FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - FORM 8-K - FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY	form8k-112581_freit.htm

Exhibit 99.1

HACKENSACK, NJ, December 21, 2010 – First Real Estate Investment Trust (“FREIT”) announced its operating results for the year and three-months ended October 31, 2010. The results of operations as presented in this earnings release are unaudited, and are not necessarily indicative of future operating results.

FINANCIAL HIGHLIGHTS	Year Ended October 31, 2010	Three Months Ended October 31, 2010
* Net Income Per Share-Basic:	$0.64	$0.11
* Dividends Per Share:	$1.20	$0.30
* FFO Per Share-Basic:	$1.28	$0.17
* FFO Payout:	93.8%	176.5%
* Average Residential Occupancy:	94.3%	94.3%
* Average Commercial Occupancy:	89.8%	89.6%

RESULTS OF OPERATIONS

Real Estate revenue for the year ended October 31, 2010 (“Fiscal 2010”) increased 3.8% to $44,053,000 compared to $42,422,000 for the year ended October 31, 2009 (“Fiscal 2009”). Real Estate revenue for the three months ended October 31, 2010 (“Current Quarter”) increased 3.6% to $10,997,000 compared to $10,619,000 for the three months ended October 31, 2009 (“Prior Year’s Quarter”).

Net income attributable to common equity (“Net Income-Common Equity”) for Fiscal 2010 was $4,411,000 ($0.64 per share basic) compared to $5,552,000 ($0.80 per share basic) for Fiscal 2009. Net Income-Common Equity for the Current Quarter was $733,000 ($0.11 per share basic) compared to $1,372,000 ($0.20 per share basic) for the Prior Year’s Quarter. Included in interest expense for Fiscal 2010 and the Current Quarter was a $2.1 million prepayment penalty related to the early extinguishment of debt and the subsequent debt refinancing at the property owned by Westwood Hills, LLC (FREIT’s 40% owned subsidiary). The impact of the prepayment penalty on Net Income-Common Equity for both Fiscal 2010 and the Current Quarter is $840,000 ($0.12 per share basic). The refinancing adds to FREIT’s cash reserves by $2.2 million, reduces interest expense on the new loan from 6.6% (weighted-average) to 4.62%, and extends the maturity of the loan 7 years (See Liquidity & Refinancing below for further information on this refinancing.) The schedule below provides a detailed analysis of the major changes that impacted Net Income-Common Equity for year and three months ended October 31, 2010 and 2009:

	Year Ended October 31,									Three Months Ended October 31,
	2010			2009			Change			2010			2009			Change
	(in thousands, except per share)									(in thousands, except per share)
Real estate revenues:
Commercial properties	$	24,923		$	23,333		$	1,590		$	6,166		$	5,967		$	199
Residential properties		19,130			19,089			41			4,831			4,652			179
Total real estate revenues		44,053			42,422			1,631			10,997			10,619			378

Operating expenses:
Real estate operations		18,607			17,600			1,007			4,369			4,407			(38	)
General and administrative		1,567			1,652			(85	)		334			323			11
Depreciation		6,053			5,870			183			1,497			1,463			34
Total operating expenses		26,227			25,122			1,105			6,200			6,193			7

Operating income		17,826			17,300			526			4,797			4,426			371

Investment income		122			221			(99	)		27			51			(24	)

Financing costs		(13,817	)		(10,848	)		(2,969	)		(5,114	)		(2,797	)		(2,317	)
Net income		4,131			6,673			(2,542	)		(290	)		1,680			(1,970	)
Net income attributable to noncontrolling interests (formerly referred to as minority interests)		280			(1,121	)		1,401			1,023			(308	)		1,331
Net income attributable to common equity	$	4,411		$	5,552		$	(1,141	)	$	733		$	1,372		$	(639	)

Earnings per share-basic (attributable to common equity)	$	0.64		$	0.80		$	(0.16	)	$	0.11		$	0.20		$	(0.09	)

Weighted average shares outstanding		6,942			6,944						6,942			6,942

SEGMENT INFORMATION

The following table sets forth comparative net operating income ("NOI") data for FREIT’s real estate segments and reconciles the NOI to consolidated net income-common equity for Fiscal 2010 and Current Quarter, as compared to the prior year’s comparable periods:

	Commercial												Residential												Combined
	Year Ended												Year Ended												Year Ended
	October 31,						Increase (Decrease)						October 31,						Increase (Decrease)						October 31,
	2010			2009			$			%			2010			2009			$			%			2010			2009
	(in thousands)												(in thousands)												(in thousands)
Rental income	$	18,634		$	17,687		$	947			5.4	%	$	18,872		$	18,781		$	91			0.5	%	$	37,506		$	36,468
Reimbursements		5,923			5,247			676			12.9	%		-			-			-						5,923			5,247
Other		156			196			(40	)		-20.4	%		258			308			(50	)		-16.2	%		414			504
Total revenue		24,713			23,130			1,583			6.8	%		19,130			19,089			41			0.2	%		43,843			42,219

Operating expenses		9,702			9,219			483			5.2	%		8,905			8,381			524			6.3	%		18,607			17,600
Net operating income	$	15,011		$	13,911		$	1,100			7.9	%	$	10,225		$	10,708		$	(483	)		-4.5	%		25,236			24,619
Average
Occupancy %		89.8	%		89.3	%					0.5	%		94.3	%		92.8	%					1.5	%

										Reconciliation to consolidated net income:
										Deferred rents - straight lining																240			238
										Amortization of acquired leases																(30	)		(35	)
										Investment income																122			221
										General and administrative expenses																(1,567	)		(1,652	)
										Depreciation																(6,053	)		(5,870	)
										Financing costs																(13,817	)		(10,848	)
										Net income																4,131			6,673
										Net income attributable to noncontrolling interests																280			(1,121	)
										Net income attributable to common equity															$	4,411		$	5,552


	Commercial												Residential											Combined
	Three Months Ended												Three Months Ended											Three Months Ended
	October 31,						Increase (Decreasee)						October 31,						Increase (Decrease)					October 31,
	2010			2009			$			%			2010			2009			$		%			2010			2009
	(in thousands)												(in thousands)											(in thousands)
Rental income	$	4,593		$	4,579		$	14			0.3	%	$	4,747		$	4,584		$	163		3.6	%	$	9,340		$	9,163
Reimbursements		1,465			1,278			187			14.6	%		-			-			-					1,465			1,278
Other		38			43			(5	)		-11.6	%		84			68			16		23.5	%		122			111
Total revenue		6,096			5,900			196			3.3	%		4,831			4,652			179		3.8	%		10,927			10,552

Operating expenses		2,365			2,404			(39	)		-1.6	%		2,004			2,003			1		0.0	%		4,369			4,407
Net operating income	$	3,731		$	3,496		$	235			6.7	%	$	2,827		$	2,649		$	178		6.7	%		6,558			6,145
Average
Occupancy %		89.6	%		89.6	%					0.0	%		94.3	%		92.0	%				2.3	%

										Reconciliation to consolidated net income:
										Deferred rents - straight lining															78			75
										Amortization of acquired leases															(8	)		(8	)
										Investment income															27			51
										General and administrative expenses															(334	)		(323	)
										Depreciation															(1,497	)		(1,463	)
										Financing costs															(5,114	)		(2,797	)
										Net income															(290	)		1,680
										Net income attributable to noncontrolling interests															1,023			(308	)
										Net income attributable to common equity														$	733		$	1,372

NOI is based on operating revenue and expenses directly associated with the operations of the real estate properties, but excludes deferred rents (straight lining), lease amortization, depreciation, financing costs and other items. FREIT assesses and measures segment operating results based on NOI. NOI is not a measure of operating results or cash flow as measured by generally accepted accounting principles, 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.

COMMERCIAL SEGMENT

Total revenue and NOI from FREIT’s commercial segment for Fiscal 2010 increased by 6.8% and 7.9%, respectively, over Fiscal 2009. The primary reasons for the increase in total revenue and NOI were higher base rental income, primarily at the Damascus Center, a $250,000 lease termination fee related to a tenant at the Rotunda shopping center, and a percentage rent payment of $123,000 relating to a tenant coming off of a percentage rent holiday. For the Current Quarter, total revenue and NOI increased by 3.3% and 6.7%, respectively, over the Prior Year’s Quarter, which was primarily attributable to higher base rental income, and higher reimbursable operating expenses over last year.

The U.S. economy has recovered from the recession, but at a recovery rate much slower than anticipated. Retail sales over the past year have posted slight gains, although among retailers, results have been mixed. The biggest problem in our areas of operations continues to be unemployment, renewing consumers’ concerns about their jobs, resulting in reluctance to increase spending. To date, our tenant fall-out has been minor, as average occupancy (exclusive of the Damascus Center, which is undergoing a major redevelopment project) for both Fiscal 2010 and the Current Quarter was 94.4%, a decrease of 1.0% from last year’s comparable periods. However, we may experience additional fall-out if the pace of the economic recovery slows down any further, or stalls.

