BRT Apartments Corp. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures A review and evaluation was performed by our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Annual Report on Form 10-K. Based on that review and evaluation, our CEO and CFO have concluded that our disclosure controls and procedures, as designed and implemented as of December 31, 2021, were effective. Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, a company's principal executive and principal financial officers and effected by a company's board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of a company; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of a company are being made only in accordance with authorizations of management and the board of directors of a company; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company's assets that could have a material effect on the financial transactions. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, our management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on its assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on these criteria. 40 Table of Contents Changes in Internal Controls over Financial Reporting There have been no changes in our internal controls over financial reporting, as defined in in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, that occurred during the three months ended December 31, 2021 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. Item 9B. Other Information. Federal Income Tax Considerations The discussion in Exhibit 99.1 filed herewith is incorporated herein by reference. Adoption of 2022 Incentive Plan In March 2022, our board of directors adopted, subject to stockholder approval, the 2022 Incentive Plan. This plan permits us to grant: (i) stock options, restricted stock, restricted stock units, performance share awards and any one or more of the foregoing, up to a maximum of 1,000,000 shares; and (ii) cash settled dividend equivalent rights in tandem with the grant of certain awards. Correction of Information in Current Report on Form 8-K Furnished on, and Press Release issued on, March 14, 2022. Due to an error, our press release issued March 14, 2022 (page 9 to exhibit 99.1 to our Current Report on Form 8-K furnished to the SEC on March 14, 2022(the “8-K”)) and the supplemental financial information (page 5 to exhibit 99.2 to our 8-K) incorrectly reported the number of shares used in calculating in such documents per share FFO and AFFO for the quarter ended December 31, 2021. The incorrect number of shares is 17,317,596. The correct number of shares is 18,240,532 .This error did not impact the values reported in the 8-K (including the exhibits thereto) for per share FFO and AFFO as such reported values were correct. We do not hereby incorporate by reference into this Annual Report on Form 10-K any of the information included in our 8-K. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable 41 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance. Apart from certain information concerning our executive officers which is set forth in Part I of this report, the other information required by Item 10 will be incorporated herein by reference to the applicable information to be in the proxy statement to be filed by May 2, 2022 for our 2022 Annual Meeting of Stockholders. Item 11. Executive Compensation. The information concerning our executive compensation required by Item 11 is incorporated herein by reference to the proxy statement to be filed by May 2, 2022 with respect to our 2022 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Except as set forth below, the information required by Item 12 is incorporated herein by reference to the proxy statement to be filed by May 2, 2022 with respect to our 2022 Annual Meeting of Stockholders. Equity Compensation Plan Information As of December 31, 2021, the only equity compensation plan under which equity compensation may be awarded is our 2020 Incentive Plan, which was approved by our stockholders in June 2020. This plan permits us to grant stock options, restricted stock, restricted stock units ("RSUs"), dividend equivalent rights and performance based awards to our employees, officers, directors, consultants and other eligible participants. The table below provides information as of December 31, 2021 with respect to our shares of common stock that may be issued upon exercise of outstanding options, warrants and rights. (See note 10 of our consolidated financial statements for further information about our equity compensation plans). Number of securities to be issued upon exercise (or vesting) of outstanding options, restricted stock units, 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 210,375 (1) — 473,101 (2) Equity compensation plans not approved by security holders — — — Total 210,375 (1) — 473,101 (2) _______________________________________________________________________________ (1) Represents shares of common stock underlying RSUs granted in 2021 pursuant to our 2020 Incentive Plan (the "2020 Plan"). The RSUs vest in 2024 subject to the satisfaction of market and performance based vesting conditions. There is no exercise price associated with such units. Excludes 316,524 shares of restricted stock issued pursuant to the 2020 plan as such shares, though subject to forfeiture, are outstanding. (2) Gives effect to the 316,524 shares of restricted stock issued and outstanding pursuant to the 2020 Plan. Does not give effect to 158,973 shares of restricted stock granted January 13, 2022 pursuant to the 2020 Plan. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information concerning relationships and certain transactions required by Item 13 is incorporated herein by reference to the proxy statement to be filed by May 2, 2022 with respect to our 2022 Annual Meeting of Stockholders. Item 14. Principal Accounting Fees and Services. The information concerning our principal accounting fees required by Item 14 is incorporated herein by reference to the proxy statement to be filed by May 2, 2022 with respect to our 2022 Annual Meeting of Stockholders. 42 Table of Contents PART IV Item 15. Exhibits, Financial Statement Schedules. (a) 1. All Financial Statements. The response is submitted in a separate section of this report following Part IV. 2. Financial Statement Schedules. The response is submitted in a separate section of this report following Part IV. 3. Exhibits: In reviewing the agreements included as exhibits to this Annual Report on Form10-K, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about us or the other parties to the agreements. Certain agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and: • should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; • have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; • may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and • were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. 43 Table of Contents Exhibit No. Title of Exhibits 1.1 Form of Equity Distribution Agreement (incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K on November 26, 2019). 1.2 Amendment No. 1 to Equity Distribution Agreements entered into as of March 31, 2021 among us, B. Riley Securities, Inc., JMP Securities LLC, and D.A. Davidson & Co. (incorporated by reference to exhibit 10.1 filed with our Quarterly Report on Form 10-Q for the period ended March 31, 2021). 2.1 Plan of Conversion dated December 8, 2016 (incorporated by reference to Annex B of Amendment No. 1 to our Registration Statement on Form S-4 filed January 12, 2017 (the "S-4 Registration") (Reg. No. 333-215221). 3.1 Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed March 20, 2017). 3.2 By-laws of the Registrant (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed March 20, 2017). 4.1 Junior Subordinated Supplemental Indenture, dated as of March 15, 2011, between us and the Bank of New York Mellon (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed March 18, 2011). 4.2 Description of Registrant's Securities Registered Pursuant to Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.2 to our Annual Report on Form 10-K for the year ended December 31, 2020). 10.1 * Shared Services Agreement, dated as of January 1, 2002, by and among Gould Investors L.P., us, One Liberty Properties, Inc., Majestic Property Management Corp., Majestic Property Affiliates, Inc. and REIT Management Corp. (incorporated by reference to Exhibit 10.2 to our Form 10-K filed December 11, 2008). 10.2 * Form of Indemnification Agreement between the Registrant on the one hand, and its executive officers and directors, on the other hand (incorporated by reference to Exhibit 10.5 to our Annual Report of Form 10-K filed December 14, 2017). 10.3 * Amended and Restated 2016 Incentive Plan (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended March 31, 2016) 10.4 Membership Interest Purchase Agreement dated as of February 23, 2016 entered into between TRB Newark Assemblage, LLC ("TRB") and TRB Newark TRS, LLC ("TRB REIT" and together with TRB, collectively, the "Seller") and RBH Partners III, LLC, and joined by RBH-TRB Newark Holdings, LLC and GS-RBH Newark Holdings, LLC (incorporated by reference to exhibit 10.2 to our Quarterly Report on Form 10-Q for the period ended March 31, 2016). 10.5 * Form of Restricted Shares Agreement for the Amended and Restated 2016 Incentive Plan (incorporated by reference to Exhibit 10.40 to our Registration Statement on Form S-4/A filed with the SEC on January 12, 2017 (File No 333-215221)). 10.6 * 2018 Incentive Plan (incorporated by reference to exhibit 10.1 to our Current Report on Form 8-K filed on March 13, 2018). 44 Table of Contents Exhibit No. Title of Exhibits 10.7 * Form of Restricted Shares Agreement for the 2018 Incentive Plan (incorporated by reference Exhibit 10.10 to our Annual Report on Form 10-K filed December 10, 2018). 10.8 2020 Incentive Plan (incorporated by reference to Exhibit 10.15 filed with our Annual Report on Form 10-K for the year ended December 31, 2020). 10.9 * Form of Performance Awards Agreement granted in 2021 pursuant to the 2020 Incentive Plan (incorporated by reference to exhibit 10.1 of our Current Report on Form 8-K filed on June 11, 2021) 10.10 Amended and Restated Loan Agreement (the "Loan Agreement") made as of November 18, 2021, by and among us and VNB New York, LLC. (incorporated by reference to Exhibit 10.1 filed with our Current Report on Form 8-K on November 18, 2021). 10.11 Unlimited guaranty given by us in favor of VNB (incorporated by reference to Exhibit 10.2 filed with our Current Report on Form 8-K on November 18, 2021). 10.12 Form of Pledge Agreement (incorporated by reference to Exhibit 10.3 filed with our Current Report on Form 8-K on November 18, 2021). 10.13 Form of Negative Pledge Agreement (incorporated by reference to Exhibit 10.4 filed with our Current Report on Form 8-K on November 18, 2021). 10.14 Letter agreement dated as of November 19, 2021 with respect to the Loan Agreement. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young, LLP. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the "Act"). 31.2 Certification of Senior Vice President—Finance pursuant to Section 302 of the Act. 31.3 Certification of Chief Financial Officer pursuant to Section 302 of the Act. 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Act. 32.2 Certification of Senior Vice President—Finance pursuant to Section 906 of the Act. 32.3 Certification of Chief Financial Officer pursuant to Section 906 of the Act. 99.1 Federal Income Tax Considerations (incorporated by reference to Exhibit 99.3 filed with our Current Report on Form 8-K on March 11, 2021) 101.INS The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. _______________________________________________________________________________ * Indicates management contract or compensatory plan or arrangement. (b) Exhibits. See Item 15(a)(3) above. Except as otherwise indicated with respect to a specific exhibit, the file number for all of the exhibits incorporated by reference is: 001-07172. (c) Financial Statements. See Item 15(a)(2) above. Item 16. Form 10-K Summary Not applicable. 45 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BRT APARTMENTS CORP. Date: March 15, 2022 By: /s/ JEFFREY A. GOULD Jeffrey A. Gould Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ ISRAEL ROSENZWEIG Chairman of the Board March 15, 2022 Israel Rosenzweig /s/ JEFFREY A. GOULD Chief Executive Officer, President and Director (Principal Executive Officer) March 15, 2022 Jeffrey A. Gould /s/ CAROL CICERO Director March 15, 2022 Carol Cicero /s/ ALAN GINSBURG Director March 15, 2022 Alan Ginsburg /s/ FREDRIC H. GOULD Director March 15, 2022 Fredric H. Gould /s/ MATTHEW J. GOULD Director March 15, 2022 Matthew J. Gould /s/ LOUIS C. GRASSI Director March 15, 2022 Louis C. Grassi /s/ GARY HURAND Director March 15, 2022 Gary Hurand /s/ JEFFREY RUBIN Director March 15, 2022 Jeffrey Rubin /s/ JONATHAN SIMON Director March 15, 2022 Jonathan Simon /s/ ELIE WEISS Director March 15, 2022 Elie Weiss /s/ GEORGE E. ZWEIER Chief Financial Officer and Vice President (Principal Financial and Accounting Officer) March 15, 2022 George E. Zweier 46 Table of Contents Item 8, Item 15(a)(1) and (2) Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules Page No. Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) F- 2 Consolidated Balance Sheets as of December 31, 2021 and 2020 F- 4 Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 F- 5 Consolidated Statements of Comprehensive Income for the years ended December 31, 2021 and 2020 F- 6 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2021 and 2020 F- 7 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 F- 8 Notes to Consolidated Financial Statements F- 10 Consolidated Financial Statement Schedule for the year ended December 31, 2021 III—Real Estate Properties and Accumulated Depreciation F- 34 All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or the notes thereto. 1 Table of Contents Index REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of BRT Apartments Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of BRT Apartments Corp. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for the years then ended, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates. F-2 Table of Contents Index Joint Venture Consolidation Assessment Joint Venture Consolidation Assessment Description of the matter The Company accounted for certain investments in real estate joint ventures under the equity method of accounting. At December 31, 2021, the Company’s investments in unconsolidated joint ventures were $112.3 million. As discussed in Note 1 to the consolidated financial statements, for each venture the Company evaluated the rights provided to each party in the venture to assess the consolidation of the venture. Auditing management’s joint venture consolidation analyses was complex and highly judgmental due to the subjectivity in assessing which activities most significantly impact the respective joint venture’s economic performance based on the purpose and design of the entity over the duration of its expected life and assessing which party has rights to direct those activities. How we addressed the matter in our audit To test the Company’s consolidation assessment for real estate joint ventures, our procedures included, among others, reviewing joint venture agreements and discussing with management the nature of the rights conveyed to the Company through the joint venture agreements. We reviewed management’s assessment of the activities that would most significantly impact the joint venture’s economic performance and evaluated whether the joint venture agreements provided participating or protective rights to the Company. We also evaluated transactions with the joint ventures for events which would require a reconsideration of previous consolidation conclusions. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2020. New York, New York March 15, 2022 F-3 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share data) December 31, 2021 2020 ASSETS Real estate properties, net of accumulated depreciation of $ 36,467 and $ 30,837 $ 293,550 $ 160,192 Investment in unconsolidated joint ventures 112,347 169,474 Cash and cash equivalents 32,339 19,885 Restricted cash 6,582 8,800 Other assets 10,341 7,390 Real estate property held for sale 4,379 — Total Assets $ 459,538 $ 365,741 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net of deferred costs of $ 980 and $ 563 $ 199,877 $ 130,434 Junior subordinated notes, net of deferred costs of $ 297 and $ 317 37,103 37,083 Accounts payable and accrued liabilities 19,607 20,536 Total Liabilities 256,587 188,053 Commitments and contingencies Equity: BRT Apartments Corp. stockholders' equity: Preferred shares $ 0.01 par value 2,000 shares authorized, none outstanding — — Common stock, $ 0.01 par value, 300,000 shares authorized, 17,349 and 16,432 shares issued at December 31, 2021 and 2020 173 164 Additional paid-in capital 258,161 245,605 Accumulated other comprehensive income — ( 19 ) Accumulated deficit ( 55,378 ) ( 67,978 ) Total BRT Apartments Corp. stockholders' equity 202,956 177,772 Non-controlling interests ( 5 ) ( 84 ) Total Equity 202,951 177,688 Total Liabilities and Equity $ 459,538 $ 365,741 See accompanying notes to consolidated financial statements. F-4 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share data) Year Ended December 31, 2021 2020 Revenues: Rental and other revenue from real estate properties $ 32,041 $ 27,451 Other income 16 651 Total revenues 32,057 28,102 Expenses: Real estate operating expenses—including $ 31 and $ 32 to related parties 14,202 12,377 Interest expense 6,757 7,100 General and administrative—including $ 641 and $ 761 to related party 12,621 11,701 Impairment charge 520 3,642 Depreciation and amortization 8,025 6,742 Total expenses 42,125 41,562 Total revenues less total expenses ( 10,068 ) ( 13,460 ) Equity in loss from unconsolidated joint ventures ( 4,208 ) ( 6,024 ) Equity in earnings from sale of unconsolidated joint venture properties 34,982 — Gain on sale of real estate 7,693 — Gain on sale of partnership interest 2,632 — Loss on extinguishment of debt ( 1,575 ) — Income (loss) from continuing operations 29,456 ( 19,484 ) Provision for taxes 206 248 Income (loss) from continuing operations, net of taxes 29,250 ( 19,732 ) (Income) attributable to non-controlling interests ( 136 ) ( 130 ) Net income (loss) attributable to common stockholders $ 29,114 $ ( 19,862 ) Weighted average number of shares of common stock outstanding: Basic 17,017,690 17,115,697 Diluted 17,084,642 17,115,697 Per share amounts attributable to common stockholders Basic $ 1.63 $ ( 1.16 ) Diluted $ 1.62 $ ( 1.16 ) See accompanying notes to consolidated financial statements. F-5 Table of Contents Index BRT REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) Year Ended December 31, 2021 2020 Net income (loss) $ 29,250 $ ( 19,732 ) Other comprehensive income (loss): Unrealized gain (loss) on derivative instruments 22 ( 12 ) Other comprehensive income (loss) 22 ( 12 ) Comprehensive income (loss) 29,272 ( 19,744 ) Comprehensive (income) attributable to non-controlling interests ( 140 ) ( 128 ) Comprehensive income (loss) attributable to common stockholders $ 29,132 $ ( 19,872 ) See accompanying notes to consolidated financial statements. F-6 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended December 31, 2021 and 2020 (Dollars in thousands, except share data) Shares of Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income (Accumulated Deficit) Non-Controlling Interests Total Balances, December 31, 2019 $ 156 $ 232,331 $ ( 10 ) $ ( 32,824 ) $ ( 93 ) $ 199,560 Distributions - Common Stock - $ 0.88 per share — — — ( 15,292 ) — ( 15,292 ) Restricted stock vesting 1 ( 1 ) — — — — Compensation expense—restricted stock and restricted stock units — 1,821 — — — 1,821 Distributions to non-controlling interests — — — — ( 118 ) ( 118 ) Shares issued through equity offering program, net 7 12,070 — — — 12,077 Shares repurchased — ( 616 ) — — — ( 616 ) Net (loss) income — — — ( 19,862 ) 130 ( 19,732 ) Other comprehensive loss — — ( 9 ) — ( 3 ) ( 12 ) Comprehensive loss — — — — — ( 19,744 ) Balances, December 31, 2020 $ 164 $ 245,605 $ ( 19 ) $ ( 67,978 ) $ ( 84 ) $ 177,688 Distributions - Common Stock - $ 0.90 per share — — — ( 16,514 ) — ( 16,514 ) Restricted stock and restricted stock units vesting 4 ( 4 ) — — — — Compensation expense—restricted stock and restricted stock units — 2,941 — — — 2,941 Distributions to non-controlling interests — — — — ( 60 ) ( 60 ) Shares issued through equity offering program, net 5 9,619 — — — 9,624 Net income — — — 29,114 136 29,250 Other comprehensive income — — 19 — 3 22 Comprehensive income — — — — — 29,272 Balances, December 31, 2021 $ 173 $ 258,161 $ — $ ( 55,378 ) $ ( 5 ) $ 202,951 See accompanying notes to consolidated financial statements F-7 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) Year Ended December 31, 2021 2020 Cash flows from operating activities: Net Income (loss) $ 29,250 $ ( 19,732 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 8,025 6,742 Amortization of deferred financing fees 295 280 Amortization of debt fair value adjustment ( 60 ) — Amortization of restricted stock and restricted stock units 2,941 1,821 Equity in loss of unconsolidated joint ventures 4,208 6,024 Equity in earnings on sale of real estate of unconsolidated ventures ( 34,982 ) — Impairment charge 520 3,642 Gain on sale of real estate ( 7,693 ) — Gain on sale of partnership interest ( 2,632 ) — Loss on extinguishment of debt 1,575 — Increases and decreases from changes in other assets and liabilities: Decrease (increase) in other assets 2,203 ( 108 ) Decrease in accounts payable and accrued liabilities ( 4,179 ) ( 424 ) Net cash used in operating activities ( 529 ) ( 1,755 ) Cash flows from investing activities: Collections from real estate loans — 150 Proceeds from the sale of mortgage loan — 4,000 Improvements to