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Net loss: FREVS reported a net loss of approximately $512,000, down from the prior year’s net income of $419,000.
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Earnings per share: Basic and diluted loss per share was $0.07, compared to earnings of $0.06 per share in the same quarter last year.
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income: Total real estate revenue saw a marginal increase of 0.3% year-over-year to approximately $6,999,000.
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Occupancy rates: Residential occupancy remains high at 95.3%, while commercial occupancy drops significantly to 50.1%.
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AFFO: Adjusted funds from operations per share decreased to $0.04 from $0.17 year-over-year.
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Dividends: The company kept its dividend at $0.05 per share.
On March 15, 2024, First Real Estate Investment Trust of New Jersey Inc (FREVS) published its 8-K filing describing financial results for the first fiscal quarter ended January 31, 2024. The company, which specializes in owning and managing residential and commercial properties primarily in New Jersey and New York faced a challenging quarter marked by a slight increase in revenue but a notable decline in net income.
Performance overview
The company’s total real estate revenue rose to approximately $6,999,000, an increase of 0.3% from the prior year’s $6,979,000. This was largely due to an increase of approximately $340,000 in residential segment base rents, which helped offset a decline in average occupancy rates from 96.8% to 95.3%. However, the shopping segment experienced a decrease in revenue of approximately $273,000, primarily due to a significant decrease in occupancy levels from 66.4% to 50.1%, following Kmart’s exit from the Westwood Plaza shopping center.
The net loss of approximately $512,000, or $0.07 per share, contrasted with net income of $419,000, or $0.06 per share, reported in the same quarter last year. The decrease in net income was primarily due to an increase in general and administrative expenses, which increased by approximately $981,000. This increase was largely due to expenses related to a financial advisory firm and legal expenses related to ongoing proceedings between FREIT and Sinatra Properties, LLC.
Financial highlights and challenges
Residential segment net operating income (NOI) showed a modest increase, while commercial NOI saw a decline, reflecting the challenges facing the commercial real estate market. The company also reported financial updates, including the full payment of a $7.5 million residential property loan, which is expected to result in annual debt service savings of approximately $558,000.
Adjusted funds from operations (AFFO), a key metric for REITs, fell to $0.04 per share from $0.17 in the year-ago period. This decline in AFFO is significant because it could affect the company’s ability to maintain dividend payments and fund operations or growth initiatives.
The board of directors declared a first quarter dividend of $0.05 on common stock, consistent with the prior year’s dividend, and will continue to assess the dividend on a quarterly basis.
Look forward
While the company’s residential segment remains robust, the significant decline in commercial occupancy poses a challenge to future revenue streams. Management’s efforts to negotiate loan terms and manage finance costs will be critical to addressing current real estate market conditions.
Diversification of First Real Estate Investment Trust of New Jersey Inc’s portfolio between residential and commercial properties provides some stability, but the company will need to address challenges in its commercial segment to improve its financial results and maintain investor confidence.
For more details and to be updated on FREIT’s filing, investors are encouraged to visit the company’s website and review its SEC filings.
View the full 8-K earnings release (here) from First Real Estate Investment Trust of New Jersey Inc for additional details.
This article first appeared on GuruFocus.
