☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2019
☐\Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number 001-07172
BRT APARTMENTS CORP.
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
60 Cutter Mill Road, Great Neck, NY
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer” “accelerated filer”, “smaller reporting company”and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of stock, as of the latest practicable date.
15,896,805 Shares of Common Stock,
par value $0.01 per share, outstanding on August 1, 2019
Real estate properties, net of accumulated depreciation and amortization of $107,587 and $91,715
Real estate loan
Cash and cash equivalents
Deposits and escrows
Investments in unconsolidated joint ventures
Real estate property held for sale
Total Assets (a)
LIABILITIES AND EQUITY
Mortgages payable, net of deferred costs of $6,448 and $6,289
Junior subordinated notes, net of deferred costs of $347 and $357
Credit facility, net of deferred costs of $ 77 and $0
Accounts payable and accrued liabilities
Total Liabilities (a)
Commitments and contingencies
BRT Apartments Corp. stockholders' equity:
Preferred shares $.01 par value 2,000 shares authorized, none outstanding
Common stock, $.01 par value, 300,000 shares authorized;
15,172 and 15,038 shares outstanding
Additional paid-in capital
Accumulated other comprehensive income
Total BRT Apartments Corp. stockholders’ equity
Total Liabilities and Equity
(a) The Company's consolidated balance sheets include the assets and liabilities of consolidated variable interest entities (VIEs). See note 6. The consolidated balance sheets include the following amounts related to the Company's VIEs as of June 30, 2019 and December 31, 2018, respectively: $660,226 and $584,074 of real estate properties; $7,143 and $5,207 of cash and cash equivalents; $9,250 and $11,705 of deposits and escrows; $4,840 and $6,302 of other assets; $22,722 and $0 of real estate property held for sale; $522,707 and $446,779 of mortgages payable, net of deferred costs; and $13,835 and $11,816 of accounts payable and accrued liabilities.
See accompanying notes to consolidated financial statements.
BRT Apartments Corp. (the "Company"), a Maryland corporation, owns, operates and develops multi-family properties. The Company conducts its operations to qualify as a real estate investment trust, or REIT, for federal income tax purposes.
Generally, the multi-family properties are acquired with joint venture partners in transactions in which the Company contributes a significant portion of the equity. At June 30, 2019, the Company owns: (a) 37 multi-family properties with 10,336 units (including 402 units in lease-up), located in 12 states with a carrying value of $1,111,344,000; and (b) interests in three unconsolidated multi-family joint ventures with 1,026 units (including 339 units in lease-up) located in two states with a carrying value of $18,402,000.
Note 2 – Basis of Preparation
The accompanying interim unaudited consolidated financial statements as of June 30, 2019, and for the three and sixmonths ended June 30, 2019 and 2018, reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the results for such interim periods. The results of operations for the three and six months ended June 30, 2019 and 2018, are not necessarily indicative of the results for the full year. The consolidated unaudited balance sheet as of December 31, 2018, has been derived from the unaudited financial statements at that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States ("GAAP"). Accordingly, these unaudited statements should be read in conjunction with the Company's audited financial statements included in its Annual Report on Form 10-K for the year ended September 30, 2018, filed with the Securities and Exchange Commission ("SEC") on December 10, 2018, for complete financial statements.
The consolidated financial statements include the accounts and operations of the Company, its wholly owned subsidiaries, and its majority owned or controlled real estate entities and its interests in variable interest entities ("VIEs") in which the Company is determined to be the primary beneficiary. Material intercompany balances and transactions have been eliminated.
The Company’s consolidated joint ventures that own multi-family properties, except as set forth in the following paragraph, were determined to be VIEs because the voting rights of some equity investors in the applicable joint venture entity are not proportional to their obligations to absorb the expected losses of the entity and their right to receive the expected residual returns. It was determined that the Company is the primary beneficiary of these joint ventures because it has a controlling interest in that it has the power to direct the activities of the VIE that most significantly impact the entity's economic performance and it has the obligation to absorb losses of the entity and the right to receive benefits that could potentially be significant to the VIE.
The joint ventures that own properties in Ocoee, FL, Lawrenceville, GA, Dallas, TX, Farmers Branch, TX and Grand Prairie, TX were determined not to be a VIEs but are consolidated because the Company has controlling rights in such entities.
With respect to its unconsolidated joint ventures, as (i) the Company is generally the managing member but does not exercise substantial operating control over these entities or the Company is not the managing member and (ii) such entities are not VIEs, the Company has determined that such joint ventures should be accounted for under the equity method of accounting for financial statement purposes.
The distributions to each joint venture partner are determined pursuant to the applicable operating agreement and may not be pro-rata to the percentage equity interest each partner has in the applicable venture.
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from those estimates. Substantially all of the Company's assets are comprised of multi- family real estate assets generally leased to tenants on a one-year basis. Therefore, the Company aggregates real estate assets for reporting purposes and operates in one reportable segment.
In February 2019, the Board of Directors of the Company authorized a change in the Company’s fiscal year end from September 30 to December 31. The change is intended to better align the Company’s fiscal year with the fiscal year of other multi-family REITs. As a result of the change in fiscal year, (i) the Company’s 2019 fiscal year began on January 1, 2019 and ends on December 31, 2019 and (ii) the Company filed a Transition Report on Form 10-Q covering the transition period from October 1, 2018 to December 31, 2018.
Note 3 - Equity
Equity Distribution Agreements
In January 2018, the Company entered into equity distribution agreements, which were amended in May 2018, with three sales agents to sell up to an aggregate of $30,000,000 of its common stock from time-to-time in an at-the-market offering. During the quarter ended June 30, 2019, the Company did not sell any shares. From the commencement of this program through June 30, 2019, the Company sold 1,590,935 shares for an aggregate sales price of $20,913,000 before commissions of $424,000 and offering related expenses of $78,000.
Common Stock Dividend Distribution
The Company declared a quarterly cash distribution of $0.20per share, payable on July 9, 2019 to stockholders of record on June 25, 2019.
Stock Based Compensation
The Company's 2018 Incentive Plan (the "2018 Plan") permits the Company to grant: (i) stock options, restricted stock, restricted stock units, performance share awards and any one or more of the foregoing, up to a maximum of 600,000shares; and (ii) cash settled dividend equivalent rights in tandem with the grant of restricted stock units or certain performance based awards.
Restricted Stock Units
In June 2016, the Company issued restricted stock units (the "Units") to acquire up to 450,000shares of common stock pursuant to the 2016 Amended and Restated Incentive Plan (the "2016 Incentive Plan"). The Units entitle the recipients, subject to continued service through the March 31, 2021 vesting date, to receive (i) the underlying shares if and to the extent certain performance and/or market conditions are satisfied at the vesting date, and (ii) an amount equal to the cash dividends paid from the grant date through the vesting date with respect to the shares of common stock underlying the Units if, when, and to the extent, the related Units vest. For financial statement purposes, because the Units are not participating securities, the shares underlying the Units are excluded in the outstanding shares reflected on the consolidated balance sheet and from the calculation of basic earnings per share. The shares underlying the Units are contingently issuable shares.
Expense is recognized over the five-year vesting period on the Units which the Company expects to vest. For the three months ended June 30, 2019 and 2018, the Company recorded $36,000and $73,000, respectively, and for the six months ended June 30, 2019 and 2018, the Company recorded $71,000 and $146,000 of compensation expense related to the amortization of unearned compensation with respect to the Units. At June 30, 2019, and December 31, 2018, $248,000 and $319,000 of compensation expense, respectively, had been deferred and will be charged to expense over the remaining vesting period.
In January 2019, the Company granted 156,399 shares of restricted stock pursuant to the 2018 Incentive Plan. As of June 30, 2019, an aggregate of 725,296 shares of unvested restricted stock are outstanding pursuant to the 2018 Incentive Plan, 2016 Incentive Plan and 2012 Incentive Plan. No additional awards may be granted under the 2016 Incentive Plan and the 2012 Incentive Plan. The shares of restricted stock vest five years from the date of grant and under specified circumstances, including a change in control, may vest earlier. For financial statement purposes, the restricted stock is not included in the outstanding shares shown on the consolidated balance sheets until they vest, but are included in the earnings per share computation.
For the three months ended June 30, 2019 and 2018, the Company recorded $337,000 and $287,000, respectively, and for the six months ended June 30, 2019 and 2018, the Company recorded $667,000 and $511,000 of compensation expense related to the amortization of unearned compensation with respect to the restricted stock awards. At June 30, 2019
and December 31, 2018, $4,011,000 and $2,735,000 has been deferred as unearned compensation and will be charged to expense over the remaining vesting periods of these restricted stock awards. The weighted average remaining vesting period of these shares of restricted stock is 2.6 years.
On September 5, 2017, the Board of Directors approved a repurchase plan authorizing the Company, effective as of October 1, 2017, to repurchase up to $5,000,000 of shares of common stock through September 30, 2019. During the three and six months ended June 30, 2019, the Company repurchased 3,590 shares of common stock at an average market price of $12.80 for an aggregate cost of $46,000. During the three and six months ended June 30, 2018, there were no repurchases of common stock. As of June 30, 2019, $4,793,000 is remaining under the repurchase plan
Per Share Data
Basic earnings (loss) per share is determined by dividing net income (loss) applicable to common stockholders for the applicable period by the weighted average number of shares of common stock outstanding during such period. The Units are excluded from the basic earnings per share calculation, as they are not participating securities. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into shares of common stock or resulted in the issuance of shares of common stock that share in the earnings of the Company. Diluted earnings per share is determined by dividing net income applicable to common stockholders for the applicable period by the weighted average number of shares of common stock deemed to be outstanding during such period. In calculating diluted earnings per share, the Company, for the three and six months ended June 30, 2019 and the three months ended June 30, 2018, did not include any shares underlying the Units as their effect would have been anti-dilutive. For the six months ended June 30, 2018, the Company included 200,000shares of common stock underlying the Units as the market criteria with respect to the Units had been met at June 30, 2018.
The following table sets forth the computation of basic and diluted earnings per share (dollars in thousands, except share amounts):
Three Months Ended June 30,
Six Months Ended June 30,
Numerator for basic and diluted earnings (loss) per share attributable to common stockholders:
Net (loss) income attributable to common stockholders
Denominator for basic earnings per share—weighted average number of shares
Effect of diluted securities
Denominator for diluted earnings per share—adjusted weighted average number of shares and assumed conversions