First Real Estate Investment Trust of New Jersey : FREIT Announces Second Quarter Fiscal 2023 Results - Form 8-K

FREIT Announces Second Quarter Fiscal 2023 Results

HACKENSACK, NJ, June 14, 2023 - First Real Estate Investment Trust of New Jersey, Inc. ("FREIT", "we" or the "Company") reported its operating results for the fiscal quarter and six months ended April 30, 2023. The results of operations as presented in this earnings release are unaudited and are not necessarily indicative of future results.

Results for the Quarter

Real estate revenue increased 4.6% to approximately $6,916,000 for the fiscal quarter ended April 30, 2023 as compared to approximately $6,615,000 for the prior year's comparable period. The increase in revenue 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 comparable period.

Net income (loss) attributable to common equity ("Net Income (Loss)") was Net Income of approximately $97,000 or $0.01 per share basic and diluted for the fiscal quarter ended April 30, 2023 as compared to Net Loss of approximately $352,000 or ($0.05) per share basic and diluted for the prior year's comparable period. The increase in Net Income was primarily driven by the following: (a) a decrease in the adjustment of the gain on sale of the Maryland Properties of approximately $1 million (with a consolidated impact to FREIT of approximately $0.6 million); (b) an increase in revenue, excluding the Maryland Properties sold, of approximately $250,000 (with a consolidated impact to FREIT of approximately $101,000); (c) an increase in 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; (d) an increase in investment income of approximately $180,000 resulting from higher interest rates in the fiscal quarter ended April 30, 2023; offset by (e) 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 fiscal quarter ended April 30, 2023 and an increase in the fixed interest rate on the loans for the Westwood Plaza and Wayne Preakness Shopping Center 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 $170,000 (with a consolidated impact to FREIT of approximately $109,000) resulting primarily from an overall increase in costs in the fiscal quarter ended April 30, 2023; (g) an increase in the reserve for uncollectible expense at the commercial properties, 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 comparable period; (h) an increase in General & Administrative expenses ("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; and (i) an increase in loss on investment in tenancy-in-common of approximately $89,000.

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

Results for the Six Months

Real estate revenue decreased 19.5% to approximately $13,895,000 for the six months ended April 30, 2023 as compared to approximately $17,264,000 for the prior year's comparable period. The decrease in revenue 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 comparable period; 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 comparable period.

Net Income was approximately $516,000 or $0.07 per share basic and diluted for the six months ended April 30, 2023 as compared to approximately $45,425,000 or $6.46 per share basic and $6.40 per share diluted for the prior year's comparable period. The decrease in Net Income was primarily driven by the following: (a) a decrease in the gain on sale of the Maryland Properties of approximately $69.2 million (with a consolidated impact to FREIT of approximately $45.8 million); (b) 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 six months ended April 30, 2023 and an increase in the fixed interest rate on the loans for the Westwood Plaza and Wayne Preakness Shopping Center properties due to the refinancing/modification of these loans; (c) 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 six months ended April 30, 2023; and (d) 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 comparable period; offset by (e) an increase in 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 comparable period; (f) a decrease in 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; (g) an increase in investment income of approximately $343,000 resulting from higher interest rates in the six months ended April 30, 2023; and (h) an increase in revenue, excluding the Maryland Properties sold, of approximately $330,000 (with a consolidated impact to FREIT of approximately $239,000).

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

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 remained stable at approximately $2,683,000 and $5,295,000 for the fiscal quarter and six months ended April 30, 2023, respectively, from approximately $2,687,000 and $5,277,000 for the prior year's comparable periods, respectively. Same property NOI for the commercial properties decreased slightly to approximately $887,000 for the fiscal quarter ended April 30, 2023 from approximately $967,000 for the prior year's comparable period and increased modestly to approximately $1,939,000 for the six months ended April 30, 2023 from approximately $1,868,000 for the prior year's comparable period.

Financing Update

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 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, LLC 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. 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.

Dividend

After careful consideration of FREIT's projected operating results and cash needs, 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.

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:

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 Stockholder Relations at (201) 488-6400

Visit us on the web: www.freitnj.com