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spk05: Good day, and welcome to the BRT Apartments Conference Call for the first quarter of 2021. Today's call is being recorded. At this time, I'd like to turn the conference call over to Evelyn Inferna of ICR. Thank you. You may begin.
spk04: Thank you. Good day, everyone, and welcome to BRT Apartments Conference Call. On the call today is Jeffrey Gould, President and Chief Executive Officer. Also available are George Zweier, 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 supplemental information and earnings release are available for your review on the investor relations section of the BRT's website. The company plans to file the 10-Q later today. Before we begin, I'd like to remind everyone that this conference call contains forward-looking statements with the 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 or negatives of these words. These forward-looking statements include but are not limited to statements regarding BRT strategy and expectations for the future. They are not guarantees of future results and are subject to risks and uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's Form 10-Q for a more complete discussion of risk factors 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 BRT'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 such results. For a more complete discussion of our financial results as reported, In accordance with GAAP, see the company's earnings release and supplemental information, which are currently available under the Investor Relations tab at our website, and the 10-Q, which BRT plans to file later today. All amounts are approximate and, among other things, reflect rounding. Unless otherwise indicated or the context otherwise requires, References to BRT's portfolio or its multi-family 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 our unconsolidated joint ventures. the use of pro rata information has certain 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 the 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 March 31st 2021 and references to the 2020 quarter refer to the quarter ended March 31st, 2020. I'd now like to turn the call over to Jeffrey Gould, President and CEO of BRT Apartments Corp. Please go ahead, Jeff.
spk03: Thank you, Evelyn. I would like to welcome everyone to BRT's first quarter conference call. We are pleased to share that we continue to see pockets of strength, allowing us to selectively raise rental rates. We continue to focus on our capital structure and have recently increased our credit facility availability. We remain confident about the year ahead as there is strong demand in many of our markets. With respect to our portfolios, as of May 1st, 2021, we owned or had interest in 38 multifamily properties consisting of 10,834 units in 11 states, including 30 properties owned by unconsolidated joint ventures and eight properties wholly owned by BRT. BRT's equity interests in these unconsolidated subsidiaries over which BRT actively oversees the management ranges from 32% to 90%. We did not buy or sell any multifamily properties during the current quarter. Net loss attributed to common stockholders was $3.8 million or 22 cents per diluted share in the current quarter versus a net loss of $4.8 million or $0.29 per diluted share in the 2020 quarter. FFO grew to $6 million in the current quarter or $0.35 per diluted share compared to $3.3 million in the 2020 quarter or $0.19 per diluted share. The increase is primarily due to BRT's share of insurance recoveries on three joint venture properties impacted by the ice storms that took place in Texas in February and to a lesser extent, improved operating margins and reduced interest expense at our portfolio. AFFO increased to $5.1 million for the current quarter or $0.30 per diluted share compared to $4 million or $0.23 per diluted share in the 2020 quarter. AFFO increased 30% on a per diluted share basis. Total rental revenues for our portfolio increased by 6.1% to $27.8 million as compared to $26.2 million in the 2020 quarter. And real estate operating expenses for the portfolio increased by 7.4% to $13.1 million as compared to $12.2 million in the 2020 quarter. NOI for our portfolio rose 5% to $14.7 million for the current quarter from $14 million for the 2020 quarter. The renewal percentages for our portfolio for the current quarter was approximately 50%. Rental rates on renewals increased an average of approximately 3% to 4%, and increases in rental rates on new leases averaged approximately 1%. Rental rates on the portfolio increased approximately 2% for the current quarter. On the value-add front, for the current quarter, 38 units were repositioned at an average of approximately $6,100 per unit, yielding an estimated annualized return on investment of approximately 26%. 