Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”,
and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
The aggregate market value of the registrant’s
shares of beneficial interest held by non-affiliates was approximately $95 million. Computation is based on the closing sales price
of such shares as quoted on the over-the-counter-market on April 30, 2019, the last business day of the registrant’s most
recently completed second quarter.
As of February 11, 2020, the number of
shares of beneficial interest outstanding was 6,856,651.
Certain information included in this
Annual Report on Form 10-K, as amended, contains or may contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). The registrant cautions readers that forward-looking statements, including, without
limitation, those relating to the registrant’s investment policies and objectives; the financial performance of the registrant;
the ability of the registrant to borrow and service its debt; the economic and competitive conditions which affect the registrant’s
business; the ability of the registrant to obtain the necessary governmental approvals for the development, expansion or renovation
of its properties, the impact of environmental conditions affecting the registrant’s properties, and the registrant’s
liquidity and capital resources, are subject to certain risks and uncertainties. Actual results or outcomes may differ materially
from those described in the forward-looking statements and will be affected by a variety of risks and factors, including, without
limitation, the registrant’s future financial performance; the availability of capital; general market conditions; national
and local economic conditions, particularly long-term interest rates; federal, state and local governmental regulations that affect
the registrant; and the competitive environment in which the registrant operates, including, the availability of retail space and
residential apartment units in the areas where the registrant’s properties are located. In addition, the registrant’s
continued qualification as a real estate investment trust involves the application of highly technical and complex rules of the
Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The forward-looking statements are made as
of the date of this Annual Report on Form 10-K, as amended, and the registrant assumes no obligation to update the forward-looking
statements or to update the reasons actual results could differ from those projected in such forward-looking statements.
First Real Estate Investment Trust of
New Jersey (the “Trust”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to its Annual
Report on Form 10-K for the fiscal year ended October 31, 2019, which was filed with the Securities and Exchange Commission (the
“SEC”) on January 21, 2020 (the “Original Filing”).
This Amendment
is being filed for the purpose of providing the information required by Items 10 through 14 of Part III of Form 10-K. This
information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K, which permits
the above-referenced Items to be incorporated in the Annual Report on Form 10-K by reference from a definitive proxy
statement, if such definitive proxy statement is filed no later than 120 days after the last day of the Trust’s fiscal year
on October 31, 2019.
In accordance
with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the cover page
to the Original Filing and Items 10 through 14 of Part III of the Original Filing are hereby amended and restated in their entirety.
In addition, pursuant to Rule 12b-15 under the Exchange Act, the Trust is including Item 15 of Part IV, solely to file
the certifications required under Section 302 of the Sarbanes-Oxley Act of 2002 with this Amendment.
PART III
ITEM 10
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Executive Officers and Trustees
The executive officers and trustees of the Trust are
as follows:
Name
|
Age
|
Position(s)
|
Robert S. Hekemian, Jr.
|
60
|
Chief Executive Officer, President and Trustee
|
Ronald J. Artinian
|
71
|
Chairman of the Board and Trustee
|
David F. McBride, Esq.
|
72
|
Trustee
|
John A. Aiello, Esq.
|
70
|
Executive Secretary, Secretary and Trustee
|
Justin F. Meng
|
41
|
Trustee
|
David B. Hekemian
|
53
|
Trustee
|
Richard J. Aslanian
|
59
|
Trustee
|
Allan Tubin
|
81
|
Chief Financial Officer and Treasurer
|
There are no family relationships
among the members of the Board of Trustees (the “Board”) and the executive officers, except that Robert S. Hekemian,
Jr., Chief Executive Officer, President and a trustee of the Trust, and David B. Hekemian, a trustee, are siblings and the sons
of the late Robert S. Hekemian, the Trust’s former Chairman and Chief Executive Officer and the former Chairman and Chief
Executive Officer of Hekemian & Co., Inc., the Trust’s managing agent (“Hekemian & Co.”). During the
past five years, none of the trustees or executive officers of the Trust have served as directors of any company with a class
of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange
Act or any company registered as an investment company under the Investment Company Act of 1940, as amended, except Robert S.
Hekemian, Jr., who was a director of Oritani Financial Corp. (ORIT), the holding company for Oritani Bank, of which he was also
a director, until Oritani Financial Corp. merged into Valley National Bancorp in December 2019, and Ronald J. Artinian, who served
as a director of CommonWealth REIT (now known as Equity Commonwealth) during 2014, and The Reserve, The Reserve Primary Fund in
Liquidation and The Reserve Yield Plus Fund in Liquidation, which are registered investment companies, from 2006 to 2016.
Each of the executive officers of the
Trust serves in his office(s) until such time as his successor is elected and qualified.
Biographical Information
Robert S. Hekemian, Jr. has
served as a trustee since 2007, and he was appointed as Chief Executive Officer of the Trust in April 2018 following the retirement
of the late Robert S. Hekemian as Chairman and Chief Executive Officer of the Trust. Mr. Hekemian was additionally appointed to
the office of President of the Trust in February 2019. Mr. Robert Hekemian, Jr.’s current term as a member of the Board is
scheduled to expire at the next annual meeting of the Trust’s shareholders, and his term as Chief Executive Officer will
expire at such time as his successor is appointed and qualifies. Mr. Hekemian has been involved in real estate activities for over
35 years, including property management, leasing, mortgage financing, construction and acquisitions of residential and commercial
properties located throughout the Northeast and Mid-Atlantic regions of the United States. He has served as President and Chief
Operating Officer of Hekemian & Co. since 2004, and is a member of the Executive Committee of Hekemian & Co. From 1983
to 2003, Mr. Hekemian served as Executive Vice President of Hekemian & Co. Mr. Hekemian is principally responsible for identifying
real estate acquisitions and evaluating the performance of the real estate properties managed by Hekemian & Co. with a view
toward maintaining or altering management and/or leasing strategies. Mr. Hekemian also serves on the Board of the New York Philharmonic.
Mr. Hekemian is Chairman of the Bergen Community College Foundation. He is a Member of the Board of Governors, Hackensack University
Medical Center, and a trustee of the Hackensack University Medical Center Foundation.
Ronald J. Artinian has
served as a trustee since 1992, and he was appointed as Chairman of the Trust in April 2018 following the retirement of the late
Robert S. Hekemian as Chairman and Chief Executive Officer of the Trust. Mr. Artinian’s current term as a member of the Board
is scheduled to expire in April 2022, and his term as Chairman will expire at such time as his successor is appointed and qualifies.
Mr. Artinian worked in the financial services industry for 26 years, including with Smith Barney, Inc. from 1989 to 1998, where
Mr. Artinian held positions as an Executive Vice President, Managing Director and National Sales Manager. Mr. Artinian retired
from Smith Barney in January 1998 in order to pursue other business interests as a private investor. Mr. Artinian joined the board
of The Reserve, a money market fund, in 2007 and served as lead
independent director from March 2009 through December 2016. Mr.
Artinian served as a member of the board of NYMAGIC, Inc., an insurance holding company specializing in commercial lines property
and casualty and ocean marine insurance, from 2008 until the sale of that company in 2010. He also served on the board of CommonWealth
REIT (now known as Equity Commonwealth), a real estate investment trust, during 2014.
David F. McBride, Esq.
has served as a trustee since 2007. His current term as a member of the Board is scheduled to expire at the next annual meeting
of the Trust. Mr. McBride has over 45 years of diversified real estate experience. He is the Chief Executive Officer of McBride
Enterprises, Inc., a family-owned real estate company started in 1898. Mr. McBride was responsible for the development of numerous
office and industrial properties, as well as residential projects in Northern New Jersey. He also oversaw the operations of his
family’s general construction company, the Alpert P. Schmidt Construction Company, civil engineering firm, Urban Planning
and Engineering Company, and commercial brokerage firm, McBride Corporate Real Estate. Mr. McBride was also instrumental in forming
the Keystone Property Trust (NYSE) in 1998 and served as its Chairman of the Board until its sale to ProLogis (NYSE) in 2004. Mr.
McBride has also been a Partner in and is presently Of Counsel to the law firm of Harwood Lloyd, LLC, specializing in real estate
matters. Since 1998, Mr. McBride has also served as the Chairman and President of the Mountain Club Inc., t/a The High Mountain
Golf Club. Mr. McBride also served on the Advisory Board of the McDonough School of Business at Georgetown University from 2008
to 2018.
John A. Aiello, Esq. has
served as the Secretary and Executive Secretary of the Trust since 2003 and as a member of the Board since December 2015. His current
term as a member of the Board of Trustees is scheduled to expire in April 2021. Mr. Aiello is an officer and shareholder of the
law firm of Giordano, Halleran & Ciesla, P.C., where he has practiced law for 46 years. He is Chairman of the law firm’s
Corporate and Securities practice group and concentrates his practice on corporate and securities law matters, including mergers
and acquisitions and various corporate finance transactions. See the section entitled “Certain Relationships and Related
Party Transactions” in this Proxy Statement. Mr. Aiello is an emeritus member and former Chairman of the Board of Directors
of the Business Law Section of the New Jersey State Bar Association and a former member of the Board of Directors of the New Jersey
chapter of the Association for Corporate Growth, a non-profit organization of professionals and business leaders in the middle
market mergers and acquisitions space. Mr. Aiello is also a member of the Advisory Board of the Leon Hess School of Business of
Monmouth University.
Justin F. Meng has served
as a member of the Board since February 2016. His current term as a member of the Board of Trustees is scheduled to
expire in April 2022. Mr. Meng is a Managing Partner and Co-Portfolio Manager at V3 Capital Management L.P., an investment firm
focused on publicly-traded real estate securities that he co-founded in 2011. Previously, he was Partner and Head of REIT
Research for High Rise Capital Management, L.P., where he worked from 2005 to 2011. From 2002 to 2005, Mr. Meng served as
an Associate at J.P. Morgan Asset Management in the Real Estate Investment Group, where he worked both in the acquisitions and
asset management departments. From 2000 to 2002, he served as an Analyst at J.P. Morgan Asset Management in their Fixed Income
Group. Mr. Meng is a CFA charterholder.
David B. Hekemian has served
as a member of the Board since April 2018. His current term as a member of the Board of Trustees is scheduled to expire in April
2021. Mr. Hekemian has served as a commercial real estate executive at Hekemian & Co. for over 30 years, holding positions
of increasing responsibilities throughout his tenure at the company focused on strategic business and investment planning, retail
development and leasing, asset profitability management and lender negotiations. From 1988 to 1992 he served as Property Manager,
and from 1992 to 1996 he served as Vice President-Salesperson. Since 1996 Mr. Hekemian has served as Principal/Broker-Salesperson,
Director of Commercial Brokerage and as a member of Hekemian & Co.’s Executive Committee. Mr. Hekemian is a member of
the Armenian Missionary Association of America, where he served as Assistant Treasurer and a member of the Budget and Finance Committee
from 1998 to 2007 and as Co-Chairman of the Investment Committee from 1996 to 2009, which included oversight and management of
a $100 million equity and fixed income portfolio.
Richard J. Aslanian has
served as a member of the Board since April 2018. His current term as a member of the Board of Trustees is scheduled to expire
in April 2021. Mr. Aslanian is the Co-Founder of Welcome Home Brands, LLC, a distributor of imported paper and plastic bakeware
products that services cruise lines, hotels, casinos and food service companies. He co-founded Welcome Home Brands, LLC in 2010.
From 2007 to 2009 Mr. Aslanian was the Chief Executive Officer, sole Managing Member and founder of Blue Ram Capital Management,
LLC, which managed an investment partnership of public equities in developed markets. In 2006, Mr. Aslanian retired from Goldman
Sachs & Co. as a Managing Director after having been with the firm since 1991, during which time he was co-head of one of the
most prominent wealth management teams of the firm. From 1985 to 1991 Mr. Aslanian was an attorney at the law firm of Paul, Weiss,
Rifkind, Wharton & Garrison LLP where he concentrated his practice on corporate and tax matters and public and private mergers
and acquisitions. Mr. Aslanian established the Richard J. Aslanian Scholarship Fund, an endowed scholarship, at the University
of Pennsylvania, and has served on the boards of several charitable organizations, including the Partnership for Inner-City Education,
the Harrison Educational Foundation and the Armenian Church Endowment Fund.
