10-Q 1 form10q-14273_frev.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended July 31, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to ____________________

Commission File No. 000-25043

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY

(Exact name of registrant as specified in its charter)

New Jersey		22-1697095
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

505 Main Street, Hackensack, New Jersey		07601
(Address of principal executive offices)		(Zip Code)

201-488-6400

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o

Accelerated Filer x

Non-Accelerated Filer o

Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of September 9, 2015, the number of shares of beneficial interest outstanding was 6,726,869

	Page 2

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY

INDEX

Part I:	Financial Information
				Page

	Item 1:	Unaudited Condensed Consolidated Financial Statements

		a.)	Condensed Consolidated Balance Sheets as at July 31, 2015 and October 31, 2014;	3

		b.)	Condensed Consolidated Statements of Income for the Nine and Three Months Ended July 31, 2015 and 2014;	4

		c.)	Condensed Consolidated Statements of Comprehensive Income for the Nine and Three Months Ended July 31, 2015 and 2014;	5

		d.)	Condensed Consolidated Statement of Equity for the Nine Months Ended July 31, 2015;	6

		e.)	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended July 31, 2015 and 2014;	7

		f.)	Notes to Condensed Consolidated Financial Statements.	8

	Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

	Item 3:	Quantitative and Qualitative Disclosures About Market Risk		28

	Item 4:	Controls and Procedures		28


Part II:	Other Information

	Item 1:	Legal Proceedings		28

	Item 1A:	Risk Factors		28

	Item 6:	Exhibits		29

	Signatures			29

Index	Page 3

Part I: Financial Information

Item 1: Unaudited Condensed Consolidated Financial Statements

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	July 31,			October 31,
	2015			2014
	(In Thousands of Dollars)
ASSETS

Real estate, at cost, net of accumulated depreciation	$	220,257		$	222,317
Construction in progress		89,906			50,146
Cash and cash equivalents		14,631			10,554
Tenants' security accounts		1,652			1,590
Receivables arising from straight-lining of rents		3,648			3,869
Accounts receivable, net of allowance for doubtful accounts		1,613			1,673
Secured loans receivable		5,451			5,451
Prepaid expenses and other assets		4,285			4,059
Deferred charges, net		4,650			5,143
Interest rate swap contract		145			515
Total Assets	$	346,238		$	305,317


LIABILITIES AND EQUITY

Liabilities:
Mortgages payable	$	299,005		$	251,552
Deferred trustee compensation payable		9,078			9,017
Accounts payable and accrued expenses		8,681			9,495
Dividends payable		2,018			2,046
Tenants' security deposits		2,526			2,319
Deferred revenue		664			1,042
Interest rate swap contract		556			—
Total Liabilities		322,528			275,471

Commitments and contingencies


Equity:
Common equity:
Shares of beneficial interest without par value:
8,000,000 shares authorized; 6,993,152 shares issued		25,644			24,985
Treasury stock, at cost: 266,283 shares at July 31, 2015
and 171,981 at October 31, 2014		(5,517	)		(3,348	)
Dividends in excess of net income		(9,827	)		(6,270	)
Accumulated other comprehensive (loss) income		(455	)		360
Total Common Equity		9,845			15,727
Noncontrolling interests in subsidiaries		13,865			14,119
Total Equity		23,710			29,846
Total Liabilities and Equity	$	346,238		$	305,317

See Notes to Condensed Consolidated Financial Statements.

Index	Page 4

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

NINE AND THREE MONTHS ENDED JULY 31, 2015 AND 2014

(Unaudited)

	Nine Months Ended July 31,						Three Months Ended July 31,
	2015			2014			2015			2014
	(In Thousands of Dollars, Except Per Share Amounts)						(In Thousands of Dollars, Except Per Share Amounts)
Revenue:
Rental income	$	28,992		$	27,435		$	9,781		$	9,342
Reimbursements		4,280			3,798			1,290			1,051
Sundry income		403			404			72			40
		33,675			31,637			11,143			10,433

Expenses:
Operating expenses		10,192			8,366			3,118			2,635
Management fees		1,489			1,453			504			495
Real estate taxes		5,921			5,490			1,994			1,762
Depreciation		4,985			4,654			1,690			1,614
		22,587			19,963			7,306			6,506

Operating income		11,088			11,674			3,837			3,927

Investment income		113			133			37			50
Interest expense including amortization
of deferred financing costs		(8,370	)		(8,434	)		(2,817	)		(2,613	)
Regency acquisition costs		—			(648	)		—			(648	)
Income from continuing operations		2,831			2,725			1,057			716

Income from discontinued operations		—			7			—			—
Gain on sale of discontinued operation		—			8,734			—			—
Net income		2,831			11,466			1,057			716

Net income attributable to
noncontrolling interest in subsidiaries		(283	)		(453	)		(89	)		(162	)

Net income attributable to
common equity	$	2,548		$	11,013		$	968		$	554

Earnings per share - basic and diluted:
Continuing operations	$	0.38		$	0.33		$	0.14		$	0.08
Discontinued operations		—			1.26			—			—
Net income attributable to common equity	$	0.38		$	1.59		$	0.14		$	0.08

Weighted average shares outstanding:
Basic		6,785			6,925			6,747			6,922
Diluted		6,786			6,925			6,755			6,922

Amounts attributable to common equity:
Income from continuing operations	$	2,548		$	2,272		$	968		$	554
Income from discontinued operations		—			8,741			—			—
Net income attributable to common equity	$	2,548		$	11,013		$	968		$	554

See Notes to Condensed Consolidated Financial Statements.

Index	Page 5

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

NINE AND THREE MONTHS ENDED JULY 31, 2015 AND 2014

(Unaudited)

	Nine Months Ended July 31,						Three Months Ended July 31,
	2015			2014			2015			2014
	(In Thousands of Dollars)						(In Thousands of Dollars)

Net income	$	2,831		$	11,466		$	1,057		$	716

Other comprehensive income (loss):
Unrealized (gain) loss on interest rate swap contracts
before reclassifications		(1,373	)		(373	)		244			(210	)
Amount reclassed from accumulated other
comprehensive income to interest expense		447			230			171			78
Net unrealized (loss) gain on interest rate swap contracts		(926	)		(143	)		415			(132	)
Comprehensive income		1,905			11,323			1,472			584
Net income attributable to noncontrolling interests		(283	)		(453	)		(89	)		(162	)
Other comprehensive income (loss):
Unrealized (gain) loss on interest rate swap contract
attributable to noncontrolling interests		111			43			(38	)		40
Comprehensive income attributable to noncontrolling interests		(172	)		(410	)		(127	)		(122	)
Comprehensive income attributable to common equity	$	1,733		$	10,913		$	1,345		$	462

See Notes to Condensed Consolidated Financial Statements.

Index	Page 6

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

NINE MONTHS ENDED JULY 31, 2015

(Unaudited)

	Common Equity
	Shares of Beneficial Interest		Treasury Shares at Cost			Dividends in Excess of Net Income			Accumulated Other Comprehensive Income (Loss)			Total Common Equity			Noncontrolling Interests			Total Equity
	(In Thousands of Dollars)

Balance at October 31, 2014	$	24,985	$	(3,348	)	$	(6,270	)	$	360		$	15,727		$	14,119		$	29,846

Repurchase of 94,302 shares of beneficial interest				(2,169	)								(2,169	)					(2,169	)

Stock based compensation expense		71											71						71

Vested share units granted to Trustees		588											588						588

Distributions to noncontrolling interests																(426	)		(426	)

Net income							2,548						2,548			283			2,831

Dividends declared, including $17 payable in share units ($0.90 per share)							(6,105	)					(6,105	)					(6,105	)

Unrealized loss on interest rate swap										(815	)		(815	)		(111	)		(926	)

Balance at July 31, 2015	$	25,644	$	(5,517	)	$	(9,827	)	$	(455	)	$	9,845		$	13,865		$	23,710

See Notes to Condensed Consolidated Financial Statements.

