BRT Apartments Corp. 10-Q

Item 1. Financial Statements BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except per share data) March 31, 2022 December 31, 2021 (unaudited) (audited) ASSETS Real estate properties, net of accumulated depreciation and amortization of $ 39,259 and $ 36,467 $ 328,334 $ 293,550 Investments in unconsolidated joint ventures 106,025 112,347 Cash and cash equivalents 29,688 32,339 Restricted cash 6,543 6,582 Other assets 12,410 10,341 Real estate property held for sale — 4,379 Total Assets $ 483,000 $ 459,538 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net of deferred costs of $ 1,297 and $ 980 $ 211,565 $ 199,877 Junior subordinated notes, net of deferred costs of $ 292 and $ 297 37,108 37,103 Accounts payable and accrued liabilities 20,125 19,607 Total Liabilities 268,798 256,587 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; 17,632 and 17,349 shares outstanding 176 173 Additional paid-in capital 262,170 258,161 Accumulated deficit ( 48,175 ) ( 55,378 ) Total BRT Apartments Corp. stockholders’ equity 214,171 202,956 Non-controlling interest 31 ( 5 ) Total Equity 214,202 202,951 Total Liabilities and Equity $ 483,000 $ 459,538 See accompanying notes to consolidated financial statements. 3 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except shares and per share data) Three Months Ended March 31, 2022 2021 Revenues: Rental and other revenue from real estate properties $ 11,430 $ 7,095 Other income 4 4 Total revenues 11,434 7,099 Expenses: Real estate operating expenses - including $ 11 and $ 7 to related parties 4,753 3,117 Interest expense 2,021 1,660 General and administrative - including $ 246 and $ 172 to related parties 3,633 3,114 Depreciation and amortization 3,606 1,537 Total expenses 14,013 9,428 Total revenues less total expenses ( 2,579 ) ( 2,329 ) Equity in earnings (loss) of unconsolidated joint ventures 1,230 ( 1,345 ) Equity in earnings from sale of unconsolidated joint ventures properties 12,961 — Gain on sale of real estate 6 — Income (loss) from continuing operations 11,618 ( 3,674 ) Income tax provision 74 57 Net income (loss) from continuing operations, net of taxes 11,544 ( 3,731 ) Net income attributable to non-controlling interest ( 36 ) ( 34 ) Net income (loss) attributable to common stockholders $ 11,508 $ ( 3,765 ) Weighted average number of shares of common stock outstanding: Basic 17,561,802 17,319,222 Diluted 17,654,349 17,319,222 Per share amounts attributable to common stockholders: Basic and Diluted $ 0.62 $ ( 0.22 ) See accompanying notes to consolidated financial statements. 4 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2022 2021 Net income (loss) $ 11,544 $ ( 3,731 ) Other comprehensive income : Unrealized income on derivative instruments — 5 Other comprehensive income — 5 Comprehensive income (loss) 11,544 ( 3,726 ) Comprehensive (income) attributable to non-controlling interests ( 36 ) ( 35 ) Comprehensive income (loss) attributable to common stockholders $ 11,508 $ ( 3,761 ) See accompanying notes to consolidated financial statements. 5 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (Dollars in thousands, except per share data) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) income Accumulated Deficit Non- Controlling Interest Total Balances, December 31, 2021 $ 173 $ 258,161 $ — $ ( 55,378 ) $ ( 5 ) $ 202,951 Distributions - common stock - $ 0.23 per share — — — ( 4,305 ) — ( 4,305 ) Restricted stock and restricted stock units vesting 2 ( 2 ) — — — — Compensation expense - restricted stock and restricted stock units — 974 — — — 974 Shares issued through equity offering program, net 1 3,037 — — — 3,038 Net income — — — 11,508 36 11,544 Other comprehensive income — — — — — — Comprehensive income 11,544 Balances, March 31, 2022 $ 176 $ 262,170 $ — $ ( 48,175 ) $ 31 $ 214,202 Common Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) income Accumulated Deficit Non- Controlling Interest Total Balances, December 31, 2020 $ 164 $ 245,605 $ ( 19 ) $ ( 67,978 ) $ ( 84 ) $ 177,688 Distributions - common stock - $ 0.22 per share — — — ( 4,011 ) — ( 4,011 ) Restricted stock vesting 4 ( 4 ) — — — — Compensation expense - restricted stock and restricted stock units — 538 — — — 538 Net (loss) income — — — ( 3,765 ) 34 ( 3,731 ) Other comprehensive income — — 4 — 1 5 Comprehensive loss ( 3,726 ) Balances, March 31, 2021 $ 168 $ 246,139 $ ( 15 ) $ ( 75,754 ) $ ( 49 ) $ 170,489 See accompanying notes to consolidated financial statements 6 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) Three Months