Good day, and welcome to the BRT Apartments Corp. Conference Call for the First Quarter of 2021. Today's call is being recorded. At this time, I'd like to turn the conference call over to Evelyn Infurna of ICR. Thank you. You may begin.

Thank you. Good day, everyone, and welcome to BRT Apartments' conference call. On the call today is Jeffrey Gould, President and Chief Executive Officer; also available are George Zweier, Chief Financial Officer; David Kalish, Senior Vice President; and Ryan Baltimore, Senior Vice President. As a reminder, this call is being webcast through the company's website at www.brtapartments.com. Additionally, the company's supplemental information and earnings release are available for your review on the Investor Relations section of the BRT's website. The company plans to file the 10-Q later today. Before we begin, I'd like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions and beliefs. Forward-looking statements can often be identified by words such as believe, expect, estimate, anticipate, intend and similar expressions and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding BRT's strategy and expectations for the future. They are not guarantees of future results and are subject to risks and uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's Form 10-Q for a more complete discussion of risk factors and other factors that could affect these forward-looking statements. Except as required by law, BRT does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes a discussion of funds from operations, or FFO; adjusted funds from operations, or AFFO; net operating income or NOI; and information regarding our pro rata share of the revenues, expenses, NOI, assets and liabilities of BRT's unconsolidated subsidiaries, all of which…

Thank you, Evelyn. I would like to welcome everyone to BRT's first quarter conference call. We are pleased to share that we continue to see pockets of strength, allowing us to selectively raise rental rates. We continue to focus on our capital structure, and have recently increased our credit facility availability. We remain confident about the year ahead as there is strong demand in many of our markets. With respect to our portfolio, as of May 1, 2021, we owned or had interest in 38 multifamily properties, consisting of 10,834 units in 11 states, including 30 properties owned by unconsolidated joint ventures and 8 properties wholly owned by BRT. BRT's equity interest in these unconsolidated subsidiaries, over which BRT actively oversees the management, ranges from 32% to 90%. We did not buy or sell any multifamily properties during the current quarter. Net loss attributed to common stockholders was $3.8 million or $0.22 per diluted share in the current quarter versus a net loss of $4.8 million or $0.29 per diluted share in the 2020 quarter. FFO grew to $6 million in the current quarter or $0.35 per diluted share compared to $3.3 million in the 2020 quarter or $0.19 per diluted share. The increase is primarily due to BRT's share of insurance recoveries on 3 joint venture properties impacted by the ice storms that took place in Texas in February, and to a lesser extent, improved operating margins and reduced interest expense at our portfolio. AFFO increased to $5.1 million for the current quarter or $0.30 per diluted share compared to $4 million or $0.23 per diluted share in the 2020 quarter. AFFO increased 30% on a per diluted share basis. Total rent full revenues for our portfolio increased by 6.1% to $27.8 million as compared to $26.2 million in…

[Operator Instructions] Our first question comes from the line of Gaurav Mehta with National Securities.

First question on your -- on the acquisition of JV interest in Civic Center. Can you maybe provide some color on why you acquired additional interest in that property?

Yes. You're speaking of Civic Center?

Yes, I think you mentioned acquired additional interest in that JV property. And if you just tell us why you did that?

Yes, it's been a property that's been performing terrific for us over the years. We're very comfortable with our partner there, and it was just a great opportunity. We thought we were buying that interest at an effective and smart price, and we went ahead and move forward with the purchase. So it's just been a great asset for us, and we wanted to own more of it. Simple as that.

Okay. Second question on the dispositions. Have you guys provided what kind of CapEx you're getting for the assets that you're selling this quarter?

No, we didn't provide for it, I can shed some light on that. We're selling things basically on our effective numbers at or around very low 4% caps, somewhere in that range. That goes for both the Daytona and the Houston sale.

Okay. Maybe on the acquisition market. Can you provide some color on what you guys are seeing generally? And what your expectations are going forward for acquisitions?

Yes, sure. It's -- obviously, it's a difficult time to buy. Very competitive landscape. Lots of people are focusing and excited about the Southeast for lots of reasons, population growth, employment growth, et cetera. We have liquidity. We're sitting on cash. We have an ATM available to us. The credit line is not -- is fully available. So we'd like to find opportunities, but at the same time, it is difficult. We -- I think that the buyout of partners is an interesting platform for us, but we'll have to see what allows, but it's not an easy time to buy, to answer your question.

Our next question comes from the line of Craig Kucera with Wunderlich Securities.

I just would like to circle back to the assets that you sold and bought. Was it a relatively flat cap rate split -- spread between the two? Or was there any delta between that?

Yes, we believe there was some delta, yes. So on the sales, like I said to Gaurav, we're trying to -- we're basically selling at low 4s for the Daytona sale and Houston. On the buys, one of the advantages we have, I think we do better on the purchases for lots of reasons. We know the asset [intelligence], partner looking to get out, various reasons, and I think we definitely improve on the purchase side. So I can't give you a specific differential, but I could tell you that effectively, the split of the [arb] has been very good for us.

Okay. Great. And with the upcoming sale of Kendall Manor, I think, just given your commentary, how difficult it is to buy, you were thinking that you might actually pay down debt versus recycling capital, but things were kind of sort of TBD. What are your current thoughts now on use -- sort of the use of proceeds from selling that asset?

Yes. Good question. Yes, we recognize that this is appropriate and a smart time to take some embedded gains in the portfolio. We've been talking about how we have these embedded gains, and it just made a lot of sense. These particular assets, and we've said before, there's reasons why we sell properties. In this particular case, we had difficult margins on Daytona. I thought it was an appropriate time to sell, because the operating expenses were high as well as Houston. And yes, the use of the money and the sales will lead to, obviously, our dollars in-house, which we plan to go towards a deleverage of the portfolio. We've been -- we do -- we are cognizant of the portfolio, their percentage of LTB and all, and we want to bring that down to some extent. And yes, some of the sales proceeds will be used for that purpose.

Got it. And just one more for me. Kind of as you think about the back half of '21, clearly, it sounds like you're seeing really strong pricing on asset sales. Have you soft circled any other assets for sale in the back half of '21?

We're always looking at the portfolio. At this point, Daytona and Houston are the only ones that we have to date. And if there's rationale and reasons for it and potentially, but those are the ones that we have sold to date. And when we look at the portfolio, we do it all the time and consider different alternatives and sometimes partners give us opportunity to buy them, it's all to be determined.

Got it. And I guess as you think about purchases in the future, are there more opportunities to take down more JV interest? And is that more attractive to you at this point versus maybe bringing new assets as you think about recycling capital?

Yes. I would say for sure that the opportunity we have at times to buy partners out, we -- like you asked in earlier question, which was a good one, we're doing better with buying out partners, far better with partners than we do as far as buying new assets in the market. The cap rates and the performance that we have on those purchases definitely are higher cap rates and better deals for us. So we hope to do that. Yes, we hope to do that more in the future, for sure.

Thank you. Our next question comes from the line of Rob Stevenson with Janney.

This is Steve Dumanski on for Rob Stevenson. Just curious to hear about the underwriting standards, I guess, going forward in terms of the pricing environment in terms of, I guess, underwriting CapEx reserves and soft cost for redeveloping units? Just wanted to hear your thoughts on where, I guess, if -- I guess, in terms of future underwriting and pricing?

I'm not sure I understand your question. As far as doing value-add, is that your question?

Yes, that's correct.

Yes. So we've been -- as you see, we've reduced the number of units that we've done on a quarterly basis pretty significantly. If we don't feel like we can achieve, I would say, a minimum 18% -- 18-plus percent return on investment to doing an upgrade, we typically don't do it. In COVID, we were very successful and very pleased with our collections and how we performed overall. But it wasn't exactly the opportune time to do a tremendous amount of value add. As we mentioned earlier, we did about 38 units, about $6,100 a unit, and we got very high returns of north of 25%. Thinking of the next quarter or 2, we're going to watch that. And I don't expect us to do a tremendous amount of value add on the units just to see how the market turns back. And then we hope to reengage and do quite a bit more.

Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Gould for any final comments.

Yes. I just want to simply say thank you all for attending. We're excited about our future. We appreciate your interest and wishing you all have been a nice day, and thank you. Speak with you all soon.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.