BRT Apartments Corp

Previous wording

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

Current wording

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

Previous wording

We are an internally managed real estate investment trust, also known as a REIT, that owns, operates and, to a lesser extent, holds interests in joint ventures that own and operate multi-family properties. At March 31, 2024, we: (i) wholly-own 21 multi-family properties with an aggregate of 5,420 units and a carrying value of $629.2 million; (ii) have ownership interests, through unconsolidated entities, in eight multi-family properties with 2,527 units and a carrying value of $32.9 million; and (iii) own other assets, through consolidated and unconsolidated subsidiaries, with a carrying value of $1.8 million. The 29 properties are located in 11 states; most of the properties are located in the Southeast United States and Texas.

Current wording

We are an internally managed real estate investment trust, also known as a REIT, that owns, operates and, to a lesser extent, holds interests in joint ventures that own and operate multi-family properties. At June 30, 2024, we: (i) wholly-own 21 multi-family properties with an aggregate of 5,420 units and a carrying value of $624.5 million; (ii) have ownership interests, through unconsolidated entities, in eight multi-family properties with 2,527 units and a carrying value of $32.1 million; and (iii) own other assets, through consolidated and unconsolidated subsidiaries, with a carrying value of $1.8 million. The 29 properties are located in 11 states; most of the properties are located in the Southeast United States and Texas.

Previous wording

As more fully described in (i) our Annual Report, and in particular, the sections thereof entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations"and (ii) below, we face challenges (e.g., inflation, rising interest rates and decelerating increases in rental rates) due to the uncertain economic environment which may limit our ability or willingness (i) to acquire properties, (ii) grow rental income or (iii) control our real estate operating expenses, some of which, such as real estate tax and insurance expense, we have a very limited ability to control.

Current wording

As more fully described (i) in our Annual Report, and in particular, the sections thereof entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations"and (ii) below, we face challenges (e.g., inflation, volatile interest rates and rental rates decreases) due to the uncertain economic environment, which may limit our ability or willingness (i) to acquire properties, (ii) grow rental income or (iii) control our real estate operating expenses, some of which, such as real estate tax and insurance expense, we have a very limited ability to control.

Previous wording

In light of the challenging acquisition environment and the limited funds available to us to acquire properties, we may, in the near term, pursue (i) the acquisition of multi-family properties through joint ventures and /or (ii) alternative investments in the multi-family property arena, such as rescue capital, which includes preferred equity investments (e.g., an investment entitling the investor to a fixed rate of return prior to distributions to more junior investors) or bridge loans (e.g., a loan secured by a first mortgage on the subject property). We do not anticipate that in the near term, these type of investments(other than joint ventures already included in our portfolio), will constitute a significant part of our portfolio. We can provide no assurance that we will pursue such investments or that if we do, such investments will be profitable for us.

Current wording

In light of the challenging acquisition environment and the limited funds available to us to acquire properties, we are pursuing (i) alternative investments in the multi-family property arena, such as rescue capital, which includes preferred equity investments (e.g., an investment entitling us to a fixed rate of return prior to distributions to more junior investors) or bridge loans (e.g., a loan secured by a first mortgage on the subject property) and/or (ii) the acquisition of multi-family properties through joint ventures. We do not anticipate that in the near term, these type of investments (other than joint ventures already included in our portfolio), will constitute a significant part of our portfolio, and can provide no assurance that such investments will be profitable for us.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The change is due to the following increases:

Current wording

The change was due to the following increases:

Previous wording

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

Current wording

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

Previous wording

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

Current wording

The increase is due to (i) $378,000 in increased insurance premiums primarily at two properties; and (ii) $287,000 due to increased real estate tax accruals- we anticipate that these accruals through the balance of 2024, will be similarly higher than such accruals in 2023.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

We received a $240,000 payment during the quarter ended March 31, 2023, representing the insurance carrier's final payment with respect to damage we sustained at The Woodland Apartments - Boerne, TX in 2021. There was no corresponding payment in the current three month period.

Current wording

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

Previous wording

We require funds to pay operating expenses and debt service obligations, acquire properties, make capital and other improvements, fund capital contributions, and pay dividends. Generally, our primary sources of capital and liquidity are the operations of our multi-family properties (including distributions from the operations of our multi-family joint ventures), mortgage debt financings and re-financings, the sale/issuance of shares of our common stock pursuant to our at-the-market equity distribution and dividend reinvestment programs, borrowings from our credit facility and our available cash. At May 1, 2024, our available liquidity was $78.5 million, including $18.5 million of cash and cash equivalents and $60 million available under our credit facility.