Ended March 31, 2022 2021 Cash flows from operating activities: Net income (loss) $ 11,544 $ ( 3,731 ) Adjustments to reconcile net income(loss) to net cash provided by operating activities: Depreciation and amortization 3,606 1,537 Amortization of deferred financing costs 52 80 Amortization of debt fair value adjustment ( 89 ) — Amortization of restricted stock and restricted stock units 974 538 Equity in earnings of unconsolidated joint ventures ( 1,230 ) 1,345 Equity in earnings of sale of real estate of unconsolidated venture ( 12,961 ) — Gain on sale of real estate ( 6 ) — Increases and decreases from changes in other assets and liabilities: (Increase) decrease in other assets ( 1,071 ) 470 Decrease in accounts payable and accrued liabilities ( 350 ) ( 87 ) Net cash provided by operating activities 469 152 Cash flows from investing activities: Improvements to real estate properties ( 802 ) ( 223 ) Purchase of investment in joint venture ( 8,288 ) — Proceeds from the sale of real estate 4,385 — Distributions from unconsolidated joint ventures 19,796 3,881 Contributions to unconsolidated joint ventures ( 2,122 ) — Net cash provided by investing activities 12,969 3,658 Cash flows from financing activities: Mortgage payoffs ( 14,558 ) — Mortgage principal payments ( 410 ) ( 801 ) Dividends paid ( 4,198 ) ( 3,777 ) Proceeds from the sale of common stock 3,038 — Net cash used in financing activities ( 16,128 ) ( 4,578 ) 7 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) Three Months Ended March 31, 2022 2021 Net decrease in cash, cash equivalents and restricted cash: ( 2,690 ) ( 768 ) Cash, cash equivalents and restricted cash at beginning of period 38,921 28,685 Cash, cash equivalents and restricted cash at end of period $ 36,231 $ 27,917 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 2,021 $ 1,587 Cash paid for income taxes $ 1 $ 6 Reclassification of property to held for sale $ — $ 16,800 Consolidation on buyout of partnership interest: Increase in real estate assets $ ( 36,802 ) Increase in other assets ( 1,784 ) Increase in mortgage payable 27,062 Increase in deferred loan costs ( 364 ) Increase on accounts payable and accrued liabilities 761 Decrease in investment in unconsolidated joint ventures 2,839 $ ( 8,288 ) See accompanying notes to consolidated financial statements 8 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows. March 31, 2022 2021 Cash and cash equivalents $ 29,688 $ 19,406 Restricted cash 6,543 8,511 Total cash, cash equivalents and restricted cash, shown in consolidated statement of cash flows $ 36,231 $ 27,917 9 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2022 Note 1 – Organization and Background BRT Apartments Corp. (the "Company" or "BRT"), a Maryland corporation, owns, operates and to a lesser extent develops multi-family properties. The Company conducts its operations to qualify as a real estate investment trust, or REIT, for federal income tax purposes. 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 March 31, 2022, the Company: (a) wholly owns eleven multi-family properties located in seven states with an aggregate of 2,864 units, and a carrying value of $ 326,350,000 ; (b) has interests, through unconsolidated entities, in 21 multi-family properties located in eight states with an aggregate of 6,121 units with a carrying value of $ 103,917,000 and; (c) has a 17.45 % interest in a development project with a carrying value of $ 2,122,000 . BRT's equity interests in these unconsolidated entities range from 17.45 % to 80 %. Most of the Company's properties are located in the Southeast United States and Texas. The Company also owns and operates various other real estate assets. At March 31, 2022, the carrying value of the other real estate assets was $ 1,984,000 . Note 2 – Basis of Preparation The accompanying interim unaudited consolidated financial statements, reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the results for such interim periods. The results of operations for the three months ended March 31, 2022 and 2021, are not necessarily indicative of the results for the full year. The consolidated audited balance sheet as of December 31, 2021, has been derived from the audited financial statements at that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States ("GAAP"). Accordingly, these unaudited statements should be read in conjunction with the Company's audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission ("SEC"). The consolidated financial statements include the accounts and operations of the Company and its wholly-owned subsidiaries. 