BRT Apartments Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; financial statements are unaudited. BRT is a multifamily REIT. At quarter-end, it wholly owned 21 properties with 5,420 units and held interests in eight joint-venture properties with 2,527 units. The 29 properties are in 11 states, concentrated in the Southeast and Texas. Dollar amounts below are in millions unless stated otherwise.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Total revenue | $23.403 | $22.939; up 2.0% |
| Rental and other property revenue | $23.298 | $22.939; up 1.6% |
| Net loss attributable to common stockholders | $(3.171); $(0.17) per share | $(4.098); $(0.21) per share |
| Net operating income (NOI), non-GAAP | $12.719 | $12.505; up $0.214 |
| Same-store NOI, non-GAAP | $12.449 | $12.238; up $0.211 |
| NAREIT FFO attributable to common stockholders, non-GAAP | $4.627; $0.25 per diluted share | $5.282; $0.28 per diluted share |
| AFFO attributable to common stockholders, non-GAAP | $6.434; $0.35 per diluted share | $6.874; $0.36 per diluted share |
| Net cash provided by operating activities | $0.653 | $0.211, as reclassified |
Revenue growth reflected a $0.589 increase at same-store properties, primarily from higher rents, partly offset by a $0.241 occupancy-related decline. Real estate operating expenses rose 1.4% to $10.579, including higher property taxes; management expects property-tax accruals to remain higher through the rest of 2024. Interest expense was $5.523, up 0.7%; general and administrative expense was $4.152, up 2.4%. Depreciation and amortization fell 19.6% to $6.435, mainly because of lower amortization of lease intangibles.
At March 31, total assets were $699.485, cash and cash equivalents were $21.252, and total equity was $220.614. Debt obligations, net of deferred costs, were $458.983, comprising $421.835 of mortgage debt and $37.148 of junior subordinated notes; the credit facility had no balance outstanding. Consolidated mortgages had a 4.02% weighted-average rate and 6.8-year weighted-average remaining term. The notes bear a floating rate and mature in April 2036. Including joint-venture mortgage principal, mortgage debt was $677.2. Joint ventures’ $250.3 of mortgage debt is not on BRT’s consolidated balance sheet.
Cash used in investing activities was $0.083; cash used in financing activities was $6.967, including $4.624 of dividends and $2.267 of share repurchases. Cash, cash equivalents, restricted cash and escrows declined $6.397 to $25.378. The company paid a $0.25-per-share quarterly dividend on April 4, 2024.
Material changes and notable items
- Equity in earnings from unconsolidated joint ventures declined to $0.228 from $0.815. Factors included the May 2023 sale of the Chatham property and Stono Oaks moving from development to service, causing previously capitalized interest to be expensed and depreciation to begin.
- Q1 2023 included a $0.240 insurance recovery; there was no corresponding recovery in Q1 2024.
- FFO and AFFO declined year over year, primarily reflecting the Chatham sale and, for FFO, the prior-year insurance recovery. Lower weighted-average shares, partly from repurchases, supported per-share results.
- The company disclosed an immaterial cash-flow classification correction to the prior period: escrows were reclassified within the cash-flow statement, increasing reported prior-period operating cash flow by $2.729.
- BRT repurchased 123,061 shares during the quarter at an average $18.43 per share, for $2.267; $7.316 remained authorized for repurchases through December 31, 2025.
Liquidity, outlook and risks
Management reported $78.5 of available liquidity as of May 1, 2024: $18.5 of cash and $60.0 available under its credit facility. The facility matures in September 2025, bears a floating rate (7.83% at May 1), and was undrawn at that date. Management described acquisition capacity as constrained by available cash and access to debt and equity capital. It may consider joint-venture acquisitions and alternative multifamily investments such as preferred equity or bridge loans, but does not expect those alternatives to be a significant near-term portfolio component.
From April 2024 through December 2027, management estimates $119.5 of mortgage amortization and interest, including joint ventures, plus mortgage balloon payments of $15.4 in 2025 and $126.1 in 2026. Estimated capital expenditures for the remainder of 2024 are $8.0. Management expects to fund needs with operating cash flow, joint-venture distributions, property sales, mortgage financing on unencumbered properties and, when available, the credit facility. It states operating cash flow and available cash are insufficient to fully fund $141.1 of balloon payments due through 2026; failure to refinance on acceptable terms could require equity issuance or property sales on unfavorable terms. Estimated cash dividends through 2027 are at least $69.9, assuming a $0.25 quarterly dividend and 18.6 million shares.
Interest-rate exposure includes $37.4 of floating-rate junior subordinated notes and the floating-rate credit facility. BRT estimates a 100-basis-point rate change would alter annual interest expense by approximately $0.374. Key risks cited include inflation, interest rates, rental demand and occupancy, rising taxes, insurance and utility costs, refinancing access, geographic concentration, joint-venture risks, property impairments, weather and uninsured losses. Ordinary-course personal-injury claims may include punitive-damage demands, which generally are not insured. BRT reported compliance in all material respects with credit-facility requirements and effective disclosure controls as of March 31, 2024.
Important facts for investors to verify
- Refinancing plans and funding sources for the $141.1 of mortgage balloon payments due through 2026, including joint-venture exposure.
- Whether operating cash flow, occupancy and rent trends can support expenses, debt service and the current dividend.
- Property-tax and other operating-cost increases, and the effects of floating-rate debt on interest expense.
- Joint-venture property performance, Stono Oaks stabilization and development costs, and any future capital contribution needs.
- The prior-period cash-flow reclassification and the comparability of reported operating cash flow.