Management Agreement, Fees and Transactions with Related Party

6 Months Ended

Apr. 30, 2024

Management Agreement, Fees and Transactions with Related Party [Abstract]

Management Agreement, Fees and Transactions with Related Party

Note 8 - Management agreement, fees and transactions with related party:

Hekemian & Co. currently manages all of the properties owned by FREIT and its affiliates. The management agreement between FREIT and Hekemian & Co. dated as of November 1, 2001 (“Management Agreement”) will expire on October 31, 2025 and is automatically renewed for successive periods of two years unless either party gives not less than six (6) months prior notice of non-renewal.

The Management Agreement requires the payment of management fees equal to 4% to 5% of rents collected. Such fees charged to operations were approximately $667,000 and $659,000 for the six months ended April 30, 2024 and 2023, respectively, and $331,000 and $332,000 for the three months ended April 30, 2024 and 2023, respectively. In addition, the Management Agreement provides for the payment to Hekemian & Co. of leasing commissions, as well as the reimbursement of certain operating expenses, such as payroll and insurance costs, incurred on behalf of FREIT. Such commissions and reimbursements amounted to approximately $315,000 and $322,000 for the six months ended April 30, 2024 and 2023, respectively, and $168,000 and $182,000 for the three months ended April 30, 2024 and 2023, respectively. FREIT also uses the resources of the Hekemian & Co. insurance department to secure various insurance coverages for its properties and subsidiaries. Hekemian & Co. is paid a commission for these services. Such commissions, charged to operations, were approximately $59,000 and $65,000 for the six months ended April 30, 2024 and 2023, respectively, and $3,000 and $16,000 for the three months ended April 30, 2024 and 2023, respectively.

From time to time, FREIT engages Hekemian & Co., or certain affiliates of Hekemian & Co., to provide additional services, such as consulting services related to development, property sales and financing activities of FREIT. Separate fee arrangements are negotiated between Hekemian & Co. and FREIT with respect to such additional services. Such fees incurred for the six and three months ended April 30, 2024 were approximately $89,400 and $76,000, respectively, and for the six and three months ended April 30, 2023 were approximately $21,000 and $21,000, respectively. Fees incurred during Fiscal 2024 related to commissions to Hekemian & Co. for the following: $32,500 for the renewal of FREIT’s line of credit; $22,400 for the modification and extension of the loan on the Steuben Arms property; $21,000 for the extension of the loan on the Westwood Plaza property; and $13,400 for the additional proceeds received from the post-closing rent escrow for the sale of the Rotunda Property. Fees incurred during Fiscal 2023 related to commissions to Hekemian & Co. for the modification and extension of the loan on the Westwood Plaza property. The commissions for the renewal of FREIT’s line of credit and the modification and extension of the loans were accounted for as a deferred mortgage cost and included in the unamortized debt issuance costs in the accompanying condensed consolidated balance sheets as of April 30, 2024 and October 31, 2023. The commission related to the sale of the Rotunda Property was charged against the gain on sale of the Maryland Properties (See Note 7) in the accompanying condensed consolidated statement of income for the six months ended April 30, 2024.

Robert S. Hekemian, Jr., Chief Executive Officer, President and a Director of FREIT, is the Chief Executive Officer of Hekemian & Co. David B. Hekemian, a Director of FREIT, is the President of Hekemian & Co. Allan Tubin, Chief Financial Officer and Treasurer of FREIT, is the Chief Financial Officer of Hekemian & Co. Director fee expense and/or executive compensation (including interest, dividends and stock awards) incurred by FREIT for the six months ended April 30, 2024 and 2023 was approximately $350,000 and $314,000, respectively, for Robert S. Hekemian, Jr., $22,000 and $21,000, respectively, for Allan Tubin and $50,000 and $46,000, respectively, for David Hekemian. Such costs are included within operating expenses on the accompanying condensed consolidated statements of income. Director fee expense and/or executive compensation (including stock awards) incurred by FREIT for the three months ended April 30, 2024 and 2023 was approximately $185,000 and $173,000, respectively, for Robert S. Hekemian, Jr., $11,000 and $11,000, respectively, for Allan Tubin and $35,000 and $33,000, respectively, for David Hekemian (See Notes 13 and 14). Such costs are included within operating expenses on the accompanying condensed consolidated statements of income.