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Preferred Apartment Communities, Inc. Reports Results for Second Quarter 2017

ATLANTA, July 31, 2017 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we", "our", the "Company" or "Preferred Apartment Communities") today reported results for the quarter ended June 30, 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.

Preferred Apartment Communities

"PAC had another very strong quarter, with all areas of the Company performing extremely well," said John A. Williams, Preferred Apartment Communities' Chairman and Chief Executive Officer.

Financial Highlights

Our operating results are presented below.





Three months ended June 30,




Six months ended June 30,






2017


2016


% change


2017


2016


% change



















Revenues

$

70,890,913



$

45,853,944



54.6%


$

137,452,248



$

87,589,725



 

56.9%

















Per share data:














Net income (loss) (1)

$

(0.40)



$

(0.40)




$

0.09



$

(0.88)



















FFO (2)

$

0.31



$

0.18



72.2%


$

0.65



$

0.35



85.7%

















Core FFO (2)

$

0.37



$

0.31



19.4%


$

0.73



$

0.61



19.7%

















Dividends (3)

$

0.235



$

0.2025



16.0%


$

0.455



$

0.395



15.2%
















(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. See Reconciliations of FFO, Core FFO and AFFO (each as defined below) to Net Income (Loss) Attributable to Common Stockholders on pages S-3 and S-4.

(3)  Per share of Common Stock and Class A Unit outstanding.

 

Net loss per share for the three months ended June 30, 2017 reflects a realized gain on the sale of Enclave at Vista Ridge of approximately $6.9 million, or $0.23 per share. Funds from operations ("FFO") for the three months ended June 30, 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 (see  "2017 Guidance" section). 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. Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders ("AFFO") removes significant non-cash revenues and expenses from our Core FFO results.

  • For the second quarter 2017, our Core FFO payout ratio to our Common Stockholders and Unitholders was approximately 68.3% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 81.5%. (1)
  • For the second quarter 2017, our Core FFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 57.3% and our AFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 61.6%. (1)
  • As of June 30, 2017, our total assets were approximately $2.6 billion compared to approximately $1.8 billion as of June 30, 2016, an increase of approximately $0.9 billion, or approximately 50.2%. This growth was driven primarily by the net addition of 18 real estate properties and an increase of approximately $114.3 million of the funded amount of our real estate loan investment portfolio since June 30, 2016.
  • As of June 30, 2017, the average age of our multifamily communities was approximately 6.5 years, which we believe is among the youngest in the multifamily REIT industry.
  • At June 30, 2017, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 54.0%.
  • Cash flow from operations for the quarter ended June 30, 2017 was approximately $24.1 million, an increase of approximately $4.6 million, or 23.6%, compared to approximately $19.5 million for the quarter ended June 30, 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-21.

Acquisitions of Properties

- During the second quarter 2017, we acquired the following properties:














Property


Location


Type


Units


Leasable square feet














Castleberry-Southard


Atlanta, GA


Grocery-anchored shopping center


n/a


80,018




Rockbridge Village


Atlanta, GA


Grocery-anchored shopping center


n/a


102,432




Claiborne Crossing


Louisville, KY


Multifamily community


242



n/a



























Sale of Property

  • During the second quarter 2017, we sold our 300-unit Enclave at Vista Ridge multifamily community located in Dallas, Texas for $44.0 million and recorded a realized gain on the sale of approximately $6.9 million. Our average annualized return on the property was approximately 15.6%.

Real Estate Loan Investments

  • 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 June 5, 2017, we closed on a loan investment of up to approximately $2.4 million to acquire a 26 acre site located in Nashville, Tennessee in support of a proposed 301 unit multifamily community.

Debt Refinancing

On June 22, 2017, we refinanced the existing $16.3 million mortgage on our Stone Creek multifamily community which bore interest at a fixed 3.75% rate per annum (the all-in rate including the mortgage insurance premium was 4.74% per annum) and was 29 years from maturity into a mortgage of $20.6 million, which bears interest at a fixed rate of 3.22% per annum (the all-in rate including the mortgage insurance premium is 3.47% per annum) and matures in 35 years.

On June 15, 2017, we refinanced the existing $61.75 million mortgage on our 525 Avalon multifamily community which bore interest at a variable rate of 1 Month LIBOR plus 200 basis points per annum and the secondary financing note of $3.25 million which bore interest at a variable rate of 1 Month LIBOR plus 1100 basis points per annum (both of which were to mature in less than two years) into a single mortgage of $67.38 million, which bears interest at a fixed rate of 3.98% per annum and matures in seven years.

These transactions permitted us to utilize approximately $4.1 million of equity from these two assets for deployment into future acquisitions and reduced our exposure to possible future interest rate increases.

 

Real Estate Assets












Owned as of
June 30, 2017


Potential additions
from real estate
loan investment
portfolio (1)


Potential total

Multifamily communities:






Properties

25



16



41


Units

8,074



4,712



12,786


Grocery-anchored shopping centers:






Properties

33



1



34


Gross leasable area (square feet)

3,477,941



200,000

(2)


3,677,941


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

1,094,000





1,094,000








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

 

Subsequent to Quarter End

  • On July 11, 2017, we closed on a loan investment of up to approximately $22.4 million in support of the construction of a 356-unit multifamily community located in Atlanta, Georgia.
  • On July 26, 2017, we closed on the acquisition of a 280-unit multifamily community located in Sarasota, Florida.
  • On July 26, 2017, we closed on the acquisition of a 99,384-square foot grocery-anchored shopping center located in the Columbia, South Carolina market.
  • On July 31, 2017, we closed on two loan investments of up to an aggregate of approximately $17.9 million in support of the construction of a 258-unit multifamily community to be located in Atlanta, Georgia.

Same Store Operations

The following table presents the percentage change in same store multifamily gross revenues, operating expenses and net operating income for the second quarter 2017 versus 2016. Our same store property operating results exclude any properties that are not comparable for the periods presented. See page S-20 of our Supplemental Financial Data Report for more details on our same store results.











Year over year growth




three months ended June 30, 2017 versus 2016




Total Revenues


Operating
Expenses


Net
Operating
Income











Multifamily

0.1%


(1.0)%


1.0%





















 

Capital Markets Activities

On May 12, 2017, the Company sold 2,750,000 shares of its common stock, par value $.01 per share, or Common Stock, at a public price of $15.25 per share pursuant to an underwritten public offering. On May 30, 2017, the Company sold an additional 412,500 shares of Common Stock at $15.25 per share pursuant to the underwriters' exercise in full of an option received in connection with the public offering. The combined gross proceeds of the two sales was approximately $48.2 million before deducting underwriting discounts and commissions and other estimated offering expenses.

During the second quarter 2017, we issued and sold an aggregate of 62,482 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 gross proceeds of approximately $62.4 million. In addition, during the second quarter 2017, we issued approximately 1.1 million 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 $13.9 million.

During the second quarter 2017, we issued and sold an aggregate of 6,215 shares of Series M Redeemable Preferred Stock ("mShares"), resulting in aggregate gross proceeds of approximately $6.2 million.

