FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY: Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

Disclaimer identifying important factors that may lead to the first real estate investment Trust of New JerseyActual results of , Inc. (“FREIT”) will differ

              From Those Projected in Forward Looking Statements.



Readers of this discussion are advised that the discussion should be read in
conjunction with the unaudited condensed consolidated financial statements of
FREIT (including related notes thereto) appearing elsewhere in this Form 10-Q,
and the consolidated financial statements included in FREIT's most recently
filed Form 10-K. Certain statements in this discussion may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements reflect FREIT's
current expectations and are based on estimates, projections, beliefs, data,
methods and assumptions of management of FREIT at the time of such statements
regarding future results of operations, economic performance, financial
condition and achievements of FREIT, and do not relate strictly to historical or
current facts. These forward-looking statements are identified through the use
of words such as "believe," "expect," "anticipate," "intend," "plan,"
"estimate," or words of similar meaning. Forward-looking statements involve
risks and uncertainties in predicting future results and conditions.

Although FREIT believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, such statements are subject to
risks and uncertainties. These and certain other uncertainties, factors and
risks, including those risk factors set forth and further described in Part I,
Item 1A entitled "Risk Factors" of our Annual Report on Form 10-K for the fiscal
year ended October 31, 2021, and other risks described in our subsequent filings
with the SEC, may cause our actual results to differ materially from those
projected. Such factors include, but are not limited to, the following: general
economic and business conditions, including the purchase of retail products over
the Internet, which will, among other things, affect demand for rental space,
the availability of prospective tenants, lease rents, the financial condition of
tenants and the default rate on leases, operating and administrative expenses
and the availability of financing; adverse changes in FREIT's real estate
markets, including, among other things, competition with other real estate
owners, competition confronted by tenants at FREIT's commercial properties;
governmental actions and initiatives; environmental/safety requirements; risks
of real estate development and acquisitions; and on-going negative effects of
the COVID-19 pandemic on our properties and tenants, and generally on our real
estate assets and the real estate markets in which we operate, and the global,
U.S. and local economies. The risks with respect to the development of real
estate include: increased construction costs, inability to obtain construction
financing, or unfavorable terms of financing that may be available, unforeseen
construction delays and the failure to complete construction within budget.

OVERVIEW

FREIT is an equity real estate investment trust ("REIT") that is
self-administered and externally managed. FREIT owns a portfolio of residential
apartment and commercial properties. FREIT's revenues consist primarily of
rental income and other related revenues from its residential and commercial
properties and additional rents derived from operating commercial properties.
FREIT's properties are primarily located in northern New Jersey and New York.

Property disposals in Maryland:

On November 22, 2021, certain affiliates (the "Maryland Sellers") of FREIT
entered into a Purchase and Sale Agreement (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 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 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 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 of $2,723,000 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. 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



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                                                                        Page 22

and the amounts of funds escrowed to FREIT, in general, depend 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 $172.2
million, was consummated by the Maryland Sellers and the Maryland Purchaser for
a purchase price of $248,750,269, after giving effect to the $15,526,731
Maryland Purchaser Escrow Payment. This sale resulted in net proceeds of
approximately $53.9 million (inclusive of approximately $1.9 million in funds
released from the Maryland Purchaser Escrow Payment during the second quarter of
Fiscal 2022), 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 brokerage fees due
to Hekemian & Co. of approximately $6.2 million. As of April 30, 2022,
approximately $1,946,000 of these funds have been released from escrow to the
Maryland Sellers. The escrow and related gain on sale were reduced by
approximately $1.2 million due to a change in estimate in the second quarter of
Fiscal 2022 related to a change in the timing of anticipated rent commencement
dates for certain tenants, which will reduce the escrowed funds available to be
released to Grande Rotunda. Approximately $6.3 million of remaining funds are
held in post-closing escrow for rents anticipated to be released and are
included in "Funds held in post-closing escrow" on the accompanying condensed
consolidated balance sheet as of April 30, 2022. The sale of the Maryland
Properties resulted in a net gain of approximately $68.8 million (as adjusted)
(with a consolidated impact to FREIT of approximately $45.6 million) which
includes approximately $8.2 million of proceeds released and anticipated to be
released from funds held in escrow, 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. See Note 7 to FREIT's condensed
consolidated financial statements for additional details on the sale of these
three properties.

COVID-19 Pandemic: The international spread of COVID-19 was declared a global
pandemic by the World Health Organization on March 11, 2020. 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 were located, implemented
stay-at-home and shut down orders for all "non-essential" business and activity
in an aggressive effort to mitigate the spread of COVID-19. Over the past year,
vaccinations for the 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
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.

As the impact of the pandemic evolves, it continues to cause uncertainty and
volatility in the 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 3.6% as of April 2022. However, the annual inflation rate
in the U.S. has accelerated to 8.3% in April 2022, the highest since 1982, which
is primarily driven by soaring food prices and energy costs, labor shortages and
supply disruptions.

