BRT Apartments Corp. (BRT)

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are an internally managed real estate investment trust, also known as a REIT, that owns, operates and to a lesser extent holds interest in joint ventures that own and operate multi family properties. At December 31, 2024, we: (i) wholly-own 21 multi-family properties with an aggregate of 5,420 units and a carrying value of $614.2 million, (ii) have ownership interests, through unconsolidated entities, in eight multi-family properties with an aggregate of 2,527 units, with a carrying value of $31.3 million; (iii) have preferred equity investments in two multi-family properties with a carrying value of $17.7 million and (iv) own other assets, through consolidated and unconsolidated entities, with a carrying value of $1.7 million. The 29 multi-family properties are located in 11 states; primarily in the Southeast United States and Texas.

During 2024:

•We invested, in two separate and unrelated transactions, an aggregate of $18.3 million (with a carrying value of $17.7 million at December 31, 2024, after giving effect to deferred loan fees and allowance for credit loss) in joint ventures that purchased a 204-unit multi-family property in Wilmington, North Carolina and a 184-unit multi-family property in Kennesaw, Georgia. These investments are unsecured and are subordinate, including the payment of the returns thereon, to an aggregate of $51.3 million of mortgage debt on these properties. We estimate that in 2025, we will generate approximately $1.2 million of interest income on these investments. For financial statement reporting purposes, these investments are treated as loans and are included in "Loan receivables, net of deferred loan fees and allowance for credit loss"on our consolidated balance sheet at December 31, 2024. See "Item 1 Business - Preferred Equity Investments" and Notes 1 and 5 to our consolidated financial statements.

•We obtained a $27.4 million mortgage on our Woodland Trails-LaGrange, GA property (the "Woodlands Financing"). The debt matures in September 2031, bears interest at a fixed rate of interest of 5.22% and is interest only until maturity.

•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 maturity from September 2025 to September 2027 and revise certain financial and other covenents. VNB required these changes as a condition to our obtaining the Woodlands Financing.

•We sold a cooperative apartment unit in New York, NY for a sales price of approximately $1.1 million and recognized a gain of $806,000.

•We repurchased 193,529 shares of our common stock for an aggregate purchase price of approximately $3.50 million (i.e., an average price of $18.07 per share).

From January 1, 2025 through February 28, 2025, we purchased 65,018 shares of our common stock for an aggregate purchase price of approximately $1.1 million (i.e., an average price of $17.49 per share). In March 2025, our board of directors increased the value of the shares that we can repurchase to up to $10 million and extended the repurchase program through December 31, 2026.

Challenges and Uncertainties as a Result of the Uncertain Economic Environment; Pursuit of Joint Venture Acquisition and Alternative Investment Opportunities

As more fully described below, we face challenges (e.g., inflation, volatile interest rates, over-supply in certain markets, rental rates decreases, mispriced (i.e.,cap rates that do not, in our belief, correlate appropriately to interest rates and other market factors), and limited acquisition opportunities) due to the uncertain economic environment, which limits our ability or willingness to (i) acquire properties, (ii) grow rental income or (iii) control our real estate operating expenses, some of which, such as real estate taxes and insurance expense, we have a very limited ability to control. In addition, several properties, (in particular, Bells Bluff and Crossings), face increasing competition due to additional supply in such markets which have and may continue to adversely impact rental rates and occupancy rates.

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, including preferred loan 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.

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Nashville/West Nashville, TN Properties - Bells Bluff and Crossings

These properties (“Bells Bluff” and "Crossings") have experienced, and continue to experience, competitive pressure due to the completion of construction of similar or higher-quality multi-family properties in Nashville and West Nashville, TN. To maintain occupancy levels, we have offered, and anticipate that we will continue to offer, short-term rent concessions and/or reduced rental rates. As a result, Bells Bluff's and Crossing's operating results have been and will continue to be, adversely impacted. 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.

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Results of Operations

Comparison of Years Ended December 31, 2024 and 2023

The term "same store properties" refers to 21 multi-family properties with an aggregate of 5,420 units that were owned for all of 2024 and 2023.

Revenues

The following table compares our revenues for the years indicated:

Rental and other revenue from real estate properties.  The components of the increase include:

•a $1.0 million increase due to a 1.3% increase in average rental rates year-over-year in the

portfolio,

•an $855,000 increase in straight line of rent concessions,net of amortization, with approximately 50% of such concessions from Bells Bluff and Crossings; and

•a $112,000 increase at our commercial property in Yonkers due to a lease extension.

The increase was offset by a $344,000 decrease in average occupancy year-over-year at the multi-family portfolio from 94.2% to 93.7%.

Loan interest and other income

The increase is due primarily to interest income of $197,000 received from the preferred equity investments which were originated in the fourth quarter of 2024. We estimate that these investments will generate an aggregate of $1.2 million of interest income in 2025.

Expenses

The following table compares our expenses for the periods indicated:

Real estate operating expenses.

The components of the increase include:

•$669,000 in real estate taxes, including $413,000 at our Newbridge Commons-Columbus, OH property due to a reassessment, and smaller increases at several other properties;

•$641,000 in insurance costs, including $380,000 due to increases in our insurance premiums under our master policy and $260,000 from two properties that are not part of our master policy;

•$293,000 in utility costs (primarily water/sewer charges) at many properties; and

•$189,000 primarily related to increased replacement costs at several properties.

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We estimate that in 2025, assuming no material changes to our current multi-family portfolio, that our insurance expense will decrease by approximately $750,000 to $1.0 million due primarily to more favorable premiums.

Interest expense

The increase is due primarily to the additional $566,000 of interest expense related to the Woodlands Financing which took place in 2024, $155,000 from the Silvana Oaks financing which took place in 2023 and $91,000 due to an increased interest rate on our junior subordinated notes. The increase was offset by a $208,000 decrease in credit facility interest expense as we did not use the facility in 2024 and a $169,000 decrease due to reduced mortgage balances from amortization.

General and administrative. The components of the increase include:

•$319,000 increase in non-cash restricted stock amortization, including $171,000 due to the higher price of the restricted stock awarded in 2024 in comparison to awards granted in prior years, and $147,000 due to the accelerated vesting of restricted stock awards of Ryan Baltimore, our former chief operating officer, who resigned in December 2024 to pursue another employment opportunity; and

• $223,000 in cash compensation costs due to higher levels of compensation.

The increase was offset by a:

•$169,000 due to reduced amortization associated with RSUs that vest upon satisfaction of performance metrics based on adjusted funds from operations, as we do not currently anticipate achieving the minimum level required for the vesting of such awards;

•$120,000 related to the reversal of a non-cash amortization expense on restricted stock awards forfeited by Mr. Baltimore;

•$120,000 decrease due to a reduction in our investor relations activities; and

•$127,000 decrease due primarily to the inclusion, in 2023, of the write off of a deposit related to a terminated transaction.

Provision for credit loss

In 2024, we recorded a non-cash provision of $270,000 related to the preferred equity investments. There was no comparable expense in 2023.

Depreciation and amortization

The change is due primarily to the decrease 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 $649,000 to $1.6 million in the year ended December 31, 2024 from $2.3 million for the 2023. The components of the decline include:

•$712,000, representing our proportionate share of the net loss from Stono Oaks - Johns Island, SC ("Stono Oaks") which was in development through 2023, but which was placed in service in 2024. Accordingly, interest and certain other expenses (which prior to 2024 were capitalized) and depreciation, are now being expensed; and

•the inclusion, in 2023, of our $399,000 proportionate share of the net income from Chatham Court and Reflections, which was sold in May 2023 (the "Chatham Sale").

The decrease was offset primarily by:

• the inclusion, in 2023, of our $212,000 proportionate share of an early extinguishment of debt charge related to the Chatham Sale; and

•$170,000 primarily due to improved rental rates.

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Equity in earnings from sale of unconsolidated joint venture properties

In 2023, we recognized a gain of $14.7 million from the Chatham Sale. There was no corresponding gain in 2024.

Casualty loss ; Insurance recovery of casualty loss

In 2023, we settled a wrongful death action (the "Lawsuit") for $323,000. As noted in the paragraph immediately below, we were reimbursed for all of such expense by our insurance carriers.

During 2023, we received insurance proceeds (i) $470,000 as reimbursement for expenses incurred related to a winter storm in December 2022 and (ii) $323,000 in connection with the settlement of the Lawsuit.

Gain on sale of real estate

In 2024, we sold a cooperative apartment in NY for a sales price of approximately $1.1 million and a gain of $806,000. In 2023, we sold a cooperative apartment in New York for a sales price of $785,000 and a gain of $604,000.

(Benefit) provision for taxes

Income tax (benefit) provision for 2024 was ($226,000), a decrease from the $54,000 provision recorded in 2023. The benefit recorded in 2024 is the result of a $534,000 refund of Tennessee franchise tax received as a result of a change in Tennessee law offset by the 2024 estimated state tax expense of $318,000. The 2023 tax expense of $54,000 includes a reversal of a prior year over-accrual.

Comparison of Years Ended December 31, 2023 and 2022

As we are a smaller reporting company, this comparison is omitted in accordance with Instruction 1 to Item 303(a) of Regulation S-K.

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Funds from Operations; Adjusted Funds from Operations; Net Operating Income.

In view of our multi-family property activities, we disclose funds from operations ("FFO") ,adjusted funds from operations ("AFFO") and net operating income ("NOI") because we believe that such metrics are a widely recognized and appropriate measure of the performance of a multi-family REIT.

We compute FFO in accordance with the "White Paper on Funds From Operations" issued by the National Association of Real Estate Investment Trusts ("NAREIT") and NAREITs related guidance. FFO is defined in the White Paper as net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. In computing FFO, we do not add back to net income the amortization of costs in connection with our financing activities or depreciation of non-real estate assets.

We compute AFFO by adjusting FFO for loss on 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 does not provide guidelines for computing AFFO, the computation of AFFO may vary from one REIT to another.

We believe that FFO and AFFO are useful and standard supplemental measures of the operating performance for equity REITs and are used frequently by securities analysts, investors and other interested parties in evaluating equity REITs, many of which present FFO and AFFO when reporting their operating results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization of real estate assets, which assures that the value of real estate assets diminish predictability over time. In fact, real estate values have historically risen and fallen with market conditions. As a result, we believe that FFO and AFFO provide a performance measure that, when compared year-over-year, should reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs and other matters without the inclusion of depreciation and amortization, providing a perspective that may not be necessarily apparent from net income. We also consider FFO and AFFO to be useful to us in evaluating potential property acquisitions.

FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. FFO and AFFO should not be considered to be an alternative to net income as a reliable measure of our operating performance; nor should FFO and AFFO be considered an alternative to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.

FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization and capital improvements. FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP.

Management recognizes that there are limitations in the use of FFO and AFFO. In evaluating our performance, management is careful to examine GAAP measures such as net income (loss) and cash flows from operating, investing and financing activities. Management also reviews the reconciliation of net income (loss) to FFO and AFFO.

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The table below provides a reconciliation of net income determined in accordance with GAAP to FFO and AFFO for each of the indicated years (amounts in thousands):

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The table below provides a reconciliation of net income per common share (on a diluted basis) determined in accordance with GAAP to FFO and AFFO.

FFO for 2024 decreased $1.7 million, or 7%, to $20.9 million in 2024 from $22.6 million in 2023. Contributing to the decline was a:

•$1.7 million decrease in operating margins (i.e., revenues less real estate operating expenses) across our portfolio (i.e. consolidated and unconsolidated multi-family properties);

•$793,000 decrease due to the inclusion, in 2023, of an insurance recovery from a casualty loss at an unconsolidated joint venture;

•$586,000 increase in interest expense; and

•$240,000 decrease due to the inclusion, in 2023, of a gain on insurance proceeds

The decrease was offset by a:

•$1.0 million increase in straight line rent concessions, net of amortization;

•$309,000 increase in other income;

•$280,000 decline in income tax expense; and

•$212,000 decline due to the inclusion, in 2023, of early extinguishment of debt charges.

AFFO decreased $2.2 million or 7.6%, to $26.7 million in 2024 from $28.9 million in 2023. The decrease is primarily due to the factors impacting the changes in FFO other than the changes to: gain on insurance proceeds, net deferred concessions and early extinguishment of debt.

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See “—Comparison of Years Ended December 31, 2024 and 2023” for further information regarding these changes.

NOI is a non-GAAP measure of performance. NOI is used by our management and many investors to evaluate and compare the performance of our properties to other comparable properties, to determine trends at our properties and to determine the estimated fair value of our properties. The usefulness of NOI may be limited in that it does not take into account, among other things, general and administrative expense, interest expense, loss on extinguishment of debt, casualty losses, insurance recoveries and gains or losses as determined by GAAP. NOI is a property specific performance metric and does not measure our performance as a whole. Same store NOI reflects the operations of seven of our ten wholly-owned properties.