real estate owned ( 1,308 ) ( 887 ) Purchase and consolidation of joint venture properties ( 111,956 ) — Proceeds from the sale of real estate owned 24,632 — Proceeds from the sale of joint venture interests 10,540 — Distributions from unconsolidated joint ventures 62,025 15,273 Contributions to unconsolidated joint ventures ( 6,031 ) ( 13,700 ) Net cash provided by investing activities ( 22,098 ) 4,836 Cash flows from financing activities: Proceeds from mortgages payable 89,680 — Mortgage payoffs ( 47,605 ) — Mortgage principal payments ( 2,688 ) ( 3,041 ) Proceeds from credit facility — 5,000 Repayment of credit facility — ( 5,000 ) Increase in deferred financing costs ( 319 ) — F-8 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) Year Ended December 31, 2021 2020 Dividends paid ( 15,769 ) ( 15,116 ) Distributions to non-controlling interests ( 60 ) ( 118 ) Proceeds from the sale of common stock 9,624 12,077 Repurchase of shares of common stock — ( 616 ) Net cash used in financing activities 32,863 ( 6,814 ) Net increase (decrease) in cash, cash equivalents and restricted cash: 10,236 ( 3,733 ) Cash, cash equivalents and restricted cash at beginning of year 28,685 32,418 Cash, cash equivalents and restricted cash at end of year $ 38,921 $ 28,685 Supplemental disclosures of cash flow information: Cash paid during the year for interest expense $ 6,523 $ 6,886 Cash paid during the year for income and excise taxes $ 173 $ 291 Consolidation on buyout of partnership interest: Increase in real estate assets $ 160,583 Increase in other assets 5,671 Increase in mortgage payable ( 29,067 ) Increase in deferred loan costs 748 Increase in accounts payable and accrued liabilities ( 2,621 ) Decrease in investment in unconsolidated joint ventures ( 23,358 ) $ 111,956 See accompanying notes to consolidated financial statements. F-9 Table of Contents Index NOTE 1— ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES Organization and Background BRT Apartments Corp. (“BRT” or the “Company”) owns, operates and, to a lesser extent, develops multi-family properties. These multi-family properties may be wholly owned by us or by unconsolidated joint ventures in which the Company contributes a significant portion of the equity. At December 31, 2021, BRT: (i) wholly-owns ten multi-family properties located in seven states with an aggregate of 2,576 units and a carrying value of $ 291,538,000 ; and (ii) has ownership interests, through unconsolidated entities, in 23 multi-family properties located in eight states with an aggregate of 6,697 units, and the carrying value of its net equity investment is $ 112,347,000 . In total, the Company has multi-family properties in 11 states, most of which are located in the Southeast United States and Texas. The Company also owns and operates various other real estate assets. At December 31, 2021, the carrying value of the other real estate assets was $ 6,400,000 . BRT conducts its operations to qualify as a real estate investment trust, or REIT, for Federal income tax purposes. Substantially all of the Company's assets are comprised of multi-family real estate assets generally leased to tenants on a one-year basis. Therefore, the Company aggregates real estate assets for reporting purposes and operates in one reportable segment. Principles of Consolidation The consolidated financial statements include the accounts and operations of the Company and its wholly owned subsidiaries. The joint venture that owns a property in Yonkers, New York was determined not to be a variable interest entity ("VIE") but is consolidated because the Company has controlling rights in such entity. The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting. For each venture, the Company evaluated the rights provided to each party in the venture to assess the consolidation of the venture. All investments in unconsolidated joint ventures have sufficient equity at risk to permit the entity to finance its activities without additional subordinated financial support and, as a group, the holders of the equity at risk have power through voting rights to direct the activities of these ventures. As a result, none of these joint ventures are VIEs. Additionally, the Company does not exercise substantial operating control over these entities, and therefore the entities are not consolidated. These investments are recorded initially at cost, as investments in unconsolidated joint ventures, and subsequently adjusted for their share of equity in earnings, cash contributions and distributions. The distributions to each joint venture partner are determined pursuant to the applicable operating agreement and may not be pro-rata to the percentage equity interest each partner has in the applicable venture. Income Tax Status The Company qualifies as a real estate investment trust under sections 856-860 of the Internal Revenue Code of 1986, as amended. The board of directors may, at its option, elect to revoke or terminate the Company's election to qualify as a real estate investment trust. The Company will not be subject to federal, and generally state and local taxes on amounts it distributes to stockholders, provided it distributes 90% of its ordinary taxable income and meets other conditions. The Company currently has net operating loss carryforwards which it can use to reduce taxable income. F-10 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES (Continued) In accordance with Accounting Standards Codification ("ASC") Topic 740 - "Income Taxes", the Company believes that it has appropriate support for the income tax positions taken and, as such, does not have any uncertain tax positions that, if successfully challenged, could result in a material impact on the Company's financial position or results of operations. The Company's income tax returns for the previous six years are subject to review by the Internal Revenue Service. Revenue Recognition Rental revenue from multi-family properties is recorded when due from residents and is recognized monthly as it is earned. Rental payments are due in advance. Leases on residential properties are generally for terms that do not exceed one year . Rental revenue from commercial properties, including the base rent that each tenant is required to pay in accordance with the terms of their respective leases, net of any rent concessions and lease incentives, is reported on a straight-line basis over the non-cancellable term of the lease. Real Estate Properties Real estate properties are stated at cost, net of accumulated depreciation, and include properties acquired through acquisition, development or foreclosure. The Company assesses the fair value of real estate acquired (including land, buildings and improvements, and identified intangibles such as acquired in-place leases) and acquired liabilities and allocates the acquisition price, including transaction costs, based on these assessments. Depreciation for multi-family properties is computed on a straight-line basis over an estimated useful life of 30 years. Intangible assets (and liabilities) are amortized over the remaining life of the related leases at the time of acquisition and is usually less than one year. Expenditures for maintenance and repairs are charged to operations as incurred. Real estate is classified as held for sale when management has determined that the applicable criteria have been met. Real estate assets that are expected to be disposed of are valued at the lower of their carrying amount or their fair value less costs to sell on an individual asset basis. Real estate classified as held for sale is not depreciated. The Company accounts for the sale of real estate when title passes to the buyer, sufficient equity payments have been received, there is no continuing involvement by the Company and there is reasonable assurance that the remaining receivable, if any, will be collected. Asset Impairments The Company reviews each real estate asset owned to determine if there are indicators of impairment. If such indicators are present, the Company determines whether the carrying amount of the asset can be recovered. Recognition of impairment is required if the undiscounted cash flows estimated to be generated by the asset are less than the asset's carrying amount and that carrying amount exceeds the estimated fair value of the asset. The estimated fair value is determined using a discounted cash flow model of the expected future cash flows through the useful life of the property. The analysis includes an estimate of the future cash flows that are expected to result from the real estate investment’s use and eventual disposition. These cash flows consider factors such as expected future operating income, trends, the effects of leasing demands, and other factors. In evaluating a property for impairment, various factors are considered, including estimated current and expected operating cash flow from the property during the projected holding period, costs necessary to extend the life or improve the asset, expected capitalization rates, projected stabilized net operating income, selling costs, and the ability to hold and dispose of such real estate in the ordinary course of business. Valuation adjustments may be necessary in the event that effective interest rates, rent-up periods, future economic conditions, and other relevant factors vary significantly from those assumed in valuing the property. If future evaluations result in a decrease in the value of the property below its carrying value, the reduction will be recognized as an impairment charge. The fair values related to the impaired real estate assets are considered to be a level 3 valuation within the fair value hierarchy. For investment in real estate ventures, if indicators of impairment are present, the Company determines if the fair value of the investment is less than its carrying value. Fair value is determined using a discounted cash flow model of the expected future cash flows through the useful life of the asset. The fair values related to the impaired investments in real estate ventures are considered to be a level 3 valuation within the fair value hierarchy. F-11 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Equity Based Compensation Compensation expense for grants of restricted stock, restricted stock units ("RSUs") and dividend equivalent rights are amortized over the vesting period of such awards, based upon the estimated fair value of such award at the grant date. The Company recognizes the effect of forfeitures when they occur and previously recognized compensation expense is reversed in the period the grant or unit is forfeited. The deferred compensation related to the RSUs to be recognized as expense is net of certain performance assumptions which are re-evaluated quarterly. For accounting purposes, the restricted shares and the RSUs are not included in the outstanding shares shown on the consolidated balance sheets until they vest; however, the restricted shares are included in the calculation of both basic and diluted earnings per share as they participate in the earnings of the Company. Derivatives and Hedging Activities The Company's objective in using derivative financial instruments is to manage interest rate risk related to variable rate debt. The Company does not use derivatives for trading or speculative purposes. The Company records all derivatives on its consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow hedges. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is reported in other comprehensive income (loss). Those amounts are reclassified to earnings in the same income statement line item that is used to present the earnings effect of the hedged item when the hedged item affects earnings. For derivatives not designated as cash flow hedges, changes in the fair value of the derivative are recognized directly in earnings in the period in which they occur. Per Share Data Basic earnings (loss) per share is determined by dividing net income (loss) applicable to holders of common stock for the applicable year by the weighted average number of shares of common stock outstanding during such year. Net income is also allocated to the unvested restricted stock outstanding during each period, as the restricted stock is entitled to receive dividends and is therefore considered a participating security. The RSU's are excluded from the basic earnings per share calculation, as they are not participating securities. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue shares of common stock were exercised or converted into shares of common stock or resulted in the issuance of shares of common stock that share in the earnings of the Company. Diluted earnings per share is determined by dividing net income applicable to common stockholders for the applicable period by the weighted average number of shares of common stock deemed to be outstanding during such period. In calculating diluted earnings per share, the Company includes only those shares underlying the RSU's that it anticipates will vest based on management's current estimates. The Company excludes any shares underlying the RSU's from such calculation if their effect would have been anti-dilutive. Cash Equivalents Cash equivalents consist of highly liquid investments; primarily, direct United States treasury obligations with maturities of three months or less when purchased. Restricted Cash Restricted cash consists of cash held for construction costs and property improvements for specific joint venture properties as may be required by contractual arrangements. F-12 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Deferred Costs Fees and costs incurred in connection with multi-family property financings are deferred and amortized over the term of the related debt obligations. Fees and costs paid related to the successful negotiation of commercial leases are deferred and amortized on a straight-line basis over the terms of the respective leases. Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. New Pronouncements In March 2020, the Financial Accounting Standard Board issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, lease, derivatives and other contracts. This guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company has elected to apply hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. NOTE 2— REAL ESTATE PROPERTIES Real estate properties, excluding a property held for sale in 2021 (see Note 7), consist of the following (dollars in thousands): December 31, 2021 2020 Land $ 38,822 $ 25,585 Building 281,841 154,854 Building improvements 9,354 10,590 Real estate properties 330,017 191,029 Accumulated depreciation ( 36,467 ) ( 30,837 ) Total real estate properties, net $ 293,550 $ 160,192 A summary of activity in real estate properties, net for the year ended December 31, 2021 follows (dollars in thousands): December 31, 2020 Balance Property Acquisitions Improvements Depreciation Asset Sale Held for Sale December 31, 2021 Balance Multi-family $ 153,604 $ 160,583 $ 1,308 $ ( 7,116 ) $ ( 16,841 ) $ — $ 291,538 Land - Daytona, FL 4,379 — — — — ( 4,379 ) — Retail shopping center - Yonkers, NY/Other 2,209 — — ( 111 ) ( 86 ) — 2,012 Total real estate properties $ 160,192 $ 160,583 $ 1,308 $ ( 7,227 ) $ ( 16,927 ) $ ( 4,379 ) $ 293,550 F-13 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 2—REAL ESTATE PROPERTIES (Continued) The following summarizes, by state, information for the year ended December 31, 2021 regarding consolidated properties (dollars in thousands): Location Number of Properties Number of Units 2021 Rental and Other Revenue from Real Estate Properties % of 2021 Rental and Other Revenue from Real Estate Properties Georgia 2 448 $ 6,723 21 % Florida 1 276 4,594 14 % South Carolina 2 474 4,402 14 % Virginia 1 220 4,273 13 % Texas (a) 1 192 3,895 12 % Tennessee 2 702 3,413 11 % Ohio 1 264 3,232 10 % Other (b) — — 1,509 5 % ____________________________ 10 2,576 $ 32,041 100 % (a) Includes the revenues of Kendall Manor which was sold in May 2021. (b) Represents non-multi-family revenues Future minimum rentals to be received pursuant to non-cancellable operating leases with terms in excess of one year, from a commercial property owned by the Company at December 31, 2021, are as follows (dollars in thousands): Year Ending December 31, Amount 2022 $ 1,185 2023 1,252 2024 953 2025 648 2026 648 Thereafter 865 Total $ 5,551 Leases at the Company's multi-family properties are generally for a term of one year or less and are not reflected in this table. NOTE 3— ACQUISITIONS, DISPOSITIONS AND IMPAIRMENT CHARGES Acquisitions of Interests in Joint Ventures In 2021, the Company purchased all of its partners' interests in three joint ventures. The Company determined that in each acquisition the gross assets acquired are concentrated in a single identifiable asset. Therefore, the transaction does not meet the definition of a business and is accounted for as an asset acquisition. The Company assessed the fair value of the tangible assets of the property as of the acquisitions dates using an income approach utilizing market capitalization rate of 4.75 % which is a Level 3 unobservable input in the fair value hierarchy. The following table summarizes these purchases (dollars in thousands): F-14 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 3—ACQUISITIONS, DISPOSITIONS AND IMPAIRMENT CHARGES Location Purchase Date No. of Units Interest Purchased Purchase Price Mortgage Debt Assumed/Acquired Bells Bluff, Nashville, TN 8/18/2021 402 42.0 % $ 27,860 $ 52,000 Crestmont at Thornblade, Greenville, SC 10/1/2021 266 10.0 % 1,600 26,425 Crossings of Bellevue, Nashville, TN 12/1/2021 300 20.0 % 16,128 37,680 968 $ 45,588 $ 116,105 The following table summarizes the purchase price allocation of the book values of those properties that are now wholly owned and is based on the proportionate share of the estimated fair value of the property on the acquisition date (dollars in thousands): Bells Bluff Crestmont at Thornblade Crossings of Bellevue Total Land $ 6,172 $ 4,033 $ 9,679 $ 19,884 Building and Improvements 77,532 34,052 29,115 140,699 Total Land and building $ 83,704 $ 38,085 $ 38,794 $ 160,583 Acquisition related lease intangibles 1,597 818 730 3,145 Total Assets $ 85,301 $ 38,903 $ 39,524 $ 163,728 Acquisition related mortgage intangible — $ 2,641 — $ 2,641 The unamortized balance of acquisition related lease intangibles, which is included in Other assets in the consolidated balance sheet, was $ 2,347,000 at December 31, 2021, and will be amortized within a one year period. The unamortized balance of acquisition related mortgage intangible, which is included in mortgages payable in the consolidated balance sheet, was $ 2,582,000 at December 31, 2021 and will be amortized as follows (dollars in thousands): Year Ending December 31, Amount 2022 $ 365 2023 376 2024 386 2025 390 2026 395 Thereafter 670 Total $ 2,582 F-15 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 3—ACQUISITIONS, DISPOSITIONS AND IMPAIRMENT CHARGES (Continued) Property Dispositions The tables below provide information regarding the Company's disposition of real estate properties during the year ended December 31, 2021 (dollars in thousands): Location Sale Date No. of Units Sales Price Gain on Sale Kendall Manor - Houston, TX 5/26/2021 272 $ 24,500 $ 7,279 New York, NY (1) 8/20/2021 1 545 414 273 $ 25,045 $ 7,693 _______________________________________ (1) Reflects the sale of a cooperative apartment unit. The Company did not dispose of any real estate properties during the year ended December 31, 2020. Impairment Charges The Company reviews each real estate asset owned, including those held through investments in unconsolidated joint ventures, for impairment when there is an event or a change in circumstances indicating that the carrying amount may not be recoverable. The Company measures and records impairment charges, and reduces the carrying value of owned properties, when indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their carrying amounts. For its unconsolidated joint venture investments, the Company measures and records impairment losses, and reduces the carrying value of the equity investment when indicators of impairment are present and the expected discounted cash flows related to the investment is less than the carrying value. In cases where the Company does not expect to recover its carrying value on properties held for use, the Company reduces its carrying value to fair value, and for properties held for sale, the Company reduces its carrying value to the fair value less costs to sell. In the year ended December 31, 2021, the Company took an impairment charge of $ 520,000 related to its investment in OPOP Tower and OPOP Loft properties, St Louis, MO, as the carrying value exceeded the fair vale by that amount. The fair value is based upon the sale price at which the Company contracted to sell this joint venture interest. This investment was sold in 2021 and no further impairments were recorded. In the year ended ended December 31, 2020, indicators of impairment were present on a 8.7 acre vacant land parcel located in South Daytona Beach, Florida. The Company had entered into a contract to sell this property at a sales price less than its carrying value and accordingly, the Company took an impairment charge related to this asset of $ 3,642,000 , representing the excess of the carrying value over the fair value. This property was sold on February 2, 2022 and no further impairments were recorded. NOTE 4— RESTRICTED CASH Restricted cash represents funds for specific purposes and therefore are not generally available for general corporate purposes. As reflected on the consolidated balance sheets, restricted cash represents funds held by or on behalf of the Company specifically allocated for capital improvements at multi-family properties. NOTE 5 - LEASES Lessor Accounting The Company owns one commercial rental property which is leased to two tenants under operating leases with current expirations ranging