Good day. Welcome to the BRT Apartments Corporation's first quarter earnings conference call. Today's conference is being recorded. At this time, I would like to turn the floor over to Mr. Tripp Sullivan of Investor Relations. Thank you. You may begin. Thank you for joining us today. On the call are Jeffrey Gould, President and Chief Executive Officer, George Zweier, Chief Financial Officer, and Ryan Baltimore, Chief Operating Officer, as well as David Kalish, Senior Vice President. I'd like to remind everyone 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. Listeners should not place undue reliance on any forward-looking statement and are encouraged to review the company's SEC filings, including its Form 10-Q for more complete discussion of risk 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 call also includes a discussion of non-GAAP measures, including FFO, AFFO, NOI, Combined Portfolio NOI, and information regarding our pro rata shared revenues, expenses, NOI, assets, and liabilities of BRT's unconsolidated subsidiaries. All the non-GAAP information discussed today has certain limitations and should be used with caution and in conjunction with the GAAP data presented in our supplemental earnings release in our reports filed with the SEC. Please see these reports and filings for the definitions of each non-GAAP measure. As a reminder, the company's supplemental information and earnings release have been posted on the investor relations section of BRT's website at www.brtapartments.com. I'd now like to turn the call over to President and CEO, Jeffrey Gould. Please go ahead, Jeff. Thank you. Welcome to the call. I'll start with some brief comments on our overall performance and the transaction environment. I'll turn the call over to George and Ryan for some additional color around our results. Our first quarter results were consistent with what we've seen across the sector this quarter. Revenues were in line with what we were anticipating. Leasing was positive, although down from the levels achieved a year ago, and expenses were in line with what we have estimated, barring some unexpected costs that George will discuss later. We're in the midst of the spring leasing season now, which is where we typically see a lift in occupancy and rents. With the continued strong population growth and demand in our markets, we have an opportunity to outperform the winter months. It's clear that rental growth in the sector won't be as strong as last year, with 5%-6% rental growth as a reasonable target. We'll need to control operating expenses as much as we can. It has been relatively quiet on the transaction front with both sellers and buyers remaining cautious. The environment hasn't changed much since last quarter. There seems to be a better understanding of where cap rates are settling. The expected sale of the Chatham Court property in Dallas during the second quarter should be completed at a sub 5% cap rate, generate an IRR of 22% over a seven-year hold and generate net proceeds of $19 million, which we intend to redeploy into our acquisition in Richmond. That acquisition is on track for a closing by year-end. Recall that's a $62.5 million total purchase price, including the assumption of approximately $32 million of mortgage debt at a fixed rate of 3.34% and maturing in 2061. We are hard on the contract and awaiting HUD approval. This is a great long-term play for us, and there are a number of similar opportunities we can pursue if we are able to source capital at the right terms. We did not utilize the ATM again this quarter, given where the stock has traded, but you may have noticed we filed an amended shelf registration statement last month. The shelf was expiring in mid-May. In the interest of good corporate governance, we expect to renew our ATM program in the near future. We are pleased with how well the portfolio continues to perform and expect that we will see the longer-term benefits of owning and controlling more of our portfolio in the years to come. We have the liquidity to deploy for new opportunities if they meet our return thresholds, and we have substantial flexibility with no debt maturities until 2025. George, please take it from here. Thank you, Jeff. The first quarter results continue to reflect the positive impact on a year-over-year basis f rom the partner buyouts and improved operating margins across the portfolio. That was offset by the higher non-controllable expenses incurred f rom the early cancellation costs associated with our previous insurance policies, r epairs from t he December w inter storm, and a utility leak at one property. Overall, the net loss attributable t o c ommon stockholders was $0.21 per diluted share, compared with net income of $0.62 per diluted share a year ago. T he primary reason for the year-over-year decline was the $0.70 gain in the p rior year period from the sale of a property owned by an unconsolidated subsidiary and increased interest expense