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BRT Apartments Corp (NYSE:BRT)
Q2 2020 Earnings Call
Aug 11, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the BRT Apartments Corp Conference Call for the Second Quarter of 2020. [Operator Instructions]

At this time, I'd like to turn the conference over to Evelyn Infurna of ICR. You may begin.

Evelyn Infurna -- Investor Relations

Thank you. Good day everyone and welcome to BRT Apartments conference call. On the call today is Geoffrey Gould, President and Chief Executive Officer also available are George Zweier, Chief Financial Officer; David Kalish, Senior Vice President and Ryan Baltimore, Senior Vice President.

As a reminder, this call is being webcast through the company's website at www.brtapartments.com. Additionally, the company's 10-Q supplemental information and earnings release are available for your review on the Investor Relations section of BRT's website.

Before we begin, I'd like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions and beliefs. Forward-looking statements can often be identified by words such as believe, expect, estimate, anticipate, intend and similar expressions and variations or negative of these words. These forward-looking statements include, but are not limited to statements regarding BRT's strategy and expectations for the future. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements.

Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's Form 10-Q for a more complete discussion of risks and other factors that could affect these forward-looking statements. Except as required by law BRT does not undertake any obligation to publicly update or revise any forward-looking statements.

This conference call also includes a discussion of funds from operations or FFO, adjusted funds from operations or AFFO, net operating income or NOI, and information regarding our pro rata share of the revenues, expenses, NOI, assets and liabilities of DRTs unconsolidated subsidiaries, all of which are non-GAAP financial measures of performance. These non-GAAP measures should be used as a supplement to and not a substitute for net income computed in accordance with GAAP. Unless otherwise indicated or the context otherwise requires discussions with respect to the operating results at the unconsolidated ventures reflects BRTs pro rata share of results.

For a more complete discussion of these non-GAAP measures to the company's earnings release, supplemental and 10-Q. Unless otherwise indicated or the context otherwise requires references to BRTs portfolio or it's multifamily portfolio and references to revenues, expenses, NOI, assets and liabilities refer to the results and accounts of BRTs wholly owned subsidiaries and it pro rata share of unconsolidated subsidiaries. BRTs pro rata share to help provide a better understanding of unconsolidated joint ventures. However, the use of pro rata information has limitations and is not representative of our operations and accounts as presented in accordance with GAAP.

Accordingly, pro rata information should be used with caution and in conjunction with GAAP data presented in our supplemental and in our reports filed with the SEC. Further references to the current quarter refer to the quarter ended June 30, 2020 and references to the 2019 quarter refer to the quarter ended June 30, 2019.

I would now like to turn the call over to Jeffrey Gould, President and CEO of BRT Apartments Corp. Please go ahead, Jeff.

Jeffrey A. Gould -- President and Chief Executive Officer

Thank you, everyone. I would like to welcome everyone to BRTs second quarter conference call. Demand for rental housing in the regions of the country where most of our properties are located remained stable during the current quarter. We collected 98% of the rent build at our multifamily properties for the current quarter and collected 98% of rent build in July 2020. We have also remained current on all our financial obligations.

We believe that the multifamily sector remains a strong asset class and is showing its resilience in these uncertain times. At the same time, we anticipate a slowdown in our acquisition activities and the implementation of our value-add strategy, as we remain cautious with respect to additional capital deployments due to the continuing economic uncertainties related to the pandemic.

Our primary near-term focus is occupancy, collections and maintaining a strong cash position, while keeping the safety of our staff and residents a top priority. We have also continued to follow closure, reopening and social distance guidelines established by the CDC and governmental authorities with respect to all of our properties, including related amenity spaces at the properties, as well as our corporate offices.

Moving now to an overview of the portfolio. As of August 1, 2020, we owned or had interest in 39 multifamily properties, consisting of 11,042 units in 11 states, including properties in lease-up and properties owned by unconsolidated joint ventures. Eight properties are wholly owned by BRT. The balance are owned through unconsolidated joint ventures with BRT generally owning a 65% to 80% equity interest in these properties. We did not buy or sell any multifamily properties during the current quarter.

The net loss attributed to common stockholders was $4.2 million or $0.25 per diluted share in the current quarter versus a net loss of $4.3 million or $0.27 per diluted share in the 2019 quarter.

