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Gain on Early Contract Termination
First Real Estate Investment Trust Of New Jersey (FREIT), ticker FREVS, has reported a gain on the early
termination of contracts for the Regency and Station Place properties in its quarterly report for April 30,
2023. The contracts were in FREIT’s favor, and if terminated on that date, FREIT would have realized a gain of
approximately $423,000 for the Regency swap and $429,000 for the Station Place swap. These gains have been
included in FREIT’s condensed consolidated balance sheet.
Adjusted Funds From Operations (AFFO)
Additionally, the report provides information on Adjusted Funds From Operations (AFFO), which is considered by
FREIT as a measure of its operating performance compared to Funds From Operations (FFO). AFFO includes adjustments
to GAAP net income that are not considered primary drivers of FREIT’s decision-making process, such as straight-line
rents and recurring capital improvements on residential apartments.
Financial Performance
For the six months ended April 30, 2023, FREIT’s FFO was $2,416,000, while AFFO was $2,202,000. This represents an
increase in AFFO from the previous year, where FFO was $2,185,000 and AFFO was $2,040,000. On a per share basis,
basic and diluted AFFO for the three-month period was $0.13, compared to $0.15 in the previous year.
FFO and AFFO Limitations
It is important to note that FFO and AFFO do not represent cash generated from operating activities in accordance
with GAAP, and they should not be considered as substitutes for net income or cash flow from operations. The
application and calculation of FFO and AFFO may vary among different REITs, making direct comparisons to other
companies challenging.
Counterparty Credit Risk
The report also discusses counterparty credit risk, highlighting that FREIT reduces this risk by entering
into contracts only with major financial institutions experienced in the derivatives market.
Inflation and Lease Agreements
Regarding inflation, the report states that FREIT’s commercial tenant leases typically allocate the responsibility
of operating expense increases to tenants, which mitigates the impact of inflation on FREIT. For apartment leases,
which are usually for one-year terms, FREIT has the opportunity to seek increased rents as leases renew or new
tenants are obtained.
Additional Sections
The report includes sections on quantitative and qualitative disclosures about market risk, controls and procedures,
legal proceedings, risk factors, and exhibits.
Conclusion
In conclusion, First Real Estate Investment Trust Of New Jersey’s quarterly report highlights a gain on the early
termination of contracts and an increase in Adjusted Funds From Operations. The company’s approach to counterparty
credit risk and inflation is also outlined in the report.
Note that we may hold securities mentioned in this article. All data is based on recent SEC filings. Even though we have implemented various manual and automatic fact-checking and data acquisition processes, some incorrect information may have slipped through (false positive). Let us know if you find any inconsistencies!