Despite the COVID-19 pandemic and preventive measures taken to mitigate the
spread, our residential properties continued to generate cash flow. At our
commercial properties, with the exception of grocery stores and other
"essential" businesses, many of our retail tenants were adversely affected by
the previously mandated shut downs and the continued lingering impact to
consumer sentiment and preferences for safety amid the reemergence of other
COVID-19 variants. The Company continues to closely monitor changes in the
collectability assessment of its tenant receivables. For the six and three
months ended April 30, 2022, rental revenue deemed uncollectible of
approximately $0.4 million and $0.3 million (with a consolidated impact to FREIT
of approximately $0.2 million and $0.2 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. For the
six and three months ended April 30, 2021, rental revenue deemed uncollectible
of approximately $0.9 million and $0.3 million (with a consolidated impact to
FREIT of approximately $0.6 million and $0.2 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. During the period beginning March 2020 through October 31, 2021, FREIT
has applied, net of amounts subsequently paid back by tenants, an aggregate of
approximately $397,000 of security deposits from its commercial tenants to
outstanding receivables due. For the six and three months ended April 30, 2022,
there were no security deposits from its commercial tenants applied to
outstanding receivables due. On a case by case basis, FREIT has offered rent
abatements totaling approximately $9,000 and $0 (with a consolidated impact to
FREIT of approximately $9,000 and $0) for the six and three months ended April
30, 2022, respectively, and $101,000 and $51,000 (with a consolidated impact to
FREIT of approximately $71,000 and $40,000) for the six and three months ended
April 30, 2021, respectively. There were no significant deferrals of rent over a
specified time period offered to its commercial tenants for the six and three
months ended April 30, 2022 and 2021. FREIT currently remains in active
discussions and negotiations with these impacted retail tenants.

For the six months ended April 30, 2022, we have experienced a positive cash
flow from operations with cash provided by operations of approximately $2.9
million. This could change based on the duration of the pandemic, which is
uncertain. We believe that our cash balance as of April 30, 2022 of
approximately $95.7 million coupled with a $13 million available line of credit
(available through October 31, 2023, see Note 9 to FREIT'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's condensed consolidated financial statements for further details). This
cash and available cash will provide us with sufficient liquidity for at least
the next twelve months from the filing of this quarterly report on Form 10-Q
including, partial or full repayment of the Wayne PSC loan should we be unable
to resolve the Wayne PSC covenant non-compliance and the bank exercises its
remedies under the loan agreement, and after giving consideration to the
dividends we may need to distribute over this period to maintain our status
as a
REIT.



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                                                                        Page 23

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. (See Note 16 to FREIT's condensed consolidated
financial statements for further details.)

Residential Properties: While our residential properties continue to generate
positive cash flow, the impact COVID-19, the significant rise in inflation and
rising interest rates may have on these properties over the next year is
uncertain.

Commercial Properties: There continues to be uncertainty in the retail
environment that could have an adverse impact on FREIT's retail tenants, which
could have an adverse impact on FREIT. The impact COVID-19, the significant rise
in inflation and rising interest rates may have on the operating and financial
performance of our commercial properties is currently uncertain.

Availability of Debt Financing: Financing has been made available to FREIT and its affiliates. (See Note 6 to FREIT’s condensed consolidated financial statements).

On December 30, 2021, FREIT 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. This loan is interest-only and has a maturity date of January
1, 2024 with the option of FREIT 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.

In accordance with certain loan agreements, FREIT 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. 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 $22.2 million as of April 30, 2022. On June 2,
2022, the lender agreed to waive the covenant default subject to the loan being
paid off on or before September 1, 2022. Additionally, Wayne PSC is in the
process of refinancing this loan with a new lender in the amount of $25 million,
which would be interest only for a term of three years and based on a fixed
interest rate of 5%. Until such time as a definitive agreement is entered into,
there can be no assurance this loan will be entered into.

Operating Cash Flow: FREIT expects that cash provided by operating activities
and cash reserves will be adequate to cover mandatory debt service payments
(including payments of interest, but excluding balloon payments 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.







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                                                                        Page 24

PRINCIPAL ACCOUNTING METHODS AND ESTIMATES

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, 2021, have been applied
consistently as of April 30, 2022, and for the six and three months ended April
30, 2022 and 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 can recognize revenue, it is required to assess,
among other things, its collectability.

Valuation of Long-Lived Assets: FREIT 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
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 management. While FREIT 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 policy to capitalize
pre-development costs, which generally include legal and professional fees and
other directly related third-party costs. Real estate taxes and interest costs
incurred during the development and construction phases are also capitalized.
FREIT ceases capitalization of these costs when the project or portion thereof
becomes operational, or when construction has been postponed. In the event of
postponement, capitalization of these costs will recommence once construction on
the project resumes.

See Note 2 to FREIT's condensed consolidated financial statements for recently
issued accounting standards.





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                                                                        Page 25

RESULTS OF OPERATIONS

Real estate revenue for the six months ended April 30, 2022 ("Current Six
Months") decreased 32.5% to $17,264,000, compared to $25,558,000 for the six
months ended April 30, 2021 ("Prior Year's Six Months"). For the three months
ended April 30, 2022 ("Current Quarter") real estate revenue decreased 48.3% to
$6,615,000, compared to $12,804,000 for the three months ended April 30, 2021
("Prior Year's Quarter").

