BRT Apartments Corp. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Cautionary Statement Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q (the "Quarterly Report"), together with other statements and information publicly disseminated by us, contains certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts. Forward looking statements are generally identifiable by use of words such as "may," "will," "will likely result," "shall," "should," "could," "believe," "expect," "intend," "anticipate," "estimate," "project," "apparent," "experiencing," or similar expressions or variations thereof. Forward-looking statements contained in this Quarterly Report are based on our beliefs, assumptions and expectations of our future performance taking into account the information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or within our control, and which could materially affect actual results, performance or achievements. Factors which may cause actual results to vary from our forward-looking statements include, but are not limited to: • 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, such as increasing inflation and interest rates; • the availability of, and costs associated with, sources of capital and liquidity; • accessibility of debt and equity capital markets; • general and local real estate conditions, including any changes in the value of our real estate; • changes in Federal, state and local governmental laws and regulations, including laws and regulations relating to taxes and real estate and related investments; • the level and volatility of interest rates; • our acquisition strategy, which may not produce the cash flows or income expected; • the competitive environment in which we operate, including competition that could adversely affect our ability to acquire properties and/or limit our ability to lease apartments or increase or maintain rental income; • a limited number of multi-family property acquisition opportunities acceptable to us; • our multi-family properties are concentrated in the Southeastern United States and Texas, which makes us more susceptible to adverse developments in those markets; • risks associated with our strategy of acquiring value-add multi-family properties, which involves greater risks than more conservative strategies; • the condition of Fannie Mae or Freddie Mac, which could adversely impact us; • our failure to comply with laws, including those requiring access to our properties by disabled persons, which could result in substantial costs; • insufficient cash flows, which could limit our ability to make required payments on our debt obligations; • our ability and the ability of our joint venture partners to maintain compliance with the covenants contained in our and our joint venture partners' debt facilities and debt instruments; • impairment in the value of real estate we own; • failure of property managers to properly manage properties; • disagreements with, or misconduct by, joint venture partners; 23 Table of Contents • decreased rental rates or ancillary revenues, or increasing vacancy rates; • our ability to lease units in newly acquired or newly constructed multi-family properties; • potential defaults on or non-renewal of leases by tenants; • creditworthiness of tenants; • our ability to successfully evaluate, finance, complete and integrate acquisitions, including the acquisitions of the interests of our joint venture partners in unconsolidated subsidiaries; • development and acquisition risks, including rising or unanticipated costs and failure of such acquisitions and developments to perform in accordance with projections; • the timing of acquisitions and dispositions; • our ability to reinvest the net proceeds of dispositions into more, or as favorable, acquisition opportunities; • potential natural disasters such as hurricanes, tornadoes and floods; • board determinations as to timing and payment of dividends, if any, and our ability or willingness to pay future dividends; • financing risks, including the risks that our cash flows from operations may be insufficient to meet required debt service obligations and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all; • lack of or insufficient amounts of insurance to cover, among other things, losses from catastrophes; • our ability to maintain our qualification as a REIT; • possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us or a subsidiary owned by us or acquired by us; • our dependence on information systems; • risks associated with breaches of our or our joint venture partners' information technology systems; • failure to comply with, or obtain waivers of, the provisions of, and covenants and coverage ratios in, our debt instruments; • risks associated with the stock ownership restrictions of the Code for REITs and the stock ownership limit imposed by our charter; • increases in real estate taxes at properties we acquire due to such acquisitions or other factors; • the other factors described in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report"), including those factors set forth under the sections of such reports, as applicable, entitled " Cautionary Statement Regarding Forward-Looking Statements," "Risk Factors," "Business," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" . We caution you not to rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control, and which could materially affect actual results, performance or achievements. Except to the extent otherwise required by applicable law or regulation, we undertake no obligation to update forward-looking statements to reflect events or circumstances after the date of the filing of this Quarterly Report or to reflect the occurrence of unanticipated events. Overview We are an internally managed real estate investment trust, also known as a REIT, that is focused on the ownership, operation and, to a lesser extent, development of multi-family properties. These properties may be wholly owned or by unconsolidated joint ventures in which we generally contribute a significant portion of the equity. 