BRT Apartments (BRT) - 2023 Q3 - Quarterly Report

Part I - Financial Information Financial Statements BRT Apartments Corp.'s unaudited consolidated financial statements for Q3 2023 show decreased assets and equity, a significant drop in net income, and increased operating cash flow Consolidated Balance Sheets The Consolidated Balance Sheet indicates a slight decrease in total assets to $721.1 million and total equity to $236.8 million as of September 30, 2023 Consolidated Balance Sheet Summary (in thousands) | Account | September 30, 2023 (unaudited) | December 31, 2022 (audited) | | :--- | :--- | :--- | | Total Assets | $721,142 | $732,118 | | Real estate properties, net | $639,989 | $651,603 | | Cash and cash equivalents | $28,117 | $20,281 | | Total Liabilities | $484,345 | $482,048 | | Mortgages payable, net | $422,935 | $403,792 | | Credit facility, net | $0 | $18,502 | | Total Equity | $236,797 | $250,070 | Consolidated Statements of Operations Net income for the nine months ended September 30, 2023, sharply decreased to $5.6 million from $54.2 million in 2022, primarily due to lower gains from joint venture property sales Statement of Operations Highlights (in thousands, except per share data) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $70,109 | $47,816 | $23,852 | $21,697 | | Total Expenses | $82,157 | $57,910 | $26,725 | $26,094 | | Equity in earnings from sale of unconsolidated JV properties | $14,744 | $64,531 | $0 | $11,472 | | Net (Loss) Income Attributable to Common Stockholders | $5,610 | $54,174 | ($1,494) | $7,059 | | Diluted EPS | $0.27 | $2.89 | ($0.08) | $0.37 | Consolidated Statements of Cash Flows Net cash provided by operating activities increased to $13.6 million, while investing activities provided $18.1 million, and financing activities used $23.9 million for the nine months ended September 30, 2023 Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $13,608 | $8,450 | | Net cash provided by (used in) investing activities | $18,069 | ($18,990) | | Net cash used in financing activities | ($23,944) | ($5,643) | | Net increase (decrease) in cash | $7,733 | ($16,184) | Notes to Consolidated Financial Statements These notes detail the company's accounting policies, property portfolio, expanded share repurchase program, modified credit facility, and joint venture property sales - As of September 30, 2023, the company wholly owns 21 multi-family properties (5,420 units) and has interests in 7 JV properties (2,287 units), primarily in the Southeast US and Texas[54] - The share repurchase program was extended to December 2025 and authorization was increased to $10 million; in the nine months ended Sep 30, 2023, the company repurchased 573,318 shares for $10.8 million[59] - In May 2023, a joint venture sold a property in Dallas, TX, for $73 million, resulting in a gain of $38.4 million, of which BRT's share was $14.7 million[130] - The company's credit facility was amended in August 2023, changing the interest rate index to SOFR + 2.50% with a 6.0% floor, and as of Sep 30, 2023, there was no outstanding balance on the $60 million facility[22][108][136] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, liquidity, and non-GAAP measures, highlighting revenue growth from 'Partner Buyouts' and significant share repurchase activity Results of Operations Operational analysis reveals consolidated revenue growth from 'Partner Buyouts' and higher rental rates, offset by increased expenses, while unconsolidated JV earnings declined due to property sales Consolidated Revenue & Expense Changes (Q3 2023 vs Q3 2022) | Item | Q3 2023 ($M) | Q3 2022 ($M) | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $23.9 | $21.7 | +9.9% | | Real estate operating expenses | $10.6 | $9.2 | +15.1% | | Interest expense | $5.6 | $5.1 | +10.3% | - For the nine months ended Sep 30, 2023, consolidated revenues increased 45.8% to $69.7 million, primarily due to $20.3 million from properties acquired through Partner Buyouts in 2022[186] - Equity in earnings from unconsolidated JVs for Q3 2023 was $0.4 million, a 96.3% decrease from $11.6 million in Q3 2022, mainly because the 2022 period included a $16.9 million gain on a property sale[200][311] Liquidity and Capital Resources The company's liquidity, totaling $81.7 million as of November 1, 2023, is insufficient to cover $133.5 million in upcoming mortgage balloon payments, necessitating refinancing or other capital-raising activities - As of November 1, 2023, the company had $81.7 million in available liquidity, comprising $21.7 million in cash and $60 million available under its credit facility[223] - The company faces $133.5 million in mortgage balloon payments through 2026, which cannot be fully funded by operating cash flow and will require refinancing or other capital-raising activities[269] - The company declared a quarterly cash dividend of $0.25 per share, payable on October 11, 2023[84][274] Funds from Operations (FFO), Adjusted Funds from Operations (AFFO), and Net Operating Income (NOI) Non-GAAP metrics show increased FFO and AFFO per share for Q3 2023, while consolidated NOI rose and Same Store NOI slightly decreased due to higher operating expenses FFO and AFFO Per Share Reconciliation | Metric (per diluted share) | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | NAREIT FFO | $0.31 | $0.29 | $0.86 | $0.84 | | AFFO | $0.41 | $0.38 | $1.14 | $1.14 | - For Q3 2023, consolidated NOI increased by $431,000 YoY, but Same Store NOI decreased by $405,000 due to an $878,000 increase in real estate operating expenses[264] Quantitative and Qualitative Disclosures About Market Risks The company's primary market risk is interest rate fluctuations, with a 100 basis point increase potentially raising annual interest expense by approximately $374,000 - The company's exposure to interest rate risk is primarily from its junior subordinated notes and credit facility; a 100 basis point increase in rates would increase annual interest expense by approximately $374,000[289] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of September 30, 2023[301] - No material changes were made to the company's internal control over financial reporting during the third quarter of 2023[290] Part II – Other Information Legal Proceedings The company agreed to settle a wrongful death lawsuit for approximately $325,000, expected to be fully covered by insurance - A wrongful death lawsuit against a subsidiary was settled for approximately $325,000, an amount expected to be fully covered by insurance[268] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity, including 264,165 shares repurchased for $5.0 million in Q3 2023, with $4.3 million remaining under authorization Share Repurchases (Q3 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2023 | 45,612 | $20.10 | | August 2023 | 84,198 | $18.81 | | September 2023 | 134,355 | $18.23 | | Total Q3 | 264,165 | $18.74 | - Subsequent to the quarter end, from October 1 to October 31, 2023, the company repurchased an additional 98,014 shares for $1.7 million[59][293] Other Information No officers or directors had Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements in effect during Q3 2023 - No officers or directors had any Rule 10b5-1 trading plans in effect during the three months ended September 30, 2023[294] Exhibits This section lists exhibits filed with the Form 10-Q, including loan agreement amendments and executive officer certifications - Filed exhibits include an amendment to the VNB New York, LLC loan agreement and CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906[307]