What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-09 compared with 2024-05-08 · 169 added, 68 removed, 172 unchanged (58% of the section changed)

13 unchanged sentences

• 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;

• challenges in acquiring or investing in multi-family properties (including challenges in (i) buying properties directly without the participation of joint venture partners and (ii) making alternative investments in multi-family properties, and the limited number of multi-family property investment/acquisition opportunities available to us), which transactions may not be completed or 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 rates;

7 unchanged sentences

• inability to obtain financing at favorable rates, if at all, or refinance existing debt as it matures due to the level and volatility of interest or capitalization rates or capital market conditions

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

Table of Content

• 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;

17 unchanged sentences

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, 2024, we:

At June 30, 2024, we:

(i) wholly-own 21 multi-family properties with an aggregate of 5,420 units and a carrying value of $624.5 million;

6 unchanged sentences

Pursuit of Joint Venture Acquisition and Alternative Investment Opportunities

As more fully described in (i) 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" and (ii) below, we face challenges ( e.g ., inflation, rising interest rates and decelerating increases in rental rates) due to the uncertain economic environment which may limit our ability or willingness (i) to acquire properties, (ii) grow rental income or (iii) control our real estate operating expenses, some of which, such as real estate tax and insurance expense, we have a very limited ability to control.

In light of the challenging acquisition environment and the limited funds available to us to acquire properties, we may, in the near term, pursue (i) the acquisition of multi-family properties through joint ventures and /or (ii) alternative investments in the multi-family property arena, such as rescue capital, which includes preferred equity investments ( e.g., an investment entitling the investor to a fixed rate of return prior to distributions to more junior investors) or bridge loans ( e.g.

, a loan secured by a first mortgage on the subject property).

We do not anticipate that in the near term, these type of investments(other than joint ventures already included in our portfolio), will constitute a significant part of our portfolio.

We can provide no assurance that we will pursue such investments or that if we do, such investments will be profitable for us.

As more fully described (i) 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" and (ii) below, we face challenges ( e.g ., inflation, volatile interest rates and rental rates decreases) due to the uncertain economic environment, which may limit our ability or willingness (i) to acquire properties, (ii) grow rental income or (iii) control our real estate operating expenses, some of which, such as real estate tax and insurance expense, we have a very limited ability to control.

In light of the challenging acquisition environment and the limited funds available to us to acquire properties, we are pursuing (i) alternative investments in the multi-family property arena, such as rescue capital, which includes preferred equity investments ( e.g., an investment entitling us to a fixed rate of return prior to distributions to more junior investors) or bridge loans ( e.g.

, a loan secured by a first mortgage on the subject property) and/or (ii) the acquisition of multi-family properties through joint ventures.

We do not anticipate that in the near term, these type of investments (other than joint ventures already included in our portfolio), will constitute a significant part of our portfolio, and can provide no assurance that such investments will be profitable for us.

Credit facility

On July 9, 2024, we and an affiliate of Valley National Bank ("VNB"), amended our credit facility to, among other things, reduce the borrowing capacity from $60 million to $40 million, extend the facility's maturity from September 2025 to September 2027 and revise certain financial and other covenants.

We reduced the amount available under the facility in connection with obtaining approximately $28 million of seven-year mortgage debt (the “Financing”) on our Woodland Trails – LaGrange, Georgia property.

We anticipate that the Financing will be completed in August 2024, will bear a fixed interest rate of 5.22%, will be interest only until maturity in 2031 and that as a result of the Financing, we will incur additional interest expense of approximately $1.5 million per year.

We anticipate using the proceeds from the Financing to invest in multi-family properties (including the alternative investments described above) and for general corporate purposes (which may include repurchases of our common stock).

Such proceeds will be invested initially in short-term US Treasury securities until they are applied.

In connection with this amendment, we paid the lender aggregate fees of approximately $375,000.

