UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended January 31, ~~2021~~2022
or
☐	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, INC.
(Exact name of registrant as specified in its charter)
~~New Jersey~~Maryland	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 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)	~~Symbol(s)~~	Name of each exchange on which registered
~~Shares of beneficial interest, without~~	Common stock, par value $0.01 per share		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. Yes ☒ No ☐

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). Yes ☒ No ☐

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 ☐	Non-Accelerated Filer ☒	Smaller Reporting Company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Yes ☐ No ☒

As of March 17, ~~2021,~~2022, the number of shares of ~~beneficial interest~~common stock outstanding was ~~6,860,048.~~6,863,744.

Page 2

FIRST REAL ESTATE

INVESTMENT TRUST OF NEW JERSEY, INC.

INDEX



Part I:Financial Information	Page
Item 1:Unaudited Condensed Consolidated Financial Statements
a.)Condensed Consolidated Balance Sheets as of January 31, ~~2021~~2022 and October 31, ~~2020;~~2021;	3
b.)Condensed Consolidated Statements of ~~Operations~~Income for the Three Months Ended January 31, 2022 ~~2021~~ and ~~2020;~~2021;	4
c.)Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Three Months Ended ~~Ended~~ January 31, ~~2021~~2022 and ~~2020;~~2021;	5
d.)Condensed Consolidated Statements of Equity for the Three Months Ended January 31, ~~2021~~2022 and ~~2020;~~2021;	6-7
e.)Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 31, ~~2021~~2022 and ~~2020;~~2021;	8
f.)Notes to Condensed Consolidated Financial Statements.	9

Item 2:~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	19 20

Item 3:Quantitative and Qualitative Disclosures About Market Risk	31 32

Item 4:Controls and Procedures	31 32


Part II:Other Information

Item 1:Legal Proceedings	32 33

Item 1A:Risk Factors	33 35
~~Item 6:Exhibits~~	33
Item 6:Exhibits	35

Signatures	33 35

Index

Page 3

Part I: Financial Information

Item 1: Unaudited Condensed Consolidated Financial Statements

FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

~~January 31,~~

~~2021~~

~~October 31,~~

~~2020~~

~~(In Thousands of Dollars)~~

~~ASSETS~~

							January 31, 2022			October 31, 2021
							(In Thousands, Except Share and Per Share Amounts)
ASSETS
Real estate, at cost, net of accumulated depreciation	$	276,096		$	278,150		$	96,999		$	270,634
Construction in progress		630			566			668			665
Cash and cash equivalents		39,788			36,860			95,438			35,891
Investment in tenancy-in-common		20,074			20,101			18,902			19,383
Tenants' security accounts		1,451			1,408			1,062			1,340
Receivables arising from straight-lining of rents		3,771			3,977			762			3,747
Accounts receivable, net of allowance for doubtful accounts of $896 and
$804 as of January 31, 2021 and October 31, 2020, respectively		1,714			1,811
Secured loans receivable		5,219			5,194
Accounts receivable, net of allowance for doubtful accounts of $1,327 and $966 as of January 31, 2022 and October 31, 2021, respectively								754			1,622
Secured loans receivable (related party)								221			5,292
Funds held in post-closing escrow								9,337			0-
Prepaid expenses and other assets		4,950			4,985			3,059			5,493
Deferred charges, net		2,162			2,163			193			2,038
Interest rate swap contract								71			0-
Total Assets	$	355,855		$	355,215		$	227,466		$	346,105


LIABILITIES AND EQUITY

Liabilities:
Mortgages payable, including deferred interest of $358 and $360 as of January 31, 2021 and October 31, 2020, respectively	$	306,269		$	307,240
Mortgages payable, including deferred interest of $358 as of January 31, 2022 and October 31, 2021							$	137,774		$	301,276
Less unamortized debt issuance costs		1,589			1,810			1,283			1,400
Mortgages payable, net		304,680			305,430			136,491			299,876

Due to affiliate		5,965			5,921			0-			3,252
Deferred trustee compensation payable		2,633			2,633
Deferred director compensation payable								2,475			2,475
Accounts payable and accrued expenses		2,901			2,277			2,804			2,375
Dividends payable		342			0-			686			686
Tenants' security deposits		2,060			2,124			1,305			2,039
Deferred revenue		928			1,043			559			1,143
Interest rate cap and swap contracts		4,426			4,924			1,117			2,308
Total Liabilities		323,935			324,352			145,437			314,154

Commitments and contingencies		0-			0-


Equity:
Common equity:
Shares of beneficial interest without par value:
8,000,000 shares authorized; 6,993,152 shares issued plus 159,063 and		28,090			27,960
152,144 vested share units granted to Trustees at January 31, 2021
and October 31, 2020, respectively
Treasury stock, at cost: 136,501 shares at January 31, 2021		(2,863	)		(2,863	)
and October 31, 2020, respectively
Undistributed earnings		13,999			13,791
Common Equity:
Preferred stock with par value of $0.01 per share:
5,000,000 and 0 shares authorized and issued, respectively, at January 31, 2022 and October 31, 2021								0-			0-
Common stock with par value of $0.01 per share:
20,000,000 shares authorized at January 31, 2022 and October 31, 2021; 6,860,048 shares issued plus 178,419 and 175,923 vested share units granted to Directors at January 31, 2022 and October 31, 2021, respectively								71			71
Additional paid-in-capital								25,622			25,556
Retained earnings								58,037			12,963
Accumulated other comprehensive loss		(3,599	)		(3,986	)		(1,089	)		(2,017	)
Total Common Equity		35,627			34,902			82,641			36,573
Noncontrolling interests in subsidiaries		(3,707	)		(4,039	)		(612	)		(4,622	)
Total Equity		31,920			30,863			82,029			31,951
Total Liabilities and Equity	$	355,855		$	355,215		$	227,466		$	346,105


	Three Months Ended January 31,						Three Months Ended January 31,
	2021			2020			2022			2021
	(In Thousands of Dollars, Except Per Share Amounts)						(In Thousands Except Per Share Amounts)
Revenue:
Rental income	$	10,850		$	13,363		$	9,763		$	10,850
Reimbursements		1,544			1,916			757			1,544
Sundry income		360			314			129			360
Total revenue		12,754			15,593			10,649			12,754

Expenses:
Operating expenses		4,108			4,015			4,293			4,108
Special committee third party advisory, legal and other expenses		0-			3,382
Management fees		526			715			497			526
Real estate taxes		1,917			2,407			1,863			1,917
Depreciation		2,295			2,932			1,820			2,295
Total expenses		8,846			13,451			8,473			8,846

Operating income		3,908			2,142			2,176			3,908

Investment income		30			72			26			30
Loss on investment in tenancy-in-common		(27	)		0-			(124	)		(27	)
Net gain on sale of Maryland properties								70,003			0-
Interest expense including amortization of deferred financing costs		(3,132	)		(4,235	)		(2,928	)		(3,132	)
Net income (loss)		779			(2,021	)
Net income								69,153			779

Net income attributable to noncontrolling
interests in subsidiaries		(221	)		(241	)
Net income (loss) attributable to common equity	$	558		$	(2,262	)
Net income attributable to noncontrolling interests in subsidiaries								(23,376	)		(221	)
Net income attributable to common equity							$	45,777		$	558

Earnings (Loss) per share:
Basic and diluted	$	0.08		$	(0.32	)
Earnings per share:
Basic							$	6.51		$	0.08
Diluted							$	6.45		$	0.08

Weighted average shares outstanding:
Basic and diluted		7,009			6,979
Basic								7,036			7,009
Diluted								7,099			7,009

Three Months Ended January 31,
2021
2020
(In Thousands of Dollars)

Net income (loss)
$
779
$
(2,021
)

Other comprehensive income (loss):
Unrealized gain (loss) on interest rate cap and swap contracts before
reclassifications
189
(420
)
Amount reclassified from accumulated other comprehensive income (loss)
to interest expense
309
30
Net unrealized gain (loss) on interest rate cap and swap contracts
498
(390
)
Comprehensive income (loss)
1,277
(2,411
)

Net income attributable to noncontrolling interests in subsidiaries
(221
)
(241
)
Other comprehensive income:
Unrealized (gain) loss on interest rate cap and swap contracts attributable
to noncontrolling interests in subsidiaries
(111
)
129
Comprehensive income attributable to noncontrolling interests in subsidiaries
(332
)
(112
)

Comprehensive income (loss) attributable to common equity
$
945
$
(2,523
)

	Three Months Ended January 31,
	2022			2021
	(In Thousands of Dollars)

Net income	$	69,153		$	779

Other comprehensive income:
Unrealized gain on interest rate cap and swap contracts before reclassifications		756			189
Amount reclassified from accumulated other comprehensive loss to interest expense		506			309
Net unrealized gain on interest rate cap and swap contracts		1,262			498
Comprehensive income		70,415			1,277

Net income attributable to noncontrolling interests in subsidiaries		(23,376	)		(221	)
Other comprehensive income:
Unrealized gain on interest rate cap and swap contracts attributable to noncontrolling interests in subsidiaries		(334	)		(111	)
Comprehensive income attributable to noncontrolling interests in subsidiaries		(23,710	)		(332	)

Comprehensive income attributable to common equity	$	46,705		$	945

Common Equity
Shares of Beneficial Interest
Treasury Shares at Cost
Undistributed Earnings
Accumulated Other Comprehensive Loss
Total Common Equity
Noncontrolling Interests
Total Equity
(In Thousands of Dollars, Except Share and Per Share Amounts)

Balance at October 31, 2020
$
27,960
$
(2,863
)
$
13,791
$
(3,986
)
$
34,902
$
(4,039
)
$
30,863

Stock based compensation expense
12
12
12

Vested share units granted to Trustees
118
118
118

Net income
558
558
221
779

Dividends declared, including $8 payable in share units ($0.05 per share)
(350
)
(350
)
(350
)

Net unrealized gain on interest rate cap and swap contracts
387
387
111
498

Balance at January 31, 2021
$
28,090
$
(2,863
)
$
13,999
$
(3,599
)
$
35,627
$
(3,707
)
$
31,920

	Common Equity
	Common Stock				Additional Paid-In-		Retained			Accumulated Other Comprehensive			Total Common			Noncontrolling Interests in			Total
	Shares		Amount		Capital		Earnings			(Loss) Income			Equity			Subsidiaries			Equity
	(In Thousands of Dollars, Except Per Share Amounts))

Balance at October 31, 2021		7,036	$	71	$	25,556	$	12,963		$	(2,017	)	$	36,573		$	(4,622	)	$	31,951

Stock based compensation expense						5								5						5

Vested share units granted to Directors, including $17 in dividends declared payable in share units ($0.10 per share)		2				61								61						61

Distributions to noncontrolling interests in subsidiaries														-			(19,700	)		(19,700	)

Net income								45,777						45,777			23,376			69,153

Dividends declared, including $17 payable in share units ($0.10 per share)								(703	)					(703	)					(703	)

Net unrealized gain on interest rate swap contracts											928			928			334			1,262

Balance at January 31, 2022		7,038	$	71	$	25,622	$	58,037		$	(1,089	)	$	82,641		$	(612	)	$	82,029

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

Balance at October 31, 2019
$
28,847
$
(4,330
)
$
(6,762
)
$
(2,040
)
$
15,715
$
333
$
16,048

Stock based compensation expense
12
12
12

Vested share units granted to Trustees and consultant
211
211
211

Vested share units issued to consultant and retired Trustee*
(1,401
)
1,401
0—
0—

Distributions to noncontrolling interests
0—
(583
)
(583
)

Net (loss) income
(2,262
)
(2,262
)
241
(2,021
)

Net unrealized loss on interest rate cap and swap contracts
(261
)
(261
)
(129
)
(390
)

Balance at January 31, 2020
$
27,669
$
(2,929
)
$
(9,024
)
$
(2,301
)
$
13,415
$
(138
)
$
13,277

	Common Equity
	Beneficial Interest				Treasury Shares at Cost								Accumulated Other			Total			Noncontrolling
	Shares		Amount		Shares		Amount			Retained Earnings			Comprehensive (Loss) Income			Common Equity			Interests in Subsidiaries			Total Equity
	(In Thousands of Dollars, Except Per Share Amounts)

Balance at October 31, 2020		7,145	$	27,960		137	$	(2,863	)	$	13,791		$	(3,986	)	$	34,902		$	(4,039	)	$	30,863

Stock based compensation expense				12													12						12

Vested share units granted to Directors, including $8 in dividends declared payable in share units ($0.05 per share)		7		118													118						118

Net income											558						558			221			779

Dividends declared, including $8 payable in share units ($0.05 per share)											(350	)					(350	)					(350	)

Net unrealized gain on interest rate cap and swap contracts														387			387			111			498

Balance at January 31, 2021		7,152	$	28,090		137	$	(2,863	)	$	13,999		$	(3,599	)	$	35,627		$	(3,707	)	$	31,920

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

								Three Months Ended
								January 31,
								2022			2021
								(In Thousands of Dollars)
Operating activities:
Net income (loss_	$	779		$	(2,021	)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Net income								$	69,153		$	779
Adjustments to reconcile net income to net cash provided by operating activities:
Net gain on sale of Maryland properties									(70,003	)		0-
Depreciation		2,295			2,932				1,820			2,295
Amortization		404			392				434			404
Stock based compensation expense		12			12				5			12
Trustee fees, consultant fee and related interest paid in stock units		110			211
Director fees and related interest paid in stock units									44			110
Loss on investment in tenancy-in-common		27			0-				124			27
Deferred rents - straight line rent		206			(63	)			10			206
Deferred real estate tax appeal fees									35			0-
Bad debt expense		171			133				408			171
Changes in operating assets and liabilities:
Tenants' security accounts		(46	)		(106	)			(734	)		(46	)
Accounts receivable, prepaid expenses and other assets		483			903				2,139			548
Accounts payable, accrued expenses and deferred
trustee compensation payable		728			(4,510	)
Accounts payable, accrued expenses and deferred director compensation payable									91			728
Deferred revenue		(115	)		(186	)			(584	)		(115	)
Due to affiliate - accrued interest		44			66				(47	)		44
Deferred interest on mortgages		(2	)		0-				0-			(2	)
Net cash provided by (used in) operating activities		5,096			(2,237	)
Net cash provided by operating activities									2,895			5,161
Investing activities:
Proceeds from sale of Maryland properties, net									247,412			0-
Proceeds from payment of secured loans receivable inclusive of accrued interest									5,094			0-
Capital improvements - existing properties		(409	)		(345	)			(485	)		(409	)
Net cash used in investing activities		(409	)		(345	)
Deferred leasing costs									(60	)		(65	)
Distribution from investment in tenancy-in-common									357			0-
Net cash provided by (used in) investing activities									252,318			(474	)
Financing activities:
Repayment of mortgages		(969	)		(1,038	)			(171,002	)		(969	)
Proceeds from mortgage loan refinancing									7,500			0-
Deferred financing costs		(73	)		0-				(246	)		(73	)
Due to affiliate - loan repayment									(3,205	)		0-
Dividends paid		0-			(1,357	)			(686	)		0-
Distributions to noncontrolling interests in subsidiaries		0-			(583	)			(19,700	)		0-
Net cash used in financing activities		(1,042	)		(2,978	)			(187,339	)		(1,042	)
Net increase (decrease) in cash, cash equivalents and restricted cash		3,645			(5,560	)
Net increase in cash, cash equivalents and restricted cash									67,874			3,645
Cash, cash equivalents and restricted cash, beginning of period		39,517			42,488				39,045			39,517
Cash, cash equivalents and restricted cash, end of period	$	43,162		$	36,928			$	106,919		$	43,162

Supplemental disclosure of cash flow data:
Interest paid	$	2,472		$	3,843			$	2,525		$	2,472

Supplemental schedule of non cash activities:
Operating activities:
Commercial tenant security deposits applied to accounts receivable	$	18		$	0-			$	0-		$	18

Investing activities:
Accrued capital expenditures, construction costs, pre-development costs and interest	$	75		$	273

Accrued transactional costs for sales of Maryland properties								$	407		$	0-
Accrued capital expenditures, construction costs and pre-development costs								$	58		$	75
Financing activities:
Dividends declared but not paid	$	342		$	0—			$	686		$	342
Dividends paid in share units	$	8		$	0—			$	17		$	8
Vested share units issued to consultant and retired trustee	$	0-		$	1,401

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

Cash and cash equivalents	$	39,788		$	31,904			$	95,438		$	39,788
Tenants' security accounts		1,451			2,148				1,062			1,451
Funds held in post-closing escrow									9,337			0-
Mortgage escrows (included in prepaid expenses and other assets)		1,923			2,876				1,082			1,923
Total cash, cash equivalents and restricted cash	$	43,162		$	36,928			$	106,919		$	43,162

First Real Estate Investment Trust of New Jersey (“FREIT”) was organized on November 1, 1961 as a New Jersey Business Trust. On July 1, 2021, FREIT completed the change of its form of organization from a New Jersey real estate investment trust to a Maryland corporation (the “Reincorporation”) which was approved by its stockholders at the annual meeting of stockholders held on May 6, 2021. The Reincorporation changed the law applicable to FREIT’s affairs from New Jersey law to Maryland law and was accomplished by the merger of FREIT with and into its wholly owned subsidiary, First Real Estate Investment Trust of New Jersey, Inc. (“FREIT Maryland”, “Trust”, “us”, “we”, “our” or the “Company”), a Maryland corporation. As a result of the Reincorporation, the separate existence of FREIT ceased and FREIT Maryland succeeded to all the business, properties, assets and liabilities of FREIT. Holders of shares of beneficial interest in FREIT received one newly issued share of common stock of FREIT Maryland for each share of FREIT that they own, without any action of stockholders required and all treasury stock held by FREIT was retired.

FREIT Maryland is organized and will continue to operate in such a manner as to qualify for taxation as a REIT under the Internal Revenue Code of 1986, as amended, and its stock is traded on the over-the counter market under the trading symbol FREVS.

