10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended April 30, 2020

or

☐	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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Shares of beneficial interest, without par value	FREVS	OTC Pink Market

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 ☒ No ☐

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 ☐

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

Large Accelerated Filer ☐	Accelerated Filer ☐	Non-Accelerated Filer ☒	Smaller Reporting Company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

As of June 9, 2020, the number of shares of beneficial interest outstanding was 6,856,651.

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 of April 30, 2020 and October 31, 2019;	3
		b.)	Condensed Consolidated Statements of Income for the Six and Three Months Ended April 30, 2020 and 2019;	4
		c.)	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Six and Three Months Ended April 30, 2020 and 2019;	5
		d.)	Condensed Consolidated Statements of Equity for the Six and Three Months Ended April 30, 2020 and 2019;	6
		e.)	Condensed Consolidated Statements of Cash Flows for the Six   Months Ended April 30, 2020 and 2019;	8
		f.)	Notes to Condensed Consolidated Financial Statements.	9
	Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
	Item 3:	Quantitative and Qualitative Disclosures About Market Risk		35
	Item 4:	Controls and Procedures		35
Part II:	Other Information
	Item 1:	Legal Proceedings		36
	Item 1A:	Risk Factors		36
	Item 6:	Exhibits		37
	Signatures			37

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)

	April 30,			October 31,
	2020			2019
	(In Thousands of Dollars)
ASSETS
Real estate, at cost, net of accumulated depreciation	$	289,169		$	330,108
Construction in progress		473			395
Cash and cash equivalents		31,751			38,075
Investment in tenancy-in-common		20,740			—
Tenants' security accounts		1,604			2,278
Receivables arising from straight-lining of rents		4,495			4,374
Accounts receivable, net of allowance for doubtful accounts of $959 and
$379 as of April 30, 2020 and October 31, 2019, respectively		1,385			1,741
Secured loans receivable		5,136			5,053
Prepaid expenses and other assets		5,531			5,951
Deferred charges, net		2,556			2,643
Total Assets	$	362,840		$	390,618
LIABILITIES AND EQUITY
Liabilities:
Mortgages payable	$	302,912		$	352,790
Less unamortized debt issuance costs		1,849			2,886
Mortgages payable, net		301,063			349,904
Due to affiliate		5,831			5,705
Deferred trustee compensation payable		2,633			7,610
Accounts payable and accrued expenses		3,487			3,097
Dividends payable		—			1,357
Tenants' security deposits		2,295			3,381
Deferred revenue		828			1,390
Interest rate cap and swap contracts		5,498			2,126
Total Liabilities		321,635			374,570
Commitments and contingencies
Equity:
Common equity:
Shares of beneficial interest without par value:
8,000,000 shares authorized; 6,993,152 shares issued plus 141,057 and		27,781			28,847
192,122 vested share units granted to Trustees at April 30, 2020
and October 31, 2019, respectively
Treasury stock, at cost: 136,501 and 206,408 shares at April 30, 2020		(2,863	)		(4,330	)
and October 31, 2019, respectively
Undistributed earnings (dividends in excess of net income)		18,196			(6,762	)
Accumulated other comprehensive loss		(4,443	)		(2,040	)
Total Common Equity		38,671			15,715
Noncontrolling interests in subsidiaries		2,534			333
Total Equity		41,205			16,048
Total Liabilities and Equity	$	362,840		$	390,618

See Notes to Condensed Consolidated Financial Statements.

Page 4 

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

SIX AND THREE MONTHS ENDED APRIL 30, 2020 AND 2019

(Unaudited)

	Six Months Ended April 30,						Three Months Ended April 30,
	2020			2019			2020			2019
	(In Thousands Except Per Share Amounts)						(In Thousands Except Per Share Amounts)
Revenue:
Rental income	$	25,457		$	26,486		$	12,094		$	13,325
Reimbursements		3,422			2,995			1,506			1,337
Sundry income		402			233			88			124
Total revenue		29,281			29,714			13,688			14,786
Expenses:
Property operating expenses		8,327			7,852			4,312			3,985
Special committee expenses		4,519			586			1,137			586
Management fees		1,223			1,285			508			648
Real estate taxes		4,522			4,801			2,115			2,371
Depreciation		5,462			5,607			2,530			2,783
Total expenses		24,053			20,131			10,602			10,373
Operating income		5,228			9,583			3,086			4,413
Investment income		136			184			64			113
Unrealized loss on interest rate cap contract		—			(159	)		—			(5	)
Gain on sale of property		—			836			—			836
Gain on deconsolidation of subsidiary		27,680			—			27,680			—
Loss on investment in tenancy-in-common		(18	)		—			(18	)		—
Interest expense including amortization
of deferred financing costs		(7,911	)		(9,179	)		(3,676	)		(4,527	)
Net income		25,115			1,265			27,136			830
Net (income) loss attributable to noncontrolling
interests in subsidiaries		(157	)		(20	)		84			(44	)
Net income attributable to common equity	$	24,958		$	1,245		$	27,220		$	786
Earnings per share:
Basic	$	3.57		$	0.18		$	3.89		$	0.11
Diluted	$	3.56		$	0.18		$	3.88		$	0.11
Weighted average shares outstanding:
Basic		6,984			6,923			6,989			6,932
Diluted		7,003			6,923			7,026			6,932

See Notes to Condensed Consolidated Financial Statements.  

Page 5 

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

SIX AND THREE MONTHS ENDED APRIL 30, 2020 AND 2019

(Unaudited)

	Six Months Ended April 30,						Three Months Ended April 30,
	2020			2019			2020			2019
	(In Thousands of Dollars)						(In Thousands of Dollars)
Net income	$	25,115		$	1,265		$	27,136		$	830
Other comprehensive income (loss):
Unrealized loss on interest rate swap contracts before
reclassifications		(3,506	)		(2,996	)		(3,086	)		(720	)
Amount reclassified from accumulated other comprehensive loss
to interest expense		134			(189	)		104			(101	)
Net unrealized loss on interest rate swap contracts		(3,372	)		(3,185	)		(2,982	)		(821	)
Comprehensive income (loss)		21,743			(1,920	)		24,154			9
Net (income) loss attributable to noncontrolling interests		(157	)		(20	)		84			(44	)
Other comprehensive loss:
Unrealized loss on interest rate swap contracts attributable
to noncontrolling interests		969			914			840			248
Comprehensive loss attributable to noncontrolling interests		812			894			924			204
Comprehensive income (loss) attributable to common equity	$	22,555		$	(1,026	)	$	25,078		$	213

See Notes to Condensed Consolidated Financial Statements.  

Page 6 

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

SIX AND THREE MONTHS ENDED APRIL 30, 2020

(Unaudited)

	Common Equity
	Shares of Beneficial Interest			Treasury Shares at Cost			Undistributed Earnings (Dividends in Excess of Net Income)			Accumulated Other Comprehensive Loss			Total Common Equity			Noncontrolling Interests			Total Equity
	(In Thousands of Dollars, Except Share and Per Share Amounts)
Balance at October 31, 2019	$	28,847		$	(4,330	)	$	(6,762	)	$	(2,040	)	$	15,715		$	333		$	16,048
Stock based compensation expense		12												12						12
Vested share units granted to Trustees and consultant		211												211						211
Vested share units issued to consultant and retired Trustee*		(1,401	)		1,401									—						—
Distributions to noncontrolling interests														—			(583	)		(583	)
Net (loss) income								(2,262	)					(2,262	)		241			(2,021	)
Net unrealized loss on interest rate swaps											(261	)		(261	)		(129	)		(390	)
Balance at January 31, 2020		27,669			(2,929	)		(9,024	)		(2,301	)		13,415			(138	)		13,277
Stock based compensation expense		12												12						12
Vested share units granted to Trustees		166												166						166
Vested share units issued to retired Trustee*		(66	)		66									—						—
Deconsolidation of subsidiary														—			3,596			3,596
Net income (loss)								27,220						27,220			(84	)		27,136
Net unrealized loss on interest rate swaps											(2,142	)		(2,142	)		(840	)		(2,982	)
Balance at April 30, 2020	$	27,781		$	(2,863	)	$	18,196		$	(4,443	)	$	38,671		$	2,534		$	41,205

* Represents the issuance of treasury shares to consultant and retired Trustee for share units earned.

See Notes to Condensed Consolidated Financial Statements.

Page 7 

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

SIX AND THREE MONTHS ENDED APRIL 30, 2019

(Unaudited)

	Common Equity
	Shares of Beneficial Interest			Treasury Shares at Cost			Undistributed Earnings (Dividends in Excess of Net Income			Accumulated Other Comprehensive Income			Total Common Equity			Noncontrolling Interests			Total Equity
	(In Thousands of Dollars, Except Share and Per Share Amounts)
Balance at October 31, 2018	$	28,288		$	(4,941	)	$	(4,376	)	$	2,517		$	21,488		$	2,856		$	24,344
Stock based compensation expense		34												34						34
Vested share units granted to Trustees and consultant		254												254						254
Vested share units issued to consultant*		(20	)		20									—						—
Distributions to noncontrolling interests														—			(294	)		(294	)
Net income (loss)								459						459			(24	)		435
Dividends declared, including $26 payable in share units ($0.15 per share)								(1,040	)					(1,040	)					(1,040	)
Net unrealized loss on interest rate swaps											(1,698	)		(1,698	)		(666	)		(2,364	)
Balance at January 31, 2019		28,556			(4,921	)		(4,957	)		819			19,497			1,872			21,369
Stock based compensation expense		35												35						35
Vested share units granted to Trustees and consultant		294												294						294
Vested share units issued to consultant and retired Trustees*		(554	)		554									—						—
Distributions to noncontrolling interests														—			(392	)		(392	)
Net income								786						786			44			830
Dividends declared, including $20 payable in share units ($0.125 per share)								(867	)					(867	)					(867	)
Net unrealized loss on interest rate swaps											(573	)		(573	)		(248	)		(821	)
Balance at April 30, 2019	$	28,331		$	(4,367	)	$	(5,038	)	$	246		$	19,172		$	1,276		$	20,448

* Represents the issuance of treasury shares to consultant and retired Trustees for share units earned.

See Notes to Condensed Consolidated Financial Statements.  

Page 8 

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED APRIL 30, 2020 AND 2019

(Unaudited)

	Six Months Ended
	April 30,
	2020			2019
	(In Thousands of Dollars)
Operating activities:
Net income	$	25,115		$	1,265
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation		5,462			5,607
Amortization		786			851
Unrealized loss on interest rate cap contract		—			159
Stock based compensation expense		24			69
Trustee fees, consultant fee and related interest paid in stock units		377			502
Gain on sale of property		—			(836	)
Gain on deconsolidation of subsidiary		(27,680	)		—
Loss on investment in tenancy-in-common		18			—
Deferred interest on mortgages		154
Deferred rents - straight line rent		(121	)		(187	)
Bad debt expense		700			68
Changes in operating assets and liabilities:
Tenants' security accounts		(117	)		112
Accounts receivable, prepaid expenses and other assets		173			1,421
Accounts payable, accrued expenses and deferred
trustee compensation payable		(4,234	)		(744	)
Deferred revenue		(515	)		(203	)
Due to affiliate - accrued interest		126			143
Net cash provided by operating activities		268			8,227
Investing activities:
Capital improvements - existing properties		(826	)		(1,543	)
Deconsolidation of subsidiary cash and cash equivalents		(1,383	)		—
Proceeds from sale of commercial property		—			7,060
Net cash (used in) provided by investing activities		(2,209	)		5,517
Financing activities:
Repayment of mortgages		(2,032	)		(7,378	)
Deferred financing costs		—			(56	)
Dividends paid		(1,357	)		(1,351	)
Distributions to noncontrolling interests		(583	)		(686	)
Net cash used in financing activities		(3,972	)		(9,471	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(5,913	)		4,273
Cash, cash equivalents and restricted cash, beginning of period		42,488			26,394
Cash, cash equivalents and restricted cash, end of period	$	36,575		$	30,667
Supplemental disclosure of cash flow data:
Interest paid, net of amounts capitalized	$	7,020		$	8,175
Supplemental schedule of non cash activities:
Operating activities:
Commercial tenant security deposits applied to accounts receivable	$	384		$	—
Investing activities:
Accrued capital expenditures, construction costs, pre-development costs and interest	$	161		$	155
Financing activities:
Dividends declared but not paid	$	—		$	848
Dividends paid in share units	$	—		$	46
Vested share units issued to consultant and retired trustee	$	1,467		$	574
Deconsolidation of subsidiary:
Real estate, at cost, net of accumulated depreciation	$	(36,225	)	$	—
Accounts receivable, net of allowance for doubtful accounts		(55	)		—
Prepaid expenses and other assets		(315	)		—
Mortgage payable		48,000			—
Unamortized debt issuance costs		(489	)		—
Accounts payable and accrued expenses		353			—
Tenants' security deposits		585			—
Deferred revenue		47			—
Deconsolidation of subsidiary cash and cash equivalents		(1,383	)		—
Net carrying value of assets and liabilities deconsolidated	$	10,518		$	—
Recognition of retained investment in tenancy-in-common at fair value	$	20,758		$	—
Derecognition of noncontrolling interest in subsidiary	$	(3,596	)	$	—
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheet:
Cash and cash equivalents	$	31,751		$	25,291
Tenants' security accounts		1,604			2,236
Mortgage escrows (included in prepaid expenses and other assets)		3,220			3,140
Total cash, cash equivalents and restricted cash	$	36,575		$	30,667

See Notes to Condensed Consolidated Financial Statements.  

Page 9 

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 six and three-month periods ended April 30, 2020 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, 2019 of First Real Estate Investment Trust of New Jersey (“FREIT”, “us”, “we”, “our” or the “Company”).

Certain prior period statement of income and cash flow line items have been reclassified to conform to the current year presentation.

Note 2 - Recently issued accounting standards:

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, “Leases (Topic 842)”, which supersedes the existing guidance for lease accounting, “Leases (Topic 840)”. ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged; however, certain refinements were made to conform the standard with the recently issued revenue recognition guidance in ASU 2014-09, “Revenue From Contracts With Customers”, specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Leasing Standard was amended by ASU 2018-11, “Targeted Improvements” (the “Practical Expedient Amendment”) in July of 2018, also codified as ASC 842, which created a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single lease component. The Company determined that its lease arrangements meet the criteria under the practical expedient to account for lease and non-lease components as a single lease component, which alleviates the requirement upon adoption of ASC 842 that we reallocate or separately present consideration from lease and non-lease components. As such, the Company elected the practical expedient as allowed by the Practical Expedient Amendment and adopted ASU 2016-02 in the first quarter of Fiscal 2020.

Substantially all of FREIT’s revenues are within the scope of ASC 842. FREIT will continue to account for its leases as operating leases. Leases for FREIT’s apartment buildings and complexes are generally short-term in nature (one to two-years in duration), based on fixed payments and contain separate lease components within the contract for each revenue stream (i.e. base rent, garage rent, etc.). Given the nature of these leases, the adoption of ASU No. 2016-02 had no impact on the accounting for the Company’s leases within the residential segment.

With respect to most of FREIT’s commercial properties, lease terms range from five years to twenty-five years with options, which if exercised would extend the terms of such leases. These lease agreements generally provide for reimbursement of real estate taxes, maintenance, insurance and certain other operating expenses of the properties (known as common area maintenance costs (“CAM”)). Some of FREIT’s leases in its commercial segment may contain lease and nonlease components. Generally, the primary lease component in most of FREIT’s commercial leases is base rent charged for the rental of space in an office complex/shopping center. Depending on the lease, the following nonlease components could be present: 1) fixed (or in substance fixed) payments related to real estate taxes and insurance; 2) variable payments that depend on an index or rate initially measured using the index or rate at the commencement date; and 3) fixed CAM reimbursements or CAM expense reimbursements based on the tenant’s proportionate share of the allocable operating expenses and CAM capital expenditures for the property.

FREIT accrues fixed lease income on a straight-line basis over the terms of the leases. FREIT accrues reimbursements from tenants for recoverable portions of real estate taxes, insurance, and CAM as variable lease consideration in the period the applicable expenditures are incurred recognizing differences between estimated recoveries and the final billed amounts in the subsequent year. Some of FREIT’s retail tenants are also required to pay overage rents based on sales over a stated base amount during the lease year. FREIT recognizes this variable lease consideration only when each tenant’s sales exceed the applicable sales threshold. Given that this standard has minimal impact on real estate operating lessors, the adoption of this new accounting guidance did not have a significant impact on FREIT’s consolidated financial statements and footnote disclosures. As a result, there was no cumulative effect adjustment to opening equity. Additionally, based on this new accounting guidance, the Company will no longer be able to capitalize certain leasing costs, such as legal expenses, as it relates to activities before a lease is entered into. (See Note 15 to FREIT’s condensed consolidated financial statements for further details).

Page 10 

In June 2016, the FASB issued ASU No. 2016-13 "Financial Instruments – Credit Losses (Topic 326)", which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities, and other financial instruments. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires entities to write down credit losses only when losses are probable and loss reversals are not permitted. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. In November 2018, the FASB issued ASU 2018-19 “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, which clarifies that operating lease receivables are outside the scope of the new standard. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, “Leases (Topic 842)”. FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures.

In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities to ASC Topic 815, Derivatives and Hedging ("ASC 815")” which amends the hedge accounting recognition and presentation requirements in ASC 815. The update is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting and increase transparency as to the scope and results of hedge programs. ASU 2017-12 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. FREIT adopted ASU 2017-12 in the first quarter of Fiscal 2020.

This guidance requires that for cash flow and net investment hedges, all changes in the fair value of the hedging instrument (i.e. both the effective and ineffective portions) will be deferred in other comprehensive income and recognized in earnings at the same time that the hedged item affects earnings. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the amendments in this update. The amended presentation and disclosure guidance is required only prospectively.

The adoption of ASU 2017-12 had no impact on the accounting for FREIT’s interest rate swap contracts, which were previously deemed effective cash flow hedges, on the following entities: Damascus Centre. LLC (“Damascus Centre”), Wayne PSC, LLC (“Wayne PSC”), FREIT Regency, LLC (“Regency”) and Station Place on Monmouth, LLC (“Station Place”). Accordingly, these interest rate swap contracts will continue to be accounted for by marking these contracts to market, taking into account present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss on the swaps in comprehensive income. The adoption of this accounting guidance has an impact on the accounting for Grande Rotunda, LLC’s (“Grande Rotunda”) interest rate cap, which was previously deemed an ineffective cash flow and for which previous to the adoption of this guidance, the change in the fair value was reported in the statements of income. Based on this new guidance, FREIT will record the change in the fair value of Grande Rotunda’s interest rate cap in other comprehensive income on a prospective basis. FREIT did not record an adjustment in Fiscal 2020 to the opening balance of retained earnings as the value of Grande Rotunda’s interest rate cap was $0 as of October 31, 2019. (See Note 4 to FREIT’s condensed consolidated financial statements for additional details).

In October 2018, the FASB issued ASU 2018-16 “Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes to ASC Topic 815, Derivatives and Hedging”. ASU 2018-16 expands the list of U.S benchmark interest rates permitted in the application of hedge accounting by adding the OIS rate based on SOFR as an eligible benchmark interest rate. ASU 2018-16 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. FREIT adopted this update in the first quarter of Fiscal 2020 which did not have an impact on the condensed consolidated financial statements or footnote disclosures.

In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 global pandemic. Under existing GAAP, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. As of April 30, 2020, we have not modified any of our leases attributed to the COVID-19 global pandemic and as a result, have not yet made a determination on whether to elect this option. Accordingly, the Lease Modification Q&A did not have an impact on our condensed consolidated 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 14 to FREIT’s condensed consolidated financial statements) 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 attributable 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 six months ended April 30, 2020, the outstanding stock options increased the average dilutive shares outstanding by approximately 19,000 shares with a $0.01 impact on earnings per share. For the three months ended April 30, 2020, the outstanding stock options increased the average dilutive shares outstanding by approximately 37,000 shares with a $0.01 impact on earnings per share. For the six and three months ended April 30, 2019, the outstanding stock options were anti-dilutive with no impact on earnings per share. There were 38,000 anti-dilutive shares for the six and three months ended April 30, 2020. The number of anti-dilutive shares which have been excluded from the computation of diluted earnings per share was approximately 311,000 for both the six and three months ended April 30, 2019. Anti-dilutive shares consist of out-of-the money stock options under the Equity Incentive Plan.

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Note 4 - Interest rate cap and swap contracts: 

On February 7, 2018, Grande Rotunda, a consolidated subsidiary, refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding available for retail tenant improvements and leasing costs in the amount of $3,380,000. This loan bears a floating interest rate at 285 basis points over the one-month LIBOR rate and has a maturity date of February 6, 2021. At April 30, 2020, the total amount outstanding on this loan was approximately $118.5 million. As part of this transaction, Grande Rotunda had purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year. At April 30, 2020, the derivative financial instrument had a notional amount of $121.9 million and a maturity date of March 5, 2021.

On December 7, 2017, Station Place (owned 100% by FREIT) closed on a $12,350,000 mortgage loan with Provident Bank. The loan bears a floating interest rate equal to 180 basis points over the one-month BBA LIBOR with a maturity date of December 15, 2027. At April 30, 2020, the total amount outstanding on this loan was approximately $12.3 million. In order to minimize interest rate volatility during the term of this loan, Station Place entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 4.35% over the term of the loan. At April 30, 2020, the derivative financial instrument had a notional amount of $12.3 million and a maturity date of December 2027.

On September 29, 2016, Wayne PSC, a consolidated subsidiary, refinanced its $24.2 million mortgage loan held by Metropolitan Life Insurance Company, with a new mortgage loan from People’s United Bank in the amount of $25.8 million. The new loan bears a floating interest rate equal to 220 basis points over the one-month BBA LIBOR with a maturity date of October 1, 2026. At April 30, 2020, the total amount outstanding on this loan was approximately $23.4 million. In order to minimize interest rate volatility during the term of the loan, Wayne PSC entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 3.625% over the term of the loan. At April 30, 2020, the derivative financial instrument had a notional amount of approximately $23.4 million and a maturity date of October 2026.

On December 26, 2012, Damascus Centre refinanced its construction loan with long-term financing provided by People’s United Bank and the first tranche of the new loan was taken down in the amount of $20 million. Based on leasing and net operating income at the shopping center, People’s United Bank agreed to a take-down of the second tranche of this loan on April 22, 2016 in the amount of $2,320,000. The total amount outstanding for both tranches of this loan held with People’s United Bank as of April 30, 2020 was approximately $19.1 million. The loan has a maturity date of January 3, 2023 and bears a floating interest rate equal to 210 basis points over the one-month BBA LIBOR. In order to minimize interest rate volatility during the term of this loan, Damascus Centre entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate on each tranche of this loan, resulting in a fixed rate of 3.81% over the term of the first tranche of this loan and a fixed rate of 3.53% over the term of the second tranche of this loan. At April 30, 2020, the derivative financial instrument had a notional amount of approximately $19.1 million and a maturity date of January 2023.

On December 29, 2014, Regency closed on a $16.2 million mortgage loan with Provident Bank. The 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. At April 30, 2020, the total amount outstanding on this loan was approximately $15.4 million. In order to minimize interest rate volatility during the term of the loan, Regency 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 April 30, 2020, the derivative financial instrument had a notional amount of approximately $15.4 million and a maturity date of December 2024.

In accordance with ASU 2017-12, which was adopted by FREIT in the first quarter of Fiscal 2020, FREIT is accounting for the Damascus Centre, Regency, Wayne PSC and Station Place interest rate swaps and the Grande Rotunda interest rate cap as cash flow hedges marking these contracts to market, taking into account present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss on the swaps in comprehensive income. For the six and three months ended April 30, 2020, FREIT recorded an unrealized loss of approximately $3,372,000 and $2,982,000, respectively, in comprehensive loss representing the change in the fair value of these cash flow hedges during such period. As of April 30, 2020, there was a liability of approximately $730,000 for the Damascus Centre swaps, $1,394,000 for the Wayne PSC swap, $1,523,000 for the Regency swap, $1,851,000 for the Station Place swap and $0 for the Grande Rotunda interest rate cap.

