What changed in this filing

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Item 1A. Risk Factors

2022-03-16 compared with 2021-03-15 · 38 added, 63 removed, 277 unchanged (27% of the section changed)

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Risks Related to the COVID-19 Pandemic

The ongoing COVID-19 pandemic, the responses thereto and the economic consequences flowing therefrom, may adversely impact our business, income, cash flow, results of operations, financial condition, liquidity, prospects, ability to service our debt obligations, and our ability to pay cash dividends to our stockholders.

We have faced, and continue to face, challenges resulting from the outbreak of the COVID-19 pandemic.

The economic consequences of the pandemic, among other things, have adversely affected the ability of some of our residents to pay rent (due to furloughs, layoffs and/or the expiration of, or reduction in, unemployment benefits).

If current economic conditions worsen or continue for an extended period, a significant number of residents may be unable to pay rent, and our ability to pay dividends and/or the debt service on our mortgages will be adversely affected.

The impact of the pandemic on our properties has and will continue to vary based on, among other things, the markets in which such properties are located and the significant economic drivers in such markets.

For example, some of our properties ( e.g., Silvana Oaks Apartments-N.

Charleston, SC and Crestmont at Thornblade-Greenville, SC.), offer housing near manufacturing and other facilities ( e.g., Boeing and BMW, respectively), and reductions in employment at these or other manufacturing or employment centers located close to our properties may make it more difficult for residents that separated from such employers to pay rent.

Other properties ( e.g., Parkway Grande-San Marcos, TX and Chatham Court and Reflections-Dallas, TX), offer housing for students at nearby colleges or universities;

changes to the programs offered at such institutions ( i.e., offering on-line classes as opposed to in-person classes) have resulted in reduced rental demand at such properties.

The pandemic (i) has limited our ability to raise rents and market our properties, (ii) delayed efforts to implement value add programs and acquire or dispose of properties, (iii) may result in reduced revenues due to rent accommodations offered to current or prospective tenants and (iv) may require us to incur additional real estate operating expenses to maintain our properties and promote the health and safety of our residents.

The occurrence or recurrence of any one or more of the foregoing may adversely impact our results of operations and liquidity and capital resource position.

Further, the governmental response to the pandemic has resulted in legislation and orders which, among other things, limit (i) our ability to exercise various remedies (including evicting non-paying tenants) with respect to residents that do not pay rent or other charges and (ii) the rents or ancillary fees we charge or collect.

The ultimate impact of the pandemic on our business, financial condition, liquidity, results of operations and prospects depends on future developments, which are highly uncertain and cannot be predicted with confidence.

The continuation of the COVID-19 pandemic, the responses thereto and the economic consequences flowing therefrom, may adversely impact our business, income, cash flow, results of operations, financial condition, liquidity, prospects, ability to service our debt obligations, and our ability to pay cash dividends to our stockholders.

We have faced, and may continue to face, challenges resulting from the COVID-19 pandemic.

The economic consequences of the pandemic, among other things, have adversely affected and may continue to adversely affect,the ability of some of our residents to pay rent (due to furloughs, layoffs and/or the expiration of, or reduction in, unemployment benefits).

If economic conditions worsen for an extended period, a significant number of residents may be unable to pay rent, and our ability to pay dividends and/or the debt service on our mortgages may be adversely affected.

The seesaw nature of the pandemic and its impact on the economy and financial markets present material risks and uncertainties.

We are unable to predict the ultimate impact that the pandemic and the related dislocations will have on our business, financial condition, results of operation and cash flows, which will depend largely on various factors outside of our control.

Risks Related to our Business

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The operating performance of our multi-family properties is impacted by the economic, environmental and other conditions of the specific markets in which our properties are concentrated.

Properties owned by consolidated joint ventures generated approximately 23%, 20%, 15% and 15% of our 2020 revenues from properties located in Georgia, Texas, Florida and Virginia, respectively, and properties owned by unconsolidated joint ventures generated 28%, 13%, 13% and 11% of our 2020 JV Rental Revenues at properties located in Texas, Georgia, South Carolina and Florida, respectively.

