Washington, DC  20549

For the quarterly period ended March 31, 2018

OR

Commission File Number 001-07172

(Exact name of Registrant as specified in its charter)

516-466-3100

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act.  (Check one):

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

o 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 accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date.

14,343,201 Shares of Common Stock,

par value $0.01 per share, outstanding on May 8, 2018

Part I ‑ FINANCIAL INFORMATION

Item 1. Financial Statements

BRT APARTMENTS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

See accompanying notes to consolidated financial statements.

BRT APARTMENTS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to consolidated financial statements.

BRT APARTMENTS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Dollars in thousands)

See accompanying notes to consolidated financial statements.

BRT APARTMENTS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

Six Months Ended March 31, 2018

(Unaudited)

(Dollars in thousands, except share data)

See accompanying notes to consolidated financial statements.

BRT APARTMENTS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

BRT APARTMENTS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(Unaudited)

(Dollars in Thousands)

See accompanying notes to consolidated financial statements .

BRT APARTMENTS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2018

Note 1 – Organization and Background

BRT Apartments Corp. (the "Company"), a Maryland corporation, owns, operates and develops multi‑family properties. The Company conducts its operations to qualify as a real estate investment trust, or REIT, for federal income tax purposes.

Generally, the multi-family properties are acquired with joint venture partners in transactions in which the Company contributes a significant portion of the equity. At March 31, 2018 , the Company owns: (a) 34 multi-family properties with 9,632 units (including 445 units at two properties engaged in lease-up activities and 402 units at a property under development), located in 11 states with a carrying value of $982,801,000 ; and (b) interests in three unconsolidated multi-family joint ventures with a carrying value of $20,637,000 .

Note 2 – Basis of Preparation

The accompanying interim unaudited consolidated financial statements as of March 31, 2018 , and for the three and six months ended March 31, 2018 and 2017 , reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the results for such interim periods. The results of operations for the three and six months ended March 31, 2018 and 2017 , are not necessarily indicative of the results for the full year. The consolidated balance sheet as of September 30, 2017 , has been derived from the audited financial statements at that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States ("GAAP") for complete financial statements.

The consolidated financial statements include the accounts and operations of the Company, its wholly owned subsidiaries, and its majority owned or controlled real estate entities and its interests in variable interest entities ("VIEs") in which the Company is determined to be the primary beneficiary. Material intercompany balances and transactions have been eliminated.

The Company's consolidated joint ventures that own multi‑family properties were determined to be VIEs because the voting rights of some equity investors in the applicable joint venture entity are not proportional to their obligations to absorb the expected losses of the entity and their right to receive the expected residual returns. It was determined that the Company is the primary beneficiary of these joint ventures because it has a controlling interest in that it has the power to direct the activities of the VIE that most significantly impact the entity's economic performance and it has the obligation to absorb losses of the entity and the right to receive benefits that could potentially be significant to the VIE.

The joint ventures that own properties in Ocoee, FL, Lawrenceville, GA, Dallas, TX and St. Louis, MO were determined not to be a VIEs but are consolidated because the Company has controlling rights in such entities.

With respect to its unconsolidated joint ventures, as (i) the Company is primarily the managing member but does not exercise substantial operating control over these entities or the Company is not the managing member and (ii) such entities are not VIEs, the Company has determined that such joint ventures should be accounted for under the equity method of accounting for financial statement purposes.

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.     

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. Actual results could differ from those estimates. 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.

Note 3 ‑ Equity

Equity Distribution Agreements

On January 11, 2018, the Company entered into equity distribution agreements with three sales agents to sell up to an aggregate of $20,000,000 of its common stock from time-to-time in an at-the-market offering. In the quarter ended March 31, 2018 , the Company sold 113,566 shares of common stock for net proceeds of $1,401,000 , after giving effect to commissions of

$30,000 and estimated offering costs ( i.e. professional and related fees) of $63,000 . From April 1, 2018 through May 8, 2018, the Company sold 62,400 shares of common stock for net proceeds of $734,000 , after giving effect to commissions of $16,000 .

Common Stock Dividend Distribution

The Company declared a quarterly cash distribution of $0.20 per share, payable on April 6, 2018, to stockholders of record on March 27, 2018.

Stock Based Compensation

The Company's Amended and Restated 2018 Incentive Plan (the "2018 Plan") permits the Company 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 600,000 shares; and (ii) cash settled dividend equivalent rights in tandem with the grant of restricted stock units and certain performance based awards.