from higher rates on our sub-debt and usage of our credit facility. FFO was $0.28 per diluted share, compared to $0.35 per diluted share a year ago, primarily due to increased interest expense on the sub-debt and credit facility and higher amortization of restricted stock and RSUs. AFFO was $0.36 p er diluted share, compared to $0.39 per diluted share a year ago, primarily due to increased interest expense on the sub-debt and credit facility. The higher expenses I noted earlier totaled a pproximately $396,000 or $0.02 per share. The increased borrowing costs year-over-year represented approximately $678,000 or $0.03 per share. With respect to the winter storm, we anticipate receiving approximately $490,000 in insurance recoveries over the next two quarters. For the combined portfolio, recurring CapEx was $1.2 million for the quarter. When you add the $558,000 in replacements that f low t hrough real e state o perating expense on our P&L, that totals approximately $1.8 million or $217 per unit. That's below the $300 per unit of replacements we have been assuming in our expense growth included in the Combined Portfolio NOI guidance. We completed the rehab of 55 units during the quarter for an investment of $422,000 at an estimated annualized ROI of 43%. Non-recurring CapEx, which represents revenue enhancing and major upgrades to properties, totaled $1.2 million during the quarter. Turning to the balance sheet. Debt to enterprise value as of March 31st was 62% compared w ith 59% a year ago, primarily due to the lower market capitalization. Available liquidity at quarter end was $75 million, which is comprised of c ash and availability under our credit facility. At May 1st, liquidity was $73 million. As of March 31st, our consolidated and unconsolidated mortgage debt had a weighted average interest rate of 4.01% and a weighted average remaining term to maturity of 7.3 years. As we noted previously, we fully paid down the $19 million of borrowings that were outstanding under our credit facility at year-end with a 10-year interest-only loan at a fixed rate of 4.45%. That's substantial positive rate arbitrage, considering the current interest rate on the credit facility is at prime. I'll turn the call over t o Ryan. Good morning. I'd like to start with the performance of our multifamily p ortfolio in the quarter. Average occupancy for the portfolio was 94.2% for the first quarter, which is down from 96.4% in the 2022 quarter, primarily due to the lack of movement during the pandemic a mong our tenants in the 2022 quarter. This is typically the quarter where we see lighter occupancy, so remaining in the mid-90% range is consistent with our expectations. Average monthly rents for the combined portfolio in the first quarter were up 10.9% compared to the 2022 quarter. For leases signed in the first quarter of 2023, we saw estimated spreads on new leases at 3.3%, renewal spreads of 6.7%, and overall spreads of 5.3%. For April, we have seen estimated spreads on new leases of 3.5%, renewal spreads of 5.6%, and overall spreads of 4.6%. Our rent-to-income ratio for all new leases signed in the first quarter is 25%, which demonstrates that our tenants continue to have minimal stress and our properties remain affordable. Given the performance of the portfolio to date, the timing of the disposition of Chatham Court in Dallas, and the acquisition of Winterfield at Midlothian in Richmond is consistent with our 2023 outlook, we affirmed our previously issued guidance as well as the accompanying assumptions. I would refer you to our supplemental for the details on that outlook and our comments on the fourth quarter earnings call for some additional color around those assumptions. Let's talk about our Combined Portfolio NOI for the quarter and some of the moving parts in that result. Recall that we introduced this metric to provide more transparency around the underlying performance of the portfolio, as well as the substantial change in the composition of our unconsolidated and consolidated properties from 2021 to 2022, as we've completed partner buyouts and sold several joint ventures in this period. Unfortunately, despite our best efforts for two quarters in a row, we've experienced some sizable increases in non-controllable expenses that obscure the performance of the portfolio. I hope to shed some light on this at this morning. The master insurance program we implemented effective in Q4 is, of course, the biggest driver in the year-over-year expense growth. I outlined the benefits of that program last quarter and expect it to pay off as the year progresses and into 2024. Our full year outlook assumed a slightly greater than 50% increase for the full year at the midpoint. The larger increase in Q1 was due to the cost of early cancellation for our previous policies. We do not anticipate this to continue throughout the year. Combined Portfolio NOI was up 1% in the first quarter compared with the first quarter of 2022. The primary