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| 8-K - FORM 8K - FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY | form8k-116555_freit.htm |
Exhibit 99.1
HACKENSACK, NJ, June 6, 2011 – First Real Estate Investment Trust (“FREIT”) reported its operating results for the six and three-month periods ended April 30, 2011. The results of operations as presented in this earnings release are unaudited, and are not necessarily indicative of future operating results.
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FINANCIAL HIGHLIGHTS
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Six Months Ended
April 30, 2011
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Three Months Ended
April 30, 2011
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* Net Income Per Share-Basic:
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$0.34
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$0.19
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* Dividends Per Share:
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$0.60
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$0.30
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* FFO Per Share-Basic:
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$0.75
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$0.39
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* FFO Payout:
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80.0%
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76.9%
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* Average Residential Occupancy:
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94.4%
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94.4%
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* Average Commercial Occupancy:
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89.8%
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90.0%
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RESULTS OF OPERATIONS
Real Estate revenue for the six months ended April 30, 2011 (“Current Six Months”) decreased 1.7% to $21,827,000 compared to $22,209,000 for the six months ended April 30, 2010 (“Prior Six Months”). Real Estate revenue for the three months ended April 30, 2011 (“Current Quarter”) decreased 3.5% to $10,966,000 compared to $11,360,000 for the three months ended April 30, 2010 (“Prior Year’s Quarter”). Net income attributable to common equity (“net income-common equity”) for the Current Six Months was $2,339,000 ($0.34 per share basic) compared to $2,302,000 ($0.33 per share basic) for the Prior Six Months. Net income-common equity for the Current Quarter was $1,320,000 ($0.19 per share basic) compared to $1,130,000 ($0.16 per share basic) for the Prior Year’s Quarter. The schedule below provides a detailed analysis of the major changes that impacted net income-common equity for the six and three months ended April 30, 2011 and 2010:
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Six Months Ended April 30,
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Three Months Ended April 30,
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2011
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2010
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Change
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2011
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2010
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Change
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(in thousands, except per share)
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(in thousands, except per share)
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Real estate revenues:
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Commercial properties
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$ | 12,037 | $ | 12,699 | $ | (662 | ) | $ | 6,054 | $ | 6,559 | $ | (505 | ) | ||||||||||
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Residential properties
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9,790 | 9,510 | 280 | 4,912 | 4,801 | 111 | ||||||||||||||||||
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Total real estate revenues
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21,827 | 22,209 | (382 | ) | 10,966 | 11,360 | (394 | ) | ||||||||||||||||
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Operating expenses:
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Real estate operations
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9,195 | 9,705 | (510 | ) | 4,495 | 5,085 | (590 | ) | ||||||||||||||||
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General and administrative
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796 | 841 | (45 | ) | 403 | 413 | (10 | ) | ||||||||||||||||
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Depreciation
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3,021 | 3,065 | (44 | ) | 1,510 | 1,543 | (33 | ) | ||||||||||||||||
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Total operating expenses
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13,012 | 13,611 | (599 | ) | 6,408 | 7,041 | (633 | ) | ||||||||||||||||
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Operating income
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8,815 | 8,598 | 217 | 4,558 | 4,319 | 239 | ||||||||||||||||||
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Investment income
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52 | 66 | (14 | ) | 23 | 30 | (7 | ) | ||||||||||||||||
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Financing costs
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(5,814 | ) | (5,781 | ) | (33 | ) | (2,888 | ) | (2,919 | ) | 31 | |||||||||||||
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Net income
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3,053 | 2,883 | 170 | 1,693 | 1,430 | 263 | ||||||||||||||||||
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Net income attributable to noncontrolling interests
(formerly referred to as minority interests)
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(714 | ) | (581 | ) | (133 | ) | (373 | ) | (300 | ) | (73 | ) | ||||||||||||
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Net income attributable to common equity
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$ | 2,339 | $ | 2,302 | $ | 37 | $ | 1,320 | $ | 1,130 | $ | 190 | ||||||||||||
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Earnings per share-basic (attributable to common equity)
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$ | 0.34 | $ | 0.33 | $ | 0.01 | $ | 0.19 | $ | 0.16 | $ | 0.03 | ||||||||||||
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Weighted average shares outstanding
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6,942 | 6,942 | 6,942 | 6,942 | ||||||||||||||||||||
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SEGMENT INFORMATION
The following tables set forth comparative net operating income ("NOI") data for FREIT’s real estate segments and reconcile the NOI to consolidated net income-common equity for the Current Six Months and Current Quarter, as compared to the prior year’s comparable periods:
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Commercial
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Residential
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Combined
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Six Months Ended
April 30, |
Increase (Decrease)
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Six Months Ended
April 30, |
Increase (Decrease)
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Six Months Ended
April 30, |
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2011
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2010
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$ | % | 2011 | 2010 | $ | % | 2011 | 2010 | |||||||||||||||||||||||||||||||
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(in thousands)
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(in thousands)
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(in thousands)
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||||||||||||||||||||||||||||||||||||||
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Rental income
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$ | 9,272 | $ | 9,633 | $ | (361 | ) | -3.7 | % | $ | 9,604 | $ | 9,395 | $ | 209 | 2.2 | % | $ | 18,876 | $ | 19,028 | |||||||||||||||||||
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Reimbursements
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2,587 | 2,890 | (303 | ) | -10.5 | % | - | - | - | 2,587 | 2,890 | |||||||||||||||||||||||||||||
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Other
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101 | 82 | 19 | 23.2 | % | 186 | 115 | 71 | 61.7 | % | 287 | 197 | ||||||||||||||||||||||||||||
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Total revenue
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11,960 | 12,605 | (645 | ) | -5.1 | % | 9,790 | 9,510 | 280 | 2.9 | % | 21,750 | 22,115 | |||||||||||||||||||||||||||
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Operating expenses
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4,951 | 5,003 | (52 | ) | -1.0 | % | 4,244 | 4,702 | (458 | ) | -9.7 | % | 9,195 | 9,705 | ||||||||||||||||||||||||||
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Net operating income
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$ | 7,009 | $ | 7,602 | $ | (593 | ) | -7.8 | % | $ | 5,546 | $ | 4,808 | $ | 738 | 15.3 | % | 12,555 | 12,410 | |||||||||||||||||||||
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Average
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Occupancy %
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89.8 | % | 90.1 | % | -0.3 | % | 94.4 | % | 93.8 | % | 0.6 | % | ||||||||||||||||||||||||||||
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Reconciliation to consolidated net income:
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Deferred rents - straight lining
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89 | 109 | ||||||||||||||||||||||||||||||||||||||
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Amortization of acquired leases
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(12 | ) | (15 | ) | ||||||||||||||||||||||||||||||||||||
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Investment income
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52 | 66 | ||||||||||||||||||||||||||||||||||||||
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General and administrative expenses
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(796 | ) | (841 | ) | ||||||||||||||||||||||||||||||||||||
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Depreciation
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(3,021 | ) | (3,065 | ) | ||||||||||||||||||||||||||||||||||||
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Financing costs
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(5,814 | ) | (5,781 | ) | ||||||||||||||||||||||||||||||||||||
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Net income
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3,053 | 2,883 | ||||||||||||||||||||||||||||||||||||||
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Net income attributable to noncontrolling interests
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(714 | ) | (581 | ) | ||||||||||||||||||||||||||||||||||||
