What changed in BRT Apartments Corp.'s 10-K — 2023 vs 2024

Business - Our Multi- Family Properties ", our equity interests in these properties range from 32% to 80% (dollars in thousands): Year Ended December 31, 2023 2022 Increase (Decrease) % change Rental revenues from unconsolidated joint ventures $ 44,785 $ 72,873 $ (28,088) (38.5) % Real estate operating expense from unconsolidated joint ventures 20,577 33,086 (12,509) (37.8) % Interest expense from unconsolidated joint ventures 9,268 16,269 (7,001) (43.0) % Depreciation from unconsolidated joint ventures 10,403 17,798 (7,395) (41.5) % Total expenses from unconsolidated joint ventures 40,248 67,153 (26,905) (40.1) % Total revenues less total expenses from unconsolidated joint ventures 4,537 5,720 (1,183) (20.7) % Other equity in earnings from unconsolidated joint ventures 126 121 5 4.1 % Impairment of assets — (8,553) 8,553 N/A Insurance recoveries from unconsolidated joint ventures — 8,553 (8,553) N/A Gain on insurance proceeds from unconsolidated joint ventures 65 567 (502) (88.5) % Gain on sale of real estate from unconsolidated joint ventures 38,418 118,270 (79,852) (67.5) % Loss on extinguishment of debt from unconsolidated joint ventures (561) (3,491) 2,930 (83.9) % Net income $ 42,585 $ 121,187 $ (78,602) (64.9) % Equity in earnings (loss) and gain on sale of real estate of unconsolidated joint ventures $ 17,037 $ 66,426 Set forth below is on explanation of the most significant changes in the components of the equity in earnings of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties.

Same store properties at Unconsolidated Properties represent seven properties that were owned for the entirety of the periods being compared.

Rental revenue from unconsolidated joint ventures The decrease is due to: • $18.4 million from the Partner Buyouts; • $7.5 million primarily from the sale, in 2022, of Verandas at Shavano-San Antonio, TX, Cinco Ranch-Katy, TX, Vive at Kellswater-Kannapolis, NC and Water's Edge-Columbia, SC (collectively, the "2022 Sales"); and • $4.4 million from the Chatham Sale.

The decrease was offset by a $2.7 million increase in rental revenue from unconsolidated same store properties, primarily due an increase in rental rates offset by a $729,000 decrease due to reduced occupancy. 29 Table of Contents Real estate operating expenses from unconsolidated joint ventures The components of the decrease include: • $7.8 million from the Partner Buyouts; • $4.2 million from the 2022 Sales; • $1.8 million from the Chatham Sale.

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

The components of the decrease are: • $4.5 million due to the Partner Buyouts; • $1.8 million from the 2022 Sales; and • $631,000 from the Chatham Sale. Depreciation from unconsolidated joint ventures .

The components of the decrease are: • $5.1 million due to the Partner Buyouts; • $1.2 million from the 2022 Sales; and • $878,000 from the Chatham Sale. Impairment of assets from unconsolidated joint ventures. During 2022, the venture recognized $8.6 million of impairment charges related to a fire at Stono Oaks, a development project located in Johns Island, SC.

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

Gain on insurance recoveries from unconsolidated joint ventures During 2022, we recognized $567,000 in gains primarily due to our receipt of insurance recoveries from claims on two properties located in Texas that were damaged in a February 2021 ice storm, which receipts exceeded the assets previously written off.

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

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

Comparison of Years Ended December 31, 2022 and 2021 As we are a smaller reporting company, this comparison is omitted in accordance with Instruction 1 to Item 303(a) of Regulation S-K. 30 Table of Contents Funds from Operations; Adjusted Funds from Operations; Net Operating Income.

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

We compute FFO in accordance with the "White Paper on Funds From Operations" issued by the National Association of Real Estate Investment Trusts ("NAREIT") and NAREIT's related guidance.

FFO is defined in the White Paper as net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.

Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. In computing FFO, we do not add back to net income the amortization of costs in connection with our financing activities or depreciation of non-real estate assets.

We compute AFFO by adjusting FFO for loss on extinguishment of debt, our straight-line rent accruals, restricted stock and RSU compensation expense, fair value adjustment of mortgage debt, gain on insurance recovery, insurance recovery from casualty loss and deferred mortgage and debt costs (including, in each case as applicable, from our share from our unconsolidated joint ventures).

Since the NAREIT White Paper does not provide guidelines for computing AFFO, the computation of AFFO may vary from one REIT to another.