FFO grew to $4.2 million in the current quarter or $0.24 per diluted share, compared to $3.5 million in the 2019 quarter or $0.22 per diluted share. AFFO increased to $4.7 million for the current quarter or $0.27 per diluted share, compared to $3.87 million or $0.24 per diluted share in the 2019 quarter. On a per-share diluted basis AFFO was 12.7% higher in the current quarter and then the 2019 quarter.

Total rental revenues for our portfolio increased by 3.9% to $26.6 million, as compared to $25.6 million in the 2019 quarter and real estate operating expenses for the portfolio declined by 1.6% to $12.3 million, as compared to $12.5 million in the 2019 quarter. The NOI for our portfolio rose 9.6% to $14.3 million for the current quarter from $13.1 million for the 2019 quarter.

Our renewal percentage for our multifamily property portfolio for the current quarter was 58%. Rental rates on renewals increased an average of 2.2% and increases in rental rates on new leases average 0.2%. Excluding the value-add units, rental rates for new leases remained unchanged.

Given the economic pressures associated with the pandemic when setting rents, we are trying to balance the impact on our residents with our obligations to our stockholders.

On the value-add front for the current quarter 60 units were repositioned at an average of approximately 7,000 hours per unit yielding an estimated annualized return on investment of approximately 14%. As reflected in our supplemental financial information, a portion of the cost may have been incurred in the prior period, but we report the return on investment when the unit is released.

We anticipate that in the near-term, there will be a slowdown in the number of units that we've repositioned at our properties, as the adverse economic impacts of the pandemic continue to unfold, which may impact our ability to achieve rent increases from repositioned units.

That being said, we estimate that our portfolio has approximately 700 units in the renovation pipeline over the next several years and at the value-add strategy will continue to be a positive factor in our ability to drive same-store rent and NOI growth over the long-term.

Our same-store pool in the current quarter is comprised of 33 properties with 9,317 units, seven of those properties totaling 1,688 units are wholly owned assets. The remaining 26 assets totaling 7,609 units are unconsolidated joint ventures. Same-store revenues for our portfolio grew to $22.4 million in the current quarter, representing a 2.4% increase from $21.8 million in the 2019 quarter. Whereas same-store expenses rose to $10.5 million in the current quarter, representing an increase of only 1.4% from $10.4 million in the 2019 quarter.

Same-store NOI for the portfolio increased to $11.9 million in the current quarter, a 3.4% increase from $11.5 million in the 2019 quarter. Same-store rental rate for our multifamily property portfolio grew 3.9% to $1,097 per unit for the current quarter from $1,056 per unit for the 2019 quarter.

Turning to the balance sheet at June 30, 2020, we had $16.9 million of cash and cash equivalents, total assets of $385.6 million, total debt of $168.9 million and total stockholders' equity of $195.2 million. At August 1, 2020, our available liquidity was approximately $32.9 million, including $13.3 million of cash and cash equivalents, $9.6 million representing restricted cash for property improvements and up to $10 million available for working capital under our credit facility.

In addition, our unconsolidated joint ventures have approximately $14.7 million of cash and cash equivalents, which is used for day-to-day working capital purposes. The aggregate mortgage debt for our wholly owned properties combined with our share of mortgage debt for our unconsolidated joint ventures totaled $659.5 million has a weighted average interest rate of 4.04% and a weighted average remaining term to maturity of 7.2 years.

On July 9, we paid our quarterly dividend of $0.22 per share, which is equivalent to an annualized yield of 8.3% based on our stock price of $10.62 as of the close of business on August 3, 2020. While the nationwide economic hardships resulting from the pandemic, did not have a material impact on our operational results for the current quarter, we continue to closely monitor each of our properties and markets in order to be proactive and bringing a resolution to any challenges that may emerge. We remain focused and determined as a company and I'm proud of the team's efforts, particularly in these unusual times.

Thank you for joining us today on our conference call. With that I will turn the call over to the operator for your questions, operator?

Questions and Answers:

Operator

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Rob Stevenson with Janney. Please proceed with your question.

Rob Stevenson -- Janney -- Analyst

Good morning, guys. Jeff, you talked about the 2.2% on renewals and the 0.2% on new leases. I believe that was the second quarter. Can you talk about what you're seeing thus for in June and August, similarly on renewals and new leases?

