The last decade has brought record real estate values and low interest rates bringing incredible value to REITS over the time. In 2021 REITS such as Blackstone (https://therealdeal.com/2021/10/22/real-estate-powers-blackstones-best-quarter-ever/) reported the best earnings ever. The same can not be said of First Real Estate Investment Trust of New Jersey Inc, a public company OTC. During record growth the board of FREVS has failed to grow the company and continue to be saddled by debt and allows the balance sheet to erode along with conflict of interests.
Robert S. Hekemian, Jr., President and Chief Executive Officer of FREIT Maryland and a director, and David B. Hekemian, a director, are shareholders of Hekemian & Co. Robert S. Hekemian, Jr. and David B. Hekemian each holds a 33.3% equity interest in Hekemian & Co which serves as managing agent for FREIT – but not only that loan and insurance fees (https://frevs.ir.edgar-online.com/efxapi/EFX_dll/EDGARpro.dll?FetchFilingHTML1) as well as consulting fees are paid. What has this brought? Continued reduction in commercial leases, down to Average Occupancy 68.9% and falling. Additionally there are few acquired properties, and the properties that remain are older and require higher maintenance, or are in flood zones.
In 2021 FREIT has outstanding loans of $301.3 million, weighted average interest rate of 3.56% and an average life of 2.44 years. A lack of investments over the last decade will now start to sting as interest rates rise, commercial vacancies fall and the board continues to allow these conflict of interests to remain. We question how such an independent board continues to allow these generous advisory and management deals which automatically renew, and contains early termination fees at the expense of stockholders. Given the company’s performance over the last decade, it forces us to question how seriously the board takes its obligation to stockholders.