We compute NOI by adjusting net income (loss) to (a) add back (1) interest expense, (2) general and administrative expenses, (3) depreciation expense, (4) provision for credit loss, (5) provision for taxes, (6) loss on extinguishment of debt, (7) equity in earning (loss) of unconsolidated joint ventures, (8) casualty loss and (9) the impact of non-controlling interests, and (b) deduct (1) other income, (2) gain on sale of real estate, (3) equity in earnings from sale of consolidated joint venture properties, (4) insurance recovery of casualty loss and (5) gain on insurance recoveries. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe NOI provides an operating perspective not immediately apparent from GAAP operating income or net income (loss). NOI is one of the measures we use to evaluate our performance because it (i) measures the core operations of property performance by excluding corporate level expenses and other items unrelated to property operating performance and (ii) captures trends in rental housing and property operating expenses. However, NOI should only be used as an alternative measure of our financial performance.

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

_____________________________________

(1) Prior year amounts have been adjusted to reflect the current year composition to reflect only those properties that were same store for both the current

and the prior year.

In 2024, NOI decreased by $30,000 from 2023 primarily due to a $1.8 million increase in operating expenses and a $344,000 decrease due to reduced occupancy. This was offset by a $1.1 million increase in rental revenues (including a $112,000 increase due to the Yonkers' lease extension) and an $855,000 increase in deferred rent concessions. Same store NOI decreased $163,000 in 2024 from 2023 due to the factors impacting NOI, other than the Yonkers' lease extension. See "-Results

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of Operations -Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023" for a discussion of these changes.

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, pay dividends and repurchase shares of our common stock. Generally, in 2024, our primary sources of capital and liquidity were the operations of our multi-family properties (including distributions of $4.7 million from the operations of our unconsolidated joint ventures), $27.4 million from the Woodland Trails Financing, and our available cash. Excluding funds held at our unconsolidated subsidiaries, at December 31, 2024 and February 28, 2025, our available liquidity was approximately $67.9 million and $62.7 million, respectively, including $27.9 million and $22.7 million, respectively, of cash and cash equivalents, and subject to compliance with borrowing base and other requirements, up to $40 million available under our credit facility. A significant amount of our cash and cash equivalents is maintained at our properties for general working capital purposes.

We anticipate that for the four years beginning January 1, 2025, our operating expenses, $118.2 million of mortgage amortization and interest expense (including $42.4 million from unconsolidated joint ventures) and $317.2 million of balloon payments due with respect to mortgages maturing through 2028 (including $151.6 million from unconsolidated joint ventures), anticipated capital expenditures (for 2025 only) of an aggregate of $11.1 million for consolidated and unconsolidated properties, estimated cash dividend payments of at least $75.1 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.8 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), mortgage financings and re-financings, sales of properties, the issuance of additional equity and, if available, our $40 million credit facility. Our operating cash flow and available cash is insufficient to fully fund the $317.2 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 multi-family properties (including making alternative investments such as preferred equity investments), 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 and (iii) raise capital from the sale of our common stock. Further, if and to the extent we generate ordinary taxable income, we will be required to make distributions to stockholders to maintain our REIT status and as a result, will be limited in our ability to use gains, if any, from property sales, as a source of funds for operating expenses, debt service and property acquisitions.

Disclosure of Known Material Contractual Obligations

The following table sets forth as of December 31, 2024 our known material contractual obligations:

____________________________

(1) Reflects payments of principal (including amortization payments) and interest and excludes deferred costs. Includes all of the debt of unconsolidated joint ventures. See the following table for information regarding same. Assumes that the interest rate on the junior subordinated notes will be 6.85% per annum, which was the rate in effect at December 31, 2024.

(2) Assumes that $948,000 and $1.7 million will be paid annually through December 31, 2029 pursuant to the shared services agreement and for the Services, respectively. See "Item 1. Business—Our Structure."

(3) Assumes that approximately $4.0 million of property management fees will be paid annually to the property managers of our multi-family properties, including $1.4 million related to unconsolidated joint ventures. Such sum reflects the amount we anticipate paying in 2025 on the multi-family properties we own at December 31, 2024. These fees are typically charges based on a percentage of rental revenues from a property. No amount has been reflected as payable pursuant thereto after five years as such amount is not determinable.

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The following table sets forth as of December 31, 2024 information regarding the components of our long-term debt obligations:

___________________________

(1) Includes payments of principal (including amortization payments), and interest, and excludes deferred financing costs.

(2) Assumes that the interest rate on the junior subordinated notes will be 6.85% per annum and that no amounts are outstanding under the credit facility.

Corporate Level Financing Arrangements

Junior Subordinated Notes

As of December 31, 2024, $37.4 million (excluding deferred costs of $237,000) 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 term SOFR plus 226 basis points. At December 31, 2024 and 2023, the interest rate on these notes was 6.85% and 7.65%, respectively.

Credit Facility

Our credit facility with VNB New York, LLC, an affiliate of Valley National Bank (collectively, "VNB"), allows us to borrow, subject to compliance with borrowing base requirements and other conditions, up to $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); provided, that not more than $25 million may be used for Operating Expenses. The credit facility is secured by cash accounts maintained by us at VNB (and we are required to maintain substantially all of our bank accounts at VNB), and the pledge of our interests in the entities that own three unencumbered multi-family properties used in calculating the borrowing base. 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 at December 31, 2024 and February 28, 2025, was 6.96% and 6.83% respectively. There is an annual fee of 0.25% on the total amount committed by VNB and unused by us. The credit facility matures in September 2027. As of February 28, 2025, there was no balance outstanding and up to $40 million was available to be borrowed thereunder.

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

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

Other Financing Sources and Arrangements

At December 31, 2024, we are joint venture partners in unconsolidated joint ventures which own eight multi-family properties which distributed $4.4 million to us in 2024. We may be required to make capital contributions with respect to these properties. At December 31, 2024, our investment in these joint venture properties have a net equity carrying value of $31.3 million and are subject to mortgage debt, which is not reflected on our consolidated balance sheet, of $251.9 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. See note 6 to our consolidated financial statements.

At December 31, 2024, we had preferred equity investments in joint ventures that own multi-family properties. These joint ventures paid us $196,000 in 2024 and we anticipate that, subject to the underlying property generating sufficient cash flow,

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that such joint ventures will pay us of $1.2 million in 2025. At December 31, 2024, the carrying value of these investments was $17.7 million and these investments are subordinate to mortgage debt of $51.3 million, which debt is not reflected on our consolidated balance sheet.

See "Item 1. Business-Mortgage Debt" for information regarding our mortgage debt at consolidated and unconsolidated subsidiaries.

Inflation

Substantially all of our multi-family property leases are for periods of one-year or less. The short-term nature of these leases generally serves to reduce our risk to adverse effects of inflation on our revenue. During 2024, we continued to experience inflationary pressures that drove higher operating expenses, primarily in personnel, repairs and maintenance, insurance and real estate taxes; such increases may continue in 2025 and thereafter, which would adversely affect our operating results.

Inflation affects the overall cost of our debt. We mitigate the risks presented by inflation through the use of long-term fixed interest rate debt and interest rate hedges and by paying down, when we deem appropriate, our credit facility debt. However, increasing interest rates, which generally correlates to increasing inflation, increases the interest expense on our junior subordinated notes and makes it less attractive to obtain mortgage debt (including the refinancing of an aggregate of $130.4 million of mortgage debt (including $60.8 million of mortgage debt at unconsolidated joint ventures, that matures in 2026) or use our credit facility in connection with acquisition and value add activities.

Cash Distribution Policy

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. Accordingly, we must, among other things, meet a number of organizational and operational requirements, including a requirement that we distribute currently at least 90% of our ordinary taxable income to our stockholders. It is our current intention to comply with these requirements and maintain our REIT status. As a REIT, we generally will not be subject to corporate federal, state or local income taxes on taxable income we distribute currently (in accordance with the Internal Revenue Code and applicable regulations) to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal, state and local income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent tax years. Even if we qualify for federal taxation as a REIT, we may be subject to certain state and local taxes on our income and to federal income taxes on our undistributed taxable income (i.e., taxable income not distributed in the amounts and in the time frames prescribed by the Internal Revenue Code and applicable regulations thereunder) and are subject to Federal excise taxes on our undistributed taxable income.

It is our intention to pay to our stockholders within the time periods prescribed by the Internal Revenue Code no less than 90%, and, if possible, 100% of our annual taxable income, including taxable gains from the sale of real estate. It will continue to be our policy to make sufficient distributions to stockholders in order for us to maintain our REIT status under the Internal Revenue Code.

We anticipate that if we do not sell any multi-family properties this year, that a significant amount of the dividends we will pay in 2025 will be treated for federal income tax purposes as a return of capital.

Our board of directors will continue to evaluate, on a quarterly basis, the amount of dividend payments based on its assessment of, among other things, our short and long-term cash and liquidity requirements, prospects, debt maturities, net income, funds from operations, and adjusted funds from operations.

Critical Accounting Estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions.

We base our estimates on historical experience, current trends and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could materially differ from any of our estimates under different assumptions or conditions. Our significant accounting policies are discussed in Note 1 of our consolidated financial statements in this report. We believe the accounting estimates listed below are the most critical to aid in

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fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Equity method investments

We report our investments in unconsolidated entities, over whose operating and financial policies we do not control, under the equity method of accounting. Under this method of accounting, our pro rata share of the applicable entity's earnings or losses is included in our consolidated statements of operations. We initially record our investments based on either the carrying value for properties contributed or the cash invested.

We evaluate our equity-method investments for impairment whenever events or changes in circumstances indicate that the carrying value of our investments may exceed the fair value. If it is determined that a decline in the fair value of our investments is not temporary, and if such reduced fair value is below its carrying value, an impairment is recorded. Determining fair value involves significant judgment. Our estimates consider available evidence including the present value of the expected future cash flows discounted at market rates, general economic conditions and other relevant factors.

Carrying Value of Real Estate Portfolio

We conduct a quarterly review of each real estate asset owned by us and through our joint ventures. This review is conducted in order to determine if indicators of impairment are present on the real estate.

In reviewing the value of the real estate assets owned, if there is an indicator of impairment and the carrying value of the real estate asset is determined to be unrecoverable, we seek to arrive at the fair value of each real estate asset by using one or more valuation techniques, such as comparable sales, discounted cash flow analysis or replacement cost analysis. A real estate asset is considered to be unrecoverable when an analysis suggests that the undiscounted cash flows to be generated by the property will be insufficient to recover our investment. Any impairment taken with respect to our real estate assets reduces our net income, assets and stockholders' equity to the extent of the amount of the allowance, but it will not affect our cash flow until such time as the property is sold.

Allowance for credit losses

We estimate the allowance for credit losses in accordance with the Current Expected Credit Loss (CECL) model under Accounting Standards Codification ("ASC") Topic 326. This model requires us to estimate expected lifetime credit losses for our loan portfolio (i.e., our preferred equity investments) by considering historical loss experience, current economic conditions, and reasonable and supportable forecasts of future economic trends. The estimate is highly subjective and involves significant judgment in the following areas:

•Historical Loss Data: We segment our loan portfolio based on risk characteristics such as borrower type, loan term, and collateral. We will use historical loss experience when available, as a basis for expected credit losses.

•Macroeconomic Forecasts: We incorporate forward-looking macroeconomic indicators, such as GDP growth, unemployment rates, and interest rate trends, to adjust historical loss trends.

•Qualitative Adjustments: We apply management judgments to adjust the allowance for factors that may not be fully captured in the quantitative model, including changes in emerging risks such as regulatory, geopolitical, or credit risks.

•The estimate of expected credit losses is inherently uncertain and sensitive to changes in economic conditions. For example, a 100-basis-point increase in unemployment rates or a prolonged downturn in the real estate market could result in a higher allowance for credit losses, negatively impacting our financial results. Conversely, improvements in economic conditions could result in a lower allowance.

•We continually evaluate the adequacy of our allowance for credit losses and adjust it as necessary. However, actual losses may differ from our estimates due to unforeseen changes in economic conditions or borrower behavior.

Purchase Price Allocations

We allocate the purchase price of properties, including acquisition costs and assumed debt, when appropriate, to the tangible and identified intangible assets and liabilities acquired based on their relative fair values. In making estimates of fair values for purposes of allocating purchase price, we use a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. We also consider information obtained about each

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property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.