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 three-month period ended January 31, ~~2021~~2022 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, ~~2020~~2021 of ~~First Real Estate Investment Trust of New Jersey (“FREIT”, “Trust”, “us”, “we”, “our” or~~FREIT Maryland.

Certain prior year cash flow line items have been reclassified to conform to the ~~“Company”).~~current year presentation.

In ~~June 2016,~~March 2020 and January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. ~~2016-13~~ 2020-04 “"Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial ~~Instruments – Credit Losses (Topic 326)"~~Reporting”, and ASU 2021-01 “Reference Rate Reform (ASC 848): Scope” which ~~amends~~provides temporary optional guidance to ease the potential burden in accounting for reference rate reform in contracts and other transactions that reference the London Interbank Offered Rate or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. ASU 2020-04 and ASU 2021-01 are effective for all entities as of March 12, 2020 through December 31, 2022. We currently do not anticipate the need to modify our existing debt agreements as a result of reference rate reform in the current ~~approach to estimate credit losses on certain financial assets, including trade~~year, however if any modification is executed as a result of reference rate reform, the Company will elect the optional expedient available under ASU 2020-04 and ~~other receivables, available-for-sale securities, and other financial instruments. Generally, this amendment requires~~ASU 2021-01, which allows entities to ~~establish a valuation allowance~~account for the ~~expected lifetime losses~~modification as if the modification was not substantial. We will disclose the nature of ~~these certain~~and reason for electing the optional expedient in each interim and annual financial ~~assets. Subsequent changes in the valuation allowance are recorded in current earnings~~statement period if 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~~applicable through December ~~15,~~31, 2022. ~~In November 2018, the FASB issued ASU 2018-19~~ ~~“Codification Improvements to Topic 326, Financial Instruments—Credit Losses”~~, which clarifies that operating lease receivables are outside the scope of the new standard. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, ~~“Leases (Topic 842)”. 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 FREIT Maryland Board of Directors (“Board”) declared a dividend of $0.10 per share in the first quarter which was paid on March 15, 2022 to stockholders of record on March 1, 2022. The Board will continue to evaluate the dividend on a quarterly basis.

Basic earnings ~~(loss)~~ 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 ~~14 to FREIT’s condensed consolidated financial statements)~~14) 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~~FREIT Maryland’s stock at the average market price during the period, thereby increasing the number of shares to be added in computing diluted earnings per share. For the three months ended January 31, 2022, the outstanding stock options increased the average dilutive shares outstanding by approximately 63,000 shares with an impact of approximately $0.06 on earnings per share. For the three months ended January 31, 2021, ~~and 2020,~~ the outstanding stock options were anti-dilutive with no impact on earnings ~~(loss)~~ per share. There were approximately ~~311,000~~0 and 311,000, ~~respectively,~~ anti-dilutive shares for the three months ended January 31, 2022 and 2021, ~~and 2020.~~respectively. Anti-dilutive shares consist of out-of-the money stock options under the Equity Incentive ~~Plan.~~Plan (See Note 13).

In accordance with ““Accounting Standards Codification Topic 815, Derivatives and Hedging ("ASC 815")”, FREIT isMaryland has been accounting for the Damascus Centre, LLC ("(“Damascus ~~Centre"~~Centre”), FREIT Regency, LLC ~~("Regency"~~(“Regency”), Wayne PSC, LLC ("(“Wayne ~~PSC"~~PSC”) and Station Place on Monmouth ~~LLC ("~~(“Station ~~Place"~~Place”) interest rate swaps and the Grande Rotunda, LLC ("(“Grande ~~Rotunda"~~Rotunda”) interest rate cap as 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 and cap in comprehensive income. On December 30, 2021, the Rotunda property owned by Grande Rotunda was sold, a portion of the proceeds from the sale was used to pay off the $116.5 million then outstanding balance of this loan and the corresponding interest rate cap on this loan matured with no settlement due at maturity. On January 10, 2022, the property owned by Damascus Centre was sold and a portion of the proceeds from the sale was used to pay off the $18.2 million then outstanding balance of this loan and the corresponding swap breakage fees of approximately $213,000 related to the early termination of the interest rate swap contracts on this loan which was included as interest expense on the accompanying condensed consolidated statement of income for the three months ended January 31, 2022. (See Note 7 for further details on the sales of these properties.)

For the three months ended January 31, 2022 and 2021, ~~and 2020,~~ FREIT Maryland recorded an unrealized gain of approximately ~~$498,000~~$1,262,000 and ~~unrealized loss of approximately $390,000,~~$498,000, respectively, in the condensed consolidated statements of comprehensive income ~~(loss)~~ representing the change in the fair value of these cash flow hedges during such ~~period.~~periods. As of January 31, 2022, there was an asset of approximately $71,000 for the Wayne PSC swap and a liability of approximately $475,000 for the Regency swap and $642,000 for the Station Place swap. As of October 31, 2021, there was a liability of approximately ~~$551,000~~$278,000 for the Damascus Centre swaps, ~~$1,105,000~~$348,000 for the Wayne PSC swap, ~~$1,280,000~~$750,000 for the Regency swap, $1,490,000 for the Station Place swap and $0 for the Grande Rotunda interest rate cap. As of October 31, 2020, FREIT recorded a liability of approximately $610,000 for the Damascus Centre swaps, $1,260,000 for the Wayne PSC swap, $1,385,000 for the Regency swap, $1,669,000$932,000 for the Station Place swap and $0 for the Grande Rotunda interest rate cap.

The fair values are based on observable inputs (level 2 in the fair value hierarchy as provided by authoritative guidance).

On February 28, 2020, FREIT Maryland reorganized its subsidiary S and A Commercial Associates Limited Partnership (“S&A”) from a partnership into a tenancy-in-common form of ownership (“TIC”). Prior to this reorganization, FREIT Maryland owned a 65% membership interest in S&A, which owned 100% of the Pierre Towers property located in Hackensack, NJNew Jersey through its 100% interest in Pierre Towers, LLC. Accordingly, FREIT consolidated the financial statements of S&A and its subsidiary to include 100% of the subsidiary’s assets, liabilities, operations and cash flows with the interest not owned by FREIT reflected as “noncontrolling interests in subsidiary” and all significant intercompany accounts and transactions were eliminated in consolidation.

Pursuant to the TIC agreement, FREIT Maryland ultimately acquired a 65% undivided interest in the Pierre Towers property which was formerly owned by S&A. Based on the guidance of Accounting Standards Codification 810, “Consolidation”, ~~FREIT’s~~FREIT Maryland’s investment in the TIC is accounted for under the equity method of accounting. While ~~FREIT’s~~FREIT Maryland’s effective ownership percentage interest in the Pierre Towers property ~~remains~~remained unchanged after the reorganization to a TIC, FREIT Maryland no longer ~~has~~had a controlling interest as the TIC is now under joint control. ~~Since~~

FREIT retained a noncontrolling financial interest in the TIC, and the deconsolidation of the subsidiary (as of February 28, 2020) is not the result of a nonreciprocal transfer to owners, FREIT recognized a gain on deconsolidation in the second quarter of Fiscal 2020. This gain was measured at the date of deconsolidation as the difference between the fair value of the investment in the TIC at the date the entity was deconsolidated and the carrying amount of the former subsidiary’s assets and liabilities.

~~FREIT’s~~Maryland’s investment in the TIC was approximately ~~$20.1~~$18.9 million and $19.4 million at ~~both~~ January 31, ~~2021~~2022 and October 31, ~~2020. For the three months ended January 31,~~ 2021, ~~FREIT recognized~~respectively, with a loss on investment in TIC of approximately $124,000 and $27,000, in the accompanying condensed consolidated ~~statement~~statements of ~~operations.~~income for the three months ended January 31, 2022 and 2021, respectively.

Hekemian & Co., Inc. (“~~Hekemian”~~Hekemian & Co.”) ~~currently~~ manages the Pierre Towers property based on a management agreement between the owners of the TIC and Hekemian & Co. dated as of February 28, 2020 ~~which expires~~and will expire on February 28, ~~2022,~~2023. The management agreement is for a term of one year and is automatically renewed for successive periods of one year unless either party gives not less than sixty (60) days prior notice of non-renewal. The management agreement requires the payment of management fees equal to 5% of rents collected. Management fees charged to operations were approximately $98,000 and $93,000 for the three months ended January 31, ~~2021.~~2022 and 2021, respectively. The Pierre Towers property also uses the resources of the Hekemian & Co. insurance department to secure various insurance coverages for its property. Hekemian & Co. is paid a commission for these services. Such commissions were charged to operations and amounted to approximately $0 and $10,000 for the three months ended January 31, ~~2021.~~2022 and 2021, respectively.

The following table summarizes the balance sheets of the Pierre Towers property as of January 31, ~~2021~~2022 and October 31, ~~2020~~2021, accounted for by the equity method:

The following table summarizes the ~~statement~~statements of operations of the Pierre Towers property for the three months ended January 31, 2022 and 2021, accounted for by the equity method:

On January 14, 2020, FREIT Maryland and certain of its affiliates (collectively, the “Sellers”), entered into a Purchase and Sale Agreement (as subsequently amended, the “Purchase and Sale Agreement”) with Sinatra Properties LLC (the “Purchaser”), which ~~as subsequently amended, provided~~provides for the sale by the Sellers to the Purchaser of 100% of the Sellers’ ownership interests in six real properties held by the Sellers in exchange for the purchase price described therein, subject to the terms and conditions of the Purchase and Sale Agreement. On April 30, 2020, the Sellers delivered written notice to the Purchaser of the Sellers’ termination of the Purchase and Sale Agreement in accordance with its terms due to the occurrence of a “Purchaser Default” thereunder, based on the Purchaser’s failure to perform its obligations under the Purchase and Sale Agreement and close the transactions contemplated therein.

Upon the execution of the Purchase and Sale Agreement, the Purchaser delivered into escrow a deposit in the amount of $15 million (the “Deposit”), in the form of an unconditional, irrevocable letter of credit in such amount (the “Letter of Credit”). The Purchase and Sale Agreement provides that the Sellers’ exclusive remedy, in the event of a “Purchaser Default” and the termination of the Purchase and Sale Agreement, is the forfeiture of the Deposit to the Sellers as liquidated damages. Accordingly, contemporaneously with the Sellers’ delivery of the termination notice to the Purchaser, the Sellers delivered written notice to the escrow agent requesting that the escrow agent release the Letter of Credit from escrow and deliver same to the Sellers.

On May 6, 2020, the Purchaser filed a complaint (the “Complaint”) against the Sellers in the Superior Court of New Jersey, in which, among other things, the Purchaser ~~alleges~~alleged breach of contract and breach of the covenant of good faith and fair dealing against the Sellers in connection with the Sellers’ termination of the Purchase and Sale Agreement. The Purchaser ~~seeks~~sought (a) a judgment of specific performance compelling the Sellers to convey the properties under the Purchase and Sale Agreement to the Purchaser; (b) declaratory judgment from the court that (i) the Purchase and Sale Agreement iswas not terminated, (ii) the Purchaser iswas not in default under the Purchase and Sale Agreement, and (iii) the Sellers ~~are~~were in default under the Purchase and Sale Agreement, subject to a right to cure; (c) an order for injunctive relief compelling the Sellers to perform the Purchase and Sale Agreement; (d) in the event that the court ~~does~~did not order specific performance, a judgment directing that the Purchaser’s $15 million deposit under the Purchase and Sale Agreement be returned to the Purchaser, and compensatory, consequential and incidental damages in an amount to be determined at trial; and (e) attorneys’ fees and costs.

The Purchaser ~~has~~ filed lis pendens with respect to each of the six properties that were subject to the Purchase and Sale ~~Agreement. The lis pendens provides~~Agreement, providing notice to the public of the Complaint. ~~Pending~~The lis pendens have been dismissed by the ~~resolution of this litigation,~~Court pursuant to the ~~filing~~Order entered on February 4, 2022 discussed below. Accordingly, subject to the Purchaser’s possible challenge of the ~~lis pendens will adversely affect~~Court’s Order, the future sale or financing of ~~those properties.~~these properties is not affected by the lis pendens.

On June 17, 2020, the Sellers filed their answer, separate defenses, and counterclaims (the “Answer”) in response to the Complaint, in which, among other things, the Sellers (a) ~~deny~~denied the Purchaser’s claim that the Sellers’ termination of the Purchase and Sale Agreement was wrongful, and ~~assert~~asserted that there was no contractual basis in the Purchase and Sale Agreement to relieve the Purchaser from its obligation to perform thereunder, or to defer or postpone the Purchaser’s obligation to perform, (b) ~~assert~~asserted certain defenses to the allegations set forth in the Complaint without admitting any liability, and (c) ~~request~~requested relief from the Court in the form of (i) judgment in the Sellers’ favor dismissing all of the Purchaser’s claims against them with prejudice and denying all of the Purchaser’s requests for relief, (ii) reasonable attorneys’ fees and costs, and (iii) such other and further relief as the Court ~~deems~~deemed just.

In addition, the Answer ~~asserts~~asserted counterclaims by the Sellers against the Purchaser for breach of contract due to the Purchaser’s failure to close the Purchase and Sale Agreement in accordance with its terms, and the Sellers ~~seek~~sought a declaratory judgment from the Court that the Sellers properly terminated the Purchase and Sale Agreement in accordance with its terms due to the Purchaser’s default and an order from the Court that the Purchaser ~~authorize~~authorized the escrow agent to release the $15 million deposit under the Purchase and Sale Agreement to the Sellers. On April 28, 2021, the Sellers amended the Answer to include (1) counterclaims against the Purchaser for breach of contract due to the Purchaser’s breach of confidentiality and non-disclosure obligations contained in the Purchase and Sale Agreement, and (2) third-party claims against Purchaser’s affiliate Kushner Realty Acquisition LLC for breach of its confidentiality and non-disclosure obligations contained in the non-disclosure agreement entered into by the parties in connection with the negotiation of the transactions contemplated by the Purchase and Sale Agreement, based on the conduct of the Purchaser and its affiliates after the Sellers terminated the Purchase and Sale Agreement.

In connection with these counterclaims and third-party claims, the Answer ~~seeks~~sought the following relief from the Court: (a) liquidated damages in the amount of $15 million, as provided in the Purchase and Sale Agreement; (b) in the alternative to the liquidated damages provided for in the Purchase and Sale Agreement, money damages in an amount to be determined at trial; (c) interest, attorneys’ fees and costs associated with the defense of the Purchaser’s claims and the prosecution of the Sellers’ counterclaims against the Purchaser, as provided for in the Purchase and Sale Agreement; (d) judgment declaring that the Sellers properly terminated the Purchase and Sale Agreement due to the Purchaser’s default thereunder; (e) judgment declaring that the Purchaser must authorize the escrow agent to release the $15 million deposit to the Sellers; (f) an order enjoining the Purchaser and ~~(f)~~its affiliates from engaging in further breaches of the Purchase and Sale Agreement and non-disclosure agreement, and compelling the Purchaser and its affiliates to return the Sellers’ confidential information and materials and to use best efforts to ensure the return of the Sellers’ confidential information and materials from third parties to whom the Purchaser and/or its affiliates provided such materials; and (g) such other relief as the Court ~~deems~~deemed just and equitable.

In the Answer filed by the Purchaser on September 15, 2020 and the Answer and Affirmative Defenses filed by the Purchaser and Kushner Realty Acquisition LLC on June 7, 2021, the Purchaser and Kushner Realty Acquisition LLC have generally denied the claims, counterclaims and allegations contained in the Sellers’ original and amended Answer, and asserted affirmative defenses to the Sellers’ claims and counterclaims.

Each of the Sellers and the Purchaser filed motions for summary judgment (“Summary Judgment Motions”) with the Court in which the litigation is pending seeking, among other things, the dismissal of the other parties’ claims.

On February 4, 2022, the Court entered an Order (the “Order”) with respect to the Summary Judgment Motions which provides as follows:

(1) The Court finds that the Plaintiff’s have breached the subject contract and the Court dismisses all claims for relief filed by the Plaintiff in this suit. The Court dismissed the Complaint and dismisses the Lis Pendens.

(2) The Court finds that the liquidated damage provision of the contract is not enforceable and the Court Orders that the $15 million held in escrow be returned to the Plaintiff.

(3) The Court dismisses the Counterclaims and Third Party Complaint. All pleadings are dismissed.

The Sellers are evaluating the Order and their rights and remedies with respect thereto. The Sellers continue to believe that the allegations set forth in the Complaint and Answer filed by the Purchaser and in the Answer and Affirmative Defenses filed by the Purchaser and Kushner Realty Acquisition LLC are without ~~merit and intend to vigorously defend~~merit.

Through the action and enforce the Sellers’ rights and remedies under the Purchase and Sale Agreement in connection with the “Purchaser Default” thereunder, including the Purchaser’s forfeiture of its $15 million deposit to the Sellers as liquidated damages as provided in the Purchase and Sale Agreement. As of thequarter ended January 31, ~~2021,~~2022, the $15 million deposit has not been included in income in the accompanying condensed consolidated statement of income.

During the three months ended January 31, 2021 and 2020, the Special Committee of the Board (which was formed in connection with the Purchase and Sale Agreement and the Plan of Liquidation discussed in Note 7) incurred on behalf of the Company $0 and $3,382,000, respectively, of third party advisory, legal and other expenses related to its activities. On May 7, 2020 the Board approved the elimination of the Special Committee as a committee of the Board and no further fees were incurred. Legal costs attributed to the legal ~~proceedings~~proceeding between FREIT Maryland and certain of its affiliates and Sinatra Properties, LLC have been incurred in the amount of approximately $613,000 and $481,000 for the three months ended January 31, ~~2021.~~2022 and 2021, respectively, and are included in operating expenses on the condensed consolidated statements of income.