The decrease in revenue for the Current Six Months was primarily attributable to
the following: (a) a decrease of approximately $8.5 million attributed to the
Maryland Properties sold; (b) a decrease from the commercial segment of
approximately $0.4 million, excluding the Maryland Properties sold, primarily
attributed to approximately $0.2 million in rental revenue being deemed
uncollectible and classified as a reduction in rental revenue in the Current Six
Months and a $0.2 million decrease resulting from a decline in the average
occupancy rate to 67.7% from 69.5% in the Prior Year's Six Months; offset by (c)
an increase from the residential segment of approximately $0.6 million,
excluding the Icon at the Rotunda Property sold, driven by an increase in base
rents across all properties and an increase in the average occupancy rate to
98.7% from 97.1% in the Prior Year's Six Months.

The decrease in revenue for the Current Quarter was primarily attributable to
the following: (a) a decrease of approximately $6.2 million attributed to the
Maryland Properties sold; (b) a decrease from the commercial segment of
approximately $0.3 million, excluding the Maryland Properties sold, primarily
attributed to approximately $0.2 million in rental revenue being deemed
uncollectible and classified as a reduction in rental revenue in the Current
Quarter and a $0.1 million decrease resulting from a decline in the average
occupancy rate to 66.6% from 68.8% in the Prior Year's Quarter; offset by (c) an
increase from the residential segment of approximately $0.3 million, excluding
the Icon at the Rotunda Property sold, primarily driven by an increase in base
rents across all properties and an increase in the average occupancy rate to
98.5% from 96.8% in the Prior Year's Quarter.

Net income (loss) attributable to common equity ("net income (loss)-common
equity") for the Current Six Months and Current Quarter was net income of
$45,425,000 ($6.46 per share basic and $6.40 per share diluted) and net loss of
$352,000 (($0.05) per share basic and diluted), compared to $567,000 ($0.08 per
share basic and diluted) and $9,000 ($0.00 per share basic and diluted), for the
Prior Year's comparable periods, respectively.

The table below provides a detailed analysis of the major changes that impacted net income (loss) on common equity for the six and three months ended
April 30, 2022 and 2021:

NON-GAAP NET INCOME (LOSS) COMPONENTS                Six Months Ended      
                  Three Months Ended
                                                         April 30,                                 April 30,
                                             2022          2021         Change         2022          2021         Change
                                                 (In Thousands of Dollars)                 (In Thousands of Dollars)

Income from real estate transactions:

  Commercial properties                   $   2,286     $   6,390     $ 

(4,104) $660 $2,872 ($2,212)

  Residential properties                      6,372         7,967        (1,595 )       2,675         4,022        (1,347 )
Total income from real estate
operations                                    8,658        14,357        (5,699 )       3,335         6,894        (3,559 )

Financing costs:
Fixed rate mortgages                         (2,431 )      (2,903 )         472        (1,089 )      (1,442 )         353
Floating rate mortgages                      (1,217 )      (2,581 )       1,364          (265 )      (1,265 )       1,000
Interest rate swap contracts breakage
fee                                            (213 )           -          (213 )           -             -             -
Other - Corporate interest                      (80 )        (140 )          60           (22 )         (79 )          57
Mortgage cost amortization                     (514 )        (568 )        
 54          (151 )        (274 )         123
Total financing costs                        (4,455 )      (6,192 )       1,737        (1,527 )      (3,060 )       1,533

Investment income                                64            59             5            38            29             9

General and administrative costs:

  Accounting fees                              (251 )        (264 )         

13 (113) (110) (3)

  Legal and professional fees                (1,010 )      (1,177 )         167          (297 )        (645 )         348
  Directors fees                               (533 )        (465 )         (68 )        (260 )        (228 )         (32 )
  Stock option expense                          (10 )         (24 )          14            (5 )         (12 )           7
  Corporate expenses                           (392 )        (800 )        

408 (194 ) (475 ) 281 Total general and administrative expenses (2,196 ) (2,730 ) 534 (869 ) (1,470 ) 601

Depreciation                                 (2,534 )      (4,633 )       

2,099 (714 ) (2,338 ) 1,624 Loss on investment in common property (156 ) (145 ) (11 ) (32 ) (118 ) 86

  Adjusted net (loss) income                   (619 )         716        (1,335 )         231           (63 )         294

Net gain (loss) on sale of Maryland
properties                                   68,771             -        68,771        (1,232 )           -        (1,232 )
  Net income (loss)                          68,152           716        67,436        (1,001 )         (63 )        (938 )

Net (income) loss attributable to
noncontrolling interests in
subsidiaries                                (22,727 )        (149 )     (22,578 )         649            72           577

  Net income (loss) attributable to
common equity                             $  45,425     $     567     $  44,858     $    (352 )   $       9     $    (361 )



The condensed consolidated results of operations for the Current Six Months and
Current Quarter are not necessarily indicative of the results to be expected for
the full year or any other period. The table above includes income from real
estate operations which is a non-



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                                                                        Page 26