Restricted Stock Units

In June 2016, the Company issued restricted stock units (the "Units") to acquire up to 450,000 shares of common stock pursuant to the 2016 Amended and Restated Incentive Plan (the "2016 Incentive Plan") . The Units entitle the recipients, subject to continued service through the March 31, 2021 vesting date, to receive (i) the underlying shares if and to the extent certain performance and/or market conditions are satisfied at the vesting date, and (ii) an amount equal to the cash dividends paid from the grant date through the vesting date with respect to the shares of common stock underlying the Units if, when, and to the extent, the related Units vest. For financial statement purposes, because the Units are not participating securities, the shares underlying the Units are excluded in the outstanding shares reflected on the consolidated balance sheet and from the calculation of basic earnings per share. The shares underlying the Units are contingently issuable shares and 200,000 of these shares have been included in the diluted earnings per share as the market conditions with respect to such units had been met at March 31, 2018.

Expense is recognized over the five year vesting period on the Units which the Company expects to vest. For the three months ended March 31, 2018 and 2017 , the Company recorded $73,000 and $110,000 , respectively, and for the six months ended March 31, 2018 and 2017 , the Company recorded $146,000 and $220,000 , respectively, of compensation expense related to the amortization of unearned compensation with respect to the Units. At March 31, 2018 , and September 30, 2017, $870,000 and $1,015,000 of compensation expense, respectively, had been deferred and will be charged to expense over the remaining vesting period.

Restricted Stock

In March 2018, the Company granted 144,797 shares of restricted stock pursuant to the 2018 Incentive Plan. As of March 31, 2018 , an aggregate of 706,247 shares of unvested restricted stock are outstanding pursuant to the 2018 Incentive Plan, 2016 Incentive Plan and 2012 Incentive Plan. No additional awards may be granted under the 2016 Incentive Plan and 2012 Incentive Plan. All 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 earnings per share computation.    

For the three months ended March 31, 2018 and 2017 , the Company recorded $224,000 and $276,000 , respectively, and for the six months ended March 31, 2018 and 2017 , the Company recorded $467,000 and $490,000 , respectively, of compensation expense related to the amortization of unearned compensation with respect to the restricted stock awards. At March 31, 2018 , and September 30, 2017, $3,603,000 and $2,356,000 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 remaining vesting period of these shares of restricted stock is 3.5 years.

Stock Buyback

On September 5, 2017, the Board of Directors approved a repurchase plan authorizing the Company, effective as of October 1, 2017, to repurchase up to $5,000,000 of shares of common stock through September 30, 2019. No shares have been repurchased pursuant to this plan.

Per Share Data

Basic earnings per share is determined by dividing net income applicable to common stockholders for the applicable period by the weighted average number of common shares outstanding during such period. The Units 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 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 outstanding and deemed to be outstanding during such period. For the three and six months ended March 31, 2018, the Company included 200,000 shares of common stock underlying the Units in the calculation of diluted earning per share as a market criteria, with respect to such units, has been met at March 31, 2018.

Note 4 ‑ Real Estate Properties

Real estate properties (including properties held for sale) consist of the following (dollars in thousands):

The following table summarizes the allocation of the purchase price of four properties purchased during the six months ended March 31, 2018 (dollars in thousands):

As result of the damage caused by Hurricane Harvey in 2017, the Company reduced the carrying value of Retreat at Cinco Ranch, located in Katy, TX by $3,471,000 and, because the Company believed it was probable that it would recover such sum from its insurance coverage, recognized such sum in insurance recoveries. Through March 31, 2018, the Company received $7,384,000 in insurance recoveries related to Hurricane Harvey, of which $3,227,000 is recorded as a gain on insurance recovery in the three and six months ended March 31, 2018 and $686,000 has been recognized as rental income ( i.e. $98,000 in 2017 and $294,000 and $588,000 in the three and six months ended March 31, 2018, respectively.)

Note 5 ‑ Acquisitions and Dispositions

Property Acquisitions

The table below provides information regarding the Company's purchases of multi-family properties for the six months ended March 31, 2018 (dollars in thousands):

_________________________________

(a) Includes $500 for the acquisition of a land parcel adjacent to the property.

In the quarter ended March 31, 2018, the Company purchased its partner's 2.5% interest in Avalon Apartments, located in Pensacola, FL., for $250,000 .

