**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





**(Mark
      One)**





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


For
      the
      Quarterly period ended April
      30, 2006


or





o  **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934**


For
      the
      transition period from _________________________ to
      ___________________.





Commission
      File No.: 2-27018





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
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                No.)







505
                Main Street, P.O. Box 667, Hackensack, New Jersey
            07602(Address
                of principal executive offices)
            (Zip
                Code)







Registrant’s
      telephone number, including area code 201-488-6400








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 require-ments
      for
      the past 90 days.


ý Yes o No




Indicate
        by check mark whether the registrant is a large accelerated filer, accelerated
        filer, or a non-accelerated filer. See definition of “Large accelerated filer
        and accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
        one):
 
 Large
                  accelerated filero
              Accelerated
                  filerý
              Non-accelerated
                  filero


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


o Yes ý No





As
      of
      June 5, 2006 there were 6,548,652 shares of beneficial interest issued and
      outstanding.





**FIRST
      REAL ESTATE INVESTMENT TRUST OF NEW JERSEY**




**INDEX**






Part
                I: Financial Information
            
            PageItem
                1: Unaudited Condensed Consolidated Financial Statementsa.)
            Condensed
                Consolidated Balance Sheetsas at April
                30, 2006 and October 31, 2005;
            
            3b.)
            Condensed
                Consolidated Statements of Income,
                Comprehensive Income and Undistributed Earnings for the Six and Three
                Months Ended April 30, 2006 and 2005;
            
            4c.)
            Condensed
                Consolidated Statements of Cash Flows for
                the Six Months Ended April 30, 2006 and 2005;
            
            5d.)
            Notes
                to Condensed Consolidated Financial Statements.
            
            6Item
                2: Management’s Discussion and Analysis of Financial
                Condition and Results of Operations.
            
            11Item
                3: Quantitative and Qualitative Disclosures About Market
                Risk.
            
            20Item
                4: Controls and Procedures.
            
            21Part
                II: Other Information
            
            21Item
                4: Submission of Matters to a Vote of Security
                Holder.Item
                6: Exhibits











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          3





**FIRST
                REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND
                SUBSIDIARIES**CONSOLIDATED
                BALANCE SHEETS
              (Unaudited)April
                30,
            
            October
                31,2006
            
            2005(In
                Thousands of Dollars)ASSETSReal
                estate, at cost, net of accumulated depreciation
            
            $
            189,005
            
            $
            188,416Construction
                in progress
            
            
            12,474
            
            
            4,770Cash
                and cash equivalents
            
            
            4,879
            
            
            5,672Tenants’
                security accounts
            
            
            2,004
            
            
            1,908Sundry
                receivables
            
            
            4,545
            
            
            4,460Secured
                loans receivable
            
            
            1,658
            
            
            1,658Prepaid
                expenses and other assets
            
            
            4,954
            
            
            4,198Deferred
                charges, net
            
            
            3,636
            
            
            3,820Interest
                rate swap contract
            
            
            124
            
            
            96Totals
            
            $
            223,279
            
            $
            214,998LIABILITIES
                AND SHAREHOLDERS’ EQUITYLiabilities:Mortgages
                payable
            
            $
            174,448
            
            $
            166,874Notes
                payable
            
            
            1,000Accounts
                payable and accrued expenses
            
            
            5,707
            
            
            6,288Dividends
                payable
            
            
            1,636
            
            
            2,916Tenants’
                security deposits
            
            
            2,598
            
            
            2,487Below
                market value leases and deferred revenue
            
            
            2,323
            
            
            274Total
                liabilities
            
            
            187,712
            
            
            178,839Minority
                interest
            
            
            7,432
            
            
            7,585Commitments
                and contingenciesShareholders’
                equity:Shares
                of beneficial interest without par value:8,000,000
                shares authorized;6,543,652
                and 6,481,152 shares issuedand
                outstanding
            
            
            21,598
            
            
            21,129Undistributed
                earnings
            
            
            6,413
            
            
            7,349Accumulated
                other comprehensive income
            
            
            124
            
            
            96Total
                shareholders’ equity
            
            
            28,135
            
            
            28,574Totals
            
            $
            223,279
            
            $
            214,998See
                Notes to Consolidated Financial
                Statements.





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          4





FIRST
                REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND
                SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF INCOME, COMPREHENSIVE INCOME
                ANDUNDISTRIBUTED
                EARNINGSSIX
                AND THREE MONTHS ENDED APRIL 30, 2006 AND 2005
              (Unaudited)Six
                Months Ended
            
            Three
                Months EndedApril
                30,
            
            April
                30,2006
            
            2005
            
            2006
            
            2005INCOME
            
            (In
                Thousands Of Dollars, Except Per Share Amounts)Revenue:Rental
                income
            
            $
            16,242
            
            $
            14,228
            
            $
            8,108
            
            $
            7,130Reimbursements
            
            
            2,418
            
            
            1,870
            
            
            1,077
            
            
            680Sundry
                income
            
            
            109
            
            
            95
            
            
            50
            
            
            55Totals
            
            
            18,769
            
            
            16,193
            
            
            9,235
            
            
            7,865Expenses:Operating
                expenses
            
            
            4,990
            
            
            3,555
            
            
            2,423
            
            
            2,091Management
                fees
            
            
            829
            
            
            713
            
            
            413
            
            
            363Real
                estate taxes
            
            
            2,719
            
            
            2,311
            
            
            1,350
            
            
            1,195Depreciation
            
            
            2,267
            
            
            2,085
            
            
            1,137
            
            
            1,010Minority
                interest
            
            
            207
            
            
            332
            
            
            130
            
            
            22Totals
            
            
            11,012
            
            
            8,996
            
            
            5,453
            
            
            4,681Operating
                income
            
            
            7,757
            
            
            7,197
            
            
            3,782
            
            
            3,184Investment
                income
            
            
            113
            
            
            119
            
            
            65
            
            
            54Interest
                expense including amortizationof
                deferred financing costs
            
            
            (5,507
            )
            
            (4,907
            )
            
            (2,772
            )
            
            (2,389
            )Net
                income
            
            $
            2,363
            
            $
            2,409
            
            $
            1,075
            
            $
            849Earnings
                per share:Basic
            
            *$*
            *0.36*
            
            *$*
            *0.38*
            
            *$*
            *0.16*
            
            *$*
            *0.13*Diluted
            
            *$*
            *0.35*
            
            *$*
            *0.36*
            
            *$*
            *0.16*
            
            *$*
            *0.12*Weighted
                average shares outstanding:Basic
            
            
            6,522
            
            
            6,423
            
            
            6,542
            
            
            6,423Diluted
            
            
            6,753
            
            
            6,703
            
            
            6,889
            
            
            6,843COMPREHENSIVE
                INCOMENet
                income
            
            $
            2,363
            
            $
            2,409
            
            $
            1,075
            
            $
            849Other
                comprehensive income:Unrealized
                gain on interestrate
                swap contract
            
