First Real Estate Investment Trust of New Jersey (FREIT), ticker FREVS, recently released its quarterly report, revealing some interesting developments and financial highlights. The company reported a net gain of approximately $68.3 million from the sale of its Maryland Properties, with a consolidated impact to FREIT of approximately $45.3 million. Additionally, the company declared a special cash distribution of approximately $51.5 million to its stockholders.
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Management Agreement with Hekemian & Co.
One notable aspect of the report is the management agreement between FREIT and Hekemian & Co., which currently manages all properties owned by FREIT and its affiliates, except for the office building at the Rotunda Property. The management agreement requires the payment of management fees equal to 4% to 5% of rents collected. The fees totaled approximately $659,000 and $790,000 for the six months ended April 30, 2023 and 2022, respectively. The agreement also includes the payment of leasing commissions and the reimbursement of certain operating expenses incurred on behalf of FREIT.
Additional Services Provided by Hekemian & Co.
FREIT has engaged Hekemian & Co. to provide additional services, such as consulting services related to development, property sales, and financing activities. Separate fee arrangements are negotiated for these additional services. In total, fees incurred for these additional services were approximately $21,000 for the six months ended April 30, 2023, and $21,000 for the three months ended April 30, 2023.
Debt Obligations and Refinancing Agreements
In terms of its debt obligations, FREIT has entered into various refinancing agreements. For example, Westwood Hills, LLC extended the term of its $25 million loan on its Westwood property, while Wayne PSC, LLC refinanced its $22.1 million loan on its Preakness Shopping Center. These refinancing agreements have resulted in annual debt service savings and net refinancing proceeds that can be used for capital expenditures and general corporate purposes.
Fair Value and Net Carrying Value of Long-term Debt
The report also provides information on the fair value and net carrying value of FREIT’s long-term debt. As of April 30, 2023, the estimated fair value of the long-term debt was $134.1 million, while the net carrying value was $137.2 million.
Reportable Segments: Commercial and Residential Properties
FREIT operates in two reportable segments: commercial properties and residential properties. The commercial segment comprises five properties, while the residential segment comprises six properties. These segments offer different types of space and have different types of tenants, requiring different operating strategies and management expertise.
Net Operating Income
The report further includes information on the company’s net operating income (NOI), which is a key measure used by real estate professionals to assess performance. For the six months ended April 30, 2023, FREIT reported a total NOI of $7.1 million, with $1.9 million generated from the commercial segment and $5.3 million generated from the residential segment.
Equity Incentive Plan
Regarding equity incentives, FREIT’s Equity Incentive Plan allows for the issuance of shares to directors and executive officers in lieu of cash compensation. As of April 30, 2023, 433,030 shares were available for issuance under the plan.
In conclusion, First Real Estate Investment Trust of New Jersey’s quarterly report provides important insight into the company’s financial performance and management fees. The sale of its Maryland Properties resulted in a significant net gain, while the management agreement with Hekemian & Co. and various refinancing agreements have impacted the company’s operating expenses and financial position. With its two reportable segments and successful equity incentive plan, FREIT continues to focus on generating long-term value for its stakeholders.
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