Share repurchases

During the quarter ended June 30, 2024, we repurchased 53,619 shares of common stock at an average price of $17.34 for an aggregate of $930,000.

After giving effect to these purchases, we are authorized to repurchase up to $6.4 million of additional shares of our common stock,

Bells Bluff-West Nashville, Tennessee

This property (“Bells Bluff”) has experienced, and continues to experience, competitive pressure due to the completion of construction of similar or higher-quality multi-family properties in Nashville.

To maintain occupancy levels, we have offered, and will continue to offer, short-term rent concessions and/or reduced rental rates.

As a result, Bells Bluff's operating results have been adversely impacted.

Although the rent concessions we are currently offering are less significant than those offered during the quarter ended June 30, 2024, we continue to offer such concessions and reduced rental rates.

We believe that due, among other things, to its vibrant economy, that over-time, the Nashville market will absorb the excess rental capacity, although we can provide no assurance in this regard.

Results of Operations

Three months ended March 31, 2024 compared to three months ended March 31, 2023 .

Three months ended June 30, 2024 compared to three months ended June 30, 2023 .

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 months ended March 31, 2024 and 2023, all of the properties in our consolidated portfolio are same store properties.

For the three months ended June 30, 2024 and 2023, all of the properties in our consolidated portfolio are same store properties.

The following table compares our revenues for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30,

(Dollars in thousands):

4 unchanged sentences

Rental and other revenue from real estate properties

The change was due to an increase of $589,000 from same store properties primarily due to an increase in rental rates across most of the portfolio, offset by a $241,000 decrease due to a decline in occupancy rates across most of the portfolio.

The increase in the current three month period ended March 31, 2024, is primarily due to the impact of increased interest rates on our cash balances, which is invested primarily in short term US Treasury bills.

The change was primarily due to the following increases:

• $413,000 due to an increase in amortization of deferred rent concessions;

• $343,000 due to an increase in rental rates across most of the portfolio;

• $117,000 from ancillary income ( i.e ., utilities reimbursement, late fees, cancellation fees, etc.

("Ancillary Income")).

The increase was offset by a $276,000 decrease in rental income at Bells Bluff.

The following table compares our expenses for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30,

(Dollars in thousands) 2024 2023 Increase

6 unchanged sentences

Real estate operating expense.

The change is due to the following increases:

• $156,000 from same store properties, including:

– $171,000 due to increased real estate tax accruals- we anticipate that these accruals through the balance of 2024, will be similarly higher than such accruals in 2023;

– $100,000 of increased costs across several other expenses categories, including payroll, insurance and leasing and advertising expense.

This increase was offset by a decline in repairs and maintenance due to the inclusion, in the corresponding period of the prior year, of $116,000 in expenses related to the December 2022 blizzard.

The change is due primarily to an increase of (i) $319,000 in insurance premiums at two properties and (ii) $115,000 due to increased real estate tax accruals - we anticipate that through the balance of 2024, these accruals will be similarly higher than such accruals in 2023.

The increase was offset by a $124,000 decrease in repairs and maintenance.

Depreciation and amortization

The decrease is due primarily to a decline in depreciation related to lease intangibles from properties where we purchased our partners' interests in 2022.

Table of Content

Equity in earnings of unconsolidated joint ventures

Equity in earnings from unconsolidated joint ventures decreased $75,000 to $389,000 for the three months ended June 30, 2024, from $464,000 for the three months ended June 30, 2023.

The decrease is due primarily to:

• $189,000 in charges from Stono Oaks - Johns Island, SC ("Stono Oaks") which was previously in development, but which was placed in service in 2024 and as of June 30, 2024, is approximately 37% leased.

Accordingly, interest and certain other expenses (which previously had been capitalized) and depreciation, are now being expensed.

• the loss of $159,000 of income from Chatham Court and Reflections which was sold in May 2023 (the Chatham Sale").

The decrease was offset primarily by the inclusion, in the corresponding period in 2023, of a $212,000 early extinguishment of debt charge related to the Chatham Sale.

Equity in earnings from sale of unconsolidated joint venture properties

In the three months ended June 30, 2023, we recognized a gain of $14.7 million from the Chatham Sale.

There was no similar gain in 2024.

Insurance recovery of casualty loss

During the quarter ended June 30, 2023, we received $215,000 in insurance proceeds as reimbursement for expenses incurred related to a winter storm in December 2022.

There was no similar recovery in the corresponding period in 2024.

Income tax (benefit) provision

Income tax (benefit) provision in the three months ended ended June 30, 2024, decreased $116,000 from the three months ended June 30, 2023 due to our recognition, in the current three months, of a $164,000 franchise tax refund from a property due to a change in Tennessee law.

In July 2024, we received $374,000 related to another property in Tennessee, and will recognize such sum in the quarter ending September 30, 2024.

Table of Content

Results of Operations

Six Months Ended June 30, 2024 compared to six months ended June 30, 2023 .

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 six months ended June 30, 2024 and 2023, all of our properties in our consolidated portfolio are same store properties.

The following table compares our revenues for the periods indicated:

Six Months Ended June 30,

(Dollars in thousands):

2024 2023 Increase

Rental and other revenue from real estate properties $ 47,076 $ 46,194 $ 882 1.9 %

Other income 189 63 126 200.0 %

Total revenues $ 47,265 $ 46,257 $ 1,008 2.2 %

Rental and other revenue from real estate properties

The change was due to the following increases:

• $876,000 due to an increase in rental rates across most of the portfolio,

• $413,000 due to an increase in amortization of deferred rent concessions;

• $136,000 in Ancillary Income.

The increase was offset by:

• a $277,000 decrease due to a decline in occupancy across most of the portfolio, and

• a $256,000 decrease in rental income at Bells Bluff.

The increase is due primarily to the impact of rising interest rates on our cash balances.

The following table compares our expenses for the periods indicated:

Six Months Ended June 30,

(Dollars in thousands) 2024 2023 Increase

(Decrease) % Change

Real estate operating expenses $ 21,425 $ 20,982 $ 443 2.1 %

Interest expense 11,023 10,996 27 0.2 %

General and administrative 7,965 7,903 62 0.8 %

Depreciation and amortization 12,901 15,551 (2,650) (17.0) %

The decrease is due primarily to a $1.6 million decline in depreciation related to lease intangibles from properties where we purchased our partner's interests in 2022.

Total expenses $ 53,314 $ 55,432 $ (2,118) (3.8) %

Real estate operating expense

The increase is due to (i) $378,000 in increased insurance premiums primarily at two properties;

and (ii) $287,000 due to increased real estate tax accruals- we anticipate that these accruals through the balance of 2024, will be similarly higher than such accruals in 2023.

Table of Content

The increase was offset by $322,000 decrease in repairs and maintenance and the inclusion, in the corresponding 2023 period, of $116,000 of expense related to the December 2022 blizzard.

Depreciation and amortization

The increase is due primarily to the decline in depreciation related to lease intangibles from properties where we purchased our partners' interests in 2022.

Equity in earnings of unconsolidated joint ventures

Equity in earnings from unconsolidated joint ventures declined to $228,000 for the three months ending March 31, 2024 from $815,000 for the three months ended March 31, 2023.

The decline is due to the following:

• $231,000 in charges from our Stono Oaks property which was previously in development.

The property has been placed in service.

Accordingly, interest which previously had been capitalized is now being expensed and the property is also now recording depreciation expense;

• the loss of income of $240,000 from the Chatham Property which was sold in May 2023;

• $109,000 recorded in the quarter ended March 31, 2023, related to income from joint venture properties sold prior to January 1, 2023.

Gain on Insurance Recovery

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

There was no corresponding payment in the current three month period.

Equity in earnings from unconsolidated joint ventures declined to $617,000 for the six months ended June 30, 2024 from $1.3 million for the six months ended June 30, 2023.

The decline is due to:

• $420,000 in charges from Stono Oaks;

• the loss of income of $397,000 from the Chatham Sale.

The decrease was offset primarily by the inclusion, in the corresponding period in 2023, of a $212,000 early extinguishment of debt charge that resulted from the Chatham Sale.

Equity in earnings from sale of unconsolidated joint venture properties

In the six months ended June 30, 2023, we recognized a gain of $14.7 million from the Chatham Sale.

There was no comparable gain in the corresponding period in 2024.

Insurance recovery of casualty loss

During the six months ended June 30, 2023, we received $215,000 in insurance proceeds as reimbursement for expenses incurred related to a winter storm in December 2022.

There was no similar recovery in the corresponding period in 2024.

Gain on insurance recoveries

During the six months ended June 30, 2024, we received a $240,000 payment, representing the final payment made by the insurance carrier with respect to damage we sustained at The Woodland Apartments - Boerne, TX in 2021.

Income tax (benefit) provision

Income tax (benefit) provision in the six months ended ended June 30, 2024, decreased $114,000 from the six months ended June 30, 2023 due to our recognition, in the current six month period, of a $164,000 franchise tax refund due to a change in Tennessee law.

In July 2024, we received $374,000 related to another property in Tennessee and will recognize such sum in the quarter ending September 30, 2024.

Table of Content

Liquidity and Capital Resources

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/issuance of shares of our common stock pursuant to our at-the-market equity distribution and dividend reinvestment programs, borrowings from our credit facility and our available cash.

At May 1, 2024, our available liquidity was $78.5 million, including $18.5 million of cash and cash equivalents and $60 million available under our credit facility.

We anticipate that from April 1, 2024 through December 31, 2027, our operating expenses, $119.5 million of mortgage amortization and interest expense (including $47.3 million from unconsolidated joint ventures), $15.4 million and $126.1 million of balloon payments with respect to mortgages maturing in 2025 and 2026, respectively (including $56.6 million maturing in 2026 from unconsolidated joint ventures), estimated capital expenditures (for the remainder of 2024 only) of $8.0 million, interest expense on our junior subordinated notes, estimated cash dividend payments of at least $69.9 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.6 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), property sales, obtaining mortgage debt financing on unencumbered properties and, to the extent available, our credit facility.

We require funds to pay operating expenses and debt service obligations, acquire and/or invest in properties (including alternative investments), 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 the unconsolidated multi-family properties), mortgage debt financings and re-financings, the issuance of shares of our common stock pursuant to our dividend reinvestment program, borrowings from our credit facility and our available cash.

At August 1, 2024, our available liquidity was $54.7 million, including $14.7 million of cash and cash equivalents and $40 million available under our credit facility.

We anticipate that from July 1, 2024 through December 31, 2027, our operating expenses, $111.1 million of mortgage amortization and interest expense (including $44.0 million from unconsolidated joint ventures and excluding the approximate $1.5 million of additional annual interest expense associated with the Financing), $15.4 million and $128.3 million of balloon payments with respect to mortgages maturing in 2025 and 2026, respectively (including $58.7 million maturing in 2026 from unconsolidated joint ventures), estimated capital expenditures (for the remainder of 2024 only) of $2.9 million, interest expense on our junior subordinated notes, estimated cash dividend payments of at least $65.5 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, the Financing, obtaining mortgage debt on two unencumbered properties ( i.e ., Avondale Station - Decatur GA and Avalon - Pensacola, FL) and, to the extent available, our credit facility.

Our operating cash flow and available cash is insufficient to fully fund the $143.7 million of balloon payments due through 2026, 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, 2024, we had mortgage debt of $677.2 million (including $250.3 million of mortgage principal debt of our unconsolidated subsidiaries).

Our ability to acquire or invest in additional multi-family property opportunities 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 June 30, 2024, we had mortgage debt of $677.5 million (including $251.6 million of mortgage debt at of our unconsolidated subsidiaries).

The mortgage debt at our:

(i) consolidated properties had a weighted average interest rate of 4.02% and a weighted average remaining term to maturity of approximately 6.5 years, and (ii) at our unconsolidated subsidiaries had a weighted average interest rate of 4.38% and a remaining term to maturity of approximately 4.4 years.

Capital improvements at (i) two unconsolidated multi-family properties will be funded by approximately $589,000 of restricted cash available at March 31, 2024 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.

Table of Content

Junior Subordinated Notes

As of March 31, 2024, $37.4 million (excluding deferred costs of $252,000) in principal amount of our junior subordinated notes is outstanding.

As of June 30, 2024, $37.4 million (excluding deferred costs of $247,000) 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, at a rate of three-month term SOFR plus 250 basis points.

At March 31, 2024 and 2023, the interest rate on these notes was 7.58% and 6.80%, respectively.

The interest rate that will be in effect for the three months ending July 31, 2024 is 7.59%.

At June 30, 2024 and 2023, the interest rate on these notes was 7.59% and 7.30%, respectively.

The interest rate that will be in effect for the three months ending October 30, 2024 is 7.52%.

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.

Our credit facility with VNB New York, LLC, an affiliate of Valley National Bank (collectively, "VNB"), as amended in July 2024, allows us to borrow, subject to compliance with borrowing base requirements and other conditions, up to $40 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);

2 unchanged sentences

The credit facility bears an annual interest rate, which resets monthly, equal to one-month term SOFR plus 250 basis points, with a floor of 6.00%.

The interest rate in effect as of March 31, 2024 was 7.82%.

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 May 1, 2024, there was no outstanding balance on the credit facility and $60 million is available to be borrowed thereunder.

The interest rate in effect at May 1, 2024 is 7.83%

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.

As of August 1, 2024, there was no outstanding balance on the credit facility and $40 million is available to be borrowed thereunder.

The interest rate in effect at August 1, 2024 is 7.85%

The terms of the credit facility include certain restrictions and covenants which, among other things, limit the incurrence of liens, require that we maintain and include in the collateral securing the facility at least two unencumbered properties with an aggregate value(as calculated pursuant to the facility) of at least $50 million, and require compliance with financial ratios relating to, among other things, maintaining a minimum tangible net worth of $140 million, the minimum amount of debt service

Table of Content

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 March 31, 2024, we were in compliance in all material respects with the requirements of the facility.

At June 30, 2024, we were in compliance in all material respects with the requirements of the facility.

Other Financing Sources and Arrangements

At March 31, 2024, we are joint venture partners in unconsolidated joint ventures which own eight multi-family properties and the distributions to us from these joint venture properties of $1.4 million in the quarter ended March 31, 2024 contributed to our liquidity and cash flow.

At June 30, 2024, we are joint venture partners in unconsolidated joint ventures which own eight multi-family properties and the distributions to us from these joint venture properties of $1.3 million in the quarter ended June 30, 2024 contributed to our liquidity and cash flow.

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

At March 31, 2024, these joint venture properties have a net-equity carrying value of $32.9 million and are subject to mortgage debt, which is not reflected on our consolidated balance sheet, of $250.3 million.

At June 30, 2024, these joint venture properties have a net-equity carrying value of $32.2 million and are subject to mortgage debt, which is not reflected on our consolidated balance sheet, of $251.6 million.

Although BRT Apartments Corp.

7 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).

Table of Content

On April 4, 2024, we paid a quarterly cash dividend of $0.25 per share to holders of record of our common stock as of the close of business on March 27, 2024.

On July 9, 2024, we paid a quarterly cash dividend of $0.25 per share to holders of record of our common stock as of the close of business on June 25, 2024.

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 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).

We compute AFFO by adjusting FFO for the loss of extinguishment of debt, our straight-line rent and rental concession 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 March 31,

GAAP Net loss attributable to common stockholders $ (3,171) $ (4,098)

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

2024 2023 2024 2023

GAAP Net (loss) income attributable to common stockholders $ (2,345) $ 11,202 $ (5,516) $ 7,104

depreciation and amortization of properties 6,466 7,543 12,901 15,551

our share of depreciation in unconsolidated joint venture properties 1,373 1,302 2,740 2,678

our share of equity in earnings from sale of unconsolidated joint venture properties — (14,744) — (14,744)

Adjustments for non-controlling interests (4) (4) (8) (8)

1 unchanged sentence

Adjustments for:

straight-line rent accruals 25 19

straight-line rent and rent concession accruals (388) 25 (363) 44

Adjustments for:

our share of straight-line rent and rent concession accruals from unconsolidated joint venture properties (60) — (60) —

our share of loss on extinguishment of debt from unconsolidated joint venture properties — 212 — 212

amortization of restricted stock and RSU expense 1,090 1,193 2,432 2,603

6 unchanged sentences

Adjusted funds from operations attributable to common stockholders $ 6,568 $ 7,181 $ 13,002 $ 14,055

Three Months Ended March 31,

Net loss attributable to common stockholders $ (0.17) $ (0.21)

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

2024 2023 2024 2023

GAAP Net (loss) income attributable to common stockholders $ (0.13) $ 0.58 $ (0.30) $ 0.36

depreciation and amortization of properties 0.35 0.40 0.69 0.82

our share of depreciation in unconsolidated joint venture properties 0.07 0.07 0.15 0.14

our share of equity in earnings from sale of unconsolidated joint venture properties — (0.77) — (0.77)

Adjustment for non-controlling interests — — — —

1 unchanged sentence

Adjustments for:

straight line rent accruals — —

straight line rent and rent concession accruals (0.02) — (0.02) —

Adjustments for:

our share of straight-line rent and rent concession accruals in unconsolidated joint venture properties

loss on extinguishment of debt — — — —

our share of loss on extinguishment of debt from

unconsolidated joint venture properties — 0.01 — 0.01

amortization of restricted stock and RSU expense 0.06 0.06 0.13 0.13

7 unchanged sentences

Diluted shares outstanding for FFO and AFFO 18,699,000 19,174,000 18,640,000 19,171,000

Three Months Ended March 31, 2024 and 2023

FFO for the three months ended March 31, 2024 decreased from the corresponding quarter in the prior year primarily due to the sale by an unconsolidated joint venture of the Chatham property in May 2023, and the inclusion, in the three months ended March 31, 2023, of the gain on insurance recoveries.

AFFO for the three months ended March 31, 2024 decreased from the corresponding period in the prior year, primarily due to the sale by an unconsolidated joint venture of the Chatham property in May 2023.

Diluted per share FFO and AFFO were favorably impacted in the three months ended March 31, 2024 by a 558,000 decrease in the current quarter from the corresponding quarter in the prior year in the weighted average shares of common stock outstanding, primarily due to stock buybacks.

See "- Results of Operations - Three Months Ended March 31, 2024 compared to three months ended March 31, 2023 ", for a discussion of these changes.

Three Months Ended June 30, 2024 and 2023

FFO for the three months ended June 30, 2024, increased from the corresponding quarter in the prior year primarily due to (i) an increase in amortization of deferred rent concessions, (ii) the inclusion, in the corresponding 2023 period, of the early extinguishment of debt charge and (iii) the Tennessee franchise tax refund in 2024.

This increase was offset primarily due to the Chatham Sale, the increase in real estate operating expenses and the inclusion, in the three months ended June 30, 2023, of an insurance recovery from a casualty loss.

AFFO for the three months ended June 30, 2024 decreased from the corresponding period in the prior year primarily due to the factors contributing to the decrease in FFO other than the early extinguishment of debt charge and the amortization of deferred rent concessions.

Diluted per share FFO and AFFO were favorably impacted in the three months ended June 30, 2024 by a 475,000 net decrease in the current quarter from the corresponding quarter in the prior year in the weighted average shares of common stock outstanding, primarily due to stock buybacks.

See "- Results of Operations - Three Months Ended June 30, 2024 compared to three months ended June 30, 2023 ", for a discussion of these changes.

Six Months Ended June 30, 2024 and 2023

FFO for the six months ended June 30, 2024 decreased from the corresponding period in the prior year primarily due to the Chatham Sale, the increase in real estate operating expenses, an increase in cash compensation expense due to higher salary levels and the inclusion, in the six months ended June 30, 2023, of an insurance recovery of casualty loss.

The decrease was offset by an increase, in 2024, in amortization of deferred rent concessions, by the inclusion, in the corresponding period of 2023, of the early extinguishment of debt charge and, in 2024, a decrease in charges associated with restricted stock units (RSUs) as certain performance metrics were not achieved, a decrease in income tax expense, and an increase in other income.

AFFO for the six months ended June 30, 2024 decreased from the corresponding period in the prior year primarily due to the factors contributing to the decrease in FFO, other than the early extinguishment of debt charge, the charges associated with the RSUs, the 2023 insurance recovery of casualty loss and amortization of deferred rent concessions.

Diluted per share FFO and AFFO were favorably impacted in the six months ended June 30, 2024 by a 531,000 net decrease in the current quarter from the corresponding quarter in the prior year in the weighted average shares of common stock outstanding, primarily due to stock buybacks.

See "- Results of Operations - Six Months Ended June 30, 2024 compared to six months ended June 30, 2023 ", 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 March 31,

2024 2023 Variance

GAAP Net loss attributable to common stockholders $ (3,171) $ (4,098) $ 927

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

2024 2023 Variance 2024 2023 Variance

GAAP Net ( loss) income attributable to common stockholders $ (2,345) $ 11,202 $ (13,547) $ (5,516) $ 7,104 $ (12,620)

Other Income (84) (63) (21) (189) (63) (126)

3 unchanged sentences

Provision for taxes (65) 51 (116) 13 127 (114)

Equity in earnings from sale of

unconsolidated joint venture

properties — (14,744) 14,744 — (14,744) 14,744

Insurance recovery — (215) 215 — — (215) 215

Gain on insurance recoveries — — — — (240) 240

4 unchanged sentences

Same store Net Operating Income $ 12,681 $ 12,452 $ 229 $ 25,130 $ 24,690 $ 440

For the three months ended March 31, 2024, NOI increased $ 214,000 from the corresponding period in 2023 primarily due to a $359,000 increase in rental revenue offset by a $145,000 increase in real estate operating expenses.

See "-Results of Operations - Three Months Ended March 31, 2024 Compared to the Three Months ended March 31, 2023 " for a discussion of these changes.

For the three months ended June 30, 2024, NOI increased $225,000 from the corresponding period in 2023 primarily due to

a $413,000 increase in amortization of deferred rent concessions and a net $343,000 increase in rental revenue in the overall portfolio.

The increase was offset by a $276,000 decrease in rental income at Bells Bluff and a $297,000 increase in real estate operating expenses.

See "-Results of Operations - Three Months Ended June 30, 2024 Compared to the Three Months ended June 30, 2023 " for a discussion of these changes.

For the six months ended June 30, 2024, NOI increased $439,000 from the corresponding period in 2023 primarily due to a $845,000 increase in rental revenue at most of our properties, a $413,000 increase in amortization of deferred rent concessions offset by a $443,000 increase in real estate operating expenses and a $376,000 decrease in rental income at Bells Bluff.

See "-Results of Operations - Six Months Ended June 30, 2024 Compared to the Six Months ended June 30, 2023 " 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