FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY - Quarter Report: 2023 April (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended April 30, 2023

or

 For the transition period from __________________ to ____________________

Commission File No. 000-25043

(201) 488-6400

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

As of June 14, 2023, the number of shares of common stock outstanding was 7,449,583.

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC.

INDEX

Part I: Financial Information

Item 1: Unaudited Condensed Consolidated Financial Statements

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

See Notes to Condensed Consolidated Financial Statements.

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

SIX AND THREE MONTHS ENDED APRIL 30, 2023 AND 2022

(Unaudited)

See Notes to Condensed Consolidated Financial Statements.

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

SIX AND THREE MONTHS ENDED APRIL 30, 2023 AND 2022

(Unaudited)

See Notes to Condensed Consolidated Financial Statements.

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

SIX AND THREE MONTHS ENDED APRIL 30, 2023

(Unaudited)

See Notes to Condensed Consolidated Financial Statements.

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

SIX AND THREE MONTHS ENDED APRIL 30, 2022

(Unaudited)

See Notes to Condensed Consolidated Financial Statements.

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED APRIL 30, 2023 AND 2022

(Unaudited)

See Notes to Condensed Consolidated Financial Statements.  

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of presentation:

First Real Estate Investment Trust of New Jersey was organized on November 1, 1961 as a New Jersey Business Trust. On July 1, 2021, First Real Estate Investment Trust of New Jersey completed the change of its form of organization from a New Jersey real estate investment trust to a Maryland corporation (the “Reincorporation”) which was approved by its stockholders at the annual meeting of stockholders held on May 6, 2021. The Reincorporation changed the law applicable to First Real Estate Investment Trust of New Jersey’s affairs from New Jersey law to Maryland law and was accomplished by the merger of First Real Estate Investment Trust of New Jersey with and into its wholly owned subsidiary, First Real Estate Investment Trust of New Jersey, Inc. (“FREIT”, “Trust”, “us”, “we”, “our” or the “Company”), a Maryland corporation. As a result of the Reincorporation, the separate existence of First Real Estate Investment Trust of New Jersey has ceased and FREIT has succeeded to all the business, properties, assets and liabilities of First Real Estate Investment Trust of New Jersey. Holders of shares of beneficial interest in First Real Estate Investment Trust of New Jersey have received one newly issued share of common stock of FREIT for each share of First Real Estate Investment Trust of New Jersey that they own, without any action of stockholders required and all treasury stock held by First Real Estate Investment Trust of New Jersey was retired.

FREIT is organized and will continue to operate in such a manner as to qualify for taxation as a REIT under the Internal Revenue Code of 1986, as amended, and its stock is traded on the over-the-counter market under the trading symbol FREVS.

The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and pursuant to the rules of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnotes required by GAAP for complete financial statements have been omitted. It is the opinion of management that all adjustments considered necessary for a fair presentation have been included, and that all such adjustments are of a normal recurring nature.

The consolidated results of operations for the six and three-month periods ended April 30, 2023 are not necessarily indicative of the results to be expected for the full year or any other period. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in FREIT’s Annual Report on Form 10-K for the year ended October 31, 2022.

Note 2 – Recently issued accounting standard:

In March 2020 and January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2020-04 “Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, and ASU 2021-01 “Reference Rate Reform (ASC 848): Scope” which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform in contracts and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. ASU 2020-04 and ASU 2021-01 are effective for all entities as of March 12, 2020 through the recently deferred date of December 31, 2024. We currently do not anticipate the need to modify our existing debt agreements as a result of reference rate reform in the current year, however if any modification is executed as a result of reference rate reform, the Company will elect the optional expedient available under ASU 2020-04 and ASU 2021-01, which allows entities to account for the modification as if the modification was not substantial. We will disclose the nature of and reason for electing the optional expedient in each interim and annual financial statement period if and when applicable through December 31, 2024.

Note 3 – Dividends and earnings (loss) per share:

The FREIT Board of Directors (“Board”) declared a dividend of approximately $372,000 ($0.05 per share) in the second quarter of Fiscal 2023, which will be paid on June 15, 2023 to stockholders of record on June 1, 2023. The Board will continue to evaluate the dividend on a quarterly basis.

Basic earnings (loss) 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 14) outstanding during each period (denominator). The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator is increased to include the number of additional shares that would have been outstanding if all potentially dilutive shares, such as those issuable upon the exercise of stock options, were issued during the period using the Treasury Stock method. Under the Treasury Stock method, the assumption is that the proceeds received upon exercise of the options, including the unrecognized stock option compensation expense attributable to future services, are used to repurchase FREIT’s stock at the average market price during the period, thereby increasing the number of shares to be added in computing diluted earnings per share. For the six and three months ended April 30, 2023, the outstanding stock options increased the average dilutive shares outstanding by approximately 7,000 and 5,000 shares with no impact on earnings per share. For the six and three months ended April 30, 2022, the outstanding stock options increased the average dilutive shares outstanding by approximately 71,000 and 0 shares, respectively, with an impact of approximately $0.06 and $0.00, respectively, on earnings (loss) per share. There were no anti-dilutive shares for the six and three months ended April 30, 2023. There were approximately 0 and 311,000 anti-dilutive shares for the six and three months ended April 30, 2022, respectively. Anti-dilutive shares consist of out-of-the money stock options under the Equity Incentive Plan (See Note 13).

