UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

x~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the Quarterly Period Ended ~~January 31,~~April 30, 2019

o~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ____________________

Commission File No.000-25043

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY

(Exact name of registrant as specified in its charter)

New Jersey		22-1697095
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

505 Main Street, Hackensack, New Jersey		07601
(Address of principal executive offices)		(Zip Code)

201-488-6400

(~~Registrant's~~Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Shares of beneficial interest, without par value	FREVS	OTC Pink Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNoo ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesxNo ☐o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☐	Accelerated Filer ~~☐ Accelerated Filer~~x ~~Non-Accelerated Filer ☐ Smaller Reporting Company ☐~~ ~~Emerging growth company ☐~~ ~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~ ~~Yes ☐ No~~x	Non-Accelerated Filer ☐ Smaller Reporting Company ☐
Emerging growth company ☐

Page 2

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ Nox

As of ~~March 11,~~June 7, 2019, the number of shares of beneficial interest outstanding ~~was 6,758,554.~~was6,784,978.

~~Index~~

~~Page 2~~

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Index

FIRST REAL ESTATE

INVESTMENT TRUST OF NEW JERSEY

INDEX~~INDEX~~

Part I:
~~Part I:~~	Financial Information
				Page

	Item 1:	Unaudited Condensed Consolidated Financial Statements

		a.)	Condensed Consolidated Balance Sheets as of ~~January 31,~~April 30, 2019 and October 31, 2018;	34

		b.)	Condensed Consolidated Statements of Income for the Six and Three Months Ended ~~January 31,~~April 30, 2019 and 2018;	45

		c.)	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Six and Three Months Ended ~~January 31,~~April 30, 2019 and 2018;	56

		d.)	Condensed Consolidated Statements of Equity for the Six and Three Months Ended ~~January 31,~~April 30, 2019 and 2018;	67-8

		e.)	Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~January 31,~~April 30, 2019 and 2018;	79

		f.)	Notes to Condensed Consolidated Financial Statements.	810

	Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1619

	Item 3:	Quantitative and Qualitative Disclosures About Market Risk		2731

	Item 4:	Controls and Procedures		27
				31

Part II:	Other Information

	Item 1:	Legal Proceedings		2731

	Item 1A:	Risk Factors		2731

	Item 6:	Exhibits		2832

	Signatures			2832

~~Index~~

~~Page 3~~

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Index

Part I: Financial Information

Item 1: Unaudited Condensed Consolidated Financial Statements

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	January 31,			October 31,			April 30,			October 31,
	2019			2018			2019			2018
	(In Thousands of Dollars)						(In Thousands of Dollars)
ASSETS

Real estate, at cost, net of accumulated depreciation	$	336,531		$	344,532		$	334,425		$	344,532
Real estate held for sale, at cost, net of accumulated depreciation (Note 13)		6,212			—
Construction in progress		259			159			278			159
Cash and cash equivalents		23,633			21,747			25,291			21,747
Tenants' security accounts		2,212			2,212
Tenants’ security accounts								2,236			2,212
Receivables arising from straight-lining of rents		4,031			3,964			4,151			3,964
Accounts receivable, net of allowance for doubtful accounts of $259 and		2,045			2,298
$276 as of January 31, 2019 and October 31, 2018, respectively
Accounts receivable, net of allowance for doubtful accounts of $256 and $276 as of April 30, 2019 and October 31, 2018, respectively								1,784			2,298
Secured loans receivable		4,000			4,000			4,000			4,000
Prepaid expenses and other assets		5,672			6,034			5,544			6,034
Deferred charges, net		2,653			2,693			2,653			2,693
Interest rate cap and swap contracts		2,076			4,434			1,571			4,434
Total Assets	$	389,324		$	392,073		$	381,933		$	392,073


LIABILITIES AND EQUITY

Liabilities:
Mortgages payable	$	349,417		$	350,504		$	343,126		$	350,504
Less unamortized debt issuance costs		3,204			3,498			2,951			3,498
Mortgages payable, net		346,213			347,006			340,175			347,006

Due to affiliate		5,488			5,417			5,560			5,417
Deferred trustee compensation payable		8,457			8,457			7,610			8,457
Accounts payable and accrued expenses		2,216			1,910			2,301			1,910
Dividends payable		1,014			338			848			338
Tenants' security deposits		3,303			3,232
Tenants’ security deposits								3,344			3,232
Deferred revenue		1,104			1,369			1,166			1,369
Interest rate swap contracts		160			—			481			-
Total Liabilities		367,955			367,729			361,485			367,729

Commitments and contingencies


Equity:
Common equity:
Shares of beneficial interest without par value:
8,000,000 shares authorized; 6,993,152 shares issued plus 172,599 and		28,556			28,288
157,395 vested share units granted to Trustees at January 31, 2019
and October 31, 2018, respectively
Treasury stock, at cost: 234,598 and 235,536 shares at January 31, 2019		(4,921	)		(4,941	)
and October 31, 2018, respectively
Shares of beneficial interest without par value: 8,000,000 shares authorized; 6,993,152 shares issued plus 164,727 and 157,395 vested share units granted to Trustees at April 30, 2019 and October 31, 2018, respectively								28,331			28,288
Treasury stock, at cost: 208,174 and 235,536 shares at April 30, 2019 and October 31, 2018, respectively								(4,367	)		(4,941	)
Dividends in excess of net income		(4,957	)		(4,376	)		(5,038	)		(4,376	)
Accumulated other comprehensive income		819			2,517			246			2,517
Total Common Equity		19,497			21,488			19,172			21,488
Noncontrolling interests in subsidiaries		1,872			2,856			1,276			2,856
Total Equity		21,369			24,344			20,448			24,344
Total Liabilities and Equity	$	389,324		$	392,073		$	381,933		$	392,073

See Notes to Condensed Consolidated Financial Statements.

~~Index~~

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Index

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

SIX AND THREE MONTHS ENDED ~~JANUARY 31,~~APRIL 30, 2019 AND 2018

(Unaudited)

	Three Months Ended January 31,						Six Months Ended April 30,						Three Months Ended April 30,
	2019			2018			2019			2018			2019			2018
	(In Thousands of Dollars, Except Per Share Amounts)						(In Thousands of Dollars, Except Per Share Amounts)						(In Thousands of Dollars, Except Per Share Amounts)
Revenue:
Rental income	$	13,161		$	12,390		$	26,486		$	25,171		$	13,325		$	12,781
Reimbursements		1,658			1,576			2,995			2,987			1,337			1,411
Sundry income		109			228			233			361			124			133
Total revenue		14,928			14,194			29,714			28,519			14,786			14,325

Expenses:
Operating expenses		3,867			4,142			8,438			8,350			4,571			4,208
Management fees		637			611			1,285			1,260			648			649
Real estate taxes		2,430			2,553			4,801			3,450			2,371			897
Depreciation		2,824			2,711			5,607			5,512			2,783			2,801
Total expenses		9,758			10,017			20,131			18,572			10,373			8,555

Operating income		5,170			4,177			9,583			9,947			4,413			5,770

Investment income		71			55			184			112			113			57
Unrealized loss on interest rate cap contract		(154	)		—
Interest expense including amortization
of deferred financing costs		(4,652	)		(5,152	)
Net income (loss)		435			(920	)
Unrealized (loss) gain on interest rate cap contract								(159	)		19			(5	)		19
Gain on sale of property								836			-			836			-
Interest expense including amortization of deferred financing costs								(9,179	)		(9,571	)		(4,527	)		(4,419	)
Net income								1,265			507			830			1,427

Net loss attributable to noncontrolling
interests in subsidiaries		24			563

Net income (loss) attributable to common equity	$	459		$	(357	)
Net (income) loss attributable to noncontrolling interests in subsidiaries								(20	)		251			(44	)		(312	)

Earnings (Loss) per share - basic and diluted	$	0.07		$	(0.05	)
Net income attributable to common equity							$	1,245		$	758		$	786		$	1,115

Earnings per share - basic and diluted							$	0.18		$	0.11		$	0.11		$	0.16

Weighted average shares outstanding:
Basic and Diluted		6,915			6,862			6,923			6,869			6,932			6,876

See Notes to Condensed Consolidated Financial Statements.

~~Index~~

~~Page 5~~

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Index

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

SIX AND THREE MONTHS ENDED ~~JANUARY 31,~~APRIL 30, 2019 AND 2018

(Unaudited)

Three Months Ended January 31,
2019 2018
(In Thousands of Dollars)

Net income (loss) $ 435 $ (920 )

Other comprehensive (loss) income:
   Unrealized (loss) gain on interest rate swap contracts before
        reclassifications (2,276 ) 1,547
   Amount reclassified from accumulated other comprehensive income
        to interest expense (88 ) 84
   Net unrealized (loss) gain on interest rate swap contracts (2,364 ) 1,631
Comprehensive (loss) income (1,929 ) 711

Net loss attributable to noncontrolling interests 24 563
Other comprehensive loss:
   Unrealized loss (gain) on interest rate swap contracts attributable
        to noncontrolling interests 666 (533 )
Comprehensive loss attributable to noncontrolling interests 690 30

Comprehensive (loss) income attributable to common equity $ (1,239 ) $ 741
Six Months Ended April 30, Three Months Ended April 30,
2019 2018 2019 2018
(In Thousands of Dollars) (In Thousands of Dollars)

Net income $ 1,265 $ 507 $ 830 $ 1,427

Other comprehensive (loss) income:
Unrealized (loss) gain on interest rate swap contracts before reclassifications (2,996 ) 2,413 (720 ) 866
Amount reclassified from accumulated other comprehensive income to interest expense (189 ) 125 (101 ) 41
Net unrealized (loss) gain on interest rate swap contracts (3,185 ) 2,538 (821 ) 907
Comprehensive (loss) income (1,920 ) 3,045 9 2,334

Net (income) loss attributable to noncontrolling interests (20 ) 251 (44 ) (312 )
Other comprehensive loss:
Unrealized loss (gain) on interest rate swap contracts attributable to noncontrolling interests 914 (775 ) 248 (242 )
Comprehensive loss (income) attributable to noncontrolling interests 894 (524 ) 204 (554 )

Comprehensive (loss) income attributable to common equity $ (1,026 ) $ 2,521 $ 213 $ 1,780

See Notes to Condensed Consolidated Financial Statements.
~~Index~~ ~~Page 6~~
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Index
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY

SIX AND THREE MONTHS ENDED ~~JANUARY 31,~~APRIL 30, 2019

(Unaudited)

Common Equity Common Equity
Shares of
Beneficial
Interest Treasury
Shares at
Cost Dividends in
Excess of Net
Income Accumulated
Other
Comprehensive
Income Total
Common
Equity Noncontrolling
Interests Total Equity Shares of
Beneficial
Interest Treasury
Shares at
Cost Dividends in
Excess of Net
Income Accumulated
Other
Comprehensive
Income Total
Common
Equity Noncontrolling
Interests Total Equity
(In Thousands of Dollars, Except Share and Per Share Amounts) (In Thousands of Dollars, Except Share and Per Share Amounts)

Balance at October 31, 2018 $ 28,288 $ (4,941 ) $ (4,376 ) $ 2,517 $ 21,488 $ 2,856 $ 24,344 $ 28,288 $ (4,941 ) $ (4,376 ) $ 2,517 $ 21,488 $ 2,856 $ 24,344

Stock based compensation expense 34 34 34 34 34 34

Vested share units granted to Trustees and consultant 254 254 254 254 254 254

Vested share units issued to consultant* (20 ) 20 — — (20 ) 20 - -

Distributions to noncontrolling interests — (294 ) (294 ) - (294 ) (294 )

Net income (loss) 459 459 (24 ) 435 459 459 (24 ) 435

Dividends declared, including $26 payable in share units ($0.15 per share) (1,040 ) (1,040 ) (1,040 ) (1,040 ) (1,040 ) (1,040 )

Net unrealized loss on interest rate swaps (1,698 ) (1,698 ) (666 ) (2,364 ) (1,698 ) (1,698 ) (666 ) (2,364 )

Balance at January 31, 2019 $ 28,556 $ (4,921 ) $ (4,957 ) $ 819 $ 19,497 $ 1,872 $ 21,369 28,556 (4,921 ) (4,957 ) 819 19,497 1,872 21,369

Stock based compensation expense 35 35 35

Vested share units granted to Trustees and consultant 294 294 294

Vested share units issued to consultant and retired Trustees* (554 ) 554 - -

Distributions to noncontrolling interests - (392 ) (392 )

Net income 786 786 44 830

Dividends declared, including $20 payable in share units ($0.125 per share) (867 ) (867 ) (867 )

Net unrealized loss on interest rate swaps (573 ) (573 ) (248 ) (821 )

Balance at April 30, 2019 $ 28,331 $ (4,367 ) $ (5,038 ) $ 246 $ 19,172 $ 1,276 $ 20,448
* Represents the issuance of treasury shares to consultant and retired Trustees for share units earned.
See Notes to Condensed Consolidated Financial Statements.
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Index
FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
SIX AND THREE MONTHS ENDED APRIL 30, 2018
(Unaudited)
Common Equity
Shares of
Beneficial
Interest Treasury
Shares at
Cost Dividends in
Excess of Net
Income Accumulated
Other
Comprehensive
Income Total
Common
Equity Noncontrolling
Interests Total Equity
(In Thousands of Dollars, Except Share and Per Share Amounts)

Balance at October 31, 2017 $ 27,651 $ (5,273 ) $ (4,824 ) $ 284 $ 17,838 $ 10,752 $ 28,590

Stock based compensation expense 31 31 31

Vested share units granted to Trustees 201 201 201

Distributions to noncontrolling interests - (6,084 ) (6,084 )

Net loss (357 ) (357 ) (563 ) (920 )

Net unrealized gain on interest rate swaps 1,098 1,098 533 1,631

Balance at January 31, 2018 27,883 (5,273 ) (5,181 ) 1,382 18,811 4,638 23,449

Stock based compensation expense 30 30 30

Vested share units granted to Trustees and consultant 233 233 233

Vested share units issued to retired Trustee* (296 ) 296 - -

Distributions to noncontrolling interests - (281 ) (281 )

Net income 1,115 1,115 312 1,427

Dividends declared, including $7 payable in share units ($0.05 per share) (344 ) (344 ) (344 )

Net unrealized gain on interest rate swaps 665 665 242 907

Balance at April 30, 2018 $ 27,850 $ (4,977 ) $ (4,410 ) $ 2,047 $ 20,510 $ 4,911 $ 25,421

* Represents the issuance of treasury shares to consultant for share units earned.

See Notes to Condensed Consolidated Financial Statements.
~~FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES~~
~~CONDENSED CONSOLIDATED STATEMENT OF EQUITY~~
~~THREE MONTHS ENDED JANUARY 31, 2018~~
~~(Unaudited)~~
Common Equity
Shares of
Beneficial
Interest Treasury
Shares at
Cost Dividends in
Excess of Net
Income Accumulated
Other
Comprehensive
Income Total
Common
Equity Noncontrolling
Interests Total Equity
(In Thousands of Dollars, Except Share and Per Share Amounts)

Balance at October 31, 2017 $ 27,651 $ (5,273 ) $ (4,824 ) $ 284 $ 17,838 $ 10,752 $ 28,590

Stock based compensation expense 31 31 31

Vested share units granted to Trustees 201 201 201

Distributions to noncontrolling interests — (6,084 ) (6,084 )

Net loss (357 ) (357 ) (563 ) (920 )

Net unrealized gain on interest rate swaps 1,098 1,098 533 1,631

Balance at January 31, 2018 $ 27,883 $ (5,273 ) $ (5,181 ) $ 1,382 $ 18,811 $ 4,638 $ 23,449
~~See Notes to Condensed Consolidated Financial Statements.~~
~~Index~~ ~~Page 7~~
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FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
~~THREE~~
SIX MONTHS ENDED ~~JANUARY 31,~~APRIL 30, 2019 AND 2018

(Unaudited)

Three Months Ended Six Months Ended
January 31, April 30,
2019 2018 2019 2018
(In Thousands of Dollars) (In Thousands of Dollars)
Operating activities:
Net income (loss) $ 435 $ (920 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Net income $ 1,265 $ 507
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 2,824 2,711 5,607 5,512
Amortization 422 295 851 766
Unrealized loss on interest rate cap contract 154 —
Unrealized loss (gain) on interest rate cap contract 159 (19 )
Stock based compensation expense 34 31 69 61
Trustee fees, consultant fee and related interest paid in stock units 228 201 502 427
Gain on sale of property (836 ) -
Deferred rents - straight line rent (67 ) (98 ) (187 ) (173 )
Bad debt expense 56 130 68 170
Changes in operating assets and liabilities:
Tenants' security deposits 71 173
Tenants’ security accounts 112 158
Accounts receivable, prepaid expenses and other assets 725 (1,086 ) 1,421 695
Accounts payable, accrued expenses and deferred
trustee compensation (24 ) 150
Accounts payable, accrued expenses and deferred trustee compensation (744 ) (1,165 )
Deferred revenue (265 ) (44 ) (203 ) (208 )
Net cash provided by operating activities 4,593 1,543 8,084 6,731
Investing activities:
Capital improvements - existing properties (805 ) (1,153 ) (1,543 ) (3,186 )
Proceeds from sale of commercial property, net 7,060 -
Acquisition of Station Place — (19,542 ) - (19,542 )
Net cash used in investing activities (805 ) (20,695 )
Net cash provided by (used in) investing activities 5,517 (22,728 )
Financing activities:
Repayment of mortgages (1,087 ) (30,172 )
Proceeds from mortgage loan refinancing — 48,000
Repayment of mortgages and construction loan (7,378 ) (146,561 )
Proceeds from mortgage loan refinancings - 166,520
Proceeds from acquisition mortgage loan — 12,350 - 12,350
Refinancing good faith deposit refund — 960
Advanced funding for construction loan reserve — 506
Repayment of credit line - (3,121 )
Interest rate cap contract cost - (89 )
Deferred financing costs — (811 ) (56 ) (2,670 )
Dividends paid (338 ) — (1,351 ) -
Due to affiliate 71 54 143 112
Distributions to noncontrolling interests (294 ) (6,084 ) (686 ) (6,365 )
Net cash (used in) provided by financing activities (1,648 ) 24,803 (9,328 ) 20,176
Net increase in cash, cash equivalents and restricted cash 2,140 5,651 4,273 4,179
Cash, cash equivalents and restricted cash, beginning of period 26,394 21,838 26,394 21,838
Cash, cash equivalents and restricted cash, end of period $ 28,534 $ 27,489 $ 30,667 $ 26,017

Supplemental disclosure of cash flow data:
Interest paid, net of amounts capitalized $ 4,176 $ 4,816 $ 8,175 $ 8,770

Supplemental schedule of non cash activities:
Investing activities:
Accrued capital expenditures, construction costs, pre-development costs and interest $ 172 $ 292 $ 155 $ 285

Financing activities:
Dividends declared but not paid $ 1,014 $ — $ 848 $ 337
Dividends paid in share units $ 26 $ — $ 46 $ 7

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheet: The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheet: The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheet:

Cash and cash equivalents $ 23,633 $ 21,717 $ 25,291 $ 18,902
Tenants' security accounts 2,212 2,141
Tenants’ security accounts 2,236 2,161
Mortgage escrows 2,689 3,631 3,140 4,954
Total cash, cash equivalents and restricted cash $ 28,534 $ 27,489 $ 30,667 $ 26,017

See Notes to Condensed Consolidated Financial Statements.
~~Index~~ ~~Page 8~~
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FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of presentation:
The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and pursuant to the rules of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnotes required by GAAP for complete financial statements have been omitted. It is the opinion of management that all adjustments considered necessary for a fair presentation have been included, and that all such adjustments are of a normal recurring nature.
The consolidated results of operations for the six and three-month ~~period~~periods ended ~~January 31,~~April 30, 2019 are not necessarily indicative of the results to be expected for the full year or any other period. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Annual Report on Form 10-K for the year ended October 31, 2018 of First Real Estate Investment Trust of New Jersey (“FREIT” or the “Company”).