Allan Tubin was appointed as
Chief Financial Officer and Treasurer of the Trust in February 2019. Mr. Tubin is the Chief Financial Officer of Hekemian &
Co., the Trust’s managing agent. As Chief Financial Officer of Hekemian & Co., Mr. Tubin
is responsible for corporate
and project finance, budgeting and tax planning, accounting, and SEC compliance for both Hekemian & Co. and its affiliates.
He is a member of Hekemian & Co.’s Acquisitions and Development Due Diligence Team, where he is responsible for financial
forecasting and modeling. Mr. Tubin has over 25 years’ experience in real estate finance. Prior to joining Hekemian &
Co. in 1996, he served as the Chief Financial Officer for the international real estate activities of the investment bank Donaldson,
Lufkin & Jenrette, and served as a certified public accountant with Ernst & Young.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange
Act requires the Trust’s executive officers and trustees, and persons who own more than 10% of the Shares, to file reports
of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Executive officers, trustees and greater than 10% Shareholders
are required by SEC regulation to furnish the Trust with copies of all Forms 3, 4 and 5 they file.
Based solely on the Trust’s review
of the copies of such forms it has received, the Trust believes that all of its trustees, executive officers and greater than 10%
Shareholders complied with all filing requirements applicable to them with respect to reports required to be filed by Section 16(a)
of the Exchange Act during fiscal 2019, except for a Form 3 for Allan Tubin in connection with his appointment as Chief Executive
Officer of the Trust, which has been filed with the SEC.
Code of Ethics
The Trust has adopted a Code of Ethics
that is applicable to all trustees, executive officers and management employees of the Trust, including, without limitation, the
Trust’s principal executive and senior financial officers. The Audit Committee is charged with administering and interpreting
the Code of Ethics. The Code of Ethics is available on the Trust’s website at www.freitnj.com under the “About
FREIT” and “Corporate Governance” tabs.
Audit Committee
The current members of the Audit
Committee of the Board of Trustees are Ronald J. Artinian, David F. McBride and Richard J. Aslanian. Ronald J. Artinian serves
as the Chairman of the Audit Committee. Each member of the Audit Committee satisfies the audit committee qualifications under the
NASDAQ Listing Rules and is independent, as independence for audit committee members is defined in the NASDAQ Listing Rules, and
they each meet the independence requirements of Exchange Act Rule 10A-3(b)(1).
The Audit Committee held four
meetings during fiscal 2019. The Audit Committee selects the independent registered public accounting firm (the “Independent
Auditors”) to audit the books and accounts of the Trust. In addition, the Audit Committee reviews and pre-approves the scope
and costs of all services (including non-audit services) provided by the Independent Auditors. The Audit Committee also monitors
the effectiveness of the audit effort and financial reporting and inquires into the adequacy of the Trust’s financial and
operating controls.
Based on its review of the criteria
of an Audit Committee Financial Expert under the rules of the Securities and Exchange Commission (the “SEC”), the Board
of Trustees does not believe that any of the members of the Trust’s Audit Committee qualifies as an Audit Committee Financial
Expert.
Each of Ronald J. Artinian, David
F. McBride and Richard J. Aslanian has made significant contributions and provided valuable service to the Trust and its Shareholders
as members of the Audit Committee. The Board of Trustees believes that each of Mr. Artinian, Mr. McBride and Mr. Aslanian has demonstrated
that he is capable of (i) understanding accounting principles generally accepted in the United States of America (“GAAP”),
(ii) assessing the general application of GAAP principles in connection with the accounting for estimates, accruals and reserves,
(iii) understanding financial statements and analyzing and evaluating the Trust’s financial statements, (iv) understanding
internal controls and procedures for financial reporting, and (v) understanding audit committee functions, all of which are attributes
of an Audit Committee Financial Expert under the rules of the SEC. Given the business experience and acumen of Mr. Artinian, Mr.
McBride and Mr. Aslanian, the Board of Trustees believes that each of them is qualified to carry out all duties and responsibilities
of the Trust’s Audit Committee. However, Mr. Artinian, Mr. McBride and Mr. Aslanian have not acquired these attributes through
the specific experience that is required for qualification as an Audit Committee Financial Expert under the rules of the SEC, such
as experience serving as, or experience actively supervising, a principal financial officer, principal accounting officer, controller,
public accountant or auditor, or experience overseeing or assessing the performance of companies or public accountants with respect
to the preparation, auditing or evaluation of financial statements. Therefore, the Board of Trustees does not believe that any
of its current members meets all of the requirements under the SEC rules for qualification as an Audit Committee Financial Expert.
The Board of Trustees believes
that Allan Tubin, the Trust’s Chief Financial Officer and Treasurer, meets all of the requirements under the rules of the
SEC for qualification as an Audit Committee Financial Expert. However, Mr. Tubin is
not a trustee of the Trust and would not meet
the requirements for qualification as an “independent director” under the NASDAQ Listing Rules due to the fact that
Mr. Tubin is an executive officer of the Trust and an executive officer of Hekemian & Co., the Trust’s managing agent.
As Chief Financial Officer of the Trust, Mr. Tubin will make the certifications required under the Sarbanes-Oxley Act of 2002 and
the related rules adopted by the SEC with respect to (i) the Trust’s financial statements and other financial information
included in periodic reports filed with the SEC, (ii) the Trust’s disclosure controls and procedures regarding the disclosure
to the certifying officers of material information relating to the Trust, and (iii) the Trust’s internal controls and the
adequacy of the design and operation of such internal controls. As a certifying officer of the Trust, Mr. Tubin will meet with
and make reports to the Audit Committee with respect to the items which are the subject matter of his certifications.
Based on the foregoing, the Board
of Trustees believes that the Audit Committee functions effectively and properly performs and discharges its duties, and the Board
does not believe that it is necessary at this time to actively search for an outside person to serve on the Board of Trustees who
would qualify as an Audit Committee Financial Expert.
ITEM 11
|
EXECUTIVE COMPENSATION
|
The Trust is externally managed
by Hekemian & Co. Hekemian & Co. is owned by members of the family of Robert S. Hekemian, Jr., Chief Executive Officer,
President and a trustee of the Trust, David B. Hekemian, a trustee of the Trust, and the late Robert S. Hekemian, a former consultant
to the Trust. As compensation for its management services, the Trust pays Hekemian & Co. management and other fees pursuant
to a Management Agreement between the Trust and Hekemian & Co. In addition, as an incentive to the employees of Hekemian &
Co. (including members of the Hekemian family) to identify and provide real estate investment opportunities for the Trust, the
Trust has advanced to such employees who are investors in certain joint venture projects a portion of the equity capital required
to be contributed by them to such joint ventures. The Management Agreement and these other incentives are more particularly described
in “Certain Relationships and Related Party Transactions; Director Independence” below.
In view of the Trust’s external
management structure, the Trust does not employ executive officers on a full-time basis. The following Compensation Discussion
and Analysis presents information regarding the Trust’s compensation policies and programs and the compensation of the Trust’s
executive officers.
Compensation Discussion and
Analysis
Overview
The Trust’s compensation
program is designed to properly compensate the executive officers commensurate with the duties and services that they are employed
to perform for the Trust, to reward their dedication, hard work and success and align their interests with the long-term interests
of the Trust. The Compensation Committee reviews the compensation paid to the executive officers in consideration of these objectives
and makes recommendations to the Board regarding its determinations. The various factors considered by the Compensation Committee
in reaching its determinations concerning the compensation of the executive officers are discussed under “Fiscal 2019 Compensation”
below.
Recovery of Erroneously Awarded
Compensation
The Board has adopted a policy
that provides that, in the event that the Trust is required to prepare an accounting restatement due to the Trust’s material
non-compliance with any financial reporting requirement, the Trust will require the reimbursement, cancellation or forfeiture,
as the case may be and to the fullest extent permitted by applicable law, of any incentive-based compensation paid to any current
or former executive officer during the three-year period preceding such restatement that was based on the erroneous data and that
was paid in excess of the compensation that would have been paid to the executive officer based on the accounting restatement.
The Trust will disclose any incentive-based compensation paid to any executive officer that is based on any measure of financial
performance or any other financial information in the Trust’s proxy statement for the annual meeting of Shareholders and
as required by the rules and regulations of the SEC.
As discussed under “Elements
of Executive Compensation” below, the Trust did not pay any incentive-based compensation to any of the executive officers
during the fiscal year ended October 31, 2019.
Hedging Policy
It is the policy of the Trust
that no employee or trustee of the Trust may purchase any financial instruments that are designed to hedge or offset any decrease
in the market value of the Trust’s Shares that (i) were previously awarded, or acquired pursuant to the exercise of any option
granted, to an employee or trustee by the Trust as part of the compensation of such employee or trustee or (ii) otherwise held,
directly or indirectly, by an employee or trustee, which financial instruments will include, without limitation, puts, calls, straddles,
equity swaps and any other derivative security that is directly linked to the Shares.
Elements of Executive Compensation
There are three elements to the
compensation of the executive officers of the Trust: (1) base salary; (2) the Equity Incentive Plan; and (3) the Amended and Restated
Deferred Fee Plan (the “Deferred Fee Plan”). The Compensation Committee and the Board believe that these elements allow
the Trust to accomplish its objectives of properly compensating the executive officers for their services to the Trust, rewarding
the dedication, hard work and success of executive officers and aligning the interests of executive officers with the long-term
interests of the Trust.
Except for base salary, benefits
under the Equity Incentive Plan and Deferred Fee Plan, and fees paid to the executive officers for their service as trustees, the
Trust does not pay any other compensation or benefits to its executive officers, whether it be in the form of bonus, long-term
incentive compensation, perquisites, rights, warrants, convertible securities, performance units, performance shares or other similar
instruments. The Equity Incentive Plan and the Deferred Fee Plan are the only employee benefit plans maintained by the Trust. There
are no employment contracts between the Trust and any of the executive officers, nor is there any compensatory plan or arrangement
between the Trust and any of the executive officers pursuant to which an executive officer would receive payments as the result
of his resignation or retirement as an executive officer, or any other event resulting in the termination of his relationship with
the Trust as an executive officer, or as a result of a change in control of the Trust. The Trust’s Deferred Fee Plan, discussed
below, provides that a participant may receive Shares with respect to amounts credited to such participant’s account under
the Deferred Fee Plan, including amounts deferred thereunder and accrued interest, upon such participant’s attainment of
the retirement age specified in the participant’s deferral election, such participant’s actual retirement, such participant’s
cessation of services prior to retirement, or the occurrence of a change in control of the Trust as defined under the Deferred
Fee Plan. The Trust’s Equity Incentive Plan provides that in the event of (i) a Change in Control (as such term is defined
in the Equity Incentive Plan), or (ii) a sale of all or substantially all of the assets of the Trust, other than a sale of assets
to a subsidiary or other affiliated entity of the Trust, all outstanding options granted under the Equity Incentive Plan will become
exercisable (to the extent not already exercisable) immediately before or contemporaneously with the occurrence of such change
in control or sale, and each outstanding restricted share award granted under the Equity Incentive Plan shall immediately become
free of all restrictions, conditions and forfeiture provisions.
As
previously reported by the Trust, on January 14, 2020, the Trust and certain of its affiliates entered into a Purchase and
Sale Agreement (the “Sale Agreement”), pursuant to which the Trust and its affiliates will sell 100% of their ownership
interests in seven real properties held by them. In addition, as previously reported by the Trust, on January 14, 2020, the Board
adopted a Plan of Voluntary Liquidation (the “Plan of Liquidation”), which provides for the voluntary termination and
liquidation of the Trust by the sale, conveyance, transfer and delivery of all of the Trust’s remaining assets. The Sale
Agreement and the Plan of Liquidation are both subject to the approval of the Trust’s shareholders. If the Sale Agreement
is approved by the Trust’s shareholders and the transactions contemplated therein are completed, but the Plan of Liquidation
is not approved by the Trust’s shareholders, then the vesting of options outstanding under our Equity Incentive Plan will
not accelerate but the Compensation Committee of our Board of Trustees may consider and approve a reduction of the exercise price
of outstanding options at such time as the Board approves a distribution to the Trust’s shareholders. However, if both the
Sale Agreement and the Plan of Liquidation are approved by the Trust’s shareholders (and the transactions contemplated in
the Sale Agreement are completed), then all unvested outstanding options will become vested upon the consummation of the transactions
contemplated in the Sale Agreement. As of October 31, 2019, there were 202,400 unexercised options collectively held by the executive
officers and trustees of the Trust that were outstanding. Additional information with respect to outstanding stock options is set
forth in the “Outstanding Equity Awards at Fiscal Year-End” table below.