Note 7 – ~~Termination of Plan of Liquidation:~~Maryland property dispositions:

On ~~January 14, 2020, the Trust’s Board~~November 22, 2021, certain affiliates (the “Maryland Sellers”) of ~~Trustees adopted~~FREIT Maryland entered into a Plan of Voluntary Liquidation with respect to the Trust (the “Plan of Liquidation”), which provided for the voluntary dissolution, termination and liquidation of the Trust by the sale, conveyance, transfer or delivery of all of the Trust’s remaining assets in accordance with the terms and conditions of the Plan of Liquidation and the Internal Revenue Code of 1986, as amended, and the Treasury regulations thereunder. The Plan of Liquidation provided that it would become effective upon (i) approval by a majority of the votes cast by Trust’s shareholders present in person or represented by proxy at a duly called meeting of the Trust’s shareholders at which a quorum is present and (ii) the consummation of the transactions contemplated by the Purchase and Sale Agreement.

~~While the Plan of Liquidation received shareholder approval, the Plan of Liquidation did not become effective as the Sellers terminated the~~ Purchase and Sale Agreement ~~by written notice delivered~~(the “Maryland Purchase and Sale Agreement”) with MCB Acquisition Company, LLC (the “Maryland Purchaser”), a third party, pursuant to which the Maryland Sellers agreed to sell three properties to the ~~Purchaser on April 30, 2020,~~Maryland Purchaser. The properties consisted of retail and office space and a residential apartment community owned by Grande Rotunda, LLC (the “Rotunda Property”), a shopping center owned by Damascus Centre, LLC (the “Damascus Property”), and a shopping center owned by WestFREIT Corp. (the “Westridge Square Property”). FREIT Maryland owns 100% of its subsidiary, WestFREIT Corp. (“WestFREIT”), a 60% interest in Grande Rotunda, LLC (“Grande Rotunda”), the joint venture that owned the Rotunda Property, and a 70% interest in Damascus Centre, LLC (“Damascus Centre”), the joint venture that owned the Damascus Property.

The original purchase price for the Rotunda Property, the Damascus Property and the ~~transactions contemplated thereby~~Westridge Square Property (collectively the “Maryland Properties”) under the Maryland Purchase and Sale Agreement was reduced by $2,723,000 from $267,000,000 to $248,750,269, after giving effect to the $15,526,731 escrow deposit described below. This reduction in the sales price was to account for improvements and repairs to the Maryland Properties and miscellaneous items identified by the Maryland Purchaser in the course of its due diligence inspection. Additionally, the Maryland Purchaser was obligated under the Maryland Purchase and Sale Agreement to deposit a total of $15,526,731 in escrow with respect to certain leases at the Maryland Properties, which have not been executed or where the rent commencement date has not occurred or economic obligations of the Maryland Sellers under certain leases remain unpaid. Although there can be no assurance, a portion of the $15,526,731 escrow deposit (the “Maryland Purchaser Escrow Payment”) may be paid to the Maryland Sellers depending upon the outcome of construction and leasing activities at the Maryland Properties.

On December 30, 2021, the sale of the Rotunda Property which had a net book value of approximately $135.7 million, was consummated by Grande Rotunda and the Maryland Purchaser for a purchase price of $191,080,598. Grande Rotunda received net proceeds from the sale of approximately $35.4 million, after payment of related mortgage debt in the amount of $116.5 million, payment of loans (including interest) to each of the partners in Grande Rotunda (FREIT Maryland with a 60% interest and Rotunda 100, LLC (“Rotunda 100”) with a 40% interest) in the amount of approximately $31 million, with FREIT Maryland receiving approximately $27.7 million, and certain transactional expenses and transfer taxes including a brokerage fee due to Hekemian & Co. of approximately $4.8 million (See Note 8). In addition, the Maryland Purchaser deposited a total of $14,026,401 of the Maryland Purchaser Escrow Payment in escrow with respect to certain leases at the Rotunda Property, which have not been executed or where the rent commencement date has not occurred or economic obligations of Grande Rotunda under certain leases remain unpaid. The net proceeds from the sale of approximately $35.4 million were distributed to the partners in Grande Rotunda with FREIT Maryland receiving approximately $21.4 million based on its 60% interest in Grande Rotunda. The sale of the Rotunda Property resulted in a net gain of approximately $51.2 million which includes approximately $8.2 million of proceeds anticipated to be released from the $14,026,401 of funds held in escrow (included in “Funds held in post-closing escrow” on the accompanying condensed consolidated balance sheet as of January 31, 2022), a write-off of the straight-line rent receivable of approximately $1.8 million and a write-off of unamortized lease commissions of approximately $1.1 million. During the first quarter ended January 31, 2022, secured loans including accrued interest held by certain members in Rotunda 100 in the amount of approximately $5.1 million were repaid to FREIT Maryland. The Maryland Purchaser Escrow Payment Agreement provides for among other things, monthly disbursements from escrow to the Maryland Purchaser related to the aforementioned tenant lease agreements until the earlier of (i) the rent commencement date of the respective tenant lease agreements or (ii) 5-years from the date of the agreement. Release and amounts of escrowed funds to FREIT Maryland, generally, is contingent on the success and timing of future leasing activities at the Maryland Properties.

On January 7, 2022, the sale of the Westridge Square Property which had a net book value of approximately $11.5 million, was consummated by WestFREIT and the Maryland Purchaser for a purchase price of $20,984,604. WestFREIT paid net cash outlays from the sale of approximately $0.7 million, after payment of related mortgage debt in the amount of approximately $21.1 million and certain transactional expenses and transfer taxes including a brokerage fee due to Hekemian & Co. of approximately $0.5 million (See Note 8). In addition, the Maryland Purchaser deposited a total of $1,015,396 of the Maryland Purchaser Escrow Payment in escrow with respect to certain leases at the Westridge Square Property, which have not been executed or where the rent commencement date has not occurred or economic obligations of WestFREIT under certain leases remain unpaid. The sale of the Westridge Square Property resulted in a net gain of approximately $8.7 million which includes approximately $0.7 million of proceeds anticipated to be released from the $1,015,396 of funds held in escrow (included in “Funds held in post-closing escrow” on the accompanying condensed consolidated balance sheet as of January 31, 2022), a write-off of the straight-line rent receivable of approximately $0.5 million and a write-off of unamortized lease commissions of approximately $0.3 million.

On January 10, 2022, the sale of the Damascus Property which had a net book value of approximately $24.6 million, was consummated by Damascus Centre and the Maryland Purchaser for a purchase price of $36,685,067. Damascus Centre received net proceeds from the sale of approximately $16.9 million, after payment of related mortgage debt in the amount of approximately $18.2 million and the corresponding swap breakage fees of approximately $213,000 related to the early termination of the interest rate swap contracts on this loan and certain transactional expenses and transfer taxes including a brokerage fee due to Hekemian & Co. of approximately $0.9 million (See Note 8). In addition, the Maryland Purchaser deposited a total of $484,934 of the Maryland Purchaser Escrow Payment in escrow with respect to certain leases at the Damascus Property, which have not been executed or where the rent commencement date has not occurred or economic obligations of Damascus Centre under certain leases remain unpaid. The net proceeds from the sale of approximately $16.9 million were distributed to the partners in Damascus Centre with FREIT Maryland receiving approximately $11.8 million based on its 70% interest in Damascus Centre. The sale of the Damascus Property resulted in a net gain of approximately $10.1 million which includes approximately $0.4 million of proceeds anticipated to be released from the $484,934 of funds held in escrow (included in “Funds held in post-closing escrow” on the accompanying condensed consolidated balance sheet as of January 31, 2022), a write-off of the straight-line rent receivable of approximately $0.6 million and a write-off of unamortized lease commissions of approximately $0.3 million.

In summary, the sale of the Maryland Properties having a total net book value of $171.8 million resulted in net proceeds from the sale of approximately $51.6 million, after payment of related mortgage debt in the amount of $155.8 million and the corresponding swap breakage fees of approximately $213,000 related to the early termination of the interest rate swap contracts on the Damascus Property loan, payment of loans (including interest) to each of the partners in Grande Rotunda in the amount of approximately $31 million and certain transactional expenses and transfer taxes including a brokerage fee due to Hekemian & Co. of approximately $6.2 million. The sale of the Maryland Properties resulted in a net gain of approximately $70 million (with a consolidated impact to FREIT Maryland of approximately $46.3 million) which includes approximately $9.3 million of proceeds anticipated to be released from the $15,526,731 of funds held in escrow (included in “Funds held in post-closing escrow” on the accompanying condensed consolidated balance sheet as of January 31, 2022), a write-off of the straight-line rent receivable of approximately $2.9 million and a write-off of unamortized lease commissions of approximately $1.7 million.

As the disposal of the Maryland Properties did not represent a strategic shift that would have a major impact on FREIT Maryland’s operations or financial results, the properties’ operations were not ~~consummated. Accordingly,~~reflected as discontinued operations in the Trust did not proceed with the sale, conveyance, transfer or delivery of all of the Trust’s remaining assets as contemplated by the Plan of Liquidation that was adopted by the Board on January 14, 2020.accompanying condensed consolidated financial statements.

Hekemian & Co. currently manages all the properties owned by FREIT Maryland and its affiliates, except for the office building at ~~The~~the Rotunda ~~located in Baltimore, Maryland,~~Property which iswas sold December 30, 2021 and was formerly managed by an independent third party management company. The management agreement between FREIT Maryland and Hekemian & Co. dated as of November 1, 2001 (“Management Agreement”) expires on October 31, ~~2021,~~2023 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 Management Agreement requires the payment of management fees equal to 4% to 5% of rents collected. Such fees charged to operations were approximately ~~$513,000~~$484,000 and ~~$699,000~~$513,000 for the three months ended January 31, ~~2021~~2022 and ~~2020,~~2021, respectively. In addition, the ~~management agreement~~Management Agreement provides for the payment to Hekemian & Co. of leasing commissions, as well as the reimbursement of certain operating expenses, such as payroll and insurance costs, incurred on behalf of ~~FREIT.~~FREIT Maryland. Such commissions and reimbursements amounted to approximately ~~$129,000~~$184,000 and ~~$475,000~~$129,000 for the three months ended January 31, ~~2021~~2022 and ~~2020,~~2021, respectively. FREIT Maryland also uses the resources of the Hekemian & Co. insurance department to secure various insurance coverages for its properties and subsidiaries. Hekemian & Co. is paid a commission for these services. Such commissions were charged to operations and amounted to approximately ~~$69,000~~$52,000 and ~~$51,000~~$69,000 for the three months ended January 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

From time to time, FREIT Maryland engages Hekemian & Co., or certain affiliates of Hekemian & Co., to provide additional services, such as consulting services related to development, property sales and financing activities of ~~FREIT.~~FREIT Maryland. Separate fee arrangements are negotiated between Hekemian & Co. and FREIT Maryland with respect to such additional services. ~~There were no such~~Such fees incurred for the three months ended January 31, 2022 and 2021 were approximately $6,294,000 and ~~2020.~~$0, respectively. Fees incurred during Fiscal 2022 related to commissions to Hekemian & Co. for the following: $4,777,000 for the sale of the Rotunda Property; $917,000 for the sale of the Damascus Property; $525,000 for the sale of the Westridge Square Property; $75,000 for the refinancing of the loan on the Boulders property. The commissions related to the sale of the Rotunda Property, the Damascus Property and the Westridge Square Property were charged against the gain on sale of the Maryland Properties (See Note 7) in the accompanying condensed consolidated income statement for the three months ended January 31, 2022. The commission for the refinancing of the loan on the Boulders property was a deferred mortgage cost included in the unamortized debt issuance costs in the accompanying condensed consolidated balance sheet as of January 31, 2022.

Robert S. Hekemian, Jr., Chief Executive Officer, President and a ~~Trustee of the Trust, is the President and Chief Operating Officer of Hekemian. David B. Hekemian, a Trustee of the Trust, is the Principal/Broker – Salesperson and~~ Director of ~~Commercial Brokerage of Hekemian. Robert S. Hekemian,~~FREIT Maryland, is the ~~former Chairman and Chief Executive Officer of the Trust, served as a consultant to the Trust and Chairman of the Board and~~ Chief Executive Officer of Hekemian ~~prior to his death in December 2019.~~& Co. David B. Hekemian, a Director of FREIT Maryland, is the President of Hekemian & Co. Allan Tubin, Chief Financial Officer and Treasurer of ~~the Trust,~~FREIT Maryland, is the Chief Financial Officer of ~~Hekemian.~~Hekemian & Co.

~~Trustee~~Director fee expense and/or executive compensation (including interest and dividends) incurred by FREIT Maryland for the three months ended January 31, ~~2021~~2022 and ~~2020~~2021 was approximately $0$135,000 and ~~$21,000, respectively, for Robert S. Hekemian,~~ $116,000, ~~and $119,000,~~ respectively, for Robert S. Hekemian, Jr., ~~$8,000~~$10,000 and $8,000, respectively, for Allan Tubin and ~~$14,000~~$15,000 and ~~$16,000,~~$14,000, respectively, for David Hekemian (See Note ~~14 to FREIT’s~~14). Such costs are included within operating expenses on the accompanying condensed consolidated ~~financial statements).~~statements of income.

Effective upon the late Robert S. Hekemian’s retirement as Chairman, Chief Executive Officer and as a Trustee on April 5, 2018, FREIT entered into a Consulting Agreement with Mr. Hekemian, pursuant to which Mr. Hekemian provided consulting services to the Trust through December 2019. The Consulting Agreement obliged Mr. Hekemian to provide advice and consultation with respect to matters pertaining to the Trust and its subsidiaries, affiliates, assets and business, for no fewer than 30 hours per month during the term of the agreement. FREIT paid Mr. Hekemian a consulting fee of $5,000 per month during the term of the Consulting Agreement, which was 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 was 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 was payable. For the three months ended January 31, 2021 and 2020, consulting fee expense for Robert S. Hekemian was approximately $0 and $8,000, respectively.

The equity owners of Rotunda 100, ~~LLC (“Rotunda 100”),~~ which owns a 40% minority equity interest in Grande Rotunda, are principally employees of ~~Hekemian.~~Hekemian & Co. To incentivize the employees of Hekemian & Co., FREIT Maryland advanced, only to employees of Hekemian & Co., up to 50% of the amount of the equity contributions that the Hekemian & Co. employees were required to invest in Rotunda 100. These advances were in the form of secured loans that bear interest at rates 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 & Co. employees’ interests in Rotunda 100 and are full recourse loans. On December 7, 2017, the Board approved a further extension of the previously amended maturity dates of these loans to the date or dates upon which distributions of cash are made by Grande Rotunda to its members as a result of a refinancing or sale of Grande Rotunda or the Rotunda ~~property.~~

Property. On December 30, 2021, the Rotunda Property was sold and the net sales proceeds were distributed to the partners in Grande Rotunda. (See Note 7 for further details.) As of January 31, 2022, approximately $5.1 million of the secured loans receivable (including accrued interest) were repaid to FREIT Maryland. The aggregate outstanding principal balance of the Rotunda 100 notes was approximately $167,000 and $4,000,000 at ~~both~~ January 31, ~~2021~~2022 and October 31, ~~2020.~~2021, respectively. The accrued but unpaid interest related to these notes as of January 31, ~~2021~~2022 and October 31, ~~2020~~2021 amounted to approximately ~~$1,219,000~~$54,000 and ~~$1,194,000,~~$1,292,000, respectively, and is included in secured loans receivable on the accompanying condensed consolidated balance sheets.

In Fiscal 2017, Grande Rotunda incurred substantial expenditures at the Rotunda ~~property~~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, during Fiscal 2017 the equity owners in Grande Rotunda ~~(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. In Fiscal 2021, Grande Rotunda ~~LLC.~~repaid $7 million to the equity owners in Grande Rotunda based on their respective pro-rata share resulting in a loan repayment to Rotunda 100 of approximately $2.8 million. As of ~~January~~October 31, 2021, ~~and October 31, 2020,~~ Rotunda 100 ~~has~~had funded Grande Rotunda with approximately ~~$6 million and $5.9~~$3.3 million (including interest)~~, respectively,~~ which iswas included in “Due to affiliate” on the accompanying condensed consolidated balance ~~sheets.~~sheet. On December 30, 2021, the Rotunda Property was sold and Grande Rotunda repaid approximately $31 million to the equity owners in Grande Rotunda resulting in a loan repayment to Rotunda 100 of approximately $3.3 million. As of January 31, 2022, all loans were repaid in full to each of the partners.

On ~~September~~December 30, ~~2020, Westwood Hills, LLC (“Westwood Hills”), a consolidated subsidiary,~~2021, FREIT Maryland refinanced its ~~$19.2~~$14.4 million loan (which would have matured on ~~November~~February 1, ~~2020)~~2022) on its Boulders property located in Rockaway, New Jersey with a new loan held by ConnectOne Bank in the amount of ~~$25,000,000,~~$7,500,000, with additional funding available to be drawn upon in the amount of $7,500,000 for corporate needs inclusive of $250,000 for legal fees potentially incurred by the lender related to the lis pendens on this ~~property.~~property resulting from the legal proceeding between FREIT Maryland and certain of its affiliates and Sinatra Properties, LLC (See Note ~~6 to FREIT’s condensed consolidated financial statements for additional details in regards to the lis pendens.)~~6). This loan ~~secured by an apartment building in Westwood, New Jersey,~~ is interest-only ~~based on a floating rate at 400 basis points over the one-month LIBOR rate with a floor of 4.15%~~ and has a maturity date of ~~October~~January 1, ~~2022~~2024 with the option of ~~Westwood Hills~~FREIT Maryland to extend for ~~two (2) additional six (6)-month periods~~one year from the maturity date, subject to certain provisions of the loan agreement. This refinancing ~~resulted in: (i)~~will provide annual debt service savings of approximately $1,173,000 as a ~~change~~result of the reduction in the principal amount, a reduction in the annual interest rate from a fixed rate of ~~4.62%~~5.37% to a ~~variable~~fixed rate ~~with a floor~~ of ~~4.15%~~2.85% and ~~(ii) net refinancing proceeds of approximately $5.6 million that were distributed to the partners in Westwood Hills with~~ interest-only payments being required under this new loan.