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 continue to anticipate that in the near term there will be a slowdown in the number of units that we reposition at our properties. We estimate that our portfolio has approximately 600 units in the renovation pipeline scheduled to be completed over the next couple of years, and note that over the long term, the value-add approach will continue to be a positive factor in our ability to drive same-store rent and NOI growth. Our same-store pool in the current quarter is comprised of 36 properties with 10,037 units. Eight of those properties totaling 1,880 units are wholly owned assets. The remaining 28 assets, totaling 8,157 units, are unconsolidated joint ventures. Same-store revenue for our portfolio grew to $25.3 million in the current quarter, representing a 4% increase from $24.4 million in the 2020 quarter, whereas same-store expenses rose to $11.9 million in the current quarter, representing an increase of 4.9% from $11.4 million in the 2020 quarter. Same-store NOI for the portfolio was $13.4 million in the current quarter, an increase of 3.3% from $13 million in the 2020 quarter. The change in NOI was primarily due to an increase in rental revenues and occupancy, offset slightly by an increase in non-controllable expenses, mainly taxes and insurance. We continue to appeal taxes when we feel that we can obtain a positive result. Same store rental rate for our multifamily property portfolio grew 1.4% to $1,100 per unit for the current quarter from $1,085 per unit for the 2020 quarter. In March 2021, we entered into a contract to sell Kendall Manor, a wholly owned property located in Houston, Texas for $24.5 million. We estimate that we will recognize a gain on sale of approximately $7.4 million in the second quarter of 2021. In April 2021, we completed the sale of an 80% interest in Anatole Apartments in Daytona Beach, Florida, to our joint venture partner for approximately $7.5 million. It is anticipated that in the quarter ending June 30, 2021, we will recognize a $2.2 million gain related to this transaction. On May 4 2021, we purchased an additional 15% interest in Civic Center one and Civic Center to both located in South Haven, Mississippi, from our joint venture partner for $6 million, which increases our ownership in these properties to 75%. Turning to the balance sheet at March 31 2021, we had $19.4 million of cash and cash equivalents, total assets of $358 million total debt of $166.8 million, and total stockholder equity of $170.5 million. At May 1st, 2021, our available liquidity was approximately $45.5 million, including $22 million of cash and cash equivalents, $8.5 million representing restricted cash for property improvements, and up to $15 million available for working capital under our credit facility. In addition, our unconsolidated joint ventures have approximately $14.9 million of cash and cash equivalents, which is used for day-to-day working capital purposes. At a minimum, we intend to maintain one month of expenses and debt service at each of our properties. The aggregate mortgage debt for our wholly owned properties combined with our share of mortgage debt for our unconsolidated joint ventures total $658.7 million, has a weighted average interest rate of 4.03% and a weighted average remaining term to maturity of 6.7 years. On April 7th, we paid our quarterly dividend of 22 cents per share, which is equivalent to an annualized yield of 4.7% based on our stock price of $18.83 as of the close of business on May 1st, 2021. Thank you for joining us today in our conference call. With that, I will turn the call over to the operator for your questions. Operator?
spk05: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Gaurav Mehta with National Securities. Please proceed with your question.
spk00: Thanks. Good morning. First question on the acquisition of JV interest in Civic Center. Can you maybe provide some color on why you acquired additional interest in that property?
spk03: Yeah. Good morning, Gaurav. You're speaking of Civic Center?
spk00: Yeah, I think you mentioned acquired additional interest in a JV property. If you just want to learn why you did that.
spk03: Yeah, it's been a property that's been performing terrific for us over the years. We're very comfortable with our partner there, and it was just a great opportunity. We thought we were buying that interest at an effective and smart price, and we want to add and move forward with the purchase. So it's just been a great asset for us, and we wanted to own more of it. Simple as that.
spk00: Okay. Second question on the disposition. Have you guys provided what kind of cap rates you're getting for the assets that you're selling this quarter?
spk03: No, we didn't provide for it. I can share some light on that. You know, we're selling things basically on our effective numbers at or around, you know, very low 4% caps, somewhere in that range. That goes for both the Daytona and the Houston sale.
spk00: Okay. Maybe on the acquisition market, can you provide some color on what you guys are seeing generally and what your expectations are going forward for acquisitions?
spk03: Yeah, sure. It's obviously, it's a difficult time to buy. Very competitive landscape. Lots of people are focusing and excited about the southeast for lots of reasons, population growth, employment growth, etc. We have liquidity. We're sitting on cash. We have an ATM available to us. The credit line is not as fully available. So, you know, we'd like to find opportunities, but at the same time, it is difficult. I think that the buyout of partners is an interesting platform for us, but we'll have to see what allows. But it's not an easy time to buy, to answer your question.
spk00: Okay. Thank you. That's all I had.
spk05: Thank you. Our next question comes from the line of Craig Kucera with Wonderlic Securities. Please proceed with your question.
spk02: Hey, good morning, guys. I just would like to circle back to the assets that you sold and bought. Was it a relatively flat cap rate spread between the two, or was there any delta between that?
spk03: Yeah, we believe there was some delta, yes. So, on the sales, like I said, the garage, we're, you know, we're trying to, we're basically selling at low fours for the Daytona sale and Houston. On the buys, you know, one of the advantages we have, I think we do better on the purchases for lots of reasons. You know, we know the asset, part of looking to get out, various reasons that I think we definitely improve on the purchase side. I can't give you a specific differential, but I can tell you that effectively the splitter there has been very good for us.
spk02: Okay, great. And with the upcoming sale of Kendall Manor, I think, you know, just given your commentary how difficult it is to buy, you were thinking that you might actually pay down debt versus recycling capital, but things were kind of, you know, sort of TBD. What are your current thoughts now on sort of the use of proceeds from selling that asset?
spk03: Yeah, good question. Yeah, you know, we recognize that this was appropriate and a smart time to take some embedded gains in the portfolio. We've been talking about how we have these embedded gains, and it just made a lot of sense. These particular assets, and we've said before, there's reasons why we sell properties. In this particular case, we had difficult margins on Daytona, thought it was an appropriate time to sell because the operating expenses were high, as well as Houston. And yes, the use of the money and the sales will lead to obviously our dollars in-house, which we plan to go towards a deleverage of the portfolio. We've been, you know, we are cognizant of the portfolio, the percentage of LTV and all, and we want to bring that down to some extent. And yes, some of the sales proceeds will be used for that purpose.
spk02: Got it. And just one more for me. Kind of as you think about the back half of 21, clearly it sounds like you're seeing really strong pricing on asset sales. Have you soft-circled any other assets for sale in the back half of 21?
spk03: We're always looking at the portfolio. At this point, Daytona and Houston are the only ones that we have to date. And, you know, if there's rationale and reasons for it, then potentially. But those are the ones that we have sold to date. And we look at the portfolio. We do it all the time, you know, and consider different alternatives. And sometimes, you know, partners give us opportunity to buy them. It's all to be determined.
spk02: Got it. And I guess as you think about purchases in the future, you know, are there more opportunities to take down more JV interest? And is that more attractive to you at this point versus, you know, maybe bringing new assets as you think about recycling capital?
spk03: Yes. I would say for sure that, you know, the opportunity we have at times to buy partners out, like you asked an earlier question, which was a good one, we're doing better with buying out partners, far better with buying out partners than we do, you know, as far as buying new assets in the market. The cap rates and the performance that we have on those purchases definitely are higher cap rates and better deals for us. So we hope to do that, yes. We hope to do that more in the future for sure.
spk02: Okay, great. Thanks a lot. Sure.
spk05: Thank you. Our next question comes from the line of Rob Stevenson with Danny. Please proceed with your question.
spk01: Yes, good morning. This is Steve Domansky for Rob Stevenson. Just curious to hear about the underwriting standards, I guess, going forward in terms of the pricing environment, in terms of, I guess, underwriting CapEx reserves and soft costs for redeveloping units. Just wanted to hear your thoughts on where... I guess in terms of future underwriting and pricing.
spk03: I'm not sure I understand your question. As far as doing value add, is that your question?
spk01: Yes, that's correct.
spk03: Yeah, so we've been, you know, as you see, we've reduced the number of units that we've done on a quarterly basis pretty significantly. If we don't feel like we can achieve, I would say, a minimum 18 to 18 plus percent return, on investment to do an upgrade. We typically don't do COVID. We were very successful and very pleased with our collections and how we performed overall, but it wasn't exactly the opportune time to do a tremendous amount of value adds. So, as we mentioned earlier, we did, you know, about 38 units, about $6,100 a unit, and we got, you know, very returns of north of 25%. I think, you know, for the next quarter or two, we're going to watch that. And I don't expect us to do a tremendous amount of value add on the units just to see how the market turns back. And then we hope to reengage and do quite a bit more.
spk01: Excellent. Thank you. That's very helpful.
spk05: Thank you. Ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to Mr. Gould for any final comments.
spk03: Yeah, I just want to simply say thank you all for attending. We're excited about our future. We appreciate your interest and wishing you all a nice day, and thank you. Speak with you all soon.
spk05: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your attention.
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