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In Fiscal 2019, FREIT was accounting for its interest rate swaps and cap contract in accordance with ASC 815. For the six and three months ended April 30, 2019, FREIT recorded an unrealized loss of approximately $3,185,000 and $821,000, respectively, in comprehensive loss representing the change in the fair value of these cash flow hedges during such period. For the six and three months ended April 30, 2019, FREIT recorded an unrealized loss in the condensed consolidated statements of income of approximately $159,000 and $5,000, respectively, for the Grande Rotunda interest rate cap representing the change in the fair value of this ineffective cash flow hedge during such period. As of October 31, 2019, FREIT recorded a liability of approximately $179,000 for the Damascus Centre swaps, $53,000 for the Wayne PSC swap, $860,000 for the Regency swap, $1,034,000 for the Station Place swap and $0 for the Grande Rotunda interest rate cap.

The fair values are based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).

Note 5 – Property disposition:

On February 8, 2019, FREIT sold a commercial building, formerly occupied as a Pathmark supermarket in Patchogue, New York for a sales price of $7.5 million. The sale of this property, which had a carrying value of approximately $6.2 million, resulted in a gain of approximately $0.8 million net of sales fees and commissions. Net cash proceeds of approximately $2 million were realized after paying off the related mortgage on this property in the amount of approximately $5.2 million. FREIT distributed and paid approximately $676,000 of this gain by way of a one-time special dividend in connection with and in anticipation of the closing of the sale of the Patchogue property of $0.10 per share. The sale of this property eliminates an operating loss of approximately $0.8 million ($0.12 per share) incurred, annually, since Pathmark vacated the building in December 2015.

As the disposal of this property did not represent a strategic shift that would have a major impact on FREIT’s operations or financial results, the property’s operations were not reflected as discontinued operations in the accompanying condensed consolidated financial statements.

Note 6 – Termination of Purchase and Sale Agreement:

On January 14, 2020, FREIT and certain of its affiliates (collectively, the “Sellers”), entered into a Purchase and Sale Agreement (as subsequently amended, the “Purchase and Sale Agreement”) with Sinatra Properties LLC (the “Purchaser”), which as subsequently amended, provided for the sale by the Sellers to the Purchaser of 100% of the Sellers’ ownership interests in six real properties held by the Sellers in exchange for the purchase price described therein, subject to the terms and conditions of the Purchase and Sale Agreement. On April 30, 2020, the Sellers delivered written notice to the Purchaser of the Sellers’ termination of the Purchase and Sale Agreement in accordance with its terms due to the occurrence of a “Purchaser Default” thereunder, based on the Purchaser’s failure to perform its obligations under the Purchase and Sale Agreement and close the transactions contemplated therein.

Upon the execution of the Purchase and Sale Agreement, the Purchaser delivered into escrow a deposit in the amount of $15 million (the “Deposit”), in the form of an unconditional, irrevocable letter of credit in such amount (the “Letter of Credit”). The Purchase and Sale Agreement provides that the Sellers’ exclusive remedy, in the event of a “Purchaser Default” and the termination of the Purchase and Sale Agreement, is the forfeiture of the Deposit to the Sellers as liquidated damages. Accordingly, contemporaneously with the Sellers’ delivery of the termination notice to the Purchaser, the Sellers delivered written notice to the escrow agent requesting that the escrow agent release the Letter of Credit from escrow and deliver same to the Sellers.

On May 6, 2020, the Purchaser filed a complaint (the “Complaint”) against the Sellers in the Superior Court of New Jersey, in which, among other things, the Purchaser alleges breach of contract and breach of the covenant of good faith and fair dealing against the Sellers in connection with the Sellers’ termination of the Purchase and Sale Agreement. The Purchaser seeks (a) a judgment of specific performance compelling the Sellers to convey the properties under the Purchase and Sale Agreement to the Purchaser; (b) declaratory judgment from the court that (i) the Purchase and Sale Agreement is not terminated, (ii) the Purchaser is not in default under the Purchase and Sale Agreement, and (iii) the Sellers are in default under the Purchase and Sale Agreement, subject to a right to cure; (c) an order for injunctive relief compelling the Sellers to perform the Purchase and Sale Agreement; (d) in the event that the court does not order specific performance, a judgment directing that the Purchaser’s $15 million deposit under the Purchase and Sale Agreement be returned to the Purchaser, and compensatory, consequential and incidental damages in an amount to be determined at trial; and (e) attorneys’ fees and costs.

The Sellers believe that the allegations set forth in the Complaint are without merit and intend to vigorously defend the action and enforce the Sellers’ rights and remedies under the Purchase and Sale Agreement in connection with the “Purchaser Default” thereunder, including the Purchaser’s forfeiture of its $15 million deposit to the Sellers as liquidated damages as provided in the Purchase and Sale Agreement. As of the quarter ended April 30, 2020, the $15 million deposit has not been included in income in the accompanying condensed consolidated statements of income.

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During the six months ended April 30, 2020 and 2019, the Special Committee of the Board incurred on behalf of the Company approximately $4,519,000 and $586,000, respectively, of expenses related to its activities. During the three months ended April 30, 2020 and 2019, the Special Committee of the Board incurred on behalf of the Company approximately $1,137,000 and $586,000, respectively, of expenses related to its activities.

Note 7 – Adoption of Plan of Liquidation:

On January 14, 2020, the Trust’s Board of Trustees adopted a Plan of Voluntary Liquidation with respect to the Trust (the “Plan of Liquidation”), which provided for the voluntary dissolution, termination and liquidation of the Trust by the sale, conveyance, transfer or delivery of all of the Trust’s remaining assets in accordance with the terms and conditions of the Plan of Liquidation and the Internal Revenue Code of 1986, as amended, and the Treasury regulations thereunder. The Plan of Liquidation provided that it would become effective upon (i) approval by a majority of the votes cast by Trust’s shareholders present in person or represented by proxy at a duly called meeting of the Trust’s shareholders at which a quorum is present and (ii) the consummation of the transactions contemplated by the Purchase and Sale Agreement.

While the Plan of Liquidation received shareholder approval, as the Sellers terminated the Purchase and Sale Agreement by written notice delivered to the Purchaser on April 30, 2020, and the transactions contemplated thereby will not be consummated, the Plan of Liquidation will not become effective, and the Trust will not proceed with the sale, conveyance, transfer or delivery of all of the Trust’s remaining assets as contemplated by the Plan of Liquidation that was adopted by the Board on January 14, 2020.

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 office building at The Rotunda located in Baltimore, Maryland, which is managed by an independent third party management company. The management agreement between FREIT and Hekemian dated as of November 1, 2001 (“Management Agreement”) expires on October 31, 2021, and is automatically renewed for successive periods of two years unless either party gives not less than six (6) months prior notice of non-renewal.

On January 14, 2020, in connection with entering into the Purchase and Sale Agreement, FREIT and Hekemian entered into a First Amendment to Management Agreement (the “First Amendment”), which amends the Management Agreement. The First Amendment would become effective if, and only if, the Plan of Liquidation became effective. Since the Plan of Liquidation will not become effective due to the termination of the Purchase and Sale Agreement, the First Amendment will not become effective. (See Notes 6 and 7 to FREIT’s condensed consolidated financial statements for further details)

The Management Agreement requires the payment of management fees equal to 4% to 5% of rents collected. Management fees, charged to operations, were approximately $1,198,000 and $1,255,000 for the six months ended April 30, 2020 and 2019, respectively, and $499,000 and $636,000 for the three months ended April 30, 2020 and 2019, 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 commissions and reimbursements amounted to approximately $704,000 and $311,000 for the six months ended April 30, 2020 and 2019, respectively, and $229,000 and $178,000 for the three months ended April 30, 2020 and 2019, respectively. 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 were charged to operations and amounted to approximately $56,000 and $48,000 for the six months ended April 30, 2020 and 2019, respectively, and $4,000 and $20,000 for the three months ended April 30, 2020 and 2019, respectively.

From time to time, FREIT engages Hekemian to provide additional services, such as consulting services related to development, property sales and financing activities of FREIT. Separate fee arrangements may be negotiated between Hekemian and FREIT with respect to such additional services. Such fees incurred during the six months ended April 30, 2020 and 2019 were approximately $0 and $131,250, respectively, and $0 and $131,250 for the three months ended April 30, 2020 and 2019, respectively. Fees incurred during Fiscal 2019 related to commissions to Hekemian for the sale of the Patchogue property.

Robert S. Hekemian, Jr., Chief Executive Officer, President and a Trustee of the Trust, is the President and Chief Operating Officer of Hekemian. David B. Hekemian, a Trustee of the Trust, is the Principal/Broker – Salesperson and Director of Commercial Brokerage of Hekemian. Robert S. Hekemian, the former Chairman and Chief Executive Officer of the Trust, served as a consultant to the Trust and Chairman of the Board and Chief Executive Officer of Hekemian prior to his death in December 2019. Allan Tubin, Chief Financial Officer and Treasurer of the Trust, is the Chief Financial Officer of Hekemian.

Trustee fee expense (including interest) incurred by FREIT for the six months ended April 30, 2020 and 2019 was approximately $21,000 and $114,000, respectively, for Robert S. Hekemian, $236,000 and $194,000, respectively, for Robert S. Hekemian, Jr., $15,000 and $7,000, respectively, for Allan Tubin and $31,000 and $28,000, respectively, for David Hekemian. Trustee fee expense (including interest) incurred by FREIT for the three months ended April 30, 2020 and 2019 was approximately $0 and $54,000, respectively, for Robert S. Hekemian, $117,000 and $99,000, respectively, for Robert S. Hekemian, Jr., $8,000 and $7,000, respectively, for Allan Tubin and $15,000 and $16,000, respectively, for David Hekemian (See Note 14 to FREIT’s condensed consolidated financial statements).

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Effective upon the late Robert S. Hekemian’s retirement as Chairman, Chief Executive Officer and as a Trustee on April 5, 2018, FREIT entered into a Consulting Agreement with Mr. Hekemian, pursuant to which Mr. Hekemian provided consulting services to the Trust through December 2019. The Consulting Agreement obliged Mr. Hekemian to provide advice and consultation with respect to matters pertaining to the Trust and its subsidiaries, affiliates, assets and business, for no fewer than 30 hours per month during the term of the agreement. FREIT paid Mr. Hekemian a consulting fee of $5,000 per month during the term of the Consulting Agreement, which was payable in the form of Shares on a quarterly basis (i.e. in quarterly installments of $15,000). The number of Shares to be issued for each quarterly installment of the consulting fee was determined by dividing the dollar amount of the consulting fee by the closing price of one Share on the OTC Pink Open Market as of the close of trading on the last trading day of the calendar quarter with respect to which such consulting fee was payable. For the six months ended April 30, 2020 and 2019, consulting fee expense for Robert S. Hekemian was approximately $8,000 and $30,000, respectively. For the three months ended April 30, 2020 and 2019, consulting fee expense for Robert S. Hekemian was approximately $0 and $15,000, respectively.

Rotunda 100, LLC owns a 40% minority equity interest in Grande Rotunda, LLC and FREIT owns a 60% equity interest in Grande Rotunda, LLC. Damascus 100, LLC owns a 30% minority equity interest in Damascus Centre, LLC and FREIT owns a 70% 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. These advances were in the form of secured loans that bear interest at rates that 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 are secured by the Hekemian employees’ interests in Rotunda 100 and are full recourse loans. The notes originally had maturity dates at the earlier of (a) ten (10) years after issue (Grande Rotunda, LLC – 6/19/2015), or, (b) at the election of FREIT, ninety (90) days after the borrower terminates employment with Hekemian, at which time all outstanding unpaid principal and interest 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. On December 7, 2017, the Board approved a further extension of the maturity dates of these loans to the date or dates upon which distributions of cash are made by Grande Rotunda, LLC to its members as a result of a refinancing or sale of Grande Rotunda, LLC or the Rotunda property.

The aggregate outstanding principal balance of the Rotunda 100 notes was $4,000,000 at both April 30, 2020, and October 31, 2019. The accrued but unpaid interest related to these notes as of April 30, 2020 and October 31, 2019 amounted to approximately $1,136,000 and $1,053,000, respectively, and is included in secured loans receivable on the accompanying condensed consolidated balance sheets.

In Fiscal 2017, Grande Rotunda, LLC incurred substantial expenditures at the Rotunda property related to retail tenant improvements, leasing costs and operating expenditures which, in the aggregate, exceeded revenues as the property was still in the rent up phase and the construction loan held with Wells Fargo at that time was at its maximum level, with no additional funding available to draw. Accordingly, during Fiscal 2017 the equity owners in Grande Rotunda, LLC (FREIT with a 60% ownership and Rotunda 100 with a 40% ownership) contributed their respective pro-rata share of any cash needs through loans to Grande Rotunda, LLC. As of April 30, 2020 and October 31, 2019, Rotunda 100 has funded Grande Rotunda, LLC with approximately $5.8 million and $5.7 million (including interest), respectively, which is included in due to affiliate on the accompanying condensed consolidated balance sheets.

Note 9 – Mortgage financings and line of credit:

On August 26, 2019, Berdan Court, LLC (“Berdan Court”), (owned 100% by FREIT), refinanced its $17 million loan (which matured on September 1, 2019) with the lender in the amount of $28,815,000. This loan, secured by an apartment building located in Wayne, New Jersey, has a term of ten years and bears a fixed interest rate equal to 3.54%. Interest-only payments are required each month for the first five years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 6.09% to a fixed rate of 3.54% and (ii) net refinancing proceeds of approximately $11.6 million which can be used for capital expenditures and general corporate purposes.

On April 3, 2019, WestFREIT, Corp. (owned 100% by FREIT) exercised its option to extend its loan held by M&T Bank, with a then outstanding balance of approximately $22.5 million, for twelve months. Effective beginning on June 1, 2019, the extension of this loan secured by the Westridge Square Shopping Center, required monthly principal payments of $47,250 plus interest based on a floating interest rate equal to 240 basis points over the one-month LIBOR and had a maturity date of May 1, 2020. This loan was extended for another six months with a new maturity date of November 1, 2020 under the same terms and conditions of the existing agreement while the lender is working closely with the Company to further modify and extend this loan.

On February 7, 2018, Grande Rotunda, LLC refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding available for retail tenant improvements and leasing costs in the amount of $3,380,000. This loan is secured by the Rotunda property, bears a floating interest rate at 285 basis points over the one-month LIBOR rate and has a maturity date of February 6, 2021 with two one-year renewal options. As part of this transaction, Grande Rotunda had purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year. As of April 30, 2020, approximately $118.5 million of this loan facility was drawn down and the interest rate was approximately 3.83%.

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On October 27, 2017, FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 27, 2020 at which point no further advances shall be permitted and provided the line of credit is not renewed by the lender, the outstanding principal balance of the line of credit shall convert to a commercial term loan maturing on October 31, 2022. Draws against the credit line can be used for working capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREIT’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is $13 million and the interest rate on the amount outstanding will be at a floating rate of 275 basis points over the 30-day LIBOR with a floor of 3.75%. As of April 30, 2020 and October 31, 2019, there was no amount outstanding and $13 million was available under the line of credit.

As a result of the negative impact of the COVID-19 pandemic at our commercial properties, we have requested debt payment relief from certain of our lenders on the retail properties, and have been granted debt service relief in the form of deferral of principal and/or interest payments for up to six months to provide debt service relief during the COVID-19 pandemic, with the deferred payments of approximately $260,000 as of April 30, 2020 being due at maturity of the loan.

Note 10 – Fair value of long-term debt:

The following table shows the estimated fair value and net carrying value of FREIT’s long-term debt at April 30, 2020 and October 31, 2019:

($ in Millions)	April 30, 2020	October 31, 2019
Fair Value	$309.6	$352.9
Carrying Value, Net	$301.1	$349.9

Fair values are estimated based on market interest rates at April 30, 2020 and October 31, 2019 and on a 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 as provided by authoritative guidance).

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 is comprised of eight (8) properties and the residential segment is comprised of seven (7) properties, excluding the Pierre Towers property which was converted into a tenancy-in-common and deconsolidated from FREIT’s operating results as of February 28, 2020 (See Note 16 to FREIT’s condensed consolidated financial statements for further details).

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, 2019. 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.

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), 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.

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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 attributable to common equity for the six and three month periods ended April 30, 2020 and 2019. Asset information is not reported since FREIT does not use this measure to assess performance.

	Six Months Ended						Three Months Ended
	April 30,						April 30,
	2020			2019			2020			2019
	(In Thousands of Dollars)						(In Thousands of Dollars)
Real estate rental revenue:
Commercial	$	13,548		$	13,079		$	6,534		$	6,452
Residential		15,612			16,448			7,096			8,214
Total real estate rental revenue		29,160			29,527			13,630			14,666
Real estate operating expenses:
Commercial		5,896			5,651			3,172			2,820
Residential		6,348			6,896			2,707			3,401
Total real estate operating expenses		12,244			12,547			5,879			6,221
Net operating income:
Commercial		7,652			7,428			3,362			3,632
Residential		9,264			9,552			4,389			4,813
Total net operating income	$	16,916		$	16,980		$	7,751		$	8,445
Recurring capital improvements - residential	$	(226	)	$	(285	)	$	(130	)	$	(161	)
Reconciliation to condensed consolidated net income attributable to common equity:
Segment NOI	$	16,916		$	16,980		$	7,751		$	8,445
Deferred rents - straight lining		121			187			58			120
Investment income		136			184			64			113
Unrealized loss on interest rate cap contract		—			(159	)		—			(5	)
General and administrative expenses		(1,828	)		(1,391	)		(1,056	)		(783	)
Special committee expenses		(4,519	)		(586	)		(1,137	)		(586	)
Gain on sale of property		—			836			—			836
Gain on deconsolidation of subsidiary		27,680			—			27,680			—
Loss on investment in tenancy-in-common		(18	)		—			(18	)		—
Depreciation		(5,462	)		(5,607	)		(2,530	)		(2,783	)
Financing costs		(7,911	)		(9,179	)		(3,676	)		(4,527	)
Net income		25,115			1,265			27,136			830
Net (income) loss attributable to noncontrolling interests in subsidiaries		(157	)		(20	)		84			(44	)
Net income attributable to common equity	$	24,958		$	1,245		$	27,220		$	786

Note 12 – Income taxes:

FREIT has elected to be treated as a REIT for federal income tax purposes and as such intends to distribute 100% of its ordinary taxable income to its shareholders as dividends for the fiscal year ending October 31, 2020. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income was recorded in FREIT’s condensed consolidated financial statements.

FREIT distributed 100% of its ordinary taxable income and 100% of its capital gain from the sale of the Patchogue, New York property to its shareholders as dividends for the fiscal year ended October 31, 2019. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income and such gain was recorded in FREIT’s condensed consolidated financial statements for the fiscal year ended October 31, 2019.

As of April 30, 2020, FREIT had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended October 31, 2017 remain open to examination by the major taxing jurisdictions to which FREIT is subject.

Note 13 – Equity incentive plan:

On September 4, 2014, the Board approved the grant of an aggregate of 246,000 non-qualified share options under FREIT’s Equity Incentive Plan (“the Plan”) to certain FREIT executive officers, the members of the Board and certain employees of Hekemian & Co., Inc., FREIT’s managing agent. The options have an exercise price of $18.45 per share, fully vested on September 3, 2019 and will expire 10 years from the date of grant, which will be September 3, 2024.

On November 10, 2016, the Board approved the grant of an aggregate of 38,000 non-qualified share options under the Plan to two members of the Board who were appointed to the Board during Fiscal 2016. The options have an exercise price of $21.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be November 9, 2026.

On May 3, 2018, the Board approved the grant of an aggregate of 38,000 non-qualified share options under the Plan to two members of the Board who were appointed to the Board during Fiscal 2018. The options have an exercise price of $15.50 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be May 2, 2028.

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On March 4, 2019, the Board approved the grant of an aggregate of 5,000 non-qualified share options under the Plan to the Chairman of the Board. The options have an exercise price of $15.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be March 3, 2029.

As of April 30, 2020, 442,060 shares are available for issuance under the Plan.

The following table summarizes stock option activity for the six-month period ended April 30, 2020:

	No. of Options		Weighted Average
	Outstanding		Exercise Price
Options outstanding beginning of period		310,740	$	18.35
Options granted during period		—		—
Options forfeited/cancelled during period		—		—
Options outstanding end of period		310,740	$	18.35
Options vested and expected to vest		308,310
Options exercisable at end of period		261,140

For the six-month periods ended April 30, 2020 and 2019, compensation expense related to stock options granted amounted to approximately $24,000 and $69,000, respectively. For the three-month periods ended April 30, 2020 and 2019, compensation expense related to stock options granted amounted to approximately $12,000 and $35,000, respectively. At April 30, 2020, there was approximately $94,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over the remaining weighted average vesting period of approximately 2.6 years.

The aggregate intrinsic value of options vested and expected to vest and options exercisable at April 30, 2020 was approximately $125,000 and $26,000, respectively.

Note 14 – 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 credited to a participant’s account will be determined by the closing price of FREIT shares on the date as set forth in the Deferred Fee Plan.

All fees payable to Trustees for the six and three-month periods ended April 30, 2020 and 2019 were deferred under the Deferred Fee Plan except for fees payable to one Trustee, who elected to receive such fees in cash. As a result of the amendment to the Deferred Fee Plan described above, for the six-month periods ended April 30, 2020 and 2019, the aggregate amounts of deferred Trustee fees together with related interest and dividends were approximately $367,000 and $517,300, respectively, which have been paid through the issuance of 18,046 and 32,753 vested FREIT share units, respectively, based on the closing price of FREIT shares on the dates as set forth in the Deferred Fee Plan.

For the six-month periods ended April 30, 2020 and 2019, FREIT has charged as expense approximately $367,000 and $471,200, respectively, representing deferred Trustee fees and interest, and the balance of approximately $0 and $46,100, respectively, representing dividends payable in respect of share units allocated to Plan participants, has been charged to equity.

The Deferred Fee Plan, as amended, provides that cumulative fees together with accrued interest deferred as of November 1, 2014 will be paid in a lump sum or in annual installments over a period not to exceed 10 years, at the election of the Participant. In connection with the termination of Robert S. Hekemian’s service to the Trust under the Consulting Agreement between Mr. Hekemian and the Trust in December 2019, Mr. Hekemian’s accrued plan benefits under the Deferred Fee Plan became payable to him and were paid in a single lump sum in the amount of approximately $4.8 million. As of April 30, 2020 and October 31, 2019, approximately $1,542,000 and $4,422,000, respectively, of fees has been deferred together with accrued interest of approximately $1,091,000 and $3,188,000, respectively.

Note 15 – Rental Income:

Commercial tenants:

As discussed in Note 2, fixed lease income under our operating leases generally includes fixed minimum lease consideration and fixed CAM reimbursements which are accrued on a straight-line basis over the terms of the leases. Variable lease income includes consideration based on sales, as well as reimbursements for real estate taxes, maintenance, insurance and certain other operating expenses of the properties.

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Minimum fixed lease consideration (in thousands of dollars) under non-cancelable tenant operating leases for each of the next five years and thereafter, excluding variable lease consideration, for the years ending October 31, as of April 30, 2020, is as follows:

Year Ending October 31,	Amount
2020*	$	19,936
2021		18,984
2022		15,727
2023		13,099
2024		10,948
Thereafter		46,774
Total	$	125,468
*Amount represents full fiscal year

The above amounts assume that all leases which expire are not renewed and, accordingly, neither minimal rentals nor rentals from replacement tenants are included.

