Q2 2020 BRT Apartments Corp Earnings Call
Good day and welcome to the BRT Apartments Corp 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 Infurna, Oh, I see our you may begin.
Thank you good day, everyone and welcome to be Archie apartments conference call on the call today's Jeffrey Gold President and Chief Executive Officer also available our George Swire, Chief Financial Officer, David Kailash, Senior Vice President and Ryan Baltimore Senior Vice President.
A reminder, this call is being webcast you the companys website at www be Archie apartments Dot com. Additionally, the company's 10-Q supplemental information and earnings release are available for your review on the Investor Relations section of B.R. Keyes 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 1995 that are based on managements current expectations assumptions and beliefs.
Forward looking statements can often be identified by words, such as believe expect estimate anticipate and similar expressions and variations are negative of these words.
These forward looking statements include but are not limited to statements regarding the Archie strategy.
Expectations for the future. They are not guarantees of future results and are subject to risks uncertainties and assumptions that could cause actual results could 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 10-Q for a more complete discussion of risks and other factors that could affect these forward looking statements except as required by law. The Archie does not undertake any application to publicly update or revise any forward looking statements.
This conference call also includes a discussion of funds from operations are assessed.
Adjusted funds from operations or a AFFO net operating income or and Hawaii and information regarding our pro rata share of the revenues expenses, and Hawaii assets and liabilities of VR cheese unconsolidated subsidiaries.
All of which are non-GAAP financial measures the performance.
These non-GAAP measures should be used as a supplement to and not a substitute for net income computed in accordance with gap.
Unless otherwise indicated for the context, otherwise requires discussions with respect to the operating results at the unconsolidated ventures reflects the our teach pro rata share results.
For a more complete discussion of these non-GAAP measures either company's earnings release supplemental and 10-Q.
Unless otherwise indicated or the context, otherwise required references to be our teach portfolio or its multifamily portfolio and references to revenues expenses and Hawaii assets and liabilities refer to the results an account crts wholly owned subsidiaries and its pro rata share of consolidate.
Subsidiaries.
The Archie use this pro rata share to help provide a better understanding of unconsolidated joint ventures. However, they use a pro rata information has one that has limitations and it's not representative of our operations an account as presented in accordance with gap.
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 FCC.
Further references to the current quarter refer to the quarter ended June 30 2020.
References to the 92019 quarter refer to the quarter ended June 32019.
I would now like to turn the call over to Jeffrey Gold President and CEO be Archie apartments Corp. Please go ahead Jeff.
Thank you everyone.
I would like to welcome everyone to be or teas second quarter conference call.
Demand for rental housing in the regions of the country, where most of our properties are located remained stable during the current quarter.
We collected 98% how the rent the old at our multifamily properties for the current quarter uncollected, 98% of rentals in July 2020.
We've also remain current on all our financial obligations.
We believe that the multifamily sector remains a strong asset class and is showing its resilience and these uncertain times at the same time, we anticipate a slowdown in our acquisition activities and the EMR implementation of our value add strategy as we can remain cautious with respect to additional capital deployments due to the continuing I can.
AMAK 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 at top priority.
We have also continue to follow closure reopening and social distance guidelines established by the CDC and governmental authorities with respect to all of our properties, including related amenities spaces that the properties as well as our corporate offices.
Moving now to an overview of the portfolio as of August 1st 2020, we owned or had interest in 39 multifamily properties, consisting of 11042 units and 11 states, including properties and lease up and properties owned by unconsolidated joint ventures.
Eight properties are only owned by BRT the balance our own through unconsolidated joint ventures with beer or T. Generally owning a 65% to 80% equity interest in these properties, we did not five or so any multifamily properties during the current quarter [noise].
The net loss attributable 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 into 2019 quarter.
At that FFO grew to $4.2 million in the current quarter or 24% <unk> per diluted share compared to $3.5 million into 2019 quarter or 22 cents per diluted share.
Hey, AFFO increased to $4.7 million for the current quarter for 27 cents per diluted share.
Parents or $3.87 million or 24 cents per diluted share in that 2019 quarter.
On a per share diluted basis. After FFO was 12.7% higher in the current quarter and then the like 2009 seem quarter.
Total rental revenues for our portfolio increased by 3.9% to $26.6 million as compared to $25.6 million into 2019 quarter and real estate operating expenses for the portfolio declined by 1.6% to $12.3 million as compared to $12.5 million last.
I was 19 quarter.
You know why for our product portfolio rose, 9.6% to $14.3 million for the current quarter from $13.1 million for the 2019 quarter.
[noise], our renewal percentage for multifamily property portfolio for the current portal was 58%.
Rental rates on renewals increased an average of 2.2% and increases in rental rates on new leases averaged <unk>, 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 her obligations to our stockholders [noise].
On the value added front for the current quarter 60 units were repositioned and an average of approximately 7000 hours per unit, yielding an estimated annualized return on investment of approximately 14%.
As reflected on our supplemental financial information a portion of the costs may have been incurred in a prior occurred but we report the return on investment when the unit is really [laughter], we anticipate spend 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 increase from reprinted repositioned units that being said, we estimate that our portfolio has approximately 700 units in the renovation pipeline over the next several years at devalues strategy will continue to be a positive factor and our ability to drive same store rent and <unk>.
In a wide growth over the long term.
Our same store pool and the current quarter is comprised of 33 properties with 9317 units seven of those properties totaling 1688 units are wholly owned assets. The remaining 26 assets totaling 7629 units are unconsolidated joint ventures.
[laughter] same store revenues for our portfolio grew to $22.4 million in the current quarter, representing a 2.4% increased from $21.8 million into 2019 quarter, whereas same store expenses rose to $10.5 million in the current quarter, representing an increase of only 1.4.
Were sent from $10.4 million into 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 into 2019 quarter [noise].
Same store rental rate for our multifamily property portfolio grew 3.9% to $1097 per unit for the current quarter from $1056 per unit for the 2019 quarter.
Turning to the balance sheet at June Thirtyth 2020, we at $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 Onest 2020 are 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 cash equivalents, which is used for day to day working capital purposes.
The aggregate mortgage debt for our wholly owned properties combined with our share of mortgage debt for our unconsolidated joint ventures totaled $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 nice, 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 Threerd 2020.
Well 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 end markets in order to be proactive in bringing a resolution to any challenges that may emerge.
We remain focused on determined as a company and I'm proud of the team's efforts, particularly in these unusual times.
Thank you for joining us today on our conference call with that I'll turn the call over to the operator for your questions operator.
Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad a confirmation Tom will indicate your line is in the question can you maybe first start to if you'd like to remove your question from the Q for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star Keith.
Our first question comes from the line of Rob Stevenson with Janney. Please proceed with your question.
Hi, good morning, guys.
Jeff you talked about the of 2.2% on renewals on the 0.2% on new leases I believe that was the second quarter up can you talk about what you're seeing thus far in July and August or similarly on renewals and new leases.
Yeah, Rob how are you.
Seem more of the same we're very focused on occupancy.
And keeping our.
So that was 90, 495% what we typically like.
And worry we are sacrificing a time some slight bumps in rents to keep to keep same. So I think we'll see continue more of that there is some slight downward pressure in occupancy.
But rental rates have been more or less flatter us only slight increases we do have a couple of properties that are are seeing isn't more generous.
Growth, but for the most part I would say, we're sticking with more or less lower rental rates lower rental increases right now.
Okay and have you guys had to use any concessions I mean, you guys don't have a really much its and lease up but I mean in terms of just on existing stabilized communities as the markets that you're operating in the sub markets had any deterioration of the point, where you've actually how to use concessions are just holding.
Rental rate flat was enough to get stuff least you generally speaking holding on flat was enough to get them list there with maybe minimal concession if any on current portfolio you touched on a development aspect and on the lease up yes, we are doing some concessions on on our lease up properties.
But on the existing asset base.
Very little if any.
Okay, and then you talked a little bit about slowing some of the renovations given the.
The economically viable.
Portion of it or you still got to wind up taking advantage in some of your properties to do some on vacancy while you have an opportunity to do so or is it basically even on select properties, it's still not making economic sense and sort of hit the pause button here for a bit.
Yeah Fair question I'd say, it's a mixed bag answer in some of our locations every time, we get to Vegas, we're continuing to do there the upgrades in getting the bumps.
Some properties, we're getting very few turnover of leases because the renewal rates are so high and there's very few apartments coming available.
So that's a mixed bag, but generally speaking where we have the opportunity where we can get a good return on investment. We are doing the are the renovations and plan to do a do so going forward and get the rental bumps then as you can see to 14% is not where we were used to where we were reporting previous quarters, maybe 20% or somewhere in that range.
So, it's a little bit down, but as long as it's rewarding and I'm worthwhile, a we would we plan to do a for the full renovation that we typically do in this case is about $7000.
And we adjusted obviously accordant property by property so.
It really depends on different properties, we're talking about and what the rental bumps we get.
Okay, and then last one for me that you guys have a body thinks earlier the year saw the accounting restatements. How are you guys thinking about the structure of acquisitions going forward or you have a significant preference for only buying wholly owned assets still happy to buy assets would have them be unconsolidated and any differences.
As in your thought on dispositions between a wholly owned the unconsolidated buckets going forward.
Yeah, well, there's two answers to that on the let me start with the existing base, we're planning to do with our existing joint venture agreements is we're going to sit down and consult with our trade JV partners and see what we can do and our existing structures to maybe make some modifications. So that we can hopefully consolidate some of the existing Paul.
As far as going forward, yes, we definitely plan to discuss with our accounting firm and others as to what we're gonna do by way of changing agreements and doing what we need to do so we can consolidate.
I don't want to get crazy with the idea of having to to change our business plan because of it.
But we would like to try to modify the agreement. So that we can consolidate when we have joint venture partners and as far as buying direct yeah. We do plan a strategy and would like to pursue a more direct strategy. In addition to the joint venture strategy. So no. We don't plan I give up the joint venture strategy at all but I think we will see but.
Tennessee more of a direct strategy.
Brokers and buying direct going forward, when we get back into acquisitions.
Okay. Thanks appreciate the time this morning.
Sure.
Thank you. Our next question comes from the line of Garth meet that with National Securities. Please proceed with your question.
You know things good morning.
Jeff I was hoping if you could comment on how the fiscal geminos manpower pure attendance to make the rent payments and what can earn back are you expecting to see the even we don't have any must terminals going forward.
Oh, Yeah, correct. It's a good question.
For us at this point, we've been trying to do our best sort of demographic studies and see within our properties you know the amount of unemployment difficult to do.
On a recurring basis, obviously, you know what their employment, it's like when they move into a property, but difficult was therein as far as keeping a good sound idea unemployment, but we think it's fairly minimal those that are that are unemployed or as a general rule.
We've done a pretty good demographic studies as to what type of employment they have weather in the retail or medical so so forth I would say that for those that are unemployed and the share. They the tendency that we have the seamless checks have been probably very meaningful and I think thats helped support such a good positive collection aspects that we have.
Had a 98% so we're watching it very carefully in there yeah I wouldn't say that there's not some concern there is some concern as to what's going to happen with Congress as to what they're going to do a stimulus or transplant et cetera.
So we're watching it closely but I don't think will have a dramatic impact on us.
It could have some minor impact on us.
Okay and it doesn't doesn't go Oh transaction market No I was wondering if you could oh for some done my comments on the on what you're seeing as far as buyer and seller. That's kinda back then and the pricing of that's up in your markets.
Yeah. So what we're seeing for what we're hearing I should say because we are speaking with brokers and our partners fairly readily there's very few transactions going on generally speaking, it's I can't imagine the percentage that it's down but is it seems like a different world as to how many properties are being a lots sold et cetera.
We had a few we had a property that we were considering selling which we pulled from the market, which was sort of in process.
Conversation, we had that we would probably have to sell it may be maybe at a 5% discount something like that I think generally speaking multifamily as a sector is really not being impacted anywhere near obviously the retail commercial office hotel aspects, there's really not a lot of distress.
So I would say if you're buying property right now the discount as minimal if any but maybe slight.
And there's very few to really have so many good.
Numbers for you because I haven't seen many properties that have transacted postcode, having some quote some deals have closed but they were really already in process pretty cold at early stages. So I would say that the impact is pretty minor and the apartment sector.
Okay. Thank you the pull ahead.
Thank you. Our next question comes from the line of Barry, Oxford with D.A. Davidson. Please proceed with your question.
Great. Thanks, guys.
Just want to build on the joint venture question, a little bit. If you guys are going to consolidate a maybe a little bit and also by.
Wholly owned apartments going forward, what will you use as far as a source of equity. So that you don't run up your debt levels.
If we go through I'm, sorry, very if we go direct is that your question yeah, right exact because you've been using the joint ventures and that's been a <unk> you know, obviously, a great sorts of equity, but if you're going to you know we you know rely more on on on your balance sheet, Where's that equity component going coming from.
You know under the assumption you don't want to run up your debt levels yeah. So.
We're very careful and focus on our debt levels, we're providing typically between 65, 80% of the equity anyway. So you know the differential is not that significant.
But where we wont buy obviously unless we have the cap or resources, where we can buy with with fair and reasonable that we're going to you know we're basically when we look at properties to sell.
Either because we were at the end of the value add scenario or potentially development properties may want to sell or whatever the reason as we have capital. The first focus will be on liquidity and then we plan to recycle that cash either through a the JV model or direct but the difference in dollars for us or cash needed.
Obviously, we will be focused on and I don't think it'll be a significant hurdle at all to buy direct as opposed to buying with partners.
Going forward, so I don't see that as a problem.
Great. Thanks, guys appreciate it.
Thank you. Our next question comes from line of Craig with Wunderlich Securities. Please proceed with your question.
Yeah, Hey, good morning, guys.
No I don't want to follow up on a couple of questions that we went over earlier just to drill down a bit I know youve slow down the redevelopment considerably from last year, I think you're doing closer to maybe 200 to even to 50 and we did 60 this quarter.
Do you have a sensor of how much more you're going are you gonna basically maintain it at that level are we looking at seeing a further drop in the value add units rusty or.
I guess it remains to be seen in part of it again like as I said earlier, it really depends on availability of units and where in the markets.
We're getting some elbowing, we're very focused on renewal rates I mean, that's a big piece of what's happening right now we'd like to get that up a little bit even more considering people are not more as likely to move.
But we plan on continuing to do the strategy I would say that if I had to guess I would say is probably going to be similar to what we're doing now as opposed to what you saw a few quarters back.
We're watching it carefully so I if I had.
Forecast I would say probably better forecast something similar to what we've done currently but it's sort of remains to be seen as to the properties that were getting the units back and the upgrades that we plan to do associated with obviously the rental rates that we can get if we perform those those renovations.
Okay, and moving back to your tenant base and sort of unemployment as Youve Survey then you have a sense of what the the overall unemployment is no roughly in your portfolio today.
It wouldn't be only a guess and and I would say from from some response, we've got it again as the guests. This is not material I would say, we're probably in the neighborhood of about 10% to 15% something like that.
But again for serving that is very very difficult.
We've done a very good study on other aspects of you know again, what what they're doing in the workforce you know and those type of questions, but hard to get full comprehensive data on true unemployment property by property other than speaking with the managers, who are hopefully speaking with each and every tenant.
And getting some feedback from them.
Okay, Great I, just want to double check on your liquidity a in the press release I think it said you guys have about $13 million with cash on hand, a in the queue I think it's closer to 10, which is correct.
Okay.
One might be an updated the curious in third and then there would be an update for August in the press release.
Okay I think they both reference August yeah, Okay. Just the days, maybe often the only difference would be probably a dividend payment.
Okay can check on and get back to you.
Sure.
Well, yeah, and I guess I mean, when you're when you're talking about the transaction market being somewhat you know frozen.
How are you looking at any other alternatives to increase your liquidity.
Oh alternatives.
Basically the alternatives as far as liquidity and focus we're not doing we're not looking at potential sales to increase liquidity. We're doing if it makes sense for us and there's been a few properties that we've been considering which will help us obviously with the sale having for liquidity other than that obviously and we have a wherever lines of credits that are fully available to us.
But we feel over in a pretty good uncomfortable liquidity position right now.
And when that would not you know stress that work really concerned about currently I wouldn't be surprised going forward. It with a couple of more sales will have even more more liquidity and at that point, we're going to get back into the.
Cycle of looking at properties and opportunities going forward.
Okay. Thank you.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. good for any final comment.
Well, let me. Thank you all for your time today I would suggest that you referred to our supplemental for a lot of additional detailed information.
Excellent transparency, we believe as far as the portfolio and if you have further questions I suggest you reach out to us by going to investors appear to you apartments Dot com.
Other than that I, just ask you all have a good day and stay safe and thank you for your time.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.