Revisiting BRT Apartments – Insider Weekends

Key Insights:

• BRT Apartments is a New York based multifamily REIT with 28 properties across 11 states that focuses primarily on sunbelt states like Texas, South Carolina and Alabama.
• We consistently saw brothers Jeffrey and Matthew Gould purchase shares of BRT indirectly through their real estate firm Gould Investors in the first half of 2023, and after a roughly one year break, these purchases have resumed.
• We’ve written about BRT before, at a time where it seemed fairly undervalued and well-positioned for future growth and wanted to revisit the company after fiscal 2023 results were released.
• Results for 2023 weren’t necessarily poor, but they weren’t the strong results we expected either – revenue and AFFO both grew, but net income and FFO were lower when compared to fiscal 2022.
• 2024 looks to be another challenging year for BRT, though management continues to have faith in the company – repurchasing $14.4 million worth of shares in 2023 and an addition $2.3 million worth of shares in 2024 so far.

BRT Apartments Corp (BRT): $17.64

Market Cap: $344.5 M

Enterprise Value: $782.95

When writing our April 2023 Monthly Newsletter, we were torn between writing about the asset management firm Victory Capital (VCTR) and the multifamily REIT BRT Apartments (BRT). Victory Capital ended up being one of the spotlight ideas for that month, and since writing about the company, we have seen the stock appreciate by more than 45%. However, we didn’t forget about BRT Apartments entirely, and instead chose to feature the company in an early April Insider Weekends post, in which we wrote the following:

BRT Apartments is a New York based multifamily REIT with 29 properties across 11 states that focuses primarily on sunbelt states like Texas, South Carolina and Alabama. We have been consistently seeing the brothers Jeffrey and Matthew Gould purchase shares of BRT indirectly through their real estate firm Gould Investors. Jeffrey serves as the President and CEO of BRT, while Matt is a Senior Vice President. In addition to its 17.53% stake in BRT, Gould Investors also has a stake in the diversified REIT One Liberty Properties (OLP). Interestingly we are only seeing insider purchases by Gould Investors and the brothers in BRT but not in OLP. BRT is the smaller of the REITs with a market cap of $396 million and One Liberty Properties has a market cap of $488 million.

At the time, the company seemed fairly undervalued and well-positioned for future growth. Occupancy rates were strong at 95.9%, adjusted funds from operations (AFFO) were $1.52 in fiscal 2022 and the company was trading at 13 times AFFO. The company guidance suggested AFFO growth, and and it appeared as if rising interest rates weren’t harming the REIT. Furthermore, a majority of the company’s debt was set to mature in 2026 and beyond, giving BRT time to either see interest rates stabilize or to divest properties as they had been doing for a few months.

The quarter immediately after we wrote about BRT was strong one, and we saw revenue grow to $23 million, net income was actually positive at $11.2 million, and FFO and AFFO were $0.28 and $0.37 per diluted share respectively. The stock price rose to over $20 per share, and the company seemed to be thriving. However, when we saw the Gould brothers begin to purchase shares at roughly the same price last week, we figured it was time to revisit the company. We wanted to understand why net income dropped so significantly in fiscal 2023 compared to the year prior.

At first, we hypothesized some of the downward trending stock price movement could be related to the recent challenges of the New York Community Bank (NYCB) concerning loans related to multifamily rent-controlled properties, but none of BRT’s apartment properties are located in New York. The table below lists all of BRT’s wholly owned consolidated properties and how they contributed to 2023 revenues:

Fiscal 2023 results weren’t terribly poor, but they weren’t the strong results we expected either. The company did grow revenue from $70 million in 2022 to $93 million in 2023, but net income dropped from $50 million to $3.9 million. FFO declined to $22.6 million ($1.19 per diluted share) compared to $23.2 million in the prior year, while AFFO increased slightly to $28.9 million ($1.52 per diluted share) compared to $28.4 million in the prior year.

Throughout 2023, the company repurchased 779,423 shares of their common stock for a total of roughly $14.4 million, and from January 1st to March 1st of 2024, they repurchased an additional 123,061 for roughly $2.3 million A key factor related to the sharp drop in net income is the sales of various properties. Proceeds from the sales of properties in 2023 totaled $14.7 million, compared to $64.5 million in 2022.

When it comes to 2024 guidance, the company hasn’t provided any numbers, but has suggested that a big focus will be on maintaining stable average occupancy rates (which currently stands at 95.9%) within their portfolio before they lift rental rates. Furthermore, BRT owns a 17.45% interest in a recently completed 240 unit Stono Oaks property in South Carolina that is in lease up, and the company expects that this will lead to a drag on earnings from equity in unconsolidated joint ventures as they must begin to recognize depreciation and interest expense associated with the development.

With management continuously purchasing shares of the company both individually and via stock buybacks, it appears as if insiders still have faith in BRT. The company continues to have a reasonably high dividend of 5.5% and it may just be that patience is the name of the game here. Leasing environments are expected to remain slightly challenging in 2024 and recover in 2025 and 2026, so we won’t be making any changes to our position in the company for the time being.

Welcome to edition 729 of Insider Weekends. Insider buying increased last week with insiders purchasing $30.22 million of stock compared to $19.93 million in the week prior. Selling also increased to $1.53 billion as compared to $1.51 billion in the week prior.

