* Represents the issuance of treasury shares to consultant and retired Director(s) for share units earned.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and significant accounting policies:
Organization:
First Real Estate Investment Trust of New Jersey (“FREIT”) was organized on November 1, 1961 as a New Jersey Business Trust. On July 1, 2021, FREIT completed the change of its form of organization from a New Jersey real estate investment trust to a Maryland corporation (the “Reincorporation”) which was approved by its stockholders at the annual meeting of stockholders held on May 6, 2021. The Reincorporation changes the law applicable to FREIT’s affairs from New Jersey law to Maryland law and was accomplished by the merger of FREIT with and into its wholly owned subsidiary, First Real Estate Investment Trust of New Jersey, Inc. (“FREIT Maryland”, “Trust”, “us”, “we”, “our” or the “Company”), a Maryland corporation. As a result of the Reincorporation, the separate existence of FREIT has ceased and FREIT Maryland has succeeded to all the business, properties, assets and liabilities of FREIT. Holders of shares of beneficial interest in FREIT have received one newly issued share of common stock of FREIT Maryland for each share of FREIT that they own, without any action of stockholders required and all treasury stock held by FREIT was retired.
FREIT Maryland is engaged in owning residential and commercial income producing properties located primarily in New Jersey, Maryland and New York. FREIT Maryland has elected to be taxed as a Real Estate Investment Trust under the provisions of Sections 856-860 of the Internal Revenue Code, as amended. Accordingly, FREIT Maryland does not pay federal income tax on income whenever income distributed to stockholders is equal to at least 90% of real estate investment trust taxable income. Further, FREIT Maryland pays no federal income tax on capital gains distributed to stockholders. FREIT Maryland is subject to federal income tax on undistributed taxable income and capital gains. FREIT Maryland may make an annual election under Section 858 of the Internal Revenue Code to apply part of the regular dividends paid in each respective subsequent year as a distribution for the immediately preceding year.
Recently issued accounting standards:
In March 2020 and January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2020-04 “Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, and ASU 2021-01 “Reference Rate Reform (ASC 848): Scope” which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform in contracts and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. ASU 2020-04 and ASU 2021-01 are effective for all entities as of March 12, 2020 through December 31, 2022. We currently do not anticipate the need to modify our existing debt agreements as a result of reference rate reform in the current year, however if any modification is executed as a result of reference rate reform, the Company will elect the optional expedient available under ASU 2020-04 and ASU 2021-01, which allows entities to account for the modification as if the modification was not substantial. We will disclose the nature of and reason for electing the optional expedient in each interim and annual financial statement period if and when applicable through December 31, 2022.
Principles of consolidation:
The consolidated financial statements include the accounts of FREIT Maryland and the following subsidiaries in which FREIT Maryland has a controlling financial interest, including two LLCs in which FREIT Maryland is the managing member with a 40% ownership interest:
Subsidiary
|
|
Owning Entity
|
|
% Ownership
|
|
Year Acquired/Organized
|
|
|
|
|
|
|
|
|
|
|
|
|
Westwood Hills, LLC
|
|
|
FREIT Maryland
|
|
|
40%
|
|
|
1994
|
|
Wayne PSC, LLC
|
|
|
FREIT Maryland
|
|
|
40%
|
|
|
2002
|
|
Damascus Centre, LLC
|
|
|
FREIT Maryland
|
|
|
70%
|
|
|
2003
|
|
Grande Rotunda, LLC
|
|
|
FREIT Maryland
|
|
|
60%
|
|
|
2005
|
|
WestFREIT, Corp
|
|
|
FREIT Maryland
|
|
|
100%
|
|
|
2007
|
|
FREIT Regency, LLC
|
|
|
FREIT Maryland
|
|
|
100%
|
|
|
2014
|
|
Station Place on Monmouth, LLC
|
|
|
FREIT Maryland
|
|
|
100%
|
|
|
2017
|
|
Berdan Court, LLC
|
|
|
FREIT Maryland
|
|
|
100%
|
|
|
2019
|
|
The consolidated financial statements include 100% of each subsidiary’s assets, liabilities, operations and cash flows, with the interests not owned by FREIT Maryland reflected as "noncontrolling interests in subsidiaries”. All significant intercompany accounts and transactions have been eliminated in consolidation.
Investment in tenancy-in-common:
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% 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. Accordingly, FREIT Maryland consolidated the financial statements of S&A and its subsidiary to include 100% of the subsidiary’s assets,
liabilities, operations and cash flows with the interest not owned by FREIT Maryland reflected as “noncontrolling interests in subsidiary” and all significant intercompany accounts and transactions were eliminated in consolidation.
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 (“ASC”) 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. (See Note 3)
Reclassification:
Certain prior year cash flow line items have been reclassified to conform to the current year presentation.
Use of estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Cash and cash equivalents:
Financial instruments that potentially subject FREIT Maryland to concentrations of credit risk consist primarily of cash and cash equivalents. FREIT Maryland considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. FREIT Maryland maintains its cash and cash equivalents in bank and other accounts, the balances of which, at times, may exceed federally insured limits.
Real estate development costs:
It is FREIT Maryland’s policy to capitalize pre-development costs, which generally include legal and other professional fees and other directly related third-party costs. Real estate taxes and interest costs incurred during the development and construction phases are also capitalized. FREIT Maryland ceases capitalization of these costs when the project or portion thereof becomes operational, or when construction has been postponed. In the event of a postponement, capitalization of these costs will recommence once construction on the project resumes.
Depreciation:
Real estate and equipment are depreciated on the straight-line method by annual charges to operations calculated to absorb costs of assets over their estimated useful lives.
Impairment of long-lived assets:
Impairment losses on long-lived assets, such as real estate and equipment, are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable. Impairment losses are then measured by comparing the fair value of assets to their carrying amounts. There were no impairments of long-lived assets for the fiscal year ended October 31, 2021. In Fiscal 2020, Cobb Theatre, an anchor tenant movie theatre at the Rotunda retail property filed for bankruptcy and rejected its lease at the Rotunda property as of June 30, 2020. In the fourth quarter of Fiscal 2020, management determined that it would be unable to re-let the space on similar terms and as such tenant improvements in the amount of approximately $7.3 million (with a consolidated impact to FREIT Maryland of approximately $4.4 million) related to Cobb Theatre were deemed impaired and written off. (See Note 16) For the fiscal year ended October 31, 2019 there were no impairments of long-lived assets.
Deferred charges:
Deferred charges consist primarily of leasing commissions which are amortized on the straight-line method over the terms of the applicable leases.
Debt issuance costs:
Debt issuance costs are amortized on the straight-line method by annual charges to income over the terms of the mortgages. Amortization of such costs is included in interest expense and approximated $1,109,000, $1,089,000 and $1,139,000 in Fiscal 2021, 2020 and 2019, respectively. Unamortized debt issuance costs are a direct deduction from mortgages payable on the consolidated balance sheets.
Revenue recognition:
Income from leases is recognized on a straight-line basis regardless of when payment is due. Lease agreements between FREIT Maryland and commercial tenants generally provide for additional rentals and reimbursements for their proportionate share of real estate taxes, insurance, common area maintenance charges and may include percentage of tenants' sales in excess of specified volumes. Percentage rents are generally included in income when reported to FREIT Maryland when earned, or ratably over the appropriate period.
Interest rate cap and swap contracts:
FREIT Maryland utilizes derivative financial instruments to reduce interest rate risk. FREIT Maryland does not hold or issue derivative financial instruments for trading purposes. FREIT Maryland recognizes all derivatives as either
assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. Changes in fair value of those instruments, which qualify as cash flow hedges, are reported in other comprehensive income. (See Note 6)
Advertising:
FREIT Maryland expenses the cost of advertising and promotions as incurred. Advertising costs charged to operations amounted to approximately $421,000, $297,000 and $281,000 in Fiscal 2021, 2020 and 2019, respectively.
Stock-based compensation:
FREIT Maryland has a stock-based compensation plan that was approved by FREIT Maryland’s Board of Directors (the “Board”), and ratified by FREIT Maryland’s stockholders. Stock based awards are accounted for based on their grant-date fair value (see Note 10).
Note 2 - Property disposition:
On February 8, 2019, FREIT Maryland sold a commercial building, formerly occupied as a Pathmark supermarket in Patchogue, New York for a sales price of $7.5 million. The sale of this property, which had a carrying value of approximately $6.2 million, resulted in a gain of approximately $0.8 million net of sales fees and commissions. Net cash proceeds of approximately $2 million were realized after paying off the related mortgage on this property in the amount of approximately $5.2 million. FREIT Maryland distributed and paid approximately $676,000 of this gain by way of a one-time special dividend in connection with and in anticipation of the closing of the sale of the Patchogue property of $0.10 per share. The sale of this property eliminated an operating loss of approximately $0.8 million ($0.12 per share) incurred, annually, since Pathmark vacated the building in December 2015.
As the disposal of this property did not represent a strategic shift that would have a major impact on FREIT Maryland’s operations or financial results, the property’s operations were not reflected as discontinued operations in the accompanying consolidated financial statements.
Note 3 - Investment in tenancy-in-common:
On February 28, 2020, FREIT Maryland reorganized S&A from a partnership into a TIC. Prior to this reorganization, FREIT Maryland 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. Accordingly, FREIT Maryland consolidated the financial statements of S&A and its subsidiary to include 100% of the subsidiary’s assets, liabilities, operations and cash flows with the interest not owned by FREIT Maryland reflected as “noncontrolling interests in subsidiary” and all significant intercompany accounts and transactions were eliminated in consolidation.
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 ASC 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. Since FREIT Maryland retained a noncontrolling financial interest in the TIC, and the deconsolidation of the subsidiary (as of February 28, 2020) was not the result of a nonreciprocal transfer to owners, FREIT Maryland recognized a gain on deconsolidation in the amount of approximately $27.7 million in the accompanying consolidated statement of income for the fiscal year ended October 31, 2020. This gain was measured at the date of deconsolidation as the difference between the fair value of the investment in the TIC at the date the entity was deconsolidated and the carrying amount of the former subsidiary’s assets and liabilities.
FREIT Maryland’s investment in the TIC was approximately $19.4 million and $20.1 million at October 31, 2021 and 2020, respectively, with a loss on investment of approximately $295,000 and $202,000, respectively, in the accompanying consolidated statements of income for the fiscal years ended October 31, 2021 and 2020, 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 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 term of the management agreement was renewed for a one-year term which will expire on February 28, 2023. The management agreement requires the payment of management fees equal to 5% of rents collected. Management fees, charged to operations, were approximately $375,000 for the fiscal year ended October 31, 2021 and $241,000 for the period from February 28, 2020 through October 31, 2020. Hekemian & Co. management fees outstanding at October 31, 2021 and 2020 were approximately $32,500 and $32,000, 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 for the fiscal year ended October 31, 2021 and $26,000 for the period from February 28, 2020 through October 31, 2020.