components were: revenue grew 7.1%, primarily due to increased rental rates across the portfolio. Total expenses increased 15.2%, primarily due to higher insurance, repairs and maintenance, and utilities. Another way to look at the expenses is controllable expenses were up 11.8%, while non-controllable expenses were up 21.5%. The $396,000 of expenses related to the items mentioned earlier impacted Combined Portfolio NOI by 2.6% on a year-over-year basis. Absent these expenses, we would have reported a 3.6% Combined Portfolio NOI this quarter. If we were looking at a 25% year-over-year increase in insurance expense, similar to many of our peers, we would have reported a Combined Portfolio NOI increase of 6.3% in Q1. That completes our prepared remarks. Operator, will you please open the call to questions? We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Our first question of the day will come from Gaurav Mehta with EF Hutton. Please go ahead. Yeah, thanks. Good morning. I wanted to ask you for NOI. In your earnings release, you talked about expectation of sequential NOI improvement through 2023. Is that sequential improvement driven by the expenses growth rate going lower? As you know. Hi, Gaurav. We know we ran into a little bit of, obviously, some issues with expenses this quarter. I think that it'll stabilize, the insurance being one of them. You know, we have a better handle on it for sure. I think in, you know, the insurance cost and what we did taking over, bringing together most of the portfolio was something that I think long-term is a big benefit for us and which obviously knocked us a bit over the last quarter. Yeah, we think things will stabilize for sure. Yeah. Just to add on to that, Gaurav, this is Ryan. You know, repairs and maintenance and the utilities with the storm damages as well as this utility leak. You know, as we mentioned, this is not something we anticipate continuing throughout the year. I think, you know, on the expense side is where we'll really see the benefit. Okay. I wanted to ask you on one particular property in San Antonio. I noticed the occupancy for that property is 85.7%, which is lower than your overall portfolio occupancy. Can you provide some color on what's going on at that property? Why is the occupancy low? Yeah. We've had some short-term problems there. Nothing that we think we can't rectify. Basically, we've had some increased delinquency there. It really stems back from the buyout of the original partner. Some of our concerns about putting in tenants that didn't necessarily meet credit, issues like that, were part of the problem from the seller. You know, it happens at times where we get into a short-term problem of occupancy after we take over a property. Like I said, we're rectifying it. Delinquencies are, you know. And those tenants that were in there that were not paying are getting pushed out, and we're getting viable tenants in place. It was a concern for us, and I'm glad you pointed it out. Obviously, the occupancy was a big concern, and it's something that, long-term we think we'll handle no problem. It's already improving quite a bit. I think you'll see steady occupancy growth, in that particular property. Okay. Lastly, on the transaction market, in the remarks you, talked about selling the property in 2Q at sub 5% cap rate. Is that cap rate indicative of where the cap rates are in all of your markets? I'm sorry, I didn't hear your question. That, in your prepared remarks, you talked about selling a property in second quarter at sub 5% cap rate. Is that like sub 5% cap rate what you're seeing in all of the markets for multifamily properties? Oh, yeah. You're asking generally what's happening with cap rates in the general market? Specific to this property, yes, it was sub 5%, or it is sub 5%. We're planning on that closing very soon. Generally with the market, I think we've seen a stabilization in cap rates and a better feel for where things are. I would say it probably runs about 50 basis points higher than... Maybe 50-100 basis points higher than the lows in the market where cap rates were as low as, say, 4%. I think we're seeing deals typically run and we're focused on cap rates, seeing that they're in the probably 4.5%-5% range. That goes from our own sales as well as from talking to partners and other people in the industry and seeing where they're selling their properties at as well. We've had some calls of late with other investor partners, and they also are seeing similar cap rates in that 4.5%-5%. The next question will come from Michael Gorman with BTIG. Please go ahead. Thanks. Good morning, guys. Ryan, you talked a little bit about some of the move-outs or some of the lack of move-outs during COVID, and that may be having some impact on the comps. Can you just talk about the retention rate that you saw in the quarter, where you think that's gonna settle out, and maybe just walk through kind of where the residents, you know, what kind of