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Net income attributable to common equity
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$ | 2,339 | $ | 2,302 | ||||||||||||||||||||||||||||||||||||
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Commercial
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Residential
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Combined
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Three Months Ended
April 30, |
Increase (Decrease)
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Three Months Ended
April 30, |
Increase (Decrease)
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Three Months Ended
April 30, |
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| 2011 | 2010 | $ | % | 2011 | 2010 | $ | % | 2011 | 2010 | |||||||||||||||||||||||||||||||
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(in thousands)
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(in thousands)
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(in thousands)
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Rental income
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$ | 4,611 | $ | 4,996 | $ | (385 | ) | -7.7 | % | $ | 4,796 | $ | 4,743 | $ | 53 | 1.1 | % | $ | 9,407 | $ | 9,739 | |||||||||||||||||||
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Reimbursements
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1,365 | 1,456 | (91 | ) | -6.3 | % | - | - | - | 1,365 | 1,456 | |||||||||||||||||||||||||||||
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Other
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49 | 58 | (9 | ) | -15.5 | % | 116 | 58 | 58 | 100.0 | % | 165 | 116 | |||||||||||||||||||||||||||
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Total revenue
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6,025 | 6,510 | (485 | ) | -7.5 | % | 4,912 | 4,801 | 111 | 2.3 | % | 10,937 | 11,311 | |||||||||||||||||||||||||||
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Operating expenses
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2,406 | 2,629 | (223 | ) | -8.5 | % | 2,089 | 2,456 | (367 | ) | -14.9 | % | 4,495 | 5,085 | ||||||||||||||||||||||||||
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Net operating income
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$ | 3,619 | $ | 3,881 | $ | (262 | ) | -6.8 | % | $ | 2,823 | $ | 2,345 | $ | 478 | 20.4 | % | 6,442 | 6,226 | |||||||||||||||||||||
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Average
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Occupancy %
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90.0 | % | 89.5 | % | 0.5 | % | 94.4 | % | 94.6 | % | -0.2 | % | ||||||||||||||||||||||||||||
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Reconciliation to consolidated net income:
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Deferred rents - straight lining
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35 | 56 | ||||||||||||||||||||||||||||||||||||||
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Amortization of acquired leases
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(6 | ) | (7 | ) | ||||||||||||||||||||||||||||||||||||
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Investment income
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23 | 30 | ||||||||||||||||||||||||||||||||||||||
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General and administrative expenses
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(403 | ) | (413 | ) | ||||||||||||||||||||||||||||||||||||
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Depreciation
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(1,510 | ) | (1,543 | ) | ||||||||||||||||||||||||||||||||||||
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Financing costs
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(2,888 | ) | (2,919 | ) | ||||||||||||||||||||||||||||||||||||
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Net income
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1,693 | 1,430 | ||||||||||||||||||||||||||||||||||||||
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Net income attributable to noncontrolling interests
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(373 | ) | (300 | ) | ||||||||||||||||||||||||||||||||||||
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Net income attributable to common equity
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$ | 1,320 | $ | 1,130 | ||||||||||||||||||||||||||||||||||||
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.
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COMMERCIAL SEGMENT
Total revenue and NOI from FREIT’s commercial segment for the Current Six Months decreased by 5.1% and 7.8%, respectively, as compared to the Prior Six Months. For the Current Quarter, total revenue and NOI decreased by 7.5% and 6.8%, respectively, as compared to the Prior Year’s Quarter. The primary reasons for the decrease in both revenue and NOI for the Current Six Months, as well as the Current Quarter were a $250,000 lease termination fee recorded in the Prior Year’s Quarter, with no comparable activity in the current periods. Lower expense reimbursements in the Current Six Months, stemming from prior year common area maintenance adjustments, also affected the reduced revenue and NOI.
The U.S. economy has recovered from the recession and continues to improve, albeit at a rate much slower than anticipated. Average occupancy (exclusive of the Damascus Center, which is undergoing a major redevelopment project) for the Current Six Months was 94.5%, a slight decrease of 0.1% from last year’s comparable period, and increased 0.6% for the Current Quarter to 94.5%, compared to 93.9% for the Prior Year’s Quarter.
