2021 ANN UAL REP ORT
B
R
T
A
P
A
R
T
M
E
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S
C
O
R
P
.
2
0
2
1
A
N
N
U
A
L
R
E
P
O
R
T
1.0
0.8
0.6
0.4
0.2
0.0
DIVIDENDS
STOCK PRICE
25
DIVIDENDS
BRT APARTMENTS CORP., a Maryland corporation, is an internally
managed real estate investment trust, also known as a REIT, that
STOCK PRICE
20
1.0
0.8
0.6
0.2
0.0
1.0
2019
0.4
2020
2021
0.8
0.6
2019
0.4
2020
DIVIDENDS
PER SHARE
0.2
0.0
$0.88
$0.90
$0.84
is focused on the ownership, operation, and to a lesser ex tent,
25
15
development of multi-family properties. At December 31, 2021, we own
or have interests in 33 multi-family properties located in 11 states with an
DIVIDENDS
aggregate of 9,273 units, including properties and units owned by
STOCK PRICE
15
5
unconsolidated joint ventures. Most of our properties are located in the
2019
2021
2020
10
0
Southeast United States and Texas.
10
20
5
BRT’s shares of common stock trade on the New York Stock Exchange
under the symbol “BRT.” As of December 31, 2021, there were 18,530,324
0
2019
10
2020
2021
2021
shares outstanding and 748 holders of record.
2019
2020
2021
STOCK PRICE
Closing Stock Price
on December 31,
$23.99
5
0
2019
2020
2021
25
20
15
DIVIDENDS
PER SHARE
$0.88
$0.90
$0.84
DIVIDENDS
PER SHARE
$0.88
$0.90
$0.84
$16.97
STOCK PRICE
Closing Stock Price
on December 31,
$15.20
$23.99
$16.97
$15.20
STOCK PRICE
Closing Stock Price
on December 31,
$23.99
AFFO
1.5
1.2
0.9
0.6
0.3
0.0
AFFO
1.5
1.2
0.9
AFFO
1.5
2019
0.6
2020
2021
1.2
0.3
0.0
0.9
2019
0.6
2020
2021
AFFO
PER SHARE
0.3
0.0
$1.33
$1.03
$1.12
AFFO
PER SHARE
2019
2020
2021
$1.33
$1.12
$1.03
AFFO
PER SHARE
$1.33
2019
2020
2021
2019
2020
2021
$16.97
$15.20
2019
2020
2021
$1.12
$1.03
2019
2020
2021
2019
2020
2021
2019
2020
2021
2019
2020
2021
2019
2020
2021
2019
2020
2021
UNITS BY STATE
(Including units owned by
unconsolidated joint ventures)
MO
174
TX
2,753
OH
264
TN 702
MS
776
AL
940
GA
959
VA
220
NC 576
SC
1,391
FL
518
TO OUR
STOCKHOLDERS
BRT Apartments Corp. operates with a vision to create a resilient, high-quality
portfolio of multifamily properties located in growth markets, primarily in the
Sunbelt. We expect to increase revenues and cash flow for our investors through
favorable market fundamentals and disciplined capital allocation and are
pleased to deliver solid full-year growth and performance in 2021. Following the
pandemic-impacted year of 2020, we carefully evaluated the acquisition and
disposition landscape, prudently consolidating our interests in properties that
met our disciplined underwriting criteria, selling interests in properties for which
we did not see adequate returns in the future, and enhancing the flexibility of
our balance sheet to position the Company for future growth.
BRT delivered strong performance in
Regarding t r ans ac t ion ac t i v i t y, we
2021. We grew AFFO by 23.9% to $23.8
opportunistically sold six multi-family
million, and AFFO per share by 18.8% to
properties(or our interests) therein, for an
$1.33 per share from 2020. Across our
aggregate sales price of $261 million and
entire por tfolio, average occupancy
acquired the remaining minority interests
increased 110 basis points to 94.8% and
in three joint venture properties for $45.6
average rents grew 5.5% to $1,142 per
million. As of January 1, 2022, our multi-
month compared to 2020. Our same-store
family portfolio consists of 33 properties
revenue grew 7.7%, same-store expenses
representing 9,273 units of which ten
increased 7.6%, and same-store NOI
properties, representing 2,756 units, are
increased 7.8% in comparison to 2020.
wholly owned.
1
During 2021, we focused on reducing
financial flexibility to pursue our goals of
leverage and lowered our debt to enter-
portfolio growth through direct acquisi-
prise value (including our pro-rata share of
tions of, and the acquisition of the inter-
the debt at our unconsolidated joint ven-
ests of our joint venture partners in,
tures) by strategically selling properties
properties that we find attractive.
and raising additional equity capital
through our ATM program. Additionally,
Finally, we want to thank the entire BRT
we entered into a new $35 million credit
team for their hard work and dedication.
facility, which provides enhanced liquidity
We also want to thank the Board for their
for BRT to pursue attractive acquisition
counsel, and our stockholders for their
opportunities and continue to grow its
trust in us.
portfolio.
Sincerely yours,
In conclusion, 2021 was a very solid year
for BRT. Our portfolio delivered excellent
results, and we continue to advance our
efforts to grow our wholly-owned portfo-
lio prudently, while also enhancing our
financial flexibility. Our geographic focus
primarily in the Sunbelt has proven to be
successful, as we directly benefit from the
historic migratory wave of jobs and fami-
lies to these markets.
Israel Rosenzweig
Chairman of the Board
Jeffrey A. Gould
President and Chief Executive Officer
As we look ahead to 2022, we are excited
April 15,2022
about the opportunities in front of us. Our
markets remain very healthy, there are
organic growth opportunities through our
value-add program and we have greater
2
FINANCIAL
HIGHLIGHTS
(Dollar amounts in thousands except per share amounts)
Rental and other revenue from real estate properties
Year ended December 31,
2021
2020
$ 32,041
$ 27,451
Other income
Total revenues
Real estate operating expenses
Interest expense
General and administrative
Impairment charge
Depreciation
Total expenses
Total revenues less total expenses
Equity in loss of unconsolidated joint ventures
Equity in earnings from sale of unconsolidated joint venture properties
Gain on sale of real estate
Gain on sale of partnership interest
Loss on extinguishment of debt
Income (loss) from continuing operations
Provision for taxes
Income (loss) from continuing operations, net of taxes
(Income) attributable to non-controlling interests
16
32,057
14,202
6,757
12,621
520
8,025
42,125
(10,068)
(4,208)
34,982
7,693
2,632
(1,575)
29,456
206
29,250
(136)
651
28,102
12,377
7,100
11,701
3,642
6,742
41,562
(13,460)
(6,024)
—
—
—
—
(19,484 )
248
(19,732 )
(130)
Net income (loss) attributable to common stockholders
$ 29,114
$ (19,862)
Per share amounts attributable to common stockholders
Basic earnings (loss) per share
Diluted earnings (loss) per share
Total assets
Real estate properties, net of accumulated depreciation
Investment in unconsolidated joint ventures
Cash and cash equivalents
Restricted cash
Mortgages payable, net of deferred costs
Junior subordinated notes, net of deferred costs
$
$
1.63
1.62
$
$
(1.16)
(1.16)
December 31,
2021
2020
$459,538
$ 365,741
293,550
112,347
32,339
6,582
199,877
37,103
160,192
169,474
19,885
8,800
130,434
37,083
Total BRT Apartments Corp. stockholders’ equity
202,956
177,772
3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-07172
BRT APARTMENTS CORP.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
60 Cutter Mill Road, Great Neck, New York
(Address of principal executive offices)
13-2755856
(I.R.S. employer
identification no.)
11021
(Zip Code)
516-466-3100
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Shares of common stock, par value $.01 per share
Trading Symbol
BRT
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No ý
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer. or a smaller
reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting
company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o
Non-accelerated filer ý
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ý
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately
$189.6 million based on the last sale price of the common equity on June 30, 2021, which is the last business day of the registrant's
most recently completed second quarter.
As of March 1, 2022, the registrant had 18,530,324 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the 2022 annual meeting of stockholders of the Registrant to be filed pursuant to Regulation
14A not later than May 2, 2022, are incorporated by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Form 10-K
Explanatory Note
Cautionary Statement Regarding Forward-Looking Statements
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Item No.
PART I
1
1A.
1B.
2
3
4
PART II
5
6
7
7A.
8
9
9A.
9B.
9C.
PART III
10
11
12
13
14
PART IV
15
16
Signatures
Page(s)
1
1
3
14
26
26
26
26
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27
41
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41
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Explanatory Note
Unless otherwise indicated or the context otherwise requires, all references to (i) “us”, “we”, “BRT” or the “Company”
refer to BRT Apartments Corp. and its consolidated and unconsolidated subsidiaries; (ii) all interest rates give effect to the
related interest rate derivative, if any; (iii) "acquisitions" include investments in unconsolidated joint ventures; (iv) references to
the impact of the COVID-19 pandemic include the impact of the governmental and non-governmental responses thereto and
the economic and financial consequences thereof, (v) our "significant subsidiaries" (as such term is by Rule 1-02(w) of
Regulation S-X, include TRB Holdings LLC, TRB Bells Bluff LLC, which own Bells Bluff, a property located in West
Nashville, TN and TRB Civic Center LLC, which owns Civic Center I and II, properties located in Southaven MS and
(vi) "same store properties" refer to properties that we owned and operated for the entirety of periods being compared, except
for properties that are in lease-up. We move properties previously excluded from our same store portfolio (because they were in
lease up) into the same store designation once they have stabilized (as described below) and such status has been reflected fully
in all applicable periods of comparison. Newly constructed, lease-up, development and redevelopment properties are deemed
stabilized upon the earlier to occur of the first full calendar quarter beginning (a) 12 months after the property is fully
completed and put in service and (b) attainment of at least 90% physical occupancy.
Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K, together with other statements and information publicly disseminated by us, contains
certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend such forward-looking statements to
be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking
statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning
matters that are not historical facts. Forward looking statements are generally identifiable by use of words such as "may,"
"will," "will likely result," "shall," "should," "could," "believe," "expect," "intend," "anticipate," "estimate," "project" or similar
expressions or variations thereof.
Forward-looking statements contained in this Annual Report are based on our beliefs, assumptions and expectations of our
future performance taking into account all information currently available to us. These beliefs, assumptions and expectations
can change as a result of many possible events or factors, not all of which are known to us or within our control, and which
could materially affect actual results, performance or achievements. Factors which may cause actual results to vary from our
forward-looking statements include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
the impact of the COVID-19 pandemic;
general economic and business condition and developments, including those currently affecting or that may affect our
economy, such as the outbreak of hostilities between Russia and Ukraine;
accessibility of debt and equity capital markets;
general and local real estate conditions, including any changes in the value of our real estate;
changes in Federal, state and local governmental laws and regulations, including laws and regulations relating to taxes
and real estate and related investments;
the level and volatility of interest rates;
challenges in acquiring properties (including challenges in buying the interests of joint venture partners and buying
properties directly without the participation of joint venture partners), which acquisitions may not be completed or may
not produce the cash flows or income expected;
the competitive environment in which we operate, including competition that could adversely affect our ability to
acquire properties and/or limit our ability to lease apartments or increase or maintain rental income;
a limited number of multi-family property acquisition opportunities acceptable to us;
the concentration of our multi-family properties in the Southeastern United States and Texas, which makes us more
susceptible to adverse developments in those markets;
risks associated with acquiring value-add multi-family properties, which involves greater risks than more conservative
approaches;
the condition of Fannie Mae or Freddie Mac, which could adversely impact us;
1
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our failure to comply with laws, including those requiring access to our properties by disabled persons, which could
result in substantial costs;
insufficient cash flows, which could limit our ability to make required payments on our debt obligations;
impairment in the value of real estate we own;
failure of property managers to properly manage properties;
disagreements with, or misconduct by, joint venture partners;
decreased rental rates or increasing vacancy rates;
our ability to lease units in newly acquired or newly constructed multi-family properties;
potential defaults on or non-renewal of leases by tenants;
creditworthiness of tenants;
our ability to obtain financing for acquisitions;
development and acquisition risks, including rising or unanticipated costs and failure of such acquisitions and
developments to perform in accordance with projections;
the timing of acquisitions and dispositions;
our ability to reinvest the net proceeds of dispositions into more, or as favorable, acquisition opportunities;
potential natural disasters such as hurricanes, tornadoes and floods;
board determinations as to timing and payment of dividends, if any, and our ability or willingness to pay future
dividends;
financing risks, including the risks that our cash flows from operations may be insufficient to meet required debt
service obligations and we may be unable to refinance our existing debt upon maturity or obtain new financing on
attractive terms or at all;
lack of or insufficient amounts of insurance to cover, among other things, losses from catastrophes;
our ability to maintain our qualification as a REIT;
possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation
of contamination of properties presently owned or previously owned by us or a subsidiary owned by us or acquired by
us;
our dependence on information systems;
risks associated with breaches of our data security;
risks associated with the stock ownership restrictions of the Code for REITs and the stock ownership limit imposed by
our charter;
increases in real estate taxes at properties we acquire due to such acquisitions or other factors; and
the other factors described in this Annual Report, including those set forth under the captions "Item 1. Business,"
"Item 1A. Risk Factors," and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations".
We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Annual
Report. Except to the extent otherwise required by applicable law or regulation, we undertake no obligation to update these
forward-looking statements to reflect events or circumstances after the filing of this Annual Report or to reflect the occurrence
of unanticipated events thereafter.
2
Item l. Business.
General
PART I
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 carrying
value of our net equity investment therein is $112.3 million. These 33 properties are located in 11 states; most of our properties
are located in the Southeast United States and Texas.
Our website can be accessed at www.brtapartments.com, where copies of our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission, or SEC,
can be obtained free of charge.
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. See "Item
1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-The
Impact of the COVID-19 Pandemic; 2021 and Recent Developments".
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. 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.
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 (the "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 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 2021 in connection with the sale of OPOP
Properties. In 2021 and 2020, these properties contributed $1.0 and $ 1.1 million, respectively, in equity in loss of
unconsolidated joint ventures.
the unconsolidated joint venture which owned The Avenue Apartments, Ocoee, FL, and Parc at 980, Lawrenceville, GA,
sold these properties for an aggregate of $225.9 million and recognized an aggregate gain on the sale of these properties
3
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 paid-off 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 sales 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, reduced the interest rate to 25 basis points over the prime rate with a floor of 3.5%, and extended 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 pursuant to our at-
the-market equity offering program.
we implemented, 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 Johns 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 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
4
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.
5
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7
The following table sets forth certain information, presented by state, related to our consolidated properties as of
December 31, 2021 (dollars in thousands):
State
Number of
Properties
Number of
Units
2021 Rental and
Other Revenues
Percent of 2021
Rental and Other
Revenues
Georgia
Florida
South Carolina (1)
Virginia
Tennessee (2)
Ohio
Texas (3)
Other (4)
Total
___________________________
2
1
2
1
2
1
1
$
448
276
474
220
702
264
192
—
10
$
—
2,576
$
6,724
4,594
4,401
4,274
3,410
3,232
2,710
1,510
30,855
22 %
15 %
14 %
14 %
11 %
10 %
9 %
5 %
100 %
(1) Includes revenues beginning in October 2021 when we purchased our venture partner's remaining interest in Crestmont at Thornblade.
(2) Includes revenues beginning in August and December 2021, when we purchased our venture partners' remaining interests in Bells Bluff and Crossings of
Bellevue, respectively.
(3) Excludes 2021 revenues from Kendall Manor.
(4) Includes non-multi- family revenues.
The following table sets forth certain information, presented by state, related to properties owned by unconsolidated joint
ventures as of December 31, 2021(dollars in thousands):
State
Texas
South Carolina
Alabama
Mississippi
North Carolina
Georgia
Missouri
Florida
Total
___________________________
Number
of
Properties
8
3
4
2
2
2
1
1
Number of
Units
2021 Rental and
Other Revenues
(1)
Percent of 2021
JV Rental
and Other
Revenues (1)
2,561
$
917
940
776
576
511
174
242
38,460
13,778
12,326
10,367
8,677
6,894
3,463
3,357
39 %
14 %
13 %
11 %
9 %
7 %
4 %
3 %
23
$
6,697
$
97,322 9,732,200,000 % 100 %
(1) The term "JV Rental and other Revenues" refers to the revenues generated at multi-family properties owned by unconsolidated joint ventures.
Excludes revenues generated in 2021 from properties sold (including the properties at which we purchased the remaining interests of our venture partners)
during such year. See note 6 to our consolidated financial statements.
Our Acquisition Approach
Current Acquisition Approach
Given the current highly competitive environment to acquire multi-family properties, and our belief that in such
environment buying properties offered for sale by third parties will not generate an appropriate risk adjusted return for our
stockholders, we are emphasizing purchasing the interests of our joint venture partners. See "- The Impact of the COVID-19
Pandemic; 2021 and Recent Developments". Although the price we pay for our venture partner's interest is greater than that
implied by such partner's percentage interest in the venture (because we in effect are buying our partner's "promote" (i.e., our
venture partner's disproportionate share of the income and/or cash flow above a pre-determined threshold in recognition of such
partner's introducing us to the acquisition opportunity)), and the blended rate of return on investment (as described below) will
not be as favorable as those generated in the past from such properties prior to the purchase of our partner's interest, we
nonetheless believe that the blended rate of return on investment (i.e., the combination of the rate of return generated from the
return on our original investment as blended with the return generated after giving effect to the purchase of our joint venture
partners' interests) that we will achieve is superior to that, and a better use of our available investable assets, than other
acquisition opportunities currently available in the market. As we are actively involved in the operations of these properties, we
are well positioned to evaluate the efficacy of such investment. We are also making a greater effort to acquire properties
8
directly (i.e., not with joint venture partners) as we expect that this will allow the possibility for greater returns on our
investment(i.e., we will not have to pay promotes) and allow the accounts and operations of such properties to be presented
directly in our consolidated financial statements.
Historic Acquisition Approach
Historically, we identified multi-family property acquisition opportunities primarily through relationships developed over
time by our officers with former borrowers, current joint venture partners, real estate investors and brokers and have focused on
acquiring the following of multi-family property types:
•
•
•
•
Class B or better properties with strong and stable cash flows in markets where we believe there exists opportunity for
rental growth and further value creation;
Class B or better properties that offer significant potential for capital appreciation through repositioning or
rehabilitating the asset to drive rental growth;
properties available at opportunistic prices providing an opportunity for a significant appreciation in value; and
development of Class A properties in markets where we believe we can generate significant returns from the operation
and if appropriate, sale of the development.
We focused on acquiring properties that provide stable risk adjusted total returns (i.e., operating income plus capital
appreciation), including value-add opportunities (i.e., properties that can be repositioned or improved allowing us to generate
higher rents or improved occupancy) and emphasized acquiring properties in the Southeast United States and Texas. We have
been opportunistic in pursuing multi-family property acquisitions and have not mandated any specific acquisition criteria,
though we take the following into account in evaluating an acquisition opportunity: location, demographics, size of the target
market, property quality, availability and terms and conditions of long-term fixed-rate mortgage debt, potential for capital
appreciation or recurring income, extent and nature of contemplated capital improvements and property age. We have,
historically, acquired properties with a joint venture partner with knowledge and experience in owning and operating multi-
family properties in the target market.
A key consideration in our acquisition process (including the current acquisition environment in which we are emphasizing
buying the interests of our joint venture partners) is the availability of mortgage debt to finance the acquisition (or the ability to
assume the mortgage debt on the property) and the terms and conditions (e.g., interest rate, amortization and maturity) of such
debt. Historically, approximately 35% to 40% of the purchase price has been paid in cash (all or a portion of our share of which
may be funded by borrowing from our credit facility) and the balance is financed with mortgage debt. We believe that the use
of leverage allows us the ability to earn a greater return on our investment than we would otherwise earn. Generally, the
mortgage debt obtained in connection with an acquisition matures five to ten years thereafter, is interest only for one to five
years after the acquisition, and provides for a fixed interest rate and for the amortization of the principal of such debt over
30 years.
Potential acquisitions are reviewed and approved by our investment committee. Approval requires the assent of not less
than five of the eight members of this committee, all of whom are our executive officers. Board of director approval is required
for any single multi-family property acquisition in which our equity investment exceeds $40 million.
From time-to-time we have pursued development opportunities with joint venture partners when we believe the potential
higher returns justify the additional risks. The factors considered in pursuing these opportunities generally include the factors
considered in evaluating a standard acquisition opportunity, and we place additional emphasis on our joint venture partner's
ability to execute a development project. We do not anticipate development properties will constitute a significant part of our
portfolio.
Purchase of Joint Venture Interests in 2021
We bought the interests of our joint venture partners in ventures that own three multi-family properties (i.e., Bells Bluff,
Crestmont at Thornblade, and Crossings of Bellevue). As a result, these properties are wholly-owned by us. The aggregate
purchase price for these interests was $45.6 million. In connection with with these purchases, we assumed debt of $26.4
million on Crestmont at Thornblade and obtained replacement debt of $89.7 million to replace the existing debt of $61.8
million on the other two properties.
9
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.