Minimum future rentals do not include contingent rentals, which may be received under certain leases on the basis of percentage of reported tenants' sales volume. Rental income that is contingent on future events is not included in income until the contingency is resolved. Contingent rentals included in income for the six and three-month periods ended April 30, 2020 and 2019 were not material.

Residential tenants:

Lease terms for residential tenants are usually one to two years.

Note 16 – Investment in tenancy-in-common:

On February 28, 2020, FREIT reorganized its subsidiary S and A Commercial Associates Limited Partnership (“S&A”) from a joint venture partnership into a tenancy-in-common form of ownership (“TIC”). Prior to this reorganization, FREIT owned a 65% membership interest in S&A, which owned 100% of the Pierre Towers property located in Hackensack, NJ through its 100% interest in Pierre Towers, LLC. Accordingly, FREIT consolidated the financial statements of S&A and its subsidiary to include 100% of the subsidiary’s assets, liabilities, operations and cash flows with the interest not owned by FREIT reflected as “noncontrolling interests in subsidiary” and all significant intercompany accounts and transactions were eliminated in consolidation.

Pursuant to the TIC agreement, FREIT ultimately acquired a 65% undivided interest in the Pierre Towers property which was formerly owned by S&A. Based on the guidance of ASC 810, “Consolidation”, FREIT’s investment in the TIC was accounted for under the equity method of accounting. While FREIT’s effective ownership percentage interest in the Pierre Towers property remains unchanged after the reorganization to a TIC, FREIT no longer has a controlling interest as the TIC is now under joint control. Since FREIT retained a noncontrolling financial interest in the TIC and the deconsolidation of the subsidiary is not the result of a nonreciprocal transfer to owners, the subsidiary was deconsolidated from FREIT as of February 28, 2020. A gain in the amount of approximately $27.7 million was recognized in the accompanying condensed consolidated statements of income for the six and three months ended April 30, 2020. This gain was measured at the date of deconsolidation as the difference between the fair value of the investment in the TIC at the date the entity was deconsolidated and the carrying amount of the former subsidiary’s assets and liabilities.

As of April 30, 2020, FREIT’s investment in TIC was approximately $20.7 million with a loss on investment of approximately $18,000 recognized in the accompanying condensed consolidated statements of income for the six and three months ended April 30, 2020 and 2019.

Hekemian currently manages the Pierre Towers property based on a management agreement between the owners of the TIC and Hekemian dated as of February 28, 2020, which expires on February 28, 2021, and is automatically renewed for successive periods of one year unless either party gives not less than sixty (60) days prior notice of non-renewal. The management agreement requires the payment of management fees equal to 5% of rents collected. Management fees, charged to operations, were approximately $62,000 for the period from February 28, 2020 through April 30, 2020.

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The following table summarizes the balance sheet of the Pierre Towers property as of April 30, 2020 accounted for by the equity method:

	April 30,
	2020
	(In Thousands of Dollars)
Real estate, net	$	80,950
Cash and cash equivalents		1,032
Tenants' security accounts		577
Receivables and other assets		501
Total assets	$	83,060
Mortgages payable, net of unamortized debt issuance costs	$	50,089
Accounts payable and accrued expenses		391
Tenants' security deposits		580
Deferred revenue		93
Equity		31,907
Total liabilities & equity	$	83,060
FREIT's investment in TIC (65% interest)	$	20,740

The following table summarizes the income statement of the Pierre Towers property for the period from February 28, 2020 through April 30, 2020 accounted for by the equity method:

	For the period from
	February 28, 2020
	through April 30, 2020
	(In Thousands of Dollars)
Revenues	$	1,242
Operating expenses		643
Net operating income		599
Depreciation		358
Interest expense including amortization
of deferred financing costs		268
Net loss	$	(27	)
FREIT's loss on investment in TIC (65% interest)	$	(18	)

Note 17 – COVID-19 Pandemic:

The international spread of COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. Many states in the U.S., including New Jersey, New York and Maryland, where our properties are located, have implemented stay-at-home orders for all "non-essential" business. Consequently, the global, U.S. and local economies have suffered significant disruption and there has been significant volatility in the financial markets. Many businesses have moved to a remote work environment, or have been forced to suspend operations completely. The COVID-19 pandemic and the actions taken by individuals, businesses and government authorities to reduce its spread have caused substantial lost business revenue, changes in consumer behavior and large reductions in liquidity and fair value of many assets. These and other adverse conditions that may unfold in the future are expected to continue until such time as government stay-at-home and shutdown orders are fully or partially lifted, and business operations and commercial activity can resume. The full or partial lifting of government stay-at-home and shutdown orders cannot be predicted with any certainty. Further, even after such orders are fully or partially lifted, the resumption of business operations and commercial activity will depend on several factors, including prevailing sentiments among workers and consumers regarding the safety of resuming public activity, and cannot be predicted with any certainty.

Page 20 

Despite the COVID-19 pandemic and preventive measures taken to mitigate the spread, our residential properties continue to generate cash flow. At our commercial properties, with the exception of grocery stores and other "essential" businesses, many of our retail tenants are adversely affected by the mandated shutdowns. For the six and three months ended April 30, 2020, FREIT incurred an increase in expense for the reserve of uncollectible rents of approximately $0.6 million (with a consolidated impact of approximately $0.4 million). FREIT currently remains in active discussions and negotiations with these impacted retail tenants. As a result of the negative impact of the COVID-19 pandemic at our commercial properties, we have requested debt payment relief from certain of our lenders on the retail properties, and have been granted debt service relief in the form of deferral of principal and/or interest payments for up to six months to provide debt service relief during the COVID-19 pandemic, with the deferred payments of approximately $260,000 as of April 30, 2020 being due at maturity of the loan. Overall, we have experienced positive cash flow from operations through the end of the fiscal quarter ended April 30, 2020, but this could change based on the duration of the pandemic, which is uncertain. We believe that our cash balance as of April 30, 2020 of approximately $31.8 million coupled with a $13 million available line of credit will provide us with sufficient liquidity for at least the next twelve months from the filing of this Form 10-Q. Additionally, in an effort to further preserve cash flow, effective May 1, 2020, our Board of Trustees reduced all fees, salaries and retainers payable to our executive officers and members of the Board of Trustees by up to 30% through the end of Fiscal 2020.

The extent of the effects of COVID-19 on our business, results of operations, cash flows, value of our real estate assets and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty. See “Item 1A. Risk Factors”.

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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 and are based on estimates, projections, beliefs, data, methods and assumptions of management of FREIT at the time of such statements regarding future results of operations, economic performance, financial condition and achievements of FREIT, and do not relate strictly to historical or current facts. These forward-looking statements are identified through the use of words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning. Forward-looking statements involve risks and uncertainties in predicting future results and conditions.

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. These and certain other uncertainties, factors and risks, including those risk factors set forth and further described in Part I, Item 1A entitled “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended October 31, 2019, and other risks described in our subsequent filings with the SEC, may cause our actual results to differ materially from those projected. Such factors include, but are not limited to, the following: general economic and business conditions, including the purchase of retail products over the Internet, 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; risks of real estate development and acquisitions; and on-going negative effects of the COVID-19 pandemic on our properties and tenants, and generally on real estate assets and the real estate markets in which we operate, and the global, U.S. and local economies (see Special Note below). 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.

Special Note Regarding the COVID-19 Pandemic:

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus, known as COVID-19 (“COVID-19”), a pandemic. The full extent of the effects of the COVID-19 pandemic, including the full extent of its effects on the global, U.S., and local economies, and on FREIT and our business, operating results, financial condition, properties, and tenants, cannot yet be known. Any future developments in this regard will be highly uncertain and cannot be predicted with any certainty, including the scope and duration of the pandemic, actions taken by governmental authorities and other third parties in response to the pandemic and the effects thereof, and the other factors discussed above and throughout this report. The uncertain future development of the COVID-19 pandemic could materially and adversely affect FREIT and our business, operating results, financial condition, liquidity, and our properties and tenants.

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. FREIT’s revenues consist primarily of rental income and other related revenues from its residential and commercial properties and additional rent in the form of expense reimbursements derived from operating commercial properties. FREIT’s properties are primarily located in northern New Jersey, Maryland and New York.

COVID-19 Pandemic: The international spread of COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. Many states in the U.S., including New Jersey, New York and Maryland, where our properties are located, have implemented stay-at-home orders for all "non-essential" business and activity in an aggressive effort to mitigate the spread of COVID-19. Consequently, the global, U.S. and local economies have suffered significant disruption and there has been significant volatility in the financial markets. Many U.S. industries and businesses have been negatively affected and millions of people have filed for unemployment resulting in the U.S. unemployment rate rising to 14.7% in April 2020, which is the highest recorded rate since the Great Depression. Many businesses have moved to a remote work environment, or have been forced to suspend operations completely. The COVID-19 pandemic and the actions taken by individuals, businesses and government authorities to reduce its spread have caused substantial lost business revenue, changes in consumer behavior and large reductions in liquidity and fair value of many assets. These and other adverse conditions that may unfold in the future are expected to continue until such time as government stay-at-home and shutdown orders are fully or partially lifted, and business operations and commercial activity can resume. The full or partial lifting of government stay-at-home and shutdown orders cannot be predicted with any certainty. Further, even after such orders are fully or partially lifted, the resumption of business operations and commercial activity will depend on several factors, including prevailing sentiments among workers and consumers regarding the safety of resuming public activity, and cannot be predicted with any certainty.

Page 22 

Despite the COVID-19 pandemic and preventive measures taken to mitigate the spread, our residential properties continue to generate cash flow. These properties are well occupied and the tenants, for the most part, continue to pay their rent. At our commercial properties, with the exception of grocery stores and other "essential" businesses, many of our retail tenants are adversely affected by the mandated shutdowns. For the six and three months ended April 30, 2020, FREIT incurred an increase in expense for the reserve of uncollectible rents of approximately $0.6 million (with a consolidated impact of approximately $0.4 million). FREIT currently remains in active discussions and negotiations with these impacted retail tenants. As a result of the negative impact of the COVID-19 pandemic at our commercial properties, we have requested debt payment relief from certain of our lenders on the retail properties, and have been granted debt service relief in the form of deferral of principal and/or interest payments for up to six months to provide debt service relief during the COVID-19 pandemic, with the deferred payments of approximately $260,000 as of April 30, 2020 being due at maturity of the loan. Overall, we have experienced positive cash flow from operations through the end of the fiscal quarter ended April 30, 2020, but this could change based on the duration of the pandemic, which is uncertain. We believe that our cash balance as of April 30, 2020 of approximately $31.8 million coupled with a $13 million available line of credit will provide us with sufficient liquidity for at least the next twelve months from the filing of this form 10-Q. Additionally, in an effort to further preserve cash flow, effective May 1, 2020, our Board of Trustees reduced all fees, salaries and retainers payable to our executive officers and members of the Board of Trustees by up to 30% through the end of Fiscal 2020.

The extent of the effects of COVID-19 on our business, results of operations, cash flows, value of our real estate assets and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty. See “Item 1A. Risk Factors”. However, we believe the actions we are taking will help minimize interruptions to our operations and will put us in the best position to participate in the economic recovery as and when such recovery occurs. FREIT will continue to actively monitor the effects of the pandemic, including governmental directives in the jurisdictions in which we operate and the recommendations of public health authorities, and will, as needed, take further measures to adapt our business in the best interests of our shareholders and personnel.

Residential Properties: FREIT has aggressively increased rental rates on its stabilized properties resulting in FREIT’s rental revenues continuing to show year-over-year increases at most of its properties. However, the impact COVID-19 may have on our residential properties over the next year is uncertain and will depend on the duration of the pandemic and the reopening of the economy.

Commercial Properties: There continues to be uncertainty in the retail environment that could have an adverse impact on FREIT’s retail tenants, which could have an adverse impact on FREIT. The impact COVID-19 may have on the operating and financial performance of our commercial properties over the next year is currently uncertain and will depend on certain developments, including, among others, the impact of COVID-19 on our tenants and the magnitude and duration of the pandemic, including its impact on store closing and social distancing rules which may impact a tenant’s ability to generate sales at sufficient levels to cover operating costs, including rent.

Special Committee Formation: On March 28, 2019, FREIT announced that its Board had established a Special Committee to explore strategic alternatives focusing on maximizing shareholder value. The Special Committee was comprised solely of independent Trustees and was charged with exploring potential strategic transactions involving FREIT, including, without limitation, a potential sale of FREIT, a business combination involving FREIT or other alternatives for maximizing shareholder value, and determining whether a potential strategic transaction is in the best interests of FREIT and its shareholders. The members of the Special Committee were Ronald J. Artinian, Richard J. Aslanian, David F. McBride and Justin F. Meng, who served as the Chairman of the Special Committee. The Special Committee engaged HFF Securities L.P. as the Special Committee’s financial advisor, and the law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal counsel to the Special Committee. On May 7, 2020, the Board approved the elimination of the Special Committee as a committee of the Board.

Termination of Purchase and Sale Agreement: On January 14, 2020, FREIT and certain of its affiliates (collectively, the “Sellers”), entered into a Purchase and Sale Agreement (as subsequently amended, the “Purchase and Sale Agreement”) with Sinatra Properties LLC (the “Purchaser”), which as subsequently amended, provided for the sale by the Sellers to the Purchaser of 100% of the Sellers’ ownership interests in six real properties held by the Sellers in exchange for the purchase price described therein, subject to the terms and conditions of the Purchase and Sale Agreement. On April 30, 2020, the Sellers delivered written notice to the Purchaser of the Sellers’ termination of the Purchase and Sale Agreement in accordance with its terms due to the occurrence of a “Purchaser Default” thereunder, based on the Purchaser’s failure to perform its obligations under the Purchase and Sale Agreement and close the transactions contemplated therein.

Upon the execution of the Purchase and Sale Agreement, the Purchaser delivered into escrow a deposit in the amount of $15 million (the “Deposit”), in the form of an unconditional, irrevocable letter of credit in such amount (the “Letter of Credit”). The Purchase and Sale Agreement provides that the Sellers’ exclusive remedy, in the event of a “Purchaser Default” and the termination of the Purchase and Sale Agreement, is the forfeiture of the Deposit to the Sellers as liquidated damages. Accordingly, contemporaneously with the Sellers’ delivery of the termination notice to the Purchaser, the Sellers delivered written notice to the escrow agent requesting that the escrow agent release the Letter of Credit from escrow and deliver same to the Sellers.

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On May 6, 2020, the Purchaser filed a complaint (the “Complaint”) against the Sellers in the Superior Court of New Jersey, in which, among other things, the Purchaser alleges breach of contract and breach of the covenant of good faith and fair dealing against the Sellers in connection with the Sellers’ termination of the Purchase and Sale Agreement. The Purchaser seeks (a) a judgment of specific performance compelling the Sellers to convey the properties under the Purchase and Sale Agreement to the Purchaser; (b) declaratory judgment from the court that (i) the Purchase and Sale Agreement is not terminated, (ii) the Purchaser is not in default under the Purchase and Sale Agreement, and (iii) the Sellers are in default under the Purchase and Sale Agreement, subject to a right to cure; (c) an order for injunctive relief compelling the Sellers to perform the Purchase and Sale Agreement; (d) in the event that the court does not order specific performance, a judgment directing that the Purchaser’s $15 million deposit under the Purchase and Sale Agreement be returned to the Purchaser, and compensatory, consequential and incidental damages in an amount to be determined at trial; and (e) attorneys’ fees and costs.

The Sellers believe that the allegations set forth in the Complaint are without merit and intend to vigorously defend the action and enforce the Sellers’ rights and remedies under the Purchase and Sale Agreement in connection with the “Purchaser Default” thereunder, including the Purchaser’s forfeiture of its $15 million deposit to the Sellers as liquidated damages as provided in the Purchase and Sale Agreement. As of the quarter ended April 30, 2020, the $15 million deposit has not been included in income in the accompanying condensed consolidated statement of income. (See Note 6 to FREIT’s condensed consolidated financial statements for further details.)

Adoption of Plan of Liquidation:

On January 14, 2020, the Trust’s Board of Trustees adopted a Plan of Voluntary Liquidation with respect to the Trust (the “Plan of Liquidation”), which provided for the voluntary dissolution, termination and liquidation of the Trust by the sale, conveyance, transfer or delivery of all of the Trust’s remaining assets in accordance with the terms and conditions of the Plan of Liquidation and the Internal Revenue Code of 1986, as amended, and the Treasury regulations thereunder. The Plan of Liquidation provided that it would become effective upon (i) approval by a majority of the votes cast by Trust’s shareholders present in person or represented by proxy at a duly called meeting of the Trust’s shareholders at which a quorum is present and (ii) the consummation of the transactions contemplated by the Purchase and Sale Agreement.

While the Plan of Liquidation received shareholder approval, as the Trust terminated the Purchase and Sale Agreement by written notice delivered to the Purchaser on April 30, 2020, and the transactions contemplated thereby will not be consummated, the Plan of Liquidation will not become effective, and the Trust will not proceed with the sale, conveyance, transfer or delivery of all of the Trust’s remaining assets as contemplated by the Plan of Liquidation that was adopted by the Board on January 14, 2020. The Board will nonetheless continue to evaluate ways in which to maximize shareholder value, including through sales of Trust assets. (See Note 7 to FREIT’s condensed consolidated financial statements for further details.)

Amendment to Management Agreement:

On January 14, 2020, in connection with entering into the Purchase and Sale Agreement, FREIT and Hekemian entered into a First Amendment to Management Agreement (the “First Amendment”), which amends the Management Agreement dated as of November 1, 2001 between FREIT and Hekemian. The First Amendment would become effective if, and only if, the Plan of Liquidation became effective. Since the Plan of Liquidation will not become effective due to the termination of the Purchase and Sale Agreement, the First Amendment will not become effective. (See Note 8 to FREIT’s condensed consolidated financial statements for further details)

Debt Financing Availability: Financing has been available to FREIT and its affiliates. On February 7, 2018, Grande Rotunda, LLC refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding available for retail tenant improvements and leasing costs in the amount of $3,380,000. This loan is secured by the Rotunda property, bears a floating interest rate at 285 basis points over the one-month LIBOR rate and has a maturity date of February 6, 2021 with two one-year renewal options. As part of this transaction, Grande Rotunda had purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year. As of April 30, 2020, approximately $118.5 million of this loan facility was drawn down and the interest rate was approximately 3.83%.

On August 26, 2019, Berdan Court, LLC (“Berdan Court”), (owned 100% by FREIT), refinanced its $17 million loan (which matured on September 1, 2019) with the lender in the amount of $28,815,000. This loan, secured by an apartment building located in Wayne, New Jersey, has a term of ten years and bears a fixed interest rate equal to 3.54%. Interest-only payments are required each month for the first five years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 6.09% to a fixed rate of 3.54% and (ii) net refinancing proceeds of approximately $11.6 million which can be used for capital expenditures and general corporate purposes.

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On April 3, 2019, WestFREIT, Corp. (owned 100% by FREIT) exercised its option to extend its loan held by M&T Bank, with a then outstanding balance of approximately $22.5 million, for twelve months. Effective beginning on June 1, 2019, the extension of this loan secured by the Westridge Square Shopping Center, required monthly principal payments of $47,250 plus interest based on a floating interest rate equal to 240 basis points over the one-month LIBOR and had a maturity date of May 1, 2020. This loan was extended for another six months with a new maturity date of November 1, 2020 under the same terms and conditions of the existing agreement while the lender is working closely with the Company to further modify and extend this loan.

On October 27, 2017, FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 27, 2020 at which point no further advances shall be permitted and provided the line of credit is not renewed by the lender, the outstanding principal balance of the line of credit shall convert to a commercial term loan maturing on October 31, 2022. Draws against the credit line can be used for working capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREIT’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is $13 million and the interest rate on the amount outstanding will be at a floating rate of 275 basis points over the 30-day LIBOR with a floor of 3.75%. As of April 30, 2020 and October 31, 2019, there was no amount outstanding and $13 million was available under the line of credit.

In accordance with the loan agreement for each of the loans described above, FREIT may be required to meet or maintain certain financial covenants throughout the term of the loan.

Operating Cash Flow: FREIT expects 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 at properties and other needs to maintain its status as a REIT for at least a period of one year from the date of filing of this quarterly report on Form 10-Q.

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, 2019, have been applied consistently as of April 30, 2020, and for the six and three months ended April 30, 2020 and 2019. 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 collectability.

Valuation of Long-Lived Assets: FREIT assesses 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 FREIT believes that our discounted cash flow methods are reasonable, different assumptions regarding such cash flows may significantly affect the measurement of impairment.

Real Estate Development Costs: It is FREIT’s policy to capitalize pre-development costs, which generally include legal and professional fees and other directly related third-party costs. Real estate taxes and interest costs incurred during the development and construction phases are also capitalized. FREIT ceases capitalization of these costs when the project or portion thereof becomes operational, or when construction has been postponed. In the event of postponement, capitalization of these costs will recommence once construction on the project resumes.

See Note 2 to the condensed consolidated financial statements for recently issued accounting standards.

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RESULTS OF OPERATIONS

Real estate revenue for the six months ended April 30, 2020 (“Current Six Months”) decreased 1.5% to $29,281,000, compared to $29,714,000 for the six months ended April 30, 2019 (“Prior Year’s Six Months”). For the three months ended April 30, 2020 (“Current Quarter”) real estate revenue decreased 7.4% to $13,688,000, compared to $14,786,000 for the three months ended April 30, 2019 (“Prior Year’s Quarter”). The decline in revenue for the Current Six Months was primarily attributable to the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results due to the conversion to a tenancy-in-common form of ownership (“TIC”) as of February 28, 2020 resulting in a decline in revenue of approximately $1.2 million offset by an increase in revenue of approximately $0.8 million driven by an increase in base rents across most residential properties and an increase in the average annual occupancy rate for the commercial space (office and retail) at the Rotunda property from an average occupancy rate of 81.7% in the Prior Year’s Six Months to 84.3% in the Current Six Months. The decline in revenue for the Current Quarter was primarily attributable to the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results due to the conversion to a TIC as of February 28, 2020 resulting in a decline in revenue of approximately $1.2 million.

Net income attributable to common equity (“net income-common equity”) for the Current Six Months and Current Quarter was $24,958,000 ($3.57 per share basic and $3.56 per share diluted) and $27,220,000 ($3.89 per share basic and $3.88 per share diluted), compared to net income of $1,245,000 ($0.18 per share basic and diluted) and $786,000 ($0.11 per share basic and diluted) for the Prior Year’s comparable periods, respectively.

Adjusted net (loss) income for the Current Six Months and Current Quarter was a net loss of $2,565,000 (($0.37) per share basic and diluted) and $544,000 (($0.08) per share basic and diluted), compared to net income of $429,000 ($0.06 per share basic and diluted) and relatively flat ($0 per share basic and diluted) for the Prior Year’s comparable periods, respectively. Adjusted net (loss) income is a non-GAAP measure, which management believes is a useful and meaningful gauge to investors of our operating performance, since it excludes the impact of unusual and infrequent items specifically: a gain on deconsolidation of the Pierre Towers property in Fiscal 2020; a gain related to the sale of the property in Patchogue, New York in Fiscal 2019.

