On February 28, 2020, FREIT reorganized 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, New Jersey 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 is 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 (as of February 28, 2020) of the subsidiary is not the result of a nonreciprocal transfer to owners, a gain on deconsolidation in the amount of approximately $27.7 million was recognized in the accompanying consolidated statement of income for the fiscal year ended October 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 October 31, 2020, FREIT’s investment in TIC was approximately $20.1 million with a loss on investment of approximately $202,000, recognized in the accompanying consolidated statement of income for the fiscal year ended October 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, 2022, 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 $241,000 for the period from February 28, 2020 through October 31, 2020. Hekemian management fees outstanding at October 31, 2020 was approximately $32,000. 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 $26,000 for the period from February 28, 2020 through October 31, 2020.

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

	October 31,
	2020
	(In Thousands of Dollars)

Real estate, net	$	80,041
Cash and cash equivalents		754
Tenants' security accounts		523
Receivables and other assets		468
Total assets	$	81,786

Mortgages payable, net of unamortized debt issuance costs	$	49,956
Accounts payable and accrued expenses		314
Tenants' security deposits		535
Deferred revenue		56
Equity		30,925
Total liabilities & equity	$	81,786

FREIT's investment in TIC (65% interest)	$	20,101

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The following table summarizes the statement of operations of the Pierre Towers property for the period from February 28, 2020 through October 31, 2020, accounted for by the equity method:

	For the period from
	February 28, 2020
	through October 31, 2020
	(In Thousands of Dollars)

Revenues	$	4,981
Operating expenses		2,786
Net operating income	$	2,195

Depreciation		1,435
Interest expense including amortization
of deferred financing costs		1,070

Net loss	$	(310	)

FREIT's loss on investment in TIC (65% interest)	$	(202	)