Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the BRT Apartment Corporation's First Quarter Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the floor over to Mr. Tripp Sullivan of Investor Relations. Thank you.

begin. may You

Tripp Sullivan

joining for Thank us you today.

Senior call Chief and the Chief Officer; David Gould, and President Officer; George Operating Kalish, as well Jeffrey Executive as President. Zweier, Baltimore, On Ryan are Vice Chief Officer; Financial

encouraged the forward-looking Listeners XX-Q SEC and conference reliance including on I'd for revise undertake affect statements as and filings, contains a assumptions, that not management's statements, Private obligation Litigation current within risks does Except that XXXX these on any of beliefs. factors the forward-looking or Reform to any of expectations, call of required to Company's Act forward-looking review BRT like update should meaning that its by forward-looking everyone undue to Securities statements. remind any not statements. this place more the Form are are complete other and law, could discussion publicly based

limitations and conjunction in the in the for in non-GAAP supplemental, caution should each with measure. discussion NOI, presented rata and measures, BRT's Please and also non-GAAP including has the includes call with unconsolidated of data our subsidiaries. reports revenues, be earnings release filed AFFO, share the regarding and filings and our reports GAAP a SEC. information and with expenses, discussed these NOI, All FFO, used liabilities This certain see today information assets NOI of of our definitions portfolio non-GAAP combined pro of

the the website reminder, a information at earnings BRT's Investor on As supplemental of posted and section have release Company's Relations been www.brtapartments.com.

Jeff. Jeffrey turn over Gould. ahead, go and to President call CEO, like now the I'd Please to

Jeffrey Gould

our turn overall on transaction Then and environment. and with and for to color welcome you, to Thank over call the start around call. additional I'll some performance the Ryan George results. some comments brief our the I'll

achieved the Revenues positive, in some will results were down unexpected with costs quarter we line later. borrowing from Leasing George with sector were expenses with was anticipating. consistent year-ago. the although were And that what a line first in this across levels we've what were what estimated, seen quarter. we discuss have Our

in are is leasing We see where occupancy rents. midst the the now, a season which lift and we spring in typically of

population an to our demand continued outperform X% It's in year the months. growth opportunity the be as and is rental clear target. growth we with have as to strong last winter markets, reasonable a the X% With sector won't rental growth strong in that

control can. to So need operating as we'll much as we expenses

cautious. much quiet It the transaction remaining since with environment hasn't has buyers quarter. front, relatively changed last sellers been The on and both

better of generate in expected However, proceeds $XX to cap on during for there at generate a Chatham hold a seems an be which rates over are our redeploy seven-year Richmond. Dallas intend understanding Court the closing of a rate, quarter IRR and should property be net to The completed year-end. XX% second million, of sub-X% acquisition into is track by cap the where in we sale acquisition of That settling.

at of price, XXXX. a total X.XX% Recall $XX that's in including of rate a debt mortgage of the fixed million million assumption purchase maturing and $XX.X approximately

if the on right opportunities approval. the terms. great HUD at and source a number are us, capital We are contract hard can play of long-term and This for is we a there pursue to are awaiting similar able we

interest near In you statement quarter, future. expiring given registration shelf governance, noticed where We filed in traded, program an did stock have ATM corporate to in the month. The good utilize not the may but the we our we ATM the mid-May. is shelf this expect of again last was amended renew

in perform we the of owning of benefits and portfolio and more well how will We see are portfolio continues come. controlling with longer-term the to the our that expect years to pleased

deploy new debt to and maturities liquidity meet for XXXX. until we with flexibility if the no return opportunities they have have our substantial thresholds, We

take here. George, from it please

George Zweier

Jeff. you, Thank

reflect on across results basis impact quarter portfolio. partner first to The a the the continued buyouts positive improved and year-over-year from operating margins the

However, non-controllable repairs cancellation property. the by storm the higher incurred leak associated insurance at previous a December with expenses the our early offset from from and utility that was policies, winter one costs

owned usage So the the diluted overall, higher diluted reason from of loss sale stockholders from a an facility. interest $X.XX year-over-year was the with common sub share and debt share the gain decline on credit in primary $X.XX net of attributable was compared for property The our and subsidiary unconsolidated net by of prior-year to the expense $X.XX period per a income rates year-ago. increased our per

due per was due the restricted sub diluted expense diluted to to share the increased and debt year-ago, share stock compared RSUs. higher facility. $X.XX of primarily $X.XX share and compared on expense on per credit a interest debt year-ago, and FFO AFFO amortization a interest primarily facility diluted was diluted credit $X.XX increased sub per share to per $X.XX and to

higher or we $X.XX approximately expenses the or year-over-year per winter receiving approximately recoveries anticipate I $XXX,XXX earlier over The quarters. totaled $XXX,XXX $XXX,XXX per borrowing With The two share. share. approximately costs represented the storm, next increased in noted to insurance $X.XX respect

million replacements that replacements our $X.X the included the portfolio estate million operating or in P&L, $X.X For been $XXX in approximately combined per the unit. recurring the our flow totals portfolio, the we combined growth, real of add have that expense CapEx unit in guidance. per That's assuming $XXX quarter. NOI for $XXX,XXX you through below on expense was When

major annualized million during and an investment represents completed properties, XX $XXX,XXX quarter revenue an enhancing rehab totaled $X.X of We upgrades the quarter. CapEx, the the XX%. units to and which during estimated Non-recurring ROI of for of

At million. the facility. May to credit was a Turning which liquidity enterprise balance at market cash as quarter sheet. XX% was capitalization. was liquidity with comprised compared value, Debt X, of million, $XX end under to lower of year-ago, March to the XX, primarily availability $XX due is XX% and our Available

had As average a of mortgage weighted of X.XX% March and average rate interest a unconsolidated X.X of maturity term and to XX, weighted our remaining debt consolidated years.

that we facility a the down substantial fully The on XX-year X.XX%. rate outstanding As of is our rate interest we at fixed of at million were a under borrowings arbitrage, year-end $XX at loan interest-only positive facility, credit with current considering rate previously, credit noted paid the the prime.

Now I'll the Ryan. turn call over to

Ryan Baltimore

the the from consistent with typically for quarter. morning. the we remaining to is where the portfolio of in lack the range our performance during Good like start first which I'd the in due This to is XXXX portfolio pandemic XXXX occupancy with quarter, see the quarter, was mid-XX% the quarter. is among our primarily down for the expectations. multifamily XX.X% tenants Average quarter occupancy, of so in the movement in our lighter XX.X%

the were first quarter. up Average for XX.X% the XXXX rents portfolio to the compared monthly in quarter combined

spreads leases of in X.X%, overall For X.X% at and leases renewal of X.X%. the first XXXX, signed saw quarter spreads new on we spreads of estimated

on spreads For X.X%, of have estimated seen renewal X.X%. of April, we X.X% new and spreads leases overall spreads of

ratio affordable. and new in to the that quarter which rent-to-income all our have remain minimal signed demonstrates XX%, first is stress properties our Our leases for tenants continue

in and the of as We previously the timing call portfolio additional our to of performance that those at outlook. Chatham XXXX fourth comments Richmond supplemental accompanying our refer of Midlothian details some is acquisition in the well disposition outlook of on assumptions. as color the with the consistent the affirmed for the on Court Dallas the Winterfield guidance our date, assumptions. would quarter earnings I you issued and for around to our Given

the underlying result. some that the Recall that Let's quarter this the moving of parts performance introduced our combined in around provide and about sold in the talk of of from to period. portfolio several and metric substantial to NOI joint ventures partner transparency for well we more a this our portfolio XXXX change and in the we've XXXX as as completed buyouts as consolidated composition unconsolidated properties

expense quarter we expected that in performance the off and we've the sizable course, I non-controllable QX year of efforts quarters morning. despite the Unfortunately, that the pay outlined light is XXXX. in a The shed this, driver some to the to row, portfolio. in some the is, our and insurance best two implemented in biggest of into effective experienced expenses hope last program progresses this program of I obscure master on benefits for year-over-year as increases growth.

assumes our the previous for slightly at than was the greater The increase we QX XX% early the and increase year. of a full-year larger for not Our cancellation in continue cost policies, midpoint. anticipate throughout full-year due to outlook do to the this

were Combined portfolio NOI The Total quarter the was primarily insurance, repairs expenses and up due X.X%, maintenance higher to due the utilities. rates XX.X%, with grew first X% revenue of across the first to and primarily rental quarter components increased primary portfolio. increased in XXXX. compared