Index	Page 7

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JULY 31, 2015 AND 2014

(Unaudited)

	Nine Months Ended
	July 31,
	2015			2014
	(In Thousands of Dollars)
Operating activities:
Net income	$	2,831		$	11,466
Adjustments to reconcile net income to net cash provided by
operating activities (including discontinued operations):
Depreciation		4,985			4,654
Amortization		548			494
Stock based compensation expense		71			—
Trustee fees and related interest payable in stock units		571			—
Net amortization of acquired leases		1			16
Gain on sale of discontinued operation		—			(8,734	)
Changes in operating assets and liabilities:
Tenants' security accounts		145			28
Accounts and straight-line rents receivable,
prepaid expenses and other assets		(78	)		(904	)
Accounts payable, accrued expenses and deferred
trustee compensation		(1,096	)		993
Deferred revenue		(321	)		(85	)
Net cash provided by operating activities		7,657			7,928
Investing activities:
Capital improvements - existing properties		(2,997	)		(3,236	)
Regency acquisition - net of proceeds held in escrow		—			(10,855	)
Construction and pre-development costs		(37,806	)		(22,244	)
Secured loans receivable to noncontrolling interest		—			(2,128	)
Net cash used in investing activities		(40,803	)		(38,463	)
Financing activities:
Repayment of mortgages and construction loan		(3,075	)		(12,268	)
Repayment of credit line		(5,000	)		(2,000	)
Proceeds from mortgage loan refinancings		16,200			19,700
Proceeds from construction loan		38,170			31,928
Proceeds from credit line		—			10,000
Deferred financing costs		(361	)		(2,582	)
Dividends paid		(6,116	)		(8,734	)
Repurchase of Company stock-Treasury shares		(2,169	)		(357	)
Additional investment by noncontrolling interest		—			2,128
Distributions to noncontrolling interests		(426	)		(765	)
Net cash provided by financing activities		37,223			37,050
Net increase in cash and cash equivalents		4,077			6,515
Cash and cash equivalents, beginning of period		10,554			7,801
Cash and cash equivalents, end of period	$	14,631		$	14,316

Supplemental disclosure of cash flow data:
Interest paid, net of amounts capitalized	$	7,684		$	7,503

Supplemental schedule of non cash activities:
Investing activities:
Proceeds from sale of discontinued operation, held in
escrow applied to 1031 replacement property	$	—		$	9,768
Accrued capital expenditures, construction costs, pre-development costs and interest	$	6,371		$	4,986
Financing activities:
Dividends declared but not paid	$	2,018		$	2,077

See Notes to Condensed Consolidated Financial Statements.

Index	Page 8

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of presentation:

The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and pursuant to the rules of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnotes required by GAAP for complete financial statements have been omitted. It is the opinion of management that all adjustments considered necessary for a fair presentation have been included, and that all such adjustments are of a normal recurring nature.

The consolidated results of operations for the nine and three-month periods ended July 31, 2015 are not necessarily indicative of the results to be expected for the full year or any other period. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Annual Report on Form 10-K for the year ended October 31, 2014 of First Real Estate Investment Trust of New Jersey (“FREIT”).

Note 2 –Recently issued accounting standards:

In April 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, which amends the definition of a discontinued operation. The new guidance requires discontinued operation treatment for disposals of a component or group of components that represent a strategic shift that has, or will have, a major impact on an entity’s operations or financial results. The ASU is effective prospectively for all disposals that occur in annual periods (and interim periods therein) beginning on or after December 15, 2014, with early adoption permitted. The Company has adopted this guidance effective with its 1st quarter ended January 31, 2015. The adoption of this guidance did not have any impact on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2016. In August 2015, the FASB extended the effective date by one year to years beginning on and after December 15, 2017. Early adoption is not permitted. ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. FREIT is currently assessing the impact this new accounting guidance will have on its consolidated financial statements and footnote disclosures.

In February 2015, the FASB issued Accounting Standards Update No. 2015-02, "Amendments to the Consolidation Analysis," ("ASU 2015-02"), which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015 with early adoption permitted. ASU 2015-02 amends: the assessment of whether a limited partnership or an LLC is a variable interest entity; the effect that fees paid to a decision maker have on the consolidation analysis; how variable interests held by a reporting entity's related parties or de facto agents affect its consolidation conclusion; and for entities other than limited partnerships or LLCs, clarifies how to determine whether the equity holders as a group have power over an entity. The adoption of ASU 2015-02 is not expected to have any effect on our consolidated financial statements or footnote disclosures.

In April 2015, the FASB issued ASU 2015-03, "Interest- Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs" which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU is effective for fiscal years beginning after December 15, 2015 and for interim periods within those fiscal years with early adoption permitted. The adoption of this guidance, which is required to be applied on a retrospective basis, will not have a material effect on our financial statements.

Note 3 - Earnings per share:

Basic earnings per share is calculated by dividing net income attributable to common equity (numerator) by the weighted average number of shares and vested share units (see Note 15) outstanding during each period (denominator). The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator is increased to include the number of additional shares that would have been outstanding if all potentially dilutive shares, such as those issuable upon the exercise of stock options, were issued during the period using the Treasury Stock method. Under the Treasury Stock method, the assumption is that the proceeds received upon exercise of the options, including the unrecognized stock option compensation expense attributed to future services, are used to repurchase FREIT’s stock at the average market price during the period, thereby reducing the number of shares to be added in computing diluted earnings per share. For the nine and three months ended July 31, 2015, the outstanding stock options increased the average dilutive shares outstanding by approximately 1,000 and 8,000 shares, respectively, with no impact on earnings per share. For the nine and three months ended July 31, 2014, no options or other potentially dilutive securities were outstanding.

Index	Page 9

Note 4 - Interest rate swap contracts:

On December 26, 2012, Damascus Centre, LLC refinanced its $15 million construction loan with a variable rate $25 million mortgage loan of which $19 million was outstanding as of July 31, 2015. The new loan will mature on January 3, 2023. In connection therewith, on December 26, 2012, FREIT entered into an interest rate swap contract to reduce the impact of interest rate fluctuations on the LIBOR based variable rate mortgage. At July 31, 2015, the derivative financial instrument had a notional amount of approximately $19.1 million and a current maturity date of January 2023. The contract effectively converts the LIBOR based variable rate to a fixed rate of 3.81%.

On December 29, 2014, FREIT Regency, LLC closed on a $16.2 million mortgage loan with Provident Bank. The new loan bears a floating interest rate equal to 125 basis points over the BBA LIBOR and the loan will mature on December 15, 2024. In order to minimize interest rate volatility during the term of the loan, FREIT Regency, LLC entered into an interest rate swap agreement that in effect, converted the floating interest rate to a fixed interest rate of 3.75% over the term of the loan. At July 31, 2015, the derivative financial instrument has a notional amount of approximately $16.2 million and a current maturity date of December 2024.

In accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities”, FREIT is accounting for the Damascus Centre, LLC and the FREIT Regency, LLC interest rate swaps as cash flow hedges and marks to market its fixed pay interest rate swaps, taking into account present interest rates compared to the contracted fixed rate over the life of the contract. For the nine and three months ended July 31, 2015, FREIT recorded an unrealized loss of $926,000 and an unrealized gain of $415,000, respectively, in comprehensive income representing the change in the fair value of the swaps which resulted in a corresponding liability of $556,000 for the Regency swap and an asset of $145,000 for the Damascus Center swap as of July 31, 2015. As of July 31, 2014, FREIT recorded an asset of $837,000 representing the fair value of the swap, along with a corresponding decrease to accumulated other comprehensive income of $143,000 and $132,000 for the nine and three months ended July 31, 2014, respectively. During the year ended October 31, 2014, FREIT recorded an unrealized loss of $465,000 in comprehensive income representing the reduction in the fair value of the swap, which resulted in a $515,000 corresponding asset as of October 31, 2014. The fair values are based on observable inputs (level 2 in the fair value hierarchy).

Note 5 – Discontinued operations:

On December 20, 2013, FREIT’s South Brunswick property, which consisted of vacant land, was sold for $11 million resulting in a capital gain of approximately $8.7 million net of sales fees and commissions. FREIT structured this sale in a manner that qualified it as a like-kind exchange of real estate pursuant to Section 1031 of the Internal Revenue Code. The 1031 Exchange transaction resulted in a deferral for income tax purposes of the $8.7 million capital gain. The net proceeds from this sale, which were approximately $9.8 million, were held in escrow until a replacement property was purchased. A replacement property related to this like-kind exchange was acquired on June 18, 2014, and the sale proceeds held in escrow were applied to the purchase price of such property (See Note 6).

The gain from the sale of the South Brunswick property described above has been classified as discontinued operations in the accompanying statements of income for the nine months ended July 31, 2014.

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. On December 29, 2014, FREIT secured long-term financing for this property in the amount of $16.2 million from Provident Bank.

Index	Page 10

The acquisition price of $20,625,000 has been allocated as follows: $18.5 million to the buildings and $2.1 million to the land.

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 Regency is part of FREIT’s Residential segment.

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

	Nine Months Ended			Three Months Ended
	July 31, 2014			July 31, 2014
	Pro Forma			Pro Forma


Revenues	$	33,039		$	10,754

Net expenses		29,608			9,413

Income from continuing operations		3,431			1,341

Income from discontinued operations		7			—
Gain on sale of discontinued operation		8,734			—

Net income		12,172			1,341

Net income attributable to noncontrolling interest in subsidiaries		(453	)		(162	)

Net income attributable to common equity	$	11,719		$	1,179

Earnings per share - basic and diluted:
Continuing operations	$	0.43		$	0.17
Discontinued operations		1.26			—
Net income attributable to common equity	$	1.69		$	0.17

Weighted average shares outstanding - basic and diluted		6,925			6,922

The pro forma results reflect the following adjustments: (a) additional depreciation expense based on the purchase price allocated to the buildings and a depreciable life of 40 years, and (b) additional interest expense based on the $10 million loan used towards the purchase of the property at acquisition date.

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 2014, or of future results of operations of FREIT’s combined properties.

Note 7 – Capitalized interest

Interest costs associated with amounts expended at the Grande Rotunda development are capitalized and included in the cost of the project. Interest capitalized during the nine-month periods ended July 31, 2015 and 2014, respectively, amounted to $1,600,000 and $744,000, and for the three-month periods ended July 31, 2015 and 2014, respectively, amounted to $667,000 and $524,000.

