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 April 30, 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 





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 
            Accelerated
      Filer x
            Non-Accelerated
      Filer 
            Smaller
      Reporting Company 




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes
 No x





As of
June 6, 2008, the number of shares of beneficial interest outstanding was
6,851,152












FIRST REAL ESTATE INVESTMENT
TRUST OF NEW JERSEY








INDEX





Part
I:  Financial Information








PageItem
      1:
            Unaudited
      Condensed Consolidated Financial Statementsa.)
            
            Consolidated Balance Sheets as at April 30, 2008 and October
      31, 2007;
            3b.)
            
            Consolidated Statements of Income, Comprehensive Income and
      Undistributed Earnings for the Six and Three Months Ended April 30, 2008
      and 2007;
            4c.)
            
            Consolidated Statements of Cash Flows for the Six Months Ended
      April 30, 2008 and 2007;
            5d.)
            
            Notes to Condensed Consolidated Financial
      Statements.
            6Item
      2:
            Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
            9Item
      3:
            Quantitative and Qualitative Disclosures About Market
      Risk
            18Item
      4:
            Controls and Procedures
            18Part
      II: Other InformationItem
      1A:
            Risk Factors
            19Item
      4:
            Submission of Matters to a Vote of Security
      Holders
            21Item
      6:
            Exhibits
            22Item
      10:
            Material Agreements
            22Signatures
            23


Page
2
 Index




Part
I:  Financial Information





Item
1:  Unaudited Condensed Consolidated Financial Statements





FIRST
REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES


CONSOLIDATED
BALANCESHEETS





(Unaudited)
            
            
            (Audited)April 30,
            
            
            October 31,2008
            
            
            2007(In
      Thousands of Dollars)ASSETSReal
      estate, at cost, net of accumulated depreciation
            
            $
            208,683
            
            
            $
            204,732Construction
      in progress
            
            
            6,263
            
            
            
            7,331Cash
      and cash equivalents
            
            
            11,611
            
            
            
            12,740Tenants'
      security accounts
            
            
            2,410
            
            
            
            2,369Sundry
      receivables
            
            
            4,081
            
            
            
            4,833Secured
      loans receivable
            
            
            3,326
            
            
            
            3,326Prepaid
      expenses and other assets
            
            
            2,487
            
            
            
            2,852Acquired
      over market leases and in-place lease costs
            
            
            985
            
            
            
            1,104Deferred
      charges, net
            
            
            3,579
            
            
            
            3,454Interest
      rate swap contract
            
            
            -
            
            
            
            14Totals
            
            $
            243,425
            
            
            $
            242,755LIABILITIESANDSHAREHOLDERS'
      EQUITYLiabilities:Mortgages
      payable
            
            $
            192,613
            
            
            $
            189,389Accounts
      payable and accrued expenses
            
            
            5,108
            
            
            
            5,193Dividends
      payable
            
            
            2,046
            
            
            
            2,704Tenants'
      security deposits
            
            
            3,133
            
            
            
            3,124Acquired
      below market value leases and deferred revenue
            
            
            3,272
            
            
            
            3,911Total
      liabilities
            
            
            206,172
            
            
            
            204,321Minority
      interest
            
            
            13,123
            
            
            
            13,304Commitments
      and contingenciesShareholders'
      equity:Shares
      of beneficial interest without par value:8,000,000
      shares authorized; 6,821,152 and 6,760,652 shares issued and
      outstanding
            
            
            23,679
            
            
            
            23,225Undistributed
      earnings
            
            
            451
            
            
            
            1,891Accumulated
      other comprehensive income
            
            
            -
            
            
            
            14Total
      shareholders' equity
            
            
            24,130
            
            
            
            25,130Totals
            
            $
            243,425
            
            
            $
            242,755





See Notes
to Condensed Consolidated Financial Statements.


Page
3
 Index




FIRST
REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES


CONSOLIDATED
STATEMENTSOF INCOME, COMPREHENSIVE INCOME


AND
UNDISTRIBUTED EARNINGS


SIX AND
THREE MONTHS ENDED APRIL 30, 2008 AND 2007


(Unaudited)





Six
      Months Ended
            
            
            Three
      Months EndedApril 30,
            
            
            April 30,2008
            
            
            
            2007
            *
            
            2008
            
            
            
            2007
            *(In
      Thousands of Dollars, Except Per Share Amounts)Revenue:Rental
      income
            
            $
            18,064
            
            
            $
            17,501
            
            
            $
            9,084
            
            
            $
            8,781Reimbursements
            
            
            2,456
            
            
            
            2,373
            
            
            
            1,071
            
            
            
            1,089Sundry
      income
            
            
            186
            
            
            
            181
            
            
            
            94
            
            
            
            78Totals
            
            
            20,706
            
            
            
            20,055
            
            
            
            10,249
            
            
            
            9,948Expenses:Operating
      expenses
            
            
            5,685
            
            
            
            5,512
            
            
            
            2,760
            
            
            
            2,617Management
      fees
            
            
            916
            
            
            
            870
            
            
            
            460
            
            
            
            435Real
      estate taxes
            
            
            2,891
            
            
            
            2,852
            
            
            
            1,445
            
            
            
            1,426Depreciation
            
            
            2,674
            
            
            
            2,649
            
            
            
            1,336
            
            
            
            1,346Totals
            
            
            12,166
            
            
            
            11,883
            
            
            
            6,001
            
            
            
            5,824Operating
      income
            
            
            8,540
            
            
            
            8,172
            
            
            
            4,248
            
            
            
            4,124Investment
      income
            
            
            313
            
            
            
            225
            
            
            
            154
            
            
            
            138Interest
      expense including amortization of deferred financing costs
            
            
            (5,818
            )
            
            
            (6,088
            )
            
            
            (2,885
            )
            
            
            (3,045
            )Minority
      interest
            
            
            (395
            )
            
            
            (258
            )
            
            
            (280
            )
            
            
            (120
            )Distribution
      to certain minority interests
            
            
            -
            
            
            
