FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, 10-K filed on 12 Jan 18
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Oct. 31, 2017
Jan. 12, 2018
Apr. 28, 2017
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY 
 
 
Entity Central Index Key
0000036840 
 
 
Document Type
10-K 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
FY 
 
 
Document Period End Date
Oct. 31, 2017 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--10-31 
 
 
Is Entity a Well-known Seasoned Issuer?
No 
 
 
Is Entity a Voluntary Filer?
No 
 
 
Entitys Reporting Status Current
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 98 
Entity Common Stock, Shares Outstanding
 
6,740,069 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Oct. 31, 2017
Oct. 31, 2016
ASSETS
 
 
Real estate, at cost, net of accumulated depreciation
$ 331,965 
$ 336,770 
Construction in progress
129 
128 
Cash and cash equivalents
7,899 
10,906 
Tenants' security accounts
2,007 
1,875 
Receivables arising from straight-lining of rents
3,359 
2,725 
Accounts receivable, net of allowance for doubtful accounts of $175 and $191 as of October 31, 2017 and 2016, respectively
1,767 
1,730 
Secured loans receivable
5,451 
5,451 
Prepaid expenses and other assets
9,135 
6,559 
Qualified intermediary deposit - 1031 exchange
6,965 
   
Deferred charges, net
2,680 
1,736 
Interest rate swap contracts
1,600 
91 
Total Assets
372,957 
367,971 
Liabilities:
 
 
Mortgages and construction loan payable
323,435 
329,719 
Less unamortized debt issuance costs
1,863 
2,521 
Mortgages payable, net (Note 4)
321,572 
327,198 
Due to affiliate
5,172 
   
Deferred trustee compensation payable
9,078 
9,078 
Accounts payable and accrued expenses
3,870 
8,379 
Dividends payable
   
2,022 
Tenants' security deposits
2,960 
2,817 
Deferred revenue
1,276 
1,134 
Interest rate swap contracts
439 
1,882 
Total Liabilities
344,367 
352,510 
Commitments and contingencies (Note 7)
   
   
Common equity:
 
 
Shares of beneficial interest without par value: 8,000,000 shares authorized; 6,993,152 shares issued plus 122,092 and 77,544 vested share units granted to Trustees at October 31, 2017 and 2016, respectively
27,651 
26,713 
Treasury stock, at cost: 253,083 shares at October 31, 2017 and 2016
(5,273)
(5,273)
Dividends in excess of net income
(4,824)
(16,916)
Accumulated other comprehensive income (loss)
284 
(1,690)
Total Common Equity
17,838 
2,834 
Noncontrolling interests in subsidiaries
10,752 
12,627 
Total Equity
28,590 
15,461 
Total Liabilities and Equity
$ 372,957 
$ 367,971 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Oct. 31, 2017
Oct. 31, 2016
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 175 
$ 191 
Shares of benefical interest, no par value (in dollars per share)
   
   
Shares of benefical interest, authorized
8,000,000 
8,000,000 
Shares of benefical interest, issued
6,993,152 
6,993,152 
Vested share units to trustees, issued
122,092 
77,544 
Treasury stock at cost, shares
253,083 
253,083 
CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Oct. 31, 2017
Oct. 31, 2016
Oct. 31, 2015
Revenue:
 
 
 
Rental income
$ 45,357 
$ 40,780 
$ 38,786 
Reimbursements
5,597 
5,158 
5,479 
Sundry income
680 
316 
518 
Total revenue
51,634 
46,254 
44,783 
Expenses:
 
 
 
Operating expenses
15,848 
13,734 
13,317 
Lease termination fee
620 
   
   
Straight line rent adjustment - bankrupt tenant
   
   
1,046 
Management fees
2,375 
2,046 
2,000 
Real estate taxes
10,139 
8,051 
7,774 
Depreciation
10,669 
7,852 
6,883 
Total expenses
39,651 
31,683 
31,020 
Operating income
11,983 
14,571 
13,763 
Investment income
206 
150 
150 
Gain on sale of property
15,395 
314 
   
Loan prepayment costs relating to property sale
(1,139)
   
   
Interest expense including amortization of deferred financing costs
(15,762)
(11,936)
(11,001)
Net income
10,683 
3,099 
2,912 
Net (income) loss attributable to noncontrolling interests in subsidiaries
2,433 
(94)
(281)
Net income attributable to common equity
$ 13,116 
$ 3,005 
$ 2,631 
Earnings per share - basic and diluted:
$ 1.92 
$ 0.44 
$ 0.39 
Weighted average shares outstanding:
 
 
 
Basic
6,833 
6,783 
6,778 
Diluted
6,833 
6,784 
6,778 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Oct. 31, 2017
Oct. 31, 2016
Oct. 31, 2015
Statement of Comprehensive Income [Abstract]
 
 
 
Net income
$ 10,683 
$ 3,099 
$ 2,912 
Other comprehensive income (loss):
 
 
 
Unrealized gain (loss) on interest rate swap contracts before reclassifications
2,424 
(1,346)
(2,196)
Amount reclassified from accumulated other comprehensive income to interest expense
528 
621 
615 
Net unrealized gain (loss) on interest rate swap contracts
2,952 
(725)
(1,581)
Comprehensive income
13,635 
2,374 
1,331 
Net (income) loss attributable to noncontrolling interests
2,433 
(94)
(281)
Other comprehensive income (loss):
 
 
 
Unrealized (gain) loss on interest rate swap contracts attributable to noncontrolling interests
(978)
65 
191 
Comprehensive income (loss) attributable to noncontrolling interests
1,455 
(29)
(90)
Comprehensive income attributable to common equity
$ 15,090 
$ 2,345 
$ 1,241 
CONSOLIDATED STATEMENTS OF EQUITY (USD $)
Shares of Beneficial Interest [Member]
Treasury Stock [Member]
Dividends in Excess of Net Income [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Total Common Equity [Member]
Noncontrolling Interests [Member]
Total
Balance at Oct. 31, 2014
$ 24,985,000 
$ (3,348,000)
$ (6,270,000)
$ 360,000 
$ 15,727,000 
$ 14,119,000 
$ 29,846,000 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Repurchase of 94,302 shares of beneficial interest
   
(2,169,000)
   
   
(2,169,000)
   
(2,169,000)
Stock based compensation expense
94,000 
   
   
   
94,000 
   
94,000 
Vested share units granted to Trustees
781,000 
   
   
   
781,000 
   
781,000 
Distributions to noncontrolling interests
   
   
   
   
   
(516,000)
(516,000)
Net income
   
   
2,631,000 
   
2,631,000 
281,000 
2,912,000 
Dividends declared, including $29 and $76 payable in share units in 2015, 2016 and 2017, respectively ($1.20, $1.20 and $0.13 per share)
   
   
(8,130,000)
   
(8,130,000)
   
(8,130,000)
Net unrealized loss on interest rate swaps
   
   
   
(1,390,000)
(1,390,000)
(191,000)
(1,581,000)
Balance at Oct. 31, 2015
25,860,000 
(5,517,000)
(11,769,000)
(1,030,000)
7,544,000 
13,693,000 
21,237,000 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Stock based compensation expense
94,000 
   
   
   
94,000 
   
94,000 
Vested share units granted to Trustees
759,000 
   
   
   
759,000 
   
759,000 
Stock options exercised
   
244,000 
   
   
244,000 
   
244,000 
Distributions to noncontrolling interests
   
   
   
   
   
(1,095,000)
(1,095,000)
Net income
   
   
3,005,000 
   
3,005,000 
94,000 
3,099,000 
Dividends declared, including $29 and $76 payable in share units in 2015, 2016 and 2017, respectively ($1.20, $1.20 and $0.13 per share)
   
   
(8,152,000)
   
(8,152,000)
   
(8,152,000)
Net unrealized loss on interest rate swaps
   
   
   
(660,000)
(660,000)
(65,000)
(725,000)
Balance at Oct. 31, 2016
26,713,000 
(5,273,000)
(16,916,000)
(1,690,000)
2,834,000 
12,627,000 
15,461,000 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Stock based compensation expense
122,000 
   
   
   
122,000 
   
122,000 
Vested share units granted to Trustees
816,000 
   
   
   
816,000 
   
816,000 
Distributions to noncontrolling interests
   
   
   
   
   
(420,000)
(420,000)
Net income
   
   
13,116,000 
   
13,116,000 
(2,433,000)
10,683,000 
Dividends declared, including $29 and $76 payable in share units in 2015, 2016 and 2017, respectively ($1.20, $1.20 and $0.13 per share)
   
   
(1,024,000)
   
(1,024,000)
   
(1,024,000)
Net unrealized loss on interest rate swaps
   
   
   
1,974,000 
1,974,000 
978,000 
2,952,000 
Balance at Oct. 31, 2017
$ 27,651,000 
$ (5,273,000)
$ (4,824,000)
$ 284,000 
$ 17,838,000 
$ 10,752,000 
$ 28,590,000 
CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Oct. 31, 2017
Oct. 31, 2016
Oct. 31, 2015
Statement of Stockholders' Equity [Abstract]
 
 
 
Dividends declared, per share
$ 0.15 
$ 1.20 
$ 1.20 
Stock dividends payable
$ 13 
$ 76 
$ 29 
Number of shares repurchased
   
   
94,302 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Oct. 31, 2017
Oct. 31, 2016
Oct. 31, 2015
Operating activities:
 
 
 
Net income
$ 10,683 
$ 3,099 
$ 2,912 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
10,669 
7,852 
6,883 
Amortization
1,932 
952 
679 
Stock based compensation expense
122 
94 
94 
Trustee fees and related interest paid in stock units
803 
683 
752 
Gain on sale of property
(15,395)
(314)
   
Deferred rents - straight line rent
(634)
(608)
1,265 1
Bad debt expense
196 
196 
631 
Net amortization of acquired leases
   
   
Changes in operating assets and liabilities:
 
 
 
Tenants' security accounts
11 
109 
104 
Accounts receivable, prepaid expenses and other assets
(2,780)
(793)
(1,766)
Accounts payable, accrued expenses and deferred trustee compensation
(1,021)
(3,264)
392 
Deferred revenue
142 
54 
95 
Net cash provided by operating activities
4,728 
8,060 
12,042 
Investing activities:
 
 
 
Proceeds from sale of property
9,135 
3,059 
   
Capital improvements - existing properties
(10,058)
(9,927)
(4,158)
Construction and pre-development costs
   
(13,535)2
(48,576)3
Net cash used in investing activities
(923)
(20,403)
(52,734)
Financing activities:
 
 
 
Repayment of mortgages and construction loan
(34,254)
(28,314)
(4,117)
Repayment of credit line
   
   
(5,000)
Proceeds from mortgage loan refinancings
23,500 
25,800 
16,200 
Proceeds from additional tranche of loan
   
2,320 
   
Restricted loan proceeds held in escrow
   
(1,850)
   
Refinancing good faith deposit
(960)
   
   
Proceeds from construction loan
1,349 
21,093 
47,740 
Advanced funding for construction loan reserve
(647)
   
   
Proceeds from credit line
3,121 
   
   
Proceeds from exercise of stock options
   
244 
   
Deferred financing costs
(640)
(377)
(371)
Dividends paid
(3,033)
(8,072)
(8,129)
Repurchase of Company stock - Treasury shares
   