During the second quarter 2017, we sold 718,842 shares of Common Stock pursuant to our "at the market" offering (the "Common Stock ATM Offering"), resulting in aggregate gross proceeds of approximately $10.0 million.

Collectively, these activities added approximately 5 million shares to our outstanding shares of Common Stock, which totaled approximately 32.4 million shares at June 30, 2017. The closing price of our Common Stock was $15.75 on June 30, 2017 versus $14.72 on June 30, 2016. Our total equity book value increased approximately 56.8% to $1.1 billion at June 30, 2017 from $687 million at June 30, 2016.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On April 17, 2017, we declared a quarterly dividend on our Common Stock of $0.235 per share for the second quarter 2017. This represents a 16.0% increase in our common stock dividend from our second quarter 2016 common stock dividend of $0.2025 per share, and an annualized dividend growth rate of 14.8% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The second quarter dividend was paid on July 14, 2017 to all stockholders of record on June 15, 2017. In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.235 per unit for the second quarter 2017, which was paid on July 14, 2017 to all Class A Unit holders of record as of June 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 $15.1 million for the quarter ended June 30, 2017 and represents a 6% annual yield.

Conference Call and Supplemental Data

Preferred Apartment Communities will hold its quarterly conference call on Tuesday, August 1, 2017 at 11:00 a.m. Eastern Time to discuss its second 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, August 1, 2017
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

The live broadcast of Preferred Apartment Communities' second 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 shareWe 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. Through December 31, 2016, the Company expensed property acquisition costs as incurred, which include costs such as due diligence, legal, certain accounting, environmental and consulting, when the acquisition constituted a business combination. Accounting Standards Update 2017-01, which was adopted by the Company effective January 1, 2017, will cause the Company to capitalize certain of these costs for transactions deemed to be asset acquisitions (which we believe our contemplated future acquisitions will be deemed to be) and amortize them over their estimated useful lives. 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 Core FFO per share to this measure.

Core FFO per share  -   We currently project Core FFO to be in the range of $1.42 - $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. Reconciliations of net income (loss) attributable to common stockholders to Core FFO, AFFO and FFO appear on pages S-3 and S-4 of the attached report, as well as on the Company's website and is available using the following link:

http://investors.pacapts.com/download/2Q17_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 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 calling 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

                    

SECOND QUARTER 2017
SUPPLEMENTAL FINANCIAL DATA

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)



Three months ended June 30,



2017


2016

Revenues:





Rental revenues


$

48,241,306



$

30,966,738


Other property revenues


8,821,245



4,308,360


Interest income on loans and notes receivable


8,490,327



6,847,724


Interest income from related parties


5,338,035



3,731,122


Total revenues


70,890,913



45,853,944







Operating expenses:





Property operating and maintenance


7,198,159



4,356,923


Property salary and benefits reimbursement to related party

3,218,870



2,516,605


Property management fees

2,060,774



1,356,409


Real estate taxes


7,680,277



5,494,608


General and administrative


1,653,999



1,191,520


Equity compensation to directors and executives

871,153



618,867


Depreciation and amortization


28,457,001



17,969,975


Acquisition and pursuit costs

5,000



2,764,742


Asset management fees to related party


4,864,397



2,958,991


Insurance, professional fees, and other expenses


1,376,545



1,571,514







Total operating expenses


57,386,175



40,800,154


Contingent asset management and general and administrative expense fees

(170,838)



(451,684)







Net operating expenses


57,215,337



40,348,470


Operating income


13,675,576



5,505,474


Interest expense


16,397,895



9,559,501


Loss on extinguishment of debt


888,428









Net loss before gain on sale of real estate


(3,610,747)



(4,054,027)







Gain on sale of real estate


6,914,949



4,271,506







Net income


3,304,202



217,479


Consolidated net (income) attributable to non-controlling interests

(96,823)



(7,961)







Net income attributable to the Company


3,207,379



209,518







Dividends declared to Series A preferred stockholders


(15,235,138)



(9,444,282)


Earnings attributable to unvested restricted stock


(5,736)



(4,824)







Net loss attributable to common stockholders


$

(12,033,495)



$

(9,239,588)







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




basic and diluted


$

(0.40)



$

(0.40)







Dividends per share declared on Common Stock


$

0.235



$

0.2025


Weighted average number of shares of Common Stock outstanding,




basic and diluted


29,893,736



23,325,663


 

Reconciliation of FFO, Core FFO, and AFFO

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






Three months ended June 30,






2017


2016









Net loss attributable to common stockholders (See note 1)

$

(12,033,495)



$

(9,239,588)










Less:

Gain on sale of real estate


(6,914,949)



(4,271,506)


Add:

Loss attributable to non-controlling interests (See note 2)

96,823



7,961



Depreciation of real estate assets


20,616,264



12,639,224



Amortization of acquired real estate intangible assets and deferred leasing costs

7,670,002



5,194,303










FFO

9,434,645



4,330,394










Add:

Acquisition and pursuit costs



5,000



2,764,742



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

43,231



32,974



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

415,892



155,683



Mortgage loan refinancing and extinguishment costs (See note 5)

1,058,055





Costs incurred from extension of management agreement with advisor (See note 6)



309,774



Contingent fees paid on sale of real estate (See note 7)

386,570












Core FFO

11,343,393



7,593,567










Add:

Non-cash equity compensation to directors and executives

871,153



618,867



Amortization of loan closing costs (See note 8)


1,053,448



513,455



Depreciation/amortization of non-real estate assets


170,735



136,448



Net loan fees received (See note 9)


417,444



422,857



Accrued interest income received (See note 10)


2,794,776



2,667,051



Amortization of lease inducements (See note 11)


92,471




Less:

Non-cash loan interest income (See note 9)


(4,349,044)



(3,268,168)



Cash paid for loan closing costs



(9,042)



Amortization of acquired above and below market lease intangibles

 





and straight-line rental revenues (See note 12)

(1,739,642)



(577,437)



Amortization of deferred revenues (See note 13)


(169,890)





Normally recurring capital expenditures and leasing costs (See note 14)

(971,595)



(698,527)










AFFO

$

9,513,249



$

7,399,071










Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

7,539,376



$

4,772,587



Distributions to Unitholders (See note 2)


211,781



179,449



Total




$

7,751,157



$

4,952,036










Common Stock dividends and Unitholder distributions per share


$

0.235



$

0.2025










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

$

0.31



$

0.18


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

$

0.37



$

0.31


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

$

0.31



$

0.31






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





Basic:




29,893,736



23,325,663



Common Stock



902,415



886,346



Class A Units




30,796,151



24,212,009



Common Stock and Class A Units














Diluted Common Stock and Class A Units (B)


32,626,680



25,461,338










Actual shares of Common Stock outstanding, including 24,408 and 30,990 unvested shares




 of restricted Common Stock at June 30, 2017 and 2016, respectively

32,444,799



23,723,168


Actual Class A Units outstanding



901,195



886,168



Total




33,345,994



24,609,336










(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 2.93% weighted average non-controlling interest in the Operating Partnership for the three-month period ended June 30, 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-5.

