BRT Apartments Corp. 10-Q

Item 1. Financial Statements BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except per share data) June 30, 2022 December 31, 2021 (unaudited) (audited) ASSETS Real estate properties, net of accumulated depreciation and amortization of $ 43,031 and $ 36,467 $ 447,886 $ 293,550 Investments in unconsolidated joint ventures 79,782 112,347 Cash and cash equivalents 57,045 32,339 Restricted cash 4,787 6,582 Other assets 15,721 10,341 Real estate property held for sale — 4,379 Total Assets $ 605,221 $ 459,538 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net of deferred costs of $ 2,863 and $ 980 $ 296,974 $ 199,877 Junior subordinated notes, net of deferred costs of $ 287 and $ 297 37,113 37,103 Accounts payable and accrued liabilities 21,984 19,607 Total Liabilities 356,071 256,587 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; 17,770 and 17,349 shares outstanding 178 173 Additional paid-in capital 266,256 258,161 Accumulated deficit ( 17,291 ) ( 55,378 ) Total BRT Apartments Corp. stockholders’ equity 249,143 202,956 Non-controlling interest 7 ( 5 ) Total Equity 249,150 202,951 Total Liabilities and Equity $ 605,221 $ 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 June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenues: Rental and other revenue from real estate properties $ 14,683 $ 6,958 $ 26,113 $ 14,053 Other income 2 3 6 7 Total revenues 14,685 6,961 26,119 14,060 Expenses: Real estate operating expenses - including $ 8 and $ 7 to related parties for the three months ended and $ 19 and $ 14 for the six months ended 6,348 3,166 11,101 6,283 Interest expense 2,912 1,609 4,933 3,269 General and administrative - including $ 185 and $ 179 to related parties for the three months ended and $ 431 and $ 351 for the six months ended 3,533 3,154 7,166 6,268 Impairment charge — 520 — 520 Depreciation and amortization 5,010 1,416 8,616 2,953 Total expenses 17,803 9,865 31,816 19,293 Total revenues less total expenses ( 3,118 ) ( 2,904 ) ( 5,697 ) ( 5,233 ) Equity in (loss) earnings of unconsolidated joint ventures ( 50 ) ( 492 ) 1,180 ( 1,837 ) Equity in earnings from sale of unconsolidated joint ventures properties 40,098 — 53,059 — Gain on sale of real estate — 7,279 6 7,279 Gain on sale of partnership interest — 2,244 — 2,244 Loss on extinguishment of debt ( 563 ) — ( 563 ) — Income from continuing operations 36,367 6,127 47,985 2,453 Income tax provision 724 67 798 124 Net income from continuing operations, net of taxes 35,643 6,060 47,187 2,329 Net income attributable to non-controlling interest ( 36 ) ( 33 ) ( 72 ) ( 67 ) Net income attributable to common stockholders $ 35,607 $ 6,027 $ 47,115 $ 2,262 Weighted average number of shares of common stock outstanding: Basic 17,671,073 17,720,488 17,616,740 17,520,963 Diluted 17,726,343 17,720,488 17,690,601 17,520,963 Per share amounts attributable to common stockholders: Basic $ 1.91 $ 0.34 $ 2.54 $ 0.13 Diluted $ 1.91 $ 0.34 $ 2.53 $ 0.13 See accompanying notes to consolidated financial statements. 4 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Dollars in thousands) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net income $ 35,643 $ 6,060 $ 47,187 $ 2,329 Other comprehensive income : Unrealized gain on derivative instruments — 5 — 10 Other comprehensive income — 5 — 10 Comprehensive income 35,643 6,065 47,187 2,339 Comprehensive (income) attributable to non-controlling interests ( 36 ) ( 34 ) ( 72 ) ( 69 ) Comprehensive income attributable to common stockholders $ 35,607 $ 6,031 $ 47,115 $ 2,270 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 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 Comprehensive income 11,544 Balances, March 31, 2022 $ 176 $ 262,170 $ — $ ( 48,175 ) $ 31 $ 214,202 Distributions - common stock - $ 0.25 per share — — — ( 4,723 ) — ( 4,723 ) Compensation expense - restricted stock and restricted stock units — 1,001 — — — 1,001 Distributions to non-controlling interests — — — — ( 60 ) ( 60 ) Shares issued through equity offering program, net 2 3,085 — — — 3,087 Net income — — — 35,607 36 35,643 Comprehensive income 35,643 Balances, June 30, 2022 $ 178 $ 266,256 $ — $ ( 17,291 ) $ 7 $ 249,150 6 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 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 Distributions - common stock - $ 0.22 per share — — — ( 4,007 ) — ( 4,007 ) Compensation expense - restricted stock and restricted stock units — 569 — — — 569 Shares issued through equity offering program, net 4 7,345 — — — 7,349 Net (loss) income — — — 6,027 33 6,060 Other comprehensive income (loss) — — 4 — 1 5 Comprehensive loss 6,065 Balances, June 30, 2021 $ 172 $ 254,053 $ ( 11 ) $ ( 73,734 ) $ ( 15 ) $ 180,465 See accompanying notes to consolidated financial statements 7 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) Six Months Ended June 30, 2022 2021 Cash flows from operating activities: Net income $ 47,187 $ 2,329 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 8,616 2,953 Amortization of deferred financing costs 132 153 Amortization of debt fair value adjustment ( 166 ) — Amortization of restricted stock and restricted stock units 1,975 1,107 Equity in (earnings) loss of unconsolidated joint ventures ( 1,180 ) 1,837 Equity in earnings of sale of real estate of unconsolidated venture ( 53,059 ) — Impairment charge — 520 Gain on sale of real estate ( 6 ) ( 7,279 ) Gain on sale of partnership interest — ( 2,244 ) Loss on extinguishment of debt 563 — Increases and decreases from changes in other assets and liabilities: Increase in other assets ( 432 ) ( 443 ) Decrease in accounts payable and accrued liabilities ( 851 ) ( 2,021 ) Net cash provided by (used in) operating activities 2,779 ( 3,088 ) Cash flows from investing activities: Improvements to real estate properties ( 1,807 ) ( 594 ) Purchase of investment in joint ventures ( 42,784 ) — Proceeds from the sale of real estate 4,385 24,133 Proceeds from the sale of partnership interest — 7,540 Distributions from unconsolidated joint ventures 74,670 8,053 Contributions to unconsolidated joint ventures ( 3,044 ) ( 6,031 ) Net cash provided by investing activities 31,420 33,101 Cash flows from financing activities: Proceeds from mortgages payable 18,953 — Mortgage payoffs ( 26,761 ) ( 14,260 ) Mortgage principal payments ( 821 ) ( 1,559 ) Increase in deferred financing costs ( 264 ) ( 38 ) Dividends paid ( 8,460 ) ( 7,592 ) Distributions to non-controlling interests ( 60 ) — Proceeds from the sale of common stock 6,125 7,349 Net cash used in financing activities ( 11,288 ) ( 16,100 ) 8 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) Six Months Ended June 30, 2022 2021 Net increase in cash, cash equivalents and restricted cash: 22,911 13,913 Cash, cash equivalents and restricted cash at beginning of period 38,921 28,685 Cash, cash equivalents and restricted cash at end of period $ 61,832 $ 42,598 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 4,826 $ 3,118 Cash paid for income taxes $ 291 $ 194 Consolidation on buyout of partnership interests: Increase in real estate assets $ ( 159,121 ) Increase in other assets ( 6,972 ) Increase in mortgage payable 107,757 Increase in deferred loan costs ( 2,272 ) Increase in accounts payable and accrued liabilities 2,646 Decrease in investment in unconsolidated joint ventures 15,178 $ ( 42,784 ) See accompanying notes to consolidated financial statements 9 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. June 30, 2022 2021 Cash and cash equivalents $ 57,045 $ 34,666 Restricted cash 4,787 7,932 Total cash, cash equivalents and restricted cash, shown in consolidated statement of cash flows $ 61,832 $ 42,598 10 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 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 the Company (including its consolidated subsidiaries) or by unconsolidated joint ventures in which the Company generally contributes a significant portion of the equity. At June 30, 2022, the Company: (a) wholly owns sixteen multi-family properties located in nine states with an aggregate of 3,848 units and a carrying value of $ 445,930,000 ; (b) has interests, through unconsolidated entities, in 14 multi-family properties located in six states with an aggregate of 4,557 units with a carrying value of $ 76,749,000 and; (c) has a 17.45 % interest in a development project with a carrying value of $ 3,044,000 . 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 June 30, 2022, the carrying value of the other real estate assets was $ 1,956,000 . 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 and six months ended June 30, 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 (the "Annual Report") 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. 11 Table of Contents Note 3 - Equity Equity Distribution Agreements Effective as of March 18, 2022, the Company (i) terminated the equity distribution agreements dated November 26, 2019, as amended March 31, 2021 and (ii) 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. During the three and six months ended June 30, 2022, the Company sold 137,477 and 273,756 shares for an aggregate sales price of $ 3,127,000 and $ 6,209,000 before commissions and fees of $ 39,087 and $ 83,166 respectively. During the three and six months ended June 30, 2021, the Company sold 410,221 shares for an aggregate sales price of $ 7,462,000 before commissions and fees of $ 112,000 , respectively. Common Stock Dividend Distribution The Company declared a quarterly cash distribution of $ 0.25 per share, payable on July 8, 2022 to stockholders of record on June 30, 2022. Dividend Reinvestment Plan The Dividend Reinvestment Plan (the “DRP”), among other things, provides stockholders with the opportunity to reinvest all or a portion of their cash dividends paid on the Company’s common stock in additional shares of its common stock, at a discount, determined in the Company’s sole discretion, of up to 5 % from the market price for the common stock (as such price is calculated pursuant to the DRP). The discount from the market price is currently 3 %. The DRP is effective with the dividend paid on July 8, 2022. Stock Based Compensation During the six months ended June 30, 2022, the Company's board of directors adopted, and the stockholders' approved, the 2022 Incentive Plan (the "2022 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, 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 June 30, 2022, 787,531 shares are available for issuance pursuant to awards under the 2022 Plan. Awards to acquire 934,092 shares of common stock are outstanding under the 2020 Incentive Plan and the 2018 Incentive Plan (collectively the "Prior Plans") and no further awards may be made pursuant to the Prior Plans. Restricted Stock Units In June 2022 and 2021, the Company issued restricted stock units (the "RSUs") to acquire up to 212,469 and 210,375 shares of common stock pursuant to the 2022 Plan and the 2020 Incentive Plan, respectively. Generally, the RSUs entitle the recipients, subject to continued service through the three year vesting period 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 June 30, 2022 and 2021, the Company recorded $ 250,000 and $ 34,000 , respectively, and for the six months ended June 30, 2022 and 2021, the Company recorded $ 500,000 and $ 71,000 , respectively, of compensation expense related to the amortization of unearned compensation with respect to the RSUs issued under the 2020 Incentive Plan. At June 30, 2022 and December 31, 2021, $ 1,747,000 and $ 2,248,000 of compensation expense, respectively, has been deferred and will be charged to expense over the remaining vesting periods. Restricted Stock In January 2022, the Company granted 158,973 shares, of restricted stock pursuant to the 2020 Plan. As of June 30, 2022 , an aggregate of 934,092 shares of unvested restricted stock are outstanding pursuant to the 2020 Incentive Plan and the 2018 Incentive Plan (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. 12 Table of Contents For the three months ended June 30, 2022 and 2021, the Company recorded $ 751,000 and $ 535,000 respectively, and for the six months ended June 30, 2022 and 2021, respectively, the Company recorded $ 1,475,000 and $ 1,036,000 , respectively, of compensation expense related to the amortization of unearned compensation with respect to the restricted stock awards. At June 30, 2022 and December 31, 2021 , $ 9,231,000 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 2.8 years. Stock Buyback On September 13, 2021, the Board of Directors approved a 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 and six months ended June 30, 2022, and June 30, 2021, the Company did no t repurchase any shares of common stock. 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 June 30, Six Months Ended June 30, 2022 2021 2022 2021 Numerator for basic and diluted earnings per share: Net Income $ 35,643 $ 6,060 $ 47,187 $ 2,329 Deduct net income attributable to non-controlling interests ( 36 ) ( 33 ) ( 72 ) ( 67 ) Deduct earnings allocated to unvested restricted stock ( 1,787 ) ( 295 ) ( 2,354 ) ( 371 ) Net income available for common stockholders: basic and diluted $ 33,820 $ 5,732 $ 44,761 $ 1,891 Denominator for basic earnings per share: Weighted average number of common shares outstanding 17,671,073 17,720,488 17,616,740 17,520,963 Effect of dilutive securities: RSUs 55,270 — 73,861 — Denominator for diluted earnings per share: Weighted average number of shares 17,726,343 17,720,488 17,690,601 17,520,963 Earnings per common share, basic $ 1.91 $ 0.34 $ 2.54 $ 0.13 Earnings per common share, diluted $ 1.91 $ 0.34 $ 2.53 $ 0.13 13 Table of Contents 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 June 30, 2022, the remaining lease term, including the renewal option deemed exercised, is 23.3 years. 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 June 30, 2022, the remaining lease term, including renewal options deemed exercised, is 14.5 years. As of June 30, 2022, the Company's Right of Use ("ROU") assets and lease liabilities were $ 2,469,000 and $ 2,550,000 , 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): June 30, 2022 December 31, 2021 Land $ 57,138 $ 38,822 Building 422,619 281,841 Building improvements 11,160 9,354 Real estate properties 490,917 330,017 Accumulated depreciation ( 43,031 ) ( 36,467 ) Total real estate properties, net $ 447,886 $ 293,550 A summary of real estate properties owned is as follows (dollars in thousands): December 31, 2021 Balance Partner Buyouts Improvements Depreciation Sale of Property June 30, 2022 Balance Multi-family $ 291,538 $ 159,121 $ 1,807 $ ( 6,537 ) $ — $ 445,929 Retail shopping center and other 2,012 — — ( 55 ) — 1,957 Total real estate properties $ 293,550 $ 159,121 $ 1,807 $ ( 6,592 ) $ — $ 447,886 14 Table of Contents Partner Buyouts In the six months ended June 30, 2022, the Company completed the purchase of its partners' remaining interests in the unconsolidated joint ventures that own the properties identified below. As a result of these purchases, these properties (including the related mortgage debt - see note 9 - "Debt Obligations") are wholly-owned and effective as of the closing of such purchase, are included in the Company's consolidated balance sheet and results of operations (dollars in thousands): Buyout Date Property Name Location Units Remaining Interest Purchased Purchase Price (1) 03/23/2022 Verandas at Alamo San Antonio, TX 288 28.1 % $ 8,721 04/07/2022 Vanguard Heights Creve Coeur, MO 174 21.6 % 4,880 05/11/2022 Jackson Square Tallahassee, FL 242 20 % 7,215 05/24/2022 Brixworth at Bridge Street Huntsville, AL 208 20 % 10,697 05/26/2022 Woodland Apartments Boerne, TX 120 20 % 3,881 06/30/2022 Grove at River Place Macon, GA 240 20 % 7,485 Total 1,272 $ 42,879 __________________ (1) The purchase price gives effect to the purchase of the "promote interest" (as more fully described in the Annual Report) of the Company's joint venture partners and does not include closing costs of $ 1,313 and operating cash acquired from the ventures of $1,408. Subsequent to the quarter ended June 30, 2022, the Company completed the purchase of its partners' remaining interests in five unconsolidated joint ventures that own the properties identified below: Buyout Date Property Name Location Units Remaining Interest Purchased Book Value of Property at 6/30/2022 Purchase Price (1) 07/12/2022 Civic I Southaven, MS 392 25 % $ 30,865 $ 18,233 07/12/2022 Civic II Southaven, MS 384 25 % 32,912 17,942 07/14/2022 Abbotts Wilmington, NC 264 20 % 37,346 9,010 07/19/2022 Somerset at Trussville Trussville, AL 328 20 % 40,514 10,558 08/03/2022 Magnolia Pointe Madison, AL 204 20 % 18,533 7,246 Total 1,572 $ 160,170 $ 62,989 ____________________ (1) The purchase price gives effect to the purchase of the "promote interest" (as more fully described in the Annual Report) of the Company's joint venture partners and does not include closing costs and operating cash acquired from the ventures.. The Company determined that the gross assets purchased in each of these 11 acquisitions is concentrated in a single identifiable asset. Therefore, the transactions do not meet the definition of a business and are accounted for as asset acquisitions. The Company assessed the fair value of the tangible assets of the properties as of the acquisition date using the cost accumulation and income approach which utilized market capitalization rates between 4.0 % and 4.5 %, which are Level 3 unobservable inputs in the fair value hierarchy. 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): 15 Table of Contents Verandas at Alamo Vanguard Heights Jackson Square Brixworth at Bridge Street The Woodland Apts Grove at River Place Total Purchase Price Allocation Land $ 3,336 $ 5,466 $ 3,398 $ 1,959 $ 1,289 $ 2,866 $ 18,314 Building and improvements 33,465 30,826 27,167 20,080 12,853 16,416 140,807 Total land and buildings $ 36,801 $ 36,292 $ 30,565 $ 22,039 $ 14,142 $ 19,282 $ 159,121 Acquisition related intangible assets 797 508 634 321 233 396 2,889 Total Asset $ 37,598 $ 36,800 $ 31,199 $ 22,360 $ 14,375 $ 19,678 $ 162,010 Acquisition related mortgage intangible $ ( 62 ) $ 588 $ 283 $ — $ — $ 136 $ 945 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 and six months ended June 30, 2022, The Company did no t record any impairment charges. In the three and six months ended June 30, 2021, the Company recorded an impairment charge of $ 520,000 related to its investment in the OPOP Towers and Loft properties, St Louis, MO, as the carrying value exceeded the fair value by that amount. The fair value was based upon the contractual price of the sale agreement which closed on 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. 16 Table of Contents Note 8 – Investment in Unconsolidated Ventures At June 30, 2022 and December 31, 2021, the Company held interests in unconsolidated joint ventures that own 14 and 23 multi-family properties (the "Unconsolidated Properties"), respectively. The condensed balance sheets below present information regarding such properties (dollars in thousands): June 30, 2022 December 31, 2021 ASSETS Real estate properties, net of accumulated depreciation of $ 91,031 and $ 133,615 $ 483,332 $ 734,247 Cash and cash equivalents 11,002 13,741 Other assets 30,147 25,535 Real estate properties held for sale 14,989 — Total Assets $ 539,470 $ 773,523 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net of deferred costs of $ 2,331 and $ 3,423 $ 387,725 $ 584,479 Accounts payable and accrued liabilities 12,484 17,064 Total Liabilities 400,209 601,543 Commitments and contingencies Equity: Total unconsolidated joint venture equity 139,261 171,980 Total Liabilities and Equity $ 539,470 $ 773,523 BRT's interest in joint venture equity $ 79,782 $ 112,347 At the indicated dates, real estate properties of the unconsolidated joint ventures consist of the following (dollars in thousands): June 30, 2022 December 31, 2021 Land $ 71,545 $ 97,230 Building 479,897 739,577 Building improvements 22,921 31,055 Real estate properties 574,363 867,862 Accumulated depreciation ( 91,031 ) ( 133,615 ) Total real estate properties, net $ 483,332 $ 734,247 At June 30, 2022 and December 31, 2021, the weighted average interest rate on the mortgages payable is 4.00 % and 3.97 %, respectively, and the weighted average remaining term to maturity is 6.3 years and 7.6 years, respectively. 17 Table of Contents The condensed income statement below presents information regarding the Unconsolidated Properties (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenues: Rental and other revenue $ 22,107 $ 33,005 $ 47,338 $ 65,677 Total revenues 22,107 33,005 47,338 65,677 Expenses: Real estate operating expenses 9,842 15,233 21,011 30,936 Interest expense 4,893 8,472 10,919 16,994 Depreciation 5,208 9,791 11,844 20,176 Total expenses 19,943 33,496 43,774 68,106 Total revenues less total expenses 2,164 ( 491 ) 3,564 ( 2,429 ) Other equity earnings 22 5 77 14 Impairment of assets — ( 490 ) — ( 2,813 ) Insurance recoveries — 490 — 2,813 Gain on insurance recoveries 52 — 567 — Gain on sale of real estate 77,681 — 101,333 — Loss on extinguishment of debt ( 2,888 ) — ( 2,918 ) — Net income (loss) from joint ventures $ 77,031 $ ( 486 ) $ 102,623 $ ( 2,415 ) BRT's equity in (loss) earnings and equity in earnings from sale of unconsolidated joint venture properties $ 40,048 $ ( 492 ) $ 54,239 $ ( 1,837 ) 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. On June 14, 2022, the unconsolidated joint ventures in which the Company had a 75 % equity interest sold Retreat at Cinco Ranch, a 268 -unit multi family property in San Antonio, TX for $ 68,300,000 . The gain on the sale of this property was $ 30,595,000 and BRT's share of the gain was $ 17,378,000 . In connection with the sale, mortgage debt of $ 30,096,000 with 3.6 years of remaining term to maturity and bearing an interest rate of 4.44 % was repaid and the joint venture incurred $ 1,257,000 from the loss on the extinguishment of debt, of which BRT's share was $ 686,000 . On June 30, 2022, the unconsolidated joint venture in which the Company had a 65 % equity interest sold The Vive, a 312 -unit multi-family property in Kannapolis, NC for $ 91,250,000 . The gain on the sale of this property was $ 47,086,000 and BRT's share of the gain was $ 22,720,000 . In connection with the sale, mortgage debt of $ 31,420,000 with 29.7 years of remaining term to maturity and bearing an interest rate of 3.52 % was repaid and the joint venture incurred $ 1,631,000 from the loss on extinguishment of debt, of which BRT's share was $ 787,000 . Acquisition of Interest in Joint Venture 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 $ 455,000 held in escrow at June 30, 2022. Joint Venture Buyouts The Company completed the partner buyout transactions in the unconsolidated joint ventures that own the properties identified in note 5 - Real Estate Properties - Partner Buyouts. As a result of these purchases, these properties (including the 18 Table of Contents related mortgage debt - see note 9 - "Debt Obligations) are wholly-owned effective as of the closing of each purchase, and are included in the Company's consolidated balance sheet and results of operations as of the applicable date. Note 9 – Debt Obligations Debt obligations consist of the following (dollars in thousands): June 30, 2022 December 31, 2021 Mortgages payable $ 299,837 $ 200,857 Junior subordinated notes 37,400 37,400 Deferred financing costs ( 3,150 ) ( 1,277 ) Total debt obligations, net of deferred costs $ 334,087 $ 236,980 Mortgages Payable At June 30, 2022, the weighted average interest rate on the Company's mortgages payable was 3.91 % and the weighted average remaining term to maturity is 9.2 years. For the three months ended June 30, 2022 and 2021, interest expense, which includes amortization of deferred financing costs, was $ 2,563,000 and $ 1,378,000 , respectively. For the six months ended June 30, 2022 and 2021, interest expense, which includes amortization of deferred financing costs, was $ 4,326,000 and $ 2,808,000 , respectively. During the three and six months ended June 30, 2022, the Company paid off mortgage debt of $ 14,558,000 on a property. Partner Buyouts The following table summarizes the information regarding the mortgages relating to the property in which BRT purchased the remaining interests of its joint venture partners during the six months ended June 30, 2022 (dollars in thousands): Property Name Location Debt at Purchase Date (1) Interest Rate Maturity Date Interest Only through Verandas at Alamo San Antonio, TX $ 27,000 3.64 % Oct 2029 October 2024 Vanguard Heights Creve Coeur, MO 29,700 4.41 % July 2031 June 2025 Jackson Square Tallahassee, FL 21,524 4.19 % Sept 2027 September 2022 Brixworth at Bridge Street (2) Huntsville, AL 11,147 4.25 % June 2032 Maturity The Woodland Apartments Boerne, TX 7,905 4.74 % Feb 2026 N/A Grove at River Place (3) Macon, GA 11,426 4.39 % Feb 2026 N/A Total $ 108,702 ___________________ (1) Excludes fair value adjustments of $ 945 determined as part of the purchase price allocation. (2) The original mortgage debt of $ 11,147 was refinanced with a new ten-year mortgage debt of $ 18,592 immediately following the buyout. (3) Includes a supplemental mortgage of $ 1,056 which was paid off immediately following the buyout. 19 Table of Contents Subsequent to June 30, 2022, the Company completed the purchase of its joint venture partners' remaining interests in five additional unconsolidated joint ventures that own the properties identified below. The following table summarizes the information regarding the mortgages relating to each purchase (dollars in thousands): Property Name Location Debt at Purchase Date (1) Interest Rate Maturity Date Interest Only through Civic I Southaven, MS $ 27,429 4.24 % March 2026 N/A Civic II Southaven, MS 30,153 3.73 % September 2026 N/A Abbotts Wilmington, NC 23,160 4.71 % July 2030 July 2025 Somerset at Trussville Trussville, AL 32,250 4.19 % June 2029 May 2025 Magnolia Pointe Madison, AL 15,000 4.08 % January 2028 December 2022 Total $ 127,992 (1) Excludes fair value adjustments to be determined as part of the purchase price allocation. 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 provides that it may be expanded to provide for up to $ 60 million of availability if another lender(s) is willing to provide an additional $ 25 million of availability). 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 June 30, 2022 is 5.00 %. 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 June 30, 2022, the Company is in compliance in all material respects with its obligations under the facility. At June 30, 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. At August 5, 2022, there was an outstanding balance of $ 22,000,000 on the facility bearing an interest rate of 5.75 % and $ 13,000,000 available to be borrowed. Interest expense for the three months ended June 30, 2022 and 2021, which includes amortization of deferred financing costs and unused fees, was $ 62,000 and $ 19,000 , respectively. Interest expense for the six months ended June 30, 2022 and 2021, which includes amortization of deferred financing costs and unused fees, was $ 107,000 and $ 36,000 , respectively. Deferred financing costs of $ 223,000 and $ 270,000 , are recorded in other assets on the Consolidated balance sheets at June 30, 2022 and December 31, 2021, respectively. Junior Subordinated Notes At June 30, 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 $ 287,000 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 June 30, 2022 and 2021 was 3.29 % and 2.21 %, respectively. The notes mature April 30, 2036. The interest rate that will be in effect for the three months ending October 30, 2022 is 4.78 % 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 June 30, 2022 and 2021, which includes amortization of deferred financing costs, was $ 286,000 and $ 212,000 , respectively. Interest expense for the six months ended June 30, 2022 and 2021, which includes amortization of deferred financing costs, was $ 498,000 and $ 426,000 , respectively. 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 20 Table of Contents June 30, 2022 and 2021 were $ 367,000 and $ 349,000 , respectively, and $ 734,000 and $ 699,000 for the six months ended June 30, 2022 and 2021, 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 $ 8,000 and $ 7,000 for the three months ended June 30, 2022 and 2021 , respectively, and $ 19,000 and $ 14,000 for the six months ended June 30, 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, (i) the 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 June 30, 2022 and 2021, allocated general and administrative expenses reimbursed by the Company to Gould Investors pursuant to the shared services agreement aggregated $ 185,000 and $ 179,000 , respectively, and $ 431,000 and $ 351,000 for the six months ended June 30, 2022 and 2021, 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 June 30, 2022 and December 31, 2021, the estimated fair value of the notes is lower than their carrying value by approximately $ 7,206,000 and $ 8,296,000 , respectively, based on a market interest rate of 5.97 % and 4.21 %, respectively. Mortgages payable: At June 30, 2022, the estimated fair value of the Company’s mortgages payable is lower than their carrying value by approximately $ 21,481,000 , assuming market interest rates between 4.27 % and 5.32 %. 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. 21 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 June 30, 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 June 30, Six Months Ended June 30, 2021 2021 Amount of (loss) gain recognized on derivative in Other Comprehensive Income $ — $ ( 27 ) Amount of (loss) gain reclassified from Accumulated Other Comprehensive Income into Interest expense $ ( 5 ) $ ( 10 ) Total amount of Interest expense presented in the Consolidated Statements of Operations $ 1,609 $ 3,269 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 June 30, 2022, that warrant additional disclosure, have been included in the notes to the consolidated financial statements. 22 Table of Contents