   
(2,169)
Due to affiliate
5,172 
   
   
Distributions to noncontrolling interests
(420)
(1,095)
(516)
Net cash (used in) provided by financing activities
(6,812)
9,749 
43,638 
Net increase (decrease) in cash and cash equivalents
(3,007)
(2,594)
2,946 
Cash and cash equivalents, beginning of year
10,906 
13,500 
10,554 
Cash and cash equivalents, end of year
7,899 
10,906 
13,500 
Supplemental disclosure of cash flow data:
 
 
 
Interest paid, net of amounts capitalized including $1,139 in loan prepayment costs related to property sale
15,160 
11,100 
11,010 
Investing activities:
 
 
 
Transfer from construction in progress to real estate for completion of Rotunda
   
124,423 
   
Proceeds from sale of property, held in escrow pending 1031 exchange
6,965 
   
   
Accrued capital expenditures, construction costs, pre-development costs and interest
413 
3,130 
8,054 
Financing activities:
 
 
 
Dividends declared but not paid
   
2,022 
2,018 
Dividends paid in share units
$ 13 
$ 76 
$ 29 
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Oct. 31, 2017
Oct. 31, 2016
Oct. 31, 2015
Statement of Cash Flows [Abstract]
 
 
 
Loan prepayment costs relating to property sale
$ 1,139 
    
    
Construction in Progress Expenditures Incurred but Not yet Paid
   
4,213 
5,523 
Straight line rent adjustment
 
 
$ 1,100 
Organization and significant accounting policies
Organization and significant accounting policies

Note 1 - Organization and significant accounting policies:

Organization:

First Real Estate Investment Trust of New Jersey ("FREIT" or the “Company”) was organized on November 1, 1961 as a New Jersey Business Trust. FREIT is engaged in owning residential and commercial income producing properties located primarily in New Jersey, Maryland and New York.

FREIT 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 does not pay federal income tax on income whenever income distributed to shareholders is equal to at least 90% of real estate investment trust taxable income. Further, FREIT pays no federal income tax on capital gains distributed to shareholders.

FREIT is subject to federal income tax on undistributed taxable income and capital gains. FREIT 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 May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which is codified as ASC 606 and effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. ASC 606 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. Based on the nature of FREIT’s operations and sources of revenue, FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which supersedes the existing guidance for lease accounting, “Leases (Topic 840)”. ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. Given that this standard has minimal impact on real estate operating lessors, FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which requires companies to include cash and cash equivalents that have restrictions on withdrawal or use in total cash and cash equivalents on the statement of cash flows. ASU 2016-18 is effective for periods beginning after December 15, 2017 and interim periods within those years and early adoption is permitted including adoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations: Clarifying the Definition of a Business,” which amends guidance that assists preparers in evaluating whether a transaction will be accounted for as an acquisition of an asset or a business, likely resulting in more acquisitions being accounted for as asset acquisitions. There are certain differences in accounting under these models, including the capitalization of transaction expenses and application of a cost accumulation model in an asset acquisition. The standard is effective for annual periods beginning after December 15, 2017, including interim periods within those periods with early adoption permitted for certain transactions. FREIT is in the process of evaluating the impact of this standard on its recent acquisition of Station Place in Red Bank, New Jersey.

Principles of consolidation:

The consolidated financial statements include the accounts of FREIT and the following subsidiaries in which FREIT has a controlling financial interest, including two LLCs in which FREIT is the managing member with a 40% ownership interest:

Subsidiary   

Owning

Entity

 

%

Ownership

 

Year

Acquired/Organized

 
                     
Westwood Hills, LLC      FREIT     40%     1994  
S and A Commercial Associates Limited Partnership   ("S and A")      FREIT     65%     2000  
Wayne PSC, LLC      FREIT     40%     2002  
Damascus Centre, LLC      FREIT     70%     2003  
Pierre Towers, LLC      S and A     100%     2004  
Grande Rotunda, LLC      FREIT     60%     2005  
WestFREIT, Corp      FREIT     100%     2007  
FREIT Regency, LLC      FREIT     100%     2014  

 

The consolidated financial statements include 100% of each subsidiary’s assets, liabilities, operations and cash flows, with the interests not owned by FREIT reflected as "noncontrolling interests in subsidiaries”. All significant inter-company accounts and transactions have been eliminated in consolidation.

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 to concentrations of credit risk consist primarily of cash and cash equivalents. FREIT considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. FREIT maintains its cash and cash equivalents in bank and other accounts, the balances of which, at times, may exceed federally insured limits of $250,000.

Real estate development costs:

It is FREIT’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 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. For the fiscal years ended October 31, 2017, 2016 and 2015, there were no impairments of long-lived assets.

Deferred charges:

Deferred charges consist 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 $1,298,000, $543,000 and $419,000 in 2017, 2016 and 2015, 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 and commercial tenants generally provide for additional rentals and reimbursements based on such factors as percentage of tenants' sales in excess of specified volumes, increases in real estate taxes, Consumer Price Indices and common area maintenance charges. These additional rentals are generally included in income when reported to FREIT, when earned, or ratably over the appropriate period.

Interest rate swap contracts:

FREIT utilizes derivative financial instruments to reduce interest rate risk. FREIT does not hold or issue derivative financial instruments for trading purposes. FREIT 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 5 to FREIT’s consolidated financial statements).

Advertising:

FREIT expenses the cost of advertising and promotions as incurred. Advertising costs charged to operations amounted to approximately $386,000, $257,000 and $162,000 in 2017, 2016 and 2015, respectively.

Stock-based compensation:

FREIT has a stock-based compensation plan that was approved by FREIT’s Board of Trustees (“Board”), and ratified by FREIT’s shareholders. Stock based awards under the plan to employees are accounted for based on their grant-date fair value (see Note 10 to FREIT’s consolidated financial statements).

Stock-based awards to nonemployees are accounted for based on the fair value of the equity instruments on the vesting date.

Property sales
Property sales

Note 2 – Property sales:

On January 11, 2016, FREIT was notified by Lakeland Bank (as successor by merger to Pascack Community Bank) of its election to exercise the option under its lease to purchase the property leased by FREIT to Lakeland Bank located in Rochelle Park, New Jersey. Pursuant to the Lease Agreement, Lakeland Bank had the right to exercise this option at a price equal to the greater of $3 million or the fair market value of the property as determined by mutual agreement between tenant and landlord. FREIT and Lakeland Bank agreed to a purchase price of $3.1 million. On June 17, 2016, FREIT sold this property, having a carrying amount of approximately $2.7 million (including a straight-line rent receivable in the amount of approximately $0.5 million), to Lakeland Bank for $3.1 million resulting in a gain of approximately $0.3 million net of sales fees. This sale resulted in FREIT’s loss of future annual rents of approximately $241,000, which would have increased periodically through September 2023.

On June 12, 2017, FREIT sold its Hammel Gardens property, a residential property located in Maywood, New Jersey, for a sales price of $17 million. The sale of this property, which had a carrying value of approximately $0.7 million, resulted in a capital gain of approximately $15.4 million net of sales fees and commissions. As a result of this sale, FREIT incurred a loan prepayment cost of approximately $1.1 million and paid off the related mortgage on the Hammel Gardens property in the amount of approximately $8 million from the proceeds of the sale. FREIT has structured this sale in a manner that qualifies it as a like-kind exchange of real estate pursuant to Section 1031 of the Internal Revenue Code. The 1031 Exchange transaction resulted in a deferral for income tax purposes of the $15.4 million capital gain. The net proceeds from this sale, which were approximately $7 million, were held in escrow until a replacement property was purchased. A replacement property related to this like-kind exchange was acquired on December 7, 2017, and the sale proceeds held in escrow were applied to the purchase price of such property (see Note 17 to FREIT’s consolidated financial statements for further details).

As the disposal of the Rochelle Park and Hammel Gardens properties did not represent a strategic shift that would have a major impact on FREIT’s operations or financial results, the properties’ operations were not reflected as discontinued operations in the accompanying consolidated financial statements.

Real estate
Real estate

Note 3 - Real estate:

Real estate consists of the following:

 

   Range of        
   Estimated  October 31, 
   Useful Lives  2017   2016 
      (In Thousands of Dollars) 
Land     $77,432   $77,744 
Unimproved land      405    405 
Apartment buildings  7-40 years   190,554    190,990 
Commercial buildings/shopping centers  5-40 years   162,837    158,413 
Equipment/Furniture  5-15 years   1,931    1,765 
Total real estate, gross      433,159    429,317 
Less accumulated depreciation      101,194    92,547 
Total real estate, net     $331,965   $336,770 
Mortgages, construction loan payable and credit line
Mortgages, construction loan payable and credit line

Note 4 – Mortgages, construction loan payable and credit line:

 

   October 31, 2017   October 31, 2016 
   Principal   Unamortized Debt Issuance Costs   Principal   Unamortized Debt Issuance Costs 
   (In Thousands of Dollars)   (In Thousands of Dollars) 
Frederick, MD (A)  $   $   $22,000   $23 
Rockaway, NJ (B)   16,660    109    17,141    138 
Westwood, NJ (C)   20,220    166    20,801    197 
Patchogue, NY (D)   5,231    2    5,231    25 
Wayne, NJ (E)   17,705    44    18,054    70 
River Edge, NJ (F)   10,456    104    10,659    122 
Maywood, NJ (G)           8,087    99 
Westwood, NJ (H)   20,628    101    21,098    135 
Wayne, NJ (I)   25,102    308    25,749    332 
Hackensack, NJ (J)   29,198    98    29,901    50 
Damascus, MD (K)   20,357    362    20,831    427 
Middletown, NY (L)   16,200    236    16,200    269 
   Total fixed rate   181,757    1,530    215,752    1,887 
Frederick, MD (A)   23,241    209         
Baltimore, MD (M)   115,316        113,967    634 
Line of credit - Provident Bank (N)   3,121    124         
   Total variable rate   141,678    333    113,967    634 
Total  $323,435   $1,863   $329,719   $2,521 

 

  

  (A)

On April 28, 2017, WestFREIT Corp., a consolidated subsidiary, refinanced its $22 million mortgage loan held by Wells Fargo Bank, with a new mortgage loan from Manufacturer’s and Traders Trust Company in the amount of $23.5 million. The new loan bears a floating interest rate equal to 275 basis points over the one-month LIBOR and 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 (as of April 30, 2017 the rate was 3.74% based on the one-month LIBOR at April 30, 2017), and (ii) net refinancing proceeds of approximately $1.1 million. The net refinancing proceeds have been used for general corporate purposes. The new loan is 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 is due. The mortgage is secured by a retail building in Frederick, Maryland having a net book value of approximately $14,992,000 as of October 31, 2017.