Property and Joint Venture Dispositions
We monitor our portfolio to identify properties that should be sold. Factors considered in deciding whether to sell a
property generally include our evaluation of the current market price of such property compared to its projected economics and
changes in the factors considered by us in acquiring such property. We also believe it is important for us to maintain strong
relationships with our joint venture partners. Accordingly, we also take into account our partners' desires with respect to
property sales. If our partners deem it in their own economic interest to dispose of a property at an earlier date than we would
otherwise dispose of a property, we may accommodate such request and agree to sell the property to a third party or attempt to
purchase our partner's interest.
Sale of Wholly-Owned Properties
On May 26, 2021, we sold Kendall Manor for a sales price of $24.5 million and recognized a gain on the sale of this
property of $7.3 million. During 2021, this property contributed $1.2 million of rental income, $830,000 of real estate
operating expense, $272,000 of interest expense and $123,000 of depreciation , respectively. During 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, respectively.
On August 20, 2021, we sold a cooperative apartment unit in New York, NY for a sales price of $545,000 and recognized a
gain on the sale of $414,000.
Dispositions of Joint Venture Properties
The unconsolidated joint venture which owned The Avenue Apartments, Ocoee, FL, and Parc at 980, Lawrenceville,
GA, sold these properties 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 million. The mortgage debt secured by these
properties and paid off in connection with the sales was in aggregate principal amount of $107.5 million, had a 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.
Sale of Joint Venture Interests
We sold our interests in the unconsolidated joint ventures that owned (i) Anatole Apartments - Daytona Beach,
FL(“Anatole Apartments”), and (ii) 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 interests of $2.6 million, after giving effect to
the impairment charge of $520,000 taken in 2021 in connection with the OPOP Properties. During 2021 (through the applicable
sales dates) and 2020, these three properties contributed $1.0 million and $1.1 million respectively, in equity in loss of
unconsolidated joint ventures.
Joint Venture Arrangements
The arrangements with our multi-family property joint venture partners are deal-specific and vary from transaction-to-
transaction. Generally, these arrangements provide for us and our joint venture partner to receive net cash flow available for
distribution and/or profits in the following order of priority (in certain cases, we are entitled to these distributions on a senior or
preferential basis): (i) a preferred return of 8% to 10% on each party's unreturned capital contributions, until such preferred
return has been paid in full; and (ii) the return in full of each party's capital contribution (and together with the preferred return,
the "Mandatory Return"). Thereafter, distributions to, and profit sharing between, joint venture partners, is determined pursuant
to the applicable agreement governing the relationship between the parties. The allocation and distribution of cash and profits
to BRT after the Mandatory Return is generally less than that implied by BRT's percentage equity interest in the venture/
property as a result of allocation/distribution provisions of our joint venture operating agreements.
Although as noted above each joint venture operating agreement contains different terms, such agreements may limit our
right to vote and receive dividends and distributions. Further, such agreements generally provide for a buy-sell procedure under
specified circumstances, including, (i) if the partners are unable to agree on major decisions or (ii) upon a change in control of
our subsidiary owning the interest in the joint venture. Further, these arrangements may also allow us, and in some cases, our
10
joint venture partner, to force the sale of the property after it has been owned by the joint venture for a specified period (e.g.,
four to five years after the acquisition).
Property Management
The day-to-day management of our multi-family properties is overseen by property management companies operating in
the market in which the property is located. Approximately 61% of our properties are managed by management companies that
are owned by a joint venture partner or its affiliates. These property management companies are paid fees ranging from 2% to
4% of revenues generated by the applicable property. Generally, we can terminate these management companies upon
specified notice or for cause, subject to the approval of the mortgage lender and, in some cases, our joint venture partner. We
believe satisfactory replacements for property managers are available, if required.
Mortgage Debt
In acquiring properties, we use fixed rate mortgage debt to pay from 50% to 65% of the purchase price. Although fixed
rate mortgage debt is typically more expensive and less flexible than variable rate mortgage debt (e.g., the interest rate is higher
at origination and there are typically high prepayment penalties, yield maintenance payments and/or defeasance penalties when
refinancing the debt prior to maturity), we prefer using such debt as it caps our exposure to fluctuating interest rates. We also
from time to time obtain supplemental mortgage debt on an acquired property which, among other things, allows us to generate
additional cash resulting from the appreciation of the value of the property. As of December 31, 2021, the weighted average
annual interest rate of the mortgage debt on all our multi-family properties is 3.91% and the weighted average remaining term
to maturity of such debt is approximately 8.2 years.
The following table sets forth scheduled principal (including amortization) mortgage payments due for all of our multi-
family properties as of December 31, 2021 (dollars in thousands):
YEAR
2022
2023
2024
2025
2026
Thereafter
Total
Principal Payments
Due for Consolidated
Properties
$
31,355
1,679
2,095
17,467
1,904
146,357
Principal
Payments Due for
Unconsolidated
Joint Ventures (1)
6,119
$
42,887
Total Principal
Payments Due
$
37,474
44,566
8,222
9,577
142,768
378,329
10,317
27,044
144,672
524,686
788,759
$
200,857
$
587,902
$
________________________
(1) Does not give effect to the minority interest's share of such debt.
The mortgage debt associated with our multi-family properties, including the mortgage debt at our significant subsidiaries
generally contain covenants, including covenants that require (i) compliance with debt service coverage ratios, (ii) the guarantor
of the mortgage debt to maintain a certain level of net worth and liquid assets or (iii) in connection with the sale or other
transfer of the property, the mortgage debt to be paid off (or assumed by the buyer with the consent of the mortgage lender).
The mortgage debt is generally non-recourse to (i) the joint venture that owns the property, subject to standard carve-outs and
(ii) to us and our subsidiary acquiring the equity interest in such joint venture. We, at the parent entity level (i.e., BRT
Apartments Corp.), are the standard carve-out guarantor with respect to our wholly owned properties. (The term "standard
carve-outs" refers to recourse items to an otherwise non-recourse mortgage and are customary to mortgage financing. While
carve-outs vary from lender to lender and transaction to transaction, the carve-outs may include, among other things, a
voluntary bankruptcy filing, environmental liabilities, the sale, financing or encumbrance of the property in violation of loan
documents, damage to property as a result of intentional misconduct or gross negligence, failure to pay valid taxes and other
claims which could create a lien on a property and the conversion of security deposits, insurance proceeds or condemnation
awards). At December 31, 2021, the principal amount of mortgage debt outstanding with respect to the properties at which we
are the carve-out guarantor is approximately $189.3 million.
Corporate Level Financing Arrangements
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Corporate Level
Financing Arrangements" for information about our corporate level financing arrangements.
Insurance
11
The multi-family properties are covered by all risk property insurance covering 100% of the replacement cost for each
building and business interruption and rental loss insurance (covering up to twelve months of loss). On a case-by-case basis,
based on an assessment of the likelihood of the risk, availability of insurance, cost of insurance and in accordance with standard
market practice, we obtain earthquake, windstorm, flood, terrorism and boiler and machinery insurance. We carry
comprehensive liability insurance and umbrella policies for each of our properties which provide no less than $5 million of
coverage per incident. We request certain extension of coverage, valuation clauses, and deductibles in accordance with standard
market practice and availability.
Although we may carry insurance for potential losses associated with our multi-family properties, we may still incur losses
due to uninsured risks, deductibles, co-payments or losses in excess of applicable insurance coverage and those losses may be
material. In addition, a substantial amount of our insurance coverage is provided through blanket policies obtained by our joint
venture partners or the property managers for such property. A consequence of obtaining insurance coverage in this manner is
that losses on properties in which we have no ownership interest could reduce significantly or eliminate the coverage available
on one or more properties in which we have an interest.
Status of Former Development Projects
Our former development projects, Canalside Sola - Columbia, SC ("Sola") and Bells Bluff-Nashville, TN ("Bells Bluff";
and together with Sola, "Sola/Bells"), commenced lease up activities during the quarters ended March 31, 2018 and March 31,
2019, respectively, and exited such status in January 2020 and September 2020, respectively. Sola is owned by an
unconsolidated joint venture and Bells Bluff, as of August 18, 2021, is wholly-owned by us. At December 31, 2021,
approximately 92.6% and 96.8%, respectively of Sola Station and Bells Bluff, respectively, had been leased and are now
stabilized properties.
Our Other Real Estate Assets and Activities
In addition to our multi-family properties, we own other real estate assets with an aggregate carrying value of $6.4 million
at December 31, 2021, including undeveloped land, cooperative apartment units and a leasehold position at a commercial
property. See notes 2 and 3 to our consolidated financial statements.
Competition
We compete to acquire multi-family properties with pension and investment funds, real estate developers, private real
estate investors and other owners and operators of such properties. Competition to acquire such properties, among other things,
is based on price and the ability to secure financing on a timely basis to complete the acquisition. To the extent that a potential
joint venture partner introduces us to a multi-family acquisition opportunity, we compete with other sources of equity capital to
participate in such joint venture based on the financial returns we are willing to offer such potential partner and the other terms
and conditions of the joint venture arrangement. We also compete for tenants at our multi-family properties—such competition
depends upon various factors, including alternative housing options available in the applicable sub-market, rent, amenities
provided and proximity to employment and quality of life venues.
Many of our competitors possess greater financial and other resources than we possess.
Government Regulation
Multifamily properties are subject to various laws, ordinances and regulations, including regulations relating to common
areas, such as swimming pools, activity centers, and recreational facilities. We believe that each of our properties has the
necessary permits and approvals to operate its business.
Americans with Disabilities Act
Our properties must comply with applicable provisions of the Americans with Disabilities Act, which we refer to as the
"ADA". Among other things, the ADA may require removal of structural barriers to access by persons with disabilities in
certain public areas of our properties where such removal is readily achievable. We believe that our properties are in substantial
compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements
of the ADA. However, noncompliance with the ADA could result in imposition of fines or an award of damages to private
litigants. Our obligations under the ADA are ongoing and we will continue to assess our properties and make alterations as
appropriate.
12
Fair Housing Act
The Fair Housing Act, which we refer to as the "FHA", its state law counterparts and the regulations promulgated by the
U.S. Department of Housing and Urban Development and various state agencies, prohibit discrimination in housing on the basis
of race or color, national origin, religion, sex, familial status or handicap (disability) and, in some jurisdictions, financial
capability or other bases. Our failure to comply with these laws could result in litigation, fines, penalties or other adverse
claims, or could result in limitations or restrictions on our ability to operate, any of which could materially and adversely affect
us. We believe that we operate our properties in substantial compliance with the FHA.
Environmental Matters
We are subject to regulation at the federal, state and municipal levels and are exposed to potential liability should our
properties or actions result in damage to the environment or to other persons or properties. These conditions include the
presence or growth of mold, potential leakage of underground storage tanks, breakage or leaks from sewer lines and risks
pertaining to waste handling. The potential costs of compliance, property damage restoration and other costs for which we
could be liable or which could occur without regard to our fault or knowledge, are unknown and could potentially be material.
There are no material claims made or pending against us with regard to environmental damage, nor are we aware of any
potential environmental hazards related to any of our properties which could reasonably be expected to result in a material loss.
Human Capital Resources
As of December 31, 2021, we had nine full time employees who devote substantially all of their business time to us. In
addition, part-time personnel (including part time executive officers), perform certain executive, administrative, legal,
accounting and clerical functions for us. The services of the part-time personnel as well as the provision to us of certain
facilities and other resources are supplied pursuant to a shared services agreement between us and several affiliated entities,
including Gould Investors L.P., the owner and operator of a diversified portfolio of real estate and other assets. The expenses
for the shared personnel, facilities and resources is allocated to us and the other affiliated entities in accordance with the shared
services agreement. The allocation is based on the estimated time devoted by such part-time personnel to the affairs of the
parties to this agreement.
We also retain several related parties, among other things, to analyze and approve multi-family property acquisitions and
dispositions, develop and maintain banking and financing relationships and provide investment advice and long-term planning
(the “Services”). The aggregate fees to be paid in 2022, and paid in 2021 and 2020, for the Services, are $1.5 million, $1.4
million and $1.4 million, respectively.
See note 11 to our consolidated financial statements for further information regarding the shared services agreement and
the Services.
We provide a competitive benefits program to help meet the needs of our employees. In addition to salaries, the program
includes annual cash bonuses, stock awards, pension plan contributions, healthcare and insurance benefits, health savings
accounts, flexible spending accounts, paid-time off, family leave and an education benefit. Employees are offered flexibility to
meet personal and family needs and regular opportunities to participate in professional development programs. Most of our
employees have a long tenure with us, which we believe is indicative of the employee-friendly work environment we provide.
We maintain a work environment that is free from discrimination or harassment on the basis of color, race, sex, national
origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by
applicable law, and our employees are compensated in a manner unrelated to their inclusion in any of the foregoing categories.
These workplace protections and compensation benefits are afforded to the part-time personnel providing services to us
pursuant to the shared services agreement.
Executive Officers of Registrant
Set forth below is a list of our executive officers whose terms will expire at our 2022 annual Board of Directors' meeting
(the business history of officers who are also directors will be provided in our proxy statement to be filed not later than May 2,
2022):
13
Name
Israel Rosenzweig (1)
Jeffrey A. Gould (2)
Mitchell K. Gould (3)
Matthew J. Gould (2)
David W. Kalish (4)
Mark H. Lundy
Steven Rosenzweig (1)
George E. Zweier
Isaac Kalish (4)
Ryan Baltimore
Age
74
56
49
62
74
59
46
58
46
30
Office
Chairman of the Board of Directors
President, Chief Executive Officer and Director
Executive Vice President
Senior Vice President and Director
Senior Vice President - Finance
Senior Vice President and Counsel
Senior Vice President - Legal
Vice President and Chief Financial Officer
Vice President and Treasurer
Chief Operating Officer
__________________________________________________________________________
(1) Steven Rosenzweig is the son of Israel Rosenzweig.
(2) Jeffrey A. Gould and Matthew J. Gould are sons of Fredric H. Gould, the former chairman of our board of directors and currently, a director.
(3) Mitchell K. Gould is a cousin of Fredric H. Gould.
(4) Isaac Kalish is the son of David W. Kalish.
Mitchell K. Gould has been employed by us since 1998, and has served as a Vice President since 1999 and Executive Vice
President since 2007.
David W. Kalish, a certified public accountant, has been our Senior Vice President, Finance since 1998. Mr. Kalish was
our Vice President and Chief Financial Officer from 1990 until 1998. He has been Chief Financial Officer of One Liberty
Properties, Inc. and Georgetown Partners, LLC. since 1990. Georgetown Partners is the managing general partner of Gould
Investors, a related party.
Mark H. Lundy has been our Counsel and/or General Counsel since 2007, Senior Vice President since 2005 and Vice
President from 1993 to 2005. He served as a Vice President of One Liberty Properties from 2000 to 2006 and has been its
Secretary and Senior Vice President since June 1993 and 2006, respectively. Since 2013, Mr. Lundy has served as President
and Chief Operating Officer, and from 1990 through 2013 as a Vice President (including Senior Vice President), of
Georgetown Partners, LLC. He is licensed to practice law in New York and Washington, D.C.
Steven Rosenzweig has been associated with us since 2013, served as a Vice President from 2015 through 2019 and as
Senior Vice President - Legal since 2019. He is licensed to practice law in New York.
George E. Zweier, a certified public accountant, has served as our Chief Financial Officer and a Vice President since 1998.
Isaac Kalish, a certified public accountant, has been associated with us since 2004, served as Assistant Treasurer from 2007
through 2014 and as Vice President and Treasurer since 2013 and 2014, respectively. Mr. Kalish has served as Vice President
and Assistant Treasurer of One Liberty Properties since 2013 and 2007, respectively, as Assistant Treasurer of Georgetown
Partners, LLC from 2012 through 2013, and as its Treasurer since 2013.
Ryan Baltimore has been employed by us since 2013, served as Senior Vice President - Corporate Strategy and Finance
from 2019 through January 2022, and as Chief Operating Officer thereafter.
Item 1A. Risk Factors.
Set forth below is a discussion of certain risks affecting our business. The categorization of risks set forth below is meant
to help you better understand the risks facing our business and is not intended to limit your consideration of the possible effects
of these risks to the listed categories.Any adverse effects arising from the realization of any of the risks discussed, including our
financial condition and results of operation, may, and likely will, adversely affect many aspects of our business.
Risks Related to the COVID-19 Pandemic
The continuation of the COVID-19 pandemic, the responses thereto and the economic consequences flowing therefrom,
may adversely impact our business, income, cash flow, results of operations, financial condition, liquidity, prospects, ability
to service our debt obligations, and our ability to pay cash dividends to our stockholders.
14
We have faced, and may continue to face, challenges resulting from the COVID-19 pandemic. The economic consequences
of the pandemic, among other things, have adversely affected and may continue to adversely affect,the ability of some of our
residents to pay rent (due to furloughs, layoffs and/or the expiration of, or reduction in, unemployment benefits). If economic
conditions worsen for an extended period, a significant number of residents may be unable to pay rent, and our ability to pay
dividends and/or the debt service on our mortgages may be adversely affected. The seesaw nature of the pandemic and its
impact on the economy and financial markets present material risks and uncertainties. We are unable to predict the ultimate
impact that the pandemic and the related dislocations will have on our business, financial condition, results of operation and
cash flows, which will depend largely on various factors outside of our control.
Risks Related to our Business
Most of our multi-family properties are located in the Southeast and Texas which makes us susceptible to adverse
developments in such markets.
The operating performance of our multi-family properties is impacted by the economic, environmental and other conditions
of the specific markets in which our properties are concentrated. At December 31, 2021: (i) our wholly-owned properties
generated approximately 22%, 15%, 14% and 14% of our 2021 revenues from properties located in Georgia, Florida, South
Carolina and Virginia, respectively, and (ii) properties owned by unconsolidated joint ventures generated 39%, 14%, 13% and
11% of our 2021 JV Rental and Other Revenues at properties located in Texas, South Carolina, Alabama and Mississippi,
respectively. Accordingly, adverse developments in such markets, including economic developments, pandemics, or natural or
man-made disasters, could adversely impact the operations of these properties and therefore our operating results and cash
flow. The concentration of our properties in the Southeast United States and Texas exposes us to risks of adverse developments
which are greater than the risks of owning properties with a more geographically diverse portfolio.
Risks involved in conducting real estate activity through joint ventures.
Most of our multi-family properties are owned through joint ventures with other persons or entities. Joint venture
investments involve risks not otherwise present when acquiring real estate directly, including the following:
•
•
•
•
•
•
•
•
•
•
our joint venture partners may have economic or business interests or objectives which are or become inconsistent
with our business interests or objectives, including differing objectives relating to the sale or refinancing of properties
held by the joint venture or the timing of the termination or liquidation of the joint venture;
the more successful a joint venture project, the more likely that profits or distributions generated above a negotiated
threshold will be allocated disproportionately in favor of our joint venture partner at a rate greater than that implied by
our partner's equity interest in the venture;
several of our joint venture partners have other competing real estate interests in the markets in which our properties
are located that could influence such partners to take actions favoring their properties to the detriment of the jointly
owned properties;
our joint venture partners obtain blanket property casualty and business interruption insurance insuring properties we
own jointly and other properties in which we have no ownership interest and as a result, claims or losses with respect
to properties owned by our joint venture partners but in which we have no interest could significantly reduce or
eliminate the insurance available to properties in which we have an interest;
our joint venture partner might become bankrupt, insolvent or otherwise refuse or be unable to meet their obligations
to us or the venture (including their obligation to make capital contributions or property distributions when due);
we may incur liabilities as a result of action taken by our joint venture partner;
our joint venture partner may not perform its property oversight responsibilities;
our joint venture partner may be in a position to take action or withhold consent contrary to our instructions or
requests, including actions that may make it more difficult to maintain our qualification as a REIT;
our joint venture partner might engage in unlawful or fraudulent conduct with respect to our jointly owned properties
or other properties in which they have an ownership interest;
changes in personnel managing our joint venture partners have resulted in greater difficulty in working with the new
personnel;
15
•
•
•
our joint venture partner may trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our
partner's interest, at a time when we otherwise would not have initiated such a transaction;
disputes between us and our joint venture partners may result in litigation or arbitration that would increase our
expenses and divert management's attention from operating our business; and
disagreements with our joint venture partners with respect to property management (including with respect to whether
a property should be sold, refinanced, or improved) could result in an impasse resulting in the inability to operate the
property effectively.
Joint venture partners have acted without our authorization (e.g., a partner modified a mortgage term without our consent).
We also have had, and expect to continue to have, disagreements with joint venture partners over various issues including,
among others, as to whether, and the extent to which, value add programs should be implemented at a property, whether a
mortgage debt on a property should be refinanced and the terms and conditions of such refinancing, and, because our joint
venture structure may incentivize our joint venture partner to sell the property sooner than we would otherwise desire, the
timing and terms and conditions of property sales.
We own 14 multi-family properties with three joint venture partners or their affiliates and may be adversely effected if we
are unable to maintain a satisfactory working relationship with any one or more of these joint venture partners.
Joint ventures that own six multi-family properties are owned with one joint venture partner or its affiliates, joint ventures
that own four multi-family properties are owned with a second joint venture partner or its affiliates and joint ventures that own
four multi-family properties are owned with a third joint venture partner or its affiliates. This concentration of ownership of
properties with a limited number of joint venture partners exposes us to risks of adverse developments, and in particular,
disputes or disagreements with such joint venture partners, which are greater than the risks of owning properties with a more
diverse group of joint venture partners.
