ATLANTA, May 1, 2017 /PRNewswire/ — Preferred Apartment Communities, Inc. (NYSE: APTS) («we», «our», the «Company» or «Preferred Apartment Communities») today reported results for the quarter ended March 31, 2017. 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.

«Our associates and properties all performed exceptionally well during the first quarter, giving us superb results,» said John A. Williams, Preferred Apartment Communities’ Chairman and Chief Executive Officer.

Acquisitions of Properties

  • During the first quarter 2017, we acquired the following properties:

 

Property

Location

Type

Units

Beds

Regents on University

Tempe, AZ

Student housing property

225

640

Broadstone at Citrus Village

Tampa, FL

Multifamily community

296

n/a

Retreat at Greystone

Birmingham, AL

Multifamily community

312

n/a

Founders Village

Williamsburg, VA

Multifamily community

247

n/a

1,080

 

Sales of Properties

  • During the first quarter 2017, we sold our Sandstone Creek and Ashford Park multifamily communities located in Kansas City, Kansas and Atlanta, Georgia, respectively, and collected aggregate gross proceeds of $113.6 million. We realized an average annualized return on these two properties of approximately 19.1%.

Financial Highlights

Our operating results are presented below.

Three months ended March 31,

2017

2016

% change

Revenues

$

66,561,335

$

41,735,781

59.5

%

Per share data:

Net income (loss) (1)

$

0.54

$

(0.49)

FFO (2)

$

0.35

$

0.17

105.9

%

Core FFO (2)

$

0.36

$

0.30

20.0

%

Dividends (3)

$

0.22

$

0.1925

14.3

%

(1) Per weighted average share of Common Stock outstanding for the periods indicated.
(2) FFO and Core FFO are presented per weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated.
(3)  Per share of Common Stock and Class A Unit outstanding.

Net income per share for the three months ended March 31, 2017 reflects a realized gain on the sale of Sandstone Creek and Ashford Park of approximately $30.7 million, or $1.14 per share. Funds from operations («FFO») in 2016 reflect acquisition-related costs of approximately $2.8 million. In 2017, the majority of these type of costs are deferred and amortized over the life of the acquired assets. Core Funds From Operations Attributable to Common Stockholders and Unitholders («Core FFO») excludes acquisition costs and certain other costs not representative of our ongoing operations.

Real Estate Assets

Owned as of
March 31, 2017

Potential additions
from purchase
options in real estate
loan investment
portfolio(1)

Potential total

Multifamily communities:

Properties

25

14

39

Units

8,132

3,861

11,993

Grocery-anchored shopping centers:

Properties

31

1

32

Gross leasable area (square feet)

3,295,491

212,800

(2)

3,508,291

Student housing properties:

Properties

2

8

10

Units

444

1,874

2,318

Beds

1,319

5,693

7,012

Office buildings:

Properties

3

3

Rentable square feet

1,093,832

1,093,832

(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) Square footage represents area covered by our purchase options and excludes 123,590 square feet owned by the grocery anchor.

 

  • Our net income per share of $0.54 for the three months ended March 31, 2017 was driven by an aggregate realized gain on the sale of Sandstone Creek and Ashford Park of approximately $30.7 million, or $1.14 per share. The proceeds from one of the properties sold were deposited into a 1031 exchange account to be used for the acquisition of multiple assets in the future. Utilization of a 1031 exchange allowed us to defer the tax liability on the sale of this asset and more efficiently redeploy our capital. All of the proceeds were redeployed by the end of April 2017.
  • For the first quarter 2017, our Core FFO payout ratio to our Common Stockholders and Unitholders was approximately 61.7% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 83.4%. (1)
  • For the first quarter 2017, our Core FFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 59.0% and our AFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 66.0%. (1)
  • As of March 31, 2017, our total assets were approximately $2.5 billion compared to approximately $1.5 billion as of March 31, 2016, an increase of approximately $1.0 billion, or approximately 65.6%. This growth was driven primarily by the net addition of 25 real estate properties and an increase of approximately $79.0 million of the funded amount of our real estate loan investment portfolio since March 31, 2016.
  • As of March 31, 2017, the average age of our multifamily communities was approximately 6.9 years, which we believe is among the youngest in the multifamily REIT industry.
  • At March 31, 2017, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 57.3%.
  • Cash flow from operations for the quarter ended March 31, 2017 was approximately $18.3 million, an increase of approximately $4.9 million, or 36.5%, compared to approximately $13.4 million for the quarter ended March 31, 2016.

(1) We calculate the Core FFO and AFFO payout ratios to Common Stockholders and Unitholders as the ratio of Common Stock dividends and distributions to Unitholders to Core FFO or AFFO, respectively. We calculate the Core FFO and AFFO payout ratios to Series A Preferred Stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and Core FFO or AFFO, respectively. 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 on page S-14.

Subsequent to Quarter End

  • On April 17, 2017, we declared a quarterly dividend on our Common Stock of $0.235 per share, payable on July 14, 2017 to stockholders of record on June 15, 2017. This is an increase of $0.015 per share or approximately 6.8% over the quarterly dividend of $0.22 per share paid to common stockholders for the first quarter 2017. This also represents an annualized dividend growth rate of 14.8% since our first dividend following our IPO in April 2011.
  • On April 20, 2017, we closed on a loan investment of up to approximately $31.5 million to acquire a 6.5 acre site located in San Jose, California that is currently zoned to provide for up to 551 multifamily units and approximately 37,000 square feet of commercial space.
  • On April 21, 2017 we closed on the acquisition of a 80,018 square foot grocery-anchored shopping center located in Atlanta, Georgia.
  • On April 26, 2017 we closed on the acquisition of a 242-unit multifamily community located in Louisville, Kentucky.

Same Store Operations

The following table presents the percentage change in same store multifamily gross revenues, operating expenses and net operating income for the first quarter 2017 versus 2016. Our same store property operating results exclude any properties that are not comparable for the periods presented. See page S-13 of our Supplemental Financial Data Report for more details on our same store results.