            
            28
            
            
            164
            
            
            23
            
            
            55Comprehensive
                income
            
            $
            2,391
            
            $
            2,573
            
            $
            1,098
            
            $
            904UNDISTRIBUTED
                EARNINGSBalance,
                beginning of period
            
            $
            7,349
            
            $
            10,633
            
            $
            6,974
            
            $
            10,587Net
                income
            
            
            2,363
            
            
            2,409
            
            
            1,075
            
            
            849Less
                dividends
            
            
            (3,299
            )
            
            (3,212
            )
            
            (1,636
            )
            
            (1,606
            )Balance,
                end of period
            
            $
            6,413
            
            $
            9,830
            
            $
            6,413
            
            $
            9,830Dividends
                per share
            
            $
            0.50
            
            $
            0.50
            
            $
            0.25
            
            $
            0.25See
                Notes to Consolidated Financial Statements.





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**FIRST
                REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND
                SUBSIDIARIES**CONSOLIDATED
                STATEMENTS OF CASH
                FLOWSSIX
                MONTHS ENDED APRIL 30, 2006 AND 2005
              (Unaudited)2006
            
            2005(In
                Thousands of Dollars)Operating
                activities:Net
                income
            
            $
            2,363
            
            $
            2,409Adjustments
                to reconcile net income to net cash provided byoperating
                activities:Depreciation
            
            
            2,267
            
            
            2,085Amortization
            
            
            217
            
            
            175Deferred
                revenue
            
            
            (177
            )
            
            (191
            )Minority
                interest
            
            
            207
            
            
            332Changes
                in operating assets and liabilities:Tenants’
                security accounts
            
            
            (96
            )
            
            (24
            )Sundry
                receivables, prepaid expenses and other assets
            
            
            (131
            )
            
            (416
            )Accounts
                payable and other liabilities
            
            
            (581
            )
            
            (305
            )Tenants’
                security deposits
            
            
            111
            
            
            60Net
                cash provided by operating activities
            
            
            4,180
            
            
            4,125Investing
                activities:Capital
                improvements - existing properties
            
            
            (1,373
            )
            
            (1,304
            )Construction
                - new properties
            
            
            (7,704
            )Contract
                deposit
            
            
            
            
            
            (1,000
            )Net
                cash used in investing activities
            
            
            (9,077
            )
            
            (2,304
            )Financing
                activities:Repayment
                of mortgages
            
            
            (976
            )
            
            (3,094
            )Construction
                and other loan proceeds
            
            
            9,550Proceeds
                from exercise of stock options
            
            
            469Dividends
                paid
            
            
            (4,579
            )
            
            (4,818
            )Distribution
                to minority interest
            
            
            (360
            )
            
            (287
            )Contribution
                by minority interest
            
            
            
            
            
            1,902Net
                cash provided by (used in) financing activities
            
            
            4,104
            
            
            (6,297
            )Net
                decrease in cash and cash equivalents
            
            
            (793
            )
            
            (4,476
            )Cash
                and cash equivalents, beginning of period
            
            
            5,672
            
            
            18,843Cash
                and cash equivalents, end of period
            
            $
            4,879
            
            $
            14,367Supplemental
                disclosure of cash flow data:Interest
                paid
            
            $
            5,533
            
            $
            4,821Income
                taxes paid
            
            $
            10
            
            $
            20Supplemental
                schedule of non cashfinancing
                activities:Dividends
                declared but not paid
            
            $
            1,636
            
            $
            1,606See
                Notes to Consolidated Financial Statements.











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FIRST
      REAL ESTATE INVESTMENT TRUST OF NEW JERSEY AND SUBSIDIARIES





NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




(Unaudited)





Note
      1 -
      Basis of presentation:


The
      accompanying condensed consolidated financial statements of First Real Estate
      Investment Trust of New Jersey (“FREIT”) have
      been prepared without audit, in accordance with accounting principles generally
      accepted in the United States of America for interim financial statements and
      pursuant to the rules of the Securities and Exchange Commission (“SEC”).
      Accordingly, certain information and footnotes required by accounting principles
      generally accepted in the United States of America 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,
      2006 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 FREIT’s Annual Report on Form 10-K for the year ended October 31,
      2005.





Reclassification:


Certain
      accounts in the 2005 financial statements have been reclassified to conform
      to
      the current presentation.





Note
      2 -
      Earnings per share:





FREIT
      has
      presented “basic” and “diluted” earnings per share in the accompanying condensed
      consolidated statements of income in accordance with the provisions of Statement
      of Financial Accounting Standards (“SFAS”) No. 128, “Earnings per Share” (“SFAS
      128”). Basic earnings per share is calculated by dividing net income by the
      weighted average number of shares outstanding during each period. 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 each of the six and three month periods
      ended April 30, 2006 and 2005, 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
                30,2006
            
            2005
            
            2006
            
            2005Basic
                weighted averageshares
                outstanding
            
            
            6,521,985
            
            
            6,423,152
            
            
            6,542,402
            
            
            6,423,152Shares
                arising from assumedexercise
                of stock options
            
            
            231,151
            
            
            280,125
            
            
            346,726
            
            
            420,188Dilutive
                weighted average sharesoutstanding
            
            
            6,753,136
            
            
            6,703,277
            
            
            6,889,128
            
            
            6,843,340





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Basic
      and
      diluted earnings per share, based on the weighted average number of shares
      outstanding during each period, are comprised of ordinary income.





Note
      3-
      Equity incentive plan:


All
      references to the amount of stock options granted, option price, fair value,
      or
      shares exercised have been adjusted to reflect stock splits. 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 may be granted 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. The following table summarizes stock option activities for the
      periods indicated:





Six
                Months Ended April 30,2006
            
            2005No.
                of
            
            Average
            
            No.
                of
            
            AverageOptions
            
            Exercise
            
            Options
            
            ExerciseOutstanding
            
            Price
            
            Outstanding
            
            PriceBalance
                beginning of period
            
            
            512,000
            
            $
            7.50
            
            
            682,000
            
            $
            7.50Grants
                during period
            
            
            -
            
            
            
            
            
            -Options
                exercised
            
            
            (62,500
            )
            $
            7.50
            
            
            (112,000
            )
            $
            7.50Options
                cancelled
            
            
            
            
            
            
            
            
            -Balance
                at end of period
            
            
            449,500
            
            $
            7.50
            
            
            570,000
            
            $
            7.50








On
      May 3,
      2006, options for 5,000 shares were exercised at $7.50 per share.







