BRT Apartments Corp. Q4 FY2022 earnings call

• Made significant progress in 2022: grew wholly-owned portfolio, improved balance sheet with most mortgage debt at fixed rates, drove NOI growth.
• Completed key transactions in 2022: partner buyouts for ~$106M, sold interest in unconsolidated properties for net gains ~$65M, and acquired a 238-unit property in Richmond, VA.
• Allocated capital to a 8.7% dividend increase and dividend reinvestment plan.
• Balance sheet had $61.3M liquidity at year-end, consolidated and unconsolidated mortgage debt had a weighted average interest rate of 3.99% and weighted average remaining term to maturity of 7.2 years.

The multifamily portfolio's fourth quarter 2022 performance included an average occupancy of 94.7% (down from 96.4% in 2021). Average monthly rents for the combined portfolio were up 9.2% compared to the 2021 quarter. Leases signed in Q4 2022 had estimated spreads of 9.5% on new leases, 9% on renewals, and 9% overall. For Jan-Feb 2023, new leases had 3.4% spreads, renewals 8%, and overall 6%. The combined portfolio NOI was up 0.7% in Q4 2022, with revenue growing 8.5% (due to higher rental rates) and expenses increasing 19.7% (primarily from repairs, maintenance, and real estate taxes).

• 2023 AFFO guidance: $1.50-$1.61 per diluted share (2.3% midpoint growth from 2022).
• FFO guidance: $1.08-$1.19 per diluted share.
• Assumptions: moderation of revenue growth (5.7% midpoint), controllable expense growth (5.6% midpoint), higher real estate tax (9.8% midpoint) and insurance (50.4% midpoint) expenses.
• Impact of Chatham Court disposition: decreases FFO by ~$0.05 and AFFO by ~$0.04-$0.05 for full year.

• Concerns about inflation impacting cost of living.
• New supply in several markets.
• Uncertainty regarding the timing and ultimate scale of a recession.
• Challenges in market pricing and acquisition due to current market conditions.

Q: Provide color on transaction market and the acquisition under contract, including funding plans?

A: Jeffrey Gould mentioned the market is tough, cap rates in 4.5%-5% range, and plans to use cash from Chatham sale and line availability with potential ATM or further sales for funding.

Q: On rental rate growth vs occupancy, and strategy going into 2023?

A: Jeffrey Gould and Ryan Baltimore discussed occupancy down mainly due to COVID-related movement differences, expected spring/summer occupancy increase, and focus on maintaining ~95% occupancy by adjusting rents as needed.