Note 4 - Interest rate cap and swap contracts: 

In accordance with “Accounting Standards Codification Topic 815, Derivatives and Hedging ("ASC 815")”, FREIT has been accounting for the Damascus Centre, LLC (“Damascus Centre”), FREIT Regency, LLC (“Regency”), Wayne PSC, LLC (“Wayne PSC”) and Station Place on Monmouth (“Station Place”) interest rate swaps and the Grande Rotunda, LLC (“Grande Rotunda”) interest rate cap as cash flow hedges marking these contracts to market, taking into account present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss on the swaps and cap in comprehensive income (loss). On December 30, 2021, the property owned by Grande Rotunda was sold, a portion of the proceeds from the sale was used to pay off the $116.5 million then outstanding balance of the underlying loan and the corresponding interest rate cap on this loan matured with no settlement due at maturity. On January 10, 2022, the property owned by Damascus Centre was sold and a portion of the proceeds from the sale was used to pay off the $18.2 million then outstanding balance of the underlying loan and the corresponding swap breakage fees of approximately $213,000 related to the early termination of the interest rate swap contracts on this loan which was included as interest expense on the accompanying condensed consolidated statement of operations for the six months ended April 30, 2022. (See Note 7 for further details on the sales of these properties.) On June 17, 2022, Wayne PSC terminated its interest rate swap contract on its underlying loan held with People’s United Bank, which had a maturity date of October 2026, for a settlement amount of approximately $1.4 million. People’s United Bank held the proceeds from this settlement in escrow until the underlying loan was paid off in July 2022. (See Note 9 for further details.)

For the six and three months ended April 30, 2023, FREIT recorded an unrealized loss of approximately $557,000 and $107,000, respectively, in the condensed consolidated statements of comprehensive loss representing the change in the fair value of these cash flow hedges during such periods. For the six and three months ended April 30, 2022, FREIT recorded an unrealized gain of approximately $3,801,000 and $2,539,000, respectively, in the condensed consolidated statements of comprehensive income representing the change in the fair value of these cash flow hedges during such periods. As of April 30, 2023, there was an asset of approximately $423,000 for the Regency swap and $429,000 for the Station Place swap. As of October 31, 2022, there was an asset of approximately $611,000 for the Regency swap and $798,000 for the Station Place swap.

The fair values are based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).

Note 5 – Investment in tenancy-in-common:

On February 28, 2020, FREIT reorganized its subsidiary S and A Commercial Associates Limited Partnership (“S&A”) from a partnership into a tenancy-in-common form of ownership (“TIC”). Prior to this reorganization, FREIT owned a 65% partnership interest in S&A, which owned 100% of the Pierre Towers property located in Hackensack, New Jersey through its 100% interest in Pierre Towers, LLC. Pursuant to the TIC agreement, FREIT ultimately acquired a 65% undivided interest in the Pierre Towers property, which was formerly owned by S&A. Based on the guidance of Accounting Standards Codification 810, “Consolidation”, FREIT’s investment in the TIC is accounted for under the equity method of accounting. While FREIT’s effective ownership percentage interest in the Pierre Towers property remained unchanged after the reorganization to a TIC, FREIT no longer had a controlling interest as the TIC is now under joint control.

FREIT’s investment in the TIC was approximately $18.6 million and $18.8 million at April 30, 2023 and October 31, 2022, respectively. For the six and three months ended April 30, 2023, FREIT recognized a loss on investment in TIC of approximately $188,000 and $121,000, respectively, in the accompanying condensed consolidated statements of income. For the six and three months ended April 30, 2022, FREIT recognized a loss on investment in TIC of approximately $156,000 and $32,000, in the accompanying condensed consolidated statements of operations.

Hekemian & Co., Inc. (“Hekemian & Co.”) manages the Pierre Towers property pursuant to a management agreement between the owners of the TIC and Hekemian & Co. dated as of February 28, 2020, which was for an initial term of one (1) year and which renews for successive one (1) year terms unless either party gives written notice of termination to the other party at least sixty (60) days prior to the end of the then-current term. The management agreement renewed for a successive one (1) year term on February 28, 2023 and will expire on February 28, 2024.

The management agreement requires the payment of management fees equal to 5% of rents collected. Management fees, charged to operations, were approximately $208,000 and $106,000 for the six and three months ended April 30, 2023, respectively, and $197,000 and $99,000 for the six and three months ended April 30, 2022, respectively. The Pierre Towers property also uses the resources of the Hekemian & Co. insurance department to secure various insurance coverages for its property. Hekemian & Co. is paid a commission for these services. There were no such commissions, charged to operations, for the six and three months ended April 30, 2023 and 2022.

The following table summarizes the balance sheets of the Pierre Towers property as of April 30, 2023 and October 31, 2022, accounted for by the equity method:

The following table summarizes the statements of operations of the Pierre Towers property for the six and three months ended April 30, 2023 and 2022, accounted for by the equity method:

Note 6 – Termination of Purchase and Sale Agreement:

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

The Court Order entered on February 4, 2022 (the “February 4 Order”) with respect to the summary judgment motions provides as follows:

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

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

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

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

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

Through the quarter ended April 30, 2023, the $15 million deposit and the $3,420,422.88 award of attorney’s fee have not been included in income in the accompanying condensed consolidated statements of operations. Legal costs attributed to the legal proceeding between FREIT and certain of its affiliates and Sinatra Properties, LLC have been incurred in the amount of approximately $391,000 and $195,000 for the six and three months ended April 30, 2023, respectively, and $892,000 and $279,000 for the six and three months ended April 30, 2022, respectively, and are included in operating expenses on the condensed consolidated statements of operations.

Note 7 – Maryland property dispositions:

On November 22, 2021, certain affiliates (the “Maryland Sellers”) of FREIT entered into a Purchase and Sale Agreement (the “Maryland Purchase and Sale Agreement”) with MCB Acquisition Company, LLC (the “Maryland Purchaser”), a third party, pursuant to which the Maryland Sellers agreed to sell three properties to the Maryland Purchaser. The properties consisted of retail and office space and a residential apartment community owned by Grande Rotunda, LLC (the “Rotunda Property”), a shopping center owned by Damascus Centre, LLC (the “Damascus Property”), and a shopping center owned by WestFREIT Corp. (the “Westridge Square Property”). FREIT owns 100% of its subsidiary, WestFREIT Corp. (“WestFREIT”), a 60% interest in Grande Rotunda, LLC (“Grande Rotunda”), the joint venture that owned the Rotunda Property, and a 70% interest in Damascus Centre, LLC (“Damascus Centre”), the joint venture that owned the Damascus Property.

The sale of the Maryland Properties having a total net book value of $172.3 million (as adjusted) was consummated by the Maryland Sellers and the Maryland Purchaser for a purchase price of $248,750,269, after giving effect to the $15,526,731 escrow deposit (the “Maryland Purchaser Escrow Payment”). This sale resulted in net proceeds of approximately $55 million (inclusive of approximately $1.1 million in funds released during the second quarter of Fiscal 2023, $0.1 million in funds released during the first quarter of Fiscal 2023 and $1.9 million in funds released in Fiscal 2022 from the Maryland Purchaser Escrow Payment), after payment of related mortgage debt in the amount of $155.8 million and the corresponding swap breakage fees of approximately $213,000 related to the early termination of the interest rate swap contracts on the Damascus Property loan, payment of loans (including interest) to each of the equity owners in Grande Rotunda in the amount of approximately $31 million and certain transactional expenses and transfer taxes including brokerage fees due to Hekemian & Co. of approximately $6.2 million. As of April 30, 2023, approximately $3,176,000 of the Maryland Purchaser Escrow Payment has been released from escrow to the Maryland Sellers. The escrow and related gain on sale were reduced by approximately $446,000 and $203,000 for the six and three months ended April 30, 2023, respectively, and $1.2 million for the six and three months ended April 30, 2022 due to a change in estimate related to a change in the timing of anticipated rent commencement dates for certain tenants, which will reduce the escrowed funds available to be released to Grande Rotunda. Approximately $4.7 million and $6.3 million of remaining funds are held in a post-closing escrow for rents and are included in “Funds held in post-closing escrow” on the accompanying condensed consolidated balance sheets as of April 30, 2023 and October 31, 2022, respectively. Approximately $3.7 million of these funds held in post-closing escrow are anticipated to be released in Fiscal 2023 and the remaining balance is anticipated to be released in Fiscal 2024. The sale of the Maryland Properties resulted in a net gain of approximately $68.3 million (as adjusted) (with a consolidated impact to FREIT of approximately $45.3 million) which includes approximately $7.8 million of proceeds released and anticipated to be released from funds held in escrow, a write-off of the straight-line rent receivable of approximately $2.9 million and a write-off of unamortized lease commissions of approximately $1.7 million.

On August 4, 2022, FREIT’s Board declared a special, extraordinary, non-recurring cash distribution of approximately $51.5 million, or $7.50 per share, which was paid on August 30, 2022, to stockholders of record on August 16, 2022 (with an ex-dividend date of August 31, 2022). This distribution represented most of the net proceeds of FREIT’s sale of its portfolio of Maryland Properties.

As the disposal of the Maryland 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 condensed consolidated financial statements.

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

Hekemian & Co. currently manages all of the properties owned by FREIT and its affiliates, except for the office building at the Rotunda Property, which was sold on December 30, 2021 and was formerly managed by an independent third party management company. The management agreement between FREIT and Hekemian & Co. dated as of November 1, 2001 (“Management Agreement”) expires on October 31, 2023 and is automatically renewed for successive periods of two years unless either party gives not less than six (6) months prior notice of non-renewal.

The Management Agreement requires the payment of management fees equal to 4% to 5% of rents collected. Such fees charged to operations were approximately $659,000 and $790,000 for the six months ended April 30, 2023 and 2022, respectively, and $332,000 and $306,000 for the three months ended April 30, 2023 and 2022, respectively. In addition, the Management Agreement provides for the payment to Hekemian & Co. of leasing commissions, as well as the reimbursement of certain operating expenses, such as payroll and insurance costs, incurred on behalf of FREIT. Such commissions and reimbursements amounted to approximately $322,000 and $348,000 for the six months ended April 30, 2023 and 2022, respectively, and $182,000 and $164,000 for the three months ended April 30, 2023 and 2022, respectively. FREIT also uses the resources of the Hekemian & Co. insurance department to secure various insurance coverages for its properties and subsidiaries. Hekemian & Co. is paid a commission for these services. Such commissions, charged to operations, were approximately $65,000 and $59,000 for the six months ended April 30, 2023 and 2022, respectively, and $16,000 and $7,000 for the three months ended April 30, 2023 and 2022, respectively.

