Preferred Apartment Communities

Investor

News Releases

Preferred Apartment Communities, Inc. Reports Results for Fourth Quarter and Year Ended 2017

ATLANTA, Feb. 26, 2018 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we", "our", the "Company" or "Preferred Apartment Communities") today reported results for the quarter and year ended December 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. See Definitions of Non-GAAP Measures.

Preferred Apartment Communities

"2017 was another year of strong performance for the Company, as evidenced by our exceptional growth in FFO per share. Beginning in 2018, we will begin providing our primary guidance for future periods on FFO per share as defined by NAREIT and will discontinue reporting or providing guidance on Core FFO" said John A. Williams, Preferred Apartment Communities' Chairman and Chief Executive Officer.

Financial Highlights

Our operating results are presented below.

















Three months ended December 31,




Year ended December 31,






2017


2016


% change


2017


2016


% change

















Revenues

$

81,652,168



$

58,991,853



38.4

%


$

294,004,615



$

200,118,915



46.9

%

















Per share data:














Net income (loss) (1)

$

(0.60)



$

(0.66)





$

(1.13)



$

(2.11)




















FFO (2)

$

0.31



$

0.24



29.2

%


$

1.32



$

0.90



46.7

%

















Core FFO (2)

$

0.36



$

0.32



12.5

%


$

1.47



$

1.31



12.2

%

















Dividends (3)

$

0.25



$

0.22



13.6

%


$

0.94



$

0.8175



15.0

%



















(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. Beginning in 2018, we will report our financial results primarily based on net income/loss and FFO as defined by NAREIT. We will not provide financial results or guidance based on Core FFO in future periods.


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

 

Funds from operations ("FFO") for the three months and for the year ended December 31, 2016 reflect acquisition-related costs, which were expensed in full when incurred. Beginning January 1, 2017, the majority of these types of costs are deferred and amortized over the lives 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. 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 year 2017, our Core FFO payout ratio to our Common Stockholders and Unitholders was approximately 66.7% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 83.6%. For the fourth quarter 2017, our Core FFO payout ratio to our Common Stockholders and Unitholders was approximately 71.1% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 81.9%. (A)
  • For the year 2017, our Core FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 57.0% and our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 62.4%. For the fourth quarter 2017, our Core FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 56.1% and our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 59.5%. (A)
  • We issued approximately 3.0 million shares of Common Stock during the fourth quarter 2017 and approximately 12.1 million shares of Common Stock during the year ended December 31, 2017.
  • At December 31, 2017, the market value of our common stock was $20.25. A hypothetical investment in our Common Stock in our initial public offering on April 5, 2011, assuming the reinvestment of all dividends and no transaction costs, would have resulted in an average annual return of approximately 31.2% through December 31, 2017.
  • As of December 31, 2017, our total assets were approximately $3.3 billion compared to approximately $2.4 billion as of December 31, 2016, an increase of approximately $0.8 billion, or approximately 34.3%. This growth was driven primarily by the acquisition of 22 real estate properties (less the sale of 3 properties) and an increase of approximately $53.9 million of the funded amount of our real estate loan investment portfolio since December 31, 2016.
  • As of December 31, 2017, the average age of our multifamily communities was approximately 6.3 years, which we believe is among the youngest in the multifamily REIT industry.
  • At December 31, 2017, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 54.9%.
  • Cash flow from operations for the year ended December 31, 2017 was approximately $86.3 million, an increase of approximately $24.6 million, or 39.9%, compared to approximately $61.7 million for the year ended December 31, 2016. Cash flow from operations for the quarter ended December 31, 2017 was approximately $15.8 million, an increase of approximately $8.0 million, or 103.0%, compared to approximately $7.8 million for the quarter ended December 31, 2016.
  • For the quarter ended December 31, 2017, our physical occupancy for established multifamily communities was 95.9%.
  • Hurricane Harvey caused property damage at our Stone Creek multifamily community located in Port Arthur, Texas which required us to write off real estate assets with a net book value
    of approximately $6.9 million. Property damage and lost rental income for this asset are covered under the National Flood Insurance Program (NFIP) and, residually, under various provisions of our master policy. Therefore, we simultaneously recorded an insurance
    receivable of the same amount, resulting in no loss being recorded in the Income Statement from the write-off. At December 31, 2017, we had received approximately $4.7 million of insurance proceeds and expect to receive the remainder during the first quarter 2018. Remediation and restoration is progressing very well, and we anticipate full completion by May of 2018. Together with Hurricane Irma, we sustained other smaller property damages, lost revenues and higher miscellaneous operating expenses at certain of our other multifamily communities and grocery-anchored shopping centers in Texas and Florida. For the three-month period and year ended December 31, 2017, rental revenues decreased $273,000 and $387,000, respectively due to lost rents. We expect to record a full recovery of these lost revenues upon settlement with our insurance carrier and receipt of funds in 2018. In addition to lost rents, our Income Statement reflects other related costs such as insurance deductibles, smaller property damages that did not exceed our property insurance deductibles, and other storm remediation expenses from the two storms. These costs combined totaled $408,000 and $511,000 for the three-month and twelve-month periods ended December 31, 2017, respectively.

(A) We calculate the Core FFO and AFFO payout ratios to Common Stockholders and preferred stockholders as the ratio of Common Stock dividends and distributions to preferred stockholders to Core FFO or AFFO, respectively. We calculate the Core FFO and AFFO payout ratios to 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.