Robert S. Hekemian, Jr., Chief
Executive Officer, President and a trustee of the Trust, is the President and Chief Operating Officer of Hekemian & Co. David
B. Hekemian, a trustee of the Trust, is the Principal/Broker – Salesperson and Director of Commercial Brokerage of Hekemian
& Co. Robert S. Hekemian, the former Chairman and Chief Executive Officer of the Trust, served as a consultant to the Trust
and Chairman of the Board and Chief Executive Officer of Hekemian & Co. prior to his death in December 2019. Pursuant to the
terms of the Management Agreement between Hekemian & Co. and the Trust, Hekemian & Co. is entitled to receive a termination
fee from the Trust under certain circumstances, including the non-renewal of the Management Agreement by the Trust, termination
of the Management Agreement by the Trust without cause, or termination of the Management Agreement by the Trust following an acquisition
of the Trust. See “Certain Relationships, Related Party Transactions; Director Independence” below.
Equity Incentive Plan
The Trust originally adopted the
Equity Incentive Plan in 1999 upon the approval of the Board and the shareholders. In 2007, the Board and shareholders approved
amendments to the Equity Incentive Plan to (a) increase the number of Shares reserved for issuance thereunder by 300,000 Shares
and (b) extend the term of the Equity Incentive Plan from September 10, 2008 to September 10, 2018. In 2018, the Board and shareholders
approved further amendments to the Equity Incentive Plan to (a) increase the number of Shares reserved for issuance thereunder
by an additional 300,000 Shares and (b) further extend the term of the Equity Incentive Plan from September 10, 2018 to September
10, 2028.
The purpose of the Equity Incentive
Plan is to allow the Trust to retain the services of individuals who have made, and/or who are expected to make, significant contributions
to the business of the Trust and its subsidiaries, to align such persons’ interests with the long-term interests of the Trust,
and to reward hard work, dedication and success by providing such individuals with an opportunity to acquire Shares of the Trust
or receive other Share-based awards. Eligible participants include executive officers, trustees and consultants of the Trust, including
employees of Hekemian & Co., the Trust’s managing agent.
The Board administers the Equity
Incentive Plan, with the full and exclusive power to interpret the plan, to adopt rules, regulations and guidelines relating to
the plan, to grant waivers of restrictions under the plan and to make all of the determinations necessary for the administration
of the plan. The Board’s authority to administer the Equity Incentive Plan includes the authority, within the limits set
forth in the plan, to determine the persons to whom awards may be granted, determine the number of Shares to be covered by each
award, establish the terms, conditions and provisions of the awards to be granted, and establish restrictions on the awards or
subsequently waive any such restriction or permit any such restriction to lapse.
The exercise price of options
granted under the Equity Incentive Plan will be equal to the Fair Market Value (as defined in the Equity Incentive Plan) of the
Shares on the date of the grant of the options. For any other form of award, the consideration, if any, to be paid in exchange
for the award will be determined by the Board, but in no event will such consideration be greater than the Fair Market Value of
the Shares on the date of grant. The term of awards will be determined by the Board, but will not exceed 10 years from the date
of grant. Awards will vest in accordance with terms fixed by the Board, and vesting of awards may accelerate upon the occurrence
of certain events, including a Change in Control (as defined in the Equity Incentive Plan), sale of all or substantially all of
the Trust’s assets, or the death, the Retirement (as defined in the Equity Incentive Plan) of the participant or the disability
of the participant.
The Board may terminate, modify
or amend the Equity Incentive Plan at any time, provided that any modification or amendment that increases the number of Shares
reserved for issuance thereunder is subject to the approval of the Trust’s shareholders, and any termination, modification
or amendment that adversely affects the terms of any outstanding awards is subject to the consent of the holders thereof.
The Board has charged the Compensation
Committee with the responsibility of making recommendations to the Board with respect to grants of awards under the Equity Incentive
Plan to eligible participants. While the Equity Incentive Plan provides that options to acquire Shares will be the principal form
of award under the plan, the plan also provides for grants of restricted Share awards and other Share-based awards.
During the 2019 fiscal year, upon
the recommendation of the Compensation Committee, the Board of Trustees granted options to acquire 5,000 Shares under the Equity
Incentive Plan to Ronald J. Artinian, the Chairman of the Board. The Compensation Committee did not recommend, and the Board of
Trustees did not make, any other grants of stock options or other equity-based awards under the Equity Incentive Plan during the
fiscal year ended October 31, 2019.
Amended and Restated Deferred
Fee Plan
Effective November 1, 2000, the
Board of trustees adopted the Deferred Fee Plan, which is intended to provide a benefit to executive officers and trustees who
have made, and/or who are expected to continue to make, significant contributions to the long-term success of the Trust. An election
to defer compensation is required to be made prior to the calendar year for which it will be effective, and is irrevocable with
respect to the calendar year to which it applies. The Deferred Fee Plan was amended and restated effective December
31, 2008, and further amended and restated effective November 1, 2014.
The original purpose of the Deferred
Fee Plan was to provide executive officers and trustees with a long-term savings opportunity. Prior to the amendments to the Deferred
Fee Plan that went into effect as of November 1, 2014, the Deferred Fee Plan permitted any executive officer or trustee to elect
to defer receipt of any compensation, including executive officer salary, trustee annual retainer fees, meeting attendance fees,
and property site inspection fees, and the rate of interest payable on any amounts deferred was fixed at 9% per annum, compounded
quarterly.
The amendments to the Deferred
Fee Plan that went into effect as of November 1, 2014 shifted the purpose of the Deferred Fee Plan from a long-term savings vehicle
for eligible participants to an opportunity for eligible participants to increase their equity position in the Trust. As amended
and restated effective November 1, 2014, the Deferred Fee Plan no longer permits trustees who are also executive officers of the
Trust to defer amounts payable to them as salary for their services as executive officers. Participants in the Deferred Fee Plan
are only permitted to defer amounts payable to them for their service as trustees. In addition, from and after November 1, 2014,
amounts deferred, together with the interest accrued on a participant’s entire balance, will be converted on the last day
of each calendar quarter into share units that are equivalent to Shares (“Share Units”), and credited to the participant’s
account. Amounts deferred under the Deferred Fee Plan are converted into Share Units on a quarterly basis, on the last day of each
calendar quarter. The number of Share Units to be credited with respect to amounts deferred during a calendar quarter will be determined
by the closing price of the Shares on the trading day immediately
preceding the last day of such calendar quarter. The participants’
existing balances as of October 31, 2014 will be preserved in the form of cash and will not be converted into Share Units, although
the interest that accrues on such existing balances from and after November 1, 2014 will be converted into Share Units. As of November
1, 2014, the interest rate on participants’ cash balances under the Deferred Fee Plan was changed from 9% per annum to the
average interest rate on ten-year Treasury bonds plus 150 basis points. In the event that any cash dividend is paid by the Trust
with respect to the Shares, each participant will be credited with a number of Share Units equal to (x) the amount of the cash
dividend paid with respect to one Share, (y) multiplied by the total number of Share Units credited to a participant’s account
as of the record date for the dividend, (z) divided by the fair market value of one Share on the trading day immediately preceding
the payment date of the dividend. In the event that any dividend is paid with respect to the Shares in Shares, each participant
will be credited with a number of Share Units equal to the number of full Shares that such participant would have received had
the participant been the owner, on the record date for the dividend, of a number of Shares equal to the number of Share Units credited
to the participant’s account.
A participant’s deferred
benefits under the Deferred Fee Plan will be paid to the participant at either: (i) the retirement age specified by the participant
in the deferral election; (ii) actual retirement of the participant; (iii) upon the earlier cessation of duties as a trustee of
the Trust prior to retirement; or (iv) upon a change in control of the Trust, as defined in the Deferred Fee Plan. On
the payment date, the Trust will issue to the participant a number of Shares equal to the number of Share Units credited to the
participant’s account, and will pay to the participant amounts maintained in the participant’s account as of October
31, 2014 as cash in either a lump sum or in a number of substantially equal annual installments over a period not to exceed 10
years, at the election of the participant, except if a participant elects to receive payment upon the occurrence of a change in
control, in which case all such amounts will be payable in a lump sum. The Trust has not created and will not create
a cash sinking fund for amounts deferred pursuant to the Deferred Fee Plan that are not payable in Shares. As a result,
any participant who elects to participate in the Deferred Fee Plan is an unsecured creditor of the Trust with respect to any amounts
deferred thereunder. The Deferred Fee Plan may be amended, suspended or terminated by resolution of the Board at any
time and from time to time, provided that no amendment, suspension or termination will operate to adversely affect the plan benefits
accrued or available for any participant.
As of October 31, 2019, an
aggregate amount of approximately $7,610,000 has been deferred under the Deferred Fee Plan, which represents an aggregate of
$4,422,000 of deferred fees and $3,188,000 of accrued deferred interest, which amounts will be maintained as cash in the
participants’ accounts under the Deferred Fee Plan and will not be converted into Share Units as described above.
Subsequent to October 31, 2019, the Trust paid an aggregate of $4,977,115, which former executive officers and trustees were
entitled to receive under the Deferred Fee Plan.
During the fiscal year ended October
31, 2019, participants deferred a total of approximately $879,800 under the Deferred Fee Plan, consisting of approximately $581,600
of deferred fees and approximately $298,200 of accrued deferred interest. Pursuant to the amendments to the Deferred Fee Plan that
became effective on November 1, 2014, the aggregate amount of $879,800 deferred by all participants converted into an aggregate
of 53,741 Share Units during the fiscal year ended October 31, 2019, which were credited to the participants’ accounts. In
addition, the participants were credited with an aggregate of 6,407 Share Units during fiscal 2019 representing dividends paid
with respect to the Share Units credited to their accounts. Additional information regarding the participants’ deferral of
fees and the conversion of deferred amounts into Share Units credited to their accounts is set forth under “Fiscal 2019 Nonqualified
Deferred Compensation” and “Fiscal 2019 Trustee Compensation” below.
The
Sale Agreement provides for the sale of a 100% interest in seven apartment properties owned by the Trust and certain of its affiliates;
however, there are circumstances in which certain apartment properties may be excluded from the transaction. If all of seven apartment
properties are sold pursuant to the Sale Agreement, the completion of the transaction will constitute a “change in control”
under the Deferred Fee Plan and entitle participants to receive a lump sum cash payment of their accrued benefits under the Deferred
Fee Plan. The terms of the Sale Agreement, including the circumstances in which certain apartment properties may be excluded from
the transaction, are described in further detail in the Trust’s Current Report on Form 8-K filed with the SEC on January
15, 2020.
Fiscal 2019 Compensation
The Compensation Committee recommended
to the Board that there be no adjustments to the compensation paid to the executive officers for the fiscal year ended October
31, 2016 from the compensation paid to them in the fiscal year ended October 31, 2015, and the Board accepted the Compensation
Committee’s recommendation and did not make any adjustments to the compensation paid to the executive officers for the fiscal
year ended October 31, 2016. The Compensation Committee similarly recommended to the Board that there be no adjustments to the
compensation paid to the executive officers for the fiscal year ended October 31, 2017, and the Board accepted the Compensation
Committee’s recommendation and did not make any adjustments to the compensation paid to the executive officers for the fiscal
year ended October 31, 2017.
Following Robert S.
Hekemian’s retirement as Chairman and Chief Executive Officer on April 5, 2018, the Board determined, upon the
recommendation of the Compensation Committee, to pay Robert S. Hekemian, Jr. a base salary for the fiscal year ended October
31, 2018 of $300,000 on a pro-rated basis for his services as Chief Executive Officer following his appointment to that
office in April 2018. Robert S. Hekemian was paid an annual base salary of $300,000 prior to his retirement in April
2018.
With respect to compensation for
the fiscal year ended October 31, 2019, the Compensation Committee recommended to the Board that the base salary paid to Robert
S. Hekemian, Jr. for his service as Chief Executive Officer of the Trust be increased to $400,000 per year from $300,000 per year,
and that there be no adjustments to the compensation paid to Allan Tubin as Chief Financial Officer and Treasurer of the Trust,
Ronald J. Artinian as Chairman of the Board of the Trust, or John A. Aiello as Executive Secretary, and the Board approved the
Compensation Committee’s recommendations.
