BRT Realty Trust — Form 10-Q Summary
Reporting period and entity: The filing covers the quarter ended March 31, 2014, and the six months then ended. The supplied filing identifies the registrant as BRT Realty Trust, not BRT Apartments Corp.; confirm the intended issuer and fiscal-period mapping.
Financial performance and position
| Metric | Three months ended March 31, 2014 | Six months ended March 31, 2014 |
|---|---|---|
| Total revenue | $15.8 million, up 55.6% year over year | $31.0 million, up 68.5% |
| Net income (loss) attributable to common shareholders | $(2.6) million; $(0.18) per share, versus $1.0 million income and $0.07 per share | $(5.3) million; $(0.37) per share, versus $(0.3) million |
| FFO / AFFO | $0.1 million / $0.6 million | $(0.04) million / $0.8 million |
| Operating cash flow | $(0.2) million for the six-month period, versus $1.2 million provided in the prior-year period |
At March 31, 2014, total assets were $634.0 million, cash and cash equivalents were $48.0 million, and restricted construction cash was $20.1 million. Total debt was $430.6 million, comprising $393.2 million of mortgages and $37.4 million of junior subordinated notes. Total equity was $167.9 million. The filing reports no common-share dividend for the quarter.
Changes and operating drivers
- Rental and other property revenue rose 116.7% in the quarter and 129.4% for six months, primarily reflecting multifamily acquisitions since April 2013 and rental income from completed Teachers Village buildings.
- Loan interest and fee revenue declined 78.7% in the quarter and 63.5% for six months as the earning-loan balance fell and the Trust reduced lending activity in favor of multifamily investments.
- Expenses grew faster than revenue: total expenses increased 92.6% in the quarter and 86.5% for six months. Higher property operating costs, mortgage interest and depreciation largely reflected the expanded property portfolio; acquisition costs also increased.
- Multifamily real estate assets increased to $397.7 million from $188.3 million a year earlier. The Trust acquired seven multifamily properties totaling 2,234 units during the six months, and purchased three more properties totaling 968 units in April for approximately $54 million, including about $35 million of mortgage debt.
Liquidity, outlook and risks
- Management reported approximately $48 million of unrestricted cash at March 31, but approximately $26 million at April 30. After estimated capital expenditure reserves and anticipated loan repayments, management estimated about $31 million available for acquisitions and working capital.
- The Newark Joint Venture’s Phase II Teachers Village construction was estimated to require $29.1 million to complete, funded by restricted cash and committed but unfunded loans and tax credits. Management believed funding was sufficient, but gave no assurance that funds would be released or obtained.
- The Newark venture expected a further rental shortfall: it estimated at least $3.3 million in additional rental payments would be needed to cover projected debt service and operating expenses for the stated period. Leasing success and adequate rents are uncertain. The venture was expected to remain unprofitable until construction and occupancy progressed.
- The venture was seeking up to $32 million of financing for another building; availability, terms and profitability were uncertain. BRT also had an obligation to contribute $3.3 million to the Greenville, South Carolina development through May 2014.
- The $25 million revolving credit facility was due to expire in June 2014. Management said expiration was not expected to have a material effect, but planned to seek a replacement and could not assure success.
- Management said net operating loss carryforwards made a dividend in calendar 2014 and for several years thereafter highly unlikely. No formal earnings or operating guidance is provided.
- Interest-rate exposure is partly hedged; management estimated that a 100-basis-point increase would reduce annual net income by $65,000 on the remaining variable-rate mortgage, while increasing rates would benefit variable-rate loan income. Real estate operations also face leasing, construction-funding, property-tax and regional economic risks.
Most important facts to verify
- Confirm that BRT Realty Trust is the intended issuer and that March 31, 2014 is the intended reporting-period end.
- Track post-quarter cash usage, acquisition funding and the replacement of the credit facility expiring in June 2014.
- Verify that Teachers Village construction funding is released as expected and that leasing revenues can cover operating costs and debt service.
- Assess the effect of continued loan-portfolio contraction and increased property-related interest and operating expenses on recurring results and cash generation.
- Distinguish GAAP losses and operating cash flow from FFO and AFFO, which the filing describes as supplemental, non-GAAP measures.