We believe that FFO and AFFO are useful and standard supplemental measures of the operating performance for equity REITs and are used frequently by securities analysts, investors and other interested parties in evaluating equity REITs, many of which present FFO and AFFO when reporting their operating results.

FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization of real estate assets, which assures that the value of real estate assets diminish predictability over time. In fact, real estate values have historically risen and fallen with market conditions.

As a result, we believe that FFO and AFFO provide a performance measure that, when compared year-over-year, should reflect the impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs and other matters without the inclusion of depreciation and amortization, providing a perspective that may not be necessarily apparent from net income.

We also consider FFO and AFFO to be useful to us in evaluating potential property acquisitions. FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP.

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

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

In evaluating our performance, management is careful to examine GAAP measures such as net income (loss) and cash flows from operating, investing and financing activities.

Management also reviews the reconciliation of net income (loss) to FFO and AFFO. 31 Table of Contents The table below provides a reconciliation of net income determined in accordance with GAAP to FFO and AFFO for each of the indicated years (amounts in thousands): 2023 2022 GAAP Net income attributable to common stockholders $ 3,873 $ 49,955 Add: depreciation of properties 28,484 24,812 Add: our share of depreciation in unconsolidated joint venture properties 5,292 10,677 Add: our share of impairment charge in unconsolidated joint venture properties — 1,493 Add: casualty loss 323 850 Deduct: gain on sales of real estate and partnership interests (604) (6) Deduct: our share of earnings in earnings from sale of unconsolidated joint venture properties (14,744) (64,531) Adjustment for non-controlling interests (16) (16) Funds from operations 22,608 23,234 Adjust for: straight-line rent accruals 93 24 Add: loss on extinguishment of debt — 563 Add: our share of loss on extinguishment of debt from unconsolidated joint venture properties 212 1,880 Add: amortization of restricted stock and RSU expense 4,768 4,487 Add: amortization of deferred mortgage and debt costs 1,072 628 Add: our share of deferred mortgage costs from unconsolidated joint venture properties 106 227 Add: amortization of fair value adjustment for mortgage debt 613 148 Less: insurance recovery of casualty loss (323) (850) Less: our share of insurance recovery from unconsolidated joint ventures — (1,493) Less: gain on insurance recovery (240) (62) Less: our share of gain on insurance proceeds from unconsolidated joint venture properties (30) (432) Adjustment for non-controlling interests (15) (4) Adjusted funds from operations $ 28,864 $ 28,350 32 Table of Contents The table below provides a reconciliation of net income per common share (on a diluted basis) determined in accordance with GAAP to FFO and AFFO. 2023 2022 Net income attributable to common stockholders $ 0.20 $ 2.66 Add: depreciation of properties 1.50 1.33 Add: our share of depreciation from unconsolidated joint venture properties 0.28 0.57 Add: our share of impairment charge in unconsolidated joint ventures — 0.08 Add: casualty loss 0.02 0.05 Deduct: gain on sales of real estate and partnership interest (0.03) — Deduct: our share of earnings from sale of unconsolidated joint venture properties (0.78) (3.45) Adjustment for non-controlling interests — — Funds from operations 1.19 1.24 Adjustment for: straight-line rent accruals — — Add: loss on extinguishment of debt — 0.03 Add: our share of loss on extinguishment of debt from unconsolidated joint ventures 0.01 0.10 Add: amortization of restricted stock and RSU expense 0.25 0.25 Add: amortization of deferred mortgage and debt costs 0.06 0.03 Add: our share of amortization of deferred mortgage and debt costs from unconsolidated ventures 0.01 0.01 Add: amortization of fair value adjustment for mortgage debt 0.03 0.01 Less: insurance recovery of casualty loss (0.02) (0.05) Deduct: our share of insurance recovery from unconsolidated joint ventures — (0.08) Deduct: gain on insurance recovery (0.01) — Deduct: our share of gain on insurance proceeds from unconsolidated joint ventures — (0.02) Adjustment for non-controlling interests — — Adjusted funds from operations $ 1.52 $ 1.52 Diluted shares outstanding for FFO and AFFO 18,931,026 18,782,695 FFO for 2023 decreased $626,000, or 2.7%, to $22.6 million from $23.2 million in 2022.

Contributing to the change was a: • $1.5 million decrease in insurance recovery from a casualty loss at an unconsolidated joint venture; • $1.2 million increase in interest expense (including $465,000 of amortization of mortgage fair value costs); • $499,000 increase in general and administrative expense (excluding non cash-amortization of restricted stock and RSU expense); and • $402,000 decrease in gains from insurance proceeds.

