Investment in Tenancy-In-Common

9 Months Ended

Jul. 31, 2024

Investment in Tenancy-In-Common [Abstract]

Investment in tenancy-in-common

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. While FREIT’s effective ownership percentage in the Pierre Towers property remained unchanged after the reorganization to a TIC, FREIT no longer has a controlling interest in the TIC as the TIC is now under joint control. Based on the guidance of ASC 810, “Consolidation”, FREIT’s investment in the TIC is accounted for under the equity method of accounting.

FREIT’s investment in the TIC was approximately $17.7 million and $18.1 million at July 31, 2024 and October 31, 2023, respectively. For the nine and three months ended July 31, 2024, FREIT recognized a loss on investment in TIC of approximately $143,000 and $96,000, respectively, in the accompanying condensed consolidated statements of operations. Additionally, because the Pierre Towers property was part of the original portfolio sale to Sinatra Properties, LLC (“Sinatra”), approximately $166,000 in expenses previously paid by and due to FREIT for the terminated Sinatra transaction (See Note 6) have been recorded in the “investment in tenancy-in-common” line item on FREIT’s condensed consolidated balance sheet as of July 31, 2024. For the nine and three months ended July 31, 2023, FREIT recognized a loss on investment in TIC of approximately $231,000 and $43,000, respectively, 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 was renewed for a successive one (1) year term expiring on February 28, 2025.

The management agreement requires the payment of management fees equal to 5% of rents collected. Management fees, charged to operations, were approximately $318,000 and $108,000 for the nine and three months ended July 31, 2024, respectively, and

$313,000 and $105,000 for the nine and three months ended July 31, 2023, respectively. The Pierre Towers property also uses the resources of the Hekemian & Co. insurance department to secure various insurance coverages for its property. Hekemian & Co. is paid a commission for these services. Such commissions were charged to operations and amounted to approximately $55,000 for both the nine and three months ended July 31, 2024 and $51,000 for both the nine and three months ended July 31, 2023.

The following table summarizes the balance sheets of the Pierre Towers property as of July 31, 2024 and October 31, 2023, accounted for by the equity method:

	July 31,		October 31,
	2024		2023
	(In Thousands of Dollars)
Real estate, net	$	73,041	$	74,202
Cash and cash equivalents		1,736		2,256
Tenants' security accounts		519		478
Receivables and other assets		679		455
Total assets	$	75,975	$	77,391
Mortgages payable, net of unamortized debt issuance costs	$	47,653	$	48,516
Accounts payable and accrued expenses		452		295
Reimbursement due to FREIT		166		—
Tenants' security deposits		524		496
Deferred revenue		197		181
Equity		26,983		27,903
Total liabilities & equity	$	75,975	$	77,391
FREIT's investment in TIC (65% interest)	$	17,539	$	18,137
Reimbursement due to FREIT		166		—
FREIT's net investment in TIC	$	17,705	$	18,137

The following table summarizes the statements of operations of the Pierre Towers property for the nine and three months ended July 31, 2024 and 2023, accounted for by the equity method:

	Nine Months Ended July 31,						Three Months Ended July 31,
	2024			2023			2024			2023
	(In Thousands of Dollars)						(In Thousands of Dollars)
Revenue	$	6,416		$	6,196		$	2,173		$	2,100
Operating expenses		3,685			3,700			1,230			1,215
Depreciation		1,674			1,655			559			554
Operating income		1,057			841			384			331
Interest income		59			—			22			—
Sinatra expenses due to FREIT		(166	)		—			(166	)		—
Interest expense including amortization of deferred financing costs		(1,170	)		(1,196	)		(388	)		(397	)
Net loss	$	(220	)	$	(355	)	$	(148	)	$	(66	)
FREIT's loss on investment in TIC (65% interest)	$	(143	)	$	(231	)	$	(96	)	$	(43	)