated approximately $15.4 million at a weighted average interest rate of 6.6%, and were due December 31, 2013. A $2.1 million prepayment penalty was incurred in connection with such refinancing. The new mortgage is payable in monthly installments of $120,752 including interest of 4.62%, through November 1, 2020, at which time the outstanding balance is due. The mortgage is secured by an apartment building in Westwood, New Jersey having a net book value of approximately $11,052,000 as of October 31, 2011.
(J)	Payable in monthly installments of interest only of $161,067 at the rate of 6.04% through June 2006, thereafter payable in monthly installments of $206,960 including interest until June 2016 at which time the unpaid balance is due. The mortgage is secured by a shopping center in Wayne, NJ having a net book value of approximately $28,893,000 as of October 31, 2011.
(K)	Payable in monthly installments of interest only of $152,994 at the rate of 5.38% through May 2009, thereafter payable in monthly installments of $191,197 including interest until May 2019 at which time the unpaid balance is due. The mortgage is secured by an apartment building in Hackensack, NJ having a net book value of approximately $41,914,000 as of October 31, 2011.
(L)	On February 1, 2010, a principal payment of $3 million was made reducing the original loan amount of $22.5 million to $19.5 million and the due date was extended until February 1, 2013. Under the restructured terms, the interest rate is now 350 basis points above the BBA LIBOR with a floor of 4%, and monthly principal payments of $10,000 are required. An additional principal payment may be required on February 1, 2012 in an amount necessary to reduce the loan to achieve a stipulated debt service coverage ratio. FREIT believes that its debt service coverage ratio will meet the stipulated requirements, and, therefore, anticipates no additional principal payments will be required. The loan represents the acquisition loan to Grande Rotunda, LLC; which was payable in monthly installments of interest only prior to the loan’s restructuring on February 1, 2010. The interest rate on the original loan varied from time-to-time based on the borrower’s election of 150 basis points over the various LIBOR, or the Lender’s prime rate. FREIT guarantees payment of up to 35% of the outstanding principal amount of the loan plus accrued interest if borrower defaults, however, Rotunda 100, LLC (a 40% joint venture partner in Grande Rotunda, LLC) has indemnified FREIT for up to 40% of any losses under its guaranty. The loan is secured by a mixed-use property in Baltimore, MD (FREIT’s Rotunda property), which has a net book value of approximately $39,605,000 as of October 31, 2011. As part of the restructured terms of the loan extension agreement, the loan is further collateralized by a first mortgage lien and the assignment of the ground lease on FREIT’s Rochelle Park, NJ land parcel.
(M)	On February 12, 2008, Damascus Second, LLC closed on a $27.3 million construction loan, secured by the Damascus Center owned by Damascus Centre, LLC located in Damascus, MD. This loan has a term of forty-eight (48) months, with one twelve (12) month extension option. It is the Company’s intent to exercise the option to extend the loan until February 12, 2013. Draws against this loan bear interest at a floating rate equal to 135 basis points over the BBA LIBOR daily floating rate. As a result of a revaluation of future funding needs of the redevelopment project, on May 6, 2010, Damascus Centre, LLC entered into a modification of its construction loan agreement, which reduced the amount of the construction loan facility from $27.3 million to $21.3 million. In addition, the construction completion due date was extended until November 1, 2011. All other terms of the construction loan remain unchanged. As of October 31, 2011, $11.8 million of this loan, which includes accrued interest, was drawn down to cover construction costs, and all construction was substantially completed as of this date. FREIT guarantees 30% of the outstanding principal amount of the loan plus other costs, if borrower defaults, however, Damascus 100, LLC (a 30% joint venture partner in Damascus Centre, LLC) has indemnified FREIT for up to 30% of any losses under its guaranty. The shopping center securing the loan has a net book value of approximately $29,222,000 as of October 31, 2011.

Fair Value of Long-Term Debt:

The following table shows the estimated fair value and carrying value of FREIT’s long-term debt at October 31, 2011 and 2010:

	October 31,	October 31,
($ in Millions)	2011	2010
Fair Value	$213.9	$212.1
Carrying Value	$203.3	$204.6

Fair values are estimated based on market interest rates at October 31, 2011 and October 31, 2010 and on discounted cash flow analysis. Changes in assumptions or estimation methods may significantly affect these fair value estimates.

Principal amounts (in thousands of dollars) due under the above obligations (assuming no additional principal payment for the Rotunda) in each of the five years subsequent to October 31, 2011 are as follows: 

Year Ending October 31,	Amount
2012	$	14,889
2013	$	30,231
2014	$	14,810
2015	$	2,836
2016	$	27,118

Credit Line:

FREIT has an $18 million line of credit provided by the Provident Bank. The line of credit is for a two year term ending in January 2014, but can be cancelled by the bank, at its will, within 60 days before or after each anniversary date. The credit line will automatically be extended at the termination date of the current term and each subsequent term for an additional period of 24 months, provided there is no default and the credit line has not been cancelled. Draws against the credit line can be used for general corporate purposes, for property acquisitions, construction activities, and letters of credit. Draws against the credit line are secured by mortgages on FREIT’s Franklin Crossing Shopping Center, Franklin Lakes, NJ, retail space in Glen Rock, NJ, Palisades Manor Apartments, Palisades Park, NJ, and Grandview Apartments, Hasbrouck Heights, NJ. Interest rates on draws will be set at the time of each draw for 30, 60, or 90-day periods, based on our choice of the prime rate or at 175 basis points over the 30, 60, or 90-day LIBOR at the time of the draws. The interest rate on the line of credit has a floor of 4%. As of October 31, 2011, $18 million is available under the line of credit, and no amount is outstanding.

FREIT’s Board of Trustees has authorized management to pursue the sale of the Palisades Manor Apartments and the Grandview Apartments, which currently secure draws on FREIT’s credit line. When or if an agreement for the sale of either or both of these properties is entered into, these properties will have to be released as collateral for the credit line, and substitute collateral may be required.

Certain of the Company’s mortgage loans and the Credit Line contain financial covenants. The Company was in compliance with all of its financial covenants as of October 31, 2011.