On April 30, 2018, the Company acquired, through a joint venture in which it has a 80% equity interest, a 208 -unit multi-family property located in Daytona, FL, for $20,500,000 , including the assumption of $13,608,000 of mortgage debt. The mortgage

debt matures in May 2025, bears interest at a fixed rate of 3.94% , is interest only for two years, and thereafter amortizes based on a 30 -year schedule. The Company contributed $6,900,000 for its ownership interest.

The table below provides information regarding the Company's purchases of multi-family properties during the six months ended March 31, 2017 (dollars in thousands):

Property Dispositions

The following table is a summary of real estate properties disposed of by the Company during the six months ended March 31, 2018 (dollars in thousands):

The following table is a summary of the real estate properties disposed of by the Company during the six months ended March 31, 2017 (dollars in thousands):

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 losses, and reduces the carrying value of properties, when indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their carrying amounts. In cases where the Company does not expect to recover its carrying costs on properties held for use, the Company reduces its carrying costs to fair value, and for properties held for sale, the Company reduces its carrying value to the fair value less costs to sell. During the three and six months ended March 31, 2018 and 2017, no impairment charges were recorded.

Note 6 - Variable Interest Entities

The Company conducts a large portion of its business with joint venture partners. Many of the Company's consolidated joint ventures that own properties were determined to be variable interest entities ("VIEs") because the voting rights of some equity partners are not proportional to their obligations to absorb the expected loses of the entity and their rights to receive expected

residual returns. It was determined that the Company is the primary beneficiary of these joint venture because it has a controlling financial interest in that it has the power to direct the activities of the VIE that most significantly impacts the entity's economic performance and it has the obligation to absorb losses of the entity and the right to receive benefits from the entity that could potentially be significant to the VIE.

The following is a summary of the carrying amounts with respect to the consolidated VIEs and their classification on the Company's consolidated balance sheets (amounts in thousands):

Note 7 - Real Estate Property Held For Sale

At September 30, 2017, Waverly Place Apartments, Melbourne, FL, with a book value of $8,969,000 , was held for sale. This property was sold on October 25, 2017. The Company did not have any properties that met the criteria for held-for-sale classification at March 31, 2018.

Note 8 - Restricted Cash

Restricted cash represents funds held for specific purposes and are therefore not generally available for general corporate purposes. The restricted cash reflected on the consolidated balance sheets represents funds that are held by or on behalf of the Company specifically for capital improvements at certain multi-family properties.

Note 9 – Investment in Unconsolidated Ventures

__________________________

The net loss from these ventures was $63,000 and $0 in the three months ended March 31, 2018 and 2017 , respectively and for the six months ended March 31, 2018 and 2017 was $88,000 and $0 , respectively.

Note 10 – Debt Obligations

Debt obligations consist of the following (dollars in thousands):

Mortgages Payable

During the six months ended March 31, 2018 , the Company obtained the following mortgage debt in connection with the related property acquisitions (dollars in thousands):

_____________________________

(a) The Company entered into an agreement related to this loan to cap LIBOR at 3.86%. See Note 13.

The Company has two construction loans financing two separate construction projects. Information regarding these loans at March 31, 2018 is set forth below (dollars in thousand):

_____________________

(a) Currently in lease up.    

Junior Subordinated Notes

At March 31, 2018 , and September 30, 2017 , the Company's junior subordinated notes had an outstanding principal balance of $37,400,000 , before deferred financing costs of $372,000 and $ 382,000 , respectively. At March 31, 2018 , the interest rate on the outstanding balance is three month LIBOR + 2.00% , or 3.77% .

The junior subordinated notes require interest only payments through the maturity date of April 30, 2036, at which time repayment of the outstanding principal and unpaid interest become due. Interest expense for the three months ended March 31, 2018 and 2017 , which includes amortization of deferred costs, was $352,000 and $287,000 , respectively, and for the six months ended March 31, 2018 and 2017 , was $682,000 and $561,000 , respectively.

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 the 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 for these services in the three months ended March 31, 2018 and 2017 were $317,000 and $302,000 , respectively, and for the six months ended March 31, 2018 and 2017 were $619,000 and $589,000 , 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 may also provide real estate brokerage and construction supervision services to these properties. These fees amounted to $10,000 and $8,000 for the three months ended March 31, 2018 and 2017 , respectively, and for the six months ended March 31, 2018 and 2017 , were $19,000 and $16,000 , respectively.

