{"url_path":"/sec/frevs/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 Management’s Discussion and Analysis","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-06-12","source_url":"https://www.sec.gov/Archives/edgar/data/36840/0001174947-26-000661-index.html","accession_number":"0001174947-26-000661","cik":"0000036840","ticker":"FREVS","issuer_name":"FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC.","edgar_url":"https://www.sec.gov/Archives/edgar/data/36840/0001174947-26-000661-index.html","primary_entity_key":"0000036840","primary_entity_name":"FIRST REAL ESTATE INVESTMENT TRUST OF NEW JERSEY, INC."},"word_count":9902,"has_tables":true,"body_markdown":"Item 2: Management’s Discussion and Analysis\nof Financial Condition and Results of Operations\n\n \n\n \n\nCautionary Statement Identifying Important Factors\nThat Could Cause First Real Estate Investment Trust of New Jersey, Inc.’s (“FREIT”) Actual Results to Differ From Those\nProjected in Forward Looking Statements.\n\n \n\nReaders of this discussion are advised that the\ndiscussion should be read in conjunction with the unaudited condensed consolidated financial statements of FREIT (including related notes\nthereto) appearing elsewhere in this Form 10-Q, and the consolidated financial statements included in FREIT’s most recently filed\nForm 10-K. Certain statements in this discussion may constitute “forward-looking statements” within the meaning of the Private\nSecurities Litigation Reform Act of 1995. Forward-looking statements reflect FREIT’s current expectations and are based on estimates,\nprojections, beliefs, data, methods and assumptions of management of FREIT at the time of such statements regarding future results of\noperations, economic performance, financial condition and achievements of FREIT, and do not relate strictly to historical or current facts.\nThese forward-looking statements are identified through the use of words such as “believe,” “expect,” “anticipate,”\n“intend,” “plan,” “estimate,” or words of similar meaning. Forward-looking statements involve risks\nand uncertainties in predicting future results and conditions.\n\n \n\nAlthough FREIT believes that the expectations\nreflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties.\nThese and certain other uncertainties, factors and risks, including those risk factors set forth and further described in Part I, Item\n1A entitled “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, and other risks described\nin our subsequent filings with the SEC, may cause our actual results to differ materially from those projected. Such factors include,\nbut are not limited to, the following: general economic and business conditions, including the purchase of retail products over the Internet,\nwhich will, among other things, affect demand for rental space, the availability of prospective tenants, lease rents, the financial condition\nof tenants and the default rate on leases, operating and administrative expenses and the availability of financing; interest rate risk;\nadverse changes in FREIT’s real estate markets, including, among other things, competition with other real estate owners, competition\nconfronted by tenants at FREIT’s commercial properties; governmental actions and initiatives; environmental/safety requirements;\nrisks of real estate development and acquisitions; and public health crises, epidemics and pandemics; and FREIT’s ability to satisfy\nthe conditions to closing the proposed sale transactions involving the Franklin Crossing and Westwood Plaza shopping centers. The risks\nwith respect to the development of real estate include: increased construction costs, inability to obtain construction financing, or unfavorable\nterms of financing that may be available, unforeseen construction delays and the failure to complete construction within budget. Other\nrisks to which FREIT is subject are: the possibility that FREIT’s stockholders do not approve the Plan of Voluntary Liquidation;\nchanges in the amount and timing of the total liquidating distributions, including as a result of unexpected levels of transaction costs,\ndelayed or terminated closings, liquidation costs or unpaid or additional liabilities and obligations; the possibility of converting to\na liquidating trust; and the occurrence of any event, change or other circumstances that could give rise to the termination of the Plan\nof Voluntary Liquidation.\n\n \n\nOVERVIEW\n\n \n\nFREIT is an equity real estate investment trust\n(“REIT”) that is self-administered and externally managed. FREIT owns a portfolio of residential apartment and commercial\nproperties. FREIT’s revenues consist primarily of rental income and other related revenues from its residential and commercial properties.\nFREIT’s properties are primarily located in northern New Jersey and New York.\n\n \n\n*The economic and financial environment*:\nThe U.S. unemployment rate has remained relatively stable since January 2026 at 4.3%. Consumer price index (CPI) inflation increased from\n2.4% in January 2026 to 3.8% in April 2026, representing the highest level in approximately three years. Mortgage rates on 30-year fixed-rate\nloans remain significantly above pre-2022 levels, with the average rate currently approximately 6.5%. The broader economy has continued\nto expand at a moderate pace, with gross domestic product (GDP) growth of approximately 2.0% in the first quarter of 2026, compared to\n0.5% in the fourth quarter of 2025. In light of the current economic environment and elevated inflation, the Federal Reserve maintained\nthe federal funds target range at 3.50% to 3.75% at its April 2026 meeting. Uncertainty regarding the duration of elevated global energy\nprices, driven in part by geopolitical developments in the Middle East, and the potential broader economic impacts of such conditions\nremain notable risks.\n\n \n\n*Residential Properties:* Our residential\nportfolio continues to generate positive cash flow. While average rents on turned units and renewal leases have remained generally stable\nacross much of the portfolio, we are observing a modest but noticeable softening in market conditions compared to prior quarters. This\nstability should continue to support FREIT’s income over time; however, the potential impact of elevated interest rates, inflation,\nand global energy prices on portfolio performance over the next year remains uncertain.\n\n \n\n*Commercial Properties:* The vacancy\nrates at the Westwood Plaza and Preakness shopping centers remain elevated. Additionally, the somewhat elevated interest rates could have\nan adverse impact on the operating and financial performance of our existing commercial tenants.\n\n \n\n \n\nPage 20 \n\n*Franklin Crossing Purchase and Sale Agreement*:\nOn April 8, 2026, FREIT (the “Seller”) entered into a Purchase and Sale Agreement (the “Franklin Crossing Agreement”)\nwith an affiliate of Regency Centers Corporation (the “Purchaser”), pursuant to which the Seller will sell to the Purchaser\n100% of Seller’s ownership interests in the Franklin Crossing shopping center located in Franklin Lakes, New Jersey, (“Franklin\nCrossing”) in exchange for the purchase price of $27,000,000, subject to the terms and conditions of the Franklin Crossing Agreement.\nUpon signing the Franklin Crossing Agreement, the Purchaser delivered into escrow held by the title company a deposit in the amount of\n$1,000,000 (the “Initial Franklin Crossing Deposit”), which was only refundable during the 30-day due diligence period immediately\nfollowing the signing. After the expiration of this period on May 8, 2026, the Initial Franklin Crossing Deposit became non-refundable\nexcept in connection with certain rights to terminate the Franklin Crossing Agreement, and the Purchaser deposited into escrow held by\nthe title company an additional amount of $1,000,000, which is non-refundable except in connection with certain rights to terminate the\nFranklin Crossing Agreement.\n\n \n\nThe Franklin Crossing Agreement contains customary\nrepresentations, warranties and indemnity provisions. The parties’ respective obligations under the Franklin Crossing Agreement\nare subject to certain customary conditions and termination rights, including the right of either the Seller or the Purchaser to terminate\nthe Franklin Crossing Agreement if the closing has not occurred on or before August 15, 2026. There is no financing contingency under\nthe Franklin Crossing Agreement.