UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








FORM
10-Q





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
the Quarterly Period Ended July 31, 2008


or


o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from __________________ to
      ____________________


Commission
File No. 000-25043







FIRST
      REAL ESTATE INVESTMENT TRUST OF NEW JERSEY(Exact
      name of registrant as specified in its charter)New
      Jersey
            
            22-1697095(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)505
      Main Street, Hackensack, New Jersey
            
            07601(Address
      of principal executive offices)
            
            (Zip
      Code)





201-488-6400


(Registrant's
telephone number, including area code)








(Former
name, former address and former fiscal year, if changed since last
report)








Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.    Yes x No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
      Accelerated Filer o
            Accelerated
      Filer x
            Non-Accelerated
      Filer o
            Smaller
      Reporting Company o




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o  No x





As of
September 9, 2008, the number of shares of beneficial interest outstanding was
6,988,152.








Page
1


FIRST REAL ESTATE INVESTMENT
TRUST OF NEW JERSEY











INDEX








Part I:
            Financial InformationPageItem 1:
            Unaudited Condensed Consolidated Financial
      Statementsa.)
            Consolidated Balance Sheets as at July 31, 2008 and October 31,
      2007;
            3b.)
            Consolidated Statements of Income, Comprehensive Income and
      Undistributed Earnings for the Nine and Three Months Ended July 31, 2008
      and 2007;
            4c.)
            Consolidated Statements of Cash Flows for the Nine Months Ended
      July 31, 2008 and 2007;
            5d.)
            Notes to Condensed Consolidated Financial
      Statements.
            6Item 2:
            Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
            10Item 3
            Quantitative and Qualitative Disclosures About Market
      Risk
            20Item 4:
            Controls and Procedures
            20Part II:
            Other InformationItem 1A:
            Risk Factors
            20Item 2:
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            23Item 6:
            Exhibits
            24Item 10:
            Material Agreements
            24Signatures
            
            
            25








Page
2


Part
I:  Financial Information





Item
1:  Unaudited Condensed Consolidated Financial
Statements








FIRST
      REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND
SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited)
            
            
            (Audited)July
      31,
            
            
            October
      31,2008
            
            
            2007(In
      Thousands of Dollars)ASSETSReal
      estate, at cost, net of accumulated depreciation
            
            $
            209,143
            
            
            $
            204,732Construction
      in progress
            
            
            8,121
            
            
            
            7,331Cash
      and cash equivalents
            
            
            9,084
            
            
            
            12,740Tenants'
      security accounts
            
            
            2,315
            
            
            
            2,369Sundry
      receivables
            
            
            4,416
            
            
            
            4,833Secured
      loans receivable
            
            
            3,326
            
            
            
            3,326Prepaid
      expenses and other assets
            
            
            2,845
            
            
            
            2,852Acquired
      over market leases and in-place lease costs
            
            
            925
            
            
            
            1,104Deferred
      charges, net
            
            
            3,532
            
            
            
            3,454Interest
      rate swap contract
            
            
            -
            
            
            
            14Totals
            
            $
            243,707
            
            
            $
            242,755LIABILITIES AND
      SHAREHOLDERS' EQUITYLiabilities:Mortgages
      payable
            
            $
            192,868
            
            
            $
            189,389Accounts
      payable and accrued expenses
            
            
            4,800
            
            
            
            5,193Dividends
      payable
            
            
            2,054
            
            
            
            2,704Tenants'
      security deposits
            
            
            3,111
            
            
            
            3,124Acquired
      below market value leases and deferred revenue
            
            
            3,518
            
            
            
            3,911Total
      liabilities
            
            
            206,351
            
            
            
            204,321Minority
      interest
            
            
            13,265
            
            
            
            13,304Commitments
      and contingenciesShareholders'
      equity:Shares
      of beneficial interest without par value:8,000,000
      shares authorized;6,846,152
      and 6,760,652 shares issued and outstanding
            
            
            23,904
            
            
            
            23,225Treasury
      stock, at cost: 5,000 shares
            
            
            (120
            )
            
            
            -Undistributed
      earnings
            
            
            307
            
            
            
            1,891Accumulated
      other comprehensive income
            
            
            -
            
            
            
            14Total
      shareholders'
      equity
            
            
            24,091
            
            
            
            25,130Totals
            
            $
            243,707
            
            
            $
            242,755See
      Notes to Condensed Consolidated Financial Statements.





Page
3





FIRST
      REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND
SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF INCOME, COMPREHENSIVE INCOMEAND
      UNDISTRIBUTED EARNINGSNINE
      AND THREE MONTHS ENDED JULY 31, 2008 AND 2007(Unaudited)Nine
      Months Ended
            
            
            Three
      Months EndedJuly
      31,
            
            
            July
      31,2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      Thousands of Dollars, Except Per Share Amounts)Revenue:Rental
      income
            
            $
            27,193
            
            
            $
            26,480
            
            
            $
            9,129
            
            
            $
            8,980Reimbursements
            
            
            3,932
            
            
            
            3,601
            
            
            
            1,475
            
            
            
            1,227Sundry
      income
            
            
            310
            
            
            
            415
            
            
            
            124
            
            
            
            234Totals
            
            
            31,435
            
            
            
            30,496
            
            
            
            10,728
            
            
            
            10,441Expenses:Operating
      expenses
            
            
            8,069
            
            
            
            8,224
            
            
            
            2,385
            
            
            
            2,713Management
      fees
            
            
            1,396
            
            
            
            1,321
            
            
            
            479
            
            
            
            451Real
      estate taxes
            
            
            4,300
            
            
            
            4,277
            
            
            
            1,409
            
            
            
            1,424Depreciation
            
            
            4,086
            
            
            
            3,972
            
            
            
            1,411
            
            
            
            1,323Totals
            
            
            17,851
            
            
            
            17,794
            
            
            
            5,684
            
            
            
            5,911Operating
      income
            
            
            13,584
            
            
            
            12,702
            
            
            
            5,044
            
            
            
            4,530Investment
      income
            
            
            437
            
            
            
            382
            
            
            
            124
            
            
            
            157Interest
      expense including amortizationof
      deferred financing costs
            
            
            (8,694
            )
            
            
            (9,099
            )
            
            
            (2,876
            )
            
            
            (3,010
            )Minority
      interest
            
            
            (768
            )
            
            
            (386
            )
            
            
            (373
            )
            
            
            (129
            )Distribution
      to certain minority interests
            
            
            -
            
            
            
            (150
            )
            
            
            -
            
            
            
            -Income
      from continuing operations
            
            
            4,559
            
            
            
            3,449
            
            
            
            1,919
            
            
            
            1,548Discontinued
      operations:Earnings
      from discontinued operations
            
            
            -
            
            
            
            91
            
            
            
            -
            
            
            
            15Gain
      on sale
            
            
            -
            
            
            
            3,680
            
            
            
            -
            
            
            
            3,680Income
      from discontinued operations
            
            
            -
            
            
            
            3,771
            
            
            
            -
            
            
            
            3,695Net
      income
            
            $
            4,559
            
            
            $
            7,220
            
            
            $
            1,919
            
            
            $
            5,243Basic
      earnings per share:Continuing
      operations
            
            $
            0.67
            
            
            $
            0.51
            
            
            $
            0.28
            
            
            $
            0.23Discontinued
      operations
            
            
            -
            
            
            
            0.56
            
            
            
            -
            
            
            
            0.55Net
      income
            
            $
            0.67
            
            
            $
            1.07
            
            
            $
            0.28
            
            
            $
            0.78Diluted
      earnings per share:Continuing
      operations
            
            $
            0.66
            
            
            $
            0.50
            
            
            $
            0.28
            
            
            $
            0.22Discontinued
      operations
            
            
            -
            
            
            
            0.54
            
            
            
            -
            
            
            
            0.54Net
      income
            
            $
            0.66
            
            
            $
            1.04
            
            
            $
            0.28
            
            
            $
            0.76Weighted
      average shares outstanding:Basic
            
            
            6,802
            
            
            
            6,752
            
            
            
            6,844
            
            
            
            6,756Diluted
            
            
            6,897
            
            
            
            6,919
            
            
            
            6,941
            
            
            
            6,925COMPREHENSIVE
      INCOMENet
      income
            
            $
            4,559
            
            
            $
            7,220
            
            
            $
            1,919
            
            
            $
            5,243Other
      comprehensive income (loss):Unrealized
      (loss) on interestrate
      swap contract
            
            
            -
            
            
            
            (48
            )
            
            
            -
            
            
            
            (19
            )Comprehensive
      income
            
            $
            4,559
            
            
            $
            7,172
            
            
            $
            1,919
            
            
            $
            5,224UNDISTRIBUTED
      EARNINGSBalance,
      beginning of period
            
            $
            1,891
            
            
            $
            1,735
            
            
            $
            451
            
            
            $
            (340
            )Net
      income
            
            
            4,559
            
            
            
            7,220
            
            
            
            1,919
            
            
            
            5,243Less
      dividends declared
            
            
            (6,143
            )
            
            
            (6,079
            )
            
            
            (2,063
            )
            
            
            (2,027
            )Balance,
      end of period
            
            $
            307
            
            
            $
            2,876
            
            
            $
            307
            
            
            $
            2,876Dividends
      declared per share
            
            $
            0.90
            
            
            $
            0.90
            
            
            $
            0.30
            
            
            $
            0.30See
      Notes to Condensed Consolidated Financial Statements.