X.X% expenses of have Absent up were expenses impacted at would NOI mentioned The combined expenses, a reported non-controllable we look NOI $XXX,XXX X.X% items related expenses, XX.X%. the expenses to portfolio were year-over-year way on to basis. Another portfolio by this a XX.X%, quarter. earlier, up combined while the controllable these

we similar If XX% reported remarks. completes would That combined a portfolio year-over-year X.X% our increase many in in at increase expense our looking NOI have to insurance QX. a were peers, we of prepared of

please Operator, open will you call the to questions?

Operator

question go ahead. now the from [Operator Hutton. day the And with will Please our come first will begin Gaurav Instructions] of question-and-answer Mehta We session. EF

Gaurav Mehta

of your talked I in XXXX. Thanks. improvement expectation NOI Good you morning. wonder in sequential release, about NOI [indiscernible] earnings

lower? expenses So driven by growth is the that sequential improvement going rate

Jeffrey Gould

little a you of as know we some bit expenses – quarter. issues hi, Yes, Gaurav. this obviously, – ran into ran with We in

I have for insurance handle think stabilize, them, one that on and of a we sure. it better the being it, will

stabilize that long-term, us is together us obviously and quarter. sure. I most over think we cost bringing yes, taking knocked insurance the will portfolio, think a benefit think, something did, we a I the things But last over, the and of which big was bit what for for

Ryan Baltimore

And not and well that, this to as utility utilities damages Gaurav this continuing anticipate and we Ryan. Yes. throughout repairs the year. maintenance – we mentioned, add this something is with The leak, the just the as is as storm to on

on I really So think where the expense we'll see benefit. side the is

Gaurav Mehta

particular which some ask that property portfolio noticed Why color occupancy. wanted occupancy for overall property? party at that the on on you what's going is than XX.X%, lower that Antonio. you one I to Okay. your San low? I provide in Can on occupancy is is

Jeffrey Gould

original in partner, tenants we that rectify. short-term like a it at we've where Basically, issues buyout seller. the there. occupancy get of necessarily had of Yes. problems we some a concerns of nothing the part of after short-term that that can't about take from the happens think problem over back increased from didn't problem some putting the And there, stems It property. credit, our really times were into meet we We've we had delinquency some

for concern delinquencies and those you out. getting in growth are viable think was Like paying bit. think and problem. see big not it us but were I the glad it out, something that in and a tenants quite And occupancy tenants pushed long-term, there getting said, a And concern. it's It's rectifying was we're in that you'll were we're place, handle. steady already I occupancy No that, Obviously, will a we particular that property. we improving pointed

Gaurav Mehta

market. talked in on the rate. In remarks, sub-X% transaction at And Okay. the you cap the XQ selling property lastly, about

that all is So of cap the markets? are of where in CapEx indicative your rate

Jeffrey Gould

I'm sorry, I didn't hear your question.

Gaurav Mehta

talked selling you cap second multifamily remarks, Is you're for seeing of quarter rate property markets prepared about rate. your cap at sub-X% sub-X% in properties? that in all what a the like In

Jeffrey Gould

Yes.

planning rates points a market. we're – where cap the on this it in than higher would soon. than with were lows was So I Generally, are. stabilization happening feel cap closing to – low a say, the in as, higher maybe market, about we've property in very generally it XX probably say, think rates things basis XX better seen where what's to market, where sub-X% runs cap Specific X%. basis asking for that XXX the points sub-X%, rates is as and general where and I with you're the it

So seeing in run that typically I focused range. seeing think cap and on the X% we're they're deals probably rates we're to X.X%

as at and sales and as partners other they're in talking their where as well from That goes the to our from industry well. selling people seeing properties own

of are with partners, seeing that cap similar late we've rates X%. to some had other So also X.X% and in they calls investor

