BRT Apartments Corp. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. BRT is a REIT owning and operating multifamily properties. At quarter-end it wholly owned 21 properties with 5,420 units and held interests in seven joint-venture properties with 2,287 units, across 11 states, primarily in the Southeast and Texas.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $23.9 million | $21.7 million | $70.1 million | $47.8 million |
| Net income (loss) attributable to common stockholders | $(1.5) million | $7.1 million | $5.6 million | $54.2 million |
| Basic EPS | $(0.08) | $0.37 | $0.30 | $2.91 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $13.6 million | $8.5 million |
| FFO per diluted share | $0.31 | $0.29 | $0.86 | $0.84 |
| AFFO per diluted share | $0.41 | $0.38 | $1.14 | $1.14 |
FFO and AFFO are non-GAAP measures. Nine-month 2023 cash flow from investing activities was $18.1 million and cash used in financing was $23.9 million. Cash, cash equivalents and restricted cash totaled $28.9 million at September 30.
Q3 same-store NOI declined to $8.8 million from $9.2 million; total NOI increased to $12.9 million from $12.5 million, largely reflecting properties consolidated after 2022 partner buyouts. Nine-month same-store NOI was $19.4 million, essentially unchanged from $19.5 million; total NOI rose to $38.1 million from $27.5 million.
Debt, liquidity and capital allocation
- September 30 debt obligations, net of deferred costs, were $460.1 million: $422.9 million of consolidated mortgages, $37.1 million of junior subordinated notes and no credit-facility balance. Consolidated mortgage principal was $427.2 million; its weighted-average rate was 4.02% and average remaining maturity 7.3 years.
- Including joint ventures, mortgage principal debt was $672.6 million. Joint-venture mortgage debt is not a BRT consolidated liability; BRT reported a $30.9 million carrying value for its JV interests.
- The $60 million credit facility was undrawn at September 30 and November 1, 2023. Its rate was 7.81% at quarter-end, adjusts monthly, and it matures in September 2025. Management reported $81.7 million of available liquidity at November 1, including $21.7 million cash.
- Management estimates $133.5 million of mortgage balloon payments due through 2026, including $15.4 million in 2025 and $118.1 million in 2026. It says operating cash flow and available cash alone are insufficient to fund the balloons; refinancing, property sales or equity issuance may be needed.
- The quarterly dividend was $0.25 per share, paid October 11, 2023. BRT repurchased 264,165 shares in Q3 for $4.95 million and a further 98,014 shares through October 31 for $1.69 million.
Changes, outlook and risks
- Nine-month revenue increased 46.6%, primarily because properties acquired from JV partners in 2022 contributed a full period of consolidated revenue. Expenses rose 41.9%, including higher operating costs, interest and depreciation. Q3 revenue rose 9.9%, while total expenses increased 2.4%.
- GAAP earnings fell sharply year over year, mainly because prior-year results included much larger gains from sales by unconsolidated joint ventures. BRT recorded its share of a $14.7 million gain from a JV property sale in 2023 versus $64.5 million in the first nine months of 2022. Q3 2023 also included a $604,000 gain on a cooperative apartment sale and insurance recoveries.
- Same-store rental revenue benefited from higher rents, offset by lower occupancy in parts of the portfolio. Management cited increased insurance costs, property operating costs and interest expense. The filing provides no formal earnings or operating guidance.
- A proposed $62.5 million acquisition of a 238-unit Richmond, Virginia property remained uncertain at quarter-end. The transaction includes assumption of approximately $32 million of 3.34% HUD debt, subject to lender approval; BRT had deposited $1.25 million, potentially forfeitable if the purchase does not close. Management anticipated potentially using the credit facility or financing unencumbered properties.
- Interest-rate exposure includes floating-rate junior subordinated notes at 7.63% at quarter-end and a floating-rate credit facility. BRT estimated a 100-basis-point rate change would affect annual interest expense by approximately $374,000. Other disclosed risks include refinancing availability, inflation, insurance and tax costs, occupancy and rent trends, and geographic concentration.
- A wrongful-death lawsuit settlement of approximately $325,000 remained subject to documentation and court approval; BRT expected its insurance carrier to fund the settlement. Management reported effective disclosure controls and no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether the Richmond acquisition closes, the lender approves the assumed mortgage, and the deposit remains at risk.
- Refinancing plans and funding for the 2025–2026 mortgage maturities, including joint-venture debt exposure.
- Same-store occupancy, rent growth, and expense trends, particularly insurance, taxes and utilities.
- Floating-rate debt costs, credit-facility availability and covenant compliance as rates and financing conditions change.
- The sustainability of the $0.25 quarterly dividend alongside planned share repurchases and capital needs.
- How much reported earnings and FFO depend on property sales, insurance recoveries and other nonrecurring items.