What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-08 compared with 2022-11-09 · 145 added, 345 removed, 165 unchanged (75% of the section changed)

8 unchanged sentences

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;

• inability to generate sufficient cash flows due to unfavorable economic and market conditions ( e.g.

, inflation, volatile interest rates and the possibility of a recession), changes in supply and/or demand, competition, uninsured losses, changes in tax and housing laws or other factors;

• adverse changes in real estate markets, including, but not limited to, the extent of future demand for multifamily units in our significant markets, barriers of entry into new markets which we may seek to enter in the future, limitations on our ability to increase or collect rental rates, competition, our ability to identify and consummate attractive acquisitions and dispositions on favorable terms, and our ability to reinvest sale proceeds in a manner that generates favorable returns;

• 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;

• decreasing rental rates or increasing vacancy rates;

• challenges in acquiring properties (including challenges in buying properties directly without the participation of joint venture partners and the limited number of multi-family property acquisition opportunities available to us), which acquisitions may not be completed or may not produce the cash flows or income expected;

• exposure to risks inherent in investments in a single industry and sector;

• the concentration of our multi-family properties in the Southeastern United States and Texas, which makes us more susceptible to adverse developments in those markets;

• increases in expenses over which we have limited control, such as real estate taxes, insurance costs and utilities, due to inflation and other factors;

• impairment in the value of real estate we own;

• failure of property managers to properly manage properties;

• accessibility of debt and equity capital markets;

• disagreements with, or misconduct by, joint venture partners;

• 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;

• inability to obtain financing at favorable rates, if at all, or refinance existing debt as it matures;

• level and volatility of interest or capitalization rates or capital market conditions;

• extreme weather and natural disasters such as hurricanes, tornadoes and floods;

• lack of or insufficient amounts of insurance to cover, among other things, losses from catastrophes;

• our ability to maintain our qualification as a REIT;

• risks associated with acquiring value-add multi-family properties, which involves greater risks than more conservative approaches;

• the condition of Fannie Mae or Freddie Mac, which could adversely impact us;

• changes in Federal, state and local governmental laws and regulations, including laws and regulations relating to taxes and real estate and related investments;

• our failure to comply with laws, including those requiring access to our properties by disabled persons, which could result in substantial costs;

• board determinations as to timing and payment of dividends, if any, and our ability or willingness to pay future dividends;

• our ability to satisfy the complex rules required to maintain our qualification as a REIT for federal income tax purposes;

• 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.

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

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

• our dependence on information systems and risks associated with breaches of such systems;

• disease outbreaks and other public health events, and measures that are taken by federal, state, and local governmental authorities in response to such outbreaks and events;

• impact of climate change on our properties or operations;

• risks associated with the stock ownership restrictions of the Internal Revenue Code of 1986, as amended (the "Code") for REITs and the stock ownership limit imposed by our charter;

• the other factors described in our Annual Report on Form 10-K for the year ended December 31, 2022( the "Annual Report")including those set forth in such report under the captions "Item 1.

Business," "Item 1A.

Risk Factors," and "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations" .

We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this report.

Except to the extent otherwise required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the filing of this report or to reflect the occurrence of unanticipated events thereafter.

We are an internally managed real estate investment trust, also known as a REIT, that owns, operates and, to a lesser extent, holds interests in joint ventures that own and operate multi-family properties.

At March 31, 2023, we:

(i) wholly-own 21 multi-family properties with an aggregate of 5,420 units and a carrying value of $645.6 million;

(ii) have ownership interests, through unconsolidated entities, in eight multi-family properties with 2,781 units and a carrying value of our net equity investment $37.7 million;

and (iii) own other assets, through consolidated and unconsolidated subsidiaries, with a carrying value of $5.4 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.

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.

As more fully described in our Annual Report, and in particular, the sections thereof entitled " Risk Factors " and " Management's Discussion and Analysis of Financial Condition and Results of Operations ", we face challenges due to the volatile economic environment.