Note 8 - Management agreement, fees and transactions with related party:

Hekemian & Co., Inc. (“Hekemian”) currently manages all the properties owned by FREIT and its affiliates, except for The Rotunda, a mixed-use office and retail facility located in Baltimore, Maryland, which is managed by an independent third party management company. The management agreement with Hekemian, effective November 1, 2001, requires the payment of management fees equal to 4% to 5% of rents collected. Such fees were approximately $1,412,000 and $1,377,000, for the nine-month period ended July 31, 2015 and 2014, respectively, and $479,000 and $470,000, for the three-month period ended July 31, 2015 and 2014, respectively. In addition, the management agreement provides for the payment to Hekemian of leasing commissions, as well as the reimbursement of operating expenses incurred on behalf of FREIT. Such items amounted to approximately $213,000 and $603,000, for the nine-month period ended July 31, 2015 and 2014, respectively, and $77,000 and $69,000, for the three-month period ended July 31, 2015 and 2014, respectively. Fees for the prior year’s nine month period include $396,000 in leasing commissions paid to Hekemian relative to the Safeway lease at the Damascus shopping center. The management agreement expires on October 31, 2015, and is automatically renewed for periods of two years unless either party gives not less than six (6) months prior notice of non-renewal.

Index	Page 11

FREIT also uses the resources of the Hekemian insurance department to secure various insurance coverages for its properties and subsidiaries. Hekemian is paid a commission for these services. Such commissions amounted to approximately $155,000 and $121,000, for the nine months ended July 31, 2015 and 2014, respectively, and $98,000 and $87,000, for the three months ended July 31, 2015 and 2014, respectively.

From time to time, FREIT engages Hekemian to provide certain additional services, such as consulting services related to development, property sales and financing activities of FREIT. Separate fee arrangements are negotiated between Hekemian and FREIT with respect to such additional services. In connection with the development activities at the Rotunda, which is owned and operated by Grande Rotunda, LLC, a definitive agreement for the development services to be provided by Hekemian Development Resources LLC (“Resources”), a wholly owned subsidiary of Hekemian, has been approved and executed. Fees incurred to Hekemian and Resources during the nine months ended July 31, 2015 and 2014 were $1,133,000 and $979,000, respectively, and $340,000 and $550,000 for the three months ended July 31, 2015 and 2014, respectively. Fees paid in the current nine-month period relate to the Rotunda development project. Fees paid in the prior year’s nine-month period include: (a) $550,000 in commissions paid to Hekemian relative to the Regency acquisition, (b) $330,000 in commissions paid to Hekemian relative to the sale of FREIT’s South Brunswick, NJ property, and (c) $99,000 in fees related to services performed with regard to the Hammel Gardens and Steuben Arms mortgage loan refinancings.

Mr. Robert S. Hekemian, Chairman of the Board, Chief Executive Officer and a Trustee of FREIT, is the Chairman of the Board and Chief Executive Officer of Hekemian. Mr. Robert S. Hekemian, Jr, a Trustee of FREIT, is the President of Hekemian. Trustee fee expense (including interest) incurred by FREIT for the nine months ended July 31, 2015 and 2014 was approximately $403,000 and $476,000, respectively, for Mr. Robert S. Hekemian, and $49,000 and $34,000, respectively, for Mr. Robert S. Hekemian, Jr.

Rotunda 100, LLC and Damascus 100, LLC own the minority interests in Grande Rotunda, LLC and Damascus Centre, LLC, respectively. Rotunda 100, LLC owns a 40% equity interest in Grande Rotunda, LLC and Damascus 100, LLC owns a 30% equity interest in Damascus Centre, LLC. The equity owners of Rotunda 100, LLC and Damascus 100, LLC are principally employees of Hekemian. To incentivize the employees of Hekemian, FREIT advanced, only to employees of Hekemian, up to 50% of the amount of the equity contributions that the Hekemian employees were required to invest in Rotunda 100, LLC and Damascus 100, LLC. These advances were in the form of secured loans that bear interest that will float at 225 basis points over the ninety (90) day LIBOR, as adjusted each November 1, February 1, May 1 and August 1. These loans were secured by the Hekemian employees’ interests in Rotunda 100 and Damascus 100, and were full recourse loans. The notes had maturity dates at the earlier of (a) ten (10) years after issue (Grande– 6/19/2015, Damascus Centre, LLC – 9/30/2016), or, (b) at the election of FREIT, ninety (90) days after the borrower terminates employment with Hekemian, at which time all outstanding unpaid principal is due. On June 4, 2015, the Board approved an extension of the maturity date of the secured loans to occur the earlier of (a) June 19, 2018 or (b) five days after the closing of a permanent mortgage loan secured by the Rotunda property.

Note 9 – Mortgage refinancings:

On May 28, 2013, the balance of the Grande Rotunda LLC acquisition loan amounting to $19 million was purchased from the bank by FREIT. The due date of the loan was May 1, 2013. While the bank agreed to an additional extension of ninety (90) days from May 1, 2013, FREIT elected to purchase the Rotunda loan from the bank and have all the bank’s rights assigned to FREIT. It was FREIT’s intention to sell this loan to the lender providing the construction financing for the expansion of the Rotunda project. On December 9, 2013, FREIT’s 60% owned affiliate, Grande Rotunda, LLC, closed with Wells Fargo Bank on a construction loan of up to $120 million to be used to reconfigure and expand its Rotunda property in Baltimore, MD. The construction loan is for a term of four (4) years, with one 12-month extension, at a rate of 225 basis points over the monthly LIBOR. As of July 31, 2015, $82.0 million of this loan was drawn down, of which $19 million was used to pay off the loan from FREIT, and $63.0 million was used toward the construction at the Rotunda.

On November 19, 2013, FREIT refinanced the mortgages on its Hammel Gardens and Steuben Arms properties that were scheduled to mature on December 1, 2013. The mortgages, aggregating $9.4 million, were refinanced for $19.7 million. The new mortgage amounts reflect, in part, the appreciated value of those assets. This refinancing resulted in: (i) a reduction of annual interest costs from 6.4% to 4.54%, and (ii) net refinancing proceeds of approximately $10 million that were available for capital expenditures and general corporate purposes.

On December 29, 2014, FREIT Regency, LLC closed on a $16.2 million mortgage loan with Provident Bank. The new loan bears a floating interest rate equal to 125 basis points over the one-month BBA LIBOR and the loan will mature on December 15, 2024. Interest-only payments are required each month through December 15, 2017. Thereafter, principal payments of $27,807 (plus accrued interest) are required each month through maturity. In order to minimize interest rate volatility during the term of the loan, FREIT Regency, LLC entered into an interest rate swap agreement that in effect, converted the floating interest rate to a fixed interest rate of 3.75% over the term of the loan. Proceeds from the loan were used to pay off the $5 million outstanding balance on FREIT’s credit line, and the remainder of the proceeds will be available to fund future capital expenditures and for general corporate purposes.

Index	Page 12

Note 10 – Fair value of long-term debt:

The following table shows the estimated fair value and carrying value of FREIT’s long-term debt at July 31, 2015 and October 31, 2014:

	July 31,		October 31,
($ In Millions)	2015		2014

Fair Value	$	304.3	$	256.0

Carrying Value	$	299.0	$	251.6

Fair values are estimated based on market interest rates at July 31, 2015 and October 31, 2014 and on discounted cash flow analysis. Changes in assumptions or estimation methods may significantly affect these fair value estimates. The fair value is based on observable inputs (level 2 in the fair value hierarchy).

Note 11 - Segment information:

FREIT has determined that it has two reportable segments: commercial properties and residential properties. These reportable segments offer different types of space, have different types of tenants, and are managed separately because each requires different operating strategies and management expertise. The commercial segment contains ten (10) separate properties and the residential segment contains seven (7) properties. The accounting policies of the segments are the same as those described in Note 1 in FREIT’s Annual Report on Form 10-K for the fiscal year ended October 31, 2014.

The chief operating and decision-making group of FREIT's commercial segment, residential segment and corporate/other is comprised of FREIT’s Board of Trustees (“Board”).

FREIT assesses and measures segment operating results based on net operating income ("NOI"). NOI, a standard used by real estate professionals, 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 items. NOI is not a measure of operating results or cash flows from operating activities as measured by GAAP, 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.

Continuing real estate rental revenue, operating expenses, NOI and recurring capital improvements for the reportable segments are summarized below and reconciled to condensed consolidated net income-common equity for the nine and three-month periods ended July 31, 2015 and 2014. Asset information is not reported since FREIT does not use this measure to assess performance.