Operator

will The from next Michael go Please come with Gorman BTIG. ahead. question

Michael Gorman

the bit having that COVID little Can about impact of Yes. you the the Thanks. move-outs or a maybe comps. just that move-outs quarter, lack of you some they some Good talked during where of leaving Is retention kind this that? out? in morning, are just to guys. residents Are Ryan, you on environment? some purchases? through options rate and what's of where the driving settle you the in talk the to saw walk the going think home it kind of – moving that's out of maybe And the other market? what residents Kind about

Ryan Baltimore

of to we're home Good not a Michael. buying. move-outs amount seeing tremendous Sure. morning, Yes, due

retention that percent a I movement. across probably there played XX-plus range still portfolio. factor said, retention less think rate rates than think, XX%, definitely of to on interest lot have side. The generally the XX% pandemic, That kind was during that. significant the closer I were in the higher We being hovers that, in obviously, a

with we look saw, which we units, you at see we did that aggressive and as We're where often, growth XX slowed renewing people seeing thing on also be has rent program, down, there. do value-add returns see definitely as at and quite that But our there's We if to are front push about look opportunities. we're well. seeing, more note is as more, one can more

occupancy retention job can where amount So It's a tremendous But buying. moving people of that on home are short-term to we're or alternative well. seeing have of lot and a generally to. as speaking, options effects not relocation

Jeffrey Gould

that, It's more because On we more to to do Yes. renovation as something of vacate full do see, units. returns, markets forward. like great. it we're we'd the renovation on hope you definitely renewal We're moving on. focused that in where have been and rents to seeing like pays on and the units, focusing a to and see We'd do

Michael Gorman

maybe that. Yes, for a sure. And on follow-up

think XX these pipeline in this, I of over months? you that tenants – returns do XXX me that of those because constructed. potentially. that the units of just line Are back perspective, kind there. you through your How have the is the terms Kind is get months does that to of from into of line kind going are Do how what next think walk sight to next like are you of sight? units your mentioned work over you'd XX

Jeffrey Gould

you market a there, just No. proof-of-concept that you've rents see rents of occupancy you've in done that Basically, be demand if – $XXX half it's by – a where there the breakpoints. vacancy the minimal renovation. full a a on the those renovated sign or higher units, the a third is allows good you've is assume because property, when the increase in minimal and done particular it's sustain seen property, in be let's those And and can

we'd to we have doing it's seeing renewal probably you towards we're rents a to proof would concept, X% renovation. the Ryan, So or don't at if frankly. stay of anything more And X%, something that add and know, consider, that? work I you do want

Ryan Baltimore

No.

number think I all on able be do to that's units, the our just I units. think – to the of is of goal

higher if think even we're there properties people aggressive we've I more continue and those where mentioned, retention is to renew, renewal rates. as on are

can. we when them do we So

units of concept. It's already depends are I It a get Jeff not think really out the to value-add units back. we're XXX available. no necessarily that those have mentioned, the property. there's is proved lot as – properties But those on guarantee units going the all existing

opportunity do right those don't now. there. we we'll get believe units We just don't there's back So know – we when

Jeffrey Gould

from saw bought other the as lot The was what the joint a It a a there to is portfolio thing you partners, of we conversation we conversation. want that was do. with to always partners back

maybe do XXX% little get we a of would of have I the some bumps bit more it aggressive the to partners that think own now ourselves, to and than been. we're probably more our renovations than

appetite more have we control. in full So owning XXX%, have of we an

Michael Gorman

goes on down, the when market. in – that kind between there's a disconnect it acquire property wonder just transaction quickly income and board, between Jeff, sellers the bid-ask on further disconnect? of even forecasting. Got market, across seeing if you're it. is for of expense are that in growth the they're Obviously, the buyers and and the have helpful. the buyers Or And performance Is understand spread looking expectations different the underlying on transaction any if where versus expectations. price? to there's maybe what this expectations kind NOI That’s it fundamental you I sellers for just transaction then maybe, the

Jeffrey Gould

is others expectation, don't to anticipate Sellers everyone X.X norm an I you example, skyrocketing, Well, there I that the years see that growth, think we have or over costs had X understanding can on and for sellers. think starting and last no have the and is on rental a growth as Insurance example. new going years. are insurance what's any with

It when example, and a then of come their didn't want on in, while tax them going the head estate think, to to impact for they I for focus had insurance. the taxes, would real a the buyer to to in increase and a rates a bury want see and were understand readjustment buyer have. took real up, not that