Note
      4-
      Segment information:





SFAS
      No.
      131, “Disclosures about Segments of an Enterprise and Related Information”,
      established standards for reporting financial information about operating
      segments in interim and annual financial reports and provides for a “management
      approach” in identifying the reportable segments.





FREIT
      has
      determined that it has two reportable segments: commercial properties and
      residential properties. These reportable segments offer different products,
      have
      different types of customers, and are managed separately because each requires
      different operating strategies and management expertise. The commercial segment
      contains eight separate properties during fiscal 2006 and seven separate
      properties during the first six months of fiscal 2005. The residential segment
      contains nine 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.





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


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          8


depreciation,
      and financing costs. NOI is not a measure of operating results or cash flows
      from operating activities as measured by accounting principles generally
      accepted in the United States of America, 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, 2006 and
      2005. Asset information is not reported since FREIT does not use this measure
      to
      assess performance.




Six
                Months Ended
            
            Three
                Months EndedApril
                30,
            
            April
                30,2006
            
            2005
            
            2006
            
            2005(in
                thousands of dollars)Real
                estate revenue:Commercial
            
            $
            10,500
            
            $
            8,295
            
            $
            5,125
            
            $
            3,885Residential
            
            
            7,896
            
            
            7,748
            
            
            3,962
            
            
            3,905Totals
            
            
            18,396
            
            
            16,043
            
            
            9,087
            
            
            7,790Real
                estate operating expenses:Commercial
            
            
            4,096
            
            
            2,785
            
            
            2,021
            
            
            1,497Residential
            
            
            3,916
            
            
            3,364
            
            
            1,884
            
            
            1,947Totals
            
            
            8,012
            
            
            6,149
            
            
            3,905
            
            
            3,444Net
                operating income:Commercial
            
            
            6,404
            
            
            5,510
            
            
            3,104
            
            
            2,388Residential
            
            
            3,980
            
            
            4,384
            
            
            2,078
            
            
            1,958Totals
            
            $
            10,384
            
            $
            9,894
            
            $
            5,182
            
            $
            4,346Recurring
                capital improvements:Residential
            
            $
            458
            
            $
            429
            
            $
            119
            
            $
            171Reconciliation
                to consolidatednet
                income:Segment
                NOI
            
            $
            10,384
            
            $
            9,894
            
            $
            5,182
            
            $
            4,346Deferred
                rents - straight-lining
            
            
            171
            
            
            150
            
            
            85
            
            
            75Amortization
                of acquired above and belowmarket
                value leases
            
            
            202
            
            
            
            
            
            63Net
                investment income
            
            
            113
            
            
            119
            
            
            65
            
            
            54Minority
                interest in earnings of subsidiaries
            
            
            (207
            )
            
            (332
            )
            
            (130
            )
            
            (22
            )General
                and administrative expenses
            
            
            (526
            )
            
            (430
            )
            
            (281
            )
            
            (205
            )Depreciation
            
            
            (2,267
            )
            
            (2,085
            )
            
            (1,137
            )
            
            (1,010
            )Financing
                costs
            
            
            (5,507
            )
            
            (4,907
            )
            
            (2,772
            )
            
            (2,389
            )Net
                income
            
            $
            2,363
            
            $
            2,409
            
            $
            1,075
            
            $
            849








Note
      5 -
      Acquisition:





On
      July
      19, 2005, FREIT’s 60% owned affiliate, Grande Rotunda, LLC, completed the
      acquisition of The Rotunda, a mixed-use property in Baltimore, Maryland. The
      Rotunda site is approximately 11.5 acres and is in close proximity to Johns
      Hopkins University. Its current configuration contains about 138,000 sq. ft.
      of
      office space, primarily in the four-story main building, and 78,000 sq. ft.
      of
      retail space on the lower level of the main building. A Giant Supermarket
      anchors the retail space.





The
      acquisition cost was approximately $31 million (inclusive of transaction costs),
      which was financed in part from an acquisition loan in the amount of $22.5
      million, and the balance in cash. The acquisition mortgage loan bears interest
      at 150 basis points over LIBOR and has an initial term of three (3) years,
      which
      makes the loan repayment


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          9


date
      July
      19, 2008.




FREIT
      contributed 60% of the cash required, with the balance contributed by its joint
      venture partner, Rotunda 100, LLC, whose equity investors are principally
      employees of Hekemian & Co., Inc. (“Hekemian”). Hekemian is the managing
      agent for FREIT’s other properties. In order to incentivize the employees of
      Hekemian to identify and provide real estate investment opportunities for FREIT,
      FREIT agreed to advance, only to the employees of Hekemian, up to 50% of the
      amount of the equity capital required to be contributed by them to Rotunda
      100,
      LLC, for this transaction. FREIT has advanced $1.7 million to the Hekemian
      employees (certain of whom are members of the family of FREIT’s Chairman of the
      Board), and these loans bear a floating rate of interest payable (resets
      quarterly at 225 basis points above the 90-day LIBOR rate) quarterly
      and are secured by the Hekemian employees’ membership equity interest in
      Rotunda 100, LLC.





The
      acquisition price of The Rotunda had been preliminarily allocated as follows:
      $14.6 million to the building and $16.3 million to the land. This purchase
      price
      allocation was based on an independent appraisal of the fair value of the
      property components at the acquisition date, with minimal value assigned to
      the
      leases.





It
      is
      FREIT’s
      policy that initial valuations are finalized, in accordance with the
      guidelines outlined in SFAS No. 141 and SFAS No. 142, no later than six (6)
      months from the acquisition date. Accordingly, as of January 31, 2006,
      based on the above independent appraisal and FREIT’s evaluation of the acquired
      in-place leases, the purchase price was re-allocated as follows: approximately
      $16 million has been allocated to the building, $16.5 million to the land,
      $.9
      million to leases-in-place at above market rents, and value allocated to leases
      at below market rents was recorded as a liability of approximately $2.6
      million.





The
      capitalized above-market lease values are amortized as a reduction of base
      rent
      rental revenue over the remaining term of the leases, and the capitalized
      below-market leases values are amortized as an increase to base rental revenue
      over the remaining terms plus renewal options of the leases. This restatement
      did not have a material affect on FREIT’s net income
      for
      the six and three months ended April 30, 2006.




