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, New Jersey through its 100% interest in Pierre Towers, LLC. 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 remained unchanged after the reorganization to a TIC, FREIT no longer had a controlling interest as the TIC is now under joint control.

FREIT’s investment in the TIC was approximately $18.9 million and $19.4 million at July 31, 2022 and October 31, 2021, respectively. For the nine and three months ended July 31, 2022, FREIT recognized a loss on investment in TIC of approximately $99,000 and a gain on investment in TIC of approximately $57,000, respectively, in the accompanying condensed consolidated statements of income. For the nine and three months ended July 31, 2021, FREIT recognized a loss on investment in TIC of approximately $245,000 and $100,000, respectively, in the accompanying condensed consolidated statements of income.

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 will renew for successive one (1) year terms upon the unanimous approval of the TIC owners prior to the expiration of the then-current term unless Hekemian & Co. delivers written notice of termination of this management agreement, which notice must be delivered at least sixty (60) days prior to the end of the then-current term.

The management agreement requires the payment of management fees equal to 5% of rents collected. Management fees charged to operations were approximately $298,000 and $101,000 for the nine and three months ended July 31, 2022, respectively, and $280,000 and $93,000 for the nine and three months ended July 31, 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 $40,000 for the nine and three months ended July 31, 2022 and $47,000 and $37,000 for the nine and three months ended July 31, 2021, respectively.

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

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

Real estate, net	$	76,525	$	78,023
Cash and cash equivalents		1,801		1,338
Tenants' security accounts		456		484
Receivables and other assets		640		510
Total assets	$	79,422	$	80,355

Mortgages payable, net of unamortized debt issuance costs	$	49,492	$	49,691
Accounts payable and accrued expenses		221		261
Tenants' security deposits		461		484
Deferred revenue		129		99
Equity		29,119		29,820
Total liabilities & equity	$	79,422	$	80,355

FREIT's investment in TIC (65% interest)	$	18,927	$	19,383

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

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

Revenue	$	5,990	$	5,674	$	2,067	$	1,900
Operating expenses		3,307		3,225		1,032		1,111
Depreciation		1,634		1,623		547		542
Operating income		1,049		826		488		247

Interest expense including amortization of deferred financing costs		1,201		1,203		400		401

Net (loss) income	$	(152)	$	(377)	$	88	$	(154)

FREIT's (loss) income on investment in TIC (65% interest)	$	(99)	$	(245)	$	57	$	(100)