Equity-Based Compensation

We grant shares of restricted stock and restricted stock units ("RSUs") to eligible plan participants, subject to the recipient's continued service over a specified period and, with respect to the RSUs, the satisfaction of specified conditions over a specified period. A portion of the RSUs vest based upon satisfaction of specified metrics with respect to (i) total stockholder return(“TSR Awards”) and (ii) adjusted funds from operations(“AFFO Awards”), in each case as calculated pursuant to the applicable award agreement. We account for the restricted stock awards and RSUs in accordance with ASC 718, Compensation - Stock Compensation, which requires that such compensation be recognized in the financial statements based on its estimated grant-date fair value. The value of such awards is recognized as compensation expense in general and administrative expenses in the accompanying consolidated statements of operations over the applicable service periods. Grant date fair value is determined with respect to the (i) the restricted stock awards, by the closing stock price on the date of grant, (ii) TSR Awards, by using a Monte Carlo simulation relying upon various assumptions and (iii) AFFO Awards, by using the closing stock price on the grant date, subject to quarterly adjustment based upon management’s subjective projections as to the achievability of the specified metrics related to the AFFO Awards; changes in the projections related to the AFFO awards may have a significant impact on the expense we recognize on such awards. See Note 11 to our consolidated financial statements.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are an internally managed real estate investment trust, also known as a REIT, that owns, operates and to a lesser extent holds interest in joint ventures that own and operate multi family properties. At December 31, 2023, we: (i) wholly-own 21 multi-family properties with an aggregate of 5,420 units and a carrying value of $634.0 million, (ii) have ownership interests, through unconsolidated entities, in seven multi-family properties with an aggregate of 2,287 units, with a carrying value of $30.4 million and (iii) own other assets, through consolidated and unconsolidated entities, with a carrying value of $5.6 million. The 28 multi-family properties are located in 11 states; primarily in the Southeast United States and Texas.

During 2023:

•The unconsolidated joint venture that owned Chatham Court and Reflections, a 494 unit multi-family property located in Dallas, TX, and in which we had a 50% interest, sold such property. Our share of the (i) gain from this sale was $14.7 million, (ii) the related early extinguishment of debt charge was $212,000, and (iii) proceeds from the sale were $19.4 million. In 2023 and 2022, this property accounted for $54,000 and $753,000, respectively, of equity in earnings from unconsolidated joint ventures.

•We paid off our credit facility debt of $19.0 million - we accomplished this by using the proceeds of new mortgage debt of $21.2 million placed on our Silvana Oaks - North Charleston, SC multi-family property; such mortgage debt matures in March 2033, bears an interest rate of 4.45% and is interest only for the term of the mortgage.

•We repurchased 779,423 shares of our common stock for an aggregate purchase price of approximately $14.4 million (i.e., an average price per share of $18.47).

•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”), which converted the Facility's interest rate to one-month term SOFR plus 250 basis points, and increased the interest rate floor to 6%. Immediately prior to the amendment, the interest rate on the facility was 8.5%; immediately thereafter, the interest rate was 7.82%

From January 1, 2024 through March 1, 2024, we purchased 123,061 shares of our common stock for an aggregate purchase price of approximately $2.3 million (i.e., an average price of $18.43per share).

Challenges and Uncertainties as a Result of the Volatile Economic Environment; Impact of Development Property

During the past two years, there has been a significant economic uncertainty due, among other things, to volatile interest rates and the challenges presented by an inflationary/potential recessionary environment. Due to this uncertainty and our belief that pricing for acquisition opportunities did not appropriately reflect market conditions, we were especially cautious in pursuing acquisition opportunities in 2023 and may continue to be cautious in pursuing such opportunities in the near future. Further, the competitive environment in several of our markets as well as anticipated expense increases create uncertainty as to our ability to improve income from continuing operations.

We have a 17.45% interest in a 240-unit development property located in Johns Island, SC. As of December 31, 2023, this project is substantially complete and lease-up has begun. We estimate that for 2024, we will record approximately $350,000 to $500,000 of equity in loss from unconsolidated ventures related to this property because the venture will begin recognizing revenue and expenses (and in particular depreciation and interest which had been capitalized during the development phase).

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Results of Operations

Comparison of Years Ended December 31, 2023 and 2022

The term "same store properties" refers to ten multi-family properties with an aggregate of 2,576 units that were owned for all of 2023 and 2022. The term "unconsolidated same store properties" with an aggregate of 2,287 units refers to seven properties that were owned for all of 2023 and 2022. As used in the comparison of the year ended December 31, 2023 and 2022, the term "Partner Buyouts" refers to our purchase in 2022 of the interests of our joint venture partners at 11 properties.

Revenues

The following table compares our revenues for the years indicated:

Rental and other revenue from real estate properties.  The components of the increase include:

•$20.8 million from the Partner Buyouts; and

•$2.6 million from same store properties, substantially all of which is due to higher average rental rates.

Offsetting the increase is a $1.0 million decrease due to a decline in occupancy from 96.4% to 93.6% at same store properties, including $343,000 at Bells Bluff-West Nashville, TN, which experienced a decline in occupancy due to increased supply in the market and change in demand for certain unit types.

Other Income

The increase is due primarily to increased earnings on our cash balances due to higher interest rates.

Expenses

The following table compares our expenses for the periods indicated:

Real estate operating expenses.  The components of the increase include:

•$9.4 million from the Partner Buyouts; and

•$1.8 million from same store properties, including:

–$880,000 due to the master insurance program implemented in December 2022 and increases in insurance costs overall.;

–$295,000 in real estate taxes due to increases primarily at four properties; and

–general cost increases, including $228,000 in property level payroll costs, $201,000 in utilities costs and $211,000 across other expense categories.

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Interest expense

The components of the increase include:

•$5.2 million due to the Partner Buyouts;

•$1.3 million due to the increase in the interest rate on our floating rate junior subordinated notes; and

•$372,000 of interest expense on the Silvana Oaks mortgage which was obtained in February 2023.

The increase was offset by a $139,000 decrease in interest expense on our credit facility primarily due to the payoff of the facility in February 2023 in connection with the receipt of proceeds from the Silvana Oaks mortgage.

General and administrative.

The components of the increase include:

•$379,000 due to the amortization expense 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 restricted stock granted in 2018); and

•$232,000 of cash compensation and related payroll expense due to higher levels of compensation and increased employee headcount.

Depreciation and amortization

The increase is due $5.8 million from the Partner Buyouts, offset by a $2.1 million decrease due to reduced depreciation related to lease intangibles resulting from such buyouts.

Equity in earnings (loss) of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties.

Please see a detailed explanation of these categories in the next section entitled "Unconsolidated Joint Ventures - Results of Operations".

Casualty loss

During the year ended December 31, 2023, we settled the Takakura Lawsuit for $323,000. During the year ended December 31, 2022, we settled a personal injury lawsuit for $850,000

Insurance recovery of casualty loss

During 2023, we received insurance proceeds of (i) $323,000 in connection with the settlement of the Takakura Lawsuit and (ii) $470,000 as reimbursement for expenses incurred related to a winter storm in December 2022. During 2022, we received $850,000 in insurance proceeds upon the settlement of a personal injury lawsuit.

Gain on Sale of Real Estate

In 2023, we sold a cooperative apartment in New York for a sales price of $785,000 and recognized a gain of $604,000.

Loss on extinguishment of debt

In 2022, we incurred $563,000 of loss on extinguishment of debt related to the mortgage refinancing affected in connection with the buyout of our joint venture partner's interest in Brixworth at Bridge Street - Huntsville, AL.

Income tax provision

Income tax provision in the year ended December 31, 2023, decreased $767,000 (i.e., from $821,000 in 2022 to $54,000 in 2023). The decrease reflects the inclusion, in 2022 of increased tax provision related to gains from the sale of properties by several joint ventures and the reversal, in 2023, of approximately $200,000 due to the over-accrual of taxes.

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Unconsolidated Joint Ventures - Results of Operations.

Equity in (loss) earnings of unconsolidated joint ventures

The table below reflects the condensed income statements of our unconsolidated properties included in note 6 of our consolidated financial statements. In accordance with US generally accepted accounting principles, each of the line items in the chart below is presented as if these properties are wholly owned by us, although as reflected under " Item 1. Business - Our Multi- Family Properties", our equity interests in these properties range from 32% to 80% (dollars in thousands):

Set forth below is on explanation of the most significant changes in the components of the equity in earnings of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties. Same store properties at Unconsolidated Properties represent seven properties that were owned for the entirety of the periods being compared.

Rental revenue from unconsolidated joint ventures

The decrease is due to:

•$18.4 million from the Partner Buyouts;

•$7.5 million primarily from the sale, in 2022, of Verandas at Shavano-San Antonio, TX, Cinco Ranch-Katy, TX, Vive at Kellswater-Kannapolis, NC and Water's Edge-Columbia, SC (collectively, the "2022 Sales"); and

•$4.4 million from the Chatham Sale.

The decrease was offset by a $2.7 million increase in rental revenue from unconsolidated same store properties, primarily due an increase in rental rates offset by a $729,000 decrease due to reduced occupancy.

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Real estate operating expenses from unconsolidated joint ventures

The components of the decrease include:

•$7.8 million from the Partner Buyouts;

•$4.2 million from the 2022 Sales;

•$1.8 million from the Chatham Sale.

The decrease was offset by an aggregate $1.2 million increase in such expenses including increases of $279,000 in utility costs, $260,000 in insurance costs, $245,000 in payroll and leasing commissions, and $191,000 in real estate taxes.

Interest expense from unconsolidated joint ventures.

The components of the decrease are:

•$4.5 million due to the Partner Buyouts;

•$1.8 million from the 2022 Sales; and

•$631,000 from the Chatham Sale.

Depreciation from unconsolidated joint ventures.

The components of the decrease are:

•$5.1 million due to the Partner Buyouts;

•$1.2 million from the 2022 Sales; and

•$878,000 from the Chatham Sale.

Impairment of assets from unconsolidated joint ventures. During 2022, the venture recognized $8.6 million of impairment charges related to a fire at Stono Oaks, a development project located in Johns Island, SC.

Insurance recoveries from unconsolidated joint ventures. During 2022, the venture recognized $8.6 million of insurance recoveries related to the Stono Oaks fire.

Gain on insurance recoveries from unconsolidated joint ventures

During 2022, we recognized $567,000 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

During 2023, we recognized a gain on the sale of real estate of $38.4 million from the Chatham Sale. During 2022, we recognized gains on the sale of real estate of $118.3 million from the 2022 Sales.

Loss on extinguishment of debt from unconsolidated joint ventures

During 2023 and 2022, we recognized loss on the early extinguishment of debt in connection with the Chatham Sale and the 2022 Sales, respectively.

Comparison of Years Ended December 31, 2022 and 2021

As we are a smaller reporting company, this comparison is omitted in accordance with Instruction 1 to Item 303(a) of Regulation S-K.

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Funds from Operations; Adjusted Funds from Operations; Net Operating Income.

In view of our multi-family property activities, we disclose funds from operations ("FFO") ,adjusted funds from operations ("AFFO") and net operating income ("NOI") because we believe that such metrics are a widely recognized and appropriate measure of the performance of a multi-family REIT.

We compute FFO in accordance with the "White Paper on Funds From Operations" issued by the National Association of Real Estate Investment Trusts ("NAREIT") and NAREIT's related guidance. FFO is defined in the White Paper as net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. In computing FFO, we do not add back to net income the amortization of costs in connection with our financing activities or depreciation of non-real estate assets.

We compute AFFO by adjusting FFO for loss on 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 does not provide guidelines for computing AFFO, the computation of AFFO may vary from one REIT to another.

We believe that FFO and AFFO are useful and standard supplemental measures of the operating performance for equity REITs and are used frequently by securities analysts, investors and other interested parties in evaluating equity REITs, many of which present FFO and AFFO when reporting their operating results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization of real estate assets, which assures that the value of real estate assets diminish predictability over time. In fact, real estate values have historically risen and fallen with market conditions. As a result, we believe that FFO and AFFO provide a performance measure that, when compared year-over-year, should reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs and other matters without the inclusion of depreciation and amortization, providing a perspective that may not be necessarily apparent from net income. We also consider FFO and AFFO to be useful to us in evaluating potential property acquisitions.

FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. FFO and AFFO should not be considered to be an alternative to net income as a reliable measure of our operating performance; nor should FFO and AFFO be considered an alternative to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.

FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization and capital improvements. FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP.

Management recognizes that there are limitations in the use of FFO and AFFO. In evaluating our performance, management is careful to examine GAAP measures such as net income (loss) and cash flows from operating, investing and financing activities. Management also reviews the reconciliation of net income (loss) to FFO and AFFO.

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The table below provides a reconciliation of net income determined in accordance with GAAP to FFO and AFFO for each of the indicated years (amounts in thousands):

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The table below provides a reconciliation of net income per common share (on a diluted basis) determined in accordance with GAAP to FFO and AFFO.

FFO for 2023 decreased $626,000, or 2.7%, to $22.6 million from $23.2 million in 2022. Contributing to the change was a:

• $1.5 million decrease in insurance recovery from a casualty loss at an unconsolidated joint venture;

• $1.2 million increase in interest expense (including $465,000 of amortization of mortgage fair value costs);

• $499,000 increase in general and administrative expense (excluding non cash-amortization of restricted stock

and RSU expense); and

• $402,000 decrease in gains from insurance proceeds.

The decrease was offset by a:

• $2.2 million decrease in early extinguishment of debt;

• $767,000 decrease in income tax expense; and

• $536,000 increase in other income.

AFFO increased $514,000 or 1.8%, to $28.9 million in 2023 from $28.4 million in 2022. Contributing to this increase was a:

• $767,000 decrease in income tax expense;

• $536,000 increase in other income; and

• $470,000 of insurance recoveries

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The increase was offset by a:

• $725,000 increase in interest expense; and

• $499,000 increase in general and administrative expense .