At December 31, 2021:

(i) our wholly-owned properties generated approximately 22%, 15%, 14% and 14% of our 2021 revenues from properties located in Georgia, Florida, South Carolina and Virginia, respectively, and (ii) properties owned by unconsolidated joint ventures generated 39%, 14%, 13% and 11% of our 2021 JV Rental and Other Revenues at properties located in Texas, South Carolina, Alabama and Mississippi, respectively.

Accordingly, adverse developments in such markets, including economic developments, pandemics, or natural or man-made disasters, could adversely impact the operations of these properties and therefore our operating results and cash flow.

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Joint venture investments involve risks not otherwise present when acquiring real estate directly, including the following:

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• our joint venture partners may have economic or business interests or objectives which are or become inconsistent with our business interests or objectives, including differing objectives relating to the sale or refinancing of properties held by the joint venture or the timing of the termination or liquidation of the joint venture;

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We own 14 multi-family properties with three joint venture partners or their affiliates and may be adversely effected if we are unable to maintain a satisfactory working relationship with any one or more of these joint venture partners.

Joint ventures that own seven multi-family properties are owned with one joint venture partner or its affiliates, joint ventures that own six multi-family properties are owned with a second joint venture partner or its affiliates and joint ventures that own four multi-family properties are owned with a third joint venture partner or its affiliates.

Joint ventures that own six multi-family properties are owned with one joint venture partner or its affiliates, joint ventures that own four multi-family properties are owned with a second joint venture partner or its affiliates and joint ventures that own four multi-family properties are owned with a third joint venture partner or its affiliates.

This concentration of ownership of properties with a limited number of joint venture partners exposes us to risks of adverse developments, and in particular, disputes or disagreements with such joint venture partners, which are greater than the risks of owning properties with a more diverse group of joint venture partners.

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The failure of third party property management companies to properly manage our properties or obtain sufficient insurance coverage could adversely impact our results of operations.

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If these property management companies do not perform their duties properly or we or our joint venture partners do not effectively supervise the activities of these managers, the occupancy rates and rental rates at the properties managed by such property managers may decline and the expenses at such properties may increase.

At December 31, 2020, one property manager manages ten of our properties, a second property manager manages six of our properties, a third property manager manages six of our properties and seven other property managers manage five or fewer properties.

At December 31, 2021, one property manager manages eight of our properties and a second property manager manages six of our properties, other property managers manage four or fewer properties.

The loss of our property managers, and in particular, the managers that manage multiple properties, could result in a decrease in occupancy rates, rental rates or both or an increase in expenses.

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further, they have fluctuated and may not be comparable year-over-year because of, among other things, (i) the timing difference as to when we accrue real estate taxes and the results of any tax appeals with respect to such accrued taxes and (ii) determinations, over which we have no control, by governmental authorities to increase tax rates, assessments or procedures.

If the costs associated with real estate taxes, utilities and insurance premiums should rise, without being offset by a corresponding increase in revenues, our results of operations could be negatively impacted, and our ability to make payments on our debt and to make distributions could be adversely affected.

If the costs associated with real estate taxes, utilities and insurance premiums should rise, without being offset by a corresponding increase in revenues, our results of operations

could be negatively impacted, and our ability to make payments on our debt and to make distributions could be adversely affected.

We may not be able to compete with competitors, many of which have greater financial and other resources than we possess.

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These efforts involve greater risks than more conservative investment strategies.

The risks related to these value-add activities include risks related to delays in the repositioning or improvement process, higher than expected capital improvement costs, the additional capital needed to execute our value-add program, the possibility that these value-add activities may not result in the anticipated higher rents and occupancy rates and the

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loss of revenue while these properties or units are undergoing capital improvements.

We may also be unable to complete the improvements of these properties and may be forced to hold or sell these properties at a loss.

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These activities may be exposed to the following risks:

• we have limited experience in development projects and will be dependent on our joint venture partner or the sponsor of the project to oversee the project's implementation;

• we may abandon opportunities that we have already begun to explore for a number of reasons, including changes in local market conditions or increases in construction or financing costs, and, as a result, we may fail to recover expenses already incurred in exploring those opportunities;

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• we may be unable to complete construction and lease-up of a development project on schedule, resulting in increased construction and financing costs and a decrease in expected rental revenues;

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• we may be unable to obtain financing with favorable terms, or at all, for the proposed development of a property, which may cause us to delay or abandon a development opportunity;

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If we are unsuccessful in refinancing such debt, or if the terms of the refinanced debt are less favorable that the current debt, we may be forced to dispose of properties on disadvantageous terms or convey properties secured by such mortgages to the mortgagees, which would reduce our income and impair the value of our portfolio.