The following table summarizes the balance sheets of the Pierre Towers property as of October 31, 2021 and 2020 accounted for by the equity method:
|
|
October 31,
|
|
|
October 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(In Thousands of Dollars)
|
|
|
|
|
|
Real estate, net
|
|
$
|
78,023
|
|
|
$
|
80,041
|
|
Cash and cash equivalents
|
|
|
1,338
|
|
|
|
754
|
|
Tenants' security accounts
|
|
|
484
|
|
|
|
523
|
|
Receivables and other assets
|
|
|
510
|
|
|
|
468
|
|
Total assets
|
|
$
|
80,355
|
|
|
$
|
81,786
|
|
|
|
|
|
|
|
|
|
|
Mortgages payable, net of unamortized debt issuance costs
|
|
$
|
49,691
|
|
|
$
|
49,956
|
|
Accounts payable and accrued expenses
|
|
|
261
|
|
|
|
314
|
|
Tenants' security deposits
|
|
|
484
|
|
|
|
535
|
|
Deferred revenue
|
|
|
99
|
|
|
|
56
|
|
Equity
|
|
|
29,820
|
|
|
|
30,925
|
|
Total liabilities & equity
|
|
$
|
80,355
|
|
|
$
|
81,786
|
|
|
|
|
|
|
|
|
|
|
FREIT Maryland's investment in TIC (65% interest)
|
|
$
|
19,383
|
|
|
$
|
20,101
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the statements of operations of the Pierre Towers property for the fiscal year ended October 31, 2021 and for the period from February 28, 2020 through October 31, 2020, accounted for by the equity method:
|
|
Year Ended October 31, 2021
|
|
|
For the period from February 28, 2020 through October 31, 2020
|
|
|
|
(In Thousands of Dollars)
|
|
|
|
|
|
Revenues
|
|
$
|
7,627
|
|
|
$
|
4,981
|
|
Operating expenses
|
|
|
4,311
|
|
|
|
2,786
|
|
Depreciation
|
|
|
2,166
|
|
|
|
1,435
|
|
Operating income
|
|
|
1,150
|
|
|
|
760
|
|
|
|
|
|
|
|
|
|
|
Interest expense including amortization of deferred financing costs
|
|
|
1,604
|
|
|
|
1,070
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(454
|
)
|
|
$
|
(310
|
)
|
|
|
|
|
|
|
|
|
|
FREIT Maryland's loss on investment in TIC (65% interest)
|
|
$
|
(295
|
)
|
|
$
|
(202
|
)
|
Note 4 - Real estate:
Real estate consists of the following:
|
|
Range of
|
|
|
|
|
|
|
|
|
Estimated
|
|
October 31,
|
|
|
|
Useful Lives
|
|
2021
|
|
|
2020
|
|
|
|
|
|
(In Thousands of Dollars)
|
|
Land
|
|
|
|
$
|
75,688
|
|
|
$
|
75,688
|
|
Unimproved land
|
|
|
|
|
405
|
|
|
|
405
|
|
Apartment buildings
|
|
7-40 years
|
|
|
156,408
|
|
|
|
155,923
|
|
Commercial buildings/shopping centers
|
|
5-40 years
|
|
|
151,598
|
|
|
|
151,293
|
|
Equipment/Furniture
|
|
5-15 years
|
|
|
2,156
|
|
|
|
1,978
|
|
Total real estate, gross
|
|
|
|
|
386,255
|
|
|
|
385,287
|
|
Less: accumulated depreciation
|
|
|
|
|
115,621
|
|
|
|
107,137
|
|
Total real estate, net
|
|
|
|
$
|
270,634
|
|
|
$
|
278,150
|
|
Note 5 - Mortgages payable and credit line:
|
|
October 31, 2021
|
|
|
October 31, 2020
|
|
|
|
Principal (Including Deferred Interest)
|
|
|
Unamortized Debt Issuance Costs
|
|
|
Principal (Including Deferred Interest)
|
|
|
Unamortized Debt Issuance Costs
|
|
|
|
(In Thousands of Dollars)
|
|
|
(In Thousands of Dollars)
|
|
Rockaway, NJ (A)
|
|
$
|
14,453
|
|
|
$
|
50
|
|
|
$
|
15,050
|
|
|
$
|
23
|
|
Westwood, NJ (B)
|
|
|
18,001
|
|
|
|
39
|
|
|
|
18,695
|
|
|
|
71
|
|
Wayne, NJ (C)
|
|
|
28,815
|
|
|
|
379
|
|
|
|
28,815
|
|
|
|
427
|
|
River Edge, NJ (D)
|
|
|
9,545
|
|
|
|
36
|
|
|
|
9,789
|
|
|
|
53
|
|
Red Bank, NJ (E)
|
|
|
11,971
|
|
|
|
93
|
|
|
|
12,181
|
|
|
|
108
|
|
Wayne, NJ (F)
|
|
|
22,588
|
|
|
|
172
|
|
|
|
23,336
|
|
|
|
205
|
|
Damascus, MD (G)
|
|
|
18,274
|
|
|
|
101
|
|
|
|
18,824
|
|
|
|
166
|
|
Middletown, NY (H)
|
|
|
14,921
|
|
|
|
104
|
|
|
|
15,255
|
|
|
|
137
|
|
Total fixed rate
|
|
|
138,568
|
|
|
|
974
|
|
|
|
141,945
|
|
|
|
1,190
|
|
Westwood, NJ (I)
|
|
|
25,000
|
|
|
|
220
|
|
|
|
25,000
|
|
|
|
460
|
|
Frederick, MD (J)
|
|
|
21,188
|
|
|
|
30
|
|
|
|
21,775
|
|
|
|
-
|
|
Baltimore, MD (K)
|
|
|
116,520
|
|
|
|
105
|
|
|
|
118,520
|
|
|
|
160
|
|
Line of credit - Provident Bank (L)
|
|
|
-
|
|
|
|
71
|
|
|
|
-
|
|
|
|
-
|
|
Total variable rate
|
|
|
162,708
|
|
|
|
426
|
|
|
|
165,295
|
|
|
|
620
|
|
Total
|
|
$
|
301,276
|
|
|
$
|
1,400
|
|
|
$
|
307,240
|
|
|
$
|
1,810
|
|
(A)Payable in monthly installments of $115,850 including interest at 5.37% through February 2022 at which time the outstanding balance is due. The mortgage is secured by a residential building in Rockaway, New Jersey having a net book value of approximately $14,532,000 as of October 31, 2021. On December 30, 2021, this loan was refinanced with a new loan in the amount of $7.5 million. (See Note 17 for additional details)
(B)On January 14, 2013, FREIT Maryland refinanced its Westwood Plaza mortgage loan in the amount of $8.0 million, with a new mortgage loan in the amount of $22,750,000, which is payable in monthly installments of $129,702 including interest at 4.75% through February 1, 2023 at which time the outstanding balance is due. The mortgage is secured by a retail building in Westwood, New Jersey having a net book value of approximately $7,051,000 as of October 31, 2021.
As a result of the negative impact of the COVID-19 pandemic at this property, FREIT Maryland was granted debt payment relief from the lender in the form of deferral of principal and interest payments for a three-month period which ended June 30, 2020, resulting in total deferred payments of approximately $390,000, of which approximately $222,000 related to deferred interest. These deferred payments are included in the mortgages payable on the consolidated balance sheet as of October 31, 2021 and 2020 and are due at the maturity of this loan.
(C)On August 26, 2019, Berdan Court, LLC (“Berdan Court”), refinanced its $17 million loan (which matured on September 1, 2019) with the lender in the amount of $28,815,000. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 6.09% to a fixed rate of 3.54% and (ii) net refinancing proceeds of approximately $11.6 million which can be used for capital expenditures and general corporate purposes.
The loan is interest-only for the first five years of the term with monthly installments of approximately $85,004 each month through September 1, 2024. Thereafter, monthly installments of principal plus interest totaling approximately $130,036 will be required each month until September 1, 2029 at which time the unpaid balance is due. The mortgage is secured by an apartment building in Wayne, New Jersey having a net book value of approximately $1,490,000 as of October 31, 2021.
(D)On November 19, 2013, FREIT Maryland refinanced mortgage loans scheduled to mature on December 1, 2013 with a new mortgage loan in the amount of $11,200,000 payable in monthly installments of $57,456 including interest at 4.54% through December 1, 2023 at which time the outstanding balance is due. The mortgage is secured by an apartment building in River Edge, New Jersey having a net book value of approximately $679,000 as of October 31, 2021.
(E)On December 7, 2017, Station Place on Monmouth, LLC (“Station Place”) closed on a mortgage loan in the amount of $12,350,000 held by Provident Bank to purchase the Station Place property in Red Bank, New Jersey. Interest-only payments were required each month for the first two years of the term and thereafter, principal payments plus accrued interest were required each month through maturity. The loan bears a floating interest rate equal to 180 basis points over the one-month BBA LIBOR with a maturity date of December 15, 2027. In order to minimize interest rate volatility during the term of the loan, Station Place entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 4.35% over the term of the loan. (See Note 6 for additional information relating to the interest rate swap.) The mortgage is secured by an apartment building in Red Bank, New Jersey having
a net book value of approximately $18,514,000 as of October 31, 2021.
(F)On September 29, 2016, Wayne PSC, LLC (“Wayne PSC”) refinanced its $24,200,000 mortgage loan held by Metropolitan Life Insurance Company, with a new mortgage loan from People’s United Bank in the amount of $25,800,000. The new loan bears a floating interest rate equal to 220 basis points over the one-month BBA LIBOR with a maturity date of October 1, 2026. In order to minimize interest rate volatility during the term of the loan, Wayne PSC, entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 3.625% over the term of the loan. This refinancing resulted in: (i) a reduction in interest rate from 6.04% to 3.625% and (ii) net refinancing proceeds of approximately $1 million that were distributed to the partners in Wayne PSC with FREIT Maryland receiving approximately $0.4 million based on it 40% membership interest in Wayne PSC. (See Note 6 for additional information relating to the interest rate swap.) The mortgage is secured by a shopping center in Wayne, New Jersey having a net book value of approximately $23,408,000 as of October 31, 2021 including approximately $0.7 million classified as construction in progress.
As a result of the negative impact of the COVID-19 pandemic at this property, we were granted debt payment relief from the lender in the form of deferral of principal and interest payments for a three-month period which ended November 1, 2020, resulting in total deferred payments of approximately $319,000, of which approximately $138,000 related to deferred interest. These deferred payments are included in the mortgages payable on the consolidated balance sheets as of October 31, 2021 and 2020 and are due at the maturity of this loan. As a result of COVID-19 pandemic rent losses and the planning for a potential redevelopment of its shopping center, as of October 31, 2021, Wayne PSC was not, and currently is not, in compliance with a look back debt service coverage ratio loan covenant contained in the mortgage loan agreement held by People’s United Bank in the amount of approximately $22.6 million as of October 31, 2021. Although the Company continues to make its required debt service payments in accordance with the loan agreement, it is unable to comply with this covenant. As such, the bank could exercise its remedies under the loan agreement including, among other things, requiring a partial or full repayment of the loan. The Company is currently working with the lender to remediate this covenant default. As of the date of the filing of this Form 10K report, the bank has not declared this loan to be in default. Until such time as a definitive agreement is entered into, there can be no assurance the loan covenant will be amended and the bank will not declare this loan to be in default.
(G)On December 26, 2012, Damascus Centre, LLC (“Damascus Centre”) refinanced its construction loan with long-term financing provided by People’s United Bank and the first tranche of the new loan was taken down in the amount of $20 million. Based on leasing and net operating income at the shopping center, People’s United Bank agreed to a takedown of the second tranche of this loan on April 22, 2016 in the amount of $2,320,000, of which approximately $470,000 was readily available and the remaining $1,850,000 was held in escrow. In July 2018, these funds totaling $1,850,000 were released from escrow by the bank and became readily available to Damascus Centre. Damascus Centre distributed amounts due to FREIT Maryland and certain members of Damascus 100.