Page
4





FIRST
      REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND
SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSNINE
      MONTHS ENDED JULY 31, 2008 AND 2007(Unaudited)Nine
      Months EndedJuly
      31,2008
            
            
            2007(In
      Thousands of Dollars)Operating
      activities:Net
      income
            
            $
            4,559
            
            
            $
            7,220Adjustments
      to reconcile net income to net cash provided byoperating
      activities (including discontinued operations):Depreciation
            
            
            4,086
            
            
            
            3,980Amortization
            
            
            516
            
            
            
            570Net
      amortization of acquired leases
            
            
            (72
            )
            
            
            (226
            )Deferred
      revenue
            
            
            (215
            )
            
            
            (389
            )Minority
      interest
            
            
            768
            
            
            
            536Gain
      on sale of discontinued operations
            
            
            -
            
            
            
            (3,680
            )Changes
      in operating assets and liabilities:Tenants'
      security accounts
            
            
            54
            
            
            
            (150
            )Sundry receivables, prepaid expenses and other assets
            
            
            40
            
            
            
            581Accounts payable, accrued expenses and other liabilities
            
            
            663
            
            
            
            567Tenants'
      security deposits
            
            
            (13
            )
            
            
            229Net
      cash provided by operating activities
            
            
            10,386
            
            
            
            9,238Investing
      activities:Capital
      improvements - existing properties
            
            
            (2,562
            )
            
            
            (1,752
            )Proceeds
      from sale of discontinued operations
            
            
            -
            
            
            
            3,796Net
      sale proceeds held in escrow
            
            
            -
            
            
            
            (3,796
            )Construction
      and pre development costs
            
            
            (7,736
            )
            
            
            (4,114
            )Net
      cash used in investing activities
            
            
            (10,298
            )
            
            
            (5,866
            )Financing
      activities:Repayment
      of mortgages
            
            
            (7,552
            )
            
            
            (19,053
            )Proceeds
      from mortgages
            
            
            6,000
            
            
            
            28,331Proceeds
      from construction loan
            
            
            5,031
            
            
            
            -Deferred
      financing costs
            
            
            (282
            )
            
            
            (638
            )Proceeds
      from exercise of stock options
            
            
            679
            
            
            
            37Repurchase
      of Company stock-Treasury shares
            
            
            (120
            )
            
            
            -Dividends
      paid
            
            
            (6,793
            )
            
            
            (7,427
            )Distribution
      to minority interest
            
            
            (707
            )
            
            
            (541
            )Net
      cash (used in) provided by financing activities
            
            
            (3,744
            )
            
            
            709Net
      increase (decrease) in cash and cash equivalents
            
            
            (3,656
            )
            
            
            4,081Cash
      and cash equivalents, beginning of period
            
            
            12,740
            
            
            
            9,616Cash
      and cash equivalents, end of period
            
            $
            9,084
            
            
            $
            13,697Supplemental
      disclosure of cash flow data:Interest
      paid, including capitalized construction period interestof
      $245 in fiscal 2008.
            
            $
            8,540
            
            
            $
            8,900Income
      taxes paid
            
            $
            44
            
            
            $
            18Supplemental
      schedule of non cash financing activities:Accrued
      capital expenditures, construction costs and pre-development
      costs
            
            $
            854
            
            
            $
            235Dividends
      declared but not paid
            
            $
            2,054
            
            
            $
            2,027See
      Notes to Condensed Consolidated Financial Statements.





Page
5





FIRST
REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)








Note 1 -
Basis of presentation:


The
accompanying condensed consolidated financial statements have been prepared
without audit, in accordance with accounting principles generally accepted in
the United States of America (“GAAP”) for interim financial statements and
pursuant to the rules of the Securities and Exchange Commission (“SEC”).
Accordingly, certain information and footnotes required by GAAP for complete
financial statements have been omitted. It is the opinion of management that all
adjustments considered necessary for a fair presentation have been included, and
that all such adjustments are of a normal recurring nature.




The
consolidated results of operations for the nine and three months ended July 31,
2008 are not necessarily indicative of the results to be expected for the full
year. The unaudited condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and related notes
included in the Annual Report on Form 10-K for the year ended October 31, 2007
of First Real Estate Investment Trust of New Jersey (“FREIT”).




Reclassification:




Certain
accounts in the 2007 financial statements have been reclassified to conform to
the current presentation.





Note 2 -
Earnings per share:




Basic
      earnings per share is calculated by dividing net income by the weighted
      average number of shares outstanding during each period (denominator). The
      calculation of diluted earnings per share is similar to that of basic
      earnings per share, except that the denominator is increased to include
      the number of additional shares that would have been outstanding if all
      potentially dilutive shares, such as those issuable upon the exercise of
      stock options and warrants, were issued during the
  period.





Nine
      Months Ended
            
            
            Three
      Months EndedJuly
      31,
            
            
            July
      31,2008
            
            
            2007
            
            
            2008
            
            
            2007Basic
      weighted average shares outstanding
            
            
            6,802,083
            
            
            
            6,752,484
            
            
            
            6,844,304
            
            
            
            6,755,652Shares
      arising from assumed exercise of stock options
            
            
            94,772
            
            
            
            166,675
            
            
            
            96,777
            
            
            
            169,513Dilutive
      weighted average shares outstanding
            
            
            6,896,855
            
            
            
            6,919,159
            
            
            
            6,941,081
            
            
            
            6,925,165




In
computing diluted earnings per share for the nine and three months ended July
31, 2008 and 2007, the assumed exercise of all of FREIT’s outstanding stock
options, adjusted for application of the treasury stock method, would have
increased the weighted average number of shares outstanding as shown in the
table below.





Basic and
diluted earnings per share, based on the weighted average number of shares
outstanding during each period, are comprised of ordinary income for the nine
and three months ended July 31, 2008, and ordinary and capital gain income for
the prior year’s comparable periods.





Note 3 -
Equity incentive plan:


On
      September 10, 1998, the Board of Trustees approved FREIT’s Equity
      Incentive Plan (the "Plan") which was ratified by FREIT's shareholders on
      April 7, 1999, whereby up to 920,000 of FREIT's shares of beneficial
      interest were available for issuance to key personnel in the form of stock
      options, restricted share awards and other share-based
    awards.


Upon
ratification of the Plan on April 7, 1999, FREIT issued 754,000 stock options
(adjusted for stock splits), which it had previously granted to key personnel on
September 10, 1998. The fair value of the options on the date of grant was $7.50
per share. As of July 31, 2008, options for 142,000 shares were outstanding. The
total intrinsic value of the options outstanding at July 31, 2008 was
approximately $2.3 million. In August and September 2008, an additional 142,000
options were exercised to purchase 142,000 shares at $7.50 per share. As a
result, all outstanding options, which expire on September 10, 2008, have been
exercised.




On
      April 4, 2007, FREIT shareholders approved amendments to FREIT’s Equity
      Incentive Plan as follows: (a) reserving an additional 300,000 shares for
      issuance under the Plan; and (b) extending the term of the Plan until
      September 10, 2018.


Page
6


Note 4 -
Discontinued operations:


On June
26, 2007, FREIT closed on its contract for the sale of the Lakewood Apartments
in Lakewood, New Jersey. The sales price for the property was $4 million. For
financial reporting purposes, FREIT recognized a gain of approximately $3.7
million from the sale. In compliance with current accounting guidance (SFAS No.
144 – “Accounting for the Impairment or Disposal of Long-Lived Assets”), the
prior year’s earnings of the Lakewood operation have been classified as “Income
from discontinued operations”. Revenue attributable to discontinued operations
was $268,000 and $61,000 for the nine and three-month periods ended July 31,
2007.





Note
      5 - Segment information:


FREIT
      has determined that it has two reportable segments: commercial properties
      and residential properties. These reportable segments offer different
      types of space, have different types of tenants, and are managed
      separately because each requires different operating strategies and
      management expertise. The commercial segment contains ten (10) separate
      properties and the residential segment contains nine (9) properties. The
      accounting policies of the segments are the same as those described in
      Note 1 in FREIT’s Annual Report on Form 10-K for the year ended October
      31, 2007.


The
      chief operating and decision-making group of FREIT's commercial segment,
      residential segment and corporate/other is comprised of FREIT’s Board of
      Trustees.


FREIT
      assesses and measures segment operating results based on net operating
      income ("NOI"). NOI, a standard used by real estate professionals, 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, and financing costs.
      NOI is not a measure of operating results or cash flows from operating
      activities as measured by GAAP, 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.


Real
      estate rental revenue, operating expenses, NOI and recurring capital
      improvements for the reportable segments are summarized below and
      reconciled to consolidated net income for the nine and three months ended
      July 31, 2008 and 2007. Asset information is not reported since FREIT does
      not use this measure to assess
performance.


Nine
      Months Ended
            
            
            Three
      Months EndedJuly
      31,
            
            
            July
      31,2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      Thousands of Dollars)Real
      estate rental revenue:Commercial
            
            $
            16,888
            
            
            $
            16,198
            
            
            $
            5,848
            
            
            $
            5,464Residential
            
            
            14,335
            
            
            
            13,886
            
            
            
            4,808
            
            
            
            4,831Totals
            
            
            31,223
            
            
            
            30,084
            
            
            
            10,656
            
            
            
            10,295Real
      estate operating expenses:Commercial
            
            
            6,440
            
            
            
            6,425
            
            
            
            2,027
            
            
            
            2,123Residential
            
            
            6,180
            
            
            
            6,120
            
            
            
            1,911
            
            
            
            1,992Totals
            
            
            12,620
            
            
            
            12,545
            
            
            
            3,938
            
            
            
            4,115Net
      operating income:Commercial
            
            
            10,448
            
            
            
            9,773
            
            
            
            3,821
            
            
            
            3,341Residential
            
            
            8,155
            
            
            
            7,766
            
            
            
            2,897
            
            
            
            2,839Totals
            
            $
            18,603
            
            
            $
            17,539
            
            
            $
            6,718
            
            
            $
            6,180Recurring
      capital improvements-residential
            
            $
            346
            
            
            $
            314
            
            
            $
            88
            
            
            $
            77Reconciliation
      to consolidated net income:Segment
      NOI
            
            $
            18,603
            
            
            $
            17,539
            
            
            $
            6,718
            
            
            $
            6,180Deferred
      rents - straight lining
            
            
            140
            
            
            
            186
            
            
            
            48
            
            
            
            72Amortization
      of acquired leases
            
            
            72
            
            
            
            226
            
            
            
            24
            
            
            
            75Net
      investment income
            
            
            437
            
            
            
            382
            
            
            
            124
            
            
            
            157Minority
      interest in earnings of subsidiaries
            
            
            (768
            )
            
            
            (386
            )
            
            
            (373
            )
            
            
            (129
            )Distribution
      to certain minority interests
            
            
            -
            
            
            
            (150
            )
            
            
            -
            
            
            
            -General
      and administrative expenses
            
            
            (1,145
            )
            
            
            (1,277
            )
            
            
            (335
            )
            
            
            (474
            )Depreciation
            
            
            (4,086
            )
            
            
            (3,972
            )
            
            
            (1,411
            )
            
            
            (1,323
            )Financing
      costs
            
            
            (8,694
            )
            
            
            (9,099
            )
            
            
            (2,876
            )
            
            
            (3,010
            )Income
      from continuing operations
            
            
            4,559
            
            
            
            3,449
            
            
            
            1,919
            
            
            
            1,548Income
      from discontinued operations
            
            
            -
            
            
            
            3,771
            
            
            
            -
            
            
            
            3,695Net
      income
            
            $
            4,559
            
            
            $
            7,220
            
            
            $
            1,919
            
            
            $
            5,243







Page
7


Note 6 -
Mortgages & notes payable:




On February 12, 2008, Damascus Centre,
LLC (“Damascus Centre”) closed on a $27.3 million construction loan that is
available to fund already expended and future construction costs. This loan has
a term of forty-eight (48) months, with one twelve (12) month extension option.
FREIT has guaranteed 30% of the loan, and the minority interests, who have a 30%
investment in the Damascus Centre, have agreed to indemnify FREIT for their
share of the guarantee. Draws against this loan bear interest at a floating rate
equal to LIBOR +1.35%. As of July 31, 2008, Damascus drew down $5.0 million of
this loan to cover construction costs.