from 2024 to 2028, with options to extend or terminate the leases. Revenues from such leases are reported F-16 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 5 - LEASES (Continued) as rental income, net, and are comprised of (i) lease components, which includes fixed lease payments and (ii) non-lease components which includes reimbursements of property level operating expenses. The Company does not separate non-lease components from the related lease components, as the timing and pattern of transfer are the same, and account for the combined component in accordance with ASC 842. Due to the impact of the COVID-19 pandemic, concession agreements were entered into with the Company’s two commercial tenants. In accordance with the FASB Staff Q&A, Topic 842 and 840 - Accounting for Lease Concessions Related to the Effects of COVID-19 Pandemic, a lessor may make an accounting policy election to (i) not evaluate whether such COVID-19 pandemic related rent-relief is a lease modification under ASC 842 and (ii) treat each tenant rent deferral or forgiveness as if it were contemplated as part of the existing lease contract. The Company elected to apply this accounting policy to the two lease agreements, based on the type of concessions provided to the tenants, where the revised cash flows are substantially the same or less than the original lease agreement. During the year ended December 31, 2020, the Company issued total abatements of $ 75,000 for the two tenants. Lessee Accounting The Company is a lessee under a ground lease in Yonkers, NY which is classified as an operating lease. The ground lease expires September 30, 2024 and provides for one 21-year renewal option. As of December 31, 2021 , the remaining lease term, including the renewal option, is 23.8 years. The Company is also a lessee under a corporate office lease in Great Neck, New York, which is classified as an operating lease. The lease expires on December 31, 2031 and provides a 5-year renewal option. As of December 31, 2021, the remaining lease term, including renewal options deemed exercised, is 15.0 years. As of December 31, 2021 , the Company's right-of-use ("ROU") assets and lease liabilities were $ 2,568,000 and $ 2,629,000 , respectively and as of December 31, 2020, the Company's ROU assets and lease liabilities were $ 2,652,000 and $ 2,674,000 , respectively. The ROU assets and lease liabilities are reported on the consolidated balance sheets in Other assets and Accounts payable and accrued liabilities , respectively. The discount rate applied to measure each ROU asset and lease liability is based on the Company’s incremental borrowing rate (“IBR”). The Company considers the general economic environment and its historical borrowing rate activity and factors in various financing and asset specific adjustments to ensure the IBR is appropriate to the intended use of the underlying lease. As the Company did not elect to apply the hindsight practical expedient, lease term assumptions determined under ASC 840 were carried forward and applied in calculating the lease liabilities recorded under ASC 842. The Company’s ground lease offers a renewal option which it assesses against relevant economic factors to determine whether it is reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that the Company is reasonably certain will be exercised, if any, are included in the measurement of the corresponding lease liability and ROU asset. As of December 31, 2021, the minimum future lease payments related to the operating ground and office leases are as follows (dollars in thousands): Year Ending December 31, Amount 2022 $ 232 2023 236 2024 243 2025 252 2026 257 Thereafter 3,502 Total undiscounted cash flows $ 4,722 Present value discount ( 2,093 ) Lease liability $ 2,629 F-17 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 6— INVESTMENT IN UNCONSOLIDATED VENTURES At December 31, 2021, the Company owns interests in unconsolidated joint ventures that own 23 multi-family properties (the "Unconsolidated Properties"). The condensed balance sheet below presents information regarding such properties (dollars in thousands): December 31, 2021 2020 ASSETS Real estate properties, net of accumulated depreciation of $ 133,615 and $ 145,600 $ 734,247 $ 1,075,178 Cash and cash equivalents 13,741 16,939 Other Assets 25,535 29,392 Total Assets $ 773,523 $ 1,121,509 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net of deferred costs of $ 3,423 and $ 5,537 $ 584,479 $ 829,646 Accounts payable and accrued liabilities 17,064 20,237 Total Liabilities 601,543 849,883 Commitments and contingencies Equity: Total unconsolidated joint venture equity 171,980 271,626 Total Liabilities and Equity $ 773,523 $ 1,121,509 Company equity interest in all joint venture equity $ 112,347 $ 169,474 F-18 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 6—INVESTMENT IN UNCONSOLIDATED VENTURES (Continued) The condensed income statement below presents information regarding the Unconsolidated Properties (dollars in thousands): Year Ended December 31, 2021 2020 Revenues: Rental and other revenue $ 121,906 $ 127,058 Total revenues 121,906 127,058 Expenses: Real estate operating expenses 56,507 60,326 Interest expense 30,964 34,918 Depreciation 35,636 41,657 Total expenses 123,107 136,901 Total revenues less total expenses ( 1,201 ) ( 9,843 ) Other equity earnings 54 117 Impairment of assets ( 2,813 ) — Insurance recoveries 2,813 — Gain on insurance recoveries 2,179 765 Gain on sale of real estate properties 83,984 — Loss on extinguishment of debt ( 9,401 ) — Net income (loss) from joint ventures $ 75,615 $ ( 8,961 ) BRT equity in loss and equity in earnings from sale of unconsolidated joint venture properties $ 30,774 $ ( 6,024 ) Acquisitions In 2021, the Company did not make any acquisitions through unconsolidated joint ventures. The table below provides information regarding the Company's property acquisition through an unconsolidated joint venture during the year ended December 31, 2020 (dollars in thousands): Location Purchase Date No. of Units Purchase Price Acquisition Mortgage Debt Initial BRT Equity Ownership Percentage Capitalized Property Acquisition Costs Abbotts Run, Wilmington, NC 2/20/2020 264 $ 38,000 $ 23,160 $ 13,700 80 % $ 459 On March 10, 2022 we acquired for $ 3,500,000 a 17.45 % interest in a planned 240 -unit development property located in Johns Island, SC. F-19 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 6—INVESTMENT IN UNCONSOLIDATED VENTURES (Continued) Dispositions The table below provides information regarding the disposition of real estate properties by an unconsolidated joint venture in the year ended December 31, 2021 (dollars in thousands): Location Sale Date No. of Units Sales Price BRT's Share of Gain on Sale Partner's Share of Gain on Sale BRT Share of Loss of Extinguishment of Debt Avenue Apts,Ocoee, FL 7/20/2021 522 $ 107,661 $ 19,518 $ 20,150 $ 4,474 Parc at 980, Lawrenceville, GA 7/28/2021 586 118,250 15,464 28,852 107 1,108 $ 225,911 $ 34,982 $ 49,002 $ 4,581 There were no sales of properties by unconsolidated joint ventures in the year ended December 31, 2020. On February 8, 2022, the unconsolidated joint venture in which we have a 65 % equity interest sold The Veranda at Shavano, a 288 -unit multi-family property in San Antonio, Texas, for a sales price of $ 53,800,000 . We estimate that the gain on the sale of this property will be approximately $ 23,700,000 and that our share of the gain, which will be recognized in the first quarter of 2022, will be approximately $ 12,700,000 . This property was secured by $ 25,100,000 of mortgage debt with 1.4 years years of remaining term to maturity and bearing an interest rate of 3.61 % which was repaid in connection with the sale. The table below provides information regarding the sale of venture interests to our joint venture partners in the year ended December 31, 2021: Location Sale Date No. of Units Sales Price BRT's Share of Gain on Sale Anatole, Daytona Beach, FL 4/20/2021 208 $ 7,540 $ 2,244 OPOP Tower and Lofts, St. Louis, MO 11/4/2021 181 3,000 388 389 $ 10,540 $ 2,632 There were no sales of interest in joint ventures in the year ended December 31, 2020. Joint Venture Buyouts In 2021, the Company purchased its venture partners' remaining interests in three joint ventures that own three properties and increased its ownership interest in a fourth joint venture that owns two properties. The operations and accounts of the three joint ventures which, as a result of such purchases, are wholly-owned by the Company are consolidated into the operations and accounts of the Company as of their respective acquisition dates. The table below provides information regarding these four acquisitions (dollars in thousands): Location Buyout Date No. of Units Percentage of Interest Purchased Purchase Price New Ownership Percentage Mortgage Balance at Acquisition Civic Center I/II, Southaven, MS 5/4/2021 776 14.7 % $ 6,031 74.7 % N/A Bells Bluff, West Nashville, TN 8/18/2021 402 41.9 % 27,860 100 % $ 52,000 Crestmont at Thornblade, Greenville, SC 10/1/2021 266 10.0 % 1,600 100 % 26,425 Crossings of Bellevue, Nashville, TN 12/1/2021 300 20.0 % 16,128 100 % 37,680 1,744 $ 51,619 $ 116,105 F-20 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 7— REAL ESTATE PROPERTY HELD FOR SALE In September 2020, the Company entered into a contract to sell a vacant parcel of land located in South Daytona Beach, FL for $ 4,700,000 with a net book value of $ 4,379,000 . The buyer's right to terminate the contract expired on November 1, 2021. At December 31, 2021, the Company reclassified the net book value of the land as Real estate property held-for-sale in the accompanying balance sheet. The property was sold on February 2, 2022. NOTE 8— DEBT OBLIGATIONS Debt obligations consist of the following (dollars in thousands): December 31, 2021 2020 Mortgages payable $ 200,857 $ 130,997 Junior subordinated notes 37,400 37,400 Deferred loan costs ( 1,277 ) ( 880 ) Total debt obligations $ 236,980 $ 167,517 A summary of activity in property debt for the year ended December 31, 2021 is as follows (dollars in thousands): Balance at December 31, 2020 $ 130,434 Acquisitions 116,105 Fair value adjustment upon consolidation 2,582 Debt payoff in conjunction with property sales ( 14,260 ) Debt Payoff ( 31,879 ) Principal Amortization ( 2,688 ) Changes in Deferred Fees ( 417 ) Balance at December 31, 2021 $ 199,877 At December 31, 2021, $ 200,857,000 of mortgage debt with a weighted average interest rate of 3.78 % and a weighted average term to maturity of 10.1 years is outstanding on eight of the Company's multi-family properties. Scheduled principal repayments for the next five years and thereafter are as follows (dollars in thousands): Year Ending December 31, Scheduled Principal Payments 2022 $ 31,355 2023 1,679 2024 2,095 2025 17,467 2026 1,904 Thereafter 146,357 $ 200,857 F-21 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 8—DEBT OBLIGATIONS (Continued) The Company incurred the following mortgage debt in connection with the purchase of its venture partners' interests in the year ended December 31, 2021 (dollars in thousands): Location Acquisition Date Mortgage balance at acquisition Interest Rate Maturity Date Bells Bluff - West Nashville, TN 8/18/2021 $ 52,000 3.48 % August 2041 Crestmont at Thornblade - Greenville, SC 10/1/2021 26,425 (a) 4.69 % November 2028 Crossings - Nashville, TN 12/1/2021 37,680 3.11 % December 2031 $ 116,105 ________________________________ (a) Debt assumed in connection with the purchase of the joint venture partner's remaining interest in the venture does not include purchase price allocation of $ 2,642 related to this debt. The Company paid off the following debt in the year ended December 31, 2021 (dollars in thousands): Mortgage Payoff Interest Rate Maturity Date Prepayment Charges Avalon - supplemental $ 2,903 4.92 % 3/1/2022 $ 29 Avondale Station 7,140 3.74 % 12/1/2022 376 Avondale Station - supp1emental 6,866 5.53 % 12/1/2022 277 Woodland Trails 14,025 4.36 % 2/1/2022 140 RIPCO 945 5.25 % 4/1/2022 — Total debt paid $ 31,879 $ 822 In connection with the pay off of the RIPCO debt, the Company terminated the interest rate swap associated with this debt. The Company did not incur any debt in the year ended December 31, 2020. Credit Facility The Company entered into an amended and restated credit facility dated November 18, 2021 with an affiliate of Valley National Bank ("VNB"). The facility allows the Company to borrow, subject to compliance with borrowing base requirements and other conditions, up to $ 35,000,000 to facilitate the acquisition of multi-family properties, repay mortgage debt secured by multi family properties and for operating expense ( i.e., working capital (including dividend payments)); provided that no more than $ 15,000,000 may be used for operating expenses. The facility is secured by the cash available in certain cash accounts maintained by the Company at VNB and the Company's pledge of its interests in the entities that own the unencumbered properties used in calculating the borrowing base. The facility matures November 2024 and bears an adjustable interest rate of 25 basis points over the prime rate, with a floor of 3.50 %. The interest rate in effect as of December 31, 2021 is 3.50 %. There is an unused facility fee of 0.25 % per annum on the total amount committed by VNB and unused by the Company. At December 31, 2021, the Company is in compliance in all material respects with its obligations under the facility. At December 31, 2021 and 2020, there was no outstanding balance on the facility and $ 35,000,000 and $ 15,000,000 , respectively, was available to be borrowed. Interest expense for the years ended December 31, 2021 and 2020, which includes amortization of deferred financing costs and unused fees, was $ 101,000 and $ 96,000 , respectively. Deferred costs of $ 270,000 and $ 12,000 are recorded in other assets on the consolidated balance sheets at December 31, 2021 and 2020, respectively. F-22 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 8—DEBT OBLIGATIONS (Continued) Junior Subordinated Notes At December 31, 2021 and 2020, the outstanding principal balance of the Company's junior subordinated notes was $ 37,400,000 before deferred financing costs of $ 297,000 and $ 317,000 , respectively. The interest rate on the outstanding balance resets quarterly and is based on three month LIBOR + 2.00 %. The rate in effect at December 31, 2021 and 2020 was 2.13 % and 2.21 % respectively. The notes mature April 30, 2036. The notes require interest only payments through the maturity date, at which time repayment of all outstanding principal and unpaid interest is due. Interest expense for the years ended December 31, 2021 and 2020, which includes amortization of deferred costs, was $ 845,000 and $ 1,119,000 , respectively. NOTE 9— INCOME TAXES The Company elected to be taxed as a REIT pursuant to the Code. As a REIT, the Company is generally not subject to Federal income taxes at the corporate level if it distributes 100% of its REIT taxable income, as defined, to its stockholders. To maintain its REIT status, the Company must distribute at least 90% of its ordinary taxable income; however, if it does not distribute 100% of its taxable income, it will be taxed on undistributed income. There are a number of organizational and operational requirements the Company must meet to remain a REIT. If the Company fails to qualify as a REIT in any taxable year, its taxable income will be subject to Federal income tax at regular corporate tax rates and it may not be able to qualify as a REIT for four subsequent tax years. Even if it is qualified as a REIT, the Company is subject to certain state and local income taxes and to Federal income and excise taxes on undistributed taxable income. For income tax purposes, the Company reports on a calendar year basis. As of December 31, 2021, tax returns for the calendar years 2018 through 2020 remain subject to examination by the Internal Revenue Service and various state and local tax jurisdictions. During the years ended December 31, 2021 and 2020, the Company recorded $ 206,000 and $ 248,000 , respectively, of state franchise tax expense, net of refunds, relating to the 2021 and 2020 calendar years. Earnings and profits, which determine the taxability of dividends to stockholders, differs from net income reported for financial statement purposes due to various items, including timing differences related to loan loss provisions, impairment charges, depreciation methods and carrying values. At December 31, 2021, it is estimated the Company had a net operating loss carryforward of $ 26,500,000 . These net operating losses may be available in future years to reduce taxable income when and if it is generated. These loss carryforwards no longer expire and are available to offset 100% of taxable income. Net operating losses generated in 2018 and thereafter will be available to offset 80% of taxable income. NOTE 10— STOCKHOLDERS' EQUITY Common Stock Dividend Distribution During the years ended December 31, 2021 and 2020, the Company declared an aggregate of $ 0.90 and $ 0.88 per share in cash dividends, respectively. Stock Based Compensation In 2020, the Company's board of directors adopted and the stockholders' approved the 2020 Incentive Plan (the "2020 Plan"). This plan permits the Company to grant: (i) stock options, restricted stock, restricted stock units, performance shares awards and any one or more of the foregoing, up to a maximum of 1,000,000 shares; and (ii) cash settled dividend equivalent rights in tandem with the grant of restricted stock units and certain performance based awards. Each of the Company's 2018 Incentive Plan (the "2018 Plan") and the Amended and Restated 2016 Incentive Plan (the "2016 Plan") authorized the Company to grant up to 600,000 shares of common stock pursuant to the same type of awards available under the 2020 Plan. No further awards may be granted pursuant to the 2018 Plan or the 2016 Plan, which are referred to collectively as the "Prior Plans." F-23 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 10—STOCKHOLDERS' EQUITY (Continued) Restricted Stock Units In March 2021, pursuant to the 2020 Plan, the Company issued restricted stock units (the "RSUs") to acquire up to 210,375 shares of common stock. The RSUs entitle the recipients, subject to continued service through March 31, 2024 (the "Performance Period"), to receive in the aggregate (i) up to 93,500 shares (the "TSR Award") of common stock based on achieving, during the Performance Period, specified levels in compounded annual growth rate ("CAGR") in total stockholder return (“TSR”), and (ii) up to 93,500 shares of common stock based on achieving, during the Performance Period, specified levels in CAGR in adjusted funds from operations (the "AFFO Award"), in each case as determined pursuant to the performance agreement. In addition, up to 23,375 shares (the "Adjustment Award") may be added to or subtracted from the TSR Award, based on attaining or failing to attain, as the case may be, during the Performance Period, of CAGR in TSR relative to the CAGR in TSR for the REITs that comprise, with specified exceptions, the FTSE NAREIT Equity Apartment Index. The recipients also receive dividend equivalent rights entitling them to receive cash dividends with respect to the shares of common stock underlying their RSUs as if the underlying shares were outstanding during the Performance Period, if, when, and to the extent, the related RSUs vest. The shares underlying the RSU's are not participating securities but are contingently issuable shares. For the TSR Awards, a third party appraiser prepared a Monte Carlo simulation pricing model to assist management in determining fair value. In preparing its simulation, the appraiser assumed an estimated life of three years , a dividend rate of 4.93 %, a risk free interest rate ranging from 0.02 % to 0.34 % and an expected price volatility ranging from 47.19 % to 59.01 %. For the AFFO Awards, fair value is based on the market value on the date of grant. Expense is not recognized on RSUs which the Company does not expect to vest because the performance conditions are not expected to be satisfied. Performance assumptions are re-evaluated quarterly. The total amount recorded at the grant date as deferred compensation with respect to the RSUs was $ 1,995,000 . In June 2016, the Company issued RSUs to acquire up to 450,000 shares shares of common stock, pursuant to the 2016 Plan. In 2021, it was determined that the market conditions with respect to 250,000 shares underlying RSU's issued under the 2016 Plan had been satisfied; such shares with an aggregate market value of $ 4,200,000 as of the measurement date, were issued and an aggregate of $ 775,000 of RSU dividend equivalents were paid. It was also determined that the performance conditions with respect to 200,000 shares underlying RSU's under the 2016 Plan had not been satisfied and accordingly, the 200,000 RSU's did not vest. The Company recorded $ 620,000 and $ 140,000 of compensation expense related to the amortization of unearned compensation with respect to the RSUs in the year ended December 31, 2021 and 2020 respectively. At December 31, 2021 and 2020, $ 2,248,000 and $ 37,000 had been deferred as unearned compensation and is to be charged to expense over the balance of the applicable performance period. Restricted Stock In January 2021 and June 2021, the Company granted 156,774 shares and 160,000 shares, respectively, of restricted stock pursuant to the 2020 Plan. As of December 31, 2021, an aggregate of 922,619 shares of unvested restricted stock are outstanding pursuant to the Plan and the Prior Plans. The shares of restricted stock vest five years from the date of grant and under specified circumstances, including a change in control, may vest earlier. For financial statement purposes, the restricted stock is not included in the outstanding shares shown on the consolidated