Q4 2020 BRT Apartments Corp Earnings Call
Good day and welcome to the BRT Apartments Corp Conference call for the fourth quarter of 2020. Today's conference is being recorded at this time I'd like to turn the floor over to evident in for net of ECR ICR. Please go ahead.
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 our Georgia, the wire Chief Financial Officer, David <unk>, Senior Vice President and Ryan Baltimore, Senior Vice President and as it.
A reminder, this call is being webcast you of the company's website at Www BRT apartments Dot com.
Additionally, the company's supplemental information and earnings release are currently available for your review on the Investor Relations section of the our keys website and its 10-K will be available on such website on Monday March 15th.
Before we begin 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 the.
These forward looking statements include but are not limited to statements regarding the our chief 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 and 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-K 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 the discussion of funds from operations or and that's all adjusted funds from operations or a S. S. All net operating income or NOI and information regarding our pro rata share of revenues expenses, and Hawaii assets and liabilities of Brt's unconsolidated.
<unk> 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 the Archie it's pro rata share of search results.
For a more complete discussion of our financial results as reported in accordance with GAAP. These non-GAAP measures and.
And these non-GAAP measures G of the company's earnings release, and supplemental information, which are currently available under the Investor Relations tab at our website and the 10-K, which will be available at such tab on Monday March 15th.
Unless otherwise indicated or the contacts other wide requires references to be our cheese portfolio or its multifamily portfolio and references to revenues expenses NOI assets and liabilities refer to the results and the counts of B R cheese wholly on subsidiaries and its pro rata share of them consolidated subsidiaries the.
And our T uses pro rata share to help provide a better understanding of our unconsolidated joint ventures.
However, the use of pro rata of information.
There's certain limitations and is not representative of the company's 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 and our reports filed with the SEC.
Further references to the current quarter of refer to the quarter ended December 31st Twenty-twenty and references to the 2019 quarter refer to the quarter ended December 31st 2019.
References to the current year refer to the year ended December 31st tranche of fungi and references to 2019 refer to the year ended December 31 2019.
I would now like to turn the call over to Jeffrey Gould, President and CEO of BRT apartments. Please go ahead Josh.
Thank you Evelyn I would like to welcome everyone to BRT as fourth quarter Conference call.
Let me start off by saying that although 2020 and bought about uncertainty and the market. We are pleased with the way our team of PRT and the properties of stepped up from from during these times, we were proactive and remain cautious and conservative with our capital deployment and as a result had strong performance. In 2020. We are confident that we are and are positioned to <unk>.
The growth of activities when the market is right as cap rates continue to remain compressed.
Main diligent with regard to safety protocols and continue to put the stats and tenants health and so.
Our top priority.
With respect to our portfolio as of March one 2021, we owned or had an interest and 39 multifamily properties consisting of 11042 units in 11 States 31 properties owned by the unconsolidated joint ventures and eight property is wholly owned by BRT Vrt's equity interest is on consolidated.
Subsidiaries over which BRT actively overseas and the management generally ranges from 50% to 90%, we did not buy or sell any multifamily properties and the current quarter.
Let's turn to our financial performance.
BRT generated F F of of approximately $5 million and the current quarter four of 29 cents per diluted share compared to three and a half million dollars in the 2019 quarter for 'twenty, one cents per diluted share for the year <unk> grew to $17 million or 90.
And 99 cents per diluted share compared to 12 million 12 point of $1 million for 74 cents per route per diluted share in 2019.
<unk> increased to $5 $6 million for the current quarter for 33 cents per diluted share compared to $4 $9 million for 30 cents per diluted share and the 2019 quarter. This represents a 10% increase and a S. S. Though on a per diluted share basis for the year and football.
The increase of $19 $2 million for $1 12 per diluted share compared to $16 $66 million or $1.03 per diluted share in 2019.
Total rental revenues for our portfolio increased to $27 $5 million as compared to $26 $5 million into 2019 quarter.
And real estate operating expenses for the portfolio increased to $12 $6 million as compared to $12 $1 million into 2019 quarter.
For the year total rental revenues for our portfolio increased to $107 $9 million as compared to $102 $2 million and 2019 and real estate operating expenses for the portfolio increased to $57 million as compared to $48 $7 million and 2019.
And it was for our portfolio of rose three five per cent to $14 $9 million for the current quarter from $14 $4 million for the 2019 quarter.
And the wife for our portfolio increased six 9% to $57 $2 million for the current year from $53 $5 million and 2019 of the.
The year over year increase was due to increased rental income at our two properties that were and lease up and increase rental revenue at our same store properties due to increased rental rates.
On the value add front for the quarter 45 units were operating at an average cost of approximately 6007 of our jobs per unit, yielding and estimated annualized return on investment of approximately 21 per cent.
For the year, we completed and improvements on 248 units, yielding and estimated return on investment of approximately 18%.
As reflected in our supplemental financial information of course.
And of the cost may have been incurred and the prior occurred but we report the return on investment and when the unit is released we continue to anticipate that and the near term it will be a continued slowdown and the number of units that we repositioned at our properties as the universe of economic impacts of the pandemic continues to unfold, which could impact our ability to achieve rent increases.
And for repo and repositioned units, although we have slowed our value add strategy at the time being we believe the strategy will continue to be of positive factor and our ability to drive same store rent and NOI growth over the long term.
Our same store pool showed resilience and the current quarter and the year due to higher occupancy higher tenant retention and higher rental rates are.
Our same store pool and the current quarter is comprised of 36 properties with 10037 units eight of those properties totaling 1000, and 880 units of our wholly owned assets. The remaining 28 assets totaling 8157 units are on consolidated joint ventures.
Same store revenues for the portfolio grew to $25 $1 million and the current quarter, representing a three two per cent increase from $24 $3 million and the 2019 quarter.
Contributing to this increase was an increase in same store rental rate over the prior year quarter from $1082 to $1091 per unit.
Same store expenses rose to $11 $5 million and the current quarter, representing an increase of three 6% from $11 $2 million in the 2019 quarter the.
The same store NOI for the portfolio increased to $13 $6 million and the current quarter and increase of two 9% from $13 $2 million and a 2019 quarter.
For the year, our same store pool was comprised of 32 properties with 9005 units seven of these properties totaling 1006 hundred 88 units are wholly owned assets. The remaining 25 assets totaling 7000, and 317 units on consolidated joint ventures.
Same store revenues grew to $87.7 million and the current year, representing a $3 one per cent increase from $85 $1 million in 2019, driven by strong occupancy is higher lease renewals and of two seven per cent per unit of rental rate increase to 1090 day $97 from 1000.
$68 per unit for 2019.
Same store expenses rose to $41 $7 million and the current year, representing an increase of five 2% from $39 $6 million and 2019.
Same store NOI for the portfolio increased to $46 million and the current year and increase of one 2% from $45 $5 million and 2019.
In February of 2021, we entered into an agreement to sell of our 80 per cent of interest and Anatol apartments Daytona Beach, Florida two of joint venture partner for approximately $7 $4 million. We anticipate the transaction will close in March or April 2021, we estimate that we will recognize the gain on sale.
All of our partnership interest of approximately $2 million from such out of.
And so on March 3rd 2021, we entered into an agreement to sell Kendall matter Houston, Texas, two and unrelated third party for approximately 24 point of $5 million and anticipate the transaction will close in April or May 2021, we estimate that we will recognize the gain on the sale of this property of approximately seven.
$5 million.
Turning to the balance sheet at December 31, 2020, we had 19 point of $9 million of cash and cash equivalents total assets of $366 million total debt of $167 $5 million and total stockholders' equity of $177.8 million.
At March one 2021, our available liquidity was approximately $36 $1 million, including $17 $3 million of cash and cash equivalents $8 $8 million, representing restricted cash for property improvements and up to $10 million available for working capital under our credit facility.
In addition of our unconsolidated joint ventures have approximately $17 million of cash and cash or cash equivalents, which is used for day to day working capital purposes.
And the 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 pro rata share of mortgage debt for our unconsolidated joint ventures totaled $659 million has a weighted average interest rate of approximately 4% and the weighted average remaining term to maturity of seven years.
On March 11th our board approved our quarterly dividend of <unk> 22 cents per share, which is equivalent to an annualized yield of four 9% based on our stock price of $18.04 as of the close of business on March 10 2021.
We are optimistic about the year ahead, but are approaching the market and the near term with caution as we continue to actively monitor our portfolio for you.
We remain focused and determined as a company and I am proud of the team's effort, particularly in these unusual times and we are pleased with our performance to date and we will stay diligent as we continue throughout the year.
And for joining us today on our conference call and with that I'll turn the call over to the operator for your questions operator.
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 one on your telephone keypad, a confirmation tone will indicate your line is and the question can you.
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Our first question comes from the line of Garre of Mehta with National Securities. Please proceed with your question.
Yeah. Thanks, good morning.
The first question on the on the dispositions I was hoping if you could provide for more color on all of the drivers for selling those two properties and and maybe touch upon the kind of pricing you receive.
Oh, Yeah. Good morning, Rob how are you, yes sure. So basically there are times that we've obviously considered sales and this particular case. These were both properties that we consider to be sort of at the end of our art investment of life and that we were seeing.
And having margin concerns as the operating expenses going up.
Somewhat older properties and need of capital improvements and as far as our concerns of value add possibilities were limited and so and these two particular cases, we move forward to to sell these assets are part and and believed in and more of a positive growth opportunities and one of them.
For science, and the partner and the other where some of them to third parties.
And we're happy with both the outcomes cap rates as you know are as low as I've seen them.
Even pre COVID-19.
So the the cap rates and the returns that we've got arent on our N O y and.
The anticipated NOI were.
In the in the low fours. So we were very pleased with that.
Okay great.
The second question I was hoping if you could comment on the new and renewal rates that you're getting and your market maybe post for Toyota.
The new I'm, sorry, I didn't hear your question.
The the new and renewal rates.
The rates that youre getting in the euro markets for your portfolio.
All of renewal yep that renewal rates.
And so it's a.
Really property.
Property specific response.
And some were getting frankly minimal.
Some of you know, where we and the typical 45 to 50 per cent and some I would say are higher.
Ryan I think Ryan and has a better specific yes, yeah, Hey, Grubhub. So also and it just in terms of new leases and renewals in terms of the actual rent increase we've seen about 2% to 3% year over year as Jeff mentioned, it is property specific and properties, where we feel there might be more occupancy pressure we've kept rents.
The relatively flat and and other properties, where occupancy has been strong we've been able to push rents. So you know we're very pleased with the two to three per cent and fact, you know we we were expecting it to be a little bit less and we're pleased with the performance of the portfolio for the year. So we were on the two to three per cent on both the renewals and new leases on blended basis.
And as far as renewal percentage, I mean, with Covid and all of the people or the less likely for sugar to move so.
We've had a higher percentage of generally and then we had pre COVID-19.
Okay. Thank you that's all I had.
Alright, thank you.
Thank you. Our next question comes from the line of Jim Sullivan with B T. I D. Please proceed with the question.
Thank you.
Jeff You are you ended your prepared comments with.
The general comment on the outlook, saying that you're optimistic for the coming year and I Wonder if you could just.
Tell us what kind of well maybe the two or three things. The that gives you that optimism about 2021.
Yeah, well I think what we're doing now at this point, it's as I said, it's a difficult environment to buy hopefully that'll change.
Over the you know and maybe it's three to six months from now, but right now and spreads are where cap rates are and makes it difficult to acquire property and with that being said we.
We are considering a few more sales and taking advantage of the opportunities. We have with these cap rates being where they are you know with potential proceeds from the sales I think we will look into acquisitions and if their timely and makes sense, we're going to do it we're going to look at possible partner buyouts.
Which could be of real interesting opportunity for us.
And were considering using some of the proceeds to delever.
Deleveraged scenario, which we believe on the long term basis will be beneficial for the company.
Taking some embedded unrealized gains and I think at this point is it's a worthwhile endeavor, where we think that either of the value add component of the deal has been completed wave of few jobs that we've really done a great job on completing the value add strategy and and.
And those may be opportunities for potential sale, but we believe that there'll be rental grade crudes are we believe and the economy coming back with the vaccines and and we're pretty excited about the you're ahead of 2021 and I will say that we probably will have and and we anticipate on the negative sides and tax.
And the insurance increases for 2021, which will affect the S. F O.
And we had some favorable tax outcomes of this past year, and we continue to fight taxes and insurance, but those of one areas, where I'm not thrilled about but it is it's the way it is but obviously of everyone should know that we do anticipate that as the possibility, but we think that the the road ahead and the coming months with again with vaccine and the economy coming back.
Is it very up is of great opportunity and we're excited about what's ahead.
Jeff's kind of in that and that day, when you talk about selling assets and buying assets.
I Wonder if you could kind of give us your view of a sense for which markets.
Two of the most optimistic about and the you know the.
One of two years in terms of internal growth.
And Conversely.
And which markets where you currently of exposure you might be looking to lighten up.
Yeah, a good question, we like our footprint a lot. We are you know, we're obviously dedicated and really focus on the south east which is.
The place to be as far as we're concerned and and people I think are starting to recognize that more and more part of the flight of money going into the south East is quite incredible. So I think we're gonna stay and our general footprint and area that we like where there's population growth where there is.
And where there's employment growth of.
So the areas that you see and in our supplemental and you see what it basically gone from Texas through the southeast up through all of the mid Atlantic. We are considering one of two new markets, but I think we're pretty much for the most part of going to stay on our foothold of where we believe and we know how to operate and have you now.
Positive tailwind and as far as and I just markets that we don't want to be and you know everyone has read about core markets and that is never something we've been involved and I will say that downtown St. Louis is one property and our portfolio that we're not pleased with it just it's the typical story of what's going on and core markets.
And where people aren't living and working downtown and that particular property has suffered a little bit. Unfortunately, that's one of the only of or a few that we're concerned about I think it would bounce back of the again as the vaccines come back, but I would say probably St. Louis is the market that we're not particularly his roles as of right now.
But you know as to come that's where we're going to basically stay where we are for the most part I think the men and just right.
Sure the they just got a follow up on the the.
And obviously you mentioned the strength of the Sun belt, you do have a presence in Ohio and are you are you content with that market and are likely to continue to.
Hold that and or expand your position and Ohio Yeah.
Ohio is an interesting and obviously you're right and it's an outlier for US we love the asset how we got there sort of a partner, but long story short we now own the asset. It's got long term very long term HUD financing on the property has performed exceptionally well we have very low rates for a long period of time and a good Martin of <unk>.
The good markets and no I don't plan on getting as a matter of fact, we are getting lots of inquiries about selling that asset as well as others and we have no interest in selling the right. Now we think that's of great long term hold so that is one that's going on kind of stick out as outside of the southeast market, but one that we like a lot.
Yeah.
Okay, great. Thanks.
Two of them.
Yeah.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Gould for any final comments.
Yeah, I just want to thank you all for joining us today and for your continued support.
As the you all stay safe and have a good day. Thank you.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.