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 Six Months and Current Quarter was
net loss of $619,000 (($0.09) per share basic and diluted) and net income of
$231,000 ($0.03 per share basic and diluted), compared to net income of $716,000
($0.10 per share basic and diluted) and net loss of $63,000 (($0.01) per share
basic and diluted), for the Prior Year's comparable periods. 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 Six Months was primarily
driven by the following: (a) a decrease of approximately $2.4 million (with a
consolidated impact to FREIT of approximately $1.7 million) attributed to the
Maryland Properties sold; offset by (b) a decrease in general and administrative
expenses ("G&A") of approximately $0.5 million primarily driven by
reincorporation expenses in the amount of approximately $0.4 million incurred in
the Prior Year's Six Months and a decline in legal costs in the amount of
approximately $0.2 million attributed to the legal proceeding between FREIT and
certain of its affiliates and Sinatra Properties, LLC; (c) a decrease in
interest expense of approximately $0.2 million attributed to the refinancing of
the loan on the Boulders property in the Current Six Months resulting in a
reduction in the interest rate and principal balance of the loan; (d) a decrease
in the reserve for uncollectible rents of approximately $0.3 million (with a
consolidated impact to FREIT of approximately $0.2 million), excluding the
Maryland Properties sold, primarily due to rental revenue being deemed
uncollectible and classified as a reduction in rental revenue in the Current Six
Months; and (e) an increase in revenue of approximately $0.2 million (with a
consolidated impact to FREIT of approximately $0.3 million), excluding the
Maryland Properties sold.

The increase in adjusted net income for the Current Quarter was primarily driven
by the following: (a) a decrease in G&A of approximately $0.6 million primarily
driven by reincorporation expenses in the amount of approximately $0.3 million
incurred in the Prior Year's Quarter and a decline in legal costs in the amount
of approximately $0.3 million attributed to the legal proceeding between FREIT
and certain of its affiliates and Sinatra Properties, LLC; (b) a decrease in the
reserve for uncollectible rents of approximately $0.3 million (with a
consolidated impact to FREIT of approximately $0.2 million), excluding the
Maryland Properties sold, primarily due to rental revenue being deemed
uncollectible and classified as a reduction in rental revenue in the Current
Quarter; (c) a decline in snow removal costs of approximately $0.3 million (with
a consolidated impact to FREIT of approximately $0.2 million), excluding the
Maryland Properties sold; (d) a decrease in interest expense of approximately
$0.1 million attributed to the refinancing of the loan on the Boulders property
resulting in a reduction in the interest rate and principal balance of the loan;
and (e) a decrease in loss on investment in tenancy-in-common of approximately
$0.1 million; offset by (f) a decrease of approximately $1 million (with a
consolidated impact to FREIT of approximately $0.8 million) attributed to the
Maryland Properties sold. (Refer to the segment disclosure below for a more
detailed discussion of the financial performance of FREIT's commercial and
residential segments.)





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                                                                        Page 27



SEGMENT INFORMATION

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


                                                Commercial                                                  Residential                                 Combined
                           Six Months Ended                                                Six Months Ended                                         Six Months Ended
                              April 30,                 Increase (Decrease)                    April 30,               Increase (Decrease)             April 30,
                          2022         2021             $                 %                2022           2021           $             %           2022          2021
                                     (In Thousands)                                                 (In Thousands)                                   (In Thousands)
Rental income           $ 5,006     $  8,987     $     (3,981 )          -44.3%       $    10,833      $ 13,141     $   (2,308 )     -17.6%     $  15,839     $ 22,128
Reimbursements            1,232        3,119           (1,887 )          -60.5%                23            78            (55 )     -70.5%         1,255        3,197
Other                        28          308             (280 )          -90.9%               203           138             65        47.1%           231          446
Total revenue             6,266       12,414           (6,148 )          -49.5%            11,059        13,357         (2,298 )     -17.2%        17,325       25,771
Operating expenses        3,919        5,811           (1,892 )          -32.6%             4,687         5,390           (703 )     -13.0%        

8,606 11,201 Net operating income $2,347 $6,603 ($4,256) -64.5% $6,372 $7,967 ($1,595) -20.0% 8,719 14,570

Average Occupancy % *     67.7%        69.5%                              -1.8%             98.7%         97.1%                        1.6%

                                                    Reconciliation to 

condensed consolidated net income-equity:

                                                    Deferred rents - straight lining                                                                  (61 )       (213 )
                                                    Investment income                                                                                  64           59
                                                    General and administrative expenses                                                            (2,196 )     (2,730 )
                                                    Loss on investment in tenancy-in-common                                                          (156 )       (145 )
                                                    Depreciation                                                                                   (2,534 )     (4,633 )
                                                    Net gain on sale of Maryland properties                                                        68,771            -
                                                    Financing costs                                                                                (4,455 )     (6,192 )
                                                          Net income                                                                               68,152          716
                                                    Net income attributable to noncontrolling interests in subsidiaries                           

(22,727) (149)

                                                          Net income attributable to common equity                                              $  45,425     $    567