See “—Comparison of Years Ended December 31, 2023 and 2022” for further information regarding these changes.

NOI is a non-GAAP measure of performance. NOI is used by our management and many investors to evaluate and compare the performance of our properties to other comparable properties, to determine trends at our properties and to determine the estimated fair value of our properties. The usefulness of NOI may be limited in that it does not take into account, among other things, general and administrative expense, interest expense, loss on extinguishment of debt, casualty losses, insurance recoveries and gains or losses as determined by GAAP. NOI is a property specific performance metric and does not measure our performance as a whole. Same store NOI reflects the operations of seven of our ten wholly-owned properties.

We compute NOI by adjusting net income (loss) to (a) add back (1) interest expense, (2) general and administrative expenses, (3) depreciation expense, (4) impairment charges, (5) provision for taxes, (6) loss on extinguishment of debt, (7) equity in loss of unconsolidated joint ventures, (8) casualty loss and (9) the impact of non-controlling interests, and (b) deduct (1) other income, (2) gain on sale of real estate (3) gain on sale of partnership interest, (4) equity in earnings from sale of consolidated joint venture properties, (5) insurance recovery of casualty loss and (6) gain on insurance recoveries. Other REIT’s may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REIT’s. We believe NOI provides an operating perspective not immediately apparent from GAAP operating income or net income (loss). NOI is one of the measures we use to evaluate our performance because it (i) measures the core operations of property performance by excluding corporate level expenses and other items unrelated to property operating performance and (ii) captures trends in rental housing and property operating expenses. However, NOI should only be used as an alternative measure of our financial performance.

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

_____________________________________

(1) Prior year amounts have been adjusted to reflect the current year composition to reflect only those properties that were same store for both the current

and the prior year.

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In 2023, NOI increased by $11.3 million from 2022 primarily due to a $20.8 million increase in rental revenues resulting from the Partner Buyouts. The increase was offset by a $9.4 million increase, primarily due to the Partner Buyouts, in real estate operating expenses. Same store NOI remained flat in 2023 from 2022 due to a $1.8 million increase in rental revenues (and in particular, the increase in average rental rates) offset by a $1.8 million increase in real estate operating expenses. See "-Results of Operations - Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022" for a discussion of these changes.

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, pay dividends and repurchase shares of our common stock. Generally, in 2023, our primary sources of capital and liquidity were the operations of our multi-family properties (including distributions of $6.3 million from the operations of our unconsolidated joint ventures), our $19.4 million share of the net proceeds from the Chatham Sale, and our available cash. Excluding funds held at our unconsolidated subsidiaries, at December 31, 2023 and March 1, 2024, our available liquidity was approximately $83.5 million and $81.2 million, respectively, including $23.5 million and $21.2 million, respectively, of cash and cash equivalents, and subject to compliance with borrowing base and other requirements, up to $60 million and $60 million, respectively, available under our credit facility. A significant amount of our cash and cash equivalents is maintained at our properties for general working capital purposes.

We anticipate that for the four years beginning January 1, 2024, our operating expenses, $127.8 million of mortgage amortization and interest expense (including $50.4 million from unconsolidated joint ventures) and $204.4 million of balloon payments due with respect to mortgages maturing through 2027 (including $76.7 million from unconsolidated joint ventures), anticipated capital expenditures (for 2024 only) of $10.1 million for both consolidated and unconsolidated properties (including an estimated $2.7 million for our value add program), estimated cash dividend payments of at least $74.0 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.5 million shares outstanding) will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), mortgage financings and re-financings, sales of properties, the issuance of additional equity and, if available, our $60 million credit facility. Our operating cash flow and available cash is insufficient to fully fund the $204.4 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 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 and (iii) raise capital from the sale of our common stock. Further, if and to the extent we generate ordinary taxable income, we will be required to make distributions to stockholders to maintain our REIT status and as a result, will be limited in our ability to use gains, if any, from property sales, as a source of funds for operating expenses, debt service and property acquisitions.

Disclosure of Known Material Contractual Obligations

The following table sets forth as of December 31, 2023 our known material contractual obligations:

____________________________

(1) Reflects payments of principal (including amortization payments) and interest and excludes deferred costs. Includes all of the debt of unconsolidated joint ventures. See the following table for information regarding same. Assumes that the interest rate on the junior subordinated notes will be 7.65% per annum , which was the rate in effect at December 31, 2023.

(2) Assumes that $966,000 will be paid annually for the next five years pursuant to the shared services agreement and $1.6 million will be paid annually through December 31, 2027 for the Services. See "Item 1. Business—Our Structure."

(3) Assumes that approximately $2.5 million of property management fees will be paid annually to the property managers of our multi-family properties, including $1.5 million related to unconsolidated joint ventures. Such sum reflects the amount we anticipate paying in 2024 on the multi-family properties we own at December 31, 2023. These fees are typically charges based on a percentage of rental revenues from a property. No amount has been reflected as payable pursuant thereto after five years as such amount is not determinable. Excludes $10.1 million of anticipated capital expenditures in 2024,including $2.7 million in connection with our value add program. Such expenditures subsequent to 2024 are not determinable.

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The following table sets forth as of December 31, 2023 information regarding the components of our long-term debt obligations:

___________________________

(1) Includes payments of principal (including amortization payments), and interest and excludes deferred financing costs.

(2) Assumes that the interest rate on the junior subordinated notes will be 7.65% per annum.

Corporate Level Financing Arrangements

Junior Subordinated Notes

As of December 31, 2023, $37.4 million (excluding deferred costs of $257,000) 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 term SOFR plus 226 basis points. At December 31, 2023 and 2022, the interest rate on these notes was 7.65% and 6.41%, respectively.

Credit Facility

Our credit facility with VNB New York, LLC, an affiliate of Valley National Bank (collectively, "VNB"), allows us to borrow, subject to compliance with borrowing base requirements and other conditions, up to $60 million, (i) for the acquisition of, and investment in, multi-family properties, (ii) to repay mortgage debt secured by multi-family properties and (iii) for Operating Expenses (i.e., working capital (including dividend payments) and operating expenses); provided, that not more than $25 million may be used for Operating Expenses. The credit facility is secured by cash accounts maintained by us at VNB (and we are required to maintain substantially all of our bank accounts at VNB), and the pledge of our interests in the entities that own three unencumbered multi-family properties used in calculating the borrowing base. 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 at December 31, 2023 and March 1, 2024, was 7.85% and 7.82% respectively. There is an annual fee of 0.25% on the total amount committed by VNB and unused by us. The credit facility matures in September 2025. As of March 1, 2024, there was no balance outstanding and up to $60 million was 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.

As of December 31, 2023, we were in compliance in all material respects with the requirements of the facility.

Other Financing Sources and Arrangements

At December 31, 2023, we are joint venture partners in unconsolidated joint ventures which own seven multi-family properties which distributed $5.2 million to us in 2023. We may be required to make capital contributions with respect to these properties. At December 31, 2023, our investment in these joint venture properties have a net equity carrying value of $30.4 million and are subject to mortgage debt, which is not reflected on our consolidated balance sheet, of $247.0 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. See note 6 to our consolidated financial statements.

See Item 1. "Business-Mortgage Debt" for information regarding our mortgage debt at consolidated and unconsolidated subsidiaries.

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Inflation

Substantially all of our multi-family property leases are for periods of one-year or less. The short-term nature of these leases generally serves to reduce our risk to adverse effects of inflation on our revenue. During 2023, we experienced inflationary pressures that drove higher operating expenses, primarily in personnel, repairs and maintenance, insurance and real estate taxes; such increases may continue in 2024 and thereafter, which would adversely affect our operating results.

Inflation affects the overall cost of our debt. We mitigate the risks presented by inflation through the use of long-term fixed interest rate debt and interest rate hedges and by paying down, when we deem appropriate, our credit facility debt. However, increasing interest rates, which generally correlates to increasing inflation, increases the interest expense on our junior subordinated notes and may make it less attractive to obtain mortgage debt or use our credit facility in connection with acquisition, refinancing and value add activities.

Cash Distribution Policy

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. Accordingly, we must, among other things, meet a number of organizational and operational requirements, including a requirement that we distribute currently at least 90% of our ordinary taxable income to our stockholders. It is our current intention to comply with these requirements and maintain our REIT status. As a REIT, we generally will not be subject to corporate federal, state or local income taxes on taxable income we distribute currently (in accordance with the Internal Revenue Code and applicable regulations) to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal, state and local income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent tax years. Even if we qualify for federal taxation as a REIT, we may be subject to certain state and local taxes on our income and to federal income taxes on our undistributed taxable income (i.e., taxable income not distributed in the amounts and in the time frames prescribed by the Internal Revenue Code and applicable regulations thereunder) and are subject to Federal excise taxes on our undistributed taxable income.

It is our intention to pay to our stockholders within the time periods prescribed by the Internal Revenue Code no less than 90%, and, if possible, 100% of our annual taxable income, including taxable gains from the sale of real estate. It will continue to be our policy to make sufficient distributions to stockholders in order for us to maintain our REIT status under the Internal Revenue Code.

We anticipate that if we do not sell any multi-family properties this year, that a significant amount of the dividends we will pay in 2024 will be treated for federal income tax purposes as a return of capital.

Our board of directors will continue to evaluate, on a quarterly basis, the amount of dividend payments based on its assessment of, among other things, our short and long-term cash and liquidity requirements, prospects, debt maturities, net income, funds from operations, and adjusted funds from operations.

Critical Accounting Estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions.

We base our estimates on historical experience, current trends and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could materially differ from any of our estimates under different assumptions or conditions. Our significant accounting policies are discussed in Note 1 of our consolidated financial statements in this report. We believe the accounting estimates listed below are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Equity method investments

We report our investments in unconsolidated entities, over whose operating and financial policies we do not control, under the equity method of accounting. Under this method of accounting, our pro rata share of the applicable entity's earnings or losses is included in our consolidated statements of operations. We initially record our investments based on either the carrying value for properties contributed or the cash invested.

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We evaluate our equity-method investments for impairment whenever events or changes in circumstances indicate that the carrying value of our investments may exceed the fair value. If it is determined that a decline in the fair value of our investments is not temporary, and if such reduced fair value is below its carrying value, an impairment is recorded. Determining fair value involves significant judgment. Our estimates consider available evidence including the present value of the expected future cash flows discounted at market rates, general economic conditions and other relevant factors.

Carrying Value of Real Estate Portfolio

We conduct a quarterly review of each real estate asset owned by us and through our joint ventures. This review is conducted in order to determine if indicators of impairment are present on the real estate.

In reviewing the value of the real estate assets owned, if there is an indicator of impairment and the carrying value of the real estate asset is determined to be unrecoverable, we seek to arrive at the fair value of each real estate asset by using one or more valuation techniques, such as comparable sales, discounted cash flow analysis or replacement cost analysis. A real estate asset is considered to be unrecoverable when an analysis suggests that the undiscounted cash flows to be generated by the property will be insufficient to recover our investment. Any impairment taken with respect to our real estate assets reduces our net income, assets and stockholders' equity to the extent of the amount of the allowance, but it will not affect our cash flow until such time as the property is sold.

Purchase Price Allocations

We allocate the purchase price of properties, including acquisition costs and assumed debt, when appropriate, to the tangible and identified intangible assets and liabilities acquired based on their relative fair values. In making estimates of fair values for purposes of allocating purchase price, we use a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. We also consider information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.

Equity-Based Compensation

We grant shares of restricted stock and restricted stock units ("RSUs") to eligible plan participants, subject to the recipient's continued service over a specified period and, with respect to the RSUs, the satisfaction of specified conditions over a specified period. A portion of the RSUs vest based upon satisfaction of specified metrics with respect to (i) total stockholder return(“TSR Awards”) and (ii) adjusted funds from operations(“AFFO Awards”), in each case as calculated pursuant to the applicable award agreement. We account for the restricted stock awards and RSUs in accordance with ASC 718, Compensation - Stock Compensation, which requires that such compensation be recognized in the financial statements based on its estimated grant-date fair value. The value of such awards is recognized as compensation expense in general and administrative expenses in the accompanying consolidated statements of operations over the applicable service periods. Grant date fair value is determined with respect to the (i) the restricted stock awards, by the closing stock price on the date of grant, (ii) TSR Awards, by using a Monte Carlo simulation relying upon various assumptions and (iii) AFFO Awards, by using the closing stock price on the grant date, subject to quarterly adjustment based upon management’s projection as to the achievability of the specified metrics related to the AFFO Awards. See Note 9 to our consolidated financial statements.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are an internally managed real estate investment trust, also known as a REIT, that is focused on the ownership, operation and, to a lesser extent, development of multi-family properties. These properties may be wholly owned or owned by unconsolidated joint ventures in which we generally have contributed a significant portion of the equity. At December 31, 2022, we: (i) wholly-own 21 multi-family properties with an aggregate of 5,420 units and a carrying value of $649.7 million, (ii) have ownership interests, through unconsolidated entities, in eight multi-family properties with an aggregate of 2,781 units, for which the carrying value of our net equity investment therein is $39.1 million and (iii) own other assets, through consolidated and unconsolidated entities, with a carrying value of $5.4 million. The 29 multi-family properties are located in eleven states; most of these properties are located in the Southeast United States and Texas.

2022 and Recent Developments.

During 2022:

Partner Buyouts

We purchased the interests of our joint venture partners in ventures that owned 11 multi-family properties for an aggregate purchase price of $105.9 million (the "2022 Partner Buyouts"). As a result, these properties are wholly-owned and the accounts (including mortgage debt of approximately $236.6 million) and results of operations of these properties are included directly in our consolidated financial statements as of the applicable date of purchase. In 2022, (i) since the applicable Partner Buyout, these properties contributed in the aggregate $23.4 million in rental revenues, $10.2 million in operating expenses, $6.6 million in interest expense and $11.2 million in depreciation, and (ii) prior to the applicable Partner Buyout contributed an aggregate of $1.2 million in income from unconsolidated joint ventures. In 2023, we anticipate that these 11 properties will generate approximately $41.8 million in rental revenues, $18.0 million of real estate operating expense, $11.9 million in interest expense and $16.6 million in depreciation. These estimates for 2023 assume that rental income and real estate operating expense will remain at the same level in 2023 as in 2022 (although we anticipate that real estate operating expense will be higher in 2023 due to the master insurance program), and assumes an anticipated increases in 2023 from 2022 in interest expense due to a mortgage refinance that occured in May 2022 and depreciation as a result of the additional investments (i.e., the purchase price paid for the remaining interest) made in such properties. Since August, 2021, we completed the purchase of the remaining interests of our joint venture partners in 14 joint ventures including three partner buyouts completed in 2021 (the "2021 Partner Buyouts"; and together with the 2022 Partner Buyouts, the "Partner Buyouts").

Sales

We recorded an aggregate gain of $64.5 million from the sale by unconsolidated subsidiaries, in four separate transactions, of four multi-family properties, and our share of the related aggregate loss on extinguishment of debt was $1.9 million. During 2022 (through the applicable sales dates) and 2021, these properties contributed a loss of $1.6 million (including our share of the early extinguishment of debt charge related to these sales) and income of $201,000 respectively, of equity in earnings (loss) of unconsolidated joint ventures.

Financing; Other

We:

•entered into the Amendment to our Facility. 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.

•raised approximately $9.9 million of equity from the sale of 447,815 shares of our common stock pursuant to our at-the-market equity offering program.

•implemented, effective with the dividend declared in June 2022, an 8.7% per share increase in our quarterly cash dividends from the immediately preceding dividend payment, and declared dividends of an aggregate of $0.98 per share.

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•implemented a dividend reinvestment plan which allows our stockholders to purchase our common stock at a discount (currently 3.0% to the trading price) and which reduced our cash outlay for dividends paid in 2022 by $1.3 million.

•maintained an average occupancy rate of 95.9% across our portfolio of multi-family properties.

• began participating in a master insurance program which covers 17 wholly-owned properties comprising 4,316 units located in 10 states. Generally, the coverage limit is $100 million ($50 million for named hurricanes) per occurrence with a deductible of $100,000 for all other perils, and varying deductibles for, among other things, wind, flood, and earthquake damage. We also obtained, on a per occurrence per property basis, general liability and umbrella coverage of $1 million and $25 million, respectively.

•used our available cash to pay-off $14.5 million of 4.29% mortgage debt of Avalon Apartments - Pensacola, FL, a wholly owned property.

•used our credit facility in October 2022 to pay off $14.9 million of maturing mortgage debt at our Silvana Oaks-North Charleston, SC property.

In February 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 an interest rate of 4.45% and is interest only for the term of the mortgage. We used the net proceeds of such mortgage debt to fully pay down our credit facility.

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 $14.3 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.

In March 2023, the Company 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 BRT’s satisfaction, of its due diligence investigation, as well as the approval by the mortgage lender of the Company’s assumption of the mortgage debt. BRT anticipates that this transaction will be completed in the fourth quarter of 2023, although we can provide no assurance that this transaction will be completed.

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 and that if implemented, that it will be beneficial to us and our stockholders.

Results of Operations

Comparison of Years Ended December 31, 2022 and 2021

The term "same store properties" refers to seven multi-family properties with an aggregate of 1,608 units that were owned for all of 2022 and 2021. The term "unconsolidated same store properties" with an aggregate of 2,781 units refers to eight properties that were owned for all of 2022 and 2021.

Revenues

The following table compares our revenues for the years indicated:

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Rental and other revenue from real estate properties.    The components of the increase include:

•$37.1 million due to the revenues from the Partner Buyouts, including $13.7 million from the inclusion, for all of 2022, of the revenues from the 2021 Partner Buyouts; and

•$2.6 million from same store properties, substantially all of which is due to higher rental rates.

Offsetting the increase is a $1.2 million decrease due to the sale of the Kendall Manor Property - Houston, TX (the "Kendall Sale") in 2021 and a $191,000 decrease due to lower occupancy at same store properties.

Expenses

The following table compares our expenses for the periods indicated:

Real estate operating expenses.   The components of the increase include:

•$16.2 million from the Partner Buyouts, of which $6.0 million is from the inclusion, for all of 2022, of the expenses from the properties included in the 2021 Partner Buyouts; and

•$1.0 million from same store properties, including increases of $440,000 in repairs and maintenance and replacement costs, which includes turnover costs, $160,000 in payroll costs, $132,000 in insurance costs and $106,000 in utility expense.

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

We anticipate that these expenses will increase in 2023 because of our implementation of the Insurance Program, industry-wide increases in the cost of property insurance coverage and the impact of inflation.

Interest expense

The change is due to a:

•$9.6 million increase due to the Partner Buyouts, including $2.9 million from the inclusion, for all of 2022, of such expense from the properties included in the 2021 Partner Buyouts;

•$612,000 increase in interest expense on our credit facility, due to a $7.9 million increase in the average outstanding balance during 2022; and

•$592,000 due to the increase in the interest rate on our floating rate junior subordinated notes.

The increase was offset by a (i) $1.8 million decrease due to the payoff of $61.3 million of mortgage debt since August 2021 ($31.9 million in 2021 and $29.5 million in 2022) and (ii) $271,000 decrease due to the Kendall Sale.

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General and administrative.

The increase is due to a $1.5 million increase in non-cash compensation expense, including increases of:

•$890,000 due to increased amortization expense from RSUs, of which increases of (i) $510,000 reflects amortization expense related to RSU's granted in June 2022 and (ii) $380,000 reflects net amortization expense primarily related to the RSUs granted in 2021;

•$400,000 due to the amortization expense related to the restricted stock granted in January 2022 (as a result of the higher fair value of the shares granted in 2022 in comparison to the restricted stock granted in 2017); and

•$254,000 due to the inclusion, for all of 2022, of the amortization expense related to the restricted stock granted in June 2021.

Also contributing to the increase was a $461,000 increase due to higher levels of cash compensation.

The increase was offset by the inclusion, in 2021, of $114,000 of professional fees related primarily to a terminated stock offering.

Impairment charges

In 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 2022.

Depreciation and amortization

The increase is due $16.9 million of such expense from the Partner Buyouts, including $5.7 million from the inclusion, for all of 2022, of such expense from the properties included in the 2021 Partner Buyouts.

Gain on sale of real estate

In 2022, we recognized a gain of $6,000 on the sale of a vacant parcel of land in South Daytona Beach, FL. In 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.

Casualty loss / Insurance recovery of casualty loss

In 2022, we settled a personal injury lawsuit for $850,000. Our insurance carrier reimbursed us for this loss.

Gain on sale of partnership interest

In 2021, we sold our interest in a joint venture that owned Anatole Apartments - Daytona, Beach, FL and OPOP Towers and Lofts - St. Louis, MO (collectively, the Anatole/OPOP Sale) and recognized an aggregate gain of $2.6 million. There was no comparable gain in 2022.

Loss on extinguishment of debt

In 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 - Huntsville, AL. In 2021, we incurred $1.6 million of prepayment charges and deferred loan fee write-offs on the payoff of three first mortgage loans and three supplemental loans with an aggregate outstanding principal balance of $31.9 million and the refinance of a mortgage loan in connection with the purchase of the interests of our joint venture partners in Crestmont at Thornblade - Greenville, SC.

Income tax provision

In 2022, income tax provision increased to $821,000 from $206,000 in 2021 due to an increase in state level taxes accrued. The increase is the result of income generated by property sales in 2022 and the unavailability of net operating loss carryforwards available in certain states to offset such income.

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Unconsolidated Joint Ventures - Results of Operations.

Equity in (loss) earnings of unconsolidated joint ventures

The table below reflects the condensed income statements of our unconsolidated properties included in note 7 of our consolidated financial statements. In accordance with US generally accepted accounting principles, each of the line items in the chart below is presented as if these properties are wholly owned by us, although as reflected under " Item 1. Business - Our Multi- Family Properties", our equity interests in these properties range from 32% to 80% (dollars in thousands):

Rental revenue from unconsolidated joint ventures

The decrease is due to:

•$31.0 million from the Partner Buyouts, including $11.0 million from the 2021 Partner Buyouts;

•$10.3 million from the sale, in 2021, of The Avenue Apartments-Ocoee, FL and Parc at 980-Lawrenceville, GA (collectively, the "Avenue/Parc Sale");

•$9.3 million from the sale, in 2022, of Verandas at Shavano-San Antonio, TX, Cinco Ranch-Katy, TX, Vive at Kellswater-Kannapolis, NC and Water's Edge-Columbia, SC (collectively, the "Shavano/Cinco/Vive /Waters Edge sales"); and

•$3.2 million from the Anatole/OPOP Sale.

The decrease was offset by a $4.9 million increase in rental revenue from unconsolidated same store properties, primarily from an increase in rental rates.

Real estate operating expenses from unconsolidated joint ventures

The components of the decrease include:

•$14.0 million from the Partner Buyouts, including $5.2 million from the 2021 Partner Buyouts;

•$4.6 million due to the Avenue/Parc Sale;

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•$4.4 million from the Shavano/Cinco/Vive/Waters Edge sales; and

•$2.0 million from the Anatole/OPOP Sales.

The decrease was offset by a $1.5 million increase from unconsolidated same store properties, including increases of $417,000 in real estate taxes, $403,000 in utility costs, $258,000 in repairs, maintenance and replacement costs and $224,000 in payroll and leasing commissions.

Interest expense from unconsolidated joint ventures.

The components of the decrease are:

•$8.5 million due to the Partner Buyouts, including $2.7 million from the 2021 Partner Buyouts;

•$2.5 million due to the Avenue/Parc Sale;

•$2.3 million from the Shavono/Cinco/Vive/Waters Edge sales; and

•$1.3 million from the Anatole/OPOP Sales.

Depreciation from unconsolidated joint ventures.

The components of the decrease are:

•$10.3 million due to the Partner Buyouts, including $3.9 million from the 2021 Partner Buyouts ;

•$3.5 million from the Shavano/Cinco/Vive/Waters Edge sales;

•$2.4 million due to to the Avenue/Parc Sale; and

•$1.3 million from the Anatole/OPOP Sales.

Impairment of assets from unconsolidated joint ventures. During 2022, we recognized $8.6 million of impairment charges related to a fire at Stono Oaks, a development project located in Johns Island, SC. During 2021, we recognized $2.8 million of impairment charges related to the February 2021 Texas winter storm (the "Texas Storm").

Insurance recoveries from unconsolidated joint ventures. During 2022, we recognized $8.6 million of insurance recoveries related to the Stono Oaks fire. During 2021, we recognized $2.8 million of insurance recoveries related to the Texas Storm.

Gain on insurance recoveries from unconsolidated joint ventures. During 2022, we recognized $567,000 in gains from insurance recoveries at Vernadas at Alamo-San Antonio, TX and Woodlands-Boerne, TX. In 2021, we recognized $1.9 million in gains from insurance recoveries at two properties (i.e., Verandas at Shavano and Verandas at Alamo, both located in San Antonio, TX), that were damaged by the Texas Storm, and $325,000 from an insurance claim on Magnolia Pointe - Madison, AL, that sustained fire damage in a prior year. In each year, the gain represents the amounts received on insurance recoveries in excess of the assets previously written-off.

Gain on sale of real estate from unconsolidated joint ventures

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

Loss on early extinguishment of debt from unconsolidated joint ventures

The loss in 2022 is due to prepayment charges from the Shavano/Cinco/Vive/Waters Edge sales. The loss in 2021 is due to prepayment charges in connection with the payoff of the mortgages related to the Avenue/Parc Sale.

Comparison of Years Ended December 31, 2021 and 2020

As we are a smaller reporting company, this comparison is omitted in accordance with Instruction 1 to Item 303(a) of Regulation S-K.

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Funds from Operations; Adjusted Funds from Operations; Net Operating Income.

In view of our multi-family property activities, we disclose funds from operations ("FFO") ,adjusted funds from operations ("AFFO") and net operating income ("NOI") because we believe that such metrics are a widely recognized and appropriate measure of the performance of a multi-family REIT.

We compute FFO in accordance with the "White Paper on Funds From Operations" issued by the National Association of Real Estate Investment Trusts ("NAREIT") and NAREIT's related guidance. FFO is defined in the White Paper as net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. In computing FFO, we do not add back to net income the amortization of costs in connection with our financing activities or depreciation of non-real estate assets.

We compute AFFO by adjusting FFO for loss on 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 does not provide guidelines for computing AFFO, the computation of AFFO may vary from one REIT to another.

We believe that FFO and AFFO are useful and standard supplemental measures of the operating performance for equity REITs and are used frequently by securities analysts, investors and other interested parties in evaluating equity REITs, many of which present FFO and AFFO when reporting their operating results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization of real estate assets, which assures that the value of real estate assets diminish predictability over time. In fact, real estate values have historically risen and fallen with market conditions. As a result, we believe that FFO and AFFO provide a performance measure that, when compared year-over-year, should reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs and other matters without the inclusion of depreciation and amortization, providing a perspective that may not be necessarily apparent from net income. We also consider FFO and AFFO to be useful to us in evaluating potential property acquisitions.

FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. FFO and AFFO should not be considered to be an alternative to net income as a reliable measure of our operating performance; nor should FFO and AFFO be considered an alternative to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.

FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization and capital improvements. FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP.

Management recognizes that there are limitations in the use of FFO and AFFO. In evaluating our performance, management is careful to examine GAAP measures such as net income (loss) and cash flows from operating, investing and financing activities. Management also reviews the reconciliation of net income (loss) to FFO and AFFO.

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The table below provides a reconciliation of net income determined in accordance with GAAP to FFO and AFFO for each of the indicated years (amounts in thousands):

The table below provides a reconciliation of net income per common share (on a diluted basis) determined in accordance with GAAP to FFO and AFFO.

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FFO for 2022 increased $5.8 million, or 33%, to $23.2 million from $17.4 million in 2021. Contributing to the improvement were:

•an $8.2 million increase in our incremental share of the operating income due to the Partner Buyouts (the "Incremental Impact"), including $3.4 million from the inclusion, for all of 2022, of the Incremented Impact from the 2021 Partner Buyouts;

•a $3.7 million decrease in loss on extinguishment of debt;

•a $3.1 million increase due to improved operating margins across our portfolio;

•a $1.7 million decrease in interest expense; and

•an $850,000 increase in an insurance recovery from a casualty loss.

The increase was offset by:

•a $7.6 million decrease from the sale of properties (including interests in properties), in 2022 and 2021;

•a $2.0 million increase in General and administrative expense (including $1.5 million of non-cash compensation expense);

•a $701,000 decrease in insurance recoveries and gains from insurance proceeds; and

•an $615,000 increase in income tax provision.

AFFO increased $4.5 million, or 19%, to $28.4 million in 2022 from $23.8 million in 2021, due to factors contributing to the improvement in FFO, excluding the $3.7 million loss on extinguishment of debt, $1.5 million in non-cash compensation expense, and a net $701,000 relating to insurance recoveries and gains.

See “—Comparison of Years Ended December 31, 2022 and 2021” for further information regarding these changes.

Diluted per share FFO and AFFO were impacted in the year ended December 31, 2022 by an $846,000 increase in the weighted averages shares of common stock outstanding primarily due to stock issuances pursuant to our at-the-market offering and equity incentive programs.

NOI is a non-GAAP measure of performance. NOI is used by our management and many investors to evaluate and compare the performance of our properties to other comparable properties, to determine trends at our properties and to determine the estimated fair value of our properties. The usefulness of NOI may be limited in that it does not take into account, among other things, general and administrative expense, interest expense, loss on extinguishment of debt, casualty losses, insurance recoveries and gains or losses as determined by GAAP. NOI is a property specific performance metric and does not measure our performance as a whole. Same store NOI reflects the operations of seven of our ten wholly-owned properties.

We compute NOI by adjusting net income (loss) to (a) add back (1) interest expense, (2) general and administrative expenses, (3) depreciation expense, (4) impairment charges, (5) provision for taxes, (6) loss on extinguishment of debt, (7) equity in loss of unconsolidated joint ventures, (8) casualty loss and (9) the impact of non-controlling interests, and (b) deduct (1) other income, (2) gain on sale of real estate (3) gain on sale of partnership interest, (4) equity in earnings from sale of consolidated joint venture properties, (5) insurance recovery of casualty loss and (6) gain on insurance recoveries. Other REIT’s may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REIT’s. We believe NOI provides an operating perspective not immediately apparent from GAAP operating income or net income (loss). NOI is one of the measures we use to evaluate our performance because it (i) measures the core operations of property performance by excluding corporate level expenses and other items unrelated to property operating performance and (ii) captures trends in rental housing and property operating expenses. However, NOI should only be used as an alternative measure of our financial performance.

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

________________________

(1) Prior year amounts have been adjusted to reflect the current year composition to reflect only those properties that were same store for both the current

and the prior year.

In 2022, NOI increased by $22.1 million from 2021 primarily due to a $38.5 million increase in rental revenues resulting from the Partner Buyouts. The increase was offset by a $16.4 million increase, primarily due to the Partner Buyouts, in real estate operating expenses. Same store NOI increased in 2022 by $1.6 million from 2021 due to a $2.6 million increase in rental revenues (and in particular, the increase in average rental rates) offset by a $1.0 million increase in real estate operating expenses. See "-Results of Operations - Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021" for a discussion of these changes.

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, in 2022, our primary sources of capital and liquidity were the operations of our multi-family properties (including distributions of $10.9 million from the operations of our unconsolidated joint ventures and $80.2 million of distributions from sale transactions), $4.4 million from property sales owned by consolidated entities, net mortgage proceeds of $19.0 million from the refinancing of mortgage debt in connection with the 2022 Partner Buyouts, $9.9 million from the sale of our common stock through our at-the-market equity offering program, and our available cash. Excluding funds held at our unconsolidated subsidiaries, at December 31, 2022 and March 1, 2023, our available liquidity was approximately $ 61.3 million and $75.3 million, respectively, including $20.3 million and $15.3 million, respectively, of cash and cash equivalents, and subject to compliance with borrowing base and other requirements, up to $41.0 million and $60.0 million, respectively, available under our credit facility.

We anticipate that for the four years beginning January 1, 2023, our operating expenses, $133.9 million of mortgage amortization and interest expense (including $55.4 million from unconsolidated joint ventures) and $118.4 million of balloon payments due with respect to mortgages maturing through 2026, estimated capital expenditures ( for 2023 only) of $11.1

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million (including an estimated $3.6 million for our value add program), estimated cash dividend payments of at least $76.4 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), mortgage financings and re-financings, sales of properties, the issuance of additional equity and, if available as noted below, our $60 million credit facility. Our operating cash flow and available cash is insufficient to fully fund the $118.4 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. Further, if and to the extent we generate ordinary taxable income, we will be required to make distributions to stockholders to maintain our REIT status and as a result, will be limited in our ability to use gains, if any, from property sales, as a source of funds for operating expenses, debt service and property acquisitions.

Disclosure of Known Material Contractual Obligations

The following table sets forth as of December 31, 2022 our known material contractual obligations:

____________________________

(1) Reflects payments of principal (including amortization payments) and interest and excludes deferred costs. Includes all of the debt of unconsolidated joint ventures. See the following table for information regarding same. Assumes that the interest rate on the junior subordinated notes will be 6.41% per annum and the interest rate on the credit facility will be 7.50% per annun, which were the rates in effect at December 31, 2022.

(2) Assumes that $1.0 million will be paid annually for the next five years pursuant to the shared services agreement and $ 1.5 million will be paid annually through December 31, 2027 for the Services. See "Item 1. Business—Our Structure."

(3) Assumes that approximately $4.4 million of property management fees will be paid annually to the property managers of our multi-family properties, including $ 1.8 million related to unconsolidated joint ventures. Such sum reflects the amount we anticipate paying in 2023 on the multi-family properties we own at December 31, 2022. These fees are typically charges based on a percentage of rental revenues from a property. No amount has been reflected as payable pursuant thereto after five years as such amount is not determinable. Excludes $11.1 million of anticipated capital expenditures in 2023,including $3.6 million in connection with our value add program. Such expenditures subsequent to 2023 are not determinable.

The following table sets forth as of December 31, 2022 information regarding the components of our long-term debt obligations:

___________________________

(1) Includes payments of principal (including amortization payments), and interest and excludes deferred financing costs.

(2) Assumes that the interest rate on the junior subordinated notes will be 6.41% per annum and includes $19 million on our credit facility which was paid off in February 2023.

Corporate Level Financing Arrangements

Junior Subordinated Notes

As of December 31, 2022, $37.4 million (excluding deferred costs of $277,000) 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

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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. Although these notes provide for an alternate method of calculating interest when LIBOR becomes unavailable in June 2023, such alternative rate may not be available in which case we may have to negotiate a secondary alternative rate with the counterparties to such debt. If we and the counterparties to this debt are unable to agree to a satisfactory secondary alternate rate, our cash flow and operating results may be adversely affected. At December 31, 2022 and 2021, the interest rate on these notes was 6.41% and 2.13%, respectively.

Credit Facility

Our credit facility with VNB New York, LLC, an affiliate of Valley National Bank (collectively, "VNB"), allows us to borrow, subject to compliance with borrowing base requirements and other conditions, up to $60 million, (i) for the acquisition of, and investment in, multi-family properties, (ii) to repay mortgage debt secured by multi-family properties and (iii) for Operating Expenses (i.e., working capital (including dividend payments) and operating expenses); provided, that not more than $25 million may be used for Operating Expenses. The credit facility is secured by cash accounts maintained by us at VNB (and we are required to maintain substantially all of our bank accounts at VNB), and the pledge of our interests in the entities that own the unencumbered multi-family properties used in calculating the borrowing base. The credit facility bears an annual interest rate, which resets daily, equal to the prime rate, with a floor of 3.50%. The interest rate at December 31, 2022 and March 1, 2023, was 7.50% and 7.75% respectively. There is an annual fee of 0.25% on the total amount committed by VNB and unused by us. The credit facility matures in September 2025. As of March 1, 2023, there was no balance outstanding and up to $60 million was 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.

As of December 31, 2022, we were in compliance in all material respects with the requirements of the facility.

Other Financing Sources and Arrangements

At December 31, 2022, we are joint venture partners in unconsolidated joint ventures which own eight multi-family properties. The distributions from the properties owned by these ventures, $6.5 million in 2022 are a meaningful source of our liquidity and cash flow. Further, we may be required to make capital contributions with respect to these properties. At December 31, 2022, our investment in these joint venture properties have a net equity carrying value of $39.1 million and are subject to mortgage debt, which is not reflected on our consolidated balance sheet, of $ 256.7 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. Prior to the 2022 Partner Buyouts, these joint venture arrangements were material to our liquidity and capital resource position. After giving affect to the 2022 Partner Buyouts, these arrangements will have a meaningful impact on our liquidity and capital resources. See note 6 to our consolidated financial statements.

See Item 1. "Business-Mortgage Debt" for information regarding our mortgage debt at consolidated and unconsolidated subsidiaries.

Inflation

Substantially all of our multi-family property leases are for periods of one-year or less. The short-term nature of these leases generally serves to reduce our risk to adverse effects of inflation on our revenue. During 2022, we experienced inflationary pressures that drove higher operating expenses, primarily in personnel, repairs and maintenance, insurance and real estate taxes; such increases may continue in 2023 and thereafter, which will adversely affect our operating results.

Inflation affects the overall cost of our debt. We mitigate the risks presented by inflation through the use of long-term fixed interest rate debt and interest rate hedges and by paying down, when we deem appropriate, our credit facility debt. However, increasing interest rates, which generally correlates to increasing inflation, may make it less attractive to obtain mortgage debt or use our credit facility in connection with acquisition, refinancing and value add activities.

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Cash Distribution Policy

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. Accordingly, to qualify as a REIT, we must, among other things, meet a number of organizational and operational requirements, including a requirement that we distribute currently at least 90% of our ordinary taxable income to our stockholders. It is our current intention to comply with these requirements and maintain our REIT status. As a REIT, we generally will not be subject to corporate federal, state or local income taxes on taxable income we distribute currently (in accordance with the Internal Revenue Code and applicable regulations) to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal, state and local income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent tax years. Even if we qualify for federal taxation as a REIT, we may be subject to certain state and local taxes on our income and to federal income taxes on our undistributed taxable income (i.e., taxable income not distributed in the amounts and in the time frames prescribed by the Internal Revenue Code and applicable regulations thereunder) and are subject to Federal excise taxes on our undistributed taxable income.