Activities During the Three Months Ended March 31, 2023

Mortgage Financing and Credit Line Paydown

On February 24, 2023, we obtained mortgage debt of $21.2 million on our Silvana Oaks-North Charleston, SC multi-family property.

Such mortgage debt matures in March 2033, bears interest of 4.45% and is interest only for the term of the mortgage.

We used the proceeds of this financing to pay off the outstanding $19 million balance on our credit facility.

Joint Venture - Contract to sell a property

On March 13, 2023, the unconsolidated joint venture that owns Chatham Court and Reflections, a 494 unit multi-family property located in Dallas, TX, and in which we have a 50% interest, entered into a contract to sell such property.

We estimate that our share of the gain from this sale will be approximately $14.6 million and that our share of the related early extinguishment of debt charge will be $167,000.

In 2022, this property accounted for $753,000 of equity in earnings from unconsolidated joint ventures.

We anticipate that the closing of this transaction, which is subject to customary closing conditions, will be completed in the quarter ending June 30, 2023, although we can provide no assurance that this transaction will be completed.

Contract to Acquire a Property

On March 8, 2023, we entered into an agreement to acquire a 238-unit multifamily property constructed in 2019 and located in Richmond, VA, for a purchase price of approximately $62.5 million.

The purchase price includes the assumption of approximately $32 million of mortgage debt bearing an interest rate of 3.34% and maturing in 2061.

The purchase is subject to the satisfaction of various conditions, including the completion, to our satisfaction, of its due diligence investigation, as well as the approval by the mortgage lender of our assumption of the mortgage debt.

We anticipate that this transaction will be completed by year end 2023, although we can provide no assurance that this transaction will be completed.

Insurance Recoveries

In late April 2023, we received $215,000, and during the quarter ending June 30, 2023, we anticipate receiving, an additional $275,000 of insurance recoveries (net of applicable deductibles) related to an approximate $614,000 of repair and maintenance expense incurred in the six months ended March 31, 2023 (including $100,000 in the quarter ended March 31, 2023), at ten properties that incurred damage as a result of a late December 2022 storm.

We anticipate that such amounts will be recorded as insurance recoveries in the quarters ending June 30, 2023 and/or September 30, 2023.

Results of Operations

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

Three months ended March 31, 2023 compared to three months ended March 31, 2022 .

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.

For the three months ended March 31, 2023 and 2022, there were ten same store properties in our consolidated portfolio.

The following table compares our revenues for the periods indicated:

Three Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands):

4 unchanged sentences

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;

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

The increase was due to:

• $10.7 million from our purchase in 2022, of the interests of our joint venture partners that owned 11 multi-family properties (the "Partner Buyouts"), and

• $1.1 million at same store properties primarily due to an increase in average rental rates.

The increase was offset by a $347,000 decrease due to a decline in occupancy rates.

The following table compares our expenses for the periods indicated:

Three Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands) 2023 2022 Increase

6 unchanged sentences

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.

The increase is due to the following changes:

• $4.9 million from the Partner Buyouts, and

• $803,000 from same store properties, including an approximate (i) $263,000 increase in insurance expense ( including approximately $70,000 related to cancellation penalties) due to the implementation, in December 2022, of the master insurance program, (ii) $238,000 of repair, maintenance and replacements and (iii) $102,000 increase in utility expense at Bells Bluff - West Nashville, TN property, primarily due to a water leak.

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.

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.

• $2.9 million increase from the Partner Buyouts;

• $423,000 increase due to an increase on the interest rate on our junior subordinated debt which is based on three month LIBOR - we estimate that our interest expense on this debt during the quarter ending June 30, 2023, will be approximately $680,000, a $394,000 increase from the quarter ended June 30, 2022;

• $250,000 increase due to the increase in the average outstanding balance on the credit facility to $11.4 million during the three months ended March 31, 2023.

As of March 31, 2023, there is no outstanding balance on the facility.

The increase was offset by a decrease of $132,000 due to the payoff of $29.5 million of mortgage debt in 2022.