The loan has a maturity date of January 3, 2023 and bears a floating interest rate equal to 210 points over the one-month BBA LIBOR. In order to minimize interest rate volatility during the term of this loan, Damascus Centre, LLC entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate on each tranche of this loan, resulting in a fixed rate of 3.81% over the term of the first tranche of this loan and a fixed rate of 3.53% over the term of the second tranche of this loan. (See Note 6 for additional information relating to the interest rate swaps.) The shopping center securing the loan has a net book value of approximately $24,700,000 as of October 31, 2021.
On January 10, 2022, the property owned by Damascus Centre was sold and a portion of the proceeds was used to pay off the approximately $18.2 million then outstanding balance of this loan. (See Note 17 for additional details.)
(H)On December 29, 2014, FREIT Regency, LLC (“Regency”) closed on a $16.2 million mortgage loan with Provident Bank. The loan bears a floating interest rate equal to 125 basis points over the one-month BBA LIBOR and will mature on December 15, 2024. Interest-only payments had been required each month through December 15, 2017 and thereafter, principal payments of $27,807 (plus accrued interest) are required each month through maturity. In order to minimize interest rate volatility during the term of the loan, Regency entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 3.75% over the term of the loan. (See Note 6 for additional information relating to the interest rate swap.) The mortgage is secured by an apartment complex in Middletown, New York having a net book value of $17,935,000 as of October 31, 2021.
(I)On September 30, 2020, Westwood Hills, LLC (“Westwood Hills”) refinanced its $19.2 million loan (which would have matured on November 1, 2020) with a new loan held by ConnectOne Bank in the amount of $25,000,000, with additional funding available in the amount of $250,000 for legal fees potentially incurred by the lender related to the lis pendens on this property. (See Note 14 for additional details in regards to the lis pendens.) This loan, is interest-only based on a floating rate at 400 basis points over the one-month LIBOR rate with a floor of 4.15% and has a maturity date of October 1, 2022 with the option of Westwood Hills to extend for two (2) additional six (6)-month periods from the maturity date, subject to certain provisions of the loan agreement. This refinancing resulted in: (i) a change in the annual interest rate from a fixed rate of 4.62% to a variable rate with a floor of 4.15% and (ii) net refinancing proceeds of approximately
$5.6 million that were distributed to the partners in Westwood Hills with FREIT Maryland receiving approximately $2.2 million based on its 40% membership interest in Westwood Hills. As of October 31, 2021, $25,000,000 of this loan was drawn and outstanding and the interest rate was based on the floor of 4.15%. The mortgage is secured by an apartment building in Westwood, New Jersey having a net book value of approximately $8,207,000 as of October 31, 2021.
(J)On April 28, 2017, WestFREIT, Corp. refinanced its $22 million mortgage loan held by Wells Fargo Bank, with a new mortgage loan from Manufacturer’s and Traders Trust Company (“M&T Bank”) in the amount of $23.5 million. The new loan had a floating interest rate equal to 275 basis points over the one-month LIBOR and had a maturity date of April 28, 2019 with the option to extend for 12 months. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 5.55% to a variable rate and (ii) net refinancing proceeds of approximately $1.1 million which have been used for general corporate purposes. The loan was payable in monthly installments of interest (as defined above) plus principal of $43,250 through May 2018 and principal of $45,250 from June 2018 through May 2019 at which time the outstanding balance became due.
On April 3, 2019, WestFREIT, Corp. exercised its option to extend this loan, with a then outstanding balance of approximately $22.5 million, for twelve months. Effective beginning on June 1, 2019, the extension of this loan required monthly principal payments of $47,250 plus interest based on a floating interest rate equal to 240 basis points over the one-month LIBOR and had a maturity date of May 1, 2020. This loan was extended to November 1, 2020 and further extended to January 31, 2021 under the same terms and conditions of the previous agreement. WestFREIT, Corp. entered into a loan extension and modification agreement with M&T Bank, effective beginning on February 1, 2021, which requires monthly principal payments of $49,250 plus interest based on a floating interest rate equal to 255 basis points over the one-month LIBOR and has a maturity date of January 31, 2022, with the option of WestFREIT, Corp. to extend for an additional one-year period through January 31, 2023, subject to certain requirements as provided for in the loan agreement including the lease-up of certain space. As of October 31, 2021, approximately $21.2 million of this loan was outstanding and the interest rate was approximately 2.68%. The mortgage is secured by a retail building in Frederick, Maryland having a net book value of approximately $11,626,000 as of October 31, 2021.
As a result of the negative impact of the COVID-19 pandemic at this property, FREIT Maryland was granted debt payment relief from the lender in the form of deferral of principal and interest payments for a three-month period which ended June 30, 2020, resulting in total deferred payments of approximately $303,800, of which approximately $162,100 related to deferred interest was repaid as of October 31, 2020. The remaining deferred balance due of approximately $141,700 is included in the mortgages payable on the consolidated balance sheets as of October 31, 2021 and 2020 and is due at the maturity of this loan.
On January 7, 2022, the property owned by WestFREIT was sold and a portion of the proceeds was used to pay off the then outstanding balance of this loan. (See Note 17 for additional details.)
(K)On February 7, 2018, Grande Rotunda, LLC (“Grande Rotunda”) refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding which was available through February 6, 2021 for retail tenant improvements and leasing costs in the amount of $3,380,000. This loan bears a floating interest rate at 285 basis points over the one-month LIBOR rate and had a maturity date of February 6, 2021, with two one-year options to extend the maturity of this loan, subject to certain requirements as provided for in the loan agreement. Grande Rotunda had purchased an interest rate cap on LIBOR for the full amount that could have been drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that could have been drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year, which matured on March 5, 2021.
Effective February 6, 2021, Grande Rotunda exercised the first extension option on this loan with a balance in the amount of approximately $118.5 million, extending the loan one year with a new maturity date of February 6, 2022. Principal payments in the amount of $500,000 were required upon exercise of the first loan extension option and per calendar quarter thereafter. Additionally, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2021, for the loan amount of approximately $118.5 million, capping the one-month LIBOR rate at 3% for one year expiring on February 6, 2022. As of October 31, 2021, the total amount outstanding on this loan was approximately $116.5 million and the interest rate was approximately 2.93%. The loan is secured by the Rotunda property, which has a net book value of approximately $136,623,000 as of October 31, 2021.
On December 30, 2021, the property owned by Grande Rotunda was sold and a portion of the proceeds was used to pay off the $116.5 million then outstanding balance of this loan. (See Note 17 for additional details.)
(L)FREIT Maryland’s revolving line of credit provided by Provident Bank was renewed for a three-year term ending on October 31, 2023. Draws against the credit line can be used for working capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREIT Maryland’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is $13 million and the interest rate on the amount outstanding is based on a floating interest rate of prime minus 25 basis points with a floor of 3.75%. As of October 31, 2021 and 2020, there was no amount outstanding and $13 million was available under the line of credit.
Certain of the Company’s mortgage loans and the line of credit contain financial covenants. Except as was noted in Note 5F above, the Company was in compliance with all of its financial covenants as of October 31, 2021. The lis pendens filed in connection with the legal proceeding between FREIT Maryland and certain of its affiliates and Sinatra Properties, LLC may adversely affect FREIT Maryland’s ability to refinance certain of its residential properties. (See Note 14 for additional details.)
Fair value of long-term debt:
The following table shows the estimated fair value and carrying value of FREIT Maryland’s long-term debt, net at October 31, 2021 and 2020:
|
|
October 31,
|
|
October 31,
|
($ in Millions)
|
|
2021
|
|
2020
|
Fair Value
|
|
$301.6
|
|
$311.4
|
|
|
|
|
|
Carrying Value, Net
|
$299.9
|
|
$305.4
|
Fair values are estimated based on market interest rates at the end of each fiscal year and on a discounted cash flow analysis. Changes in assumptions or estimation methods may significantly affect these fair value estimates. The fair value is based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).
Principal amounts (in thousands of dollars) due under the above obligations in each of the five years subsequent to October 31, 2021 are as follows:
Year Ending October 31,
|
|
Amount
|
|
2022
|
|
$
|
201,680
|
(a)(b)(c)(d)
|
2023
|
|
$
|
35,914
|
(e)
|
2024
|
|
$
|
9,663
|
|
2025
|
|
$
|
14,734
|
|
2026
|
|
$
|
817
|
|
|
|
|
|
|
|
(a)
|
Includes a loan on Rotunda property located in Baltimore, Maryland in the amount of approximately $116.5 million which would have matured on February 6, 2022. (See Note 5(K)) On December 30, 2021, the property owned by Grande Rotunda was sold and a portion of the proceeds was used to pay off the $116.5 million then outstanding balance of this loan. (See Note 17)
|
|
(b)
|
Includes a loan on Westridge Square Shopping Center located in Frederick, Maryland in the amount of approximately $21.1 million which has a maturity date of January 31, 2021. (See Note 5(J)) On January 7, 2022, the property owned by WestFREIT was sold and a portion of the proceeds was used to pay off the then outstanding balance of this loan. (See Note 17 for additional details.)
|
|
(c)
|
Includes a loan on Boulders, which is a residential property located in Rockaway, New Jersey in the amount of approximately $14.5 million which had a maturity date of February 1, 2022. The loan was refinanced on December 30, 2021 in the amount of $7.5 million with additional funding available of up to another $7.5 million and has a maturity date of January 1, 2024. (See Note 17)
|
|
(d)
|
Includes a loan on the Preakness Shopping Center located in Wayne, New Jersey in the amount of approximately $22.6 million. As a result of COVID-19 pandemic rent losses and the planning for a potential redevelopment of its shopping center, as of October 31, 2021, Wayne PSC was not, and currently is not, in compliance with a look back debt service coverage ratio loan covenant contained in the mortgage loan agreement held by People’s United Bank in the amount of approximately $22.6 million as of October 31, 2021. Although the Company continues to make its required debt service payments in accordance with the loan agreement, it is unable to comply with this covenant. As such, the bank could exercise its remedies under the loan agreement including, among other things, requiring a partial or full repayment of the loan. The Company is currently working with the lender to remediate this covenant default. As of the date of the filing of this Form 10K report, the bank has not declared this loan to be in default. Until such time as a definitive agreement is entered into, there can be no assurance the loan covenant will be amended and the bank will not declare this loan to be in default. (See Note 5(F))
|
|
(e)
|
Includes a loan on the Damascus property located in Damascus, Maryland in the amount of approximately $18.2 million. On January 10, 2022, the property owned by Damascus was sold and a portion of the proceeds was used to pay off the then outstanding balance of this loan. (See Notes 5(G) and 17)
|
Note 6 - Interest rate cap and swap contracts:
In accordance with “Accounting Standards Codification Topic 815, Derivatives and Hedging ("ASC 815")”, FREIT Maryland is accounting for the Damascus Centre, Regency, Wayne PSC and Station Place interest rate swaps and the Grande Rotunda interest rate cap as cash flow hedges marking these contracts to market, taking into account present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss on the swaps and cap in comprehensive income. For the year ended October 31, 2021, FREIT Maryland recorded an unrealized gain of approximately $2,616,000 in the consolidated statement of comprehensive income representing the change in the fair value of these cash flow hedges during such period. As of October 31, 2021, there was a liability of approximately $278,000 for the Damascus Centre swaps, $348,000 for the Wayne PSC swap, $750,000 for the Regency swap, $932,000 for the Station Place swap and $0 for the Grande Rotunda interest rate cap. For the year ended October 31, 2020, FREIT Maryland recorded an unrealized loss of approximately $2,798,000 in the consolidated statement of comprehensive income representing the change in the fair value of these cash flow hedges during such period. As of October 31, 2020, there was a liability of approximately $610,000 for the Damascus Centre swaps, $1,260,000 for the Wayne PSC swap, $1,385,000 for the Regency swap, $1,669,000 for the Station Place swap and $0 for the Grande Rotunda interest rate cap.
In Fiscal 2019, FREIT Maryland was accounting for its interest rate swaps and cap contract in accordance with ASC 815. For the year ended October 31, 2019, FREIT Maryland recorded an unrealized loss of approximately $6,400,000 in the consolidated statement of comprehensive loss representing the change in the fair value of these cash flow hedges during such period. For the year ended October 31, 2019, FREIT Maryland recorded an unrealized loss in the consolidated statement of income of approximately $160,000 for the Grande Rotunda interest rate cap representing the change in the fair value of this ineffective cash flow hedge during such period.
The fair values are based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).
Note 7 - Commitments and contingencies:
Leases
Commercial tenants:
FREIT Maryland leases commercial space having a net book value of approximately $127.8 million at October 31, 2021 to tenants for periods of up to twenty-five years. Most of the leases contain clauses for reimbursement of real estate taxes, maintenance, insurance and certain other operating expenses of the properties. Fixed lease income under our commercial operating leases generally includes fixed minimum lease consideration which is accrued on a straight-line basis over the terms of the leases. Variable lease income includes consideration based on sales, as well as reimbursements for real estate taxes, maintenance, insurance and certain other operating expenses of the properties.
Minimum fixed lease consideration (in thousands of dollars) under non-cancellable tenant operating leases for each of the next five years and thereafter, excluding variable lease consideration, rents from tenants for which collectability is deemed to be constrained and rents from the Rotunda property, WestFREIT property and Damascus property sold on December 30, 2021, January 7, 2022 and January 10, 2022, respectively, subsequent to October 31, 2021, is as follows:
Year Ending October 31,
|
|
Amount
|
|
2022
|
|
$
|
5,719
|
|
2023
|
|
|
5,083
|
|
2024
|
|
|
3,970
|
|
2025
|
|
|
3,298
|
|
2026
|
|
|
2,550
|
|
Thereafter
|
|
|
3,313
|
|
Total
|
|
$
|
23,933
|
|
The above amounts assume that all leases which expire are not renewed and, accordingly, neither month-to-month nor rentals from replacement tenants are included.
Minimum future rentals do not include contingent rentals, which may be received under certain leases on the basis of percentage of reported tenants' sales volume. Rental income that is contingent on future events is not included in income until the contingency is resolved. Contingent rentals included in income for each of the years in the three-year period ended October 31, 2021 were not material.
Residential tenants:
Lease terms for residential tenants are usually one to two years.
Environmental concerns
The Westwood Plaza Shopping Center property is in a Flood Hazard Zone. FREIT Maryland maintains flood insurance in the amount of $500,000 for the subject property, which is the maximum available under the Flood Program for the property. Any reconstruction of that portion of the property situated in the flood hazard zone is subject to regulations promulgated by the New Jersey Department of Environmental Protection ("NJDEP"), which could require extraordinary construction methods. FREIT Maryland acquired the Westwood Plaza property in 1988, and the property has not experienced any flooding that gave rise to any claims under FREIT Maryland’s flood insurance in this time period.
Note 8 - Management agreement, fees and transactions with related party:
On April 10, 2002, FREIT Maryland and Hekemian & Co. executed a management agreement dated as of November 1, 2001 (“Management Agreement”) whereby Hekemian & Co. would continue as the managing agent for FREIT Maryland. The term of the Management Agreement was renewed for a two-year term which will expire on October 31, 2023. The Management Agreement is automatically renewed for successive periods of two years unless either party gives not less than six (6) months prior notice of non-renewal.
Hekemian & Co. currently manages all of the properties owned by FREIT Maryland and its affiliates, except for the office building at The Rotunda located in Baltimore, Maryland, which is managed by an independent third party management company. However, FREIT Maryland may retain other managing agents to manage properties acquired after April 10, 2002 and to perform various other duties such as sales, acquisitions, and development with respect to any or all properties. Hekemian & Co. does not serve as the exclusive property acquisition advisor to FREIT Maryland and is not required to offer potential acquisition properties exclusively to FREIT Maryland before acquiring those properties for its own account. The Management Agreement includes a detailed schedule of fees for those services, which Hekemian & Co. may be called upon to perform. The Management Agreement provides for a termination fee in the event of a termination or non-renewal of the Management Agreement under certain circumstances.
The Management Agreement requires the payment of management fees equal to 4% to 5% of rents collected. Such fees, charged to operations, were approximately $2,127,000, $2,201,000, and $2,549,000 in Fiscal 2021, 2020 and 2019, 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 Maryland. Such commissions and reimbursements amounted to approximately $548,000, $982,000 and $762,000 in Fiscal 2021, 2020 and 2019, respectively. Total Hekemian & Co. management fees outstanding at October 31, 2021 and 2020 were approximately $185,000 and $182,000, respectively, and included in accounts payable on the accompanying consolidated balance sheets. FREIT Maryland 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 were charged to operations and amounted to approximately $209,000, $190,000 and $196,000 in Fiscal 2021, 2020 and 2019, respectively.
Grande Rotunda owns and operates the Rotunda property. FREIT Maryland owns a 60% equity interest in Grande Rotunda and Rotunda 100, LLC (“Rotunda 100”) owns a 40% equity interest in Grande Rotunda. The equity owners of Rotunda 100 are principally employees of Hekemian & Co. To incentivize the employees of Hekemian & Co, FREIT Maryland advanced, only to employees of Hekemian & Co., up to 50% of the amount of the equity contributions that the Hekemian & Co. employees were required to invest in Rotunda 100. These advances were in the form of secured loans that bear interest at rates that float at 225 basis points over the ninety (90) day LIBOR, as adjusted each November 1, February 1, May 1 and August 1. These loans are secured by the Hekemian & Co. employees’ interests in Rotunda 100 and are full recourse loans. Interest only payments are required to be made when billed.
No principal payments are required during the term of the notes, except that the borrowers are required to pay to FREIT Maryland all refinancing proceeds and other cash flow they receive from their interest in Grande Rotunda. These payments shall be applied first to accrued and unpaid interest and then any outstanding principal. The notes originally had maturity dates at the earlier of (a) ten (10) years after issue, which was June 19, 2015, or, (b) at the election of FREIT Maryland, ninety (90) days after the borrower terminates employment with Hekemian & Co., at which time all outstanding unpaid principal and interest is due. On May 8, 2008, the Board approved amendments to the existing loan agreements with the Hekemian & Co. employees, relative to their interests in Rotunda 100, to increase the aggregate amount that FREIT Maryland may advance to such employees from $2 million to $4 million. On June 4, 2015, the Board approved an extension of the maturity date of the secured loans to occur the earlier of (a) June 19, 2018 or (b) five days after the closing of a permanent mortgage loan secured by the Rotunda property. On December 7, 2017, the Board approved a further extension of the maturity dates of these loans to the date or dates upon which distributions of
cash are made by Grande Rotunda to its members as a result of a refinancing or sale of Grande Rotunda or the Rotunda property.
The aggregate outstanding principal balance of the Rotunda 100 notes was $4,000,000 at both October 31, 2021 and 2020. The accrued but unpaid interest related to these notes as of October 31, 2021 and 2020 amounted to approximately $1,292,000 and $1,194,000, respectively, and is included in secured loans receivable on the accompanying consolidated balance sheets.
In Fiscal 2017, Grande Rotunda incurred substantial expenditures at the Rotunda property related to retail tenant improvements, leasing costs and operating expenditures which, in the aggregate, exceeded revenues as the property was still in the rent up phase and the construction loan held with Wells Fargo at that time was at its maximum level, with no additional funding available to draw. Accordingly, during Fiscal 2017 the equity owners in Grande Rotunda contributed their respective pro-rata share of any cash needs through loans to Grande Rotunda. In Fiscal 2021, Grande Rotunda repaid $7 million to the equity owners in Grande Rotunda based on their respective pro-rata share resulting in a loan repayment to Rotunda 100 of approximately $2.8 million. As of October 31, 2021 and 2020, Rotunda 100 has funded Grande Rotunda with approximately $3.3 million and $5.9 million (including accrued interest), respectively, which is included in due to affiliate on the accompanying consolidated balance sheets.
From time to time, FREIT Maryland 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 Maryland. Separate fee arrangements are negotiated between Hekemian & Co. and FREIT Maryland with respect to such additional services. Such fees incurred during Fiscal 2021, 2020 and 2019 were $236,500, $125,000 and $275,000, respectively. Fees incurred during Fiscal 2021 related to commissions to Hekemian & Co. for the following: $150,000 for the extension of the Grande Rotunda loan; $54,000 for the extension and modification of the WestFREIT, Corp. loan; $32,500 for the renewal of FREIT Maryland’s line of credit. Fees incurred during Fiscal 2020 related to commissions to Hekemian & Co. for the refinancing of the Westwood Hills loan. Fees incurred during Fiscal 2019 related to commissions to Hekemian & Co. for the following: $131,250 for the sale of the Patchogue property; $144,075 for the refinancing of the Berdan Court loan.
Robert S. Hekemian, Jr., Chief Executive Officer, President and a Director of FREIT Maryland, is the President and Chief Operating Officer of Hekemian & Co. David B. Hekemian, a Director of FREIT Maryland, is the Principal/Broker – Salesperson and Director of Commercial Brokerage of Hekemian & Co. Robert S. Hekemian, the former Chairman and Chief Executive Officer of FREIT Maryland, served as a consultant to FREIT Maryland and Chairman of the Board and Chief Executive Officer of Hekemian & Co. prior to his death in December 2019. Allan Tubin, Chief Financial Officer and Treasurer of FREIT Maryland, is the Chief Financial Officer of Hekemian & Co.
Director fee expense and/or executive compensation (including interest and dividends) incurred by FREIT Maryland for Fiscal 2021, 2020 and 2019 was approximately $0, $21,000 and $214,000, respectively, for Robert S. Hekemian, $469,000, $508,000 (including a $100,000 adjustment in Fiscal 2020 related to the final approved Fiscal 2019 compensation), and $381,000, respectively, for Robert S. Hekemian, Jr., $30,000, $26,000 and $22,000, respectively, for Allan Tubin and $57,000, $50,000 and $56,000, respectively, for David Hekemian. (See Note 11 to FREIT Maryland’s consolidated financial statements). Such costs are included within operating expenses on the accompanying consolidated statements of income.
Effective upon the late Robert S. Hekemian’s retirement as Chairman, Chief Executive Officer and as a Director on April 5, 2018, FREIT Maryland entered into a consulting agreement with Mr. Hekemian, pursuant to which Mr. Hekemian provided consulting services to FREIT Maryland through December 2019. The consulting agreement obliged Mr. Hekemian to provide advice and consultation with respect to matters pertaining to FREIT Maryland and its subsidiaries, affiliates, assets and business for no fewer than 30 hours per month during the term of the agreement. FREIT Maryland paid Mr. Hekemian a consulting fee of $5,000 per month during the term of the consulting agreement, which was payable in the form of shares on a quarterly basis (i.e. in quarterly installments of $15,000). The number of shares to be issued for each quarterly installment of the consulting fee was determined by dividing the dollar amount of the consulting fee by the closing price of one share on the OTC Pink Open Market as of the close of trading on the last trading day of the calendar quarter with respect to which such consulting fee was payable. For Fiscal 2021, 2020 and 2019, consulting fee expense for Robert S. Hekemian was approximately $0, $8,000 and $60,000, respectively.