With respect to compensation for
the fiscal year ending October 31, 2020, the Compensation Committee recommended to the Board that the base salary paid to Robert
S. Hekemian, Jr. for his service as Chief Executive Officer of the Trust be maintained at $400,000 per year, and that there be
no adjustments to the compensation paid to Allan Tubin as Chief Financial Officer and Treasurer of the Trust, Ronald J. Artinian
as the Chairman of the Board or John A. Aiello as Executive Secretary.
The Compensation Committee considers
the following factors, among other things, in the course of its review of the compensation for the executive officers: (a) compensation
paid by other real estate investment trusts, both as a component of operating expenses and to ensure that the Trust’s compensation
levels are competitive in the industry; (b) the duties and responsibilities of the executive officers and the value of the services
provided by them; (c) the Trust’s operating results and financial condition, as well as the condition and prospects of the
residential and commercial real estate markets; and (d) the results of the most recent shareholder advisory vote to approve the
compensation of the executive officers, which was conducted at the 2017 Annual Meeting. For the fiscal year ending October 31,
2020, the Compensation Committee also considered the roles of the executive officers with the Trust’s evaluation and pursuit
of the strategic alternatives being pursued by the Trust, including the Sale Agreement and Plan of Liquidation.
The Compensation Committee reviews
compensation paid by other real estate investment trusts in the most general way in view of the fact that unlike many other real
estate investment trusts, the Trust is externally managed. Therefore, the Trust does not retain the services of its executive officers
on a full-time, exclusive basis, and the executive officers do not spend full time in their respective positions or devote all
of their business activities to the Trust. The Compensation Committee and the Board take these considerations into account when
determining the compensation to be paid to the Trust’s executive officers, and the compensation paid to the executive officers
reflects what the Compensation Committee and the Board believe to be fair and reasonable compensation for the services that the
executive officers provide to the Trust and their commitment to serve as executive officers of the Trust under these circumstances.
The Compensation Committee and the Board also consider the size and scope of the Trust’s business and operations as reflected
on its balance sheet and income statement in relationship to other real estate investment trusts.
As required by the rules and regulations
of the SEC, at the 2017 Annual Meeting of Shareholders, the shareholders were asked to approve an advisory resolution approving
the compensation of the executive officers as disclosed and described in the Compensation Discussion and Analysis and the compensation
tables and narratives contained in the Trust’s proxy statement used in connection with the 2017 Annual Meeting. The advisory
resolution received the approval of approximately 97.7% of the votes cast on this proposal. The Compensation Committee and the
Board concluded from the strong approval of the advisory resolution that the shareholders believe that the Trust’s compensation
policies and the compensation paid to the executive officers are appropriate and reflective of the Trust’s objectives of
aligning the interests of the executive officers with the long-term interests of the Trust. In accordance with the rules and regulations
of the SEC, and based on the results of the vote by the shareholders at the 2017 Annual Meeting on the frequency of such vote,
the advisory vote by the shareholders to approve the compensation of the executive officers will occur again at a special meeting
of the Trust’s shareholders to approve the Sale Agreement and Plan of Liquidation, among other things, which the Trust expects
to hold in the second quarter of the fiscal year ending October 31, 2020.
Risk Management
The Compensation Committee does
not believe that the Trust’s executive compensation program gives rise to any risks that are reasonably likely to have a
material adverse effect on the Trust. Executive officers are compensated on a fixed salary basis and have not been awarded any
bonuses or other compensation that might encourage the taking of unnecessary or excessive risks that threaten the long-term value
of the Trust. In addition, the Compensation Committee and the Board have utilized, the Equity Incentive Plan to align the interests
of the trustees and executive officers with the long-term interests of the Trust and the shareholders through grants of stock options
and other equity-based awards, thereby giving the trustees and executive officers additional incentives to protect the long-term
value of the Trust.
Executive Compensation and
Financial Performance
As discussed above, the executive
officers of the Trust are compensated primarily on a fixed salary basis and have not been awarded any incentive-based cash bonuses,
and the compensation paid to the executive officers is not specifically dependent upon any particular measure of financial performance.
However, the Compensation Committee considers, in general terms, both the overall financial performance and condition of the Trust
and the Trust’s long-term prospects in the Committee’s determination of appropriate levels of executive salary, among
other factors and considerations discussed under “Fiscal 2019 Compensation” above.
Chief Executive Officer Compensation
and Employee Compensation
The table below sets forth comparative
information regarding (A) the total compensation of the Chief Executive Officer for the fiscal year ended October 31, 2019, (B)
the median of the total compensation of all other employees of the Trust, not including the Chief Executive Officer, for the fiscal
year ended October 31, 2019, and (C) the ratio of the Chief Executive Officer’s total compensation to the median of the total
compensation of all other employees (other than the Chief Executive Officer). As of October 31, 2019, excluding the Chief Executive
Officer, the Trust had forty-six employees, including thirty-two full-time employees, eleven part-time and seasonal employees,
and three executive officers.
Chief Executive Officer compensation (A)
|
$481,190
|
Median compensation of all employees (not including Chief Executive Officer) (B)
|
$39,888
|
Ratio of (A) to (B)
|
12.06
|
Compensation Committee Interlocks
and Insider Participation
For
the fiscal year ended October 31, 2019, David F. McBride, Justin F. Meng and Richard J. Aslanian served on the Compensation Committee
of the Board, with Mr. McBride serving as the Chairman of the Committee. None of the members of the Compensation Committee served
as an executive officer or employee of the Trust at any time during the fiscal year ended October 31, 2019, nor have any of them
ever served as an executive officer of the Trust in any prior year.
Compensation Committee Report
The Compensation
Committee has discussed and reviewed the foregoing Compensation Discussion and Analysis with management. Based upon this review
and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in
this Amendment.
Submitted by:
|
David F. McBride, Chairman
|
|
Justin F. Meng
|
|
Richard J. Aslanian
|
SUMMARY COMPENSATION TABLE
The following
table sets forth information concerning the compensation of all of the named executive officers of the Trust (the “Executive
Officers”) as of October 31, 2019, October 31, 2018 and October 31, 2017 for services in all capacities to the Trust for
the 2019, 2018 and 2017 fiscal years, respectively. With respect to all compensation, the term “paid” will mean actually
paid or deferred.
Name and Principal
Position (1)
|
Year
|
Salary ($)(2)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation ($)
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)
|
Total ($)
|
Robert S. Hekemian,
|
2019
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
Former Chairman of the Board
|
2018
|
$128,932 (4)
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$235,806 (5)
|
$364,738 (6)
|
and Chief Executive Officer (3)
|
2017
|
$300,000
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$237,745 (5)
|
$537,745
|
Robert S. Hekemian, Jr.,
|
2019
|
$400,000
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$81,190 (9)
|
$481,190
|
President and Chief
|
2018
|
$171,781 (8)
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$63,046 (9)
|
$234,827
|
Executive Officer (7)
|
2017
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
Allan Tubin,
|
2019
|
$21,863 (11)
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$21,863
|
Treasurer and Chief
|
2018
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
Financial Officer (10)
|
2017
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
Donald W. Barney,
|
2019
|
$20,342 (13)
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$87,211 (14)
|
$107,553
|
Former President, Treasurer
|
2018
|
$75,000
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$119,515 (14)
|
$194,515
|
and
Chief Financial Officer (12)
|
2017
|
$75,000
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$114,378 (14)
|
$189,378
|
John A. Aiello, Esq.,
|
2019
|
$40,000
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$76,000 (15)
|
$116,000 (16)
|
Executive Secretary and
|
2018
|
$35,000
|
$ --
|
$ --
|
$ --
|
$ --
|
$ --
|
$68,000 (15)
|
$103,000 (16)
|
Secretary
|
2017
|
$30,000
|
$ --
|
$ --
|
$67,260
|
$ --
|
$ --
|
$71,800 (15)
|
$169,060 (16)
|
|
(1)
|
Represents the positions held by each Executive Officer for the fiscal years
ended October 31, 2019, October 31, 2018 and October 31, 2017.
|
|
(2)
|
Represents payment to the Executive Officers for their services as Executive
Officers of the Trust.
|
|
(3)
|
Robert S. Hekemian retired as Chairman, Chief Executive Officer and a trustee
of the Trust effective April 5, 2018. Mr. Hekemian did not serve as an Executive Officer of the Trust during the fiscal year ended
October 31, 2019.
|
|
(4)
|
Based on an annual base salary in the amount of $300,000, prorated for the
period beginning November 1, 2017 through the effective date of Robert S. Hekemian’s retirement as Chairman of the Board
and Chief Executive Officer on April 5, 2018.
|
|
(5)
|
Of these amounts, $200,955 and $177,958 represent accrued interest earned
in the fiscal years ended October 31, 2018 and 2017, respectively, on amounts previously deferred by Robert S. Hekemian for service
as an Executive Officer pursuant to the terms of the Deferred Fee Plan, pursuant to which payment of accrued interest is deferred
until such time that the deferred executive officer fees are paid to Mr. Hekemian; $27,642 and $55,800 represent annual retainer
fees, meeting fees and other fees paid to Mr. Hekemian in the fiscal years ended October 31, 2018 and 2017, respectively, as consideration
for his service on the Board of Trustees and, if applicable, its committees, but deferred pursuant to the terms of the Deferred
Fee Plan; and $7,209 and $3,987 represent dividends earned related to accrued interest and fees in the fiscal years ended October
31, 2018 and 2017, respectively. Pursuant to the amendments to the Deferred Fee Plan that became effective on November 1, 2014,
the aggregate amount of $235,806 deferred (including dividends earned on deferral) for the fiscal year ended October 31, 2018 converted
into an aggregate
|
|
|
|
of 14,921 Share Units, and the aggregate amount of $237,745 deferred (including dividends earned on deferral)
for the fiscal year ended October 31, 2017 converted into an aggregate of 12,917 Share Units. See “Amended and Restated Deferred
Fee Plan,” above.
|
|
(6)
|
In addition to amounts paid to Robert S. Hekemian for his service as Chairman
of the Board, Chief Executive Officer and a trustee of the Trust during the fiscal year ended October 31, 2018 until his retirement
as an Executive Officer and trustee on April 5, 2018, Mr. Hekemian entered into a Consulting Agreement with the Trust effective
April 5, 2018 and received compensation from the Trust for consulting services rendered thereunder. The compensation paid to Mr.
Hekemian under the Consulting Agreement during the fiscal years ended October 31, 2019 and 2018 is described in Item 13, “Certain
Relationships and Related Party Transactions; Trustee Independence.”
|
|
(7)
|
Robert S. Hekemian, Jr. was appointed as Chief Executive Officer of the Trust
effective April 5, 2018 and President of the Trust effective February 7, 2019. Mr. Hekemian did not serve as an Executive Officer
of the Trust during the fiscal year ended October 31, 2017.
|
|
(8)
|
Based on an annual base salary in the amount of $300,000, prorated for the
period beginning on the date of Robert S. Hekemian, Jr.’s appointment as Chief Executive Officer on April 5, 2018 through
the remainder of the fiscal year ended October 31, 2018.
|
|
(9)
|
Of these amounts, $9,840 and $11,080 represent accrued interest earned in
the fiscal years ended October 31, 2019 and 2018, respectively, on amounts previously deferred by Robert S. Hekemian, Jr. pursuant
to the terms of the Deferred Fee Plan, pursuant to which payment of accrued interest is deferred until such time that the deferred
fees are paid to Mr. Hekemian; $61,000 and $50,000 represent annual retainer fees, meeting fees and other fees paid to Mr. Hekemian
in the fiscal years ended October 31, 2019 and 2018, respectively, as consideration for his service on the Board of Trustees and,
if applicable, its committees, but deferred pursuant to the terms of the Deferred Fee Plan; and $10,350 and $1,966 represent dividends
earned related to accrued interest and fees in the fiscal years ended October 31 2019 and 2018, respectively. Pursuant to the amendments
to the Deferred Fee Plan that became effective on November 1, 2014, the aggregate amount of $81,190 deferred (including dividends
earned on deferral) for the fiscal year ended October 31, 2019 converted into an aggregate of 4,927 Share Units, and the aggregate
amount of $63,046 deferred (including dividends earned on deferral) for the fiscal year ended October 31, 2018 converted into an
aggregate of 4,002 Share Units. See “Amended and Restated Deferred Fee Plan,” above.