Acquisitions of Properties

During the fourth quarter 2017, we acquired the following properties:











Property


Location (MSA)


Units


Leasable
square feet












Multifamily communities:









Overlook at Crosstown Walk


Tampa, FL


180


n/a



Colony at Centerpointe


Richmond, VA


255


n/a












Student housing properties: (1)









Stadium Village


Atlanta, GA


198


n/a



Ursa


Waco, TX


250


n/a












Grocery-anchored shopping centers:









Crossroads Market


Naples, FL


n/a


126,895



Roswell Wieuca Shopping Center


Atlanta, GA


n/a


74,370












Office buildings:









Westridge at La Cantera


San Antonio, TX


n/a


258,000












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











 

Real Estate Assets











Owned as of
December 31,
2017


Potential additions
from real estate
loan investment
portfolio (1)


Potential total



Multifamily communities:








Properties

30



15



45




Units

9,521



4,656



14,177




Grocery-anchored shopping centers:








Properties

39



(2)


39




Gross leasable area (square feet)

4,055,461





4,055,461




Student housing properties:








Properties

4



6



10




Units

891



1,457



2,348




Beds

2,950



4,145



7,095




Office buildings:








Properties

4





4




Rentable square feet

1,352,000





1,352,000




















(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)  Effective as of September 29, 2017, we negotiated the cancellation of the purchase option on our real estate investment loan supporting the Dawsonville grocery-anchored shopping center in exchange for a fee of $250,000.

 

Subsequent to Quarter End

On January 9, 2018, we acquired a 265-unit multifamily community located in Jacksonville, Florida.

On January 16, 2018, we closed on a real estate loan investment of up to $3.5 million in support of a mixed-use project in North Augusta, South Carolina.

On January 29, 2018, we acquired an adaptive reuse office property comprised of 186,779 square feet of gross leasable area in four buildings located in Atlanta, Georgia.

On February 13, 2018, we closed on a real estate loan investment of up to $137.5 million in support of a 551-unit multifamily community in San Jose, California.

Multifamily Established Communities Financial Data

The following chart presents same store operating results for the Company's established communities. Effective with the fourth quarter 2017, we define our population of established communities as those that have been stabilized for at least three consecutive months and that have been owned for at least 15 full months as of the end of the first quarter of each year, enabling comparisons of the current year quarterly and annual reporting periods to the prior year comparative periods. The Company excludes the operating results of properties for which construction of adjacent phases has commenced and properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. For the periods presented, same store operating results consist of the operating results of the following multifamily established communities:

Stoneridge Farms at Hunt Club


Lake Cameron


Avenues at Cypress

Vineyards


Aster at Lely


Avenues at Northpointe

McNeil Ranch


Venue at Lakewood Ranch


Stone Rise

Citi Lakes


Lenox Portfolio



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

Established Communities' Same Store Net Operating Income












Three months ended:







12/31/2017


12/31/2016


$ change


% change

Revenues:









Rental revenues


$

12,148,959



$

11,717,625



$

431,334



3.7

%

Other property revenues


1,283,463



1,261,312



22,151



1.8

%

   Total revenues


13,432,422



12,978,937



453,485



3.5

%










Operating expenses:









Property operating and maintenance


1,678,366



1,635,614



42,752



2.6

%

Payroll


1,121,795



1,063,143



58,652



5.5

%

Property management fees


541,774



529,252



12,522



2.4

%

Real estate taxes


1,838,601



1,870,629



(32,028)



(1.7)

%

Other


560,977



558,314



2,663



0.5

%

   Total operating expenses


5,741,513



5,656,952



84,561



1.5

%










Same store net operating income


$

7,690,909



$

7,321,985



$

368,924



5.0

%

 

 

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








Three months ended:



12/31/2017


12/31/2016






Same store net operating income


$

7,690,909



$

7,321,985


Add:





Non-same-store property revenues


53,401,077



33,822,511


Less:





Non-same-store property operating expenses

18,709,158



12,717,326







Property net operating income


42,382,828



28,427,170


Add:





Interest revenue on notes receivable


9,586,308



7,856,232


Interest revenue on related party notes receivable


5,232,361



4,334,173


Less:





Equity stock compensation


862,617



656,336


Depreciation and amortization


34,589,849



23,158,734


Interest expense


19,383,026



13,595,639


Acquisition costs




1,661,679


Management fees


5,701,879



4,153,297


Insurance, professional fees and other

2,133,742



1,501,995


Contingent asset management and general and administrative expense fees


(727,756)



(127,322)







Net income (loss)


$

(4,741,860)



$

(3,982,783)


 

 

Established Communities' Same Store Net Operating Income












Year ended:







12/31/2017


12/31/2016


$ change


% change

Revenues:









Rental revenues


$

47,582,973



$

46,794,009



$

788,964



1.7

%

Other property revenues


5,165,554



5,152,932



12,622



0.2

%

   Total revenues


52,748,527



51,946,941



801,586



1.5

%










Operating expenses:









Property operating and maintenance


7,122,037



6,989,096



132,941



1.9

%

Payroll


4,543,955



4,393,991



149,964



3.4

%

Property management fees


2,122,317



2,087,421



34,896



1.7

%

Real estate taxes


7,508,945



7,784,122



(275,177)



(3.5)

%

Other


2,243,982



2,166,966



77,016



3.6

%

   Total operating expenses


23,541,236



23,421,596



119,640



0.5

%










Same store net operating income


$

29,207,291



$

28,525,345



$

681,946



2.4

%

 

 

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








Year ended:



12/31/2017


12/31/2016






Same store net operating income


$

29,207,291



$

28,525,345


Add:





Non-same-store property revenues


184,354,229



104,686,382


Less:





Non-same-store property operating expenses

67,789,947



40,520,336







Property net operating income


145,771,573



92,691,391


Add:





Interest revenue on notes receivable


35,697,982



28,840,857


Interest revenue on related party notes receivable


21,203,877



14,644,736


Less:





Equity stock compensation


3,470,284



2,524,042


Depreciation and amortization


116,776,809



78,139,798


Interest expense


67,468,042



44,284,144


Acquisition costs


14,002



8,547,543


Management fees


20,226,396



13,637,458


Insurance, professional fees and other

4,527,504



4,744,486


Gain on sale of real estate


37,635,014



4,271,506


Loss on extinguishment of debt


(888,428)




Contingent asset management and general and administrative expense fees


(1,729,620)



(1,585,567)







Net income (loss)


$

28,666,601



$

(9,843,414)


Real estate taxes for the year ended December 31, 2017 decreased versus the year ended December 31, 2016 due primarily to successful valuation appeal efforts.