The expiration of our $10 million credit facility in April 2021 will adversely affect our liquidity

We depend on our $10 million credit facility to provide us with liquidity, among other things, to fund acquisitions and working capital needs.

Our facility matures April 18, 2021.

Though we are negotiating an extension to this facility, if we are unsuccessful in such regard, our ability to acquire additional properties and address our working capital and other cash requirements will be adversely affected.

Our failure to comply with our obligations under our debt instruments may reduce our stockholders’ equity, and adversely affect our net income and ability to pay dividends.

Several of our debt instruments include covenants that require us to maintain certain financial ratios, including various coverage ratios, and comply with other requirements.

Failure to meet interest and other payment obligations under our debt instruments or a breach by us of the covenants to comply with certain financial ratios would place us in non-compliance under such instruments.

If the lender called a default and required us to repay the full amount outstanding under such instrument, we might be required to rapidly dispose of our properties, including properties securing such debt instruments, which could have an adverse impact on the amounts we receive on such disposition.

From time to time we have failed to comply with certain debt covenants.

If we are unable to satisfy the covenants of our debt obligations, the lender could exercise remedies available to it under the applicable debt instrument and as otherwise provided by law, including the possible appointment of a receiver to manage the property, application of deposits or reserves maintained under the debt instrument for payment of the debt, or foreclose and/or cause the forced sale of the property or asset securing such debt.

A foreclosure or other forced disposition of our assets could result in the disposition of same at below the carrying value of such asset.

The disposition of our properties or assets at below our carrying value may adversely affect our net income, reduce our stockholders’ equity and adversely affect our ability to pay dividends.

We may not have sufficient funds to make required or desired capital improvements.

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Although we believe that “bad boy” carve out guarantees are not guarantees of payment in the event of foreclosure or other actions of the foreclosing lender that are beyond the borrower’s control, some lenders in the real estate industry have recently sought to make claims for payment under such guarantees.

In the event such a claim were made against us under a “bad boy” carve out guarantee, following foreclosure

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on mortgages or related loans, and such claim were successful, our business and financial results could be materially adversely affected.

In the event such a claim were made against us under a “bad boy” carve out guarantee, following foreclosure on mortgages or related loans, and such claim were successful, our business and financial results could be materially adversely affected.

We could be negatively impacted by changes in our relationship with Fannie Mae or Freddie Mac, changes in the condition of Fannie Mae or Freddie Mac and by changes in government support for multi-family housing.

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Should these agencies have their mandates changed or reduced, lose key personnel, be disbanded or reorganized by the government or otherwise discontinue providing liquidity for the multi-family sector, our ability to obtain financing through loan programs sponsored by the agencies could be negatively impacted.

In addition, changes in our relationships with Fannie Mae and Freddie Mac, and the lenders that participate in these loan programs, with respect to our existing mortgage financing could impact our ability to obtain comparable financing for new acquisitions or refinancing for our existing multi-family real estate investments.

obtain comparable financing for new acquisitions or refinancing for our existing multi-family real estate investments.

Should our access to financing provided through Fannie Mae and Freddie Mac loan programs be reduced or impaired, it would significantly reduce our access to debt capital and/or increase borrowing costs and could significantly limit our ability to acquire properties on acceptable terms and reduce the values to be realized upon property sales.

The phasing out of LIBOR after 2021 may adversely affect our cash flow and financial results.

At December 31, 2020, we have (i) $37.4 million in principal amount of junior subordinated notes with an interest rate which resets quarterly and is based on three-month LIBOR plus 200 basis points and (ii) $74.0 million of variable rate mortgage debt (including $73.0 million, of which $47.4 million is construction financing, at our unconsolidated joint ventures) which resets monthly and is generally based on one-month LIBOR rate plus a negotiated spread (collectively, the “LIBOR Debt”).

Our exposure to fluctuating interest payments on the junior subordinated notes is unhedged and $26.6 million of variable rate mortgage debt is hedged by two interest rate swaps.