On April 15, 2011, FREIT was notified by Giant of Maryland LLC (“Giant”), the tenant and operator of the 55,330 sq. ft. Giant Supermarket at Westridge, that it will not extend the term of its lease, which expires on October 31, 2011. This lease expiration will not affect FREIT’s income or cash flow for its fiscal year ended October 31, 2011. It is FREIT’s intention to re-lease the space to a new tenant or tenants that will enhance the shopping experience at Westridge. FREIT expects the new rents to be at current market levels, which are higher than the rents paid by Giant, and anticipates increased earnings from the space. However, the space will be vacant and no rent will be received from the space beginning on November 1, 2011 unless or until FREIT is able to re-lease the space, and it is occupied by a new tenant(s). Additionally, FREIT expects to incur leasing costs and tenant improvement costs associated with re-leasing the space. The vacancy may adversely affect FREIT’s operating results in fiscal 2012 depending upon the outcome of FREIT’s re-leasing efforts for this space. In addition, FREIT will reevaluate its decision to market Westridge for sale in light of the Giant lease expiration.
Construction has commenced for the completion of the expansion and renovation of the Damascus Center. It is expected that construction will be completed prior to November 2011.
RESIDENTIAL SEGMENT
Total revenue and NOI from FREIT’s residential segment for the Current Six Months increased by 2.9% and 15.3%, respectively, as compared to the Prior Six Months. For the Current Quarter, total revenue and NOI increased by 2.3% and 20.4%, respectively, as compared to the Prior Year’s Quarter. The increase in total revenue and NOI for the Current Six Months and Current Quarter are primarily attributable to higher occupancy levels and higher base rental income at many of our residential properties, in addition to overall lower operating costs for the Current Quarter. Current Six Month results also include a $207,000 insurance recovery relating to storm damages incurred and expensed last year at the Pierre Towers apartment complex. The recovery has been recorded as an offset within operating expenses. The positive operating results for the Current Six Months reflect the upward movement of occupancy levels, as evidenced by average occupancy for the Current Six Months increasing 0.6% over last year’s comparable period.
On June 3, 2011, FREIT’s Board of Trustees authorized management to pursue the sale of the Palisades Manor Apartments, in Palisades Park, NJ, the Grandview Apartments in Hasbrouck Heights, NJ, and the Heights Manor Apartments in Spring Lake Heights, NJ. The decision to pursue the sale of these properties was based on the Board’s desire to re-deploy the net proceeds arising from the sale to real estate assets in other areas of FREIT’s operations.
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FUNDS FROM OPERATIONS (“FFO”):
Many consider FFO, which is a non-GAAP financial measure, as the standard measurement of a REIT’s performance. We compute FFO as follows:
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Six Months Ended
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Three Months Ended
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April 30,
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April 30,
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2011
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2010
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2011
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2010
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(in thousands, except per share)
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(in thousands, except per share)
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Net income
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$ | 3,053 | $ | 2,883 | $ | 1,693 | $ | 1,430 | ||||||||
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Depreciation
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3,021 | 3,065 | 1,510 | 1,543 | ||||||||||||
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Amortization of deferred mortgage costs
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147 | 106 | 74 | 53 | ||||||||||||
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Deferred rents (Straight lining)
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(89 | ) | (109 | ) | (35 | ) | (56 | ) | ||||||||
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Amortization of acquired leases
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12 | 15 | 6 | 7 | ||||||||||||
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Capital Improvements - Apartments
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(139 | ) | (120 | ) | (55 | ) | (35 | ) | ||||||||
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Distributions to noncontrolling interests
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(764 | ) | (692 | ) | (482 | ) | (344 | ) | ||||||||
| FFO | $ | 5,241 | $ | 5,148 | $ | 2,711 | $ | 2,598 | ||||||||
| FFO Per Share-Basic | $ | 0.75 | $ | 0.74 | $ | 0.39 | $ | 0.37 | ||||||||
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Weighted Average Shares Outstanding
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6,942 | 6,942 | 6,942 | 6,942 | ||||||||||||
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 comparable.
DIVIDENDS
The 2nd quarter dividend of $0.30 per share will be paid on June 15, 2011 to shareholders of record on June 1, 2011.
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 to be filed covering this period.
First Real Estate Investment Trust is a publicly traded (over-the-counter – symbol FREVS.OB) REIT organized in 1961. It has approximately $241 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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