BRT Apartments Corp. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing; quarterly results are unaudited. BRT is an internally managed REIT focused on multifamily properties, principally held through joint ventures. At year-end, it wholly owned 8 properties with 1,880 units and held interests in 31 joint-venture properties with 9,162 units.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $28.1 million | $27.8 million |
| Net income (loss) attributable to common stockholders | ($19.9 million); ($1.16) per share | $0.9 million; $0.05 per share |
| Funds from operations (FFO) | $17.0 million; $0.99 per share | $12.0 million; $0.74 per share |
| Adjusted FFO (AFFO) | $19.2 million; $1.12 per share | $16.6 million; $1.03 per share |
| Net operating income (NOI) | $15.1 million | $14.7 million |
| Same-store NOI | $12.9 million | $12.6 million |
| Cash flow from operations | ($1.8 million) | $8.6 million |
Revenue rose 1.2%. The GAAP loss followed a $3.6 million impairment charge on vacant Daytona Beach land, higher depreciation and general and administrative costs, and a $6.0 million equity loss from unconsolidated ventures. By comparison, 2019 included gains on property sales, including BRT’s share of a joint-venture sale gain. FFO and AFFO increased, primarily reflecting lower interest costs and improved property operating margins; these non-GAAP measures are not substitutes for GAAP earnings or cash flow.
At December 31, 2020, cash and cash equivalents were $19.9 million and restricted cash was $8.8 million. Total assets were $365.7 million, total liabilities $188.1 million, and stockholders’ equity $177.8 million. Consolidated debt obligations were $167.5 million, comprising $131.0 million of mortgages and $37.4 million of junior subordinated notes, before deferred costs. Joint ventures separately had approximately $835.2 million of mortgage debt, which is not on BRT’s consolidated balance sheet. Consolidated-property mortgage debt carried a 4.15% weighted-average rate; property mortgage debt across consolidated and unconsolidated properties had a 3.99% weighted-average rate.
Business developments and changes
- BRT acquired an 80% interest, through a joint venture, in a 264-unit Wilmington, North Carolina property; BRT contributed $13.7 million of equity.
- It sold a $4.0 million legacy loan at principal value plus $325,000 of interest and fees, and did not sell any multifamily properties in 2020.
- Rental and other property revenue increased $442,000. Same-store revenue rose $929,000, largely from higher rents; interest expense fell $696,000, while general and administrative expense rose $1.6 million, including costs related to the prior-period accounting restatement.
- Average occupancy is reported inconsistently in the filing: 92.3% in the MD&A and 92.8% in the business discussion. Verify the applicable portfolio measure.
- Cash dividends declared were $0.88 per share, versus $0.84 in 2019. BRT raised $12.1 million through common-stock issuance during 2020.
Outlook, risks and contingencies
Management said COVID-19 had not directly materially harmed 2020 financial condition or results, but it constrained rent increases, value-add work, acquisitions and dispositions. A prolonged or worsening downturn could reduce rent collections and cash flow and impair debt-service and dividend capacity. No quantified earnings guidance was provided.
- BRT disclosed $177.0 million of mortgage balloon payments due through 2023, including $14.0 million in 2021, $127.7 million in 2022 and $35.3 million in 2023. Management said operating cash flow and available credit would not be sufficient to repay these maturities without refinancing, asset sales or additional equity.
- The $10 million credit facility matured April 18, 2021; BRT was negotiating an extension. Failure to renew could constrain liquidity and working capital.
- Management estimated at least $45.4 million of dividends through 2023 using the then-current quarterly rate of $0.22 per share and assumed share count; future dividends are not assured.
- Post-year-end sale agreements covered BRT’s 80% interest in Anatole Apartments for approximately $7.4 million, with an estimated $2.0 million gain, and Kendall Manor for approximately $24.5 million, with an estimated $7.5 million gain. Both transactions were subject to closing conditions.
- The $3.6 million land impairment relates to a proposed $4.7 million sale that remained conditional; completion was not assured.
- A material weakness in internal controls over joint-venture consolidation accounting remained unremediated. Management concluded disclosure controls and internal control over financial reporting were not effective at year-end. The financial-statement auditor issued an unqualified opinion but did not audit internal-control effectiveness.
- A wrongful-death lawsuit involving a Houston property seeks more than $1 million in compensatory damages plus unspecified exemplary damages. Insurance is defending the claim; the filing says exemplary damages are generally not covered.
Important facts for investors to verify
- Whether the credit facility was extended or replaced after its April 2021 maturity, and the terms and availability of that liquidity.
- Refinancing, repayment or disposition plans for the 2021–2023 balloon maturities, especially the 2022 concentration.
- Closing and realized proceeds from the Anatole, Kendall Manor and Daytona land transactions, compared with management’s estimates.
- Reconciliation of the filing’s 92.3% and 92.8% occupancy figures and the trajectory of rent collection, occupancy and same-store expenses.
- Progress in remediating the consolidation-control material weakness and any subsequent accounting or reporting corrections.
- Joint-venture debt exposure, distribution capacity and potential capital calls; reported 2020 joint-venture distributions to BRT were $15.3 million.