BRT Apartments Corp. Q1 FY2022 earnings call

• Began 2022 with strong performance across the portfolio, benefiting from population/job growth and housing shortage.
• Made progress in acquiring partners’ interests in joint ventures: purchased interests in multiple properties, with aggregate purchase price ~$89 million for 2,382 units, expecting to complete by August 1.
• Capital recycling: sold a property, retired $25.1 million of mortgage debt, share of gain ~$13M; subsequent sales of Retreat at Cinco Ranch and The Vive expected, with estimated gains and IRRs.
• Value add: repositioned 83 units with ~$5,300 per unit investment, yielding ~49% annualized return.
• Balance sheet: total assets $483M, total debt $249M, liquidity $29.7M cash and equivalents at quarter end; declared quarterly dividend of $0.23 per share.

Net income attributable to common stockholders was $11.5 million, or $0.62 per diluted share, in Q1 2022 compared to a net loss of $3.8 million, or $0.22 per diluted share in Q1 2021. AFFO was $7.2 million, or $0.39 per diluted share, in Q1 2022 versus $5.1 million, or $0.30 per diluted share in Q1 2021. On March 31, 2022, the wholly owned portfolio consisted of 11 multifamily communities with 2864 units, and unconsolidated entities had 22 communities with 6121 units. Average occupancy for the portfolio was 96.4% in Q1 2022, up 2.8% from Q1 2021. Average rents were $1,215 per month in Q1 2022, up 9.2% from Q1 2021. For same store pool units (7729) in Q1 2022, same store revenue grew 10.6%, expenses increased 4.3%, and NOI grew 15.9% from Q1 2021.

• Expect all 10 partner buyout transactions (including Vanguard Heights) to be completed by August 1.
• Anticipate consolidated balance sheet to reflect ~$786 million of real estate assets and ~$429 million of mortgage debt after transactions.
• Sales of Retreat at Cinco Ranch and The Vive expected to be completed by June 30.

• Intense competition for quality assets with cap rates at historic lows.
• Changing inflation environment could impact rental growth and ability to push rents.
• Development risk related to construction costs and financing alternatives for development projects.

Q: Can you tell us what the cap rates are on those dispositions that were negotiated here on those two sales?

A: Ryan Baltimore mentioned they were in line with the current market environment prior to large rate hikes and were very pleased with the numbers but didn't provide specific cap rates.

Q: Can you give us a sense of what the dollar amount is of incremental acquisitions you might do outside of the JV interest?

A: Focused on JVs, competitive landscape makes direct acquisitions tough, and there are no specific projections on new buyouts at this point.

Q: Are you seeing any markets where you did see maybe some deceleration in the ability to push rent, particularly in March or maybe some of those leases rolling over perhaps in April?

A: General market has been very positive, no significant decrease seen yet, but it's mark-to-market dependent.

Q: How are you thinking about just development risk at this point in the cycle?

A: Made a small investment with a strategic development partner, considering increase in construction costs and financing, may do more on limited basis as it depends on construction costs and financing alternatives.