         

Reconciliation of FFO, Core FFO, and AFFO

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







Six months ended June 30,






2017


2016









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

$

2,641,167



$

(20,423,703)










Less:

Gain on sale of real estate


(37,639,009)



(4,271,506)


Add:

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

1,095,889



(80,600)



Depreciation of real estate assets


38,747,800



23,722,849



Amortization of acquired real estate intangible assets and deferred leasing costs

14,201,962



9,333,053










FFO

19,047,809



8,280,093










Add:

Acquisition and pursuit costs



14,002



5,528,327



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

70,168



112,807



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

771,441



263,527



Mortgage loan refinancing and extinguishment costs (See note 5)

1,058,055





Costs incurred from extension of management agreement with advisor (See note 6)



421,387



Contingent fees paid on sale of real estate (See note 7)

386,570












Core FFO

21,348,045



14,606,141










Add:

Non-cash equity compensation to directors and executives

1,744,255



1,229,292



Amortization of loan closing costs (See note 8)


1,851,146



1,016,985



Depreciation/amortization of non-real estate assets


333,428



260,799



Net loan fees received (See note 9)


417,444



1,124,226



Accrued interest income received (See note 10)


5,318,808



6,875,957



Amortization of lease inducements (See note 11)


92,471




Less:

Non-cash loan interest income (See note 9)


(8,647,546)



(6,507,078)



Cash paid for loan closing costs



(13,276)



Amortization of acquired above and below market lease intangibles

 





and straight-line rental revenues (See note 12)

(3,556,272)



(1,071,669)



Amortization of deferred revenues (See note 13)


(169,890)





Normally recurring capital expenditures and leasing costs (See note 14)

(1,817,511)



(1,186,439)










AFFO

$

16,914,378



$

16,334,938










Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

13,510,034



$

9,208,076



Distributions to Unitholders (See note 2)


410,523



296,844



Total




$

13,920,557



$

9,504,920










Common Stock dividends and Unitholder distributions per share


$

0.455



$

0.395










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

$

0.65



$

0.35


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

$

0.73



$

0.61


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

$

0.58



$

0.68






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





Basic:




28,423,171



23,154,702



Common Stock



914,130



751,489



Class A Units




29,337,301



23,906,191



Common Stock and Class A Units














Diluted Common Stock and Class A Units (B)


30,855,196



24,916,652










Actual shares of Common Stock outstanding, including 24,408 and 30,990 unvested shares




 of restricted Common Stock at June 30, 2017 and 2016, respectively

32,444,799



23,723,168


Actual Class A Units outstanding



901,195



886,168



Total




33,345,994



24,609,336


(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 3.12% weighted average non-controlling interest in the Operating Partnership for the six-month period ended June 30, 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-5.

 

Notes to Reconciliations 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 and six-month periods ended June 30, 2017 include activity for the multifamily community and two grocery-anchored shopping centers acquired during the second quarter 2017 only from their respective dates of acquisition. In addition, the second quarter 2017 period includes a full quarter of activity for the five multifamily communities, nine grocery-anchored shopping centers, one student housing property and three office buildings acquired during the last two quarters of 2016 and first quarter of 2017. Rental and other property revenues and expenses for the three-month period ended June 30, 2016 include activity for the multifamily community, student housing property and seven grocery-anchored shopping centers only from their respective dates of acquisition during the second quarter 2016.
  2. Non-controlling interests in our Operating Partnership consisted of a total of 901,195 Class A Units as of June 30, 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 2.93% and 3.66% for the three-month periods ended June 30, 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, which were funded by our $35 million acquisition term loan facility, or 2016 Term Loan, and on our $11 million term note, which we used to finance the acquisition of our Anderson Central grocery-anchored shopping center. 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. 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 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 June 30, 2017, aggregate unamortized loan coordination fees were approximately $10.7 million, which will be amortized over a weighted average remaining loan life of approximately 11.0 years.
  5. The adjustment consists of a loan prepayment penalty and other charges related to the refinancing of our Stone Creek multifamily community which totaled $888,428 and for the refinancing of our 525 Avalon multifamily community of $169,627.
  6. 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.
  7. On May 25, 2017,we closed on the sale of our Enclave at Vista Ridge multifamily community to an unrelated third party.  At such date, the Manager collected a cumulative total of approximately $390,000 of contingent fees.  The sales transaction, and the fact that the Company's capital contributions for the Enclave at Vista Ridge property achieved a greater than 7% annual rate of return, triggered the fees to become immediately due and payable to the Manager at the closing of the sale transaction.  The recognition of these fees are added to FFO in the calculation of Core FFO as they are not likely to occur on a regular basis.
  8. 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 June 30, 2017, aggregate unamortized loan costs were approximately $15.8 million, which will be amortized over a weighted average remaining loan life of approximately 7.7 years.
  9. 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. 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.
  10. The Company records deferred interest revenue over the lives of certain of its real estate loans. This adjustment reflects the receipt during the periods presented of interest income which was earned and accrued prior to those periods presented on various real estate loans.
  11. 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.
  12. 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 and office buildings. At June 30, 2017, the balance of unamortized below-market lease intangibles was approximately $29.1 million, which will be recognized over a weighted average remaining lease period of approximately 9.4 years.
  13. 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.
  14. 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 $3,836,457 and $1,525,336 for the three-month periods ended June 30, 2017 and 2016, respectively and $6,146,260 and $3,119,183 for the six-month periods ended June 30, 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 and office buildings.

See Definitions of Non-GAAP Measures beginning on page S-21.

 

Preferred Apartment Communities, Inc.


Consolidated Balance Sheets


(Unaudited)






June 30, 2017


December 31, 2016


Assets






Real estate





Land


$

311,350,832



$

299,547,501



Building and improvements

1,621,575,150



1,513,293,760

(1)


Tenant improvements

33,544,458



23,642,361

(1)


Furniture, fixtures, and equipment

149,377,900



126,357,742



Construction in progress

13,045,259



2,645,634



Gross real estate

2,128,893,599



1,965,486,998



Less: accumulated depreciation

(127,310,989)



(103,814,894)