FREIT had
a variable interest rate mortgage secured by its Patchogue, NY property. To
limit interest rate volatility on this loan, FREIT entered into an interest rate
swap contract. This loan came due on January 2, 2008. The due date of the loan
was extended to February 29, 2008. The interest rate swap contract terminated on
January 2, 2008. On February 29, 2008, the unpaid principal amount of this loan
of approximately $5.9 million was refinanced with a $6 million mortgage loan
bearing a fixed interest rate of 6.125%, with a ten (10) year term, and payable
according to a thirty (30) year amortization schedule. Under the terms of the
mortgage loan agreement, FREIT can request, during the term of the loan,
additional fundings that will bring the outstanding principal balance up to 75%
of loan-to-value (percentage of mortgage loan to total appraised value of
property securing the loan).





Note 7 –
Commitments & contingencies:




A
modernization and expansion is underway at our Damascus Center in Damascus, MD
(owned by our 70% owned affiliate, Damascus Centre). FREIT has issued a bond of
approximately $1 million to guaranty completion of off-site improvements. Total
construction costs are estimated to be approximately $21.9 million. Construction
on Phase I, which began in June 2007, was completed in June 2008. Phase I
construction costs were approximately $5.6 million, of which $1.1 million
related to tenant improvements. Construction financing for approximately $27.3
million has been committed that will be available to fund future and already
expended construction costs, and will be drawn upon as needed. (See Note 6 for a
more detailed discussion.)





Note 8–
Share repurchase program:




On April
9, 2008, FREIT’s Board of Trustees authorized up to $2 million for the
repurchase of FREIT shares commencing three (3) days after the announcement of
its operating results for the quarter ended April 30, 2008. Share repurchases
under this program may be made from time to time in the open market or through
privately negotiated transactions, depending on trading prices of FREIT shares
and other market conditions. This share repurchase program may be limited or
terminated at any time and without prior notice. As of July 31, 2008, FREIT
repurchased 5,000 shares of common stock at a cost of $120,000, which is
reflected in the Stockholders’ Equity section of FREIT’s balance
sheet.





Note 9–
Transactions with related party:




Hekemian
& Co., Inc. (“Hekemian”) currently manages all of the properties owned by
FREIT, except for the Rotunda, which is managed by an independent third party
management company.
  Grande
Rotunda, LLC (“Grande”) owns and operates The Rotunda, which is a mixed-use
office and retail facility located in Baltimore, Maryland. FREIT owns a 60%
equity interest in Grande, and Rotunda 100, LLC owns a 40% equity
interest.
  Damascus
Centre, LLC (“Damascus”), owns and operates the Damascus Shopping Center in
Damascus, Maryland. FREIT owns a 70% equity interest in Damascus, and Damascus
100, LLC owns a 30% equity interest.
  The
equity owners of Rotunda 100, LLC, and Damascus 100, LLC are principally
employees of Hekemian. To incentivize the employees of Hekemian, FREIT has
agreed to advance, only to employees of Hekemian, up to 50% of the amount of the
equity contributions that the Hekemian employees are required to invest in
Rotunda 100, LLC and Damascus 100, LLC. On May 8, 2008, FREIT’s Board of
Trustees approved amendments to the existing loan agreements with the Hekemian
& Co. employees, relative to their interests in Rotunda 100, LLC, to
increase the aggregate amount that FREIT may advance to such employees from $2
million to $4 million. No other terms of the loan agreements were
amended.





Page
8





In
connection with the development activities at The Rotunda and the redevelopment
activities at the Damascus Shopping Center, agreements for the payments for
development services to be provided by Hekemian Development Resources LLC
(“Resources”) have been approved. The development fee arrangement for The
Rotunda provides for Resources to receive a fee equal to 6.375% of the total
development costs of up to $136 million (as may be modified), and the fee for
the redevelopment of the Damascus Shopping Center to be equal to 7% of the
redevelopment costs of up to approximately $17.3 million (as may be modified).
As of July 31, 2008 Resources received fees of $1,000,000 and $750,000 for
development activities at The Rotunda and Damascus Shopping Center,
respectively.
  Resources,
Rotunda 100, LLC, and Damascus 100, LLC are principally owned by employees of
Hekemian, including certain members of the immediately family of Robert S.
Hekemian, FREIT’s CEO and Chairman, and Robert S. Hekemian, Jr., a trustee of
FREIT, and the members of the Hekemian family have majority management control
of these entities.





























Page
9


Item
2: Management’s Discussion and Analysis of Financial Condition
and Results of Operations





Cautionary
      Statement Identifying Important Factors That Could Cause FREIT’s Actual
      Results to Differ From Those Projectedin Forward Looking
      Statements.Readers
      of this discussion are advised that the discussion should be read in
      conjunction with the unaudited condensed consolidated financial statements
      of FREIT (including related notes thereto) appearing elsewhere in this
      Form 10-Q, and the consolidated financial statements included in FREIT’s
      most recently filed Form 10-K. Certain statements in this discussion may
      constitute “forward-looking statements” within the meaning of the Private
      Securities Litigation Reform Act of 1995. Forward-looking statements
      reflect FREIT’s current expectations regarding future results of
      operations, economic performance, financial condition and achievements of
      FREIT, and do not relate strictly to historical or current facts. FREIT
      has tried, wherever possible, to identify these forward-looking statements
      by using words such as “believe,”  “expect,” “anticipate,”
      “intend,” “plan,” “estimate,” or words of similar
  meaning.Although
      FREIT believes that the expectations reflected in such forward-looking
      statements are based on reasonable assumptions, such statements are
      subject to risks and uncertainties, which may cause the actual results to
      differ materially from those projected. Such factors include, but are not
      limited to the following: general economic and business conditions, which
      will, among other things, affect demand for rental space, the availability
      of prospective tenants, lease rents, the financial condition of tenants
      and the default rate on leases, operating and administrative expenses and
      the availability of financing; adverse changes in FREIT’s real estate
      markets, including, among other things, competition with other real estate
      owners, competition confronted by tenants at FREIT’s commercial
      properties, governmental actions and initiatives; environmental/safety
      requirements; and risks of real estate development and acquisitions. The
      risks with respect to the development of real estate include: increased
      construction costs, inability to obtain construction financing, or
      unfavorable terms of financing that may be available, unforeseen
      construction delays and the failure to complete construction within
      budget.








OVERVIEW




FREIT is
an equity real estate investment trust ("REIT") that owns a portfolio of
residential apartment and commercial properties. Our revenues consist primarily
of fixed rental income from our residential and commercial properties and
additional rent in the form of expense reimbursements derived from our income
producing commercial properties.  Our properties are primarily located
in northern New Jersey and Maryland. We acquire existing properties for
investment. We also acquire properties, which we feel have redevelopment
potential, and make changes and capital improvements to these properties. We
develop and construct properties on our vacant land. Our policy is to acquire
and develop real property for long-term investment.




During
the past nine and three month period ended July 31, 2008, we have identified the
following trends that have had an effect on our operating results and cash
flow:




Increased
occupancy and rental rates at our residential rental
properties:  As a result of the sub-prime mortgage fall-out,
generally homebuyers are experiencing less mortgage availability and higher
credit standards, coupled with higher interest costs. This has put a damper on
home and condominium purchases. It has, however, increased demand for apartment
rentals. The occupancy rates at our residential properties remain high, and we
have been aggressively increasing rental rates where possible.




Availability
of financing capital and interest rates:Since the start of our
fiscal year, benchmark interest indexes, such as Treasury bond and LIBOR rates,
have generally been trending downward and are currently lower than interest
rates of a year ago. As a result of this volatility in the interest rate market,
fewer lenders are in the market for new loans, and the lenders that are in the
market have increased their spreads (the margin that lenders charge over current
interest rates) resulting in higher interest costs to borrowers. In this
respect, FREIT has benefited with respect to its variable rate mortgages since
the spread on these loans was fixed in prior periods at the time that these
loans were closed, resulting in lower interest costs during the last nine-month
period. Conversely, the cost of financing at our future development projects at
the Rotunda and South Brunswick may prove more costly.


Page
10


SIGNIFICANT
ACCOUNTING POLICIES AND ESTIMATES




Pursuant
to the Securities and Exchange Commission ("SEC") disclosure guidance for
"Critical Accounting Policies," the SEC defines Critical Accounting Policies as
those that require the application of management's most difficult, subjective,
or complex judgments, often because of the need to make estimates about the
effect of matters that are inherently uncertain and may change in subsequent
periods.




Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, the preparation of which takes
into account estimates based on judgments and assumptions that affect certain
amounts and disclosures. Accordingly, actual results could differ from these
estimates. The accounting policies and estimates used, which are outlined in
Note 1 to our Consolidated Financial Statements included in our Annual Report on
Form 10-K for the year ended October 31, 2007, have been applied consistently as
at July 31, 2008 and October 31, 2007, and for the nine and three months ended
July 31, 2008 and 2007. We believe that the following accounting policies or
estimates require the application of management's most difficult, subjective, or
complex judgments:




Revenue
Recognition: Base rents, additional rents based on tenants' sales volume and
reimbursement of the tenants' share of certain operating expenses are generally
recognized when due from tenants. The straight-line basis is used to recognize
base rents under leases if they provide for varying rents over the lease terms.
Straight-line rents represent unbilled rents receivable to the extent
straight-line rents exceed current rents billed in accordance with lease
agreements. Before FREIT can recognize revenue, it is required to assess, among
other things, its collectibility. If we incorrectly determine the collectibility
of revenue, our net income and assets could be overstated.




Valuation
of Long-Lived Assets: We periodically assess the carrying value of long-lived
assets whenever we determine that events or changes in circumstances indicate
that their carrying amount may not be recoverable. When FREIT determines that
the carrying value of long-lived assets may be impaired, the measurement of any
impairment is based on a projected discounted cash flow method determined by
FREIT's management. While we believe that our discounted cash flow methods are
reasonable, different assumptions regarding such cash flows may significantly
affect the measurement of impairment.





All
references to per share amounts are on a diluted basis unless otherwise
indicated.




Page
11


RESULTS
OF OPERATIONS





Real
Estate revenue for the nine months ended July 31, 2008 (“Current Nine Months”)
increased 3.1% to $31,435,000 compared to $30,496,000 for the nine months ended
July 31, 2007 (“Prior Nine Months”). Real Estate revenue for the three months
ended July 31, 2008 (“Current Quarter”) increased 2.7% to $10,728,000 compared
to $10,441,000 for the three months ended July 31, 2007 (“Prior Year’s
Quarter”).  The increase in real estate revenues for the Current Nine
Month period was equally attributable to both the residential and commercial
operations. The Boulders and The Pierre Towers were the primary contributors for
the residential operations, accounting for 45% of the overall increase. The
Rotunda and Rochelle Park were the primary contributors for the commercial
operations, accounting for 39% of the overall increase. The increase in real
estate revenues for the Current Quarter was principally attributable to FREIT’s
commercial operations, primarily at The Rotunda and Rochelle Park.




During
the Prior Year’s Quarter, FREIT sold its Lakewood Apartments in Lakewood, New
Jersey. In compliance with current accounting guidance, the gain on the sale, as
well as the prior year’s earnings of the Lakewood operation was classified as
“Income from discontinued operations”, which is included within “Net Income”
after “Income from continuing operations”. (See Note 4 for a further discussion
of the sale.) Net income for the Current Nine Months was $4,559,000 ($0.66 per
share diluted) compared to $7,220,000 ($1.04 per share diluted) for the Prior
Nine Months. Net income for the Current Quarter was $1,919,000 ($0.28 per share
diluted) compared to $5,243,000 ($0.76 per share diluted) for the Prior Year’s
Quarter. Income from continuing operations for the Current Nine Months was
$4,559,000 ($0.66 per share diluted) compared to $3,449,000 ($0.50 per share
diluted) for the Prior Nine Months. Income from continuing operations for the
Current Quarter was $1,919,000 ($0.28 per share diluted) compared to $1,548,000
($0.22 per share diluted) for the Prior Year’s Quarter. Refer to the schedule
below for a detailed analysis of the major changes that impacted revenue and net
income for the nine and three months ended July 31, 2008 and 2007:





Nine
      Months Ended
            
            
            Three
      Months EndedJuly
      31,
            
            
            July
      31,2008
            
            
            2007
            
            
            Change
            
            
            2008
            
            
            2007
            
            
            Change(thousands
      of dollars)
            
            
            (thousands
      of dollars)Commercial
      Properties (except Damascus)
            
            $
            10,411
            
            
            $
            9,896
            
            
            $
            515
            
            
            $
            3,789
            
            
            $
            3,392
            
            
            $
            397Damascus
      Center - undergoing renovation
            
            
            249
            
            
            289
            
            
            (40
            )
            
            
            104
            
            
            96
            
            
            8Total
      Commercial Properties
            
            
            10,660
            
            
            
            10,185
            
            
            
            475
            
            
            
            3,893
            
            
            
            3,488
            
            
            
            405Residential
      Properties
            
            
            8,155
            
            
            
            7,766
            
            
            
            389
            
            
            
            2,897
            
            
            
            2,839
            
            
            
            58Total
      income from real estate operations
            
            
            18,815
            
            
            
            17,951
            
            
            
            864
            
            
            
            6,790
            
            
            
            6,327
            
            
            
            463Financing
      costs:Fixed
      rate mortgages
            
            
            (7,794
            )
            
            
            (7,871
            )
            
            
            77
            
            
            
            (2,615
            )
            
            
            (2,599
            )
            
            
            (16
            )Floating
      Rate - Rotunda
            
            
            (900
            )
            
            
            (1,228
            )
            
            
            328
            
            
            
            (261
            )
            
            
            (411
            )
            
            
            150Total
      financing costs
            
            
            (8,694
            )
            
            
            (9,099
            )
            
            
            405
            
            
            
            (2,876
            )
            
            
            (3,010
            )
            
            
            134Investment
      income
            
            
            437
            
            
            
            382
            
            
            
            55
            
            
            
            124
            
            
            
            157
            
            
            
            (33
            )Corporate
      expenses
            
            
            (726
            )
            
            
            (678
            )
            
            
            (48
            )
            
            
            (228
            )
            
            
            (216
            )
            
            
            (12
            )Accounting
            
            
            (419
            )
            
            
            (599
            )
            
            
            180
            
            
            
            (107
            )
            
            
            (258
            )
            
            
            151Minority
      interest in earnings of subsidiaries
            
            
            (768
            )
            
            
            (386
            )
            
            
            (382
            )
            
            
            (373
            )
            
            
            (129
            )
            
            
            (244
            )Distribution
      to Westwood Hills minority interests
            
            
            -
            
            
            
            (150
            )
            
            
            150
            
            
            
            -
            
            
            
            -
            
            
            
            -Depreciation
            
            
            (4,086
            )
            
            
            (3,972
            )
            
            
            (114
            )
            
            
            (1,411
            )
            
            
            (1,323
            )
            
            
            (88
            )Income
      from continuing operations
            
            
            4,559
            
            
            
            3,449
            
            
            
            1,110
            
            
            
            1,919
            
            
            
            1,548
            
            
            
            371Income
      from discontinued operations
            
            
            -
            
            
            
            3,771
            
            
            
            (3,771
            )
            
            
            -
            
            
            
            3,695
            
            
            
            (3,695
            )Net
      Income
            
            $
            4,559
            
            
            $
            7,220
            
            
            $
            (2,661
            )
            
            $
            1,919
            
            
            $
            5,243
            
            
            $
            (3,324
            )





The
consolidated results of operations for the Current Nine Months and Current
Quarter are not necessarily indicative of the results to be expected for the
full year.





Page
12





SEGMENT
INFORMATION


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





Nine Months Ended July
      31:Commercial
            
            
            Residential
            
            
            CombinedNine
      Months Ended
            
            
            
            
            
            
            
            
            Nine
      Months Ended
            
            
            
            
            
            
            
            
            Nine
      Months EndedJuly
      31,
            
            
            Increase
      (Decrease)
            
            
            July
      31,
            
            
            Increase
      (Decrease)
            
            
            July
      31,2008
            
            
            2007
            
            
            $
            
            
            
            %
            
            
            2008
            
            
            2007
            
            
            $
            
            
            
            %
            
            
            2008
            
            
            2007($
      in thousands)
            
            
            
            
            
            
            ($
      in thousands)
            
            
            
            
            
            
            ($
      in thousands)Rental
      income
            
            $
            12,806
            
            
            $
            12,454
            
            
            $
            352
            
            
            
            2.8
            %
            
            $
            14,175
            
            
            $
            13,614
            
            
            $
            561
            
            
            
            4.1
            %
            
            $
            26,981
            
            
            $
            26,068Reimbursements
            
            
            3,932
            
            
            
            3,601
            
            
            
            331
            
            
            
            9.2
            %
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            3,932
            
            
            
            3,601Other
            
            
            150
            
            
            
            143
            
            
            
            7
            
            
            
            4.9
            %
            
            
            160
            
            
            
            272
            
            
            
            (112
            )
            
            
            -41.2
            %
            
            
            310
            
            
            
            415Total
      revenue
            
            
            16,888
            
            
            
            16,198
            
            
            
            690
            
            
            
            4.3
            %
            
            
            14,335
            
            
            
            13,886
            
            
            
            449
            
            
            
            3.2
            %
            
            
            31,223
            
            
            
            30,084Operating
      expenses
            
            
            6,440
            
            
            
            6,425
            
            
            
            15
            
            
            
            0.2
            %
            
            
            6,180
            
            
            
            6,120
            
            
            
            60
            
            
            
            1.0
            %
            
            
            12,620
            
            
            
            12,545Net
      operating income
            
            $
            10,448
            
            
            $
            9,773
            
            
            $
            675
            
            
            
            6.9
            %
            
            $
            8,155
            
            
            $
            7,766
            
            
            $
            389
            
            
            
            5.0
            %
            
            
            18,603
            
            
            
            17,539AverageOccupancy
      %
            
            
            89.9
            %
            
            
            90.1
            %
            
            
            
            
            
            
            -0.2
            %
            
            
            94.9
            %
            
            
            94.8
            %
            
            
            
            
            
            
            0.1
            %





Reconciliation
      to consolidated net income:Deferred
      rents - straight lining
            
            
            140
            
            
            
            186Amortization
      of acquired leases
            
            
            72
            
            
            
            226Net
      investment income
            
            
            437
            
            
            
            382General
      and administrative expenses
            
            
            (1,145
            )
            
            
            (1,277
            )Depreciation
            
            
            (4,086
            )
            
            
            (3,972
            )Financing
      costs
            
            
            (8,694
            )
            
            
            (9,099
            )Distributions
      to certain minority interests
            
            
            -
            
            
            
            (150
            )Minority
      interest
            
            
            (768
            )
            
            
            (386
            )Income
      from continuing operations
            
            
            4,559
            
            
            
            3,449Income
      from discontinued operations
            
            
            -
            
            
            