The
      following unaudited pro forma information shows the results of operations for
      the six months and three months ended April 30, 2005 for FREIT and
      Subsidiaries as though The Rotunda had been acquired at the beginning of fiscal
      2005.





Six
                Months
            
            Three
                MonthsEnded
            
            Ended4/30/05
            
            4/30/05*(thousands,
                except**per
                share amounts)*Revenues
            
            $
            18,078
            
            $
            8,794Expenses
            
            
            15,832
            
            
            8,038Net
                Income
            
            $
            2,246
            
            $
            756Earnings
                Per Share:Basic
            
            *$*
            *0.35*
            
            *$*
            *0.12*Diluted
            
            *$*
            *0.34*
            
            *$*
            *0.11*Weighted
                AverageShares
                Outstanding:Basic
            
            
            6,423
            
            
            6,423Diluted
            
            
            6,703
            
            
            6,843








The
      unaudited pro forma results include adjustments for depreciation based on the
      purchase price and increased interest expense based on the mortgage placed
      on
      the property at the acquisition date.





The
      unaudited pro forma results of operations set forth above are not necessarily
      indicative of the results that would have occurred had the acquisition been
      made
      at the beginning of fiscal 2005 or of future results of operations of FREIT’s
      combined properties.





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Note
      6 -
      Credit line:





On
      February 4, 2005, FREIT replaced its expired $14 million line of credit with
      an
      $18 million line of credit. 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, Lakewood Apartments,
      Lakewood, 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 FREIT’s 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 and development activities in Rockaway, NJ,
      FREIT has utilized $1 million and has further utilized the credit line for
      the
      issuance of a $2 million Letter of Credit.





***




















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          11





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




Cautionary
                Statement Identifying Important Factors That Could Cause FREIT’s Actual
                Results to Differ From Those 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 and the availability of financing;
                adverse changes in FREIT’s real estate markets, including, among other
                things, competition with other real estate owners, risks of real
                estate
                development and acquisitions; governmental actions and initiatives;
                and
                environmental/safety requirements.




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.





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
                turn-over rates;


·
            rental
                rates;


·
            operating
                expenses;


·
            tenant
                improvement and leasing costs;


·
            cost
                of and availability of capital;


·
            new
                acquisitions and development projects; and


·
            governmental
                regulations.








A
      negative quality change in the above factors could potentially cause a
      detrimental effect in FREIT’s revenue, earnings and cash flow.





Effects
      of recent accounting pronouncements:





In
      December 2003, the FASB issued revised FIN 46, “Consolidation of Variable
      Interest Entities, an Interpretation of Accounting Research Bulletin No. 51.”
(“FIN 46R”). FIN 46R requires the consolidation of an entity in which an
      enterprise absorbs a majority of the entity’s expected losses, receives a
      majority of the entity’s expected residual returns, or both, as a result of
      ownership, contractual or other financial interests in the entity (variable
      interest entities, or “VIEs”). Previously, entities were generally consolidated
      by an enterprise when it had a controlling financial interest through ownership
      or a majority voting interest in the entity. FIN 46R was applicable
      for


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          12


financial
      statements of public entities that have interests in VIEs or potential VIEs
      referred to as special-purpose entities for periods ending after December 31,
      2003. Applications by public entities for all other types of entities were
      required in financial statements for periods ending after March 15,
      2004.





In
      accordance with the definition of related parties as defined in paragraph 16
      of
      FIN 46R and the guidance in paragraph 4h, it is the belief of the management
      of
      FREIT that FIN 46R is applicable to Westwood Hills, LLC and Wayne PSC, LLC,
      both
      40% owned by FREIT. Because of this determination, FREIT has consolidated these
      two entities in addition to its majority owned subsidiaries.




In
      December 2004, the FASB issued SFAS No.123 (R) “Accounting for Stock-Based
      Compensation.” SFAS 123 (R) establishes standards for the accounting for
      transactions in which an entity exchanges its equity instruments for goods
      or
      services. This Statement focuses primarily on accounting for transactions in
      which an entity obtains employee services in share-based payment transactions.
      SFAS 123 (R) requires that the fair value of such equity instruments be
      recognized as an expense in the historical financial statements as services
      are
      performed. Prior to SFAS 123 (R), only certain pro forma disclosures of fair
      value were required. SFAS 123 (R) became effective for FREIT for periods
      beginning August 1, 2005. The adoption of this new accounting pronouncement
      did
      not have a material impact on FREIT’s consolidated financial statements.




The
      FASB
      had issued certain other accounting pronouncements as of April 30, 2006;
      however, FREIT’s management does not believe that any of those pronouncements
      would have significantly affected our financial accounting measurements or
      disclosures had they been in effect during the six and three months ended April
      30, 2006.





SIGNIFICANT
      ACCOUNTING POLICIES AND ESTIMATES





Pursuant
      to  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, 2005, have been applied consistently
      as
      at April 30, 2006 and October 31, 2005, and for the six and three months ended
      April 30, 2006 and 2005. 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.*











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RESULTS
      OF OPERATIONS:


Six
      and
      Three Months Ended April 30, 2006 and 2005





Condensed
                Income Statement:Six
                Months Ended
            
            Three
                Months EndedApril
                30,
            
            April
                30,2006
            
            2005
            
            2006
            
            2005*(in
                thousands of dollars)*Revenues:Commercial
                Revenues:Same
                properties (1)
            
            $
            8,891
            
            $
            8,445
            
            $
            4,315
            
            $
            3,960New
                Properties
            
            
            1,982
            
            
            
            
            
            958
            
            
            -Total
                Commercial
            
            
            10,873
            
            
            8,445
            
            
            5,273
            
            
            3,960Residential
                Revenues:Same
                properties (1)
            
            
            7,896
            
            
            7,748
            
            
            3,962
            
            
            3,905Total
                residential
            
            
            7,896
            
            
            7,748
            
            
            3,962
            
            
            3,905Total
                real estate revenues
            
            
            18,769
            
            
            16,193
            
            
            9,235
            
            
            7,865Investment
                income
            
            
            113
            
            
            119
            
            
            65
            
            
            54Total
                revenues
            
            
            18,882
            
            
            16,312
            
            
            9,300
            
            
            7,919Operating
                expenses:Real
                estate operating expensesSame
                properties (1)
            
            
            9,154
            
            
            8,566
            
            
            4,538
            
            
            4,476New
                properties
            
            
            1,332
            
            
            
            
            
            634General
                and administrative expenses
            
            
            526
            
            
            430
            
            
            281
            
            
            205Financing
                costs
            
            
            5,507
            
            
            4,907
            
            
            2,772
            
            
            2,389Total
                expenses
            
            
            16,519
            
            
            13,903
            
            
            8,225
            
            
            7,070Net
                Income
            
            $
            2,363
            
            $
            2,409
            
            $
            1,075
            
            $
            849(1)
                Properties operated since the beginning of fiscal 2005.








Revenue
      for the six months ended April 30, 2006 (“Current Six Months”) increased 15.8%
      to $18,882,000 compared to $16,312,000 for the six months ended April 30, 2005
      (“Prior Six Months”). Revenue for the three months ended April 30, 2006
      (“Current Year’s Quarter”) increased 17.4% to $9,300,000 compared to $7,919,000
      for the three months ended April 30, 2005 (“Prior Year’s Quarter”). FREIT’s
      acquisition of The Rotunda in July 2005 (see Note 5-Acquisition, to the
      consolidated financial statements) accounted for the major increase in
      revenues.





Net
      income for the Current Six Months and Current Year’s Quarter was $2,363,000 and
      $1,075,000 respectively compared to net income for the Prior Six Months and
      Prior Year’s Quarter of $2,409,000 and $849,000 respectively. The reduction in
      net income for the Current Six Months compared to the Prior Six
      Months resulted primarily from higher, non-reimbursable utility costs
      at our residential properties (see discussion below).





The
      consolidated results of operations for the six and three months ended April
      30,
      2006 are not necessarily indicative of the results to be expected for the full
      year.





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SEGMENT
      INFORMATION


The
      following table sets forth comparative operating data (Net Operating
      Income-”NOI”) for FREIT’s real estate segments:





**Commercial**Six
                  Months Ended
              
              Three
                  Months EndedApril
                  30,
              
              Increase
                  (Decrease)
              
              April
                  30,
              
              Increase
                  (Decrease)2006
              
              2005
              
              $
              
              %
              
              2006
              
              2005
              
              $
              
              %(in
                  thousands)
              
              
              
              (in
                  thousands)Rental
                  income
              
              $
              8,058
              
              $
              6,409
              
              $
              1,649
              
              
              *25.7*
              *%*
              
              $
              4,039
              
              $
              3,195
              
              $
              844
              
              
              *26.4*
              *%*Reimbursements
              
              
              2,421
              
              
              1,870
              
              
              551
              
              
              *29.5*
              *%*
              
              
              1,071
              
              
              679
              
              
              392
              
              
              *57.7*
              *%*Other
              
              
              21
              
              
              16
              
              
              5
              
              
              *31.3*
              *%*
              
              
              15
              
              
              11
              
              
              4
              
              
              *36.4*
              *%*Total
                  Revenues
              
              
              10,500
              
              
              8,295
              
              
              2,205
              
              
              *26.6*
              *%*
              
              
              5,125
              
              
              3,885
              
              
              1,240
              
              
              *31.9*
              *%*Operating
                  expenses
              
              
              4,096
              
              
              2,785
              
              
              1,311
              
              
              *47.1*
              *%*
              
              
              2,021
              
              
              1,497
              
              
              524
              
              
              *35.0*
              *%***Net
                  operating income**
              
              **$**
              **6,404**
              
              **$**
              **5,510**
              
              **$**
              **894**
              
              
              ***16.2***
              ***%***
              
              **$**
              **3,104**
              
              **$**
              **2,388**
              
              **$**
              **716**
              
              
              ***30.0***
              ***%***AverageOccupancy
                  %
              
              
              ***90.6***
              ***%***
              
              ***92.6***
              ***%***
              
              
              
              
              ***-2.0***
              ***%***
              
              
              ***90.3***
              ***%***
              
              ***90.8***
              ***%***
              
              
              
              
              ***-0.5***
              ***%***




**Residential**Six
                  Months Ended
              
              Three
                  Months EndedApril
                  30,
              
              Increase
                  (Decrease)
              
              April
                  30,
              
              Increase
                  (Decrease)2006
              
              2005
              
              $
              
              %
              
              
              2006
              
              2005
              
              $
              
              %(in
                  thousands)
              
              
              
              (in
                  thousands)Rental
                  Revenues:Rental
                  income
              
              $
              7,811
              
              $
              7,675
              
              $
              136
              
              
              *1.77*
              *%*
              
              $
              3,921
              
              $
              3,867
              
              $
              54
              
              
              *1.4*
              *%*Other
                  income
              
              
              85
              
              
              73
              
              
              12
              
              
              *16.4*
              *%*
              
              
              41
              
              
              38
              
              
              3
              
              
              *8*
              *%*Total
                  Revenues
              
              
              7,896
              
              
              7,748
              
              
              148
              
              
              *1.9*
              *%*
              
              
              3,962
              
              
              3,905
              
              
              57
              
              
              *1.5*
              *%*Operating
                  expenses
              
              
              3,916
              
              
              3,364
              
              
              552
              
              
              *16.4*
              *%*
              
              
              1,884
              
              
              1,947
              
              
              (63
              )
              
              *-3.2*
              *%***Net
                  operating income**
              
              **$**
              **3,980**
              
              **$**
              **4,384**
              
              **$**
              **(404**
              **)**
              
              ***-9.2***
              ***%***
              
              **$**
              **2,078**
              
              **$**
              **1,958**
              
              **$**
              **120**
              
              
              ***6.1***
              ***%***AverageOccupancy
                  %
              
              
              ***95.0***
              ***%***
              
              ***94.6***
              ***%***
              
              
              
              
              ***0.4***
              ***%***
              
              
              ***95.1***
              ***%***
              
              ***94.7***
              ***%***
              
              
              
              
              ***0.4***
              ***%***


Six
                Months Ended
            
            
            Three
                Months EndedApril
                30,
            
            
            April
                30,2006
            
            2005
            
            
            2006
            
            2005Reconciliation
                toconsolidated
                net income:Segment
                NOI:Commercial
            
            $
            6,404
            
            $
            5,510
            
            
            $
            3,104
            
            $
            2,388Residential
            
            
            3,980
            
            
            4,384
            
            
            
            2,078
            
            
            1,958Total
            
            
            10,384
            
            
            9,894
            
            
            
            5,182
            
            
            4,346Deferred
                rents
            
            
            171
            
            
            150
            
            
            
            85
            
            
            75Amort.
                of acquired above andbelow
                market value leases
            
            
            202
            
            
            
            
            
            
            63Net
                investment income
            
            
            113
            
            
            119
            
            
            
            65
            
            
            54Gen’l
                and admin. Exp.
            