|
|
(10)
|
Allan Tubin was appointed as Chief Financial Officer and Treasurer of the
Trust effective February 7, 2019. Mr. Tubin did not serve as an executive officer of the Trust during fiscal 2018 or fiscal 2017.
|
|
(11)
|
Based on an annual base salary of $30,000 pro-rated for the period beginning
on the date of Mr. Tubin’s appointment as Chief Financial Officer and Treasurer on February 7, 2019 through the remainder
of the fiscal year ended October 31, 2019.
|
|
(12)
|
Donald W. Barney retired as President, Chief Financial Officer, Treasurer
and a trustee of the Trust effective February 7, 2019.
|
|
(13)
|
Based on an annual base salary of $75,000 prorated for the fiscal year ended
October 31, 2019 through the date of Mr. Barney’s retirement as Chief Financial Officer and Treasurer on February 7, 2019.
|
|
(14)
|
Of these amounts, $57,081, $65,992 and $58,440 represent accrued interest
earned on amounts previously deferred by Donald W. Barney for service as an Executive Officer pursuant to the terms of the Deferred
Fee Plan, pursuant to which payment of accrued interest is deferred until such time that the deferred executive officer fees are
paid to Mr. Barney in the fiscal years ended October 31, 2019, 2018 and 2017, respectively; $13,938, $50,000 and $54,000 represent
annual retainer fees, meeting fees and other fees paid to Mr. Barney in the fiscal years ended October 31, 2019, 2018 and 2017,
respectively, as consideration for his service on the Board and, if applicable, its committees, but deferred pursuant to the terms
of the Deferred Fee Plan; and $16,192, $3,523 and $1,938, represent dividends earned related to accrued interest and fees in the
fiscal years ended October 31, 2019, 2018 and 2017, respectively. Pursuant to the amendments to the Deferred Fee Plan that became
effective on November 1, 2014, the aggregate amount of $87,211 deferred (including dividends earned on deferral) for the fiscal
year ended October 31, 2019 converted into an aggregate of 5,363 Share Units, the aggregate amount of $119,515 deferred (including
dividends earned on deferral) for the fiscal year ended October 31, 2018 converted into an aggregate of 7,574 Share Units and the
aggregate amount of $114,378 deferred (including dividends earned on deferral) for the fiscal year ended October 31, 2017 converted
into an aggregate of 6,234 Share Units. See “Amended and Restated Deferred Fee Plan” above.
|
|
(15)
|
During the fiscal years ended October 31, 2019, October 31, 2018 and October
31, 2017, the Executive Secretary was entitled to receive (i) meeting attendance fees in the amount of $1,500 for each meeting
of the Board and its committees attended, $1,000 for each meeting participated in by teleconference; and (ii) property site inspection
fees in the amount of $1,000 for each site inspection attended and reimbursement of all reasonable and verified out-of-pocket expenses
incurred in connection with the site visit.
|
|
(16)
|
Mr. Aiello is an officer and shareholder in the law firm of Giordano, Halleran
& Ciesla, P.C. During the fiscal years ended October 31, 2019, 2018 and 2017, Mr. Aiello paid to the law firm the retainer
and meeting fees which he received in connection with his services as Secretary and Executive Secretary of the Trust during the
fiscal years ended October 31, 2019, 2018 and 2017.
|
The following table sets forth information concerning
the compensation of the Executive Officers that was deferred pursuant to the Deferred Fee Plan, described under “Amended
and Restated Deferred Fee Plan” above, for the fiscal year ended October 31, 2019:
FISCAL 2019 NONQUALIFIED DEFERRED
COMPENSATION
Name (1)
|
(a) (2)
Executive
Contributions
in Last FY
($)
|
(b) (2)
Registrant
Contributions
in Last FY
($)
|
(c)
Aggregate
Earnings
in Last FY
($)
|
(d)
Aggregate
Withdrawals/
Distributions
($)
|
(e) (2)
Aggregate
Balance
at Last FYE
($)
|
Robert S. Hekemian, Jr.
|
$61,000
|
$ ---
|
$20,190
|
$ ---
|
$605,194
|
Donald W. Barney (3)
|
$13,938
|
$ ---
|
$73,273
|
$207,908
|
$1,925,614
|
Allan Tubin
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
John A. Aiello, Esq.
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
|
(1)
|
Effective November 1, 2000, the Board of Trustees adopted the Deferred Fee Plan for its executive
officers and its trustees. The Deferred Fee Plan was amended and restated on December 30, 2008, effective as of December 31, 2008,
and further amended and restated on September 4, 2014, effective beginning November 1, 2014. Prior to the amendments that went
into effect beginning November 1, 2014, the Deferred Fee Plan permitted any executive officer or trustee to elect to defer receipt
of any executive officer, trustee retainer, meeting attendance, or property site inspection fee. As a result of the amendments
to the Deferred Fee Plan that went into effect on November 1, 2014, participants in the Deferred Fee Plan who are also Executive
Officers of the Trust are only permitted to defer amounts paid to them in their capacities as trustees, and are not permitted to
defer amounts paid to them in their capacities as Executive Officers. Please see the full discussion of the Deferred Fee Plan under
“Amended and Restated Deferred Fee Plan” above.
|
|
(2)
|
All amounts reported in columns (a) and (b) are reported as compensation to the named executive
officers in their capacities as members of the Board of Trustees in the fiscal year ended October 31, 2019 in the Summary Compensation
Table above.
|
|
(3)
|
Donald W. Barney retired as President, Chief Financial Officer, Treasurer and a trustee of the
Trust effective February 7, 2019.
|
The following table sets forth
information concerning the conversion into Share Units of deferred fees, accrued deferred interest and dividends payable with respect
to credited Share Units under the Deferred Fee Plan during the fiscal year ended October 31, 2019, and the aggregate number of
credited Share Units, for each executive officer individually.
Participant
|
Aggregate
Deferred
Fees for FY
2019
|
Accrued
Deferred
Interest for FY
2019
|
Dividends
Payable on
Credited Share
Units for FY
2019
|
Share Units
Credited for
FY 2019
|
Aggregate
Share Units
Credited
|
Robert S. Hekemian, Jr.
|
$61,000
|
$9,840
|
$10,350
|
4,927
|
19,025
|
Donald W. Barney
|
$13,938
|
$57,081
|
$16,192
|
5,363
|
28,008
|
Allan Tubin
|
$ ---
|
$ ---
|
$ ---
|
---
|
---
|
John A. Aiello, Esq.
|
$ ---
|
$ ---
|
$ ---
|
---
|
---
|
See “Amended and Restated Deferred Fee Plan”
above for more information concerning the terms and provisions of the Deferred Fee Plan and the information set forth in these
tables.
Securities Authorized for Issuance under Equity
Compensation Plans
The number
of stock options outstanding under the Equity Incentive Plan, the weighted-average exercise price of the outstanding options, and
the number of securities remaining available for issuance, as of October 31, 2019 were as follows:
EQUITY COMPENSATION PLAN TABLE
Plan category
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
|
Equity compensation plans approved by security holders (1)
|
310,740
|
$18.35
|
442,060
|
Equity compensation plans not approved by security holders
|
--
|
--
|
--
|
Total
|
310,740
|
$18.35
|
442,060
|
|
(1)
|
The Trust currently has no equity compensation plans other than the Equity Incentive Plan described
under “Compensation Discussion and Analysis” above.
|
OUTSTANDING EQUITY AWARDS AT
FISCAL YEAR-END
|
Option Awards
|
Stock Awards
|
Name
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
|
Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
|
Equity
Incentive Plan
Awards:
Number of
Unexercised
Shares, Units
or Other
Rights That
Have Not
Vested (#)
|
Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#)
|
Robert S. Hekemian, Jr.
|
19,000
|
---
|
---
|
$18.45 (1)
|
9/3/2024
|
---
|
---
|
---
|
---
|
|
4,000
|
---
|
---
|
$18.45 (1)
|
9/3/2024
|
---
|
---
|
---
|
---
|
Donald W. Barney
|
36,000
|
---
|
---
|
$18.45 (1)
|
9/3/2024
|
---
|
---
|
---
|
---
|
Allan Tubin
|
6,000
|
---
|
---
|
$18.45 (1)
|
9/3/2024
|
---
|
---
|
---
|
---
|
John A. Aiello, Esq.
|
11,400
|
7,600 (2)
|
---
|
$21.00 (1)
|
11/9/2026
|
---
|
---
|
---
|
---
|
|
(1)
|
The exercise price of this option is equal to the Fair Market Value of the Shares on the date of
grant (as defined in the Equity Incentive Plan), which is described under “Compensation Discussion and Analysis” above.
|
|
(2)
|
The unvested Shares underlying this option vest as follows: 3,800 Shares vest on September 4, 2020;
and 3,800 Shares vest on September 4, 2021.
|
Fiscal 2019 Option Exercises and Stock Vested
There were
no exercises of stock options or vesting of stock held by Executive Officers in the fiscal year ended October 31, 2019.
Trustee Compensation
For the fiscal year ended October
31, 2019, each trustee was entitled to receive (a) an annual retainer fee of $35,000 per year; (b) a per meeting attendance fee
of $1,500 per meeting of the Board and each committee of which a trustee is a member; (c) a $1,000 per meeting fee for telephonic
meetings of the Board and each committee; and (d) a site inspection fee of $1,000 per site inspection. The Chairman of the Board
was entitled to receive an additional annual retainer in the amount of $30,000 and a per meeting attendance fee of $1,800 per meeting
of the Board, and the Chairman of the Audit Committee, the Chairman of the Compensation Committee and the Chairman of the Long-term
Planning Committee were entitled to receive per meeting attendance fees of $1,800 per meeting of the Audit Committee, Compensation
Committee and Long-term Planning Committee, respectively. The Chairman of the Audit Committee was entitled to receive an additional
annual retainer fee of $10,000, and the Chairman of the Compensation Committee and the Chairman of the Long-term Planning Committee
were each entitled to receive an additional annual retainer fee of $7,500. The Chairman of the Special Committee was entitled to
receive an additional quarterly retainer fee of $15,000 and each other member of the Special Committee was entitled to a quarterly
retainer of $10,000.
The trustees are entitled to defer
all or any part of their retainer, meeting and property site inspection fees pursuant to the terms of the Deferred Fee Plan. For
the fiscal year ended October 31, 2019, trustees (including the trustees who were also Executive Officers during the fiscal year
ended October 31, 2019) elected to defer an aggregate amount of approximately $879,800 of annual retainer fees, meeting attendance
fees, site inspection fees and accrued interest payable to them for their services to the Board and its committees, which amount
was converted into an aggregate of 53,741 Share Units during the fiscal year ended October 31, 2019. In addition, the trustees
(including the trustees who were also Executive Officers during the fiscal year ended October 31, 2019) were credited with an aggregate
of 6,407 Share Units during fiscal 2019 from the conversion of dividends paid with respect to the Share Units credited to their
accounts. See “Elements of Executive Compensation – Amended and Restated Deferred Fee Plan” under “Compensation
Discussion and Analysis” above. For the fiscal year ended October 31, 2019, the Trust paid an aggregate of $60,000 of annual
retainer fees, meeting attendance fees and site inspection fees to the trustees in cash for their services to the Board of Trustees
and its committees.
