BRT Apartments Corp. (BRT) Bundle
Understanding BRT Apartments Corp. (BRT) Revenue Streams
Understanding BRT Apartments Corp.’s Revenue Streams
The primary revenue sources for BRT Apartments Corp. consist mainly of rental income from multi-family residential properties and other income streams. Below is a detailed breakdown of these revenue sources for the recent fiscal periods.
Breakdown of Primary Revenue Sources
| Revenue Source | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Percentage Change |
|---|---|---|---|
| Rental and other revenue from real estate properties | $24,177 | $23,510 | 2.8% |
| Interest and other income | $219 | $342 | (36.0%) |
| Total Revenues | $24,396 | $23,852 | 2.3% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, the revenue figures were as follows:
| Revenue Source | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) | Percentage Change |
|---|---|---|---|
| Rental and other revenue from real estate properties | $71,253 | $69,704 | 2.2% |
| Other income | $408 | $405 | 0.7% |
| Total Revenues | $71,661 | $70,109 | 2.2% |
Contribution of Different Business Segments to Overall Revenue
The rental revenue from real estate properties constitutes the majority of the total revenue, accounting for approximately 99.1% of total revenues in both the three and nine months ended September 30, 2024. Other income streams, including interest income, contribute a smaller percentage, reflecting the company's focus on rental income as a primary revenue driver.
Analysis of Significant Changes in Revenue Streams
During the three months ended September 30, 2024, the rental revenue increase was primarily driven by:
- A net increase of $539,000 in deferrals of rent concessions, mainly at Bells Bluff.
- A $159,000 net increase in rental rates across several properties.
Conversely, the decrease in interest and other income was attributed to the prior period's receipt of the Employee Retention Tax Credit and a reduction in interest income on invested balances. This indicates a shift in revenue dynamics where reliance on rental income remains strong, while other income sources may fluctuate based on external economic factors.
Overall, BRT Apartments Corp. has shown resilience in its primary revenue stream, with a consistent year-over-year growth trend in rental income, despite some volatility in ancillary income sources.
A Deep Dive into BRT Apartments Corp. (BRT) Profitability
Profitability Metrics
Examining the profitability metrics of the company provides essential insights for investors. Key profitability metrics include gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the company reported total revenues of $24,396,000 compared to $23,852,000 for the same period in 2023, reflecting a 2.3% increase. The total expenses for the same period were $27,242,000, resulting in a gross profit of $(2,846,000).
The operating profit for the nine months ended September 30, 2024, was a net loss of $7,721,000 compared to a net income of $5,610,000 in the prior year. The net profit margin for this period was $(10.77%).
| Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 |
|---|---|---|---|---|
| Total Revenues | $24,396,000 | $23,852,000 | $71,661,000 | $70,109,000 |
| Total Expenses | $27,242,000 | $26,725,000 | $80,556,000 | $82,157,000 |
| Net Profit (Loss) | $(2,846,000) | $(873,000) | $(7,721,000) | $5,610,000 |
| Net Profit Margin | $(11.66%) | $(3.65%) | $(10.77%) | 8.00% |
Trends in Profitability Over Time
Comparing profitability over time, the company has experienced a decline in net income attributable to common stockholders, from $5,610,000 in the nine months ended September 30, 2023, to a net loss of $(7,721,000) in the corresponding period of 2024. This trend indicates a significant decrease in profitability.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the company's net profit margin of $(10.77%) is below the industry average, which typically hovers around 10-15% for similar real estate investment trusts (REITs).
Analysis of Operational Efficiency
Operational efficiency can be assessed through the cost management and gross margin trends. The real estate operating expenses for the nine months ended September 30, 2024, were $32,612,000, a 3.3% increase from $31,565,000 in 2023. This rise in expenses, coupled with stagnant revenue growth, has led to squeezed gross margins.
Additionally, interest expense for the nine months ended September 30, 2024, amounted to $16,768,000, compared to $16,577,000 in the previous year, indicating a slight increase in financing costs that further impacts profitability.
| Expense Type | 2024 | 2023 | Percentage Change |
|---|---|---|---|
| Real Estate Operating Expenses | $32,612,000 | $31,565,000 | 3.3% |
| Interest Expense | $16,768,000 | $16,577,000 | 1.2% |
Debt vs. Equity: How BRT Apartments Corp. (BRT) Finances Its Growth
Debt vs. Equity Structure
At September 30, 2024, the total debt obligations of the company were approximately $484.3 million, a slight increase from $459.6 million at December 31, 2023.
The breakdown of debt obligations is as follows:
| Debt Type | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) |
|---|---|---|
| Mortgages Payable | $451,401 | $426,436 |
| Junior Subordinated Notes | $37,400 | $37,400 |
| Credit Facility | $0 | $0 |
| Deferred Financing Costs | ($4,496) | ($4,266) |
| Total Debt Obligations | $484,305 | $459,570 |
The company’s debt-to-equity ratio as of September 30, 2024, was approximately 2.31, calculated from total liabilities of $261.0 million and total equity of $113.6 million. This ratio is above the industry average of 1.5, indicating a higher reliance on debt financing compared to peers.