The swaps effectively fix our interest payments under the related debt.

At December 31, 2020, we have two interest swaps (one at a consolidated joint venture and the other at an unconsolidated joint venture) with separate counterparties in aggregate notional amount of $ 26.6 million.

The phasing out of LIBOR may adversely affect our cash flow and financial results.

Excluding the variable rate mortgage debt associated with a property sold in February 2022, at December 31, 2021 we had $37.4 million in variable rate debt in the form of junior subordinated notes maturing in 2036 and bearing an interest rate which resets quarterly and is based on three-month LIBOR plus 200 basis points (the “LIBOR Debt”).

Our exposure to fluctuating interest payments on the LIBOR Debt is unhedged.

The authority regulating LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after June 2023 and it is possible that LIBOR will become unavailable at an earlier date.

Approximately $37.4 million of the LIBOR Debt matures after 2023.

Accordingly, there is uncertainty as to how the interest rate on the LIBOR Debt and the related swaps, if any, will be determined when LIBOR is unavailable.

Though the LIBOR Debt and, as applicable, the related swaps, provide for alternative methods of calculating the interest rate if LIBOR is unavailable, such alternative rates may be unavailable (or the alternative rate provide for in the LIBOR Debt may be inconsistent with the alternative rate provided for by the related swap, if any), in which case we may have to negotiate an alternative rate with the counterparties to the LIBOR Debt and, as applicable, the related swaps – we can provide no assurance that we and our counterparties will be able to agree to alternative rates.

Even if alternative rates are available, the swaps may not effectively hedge our interest payment obligation under the variable rate mortgage debt and may result in fluctuating interest payments.

Although the LIBOR Debt provide for alternative methods of calculating the interest rate when LIBOR becomes unavailable, such alternative rates may be unavailable in which case we may have to negotiate a secondary alternative rate with the counterparties to the LIBOR Debt – we can provide no assurance that we and our counterparties will be able to agree to a secondary alternative rate.

Our cash flow and financial results may be adversely affected if we are unable to arrange a mutually satisfactory alternative rate to LIBOR for our LIBOR Debt.

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We depend on our subsidiaries for cash flow and will be adversely impacted if these subsidiaries are prohibited from distributing cash to us.

We conduct, and intend to conduct, all our business operations through our subsidiaries.

We conduct, and intend to conduct, substantially all of our business operations through our subsidiaries including our unconsolidated subsidiaries.

Accordingly, our only source of cash to fund our operations and pay our obligations are distributions from our subsidiaries.

We cannot assure you that our subsidiaries will be able to, or be permitted to, make distributions to us that will enable us to fund our operations.

Each of our subsidiaries is or will be a distinct legal entity and, under certain circumstances, legal and contractual restrictions, limit our ability to obtain cash from such entities.

Each of our subsidiaries is or will be a distinct legal entity and, under certain circumstances, legal and contractual restrictions( e.g.

, restrictions imposed pursuant to mortgage debt on a property), limit our ability to obtain cash from such entities.

In addition, because we operate through our subsidiaries, your claims as stockholders will be structurally subordinated to all existing and future liabilities and obligations of our subsidiaries.

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We cannot predict when or if any new U.S.

federal income tax law, regulation or administrative interpretation, or any

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amendment to any existing U.S.

federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S.

federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively.

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• increased operating costs, including increased real property taxes, maintenance, insurance and utility costs (including increased prices for fossil fuels);

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• weather conditions that may increase or decrease energy costs and other weather-related expenses;

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These charges and provisions may be required in the future as a result of factors beyond our control, including, among other things, changes in the economic environment and market conditions affecting the value of real property assets or natural or man-made disasters.

In 2020, we incurred a $3.6 million impairment charge related to the proposed sale of our Daytona land parcel.

In 2021, we incurred a $520,000 impairment charge related to our investment in the joint venture that owned the OPOP Properties and in 2020 we incurred a $3.6 million impairment charge on the South Daytona Property.

If we are required to take additional impairment charges, our results of operations will be adversely impacted.

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If we do not continue to pay cash dividends, the price of our common stock may decline.

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Risks Related to BRT's Organization, Structure and Ownership of its Stock

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Although Jeffrey A.

