On February 28, 2020, FREIT Maryland reorganized S&A from a partnership into a TIC. Prior to this reorganization, FREIT Maryland owned a 65% partnership 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 Maryland 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 Maryland reflected as “noncontrolling interests in subsidiary” and all significant intercompany accounts and transactions were eliminated in consolidation.

Pursuant to the TIC agreement, FREIT Maryland 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 Maryland’s investment in the TIC is accounted for under the equity method of accounting. While FREIT Maryland’s effective ownership percentage interest in the Pierre Towers property remained unchanged after the reorganization to a TIC, FREIT Maryland no longer had a controlling interest as the TIC is now under joint control. Since FREIT Maryland retained a noncontrolling financial interest in the TIC, and the deconsolidation of the subsidiary (as of February 28, 2020) was not the result of a nonreciprocal transfer to owners, FREIT Maryland recognized a gain on deconsolidation in the amount of approximately $27.7 million 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.

FREIT Maryland’s investment in the TIC was approximately $19.4 million and $20.1 million at October 31, 2021 and 2020, respectively, with a loss on investment of approximately $295,000 and $202,000, respectively, in the accompanying consolidated statements of income for the fiscal years ended October 31, 2021 and 2020, respectively.

Hekemian & Co., Inc. (“Hekemian & Co.”) manages the Pierre Towers property based on a management agreement between the owners of the TIC and Hekemian & Co. dated as of February 28, 2020 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 term of the management agreement was renewed for a one-year term which will expire on February 28, 2023. The management agreement requires the payment of management fees equal to 5% of rents collected. Management fees, charged to operations, were approximately $375,000 for the fiscal year ended October 31, 2021 and $241,000 for the period from February 28, 2020 through October 31, 2020. Hekemian & Co. management fees outstanding at October 31, 2021 and 2020 were approximately $32,500 and $32,000, respectively. The Pierre Towers property also uses the resources of the Hekemian & Co. insurance department to secure various insurance coverages for its property. Hekemian & Co. is paid a commission for these services. Such commissions were charged to operations and amounted to approximately $51,000 for the fiscal year ended October 31, 2021 and $26,000 for the period from February 28, 2020 through October 31, 2020.

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

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

Real estate, net	$	78,023	$	80,041
Cash and cash equivalents		1,338		754
Tenants' security accounts		484		523
Receivables and other assets		510		468
Total assets	$	80,355	$	81,786

Mortgages payable, net of unamortized debt issuance costs	$	49,691	$	49,956
Accounts payable and accrued expenses		261		314
Tenants' security deposits		484		535
Deferred revenue		99		56
Equity		29,820		30,925
Total liabilities & equity	$	80,355	$	81,786

FREIT Maryland's investment in TIC (65% interest)	$	19,383	$	20,101

The following table summarizes the statements of operations of the Pierre Towers property for the fiscal year ended October 31, 2021 and for the period from February 28, 2020 through October 31, 2020, accounted for by the equity method:

	Year Ended October 31, 2021			For the period from February 28, 2020 through October 31, 2020
	(In Thousands of Dollars)

Revenues	$	7,627		$	4,981
Operating expenses		4,311			2,786
Depreciation		2,166			1,435
Operating income		1,150			760

Interest expense including amortization of deferred financing costs		1,604			1,070

Net loss	$	(454	)	$	(310	)

FREIT Maryland's loss on investment in TIC (65% interest)	$	(295	)	$	(202	)