Q2 2021 BRT Apartments Corp Earnings Call

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Good day and welcome to the BRT Apartments Corp, second quarter 2021 earnings Conference call. Today's conference is being recorded at this time I would like to turn the floor over to Mr. Stephen Swett at ICR. Thank you you may begin.

Thank you for joining us today for BRT apartments Corp, 's second quarter 2021 earnings conference call on the call today is Jeffrey Gould, President and Chief Executive Officer also available on George Lai, Chief Financial Officer, and Senior Vice President, David Kailash and Ryan Baltimore.

I would like to remind everyone to the 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.

These forward looking statements include but are not limited to statements regarding brt's strategy and expectations for the future.

Not guarantees of future results and are subject to risks 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 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 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 <unk> net operating income or NOI and information regarding our pro rata share of revenues expenses NOI assets and liabilities of Brt's 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 on.

Unless otherwise indicated with the context of otherwise requires discussions with respect to operating results at the unconsolidated ventures reflect brt's pro rata share of search results.

For more complete discussion of our financial results as reported in accordance with GAAP C of 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 of approximate and among other things reflect the rounding.

Unless otherwise indicated with the context of otherwise requires references to BRT as portfolio, what's multifamily portfolio and references revenues expenses NOI of assets and liabilities reported results on accounts of BRT as wholly owned subsidiaries and its pro rata share of unconsolidated subsidiaries.

BRT uses pro rata share to help better 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 on accounts as presented in accordance with GAAP.

Accordingly pro rata information should be used with caution and the conjunction with the GAAP data presented in our supplemental and our reports filed with the SEC.

Further references to the current quarter refer to the quarter ended June 30th 2021 and references to the 'twenty 'twenty quarter referred to the quarter ended June 32020.

As a reminder of the company's supplemental information and earnings of lease had been posted on the Investor Relations section of Brt's website at Www Dot BRT apartments Dot com the.

Company plans to file its 10-Q shortly.

I'd now like to turn the call over the President and CEO Jeffrey Gould.

Yeah.

Thank you and welcome to the call with the first half of the year completed we are pleased with our performance. Thus far in 2021, that's on our portfolio continue to generate increases in occupancy and rental rates across many of our markets and we plan to continue our strategic initiatives to invest grow efficiently.

The capital and reduce debt to enhance our financial flexibility.

Let me begin with our results for the second quarter 2021.

Net income attributable to common stockholders was $6 million for 34 cents per diluted share compared to a net loss of $4.2 million or 25 cents per diluted share in the same quarter of 2020.

That's a problem for over 20% on a per diluted share basis, but for was $5 million or 29 cents per diluted share compared to $4.2 million or 24 cents per diluted share in the same quarter of last year.

<unk> grew approximately 15% on a per diluted share basis.

<unk> was $5.5 million or <unk> 31 cents per diluted share compared to $4.7 million or 27 cents per diluted share in the second quarter of 2020.

The growth in FY for O N E. S. F. O was primarily due to a portfolio of NOI increases of 4.9% year over year.

Turning to our portfolio at June 30 of 2021, we own 7 multifamily communities containing approximately 600 units. We also own interest through on consolidated entities and another 30 communities containing approximately 8950 units.

In the second quarter total revenues, including our pro rata share of unconsolidated entities.

The $28 million of 5.3 per cent compared to $26.6 million in the 2020 quarter.

Portfolio NOI increase of $15 million of.

For 9% compared to $14.3 million for the 2020 quarter.

Average occupancy was 95.2 per cent for the quarter ended June 30 of 2021 of 210 basis points compared to the 2020 quarter.

Average rents in the second quarter 2021 for $1129 per month of 3.

3.9% compared to the 2020 quarter for leases signed in the second quarter of 2021 spreads on new leases for 5 per cent and renewal spreads for 2.4 per cent.

In the second quarter of 2021, our same store pool for the portfolio include the 36 properties with 10160 units comprised of 1000 and 608 wholly owned units and 8552 units and are on a consolidated joint ventures for the quarter same store revenue.

<unk> grew $6.7 per cent compared to the 2020 quarter same store expenses increased 5.9% compared to the 2020 quarter and same store NOI increased 7.5 per cent compared to the 2020 quarter.

Turning to investments, we did not acquire any new properties in the current quarter. We did however, acquiring additional of 14, 7% interest in Civic Center, 1 and Civic Center, 2 in South Haven, Mississippi for $6 million from our joint venture partner.

After giving effect to the purchase we on 74, 7% of the venture that owns these properties.

On the value add front, we've repositioned 58 units at an average investment of approximately $6300 per unit, yielding an estimated annualized return on investment of approximately 34 per cent.

As reflected on our supplemental financial information of 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 portfolio, we have approximately 650 units slated for renovation over the next several years and believe that our value add expert expertise will remain a factor on our ability to drive NOI growth.

During the current quarter, we generated $9.5 million and games from the sale of properties 1 of wholly owned property and 1 property owned by the unconsolidated joint venture sub.

Subsequent to June 30th we sold 2 additional properties owned by on consolidated joint Ventures, we anticipate that during the quarter ending September 30 of 2021, we will generate gains of approximately $30 million from such sales. We sold these assets after the completion of our value add program.

We are also under contract to sell of our 70 of 6% joint venture interest in an underperforming asset at the unconsolidated subsidiaries. They don't want to St. Louis properties, the tower of O pop and losses at O part of it we plan to sell the interest to our partner for $3 million along with its assumption of our share of the mortgage financing.