  (B) 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 $15,919,000 as of October 31, 2017.
  (C) On January 14, 2013, FREIT 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 January 2023 at which time the outstanding balance is due. The new mortgage is secured by a retail building in Westwood, New Jersey having a net book value of approximately $7,612,000 as of October 31, 2017.
  (D) The loan, modified effective January 31, 2013, is payable in monthly installments of $31,046 including interest at 4.5% through March 2018 at which time the outstanding balance is due. Under the terms of the mortgage loan agreement, FREIT can request, during the term of the loan, additional funding that will bring the outstanding principal balance up to 75% of loan-to-value (percentage of mortgage loan to total appraised value of property securing the loan). Effective January 1, 2016, the monthly debt service payment has been reduced to interest only.  This arrangement will remain in effect until the earlier of the property being re-leased or sold, the full repayment of the mortgage note, or March 1, 2018.  (See Note 15 to FREIT’s consolidated financial statements for additional information.)  The mortgage is secured by a retail building in Patchogue, New York having a net book value of approximately $6,492,000 as of October 31, 2017.  
  (E) Payable in monthly installments of $121,100 including interest at 6.09% through September 1, 2019 at which time the outstanding balance is due. The mortgage is secured by an apartment building in Wayne, New Jersey having a net book value of approximately $1,705,000 as of October 31, 2017.

(F) On November 19, 2013, FREIT 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 $828,000 as of October 31, 2017.

(G) On November 19, 2013, FREIT refinanced mortgage loans scheduled to mature on December 1, 2013 with a new mortgage loan in the amount of $8,500,000 payable in monthly installments of $43,605 including interest at 4.54% through December 1, 2023 at which time the outstanding balance was due. The mortgage was secured by an apartment building in Maywood, New Jersey which was sold on June 12, 2017. A portion of the proceeds from the sale were used to pay-off the $8 million then outstanding balance plus accrued interest and fees including a $1.1 million loan prepayment cost. (See Note 2 to FREIT’s consolidated financial statements for additional information.)
  (H) Payable in monthly installments of $120,752 including interest of 4.62% through November 1, 2020 at which time the outstanding balance is due. The mortgage is secured by an apartment building in Westwood, New Jersey having a net book value of approximately $9,515,000 as of October 31, 2017.
  (I) On September 29, 2016, Wayne PSC, LLC 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, LLC 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, LLC with FREIT receiving $0.4 million based on it 40% membership interest in Wayne PSC, LLC. (See Note 5 to FREIT’s consolidated financial statements 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 $25,579,000 as of October 31, 2017 including approximately $0.1 million classified as construction in progress.   
  (J)

Payable in monthly installments of $191,197 including interest of 5.38% until May 2019 at which time the unpaid balance is due. The mortgage is secured by an apartment building in Hackensack, New Jersey having a net book value of approximately $38,818,000 as of October 31, 2017.

On January 8, 2018, Pierre Towers, LLC (“Pierre”), owned by S And A Commercial Associates Limited Partnership (a consolidated subsidiary), refinanced its $29.2 million loan held by State Farm with a new mortgage loan from New York Life Insurance in the amount of $48 million. On October 26, 2017, Pierre paid New York Life Insurance a good faith deposit in the amount of $960,000 which is included in prepaid expenses and other assets in the accompanying consolidated balance sheet. The new loan has a term of ten years and bears a fixed interest rate equal to 3.88%. Interest-only payments will be required each month for the first five years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 5.38% to a fixed rate of 3.88%; and (ii) net refinancing proceeds of approximately $17 million (after giving effect to a $1.2 million loan prepayment cost to pay-off the loan held by State Farm) which can be used for capital expenditures and general corporate purposes.

  (K) On December 26, 2012, Damascus Centre, LLC 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 take-down 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 (included in prepaid expenses and other assets in the accompanying consolidated balance sheets) is held in escrow and available to Damascus Centre, LLC once certain tenants open and begin paying rent.  The loan has a maturity date of January 3, 2023 and bears a floating interest rate equal to 210 points over the 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 5 to FREIT’s consolidated financial statements for additional information relating to the interest rate swaps.)  The shopping center securing the loan has a net book value of approximately $27,290,000 as of October 31, 2017.
 

(L)

On December 29, 2014, FREIT Regency, LLC 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 the loan will mature on December 15, 2024. Interest-only payments are required each month through December 15, 2017. 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, FREIT Regency, LLC 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 5 to FREIT’s consolidated financial statements 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 $19,655,000 as of October 31, 2017.
  (M)

The original Rotunda acquisition loan for $22.5 million, which was subsequently reduced to $19.5 million on February 1, 2010, was acquired by FREIT on May 28, 2013. FREIT subsequently sold this loan to Wells Fargo Bank. On December 9, 2013, Grande Rotunda, LLC closed with Wells Fargo Bank on a construction loan of up to $120 million to be used to redevelop and expand the Rotunda property in Baltimore, Maryland with a term of four (4) years, with one twelve-month extension, at a rate of 225 basis points over the monthly LIBOR.

On November 23, 2016, the following terms and conditions of this loan were modified: (i) the total amount that may be drawn on this loan was decreased from $120 million to $116.1 million, allowing for an additional draw of $2.1 million over the then existing balance of approximately $114 million to be used for retail tenant improvements and leasing commissions; (ii) leasing benchmarks are no longer required to be met including the waiver of the leasing benchmarks FREIT was not in compliance with as of June 30, 2016; (iii) Grande Rotunda, LLC provided an interest reserve to Wells Fargo Bank in the amount of $2 million for the purpose of funding interest payments, and is obliged to replenish the account balance to $1 million if it should fall below $500,000; (iv) the maturity date of the loan was changed from December 31, 2017 to October 31, 2017 with no option to extend; (v) the interest rate on the amount outstanding on the loan was increased by 25 basis points to 250 basis points over the monthly LIBOR. The following terms and conditions of this loan were modified and effective as of October 31, 2017: (i) the maturity date of the loan was extended 120 days from October 31, 2017 to February 28, 2018; (ii) the interest rate on the amount outstanding on the loan was increased by 35 basis points to 285 basis points over the monthly LIBOR through December 31, 2017; (iii) the interest rate on the amount outstanding on the loan was increased by 65 basis points to 315 basis points over the monthly LIBOR from January 1, 2018 through February 28, 2018. The loan is secured by the Rotunda property, which has a net book value of approximately $156,347,000 as of October 31, 2017.

As of October 31, 2017, $115.3 million of this loan was drawn down (including approximately $1.3 million during Fiscal 2017), of which $19 million was used to pay off the loan from FREIT, and $96.3 million was used toward the construction at the Rotunda. The loan was fully drawn down as of October 31, 2017 with a remaining reserve of approximately $0.8 million used as a letter of credit for offsite improvements.

Grande Rotunda, LLC is in the process of negotiating new loan documents with Aareal Capital Corporation (“Aareal”) to refinance the existing Rotunda construction loan from Wells Fargo. Aareal has provided a term sheet to Grande Rotunda, LLC to provide $121.9 million in financing that would be used to repay the existing Wells Fargo construction loan, provide an additional $3.4 million for retail tenant improvements and leasing costs, and fund loan closing costs. The Aareal loan would have an initial term of two years and two one-year renewal options, would bear a floating interest rate at 285 basis points over the one-month LIBOR rate, and would be secured by the Rotunda property. The loan is subject to Aareal’s satisfaction with its due diligence reviews and the ultimate amount of the loan will be dependent upon the value of the Rotunda property as determined by an independent appraiser. Although Grande Rotunda, LLC expects that the Aareal loan will close in January 2018, there can be no assurance this loan will close. In the event that the Aareal loan does not close and Wells Fargo does not grant an extension of the existing construction loan beyond the current maturity date of February 28, 2018, Grande Rotunda, LLC would be at risk of defaulting under the Wells Fargo loan, which could result in Wells Fargo exercising its remedies under the loan including foreclosure of the property. As a guarantor of the Wells Fargo loan, FREIT would be responsible for 25% of the loan balance (approximately $29 million), in the event that Grande Rotunda, LLC defaults under the loan.

 

(N)

Credit Line: On October 27, 2017, FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 27, 2020 at which point no further advances shall be permitted and provided the line of credit is not renewed by the lender, the outstanding principal balance of the line of credit shall convert to a commercial term loan maturing on October 31, 2022.  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’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit was increased from $12.8 million to $13 million and the interest rate on the amount outstanding will be at a floating rate of 275 basis points over the 30-day LIBOR with a floor of 3.75%.  During Fiscal 2017, FREIT utilized $3 million of its credit line to fund tenant improvements for new retail tenants at the Rotunda property. As of October 31, 2017, approximately $3.1 million was outstanding (including closing costs of approximately $0.1 million related to the renewal of the line) and $9.9 million was available under the line of credit.

Certain of the Company’s mortgage loans and the Credit Line contain financial covenants. The Company was in compliance with all of its financial covenants as of October 31, 2017.

Fair Value of Long-Term Debt:

The following table shows the estimated fair value and carrying value of FREIT’s long-term debt at October 31, 2017 and 2016:

 

    October 31,   October 31,
($ in Millions)   2017   2016
Fair Value   $317.8   $331.3
         
Carrying Value   $321.6   $327.2

 

Fair values are estimated based on market interest rates at the end of each fiscal year and on 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, 2017 are as follows: 

Year Ending  October 31,  Amount 
2018  $125,065(a)
2019  $72,082 
2020  $3,575 
2021  $22,288 
2022  $20,291 
(a)Includes approximately $115.3 million relating to the Rotunda construction loan due February 2018. (See Note 4(M) to FREIT’s consolidated financial statements.)

 

Interest rate swap contracts
Interest rate swap contracts

Note 5 - Interest rate swap contracts: 

On September 29, 2016, Wayne PSC, LLC, a consolidated subsidiary, refinanced its $24.2 million mortgage loan held by Metropolitan Life Insurance Company, with a new mortgage loan from People’s United Bank in the amount of $25.8 million. 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. At October 31, 2017, the total amount outstanding on this loan was approximately $25.1 million. In order to minimize interest rate volatility during the term of the loan, Wayne PSC, LLC 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. At October 31, 2017, the derivative financial instrument has a notional amount of approximately $25.2 million and a maturity date of October 2026.

On December 26, 2012, Damascus Centre, LLC 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 take-down of the second tranche of this loan on April 22, 2016 in the amount of $2,320,000. The total amount outstanding for both tranches of this loan held by People’s United Bank as of October 31, 2017 was approximately $20.4 million. The loan has a maturity date of January 3, 2023 and bears a floating interest rate equal to 210 basis points over the 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. At October 31, 2017, the derivative financial instrument has a notional amount of approximately $20.4 million and a maturity date of January 2023.

On December 29, 2014, FREIT Regency, LLC 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 the loan will mature on December 15, 2024. At October 31, 2017, the total amount outstanding on this loan was $16.2 million. In order to minimize interest rate volatility during the term of the loan, FREIT Regency, LLC 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. At October 31, 2017, the derivative financial instrument has a notional amount of approximately $16.2 million and a maturity date of December 2024.

In accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities”, FREIT is accounting for the Damascus Centre, LLC, FREIT Regency, LLC, and Wayne PSC, LLC interest rate swaps as cash flow hedges and marks to market its fixed pay interest rate swaps, taking into account present interest rates compared to the contracted fixed rate over the life of the contract. For the year ended October 31, 2017, FREIT recorded an unrealized gain of $2,952,000 in comprehensive income representing the change in the fair value of the swaps during such period with a corresponding asset of approximately $275,000 for the Damascus Center swaps, $1,325,000 for the Wayne PSC swap and a corresponding liability of approximately $439,000 for the Regency swap as of October 31, 2017. For the year ended October 31, 2016, FREIT recorded an unrealized loss of $725,000 in comprehensive income representing the change in the fair value of the swaps during such period with a corresponding liability of $521,000 for the Damascus Center swaps and $1,361,000 for the Regency swap and a corresponding asset of $91,000 for the Wayne PSC swap as of October 31, 2016. For the year ended October 31, 2015, FREIT recorded an unrealized loss of $1,581,000 in comprehensive income representing the change in the fair value of the swaps during such period with a corresponding liability of $945,000 for the Regency swap and $121,000 for the Damascus Center swap as of October 31, 2015. The fair values are based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).

