BRT Apartments (BRT) - 2020 Q1 - Quarterly Report

Part I - Financial Information Financial Statements This section presents the unaudited consolidated financial statements for Q1 2020, reporting a net loss of $4.8 million and total assets of $395.0 million Consolidated Balance Sheets The Consolidated Balance Sheet shows total assets increased to $395.0 million and total equity to $202.7 million as of March 31, 2020 Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 (unaudited) | December 31, 2019 (audited) | | :--- | :--- | :--- | | Total Assets | $394,960 | $390,610 | | Investments in unconsolidated joint ventures | $185,946 | $177,071 | | Cash and cash equivalents | $18,707 | $22,699 | | Total Liabilities | $192,234 | $191,050 | | Mortgages payable, net | $132,524 | $133,215 | | Total Equity | $202,726 | $199,560 | Consolidated Statements of Operations The company reported a net loss of $4.8 million for Q1 2020, or ($0.29) per share, due to decreased revenues and increased expenses Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Total revenues | $6,924 | $7,130 | | Total expenses | $9,846 | $9,213 | | Equity in loss of unconsolidated joint ventures | ($1,815) | ($2,068) | | Net loss attributable to common stockholders | ($4,831) | ($4,247) | | Diluted loss per share | ($0.29) | ($0.27) | Consolidated Statements of Comprehensive Income (Loss) The company recorded a comprehensive loss of $4.9 million for Q1 2020, including net loss and unrealized losses on derivatives Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net loss | ($4,799) | ($4,213) | | Other comprehensive loss | ($23) | ($9) | | Comprehensive loss attributable to common stockholders | ($4,851) | ($4,254) | Consolidated Statement of Equity Total equity increased to $202.7 million driven by $12.1 million from an equity offering, offset by dividends and share repurchases - Issued shares through an equity offering program, raising net proceeds of $12,077,000[23] - Paid common stock distributions of $0.22 per share, totaling $3,822,000[23] - Repurchased common stock for a total cost of $616,000[23] Consolidated Statements of Cash Flows Net cash provided by operating activities was $0.6 million, while investing activities used $10.9 million, resulting in a $3.5 million net decrease in cash Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $557 | $316 | | Net cash used in investing activities | ($10,863) | ($8,426) | | Net cash provided by (used in) financing activities | $6,838 | ($4,002) | | Net (decrease) increase in cash | ($3,468) | ($12,112) | Notes to Consolidated Financial Statements The notes detail accounting policies, business structure as a REIT, equity activities, a new property acquisition, and COVID-19 risks - The company operates as a REIT, primarily owning and operating multi-family properties through wholly-owned subsidiaries and unconsolidated joint ventures, with a focus on the Southeast United States and Texas[31][32] - During Q1 2020, the company sold 694,298 shares for $12.3 million through its at-the-market (ATM) offering and repurchased 39,093 shares for $616,000[40][48] - In February 2020, an unconsolidated joint venture acquired a 264-unit multi-family property in Wilmington, NC, for $38.0 million, with BRT contributing $13.7 million for an 80% equity interest[54] - Subsequent to the quarter-end, the company noted risks from the COVID-19 pandemic but stated it had not materially impacted operations through mid-June 2020, granting two commercial tenants rent abatements totaling $75,000 for Q2 2020[96] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, liquidity, and capital resources, highlighting strong rent collections despite COVID-19 and the need to refinance $182.9 million in mortgage balloon payments Overview The company, a REIT, acquired a new property, raised $12.3 million via ATM, and maintained 98% rent collections despite COVID-19 - In Q1 2020, the company collected 98% of billed amounts for April and May, and 95% through June 15, indicating minimal initial impact from the COVID-19 pandemic on rent payments[108] - Acquired an 80% interest in a 264-unit property in Wilmington, NC, for $38.0 million, contributing $13.7 million in equity[105] - Sold 694,298 shares of common stock for $12.3 million via its ATM program and repurchased 39,093 shares for $616,000[106][107] Results of Operations Total revenues decreased 2.9% to $6.9 million due to property sales, while total expenses increased 6.9% to $9.8 million due to higher professional fees Revenue and Expense Changes (Q1 2020 vs Q1 2019, in thousands) | Item | Q1 2020 | Q1 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $6,924 | $7,130 | ($206) | (2.9)% | | Real estate operating expenses | $3,058 | $3,176 | ($118) | (3.7)% | | General and administrative | $3,367 | $2,544 | $823 | 32.4% | | Total Expenses | $9,846 | $9,213 | $633 | 6.9% | - The decrease in