Investment in Tenancy-in-Common

12 Months Ended

Oct. 31, 2023

Investment in tenancy-in-common [Abstract]

Investment in tenancy-in-common

Note 3 – Investment in tenancy-in-common:

On February 28, 2020, FREIT reorganized S&A from a partnership into a TIC. Prior to this reorganization, FREIT 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. Pursuant to the TIC agreement, FREIT ultimately acquired a 65% undivided interest in the Pierre Towers property, which was formerly owned by S&A. While FREIT’s effective ownership percentage in the Pierre Towers Property remained unchanged after the reorganization to a TIC, FREIT no longer has a controlling interest in the TIC as the TIC is now under joint control. Based on the guidance of ASC 810, “Consolidation”, FREIT’s investment in the TIC is accounted for under the equity method of accounting.

FREIT’s investment in the TIC was approximately $18.1 million and $18.8 million at October 31, 2023 and 2022, respectively, with a loss on investment of approximately $271,000, $228,000 and $295,000, respectively, in the accompanying consolidated statements of income for the fiscal years ended October 31, 2023, 2022 and 2021, respectively.

Hekemian & Co. manages the Pierre Towers property pursuant to a management agreement between the owners of the TIC and Hekemian & Co. dated as of February 28, 2020, which was for an initial term of one (1) year and which renews for successive one (1) year terms unless either party gives written notice of termination to the other party at least sixty (60) days prior to the end of the then-current term. The management agreement was renewed for a successive one (1) year term expiring on February 28, 2025.

The management agreement requires the payment of management fees equal to 5% of rents collected. Management fees, charged to operations, were approximately $418,000, $402,000 and $375,000 for the fiscal years ended October 31, 2023, 2022 and 2021, respectively. Hekemian & Co. management fees outstanding at October 31, 2023 and 2022 were approximately $28,500 and $35,100, 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, $40,000 and $51,000 for the fiscal years ended October 31, 2023, 2022 and 2021, respectively.

The following table summarizes the balance sheets of the Pierre Towers property as of October 31, 2023 and 2022, accounted for by the equity method:

	October 31,		October 31,
	2023		2022
	(In Thousands of Dollars)
Real estate, net	$	74,202	$	76,042
Cash and cash equivalents		2,256		2,051
Tenants' security accounts		478		454
Receivables and other assets		455		583
Total assets	$	77,391	$	79,130
Mortgages payable, net of unamortized debt issuance costs	$	48,516	$	49,425
Accounts payable and accrued expenses		295		178
Tenants' security deposits		496		462
Deferred revenue		181		145
Equity		27,903		28,920
Total liabilities & equity	$	77,391	$	79,130
FREIT's investment in TIC (65% interest)	$	18,137	$	18,798

The following table summarizes the statements of operations of the Pierre Towers property for the fiscal years ended October 31, 2023, 2022 and 2021, accounted for by the equity method:

	Year Ended			Year Ended			Year Ended
	October 31, 2023			October 31, 2022			October 31, 2021
	(In Thousands of Dollars)
Revenues	$	8,278		$	8,028		$	7,627
Operating expenses		4,893			4,594			4,311
Depreciation		2,212			2,183			2,166
Operating income		1,173			1,251			1,150
Interest expense including amortization of deferred financing costs		1,590			1,601			1,604
Net loss	$	(417	)	$	(350	)	$	(454	)
FREIT's loss on investment in TIC (65% interest)	$	(271	)	$	(228	)	$	(295	)