other options the residents are moving out to in this environment? Is it home purchases? Are they leaving the market? Kind of what's driving that? Sure. Good, good morning, Michael. Yeah, we're, you know, we're not seeing a tremendous amount of move-outs due to home buying. I think interest rates have played a significant factor in that. The retention rate, you know, still kind of hovers in that the, you know, 50%-55% range generally across the portfolio. That being said, you know, I think obviously during the pandemic, there was a lot less movement. We were, you know, definitely higher than that, probably closer to 60%+ on the retention side. We're also, you know, seeing as rent growth has slowed down, people are definitely renewing more, and we're seeing more push on that front, as well. you know, one thing to note is with our value add program, which, you know, as you saw, we did about 55 units, you know, we do look at that quite often to see if we can, you know, be more aggressive there. We look at returns and see where there's opportunities. you know, that can have short-term effects on retention and occupancy as well. Generally speaking, we're not seeing a tremendous amount of home buying. You know, it's a lot of job relocation or, you know, alternative options to where people are moving to. Yeah. On that, we hope to do more on the renovation of units. We're focusing on renewal rents and markets and seeing where it pays to vacate and do a full renovation because the returns, as you see, have been great. We'd like to see, we'd like to do more units moving forward. It's something that we're definitely focused on. Yeah, for sure. Maybe a follow-up on that. I think you mentioned that kind of 880 units over the next 24 months, potentially. How does that work in terms of your line of sight? Is this just from your perspective, units that you'd like to get back because you think the returns are there? Do you have line of sight into kind of what those tenants are gonna do over the next 24 months? Kind of walk me through how that pipeline's constructed. No, I mean, basically, it's just, you know, when a proof of concept is there on a particular property where you see that the demand is there, you know, with, let's assume rents increased by $200 'cause you've done a full renovation, and if you've done a third or half of the property and you've seen, you know, the occupancy be minimal in those Or vacancy be minimal in those renovated units, it's a good sign that the market allows and can sustain rents in the higher breakpoint. If the renewal rents, say, are, you know, at 3% or 4% is something that we would probably consider and would work towards doing a new renovation. And we're seeing more proof of concept, frankly. I don't know, Ryan, do you have anything you wanna add to that? I think just on the number of units, you know, that's, I think, our goal is to be able to do all the units. I think as we've mentioned, you know, there are properties where retention's higher and people continue to renew, even if we're more aggressive on those renewal rates. You know, we do them when we can. I think the 880 is units available. It's not necessarily, you know, there's no guarantee we're gonna get all those units back. It really depends on the property. As Jeff mentioned, a lot of those units are already, you know, existing properties that have proved out the value add concept. We do believe there's opportunity there. We just don't, you know, we don't know when we'll get those units back or not. The other thing is, you know, a lot of the portfolio that you saw we bought back from partners. You know, there was always a conversation with the partners as to what we wanna do. It was a joint conversation. I think now that we own more of it 100% ourselves, we're probably a little bit more aggressive than to do the renovations and to get the bumps than maybe some of our partners would have been. We have more of an appetite, you know, and owning 100%, we have full control. Got it. Got it. That's, that's helpful. Maybe, Jeff, just quickly on the transaction market, obviously you understand kind of across the board, there's this bid-ask spread between buyers and sellers and expectations. I wonder if that goes further down, if you're seeing any disconnect between expectations for the fundamental performance in the transaction property, transaction market, where, you know, maybe buyers have different expectations for e-expense and NOI growth when they're looking to acquire versus what the sellers are forecasting. Is it just on the price or is it even on the underlying income that there's kind of a disconnect? I think there is a new norm on rental growth, and I think everyone's starting to see that you can't anticipate the growth that we've, you know, we and others have had over the last year and a half or two years. Sellers don't have any expectation, for example, and no understanding what's going on with insurance, as an example. Insurance