What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-08 · 211 added, 223 removed, 299 unchanged (59% of the section changed)

9 unchanged sentences

• the impact of the COVID-19 pandemic and the governmental and non-governmental responses thereto;

• general economic and business conditions, including those currently affecting our nation’s economy and real estate markets;

• general economic and business conditions, including those currently affecting our nation’s economy and real estate markets, such as increasing inflation and interest rates;

• the availability of, and costs associated with, sources of capital and liquidity;

39 unchanged sentences

These properties may be wholly owned or by unconsolidated joint ventures in which we generally contribute a significant portion of the equity.

At June 30, 2022, we:

(i) wholly-own sixteen multi-family with an aggregate of 3,848 units and a carrying value of $445.9 million;

(ii) have ownership interests, through unconsolidated entities, in 14 multi-family properties with 4,557 units and a carrying value of $76.7 million;

At September 30, 2022, we:

(i) wholly-own 21 multi-family with an aggregate of 5,420 units and a carrying value of $653.7 million;

(ii) have ownership interests, through unconsolidated entities, in eight multi-family properties with 2,781 units and a carrying value of $40.3

and (iii) have a 17.45% interest in a 240-unit multi-family development property with a carrying value of $3.5 million.

(excluding $500,000 held in escrow).

The 29 properties are located in 11 states;

1 unchanged sentence

See " -Other Financing Sources And Arrangements " for information regarding the contributions to, and our reliance on, the cash flow and liquidity provided by the properties owned by our unconsolidated subsidiaries.

Challenges and Uncertainties Presented by COVID-19

The pandemic did not have a direct material adverse effect on our financial condition and results of operations;

however, there were some direct negative effects ( e.g., we were more conservative in raising rents, pursuing acquisitions and in implementing our value add program, all of which, if more aggressively pursued, may have allowed us to generate additional income).

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

Challenges and Uncertainties as a Result of the Volatile Economic Environment

During the three and nine months ended September 30, 2022, economic uncertainty and stock market volatility have increased due to a number of factors, including rising inflation, increasing interest rates, the continuing COVID-19 pandemic, and lingering supply chain disruptions.

This uncertainty, volatility and the related causes may adversely impact us in the future.

Rising inflation could have an adverse impact on our operating expenses(and in particular, real estate operating expenses and general and administrative expense) and interest expense on our floating rate debt ( i.e., our junior subordinated notes and credit facility), as these costs could increase at a rate higher than our rental and other revenue.

We can provide no assurance that we will be able to mitigate the impact of rising inflation.

The Federal Reserve has been raising interest rates to combat inflation and it is anticipated that rates will continue to rise throughout the remainder of 2022.

Increases in interest rates on any of our floating rate debt will result in higher debt service costs and increases in our operating expenses that we are unable to pass through to our tenants will adversely affect our profitability and cash flows.

We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings.

Further, due to the uncertain economic environment, we anticipate that in the near term we will be especially cautious in pursuing acquiring properties.

As a result, our ability, in the near term, to grow revenue and net income through acquisitions will be adversely affected.

Buyout of Interests in Joint Ventures

Over the past nine months, our efforts have been focused on purchasing the remaining interests of our joint venture partners in the unconsolidated ventures that own multi-family properties.

We refer to such purchases and the related effects on our financial statements (as described below), as the “Partner Buyouts”.

In 2021, the six months ended June 30, 2022 and subsequent thereto, we completed three, six and five Partner Buyouts, respectively.

In 2021 and the nine months ended September 30, 2022, we completed the purchase of the remaining interests of our joint venture partners in the unconsolidated ventures that own three and 11 multi-family properties, respectively.

We refer to these 14 purchases and the related effects on our financial statements as the “Partner Buyouts”.

After a Partner Buyout is completed, such multi-family property is wholly owned and the accounts and operations of such property are included in our consolidated balance sheet and statements of operations, respectively, as of the date of completion of such purchase.

Our assets, liabilities, revenues and expenses have increased significantly as a result of these Partner Buyouts.

Had the 11 properties included in the Partner Buyouts completed in 2022 been included as of January 1, 2022 in our consolidated statements of operations, such properties would have contributed, for the six months ended June 30, 2022, an aggregate of $17.5 million of rental income and $16.4 million of expense (including $4.3 million of mortgage interest expense and $4.8 million of depreciation expense).

Our assets, liabilities, revenues and expenses increased significantly as a result of these Partner Buyouts.

Had the 11 Partner Buyouts completed in 2022 been included as of January 1, 2022 in our consolidated statements of operations, such properties would have contributed, for the nine months ended September 30, 2022, an aggregate of $18.4 million of rental income and $17.4 million of expense (including $4.5 million of mortgage interest expense and $5.1 million of depreciation expense).

We do not anticipate completing any Partner Buyouts in the near future.

Completed Purchases of the Remaining Interests of Joint Venture Partners

Set forth below is information regarding the Partner Buyouts completed during the periods indicated below.

Except as otherwise indicated, the mortgage debt reflects the debt that was on such property at the time of the purchase of the remaining interest.

Set forth below is information regarding the Partner Buyouts completed during the three months ended September 30, 2022.

The mortgage debt reflects the debt that was on such property at the time of the purchase of the remaining interest.

The purchase price gives effect to our purchase of the joint venture partners' "promote interests" (as more fully described in the Annual Report) (dollars in thousands):

During the Three Months Ended June 30, 2022

Property Name Location Units Percent Acquired Purchase Price (1) Mortgage Debt (2) Closing Date Interest Rate Maturity

Vanguard Heights Creve Couer, MO 174 21.6 % $ 4,880 $ 29,700 April 2022 4.41 % July 2031

Jackson Square Tallahassee, FL 242 20.0 % 7,215 21,524 May 2022 4.19 % September 2027

Brixworth at Bridge Street (3)

Huntsville, AL 208 20.0 % 10,697 11,147 May 2022 4.25 % June 2032

Woodland Apartments Boerne, TX 120 20.0 % 3,881 7,905 May 2022 4.74 % February 2026

Grove at River Place (4) Macon, GA 240 20.0 % 7,485 11,426 June 2022 4.39 % February 2026

Total 984 $ 34,158 $ 81,702

____________________________________

(1) Excludes closing costs and operating cash acquired from the joint ventures.

(2) Excludes fair value adjustments of $945 determined as part of the purchase price allocation.

(3) The original mortgage debt of $11,147 was refinanced with a new ten-year mortgage debt of $18,592 immediately following the buyout.

(4) Includes a supplemental mortgage of $1,056 which was paid off immediately following the buyout.

Subsequent to the quarter ended June 30, 2022, the Company completed the purchase of partners' remaining interests in five joint ventures that own the properties identified below:

Property Name Location Units Percent Acquired Purchase Price Closing Date Estimated Amount of Debt to be Included on our Consolidated Balance Sheet (1) Maturity Interest Rate

Property Name Location Units Percent Acquired Purchase Price (1) Closing Date Mortgage Debt (2) Interest Rate Maturity

Civic Center I Southaven, MS 392 25% $ 18,233 July 12, 2022 27,389 4.24 % March 2026

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Abbotts Run Willmington, NC 264 20% 9,010 July 14, 2022 23,160 4.71 % July 2030

Somerset at Trussville Birmingham, AL 328 20% 10,558 July 19, 2022 32,250 June 2029 4.19 %

Somerset at Trussville Trussville, AL 328 20% 10,558 July 19, 2022 32,250 4.19 % June 2029

Magnolia Pointe at Madison Madison, AL 204 20% 7,246 Aug 3, 2022 15,000 4.08 % January 2028

Total 1,572 $ 62,989 $ 127,904 $ 127,904,000

(1) Excludes fair value adjustments to be determined as part of the purchase price allocations

Joint Venture Property Dispositions

Completed Dispositions

On June 14, 2022, the unconsolidated joint venture that owns Retreat at Cinco Ranch, located in Katy, Texas and in which we hold a 75% equity interest, sold the property for $68.3 million, recognized a $30.6 million gain on the sale of this property and recorded a $1.1 million mortgage prepayment charge.

___________________________________

(1) Excludes closing costs and operating cash acquired from the joint ventures.

(2) Excludes fair value adjustments of $4,719 determined as part of the purchase price allocation.

Completed Disposition

On August 31, 2022, the unconsolidated joint venture that owns Waters Edge at Harbison, located in Columbia, SC and in which we held an 80% equity interest, sold the property for $32.4 million, recognized a $16.9 million gain on the sale of this property and recorded a $573,000 mortgage prepayment charge.

As a result of the sale, we recorded a $11.5 million gain and $388,000 mortgage prepayment charge, representing our share of the gain and the mortgage prepayment charge, respectively.

The mortgage debt securing the property and paid off in connection with the sale was in principal amount of $12.2 million, with a remaining term to maturity of 3.8 years and an interest rate of 4.28%.

In 2021, this property contributed $336,000 of equity in loss of unconsolidated joint ventures.

On June 30, 2022, the unconsolidated joint venture that owns The Vive, a 312-unit multi-family property located in Kannapolis, NC, in which we hold a 65% equity interest, sold the property for $91.3 million, recognized a $47.1 million gain on the sale of this property and recorded a $1.6 million mortgage prepayment charge.

As a result of the sale, we recorded a $22.7 million gain and $787,000 share of the mortgage prepayment charge, representing our share of the gain and the mortgage prepayment charge, respectively.

The mortgage debt securing the property and paid off in connection with the sale was in principal amount of $31.4 million, with a remaining term to maturity of 29.7 years and an interest rate of 3.52%.

In 2021, this property contributed $77,000 of equity in earnings of unconsolidated joint ventures.

Anticipated Dispositions

On June 20, 2022, an unconsolidated joint venture in which we hold an 80% equity interest entered into an agreement to sell Waters Edge at Harbison, a 204-unit multi-family property located in Columbia, SC, for a sales price of approximately $32.4 million.

We anticipate that this transaction, which is subject to the satisfaction of customary closing conditions, will be completed in August/September 2022, and we estimate that we will recognize a gain on the sale of this property of approximately $11.5 million, and an approximate $263,000 mortgage prepayment charge, representing our share of the gain and the mortgage prepayment charge, respectively.

As of June 30, 2022, this property had mortgage debt of $12.3 million with a remaining term to maturity of 4.2 years and an interest rate of 4.28%.

In 2021, this property contributed $66,000 of equity in loss of unconsolidated joint ventures.

Other Activities During the Three Months Ended June 30, 2022

Dividend increase

We increased our quarterly dividend by to $0.25, an increase of 8.7% from the immediately preceding dividend payment.

This dividend was payable on July 8, 2022.

In the six months ended June 30, 2022, this property contributed $103,000 of equity in loss of unconsolidated joint ventures.

Other Activities During the Three Months Ended September 30, 2022

Sale of Common Stock Pursuant to the ATM Program

1 unchanged sentence

Net proceeds after commissions and fees was $3.8 million.

Equity Incentive Program Activity

In June 2022, we awarded to 16 individuals restricted stock units (“RSUs”) and related dividend equivalent rights to acquire an aggregate of up to 212,69 shares of common stock,.

Generally, the awards vest in 2025 subject to satisfaction of, among other things, market and performance conditions similar to the RSUs granted in 2021.

See note 3 to our consolidated financial statements.

Dividend Reinvestment Plan

See Note 3 to our consolidated financial statements for information regarding our dividend reinvestment plan.

Results of Operations – Three months ended June 30, 2022 compared to three months ended June 30, 2021.

As used herein, the term "same store properties" refers to operating properties that were owned for the entirety of the periods presented.

For the three and six months ended June 30, 2022 and 2021, there were seven same store properties in our consolidated portfolio.

Credit Facility Amendment

We entered into an amendment (the "Amendment") to our amended and restated credit facility (the "Facility") with VNB New York, LLC, an affiliate of Valley National Bank (“VNB”).

Among other things, the Amendment (i) increased the amount we are permitted to borrow from $35 million to an aggregate of $60 million, subject to compliance with borrowing base requirements and other conditions, (ii) increased from $15 million to $25 million the amount that may be used for working capital (including dividend payments) and operating expenses, (iii) extended the term of the facility from November 2024 to September 2025, (iv) reduced the interest rate to the prime rate (subject to a floor of 3.5%) by eliminating the 25 basis point spread over the prime rate, (v) increased the number and value of the unencumbered properties we are required to maintain from two properties with a value of at least $50 million to three properties with a value of at least $75 million and (vi) requires that we maintain a tangible net worth of a least $140 million.

In connection with the Amendment, we paid fees of approximately $357,000 which will be amortized over the remaining term of the facility.

Mortgage Payoff

On October 31, 2022, the mortgage debt on Silvana Oaks Apartments - N.

Charleston, SC with an interest rate of 3.79% and in the amount of $14.9 million matured and was paid off.

In connection with this payoff, we borrowed $15.0 million from our credit facility.

UPREIT Structure

We are evaluating whether to establish an UPREIT structure to enhance our ability to acquire multi-family properties.

There is no timetable for the completion of such evaluation or implementation of such structure and we can provide no assurance that we will implement an UPREIT structure.

Results of Operations

Three months ended September 30, 2022 compared to three months ended September 30, 2021 .

As used herein, the term "same store properties" refers to operating properties that were wholly owned for the entirety of the periods presented.

For the three and nine months ended September 30, 2022 and 2021, there were seven same store properties in our consolidated portfolio.

The following table compares our revenues for the periods indicated:

Three Months Ended June 30,

Three Months Ended September 30,

(Dollars in thousands):

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The increase is due to the following changes:

• $7.5 million due to the Partner Buyouts, including $1.8 million from the Partner Buyouts completed during the three months ended June 30, 2022;

• $683,000 primarily due to an increase in average rental rates at same store properties.

Offsetting the increase is a $423,000 decrease due to the sale of the Kendall Manor property in May 2021 (the "Kendall Sale").

• $13.3 million due to the Partner Buyouts, including $4.9 million from the Partner Buyouts completed during the three months ended September 30, 2022;

• $727,000 at same store properties primarily due to an increase in average rental rates.

The following table compares our expenses for the periods indicated:

Three Months Ended June 30,

Three Months Ended September 30,

(Dollars in thousands) 2022 2021 Increase

3 unchanged sentences

General and administrative 3,673 3,114 559 18.0 %

Impairment charge — 520 (520) N/M

Depreciation and amortization 8,165 1,787 6,378 356.9 %

1 unchanged sentence

Real estate operating expense.

The increase is due primarily to:

• $3.3 million relating to the Partner Buyouts, including $731,000 from the Partner Buyouts completed during the three months ended June 30, 2022;

• $279,000 at same store properties due to a $93,000 increase in replacement costs and a $186,000 increase across other expense categories.

The increase was offset by a decline of $357,000 due to the Kendall Sale.

The increase is due primarily to $5.7 million from the Partner Buyouts, including $1.9 million from the Partner Buyouts completed during the three months ended September 30, 2022.

Interest expense.

The change is due to a $1.6 million increase from the Partner Buyouts, including $618,000 from the Partner Buyouts completed during the three months ended June 30, 2022.

This was offset by decreases of $354,000 due to the payoff of $31.9 million of mortgage debt in 2021, $208,000 due to the payoff of the Avalon Debt ( i.e., $14.6 million of mortgage debt on Avalon Apartments - Pensacola, FL) in the three months ended March 31, 2022 and $107,000 due to the Kendall Sale.

We anticipate that our interest expense will increase due to the Partner Buyouts, the increasing interest rate on our junior subordinated notes and the increase in borrowings from, and the interest rate on, our credit facility.

See Item 3 " Quantitative and Qualitative Disclosures About Market Risks " for information regarding the impact of changing interest rates on our floating rate junior subordinated notes.

The change is due to a:

• $2.2 million increase from the Partner Buyouts, including $1.4 million from the Partner Buyouts completed during the three months ended September 30, 2022;

• $208,000 increase due to the increase in the average outstanding balance on the credit facility to $13.8 million during the three months ended September 30, 2022 from no balance outstanding during the corresponding period of the prior year.

• $189,000 increase due to an increase on the interest rate on our junior subordinated debt which is based on three month LIBOR.

The increase was offset by a decrease of $375,000 due to the payoff of $46.5 million of mortgage debt since October 1, 2021.

General and administrative

The increase is due primarily to a $431,000 increase in non-cash compensation expense including increases of:

• $216,000 due to the inclusion, for the entire three months ended June 30, 2022 of the amortization expense related to the performance and market based restricted stock units (the "RSUs") granted in June 2021;

• $111,000 due to the inclusion, for the entire three months ended June 30, 2022, of the amortization expense with respect to the restricted stock granted in June 2021;

• $104,000 due to the amortization expense related to restricted stock granted in January 2022 (as a result of the higher fair value of the shares granted in 2021 in comparison to the restricted stock granted in 2017).

Offsetting this increase was a reduction of professional fees of $182,000 due primarily to the inclusion, in the corresponding period of the prior year, of costs related to a terminated stock offering.

Impairment charge

In the three months ended June 30, 2021, we recorded an impairment charge of $520,000 representing the excess of the book value of our investment in the Opop Tower and Loft properties, St Louis, MO, over the anticipated selling price of the investment.

There was no comparable charge in the current period.

The increase is due primarily to a $367,000 increase in non-cash compensation expense - specifically, increases of:

• $207,000 due to the inclusion, for the entire three months ended September 30, 2022, of the amortization expense related to the performance and market based restricted stock units (the "RSUs") granted in June 2022;

• $160,000 due to the amortization expense related to restricted stock, including $110,000 related to the restricted stock granted in January 2022 as a result of the higher fair value of the shares granted in 2022 in comparison to the restricted stock granted in 2017.

The balance of the increase is due primarily to increased professional fees and higher levels of compensation.

Depreciation and amortization

The increase is due primarily to $3.6 million from the Partner Buyouts, including $ 870,000 from the Partner Buyouts completed during the three months ended June 30, 2022.

Loss on extinguishment of debt

In the three months ended June 30, 2022, we incurred a $563,000 of loss on extinguishment of debt in connection with the refinance of a mortgage that occurred in connection with a Partner Buyout.

There was no comparable expense in the corresponding period of the prior year.

The increase is due primarily to $6.4 million from the Partner Buyouts, including $ 2.6 million from the Partner Buyouts completed during the three months ended September 30, 2022.

Income tax provision

In the three months ended June 30, 2022, income tax provision increased to $724,000 from $67,000 in the corresponding period of the prior years due to an increase in state level taxes accrued, the result of higher income in the current period and the reduction in certain states in net operating loss carryforwards available to offset the income.

In the three months ended September 30, 2022, income tax provision increased to $178,000 from $31,000 in the corresponding period of the prior year due to an increase in state level taxes accrued.

The increase in the accrual is the result of income generated by property sales in the current period and the unavailability of net operating loss carryforwards available in certain states to offset such income.

Gain on sale of real estate

In the three months ended September 30, 2021, we sold a cooperative apartment in New York, NY for a sales price of $545,000 and recognized a gain of $414,000 on the sale.

There was no comparable gain in the quarter ended September 30, 2022.

Loss on extinguishment of debt

In the three months ended September 30, 2021, our consolidated subsidiaries paid off three first mortgage loans and three supplemental loans with an aggregate outstanding principal balance of $31.9 million and incurred an aggregate $902,000 of prepayment charges and deferred loan fee write-offs.

There was no comparable expense in the quarter ended September 30, 2022.

Unconsolidated Joint Ventures - Results of Operations

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In accordance with US generally accepted accounting principles, each of the line items in the chart below (other than equity in income (loss) of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint ventures) is presented as if these properties are wholly owned by us although our equity interests in these properties ranges from 17.45% to 80% (see note 8 of our consolidated financial statements) (dollars in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

2022 2021 Increase

7 unchanged sentences

Other equity earnings 12 7 5 71.4 %

Impairment of assets from unconsolidated joint ventures — (490) 490 N/A

Insurance recoveries from unconsolidated joint ventures — 490 (490) N/A

Gain on insurance recoveries from unconsolidated joint ventures — 1,246 (1246) N/A

Loss on extinguishment of debt from unconsolidated joint ventures (2,888) — (2,888) N/A

Gain on sale of real estate from unconsolidated joint ventures 77,681 — 77,681 N/A

Net income (loss) from unconsolidated joint ventures $ 77,031 $ (486) $ 77,517 N/A

Loss on extinguishment of debt from unconsolidated joint ventures (573) (9,401) 8,828 (93.9) %

Gain on sale of real estate from unconsolidated joint ventures 16,937 83,984 (67,047) (79.8) %

Net income (loss) from unconsolidated joint ventures $ 17,410 $ 75,211 $ (57,801) (76.9) %

Equity in earnings (loss) of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties $ 11,607 $ 30,786 $ (19,179)

Set forth below is an explanation of the most significant changes in the components of the equity in earnings (loss) of unconsolidated joint ventures.

Same store properties at Unconsolidated Properties represent 14 properties that were owned for the entirety of the periods being compared.

Set forth below is an explanation of the most significant changes in the components of the equity in earnings of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties.

Same store properties at Unconsolidated Properties represent eight properties that were owned for the entirety of the periods being compared.

Rental and other revenues from unconsolidated joint ventures

The decrease is composed of :

• $6.0 million from the Partner Buyouts, including a net $1.4 million from the Partner Buyouts effected during the three months ended June 30, 2022;

• $11.9 million from the Partner Buyouts, including $4.4 million from the Partner Buyouts completed during the three months ended September 30, 2022;

• $3.8 million from the sale in 2022 of the properties owned by the unconsolidated joint ventures which owned Verandas at Shavano - San Antonio, TX ("Shavano"), Retreat at Cinco Ranch - Katy, TX ("Cinco") ,The Vive - Kanapolis, NC (the "Vive"), and Waters Edge at Harbison - Columbia, SC ("Waters Edge";

collectively with Shavano, Cinco, and Vive, the "Shavano/Cinco/Vive/Waters Edge Sales"), including $165,000 from the sale of Waters Edge completed during the three months ended September 30, 2022;

• $1.1 million from the sale in 2021 of the properties by the unconsolidated joint ventures which owned The Avenue Apartments-Ocoee, FL and Parc at 980-Lawrenceville, GA (collectively, the "Avenue/Parc Sales");

• $916,000 from the sale in 2021 of the properties owned by the unconsolidated joint ventures which owned Verandas at Shavano - San Antonio, TX ("Shavano"), Retreat at Cinco Ranch - Katy, TX ("Cinco") and The Vive - Kanapolis, NC, (the "Vive";

collectively with Shavano and Cinco, the "Shavano/Cinco/Vive Sales"), and in particular, the sale of Shavano;

• $863,000 from the sale in 2021 of our interests in the unconsolidated joint ventures that owned Anatole Apartments-Daytona Beach, FL and Tower at Opop and Lofts at Opop-St.

Louis, MO (collectively, the "Anatole/Opop Sales").

Offsetting the decrease was $1.6 million increase from same store sales, including $1.5 million from increased rental rates.

• $723,000 from the sale in 2021 of our interest in the unconsolidated joint venture that owned Tower at Opop and Lofts at Opop-St.

Louis, MO (the "Opop Sale").

Offsetting the decrease was a $1.2 million increase from same store properties due primarily to increased rental rates.

Real estate operating expenses from unconsolidated joint ventures

The decrease is composed of:

• $2.9 million from the Partner Buyouts, including $614,000 from the Partner Buyouts completed during the three months ended June 30, 2022;

• $2.0 million from the Avenue/Parc Sales;

• $697,000 from the Shavano/Cinco/Vive Sales, including $547,000 from the sale of Shavano;

• $540,000 from the Anatole/Opop Sales.

Offsetting this decrease was a $762,000 increase in such expenses at same store properties, with expenses generally increasing across most expense categories including payroll, utilities and repairs and maintenance.

• $5.5 million from the Partner Buyouts, including $1.8 million from the Partner Buyouts completed during the three months ended September 30, 2022;

• $1.7 million from the Shavano/Cinco/Vive/Waters Edge Sales;

• $669,000 from the Avenue/Parc Sales;

• $423,000 from the Opop Sale.

Offsetting this decrease was a $152,000 increase in such expenses at same store properties, with expenses generally increasing across most expense categories including utilities, repairs and maintenance and insurance.

Interest expense from unconsolidated joint ventures.

The decrease is due to the decrease in mortgage debt due to property sales and the Partner Buyouts-in particular:

• $1.7 million from the Partner Buyouts, including $551,000 from the Partner Buyouts completed during the three months ended June 30, 2022;

• $1.1 million from the Avenue/Parc Sales;

• $365,000 from the sale of Shavano and The Vive;

• $358,000 from the Anatole/Opop Sales.

• $3.1 million from the Partner Buyouts, including $1.1 million from the Partner Buyouts completed during the three months ended September 30, 2022;

• $926,000 from the sale of Shavano/Cinco/Vive/Waters Edge Sales;

• $341,000 from the Avenue/Parc Sales;

• $330,000 from the Opop Sale.

Depreciation from unconsolidated joint ventures

The decrease is composed of:

• $2.2 million from the Partner Buyouts, including $539,000 from the Partner Buyouts completed during the three months ended June 30, 2022;

• $1.1 million from the Avenue/Parc Sale;

• $898,000 from the Shavano/Cinco/Vive Sales;

• $371,000 from the Anatole/Opop Sales.

Impairment of assets from unconsolidated joint ventures

During the three months ended June 30, 2021, we recognized $490,000 of impairment charges at two properties located in Texas due to storm damage in 2021 (the "Texas Storm");

there were no comparable charges in the current period.

Insurance recoveries from unconsolidated joint ventures

During the three months ended June 30, 2021, we recognized $490,000 of insurance recoveries related to the impairment charges resulting from the Texas Storm;

there were no comparable recoveries in the current period.

• $3.6 million from the Partner Buyouts, including $1.3 million from the Partner Buyouts completed during the three months ended September 30, 2022;

• $1.2 million from the Shavano/Cinco/Vive/Waters Edge Sales;

• $334,000 from the Opop Sale.

Gain on insurance recoveries from unconsolidated joint ventures

In the three months ended September 30, 2021, we recognized $1.2 million in gains primarily due to our receipt of insurance recoveries from claims on three properties located in Texas that were damaged in a February 2021 ice storm ( the "Texas Storm"), which receipts exceeded the assets previously written-off.

Loss on extinguishment of debt

See " - Completed Dispositions" for information about the loss on extinguishment of debt from the sales of Cinco and The Vive.

There was no comparable loss in the three months ended June 30, 2021.

See " - Completed Disposition" for information about the loss on extinguishment of debt from the sale of Water's Edge .

In the three months ended September 30, 2021, we recognized a loss on extinguishment of debt of $9.4 million from the payoff of the mortgages in connection with the Avenue/ Parc sales.

Gain on sale of real estate from unconsolidated joint ventures

See "- Completed Dispositions" for information about the gain from the sales of Cinco and The Vive.

There was no comparable gain in the three months ended June 30, 2021.

Results of Operations – Six months ended June 30, 2022 compared to six months ended June 30, 2021.

See "- Completed Dispositions" for information about the gain from the sales of Waters Edge.

In the three months ended September 30, 2021, we recognized a gain on the sale of real estate of $84.0 million from the Avenue/ Parc Sales.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021.

The following table compares our revenues for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in thousands):

5 unchanged sentences

The increase is due to the following changes:

• $11.9 million due to the Partner Buyouts including $3.1 million from the Partner Buyouts completed during the six months ended June 30, 2022;

• $25.2 million due to the Partner Buyouts, including $12.7 million from the Partner Buyouts completed during the nine months ended September 30, 2022;

• $2.0 million primarily due to an increase in average rental rates at same store properties.

Offsetting the increase is a $1.2 million decrease due to the Kendall Sale.

Offsetting the increase is a $1.2 million decrease due to the sale of the Kendall Manor Property-Houston, TX (the "Kendall Sale").

The following table compares our expenses for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in thousands) 2022 2021 Increase

8 unchanged sentences

The increase is due primarily to:

• $5.2 million relating to the Partner Buyouts, including $1.4 million from the Partner Buyouts completed during the six months ended June 30, 2022;

• $503,000 at same store properties due to increases of $134,000 in replacement costs, $96,000 in payroll and costs and $273,000 across other expense categories.

• $10.9 million due to the Partner Buyouts, including $5.5 million from the Partner Buyouts completed during the nine months ended September 30, 2022;

• $596,000 at same store properties due to increases of $137,000 in payroll costs, $118,000 in replacement costs, $109,000 in utility costs and $232,000 across other expense categories.

The increase was offset by a decline of $828,000 due to the Kendall Sale.

Interest expense.

The change is due to a (i) $2.9 million increase from the inclusion of interest expense related to the Partner Buyouts, including $905,000 from Partner Buyouts completed during the six months ended June 30, 2022 and (ii) $115,000 due to the increase in interest expense on our floating rate junior subordinated notes.

The increase was offset by a $820,000 decrease due to the payoff of $31.9 million of mortgage debt in 2021, $280,000 related to the payoff of the Avalon Debt and $271,000 due to the Kendall Sale.

See Item 3 " Quantitative and Qualitative Disclosures About Market Risks " for information regarding the impact of changing interest rates on our floating rate junior subordinated notes.

The change is due to a:

• $6.4 million increase due to the inclusion of interest expense related to the Partner Buyouts, including $3.6 million from Partner Buyouts completed during the nine months ended September 30, 2022;

• $279,000 increase in interest expense on our credit facility, due to an increase of $5.2 million in the average outstanding balances during the nine months ended September 30, 2022 from no outstanding balance during the nine months ended September 30, 2021;

• $233,000 due to the increase in the interest rate on our floating rate junior subordinated notes.

The increase was offset by a (i) $1.4 million decrease due to the payoff of $46.5 million of mortgage debt since October 1, 2021 and (ii) $271,000 decrease due to the Kendall Sale.

General and administrative.

The increase is due to a:

• $867,000 increase in non-cash compensation expense including increases of:

– $429,000 due to the inclusion, for the entire six months ended June 30, 2022, of the amortization expense related to the RSUs granted in June 2021;

– $254,000 due to the inclusion, for the entire six months ended June 30, 2022, of the amortization expense related to the restricted stock granted in June 2021;

The increase is due to a $1.2 million increase in non-cash compensation expense, including increases of:

• $687,000 due to increased amortization expense from RSUs, of which (i) $479,000 was due primarily to the inclusion, for the entire nine months ended September 30, 2022, of the amortization expense related to the RSUs granted in 2021 and (ii) $208,000 due to the inclusion of amortization of expense related to RSU's granted in June 2022;

• $294,000 due to the amortization expense related to the restricted stock granted in January 2022 (as a result of the higher fair value of the shares granted in 2022 in comparison to the restricted stock granted in 2017);

• $139,000 increase in cash compensation costs, including compensation allocated pursuant to the shared services agreement.

The increase was offset by the inclusion, in the corresponding period of the prior year, of $230,000 of professional fees and other costs incurred in connection with a terminated stock offering.

• $254,000 due to the inclusion, for the entire nine months ended September 30, 2022, of the amortization expense related to the restricted stock granted in June 2021;

Also contributing to the increase was a $191,000 increase due to higher levels of cash compensation, including compensation allocated pursuant to the shared services agreement.

The increase was offset by the inclusion, in the corresponding period of the prior year, of $176,000 of professional fees related primarily to a terminated stock offering.

Impairment charges

In the corresponding period of the prior year, we recorded an impairment charge of $520,000 representing the excess of the book value of our investment in the Opop Tower and Loft properties, St Louis, MO, over the anticipated selling price of the investment.

There was no comparable charge in the current period.

In the nine months ended September 30, 2021, we recorded an impairment charge of $520,000 representing the excess of the book value of our investment in the Opop Tower and Loft properties, St Louis, MO, over the anticipated selling price of the investment.

There was no comparable charge in the nine months ended September 30, 2022.

Depreciation and amortization

The increase is due primarily to the inclusion of $5.8 million of such expense from the Partner Buyouts, including $1.4 million from the Partner Buyouts completed during the six months ended June 30, 2022, offset by $123,000 from the Kendall Sale.

The increase is due primarily to the inclusion of $12.1 million of such expense from the Partner Buyouts, including $6.1 million from the Partner Buyouts completed during the nine months ended September 30, 2022.The increase was offset by $123,000 due to the Kendall Sale.

Gain on sale of real estate

In the six months ended June 30, 2021, we recognized a $7.3 million gain on the Kendall Sale.

There was no comparable gain in the six months ended June 30, 2022.

In the nine months ended September 30, 2021, we recognized a $7.3 million gain on the Kendall Sale and a $414,000 gain from the sale of a cooperative apartment unit in New York, NY.

There were no comparable gains in the nine months ended September 30, 2022.

Gain on sales of partnership interest

In the six months ended June 30, 2021, we sold our interest in a joint venture that owned Anatole Apartments - Daytona, Beach, FL and recognized a gain of $2.2 million.

There was no comparable gain in the six months ended June 30, 2022.

In the nine months ended September 30, 2021, we sold our interest in a joint venture that owned Anatole Apartments - Daytona, Beach, FL and recognized a gain of $2.2 million.

There was no comparable gain in the nine months ended September 30, 2022.

Loss on extinguishment of debt

In the six months ended June 30, 2021, we incurred $563,000 of loss on extinguishment of debt with the refinance of a mortgage that took place with a Partner Buyout.

There was no comparable expense in the corresponding period of the prior year.

In the nine months ended September 30, 2022, we incurred $563,000 of loss on extinguishment of debt related to the mortgage refinancing that took place with the buyout of our joint venture partner's interest in Brixworth at Bridge Street.

In the nine months ended September 30, 2021, we incurred $902,000 of loss on extinguishment of debt in connection with the payoff of $31.9 million of mortgage debt.

Income tax provision

In the six months ended June 30, 2022 income tax provision increased to $798,000 from $124,000 in the corresponding period of the prior year due to an increase in state level taxes accrued, the result of higher income in the current period and the reduction in certain states in net operating loss carryforwards available to offset the income.

In the nine months ended September 30, 2022, income tax provision increased to $976,000 from $155,000 in the corresponding period of the prior year due to an increase in state level taxes accrued.

The increase in the accrual is the result of income generated by property sales and the unavailability of net operating loss carryforwards available in certain states to offset such income.

Unconsolidated Joint Ventures - Results of Operations

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In accordance with US generally accepted accounting principles, each of the line items in the chart below (other than equity in income (loss) of unconsolidated joint ventures) is presented as if these properties are wholly owned by us although our equity interests in these properties ranges from 17.45% to 80% (see note 8 of our consolidated financial statements) (dollars in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

2022 2021 Increase

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Set forth below is an explanation of the most significant changes in the components of the equity in earnings (loss) of unconsolidated joint ventures.

Same store properties at Unconsolidated Properties represent 14 properties that were owned for the entirety of the periods being compared and excludes four properties, three of which were sold and the fourth which is the subject of the Consolidating Transaction.

Same store properties at Unconsolidated Properties represent eight properties that were owned for the entirety of the periods being compared and excludes those properties which were or which are the subject of the Partner Buyouts.

Rental and other revenues from unconsolidated joint ventures

The decrease is composed of :

• $20.3 million from the Partner Buyouts, including $10.1 million from the Partner Buyouts completed during the nine months ended September 30, 2022;

• $10.4 million from the Avenue/Parc Sales;

• $9.2 million from the Partner Buyouts, including $2.1 million from the Partner Buyouts completed during the six months ended June 30, 2022;

• $2.2 million from the Anatole/Opop Sales;

• a net $1.1 million, primarily due to the sale of Shavano.

Offsetting the decrease was $3.5 million increase from same store sales, including $2.8 million from increased rental rates, $584,000 from increased occupancy, and $136,000 from increased ancillary fees.

• $4.9 million, from the Shavano/Cinco/Vive/Waters Edge Sales;

• $3.0 million from the Opop Sale and the sale of our partnership interests in Anatole Apartments , collectively (the"Anatole/Opop Sales").

Offsetting the decrease was a $3.8 million increase from same store sales, including $3.1 million from higher rental rates, $564,000 from increased occupancy and $189,000 from increased ancillary fees.

Real estate operating expenses from unconsolidated joint ventures

The decrease is composed of:

• $4.5 million from the Partner Buyouts, including $973,000 from the Partner Buyouts completed during the six months ended June 30, 2022;

• $10.0 million from the Partner Buyouts, including $5.0 million from the Partner Buyouts completed during the nine months ended September 30, 2022;

• $4.6 million from the Avenue/Parc Sales;

• $2.4 million from the from the Shavano/Cinco/Vive/Waters Edge Sales;

• $1.8 million from the Anatole/Opop Sales.

• $870,000 from the sales of Shavano and Cinco, including $786,000 from the sale of Shavano.

Offsetting this decrease was a $782,000 increase in such expenses at same store properties, resulting from increases in payroll, utilities and repairs and maintenance.

Offsetting this decrease was a $773,000 increase in such expenses at same store properties, resulting from increases in utilities, payroll, insurance and repairs and maintenance.

Interest expense from unconsolidated joint ventures.

The decrease is due to the decrease in mortgage debt due to property sales and the Partner Buyouts-in particular:

• $2.7 million from the Partner Buyouts, including $840,000 from the Partner Buyouts completed during the six months ended June 30, 2022;

• $5.8 million from the Partner Buyouts, including $3.2 million from the Partner Buyouts completed during the nine months ended September 30, 2022;

• $2.5 million from the Avenue/Parc Sales;

• $822,000 from the Anatole/Opop Sales;

• $322,000 from the sales of Shavano and Cinco.

• $1.3 million from the Shavano/Cinco/Vive/Waters Edge Sales;

• $1.2 million from the Anatole/Opop Sales.

Depreciation from unconsolidated joint ventures

The decrease is composed of:

• $3.7 million from the Partner Buyouts, including $917,000 from the Partner Buyouts completed during the six months ended June 30, 2022;

• $7.4 million from the Partner Buyouts, including $3.6 million from the Partner Buyouts completed during the nine months ended September 30, 2022;

• $2.4 million from the Avenue/Parc Sale;

• $1.2 million from the Shavano/Cinco/Vive Sales;

• $882,000 from the Anatole/Opop Sales

• $2.4 million from the Shavano/Cinco/Vive/Waters Edge Sales;

• $1.2 million from the Anatole/Opop Sales

Impairment of assets from unconsolidated joint ventures

During the six months ended June 30, 2021, we recognized $2.8 million of impairment charges at three properties located in Texas due to storm damage in 2021 (the "Texas Storm");

there were no comparable charges in the current period.

During the nine months ended September 30, 2021, we recognized $2.8 million of impairment charges at three properties due to the Texas Storm;

there were no comparable charges in the nine months ended September 30, 2022.

Insurance recoveries from unconsolidated joint ventures

During the six months ended June 30, 2021, we recognized $2.8 million of insurance recoveries related to the impairment charges resulting from the Texas Storm;

there were no comparable recoveries in the current period.

During the nine months ended September 30, 2021, we recognized $2.8 million of insurance recoveries related to the impairment charges resulting from the Texas Storm;

there were no comparable recoveries in the nine months ended September 30, 2022.

Gain on insurance recoveries from unconsolidated joint ventures .

In the six months ended June 30, 2022, we recognized $567,000 in gains primarily due to the fact that the amounts we received on claims related to insurance recoveries from the Texas Storm exceeded the assets previously written-off.

In the nine months ended September 30, 2022, we recognized $567,000 in gains primarily due to the fact that the amounts we received on claims related to insurance recoveries from the Texas Storm exceeded the assets previously written-off.

In the nine months ended September 30, 2021, we recognized $1.2 million related to these claims.

Loss on early extinguishment of debt from unconsolidated joint ventures

See "- Completed Dispositions " for information about the loss on extinguishment of debt from the sales of Cinco and The Vive.

There was no comparable charge in the six months ended June 30, 2021.

In the nine months ended September 30, 2022, we recognized $3.5 million of loss on extinguishment of debt from the Shavano/Cinco/Vive/Waters Edge Sales and in the nine months ended September 30, 2021, we recognized $9.4 million of loss from the extinguishment of debt from the Avenue/Parc Sale.

These losses were incurred in connection with the payoff of the mortgages upon the respective property sales.

Gain on sale of real estate from unconsolidated joint ventures

See "- Completed Dispositions" for information about the gain from the Shavano/Cinco/Vive Sales.

There was no comparable gain in the six months ended June 30, 2021.

In the nine months ended September 30, 2022, we recognized an aggregate gain of $118.2 million from the Shavano/Cinco/Vive/Waters Edge Sales and in the nine months ended September 30, 2021, we recognized an aggregate gain of $84.0 million from the Avenue/Parc Sale..

Liquidity and Capital Resources

We require funds to pay operating expenses and debt service obligations, acquire properties (including the acquisition of interests of our joint venture partners) , make capital and other improvements, fund capital contributions, pay dividends and, to the extent we deem appropriate, reduce, other than in the ordinary course, our indebtedness over time.

Generally, our primary sources of capital and liquidity are the operations of our multi-family properties (including distributions from the operations of our multi-family joint ventures and distributions from sale transactions), mortgage debt financings and re-financings, our share of the proceeds from the sale of properties, the sale of shares of our common stock pursuant to our at-the-market equity distribution program, borrowings from our credit facility and our available cash (including restricted cash).

On June 30, 2022 and August 5, 2022, our cash and cash equivalents, were approximately $57.0 million and $13.9 million, respectively, and excludes funds held at our unconsolidated joint ventures.

We anticipate that from July 1, 2022 through 2024, our operating expenses, $93.4 million of mortgage amortization and interest expense (including $56.3 million from unconsolidated joint ventures), and $14.9 million of balloon payments due with respect to mortgages maturing from 2022 to 2024, estimated cash dividend payments of at least $46.8 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.7 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), sales of properties and, to the extent available, our credit facility.

Our operating cash flow and available cash is insufficient to fully fund the $14.9 million of balloon payments, and if we are unable to refinance such debt, we may need to issue additional equity or dispose of properties, in each case on potentially unfavorable terms.

At June 30, 2022 , we had mortgage debt of $689.9 million (including $390.0 million of mortgage debt of our unconsolidated subsidiaries).

At November 4, 2022, our available liquidity was $55.9 million, including $14.9 million of cash and cash equivalents and $ 41.0 million available under our credit facility and excludes funds held at our unconsolidated joint ventures.

At November 4, 2022, the interest rate on the facility was 7%.

We anticipate that from October 1, 2022 through 2024, our operating expenses, $74.0 million of mortgage amortization and interest expense (including $30.0 million from unconsolidated joint ventures), and $14.9 million of balloon payments ( which as noted below was paid off on October 31, 2022) due with respect to a mortgage maturing from 2022 to 2024, interest expense on our credit facility and junior subordinated notes, estimated cash dividend payments of at least $42.1 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.7 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), property sales and, to the extent available, our credit facility.

On October 30, 2022, we borrowed $15.0 million from our credit facility to pay off the $14.9 million of mortgage debt that matured at the end of October 2022.

At September 30, 2022 , we had mortgage debt of $673.2 million (including $247.6 million of mortgage principal debt of our unconsolidated subsidiaries).

The mortgage debt at our:

(i) consolidated subsidiaries had a weighted average interest rate of 3.99% and a weighted average remaining term to maturity of approximately 7.8 years, and (ii) at our unconsolidated subsidiaries had a weighted average interest rate of 3.96% and a remaining term to maturity of approximately 7.3 years.

Capital improvements at (i) nine multi-family properties will be funded by approximately $4.8 million of restricted cash available at June 30, 2022 and the cash flow from operations at such properties and (ii) other properties will be funded from the cash flow from operations of such properties.

Capital improvements at (i) two unconsolidated multi-family properties will be funded by approximately $872,000 of restricted cash available at September 30, 2022 and the cash flow from operations at such properties and (ii) other properties will be funded from the cash flow from operations of such properties.

Junior Subordinated Notes

As of June 30, 2022, $37.4 million (excluding deferred costs of $287,000) in principal amount of our junior subordinated notes is outstanding.

As of September 30, 2022, $37.4 million (excluding deferred costs of $282,000) in principal amount of our junior subordinated notes is outstanding.

These notes mature in April 2036, contain limited covenants (including covenants prohibiting us from paying dividends or repurchasing capital stock if there is an event of default (as defined therein) on these notes), are redeemable at our option and bear an interest rate, which resets and is payable quarterly, of three-month LIBOR plus 200 basis points.

At August 5, 2022, June 30, 2022 and 2021, the interest rate on these notes was 4.78%, 3.29% and 2.19%, respectively.

At November 4, 2022, September 30, 2022 and 2021, the interest rate on these notes was 6.41%, 4.78% and 2.13%, respectively.

Credit Facility

Our credit facility with VNB New York, LLC, an affiliate of Valley National Bank (collectively, "VNB"), as amended and restated, allows us to borrow, subject to compliance with borrowing base requirements and other conditions, up to $35 million, (i) for the acquisition of, and investment in, multi-family properties, (ii) to repay mortgage debt secured by multi-family properties and (iii) for Operating Expenses ( i.e.

Our credit facility with VNB New York, LLC, an affiliate of Valley National Bank (collectively, "VNB"), allows us to borrow, subject to compliance with borrowing base requirements and other conditions, up to $60 million, (i) for the acquisition of, and investment in, multi-family properties, (ii) to repay mortgage debt secured by multi-family properties and (iii) for Operating Expenses ( i.e.

, working capital (including dividend payments) and operating expenses);

provided, that not more than $25 million 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 credit facility is secured by cash accounts maintained by us at VNB (and we are required to maintain substantially all of our bank accounts at VNB), and the pledge of our interests in the entities that own the unencumbered multi-family properties used in calculating the borrowing base.

The credit facility bears an annual interest rate, which resets daily, of 25 basis points over the prime rate, with a floor of 3.50%.

The credit facility bears an annual interest rate, which resets daily, equal to the prime rate, with a floor of 3.50%.

There is an annual fee of 0.25% on the total amount committed by VNB and unused by us.

The credit facility matures in November 2024.

As of the date of this filing, $22 million is outstanding on the credit facility and $13 million is available to be borrowed thereunder.

The terms of the credit facility include certain restrictions and covenants which, among other things, limit the incurrence of liens, require that we maintain and include in the collateral securing the facility at least two unencumbered properties with an aggregate value(as calculated pursuant to the facility) of at least $50 million, and require compliance with financial ratios relating to, among other things, the minimum amount of debt service coverage with respect to the properties (and amounts drawn on the credit facility) used in calculating the borrowing base.

The credit facility matures in September 2025.

Net proceeds received from the sale, financing or refinancing of our properties are generally required to be used to repay amounts outstanding on the facility.

As of November 4, 2022, $19..0 million is outstanding on the credit facility and $41.0 million is available to be borrowed thereunder.

aggregate value(as calculated pursuant to the facility) of at least $75 million, and require compliance with financial ratios relating to, among other things, maintaining a minimum tangible net worth of $140 million, the minimum amount of debt service coverage with respect to the properties (and amounts drawn on the credit facility) used in calculating the borrowing base.

Net proceeds received from the sale, financing or refinancing of wholly-owned properties are generally required to be used to repay amounts outstanding under the credit facility.

At June 30, 2022, we were in compliance in all material respects with the requirements of the facility.

At September 30, 2022, we were in compliance in all material respects with the requirements of the facility.

Other Financing Sources and Arrangements

At June 30, 2022, we are joint venture partners in unconsolidated joint ventures which own 15 multi-family properties (including a development project) and the distributions to us from these joint venture properties ($54.9 million (including $51.7 million from the sale of two properties) in the quarter ended June 30, 2022) are a material source of our liquidity and cash flow.

At September 30, 2022, we are joint venture partners in unconsolidated joint ventures which own eight multi-family properties and a development project, and the distributions to us from these joint venture properties ($14.8 million (including $13.3 million from the sale of a property) in the quarter ended September 30, 2022) are a significant source of our liquidity and cash flow.

Further, we may be required to make significant capital contributions with respect to these properties.

At June 30, 2022, these joint venture properties have a net equity carrying value of $79.8 million and are subject to net mortgage debt, which is not reflected on our consolidated balance sheet, of $390.0 million.

At September 30, 2022, these joint venture properties have a net equity carrying value of $43.8 million and are subject to mortgage debt, which is not reflected on our consolidated balance sheet, of $247.6 million.

Although BRT Apartments Corp.

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Our net operating loss at December 31, 2021 was approximately $36.0 million and we anticipate applying this amount to offset income generated in 2022.

On July 8, 2022, we paid a quarterly cash dividend of $0.25 per share.

On October 7, 2022, we paid a quarterly cash dividend of $0.25 per share.

We carefully monitor our discretionary spending.

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There have been no significant changes in such estimates since December 31, 2021.

Funds from Operations;

Adjusted Funds from Operations;

Net Operating Income

Funds from Operations, Adjusted Funds from Operations and Net Operating Income

We disclose below funds from operations (“FFO”), adjusted funds from operations (“AFFO”) and net operating income ("NOI") because we believe that such metrics are a widely recognized and appropriate measure of the performance of an equity REIT.

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The tables below provides a reconciliation of net loss determined in accordance with GAAP to FFO and AFFO on a dollar and per share basis for each of the indicated periods (dollars in thousands, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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our share of deferred mortgage costs from unconsolidated joint venture properties 33 148 199 439

our share of insurance recovery — (348) — (2,010)

our share of insurance recovery from unconsolidated joint venture properties — — — (2,010)

gain on insurance proceeds (62) — (62) —

our share of gain on insurance proceeds from unconsolidated joint venture properties — (880) (432) (880)

1 unchanged sentence

Adjusted funds from operations attributable to common stockholders $ 7,168 $ 5,655 $ 21,356 $ 16,269

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Net income (loss) attributable to common stockholders $ 1.91 $ 0.34 $ 2.53 $ 0.13

Net income attributable to common stockholders $ 0.37 $ 1.54 $ 2.91 $ 1.69

depreciation of properties 0.44 0.10 0.90 0.29

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Impairment charge — — — 0.03

our share of impairment charge in unconsolidated joint venture properties — 0.02 — 0.11

our share of equity in earnings from sale of unconsolidated joint venture properties (2.14) — (2.85) —

our share of impairment charge in unconsolidated joint

venture properties — — — 0.11

our share of equity in earnings from sale of unconsolidated

joint venture properties (0.61) (1.92) (3.47) (1.97)

gain on sale of real estate and partnership interests — (0.02) — (0.56)

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loss on extinguishment of debt — 0.05 0.03 0.05

our share of loss on extinguishment of debt from unconsolidated joint venture properties 0.08 — 0.08 —

our share of loss on extinguishment of debt from

unconsolidated joint venture properties 0.02 0.25 0.10 0.26

amortization of restricted stock and RSU expense 0.06 0.05 0.16 0.11

amortization of deferred mortgage and debt costs 0.01 — 0.02 0.01

our share of deferred mortgage and debt costs from unconsolidated joint venture properties — 0.01 0.01 0.02

our share of insurance recovery from unconsolidated joint venture properties — (0.02) — (0.11)

our share of gain on insurance proceeds from unconsolidated joint venture properties — — (0.02) —

our share of deferred mortgage and debt costs from

unconsolidated joint venture properties — 0.01 0.01 0.02

our share of insurance recovery from unconsolidated joint

venture properties — — — (0.11)

gain on insurance proceeds — — — —

our share of gain on insurance proceeds from unconsolidated

joint venture properties — (0.05) (0.02) (0.05)

Adjustments for non-controlling interests — — — —

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Diluted shares outstanding for FFO and AFFO 18,928,648 18,215,924 18,712,740 17,820,909

Three Months Ended June 30, 2022 and 2021

FFO for the three months ended June 30, 2022 decreased from the corresponding quarter in the prior year primarily due to increases in mortgage prepayment charges, state income taxes and non-cash compensation expense, and a decrease in insurance recoveries.

The decrease was offset by our share of reduced interest expense at our unconsolidated subsidiaries and improved operating margins at same store properties.

AFFO for the three months ended June 30, 2022 increased from the three months ended June 30, 2021, primarily reflecting improved operating margins and our share of reduced interest expense at our unconsolidated subsidiaries, offset by the increase in state income tax.

Diluted per share FFO and AFFO were impacted in the three months ended June 30, 2022 by a 1.3 million increase in the weighted average shares of common stock outstanding from the second quarter of 2021 through the current quarter, primarily due to stock issuances pursuant to our at-the market offering and our equity incentive programs.

Six Months Ended June 30, 2022 and 2021 - See " Results of Operations - Three Months Ended June 30, 2022 compared to three months ended June 30, 2021 ", for a discussion of these changes.

FFO decreased for the six months ended June 30, 2022 from the corresponding period in the prior year primarily due to the inclusion in the six months ended June 30, 2021 of significant insurance recoveries, and in the six months ended June 30, 2022, increases in the early extinguishment of debt charges, restricted stock and RSU amortization expense, and state income tax expense.

The decrease was offset by increased operating margins across our portfolio and our share of reduced interest expense at our unconsolidated subsidiaries.

AFFO increased for the six months ended June 30, 2022 from the corresponding period in 2021 primarily due to the increased operating margins across our portfolio and our share of reduced interest expense at our unconsolidated subsidiaries, offset by increased income tax expense.

Diluted per share FFO and AFFO were impacted in the six months ended June 30, 2022 by a 1.1 million increase in the weighted average shares of common stock outstanding from January 1, 2021 through the current quarter, primarily due to stock issuances pursuant to our at-the-market offering and equity incentive programs.

See - " Results of Operations - Six Months Ended June 30, 2022 compared to the six months ended June 30, 2021" , for a discussion of these changes.

Three Months Ended September 30, 2022 and 2021

FFO for the three months ended September 30, 2022 increased from the corresponding quarter in the prior year primarily due to a decrease in the loss on extinguishment of debt at our unconsolidated properties, improved operating margins across our portfolio and the increase in our share of the operating income due to our increased ownership in the 14 properties that were the subject Partner Buyouts(the “Incremental Impact”), net of decreases due to property sales.

The increase was offset by (i) the inclusion, in the three months ended September 30, 2021, of gains from insurance proceeds and (ii) increases, in the three months ended September 30, 2022, in general and administrative expenses (primarily non-cash compensation expense related to the amortization of restricted stock and RSU expense), and income tax expense.

AFFO for the three months ended September 30, 2022 increased from the corresponding period in the prior year, primarily reflecting improved operating margins across our portfolio and the Incremental Impact (net of decreases due to property sales).

The increase was offset by increased general and administrative expense (excluding the impact of the restricted stock and RSU amortization expense) and income tax expense.

Diluted per share FFO and AFFO were impacted in the three months ended September 30, 2022 by a 713,000 increase in the weighted average shares of common stock outstanding , primarily due to stock issuances pursuant to our at-the market offering and our equity incentive programs.

- See " Results of Operations - Three Months Ended September 30, 2022 compared to three months ended September 30, 2021 ", for a discussion of these changes.

Nine Months Ended September 30, 2022 and 2021

FFO increased for the nine months ended September 30, 2022 from the corresponding period in the prior year primarily due to improved operating margins across our portfolio, the Incremental Impact (net of decreases due to property sales), a decline in interest expense primarily due to the payoff of mortgage debt in 2021, and a decrease in loss on extinguishment of debt.

The increase was offset by (i) the inclusion, in the nine months ended September 30, 2021, of insurance recoveries and gains from insurance proceeds, and(ii) the increase , in the nine months ended September 30, 2022, in general and administrative expenses (primarily non-cash compensation expense related to the amortization of restricted stock and RSU expense), and income tax expense.

AFFO increased for the nine months ended September 30, 2022 from the corresponding period in the prior year primarily due to improved operating margins across our portfolio, the Incremental Impact (net of decreases due to property sales), and a decline in interest expense primarily due to the payoff of mortgage debt in 2021.

The increase was offset by increased income tax expense.

Diluted per share FFO and AFFO were impacted in the nine months ended September 30, 2022 by a 892,000 increase in the weighted average shares of common stock outstanding from the beginning of the third quarter, primarily due to stock issuances pursuant to our at-the-market offering and equity incentive programs.

See - " Results of Operations - Nine Months Ended September 30, 2022 compared to the nine months ended September 30, 2021" , for a discussion of these changes.

Net Operating Income, or NOI, is a non-GAAP measure of performance.

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The following table provides a reconciliation of net income attributable to common stockholders as computed in accordance with GAAP to NOI of our consolidated properties for the periods presented (dollars in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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venture properties (11,472) (34,982) (64,531) (34,982)

Gain on insurance recoveries (62) — (62) —

Loss on extinguishment of debt — 902 563 902

4 unchanged sentences

Same store Net Operating Income $ 4,094 $ 3,460 $ 11,813 $ 10,385

For the three months ended June 30, 2022, NOI increased $4.5 million from the corresponding period in 2021 primarily due to a $7.7 million increase in rental revenues (and in particular, the impact of the Partner Buyouts) offset by a $3.2 million increase, primarily from the Partner Buyouts, in real estate operating expenses.

Same store NOI in the three months ended June 30, 2022 increased by $404,000 from the corresponding period in 2021, due to a $683,000 increase in rental revenues (and in particular, the increase in average rental rates) offset by a $279,000 increase in real estate operating expenses.

See "-Results of Operations - Three Months Ended June 30, 2022 Compared to the three Months ended June 30, 2021 " for a discussion of these changes.

For the six months ended June 30, 2022, NOI increased $7.2 million from the corresponding period in 2021 primarily due to a $12.1 million increase in rental revenues (and in particular, the impact of the Partner Buyouts) offset by a $4.8 million increase, primarily from the Partner Buyouts, in real estate operating expenses.

Same store NOI in the six months ended June 30, 2022, increased by $794,000 from the corresponding period in 2021, due to a $1.3 million increase in rental revenues (and in particular, the increase in average rental rates) offset by a $503,000 increase in real estate operating expenses.

See "-Results of Operations - Six Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021 " for a discussion of these changes.

For the three months ended September 30, 2022, NOI increased $8.2 million from the corresponding period in 2021 primarily due to a $14.0 million increase in rental revenues primarily due to the impact of the Partner Buyouts offset by a $5.8 million increase, primarily due to the impact of the Partner Buyouts, in real estate operating expenses.

Same store NOI in the three months ended September 30, 2022 increased by $634,000 from the corresponding period in 2021, due to a $727,000 increase in rental revenues (and in particular, the increase in average rental rates) offset by a $93,000 increase in real estate operating expenses.

See "-Results of Operations - Three Months Ended September 30, 2022 Compared to the three Months ended September 30, 2021 " for a discussion of these changes.

For the nine months ended September 30, 2022, NOI increased $15.4 million from the corresponding period in 2021 primarily due to a $26.0 million increase in rental revenues and primarily due to the impact of the Partner Buyouts offset by a $10.6 million increase, primarily due to the Partner Buyouts, in real estate operating expenses.

Same store NOI in the nine months ended September 30, 2022 increased by $1.4 million from the corresponding period in 2021, due to a $2.0 million increase in rental revenues (and in particular, the increase in average rental rates) offset by a $596,000 increase in real estate operating expenses.

See "-Results of Operations - Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021 " for a discussion of these changes.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis