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spk00: Good day and welcome to the BRT Apartment Corp's Third Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the floor over to Stephen Sweat at ICR. Thank you. You may begin.
spk02: Thank you for joining us today for BRT Apartment Corp's Third Quarter 2021 Earnings Conference Call. On the call today is Jeffrey Gould, President and Chief Executive Officer, and also available are George Weyer, Chief Financial Officer, and Senior Vice Presidents David Kalish and Ryan Baltimore. I would 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 or negatives of these words. 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 risk 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 SEC filings, including its Form 10-K and Form 10-Q, 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 update publicly or revise any forward-looking statement. 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 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 operating results at the unconsolidated ventures reflect BRT's prorata 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 intends to file shortly. 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 multifamily portfolio and references to revenue, expenses, NOI, assets and liabilities refer to 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. However, the use of pro rata information has certain limitations as 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 September 30, 2021, and references to the 2020 quarter refer to the quarter ended September 30, 2020. As a reminder, the company's supplemental information and earnings release have been posted on the Investor Relations section of BRT's website at www.brtapartments.com. The company plans to file its 10-Q shortly. I'd like to now turn the call over to President and CEO Jeffrey Gould. Please go ahead, Jeff.
spk03: Thank you and welcome to the call. We are pleased with our results in the third quarter as our portfolio continues to perform very well and we continue to make progress in our initiatives to increase our wholly owned portfolio, unlock value, reduce leverage, and strengthen our multifamily platform. Let me begin with our results for the third quarter of 2021. Net income attributable to common stockholders was $28.1 million or $1.54 per diluted share compared to a net loss of $7.5 million or $0.44 per diluted share in the same quarter 2020. FFO was $7,000 or less than a penny per diluted share compared to $4.6 million or $0.27 per diluted share in the same quarter last year. The decline reflects our $4.6 million share of the loss on extinguishment of debt incurred by an unconsolidated joint venture in connection with two property sales. It also reflects our share of the loss on extinguishment of debt of $902,000 incurred in paying off mortgage debt in the principal amount of $31.9 million at several consolidated properties. AFFO was $5.7 million, or 31 cents per diluted share, compared to $4.9 million or 28 cents per diluted share in the third quarter of 2020. This 10.7% increase per share was primarily due to reduced interest expense and improved operating margins, occupancy and rental rates across our portfolio. Turning to our portfolio, at September 30th, 2021, our wholly owned portfolio consists of eight multifamily communities containing 2010 units, We also owned interest through unconsolidated entities in another 27 communities containing 7,444 units. In the third quarter, rental revenues, including our prorated share of unconsolidated entities, were $27.3 million versus $27.5 million in the 2020 quarter. This decrease was primarily due to the sale of assets during the current quarter. Portfolio NOI was $14.4 million, up approximately 3%, compared to $13.9 million for the 2020 quarter. Average occupancy was 96.2% for the quarter ended September 30, 2021, up 170 basis points compared to the 2020 quarter. Average rents in the third quarter of 2021 were $1,152 per month, up 6% compared to the 2020 quarter. For leases signed in the third quarter of 2021, we saw favorable spreads on new leases at 10.7%, renewal spreads of 6.1%, and overall spreads of 8.4%. In the third quarter of 2021, our same store pool for the portfolio included 9,052 units comprised of 1,608 wholly owned units and 7,444 units in our unconsolidated joint ventures. For the current quarter, same-store revenue grew 7% compared to the 2020 quarter, same-store expenses increased 5.1% compared to the 2020 quarter, and same-store NOI increased 8.9% compared to the 2020 quarter. Regarding transactions in the quarter, we continue to execute on our unique ability to add to our wholly owned portfolio by buying out joint venture partners. We believe this approach will be successful as we are well positioned to understand the true value and potential of an asset prior to owning it outright. As previously announced, we completed the purchase of our partners remaining 41.9% interest in the joint venture that owns Bell's Bluff, a 402 unit multifamily property located in West Nashville, Tennessee. The purchase price for such interest was approximately $27.9 million, and the property is now wholly owned by BRT. In connection with the closing, we obtained a $52 million 20-year fixed rate mortgage loan, bearing an interest rate of 3.48%. Subsequent to the quarter end, in October, we purchased for $1.6 million the remaining 10% interest in the venture that owns Crestmont and Thornblade, a 266-unit multifamily property in Greenville, South Carolina. Also, as previously announced, we completed the sale of Park at 980, located in Lawrenceville, Georgia, and the Avenue Apartments, located in Ocoee, Florida. We had a 50% interest in the unconsolidated joint venture that owned these properties. As a result of these sales, we recognized a $35 million share of the gain after our $4.6 million share of the loss on the extinguishment of debt. These properties produce an IRR of approximately 25% over the three years that they were owned. Additionally, in November, we completed the sale of our interest in two underperforming properties located in St. Louis for $3 million. In the second quarter of 2021, we had recorded a $520,000 impairment charge with respect to this transaction. On the value-add front, We repositioned 67 units at an average investment of approximately $6,500 per unit, yielding an estimated annualized return on investment of approximately 42%. As reflected in our supplemental financial information, a portion of the cost may have been incurred in the prior period, but we report the return on investment when the unit is released. Across our entire portfolio, we have approximately 750 units slated for renovation over the next several years. Turning to the balance sheet, during the third quarter, we paid off $31.9 million of mortgage debt on our consolidated properties. This mortgage debt was scheduled to mature in the first quarter of 2022 and bore a weighted average interest rate of 4.53%. Also, we reduced our mortgage debt within our unconsolidated subsidiaries by $107 million in connection with the sales of Park at 980 and the Avenue Apartments. The mortgages on these total properties were scheduled to mature in 2028 and bore a weighted average interest rate of 3.94%. At September 30th, 2021, we had total assets of $398 million, total debt of $171 million, and total BRT stockholder equity of $206 million. Available liquidity at quarter end included $29.6 million of cash and cash equivalents, restricted cash of $7.6 million, and up to $15 million available under our credit facility. In addition, our unconsolidated joint ventures had approximately $13.3 million of cash and cash equivalents, which is used for the applicable ventures' day-to-day work and capital purposes and renovations. The aggregate mortgage debt for our wholly owned properties, combined with our pro rata share of mortgage debt for our unconsolidated joint ventures, totals $578.1 million, has a weighted average interest rate of 4%, and a weighted average remaining term to maturity of 8.2 years. Our debt to enterprise value as of September 30th, 2021 was 66% down from 80% at September 30th, 2020. We hope to continue to bring our leverage down over time. During the quarter ended September 30th, 2021, we sold approximately 59,000 shares pursuant to our ATM sales program at an average price of $18.23 per share. Net proceeds after commissions and fees were $1.1 million. Finally, on October 7th, we paid our quarterly dividend of 23 cents per share, a 4.5% increase from the prior dividend. The current dividend equates to an annualized yield of 4.4% based on our stock price of $20.92 as of the close of business on November 5th, 2021. In conclusion, our results this year reflect the value we continue to build. Our portfolio is performing very well, and we continue our efforts to grow our wholly owned portfolio and strengthen our balance sheet. Our focus on properties in the Southeast and Sunbelt has been successful, and I am excited with the opportunity we have as we look to the balance of 2021 and into the next year. I want to thank the entire BRT team for their hard work and dedication. That completes our call. We will now open the call to your questions. Operator?
spk00: Thank you. We will now begin the question and answer session. To join the question queue you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause for a moment as callers join the queue.
spk01: Once again, if you have a question, please press star, then one.
spk00: There are no questions registered at this time. I would like to turn the conference back over to Jeff Gold for any closing remarks.
spk03: I just want to say thank you all for your time, and we appreciate your continued interest in VRT. Have a good day and thanks very much.
spk00: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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