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 24 Table of Contents million; and (iii) have a 17.45% interest in a 240-unit multi-family development property with a carrying value of $3.5 million. The 29 properties are located in 11 states; most of the properties are located in the Southeast United States and Texas. 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 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 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 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 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): 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 Civic Center II Southaven, MS 384 25% 17,942 July 12, 2022 30,105 3.73 % September 2026 Abbotts Run Willmington, NC 264 20% 9,010 July 14, 2022 23,160 4.71 % July 2030 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 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. 25 Table of Contents 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 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 We sold 174,059 shares pursuant to our at-the-market offering program at an average price of $22.22 per share. Net proceeds after commissions and fees was $3.8 million. 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. 26 Table of Contents 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. Revenues The following table compares our revenues for the periods indicated: Three Months Ended September 30, (Dollars in thousands): 2022 2021 Increase (Decrease) % Change Rental and other revenue from real estate properties $ 21,691 $ 7,709 $ 13,982 181.4 % Other income 6 5 1 20.0 % Total revenues $ 21,697 $ 7,714 $ 13,983 181.3 % Rental and other revenue from real estate properties The increase is due to the following changes: • $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; and • $727,000 at same store properties primarily due to an increase in average rental rates. Expenses The following table compares our expenses for the periods indicated: Three Months Ended September 30, (Dollars in thousands) 2022 2021 Increase (Decrease) % Change Real estate operating expenses $ 9,195 $ 3,404 $ 5,791 170.1 % Interest expense 5,061 1,535 3,526 229.7 % General and administrative 3,673 3,114 559 18.0 % Depreciation and amortization 8,165 1,787 6,378 356.9 % Total expenses $ 26,094 $ 9,840 $ 16,254 165.2 % Real estate operating expense. 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: • $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. 27 Table of Contents 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 $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; and • $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 $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 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. 28 Table of Contents Unconsolidated Joint Ventures - Results of Operations Equity in earnings (loss) of unconsolidated joint ventures. The table below reflects the condensed income statements of our Unconsolidated Properties. 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 September 30, 2022 2021 Increase (Decrease) % change Rental and other revenues from unconsolidated joint ventures $ 13,502 $ 29,818 $ (16,316) (54.7) % Real estate operating expense from unconsolidated joint ventures 6,512 14,587 (8,075) (55.4) % Interest expense from unconsolidated joint ventures 2,843 7,568 (4,725) (62.4) % Depreciation from unconsolidated joint ventures 3,113 8,288 (5,175) (62.4) % Total expenses from unconsolidated joint ventures 12,468 30,443 (17,975) (59.0) % Total revenues less total expenses from unconsolidated joint ventures 1,034 (625) 1,659 265.4 % Other equity earnings 12 7 5 71.4 % Gain on insurance recoveries from unconsolidated joint ventures — 1,246 (1246) 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 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 : • $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"); and • $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 29 Table of Contents The decrease is composed of: • $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; and • $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: • $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; and • $330,000 from the Opop Sale. Depreciation from unconsolidated joint ventures The decrease is composed of: • $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; and • $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 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 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. 