Index	Page 13

	Nine Months Ended						Three Months Ended
	July 31,						July 31,
	2015			2014			2015			2014
	(In Thousands)						(In Thousands)
Real estate rental revenue:
Commercial	$	17,439		$	16,830		$	5,751		$	5,318
Residential		16,456			14,946			5,463			5,157
Total real estate revenue		33,895			31,776			11,214			10,475

Real estate operating expenses:
Commercial		7,997			7,070			2,582			2,103
Residential		7,952			7,017			2,525			2,370
Total real estate operating expenses		15,949			14,087			5,107			4,473

Net operating income:
Commercial		9,442			9,760			3,169			3,215
Residential		8,504			7,929			2,938			2,787
Total net operating income	$	17,946		$	17,689		$	6,107		$	6,002

Recurring capital improvements-residential	$	(275	)	$	(351	)	$	(21	)	$	(210	)

Reconciliation to consolidated net income:
Segment NOI	$	17,946		$	17,689		$	6,107		$	6,002
Deferred rents - straight lining		(219	)		(123	)		(71	)		(37	)
Amortization of acquired leases		(1	)		(16	)		—			(5	)
Investment income		113			133			37			50
General and administrative expenses		(1,653	)		(1,222	)		(509	)		(419	)
Acquisition costs - Regency		—			(648	)		—			(648	)
Depreciation		(4,985	)		(4,654	)		(1,690	)		(1,614	)
Financing costs		(8,370	)		(8,434	)		(2,817	)		(2,613	)
Income from continuing operations		2,831			2,725			1,057			716

Income from discontinued operations		—			7			—			—
Gain on sale of discontinued operation		—			8,734			—			—

Net income		2,831			11,466			1,057			716

Net income attributable to noncontrolling
interests		(283	)		(453	)		(89	)		(162	)

Net income attributable to common equity	$	2,548		$	11,013		$	968		$	554

Note 12 – Income taxes:

FREIT distributed as dividends to its shareholders 100% of its ordinary taxable income for the fiscal year ended October 31, 2014 and intends to distribute as dividends 100% of its ordinary taxable income for the fiscal year ending October 31, 2015. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income was recorded in FREIT’s financial statements. As described in Note 5, FREIT completed a like-kind exchange with respect to the sale of the South Brunswick, NJ property, which was sold on December 20, 2013 at a gain of approximately $8.7 million. Accordingly, no provision for federal or state income taxes related to such gain was recorded in FREIT’s financial statements. The tax basis of Regency, which was the replacement property in the like-kind exchange, is approximately $8 million lower than the acquisition cost of approximately $20.6 million recorded for financial reporting purposes. In December 2013, FREIT distributed as dividends the entire capital gain of approximately $3.5 million realized on the sale of its Palisades Manor and Grandview properties in Fiscal 2013. With regard to such capital gain dividend distribution for Fiscal 2013, no provision for federal or state income taxes related to such capital gain income was recorded in FREIT’s financial statements.

As of July 31, 2015, FREIT had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended October 31, 2011 remain open to examination by the major taxing jurisdictions to which FREIT is subject.

Index	Page 14

Note 13 – Share repurchases:

On February 17, 2015, FREIT announced a tender offer to purchase up to 100,000 shares of FREIT’s beneficial interest at a price of $23.00 per share. The tender offer expired on March 20, 2015, and in connection therewith FREIT repurchased 94,302 shares of beneficial interest at $23.00 per share, for an aggregate purchase price of $2,168,946 which it funded principally from cash and cash equivalents. FREIT’s Trustees and executive officers did not tender their shares of beneficial interest in FREIT in the tender offer.

On September 4, 2014, the Board authorized the repurchase of 100,572 FREIT shares held by the pension plan of Hekemian, for an aggregate cash purchase of $1,855,553 or $18.45 per share, which was the closing price of FREIT shares on September 3, 2014. The repurchase which occurred in September 2014 was undertaken in connection with the termination of the pension plan. Mr. Robert S. Hekemian, Chairman and Chief Executive Officer of FREIT, and Mr. Robert S. Hekemian, Jr., a Trustee of FREIT, and members of their family were participants in the pension plan.

On December 4, 2013, the Board authorized the repurchase of up to 24,400 FREIT shares. On December 17, 2013, FREIT repurchased 20,400 shares in a privately-negotiated transaction with an unaffiliated party for an aggregate purchase price of $357,000, or $17.50 per share.

Note 14 – Stock option plan:

On September 4, 2014, the Board approved the grant of a total of 246,000 non-qualified share options under FREIT’s Equity Incentive Plan to certain FREIT Executive Officers, the members of the Board and certain employees of Hekemian & Co., Inc. The options have an exercise price of $18.45 per share, will vest over a 5 year period at 20% per year, and will expire 10 years from the date of grant, which will be September 3, 2024.

The following table summarizes stock option activity for the nine-month period ended July 31, 2015:

	Nine Months Ended July 31,
	2015
	No. of Options			Exercise
	Outstanding			Price
Options outstanding beginning of period		246,000		$	18.45
Options granted during period		—			—
Options forfeited/cancelled during period		(2,100	)		18.45
Options outstanding end of period		243,900		$	18.45
Options expected to vest		238,620
Options exercisable at end of period		—

For the nine and three-month periods ended July 31, 2015, compensation expense related to stock options granted amounted to $71,000 and $24,000, respectively. At July 31, 2015, there was approximately $384,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over a vesting period of approximately five years.

The aggregate intrinsic value of options outstanding at July 31, 2015 was $439,020.

Note 15 – Deferred fee plan:

On September 4, 2014, the Board approved amendments, effective November 1, 2014, to the FREIT Deferred Fee Plan for its Executive Officers and Trustees, one of which provides for the issuance of share units payable in FREIT shares in respect of (i) deferred amounts of all Trustee fees on a prospective basis; (ii) interest on Trustee fees deferred prior to November 1, 2014 (payable at a floating rate, adjusted quarterly, based on the average 10-year Treasury Bond interest rate plus 150 basis points); and (iii) dividends payable in respect of share units allocated to participants in the Deferred Fee Plan as a result of deferrals described above. The number of share units will be determined by the closing price of FREIT shares on the date as set forth in the Deferred Fee Plan. As a result of the plan amendment described above, all Trustee fees together with related interest and dividends described above for the nine-month period ended July 31, 2015, which amounted to approximately $588,300, have been paid through the issuance of 29,385 vested FREIT share units based on the closing price of FREIT shares on the dates as set forth in the Deferred Fee Plan. The dollar amount of vested units is reflected in “Shares of beneficial interest” in FREIT’s Condensed Consolidated Balance Sheet as of July 31, 2015.

Index	Page 15

For the nine-month period ended July 31, 2015, FREIT has charged $570,900 of this amount, representing Trustee fees and interest, to expense and the balance of $17,400, representing dividends payable in respect of share units allocated to Plan participants, has been charged to equity.

Note 16 – Subsequent event:

On August 24, 2015, FREIT issued a press release announcing that FREIT has entered into an agreement to purchase a 124 unit garden apartment community in Maywood, New Jersey. The acquisition is subject to FREIT’s conclusion of its due diligence/feasibility study period. If FREIT is satisfied with the results of the due diligence review, the acquisition is expected to close in October 2015.

Index	Page 16

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Identifying Important Factors That Could Cause First Real Estate Investment Trust of
New Jersey’s (“FREIT”) Actual Results to Differ From Those Projected in Forward Looking Statements.

Readers of this discussion are advised that the discussion should be read in conjunction with the unaudited condensed consolidated financial statements of FREIT (including related notes thereto) appearing elsewhere in this Form 10-Q, and the consolidated financial statements included in FREIT’s most recently filed Form 10-K. Certain statements in this discussion may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect FREIT’s current expectations regarding future results of operations, economic performance, financial condition and achievements of FREIT, and do not relate strictly to historical or current facts. FREIT has tried, wherever possible, to identify these forward-looking statements by using words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning.

Although FREIT believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties, which may cause the actual results to differ materially from those projected. Such factors include, but are not limited to the following: general economic and business conditions, which will, among other things, affect demand for rental space, the availability of prospective tenants, lease rents, the financial condition of tenants and the default rate on leases, operating and administrative expenses and the availability of financing; adverse changes in FREIT’s real estate markets, including, among other things, competition with other real estate owners, competition confronted by tenants at FREIT’s commercial properties; governmental actions and initiatives; environmental/safety requirements; and risks of real estate development and acquisitions. The risks with respect to the development of real estate include: increased construction costs, inability to obtain construction financing, or unfavorable terms of financing that may be available, unforeseen construction delays and the failure to complete construction within budget.

OVERVIEW

FREIT is an equity real estate investment trust ("REIT") that is self-administered and externally managed. FREIT owns a portfolio of residential apartment and commercial properties. Our revenues consist primarily of rental income and other related revenues from our residential and commercial properties and additional rent in the form of expense reimbursements derived from our operating commercial properties. Our properties are primarily located in northern New Jersey, Maryland and New York. We acquire existing properties for investment. We also acquire properties that we feel have redevelopment potential, and we make changes and capital improvements to these properties. We develop and construct properties on our vacant land. Our policy is to acquire and develop real property for long-term investment.

The economic and financial environment: After a crawling first quarter, the U.S. economy grew at a healthy pace of 3.7% in the second quarter. Additionally, drops in unemployment claims provide further evidence that the job market is on the mend. These positive trends will continue to impact favorably on the housing market and consumer spending.

Residential Properties: We have aggressively increased rental rates. As a result, our rental rates continue to show year-over-year increases. We expect increases in rental rates to taper; however, the increased rental rates that are in place should positively impact future revenues.

Commercial Properties: The retail outlook has shown improvement because of increases in consumer spending over the past year and this improvement is expected to continue over the next couple of years.

Development Projects and Capital Expenditures: We continue to make only those capital expenditures that are absolutely necessary. On July 24, 2012, the Board approved revisions to the scope of the Rotunda redevelopment project, thereby reducing the complexity and projected cost of the project. Rotunda began construction in September 2013, and is moving forward toward the completion of this construction project.

Index	Page 17

Debt Financing Availability: Financing for development projects has become more available. As a result, on December 9, 2013, Grande Rotunda, LLC closed with Wells Fargo Bank on a construction loan of up to $120 million to be used for the purpose of funding the major redevelopment and expansion project at the Rotunda. On November 19, 2013, FREIT refinanced the first mortgages on its Hammel Gardens and Steuben Arms properties that were scheduled to mature on December 1, 2013. The mortgages, aggregating $9.4 million, were refinanced for $19.7 million.

Operating Cash Flow and Dividend Distributions: We expect that cash provided by net operating income will be adequate to cover mandatory debt service payments (excluding balloon payments), necessary capital improvements and dividends necessary to retain qualification as a REIT (90% of taxable income). Until the economic climate indicates that a change is appropriate, it is FREIT’s intention to maintain its quarterly dividend at a level not less than that required to maintain its REIT status for Federal income tax purposes.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Pursuant to the SEC disclosure guidance for "Critical Accounting Policies," the SEC defines Critical Accounting Policies as those that require the application of management's most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, the preparation of which takes into account estimates based on judgments and assumptions that affect certain amounts and disclosures. Accordingly, actual results could differ from these estimates. The accounting policies and estimates used, which are outlined in Note 1 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2014, have been applied consistently as at July 31, 2015, and for the nine and three months ended July 31, 2015 and 2014. We believe that the following accounting policies or estimates require the application of management's most difficult, subjective, or complex judgments:

Revenue Recognition: Base rents, additional rents based on tenants' sales volume and reimbursement of the tenants' share of certain operating expenses are generally recognized when due from tenants. The straight-line basis is used to recognize base rents under leases if they provide for varying rents over the lease terms. Straight-line rents represent unbilled rents receivable to the extent straight-line rents exceed current rents billed in accordance with lease agreements. Before FREIT can recognize revenue, it is required to assess, among other things, its collectibility.

Valuation of Long-Lived Assets: We assess the carrying value of long-lived assets periodically, or whenever events or changes in circumstances indicate that the carrying amounts of certain assets may not be recoverable. When FREIT determines that the carrying value of long-lived assets may be impaired, the measurement of any impairment is based on a projected discounted cash flow method determined by FREIT's management. While we believe that our discounted cash flow methods are reasonable, different assumptions regarding such cash flows may significantly affect the measurement of impairment.

Recently issued accounting standards: See Note 2 to the Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS

Real estate revenue for the nine months ended July 31, 2015 (“Current Nine Months”) increased 6.4% to $33,675,000, compared to $31,637,000 for the nine months ended July 31, 2014 (“Prior Nine Months”). For the three months ended July 31, 2015 (“Current Quarter”) real estate revenue increased 6.8% to $11,143,000, compared to $10,433,000 for the three months ended July 31, 2014 (“Prior Year’s Quarter”). Income from continuing operations for the Current Nine Months and Current Quarter was $2,831,000 and $1,057,000, respectively, compared to $2,725,000 and $716,000 for the prior year’s comparable periods, respectively. The increase in income from continuing operations for the Current Nine Months and Current Quarter was primarily attributable to income generated from the Regency acquisition and the one time acquisition costs of $648,000 expensed in the prior year’s periods.

Net income attributable to common equity (“net income-common equity”) for the Current Nine Months was $2,548,000 ($0.38 per share basic and diluted), compared to $11,013,000 ($1.59 per share basic and diluted) for the Prior Nine Months. Net income-common equity for the Current Quarter was $968,000 ($0.14 per share basic and diluted), compared to $554,000 ($0.08 per share basic and diluted) for the Prior Year’s Quarter. Included in net income-common equity for the Prior Nine Months was a gain of approximately $8.7 million relating to the sale of the South Brunswick property in December 2013. The schedule below provides a detailed analysis of the major changes that impacted net income-common equity for the nine and three months ended July 31, 2015 and 2014:

Index	Page 18

NET INCOME COMPONENTS
	Nine Months Ended									Three Months Ended
	July 31,									July 31,
	2015			2014			Change			2015			2014			Change
	(In thousands)									(In thousands)
Income from real estate operations:
Commercial properties	$	9,222		$	9,621		$	(399	)	$	3,098		$	3,173		$	(75	)

Residential properties		8,504			7,929			575			2,938			2,787			151
Total income from real estate operations		17,726			17,550			176			6,036			5,960			76

Financing costs:
Fixed rate mortgages		(8,216	)		(7,986	)		(230	)		(2,777	)		(2,672	)		(105	)
Floating rate - Rotunda		(1,158	)		(411	)		(747	)		(481	)		(146	)		(335	)
Credit line		(35	)		(48	)		13			—			(48	)		48
Other- Corporate interest		(246	)		(460	)		214			(84	)		(182	)		98
Mortgage cost amortization		(315	)		(273	)		(42	)		(142	)		(89	)		(53	)
Less amounts capitalized		1,600			744			856			667			524			143
Total financing costs		(8,370	)		(8,434	)		64			(2,817	)		(2,613	)		(204	)

Investment income		113			133			(20	)		37			50			(13	)

General & administrative expenses:
Accounting fees		(413	)		(388	)		(25	)		(124	)		(125	)		1
Legal & professional fees		(95	)		(76	)		(19	)		(18	)		(39	)		21
Trustee fees		(654	)		(383	)		(271	)		(222	)		(129	)		(93	)
Stock option expense		(71	)		—			(71	)		(24	)		—			(24	)
Corporate expenses		(420	)		(375	)		(45	)		(121	)		(126	)		5
Total general & administrative expenses		(1,653	)		(1,222	)		(431	)		(509	)		(419	)		(90	)

Depreciation		(4,985	)		(4,654	)		(331	)		(1,690	)		(1,614	)		(76	)
Acquisition costs - Regency		—			(648	)		648			—			(648	)		648

Income from continuing operations		2,831			2,725			106			1,057			716			341

Income from discontinued operations		—			7			(7	)		—			—			—
Gain on sale of discontinued operation		—			8,734			(8,734	)		—			—			—

Net income		2,831			11,466			(8,635	)		1,057			716			341
Net income attributable to noncontrolling
interest in subsidiaries		(283	)		(453	)		170			(89	)		(162	)		73

Net income attributable to common equity	$	2,548		$	11,013		$	(8,465	)	$	968		$	554		$	414

The consolidated results of operations for the Current Nine Months and Current Quarter are not necessarily indicative of the results to be expected for the full year or any other period.

SEGMENT INFORMATION

The following tables set forth comparative net operating income ("NOI") data for FREIT’s real estate segments and reconciles the NOI to consolidated net income-common equity for the Current Nine Months and Current Quarter as compared to the Prior Year’s comparable periods (See below for definition of NOI):

Index	Page 19

	Commercial									Residential									Combined
	Nine Months Ended									Nine Months Ended									Nine Months Ended
	July 31,				Increase (Decrease)					July 31,				Increase (Decrease)					July 31,
	2015		2014		$			%		2015		2014		$			%		2015		2014
	(In thousands)									(In thousands)									(In thousands)
Rental income	$	13,131	$	13,017	$	114			0.9%	$	16,081	$	14,557	$	1,524			10.5%	$	29,212	$	27,574
Reimbursements		4,280		3,798		482			12.7%		—		—		—			0.0%		4,280		3,798
Other		28		15		13			86.7%		375		389		(14	)		-3.6%		403		404
Total revenue		17,439		16,830		609			3.6%		16,456		14,946		1,510			10.1%		33,895		31,776

Operating expenses		7,997		7,070		927			13.1%		7,952		7,017		935			13.3%		15,949		14,087
Net operating income	$	9,442	$	9,760	$	(318	)		-3.3%	$	8,504	$	7,929	$	575			7.3%		17,946		17,689
Average
Occupancy %		83.9%		82.7%					1.2%		94.6%		95.4%					-0.8%

Reconciliation to consolidated net income:
Deferred rents - straight lining		(219	)		(123	)
Amortization of acquired leases		(1	)		(16	)
Investment income		113			133
General and administrative expenses		(1,653	)		(1,222	)
Acquisition costs - Regency		—			(648	)
Depreciation		(4,985	)		(4,654	)
Financing costs		(8,370	)		(8,434	)
Income from continuing operations		2,831			2,725
Income from discontinued operations		—			7
Gain on sale of discontinued operation		—			8,734
Net income		2,831			11,466
Net income attributable to noncontrolling interests		(283	)		(453	)
Net income attributable to common equity	$	2,548		$	11,013

	Commercial										Residential								Combined
	Three Months Ended										Three Months Ended								Three Months Ended
	July 31,					Increase (Decrease)					July 31,				Increase (Decrease)				July 31,
	2015		2014			$			%		2015		2014		$		%		2015		2014
	(In thousands)										(In thousands)								(In thousands)
Rental income	$	4,454	$	4,288		$	166			3.9%	$	5,398	$	5,096	$	302		5.9%	$	9,852	$	9,384
Reimbursements		1,290		1,051			239			22.7%		—		—		—		0.0%		1,290		1,051
Other		7		(21	)		28			-133.3%		65		61		4		6.6%		72		40
Total revenue		5,751		5,318			433			8.1%		5,463		5,157		306		5.9%		11,214		10,475

Operating expenses		2,582		2,103			479			22.8%		2,525		2,370		155		6.5%		5,107		4,473
Net operating income	$	3,169	$	3,215		$	(46	)		-1.4%	$	2,938	$	2,787	$	151		5.4%		6,107		6,002
Average
Occupancy %		86.3%		82.3%						4.0%		94.6%		96.7%				-2.1%

Reconciliation to consolidated net income:
Deferred rents - straight lining		(71	)		(37	)
Amortization of acquired leases		—			(5	)
Investment income		37			50
General and administrative expenses		(509	)		(419	)
Acquisition costs - Regency		—			(648	)
Depreciation		(1,690	)		(1,614	)
Financing costs		(2,817	)		(2,613	)
Income from continuing operations		1,057			716
Income from discontinued operations		—			—
Gain on sale of discontinued operation		—			—
Net income		1,057			716
Net income attributable to noncontrolling interests		(89	)		(162	)
Net income attributable to common equity	$	968		$	554

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 items. FREIT assesses and measures segment operating results based on NOI.

Same Property NOI: FREIT considers same property net operating income (“Same Property NOI”) to be a useful supplemental non-GAAP measure of our operating performance. We define same property within both our commercial and residential segments to be those properties that we have owned and operated for both the current and prior periods presented, excluding those properties that we acquired, redeveloped or classified as discontinued operations during those periods. Any newly acquired property that has been in operation for less than a year, any property that is undergoing a major redevelopment, but may still be in operation at less than full capacity, and/or any property that is under contract for sale are not considered same property.

Index	Page 20

NOI and Same Property NOI are non-GAAP financial measures and are not measures of operating results or cash flow as measured by generally accepted accounting principles, and are 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.

COMMERCIAL SEGMENT

The commercial segment contains ten (10) separate properties. Seven are multi-tenanted retail or office centers, and three are single tenanted – a supermarket and two bank branches. As indicated in the table above under the caption Segment Information, total revenue from FREIT’s commercial segment for the Current Nine Months and Current Quarter increased by 3.6% and 8.1%, respectively, from the prior year’s comparable periods. The increase in total revenue for the Current Year’s periods was primarily attributable to increased rental income from increased rents and increases in the occupancy percentage over last year’s comparable periods. NOI for the Current Year’s periods decreased by 3.3% and 1.4%, respectively, from the prior year’s comparable periods. The decrease in NOI for the Current Year’s periods was primarily attributable to increases in non-reimbursable operating expenses, principally repairs and maintenance and tenant’s bad debts.

Same Property Operating Results: FREIT’s commercial segment currently contains nine (9) same properties. (See definition of same property under Segment Information above.) Since The Rotunda property is currently undergoing a major redevelopment and is operating at less than full capacity, it has been excluded from same property results for all periods presented. For the Current Year’s periods, same property revenue for the commercial segment increased by 3.4% and 6.9%, respectively, from the prior year’s comparable periods. For the Current Year’s periods, same property NOI decreased by 1.9% and increased by 2.1%, respectively, from the prior year’s comparable periods. The reasons for the changes mirror the discussion in the previous paragraph.

Index	Page 21

Leasing: The following table reflects leasing activity at our commercial properties for comparable leases (leases executed for spaces in which there was a tenant at some point during the previous twelve-month period) and non-comparable leases for the Current Nine Months:

	Number of Leases		Lease Area (Sq Ft)		Weighted Average Lease Rate (Sq Ft)		Weighted Average Prior Lease Rate (Sq Ft)		% Increase (Decrease)		Tenant Improvement Allowance (Sq Ft) (a)		Lease Commissions (Sq Ft) (a)

Comparable leases		12		76,833	$	17.80	$	14.53		22.5%	$	—	$	0.36
Non-comparable leases		5		10,026	$	37.22		N/A		N/A	$	1.33	$	1.50
Total leasing activity		17		86,859

(a) These leasing costs are presented as annualized costs per square foot and are allocated uniformly over the initial lease term.

For the Current Quarter, average occupancy showed an increase of 4.0%, as compared to the Prior Year’s Quarter. Excluding the impact of the Rotunda property, which is currently undergoing a major redevelopment project that began in September 2013, average occupancy rates for the Current Nine Months decreased 2.2% over last year’s comparable period, which was primarily due to the G-Mart vacancy at Westridge Square as of November 1, 2014.

Construction related to the expansion and renovation of the Damascus Center was completed in November 2011. We are currently in the negotiation process with potential tenants for the new, currently available space constructed in the final phase (Phase III) of this project. As of July 31, 2015, approximately 86.0% of the space at the Damascus Center is leased and 81.3% is occupied.

On July 27, 2012, FREIT signed a lease agreement with G-Mart for a significant portion (40,000 square feet) of the space at the Westridge Square shopping center that was previously occupied by Giant of Maryland, LLC (“Giant”). G-Mart managed an international grocery store chain. FREIT incurred approximately $940,000 in tenant improvement costs associated with the lease to G-Mart, which began operations at the center in September 2013. Effective November 1, 2014, G-Mart notified FREIT that it had vacated its space at the Westridge Square shopping center and would be terminating its lease. A new lease for this 40,000 square foot space was signed by H-Mart, an international grocery store chain, in November 2014. H-Mart is currently renovating their space but began paying rent in May 2015. All of the tenant improvements related to G-Mart will be utilized for H-Mart.

DEVELOPMENT ACTIVITIES

The Rotunda property in Baltimore, MD (owned by our 60% owned affiliate Grande Rotunda, LLC) is an 11.5 acre site containing a 138,000 sq. ft. office building and approximately 78,000 sq. ft. of retail space on the lower level of the office building. The redevelopment and expansion plans include a modernization of the office building and smaller adjacent buildings, construction of 379 residential apartment rental units, an additional 75,000 square feet of new retail space, and 864 above level parking spaces. With regard to the Rotunda’s redevelopment project, approximately $91.8 million has been incurred through July 31, 2015, of which $3.7 million was written-off in Fiscal 2012 as a result of revisions to the scope of the redevelopment project. All planning and feasibility study costs, as well as ongoing construction costs related to the project are being capitalized to Construction In Progress (“CIP”) until the project is completed and becomes operational. On December 9, 2013, Grande Rotunda, LLC, closed with Wells Fargo Bank on a construction loan of up to $120 million to be used to reconfigure and expand its Rotunda property in Baltimore, MD. The construction loan is for a term of four (4) years, with one 12-month extension, at a rate of 225 basis points over the monthly LIBOR. FREIT started construction in September 2013.

Through July 31, 2015, funding for the construction at the Rotunda was provided by: (a) the Grande Rotunda, LLC members, FREIT and Rotunda 100, LLC, who contributed approximately $14.5 million in accordance with the loan agreement with Wells Fargo Bank; and (b) $82.0 million in draws on the construction line with Wells Fargo Bank, of which $19 million of the draw was used to pay off the loan from FREIT, and $63.0 million was used towards the construction at the Rotunda. (See discussion under Liquidity and Capital resources for further details regarding the Rotunda financing.)

RESIDENTIAL SEGMENT

FREIT currently operates seven (7) multi-family apartment communities totaling 1,093 apartment units. As indicated in the table above under the caption Segment Information, total revenue and NOI from FREIT’s residential segment for the Current Nine Months increased by 10.1% and 7.3%, respectively, as compared to the Prior Nine Months. For the Current Quarter, total revenue and NOI increased by 5.9% and 5.4%, respectively, as compared to the Prior Year’s Quarter. The increase in total revenue and NOI for the Current Nine Months and Current Quarter was primarily attributable to: (a) the addition of the operating results of the Regency (see discussion below), and (b) increased base rent at all of our residential properties.

Index	Page 22

Same Property Operating Results: FREIT’s residential segment currently contains six (6) same properties. (See definition of same property under Segment Information above.) The Regency property is not included as same property, since it was acquired in June 2014 and was not in operation for the full 2014 fiscal year. For the Current Quarter, same property revenue for the residential segment decreased by 0.1% and same property NOI increased by 1.0% as compared to last year’s comparable period. For the Current Nine Months, same property revenue for the residential segment increased by 0.5% and same property NOI decreased by 0.5% from last year’s comparable period. Despite the overall increase in base rent for the current year, higher vacancies at several of FREIT’s residential properties for the Current Quarter, along with higher operating expenses were the primary contributors to the decrease in same property NOI for the Current Nine Months.

Our residential revenue is principally composed of monthly apartment rental income. Total rental income is a factor of occupancy and monthly apartment rents. Monthly average residential rents at the end of the Current Quarter and the Prior Year’s Quarter were $1,735 and $1,723, respectively. A 1% decline in annual average occupancy, or a 1% decline in average rents from current levels, results in an annual revenue decline of approximately $228,000 and $216,000, respectively.

On June 18, 2014, FREIT completed the acquisition of the 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), which was funded in part with the $9.8 million in net proceeds from the sale of the South Brunswick land, and the remaining balance of $11.5 million was funded utilizing $10 million of FREIT’s credit line with Provident Bank, and FREIT’s available cash. On December 29, 2014, FREIT Regency, LLC secured long-term financing for the Regency property in the amount of $16.2 million from Provident Bank (see discussion under Liquidity and Capital Resources). A portion of the loan proceeds was used to replace the funds borrowed from FREIT’s credit line, and the remainder are available to fund FREIT’s future capital expenditures and for general corporate purposes.

Capital expenditures: Since all of our apartment communities, with the exception of The Boulders and the Regency, were constructed more than 25 years ago, we tend to spend more in any given year on maintenance and capital improvements than may be spent on newer properties. Major renovation programs (apartment renovations, parking structure restoration, air conditioning system replacement, and heating/cooling riser pipe replacement) have been undertaken at The Pierre. The parking structure restoration project, as well as, the replacement of the A/C system, was completed in Fiscal 2014 at a cost of approximately $750,000 and $1 million, respectively. We have substantially completed modernizing, where required, all apartments. The remaining apartments will be renovated as they become vacant. In addition, we have completed the major project to replace the heating and cooling riser pipe system at The Pierre in the current quarter for a cost of approximately $1.4 million. Funds for these capital projects will be available from cash flow from the property's operations and cash reserves.

Index	Page 23

FINANCING COSTS

	Nine Months Ended						Three Months Ended
	July 31,						July 31,
	2015			2014			2015			2014
	(In thousands)						(In thousands)
Fixed rate mortgages:
1st Mortgages
Existing	$	7,855		$	7,373		$	2,623		$	2,445
New		361			601			154			227
2nd Mortgages
Existing		—			12			—			—
Variable rate mortgages:
Construction loan-Rotunda		1,158			329			481			146
Credit line		35			48			—			48
Other		246			542			84			182
		9,655			8,905			3,342			3,048
Amortization of Mortgage Costs		315			273			142			89
Total Financing Costs		9,970			9,178			3,484			3,137
Less Amounts capitalized		(1,600	)		(744	)		(667	)		(524	)
Total Financing Costs Expensed	$	8,370		$	8,434		$	2,817		$	2,613

Total financing costs for the Current Nine Months and Current Quarter increased 8.6% and 11.1%, respectively, compared to the prior year’s comparable periods. The increase for both the Current Nine Months and Current Quarter was primarily attributable to the Rotunda construction loan of $82.0 million, and the Regency loan of $16.2 million. (See discussions under Liquidity and Capital Resources below).

GENERAL AND ADMINISTRATIVE EXPENSES (“G & A”)

G&A expense for the Current Nine Months and Current Quarter was $1,653,000 and $509,000, respectively, compared to $1,222,000 and $419,000, respectively, for the prior year’s comparable periods. The primary components of G&A are accounting fees, legal & professional fees and Trustees’ fees. The primary reason for the increase in G&A for the Current Nine Months and Current Quarter is the increase in Trustee fees, as a result of a change in the Deferred Fee Plan, along with increases in Trustee meeting attendance fees and annual retainer fees effective November 1, 2014.

DEPRECIATION

Depreciation expense from operations for the Current Nine Months and Current Quarter was $4,985,000 and $1,690,000, respectively, as compared to $4,654,000 and $1,614,000 for the prior year’s comparable periods. The increase in depreciation was primarily attributable to depreciation related to the Regency acquisition and certain assets becoming operational as of the end of Fiscal 2014.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $7.7 million for the Current Nine Months compared to $7.9 million for the Prior Nine Months. We expect that cash provided by operating activities and cash reserves will be adequate to cover mandatory debt service payments (including payments of interest, but excluding balloon payments), real estate taxes, recurring capital improvements and dividends necessary to retain qualification as a REIT (90% of taxable income).

As at July 31, 2015, FREIT had cash and cash equivalents totaling $14.6 million, compared to $10.6 million at October 31, 2014. The increase in cash for the Current Nine Months is primarily attributable to net proceeds of approximately $15.8 million related to the securing of long-term financing for the Regency property, offset by the repayment of $5 million related to FREIT’s outstanding credit line balance and $6 million in dividend payments. (See discussion below for additional information relating to this loan.)

Index	Page 24

Credit Line: FREIT has a line of credit provided by the Provident Bank in the amount of approximately $12.8 million. The line of credit is for a two year term ending on November 1, 2016, 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, and retail space in Glen Rock, 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 rates at the time of the draws. The interest rate on the line of credit has a floor of 3.5%. The $5 million that was outstanding as of October 31, 2014, was repaid to the bank in January 2015. As of July 31, 2015, approximately $12.8 million was available under the line of credit, and no amount was outstanding.

On December 26, 2012, Damascus Centre, LLC refinanced its $15 million construction loan with long-term financing provided by People’s United Bank. The amount of the new loan is $25 million, of which $20 million has been drawn as of July 31, 2015. The balance, up to an additional $5 million, will be available as a one-time draw over a 36 month period from the closing date, and the amount available will depend on future leasing at the shopping center. The new loan will mature on January 3, 2023. The loan bears a floating interest rate equal to 210 basis points over the BBA LIBOR. In order to minimize interest rate volatility during the term of the loan, Damascus Centre, LLC entered into an interest rate swap agreement that in effect, converted the floating interest rate to a fixed interest rate of 3.81% over the term of the loan. The interest rate swap is considered a derivative financial instrument that will be used only to reduce interest rate risk, and not held or used for trading purposes. (See Note 4 for additional information relating to the interest rate swap.)

At July 31, 2015, FREIT’s aggregate outstanding mortgage debt was $299.0 million, which bears a weighted average interest rate of 4.21% and an average life of approximately 5.2 years. FREIT’s fixed rate mortgages are subject to amortization schedules that are longer than the term of the mortgages. As such, balloon payments (unpaid principal amounts at mortgage due date) for all mortgage debt will be required as follows:

Fiscal Year	2016	2017	2018	2019	2021	2022	2023	2024	2025
(In millions)
Mortgage "Balloon" Payments	$24.5	$22.0	$4.9	$127.0	$19.1	$14.4	$32.5	$15.9	$13.9

The following table shows the estimated fair value and carrying value of our long-term debt at July 31, 2015 and October 31, 2014:

	July 31,		October 31,
($ in Millions)	2015		2014

Fair Value	$	304.3	$	256.0

Carrying Value	$	299.0	$	251.6

FREIT expects to refinance the individual mortgages with new mortgages when their terms expire. To this extent we have exposure to interest rate risk. If interest rates, at the time any individual mortgage note is due, are higher than the current fixed interest rate, higher debt service may be required, and/or refinancing proceeds may be less than the amount of mortgage debt being retired. For example, at July 31, 2015, a 1% interest rate increase would reduce the fair value of our debt by $9.0 million, and a 1% decrease would increase the fair value by $9.6 million.

On November 19, 2013, FREIT refinanced the first mortgages on its Hammel Gardens and Steuben Arms properties that were scheduled to mature on December 1, 2013. The mortgages, aggregating $9.4 million, were refinanced for $19.7 million. The new mortgage amounts reflect, in part, the appreciated value of those assets. This refinancing resulted in: (i) a reduction of annual interest costs from 6.4% to 4.54%, and (ii) net refinancing proceeds of approximately $10 million that were available for capital expenditures and general corporate purposes.

Index	Page 25

On December 9, 2013, FREIT’s 60% owned affiliate, Grande Rotunda, LLC, closed with Wells Fargo Bank on a construction loan of up to $120 million to be used to reconfigure and expand its Rotunda property in Baltimore, MD. The construction loan is for a term of four (4) years, with one 12-month extension, at a rate of 225 basis points over the monthly LIBOR. As of July 31, 2015, $82.0 million of this loan was drawn down, of which $19 million was used to pay off the loan from FREIT, and $63.0 million was used towards the construction at the Rotunda.

Interest rate swap contracts: To reduce interest rate volatility, FREIT uses a “pay fixed, receive floating” interest rate swap to convert floating interest rates to fixed interest rates over the term of a certain loan. We enter into these swap contracts with a counterparty that is usually a high-quality commercial bank.

In essence, we agree to pay our counterparties a fixed rate of interest on a dollar amount of notional principal (which corresponds to our mortgage debt) over a term equal to the term of the mortgage notes. Our counterparties, in return, agree to pay us a short-term rate of interest - generally LIBOR - on that same notional amount over the same term as our mortgage notes.