FREIT receiving approximately $2.2 million based on its 40% membership interest in Westwood Hills. As of January 31, 2021, approximately $25,000,000 of this loan was drawn and outstanding and the interest rate was based on the floor of 4.15%.

of May 1, 2020. This loan was extended to November 1, 2020 and further extended to January 31, 2021 under the same terms and conditions of the existing agreement. As of January 31, 2021, approximately $21.6 million of this loan was outstanding and the interest rate was approximately 2.59%. WestFREIT Corp. entered into a loan extension and modification agreement with M&T Bank, effective beginning on February 1, 2021, which requires monthly principal payments of $49,250 plus interest based on a floating interest rate equal to 255 basis points over the one-month LIBOR and has a maturity date of January 31, 2022, with the option to extend for an additional one-year period through January 31, 2023, subject to certain requirements as provided for in the loan agreement including the lease-up of certain space.

On February 7, 2018, Grande Rotunda refinanced its construction loan with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding which was available through February 6, 2021 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 had a maturity date of February 6, 2021 with two one-year options to extend the maturity of this loan, subject to certain requirements as provided for in the loan agreement. Grande Rotunda had purchased an interest rate cap on LIBOR for the full amount that could have been drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda had purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that could have been drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year, which matured on March 5, 2021. At January 31, 2021, the total amount outstanding on this loan was approximately $118.5 million and the interest rate was approximately 2.99%. Effective February 6, 2021, Grande Rotunda exercised the first extension option on this loan with a balance in the amount of approximately $118.5 million, extending the loan one year with a new maturity date of February 6, 2022, which may be extended further for an additional one-year term at Grande Rotunda’s option. Principal payments in the amount of $500,000 per quarter are required in this first extension period and principal payments in the amount of $750,000 per quarter are required in the second extension period, if exercised. Additionally, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2021, for the loan amount of approximately $118.5 million, capping the one-month LIBOR rate at 3% for one year expiring on February 6, 2022.

~~FREIT’s~~Maryland’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 31, 2023. 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~~FREIT Maryland’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is $13 million and the interest rate on the amount outstanding is based on a floating interest rate of prime minus 25 basis points with a floor of 3.75%. As of January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, there was no amount outstanding and $13 million was available under the line of credit.

~~The lis pendens filed in connection~~In accordance with certain loan agreements, FREIT Maryland may be required to meet or maintain certain financial covenants throughout the ~~legal proceeding between FREIT and certain~~term of its affiliates and Sinatra Properties, LLC may adversely affect FREIT’s ability to refinance certain of its residential properties. (See Note 6 to FREIT’s condensed consolidated financial statements for additional details.)

the loan. As a result of the ~~negative impact of the~~ COVID-19 pandemic, ~~at our commercial properties,~~rent losses and the planning for a potential redevelopment of its shopping center, as of October 31, 2021, Wayne PSC was not, and currently is not, in ~~Fiscal 2020 we were granted~~compliance with a look back debt ~~payment relief from certain of our lenders on such properties~~service coverage ratio loan covenant contained in the ~~form of deferral of principal and/or interest payments for a three-month period, resulting in total deferred payments of approximately $1,013,000 which will become due at the maturity of the loans.~~mortgage loan agreement held by People’s United Bank. As of January 31, ~~2021 and October 31, 2020,~~2022, this loan has a balance of approximately ~~$162,000~~$22.4 million. Although the Company continues to make its required debt service payments in accordance with the loan agreement, it is unable to comply with this covenant. As such, the bank could exercise its remedies under the loan agreement including, among other things, requiring a partial or full repayment of ~~this amount has been repaid. There will be no further deferrals~~the loan with a balance of ~~principal and/or interest payments on these loans and the balance due has been included in mortgages payable on the condensed consolidated balance sheets~~approximately $22.4 million as of January 31, ~~2021~~2022. The Company is currently working with the lender to remediate this covenant default. As of the date of the filing of this quarterly report on Form 10-Q, the bank has not declared this loan to be in default. Until such time as a definitive agreement is entered into, there can be no assurance the loan covenant will be amended and ~~October 31, 2020.~~the bank will not declare this loan to be in default.

The following table shows the estimated fair value and net carrying value of ~~FREIT’s~~FREIT Maryland’s long-term debt at January 31, ~~2021~~2022 and October 31, ~~2020:~~2021:

Fair values are estimated based on market interest rates at January 31, ~~2021~~2022 and October 31, ~~2020~~2021 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 Maryland has determined that it has 2 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)~~five (5) properties, excluding the Rotunda Property, the Westridge Square Property and the Damascus Property which were sold on December 30, 2021, January 7, 2022 and January 10, 2022, respectively. The residential segment is comprised of ~~seven (7)~~six (6) properties, excluding the ~~Pierre Towers property~~Icon at the Rotunda Property which was ~~converted into a TIC and deconsolidated from FREIT’s operating results as of February 28, 2020~~sold on December 30, 2021. (See Note ~~5 to FREIT’s condensed consolidated financial statements~~7 for further ~~details).~~details.)

The accounting policies of the segments are the same as those described in Note 1 in ~~FREIT’s~~FREIT Maryland’s Annual Report on Form 10-K for the fiscal year ended October 31, ~~2020.~~2021. The chief operating and decision-making group responsible for oversight and strategic decisions of ~~FREIT's~~FREIT Maryland's commercial segment, residential segment and corporate/other is comprised of ~~FREIT’s Board of Trustees.~~FREIT Maryland’s Board.

FREIT Maryland, through its chief operating and decision making group, assesses and measures segment operating results based on net operating income ("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 periods ended January 31, ~~2021~~2022 and ~~2020.~~2021. Asset information is not reported since FREIT Maryland does not use this measure to assess performance.

FREIT Maryland has elected to be treated as a REIT for federal income tax purposes and as such intends to distribute at least 90% of its ordinary taxable income (to maintain its status as a REIT) and 100% of its capital gains to its stockholders as dividends for the fiscal year ending October 31, 2022. FREIT Maryland distributed 99% of its ordinary taxable income to its ~~shareholders~~stockholders as dividends for the fiscal year ~~ending~~ended October 31, 2021. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income ~~was~~and such gains were recorded in ~~FREIT’s~~FREIT Maryland’s condensed consolidated financial ~~statements.~~

~~There was no ordinary taxable income~~statements for the ~~fiscal year ending October~~three months ended January 31, ~~2020~~2022 and no dividends were made/declared for Fiscal 2020. Accordingly, no provision for federal or state income taxes related to such ordinary taxable income was recorded in FREIT’s condensed consolidated financial statements.2021.

As of January 31, ~~2021,~~2022, FREIT Maryland had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended October 31, 2018 remain open to examination by the major taxing jurisdictions.

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 & Co., Inc., FREIT’s managing agent. The options have an exercise price of $18.45 per share, fully vested on September 3, 2019 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.Note 13 – Equity incentive plan:

As of January 31, ~~2021,~~2022, 442,060 shares are available for issuance under the Plan.

The following table summarizes stock option activity for the ~~three-month~~three month periods ended January 31, ~~2021~~2022 and ~~2020:~~2021:

For the ~~three-month~~three month periods ended January 31, ~~2021~~2022 and ~~2020,~~2021, compensation expense related to stock options ~~granted~~vested amounted to approximately ~~$12,000~~$5,000 and $12,000, respectively. At January 31, ~~2021,~~2022, there was approximately ~~$60,000~~$25,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over the remaining weighted average vesting period of approximately 21.4 years.

The aggregate intrinsic value of options vested and expected to vest and options exercisable at January 31, ~~2021~~2022 was approximately ~~$111,000~~$1,706,000 and ~~$43,000,~~$1,563,000, respectively.

On September 4, 2014, the Board approved amendments, effective November 1, 2014, to the FREIT Maryland Deferred Fee Plan for its ~~Executive Officers~~executive officers and ~~Trustees,~~directors, one of which provides for the issuance of share units payable in FREIT Maryland shares in respect of (i) deferred amounts of all ~~Trustee~~director fees on a prospective basis; (ii) interest on ~~Trustee~~director 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 Maryland shares on the date as set forth in the Deferred Fee Plan.

~~All~~On November 4, 2021 (the “Adoption Date”), the Board approved the termination of the Deferred Fee Plan resulting in the termination of the deferral of fees ~~payable~~on December 31, 2021 with any subsequent fees earned by a participant being paid in cash. Consistent with the termination of the Deferred Fee Plan, payment related to ~~Trustees for~~each participant’s cash account (in the ~~three-month~~form of a cash lump sum payment) and share unit account (in the form of the issuance of common stock) must be made to each participant no earlier than twelve (12) months and one day after, and no later than twenty-four (24) months, after the Adoption Date. Any interest earned on the participant’s cash account along with dividends (if any) earned on share units, will continue to accrue in share units on each participant’s account until final payment is made.

For the three month periods ended January 31, ~~2021~~2022 and 2020 were deferred under the Deferred Fee Plan except for fees payable to one Trustee, 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 periods ended January 31, 2021, ~~and 2020,~~ the aggregate amounts of deferred ~~Trustee~~director fees together with related interest and dividends were approximately ~~$118,100~~$61,600 and ~~$203,000,~~$118,100, respectively, which have been paid through the issuance of ~~6,919~~2,496 and ~~9,230~~6,919 vested FREIT Maryland share units, respectively, based on the closing price of FREIT Maryland shares on the dates as set forth in the Deferred Fee Plan.

For the ~~three-month~~three month periods ended January 31, 2022 and 2021, ~~and 2020,~~ FREIT Maryland has charged as expense approximately ~~$110,200~~$43,800 and ~~$203,000,~~$110,200, respectively, representing deferred ~~Trustee~~director fees and interest, and the balance of approximately ~~$7,900~~$17,000 and ~~$0,~~$7,900, respectively, representing dividends payable in respect of share units allocated to Plan participants, has been charged to equity.

The Deferred Fee Plan, as amended, ~~provides~~provided that cumulative fees together with accrued interest deferred as of November 1, 2014 ~~will be~~was paid in a lump sum or in annual installments over a period not to exceed 10 years, at the election of the ~~Participant.~~participant. As of January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, approximately ~~$1,542,000 and $1,542,000, respectively,~~$1,454,000 of fees has been deferred together with accrued interest of approximately ~~$1,091,000 and $1,091,000, respectively.~~$1,021,000.

Fixed lease income under our commercial operating leases generally includes fixed minimum lease consideration which is accrued on a straight-line basis over the terms of the leases. Variable lease income includes consideration based on sales, as well as reimbursements for real estate taxes, maintenance, insurance and certain other operating expenses of the properties.

Minimum fixed lease consideration (in thousands of dollars) under non-cancelable tenant operating leases for each of the next five years and thereafter, excluding variable lease consideration and rents from tenants for which collectability is deemed to be constrained, for the years ending October 31, as of January 31, ~~2021,~~2022, is as follows:

The above amounts assume that all leases which expire are not renewed and, accordingly, neither ~~minimal rentals~~month-to-month nor rentals from replacement tenants are included.

Minimum future rentals do not include contingent rentals, which may be received under certain leases on the basis of percentage of reported tenants' sales volume. Rental income that is contingent on future events is not included in income until the contingency is resolved. Contingent rentals included in income for the ~~three-month~~three month periods ended January 31, ~~2021~~2022 and ~~2020~~2021 were not material.

The international spread of COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. The extent to which this pandemic could continue to affect our financial condition, liquidity, and results of operations is difficult to predict and depends on evolving factors, including: duration, scope, government actions, and other social responses. Beginning in March 2020 and throughout most of 2020, many states in the U.S., including New Jersey, New York and Maryland, where our properties ~~are~~were located, implemented stay-at-home and ~~shutdown~~shut down orders for all "non-essential" business and activity in an aggressive effort to mitigate the spread of COVID-19. ~~These orders continue to evolve resulting in a full or partial lifting of these restrictions at various points. While the United States has experienced a second wave of this pandemic over~~Over the past ~~several months,~~year, vaccinations for the ~~distribution~~COVID-19 virus were widely distributed among the general U.S. population which resulted in loosened restrictions previously mandated on our tenants identified as nonessential. However, the potential emergence of ~~vaccinations has begun.~~

vaccine-resistant variants of COVID-19 could trigger restrictions to be put back in place. Such restrictions may include mandatory business shut-downs, reduced business operations and social distancing requirements. As the impact of the pandemic ~~has been evolving,~~evolves, it continues to cause uncertainty and volatility in the financial markets. The COVID-19 pandemic and the actions taken by individuals, businesses and government authorities to reduce its spread have caused substantial lost business revenue, changes in consumer behavior and large reductions in liquidity and fair value of many assets. These and other adverse conditions that may unfold in the future are expected to continue until such time as government shutdown orders are fully lifted, and business operations and commercial activity can fully resume. The lifting of all government shutdown orders cannot be predicted with any certainty. Further, even after such orders are fully lifted, the resumption of business operations and commercial activity will depend on several factors, including prevailing sentiments among workers and consumers regarding the safety of resuming public activity, and cannot be predicted with any certainty.

Despite the COVID-19 pandemic and preventive measures taken to mitigate the spread, our residential properties ~~continue~~have continued to generate cash flow. At our commercial properties, with the exception of grocery stores and other "essential" businesses, many of our retail tenants have been ~~and continue to be~~ adversely affected by the previously mandated ~~shutdowns or~~shut downs and the continued imposed restrictions as many of these tenants have not been able to open or resume operations at full capacity. The average annual occupancy rate for the commercial properties has declined from 81.5% for the three months ended January 31, 2020 to approximately 77.1% for the three months ended January 31, 2021. During the first quarter of Fiscal 2021, Pet Valu, Inc., a pet store tenant, vacated several stores located in shopping centers owned by FREIT affiliates (Wayne PSC, Damascus Centre and Grande Rotunda) and terminated the related leases early paying an aggregate lease termination fee in the amount of approximately $260,000 (with a consolidatedlingering impact to ~~FREIT~~consumer sentiment and preferences for safety amid the reemergence of approximately $140,000). Until the space is re-leased at each of these properties, FREIT’s operating results will be adversely impacted from the loss of base rent and additional rent of approximately $0.4 million (with a consolidated impact to FREIT of approximately $0.2 million) on an annualized basis. The overall average cash realization for the commercial properties excluding the office space at the Rotunda property, based on monthly billings as compared to monthly cash collections from April 2020 through January 2021, was approximately 82%.other COVID-19 variants. The Company is closely monitoring changes in the collectability assessment of its tenant receivables as a result of certain tenants suffering adverse financial consequences related to the COVID-19 pandemic. For the three months ended January 31, 2022 and 2021, rental revenue deemed uncollectible of approximately $0.1 million and $0.6 million (with a consolidated impact to FREIT Maryland of approximately $0.1 million and $0.4 million), respectively, was classified as a reduction in rental revenue based on our assessment of the probability of collecting substantially all of the remaining rents for certain tenants. ~~As of January~~During the period beginning March 2020 through October 31, 2021, FREIT Maryland has applied, net of amounts subsequently paid back by tenants, an aggregate of approximately ~~$405,000~~$397,000 of security deposits from its commercial tenants to outstanding receivables due. For the three months ended January 31, ~~2021, on~~2022, there were no security deposits from its commercial tenants applied to outstanding receivables due. On a case by case basis, FREIT Maryland has offered ~~some commercial tenants~~ rent abatements ~~over a specified time period~~ totaling approximately $9,000 and $50,000 (with a consolidated impact to FREIT Maryland of approximately $9,000 and $31,000)~~. FREIT has not offered any new~~ for the three months ended January 31, 2022 and 2021, respectively. There were no significant deferrals of rent over a specified time period ~~during~~offered to its commercial tenants for the three months ended January 31, 2022 and 2021. FREIT Maryland currently remains in active discussions and negotiations with these impacted retail tenants.

~~As a result of~~For the negative impact of the COVID-19 pandemic at our commercial properties, in Fiscal 2020 we were granted debt payment relief from certain of our lenders on such properties in the form of deferral of principal and/or interest payments for a three-month period, resulting in total deferred payments of approximately $1,013,000, which will become due at the maturity of the loans. As of January 31, 2021 and October 31, 2020, approximately $162,000 of this amount has been repaid, there will be no further deferrals of principal and/or interest payments on these loans and the balance due has been included in mortgages payable on the consolidated balance sheets as of January 31, 2021 and October 31, 2020. (See Note 9 to FREIT’s condensed consolidated financial statements for additional details).

~~Through the end of the fiscal quarter~~three months ended January 31, ~~2021,~~2022, we have experienced a positive cash flow from operations with cash provided by operations of approximately ~~$5.1~~$2.9 million. This could change based on the duration of the pandemic, which is uncertain. We believe that our cash balance as of January 31, ~~2021~~2022 of approximately ~~$39.8~~$95.4 million coupled with a $13 million available line of credit (available through October 31, 2023, see Note 9) and the additional $7.5 million in funds available to be drawn upon on the Boulders loan (See Note 9 for additional details) will provide us with sufficient liquidity for at least the next twelve months from the filing of this quarterly report on Form 10-Q.

FREIT’s Board of Trustees has unanimously approved a proposal to change FREIT’s form of organization from a New Jersey real estate investment trust to a Maryland corporation (the “Reincorporation”). The effect of the Reincorporation will be to change the law applicable to our affairs from New Jersey law to Maryland law. If approved by shareholders at the Annual Meeting of Shareholders on May 6, 2021, the Reincorporation will be accomplished by the merger of FREIT with and into its newly formed, wholly owned subsidiary, First Real Estate Investment Trust of New Jersey, Inc. (“FREIT Maryland”). On the effective date of the Reincorporation, the separate existence of FREIT will cease and FREIT Maryland, will succeed to all the business, properties, assets and liabilities of FREIT. Holders of shares of beneficial interest in FREIT will receive one newly issued share of common stock of FREIT Maryland for each share of FREIT that they own, without any action of shareholders required. We believe that after the Reincorporation, we will continue to be organized and will continue to operate in such a manner as to qualify for taxation as a REIT under the Internal Revenue Code of 1986, as amended.

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

FREIT Maryland is an equity real estate investment trust (“REIT”) that is self-administered and externally managed. FREIT Maryland owns a portfolio of residential apartment and commercial properties. ~~FREIT’s~~FREIT Maryland’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~~rents derived from operating commercial properties. ~~FREIT’s~~FREIT Maryland’s properties are primarily located in northern New Jersey ~~Maryland~~ and New York.