The decrease was offset by a: • $2.2 million decrease in early extinguishment of debt; • $767,000 decrease in income tax expense; and • $536,000 increase in other income. AFFO increased $514,000 or 1.8%, to $28.9 million in 2023 from $28.4 million in 2022.

Contributing to this increase was a: • $767,000 decrease in income tax expense; • $536,000 increase in other income; and • $470,000 of insurance recoveries 33 Table of Contents The increase was offset by a: • $725,000 increase in interest expense; and • $499,000 increase in general and administrative expense .

See “—Comparison of Years Ended December 31, 2023 and 2022” for further information regarding these changes. NOI is a non-GAAP measure of performance.

NOI is used by our management and many investors to evaluate and compare the performance of our properties to other comparable properties, to determine trends at our properties and to determine the estimated fair value of our properties.

The usefulness of NOI may be limited in that it does not take into account, among other things, general and administrative expense, interest expense, loss on extinguishment of debt, casualty losses, insurance recoveries and gains or losses as determined by GAAP. NOI is a property specific performance metric and does not measure our performance as a whole.

Same store NOI reflects the operations of seven of our ten wholly-owned properties.

We compute NOI by adjusting net income (loss) to (a) add back (1) interest expense, (2) general and administrative expenses, (3) depreciation expense, (4) impairment charges, (5) provision for taxes, (6) loss on extinguishment of debt, (7) equity in loss of unconsolidated joint ventures, (8) casualty loss and (9) the impact of non-controlling interests, and (b) deduct (1) other income, (2) gain on sale of real estate (3) gain on sale of partnership interest, (4) equity in earnings from sale of consolidated joint venture properties, (5) insurance recovery of casualty loss and (6) gain on insurance recoveries.

Other REIT’s may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REIT’s. We believe NOI provides an operating perspective not immediately apparent from GAAP operating income or net income (loss).

NOI is one of the measures we use to evaluate our performance because it (i) measures the core operations of property performance by excluding corporate level expenses and other items unrelated to property operating performance and (ii) captures trends in rental housing and property operating expenses. However, NOI should only be used as an alternative measure of our financial performance.

The following table provides a reconciliation of net income attributable to common stockholders as computed in accordance with GAAP to NOI for the periods presented (dollars in thousands): For the year ended December 31, 2023 2022 GAAP Net income attributable to common stockholders $ 3,873 $ 49,955 Less: Other Income (548) (12) Add: Interest expense 22,161 15,514 General and administrative 15,433 14,654 Depreciation 28,484 24,812 Provision for taxes 54 821 Less: Gain on sale of real estate (604) (6) Add: Loss on extinguishment of debt — 563 Equity in (earnings) loss of unconsolidated joint venture properties (2,293) (1,895) Casualty loss 323 850 Less: Equity in earnings from sale of unconsolidated joint venture properties (14,744) (64,531) Insurance recovery of casualty loss (793) (850) Gain on insurance recovery (240) (62) Add: Net income attributable to non-controlling interests 142 144 Net Operating Income $ 51,248 $ 39,957 Less: Non same store and non multi family (1) Revenues 45,695 24,911 Operating Expenses 20,140 10,692 $ 25,555 $ 14,219 Same Store Net Operating Income $ 25,693 $ 25,738 _____________________________________ (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. 34 Table of Contents In 2023, NOI increased by $11.3 million from 2022 primarily due to a $20.8 million increase in rental revenues resulting from the Partner Buyouts.

The increase was offset by a $9.4 million increase, primarily due to the Partner Buyouts, in real estate operating expenses. Same store NOI remained flat in 2023 from 2022 due to a $1.8 million increase in rental revenues (and in particular, the increase in average rental rates) offset by a $1.8 million increase in real estate operating expenses.

See "-Results of Operations - Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022" for a discussion of these changes. Liquidity and Capital Resources We require funds to pay operating expenses and debt service obligations, acquire properties, make capital and other improvements, fund capital contributions, pay dividends and repurchase shares of our common stock.

Generally, in 2023, our primary sources of capital and liquidity were the operations of our multi-family properties (including distributions of $6.3 million from the operations of our unconsolidated joint ventures), our $19.4 million share of the net proceeds from the Chatham Sale, and our available cash.

Excluding funds held at our unconsolidated subsidiaries, at December 31, 2023 and March 1, 2024, our available liquidity was approximately $83.5 million and $81.2 million, respectively, including $23.5 million and $21.2 million, respectively, of cash and cash equivalents, and subject to compliance with borrowing base and other requirements, up to $60 million and $60 million, respectively, available under our credit facility.

