Property acquisition

9 Months Ended

Jul. 31, 2014

Business Combinations [Abstract]

Property acquisition

Note 6 – Property acquisition:

On June 18, 2014, FREIT completed the acquisition of the Regency Club (“Regency”), a residential apartment complex located in Middletown, New York. The Regency complex consists of 132 units in 11 buildings and a clubhouse. The acquisition cost was $20,625,000 (exclusive of $648,000 of transaction costs charged to expense), which was funded in part with $9.8 million in net proceeds from the sale of the South Brunswick land, and the remaining balance of $11.5 million (inclusive of the $648,000 of transaction costs) was funded utilizing $10 million of FREIT’s credit line with Provident Bank, and FREIT's available cash. FREIT is in the process of securing long-term financing for this property to replace the funds borrowed from its credit line.

The acquisition price of $20,625,000 has been preliminarily allocated as follows: $17.8 million (86.3%) to the buildings and $2.8 million (13.7%) to the land. These allocated values are subject to change as more data becomes available and the fair value of the tangible and intangible assets acquired can be more accurately determined.

The Regency will be part of FREIT’s Residential segment. Since its acquisition on June 18, 2014, total revenue, net operating income, and operating income recorded for the Regency for the 3^rd Quarter “stub” period amounts to $257,000, $133,000, and $84,000, respectively.

FREIT identified the Regency as a replacement property for the vacant land located in South Brunswick, New Jersey that FREIT sold on December 20, 2013. (See Note 5.)

The following pro forma information shows the results of operations for the nine and three-month periods ended July 31, 2014 and July 31, 2013 for FREIT and Subsidiaries as though the Regency had been acquired at the beginning of fiscal 2013:

	Nine Months Ended						Three Months Ended
	July 31,						July 31,
	2014			2013			2014			2013
	(In Thousands)						(In Thousands)
Revenues	$	33,039		$	32,279		$	10,754		$	10,928
Net expenses		29,608			29,653			9,413			9,854
Income from continuing operations		3,431			2,626			1,341			1,074
Income from discontinued operations		7			811			—			48
Gain on sale of discontinued operation		—			1,377			—			—
Net income		3,438			4,814			1,341			1,122
Net income attributable to noncontrolling interest in subsidiaries		(453	)		(454	)		(162	)		(182	)
Net income attributable to common equity	$	2,985		$	4,360		$	1,179		$	940
Earnings per share - basic:
Continuing operations	$	0.43		$	0.32		$	0.17		$	0.13
Discontinued operations		—			0.31			—			0.01
Net income attributable to common equity	$	0.43		$	0.63		$	0.17		$	0.14
Weighted average shares outstanding - basic		6,925			6,942			6,922			6,942

The pro forma results for the current and prior year periods reflect the following adjustments: (a) additional depreciation expense based on the purchase price and a depreciable life of 40 years, (b) additional interest expense based on the $10 million loan used towards the purchase of the property at acquisition date, (c) exclusion of the $8.7 million gain from the sale of the South Brunswick land in June 2014; since this sale was treated as a 1031 Exchange, and would have had to occur prior to the Regency acquisition under Section 1031 of the Internal Revenue code, and (d) exclusion of the $648,000 in non-recurring acquisition expenses related to the Regency purchase.

The 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 2013, or of future results of operations of FREIT’s combined properties.