Jeffrey A. Gould -- President and Chief Executive Officer

Yes, Rob. How are you? We're seeing more of the same. We're very focused on occupancy and keeping our occupancy levels 94% to 95% what we typically like. And we are sacrificing a time, some slight bumps in rents to keep same. So, I think we'll see continue more of that there is some slight downward pressure in occupancy. The rental rates have been more or less flat or only slight increases. We do have a couple of properties that are seen as more generous growth, but for the most part, I would say we're sticking with more or less, lower rental rates -- lower rental increases right now.

Rob Stevenson -- Janney -- Analyst

Okay, and have you guys had to use any concessions? I mean, you guys don't have really much as in lease-up. But I mean, in terms of just on existing stabilized communities as the markets that you're operating in the sub markets had any deterioration to the point where you've actually had to use concessions or just holding rental rate flat was enough to get stuff least?

Jeffrey A. Gould -- President and Chief Executive Officer

Yes, generally speaking, holding them flat was enough to get them leased with maybe minimum concession if any on current portfolio. You touched on the development aspect. And on the lease-up, yes we are doing some concessions on our lease-up properties, but on the existing asset base, very little if any.

Rob Stevenson -- Janney -- Analyst

Okay. And then you talked a little bit about slowing some of the renovations given the economically viable portion of it. Are you still going to wind up taking advantage in some of your properties to do some on vacancy, while you have an opportunity to do so? Or is it basically even on select properties, it's still not making economic sense and sort of hit the pause button here for a bit?

Jeffrey A. Gould -- President and Chief Executive Officer

Yes, fair question. I'd say it's a mixed bag answer in some of our locations every time we get a vacant, we're continuing to do the upgrades and getting the bumps. Some properties, we're getting very few turnover of leases, because the renewal rates are so high and there's very few apartments coming available, so that's mixed bag. But generally speaking, where we have the opportunity, where we can get a good return on investment, we are doing the renovations and plan to do so going forward and get the rental bumps. Then as you can see the 14% is now we were used to, we were reporting previous quarters maybe 20% or so somewhere in that range. So it's a little bit down, but as long as it's rewarding and worthwhile. We would -- we plan to do a full renovation that we typically do in this case is about $7,000. And we adjusted, obviously, according property by property. So it really depends on what the properties we're talking about and what the rental bumps we can get.

Rob Stevenson -- Janney -- Analyst

Okay, and then last one for me. You guys haven't bought anything earlier in the year saw the accounting restatements. How are you guys thinking about the structure of acquisitions going forward? Are you have a significant preference for only buying wholly owned assets still happy to buy assets and have them be unconsolidated? And any differences in your thought on dispositions between the wholly owned and the unconsolidated buckets going forward?

Jeffrey A. Gould -- President and Chief Executive Officer

Yes. Well, there's two answers to that on the -- let me start with the existing base. What we're planning to do with our existing joint venture agreements is we're going to sit down and consult with our JV partners and see what we can do in our existing structures to maybe make some modifications so that we can hopefully consolidate some of the existing portfolio. As far as going forward, yes, we definitely plan to discuss with our accounting firm and others as to what we're going to do by way of changing agreements and doing what we need to do so we can consolidate.

I don't want to get crazy with the idea of having to change our business plan because of it. But we would like to try to modify the agreement so that we can consolidate when we have joint venture partners, and as far as buying direct, we do plan our strategy and we'd like to pursue a more direct strategy in addition to the joint venture strategy. So, no, we don't plan on give up the joint venture strategy at all. But I think we will see potentially more of a direct strategy with brokers and buying direct going forward when we get back into our acquisitions.

Rob Stevenson -- Janney -- Analyst

Okay, thanks. Appreciate the time this morning.

Jeffrey A. Gould -- President and Chief Executive Officer

Okay. Thank you, Rob.

Operator

Thank you. Our next question comes from the line of Gaurav Mehta with National Securities. Please proceed with your question.

Gaurav Mehta -- National Securities -- Analyst

Yes. Thanks, good morning. Jeff, I was hoping if you could comment on how the fiscal stimulus may have helped your tenants to make their rent payment and what's going to impact? Are you expecting to see in the -- even we don't have any more stimulus going forward?