The increase in adjusted net loss for the Current Six Months was primarily driven by an increase in Special Committee expenses for advisory and legal fees incurred of approximately $3.9 million; an increase in expense for the reserve of uncollectible rents of approximately $0.6 million (with a consolidated impact of approximately $0.4 million) primarily resulting from the COVID-19 pandemic impact on certain commercial non-essential tenants due to mandated shutdowns; offset by a decrease in interest expense attributed to the decline in interest rates on variable mortgage loans of approximately $1 million (with a consolidated impact of approximately $0.7 million excluding the impact of the deconsolidation of the operating results of the Pierre Towers from FREIT’s operating results of $0.2 million); and an increase in revenue excluding the impact of the deconsolidation of the Pierre Towers from FREIT’s operating results of approximately $0.8 million. The increase in adjusted net loss for the Current Quarter was primarily driven by an increase in Special Committee expenses for advisory and legal fees incurred of approximately $0.6 million; an increase in expense for the reserve of uncollectible rents of approximately $0.6 million (with a consolidated impact of approximately $0.4 million) primarily resulting from the COVID-19 pandemic impact on certain commercial non-essential tenants due to mandated shutdowns; offset by a decrease in interest expense attributed to the decline in interest rates on variable mortgage loans of approximately $0.6 million (with a consolidated impact of approximately $0.4 million excluding the impact of the deconsolidation of the operating results of the Pierre Towers from FREIT’s operating results of $0.2 million). See Note 16 to FREIT’s condensed consolidated financial statements for further details on the deconsolidation of the Pierre Towers property to a TIC. (Refer to the segment disclosure below for a more detailed discussion of the financial performance of FREIT’s commercial and residential segments.)

Page 26 

The schedule below provides a detailed analysis of the major changes that impacted net income-common equity for the six and three months ended April 30, 2020 and 2019:

NET INCOME COMPONENTS	Six Months Ended									Three Months Ended
	April 30,									April 30,
	2020			2019			Change			2020			2019			Change
	(In Thousands of Dollars)									(In Thousands of Dollars)
Income from real estate operations:
Commercial properties	$	7,773		$	7,625		$	148		$	3,420		$	3,757		$	(337	)
Residential properties		9,264			9,542			(278	)		4,389			4,808			(419	)
Total income from real estate operations		17,037			17,167			(130	)		7,809			8,565			(756	)
Financing costs:
Fixed rate mortgages		(4,055	)		(4,508	)		453			(1,844	)		(2,202	)		358
Floating rate mortgages		(3,098	)		(3,765	)		667			(1,466	)		(1,875	)		409
Other - Corporate interest		(210	)		(315	)		105			(97	)		(153	)		56
Mortgage cost amortization		(548	)		(591	)		43			(269	)		(297	)		28
Total financing costs		(7,911	)		(9,179	)		1,268			(3,676	)		(4,527	)		851
Investment income		136			184			(48	)		64			113			(49	)
Unrealized loss on interest rate cap contract		—			(159	)		159			—			(5	)		5
General & administrative expenses:
Accounting fees		(326	)		(293	)		(33	)		(161	)		(146	)		(15	)
Legal and professional fees		(35	)		(77	)		42			(17	)		(59	)		42
Trustees and consultant fees		(714	)		(619	)		(95	)		(295	)		(355	)		60
Stock option expense		(24	)		(69	)		45			(12	)		(35	)		23
Corporate expenses		(729	)		(333	)		(396	)		(571	)		(188	)		(383	)
Total general & administrative expenses		(1,828	)		(1,391	)		(437	)		(1,056	)		(783	)		(273	)
Special committee expenses		(4,519	)		(586	)		(3,933	)		(1,137	)		(586	)		(551	)
Depreciation		(5,462	)		(5,607	)		145			(2,530	)		(2,783	)		253
Loss on investment in tenancy-in-common		(18	)		—			(18	)		(18	)		—			(18	)
Adjusted net (loss) income		(2,565	)		429			(2,994	)		(544	)		(6	)		(538	)
Gain on sale of property		—			836			(836	)		—			836			(836	)
Gain on deconsolidation of subsidiary		27,680			—			27,680			27,680			—			27,680
Net income		25,115			1,265			23,850			27,136			830			26,306
Net (income) loss attributable to noncontrolling interests in subsidiaries		(157	)		(20	)		(137	)		84			(44	)		128
Net income attributable to common equity	$	24,958		$	1,245		$	23,713		$	27,220		$	786		$	26,434

The condensed consolidated results of operations for the Current Six Months and Current Quarter are not necessarily indicative of the results to be expected for the full year or any other period. The table above includes income from real estate operations which is a non-GAAP financial measure and is not a measure of operating results or cash flow as measured by GAAP, and is not necessarily indicative of cash available to fund cash needs.

Page 27 

SEGMENT INFORMATION

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

	Commercial										Residential											Combined
	Six Months Ended										Six Months Ended											Six Months Ended
	April 30,					Increase (Decrease)					April 30,						Increase (Decrease)					April 30,
	2020		2019			$			%		2020			2019			$			%		2020			2019
	(In Thousands)										(In Thousands)											(In Thousands)
Rental income	$	10,187	$	10,112		$	75			0.7%	$	15,149		$	16,187		$	(1,038	)		-6.4%	$	25,336		$	26,299
Reimbursements		3,346		2,928			418			14.3%		76			67			9			13.4%		3,422			2,995
Other		15		39			(24	)		-61.5%		387			194			193			99.5%		402			233
Total revenue		13,548		13,079			469			3.6%		15,612			16,448			(836	)		-5.1%		29,160			29,527
Operating expenses		5,896		5,651			245			4.3%		6,348			6,896			(548	)		-7.9%		12,244			12,547
Net operating income	$	7,652	$	7,428		$	224			3.0%	$	9,264		$	9,552		$	(288	)		-3.0%		16,916			16,980
Gain on sale of property	$	—	$	836		$	(836	)		-100.0%	$	—		$	—		$	—			0.0%		—			836
Average Occupancy %		81.0%		81.3%	*					-0.3%		94.0%	**		95.3%	**					-1.3%
							Reconciliation to condensed consolidated net income-common equity:
							Deferred rents - straight lining																121			187
							Investment income																136			184
							Unrealized loss on interest rate cap contract																—			(159	)
							General and administrative expenses																(1,828	)		(1,391	)
							Special committee expenses																(4,519	)		(586	)
							Gain on deconsolidation of subsidiary																27,680			—
							Loss on investment in tenancy-in-common																(18	)		—
							Depreciation																(5,462	)		(5,607	)
							Financing costs																(7,911	)		(9,179	)
							Net income																25,115			1,265
							Net income attributable to noncontrolling interests in subsidiaries																(157	)		(20	)
							Net income attributable to common equity															$	24,958		$	1,245

	Commercial										Residential											Combined
	Three Months Ended										Three Months Ended											Three Months Ended
	April 30,					Increase (Decrease)					April 30,						Increase (Decrease)					April 30,
	2020		2019			$			%		2020			2019			$			%		2020			2019
	(In Thousands)										(In Thousands)											(In Thousands)
Rental income	$	5,063	$	5,112		$	(49	)		-1.0%	$	6,973		$	8,093		$	(1,120	)		-13.8%	$	12,036		$	13,205
Reimbursements		1,469		1,305			164			12.6%		37			32			5			15.6%		1,506			1,337
Other		2		35			(33	)		-94.3%		86			89			(3	)		-3.4%		88			124
Total revenue		6,534		6,452			82			1.3%		7,096			8,214			(1,118	)		-13.6%		13,630			14,666
Operating expenses		3,172		2,820			352			12.5%		2,707			3,401			(694	)		-20.4%		5,879			6,221
Net operating income	$	3,362	$	3,632		$	(270	)		-7.4%	$	4,389		$	4,813		$	(424	)		-8.8%		7,751			8,445
Gain on sale of property	$	—	$	836		$	(836	)		-100.0%	$	—		$	—		$	—			0.0%		—			836
Average Occupancy %		80.5%		81.2%	*					-0.7%		93.9%	**		95.5%	**					-1.6%
							Reconciliation to condensed consolidated net income-common equity:
							Deferred rents - straight lining																58			120
							Investment income																64			113
							Unrealized loss on interest rate cap contract																—			(5	)
							General and administrative expenses																(1,056	)		(783	)
							Special committee expenses																(1,137	)		(586	)
							Gain on deconsolidation of subsidiary																27,680			—
							Loss on investment in tenancy-in-common																(18	)		—
							Depreciation																(2,530	)		(2,783	)
							Financing costs																(3,676	)		(4,527	)
							Net income																27,136			830
							Net loss (income) attributable to noncontrolling interests in subsidiaries																84			(44	)
							Net income attributable to common equity															$	27,220		$	786

*	Average occupancy rate excludes the Patchogue, New York property as the property was sold in February 2019.
**	Average occupancy rate excludes the Pierre Towers property  from all periods presented as the property was deconsolidated and converted to a TIC effective February 28, 2020.

NOI is based on operating revenue and expenses directly associated with the operations of the real estate properties, but excludes deferred rents (straight lining), 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 its operating performance. FREIT defines same property within both the commercial and residential segments to be those properties that FREIT has owned and operated for both the current and prior periods presented, excluding those properties that FREIT acquired or redeveloped 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 has been sold is not considered same property.

Page 28 

NOI and Same Property NOI are non-GAAP financial measures and are not measures of operating results or cash flow as measured by GAAP, 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 eight (8) separate properties. Seven of these properties are multi-tenanted retail or office centers, and one is single tenanted on land located in Rockaway, New Jersey owned by FREIT from which it receives monthly rental income from a tenant who has built and operates a bank branch on the land. On February 8, 2019, FREIT sold a commercial building, formerly occupied as a Pathmark supermarket in Patchogue, New York for a sales price of $7.5 million. The sale of this property, which had a carrying value of approximately $6.2 million, resulted in a gain of approximately $0.8 million net of sales fees and commissions. Net cash proceeds of approximately $2 million were realized after paying off the related mortgage on this property in the amount of approximately $5.2 million. The sale of this property eliminates an operating loss of approximately $0.8 million ($0.12 per share) incurred, annually, since Pathmark vacated the building in December 2015 (see Note 5 to FREIT’s condensed consolidated financial statements for further details).

As indicated in the tables above under the caption Segment Information, total revenue from FREIT’s commercial segment for the Current Six Months and Current Quarter increased by 3.6% and 1.3%, respectively, and NOI increased by 3% and decreased by 7.4%, respectively, as compared to the Prior Year’s comparable periods. Average occupancy for all commercial properties decreased slightly by 0.3% and 0.7%, respectively, as compared to the Prior Year’s comparable periods. The increase in revenue for the Current Six Months was primarily attributable to an increase in the average annual occupancy rate for the commercial space (office and retail) at the Rotunda property from an average occupancy rate of 81.7% in the Prior Year’s Six Months to 84.3% in the Current Six Months. The increase in NOI for the Current Six Months was primarily attributable to an increase in revenue offset by an increase in bad debt expense of approximately $0.5 million. The slight increase in revenue for the Current Quarter was primarily attributable to an increase in the average annual occupancy rate for the commercial space (office and retail) at the Rotunda property from an average occupancy rate of 82.3% in the Prior Year’s Quarter to 84.4% in the Current Quarter and the decrease in NOI was primarily attributable to an increase in expense for the reserve of uncollectible rents of approximately $0.5 million.

Same Property Operating Results: FREIT’s commercial segment currently contains eight (8) same properties. (See definition of same property under Segment Information above.) The Patchogue property was excluded from same property results for all periods presented because this property was sold in February 2019. Same property revenue for the Current Six Months and Current Quarter increased by 3.6% and 1.3%, respectively, and same property NOI increased by 1.5% and decreased by 7.7%, respectively, as compared to the Prior Year’s comparable periods. The changes resulted from the factors discussed in the immediately preceding paragraph.

Leasing: The following tables reflect leasing activity at FREIT’s 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 Six Months:

RETAIL:	Number of Leases		Lease Area (Sq. Ft.)		Weighted Average Lease Rate (per Sq. Ft.)		Weighted Average Prior Lease Rate (per Sq. Ft.)		% Increase (Decrease)		Tenant Improvement Allowance (per Sq. Ft.)  (a)		Lease Commissions (per Sq. Ft.)  (a)
Comparable leases (b)		3		3,366	$	40.15	$	38.43		4.5%	$	—	$	0.80
Non-comparable leases		1		1,730	$	14.99		N/A		N/A	$	—	$	0.75
Total leasing activity		4		5,096

RETAIL:

Number of Leases

Lease Area (Sq. Ft.)

Weighted Average Lease Rate (per Sq. Ft.)

Weighted Average Prior Lease Rate (per Sq. Ft.)

% Increase (Decrease)

Tenant Improvement Allowance (per Sq. Ft.)  (a)

Lease Commissions (per Sq. Ft.)  (a)

Comparable leases (b)

—

—

$

—

$

—

—

$

—

$

—

Non-comparable leases

—

—

$

—

N/A

N/A

$

—

$

—

Total leasing activity

—

—

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

(b) This includes new tenant leases and/or modifications/extensions/renewals of existing tenant leases.        

On April 26, 2020, CB Theatre Experience, LLC filed for protection under Chapter 11 of the bankruptcy code as disclosed in the bankruptcy filings. The CB Theatre Experience, LLC (known as “Cobb Theatre”) at the Rotunda retail property in Baltimore, Maryland has been closed since April 2020 due to the mandated shutdown related to the COVID-19 pandemic. If this tenant does not reopen or the lease is not assumed by another party, FREIT’s operating results will be adversely impacted from loss of rent and additional rent of approximately $1.1 million on an annualized basis.

Page 29 

RESIDENTIAL SEGMENT

FREIT currently operates seven (7) multi-family apartment buildings or complexes totaling 1,171 apartment units. On February 28, 2020, FREIT reorganized its subsidiary S and A Commercial Associates Limited Partnership (“S&A”) from a partnership into a TIC. Prior to this reorganization, FREIT owned a 65% membership interest in S&A, which owned 100% of the Pierre Towers property located in Hackensack, NJ through its 100% interest in Pierre Towers, LLC. Accordingly, FREIT consolidated the financial statements of S&A and its subsidiary to include 100% of the subsidiary’s assets, liabilities, operations and cash flows with the interest not owned by FREIT reflected as “noncontrolling interests in subsidiary” and all significant intercompany accounts and transactions were eliminated in consolidation.

Pursuant to the TIC agreement, FREIT ultimately acquired a 65% undivided interest in the Pierre property which was formerly owned by S&A. Based on the guidance of ASC 810, “Consolidation”, FREIT’s investment in the TIC was accounted for under the equity method of accounting. While FREIT’s effective ownership percentage interest in the Pierre Towers property remains unchanged after the reorganization to a TIC, FREIT no longer has a controlling interest as the TIC is now under joint control. Since FREIT retained a noncontrolling financial interest in the TIC and the deconsolidation of the subsidiary is not the result of a nonreciprocal transfer to owners, the subsidiary was deconsolidated from FREIT as of February 28, 2020. A gain in the amount of approximately $27.7 million was recognized in the accompanying condensed consolidated statements of income for the six and three months ended April 30, 2020. This gain was measured at the date of deconsolidation as the difference between the fair value of the investment in the TIC at the date the entity was deconsolidated and the carrying amount of the former subsidiary’s assets and liabilities. (See Note 16 to FREIT’s condensed consolidated financial statements for further details.)

As indicated in the tables above under the caption Segment Information, total revenue from FREIT’s residential segment for the Current Six Months and Current Quarter decreased by 5.1% and 13.6%, respectively, and total NOI decreased by 3% and 8.8%, respectively, as compared to the Prior Year’s comparable periods. The decline in revenue for the Current Six Months was primarily attributable to the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results due to the conversion to a TIC as of February 28, 2020 resulting in a decline in revenue of approximately $1.2 million offset by an increase in base rents across most residential properties. The decline in revenue for the Current Quarter was primarily attributable to the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results resulting in a decline in revenue of approximately $1.2 million. The decline in NOI for the Current Six Months and the Current Quarter is primarily attributed to the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results resulting in a decrease of approximately $0.6 million in NOI as compared to the prior year’s comparable periods. Average occupancy for all residential properties for the Current Six Months and Current Quarter decreased by approximately 1.3% and 1.6%, respectively, over the Prior Year’s comparable periods.

Same Property Operating Results: FREIT’s residential segment currently contains seven (7) same properties. (See definition of same property under Segment Information above.) The Pierre Towers property was excluded from same property results for all periods presented because this property was deconsolidated and converted to a TIC as of February 28, 2020. Same property revenue for the Current Six Months and Current Quarter increased by 2% and 1.5%, respectively, and same property NOI increased by 1.1% and 2.5%, respectively, as compared to the Prior Year’s comparable periods. The changes resulted from the factors discussed in the immediately preceding paragraph.

FREIT’s 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 $1,932 and $1,849, respectively. For comparability purposes, the average residential rent for the Prior Year’s Quarter has been restated to include the impact of Station Place and Icon and excludes the impact of the Pierre Towers due to the deconsolidation and conversion to a TIC in the Current Quarter. 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 $271,000 and $252,000, respectively.

Capital expenditures: Since all of FREIT’s apartment communities, with the exception of the Boulders, Regency, Icon and Station Place properties, were constructed more than 25 years ago, FREIT tends to spend more in any given year on maintenance and capital improvements than may be spent on newer properties. As a result of the COVID-19 global pandemic, only capital improvements deemed essential are being made at this time. Funds for these capital projects will be available from cash flow from the property's operations and cash reserves.

Page 30 

FINANCING COSTS

	Six Months Ended April 30,				Three Months Ended April 30,
	2020		2019		2020		2019
	(In Thousands of Dollars)				(In Thousands of Dollars)
Fixed rate mortgages (a):
1st Mortgages
Existing	$	4,055	$	4,508	$	1,844	$	2,202
New		—		—		—		—
Variable rate mortgages:
1st Mortgages
Existing		3,098		3,765		1,466		1,875
New		—		—		—		—
Other		210		315		97		153
Total financing costs, gross		7,363		8,588		3,407		4,230
Amortization of mortgage costs		548		591		269		297
Total financing costs, net	$	7,911	$	9,179	$	3,676	$	4,527
(a) Includes the effect of interest rate swap contracts which effectively convert the floating interest rate to a fixed interest rate over the term of the loan.

Total financing costs for the Current Six Months decreased by approximately $1,268,000 or 13.8%, compared to the Prior Year’s Six Months of which approximately $667,000 of this decline is primarily driven by a decline in interest rates on the variable mortgage loans and approximately $270,000 of this decline is attributed to the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results due to the conversion to a TIC as of February 28, 2020. Total financing costs for the Current Quarter decreased by approximately $851,000 or 18.8%, compared to the Prior Year’s Quarter of which approximately $409,000 of this decline is primarily driven by a decline in interest rates on the variable mortgage loans and approximately $270,000 of this decline is attributed to the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results. (See Note 16 to FREIT’s condensed consolidated financial statements for further details.)

GENERAL AND ADMINISTRATIVE EXPENSES (“G&A”)

G&A expense for the Current Six Months and Current Quarter was approximately $1,828,000 and $1,056,000, respectively, compared to $1,391,000 and $783,000, respectively, for the Prior Year’s comparable periods. The primary components of G&A are accounting/auditing fees, legal and professional fees, Trustees’ and consultant fees and corporate other expenses.

SPECIAL COMMITTEE EXPENSE

Special Committee expense for the Current Six Months and Current Quarter was $4,519,000 and $1,137,000, respectively, compared to $586,000 and $586,000, respectively, for the Prior Year’s comparable periods. These expenses are primarily composed of advisory and legal fees incurred.

DEPRECIATION

Depreciation expense from operations for the Current Six Months and Current Quarter was $5,462,000 and $2,530,000, respectively, compared to $5,607,000 and $2,783,000, respectively, for the Prior Year’s comparable periods. The decline in depreciation expense for the Current Six Months and Current Quarter was primarily attributable to the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results as of February 28, 2020. (See Note 16 to FREIT’s condensed consolidated financial statements for further details.)

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $0.3 million for the Current Six Months compared to net cash provided by operating activities of $8.2 million for the Prior Year’s Six Months. FREIT expects 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 at properties and other needs to maintain its status as a REIT for at least a period of one year from the date of filing of this quarterly report on Form 10-Q.

As of April 30, 2020, FREIT had cash, cash equivalents and restricted cash totaling $36.6 million, compared to $42.5 million at October 31, 2019. The decrease in cash in the Current Six Months is primarily attributable to $4 million in net cash used in financing activities, $2.2 million in net cash used in investing activities including capital expenditures offset by $0.3 million in net cash provided by operating activities. The decline in net cash for the Current Six Months was primarily driven by Special Committee expenses paid in the amount of approximately $3.3 million, deferred compensation paid to two retired trustees in the amount of approximately $5 million and the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results reduced net cash by approximately $1.4 million.

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In Fiscal 2017, Grande Rotunda, LLC incurred substantial expenditures at the Rotunda property related to retail tenant improvements, leasing costs and operating expenditures which, in the aggregate, exceeded revenues as the property was still in the rent up phase and the construction loan previously held with Wells Fargo was at its maximum level resulting in no additional funding available to draw. Accordingly, during Fiscal 2017 the equity owners in Grande Rotunda, LLC (FREIT with a 60% ownership and Rotunda 100, LLC with a 40% ownership) contributed their respective pro-rata share of any cash needs through loans to Grande Rotunda, LLC. As of April 30, 2020 and October 31, 2019, Rotunda 100, LLC has funded Grande Rotunda, LLC with approximately $5.8 million and $5.7 million (including interest), respectively, which is included in due to affiliate on the accompanying condensed consolidated balance sheets.

Credit Line: On October 27, 2017, FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 27, 2020 at which point no further advances shall be permitted and provided the line of credit is not renewed by the lender, the outstanding principal balance of the line of credit shall convert to a commercial term loan maturing on October 31, 2022. Draws against the credit line can be used for working capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREIT’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is $13 million and the interest rate on the amount outstanding will be at a floating rate of 275 basis points over the 30-day LIBOR with a floor of 3.75%. As of April 30, 2020 and October 31, 2019, there was no amount outstanding and $13 million was available under the line of credit.

As at April 30, 2020, FREIT’s aggregate outstanding mortgage debt was $302.9 million, which bears a weighted average interest rate of 4.12% and an average life of approximately 3.6 years. FREIT’s fixed rate mortgages are subject to amortization schedules that are longer than the terms 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	2021	2022	2023	2024	2025	2026	2028	2029
($ in millions)
Mortgage "Balloon" Payments	$159.4 (A)	$14.4	$34.5	$9.0	$13.9	$18.2	$10.5	$26.0
(A) Includes loan on the Rotunda property located in Baltimore, Maryland in the amount of approximately $118.5 million refinanced with Aareal Capital Corporation on February 7, 2018.

The following table shows the estimated fair value and net carrying value of FREIT’s long-term debt at April 30, 2020 and October 31, 2019:

($ in Millions)	April 30, 2020	October 31, 2019
Fair Value	$309.6	$352.9
Carrying Value, Net	$301.1	$349.9

Fair values are estimated based on market interest rates at April 30, 2020 and October 31, 2019 and on a 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 as provided by authoritative guidance).

FREIT expects to refinance the individual mortgages with new mortgages or take extension options when their terms expire. To this extent FREIT has 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 April 30, 2020, a 1% interest rate increase would reduce the fair value of FREIT’s debt by $6.6 million, and a 1% decrease would increase the fair value by $7 million.

FREIT believes that the values of its properties will be adequate to command refinancing proceeds equal to or higher than the mortgage debt to be refinanced. FREIT continually reviews its debt levels to determine if additional debt can prudently be utilized for property acquisitions for its real estate portfolio that will increase income and cash flow to shareholders.

On August 26, 2019, Berdan Court, LLC (“Berdan Court”), (owned 100% by FREIT), refinanced its $17 million loan (which matured on September 1, 2019) with the lender in the amount of $28,815,000. This loan, secured by an apartment building located in Wayne, New Jersey, has a term of ten years and bears a fixed interest rate equal to 3.54%. Interest-only payments are required each month for the first five years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 6.09% to a fixed rate of 3.54% and (ii) net refinancing proceeds of approximately $11.6 million which can be used for capital expenditures and general corporate purposes.

On April 3, 2019, WestFREIT, Corp. (owned 100% by FREIT) exercised its option to extend its loan held by M&T Bank, with a then outstanding balance of approximately $22.5 million, for twelve months. Effective beginning on June 1, 2019, the extension of this loan secured by the Westridge Square Shopping Center, required monthly principal payments of $47,250 plus interest based on a floating interest rate equal to 240 basis points over the one-month LIBOR and had a maturity date of May 1, 2020. This loan was extended for another six months with a new maturity date of November 1, 2020 under the same terms and conditions of the existing agreement while the lender is working closely with the Company to further modify and extend this loan.

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On February 7, 2018, Grande Rotunda, LLC refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding available for retail tenant improvements and leasing costs in the amount of $3,380,000. This loan is secured by the Rotunda property, bears a floating interest rate at 285 basis points over the one-month LIBOR rate and has a maturity date of February 6, 2021 with two one-year renewal options. As part of this transaction, Grande Rotunda had purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year. As of April 30, 2020, approximately $118.5 million of this loan facility was drawn down and the interest rate was approximately 3.83%.

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. FREIT enters into these swap contracts with a counterparty that is usually a high-quality commercial bank. In essence, FREIT agrees to pay its counterparties a fixed rate of interest on a dollar amount of notional principal (which corresponds to FREIT’s mortgage debt) over a term equal to the term of the mortgage notes. FREIT’s counterparties, in return, agree to pay FREIT a short-term rate of interest - generally LIBOR - on that same notional amount over the same term as the mortgage notes.

FREIT has variable interest rate loans secured by its Damascus Centre, Regency, Wayne PSC and Station Place 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 based on a notional amount of approximately $22,320,000 ($19,135,000 at April 30, 2020) for the Damascus Centre swaps, a notional amount of approximately $16,200,000 ($15,421,000 at April 30, 2020) for the Regency swap, a notional amount of approximately $25,800,000 ($23,440,000 at April 30, 2020) for the Wayne PSC swap and a notional amount of approximately $12,350,000 ($12,282,000 at April 30, 2020) for the Station Place swap.

Interest rate cap contract: To limit exposure on interest rate volatility, FREIT uses an interest rate cap contract to cap a floating interest rate at a set pre-determined rate. FREIT enters into cap contracts with a counterparty that is usually a high-quality commercial bank. In essence, so long as the floating interest rate is below the cap rate, FREIT agrees to pay its counterparties a variable rate of interest on a dollar amount of notional principal (which corresponds to FREIT’s mortgage debt). Once the floating interest rate rises above the cap rate, FREIT’s counterparties, in return, agree to pay FREIT a short-term rate of interest above the cap on that same notional amount.

FREIT has a variable interest rate loan secured by its Rotunda property. As part of the refinancing of Grande Rotunda, LLC’s construction loan held by Wells Fargo with a new loan from Aareal Capital Corporation, Grande Rotunda, LLC purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year. The cap contract was based on a notional amount of approximately $121,900,000 ($121,900,000 at April 30, 2020) and a term of one year with the loan being hedged against having a balance of approximately $118,520,000 and a remaining term of one year.

In accordance with ASU 2017-12, which was adopted by FREIT in the first quarter of Fiscal 2020, FREIT marks-to-market its interest rate swap and cap contracts. 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. The interest rate swaps and cap are accounted for as cash flow hedges with the corresponding gains or losses on these contracts not affecting FREIT’s statements of income; changes in the fair value of these cash flow hedges will be reported in other comprehensive income and appear in the equity section of the balance sheet. This gain or loss represents the economic consequence of liquidating fixed rate swaps or the cap contract and replacing them with like-duration funding at current market rates, something we would likely never do. Periodic cash settlements of these contracts will be accounted for as an adjustment to interest expense. In Fiscal 2019, prior to the adoption of ASU 2017-12, the interest rate cap which matured on March 5, 2020 was, for accounting purposes, deemed to be an ineffective cash flow hedge with a corresponding gain or loss being recorded in FREIT’s statements of income.

FREIT has the following derivative-related risks with its swap and cap contracts (“contract”): 1) early termination risk, and 2) counterparty credit risk.

Early Termination Risk: If FREIT wants to terminate its 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 contract’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 April 30, 2020, the swap contracts for Damascus Centre, Regency, Station Place and Wayne PSC were in the counterparties’ favor. If FREIT had terminated these contracts at that date it would have realized losses of approximately $0 for the Rotunda cap, $730,000 for the Damascus Centre swaps, $1,523,000 for the Regency swap, $1,851,000 for the Station Place swap and $1,394,000 for the Wayne PSC swap, all of which have been included as a liability in FREIT’s condensed consolidated balance sheet as at April 30, 2020. The change in the fair value for the contract (gain or loss) during such period has been included in comprehensive loss and for the six and three months ended April 30, 2020, FREIT recorded an unrealized loss of approximately $3,372,000 and $2,982,000, respectively, in comprehensive loss.

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In Fiscal 2019, FREIT was accounting for its interest rate swaps and cap contract in accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities”. (See Notes 2 and 4 to FREIT’s condensed consolidated financial statements for additional details). For the six and three months ended April 30, 2019, FREIT recorded an unrealized loss of $3,185,000 and $821,000, respectively, in comprehensive income representing the change in fair value of the swaps during such period. For the six and three months ended April 30, 2019, FREIT recorded an unrealized loss in the condensed consolidated statements of income of approximately $159,000 and $5,000, respectively, for Grande Rotunda’s interest rate cap (which matured on March 5, 2020) representing the change in the fair value of this ineffective cash flow hedge during such period. As of October 31, 2019, the fair value of the Grande Rotunda interest rate cap contract was $0.

Counterparty Credit Risk: Each party to a cap or 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 or cap contracts only with major financial institutions that are experienced market makers in the derivatives market.

Dividend: The Board of Trustees did not declare a dividend for the second quarter of Fiscal 2020. The Board will continue to evaluate the dividend on a quarterly basis.

STOCK OPTION PLAN

On March 4, 2019, the Board approved the grant of an aggregate of 5,000 non-qualified share options under the Plan to the Chairman of the Board. The options have an exercise price of $15.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be March 3, 2029. (See Note 13 to FREIT’s condensed consolidated financial statements for further details.)

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ADJUSTED FUNDS FROM OPERATIONS

Funds From Operations (“FFO”) is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”). FREIT does not include sources or distributions from equity/debt sources in its computation of FFO. 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 its decision making process. These adjustments to GAAP net income are straight-line rents and recurring capital improvements on FREIT’s residential apartments. The modified FFO computation is referred to as Adjusted Funds From Operations (“AFFO”). FREIT believes that AFFO is a superior measure of its operating performance. FREIT computes FFO and AFFO as follows:

	For the Six Months Ended April 30,						For the Three Months Ended April 30,
	2020			2019			2020			2019
	(In Thousands, Except Per Share)						(In Thousands, Except Per Share)
Funds From Operations ("FFO") (a)
Net income	$	25,115		$	1,265		$	27,136		$	830
Depreciation of consolidated properties		5,462			5,607			2,530			2,783
Amortization of deferred leasing costs		238			260			125			133
Distributions to minority interests		(583	)		(686	)		—			(392	)
Adjustment to loss in investment in tenancy-in-common for depreciation		233			—			233			—
Gain on sale of property		—			(836	)		—			(836	)
Gain on deconsolidation of subsidiary		(27,680	)		—			(27,680	)		—
FFO	$	2,785		$	5,610		$	2,344		$	2,518
Per Share - Basic	$	0.40		$	0.81		$	0.34		$	0.36
Per Share - Diluted	$	0.40		$	0.81		$	0.34		$	0.36
(a) As prescribed by NAREIT.
Adjusted Funds From Operations ("AFFO")
FFO	$	2,785		$	5,610		$	2,344		$	2,518
Deferred rents (Straight lining)		(121	)		(187	)		(58	)		(120	)
Capital Improvements - Apartments		(226	)		(285	)		(130	)		(161	)
AFFO	$	2,438		$	5,138		$	2,156		$	2,237
Per Share - Basic	$	0.35		$	0.74		$	0.31		$	0.32
Per Share - Diluted	$	0.35		$	0.74		$	0.31		$	0.32
Weighted Average Shares Outstanding:
Basic		6,984			6,923			6,989			6,932
Diluted		7,003			6,923			7,026			6,932

FFO and AFFO do not represent cash generated from operating activities in accordance with GAAP, 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, 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. FREIT’s 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 FREIT to seek increased rents as leases renew or when new tenants are obtained, subject to prevailing market conditions.

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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 Chief Executive Officer and Chief Financial Officer, who concluded that FREIT’s disclosure controls and procedures are effective as of April 30, 2020. 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.

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Part II: Other Information

Item 1: Legal Proceedings

On January 14, 2020, FREIT and certain of its affiliates (collectively, the “Sellers”), entered into a Purchase and Sale Agreement (as subsequently amended, the “Purchase and Sale Agreement”) with Sinatra Properties LLC (the “Purchaser”), which as subsequently amended, provided for the sale by the Sellers to the Purchaser of 100% of the Sellers’ ownership interests in six real properties held by the Sellers in exchange for the purchase price described therein, subject to the terms and conditions of the Purchase and Sale Agreement. On April 30, 2020, the Sellers delivered written notice to the Purchaser of the Sellers’ termination of the Purchase and Sale Agreement in accordance with its terms due to the occurrence of a “Purchaser Default” thereunder, based on the Purchaser’s failure to perform its obligations under the Purchase and Sale Agreement and close the transactions contemplated therein.

Upon the execution of the Purchase and Sale Agreement, the Purchaser delivered into escrow a deposit in the amount of $15 million (the “Deposit”), in the form of an unconditional, irrevocable letter of credit in such amount (the “Letter of Credit”). The Purchase and Sale Agreement provides that the Sellers’ exclusive remedy, in the event of a “Purchaser Default” and the termination of the Purchase and Sale Agreement, is the forfeiture of the Deposit to the Sellers as liquidated damages. Accordingly, contemporaneously with the Sellers’ delivery of the termination notice to the Purchaser, the Sellers delivered written notice to the escrow agent requesting that the escrow agent release the Letter of Credit from escrow and deliver same to the Sellers.

On May 6, 2020, the Purchaser filed a complaint (the “Complaint”) against the Sellers in the Superior Court of New Jersey, in which, among other things, the Purchaser alleges breach of contract and breach of the covenant of good faith and fair dealing against the Sellers in connection with the Sellers’ termination of the Purchase and Sale Agreement. The Purchaser seeks (a) a judgment of specific performance compelling the Sellers to convey the properties under the Purchase and Sale Agreement to the Purchaser; (b) declaratory judgment from the court that (i) the Purchase and Sale Agreement is not terminated, (ii) the Purchaser is not in default under the Purchase and Sale Agreement, and (iii) the Sellers are in default under the Purchase and Sale Agreement, subject to a right to cure; (c) an order for injunctive relief compelling the Sellers to perform the Purchase and Sale Agreement; (d) in the event that the court does not order specific performance, a judgment directing that the Purchaser’s $15 million deposit under the Purchase and Sale Agreement be returned to the Purchaser, and compensatory, consequential and incidental damages in an amount to be determined at trial; and (e) attorneys’ fees and costs.

The Purchaser has filed lis pendens with respect to each of the six properties that were subject to the Purchase and Sale Agreement. The lis pendens provides notice to the public of the Complaint. The filing of the lis pendens will adversely affect the sale or financing of those properties.

The Sellers believe that the allegations set forth in the Complaint are without merit and intend to vigorously defend the action and enforce the Sellers’ rights and remedies under the Purchase and Sale Agreement in connection with the “Purchaser Default” thereunder, including the Purchaser’s forfeiture of its $15 million deposit to the Sellers as liquidated damages as provided in the Purchase and Sale Agreement. (See Note 6 to FREIT’s condensed consolidation financial statements for further details.)

Item 1A: Risk Factors

Except as set forth below, there were no material changes to the Risk Factors disclosed in FREIT’s Annual Report on Form 10-K for the year ended October 31, 2019, filed with the Securities and Exchange Commission on January 21, 2020. These risk factors may not identify or describe every risk currently applicable to us. Additional risks or uncertainties not currently known to us or that we currently deem immaterial may materially adversely affect our business, financial condition and results of operations.

The COVID-19 pandemic is adversely affecting us. Our business, financial condition, results of operations and cash flows have been and are expected to continue to be negatively impacted by the COVID-19 pandemic and the impact could be material to us.

Our business is subject to risks related to the effects of public health crises, epidemics and pandemics, including the COVID-19 pandemic. Such events could inhibit global, national and local economic activity; constrain our access to capital and other sources of funding, which could adversely affect the availability and terms of future borrowings or refinancings; adversely affect our residential tenants’ financial condition due to a sustained loss of income, which could affect their ability to pay rent; adversely affect our commercial tenants’ financial condition by limiting foot traffic and staffing at their businesses, which could affect their ability to pay rent and willingness to make new leasing commitments; reduce our cash flow, which could impact our ability to pay dividends or to service our debt; temporarily or permanently reduce the demand for retail or office space; reduce the value of our real estate assets, which may result in material non-cash impairment charges in future periods; and have other direct and indirect effects that are difficult to predict. Such risks depend upon the nature and severity of the public health concern, as well as the extent and duration of government-mandated orders and personal decisions to limit travel, economic activity and personal interaction, none of which can be predicted with confidence. In particular, we cannot predict the duration of stay-at-home and other government orders instituted in response to the COVID-19 pandemic, which vary by jurisdiction, or the short and long term economic effects caused by the pandemic, each of which could have a material adverse effect on our business.

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Item 6: Exhibits

Exhibit Index

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 April 30, 2020, are 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 statements 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: June 9, 2020
	/s/ Robert S. Hekemian, Jr.
	(Signature)
	Robert S. Hekemian, Jr.
	President and Chief Executive Officer
	(Principal Executive Officer)
	/s/ Allan Tubin
	(Signature)
	Allan Tubin
	Chief Financial Officer and Treasurer
	(Principal Financial/Accounting Officer)

EX-31.1

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EXHIBIT 31.1

CERTIFICATION

I, Robert S. Hekemian, Jr., certify that:

1. I have reviewed this report on Form 10-Q of First Real Estate Investment Trust of New Jersey;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  June 9, 2020	/s/ Robert S. Hekemian, Jr.
	Robert S. Hekemian, Jr.
	President and Chief Executive Officer

EX-31.2

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EXHIBIT 31.2

CERTIFICATION

I, Allan Tubin, certify that:

1. I have reviewed this report on Form 10-Q of First Real Estate Investment Trust of New Jersey;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  June 9, 2020	/s/ Allan Tubin
	Allan Tubin
	Chief Financial Officer and Treasurer

EX-32.1

 Page 41

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Real Estate Investment Trust of New Jersey (the “Company”) on Form 10-Q for the quarter ended April 30, 2020 (the “Report”), I, Robert S. Hekemian, Jr., President and Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C.§ 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(a) or 78o(d), and,

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  June 9, 2020	/s/ Robert S. Hekemian, Jr.
	Robert S. Hekemian, Jr.
	President and Chief Executive Officer

EX-32.2

Page 42

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Real Estate Investment Trust of New Jersey (the “Company”) on Form 10-Q for the quarter ended April 30, 2020 (the “Report”), I, Allan Tubin, Chief Financial Officer and Treasurer of the Company, do hereby certify, pursuant to 18 U.S.C.§ 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(a) or 78o(d), and,

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  June 9, 2020	/s/ Allan Tubin
	Allan Tubin
	Chief Financial Officer and Treasurer

XML

Rental Income (Schedule of Minimum Rental Income) (Details) $ in Thousands	Apr. 30, 2020 USD ($)
Operating Leases, Future Minimum Payments Receivable [Abstract]
2020	$ 19,936	[1]
2021	18,984
2022	15,727
2023	13,099
2024	10,948
Thereafter	46,774
Total	$ 125,468

[1] Amount represents full fiscal year

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Equity incentive plan (Narrative) (Details) - USD ($)					3 Months Ended		6 Months Ended
	Mar. 04, 2019	May 03, 2018	Nov. 10, 2016	Sep. 04, 2014	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for issuance					442,060		442,060
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Plan term	10 years	10 years	10 years	10 years
Vesting term	5 years	5 years	5 years
Options granted during period	5,000	38,000	38,000	246,000
Options granted during period, price per share	$ 15.00	$ 15.50	$ 21.00	$ 18.45
Compensation expense related to stock options					$ 12,000	$ 35,000	$ 24,000	$ 69,000
Unrecognized compensation cost					94,000		$ 94,000
Unrecognized compensation cost, recognition period							2 years 7 months 6 days
Aggregate intrinsic value of options expected to vest					125,000		$ 125,000
Aggregate intrinsic value of options exercisable					$ 26,000		$ 26,000

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Deferred fee plan

6 Months Ended

Apr. 30, 2020

Deferred Compensation Arrangements [Abstract]

Deferred fee plan

Note 14 – 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 credited to a participant’s account will be determined by the closing price of FREIT shares on the date as set forth in the Deferred Fee Plan.

All fees payable to Trustees for the six and three-month periods ended April 30, 2020 and 2019 were deferred under the Deferred Fee Plan except for fees payable to one Trustee, who elected to receive such fees in cash. As a result of the amendment to the Deferred Fee Plan described above, for the six-month periods ended April 30, 2020 and 2019, the aggregate amounts of deferred Trustee fees together with related interest and dividends were approximately $367,000 and $517,300, respectively, which have been paid through the issuance of 18,046 and 32,753 vested FREIT share units, respectively, based on the closing price of FREIT shares on the dates as set forth in the Deferred Fee Plan.

For the six-month periods ended April 30, 2020 and 2019, FREIT has charged as expense approximately $367,000 and $471,200, respectively, representing deferred Trustee fees and interest, and the balance of approximately $0 and $46,100, respectively, representing dividends payable in respect of share units allocated to Plan participants, has been charged to equity.

The Deferred Fee Plan, as amended, provides that cumulative fees together with accrued interest deferred as of November 1, 2014 will be paid in a lump sum or in annual installments over a period not to exceed 10 years, at the election of the Participant. In connection with the termination of Robert S. Hekemian’s service to the Trust under the Consulting Agreement between Mr. Hekemian and the Trust in December 2019, Mr. Hekemian’s accrued plan benefits under the Deferred Fee Plan became payable to him and were paid in a single lump sum in the amount of approximately $4.8 million. As of April 30, 2020 and October 31, 2019, approximately $1,542,000 and $4,422,000, respectively, of fees has been deferred together with accrued interest of approximately $1,091,000 and $3,188,000, respectively.

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Fair value of long-term debt (Tables)

6 Months Ended

Apr. 30, 2020

Fair Value Disclosures [Abstract]

Schedule of Estimated Fair Value and Carrying Value of Long-Term Debt

The following table shows the estimated fair value and net carrying value of FREIT’s long-term debt at April 30, 2020 and October 31, 2019:

($ in Millions)	April 30, 2020	October 31, 2019
Fair Value	$309.6	$352.9
Carrying Value, Net	$301.1	$349.9

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Termination of Purchase and Sale Agreement (Details) - USD ($)		3 Months Ended		6 Months Ended
	May 06, 2020	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019	Jan. 14, 2020
Expense incurred		$ 1,137,000	$ 586,000	$ 4,519,000	$ 586,000
Subsequent Event [Member]
Amount of liquidated damages	$ 15,000,000
Purchase and Sale Agreement [Member] | Seven Apartment Properties [Member]
Percentage of ownership interest						100.00%

XML

Recently issued accounting standards (Details)	Oct. 31, 2019 USD ($)
Accounting Standards Update and Change in Accounting Principle [Abstract]
Interest rate cap	$ 0

XML

Recently issued accounting standards

6 Months Ended

Apr. 30, 2020

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recently issued accounting standards

Note 2 - Recently issued accounting standards:

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, “Leases (Topic 842)”, which supersedes the existing guidance for lease accounting, “Leases (Topic 840)”. ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged; however, certain refinements were made to conform the standard with the recently issued revenue recognition guidance in ASU 2014-09, “Revenue From Contracts With Customers”, specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Leasing Standard was amended by ASU 2018-11, “Targeted Improvements” (the “Practical Expedient Amendment”) in July of 2018, also codified as ASC 842, which created a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single lease component. The Company determined that its lease arrangements meet the criteria under the practical expedient to account for lease and non-lease components as a single lease component, which alleviates the requirement upon adoption of ASC 842 that we reallocate or separately present consideration from lease and non-lease components. As such, the Company elected the practical expedient as allowed by the Practical Expedient Amendment and adopted ASU 2016-02 in the first quarter of Fiscal 2020.

Substantially all of FREIT’s revenues are within the scope of ASC 842. FREIT will continue to account for its leases as operating leases. Leases for FREIT’s apartment buildings and complexes are generally short-term in nature (one to two-years in duration), based on fixed payments and contain separate lease components within the contract for each revenue stream (i.e. base rent, garage rent, etc.). Given the nature of these leases, the adoption of ASU No. 2016-02 had no impact on the accounting for the Company’s leases within the residential segment.

With respect to most of FREIT’s commercial properties, lease terms range from five years to twenty-five years with options, which if exercised would extend the terms of such leases. These lease agreements generally provide for reimbursement of real estate taxes, maintenance, insurance and certain other operating expenses of the properties (known as common area maintenance costs (“CAM”)). Some of FREIT’s leases in its commercial segment may contain lease and nonlease components. Generally, the primary lease component in most of FREIT’s commercial leases is base rent charged for the rental of space in an office complex/shopping center. Depending on the lease, the following nonlease components could be present: 1) fixed (or in substance fixed) payments related to real estate taxes and insurance; 2) variable payments that depend on an index or rate initially measured using the index or rate at the commencement date; and 3) fixed CAM reimbursements or CAM expense reimbursements based on the tenant’s proportionate share of the allocable operating expenses and CAM capital expenditures for the property.

FREIT accrues fixed lease income on a straight-line basis over the terms of the leases. FREIT accrues reimbursements from tenants for recoverable portions of real estate taxes, insurance, and CAM as variable lease consideration in the period the applicable expenditures are incurred recognizing differences between estimated recoveries and the final billed amounts in the subsequent year. Some of FREIT’s retail tenants are also required to pay overage rents based on sales over a stated base amount during the lease year. FREIT recognizes this variable lease consideration only when each tenant’s sales exceed the applicable sales threshold. Given that this standard has minimal impact on real estate operating lessors, the adoption of this new accounting guidance did not have a significant impact on FREIT’s consolidated financial statements and footnote disclosures. As a result, there was no cumulative effect adjustment to opening equity. Additionally, based on this new accounting guidance, the Company will no longer be able to capitalize certain leasing costs, such as legal expenses, as it relates to activities before a lease is entered into. (See Note 15 to FREIT’s condensed consolidated financial statements for further details).

In June 2016, the FASB issued ASU No. 2016-13 "Financial Instruments – Credit Losses (Topic 326)", which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities, and other financial instruments. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires entities to write down credit losses only when losses are probable and loss reversals are not permitted. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. In November 2018, the FASB issued ASU 2018-19 “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, which clarifies that operating lease receivables are outside the scope of the new standard. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, “Leases (Topic 842)”. FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures.

In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities to ASC Topic 815, Derivatives and Hedging ("ASC 815")” which amends the hedge accounting recognition and presentation requirements in ASC 815. The update is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting and increase transparency as to the scope and results of hedge programs. ASU 2017-12 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. FREIT adopted ASU 2017-12 in the first quarter of Fiscal 2020.

This guidance requires that for cash flow and net investment hedges, all changes in the fair value of the hedging instrument (i.e. both the effective and ineffective portions) will be deferred in other comprehensive income and recognized in earnings at the same time that the hedged item affects earnings. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the amendments in this update. The amended presentation and disclosure guidance is required only prospectively.

The adoption of ASU 2017-12 had no impact on the accounting for FREIT’s interest rate swap contracts, which were previously deemed effective cash flow hedges, on the following entities: Damascus Centre. LLC (“Damascus Centre”), Wayne PSC, LLC (“Wayne PSC”), FREIT Regency, LLC (“Regency”) and Station Place on Monmouth, LLC (“Station Place”). Accordingly, these interest rate swap contracts will continue to be accounted for by marking these contracts to market, taking into account present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss on the swaps in comprehensive income. The adoption of this accounting guidance has an impact on the accounting for Grande Rotunda, LLC’s (“Grande Rotunda”) interest rate cap, which was previously deemed an ineffective cash flow and for which previous to the adoption of this guidance, the change in the fair value was reported in the statements of income. Based on this new guidance, FREIT will record the change in the fair value of Grande Rotunda’s interest rate cap in other comprehensive income on a prospective basis. FREIT did not record an adjustment in Fiscal 2020 to the opening balance of retained earnings as the value of Grande Rotunda’s interest rate cap was $0 as of October 31, 2019. (See Note 4 to FREIT’s condensed consolidated financial statements for additional details).

In October 2018, the FASB issued ASU 2018-16 “Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes to ASC Topic 815, Derivatives and Hedging”. ASU 2018-16 expands the list of U.S benchmark interest rates permitted in the application of hedge accounting by adding the OIS rate based on SOFR as an eligible benchmark interest rate. ASU 2018-16 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. FREIT adopted this update in the first quarter of Fiscal 2020 which did not have an impact on the condensed consolidated financial statements or footnote disclosures.

In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 global pandemic. Under existing GAAP, the Company would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. As of April 30, 2020, we have not modified any of our leases attributed to the COVID-19 global pandemic and as a result, have not yet made a determination on whether to elect this option. Accordingly, the Lease Modification Q&A did not have an impact on our condensed consolidated financial statements.

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Termination of Purchase and Sale Agreement

6 Months Ended

Apr. 30, 2020

Business Combination, Consideration Transferred [Abstract]

Termination of Purchase and Sale Agreement

Note 6 – Termination of Purchase and Sale Agreement:

On January 14, 2020, FREIT and certain of its affiliates (collectively, the “Sellers”), entered into a Purchase and Sale Agreement (as subsequently amended, the “Purchase and Sale Agreement”) with Sinatra Properties LLC (the “Purchaser”), which as subsequently amended, provided for the sale by the Sellers to the Purchaser of 100% of the Sellers’ ownership interests in six real properties held by the Sellers in exchange for the purchase price described therein, subject to the terms and conditions of the Purchase and Sale Agreement. On April 30, 2020, the Sellers delivered written notice to the Purchaser of the Sellers’ termination of the Purchase and Sale Agreement in accordance with its terms due to the occurrence of a “Purchaser Default” thereunder, based on the Purchaser’s failure to perform its obligations under the Purchase and Sale Agreement and close the transactions contemplated therein.

Upon the execution of the Purchase and Sale Agreement, the Purchaser delivered into escrow a deposit in the amount of $15 million (the “Deposit”), in the form of an unconditional, irrevocable letter of credit in such amount (the “Letter of Credit”). The Purchase and Sale Agreement provides that the Sellers’ exclusive remedy, in the event of a “Purchaser Default” and the termination of the Purchase and Sale Agreement, is the forfeiture of the Deposit to the Sellers as liquidated damages. Accordingly, contemporaneously with the Sellers’ delivery of the termination notice to the Purchaser, the Sellers delivered written notice to the escrow agent requesting that the escrow agent release the Letter of Credit from escrow and deliver same to the Sellers.

On May 6, 2020, the Purchaser filed a complaint (the “Complaint”) against the Sellers in the Superior Court of New Jersey, in which, among other things, the Purchaser alleges breach of contract and breach of the covenant of good faith and fair dealing against the Sellers in connection with the Sellers’ termination of the Purchase and Sale Agreement. The Purchaser seeks (a) a judgment of specific performance compelling the Sellers to convey the properties under the Purchase and Sale Agreement to the Purchaser; (b) declaratory judgment from the court that (i) the Purchase and Sale Agreement is not terminated, (ii) the Purchaser is not in default under the Purchase and Sale Agreement, and (iii) the Sellers are in default under the Purchase and Sale Agreement, subject to a right to cure; (c) an order for injunctive relief compelling the Sellers to perform the Purchase and Sale Agreement; (d) in the event that the court does not order specific performance, a judgment directing that the Purchaser’s $15 million deposit under the Purchase and Sale Agreement be returned to the Purchaser, and compensatory, consequential and incidental damages in an amount to be determined at trial; and (e) attorneys’ fees and costs.

The Sellers believe that the allegations set forth in the Complaint are without merit and intend to vigorously defend the action and enforce the Sellers’ rights and remedies under the Purchase and Sale Agreement in connection with the “Purchaser Default” thereunder, including the Purchaser’s forfeiture of its $15 million deposit to the Sellers as liquidated damages as provided in the Purchase and Sale Agreement. As of the quarter ended April 30, 2020, the $15 million deposit has not been included in income in the accompanying condensed consolidated statements of income.

During the six months ended April 30, 2020 and 2019, the Special Committee of the Board incurred on behalf of the Company approximately $4,519,000 and $586,000, respectively, of expenses related to its activities. During the three months ended April 30, 2020 and 2019, the Special Committee of the Board incurred on behalf of the Company approximately $1,137,000 and $586,000, respectively, of expenses related to its activities.

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Fair value of long-term debt

6 Months Ended

Apr. 30, 2020

Fair Value Disclosures [Abstract]

Fair value of long-term debt

Note 10 – Fair value of long-term debt:

The following table shows the estimated fair value and net carrying value of FREIT’s long-term debt at April 30, 2020 and October 31, 2019:

($ in Millions)	April 30, 2020	October 31, 2019
Fair Value	$309.6	$352.9
Carrying Value, Net	$301.1	$349.9

Fair values are estimated based on market interest rates at April 30, 2020 and October 31, 2019 and on a 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 as provided by authoritative guidance).

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Statement of Comprehensive Income [Abstract]
Net income	$ 27,136	$ 830	$ 25,115	$ 1,265
Other comprehensive income (loss):
Unrealized loss on interest rate swap contracts before reclassifications	(3,086)	(720)	(3,506)	(2,996)
Amount reclassified from accumulated other comprehensive loss to interest expense	104	(101)	134	(189)
Net unrealized loss on interest rate swap contracts	(2,982)	(821)	(3,372)	(3,185)
Comprehensive income (loss)	24,154	9	21,743	(1,920)
Net (income) loss attributable to noncontrolling interests	84	(44)	(157)	(20)
Other comprehensive loss:
Unrealized loss on interest rate swap contracts attributable to noncontrolling interests	840	248	969	914
Comprehensive loss attributable to noncontrolling interests	924	204	812	894
Comprehensive income (loss) attributable to common equity	$ 25,078	$ 213	$ 22,555	$ (1,026)

XML

Document and Entity Information - shares	6 Months Ended
	Apr. 30, 2020	Jun. 09, 2020
Document and Entity Information [Abstract]
Entity Registrant Name	FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY
Entity Central Index Key	0000036840
Document Type	10-Q
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Document Period End Date	Apr. 30, 2020
Amendment Flag	false
Current Fiscal Year End Date	--10-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		6,856,651
Entity Interactive Data Current	Yes
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	000-25043
Entity Incorporation, State or Country Code	NJ

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Reconciliation of Cash Reported in Balance Sheet) - USD ($) $ in Thousands	Apr. 30, 2020	Apr. 30, 2019
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheet:
Cash and cash equivalents	$ 31,751	$ 25,291
Tenants' security accounts	1,604	2,236
Mortgage escrows (included in prepaid expenses and other assets)	3,220	3,140
Total cash, cash equivalents and restricted cash	$ 36,575	$ 30,667

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Management agreement, fees and transactions with related party (Details) - USD ($)	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019	Oct. 31, 2019
Related Party Transaction [Line Items]
Asset management fees	$ 508,000	$ 648,000	$ 1,223,000	$ 1,285,000
Secured loans receivable	5,136,000		5,136,000		$ 5,053,000
Rotunda 100 members [Member]
Related Party Transaction [Line Items]
Secured loans receivable	4,000,000		4,000,000		4,000,000
Unpaid accrued interest	$ 1,136,000		$ 1,136,000		1,053,000
Grande Rotunda, LLC [Member]
Related Party Transaction [Line Items]
Ownership by noncontrolling owners (percentage)	40.00%		40.00%
Ownership by parent (percentage)	60.00%		60.00%
Due to affiliate	$ 5,800,000		$ 5,800,000		$ 5,700,000
Damascus Centre, LLC [Member]
Related Party Transaction [Line Items]
Ownership by noncontrolling owners (percentage)	30.00%		30.00%
Ownership by parent (percentage)	70.00%		70.00%
Managing Agent Hekemian & Co [Member]
Related Party Transaction [Line Items]
Asset management fees	$ 499,000	636,000	$ 1,198,000	1,255,000
Leasing commissions and reimbursement of operating expenses	229,000	178,000	704,000	311,000
Insurance commissions	4,000	20,000	56,000	48,000
Additional services	0	131,250	0	131,250
Robert S. Hekemian [Member]
Related Party Transaction [Line Items]
Trustee fees and related interest payable in stock units	0	54,000	21,000	114,000
Consulting fee per month			5,000
Consulting fee quarterly installments			15,000
Consulting services expense	0	15,000	8,000	30,000
Robert S. Hekemian, Jr. [Member]
Related Party Transaction [Line Items]
Trustee fees and related interest payable in stock units	117,000	99,000	236,000	194,000
Allan Tubin [Member]
Related Party Transaction [Line Items]
Trustee fees and related interest payable in stock units	8,000	7,000	15,000	7,000
David Hekemian [Member]
Related Party Transaction [Line Items]
Trustee fees and related interest payable in stock units	$ 15,000	$ 16,000	$ 31,000	$ 28,000
Minimum [Member]
Related Party Transaction [Line Items]
Asset management fees percentage rate			4.00%
Maximum [Member]
Related Party Transaction [Line Items]
Asset management fees percentage rate			5.00%

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Earnings per share (Details) - $ / shares	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Earnings per share:
Average dilutive shares outstanding	37,000		19,000
Impact of Earnings per share	$ 0.01		$ 0.01
Anti-dulutive shares excluded from the computation of diluted earnings per share	38,000	311,000	38,000	311,000

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Mortgage financings and line of credit

6 Months Ended

Apr. 30, 2020

Debt Disclosure [Abstract]

Mortgage financings and line of credit

Note 9 – Mortgage financings and line of credit:

On August 26, 2019, Berdan Court, LLC (“Berdan Court”), (owned 100% by FREIT), refinanced its $17 million loan (which matured on September 1, 2019) with the lender in the amount of $28,815,000. This loan, secured by an apartment building located in Wayne, New Jersey, has a term of ten years and bears a fixed interest rate equal to 3.54%. Interest-only payments are required each month for the first five years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 6.09% to a fixed rate of 3.54% and (ii) net refinancing proceeds of approximately $11.6 million which can be used for capital expenditures and general corporate purposes.

On April 3, 2019, WestFREIT, Corp. (owned 100% by FREIT) exercised its option to extend its loan held by M&T Bank, with a then outstanding balance of approximately $22.5 million, for twelve months. Effective beginning on June 1, 2019, the extension of this loan secured by the Westridge Square Shopping Center, required monthly principal payments of $47,250 plus interest based on a floating interest rate equal to 240 basis points over the one-month LIBOR and had a maturity date of May 1, 2020. This loan was extended for another six months with a new maturity date of November 1, 2020 under the same terms and conditions of the existing agreement while the lender is working closely with the Company to further modify and extend this loan.

On February 7, 2018, Grande Rotunda, LLC refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding available for retail tenant improvements and leasing costs in the amount of $3,380,000. This loan is secured by the Rotunda property, bears a floating interest rate at 285 basis points over the one-month LIBOR rate and has a maturity date of February 6, 2021 with two one-year renewal options. As part of this transaction, Grande Rotunda had purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year. As of April 30, 2020, approximately $118.5 million of this loan facility was drawn down and the interest rate was approximately 3.83%.

On October 27, 2017, FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 27, 2020 at which point no further advances shall be permitted and provided the line of credit is not renewed by the lender, the outstanding principal balance of the line of credit shall convert to a commercial term loan maturing on October 31, 2022. Draws against the credit line can be used for working capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREIT’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is $13 million and the interest rate on the amount outstanding will be at a floating rate of 275 basis points over the 30-day LIBOR with a floor of 3.75%. As of April 30, 2020 and October 31, 2019, there was no amount outstanding and $13 million was available under the line of credit.

As a result of the negative impact of the COVID-19 pandemic at our commercial properties, we have requested debt payment relief from certain of our lenders on the retail properties, and have been granted debt service relief in the form of deferral of principal and/or interest payments for up to six months to provide debt service relief during the COVID-19 pandemic, with the deferred payments of approximately $260,000 as of April 30, 2020 being due at maturity of the loan.

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Basis of presentation

6 Months Ended

Apr. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation

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 six and three-month periods ended April 30, 2020 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, 2019 of First Real Estate Investment Trust of New Jersey (“FREIT”, “us”, “we”, “our” or the “Company”).

Certain prior period statement of income and cash flow line items have been reclassified to conform to the current year presentation.

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Property disposition

6 Months Ended

Apr. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

Property disposition

Note 5 – Property disposition:

On February 8, 2019, FREIT sold a commercial building, formerly occupied as a Pathmark supermarket in Patchogue, New York for a sales price of $7.5 million. The sale of this property, which had a carrying value of approximately $6.2 million, resulted in a gain of approximately $0.8 million net of sales fees and commissions. Net cash proceeds of approximately $2 million were realized after paying off the related mortgage on this property in the amount of approximately $5.2 million. FREIT distributed and paid approximately $676,000 of this gain by way of a one-time special dividend in connection with and in anticipation of the closing of the sale of the Patchogue property of $0.10 per share. The sale of this property eliminates an operating loss of approximately $0.8 million ($0.12 per share) incurred, annually, since Pathmark vacated the building in December 2015.

As the disposal of this property did not represent a strategic shift that would have a major impact on FREIT’s operations or financial results, the property’s operations were not reflected as discontinued operations in the accompanying condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Operating activities:
Net income	$ 25,115	$ 1,265
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	5,462	5,607
Amortization	786	851
Unrealized loss on interest rate cap contract		159
Stock based compensation expense	24	69
Trustee fees, consultant fee and related interest paid in stock units	377	502
Gain on sale of property		(836)
Gain on deconsolidation of subsidiary	(27,680)
Loss on investment in tenancy-in-common	18
Deferred interest on mortgages	154
Deferred rents - straight line rent	(121)	(187)
Bad debt expense	700	68
Changes in operating assets and liabilities:
Tenants' security accounts	(117)	112
Accounts receivable, prepaid expenses and other assets	173	1,421
Accounts payable, accrued expenses and deferred trustee compensation payable	(4,234)	(744)
Deferred revenue	(515)	(203)
Due to affiliate - accrued interest	126	143
Net cash provided by operating activities	268	8,227
Investing activities:
Capital improvements - existing properties	(826)	(1,543)
Deconsolidation of subsidiary cash and cash equivalents	(1,383)
Proceeds from sale of commercial property		7,060
Net cash (used in) provided by investing activities	(2,209)	5,517
Financing activities:
Repayment of mortgages	(2,032)	(7,378)
Deferred financing costs		(56)
Dividends paid	(1,357)	(1,351)
Distributions to noncontrolling interests	(583)	(686)
Net cash used in financing activities	(3,972)	(9,471)
Net (decrease) increase in cash, cash equivalents and restricted cash	(5,913)	4,273
Cash, cash equivalents and restricted cash, beginning of period	42,488	26,394
Cash, cash equivalents and restricted cash, end of period	36,575	30,667
Supplemental disclosure of cash flow data:
Interest paid, net of amounts capitalized	7,020	8,175
Operating activities:
Commercial tenant security deposits applied to accounts receivable	384
Investing activities:
Accrued capital expenditures, construction costs, pre-development costs and interest	161	155
Financing activities:
Dividends declared but not paid		848
Dividends paid in share units		46
Vested share units issued to consultant and retired trustee	1,467	574
Deconsolidation of subsidiary:
Real estate, at cost, net of accumulated depreciation	(36,225)
Accounts receivable, net of allowance for doubtful accounts	(55)
Prepaid expenses and other assets	(315)
Mortgage payable	48,000
Unamortized debt issuance costs	(489)
Accounts payable and accrued expenses	353
Tenants' security deposits	585
Deferred revenue	47
Deconsolidation of subsidiary cash and cash equivalents	(1,383)
Net carrying value of assets and liabilities deconsolidated	10,518
Recognition of retained investment in tenancy-in-common at fair value	20,758
Derecognition of noncontrolling interest in subsidiary	$ (3,596)

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Revenue:
Rental income	$ 12,094	$ 13,325	$ 25,457	$ 26,486
Reimbursements	1,506	1,337	3,422	2,995
Sundry income	88	124	402	233
Total revenue	13,688	14,786	29,281	29,714
Expenses:
Property operating expenses	4,312	3,985	8,327	7,852
Special committee expenses	1,137	586	4,519	586
Management fees	508	648	1,223	1,285
Real estate taxes	2,115	2,371	4,522	4,801
Depreciation	2,530	2,783	5,462	5,607
Total expenses	10,602	10,373	24,053	20,131
Operating income	3,086	4,413	5,228	9,583
Investment income	64	113	136	184
Unrealized loss on interest rate cap contract		(5)		(159)
Gain on sale of property		836		836
Gain on deconsolidation of subsidiary	27,680		27,680
Loss on investment in tenancy-in-common	(18)		(18)
Interest expense including amortization of deferred financing costs	(3,676)	(4,527)	(7,911)	(9,179)
Net income	27,136	830	25,115	1,265
Net (income) loss attributable to noncontrolling interests in subsidiaries	84	(44)	(157)	(20)
Net income attributable to common equity	$ 27,220	$ 786	$ 24,958	$ 1,245
Earnings per share:
Basic	$ 3.89	$ 0.11	$ 3.57	$ 0.18
Diluted	$ 3.88	$ 0.11	$ 3.56	$ 0.18
Weighted average shares outstanding:
Basic	6,989	6,932	6,984	6,923
Diluted	7,026	6,932	7,003	6,923

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Investment in tenancy-in-common (Narrative) (Details) - USD ($) $ in Thousands	2 Months Ended	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019	Feb. 28, 2020	Oct. 31, 2019
Schedule of Equity Method Investments [Line Items]
Gain on deconsolidation of subsidiary		$ 27,680		$ 27,680
Investment in tenancy-in-common	$ 20,740	20,740		20,740
Loss on investment in tenancy-in-common		$ (18)		$ (18)
Percentage of management fees of rent collected	5.00%
Management fees	$ 62
S And A Commercial Associates Limited Partnership [Member]
Schedule of Equity Method Investments [Line Items]
Percentage of ownership interest						65.00%
Pierre Towers, LLC [Member]
Schedule of Equity Method Investments [Line Items]
Percentage of ownership interest						100.00%
TIC Agreement [Member]
Schedule of Equity Method Investments [Line Items]
Percentage of ownership interest						65.00%

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Equity incentive plan (Schedule of Stock Option Activity) (Details) - Employee Stock Option [Member] - $ / shares					6 Months Ended
	Mar. 04, 2019	May 03, 2018	Nov. 10, 2016	Sep. 04, 2014	Apr. 30, 2020
No. of Options Outstanding
Options outstanding beginning of period					310,740
Options granted during period	5,000	38,000	38,000	246,000
Options forfeited/cancelled during period
Options outstanding end of period					310,740
Options vested and expected to vest					308,310
Options exercisable at end of period					261,140
Weighted Average Exercise Price
Options outstanding beginning of period					$ 18.35
Options granted during period	$ 15.00	$ 15.50	$ 21.00	$ 18.45
Options forfeited/cancelled during period
Options outstanding end of period					$ 18.35

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Equity incentive plan

6 Months Ended

Apr. 30, 2020

Share-based Payment Arrangement [Abstract]

Equity incentive plan

Note 13 – Equity incentive plan:

On September 4, 2014, the Board approved the grant of an aggregate of 246,000 non-qualified share options under FREIT’s Equity Incentive Plan (“the Plan”) to certain FREIT executive officers, the members of the Board and certain employees of Hekemian & Co., Inc., FREIT’s managing agent. The options have an exercise price of $18.45 per share, fully vested on September 3, 2019 and will expire 10 years from the date of grant, which will be September 3, 2024.

On November 10, 2016, the Board approved the grant of an aggregate of 38,000 non-qualified share options under the Plan to two members of the Board who were appointed to the Board during Fiscal 2016. The options have an exercise price of $21.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be November 9, 2026.

On May 3, 2018, the Board approved the grant of an aggregate of 38,000 non-qualified share options under the Plan to two members of the Board who were appointed to the Board during Fiscal 2018. The options have an exercise price of $15.50 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be May 2, 2028.

On March 4, 2019, the Board approved the grant of an aggregate of 5,000 non-qualified share options under the Plan to the Chairman of the Board. The options have an exercise price of $15.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be March 3, 2029.

As of April 30, 2020, 442,060 shares are available for issuance under the Plan.

The following table summarizes stock option activity for the six-month period ended April 30, 2020:

	No. of Options		Weighted Average
	Outstanding		Exercise Price
Options outstanding beginning of period		310,740	$	18.35
Options granted during period		—		—
Options forfeited/cancelled during period		—		—
Options outstanding end of period		310,740	$	18.35
Options vested and expected to vest		308,310
Options exercisable at end of period		261,140

For the six-month periods ended April 30, 2020 and 2019, compensation expense related to stock options granted amounted to approximately $24,000 and $69,000, respectively. For the three-month periods ended April 30, 2020 and 2019, compensation expense related to stock options granted amounted to approximately $12,000 and $35,000, respectively. At April 30, 2020, there was approximately $94,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over the remaining weighted average vesting period of approximately 2.6 years.

The aggregate intrinsic value of options vested and expected to vest and options exercisable at April 30, 2020 was approximately $125,000 and $26,000, respectively.

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COVID-19 Pandemic

6 Months Ended

Apr. 30, 2020

Covid-19 Pandemic

COVID-19 Pandemic

Note 17 – COVID-19 Pandemic:

The international spread of COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. Many states in the U.S., including New Jersey, New York and Maryland, where our properties are located, have implemented stay-at-home orders for all "non-essential" business. Consequently, the global, U.S. and local economies have suffered significant disruption and there has been significant volatility in the financial markets. Many businesses have moved to a remote work environment, or have been forced to suspend operations completely. The COVID-19 pandemic and the actions taken by individuals, businesses and government authorities to reduce its spread have caused substantial lost business revenue, changes in consumer behavior and large reductions in liquidity and fair value of many assets. These and other adverse conditions that may unfold in the future are expected to continue until such time as government stay-at-home and shutdown orders are fully or partially lifted, and business operations and commercial activity can resume. The full or partial lifting of government stay-at-home and shutdown orders cannot be predicted with any certainty. Further, even after such orders are fully or partially lifted, the resumption of business operations and commercial activity will depend on several factors, including prevailing sentiments among workers and consumers regarding the safety of resuming public activity, and cannot be predicted with any certainty.

Despite the COVID-19 pandemic and preventive measures taken to mitigate the spread, our residential properties continue to generate cash flow. At our commercial properties, with the exception of grocery stores and other "essential" businesses, many of our retail tenants are adversely affected by the mandated shutdowns. For the six and three months ended April 30, 2020, FREIT incurred an increase in expense for the reserve of uncollectible rents of approximately $0.6 million (with a consolidated impact of approximately $0.4 million). FREIT currently remains in active discussions and negotiations with these impacted retail tenants. As a result of the negative impact of the COVID-19 pandemic at our commercial properties, we have requested debt payment relief from certain of our lenders on the retail properties, and have been granted debt service relief in the form of deferral of principal and/or interest payments for up to six months to provide debt service relief during the COVID-19 pandemic, with the deferred payments of approximately $260,000 as of April 30, 2020 being due at maturity of the loan. Overall, we have experienced positive cash flow from operations through the end of the fiscal quarter ended April 30, 2020, but this could change based on the duration of the pandemic, which is uncertain. We believe that our cash balance as of April 30, 2020 of approximately $31.8 million coupled with a $13 million available line of credit will provide us with sufficient liquidity for at least the next twelve months from the filing of this Form 10-Q. Additionally, in an effort to further preserve cash flow, effective May 1, 2020, our Board of Trustees reduced all fees, salaries and retainers payable to our executive officers and members of the Board of Trustees by up to 30% through the end of Fiscal 2020.

The extent of the effects of COVID-19 on our business, results of operations, cash flows, value of our real estate assets and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty. See “Item 1A. Risk Factors”.

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Earnings per share

6 Months Ended

Apr. 30, 2020

Earnings per share:

Earnings per share

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 14 to FREIT’s condensed consolidated financial statements) 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 attributable 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 six months ended April 30, 2020, the outstanding stock options increased the average dilutive shares outstanding by approximately 19,000 shares with a $0.01 impact on earnings per share. For the three months ended April 30, 2020, the outstanding stock options increased the average dilutive shares outstanding by approximately 37,000 shares with a $0.01 impact on earnings per share. For the six and three months ended April 30, 2019, the outstanding stock options were anti-dilutive with no impact on earnings per share. There were 38,000 anti-dilutive shares for the six and three months ended April 30, 2020. The number of anti-dilutive shares which have been excluded from the computation of diluted earnings per share was approximately 311,000 for both the six and three months ended April 30, 2019. Anti-dilutive shares consist of out-of-the money stock options under the Equity Incentive Plan.

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Adoption of Plan of Liquidation

6 Months Ended

Apr. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Adoption of Plan of Liquidation

Note 7 – Adoption of Plan of Liquidation:

On January 14, 2020, the Trust’s Board of Trustees adopted a Plan of Voluntary Liquidation with respect to the Trust (the “Plan of Liquidation”), which provided for the voluntary dissolution, termination and liquidation of the Trust by the sale, conveyance, transfer or delivery of all of the Trust’s remaining assets in accordance with the terms and conditions of the Plan of Liquidation and the Internal Revenue Code of 1986, as amended, and the Treasury regulations thereunder. The Plan of Liquidation provided that it would become effective upon (i) approval by a majority of the votes cast by Trust’s shareholders present in person or represented by proxy at a duly called meeting of the Trust’s shareholders at which a quorum is present and (ii) the consummation of the transactions contemplated by the Purchase and Sale Agreement.

While the Plan of Liquidation received shareholder approval, as the Sellers terminated the Purchase and Sale Agreement by written notice delivered to the Purchaser on April 30, 2020, and the transactions contemplated thereby will not be consummated, the Plan of Liquidation will not become effective, and the Trust will not proceed with the sale, conveyance, transfer or delivery of all of the Trust’s remaining assets as contemplated by the Plan of Liquidation that was adopted by the Board on January 14, 2020.

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Fair value of long-term debt (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
Fair Value Disclosures [Abstract]
Fair value of long-term debt	$ 309,600	$ 352,900
Carrying value of long-term debt	$ 301,063	$ 349,904

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Property disposition (Details) - USD ($)		3 Months Ended		6 Months Ended
	Feb. 08, 2019	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Real Estate Properties [Line Items]
Agreed sales price of property held for sale					$ 7,060,000
Capital gain			$ 836,000		$ 836,000
Special dividend paid				$ 676,000
Pathmark supermarket in Patchogue [Member]
Real Estate Properties [Line Items]
Agreed sales price of property held for sale	$ 7,500,000
Rental properties	6,200,000
Capital gain	800,000
Net cash proceeds from sale of property	2,000,000
Mortgage payoff	$ 5,200,000
Dividend per share	$ 0.10
Sale of property operating loss	$ 800,000
Price per share operating loss eliminated from sale of property	$ 0.12

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Investment in tenancy-in-common (Tables)

6 Months Ended

Apr. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Balance Sheet of Pierre Property

The following table summarizes the balance sheet of the Pierre Towers property as of April 30, 2020 accounted for by the equity method:

	April 30,
	2020
	(In Thousands of Dollars)
Real estate, net	$	80,950
Cash and cash equivalents		1,032
Tenants' security accounts		577
Receivables and other assets		501
Total assets	$	83,060
Mortgages payable, net of unamortized debt issuance costs	$	50,089
Accounts payable and accrued expenses		391
Tenants' security deposits		580
Deferred revenue		93
Equity		31,907
Total liabilities & equity	$	83,060
FREIT's investment in TIC (65% interest)	$	20,740

Schedule of Income Statement of Pierre Property

The following table summarizes the income statement of the Pierre Towers property for the period from February 28, 2020 through April 30, 2020 accounted for by the equity method:

	For the period from
	February 28, 2020
	through April 30, 2020
	(In Thousands of Dollars)
Revenues	$	1,242
Operating expenses		643
Net operating income		599
Depreciation		358
Interest expense including amortization
of deferred financing costs		268
Net loss	$	(27	)
FREIT's loss on investment in TIC (65% interest)	$	(18	)

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COVID-19 Pandemic (Details) - USD ($)	1 Months Ended	3 Months Ended	6 Months Ended
	May 30, 2020	Apr. 30, 2020	Apr. 30, 2020
Deferred payments of loan		$ 260,000	$ 260,000
Cash balance		31,800,000	31,800,000
Available line of credit		13,000,000	13,000,000
Increase in expense for reserve of uncollectible rents		600,000	600,000
Increase in expense for reserve of uncollectible rents with consolidated impact		$ 400,000	$ 400,000
Subsequent Event [Member]
Percentage reduction in fees, salaries and retainers payable	30.00%

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) - USD ($) $ in Thousands		Shares of Beneficial Interest [Member]	Treasury Shares at Cost [Member]	Undistributed Earnings (Dividends in Excess of Net Income) [Member]	Accumulated Other Comprehensive Income (loss) [Member]	Total Common Equity [Member]	Noncontrolling Interests [Member]	Total
Balance at Oct. 31, 2018		$ 28,288	$ (4,941)	$ (4,376)	$ 2,517	$ 21,488	$ 2,856	$ 24,344
Stock based compensation expense		34				34		34
Vested share units granted to Trustees and consultant		254				254		254
Vested share units issued to consultant	[1]	(20)	20
Distributions to noncontrolling interests							(294)	(294)
Net (loss) income				459		459	(24)	435
Dividends declared, including payable in share units (per share)				(1,040)		(1,040)		(1,040)
Net unrealized loss on interest rate swaps					(1,698)	(1,698)	(666)	(2,364)
Balance at Jan. 31, 2019		28,556	(4,921)	(4,957)	819	19,497	1,872	21,369
Balance at Oct. 31, 2018		28,288	(4,941)	(4,376)	2,517	21,488	2,856	24,344
Deconsolidation of subsidiary
Net (loss) income								1,265
Balance at Apr. 30, 2019		28,331	(4,367)	(5,038)	246	19,172	1,276	20,448
Balance at Jan. 31, 2019		28,556	(4,921)	(4,957)	819	19,497	1,872	21,369
Stock based compensation expense		35				35		35
Vested share units granted to Trustees and consultant		294				294		294
Vested share units issued to consultant and retired Trustees	[1]	(554)	554
Distributions to noncontrolling interests							(392)	(392)
Net (loss) income				786		786	44	830
Dividends declared, including payable in share units (per share)				(867)		(867)		(867)
Net unrealized loss on interest rate swaps					(573)	(573)	(248)	(821)
Balance at Apr. 30, 2019		28,331	(4,367)	(5,038)	246	19,172	1,276	20,448
Balance at Oct. 31, 2019		28,847	(4,330)	(6,762)	(2,040)	15,715	333	16,048
Stock based compensation expense		12				12		12
Vested share units granted to Trustees and consultant		211				211		211
Vested share units issued to consultant and retired Trustees	[1]	(1,401)	1,401
Distributions to noncontrolling interests							(583)	(583)
Net (loss) income				(2,262)		(2,262)	241	(2,021)
Net unrealized loss on interest rate swaps					(261)	(261)	(129)	(390)
Balance at Jan. 31, 2020		27,669	(2,929)	(9,024)	(2,301)	13,415	(138)	13,277
Balance at Oct. 31, 2019		28,847	(4,330)	(6,762)	(2,040)	15,715	333	16,048
Deconsolidation of subsidiary								3,596
Net (loss) income								25,115
Balance at Apr. 30, 2020		27,781	(2,863)	18,196	(4,443)	38,671	2,534	41,205
Balance at Jan. 31, 2020		27,669	(2,929)	(9,024)	(2,301)	13,415	(138)	13,277
Stock based compensation expense		12				12		12
Vested share units granted to Trustees		166				166		166
Vested share units issued to retired Trustee	[1]	(66)	66
Deconsolidation of subsidiary							3,596	3,596
Net (loss) income				27,220		27,220	(84)	27,136
Net unrealized loss on interest rate swaps					(2,142)	(2,142)	(840)	(2,982)
Balance at Apr. 30, 2020		$ 27,781	$ (2,863)	$ 18,196	$ (4,443)	$ 38,671	$ 2,534	$ 41,205

[1] Represents the issuance of treasury shares to consultant and retired Trustees for share units earned.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
ASSETS
Real estate, at cost, net of accumulated depreciation	$ 289,169	$ 330,108
Construction in progress	473	395
Cash and cash equivalents	31,751	38,075
Investment in tenancy-in-common	20,740
Tenants' security accounts	1,604	2,278
Receivables arising from straight-lining of rents	4,495	4,374
Accounts receivable, net of allowance for doubtful accounts of $959 and $379 as of April 30, 2020 and October 31, 2019, respectively	1,385	1,741
Secured loans receivable	5,136	5,053
Prepaid expenses and other assets	5,531	5,951
Deferred charges, net	2,556	2,643
Total Assets	362,840	390,618
Liabilities:
Mortgages payable	302,912	352,790
Less unamortized debt issuance costs	1,849	2,886
Mortgages payable, net	301,063	349,904
Due to affiliate	5,831	5,705
Deferred trustee compensation payable	2,633	7,610
Accounts payable and accrued expenses	3,487	3,097
Dividends payable		1,357
Tenants' security deposits	2,295	3,381
Deferred revenue	828	1,390
Interest rate cap and swap contracts	5,498	2,126
Total Liabilities	321,635	374,570
Commitments and contingencies
Common equity:
Shares of beneficial interest without par value: 8,000,000 shares authorized; 6,993,152 shares issued plus 141,057 and 192,122 vested share units granted to Trustees at April 30, 2020 and October 31, 2019, respectively	27,781	28,847
Treasury stock, at cost: 136,501 and 206,408 shares at April 30, 2020 and October 31, 2019, respectively	(2,863)	(4,330)
Undistributed earnings (dividends in excess of net income)	18,196	(6,762)
Accumulated other comprehensive loss	(4,443)	(2,040)
Total Common Equity	38,671	15,715
Noncontrolling interests in subsidiaries	2,534	333
Total Equity	41,205	16,048
Total Liabilities and Equity	$ 362,840	$ 390,618

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Investment in tenancy-in-common (Schedule of Income Statement of Pierre Property) (Details) - USD ($) $ in Thousands	2 Months Ended	3 Months Ended				6 Months Ended
	Apr. 30, 2020	Apr. 30, 2020	Jan. 31, 2020	Apr. 30, 2019	Jan. 31, 2019	Apr. 30, 2020	Apr. 30, 2019
Schedule of Equity Method Investments [Line Items]
Revenues		$ 13,688		$ 14,786		$ 29,281	$ 29,714
Operating expenses		10,602		10,373		24,053	20,131
Net operating income		3,086		4,413		5,228	9,583
Depreciation		2,530		2,783		5,462	5,607
Interest expense including amortization of deferred financing costs		3,676		4,527		7,911	9,179
Net loss		27,136	$ (2,021)	830	$ 435	25,115	1,265
FREIT's loss on investment in TIC (65% interest)		$ (18)				$ (18)
Pierre Property [Member]
Schedule of Equity Method Investments [Line Items]
Revenues	$ 1,242
Operating expenses	643
Net operating income	599
Depreciation	358
Interest expense including amortization of deferred financing costs	268
Net loss	(27)
FREIT's loss on investment in TIC (65% interest)	$ (18)

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Rental Income (Narrative) (Details)	6 Months Ended
	Apr. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
Lease terms for residential tenants, periods	2 years

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Income taxes (Details)	12 Months Ended
	Oct. 31, 2020
Income Tax Disclosure [Abstract]
Ordinary taxable income distributed as dividends (percentage)	100.00%

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Segment information

6 Months Ended

Apr. 30, 2020

Segment Reporting [Abstract]

Segment information

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 is comprised of eight (8) properties and the residential segment is comprised of seven (7) properties, excluding the Pierre Towers property which was converted into a tenancy-in-common and deconsolidated from FREIT’s operating results as of February 28, 2020 (See Note 16 to FREIT’s condensed consolidated financial statements for further details).

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, 2019. 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.

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), 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.

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 attributable to common equity for the six and three month periods ended April 30, 2020 and 2019. Asset information is not reported since FREIT does not use this measure to assess performance.

	Six Months Ended						Three Months Ended
	April 30,						April 30,
	2020			2019			2020			2019
	(In Thousands of Dollars)						(In Thousands of Dollars)
Real estate rental revenue:
Commercial	$	13,548		$	13,079		$	6,534		$	6,452
Residential		15,612			16,448			7,096			8,214
Total real estate rental revenue		29,160			29,527			13,630			14,666
Real estate operating expenses:
Commercial		5,896			5,651			3,172			2,820
Residential		6,348			6,896			2,707			3,401
Total real estate operating expenses		12,244			12,547			5,879			6,221
Net operating income:
Commercial		7,652			7,428			3,362			3,632
Residential		9,264			9,552			4,389			4,813
Total net operating income	$	16,916		$	16,980		$	7,751		$	8,445
Recurring capital improvements - residential	$	(226	)	$	(285	)	$	(130	)	$	(161	)
Reconciliation to condensed consolidated net income attributable to common equity:
Segment NOI	$	16,916		$	16,980		$	7,751		$	8,445
Deferred rents - straight lining		121			187			58			120
Investment income		136			184			64			113
Unrealized loss on interest rate cap contract		—			(159	)		—			(5	)
General and administrative expenses		(1,828	)		(1,391	)		(1,056	)		(783	)
Special committee expenses		(4,519	)		(586	)		(1,137	)		(586	)
Gain on sale of property		—			836			—			836
Gain on deconsolidation of subsidiary		27,680			—			27,680			—
Loss on investment in tenancy-in-common		(18	)		—			(18	)		—
Depreciation		(5,462	)		(5,607	)		(2,530	)		(2,783	)
Financing costs		(7,911	)		(9,179	)		(3,676	)		(4,527	)
Net income		25,115			1,265			27,136			830
Net (income) loss attributable to noncontrolling interests in subsidiaries		(157	)		(20	)		84			(44	)
Net income attributable to common equity	$	24,958		$	1,245		$	27,220		$	786

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Rental Income

6 Months Ended

Apr. 30, 2020

Operating Leases, Future Minimum Payments Receivable [Abstract]

Rental Income

Note 15 – Rental Income:

Commercial tenants:

As discussed in Note 2, fixed lease income under our operating leases generally includes fixed minimum lease consideration and fixed CAM reimbursements which are accrued on a straight-line basis over the terms of the leases. Variable lease income includes consideration based on sales, as well as reimbursements for real estate taxes, maintenance, insurance and certain other operating expenses of the properties.

Minimum fixed lease consideration (in thousands of dollars) under non-cancelable tenant operating leases for each of the next five years and thereafter, excluding variable lease consideration, for the years ending October 31, as of April 30, 2020, is as follows:

Year Ending October 31,	Amount
2020*	$	19,936
2021		18,984
2022		15,727
2023		13,099
2024		10,948
Thereafter		46,774
Total	$	125,468
*Amount represents full fiscal year

The above amounts assume that all leases which expire are not renewed and, accordingly, neither minimal rentals nor rentals from replacement tenants are included.

Minimum future rentals do not include contingent rentals, which may be received under certain leases on the basis of percentage of reported tenants' sales volume. Rental income that is contingent on future events is not included in income until the contingency is resolved. Contingent rentals included in income for the six and three-month periods ended April 30, 2020 and 2019 were not material.

Residential tenants:

Lease terms for residential tenants are usually one to two years.

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Segment information (Tables)

6 Months Ended

Apr. 30, 2020

Segment Reporting [Abstract]

Schedule of Segment and Related Information

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 attributable to common equity for the six and three month periods ended April 30, 2020 and 2019. Asset information is not reported since FREIT does not use this measure to assess performance.

	Six Months Ended						Three Months Ended
	April 30,						April 30,
	2020			2019			2020			2019
	(In Thousands of Dollars)						(In Thousands of Dollars)
Real estate rental revenue:
Commercial	$	13,548		$	13,079		$	6,534		$	6,452
Residential		15,612			16,448			7,096			8,214
Total real estate rental revenue		29,160			29,527			13,630			14,666
Real estate operating expenses:
Commercial		5,896			5,651			3,172			2,820
Residential		6,348			6,896			2,707			3,401
Total real estate operating expenses		12,244			12,547			5,879			6,221
Net operating income:
Commercial		7,652			7,428			3,362			3,632
Residential		9,264			9,552			4,389			4,813
Total net operating income	$	16,916		$	16,980		$	7,751		$	8,445
Recurring capital improvements - residential	$	(226	)	$	(285	)	$	(130	)	$	(161	)
Reconciliation to condensed consolidated net income attributable to common equity:
Segment NOI	$	16,916		$	16,980		$	7,751		$	8,445
Deferred rents - straight lining		121			187			58			120
Investment income		136			184			64			113
Unrealized loss on interest rate cap contract		—			(159	)		—			(5	)
General and administrative expenses		(1,828	)		(1,391	)		(1,056	)		(783	)
Special committee expenses		(4,519	)		(586	)		(1,137	)		(586	)
Gain on sale of property		—			836			—			836
Gain on deconsolidation of subsidiary		27,680			—			27,680			—
Loss on investment in tenancy-in-common		(18	)		—			(18	)		—
Depreciation		(5,462	)		(5,607	)		(2,530	)		(2,783	)
Financing costs		(7,911	)		(9,179	)		(3,676	)		(4,527	)
Net income		25,115			1,265			27,136			830
Net (income) loss attributable to noncontrolling interests in subsidiaries		(157	)		(20	)		84			(44	)
Net income attributable to common equity	$	24,958		$	1,245		$	27,220		$	786

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Deferred fee plan (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019	Oct. 31, 2019
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Dividends payable		$ 848,000		$ 848,000	$ 1,357,000
Robert S. Hekemian [Member]
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Trustee fee expense	0	54,000	21,000	114,000
Deferred Fee Plan [Member]
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Trustee fee expense			367,000	471,200
Deferred trustee fees	367,000	517,300	367,000	$ 517,300
Deferred accrued interest	1,091,000		$ 1,091,000		3,188,000
Basis spread on any deferred fee (percentage)			1.50%
Term of distribution to participants			10 years
Shares issued			18,046	32,753
Dividends payable	0	$ 46,100	$ 0	$ 46,100
Cumulative fees			1,542,000		$ 4,422,000
Deferred Fee Plan [Member] | Robert S. Hekemian [Member]
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Lump sum accrued plan benefits payable related party	$ 4,800,000		$ 4,800,000

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Segment information (Details) $ in Thousands	3 Months Ended				6 Months Ended
	Apr. 30, 2020 USD ($) Properties	Jan. 31, 2020 USD ($)	Apr. 30, 2019 USD ($)	Jan. 31, 2019 USD ($)	Apr. 30, 2020 USD ($) segments Properties	Apr. 30, 2019 USD ($) segments
Reportable Segments
Real estate rental revenue	$ 13,688		$ 14,786		$ 29,281	$ 29,714
Real estate operating expenses	10,602		10,373		24,053	20,131
Operating income	3,086		4,413		5,228	9,583
Reconciliation to condensed consolidated net income attributable to common equity:
Segment NOI	7,751		8,445		16,916	16,980
Deferred rents - straight lining	58		120		121	187
Investment income	64		113		136	184
Unrealized loss on interest rate cap contract			(5)			(159)
General and administrative expenses	(1,056)		(783)		(1,828)	(1,391)
Special committee expenses	(1,137)		(586)		(4,519)	(586)
Gain on sale of property			836			836
Gain on deconsolidation of subsidiary	27,680				27,680
Loss on investment in tenancy-in-common	(18)				(18)
Depreciation	(2,530)		(2,783)		(5,462)	(5,607)
Financing costs	(3,676)		(4,527)		(7,911)	(9,179)
Net income	27,136	$ (2,021)	830	$ 435	25,115	1,265
Net (income) loss attributable to noncontrolling interests in subsidiaries	84		(44)		(157)	(20)
Net income attributable to common equity	$ 27,220		786		$ 24,958	$ 1,245
Number of reportable segments | segments					2	2
Commercial [Member]
Reconciliation to condensed consolidated net income attributable to common equity:
Number of properties | Properties	8				8
Residential [Member]
Reportable Segments
Recurring capital improvements	$ (130)		(161)		$ (226)	$ (285)
Reconciliation to condensed consolidated net income attributable to common equity:
Number of properties | Properties	7				7
Operating Segments [Member]
Reportable Segments
Real estate rental revenue	$ 13,630		14,666		$ 29,160	29,527
Real estate operating expenses	5,879		6,221		12,244	12,547
Operating income	7,751		8,445		16,916	16,980
Operating Segments [Member] | Commercial [Member]
Reportable Segments
Real estate rental revenue	6,534		6,452		13,548	13,079
Real estate operating expenses	3,172		2,820		5,896	5,651
Operating income	3,362		3,632		7,652	7,428
Operating Segments [Member] | Residential [Member]
Reportable Segments
Real estate rental revenue	7,096		8,214		15,612	16,448
Real estate operating expenses	2,707		3,401		6,348	6,896
Operating income	$ 4,389		$ 4,813		$ 9,264	$ 9,552

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Investment in tenancy-in-common (Schedule of balance sheet of Pierre Property) (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Jan. 31, 2020	Oct. 31, 2019	Apr. 30, 2019	Jan. 31, 2019	Oct. 31, 2018
Schedule of Equity Method Investments [Line Items]
Real estate, net	$ 289,169		$ 330,108
Cash and cash equivalents	31,751		38,075	$ 25,291
Tenants' security accounts	1,604		2,278
Receivables and other assets	1,385		1,741
Total Assets	362,840		390,618
Mortgages payable, net of unamortized debt issuance costs	301,063		349,904
Accounts payable and accrued expenses	3,487		3,097
Tenants' security deposits	2,295		3,381
Deferred revenue	828		1,390
Equity	41,205	$ 13,277	16,048	$ 20,448	$ 21,369	$ 24,344
Total Liabilities and Equity	362,840		390,618
FREIT's investment in TIC (65% interest)	20,740
Pierre Property [Member]
Schedule of Equity Method Investments [Line Items]
Real estate, net	80,950
Cash and cash equivalents	1,032
Tenants' security accounts	577
Receivables and other assets	501
Total Assets	83,060
Mortgages payable, net of unamortized debt issuance costs	50,089
Accounts payable and accrued expenses	391
Tenants' security deposits	580
Deferred revenue	93
Equity	31,907
Total Liabilities and Equity	83,060
FREIT's investment in TIC (65% interest)	$ 20,740

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Equity incentive plan (Tables)

6 Months Ended

Apr. 30, 2020

Share-based Payment Arrangement [Abstract]

Schedule of Stock Option Activity

The following table summarizes stock option activity for the six-month period ended April 30, 2020:

	No. of Options		Weighted Average
	Outstanding		Exercise Price
Options outstanding beginning of period		310,740	$	18.35
Options granted during period		—		—
Options forfeited/cancelled during period		—		—
Options outstanding end of period		310,740	$	18.35
Options vested and expected to vest		308,310
Options exercisable at end of period		261,140

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Income taxes

6 Months Ended

Apr. 30, 2020

Income Tax Disclosure [Abstract]

Income taxes

Note 12 – Income taxes:

FREIT has elected to be treated as a REIT for federal income tax purposes and as such intends to distribute 100% of its ordinary taxable income to its shareholders as dividends for the fiscal year ending October 31, 2020. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income was recorded in FREIT’s condensed consolidated financial statements.