From time to time, FREIT engages Hekemian & Co., or certain affiliates of Hekemian & Co., to provide additional services, such as consulting services related to development, property sales and financing activities of FREIT. Separate fee arrangements are negotiated between Hekemian & Co. and FREIT with respect to such additional services. Such fees incurred for the six and three months ended April 30, 2023 were approximately $21,000 and $21,000, respectively, and for the six and three months ended April 30, 2022 were approximately $6,294,000 and $0, respectively. Fees incurred during Fiscal 2023 related to commissions to Hekemian & Co. for the modification and extension of the loan on the Westwood Plaza property. Fees incurred during Fiscal 2022 related to commissions to Hekemian & Co. for the following: $4,777,000 for the sale of the Rotunda Property; $917,000 for the sale of the Damascus Property; $525,000 for the sale of the Westridge Square Property; and $75,000 for the refinancing of the loan on the Boulders property. The commissions related to the sale of the Rotunda Property, the Damascus Property and the Westridge Square Property were charged against the gain on sale of the Maryland Properties (See Note 7) in the accompanying condensed consolidated statement of operations for the six months ended April 30, 2022. The commission for the refinancing of the loan on the Boulders property and the modification and extension of the loan on the Westwood Plaza property was accounted for as a deferred mortgage cost included in the unamortized debt issuance costs in the accompanying condensed consolidated balance sheets as of April 30, 2023 and October 31, 2022.

The Management Agreement provides for a termination fee (“Termination Fee”) in the event of a termination by FREIT without cause and a termination fee of 1.25 times the Termination Fee if the Management Agreement terminates following a merger or acquisition of FREIT (the “M&A Termination Fee”). On March 9, 2023, the Board approved an amendment to the Management Agreement (the “Second Amendment”) which provides, among other things, that the M&A Termination Fee shall be increased from 1.25 times the Termination Fee to 2.5 times the Termination Fee.

Robert S. Hekemian, Jr., Chief Executive Officer, President and a Director of FREIT, is the Chief Executive Officer of Hekemian & Co. David B. Hekemian, a Director of FREIT, is the President of Hekemian & Co. Allan Tubin, Chief Financial Officer and Treasurer of FREIT, is the Chief Financial Officer of Hekemian & Co.

Director fee expense and/or executive compensation (including interest, dividends and stock awards) incurred by FREIT for the six months ended April 30, 2023 and 2022 was approximately $314,000 and $279,000, respectively, for Robert S. Hekemian, Jr., $21,000 and $20,000, respectively, for Allan Tubin and $46,000 and $29,000, respectively, for David Hekemian. Director fee expense and/or executive compensation (including interest, dividends and stock awards) incurred by FREIT for the three months ended April 30, 2023 and 2022 was approximately $173,000 and $144,000, respectively, for Robert S. Hekemian, Jr., $11,000 and $10,000, respectively, for Allan Tubin and $33,000 and $14,000, respectively, for David Hekemian (See Notes 13 and 14). Such costs are included within operating expenses on the accompanying condensed consolidated statements of operations.

Note 9 – Mortgage financings and line of credit:

On August 19, 2022, Westwood Hills, LLC (“Westwood Hills”) exercised its right, pursuant to the loan agreement, to extend the term of its $25 million loan on its property located in Westwood, New Jersey, for an additional six (6) months from an initial maturity date of October 1, 2022 to a new maturity date of April 1, 2023. On March 1, 2023, Westwood Hills exercised its right, pursuant to the loan agreement, to extend the term of its loan, for an additional six (6) months to a new maturity date of October 1, 2023 on the same terms and conditions as stated in the loan agreement. As of April 30, 2023, $25,000,000 of this loan was drawn and outstanding and the interest rate was 8.84%. Westwood Hills is in the process of refinancing this loan with a new lender in the amount of $25,500,000 for a term of three (3) years and based on a fixed rate of interest of 6.05%. This financing is expected to close by August 2023. Until such time as a definitive agreement is entered into, there can be no assurance this loan will be entered into.

Effective February 1, 2023, FREIT entered into a loan extension and modification agreement with Valley National Bank on its loan secured by the Westwood Plaza shopping center in Westwood, New Jersey with a then outstanding balance of approximately $16,864,361. Under the terms and conditions of this loan extension and modification, the maturity date of the loan was extended for a term of one (1) year from February 1, 2023 to February 1, 2024 with the option of FREIT to extend for one additional year from the extended maturity date, subject to certain provisions of the loan agreement. The loan is payable based on monthly installments of approximately $157,347 based on a fixed rate of interest of 7.5%. Additionally, FREIT funded an interest reserve escrow account (“Escrow”) at closing representing the annualized principal and interest payments for one (1) year, amounting to approximately $1,888,166. This Escrow is held at Valley National Bank and in the event of a default on this loan, the bank shall be permitted to use the proceeds from the escrow account to make monthly debt service payments on the loan.

On July 22, 2022, Wayne PSC, LLC (“Wayne PSC”) refinanced its $22.1 million loan (inclusive of deferred interest of approximately $136,000), which would have matured on October 1, 2026, on its Preakness Shopping center located in Wayne, New Jersey with a new loan held by ConnectOne Bank in the amount of $25,000,000. This loan is interest-only based on a fixed interest rate of 5% and has a term of three years with a maturity date of August 1, 2025. Additionally, an interest reserve escrow was established at closing representing twelve months of interest of $1,250,000, which can be used to pay monthly interest on this loan with a requirement to replenish the escrow account back to $1,250,000 when the balance in the escrow account is reduced to three months of interest. This refinancing resulted in (i) annual debt service savings of approximately $340,000 due to interest-only payments; (ii) an increase in the interest rate from a fixed interest rate of 3.625% to a fixed interest rate of 5%; and (iii) net refinancing proceeds of approximately $1.1 million which can be used for capital expenditures and general corporate purposes. As part of the refinancing, Wayne PSC terminated the interest rate swap contract on the underlying loan resulting in a realized gain on the swap breakage of approximately $1.4 million (See Note 4 for additional details.) As of April 30, 2023, the interest reserve escrow account has a balance of approximately $302,000. In May 2023, Wayne PSC funded the escrow account in the amount of $950,000 to replenish the balance in the account back to $1,250,000.

On December 30, 2021, FREIT refinanced its $14.4 million loan secured by its Boulders property located in Rockaway, New Jersey (which would have matured on February 1, 2022) with a new loan held by ConnectOne Bank in the amount of $7,500,000, with additional funding available to be drawn upon in the amount of $7,500,000 for corporate needs. This loan is interest-only and has a maturity date of January 1, 2024 with the option of FREIT to extend for one year from the maturity date, subject to certain provisions of the loan agreement. This refinancing will provide annual debt service savings of approximately $1,173,000 as a result of the reduction in the principal amount, a reduction in the annual interest rate from a fixed rate of 5.37% to a fixed rate of 2.85% and interest-only payments being required under this new loan. As of April 30, 2023, $7,500,000 of this loan was drawn and outstanding.

FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 31, 2023. Draws against the credit line can be used for working capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREIT’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is $13 million and the interest rate on the amount outstanding is based on a floating interest rate of prime minus 25 basis points with a floor of 3.75%. As of April 30, 2023 and October 31, 2022, there was no amount outstanding and $13 million was available under the line of credit.

While FREIT intends to renew or refinance its debt obligations as they become due, there can be no assurance that it will be successful or, if successful, that the new terms will be similar to the terms of its existing debt obligations or as favorable.

Note 10 – Fair value of long-term debt:

The following table shows the estimated fair value and net carrying value of FREIT’s long-term debt at April 30, 2023 and October 31, 2022:

Fair values are estimated based on market interest rates at April 30, 2023 and October 31, 2022 and on a discounted cash flow analysis. Changes in assumptions or estimation methods may significantly affect these fair value estimates. The fair value is based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).

Note 11 - Segment information:

ASC 280-10, "Disclosures about Segments of an Enterprise and Related Information", establishes standards for reporting financial information about operating segments in interim and annual financial reports and provides for a "management approach" in identifying the reportable segments. FREIT has determined that it has two reportable segments: commercial properties and residential properties. These reportable segments offer different types of space, have different types of tenants, and are managed separately because each requires different operating strategies and management expertise. The commercial segment is comprised of five (5) properties, excluding the Rotunda Property, the Westridge Square Property and the Damascus Property, which were sold on December 30, 2021, January 7, 2022 and January 10, 2022, respectively. The residential segment is comprised of six (6) properties, excluding the Icon at the Rotunda Property, which was sold as part of the Maryland Properties on December 30, 2021. (See Note 7 for further details.)

The accounting policies of the segments are the same as those described in Note 1 in FREIT’s Annual Report on Form 10-K for the fiscal year ended October 31, 2022. The chief operating and decision-making group responsible for oversight and strategic decisions of FREIT's commercial segment, residential segment and corporate/other is comprised of FREIT’s Board.

FREIT, through its chief operating and decision making group, assesses and measures segment operating results based on net operating income ("NOI"). NOI, a standard used by real estate professionals, is based on operating revenue and expenses directly associated with the operations of the real estate properties, but excludes: deferred rents (straight lining), depreciation, financing costs and other items. NOI is not a measure of operating results or cash flows from operating activities as measured by GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity.

Real estate rental revenue, operating expenses, NOI and recurring capital improvements for the reportable segments are summarized below and reconciled to condensed consolidated net income (loss) attributable to common equity for the six and three months ended April 30, 2023 and 2022. Asset information is not reported since FREIT does not use this measure to assess performance.

Note 12 – Income taxes:

FREIT has elected to be treated as a REIT for federal income tax purposes and as such intends to distribute at least 90% of its ordinary taxable income (to maintain its status as a REIT) to its stockholders as dividends for the fiscal year ending October 31, 2023. FREIT distributed approximately 143.8% of its ordinary taxable income and 100% of its capital gains from the sale of the Maryland Properties to its stockholders as dividends for the fiscal year ended October 31, 2022. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income and such gains were recorded in FREIT’s condensed consolidated financial statements for the six and three months ended April 30, 2023 and 2022.

As of April 30, 2023, FREIT had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended October 31, 2019 remain open to examination by the major taxing jurisdictions.

Note 13 – Equity Incentive Plan:

On March 9, 2023, in accordance with FREIT’s Equity Incentive Plan, the Compensation Committee of the FREIT Board of Directors (the “Board”) recommended to the Board and the Board approved that for services rendered and to be rendered in Fiscal 2023, in lieu of cash compensation in the amount of $20,000, each director was awarded shares of Common Stock, $0.01 par value, (the “Shares”) in FREIT. Based on the closing price of FREIT’s Shares on March 9, 2023 of $15.50 per Share, the Board has approved an award of 1,290 Shares of FREIT to each director serving on FREIT’s Board. As such, 1,290 Shares were issued to each director on March 9, 2023 and upon issuance were deemed fully paid and non-assessable. Additionally, the Compensation Committee recommended to the Board and the Board approved other adjustments to the compensation to be paid to directors and the executive officers of FREIT.

As of April 30, 2023, 433,030 shares are available for issuance under the FREIT Equity Incentive Plan (the “Plan”).

The following table summarizes stock option activity for the six and three months ended April 30, 2023 and 2022:

For the six and three months ended April 30, 2023, compensation expense related to stock options vested amounted to approximately $10,000 and $5,000, respectively. For the six and three month periods ended April 30, 2022, compensation expense related to stock options vested amounted to approximately $10,000 and $5,000, respectively. At April 30, 2023, there was approximately $2,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over the remaining weighted average vesting period of approximately 0.1 years. The aggregate intrinsic value of options vested and expected to vest and options exercisable at April 30, 2023 was approximately $62,700 and $13,200, respectively. For the six and three months ended April 30, 2023, 113,900 and 1,000 options, respectively, were exercised for an aggregate amount of approximately $1.2 million and $7,500, respectively. There were no options exercised for the six and three months ended April 30, 2022.

Note 14 – Deferred fee plan:

On September 4, 2014, the Board approved amendments, effective November 1, 2014, to the FREIT Deferred Fee Plan for its executive officers and directors, one of which provides for the issuance of share units payable in FREIT shares in respect of (i) deferred amounts of all director fees on a prospective basis; (ii) interest on director fees deferred prior to November 1, 2014 (payable at a floating rate, adjusted quarterly, based on the average 10-year Treasury Bond interest rate plus 150 basis points); and (iii) dividends payable in respect of share units allocated to participants in the Deferred Fee Plan as a result of deferrals described above. The number of share units credited to a participant’s account was determined by the closing price of FREIT shares on the date as set forth in the Deferred Fee Plan.

For the six months ended April 30, 2023 and 2022, the aggregate amounts of deferred director fees together with related interest and dividends were approximately $26,500 and $100,500, respectively, which have been paid through the issuance of 1,630 and 4,080 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 six months ended April 30, 2023 and 2022, FREIT has charged as expense approximately $26,500 and $65,200, respectively, representing deferred director fees and interest, and the balance of approximately $0 and $35,300, respectively, representing dividends payable in respect of share units allocated to Plan participants, has been charged to equity.

On November 4, 2021 (the “Adoption Date”), the Board approved the termination of the Deferred Fee Plan resulting in the termination of the deferral of fees on December 31, 2021 with any subsequent fees earned by a participant being paid in cash. Consistent with the termination of the Deferred Fee Plan, payment related to each participant’s cash account (in the form of a cash lump sum payment) and share unit account (in the form of the issuance of common stock) (collectively “the Deferred Fee Plan Termination Payment”) must be made to each participant no earlier than twelve (12) months and one day after, and no later than twenty-four (24) months, after the Adoption Date. Any interest earned on the participant’s cash account along with dividends (if any) earned on share units, will continue to accrue in share units on each participant’s account until final payment is made. On November 3, 2022, the Board determined that the Deferred Fee Plan Termination Payment would be made to the participants in the Deferred Fee Plan on January 20, 2023.

As of October 31, 2022, the total payment related to each participant’s cash account was approximately $2,317,000 (consisting of approximately $1,366,000 of cumulative fees and approximately $951,000 of accrued interest) which had been deferred as of November 1, 2014 and was included in the “Deferred director compensation payable” in the condensed consolidated balance sheet as of October 31, 2022. On January 20, 2023, in accordance with the Deferred Fee Plan Termination Payment, this amount was paid in full to each respective participant with no remaining balance due. Additionally, payment related to each participant’s share unit account was made in the form of the issuance of stock to each respective participant resulting in the issuance of 274,509 shares of common stock for each of the 274,509 vested share units. As of April 30, 2023, there were no remaining vested share units to be paid in the form of the issuance of stock.

Note 15 – Rental Income:

Commercial tenants:

Fixed lease income under our commercial operating leases generally includes fixed minimum lease consideration, which is accrued on a straight-line basis over the terms of the leases. Variable lease income includes consideration based on sales, as well as reimbursements for real estate taxes, maintenance, insurance and certain other operating expenses of the properties.

Minimum fixed lease consideration (in thousands of dollars) under non-cancelable tenant operating leases for each of the next five years and thereafter, excluding variable lease consideration and rents from tenants for which collectability is deemed to be constrained, for the years ending October 31, as of April 30, 2023, is as follows:

The above amounts assume that all leases which expire are not renewed and, accordingly, neither month-to-month nor rentals from replacement tenants are included.

Minimum future rentals do not include contingent rentals, which may be received under certain leases on the basis of percentage of reported tenants' sales volume. Rental income that is contingent on future events is not included in income until the contingency is resolved. Contingent rentals included in income for the six and three months ended April 30, 2023 and 2022 were not material.

Residential tenants:

Lease terms for residential tenants are usually one to two years.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

FREIT is an equity real estate investment trust (“REIT”) that is self-administered and externally managed. FREIT owns a portfolio of residential apartment and commercial properties. FREIT’s revenues consist primarily of rental income and other related revenues from its residential and commercial properties and additional rents derived from operating commercial properties. FREIT’s properties are primarily located in northern New Jersey and New York.

The economic and financial environment: As of April 2023, the annual inflation rate is at 4.9%, which is the lowest since April 2021, while the U.S. unemployment rate remained at 3.4%. Though inflation remains at an elevated level, it is showing signs of slowing down as the inflation rate has come down from a 40-year high of 9.1% in June 2022. In an effort to lower inflation, the Federal Reserve continues to raise interest rates. In May 2023, the Federal Reserve raised the interest rate to 5.25%, its highest rate level since August 2007. The pace at which it continues to raise the interest rates is uncertain leading to uncertainties in the financing market and a volatile economy.

Residential Properties: Our residential properties continue to generate positive cash flow while average rents on turned units (apartments which were vacated and then re-leased to new tenants) has continued to increase across the portfolio. Additionally, the rate of increase on renewals for existing tenants has continued to be robust, but could begin to soften in the current year. These increases should meaningfully contribute to FREIT’s income over time but it is uncertain what impact the significant rise in inflation and rising interest rates may have on these properties over the next year.