Capital Markets Activities

During the fourth quarter 2017, we issued and sold an aggregate of 108,948 Units from our offering of up to 1,500,000 Units, with each Unit consisting of one share of Series A Redeemable Preferred Stock and one Warrant to purchase up to 20 shares of Common Stock (the "$1.5 Billion Series A Unit Offering"), resulting in net proceeds of approximately $98.1 million after commissions and other fees. In addition, during the fourth quarter 2017, we issued approximately 2.8 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 $41.1 million.

During the fourth quarter 2017, we issued and sold an aggregate of 2,879 shares of Series M Redeemable Preferred Stock ("mShares"), resulting in net proceeds of approximately $2.8 million after dealer manager fees.

Effective as of the close of market on November 30, 2017 our Common Stock was added to the MSCI U.S. REIT Index (RMZ).

Our outstanding shares of Common Stock totaled approximately 38.6 million shares at December 31, 2017. The closing price of our Common Stock was $20.25 on December 29, 2017 versus $14.91 on December 31, 2016. Our total equity book value increased 44.8% to approximately $1.3 billion at December 31, 2017 from $885.3 million at December 31, 2016.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On October 23, 2017, we declared a quarterly dividend on our Common Stock of $0.25 per share for the fourth quarter 2017. This represents a 13.6% increase in our common stock dividend from our fourth quarter 2016 common stock dividend of $0.22 per share, and an annualized dividend growth rate of 15.5% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The fourth quarter dividend was paid on January 16, 2018 to all stockholders of record on December 15, 2017. In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.25 per unit for the fourth quarter 2017, which was paid on January 16, 2018 to all Class A Unit holders of record as of December 15, 2017.

Monthly Dividends on Preferred Stock

We declared and paid monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $17.4 million for the quarter ended December 31, 2017 and represent a 6% annual yield. We declared and paid dividends totaling approximately $195,000 on our Series M Redeemable Preferred Stock, or mShares, for the quarter ended December 31, 2017. The mShares have an escalating dividend rate from 5.75% in year one of issuance to 7.50% in year eight and thereafter.

Conference Call and Supplemental Data

We will hold our quarterly conference call on Tuesday, February 27, 2018 at 11:00 a.m. Eastern Time to discuss our fourth quarter and full year 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, February 27, 2018
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

The live broadcast of our fourth quarter and full year 2017 conference call will be available online, on a listen-only basis, at our website, www.pacapts.com, under "Investors" and then click on the "Upcoming Events" link. A replay of the call will be archived on under the Investors/Audio Archive section.

2018 Guidance:

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

FFO per share  -   We currently project FFO to be in the range of $1.43 - $1.47 per share for the full year 2018.

Revenue - We currently project total revenues to be in the range of $400 million - $440 million for the full year 2018.

Common Stock dividends - We currently expect to increase our Common Stock dividend by an aggregate of at least 10% during 2018 as compared to 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 for the three-month and twelve-month periods ended December 31, 2017 and 2016 appear in the attached report, as well as on our website using the following link:

http://investors.pacapts.com/download/4Q17_Earnings_and_Supplemental_Data.pdf

Forward-Looking Statements

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

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

We refer you to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 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-K, Form 10-Q and Form 8-K filings and other documents filed from time to time with the SEC.

Additional Information

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

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

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

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

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

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

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

                                              

 


 

Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)








Three months ended December 31,


Year ended December 31,



2017


2016


2017


2016

Revenues:









Rental revenues


$

56,784,788



$

40,789,230



$

200,461,750



$

137,330,774


Other property revenues


10,048,711



6,012,218



36,641,006



19,302,548


Interest income on loans and notes receivable


9,586,308



7,856,232



35,697,982



28,840,857


Interest income from related parties


5,232,361



4,334,173



21,203,877



14,644,736


   Total revenues


81,652,168



58,991,853



294,004,615



200,118,915











Operating expenses:









Property operating and maintenance


8,265,541



6,098,507



29,903,092



19,981,640


Property salary and benefits

3,621,760



2,710,241



13,271,603



10,398,711


Property management fees

2,313,179



1,671,894



8,329,182



5,980,735


Real estate taxes


7,991,372



6,137,235



31,281,156



21,594,369


General and administrative


1,628,653



1,302,262



6,489,736



4,557,990


Equity compensation to directors and executives

862,617



656,336



3,470,284



2,524,042


Depreciation and amortization


34,589,849



23,158,734



116,776,809



78,139,798


Acquisition and pursuit costs



1,661,679



14,002



8,547,543


Asset management and general and administrative expense fees to related party


5,701,879



4,153,297



20,226,396



13,637,458


Insurance, professional fees, and other expenses


2,763,908



1,956,134



6,583,918



6,172,972











   Total operating expenses


67,738,758



49,506,319



236,346,178



171,535,258


Contingent asset management and general and administrative








expense fees

(727,756)



