BRT Apartments Corp. (MD)

Good day, and welcome to the BRT Apartments Conference Call for the second quarter of 2020. Today's conference is being recorded. At this time, I'd like to turn the conference over to Evelyn Inferner of ICR. You may begin.

Thank you. Good day, everyone, and welcome to BRT Apartments Conference Call. On the call today is Jeffrey Gould, President and Chief Executive Officer of Also available are George Swire, Chief Financial Officer, David Kalish, Senior Vice President, and Ryan Baltimore, Senior Vice President. As a reminder, this call is being webcast through the company's website at www.brtapartments.com. Additionally, the company's 10Q supplemental information and earnings release are available for your review on the Investor Relations section of BRT's website. Before we begin, I'd like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs. Forward-looking statements can often be identified by words such as believe, expect, estimate, anticipate, intend, and similar expressions and variations are negative of these words. These forward-looking statements include but are not limited to statements regarding BRT's strategy and expectations for the future. They are not guarantees of future results and are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's Form 10Q statement For a more complete discussion of risks and other factors that could affect these forward-looking statements, except as required by law, BRT does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes a discussion of funds from operations or FFO, adjusted funds from operations or AFFO, net operating income or NOI, and information regarding our pro rata share of the revenues, expenses, NOI, assets, and liabilities of DRT's unconsolidated subsidiaries, all of which are non-GAAP financial measures of performance. These non-GAAP measures should be used as a supplement to, and not a substitute for, net income computed in accordance with GAAP. Unless otherwise indicated, or the context otherwise requires, discussions with respect to the operating results at the unconsolidated ventures reflects BRT's pro-rata share of results. For a more complete discussion of these non-GAAP measures, these accompany earnings release, supplemental, and 10-Q. 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 the results and accounts of BRT's wholly owned subsidiaries and its pro rata share of unconsolidated subsidiaries. BRT uses pro rata share to help provide a better understanding of unconsolidated joint ventures. However, the use of pro rata information has limitations and is not representative of our operations and accounts as presented in accordance with GAAP. Accordingly, pro rata information should be used with caution and in conjunction with GAAP data presented in our supplemental and in our reports filed with the SEC. Further, references to the current quarter refer to the quarter ended June 30, 2020, and references to the 2019 quarter refer to the quarter ended June 30, 2019. I would now like to turn the call over to Jeffrey Gould, President, and CEO of BRT Apartments Corp. Please go ahead, Jeff.

Thank you, Evelyn. I would like to welcome everyone to BRT's second quarter conference call. Demand for rental housing in the regions of the country where most of our properties are located remains stable during the current quarter. We collected 98% of the rent billed at our multifamily properties for the current quarter and collected 98% of rent billed in July 2020. We have also remained current on all our financial obligations. We believe that the multi-family sector remains a strong asset class and is showing its resilience in these uncertain times. At the same time, we anticipate a slowdown in our acquisition activities and the implementation of our value-add strategy as we can remain cautious with respect to additional capital deployments due to the continuing economic uncertainties related to the pandemic. Our primary near-term focus is occupancy, collections, and maintaining a strong cash position while keeping the safety of our staff and residents a top priority. We have also continued to follow closure, reopening, and social distance guidelines established by the CDC and governmental authorities with respect to all of our properties, including related amenity spaces at the properties, as well as our corporate offices. Moving now to an overview of the portfolio, As of August 1, 2020, we owned or had interest in 39 multifamily properties consisting of 11,042 units in 11 states, including properties in lease-up and properties owned by unconsolidated joint ventures. Eight properties are wholly owned by BRT. The balance are owned through unconsolidated joint ventures, with BRT generally owning a 65% to 80% equity interest in these properties. We did not buy or sell any multifamily properties during the current quarter. The net loss attributed to common stockholders was $4.2 million or 25 cents per diluted share in the current quarter versus a net loss of $4.3 million or 27 cents per diluted share in the 2019 quarter. FFO grew to $4.2 million in the current quarter or 24 cents per diluted share compared to $3.5 million in the 2019 quarter or 22 cents per diluted share. AFFO increased to $4.7 million for the current quarter, or 27 cents per diluted share, compared to $3.87 million, or 24 cents per diluted share in the 2019 quarter. On a per share diluted basis, AFFO was 12.7% higher in the current quarter than in the 2019 quarter. Total rental revenues for our portfolio increased by 3.9% to $26.6 million as compared to $25.6 million in the 2019 quarter, and real estate operating expenses for the portfolio declined by 1.6% to $12.3 million as compared to $12.5 million in the 2019 quarter. The NOI for our portfolio rose 9.6% to $14.3 million for the current quarter, from $13.1 million for the 2019 quarter. Our renewal percentage for our multifamily property portfolio for the current quarter was 58%. Rental rates on renewals increased an average of 2.2% and increases in rental rates on new leases averaged 0.2%. Excluding the value add units, rental rates for new leases remained unchanged. Given the economic pressures associated with the pandemic, When setting rents, we are trying to balance the impact on our residents with our obligations to our stockholders. On the value-add front for the current quarter, 60 units were repositioned at an average of approximately $7,000 per unit, yielding an estimated annualized return on investment of approximately 14%. As reflected in our supplemental financial information, a portion of the cost may have been incurred in a prior period, but we report the return on investment when the unit is released. We anticipate that in the near term, there will be a slowdown in the number of units that we reposition at our properties as the adverse economic impacts of the pandemic continue to unfold, which may impact our ability to achieve rent increases from repositioned units. That being said, we estimate that our portfolio has approximately 700 units in the renovation pipeline over the next several years, and that the value-add strategy will continue to be a positive factor in our ability to drive same-store rent and NOI growth over the long term. Our same-store pool in the current quarter is comprised of 33 properties with 9,317 units, seven of those properties totaling 1,688 units are wholly owned assets. The remaining 26 assets, totaling 7,629 units, are unconsolidated joint ventures. Same store revenues for our portfolio grew to $22.4 million in the current quarter, representing a 2.4% increase from $21.8 million in the 2019 quarter, whereas same store expenses rose to $10.5 million in the current quarter, representing an increase of only 1.4% from $10.4 million in the 2019 quarter. Same-store NOI for the portfolio increased to $11.9 million in the current quarter, a 3.4% increase from $11.5 million in the 2019 quarter. Same-store rental rate for our multifamily property portfolio grew 3.9% to $1,097 per unit for the current quarter from $1,056 per unit for the 2019 quarter. Turning to the balance sheet, at June 30, 2020, we had $16.9 million of cash and cash equivalents, total assets of $385.6 million, total debt of $168.9 million, and total stockholder equity of $195.2 million. At August 1, 2020, our available liquidity was approximately $32.9 million, including $13.3 million of cash and cash equivalents, $9.6 million representing restricted cash for property improvements, and up to $10 million available for working capital under our credit facility. In addition, our unconsolidated joint ventures have approximately $14.7 million of cash and cash equivalents, which is used for day-to-day work and capital purposes. The aggregate mortgage debt for our wholly owned properties, combined with our share of mortgage debt for our unconsolidated joint ventures, totals $659.5 million, has a weighted average interest rate of 4.04%, and a weighted average remaining term to maturity of 7.2 years. On July 9th, we paid our quarterly dividend of 22 cents per share, which is equivalent to an annualized yield of 8.3% based on our stock price of $10.62 as of the close of business on August 3rd, 2020. While the nationwide economic hardships resulting from the pandemic did not have a material impact on our operational results for the current quarter, We continue to closely monitor each of our properties and markets in order to be proactive in bringing a resolution to any challenges that may emerge. We remain focused and determined as a company, and I am proud of the team's efforts, particularly in these unusual times. Thank you for joining us today on our conference call. With that, I will turn the call over to the operator for your questions. Operator?