A significant amount of our cash and cash equivalents is maintained at our properties for general working capital purposes.

We anticipate that for the four years beginning January 1, 2024, our operating expenses, $127.8 million of mortgage amortization and interest expense (including $50.4 million from unconsolidated joint ventures) and $204.4 million of balloon payments due with respect to mortgages maturing through 2027 (including $76.7 million from unconsolidated joint ventures), anticipated capital expenditures (for 2024 only) of $10.1 million for both consolidated and unconsolidated properties (including an estimated $2.7 million for our value add program), estimated cash dividend payments of at least $74.0 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.5 million shares outstanding) will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), mortgage financings and re-financings, sales of properties, the issuance of additional equity and, if available, our $60 million credit facility.

Our operating cash flow and available cash is insufficient to fully fund the $204.4 million of balloon payments, and if we are unable to refinance such debt on acceptable terms, we may need to issue additional equity or dispose of properties, in each case on potentially unfavorable terms.

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

Further, if and to the extent we generate ordinary taxable income, we will be required to make distributions to stockholders to maintain our REIT status and as a result, will be limited in our ability to use gains, if any, from property sales, as a source of funds for operating expenses, debt service and property acquisitions.

We anticipate that our insurance costs will continue to increase because of our implementation, in 2022, of a master insurance program that directly covers our wholly-owned properties (as opposed to coverage obtained by our property managers), the casualty losses that we have sustained the past several years and general increases in the cost of insurance coverage for multi-family properties.

The failure of property management companies to properly manage our properties could adversely impact our results of operations. We rely on property management companies to manage our properties.

Risks Related to Our Financing Activities, Indebtedness and Capital Resources If we are unable to refinance $138.5 million in balloon payments on mortgage debt maturing through 2026, we may be forced to sell properties on disadvantageous terms.

As of December 31, 2023, we have balloon payments of $138.5 million on mortgage debt (including $53.5 million of mortgage debt on properties owned by unconsolidated joint ventures) due in 2025 and 2026 ( i.e., $15.3 million and $123.0 million due in 2025 and 2026, respectively). The weighted average interest rate of this debt is 4.85%.

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: • 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: 21 Table of Contents • “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, 2023, Gould Investors owns approximately 19.1% of the outstanding shares of common stock and, by virtue of the applicable attribution rules under the Code, these individuals beneficially own approximately 23.3% 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.

However, there is no limitation on Gould Investors, 22 Table of Contents Fredric H. Gould, Matthew J. Gould or 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, 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.

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. 23 Table of Contents

Item 3. Legal Proceedings. As previously reported, a wholly-owned subsidiary of ours that owns a property in Houston, TX was named as a defendant, along with multiple other defendants, in a wrongful death action entitled Takakura et al. v.

Houston Pizza Venture, LP, and Papa John’s USA., Inc. et.al., 129th Judicial District, Harris County, TX, Cause No. 2019-42425 (the "Takakura Lawsuit"). The lawsuit has been settled, all claims against us were released and our share of the settlement costs were covered by our insurance policy.

From January 1, 2024 through March 1, 2024 we purchased, pursuant to our publicly announced repurchase program, 123,061 shares at a weighted average price of $18.43 per share. As of March 1, 2024, we are authorized to purchase $7.3 million of shares through December 31, 2025.

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 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 generally provide no less than $10 million to $25 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, insurance coverage at our unconsolidated properties 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.

Our Other Real Estate Assets and Activities In addition to our multi-family properties, we own assets, and in particular, real estate assets, with an aggregate carrying value of $5.6 million at December 31, 2023.

These assets include cooperative apartment units located in Lawrence and Washington Heights, NY, a leasehold position with two commercial tenants at a property in Yonkers, NY, an equity interest in a development project, which is substantially complete, in John's Island, SC and a nominal profit participation in an entity that 10 Table of Contents owns several multi-family properties in Newark, NJ.

None of these assets generate significant net income or revenue other than the leasehold interest which generated $1.3 million of rental income and $1.1 million of cash flow from operation in 2023 before giving effect to the non-controlling interest. 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, the ability to secure financing on a timely basis to complete the acquisition, an extensive network able to introduce us to appropriate acquisition opportunities and the ability to absorb certain risks that we may be unwilling to absorb (and that larger competitors may be willing to absorb).

We 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.

To the extent that a potential joint venture 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 such arrangement.

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. 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, 2023, we had 10 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 11 Table of Contents 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 2024, and paid in 2023 and 2022, for the Services, are $1.62 million, $1.54 million and $1.47 million, respectively.

See note 10 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.