            (150
            )
            
            
            -
            
            
            
            -Income
      from continuing operations
            
            
            2,640
            
            
            
            1,901
            
            
            
            1,237
            
            
            
            1,097Discontinued
      operations:Earnings
      from discontinued operations
            
            
            -
            
            
            
            76
            
            
            
            -
            
            
            
            34Income
      from discontinued operations
            
            
            -
            
            
            
            76
            
            
            
            -
            
            
            
            34Net
      income
            
            $
            2,640
            
            
            $
            1,977
            
            
            $
            1,237
            
            
            $
            1,131Basic
      earnings per share:Continuing
      operations
            
            $
            0.39
            
            
            $
            0.28
            
            
            $
            0.18
            
            
            $
            0.16Discontinued
      operations
            
            $
            -
            
            
            $
            0.01
            
            
            $
            -
            
            
            $
            0.01Net
      income
            
            $
            0.39
            
            
            $
            0.29
            
            
            $
            0.18
            
            
            $
            0.17Diluted
      earnings per share:Continuing
      operations
            
            $
            0.38
            
            
            $
            0.28
            
            
            $
            0.18
            
            
            $
            0.15Discontinued
      operations
            
            $
            -
            
            
            $
            0.01
            
            
            $
            -
            
            
            $
            0.01Net
      income
            
            $
            0.38
            
            
            $
            0.29
            
            
            $
            0.18
            
            
            $
            0.16Weighted
      average shares outstanding:Basic
            
            
            6,781
            
            
            
            6,751
            
            
            
            6,799
            
            
            
            6,751Diluted
            
            
            6,894
            
            
            
            6,916
            
            
            
            6,911
            
            
            
            6,915COMPREHENSIVE
      INCOMENet
      income
            
            $
            2,640
            
            
            $
            1,977
            
            
            $
            1,237
            
            
            $
            1,131Other
      comprehensive income (loss):Unrealized
      (loss) on interest rate swap contract
            
            
            -
            
            
            
            (29
            )
            
            
            -
            
            
            
            (22
            )Comprehensive
      income
            
            $
            2,640
            
            
            $
            1,948
            
            
            $
            1,237
            
            
            $
            1,109UNDISTRIBUTED
      EARNINGSBalance,
      beginning of period
            
            $
            1,891
            
            
            $
            1,735
            
            
            $
            1,260
            
            
            $
            556Net
      income
            
            
            2,640
            
            
            
            1,977
            
            
            
            1,237
            
            
            
            1,131Less
      dividends declared
            
            
            (4,080
            )
            
            
            (4,052
            )
            
            
            (2,046
            )
            
            
            (2,027
            )Balance,
      end of period
            
            $
            451
            
            
            $
            (340
            )
            
            $
            451
            
            
            $
            (340
            )Dividends
      declared per share
            
            $
            0.60
            
            
            $
            0.60
            
            
            $
            0.30
            
            
            $
            0.30





*  Restated
to reflect reclassification of discontinued operations.





See Notes
to Condensed Consolidated Financial Statements.


Page
4
 Index




FIRST
REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASHFLOWS


SIX
MONTHS ENDED APRIL 30, 2008 AND 2007


(Unaudited)





Six
      Months EndedApril
      30,2008
            
            
            2007(In
      Thousands of Dollars)Operating
      activities:Net
      income
            
            $
            2,640
            
            
            $
            1,977Adjustments
      to reconcile net income to net cash provided by operating activities
      (including discontinued operations):Depreciation
            
            
            2,674
            
            
            
            2,655Amortization
            
            
            381
            
            
            
            360Net
      amortization of acquired leases
            
            
            (48
            )
            
            
            (151
            )Deferred
      revenue
            
            
            (520
            )
            
            
            (298
            )Minority
      interest
            
            
            395
            
            
            
            408Changes
      in operating assets and liabilities:Tenants'
      security accounts
            
            
            (41
            )
            
            
            (51
            )Sundry
      receivables, prepaid expenses and other assets
            
            
            931
            
            
            
            1,438Accounts
      payable, accrued expenses and other liabilities
            
            
            1,051
            
            
            
            (448
            )Tenants'
      security deposits
            
            
            9
            
            
            
            91Net
      cash provided by operating activities
            
            
            7,472
            
            
            
            5,981Investing
      activities:Capital
      improvements - existing properties
            
            
            (2,058
            )
            
            
            (1,464
            )Construction
      and pre development costs
            
            
            (4,605
            )
            
            
            (3,718
            )Net
      cash used in investing activities
            
            
            (6,663
            )
            
            
            (5,182
            )Financing
      activities:Repayment
      of mortgages
            
            
            (6,995
            )
            
            
            (18,494
            )Proceeds
      from mortgages
            
            
            6,000
            
            
            
            28,331Proceeds
      from construction loan
            
            
            4,219
            
            
            
            -Deferred financing
      costs
            
            
            (283
            )
            
            
            (524
            )Proceeds
      from exercise of stock options
            
            
            454
            
            
            
            37Dividends
      paid
            
            
            (4,738
            )
            
            
            (5,400
            )Distribution
      to minority interest
            
            
            (595
            )
            
            
            (387
            )Net
      cash (used in) provided by financing activities
            
            
            (1,938
            )
            
            
            3,563Net
      increase (decrease) in cash and cash equivalents
            
            
            (1,129
            )
            
            
            4,362Cash
      and cash equivalents, beginning of period
            
            
            12,740
            
            
            
            9,616Cash
      and cash equivalents, end of period
            
            $
            11,611
            
            
            $
            13,978Supplemental
      disclosure of cash flow data:Interest
      paid, including capitalized construction period interest of $157 in fiscal
      2008.
            
            $
            5,720
            
            
            $
            5,956Income
      taxes paid
            
            $
            10
            
            
            $
            18Supplemental
      schedule of non cash financing activities:Accrued
      capital expenditures, construction costs and pre-development
      costs
            
            $
            774
            
            
            $
            34Dividends
      declared but not paid
            
            $
            2,046
            
            
            $
            2,027





See Notes
to Condensed Consolidated Financial Statements.


