ATLANTA, Nov. 5, 2018 /PRNewswire/ — Preferred Apartment Communities, Inc. (NYSE: APTS) (“we,” “our,” the “Company” or “Preferred Apartment Communities”) today reported results for the quarter ended September 30, 2018. Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of Common Stock and Class A Units of the Company’s operating partnership (“Class A Units”) outstanding. See Definitions of Non-GAAP Measures.

“In the third quarter and subsequent to quarter end, we were able to capture approximately $35.5 million in realized gains on the sales of two of our older assets. This was somewhat offset by an approximate $3.0 million ($0.07 per share) loan loss allowance that we recorded on a real estate loan investment we made in Irvine, California. This loan paid over $21.1 million in interest, allowing us to book an approximate 12.9% IRR over the life of the loan. When the property is sold to a third party buyer, however, the total distributable proceeds will not cover all the interest we had accrued. As a result, we are reducing our guidance range for 2018 FFO per share from $1.43 – $1.47 (midpoint $1.45 per share) to $1.39 – $1.42  (midpoint $1.405 per share),” said Daniel M. DuPree, Preferred Apartment Communities’ Chairman and Chief Executive Officer.

Preferred Apartment Communities

Financial Highlights

Our operating results for the three-month and nine-month periods ended September 30, 2018 were:

Three months ended
September 30,

Nine months ended
September 30,

2018

2017

% change

2018

2017

% change

Revenues (in thousands)

$

104,232

$

74,900

39.2

%

$

290,991

$

212,352

37.0

%

Per share data:

Net income (loss) (1)

$

(0.35)

$

(0.49)

$

(1.16)

$

(0.46)

FFO (2)

$

0.28

$

0.36

(22.2)

%

$

1.03

$

1.01

2.0

%

AFFO (2)

$

0.21

$

0.28

(25.0)

%

$

0.84

$

0.85

(1.2)

%

Dividends (3)

$

0.255

$

0.235

8.5

%

$

0.76

$

0.69

10.1

%

(1)

Per weighted average share of Common Stock outstanding for the periods indicated.

(2)

FFO and AFFO results are presented per weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliation of FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders on page S-3 and Definitions of Non-GAAP Measures beginning on page S-21.

(3)

Per share of Common Stock and Class A Unit outstanding.

 

  • For the third quarter 2018, our FFO payout ratio to Common Stockholders and Unitholders was approximately 92.8% and our FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 66.1%. For the nine months ended September 30, 2018, our FFO payout ratio to Common Stockholders and Unitholders was approximately 74.5% and our FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 60.1%.
  • For the third quarter 2018, our AFFO payout ratio to Common Stockholders and Unitholders was approximately 124.3% and our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 72.3%. For the nine months ended September 30, 2018, our AFFO payout ratio to Common Stockholders and Unitholders was approximately 91.2% and our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 64.8%. (A)

  • For the third quarter 2018, our same store net operating income for our established multifamily communities increased approximately 2.7% as compared to the third quarter 2017. (B) For the third quarter 2018, our average established multifamily communities’ physical occupancy was 95.3% and our same-store rental revenue grew 3.8% from the third quarter 2017. For the nine-month period ended September 30, 2018, our same store net operating income for our established multifamily communities increased approximately 6.5% as compared to the nine-month period ended September 30, 2017.
  • At September 30, 2018, the market value of our common stock was $17.58 per share. A hypothetical investment in our Common Stock in our initial public offering on April 5, 2011, assuming the reinvestment of all dividends and no transaction costs, would have resulted in an average annual return of approximately 24.4% through September 30, 2018.
  • As of September 30, 2018, the average age of our multifamily communities was approximately 5.3 years, which is the youngest in the public multifamily REIT industry.
  • Approximately 84.0% of our permanent property-level mortgage debt has fixed interest rates and approximately 6.4% has variable interest rates which are capped. We believe we are well protected against potential increases in market interest rates.
  • At September 30, 2018, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 54.4 %. Our leverage calculation excludes the gross assets of approximately $262.2 million and liabilities of approximately $257.3 million that we consolidated as a result of our investment in the ML-04 pool from the Freddie Mac K program.
  • As of September 30, 2018, our total assets were approximately $4.1 billion compared to approximately $2.9 billion as of September 30, 2017, an increase of approximately $1.2 billion, or approximately 41.9%. This growth was driven primarily by the acquisition of 22 real estate properties (net of the sale of 2 properties). In addition, our assets increased due to the consolidation of the ML-04 pool from the Freddie Mac K program.
  • Cash flow from operations for the quarter ended September 30, 2018 was approximately $38.8 million, an increase of approximately $10.7 million, or 38.1%, compared to approximately $28.1 million for the quarter ended September 30, 2017. Cash flow from operations for the third quarter 2018 was more than sufficient to fund our aggregate dividends and distributions for the period, which totaled approximately $33.0 million.
  • On August 31, 2018, we closed on two real estate loan investments aggregating up to approximately $12.3 million in support of a multifamily community project in Fredericksburg, Virginia.
  • On September 28, 2018, we sold our Stone Rise multifamily community located in Philadelphia, Pennsylvania for a net gain of approximately $18.6 million, which resulted in an internal rate of return of approximately 21.5% from April 15, 2011, the date the property was acquired.

(A) We calculate the AFFO payout ratio to Common Stockholders as the ratio of Common Stock dividends and distributions to AFFO. We calculate the AFFO payout ratio to preferred stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and AFFO. Since our operations resulted in a net loss from continuing operations for the periods presented, a payout ratio based on net loss is not calculable. See Definitions of Non-GAAP Measures.

(B) Same store net operating income is a non-GAAP measure. See Definitions of Non-GAAP Measures.

Acquisitions of Properties

During the third quarter 2018, we acquired the following properties:

Property

Location (MSA)

Units / Leasable square
feet

Office building:

150 Fayetteville

Raleigh, NC

560,000

LSF

Multifamily Community:

The Lodge at Hidden River

Tampa, FL

300

units

Grocery-anchored shopping center:

Brawley Commons

Charlotte, NC

122,028

LSF

 Real Estate Assets

Owned as of
September 30,
2018

Potential additions
from real estate loan
investment
portfolio (1) (2)

Potential total

Multifamily communities:

Properties

31

11

42

Units

9,852

2,915

12,767

Grocery-anchored shopping centers:

Properties

44

44

Gross leasable area (square feet)

4,571,888

4,571,888

Student housing properties:

Properties

7

1

8

Units

1,679

248

1,927

Beds

5,208

816

6,024

Office buildings:

Properties

6

6

Rentable square feet

2,099,000

2,099,000

(1)  We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio.

(2)  On May 7, 2018, we terminated purchase options on three multifamily communities and two student housing properties in exchange for aggregate termination fees of approximately $12.5 million. Potential additions to our real estate asset portfolio excludes the properties supported by these five loans.

Subsequent to Quarter End

On October 23, 2018, we sold our Stoneridge Farms at Hunt Club multifamily community located in Nashville, Tennessee for a gain on the sale of approximately $16.9 million, which resulted in an average annual return of approximately 22% from September 26, 2014, the date the property was acquired.

On October 31, 2018, we refinanced the variable rate mortgage on our Sol student housing community into a $36.2 million mortgage maturing on November 1, 2028 and which bears interest at a fixed rate of 4.71% per annum.

On November 1, 2018, our board of directors declared a quarterly dividend on our Common Stock of $0.26 per share, payable on January 15, 2019 to stockholders of record on December 14, 2018.

Multifamily Established Communities Financial Data

The following chart presents same store operating results for the Company’s established communities.We define our population of established communities as those that have achieved occupancy at or above 93% occupancy for all 3 consecutive months within a single quarter (stabilized) before the beginning of the prior year and that have been owned for at least 15 full months as of the end of the first quarter of the current year, enabling comparisons of the current year quarterly and annual reporting periods to the prior year comparative periods. The Company excludes the operating results of properties for which construction of adjacent phases has commenced and properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. For the periods presented, same store operating results consist of the operating results of the following multifamily established communities:

Aster at Lely Resort

Avenues at Cypress

Avenues at Northpointe

Citi Lakes

Lenox Portfolio

Venue at Lakewood Ranch

Overton Rise

Sorrel

Vineyards

At September 30, 2018, our Stoneridge Farms at Hunt Club and McNeil Ranch multifamily communities were being marketed for sale and are therefore excluded from our established communities same store population.

Same store net operating income is a non-GAAP measure that is most directly comparable to net income (loss), as shown in the reconciliations below.

Reconciliation of Multifamily Established Communities’ Net Income (Loss) to Same Store Net Operating Income (NOI)

Three months ended:

(in thousands)

9/30/2018

9/30/2017

Net income

$

8,354

$

42

Add:

Equity stock compensation

796

863

Depreciation and amortization

44,499

28,904

Interest expense

25,657

16,678

Management fees

7,234

5,148

Insurance, professional fees and other expenses

715

581

Loan loss allowance

3,029

Waived asset management and general and administrative expense fees

(1,934)

(656)

Less:

Interest revenue on notes receivable

13,618

9,674

Interest revenue on related party notes receivable

3,671

5,820

Income from consolidated VIEs

131

Gain on sale of real estate

18,605

Property net operating income

52,325

36,066

Less:

Non-same-store property revenues

74,937

47,843

Add:

Non-same-store property operating expenses

29,305

18,296

Same store net operating income

$

6,693

$

6,519

 

Multifamily Established Communities’ Same Store Net Operating Income

Three months ended:

(in thousands)

9/30/2018

9/30/2017

$ change

% change

Revenues:

Rental revenues

$

10,907

$

10,519

$

388

3.7

%

Other property revenues

1,099

1,044

55

5.3

%

Total revenues

12,006

11,563

443

3.8

%

Operating expenses:

Property operating and maintenance

1,594

1,588

6

0.4

%

Payroll

991

967

24

2.5

%

Property management fees

482

465

17

3.7

%

Real estate taxes

1,748

1,517

231

15.2

%

Other

498

507

(9)

(1.8)

%

Total operating expenses

5,313

5,044

269

5.3

%

Same store net operating income

$

6,693

$

6,519

$

174

2.7

%

 

Reconciliation of Multifamily Established Communities’ Net Income (Loss) to Same Store Net Operating Income (NOI)

Nine months ended:

(in thousands)

9/30/2018

9/30/2017

Net income

$

17,339

$

33,409

Add:

Equity stock compensation

2,881

2,608

Depreciation and amortization

127,210

82,187

Interest expense

68,972

48,085

Acquisition costs

14

Management fees

20,096

14,525

Insurance, professional fees and other expenses

2,487

2,395

Loan loss allowance

3,029

Waived asset management and general and administrative expense fees

(4,583)

(1,002)

Loss on extinguishment of debt

888

Less:

Interest revenue on notes receivable

37,576

26,112

Interest revenue on related party notes receivable

12,310

15,971

Income from consolidated VIEs

185

Gain on sale of real estate

38,961

37,635

Property net operating income

148,399

103,391

Less:

Non-same-store property revenues

205,316

135,848

Add:

Non-same-store property operating expenses

77,144

51,441

Same store net operating income

$

20,227

$

18,984

 

Multifamily Established Communities’ Same Store Net Operating Income

Nine months ended:

(in thousands)

9/30/2018

9/30/2017

$ change

% change

Revenues:

Rental revenues

$

32,481

$

31,352

$

1,129

3.6

%

Other property revenues

3,308

3,069

239

7.8

%

Total revenues

35,789

34,421

1,368

4.0

%

Operating expenses:

Property operating and maintenance

4,497

4,400

97

2.2

%

Payroll

2,852

2,889

(37)

(1.3)

%

Property management fees

1,435

1,387

48

3.5

%

Real estate taxes

5,251

5,236

15

0.3

%

Other

1,527

1,525

2

0.1

%

Total operating expenses

15,562

15,437

125

0.8

%

Same store net operating income

$

20,227

$

18,984

$

1,243

6.5

%

Capital Markets Activities

During the third quarter 2018, we issued and sold an aggregate of 101,616 Units from our offering of up to 1,500,000 Units, with each Unit consisting of one share of Series A Redeemable Preferred Stock and one Warrant to purchase up to 20 shares of Common Stock (the “$1.5 Billion Series A Unit Offering”), resulting in net proceeds of approximately $91.4 million after commissions and other fees. In addition, during the third quarter 2018, we issued 358,040 shares of Common Stock pursuant to the exercise of warrants issued under our Series A Preferred Stock offering, resulting in aggregate gross proceeds of approximately $4.6 million.

During the third quarter 2018, we issued and sold an aggregate of 8,199 shares of Series M Redeemable Preferred Stock (“mShares”), resulting in net proceeds of approximately $8.0 million after dealer manager fees.

Our outstanding shares of Common Stock totaled approximately 40.8 million shares at September 30, 2018. The market value of our Common Stock was $17.58 per share on September 30, 2018 versus $18.88 on September 30, 2017. Our total equity book value increased 29.2% to approximately $1.5 billion at September 30, 2018 from $1.2 billion at September 30, 2017.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On August 2, 2018, we declared a quarterly dividend on our Common Stock of $0.255 per share for the third quarter 2018. This represents a 8.5% increase in our common stock dividend from our third quarter 2017 common stock dividend of $0.235 per share, and an annualized dividend growth rate of 14.4% since September 30, 2011, the first quarter end following our initial public offering in April 2011. The third quarter dividend was paid on October 15, 2018 to all stockholders of record on September 14, 2018. In conjunction with the Common Stock dividend, the Company’s operating partnership declared a distribution on its Class A Units of $0.255 per unit for the third quarter 2018, which was paid on October 15, 2018 to all Class A Unit holders of record as of September 14, 2018.

Monthly Dividends on Preferred Stock

We declared and paid monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $21.8 million for the quarter ended September 30, 2018 and represent a 6% annual yield. We declared and paid dividends totaling approximately $466,000 on our Series M Redeemable Preferred Stock, or mShares, for the quarter ended September 30, 2018. The mShares have an escalating dividend rate from 5.75% in year one of issuance to 7.50% in year eight and thereafter.

Conference Call and Supplemental Data

We will hold our quarterly conference call on Tuesday, November 6, 2018 at 11:00 a.m. Eastern Time to discuss our third quarter 2018 results. To participate in the conference call, please dial in to the following:

Live Conference Call Details
Domestic Dial-in Number: 1-844-890-1791
International Dial-in Number: 1-412-380-7408
Company: Preferred Apartment Communities, Inc.
Date: Tuesday, November 6, 2018
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

The live broadcast of our third quarter 2018 conference call will be available online, on a listen-only basis, at our website, www.pacapts.com, under “Investors” and then click on the “Upcoming Events” link. A replay of the call will be archived on under the Investors/Audio Archive section.

2018 Guidance:

Net income (loss) per share –  We are actively adding properties and real estate loan investments to our real estate portfolio and the specific timing of the closing of acquisitions is difficult to predict. Acquisition activity by its nature can cause material variation in our reported depreciation and amortization expense and interest income. Since net income (loss) per share is calculated net of depreciation and amortization expense, our net income (loss) results can fluctuate, possibly significantly, depending upon the timing of the closing of acquisitions. For this reason, we are unable to reasonably forecast this measure or provide a reconciliation of our projected FFO per share to this measure.

FFO per share  –   We currently project FFO to be in the range of $1.39$1.42 per share for the full year 2018.

RevenueWe currently project total revenues to be in the range of $400 million$415 million for the full year 2018.

AFFO and FFO are calculated after deductions for all preferred stock dividends. Reconciliations of net income (loss) attributable to common stockholders to FFO and AFFO for the three-month and nine-month periods ended September 30, 2018 and 2017 appear on page S-3 of the attached report, as well as on our website using the following link:

http://investors.pacapts.com/download/3Q18_Earnings_and_Supplemental_Data.pdf

Forward-Looking Statements

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:  Estimates of future earnings, guidance, goals and performance are, by definition, and certain other statements in this Earnings Release and Supplemental Financial Data Report may constitute, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or transactions to be materially different from the results, guidance, goals, performance, achievements or transactions expressed or implied by the forward-looking statements.  Factors that impact such forward-looking statements include, among others, our business and investment strategy; legislative or regulatory actions; the state of the U.S. economy generally or in specific geographic areas; economic trends and economic recoveries; changes in operating costs, including real estate taxes, utilities and insurance costs; our ability to obtain and maintain debt or equity financing; financing and advance rates for our target assets; our leverage level; changes in the values of our assets; the occurrence of natural or man-made disasters; availability of attractive investment opportunities in our target markets; our ability to maintain our qualification as a real estate investment trust, or REIT, for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; availability of quality personnel; our understanding of our competition and market trends in our industry; and interest rates, real estate values, the debt securities markets and the general economy.

Except as otherwise required by the federal securities laws, we assume no liability to update the information in this Earnings Release and Supplemental Financial Data Report.

We refer you to the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2017 that was filed with the Securities and Exchange Commission, or SEC, on March 1, 2018, which discuss various factors that could adversely affect our financial results. Such risk factors and information may be updated or supplemented by our Form 10-K, Form 10-Q and Form 8-K filings and other documents filed from time to time with the SEC.

Additional Information

The SEC has declared effective the registration statement filed by the Company for each of the offerings to which this communication may relate. Before you invest, you should read the final prospectus, and any prospectus supplements, forming a part of the registration statement and other documents the Company has filed with the SEC for more complete information about the Company and the offering to which this communication may relate. In particular, you should carefully read the risk factors described in the final prospectus and in any related prospectus supplement and in the documents incorporated by reference in the final prospectus and any related prospectus supplement to which this communication may relate. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, the Company or its dealer manager, Preferred Capital Securities, LLC, with respect to the mShares Offering and the $1.5 Billion Unit Offering, and JonesTrading Institutional Services LLC, with respect to the Common Stock ATM Offering, will arrange to send you a prospectus if you request it by contacting Leonard A. Silverstein at (770) 818-4100, 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.

The prospectus supplement for the Common Stock ATM Offering, dated July 10, 2017, including a base prospectus, dated May 17, 2016, can be accessed through the following link:

https://www.sec.gov/Archives/edgar/data/1481832/000148183217000110/atmprospectusspring2017.htm

The final prospectus for the mShares Offering, dated January 19, 2017, can be accessed through the following link:

https://www.sec.gov/Archives/edgar/data/1481832/000148183217000008/a424prospectus-mshares1.htm

The final prospectus for the $1.5 Billion Unit Offering, dated March 16, 2017, can be accessed through the following link:

https://www.sec.gov/Archives/edgar/data/1481832/000148183217000061/a424prospectus-15bseriesar.htm

 

THIRD QUARTER 2018 – SUPPLEMENTAL FINANCIAL DATA

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)

Three months ended September 30,

(In thousands, except per-share figures)

2018

2017

Revenues:

Rental revenues

$

73,640

$

50,072

Other property revenues

13,303

9,335

Interest income on loans and notes receivable

13,618

9,673

Interest income from related parties

3,671

5,820

Total revenues

104,232

74,900

Operating expenses:

Property operating and maintenance

12,893

7,901

Property salary and benefits

4,911

3,403

Property management fees

2,998

2,053

Real estate taxes

10,597

7,706

General and administrative

2,221

1,702

Equity compensation to directors and executives

796

863

Depreciation and amortization

44,499

28,904

Asset management and general and administrative expense

fees to related party

7,234

5,148

Loan loss allowance

3,029

Insurance, professional fees, and other expenses

1,713

1,156

Total operating expenses

90,891

58,836

Waived asset management and general and administrative

expense fees

(1,934)

(656)

Net operating expenses

88,957

58,180

Operating income

15,275

16,720

Interest expense

25,657

16,678

Change in fair value of net assets of consolidated VIE

131

Net income (loss) before gain on sale of real estate

(10,251)

42

Gain on sale of real estate

18,605

Net income

8,354

42

Consolidated net (income) attributable to non-controlling interests

(216)

(1)

Net income attributable to the Company

8,138

41

Dividends declared to preferred stockholders

(22,360)

(16,421)

Earnings attributable to unvested restricted stock

(5)

(4)

Net loss attributable to common stockholders

$

(14,227)

$

(16,384)

Net loss per share of Common Stock available to common stockholders,

basic and diluted

$

(0.35)

$

(0.49)

Weighted average number of shares of Common Stock outstanding,

basic and diluted

40,300

33,540

 

 

Reconciliation of FFO and AFFO

to Net (Loss) Income Attributable to Common Stockholders (A)

Three months ended September 30,

(In thousands, except per-share figures)

2018

2017

Net loss attributable to common stockholders (See note 1)

$

(14,227)

$

(16,384)

Add:

Depreciation of real estate assets

33,037

21,597

Amortization of acquired real estate intangible assets and deferred leasing costs

11,058

7,106

Net income attributable to non-controlling interests (See note 2)

216

1

Less:

Gain on sale of real estate

(18,605)

FFO

11,479

12,320

Add:

Loan cost amortization on acquisition term note

19

29

Amortization of loan coordination fees paid to the Manager (See note 3)

673

407

Weather-related property operating losses (See note 4)

161

217

Non-cash equity compensation to directors and executives

796

863

Amortization of loan closing costs (See note 5)

1,309

905

Depreciation/amortization of non-real estate assets

404

202

Net loan fees received (See note 6)

248

879

Accrued interest income received (See note 7)

4,298

1,797

Loan loss allowance (See note 8)

3,029

Deemed dividends from cash redemptions of preferred stock

2

Amortization of lease inducements (See note 9)

387

145

Non-cash dividends on Series M Preferred Stock

63

33

Less:

Non-cash loan interest income (See note 7)

(4,104)

(4,860)

Non-cash revenues from mortgage-backed securities

(131)

Amortization of purchase option termination revenues in excess of cash received (See note 10)

(4,478)

Cash paid for loan closing costs

(25)

Amortization of acquired above and below market lease intangibles

and straight-line rental revenues (See note 11)

(3,353)

(1,941)

Amortization of deferred revenues (See note 12)

(680)

(287)

Normally recurring capital expenditures and leasing costs (See note 13)

(1,528)

(1,214)

AFFO

$

8,569

$

9,495

Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends

$

10,377

$

8,158

Distributions to Unitholders (See note 2)

272

212

Total

$

10,649

$

8,370

Common Stock dividends and Unitholder distributions per share

$

0.255

$

0.235

FFO per weighted average basic share of Common Stock and Unit outstanding

$

0.28

$

0.36

AFFO per weighted average basic share of Common Stock and Unit outstanding

$

0.21

$

0.28

Weighted average shares of Common Stock and Units outstanding: (A)

Basic:

Common Stock

40,300

33,540

Class A Units

1,069

901

Common Stock and Class A Units

41,369

34,441

Diluted Common Stock and Class A Units (B)

42,890

37,820

Actual shares of Common Stock outstanding, including 19 and 18 unvested shares

 of restricted Common Stock at September 30, 2018 and 2017, respectively

40,804

35,616

Actual Class A Units outstanding at September 30, 2018 and 2017, respectively.

1,068

901

Total

41,872

36,517

(A) Units and Unitholders refer to Class A Units in our Operating Partnership, or Class A Units, and holders of Class A Units, respectively. Unitholders include recipients of awards of Class B Units in our Operating Partnership, or Class B Units, for annual service which became vested and earned and automatically converted to Class A Units. Unitholders also include the entity that contributed the Wade Green grocery-anchored shopping center. The Class A Units collectively represent an approximate 2.58% weighted average non-controlling interest in the Operating Partnership for the three-month period ended September 30, 2018.

(B) Since our FFO and AFFO results are positive for the periods reflected above, we are presenting recalculated diluted weighted average shares of Common Stock and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common stock equivalents from grants of the Class B Units, warrants included in units of Series A Preferred Stock issued, as well as annual grants of restricted Common Stock. The weighted average shares of Common Stock outstanding presented on the Consolidated Statements of Operations are the same for basic and diluted for any period for which we recorded a net loss available to common stockholders, excluding any gains from sales of real estate assets.

See Notes to Reconciliation of FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders on page S-5.

 

 

Reconciliation of FFO and AFFO

to Net (Loss) Income Attributable to Common Stockholders (A)

Nine months ended September 30,

(In thousands, except per-share figures)

2018

2017

Net loss attributable to common stockholders (See note 1)

$

(45,931)

$

(13,742)

Add:

Depreciation of real estate assets

90,190

60,344

Amortization of acquired real estate intangible assets and deferred leasing costs

35,963

21,308

Net income attributable to non-controlling interests (See note 2)

456

1,097

Less:

Gain on sale of real estate

(38,961)

(37,635)

FFO

41,717

31,372

Add:

Acquisition and pursuit costs

14

Loan cost amortization on acquisition term notes

63

99

Amortization of loan coordination fees paid to the Manager (See note 3)

1,780

1,178

Mortgage loan refinancing and extinguishment costs

61

1,058

(Insurance recovery in excess of) weather-related property operating losses  (See note 4)

(33)

217

Contingent management fees recognized

387

Non-cash equity compensation to directors and executives

2,881

2,608

Amortization of loan closing costs (See note 5)

3,567

2,757

Depreciation/amortization of non-real estate assets

1,057

535

Net loan fees received (See note 6)

1,459

1,296

Accrued interest income received (See note 7)

8,410

7,115

Loan loss allowance (See note 8)

3,029

Deemed dividends from cash redemptions of preferred stock

522

Non-cash dividends on Series M Preferred Stock

216

33

Amortization of lease inducements (See note 9)

955

237

Less:

Non-cash loan interest income (See note 7)

(14,726)

(13,507)

Cash paid for loan closing costs

(416)

Amortization of purchase option termination revenues in excess of cash received (See note 10)

(1,964)

Non-cash revenues from mortgage-backed securities

(185)

Amortization of acquired above and below market lease intangibles

 

and straight-line rental revenues (See note 11)

(9,047)

(5,497)

Amortization of deferred revenues (See note 12)

(1,765)

(457)

Normally recurring capital expenditures and leasing costs (See note 13)

(3,482)

(3,032)

AFFO

$

34,099

$

26,413

Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends

30,283

21,668

Distributions to Unitholders (See note 2)

813

622

Total

31,096

22,290

Common Stock dividends and Unitholder distributions per share

$

0.76

$

0.69

FFO per weighted average basic share of Common Stock and Unit outstanding

$

1.03

$

1.01

AFFO per weighted average basic share of Common Stock and Unit outstanding

$

0.84

$

0.85

Weighted average shares of Common Stock and Units outstanding: (A)

Basic:

Common Stock

39,598

30,147

Class A Units

1,070

910

Common Stock and Class A Units

40,668

31,057

Diluted Common Stock and Class A Units (B)

41,936

33,645

Actual shares of Common Stock outstanding, including 19 and 18 unvested shares

 of restricted Common Stock at September 30, 2018 and 2017, respectively

40,804

35,616

Actual Class A Units outstanding at September 30, 2018 and 2017, respectively.

1,068

901

Total

41,872

36,517

(A) Units and Unitholders refer to Class A Units in our Operating Partnership, or Class A Units, and holders of Class A Units, respectively. Unitholders include recipients of awards of Class B Units in our Operating Partnership, or Class B Units, for annual service which became vested and earned and automatically converted to Class A Units. Unitholders also include the entity that contributed the Wade Green grocery-anchored shopping center. The Class A Units collectively represent an approximate 2.63% weighted average non-controlling interest in the Operating Partnership for the nine-month period ended September 30, 2018.

(B) Since our FFO and AFFO results are positive for the periods reflected above, we are presenting recalculated diluted weighted average shares of Common Stock and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common stock equivalents from grants of the Class B Units, warrants included in units of Series A Preferred Stock issued, as well as annual grants of restricted Common Stock. The weighted average shares of Common Stock outstanding presented on the Consolidated Statements of Operations are the same for basic and diluted for any period for which we recorded a net loss available to common stockholders, excluding any gains from sales of real estate assets.

See Notes to Reconciliation of FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders on page S-5.

 

Notes to Reconciliations of FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders

1)

Rental and other property revenues and property operating expenses for the quarter ended September 30, 2018 include activity for the multifamily community, office building and grocery-anchored shopping center acquired during the quarter only from their respective dates of acquisition. In addition, the third quarter 2018 period includes activity for the five multifamily communities, seven grocery-anchored shopping centers, five student housing properties and three office buildings acquired since September 30, 2017. Rental and other property revenues and expenses for the third quarter 2017 include activity for the acquisitions made during that period only from their respective dates of acquisition.

2)

Non-controlling interests in our Operating Partnership consisted of a total of 1,068,400 Class A Units as of September 30, 2018. Included in this total are 419,228 Class A Units which were granted as partial consideration to the seller in conjunction with the seller’s contribution to us on February 29, 2016 of the Wade Green grocery-anchored shopping center. The remaining Class A units were awarded primarily to our key executive officers. The Class A Units are apportioned a percentage of our financial results as non-controlling interests. The weighted average ownership percentage of these holders of Class A Units was calculated to be 2.59% and 2.62% for the three-month periods ended September 30, 2018 and 2017, respectively.

3)

As of January 1, 2016, we pay loan coordination fees to Preferred Apartment Advisors, LLC, our Manager, related to obtaining mortgage financing for acquired properties. Loan coordination fees were introduced to reflect the administrative effort involved in arranging debt financing for acquired properties. The portion of the loan coordination fees paid up until July 1, 2017 attributable to the financing were amortized over the lives of the respective mortgage loans, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Beginning effective July 1, 2017, the loan coordination fee was lowered from 1.6%  to 0.6% of the amount of any mortgage indebtedness on newly-acquired properties or refinancing. All of the loan coordination fees paid to our Manager subsequent to July 1, 2017 are amortized over the life of the debt. At September 30, 2018, aggregate unamortized loan coordination fees were approximately $13.0 million, which will be amortized over a weighted average remaining loan life of approximately 10.2 years.

4)

We sustained weather related operating losses due to Hurricane Harvey at our Stone Creek multifamily community during the nine months ended September 30, 2018; these costs are added back to FFO in our calculation of AFFO. Lost rent and other operating costs incurred during the nine-month period ended September 30, 2018 totaled approximately $555,000. This number is offset the receipt from our insurance carrier of approximately $588,000 for recoveries of lost rent, which was recognized in our statements of operations for the nine months ended September 30, 2018.

5)

We incur loan closing costs on our existing mortgage loans, which are secured on a property-by-property basis by each of our acquired real estate assets, and also for occasional amendments to our syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. On March 23, 2018, but effective April 13, 2018, the maximum borrowing capacity on the Revolving Line of Credit was increased from $150 million to $200 million. These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability. At September 30, 2018, aggregate unamortized loan costs were approximately $21.2 million, which will be amortized over a weighted average remaining loan life of approximately 7.6 years.

6)

We receive loan origination fees in conjunction with the origination of certain real estate loan investments. These fees are then recognized as revenue over the lives of the applicable loans as adjustments of yield using the effective interest method. The total fees received after the payment of loan origination fees to our Manager are additive adjustments in the calculation of AFFO. Correspondingly, the amortized non-cash income is a deduction in the calculation of AFFO. Over the lives of certain loans, we accrue additional interest amounts that become due to us at the time of repayment of the loan or refinancing of the property, or when the property is sold. This non-cash interest income is subtracted from FFO in our calculation of AFFO. The amount of additional accrued interest becomes an additive adjustment to FFO once received from the borrower (see note 7).

7)

This adjustment reflects the receipt during the periods presented of additional interest income (described in note 6 above) which was earned and accrued prior to those periods presented on various real estate loans.

8)

During the third quarter 2018, we recorded a $3.0 million allowance for loss on our real estate loan investment to the developer of Fusion Apartments in Irvine, California, which is reflected on our statements of operations.

9)

This adjustment removes the non-cash amortization of costs incurred to induce tenants to lease space in our office buildings and grocery-anchored shopping centers.

10)

On May 7, 2018, we terminated our existing purchase options on the Encore, Bishop Street and Hidden River multifamily communities and the Haven 46 and Haven Charlotte student housing properties, all of which are partially supported by real estate loan investments held by us. In exchange, we are to receive termination fees aggregating approximately $12.5 million from the developers. As of September 30, 2018, we have received approximately $4.6 million in cash in excess of the recognized termination fees, which are added to FFO in our calculation of AFFO.

11)

This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At September 30, 2018, the balance of unamortized below-market lease intangibles was approximately $43.2 million, which will be recognized over a weighted average remaining lease period of approximately 8.9 years.

12)

This adjustment removes the non-cash amortization of deferred revenue recorded by us in conjunction with Company-owned lessee-funded tenant improvements in our office buildings, as well as non-cash revenue earned from our investment in the collateralized mortgage-backed security in the ML-04 pool from the Freddie Mac K program.

13)

We deduct from FFO normally recurring capital expenditures that are necessary to maintain our assets’ revenue streams in the calculation of AFFO. This adjustment also deducts from FFO capitalized amounts for third party costs during the period to originate or renew leases in our grocery-anchored shopping centers and office buildings. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures. See Capital Expenditures, Grocery-Anchored Shopping Center Portfolio, and Office Buildings Portfolio sections for definitions of these terms.

See Definitions of Non-GAAP Measures.

 

 

Preferred Apartment Communities, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per-share par values)

September 30, 2018

December 31, 2017

Assets

Real estate

Land

$

490,394

$

406,794

Building and improvements

2,494,904

2,043,853

Tenant improvements

105,390

63,425

Furniture, fixtures, and equipment

261,806

210,779

Construction in progress

5,353

10,491

Gross real estate

3,357,847

2,735,342

Less: accumulated depreciation

(242,579)

(172,756)

Net real estate

3,115,268

2,562,586

Real estate loan investments, net of deferred fee income and allowance for loan loss

326,765

255,345

Real estate loan investments to related parties, net

60,635

131,451

Real estate assets held for sale, net

36,360

Total real estate and real estate loan investments, net

3,539,028

2,949,382

Cash and cash equivalents

26,840

21,043

Restricted cash

59,531

51,969

Notes receivable

14,285

17,318

Note receivable and revolving lines of credit due from related parties

33,140

22,739

Accrued interest receivable on real estate loans

31,250

26,865

Acquired intangible assets, net of amortization

112,914

102,743

Deferred loan costs on Revolving Line of Credit, net of amortization

1,118

1,385

Deferred offering costs

7,741

6,544

Tenant lease inducements, net

20,275

14,425

Tenant receivables and other assets

41,632

37,957

Variable Interest Entity (“VIE”) assets, at fair value

262,228

Total assets

$

4,149,982

$

3,252,370

Liabilities and equity

Liabilities

Mortgage notes payable, net of deferred loan costs

$

2,140,583

$

1,776,652

Revolving line of credit

55,700

41,800

Term note payable, net of deferred loan costs

10,994

Real estate loan investment participation obligation

10,495

13,986

Unearned purchase option termination fees

5,756

Deferred revenue

37,964

27,947

Accounts payable and accrued expenses

47,548

31,253

Accrued interest payable

6,322

5,028

Dividends and partnership distributions payable

18,188

15,680

Acquired below market lease intangibles, net of amortization

43,155

38,857

Security deposits and other liabilities

14,586

9,407

VIE liabilities, at fair value

257,303

Total liabilities

2,637,600

1,971,604

Commitments and contingencies

Equity

Stockholders’ equity

Series A Redeemable Preferred Stock, $0.01 par value per share; 3,050

   shares authorized; 1,565 and 1,250 shares issued; 1,508 and 1,222

 shares outstanding at September 30, 2018 and December 31, 2017, respectively

15

12

Series M Redeemable Preferred Stock, $0.01 par value per share; 500

   shares authorized; 37 and 15 shares issued and outstanding

 at September 30, 2018 and December 31, 2017, respectively

Common Stock, $0.01 par value per share; 400,067 shares authorized;

40,785 and 38,565 shares issued and outstanding at

September 30, 2018 and December 31, 2017, respectively

408

386

Additional paid-in capital

1,509,411

1,271,040

Accumulated earnings

4,449

      Total stockholders’ equity

1,509,834

1,275,887

Non-controlling interest

2,548

4,879

Total equity

1,512,382

1,280,766

Total liabilities and equity

$

4,149,982

$

3,252,370

 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

Nine months ended September 30,

(In thousands)

2018

2017

Operating activities:

Net income

$

17,339

$

33,409

Reconciliation of net income to net cash provided by operating activities:

Depreciation and amortization expense

127,210

82,187

Amortization of above and below market leases

(4,297)

(2,394)

Deferred revenues and fee income amortization

(3,103)

(1,526)

Purchase option termination fee amortization

(6,554)

Amortization of market discount on assumed debt and lease incentives

1,152

364

Deferred loan cost amortization

5,213

3,907

(Increase) in accrued interest income on real estate loans

(4,385)

(5,832)

Change in fair value of net assets of consolidated VIE

(185)

Equity compensation to executives and directors

2,881

2,608

Gain on sale of real estate

(38,961)

(37,635)

Cash received for purchase option terminations

5,100

Loss on extinguishment of debt

888

Mortgage interest received from consolidated VIE

3,429

Mortgage interest paid to other participants of consolidated VIE

(3,429)

Increase in loan loss allowance

3,029

Other

189

Changes in operating assets and liabilities:

(Increase) in tenant receivables and other assets

(3,518)

(7,818)

(Increase) in tenant lease incentives

(6,786)

(11,890)

Increase in accounts payable and accrued expenses

14,470

11,641

Increase in accrued interest, prepaid rents and other liabilities

3,369

2,348

Net cash provided by operating activities

111,974

70,446

Investing activities:

Investment in real estate loans

(145,413)

(119,226)

Repayments of real estate loans

141,729

42,495

Notes receivable issued

(5,949)

(6,250)

Notes receivable repaid

8,941

3,507

Note receivable issued to and draws on line of credit by related parties

(39,377)

(25,740)

Repayments of line of credit by related parties

28,566

23,468

Loan origination fees received

2,919

2,593

Loan origination fees paid to Manager

(1,459)

(1,296)

Investment in mortgage-backed securities

(4,739)

Mortgage principal received from consolidated VIE

705

Acquisition of properties

(662,918)

(485,010)

Disposition of properties, net

83,636

148,101

Receipt of insurance proceeds for capital improvements

412

Additions to real estate assets – improvements

(36,288)

(12,031)

(Deposits) on acquisitions

3,552

2,429

Net cash used in investing activities

(625,683)

(426,960)

Financing activities:

Proceeds from mortgage notes payable

386,559

332,428

Payments for mortgage notes payable

(66,875)

(121,066)

Payments for deposits and other mortgage loan costs

(7,150)

(11,580)

Payments for mortgage prepayment costs

(817)

Proceeds from real estate loan participants

5

224

Payments to real estate loan participants

(4,372)

(3,467)

Proceeds from lines of credit

362,100

190,000

Payments on lines of credit

(348,200)

(274,500)

Repayment of the Term Loan

(11,000)

Mortgage principal paid to other participants of consolidated VIE

(705)

Proceeds from sales of Units, net of offering costs and redemptions

303,391

206,312

Proceeds from sales of Common Stock

74,213

Proceeds from exercises of warrants

16,553

39,430

Payments for redemptions of preferred stock

(9,033)

(4,512)

Common Stock dividends paid

(29,488)

(19,251)

Preferred stock dividends paid

(61,093)

(44,890)

Distributions to non-controlling interests

(762)

(605)

Payments for deferred offering costs

(2,862)

(5,420)

Net cash provided by financing activities

527,068

356,499

Net increase (decrease) in cash, cash equivalents and restricted cash

13,359

(15)

Cash, cash equivalents and restricted cash, beginning of period

73,012

67,715

Cash, cash equivalents and restricted cash, end of period

$

86,371

$

67,700

 

Real Estate Loan Investments

The following tables present details pertaining to our portfolio of fixed rate, interest-only real estate loan investments.

Project/Property

Location

Maturity date

Optional
extension date

Total loan

commitments

Carrying amount (1) as of

Current /

deferred
interest %

per annum

September 30, 2018

December 31, 2017

Multifamily communities:

(in thousands)

Encore

Atlanta, GA

12/31/2018

10/9/2020

$

10,958

$

10,958

$

10,958

8.5 / 5

Encore Capital

Atlanta, GA

4/8/2019

10/9/2020

9,758

8,145

7,521

8.5 / 5

Palisades

Northern VA

5/17/2019

N/A

17,270

17,132

17,111

8 / 5

Fusion

Irvine, CA

12/1/2018

5/31/2020

70,835

66,365

58,447

8.5 / 0

Green Park

Atlanta, GA

2/28/2018

N/A

11,464

8.5 / 5.83

Bishop Street

Atlanta, GA

2/18/2020

N/A

12,693

12,693

12,145

8.5 / 6.5

Hidden River (3)

Tampa, FL

12/3/2018

N/A

4,735

8.5 / 6.5

Hidden River Capital (3)

Tampa, FL

12/4/2018

N/A

5,041

8.5 / 6.5

CityPark II

Charlotte, NC

1/7/2019

1/7/2021

3,365

3,365

3,365

8.5 / 6.5

CityPark II Capital

Charlotte, NC

1/8/2019

1/31/2021

3,916

3,864

3,624

8.5 / 6.5

Park 35 on Clairmont

Birmingham, AL

6/26/2019

6/26/2020

21,060

21,060

21,060

8.5 / 2

Wiregrass

Tampa, FL

5/15/2020

5/15/2023

14,976

13,833

12,972

8.5 / 6.5

Wiregrass Capital

Tampa, FL

5/15/2020

5/15/2023

4,244

3,808

3,561

8.5 / 6.5

Berryessa

San Jose, CA

4/19/2018

N/A

30,571

10.5 / 0

Berryessa

San Jose, CA

2/13/2021

2/13/2023

137,616

67,822

8.5 / 6

The Anson (2)

Nashville, TN

6/1/2018

N/A

2,261

12 / 0

The Anson

Nashville, TN

11/24/2021

11/24/2023

6,240

8.5 / 4.5

The Anson

Nashville, TN

11/24/2021

11/24/2023

5,659

824

8.5 / 4.5

Fort Myers

Fort Myers, FL

2/3/2021

2/3/2022

9,416

7,944

3,521

8.5 / 5.5

Fort Myers Capital

Fort Myers, FL

2/3/2021

2/3/2022

6,193

5,325

4,994

8.5 / 5.5

360 Forsyth

Atlanta, GA

7/11/2020

7/11/2022

22,412

19,320

13,400

8.5 / 5.5

Morosgo

Atlanta, GA

1/31/2021

1/31/2022

11,749

10,507

4,951

8.5 / 5.5

Morosgo Capital

Atlanta, GA

1/31/2021

1/31/2022

6,176

5,077

4,761

8.5 / 5.5

University City Gateway

Charlotte, NC

8/15/2021

8/15/2022

10,336

10,335

850

8.5 / 5

University City Gateway

Capital

Charlotte, NC

8/18/2021

8/18/2022

7,338

5,901

5,530

8.5 / 5

Cameron Park

Alexandria, VA

10/11/2021

10/11/2023

21,340

9,874

8.5 / 3

Cameron Park Capital

Alexandria, VA

10/11/2021

10/11/2023

8,850

7,395

8.5 / 3

Southpoint

Fredericksburg, VA

2/28/2022

2/28/2024

7,348

8.5 / 4

Southpoint Capital

Fredericksburg, VA

2/28/2022

2/28/2024

4,962

2,668

8.5 / 4

Student housing properties:

Haven 12

Starkville, MS

12/17/2018

11/30/2020

6,116

6,116

5,816

8.5 / 0

Haven46

Tampa, FL

3/29/2019

9/29/2020

9,820

9,820

9,820

8.5 / 5

Haven Northgate (3)

College Station, TX

6/20/2019

N/A

65,724

(4)  / 1.5

Lubbock II (3)

Lubbock, TX

4/20/2019

N/A

9,357

8.5 / 0

Haven Charlotte

Charlotte, NC

12/22/2019

12/22/2021

19,582

19,045

17,039

8.5 / 6.5

Haven Charlotte Member

Charlotte, NC

12/22/2019

12/22/2021

8,201

8,201

7,795

8.5 / 6.5

Solis Kennesaw

Atlanta, GA

9/26/2020

9/26/2022

12,359

11,100

1,610

8.5 / 5.5

Solis Kennesaw Capital

Atlanta, GA

10/1/2020

10/1/2022

8,360

7,619

7,145

8.5 / 5.5

New Market Properties:

Dawson Marketplace

Atlanta, GA

9/24/2020

9/24/2022

12,857

12,857

12,857

8.5 / 6.9 (5)

Other:

Crescent Avenue (6)

Atlanta, GA

4/13/2018

N/A

8,500

10 / 5

North Augusta Ballpark

North Augusta, SC

1/15/2021

1/15/2024

3,500

3,216

9 / 6

$

515,505

392,189

388,506

Unamortized loan origination fees

(1,760)

(1,710)

Allowance for loan losses

(3,029)

Carrying amount

$

387,400

$

386,796

(1) Carrying amounts presented per loan are amounts drawn, exclusive of deferred fee revenue.

(2) Effective May 24, 2018, the land acquisition bridge loan was converted into a real estate loan and a capital loan, shown below.

(3) The loan was repaid in full in connection with our acquisition of the underlying property.

(4) The current interest rate on the Haven Northgate loan was a variable rate of 600 basis points over LIBOR.

(5) Effective January 1, 2018, the deferred interest rate increased to 6.9% per annum until the accumulated accrued interest balance reaches $250, at which point the deferred interest rate reverts to 5.0%.

(6) The loan was repaid in full on June 20, 2018.

 

We hold options, but not obligations, to purchase certain of the properties which are partially financed by our real estate loan investments. The option purchase prices are negotiated at the time of the loan closing and are to be calculated based upon market cap rates at the time of exercise of the purchase option, less a discount ranging from between 10 and 60 basis points, depending on the loan. As of September 30, 2018, potential property acquisitions and units from projects in our real estate loan investment portfolio consisted of:

Total units
upon

Purchase option window

Project/Property

Location

completion (1)

Begin

End

Multifamily communities:

Encore

Atlanta, GA

(2)

N/A

N/A

Palisades

Northern VA

304

1/1/2019

5/31/2019

Bishop Street

Atlanta, GA

(2)

N/A

N/A

Hidden River

Tampa, FL

(2)

N/A

N/A

CityPark II

Charlotte, NC

200

1/1/2019

4/1/2019

Park 35 on Clairmont

Birmingham, AL

(3)

N/A

N/A

Fort Myers

Fort Myers, FL

224

S + 90 days (4)

S + 150 days (4)

Wiregrass

Tampa, FL

392

S + 90 days (4)

S + 150 days (4)

360 Forsyth

Atlanta, GA

356

S + 90 days (4)

S + 150 days (4)

Morosgo

Atlanta, GA

258

S + 90 days (4)

S + 150 days (4)

University City Gateway

Charlotte, NC

338

S + 90 days (4)

S + 150 days (4)

Berryessa

San Jose, CA

N/A

N/A

The Anson

Nashville, TN

301

S + 90 days (4)

S + 150 days (4)

North Augusta Ballpark

North Augusta, SC

N/A

N/A

Cameron Park

Alexandria, VA

302

S + 90 days (4)

S + 150 days (4)

Southpoint

Fredericksburg, VA

240

S + 90 days (4)

S + 150 days (4)

Student housing properties:

Haven46

Tampa, FL

(2)

N/A

N/A

Haven Charlotte

Charlotte, NC

(2)

N/A

N/A

Solis Kennesaw

Atlanta, GA

248

(5)

(5)

3,163

(1) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio. The Berryessa and North Augusta Ballpark projects do not include exclusive purchase options, but we hold a Right of First Offer on these projects at prices acceptable to us and the developer.

(2) On May 7, 2018, these five purchase options were terminated, in exchange for an aggregate $12.5 million in termination fees from the developers.

(3) The option period on the loan expired unexercised on September 1, 2018.

(4) The option period window begins and ends at the number of days indicated beyond the achievement of a 93% physical occupancy rate by the underlying property.

(5) The option period begins on October 1 of the second academic year following project completion and ends on the following December 31. The developer may elect to expedite the option period to begin December 1, 2019 and end on December 31, 2019.

 

Mortgage Indebtedness

The following table presents certain details regarding our mortgage notes payable:

Principal balance as of

Acquisition/

refinancing
date

September 30,
2018

December 31,
2017

Maturity
date

Interest
rate

Basis point
spread over
1 Month
LIBOR

Interest only
through date
(1)

Multifamily communities:

(in thousands)

Stone Rise

7/3/2014

$

(2)

$

23,939

8/1/2019

2.89

%

Fixed rate

8/31/2015

Summit Crossing

10/31/2017

38,520

39,019

11/1/2024

3.99

%

Fixed rate

N/A

Summit Crossing II

3/20/2014

13,357

13,357

4/1/2021

4.49

%

Fixed rate

4/30/2019

McNeil Ranch

1/24/2013

13,487

13,646

2/1/2020

3.13

%

Fixed rate

2/28/2018

Lake Cameron

1/24/2013

(3)

19,773

2/1/2020

3.13

%

Fixed rate

2/28/2018

Stoneridge

9/26/2014

25,679

26,136

10/1/2019

3.18

%

Fixed rate

N/A

Vineyards

9/26/2014

34,201

34,672

10/1/2021

3.68

%

Fixed rate

10/31/2017

Avenues at Cypress

2/13/2015

21,319

21,675

9/1/2022

3.43

%

Fixed rate

N/A

Avenues at Northpointe

2/13/2015

27,043

27,467

3/1/2022

3.16

%

Fixed rate

3/31/2017

Venue at Lakewood Ranch

5/21/2015

28,882

29,348

12/1/2022

3.55

%

Fixed rate

N/A

Aster at Lely Resort

6/24/2015

31,967

32,471

7/5/2022

3.84

%

Fixed rate

N/A

CityPark View

6/30/2015

20,690

21,038

7/1/2022

3.27

%

Fixed rate

N/A

Avenues at Creekside

7/31/2015

39,904

40,523

8/1/2024

3.86

%

160

(4)

8/31/2016

Citi Lakes

9/3/2015

41,779

42,396

4/1/2023

4.43

%

217

(5)

N/A

Stone Creek

6/22/2017

20,222

20,467

7/1/2052

3.22

%

Fixed rate

N/A

Lenox Village Town Center

12/21/2015

29,461

30,009

5/1/2019

3.82

%

Fixed rate

N/A

Lenox Village III

12/21/2015

17,551

17,802

1/1/2023

4.04

%

Fixed rate

N/A

Overton Rise

2/1/2016

39,414

39,981

8/1/2026

3.98

%

Fixed rate

N/A

Baldwin Park

1/5/2016

77,800

77,800

1/5/2019

4.56

%

230

1/4/2019

Crosstown Walk

1/15/2016

31,033

31,486

2/1/2023

3.90

%

Fixed rate

N/A

525 Avalon Park

6/15/2017

66,039

66,912

7/1/2024

3.98

%

Fixed rate

N/A

City Vista

7/1/2016

34,562

35,073

7/1/2026

3.68

%

Fixed rate

N/A

Sorrel

8/24/2016

32,306

32,801

9/1/2023

3.44

%

Fixed rate

N/A

Citrus Village

3/3/2017

29,539

29,970

6/10/2023

3.65

%

Fixed rate

6/09/2017

Retreat at Greystone

11/21/2017

34,789

35,210

12/1/2024

4.31

%

Fixed rate

N/A

Founders Village

3/31/2017

30,882

31,271

4/1/2027

4.31

%

Fixed rate

N/A

Claiborne Crossing

4/26/2017

26,487

26,801

6/1/2054

2.89

%

Fixed rate

N/A

Luxe at Lakewood Ranch

7/26/2017

38,554

39,066

8/1/2027

3.93

%

Fixed rate

N/A

Adara at Overland Park

9/27/2017

31,345

31,760

4/1/2028

3.90

%

Fixed rate

N/A

Aldridge at Town Village

10/31/2017

37,381

37,847

11/1/2024

4.19

%

Fixed rate

(6)

N/A

Reserve at Summit Crossing

9/29/2017

19,746

20,017

10/1/2024

3.87

%

Fixed rate

N/A

Overlook at Crosstown Walk

11/21/2017

21,946

22,231

12/1/2024

3.95

%

Fixed rate

N/A

Colony at Centerpointe

12/20/2017

32,929

33,346

10/1/2026

3.68

%

Fixed rate

N/A

Lux at Sorrel

1/9/2018

31,199

2/1/2030

3.91

%

Fixed rate

N/A

Green Park

2/28/2018

39,409

3/10/2028

4.09

%

Fixed rate

N/A

The Lodge at Hidden River

9/27/2018

41,685

10/1/2028

4.32

%

Fixed rate

N/A

Total multifamily communities

1,101,107

1,045,310

Grocery-anchored shopping centers:

Spring Hill Plaza

9/5/2014

9,314

9,470

10/1/2019

3.36

%

Fixed rate

10/31/2015

Parkway Town Centre

9/5/2014

6,774

6,887

10/1/2019

3.36

%

Fixed rate

10/31/2015

Woodstock Crossing

8/8/2014

2,949

2,989

9/1/2021

4.71

%

Fixed rate

N/A

Deltona Landings

9/30/2014

6,661

6,778

10/1/2019

3.48

%

Fixed rate

N/A

Powder Springs

9/30/2014

7,029

7,152

10/1/2019

3.48

%

Fixed rate

N/A

Kingwood Glen

9/30/2014

11,145

11,340

10/1/2019

3.48

%

Fixed rate

N/A

Barclay Crossing

9/30/2014

6,266

6,376

10/1/2019

3.48

%

Fixed rate

N/A

Sweetgrass Corner

9/30/2014

7,600

7,731

10/1/2019

3.58

%

Fixed rate

N/A

Parkway Centre

9/30/2014

4,364

4,441

10/1/2019

3.48

%

Fixed rate

N/A

The Market at Salem Cove

10/6/2014

9,296

9,423

11/1/2024

4.21

%

Fixed rate

11/30/2016

Independence Square

8/27/2015

11,780

11,967

9/1/2022

3.93

%

Fixed rate

9/30/2016

Royal Lakes Marketplace

9/4/2015

9,580

9,690

9/4/2020

4.61

%

250

4/3/2017

The Overlook at Hamilton Place

12/22/2015

20,012

20,301

1/1/2026

4.19

%

Fixed rate

N/A

Summit Point

10/30/2015

11,947

12,208

11/1/2022

3.57

%

Fixed rate

N/A

East Gate Shopping Center

4/29/2016

5,468

5,578

5/1/2026

3.97

%

Fixed rate

N/A

Fury’s Ferry

4/29/2016

6,317

6,444

5/1/2026

3.97

%

Fixed rate

N/A

Rosewood Shopping Center

4/29/2016

4,243

4,328

5/1/2026

3.97

%

Fixed rate

N/A

Southgate Village

4/29/2016

7,542

7,694

5/1/2026

3.97

%

Fixed rate

N/A

The Market at Victory Village

5/16/2016

9,104

9,214

9/11/2024

4.40

%

Fixed rate

10/10/2017

Wade Green Village

4/7/2016

7,854

7,969

5/1/2026

4.00

%

Fixed rate

N/A

Lakeland Plaza

7/15/2016

28,450

29,023

8/1/2026

3.85

%

Fixed rate

N/A

University Palms

8/8/2016

12,890

13,162

9/1/2026

3.45

%

Fixed rate

N/A

Cherokee Plaza

8/8/2016

24,839

25,322

9/1/2021

4.35

%

225

(7)

N/A

Sandy Plains Exchange

8/8/2016

9,004

9,194

9/1/2026

3.45

%

Fixed rate

N/A

Thompson Bridge Commons

8/8/2016

12,037

12,291

9/1/2026

3.45

%

Fixed rate

N/A

Heritage Station

8/8/2016

8,909

9,097

9/1/2026

3.45

%

Fixed rate

N/A

Oak Park Village

8/8/2016

9,194

9,388

9/1/2026

3.45

%

Fixed rate

N/A

Shoppes of Parkland

8/8/2016

16,045

16,241

9/1/2023

4.67

%

Fixed rate

N/A

Champions Village

10/18/2016

27,400

27,400

11/1/2021

5.11

%

300

(8)

11/1/2021

Castleberry-Southard

4/21/2017

11,227

11,383

5/1/2027

3.99

%

Fixed rate

N/A

Rockbridge Village

6/6/2017

13,942

14,142

7/5/2027

3.73

%

Fixed rate

N/A

Irmo Station

7/26/2017

10,373

10,566

8/1/2030

3.94

%

Fixed rate

N/A

Maynard Crossing

8/25/2017

18,044

18,388

9/1/2032

3.74

%

Fixed rate

N/A

Woodmont Village

9/8/2017

8,587

8,741

10/1/2027

4.125

%

Fixed rate

N/A

West Town Market

9/22/2017

8,794

8,963

10/1/2025

3.65

%

Fixed rate

N/A

Crossroads Market

12/5/2017

18,699

19,000

1/1/2030

3.95

%

Fixed rate

N/A

Anderson Central

3/16/2018

11,888

4/1/2028

4.32

%

Fixed rate

N/A

Greensboro Village

5/22/2018

8,501

6/1/2028

4.20

%

Fixed rate

N/A

Governors Towne Square

5/22/2018

11,310

6/1/2028

4.20

%

Fixed rate

N/A

Conway Plaza

6/29/2018

9,756

7/5/2028

4.29

%

Fixed rate

N/A

Brawley Commons

7/6/2018

18,491

8/1/2028

4.36

%

Fixed rate

N/A

Total grocery-anchored shopping centers

463,625

410,281

Student housing properties:

North by Northwest

6/1/2016

32,198

32,767

10/1/2022

4.02

%

Fixed rate

N/A

SoL

3/29/2018

37,485

37,485

1/29/2019

4.36

%

210

1/29/2019

Stadium Village

10/27/2017

46,308

46,930

11/1/2024

3.80

%

Fixed rate

N/A

Ursa

12/18/2017

31,400

31,400

1/5/2020

5.26

%

300

1/5/2020

The Tradition

5/10/2018

30,000

6/6/2021

6.26

%

400

(9)

6/6/2021

Retreat at Orlando

5/31/2018

47,125

9/1/2025

4.09

%

Fixed rate

9/1/2020

The Bloc

6/27/2018

28,966

7/9/2021

5.81

%

355

(10)

7/9/2021

Total student housing properties

253,482

148,582

Office buildings:

Brookwood Center

8/29/2016

31,668

32,219

9/10/2031

3.52

%

Fixed rate

10/9/2017

Galleria 75

11/4/2016

5,588

5,716

7/1/2022

4.25

%

Fixed rate

N/A

Three Ravinia

12/30/2016

115,500

115,500

1/1/2042

4.46

%

Fixed rate

1/31/2022

Westridge at La Cantera

11/13/2017

53,488

54,440

12/10/2028

4.10

%

Fixed rate

N/A

Armour Yards

1/29/2018

40,000

2/1/2028

4.10

%

Fixed rate

2/29/2020

150 Fayetteville

7/31/2018

114,400

8/10/2028

4.27

%

Fixed rate

9/9/2020

Total office buildings

360,644

207,875

Grand total

2,178,858

1,812,048

Less: deferred loan costs

(33,775)

(30,249)

Less: below market debt adjustment

(4,500)

(5,147)

Mortgage notes, net

$

2,140,583

$

1,776,652

Footnotes to Mortgage Notes Table

(1) Following the indicated interest only period (where applicable), monthly payments of accrued interest and principal are based on a 25 to 35-year amortization period through the maturity date.

(2) On September 28, 2018, the Company legally defeased the mortgage loan in conjunction with the sale of its Stone Rise property located in Philadelphia, PA. In connection with the defeasance, the mortgage and other liens on the property were extinguished and all existing collateral, including various guarantees, were released. As a result of the defeasance, the Company incurred costs associated with a defeasance premium of approximately $71,000.

(3) On March 20, 2018, the Company legally defeased the mortgage loan in conjunction with the sale of its Lake Cameron property, located in Raleigh, NC. In connection with the defeasance, the mortgage and other liens on the property were extinguished and all existing collateral, including various guarantees, were released. As a result of the defeasance, the Company incurred costs associated with a defeasance premium of approximately $355,000.

(4)  The mortgage instrument was assumed as part of the sales transaction; the 1 Month LIBOR index is capped at 5.0%, resulting in a cap on the combined rate of 6.6%.

(5) The 1 Month LIBOR index is capped at 4.33% resulting in a cap on the combined rate of 6.5%.

(6) The property was temporarily financed through a credit facility sponsored by the Federal Home Loan Mortgage Corporation; the Company obtained permanent mortgage financing subsequent to the closing as shown.

(7) The interest rate has a floor of 2.7%.

(8) The interest rate has a floor of 3.25%.

(9) The interest rate has a floor of 5.6%.

(10) The interest rate has a floor of 5.25%.

 

Multifamily Communities

As of September 30, 2018, our multifamily community portfolio consisted of the following properties:

Three months ended
September 30, 2018

Property

Location

Number of
units

Average unit
size (sq. ft.)

Average
physical
occupancy

Average
rent per
unit

Established Communities:

Avenues at Cypress

Houston, TX

240

1,170

96.8

%

$

1,436

Avenues at Northpointe

Houston, TX

280

1,167

96.2

%

$

1,382

Vineyards

Houston, TX

369

1,122

96.3

%

$

1,167

Aster at Lely Resort

Naples, FL

308

1,071

93.9

%

$

1,480

Venue at Lakewood Ranch

Sarasota, FL

237

1,001

94.0

%

$

1,561

Citi Lakes

Orlando, FL

346

984

93.4

%

$

1,419

Lenox Portfolio

Nashville, TN

474

861

95.7

%

$

1,205

Overton Rise

Atlanta, GA

294

1,018

95.4

%

$

1,541

Sorrel

Jacksonville, FL

290

1,048

95.6

%

$

1,270

Total/Average Established Communities

2,838

95.3

%

Summit Crossing

Atlanta, GA

485

1,053

97.1

%

$

1,187

McNeil Ranch

Austin, TX

192

1,071

$

1,246

CityPark View

Charlotte, NC

284

948

$

1,099

Avenues at Creekside

San Antonio, TX

395

974

$

1,147

Stone Creek

Houston, TX

246

852

$

1,078

525 Avalon Park

Orlando, FL

487

1,394

96.0

%

$

1,438

Retreat at Greystone

Birmingham, AL

312

1,100

96.5

%

$

1,234

Broadstone at Citrus Village

Tampa, FL

296

980

97.0

%

$

1,288

Stoneridge Farms at the Hunt Club

Nashville, TN

364

1,153

$

1,103

Founders Village

Williamsburg, VA

247

1,070

96.5

%

$

1,373

Crosstown Walk

Tampa, FL

342

981

94.6

%

$

1,293

Claiborne Crossing

Louisville, KY

242

1,204

96.6

%

$

1,334

Luxe at Lakewood Ranch

Sarasota, FL

280

1,105

$

1,505

Adara Overland Park

Kansas City, KS

260

1,116

96.3

%

$

1,335

Aldridge at Town Village

Atlanta, GA

300

969

95.6

%

$

1,350

The Reserve at Summit Crossing

Atlanta, GA

172

1,002

95.7

%

$

1,347

Overlook at Crosstown Walk

Tampa, FL

180

986

94.1

%

$

1,385

Colony at Centerpointe

Richmond, VA

255

1,149

95.9

%

$

1,370

Lux at Sorrel

Jacksonville, FL

265

1,025

94.0

%

$

1,385

Green Park

Atlanta, GA

310

985

94.0

%

$

1,453

Lodge at Hidden River

Tampa, FL

300

980

Value-add project:

Village at Baldwin Park

Orlando, FL

528

1,069

$

1,646

6,742

Joint venture:

City Vista

Pittsburgh, PA

272

1,023

96.2

%

$

1,357

Total PAC Non-Established Communities

7,014

Average stabilized physical occupancy

95.6

%

Total multifamily community units

9,852

For the three-month period ended September 30, 2018, our average established multifamily communities’ physical occupancy was 95.3%. We calculate average established physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date and that have been owned for at least 15 full months as of the end of the first quarter of each year. We exclude the operating results of properties for which construction of adjacent phases has commenced, properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. For the three-month period ended September 30, 2018, our average stabilized physical occupancy was 95.6%. We calculate average stabilized physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date. For the three-month period ended September 30, 2018, our average economic occupancy was 95.5%. We define average economic occupancy as market rent reduced by vacancy losses, expressed as a percentage. All of our multifamily properties are included in these calculations except for properties which are not yet stabilized (which we define as properties having first achieved 93% physical occupancy for three full months in a quarter), properties which are owned for less than the entire reporting period and properties which are undergoing significant capital projects, have sustained significant casualty losses or are adding additional phases (Stone Creek, Village at Baldwin Park, Luxe at Lakewood Ranch, CityPark View and Avenues at Creekside). We also exclude properties which are currently being marketed for sale, which included Stoneridge Farms at Hunt Club at September 30, 2018.

Student Housing Properties

As of September 30, 2018, our student housing portfolio consisted of the following properties:

 

Three months ended
September 30, 2018

Property

Location

Number
of units

Number
of beds

Average unit
size (sq. ft.)

Average
physical
occupancy

Average rent
per bed

Student housing properties:

North by Northwest

Tallahassee, FL

219

679

1,250

95.2

%

$

730

SoL

Tempe, AZ

224

639

1,296

95.1

%

$

701

Stadium Village (1)

Atlanta, GA

198

792

1,466

97.2

%

$

700

Ursa (1)

Waco, TX

250

840

1,634

n/a

The Tradition

College Station, TX

427

808

549

n/a

The Retreat at Orlando

Orlando, FL

221

894

2,036

n/a

The Bloc

Lubbock, TX

140

556

1,394

n/a

1,679

5,208

(1) The Company acquired and owns an approximate 99% equity interest in a joint venture which owns both Stadium Village and Ursa.

 

Capital Expenditures

We regularly incur capital expenditures related to our owned multifamily communities and student housing properties. Capital expenditures may be nonrecurring and discretionary, as part of a strategic plan intended to increase a property’s value and corresponding revenue-generating ability, or may be normally recurring and necessary to maintain the income streams and present value of a property. Certain capital expenditures may be budgeted and reserved for upon acquiring a property as initial expenditures necessary to bring a property up to our standards or to add features or amenities that we believe make the property a compelling value to prospective residents in its individual market. These budgeted nonrecurring capital expenditures in connection with an acquisition are funded from the capital source(s) for the acquisition and are not dependent upon subsequent property operating cash flows for funding.

For the three-month period ended September 30, 2018, our capital expenditures for multifamily communities consisted of:

Capital Expenditures – Multifamily Communities

Recurring

Non-recurring

Total

(in thousands, except per-unit figures)

Amount

Per Unit

Amount

Per Unit

Amount

Per Unit

Appliances

$

117

$

11.96

$

$

$

117

$

11.96

Carpets

418

42.78

418

42.78

Wood / vinyl flooring

87

8.87

87

8.87

Mini blinds and ceiling fans

31

3.17

31

3.17

Fire safety

34

3.46

34

3.46

HVAC

143

14.60

143

14.60

Computers, equipment, misc.

3

0.34

83

8.50

86

8.84

Elevators

Exterior painting

159

16.28

159

16.28

Leasing office and other common amenities

38

3.92

1,741

178.08

1,779

182.00

Major structural projects

5,532

565.93

5,532

565.93

Cabinets and countertop upgrades

769

78.63

769

78.63

Landscaping and fencing

293

29.99

293

29.99

Parking lot

279

28.54

279

28.54

Common area items

95

9.72

95

9.72

Totals

$

837

$

85.64

$

8,985

$

919.13

$

9,822

$

1,004.77

 

For the three-month period ended September 30, 2018, our capital expenditures for student housing properties consisted of:

Capital Expenditures – Student Housing Properties

Recurring

Non-recurring

Total

(in thousands, except per-unit figures)

Amount

Per Bed

Amount

Per Bed

Amount

Per Bed

Appliances

$

23

$

4.47

$

$

$

23

$

4.47

Carpets

73

13.95

73

13.95

Wood / vinyl flooring

1

0.16

1

0.16

Mini blinds and ceiling fans

9

1.76

9

1.76

Fire safety

HVAC

31

5.96

31

5.96

Computers, equipment, misc.

3

0.50

44

8.46

47

8.96

Elevators

Exterior painting

Leasing office and other common amenities

66

12.76

29

5.56

95

18.32

Major structural projects

3

0.56

3

0.56

Cabinets and counter top upgrades

1

0.12

227

43.56

228

43.68

Landscaping and fencing

6

1.06

6

1.06

Parking lot

Common area items

36

6.83

36

6.83

Totals

$

207

$

39.68

$

345

$

66.03

$

552

$

105.71

 

Grocery-Anchored Shopping Center Portfolio

As of September 30, 2018, our grocery-anchored shopping center portfolio consisted of the following properties:

Property name

Location

Year built

GLA (1)

Percent
leased

Grocery
anchor
tenant

Castleberry-Southard

 Atlanta, GA

2006

80,018

100.0

%

 Publix

Cherokee Plaza

 Atlanta, GA

1958

102,864

100.0

%

Kroger

Governors Towne Square

 Atlanta, GA

2004

68,658

95.9

%

 Publix

Lakeland Plaza

 Atlanta, GA

1990

301,711

94.6

%

Sprouts

Powder Springs

 Atlanta, GA

1999

77,853

96.9

%

 Publix

Rockbridge Village

 Atlanta, GA

2005

102,432

94.2

%

 Kroger

Roswell Wieuca Shopping Center

 Atlanta, GA

2007

74,370

100.0

%

 The Fresh Market

Royal Lakes Marketplace

 Atlanta, GA

2008

119,493

89.3

%

 Kroger

Sandy Plains Exchange

 Atlanta, GA

1997

72,784

93.2

%

Publix

Summit Point

 Atlanta, GA

2004

111,970

86.9

%

 Publix

Thompson Bridge Commons

 Atlanta, GA

2001

92,587

96.1

%

Kroger

Wade Green Village

 Atlanta, GA

1993

74,978

93.2

%

 Publix

Woodmont Village

 Atlanta, GA

2002

85,639

94.6

%

Kroger

Woodstock Crossing

 Atlanta, GA

1994

66,122

100.0

%

 Kroger

East Gate Shopping Center

 Augusta, GA

1995

75,716

92.2

%

 Publix

Fury’s Ferry

 Augusta, GA

1996

70,458

98.6

%

 Publix

Parkway Centre

 Columbus, GA

1999

53,088

100.0

%

 Publix

Spring Hill Plaza

 Nashville, TN

2005

61,570

100.0

%

 Publix

Parkway Town Centre

 Nashville, TN

2005

65,587

98.2

%

 Publix

The Market at Salem Cove

 Nashville, TN

2010

62,356

97.8

%

 Publix

The Market at Victory Village

 Nashville, TN

2007

71,300

98.5

%

 Publix

Greensboro Village

 Nashville, TN

2005

70,203

98.3

%

 Publix

The Overlook at Hamilton Place

 Chattanooga, TN

1992

213,095

100.0

%

 The Fresh Market

Shoppes of Parkland

 Miami-Ft. Lauderdale, FL

2000

145,720

98.4

%

BJ’s Wholesale Club

Barclay Crossing

 Tampa, FL

1998

54,958

100.0

%

 Publix

Deltona Landings

 Orlando, FL

1999

59,966

100.0

%

 Publix

University Palms

 Orlando, FL

1993

99,172

100.0

%

Publix

Conway Plaza

 Orlando, FL

1966

117,705

98.0

%

Publix

Crossroads Market

 Naples, FL

1993

126,895

100.0

%

Publix

Neapolitan Way

 Naples, FL

1985

137,580

91.6

%

Publix

Champions Village

 Houston, TX

1973

383,346

78.9

%

Randalls

Kingwood Glen

 Houston, TX

1998

103,397

97.9

%

 Kroger

Independence Square

 Dallas, TX

1977

140,218

84.9

%

 Tom Thumb

Oak Park Village

 San Antonio, TX

1970

64,855

100.0

%

H.E.B.

Sweetgrass Corner

 Charleston, SC

1999

89,124

96.2

%

 Bi-Lo

Irmo Station

 Columbia, SC

1980

99,384

95.3

%

Kroger

Anderson Central

 Greenville Spartanburg, SC

1999

223,211

96.1

%

 Walmart

Fairview Market

 Greenville Spartanburg, SC

1998

53,888

73.5

%

Aldi

Rosewood Shopping Center

 Columbia, SC

2002

36,887

90.2

%

 Publix

Brawley Commons

 Charlotte, NC

1997

122,028

97.4

%

 Publix

West Town Market

 Charlotte, NC

2004

67,883

100.0

%

Harris Teeter

Heritage Station

 Raleigh, NC

2004

72,946

100.0

%

Harris Teeter

Maynard Crossing

 Raleigh, NC

1996

122,781

96.9

%

Harris Teeter

Southgate Village

 Birmingham, AL

1988

75,092

98.0

%

 Publix

Grand total/weighted average

4,571,888

94.6

%

 

(1) Gross leasable area, or GLA, represents the total amount of property square footage that can be leased to tenants.

As of September 30, 2018, our grocery-anchored shopping center portfolio was 94.6% leased. We define percent leased as the percentage of gross leasable area that is leased, including noncancelable lease agreements that have been signed which have not yet commenced.

Details regarding lease expirations (assuming no exercises of tenant renewal options) within our grocery-anchored shopping center portfolio as of September 30, 2018 were:

Total grocery-anchored shopping center portfolio

Number of leases

Leased GLA

Percent of leased
GLA

Month to month

10

25,107

0.6

%

2018

18

34,746

0.8

%

2019

105

578,975

13.4

%

2020

125

535,312

12.4

%

2021

123

557,261

12.9

%

2022

106

351,053

8.1

%

2023

92

378,994

8.8

%

2024

28

610,914

14.1

%

2025

26

429,810

9.9

%

2026

12

143,420

3.3

%

2027

19

121,651

2.8

%

2028+

36

553,131

12.9

%

Total

700

4,320,374

100.0

%

 

The Company’s Quarterly Report on Form 10-Q for third quarter 2018 will present income statements of New Market Properties, LLC within the Results of Operations section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Second-generation capital expenditures within our grocery-anchored shopping center portfolio by property for the third quarter 2018 totaled approximately $469,000. Second-generation capital expenditures exclude those expenditures made in our grocery-anchored shopping center portfolio (i) to lease space to “first generation” tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our ownership standards, and (iii) for property re-developments and repositioning.

Office Building Portfolio

As of September 30, 2018, our office building portfolio consisted of the following properties:

Property Name

Location

GLA

Percent
leased

Three Ravinia

Atlanta, GA

814,000

91

%

150 Fayetteville

Raleigh, NC

560,000

89

%

Westridge at La Cantera

San Antonio, TX

258,000

100

%

Armour Yards

Atlanta, GA

187,000

94

%

Brookwood Center

Birmingham, AL

169,000

100

%

Galleria 75

Atlanta, GA

111,000

96

%

2,099,000

93

%

 

The Company’s office building portfolio includes the following significant tenants:

Rentable square
footage

Percent of
Annual Base
Rent

Annual Base
Rent (in
thousands)

InterContinental Hotels Group

520,039

25.4

%

$

11,821

State Farm Mutual Automobile Insurance Company

183,168

7.1

%

3,300

United Services Automobile Association

129,015

6.5

%

3,042

Harland Clarke Corporation

129,016

6.0

%

2,811

Smith Anderson

91,998

5.9

%

2,768

1,053,236

50.9

%

$

23,742

               

The Company defines Annual Base Rent as the current monthly base rent annualized under the respective leases.

The Company’s leased square footage of its office building portfolio expires according to the following schedule:

Office building portfolio

Percent of

Year of lease
expiration

Rentable square

rented

feet

square feet

2018

23,128

1.2

%

2019

50,109

2.6

%

2020

62,478

3.2

%

2021

241,325

12.5

%

2022

58,922

3.1

%

2023

109,036

5.6

%

2024

203,703

10.5

%

2025

125,987

6.5

%

2026

91,998

4.8

%

2027

259,700

13.4

%

2028+

707,166

36.6

%

Total

1,933,552

100.0

%

 

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $16,000 during the third quarter 2018. Second-generation capital expenditures exclude those expenditures made in our office building portfolio (i) to lease space to “first generation” tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our Class A ownership standards (and which amounts were underwritten into the total investment at the time of acquisition) and (iii) for property re-developments and repositionings.

Definitions of Non-GAAP Measures

We disclose FFO, AFFO and NOI, each of which meet the definition of a “non-GAAP financial measure”, as set forth in Item 10(e) of Regulation S-K promulgated by the SEC. As a result we are required to include in this filing a statement of why the Company believes that presentation of these measures provides useful information to investors. None of FFO, AFFO and NOI should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further FFO, AFFO and NOI should be compared with our reported net income or net loss and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements. FFO and AFFO are not considered measures of liquidity and are not alternatives to measures calculated under GAAP.

Funds From Operations Attributable to Common Stockholders and Unitholders (“FFO”)

FFO is one of the most commonly utilized Non-GAAP measures currently in practice. In its 2002 “White Paper on Funds From Operations,” which was most recently revised in 2012, the National Association of Real Estate Investment Trusts, or NAREIT, standardized the definition of how Net income/loss should be adjusted to arrive at FFO, in the interests of uniformity and comparability. We have adopted the NAREIT definition for computing FFO as a meaningful supplemental gauge of our operating results, and as is most often presented by other REIT industry participants.

The NAREIT definition of FFO (and the one reported by the Company) is:
Net income/loss:

  • excluding impairment charges on and gains/losses from sales of depreciable property;
  • plus depreciation and amortization of real estate assets and deferred leasing costs; and
  • after adjustments for the Company’s proportionate share of unconsolidated partnerships and joint ventures. 

Not all companies necessarily utilize the standardized NAREIT definition of FFO, so caution should be taken in comparing the Company’s reported FFO results to those of other companies. The Company’s FFO results are comparable to the FFO results of other companies that follow the NAREIT definition of FFO and report these figures on that basis. FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.

Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders (“AFFO”)

AFFO makes further adjustments to FFO results in order to arrive at a more refined measure of operating and financial performance. There is no industry standard definition of AFFO and practice is divergent across the industry. The Company calculates AFFO as:

FFO, plus:

  • non-cash equity compensation to directors and executives;
  • amortization of loan closing costs;
  • losses on debt extinguishments or refinancing costs;
  • weather-related property operating losses;
  • amortization of loan coordination fees paid to the Manager;
  • depreciation and amortization of non-real estate assets;
  • net loan fees received;
  • accrued interest income received;
  • allowances for loan loss reserves;
  • cash received for purchase option terminations;
  • deemed dividends on preferred stock redemptions;
  • non-cash dividends on Series M Preferred Stock; and
  • amortization of lease inducements;

Less:

  • non-cash loan interest income;
  • cash paid for loan closing costs;
  • amortization of acquired real estate intangible liabilities;
  • amortization of straight line rent adjustments and deferred revenues; and
  • normally-recurring capital expenditures and capitalized retail direct leasing costs.

AFFO figures reported by us may not be comparable to those AFFO figures reported by other companies. We utilize AFFO as another measure of the operating performance of our portfolio of real estate assets. We believe AFFO is useful to investors as a supplemental gauge of our operating performance and may be useful in comparing our operating performance with other real estate companies. AFFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders. FFO and AFFO are not considered measures of liquidity and are not alternatives to measures calculated under GAAP.

Multifamily Established Communities’ Same Store Net Operating Income (NOI)

We use same store net operating income as an operational metric for our established communities, enabling comparisons of those properties’ operating results between the current reporting period and the prior year comparative period. We define our population of established communities as those that are stabilized and that have been owned for at least 15 full months, as of the end of the first quarter of each year, and exclude the operating results of properties for which construction of adjacent phases has commenced, and properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. We define net operating income as rental and other property revenues, less total property and maintenance expenses, property management fees, real estate taxes, general and administrative expenses, and property insurance. We believe that net operating income is an important supplemental measure of operating performance for REITs because it provides measures of core operations, rather than factoring in depreciation and amortization, financing costs, acquisition costs, and other corporate expenses. Net operating income is a widely utilized measure of comparative operating performance in the REIT industry, but is not a substitute for the most comparable GAAP-compliant measure, net income/loss.

About Preferred Apartment Communities, Inc.         

Preferred Apartment Communities, Inc. (NYSE: APTS), or the Company, is a Maryland corporation formed primarily to acquire and operate multifamily properties in select targeted markets throughout the United States. As part of our business strategy, we may enter into forward purchase contracts or purchase options for to-be-built multifamily communities and we may make real estate related loans, provide deposit arrangements or provide performance assurances, as may be necessary or appropriate, in connection with the development of multifamily communities and other properties.  As a secondary strategy, we may acquire or originate senior mortgage loans, subordinate loans or real estate loans secured by interests in multifamily properties, membership or partnership interests in multifamily properties and other multifamily related assets and invest a lesser portion of our assets in other real estate related investments, including other income-producing property types, senior mortgage loans, subordinate loans or real estate loans secured by interests in other income-producing property types or membership or partnership interests in other income-producing property types as determined by Preferred Apartment Advisors, LLC, or our Manager, as appropriate for us. At September 30, 2018, the Company was the approximate 97.4% owner of Preferred Apartment Communities Operating Partnership, L.P., or the Operating Partnership. We elected to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended, commencing with our tax year ended December 31, 2011.

 

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SOURCE Preferred Apartment Communities, Inc.