General and administrative

The increase is due primarily to a $435,000 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.

• $264,000 due to the inclusion, for the entire three months ended March 31, 2023, of the amortization expense related to the performance and market based restricted stock units (the "RSUs") granted in June 2022;

• $171,000 due to the amortization expense related to restricted stock, including $143,000 related to the restricted stock granted in January 2023 as a result of the higher fair value of the shares granted in 2023 in comparison to the value of the restricted stock granted in 2018.

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.

The increase is due primarily to $5.1 million from the Partner Buyouts, offset by a $721,000 decline due to reduced depreciation related to lease intangibles.

Gain on insurance recoveries

We received a $240,000 payment during the quarter ended March 31, 2023, representing the final payment made by the insurance carrier with respect to damage we sustained at The Woodland Apartments - Boerne, TX in 2021.

Unconsolidated Joint Ventures - Results of Operations

2 unchanged sentences

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 32 to 80% (see note 7 of our consolidated financial statements) (dollars in thousands):

Three Months Ended September 30,

Three Months Ended March 31,

2023 2022 Increase

7 unchanged sentences

Other equity earnings 113 55 58 105.5 %

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

Gain on insurance recoveries from unconsolidated joint ventures 65 515 (450) (87.4) %

Loss on extinguishment of debt from unconsolidated joint ventures — ( 30 ) 30 (100.0) %

Gain on sale of real estate from unconsolidated joint ventures — 23,652 (23,652) (100.0) %

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)

Net income from unconsolidated joint ventures $ 1,473 $ 25,592 $ (24,119) (94.2) %

Equity in earnings of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties $ 815 $ 14,191 $ (13,376) (94.3) %

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.

1 unchanged sentence

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");

• $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:

• $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:

• $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:

• $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 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.

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

The following table compares our revenues for the periods indicated:

Nine Months Ended September 30,

(Dollars in thousands):

2022 2021 Increase

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;

• $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").

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;

• $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;

• $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 $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);

• $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 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.

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;

• $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.

The components of the decrease include:

• $10.1 million from the Partner Buyouts;

• $3.9 million from the sale in 2022 of the following properties owned by unconsolidated joint ventures:

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 "2022 Sales").

Offsetting the decrease was a $868,000 increase from same store properties due to increased rental rates, net of the impact of a decrease in occupancy rates..

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;

• $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.

The components of the decrease are:

• $4.3 million from the Partner Buyouts;

• $1.9 million from the 2022 Sales.

Offsetting this decrease was a $678,000 increase in such expenses at same store properties, with expenses generally increasing across most expense categories including real estate taxes and utilities and payroll.

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;

• $1.2 million from the Anatole/Opop Sales.

• $2.5 million from the Partner Buyouts;

• $1.0 million from the 2022 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;

• $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.

The components of the decrease include:

• $2.8 million from the Partner Buyouts;

• $908,000 from the 2022 Sales (excluding Shavano).

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.

In the three months ended March 31, 2023, we recognized a $65,000 gain on insurance recoveries from a claim filed at a property and in the three months ended March 31, 2022, we recognized $515,000 in gains primarily due to our receipt of insurance recoveries from claims on two properties located in Texas that were damaged in a February 2021 ice storm, which receipts exceeded the assets previously written-off.

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..

In the three months ended March 31, 2022, we recognized a gain on the sale of real estate of $23.7 million from the sale of Varandas at Shavano - San Antonio, TX.

There was no comparative sale in the quarter ended March 31, 2023.

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).

We require funds to pay operating expenses and debt service obligations, acquire properties, make capital and other improvements, fund capital contributions and pay dividends.

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), mortgage debt financings and re-financings, 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 May 1, 2023, our available liquidity was $73.4 million, including $13.4 million of cash and cash equivalents and $60 million available under our credit facility.

At May 1, 2023, the interest rate on the credit facility was 8%.

