FREVS First Real Estate Investment Trust of New Jersey Inc (PK)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

CURRENT REPORT

 

Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

September 14, 2023

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC.

(Exact name of registrant as specified in charter)

Maryland	000-25043	22-1697095
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
505 Main Street, Suite 400, Hackensack, New Jersey			07601
(Address of principal executive offices)			(Zip Code)

 

Registrant’s telephone number, including area code: (201) 488-6400

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c))

 

 

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

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	FREVS	OTC Pink Market
Preferred Stock Purchase Rights (1)

 

(1)

Registered pursuant to Section 12 (b) of the Act pursuant to a form 8-A filed by the registrant on August 3, 2023. Until the Distribution Date (as defined in the registrant’s Stockholder Rights Agreement dated July 31, 2023) the Preferred Stock Purchase Rights will be transferred with and only with the shares of the registrant’s Common Stock to which the Preferred Stock Purchase Rights are attached.

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

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. ☐

 

 

Item 2.02 Results of Operations and Financial Condition

 

OPERATING RESULTS

 

The registrant has released its operating results for the fiscal quarter and nine months ended July 31, 2023. The Press Release is included as Exhibit 99.1 to this Form 8-K.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

99.1 Registrant’s press release dated September 14, 2023

 

 

 

 

 

 

 

The statements in this report, which relate to future earnings or performance, are forward-looking. Actual results may differ materially and be adversely affected by such factors as market and economic conditions, longer than anticipated lease-up periods or the inability of certain tenants to pay rents. Additional information about these factors is contained in the Company’s filings with the SEC including the Company’s most recent filed reports on Form 10-K and Form 10-Q.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC.
	(Registrant)
	By:	/s/ Robert S. Hekemian, Jr.
		Robert S. Hekemian, Jr.
		President and Chief Executive Officer

Date: September 14, 2023

 

 

EXHIBIT INDEX

 

Exhibit
Number	Description
99.1	Press Release – Operating results for the fiscal quarter and nine months ended July 31, 2023.

 

 

 

 

HACKENSACK, NJ, September 14, 2023 – First Real Estate Investment Trust of New Jersey, Inc. (“FREIT” or the “Company”) reported its operating results for the fiscal quarter and nine months ended July 31, 2023. The results of operations as presented in this earnings release are unaudited and are not necessarily indicative of future results.

 

FINANCIAL HIGHLIGHTS & OPERATING STATISTICS
	For the Fiscal Quarter Ended			For the Nine Months Ended
	July 31,			July 31,
	2023	2022		2023	2022
GAAP (Loss) Earnings Per Share - Basic	($0.06)	$0.16		$0.01	$6.61
GAAP (Loss) Earnings Per Share - Diluted	($0.06)	$0.16		$0.01	$6.56
AFFO Per Share - Basic and Diluted	$0.10	$0.15		$0.40	$0.44
Dividends Per Share	$0.30	$0.00		$0.40	$0.20
Total Average Residential Occupancy *	96.8%	97.8%		97.1%	98.4%
Total Average Commercial Occupancy *	65.1%	65.9%		65.4%	67.1%
* Average occupancy rate excludes the Rotunda Property, the Damascus Property and the Westridge Square Property (collectively the "Maryland Properties") from all periods presented as the properties were sold in the nine months ended July 31, 2022.

 

“We delivered a solid quarter of operational and financial performance,” said Robert Hekemian, Chief Executive Officer of FREIT. “This performance was achieved despite increases in legal expenses and other costs associated with adverse actions from an external entity. We are also pleased to announce the recapture of the Kmart space at our Westwood Plaza shopping center-see discussion below. The Board is committed to protecting and delivering value for all FREIT stockholders”.

 

Results for the Quarter

Real estate revenue increased 4.8% to approximately $7,296,000 for the fiscal quarter ended July 31, 2023 as compared to approximately $6,959,000 for the prior year’s comparable period. The change in revenue was primarily attributable to an increase from the residential segment driven by an increase in base rents across all properties.

Net (loss) income attributable to common equity (“Net (Loss) Income”) was Net Loss of approximately ($412,000) or ($0.06) per share basic and diluted for the fiscal quarter ended July 31, 2023 as compared to Net Income of approximately $1,121,000 or $0.16 per share basic and diluted for the prior year’s comparable period. The change in Net Income was primarily driven by an increase in general and administrative expenses (“G&A”) of approximately $648,000 attributed to legal costs relating to the ongoing litigation between FREIT and Sinatra Properties, LLC, as well as the Board’s adoption of the Company’s Stockholder Rights Plan implemented on July 28, 2023. A significant portion of the change results from material items such as an adjustment to the net gain on the Maryland property sale during the fiscal quarter ended July 31, 2023 and a realized gain on the Wayne PSC interest rate swap termination during the prior year’s comparable period.

(Refer to “Table of Revenue & Net (Loss) Income Components”)

Results for the Nine Months

Real estate revenue decreased 12.5% to approximately $21,191,000 for the nine months ended July 31, 2023 as compared to approximately $24,223,000 for the prior year’s comparable period. The change in revenue was primarily attributable to a decrease of approximately $3.6 million attributed to the Maryland Properties sold in the prior year’s comparable period offset by an increase from the residential segment of approximately $0.5 million primarily driven by an increase in base rents across all properties.

Net Income was approximately $104,000 or $0.01 per share basic and diluted for the nine months ended July 31, 2023 as compared to approximately $46,546,000 or $6.61 per share basic and $6.56 per share diluted for the prior year’s comparable period. The change in Net Income was almost entirely driven by the prior year’s comparable period income attributable to the Maryland Properties sold and the $1.4 million gain on the Wayne PSC interest rate swap termination. Also affecting the change in net income were increases in interest costs and investment income reflecting the higher interest rate environment, higher administrative costs and the costs incurred to adopt the Stockholders Rights Plan.

(Refer to “Table of Revenue & Net (Loss) Income Components”)

 

Table of Revenue & Net (Loss) Income Components

 

		For the Fiscal Quarter Ended July 31,												For the Nine Months Ended July 31,
		2023				2022				Change				2023				2022				Change
		(In Thousands Except Per Share Amounts)												(In Thousands Except Per Share Amounts)
Revenue:
Commercial properties		$	2,260			$	2,215			$	45			$	6,522			$	8,420			$	(1,898	)
Residential properties			5,036				4,744				292				14,669				15,803				(1,134	)
Total real estate revenues			7,296				6,959				337				21,191				24,223				(3,032	)
Operating expenses:
Real estate operating expenses			3,483				3,328				155				10,308				11,934				(1,626	)
General and administrative expenses			1,559				911				648				3,361				3,107				254
Depreciation			744				723				21				2,198				3,257				(1,059	)
Total operating expenses			5,786				4,962				824				15,867				18,298				(2,431	)
Financing costs			(2,031	)			(1,774	)			(257	)			(5,858	)			(6,229	)			371
Investment income			275				119				156				682				183				499
(Loss) gain on investment in tenancy-in-common			(43	)			57				(100	)			(231	)			(99	)			(132	)
Net (loss) gain on sale of Maryland properties			(557	)			—				(557	)			(1,003	)			68,771				(69,774	)
Net realized gain on Wayne PSC interest rate swap contract termination			—				1,415				(1,415	)			—				1,415				(1,415	)
Net (loss) income			(846	)			1,814				(2,660	)			(1,086	)			69,966				(71,052	)
Net loss (income) attributable to noncontrolling interests in subsidiaries			434				(693	)			1,127				1,190				(23,420	)			24,610
Net (loss) income attributable to common equity		$	(412	)		$	1,121			$	(1,533	)		$	104			$	46,546			$	(46,442	)
(Loss) earnings per share:
Basic		$	(0.06	)		$	0.16			$	(0.22	)		$	0.01			$	6.61			$	(6.60	)
Diluted		$	(0.06	)		$	0.16			$	(0.22	)		$	0.01			$	6.56			$	(6.55	)
Weighted average shares outstanding:
Basic			7,449				7,040								7,438				7,038
Diluted			7,449				7,114								7,444				7,110

 

Same Property Net Operating Income

FREIT considers same property net operating income (“Same Property NOI”) to be a useful supplemental non-GAAP measure of its operating performance. FREIT defines same property within both the commercial and residential segments to be those properties that FREIT has owned and operated for both the current and prior periods presented, excluding those properties that FREIT acquired, sold or redeveloped during those periods. Any newly acquired property that has been in operation for less than a year, any property that is undergoing a major redevelopment but may still be in operation at less than full capacity, and/or any property that has been sold is not considered same property. Currently, FREIT’s commercial segment

contains five (5) same properties and the residential segment contains six (6) same properties. The Maryland Properties sold in the prior year’s comparable period were excluded from same property results for all periods presented.

Same property NOI for the residential properties increased modestly to approximately $2,843,000 and $8,138,000 for the fiscal quarter and nine months ended July 31, 2023, respectively, from approximately $2,643,000 and $7,921,000 for the prior year’s comparable periods, respectively. Same property NOI for the commercial properties decreased slightly to approximately $1,001,000 for the fiscal quarter ended July 31, 2023 from approximately $1,047,000 for the prior year’s comparable period and increased modestly to approximately $2,939,000 for the nine months ended July 31, 2023 from approximately $2,916,000 for the prior year’s comparable period.

Kmart Lease Update

On June 24, 2023, the owner/operator of the 84,254 square foot Kmart store located at our Westwood Plaza shopping center in Westwood, New Jersey informed FREIT of its intent to sublet their space to three unidentified retail tenants. The current term of the lease for Kmart expires on October 31, 2027 with two 5-year renewal options remaining. The lease agreement provides that base rent payments are fixed at $4.00 per square foot ($336,720 annually) and additional rent for common area maintenance and insurance costs are based on an amount less than Kmart’s pro rata share of the shopping center. Management’s review of the Kmart space has determined that this space has a current rental market value of between $15 and $24 per square foot. While significant tenant and/or capital improvements will be necessary to fit-up this space for a new tenant or tenants, the higher rent potentially realizable equates to annual revenues in excess of approximately $930,000 to $1,685,000. FREIT believes these increased rent amounts, if achieved, will more than offset lost rent from Kmart and other tenants with co-tenancy clauses and will only increase the overall value of the shopping center. Accordingly, on July 24, 2023, FREIT denied Kmart’s request and elected pursuant to the lease to terminate the Kmart lease effective October 23, 2023. Thus, FREIT will now have full control of this space instead of waiting another 14 years to renegotiate or re-lease this space at a higher market rent.

Financing Update

On August 3, 2023, Westwood Hills, LLC refinanced its $25,000,000 loan (which would have matured on October 1, 2023) secured by its residential property located in Westwood, New Jersey with a new loan in the amount of $25,500,000. This loan is based on a fixed interest rate of 6.05%, provides for monthly payments of $153,706 and has a term of three years with a maturity date of September 1, 2026. This refinancing resulted in a decrease in the interest rate from a variable interest rate of approximately 9.21% (as of July 31, 2023) to a fixed interest rate of 6.05% and annual debt service savings of approximately $535,000.

Dividend

The Board declared a total dividend of approximately $2,235,000 ($0.30 per share) in the third quarter of Fiscal 2023, which was composed of an ordinary dividend of $0.05 per share and a special dividend of $0.25 per share to distribute funds released in Fiscal 2023 from a post-closing rent escrow established in connection with the sale of FREIT’s Maryland Properties. The total dividend of $0.30 per share will be paid on September 15, 2023 to holders of record of said shares at the close of business on September 1, 2023. The Board will continue to evaluate the dividend on a quarterly basis.

 

Adjusted Funds From Operations

Funds From Operations (“FFO”) is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”). FREIT does not include distributions from equity/debt/capital gain sources in its computation of FFO. Although many consider FFO as the standard measurement of a REIT’s performance, FREIT modified the NAREIT computation of FFO to include other adjustments to GAAP net income, which are not considered by management to be the primary drivers of its decision making process. These adjustments to GAAP net income are straight-line rents and recurring capital improvements on FREIT’s residential apartments.

The modified FFO computation is referred to as Adjusted Funds From Operations (“AFFO”). FREIT believes that AFFO is a superior measure of its operating performance. FREIT computes FFO and AFFO as follows:

 

 

		For the Fiscal Quarter Ended July 31,								For the Nine Months Ended July 31,
		2023				2022				2023				2022
		(In Thousands Except Per Share Amounts)								(In Thousands Except Per Share Amounts)
Funds From Operations ("FFO") (a)
Net (loss) income		$	(846	)		$	1,814			$	(1,086	)		$	69,966
Depreciation of consolidated properties			744				723				2,198				3,257
Amortization of deferred leasing costs			27				19				67				107
Distributions to non-controlling interests			—	(b)			(210	)			—	(b)			(735	)(c)
Net loss (gain) on sale of Maryland properties			557				—				1,003				(68,771	)
Net realized gain on Wayne PSC interest rate swap contract termination			—				(1,415	)			—				(1,415	)
Adjustment to loss on investment in tenancy-in-common for depreciation			359				355				1,075				1,062
FFO		$	841			$	1,286			$	3,257			$	3,471
Per Share - Basic and Diluted		$	0.11			$	0.18			$	0.44			$	0.49
(a) As prescribed by NAREIT.
(b) FFO excludes the additional distribution of proceeds to non-controlling interests in the amount of approximately $1.2 million and $3.3 million for the fiscal quarter and nine months ended July 31, 2023, respectively, related to the sale of the Damascus and Rotunda properties.
(c) FFO excludes the distribution of proceeds to non-controlling interests in the amount of approximately $19.4 million related to the sale of the Damascus and Rotunda properties.
Adjusted Funds From Operations ("AFFO")
FFO		$	841			$	1,286			$	3,257			$	3,471
Deferred rents (Straight lining)			15				(36	)			91				25
Capital Improvements - Apartments			(117	)			(195	)			(407	)			(401	)
AFFO		$	739			$	1,055			$	2,941			$	3,095
Per Share - Basic and Diluted		$	0.10			$	0.15			$	0.40			$	0.44
Weighted Average Shares Outstanding:
Basic			7,449				7,040				7,438				7,038
Diluted			7,449				7,114				7,444				7,110

 

FFO and AFFO do not represent cash generated from operating activities in accordance with accounting principles generally accepted in the United States of America, and therefore should not be considered a substitute for net income as a measure of results of operations or for cash flow from operations as a measure of liquidity. Additionally, the application and calculation of FFO and AFFO by certain other REITs may vary materially from that of FREIT, and therefore FREIT’s FFO and AFFO may not be directly comparable to those of other REITs.

 

 

The statements in this report, which relate to future earnings or performance, are forward-looking. Actual results may differ materially and be adversely affected by such factors as market and economic conditions, longer than anticipated lease-up periods or the inability of certain tenants to pay rents. Additional information about these factors is contained in the Company’s filings with the SEC including the Company’s most recent filed reports on Form 10-K and Form 10-Q.

First Real Estate Investment Trust of New Jersey, Inc. is a publicly traded (over-the-counter – symbol FREVS) REIT organized in 1961. Its portfolio of residential and commercial properties are located in New Jersey and New York, with the largest concentration in northern New Jersey.

For additional information, contact Investor Relations at (201) 488-6400

Visit us on the web: www.freitnj.com

v3.23.2

Cover	Sep. 14, 2023
Document Type	8-K
Amendment Flag	false
Document Period End Date	Sep. 14, 2023
Entity File Number	000-25043
Entity Registrant Name	FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC.
Entity Central Index Key	0000036840
Entity Tax Identification Number	22-1697095
Entity Incorporation, State or Country Code	MD
Entity Address, Address Line One	505 Main Street
Entity Address, Address Line Two	Suite 400
Entity Address, City or Town	Hackensack
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	07601
City Area Code	(201)
Local Phone Number	488-6400
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Common Stock [Member]
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	FREVS
Preferred Stock [Member]
Title of 12(b) Security	Preferred Stock Purchase Rights

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