Robert S. Hekemian, Jr.

About Robert S. Hekemian, Jr.

Robert S. Hekemian, Jr. is Chief Executive Officer (since April 2018), President (since February 2019), and a director (since 2007) of First Real Estate Investment Trust of New Jersey, Inc. (FREIT/FREVS). He is 65, with 40+ years of real estate experience across property management, leasing, financing, construction, and acquisitions; education includes a B.S. in Business Administration (American University) and an M.S. in Management as an MIT Sloan Fellow . FREIT discloses cumulative TSR values in its pay-versus-performance table and net income trends; 2024 TSR value of $100 was $140.51, 2023 $130.77, 2022 $124.62; net income attributable to common equity was $15.9 million in FY2024, $0.8 million in FY2023, $46.0 million in FY2022 .

Past Roles

External Roles

Fixed Compensation

Notes:

• The Compensation Committee increased CEO base salary to $600,000 effective March 9, 2023; FY2023 reflects prorated impact .
• CEO and directors received fully vested stock awards in lieu of $20,000 cash in FY2023 and FY2024 .

Performance Compensation

• FREIT did not pay any incentive-based compensation to executive officers during FY2024; clawback policy adopted for any future incentive-based compensation tied to erroneous data .

Equity Ownership & Alignment

Policy overlays:

• Hedging prohibited for employees/directors (puts, calls, swaps, derivatives) .
• No outstanding options at FY2024 year-end; no unvested equity awards disclosed for CEO .

Employment Terms

• No employment contracts between FREIT and executive officers; no severance or change-in-control cash arrangements for executives at the FREIT level .
• Equity Incentive Plan provides for accelerated vesting/exercisability upon “change in control” or sale of substantially all assets; awards vest terms set by Board; term up to 10 years; plan extended to 2028 .
• Deferred Fee Plan was terminated; final payments occurred Jan 20, 2023 (approx. $2.317 million cash across participants and 274,509 shares issued for vested share units) .
• FREIT is externally managed; Management Agreement with Hekemian & Co. auto-renews every two years (current term expires Oct 31, 2025). FREIT may terminate without cause on one year notice; termination fee applies; if following merger/acquisition, fee equals 2.5× the standard termination fee .

Board Governance

• Board leadership is separated: Chairman (Ronald J. Artinian) and CEO (Robert S. Hekemian, Jr.); no formal Lead Independent Director though Chairman functions informally in that role .
• Independence: 4 of 7 directors qualify as independent: Ronald J. Artinian, David F. McBride, Justin F. Meng, Richard J. Aslanian; all committee members are independent .
• Board meetings: 14 in FY2024; each director attended at least 75% of Board and committee meetings; all attended 2024 annual meeting .

Committee memberships and chairs:

• Audit Committee Financial Expert: Board does not believe any member qualifies under SEC rules, though members possess relevant attributes .

Director compensation:

• FY2024: Each director received $20,000 equity grant (1,230 shares at $16.25) and $60,000 annual retainer; committee membership retainer $2,500; chair retainers: Board $30,000, Audit $15,000, Compensation $10,000 .
• FY2025: 1,193 shares awarded per director based on $16.76 price; same cash retainer and committee fees .

Compensation Structure Analysis

• Cash vs equity mix: CEO compensation primarily fixed salary; small equity component via director stock awards; no cash bonuses or long-term incentive plans at FREIT level .
• Shift in instruments: Stock options are currently none outstanding as of FY2024; equity grants have been direct-share awards to directors; prior broad option exercise in 2022 after exercise price adjustment tied to extraordinary distribution (now fully exercised/expired) .
• Guaranteed vs at-risk pay: CEO pay is largely fixed; compensation is not dependent on specific financial metrics; Compensation Committee considers overall performance qualitatively .
• Clawback: Policy to recover incentive-based compensation in case of restatement; relevant if future incentive comp is adopted .