The Company shares facilities, personnel and other resources with One Liberty Properties, Inc., Majestic Property, and Gould Investors L.P. Certain of our executive officers and/or directors also serve in management positions, and have ownership interests, in One Liberty and/or Georgetown Partners Inc., the managing partner of Gould Investors L.P. The allocation of expenses for the facilities, personnel and other resources shared by the Company, One Liberty and Gould Investors is computed in accordance with a shared services agreement by and among the Company and these entities and is included in general and administrative expense on the consolidated statements of operations. For the three months ended March 31, 2018 and 2017, net allocated general and administrative expenses reimbursed by the Company to Gould Investors L.P. pursuant to the shared services agreement aggregated $147,000 and $103,000 , respectively, and for the six months ended March 31, 2018 and 2017 were $228,000 and $182,000 , respectively.

Management of many of the Company's multi-family properties (including two multi-family properties owned by two unconsolidated joint ventures) is performed by the Company's joint venture partners or their affiliates. None of these joint venture partners is Gould Investors L.P., Majestic Property or their affiliates. Management fees to these related parties for the three months ended March 31, 2018 and 2017 were $908,000 and $672,000 , respectively, and for the six months ended March 31, 2018 and 2017 were $1,767,000 and $1,296,000 . In addition, the Company may pay an acquisition fee to a joint venture partner in connection with a property purchased by such joint venture. Capitalized acquisition fees to these related parties for the three months ended March 31, 2018 and 2017 , were $1,300,000 and $350,000 , respectively, and for six months ended March 31, 2018 and 2017 , were $1,530,000 and $650,000 , respectively.

Note 12 – Fair Value of Financial Instruments

Financial Instruments Not Carried at Fair Value

The following methods and assumptions were used to estimate the fair value of each class of financial instruments that are not recorded 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 in the balance sheets for these instruments approximate their fair value due to the short term nature of these accounts.

Junior subordinated notes: At March 31, 2018 and September 30, 2017 , the estimated fair value of the notes is lower than their carrying value by approximately $12,865,000 and $15,705,000 based on a market interest rate of 7.18% and 6.37% , respectively.

Mortgages payable: At March 31, 2018 , the estimated fair value of the Company's mortgages payable is lower than their carrying value by approximately $23,145,000 assuming market interest rates between 3.99% and 5.66% and at September 30, 2017 , the estimated fair value of the Company's mortgages payable was lower than their carrying value by approximately $11,400,000 assuming market interest rates between 3.78% and 5.02% . Market interest rates were determined using rates which the Company believes reflects institutional lender yield requirements at the balance sheet dates.

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.

Financial Instruments Carried 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 market 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. Set forth below is information regarding the Company's financial assets and liabilities measured at fair value as of March 31, 2018 (dollars in thousands):

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, foreign exchange rates, and implied volatilities. At March 31, 2018 , these derivatives are included in other assets on the consolidated balance sheet.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with them utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. As of March 31, 2018 , 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 derivatives valuation is classified in Level 2 of the fair value hierarchy.

Note 13 – Derivative Financial Instruments

Cash Flow Hedges of Interest Rate Risk

The Company's objective in using interest rate derivatives is 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 effective portion of changes in the fair value of derivatives, designated and that qualify as cash flow hedges, is recorded in Accumulated Other Comprehensive Income on our consolidated balance sheets and is subsequently reclassified into earnings in the period that the hedged transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.

As of March 31, 2018 , the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollars in thousands):

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 (amounts in thousands):

As of March 31, 2018 , the Company did not have any derivative instruments that were considered to be ineffective and does not use derivative instruments for trading or speculative purposes.

The following table presents the effect of the Company's interest rate swaps on the consolidated statements of comprehensive (loss) income for the dates indicated (dollars in thousands):

No gain or loss was recognized related to hedge ineffectiveness or to amounts excluded from effectiveness testing on the Company's cash flow hedges during the three and six months ended March 31, 2018 and March 31, 2017 . The Company estimates an additional $294,000 will be reclassified from other comprehensive loss as a decrease to interest expense over the next twelve months.

Credit-risk-related Contingent Features

The agreement between the Company and its derivative counterparties provides that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, the Company could be declared in default on its derivative obligations.

Note 14 – New Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), prescribes a single, common revenue standards which supersedes nearly all existing revenue recognition guidance under U.S. GAAP, including most industry-specific requirements. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 outlines a five step model to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative

effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard during the year ending September 30, 2019.

In February 2016, the FASB issued ASU No. 2016-02 , Leases. ASU 2016-02 supersedes the current accounting for leases and while retaining two distinct types of leases, finance and operating, (i) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting (ii) eliminates most real estate specific lease provisions, and (iii) aligns many of the underlying lessor model principles with those in the new revenue standard. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and early adoption is permitted. We are required to adopt ASU 2016-02 using the modified retrospective approach which requires us to record leases existing as of or are entered into after the beginning of the earliest comparative period presented in the financial statements under the new lease standard. We are currently evaluating the impact of our pending adoption of ASU No. 2016-02 on our consolidated financial statements. We believe our adoption of the new leasing standard will result in an immaterial increase in the assets and liabilities on our consolidated balance sheets, with no material impact to our consolidated statements of income and comprehensive income.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), which provides specific guidance on eight cash flow classification issues and how to reduce diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The effective date of the standard will be fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the new guidance to determine the impact, if any, on the consolidated financial statements.

In November 2016, the FASB issued ASU Update No. 2016-018, Statement of Cash Flows (Topic 230): Restricted Cash, (a consensus of the Emerging Issues Task Force). The new standard requires that the statement of cash flows explain the change during the period in the combined total of cash, cash equivalents, and amounts generally described as restricted cash equivalents. Entities will also be required to reconcile such total to amounts on the balance sheet and disclose relevant information about the nature of the restrictions on the basis of their individual facts and circumstances. The effective date of the standard will be fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and early adoption is permitted.

Note 15 – Subsequent Events

Subsequent events have been evaluated and any significant events, relative to our consolidated financial statements as of March 31, 2018 , that warrant additional disclosure, have been included in the notes to the consolidated financial statements.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

With the exception of historical information, this report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended. We intend such forward-looking statements to be covered by the safe harbor provision 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, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may", "will", "believe", "expect", "intend", "anticipate", "estimate", "project", or similar expressions or variations thereof. Forward-looking statements involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, performance or achievements. Investors are cautioned not to place undue reliance on any forward-looking statements and are urged to read "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2017 and in reports filed with the SEC thereafter.

Overview

General

We are an internally managed real estate investment trust, also known as a REIT, that is focused on the ownership, operation and development of multi‑family properties. These activities are conducted primarily through joint ventures in which we have a substantial ownership position. At March 31, 2018 , we (i) own 34 multi-family properties located in 11 states with an aggregate of 9,632 units (including 445 units at two properties engaged in lease up activities ( i.e. , Factory at Garco Park and Vanguard Heights) and 402 units at a property under development ( i.e ., Bells Bluff)) with a carrying value of $982.8 million and (ii) have ownership interests, through unconsolidated entities, in three multi-family properties with a carrying value of $20.6 million. Most of our properties are located in the southeast United States and Texas.

As used herein, the term "same store properties" refers to operating properties that were owned for the entirety of the periods being presented and excludes properties that were in development or lease up during such periods. Retreat at Cinco Ranch Katy, Texas, has been excluded from same store properties due to the damage it sustained from Hurricane Harvey. For the three months ended March 31, 2018 and 2017, there were 22 same store properties and for the six months ended March 31, 2018 and 2017, there were 21 same store properties.

Hurricane Harvey

In August 2017, Hurricane Harvey caused significant damage to our 268-unit Retreat at Cinco Ranch, Katy, Texas property. Among other things, 96 of our ground floor units were rendered uninhabitable and as a result of the extensive damage to the common areas of the property ( i.e., pool and clubhouse), we offered, rent concessions and other accommodations to induce tenancies for the second and third floor units to reside at the property. As a result of the damage caused by the hurricane, we reduced the carrying value of this property by $3.5 million and, because we believed it was probable that we would recover such sum from our insurance coverage, we recognized $3.5 million in insurance recoveries. Through March 31, 2018, we received approximately $7.4 million (including $686,000 in rental income as described below) in insurance recoveries related to the loss, of which $3.2 million is recorded as a gain on insurance recovery in the three and six months ended March 31, 2018.

Our business interruption insurance is covering our losses in rental income with respect to the ground floor units until such units are repaired and accordingly, we continue to accrue revenues to be generated from such units. Through March 31, 2018 we received $686,000 to cover lost rental income, of which $294,000 and $588,000 is recorded as rental income in the three and six months ended March 31, 2018, respectively. We are also seeking to recover from our insurance carriers the cost of rent concessions and other accommodations we previously offered tenants and prospective tenants, which totaled approximately $145,000. As of May 1, 2018, certain common areas have been restored and nine ground floor units have been restored and leased. We anticipate this property will be substantially repaired by September 2018. We continue to negotiate with our insurance carriers to ensure that we are fully compensated for the damages sustained at Retreat at Cinco Ranch as a result of Hurricane Harvey.

Status of Lease Up Activities and Development Project

At March 31, 2018, the occupancy rate at Factory at Garco Park and Vanguard Heights, which are in engaged in lease up activities, was 85.2% and 88.5%, respectively.

We anticipate that the buildings at our Bells Bluff development property will be completed from time to time from the end of calendar year 2018 through the end of calendar year 2019.

Dividend Declared During the Quarter Ended March 31, 2018

During the quarter ended March 31, 2018, we declared a quarterly dividend on our common stock of $0.20 per share that was paid on April 6, 2018, to stockholders of record on March 27, 2018. This dividend represented an 11.1% increase from the dividend paid in January 2018.

Acquisitions, Dispositions and Other Developments During the Three Months Ended March 31, 2018

Acquisitions

On February 7, 2018, we acquired the Avenue Apartments, a 522-unit multi-family property located in Ocoee, FL, for $71.3 million, including $53.1 million of mortgage debt obtained in connection with the acquisition. Based on our underwriting, we estimate that on a quarterly basis this property will generate $1.6 million of rental revenue, $776,000 of real estate operating expense, $532,000 of interest expense and $948,000 of depreciation expense.

On February 15, 2018, we acquired Parc @ 980, a 586-unit multi-family property located in Lawrenceville, GA, for $77.2 million, including $54.4 million of mortgage debt obtained in connection with the acquisition. Based on our underwriting, we estimate that on a quarterly basis this property will generate $1.8 million of rental revenue, $911,000 of real estate operating expense, $541,000 of interest expense and $1.0 million of depreciation expense.

Dispositions

On February 5, 2018, we sold The Fountains Apartments, a 542-unit multi-family located in Palm Beach Gardens, FL, for a sales price of $97.2 million, and recognized a gain of $41.8 million, of which $20.6 million was allocated to the non-controlling partner. We also incurred $594,000 of mortgage prepayment costs, of which $289,000 was allocated to the non-controlling partner. During the quarter ended December 31, 2017, this property generated $2.3 million of rental revenues, $1.0 million of operating expenses, $463,000 of interest expense and $480,000 of depreciation expense.

On February 23, 2018, we sold Valley Venue Apartments, a 618-unit multi-family located in Valley, AL, for a sales price of $51.0 million, and recognized a gain of $9.7 million, of which $4.5 million was allocated to the non-controlling partner. In the quarter ended December 31, 2017, this property generated $1.5 million of rental revenues, $782,000 of operating expenses, $332,000 of interest expense and $412,000 of depreciation expense.

Generally, in the event of the sale of a multi-family property owned by a joint venture, as a result of allocation/distribution provisions of the applicable joint venture operating agreement, the allocation and distributions of cash and profits to us (as opposed to our joint venture partner) will be less than that implied by our percentage equity interest in the property

Recent Developments

On April 30, 2018, we acquired, through a consolidated joint venture in which we have a 80% equity interest, a 208-unit multi-family property located in Daytona, FL, for $20.5 million, including the assumption of $13.6 million in mortgage debt. The mortgage matures in May 2025, bears interest at a fixed rate of 3.94%, is interest only for two years, and thereafter amortizes based on a 30 year schedule. Based on our underwriting, we estimate that on a quarterly basis this property will generate $605,000 of rental revenue, $298,000 of real estate operating expenses, $134,000 of interest expense and $545,000 and depreciation expense.

Results of Operations – Three months ended March 31, 2018 compared to three months ended March 31, 2017 .

Revenues

The following table compares our revenues for the periods indicated:

Rental and other revenues from real estate properties.

The increase is due primarily to:

Offsetting this increase was a decrease of $4.1 million from the six properties sold from January 1, 2017, to March 31, 2018, including $2.1 million from two properties sold in the current quarter.

Expenses

The following table compares our expenses for the periods indicated:

Real estate operating expenses.

The increase is due primarily to: