Property acquisition

12 Months Ended

Oct. 31, 2014

Property acquisition [Abstract]

Property acquisition

Note 3 – 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. On December 29, 2014, FREIT secured long-term financing for this property in the amount of $16.2 million from Provident Bank. A portion of the loan will be used to replace the funds borrowed from its credit line, and the remainder will be available to fund FREIT's future capital expenditures and for general corporate purposes (see Note 17).

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 is part of FREIT's Residential segment. Results of Regency's operations are included in the accompanying financial statements from June 18, 2014, the date of acquisition. Since its acquisition, total revenue, net operating income, and net income recorded for the Regency amounts to $808,000, $314,000, and $165,000, 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 2).

The following unaudited pro forma information shows the results of operations for the fiscal years ended October 31, 2014, 2013 and 2012 for FREIT and Subsidiaries as though the Regency had been acquired at the beginning of fiscal 2012:

	Years Ended October 31,
	2014			2013			2012
	(In Thousands)
Revenues	$	44,016		$	43,672		$	47,213
Net expenses		40,033			39,935			42,942
Income from continuing operations		3,983			3,737			4,271
Income from discontinued operations		7			797			460
Gain on sale of discontinued operation		—			3,545			7,528
Net income		3,990			8,079			12,259
Net income attributable to noncontrolling interest in subsidiaries		(507	)		(493	)		(645	)
Net income attributable to common equity	$	3,483		$	7,586		$	11,614
Earnings per share - basic and diluted:
Continuing operations	$	0.50		$	0.47		$	0.52
Discontinued operations		0.00			0.62			1.15
Net income attributable to common equity	$	0.50		$	1.09		$	1.67
Weighted average shares outstanding - basic and diluted		6,908			6,942			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 allocated to the buildings 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 2012, or of future results of operations of FREIT's combined properties.