We expect the sale of all caused by the end of the third quarter and we recognize the $520000 impairment in the second quarter.

Proceeds from the sales are expected to fund future growth via acquisition the potential buyout of our partner's interest in share certain joint ventures repayment of debt and for general corporate purposes, specifically, we intend to use part of proceeds from the sales to strengthen our capital structure for the anticipated repayment of.

Of approximately $50 million to $60 million of secured debt by year end 2021.

In July of 2021, we paid off $17 million of mortgage debt at 2 of our wholly owned properties.

So some of mortgage debt was scheduled to mature in the first quarter of 2022 and for a weighted average interest rate of 4 point of 4.6%. We also reduced our mortgage debt at our unconsolidated subsidiaries like 100 of $7 million in connection with the sales of park of 980 and the Avenue of apartments.

By focusing on the balance sheet and the competitive acquisition environment. We believe we will be in a better position to support growth over the long term.

Obviously with the challenging acquisition environment. We are very pleased to continue our focus on our unique ability to buy out of our joint venture partners.

The strategy continues to prove to be successful as we were able to understand as we were able to understand the true value and potential of an asset prior to owning it outright on most recent for Ray It's bells boss of Nashville, Tennessee, where we're where we are acquiring our partner's interest in a high end community and a highly desirable growth markets.

Furthermore, in connection with this acquisition, we obtained a commitment for 20 year fixed rate financing of 3.48 per cent.

Turning to the balance sheet at June 30 of 2021, we had total assets of $351 million total debt of $152 million and total stockholder equity of of $180 million of.

Available liquidity at quarter end included $35 million of cash on cash equivalents restricted cash of $8 million and up to $15 million available under our credit facility.

In addition, our unconsolidated joint ventures have approximately $15 million of cash and 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 on consolidated joint ventures total 600 of $32 million at a weighted interest rate of 4.03 per cent and a weighted average remaining term to maturity of 6.7 years, our debt to enterprise value as of June 30 of 2021.

Was <unk> 64 per cent.

During the quarter ended June 30 of 2021, we sold approximately 410000 shares pursuant to our ATM sales program at an average price of $18.19 per share net proceeds after commissions and fees were $7.3 million.

On July 9th we paid a quarterly dividend of 22 cents per share, which is equivalent to an annualized yield of 5.1% based on our stock price of $17.37 as of the close of business on all of a second 2021.

Needless to say it has been a very busy and quite strong start to 2021 and.

And we look to build in our on our success as we move through the balance of the year on beyond.

That completes our call we will now open up to questions. Operator. Please go ahead.

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 1 on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star 2 if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up of your handset before pressing the star key.

1 moment, please while we poll for questions.

Okay.

Okay.

As a reminder, if you'd like to ask a question. Please press star 1 on your telephone keypad.

As a reminder, if you'd like to ask the question. Please press star 1 on your telephone keypad 1 moment, please while we poll for questions.

Yeah.

Yeah.

Mhm.

Yeah.

Your first question comes from the line of Aaron Hecht with JMP Securities. Please proceed with your question.

Okay.

Okay.

Aaron Hecht of your line is now live. Please proceed with your question.

Hey, guys How're you doing sorry, I was on mute.

Quick 1 for you Jeff on the potential buyout of the joint venture partners. What do you think the depths of.

Of that opportunity looks like.

On the timeframe.

And differential on pricing on.

Buying out of those partners versus open market transactions.

Yeah, Hi, Erinn so yeah.

Yeah. We think there is some depth to it were working on the number of different possibilities.

On the timing wise difficult to say.

Every partner is slightly different with their approach.

But it's the obviously the buyout opportunities knowing that we have some experience with the properties. We see the acquisition costs, it's a slightly better yields for sure than market pricing, it's a great opportunity for us So we're pushing hard.

To make some of those opportunities of reality.

Yeah, and then just the on general market conditions.

Is the Delta Varian had any impact on.

Leasing velocity or what traffic.

Are you seeing upticks in activity just on general economic trends kind of any insights around where you're seeing more recently.

Yeah, frankly, we've seen no negative effects of the last few months have been actually pretty.

Amazingly positive with increasing occupancy and rental trends renewal trends, it's been very very positive. So we've not seen anything to date.

It's been surprisingly surprisingly good.

Obviously, we'll have to see what happens in the future, but the net the last few months have been excellent.

Sure.

And then capital structure wise little ATM usage this quarter or do you expect that to continue.

And any thoughts around capital structure and the growth initiatives.

Yeah. So you know the ATM is available to us if and when we want it. The reality is we watch it carefully and decided on a.

Daily basis, we'd like to grow for Growth's Smart as we said before so in that you know that that includes us buying the property potentially with partners or gearing up to buy direct.

With brokers and start to buy more of the on a direct basis continue to the spark. This partner buyout scenario do some more value add so yeah. Our hope is to grow and the gross smart.

And if we need equity Ah.

The potential use of the potential way to get to come about it.

So we watch it regularly and it may be used I would say well have to see great. Thanks, Thanks for the thoughts a nice quarter.

Thank you.

Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to management for closing remarks.

Yeah, I just want to thank everybody for your time today, and we look forward to continue to push forward and do well for the company and for our shareholders of Thank you all for your time.

This concludes today's conference you may disconnect your lines at this time. Thank you all for your participation.

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Okay.

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Uh huh.

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Yeah.

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