COVID-19 Pandemic: The international spread of COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020. The extent to which this pandemic could continue to affect our financial condition, liquidity, and results of operations is difficult to predict and depends on evolving factors, including: duration, scope, government actions, and other social responses. Beginning in March 2020 and throughout most of 2020, many states in the U.S., including New Jersey, New York and Maryland, where our properties ~~are~~were located, implemented stay-at-home and ~~shutdown~~shut down orders for all "non-essential" business and activity in an aggressive effort to mitigate the spread of COVID-19. ~~These orders continue to evolve resulting in a full or partial lifting of these restrictions at various points. While the United States has experienced a second wave of this pandemic over~~Over the past ~~several months, the distribution of~~year, vaccinations ~~has begun.~~

As the impact of the pandemic has been evolving, it continues to cause uncertainty and volatility in the financial markets. Many U.S. industries and businesses have been negatively affected and millions of people have filed for unemployment resulting in the U.S. unemployment rate rising to 14.7% in April 2020, which was the highest recorded rate since the Great Depression. Since April 2020, the U.S unemployment rate has declined to 6.3% as of January 2021, as many businesses continue to reopen and rehire employees following many of the COVID-19 virus were widely distributed among the general U.S. population which resulted in loosened restrictions previously mandated ~~shutdown orders.~~on our tenants identified as nonessential. However, the ~~jobless rate remains well above the pre-pandemic levels~~potential emergence of ~~about 3.5%.~~vaccine-resistant variants of COVID-19 could trigger restrictions to be put back in place. Such restrictions may include mandatory business shut-downs, reduced business operations and social distancing requirements. The COVID-19 pandemic and the actions taken by individuals, businesses and government authorities to reduce its spread have caused substantial lost business revenue, changes in consumer behavior and large reductions in liquidity and fair value of many assets. ~~These~~

As the impact of the pandemic evolves, it continues to cause uncertainty and ~~other adverse conditions that may unfold~~volatility in the ~~future are expected~~financial markets. Many U.S. industries and businesses were negatively affected and millions of people filed for unemployment resulting in the U.S. unemployment rate rising to 14.7% in April 2020, which was the highest recorded rate since the Great Depression. Since April 2020, the U.S unemployment rate has declined to 4% as of January 2022, as many businesses continue ~~until such time as government shutdown~~to reopen and rehire employees following many of the COVID-19 mandated shut down orders ~~are fully lifted,~~being lifted. However, the jobless rate remains above the pre-pandemic levels of about 3.5%. Additionally, the annual inflation rate in the U.S. has accelerated to 7.5% in January 2022, the highest since 1982, which is primarily driven by soaring energy costs, labor shortages and business operations and commercial activity can fully resume. The lifting of all government shutdown orders cannot be predicted with any certainty. Further, even after such orders are fully lifted, the resumption of business operations and commercial activity will depend on several factors, including prevailing sentiments among workers and consumers regarding the safety of resuming public activity, and cannot be predicted with any certainty.supply disruptions.

Despite the COVID-19 pandemic and preventive measures taken to mitigate the spread, our residential properties ~~continue~~continued to generate cash flow. With the exception of the Icon at the Rotunda property, the annual average occupancy rates were approximately 94.6% or higher for the three months ended January 31, 2021. The tenants at these properties, for the most part, continue to pay their rent. The annual average occupancy rate at the Icon increased from 91.5% for the fiscal year ended October 31, 2020 to 93.1% for the three months ended January 31, 2021 which is primarily attributed to an increase in tenants who attend either Loyola University or Johns Hopkins University, both of which are in close proximity to the Icon and are offering more in-person classes in the spring semester than they did in the fall semester.

At our commercial properties, with the exception of grocery stores and other "essential" businesses, many of our retail tenants have been ~~and continue to be~~ adversely affected by the previously mandated ~~shutdowns or~~shut downs and the continued imposed restrictions as many of these tenants have not been able to open or resume operations at full capacity. The average annual occupancy rate for the commercial properties has declined from 81.5% for the three months ended January 31, 2020 to approximately 77.1% for the three months ended January 31, 2021. During the first quarter of Fiscal 2021, Pet Valu, Inc., a pet store tenant, vacated several stores located in shopping centers owned by FREIT affiliates (Wayne PSC, Damascus Centre and Grande Rotunda) and terminated the related leases early paying an aggregate lease termination fee in the amount of approximately $260,000 (with a consolidatedlingering impact to ~~FREIT~~consumer

sentiment and preferences for safety amid the reemergence of approximately $140,000). Until the space is re-leased at each of these properties, FREIT’s operating results will be adversely impacted from the loss of base rent and additional rent of approximately $0.4 million (with a consolidated impact to FREIT of approximately $0.2 million) on an annualized basis. The overall average cash realization for the commercial properties excluding the office space at the Rotunda property, based on monthly billings as compared to monthly cash collections from April 2020 through January 2021, was approximately 82%.other COVID-19 variants. The Company is closely monitoring changes in the collectability assessment of its tenant receivables as a result of certain tenants suffering adverse financial consequences related to the COVID-19 pandemic. For the three months ended January 31, 2022 and 2021, rental revenue deemed uncollectible of approximately $0.1 million and $0.6 million (with a consolidated impact to FREIT Maryland of approximately $0.1 million and $0.4 million), respectively, was classified as a reduction in rental revenue based on our assessment of the probability of collecting substantially all of the remaining rents for certain tenants. ~~As of January~~During the period beginning March 2020 through October 31, 2021, FREIT Maryland has applied, net of amounts subsequently paid back by tenants, an aggregate of approximately ~~$405,000~~$397,000 of security deposits from its commercial tenants to outstanding receivables due. For the three months ended January 31, ~~2021, on~~2022, there were no security deposits from its commercial tenants applied to outstanding receivables due. On a case by case basis, FREIT Maryland has offered ~~some commercial tenants~~ rent abatements ~~over a specified time period~~ totaling approximately $9,000 and $50,000 (with a consolidated impact to FREIT Maryland of approximately $9,000 and $31,000)~~. FREIT has not offered any new~~ for the three months ended January 31, 2022 and 2021, respectively. There were no significant deferrals of rent over a specified time period ~~during~~offered to its commercial tenants for the three months ended January 31, 2022 and 2021. FREIT Maryland currently remains in active discussions and negotiations with these impacted retail tenants.

~~Through the end of the fiscal quarter~~three months ended January 31, ~~2021,~~2022, we have experienced a positive cash flow from operations with cash provided by operations of approximately ~~$5.1~~$2.9 million. This could change based on the duration of the pandemic, which is uncertain. We believe that our cash balance as of January 31, ~~2021~~2022 of approximately ~~$39.8~~$95.4 million coupled with a $13 million available line of credit (available through October 31, 2023, see Note 9)9 to FREIT Maryland’s condensed consolidated financial statements for further details) and the additional $7.5 million in funds available to be drawn upon on the Boulders loan (See Note 9 to FREIT Maryland’s condensed consolidated financial statements for further details) will provide us with sufficient liquidity for at least the next twelve months from the filing of this quarterly report on Form 10-Q.

The extent of the effects of COVID-19 on our business, results of operations, cash flows, value of our real estate assets and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty. ~~However, we believe the actions we have taken and continue~~(See Note 16 to ~~take will help minimize interruptions to our operations and will put us in the best position to participate in the economic recovery as the recovery occurs.~~ FREIT will continue to actively monitor the effects of the pandemic, including governmental directives in the jurisdictions in which we operate and the recommendations of public health authorities, and will, as needed, takeMaryland’s condensed consolidated financial statements for further ~~measures to adapt our business in the best interests of our shareholders and personnel.~~details.)

Residential Properties: While our residential properties continue to generate positive cash flow, the impact COVID-19 and the significant rise in inflation may have on these properties over the next year is ~~uncertain and will depend on the duration of the pandemic and the reopening of the economy.~~uncertain.

Commercial Properties: There continues to be uncertainty in the retail environment that could have an adverse impact on ~~FREIT’s~~FREIT Maryland’s retail tenants, which could have an adverse impact on ~~FREIT. As restrictions continue to evolve,~~FREIT Maryland. The impact COVID-19 and the ~~impact COVID-19~~significant rise in inflation may have on the operating and financial performance of our commercial properties ~~over the next year~~ is currently ~~uncertain~~uncertain.

On November 22, 2021, certain affiliates (the “Maryland Sellers”) of FREIT Maryland entered into a Purchase and ~~will depend on certain developments, including, among others,~~Sale Agreement (the “Maryland Purchase and Sale Agreement”) with MCB Acquisition Company, LLC (the “Maryland Purchaser”), a third party, pursuant to which the ~~impact of COVID-19 on our tenants, the magnitude and duration of the pandemic, including its impact on store closing and social distancing rules which may impact a tenant’s ability~~Sellers agreed to ~~generate sales at sufficient levels to cover operating costs, including rent and the rollout of the vaccinations~~sell three properties to the ~~population.~~

~~Burlington Coat Factory (“Burlington”~~Maryland Purchaser. The properties consisted of retail and office space and a residential apartment community owned by Grande Rotunda, LLC (the “Rotunda Property”), ~~which does business as~~ a ~~retail tenant at~~shopping center owned by Damascus Centre, LLC (the “Damascus Property”), and a shopping center owned by WestFREIT Corp. (the “Westridge Square Property”). FREIT Maryland owns 100% of its subsidiary, WestFREIT Corp. (“WestFREIT”), a 60% interest in Grande Rotunda, LLC (“Grande Rotunda”), the joint venture that owned the Rotunda Property, and a 70% interest in Damascus Centre, LLC (“Damascus Centre”), the joint venture that owned the Damascus Property.

The original purchase price for the Rotunda Property, the Damascus Property and the Westridge Square ~~Shopping Center located~~Property (collectively the “Maryland Properties”) under the Maryland Purchase and Sale Agreement was reduced by $2,723,000 from $267,000,000 to $248,750,269, after giving effect to the $15,526,731 escrow deposit described below. This reduction in ~~Frederick,~~the sales price was to account for improvements and repairs to the Maryland Properties and miscellaneous items identified by the Maryland Purchaser in the course of its due diligence inspection. Additionally, the Maryland Purchaser was obligated under the Maryland Purchase and Sale Agreement to deposit a total of $15,526,731 in escrow with respect to certain leases at the Maryland Properties, which have not been executed or where the rent commencement date has not exercised its option to renew its lease which is set to expire on November 30, 2021. The Company is currently engaged in discussions with Burlington in regards to extending its lease at this center. If Burlington does not extend its lease, FREIT’s operating results will be adversely impacted by the loss of base rent and additional rent of approximately $1 million on an annualized basis from this tenant.

~~Reincorporation:~~ FREIT’s Board has unanimously approved a proposal to change FREIT’s form of organization from a New Jersey real estate investment trust to a Maryland corporation (the “Reincorporation”). The effectoccurred or economic obligations of the ~~Reincorporation will~~Sellers under certain leases remain unpaid. Although there can be no assurance, a portion of the $15,526,731 escrow deposit (the “Maryland Purchaser Escrow Payment”) may be paid to ~~change~~ the ~~law applicable to our affairs from New Jersey law to Maryland law. If approved by shareholders~~Sellers depending upon the outcome of construction and leasing activities at the ~~Annual Meeting~~Maryland Properties. The Maryland Purchaser Escrow Payment Agreement provides for among other things, monthly disbursements from escrow to the Maryland Purchaser related to the aforementioned tenant lease agreements until the earlier of ~~Shareholders on May 6, 2021,~~(i) the Reincorporation will be accomplished by the merger of FREIT with and into its newly formed, wholly owned subsidiary, First Real Estate Investment Trust of New Jersey, Inc. (“FREIT Maryland”). On the effectiverent commencement date of the ~~Reincorporation,~~respective tenant lease agreements or (ii) 5-years from the ~~separate existence~~date of ~~FREIT will cease~~the agreement. Release and amounts of escrowed funds to FREIT Maryland, ~~will succeed~~generally, is contingent on the success and timing of future leasing activities at the Maryland Properties.

The sale of the Maryland Properties having a total net book value of $171.8 million resulted in net proceeds from the sale of approximately $51.6 million, after payment of related mortgage debt in the amount of $155.8 million and the corresponding swap breakage fees of approximately $213,000 related to ~~all~~ the ~~business, properties, assets~~early termination of the interest rate swap contracts on the Damascus Property loan, payment of loans (including interest) to each of the partners in Grande Rotunda in the amount of approximately $31 million and ~~liabilities~~certain transactional expenses and transfer taxes including a brokerage fee due to Hekemian & Co. of ~~FREIT. Holders~~approximately $6.2 million. The sale of ~~shares~~the Maryland Properties resulted in a net gain of ~~beneficial interest in FREIT will receive one newly issued share of common stock of~~approximately $70 million (with a consolidated impact to FREIT Maryland ~~for each share~~ of ~~FREIT that they own, without any action~~approximately $46.3 million) which includes approximately $9.3 million of ~~shareholders required. We believe that after the Reincorporation, we will continue~~proceeds anticipated to be ~~organized~~released from the $15,526,731 of funds held in escrow (included in “Funds held in post-closing escrow” on the accompanying condensed consolidated balance sheet as of January 31, 2022), a write-off of the straight-line rent receivable of approximately $2.9 million and ~~will continue~~a write-off of unamortized lease commissions of approximately $1.7 million. See Note 7 to ~~operate in such a manner as to qualify for taxation as a REIT under the Internal Revenue Code of 1986, as amended. (See Note 17 to FREIT’s~~FREIT Maryland’s condensed consolidated financial statements for ~~further details.)~~additional details on the sale of these three properties.

Debt Financing Availability: Financing has been available to FREIT Maryland and its affiliates. The lis pendens filed in connection with the legal proceeding between FREIT Maryland and certain of its affiliates and Sinatra Properties, LLC ~~may adversely affect FREIT’s ability~~have been dismissed by the Court pursuant to ~~refinance certain~~the Order entered on February 4, 2022 discussed elsewhere in this report. (See Note 6 to FREIT Maryland’s condensed consolidated financial statements). Accordingly, subject to the possible challenge of ~~its residential properties.~~the Court’s Order by Sinatra Properties, LLC the future sale or financing of these properties is not affected by the lis pendens.

On ~~February 7, 2018, Grande Rotunda, LLC (“Grande Rotunda”), a consolidated subsidiary,~~December 30, 2021, FREIT Maryland refinanced its construction loan with a new loan held by Aareal Capital Corporation in the amount of approximately $118.5 million with additional funding which was available through February 6, 2021 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 had a maturity date of February 6, 2021 with two one-year options to extend the maturity of this loan, subject to certain requirements as provided for in the loan agreement. Grande Rotunda had purchased an interest rate cap on LIBOR for the full amount that could have been drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda had purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that could have been drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year, which matured on March 5, 2021. At January 31, 2021, the total amount outstanding on this loan was approximately $118.5 million and the interest rate was approximately 2.99%. Effective February 6, 2021, Grande Rotunda exercised the first extension option on this loan with a balance in the amount of approximately $118.5 million, extending the loan one year with a new maturity date of February 6, 2022, which may be extended further for an additional one-year term at Grande Rotunda’s option. Principal payments in the amount of $500,000 per quarter are required in this first extension period and principal payments in the amount of $750,000 per quarter are required in the second extension period, if exercised. Additionally, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2021, for the loan amount of approximately $118.5 million, capping the one-month LIBOR rate at 3% for one year expiring on February 6, 2022.

~~On September 30, 2020, Westwood Hills, LLC (“Westwood Hills”), a consolidated subsidiary, refinanced its $19.2~~$14.4 million loan (which would have matured on ~~November~~February 1, ~~2020)~~2022) on its Boulders property located in Rockaway, New Jersey with a new loan held by ConnectOne Bank in the amount of ~~$25,000,000,~~$7,500,000, with additional funding available to be drawn upon in the amount of $7,500,000 for corporate needs inclusive of $250,000 for legal fees potentially incurred by the lender related to the lis pendens on this ~~property.~~property resulting from the legal proceeding between FREIT Maryland and certain of its affiliates and Sinatra Properties, LLC (See Note 6 to ~~FREIT’s~~FREIT Maryland’s condensed consolidated financial ~~statements for additional details in regards to the lis pendens.)~~statements). This loan ~~secured by an apartment building in Westwood, New Jersey,~~ is interest-only ~~based on a floating rate at 400 basis points over the one-month LIBOR rate with a floor of 4.15%~~ and has a maturity date of ~~October~~January 1, ~~2022~~2024 with the option of ~~Westwood Hills~~FREIT Maryland to extend for ~~two (2) additional six (6)-month periods~~one year from the maturity date, subject to certain provisions of the loan agreement. This refinancing ~~resulted in: (i)~~will provide annual debt service savings of approximately $1,173,000 as a ~~change~~result of the reduction in the principal amount, a reduction in the annual interest rate from a fixed rate of ~~4.62%~~5.37% to a variable rate with a floor of 4.15% and (ii) net refinancing proceeds of approximately $5.6 million that were distributed to the partners in Westwood Hills with FREIT receiving approximately $2.2 million based on its 40% membership interest in Westwood Hills. As of January 31, 2021, approximately $25,000,000 of this loan was drawn and outstanding and the interest rate was based on the floor of 4.15%.

On April 3, 2019, WestFREIT Corp. (owned 100% by FREIT) exercised its option to extend its loan secured by the Westridge Square shopping center in Frederick, Maryland, held by M&T Bank, with a then outstanding balance of approximately $22.5 million, for twelve months. Effective beginning on June 1, 2019, the extension of this loan required 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 had a maturity date of May 1, 2020. This loan was extended to November 1, 2020 and further extended to January 31, 2021 under the same terms and conditions of the existing agreement. As of January 31, 2021, approximately $21.6 million of this loan was outstanding and the interest rate was approximately 2.59%. WestFREIT Corp. entered into a loan extension and modification agreement with M&T Bank, effective beginning on February 1, 2021, which requires monthly principal payments of $49,250 plus interest based on a floating interest rate equal to 255 basis points over the one-month LIBOR and has a maturity date of January 31, 2022, with the option to extend for an additional one-year period through January 31, 2023, subject to certain requirements as provided for in the loan agreement including the lease-up of certain space.