Recent debt activity includes:
- Obtained a mortgage of $27.4 million on a property in August 2024 with a fixed interest rate of 5.22%, maturing in September 2031.
- Weighted average interest rate on mortgages payable as of September 30, 2024, was 4.09%, with a remaining term to maturity of approximately 6.3 years.
- Outstanding junior subordinated notes carry an interest rate of 7.52% as of September 30, 2024, maturing in April 2036.
The company continues to balance its financing through a combination of debt and equity. As of November 6, 2024, available liquidity was approximately $67.5 million, including $27.5 million in cash and $40 million available under the credit facility.
Equity financing is also a significant aspect of the company’s strategy, evidenced by the issuance of common stock through a dividend reinvestment plan (DRIP) which contributed $2.8 million in proceeds during the last nine months.
In conclusion, the company’s financial structure reflects a higher leverage position compared to industry standards, with ongoing efforts to manage debt levels while pursuing growth opportunities through equity financing.
Assessing BRT Apartments Corp. (BRT) Liquidity
Assessing BRT Apartments Corp.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, BRT Apartments Corp. reported a current ratio of 1.28, calculated using current assets of $15.055 million and current liabilities of $11.776 million. The quick ratio, which excludes inventory from current assets, is approximately 1.27.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, stands at $3.279 million for BRT as of September 30, 2024. This indicates a positive trend compared to the previous year, where the working capital was approximately $1.763 million.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, shows:
- Net cash provided by operating activities: $16.562 million
- Net cash used in investing activities: ($1.288 million)
- Net cash provided by financing activities: $8.701 million
Overall, the total increase in cash, cash equivalents, and restricted cash for the period is $23.975 million, resulting in a total of $55.750 million at the end of the period.
Potential Liquidity Concerns or Strengths
Despite a positive working capital position, there are liquidity concerns related to the upcoming debt obligations. The company has a total debt obligation of $484.305 million as of September 30, 2024, which includes $451.401 million in mortgages and $37.400 million in junior subordinated notes.
| Liquidity Metric | Value |
|---|---|
| Current Ratio | 1.28 |
| Quick Ratio | 1.27 |
| Working Capital | $3.279 million |
| Net Cash from Operating Activities | $16.562 million |
| Net Cash Used in Investing Activities | ($1.288 million) |
| Net Cash from Financing Activities | $8.701 million |
| Total Cash at End of Period | $55.750 million |
| Total Debt Obligations | $484.305 million |
Is BRT Apartments Corp. (BRT) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will examine key valuation ratios including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the diluted earnings per share (EPS) was $(0.12) for the third quarter, resulting in a P/E ratio that cannot be calculated due to negative earnings.
Price-to-Book (P/B) Ratio
The book value per share is calculated based on total equity. As of September 30, 2024, total equity was $209,767,000 with 17,798,000 shares outstanding, resulting in a book value per share of approximately $11.76. The stock price as of the same date was around $14.00, giving a P/B ratio of approximately 1.19.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) can be calculated as total debt plus market capitalization minus cash. The total debt, as of September 30, 2024, was $484,305,000, with cash and cash equivalents at $45,801,000. Assuming a market capitalization based on the stock price of $14.00, the market cap is $249,172,000. Thus, the EV is $484,305,000 + $249,172,000 - $45,801,000 = $687,676,000. The EBITDA for the last twelve months was approximately $38,641,000, yielding an EV/EBITDA ratio of approximately 17.8.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated. As of September 30, 2024, the stock was trading at around $14.00, compared to approximately $18.74 one year prior, indicating a decline of approximately 25%.
Dividend Yield and Payout Ratios
The company has consistently paid dividends at a rate of $0.25 per share quarterly, totaling $1.00 annually. Given the current stock price of $14.00, the dividend yield stands at approximately 7.14%. The payout ratio based on the diluted EPS of $(0.12) indicates a negative payout ratio, which suggests that the dividends are not supported by earnings at present.
Analyst Consensus on Stock Valuation
Analyst ratings for the stock suggest a consensus of Hold, with varying opinions on the stock's potential based on current financial performance and market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | N/A (Negative EPS) |
| P/B Ratio | 1.19 |
| EV/EBITDA Ratio | 17.8 |
| Current Stock Price | $14.00 |
| Dividend Yield | 7.14% |
| Analyst Consensus | Hold |
Key Risks Facing BRT Apartments Corp. (BRT)
Key Risks Facing BRT Apartments Corp.
Industry Competition: The multi-family housing market is highly competitive. As of September 30, 2024, the Company faced stiff competition from both local and national players, impacting its ability to maintain or increase rental rates.
Regulatory Changes: Changes in housing regulations and tax laws can affect operational costs and profitability. For instance, a recent change in Tennessee law resulted in a $534,000 franchise tax refund, highlighting the impact of regulatory environments on financial results.