balance sheets until they vest, but are included in the basic and diluted earnings per share computation. During the years ended December 31, 2021 and 2020, the Company recorded $ 2,321,000 and $ 1,681,000 , respectively, of compensation expense related to the amortization of unearned compensation with respect to the restricted stock awards. At December 31, 2021 and 2020, $ 7,332,000 and $ 4,411,000 , respectively, has been deferred as unearned compensation and will be charged to expense over the remaining vesting periods of these restricted stock awards. The weighted average vesting period of these restricted shares is 2.8 years. Subsequent to December 31, 2021, the Company granted 158,973 shares of restricted stock pursuant to the 2020 Plan. Changes in the number of restricted shares outstanding under the Company's equity incentive plans are shown below: F-24 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 10—STOCKHOLDERS' EQUITY (Continued) Year Ended December 31, 2021 2020 Outstanding at beginning of the year 744,145 725,296 Issued 316,774 158,299 Cancelled ( 950 ) — Vested ( 137,350 ) ( 139,450 ) Outstanding at the end of the year 922,619 744,145 The following table reflects the compensation expense recorded for all incentive plans (dollars in thousands): Year Ended December 31, 2021 2020 Restricted stock grants $ 2,321 $ 1,681 Restricted stock units 620 140 Total compensation $ 2,941 $ 1,821 Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share (dollars in thousands): Year Ended December 31, 2021 2020 Numerator for basic and diluted earnings per share: Net income (loss) $ 29,250 $ ( 19,732 ) Deduct (earnings) attributable to non-controlling interests ( 136 ) ( 130 ) Deduct (earnings) loss allocated to unvested restricted stock ( 1,412 ) 1,520 Net income (loss) available for common stockholders: basic and diluted $ 27,702 $ ( 18,342 ) Denominator for basic earnings per share: Weighted average number of common shares outstanding 17,017,690 17,115,697 Effect of dilutive securities: RSUs (1) 66,952 — Denominator for diluted earnings per share: Weighted average number of shares 17,084,642 17,115,697 Earnings (loss) per common share, basic $ 1.63 $ ( 1.16 ) Earnings (loss) per common share, diluted $ 1.62 $ ( 1.16 ) _______________________________________ (1) For the year ended December 31, 2020, excludes the shares underlying RSUs as their effect would have been anti-dilutive. F-25 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 10—STOCKHOLDERS' EQUITY (Continued) Equity Distribution Agreements The following table reflects the sale of shares pursuant to the equity distribution agreements entered into on November 26, 2019, as amended, with three sales agents in an at-the-market offering (dollars in thousands): Number of Shares Sold Average Price Gross Proceeds Commissions and Fees Net Proceeds Dollar Value of Shares Sold Aggregate amount available under agreement $ 30,000 2019 111,963 $ 18.06 $ 2,022 $ 31 $ 1,991 ( 2,022 ) 2020 694,298 $ 17.71 12,293 185 $ 12,108 ( 12,293 ) 2021 529,126 $ 18.47 9,772 147 $ 9,625 ( 9,772 ) 1,335,387 $ 24,087 $ 363 $ 23,724 Remaining amount available under agreement: $ 5,913 Subsequent to year end, the Company sold an additional 200,000 shares and received net proceeds of $ 2,173,000 . Stock Buyback Effective as of October 1, 2019, the Board of Directors authorized the Company to purchase up to $ 5,000,000 of shares of common stock through September 30, 2021. During the year ended December 31, 2020, the Company repurchased 39,093 shares of common stock , at an average market price of $ 15.76 for an aggregate cost of $ 616,000 . No other shares were repurchased under this authorization. On September 13, 2021, the Board of Directors approved a stock purchase plan authorizing the Company, effective as of October 1, 2021, to repurchase up to $ 5,000,000 of shares of common stock through December 31, 2023. During the year ended December 31, 2021, the Company did no t repurchase any shares of common stock. NOTE 11— RELATED PARTY TRANSACTIONS The Company has retained certain of its executive officers and Fredric H. Gould, a director, to provide, among other things, the following services: participating in the Company's multi-family property analysis and approval process ( which includes service on an investment committee), providing investment advice, long term planning and consulting with executives and employees with respect to other business matters, as required. The aggregate fees paid in 2021 and 2020 for these services were $ 1,398,000 and $ 1,398,000 , respectively. Management of certain properties owned by the Company and certain joint venture properties is provided by Majestic Property Management Corp. ("Majestic Property"), a company wholly owned by Fredric H. Gould, under renewable year-to-year agreements. Certain of the Company's officers and directors are also officers and directors of Majestic Property. Majestic Property provides real property management, real estate brokerage and construction supervision services to these properties. For the years ended December 31, 2021 and 2020, fees for these services were $ 31,000 and $ 32,000 , respectively. Pursuant to a shared services agreement between the Company and several affiliated entities, including Gould Investors L.P., the owner and operator of a diversified portfolio of real estate and other assets and One Liberty Properties, Inc., a NYSE listed equity REIT, the (i) services of the part time personnel that perform certain executive, administrative, legal, accounting and clerical functions and (ii) certain facilities and other resources, are provided to the Company. The allocation of expenses for the facilities, personnel and other resources shared by, among others, the Company and Gould Investors, is computed in accordance with such agreement and is included in general and administrative expense on the consolidated statements of operations. During the years ended December 31, 2021 and 2020 allocated general and administrative expenses reimbursed by the Company to Gould Investors pursuant to the shared services agreement aggregated $ 641,000 and $ 761,000 , respectively. Fredric H. Gould is executive officer and sole stockholder of Georgetown Partners, LLC, the managing general partner of Gould Investors L.P.("Gould Investors"). Mr. Gould is also the vice chairman of the board of directors of One Liberty F-26 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 11—RELATED PARTY TRANSACTIONS (Continued) Properties and certain of the Company's officers and directors are also officers or directors of One Liberty Properties and Georgetown Partners. As of December 31, 2021 and 2020, $ 118,000 and $ 124,000 , res pectively, remains unpaid and is included in accounts payable and accrued liabilities on the consolidated balance sheets. The Company obtains certain insurance in conjunction with Gould Investors and reimburses Gould Investors for the Company's share of the insurance cost. Insurance reimbursements to Gould Investors for the years ended December 31, 2021 and 2020 were $ 61,000 and $ 39,000 , respectively. NOTE 12— FAIR VALUE OF FINANCIAL INSTRUMENTS Financial Instruments Not Measured at Fair Value The following methods and assumptions were used to estimate the fair value of each class of financial instruments that are not reported at fair value on the consolidated balance sheets: Cash and cash equivalents, restricted cash, accounts receivable (included in other assets), accounts payable and accrued liabilities: The carrying amounts reported on the balance sheets for these instruments approximate their fair value due to the short term nature of these accounts. Junior subordinated notes: At December 31, 2021 and 2020, the estimated fair value of the Company's junior subordinated notes is less than their carrying value by approximately $ 8,296,000 and $ 8,670,000 , respectively, based on market interest rates of 4.21 % and 4.22 %, respectively. Mortgages payable: At December 31, 2021, the estimated fair value of the Company's mortgages payable is less than their carrying value by approximately $ 511,000 , assuming market interest rates between 3.12 % and 3.87 %. At December 31, 2020, the estimated fair value was greater than the carrying value by $ 3,831,000 , assuming market interest rates between 2.87 % and 3.28 %. Market interest rates were determined using current financing transaction information provided by third party institutions. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value assumptions. The fair values of debt obligations are considered to be Level 2 valuations within the fair value hierarchy. Financial Instruments Measured at Fair Value The Company's fair value measurements are based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, there is a fair value hierarchy that distinguishes between markets participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity's own assumptions about market participant assumptions. Level 1 assets/liabilities are valued based on quoted prices for identical instruments in active markets, Level 2 assets/liabilities are valued based on quoted prices in active markets for similar instruments, on quoted prices in less active or inactive markets, or on other "observable" market inputs and Level 3 assets/liabilities are valued based significantly on "unobservable" market inputs. The Company does not currently own any financial instruments that are classified as Level 3. At December 31, 2021, the Company had no financial assets or liabilities measured at fair value. Set forth below is information regarding the Company's financial liabilities measured at fair value as of December 31, 2020 (dollars in thousands): Carrying and Fair Value Fair Value Measurements Using Fair Value Hierarchy Level 1 Level 2 Level 3 Financial Liabilities: Interest rate swap $ 23 — $ 23 — F-27 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 12—FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) Derivative financial instruments: Fair values are approximated using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, and implied volatilities. At December 31, 2020, this derivative is included in Accounts payable and accrued liabilities on the consolidated balance sheet. Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with it utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparty. As of December 31, 2020, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative position and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuation is classified in Level 2 of the fair value hierarchy. Long-lived assets The Company measures its real estate investments at fair value on a nonrecurring basis. During the year ended December 31, 2021, the fair value of the real estate investment was determined using the following input levels (dollars in thousands): Carrying and Fair Value Fair Value Measurements Using Fair Value Hierarchy Level 1 Level 2 Level 3 Non-Financial Assets: Investment in unconsolidated joint venture $ 3,000 $ — $ 3,000 $ — During the year ended December 31, 2020, the fair value of the real estate investment was determined using the following input levels (dollars in thousands): Carrying and Fair Value Fair Value Measurements Using Fair Value Hierarchy Level 1 Level 2 Level 3 Non-Financial Assets: Long-lived assets $ 4,379 $ — $ — $ 4,379 The Company reviews its investments in real estate when events or circumstances change indicating the carry value of the investment may not be recoverable. In the evaluation of an investment for impairment, many factors are considered, including estimated current and expected cash flows from the asset during the projected hold period, costs necessary to extend the life of the asset, expected capitalization rates, and projected stabilized net operating income and the ability to hold or dispose of the asset in the ordinary course of business. Quantitative information about Level 2 measurements is as follows: Fair Value Valuation Technique Significant Unobservable Inputs Non-Financial Assets: Long-Lived assets: OPOP Tower and Lofts, St. Louis, MO $ 3,000 Sales Contract Sales Contract F-28 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 12—FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) Quantitative information about Level 3 measurements is as follows: Fair Value Valuation Technique Significant Unobservable Inputs Non-Financial Assets: Long-Lived assets: Vacant land - South Daytona Beach, FL $ 4,379 Discounted cash flow Non-binding sales contract /Discount rate 12.5 % NOTE 13— COMMITMENT AND CONTINGENCIES The Company maintains a non-contributory defined contribution pension plan covering eligible employees and officers. Contributions by the Company are made through a money purchase plan, based upon a percent of qualified employees' total salary as defined therein. Pension expense approximated $ 423,000 and $ 386,000 during the years ended December 31, 2021 and 2020, respectively. At December 31, 2021 and 2020, $ 23,000 and $ 186,000 , respectively, remains unpaid and is included in accounts payable and accrued liabilities on the consolidated balance sheets. At December 31, 2021, the Company is the carve-out guarantor with respect to mortgage debt in principal amount of $ 189,290,000 at seven multi-family properties. NOTE 14— DERIVATIVE FINANCIAL INSTRUMENTS Cash Flow Hedges of Interest Rate Risk The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. As of December 31, 2021, the Company did not have any outstanding interest rate derivatives that was designated as a cash flow hedge of interest rate risk (dollars in thousands): Non-designated Derivatives Derivatives not designated as hedges are not speculative and are used to manage the Company's exposure to interest rate movements and other identified risks but do not meet the hedge accounting requirements. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. At December 31, 2020, the Company did not have any outstanding derivatives that were not designated as hedges in qualifying hedging relationships. The table below presents the fair value of the Company's derivative financial instruments as well as its classification on the consolidated balance sheets as of the dates indicated (dollars in thousands): Derivatives as of: December 31, 2021 December 31, 2020 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Other Assets $ — Other assets $ — Accounts payable and accrued liabilities $ — Accounts payable and accrued liabilities $ 23 F-29 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 14—DERIVATIVE FINANCIAL INSTRUMENTS (Continued) The following table presents the effect of the Company's derivative financial instrument on the consolidated statements of comprehensive income (loss) for the years ended December 31, 2021 and 2020 and (dollars in thousands): Year Ended December 31, 2021 2020 Amount of loss recognized on derivative in Other Comprehensive Income $ ( 1 ) $ ( 27 ) Amount of (loss) gain reclassified from Accumulated Other Comprehensive (loss) income into Interest Expense $ ( 12 ) $ ( 15 ) Total amount of Interest expense presented in the Consolidated Statement of Operations $ 6,757 $ 7,100 During the year ended December 31, 2021, the Company accelerated the reclassification of losses of $ 12,000 from other comprehensive income to earnings as a result of the hedged forecasted transaction becoming probable not to occur. F-30 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 15— QUARTERLY FINANCIAL DATA (Unaudited) 2021 1st Quarter Jan - March 2nd Quarter April - June 3rd Quarter July - September 4th Quarter Oct - Dec Total For Year Revenues: Rental and other revenue $ 7,095 $ 6,958 $ 7,709 $ 10,279 $ 32,041 Other income 4 3 5 4 16 Total revenues 7,099 6,961 7,714 10,283 32,057 Expenses: Real estate operating expenses 3,117 3,166 3,404 4,515 14,202 Interest expense 1,660 1,609 1,535 1,953 6,757 General and administrative 3,114 3,154 3,114 3,239 12,621 Impairment charge — 520 — — 520 Depreciation 1,537 1,416 1,787 3,285 8,025 Total expenses 9,428 9,865 9,840 12,992 42,125 Total revenues less total expenses ( 2,329 ) ( 2,904 ) ( 2,126 ) ( 2,709 ) ( 10,068 ) Equity in loss of unconsolidated joint ventures ( 1,345 ) ( 492 ) ( 4,196 ) 1,825 ( 4,208 ) Equity in earnings from sale of unconsolidated joint venture properties — — 34,982 — 34,982 Gain on sale of real estate — 7,279 414 — 7,693 Gain on sale of partnership interest 2,244 — 388 2,632 Loss on extinguishment of debt — — ( 902 ) ( 673 ) ( 1,575 ) Loss from continuing operations ( 3,674 ) 6,127 28,172 ( 1,169 ) 29,456 Provision for taxes 57 67 31 51 206 (Loss) income from continuing operations, net of taxes ( 3,731 ) 6,060 28,141 ( 1,220 ) 29,250 (Income) attributable to non-controlling interests ( 34 ) ( 33 ) ( 35 ) ( 34 ) ( 136 ) Net (loss) income attributable to common stockholders $ ( 3,765 ) $ 6,027 $ 28,106 $ ( 1,254 ) 29,114 Basic and diluted and per share amounts attributable to common stockholders Basic (loss) income per share $ ( 0.22 ) $ 0.34 $ 1.55 $ ( 0.08 ) $ 1.63 Diluted (loss) income per share $ ( 0.22 ) $ 0.34 $ 1.54 $ ( 0.08 ) $ 1.62 F-31 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 15—QUARTERLY FINANCIAL DATA (Unaudited) (Continued) 2020 1st Quarter Jan - March 2nd Quarter April - June 3rd Quarter July - September 4th Quarter Oct - Dec Total For Year Revenues: Rental and other revenue $ 6,745 $ 6,657 $ 7,020 $ 7,029 $ 27,451 Other income 179 159 293 20 651 Total revenues 6,924 6,816 7,313 7,049 28,102 Expenses: Real estate operating expenses 3,058 3,004 3,289 3,026 12,377 Interest expense 1,860 1,809 1,731 1,700 7,100 General and administrative 3,367 2,957 2,730 2,647 11,701 Impairment charge — — 3,642 — 3,642 Depreciation 1,561 1,809 1,777 1,595 6,742 Total expenses 9,846 9,579 13,169 8,968 41,562 Total revenues less total expenses ( 2,922 ) ( 2,763 ) ( 5,856 ) ( 1,919 ) ( 13,460 ) Equity in (loss) of unconsolidated joint ventures ( 1,815 ) ( 1,387 ) ( 1,529 ) ( 1,293 ) ( 6,024 ) Equity in earnings from sale of unconsolidated joint venture properties — — — — — Gain on sale of real estate — — — — — Loss on extinguishment of debt — — — — — Income (loss) from continuing operations ( 4,737 ) ( 4,150 ) ( 7,385 ) ( 3,212 ) ( 19,484 ) Provision for taxes 62 65 65 56 248 (Loss) income from continuing operations, net of taxes ( 4,799 ) ( 4,215 ) ( 7,450 ) ( 3,268 ) ( 19,732 ) Net (income) attributable to non-controlling interests ( 32 ) ( 31 ) ( 34 ) ( 33 ) ( 130 ) Net (loss) income attributable to common stockholders $ ( 4,831 ) $ ( 4,246 ) $ ( 7,484 ) $ ( 3,301 ) ( 19,862 ) Basic and diluted per share amounts attributable to common stockholders Basic loss per share $ ( 0.29 ) $ ( 0.25 ) $ ( 0.44 ) $ ( 0.19 ) $ ( 1.16 ) Diluted loss per share $ ( 0.29 ) $ ( 0.25 ) $ ( 0.44 ) $ ( 0.19 ) $ ( 1.16 ) F-32 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 NOTE 16— SUBSEQUENT EVENTS Subsequent events have been evaluated and any significant events, relative to our consolidated financial statements as of December 31, 2021 that warrant additional disclosure have been included in the notes to the consolidated financial statements. The Company is presented with the risks presented by the novel coronavirus or COVID-19, which has spread and may continue to spread, to markets in which it operates. The ultimate extent of the impact of the pandemic on the Company’s business, financial condition, liquidity, results of operations and prospects will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, the severity of, and the actions taken to control, the pandemic, and the short-term and long-term economic impact thereof. F-33 Table of Contents Index BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2021 BRT APARTMENTS CORP. AND SUBSIDIARIES SCHEDULE III—REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION DECEMBER 31, 2021 (Dollars in thousands) Initial Cost to Company Costs Capitalized Subsequent to Acquisition Gross Amount At Which Carried at December 31, 2021 Depreciation Life Description Encumbrances Land Buildings and Improvements Land Improvements Carrying Costs Land Buildings and Improvements Total (a) Accumulated Depreciation Date of Construction Date Acquired Commercial Yonkers, NY. $ — — $ 4,000 — $ 320 — — $ 4,320 $ 4,320 $ 2,309 (b) Aug-2000 39 years South Daytona, FL. — $ 10,437 — $ 49 — — $ 4,379 — 4,379 — N/A Feb-2008 N/A Multi-Family Residential North Charleston, SC 15,211 2,435 18,970 — 1,443 — 2,435 20,413 22,848 6,726 2010 Oct-2012 30 years Decatur, GA — 1,698 8,676 — 2,272 — 1,698 10,948 12,646 3,746 1954 Nov-2012 30 years Columbus, OH 8,985 1,372 12,678 — 724 — 1,372 13,402 14,774 3,998 1999 Nov-2013 30 years Pensacola, FL 14,558 2,758 25,192 — 1506 — 2,758 26,698 29,456 6,654 2008 Dec-2014 30 years San Marcos, TX 16,560 2,303 17,605 — 114 — 2,303 17,719 20,022 1,748 2014 Oct-2019 30 years LaGrange, GA — 832 21,969 — 710 — 832 22,679 23,511 5,035 2009 Nov-15 30 years Fredericksburg, VA 26,856 7,540 33,196 — 835 — 7,540 34,031 41,571 4,822 2005 Jul-18 30 years Nashville, TN 52,000 6,172 77,532 — 190 — 6,172 77,722 83,894 1,009 2017 Sept -21 30 years Greenville, SC 29,007 4,033 34,052 — 50 — 4,033 34,102 38,135 326 1998 Oct-21 30 years Nashville, TN 37,680 9,679 29,114 — 47 — 9,679 29,161 38,840 94 1985 Dec-21 30 years Total $ 200,857 $ 49,259 $ 282,984 $ 49 $ 8,211 $ — $ 43,201 $ 291,195 $ 334,396 $ 36,467 ` F-34 Table of Contents Index BRT REALTY TRUST AND SUBSIDIARIES SCHEDULE III—REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION DECEMBER 31, 2021 (Dollars in thousands) Notes to the schedule: (a) Total real estate properties $ 334,396 Less: Accumulated depreciation ( 36,467 ) Net real estate properties $ 297,929 (b) Information not readily obtainable. A reconciliation of real estate properties is as follows: 2021 2020 Balance at beginning of year $ 160,192 $ 169,689 Additions: Acquisitions 160,583 — Capital improvements 1,308 887 161,891 887 Deductions: Sales 16,927 — Depreciation 7,227 6,742 Impairment Charge — 3,642 24,154 10,384 Balance at end of year $ 297,929 $ 160,192 F-35