FREIT’s revolving line of credit provided by the Provident Bank was renewed for a three-year term ending on October 31, 2023. 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 is $13 million and the interest rate on the amount outstanding is based on a floating interestfixed rate of ~~prime minus 25 basis points with a floor of 3.75%. As of January 31, 2021~~2.85% and ~~October 31, 2020, there was no amount outstanding and $13 million was available~~interest-only payments being required under ~~the line of credit.~~this new loan.

In accordance with ~~the~~certain loan ~~agreement for each of the loans described above,~~agreements, FREIT Maryland may be required to meet or maintain certain financial covenants throughout the term of the loan. As a result of the COVID-19 pandemic, rent losses and the planning for a potential redevelopment of its shopping center, as of October 31, 2021, Wayne PSC was not, and currently is not, in compliance with a look back debt service coverage ratio loan covenant contained in the mortgage loan agreement held by People’s United Bank. As of January 31, 2022, this loan has a balance of approximately $22.4 million. Although the Company continues to make its required debt service payments in accordance with the loan agreement, it is unable to comply with this covenant. As such, the bank could exercise its remedies under the loan agreement including, among other things, requiring a partial or full repayment of the loan with a balance of approximately $22.4 million as of January 31, 2022. The Company is currently working with the lender to remediate this covenant default. As of the date of the filing of this quarterly report on Form 10-Q, the bank has not declared this loan to be in default. Until such time as a definitive agreement is entered into, there can be no assurance the loan covenant will be amended and the bank will not declare this loan to be in default.

Operating Cash Flow: FREIT Maryland 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 which are expected to be refinanced and/or extended), real estate taxes, recurring capital improvements at its 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.

Pursuant to the SEC disclosure guidance for "Critical Accounting Policies," the SEC defines Critical Accounting Policies as those that require the application of 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, ~~2020,~~2021, have been applied consistently as of January 31, ~~2021,~~2022, and for the three months ended January 31, ~~2021~~2022 and ~~2020.~~2021. We believe that the following accounting policies or estimates require the application of management's most difficult, subjective, or complex judgments.

Revenue Recognition: Base rents, additional rents based on tenants' sales volume and reimbursement of the 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 receivable represent unbilled rents receivable to the extent straight-line rents exceed current rents billed in accordance with lease agreements. Before FREIT Maryland can recognize revenue, it is required to assess, among other things, its collectability.

Valuation of Long-Lived Assets: FREIT Maryland assesses 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 Maryland 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 Maryland's management. While FREIT Maryland believes 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~~FREIT Maryland’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 Maryland 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~~FREIT Maryland’s condensed consolidated financial statements for recently issued accounting standards.

Real estate revenue for the three months ended January 31, ~~2021~~2022 (“Current Quarter”) decreased ~~18.2%~~16.5% to ~~$12,754,000,~~$10,649,000, compared to ~~$15,593,000~~$12,754,000 for the three months ended January 31, ~~2020~~2021 (“Prior Year’s Quarter”). The ~~decline~~decrease in revenue for the Current Quarter was primarily attributable to the following: (a) a ~~decline in revenue~~decrease of approximately $2$2.3 million ~~resulting from the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results due~~attributed to the ~~conversion to a tenancy-in-common form of ownership (“TIC”) as of February 28, 2020;~~Maryland Properties sold in the Current Quarter; (b) a ~~reduction in total revenue in the amount~~decrease of approximately ~~$0.6~~$0.1 million ~~as compared to~~primarily driven by lease termination fees received in the Prior Year’s Quarter due to rental revenue being deemed uncollectible and classified as a reduction in rental revenue attributed to commercial tenants suffering adverse financial consequences as a result of the COVID-19 pandemic; and (c) a decline in total revenue of approximately $0.2 million, which includes lease termination payments received from Pet Valu, Inc., a former pet store tenant at the Preakness Shopping Center located in Wayne, New Jersey; offset by (c) an increase from the residential segment, excluding the Icon at the Rotunda Property sold in the ~~amount~~Current Quarter, of approximately ~~$0.2~~$0.3 million ~~and a settlement payment in the amount of approximately $0.2 million received from Cobb Theatres,~~ primarily driven by ~~a decline~~an increase in the average occupancy rate ~~for the commercial properties~~ to ~~77.1%~~98.9% from ~~81.5%~~97.3% in the Prior Year’s Quarter.

Net income ~~(loss)~~ attributable to common equity (“net ~~income (loss)-common~~income-common equity”) for the Current Quarter was ~~net income of $558,000~~$45,777,000 ($~~0.08~~6.51 per share basic and $6.45 per share diluted), compared to ~~net loss of $2,262,000 (($0.32)~~$558,000 ($0.08 per share basic and diluted), for the Prior Year’s Quarter. The increase in net income in the Current Quarter was primarily driven by the following: (a) a decrease in Special Committee third party advisory, legal and other expenses incurred of approximately $3.4 million as the Special Committee was eliminated in May 2020; (b) a decrease in financing costs of approximately $0.6 million (with a consolidated impact to FREIT of approximately $0.4 million), (excluding the impact of the deconsolidation of the operating results of the Pierre Towers from FREIT’s operating results of approximately $0.5 million in interest expense), driven by a decline in interest rates on variable mortgage loans; offset by (c) a reduction in total revenue, excluding the impact of the conversion of the Pierre Towers property to a TIC, in the amount of approximately $0.8 million (with a consolidated impact to FREIT of approximately $0.5 million) as explained above; and (d) an increase in General & Administrative expenses of approximately $0.5 million primarily driven by an increase in legal costs attributed to the legal proceedings between FREIT and certain of its affiliates and Sinatra Properties, LLC. (Refer to the segment disclosure below for a more detailed discussion of the financial performance of FREIT’s commercial and residential segments.)

The schedule below provides a detailed analysis of the major changes that impacted net ~~income (loss)-common~~income-common equity for the three months ended January 31, ~~2021~~2022 and ~~2020:~~2021:

Income from real estate operations:
Commercial properties
$
3,518
$
4,353
$
(835
)
Residential properties
3,945
4,875
(930
)
Total income from real estate operations
7,463
9,228
(1,765
)

Financing costs:
Fixed rate mortgages
(1,461
)
(2,211
)
750
Floating rate mortgages
(1,316
)
(1,632
)
316
Other - Corporate interest
(61
)
(113
)
52
Mortgage cost amortization
(294
)
(279
)
(15
)
Total financing costs
(3,132
)
(4,235
)
1,103

Investment income
30
72
(42
)

General & administrative expenses:
Accounting fees
(154
)
(165
)
11
Legal and professional fees
(532
)
(18
)
(514
)
Trustees and consultant fees
(237
)
(419
)
182
Stock option expense
(12
)
(12
)
-
Corporate expenses
(325
)
(158
)
(167
)
Total general & administrative expenses
(1,260
)
(772
)
(488
)

Special committee third party advisory, legal and other expenses
-
(3,382
)
3,382
Depreciation
(2,295
)
(2,932
)
637
Loss on investment in tenancy-in-common
(27
)
-
(27
)
Net income (loss)
779
(2,021
)
2,800

Net income attributable to noncontrolling interests in subsidiaries
(221
)
(241
)
20

Net income (loss) attributable to common equity
$
558
$
(2,262
)
$
2,820

The condensed consolidated results of operations for the Current Quarter are not necessarily indicative of the results to be expected for the full year or any other period. The table above includes income from real estate operations which is a non-GAAP financial measure and is not a measure of operating results or cash flow as measured by GAAP, and is not necessarily indicative of cash available to fund cash needs.

Adjusted net (loss) income for the Current Quarter was adjusted net loss of $850,000 ($0.12 per share basic and diluted), compared to adjusted net income of $779,000 ($0.11 per share basic and diluted), for the Prior Year’s Quarter. Adjusted net (loss) 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 on sale of Maryland properties in Fiscal 2022.

The decrease in adjusted net income for the Current Quarter was primarily driven by the following: (a) a decrease of approximately $1.4 million (with a consolidated impact to FREIT Maryland of approximately $0.9 million) attributed to the Maryland Properties sold in the Current Quarter; (b) an increase in general and administrative expenses (“G&A”) of approximately $0.1 million primarily driven by an increase in legal costs attributed to the legal proceeding between FREIT Maryland and certain of its affiliates and Sinatra Properties, LLC; (c) an increase in loss on investment in tenancy-in-common of approximately $0.1 million; (d) an increase in adjusted net loss at the Preakness Shopping Center of approximately $0.3 million (with a consolidated impact to FREIT Maryland of approximately $0.1 million) primarily attributed to a decline in revenue of approximately $0.1 million as explained above, an increase in snow removal costs of approximately $0.1 million and an increase in depreciation expense of approximately $0.1 million resulting from the write-off of tenant improvements; offset by (e) an increase of approximately $0.2 million (with a consolidated impact to FREIT Maryland of approximately $0.2 million) from the residential segment, excluding the Maryland Properties sold, primarily attributed to the increase in revenue as explained above. (Refer to the segment disclosure below for a more detailed discussion of the financial performance of FREIT Maryland’s commercial and residential segments.)

The following table sets forth comparative net operating income ("NOI") data for ~~FREIT’s~~FREIT Maryland’s real estate segments and reconciles the NOI to condensed consolidated net ~~income (loss)-common~~income-common equity for the Current Quarter as compared to the Prior Year’s Quarter (see below for definition of NOI):

Commercial
Residential
Combined
Three Months Ended
January 31,
Increase
(Decrease)
Three Months Ended
January 31,
Increase
(Decrease)
Three Months Ended
January 31,
2021
2020
$
%
2021
2020
$
%
2021
2020
(In Thousands)
(In Thousands)
(In Thousands)

Rental income
$
4,551
$
5,124
$
(573
)
-11.2%
$
6,505
$
8,176
$
(1,671
)
-20.4%
$
11,056
$
13,300
Reimbursements
1,504
1,877
(373
)
-19.9%
40
39
1
2.6%
1,544
1,916
Other
296
13
283
2176.9%
64
301
(237
)
-78.7%
360
314
Total revenue
6,351
7,014
(663
)
-9.5%
6,609
8,516
(1,907
)
-22.4%
12,960
15,530
Operating expenses
2,627
2,724
(97
)
-3.6%
2,664
3,641
(977
)
-26.8%
5,291
6,365
Net operating income
$
3,724
$
4,290
$
(566
)
-13.2%
$
3,945
$
4,875
$
(930
)
-19.1%
7,669
9,165

Average Occupancy %
77.1%
81.5%
-4.4%
96.0%
*
94.1%
*
1.9%

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 Maryland assesses and measures segment operating results based on NOI.

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

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.

The commercial segment contains ~~eight (8)~~five (5) separate ~~properties. Seven~~properties, excluding the Rotunda Property, the Westridge Square Property and the Damascus Property which were sold on December 30, 2021, January 7, 2022 and January 10, 2022, respectively. Three of these properties are multi-tenanted retail ~~or office~~ centers, one is a single tenanted retail center located in Glen Rock, New Jersey and one is single tenanted on land located in Rockaway, New Jersey owned by FREIT Maryland from which it receives monthly rental income from a tenant who has built and operates a bank branch on the land. (See Note 7 to FREIT Maryland’s condensed consolidated financial statements for additional details on the sale of these three properties.)

As indicated in the table above under the caption Segment Information, total revenue and NOI from ~~FREIT’s~~FREIT Maryland’s commercial segment for the Current Quarter decreased by ~~9.5%~~32% and ~~13.2%~~56.1%, respectively, as compared to the Prior Year’s Quarter. Average occupancy for all commercial properties for the Current Quarter decreased by ~~4.4%~~1.3%, as compared to the Prior Year’s Quarter.

The decline in revenue for the Current Quarter was primarily attributable to the following: (a) a decrease of approximately $1.9 million (excluding an increase in the straight-line rent receivable of approximately $0.2 million) attributed to the Maryland Properties sold in the Current Quarter; and (b) a decrease of approximately $0.1 million attributed to lease termination fees received in the Prior Year’s Quarter from Pet Valu, Inc., a former pet store tenant at the Preakness Shopping Center. The decrease in NOI for the Current Quarter was primarily attributable to the following: (a) a ~~reduction in total revenue~~decrease of approximately $1.8 million attributed to the Maryland Properties sold in the amount of approximately $0.4 million (excluding the straight-line rent receivable write-off of approximately $0.2 million) due to rental revenue being deemed uncollectible and classified as a reduction in rental revenue attributed to commercial tenants suffering adverse financial consequences as a result of the COVID-19 pandemic;Current Quarter; and (b) a ~~decline in total revenue~~decrease of approximately $0.2 million which includes lease termination payments received from Pet Valu in the amount of approximately $0.2 million and a settlement payment in the amount of approximately $0.2 million received from Cobb Theatres, primarily driven byattributed to a decline in revenue of approximately $0.1 million as explained above and an increase in snow removal costs of approximately $0.1 million at the ~~average occupancy rate for the commercial properties to 77.1% from 81.5% in the Prior Year’s Quarter.~~Preakness Shopping Center.

Same Property Operating Results: ~~FREIT’s~~FREIT Maryland’s commercial segment currently contains ~~eight (8)~~five (5) same properties. (See definition of same property under Segment Information above.) ~~Since~~The Rotunda property, the Westridge Square Property and the Damascus Property were excluded from same property results for all ~~of FREIT’s commercial~~periods presented because these properties ~~are considered same properties~~were sold in the Current Quarter. Same property revenue and NOI for the Current Quarter ~~refer~~decreased by 6.8% and 24%, respectively, as compared to the Prior Year’s Quarter. The changes resulted from the factors discussed in the immediately preceding ~~paragraph for discussion of changes in same property results.~~paragraph.

Leasing: The following tables reflect leasing activity at ~~FREIT’s~~FREIT Maryland’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:~~

~~During~~Quarter (excluding any leases executed for the ~~first quarter of Fiscal 2021, Pet Valu, Inc., a pet store tenant, vacated several stores located in shopping centers owned by FREIT affiliates (Wayne PSC,~~Rotunda Property, the Westridge Square Property and the Damascus ~~Centre and Grande Rotunda) and terminated the related leases early paying an aggregate lease termination fee~~Property which were sold in the ~~amount~~Current Quarter):

(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 approximately $260,000 (with a consolidated impact to FREIT of approximately $140,000). Until the space is re-leased at each of these properties, FREIT’s operating results will be adversely impacted from the loss of base rent and additional rent of approximately $0.4 million (with a consolidated impact to FREIT of approximately $0.2 million) on an annualized basis.

On April 26, 2020, CB Theatre Experience, LLC filed for protection under Chapter 11 of the bankruptcy code as disclosed in the bankruptcy filings. The CB Theatre Experience, LLC (known as “Cobb Theatre”) at the Rotunda retail property in Baltimore, Maryland has been closed since April 2020 due to the mandated shutdown related to the COVID-19 pandemic and on July 14, 2020 rejected its lease at this property as of June 30, 2020. Until this space is re-leased, FREIT’s operating results will be adversely impacted from loss of rent and additional rent of approximately $1.1 million (with a consolidated impact to FREIT of approximately $0.7 million) on an annualized basis. During the first quarter ended January 31, 2021, FREIT received a settlement payment from Cobb Theatre in the amount of approximately $0.2 million (with a consolidated impact to FREIT of approximately $0.1 million). The Company is currently exploring all possible options for the re-leasing of this space.existing tenant leases.

FREIT Maryland currently operates ~~seven (7)~~six (6) multi-family apartment buildings or complexes totaling ~~1,171~~792 apartment units. On February 28, 2020, FREIT reorganized its subsidiary S and A Commercial Associates Limited Partnership (“S&A”) from a partnership into a TIC. Prior to this reorganization, FREIT owned a 65% membership interest in S&A, which owned 100% ofunits, excluding the ~~Pierre Towers property located in Hackensack, NJ through its 100% interest in Pierre Towers, LLC. Accordingly, FREIT consolidated~~Icon at the financial statements of S&A and its subsidiary to include 100% of the subsidiary’s assets, liabilities, operations and cash flows with the interest not owned by FREIT reflected as “noncontrolling interests in subsidiary” and all significant intercompany accounts and transactions were eliminated in consolidation.

~~Pursuant to the TIC agreement, FREIT ultimately acquired a 65% undivided interest in the Pierre Towers property~~Rotunda Property which was ~~formerly owned by S&A. Based~~sold on ~~the guidance of Accounting Standards Codification 810, “Consolidation~~”, FREIT’s investment in the TIC is accounted for under the equity method of accounting. While FREIT’s effective ownership percentage interest in the Pierre Towers property remains unchanged after the reorganization to a TIC, FREIT no longer has a controlling interest as the TIC is now under joint control.December 30, 2021. (See Note 57 to ~~FREIT’s~~FREIT Maryland’s condensed consolidated financial statements for ~~further details.~~additional details on the sale of the Rotunda Property.)

As indicated in the table above under the caption Segment Information, total revenue and NOI from ~~FREIT’s~~FREIT Maryland’s residential segment for the Current Quarter decreased by ~~22.4%~~4.1% and ~~19.1%~~6.3%, respectively, as compared to the Prior Year’s Quarter. Average occupancy for all residential properties for the Current Quarter increased by 1.6%, as compared to the Prior Year’s Quarter.

The ~~decline~~decrease in revenue for the Current Quarter was primarily attributable to the following: (a) a ~~deconsolidation~~decrease of ~~the operating results of the Pierre Towers property from FREIT’s operating results due~~approximately $0.6 million attributed to the ~~conversion to a TIC as of February 28, 2020 resulting~~Icon at the Rotunda Property sold in ~~a decline in revenue of approximately $2 million;~~the Current Quarter; offset by (b) ~~a $0.1~~an increase of approximately $0.3 million, ~~increase in revenue~~excluding the Icon at the Rotunda Property, primarily driven by ~~the~~an increase in the average occupancy ~~by approximately 1.9% over~~rate to 98.9% from 97.3% in the Prior Year’s Quarter. The ~~decline~~decrease in NOI for the Current Quarter was primarily attributable to the ~~deconsolidation~~following: (a) a decrease of ~~the operating results of the Pierre Towers property from FREIT’s operating results due~~approximately $0.4 million attributed to the ~~conversion to a TIC~~Icon at the Rotunda Property sold in the Current Quarter; offset by (b) an increase of approximately $0.2 million, excluding the Icon at the Rotunda Property, which was primarily driven by an increase in revenue as ~~of February 28, 2020.~~explained above.

Same Property Operating Results: ~~FREIT’s~~FREIT Maryland’s residential segment currently contains ~~seven (7)~~six (6) same properties. (See definition of same property under Segment Information above.) The ~~Pierre Towers~~Icon at the Rotunda property was excluded from same property results

for all periods presented because this property was ~~deconsolidated and converted to a TIC as of February 28, 2020.~~sold in the Current Quarter. Same property revenue and NOI for the Current Quarter increased by ~~1.9%~~7.5% and ~~2.4%~~7%, respectively, as compared to the Prior Year’s Quarter. The changes resulted from the factors discussed in the immediately preceding paragraph.

~~FREIT’s~~FREIT Maryland’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 Icon at the Rotunda property which was sold in the Current Quarter), at the end of the Current Quarter and the Prior Year’s Quarter were ~~$1,993~~$1,958 and ~~$1,919,~~$1,957, respectively. For comparability purposes, the average residential rent for the Prior Year’s Quarter has been restated to exclude the impact of the Pierre Towers due to the deconsolidation and conversion to a TIC in Fiscal 2020. 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 ~~$280,000~~$186,000 and ~~$272,000,~~$184,000, respectively.

Capital expenditures: Since all of ~~FREIT’s~~FREIT Maryland’s apartment communities, with the exception of the Boulders, Regency ~~Icon~~ and Station Place properties, were constructed more than 25 years ago, FREIT Maryland tends to spend more in any given year on maintenance and capital improvements than may be spent on newer properties. As a result of the COVID-19 global pandemic, only capital improvements deemed essential are being made at this time. Funds for these capital projects ~~will be~~are available from cash flow from the property's operations and cash reserves.

Total financing costs for the Current Quarter decreased by approximately ~~$1,103,000~~$204,000, or ~~26%~~6.5%, compared to the Prior Year’s Quarter which is primarily attributable to the following: (a) a decline of approximately $364,000 in interest on variable ~~mortgage~~rate mortgages primarily attributed to the pay-down in the Current Quarter of the loans outstanding on the Rotunda Property and the Westridge Square Property from the net proceeds of the sale; (b) an increase of approximately ~~$581,000 resulting from lower interest rates; and (b)~~$69,000 primarily attributed to the ~~deconsolidation~~write-off of the ~~Pierre Towers property from FREIT’s operating results due~~deferred mortgage costs on the loans associated with the sale of the Maryland Properties; offset by (c) an increase of approximately $213,000 attributed to a breakage fee on the early termination of the interest rate swap contracts relating to the ~~conversion to a TIC as~~loan outstanding on the Damascus property, which was repaid from the net proceeds of ~~February 28, 2020 resulting~~the sale of the Damascus property in ~~a decrease in net financing costs of approximately $484,000.~~the Current Quarter. (See Note 57 to ~~FREIT’s~~FREIT Maryland’s condensed consolidated financial statements for ~~further~~additional details on the ~~deconsolidation~~sale of ~~the Pierre Towers property.~~these three properties.)

G&A expense for the Current Quarter was ~~$1,260,000~~approximately $1,327,000 compared to ~~$772,000~~$1,260,000 for the Prior Year’s Quarter. The primary components of G&A are ~~accounting/auditing fees,~~ legal and professional fees, ~~Trustees’~~directors’ fees, corporate expenses and ~~consultant fees and corporate expenses.~~accounting/auditing fees. The increase in G&A costs for the Current Quarter was primarily driven by an increase in legal costs ~~of approximately $481,000 resulting from~~attributed to the legal ~~proceedings~~proceeding between FREIT Maryland and certain of its affiliates and Sinatra Properties, ~~LLC and approximately $140,000 in corporate expenses to reincorporate FREIT in the state of Maryland offset by a decline in Trustees’ and consultant fees of approximately $178,000.~~LLC.

~~Special Committee third party advisory, legal and other expenses~~Depreciation expense for the Current Quarter was $0approximately $1,820,000 compared to ~~$3,382,000 for the Prior Year’s Quarter. On May 7, 2020, the Board approved the elimination of the Special Committee as a committee of the Board and no further fees were incurred.~~

~~Depreciation expense from operations for the Current Quarter was~~ $2,295,000 ~~compared to $2,932,000~~ for the Prior Year’s Quarter. The decline in depreciation expense for the Current Quarter was primarily attributable to the following: (a) a ~~decline~~decrease of approximately $0.5 million attributed to the sale of the Maryland Properties in the ~~amount~~Current Quarter; offset by (b) an increase of approximately $345,000 resulting from the deconsolidation of the operating results of the Pierre Towers property from FREIT’s operating results as of February 28, 2020; and (b) a decline in the amount of approximately $292,000 related$0.1 million attributed to tenant improvements written off at the Preakness Shopping Center in ~~Fiscal 2020. (See Note 5 to FREIT’s condensed consolidated financial statements for further details on~~ the ~~deconsolidation of the Pierre Towers property.)~~Current Quarter.

Net cash provided by operating activities was approximately ~~$5.1~~$2.9 million for the Current Quarter compared to net cash ~~used in~~provided by operating activities of ~~$2.2 million~~approximately $5.2 for the Prior Year’s Quarter. FREIT Maryland 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 which are expected to be refinanced and/or extended), real estate taxes, dividends, recurring capital improvements at its 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, ~~2021,~~2022, FREIT Maryland had cash, cash equivalents and restricted cash totaling ~~$43.2~~$106.9 million, compared to ~~$39.5~~$39 million at October 31, ~~2020.~~2021. The increase in cash in the Current Quarter is primarily attributable to approximately ~~$5.1~~$252.3 million in net cash provided by investing activities including capital expenditures and $2.9 million in net cash provided by operating activities offset by approximately $1$187.3 million in net cash used in financing ~~activities~~activities. The increase in cash of approximately $67.9 million was primarily attributed to the following: (a) a distribution of net proceeds received from the sale of the Rotunda Property of approximately $54.2 million (inclusive of a loan repayment from Grande Rotunda of approximately $27.7 million and repayment of secured loans receivable including accrued interest held by certain members in Rotunda 100 of approximately ~~$0.4~~$5.1 million); (b) a distribution of net proceeds received from the sale of the Damascus Property of approximately $11.8 million; (c) anticipated funds of approximately $9.3 million to be released from funds held in post-closing escrow related to the sale of the Maryland Properties; offset by (d) a loan pay-down including closing costs of approximately $7.6 million attributed to the refinancing of the loan on the Boulders property; and (e) a net cash ~~used in investing activities including capital expenditures.~~

~~In Fiscal 2017, Grande Rotunda, LLC incurred substantial expenditures at~~outlay from the ~~Rotunda property related~~sale of the Westridge Square Property of approximately $0.7 million. (See Note 7 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 noFREIT Maryland’s condensed consolidated financial statements for additional funding available to draw. Accordingly, during Fiscal 2017 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, 2021 and October 31, 2020, Rotunda 100, LLC has funded Grande Rotunda, LLC with approximately $6 million and $5.9 million (including accrued interest), respectively, which is included in “Due to affiliate”details on the ~~accompanying condensed consolidated balance sheets.~~sale of these three properties.)

Credit Line: ~~FREIT’s~~FREIT Maryland’s revolving line of credit provided by ~~the~~ Provident Bank was renewed for a three-year term ending on October 31, 2023. 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~~FREIT Maryland’s Franklin Crossing Shopping Center in Franklin Lakes, New Jersey and retail space in Glen Rock, New Jersey. The total line of credit is $13 million and the interest rate on the amount outstanding is based on a floating interest rate of prime minus 25 basis points with a floor of 3.75%. As of January 31, ~~2021~~2022 and October 31, ~~2020,~~2021, there was no amount outstanding and $13 million was available under the line of credit.

Dividend: After careful consideration of FREIT Maryland’s projected operating results and cash needs, the Board declared a dividend of $0.10 per share in the first quarter which was paid on March 15, 2022 to stockholders of record on March 1, 2022. The Board will continue to evaluate the dividend on a quarterly basis.

As atof January 31, ~~2021, FREIT’s~~2022, FREIT Maryland’s aggregate outstanding mortgage debt was ~~$306.3~~$137.8 million, which bears a weighted average interest rate of ~~3.57%~~3.94% and an average life of approximately ~~3.19~~2.03 years. ~~FREIT’s fixed rate~~FREIT Maryland’s mortgages are subject to amortization schedules that are longer than the terms of the mortgages. As such, balloon payments (unpaid principal amounts at the mortgage due date) for all mortgage debt will be required as follows:

Fiscal Year	2021	2022	2023	2024	2025	2026	2027	2028	2029
($ in millions)
Mortgage "Balloon" Payments	$0.0	$151.5 (A)	$59.8	$9.0	$13.9	$18.6	$0.0	$10.5	$26.0

The following table shows the estimated fair value and net carrying value of ~~FREIT’s~~FREIT Maryland’s long-term debt at January 31, ~~2021~~2022 and October 31, ~~2020:~~2021:

FREIT Maryland expects to refinance the individual mortgages with new mortgages or exercise extension options when their terms expire. To this extent FREIT Maryland 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, ~~2021,~~2022, a 1% interest rate increase would reduce the fair value of ~~FREIT’s~~FREIT Maryland’s debt by ~~$5.4~~$4 million, and a 1% decrease would increase the fair value by ~~$5.7~~$4.3 million.

FREIT Maryland 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.~~stockholders.

On ~~February 7, 2018, Grande Rotunda~~December 30, 2021, FREIT Maryland refinanced its $14.4 million loan (which would have matured on February 1, 2022) on its Boulders property located in Rockaway, New Jersey with a new loan held by ConnectOne Bank in the amount of $7,500,000, with additional funding available to be drawn upon in the amount of $7,500,000 for corporate needs inclusive of $250,000 for legal fees potentially incurred by the lender related to the lis pendens on this property resulting from the legal proceeding between FREIT Maryland and certain of its affiliates and Sinatra Properties, LLC (See Note 6 to FREIT Maryland’s condensed consolidated financial statements). This loan is interest-only and has a maturity date of January 1, 2024 with the option of FREIT Maryland to extend for one year from the maturity date, subject to certain provisions of the loan agreement. This refinancing will provide annual debt service savings of approximately $1,173,000 as a result of the reduction in the principal amount, a reduction in the annual interest rate from a fixed rate of 5.37% to a fixed rate of 2.85% and interest-only payments being required under this new loan.

Interest rate swap contracts: To reduce interest rate volatility, FREIT Maryland 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 Maryland enters into these swap contracts with a counterparty that is usually a high-quality commercial bank. In essence, FREIT Maryland agrees to pay its counterparties a fixed rate of interest on a dollar amount of notional principal (which generally corresponds to FREIT Maryland’s mortgage debt) over a term equal to the term of the mortgage notes. FREIT Maryland’s counterparties, in return, agree to pay FREIT Maryland a short-term rate of interest - generally LIBOR - on that same notional amount over the same term as the mortgage notes.

FREIT Maryland has variable interest rate loans secured by its Damascus Centre, Regency, Wayne PSC and Station Place properties. To reduce interest rate fluctuations, FREIT Maryland 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 $16,200,000 ($14,838,000 at January 31, 2022) for the Regency swap, a notional amount of approximately $25,800,000 ($22,144,000 at January 31, 2022) for the Wayne PSC swap and a notional amount of approximately $12,350,000 ($11,917,000 at January 31, 2022) for the Station Place swap. On January 10, 2022, the property owned by Damascus Centre was sold and a portion of the proceeds from the sale was used to pay off the $18.2 million then outstanding balance of this loan and the corresponding swap breakage fees of approximately $213,000 related to the early termination of the interest rate swap contracts on this loan which was included as interest expense on the accompanying condensed consolidated statement of income for the three months ended January 31, 2022. (See Note 7 to FREIT Maryland’s condensed consolidated financial statements for further details.)

Interest rate cap contract: To limit exposure on interest rate volatility, FREIT Maryland uses an interest rate cap contract to cap a floating interest rate at a set pre-determined rate. FREIT Maryland 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 Maryland agrees to pay its counterparties a variable rate of interest on a dollar amount of notional principal (which generally corresponds to FREIT Maryland’s mortgage debt). Once the floating interest rate rises above the cap rate, FREIT Maryland’s counterparties, in return, agree to pay FREIT Maryland a short-term rate of interest above the cap on that same notional amount.

FREIT Maryland had a variable interest rate loan secured by its Rotunda Property. As part of the refinancing of Grande Rotunda’s construction loan with a new loan ~~held by~~from Aareal Capital Corporation, in the amount of approximately $118.5 million with additional funding which was available through February 6, 2021 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 had a maturity date of February 6, 2021 with two one-year options to extend the maturity of this loan, subject to certain requirements as provided for in the loan agreement. Grande Rotunda had purchased an interest rate cap contract on LIBOR for the full amount that could have been drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda had purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that could have been drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year, maturing on March 5, 2021. ~~At January 31, 2021, the total amount outstanding on this loan was approximately $118.5 million and the interest rate was approximately 2.99%.~~ Effective February 6, 2021, Grande Rotunda exercised the first extension option on this loan with a balance in the amount of approximately $118.5 million, extending

the loan one year with a new maturity date of February 6, 2022, which may be extended further for an additional one-year term at Grande Rotunda’s option. Principal payments in the amount of $500,000 per quarter are required in this first extension period and principal payments in the amount of $750,000 per quarter are required in the second extension period, if exercised.2022. Additionally, Grande Rotunda purchased an interest rate cap contract on LIBOR, with an effective date of March 5, 2021, for the loan amount of approximately $118.5 million, capping the one-month LIBOR rate at 3% for one year expiring on February 6, 2022.

On ~~September~~December 30, ~~2020, Westwood Hills refinanced its $19.2~~2021, the Rotunda Property owned by Grande Rotunda was sold, a portion of the proceeds from the sale was used to pay off the $116.5 million then outstanding balance of this loan ~~(which would have matured on November 1, 2020) with a new loan held by ConnectOne Bank in~~and the ~~amount of $25,000,000, with additional funding available in the amount of $250,000 for legal fees potentially incurred by the lender related to the lis pendens~~corresponding interest rate cap on this ~~property.~~loan matured with no settlement due at maturity. (See Note 67 to ~~FREIT’s~~FREIT Maryland’s condensed consolidated financial statements for additional details in regards to the lis pendens.) This loan, secured by an apartment building in Westwood, New Jersey, is interest-only based on a floating rate at 400 basis points over the one-month LIBOR rate with a floor of 4.15% and has a maturity date of October 1, 2022 with the option of Westwood Hills to extend for two (2) additional six (6)-month periods from the maturity date, subject to certain provisions of the loan agreement. This refinancing resulted in: (i) a change in the annual interest rate from a fixed rate of 4.62% to a variable rate with a floor of 4.15% and (ii) net refinancing proceeds of approximately $5.6 million that were distributed to the partners in Westwood Hills with FREIT receiving approximately $2.2 million based on its 40% membership interest in Westwood Hills. As of January 31, 2021, approximately $25,000,000 of this loan was drawn and outstanding and the interest rate was based on the floor of 4.15%.

On April 3, 2019, WestFREIT Corp. exercised its option to extend its loan secured by the Westridge Square shopping center in Frederick, Maryland, held by M&T Bank, with a then outstanding balance of approximately $22.5 million, for twelve months. Effective beginning on June 1, 2019, the extension of this loan required 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 had a maturity date of May 1, 2020. This loan was extended to November 1, 2020 and further extended to January 31, 2021 under the same terms and conditions of the existing agreement. As of January 31, 2021, approximately $21.6 million of this loan was outstanding and the interest rate was approximately 2.59%. WestFREIT Corp. entered into a loan extension and modification agreement with M&T Bank, effective beginning on February 1, 2021, which requires monthly principal payments of $49,250 plus interest based on a floating interest rate equal to 255 basis points over the one-month LIBOR and has a maturity date of January 31, 2022, with the option to extend for an additional one-year period through January 31, 2023, subject to certain requirements as provided for in the loan agreement including the lease-up of certain space.

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 loans secured by its Damascus Centre, Regency, Wayne PSC 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 ($18,735,000 at January 31, 2021) for the Damascus Centre swaps, a notional amount of approximately $16,200,000 ($15,171,000 at January 31, 2021) for the Regency swap, a notional amount of approximately $25,800,000 ($22,896,000 at January 31, 2021) for the Wayne PSC swap and a notional amount of approximately $12,350,000 ($12,130,000 at January 31, 2021) 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 secured by its Rotunda property. As part of the refinancing of Grande Rotunda’s construction loan with a new loan from Aareal Capital Corporation, Grande Rotunda had purchased an interest rate cap on LIBOR for the full amount that could have been drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for the first two years of this loan which matured on March 5, 2020. On February 28, 2020, Grande Rotunda had purchased an interest rate cap on LIBOR, with an effective date of March 5, 2020, for the full amount that could have been drawn on this loan of $121.9 million, capping the one-month LIBOR rate at 3% for one year, maturing on March 5, 2021. The cap contract was based on a notional amount of approximately $121,900,000 ($121,900,000 at January 31, 2021) and a maturity date of March 5, 2021 with the loan being hedged against having a balance of approximately $118,520,000 and a maturity date of February 6, 2021. Effective February 6, 2021, Grande Rotunda exercised the first extension option on this loan with a balance in the amount of approximately $118.5 million, extending the loan one year with a new maturity date of February 6, 2022. Additionally, Grande Rotunda purchased an interest rate cap on LIBOR, with an effective date of March 5, 2021, for the loan amount of approximately $118.5 million, capping the one-month LIBOR rate at 3% for one year expiring on February 6, 2022.details.)