Commercial Properties: While our retail properties have stabilized from the impact of the COVID-19 pandemic, certain of our properties still have not attained pre-pandemic operating levels despite some recovery in brick and mortar retail. Additionally, the significant rise in inflation and rising interest rates could have an impact on the operating and financial performance of our commercial properties.

Debt Financing Availability: Financing has been available to FREIT and its affiliates. Certain recent refinancings and loan modifications/extensions have been at higher interest rates and for shorter terms.

Effective February 1, 2023, FREIT entered into a loan extension and modification agreement with Valley National Bank on its loan secured by the Westwood Plaza shopping center in Westwood, New Jersey with a then outstanding balance of approximately $16,864,361. Under the terms and conditions of this loan extension and modification, the maturity date of the loan was extended for a term of one (1) year from February 1, 2023 to February 1, 2024 with the option of FREIT to extend for one additional year from the extended maturity date, subject to certain provisions of the loan agreement. The loan is payable based on monthly installments of approximately $157,347 based on a fixed rate of interest of 7.5%. Additionally, FREIT funded an interest reserve escrow account (“Escrow”) at closing representing the annualized principal and interest payments for one (1) year, amounting to approximately $1,888,166. This Escrow is held at Valley National Bank and in the event of a default on this loan, the bank shall be permitted to use the proceeds from the escrow account to make monthly debt service payments on the loan.

On August 19, 2022, Westwood Hills, LLC (“Westwood Hills”) exercised its right, pursuant to the loan agreement, to extend the term of its $25 million loan on its property located in Westwood, New Jersey, for an additional six (6) months from an initial maturity date of October 1, 2022 to a new maturity date of April 1, 2023. On March 1, 2023, Westwood Hills exercised its right, pursuant to the loan agreement, to extend the term of its loan, for an additional six (6) months to a new maturity date of October 1, 2023 on the same terms and conditions as stated in the loan agreement. As of April 30, 2023, $25,000,000 of this loan was drawn and outstanding and the interest rate was 8.84%. Westwood Hills is in the process of refinancing this loan with a new lender in the amount of $25,500,000 for a term of three (3) years and based on a fixed rate of interest of 6.05%. This financing is expected to close by August 2023. Until such time as a definitive agreement is entered into, there can be no assurance this loan will be entered into.

Operating Cash Flow: FREIT expects that cash provided by operating activities and cash reserves will be adequate to cover mandatory debt service payments (including payments of interest, but excluding balloon payments, which are expected to be refinanced and/or extended), real estate taxes, recurring capital improvements at its properties and other needs to maintain its status as a REIT for at least a period of one year from the date of filing of this quarterly report on Form 10-Q.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Pursuant to the SEC disclosure guidance for "Critical Accounting Policies," the SEC defines Critical Accounting Policies as those that require the application of management's most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, the preparation of which takes into account estimates based on judgments and assumptions that affect certain amounts and disclosures. Accordingly, actual results could differ from these estimates. The accounting policies and estimates used, which are outlined in Note 1 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022, have been applied consistently as of April 30, 2023, and for the six and three months ended April 30, 2023 and 2022. We believe that the following accounting policies or estimates require the application of management's most difficult, subjective, or complex judgments.

Revenue Recognition: Base rents, additional rents based on tenants' sales volume and reimbursement of the tenants' share of certain operating expenses are generally recognized when due from tenants. The straight-line basis is used to recognize base rents under leases if they provide for varying rents over the lease terms. Straight-line rents receivable represent unbilled rents receivable to the extent straight-line rents exceed current rents billed in accordance with lease agreements. Before FREIT can recognize revenue, it is required to assess, among other things, its collectability.

Valuation of Long-Lived Assets: FREIT assesses the carrying value of long-lived assets periodically, or whenever events or changes in circumstances indicate that the carrying amounts of certain assets may not be recoverable. When FREIT determines that the carrying value of long-lived assets may be impaired, the measurement of any impairment is based on a projected discounted cash flow method determined by FREIT's management. While FREIT believes that our discounted cash flow methods are reasonable, different assumptions regarding such cash flows may significantly affect the measurement of impairment.

Real Estate Development Costs: It is FREIT’s policy to capitalize pre-development costs, which generally include legal and 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 postponement, capitalization of these costs will recommence once construction on the project resumes.

See Note 2 to FREIT’s condensed consolidated financial statements for recently issued accounting standards.

RESULTS OF OPERATIONS

Real estate revenue for the six months ended April 30, 2023 (“Current Six Months”) decreased 19.5% to $13,895,000 compared to $17,264,000 for the six months ended April 30, 2022 (“Prior Year’s Six Months”). Real estate revenue for the three months ended April 30, 2023 (“Current Quarter”) increased 4.6% to $6,916,000 compared to $6,615,000 for the three months ended April 30, 2022 (“Prior Year’s Quarter”).

The decrease in revenue for the Current Six Months was primarily attributable to the following: (a) a decrease of approximately $3.7 million attributed to the Maryland Properties sold in the Prior Year’s Six Months; offset by (b) an increase from the residential segment of approximately $0.2 million primarily driven by an increase in base rents across most properties; and (c) an increase from the commercial segment of approximately $0.1 million primarily attributed to rental revenue being deemed uncollectible and classified as a reduction in rental revenue in the Prior Year’s Six Months.

The increase in revenue for the Current Quarter was primarily attributable to the following: (a) an increase from the residential segment of approximately $0.2 million primarily driven by an increase in base rents across all properties; and (b) an increase from the commercial segment of approximately $0.1 million, primarily attributed to rental revenue being deemed uncollectible and classified as a reduction in rental revenue in the Prior Year’s Quarter.

Net income (loss) attributable to common equity (“net income (loss)-common equity”) for the Current Six Months and Current Quarter was net income of $516,000 ($0.07 per share basic and diluted) and $97,000 ($0.01 per share basic and diluted), compared to net income of $45,425,000 ($6.46 per share basic and $6.40 per share diluted) and net loss of $352,000 (($0.05) per share basic and diluted), for the Prior Year’s comparable periods, respectively.

The schedule below provides a detailed analysis of the major changes that impacted net income (loss)-common equity for the six and three months ended April 30, 2023 and 2022:

The condensed consolidated results of operations for the Current Six Months and Current Quarter are not necessarily indicative of the results to be expected for the full year or any other period. The table above includes income from real estate operations, which is a non-GAAP financial measure and is not a measure of operating results or cash flow as measured by GAAP, and is not necessarily indicative of cash available to fund cash needs.

Adjusted net income (loss) for the Current Six Months and Current Quarter was net income of $206,000 ($0.03 per share basic and diluted) and net loss of $83,000 (($0.01) per share basic and diluted), compared to a net loss of $619,000 (($0.09) per share basic and diluted) and net income of $231,000 ($0.03 per share basic and diluted), for the Prior Year’s comparable periods. Adjusted net income (loss) is a non-GAAP measure, which management believes is a useful and meaningful gauge to investors of our operating performance, since it excludes the impact of unusual and infrequent items specifically: a (loss) gain on sale of Maryland Properties.

The increase in adjusted net income for the Current Six Months was primarily driven by the following: (a) an increase in adjusted net income of approximately $669,000 (with a consolidated impact to FREIT of approximately $428,000) attributed to losses incurred in the prior year’s comparable period at the Maryland Properties sold in the Prior Year’s Six Months; (b) a decrease in General & Administrative expenses (“G&A”) of approximately $394,000 primarily driven by a decline in legal costs attributed to the legal proceeding between FREIT and certain of its affiliates and Sinatra Properties, LLC of approximately $500,000 offset by an increase in director fees of approximately $151,000 primarily attributed to the issuance of stock awards for services rendered and to be rendered in 2023 in lieu of cash compensation (See Note 13 to FREIT’s condensed consolidated financial statements for additional details); (c) an increase in investment income of approximately $343,000 resulting from higher interest rates in the Current Six Months; (d) an increase in revenue, excluding the Maryland Properties sold, of approximately $330,000 (with a consolidated impact to FREIT of approximately $239,000); offset by (e) an increase in interest expense, excluding the Maryland Properties sold, of approximately $677,000 (with a consolidated impact to FREIT of approximately $264,000) primarily attributed to the increase in the variable interest rate on the loan for the Westwood Hills property in the Current Six Months and an increase in the fixed interest rate on the loans for the Westwood Plaza and Wayne PSC properties due to the refinancing/modification of these loans; (f) an increase in total operating expenses at the residential properties, excluding the Icon property sold, of approximately $185,000 (with a consolidated impact to FREIT of approximately $104,000) resulting primarily from an overall increase in costs in the Current Year’s Six Months; and (g) an increase in the reserve for uncollectible expense at the commercial properties, excluding the Maryland Properties sold, of approximately $84,000 (with a consolidated impact to FREIT of approximately $50,000) resulting primarily from rental revenue being deemed uncollectible and classified from expense to a reduction in rental revenue in the Prior Year’s Six Months.

The decrease in adjusted net income for the Current Quarter was primarily driven by the following: (a) an increase in interest expense of approximately $425,000 (with a consolidated impact to FREIT of approximately $222,000) primarily attributed to the increase in the variable interest rate on the loan for the Westwood Hills property in the Current Quarter and an increase in the fixed interest rate on the loans for the Westwood Plaza and Wayne PSC properties due to the refinancing/modification of these loans; (b) an increase in total operating expenses at the residential properties, excluding the Icon property sold, of approximately $170,000 (with a consolidated impact to FREIT of approximately $109,000) resulting primarily from an overall increase in costs in the Current Quarter; (c) an increase in the reserve for uncollectible expense at the commercial properties in the Current Quarter, excluding the Maryland Properties sold, of approximately $151,000 (with a consolidated impact to FREIT of approximately $63,000) resulting primarily from rental revenue being deemed uncollectible and classified from expense to a reduction in rental revenue in the Prior Year’s Quarter; (d) an increase in G&A of approximately $106,000 primarily driven by an increase in director fees of approximately $155,000 primarily attributed to the issuance of stock awards for services rendered and to be rendered in 2023 in lieu of cash compensation (See Note 13 to FREIT’s condensed consolidated financial statements for additional details); (e) an increase in loss on investment in tenancy-in-common of approximately $89,000; offset by (f) an increase in revenue, excluding the Maryland Properties sold, of approximately $250,000 (with a consolidated impact to FREIT of approximately $101,000); (g) an increase in adjusted net income of approximately $220,000 (with a consolidated impact to FREIT of approximately $168,000) attributed to losses incurred in the prior year’s comparable period at the Maryland Properties sold in the prior year; and (h) an increase in investment income of approximately $180,000 resulting from higher interest rates in the Current Quarter.

(Refer to the segment disclosure below for a more detailed discussion of the financial performance of FREIT’s commercial and residential segments.)

SEGMENT INFORMATION

The following tables set forth comparative net operating income ("NOI") data for FREIT’s real estate segments and reconciles the NOI to condensed consolidated net income (loss)-common equity for the Current Six Months and Current Quarter as compared to the Prior Year’s comparable periods (see below for definition of NOI):