Capitalized interest
Capitalized interest

Note 6 - Capitalized interest

Interest costs associated with amounts expended for the Rotunda development were capitalized and included in the cost of the project. Capitalization of interest ceased upon substantial completion of the project which occurred as of the end of the third quarter of Fiscal 2016. There was no interest capitalized in Fiscal 2017. Interest capitalized during the years ended October 31, 2016 and 2015, amounted to approximately $2,611,000 and $2,447,000, respectively.

Commitments and contingencies
Commitments and contingencies

Note 7 - Commitments and contingencies:

Leases:

Commercial tenants:

FREIT leases commercial space having a net book value of approximately $154.9 million at October 31, 2017 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.

Minimum rental income (in thousands of dollars) to be received from non-cancelable operating leases in years subsequent to October 31, 2017 is as follows:

 

Year Ending October 31,  Amount 
2018  $18,520 
2019   17,649 
2020   16,659 
2021   14,775 
2022   11,445 
Thereafter   54,869 
Total  $133,917 

The above amounts assume that all leases which expire are not renewed and, accordingly, neither minimal rentals 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 or increases in Consumer Price Indices. 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 three years for the period ended October 31, 2017 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 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.

Prior to its purchase in November 2002 by Wayne PSC, LLC, a 40% owned consolidated affiliate of FREIT (“Wayne PSC”), a Phase I and Phase II Environmental Assessment of the Preakness shopping center revealed soil and ground water contamination with Percloroethylene (Dry Cleaning Fluid) caused by the mishandling of this chemical by a former dry cleaner tenant. The seller of the center to Wayne PSC has paid for and completed all required remediation work in accordance with the NJDEP standards, and this matter is now closed. In prior years, FREIT conducted environmental audits for all of its properties except for its undeveloped land and retail properties in Franklin Lakes (Franklin Crossing) and Glen Rock, New Jersey. Except as noted above, the environmental reports secured by FREIT have not revealed any environmental conditions on its properties, which require remediation pursuant to any applicable federal or state law or regulation.

FREIT has determined that several of its properties contain lead based paint (“LBP”). FREIT believes that it complies with all federal, state and local requirements as they pertain to LBP.

FREIT does not believe that the environmental conditions described above will have a material adverse effect upon the capital expenditures, revenues, earnings, financial condition or competitive position of FREIT.

Letters of credit:

In connection with the renovation and expansion at the Rotunda, performance letters of credit totaling approximately $1.0 million as of October 31, 2017 were issued to guarantee the completion of off-site improvements.

Income taxes
Income taxes

Note 9 - Income taxes:

There was no ordinary taxable income for fiscal year ended October 31, 2017 for FREIT to distribute to its shareholders. As described in Note 2 to FREIT’s consolidated financial statements, FREIT completed a like-kind exchange with respect to the sale of the Maywood, New Jersey property, which was sold on June 12, 2017 at a capital gain of approximately $15.4 million. The tax basis of Station Place in Red Bank, New Jersey, which was the replacement property in the like-kind exchange, is approximately $18.3 million lower than the acquisition cost of approximately $19 million recorded for financial reporting purposes. FREIT distributed 100% of its ordinary taxable income for each of the fiscal years ended October 31, 2016 and 2015 to its shareholders as dividends. FREIT distributed 100% of the capital gain in Fiscal 2016 from the sale of the property in Rochelle Park, New Jersey (See Note 2 to FREIT’s consolidated financial statements) to its shareholders as dividends. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income or gain was recorded in FREIT’s consolidated financial statements for each of the fiscal years ended October 31, 2017, 2016 and 2015.

As of October 31, 2017, FREIT had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended October 31, 2015 remain open to examination by the major taxing jurisdictions to which FREIT is subject.

Equity incentive plan
Equity incentive plan

Note 10- Equity incentive plan:

On September 10, 1998, the Board approved FREIT's Equity Incentive Plan (the "Plan") which was ratified by FREIT's shareholders on April 7, 1999, whereby up to 920,000 of FREIT's shares of beneficial interest (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's number of authorized shares of beneficial interest. Key personnel eligible for these awards include trustees, 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. 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 shareholders 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. As of October 31, 2017, 185,020 shares are available for issuance under the Plan.

On September 4, 2014, the Board approved the grant of a total of 246,000 non-qualified share options under the Plan to certain FREIT executive officers, the members of the Board and certain employees of Hekemian & Co., Inc.,

FREIT’s managing agent. The options have an exercise price of $18.45 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 September 3, 2024.

On November 10, 2016, the Board approved the grant of a total of 38,000 non-qualified share options under the Plan to two members of the Board who were appointed to the Board during Fiscal 2016. The options have an exercise price of $21.00 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 November 9, 2026.

The following table summarizes stock option activity for Fiscal 2017:

 

   Year Ended October 31, 
   2017 
   No. of Options   Exercise 
   Outstanding   Price 
Options outstanding beginning of period   229,880   $18.45 
Options granted during period   38,000   $21.00 
Options forfeited/cancelled during period   (100)  $18.45 
Options outstanding end of period   267,780   $18.81 
Options vested and expected to vest   262,280      
Options exercisable at end of period   140,260      

 

The estimated fair value of options granted during Fiscal 2017 was $3.54 per option. Such value was estimated on the grant date using a binomial lattice option pricing model using the following assumptions:

 

·Expected volatility – 30.30%
·Risk-free interest rate – 2.23%
·Imputed option life – 6.3 years
·Expected dividend yield – 4.66%

 

For options granted during Fiscal 2017, the following assumptions were used: (1) 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; (2) 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; (3) 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; (4) The expected dividend yield was based on the Company’s historical dividend yield, exclusive of capital gain dividends.

For Fiscal 2017, 2016 and 2015, compensation expense related to stock options granted amounted to $122,000, $94,000 and $94,000, respectively. At October 31, 2017, there was approximately $279,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over the remaining weighted average vesting period of approximately 2.4 years.

 

The aggregate intrinsic value of options vested and expected to vest and options exercisable at October 31, 2017 was $78,000 and $46,000, respectively.

Deferred fee plan
Deferred fee plan

Note 11- Deferred fee plan:

During Fiscal 2001, the Board adopted a deferred fee plan for its officers and trustees, 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 trustee may elect to defer receipt of any fees that would be due them. These fees include annual retainer and meeting attendance fees as determined by the full Board of Trustees. 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 is 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 trustee.

On September 4, 2014, the Board approved amendments, effective November 1, 2014, to the FREIT Deferred Fee Plan for its Executive Officers and Trustees, one of which provides for the issuance of share units payable in FREIT shares in respect of (i) deferred amounts of all Trustee fees on a prospective basis; (ii) interest on Trustee 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 will be determined by the closing price of FREIT shares on the date as set forth in the Deferred Fee Plan. All fees payable to Trustees for year ended October 31, 2017 were deferred under the Deferred Fee Plan except for fees payable to one Trustee, who elected to receive such fees in cash. All fees payable to Trustees for the year ended October 31, 2016 were deferred under the Deferred Fee Plan except for the fees payable to two Trustees, who elected to receive such fees in cash. As a result of the amendment to the Deferred Fee Plan described above, for the year ended October 31, 2017 and 2016, the aggregate amounts of deferred Trustee fees together with related interest and dividends were approximately $815,800 and $759,100, respectively, which have been paid through the issuance of 44,548 and 38,194, vested FREIT share units, respectively, based on the closing price of FREIT shares on the dates as set forth in the Deferred Fee Plan.

For the year ended October 31, 2017 and 2016, FREIT has charged as expense approximately $802,800 and $683,100, respectively, representing Trustee fees and interest, and the balance of approximately $13,000 and $76,000, respectively, representing dividends payable in respect of share units allocated to Plan participants, has been charged to equity.

The Deferred Fee Plan, as amended, provides that cumulative fees together with accrued interest deferred as of November 1, 2014 will be paid in a lump sum or in annual installments over a period not to exceed 10 years, at the election of the Participant. As of October 31, 2017 and 2016, approximately $5,224,000 of fees has been deferred together with accrued interest of approximately $3,854,000 for each fiscal year ended.

Dividends and earnings per share
Dividends and earnings per share

Note 12- Dividends and earnings per share:

FREIT declared dividends of approximately $1,024,000 ($0.15 per share), $8,152,000 ($1.20 per share) and $8,130,000 ($1.20 per share) to shareholders of record during Fiscal 2017, 2016 and 2015.

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 to FREIT’s consolidated financial statements) 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 attributed to future services, are used to repurchase FREIT’s stock at the average market price during the period, thereby reducing the number of shares to be added in computing diluted earnings per share.

For Fiscal 2017, the outstanding stock options were anti-dilutive with no impact on diluted earnings per share. For Fiscal 2016, the outstanding stock options increased the average dilutive shares outstanding by approximately 1,627 shares with no impact on earnings per share. For Fiscal 2015, the outstanding stock options were anti-dilutive with no impact on diluted earnings per share.

Segment information
Segment information

Note 13- Segment information:

ASC 280-10, "Disclosures about Segments of an Enterprise and Related Information", established 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 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.

During the fiscal years ended October 31, 2017 and 2016, the commercial segment is comprised of nine (9) properties after giving effect to the sale of a property on June 17, 2016 (See Note 2 to FREIT’s consolidated financial statements). The commercial segment is comprised of ten (10) properties during the fiscal year ended October 31, 2015. The residential segment is comprised of seven (7) properties after giving effect to the sale of a property on June 12, 2017 (See Note 2 to FREIT’s consolidated financial statements) during the fiscal year ended October 31, 2017. The residential segment is comprised of eight (8) properties during the fiscal year ended October 31, 2016, which includes the 379-unit apartment complex constructed as part of the redevelopment and expansion project at the Rotunda which was completed in the third quarter of Fiscal 2016. The residential segment is comprised of seven (7) properties during the fiscal year ended October 31, 2015.

The accounting policies of the segments are the same as those described in Note 1. The chief operating decision-making group of FREIT's commercial segment, residential segment and corporate/other is comprised of FREIT’s Board of Trustees.

FREIT 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, amortization of acquired lease values and other items. NOI is not a measure of operating results or cash flows from operating activities as measured by accounting principles generally accepted in the United States of America, 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, 2017. Asset information is not reported since FREIT does not use this measure to assess performance.

 

   Years Ended October 31, 
   2017   2016   2015 
   (In Thousands of Dollars) 
Real estate rental revenue:               
Commercial  $24,114   $22,694   $23,037 
Residential   26,886    22,952    21,966 
Total real estate rental revenue   51,000    45,646    45,003 
                
Real estate operating expenses:               
Commercial   11,791    10,661    10,436 
Residential   14,442    11,136    10,626 
Total real estate operating expenses   26,233    21,797    21,062 
                
Net operating income:               
Commercial   12,323    12,033    12,601 
Residential   12,444    11,816    11,340 
Total net operating income  $24,767   $23,849   $23,941 
                
                
Recurring capital improvements - residential  $(798)  $(898)  $(424)
                
                
Reconciliation to consolidated net income attributable to common equity:               
Segment NOI  $24,767   $23,849   $23,941 
Gain on sale of property   15,395    314     
Loan prepayment costs relating to property sale   (1,139)        
Lease termination fee   (620)        
Deferred rents - straight lining   634    608    (219)
Amortization of acquired leases           (1)
Investment income   206    150    150 
General and administrative expenses   (2,129)   (2,034)   (2,029)
Straight line rent adjustment - bankrupt tenant           (1,046)
Depreciation   (10,669)   (7,852)   (6,883)
Financing costs   (15,762)   (11,936)   (11,001)
Net income   10,683    3,099    2,912 
Net (income) loss attributable to  noncontrolling interests   2,433    (94)   (281)
Net income attributable to common equity  $13,116   $3,005   $2,631 
Share repurchases
Share repurchases

Note 14- Share repurchases:

On February 17, 2015, FREIT announced a tender offer to purchase up to 100,000 shares of FREIT’s beneficial interest at a price of $23.00 per share. The number of shares proposed to be purchased in the tender offer represented approximately 1.5% of FREIT’s then-outstanding shares. The tender offer expired on March 20, 2015, and in connection therewith FREIT repurchased 94,302 shares of FREIT’s beneficial interest at $23.00 per share for an aggregate purchase price of $2,168,946, which it funded principally from cash and cash equivalents. FREIT’s Trustees and executive officers did not tender their shares of beneficial interest in FREIT in the tender offer.

Pathmark Stores, Inc. Bankruptcy Filing
Pathmark Stores, Inc. Bankruptcy Filing

Note 15- Pathmark Stores, Inc. bankruptcy filing

On July 19, 2015, A&P filed for protection under Chapter 11 of the bankruptcy code as disclosed in the bankruptcy filings. A&P announced its intention to sell its assets and wind up its affairs. FREIT owns a 63,932 square foot store in Patchogue, New York with a carrying value of approximately $6.5 million as of October 31, 2017 that was leased to Pathmark, a subsidiary of A&P, and operated as a Pathmark Super Store. This lease was rejected by A&P as of December 31, 2015.

In accordance with GAAP, FREIT accounted for rental income from the store using the straight line method and accrued rent evenly over the lease term after taking into account scheduled future rent increases, with excess rent accrued over amounts received accounted for as a receivable on the consolidated balance sheets. At October 31, 2015, approximately $1,046,000 remained as a straight line rent receivable. FREIT recorded an expense in the fourth quarter of Fiscal 2015 of $1,046,000 ($0.15 per share basic and diluted) for provision for loss related to the straight line rent receivable for Pathmark. The provision had no impact on cash flow but did have an impact on funds from operations. As a result of the lease having been rejected, FREIT is losing annual rents of approximately $1.4 million until the store is re-leased. FREIT has assessed the real estate for impairment and determined that no impairment exists at October 31, 2017. FREIT is exploring various options for this property.

Anchor tenant termination and modification of lease
Anchor tenant termination fee and modification of lease

Note 16- Anchor tenant termination and modification of lease

FREIT owns and operates an 87,661 square foot shopping center located in Franklin Lakes, New Jersey, the anchor tenant of which is The Stop & Shop Supermarket Company, LLC (“Stop & Shop”). On July 26, 2017, Stop & Shop entered into a lease modification with FREIT whereby the tenant exercised its option to renew the lease for a ten year period with a right of the tenant to terminate the lease at any time during the fifth year if the store does not meet certain sales volume levels set forth in the modification. This lease modification, which provides for a $250,000 reduction in annual rent, has adversely affected and will adversely affect FREIT’s future operating results.

On January 4, 2017, Macy’s, Inc. announced its intention to close several of its department stores across the United States, including the approximately 81,160 square foot Macy’s anchor store located at the Preakness Shopping Center in Wayne, New Jersey. Wayne PSC, LLC (“Wayne PSC”), a 40% owned consolidated affiliate of FREIT, owns and operates this shopping center in which Macy’s operated its store under a long-term lease and was paying annual rent of approximately $234,000 ($2.88 per square foot) with no future rent escalations for the remaining term and option periods of the lease. On April 25, 2017, Wayne PSC announced it had agreed to a termination of Macy’s lease effective as of April 15, 2017. To terminate the lease and take possession of the space, Wayne PSC paid Macy’s a termination fee of $620,000, which was fully expensed in the second quarter of Fiscal 2017. Wayne PSC expects to re-position this space and re-lease it to a new tenant (or multiple tenants) at market rents, which are currently higher than the rent provided for under the terminated Macy’s lease. FREIT will lose total consolidated annual rental income, including reimbursements, of approximately $0.2 million until such time as the space is fully re-leased. FREIT anticipates increased revenue from the space when it is fully re-leased.

Subsequent Event
Subsequent Event

Note 17- Subsequent event

On December 7, 2017, FREIT completed the acquisition of Station Place, a residential apartment complex consisting of one building with 45 units, located in Red Bank, New Jersey through Station Place on Monmouth, LLC FREIT’s 100% owned consolidated affiliate. FREIT identified Station Place as a replacement property for the Maywood, New Jersey property that FREIT sold on June 12, 2017 (see Note 2 and Note 17 to FREIT’s consolidated financial statements). Station Place will be part of FREIT’s Residential segment. The acquisition cost was $19,000,000 (exclusive of $542,000 of transaction costs), which was funded in part with $7 million in net proceeds from the sale of the Maywood, New Jersey property, and the remaining balance of $12,350,000 (inclusive of the transaction costs) was funded by Station Place on Monmouth, LLC (owned 100% by FREIT) through long-term financing for this property from Provident Bank. 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 on Monmouth, LLC 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.

Selected quarterly financial data (unaudited)
Selected quarterly financial data (unaudited)

Note 18- Selected quarterly financial data (unaudited):

The following summary represents the results of operations for each quarter for the years ended October 31, 2017 and 2016 (in thousands, except per share amounts):

 

2017:  Quarter Ended   Year Ended 
   January 31,   April 30,   July 31,   October 31,   October 31, 
                     
Revenue  $12,599   $12,664   $12,680   $13,691   $51,634 
Expenses   12,943    14,365(a)   (421)(b)   14,064    40,951 
    Net income (loss)   (344)   (1,701)   13,101    (373)   10,683 
                          
Net loss attributable to noncontrolling interests in subsidiaries   407    1,002    653    371    2,433 
    Net income (loss) attributable to common equity  $63   $(699)  $13,754   $(2)  $13,116 
                          
Earnings (loss) per share - basic and diluted  $0.01   $(0.10)(a)  $2.01(b)  $   $1.92 
Dividends declared per share  $0.15   $   $   $   $0.15 
                          
2016:  Quarter Ended   Year Ended 
   January 31,   April 30,   July 31,   October 31,   October 31, 
                     
Revenue  $11,424   $11,064   $11,590   $12,176   $46,254 
Expenses   10,381    10,130    10,133(c)   12,511    43,155 
    Net income (loss)   1,043    934    1,457    (335)   3,099 
                          
Net (income) loss attributable to noncontrolling interests in subsidiaries   (41)   (125)   (211)   283    (94)
    Net income (loss) attributable to common equity  $1,002   $809   $1,246   $(52)  $3,005 
                          
Earnings (loss) per share - basic and diluted  $0.15   $0.12   $0.18(c)  $(0.01)  $0.44 
Dividends declared per share  $0.30   $0.30   $0.30   $0.30   $1.20 
                          

 

(a) Includes expense for lease termination fee paid in the amount of $620,000 to Macy's to terminate the lease and take possession of the space at the Preakness Shopping center located in Wayne, NJ ($0.03 per share)

(b) Includes a $15.4 million gain from the sale of the Maywood, New Jersey property ("Hammel Gardens") on June 12, 2017 offset by a $1.1 million loan prepayment cost related to this sale ($2.08 per share)

(c) Includes $0.3M gain on sale of commercial property in Rochelle Park, New Jersey which was sold on June 17, 2016 ($0.05 per share)

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

OCTOBER 31, 2017

(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 10,456 364 1,773 - 1,473 364 3,246 3,610 2,782 1966 1975 7-40 years
Berdan Court, Wayne, NJ 17,705 250 2,206 - 4,482 250 6,688 6,938 5,233 1964 1965 7-40 years
Westwood Hills, Westwood, NJ 20,628 3,849 11,546 - 2,535 3,849 14,081 17,930 8,415 1965-70 1994 7-39 years
Pierre Towers, Hackensack, NJ 29,198 8,390 37,486 19 9,108 8,409 46,594 55,003 16,185 1970 2004 7-40 years
Boulders - Rockaway, NJ 16,660 1,632 - 3,386 15,790 5,018 15,790 20,808 4,889 2005-2006 1963/1964 7-40 years
Regency Club - Middletown, NY 16,200 2,833 17,792 - 630 2,833 18,422 21,255 1,600 2003 2014 7-40 years
Icon - Baltimore, MD 67,921 5,871 - - 87,596 5,871 87,596 93,467 2,726 2016 2005 7-40 years
 
Commercial Properties:
Damascus Shopping Center,
Damascus, MD 20,357 2,950 6,987 6,296 17,236 9,246 24,223 33,469 6,179 1960's 2003 5-39.5 years
Franklin Crossing, Franklin Lakes, NJ - 29 - 3,382 7,427 3,411 7,427 10,838 3,835 1963/75/97 1966 5-39.5 years
Glen Rock, NJ - 12 36 - 214 12 250 262 156 1940 1962 5-25 years
Building formerly occupied by supermarket
Patchogue, NY 5,231 2,128 8,818 - (8) 2,128 8,810 10,938 4,446 1997 1997 15-39.5 years
Westridge Square S/C, Frederick, MD 23,241 9,135 19,159 (1) 4,577 9,134 23,736 32,870 17,878 1986 1992 5-31.5 years
Westwood Plaza, Westwood, NJ 20,220 6,889 6,416 - 2,452 6,889 8,868 15,757 8,145 1981 1988 5-31.5 years
Preakness S/C, Wayne, NJ 25,102 9,280 24,217 - 2,203 9,280 26,420 35,700 10,407 1955/89/00 2002 5-39.5 years
The Rotunda, Baltimore, MD 47,395 10,392 14,634 232 48,666 10,624 63,300 73,924 8,318 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
$320,314 $64,679 $151,070 $13,158 $204,381 $      - $77,837 $355,451 $433,288 $101,194
 

(1) Total cost for each property is the same for federal income tax purposes, with the exception of Pierre Towers, Preakness S/C, the Regency Club and the Rotunda properties (Icon and The Rotunda) whose cost for federal income tax purposes is approximately $42.6 million, $36 million, $13.2 million and $165.7 million, respectively.

 

Reconciliation of Real Estate and Accumulated Depreciation:        
             
   2017   2016   2015 
             
Real estate:               
    Balance, Beginning of year  $429,445   $409,297   $354,032 
                
    Additions:               
      Buildings and improvements   6,602    26,206    55,265 
                
    Disposal:               
      Buildings and improvements   (443)   (3,513)    
                
    Sale of property   (2,316)   (2,545)    
                
    Balance, end of year  $433,288   $429,445   $409,297 
                
Accumulated depreciation:               
    Balance, beginning of year  $92,547   $88,452   $81,569 
                
    Additions - Charged to operating expenses   10,667    7,852    6,883 
                
    Disposal - Buildings and improvements   (409)   (3,466)    
                
    Sale of property   (1,611)   (291)    
                
    Balance, end of year  $101,194   $92,547   $88,452 

 

Organization and significant accounting policies (Policies)

Organization:

First Real Estate Investment Trust of New Jersey ("FREIT" or the “Company”) was organized on November 1, 1961 as a New Jersey Business Trust. FREIT is engaged in owning residential and commercial income producing properties located primarily in New Jersey, Maryland and New York.

FREIT 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 does not pay federal income tax on income whenever income distributed to shareholders is equal to at least 90% of real estate investment trust taxable income. Further, FREIT pays no federal income tax on capital gains distributed to shareholders.

FREIT is subject to federal income tax on undistributed taxable income and capital gains. FREIT 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 May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which is codified as ASC 606 and effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. ASC 606 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. Based on the nature of FREIT’s operations and sources of revenue, FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which supersedes the existing guidance for lease accounting, “Leases (Topic 840)”. ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. Given that this standard has minimal impact on real estate operating lessors, FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures.

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which requires companies to include cash and cash equivalents that have restrictions on withdrawal or use in total cash and cash equivalents on the statement of cash flows. ASU 2016-18 is effective for periods beginning after December 15, 2017 and interim periods within those years and early adoption is permitted including adoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations: Clarifying the Definition of a Business,” which amends guidance that assists preparers in evaluating whether a transaction will be accounted for as an acquisition of an asset or a business, likely resulting in more acquisitions being accounted for as asset acquisitions. There are certain differences in accounting under these models, including the capitalization of transaction expenses and application of a cost accumulation model in an asset acquisition. The standard is effective for annual periods beginning after December 15, 2017, including interim periods within those periods with early adoption permitted for certain transactions. FREIT is in the process of evaluating the impact of this standard on its recent acquisition of Station Place in Red Bank, New Jersey.

Principles of consolidation:

The consolidated financial statements include the accounts of FREIT and the following subsidiaries in which FREIT has a controlling financial interest, including two LLCs in which FREIT is the managing member with a 40% ownership interest:

Subsidiary   

Owning

Entity

 

%

Ownership

 

Year

Acquired/Organized

 
                     
Westwood Hills, LLC      FREIT     40%     1994  
S and A Commercial Associates Limited Partnership   ("S and A")      FREIT     65%     2000  
Wayne PSC, LLC      FREIT     40%     2002  
Damascus Centre, LLC      FREIT     70%     2003  
Pierre Towers, LLC      S and A     100%     2004  
Grande Rotunda, LLC      FREIT     60%     2005  
WestFREIT, Corp      FREIT     100%     2007  
FREIT Regency, LLC      FREIT     100%     2014  

 

The consolidated financial statements include 100% of each subsidiary’s assets, liabilities, operations and cash flows, with the interests not owned by FREIT reflected as "noncontrolling interests in subsidiaries”. All significant inter-company accounts and transactions have been eliminated in consolidation.

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 to concentrations of credit risk consist primarily of cash and cash equivalents. FREIT considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. FREIT maintains its cash and cash equivalents in bank and other accounts, the balances of which, at times, may exceed federally insured limits of $250,000.

Real estate development costs:

It is FREIT’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 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. For the fiscal years ended October 31, 2017, 2016 and 2015, there were no impairments of long-lived assets.

Deferred charges:

Deferred charges consist 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 $1,298,000, $543,000 and $419,000 in 2017, 2016 and 2015, 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 and commercial tenants generally provide for additional rentals and reimbursements based on such factors as percentage of tenants' sales in excess of specified volumes, increases in real estate taxes, Consumer Price Indices and common area maintenance charges. These additional rentals are generally included in income when reported to FREIT, when earned, or ratably over the appropriate period.

Interest rate swap contracts:

FREIT utilizes derivative financial instruments to reduce interest rate risk. FREIT does not hold or issue derivative financial instruments for trading purposes. FREIT 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 5 to FREIT’s consolidated financial statements).

Advertising:

FREIT expenses the cost of advertising and promotions as incurred. Advertising costs charged to operations amounted to approximately $386,000, $257,000 and $162,000 in 2017, 2016 and 2015, respectively.

Stock-based compensation:

FREIT has a stock-based compensation plan that was approved by FREIT’s Board of Trustees (“Board”), and ratified by FREIT’s shareholders. Stock based awards under the plan to employees are accounted for based on their grant-date fair value (see Note 10 to FREIT’s consolidated financial statements).

Stock-based awards to nonemployees are accounted for based on the fair value of the equity instruments on the vesting date.

Organization and significant accounting policies (Tables)
Schedule of subsidiaries in which FREIT has a controlling financial interest

The consolidated financial statements include the accounts of FREIT and the following subsidiaries in which FREIT has a controlling financial interest, including two LLCs in which FREIT is the managing member with a 40% ownership interest:

Subsidiary   

Owning

Entity

 

%

Ownership

 

Year

Acquired/Organized

 
                     
Westwood Hills, LLC      FREIT     40%     1994  
S and A Commercial Associates Limited Partnership   ("S and A")      FREIT     65%     2000  
Wayne PSC, LLC      FREIT     40%     2002  
Damascus Centre, LLC      FREIT     70%     2003  
Pierre Towers, LLC      S and A     100%     2004  
Grande Rotunda, LLC      FREIT     60%     2005  
WestFREIT, Corp      FREIT     100%     2007  
FREIT Regency, LLC      FREIT     100%     2014  
Real estate (Tables)
Schedule of real estate and equipment

Real estate consists of the following:

 

   Range of        
   Estimated  October 31, 
   Useful Lives  2017   2016 
      (In Thousands of Dollars) 
Land     $77,432   $77,744 
Unimproved land      405    405 
Apartment buildings  7-40 years   190,554    190,990 
Commercial buildings/shopping centers  5-40 years   162,837    158,413 
Equipment/Furniture  5-15 years   1,931    1,765 
Total real estate, gross      433,159    429,317 
Less accumulated depreciation      101,194    92,547 
Total real estate, net     $331,965   $336,770 
Mortgages, construction loan payable and credit line (Tables)

   October 31, 2017   October 31, 2016 
   Principal   Unamortized Debt Issuance Costs   Principal   Unamortized Debt Issuance Costs 
   (In Thousands of Dollars)   (In Thousands of Dollars) 
Frederick, MD (A)  $   $   $22,000   $23 
Rockaway, NJ (B)   16,660    109    17,141    138 
Westwood, NJ (C)   20,220    166    20,801    197 
Patchogue, NY (D)   5,231    2    5,231    25 
Wayne, NJ (E)   17,705    44    18,054    70 
River Edge, NJ (F)   10,456    104    10,659    122 
Maywood, NJ (G)           8,087    99 
Westwood, NJ (H)   20,628    101    21,098    135 
Wayne, NJ (I)   25,102    308    25,749    332 
Hackensack, NJ (J)   29,198    98    29,901    50 
Damascus, MD (K)   20,357    362    20,831    427 
Middletown, NY (L)   16,200    236    16,200    269 
   Total fixed rate   181,757    1,530    215,752    1,887 
Frederick, MD (A)   23,241    209         
Baltimore, MD (M)   115,316        113,967    634 
Line of credit - Provident Bank (N)   3,121    124         
   Total variable rate   141,678    333    113,967    634 
Total  $323,435   $1,863   $329,719   $2,521 

 

  

  (A)

On April 28, 2017, WestFREIT Corp., a consolidated subsidiary, refinanced its $22 million mortgage loan held by Wells Fargo Bank, with a new mortgage loan from Manufacturer’s and Traders Trust Company in the amount of $23.5 million. The new loan bears a floating interest rate equal to 275 basis points over the one-month LIBOR and 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 (as of April 30, 2017 the rate was 3.74% based on the one-month LIBOR at April 30, 2017), and (ii) net refinancing proceeds of approximately $1.1 million. The net refinancing proceeds have been used for general corporate purposes. The new loan is 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 is due. The mortgage is secured by a retail building in Frederick, Maryland having a net book value of approximately $14,992,000 as of October 31, 2017.

  (B) 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 $15,919,000 as of October 31, 2017.
  (C) On January 14, 2013, FREIT 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 January 2023 at which time the outstanding balance is due. The new mortgage is secured by a retail building in Westwood, New Jersey having a net book value of approximately $7,612,000 as of October 31, 2017.
  (D) The loan, modified effective January 31, 2013, is payable in monthly installments of $31,046 including interest at 4.5% through March 2018 at which time the outstanding balance is due. Under the terms of the mortgage loan agreement, FREIT can request, during the term of the loan, additional funding that will bring the outstanding principal balance up to 75% of loan-to-value (percentage of mortgage loan to total appraised value of property securing the loan). Effective January 1, 2016, the monthly debt service payment has been reduced to interest only.  This arrangement will remain in effect until the earlier of the property being re-leased or sold, the full repayment of the mortgage note, or March 1, 2018.  (See Note 15 to FREIT’s consolidated financial statements for additional information.)  The mortgage is secured by a retail building in Patchogue, New York having a net book value of approximately $6,492,000 as of October 31, 2017.  
  (E) Payable in monthly installments of $121,100 including interest at 6.09% through September 1, 2019 at which time the outstanding balance is due. The mortgage is secured by an apartment building in Wayne, New Jersey having a net book value of approximately $1,705,000 as of October 31, 2017.

(F) On November 19, 2013, FREIT 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 $828,000 as of October 31, 2017.

(G) On November 19, 2013, FREIT refinanced mortgage loans scheduled to mature on December 1, 2013 with a new mortgage loan in the amount of $8,500,000 payable in monthly installments of $43,605 including interest at 4.54% through December 1, 2023 at which time the outstanding balance was due. The mortgage was secured by an apartment building in Maywood, New Jersey which was sold on June 12, 2017. A portion of the proceeds from the sale were used to pay-off the $8 million then outstanding balance plus accrued interest and fees including a $1.1 million loan prepayment cost. (See Note 2 to FREIT’s consolidated financial statements for additional information.)
  (H) Payable in monthly installments of $120,752 including interest of 4.62% through November 1, 2020 at which time the outstanding balance is due. The mortgage is secured by an apartment building in Westwood, New Jersey having a net book value of approximately $9,515,000 as of October 31, 2017.
  (I) On September 29, 2016, Wayne PSC, LLC 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, LLC 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, LLC with FREIT receiving $0.4 million based on it 40% membership interest in Wayne PSC, LLC. (See Note 5 to FREIT’s consolidated financial statements 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 $25,579,000 as of October 31, 2017 including approximately $0.1 million classified as construction in progress.   
  (J)

Payable in monthly installments of $191,197 including interest of 5.38% until May 2019 at which time the unpaid balance is due. The mortgage is secured by an apartment building in Hackensack, New Jersey having a net book value of approximately $38,818,000 as of October 31, 2017.

On January 8, 2018, Pierre Towers, LLC (“Pierre”), owned by S And A Commercial Associates Limited Partnership (a consolidated subsidiary), refinanced its $29.2 million loan held by State Farm with a new mortgage loan from New York Life Insurance in the amount of $48 million. On October 26, 2017, Pierre paid New York Life Insurance a good faith deposit in the amount of $960,000 which is included in prepaid expenses and other assets in the accompanying consolidated balance sheet. The new loan has a term of ten years and bears a fixed interest rate equal to 3.88%. Interest-only payments will be required each month for the first five years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 5.38% to a fixed rate of 3.88%; and (ii) net refinancing proceeds of approximately $17 million (after giving effect to a $1.2 million loan prepayment cost to pay-off the loan held by State Farm) which can be used for capital expenditures and general corporate purposes.

  (K) On December 26, 2012, Damascus Centre, LLC 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 take-down 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 (included in prepaid expenses and other assets in the accompanying consolidated balance sheets) is held in escrow and available to Damascus Centre, LLC once certain tenants open and begin paying rent.  The loan has a maturity date of January 3, 2023 and bears a floating interest rate equal to 210 points over the 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 5 to FREIT’s consolidated financial statements for additional information relating to the interest rate swaps.)  The shopping center securing the loan has a net book value of approximately $27,290,000 as of October 31, 2017.
 

(L)

On December 29, 2014, FREIT Regency, LLC 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 the loan will mature on December 15, 2024. Interest-only payments are required each month through December 15, 2017. 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, FREIT Regency, LLC 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 5 to FREIT’s consolidated financial statements 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 $19,655,000 as of October 31, 2017.
  (M)

The original Rotunda acquisition loan for $22.5 million, which was subsequently reduced to $19.5 million on February 1, 2010, was acquired by FREIT on May 28, 2013. FREIT subsequently sold this loan to Wells Fargo Bank. On December 9, 2013, Grande Rotunda, LLC closed with Wells Fargo Bank on a construction loan of up to $120 million to be used to redevelop and expand the Rotunda property in Baltimore, Maryland with a term of four (4) years, with one twelve-month extension, at a rate of 225 basis points over the monthly LIBOR.

On November 23, 2016, the following terms and conditions of this loan were modified: (i) the total amount that may be drawn on this loan was decreased from $120 million to $116.1 million, allowing for an additional draw of $2.1 million over the then existing balance of approximately $114 million to be used for retail tenant improvements and leasing commissions; (ii) leasing benchmarks are no longer required to be met including the waiver of the leasing benchmarks FREIT was not in compliance with as of June 30, 2016; (iii) Grande Rotunda, LLC provided an interest reserve to Wells Fargo Bank in the amount of $2 million for the purpose of funding interest payments, and is obliged to replenish the account balance to $1 million if it should fall below $500,000; (iv) the maturity date of the loan was changed from December 31, 2017 to October 31, 2017 with no option to extend; (v) the interest rate on the amount outstanding on the loan was increased by 25 basis points to 250 basis points over the monthly LIBOR. The following terms and conditions of this loan were modified and effective as of October 31, 2017: (i) the maturity date of the loan was extended 120 days from October 31, 2017 to February 28, 2018; (ii) the interest rate on the amount outstanding on the loan was increased by 35 basis points to 285 basis points over the monthly LIBOR through December 31, 2017; (iii) the interest rate on the amount outstanding on the loan was increased by 65 basis points to 315 basis points over the monthly LIBOR from January 1, 2018 through February 28, 2018. The loan is secured by the Rotunda property, which has a net book value of approximately $156,347,000 as of October 31, 2017.

As of October 31, 2017, $115.3 million of this loan was drawn down (including approximately $1.3 million during Fiscal 2017), of which $19 million was used to pay off the loan from FREIT, and $96.3 million was used toward the construction at the Rotunda. The loan was fully drawn down as of October 31, 2017 with a remaining reserve of approximately $0.8 million used as a letter of credit for offsite improvements.

Grande Rotunda, LLC is in the process of negotiating new loan documents with Aareal Capital Corporation (“Aareal”) to refinance the existing Rotunda construction loan from Wells Fargo. Aareal has provided a term sheet to Grande Rotunda, LLC to provide $121.9 million in financing that would be used to repay the existing Wells Fargo construction loan, provide an additional $3.4 million for retail tenant improvements and leasing costs, and fund loan closing costs. The Aareal loan would have an initial term of two years and two one-year renewal options, would bear a floating interest rate at 285 basis points over the one-month LIBOR rate, and would be secured by the Rotunda property. The loan is subject to Aareal’s satisfaction with its due diligence reviews and the ultimate amount of the loan will be dependent upon the value of the Rotunda property as determined by an independent appraiser. Although Grande Rotunda, LLC expects that the Aareal loan will close in January 2018, there can be no assurance this loan will close. In the event that the Aareal loan does not close and Wells Fargo does not grant an extension of the existing construction loan beyond the current maturity date of February 28, 2018, Grande Rotunda, LLC would be at risk of defaulting under the Wells Fargo loan, which could result in Wells Fargo exercising its remedies under the loan including foreclosure of the property. As a guarantor of the Wells Fargo loan, FREIT would be responsible for 25% of the loan balance (approximately $29 million), in the event that Grande Rotunda, LLC defaults under the loan.

 

(N)

Credit Line: On October 27, 2017, FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 27, 2020 at which point no further advances shall be permitted and provided the line of credit is not renewed by the lender, the outstanding principal balance of the line of credit shall convert to a commercial term loan maturing on October 31, 2022.  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’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit was increased from $12.8 million to $13 million and the interest rate on the amount outstanding will be at a floating rate of 275 basis points over the 30-day LIBOR with a floor of 3.75%.  During Fiscal 2017, FREIT utilized $3 million of its credit line to fund tenant improvements for new retail tenants at the Rotunda property. As of October 31, 2017, approximately $3.1 million was outstanding (including closing costs of approximately $0.1 million related to the renewal of the line) and $9.9 million was available under the line of credit.

Certain of the Company’s mortgage loans and the Credit Line contain financial covenants. The Company was in compliance with all of its financial covenants as of October 31, 2017.

The following table shows the estimated fair value and carrying value of FREIT’s long-term debt at October 31, 2017 and 2016:

 

    October 31,   October 31,
($ in Millions)   2017   2016
Fair Value   $317.8   $331.3
         
Carrying Value   $321.6   $327.2

Principal amounts (in thousands of dollars) due under the above obligations in each of the five years subsequent to October 31, 2017 are as follows: 

Year Ending  October 31,  Amount 
2018  $125,065(a)
2019  $72,082 
2020  $3,575 
2021  $22,288 
2022  $20,291 
(a)Includes approximately $115.3 million relating to the Rotunda construction loan due February 2018. (See Note 4(M) to FREIT’s consolidated financial statements.)
Commitments and contingencies (Tables)
Schedule of minimum rental income to be received from non-cancelable operating leases

Minimum rental income (in thousands of dollars) to be received from non-cancelable operating leases in years subsequent to October 31, 2017 is as follows:

 

Year Ending October 31,  Amount 
2018  $18,520 
2019   17,649 
2020   16,659 
2021   14,775 
2022   11,445 
Thereafter   54,869 
Total  $133,917 
Equity incentive plan (Tables)
Schedule of Stock Option Activity

The following table summarizes stock option activity for Fiscal 2017:

 

   Year Ended October 31, 
   2017 
   No. of Options   Exercise 
   Outstanding   Price 
Options outstanding beginning of period   229,880   $18.45 
Options granted during period   38,000   $21.00 
Options forfeited/cancelled during period   (100)  $18.45 
Options outstanding end of period   267,780   $18.81 
Options vested and expected to vest   262,280      
Options exercisable at end of period   140,260      

 

Segment information (Tables)
Schedule of segment and related information

Asset information is not reported since FREIT does not use this measure to assess performance.

 

   Years Ended October 31, 
   2017   2016   2015 
   (In Thousands of Dollars) 
Real estate rental revenue:               
Commercial  $24,114   $22,694   $23,037 
Residential   26,886    22,952    21,966 
Total real estate rental revenue   51,000    45,646    45,003 
                
Real estate operating expenses:               
Commercial   11,791    10,661    10,436 
Residential   14,442    11,136    10,626 
Total real estate operating expenses   26,233    21,797    21,062 
                
Net operating income:               
Commercial   12,323    12,033    12,601 
Residential   12,444    11,816    11,340 
Total net operating income  $24,767   $23,849   $23,941 
                
                
Recurring capital improvements - residential  $(798)  $(898)  $(424)
                
                
Reconciliation to consolidated net income attributable to common equity:               
Segment NOI  $24,767   $23,849   $23,941 
Gain on sale of property   15,395    314     
Loan prepayment costs relating to property sale   (1,139)        
Lease termination fee   (620)        
Deferred rents - straight lining   634    608    (219)
Amortization of acquired leases           (1)
Investment income   206    150    150 
General and administrative expenses   (2,129)   (2,034)   (2,029)
Straight line rent adjustment - bankrupt tenant           (1,046)
Depreciation   (10,669)   (7,852)   (6,883)
Financing costs   (15,762)   (11,936)   (11,001)
Net income   10,683    3,099    2,912 
Net (income) loss attributable to  noncontrolling interests   2,433    (94)   (281)
Net income attributable to common equity  $13,116   $3,005   $2,631 
Selected quarterly financial data (unaudited) (Tables)
Schedule of quarterly results of operation

The following summary represents the results of operations for each quarter for the years ended October 31, 2017 and 2016 (in thousands, except per share amounts):

 

2017:  Quarter Ended   Year Ended 
   January 31,   April 30,   July 31,   October 31,   October 31, 
                     
Revenue  $12,599   $12,664   $12,680   $13,691   $51,634 
Expenses   12,943    14,365(a)   (421)(b)   14,064    40,951 
    Net income (loss)   (344)   (1,701)   13,101    (373)   10,683 
                          
Net loss attributable to noncontrolling interests in subsidiaries   407    1,002    653    371    2,433 
    Net income (loss) attributable to common equity  $63   $(699)  $13,754   $(2)  $13,116 
                          
Earnings (loss) per share - basic and diluted  $0.01   $(0.10)(a)  $2.01(b)  $   $1.92 
Dividends declared per share  $0.15   $   $   $   $0.15 
                          

 

2016:  Quarter Ended   Year Ended 
   January 31,   April 30,   July 31,   October 31,   October 31, 
                     
Revenue  $11,424   $11,064   $11,590   $12,176   $46,254 
Expenses   10,381    10,130    10,133(c)   12,511    43,155 
    Net income (loss)   1,043    934    1,457    (335)   3,099 
                          
Net (income) loss attributable to noncontrolling interests in subsidiaries   (41)   (125)   (211)   283    (94)
    Net income (loss) attributable to common equity  $1,002   $809   $1,246   $(52)  $3,005 
                          
Earnings (loss) per share - basic and diluted  $0.15   $0.12   $0.18(c)  $(0.01)  $0.44 
Dividends declared per share  $0.30   $0.30   $0.30   $0.30   $1.20 
                          

 

(a) Includes expense for lease termination fee paid in the amount of $620,000 to Macy's to terminate the lease and take possession of the space at the Preakness Shopping center located in Wayne, NJ ($0.03 per share)

(b) Includes a $15.4 million gain from the sale of the Maywood, New Jersey property ("Hammel Gardens") on June 12, 2017 offset by a $1.1 million loan prepayment cost related to this sale ($2.08 per share)

(c) Includes $0.3M gain on sale of commercial property in Rochelle Park, New Jersey which was sold on June 17, 2016 ($0.05 per share)

Organization and significant accounting policies (Narrative) (Details) (USD $)
12 Months Ended
Oct. 31, 2017
Oct. 31, 2016
Oct. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
 
Advertising costs
$ 386,000 
$ 257,000 
$ 162,000 
Amortization of mortgage costs and leasing commissions
$ 1,298,000 
$ 543,000 
$ 419,000 
Organization and significant accounting policies (Schedule of Subsidiaries) (Details)
12 Months Ended
Oct. 31, 2017
Westwood Hills, LLC [Member]
 
% Ownership
40.00% 
Year Acquired/Organized
1994 
S and A Commercial Associates Limited Partnership ("S and A") [Member]
 
% Ownership
65.00% 
Year Acquired/Organized
2000 
Wayne PSC, LLC [Member]
 
% Ownership
40.00% 
Year Acquired/Organized
2002 
Damascus Centre, LLC [Member]
 
% Ownership
70.00% 
Year Acquired/Organized
2003 
Pierre Towers, LLC [Member]
 
% Ownership
100.00% 
Year Acquired/Organized
2004 
Grande Rotunda, LLC [Member]
 
% Ownership
60.00% 
Year Acquired/Organized
2005 
WestFREIT Corp [Member]
 
% Ownership
100.00% 
Year Acquired/Organized
2007 
FREIT Regency, LLC [Member]
 
% Ownership
100.00% 
Year Acquired/Organized
2014 
Property sales (Details) (USD $)
12 Months Ended 1 Months Ended 12 Months Ended 0 Months Ended
Oct. 31, 2017
Oct. 31, 2016
Oct. 31, 2015
Jun. 30, 2016
Lakeland Bank Property [Member]
Oct. 31, 2017
Lakeland Bank Property [Member]
Jun. 17, 2016
Lakeland Bank Property [Member]
Jun. 12, 2017
Hammel Gardens Property [Member]
Real Estate Properties [Line Items]
 
 
 
 
 
 
 
Rental properties
 
 
 
 
 
$ 2,700,000 
$ 700,000 
Straight-line rent receivable on property held for sale
 
 
 
 
 
500,000 
 
Agreed sales price of property held for sale
9,135,000 
3,059,000 
   
3,100,000 
 
 
17,000,000 
Gain on sale of property held for sale
15,395,000 
314,000 
   
300,000 
 
 
15,400,000 
Maximum purchase price of property
 
 
 
 
3,000,000 
 
 
Lost annual rents due to sale of property
 
 
 
 
241,000 
 
 
Mortgage prepayment penalty
 
 
 
 
 
 
1,100,000 
Net proceeds from sale of property
 
 
 
 
 
 
8,000,000 
Net proceeds from sale of property to be held in escrow until replacement property is purchased
 
 
 
 
 
 
7,000,000 
Deferral of capital gain on sale of property from qualification as like-kind exchange of real estate pursuant to Section 1031 of the Internal Revenue Code
 
 
 
 
 
 
$ 15,400,000 
Real estate (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 12 Months Ended 12 Months Ended
Oct. 31, 2017
Oct. 31, 2016
Oct. 31, 2017
Minimum [Member]
Equipment/Furniture [Member]
Oct. 31, 2017
Maximum [Member]
Equipment/Furniture [Member]
Oct. 31, 2017
Apartment Buildings [Member]
Oct. 31, 2016
Apartment Buildings [Member]
Oct. 31, 2017
Apartment Buildings [Member]
Minimum [Member]
Oct. 31, 2017
Apartment Buildings [Member]
Maximum [Member]
Oct. 31, 2017
Commercial Buildings/Shopping Centers [Member]
Oct. 31, 2016
Commercial Buildings/Shopping Centers [Member]
Oct. 31, 2017
Commercial Buildings/Shopping Centers [Member]
Minimum [Member]
Oct. 31, 2017
Commercial Buildings/Shopping Centers [Member]
Maximum [Member]
Property, Plant and Equipment [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Land
$ 77,432 
$ 77,744 
 
 
 
 
 
 
 
 
 
 
Unimproved land
405 
405 
 
 
 
 
 
 
 
 
 
 
Equipment/Furniture
1,931 
1,765 
 
 
 
 
 
 
 
 
 
 
Total real estate, gross
433,159 
429,317 
 
 
190,554 
190,990 
 
 
162,837 
158,413 
 
 
Less accumulated depreciation
101,194 
92,547 
 
 
 
 
 
 
 
 
 
 
Total real estate, net
$ 331,965 
$ 336,770 
 
 
 
 
 
 
 
 
 
 
Estimated Useful Lives
 
 
5 years 
15 years 
 
 
7 years 
40 years 
 
 
5 years 
40 years 
Mortgages, construction loan payable and credit line (Narrative) (Details) (USD $)
12 Months Ended 0 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Oct. 31, 2017
Oct. 31, 2016
Oct. 31, 2015
Jan. 14, 2013
Mortgages [Member]
Westwood, NJ#1 [Member]
Sep. 29, 2016
Mortgages [Member]
Wayne, PSC LLC [Member]
Oct. 31, 2017
Mortgages [Member]
Wayne, PSC LLC [Member]
Dec. 29, 2014
Mortgages [Member]
Provident Bank Mortgage [Member]
Oct. 31, 2017
Mortgages [Member]
Grande Rotunda, LLC [Member]
Jun. 30, 2016
Mortgages [Member]
Grande Rotunda, LLC [Member]
Minimum [Member]
Jun. 30, 2016
Mortgages [Member]
Grande Rotunda, LLC [Member]
Maximum [Member]
Apr. 28, 2017
Mortgages [Member]
Frederick, MD [Member]
Oct. 31, 2017
Mortgages [Member]
Frederick, MD [Member]
Oct. 31, 2017
Mortgages [Member]
Rockaway, NJ Mortgage [Member]
Oct. 31, 2017
Mortgages [Member]
Westwood, NJ #2 [Member]
Oct. 31, 2017
Mortgages [Member]
Patchogue, NY [Member]
Oct. 31, 2017
Mortgages [Member]
Wayne, NJ Mortgage 1 [Member]
Oct. 31, 2017
Mortgages [Member]
River Edge, NJ Refinanced Mortgage [Member]
Oct. 31, 2017
Mortgages [Member]
Refinanced Maywood, NJ Mortgage [Member]
Oct. 31, 2017
Mortgages [Member]
Westwood, NJ #3 [Member]
Oct. 31, 2017
Mortgages [Member]
People's United Bank [Member]
Oct. 31, 2017
Mortgages [Member]
Second Wayne, NJ Mortgage [Member]
Oct. 31, 2017
Mortgages [Member]
Second Wayne, NJ Mortgage [Member]
Construction in Progress [Member]
Oct. 31, 2017
Mortgages [Member]
Hackensack, NJ [Member]
Oct. 31, 2017
Mortgages [Member]
Hackensack, NJ [Member]
Pierre Towers, LLC [Member]
Oct. 31, 2017
Mortgages [Member]
Damascus, MD [Member]
Oct. 31, 2016
Mortgages [Member]
Damascus, MD [Member]
Oct. 31, 2017
People's United Bank [Member]
Sep. 29, 2016
People's United Bank [Member]
Apr. 22, 2016
People's United Bank [Member]
Apr. 22, 2016
People's United Bank [Member]
Readily Available [Member]
Oct. 31, 2017
People's United Bank [Member]
Baltimore, MD [Member]
Oct. 31, 2017
Notes Payable, Other Payables [Member]
Oct. 31, 2016
Notes Payable, Other Payables [Member]
Feb. 1, 2010
Notes Payable, Other Payables [Member]
Baltimore, MD [Member]
Oct. 31, 2017
Notes Payable, Other Payables [Member]
Baltimore, MD [Member]
Nov. 23, 2016
Notes Payable, Other Payables [Member]
Baltimore, MD [Member]
Oct. 31, 2016
Notes Payable, Other Payables [Member]
Baltimore, MD [Member]
Oct. 31, 2017
Notes Payable, Other Payables [Member]
Baltimore, MD [Member]
Fiscal Year [Member]
Oct. 31, 2017
Notes Payable, Other Payables [Member]
Baltimore, MD [Member]
Minimum [Member]
Oct. 31, 2017
Notes Payable, Other Payables [Member]
Baltimore, MD [Member]
Maximum [Member]
Oct. 31, 2017
Notes Payable, Other Payables [Member]
Frederick, MD [Member]
Oct. 31, 2016
Notes Payable, Other Payables [Member]
Frederick, MD [Member]
Oct. 31, 2017
Provident Bank [Member]
Oct. 31, 2016
Provident Bank [Member]
Oct. 31, 2017
Provident Bank [Member]
Middletown, NY Mortgage [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Refinanced loan amount
 
 
 
$ 8,000,000 
$ 24,200,000 
 
 
$ 121,900,000 
 
 
$ 23,500,000 
 
 
 
 
 
 
 
 
$ 25,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis points, interest rate
 
 
 
 
 
 
 
2.85% 
 
 
2.75% 
 
 
 
 
 
 
 
 
2.20% 
 
 
 
 
2.10% 
 
 
 
 
 
2.25% 
 
 
2.25% 
2.50% 
 
 
 
 
 
 
 
1.25% 
 
1.25% 
Fixed interest rate
 
 
 
 
 
3.625% 
 
 
 
 
 
5.55% 
5.37% 
4.75% 
4.50% 
6.09% 
4.54% 
4.54% 
4.62% 
 
6.04% 
 
5.38% 
3.88% 
3.81% 
 
 
 
3.53% 
 
 
 
 
 
4.00% 
 
 
 
 
 
 
 
3.75% 
 
3.75% 
Membership interest percentage
 
 
 
 
 
40.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Periodic Payment
 
 
 
 
 
 
 
 
 
 
 
45,250 
115,850 
129,702 
31,046 
121,100 
57,456 
43,605 
120,752 
 
 
 
191,197 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Collateral Amount
 
 
 
 
 
 
 
 
 
 
 
14,992,000 
15,919,000 
7,612,000 
6,492,000 
1,705,000 
828,000 
 
9,515,000 
 
25,579,000 
100,000 
38,818,000 
 
27,290,000 
 
 
 
 
 
 
 
 
19,500,000 
156,347,000 
 
 
 
 
 
 
 
3,100,000 
 
19,655,000 
Loan amount
 
 
 
 
 
 
16,200,000 
3,400,000 
 
 
 
 
 
22,750,000 
 
 
11,200,000 
8,500,000 
 
 
 
 
 
48,000,000 
 
 
 
25,800,000 
 
 
 
 
 
22,500,000 
 
 
 
 
 
 
 
 
16,200,000 
 
16,200,000 
Amount drawn on loan
323,435,000 
329,719,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
960,000 
20,000,000 
20,000,000 
20,400,000