            
            (526
            )
            
            (430
            )
            
            
            (281
            )
            
            (205
            )Depreciation
            
            
            (2,267
            )
            
            (2,085
            )
            
            
            (1,137
            )
            
            (1,010
            )Financing
                costs
            
            
            (5,507
            )
            
            (4,907
            )
            
            
            (2,772
            )
            
            (2,389
            )Minority
                interest
            
            
            (207
            )
            
            (332
            )
            
            
            (130
            )
            
            (22
            )**Net
                income**
            
            **$**
            **2,363**
            
            **$**
            **2,409**
            
            
            **$**
            **1,075**
            
            **$**
            **849**


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The
      above
      table details the comparative NOI for FREIT’s Commercial and Residential
      Segments, and reconciles the combined NOI to consolidated net income. 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.





COMMERCIAL
      SEGMENT





FREIT’s
      commercial properties consist of eight (8) properties totaling approximately
      1,127,000 sq. ft. of retail space and 138,000 sq. ft. of office space. Seven
      are
      multi-tenanted retail or office centers, and one is a single tenanted store.
      In
      addition, FREIT has leased land and receives rental income from a tenant who
      has
      built and operates a bank branch on land FREIT owns in Rockaway, NJ.


The
        occupancy percentages indicated on the above chart are weighted averages
        of all
        our commercial properties. The occupancy percentage of our properties by
        same
        properties, newly acquired properties and properties undergoing expansion
        and/or
        renovations are as follows:
 
 Average
                  Occupancy PercentageSix
                  Months Ended
              
              Three
                  Months EndedApril
                  30,
              
              April
                  30,2006
              
              2005
              
              2006
              
              2005Same
                  operating properties
              
              
              *98.5*
              *%*
              
              *95.9*
              *%*
              
              *98.1*
              *%*
              
              *95.8*
              *%*Properties
                  UndergoingExpansion
                  / Renovation:Damascus
                  Center
              
              
              *71.1*
              *%*
              
              *71.1*
              *%*
              
              *71.1*
              *%*
              
              *71.1*
              *%*The
                  Rotunda
              
              
              *83.4*
              *%*
              
              *(a*
              *)*
              
              82.79
              %
              
              *(a*
              *)**(a)*Acquired July 19, 2005.
 
 For
        a
        discussion of occupancy at our properties undergoing renovation or expansion,
        see below.


As
      indicated in the above Segment Information table, revenues and NOI from our
      commercial segment for the Current Six Months and Current Year’s Quarter have
      increased 26.6% and 16.2% respectively over the comparable prior year’s periods.
      The contribution made by The Rotunda (acquired July 19, 2005), during the
      Current Six Months and Current Year’s Quarter to revenue and NOI is reflected in
      the following chart:





Six
                  Months EndedApril
                  30, 2006
              
              April
                  30, 2005*(in
                  thousands)*Commercial
              
              
              
              Same
              
              SameCombined
              
              Rotunda
              
              Properties
              
              PropertiesRevenues
              
              $
              10,500
              
              $
              1,738
              
              $
              8,762
              
              $
              8,295Expenses
              
              
              4,096
              
              
              1,139
              
              
              2,957
              
              
              2,785NOI
              
              $
              6,404
              
              $
              599
              
              $
              5,805
              
              $
              5,510


Three
                  Months EndedApril
                  30, 2006
              
              April
                  30, 2005*(in
                  thousands)*Commercial
              
              
              
              Same
              
              SameCombined
              
              Rotunda
              
              Properties
              
              PropertiesRevenues
              
              $
              5,125
              
              $
              972
              
              $
              4,153
              
              $
              3,885Expenses
              
              
              2,021
              
              
              534
              
              
              1,487
              
              
              1,497NOI
              
              $
              3,104
              
              $
              438
              
              $
              2,666
              
              $
              2,388




NOI
      for
      same properties has increased 5.4% and 11.6% during the current year’s periods
      compared to the prior year’s periods.




Development
      Activities:




The
      Rotunda: Acquired in July 2005, the property is on 11.5 acres of land and is
      currently configured into about 138,000 sq. ft. of office space and 78,000
      sq.
      ft. of retail space on the lower level of the main building. We are planning
      a
      modernization and expansion of the retail space, as well as the development
      of
      residential apartment units as allowed by the current zoning. Final development
      plans, however, are subject to approval by local governmental authorities.




Damascus
      Center, Damascus, MD: FREIT is planning a modernization and expansion of
      Damascus Center. Building plans for Phase I are completed and have been
      submitted for governmental approvals. It is anticipated that Phase I
      construction will begin around July 2006. Because of this expansion, current
      leases for certain




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tenants
      are being allowed to expire and are not being renewed. This has caused occupancy
      to decline, on a temporary basis, during the construction phase.




Tenant
      Improvement Reserve (“TIR”): A former Tenant located at FREIT’s Westridge Square
      shopping center entered into a lease termination agreement whereby the Tenant
      paid FREIT, among other payments, a lump sum payment of approximately $1,035,000
      in February 2004, for repairing and refurbishing space vacated by Tenant. The
      Tenant made the payment in February 2004. This TIR is being held by the mortgage
      lender in an interest bearing escrow account held for the benefit of the
      mortgage lender. This TIR will be disbursed to FREIT in $250,000 increments
      as
      comparable amounts of TI’s are incurred, or in full at the earlier of when a
      Certificate of Occupancy is obtained and the space vacated by the Tenant is
      leased and re-occupied, or when the mortgage loan is fully repaid.







RESIDENTIAL
      SEGMENT




FREIT
      operates nine (9) multi-family apartment communities totaling 986 apartment
      units. The NOI of our residential properties is summarized in the above
      table.






During
      the Current Year’s Quarter NOI was $2,078,000, an increase of $120,000 (6.1%)
      over the Prior Year’s Quarter. On a year-to-date basis, NOI for the Current Six
      Months is $404,000, or 9.2%, below the Prior Year’s Six Months results. This
      shortfall reflects the higher utility costs incurred (up 162%) during the first
      quarter of this fiscal year 2006. Revenue and occupancy rates have increased
      slightly during the current reporting periods compared to the prior year, and
      we
      expect continued favorable increases over the balance of fiscal year 2006.




Our
      residential revenue is principally composed of monthly apartment rental income.
      Total rental income is a factor of occupancy and monthly apartment rents. 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 $163,000
      and $154,000 respectively.