\n\n \n\nThe Board unanimously approved the Franklin Crossing\nAgreement and the transaction contemplated thereby which is expected to close in the third quarter of 2026. (See Note 12 to FREIT’s\ncondensed consolidated financial statements for additional information.)\n\n \n\n*Westwood Plaza Purchase and Sale Agreement*:\nOn May 26, 2026, FREIT (the “Seller”) entered into a Purchase and Sale Agreement (the “Westwood Plaza Agreement”)\nwith an affiliate of Regency Centers Corporation (the “Purchaser”), pursuant to which the Seller will sell to the Purchaser\n100% of Seller’s ownership interests in the Westwood Plaza shopping center located at 700 Broadway in Westwood, New Jersey (“Westwood\nPlaza”) in exchange for the purchase price of $28,800,000, subject to the terms and conditions of the Westwood Plaza Agreement.\n\n \n\nUpon signing the Westwood Plaza Agreement, the\nPurchaser delivered into escrow held by the title company a deposit in the amount of $1,200,000 (the “Initial Westwood Plaza Deposit”),\nwhich is refundable during a 120-day due diligence period immediately following the signing. After the expiration of this period on September\n23, 2026, the Initial Westwood Plaza Deposit becomes non-refundable except in connection with certain rights to terminate the Westwood\nPlaza Agreement. If the Purchaser elects to proceed with the transaction after the expiration of the initial 120-day due diligence period,\nthe Purchaser is obligated to deposit into escrow an additional amount of $1,000,000, which is non-refundable except in connection with\ncertain rights to terminate the Westwood Plaza Agreement. Upon expiration of the initial 120-day due diligence period, the Purchaser has\nthe option of entering into a second due diligence period for up to an additional nine months. The Purchaser is obligated to pay to the\nSeller $50,000 for each month that it elects to engage in due diligence during the second due diligence period. Payments made by the Purchaser\nto extend the due diligence period are non-refundable except in the event of a breach by Seller and are not applied to the purchase price\nat closing.\n\n \n\nThe Westwood Plaza Agreement contains customary\nrepresentations, warranties and indemnity provisions. The parties’ respective obligations under the Westwood Plaza Agreement are\nsubject to certain customary conditions and termination rights, including the right of either the Seller or the Purchaser to terminate\nthe Westwood Plaza Agreement if the closing has not occurred on or before August 15, 2027. There is no financing contingency under the\nWestwood Plaza Agreement.\n\n \n\nThe Board unanimously approved the Westwood Plaza\nAgreement and the transaction contemplated thereby. (See Note 13 to FREIT’s condensed consolidated financial statements for additional\ninformation.)\n\n \n\n*Approval of Plan of Voluntary Liquidation:*\nOn May 12, 2026, FREIT’s Board unanimously determined advisable and approved a Plan of Voluntary Liquidation (the “Plan of\nVoluntary Liquidation”). The Plan of Voluntary Liquidation provides for the Company’s complete liquidation and dissolution\nin accordance with Section 331, Section 336 and Section 346(a) of the Internal Revenue Code of 1986, as amended, and the Maryland General\nCorporation Law. Effectiveness of the Plan of Voluntary Liquidation is subject to approval by the affirmative vote of the holders of Common\nStock entitled to cast a majority of all the votes entitled to be cast on the matter. FREIT currently anticipates that the Plan of Voluntary\nLiquidation will be submitted for stockholder approval at a special meeting of the stockholders, expected to occur in the Fall of 2026.\n\n \n\n \n\nUpon the effectiveness of the Plan of Voluntary\nLiquidation and pursuant thereto, the Company is authorized to sell, convey, transfer and deliver or otherwise dispose of, or cause its\nsubsidiaries to sell, convey, transfer and deliver or otherwise dispose of, all of their remaining assets, without further approval of\nthe stockholders. The Plan of Voluntary Liquidation further provides that upon a determination of the Board, the Company may transfer\nand assign any remaining assets of the Company and its subsidiaries to a liquidating trust (a “Liquidating Trust”), subject\nto the terms of the Plan of Voluntary Liquidation, and the Board may cause the Company to make the final distribution to the Company’s\nstockholders as a distribution in kind of beneficial interests in the Liquidating Trust, at such time as the Board deems appropriate or\nadvantageous in its discretion. (See Note 13 to FREIT’s condensed consolidated financial statements for additional information.)\n\n \n\n*Third Amendment to Management Agreement*:\nOn May 13, 2026, FREIT entered into a Third Amendment to the Management Agreement dated November 1, 2001 between the Company and Hekemian\n& Co. The Third Amendment provides that upon the closing of any sale or other disposition of the Company’s entire direct or\nindirect interest in each property managed by Hekemian & Co., including sales or dispositions of a managed property in furtherance\nof the Plan of Voluntary Liquidation, the Management\n\n \n\nPage 21 \n\nAgreement shall automatically terminate with respect to such property and the Company\nshall pay to Hekemian & Co. (a) any and all commissions and fees for management services and reimbursement required to be paid by\nthe Company pursuant to the Management Agreement in respect of the applicable property up to the termination date, calculated on a pro\nrata basis plus (b) a termination fee in respect to such property equal to the product of (x) the Company’s direct or indirect percentage\nownership interest in such property times (y) 2.5 times (z) one (1) year’s Base Management Fee in respect of such property. The\nBase Management Fee is computed by dividing the annual base management fee allocable to the applicable property paid by the Company to\nHekemian & Co. over the immediately prior three (3) fiscal years prior to such termination by three (3).\n\n \n\nUpon the closing of any sale or other disposition\nof the Company’s entire direct or indirect interest in a managed property, including sales or dispositions in furtherance of the\nPlan of Voluntary Liquidation, the Company is required to pay to Hekemian & Co. a fee equal to 1.65% of the sales price for the property.\nIn the event a property is not wholly owned, directly or indirectly, by the Company, the sales fee payable to Hekemian & Co. shall\nonly be payable in respect of the Company’s percentage ownership share of the applicable property. (See Note 13 to FREIT’s\ncondensed consolidated financial statements for additional information.)\n\n \n\n*Incentive Compensation Arrangement*:\nTo provide an incentive to Robert S. Hekemian, Jr., Chief Executive Officer, President and a director of the Trust, to facilitate the\ntimely sale of FREIT’s properties, the Board has approved an incentive compensation arrangement that will entitle Mr. Hekemian to\na $1,000,000 cash bonus if the Company sells and/or enters into contracts to sell all of its real properties within 18 months after the\napproval of the Plan of Voluntary Liquidation by FREIT’s stockholders and receives aggregate gross proceeds from such sales in excess\nof $319.9 million. To receive the bonus, the sale of all of the Company’s properties must close.\n\n \n\nIn addition, in recognition of the increased time commitment and effort\nanticipated to be required of members of the Board to oversee, implement and administer the Plan of Voluntary Liquidation, including the\nsale of properties pursuant to the Plan of Voluntary Liquidation, the Board approved an increase effective May 1, 2026 in the annual cash\nretainer fee payable to each director from $60,000 to $120,000.\n\n \n\n(See Note 13 to FREIT’s condensed consolidated\nfinancial statements for additional information.)\n\n \n\n*Stockholder Rights Agreement Extension*:\nOn May 13, 2026, FREIT’s Board entered into a First Amendment to the Stockholder Rights Agreement dated July 31, 2023, between the\nCompany and Computershare Trust Company, N.A., as Rights Agent. Pursuant to the terms of the First Amendment to the Stockholder Rights\nAgreement, the expiration term of the stockholder rights will be extended from July 31, 2026 to July 31, 2029. (See Note 13 to FREIT’s\ncondensed consolidated financial statements for additional information.)\n\n \n\n*Debt Financing Availability:* Financing\nhas been available to FREIT and its affiliates. Certain recent refinancings and loan modifications/extensions have been at higher interest\nrates and for shorter terms. In accordance with certain loan agreements, FREIT may be required to meet or maintain certain financial covenants\nthroughout the term of the loan.