Q1 2021 BRT Apartments Corp Earnings Call
Good day and welcome to the BRT Apartments Corp 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 evident in front of 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, our Georgia, Dwyer, Chief Financial Officer, David Palish, Senior Vice President and Ryan Baltimore Senior Vice President as.
As a reminder, this call is being webcast through the Companys website at Www Dot BRT apartments Dot 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.
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's 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 statements.
Listeners should not place undue reliance on any forward looking statements and are encouraged to review the Companys 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 the discussion of funds from operations or <unk> adjusted funds from operations or a S. S. O net operating income or NOI and information regarding our pro rata share of the revenues expenses NOI assets and liabilities of the Rts on consolidated.
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 Rts 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 other and among other things reflect rounding.
Less otherwise indicated or the context, otherwise requires references to brt's portfolio or its multifamily portfolio and references to revenues expenses NOI assets and liabilities refer to the results in the accounts of Brt's wholly owned subsidiaries and its.
Pro rata share of unconsolidated subsidiaries.
The R. T 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 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.
The further references to the current quarter refer to the quarter ended March 31st.
2021, and references to the 'twenty 'twenty quarter referred to the quarter ended March 31.
2020, I'd lapped 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 everyone I would like to welcome everyone to BRT as 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 portfolio as of May one 2021, we owned or had interest in 38 multifamily properties consisting of 10834 units in 11 states.
The 30 properties owned by unconsolidated joint ventures, and eight properties wholly owned by BRT.
Brg's equity interest 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 of R. 22 per diluted share in the current quarter versus the net loss of $4 8 million or 29 cents per diluted share in the 2020 quarter F N.
Oh grew to $6 million in the current quarter or <unk> 35 per diluted share compared to $3 $3 million in the 2020 quarter or <unk> 19 per diluted share. The increase is primarily due to the BRT of 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.
<unk> increased to $5 $1 million for the current quarter or <unk> 30 per diluted share compared to $4 million or 23 per diluted share in the 2020 quarter.
<unk> increased 30% on a per diluted share basis.
Total rental revenues for our portfolio increased by six 1% of $27 8 million as compared to $26 $2 million in the 2020 quarter and real estate operating expenses for the portfolio increased by seven 4% of $13 $1 million as compared to $12 $2 million.
In the 2020 quarter.
NOI for our portfolio of 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 average approximately 1%.
Rental rates on the portfolio increased approximately 2% for the current quarter.
On the value add front for the quarter for the current quarter of 38 units repositioned and an average of approximately 60 $6100 per unit, yielding an estimated annualized return on investment of approximately 26%.
As reflected in our supplemental financial information of portion of the costs may have been incurred in the 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.
That's in the renovation pipeline scheduled to be completed over the next couple of years and know 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 when tent with 10037 units eight of those properties totaling 1880 units our wholly owned assets. The remaining 28 assets totaling 8157 units.
Our 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 four.
9% from $11 $4 million in the 2020 quarter the.
Same store NOI for the portfolio was $13 $4 million in the current quarter, an increase of three 3% from 13 millions of dollars in the 2020 quarter the.
The change in the NOI was primarily due to an increase in rental revenues in 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 one point of 4% to $1100 per unit for the current quarter from $1085 per unit for the 2020 quarter in <unk>.
March 2021, we entered into a contract to sell Kendall manner of wholly owned property located in the Houston, Texas for $24 $5 million, we estimate that we will recognize the 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 and Anatol apartments in Daytona Beach, Florida to our joint venture partner for approximately seven $5 million. It is anticipated that in the quarter ending June 30 of 2021, we will recognize the $2 $2 million gain related to this transaction.
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On May 4th 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 four.
$4 million of cash and cash equivalents total assets of $358 million total debt of $166 8 million and total stockholder equity of $175 million and May one 2021 of our available liquidity was approximately $45 $5 million.
<unk> $22 million of cash and cash equivalents.
And a half million dollars, representing restricted cash per property improvements and up to $15 million available for working capital 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 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 share of mortgage debt for our unconsolidated joint ventures totaled $658 $7 million has a weighted average interest rate of four 3% and a weighted average remaining term to maturity of six seven years.
On April 17th we paid our quarterly dividend of <unk> 22 cents per share, which is equivalent to an annualized yield of four 7% based on our stock price of $18 83.
As of the close of business on May one 2021.
Thank you for joining us today on our conference call with that I will 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 in the question queue. You May press star two if you'd like to remove your question from the Kim from participants using speaker equipment. It may be necessary to pick up of your handset before pressing the star keys.
Yeah.
Our first question comes from the line of golf meet the with National Securities. Please proceed with your question.
Thanks, Good morning.
First question on your on the acquisition of JV interest.
So the tender can you maybe provide some color on why you acquired additional interest in that property.
Yeah, Good morning, Ralph.
Speaking of Civic Center.
Yeah, I think you mentioned required.
It is meant trusting of JV property.
And if you were just the learn why you did that.
Yes, 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 with what we were buying debt interest at an.
The effective and smart price and we went ahead and moved forward with the purchase so it's just been of great asset for us and we wanted to own more of it simple as that.
Okay.
The second question on the on the dispositions have you guys provided what kind of cap rates, you're getting for the assets that you're selling this quarter.
No we didn't provide Florida I can share some light on that we can of worms.
All of the things basically are on our effective numbers added around you know very low 4% caps somewhere in that range.
That goes for both the the Daytona and the Houston sale.
Okay.
Hum.
Maybe on the acquisition market. They can you provide some color on what you guys are seeing generally and what your expectations are going forward.
Conditions.
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 et cetera, we have liquidity, we're sitting on cash we have an ATM available to us the credit line is not a.
It's fully available so yeah, 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.
Okay. Thank you that's all the hub.
Thank you. Our next question comes from the line of Craig Kucera with Wunderlich Securities. Please proceed with your question.
Hey, good morning, guys I, just would like to circle back to the to the assets that you sold in and bought what was it a relatively flat cap rates spread between the two or was there any delta between that.
Yeah. Those are the we believe the Watson Delta, yes. So on the sales like I said, the Koran of where you know we're trying to basically selling at low fours.
The Daytona sale.
And and and the Houston on.
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 window of the assets.
<unk> current of looking to get out various reasons that I think we can we definitely improves on the purchase side. So I can't give you a specific differential but I can tell you the effectively the the split of where they are the has been very good for us.
Okay, Great and then with the upcoming sale of Pendle manner. I think you know just given your commentary of 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 unused are sort of the use of proceeds from selling that asset.
Yeah, a good question yeah, we recognize that this is appropriate in the smart time to take some embedded gains in the portfolio and we've been talking about how we have this embedded gains and it just made a lot of sense. These particular assets and we've said before he was the reasons why we sell properties in this particular case, we had difficult.
Margins on Daytona thought it was the 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 do we are cognizant of the portfolio the percentage of the LTE as being all in.
We want to bring that down some extent and yeah. Some of the sales proceeds will be used for that purpose.
Got it and just one more from me I'm kind of as you think about the back half of 'twenty, one clearly it sounds like you've seen really strong pricing on the asset sales have you soft circled any other assets for sale in the back half of 'twenty one.
Well, we're always looking at the portfolio at this point of Daytona and Houston are the only ones that we have to date.
And as you know if the rationale and reason the reasons for it and potentially but are those the ones that we have sold to date.
And we look at the portfolio, we do it all the time and consider different alternatives and so sometimes.
Partners give us opportunity to buy them, it's it's all to be determined.
Got it and I guess as you think about.
Purchases in the future you know are there more opportunities to take out of more JV interest in and is that more attractive to you at this point versus.
You know, maybe bringing new assets as you think about recycling capital.
Yes, I would say for sure of that you know the opportunity we have at times to buy partners out we'd like you asked the earlier question, which was a good one we're doing better with buying out partners are far better.
Partners than we do you know as far as buying new assets in the market the cap rates than the performance that we have on those on those purchase of definitely are of higher cap rates and better deals for us. So we hope to do that yes, we hope to get that more in the future for sure.
Okay, great. Thanks, a lot.
Sure.
Thank you. Our next question comes from the line of Rob Stevenson with Janney. Please proceed with your question yes.
Yes. Good morning. This is Steve Domanski 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, the underwriting capex reserves in the soft cost for a redeveloped units just wanted to hear your thoughts on where I guess, if the I guess.
In terms of future underwriting and pricing.
I'm not sure I understand your question of it.
As far as doing value add is that of your question, Yes, that's correct.
Yeah. So we've been as you see we have reduced the number of units that we've done on a quarterly basis pretty significantly.
If we don't if we don't feel like we can achieve I would say a minimum of 18 to 18 plus percent return on investments of doing an upgrade we typically don't do.
The COVID-19, we were very successful and very pleased with our collections and how we performed overall.
Wasn't exactly the opportune time to do tremendous amount of value add so.
As we mentioned earlier, we did about 30 of units about $6100 of unit and we got you know very returns of north of 25 per cent.
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 re engage and do quite a bit more.
Excellent. Thank you that's very helpful.
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.
Yeah, I just want to simply say thank you all for attending our we're excited about our future. We appreciate your interest and wish you all have a nice day and thank you.
It's really awesome.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.