FISCAL 2019 TRUSTEE
COMPENSATION (1)
Name
|
Fees Earned
or Paid in
Cash
($)
|
Stock Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan
Compensation ($)
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(2)
|
All Other
Compensation ($)
|
Total
($)
|
Ronald J. Artinian
|
$186,964
|
$ ---
|
$12,150
|
$ ---
|
$ ---
|
$ ---
|
$199,114
|
Alan L. Aufzien (3)
|
$46,121 (4)
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
$46,121
|
David F. McBride
|
$127,240
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
$127,240
|
Justin F. Meng
|
$122,411
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
$ ---
|
$122,411
|
David B. Hekemian
|
$56,251
|
$ ---
|
$ --
|
$ ---
|
$ ---
|
$ ---
|
$56,251
|
Richard J. Aslanian
|
$98,651
|
$ ---
|
$ --
|
$ ---
|
$ ---
|
$ ---
|
$98,651
|
|
(1)
|
See the Summary Compensation Table above for information regarding compensation paid to each of
Robert S. Hekemian, Jr., Donald W. Barney and John A. Aiello during the fiscal year ended October 31, 2019 in connection with their
positions as trustees.
|
|
(2)
|
Effective November 1, 2014, the Deferred Fee Plan was amended to provide that the interest rate
was equal to the average interest rate on ten-year Treasury bonds plus 150 basis points. The Deferred Fee Plan was also amended
to provide that accrued deferred interest from and after November 1, 2014 would be converted into Share Units equivalent to Shares
on a monthly basis. See “Amended and Restated Deferred Fee Plan” above for a description of the amendments to the Deferred
Fee Plan.
|
|
(3)
|
Alan F. Aufzien retired as a trustee of the Trust upon the conclusion of the Trust’s 2019
Annual Meeting of Shareholders held on April 4, 2019.
|
|
(4)
|
The annual trustee retainer fee paid to Mr. Aufzien with respect to the 2019 fiscal year was pro-rated
through the date of his retirement as a trustee on April 4, 2019, based on a base annual retainer fee of $35,000.
|
The following table sets forth
information concerning the conversion of deferred fees and accrued deferred interest into Share Units under the Deferred Fee Plan
during the fiscal year ended October 31, 2019 for each trustee who participated in the Deferred Fee Plan during the fiscal year
ended October 31, 2019, except that the information concerning the participation of Robert S. Hekemian, Jr., Donald W. Barney and
John A. Aiello, Esq., in the Deferred Fee Plan in their capacities as trustees is set forth under “Executive Compensation”
above.
Participant
|
Aggregate
Deferred Fees
for FY 2019
|
Accrued
Deferred
Interest for FY
2019
|
Dividends Paid
on Credited
Share Units for
FY 2019
|
Share Units
Credited for
FY 2019
|
Aggregate
Share Units
Credited
|
Ronald J. Artinian
|
$108,317
|
$31,048
|
$17,599
|
9,473
|
32,962
|
Alan F. Aufzien
|
$30,944
|
$12,015
|
$3,162
|
3,004
|
--
|
David F. McBride
|
$104,617
|
$9,747
|
$12,876
|
7,675
|
24,391
|
Justin F. Meng
|
$115,796
|
$0
|
$6,615
|
7,357
|
13,797
|
David B. Hekemian
|
$53,500
|
$0
|
$1,251
|
3,285
|
3,285
|
Richard J. Aslanian
|
$93,517
|
$0
|
$2,134
|
5,746
|
5,746
|
Totals
|
$506,691
|
$52,810
|
$43,637
|
36,540
|
80,181
|
ITEM 12
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
The
following table sets forth certain information regarding the beneficial ownership of Shares for (i) each person who is a beneficial
owner of 5% or more of our outstanding Shares, (ii) each of our trustees and executive officers and (iii) all of our trustees and
executive officers as a group, each as of February 11, 2020 unless otherwise indicated in the table below.
Amount and Nature of Beneficial
Ownership
Name of Beneficial Owner (1)
|
|
(A)
Aggregate
Number of Shares
Beneficially
Owned (2)
|
|
(B)
Number of Shares
Acquirable within
60 Days
|
|
(C)
Aggregate
Number of Shares
Deemed to be
Beneficially
Owned
(Column A plus
Column B)
|
|
(D)
Percent
of Class (3)
|
Ronald J. Artinian (4)
|
|
|
443,392
|
(6)
|
|
|
23,400
|
(5)
|
|
|
466,792
|
(6)
|
|
|
6.8
|
%
|
David F. McBride, Esq. (4)
|
|
|
5,000
|
(7)
|
|
|
19,000
|
(5)
|
|
|
24,000
|
(7)
|
|
|
*
|
|
Robert S. Hekemian, Jr. (4)(8)
|
|
|
300,148
|
(9)
|
|
|
23,000
|
(5)
|
|
|
323,148
|
(9)
|
|
|
4.7
|
%
|
John A. Aiello, Esq. (4)(8)
|
|
|
5,000
|
|
|
|
11,400
|
(5)
|
|
|
16,400
|
|
|
|
*
|
|
Justin F. Meng (4)
|
|
|
15,000
|
(10)
|
|
|
11,400
|
(5)
|
|
|
26,400
|
(10)
|
|
|
*
|
|
David B. Hekemian (4)
|
|
|
405,546
|
(11)
|
|
|
18,800
|
(5)
|
|
|
424,346
|
(11)
|
|
|
6.2
|
%
|
Richard J. Aslanian (4)
|
|
|
10,200
|
|
|
|
3,800
|
(5)
|
|
|
14,000
|
|
|
|
*
|
|
Allan Tubin (8)
|
|
|
7,662
|
|
|
|
6,000
|
(5)
|
|
|
13,662
|
|
|
|
*
|
|
All trustees and executive officers as a group (8 persons) (6)(7)(9)(10)(11)(12)
|
|
|
1,089,732
|
(12)
|
|
|
116,800
|
(5)
|
|
|
1,206,532
|
(12)
|
|
|
17.3
|
%
|
*
Shares beneficially owned do not exceed 1% of the Trust’s issued and outstanding Shares.
|
(1)
|
All trustees and executive officers listed in this table, with the exception
of John A. Aiello, maintain a mailing address at 505 Main Street, P.O. Box 667, Hackensack, New Jersey 07602. John A. Aiello maintains
a mailing address at 125 Half Mile Road, Suite 300, Red Bank, New Jersey 07701.
|
|
(2)
|
Except as otherwise indicated, all of the Shares are held beneficially and
of record.
|
|
(3)
|
Based on 6,856,651 Shares outstanding as of February 11, 2020.
|
|
(4)
|
A trustee of the Trust.
|
|
(5)
|
Vested options to acquire Shares that are currently exercisable, or options
that vest and become exercisable within 60 days after February 11, 2020.
|
|
(6)
|
Includes 52,504 Shares held in Individual Retirement Accounts for the benefit
of Mr. Artinian. Also includes 4,250 Shares which are held by Mr. Artinian’s son, with respect to which Mr. Artinian disclaims
beneficial ownership.
|
|
(7)
|
Includes 4,000 Shares held by Mr. McBride’s wife.
|
|
(8)
|
An executive officer of the Trust.
|
|
(9)
|
Includes (i) an aggregate of 102,216 Shares which are held by certain partnerships
and limited liability companies in which Mr. Hekemian is a partner or member, (ii) 9,238 Shares which are held in trust by Mr.
Hekemian for the benefit of his children, and (iii) an aggregate of 11,000 Shares which are held in certain trusts for the benefit
of Mr. Hekemian’s nephews and of which Mr. Hekemian is trustee. Also includes 25,458 Shares held in a trust of which
|
|
|
|
Mr.
Hekemian is a beneficiary. Mr. Hekemian disclaims beneficial ownership of the foregoing Shares held in partnerships, limited liability
companies and trusts except to the extent of his pecuniary interest in such partnerships, limited liability companies and trusts.
|
|
(10)
|
Includes 2,400 Shares held by Mr. Meng’s wife, with respect to which
Mr. Meng disclaims beneficial ownership.
|
|
(11)
|
Includes (i) an aggregate of 102,216 Shares which are held by certain partnerships
and limited liability companies in which Mr. Hekemian is a partner or member, (ii) an aggregate of 17,638 Shares which are held
in certain trusts for the benefit of Mr. Hekemian’s nephews and niece and of which Mr. Hekemian is a trustee, (iii) 25,458
Shares held in a trust of which Mr. Hekemian is a beneficiary, (iv) an aggregate of 88,940 Shares held by the Robert and Mary Jane
Hekemian Foundation, Inc. of which Mr. Hekemian is the Vice President/Treasurer, and (v) 6,000 Shares held in trust by Mr. Hekemian
for the benefit of his children. Mr. Hekemian disclaims beneficial ownership of the foregoing Shares held in partnerships, limited
liability companies and trusts except to the extent of his pecuniary interest in such partnerships, limited liability companies
and trusts. Also includes 1,600 Shares held by Mr. Hekemian’s wife, with respect to which Mr. Hekemian disclaims beneficial
ownership.
|
|
(12)
|
Robert S. Hekemian, Jr. and David B. Hekemian are both deemed to be the beneficial
owner of 102,216 Shares held by certain partnerships and limited liability companies in which each of them is a partner or member.
Therefore, the total number of Shares beneficially owned by all executive officers and trustees as a group, which includes both
Robert S. Hekemian, Jr. and David B. Hekemian, is not merely the aggregate of the beneficial ownership of each executive officer
and trustee, since calculating the aggregate number of Shares beneficially owned by all executive officers and trustees as a group
on that basis would result in the 102,216 Shares of which both Robert S. Hekemian, Jr. and David B. Hekemian are deemed the beneficial
owner being double-counted. As disclosed above, Robert S. Hekemian, Jr. and David B. Hekemian disclaim beneficial ownership of
the 102,216 Shares except to the extent of their respective pecuniary interests in the partnerships and limited liability companies
that hold such Shares.
|
ITEM 13
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
Of the seven members of the Board,
Ronald J. Artinian, David F. McBride, Justin F. Meng and Richard J. Aslanian qualify as “independent directors” in
accordance with the applicable NASDAQ Listing Rules and SEC rules. The independence of the trustees serving on committees of the
Board is discussed under “Committees of the Board of Trustees” above.
The Board has adopted a written
charter for the Audit Committee (see “Audit Committee” under Item 10 above) whereby the Audit Committee oversees and
evaluates all related party transactions proposed to be entered into by the Trust. In addition, the Declaration of Trust contains
procedures in the event of any proposed purchase or sale of any properties between the Trust and any trustee, executive officer
or any firm, partnership or corporation in which a trustee or executive officer has or may have an interest. Further, the Trust
has adopted a Code of Ethics applicable to all trustees, executive officers and management employees of the Trust (see “Code
of Ethics” under Item 10 above), which Code of Ethics promotes the honest and ethical conduct, including the ethical handling
of actual or apparent conflicts of interest between personal and professional relationships.
Robert S. Hekemian, Jr., President
and Chief Executive Officer of the Trust and a trustee, and David B. Hekemian, a trustee, are shareholders of Hekemian & Co.
Robert S. Hekemian, Jr. and David B. Hekemian each hold a 33.3% equity interest in Hekemian & Co. The balance of the equity
interest in Hekemian & Co. is held by the estate of the late Robert S. Hekemian, the former Chairman of the Board and Chief
Executive Officer of the Trust, and Bryan S. Hekemian. Robert S. Hekemian was the father of Robert S. Hekemian, Jr., David B. Hekemian
and Bryan S. Hekemian. Robert S. Hekemian served as the Chairman of the Board and Chief Executive Officer of Hekemian & Co.;
Robert S. Hekemian, Jr. serves as the President and Chief Operating Officer of Hekemian & Co.; David B. Hekemian serves as
a Vice President and the Treasurer of Hekemian & Co.; and Bryan S. Hekemian serves as a Vice President and the Secretary of
Hekemian & Co..
On April 10, 2002, the Trust and
Hekemian & Co. entered into a Management Agreement replacing the Management Agreement dated December 20, 1961, as extended.
The term of the Management Agreement was automatically renewed as of November 1, 2019 for a two-year period, which will expire
on October 31, 2021. The term of the Management Agreement automatically renews for periods of two years unless either party gives
not less than six months prior notice to the other of non-renewal. The Trust may terminate the Management Agreement (i) without
cause upon one year’s prior written notice, (ii) for cause if Hekemian & Co. has not cured an event of default within
30 days of receipt of notice of termination from the Trust, or (iii) in the event of an acquisition of the Trust where the Trust
ceases to effectively exist as an operating entity. The Management Agreement provides for a termination fee in the event of a termination
by the Trust without cause or following a merger or acquisition of the Trust.
Under the Management Agreement,
Hekemian & Co. serves as Managing Agent for the Trust and the Trust’s properties which the Trust owned on November 1,
2001. The Trust may retain Hekemian & Co. or other managing agents to manage its properties acquired after November 1, 2001
and to perform various other duties such as sales, acquisitions, and development with respect to any or all of the Trust’s
properties. However, Hekemian & Co. currently manages all properties owned by the Trust and all subsidiaries and affiliates
of the Trust, except for the commercial office space of the Rotunda, a mixed use (office, retail and residential) property located
in Baltimore, Maryland that was acquired in July 2005 by Grande Rotunda, LLC (“Grande Rotunda”), a limited liability
company in which the Trust owns a 60% equity interest. An unaffiliated third party management company manages the commercial office
space at the Rotunda. Hekemian & Co. is not the exclusive advisor for the Trust to locate and recommend investments deemed
suitable for the Trust, and it is not required to offer potential acquisition properties exclusively to the Trust before acquiring
those properties for Hekemian & Co.’s own account or for others, including shareholders and employees of Hekemian &
Co.
On
January 14, 2020, in connection with the transactions contemplated in the Sale Agreement and the Plan of Liquidation, the Trust
and Hekemian & Co. entered into a First Amendment to Management Agreement, which will become effective upon the effectiveness
of the Plan of Liquidation and amends the Management Agreement. The First Amendment provides that upon the closing of any sale
or other disposition of the Trust’s entire direct or indirect interest in each Trust property, whether pursuant to the Sale
Agreement or otherwise in furtherance of the Plan of Liquidation, (a) the Management Agreement will automatically terminate and
be of no further force or effect with respect to such Trust Property and (b) the Trust will pay to Hekemian & Co. (i) any and
all commissions and fees for management services and reimbursement required to be paid by the Trust pursuant to the Management
Agreement in respect of the applicable Trust property up to the termination date, calculated on a pro rata basis, plus (ii) a termination
fee in respect of such Trust property in an amount equal to the product of (x) the Trust’s direct or indirect percentage
ownership interest in such Trust property, multiplied by (y) 1.25, multiplied by (z) one (1) year’s Base Management Fee (as
defined in the Management Agreement and First Amendment) in respect of such Trust property.
In addition,
the First Amendment amends the Management Agreement to provide that upon the closing of any sale or other disposition of the Trust’s
entire direct or indirect interest in each Trust property, whether pursuant to the Sale Agreement or otherwise in furtherance of
the Plan of Liquidation, the Trust will pay to Hekemian & Co. a sales fee equal to 1.65% of the sales
price for such Trust
property (reduced from the existing range of 2.5% to 4.5% in the Management Agreement); provided, however, that in the event that
a Trust property is not wholly owned, directly or indirectly, by the Trust, the sales fee payable to Hekemian & Co. will only
be payable in respect of the Trust’s percentage ownership share of the applicable Trust property.
The First Amendment provides that the
foregoing fees will be paid in lieu of, and shall supersede in their entirety, any other payments which otherwise would be payable
to Hekemian & Co. under the Management Agreement arising out of or attributable to the sale or other disposition of the of
the Trust’s entire direct or indirect interest in each Trust property or the termination of the Management Agreement in respect
of such Trust property (including, without limitation, any Termination Fee, M&A Termination Fee or Sale of Property Fee under
the Management Agreement (each as defined in the Management Agreement)). The First Amendment will become effective if, and only
if, the Plan of Liquidation becomes effective.
The Trust retained Hekemian &
Co. to manage the Preakness Shopping Center, which was acquired on November 1, 2002 by WaynePSC, LLC (“WaynePSC”),
a limited liability company in which the Trust owns a 40% membership interest, and the Damascus Shopping Center, which was acquired
on July 31, 2003 by Damascus Centre, LLC (“Damascus Centre”), a limited liability company in which the Trust owns a
70% equity interest. In the fiscal year ended October 31, 2004, the Trust retained Hekemian & Co. to manage The Pierre Towers,
an apartment complex acquired on April 15, 2004 by S And A Commercial Associates Limited Partnership (“S&A”), a
limited partnership in which the Trust owns a 65% equity interest. In the fiscal year ended October 31, 2005, the Trust retained
Hekemian & Co. to provide supervisory and management services to Grande Rotunda, although the Trust did not retain Hekemian
& Co. to manage the commercial office space at the Rotunda.
Pursuant to the terms of the Management
Agreement, the Trust pays Hekemian & Co. certain basic management fees, mortgage fees, administrative fees, other miscellaneous
fees and leasing commissions as compensation for its services. The Management Agreement includes a detailed schedule of such fees
and commissions for those services which the Managing Agent may be called upon to perform. During the fiscal year ended October
31, 2019, the Trust paid or accrued to Hekemian & Co. and Hekemian Development Resources, LLC, a wholly-owned subsidiary of
Hekemian & Co. (“Hekemian Resources”), management and other fees in the approximate aggregate amount of $3,587,000,
which includes the management fees of approximately $2,549,000 described in more detail below, and mortgage, leasing and other
fees in the approximate amount of $1,038,000. Included in other fees for the fiscal year ended October 31, 2019 are commissions
payable to Hekemian & Co. for the following transactions: $131,250 for the sale of the Patchogue property and $144,075 for
the refinancing of the Berdan Court, LLC loan.
The Trust also uses the resources
of Hekemian & Co.’s insurance department to secure insurance coverage for its properties and subsidiaries. Hekemian &
Co. is paid a commission for these services, which amounted to approximately $196,000 in the fiscal year ended October 31, 2019.
During the fourth quarter of the
fiscal year ended October 31, 2007, the Board approved development fee arrangements for supervising the Rotunda and Damascus Shopping
Center redevelopment projects. Hekemian Resources entered into Agency Agreements with each of Grande Rotunda and Damascus Centre
for the performance of management services in connection with the Rotunda and Damascus Center redevelopment projects on December
10, 2009 and August 13, 2008, respectively. The Agency Agreement with respect to the Rotunda was subsequently amended as of July
24, 2012 based on revisions to the scope of the project approved by the Board. The Agency Agreement with respect to the Rotunda
project provides for Hekemian Resources to receive a fee equal to 6.375% of the total development costs as defined less the amount
of $3,000,000 that Grande Rotunda had previously paid to Hekemian & Co. for the Rotunda project. Such development fees may
be modified should the Board approve a change in the scope of the project. In addition, the Trust paid Hekemian Resources a fee
in the amount of $1,400,000 in connection with the revision to the scope of the Rotunda project. The Trust paid $500,000 of this
fee to Hekemian Resources in the fiscal year ended October 31, 2013. The balance of $900,000 became due upon the issuance of a
certificate of occupancy for the multi-family portion of the project. A final certificate of occupancy was issued in the fiscal
year ended October 31, 2016; however, Hekemian Resources agreed to defer the payment of the $900,000 balance of this fee, and accordingly
the $900,000 portion of the fee was included in accounts payable on the Trust’s consolidated balance sheet at October 31,
2017. The Trust paid the $900,000 portion of this fee to Hekemian Resources in February 2018 in connection with the refinancing
of the Wells Fargo construction loan for the Rotunda property with a new construction loan from Aareal Capital Corporation. The
Trust also paid Hekemian Resources the amount of $45,000 representing a mutually agreed upon amount of interest on the $900,000
portion of the fee for the period during which Hekemian Resources had agreed to defer payment thereof.
The Damascus Center redevelopment
project has been completed, and all development fees due and payable pursuant to the Agency Agreement between Hekemian Resources
and Damascus Centre were paid in full prior to the fiscal year ended October 31, 2014.
From time to time, the Trust engages
Hekemian & Co. to provide certain additional services, such as consulting services related to development and financing activities
of the Trust. Separate fee arrangements are negotiated between the Trust and Hekemian & Co. with respect to such services.
The Trust also reimburses Hekemian & Co. for the salaries, payroll taxes,
insurance costs and certain other costs of personnel
employed at the Trust’s properties by Hekemian & Co. on behalf of the Trust.
The Trust’s real estate
investments may be in the form of wholly-owned fee interests or, if the circumstances warrant, joint venture interests. The Trust
will make certain real estate investments through joint ventures with other parties from time to time in order to diversify risk.
The Trust will also consider investing in real estate that requires development or that involves particular risk through joint
ventures in order to meet the Trust’s investment objectives. In furtherance of these objectives, the Trust has invested in
joint ventures with employees and affiliates of Hekemian & Co. and with trustees of the Trust, as described below.
The Trust owns a 60% equity interest
in, and is the managing member of, Grande Rotunda. Rotunda 100, LLC, a New Jersey limited liability company (“Rotunda 100”),
owns a 40% interest in Grande Rotunda. Robert S. Hekemian, Jr., Chief Executive Officer and a trustee of the Trust, and members
of his immediate family, including Robert S. Hekemian, the former Chairman and Chief Executive Officer of and consultant to the
Trust, David B. Hekemian, a trustee of the Trust, and other employees of Hekemian & Co., have majority managing control of
Rotunda 100. In July 2005, Grande Rotunda completed the acquisition of the Rotunda for a purchase price of 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
of which was contributed in cash by the members of Grande Rotunda in proportion to their membership interests. As an incentive
to the employees of Hekemian & Co. to identify and provide real estate investment opportunities for the Trust, the Trust advanced
to the employees of Hekemian & Co. who are members of Rotunda 100 (including Robert S. Hekemian, Jr., David B. Hekemian and
certain other members of the immediate family of the late Robert S. Hekemian), 50% of the amount of the equity capital required
to be contributed by them to Rotunda 100 in connection with the acquisition and operation of the Rotunda. The Trust initially loaned
an aggregate amount of approximately $1,900,000 to those Hekemian & Co. employees (including approximately $1,700,000 million
to Robert S. Hekemian, Jr., David B. Hekemian and certain other members of the immediate family of Robert S. Hekemian) with respect
to their equity capital contributions (the “Rotunda Notes”). On May 8, 2008, the Board of Trustees approved amendments
to the loan agreements to increase the aggregate amount of the loans to $4,000,000 (which increased the aggregate amount loaned
to Robert S. Hekemian, Jr., David B. Hekemian and certain other members of the immediate family of Robert S. Hekemian in connection
with the Rotunda Notes to $3,700,000 from the initial aggregate amount of $1,700,000). These loans bear interest that floats at
225 basis points over the 90 day London Interbank Offered Rate (“LIBOR”), as adjusted each November 1, February 1,
May 1 and August 1, and the loans are secured by such employees’ membership interests in Rotunda 100. The Rotunda Notes originally
provided for payments of accrued interest on a quarterly basis, with no principal payments required during the term of the Rotunda
Notes, except that the borrowers were required to pay to the Trust all refinancing proceeds and other cash flow they received from
their interests in Grande Rotunda. The Rotunda Notes were originally scheduled to mature at the earlier of (a) 10 years after issue,
on June 19, 2015 and (b) at the election of the Trust, 90 days after the borrower terminates employment with Hekemian & Co.,
at which time all outstanding unpaid amounts would be due. On June 4, 2015, the Board approved an extension of the terms of each
of the Rotunda Notes to the earlier to occur of (a) June 19, 2018 and (b) the day that is 5 days after Grande Rotunda closes on
a permanent mortgage loan secured by the Rotunda property. On December 7, 2017, the Board approved amendments to the Rotunda Notes
to further extend the term of each of the Rotunda Notes to the date or dates upon which Grande Rotunda makes distributions of cash
to its members as a result of either a refinancing of Grande Rotunda’s indebtedness or a sale of Grande Rotunda or all or
a portion of the real property owned by it; provided, that the Rotunda Notes will mature only to the extent of such distributions
to the maker of the Rotunda Notes. Pursuant to the December 7, 2017 amendments, distributions of cash as a result of events other
than a refinancing of the indebtedness of Grande Rotunda or sale of the Rotunda property will not result in the maturation of the
Rotunda Notes. At October 31, 2019, the outstanding principal balance on the Rotunda Notes was $4,000,000, and the accrued but
unpaid interest on the Rotunda Notes was $1,053,000. Grande Rotunda paid Hekemian & Co. approximately $640,000 in management
fees during the fiscal year ended October 31, 2019, which is included in the $2,549,000 of management fees paid by the Trust to
Hekemian & Co. during the fiscal year ended October 31, 2019 mentioned above. Pursuant to the terms of the Management Agreement,
Grande Rotunda paid Hekemian & Co. leasing commissions in the aggregate amount of approximately $150,000, which is included
in the $1,038,000 of mortgage, leasing and other fees paid to Hekemian & Co. mentioned above.
Prior to the refinancing of the
Wells Fargo construction loan for the Rotunda property with a new construction loan from Aareal Capital Corporation, the Trust
and Rotunda 100, as the 60% and 40% owners of Grande Rotunda, respectively, had been contributing their respective pro-rata share
of Grande Rotunda’s cash needs through loans to Grande Rotunda. As of October 31, 2019, Rotunda 100 had funded Grande Rotunda
with approximately $5.7 million (including interest), which is included in “Due to affiliate” on the Trust’s
consolidated balance sheet as of October 31, 2019 and is characterized as a demand loan that Rotunda 100 can require to be repaid
at any time.