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 variable interest entities ("VIEs"). Additionally, as determined in accordance with GAAP, 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. The joint venture that owns a property in Yonkers, New York, was determined not to be a VIE but is consolidated because the Company has controlling rights in such entity. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from those estimates. 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. 10 Table of Contents Note 3 - Equity Equity Distribution Agreements On March 18, 2022, the Company entered into separate equity distribution agreements with two sales agents to sell an aggregate sales price of up to $ 40,000,000 of its common stock from time-to-time in an at-the-market offering. Effective as of March 18, 2022, the Company terminated the equity distribution agreements dated November 26, 2019, as amended March 31, 2021. During the three months ended March 31, 2022, the Company sold 136,279 shares for an aggregate sales price of $ 3,081,825 before commissions and fees of $ 44,079 . During the three months ended March 31, 2021, the Company did not sell shares. Common Stock Dividend Distribution The Company declared a quarterly cash distribution of $ 0.23 per share, payable on April 7, 2022 to stockholders of record on March 24, 2022. Stock Based Compensation The Company's 2020 Incentive Plan (the "2020 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, for 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. As of March 31, 2022, 314,128 shares are available for issuance pursuant to awards under the 2020 Plan. Restricted Stock Units In June 2021, the Company issued restricted stock units (the "RSUs") to acquire up to 210,375 shares of common stock pursuant to the 2020 Plan. The RSUs entitled the recipients, subject to continued service through the applicable vesting date ( i.e., March 31, 2024) to receive (i) the underlying shares if and to the extent certain performance and/or market conditions are satisfied at the vesting date, and (ii) an amount equal to the cash dividends that would have been paid from the grant date through the vesting date with respect to the shares of common stock underlying the RSUs if, when, and to the extent, the related RSUs vest. The shares underlying the RSUs are not participating securities but are contingently issuable shares. Expense is recognized over the applicable vesting period on the RSUs which the Company expects to vest. For the three months ended March 31, 2022 and 2021, the Company recorded $ 250,000 and $ 37,000 , respectively, of compensation expense related to the amortization of unearned compensation with respect to the RSUs. At March 31, 2022 and December 31, 2021, $ 1,997,000 and $ 2,248,000 of compensation expense, respectively, has been deferred and will be charged to expense over the remaining vesting period. Restricted Stock In January 2022, the Company granted 158,973 shares, of restricted stock pursuant to the 2020 Plan. As of March 31, 2022 , an aggregate of 934,342 shares of unvested restricted stock are outstanding pursuant to the 2020 Incentive Plan and the 2018 Incentive Plan (the "2018 Plan"). No additional awards may be granted under the 2018 Plan. 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 is included in the earnings per share computation. For the three months ended March 31, 2022 and 2021, the Company recorded $ 724,000 and $ 501,000 respectively, of compensation expense related to the amortization of unearned compensation with respect to the restricted stock awards. At March 31, 2022 and December 31, 2021 , $ 9,986,000 and $ 7,332,000 , 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 remaining vesting period of these shares of restricted stock is 3.1 years. Stock Buyback On September 13, 2021, the Board of Directors approved a new stock repurchase 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 three months ended March 31, 2022, the Company did no t repurchase any shares of common stock. 11 Table of Contents Per Share Data Basic earnings (loss) per share is determined by dividing net income (loss) applicable to common stockholders for the applicable period by the weighted average number of shares of common stock outstanding during such period. 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 RSUs 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 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 RSUs that it anticipates will vest based on management's current estimates. The Company excludes any shares underlying the RSUs from such calculation if their effect would have been anti-dilutive. The following table provides a reconciliation of the numerator and denominator of earnings per share calculations (amounts in thousands, except per share amounts): Three Months Ended March 31, 2022 2021 Numerator for basic and diluted earnings per share: Net Income (loss) $ 11,544 $ ( 3,731 ) Deduct net income attributable to non-controlling interests ( 36 ) ( 34 ) Deduct (earnings) loss allocated to unvested restricted stock ( 574 ) 163 Net income (loss) available for common stockholders: basic and diluted $ 10,934 $ ( 3,602 ) Denominator for basic earnings per share: Weighted average number of common shares outstanding 17,561,802 17,319,222 Effect of dilutive securities: RSUs 92,547 — (1) Denominator for diluted earnings per share: Weighted average number of shares 17,654,349 17,319,222 Earnings (loss) per common share, basic $ 0.62 $ ( 0.22 ) Earnings (loss) per common share, diluted $ 0.62 $ ( 0.22 ) ______________________ (1) E xcludes the shares underlying RSU's as their effect would have been anti-dilutive. Note 4 - Leases Lessor Accounting The Company owns a commercial building leased to two tenants under operating leases expiring from 2024 to 2028, with tenant options to extend or terminate the leases. Revenues from such leases are reported 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 accounts for the combined component in accordance with ASC 842. 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 March 31, 2022, the remaining lease term, including the renewal option deemed exercised, is 23.5 years. 12 Table of Contents The Company is 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 five-year renewal option. As of March 31, 2022, the remaining lease term, including renewal options deemed exercised, is 14.8 years. As of March 31, 2022, the Company's Right of Use ("ROU") assets and lease liabilities were $ 2,518,000 and $ 2,589,000 , respectively. As of December 31, 2021, the Company's ROU assets and lease liabilities were $ 2,568,000 and $ 2,629,000 , 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. Note 5 ‑ Real Estate Properties Real estate properties, excluding real estate held for sale, consists of the following (dollars in thousands): March 31, 2022 December 31, 2021 Land $ 42,158 $ 38,822 Building 315,279 281,841 Building improvements 10,156 9,354 Real estate properties 367,593 330,017 Accumulated depreciation ( 39,259 ) ( 36,467 ) Total real estate properties, net $ 328,334 $ 293,550 A summary of real estate properties owned is as follows (dollars in thousands): December 31, 2021 Balance Additions Capitalized Costs and Improvements Depreciation Sale of Property March 31, 2022 Balance Multi-family $ 291,538 $ 36,802 $ 802 $ ( 2,792 ) $ — $ 326,350 Land - Daytona, FL 4,379 — — — ( 4,379 ) — Retail shopping center and other 2,012 — — ( 28 ) — 1,984 Total real estate properties $ 297,929 $ 36,802 $ 802 $ ( 2,820 ) $ ( 4,379 ) $ 328,334 Property Acquisition On March 23, 2022, the Company completed the purchase of its partners' remaining 28.1 % interest in Verandas at Alamo, San Antonio, TX, for a purchase price of $ 8,721,000 . As a result of this purchase, this property is wholly-owned and effective March 23, 2022, is included in the Company's consolidated results of operations and accounts, including mortgage debt (see note 9 - "Debt Obligations"). The Company determined that the gross assets purchased in this acquisition 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 acquisition date using the cost accumulation and income approach which utilized a market capitalization rate of 4.5 % which is a Level 3 unobservable input in the fair value hierarchy. 13 Table of Contents The following table summarizes the allocation of the book value based on the proportionate share of the estimated fair value of the property on the acquisition date (dollars in thousands): Purchase Price Allocation Land $ 3,336 Building and improvements 33,404 Total land and buildings 36,740 Acquisition related intangible assets 797 Total Asset $ 37,537 Acquisition related mortgage intangible $ 62 Property Disposition On February 2, 2022 the Company sold a vacant land parcel located in Daytona, Florida for a sales price of $ 4,700,000 , and, after closing costs, recognized a nominal gain. In 2020, we recognized an impairment charge of $ 3,600,000 in connection with this property. At December 31, 2021, this property was classified as held-for-sale. Note 6 - 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. When 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. When the Company does not expect to recover its carrying value on unconsolidated joint ventures that are under contract for sale, the Company, when it is determined that the sale is probable, reduces its carrying value to its fair value. For the three months ended March 31, 2022 and 2021, the Company did not record any impairment charges. Note 7 - Restricted Cash Restricted cash represents funds held for specific purposes and are therefore not available for general corporate purposes. The restricted cash reflected on the consolidated balance sheets represents funds that are held by the Company specifically for capital improvements at certain multi-family properties owned by unconsolidated joint ventures. 14 Table of Contents Note 8 – Investment in Unconsolidated Ventures At March 31, 2022 and December 31, 2021, the Company held interests in unconsolidated joint ventures that own 21 and 23 multi-family properties (the "Unconsolidated Properties"), respectively. The condensed balance sheets below present information regarding such properties (dollars in thousands): March 31, 2022 December 31, 2021 ASSETS Real estate properties, net of accumulated depreciation of $ 125,930 and $ 133,615 $ 675,246 $ 734,247 Cash and cash equivalents 11,567 13,741 Other assets 25,944 25,535 Total Assets $ 712,757 $ 773,523 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net of deferred costs of $ 3,244 and $ 3,423 $ 531,246 $ 584,479 Accounts payable and accrued liabilities 10,266 17,064 Total Liabilities 541,512 601,543 Commitments and contingencies Equity: Total unconsolidated joint venture equity 171,245 171,980 Total Liabilities and Equity $ 712,757 $ 773,523 BRT's interest in joint venture equity $ 106,025 $ 112,347 At the indicated dates, real estate properties of the unconsolidated joint ventures consist of the following (dollars in thousands): March 31, 2022 December 31, 2021 Land $ 92,378 $ 97,230 Building 678,140 739,577 Building improvements 30,658 31,055 Real estate properties 801,176 867,862 Accumulated depreciation ( 125,930 ) ( 133,615 ) Total real estate properties, net $ 675,246 $ 734,247 At March 31, 2022 and December 31, 2021, the weighted average interest rate on the mortgages payable is 4.07 % and 3.97 %, respectively, and the weighted average remaining term to maturity is 7.64 years and 7.60 years , respectively. 15 Table of Contents The condensed income statement below presents information regarding the Unconsolidated Properties (dollars in thousands): Three Months Ended March 31, 2022 2021 Revenues: Rental and other revenue $ 25,231 $ 32,672 Total revenues 25,231 32,672 Expenses: Real estate operating expenses 11,169 15,703 Interest expense 6,026 8,522 Depreciation 6,636 10,385 Total expenses 23,831 34,610 Total revenues less total expenses 1,400 ( 1,938 ) Other equity earnings 55 9 Impairment of assets — ( 2,323 ) Insurance recoveries — 2,323 Gain on insurance recoveries 515 — Gain on sale of real estate 23,652 — Loss on extinguishment of debt ( 30 ) — Net income (loss) from joint ventures $ 25,592 $ ( 1,929 ) BRT's equity in earnings (loss) and equity in earnings from sale of unconsolidated joint venture properties $ 14,191 $ ( 1,345 ) Joint Venture Sales On February 8, 2022, the unconsolidated joint venture in which the Company had a 65 % equity interest sold The Verandas at Shavano, a 288 -unit multi-family property in San Antonio, TX, for a sales price of $ 53,750,000 . The gain on the sale of this property was $ 23,652,000 and BRT's share of the gain was $ 12,961,000 . In connection with the sale, mortgage debt of $ 25,100,000 with 1.2 years of remaining term to maturity and bearing an interest rate of 3.61 % was repaid. Subsequent to March 31, 2022, the unconsolidated joint ventures in which the Company has a (i) 75 % equity interest entered into a contract dated as of April 16, 2022 to sell Retreat at Cinco Ranch, a 268 -unit multi family property in San Antonio, TX for $ 68,500,000 and (ii) 65 % equity interest entered into a contract dated as of May 3, 2022 to sell The Vive, a 312 -unit multi-family property in Kannapolis, NC for $ 92,000,000 . The completion of these two sales are subject to the satisfaction of customary closing conditions and are not contingent upon the closing of one-another; it is anticipated that such sales will be completed during the quarter ending June 30, 2022. Joint Venture Acquisitions On March 10, 2022, the Company purchased a 17.45 % interest in a planned 240 -unit development property, Stono Oaks, located in Johns Island, SC. The purchase price for the interest, was $ 3,500,000 , which includes $ 2,122,000 held in escrow at March 31, 2022. Joint Venture Buyouts On March 23, 2022, the Company completed its acquisition of the remaining 28.1 % interest owned by its joint venture partner in the entity that owns Verandas at Alamo, a 288 -unit multi-family property located in San Antonio, TX. The purchase price for the interest was $ 8,721,000 . As a result of this purchase, Verandas at Alamo, effective as of the purchase date, is wholly-owned, and its operations and accounts are consolidated, including mortgage debt (see note 9 - "Debt Obligations"). Subsequent to March 31, 2022, the Company completed its acquisition of the remaining 21.6 % interest owned by its joint venture partner in the entity that owns Vanguard Heights, a 174 -unit multi-family property located in Creve Coeur, MO. The purchase price for the interest was $ 4,800,000 . As a result of this purchase, Vanguard Heights, effective as of the purchase 16 Table of Contents date, is wholly-owned and its operations and accounts will be consolidated, including mortgage debt in principal amount of $ 29,700,000 with an interest rate of 4.41 % (interest only until July 2025) and maturing in July 2031. Note 9 – Debt Obligations Debt obligations consist of the following (dollars in thousands): March 31, 2022 December 31, 2021 Mortgages payable $ 212,862 $ 200,857 Junior subordinated notes 37,400 37,400 Deferred financing costs ( 1,589 ) ( 1,277 ) Total debt obligations, net of deferred costs $ 248,673 $ 236,980 Mortgages Payable At March 31, 2022, the weighted average interest rate on the Company's mortgage payables was 3.73 % and the weighted average remaining term to maturity is 10.2 years. For the three months ended March 31, 2022 and 2021, interest expense, which includes amortization of deferred financing costs, was $ 1,763,000 and $ 1,430,000 , respectively. During the three months ended March 31, 2022, the Company paid off mortgage debt of $ 14,558,000 on a property. On March 23, 2022, as a result of the purchase of its partners' remaining interests in Verandas at Alamo - San Antonio, TX, mortgage debt in principal amount of $ 27,000,000 with a fixed rate ( i.e. , 3.64 % and interest only until October 2024 and a maturity of December 2029) will be included on the Company's consolidated balance sheet. On April 7, 2022, as a result of the purchase of its partners' remaining interests in Vanguard Heights - Creve Coeur, MO, mortgage debt in principal amount of $ 29,700,000 with a fixed rate ( i.e. , 4.41 % and interest only for until July 2025 and a maturity of July 2031) will be included on the Company's consolidated balance sheet. Credit Facility The Company's amended and restated credit facility dated November 18, 2021 with an affiliate of Valley National Bank ("VNB") 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, matures November 2024 and bears an adjustable interest rate of 25 basis points over the prime rate, with a floor of 3.5 %. The interest rate in effect as of March 31, 2022 is 3.75 %. There is an unused facility fee of 0.25 % per annum on the total amount committed by Valley National Bank and unused by the Company. At March 31, 2022, the Company is in compliance with all material respects with its obligations under the facility. At March 31, 2022 and December 31, 2021, there was no outstanding balance on the facility and $ 35,000,000 was available to be borrowed in both periods. Interest expense for the three months ended March 31, 2022 and 2021, which includes amortization of deferred financing costs and unused fees, was $ 45,000 and $ 17,000 , respectively. Deferred financing costs of $ 247,000 and $ 270,000 , are recorded in other assets on the Consolidated balance sheets at March 31, 2022 and December 31, 2021, respectively. Junior Subordinated Notes At March 31, 2022 and December 31, 2021, the outstanding principal balance of the Company's junior subordinated notes was $ 37,400,000 , before deferred financing costs of $ 292,000 and $ 297,000 , respectively. The interest rate on the outstanding balance resets quarterly and is based on three months LIBOR + 2.00 %. The rate in effect at March 31, 2022 and 2021 was 2.30 % and 2.21 %, respectively. The notes mature April 30, 2036. The junior subordinated notes require interest only payments through the maturity date of April 30, 2036, at which time repayment of the outstanding principal and unpaid interest become due. Interest expense for the three months ended March 31, 2022 and 2021, which includes amortization of deferred financing costs, was $ 212,000 and $ 214,000 , respectively. 17 Table of Contents Note 10 – Related Party Transactions The Company has retained certain of its executive officers and Fredric H. Gould, a director, among other things, to participate in the Company's multi-family property analysis and approval process (which includes service on an investment committee), provide investment advice, and provide long-term planning and consulting with executives and employees with respect to other business matters, as required. The aggregate fees incurred for these services in each of the three months ended March 31, 2022 and 2021 were $ 367,000 and $ 350,000 , 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. Certain of the Company's officers and directors are also officers and directors of Majestic Property. Majestic Property may also provide real estate brokerage and construction supervision services to these properties. These fees amounted to $ 11,000 and $ 7,000 for the three months ended March 31, 2022 and 2021, respectively. Pursuant to a shared services agreement between the Company and several affiliated entities, including Gould Investors L.P. ("Gould Investors"), 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 three months ended March 31, 2022 and 2021, allocated general and administrative expenses reimbursed by the Company to Gould Investors pursuant to the shared services agreement aggregated $ 246,000 and $ 172,000 , respectively. Jeffrey A. Gould and Matthew J. Gould, executive officers and directors of the Company are executive officers of Georgetown Partners, LLC, the managing general partner of Gould Investors. Note 11 – Fair Value Measurements Financial Instruments Not Carried at Fair Value The following methods and assumptions were used to estimate the fair value of each class of financial instruments that are not recorded 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 in the balance sheets for these instruments approximate their fair value due to the short term nature of these accounts. Junior subordinated notes: At March 31, 2022 and December 31, 2021, the estimated fair value of the notes is lower than their carrying value by approximately $ 8,150,000 and $ 8,296,000 , respectively, based on a market interest rate of 4.30 % and 4.21 %, respectively. Mortgages payable: At March 31, 2022, the estimated fair value of the Company’s mortgages payable is lower than their carrying value by approximately $ 36,739,000 , assuming market interest rates between 3.92 % and 4.67 %. At December 31, 2021, the estimated fair value of the Company's mortgages payable was greater than their carrying value by approximately $ 511,000 , assuming market interest rates between 3.12 % and 3.87 %. Market interest rates were determined using rates which the Company believes reflects institutional lender yield requirements at the balance sheet dates. 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. Non-recurring fair value measurements The Company reviews each investment in real estate and joint venture interests when events or circumstances change, indicating the carrying 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, projected stabilized net operating income, and the ability to hold or dispose of the asset in the ordinary course of business. 18 Table of Contents Note 12 – Derivative Financial Instruments Cash Flow Hedges of Interest Rate Risk The Company's objective 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 March 31, 2022 and December 31, 2021, the Company did not have any outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk. The following table presents the effect of the Company’s interest rate swaps on the consolidated statements of comprehensive income (loss) for the dates indicated (dollars in thousands): Three Months Ended March 31, 2021 Amount of (loss) gain recognized on derivative in Other Comprehensive Income $ — Amount of (loss) gain reclassified from Accumulated Other Comprehensive Income into Interest expense $ ( 5 ) Total amount of Interest expense presented in the Consolidated Statements of Operations $ 1,660 Note 13 – New Accounting 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 14 – Subsequent Events Subsequent events have been evaluated and any significant events, relative to our consolidated financial statements as of March 31, 2022, that warrant additional disclosure, have been included in the notes to the consolidated financial statements. 19 Table of Contents