We anticipate that from April 1, 2023 through December 31, 2026, our operating expenses, $130.5 million of mortgage amortization and interest expense (including $53.2 million from unconsolidated joint ventures), $123.4 million of balloon payments with respect to mortgages maturing in 2025 and 2026, estimated capital expenditures (for 2023 only) of $8.7 million (including an estimated $2.9 million for our value add program), interest expense on our junior subordinated notes, estimated cash dividend payments of at least $71.6 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 19.1 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.

Our operating cash flow and available cash is insufficient to fully fund the $123.4 million of balloon payments, and if we are unable to refinance such debt on acceptable terms, we may need to issue additional equity or dispose of properties, in each case on potentially unfavorable terms.

Our ability to acquire additional multi-family properties and implement value-add projects is limited by our available cash and our ability to (i) draw on our credit facility, (ii) obtain, on acceptable terms, mortgage debt from lenders, and (iii) raise capital from the sale of our common stock.

At March 31, 2023, we had mortgage debt of $691.2 million (including $260.8 million of mortgage principal debt of our unconsolidated subsidiaries).

The mortgage debt at our:

(i) consolidated subsidiaries had a weighted average interest rate of 4.02% 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 4.07% and a remaining term to maturity of approximately 5.8 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.

Capital improvements at (i) two unconsolidated multi-family properties will be funded by approximately $830,000 of restricted cash available at March 31, 2023 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.

As of March 31, 2023, $37.4 million (excluding deferred costs of $272,000 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.

At March 31, 2023 and 2022, the interest rate on these notes was 6.80% and 2.30%, respectively.

in our Annual Report, there is uncertainty as to whether the alternative interest rates to LIBOR contemplated by these notes will be available when LIBOR becomes unavailable in July 2023.

Credit Facility

4 unchanged sentences

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

The interest rate in effect as of March 31, 2023 was 8%.

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

1 unchanged sentence

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.

As of May 1, 2023, there was no outstanding balance on the credit facility and $60 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 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.

At March 31, 2023, 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.

At March 31, 2023, 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 of $2.2 million in the quarter ended March 31, 2023 contributed to 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.

At March 31, 2023, these joint venture properties have a net equity carrying value of $41.2 million and are subject to mortgage debt, which is not reflected on our consolidated balance sheet, of $260.8 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 7 to our consolidated financial statements.

5 unchanged sentences

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.

On April 4, 2023, we paid a quarterly cash dividend of $0.25 per share.

We carefully monitor our discretionary spending.

10 unchanged sentences

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.

We compute AFFO by adjusting FFO for the loss of extinguishment of debt,our straight-line rent accruals, restricted stock and RSU compensation expense, fair value adjustment of mortgage debt, gain on insurance recovery, insurance recovery from casualty loss and deferred mortgage and debt costs ( including, in each case as applicable, from our share from our unconsolidated joint ventures).

Since the NAREIT White Paper only provides guidelines for computing FFO, the computation of AFFO may vary from one REIT to another.

12 unchanged sentences

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

Three Months Ended March 31,

GAAP Net (loss) income attributable to common stockholders $ (4,098) $ 11,508

depreciation of properties 8,008 3,606

our share of depreciation in unconsolidated joint venture properties 1,376 4,318

Impairment charge — — — 520

our share of impairment charge in unconsolidated joint venture properties — — — 2,010

our share of equity in earnings from sale of unconsolidated joint venture properties — (12,961)

gain on sale of real estate and partnership interests — (414) (6) (9,937)

gain on sale of real estate — (6)

Adjustments for non-controlling interests (4) (4)

2 unchanged sentences

straight-line rent accruals 19 6

loss on extinguishment of debt — 902 563 902

our share of loss on extinguishment of debt from unconsolidated joint venture properties — 19

2 unchanged sentences

our share of deferred mortgage costs from unconsolidated joint venture properties 27 93

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

amortization of fair value adjustment for mortgage debt 157 —

gain on insurance proceeds (240) —

2 unchanged sentences

Adjusted funds from operations attributable to common stockholders $ 6,874 $ 7,243

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

Three Months Ended March 31,

Net (loss) income attributable to common stockholders $ (0.21) $ 0.62

depreciation of properties 0.42 0.20

our share of depreciation in unconsolidated joint venture properties 0.07 0.23

Impairment charge — — — 0.03

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)

our share of equity in earnings from sale of unconsolidated joint venture properties — (0.70)

gain on sale of real estate — —

Adjustment for non-controlling interests — —

2 unchanged sentences

straight line rent accruals — —

loss on extinguishment of debt — 0.05 0.03 0.05

our share of loss on extinguishment of debt from

unconsolidated joint venture properties 0.02 0.25 0.10 0.26

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

amortization of restricted stock and RSU expense 0.07 0.05

amortization of deferred mortgage and debt costs 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 — — — (0.11)

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

amortization of fair value adjustment for mortgage debt 0.01 —

gain on insurance proceeds (0.01) —

our share of gain on insurance proceeds from unconsolidated

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

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

Adjustments for non-controlling interests — —

1 unchanged sentence

Diluted shares outstanding for FFO and AFFO 19,137,577 18,570,639

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.

Three Months Ended March 31, 2023 and 2022

FFO for the three months ended March 31, 2023 decreased from the corresponding quarter in the prior year primarily due to the increases in (i) interest expense (the result of increased usage on our credit facility and increased interest rates on our subordinated debt);

(ii) general and administrative expenses (primarily non-cash compensation expense related to the amortization of restricted stock and RSU expense);

and (iii) amortization of mortgage fair value adjustments related to Partner Buyouts.

AFFO for the three months ended March 31, 2023 decreased from the corresponding period in the prior year, primarily due to the increase in interest expense, the result of increased usage on our credit facility and increased interest rates on our subordinated debt.

Diluted per share FFO and AFFO were impacted in the three months ended March 31, 2023 by a 567,000 increase in the weighted average shares of common stock outstanding, primarily due to stock issuances pursuant to our at-the market offering, equity incentive program and dividend reinvestment plan.

See " Results of Operations - Three Months Ended March 31, 2023 compared to three months ended March 31, 2022 ", for a discussion of these changes.

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

8 unchanged sentences

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 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

Three Months Ended March 31,

2023 2022 Variance

GAAP Net (loss) income attributable to common stockholders $ (4,098) $ 11,508 $ (15,606)

Other Income — (4) 4

1 unchanged sentence

General and administrative 4,055 3,633 422

Impairment charge — — — 520

Depreciation 8,165 1,787 16,781 4,740

Depreciation and amortization 8,008 3,606 4,402

Provision for taxes 76 74 2

Gain on sale of real estate — (6) 6

Gain on sale of partnership interest — — — (2,244)

Equity in earnings from sale of unconsolidated joint

1 unchanged sentence

Gain on insurance recoveries (240) — (240)

Loss on extinguishment of debt — 902 563 902

Equity in (earnings) loss of unconsolidated joint venture properties (135) 4,196 (1,315) 6,033

Equity in (earnings) of unconsolidated joint venture properties (815) (1,230) 415

Net income attributable to non-controlling interests 36 36 —

Net Operating Income $ 12,505 $ 6,677 $ 5,828

Non-same store Net Operating Income (loss) 8,402 845 (15,695) (1,690)

Non-same store Net Operating Income 6,127 320 5,807

Same store Net Operating Income $ 6,378 $ 6,357 $ 21

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.

For the three months ended March 31, 2023, NOI increased $5.8 million from the corresponding period in 2022 primarily due to a $11.5 million increase in rental revenues offset by a $5.7 million increase in real estate operating expenses.

The increase in rental revenue and real estate operating expenses were primarily due to the Partner Buyouts.

Same store NOI in the three months ended March 31, 2023 increased by $21,000 from the corresponding period in 2022, due to a $823,000 increase in rental revenues (and in particular, the increase in average rental rates) offset by a $802,000 increase in real estate operating expenses.

See "-Results of Operations - Three Months Ended March 31, 2023 Compared to the three Months ended March 31, 2022 " 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