On February 28, 2020, FREIT reorganized its subsidiary S and A Commercial Associates Limited Partnership (“S&A”) from a 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 operations for the nine months ended July 31, 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 July 31, 2020, FREIT’s investment in TIC was approximately $20.7 million with a loss on investment of approximately $96,000 and $78,000, respectively, recognized in the accompanying condensed consolidated statements of operations for the nine and three months ended July 31, 2020.

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 $150,000 for the period from February 28, 2020 through July 31, 2020 and $88,000 for the three months ended July 31, 2020. The Pierre Towers property also uses the resources of the Hekemian insurance department to secure various insurance coverages for its property. Hekemian is paid a commission for these services. Such commissions were charged to operations and amounted to approximately $22,000 for the period from February 28, 2020 through July 31, 2020 and for the three months ended July 31, 2020.

The following table summarizes the balance sheet of the Pierre Towers property as of July 31, 2020 accounted for by the equity method:

		July 31,
		2020
		(In Thousands of Dollars)

Real estate, net	$	80,558
Cash and cash equivalents		1,557
Tenants' security accounts		569
Receivables and other assets		483
Total assets	$	83,167

Mortgages payable, net of unamortized debt issuance costs	$	50,022
Accounts payable and accrued expenses		725
Tenants' security deposits		562
Deferred revenue		71
Equity		31,787
Total liabilities & equity	$	83,167

FREIT's investment in TIC (65% interest)	$	20,662

The following table summarizes the statements of operations of the Pierre Towers property for the period from February 28, 2020 through July 31, 2020 and for the three months ended July 31, 2020, accounted for by the equity method:

	For the period from
	February 28, 2020			Three months ended
	through July 31, 2020			July 31, 2020
	(In Thousands of Dollars)			(In Thousands of Dollars)

Revenues	$	3,106		$	1,864
Operating expenses		1,689			1,046
Net operating income		1,417			818

Depreciation		895			537
Interest expense including amortization of deferred financing costs		669			401
Net loss	$	(147	)	$	(120	)

FREIT's loss on investment in TIC (65% interest)	$	(96	)	$	(78	)