Current GAAP requires us to mark-to-market fixed pay interest rate swaps. As the floating interest rate varies from time-to-time over the term of the contract, the value of the contract will change upward or downward. If the floating rate is higher than the fixed rate, the value of the contract goes up and there is a gain and an asset. If the floating rate is less than the fixed rate, there is a loss and a liability. These gains or losses will not affect our income statement. Changes in the fair value of these swap contracts will be reported in other comprehensive income and appear in the equity section of our balance sheet. This gain or loss represents the economic consequence of liquidating our fixed rate swap contracts and replacing them with like-duration funding at current market rates, something we would likely never do. Periodic cash settlements of the swap contract will be accounted for as an adjustment to interest expense.

FREIT had variable interest rate mortgages securing its Damascus Center and Regency properties. To reduce interest rate fluctuations FREIT entered into interest rate swap contracts for each of these loans. These interest rate swap contracts effectively converted variable interest rate payments to fixed interest rate payments. The contracts were initially based on a notional amount of approximately $20,000,000 ($19,066,000 at July 31, 2015) for the Damascus Center swap, and a notional amount of approximately $16,200,000 at July 31, 2015 for the Regency swap. FREIT has the following derivative-related risks with its swap contracts: 1) early termination risk, and 2) counterparty credit risk.

Early Termination Risk: If FREIT wants to terminate its swap contract before maturity, it would be bought out or terminated at market value; i.e., the difference in the present value of the anticipated net cash flows from each of the swap’s parties. If current variable interest rates are significantly below FREIT’s fixed interest rate payments, this could be costly. Conversely, if interest rates rise above FREIT’s fixed interest payments and FREIT elected early termination, FREIT would realize a gain on termination. At July 31, 2015, the Damascus Center’s swap contract was in our favor and the Regency’s swap contract was in the counterparties’ favor. If FREIT had terminated its contracts at that date it would have realized a gain of approximately $145,000 for the Damascus Center swap, and a loss of approximately $556,000 for the Regency swap which have been included as an asset and a liability, respectively, in FREIT’s balance sheet as at July 31, 2015, and the change (gain or loss) between reporting periods included in comprehensive income. At October 31, 2014, FREIT’s Damascus Center swap contract was in-the-money. If FREIT had terminated its contract at that date it would have realized a gain of approximately $515,000. This amount has been included as an asset in FREIT’s balance sheet as at October 31, 2014.

Counterparty Credit Risk: Each party to a swap contract bears the risk that its Counterparty will default on its obligation to make a periodic payment. FREIT reduces this risk by entering into swap contracts only with major financial institutions that are experienced market makers in the derivatives market.

Index	Page 26

We believe that the values of our properties will be adequate to command refinancing proceeds equal to or higher than the mortgage debt to be refinanced. We continually review our debt levels to determine if additional debt can prudently be utilized for property acquisition additions to our real estate portfolio that will increase income and cash flow to our shareholders.

SHARE REPURCHASES

On February 17, 2015, FREIT announced a tender offer to purchase up to 100,000 shares of beneficial interest at a price of $23.00 per share, which it funded principally from cash and cash equivalents. The tender offer expired on March 20, 2015. The number of shares proposed to be purchased in the tender offer represents approximately 1.5% of FREIT’s currently outstanding shares. As a result of the tender offer, FREIT repurchased 94,302 shares of beneficial interest at $23.00 per share, for an aggregate purchase price of $2,168,946. FREIT’s Trustees and executive officers did not tender any of their shares of beneficial interest in FREIT in the tender offer. (See Note 13 for further details.)

On September 4, 2014, the Board authorized the repurchase of 100,572 FREIT shares held by the pension plan of Hekemian & Co., Inc., FREIT’s managing agent, for an aggregate cash purchase of $1,855,553 or $18.45 per share, which was the closing price of FREIT shares on September 3, 2014. The repurchase occurred in September 2014 in connection with the termination of the pension plan. Mr. Robert S. Hekemian, Chairman and Chief Executive Officer of FREIT, and Mr. Robert S. Hekemian, Jr., a Trustee of FREIT, and members of their family were participants in the pension plan.

STOCK OPTION PLAN

DEFERRED FEE PLAN

ADJUSTED FUNDS FROM OPERATIONS

Funds From Operations (“FFO”) is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”). Effective with the 3^rd Quarter of Fiscal 2013, FREIT revised its FFO calculation to be in conformance with the NAREIT definition. Although many consider FFO as the standard measurement of a REIT’s performance, FREIT modified the NAREIT computation of FFO to include other adjustments to GAAP net income that are not considered by management to be the primary drivers of their decision making process. These adjustments to GAAP net income are amortization of acquired leases, straight-line rents, FFO from discontinued operations and recurring capital improvements on our residential apartments. The modified FFO computation is referred to as Adjusted Funds From Operations (“AFFO”). FREIT believes that AFFO is useful to investors as a supplemental gauge of our operating performance. We compute FFO and AFFO as follows:

Index	Page 27

	Nine Months Ended July 31,						Three Months Ended July 31,
	2015			2014			2015			2014
	(in thousands, except per share amounts)						(in thousands, except per share amounts)
Funds From Operations ("FFO") (a)

Net income	$	2,831		$	11,466		$	1,057		$	716
Depreciation of consolidated properties		4,985			4,654			1,690			1,614
Amortization of deferred leasing costs		233			221			82			89
Gain on sale of discontinued operation		—			(8,734	)		—			—
Distributions to minority interests		(426	)		(765	)		(30	)		(300	)
FFO	$	7,623		$	6,842		$	2,799		$	2,119

*Per Share - Basic and Diluted*	$	1.12		$	0.99		$	0.41		$	0.31

(a) As prescribed by NAREIT.

Adjusted Funds From Operations ("AFFO")

FFO	$	7,623		$	6,842		$	2,799		$	2,119
Amortization of acquired leases		1			16			—			5
Deferred rents (Straight lining)		219			123			71			37
Acquisition expenses - Regency apartments		—			648			—			648
Less: FFO from discontinued operations		—			(7	)		—			—
Capital Improvements - Apartments		(275	)		(351	)		(21	)		(210	)
AFFO	$	7,568		$	7,271		$	2,849		$	2,599

*Per Share - Basic and Diluted*	$	1.12		$	1.05		$	0.42		$	0.38

Weighted Average Shares Outstanding:
*Basic*		6,785			6,925			6,747			6,922
*Diluted*		6,786			6,925			6,755			6,922

FFO and AFFO do 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 and AFFO by certain other REITs may vary materially from that of FREIT’s, and therefore FREIT’s FFO and AFFO may not be directly comparable to those of other REITs.

INFLATION

Inflation can impact the financial performance of FREIT in various ways. Our commercial tenant leases normally provide that the tenants bear all or a portion of most operating expenses, which can reduce the impact of inflationary increases on FREIT. Apartment leases are normally for a one-year term, which may allow us to seek increased rents as leases renew or when new tenants are obtained, subject to prevailing market conditions.

Index	Page 28

Item 3: Quantitative and Qualitative Disclosures About Market Risk

See “Commercial Segment”, “Residential Segment” and “Liquidity and Capital Resources” under Item 2 above for a detailed discussion of FREIT’s quantitative and qualitative market risk disclosures.

Item 4: Controls and Procedures

At the end of the period covered by this report, we carried out an evaluation of the effectiveness of the design and operation of FREIT’s disclosure controls and procedures. This evaluation was carried out under the supervision and with participation of FREIT’s management, including FREIT’s Chairman and Chief Executive Officer and Chief Financial Officer, who concluded that FREIT’s disclosure controls and procedures are effective as of July 31, 2015. There has been no change in FREIT’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, FREIT’s internal control over financial reporting.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in FREIT’s reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in FREIT’s reports filed under the Exchange Act is accumulated and communicated to management, including FREIT’s Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

Part II: Other Information

Item 1: Legal Proceedings

None.

Item 1A: Risk Factors

There were no material changes in any risk factors previously disclosed in FREIT’s Annual Report on Form 10-K for the year ended October 31, 2014, that was filed with the Securities and Exchange Commission on January 14, 2015.

Index	Page 29

Item 6: Exhibits

Exhibit Index

Exhibit 10.1 - Amendment No 2. to Amended and Restated Deferred Fee Plan, adopted May 7, 2015

Exhibit 31.1 - Section 302 Certification of Chief Executive Officer

Exhibit 31.2 - Section 302 Certification of Chief Financial Officer

Exhibit 32.1 - Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

Exhibit 32.2 - Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

Exhibit 101 - The following materials from FREIT’s quarterly report on Form 10-Q for the period ended July 31, 2015, formatted in Extensible Business Reporting Language (“XBRL”): (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of income; (iii) condensed consolidated statements of comprehensive income; (iv) condensed consolidated statement of equity; (v) condensed consolidated statements of cash flows; and (vi) notes to condensed consolidated financial statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FIRST REAL ESTATE INVESTMENT
	TRUST OF NEW JERSEY
	(Registrant)

Date: September 9, 2015
	/s/ Robert S. Hekemian
	(Signature)
	Robert S. Hekemian
	Chairman of the Board and Chief Executive Officer
	(Principal Executive Officer)


	/s/ Donald W. Barney
	(Signature)
	Donald W. Barney
	President, Treasurer and Chief Financial Officer
	(Principal Financial/Accounting Officer)