On July 7, 2010, FREIT’s Board of Trustees authorized management to pursue a sale of the Westridge Square Shopping Center located in Frederick, Maryland. The decision to sell the property (acquired in 1992) was based on the Board’s desire to re-deploy the net proceeds of the sale to real estate assets in other areas of FREIT’s operations. It is the intention of the Board to structure the sale as a like-kind exchange (Internal Revenue Code Sec.1031), in order to defer the taxable income on the expected gain. The property is being actively marketed for sale. Due to current conditions in the commercial real estate market, it is not possible for management to estimate when the sale of the property will occur.

RESIDENTIAL SEGMENT

Total revenue from FREIT’s residential segment for Fiscal 2010 reported a slight increase of 0.2% over Fiscal 2009, whereas NOI for Fiscal 2010 decreased by 4.5% from last year’s comparable period. Despite the increase in total revenue, higher than normal unemployment in our areas of operation over the past year, compounded by losses approximating $260,000 resulting from recent storm damage costs at the Pierre Towers apartment complex, and overall higher operating costs, particularly utility costs caused by the colder winter this year, were the primary reasons for the decrease in NOI. On a positive note, total revenue and NOI for the Current Quarter increased by 3.8% and 6.7%, respectively, over the Prior Year’s Quarter. The positive operating results for the Current Quarter reflect the upward movement of occupancy and rents during the current fiscal year, as evidenced by average occupancy for Fiscal 2010 and Current Quarter increasing by 1.5% and 2.3%, respectively, over last year’s comparable periods.

LIQUIDITY & REFINANCING

On October 20, 2010, Westwood Hills, LLC refinanced the mortgage loans secured by its Westwood Hills apartment property in Westwood, N.J., with a new mortgage for $23.5 million. The new mortgage bears interest at 4.62%, and is due November 1, 2020. The refinanced mortgages had outstanding principal balances that aggregated approximately $15.4 million at a weighted average interest rate of 6.6%, and were due December 31, 2013. Due to the early extinguishment of the original debt, prepayment penalties of approximately $2.1 million were incurred, and reported as interest expense in the Current Quarter. After closing costs, Westwood Hills netted approximately $5.6 million from this refinancing. The refinancing adds to FREIT’s cash reserves by $2.2 million, extends the maturity of the loan 7 years, and despite the increase in loan amount, the monthly debt service will decrease slightly as a result of the lower interest rate on the new loan.

FUNDS FROM OPERATIONS (“FFO”):

Many consider FFO, which is a non-GAAP financial measure, as the standard measurement of a REIT’s performance. We compute FFO as follows:

	Year Ended October 31,						Three Months Ended October 31,
	2010			2009			2010			2009
	($ in thousands)						($ in thousands)

Net income	$	4,131		$	6,673		$	(290	)	$	1,680
Depreciation		6,053			5,870			1,497			1,463
Amortization of deferred mortgage costs		329			239			162			65
Deferred rents (Straight lining)		(240	)		(238	)		(78	)		(75	)
Amortization of acquired leases		30			35			8			8
Capital Improvements - Apartments		(363	)		(204	)		(109	)		(61	)
Distributions from operations to noncontrolling interests		(1,022	) *		(926	)		-			(106	)
FFO	$	8,918		$	11,449		$	1,190		$	2,974

FFO Per Share-Basic	$	1.28		$	1.65		$	0.17		$	0.43

Weighted Average Shares Outstanding		6,942			6,944			6,942			6,942

* Excludes $3,360,000 of distributions to noncontrolling interests arising from proceeds related to a mortgage refinancing.

FFO does not represent cash generated from operating activities in accordance with accounting principles generally accepted in the United States of America, and therefore should not be considered a substitute for net income as a measure of results of operations or for cash flow from operations as a measure of liquidity. Additionally, the application and calculation of FFO by certain other REITs may vary materially from that of FREIT’s, and therefore FREIT’s FFO and the FFO of other REITs may not be directly comparable.

DIVIDENDS

The 4th quarter dividend of $0.30 per share was paid on December 15, 2010 to shareholders of record on December 1, 2010.

The statements in this report that relate to future earnings or performance are forward-looking. Actual results might differ materially and be adversely affected by such factors as longer than anticipated lease-up periods or the inability of tenants to pay increased rents. Additional information about these factors is contained in the Trust’s filings with the SEC including the Trust’s most recent filed report on Form 10-K and Form 10-Q.

First Real Estate Investment Trust is a publicly traded (over-the-counter – symbol FREVS) REIT organized in 1961. It has approximately $245 million (historical cost basis) of assets. Its portfolio of residential and commercial properties extends from Eastern L.I. to Maryland, with the largest concentration in Northern New Jersey.

For additional information contact Shareholder Relations at (201) 488-6400

Visit us on the web: www.freitnj.com

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