Related Party Transactions

• External management: Hekemian & Co. manages all FREIT properties and receives management, leasing, mortgage origination, and other fees; FY2024 total approx. $2,003,000 (mgmt ~$1,351,000; other fees ~$652,000) .
• Joint ventures with affiliates: Westwood Hills paid ~$274,000 in management fees; Wayne PSC paid ~$136,000 in management fees and ~$5,000 in leasing commissions to Hekemian & Co. in FY2024 .
• Legacy Rotunda venture loans: FREIT advanced equity capital via Rotunda Notes to Hekemian & Co. employees/family entities; all repaid after Rotunda sale; no outstanding principal/interest remaining by FY2022 .
• Legal services: Secretary/Director John A. Aiello’s law firm received $243,219 in FY2024; he paid his $50,000 retainer to the firm .
• Valley National Bancorp loan: FREIT extended Westwood Plaza mortgage multiple times through May 1, 2025; arm’s-length terms; CEO Hekemian formerly Oritani director prior to Oritani’s merger into Valley .

Performance & Track Record

Financial performance (GAAP):

TSR and pay-versus-performance:

Operational notes:

• FY2024 results include net litigation settlement income of $15.673 million, boosting net income; segment NOI was $15.051 million; average residential occupancy 96.1%, commercial 50.9% .
• FY2023 decline reflected impact from prior property sales and occupancy changes .

Say-on-Pay & Shareholder Feedback

• 2023 advisory vote on executive compensation approved with approximately 74.6% of votes cast; next triennial say-on-pay expected at 2026 annual meeting .

Board Service History and Dual-Role Implications

• Hekemian holds dual roles as CEO/President and Director; he is also CEO and 33.3% equity holder of Hekemian & Co., FREIT’s external manager, which raises independence considerations and potential conflicts mitigated through independent committees and Audit Committee oversight of related-party transactions .
• Chairman is independent (Artinian), separating board leadership from management; no formal Lead Independent Director, but Chairman serves similar function informally .
• Committee composition is fully independent; attendance thresholds met .

Risk Indicators & Red Flags

• Share pledging: 78,917 shares pledged as collateral by Hekemian—a governance red flag for potential forced selling risk .
• External management fees and family affiliations: Significant related-party transactions with Hekemian & Co.; management agreement termination fee (including 2.5× multiplier upon merger/acquisition) can impact change-of-control outcomes .
• No Audit Committee Financial Expert under SEC definition, though members possess relevant attributes .
• Family relationship on board: Robert S. Hekemian, Jr. and David B. Hekemian are siblings; both have interests in Hekemian & Co. .
• Options repricing/adjustment occurred tied to extraordinary distribution in 2022 followed by large option exercises; currently no outstanding options .

Compensation Committee Analysis

• Committee: David F. McBride (Chair), Justin F. Meng, Richard J. Aslanian; one meeting held in FY2024 .
• No use of external compensation consultants disclosed; compensation philosophy emphasizes fixed pay with equity alignment via the Equity Incentive Plan; risk assessment indicates program does not encourage excessive risk .

Equity Ownership & Director Compensation Guidelines

• Director stock awards annually in lieu of $20,000 cash; retainer and chair fees as disclosed; total FY2024 director cash retainer paid $462,500 and $140,000 in stock awards across directors .
• Stock ownership guidelines for executives/directors not disclosed; hedging prohibited; pledging occurs and is disclosed .

Employment Contracts, Severance & Change-of-Control Economics

• Executives have no employment contracts with FREIT; no severance multiples or cash change-in-control payments at executive level .
• Equity plan accelerates vesting upon change in control; Board may set award terms including vesting and term up to 10 years .
• External manager (Hekemian & Co.) has termination fee and enhanced fee upon merger/acquisition; auto-renews; termination mechanics disclosed .

Investment Implications

• Alignment: CEO’s 4.9% beneficial ownership and annual equity awards suggest alignment, but pledging of 78,917 shares introduces forced-sale risk during market stress . The prohibition on hedging reduces misalignment risk .
• Incentive structure: Absence of incentive-based cash bonuses and performance-metric-linked equity reduces pay-for-performance signaling; qualitative consideration by the Compensation Committee means limited direct trading signals from comp outcomes .
• External manager economics: Material related-party fees to Hekemian & Co. and robust termination provisions could influence strategic decisions around asset sales or corporate actions; diligence on fee sustainability and committee oversight is key .
• Track record: FY2024 net income buoyed by litigation settlement; operational NOI steady; TSR trend improved to $140.51 vs $100 baseline over three-year disclosure, supporting shareholder returns despite mixed operating headwinds in commercial occupancy .