\n\n \n\nOn October 31, 2023, FREIT exercised its right,\npursuant to the loan agreement held with Valley National Bank, to extend the term of its loan secured by the Westwood Plaza shopping center\nlocated in Westwood, New Jersey, with a then outstanding balance of approximately $16.6 million, for one additional year from an initial\nmaturity date of February 1, 2024 to a new maturity date of February 1, 2025. This loan extension was based on a fixed interest rate of\n8.5% and was payable based on monthly installments of principal and interest of approximately $166,727. Additionally, FREIT funded the\ninterest reserve escrow account for this loan (“Escrow”) with an additional $112,556, increasing the Escrow balance to $2,000,722,\nwhich represented the annualized principal and interest payments for one (1) year under this loan extension. Effective February 1, 2025,\nValley National Bank extended this loan for 90 days from a maturity date of February 1, 2025 to a maturity date of May 1, 2025 under the\nsame terms and conditions of the existing loan agreement.\n\n \n\nEffective May 1, 2025, FREIT entered into a loan\nextension and modification agreement with Valley National Bank and paid down this loan by approximately $5.7 million (including deferred\ninterest of approximately $0.2 million) bringing the loan balance to $10 million. Under the terms and conditions of this loan extension\nand modification, the maturity date of this loan was extended for one year to May 1, 2026, the interest rate on the outstanding debt was\nbased on a fixed interest rate of 8.5% and monthly installments of principal and interest of approximately $107,978 were required. The\npay down of this loan resulted in annual debt service savings of approximately $705,000. Additionally, the Escrow balance was reduced\nfrom $2,000,722 to $1,295,739 resulting in a refund to FREIT of $704,983. This Escrow is held at Valley National Bank and in the event\nof a default on this loan, the bank shall be permitted to use the proceeds from the Escrow to make monthly debt service payments on the\nloan. This loan has been further extended by Valley National Bank for an additional 90 days with a new maturity date of August 1, 2026\nbased on the same terms and conditions of the existing loan agreement. (See Note 7 to FREIT’s condensed consolidated financial statements\nfor further details.)\n\n \n\nOn December 15, 2024, the mortgage secured by\nan apartment building located in Middletown, New York and the corresponding interest rate swap contract on its underlying loan came due\nwith no settlement of the swap contract due at maturity. Effective December 15, 2024, FREIT Regency, LLC entered into a loan extension\nand modification agreement with the lender of this loan, Provident Bank, with a then outstanding loan balance of approximately $13.9 million.\nUnder the terms and conditions of this loan extension and modification, the maturity date of this loan is extended for three years to\nDecember 15, 2027, the interest rate on the\n\n \n\nPage 22 \n\noutstanding debt is based on a fixed interest rate of 6.05% and monthly installments of principal\nand interest of approximately $84,521 are required. (See Note 7 to FREIT’s condensed consolidated financial statements for further\ndetails.)\n\n \n\nOn August 1, 2025, the mortgage in the amount\nof $25,000,000, secured by the Preakness shopping center located in Wayne, New Jersey, reached its maturity date. Wayne PSC, LLC continues\nto work with the current lender, ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several\nextensions of the loan’s maturity date, with the most recent extension through August 1, 2026, while discussions are ongoing. Each\nextension has been made under the same terms and conditions of the existing loan agreement. Management expects this loan to be further\nmodified and extended, however, until such time as a definitive agreement providing for a modification, extension or replacement of this\nloan is entered into, there can be no assurance that such an agreement will be reached. (See Note 7 to FREIT’s condensed consolidated\nfinancial statements for further details.)\n\n \n\nFREIT’s revolving line of credit in the\namount of $13 million, provided by Provident Bank, was set to expire on October 31, 2026. Draws against the $13 million credit line were\nsecured by mortgages on FREIT’s Franklin Crossing Shopping center in Franklin Lakes, New Jersey and retail space in Glen Rock, New\nJersey. As of April 30, 2026 and October 31, 2025, there was no amount outstanding and $13 million was available under this line of credit.\n\n \n\nOn May 26, 2026, FREIT’s $13 million line\nof credit has been replaced with a $20 million line of credit provided by Provident Bank secured by a mortgage on FREIT’s Boulders\nproperty in Rockaway, New Jersey. Draws against this credit line can be used for working capital needs and standby letters of credit.\nThe line of credit will expire on October 31, 2029 and the interest rate on any amount outstanding will be based on a floating interest\nrate of prime minus 25 basis points with a floor of 6.75%. (See Note 7 to FREIT’s condensed consolidated financial statements for\nfurther details.)\n\n \n\n*Operating\nCash Flow:* FREIT expects that cash provided by operating activities and cash reserves will be adequate to cover mandatory debt\nservice payments (including payments of interest, but excluding balloon payments, which are expected to be refinanced and/or extended),\nreal estate taxes, recurring capital improvements at its properties and other needs to maintain its status as a REIT for at least a period\nof one year from the date of filing of this quarterly report on Form 10-Q.\n\n \n\nSIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES\n\n \n\nPursuant to the SEC disclosure guidance for \"Critical\nAccounting Policies,\" the SEC defines Critical Accounting Policies as those that require the application of management's most difficult,\nsubjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain\nand may change in subsequent periods.\n\n \n\nOur discussion and analysis of our financial condition\nand results of operations are based upon our consolidated financial statements, the preparation of which takes into account estimates\nbased on judgments and assumptions that affect certain amounts and disclosures. Accordingly, actual results could differ from these estimates.\nThe accounting policies and estimates used, which are outlined in Note 1 to our Consolidated Financial Statements included in our Annual\nReport on Form 10-K for the fiscal year ended October 31, 2025, have been applied consistently as of April 30, 2026, and for the six and\nthree months ended April 30, 2026 and 2025. We believe that the following accounting policies or estimates require the application of\nmanagement's most difficult, subjective, or complex judgments.\n\n \n\nRevenue Recognition: Base rents, additional rents\nbased on tenants' sales volume and reimbursement of the tenants' share of certain operating expenses are generally recognized when earned\nfrom tenants. The straight-line basis is used to recognize base rents under leases if they provide for varying rents over the lease terms.\nStraight-line rents receivable represent unbilled rents receivable to the extent straight-line rents exceed current rents billed in accordance\nwith lease agreements. Before FREIT can recognize revenue, it is required to assess, among other things, its collectability.\n\n \n\nValuation of Long-Lived Assets: FREIT assesses\nthe carrying value of long-lived assets periodically, or whenever events or changes in circumstances indicate that the carrying amounts\nof certain assets may not be recoverable. When FREIT determines that the carrying value of long-lived assets may be impaired, the measurement\nof any impairment is based on a projected discounted cash flow method determined by FREIT's management. While we believe that our discounted\ncash flow methods are reasonable, different assumptions regarding such cash flows may significantly affect the measurement of impairment.\n\n \n\nReal Estate Development Costs: It is FREIT’s\npolicy to capitalize pre-development costs, which generally include legal and professional fees and other directly related third-party\ncosts. Real estate taxes and interest costs incurred during the development and construction phases are also capitalized. FREIT ceases\ncapitalization of these costs when the project or portion thereof becomes operational, or when construction has been postponed. In the\nevent of postponement, capitalization of these costs will recommence once construction on the project resumes.