Termination of Purchase and Sale Agreement:

3 Months Ended

Jan. 31, 2023

Termination Of Purchase And Sale Agreement Disclosure Abstract

Termination of Purchase and Sale Agreement:

Note 6 – Termination of Purchase and Sale Agreement:

On February 4, 2022, the Superior Court of New Jersey, Monmouth County (“Court”) entered an Order with respect to summary judgment motions filed by the parties in connection with litigation between certain affiliates of FREIT (the “Sellers” or “Defendant”) and Sinatra Properties, LLC (“Sinatra” or “Plaintiff”). The litigation relates to a Purchase and Sale Agreement entered into on January 14, 2020 (“PSA”) between the Sellers and Sinatra involving the sale by the Sellers of 100% of their ownership interests in six (6) real properties held by the Sellers.

The Court Order entered on February 4, 2022 (the “February 4 Order”) with respect to the Summary Judgment Motions provides as follows:

(1) The Court finds that the Plaintiff’s have breached the subject contract and the Court dismisses all claims for relief filed by the Plaintiffs in this suit. The Court dismissed the Complaint and dismisses the Lis Pendens.

(2) The Court finds that the liquidated damage provision of the contract is not enforceable and the Court Orders that the $15 million held in escrow be returned to the Plaintiff.

(3) The Court dismisses the Counterclaims and Third Party Complaint. All pleadings are dismissed.

On May 31, 2022, Sinatra filed a Motion for Reconsideration with the Court, requesting that the Court reconsider its February 4, 2022 Order and, among other things, (a) grant Sinatra’s motion for summary judgment, and (b) reverse the Court’s findings that (1) Sinatra breached the Purchase and Sale Agreement, (2) the Sellers did not breach the Purchase and Sale Agreement and (3) the Court’s dismissal of the Complaint and Lis Pendens. On July 8, 2022, the Court denied Sinatra’s Motion for Reconsideration.

Following the February 4 Order, the Sellers and the Purchaser each filed a motion for an award of attorney’s fees and costs pursuant to the applicable provisions of the Purchase and Sale Agreement. On December 8, 2022 the Court entered an Order awarding Sellers $3,420,422.88 in attorneys’ fees and denying the Plaintiff’s request for attorneys’ fees (the “December 8 Order”). Upon entering the December 8 Order, the Court had adjudicated all unresolved issues in the action.

On December 8, 2022, the Sellers filed a Notice of Appeal, appealing from that portion of the February 4 Order which declined to enforce the liquidated damages provision in the Purchase and Sale Agreement. As a result of such appeal by the Sellers, the liquidated damage amount of $15 million remains in escrow and has not been returned to Sinatra.

On December 22, 2022, the Purchaser filed a Notice of Cross Appeal appealing from all determinations by the Court adverse to the Purchaser, including (i) that portion of the February 4 Order holding that the Purchaser breached the contract; (ii) the denial of the Purchaser’s motion for reconsideration of the February 4 Order; and (iii) the December 8 Order awarding the Sellers $3,420,422.88 in attorneys’ fees and denying the Purchaser’s request for attorneys’ fees.

The Sellers continue to believe that the allegations set forth in the Complaint filed by Sinatra and in the Answer to Counterclaims and Third-Party Complaint and Affirmative Defenses filed by Sinatra and Kushner Realty Acquisition LLC, are without merit.

Through the quarter ended January 31, 2023, the $15 million deposit and the $3,420,422.88 award of attorney’s fees have not been included in income in the accompanying condensed consolidated statements of income. Legal costs attributed to the legal proceeding between FREIT and certain of its affiliates and Sinatra Properties, LLC have been incurred in the amount of approximately $196,000 and $613,000 for the three months ended January 31, 2023 and 2022, respectively, and are included in operating expenses on the condensed consolidated statements of income.