Page
5
 Index




FIRST
REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES


NOTESTO 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 six and three months ended April 30,
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. (See Note 4 for a more detailed
discussion.)





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.




In
computing diluted earnings per share for the six and three months ended April
30, 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.




Six
      Months Ended
            
            
            Three
      Months EndedApril 30,
            
            
            April 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Basic
      weighted average shares outstanding
            
            
            6,780,740
            
            
            
            6,750,873
            
            
            
            6,799,219
            
            
            
            6,751,101Shares
      arising from assumed exercise of stock options
            
            
            113,470
            
            
            
            165,091
            
            
            
            111,944
            
            
            
            164,016Dilutive
      weighted average shares outstanding
            
            
            6,894,210
            
            
            
            6,915,964
            
            
            
            6,911,163
            
            
            
            6,915,117






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 six and
three months ended April 30, 2008 and 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 April 30, 2008, options for 172,000 shares were outstanding.
The total intrinsic value of the options outstanding at April 30, 2008 was
approximately $2.5 million.




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
 Index


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 reclassified to
“Income from discontinued operations”. Revenue attributable to discontinued
operations was $207,000 and $100,000 for the prior year’s six and three month
periods ended April 30, 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 six and three months ended April 30, 2008 and
2007. Asset information is not reported since FREIT does not use this measure to
assess performance.





Six
      Months Ended
            
            
            Three
      Months EndedApril 30,
            
            
            April 30,2008
            
            
            
            2007
            *
            
            2008
            
            
            
            2007
            *(In
      Thousands of Dollars)Real
      estate rental revenue:Commercial
            
            $
            11,039
            
            
            $
            10,735
            
            
            $
            5,415
            
            
            $
            5,272Residential
            
            
            9,527
            
            
            
            9,055
            
            
            
            4,765
            
            
            
            4,542Totals
            
            
            20,566
            
            
            
            19,790
            
            
            
            10,180
            
            
            
            9,814Real
      estate operating expenses:Commercial
            
            
            4,412
            
            
            
            4,303
            
            
            
            2,121
            
            
            
            2,138Residential
            
            
            4,270
            
            
            
            4,128
            
            
            
            2,124
            
            
            
            1,927Totals
            
            
            8,682
            
            
            
            8,431
            
            
            
            4,245
            
            
            
            4,065Net
      operating income:Commercial
            
            
            6,627
            
            
            
            6,432
            
            
            
            3,294
            
            
            
            3,134Residential
            
            
            5,257
            
            
            
            4,927
            
            
            
            2,641
            
            
            
            2,615Totals
            
            $
            11,884
            
            
            $
            11,359
            
            
            $
            5,935
            
            
            $
            5,749Recurring
      capital improvements-residential
            
            $
            258
            
            
            $
            239
            
            
            $
            118
            
            
            $
            65Reconciliation
      to consolidated net income:Segment
      NOI
            
            $
            11,884
            
            
            $
            11,359
            
            
            $
            5,935
            
            
            $
            5,749Deferred
      rents - straight lining
            
            
            92
            
            
            
            114
            
            
            
            45
            
            
            
            59Amortization
      of acquired leases
            
            
            48
            
            
            
            151
            
            
            
            24
            
            
            
            75Net
      investment income
            
            
            313
            
            
            
            225
            
            
            
            154
            
            
            
            138Minority
      interest in earnings of subsidiaries
            
            
            (395
            )
            
            
            (258
            )
            
            
            (280
            )
            
            
            (120
            )Distribution
      to certain minority interests
            
            
            -
            
            
            
            (150
            )
            
            
            -
            
            
            
            -General
      and administrative expenses
            
            
            (810
            )
            
            
            (803
            )
            
            
            (420
            )
            
            
            (413
            )Depreciation
            
            
            (2,674
            )
            
            
            (2,649
            )
            
            
            (1,336
            )
            
            
            (1,346
            )Financing
      costs
            
            
            (5,818
            )
            
            
            (6,088
            )
            
            
            (2,885
            )
            
            
            (3,045
            )Income
      from continuing operations
            
            
            2,640
            
            
            
            1,901
            
            
            
            1,237
            
            
            
            1,097Income
      from discontinued operations
            
            
            -
            
            
            
            76
            
            
            
            -
            
            
            
            34Net
      income
            
            $
            2,640
            
            
            $
            1,977
            
            
            $
            1,237
            
            
            $
            1,131





*  Restated
to reflect reclassification of discontinued operations.


Page
7
 Index




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 April 30, 2008, Damascus drew down $4.2 million
from 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 will be approximately $21.9 million. Construction on Phase I
began in June 2007 with completion expected no later than June 2008. Phase I
construction costs will approximate $4 - $4.5 million of which $4.2 million has
already been expended. 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. As of April 30, 2008,
Damascus drew down $4.2 million from this loan to cover construction
costs.





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.





Note 9–
Subsequent events:




FREIT
owns a 60% membership interest in and is the managing member of Grande Rotunda,
LLC (“Grande Rotunda”). Rotunda 100, LLC, a New Jersey limited liability
company, owns a 40% interest in Grande Rotunda. Employees of Hekemian & Co.,
Inc. (“Hekemian & Co.”), the managing agent of FREIT, including members of
the immediate family of Robert S. Hekemian, Chairman and Chief Executive Officer
of FREIT, own Rotunda 100, LLC, and the members of Mr. Hekemian’s family have
majority management control of this entity. Grande Rotunda is the owner of a
mixed-use (office/retail) property in Baltimore, MD.




As an
incentive to the employees of Hekemian & Co. to identify and provide real
estate investment opportunities to FREIT, FREIT has agreed to advance the
Hekemian & Co. employees, who are members of Rotunda 100, LLC, 50% of the
amount which such employees are required to contribute toward the acquisition
and operation of the Grande Rotunda, up to $2 million. The Hekemian & Co.
employees have pledged their interests in Rotunda 100, LLC to FREIT as
collateral security for these loans. FREIT collects a market level interest rate
on the outstanding principal balance of such loans, and the loans are full
recourse loans to the borrowers.