Net real estate

2,001,582,610



1,861,672,104



Real estate loan investments, net of deferred fee income

234,031,624



201,855,604



Real estate loan investments to related parties, net

159,357,590



130,905,464



Total real estate and real estate loan investments, net

2,394,971,824



2,194,433,172









Cash and cash equivalents

13,055,897



12,321,787



Restricted cash

47,905,398



55,392,984



Notes receivable

17,296,399



15,499,699



Note receivable and revolving line of credit due from related party

22,620,235



22,115,976



Accrued interest receivable on real estate loans

24,871,043



21,894,549



Acquired intangible assets, net of amortization

81,455,656



79,156,400



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

1,736,201



1,768,779



Deferred offering costs

5,351,680



2,677,023



Tenant lease inducements, net

7,408,163



261,492



Tenant receivables and other assets

22,860,026



15,310,741









Total assets

$

2,639,532,522



$

2,420,832,602









Liabilities and equity





Liabilities





Mortgage notes payable, net of deferred loan costs

$

1,400,670,042



$

1,305,870,471



Revolving line of credit

38,500,000



127,500,000



Term note payable, net of deferred loan costs

10,994,410



10,959,905



Real estate loan investment participation obligation

18,598,928



20,761,819



Deferred revenue

16,029,840





Accounts payable and accrued expenses

25,525,913



20,814,910



Accrued interest payable

3,443,723



3,541,640



Dividends and partnership distributions payable

12,731,472



10,159,629



Acquired below market lease intangibles, net of amortization

29,065,548



29,774,033



Security deposits and other liabilities

6,571,096



6,189,033



Total liabilities

1,562,130,972



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; 1,064,054 and 924,855 shares issued; 1,043,551 and 914,422





shares outstanding at June 30, 2017 and December 31, 2016, respectively

10,436



9,144



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





   shares authorized; 7,850 and 0 shares issued and outstanding





at June 30, 2017 and December 31, 2016, respectively

79





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





  32,420,391 and 26,498,192 shares issued and outstanding at





June 30, 2017 and December 31, 2016, respectively

324,204



264,982



Additional paid-in capital

1,065,382,200



906,737,470



Accumulated earnings (deficit)

9,038,150



(23,231,643)



      Total stockholders' equity

1,074,755,069



883,779,953



Non-controlling interest

2,646,481



1,481,209



Total equity

1,077,401,550



885,261,162









Total liabilities and equity

$

2,639,532,522



$

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)




Six months ended June 30,



2017


2016

Operating activities:





Net income (loss )


$

33,365,682



$

(3,172,011)


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




Depreciation expense


39,063,687



23,973,536


Amortization expense


14,219,503



9,343,165


Amortization of above and below market leases

(1,561,873)



(593,455)


Deferred revenues and fee income amortization

(804,532)



(492,490)


Lease incentive cost amortization

92,471




Deferred loan cost amortization

2,649,602



1,393,318


(Increase) decrease in accrued interest income on real estate loans

(2,976,494)



543,167


Equity compensation to executives, directors and consultants

1,744,255



1,256,296


Other


189,400



(1,067)


Gain on sale of real estate


(37,639,009)



(4,271,506)


Loss on extinguishment of debt

888,428




Changes in operating assets and liabilities:




(Increase) decrease in tenant receivables and other assets

(3,619,041)



433,419


(Increase) in tenant lease incentives

(7,239,142)




Increase in accounts payable and accrued expenses

4,136,539



3,374,618


(Decrease) increase in accrued interest and other liabilities

(159,833)



1,072,770


Net cash provided by operating activities

42,349,643



32,859,760







Investing activities:





Investment in real estate loans


(70,319,643)



(75,603,964)


Repayments of real estate loans


9,866,000



27,695,229


Notes receivable issued


(3,728,561)



(8,051,980)


Notes receivable repaid


1,967,124



9,615,213


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

(14,978,535)



(18,653,990)


Repayments of line of credit by related party

14,254,008



13,842,681


Loan origination fees received

834,888



2,249,137


Loan origination fees paid to Manager

(417,444)



(1,124,226)


Acquisition of properties


(191,992,655)



(404,186,508)


Disposition of properties, net


118,241,692



10,606,386


Additions to real estate assets - improvements

(7,763,257)



(3,990,551)


Deposits paid on acquisitions


(919,534)



(11,194,950)


Decrease in restricted cash

7,108,164



(4,291,485)


Net cash used in investing activities

(137,847,753)



(463,089,008)







Financing activities:





Proceeds from mortgage notes payable

156,280,000



249,840,000


Payment for mortgage notes payable

(116,052,865)



(4,692,524)


Payments for deposits and other mortgage loan costs

(6,038,969)



(9,616,676)


Payments for mortgage prepayment costs

(817,313)




Proceeds from real estate loan participants

165,840



135,398


Payments to real estate loan participants

(2,466,500)




Proceeds from lines of credit


97,000,000



195,500,000


Payments on lines of credit


(186,000,000)



(201,500,000)


Proceeds from term loan




46,000,000


Repayment of the term loan




(5,000,000)


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

128,699,644



180,446,649


Proceeds from sales of Common Stock

56,115,635




Proceeds from exercises of warrants

14,900,868



9,380,346


Common stock dividends paid


(11,711,273)



(8,750,488)


Preferred stock dividends paid


(28,990,642)



(16,284,348)


Distributions to non-controlling interests

(393,699)



(170,630)


Payments for deferred offering costs

(4,458,506)



(1,780,973)


Net cash provided by financing activities

96,232,220



433,506,754






Net increase (decrease) in cash and cash equivalents

734,110



3,277,506


Cash and cash equivalents, beginning of year

12,321,787



2,439,605


Cash and cash equivalents, end of year

$

13,055,897



$

5,717,111


 

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






June 30, 2017


December 31, 2016

















Multifamily communities:















Founders Village


Williamsburg, VA



N/A


$



$

(2)



$

9,866,000



Encore


Atlanta, GA


4/8/2019


10/8/2020


10,958,200



10,958,200



10,958,200



8.5 / 5

Encore Capital


Atlanta, GA


4/8/2019


10/8/2020


9,758,200



7,124,104



6,748,380



8.5 / 5

Palisades


Northern VA


2/18/2018


8/18/2019


17,270,000



16,877,906



16,214,545



8 / 5

Fusion


Irvine, CA


5/31/2018


5/31/2020


63,911,961



54,523,182



49,456,067



8.5 / 7.5

Green Park


Atlanta, GA


12/1/2017


12/1/2019


13,464,372



13,464,372



13,464,372



8.5 / 5.83

Summit Crossing III


Atlanta, GA


2/26/2018


2/26/2020


7,246,400



7,246,400



7,246,400



8.5 / 7.5

Overture


Tampa, FL


7/21/2018


7/21/2020


6,920,000



6,390,213



6,123,739



8.5 / 7.5

Aldridge at Town Village


Atlanta, GA


12/27/2017


12/27/2019


10,975,000



10,975,000



10,656,171



8.5 / 6

Bishop Street


Atlanta, GA


2/18/2020


N/A


12,693,457



11,630,285



11,145,302



8.5 / 6.5

Hidden River


Tampa, FL


12/3/2018


12/3/2020


4,734,960



4,734,960



4,734,960



8.5 / 6.5

Hidden River Capital


Tampa, FL


12/4/2018


12/4/2020


5,380,000



4,827,547



4,626,238



8.5 / 6.5

CityPark II


Charlotte, NC


1/7/2019


1/7/2021


3,364,800



3,364,800



3,364,800



8.5 / 6.5

CityPark II Capital


Charlotte, NC


1/8/2019


1/31/2021


3,916,000



3,470,383



3,325,668



8.5 / 6.5

Park 35 on Clairmont


Birmingham, AL


6/26/2018


6/26/2020


21,060,160



20,657,297



19,795,886



8.5 / 2

Fort Myers


Fort Myers, FL


9/25/2017


N/A


4,000,000



3,880,810



3,654,621



12 / 0

Wiregrass


Tampa, FL


5/15/2020


5/15/2023


14,975,853



11,187,948



1,862,548



8.5 / 6.5

Wiregrass Capital


Tampa, FL


5/15/2020


5/15/2023


3,744,147



3,410,327



3,268,114



8.5 / 6.5

360 Forsyth


Atlanta, GA


12/1/2017


N/A


3,225,000



2,702,901



2,520,420



12 / 0

Berryessa


San Jose, CA


4/19/2018


N/A


31,509,000



28,980,430





10.5 / 0

Brentwood


Nashville, TN


6/1/2018


N/A


2,376,000



2,108,579





12 / 0
















Student housing properties:













Haven West


Atlanta, GA


6/2/2018


N/A


6,940,795



6,784,167



6,784,167



8 / 6

Haven 12


Starkville, MS


12/16/2017


11/30/2020


6,116,384



5,815,849



5,815,849



8.5 / 6.5

Stadium Village


Atlanta, GA


11/27/2017


N/A


13,424,995



13,329,868



13,329,868



8.5 / 5.83

18 Nineteen


Lubbock, TX


4/9/2018


4/9/2020


15,598,352



15,584,017



15,584,017



8.5 / 6

Haven South


Waco, TX


5/1/2018


5/1/2019


15,455,668



15,422,521



15,301,876



8.5 / 6

Haven46


Tampa, FL


3/29/2019


9/29/2020


9,819,662



9,609,792



9,136,847



8.5 / 5

Haven Northgate


College Station, TX


6/20/2019


6/20/2020


64,678,549



60,872,744



46,419,194



7.06 / 1.5

Lubbock II


Lubbock, TX


4/20/2019


N/A


9,357,171



9,170,010



8,770,838



8.5 / 5

Haven Charlotte


Charlotte, NC


12/22/2019


12/22/2021


19,581,593



1,629,946



5,781,295



8.5 / 6.5

Haven Charlotte Member


Charlotte, NC


12/22/2019


12/22/2021


8,201,170



7,432,323





8.5 / 6.5
















New Market Properties:















Dawson Marketplace


Atlanta, GA


11/15/2018


11/15/2020


12,857,005



12,857,005



12,613,860



8.5 / 5
















Other:















Crescent Avenue


Atlanta, GA


1/31/2018


N/A


8,500,000



8,000,000



6,000,000



10 / 5
























$

442,014,854



395,023,886



334,570,242




Unamortized loan origination fees








(1,634,672)



(1,809,174)




Carrying amount










$

393,389,214



$

332,761,068



















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

(2) The loan extended to Founders Village, with a total commitment of $10.3 million, was paid off during the first quarter.























 

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


Purchase option window


Project/Property

Location


completion (1)


Begin


End











Multifamily communities:









Encore

Atlanta, GA


339



1/8/2018


5/8/2018


Palisades

Northern VA


304



3/1/2018


7/31/2018


Fusion

Irvine, CA


280



1/1/2018


4/1/2018


Green Park

Atlanta, GA


310



11/1/2017


2/28/2018


Summit Crossing III

Atlanta, GA


172



8/1/2017


11/1/17(2)


Overture

Tampa, FL


180



1/1/2018


5/1/2018


Aldridge at Town Village

Atlanta, GA


300



11/1/2017


2/28/2018


Bishop Street

Atlanta, GA


232



10/1/2018


12/31/2018


Hidden River

Tampa, FL


300



9/1/2018


12/31/2018


CityPark II

Charlotte, NC


200



5/1/2018


8/31/2018


Park 35 on Clairmont

Birmingham, AL


271



S + 90 days (3)


S + 150 days (3)


Fort Myers

Fort Myers, FL


224



N/A


N/A


Wiregrass

Tampa, FL


392



S + 90 days (3)


S + 150 days (3)


360 Forsyth

Atlanta, GA


356



N/A


N/A


Berryessa

San Jose, CA


551



N/A


N/A


Brentwood

Nashville, TN


301



N/A


N/A











Student housing properties:









Haven West

Atlanta, GA


160



N/A


N/A


Haven 12

Starkville, MS


152



9/1/2017


11/30/2017


Stadium Village

Atlanta, GA


198



9/1/2017


11/30/2017


18 Nineteen

Lubbock, TX


217



10/1/2017


12/31/2017


Haven South

Waco, TX


250



10/1/2017


12/31/2017


Haven46

Tampa, FL


158



11/1/2018


1/31/2019


Haven Northgate

College Station, TX


427



10/1/2018


12/31/2018


Lubbock II

Lubbock, TX


140



11/1/2018


1/31/2019


Haven Charlotte

Charlotte, NC


332



12/1/2019


2/28/2020











New Market Properties:









Dawson Marketplace (4)

Atlanta, GA




12/16/2017


12/15/2018














6,746
















(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) Effective July 31, 2017, the option period window was amended to be November 1, 2017 through February 28, 2018.


(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.


(4) The Dawson Marketplace grocery-anchored shopping center and outparcels covered under our purchase option will consist of approximately 200,000 square feet of gross leasable area, which excludes 123,590 square feet owned by the grocery anchor.


 

Mortgage Indebtedness








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




















Principal balance as of








Interest only through date (1)


Acquisition/

refinancing date


June 30, 2017


December 31, 2016


Maturity date


Interest rate


Basis point spread over 1 Month LIBOR
















Multifamily communities:














Stone Rise

7/3/2014


$

24,213,618



$

24,485,726



8/1/2019


2.89%


Fixed rate


8/31/2015

Summit Crossing

4/21/2011


19,860,318



20,034,920



5/1/2018


4.71%


Fixed rate


5/1/2014

Summit Crossing secondary financing

8/28/2014


5,012,186



5,057,941



9/1/2019


4.39%


Fixed rate


N/A

Summit II

3/20/2014


13,357,000



13,357,000



4/1/2021


4.49%


Fixed rate


4/30/2019

Ashford Park

1/24/2013



(2)

25,626,000



2/1/2020


3.13%


Fixed rate


2/28/2018

Ashford Park secondary financing

8/28/2014



(2)

6,404,575



2/1/2020


4.13%


Fixed rate


N/A

McNeil Ranch

1/24/2013


13,646,000



13,646,000



2/1/2020


3.13%


Fixed rate


2/28/2018

Lake Cameron

1/24/2013


19,773,000



19,773,000



2/1/2020


3.13%


Fixed rate


2/28/2018

Enclave at Vista Ridge

9/26/2014



(3)

24,862,000



10/1/2021


3.68%


Fixed rate


10/31/2017

Sandstone

9/26/2014



(4)

30,894,890



10/1/2019


3.18%


Fixed rate


N/A

Stoneridge

9/26/2014


26,434,325



26,729,985



10/1/2019


3.18%


Fixed rate


N/A

Vineyards

9/26/2014


34,775,000



34,775,000



10/1/2021


3.68%


Fixed rate


10/31/2017

Avenues at Cypress

2/13/2015


21,906,503



22,135,938



9/1/2022


3.43%


Fixed rate


N/A

Avenues at Northpointe

2/13/2015


27,742,905



27,878,000



3/1/2022


3.16%


Fixed rate


3/31/2017

Venue at Lakewood Ranch

5/21/2015


29,650,431



29,950,413



12/1/2022


3.55%


Fixed rate


N/A

Aster Lely

6/24/2015


32,799,051



33,120,899



7/5/2022


3.84%


Fixed rate


N/A

CityPark View

6/30/2015


21,264,437



21,489,269



7/1/2022


3.27%


Fixed rate


N/A

Avenues at Creekside

7/31/2015


40,936,474



41,349,590



8/1/2024


2.83%


160

(5)

8/31/2016

Citi Lakes

9/3/2015


42,839,836



43,309,606



4/1/2023


3.40%


217

(6)

N/A

Stone Creek

6/22/2017


20,600,000



16,497,919



7/1/2052


3.22%


Fixed rate


N/A

Lenox Village Town Center

12/21/2015


30,365,048



30,717,024



5/1/2019


3.82%


Fixed rate


N/A

Lenox Village III

12/21/2015


17,964,720



18,125,780



1/1/2023


4.04%


Fixed rate


N/A

Overton Rise

2/1/2016


40,348,086



40,712,134



8/1/2026


3.98%


Fixed rate


N/A

Baldwin Park

1/5/2016


73,910,000



73,910,000



1/5/2019


3.13%


190


1/5/2019

Baldwin Park secondary financing

1/5/2016


3,890,000



3,890,000



1/5/2019


11.13%


990


1/5/2019

Crosstown Walk

1/15/2016


31,778,875



32,069,832



2/1/2023


3.90%


Fixed rate


N/A

Avalon Park

6/15/2017


67,380,000


(7)

61,750,000



7/1/2024


3.98%


Fixed rate


N/A

Avalon Park secondary financing

5/31/2016



(7)

3,250,000



6/5/2019


11.98%


1100


N/A

City Vista

7/1/2016


35,405,459



35,734,946



7/1/2026


3.68%


Fixed rate


N/A

Sorrel

8/24/2016


33,122,776



33,442,303



9/1/2023


3.44%


Fixed rate


N/A

Citrus Village

3/3/2017


30,250,000





6/10/2023


3.65%


Fixed rate


6/09/2017

Table continued from previous page



Principal balance as of








Interest only through date (1)


Acquisition/

refinancing date


June 30, 2017


December 31, 2016


Maturity date


Interest rate


Basis point spread over 1 Month LIBOR


Retreat at Greystone

3/24/2017


35,210,000





3/1/2022


3.03%


185


2/28/2022

Founders Village

3/31/2017


31,522,474





4/1/2027


4.31%


Fixed rate


N/A

Claiborne Crossing

4/26/2017


27,006,350





6/1/2054


2.89%


Fixed rate


N/A















Total multifamily communities



852,964,872



814,980,690
























Grocery-anchored shopping centers:

Spring Hill Plaza

9/5/2014


9,572,055



9,672,371



10/1/2019


3.36%


N/A


10/31/2015

Parkway Town Centre

9/5/2014


6,961,494



7,034,452



10/1/2019


3.36%


N/A


10/31/2015

Woodstock Crossing

8/8/2014


3,015,653



3,041,620



9/1/2021


4.71%


N/A


N/A

Deltona Landings

9/30/2014


6,854,086



6,928,913



10/1/2019


3.48%


N/A


N/A

Powder Springs

9/30/2014


7,232,242



7,311,197



10/1/2019


3.48%


N/A


N/A

Kingwood Glen

9/30/2014


11,467,595



11,592,787



10/1/2019


3.48%


N/A


N/A

Barclay Crossing

9/30/2014


6,447,568



6,517,956



10/1/2019


3.48%


N/A


N/A

Sweetgrass Corner

9/30/2014


7,816,158



7,900,135



10/1/2019


3.58%


N/A


N/A

Parkway Centre

9/30/2014


4,490,608



4,539,632



10/1/2019


3.48%


N/A


N/A

The Market at Salem Cove

10/6/2014


9,505,761



9,586,678



11/1/2024


4.21%


N/A


11/30/2016

Independence Square

8/27/2015


12,089,068



12,208,524



9/1/2022


3.93%


N/A


9/30/2016

Royal Lakes Marketplace

9/4/2015


9,763,379



9,800,000



9/4/2020


3.72%


250


4/3/2017

The Overlook at Hamilton Place

12/22/2015


20,488,683



20,672,618



1/1/2026


4.19%


N/A


N/A

Summit Point

10/30/2015


12,379,115



12,546,792



11/1/2022


3.57%


N/A


N/A

East Gate Shopping Center

4/29/2016


5,649,748



5,719,897



5/1/2026


3.97%


N/A


N/A

Fury's Ferry

4/29/2016


6,526,433



6,607,467



5/1/2026


3.97%


N/A


N/A

Rosewood Shopping Center

4/29/2016


4,383,425



4,437,851



5/1/2026


3.97%


N/A


N/A

Southgate Village

4/29/2016


7,792,756



7,889,513



5/1/2026


3.97%


N/A


N/A

The Market at Victory Village

5/16/2016


9,250,000



9,250,000



9/11/2024


4.40%


N/A


10/10/2017

Wade Green Village

4/7/2016


8,043,299



8,116,465



5/1/2026


4.00%


N/A


N/A

Lakeland Plaza

7/15/2016


29,395,048



29,760,342



8/1/2026


3.85%


N/A


N/A

University Palms

8/8/2016


13,339,432



13,513,891



9/1/2026


3.45%


N/A


N/A

Cherokee Plaza

8/8/2016


25,662,371



26,017,293



9/1/2021


3.48%


225

(8)

N/A

Sandy Plains Exchange

8/8/2016


9,317,986



9,439,850



9/1/2026


3.45%


N/A


N/A

Thompson Bridge Commons

8/8/2016


12,456,675



12,619,589



9/1/2026


3.45%


N/A


N/A

Heritage Station

8/8/2016


9,219,901



9,340,483



9/1/2026


3.45%


N/A


N/A

Oak Park Village

8/8/2016


9,514,154



9,638,584



9/1/2026


3.45%


N/A


N/A

Shoppes of Parkland

8/8/2016


16,367,312



16,492,503



9/1/2023


4.67%


N/A


N/A

Champions Village

10/18/2016


27,400,000



27,400,000



11/1/2021


4.23%


300

(9)

11/1/2021

Castleberry-Southard

4/21/2017


11,483,401





5/1/2027


3.99%


N/A


N/A

Table continued from previous page



Principal balance as of








Interest only through date (1)


Acquisition/

refinancing date


June 30, 2017


December 31, 2016


Maturity date


Interest rate


Basis point spread over 1 Month LIBOR


Rockbridge Village

6/6/2017


14,250,000





7/5/2027


3.73%


N/A


N/A















Total Grocery-anchored shopping centers



348,135,406



325,597,403
























Student housing properties:

North by Northwest

6/1/2016


33,135,183



33,499,754



9/1/2022


4.02%


N/A


N/A

Regents on University

2/28/2017


37,485,000





3/1/2022


3.23%


220


3/1/2022















Total student housing properties



70,620,183



33,499,754
























Office buildings:

Brookwood Center

8/29/2016


32,400,000



32,400,000



9/10/2031


3.52%


N/A


10/9/2017

Galleria 75

11/4/2016


5,809,013



5,900,265



7/1/2022


4.25%


N/A


N/A

Three Ravinia

12/30/2016


115,500,000



115,500,000



1/1/2042


4.46%


N/A


1/31/2022















Total office buildings



153,709,013



153,800,265










Grand total



1,425,429,474



1,327,878,112










Less: deferred loan costs



(24,759,432)



(22,007,641)










Mortgage notes, net



$

1,400,670,042



$

1,305,870,471
























 

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 March 7, 2017, the Company legally defeased the mortgage loan collateralized by its Ashford Park property, located in Atlanta, GA. 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 $1.1 million plus a prepayment premium of approximately $0.4 million.

(3) On May 25, 2017, the Company legally defeased the mortgage loan collateralized by its Enclave at Vista Ridge property, located in Dallas, TX. 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 $2.06 million.

(4) On January 20, 2017, the Company legally defeased the mortgage loan collateralized by its Sandstone property, located in Kansas City, KS. 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 $1.4 million.

(5)  The mortgage instrument was assumed as part of the sales transaction; the 1 Month LIBOR index is capped at 5.0%.

(6) The 1 Month LIBOR index is capped at 4.33%.

(7)  On June 15, 2017, the two existing mortgage instruments were refinanced into a single mortgage in the amount of $67.38 million bearing interest at a fixed rate of 3.98% per annum.

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

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


 

Multifamily Communities

























Three months ended June 30, 2017


Property


Location


Number of
units


Average unit
size (sq. ft.)


Average
physical
occupancy


Average
rent per
unit














Stone Rise


Philadelphia, PA


216



1,078



96.6%


$

1,449



Summit Crossing


Atlanta, GA


485



1,053



97.5%


$

1,130



Lake Cameron


Raleigh, NC


328



940



94.7%


$

952



McNeil Ranch


Austin, TX


192



1,071



95.1%


$

1,252



Avenues at Cypress


Houston, TX


240



1,170



94.4%


$

1,384



Avenues at Northpointe


Houston, TX


280



1,167



92.5%


$

1,299



Stoneridge Farms at the Hunt Club


Nashville, TN


364



1,153



94.3%


$

1,067



Vineyards


Houston, TX


369



1,122



94.3%


$

1,111



Aster at Lely Resort


Naples, FL


308



1,071



95.8%


$

1,371



Venue at Lakewood Ranch


Sarasota, FL


237



1,001



93.7%


$

1,523



Citi Lakes


Orlando, FL


346



984



93.8%


$

1,351



Overton Rise


Atlanta, GA


294



1,018



96.1%


$

1,436



Lenox Portfolio


Nashville, TN


474



861



96.1%


$

1,188















Total/Avg PAC Same Store




4,133





95.1%
















CityPark View


Charlotte, NC


284



948




$

1,073



Avenues at Creekside


San Antonio, TX


395



974




$

1,130



Stone Creek


Houston, TX


246



852




$

1,019



Crosstown Walk


Tampa, FL


342



981



95.6%


$

1,231



525 Avalon Park


Orlando, FL


487



1,394




$

1,343



Sorrel


Jacksonville, FL


290



1,048



94.6%


$

1,216



Retreat at Greystone


Birmingham, AL


312



1,100




$

1,213



Broadstone at Citrus Village


Tampa, FL


296



980




$

1,251



Founders Village


Williamsburg, VA


247



1,070




$

1,343



Claiborne Crossing


Louisville, KY


242



1,204




n/a















Value-add project:












Village at Baldwin Park


Orlando, FL


528



1,069




$

1,489



















3,669





















Joint venture:












City Vista


Pittsburgh, PA


272



1,023




$

1,351















Total PAC Non-Same Store




3,941









Average stabilized physical occupancy








95.1%

(1)

$

1,234



Student housing communities:










Average
rent per
bed


North by Northwest


Tallahassee, FL


219


(2)


1,137



98.7%


$

722



Regents on University


Tempe, AZ


225


(2)


1,296



94.1%


$

713



























Total All PAC units




8,518





















(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 June 30, 2017, our average physical occupancy was 95.1%. We calculate average physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date. For the three-month period ended June 30, 2017, our average economic occupancy was 94.8%. 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, 525 Avalon Park and CityPark View). We also exclude properties which are currently being marketed for sale, of which there were none at June 30, 2017.

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) for property re-developments and repositionings and (iv) for building improvements that are recoverable from future operating cost savings. 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 June 30 2017, our capital expenditures were as follows:












Nonrecurring/first generation capital expenditures


Recurring / second generation capital expenditures





Budgeted at acquisition


Other


Total



Total












Multifamily Communities:











Summit Crossing


$



$

23,975



$

23,975



$

40,463



$

64,438


Stone Rise








9,573



9,573


McNeil Ranch




21,156



21,156



34,743



55,899


Lake Cameron




8,197



8,197



46,128



54,325


Stoneridge Farms at the Hunt Club




235,255



235,255



35,008



270,263


Vineyards




14,748



14,748



62,004



76,752


Enclave




14,787



14,787



23,626



38,413


Cypress




1,670



1,670



7,879



9,549


Northpointe




5,763



5,763



27,538



33,301


Venue at Lakewood Ranch








31,049



31,049


Aster at Lely


147,205



4,100



151,305



15,366



166,671


CityPark View




6,981



6,981



594



7,575


Avenues at Creekside




30,086



30,086



16,357



46,443


Citi Lakes




7,892



7,892



25,298



33,190


Stone Creek




2,974



2,974



22,977



25,951


Lenox Portfolio


59,163



56,972



116,135



28,863



144,998


Village at Baldwin Park


715,840



9,554



725,394



45,378



770,772


Crosstown Walk








35,800



35,800


Overton Rise




2,317



2,317



10,596



12,913


525 Avalon Park


126,129





126,129



41,924



168,053


City Vista


15,109





15,109



5,242



20,351


Sorrel


133,572



3,570



137,142



9,302



146,444


Citrus Village




3,833



3,833



18,749



22,582


Retreat at Greystone


7,489





7,489



7,687



15,176
























Capital expenditures, continued


Nonrecurring/first generation capital expenditures


Recurring / second generation capital expenditures





Budgeted at acquisition


Other


Total



Total












Founders Village


13,548





13,548



3,664



17,212


Claiborne Crossing


23,161





23,161



1,184



24,345













Total multifamily communities


1,241,216



453,830



1,695,046



606,992



2,302,038









Grocery-anchored shopping centers:











Woodstock Crossing




1,020



1,020



627



1,647


Parkway Town Centre




92,970



92,970





92,970


Spring Hill Plaza








4,517



4,517


Barclay Crossing








4,855



4,855


Deltona Landings




6,120



6,120





6,120


Parkway Centre








2,840



2,840


Sweetgrass Corner








5,255



5,255


The Market at Salem Cove








41,365



41,365


Independence Square




16,174



16,174



18,417



34,591


Royal Lakes Marketplace








6,950



6,950


The Overlook at Hamilton Place




133,132



133,132



70,590



203,722


Wade Green Village




16,060



16,060



2,547



18,607


Anderson Central








4,638



4,638


East Gate Shopping Center








6,620



6,620


Fairview Market








29,369



29,369


Fury's Ferry




7,207



7,207



6,931



14,138


The Market at Victory Village




76,332



76,332





76,332


Lakeland Plaza




30,161



30,161



27,550



57,711


Cherokee Plaza




8,646



8,646





8,646


Heritage Station




51,027



51,027





51,027


Oak Park Village








11,737



11,737


Sandy Plains Exchange




1,020



1,020



2,196



3,216


Shoppes of Parkland




17,290



17,290



11,410



28,700


Thompson Bridge Commons








4,190



4,190


University Palms




5,206



5,206



4,478



9,684


Champions Village


547,248





547,248



27,978



575,226













Total grocery-anchored shopping centers


547,248



462,365



1,009,613



295,060



1,304,673













Student Housing:











North by Northwest




121,919



121,919



1,293



123,212


Regents on University




39,390



39,390



5,951



45,341













Total student housing properties




161,309



161,309



7,244



168,553













Office Buildings:











Brookwood Center


825



3,000



3,825





3,825


Galleria 75




5,834



5,834



62,299



68,133


Three Ravinia


675,521



285,309



960,830





960,830













Total office buildings


676,346



294,143



970,489



62,299



1,032,788













Grand total


$

2,464,810



$

1,371,647



$

3,836,457



$

971,595



$

4,808,052


 

Grocery-Anchored Shopping Center Portfolio

As of June 30, 2017, 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



93.0%


 Publix

Cherokee Plaza

 Atlanta, GA


1958


102,864



100.0%


Kroger

Lakeland Plaza

 Atlanta, GA


1990


301,711



94.7%


Sprouts

Powder Springs

 Atlanta, GA


1999


77,853



87.4%


 Publix

Rockbridge Village

 Atlanta, GA


2005


102,432



95.5%


 Kroger

Royal Lakes Marketplace

 Atlanta, GA


2008


119,493



83.6%


 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

Woodstock Crossing

 Atlanta, GA


1994


66,122



91.1%


 Kroger

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

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

The Overlook at Hamilton Place

 Chattanooga, TN


1992


213,095



97.8%


 The Fresh Market

Shoppes of Parkland

 Miami-Ft. Lauderdale, FL


2000


145,720



100.0%


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



88.0%


 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



96.1%


 Walmart

Fairview Market

 Greenville Spartanburg, SC


1998


53,888



100.0%


 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











Grand total/weighted average





3,477,941



93.5%



 

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

As of June 30, 2017, our grocery-anchored shopping center portfolio was 93.5% 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 June 30, 2017 were:




Total grocery-anchored shopping center portfolio


Number of leases


Leased GLA


Percent of leased GLA







Month to month

6



18,822



0.6%

2017

33



71,107



2.2%

2018

90



340,388



10.5%

2019

83



657,379



20.2%

2020

78



401,726



12.4%

2021

75



353,085



10.9%

2022

53



193,597



6.0%

2023

8



23,800



0.7%

2024

16



320,413



9.9%

2025

15



280,704



8.6%

2026

7



118,711



3.7%

2027+

22



471,109



14.3%







Total

486



3,250,841



100.0%

 

The Company's Quarterly Report on Form 10-Q for the second quarter 2017 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.

               

Office Building Portfolio

As of June 30, 2017, our office building portfolio consisted of the following properties:








Property Name


Location


GLA


Percent leased

Three Ravinia


Atlanta, GA


814,000



98.0%

Brookwood Center


Birmingham, AL


169,000



100.0%

Galleria 75


Atlanta, GA


111,000



89.0%





1,094,000



97.0%

 

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












Square footage


Percentage of total SF


Annual base rent

InterContinental Hotels Group

492,522



45.0%


$

11,080,324


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





864,191



79.0%


$

18,750,084










 

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


32,481



3.1%

2018


12,154



1.2%

2019


13,044



1.2%

2020


91,615



8.7%

2021


217,000



20.6%

2022


7,030



0.7%

2023


56,644



5.4%

2024


19,147



1.8%

2025


47,870



4.5%

2026




—%

2027+


555,635



52.8%

Total


1,052,620



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 an additional phase of the CityPark View multifamily community, which is 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

Summit Crossing


Stone Rise

Overton Rise



 

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:







6/30/2017


6/30/16


$ change


% change

Revenues:









Rental revenues


$

14,616,414



$

14,549,545



$

66,869



0.5%

Other property revenues


1,568,671



1,620,965



(52,294)



(3.2)%

Total revenues


16,185,085



16,170,510



14,575



0.1%










Operating expenses:









Property operating and maintenance


2,148,542



2,013,646



134,896



6.7%

Payroll


1,384,240



1,340,208



44,032



3.3%

Property management fees


655,955



637,882



18,073



2.8%

Real estate taxes


2,193,377



2,461,835



(268,458)



(10.9)%

Other


668,379



669,366



(987)



(0.1)%

Total operating expenses


7,050,493



7,122,937



(72,444)



(1.0)%










Same store net operating income


$

9,134,592



$

9,047,573



$

87,019



1.0%

 

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








Three months ended:



6/30/2017


6/30/16






Same store net operating income


$

9,134,592



$

9,047,573


Add:





Non-same-store property revenues


40,877,465



19,104,589


Less:





Non-same-store property operating expenses

15,346,129



7,996,965







Property net operating income


34,665,928



20,155,197


Add:





Interest revenue on notes receivable


8,490,327



6,847,724


Interest revenue on related party notes receivable


5,338,035



3,731,122


Less:





Equity stock compensation


871,153



618,867


Depreciation and amortization


28,457,001



17,969,975


Interest expense


16,397,895



9,559,501


Acquisition costs


5,000



2,764,742


Management fees


4,864,397



2,958,991


Insurance, professional fees and other

792,001



1,367,678


Gain on sale of real estate


6,914,949



4,271,506


Loss on extinguishment of debt


(888,428)




Contingent asset management and general and administrative expense fees


170,838



451,684







Net income (loss)


$

3,304,202



$

217,479


 

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 in June 2016 with our Manager, contingent fees paid to our Manager at the time of  a property's sale, realized losses on debt extinguishment or refinancing 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;
  • accrued interest income received; and
  • amortization of lease inducements;

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;
  • 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 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 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 June 30, 2017, the Company was the approximate 97.3% 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.

 

SOURCE Preferred Apartment Communities, Inc.

For further information: Leonard A. Silverstein, President and Chief Operating Officer, Preferred Apartment Communities, Inc., lsilverstein@pacapts.com, +1-770-818-4147

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