Note 9 - Income taxes:
FREIT Maryland has elected to be treated as a REIT for federal income tax purposes and has distributed 99% of its ordinary taxable income to its stockholders as dividends for the fiscal year ended October 31, 2021. There was no ordinary taxable income for the fiscal year ended October 31, 2020 and no dividends were made/declared for Fiscal 2020. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income was recorded in FREIT Maryland’s consolidated financial statements for the fiscal years ended October 31, 2021 and 2020.
FREIT Maryland distributed 100% of its ordinary taxable income and 100% of its capital gain from the sale of the Patchogue, New York property to its stockholders as dividends for the fiscal year ended October 31, 2019. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income and such gain was recorded in FREIT Maryland’s consolidated financial statements for the fiscal year ended October 31, 2019.
As of October 31, 2021, FREIT Maryland had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended October 31, 2018 remain open to examination by the major taxing jurisdictions.
Note 10 - Equity Incentive Plan:
On September 10, 1998, the Board approved FREIT Maryland's Equity Incentive Plan (the "Plan") which was ratified by FREIT Maryland's stockholders on April 7, 1999, whereby up to 920,000 of FREIT Maryland's shares (adjusted for stock splits) may be granted to key personnel in the form of stock options, restricted share awards and other share-based awards. In connection therewith, the Board approved an increase of 920,000 shares in FREIT Maryland's number of authorized shares. Key personnel eligible for these awards include directors, executive officers and other persons or entities including, without limitation, employees, consultants and employees of consultants, who are in a position to make significant contributions to the success of FREIT Maryland. Under the Plan, the exercise price of all options will be the fair market value of the shares on the date of grant. The consideration to be paid for restricted share and other share-based awards shall be determined by the Board, with the amount not to exceed the fair market value of the shares on the date of grant. The maximum term of any award granted may not exceed ten years. The Board will determine the actual terms of each award.
On April 4, 2007, FREIT Maryland stockholders approved amendments to the Plan as follows: (a) reserving an additional 300,000 shares for issuance under the Plan; and (b) extending the term of the Plan until September 10, 2018. On April 5, 2018, FREIT Maryland stockholders approved amendments to the Plan to (a) increase the number of shares reserved for issuance thereunder by an additional 300,000 shares and (b) further extend the term of the Plan from September 10, 2018 to September 10, 2028. As of October 31, 2021, 442,060 shares are available for issuance under the Plan. There was no impact to the Plan or options previously granted as a result of the Reincorporation of FREIT with and into FREIT Maryland as discussed in Note 1.
On March 4, 2019, the Board approved the grant of an aggregate of 5,000 non-qualified share options under the Plan to the Chairman of the Board. The options have an exercise price of $15.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be March 3, 2029.
The following table summarizes stock option activity for Fiscal 2021, 2020 and 2019:
|
|
Year Ended October 31,
|
|
Year Ended October 31,
|
|
Year Ended October 31,
|
|
|
2021
|
|
2020
|
|
2019
|
|
|
No. of
Options
|
|
Exercise
|
|
No. of
Options
|
|
|
Exercise
|
|
No. of
Options
|
|
Exercise
|
|
|
Outstanding
|
|
Price
|
|
Outstanding
|
|
|
Price
|
|
Outstanding
|
|
Price
|
Options outstanding at beginning of year
|
|
310,740
|
|
$
|
18.35
|
|
310,740
|
|
|
$
|
18.35
|
|
305,780
|
|
$
|
18.40
|
Options granted during year
|
|
-
|
|
|
-
|
|
-
|
|
|
|
-
|
|
5,000
|
|
|
15.00
|
Options forfeited/cancelled during year
|
|
-
|
|
|
-
|
|
-
|
|
|
|
-
|
|
(40
|
)
|
|
18.45
|
Options outstanding at end of year
|
|
310,740
|
|
$
|
18.35
|
|
310,740
|
|
|
$
|
18.35
|
|
310,740
|
|
$
|
18.35
|
Options vested and expected to vest
|
|
309,450
|
|
|
|
|
308,310
|
|
|
|
|
|
308,310
|
|
|
|
Options exercisable at end of year
|
|
292,540
|
|
|
|
|
276,340
|
|
|
|
|
|
260,140
|
|
|
|
The estimated fair value of options granted during Fiscal 2019 was $2.43 per option. Such value was estimated on the grant date using a binomial lattice option pricing model using the following assumptions:
•
Expected volatility – 27.69%
•
Risk-free interest rate – 2.72%
•
Imputed option life – 6.3 years
•
Expected dividend yield – 3.82%
The expected volatility over the options’ expected life was based on the historical volatility of the weekly closing price of the Company’s stock over a five (5) year period. The risk-free interest rate was based on the annual yield on the grant date of a zero-coupon U.S. Treasury Bond, the maturity of which equals the option’s expected life. The imputed option life was based on the simplified expected term calculation permitted by the SEC, which defines the expected life as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. The expected dividend yield was based on the Company’s historical dividend yield, exclusive of capital gain dividends. The fair value is based on unobservable inputs (level 3 in the fair value hierarchy as provided by authoritative guidance).
For Fiscal 2021, 2020 and 2019, compensation expense related to stock options granted amounted to approximately $42,000, $46,000 and $124,000, respectively. At October 31, 2021, there was approximately $30,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over the remaining weighted average vesting period of approximately 1.6 years. The aggregate intrinsic value of options vested and expected to vest and options exercisable at October 31, 2021 was approximately $410,000 and $341,000, respectively.
Note 11 - Deferred fee plan:
During Fiscal 2001, the Board adopted a deferred fee plan for its officers and directors, which was amended and restated in Fiscal 2009 to make the deferred fee plan compliant with Section 409A of the Internal Revenue Code and the regulations promulgated thereunder (the "Deferred Fee Plan"). Pursuant to the Deferred Fee Plan, any officer or director might elect to defer receipt of any fees that would be due to them. These fees included annual retainer and meeting attendance fees as determined by the Board. Prior to the amendments to the Deferred Fee Plan that went into effect November 1, 2014 (described in the following paragraph), amounts deferred under the Deferred Fee Plan accrued interest at a rate of 9% per annum, compounded quarterly. Any such deferred fee was to be paid to the participants at the later of: (i) the retirement age specified in the deferral election; (ii) actual retirement; or (iii) upon cessation of a participant's duties as an officer or director.
On September 4, 2014, the Board approved amendments, effective November 1, 2014, to the FREIT Maryland Deferred Fee Plan for its executive officers and directors, one of which provided for the issuance of share units payable in FREIT Maryland shares in respect of (i) deferred amounts of all director fees on a prospective basis; (ii) interest on director fees deferred prior to November 1, 2014 (payable at a floating rate, adjusted quarterly, based on the average 10-year Treasury Bond interest rate plus 150 basis points); and (iii) dividends payable in respect of share units allocated to participants in the Deferred Fee Plan as a result of deferrals described above. The number of share units credited to a participant’s account was determined by the closing price of FREIT Maryland shares on the date as set forth in the Deferred Fee Plan.
All fees payable to directors for the years ended October 31, 2021, 2020 and 2019 were deferred under the Deferred Fee Plan except for fees payable to one director, who elected to receive such fees in cash. As a result of the amendment to the Deferred Fee Plan described above, for the years ended October 31, 2021 and 2020, the aggregate amounts of deferred director fees together with related interest and dividends were approximately $488,000 and $526,000, respectively, which have been paid through the issuance of 27,176 and 29,134, vested FREIT Maryland share units, respectively, based on the closing price of FREIT Maryland shares on the dates as set forth in the Deferred Fee Plan.
For the years ended October 31, 2021 and 2020, FREIT Maryland has charged as expense approximately $446,000 and $526,000, respectively, representing deferred director fees and interest, and the balance of approximately $42,000 and $0, respectively, representing dividends payable in respect of share units allocated to Plan participants, has been charged to equity.
The Deferred Fee Plan, as amended, provided that cumulative fees together with accrued interest deferred as of November 1, 2014 was paid in a lump sum or in annual installments over a period not to exceed 10 years, at the election of the participant. In connection with the termination of Robert S. Hekemian’s service to FREIT Maryland under the consulting agreement between Mr. Hekemian and FREIT Maryland in December 2019, Mr. Hekemian’s accrued plan benefits under the Deferred Fee Plan became payable to him and were paid in a single lump sum in the amount of approximately $4.8 million in Fiscal 2020. As of October 31, 2021 and 2020, approximately $1,454,000 and $1,542,000, respectively, of fees has been deferred together with accrued interest of approximately $1,021,000 and $1,091,000, respectively.
On November 4, 2021 (the “Adoption Date”), the Board approved the termination of the Deferred Fee Plan resulting in the termination of the deferral of fees on December 31, 2021 with any subsequent fees earned by a participant being paid in cash. Consistent with the termination of the Deferred Fee Plan, payment related to each participant’s cash account (in the form of a cash lump sum payment) and share unit account (in the form of the issuance of common shares) must be made to each participant no earlier than twelve (12) months and one day after, and no later than twenty-four (24) months, after the Adoption Date. Any interest earned on the participant’s cash account along with dividends (if any) earned on share units, will continue to accrue in share units on each participant’s account until final payment is made.
Note 12 - Dividends and earnings per share:
FREIT Maryland declared dividends of approximately $1,755,000 ($0.25 per share), $0 and $4,173,000 ($0.60 per share), respectively, to stockholders of record during Fiscal 2021, 2020 and 2019.
Basic earnings per share is calculated by dividing net income attributable to common equity (numerator) by the weighted average number of shares and vested share units (See Note 11) outstanding during each period (denominator). The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator
is increased to include the number of additional shares that would have been outstanding if all potentially dilutive shares, such as those issuable upon the exercise of stock options, were issued during the period using the Treasury Stock method. Under the Treasury Stock method, the assumption is that the proceeds received upon exercise of the options, including the unrecognized stock option compensation expense attributable to future services, are used to repurchase FREIT Maryland’s stock at the average market price during the period, thereby increasing the number of shares to be added in computing diluted earnings per share.
For Fiscal 2021 and 2020, the outstanding stock options increased the average dilutive shares outstanding by approximately 3,000 and 1,500 shares, respectively, with no impact on earnings per share. For Fiscal 2019, the outstanding stock options were anti-dilutive with no impact on diluted earnings per share.
There were approximately 268,000, 268,000 and 306,000, respectively, anti-dilutive shares for the years ended October 31, 2021, 2020 and 2019. Anti-dilutive shares consist of out-of-the money stock options under the Plan.
Note 13 - Segment information:
ASC 280-10, "Disclosures about Segments of an Enterprise and Related Information", establishes standards for reporting financial information about operating segments in interim and annual financial reports and provides for a "management approach" in identifying the reportable segments. FREIT Maryland has determined that it has two reportable segments: commercial properties and residential properties. These reportable segments offer different types of space, have different types of tenants, and are managed separately because each requires different operating strategies and management expertise.
The commercial segment is comprised of eight (8) properties, excluding the land and building formerly occupied as a Pathmark supermarket in Patchogue, New York, which was sold on February 8, 2019 (see Note 2), during the fiscal years ended October 31, 2021, 2020 and 2019. The residential segment is comprised of seven (7) properties, excluding the Pierre Towers property which was converted into a tenancy-in-common and deconsolidated from FREIT Maryland’s operating results as of February 28, 2020 (see Note 3), during the fiscal years ended October 31, 2021 and 2020. The residential segment was comprised of eight (8) properties during the fiscal year ended October 31, 2019.