It is our intention to pay to our stockholders within the time periods prescribed by the Internal Revenue Code no less than 90%, and, if possible, 100% of our annual taxable income, including taxable gains from the sale of real estate. It will continue to be our policy to make sufficient distributions to stockholders in order for us to maintain our REIT status under the Internal Revenue Code.

Our board of directors will continue to evaluate, on a quarterly basis, the amount of dividend payments based on its assessment of, among other things, our short and long-term cash and liquidity requirements, prospects, debt maturities, net income, funds from operations, and adjusted funds from operations.

Critical Accounting Estimates

Our significant accounting policies are more fully described in note 1 to our consolidated financial statements. The preparation of financial statements and related disclosure in conformity with accounting principles generally accepted in the United States requires management to make certain judgments and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Certain of our accounting policies are particularly important to understand our financial position and results of operations and require the application of significant judgments and estimates by our management; as a result they are subject to a degree of uncertainty. These significant accounting policies include the following:

Equity method investments

We report our investments in unconsolidated entities, over whose operating and financial policies we have the ability to exercise significant influence but not control, under the equity method of accounting. Under this method of accounting, our pro rata share of the applicable entity's earnings or losses is included in our consolidated statements of operations. We initially record our investments based on either the carrying value for properties contributed or the cash invested.

We evaluate our equity-method investments for impairment whenever events or changes in circumstances indicate that the carrying value of our investments may exceed the fair value. If it is determined that a decline in the fair value of our investments is not temporary, and if such reduced fair value is below its carrying value, an impairment is recorded. Determining fair value involves significant judgment. Our estimates consider available evidence including the present value of the expected future cash flows discounted at market rates, general economic conditions and other relevant factors. In 2021, we recorded an impairment related to our equity investment in the OPOP Properties. We sold our interests in these properties in November 2021.

Carrying Value of Real Estate Portfolio

We conduct a quarterly review of each real estate asset owned by us and through our joint ventures. This review is conducted in order to determine if indicators of impairment are present on the real estate.

In reviewing the value of the real estate assets owned, if there is an indicator of impairment and the carrying value of the real estate asset is determined to be unrecoverable, we seek to arrive at the fair value of each real estate asset by using one or more valuation techniques, such as comparable sales, discounted cash flow analysis or replacement cost analysis. A real estate asset is considered to be unrecoverable when an analysis suggests that the undiscounted cash flows to be generated by the property will be insufficient to recover our investment. Any impairment taken with respect to our real estate assets reduces our net income, assets and stockholders' equity to the extent of the amount of the allowance, but it will not affect our cash flow until such time as the property is sold.

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Purchase Price Allocations

We allocate the purchase price of properties, including acquisition costs and assumed debt, when appropriate, to the tangible and identified intangible assets and liabilities acquired based on their relative fair values. In making estimates of fair values for purposes of allocating purchase price, we use a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. We also consider information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are an internally managed real estate investment trust, also known as a REIT, that is focused on the ownership, operation and, to a lesser extent, development of multi-family properties. These properties may be wholly owned or owned by unconsolidated joint ventures in which we generally contributed 65% to 80% of the equity. At December 31, 2021, we: (i) wholly-own ten multi-family properties with an aggregate of 2,576 units and a carrying value of $291.5 million, and (ii) have ownership interests, through unconsolidated entities, in 23 multi-family properties with an aggregate of 6,697 units, and the carrying value of our net equity investment therein is $112.3 million. These 33 properties are located in eleven states; most of which are located in the Southeast United States and Texas.

The Impact of the COVID-19 Pandemic; 2021 and Recent Developments.

The pandemic did not have a direct material adverse effect on our financial condition and results of operations; however, there were some direct negative effects (e.g., properties adjacent to colleges and universities experienced lower occupancy levels and rental income due to remote learning) and indirect negative effects (e.g., we were more conservative in raising rents, pursuing acquisitions and in implementing our value add program, all of which, if more aggressively pursued, may have allowed us to generate additional income). The impact of the pandemic on our business, financial condition, liquidity, results of operations and prospects will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

During 2021:

Purchases

•we purchased the interests of our joint venture partners in ventures that own three multi-family properties (i.e., Bells Bluff, Crestmont at Thornblade, and Crossings at Bellevue) for an aggregate purchase price of $45.6 million. As a result, these properties are wholly-owned and the accounts and results of operations of these properties are included directly in our consolidated financial statements as of the applicable date of purchase (the "Consolidating Transactions"). In connection with these transactions, we assumed mortgage debt of $26.4 million at Crestmont at Thornblade and obtained replacement mortgage debt of $89.7 million to replace the existing debt of $61.8 million on the other two properties. In 2021, these three properties contributed in the aggregate, $4.4 million in rental revenues, $2.0 million in operating expenses, $1.0 million in interest expense and $2.2 million in depreciation, respectively, in the aggregate in 2021. In 2022, we anticipate that these three properties will generate approximately $17.0 million in rental revenues, $7.4 million of real estate operating expense, $4.0 million in interest expense and $8.1 million in depreciation.

•we purchased an additional 14.7% interest in Civic Center I and Civic Center II - Southaven, MS from our joint venture partner for $6.0 million. After giving effect to this purchase, we own 74.7% of the venture that owns these properties.

Sales

•we sold Kendall Manor - Houston, TX, a wholly-owned property ("Kendall Manor"), to an unrelated third party for $24.5 million and recognized a gain on the sale of this property of $7.3 million. In connection with the sale, we paid off the $14.3 million of mortgage debt maturing in August 2021 and bearing an annual interest rate of 4.29%. During (a) 2021(through the May 26 sale date), this property contributed $1.2 million of rental income, $830,000 thousand million of real estate operating expenses, $272,000 of interest expense and $123,000 of depreciation, and (b) 2020, this property contributed $2.9 million of rental income, $1.9 million of real estate operating expenses, $675,000 of interest expense and $848,000 of depreciation.

•we sold our interests in the unconsolidated joint ventures that owned (a) Anatole Apartments - Daytona Beach, FL(“Anatole Apartments”), and (b)Tower at OPOP and Lofts at OPOP-St Louis, MO (collectively, the "OPOP Properties”), to our joint venture partners, for $10.5 million and recognized a gain on sales of our partnership interests of $2.6 million, after giving effect to the impairment charge of $520,000 taken in connection with the sale of OPOP Properties. We refer to the sale of the interests in Anatole Apartments and OPOP Properties as the "Anatole/OPOP Sales". In 2021 and 2020, these properties contributed $1.0 million and $1.1 million, respectively, in equity in loss of unconsolidated joint ventures.

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•the unconsolidated joint venture which owned The Avenue Apartments, Ocoee, FL, and Parc at 980, Lawrenceville, GA, sold these properties (collectively, the "Avenue/Parc Sale") for an aggregate of $225.9 million and recognized an aggregate gain on the sale of these properties of $84.0 million. As a result of these sales, we recorded an aggregate gain of $35.0 million. The mortgage debt secured by these properties and discharged in connection with the sales was in aggregate principal amount of $107.5 million, had weighted average interest rate of 3.94% and a weighted average remaining term to maturity of 6.6 years. In connection with these sales, the joint venture recognized an aggregate loss on the extinguishment of debt of $9.4 million, of which our share was $4.6 million. During 2021 (through the applicable sales dates) and 2020, these properties contributed $60,000 and $(54,000), respectively, of equity in earnings (loss) of unconsolidated joint ventures.

•we sold a cooperative apartment unit located in New York, NY for a sale price of $545,000 and recognized a gain of $414,000

Financing;Other

•we amended and restated our credit facility, among other things, to increase the amount available to be borrowed to $35 million, reduce the interest rate to 25 basis points over the prime rate with a floor of 3.5%, and extend the facility through November 2024.

•our consolidated subsidiaries paid-off three first mortgages and three supplemental mortgages with an aggregate balance of $31.9 million. These mortgages had a weighted average interest rate of 4.53% and a remaining term to maturity of nine months. In connection with the payoffs, we incurred a loss on the extinguishment of debt of $822,000.

•we raised approximately $9.6 million of equity from the sale of 529,126 shares of our common stock.

•we effected, in September 2021, a 4.5% per share increase in our cash dividend, and declared dividends of an aggregate of $0.90 per share in 2021.

•we maintained an average occupancy rate of 97.1% at our wholly owned properties and 94.2% at our joint venture properties.

Subsequent to December 31, 2021,

•we sold a vacant land parcel located in Daytona, Florida (the "South Daytona Property") for a sales price of $4.7 million, and after closing costs recognized a nominal gain. In 2020, we recognized an impairment charge of $3.6 million in connection with this property.

•we acquired for $ 3.5 million a 17.45% interest in a planned 240-unit development property located in John's Island SC. We anticipate that this development will be completed in the fourth quarter of 2023.

•the unconsolidated joint venture in which we have a 65% equity interest sold The Veranda at Shavano, a 288-unit multi-family property in San Antonio, Texas, for a sales price of $53.8 million. We estimate that the gain on the sale of this property will be approximately $23.7 million and that our share of the gain, which will be recognized in the first quarter of 2022, will be approximately $12.7 million. This property was secured by $25.1 million of floating rate mortgage debt with 1.4 years of remaining term to maturity which was repaid in connection with the sale. The venture also terminated an interest rate swap and paid a termination fee of $188,000, of which our share will be approximately $122,000. During the year ended December 31, 2021, this property generated $526,000 of equity in earnings from unconsolidated joint ventures, which includes a $616,000 gain from insurance proceeds. During the year ended December 31, 2020, this property generated $322,000 of equity in loss from unconsolidated joint ventures.

•we used our available cash to pay-off $15.5 million of 4.29% mortgage debt of Avalon Apartments - Pensacola, FL, a wholly owned property, that was scheduled to mature in March 2022.

•we raised $2.2 million of equity from the sale of 100,000 shares of our common stock pursuant to our at-the-market offering program through March 1, 2022.

•we announced that we entered into separate agreements to acquire (the “2022 Partner Buyouts”) the remaining interests of five of our joint venture partners at five multi-family properties with an aggregate of 1,064 units. The aggregate purchase price for these interests is approximately $30.4 million and in connection with such purchases, we will assume mortgage debt that as of December 31, 2021, was in aggregate principal amount of $97.7 million. (Such

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mortgage debt is currently reflected in Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations- Disclosure of Known Material Contractual Obligations”). The completion of these purchases is subject to customary closing conditions (including with respect to four of the purchases, the approval of the holder of the applicable mortgage debt), and no purchase is contingent upon the completion of any other purchase. The weighted average remaining term to maturity of the mortgage debt to be assumed is 7.1 years and the weighted average interest rate thereon is 4.17%. This mortgage debt will be non-recourse to us at the BRT parent level and to our subsidiary that owns the applicable property, subject to customary carve-out guarantees and indemnities at the parent and property subsidiary levels. During 2021, these properties contributed an aggregate of $295,000 of equity in loss of unconsolidated joint ventures. We anticipate using our available cash to fund these purchases and that these transactions will be completed over the next several months. After a purchase is completed, such property will be wholly owned and the accounts and operations of such property will be included directly, from the date of such purchase, in our consolidated balance sheets and consolidated statement of operations, respectively. As a result, we anticipate that our revenues, total expenses, assets and liabilities, will increase. We can provide no assurance that any of these transactions will be completed or that if completed, will be accretive.

2022 Acquisition Plan

Given the highly competitive environment to acquire multi-family properties, and our belief that in the current environment buying properties from third parties will not generate an appropriate risk adjusted return for our stockholders, we are emphasizing the purchase of the interests of our joint venture partners (“Partner Buyouts”). Although we believe that the blended rate of return we anticipate generating from the Partner Buyouts will be superior to that available from other acquisition opportunities currently available in the market, the blended rate of return on our investment generated from Partner Buyouts will not be as favorable as those we generated in the past from such properties prior to such Partner Buyouts. We also anticipate making a greater effort to buy properties directly (i.e., without joint venture partners) as direct purchases may be attractive if we do not have to pay a promote. See “Item 1.Business-Our Acquisition Approach-Current Acquisition Approach”.

Results of Operations

Comparison of Years Ended December 31, 2021 and 2020

The term "same store properties" refers to seven multi-family properties that were owned for all of 2021 and 2020. The term "unconsolidated same store properties" refers to 21 properties that were owned for all of 2021 and 2020, other than the Sola Station property that was in lease-up.

Revenues

The following table compares our revenues for the years indicated:

Rental and other revenue from real estate properties.    The components of the increase include:

•$4.4 million due to the inclusion of the revenues from the Consolidating Transactions;

•$1.8 million from same store properties, of which approximately $909,000 is due to higher rental rates, $511,000 from increased occupancy and $361,000 is due to an increase in ancillary income (e.g., utility reimbursements and late fees)- approximately $592,000 of the $1.8 million increase is due to increased rents and occupancy at Avalon Apartments - Pensacola, Florida.

The increase was offset by the inclusion, in 2020, of $1.7 million of rental and other revenue from the Kendall Property.

Other income. The decrease is due to reduced interest income resulting from the sale of a loan on September 30, 2020.

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Expenses

The following table compares our expenses for the periods indicated:

Real estate operating expenses.   The components of the increase include:

•$2.0 million from the inclusion of the expenses from the Consolidating Transactions; and

•$765,000 from same store properties, including a $303,000 increase in real estate taxes at Avondale Station - Decatur, GA, due to an increase in the assessment of the property's value and a $164,000 increase in insurance premiums across the portfolio.

The increase was offset by $1.0 million of expenses related to the Kendall Manor sale.

Interest expense.   The decrease is due to a :

•$693,000 decrease from same store properties due to the payoff of mortgage debt;

• $404,000 decrease from the Kendall Manor sale; and

• $270,000 decrease primarily due to the 73 basis point decrease in the average interest rate on our floating rate junior subordinated debt resulting from the decline in the three-month LIBOR rate. See Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" for information regarding the impact of changes in the LIBOR rate.

This was offset by an $1.0 million increase in interest expense from the Consolidating Transactions.

General and administrative.

The increase is due to:

•a $1.2 million increase in compensation expense, including $478,000 of increased non-cash amortization expense due primarily to the RSUs granted in 2021, $323,000 due to the non-cash amortization of restricted stock expense (primarily related to the higher fair value of the shares granted in January 2021 in comparison to the shares issued in 2016 and that vested in 2021), and $318,000 due to the non-cash amortization of restricted stock expense that was issued in June 2021; and

•a $469,000 increase in professional expenses incurred during the 2021 period, including $291,000 related to the follow-on-equity offering terminated in May 2021 and $178,000 in general legal and accounting fees and consulting fees related to compensation and insurance matters. These increases were offset by the inclusion, in the corresponding period of 2020, of (i) $712,000 of professional fees and expenses related to the restatement of our financial statements in 2020 and (ii) $120,000 in costs related to our shared services agreement, primarily related to costs related to the restatement of our financial statements in 2020.

Impairment charge

In 2021, we recorded an impairment charge of $520,000 representing the excess of the book value of our investment in OPOP Properties over the expected sale price of the investment. OPOP Properties was sold in November 2021. In 2020, we recorded a $3.6 million impairment charge with respect to the South Daytona Property. This property was sold in February 2022.

Depreciation

The increase is due the inclusion of $2.2 million of depreciation from the Consolidating Transactions.

The increase was offset by:

•a $726,000 decline due to the Kendall Manor sale; and

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•the inclusion in 2020 of a $233,000 adjustment (i.e., to reflect an increase in the asset value) to such expense in connection with our purchase of our joint venture partner's interest in the ventures that owns Kilburn Crossing and Parkway Grande.

Other revenue and expense items

See "- Unconsolidated Joint Ventures - Results of Operations" below for a discussion of Equity in loss on unconsolidated joint ventures and Equity in earnings from sale of unconsolidated joint venture properties

Gain on sale of real estate

In 2021, we recognized gains of $7.3 million from the Kendall Sale and $414,000 from the sale of a cooperative apartment in New York, NY. There was no comparable gain in 2020.

Gain on sale of partnership interest

In 2021, we recognized gains of $2.2 million in connection with the sale of our interest in the joint venture which owns Anatole Apartments, and $388,000 from the sale of our interest in the joint venture which owns the OPOP Properties. The gain on the sale of OPOP Properties is net of an impairment charge of $520,000 taken in 2021 to reduce the carrying value of the investment to its fair value. There was no comparable gain in 2020.

Loss on extinguishment of debt.

In 2021, we incurred $1.6 million of prepayment charges and deferred loan fee write-offs on the payoff of three first mortgage loans and three supplemental loans with an aggregate outstanding principal balance of $37.9 million and the refinance of a mortgage loan in connection with the purchase of the interests of our joint venture partners in Crestmont at Thornblade. There was no comparable loss in 2020.

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Unconsolidated Joint Ventures - Results of Operations.

Equity in (loss) earnings of unconsolidated joint ventures

The table below reflects the condensed income statements of our unconsolidated properties included in note 7 of our consolidated financial statements. In accordance with US generally accepted accounting principles, each of the line items in the chart below is presented as if these properties are wholly owned by us, although as reflected under " Item 1. Business - Our Multi- Family Properties", our equity interests in these properties range from 32% to 90% (dollars in thousands):

Rental revenue from unconsolidated joint ventures

The decrease is due primarily to:

•$7.0 million from the Avenue/Parc Sale;

•$2.5 million from the Anatole/OPOP Sale; and

•$2.5 million due to the Consolidating Transactions.

The decrease was offset by:

•a $5.7 million increase in rental revenue from unconsolidated same store properties - $3.3 million from an increase in rental rates, $1.4 million from increased occupancy and $1.0 million due to an increase in ancillary fees (e.g., late fees, waiver fees and tech/cable package) - approximately $967,000 of the increase is due to Mercer Crossing - Farmers Branch, TX, $542,000 is due to Chatham Court and Reflections - Dallas, TX and $480,000 is due to Cinco Ranch- Katy, TX;

•$605,000 from the inclusion, for all of 2021, a property (i.e., Sola Station- Columbia, SC) that was in lease-up for a portion of 2020, and

•$594,000 from the inclusion, for all of 2021, of Abbotts Run-Wilmington, NC ("Abbots Run"), that was only owned for a portion of 2020.

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Real estate operating expenses from unconsolidated joint ventures

The components of the decrease include:

• $3.3 million due to the Avenue/Parc Sale;

• $1.4 million from the Consolidating Transactions; and

• $1.3 million from the Anatole/OPOP Sales.

The decrease was offset by:

•a $1.8 million increase from unconsolidated same store properties, including increases of $579,000 in repairs, maintenance and replacement costs, $576,000 in utility costs, $352,000 in payroll and leasing commissions, and $315,000 in insurance costs, and

•$409,000 from the inclusion, for all of 2021, of Abbotts Run.

Interest expense from unconsolidated joint ventures. The components of the decrease are $1.9 million due to the Avenue/Parc Sale, $1.2 million due to the Consolidating Transactions, $616,000 from the Anatole/OPOP Sales and the balance is due primarily to reduced principal balances on mortgages at unconsolidated same store properties resulting from amortization.

Depreciation from unconsolidated joint ventures. The components of the decrease are $2.8 million due to to the Avenue/Parc Sale, $1.5 million due to the Consolidating Transactions, $692,000 from the Anatole/OPOP Sales and $1.0 million due to a decrease in depreciable assets.

Impairment charges from unconsolidated joint ventures. During 2021, we recognized $2.8 million of impairment charges related to the February 2021 Texas winter storm (the "Texas Storm"). There were no comparable charges in 2020.

Insurance recoveries from unconsolidated joint ventures. During 2021, we recognized $2.8 million of insurance recoveries related to the Texas Storm. There were no comparable recoveries in 2020.

Gain on insurance recoveries from unconsolidated joint ventures. During 2021, we recognized $1.9 million in gains from insurance recoveries at two properties (i.e., Verandas at Shavano and Retreat at Cinco Ranch, both located in San Antonio, TX), that were damaged by the Texas Storm, and $325,000 from an insurance claim on Magnolia Pointe - Madison, AL, that sustained fire damage in a prior year, as in each case, the amounts received on claims exceeded the assets previously written-off. In 2020, we also recognized a gain of $765,000 related to Magnolia Pointe - Madison, AL, property.

Gain on sale of real estate from unconsolidated joint ventures

On July 20, 2021, the unconsolidated joint venture which owned The Avenue Apartments, Ocoee, FL, sold the property for $107.7 million and recognized a gain on the sale of this property of $39.7 million.

On July 28, 2021, the unconsolidated joint venture which owned Parc at 980, Lawrenceville, GA, sold the property for $118.3 million and recognized a gain on the sale of this property of $44.3 million.

There were no comparable sales in 2020.

Loss on early extinguishment of debt from unconsolidated joint ventures

The loss in 2021 is due to prepayment charges in connection with the payoff of the mortgages related to the Avenue/Parc Sale. There was no comparable loss in 2020.

Comparison of Years Ended December 31, 2020 and 2019

As we qualify as a smaller reporting company, this comparison is omitted in accordance with Instruction 1 to Item 303(a) of Regulation S-K.

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Funds from Operations; Adjusted Funds from Operations; Net Operating Income.

In view of our multi-family property activities, we disclose funds from operations ("FFO") ,adjusted funds from operations ("AFFO") and net operating income ("NOI") because we believe that such metrics are a widely recognized and appropriate measure of the performance of a multi-family REIT.

We compute FFO in accordance with the "White Paper on Funds From Operations" issued by the National Association of Real Estate Investment Trusts ("NAREIT") and NAREIT's related guidance. FFO is defined in the White Paper as net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. In computing FFO, we do not add back to net income the amortization of costs in connection with our financing activities or depreciation of non-real estate assets.

We compute AFFO by adjusting FFO for loss on extinguishment of debt, our straight-line rent accruals, restricted stock and RSU compensation expense, gain on insurance recovery, and deferred mortgage and debt costs (including our share of our unconsolidated joint ventures). Since the NAREIT White Paper does not provide guidelines for computing AFFO, the computation of AFFO may vary from one REIT to another.

We believe that FFO and AFFO are useful and standard supplemental measures of the operating performance for equity REITs and are used frequently by securities analysts, investors and other interested parties in evaluating equity REITs, many of which present FFO and AFFO when reporting their operating results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization of real estate assets, which assures that the value of real estate assets diminish predictability over time. In fact, real estate values have historically risen and fallen with market conditions. As a result, we believe that FFO and AFFO provide a performance measure that, when compared year over year, should reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs and other matters without the inclusion of depreciation and amortization, providing a perspective that may not be necessarily apparent from net income. We also consider FFO and AFFO to be useful to us in evaluating potential property acquisitions.

FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP. FFO and AFFO should not be considered to be an alternative to net income as a reliable measure of our operating performance; nor should FFO and AFFO be considered an alternative to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.

FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization and capital improvements. FFO and AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP.

Management recognizes that there are limitations in the use of FFO and AFFO. In evaluating our performance, management is careful to examine GAAP measures such as net income (loss) and cash flows from operating, investing and financing activities. Management also reviews the reconciliation of net income (loss) to FFO and AFFO.

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The table below provides a reconciliation of net (loss) income determined in accordance with GAAP to FFO and AFFO for each of the indicated years (amounts in thousands):

The table below provides a reconciliation of net (loss) income per common share (on a diluted basis) determined in accordance with GAAP to FFO and AFFO.

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FFO for 2021 increased $430,000, or 2.5%, to $17.4 million from $17.0 million in 2020 due primarily to improved operating margins at same store properties, the Consolidating Transactions (including the purchase of the interest in Civic Center I and II), reduced interest expense, insurance recoveries and gain on insurance proceeds. The increase was offset by the increase in debt prepayment charges, the sale of properties, the sale of properties by joint ventures and the sale of interests in joint ventures (collectively referred to as, the "2021 Sales"), the non-cash amortization of equity award expense and the inclusion, in 2020, of other income related to a loan receivable that was paid-off in September 2020.

FFO for 2021 decreased $ 0.02 per diluted share, or 2.0%, from $0.99 per diluted share to $0.97 per diluted share due primarily to issuances pursuant to our equity incentive and at-the-market equity offering programs.

AFFO for 2021 increased $4.6 million, or 23.9%, to $23.8 million from $19.2 million in 2020, primarily due to improved operating margins, the Consolidated Transactions (including the purchase of the interest in Civic Center I and II) and reduced interest expense offset by the 2021 Sales and the inclusion, in 2020, of other income from a loan receivable that was paid off in September 2020. Per share AFFO was impacted negatively by issuances pursuant to our equity incentive and at-the-market equity offering programs.

NOI is a non-GAAP measure of performance. NOI is used by our management and many investors to evaluate and compare the performance of our properties to other comparable properties, to determine trends at our properties and to determine the estimated fair value of our properties. The usefulness of NOI may be limited in that it does not take into account, among other things, general and administrative expense, interest expense, loss on extinguishment of debt, casualty losses, insurance recoveries and gains or losses as determined by GAAP. NOI is a property specific performance metric and does not measure our performance as a whole. Same store NOI reflects the operations of seven of our ten wholly-owned properties.

We compute NOI by adjusting net income (loss) to (a) add back (1) depreciation expense, (2) general and administrative expenses, (3) interest expense, (4) loss on extinguishment of debt, (5) equity in loss of unconsolidated joint ventures, (6) provision for taxes, (7) the impact of non-controlling interests, and (b) deduct (1) other income, (2) gain on sale of real estate, and (3) gain on insurance recoveries related to casualty loss. Other REIT’s may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REIT’s. We believe NOI provides an operating perspective not immediately apparent from GAAP operating income or net income (loss). NOI is one of the measures we use to evaluate our performance because it (i) measures the core operations of property performance by excluding corporate level expenses and other items unrelated to property operating performance and (ii) captures trends in rental housing and property operating expenses. However, NOI should only be used as an alternative measure of our financial performance.

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