Market Conditions: Economic factors such as interest rates and employment rates directly influence rental demand. The Company had mortgage debt of $705.2 million as of September 30, 2024, which included a weighted average interest rate of 4.09%. A 100 basis point increase in interest rates would increase related interest expenses by approximately $374,000 annually.
Operational Risks
Operational risks stem from the management of properties and the execution of business strategies. For the nine months ended September 30, 2024, the Company reported total revenues of $71.661 million, a modest increase from $70.109 million in the same period of the previous year. However, real estate operating expenses increased by 3.3%, amounting to $32.612 million.
The Company also experienced increased operating expenses due to a rise in insurance premiums of $533,000 and real estate tax accruals of $502,000. These operational challenges could affect cash flows and profitability if not managed effectively.
Financial Risks
Financial risks include debt obligations and liquidity constraints. The Company has a credit facility with a borrowing capacity of $40 million, which was amended in July 2024. As of September 30, 2024, there was no outstanding balance on this facility. However, the ability to draw on this facility is contingent upon compliance with borrowing base requirements.
The Company’s total debt obligations, net of deferred costs, amounted to $484.305 million as of September 30, 2024. This significant debt level poses a risk, particularly if cash generated from operations is insufficient to cover debt service obligations, which include $107.1 million of mortgage amortization and interest expenses due from October 1, 2024, through December 31, 2027.
Strategic Risks
Strategic risks arise from the Company’s ability to identify and capitalize on growth opportunities in the multi-family sector. The Company’s capacity to acquire new properties is limited by available cash and the ability to finance acquisitions through mortgage debt or equity sales. As of September 30, 2024, the Company had $37.4 million in outstanding junior subordinated notes, which bear an interest rate of 7.52%.
Mitigation Strategies
To address these risks, the Company is focusing on enhancing operational efficiencies and optimizing its property management strategies. The management has also indicated plans to refinance debt on favorable terms to manage cash flows better. Additionally, maintaining a robust capital structure and liquidity position will be essential to mitigate financial risks moving forward.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | High competition in multi-family housing market | Pressure on rental rates | Enhance property management and marketing strategies |
| Regulatory Changes | Changes in housing regulations and tax laws | Increased operational costs | Monitor regulatory environment and adapt strategies |
| Market Conditions | Economic factors affecting rental demand | Potential decrease in occupancy rates | Diversify property portfolio and enhance tenant retention |
| Operational Risks | Increased operating expenses | Reduced profitability | Implement cost control measures |
| Financial Risks | Significant debt obligations | Cash flow strain | Refinance debt and improve cash flow management |
| Strategic Risks | Limited capacity for new acquisitions | Stunted growth opportunities | Explore joint ventures and partnerships for expansion |
Future Growth Prospects for BRT Apartments Corp. (BRT)
Future Growth Prospects for BRT Apartments Corp.
Analysis of Key Growth Drivers
Several factors are poised to drive growth for the company in the upcoming years:
- Market Expansion: The company has been actively pursuing new acquisitions, including a recent investment of $18.3 million in joint ventures for multi-family properties in Wilmington, North Carolina, and Kennesaw, Georgia.
- Rental Revenue Growth: For the nine months ended September 30, 2024, rental and other revenue increased by 2.2% to $71.7 million compared to $70.1 million for the same period in 2023.
- Interest Expense Management: The weighted average interest rate on mortgage payables stood at 4.09% with a remaining term of 6.3 years as of September 30, 2024.
Future Revenue Growth Projections and Earnings Estimates
The company anticipates continued revenue growth driven by strategic initiatives:
- Projected Revenue Growth: Analysts predict a compound annual growth rate (CAGR) of approximately 2-5% for rental income over the next three years.
- Earnings Estimates: The adjusted funds from operations (AFFO) per diluted share for the nine months ended September 30, 2024, was $1.06, slightly down from $1.14 in the same period of 2023.
Strategic Initiatives or Partnerships
The company is leveraging various strategic initiatives to bolster its growth:
- Joint Ventures: The company has invested significantly in joint ventures, which contributed $986,000 in equity earnings from unconsolidated joint ventures for the nine months ended September 30, 2024.
- Credit Facility Utilization: An amended credit facility allows borrowing up to $40 million, facilitating acquisitions and operational expenses.
Competitive Advantages
The following competitive advantages position the company favorably for growth:
- Portfolio Diversification: The company holds a diversified portfolio of multi-family properties, reducing risk exposure.
- Experienced Management: The management team has extensive industry experience, enhancing operational efficiencies and strategic decision-making.
| Growth Driver | Current Value | Year-over-Year Change |
|---|---|---|
| Rental Revenue | $71.7 million | +2.2% |
| Joint Venture Investment | $18.3 million | N/A |
| Weighted Average Interest Rate | 4.09% | -0.32% |
| AFFO per Share | $1.06 | -7.0% |
The company's proactive measures and strategic initiatives signify a robust framework for future growth, ensuring its competitive positioning in the multi-family real estate market.
BRT Apartments Corp. (BRT) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- BRT Apartments Corp. (BRT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of BRT Apartments Corp. (BRT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View BRT Apartments Corp. (BRT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.