On Thursday, B.Riley maintained a Buy rating on shares of BRT Apartments Corp. (NYSE: BRT) and increased the price target to $21.00 from $20.50. The firm anticipates BRT Apartments will navigate through current market challenges, particularly the absorption of new supply from Sunbelt apartment development and the beneficial effects of declining interest rates.
BRT Apartments has experienced a tempered growth in same-store net operating income (SSNOI) in the first half of 2024, with a rise of 1.7%, which is lower than its annual average of 6.1% from 2020 to 2023. This slowdown is attributed to the influx of new competing properties, particularly impacting locations such as the Bell’s Bluff property in Nashville.
Despite an increase in occupancy to over 93.5% in the second quarter of 2024, the company had to reduce rents to stimulate demand, leading to a nearly 17% quarter-over-quarter decrease in average rent at the property.
Looking ahead, the analyst expects the pressure from new developments to ease, given the significant reduction in apartment development starts in the Sunbelt region. Moreover, lower interest rates are seen as a potential boon for the company's valuation, as they could lead to a decrease in capitalization rates, limit dilution from debt refinancing, and reduce the cost of external growth.
While peers in the sector have seen their stock prices lifted by these positive factors in the last three months, BRT Apartments has not experienced the same uplift.
Nonetheless, with the company's second-quarter SSNOI performance aligning with its peers and a current discount of 13.5%/13.9% compared to suburban Sunbelt-focused apartment REIT peers on a 2024/2025 funds from operations (FFO) per share multiple basis, B.Riley views BRT Apartments as an attractive investment relative to its peers. The firm's revised price target reflects this positive outlook.
In other recent news, BRT Apartments Corp. secured a $27.4 million mortgage for its Woodland Trails property in Georgia. The financing, with a fixed interest rate of 5.22%, is structured as interest-only until its maturity in 2031. The company plans to use the proceeds from this mortgage for investments in additional multi-family properties and general corporate purposes. This may also include the repurchase of BRT's common stock.
In addition, BRT Apartments Corp. has disclosed its financial results and provided supplemental information in a recent filing with the U.S. Securities and Exchange Commission. This supplemental information is intended to support the company's disclosure, but does not indicate any material determination or mandatory dissemination by Regulation FD.
These are among the recent developments for BRT Apartments Corp., which continues to pursue opportunities for growth and strengthen its financial position through strategic financing activities.
InvestingPro Insights
As B.Riley maintains a bullish stance on BRT Apartments Corp., a look at recent InvestingPro data and tips offers additional context for investors considering the stock. Despite a challenging environment, BRT Apartments has been demonstrating resilience with a management team committed to enhancing shareholder value, as evidenced by their aggressive share buyback strategy and a track record of raising its dividend for 7 consecutive years.
InvestingPro data reveals a market capitalization of $358.48 million and a high dividend yield of 5.5%, reflecting the company's commitment to returning value to shareholders. This is particularly noteworthy given the current negative profitability metrics, with a P/E ratio standing at -33.24, indicating that the market expects future earnings improvements. The company's revenue growth over the last twelve months as of Q2 2024 was 4.09%, modest yet positive in a challenging market.
However, with analysts not expecting the company to be profitable this year and a net income projected to drop, investors should weigh these factors alongside the company's long-term return performance, which has been high over the past decade.
BRT Apartments' recent price is at 90.31% of its 52-week high, suggesting some investors see potential in the stock despite current headwinds. For those interested in a deeper dive, InvestingPro offers additional tips and insights on BRT Apartments Corp. at https://www.investing.com/pro/BRT.
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