30 Table of Contents Nine months ended September 30, 2022 compared to nine months ended September 30, 2021. Revenues The following table compares our revenues for the periods indicated: Nine Months Ended September 30, (Dollars in thousands): 2022 2021 Increase (Decrease) % Change Rental and other revenue from real estate properties 47,804 21,762 $ 26,042 119.7 % Other income 12 12 — — % Total revenues $ 47,816 $ 21,774 $ 26,042 119.6 % Rental and other revenue from real estate properties The increase is due to the following changes: • $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; and • $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 sale of the Kendall Manor Property-Houston, TX (the "Kendall Sale"). Expenses The following table compares our expenses for the periods indicated: Nine Months Ended September 30, (Dollars in thousands) 2022 2021 Increase (Decrease) % Change Real estate operating expenses 20,296 9,687 $ 10,609 109.5 % Interest expense 9,994 4,804 5,190 108.0 % General and administrative 10,839 9,382 1,457 15.5 % Impairment charges — 520 (520) N/M Depreciation and amortization 16,781 4,740 12,041 254.0 % Total expenses 57,910 29,133 $ 28,777 98.8 % Real estate operating expense. The increase is due primarily to: • $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; and • $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: • $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; and • $233,000 due to the increase in the interest rate on our floating rate junior subordinated notes. 31 Table of Contents 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 $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); and • $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; and 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 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 $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 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 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 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 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. 32 Table of Contents Unconsolidated Joint Ventures - Results of Operations Equity in earnings (loss) of unconsolidated joint ventures. The table below reflects the condensed income statements of our Unconsolidated Properties. 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): Nine Months Ended September 30, 2022 2021 Increase (Decrease) % change Rental and other revenues from unconsolidated joint ventures $ 60,840 $ 95,495 $ (34,655) (36.3) % Real estate operating expense from unconsolidated joint ventures 27,523 45,523 (18,000) (39.5) % Interest expense from unconsolidated joint ventures 13,762 24,562 (10,800) (44.0) % Depreciation from unconsolidated joint ventures 14,957 28,464 (13,507) (47.5) % Total expenses from unconsolidated joint ventures 56,242 98,549 (42,307) (42.9) % Total revenues less total expenses from unconsolidated joint ventures 4,598 (3,054) 7,652 250.6 % Other equity earnings 89 21 68 323.8 % Impairment of assets from unconsolidated joint ventures — (2,813) 2,813 N/A Insurance recoveries from unconsolidated joint ventures — 2,813 (2813) N/A Gain on insurance recoveries from unconsolidated joint ventures 567 1,246 (679) N/A Loss on extinguishment of debt from unconsolidated joint ventures (3,491) (9,401) 5,910 N/A Gain on sale of real estate from unconsolidated joint ventures 118,270 83,984 34,286 N/A Net income (loss) from unconsolidated joint ventures $ 120,033 $ 72,796 $ 47,237 N/A Equity in earnings (loss) of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties $ 65,846 $ 28,949 $ 36,897 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 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; • $4.9 million, from the Shavano/Cinco/Vive/Waters Edge Sales; and • $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. 33 Table of Contents Real estate operating expenses from unconsolidated joint ventures The decrease is composed of: • $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; and • $1.8 million from the Anatole/Opop Sales. 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: • $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; • $1.3 million from the Shavano/Cinco/Vive/Waters Edge Sales; and • $1.2 million from the Anatole/Opop Sales. Depreciation from unconsolidated joint ventures The decrease is composed of: • $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; • $2.4 million from the Shavano/Cinco/Vive/Waters Edge Sales; and • $1.2 million from the Anatole/Opop Sales Impairment of assets from unconsolidated joint ventures 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 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 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 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. 34 Table of Contents Gain on sale of real estate from unconsolidated joint ventures 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. 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) 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 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 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"), 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 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, 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 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. 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 three unencumbered properties with an 35 Table of Contents 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 September 30, 2022, we were in compliance in all material respects with the requirements of the facility. Other Financing Sources and Arrangements 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 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. is not the obligor with respect to such mortgage debt, the loss of any of these properties due to mortgage foreclosure or similar proceedings would have a material adverse effect on our results of operations and financial condition. These joint venture arrangements have been, and we anticipate that they will continue to be, material to our liquidity and capital resource position. See note 8 to our consolidated financial statements. Cash Distribution Policy We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, which we refer to as the “Code.” To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute to our stockholders within the time frames prescribed by the Code at least 90% of our ordinary taxable income. Management currently intends to maintain our REIT status. As a REIT, we generally will not be subject to corporate Federal income tax on taxable income we distribute to stockholders in accordance with the Code. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent tax years. Even if we qualify for Federal taxation as a REIT, we are subject to certain state and local taxes on our income and to Federal income and excise taxes on undistributed taxable income ( i.e ., taxable income not distributed in the amounts and in the time frames prescribed by the Code). 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 October 7, 2022, we paid a quarterly cash dividend of $0.25 per share. We carefully monitor our discretionary spending. Our largest recurring discretionary expenditure has been our quarterly dividend (which was $0.25 per share of common stock, or in the approximate amount of $4.7 million, for the most recent quarter). Each quarter, our board of directors evaluates the timing and amount of our dividend based on its assessment of, among other things, our short and long- term cash and liquidity requirements, prospects, debt maturities, projections of our REIT taxable income, net income, funds from operations, and adjusted funds from operations. Application of Critical Accounting Estimates A complete discussion of our critical accounting estimates is included in our Annual Report. There have been no significant changes in such estimates since December 31, 2021. 36 Table of Contents 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. We compute FFO in accordance with the “White Paper on Funds From Operations” issued by the National Association of Real Estate Investment Trusts (“NAREIT”) and NAREIT’s related guidance. FFO is defined in the White Paper as net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. In computing FFO, we do not add back to net income the amortization of costs in connection with our financing activities or depreciation of non-real estate assets. We compute AFFO by deducting from FFO our straight-line rent accruals, loss on extinguishment of debt, restricted stock and restricted stock unit expense, deferred mortgage costs and gain on insurance recovery. Since the NAREIT White Paper only provides guidelines for computing FFO, the computation of AFFO may vary from one REIT to another. We believe that FFO and AFFO are useful and standard supplemental measures of the operating performance for equity REITs and are used frequently by securities analysts, investors and other interested parties in evaluating equity REITs, many of which present FFO and AFFO when reporting their operating results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization of real estate assets, which assumes that the carrying value of real estate assets diminishes predictably over time. In fact, real estate values have historically risen and fallen with market conditions. As a result, we believe that FFO and AFFO provide a performance measure that when compared year over year, should reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs and other matters without the inclusion of depreciation and amortization, providing a perspective that may not be necessarily apparent from net income. We also consider FFO and AFFO to be useful to us in evaluating potential property acquisitions. FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. FFO and AFFO should not be considered to be an alternative to net income as a reliable measure of our operating performance; nor should FFO and AFFO be considered an alternative to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity. FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization and capital improvements. FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP. Management recognizes that there are limitations in the use of FFO and AFFO. In evaluating our performance, management is careful to examine GAAP measures such as net income and cash flows from operating, investing and financing activities. 37 Table of Contents 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 September 30, Nine Months Ended September 30, 2022 2021 2022 2021 GAAP Net income attributable to common stockholders $ 7,059 $ 28,106 $ 54,174 $ 30,368 Add: depreciation of properties 8,165 1,787 16,781 4,740 Add: our share of depreciation in unconsolidated joint venture properties 1,657 5,514 9,234 18,389 Add: Impairment charge — — — 520 Add: our share of impairment charge in unconsolidated joint venture properties — — — 2,010 Deduct: our share of equity in earnings from sale of unconsolidated joint venture properties (11,472) (34,982) (64,531) (34,982) Deduct: gain on sale of real estate and partnership interests — (414) (6) (9,937) Adjustments for non-controlling interests (4) (4) (12) (12) NAREIT Funds from operations attributable to common stockholders 5,405 7 15,640 11,096 Adjustments for: straight-line rent accruals 6 (10) 18 (30) Add: loss on extinguishment of debt — 902 563 902 Add: our share of loss on extinguishment of debt from unconsolidated joint venture properties 388 4,581 1,880 4,581 Add: amortization of restricted stock and RSU expense 1,208 843 3,183 1,950 Add: amortization of deferred mortgage and debt costs 191 62 370 215 Add: our share of deferred mortgage costs from unconsolidated joint venture properties 33 148 199 439 Less: our share of insurance recovery from unconsolidated joint venture properties — — — (2,010) Less: gain on insurance proceeds (62) — (62) — Less: our share of gain on insurance proceeds from unconsolidated joint venture properties — (880) (432) (880) Adjustments for non-controlling interests (1) 2 (3) 6 Adjusted funds from operations attributable to common stockholders $ 7,168 $ 5,655 $ 21,356 $ 16,269 38 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net income attributable to common stockholders $ 0.37 $ 1.54 $ 2.91 $ 1.69 Add: depreciation of properties 0.44 0.10 0.90 0.29 Add: our share of depreciation in unconsolidated joint venture properties 0.09 0.30 0.50 1.04 Add: Impairment charge — — — 0.03 Add: our share of impairment charge in unconsolidated joint venture properties — — — 0.11 Deduct: our share of equity in earnings from sale of unconsolidated joint venture properties (0.61) (1.92) (3.47) (1.97) Deduct: gain on sale of real estate and partnership interests — (0.02) — (0.56) Adjustment for non-controlling interests — — — — NAREIT Funds from operations per diluted common share 0.29 — 0.84 0.63 Adjustments for: straight line rent accruals — — — — Add: loss on extinguishment of debt — 0.05 0.03 0.05 Add: our share of loss on extinguishment of debt from unconsolidated joint venture properties 0.02 0.25 0.10 0.26 Add: amortization of restricted stock and RSU expense 0.06 0.05 0.16 0.11 Add: amortization of deferred mortgage and debt costs 0.01 — 0.02 0.01 Add: our share of deferred mortgage and debt costs from unconsolidated joint venture properties — 0.01 0.01 0.02 Less: our share of insurance recovery from unconsolidated joint venture properties — — — (0.11) Less: gain on insurance proceeds — — — — Less: our share of gain on insurance proceeds from unconsolidated joint venture properties — (0.05) (0.02) (0.05) Adjustments for non-controlling interests — — — — Adjusted funds from operations per diluted common share $ 0.38 $ 0.31 $ 1.14 $ 0.92 Diluted shares outstanding for FFO and AFFO 18,928,648 18,215,924 18,712,740 17,820,909 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. 39 Table of Contents - 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. NOI is used by our management and many investors to evaluate and compare the performance of our properties to other comparable properties, to determine trends at our properties and to determine the estimated fair value of our properties. The usefulness of NOI may be limited in that it does not take into account, among other things, general and administrative expense, interest expense, loss on extinguishment of debt, casualty losses, insurance recoveries and gains or losses as determined by GAAP. NOI is a property specific performance metric and does not measure our performance as a whole. We compute NOI, by adjusting net income (loss) to (a) add back (1) depreciation expense, (2) general and administrative expenses, (3) interest expense, (4) loss on extinguishment of debt, (5) equity in loss of unconsolidated joint ventures, (6) provision for taxes, (7) the impact of non-controlling interests, and (b) deduct (1) other income, (2) gain on sale of real estate, and (3) gain on insurance recoveries related to casualty loss. Other REIT’s may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REIT’s. We believe NOI provides an operating perspective not immediately apparent from GAAP operating income or net income (loss). NOI is one of the measures we use to evaluate our performance because it (i) measures the core operations of property performance by excluding corporate level expenses and other items unrelated to property operating performance and (ii) captures trends in rental housing and property operating expenses. However, NOI should only be used as an alternative measure of our financial performance. 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): 40 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 GAAP Net income attributable to common stockholders $ 7,059 $ 28,106 $ 54,174 $ 30,368 Less: Other Income (6) (5) (12) (12) Add: Interest expense 5,061 1,535 9,994 4,804 General and administrative 3,673 3,114 10,839 9,382 Impairment charge — — — 520 Depreciation 8,165 1,787 16,781 4,740 Provision for taxes 178 31 976 155 Less: Gain on sale of real estate — (414) (6) (7,693) Gain on sale of partnership interest — — — (2,244) Equity in earnings from sale of unconsolidated joint venture properties (11,472) (34,982) (64,531) (34,982) Gain on insurance recoveries (62) — (62) — Add: Loss on extinguishment of debt — 902 563 902 Adjust for: Equity in (earnings) loss of unconsolidated joint venture properties (135) 4,196 (1,315) 6,033 Add: Net income attributable to non-controlling interests 35 35 107 102 Net Operating Income $ 12,496 $ 4,305 $ 27,508 $ 12,075 Less: Non-same store Net Operating Income (loss) 8,402 845 (15,695) (1,690) Same store Net Operating Income $ 4,094 $ 3,460 $ 11,813 $ 10,385 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. 41 Table of Contents