Note 2 - Recently issued accounting standards:
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers”, which is codified as ASC 606 and effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. ASC 606 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance.
On November 1, 2018, FREIT adopted ASU No. 2014-09 using the modified retrospective approach. Since FREIT’s primary source of revenue is operating leases, which fall under the scope of “Leases, Topic 840” and will be under the scope of “Leases, Topic 842” once adopted in November 2019, the adoption of this standard did not have a significant impact on its consolidated financial statements and footnote disclosures. Additionally, the Company has elected to adopt the practical expedient under ASU 2018-11, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance. The adoption of this standard did not have a significant impact on the consolidated financial statements and FREIT did not record any such cumulative adjustment as of the adoption date of November 1, 2018 in connection with the implementation of ASU No. 2014-09.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which supersedes the existing guidance for lease accounting, “Leases (Topic 840)”. ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Leasing Standard was amended by ASU 2018-11, ““Targeted ~~Improvements”~~Improvements” (the “Practical Expedient Amendment”)in July of 2018 by allowing lessors to elect to combine lease and associated nonlease components, by classes of underlying asset, in contracts meeting certain criteria. The Company expects to qualify for the practical expedient as allowed by the Practical Expedient Amendment. Given that this standard has minimal impact on real estate operating lessors, FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures. Based on this new accounting guidance, the Company will no longer be able to capitalize certain leasing costs, such as legal expenses, as it relates to activities before a lease is entered into.
In June 2016, the FASB issued ASU No. 2016-13 "“Financial Instruments – Credit Losses (Topic 326)"”, which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities, and other financial instruments. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires entities to write down credit losses only when losses are probable and loss reversals are not permitted. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures.
In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which requires companies to include cash and cash equivalents that have restrictions on withdrawal or use in total cash and cash equivalents on the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 and interim periods within those years and early adoption is permitted including adoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. FREIT adopted this new accounting guidance in the first quarter of Fiscal 2019, which changed the presentation of cash and cash equivalents to include restricted cash on the consolidated statement of cash flows.
~~Index~~ ~~Page 9~~
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In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities to ASC Topic 815, Derivatives and Hedging ("(“ASC ~~815"~~815”)” which amends the hedge accounting recognition and presentation requirements in ASC 815. The update is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting and increase transparency as to the scope and results of hedge programs. ASU 2017-12 requires subsequent changes in fair value of a hedging instrument that has been designated and qualifies as a cash flow hedge to be recognized as a component of ~~"other~~“other comprehensive income (loss)."” ASU 2017-12 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018, with early adoption permitted. FREIT does not expect the adoption of this new accounting guidance to have a significant impact on its consolidated financial statements and footnote disclosures.
The ~~SEC's~~SEC’s Disclosure Update and Simplification rule (Release 33-10532) amends the interim financial statement requirements to require a reconciliation of changes in ~~stockholders'~~stockholders’ equity in the notes or as a separate statement. This analysis should reconcile the beginning balance to the ending balance of each caption in ~~stockholders'~~stockholders’ equity for each period for which an income statement is required to be filed and comply with the remaining content requirements of Rule 3-04 of Regulation S-X. As a result, registrants will have to provide the reconciliation for both the year-to-date and quarterly periods and comparable periods in Form 10-Q but only for the year-to-date periods in registration statements. The rule does not prescribe the format of the presentation as long as the appropriate periods are provided. Per a Compliance and Disclosure Interpretation (Q 105.09, Exchange Act Forms, 10-Q), ~~"The~~“The amendments are effective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendments and proximity of effectiveness to the filing date for most ~~filers'~~filers’ quarterly reports, the staff would not object if the ~~filer's~~filer’s first presentation of the changes in ~~shareholders'~~shareholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments."” This essentially ~~makes~~made the requirements effective for the ~~Company's~~Company’s first quarter 2019 filing. FREIT has adopted this guidance in the first quarter of Fiscal 2019 by presenting a reconciliation of changes in stockholders’ equity for the current and prior period as a separate statement.
Note 3 - Earnings ~~(Loss)~~ per share:
Basic earnings per share is calculated by dividing net income attributable to common equity (numerator) by the weighted average number of shares and vested share units (See Note 1213 to FREIT’s condensed consolidated ~~financials)~~financial statements) outstanding during each period (denominator). The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator is increased to include the number of additional shares that would have been outstanding if all potentially dilutive shares, such as those issuable upon the exercise of stock options, were issued during the period using the Treasury Stock method. Under the Treasury Stock method, the assumption is that the proceeds received upon exercise of the options, including the unrecognized stock option compensation expense attributable to future services, are used to repurchase FREIT’s stock at the average market price during the period, thereby reducing the number of shares to be added in computing diluted earnings per share. For the six and three months ended ~~January 31,~~April 30, 2019 and 2018, the outstanding stock options were anti-dilutive with no impact on earnings ~~(loss)~~ per share.
Note 4 - Interest rate cap and swap contracts:

On February 7, 2018, Grande Rotunda, LLC, a consolidated subsidiary, refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding available for retail tenant improvements and leasing costs in the amount of $3,380,000. This loan bears a floating interest rate at 285 basis points over the one-month LIBOR rate and has a maturity date of February 6, 2021. At ~~January 31,~~April 30, 2019, the total amount outstanding on this loan was approximately $118.5 million. As part of this transaction, Grande Rotunda, LLC purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan. At ~~January 31,~~April 30, 2019, the derivative financial instrument has a notional amount of $121.9 million and a maturity date of March 5, 2020.
On December 7, 2017, Station Place on Monmouth, LLC (owned 100% by FREIT) closed on a $12,350,000 mortgage loan with Provident Bank. The loan bears a floating interest rate equal to 180 basis points over the one-month BBA LIBOR with a maturity date of December 15, 2027. At ~~January 31,~~April 30, 2019, the total amount outstanding on this loan was $12,350,000. In order to minimize interest rate volatility during the term of this loan, Station Place on Monmouth, LLC entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 4.35% over the term of the loan. At ~~January 31,~~April 30, 2019, the derivative financial instrument has a notional amount of $12,350,000 and a maturity date of December 2027.
On September 29, 2016, Wayne PSC, LLC, a consolidated subsidiary, refinanced its $24.2 million mortgage loan held by Metropolitan Life Insurance Company, with a new mortgage loan from People’s United Bank in the amount of $25.8 million. The new loan bears a floating interest rate equal to 220 basis points over the one-month BBA LIBOR with a maturity date of October 1, 2026. At ~~January 31,~~April 30, 2019, the total amount outstanding on this loan was approximately ~~$24.3~~$24.1 million. In order to minimize interest rate volatility during the term of the loan, Wayne PSC, LLC entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 3.625% over the term of the loan. At ~~January 31,~~April 30, 2019, the derivative financial instrument has a notional amount of approximately ~~$24.3~~$24.1 million and a maturity date of October 2026.
On December 26, 2012, Damascus Centre, LLC refinanced its construction loan with long-term financing provided by People’s United Bank and the first tranche of the new loan was taken down in the amount of $20 million. Based on leasing and net operating income at the shopping center, People’s United Bank agreed to a take-down of the second tranche of this loan on April 22, 2016 in the amount of $2,320,000. The total amount outstanding for both tranches of this loan held with People’s United Bank
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as of ~~January 31,~~April 30, 2019 was approximately ~~$19.7~~$19.6 million. The loan has a maturity date of January 3, 2023 and bears a floating interest rate equal to 210 basis points over the one-month BBA LIBOR. In order to minimize interest rate volatility during the term of this loan, Damascus Centre, LLC entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate on each tranche of this loan, resulting in a fixed rate of 3.81% over the term of the first tranche of this loan and a fixed rate of 3.53% over the term of the second tranche of this loan. At ~~January 31,~~April 30, 2019, the derivative financial instrument has a notional amount of approximately ~~$19.8~~$19.7 million and a maturity date of January 2023.

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On December 29, 2014, FREIT Regency, LLC closed on a $16.2 million mortgage loan with Provident Bank. The loan bears a floating interest rate equal to 125 basis points over the one-month BBA LIBOR and the loan will mature on December 15, 2024. At ~~January 31,~~April 30, 2019, the total amount outstanding on this loan was approximately $15.8 million. In order to minimize interest rate volatility during the term of the loan, FREIT Regency, LLC entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 3.75% over the term of the loan. At ~~January 31,~~April 30, 2019, the derivative financial instrument has a notional amount of approximately $15.8 million and a maturity date of December 2024.
In accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities”, FREIT is accounting for the Damascus Centre, LLC, FREIT Regency, LLC, Wayne PSC, LLC and Station Place on Monmouth, LLC interest rate swaps as effective cash flow hedges marking these contracts to market, taking into account present interest rates compared to the contracted fixed rate over the life of the contract and recording the unrealized gain or loss on the swaps in comprehensive income. For the ~~three~~six months ended ~~January 31,~~April 30, 2019, FREIT recorded an unrealized loss of approximately ~~$2,364,000~~$3,185,000 in comprehensive income representing the change in the fair value of these cash flow hedges during such period with a corresponding asset of approximately ~~$502,000~~$329,000 for the Damascus Centre swaps and ~~$1,569,000~~$1,241,000 for the Wayne PSC swap and a corresponding liability of approximately ~~$86,000~~$244,000 for the Regency swap and ~~$74,000~~$237,000 for the Station Place on Monmouth swap as of ~~January 31,~~April 30, 2019. For the ~~three~~six months ended ~~January 31,~~April 30, 2018, FREIT recorded an unrealized gain of approximately ~~$1,631,000~~$2,538,000 in comprehensive income representing the change in the fair value of these cash flow hedges during such period. For the three months ended April 30, 2019 and 2018, FREIT recorded an unrealized loss of approximately $821,000 and unrealized gain of approximately $907,000, respectively, in comprehensive income representing the change in the fair value of these cash flow hedges during such period. For the year ended October 31, 2018, FREIT recorded an unrealized gain of approximately $3,113,000 in comprehensive income representing the change in the fair value of these cash flow hedges during such period with a corresponding asset of approximately $955,000 for the Damascus Centre swaps, $2,452,000 for the Wayne PSC swap, $408,000 for the Regency swap and $460,000 for the Station Place on Monmouth swap as of October 31, 2018.
The Grande Rotunda, LLC interest rate cap is, for accounting purposes, deemed to be accounted for as an ineffective cash flow hedge with a corresponding gain or loss being recorded in FREIT’s income statement. For the ~~three~~six months ended ~~January 31,~~April 30, 2019, FREIT recorded an unrealized loss in the condensed consolidated statement of income of approximately ~~$154,000~~$159,000 for the Grande Rotunda, LLC interest rate cap representing the change in the fair value of this ineffective cash flow hedge during such period with a corresponding asset of approximately ~~$5,000~~$1,000 as of ~~January 31,~~April 30, 2019. For the three months ended April 30, 2019, FREIT recorded an unrealized loss in the condensed consolidated statement income of approximately $5,000 for the Grande Rotunda, LLC interest rate cap representing the change in the fair value of this ineffective cash flow hedge during such period. For the six and three months ended April 30, 2018, FREIT recorded an unrealized gain in the condensed consolidated statement of income of approximately $19,000 for the Grande Rotunda, LLC interest rate cap representing the change in the fair value of this ineffective cash flow hedge during such periods.
The fair values are based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).

Note 5 – Property acquisition:
On December 7, 2017, FREIT completed the acquisition of Station Place, a residential apartment complex consisting of one building with 45 units, located in Red Bank, New Jersey through Station Place on Monmouth, LLC (FREIT’s 100% owned consolidated subsidiary). FREIT identified Station Place as the replacement property for the Hammel Gardens property located in Maywood, New Jersey that FREIT sold on June 12, 2017, which completed the like-kind exchange pursuant to Section 1031 of the Internal Revenue Code. Station Place is part of FREIT’s residential segment. The acquisition cost was $19,550,000 (inclusive of approximately $550,000 of transaction costs capitalized as part of the asset acquisition), which was funded in part with $7 million in net proceeds from the sale of the Hammel Gardens property, and the remaining balance of $12,350,000 (inclusive of the transaction costs) was funded by Station Place on Monmouth, LLC through long-term financing for this property from Provident Bank.
The acquisition cost of $19.6 million has been allocated as follows: $10.8 million to the building and $8.8 million to the land.

Note 6 – Property disposition:
On February 8, 2019, FREIT sold a commercial building, formerly occupied as a Pathmark supermarket in Patchogue, New York for a sales price of $7.5 million. The sale of this property, which had a carrying value of approximately $6.2 million, resulted in a gain of approximately $0.8 million net of sales fees and commissions. Net cash proceeds of approximately $2 million were realized after paying off the related mortgage on this property in the amount of approximately $5.2 million. FREIT distributed and paid approximately $676,000 of this gain by way of a one-time special dividend in connection with
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and in anticipation of the closing of the sale of the Patchogue property of $0.10 per share. The sale of this property eliminates an operating loss of approximately $0.8 million ($0.12 per share) incurred, annually, since Pathmark vacated in December 2015.
As the disposal of this property did not represent a strategic shift that would have a major impact on FREIT’s operations or financial results, the property’s operations were not reflected as discontinued operations in the accompanying condensed consolidated financial statements.
Note 7 - Management agreement, fees and transactions with related party:
Hekemian & Co., Inc. (“Hekemian”) currently manages all the properties owned by FREIT and its affiliates, except for the office building at The Rotunda located in Baltimore, Maryland, which is managed by an independent third party management company. The management agreement with Hekemian, effective November 1, 2001, requires the payment of management fees equal to 4% to 5% of rents collected. Such fees, charged to operations, were approximately ~~$619,000~~$1,255,000 and ~~$575,000~~$1,194,000 for the six months ended April 30, 2019 and 2018, respectively, and approximately $636,000 and $619,000 for the three months ended ~~January 31,~~April 30, 2019 and 2018, respectively. In addition, the management agreement provides for the payment to Hekemian of leasing commissions, as well as the reimbursement of operating expenses incurred on behalf of FREIT. Such commissions and reimbursements amounted to approximately ~~$133,000~~$311,000 and ~~$141,000~~$270,000 for the six months ended April 30, 2019 and 2018, respectively, and $178,000 and $130,000 for the three months ended ~~January 31,~~April 30, 2019 and 2018, respectively. The management agreement expires on October 31, 2019, and is automatically renewed for successive periods of two years unless either party gives not less than six (6) months prior notice of non-renewal. The Trust did not give notice of non-renewal.
FREIT also uses the resources of the Hekemian insurance department to secure various insurance coverages for its properties and subsidiaries. Hekemian is paid a commission for these services. Such commissions were charged to operations and amounted to approximately ~~$29,000~~$48,000 and ~~$31,000~~$49,000 for the six months ended April 30, 2019 and 2018, respectively, and $20,000 and $17,000 for the three months ended ~~January 31,~~April 30, 2019 and 2018, respectively.

~~Index~~ ~~Page 11~~
From time to time, FREIT engages Hekemian to provide additional services, such as consulting services related to development, property sales and financing activities of FREIT. Separate fee arrangements are negotiated between Hekemian and FREIT with respect to such additional services. Such fees incurred during the ~~three~~six months ended ~~January 31,~~April 30, 2019 and 2018 were approximately $0$131,250 and ~~$762,500,~~$1,195,000, respectively, and $131,250 and $432,500 for the three months ended April 30, 2019 and 2018, respectively. Fees incurred during Fiscal 2019 related to commissions to Hekemian for the ~~three months ended January 31,~~sale of the Patchogue property. Fees incurred during Fiscal 2018 related to commissions to Hekemian for the following: $522,500 for the purchase of the Station Place ~~property in~~property; $400,000 for the ~~amount~~refinancing of ~~$522,500 and commissions related to~~the Grande Rotunda, LLC loan; $240,000 for the refinancing of the Pierre Towers, LLC ~~loan in~~loan; $32,500 for the ~~amount~~renewal of ~~$240,000.~~FREIT’s line of credit.
In Fiscal 2007, FREIT’s Board of Trustees approved and FREIT executed a development fee agreement for the Rotunda redevelopment project for the development services to be provided by Hekemian Development Resources, LLC (“Resources”), a wholly-owned subsidiary of Hekemian. As part of this agreement, the Board approved the payment of a fee to Resources in the amount of $1.4 million in connection with the revision to the scope of the Rotunda redevelopment project. Grande Rotunda, LLC paid $500,000 of this fee to Resources in Fiscal 2013 and the balance of $900,000 became due upon the issuance of a certificate of occupancy for the multi-family portion of this project. A final certificate of occupancy was issued in Fiscal 2016; however, Resources agreed to defer the payment of the $900,000 balance of this fee. Grande Rotunda, LLC paid the $900,000 portion of this fee to Resources in February 2018 in connection with the refinancing of the Wells Fargo construction loan for the Rotunda property with a new loan from Aareal Capital Corporation. Additionally, Grande Rotunda, LLC paid Resources the amount of approximately $45,000 representing a mutually agreed upon amount of interest on the $900,000 portion of the fee for the period during which Hekemian Resources had agreed to defer payment thereof.
Robert S. Hekemian, the Chairman of the Board and Chief Executive Officer of Hekemian, is the former Chairman and Chief Executive Officer of FREIT. Mr. Hekemian retired as Chairman and Chief Executive Officer of FREIT effective upon the conclusion of FREIT’s 2018 Annual Meeting of Shareholders held on April 5, 2018 (the “2018 Annual Meeting”). Robert S. Hekemian, Jr., the President of Hekemian, is a Trustee of FREIT, and succeeded Robert S. Hekemian as Chief Executive Officer of FREIT effective upon the conclusion of the 2018 Annual Meeting. ~~Robert S. Hekemian, Jr. was later appointed as the President of FREIT in February 2019, and as a result he holds the offices of both Chief Executive Officer and President of FREIT.~~ David Hekemian, a Principal of Hekemian, was elected as a Trustee of FREIT at the 2018 Annual Meeting. On February 7, 2019, Donald W. Barney retired and resigned as President, Chief Financial Officer, Treasurer and a Trustee of FREIT. The Board of Trustees appointed Allan Tubin, the Chief Financial Officer of Hekemian, as the Chief Financial Officer and Treasurer of the Trust and Robert S. Hekemian, Jr. as President of the Trust. As a result, Robert S. Hekemian, Jr. holds the offices of both Chief Executive Officer and President of FREIT.
Trustee fee expense (including interest) incurred by FREIT for the six months ended April 30, 2019 and 2018 was approximately $114,000 and $255,000, respectively, for Robert S. Hekemian, $194,000 and $41,000, respectively, for Robert S. Hekemian, Jr., $7,000 and $0, respectively, for Allan Tubin and $28,000 and $2,000, respectively, for David Hekemian. Trustee fee expense (including interest) incurred by FREIT for the three months ended ~~January 31,~~April 30, 2019 and 2018 was approximately ~~$60,000~~$54,000 and ~~$136,000,~~$119,000, respectively, for Robert S. Hekemian, ~~$95,000~~$99,000 and ~~$14,000,~~$27,000, respectively, for Robert S. Hekemian, Jr., $7,000 and ~~$12,000~~$0, respectively, for Allan Tubin and ~~$0,~~$16,000 and $2,000, respectively, for David Hekemian (See Note 1213 to FREIT’s condensed consolidated financial statements).
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Pursuant to the terms of a Consulting Agreement between Robert S. Hekemian and the Trust, Mr. Hekemian will continue to serve the Trust in a consulting capacity effective April 5, 2018. The Consulting Agreement has a term of four years and obliges Mr. Hekemian to provide advice and consultation with respect to matters pertaining to FREIT and its subsidiaries, affiliates, assets and business for no fewer than 30 hours per month during the term of the agreement. FREIT will pay Mr. Hekemian a consulting fee of $5,000 per month during the term of the Consulting Agreement, which shall be payable in the form of Shares on a quarterly basis (i.e. in quarterly installments of $15,000). The number of Shares to be issued for each quarterly installment of the consulting fee will be determined by dividing the dollar amount of the consulting fee by the closing price of one Share on the OTC Pink Open Market as of the close of trading on the last trading day of the calendar quarter with respect to which such consulting fee is payable. For the six months ended April 30, 2019 and 2018, consulting fee expense for Robert S. Hekemian was approximately $30,000 and $4,200, respectively. For the three months ended ~~January 31,~~April 30, 2019 and 2018, consulting fee expense for Robert S. Hekemian was approximately $15,000 and ~~$0,~~$4,200, respectively.
Rotunda 100, LLC owns a 40% minority equity interest in Grande Rotunda, LLC and FREIT owns a 60% equity interest in Grande Rotunda, LLC. Damascus 100, LLC owns a 30% minority equity interest in Damascus Centre, LLC and FREIT owns a 70% equity interest in Damascus Centre, LLC. The equity owners of Rotunda 100, LLC and Damascus 100, LLC are principally employees of Hekemian. To incentivize the employees of Hekemian, FREIT advanced, only to employees of Hekemian, up to 50% of the amount of the equity contributions that the Hekemian employees were required to invest in Rotunda 100, LLC and Damascus 100, LLC. These advances were in the form of secured loans that bear interest that float at 225 basis points over the ninety (90) day LIBOR, as adjusted each November 1, February 1, May 1 and August 1. These loans are secured by the Hekemian employees’ interests in Rotunda 100 and Damascus 100, and are full recourse loans. The notes originally had maturity dates at the earlier of (a) ten (10) years after issue (Grande Rotunda, LLC – 6/19/2015, Damascus Centre, LLC – 9/30/2016), or, (b) at the election of FREIT, ninety (90) days after the borrower terminates employment with Hekemian, at which time all outstanding unpaid principal and interest is due. On June 4, 2015, the Board approved an extension of the maturity date of the secured loans to occur the earlier of (a) June 19, 2018 or (b) five days after the closing of a permanent mortgage loan secured by the Rotunda property. On December 7, 2017, the Board approved a further extension of the maturity dates of these loans to the date or dates upon which distributions of cash are made by Grande Rotunda, LLC to its members as a result of a refinancing or sale of Grande Rotunda, LLC or the Rotunda property.
In the fourth quarter of Fiscal 2018, the Damascus 100 members repaid their secured notes outstanding in full for a total payment of $1,870,000, which was composed of principal in the amount of $1,451,000 and accrued interest in the amount of approximately $419,000. As of ~~January 31,~~April 30, 2019, and October 31, 2018, only the principal and accrued interest on the secured notes receivable with Rotunda 100 members was outstanding. As such, the aggregate outstanding principal balance of the notes was $4,000,000 at both ~~January 31,~~April 30, 2019 and October 31, 2018. The accrued but unpaid interest related to these notes as of ~~January 31,~~April 30, 2019 and October 31, 2018 amounted to approximately ~~$909,000~~$958,000 and $862,000, respectively, and is included in accounts receivable on the accompanying condensed consolidated balance sheets.

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In Fiscal 2017, Grande Rotunda, LLC incurred substantial expenditures at the Rotunda property related to retail tenant improvements, leasing costs and operating expenditures which, in the aggregate, exceeded revenues as the property was still in the rent up phase and the construction loan held with Wells Fargo at that time was at its maximum level, with no additional funding available to draw. Accordingly, the equity owners in Grande Rotunda, LLC (FREIT with a 60% ownership and Rotunda 100 with a 40% ownership) contributed their respective pro-rata share of any cash needs through loans to Grande Rotunda, LLC. As of ~~January 31,~~April 30, 2019 and October 31, 2018, Rotunda 100 has funded Grande Rotunda, LLC with approximately ~~$5.5~~$5.6 million and $5.4 million (including interest), respectively, which is included in “Due to affiliate” on the accompanying condensed consolidated balance sheets.

Note 78 – Mortgage financings and line of credit:
On April 3, 2019, WestFREIT, Corp. (owned 100% by FREIT) exercised its option to extend its loan held by M&T Bank, with an outstanding balance of approximately $22.5 million, for twelve months. Effective beginning on June 1, 2019, the extension of this loan secured by the Westridge Square Shopping Center, will require monthly principal payments of $47,250 plus interest based on a floating interest rate equal to 240 basis points over the one-month LIBOR and has a maturity date of May 1, 2020.
On February 7, 2018, Grande Rotunda, LLC refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding available for retail tenant improvements and leasing costs in the amount of $3,380,000. This refinancing paid off the loan previously held by Wells Fargo, funded loan closing costs and paid the amount due to Hekemian Development Resources for a development fee of $900,000 plus accrued interest of approximately $45,000 (See Note 67 to FREIT’s condensed consolidated financial statements for further details on this fee). This loan is secured by the Rotunda property, bears a floating interest rate at 285 basis points over the one-month LIBOR rate and has a maturity date of February 6, 2021 with two one-year renewal options. As part of this transaction, Grande Rotunda, LLC purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan. As of ~~January 31,~~April 30, 2019, approximately $118.5 million of this loan facility was drawn down and the interest rate was approximately ~~5.36%~~5.33%.
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On January 8, 2018, Pierre Towers, LLC (“Pierre Towers”), (which is owned by S And A Commercial Associates Limited Partnership (“S&A”), a consolidated subsidiary of FREIT), refinanced its $29.1 million loan held by State Farm with a new mortgage loan from New York Life Insurance in the amount of $48 million. Pierre Towers paid New York Life Insurance a good faith deposit in the amount of $960,000 and was reimbursed by New York Life when the loan was closed in January 2018. The new loan has a term of ten years and bears a fixed interest rate equal to 3.88%. Interest-only payments are required each month for the first five years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 5.38% to a fixed rate of 3.88%; and (ii) net refinancing proceeds of approximately $17.2 million (after giving effect to a $1.2 million loan prepayment cost to pay-off the loan held by State Farm) that were distributed to the partners in S&A with FREIT receiving approximately $11.2 million, based on its 65% membership interest in S&A, which can be used for capital expenditures and general corporate purposes.
On December 7, 2017, Station Place on Monmouth, LLC (owned 100% by FREIT) closed on a mortgage loan in the amount of $12,350,000 held by Provident Bank to purchase the Station Place property in Red Bank, New Jersey (see Note 5 to FREIT’s condensed consolidated financial statements). Interest-only payments are required each month for the first two years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. The loan bears a floating interest rate equal to 180 basis points over the one-month BBA LIBOR with a maturity date of December 15, 2027. In order to minimize interest rate volatility during the term of the loan, Station Place on Monmouth, LLC entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 4.35% over the term of the loan.
On January 21, 2019, Station Place on Monmouth, LLC entered into a modification agreement with Provident Bank. The material terms of the modification were: (i) FREIT guarantees $2,350,000 of the outstanding principal balance of the loan; and (ii) the loan’s Debt Service Coverage Ratio (“DSCR”) covenants are reduced to a single test that will be tested semi-annually (commencing with the six-month period ending April 30, 2019) and require a DSCR of 1.2 / 1.0 based on actual debt service. Prior to this modification, the loan’s DSCR covenants were calculated using the greater of the actual debt service or other hypothetical debt service measures, as provided in the loan agreement, that were to be tested quarterly. As previously disclosed in FREIT’s current report on Form 8-K filed with the SEC on January 24, 2019, Station Place had not been in compliance with the loan covenants as of October 31, 2018, and the modification waives all previous non-compliance. If the DSCR should fall below 1.2 / 1.0, Provident Bank, at its discretion, may require a current appraisal of the Station Place property. If the loan balance exceeds 85% loan-to-value (“L-T-V”) based on the appraised value, Station Place may be required to resize the loan to bring the L-T-V into compliance by paying down the outstanding principal balance of the loan, posting a letter of credit, or providing additional collateral to Provident Bank.
On October 27, 2017, FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 27, 2020 at which point no further advances shall be permitted and provided the line of credit is not renewed by the lender, the outstanding principal balance of the line of credit shall convert to a commercial term loan maturing on October 31, 2022. Draws against the credit line can be used for working capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREIT’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit was increased from $12.8 million to $13 million and the interest rate on the amount outstanding will be at a floating rate of 275 basis points over the 30-day LIBOR with a floor of 3.75%. As of ~~January 31,~~April 30, 2019 and October 31, 2018, there was no amount outstanding and $13 million was available under the line of credit.

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Note 89 – Fair value of long-term debt:
The following table shows the estimated fair value and carrying value of FREIT’s long-term debt at ~~January 31,~~April 30, 2019 and October 31, 2018:

($ in Millions) January 31, 2019 October 31, 2018 April 30, 2019 October 31, 2018

Fair Value $ 342.2 $ 338.3 $337.1 $338.3

Carrying Value $ 346.2 $ 347.0 $340.2 $347.0

Fair values are estimated based on market interest rates at ~~January 31,~~April 30, 2019 and October 31, 2018 and on a discounted cash flow analysis. Changes in assumptions or estimation methods may significantly affect these fair value estimates. The fair value is based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).
Note 910 - Segment information:
FREIT has determined that it has two reportable segments: commercial properties and residential properties. These reportable segments offer different types of space, have different types of tenants, and are managed separately because each requires different operating strategies and management expertise. The commercial segment is comprised of eight (8) properties, excluding the land and building formerly occupied as a Pathmark supermarket in Patchogue, New York, which was sold on February 8, 2019 (see Note 136 to FREIT’s condensed consolidated financial statements). The residential segment is comprised of eight (8) properties.
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The accounting policies of the segments are the same as those described in Note 1 in FREIT’s Annual Report on Form 10-K for the fiscal year ended October 31, 2018. The chief operating and decision-making group of ~~FREIT's~~FREIT’s commercial segment, residential segment and corporate/other is comprised of FREIT’s Board of Trustees (“Board”).
FREIT assesses and measures segment operating results based on net operating income ~~("NOI"~~(“NOI”). NOI, a standard used by real estate professionals, is based on operating revenue and expenses directly associated with the operations of the real estate properties, but excludes: deferred rents (straight lining), depreciation, financing costs and other items. NOI is not a measure of operating results or cash flows from operating activities as measured by GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity.
Real estate rental revenue, operating expenses, NOI and recurring capital improvements for the reportable segments are summarized below and reconciled to condensed consolidated net income ~~(loss)~~ attributable to common equity for the ~~three month~~six and three-month periods ended ~~January 31,~~April 30, 2019 and 2018. Asset information is not reported since FREIT does not use this measure to assess performance.

Three Months Ended
January 31,
2019 2018
(In Thousands of Dollars)
Real estate rental revenue:
Commercial $ 6,627 $ 6,303
Residential 8,234 7,793
Total real estate rental revenue 14,861 14,096

Real estate operating expenses:
Commercial 2,831 3,037
Residential 3,495 3,716
Total real estate operating expenses 6,326 6,753

Net operating income:
Commercial 3,796 3,266
Residential 4,739 4,077
Total net operating income $ 8,535 $ 7,343

Recurring capital improvements - residential $ (124 ) $ (111 )

Reconciliation to condensed consolidated net income (loss) attributable to common equity:
Segment NOI $ 8,535 $ 7,343
Deferred rents - straight lining 67 98
Investment income 71 55
Unrealized loss on interest rate cap contract (154 ) —
General and administrative expenses (608 ) (553 )
Depreciation (2,824 ) (2,711 )
Financing costs (4,652 ) (5,152 )
Net income (loss) 435 (920 )
    Net loss attributable to noncontrolling interests in subsidiaries 24 563
Net income (loss) attributable to common equity $ 459 $ (357 )
Six Months Ended Three Months Ended
April 30, April 30,
2019 2018 2019 2018
(In Thousands of Dollars) (In Thousands of Dollars)
Real estate rental revenue:
Commercial $ 13,079 $ 12,566 $ 6,452 $ 6,263
Residential 16,448 15,780 8,214 7,987
Total real estate rental revenue 29,527 28,346 14,666 14,250

Real estate operating expenses:
Commercial 5,651 6,001 2,820 2,964
Residential 6,896 5,867 3,401 2,151
Total real estate operating expenses 12,547 11,868 6,221 5,115

Net operating income:
Commercial 7,428 6,565 3,632 3,299
Residential 9,552 9,913 4,813 5,836
Total net operating income $ 16,980 $ 16,478 $ 8,445 $ 9,135

Recurring capital improvements - residential $ (285 ) $ (238 ) $ (161 ) $ (127 )

Reconciliation to condensed consolidated net income attributable to common equity:
Segment NOI $ 16,980 $ 16,478 $ 8,445 $ 9,135
Gain on sale of property 836 - 836 -
Deferred rents - straight lining 187 173 120 75
Investment income 184 112 113 57
Unrealized (loss) gain on interest rate cap contract (159 ) 19 (5 ) 19
General and administrative expenses (1,977 ) (1,192 ) (1,369 ) (639 )
Depreciation (5,607 ) (5,512 ) (2,783 ) (2,801 )
Financing costs (9,179 ) (9,571 ) (4,527 ) (4,419 )
Net income 1,265 507 830 1,427
Net (income) loss attributable to noncontrolling interests in subsidiaries (20 ) 251 (44 ) (312 )
Net income attributable to common equity $ 1,245 $ 758 $ 786 $ 1,115

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Note 1011 – Income taxes:
FREIT intends to distribute 100% of its ordinary taxable income to its shareholders as dividends for the fiscal year ending October 31, 2019. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income was recorded in FREIT’s condensed consolidated financial statements.
There was no ordinary taxable income for the fiscal year ended October 31, 2018 for FREIT to distribute to its shareholders. As described in Note 5 to FREIT’s condensed consolidated financial statements, FREIT completed a like-kind exchange with respect to the sale of the Hammel Gardens property in Maywood, New Jersey, ~~property,~~ which was sold on June 12, 2017 resulting in a capital gain of approximately $15.4 million. The tax basis of Station Place in Red Bank, New Jersey, which was the replacement property in the like-kind exchange, was approximately $18.9 million lower than the acquisition cost of approximately $19.6 million recorded for financial reporting purposes. Accordingly, no provision for federal or state income taxes related to such gain was recorded in FREIT’s condensed consolidated financial statements for the fiscal year ended October 31, 2018.
As of ~~January 31,~~April 30, 2019, FREIT had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended October 31, ~~2016~~2015 remain open to examination by the major taxing jurisdictions to which FREIT is subject.

Note 1112 – Stock option plan:
On September 4, 2014, the Board approved the grant of an aggregate of 246,000 non-qualified share options under FREIT’s Equity Incentive Plan (“the Plan”) to certain FREIT executive officers, the members of the Board and certain employees of Hekemian &
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Co., Inc., FREIT’s managing agent. The options have an exercise price of $18.45 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be September 3, 2024.
On November 10, 2016, the Board approved the grant of an aggregate of 38,000 non-qualified share options under the Plan to two members of the Board who were appointed to the Board during Fiscal 2016. The options have an exercise price of $21.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be November 9, 2026.
On May 3, 2018, the Board approved the grant of an aggregate of 38,000 non-qualified share options under the Plan to two members of the Board who were appointed to the Board during Fiscal 2018. The options have an exercise price of $15.50 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be May 2, 2028.
On March 4, 2019, the Board approved the grant of an aggregate of 5,000 non-qualified share options under the Plan to the Chairman of the Board. The options have an exercise price of $15.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be March 3, 2029.
On April 5, 2018, FREIT shareholders approved an amendment to the Plan reserving an additional 300,000 shares for issuance under the Plan. As of ~~January 31,~~April 30, 2019, ~~447,060~~442,060 shares are available for issuance under the Plan.
The following table summarizes stock option activity for the ~~three-month~~six-month period ended ~~January 31,~~April 30, 2019:

No. of Options Weighted Average No. of Options Weighted Average
Outstanding Exercise Price Outstanding Exercise Price
Options outstanding beginning of period 305,780 $ 18.40 305,780 $ 18.40
Options granted during period — — 5,000 15.00
Options forfeited/cancelled during period (40 ) 18.45 (40 ) 18.45
Options outstanding end of period 305,740 $ 18.40 310,740 $ 18.35
Options vested and expected to vest 299,140 303,990
Options exercisable at end of period 200,260 211,260
The estimated fair value of options granted during Fiscal 2019 was $2.43 per option. Such value was estimated on the grant date using a binomial lattice option pricing model using the following assumptions:
· Expected volatility – 27.69%
· Risk-free interest rate – 2.72%
· Imputed option life – 6.3 years
· Expected dividend yield – 3.82%
The expected volatility over the options’ expected life was based on the historical volatility of the weekly closing price of the Company’s stock over a five (5) year period. The risk-free interest rate was based on the annual yield on the grant date of a zero-coupon U.S. Treasury Bond, the maturity of which equals the option’s expected life. The imputed option life was based on the simplified expected term calculation permitted by the SEC, which defines the expected life as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. The expected dividend yield was based on the Company’s historical dividend yield, exclusive of capital gain dividends. The fair value is based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).

For the ~~three-month~~six-month periods ended ~~January 31,~~April 30, 2019 and 2018, compensation expense related to stock options granted amounted to approximately ~~$34,000~~$69,000 and ~~$31,000,~~$61,000, respectively. For the three-month periods ended April 30, 2019 and 2018, compensation expense related to stock options granted amounted to approximately $35,000 and $30,000, respectively. At ~~January 31,~~April 30, 2019, there was approximately ~~$194,000~~$172,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over the remaining weighted average vesting period of approximately ~~2.4~~2.5 years.
The aggregate intrinsic value of options vested and expected to vest at ~~January 31,~~April 30, 2019 was approximately ~~$11,000.~~$55,000. There was no aggregate intrinsic value of options exercisable at ~~January 31,~~April 30, 2019 as the exercise price of the vested options was greater than the market or average share price.
Note 1213 – Deferred fee plan:
On September 4, 2014, the Board approved amendments, effective November 1, 2014, to the FREIT Deferred Fee Plan for its Executive Officers and Trustees, one of which provides for the issuance of share units payable in FREIT shares in respect of (i) deferred amounts of all Trustee fees on a prospective basis; (ii) interest on Trustee fees deferred prior to November 1, 2014 (payable at a floating rate, adjusted quarterly, based on the average 10-year Treasury Bond interest rate plus 150 basis points); and (iii) dividends payable in respect of share units allocated to participants in the Deferred Fee Plan as a result of deferrals described above. The number of share units credited to a participant’s account will be determined by the closing price of FREIT shares on the date as set forth in the Deferred Fee Plan. All fees payable to Trustees for the six and three-month periods ended ~~January 31,~~April 30, 2019
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were deferred under the Deferred Fee Plan except for fees payable to one Trustee, who elected to receive such fees in cash. All fees payable to Trustees for the six and three-month periods ended April 30, 2018 were deferred under the Deferred Fee Plan except for fees payable to ~~one Trustee,~~three Trustees, who elected to receive such fees in cash. As a result of the amendment to the Deferred Fee Plan described above, for the ~~three-month~~six-month periods ended ~~January 31,~~April 30, 2019 and 2018, the aggregate amounts of deferred Trustee fees together with related interest and dividends were approximately ~~$238,200~~$517,300 and ~~$201,000,~~$430,000, respectively, which have been paid through the issuance of ~~15,204~~32,753 and ~~13,289~~28,118 vested FREIT share units, respectively, based on the closing price of FREIT shares on the dates as set forth in the Deferred Fee Plan.

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For the ~~three-month~~six-month periods ended ~~January 31,~~April 30, 2019 and 2018, FREIT has charged as expense approximately ~~$212,600~~$471,200 and ~~$201,000,~~$423,300, respectively, representing deferred Trustee fees and interest, and the balance of approximately ~~$25,600~~$46,100 and ~~$0,~~$6,700, respectively, representing dividends payable in respect of share units allocated to Plan participants, has been charged to equity.
~~Note 13 – Subsequent events:~~
On February 8, 2019, FREIT sold a commercial building, formerly occupied as a Pathmark supermarket in Patchogue, New York for a sales price of $7.5 million. The sale of this property, which had a carrying value of approximately $6.2 million (and is presented as held for sale on the condensed consolidated balance sheet as of January 31, 2019), resulted in a capital gain of approximately $0.8 million (on a GAAP basis) net of sales fees and commissions. Net cash proceeds of approximately $2 million were realized after paying off the related mortgage on this property in the amount of approximately $5.2 million. The sale of this property eliminates an operating loss of approximately $0.8 million ($0.12 per share) incurred, annually, since Pathmark vacated in December 2015.
On February 7, 2019, Donald W. Barney retired and resigned as President, Chief Financial Officer, Treasurer and a Trustee of First Real Estate Investment Trust of New Jersey (the “Trust”). The Board of Trustees appointed Allan Tubin as Chief Financial Officer and Treasurer of the Trust and Robert S. Hekemian, Jr. as President of the Trust.
On March 4, 2019, the Board approved the grant of an aggregate of 5,000 non-qualified share options under the Plan to the Chairman of the Board. The options have an exercise price of $15.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be March 3, 2029.
~~Index~~ ~~Page 16~~
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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Identifying Important Factors That Could Cause First Real Estate Investment Trust of New Jersey’s (“FREIT”) Actual Results to Differ From Those Projected in Forward Looking Statements.

Readers of this discussion are advised that the discussion should be read in conjunction with the unaudited condensed consolidated financial statements of FREIT (including related notes thereto) appearing elsewhere in this Form 10-Q, and the consolidated financial statements included in FREIT’s most recently filed Form 10-K. Certain statements in this discussion may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect FREIT’s current expectations regarding future results of operations, economic performance, financial condition and achievements of FREIT, and do not relate strictly to historical or current facts. FREIT has tried, wherever possible, to identify these forward-looking statements by using words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning.
Although FREIT believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties, which may cause the actual results to differ materially from those projected. Such factors include, but are not limited to the following: general economic and business conditions, including the purchase of retail products over the Internet, which will, among other things, affect demand for rental space, the availability of prospective tenants, lease rents, the financial condition of tenants and the default rate on leases, operating and administrative expenses and the availability of financing; adverse changes in FREIT’s real estate markets, including, among other things, competition with other real estate owners, competition confronted by tenants at FREIT’s commercial properties; governmental actions and initiatives; environmental/safety requirements; and risks of real estate development and acquisitions. The risks with respect to the development of real estate include: increased construction costs, inability to obtain construction financing, or unfavorable terms of financing that may be available, unforeseen construction delays and the failure to complete construction within budget.

OVERVIEW
FREIT is an equity real estate investment trust (“REIT”) that is self-administered and externally managed. FREIT owns a portfolio of residential apartment and commercial properties. FREIT’s revenues consist primarily of rental income and other related revenues from its residential and commercial properties and additional rent in the form of expense reimbursements derived from operating commercial properties. FREIT’s properties are primarily located in northern New Jersey, Maryland and New York. FREIT acquires existing properties for investment and properties that FREIT believes have redevelopment potential through changes and capital improvements to these properties. FREIT develops and constructs properties on its vacant land. FREIT’s policy is to acquire and develop real property for long-term investment.
The economic and financial environment: The U.S. economy grew ~~throughout 2018 at~~ an average annualized rate of ~~3.4%, which is~~3.2% in the ~~strongest average annualized growth rate since the third~~first quarter of ~~2014.~~2019. Employment remains healthy with an unemployment rate at 4%3.6% in ~~January~~March 2019, ~~and real~~which is the lowest rate since December 1969. Real income continues to grow at a solid pace. If the U.S. economy continues to improve, the Federal Reserve may continue to increase lending rates which may affect the refinancing of mortgages coming due in the short-term and borrowings for other purposes.
Residential Properties: FREIT has aggressively increased rental rates on its stabilized properties. As a result, FREIT’s rental rates continue to show year-over-year increases. FREIT expects increases in rental rates to taper; however, the increased rental rates that are in place should positively impact future revenues.
Commercial Properties: There continues to be uncertainty in the retail environment that could have an adverse impact on FREIT’s retail tenants, which could have an adverse impact on FREIT.
Special Committee Formation: On March 28, 2019, FREIT announced that its Board of Trustees (the “Board”) established a Special Committee of the Board (the “Special Committee”) to explore strategic alternatives focusing on maximizing shareholder value. The Special Committee is comprised solely of independent Trustees and is charged with exploring potential strategic transactions involving FREIT, including, without limitation, a potential sale of FREIT, a business combination involving FREIT or other alternatives for maximizing shareholder value, and determining whether a potential strategic transaction is in the best interests of FREIT and its shareholders. The members of the Special Committee are Ronald J. Artinian, Richard J. Aslanian, David F. McBride and Justin F. Meng. The Special Committee has engaged HFF Securities L.P. as the Special Committee’s financial advisor, and the law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal counsel to the Special Committee. There can be no assurance that the Special Committee’s exploration of potential strategic transactions will result in any transaction being consummated. FREIT does not intend to discuss or disclose any developments with respect to the Special Committee’s functions or activity, unless and until otherwise determined that further disclosure is appropriate or required by regulation or law. There is no formal timetable for the Special Committee’s completion of its exploration of potential strategic transactions.
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Development Projects and Capital Expenditures: FREIT continues to make only those capital expenditures that are absolutely necessary. The construction at the Rotunda development project began in September 2013 and, with the exception of retail tenant improvements, the redevelopment was substantially completed in the third quarter of Fiscal 2016. By the end of the third quarter of Fiscal 2018, the residential section reached a stabilized level of occupancy of approximately 94%. The retail space continues to lease-up and is approximately ~~84.9%~~84.6% leased and ~~79.3%~~82.1% occupied as of ~~January 31,~~April 30, 2019. FREIT expects Rotunda’s operations to stabilize in late 2019.
Debt Financing Availability: Financing has been available to FREIT and its affiliates. On February 7, 2018, Grande Rotunda, LLC refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding available for retail tenant improvements and leasing costs in the amount of $3,380,000. This refinancing paid off the loan previously held by Wells Fargo, funded loan closing costs and paid the amount due to Hekemian Development Resources for a development fee of $900,000 plus accrued interest of approximately $45,000 (See Note 67 to FREIT’s condensed consolidated financial statements for further details on this fee). This loan is secured by the Rotunda property, bears a floating interest rate at 285 basis points over the one-month LIBOR rate and has a maturity date of February 6, 2021 with two one-year renewal options. As part of this transaction, Grande Rotunda, LLC purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan. As of ~~January 31,~~April 30, 2019, approximately $118.5 million of this loan facility was drawn down and the interest rate was approximately ~~5.36%~~5.33%.

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On April 3, 2019, WestFREIT, Corp. (owned 100% by FREIT) exercised its option to extend its loan held by M&T Bank, with an outstanding balance of approximately $22.5 million, for twelve months. Effective beginning on June 1, 2019, the extension of this loan secured by the Westridge Square Shopping Center, will require monthly principal payments of $47,250 plus interest based on a floating interest rate equal to 240 basis points over the one-month LIBOR and has a maturity date of May 1, 2020.
On January 8, 2018, Pierre Towers, LLC (“Pierre”), owned by S And A Commercial Associates Limited Partnership (“S&A”), which is a consolidated subsidiary, refinanced its $29.1 million loan held by State Farm with a new mortgage loan from New York Life Insurance in the amount of $48 million. Pierre paid New York Life Insurance a good faith deposit in the amount of $960,000, which was reimbursed by New York Life when the loan was closed in January 2018. The new loan has a term of ten years and bears a fixed interest rate equal to 3.88%. Interest-only payments are required each month for the first five years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 5.38% to a fixed rate of 3.88%; and (ii) net refinancing proceeds of approximately $17.2 million (after giving effect to a $1.2 million loan prepayment cost to pay-off the loan held by State Farm) that were distributed to the partners in S&A with FREIT receiving approximately $11.2 million, based on its 65% membership interest in S&A, which can be used for capital expenditures and general corporate purposes.
On December 7, 2017, Station Place on Monmouth, LLC (owned 100% by FREIT) closed on a mortgage loan in the amount of $12,350,000 held by Provident Bank to purchase the Station Place property in Red Bank, New Jersey. Interest-only payments are required each month for the first two years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. The loan bears a floating interest rate equal to 180 basis points over the one-month BBA LIBOR with a maturity date of December 15, 2027. In order to minimize interest rate volatility during the term of the loan, Station Place on Monmouth, LLC entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 4.35% over the term of the loan.
On January 21, 2019, Station Place on Monmouth, LLC entered into a modification agreement with Provident Bank. The material terms of the modification were: (i) FREIT guarantees $2,350,000 of the outstanding principal balance of the loan; and (ii) the loan’s Debt Service Coverage Ratio (“DSCR”) covenants are reduced to a single test that will be tested semi-annually (commencing with the six-month period ending April 30, 2019) and require a DSCR of 1.2 / 1.0 based on actual debt service. Prior to this modification, the loan’s DSCR covenants were calculated using the greater of the actual debt service or other hypothetical debt service measures, as provided in the loan agreement, that were to be tested quarterly. As previously disclosed in FREIT’s current report on Form 8-K filed with the SEC on January 24, 2019, Station Place had not been in compliance with the loan covenants as of October 31, 2018, and the modification waives all previous non-compliance. If the DSCR should fall below 1.2 / 1.0, Provident Bank, at its discretion, may require a current appraisal of the Station Place property. If the loan balance exceeds 85% loan-to-value (“L-T-V”) based on the appraised value, Station Place may be required to resize the loan to bring the L-T-V into compliance by paying down the outstanding principal balance of the loan, posting a letter of credit, or providing additional collateral to Provident Bank.
On October 27, 2017, FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 27, 2020 at which point no further advances shall be permitted and provided the line of credit is not renewed by the lender, the outstanding principal balance of the line of credit shall convert to a commercial term loan maturing on October 31, 2022. Draws against the credit line can be used for working capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREIT’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit was increased from $12.8 million to $13 million and the interest rate on the amount
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outstanding will be at a floating rate of 275 basis points over the 30-day LIBOR with a floor of 3.75%. As of ~~January 31,~~April 30, 2019 and October 31, 2018, there was no amount outstanding and $13 million was available under the line of credit.
In accordance with the loan agreement for each of the loans described above, FREIT may be required to meet or maintain certain financial covenants throughout the term of the loan.
Operating Cash Flow: FREIT expects that cash provided by operating activities and cash reserves will be adequate to cover mandatory debt service payments (including payments of interest, but excluding balloon payments), real estate taxes, recurring capital improvements at properties and other needs to maintain its status as a REIT for at least a period of one year from the date of filing of this quarterly report on Form 10-Q.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
Pursuant to the SEC disclosure guidance for ~~"Critical~~“Critical Accounting Policies,"” the SEC defines Critical Accounting Policies as those that require the application of ~~management's~~management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, the preparation of which takes into account estimates based on judgments and assumptions that affect certain amounts and disclosures. Accordingly, actual results could differ from these estimates. The accounting policies and estimates used, which are outlined in Note 1 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2018, have been applied consistently as of ~~January 31,~~April 30, 2019, and for the six and three months ended ~~January 31,~~April 30, 2019 and 2018. We believe that the following accounting policies or estimates require the application of ~~management's~~management’s most difficult, subjective, or complex judgments:

~~Index~~ ~~Page 18~~
Revenue Recognition: Base rents, additional rents based on ~~tenants'~~tenants’ sales volume and reimbursement of the ~~tenants'~~tenants’ share of certain operating expenses are generally recognized when due from tenants. The straight-line basis is used to recognize base rents under leases if they provide for varying rents over the lease terms. Straight-line rents represent unbilled rents receivable to the extent straight-line rents exceed current rents billed in accordance with lease agreements. Before FREIT can recognize revenue, it is required to assess, among other things, its collectability.
Valuation of Long-Lived Assets: We assess the carrying value of long-lived assets periodically, or whenever events or changes in circumstances indicate that the carrying amounts of certain assets may not be recoverable. When FREIT determines that the carrying value of long-lived assets may be impaired, the measurement of any impairment is based on a projected discounted cash flow method determined by ~~FREIT's~~FREIT’s management. While we believe that our discounted cash flow methods are reasonable, different assumptions regarding such cash flows may significantly affect the measurement of impairment.
Real Estate Development Costs: It is FREIT’s policy to capitalize pre-development costs, which generally include legal and professional fees and other directly related third-party costs. Real estate taxes and interest costs incurred during the development and construction phases are also capitalized. FREIT ceases capitalization of these costs when the project or portion thereof becomes operational, or when construction has been postponed. In the event of postponement, capitalization of these costs will recommence once construction on the project resumes.
See Note 2 to the condensed consolidated financial statements for recently issued accounting standards.
RESULTS OF OPERATIONS
Real estate revenue for the six months ended April 30, 2019 (“Current Six Months”) increased 4.2% to $29,714,000, compared to $28,519,000 for the six months ended April 30, 2018 (“Prior Year’s Six Months”). For the three months ended ~~January 31,~~April 30, 2019 (“Current Quarter”), real estate revenue increased ~~5.2%~~3.2% to ~~$14,928,000,~~$14,786,000, compared to ~~$14,194,000~~$14,325,000 for the three months ended ~~January 31,~~April 30, 2018 (“Prior Year’s Quarter”). The increase in revenue was primarily attributable to an increase in the average occupancy rate at the Rotunda property resulting from the lease-up of the new residential units and retail space at the property.
Net income ~~(loss)~~ attributable to common equity (“net ~~income (loss)-common~~income-common equity”) for the Current Six Months and Current Quarter was ~~income of $459,000 or $0.07~~$1,245,000 ($0.18 per share basic and ~~diluted, compared to a loss of $357,000 or~~diluted) and $786,000 ($~~0.05)~~0.11 per share basic and ~~diluted~~diluted), compared to $758,000 ($0.11 per share basic and diluted) and $1,115,000 ($0.16 per share basic and diluted) for the Prior Year’s ~~Quarter. The Current Quarter’s increase in~~comparable periods, respectively.
Adjusted net income for the Current Six Months and Current Quarter was ~~due~~$429,000 ($0.06 per share basic and diluted) and relatively flat ($0 per share basic and diluted), compared to $507,000 ($0.07 per share basic and diluted) and $1,427,000 ($0.21 per share basic and diluted) for the Prior Year’s ~~Quarter~~comparable periods, respectively. Adjusted income is a non-GAAP measure, which management believes is a useful and meaningful gauge to investors of our operating performance, since it excludes the impact of unusual and infrequent items specifically: a gain related to the sale of the property in Patchogue, New York in Fiscal 2019. The decrease in adjusted net income for the Current Six Months was primarily driven by the following: real estate tax credits and refunds related to the Icon at the Rotunda property in the amount of approximately $1.1 million received in the Prior Year’s Six Months related to Fiscal 2017 (with a consolidated impact to FREIT of approximately $0.7 million); special committee expenses
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Index
in the amount of approximately $0.6 million related to advisory and legal fees incurred; interest expense increase on the loan on the Rotunda property in the amount of approximately $0.5 million resulting from an increase in interest rates; offset by an increase in revenue of approximately $1.2 million as explained above and the Prior Year’s Six Months being burdened by a $1.2 million loan prepayment cost (with a consolidated impact to FREIT of $0.8 million) related to the Pierre Towers, LLC loan refinancing. ~~(Refer~~The decrease in adjusted net income for the Current Quarter was primarily driven by the following: real estate tax credits and refunds related to the Icon at the Rotunda property in the amount of approximately $1.1 million received in the Prior Year’s Quarter related to Fiscal 2017 (with a consolidated impact to FREIT of approximately $0.7 million); special committee expenses in the amount of approximately $0.6 million related to advisory and legal fees incurred; interest expense increase on the loan on Rotunda property in the amount of approximately $0.3 million resulting from an increase in interest rates; offset by an increase in revenue of approximately $0.5 million as explained above. Refer to the segment disclosure below for a more detailed discussion on the financial performance of FREIT’s commercial and residential segments.)

~~Index~~ ~~Page 19~~
The schedule below provides a detailed analysis of the major changes that impacted net ~~income (loss)-common~~income-common equity for the six and three months ended ~~January 31,~~April 30, 2019 and 2018:
Three Months Ended Six Months Ended Three Months Ended
January 31, April 30, April 30,
2019 2018 Change 2019 2018 Change 2019 2018 Change
(In Thousands of Dollars) (In Thousands of Dollars) (In Thousands of Dollars)
Income from real estate operations:
Commercial properties $ 3,868 $ 3,384 $ 484 $ 7,625 $ 6,778 $ 847 $ 3,757 $ 3,394 $ 363
Residential properties 4,734 4,057 677 9,542 9,873 (331 ) 4,808 5,816 (1,008 )
Total income from real estate operations 8,602 7,441 1,161 17,167 16,651 516 8,565 9,210 (645 )

Financing costs:
Fixed rate mortgages (2,306 ) (3,314 ) 1,008 (4,508 ) (5,608 ) 1,100 (2,202 ) (2,294 ) 92
Floating rate mortgages (1,890 ) (247 ) (1,643 ) (3,765 ) (1,812 ) (1,953 ) (1,875 ) (1,565 ) (310 )
Floating rate - Rotunda construction loan — (1,231 ) 1,231 - (1,321 ) 1,321 - (90 ) 90
Credit line — (25 ) 25 - (28 ) 28 - (3 ) 3
Other - Corporate interest (162 ) (185 ) 23 (315 ) (336 ) 21 (153 ) (151 ) (2 )
Mortgage cost amortization (294 ) (150 ) (144 ) (591 ) (466 ) (125 ) (297 ) (316 ) 19
Total financing costs (4,652 ) (5,152 ) 500 (9,179 ) (9,571 ) 392 (4,527 ) (4,419 ) (108 )

Investment income 71 55 16 184 112 72 113 57 56
Unrealized loss on interest rate cap contract (154 ) — (154 )
Unrealized (loss) gain on interest rate cap contract (159 ) 19 (178 ) (5 ) 19 (24 )

General & administrative expenses:
Accounting fees (147 ) (141 ) (6 ) (293 ) (277 ) (16 ) (146 ) (136 ) (10 )
Legal and professional fees (18 ) (26 ) 8 (77 ) (88 ) 11 (59 ) (62 ) 3
Trustees and consultant fees (264 ) (234 ) (30 ) (619 ) (495 ) (124 ) (355 ) (261 ) (94 )
Stock option expense (34 ) (31 ) (3 ) (69 ) (61 ) (8 ) (35 ) (30 ) (5 )
Special committee expenses (586 ) - (586 ) (586 ) - (586 )
Corporate expenses (145 ) (121 ) (24 ) (333 ) (271 ) (62 ) (188 ) (150 ) (38 )
Total general & administrative expenses (608 ) (553 ) (55 ) (1,977 ) (1,192 ) (785 ) (1,369 ) (639 ) (730 )

Depreciation (2,824 ) (2,711 ) (113 ) (5,607 ) (5,512 ) (95 ) (2,783 ) (2,801 ) 18
Net income (loss) 435 (920 ) 1,355
Adjusted net income 429 507 (78 ) (6 ) 1,427 (1,433 )

Net loss attributable to noncontrolling interests in subsidiaries 24 563 (539 )
Gain on sale of property 836 - 836 836 - 836
Net income 1,265 507 758 830 1,427 (597 )

Net income (loss) attributable to common equity $ 459 $ (357 ) $ 816
Net (income) loss attributable to noncontrolling interests in subsidiaries (20 ) 251 (271 ) (44 ) (312 ) 268

Net income attributable to common equity $ 1,245 $ 758 $ 487 $ 786 $ 1,115 $ (329 )

The condensed consolidated results of operations for the Current Six Months and Current Quarter are not necessarily indicative of the results to be expected for the full year or any other period.

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SEGMENT INFORMATION
The following ~~table sets~~tables set forth comparative net operating income ~~("NOI"~~(“NOI”) data for FREIT’s real estate segments and reconciles the NOI to condensed consolidated net ~~income (loss)-common~~income-common equity for the Current Six Months and Current Quarter as compared to the Prior Year’s ~~Quarter~~comparable periods (see below for definition of NOI):

Commercial Residential Combined Commercial Residential Combined
Three Months Ended Three Months Ended Three Months Ended Six Months Ended Six Months Ended Six Months Ended
January 31, Increase (Decrease) January 31, Increase (Decrease) January 31, April 30, Increase (Decrease) April 30, Increase (Decrease) April 30,
2019 2018 $ % 2019 2018 $ % 2019 2018 2019 2018 $ % 2019 2018 $ % 2019 2018
(In Thousands) (In Thousands) (In Thousands) (In Thousands) (In Thousands) (In Thousands)
Rental income $ 5,000 $ 4,712 $ 288 6.1% $ 8,094 $ 7,580 $ 514 6.8% $ 13,094 $ 12,292 $ 10,112 $ 9,572 $ 540 5.6 % $ 16,187 $ 15,426 $ 761 4.9 % $ 26,299 $ 24,998
Reimbursements 1,623 1,557 66 4.2% 35 19 16 84.2% 1,658 1,576 2,928 2,950 (22 ) -0.7 % 67 37 30 81.1 % 2,995 2,987
Other 4 34 (30 ) -88.2% 105 194 (89 ) -45.9% 109 228 39 44 (5 ) -11.4 % 194 317 (123 ) -38.8 % 233 361
Total revenue 6,627 6,303 324 5.1% 8,234 7,793 441 5.7% 14,861 14,096 13,079 12,566 513 4.1 % 16,448 15,780 668 4.2 % 29,527 28,346
Operating expenses 2,831 3,037 (206 ) -6.8% 3,495 3,716 (221 ) -5.9% 6,326 6,753 5,651 6,001 (350 ) -5.8 % 6,896 5,867 1,029 17.5 % 12,547 11,868
Net operating income $ 3,796 $ 3,266 $ 530 16.2% $ 4,739 $ 4,077 $ 662 16.2% 8,535 7,343 $ 7,428 $ 6,565 $ 863 13.1 % $ 9,552 $ 9,913 $ (361 ) -3.6 % 16,980 16,478
Gain on sale of property $ 836 $ - $ 836 100.0 % $ - $ - $ - 0.0 % 836 -

Average Occupancy % 77.5% 75.6% 1.9% 95.2% 93.1% 2.1% 81.3 % * 79.7 % * 1.6 % 95.2 % 93.7 % 1.5 %

Reconciliation to condensed consolidated net income (loss)-common equity:
Deferred rents - straight lining 67 98
Investment income 71 55
Unrealized loss on interest rate cap contract (154 ) —
General and administrative expenses (608 ) (553 )
Depreciation (2,824 ) (2,711 )
Financing costs (4,652 ) (5,152 )
           Net income (loss) 435 (920 )
Net loss attributable to noncontrolling interests in subsidiaries 24 563
           Net income (loss) attributable to common equity $ 459 $ (357 )
Reconciliation to condensed consolidated net income-common equity:
Deferred rents - straight lining 187 173
Investment income 184 112
Unrealized (loss) gain on interest rate cap contract (159 ) 19
General and administrative expenses (1,977 ) (1,192 )
Depreciation (5,607 ) (5,512 )
Financing costs (9,179 ) (9,571 )
Net income 1,265 507
Net (income) loss attributable to noncontrolling interests in subsidiaries (20 ) 251
Net income attributable to common equity $ 1,245 $ 758

Commercial Residential Combined
Three Months Ended Three Months Ended Three Months Ended
April 30, Increase (Decrease) April 30, Increase (Decrease) April 30,
2019 2018 $ % 2019 2018 $ % 2019 2018
(In Thousands) (In Thousands) (In Thousands)
Rental income $ 5,112 $ 4,860 $ 252 5.2 % $ 8,093 $ 7,846 $ 247 3.1 % $ 13,205 $ 12,706
Reimbursements 1,305 1,393 (88 ) -6.3 % 32 18 14 77.8 % 1,337 1,411
Other 35 10 25 250.0 % 89 123 (34 ) -27.6 % 124 133
Total revenue 6,452 6,263 189 3.0 % 8,214 7,987 227 2.8 % 14,666 14,250
Operating expenses 2,820 2,964 (144 ) -4.9 % 3,401 2,151 1,250 58.1 % 6,221 5,115
Net operating income $ 3,632 $ 3,299 $ 333 10.1 % $ 4,813 $ 5,836 $ (1,023 ) -17.5 % 8,445 9,135
Gain on sale of property $ 836 $ - $ 836 100.0 % $ - $ - $ - 0.0 % 836 -

Average Occupancy % 81.2 % * 80.4 % * 0.8 % 95.1 % 94.2 % 0.9 %

~~Index~~ ~~Page 20~~
Reconciliation to condensed consolidated net income-common equity:
Deferred rents - straight lining 120 75
Investment income 113 57
Unrealized (loss) gain on interest rate cap contract (5 ) 19
General and administrative expenses (1,369 ) (639 )
Depreciation (2,783 ) (2,801 )
Financing costs (4,527 ) (4,419 )
Net income 830 1,427
Net income attributable to noncontrolling interests in subsidiaries (44 ) (312 )
Net income attributable to common equity $ 786 $ 1,115
* Average occupancy rate excludes the Patchogue, New York property from all periods presented as the property was sold in February 2019.
NOI is based on operating revenue and expenses directly associated with the operations of the real estate properties, but excludes deferred rents (straight lining), depreciation, financing costs and other items. FREIT assesses and measures segment operating results based on NOI.
Same Property NOI: 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 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.
NOI and Same Property NOI are non-GAAP financial measures and are not measures of operating results or cash flow as measured by GAAP, and are not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity.
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COMMERCIAL SEGMENT
The commercial segment contains eight (8) properties, excluding the ~~land and building formerly occupied as a Pathmark supermarket in~~ Patchogue, New York property sold onin February ~~8, 2019 (see Note 13 to FREIT’s condensed consolidated financial statements).~~2019. Seven of these properties are multi-tenanted retail or office centers, and one is single tenanted on land located in Rockaway, New Jersey owned by FREIT from which it receives monthly rental income from a tenant who has built and operates a bank branch on the land. On February 8, 2019, FREIT sold a commercial building, formerly occupied as a Pathmark supermarket in Patchogue, New York for a sales price of $7.5 million. The sale of this property, which had a carrying value of approximately $6.2 million, resulted in a gain of approximately $0.8 million net of sales fees and commissions. Net cash proceeds of approximately $2 million were realized after paying off the related mortgage on this property in the amount of approximately $5.2 million. The sale of this property eliminates an operating loss of approximately $0.8 million ($0.12 per share) incurred, annually, since Pathmark vacated in December 2015 (see Note 6 to FREIT’s condensed consolidated financial statements for further details).
As indicated in the ~~table~~tables above under the caption Segment Information, total revenue from FREIT’s commercial segment for the Current Six Months and Current Quarter increased by ~~5.1%~~4.1% and 3%, respectively, and NOI increased by ~~16.2%~~13.1% and 10.1%, respectively, as compared to the Prior Year’s ~~Quarter.~~comparable periods. Average occupancy for all commercial properties increased by ~~1.9%~~1.6% and 0.8%, respectively, as compared to the Prior Year’s ~~Quarter.~~comparable periods. The increase in revenue and NOI was primarily attributable to an increase in occupancy at the Rotunda property resulting from the lease-up of the new retail space from an average annual occupancy ~~69.4%~~70.6% in the Prior Year’s ~~Quarter~~Six Months to ~~79.3%~~80.5% in the Current ~~Quarter.~~Six Months.
Same Property Operating Results: FREIT’s commercial segment currently contains eight (8) same properties. (See definition of same property under Segment Information above.) ~~Since~~The Patchogue property was excluded from same property results for all ~~of FREIT’s commercial properties are considered~~periods presented because this property was sold in February 2019. Same property revenue for the Current Six Months and Current Quarter increased by 4.1% and 3%, respectively and same ~~properties~~property NOI increased by 11.5% and 7.8%, respectively, as compared to the Prior Year’s comparable periods. The changes resulted from the factors discussed in the ~~Current Quarter, refer to the~~immediately preceding ~~paragraph for discussion of changes in same property results.~~paragraph.
Leasing: The following tables reflect leasing activity at FREIT’s commercial properties for comparable leases (leases executed for spaces in which there was a tenant at some point during the previous twelve-month period) and non-comparable leases for the Current ~~Quarter:~~Six Months:

RETAIL: Number of
Leases Lease Area
(Sq. Ft.) Weighted
Average Lease
Rate (per Sq.
Ft.) Weighted
Average Prior
Lease Rate (per
Sq. Ft.) % Increase
(Decrease) Tenant
Improvement
Allowance (per
Sq. Ft.)  (a) Lease
Commissions
(per Sq. Ft.)  (a)

Comparable leases (b) 6 14,741 $ 28.96 $ 29.22 -0.9% $ 1.12 $ 0.75

Non-comparable leases 1 1,130 $ 27.83 N/A N/A $ — $ 1.39

Total leasing activity 7 15,871

RETAIL: Number of
Leases Lease Area
(Sq. Ft.) Weighted
Average Lease
Rate (per Sq.
Ft.) Weighted
Average Prior
Lease Rate (per
Sq. Ft.) % Increase
(Decrease) Tenant
Improvement
Allowance (per
Sq. Ft.) (a) Lease
Commissions
(per Sq. Ft.) (a)

Comparable leases (b) 9 23,708 $ 32.64 $ 29.70 9.9 % $ 0.49 $ 0.76

Non-comparable leases 2 6,480 $ 26.49 N/A N/A $ 3.08 $ 1.48

Total leasing activity 11 30,188

OFFICE: Number of
Leases Lease Area
(Sq. Ft.) Weighted
Average Lease
Rate (per Sq.
Ft.) Weighted
Average Prior
Lease Rate (per
Sq. Ft.) % Increase
(Decrease) Tenant
Improvement
Allowance (per
Sq. Ft.) (a) Lease
Commissions
(per Sq. Ft.) (a)

Comparable leases (b) 15 48,848 $ 18.35 $ 18.46 -0.6 % $ 0.34 $ 0.52

Non-comparable leases 4 4,976 $ 27.93 N/A N/A $ 1.90 $ 1.30

Total leasing activity 19 53,824

OFFICE: Number of
Leases Lease Area
(Sq. Ft.) Weighted
Average Lease
Rate (per Sq.
Ft.) Weighted
Average Prior
Lease Rate (per
Sq. Ft.) % Increase
(Decrease) Tenant
Improvement
Allowance (per
Sq. Ft.)  (a) Lease
Commissions
(per Sq. Ft.)  (a)

Comparable leases (b) 5 5,550 $ 25.99 $ 22.75 14.2% $ 2.08 $ 0.81

Non-comparable leases 2 4,350 $ 25.56 N/A N/A $ 4.84 $ 1.15

Total leasing activity 7 9,900
~~(a) These leasing costs are presented as annualized costs per square foot and are allocated uniformly over the initial lease term.~~
~~(b) This includes new tenant leases and/or modifications/extensions/renewals of existing tenant leases.~~
(a) These leasing costs are presented as annualized costs per square foot and are allocated uniformly over the initial lease term.
(b) This includes new tenant leases and/or modifications/extensions/renewals of existing tenant leases.

In October 2018, Sears and certain of its subsidiaries, including Kmart Corporation, filed for protection under Chapter 11 of the bankruptcy code as disclosed in the bankruptcy filings. While Sears has elected to close numerous stores, as of the date of this report, Sears continues to pay rent and the Kmart store at the Westwood Plaza Shopping Center in Westwood, New Jersey remains open for business. InThe lease has been assumed under Transform Holdco LLC, the ~~event that the~~newly formed company doing business as Sears, Kmart ~~lease is rejected in the course of Sears’ bankruptcy proceedings, FREIT’s operating results would be adversely impacted.~~
In March 2018, iHeartMedia Inc. along with its affiliates, including iHeartMedia+Entertainment (formerly known as Clear Channel Broadcasting Inc.), filed jointly for protection under Chapter 11 of the bankruptcy code as disclosed in the bankruptcy filings. As of the date of this report, the lease for iHeartMedia+Entertainment at the Rotunda property in Baltimore, Maryland was assumed by the bankrupt entity, which continues to pay rent and ~~remains open for business.~~their subsidiaries.

~~Index~~ ~~Page 21~~
RESIDENTIAL SEGMENT
FREIT currently operates eight (8) multi-family apartment buildings or complexes totaling 1,437 apartment units. On December 7, 2017, FREIT completed the acquisition of Station Place, a residential apartment complex consisting of one building with 45 units, located in Red Bank, New Jersey through Station Place on Monmouth, LLC (FREIT’s 100% owned consolidated subsidiary). FREIT identified Station Place as the replacement property for the Hammel Gardens property located in Maywood, New Jersey that FREIT sold on June 12, 2017, which completed the like-kind exchange pursuant to Section 1031 of the Internal Revenue Code ~~(See~~(see Note 5 to FREIT’s condensed consolidated ~~financials~~financial statements for further details).
As indicated in the ~~table~~tables above under the caption Segment Information, total revenue from FREIT’s residential segment for the Current ~~Quarter increased by 5.7%~~Six Months and ~~NOI for the~~ Current Quarter increased by ~~16.2%~~4.2% and 2.8%, respectively, and NOI decreased by 3.6% and 17.5%, respectively, as compared to the Prior Year’s ~~Quarter. Average occupancy for all residential properties for the Current Quarter increased approximately 2.1% over the Prior Year’s Quarter.~~comparable periods. The increase in revenue ~~and NOI~~ for the Current Six Months and Current Quarter was primarily driven by an increase in the average annual occupancy at the Icon (the residential portion of the Rotunda
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Index
property in Baltimore, Maryland) to ~~95.3%~~95% and 94.6% in the Current Six Months and Current Quarter, respectively, as compared to ~~86.1%~~88.5% and 90.9% in the Prior Year’s ~~Quarter. Also contributing to the increase~~comparable periods. The decrease in NOI for the Current Six Months and the Current Quarter was primarily attributed to the ~~timing of~~ real estate tax credits ~~earned~~and refunds related to the Icon property at the Rotunda in the ~~Current Quarter as compared to the prior year (tax refund and credit was not~~amount of $1.1 million received in the ~~prior year until~~Prior Year’s Six Months related to Fiscal 2017 (with a consolidated impact to FREIT of approximately $0.7 million). Average occupancy for all residential properties for the ~~second quarter of fiscal 2018).~~Current Six Months and Current Quarter increased approximately 1.5% and 0.9%, respectively, over the Prior Year’s comparable periods.
Same Property Operating Results: FREIT’s residential segment currently contains seven (7) same properties. (See definition of same property under Segment Information above.) The Station Place property is not included as same property, since it is a newly acquired property that had been in operation for less than a year in fiscal 2018. For the Current Six Months and Current Quarter, same property revenue increased by 4% and 3.4%, respectively, and NOI ~~increased~~decreased by ~~4.5%~~3.7% and ~~16.3%~~17.7%, respectively, as compared to the Prior Year’s ~~Quarter.~~comparable periods. Average occupancy for same properties increased approximately ~~2.4%~~1.7% and 1%, respectively, over the Prior Year’s ~~Quarter.~~comparable periods. The changes resulted from the factors discussed in the immediately preceding paragraph.
FREIT’s residential revenue is principally composed of monthly apartment rental income. Total rental income is a factor of occupancy and monthly apartment rents. Monthly average residential rents, (excluding from both periods presented for comparability purposes, the Station Place property which was a newly acquired property that had been in operation for less than a year in fiscal 2018 and the Icon which reached a stabilized occupancy rate in the third quarter of the prior year), at the end of the Current Quarter and the Prior Year’s Quarter were ~~$1,921~~$1,927 and ~~$1,876,~~$1,879, respectively. A 1% decline in annual average occupancy, or a 1% decline in average rents from current levels, results in an annual revenue decline of approximately $234,000 and ~~$224,000,~~$223,000, respectively.
Capital expenditures: Since all of FREIT’s apartment communities, with the exception of the Boulders, Regency, Icon and Station Place properties, were constructed more than 25 years ago, FREIT tends to spend more in any given year on maintenance and capital improvements than may be spent on newer properties. Funds for these capital projects will be available from cash flow from the ~~property's~~property’s operations and cash reserves. In April 2018, Pierre Towers, LLC (“Pierre”), a consolidated subsidiary, entered into an agreement with Public Service Electric & Gas Company (“PSE&G”), whereby PSE&G funded a project to make certain upgrades at the Pierre property located in Hackensack, New Jersey, which included boiler replacement, ~~lighting~~ replacement of interior and exterior lighting fixtures and minor lighting controls in apartment lighting. PSE&G funded 100% of this project at a total cost of ~~$927,000~~approximately $926,000 and the project was completed in December 2018. Per the reimbursement agreement, Pierre Towers, LLC will reimburse PSE&G for approximately ~~$316,000~~$314,000 of this cost on a monthly basis over a five-year term with no interest.

FINANCING COSTS

Three Months Ended January 31, Six Months Ended April 30, Three Months Ended April 30,
2019 2018 2019 2018 2019 2018
(In Thousands of Dollars) (In Thousands of Dollars) (In Thousands of Dollars)
Fixed rate mortgages (a):
1st Mortgages
Existing $ 2,306 $ 3,222 $ 4,508 $ 4,918 $ 2,202 $ 1,696
New — 92 - 690 - 598
Variable rate mortgages:
1st Mortgages
Existing 1,890 247 3,765 503 1,875 256
New - 1,309 - 1,309
Construction loan-Rotunda — 1,231 - 1,321 - 90
Credit line — 25 - 28 - 3
Other 162 185 315 336 153 151
Total financing costs, gross 4,358 5,002 8,588 9,105 4,230 4,103
Amortization of mortgage costs 294 150 591 466 297 316
Total financing costs $ 4,652 $ 5,152 $ 9,179 $ 9,571 $ 4,527 $ 4,419

(a) Includes the effect of interest rate swap contracts which effectively convert the floating interest rate to a fixed interest rate over the term of the loan.

(a) Includes the effect of interest rate swap contracts which effectively convert the floating interest rate to a fixed interest rate over the term of the loan.

~~Index~~ ~~Page 22~~
Total financing costs for the Current ~~Quarter~~Six Months decreased by approximately ~~$500,000~~$392,000 or ~~9.7%~~4.1% as compared to the Prior Year’s Six Months, which was primarily driven by a $1 million decrease in interest expense on the Pierre Towers, LLC loan driven by the Prior Year’s Six Months being burdened by a $1.2 million loan prepayment cost (with a consolidated impact to FREIT of $0.8 million) related to the loan refinancing offset by an increase of approximately $0.5 million in interest expense on the Grande Rotunda, LLC loan resulting from an increase in the one-month LIBOR rate. Total financing costs for the Current Quarter increased by approximately $108,000 or 2.4% as compared to the Prior Year’s Quarter, which was primarily driven by ~~a decrease of approximately $1 million in interest expense on~~ the ~~Pierre Towers, LLC loan resulting from a $1.2 million loan prepayment cost paid in the prior year related to the refinancing of the loan on the Pierre property offset by an~~ increase ~~of approximately $0.4 million~~ in interest expense on the Grande Rotunda ~~LLC~~ loan resulting from an increase in the ~~refinancing of the loan on the Rotunda property in February 2018.~~one-month LIBOR rate. (See Note 78 to FREIT’s condensed consolidated financial statements for further details.)
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Index
GENERAL AND ADMINISTRATIVE EXPENSES (“G & A”)
G&A expense for the Current Six Months and Current Quarter was ~~$608,000~~$1,977,000 and $1,369,000, respectively, compared to ~~$553,000~~$1,192,000 and $639,000, respectively for the Prior Year’s ~~Quarter.~~comparable periods. The primary components of G&A are accounting/auditing fees, legal and professional fees, Trustees’ and consultant fees, and Special Committee fees. The increase in G&A expense was primarily attributed to expenses incurred by the Special Committee related to advisory and legal fees incurred.

DEPRECIATION
Depreciation expense from operations for the Current Six Months and Current Quarter was ~~$2,824,000~~$5,607,000 and $2,783,000, respectively, compared to ~~$2,711,000~~$5,512,000 and $2,801,000, respectively, for the Prior Year’s ~~Quarter.~~comparable periods. The slight increase in depreciation for the Current Six Months was primarily attributable to additional tenant improvements at the Rotunda property being placed into service as the property continues to lease-up.

LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was ~~$4.6~~$8.1 million for the Current ~~Quarter~~Six Months compared to ~~$1.5~~$6.7 million for the Prior Year’s ~~Quarter.~~Six Months. FREIT expects that cash provided by operating activities and cash reserves will be adequate to cover mandatory debt service payments (including payments of interest, but excluding balloon payments), real estate taxes, recurring capital improvements at properties and other needs to maintain its status as a REIT for at least a period of one year from the date of filing of this quarterly report on Form 10-Q.
As of ~~January 31,~~April 30, 2019, FREIT had cash, cash equivalents and restricted cash totaling ~~$28.5~~$30.7 million, compared to $26.4 million at October 31, 2018. The increase in cash for the Current ~~Quarter~~Six Months is primarily attributable to ~~$4.6~~$8.1 million in net cash provided by operating activities, $5.5 million in net cash provided by investing activities including capital expenditure offset by ~~$1.7~~$9.3 million in net cash used in financing ~~activities and $0.8 million in net cash used in investing activities including capital expenditures.~~activities.
On February 8, 2019, FREIT sold a commercial building, formerly occupied as a Pathmark supermarket in Patchogue, New York for a sales price of $7.5 million. The sale of this property, which had a carrying value of approximately $6.2 million, ~~(and is presented as held for sale on the condensed consolidated balance sheet as of January 31, 2019),~~ resulted in a ~~capital~~ gain of approximately $0.8 million ~~(on a GAAP basis)~~ net of sales fees and commissions. Net cash proceeds of approximately $2 million were realized after paying off the related mortgage on this property in the amount of approximately $5.2 million. In connection with and in anticipation of the closing of the sale of the Patchogue property, FREIT declared a one-time special dividend of $0.10 per share in the first quarter of Fiscal 2019. The sale of this property eliminates an operating loss of approximately $0.8 million ($0.12 per share) incurred, annually, since Pathmark vacated in December 2015. (See Note 6 to FREIT’s condensed consolidated financial statements.)
On April 25, 2017, Wayne PSC announced it had agreed to a termination of Macy’s lease for the 81,160 square foot Macy’s store at the Preakness Shopping Center, effective as of April 15, 2017. To terminate the lease and take possession of the space, Wayne PSC paid Macy’s a termination fee of $620,000. Wayne PSC expects to re-position this space and re-lease to a new tenant (or multiple tenants) at market rents, which are currently higher than the rent provided for under the terminated Macy’s lease. FREIT will lose total consolidated annual rental income, including reimbursements, of approximately $0.2 million until such time as the space is fully re-leased. FREIT anticipates increased revenue from the space when it is re-leased.
On December 7, 2017, FREIT completed the acquisition of Station Place, a residential apartment complex consisting of one building with 45 units, located in Red Bank, New Jersey through Station Place on Monmouth, LLC (FREIT’s 100% owned consolidated subsidiary). FREIT identified Station Place as a replacement property for the Hammel Gardens property that FREIT sold on June 12, 2017 to complete the like-kind exchange transaction under Section 1031 of the Internal Revenue Code. Station Place is part of FREIT’s residential segment. The acquisition cost was $19,550,000 (inclusive of approximately $550,000 of transaction costs capitalized as part of the asset acquisition), which was funded in part with $7 million in net proceeds from the sale of the Hammel Gardens property, and the remaining balance of $12,350,000 (inclusive of the transaction costs) was funded by Station Place on Monmouth, LLC through long-term financing for this property from Provident Bank. (See Note 5 to FREIT’s condensed consolidated financial statements.)
FREIT owns and operates an 87,661 square foot shopping center located in Franklin Lakes, New Jersey, the anchor tenant of which is Stop & Shop. On July 26, 2017, Stop & Shop entered into a lease modification with FREIT whereby the tenant exercised its option to renew the lease for a ten-year period with a right of the tenant to terminate the lease at any time during the fifth year if the store does not meet certain sales volume levels set forth in the modification. This lease modification, which provided for a $250,000 reduction in annual rent, has adversely affected and will adversely affect FREIT’s future operating results.
In Fiscal 2017, Grande Rotunda, LLC incurred substantial expenditures at the Rotunda property related to retail tenant improvements, leasing costs and operating expenditures which, in the aggregate, exceeded revenues as the property was still in the rent up phase and the construction loan previously held with Wells Fargo was at its maximum level resulting in no additional funding available to draw. Accordingly, the equity owners in Grande Rotunda, LLC (FREIT with a 60% ownership and Rotunda 100, LLC with a 40% ownership) contributed their respective pro-rata share of any cash needs through loans to Grande Rotunda, LLC. As of ~~January 31,~~April 30, 2019 and October 31, 2018, Rotunda 100, LLC has funded Grande Rotunda, LLC with approximately ~~$5.5~~ $5.6
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Index
million and $5.4 million (including interest), respectively, which is included in “Due to affiliate” on the accompanying condensed consolidated balance sheets.

~~Index~~ ~~Page 23~~
On April 22, 2016, Damascus Centre, LLC was able to take-down a second tranche of its loan held with People’s United Bank in the amount of $2,320,000, of which approximately $470,000 was readily available and the remaining $1,850,000 was held in escrow. In July 2018, these funds totaling $1,850,000 were released from escrow by the bank and became readily available to Damascus, Centre LLC. Damascus Centre, LLC distributed amounts due to FREIT and Damascus 100 and Damascus 100 in turn repaid FREIT the secured loans receivable plus accrued interest in the amount of approximately $1.9 million.
Credit Line: On October 27, 2017, FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 27, 2020 at which point no further advances shall be permitted and provided the line of credit is not renewed by the lender, the outstanding principal balance of the line of credit shall convert to a commercial term loan maturing on October 31, 2022. Draws against the credit line can be used for working capital needs and standby letters of credit. Draws against the credit line are secured by mortgages on FREIT’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit was increased from $12.8 million to $13 million and the interest rate on the amount outstanding will be at a floating rate of 275 basis points over the 30-day LIBOR with a floor of 3.75%. As of ~~January 31,~~April 30, 2019 and October 31, 2018, there was no amount outstanding and $13 million was available under the line of credit.
As at ~~January 31,~~April 30, 2019, FREIT’s aggregate outstanding mortgage debt was ~~$349.4~~$343.1 million, which bears a weighted average interest rate of ~~4.49%~~4.69% and an average life of approximately 44.1 years. FREIT’s fixed rate mortgages are subject to amortization schedules that are longer than the terms of the mortgages. As such, balloon payments (unpaid principal amounts at mortgage due date) for all mortgage debt will be required as follows:

Fiscal Year 2019 2020 2021 2022 2023 2024 2025 2026 2028
($ in millions)
Mortgage “Balloon” Payments $17.0 (A) $21.9 $137.6 (B) $14.4 $34.4 $9.0 $13.9 $18.2 $53.9
Fiscal Year 2019 2021 2022 2023 2024 2025 2026 2028
($ in millions)
Mortgage "Balloon" Payments    $39.5 (A) $137.6 (B) $14.4 $34.4 $9.0 $13.9 $18.2 $53.9

(A) Excludes Patchogue balloon payment of $5.2 million as the property was sold on February 8, 2019 and the related mortgage was paid off with the proceeds from the sale. (See Note 13 to FREIT's condensed consolidated financial statements.) The remaining balance represents two loans aggregating approximately $39.5 million which are extendable for a period of one (1) year.
(B) Includes Rotunda loan in the amount of approximately $118.5 million refinanced with Aareal Capital Corporation on February 7, 2018.
(A) Represents loan on Berdan Court property located in Wayne, New Jersey, which is extendable for a period of one (1) year.
(B) Includes loan on the Rotunda property located in Baltimore, Maryland in the amount of approximately $118.5 million refinanced with Aareal Capital Corporation on February 7, 2018.

The following table shows the estimated fair value and carrying value of FREIT’s long-term debt at ~~January 31,~~April 30, 2019 and October 31, 2018:

($ in Millions) January 31, 2019 October 31, 2018 April 30, 2019 October 31, 2018

Fair Value $ 342.2 $ 338.3 $337.1 $338.3

Carrying Value $ 346.2 $ 347.0
Carring Value $340.2 $347.0

Fair values are estimated based on market interest rates at ~~January 31,~~April 30, 2019 and October 31, 2018 and on a discounted cash flow analysis. Changes in assumptions or estimation methods may significantly affect these fair value estimates. The fair value is based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).
FREIT expects to refinance the individual mortgages with new mortgages when their terms expire. To this extent FREIT has exposure to interest rate risk. If interest rates, at the time any individual mortgage note is due, are higher than the current fixed interest rate, higher debt service may be required, and/or refinancing proceeds may be less than the amount of mortgage debt being retired. For example, at ~~January 31,~~April 30, 2019, a 1% interest rate increase would reduce the fair value of FREIT’s debt by ~~$8.5~~$8.2 million, and a 1% decrease would increase the fair value by $9$8.7 million.
FREIT believes that the values of its properties will be adequate to command refinancing proceeds equal to or higher than the mortgage debt to be refinanced. FREIT continually reviews its debt levels to determine if additional debt can prudently be utilized for property acquisitions for its real estate portfolio that will increase income and cash flow to shareholders.
On April 3, 2019, WestFREIT, Corp. (owned 100% by FREIT) exercised its option to extend its loan held by M&T Bank, with an outstanding balance of approximately $22.5 million, for twelve months. Effective beginning on June 1, 2019, the extension of this loan secured by the Westridge Square Shopping Center, will require monthly principal payments of $47,250 plus interest based on a floating interest rate equal to 240 basis points over the one-month LIBOR and has a maturity date of May 1, 2020.
On February 7, 2018, Grande Rotunda, LLC refinanced its $115.3 million construction loan held by Wells Fargo with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding available for retail tenant improvements and leasing costs in the amount of $3,380,000. This refinancing paid off the loan previously held by Wells Fargo, funded loan closing costs and paid the amount due to Hekemian Development Resources for a development fee of $900,000 plus accrued interest of approximately $45,000 (See Note 67 to FREIT’s condensed consolidated financial statements for further details on this fee). This loan is secured by the Rotunda property, bears a floating interest rate at 285 basis points over the one-month LIBOR rate and has a maturity date of February 6, 2021 with two one-year renewal options. As part of this transaction, Grande Rotunda, LLC purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9
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million, capping the one-month LIBOR rate at 3% for the first two years of this loan. As of ~~January 31,~~April 30, 2019, approximately $118.5 million of this loan facility was drawn down and the interest rate was approximately ~~5.36%~~5.33%.

~~Index~~ ~~Page 24~~
On January 8, 2018, Pierre Towers, LLC (“Pierre”), owned by S And A Commercial Associates Limited Partnership (“S&A”), which is a consolidated subsidiary, refinanced its $29.1 million loan held by State Farm with a new mortgage loan from New York Life Insurance in the amount of $48 million. Pierre paid New York Life Insurance a good faith deposit in the amount of $960,000, which was reimbursed by New York Life when the loan was closed in January 2018. The new loan has a term of ten years and bears a fixed interest rate equal to 3.88%. Interest-only payments are required each month for the first five years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. This refinancing resulted in: (i) a reduction in the annual interest rate from a fixed rate of 5.38% to a fixed rate of 3.88%; and (ii) net refinancing proceeds of approximately $17.2 million (after giving effect to a $1.2 million loan prepayment cost to pay-off the loan held by State Farm) that were distributed to the partners in S&A with FREIT receiving approximately $11.2 million, based on its 65% membership interest in S&A, which can be used for capital expenditures and general corporate purposes.
On December 7, 2017, Station Place on Monmouth, LLC (owned 100% by FREIT) closed on a mortgage loan in the amount of $12,350,000 held by Provident Bank to purchase the Station Place property in Red Bank, New Jersey. Interest-only payments are required each month for the first two years of the term and thereafter, principal payments plus accrued interest will be required each month through maturity. The loan bears a floating interest rate equal to 180 basis points over the one-month BBA LIBOR with a maturity date of December 15, 2027. In order to minimize interest rate volatility during the term of the loan, Station Place on Monmouth, LLC entered into an interest rate swap agreement that, in effect, converted the floating interest rate to a fixed interest rate of 4.35% over the term of the loan. On January 21, 2019, Station Place on Monmouth, LLC entered into a modification agreement with Provident Bank to modify the loan’s DSCR covenants. ~~See~~(See Note 78 to the condensed consolidated financial ~~statements and Item 2, “~~~~Management’s Discussion and Analysis of Financial Condition and Results of Operation – Overview~~~~” above.~~statements.)
Interest rate swap contracts: To reduce interest rate volatility, FREIT uses a “pay fixed, receive floating” interest rate swap to convert floating interest rates to fixed interest rates over the term of a certain loan. FREIT enters into these swap contracts with a counterparty that is usually a high-quality commercial bank. In essence, FREIT agrees to pay its counterparties a fixed rate of interest on a dollar amount of notional principal (which corresponds to FREIT’s mortgage debt) over a term equal to the term of the mortgage notes. FREIT’s counterparties, in return, agree to pay FREIT a short-term rate of interest - generally LIBOR - on that same notional amount over the same term as the mortgage notes.
FREIT has variable interest rate ~~mortgages securing~~loans secured by its Damascus Centre, Regency, Preakness Shopping Center and Station Place properties. To reduce interest rate fluctuations, FREIT entered into interest rate swap contracts for each of these loans. These interest rate swap contracts effectively converted variable interest rate payments to fixed interest rate payments. The contracts were based on a notional amount of approximately $22,320,000 ($~~19,782,000~~19,652,000 at ~~January 31,~~April 30, 2019) for the Damascus Centre swaps, a notional amount of approximately $16,200,000 ($~~15,839,000~~15,755,000 at ~~January 31,~~April 30, 2019) for the Regency swap, a notional amount of approximately $25,800,000 ($~~24,318,000~~24,143,000 at ~~January 31,~~April 30, 2019) for the Preakness Shopping Center swap and a notional amount of approximately $12,350,000 ($12,350,000 at ~~January 31,~~April 30, 2019) for the Station Place swap.
Interest rate cap contract: To limit exposure on interest rate volatility, FREIT uses an interest rate cap contract to cap a floating interest rate at a set pre-determined rate. FREIT enters into cap contracts with a counterparty that is usually a high-quality commercial bank. In essence, so long as the floating interest rate is below the cap rate, FREIT agrees to pay its counterparties a variable rate of interest on a dollar amount of notional principal (which corresponds to FREIT’s mortgage debt). Once the floating interest rate rises above the cap rate, FREIT’s counterparties, in return, agree to pay FREIT a short-term rate of interest above the cap on that same notional amount.
FREIT has a variable interest rate loan ~~securing~~secured by its Rotunda property. As part of the refinancing of Grande Rotunda, LLC’s construction loan held by Wells Fargo with a new loan from Aareal Capital Corporation, Grande Rotunda, LLC purchased an interest rate cap on LIBOR for the full amount that can be drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan. The cap contract was based on a notional amount of approximately $121,900,000 ($121,900,000 at ~~January 31,~~April 30, 2019) and a term of two years with the loan being hedged against having a balance of approximately $118,520,000 and a term of three years.
Current GAAP requires FREIT to mark-to-market its interest rate swap and cap contracts. As the floating interest rate varies from time-to-time over the term of the contract, the value of the contract will change upward or downward. If the floating rate is higher than the fixed rate, the value of the contract goes up and there is a gain and an asset. If the floating rate is less than the fixed rate, there is a loss and a liability. The interest rate swaps are accounted for as effective cash flow hedges with the corresponding gains or losses on these contracts not affecting FREIT’s income statement; changes in the fair value of these cash flow hedges will be reported in other comprehensive income and appear in the equity section of the balance sheet. The interest rate cap is, for accounting purposes, deemed to be accounted for as an ineffective cash flow hedge with a corresponding gain or loss being recorded in FREIT’s income statement. This gain or loss represents the economic consequence of liquidating fixed rate swaps or the cap contract and replacing them with like-duration funding at current market rates, something we would likely never do. Periodic cash settlements of these contracts will be accounted for as an adjustment to interest expense.
~~Index~~ ~~Page 25~~
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FREIT has the following derivative-related risks with its swap and cap contracts (“contract”): 1) early termination risk, and 2) counterparty credit risk.
Early Termination Risk: If FREIT wants to terminate its contract before maturity, it would be bought out or terminated at market value; i.e., the difference in the present value of the anticipated net cash flows from each of the contract’s parties. If current variable interest rates are significantly below FREIT’s fixed interest rate payments, this could be costly. Conversely, if interest rates rise above FREIT’s fixed interest payments and FREIT elected early termination, FREIT would realize a gain on termination. At ~~January 31,~~April 30, 2019, the interest rate cap contract for the Rotunda property and the swap contracts for the Damascus Centre and Preakness Shopping Center properties were in FREIT’s favor. If FREIT had terminated these contracts at that date it would have realized gains of approximately ~~$1,569,000~~$1,241,000 for the Preakness Shopping Center swap, ~~$502,000~~$329,000 for the Damascus Centre swaps and ~~$5,000~~$1,000 for the Rotunda cap, all of which have been included as an asset in FREIT’s condensed consolidated balance sheet as at ~~January 31,~~April 30, 2019. At ~~January 31,~~April 30, 2019, the swap contracts for the Regency and Station Place were in the counterparties’ favor. If FREIT had terminated these contracts at that date, it would have realized losses of approximately ~~$86,000~~$244,000 for the Regency swap and ~~$74,000~~$237,000 for the Station Place swap, all of which have been included as a liability in FREIT’s condensed consolidated balance sheet as at ~~January 31,~~April 30, 2019.
The change in the fair value for the interest rate swap contracts (gain or loss) during such period has been included in comprehensive income and for the six and three months ended ~~January 31,~~April 30, 2019, FREIT recorded an unrealized loss of ~~$2,364,000~~$3,185,000 and $821,000, respectively, in comprehensive income. The change in the fair value of the Rotunda interest rate cap contract (gain or loss) during such period has been included in the condensed consolidated statement of income and for the six and three months ended ~~January 31,~~April 30, 2019, FREIT recorded an unrealized loss of approximately ~~$154,000.~~$159,000 and $5,000, respectively. For the six and three months ended ~~January 31,~~April 30, 2018, FREIT recorded an unrealized gain of ~~$1,631,000~~$2,538,000 and $907,000, respectively, in comprehensive income representing the change in fair value of the swaps during such period. For the year ended October 31, 2018, FREIT recorded an unrealized gain of $3,113,000 in comprehensive income representing the change in fair value of the swaps during such period with a corresponding asset of approximately $2,452,000 for the Preakness Shopping Center swap, $955,000 for the Damascus Center swaps, $408,000 for the Regency swap and $460,000 for the Station Place swap as of October 31, 2018. For the year ended October 31, 2018, FREIT recorded an unrealized gain of $72,000 in the condensed consolidated statement of income representing the change in the fair value of the Rotunda interest rate cap contract during such period with a corresponding asset of approximately $159,000 as of October 31, 2018.
Counterparty Credit Risk: Each party to a cap or swap contract bears the risk that its counterparty will default on its obligation to make a periodic payment. FREIT reduces this risk by entering into swap or cap contracts only with major financial institutions that are experienced market makers in the derivatives market.
Dividend: After careful consideration of FREIT’s projected operating results and cash needs, the Board of Trustees declared a ~~first~~second quarter dividend of ~~$0.05~~$0.125 per share. Additionally, the Board of Trustees declared a one-time special dividend in connection with and in anticipation of the closing of the sale of the Patchogue property of $0.10 per share. The total dividend of $0.15 per share, which will be paid on ~~March 15,~~June 14, 2019 to shareholders of record on ~~March~~June 1, 2019. The Board will continue to evaluate the dividend on a quarterly basis.

STOCK OPTION PLAN
On April 5, 2018, FREIT shareholders approved an amendment to FREIT’s Equity Incentive Plan (the “Plan”) reserving an additional 300,000 shares for issuance under the Plan. As of ~~October 31, 2018, 447,060~~April 30, 2019, 442,060 shares are available for issuance under the ~~Plan after giving effect to the amendment.~~Plan.
On May 3, 2018, the Board approved the grant of ~~a total~~an aggregate of 38,000 non-qualified share options under the ~~Equity Incentive~~ Plan to two members of the Board who were appointed to the Board during Fiscal 2018. The options have an exercise price of $15.50 per share, will vest in equal annual installments over a 5-year period, and will expire 10 years from the date of grant, which will be May 2, 2028.

On March 4, 2019, the Board approved the grant of an aggregate of 5,000 non-qualified share options under the Plan to the Chairman of the Board. The options have an exercise price of $15.00 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be March 3, 2029.
~~Index~~ ~~Page 26~~
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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 sources or distributions from equity/debt 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 that 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.~~apartments and lease termination fees paid to buyout a lease. 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 Three Months Ended January 31,
2019 2018
(In Thousands, Except Per Share)
Funds From Operations ("FFO") (a)
Net income (loss) $ 435 $ (920 )
Depreciation of consolidated properties 2,824 2,711
Amortization of deferred leasing costs 127 145
Distributions to minority interests (294 ) (60 )(b)
FFO $ 3,092 $ 1,876

   Per Share - Basic and Diluted $ 0.45 $ 0.27

(a) As prescribed by NAREIT.
(b) FFO excludes the distribution of proceeds to minority interest in the amount of approximately $6 million related to the refinancing of the loan for Pierre Towers, LLC, owned by S And A Commercial Associates Limited Partnership which is a consolidated subsidiary. See Note 7 to the condensed consolidated financial statements for further details.

Adjusted Funds From Operations ("AFFO")
FFO $ 3,092 $ 1,876
Deferred rents (Straight lining) (67 ) (98 )
Capital Improvements - Apartments (124 ) (111 )
AFFO $ 2,901 $ 1,667

  Per Share - Basic and Diluted $ 0.42 $ 0.24

Weighted Average Shares Outstanding:
Basic and Diluted 6,915 6,862
For the Six Months Ended April 30, For the Three Months Ended April 30,
2019 2018 2019 2018
(In Thousands, Except Per Share) (In Thousands, Except Per Share)
Funds From Operations (“FFO”) (a)
Net income $ 1,265 $ 507 $ 830 $ 1,427
Depreciation of consolidated properties 5,607 5,512 2,783 2,801
Amortization of deferred leasing costs 260 300 133 155
Distributions to minority interests (686 ) (340 )(b) (392 ) (280 )
Gain on sale of property (836 ) - (836 ) -
FFO $ 5,610 $ 5,979 $ 2,518 $ 4,103

Per Share - Basic and Diluted $ 0.81 $ 0.87 $ 0.36 $ 0.60

(a) As prescribed by NAREIT.
(b) FFO excludes the distribution of proceeds to minority interest in the amount of approximately $6 million related to the refinancing of the loan for Pierre Towers, LLC, owned by S And A Commercial Associates Limited Partnership which is a consolidated subsidiary. See Note 8 to the condensed consolidated financial statements for further details.
Adjusted Funds From Operations (“AFFO”)
FFO $ 5,610 $ 5,979 $ 2,518 $ 4,103
Deferred rents (Straight lining) (187 ) (173 ) (120 ) (75 )
Capital Improvements - Apartments (285 ) (238 ) (161 ) (127 )
AFFO $ 5,138 $ 5,568 $ 2,237 $ 3,901

Per Share - Basic and Diluted $ 0.74 $ 0.81 $ 0.32 $ 0.57

Weighted Average Shares Outstanding:
Basic and Diluted 6,923 6,869 6,932 6,876

FFO and AFFO do not represent cash generated from operating activities in accordance with GAAP, 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.

INFLATION
Inflation can impact the financial performance of FREIT in various ways. FREIT’s commercial tenant leases normally provide that the tenants bear all or a portion of most operating expenses, which can reduce the impact of inflationary increases on FREIT. Apartment leases are normally for a one-year term, which may allow FREIT to seek increased rents as leases renew or when new tenants are obtained, subject to prevailing market conditions.
~~Index~~ ~~Page 27~~
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Item 3: Quantitative and Qualitative Disclosures About Market Risk
See “Commercial Segment”, “Residential Segment” and “Liquidity and Capital Resources” under Item 2 above for a detailed discussion of FREIT’s quantitative and qualitative market risk disclosures.

Item 4: Controls and Procedures
At the end of the period covered by this report, we carried out an evaluation of the effectiveness of the design and operation of FREIT’s disclosure controls and procedures. This evaluation was carried out under the supervision and with participation of FREIT’s management, including FREIT’s Chief Executive Officer and Chief Financial Officer, who concluded that FREIT’s disclosure controls and procedures are effective as of ~~January 31,~~April 30, 2019. There has been no change in FREIT’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, FREIT’s internal control over financial reporting.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in FREIT’s reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in FREIT’s reports filed under the Exchange Act is accumulated and communicated to management, including FREIT’s Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

Part II: Other Information

Item 1: Legal Proceedings
None.

Item 1A: Risk Factors
There were no material changes in any risk factors previously disclosed in FREIT’s Annual Report on Form 10-K for the year ended October 31, 2018, that was filed with the Securities and Exchange Commission on January 11, 2019.
~~Index~~ ~~Page 28~~
Page 32
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Item 6: Exhibits
Exhibit Index

Exhibit 31.1 - Section 302 Certification of Chief Executive Officer
Exhibit 31.2 - Section 302 Certification of Chief Financial Officer
Exhibit 32.1 - Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
Exhibit 32.2 - Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

Exhibit 101 - The following materials from FREIT’s quarterly report on Form 10-Q for the period ended ~~January 31,~~April 30, 2019, are formatted in Extensible Business Reporting Language (“XBRL”): (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of income; (iii) condensed consolidated statements of comprehensive income; (iv) condensed consolidated statements of equity; (v) condensed consolidated statements of cash flows; and (vi) notes to condensed consolidated financial statements.

SIGNATURES

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

FIRST REAL ESTATE INVESTMENT
TRUST OF NEW JERSEY
(Registrant)

Date: ~~March 11,~~June 7, 2019
/s/ Robert S. Hekemian, Jr.
(Signature)
Robert S. Hekemian, Jr.
President and Chief Executive Officer
(Principal Executive Officer)

/s/ Allan Tubin
(Signature)
Allan Tubin
Chief Financial Officer and Treasurer
(Principal Financial/Accounting Officer)

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from __________________ to ____________________

	Common Equity																					Common Equity
	Shares of Beneficial Interest			Treasury Shares at Cost			Dividends in Excess of Net Income			Accumulated Other Comprehensive Income			Total Common Equity			Noncontrolling Interests			Total Equity			Shares of Beneficial Interest			Treasury Shares at Cost			Dividends in Excess of Net Income			Accumulated Other Comprehensive Income			Total Common Equity			Noncontrolling Interests			Total Equity
	(In Thousands of Dollars, Except Share and Per Share Amounts)																					(In Thousands of Dollars, Except Share and Per Share Amounts)

Balance at October 31, 2018	$	28,288		$	(4,941	)	$	(4,376	)	$	2,517		$	21,488		$	2,856		$	24,344		$	28,288		$	(4,941	)	$	(4,376	)	$	2,517		$	21,488		$	2,856		$	24,344

Stock based compensation expense		34												34						34			34												34						34

Vested share units granted to Trustees and consultant		254												254						254			254												254						254

Vested share units issued to consultant*		(20	)		20									—						—			(20	)		20									-						-

Distributions to noncontrolling interests														—			(294	)		(294	)														-			(294	)		(294	)

Net income (loss)								459						459			(24	)		435									459						459			(24	)		435

Dividends declared, including $26 payable in share units ($0.15 per share)								(1,040	)					(1,040	)					(1,040	)								(1,040	)					(1,040	)					(1,040	)

Net unrealized loss on interest rate swaps											(1,698	)		(1,698	)		(666	)		(2,364	)											(1,698	)		(1,698	)		(666	)		(2,364	)

Balance at January 31, 2019	$	28,556		$	(4,921	)	$	(4,957	)	$	819		$	19,497		$	1,872		$	21,369			28,556			(4,921	)		(4,957	)		819			19,497			1,872			21,369

Stock based compensation expense																							35												35						35

Vested share units granted to Trustees and consultant																							294												294						294

Vested share units issued to consultant and retired Trustees*																							(554	)		554									-						-

Distributions to noncontrolling interests																																			-			(392	)		(392	)

Net income																													786						786			44			830

Dividends declared, including $20 payable in share units ($0.125 per share)																													(867	)					(867	)					(867	)

Net unrealized loss on interest rate swaps																																(573	)		(573	)		(248	)		(821	)

Balance at April 30, 2019																						$	28,331		$	(4,367	)	$	(5,038	)	$	246		$	19,172		$	1,276		$	20,448

		Three Months Ended							Six Months Ended
		January 31,							April 30,
		2019			2018				2019			2018
		(In Thousands of Dollars)							(In Thousands of Dollars)
Operating activities:
Net income (loss)		$	435		$	(920	)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Net income									$	1,265		$	507
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			2,824			2,711				5,607			5,512
Amortization			422			295				851			766
Unrealized loss on interest rate cap contract			154			—
Unrealized loss (gain) on interest rate cap contract										159			(19	)
Stock based compensation expense			34			31				69			61
Trustee fees, consultant fee and related interest paid in stock units			228			201				502			427
Gain on sale of property										(836	)		-
Deferred rents - straight line rent			(67	)		(98	)			(187	)		(173	)
Bad debt expense			56			130				68			170
Changes in operating assets and liabilities:
Tenants' security deposits			71			173
Tenants’ security accounts										112			158
Accounts receivable, prepaid expenses and other assets			725			(1,086	)			1,421			695
Accounts payable, accrued expenses and deferred
trustee compensation			(24	)		150
Accounts payable, accrued expenses and deferred trustee compensation										(744	)		(1,165	)
Deferred revenue			(265	)		(44	)			(203	)		(208	)
Net cash provided by operating activities			4,593			1,543				8,084			6,731
Investing activities:
Capital improvements - existing properties			(805	)		(1,153	)			(1,543	)		(3,186	)
Proceeds from sale of commercial property, net										7,060			-
Acquisition of Station Place			—			(19,542	)			-			(19,542	)
Net cash used in investing activities			(805	)		(20,695	)
Net cash provided by (used in) investing activities										5,517			(22,728	)
Financing activities:
Repayment of mortgages			(1,087	)		(30,172	)
Proceeds from mortgage loan refinancing			—			48,000
Repayment of mortgages and construction loan										(7,378	)		(146,561	)
Proceeds from mortgage loan refinancings										-			166,520
Proceeds from acquisition mortgage loan			—			12,350				-			12,350
Refinancing good faith deposit refund			—			960
Advanced funding for construction loan reserve			—			506
Repayment of credit line										-			(3,121	)
Interest rate cap contract cost										-			(89	)
Deferred financing costs			—			(811	)			(56	)		(2,670	)
Dividends paid			(338	)		—				(1,351	)		-
Due to affiliate			71			54				143			112
Distributions to noncontrolling interests			(294	)		(6,084	)			(686	)		(6,365	)
Net cash (used in) provided by financing activities			(1,648	)		24,803				(9,328	)		20,176
Net increase in cash, cash equivalents and restricted cash			2,140			5,651				4,273			4,179
Cash, cash equivalents and restricted cash, beginning of period			26,394			21,838				26,394			21,838
Cash, cash equivalents and restricted cash, end of period		$	28,534		$	27,489			$	30,667		$	26,017

Supplemental disclosure of cash flow data:
Interest paid, net of amounts capitalized		$	4,176		$	4,816			$	8,175		$	8,770

Supplemental schedule of non cash activities:
Investing activities:
Accrued capital expenditures, construction costs, pre-development costs and interest		$	172		$	292			$	155		$	285

Financing activities:
Dividends declared but not paid		$	1,014		$	—			$	848		$	337
Dividends paid in share units		$	26		$	—			$	46		$	7

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheet:	The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheet:							The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheet:

Cash and cash equivalents		$	23,633		$	21,717			$	25,291		$	18,902
Tenants' security accounts			2,212			2,141
Tenants’ security accounts										2,236			2,161
Mortgage escrows			2,689			3,631				3,140			4,954
Total cash, cash equivalents and restricted cash		$	28,534		$	27,489			$	30,667		$	26,017

($ in Millions)	January 31, 2019		October 31, 2018		April 30, 2019	October 31, 2018

Fair Value	$	342.2	$	338.3	$337.1	$338.3

Carrying Value	$	346.2	$	347.0	$340.2	$347.0

	No. of Options			Weighted Average		No. of Options			Weighted Average
	Outstanding			Exercise Price		Outstanding			Exercise Price
Options outstanding beginning of period		305,780		$	18.40		305,780		$	18.40
Options granted during period		—			—		5,000			15.00
Options forfeited/cancelled during period		(40	)		18.45		(40	)		18.45
Options outstanding end of period		305,740		$	18.40		310,740		$	18.35
Options vested and expected to vest		299,140					303,990
Options exercisable at end of period		200,260					211,260

	Commercial									Residential									Combined				Commercial														Residential												Combined
	Three Months Ended									Three Months Ended									Three Months Ended				Six Months Ended														Six Months Ended												Six Months Ended
	January 31,				Increase (Decrease)					January 31,				Increase (Decrease)					January 31,				April 30,								Increase (Decrease)						April 30,						Increase (Decrease)						April 30,
	2019		2018		$			%		2019		2018		$			%		2019		2018		2019				2018				$			%			2019			2018			$			%			2019		2018
	(In Thousands)									(In Thousands)									(In Thousands)				(In Thousands)														(In Thousands)												(In Thousands)
Rental income	$	5,000	$	4,712	$	288			6.1%	$	8,094	$	7,580	$	514			6.8%	$	13,094	$	12,292	$	10,112			$	9,572			$	540			5.6	%	$	16,187		$	15,426		$	761			4.9	%	$	26,299	$	24,998
Reimbursements		1,623		1,557		66			4.2%		35		19		16			84.2%		1,658		1,576		2,928				2,950				(22	)		-0.7	%		67			37			30			81.1	%		2,995		2,987
Other		4		34		(30	)		-88.2%		105		194		(89	)		-45.9%		109		228		39				44				(5	)		-11.4	%		194			317			(123	)		-38.8	%		233		361
Total revenue		6,627		6,303		324			5.1%		8,234		7,793		441			5.7%		14,861		14,096		13,079				12,566				513			4.1	%		16,448			15,780			668			4.2	%		29,527		28,346
Operating expenses		2,831		3,037		(206	)		-6.8%		3,495		3,716		(221	)		-5.9%		6,326		6,753		5,651				6,001				(350	)		-5.8	%		6,896			5,867			1,029			17.5	%		12,547		11,868
Net operating income	$	3,796	$	3,266	$	530			16.2%	$	4,739	$	4,077	$	662			16.2%		8,535		7,343	$	7,428			$	6,565			$	863			13.1	%	$	9,552		$	9,913		$	(361	)		-3.6	%		16,980		16,478
Gain on sale of property																							$	836			$	-			$	836			100.0	%	$	-		$	-		$	-			0.0	%		836		-

Average Occupancy %		77.5%		75.6%					1.9%		95.2%		93.1%					2.1%						81.3	%	*		79.7	%	*					1.6	%		95.2	%		93.7	%					1.5	%

Reconciliation to condensed consolidated net income (loss)-common equity:
Deferred rents - straight lining		67			98
Investment income		71			55
Unrealized loss on interest rate cap contract		(154	)		—
General and administrative expenses		(608	)		(553	)
Depreciation		(2,824	)		(2,711	)
Financing costs		(4,652	)		(5,152	)
Net income (loss)		435			(920	)
Net loss attributable to noncontrolling interests in subsidiaries		24			563
Net income (loss) attributable to common equity	$	459		$	(357	)

RETAIL:	Number of Leases		Lease Area (Sq. Ft.)		Weighted Average Lease Rate (per Sq. Ft.)		Weighted Average Prior Lease Rate (per Sq. Ft.)		% Increase (Decrease)		Tenant Improvement Allowance (per Sq. Ft.) (a)		Lease Commissions (per Sq. Ft.) (a)

Comparable leases (b)		6		14,741	$	28.96	$	29.22		-0.9%	$	1.12	$	0.75

Non-comparable leases		1		1,130	$	27.83		N/A		N/A	$	—	$	1.39

Total leasing activity		7		15,871


OFFICE:	Number of Leases		Lease Area (Sq. Ft.)		Weighted Average Lease Rate (per Sq. Ft.)		Weighted Average Prior Lease Rate (per Sq. Ft.)		% Increase (Decrease)			Tenant Improvement Allowance (per Sq. Ft.) (a)		Lease Commissions (per Sq. Ft.) (a)

Comparable leases (b)		15		48,848	$	18.35	$	18.46		-0.6	%	$	0.34	$	0.52

Non-comparable leases		4		4,976	$	27.93		N/A		N/A		$	1.90	$	1.30

Total leasing activity		19		53,824

	(a)	These leasing costs are presented as annualized costs per square foot and are allocated uniformly over the initial lease term.
	(b)	This includes new tenant leases and/or modifications/extensions/renewals of existing tenant leases.

Fiscal Year	2019	2020	2021	2022	2023	2024	2025	2026	2028
($ in millions)
Mortgage “Balloon” Payments	$17.0 (A)	$21.9	$137.6 (B)	$14.4	$34.4	$9.0	$13.9	$18.2	$53.9

	For the Three Months Ended January 31,
	2019			2018
	(In Thousands, Except Per Share)
Funds From Operations ("FFO") (a)
Net income (loss)	$	435		$	(920	)
Depreciation of consolidated properties		2,824			2,711
Amortization of deferred leasing costs		127			145
Distributions to minority interests		(294	)		(60	)(b)
FFO	$	3,092		$	1,876

Per Share - Basic and Diluted	$	0.45		$	0.27

(a) As prescribed by NAREIT.
(b) FFO excludes the distribution of proceeds to minority interest in the amount of approximately $6 million related to the refinancing of the loan for Pierre Towers, LLC, owned by S And A Commercial Associates Limited Partnership which is a consolidated subsidiary. See Note 7 to the condensed consolidated financial statements for further details.

Adjusted Funds From Operations ("AFFO")
FFO	$	3,092		$	1,876
Deferred rents (Straight lining)		(67	)		(98	)
Capital Improvements - Apartments		(124	)		(111	)
AFFO	$	2,901		$	1,667

Per Share - Basic and Diluted	$	0.42		$	0.24

Weighted Average Shares Outstanding:
Basic and Diluted		6,915			6,862

	For the Six Months Ended April 30,						For the Three Months Ended April 30,
	2019			2018			2019			2018
	(In Thousands, Except Per Share)						(In Thousands, Except Per Share)
Funds From Operations (“FFO”) (a)
Net income	$	1,265		$	507		$	830		$	1,427
Depreciation of consolidated properties		5,607			5,512			2,783			2,801
Amortization of deferred leasing costs		260			300			133			155
Distributions to minority interests		(686	)		(340	)(b)		(392	)		(280	)
Gain on sale of property		(836	)		-			(836	)		-
FFO	$	5,610		$	5,979		$	2,518		$	4,103

Per Share - Basic and Diluted	$	0.81		$	0.87		$	0.36		$	0.60

Adjusted Funds From Operations (“AFFO”)
FFO	$	5,610		$	5,979		$	2,518		$	4,103
Deferred rents (Straight lining)		(187	)		(173	)		(120	)		(75	)
Capital Improvements - Apartments		(285	)		(238	)		(161	)		(127	)
AFFO	$	5,138		$	5,568		$	2,237		$	3,901

Per Share - Basic and Diluted	$	0.74		$	0.81		$	0.32		$	0.57

Weighted Average Shares Outstanding:
Basic and Diluted		6,923			6,869			6,932			6,876

	FIRST REAL ESTATE INVESTMENT
	TRUST OF NEW JERSEY
	(Registrant)

Date: ~~March 11,~~June 7, 2019
	/s/ Robert S. Hekemian, Jr.
	(Signature)
	Robert S. Hekemian, Jr.
	President and Chief Executive Officer
	(Principal Executive Officer)


	/s/ Allan Tubin
	(Signature)
	Allan Tubin
	Chief Financial Officer and Treasurer
	(Principal Financial/Accounting Officer)