Year over year growth

three months ended March 31, 2017 versus 2016

Total Revenues

Operating Expenses

Net Operating Income

Multifamily

1.4

%

(2.4)

%

5.0

%

Capital Markets Activities

On February 14, 2017, we closed our existing $900 million offering of Units (the «$900 Million Follow-on Offering»), with each Unit consisting of one share of our Series A Redeemable Preferred Stock and one Warrant to purchase up to 20 shares of our Common Stock, after a successful capital raise of $900 million. On the same day, our registration statement on Form S-3 (Registration No. 333-211924) (the «$1.5 Billion Follow-On Registration Statement») was declared effective by the Securities and Exchange Commission (the «SEC»). This $1.5 Billion Follow-On Registration Statement allows us to offer up to a maximum of 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 Unit Offering»). The price per Unit is $1,000, subject to adjustment if a participating broker-dealer reduces its commission. The Units are being offered by our affiliate, Preferred Capital Securities, LLC («PCS»), on a «reasonable best efforts» basis and we intend to invest substantially all the net proceeds of the $1.5 Billion Unit Offering in connection with the acquisition of multifamily communities, other real estate-related investments and general working capital purposes.

During the first quarter 2017, we issued and sold an aggregate of 76,717 Units from the $900 Million Follow-on Offering and the $1.5 Billion Unit Offering, resulting in gross proceeds of approximately $76.6 million. In addition, during the first quarter 2017, we issued approximately 336,000 shares of Common Stock pursuant to the exercise of warrants issued under our Series A Preferred Stock offerings, resulting in aggregate gross proceeds of approximately $3.8 million.

Our registration statement on Form S-3 (Registration No. 333-214531) (the «mShares Registration Statement») allows us to offer up to a maximum of 500,000 shares of Series M Redeemable Preferred Stock («mShares»), par value $0.01 per share (the «mShares Offering»).  The mShares are being offered by PCS on a «reasonable best efforts» basis. The price per share is $1,000. We intend to invest substantially all the net proceeds of the mShares Offering in connection with the acquisition of multifamily communities, other real estate-related investments and general working capital purposes. During the first quarter 2017, we issued and sold 1,635 mShares resulting in gross proceeds of approximately $1.6 million.

Sales from our offering of up to $150 million of Common Stock from time to time in an «at the market» offering (the «2016 ATM Offering») were immaterial for the first quarter 2017.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On February 2, 2017, we declared a quarterly dividend on our Common Stock of $0.22 per share for the first quarter 2017. This represents a 14.3% increase in our common stock dividend from our first quarter 2016 common stock dividend of $0.1925 per share, and an annualized dividend growth rate of 13.3% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The first quarter dividend was paid on April 14, 2017 to all stockholders of record on March 15, 2017. In conjunction with the Common Stock dividend, the Company’s operating partnership declared a distribution on its Class A Units of $0.22 per unit for the first quarter 2017, which was paid on April 14, 2017 to all Class A Unit holders of record as of March 15, 2017.

Monthly Dividends on Series A Redeemable Preferred Stock

We declared and paid monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $14.4 million for the quarter ended March 31, 2017 and represents a 6% annual yield.

Conference Call and Supplemental Data

Preferred Apartment Communities will hold its quarterly conference call on Tuesday, May 2, 2017 at 11:00 a.m. Eastern Time to discuss its first quarter 2017 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, May 2, 2017
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

The live broadcast of Preferred Apartment Communities’ first quarter conference call will be available online, on a listen-only basis, at the company’s website, www.pacapts.com, under «Investors» and then click on the «Upcoming Events» link. A replay of the call will be archived on Preferred Apartment Communities’ website under Investors/Audio Archive.

 

2017 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. Effective January 1, 2017, we adopted Accounting Standard Update 2017-01, which requires acquisition costs for asset acquisitions (which we believe our contemplated future acquisitions will be) to be capitalized and amortized rather than expensed as incurred, as was the case under previous guidance. Such activity by 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 widely. For this reason, we are unable to reasonably forecast this measure or provide a reconciliation of our projected Core FFO per share to this measure.

Core FFO per share  –   We currently project Core FFO to be in the range of $1.40 – $1.48 per share for the full year 2017.

Revenue  We currently project total revenues to be in the range of $285 million – $315 million for the full year 2017.

Core FFO, AFFO and FFO are all calculated after deductions for all preferred stock dividends. A reconciliation of net income (loss) attributable to common stockholders to Core FFO, AFFO and FFO appears on page S-3 of the attached report, as well as on the Company’s website and is available using the following link:

http://investors.pacapts.com/download/1Q17_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 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; 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; 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 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, 2016 that was filed with the Securities and Exchange Commission, or SEC, on March 1, 2017, 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-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 (including prospectus) 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 2016 ATM Offering, will arrange to send you a prospectus if you request it by calling Leonard A. Silverstein at (770) 818-4100, 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.

The prospectus for the 2016 ATM Offering, dated July 18, 2016, including a base prospectus, dated May 17, 2016, can be accessed through the following link:

https://www.sec.gov/Archives/edgar/data/1481832/000148183216000152/atmprospectus.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

 

FIRST QUARTER 2017
SUPPLEMENTAL FINANCIAL DATA

 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)

Three months ended March 31,

2017

2016

Revenues:

Rental revenues

$

45,363,521

$

28,255,599

Other property revenues

8,436,111

3,760,083

Interest income on loans and notes receivable

7,947,811

6,942,159

Interest income from related parties

4,813,892

2,777,940

Total revenues

66,561,335

41,735,781

Operating expenses:

Property operating and maintenance

6,538,639

4,021,362

Property salary and benefits reimbursement to related party

3,028,350

2,363,463

Property management fees

1,901,783

1,228,021

Real estate taxes

7,903,801

5,173,441

General and administrative

1,505,510

919,952

Equity compensation to directors and executives

873,102

610,425

Depreciation and amortization

24,826,189

15,346,726

Acquisition and pursuit costs

9,002

2,763,585

Asset management fees to related party

4,512,514

2,766,086

Insurance, professional fees, and other expenses

1,291,404

1,306,981

Total operating expenses

52,390,294

36,500,042

Contingent asset management and general and administrative expense fees

(175,082)

(269,601)

Net operating expenses

52,215,212

36,230,441

Operating income

14,346,123

5,505,340

Interest expense

15,008,703

8,894,830

Net loss before gain on sale of real estate

(662,580)

(3,389,490)

Gain on sale of real estate

30,724,060

Net income (loss)

30,061,480

(3,389,490)

Consolidated net (income) loss attributable to non-controlling interests

(999,066)

88,561

Net income (loss) attributable to the Company

29,062,414

(3,300,929)

Dividends declared to Series A preferred stockholders

(14,386,047)

(7,881,735)

Earnings attributable to unvested restricted stock

(1,705)

(1,451)

Net income (loss) attributable to common stockholders

$

14,674,662

$

(11,184,115)

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

basic and diluted

$

0.54

$

(0.49)

Dividends per share declared on Common Stock

$

0.22

$

0.1925

Weighted average number of shares of Common Stock outstanding,

basic and diluted

26,936,266

22,983,741

 

 

Reconciliation of FFO, Core FFO, and AFFO

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

Three months ended March 31,

2017

2016

Net income (loss) attributable to common stockholders (See note 1)

$

14,674,662

$

(11,184,115)

Less:

Income (loss) attributable to non-controlling interests (See note 2)

999,066

(88,561)

Gain on sale of real estate

(30,724,060)

Add:

Depreciation of real estate assets

18,131,536

11,083,625

Amortization of acquired real estate intangible assets and deferred leasing costs

6,531,960

4,138,750

FFO

9,613,164

3,949,699

Add:

Acquisition and pursuit costs

9,002

2,763,585

Loan cost amortization on acquisition term note (See note 3)

26,938

79,833

Amortization of loan coordination fees paid to the Manager (See note 4)

355,550

107,844

Costs incurred from extension of management agreement with advisor (See note 5)

111,613

Core FFO

10,004,654

7,012,574

Add:

Non-cash equity compensation to directors and executives

873,102

610,425

Amortization of loan closing costs (See note 6)

797,698

503,530

Depreciation/amortization of non-real estate assets

162,693

124,351

Net loan fees received (See note 7)

701,369

Accrued interest income received (See note 8)

2,524,032

4,208,906

Less:

Non-cash loan interest income (See note 7)

(4,298,502)

(3,238,910)

Cash paid for loan closing costs

(4,234)

Amortization of acquired real estate intangible liabilities (See note 9)

(1,816,630)

(494,232)

Normally recurring capital expenditures and leasing costs (See note 10)

(845,915)

(487,912)

AFFO

$

7,401,132

$

8,935,867

Common Stock dividends and distributions to Unitholders declared:

Common Stock dividends

$

5,970,658

$

4,435,489

Distributions to Unitholders (See note 2)

198,742

117,395

Total

$

6,169,400

$

4,552,884

Common Stock dividends and Unitholder distributions per share

$

0.22

$

0.1925

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

$

0.35

$

0.17

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

$

0.36

$

0.30

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

$

0.27

$

0.38

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

Basic:

Common Stock

26,936,266

22,983,741

Class A Units

925,976

616,632

Common Stock and Class A Units

27,862,242

23,600,373

Diluted Common Stock and Class A Units (B)

28,785,670

24,192,250

Actual shares of Common Stock outstanding, including 7,749 and 7,536 unvested shares

 of restricted Common Stock at March 31, 2017 and 2016, respectively

27,193,122

23,070,562

Actual Class A Units outstanding

903,371

886,520

Total

28,096,493

23,957,082

(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 3.32% weighted average non-controlling interest in the Operating Partnership for the three-month period ended March 31, 2017.

(B) Since our Core 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.

 

See Notes to Reconciliation of FFO, Core FFO and AFFO to Net Loss Attributable to Common Stockholders on page S-4.

Notes to Reconciliation of FFO, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders

  1. Rental and other property revenues and expenses for the three-month period ended March 31, 2017 include activity for the three multifamily communities and one student housing property acquired during the first quarter 2017 only from their respective dates of acquisition. In addition, the first quarter 2017 period includes a full quarter of activity for the three multifamily communities, 16 grocery-anchored shopping centers, one student housing property and three office buildings acquired during the last three quarters of 2016. Rental and other property revenues and expenses for the three-month period ended March 31, 2016 include activity for the three multifamily communities and one grocery-anchored shopping center only from their respective dates of acquisition during the first quarter 2016.
  2. Non-controlling interests in our Operating Partnership consisted of a total of 903,371 Class A Units as of March 31, 2017. 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 3.32% and 2.61% for the three-month periods ended March 31, 2017 and 2016, respectively.
  3. We incurred loan closing costs for the acquisition of the Village at Baldwin Park multifamily community during the first quarter 2016 on our $35 million acquisition term loan facility, or 2016 Term Loan, and on our $11 million term note. These costs were deferred and are being amortized over the lives of the two instruments. The amortization expense of these deferred costs is an additive adjustment in the calculation of Core FFO.
  4. 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 replace acquisition fees and to more accurately reflect the administrative effort involved in arranging debt financing for acquired properties. The portion of the loan coordination fees attributable to the financing are amortized over the lives of the respective mortgage loans, and this non-cash amortization expense is an addition to FFO in the calculation of Core FFO. At March 31, 2017, aggregate unamortized loan coordination fees were approximately $10.3 million, which will be amortized over a weighted average remaining loan life of approximately 9.5 years.
  5. We incurred legal costs pertaining to the extension of our management agreement with our Manager. The three-year extension was effective as of June 3, 2016. Such costs are an additive adjustment to FFO in our calculation of Core FFO.
  6. 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 $150 million syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. 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 Core 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 March 31, 2017, aggregate unamortized loan costs were approximately $25.7 million, which will be amortized over a weighted average remaining loan life of approximately 7.9 years.
  7. We receive loan 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 in excess of amortization income, after the payment of acquisition fees to our Manager are additive adjustments in the calculation of AFFO. Correspondingly, the non-cash income recognized under the effective interest method is a deduction in the calculation of AFFO. We also accrue over the lives of certain loans 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 to a third party. This non-cash income is deducted from Core FFO in the calculation of AFFO.
  8. The Company records deferred interest revenue on certain of its real estate loans. These adjustments reflect the receipt during the periods presented of interest income which was earned and accrued prior to those periods presented on various real estate loans.
  9. 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 the Company’s 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. At March 31, 2017, the balance of unamortized below-market lease intangibles was approximately $28.7 million, which will be recognized over a weighted average remaining lease period of approximately 9.3 years.
  10. We deduct from Core FFO normally recurring capital expenditures that are necessary to maintain our assets’ revenue streams in the calculation of AFFO. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures, which totaled $1,853,419 and $1,593,847 for the three-month periods ended March 31, 2017 and 2016, respectively. This adjustment also deducts from Core FFO capitalized amounts for third party costs during the period to originate or renew leases in our grocery-anchored shopping centers.

See Definitions of Non-GAAP Measures beginning on page S-14.

 

 

Preferred Apartment Communities, Inc.

Consolidated Balance Sheets

(Unaudited)

March 31, 2017

December 31, 2016

Assets

Real estate

Land

$

307,665,224

$

299,547,501

Building and improvements

1,590,022,871

1,513,293,760

(1)

Tenant improvements

30,906,412

23,642,361

(1)

Furniture, fixtures, and equipment

143,692,656

126,357,742

Construction in progress

5,539,735

2,645,634

Gross real estate

2,077,826,898

1,965,486,998

Less: accumulated depreciation

(110,332,373)

(103,814,894)

Net real estate

1,967,494,525

1,861,672,104

Real estate loan investments, net of deferred fee income

195,348,980

201,855,604

Real estate loan investments to related parties, net

144,077,171

130,905,464

Total real estate and real estate loan investments, net

2,306,920,676

2,194,433,172

Cash and cash equivalents

13,365,130

12,321,787

Restricted cash

53,448,631

55,392,984

Notes receivable

16,787,881

15,499,699

Note receivable and revolving line of credit due from related party

22,107,866

22,115,976

Accrued interest receivable on real estate loans

23,440,710

21,894,549

Acquired intangible assets, net of amortization

80,480,916

79,156,400

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

1,927,264

1,768,779

Deferred offering costs

3,881,476

2,677,023

Tenant receivables and other assets

22,068,792

15,572,233

Total assets

$

2,544,429,342

$

2,420,832,602

Liabilities and equity

Liabilities

Mortgage notes payable, principal amount

$

1,395,287,423

$

1,327,878,112

Less: deferred loan costs, net of amortization

(23,671,268)

(22,007,641)

Mortgage notes payable, net of deferred loan costs

1,371,616,155

1,305,870,471

Revolving line of credit

97,000,000

127,500,000

Term note payable

11,000,000

11,000,000

Less: deferred loan costs, net of amortization

(13,157)

(40,095)

Term note payable, net of deferred loan costs

10,986,843

10,959,905

Real estate loan investment participation obligation

18,295,509

20,761,819

Deferred revenue

9,256,887

Accounts payable and accrued expenses

20,299,035

20,814,910

Accrued interest payable

3,387,559

3,541,640

Dividends and partnership distributions payable

10,859,650

10,159,629

Acquired below market lease intangibles, net of amortization

28,694,320

29,774,033

Security deposits and other liabilities

6,772,416

6,189,033

Total liabilities

1,577,168,374

1,535,571,440

Commitments and contingencies

Equity

Stockholder’s equity

Series A Redeemable Preferred Stock, $0.01 par value per share; 3,050,000

shares authorized; 1,001,572 and 924,855 shares issued; 987,329 and 914,422

shares outstanding at March 31, 2017 and December 31, 2016, respectively

9,873

9,144

Series M Redeemable Preferred Stock, $0.01 par value per share; 500,000

shares authorized; 1,635 and 0 shares issued and outstanding

at March 31, 2017 and December 31, 2016, respectively

16

Common Stock, $0.01 par value per share; 400,066,666 shares authorized;

27,185,373 and 26,498,192 shares issued and outstanding at

March 31, 2017 and December 31, 2016, respectively

271,854

264,982

Additional paid-in capital

960,681,007

906,737,470

Accumulated earnings (deficit)

5,830,771

(23,231,643)

Total stockholders’ equity

966,793,521

883,779,953

Non-controlling interest

467,447

1,481,209

Total equity

967,260,968

885,261,162

Total liabilities and equity

$

2,544,429,342

$

2,420,832,602

(1) In the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, the Company reported an amount of tenant improvements on its acquisition of the Three Ravinia office building that should have been classified as building and improvements. Adjusted amounts are shown here.

 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

Three months ended March 31,

2017

2016

Operating activities:

Net income (loss )

$

30,061,480

$

(3,389,490)

Reconciliation of net income (loss) to net cash provided by operating activities:

Depreciation expense

18,287,611

11,203,056

Amortization expense

6,538,578

4,143,670

Amortization of above and below market leases

(797,582)

(265,410)

Deferred fee income amortization

(284,064)

(264,197)

Deferred loan cost amortization

1,180,186

691,207

(Increase) in accrued interest income on real estate loans

(1,546,162)

1,075,458

Equity compensation to executives, directors and consultants

873,102

610,425

Other

186,912

(4,616)

Gain on sale of real estate

(30,724,060)

Changes in operating assets and liabilities:

(Increase) in tenant receivables and other assets

(1,965,423)

(86,020)

(Increase) in tenant lease incentives

(2,912,500)

Increase in accounts payable and accrued expenses

(716,461)

(1,267,380)

Increase in accrued interest payable

(63,808)

721,170

Increase in prepaid rents

150,096

113,055

Increase in security deposits and other liabilities

8,686

109,187

Net cash provided by operating activities

18,276,591

13,390,115

Investing activities:

Investment in real estate loans

(16,271,909)

(56,970,287)

Repayments of real estate loans

9,866,000

27,695,229

Notes receivable issued

(1,263,292)

(3,870,191)

Notes receivable repaid

9,505,081

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

(7,650,000)

(12,382,910)

Repayments of line of credit by related party

7,553,568

5,508,066

Origination fees received on real estate loans

1,403,422

Origination fees paid on real estate loans

(701,369)

Acquisition of properties

(138,467,592)

(220,850,440)

Disposition of properties, net

77,793,170

Additions to real estate assets – improvements

(3,680,079)

(1,461,711)

Deposits paid on acquisitions

(1,837,695)

(2,644,056)

Decrease in restricted cash

4,449,837

1,808,375

Net cash used in investing activities

(69,507,992)

(252,960,791)

Financing activities:

Proceeds from mortgage notes payable

104,300,000

151,640,000

Payment for mortgage extinguishment

(67,140,689)

(2,185,191)

Payments for deposits and other mortgage loan costs

(3,398,718)

(3,716,469)

Proceeds from real estate loan participants

81,632

67,066

Payments to real estate loan participants

(2,466,500)

Proceeds from lines of credit

37,500,000

87,500,000

Payments on lines of credit

(68,000,000)

(105,000,000)

Proceeds from term loan

35,000,000

Repayment of the term loan

(5,000,000)

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

68,986,692

90,090,574

Proceeds from sales of Common Stock

186,119

Proceeds from exercises of warrants

4,248,574

5,548,468

Common stock dividends paid

(5,740,616)

(4,314,999)

Preferred stock dividends paid

(13,960,568)

(7,391,620)

Distributions to non-controlling interests

(194,957)

(53,241)

Payments for deferred offering costs

(2,126,225)

(350,012)

Net cash provided by financing activities

52,274,744

241,834,576

Net increase (decrease) in cash and cash equivalents

1,043,343

2,263,900

Cash and cash equivalents, beginning of year

12,321,787

2,439,605

Cash and cash equivalents, end of year

$

13,365,130

$

4,703,505

 

Real Estate Loan Investments

The following table presents our portfolio of real estate loan investments. The loan balance column lists the drawn amount of each loan as of March 31, 2017. 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 15 and 60 basis points, depending on the loan.

Total units
upon

Loan balance at
March 31,

Total loan

Purchase option window

Project/Property

Location

completion (1)

2017 (2)

 commitments

Begin

End

Multifamily communities:

Encore

Atlanta, GA

340

$

10,958,200

$

10,958,200

1/8/2018

5/8/2018

Encore Capital

Atlanta, GA

6,933,429

9,758,200

N/A

N/A

Palisades

Northern VA

304

16,541,073

17,270,000

3/1/2018

7/31/2018

Fusion

Irvine, CA

280

50,514,711

59,052,583

1/1/2018

4/1/2018

Green Park

Atlanta, GA

310

13,464,372

13,464,372

11/1/2017

2/28/2018

Summit Crossing III

Atlanta, GA

172

7,246,400

7,246,400

8/1/2017

11/30/2017

Overture

Tampa, FL

180

6,254,823

6,920,000

1/1/2018

5/1/2018

Aldridge at Town Village

Atlanta, GA

300

10,884,275

10,975,000

11/1/2017

2/28/2018

Bishop Street

Atlanta, GA

232

11,383,876

12,693,457

10/1/2018

12/31/2018

Hidden River

Tampa, FL

300

4,734,960

4,734,960

9/1/2018

12/31/2018

Hidden River Capital

Tampa, FL

4,725,266

5,380,000

N/A

N/A

CityPark II

Charlotte, NC

200

3,364,800

3,364,800

5/1/2018

8/31/2018

CityPark II Capital

Charlotte, NC

3,396,856

3,916,000

N/A

N/A

Park 35 on Clairmont

Birmingham, AL

271

20,219,632

21,060,160

S + 90 days (3)

S + 150 days (3)

Fort Myers

Fort Myers, FL

224

3,765,396

4,000,000

N/A

N/A

Wiregrass

Tampa, FL

392

5,253,571

14,975,853

S + 90 days (3)

S + 150 days (3)

Wiregrass Capital

Tampa, FL

3,338,073

3,744,147

N/A

N/A

360 Forsyth

Atlanta, GA

356

2,622,520

3,225,000

N/A

N/A

Student housing properties:

Haven West

Atlanta, GA

160

6,784,167

6,940,795

N/A

N/A

Haven 12

Starkville, MS

152

5,815,849

6,116,384

9/1/2017

11/30/2017

Stadium Village

Atlanta, GA

198

13,329,868

13,424,995

9/1/2017

11/30/2017

18 Nineteen

Lubbock, TX

217

15,584,017

15,598,352

10/1/2017

12/31/2017

Haven South

Waco, TX

250

15,418,199

15,455,668

10/1/2017

12/31/2017

Haven46

Tampa, FL

158

9,369,251

9,819,662

11/1/2018

1/31/2019

Haven Northgate

College Station, TX

427

53,811,320

64,678,549

10/1/2018

12/31/2018

Lubbock II

Lubbock, TX

140

8,967,201

9,357,171

11/1/2018

1/31/2019

Haven Charlotte

Charlotte, NC

332

196,763

19,581,593

12/1/2019

2/28/2020

Haven Charlotte Member

Charlotte, NC

7,240,278

8,201,170

N/A

N/A

New Market Properties:

Dawson Marketplace

Atlanta, GA

12,857,005

12,857,005

12/16/2017

12/15/2018

Other:

Crescent Avenue

Atlanta, GA

6,000,000

6,000,000

N/A

N/A

5,895

340,976,151

$

400,770,476

Unamortized loan origination fees

(1,550,000)

Carrying amount

$

339,426,151

(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) Loan balances presented are principal amounts due.

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

 

Multifamily Communities

Three months ended
March 31, 2017

Property

Location

Number
of units

Average unit
size (sq. ft.)

Average
physical
occupancy

Average
rent per
unit

Lake Cameron

Raleigh, NC

328

940

94.8

%

$

951

McNeil Ranch

Austin, TX

192

1,071

92.7

%

$

1,242

Avenues at Cypress

Houston, TX

240

1,166

94.8

%

$

1,388

Avenues at Northpointe

Houston, TX

280

1,154

93.5

%

$

1,310

Stoneridge Farms at the Hunt Club

Nashville, TN

364

1,153

92.2

%

$

1,058

Vineyards

Houston, TX

369

1,122

91.7

%

$

1,119

Aster at Lely Resort

Naples, FL

308

979

94.2

%

$

1,380

Venue at Lakewood Ranch

Sarasota, FL

237

1,001

95.3

%

$

1,556

Citi Lakes

Orlando, FL

346

984

92.2

%

$

1,333

Lenox Portfolio

Nashville, TN

474

886

96.6

%

$

1,170

Total/Avg PAC Same Store

3,138

94

%

Stone Rise

Philadelphia, PA

216

1,079

93.6

%

$

1,438

Enclave at Vista Ridge

Dallas, TX

300

1,079

94.4

%

$

1,164

Summit Crossing

Atlanta, GA

485

1,053

96.0

%

$

1,109

CityPark View

Charlotte, NC

284

948

$

1,078

Avenues at Creekside

San Antonio, TX

395

974

$

1,114

Stone Creek

Houston, TX

246

852

94.7

%

$

1,026

Overton Rise

Atlanta, GA

294

1,018

93.6

%

$

1,433

Crosstown Walk

Tampa, FL

342

980

$

1,208

525 Avalon Park

Orlando, FL

487

1,394

$

1,316

Sorrel

Jacksonville, FL

290

1,048

94.0

%

$

1,219

Retreat at Greystone

Birmingham, AL

312

1,100

n/a

Broadstone at Citrus Village

Tampa, FL

296

980

n/a

Founders Village

Williamsburg, VA

247

1,070

n/a

Value-add project:

Village at Baldwin Park

Orlando, FL

528

1,069

$

1,490

4,722

Joint venture:

City Vista

Pittsburgh, PA

272

1,023

$

1,334

Total PAC Non-Same Store

4,994

Stabilized occupancy

94.1

%

(1)

Student housing communities:

Average
rent per
bed

North by Northwest

Tallahassee, FL

219

(2)

1,137

99.7

%

$

715

Regents on University

Tempe, AZ

225

(2)

1,296

Total All PAC units

8,576

(1) Excludes average occupancy for student housing communities.

(2) North by Northwest has 679 beds and Regents on University has 640 beds.

 

For the three-month period ended March 31, 2017, our average physical occupancy was 94.1%. We calculate average physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing four months from the reporting period end date. For the three-month period ended March 31, 2017, our average economic occupancy was 94%. 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), properties which are owned for less than the entire reporting period and properties which are undergoing significant capital projects or are adding additional phases (Summit Crossing, Stone Creek, Village at Baldwin Park, 525 Avalon Park and CityPark View). We also exclude properties which are currently being marketed for sale (Stone Rise and Enclave at Vista Ridge).

Capital Expenditures

We regularly incur capital expenditures related to our owned 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 or retail tenants 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.

Excluded from these deductions are capital expenditures made in our office and retail portfolios (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), (iii) property re-developments and repositionings, (iv) building improvements that are recoverable from future operating cost savings, and (v) capital incurred within 12 months prior to the disposition date for any properties sold. The addition of the «first generation» capital expenditures category has impacted the analysis of our retail-related tenant improvements and leasing costs, which were solely included under recurring capital expenditures in prior reporting periods.

For the three-month period ended March 31, 2017, our capital expenditures were as follows:

Nonrecurring capital expenditures

Recurring capital
expenditures

Budgeted at
acquisition

Other

Total

Total

Multifamily Communities:

Summit Crossing

$

$

$

$

27,066

$

27,066

Stone Rise

11,043

11,043

Ashford Park

19,800

19,800

11,208

31,008

McNeil Ranch

3,245

3,245

13,708

16,953

Lake Cameron

35,000

35,000

50,414

85,414

Stoneridge Farms at the Hunt Club

9,408

9,408

41,173

50,581

Vineyards

3,798

3,798

45,140

48,938

Enclave

14,983

14,983

49,385

64,368

Sandstone

5,938

5,938

Cypress

9,643

9,643

25,570

35,213

Northpointe

6,383

6,383

30,693

37,076

Lakewood Ranch

8,395

8,395

Aster at Lely

12,404

12,404

CityPark View

22,099

22,099

2,094

24,193

Avenues at Creekside

32,470

32,470

Citilakes

1,599

1,599

24,704

26,303

Stone Creek

20,119

20,119

Lenox Portfolio

175,974

20,818

196,792

29,211

226,003

Village at Baldwin Park

552,980

552,980

33,911

586,891

Crosstown Walk

26,757

26,757

8,436

35,193

Overton Rise

10,568

10,000

20,568

13,621

34,189

525 Avalon Park

58,152

58,152

City Vista

9,634

9,634

2,645

12,279

Sorrel

229,543

229,543

5,543

235,086

Citrus Village

18,152

18,152

4,415

22,567

Retreat at Greystone

10,500

10,500

10,500

997,717

193,167

1,190,884

567,458

1,758,342

Capital expenditures, continued

Nonrecurring/first generation capital expenditures

Recurring / second
generation capital
expenditures

Budgeted at
acquisition

Other

Total

Total

Grocery-anchored shopping centers:

Woodstock Crossing

2,625

2,625

2,625

Parkway Town Centre

13,812

13,812

13,812

Spring Hill Plaza

17,522

17,522

Deltona Landings

9,358

9,358

9,358

Sweetgrass Corner

116,942

116,942

Salem Cove

16,687

16,687

Independence Square

1,295

1,295

5,144

6,439

Summit Point

3,346

3,346

3,346

The Overlook at Hamilton Place

5,700

5,700

Wade Green Village

3,645

3,645

9,487

13,132

Anderson Central

1,880

1,880

1,626

3,506

East Gate Shopping Center

4,190

4,190

4,190

Fairview Market

9,290

9,290

7,041

16,331

Fury’s Ferry

43,420

43,420

19,466

62,886

Rosewood Shopping Center

1,990

1,990

The Market at Victory Village

2,800

2,800

Lakeland Plaza

21,309

21,309

28,364

49,673

Cherokee Plaza

16,270

16,270

14,327

30,597

Oak Park Village

1,937

1,937

1,937

Sandy Plains Exchange

2,115

2,115

2,115

University Palms

2,076

2,076

Shoppes of Parkland

49,070

49,070

6,763

55,833

Champions Village

170,017

170,017

170,017

353,579

353,579

255,935

609,514

Student Housing:

North by Northwest

308,956

308,956

21,490

330,446

Regents on University

1,032

1,032

Office Buildings:

2nd Generation Leasing Capital

2nd Generation Building Capital

Total

$

1,306,673

$

546,746

$

1,853,419

$

845,915

$

2,699,334

 

Grocery-Anchored Shopping Center Portfolio

As of March 31, 2017, our grocery-anchored shopping center portfolio consisted of the following properties:

Property name

Location

Year built

GLA (1)

Percent
leased

Grocery anchor
tenant

Woodstock Crossing

 Atlanta, GA

1994

66,122

92.6

%

 Kroger

Cherokee Plaza

 Atlanta, GA

1958

102,864

100.0

%

Kroger

Lakeland Plaza

 Atlanta, GA

1990

301,711

95.2

%

Sprouts

Powder Springs

 Atlanta, GA

1999

77,853

92.8

%

 Publix

Royal Lakes Marketplace

 Atlanta, GA

2008

119,493

84.4

%

 Kroger

Sandy Plains Exchange

 Atlanta, GA

1997

72,784

93.2

%

Publix

Summit Point

 Atlanta, GA

2004

111,970

81.5

%

 Publix

Thompson Bridge Commons

 Atlanta, GA

2001

92,587

97.3

%

Kroger

Wade Green Village

 Atlanta, GA

1993

74,978

89.7

%

 Publix

East Gate Shopping Center

 Augusta, GA

1995

75,716

89.5

%

 Publix

Fury’s Ferry

 Augusta, GA

1996

70,458

100.0

%

 Publix

Parkway Centre

 Columbus, GA

1999

53,088

97.4

%

 Publix

Spring Hill Plaza

 Nashville, TN

2005

61,570

100.0

%

 Publix

Parkway Town Centre

 Nashville, TN

2005

65,587

100.0

%

 Publix

Salem Cove

 Nashville, TN

2010

62,356

97.8

%

 Publix

The Market at Victory Village

 Nashville, TN

2007

71,300

98.5

%

 Publix

The Overlook at Hamilton Place

 Chattanooga, TN

1992

213,095

93.6

%

 The Fresh Market

Shoppes of Parkland

 Miami-Ft. Lauderdale, FL

2000

145,720

98.3

%

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

98.4

%

Publix

Champions Village

 Houston, TX

1973

383,093

78.9

%

Randalls

Kingwood Glen

 Houston, TX

1998

103,397

100.0

%

 Kroger

Independence Square

 Dallas, TX

1977

140,218

88.7

%

 Tom Thumb

Oak Park Village

 San Antonio, TX

1970

64,287

100.0

%

H.E.B.

Sweetgrass Corner

 Charleston, SC

1999

89,124

98.6

%

 Bi-Lo

Anderson Central

 Greenville Spartanburg, SC

1999

223,211

97.1

%

 Walmart

Fairview Market

 Greenville Spartanburg, SC

1998

53,888

97.4

%

 Publix

Rosewood Shopping Center

 Columbia, SC

2002

36,887

90.2

%

 Publix

Heritage Station

 Raleigh, NC

2004

72,946

100.0

%

Harris Teeter

Southgate Village

 Birmingham, AL

1988

75,092

100.0

%

 Publix

3,295,491

93.4

%

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

 

As of March 31, 2017, our grocery-anchored shopping center portfolio was 93.4% 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 March 31, 2017 were:

Total grocery-anchored shopping center portfolio

Number of leases

Leased GLA

Percent of leased
GLA

Month to month

9

23,901

0.8

%

2017

52

104,616

3.4

%

2018

89

338,808

11.0

%

2019

77

639,376

20.8

%

2020

69

386,862

12.6

%

2021

67

340,938

11.1

%

2022

36

159,966

5.2

%

2023

6

23,839

0.8

%

2024

14

317,813

10.3

%

2025

14

212,072

6.9

%

2026

5

70,661

2.3

%

2027+

18

458,179

14.8

%

456

3,077,031

100.0

%

 

The Company’s Quarterly Report on Form 10-Q for the first quarter 2017 will present statements of operations by reportable segment within the Results of Operations section of Management’s Discussion and Analysis of Financial Condition and Results of Operations. Included in this disclosure will be revenues and specifically identifiable expenses of New Market Properties, LLC.

Office Building Portfolio

As of March 31, 2017, our office building portfolio consisted of the following properties:

Property Name

Location

GLA

Percent leased

Three Ravinia

Atlanta, GA

813,746

98.4

%

Brookwood

Birmingham, AL

169,489

100.0

%

Galleria 75

Atlanta, GA

110,597

88.0

%

1,093,832

97.6

%

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

Square footage

Percentage of
total SF

Annual base rent

InterContinental Hotels Group

491,408

44.9

%

$

11,055,116

State Farm Mutual Automobile Insurance Company

183,168

16.7

%

$

3,205,579

Access Insurance Holdings Inc

77,518

7.1

%

$

1,042,629

Southern Natural Gas Company

63,113

5.8

%

$

2,040,303

Surgical Care Affiliates

47,870

4.4

%

$

1,381,249

863,077

78.9

%

Total office square footage

1,093,832

 

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

2017

40,098

3.8

%

2018

26,740

2.6

%

2019

13,044

1.2

%

2020

91,615

8.7

%

2021

215,742

20.5

%

2022

7,030

0.7

%

2023

34,441

3.3

%

2024

19,147

1.8

%

2025

47,870

4.6

%

2026

%

2027+

554,521

52.8

%

1,050,248

100.00

%

 

Multifamily Same Store Financial Data

The following chart presents same store operating results for the Company’s multifamily communities that have been owned for at least 15 full months, enabling comparisons of the current year reporting period to the prior year comparative period. The Company excludes the same store operating results of properties for which construction of adjacent phases have commenced (the Company holds real estate loans partially supporting additional phases of the CityPark View and Summit Crossing multifamily communities, which are excluded as well).  For the periods presented, same store operating results consist of the operating results of the following multifamily communities:

Stoneridge Farms at Hunt Club

Lake Cameron

Vineyards

Aster at Lely

McNeil Ranch

Venue at Lakewood Ranch

Avenues at Cypress

Lenox Portfolio

Avenues at Northpointe

Citi Lakes

Same store net operating income is a non-GAAP measure that is most directly comparable to net income (loss), with a reconciliation following below.

Same Store Net Operating Income

Three months ended:

3/31/2017

3/31/16

$ change

% change

Revenues:

Rental revenues

$

11,049,371

$

10,897,845

$

151,526

1.4

%

Other property revenues

1,158,547

1,137,611

20,936

1.8

%

Total revenues

12,207,918

12,035,456

172,462

1.4

%

Operating expenses:

Property operating and maintenance

1,560,491

1,599,207

(38,716)

(2.4)

%

Payroll

1,065,204

1,070,668

(5,464)

(0.5)

%

Property management fees

485,923

482,228

3,695

0.8

%

Real estate taxes

2,019,758

2,149,716

(129,958)

(6.0)

%

Other

554,513

522,879

31,634

6.0

%

Total operating expenses

5,685,889

5,824,698

(138,809)

(2.4)

%

Same store net operating income

$

6,522,029

$

6,210,758

$

311,271

5.0

%

 

 

Reconciliation of Same Store Net Operating Income (NOI) to Net Income (Loss)

Three months ended:

3/31/2017

3/31/16

Same store net operating income

$

6,522,029

$

6,210,758

Add:

Non-same-store property revenues

41,591,714

19,980,227

Less:

Non-same-store property operating expenses

15,625,379

8,254,922

Property net operating income

32,488,364

17,936,063

Add:

Interest revenue on notes receivable

7,947,811

6,942,159

Interest revenue on related party notes receivable

4,813,892

2,777,940

Less:

Equity stock compensation

873,102

610,425

Depreciation and amortization

24,826,189

15,346,726

Interest expense

15,008,703

8,894,830

Acquisition costs

9,002

2,763,585

Management fees

4,512,514

2,766,086

Insurance, professional fees and other

858,219

933,601

Gain on sale of real estate

30,724,060

Contingent asset management and general and administrative expense fees

(175,082)

(269,601)

Net income (loss)

$

30,061,480

$

(3,389,490)

 

Definitions of Non-GAAP Measures

Funds From Operations Attributable to Common Stockholders and Unitholders («FFO»)

Analysts, managers and investors make certain adjustments to reported net income amounts under U.S. GAAP in order to better assess these vehicles’ operating results. 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.

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. The Company believes FFO is useful to investors as a supplemental gauge of our operating results.  FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.

Core Funds From Operations Attributable to Common Stockholders and Unitholders («Core FFO»)

Core FFO makes certain adjustments to FFO, which are either not likely to occur on a regular basis or are otherwise not representative of the Company’s ongoing operating performance. For example, the Company incurs substantial costs related to property acquisitions, which, prior to 2017, were required to be recognized as expenses when they were incurred. The Company added back any such acquisition and pursuit costs, including costs incurred in connection with obtaining short term debt financing for acquisitions and beginning January 1, 2016, amortization of loan coordination fees to FFO in its calculation of Core FFO since such costs are not representative of our operating results. The Company also adds back any costs incurred related to the extension of our management agreement with our Manager, realized losses on debt extinguishment and any non-cash dividends in this calculation. Core FFO figures reported by us may not be comparable to those Core FFO figures reported by other companies.

We utilize Core FFO as a measure of the operating performance of our portfolio of real estate assets.  We believe Core FFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other real estate companies that are not as involved in ongoing acquisition activities. Core 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 Core 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:

Core FFO, plus:

  • non-cash equity compensation to directors and executives;
  • amortization of loan closing costs, excluding costs incurred in connection with obtaining short term financing related to acquisitions;
  • depreciation and amortization of non-real estate assets;
  • net loan fees received; and
  • accrued interest income received;

Less:

  • non-cash loan interest income;
  • cash paid for pursuit costs on abandoned acquisitions;
  • cash paid for loan closing costs;
  • amortization of acquired real estate intangible liabilities; 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 is 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, Core FFO, and AFFO are not considered measures of liquidity and are not alternatives to measures calculated under GAAP.

Same Store Net Operating Income (NOI)

The Company uses same store net operating income as an operational metric for properties the Company has owned for at least 15 full months, enabling comparisons of those properties’ operating results between the current reporting period and the prior year comparative period. The Company defines 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. The Company believes 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 construction of multifamily communities and other properties.  As a secondary strategy, we also 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 March 31, 2017, the Company was the approximate 96.8% 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.