Current wording

We require funds to pay operating expenses and debt service obligations, acquire and/or invest in properties (including alternative investments), make capital and other improvements, fund capital contributions, and pay dividends. Generally, our primary sources of capital and liquidity are the operations of our multi-family properties (including distributions from the operations of the unconsolidated multi-family properties), mortgage debt financings and re-financings, the issuance of shares of our common stock pursuant to our dividend reinvestment program, borrowings from our credit facility and our available cash. At August 1, 2024, our available liquidity was $54.7 million, including $14.7 million of cash and cash equivalents and $40 million available under our credit facility.

Previous wording

We anticipate that from April 1, 2024 through December 31, 2027, our operating expenses, $119.5 million of mortgage amortization and interest expense (including $47.3 million from unconsolidated joint ventures), $15.4 million and $126.1 million of balloon payments with respect to mortgages maturing in 2025 and 2026, respectively (including $56.6 million maturing in 2026 from unconsolidated joint ventures), estimated capital expenditures (for the remainder of 2024 only) of $8.0 million, interest expense on our junior subordinated notes, estimated cash dividend payments of at least $69.9 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.6 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), property sales, obtaining mortgage debt financing on unencumbered properties and, to the extent available, our credit facility. Our operating cash flow and available cash is insufficient to fully fund the $141.1 million of balloon payments due through 2026, and if we are unable to refinance such debt on acceptable terms, we may need to issue additional equity or dispose of properties, in each case on potentially unfavorable terms.

Current wording

We anticipate that from July 1, 2024 through December 31, 2027, our operating expenses, $111.1 million of mortgage amortization and interest expense (including $44.0 million from unconsolidated joint ventures and excluding the approximate $1.5 million of additional annual interest expense associated with the Financing), $15.4 million and $128.3 million of balloon payments with respect to mortgages maturing in 2025 and 2026, respectively (including $58.7 million maturing in 2026 from unconsolidated joint ventures), estimated capital expenditures (for the remainder of 2024 only) of $2.9 million, interest expense on our junior subordinated notes, estimated cash dividend payments of at least $65.5 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.7 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), property sales, the Financing, obtaining mortgage debt on two unencumbered properties (i.e., Avondale Station - Decatur GA and Avalon - Pensacola, FL) and, to the extent available, our credit facility. Our operating cash flow and available cash is insufficient to fully fund the $143.7 million of balloon payments due through 2026, and if we are unable to refinance such debt on acceptable terms, we may need to issue additional equity or dispose of properties, in each case on potentially unfavorable terms.

Previous wording

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.

Current wording

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

Previous wording

At March 31, 2024, we had mortgage debt of $677.2 million (including $250.3 million of mortgage principal debt of our unconsolidated subsidiaries). The mortgage debt at our: (i) consolidated properties had a weighted average interest rate of 4.02% and a weighted average remaining term to maturity of approximately 6.8 years, and (ii) at our unconsolidated subsidiaries had a weighted average interest rate of 4.36% and a remaining term to maturity of approximately 4.7 years.

Current wording

At June 30, 2024, we had mortgage debt of $677.5 million (including $251.6 million of mortgage debt at of our unconsolidated subsidiaries). The mortgage debt at our: (i) consolidated properties had a weighted average interest rate of 4.02% and a weighted average remaining term to maturity of approximately 6.5 years, and (ii) at our unconsolidated subsidiaries had a weighted average interest rate of 4.38% and a remaining term to maturity of approximately 4.4 years.

Previous wording

As of March 31, 2024, $37.4 million (excluding deferred costs of $252,000) in principal amount of our junior subordinated notes is outstanding. These notes mature in April 2036, contain limited covenants (including covenants prohibiting us from paying dividends or repurchasing capital stock if there is an event of default (as defined therein) on these notes), are redeemable at our option and bear an interest rate, which resets and is payable quarterly, at a rate of three-month term SOFR plus 250 basis points. At March 31, 2024 and 2023, the interest rate on these notes was 7.58% and 6.80%, respectively. The interest rate that will be in effect for the three months ending July 31, 2024 is 7.59%.

Current wording

As of June 30, 2024, $37.4 million (excluding deferred costs of $247,000) in principal amount of our junior subordinated notes is outstanding. These notes mature in April 2036, contain limited covenants (including covenants prohibiting us from paying dividends or repurchasing capital stock if there is an event of default (as defined therein) on these notes), are redeemable at our option and bear an interest rate, which resets and is payable quarterly, at a rate of three-month term SOFR plus 250 basis points. At June 30, 2024 and 2023, the interest rate on these notes was 7.59% and 7.30%, respectively. The interest rate that will be in effect for the three months ending October 30, 2024 is 7.52%.

Previous wording

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 monthly, equal to one-month term SOFR plus 250 basis points, with a floor of 6.00%. The interest rate in effect as of March 31, 2024 was 7.82%. There is an annual fee of 0.25% on the total amount committed by VNB and unused by us. The credit facility matures in September 2025. Net proceeds received from the sale, financing or refinancing of our properties are generally required to be used to repay amounts outstanding on the facility. As of May 1, 2024, there was no outstanding balance on the credit facility and $60 million is available to be borrowed thereunder. The interest rate in effect at May 1, 2024 is 7.83%

Current wording

Our credit facility with VNB New York, LLC, an affiliate of Valley National Bank (collectively, "VNB"), as amended in July 2024, allows us to borrow, subject to compliance with borrowing base requirements and other conditions, up to $40 million, (i) for the acquisition of, and investment in, multi-family properties, (ii) to repay mortgage debt secured by multi-family properties and (iii) for Operating Expenses (i.e., working capital (including dividend payments) and operating expenses); 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 monthly, equal to one-month term SOFR plus 250 basis points, with a floor of 6.00%. 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. Net proceeds received from the sale, financing or refinancing of our properties are generally required to be used to repay amounts outstanding on the facility. As of August 1, 2024, there was no outstanding balance on the credit facility and $40 million is available to be borrowed thereunder. The interest rate in effect at August 1, 2024 is 7.85%

Previous wording

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.

Current wording

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.

Previous wording

At March 31, 2024, we are joint venture partners in unconsolidated joint ventures which own eight multi-family properties and the distributions to us from these joint venture properties of $1.4 million in the quarter ended March 31, 2024 contributed to our liquidity and cash flow. Further, we may be required to make significant capital contributions with respect to these properties. At March 31, 2024, these joint venture properties have a net-equity carrying value of $32.9 million and are subject to mortgage debt, which is not reflected on our consolidated balance sheet, of $250.3 million. 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 7 to our consolidated financial statements.

Current wording

At June 30, 2024, we are joint venture partners in unconsolidated joint ventures which own eight multi-family properties and the distributions to us from these joint venture properties of $1.3 million in the quarter ended June 30, 2024 contributed to our liquidity and cash flow. Further, we may be required to make significant capital contributions with respect to these properties. At June 30, 2024, these joint venture properties have a net-equity carrying value of $32.2 million and are subject to mortgage debt, which is not reflected on our consolidated balance sheet, of $251.6 million. Although BRT Apartments Corp. 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 7 to our consolidated financial statements.

Previous wording

We compute AFFO by adjusting FFO for the loss of extinguishment of debt, our straight-line rent accruals, restricted stock and RSU compensation expense, fair value adjustment of mortgage debt, gain on insurance recovery, insurance recovery from casualty loss and deferred mortgage and debt costs ( including, in each case as applicable, from our share from our unconsolidated joint ventures). Since the NAREIT White Paper only provides guidelines for computing FFO, the computation of AFFO may vary from one REIT to another.

Current wording

We compute AFFO by adjusting FFO for the loss of extinguishment of debt, our straight-line rent and rental concession accruals, restricted stock and RSU compensation expense, fair value adjustment of mortgage debt, gain on insurance recovery, insurance recovery from casualty loss and deferred mortgage and debt costs ( including, in each case as applicable, from our share from our unconsolidated joint ventures). Since the NAREIT White Paper only provides guidelines for computing FFO, the computation of AFFO may vary from one REIT to another.

Previous wording

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

Current wording

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

Previous wording

For the three months ended March 31, 2024, NOI increased $ 214,000 from the corresponding period in 2023 primarily due to a $359,000 increase in rental revenue offset by a $145,000 increase in real estate operating expenses. See"-Results of Operations - Three Months Ended March 31, 2024 Compared to the Three Months ended March 31, 2023 " for a discussion of these changes.

Current wording

For the six months ended June 30, 2024, NOI increased $439,000 from the corresponding period in 2023 primarily due to a $845,000 increase in rental revenue at most of our properties, a $413,000 increase in amortization of deferred rent concessions offset by a $443,000 increase in real estate operating expenses and a $376,000 decrease in rental income at Bells Bluff. See"-Results of Operations - Six Months Ended June 30, 2024 Compared to the Six Months ended June 30, 2023 " for a discussion of these changes.