            3,771Net
      income
            
            $
            4,559
            
            
            $
            7,220





Three Months Ended
      July 31:Commercial
            
            
            Residential
            
            
            CombinedThree
      Months Ended
            
            
            
            
            
            
            
            
            Three
      Months Ended
            
            
            
            
            
            
            
            
            Three
      Months EndedJuly
      31,
            
            
            Increase
      (Decrease)
            
            
            July
      31,
            
            
            Increase
      (Decrease)
            
            
            July
      31,2008
            
            
            2007
            
            
            $
            
            
            
            %
            
            
            2008
            
            
            2007
            
            
            $
            
            
            
            %
            
            
            2008
            
            
            2007($
      in thousands)
            
            
            
            
            
            
            ($
      in thousands)
            
            
            
            
            
            
            ($
      in thousands)Rental
      income
            
            $
            4,320
            
            
            $
            4,192
            
            
            $
            128
            
            
            
            3.1
            %
            
            $
            4,737
            
            
            $
            4,642
            
            
            $
            95
            
            
            
            2.0
            %
            
            $
            9,057
            
            
            $
            8,834Reimbursements
            
            
            1,475
            
            
            
            1,227
            
            
            
            248
            
            
            
            20.2
            %
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            1,475
            
            
            
            1,227Other
            
            
            53
            
            
            
            45
            
            
            
            8
            
            
            
            17.8
            %
            
            
            71
            
            
            
            189
            
            
            
            (118
            )
            
            
            -62.4
            %
            
            
            124
            
            
            
            234Total
      revenue
            
            
            5,848
            
            
            
            5,464
            
            
            
            384
            
            
            
            7.0
            %
            
            
            4,808
            
            
            
            4,831
            
            
            
            (23
            )
            
            
            -0.5
            %
            
            
            10,656
            
            
            
            10,295Operating
      expenses
            
            
            2,027
            
            
            
            2,123
            
            
            
            (96
            )
            
            
            -4.5
            %
            
            
            1,911
            
            
            
            1,992
            
            
            
            (81
            )
            
            
            -4.1
            %
            
            
            3,938
            
            
            
            4,115Net
      operating income
            
            $
            3,821
            
            
            $
            3,341
            
            
            $
            480
            
            
            
            14.4
            %
            
            $
            2,897
            
            
            $
            2,839
            
            
            $
            58
            
            
            
            2.0
            %
            
            
            6,718
            
            
            
            6,180AverageOccupancy
      %
            
            
            89.8
            %
            
            
            91.0
            %
            
            
            
            
            
            
            -1.2
            %
            
            
            94.2
            %
            
            
            95.9
            %
            
            
            
            
            
            
            -1.7
            %





Reconciliation
      to consolidated net income:Deferred
      rents - straight lining
            
            
            48
            
            
            
            72Amortization
      of acquired leases
            
            
            24
            
            
            
            75Net
      investment income
            
            
            124
            
            
            
            157General
      and administrative expenses
            
            
            (335
            )
            
            
            (474
            )Depreciation
            
            
            (1,411
            )
            
            
            (1,323
            )Financing
      costs
            
            
            (2,876
            )
            
            
            (3,010
            )Distributions
      to certain minority interests
            
            
            -
            
            
            
            -Minority
      interest
            
            
            (373
            )
            
            
            (129
            )Income
      from continuing operations
            
            
            1,919
            
            
            
            1,548Income
      from discontinued operations
            
            
            -
            
            
            
            3,695Net
      income
            
            $
            1,919
            
            
            $
            5,243




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, and financing costs. 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.


Page
13








SUPPLEMENTARY
SEGMENT INFORMATION


Commercial
lease expirations as at October 31, 2007, assuming none of the tenants exercise
renewal options:





Annual
      Rent of Expiring LeasesYear
      Ending
            
            Number
      of
            
            Expiring
      Leases
            
            Percent
      ofOctober
      31,
            
            Expiring
      Leases
            
            Sq.
      Ft.
            
            Commercial
      Sq. Ft.
            
            Total
            
            Per
      Sq. Ft.Month
      to month
            
            
            24
            
            
            
            59,092
            
            
            
            5.4
            %
            
            $
            1,082,497
            
            
            $
            18.322008
            
            
            20
            
            
            
            67,554
            
            
            
            6.2
            %
            
            $
            1,339,565
            
            
            $
            19.832009
            
            
            15
            
            
            
            44,143
            
            
            
            4.1
            %
            
            $
            801,213
            
            
            $
            18.152010
            
            
            19
            
            
            
            89,719
            
            
            
            8.3
            %
            
            $
            1,283,854
            
            
            $
            14.312011
            
            
            15
            
            
            
            57,081
            
            
            
            5.2
            %
            
            $
            1,342,052
            
            
            $
            23.512012
            
            
            10
            
            
            
            191,758
            
            
            
            17.6
            %
            
            $
            1,384,803
            
            
            $
            7.222013
            
            
            4
            
            
            
            33,346
            
            
            
            3.1
            %
            
            $
            641,326
            
            
            $
            19.232014
            
            
            4
            
            
            
            20,121
            
            
            
            1.9
            %
            
            $
            318,276
            
            
            $
            15.822015
            
            
            7
            
            
            
            76,104
            
            
            
            7.0
            %
            
            $
            862,806
            
            
            $
            11.342016
            
            
            3
            
            
            
            20,576
            
            
            
            1.9
            %
            
            $
            172,432
            
            
            $
            8.382017
            
            
            1
            
            
            
            2,786
            
            
            
            0.3
            %
            
            $
            65,471
            
            
            $
            23.50














The
following tables present the average rental income on a per unit and square foot
basis for each of our Residential and Commercial properties, respectively for
the Current Nine Months and Prior Nine Months:











Residential
      Apartment Properties:
            
            Commercial
      Properties:Property
      & Location
            No.
      of Units
            Average
      Occupancy Rate @ 7/31/08
            Average
      Monthly Rent per Unit @ 7/31/08
            Average
      Monthly Rent per Unit @ 7/31/07
            
            Property
      & Location
            Leaseable
      Space - Approximate Sq. Ft.
            Average
      Occupancy Rate @ 7/31/08
            Average
      Annualized Rent per Sq. Ft. @ 7/31/08
            Average
      Annualized Rent per Sq. Ft. @ 7/31/07Palisades
      Manor
            12
            97.5%
            $1,068
            $1,030
            
            Franklin
      Crossing
            87,041
            92.5%
            $22.46
            $21.49Palisades
      Park, NJ
            
            
            
            
            
            Franklin
      Lakes, NJGrandview
      Apts.
            20
            100.0%
            $1,143
            $1,093
            
            Westwood
      Plaza
            173,854
            100.0%
            $12.51
            $12.50Hasbrouck
      Heights, NJ
            
            
            
            
            
            Westwood,
      NJHeights
      Manor
            79
            93.2%
            $1,118
            $1,071
            
            Westridge
      Square
            256,620
            91.6%
            $12.09
            $11.85Spring
      Lake Heights, NJ
            
            
            
            
            
            Frederick,
      MDHammel
      Gardens
            80
            97.3%
            $1,187
            $1,162
            
            Pathmark
      Super Store
            63,962
            100.0%
            $19.49
            $18.35Maywood,
      NJ
            
            
            
            
            
            Patchogue,
      NYSteuben
      Arms
            100
            96.9%
            $1,253
            $1,213
            
            Glen
      Rock, NJ
            4,800
            100.0%
            $19.96
            $19.96River
      Edge, NJBerdan
      Court
            176
            97.0%
            $1,403
            $1,348
            
            Preakness
      Center
            322,136
            97.6%
            $12.46
            $12.01Wayne,
      NJ
            
            
            
            
            
            Wayne,
      NJPierre
      Towers
            269
            92.1%
            $1,778
            $1,708
            
            Damascus
      Center *
            139,878
            49.3%
            $8.56
            $9.12Hackensack,
      NJ
            
            
            
            
            
            Damascus,
      MDWestwood
      Hills
            210
            94.8%
            $1,418
            $1,381
            
            The
      Rotunda
            216,645
            90.5%
            $17.74
            $17.57Westwood
      Hills, NJ
            
            
            
            
            
            Baltimore,
      MDBoulders
            129
            95.3%
            $1,353
            $1,286
            
            *
      Undergoing renovation and expansion.Rockaway,
      NJ




Page
14


COMMERCIAL
SEGMENT




FREIT’s
commercial properties consist of ten (10) properties totaling approximately
1,127,000 sq. ft. of retail space and 138,000 sq. ft. of office
space.  Seven (7) are multi-tenanted retail or office centers, and one
is a single tenanted store. In addition, FREIT has two parcels of leased land,
from which it receives rental income. One is from a tenant who has built and
operates a bank branch on land FREIT owns in Rockaway, NJ. The other is from a
tenant who intends to build and operate a bank branch on land FREIT owns in
Rochelle Park, NJ.


As
indicated in the above Segment Information table, revenue from FREIT’s
commercial segment for the Current Nine Months and Current Quarter increased by
4.3% and 7.0%, respectively, over the comparable prior year’s periods. NOI for
the Current Nine Months and Current Quarter increased by 6.9% and 14.4%, over
the comparable prior year’s periods. The favorable increase in both revenue and
NOI was primarily attributable to higher occupancy levels along with increased
common area maintenance charge reimbursements at The Rotunda property, in
addition to nine months of revenue being generated by our land in Rochelle Park,
which was purchased in September 2007. However, the current year increases in
revenue and NOI were adversely affected by the renovation at our Damascus
Shopping Center property located in Damascus, MD (the “Damascus Center”), which
caused a temporary decline in occupancy levels at the Damascus Center. Average
occupancy rates for FREIT’s commercial segment for the Current Nine Months was
at 95.0%, exclusive of the Damascus Center, compared to 94.3% for the prior
year’s period. As a result of this renovation, temporary declines in both
revenue and NOI were experienced at the Damascus Center of $56,000 and $47,000,
respectively for the Current Nine Month period. (See discussion below).