\n\n \n\nSee Note 2 to FREIT’s condensed consolidated\nfinancial statements for recently issued accounting standards.\n\n \n\n \n\nPage 23 \n\nRESULTS OF OPERATIONS\n\n \n\nReal estate revenue for the six months ended April\n30, 2026 (“Current Six Months”) increased 4.2% to $15,138,000 compared to $14,527,000 for the six months ended April 30, 2025\n(“Prior Year’s Six Months”). Real estate revenue for the three months ended April 30, 2026 (“Current Quarter”)\nincreased 5.2% to $7,634,000 compared to $7,258,000 for the three months ended April 30, 2025 (“Prior Year’s Quarter”).\n\n \n\nThe increase in revenue of approximately $611,000\nfor the Current Six Months was primarily driven by a $303,000 increase in residential revenue from higher base rents, despite a modest\ndecline in average occupancy from 96.9% for the Prior Year’s Six Months to 95.6% for the Current Six Months, and a $262,000 increase\nin commercial revenue. Commercial growth primarily reflects higher reimbursable revenue (up $142,000 due to increased snow removal costs),\n$88,000 in additional rent from TJ Maxx at Westwood Plaza following the expiration of its co-tenancy clause, and $43,000 increase in revenue\nrecognized from a collectability-constrained tenant at the Preakness shopping center.\n\n \n\nThe increase in revenue of approximately $376,000\nfor the Current Quarter was primarily driven by a $111,000 increase in residential revenue from higher base rents, despite a decline in\naverage occupancy from 97.1% for the Prior Year’s Quarter to 95.7% for the Current Quarter, and a $238,000 increase in commercial\nrevenue. Commercial growth primarily reflects higher reimbursable revenue (up $148,000 due to increased snow removal costs), $61,000 in\nadditional rent from TJ Maxx at the Westwood Plaza shopping center following the expiration of its co-tenancy clause, and a $39,000 increase\nin revenue recognized from a collectability-constrained tenant at the Preakness shopping center.\n\n \n\nThe schedule below provides a detailed analysis\nof the major changes that impacted net income-common equity for the six and three months ended April 30, 2026 and 2025:\n\n \n\n  \nSix Months Ended \nThree Months Ended\n\n  \nApril 30, \nApril 30,\n\n  \n2026 \n2025 \nChange \n2026 \n2025 \nChange\n\n  \n(In Thousands of Dollars) \n(In Thousands of Dollars)\n\nIncome from real estate operations: \n    \n    \n    \n    \n    \n   \n\nCommercial properties \n$1,204  \n$1,074  \n$130  \n$604  \n$535  \n$69 \n\nResidential properties \n 6,423  \n 6,252  \n 171  \n 3,209  \n 3,258  \n (49)\n\nTotal income from real estate operations \n 7,627  \n 7,326  \n 301  \n 3,813  \n 3,793  \n 20 \n\n  \n    \n    \n    \n    \n    \n   \n\nFinancing costs: \n    \n    \n    \n    \n    \n   \n\nFixed rate mortgages \n (3,356) \n (3,489) \n 133  \n (1,707) \n (1,738) \n 31 \n\nMortgage cost amortization \n (305) \n (235) \n (70) \n (93) \n (113) \n 20 \n\nTotal financing costs \n (3,661) \n (3,724) \n 63  \n (1,800) \n (1,851) \n 51 \n\n  \n    \n    \n    \n    \n    \n   \n\nInvestment income \n 549  \n 750  \n (201) \n 265  \n 350  \n (85)\n\n  \n    \n    \n    \n    \n    \n   \n\nGeneral & administrative expenses: \n    \n    \n    \n    \n    \n   \n\nAccounting fees \n (206) \n (220) \n 14  \n (101) \n (102) \n 1 \n\nLegal and professional fees \n (374) \n (306) \n (68) \n (303) \n (59) \n (244)\n\nDirectors fees \n (733) \n (733) \n —  \n (436) \n (436) \n — \n\nCorporate expenses \n (452) \n (377) \n (75) \n (212) \n (194) \n (18)\n\nTotal general & administrative expenses \n (1,765) \n (1,636) \n (129) \n (1,052) \n (791) \n (261)\n\n  \n    \n    \n    \n    \n    \n   \n\nDepreciation \n (1,445) \n (1,457) \n 12  \n (724) \n (734) \n 10 \n\n(Loss) income on investment in tenancy-in-common \n (69) \n 23  \n (92) \n (68) \n 14  \n (82)\n\nNet income \n 1,236  \n 1,282  \n (46) \n 434  \n 781  \n (347)\n\n  \n    \n    \n    \n    \n    \n   \n\nNet loss attributable to noncontrolling interests in subsidiaries \n 323  \n 226  \n 97  \n 182  \n 113  \n 69 \n\n  \n    \n    \n    \n    \n    \n   \n\nNet income attributable to common equity \n$1,559  \n$1,508  \n$51  \n$616  \n$894  \n$(278)\n\n \n\n \n\nThe condensed consolidated results of operations\nfor the Current Six Months and Current Quarter are not necessarily indicative of the results to be expected for the full year or any other\nperiod. The table above includes income from real estate operations, which is a non-GAAP financial measure and is not a measure of operating\nresults or cash flow as measured by GAAP, and is not necessarily indicative of cash available to fund cash needs.\n\n \n\n \n\nPage 24 \n\nNet income-common equity for the Current Six Months\nwas $1,559,000 ($0.21 per share basic and diluted) compared to $1,508,000 ($0.20 per share basic and diluted) for the Prior Year’s\nSix Months. Net income-common equity for the Current Quarter was $616,000 ($0.08 per share basic and diluted) compared to $894,000 ($0.12\nper share basic and diluted) for the Prior Year’s Quarter.\n\n \n\nThe increase in net income-common equity of approximately\n$51,000 for the Current Six Months was primarily driven by higher revenue of $611,000 (FREIT’s share $514,000), partially offset\nby higher operating expenses and lower investment income. Operating expenses increased due to a $306,000 rise in snow removal costs (FREIT’s\nshare $230,000) resulting from a harsher winter and a $157,000 increase in utility costs (FREIT’s share $97,000) due to rising energy\nprices. Investment income declined by approximately $200,000 (FREIT’s share $186,000), primarily due to lower average cash balances.\n\n \n\nThe decrease in net income-common equity of approximately\n$278,000 for the Current Quarter was primarily driven by higher operating and other expenses and lower investment income, partially offset\nby higher revenue. Expenses increased due to a $261,000 rise in general and administrative expenses related primarily to legal and professional\ncosts associated with potential property sales and the development of a plan of liquidation, a $193,000 increase in snow removal costs\n(FREIT’s share $118,000) due to a harsher winter, and an $82,000 increase in loss on investment in TIC. Investment income declined\nby approximately $85,000 (FREIT’s share $78,000), primarily due to lower average cash balances. These factors were partially offset\nby higher revenue of approximately $376,000 (FREIT’s share $320,000).\n\n \n\n(Refer to the segment disclosure below for a\nmore detailed discussion of the financial performance of FREIT’s commercial and residential segments.)\n\n \n\n \n\nPage 25 \n\nSEGMENT INFORMATION\n\n \n\nThe following tables set forth comparative net\noperating income (\"NOI\") data for FREIT’s real estate segments and reconcile the NOI to condensed consolidated net income-common\nequity for the Current Six Months and Current Quarter as compared to the Prior Year’s comparable periods (see below for definition\nof NOI):\n\n \n\n  \nCommercial \nResidential \nCombined\n\n  \nSix Months Ended \n  \n  \nSix Months Ended \n  \n  \nSix Months Ended\n\n  \nApril 30, \nIncrease (Decrease) \nApril 30, \nIncrease (Decrease) \nApril 30,\n\n  \n2026 \n2025 \n$ \n% \n2026 \n2025 \n$ \n% \n2026 \n2025\n\n  \n(In Thousands) \n  \n(In Thousands) \n  \n(In Thousands)\n\nRental income \n$2,913  \n$2,773  \n$140  \n 5.0%  \n$10,928  \n$10,610  \n$318  \n 3.0%  \n$13,841  \n$13,383 \n\nReimbursements \n 1,122  \n 980  \n 142  \n 14.5%  \n (2) \n 6  \n (8) \n -133.3%  \n 1,120  \n 986 \n\nOther \n 7  \n 27  \n (20) \n -74.1%  \n 180  \n 187  \n (7) \n -3.7%  \n 187  \n 214 \n\nTotal revenue \n 4,042  \n 3,780  \n 262  \n 6.9%  \n 11,106  \n 10,803  \n 303  \n 2.8%  \n 15,148  \n 14,583 \n\nOperating expenses \n 2,828  \n 2,650  \n 178  \n 6.7%  \n 4,683  \n 4,551  \n 132  \n 2.9%  \n 7,511  \n 7,201 \n\nNet operating income \n$1,214  \n$1,130  \n$84  \n 7.4%  \n$6,423  \n$6,252  \n$171  \n 2.7%  \n 7,637  \n 7,382 \n\n  \n    \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nAverage Occupancy % \n 47.5%  \n 48.2%  \n    \n -0.7%  \n 95.6%  \n 96.9%  \n    \n -1.3%  \n    \n   \n\n \n\n \nReconciliation to condensed consolidated net income-common equity:\n  \n \n\n \nDeferred rents - straight lining \n (10) \n (56)\n\n \nInvestment income \n 549  \n 750 \n\n \nGeneral and administrative expenses \n (1,765) \n (1,636)\n\n \n(Loss) income on investment in tenancy-in-common \n (69) \n 23 \n\n \nDepreciation \n (1,445) \n (1,457)\n\n \nFinancing costs \n (3,661) \n (3,724)\n\n \nNet income \n 1,236  \n 1,282 \n\n \nNet loss attributable to noncontrolling interests in subsidiaries \n 323  \n 226 \n\n \nNet income attributable to common equity \n$1,559  \n$1,508 \n\n \n\n  \nCommercial \nResidential \nCombined\n\n  \nThree Months Ended \n  \n  \nThree Months Ended \n  \n  \nThree Months Ended\n\n  \nApril 30, \nIncrease (Decrease) \nApril 30, \nIncrease (Decrease) \nApril 30,\n\n  \n2026 \n2025 \n$ \n% \n2026 \n2025 \n$ \n% \n2026 \n2025\n\n  \n(In Thousands) \n  \n(In Thousands) \n  \n(In Thousands)\n\nRental income \n$1,516  \n$1,423  \n$93  \n 6.5%  \n$5,465  \n$5,340  \n$125  \n 2.3%  \n$6,981  \n$6,763 \n\nReimbursements \n 568  \n 420  \n 148  \n 35.2%  \n (1) \n 1  \n (2) \n -200.0%  \n 567  \n 421 \n\nOther \n —  \n 3  \n (3) \n -100.0%  \n 87  \n 99  \n (12) \n -12.1%  \n 87  \n 102 \n\nTotal revenue \n 2,084  \n 1,846  \n 238  \n 12.9%  \n 5,551  \n 5,440  \n 111  \n 2.0%  \n 7,635  \n 7,286 \n\nOperating expenses \n 1,479  \n 1,283  \n 196  \n 15.3%  \n 2,342  \n 2,182  \n 160  \n 7.3%  \n 3,821  \n 3,465 \n\nNet operating income \n$605  \n$563  \n$42  \n 7.5%  \n$3,209  \n$3,258  \n$(49) \n -1.5%  \n 3,814  \n 3,821 \n\n  \n    \n    \n    \n    \n    \n    \n    \n    \n    \n   \n\nAverage Occupancy % \n 47.6%  \n 48.2%  \n    \n -0.6%  \n 95.7%  \n 97.1%  \n    \n -1.4%  \n    \n   \n\n \n\n \nReconciliation to condensed consolidated net income-common equity:\n  \n \n\n \nDeferred rents - straight lining \n (1) \n (28)\n\n \nInvestment income \n 265  \n 350 \n\n \nGeneral and administrative expenses \n (1,052) \n (791)\n\n \n(Loss) income on investment in tenancy-in-common \n (68) \n 14 \n\n \nDepreciation \n (724) \n (734)\n\n \nFinancing costs \n (1,800) \n (1,851)\n\n \nNet income \n 434  \n 781 \n\n \nNet loss attributable to noncontrolling interests in subsidiaries \n 182  \n 113 \n\n \nNet income attributable to common equity \n$616  \n$894 \n\n \n\nNOI is based on operating revenue and expenses\ndirectly associated with the operations of the real estate properties, but excludes deferred rents (straight lining), depreciation, financing\ncosts and other items. FREIT assesses and measures segment operating results based on NOI.\n\n \n\nSame Property NOI: FREIT considers same property\nnet operating income (“Same Property NOI”) to be a useful supplemental non-GAAP measure of its operating performance. FREIT\ndefines same property within both the commercial and residential segments to be those properties that FREIT has owned and operated for\nboth the current and prior periods presented, excluding those properties that FREIT acquired, sold or redeveloped during those periods.\nAny newly acquired property that has been in operation for less than a year, any property that is undergoing a major redevelopment but\nmay still be in operation at less than full capacity, and/or any property that has been sold is not considered same property.\n\n \n\nNOI and Same Property NOI are non-GAAP financial\nmeasures and are not measures of operating results or cash flow as measured by GAAP, and are not necessarily indicative of cash available\nto fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity.\n\n \n\n \n\nPage 26 \n\nCOMMERCIAL SEGMENT\n\n \n\nThe commercial segment contains five (5) separate\nproperties. Four of these properties are multi-tenanted retail centers and one is single tenanted on land located in Rockaway, New Jersey\nowned by FREIT from which it receives monthly rental income from a tenant who has built and operates a bank branch on the land.\n\n \n\nAs indicated in the tables above under the caption\nSegment Information, total revenue from FREIT’s commercial segment for the Current Six Months and Current Quarter increased by 6.9%\nand 12.9%, respectively, and NOI increased by 7.4% and 7.5%, respectively, as compared to the Prior Year’s comparable periods. Average\noccupancy for all commercial properties for the Current Six Months and Current Quarter decreased by 0.7% and 0.6%, respectively, as compared\nto the Prior Year’s comparable periods.\n\n \n\nThe increase in revenue for the Current Six Months\nwas primarily driven by the following: (a) an increase in reimbursable revenue of approximately $142,000 mainly attributed to increased\nsnow removal costs; (b) an increase in revenue of approximately $88,000 received from TJ Maxx at the Westwood Plaza shopping center due\nto the expiration of its one-year co-tenancy clause in March 2025; and (c) an increase in revenue recognized of approximately $43,000\nfrom a tenant deemed collectability constrained at the Preakness shopping center.\n\n \n\nThe increase in NOI for the Current Six Months\nwas primarily driven by the following: (a) an increase in revenue of approximately $262,000; offset by (b) an increase in total operating\nexpenses of approximately $178,000, primarily related to snow removal costs due to a harsher winter.\n\n \n\nThe increase in revenue for the Current Quarter\nwas primarily driven by an increase in reimbursable revenue of approximately $148,000 mainly attributed to increased snow removal costs;\n(b) an increase in revenue of approximately $61,000 received from TJ Maxx at the Westwood Plaza shopping center due to the expiration\nof its one-year co-tenancy clause in March 2025; and (c) an increase in revenue recognized of approximately $39,000 from a tenant deemed\ncollectability constrained at the Preakness shopping center.\n\n \n\nThe increase in NOI for the Current Quarter was\nprimarily driven by the following: (a) an increase in revenue of approximately $238,000; offset by (b) an increase in total operating\nexpenses of approximately $196,000 primarily related to snow removal costs due to a harsher winter.\n\n \n\nSame Property Operating Results: FREIT’s\ncommercial segment currently contains five (5) same properties. (See definition of same property under Segment Information above.) Since\nall of FREIT’s commercial properties are considered same properties in the current fiscal year, refer to the preceding paragraphs\nfor discussion of changes in same property results.\n\n \n\nLeasing: The following table reflects leasing\nactivity at FREIT’s commercial properties for comparable leases (leases executed for spaces in which there was a tenant at some\npoint during the previous twelve-month period) and non-comparable leases for the Current Six Months:\n\n \n\nRETAIL: \nNumber of\n\nLeases  \nLease Area\n\n(Sq. Ft.)  \nWeighted\n\nAverage\n\nLease Rate\n\n(per Sq. Ft.)  \nWeighted\n\nAverage Prior\n\nLease Rate\n\n(per Sq. Ft.)  \n% Increase\n\n(Decrease)  \nTenant\n\nImprovement\n\nAllowance\n\n(per Sq. Ft.)\n\n(a)  \nLease\n\nCommissions\n\n(per Sq. Ft.)\n\n(a) \n\n  \n   \n   \n   \n   \n   \n   \n  \n\nComparable leases (b) \n 5  \n 12,618  \n$22.43  \n$22.43  \n 0.0%  \n$—  \n$0.17 \n\n  \n    \n    \n    \n    \n    \n    \n   \n\nNon-comparable leases \n 1  \n 8,000  \n$18.90  \n  N/A   \n  N/A   \n$—  \n$0.95 \n\n  \n    \n    \n    \n    \n    \n    \n   \n\nTotal leasing activity \n 6  \n 20,618  \n    \n    \n    \n    \n   \n\n \n\n(a) These leasing costs are presented as annualized costs per square foot and are allocated uniformly over the lease term.\n\n(b) This includes new tenant leases and/or modifications/extensions/renewals of existing tenant leases.        \n\n \n\nRESIDENTIAL SEGMENT\n\n \n\nFREIT currently operates six (6) multi-family\napartment buildings or complexes totaling 792 apartment units, excluding the Pierre Towers property, which was converted to a TIC (see\nNote 5 to FREIT’s condensed consolidated financial statements).\n\n \n\nAs indicated in the tables above under the caption\nSegment Information, total revenue from FREIT’s residential segment for the Current Six Months and Current Quarter increased by\n2.8% and 2.0%, respectively, and NOI increased by 2.7% and decreased by 1.5%, respectively, compared to the Prior Year’s comparable\nperiods. Average occupancy for all residential properties for the Current Six Months and Current Quarter decreased by 1.3% and 1.4%, respectively,\ncompared to the Prior Year’s comparable periods.\n\n \n\nThe increase in revenue for the Current Six Months\nwas primarily attributable to an increase in base rents across all properties while the average occupancy rate declined from 96.9% in\nthe Prior Year’s Six Months to 95.6% in the Current Six Months. The increase in NOI for the Current Six Months was primarily attributable\nto the following: (a) an increase in revenue of approximately $303,000; offset by (b) an increase in snow removal costs of approximately\n$111,000 due to a harsher winter; and (c) an increase in utility costs of approximately $94,000 due to rising energy costs.\n\n \n\n \n\nPage 27 \n\nThe increase in revenue for the Current Quarter\nwas primarily attributable to an increase in base rents across most properties while the average occupancy declined from 97.1% in the\nPrior Year’s Quarter to 95.7% in the Current Quarter. The decrease in NOI for the Current Quarter was attributable to the following:\n(a) an increase in total operating costs of approximately $160,000 primarily due to an increase in snow removal costs, utility costs and\nrepair and maintenance costs; offset by (b) an increase in revenue of approximately $111,000.\n\n \n\nSame Property Operating Results: FREIT’s\nresidential segment currently contains six (6) same properties. (See definition of same property under Segment Information above.) Since\nall of FREIT’s residential properties are considered same properties in the current fiscal year, refer to the preceding paragraphs\nfor discussion of changes in same property results.\n\n \n\nFREIT’s residential revenue is principally\ncomposed of monthly apartment rental income. Total rental income is a factor of occupancy and monthly apartment rents. Monthly average\nresidential rents at the end of the Current Quarter and the Prior Year’s Quarter were $2,447 and $2,361, respectively. A 1% decline\nin annual average occupancy, or a 1% decline in average rents from current levels, results in an annual revenue decline of approximately\n$233,000 and $223,000, respectively.\n\n \n\nCapital expenditures: FREIT tends to spend more\nin any given year on maintenance and capital improvements at its residential properties which were constructed more than 25 years ago\n(Steuben Arms, Berdan Court and Westwood Hills properties) than on its newer properties (Boulders, Regency and Station Place properties).\nFunds for these capital projects are available from cash flow from the property's operations and cash reserves.\n\n \n\nINTEREST EXPENSE INCLUDING AMORTIZATION OF\nDEFERRED FINANCING COSTS (“NET FINANCING COSTS”)\n\n \n\n  \nSix Months Ended April 30,  \nThree Months Ended April 30, \n\n  \n2026  \n2025  \n2026  \n2025 \n\n  \n(In Thousands of Dollars)  \n(In Thousands of Dollars) \n\nFixed rate mortgages (a): \n    \n    \n    \n   \n\n1st Mortgages \n    \n    \n    \n   \n\nExisting \n$3,356  \n$3,489  \n$1,707  \n$1,738 \n\nNew \n —  \n —  \n —  \n — \n\nTotal gross financing costs \n 3,356  \n 3,489  \n 1,707  \n 1,738 \n\nAmortization of deferred financing costs \n 305  \n 235  \n 93  \n 113 \n\nTotal net financing costs \n$3,661  \n$3,724  \n$1,800  \n$1,851 \n\n \n\n(a) Includes the effect of an interest rate swap contract which effectively converts the floating interest rate to a fixed interest rate over the term of the loan.\n\n \n\nTotal net financing\ncosts for the Current Six Months decreased by approximately $63,000 or 1.7%, as compared to the Prior Year’s Six Months which was\nprimarily attributable to the following: (a) a decrease of approximately $232,000 resulting from the $5.7 million pay down of the loan\non the Westwood Plaza shopping center in May 2025; offset by (b) an increase of approximately $157,000 resulting from the extension fee\npaid to extend the loan on the Preakness shopping center in the Current Six Months.\n\n \n\nTotal net financing\ncosts for the Current Quarter decreased by approximately $51,000 or 2.8%, compared to the Prior Year’s Quarter which was primarily\nattributable to the following: (a) a decrease of approximately $109,000 resulting from the $5.7 million pay down of the loan on the Westwood\nPlaza shopping center in May 2025; offset by (b) an increase of approximately $75,000 resulting from the extension fee paid to extend\nthe loan on the Preakness shopping center in the Current Quarter.\n\n \n\nINVESTMENT INCOME\n\n \n\nInvestment income\nfor the Current Six Months and Current Quarter was approximately $549,000 and $265,000, respectively, as compared to $750,000 and $350,000,\nrespectively, for the Prior Year’s comparable periods. Investment income is principally derived from interest earned from cash on\ndeposit in institutional money market funds and short-term U.S. treasury securities. The decrease in investment income of approximately\n$201,000 and $85,000 for the Current Six Months and Current Quarter, respectively, was primarily due to a decline in the average balance\nof cash and cash equivalents (including US Treasury securities available for sale) of approximately $4.1 million and $3.4 million, respectively,\nas compared to the Prior Year’s comparable periods.\n\n \n\nGENERAL AND ADMINISTRATIVE EXPENSES (“G&A”)\n\n \n\nG&A for\nthe Current Six Months and Current Quarter was approximately $1,765,000 and $1,052,000, respectively, as compared to $1,636,000 and $791,000,\nrespectively, for the Prior Year’s comparable periods. The primary components of G&A are legal and professional fees, directors’\nfees, corporate expenses and accounting/auditing fees. The increase in G&A of approximately $129,000 and $261,000 for the Current\nSix Months and Current Quarter, respectively, were primarily attributed to legal and professional expenses related to the potential sales\nof certain properties and the development of a plan of liquidation.\n\n \n\n \n\nPage 28 \n\nDEPRECIATION\n\n \n\nDepreciation\nexpense for the Current Six Months and Current Quarter was approximately $1,445,000 and $724,000, respectively, as compared to $1,457,000\nand $734,000, respectively, for the Prior Year’s comparable periods.\n\n \n\nLIQUIDITY AND CAPITAL RESOURCES\n\n \n\nNet cash provided\nby operating activities was approximately $2,618,000 for the Current Six Months compared to approximately $2,262,000 for the Prior Year’s\nSix Months. FREIT expects that cash provided by operating activities and cash reserves will be adequate to cover mandatory debt service\npayments (including payments of interest, but excluding balloon payments, which are expected to be refinanced and/or extended), real estate\ntaxes, dividends, recurring capital improvements at its properties and other needs to maintain its status as a REIT for at least a period\nof one year from the date of filing of this quarterly report on Form 10-Q.\n\n \n\nAs of April\n30, 2026, FREIT had cash, cash equivalents and restricted cash totaling approximately $17,738,000, as compared to approximately $21,528,000\nat October 31, 2025. The decrease in cash, cash equivalents and restricted cash in the Current Six Months of approximately $3,790,000\nwas primarily attributable to net cash used in investing activities of approximately $3,210,000 and net cash used in financing activities\nof approximately $3,198,000 offset by net cash provided by operating activities of approximately $2,618,000. The decrease in cash, cash\nequivalents and restricted cash was primarily attributed to the following: (a) the purchase of investments in U.S. Treasury securities\nof approximately $26,843,000; (b) repayment of mortgages of approximately $958,000; (c) distributions to noncontrolling interests in subsidiaries\nof approximately $555,000; (d) capital improvements of approximately $249,000; (e) deferred financing costs of approximately $191,000\npaid in the Current Six Months primarily for the extension of the loan on the Preakness shopping center; offset by (f) proceeds received\nfrom maturities of U.S. Treasury securities of approximately $23,958,000; and (g) cash provided by operating activities net of dividends\npaid of approximately $1,124,000.\n\n \n\nCredit Line: FREIT’s revolving line of credit\nin the amount of $13 million, provided by Provident Bank, was set to expire on October 31, 2026. Draws against the $13 million credit\nline were secured by mortgages on FREIT’s Franklin Crossing Shopping center in Franklin Lakes, New Jersey and retail space in Glen\nRock, New Jersey. As of April 30, 2026 and October 31, 2025, there was no amount outstanding and $13 million was available under this\nline of credit.\n\n \n\nOn May 26, 2026, FREIT’s $13 million line\nof credit has been replaced with a $20 million line of credit provided by Provident Bank secured by a mortgage on FREIT’s Boulders\nproperty in Rockaway, New Jersey. Draws against this credit line can be used for working capital needs and standby letters of credit.\nThe line of credit will expire on October 31, 2029 and the interest rate on any amount outstanding will be based on a floating interest\nrate of prime minus 25 basis points with a floor of 6.75%. (See Note 7 to FREIT’s condensed consolidated financial statements for\nfurther details.)\n\n \n\nDividend: On April 9, 2026, FREIT’s Board\nof Directors (“Board”) declared a dividend of approximately $748,000 ($0.10 per share on the common stock of FREIT) for the\nsecond quarter of Fiscal 2026, which will be paid on June 12, 2026 to stockholders of record at the close of business on May 29, 2026.\nFREIT’s Board will continue to evaluate the dividend on a quarterly basis and there can be no assurance that dividends will be declared\nfor any future period. In addition, the amount of the dividend declared on April 9, 2026 is not necessarily indicative of the amount of\nany dividends that may be declared in the future.\n\n \n\n \n\nPage 29 \n\nAs of April 30, 2026, FREIT’s aggregate\noutstanding mortgage debt was $120.3 million, which bears a weighted average interest rate of 5.34% and an average life of approximately\n1.2 years. FREIT’s mortgages are subject to amortization schedules that are longer than the terms of the mortgages. As such, balloon\npayments (unpaid principal amounts at the mortgage due date) for all mortgage debt will be required as follows:\n\n \n\nFiscal Year\n \n2026\n2027\n2028\n2029\n\n($ in millions) \n \n \n \n \n \n\nMortgage \"Balloon\" Payments   \n \n$59.0 (A)\n$8.6\n$23.8\n$26.0\n\n \n\n \n(A)\nIncludes the following:\n\n \n\n \n(1)\nThe loan on the Preakness shopping center located in Wayne, New Jersey in the amount of $25 million, which had a maturity date of August 1, 2025. Wayne PSC, LLC continues to work with the current lender, ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several extensions of the loan’s maturity date, with the most recent extension through August 1, 2026, while discussions are ongoing. Each extension has been made under the same terms and conditions of the existing loan agreement. Management expects this loan to be further modified and extended, however, until such time as a definitive agreement providing for a modification, extension or replacement of this loan is entered into, there can be no assurance that such an agreement will be reached.  (See Note 7 to FREIT's condensed consolidated financial statements for additional details.) \n\n \n\n \n(2)\nThe loan on the Westwood Plaza shopping center located in Westwood, New Jersey, in the amount of approximately $9.6 million which has a maturity date of August 1, 2026.  Management expects this loan to be extended/refinanced, however, until such time as a definitive agreement providing for a modification, extension or replacement of this loan is entered into, there can be no assurance that such an agreement will be reached. (See Note 7 to FREIT's condensed consolidated financial statements for additional details.) \n\n \n\n \n(3)\nThe loan on the Westwood Hills property located in Westwood, New Jersey, in the amount of approximately $24.6 million which has a maturity date of September 1, 2026.  Management expects this loan to be extended/refinanced, however, until such time as a definitive agreement providing for a modification, extension or replacement of this loan is entered into, there can be no assurance that such an agreement will be reached. (See Note 7 to FREIT's condensed consolidated financial statements for additional details.) \n\n \n\nThe following table shows the estimated fair value\nand net carrying value of FREIT’s long-term debt at April 30, 2026 and October 31, 2025:\n\n \n\n($ in Millions)\n \nApril 30, 2026\n \nOctober 31, 2025\n\n \n \n \n \n \n\nFair Value\n \n$117.4\n \n$118.4\n\nCarrying Value, Net\n \n$119.9\n \n$120.8\n\n \n\nFair values are estimated based on market interest\nrates at April 30, 2026 and October 31, 2025 and on a discounted cash flow analysis. Changes in assumptions or estimation methods may\nsignificantly affect these fair value estimates. The fair value is based on observable inputs (level 2 in the fair value hierarchy as\nprovided by authoritative guidance).\n\n \n\nFREIT expects to refinance the individual mortgages\nwith new mortgages or exercise extension options when their terms expire. To this extent, FREIT has exposure to interest rate risk. If\ninterest rates, at the time any individual mortgage note is due, are higher than the current fixed interest rate, higher debt service\nmay be required, and/or refinancing proceeds may be less than the amount of mortgage debt being retired. For example, at April 30, 2026,\na 1% interest rate increase would reduce the fair value of FREIT’s debt by $1.4 million, and a 1% decrease would increase the fair\nvalue by $1.4 million.\n\n \n\nOn October 31, 2023, FREIT exercised its right,\npursuant to the loan agreement held with Valley National Bank, to extend the term of its loan with a then outstanding balance of approximately\n$16.6 million and secured by the Westwood Plaza shopping center located in Westwood, New Jersey for one additional year from an initial\nmaturity date of February 1, 2024 to a new maturity date of February 1, 2025. This loan extension was based on a fixed interest rate of\n8.5% and was payable based on monthly installments of principal and interest of approximately $166,727. Additionally, FREIT funded the\ninterest reserve escrow account for this loan (“Escrow”) with an additional $112,556, increasing the Escrow balance to $2,000,722,\nwhich represented the annualized principal and interest payments for one (1) year under this loan extension. Effective February 1, 2025,\nValley National Bank extended this loan for 90 days from a maturity date of February 1, 2025 to a maturity date of May 1, 2025 under the\nsame terms and conditions of the existing loan agreement.\n\n \n\n \n\nPage 30 \n\nEffective May 1, 2025, FREIT entered into a loan\nextension and modification agreement with Valley National Bank and paid down this loan by approximately $5.7 million (including deferred\ninterest of approximately $0.2 million) bringing the loan balance to $10 million. Under the terms and conditions of this loan extension\nand modification, the maturity date of this loan was extended for one year to May 1, 2026, the interest rate on the outstanding debt was\nbased on a fixed interest rate of 8.5% and monthly installments of principal and interest of approximately $107,978 were required. The\npay down of this loan resulted in annual debt service savings of approximately $705,000. Additionally, the Escrow balance was reduced\nfrom $2,000,722 to $1,295,739 resulting in a refund to FREIT of $704,983. This Escrow is held at Valley National Bank and in the event\nof a default on this loan, the bank shall be permitted to use the proceeds from the Escrow to make monthly debt service payments on the\nloan. This loan has been further extended by Valley National Bank for an additional 90 days with a new maturity date of August 1, 2026\nbased on the same terms and conditions of the existing loan agreement. (See Note 7 to FREIT’s condensed consolidated financial statements\nfor further details.)\n\n \n\nOn December 15, 2024, the mortgage secured by\nan apartment building located in Middletown, New York and the corresponding interest rate swap contract on its underlying loan came due\nwith no settlement of the swap contract due at maturity. Effective December 15, 2024, FREIT Regency, LLC entered into a loan extension\nand modification agreement with the lender of this loan, Provident Bank, with a then outstanding loan balance of approximately $13.9 million.\nUnder the terms and conditions of this loan extension and modification, the maturity date of this loan is extended for three years to\nDecember 15, 2027, the interest rate on the outstanding debt is based on a fixed interest rate of 6.05% and monthly installments of principal\nand interest of approximately $84,521 are required. (See Note 7 to FREIT’s condensed consolidated financial statements for further\ndetails.)\n\n \n\nOn August 1, 2025, the mortgage in the amount\nof $25,000,000, secured by the Preakness shopping center located in Wayne, New Jersey, reached its maturity date. Wayne PSC, LLC continues\nto work with the current lender, ConnectOne Bank, on a potential modification and extension of the loan. ConnectOne Bank has issued several\nextensions of the loan’s maturity date, with the most recent extension through August 1, 2026, while discussions are ongoing. Each\nextension has been made under the same terms and conditions of the existing loan agreement. Management expects this loan to be further\nextended, however, until such time as a definitive agreement providing for a modification, extension or replacement of this loan is entered\ninto, there can be no assurance that such an agreement will be reached. (See Note 7 to FREIT’s condensed consolidated financial\nstatements for further details.)\n\n \n\nInterest rate swap contract: To reduce interest\nrate volatility, FREIT uses a “pay fixed, receive floating” interest rate swap to convert floating interest rates to fixed\ninterest rates over the term of a certain loan. FREIT enters into an interest rate swap contract with a counterparty that is usually a\nhigh-quality commercial bank. In essence, FREIT agrees to pay its counterparty a fixed rate of interest on a dollar amount of notional\nprincipal (which generally corresponds to FREIT’s mortgage debt) over a term equal to the term of the mortgage note. FREIT’s\ncounterparty, in return, agrees to pay FREIT a short-term rate of interest - generally SOFR (“Secured Overnight Financing Rate”)\n- on that same notional amount over the same term as the mortgage note.\n\n \n\nFREIT has a variable interest rate loan secured\nby its Station Place property. To reduce interest rate fluctuations, FREIT entered into an interest rate swap contract for this loan,\nwhich effectively converted variable interest rate payments to fixed interest rate payments. The interest rate swap contract was based\non a notional amount of approximately $12,350,000 ($10,900,000 at April 30, 2026). FREIT had a variable interest rate loan secured by\nits Regency property. On December 15, 2024, the Regency loan and its corresponding interest rate swap contract matured with no settlement\ndue at maturity. (See Note 7 to FREIT’s condensed consolidated financial statements for further details.)\n\n \n\nIn accordance with ASU 2017-12, *“Targeted\nImprovements to Accounting for Hedging Activities to Accounting Standards Codification Topic 815, Derivatives and Hedging (\"ASC 815\")”*,\nFREIT marks-to-market its interest rate swap contract. As the floating interest rate varies from time-to-time over the term of the contract,\nthe value of the contract will change upward or downward. If the floating rate is higher than the fixed rate, the value of the contract\ngoes 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\nrate swap contract is accounted for as a cash flow hedge with the corresponding gain or loss on this contract not affecting FREIT’s\ncondensed consolidated statement of income; changes in the fair value of this cash flow hedge will be reported in other comprehensive\nincome and appear in the equity section of the condensed consolidated balance sheet. This gain or loss represents the economic consequence\nof liquidating a fixed interest rate swap and replacing it with like-duration funding at current market rates, something we would likely\nnever do. Periodic cash settlements of this contract will be accounted for as an adjustment to interest expense.\n\n \n\nFREIT has the following derivative-related risks\nwith its interest rate swap contract (“contract”): 1) early termination risk, and 2) counterparty credit risk.\n\n \n\n*Early Termination Risk*: If FREIT\nwants to terminate its contract before maturity, it would be bought out or terminated at market value; i.e., the difference in the present\nvalue of the anticipated net cash flows from each of the contract’s parties. If current variable interest rates are significantly\nbelow FREIT’s fixed interest rate payments, this could be costly. Conversely, if interest rates rise above FREIT’s fixed interest\npayments and FREIT elected early termination, FREIT would realize a gain on termination. At April 30, 2026, the contract for Station Place\nwas in FREIT’s favor. If FREIT had terminated this contract at that date, it would have realized a gain of approximately $215,000\nfor the Station Place swap, which amount has been included as an asset in FREIT’s condensed consolidated balance sheet as at April\n30, 2026. The change in the fair value for the contract (gain or loss) during such period has been included in comprehensive income and\nfor the six and three months ended April 30, 2026, FREIT recorded an unrealized gain of approximately $35,000 and\n\n \n\nPage 31 \n\n$65,000, respectively,\nin the condensed consolidated statements of comprehensive income. For the six and three months ended April 30, 2025, FREIT recorded an\nunrealized loss of approximately $269,000 and $227,000, respectively, in the condensed consolidated statements of comprehensive income.\n\n \n\n*Counterparty Credit Risk*: Each\nparty to a contract bears the risk that its counterparty will default on its obligation to make a periodic payment. FREIT reduces this\nrisk by entering into a contract only with major financial institutions that are experienced market makers in the derivatives market.\n\n \n\nFUNDS FROM OPERATIONS\n\n \n\nFunds From Operations (“FFO”) is a\nnon-GAAP measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”). FREIT does not include distributions\nfrom equity/debt/capital gain sources in its computation of FFO. Although many consider FFO the standard measurement of a REIT’s\nperformance, FREIT supplements the NAREIT computation to include other adjustments to GAAP net income that are not considered by management\nto be the primary drivers of its decision making process. These adjustments are straight-line rents and recurring capital improvements\non FREIT’s residential apartments. The modified FFO computation is referred to as Adjusted Funds From Operations (“AFFO”).\nFREIT believes that AFFO is a superior measure of its operating performance. FREIT computes FFO and AFFO as follows:\n\n \n\n  \nFor the Six Months Ended April 30,  \nFor the Three Months Ended April 30, \n\n  \n2026  \n2025  \n2026  \n2025 \n\n  \n(In Thousands, Except Per Share)  \n(In Thousands Except Per Share) \n\nFunds From Operations (\"FFO\") (a) \n    \n    \n    \n   \n\nNet income \n$1,236  \n$1,282  \n$434  \n$781 \n\nDepreciation of consolidated properties \n 1,445  \n 1,457  \n 724  \n 734 \n\nAmortization of deferred leasing costs \n 44  \n 45  \n 24  \n 19 \n\nDistributions to non-controlling interests \n (540)(b) \n (480)(c) \n (180)(b) \n (120)(c)\n\nAdjustment to loss on investment in tenancy-in-common for depreciation \n 785  \n 732  \n 393  \n 367 \n\nFFO \n$2,970  \n$3,036  \n$1,395  \n$1,781 \n\n  \n    \n    \n    \n   \n\n Per Share - Basic and Diluted \n$0.40  \n$0.41  \n$0.19  \n$0.24 \n\n  \n    \n    \n    \n   \n\n(a) As prescribed by NAREIT.\n\n(b) FFO excludes the additional distribution of proceeds to non-controlling interests in the amount of approximately $15,000 for both the six and three months ended April 30, 2026 related to the sale of the Rotunda property located in Maryland in a prior year.\n\n(c) FFO excludes the additional distribution of proceeds to non-controlling interests in the amount of approximately $163,000 and $80,000 for the six and three months ended April 30, 2025, respectively, related to the sale of the Rotunda and Damascus properties located in Maryland in a prior year.\n\n  \n    \n    \n    \n   \n\nAdjusted Funds From Operations (\"AFFO\") \n    \n    \n    \n   \n\nFFO \n$2,970  \n$3,036  \n$1,395  \n$1,781 \n\nDeferred rents (Straight lining) \n 10  \n 56  \n 1  \n 28 \n\nCapital Improvements - Apartments \n (248) \n (203) \n (186) \n (126)\n\nAFFO \n$2,732  \n$2,889  \n$1,210  \n$1,683 \n\n  \n    \n    \n    \n   \n\nPer Share - Basic and Diluted \n$0.37  \n$0.39  \n$0.16  \n$0.23 \n\n  \n    \n    \n    \n   \n\n Weighted Average Shares Outstanding: \n    \n    \n    \n   \n\n Basic and Diluted \n 7,474  \n 7,466  \n 7,477  \n 7,469 \n\n \n\nFFO and AFFO do not represent cash generated from\noperating activities in accordance with GAAP and therefore should not be considered a substitute for net income as a measure of results\nof operations or for cash flow from operations as a measure of liquidity. Additionally, the application and calculation of FFO and AFFO\nby other REITs may vary materially from that of FREIT, and therefore FREIT’s FFO and AFFO may not be directly comparable to those\nof other REITs.\n\n \n\nINFLATION\n\n \n\nInflation can impact the financial performance\nof FREIT in various ways. FREIT’s commercial tenant leases generally provide that the tenants bear all or a portion of most operating\nexpenses, which can reduce the impact of inflationary increases on FREIT. Apartment leases are generally for one to two-years in term,\nwhich may allow FREIT to seek increased rents as leases renew or when new tenants are obtained, subject to prevailing market conditions.\n\n \n\n \n\nPage 32"}