On May 8,
2008, FREIT’s Board of Trustees approved amendments to the existing loan
agreements with the Hekemian & Co. employees 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
 Index




Item
2: Management’sDiscussion 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 Projected in 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 six and three month period ended April 30, 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 come down, although slight up ticks were registered in April and May 2008.
As a result of the 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 six-month period. Conversely,
the cost of financing at our future development projects at the Rotunda and
South Brunswick may prove more costly.


Page
9
 Index




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 April 30, 2008 and October 31, 2007, and for the six and three months ended
April 30, 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
10
 Index




RESULTS
OF OPERATIONS




Real
Estate revenue for the six months ended April 30, 2008 (“Current Six Months”)
increased 3.2% to $20,706,000 compared to $20,055,000 for the six months ended
April 30, 2007 (“Prior Six Months”). Real Estate revenue for the three months
ended April 30, 2008 (“Current Quarter”) increased 3.0% to $10,249,000 compared
to $9,948,000 for the three months ended April 30, 2007 (“Prior Year’s
Quarter”).  The increase in real estate revenues was principally
attributable to FREIT’s residential operations, primarily at The Boulders and
The Pierre Towers, which accounted for 58% and 56% of the increase for the
current six and three month periods, respectively.




Net
income for the Current Six Months was $2,640,000 ($0.38 diluted) compared to
$1,977,000 ($0.29 diluted) for the Prior Six Months. Net income for the Current
Quarter was $1,237,000 ($0.18 diluted) compared to $1,131,000 ($0.16 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 six
and three months ended April 30, 2008 and 2007:










NET
      INCOME COMPONENTSSix
      Months Ended
            
            
            Three
      Months EndedApril
      30,
            
            
            April
      30,2008
            
            
            2007*
            
            
            Change
            
            
            2008
            
            
            2007*
            
            
            Change(thousands
      of dollars)
            
            
            (thousands
      of dollars)Commercial
      PropertiesSame Properties(1)
            
            $
            6,623
            
            
            $
            6,504
            
            
            $
            119
            
            
            $
            3,273
            
            
            $
            3,186
            
            
            $
            87Damascus Center
      - undergoing renovation
            
            
            144
            
            
            
            193
            
            
            
            (49
            )
            
            
            90
            
            
            
            82
            
            
            
            8Total
      Commercial Properties
            
            
            6,767
            
            
            
            6,697
            
            
            
            70
            
            
            
            3,363
            
            
            
            3,268
            
            
            
            95Residential
      PropertiesSame Properties(1)
            
            
            5,257
            
            
            
            4,927
            
            
            
            330
            
            
            
            2,641
            
            
            
            2,615
            
            
            
            26Total
      Residential Properties
            
            
            5,257
            
            
            
            4,927
            
            
            
            330
            
            
            
            2,641
            
            
            
            2,615
            
            
            
            26Total
      income from real estate operations
            
            
            12,024
            
            
            
            11,624
            
            
            
            400
            
            
            
            6,004
            
            
            
            5,883
            
            
            
            121Financing
      costs:Fixed
      rate mortgagesSame Properties(1)
            
            
            (5,179
            )
            
            
            (5,271
            )
            
            
            92
            
            
            
            (2,618
            )
            
            
            (2,647
            )
            
            
            29Floating
      Rate - Rotunda
            
            
            (639
            )
            
            
            (817
            )
            
            
            178
            
            
            
            (267
            )
            
            
            (398
            )
            
            
            131Total
      financing costs
            
            
            (5,818
            )
            
            
            (6,088
            )
            
            
            270
            
            
            
            (2,885
            )
            
            
            (3,045
            )
            
            
            160Investment
      income
            
            
            313
            
            
            
            225
            
            
            
            88
            
            
            
            154
            
            
            
            138
            
            
            
            16Corporate
      expenses
            
            
            (497
            )
            
            
            (461
            )
            
            
            (36
            )
            
            
            (286
            )
            
            
            (301
            )
            
            
            15Accounting
            
            
            (313
            )
            
            
            (342
            )
            
            
            29
            
            
            
            (134
            )
            
            
            (112
            )
            
            
            (22
            )Minority
      interest in earnings of subsidiaries
            
            
            (395
            )
            
            
            (258
            )
            
            
            (137
            )
            
            
            (280
            )
            
            
            (120
            )
            
            
            (160
            )Distribution
      to Westwood Hills minority interests  (2)
            
            
            -
            
            
            
            (150
            )
            
            
            150
            
            
            
            -
            
            
            
            -
            
            
            
            -Depreciation:Same Properties(1)
            
            
            (2,674
            )
            
            
            (2,649
            )
            
            
            (25
            )
            
            
            (1,336
            )
            
            
            (1,346
            )
            
            
            10Total
      depreciation
            
            
            (2,674
            )
            
            
            (2,649
            )
            
            
            (25
            )
            
            
            (1,336
            )
            
            
            (1,346
            )
            
            
            10Income
      from continuing operations
            
            
            2,640
            
            
            
            1,901
            
            
            
            739
            
            
            
            1,237
            
            
            
            1,097
            
            
            
            140Income
      from discontinued operations
            
            
            -
            
            
            
            76
            
            
            
            (76
            )
            
            
            -
            
            
            
            34
            
            
            
            (34
            )Net
      Income
            
            $
            2,640
            
            
            $
            1,977
            
            
            $
            663
            
            
            $
            1,237
            
            
            $
            1,131
            
            
            $
            106





*  Restated
to reflect reclassification of discontinued operations.


(1)
Properties operated since the beginning of fiscal 2007.


(2) Prior
to change of Terms of LLC Operating Agreement effective June 1, 2007 with
respect to recovery of


distributions
in excess of cumulative net income of the LLC.







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


Page
11
 Index




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 Six Months and Current Quarter, as compared to the prior year’s
comparable periods:




Six Months Ended April
      30:Commercial
            
            
            Residential
            
            
            CombinedSix
      Months EndedApril
      30,
            
            
            Increase (Decrease)
            
            
            Six
      Months EndedApril
      30,
            
            
            Increase (Decrease)
            
            
            Six
      Months EndedApril
      30,2008
            
            
            2007
            
            
            $
            
            
            %
            
            
            2008
            
            
            2007*
            
            
            $
            
            
            %
            
            
            2008
            
            
            2007*($
      in thousands)
            
            
            
            
            
            ($
      in thousands)
            
            
            
            
            
            
            ($
      in thousands)Rental
      income
            
            $
            8,486
            
            
            $
            8,262
            
            
            $
            224
            
            
            
            2.7
            %
            
            $
            9,438
            
            
            $
            8,974
            
            
            $
            464
            
            
            
            5.2
            %
            
            $
            17,924
            
            
            $
            17,236Reimbursements
            
            
            2,456
            
            
            
            2,373
            
            
            
            83
            
            
            
            3.5
            %
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            2,456
            
            
            
            2,373Other
            
            
            97
            
            
            
            100
            
            
            
            (3
            )
            
            
            -3.0
            %
            
            
            89
            
            
            
            81
            
            
            
            8
            
            
            
            9.9
            %
            
            
            186
            
            
            
            181Total
      revenue
            
            
            11,039
            
            
            
            10,735
            
            
            
            304
            
            
            
            2.8
            %
            
            
            9,527
            
            
            
            9,055
            
            
            
            472
            
            
            
            5.2
            %
            
            
            20,566
            
            
            
            19,790Operating
      expenses
            
            
            4,412
            
            
            
            4,303
            
            
            
            109
            
            
            
            2.5
            %
            
            
            4,270
            
            
            
            4,128
            
            
            
            142
            
            
            
            3.4
            %
            
            
            8,682
            
            
            
            8,431Net
      operating income
            
            $
            6,627
            
            
            $
            6,432
            
            
            $
            195
            
            
            
            3.0
            %
            
            $
            5,257
            
            
            $
            4,927
            
            
            $
            330
            
            
            
            6.7
            %
            
            
            11,884
            
            
            
            11,359AverageOccupancy
      %
            
            
            90.0
            %
            
            
            89.7
            %
            
            
            
            
            
            
            0.3
            %
            
            
            95.2
            %
            
            
            94.3
            %
            
            
            
            
            
            
            0.9
            %Reconciliation
      to consolidated net income:Deferred
      rents - straight lining
            
            
            
            92
            
            
            
            114Amortization
      of acquired leases
            
            
            
            48
            
            
            
            151Net
      investment income
            
            
            
            313
            
            
            
            225General
      and administrative expenses
            
            
            
            (810
            )
            
            
            (803
            )Depreciation
            
            
            
            (2,674
            )
            
            
            (2,649
            )Financing
      costs
            
            
            
            (5,818
            )
            
            
            (6,088
            )Distributions
      to certain minority interests
            
            
            
            -
            
            
            
            (150
            )Minority
      interest
            
            
            
            (395
            )
            
            
            (258
            )Income
      from continuing operations
            
            
            
            2,640
            
            
            
            1,901Income
      from discontinued operations
            
            
            
            -
            
            
            
            76Net
      income
            
            
            $
            2,640
            
            
            $
            1,977





*  Restated
to reflect reclassification of discontinued operations.






Three Months Ended
      April 30:Commercial
            
            
            Residential
            
            
            CombinedThree
      Months EndedApril 30,
            
            
            Increase (Decrease)
            
            
            Three
      Months EndedApril 30,
            
            
            Increase (Decrease)
            
            
            Three
      Months EndedApril 30,2008
            
            
            2007
            
            
            $
            
            
            %
            
            
            2008
            
            
            2007*
            
            
            $
            
            
            %
            
            
            2008
            
            
            2007*($
      in thousands)
            
            
            
            
            
            ($
      in thousands)
            
            
            
            
            
            ($
      in thousands)Rental
      income
            
            $
            4,292
            
            
            $
            4,126
            
            
            $
            166
            
            
            
            4.0
            %
            
            $
            4,723
            
            
            $
            4,521
            
            
            $
            202
            
            
            
            4.5
            %
            
            $
            9,015
            
            
            $
            8,647Reimbursements
            
            
            1,071
            
            
            
            1,089
            
            
            
            (18
            )
            
            
            -1.7
            %
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            1,071
            
            
            
            1,089Other
            
            
            52
            
            
            
            57
            
            
            
            (5
            )
            
            
            -8.8
            %
            
            
            42
            
            
            
            21
            
            
            
            21
            
            
            
            100.0
            %
            
            
            94
            
            
            
            78Total
      revenue
            
            
            5,415
            
            
            
            5,272
            
            
            
            143
            
            
            
            2.7
            %
            
            
            4,765
            
            
            
            4,542
            
            
            
            223
            
            
            
            4.9
            %
            
            
            10,180
            
            
            
            9,814Operating
      expenses
            
            
            2,121
            
            
            
            2,138
            
            
            
            (17
            )
            
            
            -0.8
            %
            
            
            2,124
            
            
            
            1,927
            
            
            
            197
            
            
            
            10.2
            %
            
            
            4,245
            
            
            
            4,065Net
      operating income
            
            $
            3,294
            
            
            $
            3,134
            
            
            $
            160
            
            
            
            5.1
            %
            
            $
            2,641
            
            
            $
            2,615
            
            
            $
            26
            
            
            
            1.0
            %
            
            
            5,935
            
            
            
            5,749AverageOccupancy
      %
            
            
            90.7
            %
            
            
            89.9
            %
            
            
            
            
            
            
            0.8
            %
            
            
            94.7
            %
            
            
            94.7
            %
            
            
            
            
            
            
            0.0
            %Reconciliation
      to consolidated net income:Deferred
      rents - straight lining
            
            
            
            45
            
            
            
            59Amortization
      of acquired leases
            
            
            
            24
            
            
            
            75Net
      investment income
            
            
            
            154
            
            
            
            138General
      and administrative expenses
            
            
            
            (420
            )
            
            
            (413
            )Depreciation
            
            
            
            (1,336
            )
            
            
            (1,346
            )Financing
      costs
            
            
            
            (2,885
            )
            
            
            (3,045
            )Distributions
      to certain minority interests
            
            
            
            -
            
            
            
            -Minority
      interest
            
            
            
            (280
            )
            
            
            (120
            )Income
      from continuing operations
            
            
            
            1,237
            
            
            
            1,097Income
      from discontinued operations
            
            
            
            -
            
            
            
            34Net
      income
            
            
            $
            1,237
            
            
            $
            1,131





*  Restated
to reflect reclassification of discontinued operations.


Page
12
 Index




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.





SUPPLEMENTARY
SEGMENT INFORMATION




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





Annual
      Rent of Expiring LeasesYear
      EndingOctober
      31,
            
            Number
      ofExpiring
      Leases
            
            
            Expiring
      LeasesSq.
    Ft.
            
            
            Percent
      ofCommercial 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 Six Months and Prior Six Months:








Residential
      Apartment Properties:
            
            
            
            
            Commercial
      Properties:Property
      & Location
            
            No.
      of Units
            
            
            Average
      Occupancy Rate @ 4/30/08
            
            
            Average
      Monthly Rent per Unit @ 4/30/08
            
            
            Average
      Monthly Rent per Unit @ 4/30/07
            
            Property
      & Location
            
            Leaseable
      Space - Approximate Sq. Ft.
            
            
            Average
      Occupancy Rate @ 4/30/08
            
            
            Average
      Annualized Rent per Sq. Ft. @ 4/30/08
            
            
            Average
      Annualized Rent per Sq. Ft. @ 4/30/07Palisades
      Manor
            
            12
            
            
            100.0%
            
            
            $1,058
            
            
            $1,031
            
            Franklin Crossing
            
            87,041
            
            
            93.2%
            
            
            $22.91
            
            
            $21.92Palisades
      Park, NJ
            
            
            
            
            
            
            
            
            
            
            
            
            Franklin Lakes,
      NJGrandview
      Apts.
            
            20
            
            
            100.0%
            
            
            $1,138
            
            
            $1,086
            
            Westwood Plaza
            
            173,854
            
            
            100.0%
            
            
            $12.77
            
            
            $12.85Hasbrouck
      Heights, NJ
            
            
            
            
            
            
            
            
            
            
            
            
            Westwood,
      NJHeights
      Manor
            
            79
            
            
            92.4%
            
            
            $1,127
            
            
            $1,079
            
            Westridge
      Square
            
            256,620
            
            
            90.8%
            
            
            $12.37
            
            
            $12.25Spring
      Lake Heights, NJ
            
            
            
            
            
            
            
            
            
            
            
            
            Frederick,
      MDHammel Gardens
            
            80
            
            
            97.3%
            
            
            $1,179
            
            
            $1,157
            
            Pathmark
      Super Store
            
            63,962
            
            
            100.0%
            
            
            $19.99
            
            
            $18.49Maywood,
      NJ
            
            
            
            
            
            
            
            
            
            
            
            
            Patchogue,
      NYSteuben
      Arms
            
            100
            
            
            97.0%
            
            
            $1,251
            
            
            $1,207
            
            Glen Rock,
      NJ
            
            4,800
            
            
            100.0%
            
            
            $20.48
            
            
            $20.48River
      Edge, NJBerdan
      Court
            
            176
            
            
            98.0%
            
            
            $1,389
            
            
            $1,337
            
            Preakness Center
            
            322,136
            
            
            97.4%
            
            
            $12.63
            
            
            $12.13Wayne,
      NJ
            
            
            
            
            
            
            
            
            
            
            
            
            Wayne,
      NJPierre Towers
            
            269
            
            
            93.9%
            
            
            $1,764
            
            
            $1,703
            
            Damascus Center*
            
            139,878
            
            
            52.3%
            
            
            $8.02
            
            
            $9.56Hackensack,
      NJ
            
            
            
            
            
            
            
            
            
            
            
            
            Damascus,
      MDWestwood
      Hills
            
            210
            
            
            93.7%
            
            
            $1,402
            
            
            $1,376
            
            The
      Rotunda
            
            216,645
            
            
            89.9%
            
            
            $18.22
            
            
            $17.95Westwood
      Hills, NJ
            
            
            
            
            
            
            
            
            
            
            
            
            Baltimore,
      MDBoulders
            
            129
            
            
            94.7%
            
            
            $1,358
            
            
            $1,262
            
            *
      Undergoing renovation and expansion.Rockaway,
      NJ


Page
13
 Index




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 Par, NJ.




As
indicated in the above Segment Information table, revenue from FREIT’s
commercial segment for the Current Six Months and Current Quarter increased by
2.8% and 2.7%, respectively, over the comparable prior year’s periods. NOI for
the Current Six Months and Current Quarter increased by 3.0% and 5.1%, over the
comparable prior year’s periods. The favorable increase in both revenue and NOI
was primarily attributable to our land in Rochelle Park, purchased in September
2007, which was generating revenue for the full Current Six Month period.
However, the current year increases in both revenues and NOI were adversely
affected by the anticipated planned 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 Six Months was at 94.7%,
exclusive of the Damascus Center, compared to 93.8% 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 $61,000 and $50,000, respectively for the
Current Six Month period. (See discussion below).




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





Six
      Months Ended April 30,2008
            
            
            2007Commercial
            
            
            
            
            
            Same
            
            
            Commercial
            
            
            
            
            
            Same($000)
            
            
            Properties
            
            
            Damascus
            
            
            Properties
            
            
            Properties
            
            
            Damascus
            
            
            PropertiesRevenues
            
            
            $
            11,039
            
            
            $
            354
            
            
            $
            10,685
            
            
            $
            10,735
            
            
            $
            415
            
            
            $
            10,320Expenses
            
            
            
            4,412
            
            
            
            208
            
            
            
            4,204
            
            
            
            4,303
            
            
            
            219
            
            
            
            4,084NOI
            
            
            $
            6,627
            
            
            $
            146
            
            
            $
            6,481
            
            
            $
            6,432
            
            
            $
            196
            
            
            $
            6,236Three
      Months Ended April 30,2008
            
            
            2007Commercial
            
            
            
            
            
            
            Same
            
            
            Commercial
            
            
            
            
            
            
            Same($000)
            
            
            Properties
            
            
            Damascus
            
            
            Properties
            
            
            Properties
            
            
            Damascus
            
            
            PropertiesRevenues
            
            
            $
            5,415
            
            
            $
            202
            
            
            $
            5,213
            
            
            $
            5,272
            
            
            $
            216
            
            
            $
            5,056Expenses
            
            
            
            2,121
            
            
            
            110
            
            
            
            2,011
            
            
            
            2,138
            
            
            
            131
            
            
            
            2,007NOI
            
            
            $
            3,294
            
            
            $
            92
            
            
            $
            3,202
            
            
            $
            3,134
            
            
            $
            85
            
            
            $
            3,049








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.  Building plans for
Phase I have been approved and construction on Phase I began in June 2007 with
completion expected no later than June 2008. Phase I construction costs will
approximate $4 - $4.5 million of which approximately $4.2 million has already
been expended. 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
April 30, 2008, Damascus drew down $4.2 million from 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) continues.
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. These development costs are expected to approximate $145
million. City Planning Board approval has been received, and construction is
expected to start during calendar 2008.


Page
14
 Index




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 Six Months increased 5.2% to $9,527,000 and NOI for the same period
is also up 6.7% to $5,257,000. For the Current Quarter, revenue increased 4.9%
to $4,765,000 and NOI is also up slightly by 1.0% to $2,641,000. The primary
reason for the increase was higher occupancy levels, specifically at The
Boulders and The Pierre Towers, which continue to be strong contributors to
FREIT’s residential operations, accounting for 81% of the increase in revenue
and 88% of the increase in NOI for the Current Six Months.




Revenues
from FREIT’s residential properties continue to increase. Average occupancy
rates for the Current Six Months increased to 95.2%, compared to 94.3% for the
Prior Six Months. The occupancy level at The Boulders was in excess of 96% at
the end of April 2008, and averaged 94.7% during the Current Six 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 Six Months and the
Prior Six Month period were $1,547 and $1,472, 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 $199,600 and $187,900,
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 April 30, 2008, we
expended approximately $2.8 million in capital improvements at The Pierre,
including approximately $78,000 during the Current Six Months.





FINANCING
COSTS




Six
      Months Ended
            
            
            Three Months
      EndedApril 30,
            
            
            April 30,2008
            
            
            2007
            
            
            2008
            
            
            2007($
      in thousands)
            
            
            ($
      in thousands)Fixed
      rate mortgages:1st
      MortgagesExisting
            
            $
            4,365
            
            
            $
            3,815
            
            
            $
            1,996
            
            
            $
            1,422New
            
            
            61
            
            
            
            -
            
            
            
            612nd
      MortgagesExisting
            
            
            597
            
            
            
            1,168
            
            
            
            467
            
            
            
            1,035Variable
      rate mortgages:Acquisition
      loan-Rotunda
            
            
            678
            
            
            
            788
            
            
            
            286
            
            
            
            383Construction
      loan-Damascus
            
            
            18
            
            
            
            -
            
            
            
            18Other
            
            
            115
            
            
            
            185
            
            
            
            60
            
            
            
            1385,834
            
            
            
            5,956
            
            
            
            2,888
            
            
            
            2,978Amortization
      of Mortgage Costs
            
            
            141
            
            
            
            132
            
            
            
            68
            
            
            
            67Total
      Financing Costs
            
            
            5,975
            
            
            
            6,088
            
            
            
            2,956
            
            
            
            3,045Less
      amount capitalized
            
            
            (157
            )
            
            
            -
            
            
            
            (71
            )
            
            
            -Financing
      costs expensed
            
            $
            5,818
            
            
            $
            6,088
            
            
            $
            2,885
            
            
            $
            3,045






Financing
costs before capitalized amounts for the Current Six Months and Current Quarter
decreased 1.9% and 2.9%, 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 Six Month period decreased the level of interest expense
for the Rotunda by approximately $178,000 and $131,000, to $639,000 and $267,000
for the Current Six Months and Current Quarter, respectively.


Page
15
 Index




NET
INVESTMENT INCOME




Net
investment income for the Current Six Months and Current Quarter increased 39%
and 12% to $313,000 and $154,000, respectively, over the comparable prior year’s
periods. 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 was primarily attributable to
higher interest income for the Current Six Months and Current Quarter due to
higher interest rates on the Company’s investments.





GENERAL
AND ADMINISTRATIVE EXPENSES (“G & A”)




During
the Current Six Months and Current Quarter, G & A was $810,000 and $420,000,
respectively, as compared to $803,000 and $413,000 for the prior year’s periods.
The increases for the Current Six Month and Current Quarter periods were
primarily attributable to increased office overhead costs and Trustees’ fees
offset by reduced accounting fees.





DEPRECIATION




Depreciation
expense for the Current Six Months and Current Quarter was $2,674,000 and
$1,336,000, respectively, an increase of $25,000 from the Prior Six Months and a
decrease of $10,000 from the Prior Year’s Quarter. 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 $7.5 million for the Current Six Months compared to $6.0 million for the
Prior Six 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
April 30, 2008, we had cash and marketable securities totaling $11.6 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%. On April 30, 2008,
Damascus drew down $4.2 million of this loan to cover construction costs.




Page
16
 Index




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




April 30,
2008, FREIT’s aggregate outstanding mortgage debt was $192.6 million and bears a
weighted average interest rate of 5.99%, and an average life of approximately
5.8 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
            
            2008
            
            
            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
            
            
            $
            5.9
            
            
            $
            28.1
            
            
            $
            14.4





April 30,
            
            
            October 31,($
      in Millions)
            
            2008
            
            
            2007Fair
      Value
            
            $199.0
            
            
            $188.7Carrying
      Value
            
            $192.6
            
            
            $189.4








The
following table shows the estimated fair value and carrying value of our
long-term debt at April 30, 2008 and October 31, 2007:




Fair
values are estimated based on market interest rates at April 30, 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 April 30, 2008 a 1% interest rate increase would reduce the fair
value of our debt by $10.1 million, and a 1% decrease would increase the fair
value by $11.0 million.




FREIT
also has interest rate exposure on its floating rate loans. Currently, FREIT has
$26.7 million in floating rate loans outstanding, of which $22.5 million relates
to the acquisition loan for The Rotunda and $4.2 million relates to the
construction loans for the Damascus redevelopment project. A 1% rate fluctuation
would impact FREIT’s annual interest cost by approximately
$267,000.




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.


Page
17
 Index




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")Six
      Months Ended
            
            
            Three
      Months EndedApril 30,
            
            
            April 30,2008
            
            
            2007*
            
            
            2008
            
            
            2007*($
      in thousands, except per share amounts)Net
      income
            
            $
            2,640
            
            
            $
            1,977
            
            
            $
            1,237
            
            
            $
            1,131Depreciation
            
            
            2,674
            
            
            
            2,649
            
            
            
            1,336
            
            
            
            1,346Amortization
      of deferred mortgage costs
            
            
            141
            
            
            
            132
            
            
            
            68
            
            
            
            67Deferred
      rents (Straight lining)
            
            
            92
            
            
            
            (114
            )
            
            
            45
            
            
            
            (59
            )Amortization
      of acquired leases
            
            
            (48
            )
            
            
            (151
            )
            
            
            (24
            )
            
            
            (75
            )Capital
      Improvements - Apartments
            
            
            (258
            )
            
            
            (239
            )
            
            
            (118
            )
            
            
            (65
            )Discontinued
      operations
            
            
            -
            
            
            
            (76
            )
            
            
            -
            
            
            
            (34
            )Minority
      interests:Equity
      in earnings of affiliates
            
            
            395
            
            
            
            408
            
            
            
            280
            
            
            
            120Distributions
      to minority interests
            
            
            (595
            )
            
            
            (387
            )
            
            
            (268
            )
            
            
            (87
            )FFO
            
            $
            5,041
            
            
            $
            4,199
            
            
            $
            2,556
            
            
            $
            2,344Per
      Share - Basic
            
            $
            0.74
            
            
            $
            0.62
            
            
            $
            0.38
            
            
            $
            0.35Per
      Share - Diluted
            
            $
            0.73
            
            
            $
            0.61
            
            
            $
            0.37
            
            
            $
            0.34Weighted
      Average Shares Outstanding:Basic
            
            
            6,781
            
            
            
            6,751
            
            
            
            6,799
            
            
            
            6,751Diluted
            
            
            6,894
            
            
            
            6,916
            
            
            
            6,911
            
            
            
            6,915*  Restated
      to reflect reclassification of discontinued
operations







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.








Item
3: Quantitativeand 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: Controlsand Procedures





At the
end of the period covered by this report, 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 six months of
fiscal 2008 that has materially affected, or is reasonably likely to materially
affect, FREIT’s internal control over financial reporting.


Page
18
 Index




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:  RiskFactors





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.





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


Page
19
 Index


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 $166 million of non-recourse mortgage debt subject
to fixed interest rates, and $26.7 million of partial recourse mortgage debt
subject to variable interest rates ($22.5 million relates to the acquisition of
the Rotunda property, and $4.2 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.




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.


Page
20
 Index




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.




FREIT
may fail to qualify 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.








Item
4:  Submissionof Matters to a Vote of Security
Holders





The
following matters were submitted to a vote of security holders at FREIT’s Annual
Meeting of Shareholders held on April 9, 2008:





A.  Shareholders
re-elected Mr. Robert S. Hekemian, Mr. David F. McBride and Mr. Robert S.
Hekemian, Jr. to serve as Trustees for a three (3) year term. The balloting for
the elections was as follows:





Robert S. Hekemian
            David F. McBride
            Robert S. Hekemian,
      Jr.Votes
      For
            5,628,810
            5,649,076
            5,629,010Votes
      Withheld
            94,966
            74,700
            94,766








The other
members of the Board of Trustees are as follows:





Name
            Term
      ExpiresDonald W. Barney
            April
      2009Ronald J. Artinian
            April
      2010Alan L. Aufzien
            April
      2010Herbert C. Klein,
      Esq.
            April
      2009


Page
21
 Index




Item
6: Exhibits





Reference
is made to the Exhibit index below.







Exhibit
Index






PageExhibit
      31.1 - Section 302 Certification of Chief Executive
Officer
            
            24Exhibit
      31.2 - Section 302 Certification of Chief Financial
Officer
            
            25Exhibit
      32.1 - Certification of Chief Executive Officer pursuant to 18 U.S.C.
      Section 1350
            
            26Exhibit
      32.2 - Certification of Chief Financial Officer pursuant to 18 U.S.C.
      Section 1350
            
            27








Item
10: MaterialAgreements





Reference
is made to the Exhibit index below








Exhibit
index








PageExhibit
      10.1 –
            Indemnification
      Agreement – Damascus 100 LLC to FREIT
            28Exhibit
      10.2 –
            Indemnification
      Agreement – Rotunda 100 LLC to FREIT
            31Exhibit
      10.3 –
            Sample
      of notes to Hekemian employees for investment in Grande Rotunda, LLC.
      (Promissory Notes, Pledge and Security Agreement, Amendment to Promissory
      Notes and Pledge And Security Agreement)
            34Exhibit
      10.4 –
            Sample
      of notes to Hekemian employees for investment in Damascus Centre, LLC.
      (Promissory Notes, Pledge and Security Agreement)
            93


Page
22
 Index




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:
      June 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 23