On February 28, 2020, FREIT Maryland 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 Maryland 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. 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 Accounting Standards Codification 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.

FREIT Maryland’s investment in the TIC was approximately $18.9 million and $19.4 million at January 31, 2022 and October 31, 2021, respectively, with a loss on investment in TIC of approximately $124,000 and $27,000, in the accompanying condensed consolidated statements of income for the three months ended January 31, 2022 and 2021, 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 will expire on February 28, 2023. The management agreement is for a term of one year 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 $98,000 and $93,000 for the three months ended January 31, 2022 and 2021, 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 $0 and $10,000 for the three months ended January 31, 2022 and 2021, respectively.

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The following table summarizes the balance sheets of the Pierre Towers property as of January 31, 2022 and October 31, 2021, accounted for by the equity method:

		January 31,		October 31,
		2022		2021
		(In Thousands of Dollars)

Real estate, net	$	77,508	$	78,023
Cash and cash equivalents		1,205		1,338
Tenants' security accounts		475		484
Receivables and other assets		359		510
Total assets	$	79,547	$	80,355

Mortgages payable, net of unamortized debt issuance costs	$	49,624	$	49,691
Accounts payable and accrued expenses		275		261
Tenants' security deposits		475		484
Deferred revenue		93		99
Equity		29,080		29,820
Total liabilities & equity	$	79,547	$	80,355

FREIT Maryland's investment in TIC (65% interest)	$	18,902	$	19,383

The following table summarizes the statements of operations of the Pierre Towers property for the three months ended January 31, 2022 and 2021, accounted for by the equity method:

	Three Months Ended January 31,
	2022			2021
	(In Thousands of Dollars)

Revenue	$	1,954		$	1,891
Operating expenses		1,201			991
Depreciation		542			540
Operating income		211			360

Interest expense including amortization of deferred financing costs		401			401

Net loss	$	(190	)	$	(41	)

FREIT Maryland's loss on investment in TIC (65% interest)	$	(124	)	$	(27	)