BRT Apartments Corp. (MD)

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.

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.

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?