BRT Apartments (BRT) Q3 2026 earnings review
BRT's rent income barely moved, but its interest costs climbed
BRT Apartments, a Southeast and Texas landlord, collected slightly more rent but kept less of it for shareholders. Revenue rose 1%, while interest costs climbed 7% because BRT swapped cheap old mortgages for pricier new ones. As a result, cash earnings per share, a measure the board weighs when it sets the dividend, fell 14%.
| Revenue | $24.7M +1.2% from a year ago |
|---|---|
| Cash earnings per share (AFFO) | $0.31 $0.36 a year ago |
| Interest expense | $6.3M $5.9M a year ago |
| Interest outlook | About $1.8M a year higher from debt deals in July and August |
⚖️ Verdict: 🔴 Bearish
The story got worse because borrowing costs now absorb the small rent gains, and BRT expects that to continue. The company estimates its recent debt deals add about $1.8 million a year in interest. Its loans due in 2027 also carry rates below today's market, the filing says. One positive: overhead fell after senior executives retired, though most of that saving involves no cash.
The question now is whether BRT can keep its dividend and buybacks while debt costs rise. Either rents pick up and refinancing stays affordable, or the landlord cuts payouts, sells buildings or issues shares. The terms on next year's mortgage refinancings will settle it.
🐂 Bull Case
Overhead Costs Fell After Executive Retirements
BRT Apartments runs its business with a small central team, and the cost of that overhead fell 10.5% from a year ago. The filing ties most of the drop to smaller stock-award charges after senior executives retired.
- Overhead: 14.2% of revenue, against 16.1% a year ago
- Stock-award charges: down $439,000 in the quarter
- Payroll over nine months: down $152,000
The saving lifts reported profit, but most of it involves no cash. Stock awards never counted in BRT's cash earnings measure. So the cash gain comes mainly from lower pay, and that is small beside the rise in interest.
What to watch: overhead as a share of revenue in the fourth quarter. A level near 14% would show that the landlord now runs on a lower cost base.
BRT Cut the Price of Its Credit Line
BRT keeps a $40 million credit line with Valley National Bank as backup money. In September the two sides amended it, so BRT now pays 2.1 percentage points above a benchmark short-term rate, down from 2.5.
- Minimum rate on the line: 5%, down from 6%
- Cash plus unused credit: about $52 million on November 2
- Extra cash from refinancing Civic Center 2 in July: about $20 million, by our math
This matters because the landlord may need the line for Ranch Lake, a Florida complex it agreed to buy, and for loans due next year. But the line itself expires in September 2027, so BRT must renew it too.
What to watch: whether BRT draws on the line to close Ranch Lake in early 2027. That would add debt whose rate moves with the market.
🐻 Bear Case
Interest Costs Grew Far Faster Than Rent
BRT Apartments borrows against its buildings, and many of its mortgages carry rates fixed years ago. As those loans come due, the landlord replaces them at today's rates. In July it swapped a 3.73% loan on its Civic Center 2 property for a 5.38% loan.
BRT said that loan and four refinanced late last year added $663,000 of mortgage interest in the quarter. Rent income did not keep pace, so interest now takes a bigger share of every dollar BRT collects.
- Interest expense: up 7.1% from a year ago
- Revenue: up 1.2%
- Interest as a share of revenue: 25.5%, up 1.4 percentage points
- Cash earnings per share: 31 cents, against 36 cents a year ago
This matters because cash earnings pay the dividend. Landlords call this measure AFFO, short for adjusted funds from operations, and it strips out depreciation and other non-cash charges. BRT's per-share figure fell 14%, and the company expects mortgage interest to keep rising.
What to watch: interest expense in the fourth quarter, the first full quarter with the new Civic Center 2 loan. A further rise in its share of revenue would mean rents still trail borrowing costs.
Payouts Exceeded the Cash the Business Produced
BRT Apartments says it will "carefully monitor our discretionary spending", naming the dividend and buybacks as the largest items. Yet over nine months it paid $10.4 million in cash dividends and $9.4 million for buybacks.
- Dividends plus buybacks: 117% of operating cash flow, by our math
- Dividend: 81% of cash earnings per share (AFFO), against 69% a year ago
- Equity: $150 million, down 15% since December
So BRT pays out more cash than its operations bring in, and cash fell to about $12 million by November. Its credit line requires a "tangible net worth of $140 million", and the filing does not show how the bank measures it.
What to watch: fourth-quarter buybacks and the next dividend decision. More buying while cash shrinks would leave less money for 2027 refinancings.
Rents Barely Moved in Oversupplied Markets
BRT said too many new apartments compete for tenants in eight of its markets, including Atlanta and Dallas. It offers rent discounts, called concessions, "as a means to improve occupancy", and those discounts cut rental income.
- Rate increases: $86,000, about 0.4% of rental revenue by our math
- Property operating costs: 46.8% of revenue, up 0.4 percentage points
- Buildings co-owned with partners: operating margin of 48.1%, against 52.4% a year ago
Utilities, payroll, advertising and repairs pushed property costs up 2.1%, while cheaper insurance offset only part. So rent minus property costs at buildings BRT owned a year ago, which landlords call net operating income, hardly changed.
What to watch: the rental-rate line in the fourth-quarter results. If rate increases stay this small, rent cannot cover the rising interest bill.
Mortgages Worth $207 Million Come Due by 2028
Most of BRT's mortgages end with one large repayment, called a balloon payment. The filing lists $207.4 million of these due through 2028, including loans at buildings it co-owns with partners.
BRT wrote that its cash flow and cash are "insufficient to fully fund" those payments. Without new loans, the landlord may issue shares or sell buildings "on potentially unfavorable terms".
- Due in 2027: $102.8 million
- Due in 2028: $104.6 million
- Average rate on loans maturing through 2027: 4.75%
This matters because recent refinancings all raised the interest bill. By our math, the rate a BRT partnership got in Atlanta in August sits about 1 percentage point above the 2027 loans' average.
What to watch: the rate on the first 2027 refinancing, which BRT will report in its filings next year. A rate near today's market would lift interest costs again.
👓 Other Themes
BRT Plans an $80 Million Florida Purchase
BRT agreed in June to buy Ranch Lake, an apartment complex in Bradenton, Florida, for about $80 million. The deal includes a government-insured mortgage at 2.91%, below current market rates, which BRT would take over. The seller reported $7.3 million of revenue over the past year, about 8% of BRT's sales last year by our math. BRT expects to close in early 2027, once the housing agency and lender approve.
BRT Now Assumes Higher Market Mortgage Rates
Each quarter BRT estimates what its fixed-rate debt would be worth at current lending rates. In September it used rates above 6%, against roughly 5% in December. That puts its mortgages $41.9 million below their book value, so its existing loans cost less than new ones would. The filing also cites tariffs, recession risk and the wars involving Ukraine and Iran.
💲 Other KPIs
Borrowing keeps climbing as a share of what BRT owns. Debt equals 74.4% of total assets, against 71.6% in December, and the ratio has risen in each quarter this year. New mortgages added debt while depreciation and losses shrank the asset base, which leaves less room to absorb pricier refinancings.
BRT's two preferred stakes in apartment owners, which it books as loans, kept paying on time. Interest income from them rose 6.8% to $346,000. But at today's market rates, BRT values them $540,000 below their book value, because those rates now exceed what the stakes pay in cash each month.
The share count fell 1.1% from a year ago because BRT kept buying back stock. It repurchased 276,014 shares in the quarter, after none a year earlier. A smaller count supports per-share figures, but it did not stop cash earnings per share from dropping.
🔮 Guidance
New. BRT estimates its July and August debt deals add about $1.8 million a year in interest. By our math, that equals about 7% of the third quarter's interest cost on a yearly basis. The company also expects its 2027 refinancings to raise mortgage interest, because current rates exceed what those loans carry.
Unchanged. BRT paid 25 cents a share again in October. The filing puts cash dividends through 2028 at no less than $41.8 million at that rate. The board sets the amount each quarter after reviewing cash needs, debt maturities and earnings measures, the filing says.
Raised. The board refilled the buyback program to $10 million in September, its second top-up this year. BRT then spent $3.3 million in October and early November, leaving about $5.4 million. By our math, nine-month buybacks already run nearly twice the 2025 full-year total.
Unchanged. BRT still expects to close the Bradenton purchase in the first quarter of 2027. By our math, the price minus the assumed mortgage leaves about $34 million for BRT to fund. The company plans to use cash, operating cash flow, mortgage proceeds and, if needed, its credit line.
❓ Key Questions
How will BRT fund its share of Ranch Lake?
By our math, the purchase needs about $34 million beyond the assumed mortgage, while BRT held about $12 million of cash in early November. A draw on the credit line would add debt at about 6%.
What rates does BRT expect on its 2027 refinancings?
BRT said current rates exceed those on its maturing mortgages. A rate for the first 2027 deal would show how far interest costs climb next year.
How does the bank measure BRT's tangible net worth?
Book equity fell to $150 million, and the credit line requires at least $140 million of tangible net worth. The filing does not say whether the bank's measure adds back depreciation.
Will buybacks continue while cash shrinks?
Dividends and buybacks took 117% of operating cash flow over nine months, by our math. BRT kept buying after the quarter ended, even as large mortgage repayments approach.
What were occupancy and average rent this quarter?
BRT reported combined occupancy of 94.4% for the second quarter, but the filing omits the third-quarter figure. It would show whether rent discounts are winning tenants.