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 Accounting Standards Codification 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 of the subsidiary (as of February 28, 2020) is not the result of a nonreciprocal transfer to owners, FREIT recognized a gain on deconsolidation in the second quarter of Fiscal 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.

FREIT’s investment in the TIC was approximately $20.1 million at both January 31, 2021 and October 31, 2020. For the three months ended January 31, 2021, FREIT recognized a loss on investment in TIC of approximately $27,000 in the accompanying condensed consolidated statement of operations.

Hekemian & Co., Inc. (“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 $93,000 for the three months ended January 31, 2021. 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 $10,000 for the three months ended January 31, 2021.

The following table summarizes the balance sheets of the Pierre Towers property as of January 31, 2021 and October 31, 2020 accounted for by the equity method:

		January 31,		October 31,
		2021		2020
		(In Thousands of Dollars)

Real estate, net	$	79,536	$	80,041
Cash and cash equivalents		1,155		754
Tenants' security accounts		529		523
Receivables and other assets		430		468
Total assets	$	81,650	$	81,786

Mortgages payable, net of unamortized debt issuance costs	$	49,890	$	49,956
Accounts payable and accrued expenses		297		314
Tenants' security deposits		521		535
Deferred revenue		59		56
Equity		30,883		30,925
Total liabilities & equity	$	81,650	$	81,786

FREIT's investment in TIC (65% interest)	$	20,074	$	20,101

Index

Page 11

The following table summarizes the statement of operations of the Pierre Towers property for the three months ended January 31, 2021, accounted for by the equity method:

		Three Months Ended
		January 31, 2021
		(In Thousands of Dollars)

Revenues	$	1,891
Operating expenses		991
Net operating income		900

Depreciation		540
Interest expense including amortization of deferred financing costs		401

Net loss	$	(41)

FREIT's loss on investment in TIC (65% interest)	$	(27)