In accordance with ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities to Accounting Standards Codification Topic 815, Derivatives and Hedging ("ASC 815")”, FREIT Maryland marks-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 and cap are accounted for as cash flow hedges with the corresponding gains or losses on these contracts not affecting ~~FREIT’s~~FREIT Maryland’s condensed consolidated statement of ~~operations;~~income; 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 condensed consolidated balance sheet. 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.

FREIT Maryland has the following derivative-related risks with its interest rate swap and cap contracts (“contract”): 1) early termination risk, and 2) counterparty credit risk.

Early Termination Risk: If FREIT Maryland 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~~FREIT Maryland’s fixed interest rate payments, this could be costly. Conversely, if interest rates rise above ~~FREIT’s~~FREIT Maryland’s fixed interest payments and FREIT Maryland elected early termination, FREIT Maryland would realize a gain on termination. At January 31, ~~2021,~~2022, the ~~swap~~ contracts for ~~Damascus Centre,~~ Regency and Station Place ~~and Wayne PSC~~ were in the counterparties’ favor and the contract for Wayne PSC was in FREIT Maryland’s favor. If FREIT Maryland had terminated these contracts at that date it would have realized losses of approximately ~~$0 for the Grande Rotunda cap, $551,000 for the Damascus Centre swaps, $1,280,000~~$475,000 for the Regency swap ~~$1,490,000~~and $642,000 for the Station Place ~~swap and $1,105,000 for the Wayne PSC~~ swap all of which have been included as a liability in ~~FREIT’s~~FREIT Maryland’s condensed consolidated balance sheet as at January 31, ~~2021.~~2022 and a gain of approximately $71,000 for the Wayne PSC swap which has been included as an asset in FREIT Maryland’s condensed consolidated balance sheet as of January 31, 2022. The change in the fair value for the contract (gain or loss) during such period has been included in comprehensive income (loss) and for the three months ended January 31, 2022 and 2021, ~~and 2020,~~ FREIT Maryland recorded an unrealized gain of approximately ~~$498,000~~$1,262,000 and ~~unrealized loss of approximately $390,000,~~$498,000, respectively, in the condensed consolidated statements of comprehensive ~~income (loss).~~income.

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 Maryland reduces this risk by entering into ~~swap or cap contracts~~a contract 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 quarter dividend of $0.05 per share which was paid on March 15, 2021 to shareholders of record on March 1, 2021. The Board will continue to evaluate the dividend on a quarterly basis.

Funds From Operations (“FFO”) is a non-GAAP measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”). FREIT Maryland does not include ~~sources or~~ distributions from equity/~~debt~~debt/capital gain sources in its computation of FFO. Although many consider FFO as the standard measurement of a REIT’s performance, FREIT Maryland 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~~FREIT Maryland’s residential apartments. The modified FFO computation is referred to as Adjusted Funds From Operations (“AFFO”). FREIT Maryland believes that AFFO is a superior measure of its operating performance. FREIT Maryland computes FFO and AFFO as follows:

For the Three Months
Ended January 31,
2021
2020
(In Thousands, Except Per Share)
Funds From Operations ("FFO") (a)
Net income (loss)
$
779
$
(2,021
)
Depreciation of consolidated properties
2,295
2,932
Amortization of deferred leasing costs
110
113
Distributions to minority interests
-
(583
)
Adjustment to loss in investment in tenancy-in-common for depreciation
351
-
FFO
$
3,535
$
441

Per Share - Basic and Diluted
$
0.50
$
0.06

(a) As prescribed by NAREIT.

Adjusted Funds From Operations ("AFFO")
FFO
$
3,535
$
441
Deferred rents (Straight lining)
206
(63
)
Capital Improvements - Apartments
(82
)
(96
)
AFFO
$
3,659
$
282

Per Share - Basic and Diluted
$
0.52
$
0.04

Weighted Average Shares Outstanding:
Basic and Diluted
7,009
6,979

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 Maryland, and therefore ~~FREIT’s~~FREIT Maryland’s FFO and AFFO may not be directly comparable to those of other REITs.

Inflation can impact the financial performance of FREIT Maryland in various ways. ~~FREIT’s~~FREIT Maryland’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.~~FREIT Maryland. Apartment leases are normally for a one-year term, which may allow FREIT Maryland to seek increased rents as leases renew or when new tenants are obtained, subject to prevailing market conditions.

See “Commercial Segment”, “Residential Segment” and “Liquidity and Capital Resources” under Item 2 above for a detailed discussion of ~~FREIT’s~~FREIT Maryland’s quantitative and qualitative market risk disclosures.

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~~FREIT Maryland’s disclosure controls and procedures. This evaluation was carried out under the supervision and with participation of ~~FREIT’s~~FREIT Maryland’s management, including ~~FREIT’s~~FREIT Maryland’s Chief Executive Officer and Chief Financial Officer, who concluded that ~~FREIT’s~~FREIT Maryland’s disclosure controls and procedures are effective as of January 31, ~~2021.~~2022. There has been no change in ~~FREIT’s~~FREIT Maryland’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~~FREIT Maryland’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~~FREIT Maryland’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~~FREIT Maryland’s reports filed under the Exchange Act is accumulated and communicated to management, including ~~FREIT’s~~FREIT Maryland’s Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

Upon the execution of the Purchase and Sale Agreement, the Purchaser delivered into escrow a deposit in the amount of $15 million (the “Deposit”), in the form of an unconditional, irrevocable letter of credit in such amount (the “Letter of Credit”). The Purchase and Sale Agreement ~~provides~~provided that the Sellers’ exclusive remedy, in the event of a “Purchaser Default” and the termination of the Purchase and Sale Agreement, is the forfeiture of the Deposit to the Sellers as liquidated damages. Accordingly, contemporaneously with the Sellers’ delivery of the termination notice to the Purchaser, the Sellers delivered written notice to the escrow agent requesting that the escrow agent release the Letter of Credit from escrow and deliver same to the Sellers.

confidential information and materials from third parties to whom the Purchaser and/or its affiliates provided such materials; and (g) such other relief as the Court ~~deems~~deemed just and equitable. ~~(See Note 6~~

Each of the Sellers and the Purchaser filed motions for ~~further details.~~summary judgment (“Summary Judgment Motions”) with the Court in which the litigation is pending seeking, among other things, the dismissal of the other parties’ claims.

On February 4, 2022, the Court entered an Order (the “Order”) with respect to the Summary Judgment Motions which provides as follows:

(2) The Court finds that the liquidated damage provision of the contract is not enforceable and the Court Orders that the $15 million held in escrow be returned to the Plaintiff.

(3) The Court dismisses the Counterclaims and Third Party Complaint. All pleadings are dismissed.

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, ~~2020,~~2021, that was filed with the Securities and Exchange Commission on January ~~29, 2021.~~28, 2022.

Exhibit 101 - The following materials from FREIT Maryland’s quarterly report on Form 10-Q for the period ended January 31, 2022, are formatted in Inline Extensible Business Reporting Language (“iXBRL”): (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.

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.

		January 31,		October 31,
		2021		2020
		(In Thousands of Dollars)

Real estate, net	$	79,536	$	80,041
Cash and cash equivalents		1,155		754
Tenants' security accounts		529		523
Receivables and other assets		430		468
Total assets	$	81,650	$	81,786

Mortgages payable, net of unamortized debt issuance costs	$	49,890	$	49,956
Accounts payable and accrued expenses		297		314
Tenants' security deposits		521		535
Deferred revenue		59		56
Equity		30,883		30,925
Total liabilities & equity	$	81,650	$	81,786

FREIT's investment in TIC (65% interest)	$	20,074	$	20,101

($ in Millions)	January 31, 2021	October 31, 2020	January 31, 2022	October 31, 2021

Fair Value	$308.8	$311.4	$136.5	$301.6

Carrying Value, Net	$304.7	$305.4	$136.5	$299.9

	Three Months Ended January 31, 2021				Three Months Ended January 31, 2020				Three Months Ended January 31, 2022				Three Months Ended January 31, 2021
	No. of Options		Exercise		No. of Options		Exercise		No. of Options		Exercise		No. of Options		Exercise
	Outstanding		Price		Outstanding		Price		Outstanding		Price		Outstanding		Price
Options outstanding at beginning of period		310,740	$	18.35		310,740	$	18.35		310,740	$	18.35		310,740	$	18.35
Options granted during period		0-		0-		0-		0-		0-		0-		0-		0-
Options forfeited/cancelled during period		0-		0-		0-		0-		0-		0-		0-		0-
Options outstanding at end of period		310,740	$	18.35		310,740	$	18.35		310,740	$	18.35		310,740	$	18.35
Options vested and expected to vest		308,310				308,310				309,450				308,310
Options exercisable at end of period		276,340				260,140				292,540				276,340

Year Ending October 31,	Amount			Amount
2021*	$	17,096
2022		14,380
2022*				$	5,782
2023		11,817			5,191
2024		9,652			4,110
2025		8,249			3,413
2026					2,666
Thereafter		25,486			3,362
Total	$	86,680		$	24,524
*Amount represents full fiscal year

*Amount represents full fiscal year and excludes rents from the Rotunda Property, the Westridge Square Property and the Damascus Property sold on December 30, 2021, January 7, 2022 and January 10, 2022, respectively.			*Amount represents full fiscal year and excludes rents from the Rotunda Property, the Westridge Square Property and the Damascus Property sold on December 30, 2021, January 7, 2022 and January 10, 2022, respectively.

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)		3		6,646	$	24.73	$	25.34		-2.4%	$	-	$	0.15

Non-comparable leases		-		-	$	-		N/A		N/A	$	-	$	-

Total leasing activity		3		6,646

	Common Equity
	Shares of Beneficial Interest		Treasury Shares at Cost			Undistributed Earnings			Accumulated Other Comprehensive Loss			Total Common Equity			Noncontrolling Interests			Total Equity
	(In Thousands of Dollars, Except Share and Per Share Amounts)

Balance at October 31, 2020	$	27,960	$	(2,863	)	$	13,791		$	(3,986	)	$	34,902		$	(4,039	)	$	30,863

Stock based compensation expense		12											12						12

Vested share units granted to Trustees		118											118						118

Net income							558						558			221			779

Dividends declared, including $8 payable in share units ($0.05 per share)							(350	)					(350	)					(350	)

Net unrealized gain on interest rate cap and swap contracts										387			387			111			498

Balance at January 31, 2021	$	28,090	$	(2,863	)	$	13,999		$	(3,599	)	$	35,627		$	(3,707	)	$	31,920

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

Balance at October 31, 2019	$	28,847		$	(4,330	)	$	(6,762	)	$	(2,040	)	$	15,715		$	333		$	16,048

Stock based compensation expense		12												12						12

Vested share units granted to Trustees and consultant		211												211						211

Vested share units issued to consultant and retired Trustee*		(1,401	)		1,401									0—						0—

Distributions to noncontrolling interests														0—			(583	)		(583	)

Net (loss) income								(2,262	)					(2,262	)		241			(2,021	)

Net unrealized loss on interest rate cap and swap contracts											(261	)		(261	)		(129	)		(390	)

Balance at January 31, 2020	$	27,669		$	(2,929	)	$	(9,024	)	$	(2,301	)	$	13,415		$	(138	)	$	13,277


Reconciliation to condensed consolidated net income (loss) attributable to common equity:
Reconciliation to condensed consolidated net income attributable to common equity:
Segment NOI	$	7,669		$	9,165		$	5,333		$	7,669
Deferred rents - straight lining		(206	)		63			(10	)		(206	)
Investment income		30			72			26			30
General and administrative expenses		(1,260	)		(772	)		(1,327	)		(1,260	)
Special committee third party advisory, legal and other expenses		0-			(3,382	)
Loss on investment in tenancy-in-common		(27	)		0-			(124	)		(27	)
Depreciation		(2,295	)		(2,932	)		(1,820	)		(2,295	)
Net gain on sale of Maryland properties								70,003			0-
Financing costs		(3,132	)		(4,235	)		(2,928	)		(3,132	)
Net income (loss)		779			(2,021	)
Net income								69,153			779
Net income attributable to noncontrolling interests in subsidiaries		(221	)		(241	)		(23,376	)		(221	)
Net income (loss) attributable to common equity	$	558		$	(2,262	)
Net income attributable to common equity							$	45,777		$	558

NON-GAAP NET INCOME COMPONENTS	Three Months Ended
	January 31,
	2022			2021			Change
	(In Thousands of Dollars)
Income from real estate operations:
Commercial properties	$	1,626		$	3,518		$	(1,892	)
Residential properties		3,697			3,945			(248	)
Total income from real estate operations		5,323			7,463			(2,140	)

Financing costs:
Fixed rate mortgages		(1,342	)		(1,461	)		119
Floating rate mortgages		(952	)		(1,316	)		364
Interest rate swap contracts breakage fee		(213	)		—			(213	)
Other - Corporate interest		(58	)		(61	)		3
Mortgage cost amortization		(363	)		(294	)		(69	)
Total financing costs		(2,928	)		(3,132	)		204

Investment income		26			30			(4	)

General & administrative expenses:
Accounting fees		(138	)		(154	)		16
Legal and professional fees		(713	)		(532	)		(181	)
Directors fees		(273	)		(237	)		(36	)
Stock option expense		(5	)		(12	)		7
Corporate expenses		(198	)		(325	)		127
Total general & administrative expenses		(1,327	)		(1,260	)		(67	)

Depreciation		(1,820	)		(2,295	)		475
Loss on investment in tenancy-in-common		(124	)		(27	)		(97	)
Adjusted net (loss) income		(850	)		779			(1,629	)

Net gain on sale of Maryland properties		70,003			—			70,003
Net income		69,153			779			68,374

Net income attributable to noncontrolling interests in subsidiaries		(23,376	)		(221	)		(23,155	)

Net income attributable to common equity	$	45,777		$	558		$	45,219

	Commercial									Residential									Combined
	Three Months Ended									Three Months Ended									Three Months Ended
	January 31,				Increase (Decrease)					January 31,				Increase (Decrease)					January 31,
	2022		2021		$			%		2022		2021		$			%		2022		2021
	(In Thousands)									(In Thousands)									(In Thousands)
Rental income	$	3,576	$	4,551	$	(975	)		-21.4%	$	6,197	$	6,505	$	(308	)		-4.7%	$	9,773	$	11,056
Reimbursements		727		1,504		(777	)		-51.7%		30		40		(10	)		-25.0%		757		1,544
Other		18		296		(278	)		-93.9%		111		64		47			73.4%		129		360
Total revenue		4,321		6,351		(2,030	)		-32.0%		6,338		6,609		(271	)		-4.1%		10,659		12,960
Operating expenses		2,685		2,627		58			2.2%		2,641		2,664		(23	)		-0.9%		5,326		5,291
Net operating income	$	1,636	$	3,724	$	(2,088	)		-56.1%	$	3,697	$	3,945	$	(248	)		-6.3%		5,333		7,669

Average Occupancy % *		68.9%		70.2%					-1.3%		98.9%		97.3%					1.6%

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)		2		2,124	$	27.01	$	25.93		4.2%	$	-	$	1.26

Non-comparable leases		-		-	$	-		N/A		N/A	$	-	$	-

Total leasing activity		2		2,124

	~~(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.~~

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)		1		2,750	$	20.50	$	60.80		-66.3%	$	—	$	—

Non-comparable leases		2		4,483	$	25.15		N/A		N/A	$	1.49	$	1.26

Total leasing activity		3		7,233

	For the Three Months Ended January 31,
	2021			2020
	(In Thousands, Except Per Share)
Funds From Operations ("FFO") (a)
Net income (loss)	$	779		$	(2,021	)
Depreciation of consolidated properties		2,295			2,932
Amortization of deferred leasing costs		110			113
Distributions to minority interests		-			(583	)
Adjustment to loss in investment in tenancy-in-common for depreciation		351			-
FFO	$	3,535		$	441

Per Share - Basic and Diluted	$	0.50		$	0.06

(a) As prescribed by NAREIT.

Adjusted Funds From Operations ("AFFO")
FFO	$	3,535		$	441
Deferred rents (Straight lining)		206			(63	)
Capital Improvements - Apartments		(82	)		(96	)
AFFO	$	3,659		$	282

Per Share - Basic and Diluted	$	0.52		$	0.04

Weighted Average Shares Outstanding:
Basic and Diluted		7,009			6,979

	For the Three Months Ended January 31,
	2022			2021
	(In Thousands, Except Per Share)
Funds From Operations ("FFO") (a)
Net income	$	69,153		$	779
Depreciation of consolidated properties		1,820			2,295
Amortization of deferred leasing costs		71			110
Distributions to non-controlling interests		(345	)		—
Net gain on sale of Maryland properties		(70,003	)		—
Adjustment to loss in investment in tenancy-in-common for depreciation		353			351
FFO	$	1,049		$	3,535

Per Share - Basic and Diluted	$	0.15		$	0.50

(a) As prescribed by NAREIT.

Adjusted Funds From Operations ("AFFO")
FFO	$	1,049		$	3,535
Deferred rents (Straight lining)		10			206
Capital Improvements - Apartments		(48	)		(82	)
AFFO	$	1,011		$	3,659

Per Share - Basic and Diluted	$	0.14		$	0.52

Weighted Average Shares Outstanding:
Basic		7,036			7,009
Diluted		7,099			7,009

	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, 2021, are formatted in Inline Extensible Business Reporting Language (“iXBRL”): (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of operations; (iii) condensed consolidated statements of comprehensive income (loss); (iv) condensed consolidated statements of equity; (v) condensed consolidated statements of cash flows; and (vi) notes to condensed consolidated financial statements.

	FIRST REAL ESTATE INVESTMENT
	TRUST OF NEW JERSEY, INC.
	(Registrant)

Date: March 17, ~~2021~~ 2022
	/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)