FREIT distributed 100% of its ordinary taxable income and 100% of its capital gain from the sale of the Patchogue, New York property to its shareholders as dividends for the fiscal year ended October 31, 2019. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income and such gain was recorded in FREIT’s condensed consolidated financial statements for the fiscal year ended October 31, 2019.

As of April 30, 2020, FREIT had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended October 31, 2017 remain open to examination by the major taxing jurisdictions to which FREIT is subject.

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Investment in tenancy-in-common

6 Months Ended

Apr. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investment in tenancy-in-common

Note 16 – Investment in tenancy-in-common:

On February 28, 2020, FREIT reorganized its subsidiary S and A Commercial Associates Limited Partnership (“S&A”) from a joint venture partnership into a tenancy-in-common form of ownership (“TIC”). Prior to this reorganization, FREIT owned a 65% membership interest in S&A, which owned 100% of the Pierre Towers property located in Hackensack, NJ through its 100% interest in Pierre Towers, LLC. Accordingly, FREIT consolidated the financial statements of S&A and its subsidiary to include 100% of the subsidiary’s assets, liabilities, operations and cash flows with the interest not owned by FREIT reflected as “noncontrolling interests in subsidiary” and all significant intercompany accounts and transactions were eliminated in consolidation.

Pursuant to the TIC agreement, FREIT ultimately acquired a 65% undivided interest in the Pierre Towers property which was formerly owned by S&A. Based on the guidance of ASC 810, “Consolidation”, FREIT’s investment in the TIC was accounted for under the equity method of accounting. While FREIT’s effective ownership percentage interest in the Pierre Towers property remains unchanged after the reorganization to a TIC, FREIT no longer has a controlling interest as the TIC is now under joint control. Since FREIT retained a noncontrolling financial interest in the TIC and the deconsolidation of the subsidiary is not the result of a nonreciprocal transfer to owners, the subsidiary was deconsolidated from FREIT as of February 28, 2020. A gain in the amount of approximately $27.7 million was recognized in the accompanying condensed consolidated statements of income for the six and three months ended April 30, 2020. This gain was measured at the date of deconsolidation as the difference between the fair value of the investment in the TIC at the date the entity was deconsolidated and the carrying amount of the former subsidiary’s assets and liabilities.

As of April 30, 2020, FREIT’s investment in TIC was approximately $20.7 million with a loss on investment of approximately $18,000 recognized in the accompanying condensed consolidated statements of income for the six and three months ended April 30, 2020 and 2019.

Hekemian currently manages the Pierre Towers property based on a management agreement between the owners of the TIC and Hekemian dated as of February 28, 2020, which expires on February 28, 2021, and is automatically renewed for successive periods of one year unless either party gives not less than sixty (60) days prior notice of non-renewal. The management agreement requires the payment of management fees equal to 5% of rents collected. Management fees, charged to operations, were approximately $62,000 for the period from February 28, 2020 through April 30, 2020.

The following table summarizes the balance sheet of the Pierre Towers property as of April 30, 2020 accounted for by the equity method:

	April 30,
	2020
	(In Thousands of Dollars)
Real estate, net	$	80,950
Cash and cash equivalents		1,032
Tenants' security accounts		577
Receivables and other assets		501
Total assets	$	83,060
Mortgages payable, net of unamortized debt issuance costs	$	50,089
Accounts payable and accrued expenses		391
Tenants' security deposits		580
Deferred revenue		93
Equity		31,907
Total liabilities & equity	$	83,060
FREIT's investment in TIC (65% interest)	$	20,740

The following table summarizes the income statement of the Pierre Towers property for the period from February 28, 2020 through April 30, 2020 accounted for by the equity method:

	For the period from
	February 28, 2020
	through April 30, 2020
	(In Thousands of Dollars)
Revenues	$	1,242
Operating expenses		643
Net operating income		599
Depreciation		358
Interest expense including amortization
of deferred financing costs		268
Net loss	$	(27	)
FREIT's loss on investment in TIC (65% interest)	$	(18	)

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Interest rate cap and swap contracts

6 Months Ended

Apr. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Interest rate cap and swap contracts

Note 4 - Interest rate cap and swap contracts: 

On February 7, 2018, Grande Rotunda, a consolidated subsidiary, refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding available for retail tenant improvements and leasing costs in the amount of $3,380,000. This loan bears a floating interest rate at 285 basis points over the one-month LIBOR rate and has a maturity date of February 6, 2021. At April 30, 2020, the total amount outstanding on this loan was approximately $118.5 million. As part of this transaction, Grande Rotunda had purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year. At April 30, 2020, the derivative financial instrument had a notional amount of $121.9 million and a maturity date of March 5, 2021.

On December 7, 2017, Station Place (owned 100% by FREIT) closed on a $12,350,000 mortgage loan with Provident Bank. The loan bears a floating interest rate equal to 180 basis points over the one-month BBA LIBOR with a maturity date of December 15, 2027. At April 30, 2020, the total amount outstanding on this loan was approximately $12.3 million. In order to minimize interest rate volatility during the term of this loan, Station Place entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 4.35% over the term of the loan. At April 30, 2020, the derivative financial instrument had a notional amount of $12.3 million and a maturity date of December 2027.

On September 29, 2016, Wayne PSC, a consolidated subsidiary, refinanced its $24.2 million mortgage loan held by Metropolitan Life Insurance Company, with a new mortgage loan from People’s United Bank in the amount of $25.8 million. The new loan bears a floating interest rate equal to 220 basis points over the one-month BBA LIBOR with a maturity date of October 1, 2026. At April 30, 2020, the total amount outstanding on this loan was approximately $23.4 million. In order to minimize interest rate volatility during the term of the loan, Wayne PSC entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 3.625% over the term of the loan. At April 30, 2020, the derivative financial instrument had a notional amount of approximately $23.4 million and a maturity date of October 2026.

On December 26, 2012, Damascus Centre refinanced its construction loan with long-term financing provided by People’s United Bank and the first tranche of the new loan was taken down in the amount of $20 million. Based on leasing and net operating income at the shopping center, People’s United Bank agreed to a take-down of the second tranche of this loan on April 22, 2016 in the amount of $2,320,000. The total amount outstanding for both tranches of this loan held with People’s United Bank as of April 30, 2020 was approximately $19.1 million. The loan has a maturity date of January 3, 2023 and bears a floating interest rate equal to 210 basis points over the one-month BBA LIBOR. In order to minimize interest rate volatility during the term of this loan, Damascus Centre entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate on each tranche of this loan, resulting in a fixed rate of 3.81% over the term of the first tranche of this loan and a fixed rate of 3.53% over the term of the second tranche of this loan. At April 30, 2020, the derivative financial instrument had a notional amount of approximately $19.1 million and a maturity date of January 2023.

On December 29, 2014, Regency closed on a $16.2 million mortgage loan with Provident Bank. The 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. At April 30, 2020, the total amount outstanding on this loan was approximately $15.4 million. In order to minimize interest rate volatility during the term of the loan, Regency 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 April 30, 2020, the derivative financial instrument had a notional amount of approximately $15.4 million and a maturity date of December 2024.

In accordance with ASU 2017-12, which was adopted by FREIT in the first quarter of Fiscal 2020, FREIT is accounting for the Damascus Centre, Regency, Wayne PSC and Station Place interest rate swaps and the Grande Rotunda interest rate cap as cash flow hedges marking these contracts to market, taking into account present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss on the swaps in comprehensive income. For the six and three months ended April 30, 2020, FREIT recorded an unrealized loss of approximately $3,372,000 and $2,982,000, respectively, in comprehensive loss representing the change in the fair value of these cash flow hedges during such period. As of April 30, 2020, there was a liability of approximately $730,000 for the Damascus Centre swaps, $1,394,000 for the Wayne PSC swap, $1,523,000 for the Regency swap, $1,851,000 for the Station Place swap and $0 for the Grande Rotunda interest rate cap.

In Fiscal 2019, FREIT was accounting for its interest rate swaps and cap contract in accordance with ASC 815. For the six and three months ended April 30, 2019, FREIT recorded an unrealized loss of approximately $3,185,000 and $821,000, respectively, in comprehensive loss representing the change in the fair value of these cash flow hedges during such period. For the six and three months ended April 30, 2019, FREIT recorded an unrealized loss in the condensed consolidated statements of income of approximately $159,000 and $5,000, respectively, for the Grande Rotunda interest rate cap representing the change in the fair value of this ineffective cash flow hedge during such period. As of October 31, 2019, FREIT recorded a liability of approximately $179,000 for the Damascus Centre swaps, $53,000 for the Wayne PSC swap, $860,000 for the Regency swap, $1,034,000 for the Station Place swap and $0 for the Grande Rotunda interest rate cap.

The fair values are based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).

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Management agreement, fees and transactions with related party

6 Months Ended

Apr. 30, 2020

Related Party Transactions [Abstract]

Management agreement, fees and transactions with related party

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 office building at The Rotunda located in Baltimore, Maryland, which is managed by an independent third party management company. The management agreement between FREIT and Hekemian dated as of November 1, 2001 (“Management Agreement”) expires on October 31, 2021, and is automatically renewed for successive periods of two years unless either party gives not less than six (6) months prior notice of non-renewal.

On January 14, 2020, in connection with entering into the Purchase and Sale Agreement, FREIT and Hekemian entered into a First Amendment to Management Agreement (the “First Amendment”), which amends the Management Agreement. The First Amendment would become effective if, and only if, the Plan of Liquidation became effective. Since the Plan of Liquidation will not become effective due to the termination of the Purchase and Sale Agreement, the First Amendment will not become effective. (See Notes 6 and 7 to FREIT’s condensed consolidated financial statements for further details)

The Management Agreement requires the payment of management fees equal to 4% to 5% of rents collected. Management fees, charged to operations, were approximately $1,198,000 and $1,255,000 for the six months ended April 30, 2020 and 2019, respectively, and $499,000 and $636,000 for the three months ended April 30, 2020 and 2019, 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 commissions and reimbursements amounted to approximately $704,000 and $311,000 for the six months ended April 30, 2020 and 2019, respectively, and $229,000 and $178,000 for the three months ended April 30, 2020 and 2019, respectively. 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 were charged to operations and amounted to approximately $56,000 and $48,000 for the six months ended April 30, 2020 and 2019, respectively, and $4,000 and $20,000 for the three months ended April 30, 2020 and 2019, respectively.

From time to time, FREIT engages Hekemian to provide additional services, such as consulting services related to development, property sales and financing activities of FREIT. Separate fee arrangements may be negotiated between Hekemian and FREIT with respect to such additional services. Such fees incurred during the six months ended April 30, 2020 and 2019 were approximately $0 and $131,250, respectively, and $0 and $131,250 for the three months ended April 30, 2020 and 2019, respectively. Fees incurred during Fiscal 2019 related to commissions to Hekemian for the sale of the Patchogue property.

Robert S. Hekemian, Jr., Chief Executive Officer, President and a Trustee of the Trust, is the President and Chief Operating Officer of Hekemian. David B. Hekemian, a Trustee of the Trust, is the Principal/Broker – Salesperson and Director of Commercial Brokerage of Hekemian. Robert S. Hekemian, the former Chairman and Chief Executive Officer of the Trust, served as a consultant to the Trust and Chairman of the Board and Chief Executive Officer of Hekemian prior to his death in December 2019. Allan Tubin, Chief Financial Officer and Treasurer of the Trust, is the Chief Financial Officer of Hekemian.

Trustee fee expense (including interest) incurred by FREIT for the six months ended April 30, 2020 and 2019 was approximately $21,000 and $114,000, respectively, for Robert S. Hekemian, $236,000 and $194,000, respectively, for Robert S. Hekemian, Jr., $15,000 and $7,000, respectively, for Allan Tubin and $31,000 and $28,000, respectively, for David Hekemian. Trustee fee expense (including interest) incurred by FREIT for the three months ended April 30, 2020 and 2019 was approximately $0 and $54,000, respectively, for Robert S. Hekemian, $117,000 and $99,000, respectively, for Robert S. Hekemian, Jr., $8,000 and $7,000, respectively, for Allan Tubin and $15,000 and $16,000, respectively, for David Hekemian (See Note 14 to FREIT’s condensed consolidated financial statements).

Effective upon the late Robert S. Hekemian’s retirement as Chairman, Chief Executive Officer and as a Trustee on April 5, 2018, FREIT entered into a Consulting Agreement with Mr. Hekemian, pursuant to which Mr. Hekemian provided consulting services to the Trust through December 2019. The Consulting Agreement obliged Mr. Hekemian to provide advice and consultation with respect to matters pertaining to the Trust and its subsidiaries, affiliates, assets and business, for no fewer than 30 hours per month during the term of the agreement. FREIT paid Mr. Hekemian a consulting fee of $5,000 per month during the term of the Consulting Agreement, which was payable in the form of Shares on a quarterly basis (i.e. in quarterly installments of $15,000). The number of Shares to be issued for each quarterly installment of the consulting fee was determined by dividing the dollar amount of the consulting fee by the closing price of one Share on the OTC Pink Open Market as of the close of trading on the last trading day of the calendar quarter with respect to which such consulting fee was payable. For the six months ended April 30, 2020 and 2019, consulting fee expense for Robert S. Hekemian was approximately $8,000 and $30,000, respectively. For the three months ended April 30, 2020 and 2019, consulting fee expense for Robert S. Hekemian was approximately $0 and $15,000, respectively.

Rotunda 100, LLC owns a 40% minority equity interest in Grande Rotunda, LLC and FREIT owns a 60% equity interest in Grande Rotunda, LLC. Damascus 100, LLC owns a 30% minority equity interest in Damascus Centre, LLC and FREIT owns a 70% 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. These advances were in the form of secured loans that bear interest at rates that 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 are secured by the Hekemian employees’ interests in Rotunda 100 and are full recourse loans. The notes originally had maturity dates at the earlier of (a) ten (10) years after issue (Grande Rotunda, LLC – 6/19/2015), or, (b) at the election of FREIT, ninety (90) days after the borrower terminates employment with Hekemian, at which time all outstanding unpaid principal and interest 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. On December 7, 2017, the Board approved a further extension of the maturity dates of these loans to the date or dates upon which distributions of cash are made by Grande Rotunda, LLC to its members as a result of a refinancing or sale of Grande Rotunda, LLC or the Rotunda property.

The aggregate outstanding principal balance of the Rotunda 100 notes was $4,000,000 at both April 30, 2020, and October 31, 2019. The accrued but unpaid interest related to these notes as of April 30, 2020 and October 31, 2019 amounted to approximately $1,136,000 and $1,053,000, respectively, and is included in secured loans receivable on the accompanying condensed consolidated balance sheets.

In Fiscal 2017, Grande Rotunda, LLC incurred substantial expenditures at the Rotunda property related to retail tenant improvements, leasing costs and operating expenditures which, in the aggregate, exceeded revenues as the property was still in the rent up phase and the construction loan held with Wells Fargo at that time was at its maximum level, with no additional funding available to draw. Accordingly, during Fiscal 2017 the equity owners in Grande Rotunda, LLC (FREIT with a 60% ownership and Rotunda 100 with a 40% ownership) contributed their respective pro-rata share of any cash needs through loans to Grande Rotunda, LLC. As of April 30, 2020 and October 31, 2019, Rotunda 100 has funded Grande Rotunda, LLC with approximately $5.8 million and $5.7 million (including interest), respectively, which is included in due to affiliate on the accompanying condensed consolidated balance sheets.

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Interest rate cap and swap contracts (Details) - USD ($)			1 Months Ended	3 Months Ended			6 Months Ended
	Feb. 07, 2018	Dec. 07, 2017	Sep. 29, 2016	Apr. 30, 2020	Feb. 28, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019	Oct. 31, 2019	Apr. 22, 2016	Dec. 26, 2012
Derivative [Line Items]
Mortgages payable				$ 302,912,000			$ 302,912,000		$ 352,790,000
Interest rate swap contract liability				5,498,000			5,498,000		2,126,000
Unrealized loss on derivatives						$ 5,000		$ 159,000
Net unrealized gain (loss) on interest rate swap contracts				(2,982,000)		(821,000)	(3,372,000)	(3,185,000)
Damascus Centre Swap [Member]
Derivative [Line Items]
Interest rate swap contract liability				730,000			730,000
Wayne PSC swap [Member]
Derivative [Line Items]
Interest rate swap contract liability				1,394,000			1,394,000
Regency Swap [Member]
Derivative [Line Items]
Interest rate swap contract liability				1,523,000			1,523,000
Station Place [Member]
Derivative [Line Items]
Interest rate swap contract liability				1,851,000			1,851,000
Grande Rotunda LLC [Member]
Derivative [Line Items]
Interest rate swap contract liability				0			0
Station Place [Member]
Derivative [Line Items]
Loan amount		$ 12,350,000		12,300,000			12,300,000
Notional amount of interest rate swap				12,300,000			12,300,000
Fixed interest rate		4.35%
Interest rate swap contract liability									1,034,000
Basis points, interest rate		1.80%
Maturity date of interest rate cap		Dec. 15, 2027
Grande Rotunda LLC [Member]
Derivative [Line Items]
Interest rate cap contract liability									0
Unrealized loss on derivatives						$ 5,000		$ 159,000
Wells Fargo Bank [Member]
Derivative [Line Items]
Loan amount	$ 115,300,000
Aareal Capital Corporation [Member]
Derivative [Line Items]
Loan amount	118,500,000
Available to draw	$ 3,380,000
Basis points, interest rate	2.85%
Maturity date of loan	Feb. 06, 2021
Grande Rotunda LLC Loan [Member]
Derivative [Line Items]
Loan amount				118,500,000			118,500,000
Notional amount of interest rate cap				$ 121,900,000	$ 121,900,000		$ 121,900,000
Interest rate cap				3.00%	3.00%		3.00%
Maturity date of interest rate cap					Mar. 05, 2021		Mar. 05, 2020
Wayne PSC, LLC Loan [Member]
Derivative [Line Items]
Refinanced loan amount			$ 24,200,000
Loan amount			$ 25,800,000	$ 23,400,000			$ 23,400,000
Notional amount of interest rate swap				23,400,000			23,400,000
Fixed interest rate			3.625%
Basis points, interest rate			2.20%
Maturity date of interest rate cap			Oct. 01, 2026
People's United Bank [Member]
Derivative [Line Items]
Loan amount				19,100,000			19,100,000
Mortgages payable										$ 2,320,000
Notional amount of interest rate swap				$ 19,100,000			$ 19,100,000
People's United Bank [Member] | Tranche One [Member]
Derivative [Line Items]
Loan amount											$ 20,000,000
Fixed interest rate				3.81%			3.81%
Basis points, interest rate							2.10%
Maturity date of loan							Jan. 03, 2023
People's United Bank [Member] | Tranche Two [Member]
Derivative [Line Items]
Loan amount										$ 2,320,000
Fixed interest rate				3.53%			3.53%
Regency Loan [Member]
Derivative [Line Items]
Refinanced loan amount							$ 16,200,000
Loan amount				$ 15,400,000			15,400,000
Notional amount of interest rate swap				$ 15,400,000			$ 15,400,000
Fixed interest rate				3.75%			3.75%
Basis points, interest rate							1.25%
Maturity date of loan							Dec. 15, 2024
Damascus Centre [Member]
Derivative [Line Items]
Interest rate swap contract liability									179,000
Wayne PSC swap [Member]
Derivative [Line Items]
Interest rate swap contract liability									53,000
Regency Swap [Member]
Derivative [Line Items]
Interest rate swap contract liability									$ 860,000

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Rental Income (Tables)

6 Months Ended

Apr. 30, 2020

Baltimore, MD [Member]

Schedule of Minimum Rental Income to be Received from Non-Cancelable Operating Leases

Minimum fixed lease consideration (in thousands of dollars) under non-cancelable tenant operating leases for each of the next five years and thereafter, excluding variable lease consideration, for the years ending October 31, as of April 30, 2020, is as follows:

Year Ending October 31,	Amount
2020*	$	19,936
2021		18,984
2022		15,727
2023		13,099
2024		10,948
Thereafter		46,774
Total	$	125,468
*Amount represents full fiscal year

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Mortgage financings and line of credit (Details) - USD ($)			1 Months Ended		3 Months Ended
	Apr. 03, 2019	Feb. 07, 2018	Aug. 26, 2019	Oct. 27, 2017	Feb. 28, 2020	Apr. 30, 2020	Oct. 31, 2019
Debt Instrument [Line Items]
Deferred payments of loan						$ 260,000
M&T Bank [Member]
Debt Instrument [Line Items]
Loan amount	$ 22,500,000
Basis points, interest rate	2.40%
Maturity date of loan	May 01, 2020
Extended maturity date of loan	Nov. 01, 2020
Monthly payment of loan	$ 47,250
Wells Fargo Bank [Member]
Debt Instrument [Line Items]
Loan amount		$ 115,300,000
Aareal Capital Corporation [Member]
Debt Instrument [Line Items]
Loan amount		$ 118,500,000
Basis points, interest rate		2.85%
Maturity date of loan		Feb. 06, 2021
Available to draw		$ 3,380,000
Grande Rotunda LLC [Member]
Debt Instrument [Line Items]
Loan amount						$ 118,500,000
Loan amount available					$ 121,900,000
Interest rate cap					3.00%	3.83%
Maturity date of interest rate cap					Mar. 05, 2020
Provident Bank [Member]
Debt Instrument [Line Items]
Basis points, interest rate				2.75%
Interest rate cap							3.75%
Maturity date of loan				Oct. 31, 2022
Term of the loan				3 years
Line of credit, maximum borrowing capacity						$ 13,000,000	$ 13,000,000
Berdan Court, LLC [Member]
Debt Instrument [Line Items]
Fixed rate mortgage loans			$ 17,000,000
Loan amount			$ 28,815,000
Interest rate cap			3.54%
Term of the loan			10 years
Net proceeds from refinancing of debt			$ 11,600,000
Percentage of acquisition			100.00%
Berdan Court, LLC [Member] | Minimum [Member]
Debt Instrument [Line Items]
Fixed interest rate			3.54%
Berdan Court, LLC [Member] | Maximum [Member]
Debt Instrument [Line Items]
Fixed interest rate			6.09%
WestFREIT, Corp [Member]
Debt Instrument [Line Items]
Percentage of acquisition	100.00%

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Apr. 30, 2019	Jan. 31, 2019
Statement of Stockholders' Equity [Abstract]
Stock dividends payable	$ 20	$ 26
Dividends declared, per share	$ 0.125	$ 0.15

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 959	$ 379
Shares of benefical interest, no par value
Shares of benefical interest, authorized	8,000,000	8,000,000
Shares of benefical interest, issued	6,993,152	6,993,152
Vested share units to trustees, issued	141,057	192,122
Treasury stock at cost, shares	136,501	206,408