Good day, and welcome to the BRT Apartments Corporation third quarter 2022 earnings conference call. Today’s conference is being recorded. At this time, I’d like to turn the floor over to Mr. Kevin Reed of ICR. Thank you, sir, and you may now begin.

Thank you for joining us today for BRT Apartment Corp.'s third quarter 2022 earnings conference call. On the call today is Jeffrey 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. 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 call also includes a discussion of non-GAAP measures, including FFO, AFFO, NOI, and information regarding our pro rata share of revenues, expenses, NOI, assets and liabilities of BRT's unconsolidated subsidiaries. All the non-GAAP information discussed today has certain limitations to be used with caution and in conjunction with GAAP data presented in our supplemental earnings release, and in our reported filings with the SEC. Unless otherwise indicated, or the 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. 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. We anticipate that our quarterly report on Form 10-Q will be filed later today. I'd now like to turn the call over to President and CEO, Jeffrey Gould. Please, go ahead, Jeff.

Thank you, and welcome to the call. We are pleased to share that BRT had another strong quarter across our portfolio. The consistent and deliberate approach we have used over the past year to grow our portfolio through acquisitions of our joint venture partners’ interests, has resulted in strong quarterly operational results. Our quality property portfolio is located in strong and growing markets, and is comprised of fixed-rate mortgage debt with no near-term maturities until 2025, providing BRT with a significant hedge to weather an increasingly uncertain macroeconomic backdrop. We have been prudent in our planning and judicious in our execution in growing our wholly-owned portfolio, which currently stands at 21 properties. Going forward, we are watching markets carefully as interest rates rise and pricing evolves. As always, we will remain disciplined in our process to identify properties that meet our quality and underwriting standards. We have been through cycles before, and we believe that the current dislocation and uncertainty in the broader economy, will lead to opportunities, and BRT will be there to take advantage of them when they do. Turning to our results for the third quarter of 2022, net income attributable to common stockholders was $7.06 million or $0.37 per diluted share, compared to $28.11 million or $1.54 per diluted share in the same quarter of 2021. The change is due primarily to a larger gain on sale at an unconsolidated property in the corresponding period in the prior year. AFFO was $7.17 million or $0.38 per diluted share, compared to $5.66 million or $0.31 per diluted share in the third quarter of 2021. The increase in AFFO per share is due primarily to improved operating margins across our portfolio, and the incremental impact of partners buyouts. The increase was offset by increased general and administrative expenses,…

Thank you. [Operator Instructions] First question comes from Gaurav Mehta of EF Hutton. Please go ahead, sir.

Yes, thanks. Good morning. I was wondering if you could provide some color on the transaction market. What kind of movement have you seen in cap rates as interest rates have gone up in your markets?

Yes. Hi, Gaurav. Yes, so transactions have slowed considerably. The amount of the volume of transactions has almost come to - well, I wouldn't say a halt, but it's way, way down from years past. I think the bid ask and getting sellers to understand the real world of what's happened with cap rates since interest rates have moved so high, is going to take some time for them to digest and acknowledge. And I think for the time being, it's going to be a period of time where getting the sellers to understand this is going to be a few months process at minimum. We've seen cap rates rise, I'd say at least about 125 basis points, if not more, from the few deals that we've seen and bid on. But I think it's going to take some time again for the sellers to understand where pricing is as of now. And caps are difficult to actually ascertain because of the amount of closed deals that have happened over the last few months.

Okay. Maybe on the operation side, have you seen any weakness at all in terms of how much you can push rents, or are you still able to push rents to your tenants?

Yes, we've been able to continue to push rents. I would say that the amount at which we're, and the velocity at which we've been able to increase the rents has slowed a little bit for sure. Still very positive and still terrific. As a matter of fact, it lasted longer than I had expected. I had thought that it was going to slow down earlier than it did, but still seeing very nice increases, but not to the same extent that we were over the last maybe six to nine months. This time of year, occupancies tend to drop a little bit. Our turnover seems to drop a little bit as well, but asking rents are still positive, but just not to the same extent as the crazy increase you were getting over the last few quarters.

Okay. And maybe lastly on the renovation side, would you expect to continue doing renovations in next year if the rent growth has slowed down as compared to six to nine months ago?

Yes, we still plan on actively involving ourselves in our renovations of individual units. I think that actually may tick up as we bought out some of these partners over the course of the past year. We think there's opportunity to increase rents pretty significantly, and the return on investment for the renovated units are terrific. So, I anticipate that we'll probably do - continue to do more and hope to do as many as we can because it's a great opportunity to increase cashflow.

Okay, Thank you. That's all I had.

Thank you [Operator instructions]. And one next question will be from Craig Kucera of B. Riley Securities. Please go ahead.

Yes, thanks. Good morning, guys. I want to start first talking about your same-store NOI. Clearly, here in the third quarter, a pretty strong ability to push rents, but I think in the first half of the year, you had a bit more challenges on the operating expense side, but that clearly kind of changed here in the third quarter. I think your expenses were up maybe 3% or so. Is there anything in particular that you attribute that to?

Yes, I would - I mean, we are seeing generally some increases in expenses. And yes, the expense side of things was a little light, I would say primarily because of - we've had some favorable tax shares on properties, which I think contributed to that. We're seeing more specific - we're definitely seeing some increases with utilities, payroll, insurance, et cetera. But the tax shares and the benefits of those and the booking those, definitely we were favorable, and why the expenses were as low as they were.

Okay, thanks for that. And just curious, as you have people coming in and signing new leases that pretty wide spreads relative to the prior, do you have any sense that the renters coming to your properties are maybe trading down from higher price rentals, maybe they're marginally higher income-type renters or any other sort of surveys that you do to try to determine kind of where they're coming from?

Yes, I don't - we have - we're trying to track and we've been - and we're doing something now to track the migration from either - from higher end properties. I would tell you that we have not specifically noticed that, but - and it's been a pretty consistent theme. What we've noticed over the last few months is I think we're seeing there is a little bit more of - I wouldn't say an issue, but a little bit more concern of what people can pay now. And the affordability factor may start to creep in a bit more, but fortunately, delinquencies have been low, et cetera. But we have not necessarily seen a huge migration from A quality to ours. It's been a pretty stable flow of continued B plus, or A minus renters. But I wouldn't be surprised to see some of those A migrating down to kind of the workforce housing that we can supply with the amended packages and everything else we have. So, we're keeping an eye on it, and probably have a better answer for you next quarter, but it wouldn't be surprising if we do see more of that.

Okay. Thanks. Appreciate it.

This concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Gould for closing remarks.

I just want to thank you all for your time this morning and your continued interest in BRT. I hope you all have a great day, and we'll speak again soon.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.