Nine
      Months Ended July 31,2008
            
            
            2007Commercial
            
            
            
            
            
            Same
            
            
            Commercial
            
            
            
            
            
            Same($000)
            
            Properties
            
            
            Damascus
            
            
            Properties
            
            
            Properties
            
            
            Damascus
            
            
            PropertiesRevenues
            
            $
            16,888
            
            
            $
            554
            
            
            $
            16,334
            
            
            $
            16,198
            
            
            $
            610
            
            
            $
            15,588Expenses
            
            
            6,440
            
            
            
            307
            
            
            
            6,133
            
            
            
            6,425
            
            
            
            316
            
            
            
            6,109NOI
            
            $
            10,448
            
            
            $
            247
            
            
            $
            10,201
            
            
            $
            9,773
            
            
            $
            294
            
            
            $
            9,479Three
      Months Ended July 31,2008
            
            
            2007Commercial
            
            
            
            
            
            
            Same
            
            
            Commercial
            
            
            
            
            
            
            Same($000)
            
            Properties
            
            
            Damascus
            
            
            Properties
            
            
            Properties
            
            
            Damascus
            
            
            PropertiesRevenues
            
            $
            5,848
            
            
            $
            201
            
            
            $
            5,647
            
            
            $
            5,464
            
            
            $
            195
            
            
            $
            5,269Expenses
            
            
            2,027
            
            
            
            100
            
            
            
            1,927
            
            
            
            2,123
            
            
            
            97
            
            
            
            2,026NOI
            
            $
            3,821
            
            
            $
            101
            
            
            $
            3,720
            
            
            $
            3,341
            
            
            $
            98
            
            
            $
            3,243




The
impact of the Damascus renovation on the nine and three month results of the
commercial segment is reflected in the following table:





DEVELOPMENT
ACTIVITIES




A
modernization and expansion is underway at our Damascus Center in Damascus, MD
(owned by our 70% owned affiliate, Damascus Centre, LLC). Total construction
costs are expected to approximate $21.9 million. The building plans incorporate an
expansion of retail space from its current configuration of approximately
140,000 sq. ft to approximately 150,000 sq ft., and will be anchored by a modern
58,000 sq ft Safeway supermarket.Building plans for Phase I have been
approved and construction on Phase I began in June 2007, and was completed in
June 2008. Phase I construction costs were approximately $5.6 million, of which
$1.1 million related to tenant improvements. On February 12, 2008, Damascus
Centre, LLC closed on a $27.3 million construction loan that is available to
fund already expended and future construction costs.  This loan will
be drawn upon as needed. As of July 31, 2008, Damascus drew down $5.0 million of
this loan to cover construction costs. (See “Liquidity and Capital Resources”
for additional information regarding this loan.) Because of this expansion,
leases for certain tenants have been allowed to expire and not renewed. This has
caused occupancy to decline, on a temporary basis, during the construction
phase.




Development
plans and studies for the expansion and renovation of our Rotunda property in
Baltimore, MD (owned by our 60% owned affiliate Grande Rotunda, LLC) continue.
The Rotunda property, on an 11.5-acre site, currently consists of an office
building containing 138,000 sq. ft. of office space and 78,000 sq. ft. of retail
space on the lower floor of the main building. The building plans incorporate an
expansion of approximately 180,500 sq ft. of retail space, approximately 302
residential rental apartments, 56 condominium units and 120 hotel rooms, and
structured parking. Development costs for this project are expected to
approximate $145 million. City Planning Board approval has been received, and
construction is expected to start during our next fiscal year.


Page
15





FREIT
recently completed the re-configuration and renovation of the space formerly
occupied by a movie theater at its Westridge Square Shopping Center in
Frederick, MD at a cost approximating $1 million. The former movie theater
operator, as part of its lease termination fee, supplied the funds for this
re-configuration.





RESIDENTIAL
SEGMENT




FREIT
operates nine (9) multi-family apartment communities totaling 1,075 apartment
units. As indicated in the table above, revenue from our residential segment for
the Current Nine Months increased 3.2% to $14,335,000 and NOI for the same
period is up 5.0% to $8,155,000. This was primarily attributable to higher
occupancy levels, specifically at The Boulders and The Pierre Towers, which
continue to be strong contributors to FREIT’s residential operations, accounting
for 95% of the increase in revenue and 103% of the increase in NOI for the
Current Nine Months. For the Current Quarter, revenue decreased 0.5% to
$4,808,000 and NOI increased by 2.0% to $2,897,000. A slight decrease in
occupancy levels for the quarter was the primary reason for the decrease in
revenue for the Current Quarter.




Rental
revenues from FREIT’s residential properties continue to increase. Average
occupancy rates for the Current Nine Months increased slightly to 94.9%,
compared to 94.8% for the Prior Nine Months. The occupancy level at The Boulders
was in excess of 96% at the end of July 2008, and averaged 95.3% during the
Current Nine Month period.




Our
residential revenue is principally composed of monthly apartment rental income.
Total rental income is a factor of occupancy and monthly apartment rents.
Monthly average residential rents at the end of the Current Nine Months and the
Prior Nine Month period were $1,556 and $1,484, respectively. A 1% decline in
annual average occupancy, or a 1% decline in average rents from current levels,
results in an annual revenue decline of approximately $200,700 and $189,800,
respectively.




Capital
expenditures: Since all of our apartment communities, with the exception of The
Boulders, were constructed more than 25 years ago, we tend to spend more in any
given year on maintenance and capital improvements than may be spent on newer
properties. A major renovation program is ongoing at The Pierre Towers apartment
complex (“The Pierre”). We intend to modernize, where required, all apartments
and some of the buildings’ mechanical services. This renovation is expected to
cost approximately $3 - $4 million, and apartments are to be renovated as they
become temporarily vacant, over the next several years. These costs will be
financed from operating cash flow and cash reserves. Through July 31, 2008, we
expended approximately $2.8 million in capital improvements at The Pierre,
including approximately $130,000 during the Current Nine Months.





FINANCING
COSTS





Nine
      Months Ended
            
            
            Three
      Months EndedJuly
      31,
            
            
            July
      31,2008
            
            
            2007
            
            
            2008
            
            
            2007($
      in thousands)
            
            
            ($
      in thousands)Fixed
      rate mortgages:1st
      MortgagesExisting
            
            $
            6,459
            
            
            $
            6,027
            
            
            $
            2,094
            
            
            $
            2,211New
            
            
            153
            
            
            
            -
            
            
            
            922nd
      MortgagesExisting
            
            
            893
            
            
            
            1,472
            
            
            
            296
            
            
            
            304Variable
      rate mortgages:Acquisition
      loan-Rotunda
            
            
            972
            
            
            
            1,184
            
            
            
            294
            
            
            
            396Construction
      loan-Damascus
            
            
            62
            
            
            
            -
            
            
            
            44
            
            
            
            -Other
            
            
            178
            
            
            
            217
            
            
            
            63
            
            
            
            328,717
            
            
            
            8,900
            
            
            
            2,883
            
            
            
            2,943Amortization
      of Mortgage Costs
            
            
            222
            
            
            
            199
            
            
            
            81
            
            
            
            67Total
      Financing Costs
            
            
            8,939
            
            
            
            9,099
            
            
            
            2,964
            
            
            
            3,010Less
      amount capitalized
            
            
            (245
            )
            
            
            -
            
            
            
            (88
            )
            
            
            -Financing
      costs expensed
            
            $
            8,694
            
            
            $
            9,099
            
            
            $
            2,876
            
            
            $
            3,010





Financing
costs before capitalized amounts for the Current Nine Months and Current Quarter
decreased 1.8% and 1.5%, over the prior year’s comparable periods. This decrease
was primarily attributable to our $22.5 million acquisition loan for The Rotunda
property, which bears a floating interest rate. Lower interest rates over the
course of the Current Nine Month period decreased the level of interest expense
for The Rotunda by approximately $327,000 and $149,000, to $900,000 and $261,000
for the Current Nine Months and Current Quarter, respectively.


Page
16


NET
INVESTMENT INCOME




Net
investment income for the Current Nine Months increased 14% to $437,000 from the
Prior Nine Months, and decreased 21% to $124,000, over the Prior Year’s Quarter.
Net investment income is principally derived from interest earned from cash on
deposit in institutional money market funds and interest earned from secured
loans receivable (loans made to Hekemian employees, including certain members of
the immediate family of Robert S. Hekemian, FREIT’s CEO and Chairman of the
Board, for their equity investment in Grande Rotunda, LLC, a limited liability
company, in which FREIT owns a 60% equity interest and Damascus Center, LLC, a
limited liability company, in which FREIT owns a 70% equity interest). The
increase in net investment income for the Current Nine Months was primarily
attributable to higher interest income due to higher interest rates on the
Company’s investments.





GENERAL
AND ADMINISTRATIVE EXPENSES (“G & A”)




During
the Current Nine Months and Current Quarter, G & A was $1,145,000 and
$335,000, respectively, as compared to $1,277,000 and $474,000 for the prior
year’s periods. The decrease for the Current Nine Months and Current Quarter was
primarily attributable to a lower level of accounting fees, offset slightly by
increased office overhead costs.





DEPRECIATION




Depreciation
expense for the Current Nine Months and Current Quarter was $4,086,000 and
$1,411,000, respectively, an increase of $114,000 and $88,000 from the prior
year’s comparable periods. The increase was primarily attributable to FREIT’s
residential operations, specifically with respect to current renovation and
construction projects becoming operational at both The Pierre and The Boulders
during FREIT’s first quarter ended January 31, 2008.





LIQUIDITY
AND CAPITAL RESOURCES




Our
financial condition remains strong. Net Cash Provided By Operating Activities
was $10.4 million for the Current Nine Months compared to $9.2 million for the
Prior Nine Months. We expect that cash provided by operating activities will be
adequate to cover mandatory debt service payments, recurring capital
improvements and dividends necessary to retain qualification as a REIT (90% of
taxable income).




As at
July 31, 2008, we had cash and marketable securities totaling $9.1 million
compared to $12.7 million at October 31, 2007.




Credit
Line:


FREIT has
an $18 million line of credit provided by the Provident Bank. The line of credit
is for three years but can be cancelled by the bank, at its will, at each
anniversary date. Draws against the credit line can be used for general
corporate purposes, for property acquisitions, construction activities, and
letters of credit. Draws against the credit line are secured by mortgages on
FREIT’s Franklin Crossing Shopping Center, Franklin Lakes, NJ, retail space in
Glen Rock, NJ, Palisades Manor Apartments, Palisades Park, NJ, and Grandview
Apartments, Hasbrouck Heights, NJ. .Interest rates on
draws will be set at the time of each draw for 30, 60, or 90-day periods, based
on our choice of the prime rate or at 175 basis points over the 30, 60, or
90-day LIBOR rates at the time of the draws.




In
connection with its construction activities at The Boulders in Rockaway, NJ,
FREIT had drawn down $1.5 million and further utilized the credit line for the
issuance of a $2 million Letter of Credit (“LoC”). The $1.5 million was repaid
during the Prior Year’s 1st Quarter
and the $2 million LoC was retired on May 16, 2007. $18 million is currently
available under the line of credit.




We are planning an expansion and
redevelopment of The Rotunda in Baltimore, MD and have begun the rebuilding of
the Damascus Shopping Center, in Damascus, MD. The total capital required for
these projects is estimated at $145 million, and $21.9 million, respectively.
Financing for the Rotunda project will be, in part, from mortgage financing and,
in part, from funds available in our institutional money market investment. On
February 12, 2008, Damascus Centre, LLC (“Damascus Centre”) closed on a $27.3
million construction loan that is available to fund already expended and future
construction costs. This loan has a term of forty-eight (48) months, with one
twelve (12) month extension option. FREIT has guaranteed 30% of the loan, and
the minority interests, who have a 30% investment in the Damascus Centre, have
agreed to indemnify FREIT for their share of the guarantee. Draws against this
loan bear interest at a floating rate equal to LIBOR +1.35%. As of July 31,
2008, Damascus drew down $5.0 million of this loan to cover construction costs.




We expect
these development projects to add to revenues, income, cash flow, and
shareholder value.




Page
17







At July
31, 2008, FREIT’s aggregate outstanding mortgage debt was $192.9 million and
bears a weighted average interest rate of 5.94%, and an average life of
approximately 5.6 years. These fixed rate mortgages are subject to amortization
schedules that are longer than the term of the mortgages. As such, balloon
payments (unpaid principal amounts at mortgage due date) for all mortgage debt
will be required as follows:





Fiscal
      Year
            2009
            2010
            2013
            2014
            2016
            2017
            2018
            2019
            2022($
      in millions)Mortgage
      "Balloon" Payments
            $22.5
            $12.2
            $8.0
            $25.9
            $24.5
            $22.0
            $5.0
            $28.1
            $14.4




The following table shows
the estimated fair value and carrying value of our long-term debt at July 31,
2008 and October 31, 2007:


July
      31,
            
            
            October
      31,($
      in Millions)
            
            2008
            
            
            2007Fair
      Value
            
            $
            196.8
            
            
            $
            188.7Carrying
      Value
            
            $
            192.9
            
            
            $
            189.4




Fair
values are estimated based on market interest rates at July 31, 2008 and October
31, 2007 and on discounted cash flow analysis. Changes in assumptions or
estimation methods may significantly affect these fair value
estimates.




FREIT
expects to refinance the individual mortgages with new mortgages when their
terms expire. To this extent we have exposure to interest rate risk. If interest
rates, at the time any individual mortgage note is due, are higher than the
current fixed interest rate, higher debt service may be required, and/or
refinancing proceeds may be less than the amount of mortgage debt being retired.
For example, at July 31, 2008 a 1% interest rate increase would reduce the fair
value of our debt by $9.7 million, and a 1% decrease would increase the fair
value by $10.6 million.




FREIT
also has interest rate exposure on its floating rate loans. Currently, FREIT has
$27.5 million in floating rate loans outstanding, of which $22.5 million relates
to the acquisition loan for The Rotunda and $5.0 million relates to the
construction loans for the Damascus redevelopment project. A 1% rate fluctuation
would impact FREIT’s annual interest cost by approximately
$275,000.




We
believe that the values of our properties will be adequate to command
refinancing proceeds equal to or higher than the mortgage debt to be refinanced.
We continually review our debt levels to determine if additional debt can
prudently be utilized for property acquisition additions to our real estate
portfolio that will increase income and cash flow to our
shareholders.





FREIT had
a variable interest rate mortgage secured by its Patchogue, NY property. To
limit interest rate volatility on this loan, FREIT entered into an interest rate
swap contract. This loan came due on January 2, 2008. The due date of the loan
was extended to February 29, 2008. The interest rate swap contract terminated on
January 2, 2008. On February 29, 2008, the unpaid principal amount of this loan
of approximately $5.9 million was refinanced with a $6 million mortgage loan
bearing a fixed interest rate of 6.125%, with a ten (10) year term, and payable
according to a thirty (30) year amortization schedule. Under the terms of the
mortgage loan agreement, FREIT can request, during the term of the loan,
additional fundings that will bring the outstanding principal balance up to 75%
of loan-to-value (percentage of mortgage loan to total appraised value of
property securing the loan).




Share
repurchase program:


On April
9, 2008, FREIT’s Board of Trustees authorized up to $2 million for the
repurchase of FREIT shares commencing three (3) days after the announcement of
its operating results for the quarter ended April 30, 2008. Share repurchases
under this program may be made from time to time in the open market or through
privately negotiated transactions, depending on trading prices of FREIT shares
and other market conditions. This share repurchase program may be limited or
terminated at any time and without prior notice. As of July 31, 2008, FREIT
repurchased 5,000 shares of common stock at a cost of $120,000, which is
reflected in the Stockholders’ Equity section of FREIT’s balance
sheet.





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18








FUNDS
FROM OPERATIONS (“FFO”)


Many
consider FFO as the standard measurement of a REIT’s performance. We compute FFO
as follows:





Funds From Operations
      ("FFO")Nine
      Months Ended
            
            
            Three
      Months EndedJuly
      31,
            
            
            July
      31,2008
            
            
            2007
            
            
            2008
            
            
            2007($
      in thousands, except per share amounts)Net
      income
            
            $
            4,559
            
            
            $
            7,220
            
            
            $
            1,919
            
            
            $
            5,243Depreciation
            
            
            4,086
            
            
            
            3,972
            
            
            
            1,411
            
            
            
            1,323Amortization
      of deferred mortgage costs
            
            
            222
            
            
            
            199
            
            
            
            81
            
            
            
            67Deferred
      rents (Straight lining)
            
            
            (140
            )
            
            
            (186
            )
            
            
            (48
            )
            
            
            (72
            )Amortization
      of acquired leases
            
            
            (72
            )
            
            
            (226
            )
            
            
            (24
            )
            
            
            (75
            )Capital
      Improvements - Apartments
            
            
            (346
            )
            
            
            (314
            )
            
            
            (88
            )
            
            
            (77
            )Discontinued
      operations
            
            
            -
            
            
            
            (3,771
            )
            
            
            -
            
            
            
            (3,695
            )Minority
      interests:Equity
      in earnings of affiliates
            
            
            768
            
            
            
            536
            
            
            
            373
            
            
            
            129Distributions
      to minority interests
            
            
            (707
            )
            
            
            (541
            )
            
            
            (112
            )
            
            
            (155
            )FFO
            
            $
            8,370
            
            
            $
            6,889
            
            
            $
            3,512
            
            
            $
            2,688Per
      Share - Basic
            
            $
            1.23
            
            
            $
            1.02
            
            
            $
            0.51
            
            
            $
            0.40Per
      Share - Diluted
            
            $
            1.21
            
            
            $
            1.00
            
            
            $
            0.51
            
            
            $
            0.39Weighted
      Average Shares Outstanding:Basic
            
            
            6,802
            
            
            
            6,752
            
            
            
            6,844
            
            
            
            6,756Diluted
            
            
            6,897
            
            
            
            6,919
            
            
            
            6,941
            
            
            
            6,925





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





INFLATION


Inflation
can impact the financial performance of FREIT in various ways. Our commercial
tenant leases normally provide that the tenants bear all or a portion of most
operating expenses, which can reduce the impact of inflationary increases on
FREIT. Apartment leases are normally for a one-year term, which may allow us to
seek increased rents as leases renew or when new tenants are
obtained.





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19








Item
3: Quantitative and Qualitative Disclosures About Market
Risk





See
“Residential Segment” and “Liquidity and Capital Resources” under Item 2 above
for a detailed discussion of FREIT’s quantitative and qualitative market risk
disclosures.





Item
4: Controls and Procedures





As of
October 31, 2007, we carried out an evaluation of the effectiveness of the
design and operation of FREIT’s disclosure controls and procedures. This
evaluation was carried out under the supervision and with participation of
FREIT’s management, including FREIT’s Chairman and Chief Executive Officer and
Chief Financial Officer, who concluded that FREIT’s disclosure controls and
procedures are effective. There has been no change in FREIT’s internal control
over financial reporting during the first nine months of fiscal 2008 that has
materially affected, or is reasonably likely to materially affect, FREIT’s
internal control over financial reporting.





Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in FREIT’s reports filed or
submitted under the Exchange Act is recorded, processed, summarized, and
reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in
FREIT’s reports filed under the Exchange Act is accumulated and communicated to
management, including FREIT’s Chief Executive Officer and Chief Financial
Officer as appropriate, to allow timely decisions regarding required
disclosure.





Part
II:  Other Information





Item
1A:  Risk Factors





Almost
all of FREIT’s income and cash flow is derived from the net rental income
(revenues after expenses) from our properties. FREIT’s business and financial
results are affected by the following fundamental factors:


§
            the
      national and regional economic
climate;


§
            occupancy
      rates at the properties;


§
            tenant
      turnover rates;


§
            rental
      rates;


§
            operating
      expenses;


§
            tenant
      improvement and leasing costs;


§
            cost
      of and availability of capital;


§
            new
      acquisitions and development projects;
and


§
            changes
      in governmental regulations, real estate tax rates and similar
      matters.


A
negative quality change in the above factors could potentially cause a
detrimental effect on FREIT’s revenue, earnings and cash flow. If rental
revenues decline, we would expect to have less cash available to pay our
indebtedness and distribute to our shareholders.




Changes
in General Economic Climate:  FREIT derives the majority of its
revenues from renting apartments to individuals or families, and from retailers
renting space at its shopping centers. A decline in general economic conditions,
particularly in New Jersey and Maryland, where a majority of our properties are
located, may cause reductions in rental revenues. A decline in general economic
conditions may cause apartment tenants to double-up or vacate, causing increases
in vacancies, or to resist monthly rent increases. Additionally, a general
decline in economic conditions may cause a lack of consumer confidence,
resulting in lower levels of consumer spending that could adversely affect the
financial condition of some of our retail tenants, resulting in their inability
to pay rent and/or expense recovery charges (represents recovery of certain
common area maintenance charges, including insurance and real estate taxes).
These retail tenants may vacate or fail to exercise renewal options for their
space.





Page
20





Tenants
unable to pay rent:Financially distressed
tenants may be unable to pay rents and expense recovery charges, where
applicable, and may default on their leases. Enforcing our rights as landlord
could result in substantial costs and may not result in a full recovery of
unpaid rent. If a tenant files for bankruptcy, the tenant’s lease may be
terminated. In each such instance FREIT’s income and cash flow would be
negatively impacted.




Costs of
re-renting space: If tenants fail to renew leases, fail to exercise
renewal options, or terminate their leases early, the lost rents due to vacancy
and the costs of re-renting the space could prove costly to FREIT. In addition
to cleaning and renovating the vacated space, we may be required to grant
concessions to a new tenant, and may incur leasing brokerage
commissions.  The lease terms to a new tenant may be less favorable
than the prior tenant’s lease terms, and will negatively impact FREIT’s income
and cash flow and adversely affect our ability to pay mortgage debt and interest
or make distributions to our shareholders.




Inflation
may adversely affect our financial condition and results of
operations:Increased inflation
could have a pronounced negative impact on our operating and administrative
expenses, as these costs may increase at a higher rate than our rents. While
increases in most operating expenses at our commercial properties can be passed
on to retail tenants, increases in expenses at our residential properties cannot
be passed on to residential tenants. Unreimbursed increased operating expenses
may reduce cash flow available for payment of mortgage debt and interest, and
for distributions to shareholders.





Development
and construction risks:As part of its
investment strategy, FREIT seeks to acquire property for development and
construction, as well as to develop and build on land already in its portfolio.
FREIT is currently renovating its shopping center located in Damascus, Maryland,
and is planning a major development at its Rotunda property in Baltimore,
Maryland. In addition it is contemplating the construction of an industrial
building on its South Brunswick, New Jersey property. Development and
construction activities are challenged with the following risks, which may
adversely affect our cash flow:




·
            financing
      may not be available in the amounts we seek, or may not be on favorable
      terms;


·
            long-term
      financing may not be available upon completion of the construction;
      and


·
            failure
      to complete construction on schedule or within budget may increase debt
      service costs and construction
costs.




Debt
financing could adversely affect income and cash flow: FREIT relies on debt
financing to fund its growth through acquisitions and development activities. To
the extent third party debt financing is not available, or not available on
favorable terms, acquisitions and development activities will be
curtailed.




FREIT
currently has approximately $165.4 million of non-recourse mortgage debt subject
to fixed interest rates, and $27.5 million of partial recourse mortgage debt
subject to variable interest rates ($22.5 million relates to the acquisition of
the Rotunda property, and $5.0 million relates to the Damascus redevelopment
project). These mortgages are being repaid over periods (amortization schedules)
that are longer than the terms of the mortgages. Accordingly, when the mortgages
become due (at various times) significant balloon payments (the unpaid principal
amounts) will be required.  FREIT expects to refinance the individual
mortgages with new mortgages when their terms expire. To this extent we have
exposure to capital availability and interest rate risk. If interest rates, at
the time any individual mortgage note is due, are higher than the current fixed
interest rate, higher debt service may be required and/or refinancing proceeds
may be less than the amount of the mortgage debt being retired.




To the
extent we are unable to refinance our indebtedness on acceptable terms, we may
need to dispose of one or more of our properties upon disadvantageous
terms.




Our
revolving $18 million credit line (currently unutilized and fully available) and
our acquisition mortgage loan contain financial covenants that could restrict
our acquisition activities and result in a default on these loans if we fail to
satisfy these covenants.





Page
21





Real
estate is a competitive business:FREIT
is subject to normal competition with other investors to acquire real property
and to profitably manage such property. Numerous other REITs, banks, insurance
companies and pension funds, as well as corporate and individual developers and
owners of real estate, compete with FREIT in seeking properties for acquisition
and for tenants. Many of these competitors have significantly greater financial
resources than FREIT. In addition, retailers at FREIT's commercial properties
face increasing competition from discount shopping centers, outlet malls, sales
through catalogue offerings, discount shopping clubs, marketing and shopping
through cable and computer sources, particularly over the internet, and
telemarketing. In many markets, the trade areas of FREIT's commercial properties
overlap with the trade areas of other shopping centers. Renovations and
expansions at those competing shopping centers and malls could negatively affect
FREIT's commercial properties by encouraging shoppers to make their purchases at
such new, expanded or renovated shopping centers and malls. Increased
competition through these various sources could adversely affect the viability
of FREIT's tenants, and any new commercial real estate competition developed in
the future could potentially have an adverse effect on the revenues of and
earnings from FREIT's commercial properties.




Illiquidity
of real estate investment:Real estate investments
are relatively difficult to buy and sell quickly. Accordingly, the ability of
FREIT to vary its portfolio in response to changing economic, market or other
conditions is limited. Also, FREIT’s interests in its partially owned
subsidiaries are subject to transfer constraints by the operating agreements,
which govern FREIT’s investment in these partially owned
subsidiaries.




Environmental
problems may be costly:Both federal and state
governments are concerned with the impact of real estate construction and
development programs upon the environment. Environmental legislation affects the
cost of selling real estate, the cost to develop real estate, and the risks
associated with purchasing real estate.




Under
various federal, state and local environmental laws, statutes, ordinances, rules
and regulations, an owner of real property may be liable for the costs of
removal or remediation of certain hazardous or toxic substances at, on, in or
under such property, as well as certain other potential costs relating to
hazardous or toxic substances (including government fines and penalties and
damages for injuries to persons and adjacent property). Such laws often impose
such liability without regard to whether the owners knew of, or were responsible
for, the presence or disposal of such substances. Such liability may be imposed
on the owner in connection with the activities of any operator of, or tenant at
the property. The cost of any required remediation, removal, fines or personal
or property damages and the owner's liability therefore could exceed the value
of the property and/or the aggregate assets of the owner. In addition, the
presence of such substances, or the failure to properly dispose of or remediate
such substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral. If FREIT incurred any
such liability, it could reduce FREIT's revenues and ability to make
distributions to its shareholders.




A
property can also be negatively impacted by either physical contamination or by
virtue of an adverse effect upon value attributable to the migration of
hazardous or toxic substances, or other contaminants that have or may have
emanated from other properties.




Qualification
as a REIT:Since its inception in
1961, FREIT has elected, and will continue to operate so as to qualify as a REIT
for federal income tax purposes. In order to qualify as a REIT, we must satisfy
a number of highly technical and complex provisions of the Internal Revenue
Code. Governmental legislation, new regulations, administrative interpretations
may significantly change the tax laws with respect to the requirements for
qualification as a REIT, or the federal income tax consequences of qualifying as
a REIT. Although FREIT intends to continue to operate in a manner to allow it to
qualify as a REIT, future economic, market, legal, tax or other considerations
may cause it to revoke the REIT election or fail to qualify as a REIT. Such a
revocation would subject FREIT’s income to federal income tax at regular
corporate rates, and failure to qualify as a REIT would also eliminate the
requirement that we pay dividends to our shareholders.




Change
of investment and operating policies:FREIT’s investment and
operating policies, including indebtedness and dividends, are exclusively
determined by FREIT’s Board of Trustees, and not subject to shareholder
approval.


Page
22





Item
2:  Unregistered Sales of Equity Securities and Use of
Proceeds





Information
regarding FREIT’s share repurchase program for the three months ended July 31,
2008 is as follows:











Issuer
Purchases of Equity Securities





Period
            Total
      Number of
              Shares
      Purchased1
            Average
      Price Paid
              Per
      Share
            Total
      Number of
              Shares
      Purchased as
              Part
      of Publicly
              Announced
      Program
            Approximate
      Dollar
              Value
      of Shares that
              May
      Yet Be
              Purchased
      Under the
              ProgramMay
      1, 2008 through May 31, 2008
            -
            -
            -
            $
      2,000,000June
      1, 2008 through June 30, 2008
            5,000
            $
      24.00
            5,000
            $
      1,880,000July
      1, 2008 through July 31, 2008
            -
            -
            -
            $
      1,880,000Total
            5,000
            $
      24.00
            5,000
            $
      1,880,000





1
            On
      April 9, 2008, FREIT’s Board of Trustees authorized up to $2 million for
      the repurchase of FREIT’s shares of beneficial interest commencing three
      (3) days after the announcement of FREIT’s operating results for the
      quarter ended April 30, 2008.  Share repurchases under this
      program may be made from time to time in the open market or through
      privately negotiated transactions, depending on the trading prices of
      FREIT’s shares and other market conditions.  FREIT’s share
      repurchase program may be limited or terminated at any time and without
      prior notice.














Page
23











Item
6: Exhibits





Reference
is made to the Exhibit index below.








Exhibit
Index





PageExhibit 31.1 - Section 302 Certification of Chief
      Executive Officer
            26Exhibit 31.2 - Section 302 Certification of Chief
      Financial Officer
            27Exhibit 32.1 - Certification of Chief Executive
      Officer pursuant to 18 U.S.C. Section 1350
            28Exhibit 32.2- Certification of Chief Financial
      Officer pursuant to 18 U.S.C. Section 1350
            29














Item
10: Material Agreements





Reference
is made to the Exhibit index below








Exhibit
Index








PageExhibit 10.1– Agency Agreement – Damascus Center,
      LLC with Hekemian  Development Resources, LLC
            30














Page
24














SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.











FIRST
      REAL ESTATE INVESTMENTTRUST OF NEW
      JERSEY(Registrant)Date:
      September 9, 2008/s/
      Robert S. Hekemian(Signature)Robert
      S. HekemianChairman
      of the Board and Chief Executive Officer(Principal
      Executive Officer)/s/
      Donald W. Barney(Signature)Donald
      W. BarneyPresident,
      Treasurer and Chief Financial Officer(Principal
      Financial/Accounting Officer)





Page 25