The Trust owns a 70% membership
interest in Damascus Centre, which is the owner of the Damascus Shopping Center. During the fiscal year ended October 31, 2005,
in order to incentivize employees of Hekemian & Co., the Trust’s Board authorized an investor group comprised principally
of Hekemian employees (including the late Robert S. Hekemian, Robert S. Hekemian, Jr., David B. Hekemian and certain other members
of the immediate family of Robert S. Hekemian) (the “Hekemian Group”) to acquire a 30% equity interest in Damascus
Centre through Damascus 100, LLC (“Damascus 100”).
The sale of an equity interest in Damascus Centre to Damascus 100
was completed on October 31, 2006, at a sale price of $3,224,000, of which the Trust financed approximately $1,451,000. The Trust
agreed to advance to the Hekemian Group up to 50% of the amount of the equity purchase price required to be paid by them (including
approximately $1,300,000 to Robert S. Hekemian, Jr., David B. Hekemian and certain other members of the immediate family of Robert
S. Hekemian) (the “Damascus Notes”). These advances were in the form of secured loans that bore interest that floated
at 225 basis points over the 90 day LIBOR, as adjusted each November 1, February 1, May 1 and August 1. The Damascus Notes originally
provided for payments of accrued interest on a quarterly basis, with no principal payments required during the term of the Damascus
Notes, except that the borrowers were required to pay to the Trust all refinancing proceeds and other cash flow they received from
their interests in Damascus Centre. The Damascus Notes were originally scheduled to mature at the earlier of (a) 10 years after
issue, on September 30, 2016 and (b) at the election of the Trust, 90 days after the borrower terminates employment with Hekemian
& Co., at which time all outstanding unpaid amounts would be due. On June 4, 2015, the Board approved an extension of the term
of each of the Damascus Notes to the earlier to occur of (a) June 19, 2018 and (b) the day that is 5 days after the Grande Rotunda,
LLC closes on a permanent mortgage loan secured by the Rotunda property. The loans were secured by such employees’ membership
interests in Damascus 100. On December 7, 2017, the Board approved amendments to the Damascus Notes to further extend the term
of each of the Damascus Notes to the date or dates upon which Grande Rotunda makes distributions of cash to its members as a result
of either a refinancing of Grande Rotunda’s indebtedness or a sale of Grande Rotunda or all or a portion of the real property
owned by it; provided, that the Damascus Notes will mature only to the extent of such distributions to the maker of the Damascus
Notes. Pursuant to the December 7, 2017 amendments, distributions of cash as a result of events other than a refinancing of the
indebtedness of Grande Rotunda or sale of the Rotunda property would not have resulted in the maturation of the Damascus Notes.
In the fourth quarter of the fiscal year ended October 31, 2018, the Damascus 100 members repaid the Damascus Notes in full for
a total payment of $1,870,000, which was comprised of principal in the amount of $1,451,000 and accrued interest in the amount
of approximately $419,000. Damascus Centre paid Hekemian & Co. approximately $135,000 in management fees during the fiscal
year ended October 31, 2019, which is included in $2,549,000 of management fees paid by the Trust to Hekemian & Co. and Hekemian
Resources during the fiscal year ended October 31, 2019 mentioned above. Pursuant to the Management Agreement, Damascus Centre
paid leasing commissions to Hekemian & Co. in the aggregate amount of approximately $5,000, which is included in the $1,038,000
of mortgage, leasing and other fees paid to Hekemian & Co. mentioned above during the fiscal year ended October 31, 2019.
The Trust owns a 40% membership
interest in Westwood Hills, LLC, a New Jersey limited liability company (“Westwood Hills”), which is the owner of a
210-unit residential apartment complex in Westwood, New Jersey. In addition, an aggregate of 35% of the membership interests in
Westwood Hills is beneficially owned by Robert S. Hekemian, Jr., the Chief Executive Officer, President and a trustee of the Trust
and a shareholder and officer of Hekemian & Co.; Ronald J. Artinian, the Chairman and a trustee of the Trust; David B. Hekemian,
a trustee of the Trust and a shareholder and officer of Hekemian & Co.; the late Robert S. Hekemian, the former Chairman and
Chief Executive Officer of and consultant to the Trust and a shareholder and officer of Hekemian & Co.; members of the immediate
families of Robert S. Hekemian and Robert S. Hekemian, Jr.; Donald W. Barney, a trustee of the Trust until his retirement in February
2019; and another former trustee of the Trust. Pursuant to the terms of an operating agreement, the Trust is the Managing Member
of Westwood Hills. Hekemian & Co. currently serves as the Managing Agent for Westwood Hills. During the fiscal year ended October
31, 2019, Westwood Hills paid Hekemian & Co. approximately $224,000 in management fees, which is included in the $2,549,000
of management fees paid by the Trust to Hekemian & Co. and Hekemian Resources during the fiscal year ended October 31, 2019
mentioned above.
The Trust owns a 40% equity interest
in WaynePSC. H-TPKE, LLC, a New Jersey limited liability company (“H-TPKE”), owns a 60% equity interest in WaynePSC.
In addition, an aggregate of approximately 73% of the membership interests in H-TPKE is controlled by Robert S. Hekemian, Jr.,
the Chief Executive Officer, President and a trustee of the Trust and a shareholder and officer of Hekemian & Co.; David B.
Hekemian, a trustee of the Trust and a shareholder and officer of Hekemian & Co.; the late Robert S. Hekemian, the former Chairman
and Chief Executive Officer and consultant to the Trust and a shareholder and officer of Hekemian & Co.; members of the families
of Robert S. Hekemian, Jr., David B. Hekemian and Robert S. Hekemian; and other employees of Hekemian & Co. The Trust is the
Managing Member of WaynePSC. WaynePSC owns a 323,000 +/- sq. ft. community shopping center located in Wayne, New Jersey, known
as the Preakness Shopping Center. Hekemian & Co. is the Managing Agent for the Preakness Shopping Center. During the fiscal
year ended October 31, 2019, WaynePSC paid Hekemian & Co. an annual property management fee in the approximate amount of $200,000,
which is included in the $2,549,000 of management fees paid by the Trust to Hekemian & Co. and Hekemian Resources during the
fiscal year ended October 31, 2019 mentioned above. Pursuant to the terms of the Management Agreement, WaynePSC paid Hekemian &
Co. leasing commissions in the aggregate amount of approximately $20,000 with respect to leasing activity at the Preakness Shopping
Center, which is included in the $1,038,000 of mortgage, leasing and other fees paid to Hekemian & Co. mentioned above.
The Trust owns a 65% equity interest
in and is the managing and general partner of S&A. The remaining 35% of equity interests in S&A is owned by Robert S. Hekemian,
Jr., the Chief Executive Officer, President and a trustee of the Trust and a shareholder and officer of Hekemian & Co.; David
B. Hekemian, a trustee of the Trust and a shareholder and officer of
Hekemian & Co.; the late Robert S. Hekemian, the former
Chairman and Chief Executive Officer and consultant to the Trust and a former shareholder and officer of Hekemian & Co.; members
of the families of Robert S. Hekemian, Jr., David B. Hekemian and Robert S. Hekemian; and other employees of Hekemian & Co.
and/or affiliates of Hekemian & Co. In February 2005, and in accordance with its investment policy regarding risk diversification,
the Trust allowed the minority owners of S&A to make a cash contribution to S&A of approximately $1.3 million to increase
their ownership interest in S&A from approximately 25% to 35%, which approximated market value at the time of the investment.
On April 15, 2004, S&A purchased The Pierre Towers, a residential apartment complex located in Hackensack, New Jersey. During
the fiscal year ended October 31, 2019, Pierre Towers, LLC, on behalf of S&A, paid Hekemian & Co. management fees in the
amount of approximately $371,000, which is included in the $2,549,000 of management fees paid by the Trust to Hekemian & Co.
and Hekemian Resources during the fiscal year ended October 31, 2019 mentioned above.
Robert S. Hekemian, Jr., the Chief
Executive Officer, President and a trustee of the Trust and a shareholder and officer of Hekemian & Co., was a director of
Oritani Financial Corp. and its subsidiary, Oritani Bank, until Oritani Financial was merged into Valley National Bancorp in December
2019. The Trust is a party to a commercial mortgage loan with Valley National Bancorp. The mortgage loan is in the original principal
amount of $22,750,000 with an interest rate of 4.75% per annum, and is secured by the Trust’s Westwood Plaza property and
matures on January 13, 2023. This mortgage loan was negotiated at arm’s length and was on standard terms. Another mortgage
loan with Oritani Bank in the original principal amount of $6,000,000 was repaid by the Trust in February 2019.
The Trust retained the law firm
of Giordano, Halleran & Ciesla, P.C during the fiscal year ended October 31, 2019 to furnish legal services. John A. Aiello,
a trustee and executive officer of the Trust, is an officer and shareholder in the law firm. During the fiscal year ended October
31, 2019, Giordano, Halleran & Ciesla, P.C. received $164,788 in fees from the Trust for its services. In addition, Mr. Aiello
paid to the law firm the amount of $60,500, representing retainer and meeting fees, which Mr. Aiello received in connection with
his services as the Secretary and Executive Secretary of the Trust during the fiscal year ended October 31, 2019.
Effective upon the late Robert
S. Hekemian’s retirement as Chairman, Chief Executive Officer and as a trustee on April 5, 2018, the Trust entered into a
Consulting Agreement with Mr. Hekemian, pursuant to which Mr. Hekemian provided consulting services to the Trust through December
2019. Under the Consulting Agreement, Mr. Hekemian was obliged to provide advice and consultation with respect to matters pertaining
to the Trust and its subsidiaries, affiliates, assets and business, for no fewer than 30 hours per month during the term of the
agreement. The Trust paid Mr. Hekemian a consulting fee of $5,000 per month during the term of the Consulting Agreement, which
was payable in the form of Shares on a quarterly basis (i.e. in quarterly installments of $15,000). The number of Shares to be
issued for each quarterly installment of the consulting fee was determined by dividing the dollar amount of the consulting fee
by the closing price of one Share on the OTC Pink Open Market as of the close of trading on the last trading day of the calendar
quarter with respect to which such consulting fee was payable. For the fiscal year ended October 31, 2019, consulting fee expense
for Robert S. Hekemian was approximately $60,000.
ITEM 14
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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Audit Fees
Audit fees billed by
EisnerAmper LLP to the Trust totaled $507,000 for the fiscal year ended October 31, 2019 and $384,000 for the fiscal year
ended October 31, 2018 for professional services rendered in connection with the audits of the Trust’s consolidated
financial statements, audits of internal controls over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002, and reviews of the quarterly reports on Form 10-Q for the fiscal years ended October 31, 2019 and
2018, respectively.
Audit-Related Fees
Audit-related fees billed in the
fiscal year ended October 31, 2019 totaled $35,000 in connection with matters related to the Sale Agreement. There were no fees
billed for audit-related services in the fiscal year ended October 31, 2018.
Tax Fees
In the fiscal year ended October
31, 2019, EisnerAmper LLP billed the Trust $32,500 for the preparation of the Trust’s 2018 tax return and $6,000 in connection
with an analysis relating to the payment of dividends and return of capital. In addition, EisnerAmper LLP billed the Trust $106,000
in the fiscal year ended October 31, 2019 for tax-related matters and consultations in connection with the Sale Agreement. In the
fiscal year ended October 31, 2018, EisnerAmper LLP billed the Trust $32,500 for the preparation of the Trust’s 2017 tax
return, $6,000 in connection with an analysis relating to the payment of dividends and return of capital and $2,500 in connection
with the implementation of the Tax Cuts and Jobs Act in 2018.
All Other Fees
EisnerAmper LLP did not bill the
Trust for any other services during the fiscal years ended October 31, 2019 and 2018.
Policy on Pre-Approval of Audit
and Permissible Non-Audit Services
All audit and non-audit services
provided by the Trust’s independent registered public accounting firm and the fees associated therewith are pre-approved
by the Audit Committee in accordance with the written charter of the Audit Committee adopted by the Board of Trustees. The Audit
Committee gives due consideration to the potential impact of all non-audit services on auditor independence. The engagement of
EisnerAmper LLP, which was pre-approved by the Audit Committee, did not make use of the de minimis exception for pre-approval contained
in the rules of the SEC that permit limited engagements for non-audit services involving amounts under a specified threshold.