Gould devotes substantially all of his business time to our affairs, he devotes a limited amount of his business time to entities affiliated with us.

Gould devotes substantially all of his business time to our affairs, he devotes a portion of his business time to entities affiliated with us.

In addition to Jeffrey A.

Gould, only three other senior executive officers, Mitchell Gould, our executive vice president, Ryan Baltimore, senior vice president-corporate strategy and finance, and George Zweier, vice president and chief financial officer, devote all or substantially all of their business time to us.

Gould, only three other executive officers, Mitchell Gould, our executive vice president, Ryan Baltimore, chief operating officer, and George Zweier, vice president and chief financial officer, devote all or substantially all of their business time to us.

Many of our executives (i) also provide the Services (see " Item 1.

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• establish advance notice and informational requirements and time limitations on any director nomination or proposal that a stockholder wishes to make at a meeting of stockholders;

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• provide that directors may be removed only for cause and only by the vote of at least two-thirds of all votes generally entitled to be cast in the election of directors;

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To facilitate our qualification as a REIT under the Code, among other purposes, the Charter generally prohibits any person from actually or constructively owning more than 6.0%, in value or number of shares, whichever is more restrictive, of our outstanding shares of common stock, or more than 6.0% in value of the aggregate outstanding shares of all classes and series of our stock, which we refer to as the “ownership limits,” unless our board of directors exempts the person from such ownership limit.

In addition, the Charter prohibits any person from beneficially or constructively owning shares of our stock that would result in more than 50% of the

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value of the outstanding shares of our stock to be beneficially owned by five or fewer individuals, regardless of whether such ownership is during the last half of any taxable year, which we refer to as the “Five or Fewer Limit.” Shares owned or acquired in violation of either of these restrictions will be transferred automatically to a trust for the benefit of a charitable beneficiary selected by us.

In addition, the Charter prohibits any person from beneficially or constructively owning shares of our stock that would result in more than 50% of the value of the outstanding shares of our stock to be beneficially owned by five or fewer individuals, regardless of whether such ownership is during the last half of any taxable year, which we refer to as the “Five or Fewer Limit.” Shares owned or acquired in violation of either of these restrictions will be transferred automatically to a trust for the benefit of a charitable beneficiary selected by us.

The person that owned or acquired our stock in violation of the restrictions in the Charter will not be entitled to any dividends or distributions paid after the date of the transfer to the trust and, upon a sale of such shares by the trust, will generally be entitled to receive only the lesser of the market value on the date of the event that resulted in the transfer to the trust or the net proceeds of the sale by the trust to a person who could own the shares without violating the ownership limits.

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If our common stock is removed from the Russell 3000® Index because it does not meet the criteria for continued inclusion in such index, index funds, institutional investors, or other holders attempting to track the composition of that index may be required to sell our common stock, which would adversely impact the price and frequency at which it trades.

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A material weakness in our internal control over financial reporting was identified and has not been remediated.

We are required by law to engage in an ongoing review of our disclosure controls and procedures and internal control over financial reporting.

In connection with the preparation and filing of our Annual Report on Form 10-K for the year ended December 31, 2019, we identified the material weakness, described below, in the internal controls over financial reporting.

A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We concluded that our internal controls surrounding the supervision and review of management’s analyses over the accounting for consolidated entities were ineffective and that we had consolidated the accounts and operations of most of our joint ventures in a manner inconsistent with Accounting Standards Codification 810 (the "Consolidation Standard") .

While we have taken action to address this material weakness, we cannot provide any assurance that such measures, or any other measures we take, will be effective, and this material weakness has not been remediated.

If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report our financial results, detect or prevent fraud, or file our periodic reports in a timely manner, which may, among other adverse consequences, cause investors to lose confidence in our reported financial information and lead to a decline in our stock price.

General Business Risks

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Such persons also rely on information technology systems for the collection and distribution of funds.

Our information technology systems have been breached though none of our properties nor tenants have suffered any damages therefrom.

Our information technology systems have been breached though, to our knowledge, none of our properties nor tenants have suffered any material damages therefrom.

There can be no assurance that we, our joint venture partners or property managers will be able to prevent unauthorized access to sensitive information or the unauthorized distribution of funds.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors