FREVS First Real Estate Investment Trust of New Jersey

Management Discussion

• Real estate revenue for Fiscal 2019 increased 3.9% to $60,277,000 compared to $57,997,000 for Fiscal 2018. 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 residential units and retail space at the property.
• Net income attributable to common equity (“net income-common equity”) for Fiscal 2019 was $1,787,000 ($0.26 per share basic and diluted), compared to $1,483,000 ($0.21 per share basic and diluted) for Fiscal 2018.
• Adjusted net income for Fiscal 2019 was $957,000 ($0.14 per share basic and diluted) compared to $966,000 ($0.14 per share basic and diluted) for Fiscal 2018. 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 slight decrease in adjusted net income for Fiscal 2019 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 Fiscal 2018 related to Fiscal 2017 (with a consolidated impact to FREIT of approximately $0.7 million); general and administrative expense increase in the amount of approximately $1.7 million, primarily attributable to $1.4 million in Special Committee expenses related to advisory and legal fees incurred in Fiscal 2019; interest expense increase on the loan on the Rotunda property in the amount of approximately $0.6 million resulting primarily from an increase in interest rates as compared to the prior year; offset by an increase in revenue of approximately $2.3 million as explained above and Fiscal 2018 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 to the segment disclosure below for a more detailed discussion on the financial performance of FREIT’s commercial and residential segments.)