rental revenue was primarily due to the sale of two properties in July 2019, which contributed $1.0 million in revenue in the prior-year period[112] - General and administrative expenses increased mainly due to a $596,000 rise in professional fees, of which $523,000 was related to the financial restatement[119] - Equity in loss from unconsolidated joint ventures decreased by $253,000, driven by a $2.5 million increase in rental revenues from these ventures, primarily from property acquisitions and lease-ups[121][122] Liquidity and Capital Resources Available liquidity was $33.4 million as of June 1, 2020, but $182.9 million in mortgage balloon payments through 2022 will require refinancing - Available liquidity at June 1, 2020, was $33.4 million, consisting of $18.5 million in cash, $9.9 million in restricted cash, and $5.0 million available under its credit facility[134] - The company faces $182.9 million in mortgage balloon payments from 2020 to 2022 (including amounts from unconsolidated JVs), which will require refinancing or other capital actions as operating cash flow is insufficient to cover them[135] - The company has a $10 million credit facility, of which $5 million was available as of June 1, 2020, maturing in April 2021[134][139] Funds from Operations; Adjusted Funds from Operations NAREIT FFO was $3.3 million and AFFO was $4.0 million for Q1 2020, with AFFO per share remaining flat at $0.23 FFO and AFFO Reconciliation (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | GAAP Net loss attributable to common stockholders | ($4,831) | ($4,247) | | NAREIT Funds from operations | $3,298 | $3,062 | | Adjusted funds from operations (AFFO) | $3,968 | $3,718 | | NAREIT FFO per diluted common share | $0.19 | $0.19 | | AFFO per diluted common share | $0.23 | $0.23 | Net Operating Income Consolidated NOI was $3.7 million in Q1 2020, while same-store NOI increased by $55,000 due to higher rental rates NOI Reconciliation (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | GAAP Net loss attributable to common stockholders | ($4,831) | ($4,247) | | Net Operating Income (NOI) | $3,687 | $3,710 | | Non-same store NOI | ($560) | ($638) | | Same store NOI | $3,127 | $3,072 | - Same-store NOI increased by $55,000, primarily due to a $248,000 increase in revenues from higher rental rates, partially offset by a $193,000 increase in operating expenses[157] Quantitative and Qualitative Disclosures About Market Risks The primary market risk is interest rate risk on variable-rate junior subordinated notes, where a 100 basis point change impacts annual interest expense by $374,000 - The company's junior subordinated notes bear interest at three-month LIBOR plus 2.00%, where a 100 basis point (1%) change would alter annual interest expense by approximately $374,000[161] - All mortgage debt is fixed rate, except for one mortgage effectively fixed through an interest rate swap[159] Controls and Procedures Disclosure controls were ineffective as of March 31, 2020, due to a material weakness in accounting for joint ventures, with a remediation plan underway - A material weakness was identified in internal controls over financial reporting related to the consolidation of properties that should have been accounted for using the equity method[163] - As a result of the material weakness, the CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2020[164] - Management has implemented a remediation plan, including enhanced procedures, multi-level reviews, and additional training, to address the control deficiency[165] Part II - Other Information Legal Proceedings A subsidiary faces a wrongful death lawsuit seeking over $1 million in compensatory damages, which the company believes is covered by insurance - A subsidiary is a defendant in a wrongful death lawsuit seeking over $1 million in compensatory damages and unspecified exemplary damages[171] - The company believes its primary and umbrella insurance is sufficient to cover the claim for compensatory damages, but not for exemplary damages[171] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 39,093 shares for $616,000 in Q1 2020, with $4.4 million remaining for future repurchases Common Stock Repurchases (Q1 2020) | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost (Approx.) | | :--- | :--- | :--- | :--- | | Jan 2020 | 0 | N/A | $0 | | Feb 2020 | 14,000 | $15.60 | $218,400 | | Mar 2020 | 25,093 | $15.85 | $397,724 | | Total | 39,093 | $15.76 | $616,124 | - As of March 31, 2020, approximately $4.4 million remained available for future repurchases under the company's stock buyback program, which runs through September 30, 2021[172] Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and financial statements in Inline XBRL format - The filing includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[173] - Financial data is provided in Inline XBRL format as required by the SEC[173]