Jeffrey A. Gould -- President and Chief Executive Officer

Yes, Gaurav. It's a good question. For us, at this point, we have been trying to do our best sort of demographic studies and see within our properties the amount of unemployment. Difficult to do on a recurring basis, obviously, you know, what their employment is like when they move into a property, but difficult as they're in as far as keeping a good sound idea of unemployment, but we think it's fairly minimal. Those that are unemployed as a general rule, we've done a pretty good demographic study as to what type of employment they have, whether in the retail or medical so forth.

I would say that, for those that are unemployed and the share of the tendency that we have, the similar checks has been probably very meaningful. And I think that's helped to support such a good positive collection aspects that we've had in 98%. So we're watching it very carefully. And I wouldn't say that there's not some concern. There is some concern as to what's going to happen with Congress as to what they're going to do with stimulus our Trump's plan, etc. So we're watching it closely. But, I don't think it will have a dramatic impact on us, but could have some minor impact on us.

Gaurav Mehta -- National Securities -- Analyst

Okay. And I guess in terms of transaction market, I was wondering if you could offer some general comments on what you are seeing as far as buyer and seller disconnect and the pricing of the assets in the market?

Jeffrey A. Gould -- President and Chief Executive Officer

Yes. So what we're seeing -- what we're hearing, I should say, because we are speaking with brokers and our partners fairly readily. There's very few transactions going on, generally speaking. I can't imagine the percentage that is down, but it seems like a different world as to how many properties are being bought, sold, etc. We had a few -- we had a property that we were considering selling, which we pulled from the market, which was sort of in process. Conversation we had that -- we would probably have to sell it, maybe a 5% discount, something like that. I think generally speaking multifamily as a sector is really not being impacted anywhere near. Obviously the retail, commercial office, hotel aspects, there's really not a lot of distress.

So I would say if you're buying a property right now, the discount is minimal, if any, but maybe slight. And there's very few to really have so many good numbers for you, because I haven't seen many properties that have transacted post COVID. I mean, some deals have closed, but they were really early in process pre-COVID or early stages. So I would say the impact is pretty minor in the apartment sector.

Gaurav Mehta -- National Securities -- Analyst

Okay, thank you. That's all I had.

Operator

Thank you. Our next question comes from the line of Barry Oxford with D.A. Davidson. Please proceed with your question.

Barry Oxford -- D.A. Davidson -- Analyst

Great. Thanks guys. Just want to build on the joint venture question a little bit. If you guys are going to consolidate maybe a little bit and also by wholly owned apartments going forward. What will you use as -- for as a source of equity so that you don't run up your debt levels?

Jeffrey A. Gould -- President and Chief Executive Officer

If we go direct -- I'm sorry, Barry -- if we go direct, is that your question?

Barry Oxford -- D.A. Davidson -- Analyst

Yes. Right, exactly. What you've been using the joint ventures and that's been a obviously a great source of equity. But if you're going to, rely more on your balance sheet. Where's that equity component going -- coming from? You know, under the assumption you don't want to run up your debt levels?

Jeffrey A. Gould -- President and Chief Executive Officer

Yes. So, we're very careful and focused on our debt levels. We're providing typically between 65% and 80% of the equity anyway, so the differential is not that significant. But we won't buy obviously, unless we have the capital resources where we can buy with fair and reasonable debt. We're going to -- we're basically when we look at properties to sell, either because we were at the end of the value-add scenario or potentially development properties may want to sell or for whatever other reason, as we have capital, the first focus will be on liquidity. And then we plan to recycle that cash either through the JV model or direct. But the difference in dollars for us or cash needed, obviously, we'll be focused on and I don't think it'll be a significant hurdle at all to buy direct as opposed to buying with partners going forward, so I don't see that as a problem.

Barry Oxford -- D.A. Davidson -- Analyst

Great, thanks. I appreciate it.

Operator

Thank you. And our next question comes from Craig Kucera with Wunderlich Securities. Please proceed with your question.

Craig Kucera -- Wunderlich Securities -- Analyst

Yes. Hey good morning, guys. I know -- I do want to follow-up on a couple of questions that we went over earlier, just to drill down a bit. I know you've slowed down the redevelopment considerably from last year. I think you were doing closer to maybe 200 to even 250 and we did 60 this quarter. Do you have a sensor of how much more you're doing -- are you going to basically maintain it at that level? Are we looking at seeing a further drop in the value-add units in the rest of the year?

Jeffrey A. Gould -- President and Chief Executive Officer

I guess it remains to be seen. And part of it again like -- as I said earlier, it really depends on availability of units, and where in the markets we're getting this availability. We're very focused on renewal rates. I mean, that's a big piece of what's happening right now. We'd like to get that up a little bit even more, considering people are not more as likely to move. But we plan on continuing to do the strategy. I would say that, if I had to guess I'd say it's probably going to be similar to what we're doing now. As opposed to what you saw, a few quarters back. We're sort of watching it carefully.

So, if I had to forecast, I would say probably better to forecast something similar to what we've done currently. But it sort of remains to be seen as to the properties that we're getting the units back and the upgrades that we plan to do associated with obviously the rental rates that we can get if we perform those renovations.

Craig Kucera -- Wunderlich Securities -- Analyst

Okay. And moving back to your tenant base and then sort of unemployment. As you survey them, do you have a sense of what the overall unemployment is roughly in your portfolio today?

Jeffrey A. Gould -- President and Chief Executive Officer

It would be only the guess. And, I would say from some response we've got it, again, this is a guess, this is not material. I would say, we're probably in the neighborhood of about 10% to 15%, something like that. But again, serving that is very, very difficult. We've done a very good study on other aspects of again what they're doing in the workforce and those types of questions, but hard to get full comprehensive data on true unemployment property-by-property, other than speaking with the managers, who are hopefully speaking with each and every tenant and getting some feedback from them.

Craig Kucera -- Wunderlich Securities -- Analyst

Okay. Great. I just want to double check on your liquidity. In the press release, I think you said you guys have about $13 million of cash on hand. In the Q, I think it's closer to $10 million, which is correct?

George Zweier -- Vice President and Chief Financial Officer

I think one might be an updated. The Q would be at June 30, and then there would be an update for August in the press release.

Craig Kucera -- Wunderlich Securities -- Analyst

Okay. I think you have both referenced August.

George Zweier -- Vice President and Chief Financial Officer

Yes. Okay, then just the dates maybe off. The only difference would be probably as dividend payment. I can check on and get back to you.

Craig Kucera -- Wunderlich Securities -- Analyst

Sure. And I guess, I mean, when you're talking about the transaction market being somewhat frozen. Are you looking at any other alternatives to increase your liquidity?

Jeffrey A. Gould -- President and Chief Executive Officer

Alternatives -- basically, the alternatives as far as liquidity and focus. We're not doing -- we're not looking at potential sales to increase liquidity. We're doing, if it makes sense for us and there's been a few properties that we've been considering, which will help us, obviously, with the sale having for liquidity. Other than that, obviously we have our lines of credit that are fully available to us. But we feel we're in a pretty good, comfortable liquidity position right now. And, would not stress the work really concerned about currently, I wouldn't be surprised going forward with a couple more sales. We'll have even more liquidity, and at that point, we're going to get back into the cycle of looking at properties and opportunities going forward.

Craig Kucera -- Wunderlich Securities -- Analyst

Okay, thanks. Thank you.

Operator

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Gould for any final comments.

Jeffrey A. Gould -- President and Chief Executive Officer

Yes. Well, let me thank you all for your time today. I would suggest that, you refer to our supplemental for a lot of additional detailed information, excellent transparency we believe as far as the portfolio. And if you have further questions, I suggest you reach out to us by going to investors at brtapartments.com. Other than that, I'd just ask you all to have a good day and stay safe and thank you for your time.

Operator

[Operator Closing Remarks]

Duration: 27 minutes

Call participants:

Evelyn Infurna -- Investor Relations

Jeffrey A. Gould -- President and Chief Executive Officer

George Zweier -- Vice President and Chief Financial Officer

Rob Stevenson -- Janney -- Analyst

Gaurav Mehta -- National Securities -- Analyst

Barry Oxford -- D.A. Davidson -- Analyst

Craig Kucera -- Wunderlich Securities -- Analyst

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