Capital
      expenditures: Since our apartment communities 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. At The Pierre a major
      renovation program has been started. We intend to modernize, where required,
      all
      apartments and modernize some of the buildings mechanical services. This
      renovation is expected to cost approximately $2 million and take, at least,
      several years to complete. These costs will be financed from operating cash
      flow
      and cash reserves. Through April 30, 2006 we expended approximately $900,000
      in
      capital improvements at The Pierre.





The
      Boulders, Rockaway Township, NJ


Construction
      started in July 2005 on 129 garden apartment units on FREIT’s property
      in
      Rockaway, NJ. Development costs estimated at $17.7 million (about $11.1 million
      expended through April 30, 2006), are being financed from construction financing
      and funds available from our cash and cash equivalents. Construction will be
      completed by August 2006. Certificates of Occupancy for five buildings have
      been
      received, and tenants will start taking occupancy during June 2006. We expect
      The Boulders to add to earnings, cash flow and shareholder value.























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          17


FINANCING
      COSTS




Six
                Months Ended
            
            Three
                Months EndedApril
                30,
            
            April
                30,2006
            
            2005
            
            2006
            
            2005($000)
            
            ($000)Fixed
                rate mortgages1st
                MortgagesExisting
            
            $
            4,336
            
            $
            4,388
            
            $
            2,164
            
            $
            2,188Prepaid
            
            
            
            
            
            46
            
            
            -
            
            
            -New
                (1)
            
            
            672
            
            
            
            
            
            343
            
            
            -Construction
                Loan (1)
            
            
            155
            
            
            
            
            
            1342nd
                MortgagesExisting
            
            
            272
            
            
            278
            
            
            136
            
            
            139Other
            
            
            98
            
            
            42
            
            
            65
            
            
            215,533
            
            
            4,754
            
            
            2,842
            
            
            2,348Amortization
                ofMortgage
                costs
            
            
            129
            
            
            86
            
            
            64
            
            
            41Prepayment
                fee
            
            
            
            
            
            67
            
            
            -
            
            
            -Total
                financing costs
            
            
            5,662
            
            
            4,907
            
            
            2,906
            
            
            2,389Less
                amount capitalized
            
            
            (155
            )
            
            
            
            
            (134
            )Financing
                costs expensed
            
            $
            5,507
            
            $
            4,907
            
            $
            2,772
            
            $
            2,389(1)
                Mortgages not in place at beginning of fiscal 2005.





Financing
      Costs for the Current Six Months and Current Quarter increased 12.2% and 16%
      respectively, over the prior year’s reporting periods. The increases are
      principally attributable to The Rotunda acquisition financing costs of $672,000
      and $343,000 respectively.




LIQUIDITY
      AND CAPITAL RESOURCES




Our
      financial condition remains strong. Net Cash Provided By Operating Activities
      was $4.2 million for the Current Six Months compared to $4.1 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).




Credit
      Line:


On
      February 4, 2005, FREIT replaced its expired $14 million line of credit with
      an
      $18 million line of credit. 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 (see below). 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, Lakewood
      Apartments, Lakewood, 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 and development activities at Rockaway, NJ,
      FREIT has drawn down $1 million and has further utilized the credit line for
      the
      issuance of a $2 million Letter of Credit to guaranty the completion of on-site
      and off-site improvements that have now been substantially
      completed.





As
      described in the segment analysis above, we are building 129 apartment units
      in
      Rockaway Township, NJ. Construction costs at Rockaway are estimated at $17.7
      million, with about $11.1 million


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expended
      through April 30, 2006. Construction costs are being funded from draws against
      a
      construction loan. Upon completion of construction, the construction loan will
      be converted to a permanent loan with additional funding to bring the permanent
      loan balance up to $20.7 million. We also are planning the rebuilding of the
      Damascus Shopping Center, in Damascus, MD, and an expansion and redevelopment
      of
      The Rotunda in Baltimore, MD. The total capital required for these projects
      is
      estimated at $13 million, and $70 million, respectively. We expect to finance
      these costs, in part, from construction and mortgage financing and, in part,
      from our cash and cash equivalents. We expect these development projects to
      add
      to revenues, income, cash flow, and shareholder value.





At
      April
      30, 2006, FREIT’s aggregate outstanding mortgage debt was $174.4 million
      comprised as follows:





WeightedAverage*$Millions*
            
            InterestFixed
                rate mortgages
            
            $
            143.4
            
            
            *6.39*
            *%*Variable
                rate mortgages:Construction
                loan
            
            
            8.5
            
            
            *6.23*
            *%*Acquisition
                loan
            
            
            22.5
            
            
            *6.58*
            *%*$
            174.4
            
            
            *6.40*
            *%*





These
      mortgages bear a weighted average interest rate of 6.4%, and an average life
      of
      approximately 6 years. These mortgages are subject to amortization schedules
      that are longer than the terms 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
            
            $
                Millions2007
            
            $
                24.22008
            
            $
                28.42010
            
            $
                12.32013
            
            $  
                8.02014
            
            $
                26.12016
            
            $
                24.72019
            
            $
                28.3





The
      following table shows the estimated fair value and carrying value of our
      long-term debt at April 30, 2006 and October 31, 2005:





April
                30,
            
            October
                31,*(In
                Millions)*
            
            2006
            
            2005Fair
                Value
            
            $
            176.3
            
            $
            171.9Carrying
                Value
            
            $
            174.4
            
            $
            166.9





Fair
      values are estimated based on market interest rates at April 30, 2006 and
      October 31, 2005 and on discounted cash flow analysis. Changes in assumptions
      or
      estimation methods may significantly affect these fair value estimates.





FREIT
      expects to re-finance the individual mortgages with new mortgages when their
      terms expire. To this extent we have exposure to interest rate risk on our
      fixed
      rate debt obligations. 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 re-financing proceeds may be less than the
      amount of mortgage debt being retired. For example, at April 30, 2006 a 1%
      interest rate increase would reduce the fair value of our debt by $5.0 million,
      and a 1% decrease would increase the fair value by $5.4 million.


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We
      believe that the values of our properties will be adequate to command
      re-financing proceeds equal to or higher than the mortgage debt to be
      re-financed. 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
      shareholders.





Interest
      rate swap contract: To reduce interest rate volatility, FREIT uses “pay fixed,
      receive floating” interest rate swaps to convert floating interest rates to
      fixed interest rates over the terms of certain loans. We enter into these swap
      contracts with a counterparty that is usually a high-quality commercial
      bank.





In
      essence, we agree to pay our counterparty a fixed rate of interest on a dollar
      amount of notional principal (which corresponds to our mortgage debt) over
      a
      term equal to the term of the mortgage note. Our counterparty, in return, agrees
      to pay us a short-term rate of interest - generally LIBOR - on that same
      notional amount over the same term as our mortgage note.





FASB
      133
      requires us to mark-to-market fixed pay interest rate swaps. As the floating
      interest rate varies from time-to-time over the term of the contract, the value
      of the contract will change upward or downward. If the floating rate is higher
      than the fixed rate, the value of the contract goes up and there is a gain
      and
      an asset. If the floating rate is less than the fixed rate, there is a loss
      and
      a liability. These gains or losses will not affect our income statement. Changes
      in the fair value of these swap contracts will be reported in earnings of other
      comprehensive income and appear in the equity section of our balance
      sheet.





This
      gain
      or loss represents the economic consequence of liquidating our fixed rate swap
      contracts and replacing them with like-duration funding at current market rates,
      something we would likely never do.





FREIT
      had
      a variable interest rate mortgage securing its Patchogue, NY property. To reduce
      interest rate fluctuations, FREIT entered into an interest rate swap contract.
      This rate swap contract effectively converted variable interest rate payments
      to
      fixed interest rate payments. The contract was initially based on a notional
      amount of approximately $6,769,000 ($6,226,000 at April 30, 2006). FREIT has
      the
      following derivative-related risks with its swap contract: 1) early termination
      risk, and 2) counterparty credit risk.





Early
      Termination Risk: If FREIT wants to terminate its swap contract before maturity,
      it has to be bought out or terminated at market value; i.e., the difference
      in
      the present value of the anticipated net cash flows from each of the swap’s
      parties. If current variable interest rates are below FREIT’s fixed interest
      rate payments, this could be costly. Conversely, if interest rates rise above
      FREIT’s fixed interest payments and FREIT wished early termination, FREIT would
      realize a gain on termination. At April 30, 2006, FREIT’s swap contract was in
      the money. If FREIT had terminated its contract at that date it would have
      realized a gain of about $124,000. This amount has been included as an asset
      in
      FREIT’s balance sheet as at April 30, 2006, and the change (gain or loss)
      between reporting periods included in comprehensive income.





Counterparty
      Credit Risk: Each party to a swap contract bears the risk that its counterparty
      will default on its obligation to make a periodic payment. FREIT reduces this
      risk by entering swap contracts only with major financial institutions that
      are
      experienced market makers in the derivatives market.























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FUNDS
      FROM OPERATIONS (“FFO”):





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







Six
                Months Ended
            
            Three
                Months EndedApril
                30,
            
            April
                30,2006
            
            2005
            
            2006
            
            2005(*thousands)*Net
                income
            
            $
            2,363
            
            $
            2,409
            
            $
            1,075
            
            $
            849Depreciation
            
            
            2,267
            
            
            2,085
            
            
            1,137
            
            
            1,010Amortization
                of deferred mortgage costs
            
            
            129
            
            
            86
            
            
            64
            
            
            41Mortgage
                prepayment penalty
            
            
            
            
            
            67
            
            
            -
            
            
            -Deferred
                rents - straight-lining
            
            
            (171
            )
            
            (150
            )
            
            (85
            )
            
            (75
            )Amortization
                of acquired above and belowmarket
                value leases
            
            
            (202
            )
            
            
            
            
            (63
            )
            
            -Capital
                improvements - Apartments
            
            
            (458
            )
            
            (429
            )
            
            (119
            )
            
            (171
            )Minority
                interests:Equity
                in earnings of affiliates
            
            
            207
            
            
            332
            
            
            130
            
            
            22Distributions
                to minority interest
            
            
            (360
            )
            
            (287
            )
            
            (360
            )
            
            (50
            )**Funds
                From Operations**
            
            **$**
            **3,775**
            
            **$**
            **4,113**
            
            **$**
            **1,779**
            
            **$**
            **1,626*****Pre
                Share - Basic***
            
            *$*
            *0.58*
            
            *$*
            *0.64*
            
            *$*
            *0.27*
            
            *$*
            *0.25****Per
                Share - Diluted***
            
            *$*
            *0.56*
            
            *$*
            *0.61*
            
            *$*
            *0.26*
            
            *$*
            *0.24***Weighted
                Average Shares Outstanding:***Basic*
            
            
            6,522
            
            
            6,423
            
            
            6,542
            
            
            6,423*Diluted*
            
            
            6,753
            
            
            6,703
            
            
            6,889
            
            
            6,843








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: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK





See
      “Liquidity and Capital Resources” above.







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Item
      4: CONTROLS AND 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 were effective. There has been no change
      in
      FREIT’s internal control over financial reporting during the three months ended
      April 30, 2006 that has materially affected, or is reasonably likely to
      materially affect, FREIT’s internal control over financial
      reporting.





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





Part
      II
      Other Information





Item
      4: Submission of Matters to a Vote of Security
      Holders:





The
      following matter was submitted to a vote of security holders at FREIT’s Annual
      Meeting of Shareholders held on April 11, 2006:





The
      Shareholders re-elected both Mr. Donald W. Barney and Herbert C. Klein,
      Esq. to serve as Trustees for a three (3) year term. The balloting for elections
      was as follows:





**Donald
                W. Barney**
            **Herbert
                C. Klein, Esq.****VOTES
                FOR**
            5,799,928
            5,793,795**VOTES
                WITHHELD**
            15,048
            21,181




The
        other
        members of the Board of Trustees are as follows:
   **Name**
              
              **Term
                  Expires**Robert
                  S. Hekemian
              
              April
                  2008Ronald
                  J. Artinian
              
              April
                  2007Alan
                  L. Aufzien
              
              April
                  2007


Item
      6. Exhibits





Reference
      is made to the Exhibit index below.







Exhibit
      Index





Exhibit
      31.1 Section 302 Certification of Chief Executive
      Officer





Exhibit
      31.2 Section 302 Certification of Chief Financial
      Officer





Exhibit
      32.1 Certification of Chief Executive Officer pursuant
      to 18 U.S.C. Section 1350





Exhibit
      32.2 Certification of Chief Financial Officer pursuant
      to 18 U.S.C. Section 1350













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**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 INVESTMENT****TRUST
                OF NEW JERSEY**(Registrant)Date:
                June 8, 2006/s/
                Robert S. Hekemian(Signature)Robert
                S. HekemianChairman
                of the Board and Chief Executive Officer/s/
                Donald W. Barney(Signature)Donald
                W. BarneyPresident,
                Treasurer and Chief Financial Officer(Principal
                Financial/Accounting Officer)





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