                                                 Commercial                                                      Residential                                    Combined
                           Three Months Ended                                                   Three Months Ended                                         Three Months Ended
                               April 30,                  Increase (Decrease)                       April 30,                  Increase (Decrease)             April 30,
                            2022         2021             $                  %                 2022              2021            $             %           2022          2021
                                      (In Thousands)                                                     (In Thousands)                                      (In Thousands)
Rental income           $   1,430      $ 4,436     $      (3,006 )          -67.8%       $      4,636        $    6,636     $  (2,000 )      -30.1%     $   6,066     $ 11,072
Reimbursements                505        1,615            (1,110 )          -68.7%                 (7 )              38           (45 )     -118.4%           498        1,653
Other                          10           12                (2 )          -16.7%                 92                74            18         24.3%           102           86
Total revenue               1,945        6,063            (4,118 )          -67.9%              4,721             6,748        (2,027 )      -30.0%         6,666       12,811
Operating expenses          1,234        3,184            (1,950 )         
-61.2%              2,046             2,726          (680 )      -24.9%         3,280        5,910
Net operating income    $     711      $ 2,879     $      (2,168 )          -75.3%       $      2,675        $    4,022     $  (1,347 )      -33.5%         3,386        6,901
Average Occupancy % *       66.6%        68.8%                               -2.2%              98.5%             96.8%                        1.7%

                                                      Reconciliation to 

Condensed consolidated net income-ordinary equity:

                                                      Deferred rents - straight lining                                                                        (51 )         (7 )
                                                      Investment income                                                                                        38           29
                                                      General and administrative expenses                                                                    (869 )     (1,470 )
                                                      Loss on investment in tenancy-in-common                                                                 (32 )       (118 )
                                                      Depreciation                                                                                           (714 )     (2,338 )
                                                      Net loss on sale of Maryland properties                                                              (1,232 )          -
                                                      Financing costs                                                                                      (1,527 )     (3,060 )
                                                            Net loss                                                                                       (1,001 )        (63 )
                                                      Net loss attributable
to noncontrolling interests in subsidiaries                                       649           72
                                                            Net (loss) income attributable to common equity                                       
     $    (352 )   $      9




       * Average occupancy rate excludes the Rotunda Property, the Damascus

property and the Westridge Square property of all periods presented as

         the properties were sold in the Current Six Months. See Note 7 to FREIT
         Maryland's condensed consolidated financial statements for further
         details.



The RNE is based on the operating income and expenses directly associated with the operation of the properties, but excludes deferred (linear) rents, depreciation, financing costs and other elements. FREIT evaluates and measures the operating results of the segment based on the RNE.

Same Property NOI: FREIT considers same property net operating income ("Same
Property NOI") to be a useful supplemental non-GAAP measure of its operating
performance. FREIT defines same property within both the commercial and
residential segments to be those properties that FREIT has owned and operated
for both the current and prior periods presented, excluding those properties
that FREIT acquired, sold or redeveloped during those periods. Any newly
acquired property that has been in operation for less than



  Index

                                                                        Page 28
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.



COMMERCIAL SECTOR

The commercial segment contains five (5) separate 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 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 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'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 from FREIT's commercial segment for the Current Six Months and Current
Quarter decreased by 49.5% and 67.9%, respectively, and NOI decreased by 64.5%
and 75.3%, respectively, as compared to the Prior Year's comparable periods.
Average occupancy for all commercial properties for the Current Six Months and
Current Quarter decreased by 1.8% and 2.2%, respectively, as compared to the
Prior Year's comparable periods.

The decline in revenue for the Current Six Months was primarily attributable to
the following: (a) a decrease of approximately $5.7 million (excluding an
increase in the straight-line rent receivable of approximately $0.1 million)
attributed to the Maryland Properties sold; and (b) a decrease of approximately
$0.4 million, excluding the Maryland Properties sold, primarily attributed to
rental revenue being deemed uncollectible and classified as a reduction in
rental revenue in the Current Six Months and a decline in the average occupancy
rate to 67.7% from 69.5% in the Prior Year's Six Months. The decrease in NOI for
the Current Six Months was primarily attributable to the following: (a) a
decrease of approximately $4.1 million attributed to the Maryland Properties
sold; (b) a decline in revenue of approximately $0.4 million, excluding the
Maryland Properties sold, as explained above; offset by (c) a decrease in the
reserve for uncollectible rents of approximately $0.2 million, excluding the
Maryland Properties sold, primarily due to rental revenue being deemed
uncollectible and classified as a reduction in rental revenue in the Current Six
Months.

The decline in revenue for the Current Quarter was primarily attributable to the
following: (a) a decrease of approximately $3.9 million attributed to the
Maryland Properties sold; and (b) a decrease of approximately $0.3 million,
excluding the Maryland Properties sold, primarily attributed to rental revenue
being deemed uncollectible and classified as a reduction in rental revenue in
the Current Quarter and a decline in the average occupancy rate to 66.6% from
68.8% in the Prior Year's Quarter. The decrease in NOI for the Current Quarter
was primarily attributable to the following: (a) a decrease of approximately
$2.3 million attributed to the Maryland Properties sold; (b) a decline in
revenue of approximately $0.3 million, excluding the Maryland Properties sold,
as explained above; offset by (c) a decrease in the reserve for uncollectible
rents of approximately $0.2 million, excluding the Maryland Properties sold,
primarily due to rental revenue being deemed uncollectible and classified as a
reduction in rental revenue in the Current Quarter; and (d) a decline in snow
removal costs of approximately $0.2 million, excluding the Maryland Properties
sold.

Same Property Operating Results: FREIT's commercial segment currently contains
five (5) same properties. (See definition of same property under Segment
Information above.) The Rotunda property, the Westridge Square Property and the
Damascus Property were excluded from same property results for all periods
presented because these properties were sold in the Current Six Months. Same
property revenue for the Current Six Months and Current Quarter decreased by 9%
and 11.4%, respectively, and same property NOI decreased by 6.5% and increased
by 19.1%, respectively, as compared to the Prior Year's comparable periods. The
changes resulted from the factors discussed in the immediately preceding
paragraph.

Leasing: The following table reflects leasing activity at FREIT's commercial
properties for comparable leases (leases executed for spaces in which there was
a tenant at some point during the previous twelve-month period) and
non-comparable leases for the Current Six Months (excluding any leases executed
for the Rotunda Property, the Westridge Square Property and the Damascus
Property which were sold in the Current Six Months):



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

Comparable leases (b)                5           90,493     $        5.51     $          6.67           -17.4%     $            -     $           0.02

Non-comparable leases                5           11,875     $       26.37                N/A              N/A      $         1.07     $           1.32

Total leasing activity              10          102,368



(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.





  Index

                                                                        Page 29

RESIDENTIAL SEGMENT

FREIT currently operates six (6) multi-family apartment buildings or complexes
totaling 792 apartment units, excluding the Icon at the Rotunda Property which
was sold on December 30, 2021 (see Note 7 to FREIT's condensed consolidated
financial statements) and the Pierre Towers property which was converted to a
TIC (see Note 5 to FREIT's condensed consolidated financial statements).

As indicated in the table above under the caption Segment Information, total
revenue from FREIT's residential segment for the Current Six Months and Current
Quarter decreased by 17.2% and 30%, respectively, and NOI decreased by 20% and
33.5%, respectively, as compared to the Prior Year's comparable periods. Average
occupancy for all residential properties for the Current Six Months and Current
Quarter increased by 1.6% and 1.7%, respectively, as compared to the Prior
Year's comparable periods.

The decrease in revenue for the Current Six Months was primarily attributable to
the following: (a) a decrease of approximately $2.9 million attributed to the
Icon at the Rotunda Property sold; offset by (b) an increase of approximately
$0.6 million, excluding the Icon at the Rotunda Property sold, primarily driven
by an increase in base rents and an increase in the average occupancy rate to
98.7% from 97.1% in the Prior Year's Quarter. The decrease in NOI for the
Current Six Months was primarily attributable to the following: (a) a decrease
of approximately $2.1 million attributed to the Icon at the Rotunda Property
sold; offset by (b) an increase in revenue of approximately $0.6 million,
excluding the Icon at the Rotunda Property; and (c) a decrease in the reserve
for uncollectible rents of approximately $0.1 million, excluding the Maryland
Properties sold.

The decrease in revenue for the Current Quarter was primarily attributable to
the following: (a) a decrease of approximately $2.3 million attributed to the
Icon at the Rotunda Property sold; offset by (b) an increase of approximately
$0.3 million, excluding the Icon at the Rotunda Property sold, primarily driven
by an increase in base rents and an increase in the average occupancy rate to
98.5% from 96.8% in the Prior Year's Quarter. The decrease in NOI for the
Current Quarter was primarily attributable to the following: (a) a decrease of
approximately $1.7 million attributed to the Icon at the Rotunda Property sold;
offset by (b) an increase of approximately $0.3 million in revenue, excluding
the Icon at the Rotunda Property sold; (c) a decrease in the reserve for
uncollectible rents of approximately $0.1 million, excluding the Maryland
Properties sold; and (d) a decline in snow removal costs of approximately $0.1
million, excluding the Maryland Properties sold.

Same Property Operating Results: FREIT's residential segment currently contains
six (6) same properties. (See definition of same property under Segment
Information above.) The Icon at the Rotunda property was excluded from same
property results for all periods presented because this property was sold in the
Current Six Months. Same property revenue for the Current Six Months and Current
Quarter increased by 7.2% and 6.9%, respectively, and same property NOI
increased by 10.4% and 13.7%, respectively, as compared to the Prior Year's
comparable periods. The changes resulted from the factors discussed in the
immediately preceding paragraph.

FREIT's residential revenue is principally composed of monthly apartment rental
income. Total rental income is a factor of occupancy and monthly apartment
rents. Monthly average residential rents, (excluding from both periods presented
for comparability purposes the Icon at the Rotunda property which was sold in
the Current Six Months), at the end of the Current Quarter and the Prior Year's
Quarter were $1,984 and $1,892, respectively. A 1% decline in annual average
occupancy, or a 1% decline in average rents from current levels, results in an
annual revenue decline of approximately $189,000 and $186,000, respectively.

Capital expenditures: Since all of FREIT's apartment communities, with the
exception of the Boulders, Regency and Station Place properties, were
constructed more than 25 years ago, FREIT tends to spend more in any given year
on maintenance and capital improvements than may be spent on newer properties.
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 are
available from cash flow from the property's operations and cash reserves.



FINANCING COSTS



                                               Six Months Ended April 30,           Three Months Ended April 30,
                                                2022                2021              2022                2021
                                                (In Thousands of Dollars)             (In Thousands of Dollars)
Fixed rate mortgages (a):
  1st Mortgages
  Existing                                  $       2,359       $       2,903     $       1,037       $       1,442
  New                                                  72                   -                52                   -

Variable Rate Mortgages:

  1st Mortgages
  Existing                                          1,217               2,581               265               1,265
  New                                                   -                   -                 -                   -
Interest rate swap contracts breakage fee             213                  
                  -                   -
Other                                                  80                 140                22                  79
Total financing costs, gross                        3,941               5,624             1,376               2,786
   Amortization of mortgage costs                     514                
568               151                 274
Total financing costs, net                  $       4,455       $       6,192     $       1,527       $       3,060



(a) Includes the effect of interest rate swaps which effectively convert the variable interest rate to a fixed interest rate over the term of the loan.


  Index

                                                                        Page 30

Total financing costs for the Current Six Months decreased by approximately
$1,737,000, or 28.1%, compared to the Prior Year's Six Months which was
primarily attributable to the following: (a) a decline of approximately
$1,758,000 primarily attributed to the pay-down of the loans outstanding on the
Maryland Properties sold in the Current Six Months; (b) a decrease of
approximately $165,000 attributed to the refinancing of the loan on the Boulders
property in the Current Six Months resulting in a reduction in the interest rate
from 5.37% to 2.85% and in the principal balance from approximately $14.4
million to $7.5 million; 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 loan outstanding on the Damascus property, which was
repaid from the net proceeds of the sale of the Damascus property in the Current
Six Months.

Total financing costs for the Current Quarter decreased by approximately
$1,533,000, or 50.1%, compared to the Prior Year's Quarter which was primarily
attributable to the following: (a) a decline of approximately $1,399,000
primarily attributed to the pay-down of the loans outstanding on the Maryland
Properties sold; and (b) a decrease of approximately $117,000 attributed to the
refinancing of the loan on the Boulders property.

(See Note 7 to Freit’s condensed consolidated financial statements for more details on the sale of these three properties.)

GENERAL AND ADMINISTRATIVE EXPENSES

G&A for the Current Six Months and Current Quarter was approximately $2,196,000
and $869,000, respectively, compared to $2,730,000 and $1,470,000, respectively,
for the Prior Year's comparable periods. The primary components of G&A are legal
and professional fees, directors' fees, corporate expenses and
accounting/auditing fees. The decrease in G&A for the Current Six Months was
primarily driven by reincorporation expenses in the amount of approximately $0.4
million incurred in the Prior Year's Six Months and a decline in legal costs in
the amount of approximately $0.2 million attributed to the legal proceeding
between FREIT and certain of its affiliates and Sinatra Properties, LLC. The
decrease in G&A for the Current Quarter was primarily driven by reincorporation
expenses in the amount of approximately $0.3 million incurred in the Prior
Year's Quarter and a decline in legal costs in the amount of approximately $0.3
million attributed to the legal proceeding between FREIT and certain of its
affiliates and Sinatra Properties, LLC.

DEPRECIATION

Depreciation expense for the Current Six Months and Current Quarter was
approximately $2,534,000 and $714,000, respectively, compared to $4,633,000 and
$2,338,000, respectively, for the Prior Year's comparable periods. The decline
in depreciation expense for the Current Six Months and Current Quarter was
primarily attributable the sale of the Maryland Properties. (See Note 7 to
FREIT's condensed consolidated financial statements for additional details on
the sale of these three properties.)

CASH AND CAPITAL RESOURCES

Net cash provided by operating activities was approximately $2.9 million for the
Current Six Months compared to net cash provided by operating activities of
approximately $8.8 million for the Prior Year's Six Months. FREIT expects that
cash provided by operating activities and cash reserves will be adequate to
cover mandatory debt service payments (including payments of interest, but
excluding balloon payments 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 April 30, 2022, FREIT had cash, cash equivalents and restricted cash
totaling $104 million, compared to $39 million at October 31, 2021. The increase
in cash in the Current Six Months was primarily attributable to approximately
$250.8 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 $188.8 million in net cash used in financing activities.
The increase in cash of approximately $64.9 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 by certain members in Rotunda 100 of
approximately $5.1 million); (b) a distribution of net proceeds received from
the sale of the Damascus Property of approximately $11.8 million; (c) net
proceeds received from the sale of the Westridge Square Property of
approximately $0.1 million; (d) anticipated funds to be released of
approximately $6.3 million and funds released of approximately $1.9 million from
the funds held in post-closing escrow for rents related to the sale of the
Maryland Properties; offset by (e) a loan pay-down including closing costs of
approximately $7.6 million attributed to the refinancing of the loan on the
Boulders property; and (f) dividends paid in the Current Six Months the amount
of approximately $1.4 million. (See Note 7 to FREIT's condensed consolidated
financial statements for additional details on the sale of these three
properties.)

Credit Line: FREIT's revolving line of credit provided by 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 interest



  Index

                                                                        Page 31

prime rate minus 25 basis points with a floor of 3.75%. From April 30, 2022
and October 31, 2021there was no outstanding amount and $13 million was available under the line of credit.

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

As of April 30, 2022, FREIT's aggregate outstanding mortgage debt was $137.2
million, which bears a weighted average interest rate of 3.96% and an average
life of approximately 1.9 years. FREIT'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               2022    2023    2024    2025    2026    2027    2028    2029
($ in millions)
Mortgage "Balloon"        $47.4
Payments                   (A)    $17.1   $16.5   $13.9   $0.0    $0.0    $10.5  $26.0

                     (A) Includes the following:
                         (1) A loan on the Preakness Shopping Center located in Wayne,
                         New Jersey in the amount of approximately $22.2 million.
                         Although the Company continues to make its required debt
                         service payments in accordance with the loan agreement, it was
                         unable to comply with a look back debt service coverage ratio
                         loan covenant contained in the mortgage loan agreement held by
                         People's United Bank. On June 2, 2022, the lender agreed to
                         waive the covenant default subject to the loan being paid off
                         on or before September 1, 2022. (See Note 9 to FREIT's
                         condensed consolidated financial statements for additional
                         details.)

                         (2) A loan on the Westwood Hills property located in Westwood,
                         New Jersey in the amount of $25 million which matures on
                         October 1, 2022 and has an option to extend for two (2)
                         additional six (6)-month periods from the maturity date,
                         subject to provisions of the loan agreement.



The following table shows the estimated fair value and net book value of FREIT’s long-term debt as at April 30, 2022 and October 31, 2021:


($ in Millions)      April 30, 2022   October 31, 2021

Fair Value               $131.8            $301.6

Carrying Value, Net      $136.1            $299.9





Fair values are estimated based on market interest rates at April 30, 2022 and
October 31, 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 expects to refinance the individual mortgages with new mortgages or
exercise extension options when their terms expire. To this extent FREIT has
exposure to interest rate risk. If interest rates, at the time any individual
mortgage note is due, are higher than the current fixed interest rate, higher
debt service may be required, and/or refinancing proceeds may be less than the
amount of mortgage debt being retired. For example, at April 30, 2022, a 1%
interest rate increase would reduce the fair value of FREIT's debt by $3.6
million, and a 1% decrease would increase the fair value by $3.8 million.

FREIT continually reviews its debt levels to determine if additional debt can
prudently be utilized for property acquisitions for its real estate portfolio
that will increase income and cash flow to stockholders.

On December 30, 2021, FREIT 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. This loan is interest-only and has a maturity date of January
1, 2024 with the option of FREIT 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 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 generally
corresponds to FREIT's mortgage debt) over a term equal to the term of the
mortgage



  Index

                                                                        Page 32

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 $16,200,000 ($14,754,000 at April 30, 2022) for the
Regency swap, a notional amount of approximately $25,800,000 ($21,949,000 at
April 30, 2022) for the Wayne PSC swap and a notional amount of approximately
$12,350,000 ($11,862,000 at April 30, 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 the underlying 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 six months ended
April 30, 2022. (See Note 7 to FREIT's condensed consolidated financial
statements for further details.)

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
generally 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 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 from
Aareal Capital Corporation, 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. 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 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 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 the underlying
loan and the corresponding interest rate cap on this loan matured with no
settlement due at maturity. (See Note 7 to FREIT's condensed consolidated
financial statements for further 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 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 condensed consolidated statement of
operations; 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 has the following risks associated with derivatives with its interest rate swaps and cap agreements (“agreement”): 1) early termination risk, and 2) counterparty credit risk.

Early Termination Risk: If FREIT wants to terminate its contract before
maturity, it would be bought out or terminated at market value; i.e., the
difference in the present value of the anticipated net cash flows from each of
the contract's parties. If current variable interest rates are significantly
below FREIT's fixed interest rate payments, this could be costly. Conversely, if
interest rates rise above FREIT's fixed interest payments and FREIT elected
early termination, FREIT would realize a gain on termination. At April 30, 2022,
the contracts for Regency, Station Place and Wayne PSC were in FREIT's favor. If
FREIT had terminated these contracts at that date it would have realized gains
of approximately $131,000 for the Regency swap, $158,000 for the Station Place
swap and $1,204,000 for the Wayne PSC swap all of which have been included as an
asset in FREIT's condensed consolidated balance sheet as at April 30, 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 six and three months
ended April 30, 2022, FREIT recorded an unrealized gain of approximately
$3,801,000 and $2,539,000, respectively, in the condensed consolidated
statements of comprehensive income. For the six and three months ended April 30,
2021, FREIT recorded an unrealized gain of approximately $1,675,000 and
$1,177,000, respectively, in the condensed consolidated statements of
comprehensive income.



  Index

                                                                        Page 33

Counterparty credit risk: Each party to a contract bears the risk that its counterparty will default on its obligation to make a periodic payment. FREIT reduces this risk by contracting only with large financial institutions that are experienced market makers in the derivatives market.

ADJUSTED FUNDS OF OPERATING

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

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