The accounting policies of the segments are the same as those described in Note 1. The chief operating and decision-making group responsible for oversight and strategic decisions of FREIT Maryland's commercial segment, residential segment and corporate/other is comprised of FREIT Maryland’s Board.
FREIT Maryland through its chief operating and decision making group, assesses and measures segment operating results based on net operating income ("NOI"). NOI, a standard used by real estate professionals, is based on operating revenue and expenses directly associated with the operations of the real estate properties, but excludes: deferred rents (straight lining), depreciation, financing costs and other items. NOI is not a measure of operating results or cash flows from operating activities as measured by GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity.
Real estate rental revenue, operating expenses, NOI and recurring capital improvements for the reportable segments are summarized below and reconciled to consolidated net income attributable to common equity for each of the years in the three-year period ended October 31, 2021. Asset information is not reported since FREIT Maryland does not use this measure to assess performance.
|
|
Years Ended October 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
2019
|
|
|
|
(In Thousands of Dollars)
|
|
Real estate rental revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
23,547
|
|
|
$
|
24,486
|
|
|
$
|
26,692
|
|
Residential
|
|
|
26,974
|
|
|
|
28,638
|
|
|
|
33,175
|
|
Total real estate rental revenue
|
|
|
50,521
|
|
|
|
53,124
|
|
|
|
59,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
11,223
|
|
|
|
11,334
|
|
|
|
11,694
|
|
Residential
|
|
|
11,071
|
|
|
|
11,588
|
|
|
|
14,368
|
|
Total real estate operating expenses
|
|
|
22,294
|
|
|
|
22,922
|
|
|
|
26,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
12,324
|
|
|
|
13,152
|
|
|
|
14,998
|
|
Residential
|
|
|
15,903
|
|
|
|
17,050
|
|
|
|
18,807
|
|
Total net operating income
|
|
$
|
28,227
|
|
|
$
|
30,202
|
|
|
$
|
33,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring capital improvements - residential
|
|
$
|
(625
|
)
|
|
$
|
(347
|
)
|
|
$
|
(685
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to consolidated net income attributable to common equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment NOI
|
|
$
|
28,227
|
|
|
$
|
30,202
|
|
|
$
|
33,805
|
|
Deferred rents - straight lining
|
|
|
(230
|
)
|
|
|
(397
|
)
|
|
|
410
|
|
Investment income
|
|
|
116
|
|
|
|
204
|
|
|
|
360
|
|
Unrealized loss on interest rate cap contract
|
|
|
-
|
|
|
|
-
|
|
|
|
(160
|
)
|
Third party transaction costs
|
|
|
-
|
|
|
|
(4,606
|
)
|
|
|
(1,416
|
)
|
Gain on sale of property
|
|
|
-
|
|
|
|
-
|
|
|
|
836
|
|
Gain on deconsolidation of subsidiary
|
|
|
-
|
|
|
|
27,680
|
|
|
|
-
|
|
Loss on investment in tenancy-in-common
|
|
|
(295
|
)
|
|
|
(202
|
)
|
|
|
-
|
|
General and administrative expenses
|
|
|
(5,195
|
)
|
|
|
(3,821
|
)
|
|
|
(2,633
|
)
|
Depreciation
|
|
|
(9,300
|
)
|
|
|
(10,341
|
)
|
|
|
(11,339
|
)
|
Tenant improvement write-off due to COVID-19
|
|
|
-
|
|
|
|
(7,277
|
)
|
|
|
-
|
|
Financing costs
|
|
|
(12,276
|
)
|
|
|
(14,122
|
)
|
|
|
(18,070
|
)
|
Net income
|
|
|
1,047
|
|
|
|
17,320
|
|
|
|
1,793
|
|
Net (income) loss attributable to noncontrolling interests in subsidiaries
|
|
|
(120
|
)
|
|
|
3,233
|
|
|
|
(6
|
)
|
Net income attributable to common equity
|
|
$
|
927
|
|
|
$
|
20,553
|
|
|
$
|
1,787
|
|
Note 14 - Termination of Purchase and Sale Agreement:
On January 14, 2020, FREIT Maryland and certain of its affiliates (collectively, the “Sellers”), entered into a Purchase and Sale Agreement (as subsequently amended, the “Purchase and Sale Agreement”) with Sinatra Properties LLC (the “Purchaser”), which provided for the sale by the Sellers to the Purchaser of 100% of the Sellers’ ownership interests in six real properties held by the Sellers in exchange for the purchase price described therein, subject to the terms and conditions of the Purchase and Sale Agreement. On April 30, 2020, the Sellers delivered written notice to the Purchaser of the Sellers’ termination of the Purchase and Sale Agreement in accordance with its terms due to the occurrence of a “Purchaser Default” thereunder, based on the Purchaser’s failure to perform its obligations under the Purchase and Sale Agreement and close the transactions contemplated therein.
Upon the execution of the Purchase and Sale Agreement, the Purchaser delivered into escrow a deposit in the amount of $15 million (the “Deposit”), in the form of an unconditional, irrevocable letter of credit in such amount (the “Letter of Credit”). The Purchase and Sale Agreement provides that the Sellers’ exclusive remedy, in the event of a “Purchaser Default” and the termination of the Purchase and Sale Agreement, is the forfeiture of the Deposit to the Sellers as liquidated damages. Accordingly, contemporaneously with the Sellers’ delivery of the termination notice to the Purchaser, the Sellers delivered written notice to the escrow agent requesting that the escrow agent release the Letter of Credit from escrow and deliver same to the Sellers.
On May 6, 2020, the Purchaser filed a complaint (the “Complaint”) against the Sellers in the Superior Court of New Jersey, in which, among other things, the Purchaser alleges breach of contract and breach of the covenant of good faith and fair dealing against the Sellers in connection with the Sellers’ termination of the Purchase and Sale Agreement. The Purchaser seeks (a) a judgment of specific performance compelling the Sellers to convey the properties under the Purchase and Sale Agreement to the Purchaser; (b) declaratory judgment from the court that (i) the Purchase and Sale Agreement is not terminated, (ii) the Purchaser is not in default under the Purchase and Sale
Agreement, and (iii) the Sellers are in default under the Purchase and Sale Agreement, subject to a right to cure; (c) an order for injunctive relief compelling the Sellers to perform the Purchase and Sale Agreement; (d) in the event that the court does not order specific performance, a judgment directing that the Purchaser’s $15 million deposit under the Purchase and Sale Agreement be returned to the Purchaser, and compensatory, consequential and incidental damages in an amount to be determined at trial; and (e) attorneys’ fees and costs.
The Purchaser has filed lis pendens with respect to each of the six properties that were subject to the Purchase and Sale Agreement. The lis pendens provides notice to the public of the Complaint. Pending the resolution of this litigation, the filing of the lis pendens will adversely affect the future sale or financing of those properties.
On June 17, 2020, the Sellers filed their answer, separate defenses, and counterclaims (the “Answer”) in response to the Complaint, in which, among other things, the Sellers (a) deny the Purchaser’s claim that the Sellers’ termination of the Purchase and Sale Agreement was wrongful, and assert that there was no contractual basis in the Purchase and Sale Agreement to relieve the Purchaser from its obligation to perform thereunder, or to defer or postpone the Purchaser’s obligation to perform, (b) assert certain defenses to the allegations set forth in the Complaint without admitting any liability, and (c) request relief from the Court in the form of (i) judgment in the Sellers’ favor dismissing all of the Purchaser’s claims against them with prejudice and denying all of the Purchaser’s requests for relief, (ii) reasonable attorneys’ fees and costs, and (iii) such other and further relief as the Court deems just.
In addition, the Answer asserts counterclaims by the Sellers against the Purchaser for breach of contract due to the Purchaser’s failure to close the Purchase and Sale Agreement in accordance with its terms, and the Sellers seek a declaratory judgment from the Court that the Sellers properly terminated the Purchase and Sale Agreement in accordance with its terms due to the Purchaser’s default and an order from the Court that the Purchaser authorize the escrow agent to release the $15 million deposit under the Purchase and Sale Agreement to the Sellers. On April 28, 2021, the Sellers amended the Answer to include (1) counterclaims against the Purchaser for breach of contract due to the Purchaser’s breach of confidentiality and non-disclosure obligations contained in the Purchase and Sale Agreement, and (2) third-party claims against Purchaser’s affiliate Kushner Realty Acquisition LLC for breach of its confidentiality and non-disclosure obligations contained in the non-disclosure agreement entered into by the parties in connection with the negotiation of the transactions contemplated by the Purchase and Sale Agreement, based on the conduct of the Purchaser and its affiliates after the Sellers terminated the Purchase and Sale Agreement.
In connection with these counterclaims and third-party claims, the Answer seeks the following relief from the Court: (a) liquidated damages in the amount of $15 million, as provided in the Purchase and Sale Agreement; (b) in the alternative to the liquidated damages provided for in the Purchase and Sale Agreement, money damages in an amount to be determined at trial; (c) interest, attorneys’ fees and costs associated with the defense of the Purchaser’s claims and the prosecution of the Sellers’ counterclaims against the Purchaser, as provided for in the Purchase and Sale Agreement; (d) judgment declaring that the Sellers properly terminated the Purchase and Sale Agreement due to the Purchaser’s default thereunder; (e) judgment declaring that the Purchaser must authorize the escrow agent to release the $15 million deposit to the Sellers; (f) an order enjoining the Purchaser and its affiliates from engaging in further breaches of the Purchase and Sale Agreement and non-disclosure agreement, and compelling the Purchaser and its affiliates to return the Sellers’ confidential information and materials and to use best efforts to ensure the return of the Sellers’ confidential information and materials from third parties to whom the Purchaser and/or its affiliates provided such materials; and (g) such other relief as the Court deems just and equitable.
In the Answer filed by the Purchaser on September 15, 2020 and the Answer and Affirmative Defenses filed by the Purchaser and Kushner Realty Acquisition LLC on June 7, 2021, the Purchaser and Kushner Realty Acquisition LLC have generally denied the claims, counterclaims and allegations contained in the Sellers’ original and amended Answer, and asserted affirmative defenses to the Sellers’ claims and counterclaims.
The Sellers believe that the allegations set forth in the Complaint and Answer filed by the Purchaser and in the Answer and Affirmative Defenses filed by the Purchaser and Kushner Realty Acquisition LLC are without merit and intend to vigorously defend the action and enforce the Sellers’ rights and remedies under the Purchase and Sale Agreement in connection with the “Purchaser Default” thereunder, including the Purchaser’s forfeiture of its $15 million deposit to the Sellers as liquidated damages as provided in the Purchase and Sale Agreement. As of the year ended October 31, 2021, the $15 million deposit has not been included in income in the accompanying consolidated statement of income.
During the years ended October 31, 2021, 2020 and 2019, the Special Committee of the Board (“Special Committee”) incurred on behalf of the Company third party transaction costs for advisory, legal and other expenses primarily related to the Purchase and Sale Agreement and the Plan of Liquidation discussed in Note 15 in the amount of approximately $0, $4,606,000 and $1,416,000, respectively. On April 30, 2020, the Sellers delivered written notice to the Purchaser of the Sellers’ termination of the Purchase and Sale Agreement and on May 7, 2020 the Board approved the elimination of the Special Committee. No further transaction costs were incurred thereafter. Legal costs attributed to the legal proceeding between FREIT Maryland and certain of its affiliates and Sinatra Properties, LLC have been incurred in the amount of approximately $2,282,000 and $957,000 for the years ended October 31, 2021 and 2020, respectively.
Note 15 - Termination of Plan of Liquidation:
On January 14, 2020, the Trust’s Board adopted a Plan of Voluntary Liquidation with respect to the Trust (the “Plan of Liquidation”), which provided for the voluntary dissolution, termination and liquidation of the Trust by the sale,
conveyance, transfer or delivery of all of the Trust’s remaining assets in accordance with the terms and conditions of the Plan of Liquidation and the Internal Revenue Code of 1986, as amended, and the Treasury regulations thereunder. The Plan of Liquidation provided that it would become effective upon (i) approval by a majority of the votes cast by Trust’s stockholders present in person or represented by proxy at a duly called meeting of the Trust’s stockholders at which a quorum is present and (ii) the consummation of the transactions contemplated by the Purchase and Sale Agreement.
While the Plan of Liquidation received stockholder approval, the Plan of Liquidation did not become effective as the Sellers terminated the Purchase and Sale Agreement by written notice delivered to the Purchaser on April 30, 2020, and the transactions contemplated thereby were not consummated. Accordingly, the Trust did not proceed with the sale, conveyance, transfer or delivery of all of the Trust’s remaining assets as contemplated by the Plan of Liquidation that was adopted by the Board on January 14, 2020.
Note 16 - COVID-19 Pandemic:
The international spread of COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. The extent to which this pandemic could continue to affect our financial condition, liquidity, and results of operations is difficult to predict and depends on evolving factors, including: duration, scope, government actions, and other social responses. Beginning in March 2020 and throughout most of 2020, many states in the U.S., including New Jersey, New York and Maryland, where our properties are located, implemented stay-at-home and shut down orders for all "non-essential" business and activity in an aggressive effort to mitigate the spread of COVID-19. These orders have continued to evolve resulting in the lifting of these restrictions over the past year. Vaccinations for the COVID-19 virus have been widely distributed among the general U.S. population which has resulted in loosened restrictions previously mandated on our tenants identified as nonessential. However, the potential emergence of vaccine-resistant variants of COVID-19 could trigger restrictions to be put back in place. Such restrictions may include mandatory business shut-downs, reduced business operations and social distancing requirements. As the impact of the pandemic evolves, it continues to cause uncertainty and volatility in the financial markets. The COVID-19 pandemic and the actions taken by individuals, businesses and government authorities to reduce its spread have caused substantial lost business revenue, changes in consumer behavior and large reductions in liquidity and fair value of many assets.
Despite the COVID-19 pandemic and preventive measures taken to mitigate the spread, our residential properties have continued to generate cash flow. At our commercial properties, with the exception of grocery stores and other "essential" businesses, many of our retail tenants have been adversely affected by the previously mandated shut downs and the continued lingering impact to consumer sentiment and preferences for safety amid the reemergence of other COVID-19 variants. During the first quarter of Fiscal 2021, Pet Valu, Inc., a pet store tenant, vacated several stores located in shopping centers owned by FREIT Maryland affiliates (Wayne PSC, Damascus Centre and Grande Rotunda) and terminated the related leases early paying an aggregate lease termination fee in the amount of approximately $260,000 (with a consolidated impact to FREIT Maryland of approximately $140,000). The properties owned by Grande Rotunda and Damascus Centre were sold on December 30, 2021 and January 10, 2022, respectively. See Note 17 to FREIT Maryland’s consolidated financial statements for additional details. The Company is closely monitoring changes in the collectability assessment of its tenant receivables as a result of certain tenants suffering adverse financial consequences related to the COVID-19 pandemic. For the fiscal years ended October 31, 2021 and 2020, rental revenue deemed uncollectible of approximately $1.3 million and $1.4 million (with a consolidated impact to FREIT Maryland of approximately $0.8 million and $0.9 million), respectively, was classified as a reduction in rental revenue based on our assessment of the probability of collecting substantially all of the remaining rents for certain tenants. During the period beginning March 2020 through October 31, 2021, FREIT Maryland has applied, net of amounts subsequently paid back by tenants, an aggregate of approximately $397,000 of security deposits from its commercial tenants to outstanding receivables due. On a case by case basis, FREIT has offered some commercial tenants deferrals of rent over a specified time period totaling approximately $132,000 and $206,000 (with a consolidated impact to FREIT Maryland of approximately $81,000 and $192,000) and rent abatements totaling approximately $239,000 and $238,000 (with a consolidated impact to FREIT Maryland of approximately $158,000 and $156,000) for the fiscal years ended October 31, 2021 and 2020, respectively. FREIT Maryland currently remains in active discussions and negotiations with these impacted retail tenants.
Cobb Theatre, an anchor tenant movie theatre at the Rotunda retail property filed for bankruptcy and rejected its lease at the Rotunda property as of June 30, 2020. As a result of the rejection of this lease, uncollected rents in the amount of approximately $0.3 million and a straight-line rent receivable of approximately $0.4 million were reversed against revenue, and unamortized leasing commissions in the amount of approximately $0.2 million were written off and fully expensed in Fiscal 2020 resulting in a net impact to net income of approximately $0.9 million (with a consolidated impact to FREIT Maryland of approximately $0.5 million) for the year ended October 31, 2020. Tenant improvements related to the Cobb Theatre with a net book value of approximately $7.3 million (with a consolidated impact to FREIT Maryland of approximately $4.4 million) as of October 31, 2020 were deemed to be impaired, written off and charged to operations in the consolidated statement of income for the fiscal year ended October 31, 2020. On December 30, 2021, the property owned by Grande Rotunda was sold. (See Note 17 for additional details.)
As a result of the negative impact of the COVID-19 pandemic at our commercial properties, in Fiscal 2020 we were granted debt payment relief from certain of our lenders on such properties in the form of deferral of principal and/or interest payments for a three-month period, resulting in total deferred payments of approximately $1,013,000 which will become due at the maturity of the loans. As of October 31, 2021 and 2020, approximately $162,000 of this amount has been repaid, there will be no further deferrals of principal and/or interest payments on these loans and the balance due has been included in mortgages payable on the consolidated balance sheets as of October 31, 2021 and 2020. (See Note 5 to FREIT Maryland’s consolidated financial statements for additional details).
For the fiscal year ended October 31, 2021, we have experienced a positive cash flow from operations with cash provided by operations of approximately $12.2 million. This could change based on the duration of the pandemic, which is uncertain. We believe that our cash balance as of October 31, 2021 of approximately $35.9 million coupled with a $13 million available line of credit (available through October 31, 2023, see Note 5) and the additional $7.5 million in funds available to draw on the Boulders loan (See Note 17 for additional details) will provide us with sufficient liquidity for at least the next twelve months from the filing of this Form 10-K.
The extent of the effects of COVID-19 on our business, results of operations, cash flows, value of our real estate assets and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty.
Note 17 -Subsequent events:
Boulders Refinancing
On December 30, 2021, FREIT Maryland refinanced its $14.4 million loan (which would have matured on February 1, 2022) on its Boulders property located in Rockaway, New Jersey with a new loan held by ConnectOne Bank in the amount of $7,500,000, with additional funding available to be drawn in the amount of $7,500,000 for corporate needs inclusive of $250,000 for legal fees potentially incurred by the lender related to the lis pendens on this property resulting from the legal proceedings between FREIT Maryland and certain of its affiliates and Sinatra Properties, LLC (See Note 14). This loan is interest-only and has a maturity date of January 1, 2024 with the option of FREIT Maryland to extend for one year from the maturity date, subject to certain provisions of the loan agreement. This refinancing will provide annual debt service savings of approximately $1,173,000 as result of the reduction in the principal amount and a reduction in the annual interest rate from a fixed rate of 5.37% to a fixed rate of 2.85% and interest-only payments being required under this new loan.
Purchase and Sale Agreement
On November 22, 2021, certain affiliates (the “Sellers”) of FREIT Maryland entered into a Purchase and Sale Agreement (the “Maryland Purchase and Sale Agreement”) with MCB Acquisition Company, LLC (the “Purchaser”), a third party, pursuant to which the Sellers agreed to sell three properties to the Purchaser. The properties consisted of retail and office space and a residential apartment community owned by Grande Rotunda, LLC (the “Rotunda Property”), a shopping center owned by Damascus Centre, LLC (the “Damascus Property”), and a shopping center owned by WestFREIT Corp. (the “Westridge Square Property”). FREIT Maryland owns 100% of its subsidiary, WestFREIT Corp. (“WestFREIT”), a 60% interest in Grande Rotunda, LLC (“Grande Rotunda”), the joint venture that owned the Rotunda Property, and a 70% interest in Damascus Centre, LLC (“Damascus Centre”), the joint venture that owned the Damascus Property.
The original purchase price for the Rotunda Property, the Damascus Property and the Westridge Square Property (collectively the “Properties”) under the Maryland Purchase and Sale Agreement was reduced by $2,723,000 from $267,000,000 to $248,750,269, after giving effect to the $15,526,731 escrow deposit described below. This reduction in the sales price was to account for improvements and repairs to the Properties and miscellaneous items identified by the Purchaser in the course of its due diligence inspection. Additionally, the Purchaser was obligated under the Purchase and Sale Agreement to deposit a total of $15,526,731 in escrow with respect to certain leases at the Properties where the rent commencement date has not occurred or economic obligations of the Sellers under certain leases remain unpaid. Although there can be no assurance, a portion of the $15,526,731 escrow deposit (the “Purchaser Escrow Payment”) may be paid to the Sellers depending upon the outcome of construction and leasing activities at the Properties.
On December 30, 2021, the sale of the Rotunda Property was consummated by Grande Rotunda and the Purchaser for a purchase price of $191,080,598. Grande Rotunda received net proceeds from the sale of approximately $68.7 million, after payment of related mortgage debt in the amount of $116.5 million and certain transactional expenses and transfer taxes, and not including loans (including interest) from each of the partners in Grande Rotunda (FREIT Maryland and Rotunda 100, LLC), totaling approximately $30.9 million which will be repaid with proceeds from the sale. In addition, the Purchaser deposited a total of $14,026,401 of the Purchaser Escrow Payment in escrow with respect to certain leases at the Rotunda Property where the rent commencement date has not occurred or economic obligations of Grande Rotunda under certain leases remain unpaid. The sale of the Rotunda Property resulted in a net gain of approximately
$52 million which includes approximately $8.2 million of proceeds anticipated to be released from the $14,026,401 held in escrow.
On January 7, 2022, the sale of the Westridge Square Property was consummated by WestFREIT and the Purchaser for a purchase price of $20,984,604. WestFREIT paid net cash outlays from the sale of approximately $0.7 million, after payment of related mortgage debt in the amount of approximately $21.1 million and certain transactional expenses and transfer taxes. In addition, the Purchaser deposited a total of $1,015,396 of the Purchaser Escrow Payment in escrow with respect to certain leases at the Westridge Square Property where the rent commencement date has not occurred or economic obligations of WestFREIT under certain leases remain unpaid. The sale of the Westridge Square Property resulted in a net gain of approximately $8.7 million which includes approximately $0.7 million of proceeds anticipated to be released from the $1,015,396 held in escrow.