Sell/Buy Ratio: The Insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by the total insider purchases that week. The adjusted ratio decreased to 50.75. In other words, insiders sold more than 50 times as much stock as they purchased. This week the Sell/Buy ratio was favorable; compared to the prior week when the ratio stood at 76.10.

Notable Insider Buys:

1. Pagaya Technologies Ltd. (PGY): $10.74

Shares of this AI-driven asset management company were acquired by 6 insiders:

• Chief Revenue Officer Yahav Yulzari acquired 60,000 shares, paying $10.17 per share for a total amount of $610,062. Mr. Yulzari increased his stake by 25.03% to 299,699 shares with this purchase.
• Chief Technology Officer Avital Pardo acquired 38,480 shares, paying $10.36 per share for a total amount of $398,634. Mr. Pardo increased his stake by 9.47% to 444,926 shares with this purchase.
• Chief Executive Officer Gal Krubiner acquired 33,600 shares, paying $10.36 per share for a total amount of $348,069. Mr. Krubiner increased his stake by 6.86% to 523,076 shares with this purchase.
• Director Avi Zeevi acquired 30,000 shares, paying $10.35 per share for a total amount of $310,578. Mr. Zeevi increased his stake by 530.41% to 35,656 shares with this purchase.
• President Sanjiv Das acquired 22,727 shares, paying $10.57 per share for a total amount of $240,336. Mr. Das increased his stake by inf% to 22,727 shares with this purchase.
• Chief People Officer Tami Rosen acquired 10,000 shares, paying $10.47 per share for a total amount of $104,723. Mr. Rosen increased his stake by 53.14% to 28,818 shares with this purchase.

You can view the list of recent insider transactions for Pagaya Technologies Ltd. here.

2. Flora Growth Corp (FLGC): $1.98

CEO Clifford Starke acquired 526,315 shares of this vertically integrated cannabis company, paying $1.90 per share for a total amount of $999,998.

You can view the list of recent insider transactions for Flora Growth Corp here.

3. BRT Apartments Corp (BRT): $17.64

President and CEO Jeffrey Gould acquired 12,299 shares of this apartment REIT, paying $16.85 per share for a total amount of $207,215.

You can view the list of recent insider transactions for BRT Apartments Corp here.

4. Neogen Corp. (NEOG): $12.38

Shares of this food safety company were acquired by 3 insiders:

• CEO John Edward Adent acquired 23,000 shares, paying $12.36 per share for a total amount of $284,190. Mr. Adent increased his stake by 17.78% to 152,389 shares with this purchase.
• CFO David H. Naemura acquired 12,500 shares, paying $12.51 per share for a total amount of $156,321. Mr. Naemura increased his stake by 71.27% to 30,040 shares with this purchase.
• Director James C. Borel acquired 7,500 shares, paying $13.06 per share for a total amount of $97,986. Mr. Borel increased his stake by 53.99% to 21,392 shares with this purchase.

You can view the list of recent insider transactions for Neogen Corp. here.

5. NexPoint Diversified Real Estate Trust (NXDT): $6.44

Director Arthur B. Laffer acquired 40,000 shares of this diversified real estate investment company, paying $6.14 per share for a total amount of $245,800.

You can view the list of recent insider transactions for NexPoint Diversified Real Estate Trust here.

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Vital Farms Inc. (VITL): $25.07

Shares of this sustainable food company were sold by 2 insiders:

• Executive Chairperson Matthew Ohayer sold 7,462,777 shares for $25.26, generating $188.51 million from the sale.
• President nd CEO Russell Diez-Canseco sold 30,000 shares for $25.03, generating $750,900 from the sale.

You can view the list of recent insider transactions for Vital Farms Inc. here.

2. Microstrategy Inc. (MSTR): $1479.58

Executive Chairman Michael J. Saylor sold 25,000 shares of this business intelligence software company for $1508.83, generating $37.72 million from the sale.

You can view the list of recent insider transactions for Microstrategy Inc. here.

3. Salesforce Inc. (CRM): $294.32

Shares of this cloud-based software company were sold by 2 insiders:

• Chair and CEO Marc Benioff sold 75,000 shares for $300.34, generating $22.53 million from the sale.
• Co-Founder and CTO, Slack Parker Harris sold 4,200 shares for $301.75, generating $1.27 million from the sale.

You can view the list of recent insider transactions for Salesforce Inc. here.

4. NVIDIA Corp (NVDA): $881.86

Director Mark A. Stevens sold 22,700 shares of this leading semiconductor company for $879.97, generating $19.98 million from the sale.

You can view the list of recent insider transactions for NVIDIA Corp here.

5. Pure Storage Inc. (PSTG): $53.43

Shares of this flash storage company were sold by 4 insiders:

• Director Scott Dietzen sold 272,541 shares for $53.33, generating $14.54 million from the sale.
• Chief Product Officer Ajay Singh sold 37,588 shares for $53.54, generating $2.01 million from the sale.
• Director Roxanne Taylor sold 36,860 shares for $53.76, generating $1.98 million from the sale.
• Director Storage, Inc. Pure sold 7,500 shares for $52.80, generating $396,000 from the sale.

You can view the list of recent insider transactions for Pure Storage Inc. here.

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

Disclaimer:  I hold long positions in BRT Apartments. Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.