UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

For the quarterly period ended March 31, 2011

OR

Commission File Number 001-07172

BRT REALTY TRUST

(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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  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 a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

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

14,070,774 Shares of Beneficial Interest,

$3 par value, outstanding on May 6, 2011

Part 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

BRT REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share data)

See accompanying notes to consolidated financial statements.

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BRT REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except share data)

2

BRT REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(Unaudited)

(Dollars in thousands, except share data)

See accompanying notes to consolidated financial statements.

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BRT REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(Dollars in thousands, except share data)

See accompanying notes to consolidated financial statements.

4

BRT REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in Thousands)

5

BRT REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

(Dollars in Thousands)

See accompanying notes to consolidated financial statements.

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BRT REALTY TRUST AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2011

Note 1 — Organization and Background

BRT Realty Trust is a business trust organized under the laws of the Commonwealth of Massachusetts.  Our primary business is to originate and hold for investment senior mortgage loans secured by commercial and multi-family real estate property in the United States. We recently began originating loans to persons purchasing their own mortgage debt or purchasing third party mortgage debt, in each case at a discount to the principal amount thereof.  The purchase of third party mortgage debt is generally structured as a repurchase agreement pursuant to which we purchase the mortgage and our counterparty is obligated to repurchase such mortgage within a specified period. The loans we originate generally have relatively high yields and are short-term or bridge loans with a duration ranging from six months to one year.  Historically we have loaned money at a floating rate of interest based on a spread over the prime rate.  More recently, the majority of the loans we have originated have been fixed rate loans.  We receive an origination fee for the loans we originate. We conduct our operations to qualify as a real estate investment trust, or REIT, for Federal income tax purposes.

From time-to-time we originate junior commercial and multi-family mortgage loans, participate as an equity investor in, and mortgage lender to, joint ventures which acquire income producing real estate property, and purchase securities of other REITs.

Note 2 - Basis of Preparation

The accompanying interim unaudited consolidated financial statements as of March 31, 2011 and for the three and six months ended March 31, 2011 and March 31, 2010 reflect all normal recurring adjustments which are, in the opinion of management, 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, 2011 and March 31, 2010 are not necessarily indicative of the results for the full year.  The balance sheet as of September 30, 2010 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 for complete financial statements.

Certain items on the consolidated financial statements for the preceding period have been reclassified to conform with the current presentation of the consolidated financial statements.

The consolidated financial statements include the accounts and operations of BRT Realty Trust, its wholly owned subsidiaries, and its majority-owned or controlled real estate entities and its interests in variable interest entities in which it is the primary beneficiary.  Material intercompany items and transactions have been eliminated. BRT Realty Trust and its subsidiaries are hereinafter referred to as “BRT” or the “Trust.”

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

RBH-TRB Newark Holdings LLC (“Newark Joint Venture”) was determined to be a Variable Interest Entity (“VIE”) because the Trust has voting rights that are not proportionate to its economic interests.  The Trust was determined to be the primary beneficiary as it has the power to direct the activities that

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Note 2 - Basis of Preparation (Continued)

most significantly impact the economic performance and the obligation to absorb losses that could potentially be significant to this VIE.  For these reasons, the Trust has consolidated the operations of this VIE in the Trust’s consolidated financial statements.

These statements should be read in conjunction with the consolidated financial statements and related notes which are included in BRT’s Annual Report on Form 10-K for the year ended September 30, 2010.

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.

Note 3 - Equity

Common Share Dividend Distribution

During the quarter ended March 31, 2011, the Trust did not declare a dividend to its shareholders.

Restricted Shares

An aggregate of 850,000 shares have been authorized for issuance under the Trust’s equity incentive plans, of which 231,885 shares remain available for future grants at March 31, 2011. The shares issued vest five years from the date of issuance and under specified circumstances, including a change in control, may vest earlier.  Since inception of the plans, 126,410 shares have vested. For accounting purposes, the restricted stock is not included in the outstanding shares shown on the consolidated balance sheet until they vest, but is included in the earnings per share computation.  The estimated fair value of restricted stock at the date of grant is being amortized ratably into expense over the applicable vesting period. For the three months ended March 31, 2011 and 2010, the Trust recorded $218,000 and $213,000 of compensation expense respectively, and for the six months ended March 31, 2011 and 2010, recorded $426,000 and $431,000 of compensation expense, respectively, as a result of the amortization of restricted shares.  At March 31, 2011, $2,222,000 has been deferred as unearned compensation and will be charged to expense over the remaining weighted average vesting period of approximately 3.35 years.

Per Share Data

Basic earnings (loss) per share attributable to holders of shares of beneficial interest was determined by dividing net income (loss) for the period by the weighted average number of common shares outstanding during each period.

Diluted earnings (loss) per share attributable to holders of shares of beneficial interest reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares or resulted in the issuance of common shares that shared in the earnings of the Trust.

Basic and diluted shares outstanding for the three months ended March 31, 2011 and 2010 were 14,047,924 and 14,090,229, respectively, and for the six months ended March 31, 2011 and 2010 were 14,012,404 and 13,647,654, respectively.

The impact of dilutive securities is not included in the computation of loss per share for the three and six months ended March 31, 2010, as the inclusion of such common share equivalents would be anti-dilutive.

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Note 4 - Real Estate Loans and Purchase Money Mortgages

At March 31, 2011, information relating to real estate loans and purchase money mortgages, all of which are first mortgage loans, is summarized as follows (dollars in thousands):

During the quarter ended March 31, 2011, a non-performing loan with a book value of $25.9 million (before loan loss allowance of $2,985,000), secured by a vacant loft building (with retail) and located in New York City, was sold to an unaffiliated third party for $25.5 million.  The Trust recorded a charge off on this loan of $429,000.

A second non-performing loan, with a book value of $580,000 (before loan loss allowance of $180,000) and secured by a vacant multi-family property located in New York City was satisfied in the current quarter.  The Trust received proceeds of $401,000 and charged off the remaining balance of $179,000.

At March 31, 2011, the Trust had one non-earning loan outstanding, which was originated in October 2008.  The loan has an aggregate outstanding principal balance of $8,488,000, and represents 8.6% of total real estate loans and 4.6% of total assets.  This collateral dependent loan, secured by condominium units, is recourse to the borrower.  The loan is not impaired and no allowance for loan loss has been established.  This loan represents a pari passu interest in a loan with a principal balance of $16,976,000. The borrower filed for protection under Chapter XI of the Federal Bankruptcy Code in December 2009 and has filed a plan of reorganization that the Trust is contesting.  The Trust is seeking to enforce judgments against the individual guarantors of this loan.

The Trust recognized cash basis interest of $153,000 and $146,000 on non-earning loans in the three months ended March 31, 2011 and March 31, 2010 and $303,000 and $277,000 in the six months ended March 31, 2011 and 2010, respectively.

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Note 4 - Real Estate Loans and Purchase Money Mortgages (Continued)

At March 31, 2011, three separate, unaffiliated borrowers had loans outstanding in excess of 5% of total assets. Information regarding these loans is set forth in the table below (dollars in thousands):

The Trust’s portfolio consists of senior mortgage loans, secured by residential and commercial property, 67% of which are located in New York, 20% in Florida and 13% in 5 other states.

Note 5 - Allowance for Possible Loan Losses

An analysis of the loan loss allowance at March 31, 2011 and March 31, 2010, respectively, is as follows (dollars in thousands):

A loan evaluated for impairment is deemed to be impaired when based on current information and events, it is probable, in the judgment of management, that the Trust will not be able to collect all amounts due according to the contractual terms of the loan documents. When making this evaluation numerous factors are considered, including, market evaluations of the underlying collateral, estimated operating cash flow from the property during the projected holding period, and estimated sales value computed by applying an estimated capitalization rate to the projected stabilized net operating income of the specific property, less selling costs, discounted at market discount rates. If upon completion of the evaluation, the value of the collateral securing the loan is less than the recorded investment in the loan, an allowance is created with a corresponding charge to expense. The fair values related to the collateral securing our impaired loans are based on discounted cash flow models, which are considered to be Level 3 within the fair value hierarchy.  When the Trust acquires title to the property, the loan loss allowance is adjusted by charging off all amounts related to the loan and recording the property at the adjusted carrying value of the loan.

In the quarter ended March 31, 2011, the Trust reversed $2,566,000 of previously provided loan loss allowance.  This allowance related primarily to a non-performing loan which was sold during the quarter.

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Note 6 - Real Estate Properties

A summary of real estate properties owned is as follows (dollars in thousands):

Note 7 — Investment in Unconsolidated Ventures

The Trust is a partner in two unconsolidated ventures, each of which owns and operates one property.  The Trust’s share of the ventures’ earnings was $86,000 and $35,000 for the three months ended March 31, 2011 and 2010 and $135,000 and $110,000 for the six months ended March 31, 2011 and 2010, respectively.  The Trust’s investment in these unconsolidated ventures totaled $815,000 and $775,000 at March 31, 2011 and September 30, 2010, respectively.

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Note 8 — Available-For-Sale Securities

At March 31, 2011, the Trust’s available-for-sale securities which consisted solely of equity securities. These securities had a market value of $4,677,000 and a cost basis of $3,488,000.  Unrealized gains totaled $1,225,000 and unrealized losses totaled $36,000.

Unrealized gains and losses are reflected as accumulated other comprehensive income-net unrealized gain on available-for-sale securities in the accompanying consolidated balance sheets.

The Trust’s available-for-sale equity securities were determined to be Level 1 financial assets within the valuation hierarchy established by current accounting guidance, and the valuation is based on current market quotes received from financial sources that trade such securities.  All of the available-for-sale securities in an unrealized loss position are equity securities and amounts are not considered to be other-than-temporary impairment because the Company expects the value of these securities to recover and plans on holding them until at least such recovery.

During the three months ended March 31, 2011, the Trust sold available-for-sale equity securities for $2,231,000 with a basis of $2,130,000, determined using average cost.  Accordingly, the Trust recognized a gain of $101,000 from these sales.  In the six months ended March 31, 2011, the Trust sold equity securities for $2,871,000 with a basis of $2,349,000, determined using average cost.  Accordingly, the Trust recognized a gain of $522,000 from these sales.

During the three and six months ended March 31, 2011, the Trust sold available-for-sale debt securities for $3,417,000 which had a basis of $2,925,000 determined using specific cost.  Accordingly, the Trust recognized a gain of $492,000 from these sales.

During the three and six months ended March 31, 2010, the Trust sold available-for-sale equity securities for $2,425,000.  The basis of these securities was $975,000, determined using average cost.  Accordingly, the Trust recognized a gain of $1,450,000 from these sales. The Trust also sold an available-for-sale debt security for $1,000,000.  The basis of this security was $864,000 and was determined using specific identification.  Accordingly, the Trust recognized a gain of $136,000 on this sale.

Note 9 — Debt Obligations

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

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Note 9 — Debt Obligations (Continued)

Junior Subordinated Notes

On March 15, 2011, the Trust restructured its existing junior subordinated notes resulting in the repayment of $5,000,000 of the outstanding notes at par and the reduction of the interest rates on the remaining outstanding notes as set forth in the table below:

At March 31, 2011 the outstanding balance of the subordinated notes was $37,400,000.

The Trust accounted for the restructuring of this debt as an extinguishment of debt.  For the three and six months ended March 31, 2011, the Trust recognized a loss on the extinguishment of the debt of $2,138,000, which represented the unamortized principal of $1,308,000 and unamortized costs of $830,000.  The Trust also incurred third party costs of $512,000 which were deferred and will be amortized over the remaining life of the notes.

Interest expense for the three and six months ended March 31, 2011 was $483,000 and $1,004,000, respectively.  For the three and six months ended March 31, 2010, interest expense was $515,000 and $1,029,000 respectively.  Amortization of the deferred costs was $7,000 and $15,000 for the three and six months ended March 31, 2011, respectively.  For the three and six months ended March 31, 2010, amortization of these costs was $8,000 and $16,000, respectively.

Mortgages Payable

The Trust has five first mortgages and one second mortgage outstanding with an aggregate principal balance at March 31, 2011 of $12,558,000.  One of these mortgages, with an outstanding balance at March 31, 2011 of $2,090,000, is secured by a long term leasehold position on a shopping center owned by a consolidated joint venture.  The remaining five mortgages, with outstanding balances at March 31, 2011 of $10,468,000, are secured by individual parcels of two land assemblages in Newark, NJ owned by another consolidated joint venture. The Trust has guaranteed $493,000 of one of the mortgage obligations at March 31, 2011, based on the current outstanding balance.  The guarantee will increase to $2,154,000 if the full amount of the $8,600,000 loan is drawn and outstanding.

Interest expense relating to the mortgages payable for the three and six months ended March 31, 2011 was $287,000 and $577,000 respectively.  For the three and six months ended March 31, 2010, interest expense was $198,000 and $393,000, respectively.

During the three and six months ended March 31, 2011, the Trust capitalized interest expense of $234,000 and $397,000, respectively.  This interest is being capitalized in connection with the development of a portion of our Newark Joint Venture’s properties.

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Note 10 — Comprehensive Income (Loss)

Comprehensive income (loss) for the three and six month’s was as follows (dollars in thousands):

Note 11 -Segment Reporting

Management has determined that it operates in two reportable segments: (i) a loan and investment segment which includes the origination and servicing of our loan portfolio and investments; and (ii) a real estate segment which includes the operation and disposition of our real estate assets.

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Note 11 -Segment Reporting (Continued)

The following table summarizes our segment reporting for the three and six months ended March 31, 2011 (dollars in thousands):