costs are skyrocketing. Sellers, I think, wanna bury their head and not see the real impact of insurance. It took a while for them to understand a readjustment in taxes, real estate taxes, for example, when a buyer had to come in and the taxes were going up and they didn't wanna focus on the increase that a buyer would then have. The same thing's happening with insurance. I think it's a model that they have to learn and understand and realize that the increases have been, you know, substantial. It's partly on the expense side. It's partly on the rental side as well. I would say the rental side, I think, you know, people read about and hear about and sellers see that it's not the same growth as it was. I don't think there's a real focus on the expense side as much as they need to see. In time, you know, I think they'll understand it better. Then there'll be more of a, you know, an understanding between buyer and seller of what real true NOI is. Great. Just last one for me, just quickly. I know, the loan on Silvana, you closed on that in February. When was that rate locked? Is that kind of representative of where you think you could do additional secured debt in today's market? So that rate was locked earlier this year, and it was done at, you know, we kinda got a good timing. We were monitoring rates pretty much daily when we were ready to lock, and we were able to take advantage of a good dip in the market. I think today you're seeing still probably closer to that 5%+ on the debt side. I think the 4.45% that we got is a very strong piece of paper now, and we do believe it's very good long-term. As George mentioned, you know, the arbitrage versus the credit facility rate at Prime is pretty significant there. Yeah, I think today we're still getting quoted and seeing things probably in the 5%+ range on the Fannie / Freddie debt. The good news is we have no, you know, our line is there's nothing outstanding. We're very focused on keeping the line balance at or near zero, you know, for the most part, as best we can. You know, with the rate that we're paying on the line, it's obviously we don't think it's very good borrowing right now. You know, we're very cognizant of that and careful of the usage of the line. Great. Thanks for the time, guys. Sure. The last question will come from Craig Kucera with B. Riley FBR. Please go ahead. Good morning, guys. Jeff, I appreciated the color on the San Antonio property, but your suburban Dallas JV asset has also seen some occupancy softness over the past several quarters. Is that property also having some bad debt issues, or is something else going on? No. What we saw there is frankly just a little bit of supply issues. I mean, I'm pleased to say that the portfolio overall has seen, you know, we have not seen a great deal of new supply in our markets, which is you know, obviously terrific. Exception is to some extent is Dallas, Huntsville, Alabama, maybe Nashville, Tennessee. These markets continue to expand and with new development is You know, increased job growth and all. I think some of the Dallas specific portfolio had to do with new supply in these markets, which is being absorbed. I think the, I think it's number 1 or top couple of states, and cities where population growth is still rampant. I think with that, there's the new supply is getting eaten up. That had some impact on Dallas. Okay, great. Just circling back to some bigger picture comments. You mentioned that cap rates were settling down and, you know, kind of gave your thoughts on where they had gone. I'm curious, are you seeing a pickup in transaction volume or are things still relatively slow? Things are still relatively slow. I would say it picked up slightly from, you know, maybe February of this year, but slightly only. As far overall, I mean, the deal flow is not what's in the normal path of what we've seen over the years. Again, I think it goes back to the earlier question from Michael of, you know, sellers understanding of what markets are and what pricing they can get. People waiting to see what's gonna happen with the economy, and seeing what's going on with all the reports, et cetera. You know, we'd like to think that volume will pick up. I think, once you first get an understanding of cap rates and there's some stabilization, that helps. Until interest rates and, you know, with are gonna stay at a certain level and where everyone's comfortable and there's not that uncertainty, I think it'll remain somewhat quiet going forward. All right. Thanks. Sure. This concludes our question and answer session. I would like to turn the conference back over to Mr. Jeff Gould for any closing remarks. Please go ahead. Just wanna say thank you all for joining us. We appreciate your continued support and interest in BRT. Have a nice day. If you have any follow-up questions, feel free to call Ryan or myself at any time, and we'll be happy to speak with you. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.