BRT Apartments Corp. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a quarterly report; fourth-quarter figures are separately identified below. BRT is an internally managed REIT focused on multifamily properties, primarily in the Southeast and Texas. At year-end it wholly owned 10 properties with 2,576 units and held interests in 23 unconsolidated joint-venture properties with 6,697 units.
Key financial results
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $32.1 million | $28.1 million |
| Net income (loss) attributable to common stockholders | $29.1 million | ($19.9 million) |
| Diluted earnings (loss) per share | $1.62 | ($1.16) |
| FFO | $17.4 million; $0.97 per diluted share | $17.0 million; $0.99 per diluted share |
| AFFO | $23.8 million; $1.33 per diluted share | $19.2 million; $1.12 per diluted share |
| NOI | $17.8 million | $15.1 million |
| Same-store NOI | $14.1 million | $13.1 million |
| Net cash from operating activities | ($0.5 million) | ($1.8 million) |
Revenue rose 14.1%. Management attributed the increase largely to properties brought into consolidation after partner-interest purchases and improved same-store rents and occupancy. Average occupancy was 97.1% at wholly owned properties and 94.2% at joint-venture properties. Net income turned positive chiefly because of gains from property and joint-venture sales; it should not be read as recurring operating earnings. FFO rose 2.5% in total but declined 2.0% per diluted share, while AFFO increased 23.9% in total.
Fourth quarter: Revenue was $10.3 million versus $7.0 million in Q4 2020. Net loss attributable to common stockholders was $1.3 million, or $0.08 per diluted share, versus a $3.3 million loss, or $0.19 per diluted share, in Q4 2020.
Balance sheet, liquidity and capital
- At December 31, 2021, cash and cash equivalents were $32.3 million and restricted cash was $6.6 million. Reported available liquidity was approximately $67.3 million, including $35 million available under the credit facility, subject to borrowing conditions.
- Consolidated debt obligations were approximately $237.0 million: $200.9 million of mortgages and $37.4 million of junior subordinated notes. The notes bear floating interest based on three-month LIBOR plus 200 basis points and mature in 2036. The credit facility had no balance outstanding and matures in November 2024.
- Unconsolidated joint ventures had $584.5 million of mortgage debt on their balance sheets; BRT’s recorded equity investment in those ventures was $112.3 million. Joint-venture debt is generally non-recourse, subject to customary carve-outs.
- Operating cash flow was negative; investing activities used $22.1 million and financing activities provided $32.9 million. Investing cash flows included $62.0 million of distributions from unconsolidated ventures, including $46.7 million from sale transactions.
- BRT declared $0.90 per share in dividends in 2021, up from $0.88 in 2020. It raised $9.6 million through its at-the-market share offering during 2021.
Material changes and unusual items
- BRT bought out partners in Bells Bluff, Crestmont at Thornblade and Crossings of Bellevue for a combined $45.6 million, consolidating the properties. It also acquired an additional 14.7% interest in Civic Center I and II for $6.0 million.
- BRT sold Kendall Manor for $24.5 million, recognizing a $7.3 million gain; sold interests in the Anatole and OPOP joint ventures for $10.5 million, recognizing a $2.6 million gain after impairment; and recorded $35.0 million as its share of gains on joint-venture sales of The Avenue and Parc at 980.
- FY2021 included a $1.6 million loss on extinguishment of debt and a $0.5 million impairment charge. Joint ventures recorded $2.8 million of Texas winter-storm impairment charges, offset by $2.8 million of insurance recoveries; BRT also recognized insurance-related gains through its equity in joint ventures.
- Same-store NOI increased by approximately $1.0 million, as stronger rental revenue more than offset higher operating expenses. Real estate operating expenses rose 14.7% overall, partly reflecting newly consolidated properties.
Outlook, risks and contingencies
- Management emphasized partner buyouts over third-party acquisitions, citing competition and its assessment of risk-adjusted returns. It also expects to pursue more direct acquisitions. Management cautioned that the announced buyouts may not close or prove accretive.
- After year-end, BRT agreed to buy out partners at five properties for approximately $30.4 million and assume $97.7 million of mortgage debt. Closing conditions apply, including lender approval for four transactions. Management expects to use available cash and expects the properties’ revenues, expenses, assets and liabilities to increase upon consolidation.
- Management disclosed $64.7 million of balloon mortgage payments due through 2024, including $29.4 million in 2022 and $35.3 million in 2023. It stated operating cash flow and available credit-facility funds are insufficient to pay these maturities outright; refinancing, property sales or additional equity may be needed.
- After year-end, BRT used cash to repay $15.5 million of mortgage debt, sold the Veranda at Shavano through a joint venture (with BRT estimating its share of the gain at approximately $12.7 million), and acquired a 17.45% interest in a planned 240-unit development.
- Key disclosed risks include geographic concentration, joint-venture partner and property-manager dependence, property and insurance costs, refinancing and interest-rate exposure, LIBOR transition, potential impairment, natural disasters, COVID-19 effects and REIT qualification. Management said COVID-19 had not materially adversely affected FY2021 results, but noted property-specific occupancy and rental impacts and uncertainty about future effects.
- A wrongful-death claim involving a Houston property seeks unspecified compensatory damages in excess of $1 million and exemplary damages. The insurer is defending the claim; BRT believes primary and umbrella coverage is sufficient for compensatory damages, while exemplary damages generally are not insured.
Important facts for investors to verify
- Whether the announced five partner buyouts closed, their financing and actual effect on earnings, cash flow and leverage.
- How the 2022–2024 mortgage maturities were refinanced or funded, and whether refinancing terms changed interest expense or property-sale plans.
- How much of FY2021 net income and reported FFO/AFFO reflects recurring property operations versus sales, insurance proceeds, debt-prepayment costs and equity awards.
- Current occupancy, rent growth, operating costs and capital needs across wholly owned and joint-venture properties, particularly in BRT’s concentrated markets.
- The LIBOR replacement terms for the $37.4 million floating-rate notes and sensitivity to rates; management estimated a 100-basis-point increase would raise 2022 interest expense by $374,000.
- The filing notes a correction to share-count information in a March 2022 release: the correct denominator for Q4 per-share FFO and AFFO was 18,240,532 shares, not 17,317,596; reported per-share values were stated to be unchanged.