Thank you for holding. Welcome to the BRT Apartments Corp Second Quarter 2022 Earnings Conference Call. Please note that all participants are in listen-only mode and this call is being recorded. After the presentation, there will be a chance to ask questions. I will now hand it over to Stephen Swett from Investor Relations. Please proceed.

Thank you for joining us today for BRT Apartment Corp.'s second quarter 2022 earnings conference call. On the call today is Jeff Gould, President and Chief Executive Officer. Also available are George Zweier, Chief Financial Officer; Ryan Baltimore, Chief Operating Officer; and David Kalish, Senior Vice President. I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions and beliefs. Forward-looking statements can often be identified by words such as believe, expect, estimate, anticipate, intend and similar expressions and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding BRT's strategy and expectations for the future. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's SEC filings including its Form 10-K and Form 10-Q for a more complete discussion of risks and other factors that could affect these forward-looking statements. Except as required by law, BRT does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes a discussion of funds from operations, or FFO, adjusted funds from operations, or AFFO, net operating income, or NOI, and information regarding our pro rata share of revenues, expenses, NOI, assets and liabilities of BRT's unconsolidated subsidiaries, all of which are non-GAAP financial measures of performance. These non-GAAP measures should be used as a supplement to, and not a substitute for, net income computed in accordance with GAAP. Unless otherwise indicated, or the context otherwise requires, discussions with respect to operating results at the unconsolidated ventures reflect BRT's pro rata share of such results. For a more complete discussion of our financial results, as reported in accordance with GAAP, see the company's earnings release and supplemental information and 10-Q which are currently filed and available under the Investor Relations tab at our website. All amounts are approximate and, among other things, reflect rounding. Unless otherwise indicated, or context otherwise requires, references to BRT's portfolio or its multifamily portfolio, and references to revenues, expenses, NOI, assets and liabilities, refer to results and accounts of BRT's wholly owned subsidiaries and its pro rata share of unconsolidated subsidiaries. BRT uses pro rata share to help provide a better understanding of our unconsolidated joint ventures. However, the use of pro rata information has certain limitations, and is not representative of our operations and accounts as presented in accordance with GAAP. Accordingly, pro rata information should be used with caution and in conjunction with the GAAP data presented in our supplemental and in our reports filed with the SEC. Further references to the current quarter refer to the quarter ended June 30, 2022, and references to the 2021 quarter refer to the quarter ended June 30, 2021. As a reminder, the company's supplemental information and earnings release have been posted on the Investor Relations section of BRT's website at www.brtapartments.com. I'd now like to turn the call over to President and Chief Executive Officer, Jeffrey Gould. Please, go ahead, Jeff.

Thank you and welcome to the call. The second quarter was another strong quarter of performance across our portfolio as we continue to benefit from strong fundamentals in most of our markets driven by ongoing population and job growth as well as the significant shortage of quality housing in many of these areas. Additionally, we have made significant progress on our efforts to grow our wholly-owned portfolio and simplify our capital structure through acquisitions of our partners’ interests. These transactions allow us to capture value by adding additional income, as well as incremental assets to the balance sheet. We have now completed all of our previously announced buyouts, as well as most of the announced sales, which have produced strong gains for the company. As a result, our wholly-owned portfolio today considering all the transactions completed over the last nine months now includes 21 properties consisting of 5,420 units, increased by approximately 3,800 units from this time last year. Turning to our results, for the second quarter of 2022, net income attributable to common shareholders was $35.6 million, or $1.91 per diluted share, compared to $6 million, or $0.34 per diluted share in the same quarter of 2021. The improvement was due primarily to our $40.1 million share of the gains from the sale of two properties owned by unconsolidated subsidiaries. AFFO was $6.9 million, or $0.37 per diluted share, compared to $5.5 million, or $0.31 per diluted share in the second quarter of 2021. Contributing to the 19% increase in AFFO per share were improved operating margins and our share of reduced interest expense at our unconsolidated subsidiaries, offset by the increase in state income tax. In addition, AFFO per share amounts were also affected by the issuance of shares on our ATM and equity incentive programs. Turning to our portfolio, at June 30, 2022, our wholly-owned portfolio consisted of 16 multifamily communities containing 3,848 units. We also owned interest through unconsolidated entities in another 14 communities containing 4,557 units. Average occupancy for the portfolio was 96.1% for the quarter ended June 30, 2022, up 80 basis points compared to the 2021 quarter. Average rents for the portfolio in the second quarter of 2022 were $1,252 per month, up 10.9% compared to the 2021 quarter. For leases signed in the second quarter of 2022, we saw favorable spreads on new leases at 15.1%, renewal spreads of 10.7% and overall spreads of 12.6%. In the second quarter of 2022 our same-store pool for the portfolio including 6,165 units, of which 1,608 units were consolidated and 4,557 units were owned by unconsolidated joint ventures. For these properties same-store revenue grew 10%, same-store expenses increased by 10.7% and same-store NOI grew 9.4% in each case from the 2021 quarter. Regarding transactions year-to-date, we have been very active both during the second quarter and subsequent to quarter end in buying out the interests of our joint venture partners. Let me highlight our recent buyout activity. During the second quarter, we completed the purchase of the remaining interest in joint ventures that owned five multifamily properties with an aggregate of 984 units for an aggregate purchase price of $34.2 million. Subsequent to quarter end, we completed the purchase of the remaining interest in the joint ventures that owned five multifamily properties with an aggregate of 1,572 units for an aggregate purchase price of $63 million. We now have completed all 11 of the buyout transactions previously announced for an aggregate purchase price of $105.9 million. We believe there is upside in these acquisitions through value-add opportunities, management efficiencies and market growth. After giving effect to the purchases including those completed subsequent to the second quarter, we estimate that our consolidated balance sheet will reflect real estate assets of approximately $668 million and approximately $426 million of mortgage debt. Turning to capital recycling, in June of 2022, we sold Retreat at Cinco Ranch, a 268 unit property in Katy, Texas for $68.3 million. We retired $30.1 million of mortgage debt and BRT’s share of the gain on sale was approximately $17.4 million, excluding our share of debt prepayment fees of $686,000 and this transaction provided us with an IRR of over 20% over the 6.5 years it was owned. Also in June, we sold The Vive, a 312 unit multifamily property in Kannapolis, North Carolina for $91.3 million. We retired $31.4 million of mortgage debt and BRT’s share of the gain on sale was approximately $22.7 million excluding our share of debt prepayment fees of $787,000, and this transaction provided us with an IRR of over 40% over the three plus years it was owned. Also during the second quarter, we agreed to sell Waters Edge at Harbison, a 204-unit multifamily community in Columbia, South Carolina in which BRT holds an 80% equity interest for $32.4 million. We will be retiring $12.3 million of debt with this disposition. We anticipate that this transaction will be completed late August or early September, subject to customary closing conditions. We expect that our share of the gain will be approximately $11.5 million, excluding our share of debt prepayment fees of $263,000, and we estimate that our IRR will be approximately 20% over the six years it was owned. We’ve planned to use the sale proceeds to pay down our credit facility. On the value-add front, we repositioned the 107 units with an average investment of approximately $7,000 per unit yielding an estimated annualized return on investment of approximately 46%. As reflected in our supplemental financial information, a portion of the cost may have been incurred in the prior period but we report the return on investment when the units released. Across our entire portfolio, we have approximately 800 units available for renovation over the next couple of years. Turning to the balance sheet, at June 30, 2022, we had total assets of $605 million, total debt of $334 million and total BRT stockholder equity of $249 million. Available liquidity at quarter end included $57 million of cash and cash equivalents, restricted cash of $4.8 million primarily for capital improvements, and up to $35 million available under our credit facility. In addition, our unconsolidated joint ventures had approximately $11 million of cash and cash equivalents, which is used for the applicable ventures' day-to-day working capital purposes and renovations. At August 5, 2022, our available liquidity was approximately $31.4 million comprised of $13.9 million of cash and cash equivalents, $4.5 million of restricted cash and subject to compliance with borrowing base and other requirements, up to $30 million available under our credit facility. The aggregate mortgage debt at June 30 for our wholly-owned properties combined with our pro rata share of mortgage debt for our unconsolidated joint ventures totals $536.6 million, with a weighted average interest rate of 3.95% and a weighted average remaining term to maturity of 7.8 years. We continue to keep a focus on our leverage ratios and our debt to enterprise value as of June 30, 2022, to 63%, down from 64% at June 30, 2021. In the second quarter, we sold approximately 137,000 shares pursuant to our ATM sales program, at a weighted average price per share of $22.75. Net proceeds were approximately $3.1 million. Finally, on July 8, 2022, we paid a quarterly dividend of $0.25 per share, an increase of 8.7% from the prior quarterly dividend. This current dividend equates to an annualized yield of 4.53%, based on our stock price of $22.07, as of the close of business on August 5, 2022. In conclusion, the second quarter was another strong quarter for BRT, during which we continued to make considerable progress. We efficiently recycled capital through targeted dispositions where we believe we have maximized value and reinvested proceeds into the acquisition of our partners’ interest in properties with which we are very familiar and at which we believe there is upside potential. As we look ahead to the second half of 2022 and beyond, we are very pleased with the growth in our wholly-owned portfolio and the ongoing strength of our markets. We are hopeful that there will be a further chance to grow as the current disruption and uncertainty in the economy may lead to opportunity. I want to thank the entire BRT team for their hard work and contribution to our successes. That completes our call. We will now open the call to your questions.

Thank you. Our first question is from Gaurav Mehta with EF Hutton. Please go ahead.

Good morning. First question on your portfolio and as of – obviously done quite a bit of asset recycling this year. I was wondering if you could help us understand how much more opportunity is left in your portfolio as far as buyout of JV partners and dispositions?

Hi, Gaurav, yeah, on the buyouts, obviously, we’ve been pretty good up to there. We are also trying to buy out some of the remaining partners. I would say, the more low-hanging fruit are easier deals that we were able to be successful with we’ve taken care of, but we still have potential opportunities on a couple of situations. I don’t think we are going to get to the point where we are going to be able to buy out all the remaining partners in a fairly short period of time, but it’s something that over time, we think it will resolve itself and the portfolio at some point will be almost fully consolidated. And as far as the sales go, Waters Edge is the last one we have contemplated at this point, which I mentioned earlier. New things do come up and it’s possible, but as of right now we have no other sales specifically focused or targeted.

Great. And then, a second question, can you provide some color on the transaction market? What are you seeing as far as valuations and cap rates?

Yeah, I mean, obviously, since May June with interest rates changing and the reset on pricing, I think volume has slowed, as far as opportunities sellers have to understand the new norm. And we believe that pricing will be better in a few months than it is today. So we have been looking and – but we haven’t pulled the trigger or anything as of right now. I would expect that in the fall, things will get much busier. I think there will be a new expectation and understanding from the sellers’ point of view. Obviously, as I mentioned, disruption in leased opportunity and we think that come from – we will have some opportunity to see some transactional volume that might be of interest, which we are excited about looking forward to. I can’t give you specifics on cap rates because it’s really all over the place right now. It’s changed a lot, but I could tell you that, in my estimate, it probably has gone up maybe 25 to 50 basis points from where it was which was in the low threes at some point. So, still very low cap rates, but I would say simply higher than it’s been let’s say six months ago.

Okay. Thank you.

Thank you.

The next question is from Craig Kucera with B. Riley Securities. Please go ahead.

Yeah, hi, good morning, guys. Just want to start with the balance sheet, you had a junior subordinated notes out for quite a while and there have been a very excessive source of capital, but with the short-term rates rising and maybe likely to continue to rise, are you considering any sort of refinance there, perhaps a swap?

We look at it regularly, and obviously as you said the rates are rising. It’s still a relatively cheap piece of paper but it’s something we look at all the time. We have no immediate plans to do anything about it right now. But we are watching and if interest rates do climb further, then it may become something that we will focus on. But at this point, I think it’s more likely we keep the subordinated debt as we show it today. But it is something we watch pretty regularly.

Okay, great. Changing gears, very strong rent growth pretty much across the border – across the board I should say in the second quarter. How was July trending?

Everything looks to be going well and pretty well. I speak to my direct managers on a daily basis because obviously this can’t continue forever. And what I ask them pretty much daily is, are you seeing any slowdown? Are you seeing any resistance and I would say, generally I am very confident to say that things are going well and we are still seeing very nice increases lost lease and everything else is pretty significant. So we have seen similar trends what we’ve seen over the last few quarters.

Got it. And thus far, that rent growth has led to some pretty aggressive same-store NOI growth, plus, you have seen a pretty sizable pick up in operating expense, particularly in this quarter I think it was about 10%. Are there any particular expense categories driving out of that higher labor costs, property management et cetera, any feel or anything color would be helpful.

Yeah, I’ll give you a general answer then I will turn it over to Ryan to give you more specifics, but inflation definitely is causing some increase in expenses. It’s not – normally I’d say that expenses has so many relations to taxes. In this case, it is actually line items that you are talking about, but Ryan can give you the detail.

Yes, hi, Craig, so it’s really two main items you kind of hit it with the payroll side. Cost on the payroll have increased in order to keep talent at the property mainly on the maintenance side to keep good maintenance people at these properties you had to increase cost a little bit there. And the other real piece of it was as demand and occupancy increase, we did have to turn a lot more units and get them ready. So that increased, as well kind of across the board on most of the portfolio. So, it was really those two lines and there were some small increases on the utility side. As people continue to work from home, there is more usage on electricity and water. But for the most part, the inflationary pressures on the payroll, as well as the unit turns were the real main drivers.

Got it and just one more for me. I know, Jeff, you made some commentary about potentially seeing better pricing on acquisitions and getting a little more active maybe in the fall, but what is the company's sort of total appetite from where the balance sheet stands today? And would you think about perhaps recycling more capital to do that? Or would you just bring those on utilizing some combination of debt and equity or something else?

Well, we have base – we have the credit facility we have earmarked from some of these sales, et cetera, ability to pay the credit line off completely. So we have a lot of availability. We have a strong desire to grow and grow smart and effectively. So when the pricing and the spreads become something that we believe in along with the appreciation on the asset, the opportunity to do value-add to really make a significant difference, we are trying and wanting and willing to and wanting to go out and buy considerably more assets if and when the appropriate time. So what we've seen and it's been relatively quiet over the last 6, 9 months on new acquisitions, not partner buyouts, is that the pricing was just too tight and we were disciplined about it. And I think that with the disruption that I mentioned earlier, I think that's going to change to some extent. There is different players in the market now and will be. There are a lot more – a lot of these funds had a lot of money to spend and they spend it not focused on the rate, on the mortgage that they're getting. But more buyers, I think, in our space will come in needing to get the financing and obviously rates are pretty sensitive and needed to stay down in order to keep spreads down. So we're watching it daily. I just think the spreads were too tight at the time and I think they are going to get wider as far as interest rates to cap rates.

Okay. Thanks. Appreciated.

The next question is from Michael Gorman with BTIG. Please go ahead.

Yeah, thanks. Good morning. Jeff, I was wondering if you could just talk a little bit more about the conversations you're having with your partners. You mentioned the low-hanging fruits kind of being out of the way here. I am curious, is that a function of some of the stuff you're talking about in the transaction market, where expectations may have shifted and how you are thinking about assets versus the partners? Or is it something else there in terms of structure and maybe just a flavor for the conversations you're having there?

Yes. So the remaining unconsolidated it's not about structure, no. We have all the structures and all the discipline we need and all the specifics in our documentation that allow us to do certain things. It's really that the remaining unconsolidated partners want to continue to own the asset with us and they want to continue to run the asset and they believe in the upside of the asset. So, it's hard to make a deal and to buy them out when they are so aggressive in such belief that the asset will do so well and we haven't just been able to come to terms on a buyout price. So, usually, what happens with a couple of the partners we have remaining and what we've seen historically is that a lot of these deals run to maturity of our loans and usually then that's an event that causes some more likely position on potential sale. But these remaining partners really believe in the assets that we have along with us and they see future upside. So there is - it's very hard to get to deal. We were able to buy the partners out at what we think was at prices that were better than market then. They are probably slightly closer to the market now. But I would say we still think they were very good buys. But the asking price because of the potential upside is too great for us and it's hard to convince them otherwise because we actually agree with them. So, that's why I say it's more difficult to buy them right now. But that will get sorted out. Either what's going to happen over time is we will find a way to buy them or we may sell the assets in the years to come and recycle that capital hopefully to 100% owned assets that we are buying directly.

Fair enough. That's helpful. And then, maybe just on the resident front. Obviously, you are continuing to see good pricing power on the rent side and underwriting the residents on the new leases. I am wondering if you have any sense for the financial health, the financial picture of the residents that are renewing and kind of how their financial situation is fairing right now, just given all the other cost pressures that are likely going on in their lives.

Yeah, very good question. So obviously, with new tenants, you get to do all the background and all the work to make sure that they are at least three times or 3.5 times, whatever it might be on a given property of their coverage to rent. That's easy. You are right. On the lease expirations and renewals, we don't get updated information, but we obviously have payment history from them. There is a bump in the rent, but we typically know from management. They get to know the tenants pretty well. So we get to have an understanding of how they are doing and what they are doing. I mean, we typically hear of potential layoffs, things like that, just from just general guidance. But tenants that are solid, that are paying us and historically have paid us on time and everything else, we believe those are good tenants and tenants that will continue to pay. And we've seen that to be pretty solid. So you're right, we don't get new financials and new updated information from – on renewal. But it's been very strong as far as the collections have gone on those renewed tenants. So, we're pretty pleased with it.

Excellent. Thanks for the time, guys.

Thank you.

This concludes the time allocated for questions on today's call. I'd like to turn the conference back over to Jeffrey Gould for any closing remarks.

Well, good questions today and I thank you all for your time and your interest in BRT. Wish you all have a good day and we will speak soon. If you have any questions or need anything, please just call either Ryan or myself and we'll follow up with you. Thank you very much.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.