On January 10, 2022, the sale of the Damascus Property was consummated by Damascus Centre and the Purchaser for a purchase price of $36,685,067. Damascus Centre received net proceeds from the sale of approximately $16.9 million, after payment of related mortgage debt in the amount of approximately $18.2 million and certain transactional expenses and transfer taxes. In addition, the Purchaser deposited a total of $484,934 of the Purchaser Escrow Payment in escrow with respect to certain leases at the Damascus Property where the rent commencement date has not occurred or economic obligations of Damascus Centre under certain leases remain unpaid. The sale of the Damascus Property resulted in a net gain of approximately $10.1 million which includes approximately $0.4 million of proceeds anticipated to be released from the $484,934 held in escrow.
Note 18 - Selected quarterly financial data (unaudited):
The following summary represents the results of operations for each quarter for the years ended October 31, 2021 and 2020 (in thousands, except per share amounts):
2021:
|
|
Quarter Ended
|
|
|
Year Ended
|
|
|
|
January 31,
|
|
|
April 30,
|
|
|
July 31,
|
|
|
October 31,
|
|
|
October 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
12,754
|
|
|
$
|
12,804
|
|
|
$
|
12,542
|
|
|
$
|
12,191
|
(d)
|
|
$
|
50,291
|
|
Expenses, net
|
|
|
11,975
|
|
|
|
12,867
|
|
|
|
12,226
|
|
|
|
12,176
|
|
|
|
49,244
|
|
Net income (loss)
|
|
|
779
|
|
|
|
(63
|
)
|
|
|
316
|
|
|
|
15
|
|
|
|
1,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to noncontrolling interests in subsidiaries
|
|
|
(221
|
)
|
|
|
72
|
|
|
|
(107
|
)
|
|
|
136
|
|
|
|
(120
|
)
|
Net income attributable to common equity
|
|
$
|
558
|
|
|
$
|
9
|
|
|
$
|
209
|
|
|
$
|
151
|
|
|
$
|
927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic and diluted
|
|
$
|
0.08
|
|
|
$
|
-
|
|
|
$
|
0.03
|
|
|
$
|
0.02
|
|
|
$
|
0.13
|
|
Dividends declared per share
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.10
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020:
|
|
Quarter Ended
|
|
|
Year Ended
|
|
|
|
January 31,
|
|
|
April 30,
|
|
|
July 31,
|
|
|
October 31,
|
|
|
October 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
15,593
|
|
|
$
|
13,688
|
|
|
$
|
12,149
|
(b)
|
|
$
|
11,297
|
|
|
$
|
52,727
|
|
Expenses, net
|
|
|
17,614
|
|
|
|
(13,448
|
)(a)
|
|
|
12,469
|
(b)
|
|
|
18,772
|
(c)
|
|
|
35,407
|
|
Net (loss) income
|
|
|
(2,021
|
)
|
|
|
27,136
|
|
|
|
(320
|
)
|
|
|
(7,475
|
)
|
|
|
17,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to noncontrolling interests in subsidiaries
|
|
|
(241
|
)
|
|
|
84
|
|
|
|
139
|
|
|
|
3,251
|
|
|
|
3,233
|
|
Net (loss) income attributable to common equity
|
|
$
|
(2,262
|
)
|
|
$
|
27,220
|
|
|
$
|
(181
|
)
|
|
$
|
(4,224
|
)
|
|
$
|
20,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings per share - basic and diluted
|
|
$
|
(0.32
|
)
|
|
$
|
3.88
|
(a)
|
|
$
|
(0.02
|
)(b)
|
|
$
|
(0.60
|
)(c)
|
|
$
|
2.94
|
|
Dividends declared per share
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Includes $27.7 million gain on deconsolidation of subsidiary related to the Pierre Towers property which was deconsolidated from FREIT's operating results due to the conversion to a tenancy-in-common form of ownership on February 28, 2020. ($3.96 per share)
|
|
(b) Includes impact of the rejection of the lease for Cobb Theatre at the Rotunda retail property as of June 30, 2020 resulting in the reversal against revenue of uncollected rents in the amount of approximately $0.3 million and a straight-line rent receivable of approximately $0.4 million and the write-off of unamortized leasing commissions in the amount of approximately $0.2 million resulting in a net impact of approximately $0.9 million (with a consolidated impact to FREIT of approximately $0.5 million). ($0.07 per share)
|
|
(c) Includes write-off of Cobb Theatre's tenant improvements of approximately $7.3 million (with a consolidated impact to FREIT of approximately $4.4 million) at the Rotunda retail property due to COVID-19. ($0.62 per share)
|
|
(d) Includes settle-ups of Common Area Maintenance with commercial tenants of approximately $0.7 million for the fiscal quarter ended October 31, 2021, of which approximately $0.4 million related to Fiscal 2020 and approximately $0.3 million related to prior quarters in Fiscal 2021.
|
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION
OCTOBER 31, 2021
(In Thousands of Dollars)
Column A
|
Column B
|
Column C
|
Column D
|
Column E
|
Column F
|
Column G
|
Column H
|
Column I
|
|
|
Initial Cost
|
Costs Capitalized
|
Gross Amount at Which
|
|
|
|
|
|
|
to Company
|
Subsequent to Acquisition
|
Carried at Close of Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life on
|
|
|
|
Buildings
|
|
|
|
|
Buildings
|
|
|
|
|
Which
|
|
Encum-
|
|
and
|
|
Improve-
|
Carrying
|
|
and
|
|
Accumulated
|
Date of
|
Date
|
Depreciation
|
Description
|
brances
|
Land
|
Improvements
|
Land
|
ments
|
Costs
|
Land
|
Improvements
|
Total (1)
|
Depreciation
|
Construction
|
Acquired
|
is Computed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steuben Arms, River Edge, NJ
|
$ 9,545
|
$ 364
|
$ 1,773
|
$ -
|
$ 1,531
|
|
$ 364
|
$ 3,304
|
$ 3,668
|
$ 2,989
|
1966
|
1975
|
7-40 years
|
Berdan Court, Wayne, NJ
|
28,815
|
250
|
2,206
|
-
|
4,991
|
|
250
|
7,197
|
7,447
|
5,957
|
1964
|
1965
|
7-40 years
|
Westwood Hills, Westwood, NJ
|
25,000
|
3,849
|
11,546
|
-
|
2,919
|
|
3,849
|
14,465
|
18,314
|
10,107
|
1965-70
|
1994
|
7-39 years
|
Boulders - Rockaway, NJ
|
14,453
|
1,632
|
-
|
3,386
|
16,091
|
|
5,018
|
16,091
|
21,109
|
6,628
|
2005-2006
|
1963/1964
|
7-40 years
|
Regency Club - Middletown, NY
|
14,921
|
2,833
|
17,792
|
-
|
973
|
|
2,833
|
18,765
|
21,598
|
3,663
|
2003
|
2014
|
7-40 years
|
Icon - Baltimore, MD (2)
|
64,086
|
5,871
|
-
|
-
|
87,884
|
|
5,871
|
87,884
|
93,755
|
11,563
|
2016
|
2005
|
7-40 years
|
Station Place - Red Bank, NJ
|
11,971
|
8,793
|
10,757
|
-
|
19
|
|
8,793
|
10,776
|
19,569
|
1,055
|
2015
|
2017
|
7-40 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Damascus Shopping Center,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Damascus, MD (2)
|
18,274
|
2,950
|
6,987
|
6,296
|
17,232
|
|
9,246
|
24,219
|
33,465
|
8,765
|
1960's
|
2003
|
5-39.5 years
|
Franklin Crossing, Franklin Lakes,
NJ
|
-
|
29
|
-
|
3,382
|
7,438
|
|
3,411
|
7,438
|
10,849
|
4,545
|
1963/75/97
|
1966
|
5-39.5 years
|
Glen Rock, NJ
|
-
|
12
|
36
|
-
|
164
|
|
12
|
200
|
212
|
164
|
1940
|
1962
|
5-25 years
|
Westridge Square S/C, Frederick,
MD (2)
|
21,188
|
9,135
|
19,159
|
(1)
|
4,796
|
|
9,134
|
23,955
|
33,089
|
21,463
|
1986
|
1992
|
5-31.5 years
|
Westwood Plaza, Westwood, NJ
|
18,001
|
6,889
|
6,416
|
-
|
2,389
|
|
6,889
|
8,805
|
15,694
|
8,643
|
1981
|
1988
|
5-31.5 years
|
Preakness S/C, Wayne, NJ
|
22,588
|
9,280
|
24,217
|
-
|
2,799
|
|
9,280
|
27,016
|
36,296
|
13,174
|
1955/89/00
|
2002
|
5-39.5 years
|
The Rotunda, Baltimore, MD (2)
|
52,434
|
10,392
|
14,634
|
232
|
46,078
|
|
10,624
|
60,712
|
71,336
|
16,905
|
1920/2016
|
2005
|
5-40 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land Leased:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rockaway, NJ
|
-
|
114
|
-
|
-
|
-
|
|
114
|
-
|
114
|
-
|
|
1963/1964
|
|
Vacant Land:
|
|
|
|
`
|
|
|
|
|
|
|
|
|
|
Franklin Lakes, NJ
|
-
|
224
|
-
|
(156)
|
-
|
|
68
|
-
|
68
|
-
|
|
1966/93
|
|
Wayne, NJ
|
-
|
286
|
-
|
-
|
-
|
|
286
|
-
|
286
|
-
|
|
2002
|
|
Rockaway, NJ
|
-
|
51
|
-
|
-
|
-
|
|
51
|
-
|
51
|
-
|
|
1963/1964
|
|
|
$ 310,276
|
$ 62,954
|
$ 115,523
|
$ 13,139
|
$ 195,304
|
$ -
|
$ 76,093
|
$ 310,827
|
$ 386,920
|
$ 115,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Total cost for each property is the same for federal income tax purposes, with the exception of the Regency Club, Station Place and the Rotunda properties (Icon and The Rotunda) whose cost for federal income tax purposes is approximately $13.5 million, $4.2 million and $163.2 million, respectively.
|
|
(2) The properties owned by Grande Rotunda, WestFREIT and Damascus Centre were sold on December 30, 2021, January 7, 2022 and January 10, 2022, respectively. See Note 17 to FREIT Maryland’s consolidated financial statements for additional details.
|
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(In Thousands of Dollars)
Reconciliation of Real Estate and Accumulated Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, Beginning of year
|
|
$
|
385,853
|
|
|
$
|
448,866
|
|
|
$
|
456,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions - Buildings and improvements
|
|
|
1,883
|
|
|
|
2,055
|
|
|
|
3,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposals - Buildings and improvements
|
|
|
(816
|
)
|
|
|
(585
|
)
|
|
|
(240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenant improvement write-off due to COVID-19
|
|
|
-
|
|
|
|
(8,910
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of property
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deconsolidation of subsidiary
|
|
|
-
|
|
|
|
(55,573
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
386,920
|
|
|
$
|
385,853
|
|
|
$
|
448,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
$
|
107,137
|
|
|
$
|
118,363
|
|
|
$
|
111,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions - Charged to operating expenses
|
|
|
9,300
|
|
|
|
10,341
|
|
|
|
11,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenant improvement write-off due to COVID-19 - Charged to operating expenses
|
|
|
-
|
|
|
|
(1,637
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposals - Buildings and improvements
|
|
|
(816
|
)
|
|
|
(583
|
)
|
|
|
(217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of property
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,726
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deconsolidation of subsidiary
|
|
|
-
|
|
|
|
(19,347
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
115,621
|
|
|
$
|
107,137
|
|
|
$
|
118,363
|
|
Table of Contents
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY,
INC. (“FREIT Maryland”)