Well, the with same thing insurance. happened

that have it's I been that a and learn understand to the and have think they model increases realize substantial.

real on the expense growth and I the that I don't side, same understanding see say rental the as the true much And they'll hear it's NOI there'll be about a understand think of about buyer on expense need on I rental as more then think side they So between sellers not it's I people and partly side real and in to as as is. see. it what side. – focus read of would was. partly seller time, there's an well. It's And better. think it the

Michael Gorman

rate could that just the of quickly. today's think debt we secured And When then that market? in on locked? representative kind you in one February. that you where Silvana, last know loan additional And is just for do on me, I Great. was closed of

Jeffrey Gould

Yes.

– good daily at when ready able kind we done And advantage monitoring this rates we take to were rate a that of earlier and dip lock, we We market. were a were got good was much to in the timing. So was locked pretty year. it of

on today, think you're X% debt I probably still seeing that to closer the plus side.

I I a term. arbitrage facility is got mentioned, the pretty George as X.XX% rate think think do very we believe And very credit it's there. strong that So and the prime we piece long – the good versus don't paper now, is significant of at

we're think the Freddie in yes, and seeing So things the percent getting I debt. range today, five-plus on quoted still probably Fannie,

Ryan Baltimore

the best – is we're or it's good obviously, very – most on right line The don't borrowing very line, with nothing keeping the part news that balance no as paying the on zero We're focused rate have at line the And is outstanding. for good we our we there's we a now. can. near think

So and we're that the the line. careful very of of cognizant usage of

Michael Gorman

Great. Thanks for the time, guys.

Jeffrey Gould

Sure.

Operator

The last question come ahead. FBR. Kucera go Riley with will B. from Craig Please

Craig Kucera

going guys. the the that your San Dallas the I morning, asset softness on Or past good also property on? also Hey, Jeff, seen occupancy color property, over appreciated something having debt JV else bad quarters. has but issues? Antonio several some is Is suburban some

Jeffrey Gould

markets, some to What with development, have supply portfolio, saw I'm a is, extent, maybe mean is, increased Alabama, and little new is growth great new No. seen not say Nashville, I these Exception that we there Huntsville, Dallas, to in which pleased continue we just a overall, issues. markets our all. supply seen And terrific. bit has obviously is deal to – But expand. job frankly, Tennessee. of of the

absorbed. some of to in think I which new portfolio these the is being do markets, with Dallas-specific So had supply

that, new population impact the and it's of is Dallas. or states had is I think top supplier some with number eaten growth cities on up, getting but couple think rampant, still I where and that one

Craig Kucera

just bigger-picture comments. Great. to back Okay. some And circling

of But curious, are cap on and pickup a relatively Or that in seeing had down, they You volume? gone. your transaction thoughts were kind you mentioned you where things give still slow? I'm rates are settling

Jeffrey Gould

maybe, year, slightly slow. say, still would slightly picked this only. up I are relatively it Things but February of from,

Again, far from the markets As sellers' earlier overall, is deal to years. the Michael normal et reports, going they with going see of are cetera. what the economy seen seeing I mean all the goes pricing in it flow waiting of with question People what's and I on and as not what understanding the back we've path over think what can to what's of happen to get. what's the

to that we'd So pick will think like up. volume

– I helps. I are an and get it think think until there's once interest and level going somewhat a first there's not some of quiet stabilization, you understanding that forward. rates will and certain to comfortable where everyone at rates remain stay going But is that uncertainty, cap

Craig Kucera

Thanks. right. All

Jeffrey Gould

Sure.

Operator

concludes Please to the question-and-answer like turn Mr. for session. This go our over would to conference ahead. Gould Jeff remarks. I back closing any

Jeffrey Gould

joining support BRT. to want thank appreciate for day. nice in a We say all Have Just and continued your interest you us.

free time, any questions, have call you. to to Thank or with we'll you feel follow-up myself and Ryan you. If be any happy at speak

Operator

concluded. now The today's conference Thank you attending presentation. for is

disconnect. may You now

BRT Apartments (BRT) 9 May 232023 Q1 Earnings call transcript