The failure of third party property management companies to properly manage our properties or obtain sufficient insurance
coverage could adversely impact our results of operations.
We and our joint venture partners rely on property management companies to manage our properties. At December 31,
2021, approximately 20 properties are managed by a management company owned by or affiliated with a joint venture partner.
These management companies are responsible for, among other things, leasing and marketing rental units, selecting tenants
(including an evaluation of the creditworthiness of tenants), collecting rent, paying operating expenses, maintaining the
property and obtaining insurance coverage for the properties they manage. If these property management companies do not
perform their duties properly or we or our joint venture partners do not effectively supervise the activities of these managers,
the occupancy rates and rental rates at the properties managed by such property managers may decline and the expenses at such
properties may increase. At December 31, 2021, one property manager manages eight of our properties and a second property
manager manages six of our properties, other property managers manage four or fewer properties. The loss of our property
managers, and in particular, the managers that manage multiple properties, could result in a decrease in occupancy rates, rental
rates or both or an increase in expenses. Further, property managers are also responsible for obtaining insurance coverage with
respect to the properties they manage, which coverage is often obtained pursuant to blanket policies covering many properties
in which we have no interest. Losses at properties managed by our property managers but in which we have no interest could
reduce significantly the insurance coverage available at our properties managed by these property managers. It may be difficult
to terminate a non-performing management company, particularly a management company owned or affiliated with a joint
venture because such termination may require the approval of the mortgagee, our joint venture partner or both. If we are unable
to terminate an underperforming property manager on a timely basis, our occupancy and rental rates may decrease and our
expenses may increase.
Increasing real estate taxes, utilities and insurance premiums may negatively impact operating results.
The cost of real estate taxes, utilities and insuring our multi-family properties is a significant component of real estate
operating expense. These expenses are subject to significant increases and fluctuations, which we may be unable to control. For
example, our share of the insurance premiums at joint venture properties is determined by our joint venture partner at such
properties; further, casualty losses at certain properties have resulted in significant increases in the insurance premiums we pay
for insurance coverage at such properties. Real estate taxes may increase as our properties are reassessed by taxing authorities
and as property tax rates change. Our real estate taxes have increased over time; further, they have fluctuated and may not be
comparable year-over-year because of, among other things, (i) the timing difference as to when we accrue real estate taxes and
the results of any tax appeals with respect to such accrued taxes and (ii) determinations, over which we have no control, by
governmental authorities to increase tax rates, assessments or procedures. If the costs associated with real estate taxes, utilities
and insurance premiums should rise, without being offset by a corresponding increase in revenues, our results of operations
16
could be negatively impacted, and our ability to make payments on our debt and to make distributions could be adversely
affected.
We may not be able to compete with competitors, many of which have greater financial and other resources than we possess.
We compete with many third parties engaged in the ownership and operation of multi-family properties, including other
REITs, specialty finance companies, public and private investors, investment and pension funds and other entities. Many of
these competitors have substantially greater financial and other resources than we do. Larger and more established competitors
enjoy significant competitive advantages that result from, among other things, enhanced operating efficiencies and more
extensive networks providing greater and more favorable access to capital, financing and tax credit allocations and more
favorable acquisition opportunities.
Our operating results are significantly influenced by demand for multi-family properties generally, and a decrease in such
demand will likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.
Our current portfolio is focused on multi-family properties, and we expect that going forward we will continue to focus on
the acquisition, disposition and operation of such properties. As a result, we are subject to risks inherent in investments in a
single industry, and a decrease in the demand for multi-family properties would likely have a greater adverse effect on our
rental revenues than if we owned a more diversified real estate portfolio.
Our value-add activities involve greater risks than more conservative investment strategies.
In many cases, we seek to acquire properties at which we believe our investment of additional capital to enhance such
properties will result in increased rental rates and higher resale value. These efforts involve greater risks than more conservative
investment strategies. The risks related to these value-add activities include risks related to delays in the repositioning or
improvement process, higher than expected capital improvement costs, the additional capital needed to execute our value-add
program, the possibility that these value-add activities may not result in the anticipated higher rents and occupancy rates and the
loss of revenue while these properties or units are undergoing capital improvements. We may also be unable to complete the
improvements of these properties and may be forced to hold or sell these properties at a loss. For these and other reasons, we
cannot assure you that we will realize growth in the value of our value-add multifamily properties, and as a result, our ability to
make distributions to our stockholders could be adversely affected.
Increased competition and increased affordability of residential homes could limit our ability to retain our tenants or
increase or maintain rents.
Our multi-family properties compete with numerous housing alternatives, including other multi-family and single-family
rental homes, as well as owner occupied single and multi-family homes. Our ability to retain tenants and increase or maintain
rents or occupancy levels could be adversely affected by the alternative housing in a particular area and, due to declining
housing prices, mortgage interest rates and government programs to promote home ownership, the increasing affordability of
owner occupied single and multi-family homes.
Our operating results and assets may be negatively affected if our insurance coverage is insufficient to compensate us for
casualty events occurring at our properties.
Our multi-family properties, including the properties owned by the joint ventures in which we are members, carry all risk
property insurance covering the property and improvements thereto for the cost of replacement in the event of a casualty.
Though we maintain insurance coverage, such coverage may be insufficient to compensate us for losses sustained as a result of
a casualty because, among other things:
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the amount of insurance coverage maintained for any property may be insufficient to pay the full replacement cost
following a casualty event;
the rent loss coverage under a policy may not extend for the full period of time that a tenant or tenants may be entitled
to a rent abatement that is a result of, or that may be required to complete restoration following, a casualty event;
certain types of losses, such as those arising from earthquakes, floods, hurricanes and terrorist attacks, may be
uninsurable or may not be economically feasible to insure;
changes in zoning, building codes and ordinances, environmental considerations and other factors may make it
impossible or impracticable, to use insurance proceeds to replace damaged or destroyed improvements at a property;
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insurance coverage is part of blanket insurance policies in which losses on properties in which we have no ownership
interest could reduce significantly or eliminate the coverage available on our properties; and
the deductibles applicable to one or more buildings at a property may be greater than the losses sustained at such
buildings.
If our insurance coverage is insufficient to cover losses sustained as a result of one or more casualty events, our operating
results and the value of our portfolio will be adversely affected.
Development, redevelopment and construction risks could affect our operating results.
We may continue to develop and redevelop multi-family properties. These activities may be exposed to the following
risks:
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we have limited experience in development projects and will be dependent on our joint venture partner or the sponsor
of the project to oversee the project's implementation;
we may abandon opportunities that we have already begun to explore for a number of reasons, including changes in
local market conditions or increases in construction or financing costs, and, as a result, we may fail to recover
expenses already incurred in exploring those opportunities;
occupancy rates and rents at development properties may fail to meet our original expectations for a number of
reasons, including changes in market and economic conditions beyond our control and the development by competitors
of competing properties;
we may be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy, or other required
governmental or third party permits and authorizations, which could result in increased costs or the delay or
abandonment of development opportunities;
we may incur costs that exceed our original estimates due to increased material, labor or other costs;
we may be unable to complete construction and lease-up of a development project on schedule, resulting in increased
construction and financing costs and a decrease in expected rental revenues;
we may be unable to obtain financing with favorable terms, or at all, for the proposed development of a property,
which may cause us to delay or abandon a development opportunity; and
we may be unable to refinance with favorable terms, or at all, any construction or other financing obtained for a
development property, which may cause us to sell the property on less favorable terms or surrender the property to the
lender.
If we are unable to address effectively these and other risks associated with development projects, our financial condition
and results of operations may be adversely effected.
Risks Related to Our Financing Activities, Indebtedness and Capital Resources
If we are unable to refinance $64.7 million in balloon payments on mortgage debt maturing through 2024, we may be forced
to sell properties on disadvantageous terms.
As of December 31, 2021, we have balloon payments of $64.7 million on mortgage debt (including $35.3 million of
mortgage debt on properties owned by unconsolidated joint ventures) due through 2024 (including $29.4 million and $35.3
million due in 2022 and 2023, respectively). The weighted average interest rate of this debt is 4.05%. Our operating cash flow
and funds available under our credit facility will be insufficient to discharge this debt when due. Accordingly, we may seek to
refinance this debt or sell the related property prior to the maturity of such debt. Increases in interest rates, or reduced access to
credit markets due, among other things, to more stringent lending requirements or our high level of leverage, may make it
difficult for us to refinance this mortgage debt on terms as favorable as the current debt. If we are unsuccessful in refinancing
such debt, or if the terms of the refinanced debt are less favorable that the current debt, we may be forced to dispose of
properties on disadvantageous terms or convey properties secured by such mortgages to the mortgagees, which would reduce
our income and impair the value of our portfolio.
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Our failure to comply with our obligations under our debt instruments may reduce our stockholders’ equity, and adversely
affect our net income and ability to pay dividends.
Several of our debt instruments include covenants that require us to maintain certain financial ratios, including various
coverage ratios, and comply with other requirements. Failure to meet interest and other payment obligations under our debt
instruments or a breach by us of the covenants to comply with certain financial ratios would place us in non-compliance under
such instruments. If the lender called a default and required us to repay the full amount outstanding under such instrument, we
might be required to rapidly dispose of our properties, including properties securing such debt instruments, which could have an
adverse impact on the amounts we receive on such disposition. From time to time we have failed to comply with certain debt
covenants. If we are unable to satisfy the covenants of our debt obligations, the lender could exercise remedies available to it
under the applicable debt instrument and as otherwise provided by law, including the possible appointment of a receiver to
manage the property, application of deposits or reserves maintained under the debt instrument for payment of the debt, or
foreclose and/or cause the forced sale of the property or asset securing such debt. A foreclosure or other forced disposition of
our assets could result in the disposition of same at below the carrying value of such asset. The disposition of our properties or
assets at below our carrying value may adversely affect our net income, reduce our stockholders’ equity and adversely affect
our ability to pay dividends.
We may not have sufficient funds to make required or desired capital improvements.
Our multi-family properties face competition from newer and updated properties. At December 31, 2021 the weighted
average age (based on the number of units) of our multi-family properties is approximately 18 years. To remain competitive and
increase occupancy at these properties and/or make them attractive to potential tenants or purchasers, we may have to make
significant capital improvements and/or incur deferred maintenance costs with respect to these properties. At December 31,
2021, we have $6.6 million of restricted cash that can only be used for improvements at specific properties. The cost of future
improvements and deferred maintenance is uncertain and the amounts earmarked for specific properties may be insufficient to
effectuate needed improvements. Our results of operations and financial conditions may be adversely affected if we are
required to expend significant funds (other than funds earmarked for such purposes) to repair or improve our properties.
Our acquisition, development and value-add activities are limited by the funds available to us.
Our ability to acquire additional multi-family properties, develop new properties and improve the properties in our
portfolio is limited by the funds available to us and our ability to obtain, on acceptable terms, equity contributions from joint
venture partners and mortgage debt from lenders. At December 31, 2021, we had $32.3 million of cash and cash equivalents
and $6.6 million designated as restricted cash for improvements at 13 multi-family properties. Our multi-family acquisition and
value-add activities are constrained by funds available to us which will limit growth in our revenues and operating results.
If we are required to make payments under any “bad boy” carve out guarantees that we have provided in connection with
certain mortgages and related loans, our business and financial results could be materially adversely affected.
In obtaining certain non-recourse loans, we have provided our lenders with standard carve out guarantees. These
guarantees are only applicable if and when the borrower directly, or indirectly through an agreement with an affiliate, joint
venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other
actions that are fraudulent or improper (commonly referred to as “bad boy” guarantees). Although we believe that “bad boy”
carve out guarantees are not guarantees of payment in the event of foreclosure or other actions of the foreclosing lender that are
beyond the borrower’s control, some lenders in the real estate industry have recently sought to make claims for payment under
such guarantees. In the event such a claim were made against us under a “bad boy” carve out guarantee, following foreclosure
on mortgages or related loans, and such claim were successful, our business and financial results could be materially adversely
affected.
We could be negatively impacted by changes in our relationship with Fannie Mae or Freddie Mac, changes in the condition
of Fannie Mae or Freddie Mac and by changes in government support for multi-family housing.
Fannie Mae and Freddie Mac have been a major source of financing for multi-family real estate in the United States and we
have used loan programs sponsored by these agencies to finance most of our acquisitions of multi-family properties. There have
been ongoing discussion by the government and other interested parties with regard to the long term structure and viability of
Fannie Mae and Freddie Mac, which could result in adjustments to guidelines for their loan products. Should these agencies
have their mandates changed or reduced, lose key personnel, be disbanded or reorganized by the government or otherwise
discontinue providing liquidity for the multi-family sector, our ability to obtain financing through loan programs sponsored by
the agencies could be negatively impacted. In addition, changes in our relationships with Fannie Mae and Freddie Mac, and the
lenders that participate in these loan programs, with respect to our existing mortgage financing could impact our ability to
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obtain comparable financing for new acquisitions or refinancing for our existing multi-family real estate investments. Should
our access to financing provided through Fannie Mae and Freddie Mac loan programs be reduced or impaired, it would
significantly reduce our access to debt capital and/or increase borrowing costs and could significantly limit our ability to
acquire properties on acceptable terms and reduce the values to be realized upon property sales.
The phasing out of LIBOR may adversely affect our cash flow and financial results.
Excluding the variable rate mortgage debt associated with a property sold in February 2022, at December 31, 2021 we had
$37.4 million in variable rate debt in the form of junior subordinated notes maturing in 2036 and bearing an interest rate which
resets quarterly and is based on three-month LIBOR plus 200 basis points (the “LIBOR Debt”). Our exposure to fluctuating
interest payments on the LIBOR Debt is unhedged. The authority regulating LIBOR announced it intends to stop compelling
banks to submit rates for the calculation of LIBOR after June 2023 and it is possible that LIBOR will become unavailable at an
earlier date. Although the LIBOR Debt provide for alternative methods of calculating the interest rate when LIBOR becomes
unavailable, such alternative rates may be unavailable in which case we may have to negotiate a secondary alternative rate with
the counterparties to the LIBOR Debt – we can provide no assurance that we and our counterparties will be able to agree to a
secondary alternative rate. Our cash flow and financial results may be adversely affected if we are unable to arrange a mutually
satisfactory alternative rate to LIBOR for our LIBOR Debt. Further, the absence of LIBOR or a generally acceptable
alternative thereto may make it more challenging to hedge our interest rate exposure on variable rate debt that we may incur in
the future which in turn may make it more difficult to acquire properties.
We depend on our subsidiaries for cash flow and will be adversely impacted if these subsidiaries are prohibited from
distributing cash to us.
We conduct, and intend to conduct, substantially all of our business operations through our subsidiaries including our
unconsolidated subsidiaries. Accordingly, our only source of cash to fund our operations and pay our obligations are
distributions from our subsidiaries. We cannot assure you that our subsidiaries will be able to, or be permitted to, make
distributions to us that will enable us to fund our operations. Each of our subsidiaries is or will be a distinct legal entity and,
under certain circumstances, legal and contractual restrictions(e.g., restrictions imposed pursuant to mortgage debt on a
property), limit our ability to obtain cash from such entities. In addition, because we operate through our subsidiaries, your
claims as stockholders will be structurally subordinated to all existing and future liabilities and obligations of our subsidiaries.
Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our subsidiaries will be able to
satisfy your claims as stockholders only after all our and our subsidiaries' liabilities and obligations have been paid in full.
Regulatory and Tax Risks
Changes to the U.S. federal income tax laws could have an adverse impact on our business and financial results.
At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be
amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any
amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted,
promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our
stockholders could be adversely affected by any such change in the U.S. federal income tax laws, regulations or administrative
interpretations.
Liabilities relating to environmental matters may impact the value of our properties.
We may be subject to environmental liabilities arising from the ownership of properties. Under various federal, state and
local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances
released on its property. These laws often impose liability without regard to whether the owner or operator knew of, or was
responsible for, the release of such hazardous substances.
The presence of hazardous substances on our properties may adversely affect our ability to finance or sell the property and
we may incur substantial remediation costs. The discovery of material environmental liabilities attached to such properties
could have a material adverse effect on our results of operations and financial condition.
Compliance or failure to comply with the ADA or other safety regulations and requirements could result in substantial costs.
The ADA generally requires that public buildings, including the public areas at our properties, be made accessible to
disabled persons. Non-compliance could result in the imposition of fines by governmental authorities or the award of damages
to private litigants. From time-to-time claims may be asserted against us with respect to some of our properties under the ADA.
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If, under the ADA, we are required to make substantial alterations and capital expenditures in one or more of our properties, it
could adversely affect our financial condition and results of operations.
Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life
safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not
know whether existing requirements will change or whether compliance with future requirements will require significant
unanticipated expenditures that will affect our cash flow and results of operations.
We could be adversely affected if we or any of our subsidiaries are required to register as an investment company under the
Investment Company Act of 1940 as amended (the “1940 Act”).
We conduct our operations so that neither we, nor any of our subsidiaries is required to register as investment companies
under the 1940 Act. If we or any of our subsidiaries is required to register as an investment company but fail to do so, the
unregistered entity would be prohibited from engaging in certain business, and criminal and civil actions could be brought
against such entity. In addition, the contracts of such entity would be unenforceable unless a court required enforcement, and a
court could appoint a receiver to take control of the entity and liquidate its business.
Risks Associated with the Real Estate Industry and REITs.
We face numerous risks associated with the real estate industry that could adversely affect our results of operations through
decreased revenues or increased costs.
As a real estate company, we are subject to various changes in real estate conditions, and any negative trends in such real
estate conditions may adversely affect our results of operations through decreased revenues or increased costs. These conditions
include:
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changes in national, regional and local economic conditions, which may be negatively impacted by concerns about
inflation, deflation, government deficits, unemployment rates and decreased consumer confidence particularly in
markets in which we have a high concentration of properties;
increases in interest rates, which could adversely affect our ability to obtain financing or to buy or sell properties on
favorable terms or at all;
the inability of tenants to pay rent;
the existence and quality of the competition, such as the attractiveness of our properties as compared to our
competitors' properties based on considerations such as convenience of location, rental rates, amenities and safety
record;
increased operating costs, including increased real property taxes, maintenance, insurance and utility costs
(including increased prices for fossil fuels);
weather conditions that may increase or decrease energy costs and other weather-related expenses;
oversupply of apartments or single-family housing or a reduction in demand for real estate in the markets in which
our properties are located;
a favorable interest rate environment that may result in a significant number of residents or potential residents of our
multi-family properties deciding to purchase homes instead of renting;
changes in, or increased costs of compliance with, laws and/or governmental regulations, including those governing
usage, zoning, the environment and taxes; and
rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents
to offset increases in operating costs.
Moreover, other factors may adversely affect our results of operations, including potential liability under environmental
and other laws and other unforeseen events, many of which are discussed elsewhere in the following risk factors. Any or all of
these factors could materially adversely affect our results of operations through decreased revenues or increased costs.
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Compliance with REIT requirements may hinder our ability to maximize profits.
We must continually satisfy tests concerning, among other things, our sources of income, the amounts we distribute to our
stockholders and the ownership of our common stock, to qualify as a REIT for Federal income tax purposes. We may also be
required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for
distribution. Accordingly, compliance with REIT requirements may hinder our ability to operate solely on the basis of
maximizing profits.
To qualify as a REIT, we must also ensure that at the end of each calendar quarter at least 75% of the value of our assets
consists of cash, cash items, government securities and qualified REIT real estate assets. The remainder of our investment in
securities cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total
value of the outstanding securities of such issuer. In addition, no more than 5% of the value of our assets can consist of the
securities of any one issuer, other than a qualified REIT security. If we fail to comply with these requirements, we must dispose
of the portion of our assets in excess of such amounts within 30 days after the end of the calendar quarter in order to avoid
losing our REIT status and suffering adverse tax consequences. This requirement could cause us to dispose of assets for
consideration of less than their true value and could lead to a material adverse impact on our results of operations and financial
condition.
Because real estate investments are illiquid, we may not be able to reconfigure our portfolio on a timely basis.
Real estate investments generally cannot be sold quickly. We may not be able to reconfigure our portfolio promptly in
response to economic or other conditions. Further, even if we are able to sell properties, we may be unable to reinvest the
proceeds of such sales in opportunities that are as favorable as the properties sold. Our inability to reconfigure our portfolio to
profitably reinvest the proceeds of property sales promptly could adversely affect our financial condition and results of
operations.
We may incur impairment charges in 2022.
We evaluate on a quarterly basis our real estate portfolio for indicators of impairment. Impairment charges reflect
management's judgment of the probability and severity of the decline in the value of real estate assets we own. These charges
and provisions may be required in the future as a result of factors beyond our control, including, among other things, changes in
the economic environment and market conditions affecting the value of real property assets or natural or man-made disasters. In
2021, we incurred a $520,000 impairment charge related to our investment in the joint venture that owned the OPOP Properties
and in 2020 we incurred a $3.6 million impairment charge on the South Daytona Property. If we are required to take additional
impairment charges, our results of operations will be adversely impacted.
If we do not continue to pay cash dividends, the price of our common stock may decline.
REIT's are generally required to distribute annually at least 90% of their ordinary taxable income to maintain our REIT
status under the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, which we
refer to as the Code. Because we continue to generate operating losses primarily due to the impact of depreciation, we are not
currently required, and may not be required in the future, to pay dividends to maintain our REIT status. Accordingly, we
cannot assure you that we will pay dividends in the future. If we do not continue to pay cash dividends, the price of our
common stock may decline.
Risks Related to BRT's Organization, Structure and Ownership of its Stock
Our transactions with affiliated entities involve conflicts of interest.
Entities affiliated with us and with certain of our executive officers provide services to us and on our behalf. These
transactions may not be on terms as favorable as those that we would receive if the transactions were entered into with
unaffiliated entities and persons. Among other things, we retain certain executive officers and others to provide the Services.
The aggregate fees to be paid for the Services in 2022, and paid in 2021 and 2020, are $1.5 million, $1.4 million and $1.4
million, respectively. We obtain certain executive, administrative, legal, accounting and clerical personnel and the use of certain
facilities pursuant to the shared services agreement. During 2021 and 2020, we reimbursed Gould Investors $641,000 and
$761,000, respectively, for the personnel and facilities provided pursuant to the shared services agreement. We also obtain
certain insurance in conjunction with Gould Investors and reimbursed Gould Investors $61,000 and $39,000, in 2021 and 2020,
respectively, for our share of the insurance cost.
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Senior management and other key personnel are critical to our business and our future success may depend on our ability to
retain them.
We depend on the services of Jeffrey A. Gould, our president and chief executive officer, and other members of senior
management to carry out our business and investment strategies. Although Jeffrey A. Gould devotes substantially all of his
business time to our affairs, he devotes a portion of his business time to entities affiliated with us. In addition to Jeffrey A.
Gould, only three other executive officers, Mitchell Gould, our executive vice president, Ryan Baltimore, chief operating
officer, and George Zweier, vice president and chief financial officer, devote all or substantially all of their business time to us.
Many of our executives (i) also provide the Services (see "Item 1. Business-Human Capital Resources") and (ii) provide their
services on a part-time basis pursuant to the shared services agreement. We rely on part-time executive officers to provide
certain services to us, including legal and certain accounting services, since we do not employ full-time executive officers to
handle all of these services. If the shared services agreement is terminated or the executives performing Services are unwilling
to continue to do so, we will have to obtain such services from other sources or hire employees to perform them. We may not be
able to replace these services or hire such employees in a timely manner or on terms, including cost and level of expertise, that
are equivalent to or better than those we receive pursuant to the Services and the shared services agreement.
In addition, in the future we may need to attract and retain qualified senior management and other key personnel, both on a
full-time and part-time basis. The loss of the services of any of our senior management or other key personnel or our inability to
recruit and retain qualified personnel in the future, could impair our ability to carry out our business and our investment
strategies.
We do not carry key man life insurance on members of our senior management.
Certain provisions of our Articles of Incorporation, our Bylaws and Maryland law may inhibit a change in control that
stockholders consider favorable and could also limit the market price of our common stock
Certain provisions of our Articles of Incorporation (the "Charter"), our Bylaws and Maryland law may impede, or prevent,
a third party from acquiring control of us without the approval of our board of directors. These provisions:
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provide for a staggered board of directors consisting of three classes, with one class of directors being elected each
year and each class being elected for three-year terms and until their successors are duly elected and qualify;
impose restrictions on ownership and transfer of our stock (such provisions being intended to, among other
purposes, facilitate our compliance with certain requirements under the Internal Revenue Code of 1986, as amended
(the "Code"), relating to our qualification as a REIT under the Code);
prevent our stockholders from amending the Bylaws;
limit who may call special meetings of stockholders;
establish advance notice and informational requirements and time limitations on any director nomination or proposal
that a stockholder wishes to make at a meeting of stockholders;
provide that directors may be removed only for cause and only by the vote of at least two-thirds of all votes
generally entitled to be cast in the election of directors;
do not permit cumulative voting in the election of our board of directors, which would otherwise permit holders of
less than a majority of outstanding shares to elect one or more directors; and
authorize our board of directors, without stockholder approval, to amend the Charter to increase or decrease the
aggregate number of shares of our stock or the number of shares of stock of any class or series that we have
authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the
preferences, rights and other terms of the classified or reclassified shares.
Certain provisions of the Maryland General Corporation Law (the “MGCL”) may impede a third party from making a
proposal to acquire us or inhibit a change of control under circumstances that otherwise could be in the best interest of holders
of shares of our common stock, including:
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“business combination” provisions that, subject to certain exceptions and limitations, prohibit certain business
combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns
10% or more of the voting power of our outstanding voting stock or an affiliate or associate of BRT who, at any
time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more
of the voting power of our then outstanding voting stock) or an affiliate thereof for five years after the most recent
date on which the stockholder becomes an interested stockholder, and thereafter impose two super-majority
stockholder voting requirements on these combinations;
“control share” provisions that provide that, subject to certain exceptions, holders of “control shares” of BRT
(defined as voting shares which, when aggregated with other shares controlled by the stockholder, entitle the holder
to exercise voting power in the election of directors within one of three increasing ranges) acquired in a “control
share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding
“control shares,” subject to certain exceptions) have no voting rights with respect to the control shares except to the
extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast
on the matter, excluding all interested shares; and
additionally, Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and
regardless of what is currently provided in the Charter or the Bylaws, to implement certain corporate governance
provisions.
We have (1) exempted all business combinations between us and any other person, provided that each such business
combination is first approved by our board of directors (including a majority of directors who are not affiliates or associates of
such other person), from the Maryland Business Combination Act and (2) opted out of the Maryland Control Share Acquisition
Act.
Ownership of less than 6.0% of our outstanding shares or less than 6.0% of the aggregate outstanding shares of all classes
and series of our stock could violate the restrictions on ownership and transfer in our Charter, which would result in the
transfer of the shares owned or acquired in violation of such restrictions to a trust for the benefit of a charitable beneficiary
and loss of the right to receive dividends and other distributions on, and the economic benefit of any appreciation of, such
shares, and you may not have sufficient information to determine at any particular time whether an acquisition of our
shares will result in the loss of the economic benefit of such shares.
In order for us to qualify as a real estate investment trust under the Code, no more than 50% of the value of the outstanding
shares of our stock may be owned, directly or indirectly or through application of certain attribution rules, by five or fewer
“individuals” (as defined in the Code) at any time during the last half of a taxable year. To facilitate our qualification as a REIT
under the Code, among other purposes, the Charter generally prohibits any person from actually or constructively owning more
than 6.0%, in value or number of shares, whichever is more restrictive, of our outstanding shares of common stock, or more
than 6.0% in value of the aggregate outstanding shares of all classes and series of our stock, which we refer to as the
“ownership limits,” unless our board of directors exempts the person from such ownership limit. In addition, the Charter
prohibits any person from beneficially or constructively owning shares of our stock that would result in more than 50% of the
value of the outstanding shares of our stock to be beneficially owned by five or fewer individuals, regardless of whether such
ownership is during the last half of any taxable year, which we refer to as the “Five or Fewer Limit.” Shares owned or acquired
in violation of either of these restrictions will be transferred automatically to a trust for the benefit of a charitable beneficiary
selected by us. The person that owned or acquired our stock in violation of the restrictions in the Charter will not be entitled to
any dividends or distributions paid after the date of the transfer to the trust and, upon a sale of such shares by the trust, will
generally be entitled to receive only the lesser of the market value on the date of the event that resulted in the transfer to the
trust or the net proceeds of the sale by the trust to a person who could own the shares without violating the ownership limits.
Our board of directors has exempted Gould Investors, Fredric H. Gould, Matthew J. Gould and Jeffrey A. Gould from the
ownership limits and has not established a limitation on ownership for such persons. Based on information supplied to us, as of
December 31, 2021, Gould Investors owns approximately 16.1% of the outstanding shares of common stock and, by virtue of
the applicable attribution rules under the Code, one individual currently beneficially owns 22.0% of outstanding shares of
common stock. As a result, the acquisition by each of four other individuals of 6.0% of our outstanding common stock, when
combined with the ownership of our common stock of Gould Investors, Fredric H. Gould, Matthew J. Gould and Jeffrey A.
Gould, generally would not result in a violation of the Five or Fewer Limit.
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However, there is no limitation on Gould Investors, Fredric H. Gould, Matthew J. Gould, Jeffrey A. Gould acquiring
additional shares of our common stock or otherwise increasing their percentage of ownership of our common stock, meaning
that the amount of our stock that other persons or entities may acquire without violating the Five or Fewer Limit could be
reduced in the future and without notice. To the extent that Gould Investors, Fredric H. Gould, Matthew J. Gould and Jeffrey A.
Gould, or their affiliates, acquire additional shares or our stock, or any other event occurs (including a repurchase of shares of
our stock), that results in an individual beneficially or constructively owning 26.0% or more of the outstanding shares of our
stock within the meaning of the Charter, the acquisition by four other individuals of 6.0% or less of our outstanding stock
would violate the Five or Fewer Limit and, therefore, could cause the stock acquired by one or more of these other individuals
to be transferred to the charitable trust, despite their compliance with the 6.0% ownership limits. If any of the foregoing occurs,
compliance with the 6.0% ownership limit will not ensure that your ownership of our stock does not cause a violation of the
Five or Fewer Limit or that your shares of our stock are not transferred to the charitable trust.
Gould Investors, Fredric H. Gould, Matthew J. Gould and Jeffrey A. Gould will be required by the Exchange Act and
regulations promulgated thereunder to report, with certain exceptions, their acquisition of additional shares of our stock within
two days of such acquisitions, and all holders of our stock will be required to file reports of their acquisition of beneficial
ownership (as defined in the Exchange Act) of more than 5% of our outstanding stock. However, beneficial ownership for
purposes of the reporting requirements under the Exchange Act is calculated differently than beneficial ownership for purposes
of determining compliance with the Five or Fewer Limit. Further, to the extent that any one or more of Gould Investors, Fredric
H. Gould, Matthew J. Gould or Jeffrey A. Gould acquires 30% or more of our outstanding stock, ownership of five percent or
less of our outstanding stock could still result in a violation of the Five or Fewer Limit and, therefore, cause newly-acquired
stock in our company to be transferred to the charitable trust. As a result, you may not have enough information currently
available to you at any time to determine the percentage of ownership of our stock that you can acquire without violating the
Five or Fewer Limit and losing the economic benefit of the ownership of such newly-acquired shares.
The stock market is volatile, and fluctuations in our operating results, removal from various indices and other factors could
cause our stock price to decline.
The stock market has experienced, and may continue to experience, fluctuations that significantly impact the market prices
of securities issued by many companies. Market fluctuations could adversely affect our stock price. These fluctuations have
often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations,
as well as general economic, systemic, political and market conditions, such as pandemics, recessions, loss of investor
confidence, interest rate changes, government shutdowns, or trade wars, may negatively affect the market price of our common
stock. Moreover, our operating results may fluctuate and vary from period to period due to the risk factors set forth herein.
Although our common stock is quoted on the New York Stock Exchange, the volume of trades on any given day has been
limited historically, as a result of which stockholders might not have been able to sell or purchase our common stock at the
volume, price or time desired. In June 2018, our common stock was added to the Russell 3000® Index. In the short term this
may have favorably impacted the price, trading volume, and liquidity of our common stock, in part, because holders attempting
to track the composition of that index may have been required to buy our common stock, which could cause a material increase
in the price at which our common stock trades. If our common stock is removed from the Russell 3000® Index because it does
not meet the criteria for continued inclusion in such index, index funds, institutional investors, or other holders attempting to
track the composition of that index may be required to sell our common stock, which would adversely impact the price and
frequency at which it trades.
General Business Risks
Breaches of information technology systems could materially harm our business and reputation.
We, our joint venture partners and the property managers managing our properties, collect and retain, through information
technology systems, financial, personal and other sensitive information provided by third parties, including tenants, vendors and
employees. Such persons also rely on information technology systems for the collection and distribution of funds. Our
information technology systems have been breached though, to our knowledge, none of our properties nor tenants have suffered
any material damages therefrom. There can be no assurance that we, our joint venture partners or property managers will be
able to prevent unauthorized access to sensitive information or the unauthorized distribution of funds. Any loss of this
information or unauthorized distribution of funds as a result of a breach of information technology systems may result in loss of
funds to which we are entitled, legal liability and costs (including damages and penalties), as well as damage to our reputation,
that could materially and adversely affect our business and financial performance.
25
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Our executive office is located at 60 Cutter Mill Road, Suite 303, Great Neck, New York. We believe that such facilities
are satisfactory for our current and projected needs.
See "Item 1—Business" for additional information regarding our properties.
Item 3. Legal Proceedings.
A wholly-owned subsidiary of ours that owns a property in Houston, TX is named as a defendant, along with multiple
defendants in an action (Takakura et al. v. Houston Pizza Venture, LP, and Papa John’s USA., Inc. et.al., 129th Judicial
District, Harris County, Texas, Cause No. 2019-42425), alleging the wrongful death as a result of a homicide of a delivery
person at our property. The complaint seeks compensatory damages in an unspecified amount in excess of $1 million and an
unspecified amount of exemplary damages. Our primary insurance carrier is defending the claim; we believe we have sufficient
primary and umbrella insurance to cover the claim for compensatory damages. Insurance generally does not cover claims for
exemplary damages.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Market Information; Holders
Our shares of common stock are listed on the New York Stock Exchange, or the NYSE, under the symbol "BRT." As of
March 7, 2022, there were approximately 748 holders of record of our common stock.
Issuer Purchases of Equity Securities
As of October 1, 2021, our Board of Directors authorized us to repurchase up to $5.0 million of shares of our common
stock through December 31, 2023. During the quarter ended December 31, 2021, we did not repurchase any shares of common
stock.
Item 6. [Reserved]
26
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.
27
•
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
28
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:
(Dollars in thousands):
2021
2020
Increase
(Decrease)
% Change
Rental and other revenue from real estate properties
$
32,041 $ 27,451 $
4,590
Other income
Total revenues
16
651
(635)
$
32,057 $ 28,102 $
3,955
16.7 %
(97.5) %
14.1 %
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.
29
Expenses
The following table compares our expenses for the periods indicated:
(Dollars in thousands)
Real estate operating expenses
Interest expense
General and administrative
Impairment charge
Depreciation
Total expenses
2021
2020
Increase
(Decrease)
% Change
$
14,202
$
12,377
$
1,825
6,757
12,621
520
8,025
7,100
11,701
3,642
6,742
$
42,125
$
41,562
$
(343)
920
(3,122)
1,283
563
14.7 %
(4.8) %
7.9 %
(85.7) %
19.0 %
1.4 %
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
30
•
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.
31
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):
Year Ended
December 31,
2021
2020
Increase
(Decrease)
%
change
Rental revenues from unconsolidated joint ventures
$ 121,906
$ 127,058
$
(5,152)
(4.1) %
Real estate operating expense from unconsolidated joint ventures
56,507
60,326
(3,819)
(6.3) %
Interest expense from unconsolidated joint ventures
30,964
34,918
(3,954)
(11.3) %
Depreciation from unconsolidated joint ventures
35,636
41,657
(6,021)
(14.5) %
Total expenses from unconsolidated joint ventures
123,107
136,901
(13,794)
(10.1) %
Total revenues less total expenses from unconsolidated joint ventures
(1,201)
(9,843)
8,642
(87.8) %
Other equity in earnings from unconsolidated joint ventures
Impairment of assets
Insurance recoveries from unconsolidated joint ventures
Gain on sale of real estate from unconsolidated joint ventures
Gain on insurance proceeds from unconsolidated joint ventures
Loss on extinguishment of debt from unconsolidated joint ventures
54
(2,813)
2,813
83,984
2,179
(9,401)
117
—
—
—
765
—
(63)
(53.8) %
(2,813)
2,813
83,984
N/A
N/A
N/A
1,414
184.8 %
(9,401)
N/A
Net (loss) income
$ 75,615
$
(8,961) $ 84,576
Equity in earnings (loss) and gain on sale of real estate of unconsolidated joint ventures
$ 30,774
$
(6,024)
•
•
•
•
•
•
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.
32
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.
33
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.
34
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):
GAAP Net income (loss) attributable to common stockholders
Add: depreciation of properties
Add: our share of depreciation in unconsolidated joint venture properties
Add: impairment charge
Add: our share of impairment charge in unconsolidated joint venture properties
Deduct: our share of earnings in earnings from sale of unconsolidated joint
venture properties
Deduct: gain on sales of real estate and partnership interests
Adjustment for non-controlling interests
Funds from operations
Adjust for: straight-line rent accruals
Add: loss on extinguishment of debt
Add: our share of loss on extinguishment of debt from unconsolidated joint
venture properties
Add: amortization of restricted stock and RSU expense
Add: amortization of deferred mortgage and debt costs
Add: our share of deferred mortgage costs from unconsolidated joint venture properties
Less: our share of insurance recovery from unconsolidated joint ventures
Less: our share of gain on insurance proceeds from unconsolidated joint venture
properties
Adjustment for non-controlling interests
Adjusted funds from operations
2021
2020
$
29,114
$
(19,862)
8,025
23,083
520
2,010
(34,982)
(10,325)
(16)
17,429
(18)
1,575
4,581
2,941
295
542
(2,010)
(1,528)
4
6,742
26,493
3,642
—
—
—
(16)
16,999
(40)
—
—
1,821
320
626
—
(519)
6
$
23,811
$
19,213
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.
Net income (loss) attributable to common stockholders
Add: depreciation of properties
Add: our share of depreciation from unconsolidated joint venture properties
Add: impairment charge
Add: our share of impairment charge in unconsolidated joint ventures
Deduct: our share of earnings from sale of unconsolidated joint venture properties
Deduct: gain on sales of real estate and partnership interest
Adjustment for non-controlling interests
Funds from operations
Adjustment for: straight-line rent accruals
Add: loss on extinguishment of debt
Add: our share of loss on extinguishment of debt from unconsolidated joint ventures
Add: amortization of restricted stock and RSU expense
Add: amortization of deferred mortgage and debt costs
Add: our share of amortization of deferred mortgage and debt costs from
unconsolidated ventures
Deduct: our share of insurance recovery from unconsolidated joint ventures
Deduct: our share of gain on insurance proceeds from unconsolidated joint ventures
Adjustment for non-controlling interests
Adjusted funds from operations
2021
2020
$
1.62
$
(1.16)
0.45
1.29
0.03
0.11
(1.95)
(0.58)
—
0.97
—
0.09
0.26
0.16
0.02
0.03
(0.11)
(0.09)
—
1.33
$
$
0.39
1.55
0.21
—
—
—
—
0.99
—
—
—
0.10
0.02
0.04
—
(0.03)
—
1.12
Diluted shares outstanding for FFO and AFFO
17,936,465
17,115,697
35
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.
36
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):
For the year ended December 31,
2021
2020
GAAP Net income (loss) attributable to common stockholders
$
29,114
$
Less: Other Income
Add: Interest expense
General and administrative
Depreciation
Impairment charge
Provision for taxes
Less: Gain on sale of real estate
Gain on the sale of partnership interests
Add: Loss on extinguishment of debt
Equity in loss of unconsolidated joint venture properties
Less: Equity in earnings from sale of unconsolidated joint venture properties
Add: Net income attributable to non-controlling interests
Net Operating Income
Less: Non same store and non multi family (1)
Revenues
Operating Expenses
Same Store Net Operating Income
(16)
6,757
12,621
8,025
520
206
(7,693)
(2,632)
1,575
4,208
(34,982)
136
$
17,839
$
(7,125)
3,393
$
14,107
$
(19,862)
(651)
7,100
11,701
6,742
3,642
248
—
—
—
6,024
—
130
15,074
(4,316)
2,333
13,091
________________________
(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.
NOI increased in 2021 by $2.8 million, or 18.2%, to $ 17.9 million from $15.1 million in 2020, primarily due to $2.4
million from the Consolidating Transactions and a $1.0 million increase in Same Store NOI offset by a $678,000 decrease due
to the sale of Kendall Manor. The Same Store NOI increase is due primarily to a $1.7 million increase in rental revenue from
increased rental rates and, to a lesser extent, higher occupancy rates and higher ancillary income, offset by a $765,000 increase
in operating expenses. See " Results of Operations - Years Ended December 31, 2021 and 2020"
Disclosure of Known Material Contractual Obligations
The following table sets forth as of December 31, 2021 our known material contractual obligations:
(Dollars in thousands)
Payment Due by Period
Less than
1 Year
1 - 3
Years
3 - 5
Years
More than
5 Years
Total
Long-Term Debt Obligations (1)
$ 68,729
$ 113,037
$ 221,695
$ 648,232
$ 1,051,693
Operating Lease Obligations
Purchase Obligations (2)(3)
Total
____________________________
232
7,227
483
507
14,454
14,454
3,499
—
4,721
36,135
$ 76,188
$ 127,974
$ 236,656
$ 651,731
$ 1,092,549
(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 2.13% per annum
which was the rate in effect at December 31, 2021.
(2) Assumes that $922,000 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$4.8 million of property management fees will be paid annually to the property managers of our multi-family properties,
including $3.9 million related to unconsolidated joint ventures. Such sum reflects the amount we anticipate paying in 2022 on the multi-family properties we
own at December 31, 2021. 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.
37
The following table sets forth as of December 31, 2021 information regarding the components of our long-term debt
obligations:
(Dollars in thousands)
Payment due by Period
Less than
1 Year
1 - 3
Years
3 - 5
Years
More than
5 Years
Total
Mortgages on consolidated properties (1)
$ 38,273
$ 16,281
$ 29,551
$ 176,123
$
260,228
Mortgages on unconsolidated properties (1)(2)
29,659
95,162
190,550
426,479
797
1,594
1,594
45,630
$ 68,729
$ 113,037
$ 221,695
$ 648,232
$
1,051,693
741,850
49,615
Junior subordinated notes (3)
Total
___________________________
(1) Includes payments of principal (including amortization payments), and interest and excludes deferred costs.
(2) Includes all of the debt of unconsolidated joint ventures, including Verandas at Shavano which was sold in February 2022.
(3) Assumes that the interest rate on the junior subordinated notes will be 2.13% per annum.
Liquidity and Capital Resources
We require funds to pay operating expenses and debt service obligations, acquire properties (including the acquisition of
interest of our joint venture partners), make capital improvements, fund capital contributions, pay dividends and to the extent
we deem appropriate, repurchase shares pursuant to our share buy back program . In 2021, our primary sources of capital and
liquidity were the operations of our multi-family properties (including distributions of $15.3 million from the operations of our
unconsolidated joint ventures and $46.7 million of distributions from sale transactions), $35.2 million from property sales
(including sales of properties owned by consolidated entities and sales of interests in unconsolidated joint ventures), net
mortgage proceeds of $21.5 from the refinancing of mortgage debt in connection with the purchase of the remaining interests of
certain joint ventures, $9.6 million from the sale of our common stock through our at-the-market equity offering program, and
our available cash (including restricted cash). Excluding funds held at our unconsolidated subsidiaries, at December 31, 2021
and February 28, 2022, our available liquidity was approximately $67.3 million and $75.7 million, respectively, including $32.3
million and $40.7 million, respectively, of cash and cash equivalents, and subject to compliance with borrowing base and other
requirements, up to $35 million and $35 million, respectively, available under our credit facility.
After giving effect to the sale of Verandas at Shavano, we anticipate that for the three years beginning January 1, 2022, our
operating expenses, $112.8 million of mortgage amortization and interest expense and $40.2 million of balloon payments
(including $87.6 million and $10.8 million, respectively, from unconsolidated joint ventures) due with respect to mortgages
maturing from 2022 to 2024, estimated cash dividend payments of at least $51.1 million (assuming (i) the current quarterly
dividend rate of $0.23 per share and (ii) 18.5 million shares outstanding) and share repurchases, if any, pursuant to our share
buy back program, 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 $35 million credit facility. Our operating cash flow and available cash is insufficient to fully fund the $64.7 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.
Capital improvements at (i) 13 multi-family properties will be funded by approximately $6.6 million of restricted cash
available at December 31, 2021 and (ii) other properties will be funded from the operations of such properties.
Our ability to acquire additional multi-family properties (including our acquisitions of our partners' interests in properties
owned by joint ventures) is limited by our available cash and our ability to (i) draw on our credit facility, (ii) obtain, on
acceptable terms and 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.
Corporate Level Financing Arrangements
Junior Subordinated Notes
As of December 31, 2021 $37.4 million (excluding deferred costs of $297,000) 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
38
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, if not earlier, 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 efffected. At December 31, 2021
and 2020, the interest rate on these notes was 2.13% and 2.21%, respectively.
Credit Facility
Our credit facility with VNB New York, LLC, an affiliate of Valley National Bank (collectively, "VNB"), as amended and
restated, allows us to borrow, subject to compliance with borrowing base requirements and other conditions, up to $35 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 $15 million may be used for Operating Expenses. (The facility provides that it may be expanded to
provide for up to $60 million of availability if another lender(s) is willing to provide an additional $25 million of availability).
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, of 25 basis points over the
prime rate, with a floor of 3.50%. There is an annual fee of 0.25% on the total amount committed by VNB and unused by us.
The credit facility matures in November 2024. As of the date of this filing, no amounts are outstanding on the credit facility and
$35 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, 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.
We are in compliance in all material respects with the requirements of the facility.
Other Financing Sources and Arrangements
At December 31, 2021, we are joint venture partners in unconsolidated joint ventures which own 23 multi-family
properties. The distributions from the properties owned by these ventures, $62.0 million in 2021 (including $46.7 million from
the sale of such properties) are a material source of our liquidity and cash flow. Further, we may be required to make
significant capital contributions with respect to these properties. At December 31, 2021, our investment in these joint venture
properties have a net equity carrying value of $112.3 million and are subject to mortgage debt, which is not reflected on our
consolidated balance sheet, of $587.9 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. These joint venture arrangements have been, and we anticipate that they
will continue to be, material to our liquidity and capital resource position. See note 6 to our consolidated financial statements.
See Item 1. "Business-Mortgage Debt" for information regarding our mortgage debt at consolidated and unconsolidated
subsidiaries.
Inflation
As the majority of our lease terms are for a period of one-year or less we are able to reset rental rates to market if renewed.
Accordingly, due to the short-term nature of our leases, we do not believe our results will be materially adversely affected by
inflation.
Inflation may also affect the overall cost of debt, as the implied cost of capital increases. Currently, interest rates are less
than historical averages. However, the Federal Reserve, in response to or in anticipation of continued inflation concerns, could
continue to raise interest rates. Other than with respect to our LIBOR Debt and debt incurred pursuant to our credit facility, we
intend to mitigate these risks through long-term fixed interest rate loans and interest rate hedges.
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
39
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. This property was sold 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, whether by us or our joint ventures, 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
40
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 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our junior subordinated notes bear interest at the rate of three-month LIBOR plus 200 basis points. A 100 basis point
increase in the rate would result in an increase in interest expense in 2022 of $374,000 and a 100 basis point decrease in the rate
would result in a $77,000 decrease in interest expense in 2022.
Item 8. Financial Statements and Supplementary Data.
The information required by this item appears in a separate section of this Report following Part IV.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
A review and evaluation was performed by our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Annual Report on Form 10-
K. Based on that review and evaluation, our CEO and CFO have concluded that our disclosure controls and procedures, as
designed and implemented as of December 31, 2021, were effective.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process
designed by, or under the supervision of, a company's principal executive and principal financial officers and effected by a
company's board, management and other personnel to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those
policies and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of a company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with GAAP, and that receipts and expenditures of a company are being made only in accordance with
authorizations of management and the board of directors of a company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of a company's assets that could have a material effect on the financial transactions.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate
because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the
effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, our
management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control-Integrated Framework (2013).
Based on its assessment, our management concluded that, as of December 31, 2021, our internal control over financial
reporting was effective based on these criteria.
41
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal controls over financial reporting, as defined in in Rules 13a-15(f) and 15d-15(f)
promulgated under the Exchange Act, that occurred during the three months ended December 31, 2021 that materially affected,
or is reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B. Other Information.
Federal Income Tax Considerations
The discussion in Exhibit 99.1 filed herewith is incorporated herein by reference.
Adoption of 2022 Incentive Plan
In March 2022, our board of directors adopted, subject to stockholder approval, the 2022 Incentive Plan. This plan
permits us to grant: (i) stock options, restricted stock, restricted stock units, performance share awards and any one or more of
the foregoing, up to a maximum of 1,000,000 shares; and (ii) cash settled dividend equivalent rights in tandem with the grant
of certain awards.
Correction of Information in Current Report on Form 8-K Furnished on, and Press Release issued on, March 14, 2022.
Due to an error, our press release issued March 14, 2022 (page 9 to exhibit 99.1 to our Current Report on Form 8-K
furnished to the SEC on March 14, 2022(the “8-K”)) and the supplemental financial information (page 5 to exhibit 99.2 to our
8-K) incorrectly reported the number of shares used in calculating in such documents per share FFO and AFFO for the quarter
ended December 31, 2021. The incorrect number of shares is 17,317,596. The correct number of shares is 18,240,532 .This
error did not impact the values reported in the 8-K (including the exhibits thereto) for per share FFO and AFFO as such
reported values were correct. We do not hereby incorporate by reference into this Annual Report on Form 10-K any of the
information included in our 8-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable
42
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Apart from certain information concerning our executive officers which is set forth in Part I of this report, the other
information required by Item 10 will be incorporated herein by reference to the applicable information to be in the proxy
statement to be filed by May 2, 2022 for our 2022 Annual Meeting of Stockholders.
Item 11. Executive Compensation.
The information concerning our executive compensation required by Item 11 is incorporated herein by reference to the
proxy statement to be filed by May 2, 2022 with respect to our 2022 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Except as set forth below, the information required by Item 12 is incorporated herein by reference to the proxy statement to
be filed by May 2, 2022 with respect to our 2022 Annual Meeting of Stockholders.
Equity Compensation Plan Information
As of December 31, 2021, the only equity compensation plan under which equity compensation may be awarded is our 2020
Incentive Plan, which was approved by our stockholders in June 2020. This plan permits us to grant stock options, restricted
stock, restricted stock units ("RSUs"), dividend equivalent rights and performance based awards to our employees, officers,
directors, consultants and other eligible participants. The table below provides information as of December 31, 2021 with
respect to our shares of common stock that may be issued upon exercise of outstanding options, warrants and rights. (See note
10 of our consolidated financial statements for further information about our equity compensation plans).
Number of securities to
be
issued upon exercise
(or vesting) of
outstanding options,
restricted stock units,
warrants and rights
(a)
Weighted-
average
exercise
price of
outstanding
options,
warrants and
rights
(b)
Number of
securities remaining
available-for future
issuance under
equity
compensation plans
—excluding
securities reflected
in column (a)
(c)
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
210,375
—
210,375
(1)
(1)
—
—
—
473,101
—
473,101
(2)
(2)
_______________________________________________________________________________
(1) Represents shares of common stock underlying RSUs granted in 2021 pursuant to our 2020 Incentive Plan (the "2020 Plan"). The RSUs vest in 2024 subject
to the satisfaction of market and performance based vesting conditions. There is no exercise price associated with such units. Excludes 316,524 shares of
restricted stock issued pursuant to the 2020 plan as such shares, though subject to forfeiture, are outstanding.
(2) Gives effect to the 316,524 shares of restricted stock issued and outstanding pursuant to the 2020 Plan. Does not give effect to 158,973 shares of restricted
stock granted January 13, 2022 pursuant to the 2020 Plan.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information concerning relationships and certain transactions required by Item 13 is incorporated herein by reference
to the proxy statement to be filed by May 2, 2022 with respect to our 2022 Annual Meeting of Stockholders.
Item 14. Principal Accounting Fees and Services.
The information concerning our principal accounting fees required by Item 14 is incorporated herein by reference to the
proxy statement to be filed by May 2, 2022 with respect to our 2022 Annual Meeting of Stockholders.
43
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
1.
All Financial Statements.
The response is submitted in a separate section of this report following Part IV.
2.
Financial Statement Schedules.
The response is submitted in a separate section of this report following Part IV.
3.
Exhibits:
In reviewing the agreements included as exhibits to this Annual Report on Form10-K, please remember they are included
to provide you with information regarding their terms and are not intended to provide any other factual or disclosure
information about us or the other parties to the agreements. Certain agreements contain representations and warranties by each
of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the
other parties to the applicable agreement and:
•
•
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one
of the parties if those statements prove to be inaccurate;
have been qualified by disclosures that were made to the other party in connection with the negotiation of the
applicable agreement, which disclosures are not necessarily reflected in the agreement;
• may apply standards of materiality in a way that is different from what may be viewed as material to you or other
investors; and
•
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the
agreement and are subject to more recent developments. Accordingly, these representations and warranties may not
describe the actual state of affairs as of the date they were made or at any other time.
44
Exhibit
No.
1.1
1.2
2.1
3.1
3.2
4.1
4.2
Title of Exhibits
Form of Equity Distribution Agreement (incorporated by reference to Exhibit 1.1 to our Current Report on Form
8-K on November 26, 2019).
Amendment No. 1 to Equity Distribution Agreements entered into as of March 31, 2021 among us, B. Riley
Securities, Inc., JMP Securities LLC, and D.A. Davidson & Co. (incorporated by reference to exhibit 10.1 filed
with our Quarterly Report on Form 10-Q for the period ended March 31, 2021).
Plan of Conversion dated December 8, 2016 (incorporated by reference to Annex B of Amendment No. 1 to our
Registration Statement on Form S-4 filed January 12, 2017 (the "S-4 Registration") (Reg. No. 333-215221).
Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to our Current Report on
Form 8-K filed March 20, 2017).
By-laws of the Registrant (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed
March 20, 2017).
Junior Subordinated Supplemental Indenture, dated as of March 15, 2011, between us and the Bank of New York
Mellon (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed March 18, 2011).
Description of Registrant's Securities Registered Pursuant to Section 12 of the Exchange Act (incorporated by
reference to Exhibit 4.2 to our Annual Report on Form 10-K for the year ended December 31, 2020).
10.1 * Shared Services Agreement, dated as of January 1, 2002, by and among Gould Investors L.P., us, One Liberty
Properties, Inc., Majestic Property Management Corp., Majestic Property Affiliates, Inc. and REIT Management
Corp. (incorporated by reference to Exhibit 10.2 to our Form 10-K filed December 11, 2008).
10.2 * Form of Indemnification Agreement between the Registrant on the one hand, and its executive officers and
directors, on the other hand (incorporated by reference to Exhibit 10.5 to our Annual Report of Form 10-K filed
December 14, 2017).
10.3 * Amended and Restated 2016 Incentive Plan (incorporated by reference to Exhibit 10.1 to our Quarterly Report
on Form 10-Q for the period ended March 31, 2016)
10.4
Membership Interest Purchase Agreement dated as of February 23, 2016 entered into between TRB Newark
Assemblage, LLC ("TRB") and TRB Newark TRS, LLC ("TRB REIT" and together with TRB, collectively, the
"Seller") and RBH Partners III, LLC, and joined by RBH-TRB Newark Holdings, LLC and GS-RBH Newark
Holdings, LLC (incorporated by reference to exhibit 10.2 to our Quarterly Report on Form 10-Q for the period
ended March 31, 2016).
10.5 * Form of Restricted Shares Agreement for the Amended and Restated 2016 Incentive Plan (incorporated by
reference to Exhibit 10.40 to our Registration Statement on Form S-4/A filed with the SEC on January 12, 2017
(File No 333-215221)).
10.6 * 2018 Incentive Plan (incorporated by reference to exhibit 10.1 to our Current Report on Form 8-K filed on
March 13, 2018).
45
Exhibit
No.
Title of Exhibits
10.7 * Form of Restricted Shares Agreement for the 2018 Incentive Plan (incorporated by reference Exhibit 10.10 to
10.8
our Annual Report on Form 10-K filed December 10, 2018).
2020 Incentive Plan (incorporated by reference to Exhibit 10.15 filed with our Annual Report on Form 10-K for
the year ended December 31, 2020).
10.9 * Form of Performance Awards Agreement granted in 2021 pursuant to the 2020 Incentive Plan (incorporated by
reference to exhibit 10.1 of our Current Report on Form 8-K filed on June 11, 2021)
10.10 Amended and Restated Loan Agreement (the "Loan Agreement") made as of November 18, 2021, by and among
us and VNB New York, LLC. (incorporated by reference to Exhibit 10.1 filed with our Current Report on Form
8-K on November 18, 2021).
10.11 Unlimited guaranty given by us in favor of VNB (incorporated by reference to Exhibit 10.2 filed with our
Current Report on Form 8-K on November 18, 2021).
10.12
10.13
10.14
Form of Pledge Agreement (incorporated by reference to Exhibit 10.3 filed with our Current Report on Form 8-
K on November 18, 2021).
Form of Negative Pledge Agreement (incorporated by reference to Exhibit 10.4 filed with our Current Report on
Form 8-K on November 18, 2021).
Letter agreement dated as of November 19, 2021 with respect to the Loan Agreement.
21.1
Subsidiaries of the Registrant.
23.1
Consent of Ernst & Young, LLP.
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the "Act").
31.2
Certification of Senior Vice President—Finance pursuant to Section 302 of the Act.
31.3
Certification of Chief Financial Officer pursuant to Section 302 of the Act.
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Act.
32.2
Certification of Senior Vice President—Finance pursuant to Section 906 of the Act.
32.3
Certification of Chief Financial Officer pursuant to Section 906 of the Act.
99.1
Federal Income Tax Considerations (incorporated by reference to Exhibit 99.3 filed with our Current Report on
Form 8-K on March 11, 2021)
101.INS
The instance document does not appear in the interactive data file because its XBRL tags are embedded within
the inline XBRL document.
_______________________________________________________________________________
*
Indicates management contract or compensatory plan or arrangement.
(b) Exhibits.
See Item 15(a)(3) above. Except as otherwise indicated with respect to a specific exhibit, the file number for all of the
exhibits incorporated by reference is: 001-07172.
(c) Financial Statements.
See Item 15(a)(2) above.
Item 16. Form 10-K Summary
Not applicable.
46
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
March 15, 2022
Date
:
BRT APARTMENTS CORP.
By:
/s/ JEFFREY A. GOULD
Jeffrey A. Gould
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
Chairman of the Board
March 15, 2022
Chief Executive Officer, President and Director
(Principal Executive Officer)
March 15, 2022
/s/ ISRAEL ROSENZWEIG
Israel Rosenzweig
/s/ JEFFREY A. GOULD
Jeffrey A. Gould
/s/ CAROL CICERO
Carol Cicero
/s/ ALAN GINSBURG
Alan Ginsburg
/s/ FREDRIC H. GOULD
Fredric H. Gould
/s/ MATTHEW J. GOULD
Matthew J. Gould
Director
Director
Director
Director
/s/ LOUIS C. GRASSI
Director
Louis C. Grassi
/s/ GARY HURAND
Gary Hurand
Director
/s/ JEFFREY RUBIN
Director
Jeffrey Rubin
/s/ JONATHAN SIMON
Director
Jonathan Simon
/s/ ELIE WEISS
Elie Weiss
/s/ GEORGE E. ZWEIER
George E. Zweier
Director
Chief Financial Officer and Vice President
(Principal Financial and Accounting Officer)
47
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
March 15, 2022
This page intentionally left blank
Item 8, Item 15(a)(1) and (2)
Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the years ended December 31, 2021 and 2020
Consolidated Statements of Comprehensive Income for the years ended December 31, 2021 and 2020
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020
Notes to Consolidated Financial Statements
Consolidated Financial Statement Schedule for the year ended December 31, 2021
III—Real Estate Properties and Accumulated Depreciation
Page No.
F-2
F-4
F-5
F-6
F-7
F-8
F-10
F-34
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated
financial statements or the notes thereto.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of BRT Apartments Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of BRT Apartments Corp. and subsidiaries (the Company) as
of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in
stockholders’ equity and cash flows for the years then ended, and the related notes and financial statement schedule listed in
the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and
2020, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted
accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the account or disclosures to which it relates.
F-2
Description of
the matter
How we
addressed the
matter in our
audit
Joint Venture Consolidation Assessment
The Company accounted for certain investments in real estate joint ventures under
the equity method of accounting. At December 31, 2021, the Company’s investments
in unconsolidated joint ventures were $112.3 million. As discussed in Note 1 to the
consolidated financial statements, for each venture the Company evaluated the rights
provided to each party in the venture to assess the consolidation of the venture.
Auditing management’s joint venture consolidation analyses was complex and
highly judgmental due to the subjectivity in assessing which activities most
significantly impact the respective joint venture’s economic performance based on
the purpose and design of the entity over the duration of its expected life and
assessing which party has rights to direct those activities.
To test the Company’s consolidation assessment for real estate joint ventures, our
procedures included, among others, reviewing joint venture agreements and
discussing with management the nature of the rights conveyed to the Company
through the joint venture agreements. We reviewed management’s assessment of the
activities that would most significantly impact the joint venture’s economic
performance and evaluated whether the joint venture agreements provided
participating or protective rights to the Company. We also evaluated transactions
with the joint ventures for events which would require a reconsideration of previous
consolidation conclusions.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2020.
New York, New York
March 15, 2022
F-3
BRT APARTMENTS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
December 31,
2021
2020
ASSETS
Real estate properties, net of accumulated depreciation of $36,467 and $30,837
$
293,550 $
Investment in unconsolidated joint ventures
Cash and cash equivalents
Restricted cash
Other assets
Real estate property held for sale
Total Assets
LIABILITIES AND EQUITY
Liabilities:
Mortgages payable, net of deferred costs of $980 and $563
Junior subordinated notes, net of deferred costs of $297 and $317
Accounts payable and accrued liabilities
Total Liabilities
Commitments and contingencies
Equity:
BRT Apartments Corp. stockholders' equity:
112,347
32,339
6,582
10,341
4,379
160,192
169,474
19,885
8,800
7,390
—
$
$
459,538 $
365,741
199,877 $
130,434
37,103
19,607
256,587
37,083
20,536
188,053
Preferred shares $0.01 par value 2,000 shares authorized, none outstanding
—
—
Common stock, $0.01 par value, 300,000 shares authorized,
17,349 and 16,432 shares issued at December 31, 2021 and 2020
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total BRT Apartments Corp. stockholders' equity
Non-controlling interests
Total Equity
Total Liabilities and Equity
173
258,161
—
(55,378)
202,956
(5)
202,951
$
459,538 $
164
245,605
(19)
(67,978)
177,772
(84)
177,688
365,741
See accompanying notes to consolidated financial statements.
F-4
BRT APARTMENTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
Revenues:
Rental and other revenue from real estate properties
$
32,041 $
27,451
Year Ended December 31,
2021
2020
Other income
Total revenues
Expenses:
Real estate operating expenses—including $31 and $32 to related parties
Interest expense
General and administrative—including $641 and $761 to related party
Impairment charge
Depreciation and amortization
Total expenses
Total revenues less total expenses
Equity in loss from unconsolidated joint ventures
Equity in earnings from sale of unconsolidated joint venture properties
Gain on sale of real estate
Gain on sale of partnership interest
Loss on extinguishment of debt
Income (loss) from continuing operations
Provision for taxes
Income (loss) from continuing operations, net of taxes
(Income) attributable to non-controlling interests
16
32,057
14,202
6,757
12,621
520
8,025
42,125
(10,068)
(4,208)
34,982
7,693
2,632
(1,575)
29,456
206
29,250
(136)
651
28,102
12,377
7,100
11,701
3,642
6,742
41,562
(13,460)
(6,024)
—
—
—
—
(19,484)
248
(19,732)
(130)
Net income (loss) attributable to common stockholders
$
29,114 $
(19,862)
Weighted average number of shares of common stock outstanding:
Basic
Diluted
Per share amounts attributable to common stockholders
Basic
Diluted
17,017,690
17,115,697
17,084,642
17,115,697
$
$
1.63 $
1.62 $
(1.16)
(1.16)
See accompanying notes to consolidated financial statements.
F-5
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
Net income (loss)
Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments
Other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive (income) attributable to non-controlling interests
Year Ended December 31,
2021
2020
$
29,250 $
(19,732)
22
22
29,272
(140)
(12)
(12)
(19,744)
(128)
Comprehensive income (loss) attributable to common stockholders
$
29,132 $
(19,872)
See accompanying notes to consolidated financial statements.
F-6
BRT APARTMENTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2021 and 2020
(Dollars in thousands, except share data)
Shares of
Common
Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss) Income
(Accumulated
Deficit)
Non-
Controlling
Interests
Total
Balances, December 31, 2019
$
156 $ 232,331 $
(10) $
(32,824) $
(93) $ 199,560
Distributions - Common Stock - $0.88 per share
Restricted stock vesting
Compensation expense—restricted stock and
restricted stock units
Distributions to non-controlling interests
Shares issued through equity offering program, net
Shares repurchased
Net (loss) income
Other comprehensive loss
Comprehensive loss
—
1
—
—
7
—
—
—
—
—
(1)
1,821
—
12,070
(616)
—
—
—
—
—
—
—
—
—
—
(9)
—
(15,292)
—
—
—
—
—
—
—
—
(15,292)
—
1,821
(118)
(118)
—
—
12,077
(616)
(19,862)
130
(19,732)
—
—
(3)
—
(12)
(19,744)
Balances, December 31, 2020
$
164 $ 245,605 $
(19) $
(67,978) $
(84) $ 177,688
Distributions - Common Stock - $0.90 per share
Restricted stock and restricted stock units vesting
Compensation expense—restricted stock and
restricted stock units
Distributions to non-controlling interests
Shares issued through equity offering program, net
Net income
Other comprehensive income
Comprehensive income
—
4
—
—
5
—
—
—
—
(4)
2,941
—
9,619
—
—
—
—
—
—
—
—
—
19
—
(16,514)
—
—
—
—
29,114
—
—
—
—
—
(60)
—
136
3
—
(16,514)
—
2,941
(60)
9,624
29,250
22
29,272
Balances, December 31, 2021
$
173 $ 258,161 $
— $
(55,378) $
(5) $ 202,951
See accompanying notes to consolidated financial statements
F-7
BRT APARTMENTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Cash flows from operating activities:
Net Income (loss)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
Amortization of deferred financing fees
Amortization of debt fair value adjustment
Amortization of restricted stock and restricted stock units
Equity in loss of unconsolidated joint ventures
Equity in earnings on sale of real estate of unconsolidated ventures
Impairment charge
Gain on sale of real estate
Gain on sale of partnership interest
Loss on extinguishment of debt
Increases and decreases from changes in other assets and liabilities:
Decrease (increase) in other assets
Decrease in accounts payable and accrued liabilities
Net cash used in operating activities
Cash flows from investing activities:
Collections from real estate loans
Proceeds from the sale of mortgage loan
Improvements to real estate owned
Purchase and consolidation of joint venture properties
Proceeds from the sale of real estate owned
Proceeds from the sale of joint venture interests
Distributions from unconsolidated joint ventures
Contributions to unconsolidated joint ventures
Net cash provided by investing activities
Cash flows from financing activities:
Proceeds from mortgages payable
Mortgage payoffs
Mortgage principal payments
Proceeds from credit facility
Repayment of credit facility
Increase in deferred financing costs
F-8
Year Ended December 31,
2021
2020
$
29,250 $
(19,732)
8,025
295
(60)
2,941
4,208
(34,982)
520
(7,693)
(2,632)
1,575
2,203
(4,179)
(529)
—
—
(1,308)
(111,956)
24,632
10,540
62,025
(6,031)
(22,098)
89,680
(47,605)
(2,688)
—
—
(319)
6,742
280
—
1,821
6,024
—
3,642
—
—
—
(108)
(424)
(1,755)
150
4,000
(887)
—
—
—
15,273
(13,700)
4,836
—
—
(3,041)
5,000
(5,000)
—
BRT APARTMENTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Dividends paid
Distributions to non-controlling interests
Proceeds from the sale of common stock
Repurchase of shares of common stock
Net cash used in financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense
Cash paid during the year for income and excise taxes
Consolidation on buyout of partnership interest:
Increase in real estate assets
Increase in other assets
Increase in mortgage payable
Increase in deferred loan costs
Increase in accounts payable and accrued liabilities
Decrease in investment in unconsolidated joint ventures
Year Ended December 31,
2021
2020
(15,769)
(15,116)
(60)
9,624
—
32,863
10,236
28,685
38,921 $
(118)
12,077
(616)
(6,814)
(3,733)
32,418
28,685
6,523 $
173 $
6,886
291
$
$
$
$
160,583
5,671
(29,067)
748
(2,621)
(23,358)
$
111,956
See accompanying notes to consolidated financial statements.
F-9
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Background
BRT Apartments Corp. (“BRT” or the “Company”) owns, operates and, to a lesser extent, develops multi-family
properties. These multi-family properties may be wholly owned by us or by unconsolidated joint ventures in which the
Company contributes a significant portion of the equity. At December 31, 2021, BRT: (i) wholly-owns ten multi-family
properties located in seven states with an aggregate of 2,576 units and a carrying value of $291,538,000; and (ii) has ownership
interests, through unconsolidated entities, in 23 multi-family properties located in eight states with an aggregate of 6,697 units,
and the carrying value of its net equity investment is $112,347,000. In total, the Company has multi-family properties in 11
states, most of which are located in the Southeast United States and Texas.
The Company also owns and operates various other real estate assets. At December 31, 2021, the carrying value of the
other real estate assets was $6,400,000.
BRT conducts its operations to qualify as a real estate investment trust, or REIT, for Federal income tax purposes.
Substantially all of the Company's assets are comprised of multi-family real estate assets generally leased to tenants on a
one-year basis. Therefore, the Company aggregates real estate assets for reporting purposes and operates in one reportable
segment.
Principles of Consolidation
The consolidated financial statements include the accounts and operations of the Company and its wholly owned
subsidiaries.
The joint venture that owns a property in Yonkers, New York was determined not to be a variable interest entity ("VIE")
but is consolidated because the Company has controlling rights in such entity.
The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting. For
each venture, the Company evaluated the rights provided to each party in the venture to assess the consolidation of the venture.
All investments in unconsolidated joint ventures have sufficient equity at risk to permit the entity to finance its activities
without additional subordinated financial support and, as a group, the holders of the equity at risk have power through voting
rights to direct the activities of these ventures. As a result, none of these joint ventures are VIEs. Additionally, the Company
does not exercise substantial operating control over these entities, and therefore the entities are not consolidated. These
investments are recorded initially at cost, as investments in unconsolidated joint ventures, and subsequently adjusted for their
share of equity in earnings, cash contributions and distributions. The distributions to each joint venture partner are determined
pursuant to the applicable operating agreement and may not be pro-rata to the percentage equity interest each partner has in the
applicable venture.
Income Tax Status
The Company qualifies as a real estate investment trust under sections 856-860 of the Internal Revenue Code of 1986, as
amended. The board of directors may, at its option, elect to revoke or terminate the Company's election to qualify as a real
estate investment trust.
The Company will not be subject to federal, and generally state and local taxes on amounts it distributes to stockholders,
provided it distributes 90% of its ordinary taxable income and meets other conditions. The Company currently has net operating
loss carryforwards which it can use to reduce taxable income.
F-10
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
In accordance with Accounting Standards Codification ("ASC") Topic 740 - "Income Taxes", the Company believes
that it has appropriate support for the income tax positions taken and, as such, does not have any uncertain tax positions that, if
successfully challenged, could result in a material impact on the Company's financial position or results of operations. The
Company's income tax returns for the previous six years are subject to review by the Internal Revenue Service.
Revenue Recognition
Rental revenue from multi-family properties is recorded when due from residents and is recognized monthly as it is earned.
Rental payments are due in advance. Leases on residential properties are generally for terms that do not exceed one year.
Rental revenue from commercial properties, including the base rent that each tenant is required to pay in accordance with
the terms of their respective leases, net of any rent concessions and lease incentives, is reported on a straight-line basis over the
non-cancellable term of the lease.
Real Estate Properties
Real estate properties are stated at cost, net of accumulated depreciation, and include properties acquired through
acquisition, development or foreclosure.
The Company assesses the fair value of real estate acquired (including land, buildings and improvements, and identified
intangibles such as acquired in-place leases) and acquired liabilities and allocates the acquisition price, including transaction
costs, based on these assessments. Depreciation for multi-family properties is computed on a straight-line basis over an
estimated useful life of 30 years. Intangible assets (and liabilities) are amortized over the remaining life of the related leases at
the time of acquisition and is usually less than one year. Expenditures for maintenance and repairs are charged to operations as
incurred.
Real estate is classified as held for sale when management has determined that the applicable criteria have been met. Real
estate assets that are expected to be disposed of are valued at the lower of their carrying amount or their fair value less costs to
sell on an individual asset basis. Real estate classified as held for sale is not depreciated.
The Company accounts for the sale of real estate when title passes to the buyer, sufficient equity payments have been
received, there is no continuing involvement by the Company and there is reasonable assurance that the remaining receivable, if
any, will be collected.
Asset Impairments
The Company reviews each real estate asset owned to determine if there are indicators of impairment. If such indicators are
present, the Company determines whether the carrying amount of the asset can be recovered. Recognition of impairment is
required if the undiscounted cash flows estimated to be generated by the asset are less than the asset's carrying amount and that
carrying amount exceeds the estimated fair value of the asset. The estimated fair value is determined using a discounted cash
flow model of the expected future cash flows through the useful life of the property. The analysis includes an estimate of the
future cash flows that are expected to result from the real estate investment’s use and eventual disposition. These cash flows
consider factors such as expected future operating income, trends, the effects of leasing demands, and other factors. In
evaluating a property for impairment, various factors are considered, including estimated current and expected operating cash
flow from the property during the projected holding period, costs necessary to extend the life or improve the asset, expected
capitalization rates, projected stabilized net operating income, selling costs, and the ability to hold and dispose of such real
estate in the ordinary course of business. Valuation adjustments may be necessary in the event that effective interest rates, rent-
up periods, future economic conditions, and other relevant factors vary significantly from those assumed in valuing the
property. If future evaluations result in a decrease in the value of the property below its carrying value, the reduction will be
recognized as an impairment charge. The fair values related to the impaired real estate assets are considered to be a level 3
valuation within the fair value hierarchy.
For investment in real estate ventures, if indicators of impairment are present, the Company determines if the fair value of
the investment is less than its carrying value. Fair value is determined using a discounted cash flow model of the expected
future cash flows through the useful life of the asset. The fair values related to the impaired investments in real estate ventures
are considered to be a level 3 valuation within the fair value hierarchy.
F-11
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Equity Based Compensation
Compensation expense for grants of restricted stock, restricted stock units ("RSUs") and dividend equivalent rights are
amortized over the vesting period of such awards, based upon the estimated fair value of such award at the grant date. The
Company recognizes the effect of forfeitures when they occur and previously recognized compensation expense is reversed in
the period the grant or unit is forfeited. The deferred compensation related to the RSUs to be recognized as expense is net of
certain performance assumptions which are re-evaluated quarterly. For accounting purposes, the restricted shares and the RSUs
are not included in the outstanding shares shown on the consolidated balance sheets until they vest; however, the restricted
shares are included in the calculation of both basic and diluted earnings per share as they participate in the earnings of the
Company.
Derivatives and Hedging Activities
The Company's objective in using derivative financial instruments is to manage interest rate risk related to variable rate
debt. The Company does not use derivatives for trading or speculative purposes. The Company records all derivatives on its
consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended
use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge
accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives
designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow
hedges. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is
reported in other comprehensive income (loss). Those amounts are reclassified to earnings in the same income statement line
item that is used to present the earnings effect of the hedged item when the hedged item affects earnings. For derivatives not
designated as cash flow hedges, changes in the fair value of the derivative are recognized directly in earnings in the period in
which they occur.
Per Share Data
Basic earnings (loss) per share is determined by dividing net income (loss) applicable to holders of common stock for the
applicable year by the weighted average number of shares of common stock outstanding during such year. Net income is also
allocated to the unvested restricted stock outstanding during each period, as the restricted stock is entitled to receive dividends
and is therefore considered a participating security. The RSU's are excluded from the basic earnings per share calculation, as
they are not participating securities.
Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue shares of
common stock were exercised or converted into shares of common stock or resulted in the issuance of shares of common stock
that share in the earnings of the Company. Diluted earnings per share is determined by dividing net income applicable to
common stockholders for the applicable period by the weighted average number of shares of common stock deemed to be
outstanding during such period.
In calculating diluted earnings per share, the Company includes only those shares underlying the RSU's that it anticipates
will vest based on management's current estimates. The Company excludes any shares underlying the RSU's from such
calculation if their effect would have been anti-dilutive.
Cash Equivalents
Cash equivalents consist of highly liquid investments; primarily, direct United States treasury obligations with maturities of
three months or less when purchased.
Restricted Cash
Restricted cash consists of cash held for construction costs and property improvements for specific joint venture properties
as may be required by contractual arrangements.
F-12
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Costs
Fees and costs incurred in connection with multi-family property financings are deferred and amortized over the term of the
related debt obligations. Fees and costs paid related to the successful negotiation of commercial leases are deferred and
amortized on a straight-line basis over the terms of the respective leases.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those estimates.
New Pronouncements
In March 2020, the Financial Accounting Standard Board issued ASU 2020-04, Reference Rate Reform (Topic 848).
ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, lease, derivatives and
other contracts. This guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities
occur. During the first quarter of 2020, the Company has elected to apply hedge accounting expedients related to probability
and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged
transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the
presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance
and may apply other elections as applicable as additional changes in the market occur.
NOTE 2—REAL ESTATE PROPERTIES
Real estate properties, excluding a property held for sale in 2021 (see Note 7), consist of the following (dollars in
thousands):
Land
Building
Building improvements
Real estate properties
Accumulated depreciation
December 31,
2021
2020
$
38,822
$
281,841
9,354
330,017
(36,467)
Total real estate properties, net
$
293,550
$
25,585
154,854
10,590
191,029
(30,837)
160,192
A summary of activity in real estate properties, net for the year ended December 31, 2021 follows (dollars in thousands):
Multi-family
Land - Daytona, FL
Retail shopping center - Yonkers,
NY/Other
December 31,
2020 Balance
Property
Acquisitions
Improvements Depreciation Asset Sale
Held for
Sale
December 31,
2021 Balance
$
153,604
$ 160,583 $
1,308 $
(7,116) $ (16,841) $ — $
291,538
4,379
2,209
—
—
—
—
—
—
(4,379)
—
(111)
(86)
—
2,012
Total real estate properties
$
160,192
$ 160,583 $
1,308 $
(7,227) $ (16,927) $ (4,379) $
293,550
F-13
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 2—REAL ESTATE PROPERTIES (Continued)
The following summarizes, by state, information for the year ended December 31, 2021 regarding consolidated properties
(dollars in thousands):
Location
Georgia
Florida
South Carolina
Virginia
Texas (a)
Tennessee
Ohio
Other (b)
Number of
Properties
Number of
Units
2021 Rental and Other
Revenue from Real Estate
Properties
% of 2021 Rental and
Other Revenue from
Real Estate Properties
2
1
2
1
1
2
1
—
10
448 $
276
474
220
192
702
264
—
6,723
4,594
4,402
4,273
3,895
3,413
3,232
1,509
21 %
14 %
14 %
13 %
12 %
11 %
10 %
5 %
2,576 $
32,041
100 %
____________________________
(a) Includes the revenues of Kendall Manor which was sold in May 2021.
(b) Represents non-multi-family revenues
Future minimum rentals to be received pursuant to non-cancellable operating leases with terms in excess of one year,
from a commercial property owned by the Company at December 31, 2021, are as follows (dollars in thousands):
Year Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total
Amount
$
1,185
1,252
953
648
648
865
$
5,551
Leases at the Company's multi-family properties are generally for a term of one year or less and are not reflected in this
table.
NOTE 3—ACQUISITIONS, DISPOSITIONS AND IMPAIRMENT CHARGES
Acquisitions of Interests in Joint Ventures
In 2021, the Company purchased all of its partners' interests in three joint ventures. The Company determined that in each
acquisition the gross assets acquired are concentrated in a single identifiable asset. Therefore, the transaction does not meet the
definition of a business and is accounted for as an asset acquisition. The Company assessed the fair value of the tangible assets
of the property as of the acquisitions dates using an income approach utilizing market capitalization rate of 4.75% which is a
Level 3 unobservable input in the fair value hierarchy. The following table summarizes these purchases (dollars in thousands):
F-14
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 3—ACQUISITIONS, DISPOSITIONS AND IMPAIRMENT CHARGES
Location
Bells Bluff, Nashville, TN
Crestmont at Thornblade, Greenville, SC
Crossings of Bellevue, Nashville, TN
Purchase
Date
No. of
Units
Interest
Purchased
Purchase
Price
Mortgage
Debt Assumed/
Acquired
8/18/2021
10/1/2021
12/1/2021
402
266
300
968
42.0 % $
27,860
$
10.0 %
1,600
20.0 %
16,128
52,000
26,425
37,680
$
45,588
$
116,105
The following table summarizes the purchase price allocation of the book values of those properties that are now wholly
owned and is based on the proportionate share of the estimated fair value of the property on the acquisition date (dollars in
thousands):
Land
Building and Improvements
Total Land and building
Bells Bluff
Crestmont at
Thornblade
Crossings of
Bellevue
Total
$
$
6,172
$
4,033
$
9,679
$
19,884
77,532
34,052
29,115
140,699
83,704
$
38,085
$
38,794
$
160,583
Acquisition related lease intangibles
Total Assets
1,597
818
730
3,145
$
85,301
$
38,903 $
39,524
$
163,728
Acquisition related mortgage intangible
—
$
2,641
—
$
2,641
The unamortized balance of acquisition related lease intangibles, which is included in Other assets in the consolidated
balance sheet, was $2,347,000 at December 31, 2021, and will be amortized within a one year period.
The unamortized balance of acquisition related mortgage intangible, which is included in mortgages payable in the
consolidated balance sheet, was $2,582,000 at December 31, 2021 and will be amortized as follows (dollars in thousands):
Year Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total
Amount
$
365
376
386
390
395
670
$
2,582
F-15
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 3—ACQUISITIONS, DISPOSITIONS AND IMPAIRMENT CHARGES (Continued)
Property Dispositions
The tables below provide information regarding the Company's disposition of real estate properties during the year ended
December 31, 2021 (dollars in thousands):
Location
Kendall Manor - Houston, TX
New York, NY (1)
_______________________________________
(1) Reflects the sale of a cooperative apartment unit.
Sale Date
No. of Units
Sales Price
Gain on Sale
5/26/2021
8/20/2021
272
$
24,500
$
1
545
273
$
25,045
$
7,279
414
7,693
The Company did not dispose of any real estate properties during the year ended December 31, 2020.
Impairment Charges
The Company reviews each real estate asset owned, including those held through investments in unconsolidated joint
ventures, for impairment when there is an event or a change in circumstances indicating that the carrying amount may not be
recoverable.
The Company measures and records impairment charges, and reduces the carrying value of owned properties, when
indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their
carrying amounts. For its unconsolidated joint venture investments, the Company measures and records impairment losses, and
reduces the carrying value of the equity investment when indicators of impairment are present and the expected discounted cash
flows related to the investment is less than the carrying value.
In cases where the Company does not expect to recover its carrying value on properties held for use, the Company reduces
its carrying value to fair value, and for properties held for sale, the Company reduces its carrying value to the fair value less
costs to sell.
In the year ended December 31, 2021, the Company took an impairment charge of $520,000 related to its investment in
OPOP Tower and OPOP Loft properties, St Louis, MO, as the carrying value exceeded the fair vale by that amount. The fair
value is based upon the sale price at which the Company contracted to sell this joint venture interest. This investment was sold
in 2021 and no further impairments were recorded.
In the year ended ended December 31, 2020, indicators of impairment were present on a 8.7 acre vacant land parcel
located in South Daytona Beach, Florida. The Company had entered into a contract to sell this property at a sales price less
than its carrying value and accordingly, the Company took an impairment charge related to this asset of $3,642,000,
representing the excess of the carrying value over the fair value. This property was sold on February 2, 2022 and no further
impairments were recorded.
NOTE 4—RESTRICTED CASH
Restricted cash represents funds for specific purposes and therefore are not generally available for general corporate
purposes. As reflected on the consolidated balance sheets, restricted cash represents funds held by or on behalf of the Company
specifically allocated for capital improvements at multi-family properties.
NOTE 5 - LEASES
Lessor Accounting
The Company owns one commercial rental property which is leased to two tenants under operating leases with current
expirations ranging from 2024 to 2028, with options to extend or terminate the leases. Revenues from such leases are reported
F-16
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 5 - LEASES (Continued)
as rental income, net, and are comprised of (i) lease components, which includes fixed lease payments and (ii) non-lease
components which includes reimbursements of property level operating expenses. The Company does not separate non-lease
components from the related lease components, as the timing and pattern of transfer are the same, and account for the combined
component in accordance with ASC 842.
Due to the impact of the COVID-19 pandemic, concession agreements were entered into with the Company’s two
commercial tenants. In accordance with the FASB Staff Q&A, Topic 842 and 840 - Accounting for Lease Concessions Related
to the Effects of COVID-19 Pandemic, a lessor may make an accounting policy election to (i) not evaluate whether such
COVID-19 pandemic related rent-relief is a lease modification under ASC 842 and (ii) treat each tenant rent deferral or
forgiveness as if it were contemplated as part of the existing lease contract. The Company elected to apply this accounting
policy to the two lease agreements, based on the type of concessions provided to the tenants, where the revised cash flows are
substantially the same or less than the original lease agreement. During the year ended December 31, 2020, the Company
issued total abatements of $75,000 for the two tenants.
Lessee Accounting
The Company is a lessee under a ground lease in Yonkers, NY which is classified as an operating lease. The ground lease
expires September 30, 2024 and provides for one 21-year renewal option. As of December 31, 2021, the remaining lease term,
including the renewal option, is 23.8 years.
The Company is also a lessee under a corporate office lease in Great Neck, New York, which is classified as an operating
lease. The lease expires on December 31, 2031 and provides a 5-year renewal option. As of December 31, 2021, the remaining
lease term, including renewal options deemed exercised, is 15.0 years.
As of December 31, 2021, the Company's right-of-use ("ROU") assets and lease liabilities were $2,568,000 and
$2,629,000, respectively and as of December 31, 2020, the Company's ROU assets and lease liabilities were $2,652,000 and
$2,674,000, respectively. The ROU assets and lease liabilities are reported on the consolidated balance sheets in Other assets
and Accounts payable and accrued liabilities, respectively.
The discount rate applied to measure each ROU asset and lease liability is based on the Company’s incremental borrowing
rate (“IBR”). The Company considers the general economic environment and its historical borrowing rate activity and factors
in various financing and asset specific adjustments to ensure the IBR is appropriate to the intended use of the underlying lease.
As the Company did not elect to apply the hindsight practical expedient, lease term assumptions determined under ASC 840
were carried forward and applied in calculating the lease liabilities recorded under ASC 842. The Company’s ground lease
offers a renewal option which it assesses against relevant economic factors to determine whether it is reasonably certain of
exercising or not exercising the option. Lease payments associated with renewal periods that the Company is reasonably certain
will be exercised, if any, are included in the measurement of the corresponding lease liability and ROU asset.
As of December 31, 2021, the minimum future lease payments related to the operating ground and office leases are as
follows (dollars in thousands):
Year Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total undiscounted cash flows
Present value discount
Lease liability
Amount
232
236
243
252
257
3,502
4,722
(2,093)
2,629
$
$
$
F-17
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 6—INVESTMENT IN UNCONSOLIDATED VENTURES
At December 31, 2021, the Company owns interests in unconsolidated joint ventures that own 23 multi-family properties
(the "Unconsolidated Properties"). The condensed balance sheet below presents information regarding such properties (dollars
in thousands):
ASSETS
Real estate properties, net of accumulated depreciation of $133,615 and $145,600
$
734,247
$ 1,075,178
December 31,
2021
2020
Cash and cash equivalents
Other Assets
Total Assets
LIABILITIES AND EQUITY
Liabilities:
13,741
25,535
16,939
29,392
$
773,523
$ 1,121,509
Mortgages payable, net of deferred costs of $3,423 and $5,537
$
584,479
$
829,646
Accounts payable and accrued liabilities
Total Liabilities
Commitments and contingencies
Equity:
Total unconsolidated joint venture equity
Total Liabilities and Equity
17,064
601,543
20,237
849,883
171,980
271,626
$
773,523
$ 1,121,509
Company equity interest in all joint venture equity
$
112,347
$
169,474
F-18
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 6—INVESTMENT IN UNCONSOLIDATED VENTURES (Continued)
The condensed income statement below presents information regarding the Unconsolidated Properties (dollars in
thousands):
Revenues:
Rental and other revenue
Total revenues
Expenses:
Real estate operating expenses
Interest expense
Depreciation
Total expenses
Total revenues less total expenses
Other equity earnings
Impairment of assets
Insurance recoveries
Gain on insurance recoveries
Gain on sale of real estate properties
Loss on extinguishment of debt
Net income (loss) from joint ventures
BRT equity in loss and equity in earnings from sale of unconsolidated joint venture properties
Acquisitions
Year Ended December 31,
2021
2020
$
121,906
$
121,906
127,058
127,058
56,507
30,964
35,636
123,107
(1,201)
54
(2,813)
2,813
2,179
83,984
(9,401)
60,326
34,918
41,657
136,901
(9,843)
117
—
—
765
—
—
$
$
75,615
$
(8,961)
30,774
$
(6,024)
In 2021, the Company did not make any acquisitions through unconsolidated joint ventures.
The table below provides information regarding the Company's property acquisition through an unconsolidated joint
venture during the year ended December 31, 2020 (dollars in thousands):
Location
Purchase
Date
No. of
Units
Purchase
Price
Acquisition
Mortgage
Debt
Initial BRT
Equity
Ownership
Percentage
Capitalized
Property
Acquisition
Costs
Abbotts Run, Wilmington, NC
2/20/2020
264
$
38,000
$
23,160
$ 13,700
80 % $
459
On March 10, 2022 we acquired for $3,500,000 a 17.45% interest in a planned 240-unit development property located in
Johns Island, SC.
F-19
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 6—INVESTMENT IN UNCONSOLIDATED VENTURES (Continued)
Dispositions
The table below provides information regarding the disposition of real estate properties by an unconsolidated joint venture
in the year ended December 31, 2021 (dollars in thousands):
Location
Avenue Apts,Ocoee, FL
Parc at 980, Lawrenceville, GA
Sale Date
7/20/2021
7/28/2021
No. of
Units
Sales Price
BRT's Share
of Gain on
Sale
Partner's Share of
Gain on Sale
BRT Share of Loss
of Extinguishment
of Debt
522
$
107,661
$
19,518 $
20,150 $
586
118,250
15,464
28,852
1,108
$
225,911
$
34,982 $
49,002 $
4,474
107
4,581
There were no sales of properties by unconsolidated joint ventures in the year ended December 31, 2020.
On February 8, 2022, 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 $53,800,000. We estimate that the gain
on the sale of this property will be approximately $23,700,000 and that our share of the gain, which will be recognized in the
first quarter of 2022, will be approximately $12,700,000. This property was secured by $25,100,000 of mortgage debt with 1.4
years years of remaining term to maturity and bearing an interest rate of 3.61% which was repaid in connection with the sale.
The table below provides information regarding the sale of venture interests to our joint venture partners in the year ended
December 31, 2021:
Location
Anatole, Daytona Beach, FL
OPOP Tower and Lofts, St. Louis, MO
Sale Date
No. of Units
Sales Price
BRT's Share of
Gain on Sale
4/20/2021
11/4/2021
208
$
7,540
$
181
3,000
389
$
10,540
$
2,244
388
2,632
There were no sales of interest in joint ventures in the year ended December 31, 2020.
Joint Venture Buyouts
In 2021, the Company purchased its venture partners' remaining interests in three joint ventures that own three properties
and increased its ownership interest in a fourth joint venture that owns two properties. The operations and accounts of the
three joint ventures which, as a result of such purchases, are wholly-owned by the Company are consolidated into the
operations and accounts of the Company as of their respective acquisition dates. The table below provides information
regarding these four acquisitions (dollars in thousands):
Location
Civic Center I/II, Southaven, MS
Bells Bluff, West Nashville, TN
Crestmont at Thornblade, Greenville, SC
Crossings of Bellevue, Nashville, TN
Buyout Date
5/4/2021
8/18/2021
10/1/2021
12/1/2021
No. of
Units
Percentage of
Interest
Purchased
Purchase
Price
New
Ownership
Percentage
Mortgage
Balance at
Acquisition
776
402
266
300
14.7 % $ 6,031
74.7 %
41.9 % 27,860
100 % $
10.0 %
1,600
20.0 % 16,128
100 %
100 %
N/A
52,000
26,425
37,680
1,744
$ 51,619
$
116,105
F-20
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 7—REAL ESTATE PROPERTY HELD FOR SALE
In September 2020, the Company entered into a contract to sell a vacant parcel of land located in South Daytona Beach, FL
for $4,700,000 with a net book value of $4,379,000. The buyer's right to terminate the contract expired on November 1, 2021.
At December 31, 2021, the Company reclassified the net book value of the land as Real estate property held-for-sale in the
accompanying balance sheet. The property was sold on February 2, 2022.
NOTE 8—DEBT OBLIGATIONS
Debt obligations consist of the following (dollars in thousands):
Mortgages payable
Junior subordinated notes
Deferred loan costs
Total debt obligations
December 31,
2021
2020
$
$
200,857
$
37,400
(1,277)
130,997
37,400
(880)
236,980
$
167,517
A summary of activity in property debt for the year ended December 31, 2021 is as follows (dollars in thousands):
Balance at December 31, 2020
Acquisitions
Fair value adjustment upon consolidation
Debt payoff in conjunction with property sales
Debt Payoff
Principal Amortization
Changes in Deferred Fees
Balance at December 31, 2021
$
$
130,434
116,105
2,582
(14,260)
(31,879)
(2,688)
(417)
199,877
At December 31, 2021, $200,857,000 of mortgage debt with a weighted average interest rate of 3.78% and a weighted
average term to maturity of 10.1 years is outstanding on eight of the Company's multi-family properties. Scheduled principal
repayments for the next five years and thereafter are as follows (dollars in thousands):
Year Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Scheduled Principal
Payments
31,355
1,679
2,095
17,467
1,904
146,357
200,857
$
$
F-21
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 8—DEBT OBLIGATIONS (Continued)
The Company incurred the following mortgage debt in connection with the purchase of its venture partners' interests in the
year ended December 31, 2021 (dollars in thousands):
Location
Acquisition Date
Mortgage balance
at acquisition
Interest Rate
Maturity Date
Bells Bluff - West Nashville, TN
8/18/2021
$
52,000
Crestmont at Thornblade - Greenville, SC
Crossings - Nashville, TN
________________________________
10/1/2021
12/1/2021
$
26,425 (a)
37,680
116,105
3.48 %
4.69 %
3.11 %
August 2041
November 2028
December 2031
(a) Debt assumed in connection with the purchase of the joint venture partner's remaining interest in the venture does not include purchase price allocation of
$2,642 related to this debt.
The Company paid off the following debt in the year ended December 31, 2021 (dollars in thousands):
Avalon - supplemental
Avondale Station
Avondale Station - supp1emental
Woodland Trails
RIPCO
Total debt paid
Mortgage
Payoff
Interest
Rate
Maturity Date
Prepayment
Charges
$
2,903
7,140
6,866
14,025
4.92 %
3/1/2022 $
3.74 %
12/1/2022
5.53 %
4.36 %
12/1/2022
2/1/2022
945
5.25 %
4/1/2022
$
31,879
29
376
277
140
—
$822
In connection with the pay off of the RIPCO debt, the Company terminated the interest rate swap associated with this debt.
The Company did not incur any debt in the year ended December 31, 2020.
Credit Facility
The Company entered into an amended and restated credit facility dated November 18, 2021 with an affiliate of Valley
National Bank ("VNB"). The facility allows the Company to borrow, subject to compliance with borrowing base requirements
and other conditions, up to $35,000,000 to facilitate the acquisition of multi-family properties, repay mortgage debt secured by
multi family properties and for operating expense (i.e.,working capital (including dividend payments)); provided that no more
than $15,000,000 may be used for operating expenses. The facility is secured by the cash available in certain cash accounts
maintained by the Company at VNB and the Company's pledge of its interests in the entities that own the unencumbered
properties used in calculating the borrowing base. The facility matures November 2024 and bears an adjustable interest rate of
25 basis points over the prime rate, with a floor of 3.50%. The interest rate in effect as of December 31, 2021 is 3.50%. There
is an unused facility fee of 0.25% per annum on the total amount committed by VNB and unused by the Company. At
December 31, 2021, the Company is in compliance in all material respects with its obligations under the facility.
At December 31, 2021 and 2020, there was no outstanding balance on the facility and $35,000,000 and $15,000,000,
respectively, was available to be borrowed. Interest expense for the years ended December 31, 2021 and 2020, which includes
amortization of deferred financing costs and unused fees, was $101,000 and $96,000, respectively. Deferred costs of $270,000
and $12,000 are recorded in other assets on the consolidated balance sheets at December 31, 2021 and 2020, respectively.
F-22
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 8—DEBT OBLIGATIONS (Continued)
Junior Subordinated Notes
At December 31, 2021 and 2020, the outstanding principal balance of the Company's junior subordinated notes was
$37,400,000 before deferred financing costs of $297,000 and $317,000, respectively. The interest rate on the outstanding
balance resets quarterly and is based on three month LIBOR + 2.00%. The rate in effect at December 31, 2021 and 2020 was
2.13% and 2.21% respectively. The notes mature April 30, 2036.
The notes require interest only payments through the maturity date, at which time repayment of all outstanding principal
and unpaid interest is due. Interest expense for the years ended December 31, 2021 and 2020, which includes amortization of
deferred costs, was $845,000 and $1,119,000, respectively.
NOTE 9—INCOME TAXES
The Company elected to be taxed as a REIT pursuant to the Code. As a REIT, the Company is generally not subject to
Federal income taxes at the corporate level if it distributes 100% of its REIT taxable income, as defined, to its stockholders. To
maintain its REIT status, the Company must distribute at least 90% of its ordinary taxable income; however, if it does not
distribute 100% of its taxable income, it will be taxed on undistributed income. There are a number of organizational and
operational requirements the Company must meet to remain a REIT. If the Company fails to qualify as a REIT in any taxable
year, its taxable income will be subject to Federal income tax at regular corporate tax rates and it may not be able to qualify as a
REIT for four subsequent tax years. Even if it is qualified as a REIT, the Company is subject to certain state and local income
taxes and to Federal income and excise taxes on undistributed taxable income. For income tax purposes, the Company reports
on a calendar year basis. As of December 31, 2021, tax returns for the calendar years 2018 through 2020 remain subject to
examination by the Internal Revenue Service and various state and local tax jurisdictions.
During the years ended December 31, 2021 and 2020, the Company recorded $206,000 and $248,000, respectively, of state
franchise tax expense, net of refunds, relating to the 2021 and 2020 calendar years.
Earnings and profits, which determine the taxability of dividends to stockholders, differs from net income reported for
financial statement purposes due to various items, including timing differences related to loan loss provisions, impairment
charges, depreciation methods and carrying values.
At December 31, 2021, it is estimated the Company had a net operating loss carryforward of $26,500,000. These net
operating losses may be available in future years to reduce taxable income when and if it is generated. These loss carryforwards
no longer expire and are available to offset 100% of taxable income. Net operating losses generated in 2018 and thereafter will
be available to offset 80% of taxable income.
NOTE 10—STOCKHOLDERS' EQUITY
Common Stock Dividend Distribution
During the years ended December 31, 2021 and 2020, the Company declared an aggregate of $0.90 and $0.88 per share in
cash dividends, respectively.
Stock Based Compensation
In 2020, the Company's board of directors adopted and the stockholders' approved the 2020 Incentive Plan (the "2020
Plan"). This plan permits the Company to grant: (i) stock options, restricted stock, restricted stock units, performance shares
awards and any one or more of the foregoing, up to a maximum of 1,000,000 shares; and (ii) cash settled dividend equivalent
rights in tandem with the grant of restricted stock units and certain performance based awards.
Each of the Company's 2018 Incentive Plan (the "2018 Plan") and the Amended and Restated 2016 Incentive Plan (the
"2016 Plan") authorized the Company to grant up to 600,000 shares of common stock pursuant to the same type of awards
available under the 2020 Plan. No further awards may be granted pursuant to the 2018 Plan or the 2016 Plan, which are referred
to collectively as the "Prior Plans."
F-23
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 10—STOCKHOLDERS' EQUITY (Continued)
Restricted Stock Units
In March 2021, pursuant to the 2020 Plan, the Company issued restricted stock units (the "RSUs") to acquire up to 210,375
shares of common stock. The RSUs entitle the recipients, subject to continued service through March 31, 2024 (the
"Performance Period"), to receive in the aggregate (i) up to 93,500 shares (the "TSR Award") of common stock based on
achieving, during the Performance Period, specified levels in compounded annual growth rate ("CAGR") in total stockholder
return (“TSR”), and (ii) up to 93,500 shares of common stock based on achieving, during the Performance Period, specified
levels in CAGR in adjusted funds from operations (the "AFFO Award"), in each case as determined pursuant to the
performance agreement. In addition, up to 23,375 shares (the "Adjustment Award") may be added to or subtracted from the
TSR Award, based on attaining or failing to attain, as the case may be, during the Performance Period, of CAGR in TSR
relative to the CAGR in TSR for the REITs that comprise, with specified exceptions, the FTSE NAREIT Equity Apartment
Index. The recipients also receive dividend equivalent rights entitling them to receive cash dividends with respect to the shares
of common stock underlying their RSUs as if the underlying shares were outstanding during the Performance Period, if, when,
and to the extent, the related RSUs vest. The shares underlying the RSU's are not participating securities but are contingently
issuable shares.
For the TSR Awards, a third party appraiser prepared a Monte Carlo simulation pricing model to assist management in
determining fair value. In preparing its simulation, the appraiser assumed an estimated life of three years, a dividend rate of
4.93%, a risk free interest rate ranging from 0.02% to 0.34% and an expected price volatility ranging from 47.19% to 59.01%.
For the AFFO Awards, fair value is based on the market value on the date of grant. Expense is not recognized on RSUs which
the Company does not expect to vest because the performance conditions are not expected to be satisfied. Performance
assumptions are re-evaluated quarterly. The total amount recorded at the grant date as deferred compensation with respect to the
RSUs was $1,995,000.
In June 2016, the Company issued RSUs to acquire up to 450,000 shares shares of common stock, pursuant to
the 2016 Plan. In 2021, it was determined that the market conditions with respect to 250,000 shares underlying RSU's issued
under the 2016 Plan had been satisfied; such shares with an aggregate market value of $4,200,000 as of the measurement date,
were issued and an aggregate of $775,000 of RSU dividend equivalents were paid. It was also determined that the performance
conditions with respect to 200,000 shares underlying RSU's under the 2016 Plan had not been satisfied and accordingly, the
200,000 RSU's did not vest.
The Company recorded $620,000 and $140,000 of compensation expense related to the amortization of unearned
compensation with respect to the RSUs in the year ended December 31, 2021 and 2020 respectively. At December 31, 2021
and 2020, $2,248,000 and $37,000 had been deferred as unearned compensation and is to be charged to expense over the
balance of the applicable performance period.
Restricted Stock
In January 2021 and June 2021, the Company granted 156,774 shares and 160,000 shares, respectively, of restricted stock
pursuant to the 2020 Plan. As of December 31, 2021, an aggregate of 922,619 shares of unvested restricted stock are
outstanding pursuant to the Plan and the Prior Plans. The shares of restricted stock vest five years from the date of grant and
under specified circumstances, including a change in control, may vest earlier. For financial statement purposes, the restricted
stock is not included in the outstanding shares shown on the consolidated balance sheets until they vest, but are included in the
basic and diluted earnings per share computation. During the years ended December 31, 2021 and 2020, the Company recorded
$2,321,000 and $1,681,000, respectively, of compensation expense related to the amortization of unearned compensation with
respect to the restricted stock awards. At December 31, 2021 and 2020, $7,332,000 and $4,411,000, respectively, has been
deferred as unearned compensation and will be charged to expense over the remaining vesting periods of these restricted stock
awards. The weighted average vesting period of these restricted shares is 2.8 years. Subsequent to December 31, 2021, the
Company granted 158,973 shares of restricted stock pursuant to the 2020 Plan. Changes in the number of restricted shares
outstanding under the Company's equity incentive plans are shown below:
F-24
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 10—STOCKHOLDERS' EQUITY (Continued)
Outstanding at beginning of the year
Issued
Cancelled
Vested
Outstanding at the end of the year
Year Ended December 31,
2021
2020
744,145
316,774
(950)
725,296
158,299
—
(137,350)
(139,450)
922,619
744,145
The following table reflects the compensation expense recorded for all incentive plans (dollars in thousands):
Restricted stock grants
Restricted stock units
Total compensation
Earnings Per Share
Year Ended December 31,
2021
2020
$
$
2,321
$
620
2,941
$
1,681
140
1,821
The following table sets forth the computation of basic and diluted earnings per share (dollars in thousands):
Numerator for basic and diluted earnings per share:
Net income (loss)
Deduct (earnings) attributable to non-controlling interests
Deduct (earnings) loss allocated to unvested restricted stock
Net income (loss) available for common stockholders: basic and diluted
Year Ended December 31,
2021
2020
$
$
29,250 $
(136)
(1,412)
27,702 $
(19,732)
(130)
1,520
(18,342)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding
17,017,690
17,115,697
Effect of dilutive securities:
RSUs (1)
Denominator for diluted earnings per share:
Weighted average number of shares
Earnings (loss) per common share, basic
Earnings (loss) per common share, diluted
_______________________________________
66,952
—
17,084,642
17,115,697
$
$
1.63 $
1.62 $
(1.16)
(1.16)
(1) For the year ended December 31, 2020, excludes the shares underlying RSUs as their effect would have been anti-dilutive.
F-25
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 10—STOCKHOLDERS' EQUITY (Continued)
Equity Distribution Agreements
The following table reflects the sale of shares pursuant to the equity distribution agreements entered into on November 26,
2019, as amended, with three sales agents in an at-the-market offering (dollars in thousands):
Number of
Shares Sold
Average
Price
Gross
Proceeds
Commissions
and Fees
Net
Proceeds
Dollar Value of
Shares Sold
Aggregate amount available under agreement
2019
2020
2021
Remaining amount available under agreement:
111,963
$ 18.06
$
2,022
$
694,298
$ 17.71
529,126
$18.47
12,293
9,772
1,335,387
$ 24,087
$
31
185
147
363
$
$
$
$
1,991
12,108
9,625
23,724
$
30,000
(2,022)
(12,293)
(9,772)
$
5,913
Subsequent to year end, the Company sold an additional 200,000 shares and received net proceeds of $2,173,000.
Stock Buyback
Effective as of October 1, 2019, the Board of Directors authorized the Company to purchase up to $5,000,000 of shares of
common stock through September 30, 2021. During the year ended December 31, 2020, the Company repurchased 39,093
shares of common stock , at an average market price of $15.76 for an aggregate cost of $616,000. No other shares were
repurchased under this authorization.
On September 13, 2021, the Board of Directors approved a stock purchase plan authorizing the Company, effective as of
October 1, 2021, to repurchase up to $5,000,000 of shares of common stock through December 31, 2023. During the year ended
December 31, 2021, the Company did not repurchase any shares of common stock.
NOTE 11—RELATED PARTY TRANSACTIONS
The Company has retained certain of its executive officers and Fredric H. Gould, a director, to provide, among other
things, the following services: participating in the Company's multi-family property analysis and approval process ( which
includes service on an investment committee), providing investment advice, long term planning and consulting with executives
and employees with respect to other business matters, as required. The aggregate fees paid in 2021 and 2020 for these services
were $1,398,000 and $1,398,000, respectively.
Management of certain properties owned by the Company and certain joint venture properties is provided by Majestic
Property Management Corp. ("Majestic Property"), a company wholly owned by Fredric H. Gould, under renewable year-to-
year agreements. Certain of the Company's officers and directors are also officers and directors of Majestic Property. Majestic
Property provides real property management, real estate brokerage and construction supervision services to these properties.
For the years ended December 31, 2021 and 2020, fees for these services were $31,000 and $32,000, respectively.
Pursuant to a shared services agreement between the Company and several affiliated entities, including Gould Investors
L.P., the owner and operator of a diversified portfolio of real estate and other assets and One Liberty Properties, Inc., a NYSE
listed equity REIT, the (i) services of the part time personnel that perform certain executive, administrative, legal, accounting
and clerical functions and (ii) certain facilities and other resources, are provided to the Company. The allocation of expenses
for the facilities, personnel and other resources shared by, among others, the Company and Gould Investors, is computed in
accordance with such agreement and is included in general and administrative expense on the consolidated statements of
operations. During the years ended December 31, 2021 and 2020 allocated general and administrative expenses reimbursed by
the Company to Gould Investors pursuant to the shared services agreement aggregated $641,000 and $761,000, respectively.
Fredric H. Gould is executive officer and sole stockholder of Georgetown Partners, LLC, the managing general partner of
Gould Investors L.P.("Gould Investors"). Mr. Gould is also the vice chairman of the board of directors of One Liberty
F-26
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 11—RELATED PARTY TRANSACTIONS (Continued)
Properties and certain of the Company's officers and directors are also officers or directors of One Liberty Properties and
Georgetown Partners. As of December 31, 2021 and 2020, $118,000 and $124,000, respectively, remains unpaid and is
included in accounts payable and accrued liabilities on the consolidated balance sheets.
The Company obtains certain insurance in conjunction with Gould Investors and reimburses Gould Investors for the
Company's share of the insurance cost. Insurance reimbursements to Gould Investors for the years ended December 31, 2021
and 2020 were $61,000 and $39,000, respectively.
NOTE 12—FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Instruments Not Measured at Fair Value
The following methods and assumptions were used to estimate the fair value of each class of financial instruments that
are not reported at fair value on the consolidated balance sheets:
Cash and cash equivalents, restricted cash, accounts receivable (included in other assets), accounts payable and accrued
liabilities: The carrying amounts reported on the balance sheets for these instruments approximate their fair value due to the
short term nature of these accounts.
Junior subordinated notes: At December 31, 2021 and 2020, the estimated fair value of the Company's junior
subordinated notes is less than their carrying value by approximately $8,296,000 and $8,670,000, respectively, based on market
interest rates of 4.21% and 4.22%, respectively.
Mortgages payable: At December 31, 2021, the estimated fair value of the Company's mortgages payable is less than
their carrying value by approximately $511,000, assuming market interest rates between 3.12% and 3.87%. At December 31,
2020, the estimated fair value was greater than the carrying value by $3,831,000, assuming market interest rates between
2.87% and 3.28%. Market interest rates were determined using current financing transaction information provided by third
party institutions.
Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market
assumptions and/or estimation methodologies may have a material effect on the estimated fair value assumptions. The fair
values of debt obligations are considered to be Level 2 valuations within the fair value hierarchy.
Financial Instruments Measured at Fair Value
The Company's fair value measurements are based on the assumptions that market participants would use in pricing the
asset or liability. As a basis for considering market participant assumptions in fair value measurements, there is a fair value
hierarchy that distinguishes between markets participant assumptions based on market data obtained from sources independent
of the reporting entity and the reporting entity's own assumptions about market participant assumptions. Level 1 assets/
liabilities are valued based on quoted prices for identical instruments in active markets, Level 2 assets/liabilities are valued
based on quoted prices in active markets for similar instruments, on quoted prices in less active or inactive markets, or on other
"observable" market inputs and Level 3 assets/liabilities are valued based significantly on "unobservable" market inputs. The
Company does not currently own any financial instruments that are classified as Level 3.
At December 31, 2021, the Company had no financial assets or liabilities measured at fair value.
Set forth below is information regarding the Company's financial liabilities measured at fair value as of December 31,
2020 (dollars in thousands):
Financial Liabilities:
Interest rate swap
Carrying and
Fair Value
Fair Value Measurements Using Fair Value
Hierarchy
Level 1
Level 2
Level 3
$
23
—
$
23
—
F-27
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 12—FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Derivative financial instruments: Fair values are approximated using widely accepted valuation techniques including
discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the
derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, and
implied volatilities. At December 31, 2020, this derivative is included in Accounts payable and accrued liabilities on the
consolidated balance sheet.
Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of
the fair value hierarchy, the credit valuation adjustments associated with it utilize Level 3 inputs, such as estimates of current
credit spreads to evaluate the likelihood of default by itself and its counterparty. As of December 31, 2020, the Company
assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative position and
determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the
Company determined that its derivative valuation is classified in Level 2 of the fair value hierarchy.
Long-lived assets
The Company measures its real estate investments at fair value on a nonrecurring basis. During the year ended December
31, 2021, the fair value of the real estate investment was determined using the following input levels (dollars in thousands):
Non-Financial Assets:
Investment in unconsolidated joint venture
$
3,000 $
— $
3,000 $
—
Carrying and Fair
Value
Level 1
Level 2
Level 3
Fair Value Measurements Using Fair Value Hierarchy
During the year ended December 31, 2020, the fair value of the real estate investment was determined using the following
input levels (dollars in thousands):
Non-Financial Assets:
Long-lived assets
Carrying and Fair
Value
Level 1
Level 2
Level 3
Fair Value Measurements Using Fair Value Hierarchy
$
4,379 $
— $
— $
4,379
The Company reviews its investments in real estate when events or circumstances change indicating the carry value of the
investment may not be recoverable. In the evaluation of an investment for impairment, many factors are considered, including
estimated current and expected cash flows from the asset during the projected hold period, costs necessary to extend the life of
the asset, expected capitalization rates, and projected stabilized net operating income and the ability to hold or dispose of the
asset in the ordinary course of business.
Quantitative information about Level 2 measurements is as follows:
Non-Financial Assets: Long-Lived assets:
OPOP Tower and Lofts, St. Louis, MO
$
3,000
Sales Contract
Sales Contract
Fair Value
Valuation Technique
Significant Unobservable Inputs
F-28
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 12—FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Quantitative information about Level 3 measurements is as follows:
Non-Financial Assets: Long-Lived assets:
Vacant land - South Daytona Beach, FL
$
4,379 Discounted cash flow
Non-binding sales contract /Discount rate 12.5%
Fair Value
Valuation Technique
Significant Unobservable Inputs
NOTE 13—COMMITMENT AND CONTINGENCIES
The Company maintains a non-contributory defined contribution pension plan covering eligible employees and officers.
Contributions by the Company are made through a money purchase plan, based upon a percent of qualified employees' total
salary as defined therein. Pension expense approximated $423,000 and $386,000 during the years ended December 31, 2021
and 2020, respectively. At December 31, 2021 and 2020, $23,000 and $186,000, respectively, remains unpaid and is included
in accounts payable and accrued liabilities on the consolidated balance sheets.
At December 31, 2021, the Company is the carve-out guarantor with respect to mortgage debt in principal amount of
$189,290,000 at seven multi-family properties.
NOTE 14—DERIVATIVE FINANCIAL INSTRUMENTS
Cash Flow Hedges of Interest Rate Risk
The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its
exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its
interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable
amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without
exchange of the underlying notional amount.
The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated
Other Comprehensive Income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction
affects earnings.
As of December 31, 2021, the Company did not have any outstanding interest rate derivatives that was designated as a
cash flow hedge of interest rate risk (dollars in thousands):
Non-designated Derivatives
Derivatives not designated as hedges are not speculative and are used to manage the Company's exposure to interest rate
movements and other identified risks but do not meet the hedge accounting requirements. Changes in the fair value of
derivatives not designated in hedging relationships are recorded directly in earnings. At December 31, 2020, the Company did
not have any outstanding derivatives that were not designated as hedges in qualifying hedging relationships.
The table below presents the fair value of the Company's derivative financial instruments as well as its classification on
the consolidated balance sheets as of the dates indicated (dollars in thousands):
December 31, 2021
December 31, 2020
Derivatives as of:
Balance Sheet Location
Fair Value
Balance Sheet Location
Fair Value
Other Assets
Accounts payable and accrued liabilities
$
$
—
Other assets
—
Accounts payable and
accrued liabilities
$
$
—
23
F-29
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 14—DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
The following table presents the effect of the Company's derivative financial instrument on the consolidated statements
of comprehensive income (loss) for the years ended December 31, 2021 and 2020 and (dollars in thousands):
Amount of loss recognized on derivative in Other Comprehensive Income
Amount of (loss) gain reclassified from Accumulated Other Comprehensive (loss) income into
Interest Expense
Total amount of Interest expense presented in the Consolidated Statement of Operations
Year Ended December 31,
2020
2021
$
$
$
(1)
$
(12)
6,757
$
$
(27)
(15)
7,100
During the year ended December 31, 2021, the Company accelerated the reclassification of losses of $12,000 from other
comprehensive income to earnings as a result of the hedged forecasted transaction becoming probable not to occur.
F-30
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 15—QUARTERLY FINANCIAL DATA (Unaudited)
Revenues:
Rental and other revenue
Other income
Total revenues
Expenses:
Real estate operating expenses
Interest expense
General and administrative
Impairment charge
Depreciation
Total expenses
1st Quarter
Jan - March
2nd Quarter
April - June
3rd Quarter
July - September
4th Quarter
Oct - Dec
Total
For Year
2021
$
7,095 $
6,958 $
7,709 $
10,279 $
32,041
4
3
7,099
6,961
3,117
1,660
3,114
—
1,537
9,428
3,166
1,609
3,154
520
1,416
9,865
5
7,714
3,404
1,535
3,114
—
1,787
9,840
4
16
10,283
32,057
4,515
1,953
3,239
—
3,285
12,992
14,202
6,757
12,621
520
8,025
42,125
Total revenues less total expenses
(2,329)
(2,904)
(2,126)
(2,709)
(10,068)
Equity in loss of unconsolidated joint ventures
(1,345)
(492)
(4,196)
1,825
(4,208)
Equity in earnings from sale of unconsolidated
joint venture properties
Gain on sale of real estate
Gain on sale of partnership interest
Loss on extinguishment of debt
Loss from continuing operations
Provision for taxes
(Loss) income from continuing operations, net of
taxes
(Income) attributable to non-controlling interests
Net (loss) income attributable to common
stockholders
Basic and diluted and per share amounts
attributable to common stockholders
—
—
—
(3,674)
57
—
7,279
2,244
—
6,127
67
34,982
414
—
(902)
28,172
31
—
—
388
(673)
(1,169)
51
34,982
7,693
2,632
(1,575)
29,456
206
(3,731)
6,060
28,141
(1,220)
29,250
(34)
(33)
(35)
(34)
(136)
$
(3,765) $
6,027 $
28,106 $
(1,254)
29,114
Basic (loss) income per share
Diluted (loss) income per share
$
$
(0.22) $
0.34 $
1.55 $
(0.08) $
(0.22) $
0.34 $
1.54 $
(0.08) $
1.63
1.62
F-31
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 15—QUARTERLY FINANCIAL DATA (Unaudited) (Continued)
2020
1st Quarter
Jan - March
2nd Quarter
April - June
3rd Quarter
July - September
4th Quarter
Oct - Dec
Total
For Year
Revenues:
Rental and other revenue
$
6,745 $
6,657 $
7,020 $
7,029 $
27,451
Other income
Total revenues
Expenses:
Real estate operating expenses
Interest expense
General and administrative
Impairment charge
Depreciation
Total expenses
179
6,924
3,058
1,860
3,367
—
1,561
9,846
159
6,816
3,004
1,809
2,957
—
1,809
9,579
293
7,313
3,289
1,731
2,730
3,642
1,777
13,169
20
7,049
3,026
1,700
2,647
—
1,595
8,968
651
28,102
12,377
7,100
11,701
3,642
6,742
41,562
Total revenues less total expenses
(2,922)
(2,763)
(5,856)
(1,919)
(13,460)
Equity in (loss) of unconsolidated joint ventures
(1,815)
(1,387)
(1,529)
(1,293)
(6,024)
Equity in earnings from sale of unconsolidated
joint venture properties
Gain on sale of real estate
Loss on extinguishment of debt
Income (loss) from continuing operations
Provision for taxes
(Loss) income from continuing operations, net of
taxes
Net (income) attributable to non-controlling
interests
Net (loss) income attributable to common
stockholders
Basic and diluted per share amounts attributable
to common stockholders
Basic loss per share
Diluted loss per share
—
—
—
(4,737)
62
—
—
—
(4,150)
65
—
—
—
(7,385)
65
—
—
—
(3,212)
56
—
—
—
(19,484)
248
(4,799)
(4,215)
(7,450)
(3,268)
(19,732)
(32)
(31)
(34)
(33)
(130)
$
(4,831) $
(4,246) $
(7,484) $
(3,301)
(19,862)
$
$
(0.29) $
(0.25) $
(0.44) $
(0.19) $
(0.29) $
(0.25) $
(0.44) $
(0.19) $
(1.16)
(1.16)
F-32
BRT APARTMENTS CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2021
NOTE 16—SUBSEQUENT EVENTS
Subsequent events have been evaluated and any significant events, relative to our consolidated financial statements as of
December 31, 2021 that warrant additional disclosure have been included in the notes to the consolidated financial statements.
The Company is presented with the risks presented by the novel coronavirus or COVID-19, which has spread and may
continue to spread, to markets in which it operates. The ultimate extent of the impact of the pandemic on the Company’s
business, financial condition, liquidity, results of operations and prospects will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including the duration, the severity of, and the actions taken to
control, the pandemic, and the short-term and long-term economic impact thereof.
F-33
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`
SCHEDULE III—REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION
BRT REALTY TRUST AND SUBSIDIARIES
DECEMBER 31, 2021
(Dollars in thousands)
Notes to the schedule:
(a) Total real estate properties
Less: Accumulated depreciation
Net real estate properties
(b)
Information not readily obtainable.
A reconciliation of real estate properties is as follows:
Balance at beginning of year
Additions:
Acquisitions
Capital improvements
Deductions:
Sales
Depreciation
Impairment Charge
Balance at end of year
$ 334,396
(36,467)
$ 297,929
2021
2020
$
160,192 $
169,689
160,583
1,308
161,891
16,927
7,227
—
24,154
—
887
887
—
6,742
3,642
10,384
$
297,929 $
160,192
F-35
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CORPORATE
DIRECTORY
ISRAEL ROSENZWEIG
Chairman of the Board of Directors;
Senior Vice President of Georgetown
Partners LLC, the managing general
partner of Gould Investors L.P., a real
estate limited partnership; Senior Vice
President of One Liberty Properties, Inc.
JEFFREY A. GOULD
Director, President and Chief Executive
Officer; Senior Vice President of
Georgetown Partners LLC; Senior Vice
President and Director of One Liberty
Properties, Inc.
MATTHEW J. GOULD
Director and Senior Vice President;
Chairman of the Board and Chief
Executive Officer of Georgetown
Partners LLC; Chairman of the Board of
Directors of One Liberty Properties, Inc.;
Chief Executive Officer of Rainbow
Realty Group; Director of Halsa
Holdings, Inc.
DAVID W. KALISH
Senior Vice President—Finance;
Senior Vice President and Chief
Financial Officer of Georgetown
Partners LLC; Senior Vice President
and Chief Financial Officer of One
Liberty Properties, Inc.
MARK H. LUNDY
Senior Vice President; President and
Chief Operating Officer of Georgetown
Partners LLC; Senior Vice President of
One Liberty Properties, Inc.
GEORGE E. ZWEIER
Vice President and Chief
Financial Officer
MITCHELL K. GOULD
Executive Vice President
ISAAC KALISH
Vice President and Treasurer; Vice
President and Assistant Treasurer
of Georgetown Partners LLC; Vice
President and Assistant Treasurer of
One Liberty Properties, Inc.
STEVEN ROSENZWEIG
Senior Vice President, Legal;
Vice President of Georgetown
Partners LLC
RYAN BALTIMORE
Chief Operating Officer
ALAN H. GINSBURG
Director; Chairman of The CED
Companies and AHG Group of
Companies
FREDRIC H. GOULD
Director; Vice Chairman of the Board of
Directors of One Liberty Properties Inc.
LOUIS C. GRASSI
Director; Managing Partner, Grassi &
Co., CPAs
GARY J. HURAND
Director; President of Management
Diversified Inc.
JEFFREY RUBIN
Director; Chief Executive Officer and
President of The JR Group; Chief
Executive Officer of Summit
Processing Group LLC
JONATHAN H. SIMON
Director; Chief Executive Officer of
Simon Baron Development Group
ELIE WEISS
Director; Chief Executive Officer of
Five Forty Investments
CAROL CICERO
Director
REGISTRAR AND TRANSFER
American Stock Transfer
and Trust Company
6201 15th Avenue
Brooklyn, New York 11219
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young, LLP
5 Times Square
New York, New York 10036
FORM 10-K AVAILABLE
A copy of the annual report (Form 10-K)
filed with the Securities and Exchange
Commission may be obtained without
charge by writing to BRT Apartments
Corp., 60 Cutter Mill Road, Suite 303,
Great Neck, New York 11021,
Attn: Secretary.
COMMON STOCK
The Company’s common stock
is listed on the New York Stock
Exchange under the ticker
symbol BRT.
WEB SITE ADDRESS
www.brtapartments.com
Annual Report Design by Curran & Connors, Inc. / www.curran-connors.com
B
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A
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C
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2
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2
1
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P
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T
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
(516) 466-3100
www.brtapartments.com