(127,322)



(1,729,620)



(1,585,567)











Net operating expenses


67,011,002



49,378,997



234,616,558



169,949,691


Operating income


14,641,166



9,612,856



59,388,057



30,169,224


Interest expense


19,383,026



13,595,639



67,468,042



44,284,144


Loss on extinguishment of debt






888,428




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


(4,741,860)



(3,982,783)



(8,968,413)



(14,114,920)


Gain on sale of real estate






37,635,014



4,271,506











Net income (loss)


(4,741,860)



(3,982,783)



28,666,601



(9,843,414)


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

111,403



135,246



(985,605)



310,291











Net income (loss) attributable to the Company


(4,630,457)



(3,847,537)



27,680,996



(9,533,123)











Dividends declared to preferred stockholders


(17,609,084)



(12,738,922)



(63,651,265)



(41,080,645)


Earnings attributable to unvested restricted stock


(3,051)



(3,409)



(14,794)



(15,843)











Net loss attributable to common stockholders


$

(22,242,592)



$

(16,589,868)



$

(35,985,063)



$

(50,629,611)


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








basic and diluted


$

(0.60)



$

(0.66)



$

(1.13)



$

(2.11)











Weighted average number of shares of Common Stock outstanding,








basic and diluted


37,205,390



25,210,069



31,926,472



23,969,494


 

 

Reconciliation of FFO, Core FFO, and AFFO

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






Three months ended December 31,






2017


2016









Net loss attributable to common stockholders (See note 1)

$

(22,242,592)



$

(16,589,868)










Add:

Depreciation of real estate assets


24,940,998



16,890,027



Amortization of acquired real estate intangible assets and deferred leasing costs

9,385,732



6,123,722



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


(111,403)



(135,246)










FFO

11,972,735



6,288,635










Add:

Acquisition and pursuit costs





1,661,679



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

29,193



26,938



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

420,660



317,997



Weather-related property operating losses  (See note 5)

681,136





Payment of costs related to property refinancing (See note 6)

683,518












Core FFO

13,787,242



8,295,249










Add:

Non-cash equity compensation to directors and executives

862,617



656,336



Amortization of loan closing costs (See note 7)


793,306



818,685



Depreciation/amortization of non-real estate assets


263,119



144,985



Net loan fees received (See note 8)


17,810



497,277



Accrued interest income received (See note 9)


4,696,934





Non-cash dividends on Series M Preferred Stock


29,785





Amortization of lease inducements (See note 10)


200,344




Less:

Non-cash loan interest income (See note 8)


(4,556,558)



(4,227,953)



Cash paid for loan closing costs

(27,917)



(215,258)



Amortization of acquired above and below market lease intangibles





and straight-line rental revenues (See note 11)

(2,678,503)



(743,550)



Amortization of deferred revenues (See note 12)


(398,507)





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

(1,026,037)



(617,237)










AFFO

$

11,963,635



$

4,608,534










Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

9,575,975



$

5,740,616



Distributions to Unitholders (See note 2)


221,184



194,957



Total




$

9,797,159



$

5,935,573










Common Stock dividends and Unitholder distributions per share


$

0.25



$

0.22










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

$

0.31



$

0.24


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

$

0.36



$

0.32


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

$

0.31



$

0.18






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





Basic:








Common Stock



37,205,390



25,210,069



Class A Units




895,112



886,168



   Common Stock and Class A Units


38,100,502



26,096,237











Diluted Common Stock and Class A Units (B)


43,355,215



27,009,119










Actual shares of Common Stock outstanding, including 12,204 and 15,498 unvested shares




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

38,576,926



26,513,690


Actual Class A Units outstanding at December 31, 2017 and 2016, respectively.

884,735



886,168



Total




39,461,661



27,399,858










(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 2.35% weighted average non-controlling interest in the Operating Partnership for the three-month period ended December 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.

 

 

Reconciliation of FFO, Core FFO, and AFFO

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







Year ended December 31,






2017


2016









Net loss attributable to common stockholders (See note 1)

$

(35,985,063)



$

(50,629,611)








Add:

Depreciation of real estate assets


85,285,385



55,896,381



Amortization of acquired real estate intangible assets and deferred leasing costs

30,693,340



21,700,590


Less:

Gain on sale of real estate


(37,635,014)



(4,271,506)



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

985,605



(310,291)










FFO

43,344,253



22,385,563










Add:

Acquisition and pursuit costs



14,002



8,547,543



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

128,339



166,682



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

1,599,151



869,651



Mortgage loan refinancing and extinguishment costs (See note 6)

1,741,573





Costs incurred from extension of management agreement with advisor (See note 14)



421,387



Weather-related property operating losses  (See note 5)

897,872





Contingent fees paid on sale of real estate (See note 15)

386,570












Core FFO

48,111,760



32,390,826










Add:

Non-cash equity compensation to directors and executives

3,470,284



2,524,042



Amortization of loan closing costs (See note 7)


3,549,825



2,559,096



Depreciation/amortization of non-real estate assets


798,084



542,827



Net loan fees received (See note 8)


1,314,194



1,872,105



Accrued interest income received (See note 9)


11,812,531



6,875,957



Non-cash dividends on Series M Preferred Stock


62,878





Amortization of lease inducements (See note 10)


437,381




Less:

Non-cash loan interest income (See note 8)


(18,063,613)



(14,685,707)



Cash paid for loan closing costs

(27,917)



(228,534)



Amortization of acquired above and below market lease intangibles





and straight-line rental revenues (See note 11)

(8,175,688)



(2,458,342)



Amortization of deferred revenues (See note 12)


(855,323)





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

(4,057,857)



(2,797,360)










AFFO

$

38,376,539



$

26,594,910


Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

31,244,265



$

19,940,730



Distributions to Unitholders (See note 2)


843,488



671,250



Total




$

32,087,753



$

20,611,980










Common Stock dividends and Unitholder distributions per share


$

0.94



$

0.8175










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

$

1.32



$

0.90


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

$

1.47



$

1.31


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

$

1.17



$

1.07






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





Basic:








Common Stock



31,926,472



23,969,494



Class A Units




906,076



819,197



   Common Stock and Class A Units


32,832,548



24,788,691









Diluted Common Stock and Class A Units (B)


36,938,961



26,502,136


Actual shares of Common Stock outstanding, including 12,204 and 15,498 unvested shares




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

38,576,926



26,513,690


Actual Class A Units outstanding at December 31, 2017 and 2016, respectively.

884,735



886,168



Total




39,461,661



27,399,858


(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 2.76% weighted average non-controlling interest in the Operating Partnership for the twelve-month period ended December 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.

 

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

  1. Rental and other property revenues and property operating expenses for the quarter and year ended December 31, 2017 include activity for the 10 multifamily communities, three student housing projects, one office building and eight grocery-anchored shopping centers acquired during 2017 only from their respective dates of acquisition. In addition, the fourth quarter 2017 period includes a full quarter of activity for the six multifamily communities, 17 grocery-anchored shopping centers, one student housing property and three office buildings acquired during 2016. Rental and other property revenues and expenses for the quarter and year ended December 31, 2016 include activity for the 2016 acquisitions only from their respective dates of acquisition during 2016.
  2. Non-controlling interests in our Operating Partnership consisted of a total of 884,735 Class A Units as of December 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 2.35% and 3.40% for the three-month periods ended December 31, 2017 and 2016, respectively and  2.76% and 3.30% for the years ended December 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, which were funded by our $35 million acquisition term loan facility, or 2016 Term Loan, on our $11 million term note, which we used to finance the acquisition of our Anderson Central grocery-anchored shopping center, and on our $200 million acquisition revolving credit facility, or Acquisition Facility, which is used to finance acquisitions of multifamily communities and student housing communities. The 2016 Term Loan was repaid in full on August 5, 2016, while the $11 million term note and Acquisition
    Facility remain outstanding. The costs to establish these instruments were deferred and amortized over the lives of the 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 reflect the administrative effort involved in arranging debt financing for acquired properties. The portion of the loan coordination fees paid up until July 1, 2017 attributable to the financing were amortized over the lives of the respective mortgage loans, and this non-cash amortization expense is an addition to FFO in the calculation of Core FFO. Beginning effective July 1, 2017, the loan coordination fee was lowered from 1.6%  to 0.6% of the amount of any mortgage indebtedness on newly-acquired properties or refinancing. All of the loan coordination fees paid to our Manager subsequent to July 1, 2017 are amortized over the life of the debt. At December 31, 2017, aggregate unamortized loan coordination fees were approximately $12.1 million, which will be amortized over a weighted average remaining loan life of approximately 10.6 years.
  5. We sustained weather-related operating losses at certain of our properties during the third and fourth quarters of 2017; these costs are added back to FFO in our calculation of Core FFO. Included in these adjustments are lost rental revenues that totaled $386,531 for the year ended December 31, 2017 and $272,835 for the fourth quarter. Any insurance reimbursement for lost rent cannot be reflected in our statements of operations until the funds are received from the insurance carrier.
  6. For the three months ended December 31, 2017, this adjustment consists of charges related to the refinancing of our Aldridge at Town Village, Summit Crossing and Retreat at Greystone multifamily communities. For the year ended December 31, 2017, the adjustment also includes a loan prepayment penalty and other charges related to the refinancing of our Stone Creek and 525 Avalon multifamily communities.
  7. 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 December 31, 2017, aggregate unamortized loan costs were approximately $19.2 million, which will be amortized over a weighted average remaining loan life of approximately 8.0 years.
  8. We receive loan origination fees in conjunction with the origination of certain real estate loan investments. These fees are then recognized as revenue over the lives of the applicable loans as adjustments of yield using the effective interest method.  The total fees received after the payment of loan origination fees to our Manager are additive adjustments in the calculation of AFFO. Correspondingly, the amortized non-cash income is a deduction in the calculation of AFFO. Over the lives of certain loans, we accrue additional interest amounts that become due to us at the time of repayment of the loan or refinancing of the property, or when the property is sold. This non-cash interest income is subtracted from Core FFO in our calculation of AFFO.
  9. This adjustment reflects the receipt during the periods presented of additional interest income (described in note 8 above) which was earned and accrued prior to those periods presented on various real estate loans.
  10. 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.
  11. This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At December 31, 2017, the balance of unamortized below-market lease intangibles was approximately $38.9 million, which will be recognized over a weighted average remaining lease period of approximately 9.7 years.
  12. This adjustment removes the non-cash amortization of deferred revenue recorded by us in conjunction with Company-owned lessee-funded tenant improvements in our office buildings.
  13. We deduct from Core FFO normally recurring capital expenditures that are necessary to maintain our assets' revenue streams in the calculation of AFFO. 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. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures.
  14. We incurred legal costs pertaining to the extension of our management agreement with our Manager. The three-year evergreen extension was effective as of June 3, 2016.
  15. 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, our Manager collected a cumulative total of approximately $390,000 of contingent fees.  The sales transaction, and the fact that our capital contributions for the Enclave at Vista Ridge property achieved an annual rate of return which exceeded 7%, 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.

See Definitions of Non-GAAP Measures.

 

Preferred Apartment Communities, Inc.


Consolidated Balance Sheets


(Unaudited)






December 31, 2017


December 31, 2016


Assets






Real estate





Land


$

406,794,429



$

299,547,501



Building and improvements

2,043,853,105



1,513,293,760



Tenant improvements

63,424,729



23,642,361



Furniture, fixtures, and equipment

210,778,838



126,357,742



Construction in progress

10,490,769



2,645,634



Gross real estate

2,735,341,870



1,965,486,998



Less: accumulated depreciation

(172,755,498)



(103,814,894)



Net real estate

2,562,586,372



1,861,672,104



Real estate loan investments, net of deferred fee income

255,344,584



201,855,604



Real estate loan investments to related parties, net

131,451,359



130,905,464



Total real estate and real estate loan investments, net

2,949,382,315



2,194,433,172









Cash and cash equivalents

21,042,862



12,321,787



Restricted cash

51,968,519



55,392,984



Notes receivable

17,317,743



15,499,699



Note receivable and revolving line of credit due from related party

22,739,022



22,115,976



Accrued interest receivable on real estate loans

26,864,905



21,894,549



Acquired intangible assets, net of amortization

102,743,389



79,156,400



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

1,385,208



1,768,779



Deferred offering costs

6,544,310



2,677,023



Tenant lease inducements, net

14,424,398



261,492



Tenant receivables and other assets

37,956,954



15,310,741









Total assets

$

3,252,369,625



$

2,420,832,602









Liabilities and equity





Liabilities





Mortgage notes payable, net of deferred loan costs

1,776,652,171



1,305,870,471



Revolving line of credit

41,800,000



127,500,000



Term note payable, net of deferred loan costs

10,994,194



10,959,905



Real estate loan investment participation obligation

13,985,978



20,761,819



Deferred revenue

27,947,352





Accounts payable and accrued expenses

31,252,705



20,814,910



Accrued interest payable

5,028,161



3,541,640



Dividends and partnership distributions payable

15,679,940



10,159,629



Acquired below market lease intangibles, net of amortization

38,856,615



29,774,033



Security deposits and other liabilities

9,406,816



6,189,033



Total liabilities

1,971,603,932



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; 1,250,279 and 924,855 shares issued; 1,222,013 and 914,422





shares outstanding at December 31, 2017 and 2016, respectively

12,220



9,144



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





   shares authorized; 15,275 and 0 shares issued and outstanding





at December 31, 2017 and 2016, respectively

153





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





  38,564,722 and 26,498,192 shares issued and outstanding at





December 31, 2017 and 2016, respectively

385,647



264,982



Additional paid-in capital

1,271,039,723



906,737,470



Accumulated earnings (deficit)

4,449,353



(23,231,643)



     Total stockholders' equity

1,275,887,096



883,779,953



Non-controlling interest

4,878,597



1,481,209



   Total equity

1,280,765,693



885,261,162









Total liabilities and equity

$

3,252,369,625



$

2,420,832,602



 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)




Year ended December 31,



2017


2016

Operating activities:





Net income (loss )


$

28,666,601



$

(9,843,414)


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




Depreciation expense


86,017,560



56,415,608


Amortization expense


30,759,249



21,724,190


Amortization of above and below market leases

(3,335,303)



(1,653,016)


Deferred revenues and fee income amortization

(2,346,579)



(994,809)


Mark to market debt and lease incentive amortization

630,503




Deferred loan cost amortization

5,084,193



3,595,429


(Increase) in accrued interest income on real estate loans

(4,970,356)



(7,599,901)


Equity compensation to executives and directors

3,470,284



2,524,042


Gain on sale of real estate


(37,635,014)



(4,271,506)


Loss on extinguishment of debt


888,428




Other


189,400



48,126


Changes in operating assets and liabilities:




   (Increase) in tenant receivables and other assets

(12,105,325)



(4,331,216)


  (Increase) in tenant lease incentives

(14,260,180)




  Increase in accounts payable and accrued expenses

2,382,465



3,112,553


  Increase in accrued interest and other liabilities

2,853,145



2,935,383


Net cash provided by operating activities

86,289,071



61,661,469







Investing activities:





Investment in real estate loans


(148,345,526)



(151,027,549)


Repayments of real estate loans


94,409,668



36,672,482


Notes receivable issued


(7,863,998)



(9,887,486)


Notes receivable repaid


6,099,653



12,895,101


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

(35,281,195)



(34,206,553)


Repayments of line of credit by related party

34,228,970



31,096,618


Loan origination fees received

2,633,592



3,703,514


Loan origination fees paid to Manager

(1,319,399)



(1,886,105)


Acquisition of properties


(781,828,497)



(1,010,111,945)


Disposition of properties, net


118,237,697



10,616,386


Receipt of insurance proceeds for capital improvements

4,719,009




Additions to real estate assets - improvements

(17,787,037)



(10,263,736)


(Deposits) on acquisitions


(2,034,398)



(839,600)


Decrease (increase) in restricted cash

10,378,557



(3,344,721)


Net cash used in investing activities

(723,752,904)



(1,126,583,594)







Financing activities:





Proceeds from mortgage notes payable

517,488,647



622,394,000


Payments for mortgage notes payable

(124,039,890)



(12,035,587)


Payments for deposits and other mortgage loan costs

(14,772,295)



(19,130,246)


Payments for mortgage prepayment costs

(817,313)




Proceeds from real estate loan participants

224,188



6,432,700


Payments to real estate loan participants

(7,882,643)




Proceeds from lines of credit


275,000,000



470,136,020


Payments on lines of credit


(360,700,000)



(377,136,020)


Proceeds from Term Loan




46,000,000


Repayment of the Term Loan




(35,000,000)


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

302,467,332



390,904,255


Proceeds from sales of Common Stock

74,213,118



22,956,604


Proceeds from exercises of warrants

80,970,365



21,503,490


Common Stock dividends paid


(27,408,905)



(18,515,113)


Preferred stock dividends paid


(61,966,313)



(38,940,901)


Distributions to non-controlling interests

(817,260)



(529,528)


Payments for deferred offering costs

(6,314,123)



(4,685,367)


Contribution from non-controlling interests

540,000



450,000


Net cash provided by financing activities

646,184,908



1,074,804,307






Net increase in cash and cash equivalents

8,721,075



9,882,182


Cash and cash equivalents, beginning of period

12,321,787



2,439,605


Cash and cash equivalents, end of period

$

21,042,862



$

12,321,787


 

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






December 31,

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



7,521,425



6,748,380



8.5 / 5

Palisades


Northern VA


5/17/2018


N/A


17,270,000



17,111,298



16,214,545



8 / 5

Fusion


Irvine, CA


5/31/2018


5/31/2020


63,911,961



58,447,468



49,456,067



8.5 / 7.5

Green Park


Atlanta, GA


2/28/2018


12/1/2019


13,464,372



11,464,372



13,464,372



8.5 / 5.83

Summit Crossing III


Atlanta, GA



N/A





(3)


7,246,400



Overture


Tampa, FL



N/A





(3)


6,123,739



8.5 / 7.5

Aldridge at Town Village


Atlanta, GA



N/A





(3)


10,656,171



Bishop Street


Atlanta, GA


2/18/2020


N/A


12,693,457



12,144,914



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



5,041,161



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



3,623,944



3,325,668



8.5 / 6.5

Park 35 on Clairmont


Birmingham, AL


6/26/2018


6/26/2020


21,060,160



21,060,160



19,795,886



8.5 / 2

Wiregrass


Tampa, FL


5/15/2020


5/15/2023


14,975,853



12,972,273



1,862,548



8.5 / 6.5

Wiregrass Capital


Tampa, FL


5/15/2020


5/15/2023


3,744,147



3,561,231



3,268,114



8.5 / 6.5

Berryessa


San Jose, CA


4/19/2018


N/A


31,509,000



30,571,375





10.5 / 0

Brentwood


Nashville, TN


6/1/2018


N/A


2,376,000



2,260,525





12 / 0

Fort Myers


Fort Myers, FL



N/A





(4)


3,654,621



Fort Myers


Fort Myers, FL


2/3/2021


2/3/2022


9,416,000



3,521,014





8.5 / 5.5

Fort Myers Capital


Fort Myers, FL


2/3/2021


2/3/2022


6,193,000



4,994,108





8.5 / 5.5

360 Forsyth


Atlanta, GA



N/A





(4)


2,520,420



360 Forsyth


Atlanta, GA


7/11/2020


7/11/2022


22,412,000



13,400,166





8.5 / 5.5

Morosgo


Atlanta, GA


1/31/2021


1/31/2022


11,749,000



4,950,824





8.5 / 5.5

Morosgo Capital


Atlanta, GA


1/31/2021


1/31/2022


6,176,000



4,761,050





8.5 / 5.5

University City Gateway


Charlotte, NC


8/15/2021


8/15/2022


10,336,000



849,726





8.5 / 5

University City Gateway















Capital


Charlotte, NC


8/18/2021


8/18/2022


7,338,000



5,530,045





8.5 / 5
















Student housing properties:













Haven West


Atlanta, GA



N/A





(5)


6,784,167



Haven 12


Starkville, MS


12/17/2018


11/30/2020


6,116,384



5,815,849



5,815,849



8.5 / 6.5

Stadium Village


Atlanta, GA



N/A





(3)


13,329,868



8.5 / 5.83

18 Nineteen


Lubbock, TX



N/A





(6)


15,584,017



8.5 / 6

Haven South


Waco, TX



N/A





(3)


15,301,876



8.5 / 6

Haven46


Tampa, FL


3/29/2019


9/29/2020


9,819,662



9,819,662



9,136,847



8.5 / 5

Haven Northgate


College Station, TX


6/20/2019


6/20/2020


67,680,000



65,724,317



46,419,194



7.25 / 1.5

Lubbock II


Lubbock, TX


4/20/2019


N/A


9,357,171



9,357,078



8,770,838



8.5 / 5

Haven Charlotte


Charlotte, NC


12/22/2019


12/22/2021


19,581,593



17,039,277



5,781,295



8.5 / 6.5

Haven Charlotte Member


Charlotte, NC


12/22/2019


12/22/2021


8,201,170



7,794,612





8.5 / 6.5

Solis Kennesaw


Atlanta, GA


9/26/2020


9/26/2022


12,358,946



1,609,395





8.5 / 5.5

Solis Kennesaw Capital


Atlanta, GA


10/1/2020


10/1/2022


8,360,000



7,143,866





8.5 / 5.5
















New Market Properties:















Dawson Marketplace


Atlanta, GA


9/24/2020


9/24/2022


12,857,005



12,857,005



12,613,860



8.5 / 5 (7)
















Other:















Crescent Avenue


Atlanta, GA


4/13/2018


5/31/2018


8,500,000



8,500,000



6,000,000



10 / 5
























$

455,569,041



388,506,100



334,570,242




Unamortized loan origination fees








(1,710,157)



(1,809,174)



















Carrying amount










$

386,795,943



$

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.

(3) Loan was repaid in connection with our acquisition of the property during 2017.

(4) Previously existing land acquisition bridge loan was converted into real estate loan investment and capital/member loan during the third quarter.

(5) The loan extended to Haven West, with a total commitment of $6.9 million, was paid off during the third quarter.

(6) The loan extended to 18Nineteen was repaid during the fourth quarter 2017 following the sale of the property to a third party.

(7) Effective January 1, 2018, the deferred interest rate increased to 6.9% per annum until the total accrued interest reaches $250,000, at which point the deferred interest reverts to 5.0%.

 

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. As of December 31, 2017, our actual and potential purchase option portfolio consisted of:




Total units upon


Purchase option window


Project/Property

Location


completion (1)


Begin


End











Multifamily communities:









Encore

Atlanta, GA


339



4/2/2018


7/9/2018


Palisades

Northern VA


304



1/1/2019


5/31/2019


Fusion

Irvine, CA


280



10/1/2018


1/1/2019


Green Park

Atlanta, GA


310



3/1/2018


6/30/2018

(2)

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



S + 90 days (3)


S + 150 days (3)


Wiregrass

Tampa, FL


392



S + 90 days (3)


S + 150 days (3)


360 Forsyth

Atlanta, GA


356



S + 90 days (3)


S + 150 days (3)


Morosgo

Atlanta, GA


258



S + 90 days (3)


S + 150 days (3)


University City Gateway

Charlotte, NC


338



S + 90 days (3)


S + 150 days (3)


Berryessa

San Jose, CA


551



N/A


N/A


Brentwood

Nashville, TN


301



N/A


N/A











Student housing properties:









Haven 12

Starkville, MS


152



4/1/2018


6/30/2018


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


Solis Kennesaw

Atlanta, GA


248



(4)


(4)














6,113
















(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 as of October 26, 2017, the purchase option window on the property was amended as shown.


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


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


 

Mortgage Indebtedness

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




Principal balance as of








Interest only
through date
(1)


Acquisition/

refinancing
date


December 31,
2017


December 31,
2016


Maturity
date


Interest
rate


Basis point
spread over
1 Month
LIBOR
















Multifamily communities:














Stone Rise

7/3/2014


$

23,939,461



$

24,485,726



8/1/2019


2.89

%


Fixed rate


8/31/2015

Summit Crossing

4/21/2011




20,034,920



5/1/2018




Fixed rate


5/1/2014

Summit Crossing secondary financing

8/28/2014




5,057,941



9/1/2019




Fixed rate


N/A

Summit Crossing refinancing

10/31/2017


39,018,600





11/1/2024


3.99

%


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




Fixed rate


2/28/2018

Ashford Park secondary financing

8/28/2014



(2)

6,404,575



2/1/2020




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




Fixed rate


10/31/2017

Sandstone

9/26/2014



(4)

30,894,890



10/1/2019




Fixed rate


N/A

Stoneridge

9/26/2014


26,136,226



26,729,985



10/1/2019


3.18

%


Fixed rate


N/A

Vineyards

9/26/2014


34,672,349



34,775,000



10/1/2021


3.68

%


Fixed rate


10/31/2017

Avenues at Cypress

2/13/2015


21,675,160



22,135,938



9/1/2022


3.43

%


Fixed rate


N/A

Avenues at Northpointe

2/13/2015


27,466,988



27,878,000



3/1/2022


3.16

%


Fixed rate


3/31/2017

Venue at Lakewood Ranch

5/21/2015


29,347,966



29,950,413



12/1/2022


3.55

%


Fixed rate


N/A

Aster Lely

6/24/2015


32,470,974



33,120,899



7/5/2022


3.84

%


Fixed rate


N/A

CityPark View

6/30/2015


21,037,805



21,489,269



7/1/2022


3.27

%


Fixed rate


N/A

Avenues at Creekside

7/31/2015


40,523,358



41,349,590



8/1/2024


3.16

%


160

(5)

8/31/2016

Citi Lakes

9/3/2015


42,396,307



43,309,606



4/1/2023


3.73

%


217

(6)

N/A

Stone Creek

6/22/2017


20,466,519



16,497,919



7/1/2052


3.22

%


Fixed rate


N/A

Lenox Village Town Center

12/21/2015


30,009,461



30,717,024



5/1/2019


3.82

%


Fixed rate


N/A

Lenox Village III

12/21/2015


17,802,373



18,125,780



1/1/2023


4.04

%


Fixed rate


N/A

Overton Rise

2/1/2016


39,981,145



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


3.46

%


190


1/4/2019

Baldwin Park secondary financing

1/5/2016


3,890,000



3,890,000



1/5/2019


11.46

%


990


1/4/2019

Crosstown Walk

1/15/2016


31,485,601



32,069,832



2/1/2023


3.90

%


Fixed rate


N/A

525 Avalon Park

5/31/2016



(7)

61,750,000



7/1/2024




200

(7)

N/A

525 Avalon Park secondary financing

5/31/2016



(7)

3,250,000



6/5/2019




1100

(7)

N/A

525 Avalon Park refinancing

6/15/2017


66,912,118





7/1/2024


3.98

%


Fixed rate


N/A

City Vista

7/1/2016


35,073,438



35,734,946



7/1/2026


3.68

%


Fixed rate


N/A

Sorrel

8/24/2016


32,800,838



33,442,303



9/1/2023


3.44

%


Fixed rate


N/A

Citrus Village

3/3/2017


29,969,646





6/10/2023


3.65

%


Fixed rate


6/09/2017

Retreat at Greystone

11/21/2017


35,210,000





12/1/2024


4.31

%


Fixed rate


N/A

Founders Village

3/31/2017


31,271,292





4/1/2027


4.31

%


Fixed rate


N/A

Claiborne Crossing

4/26/2017


26,800,760





6/1/2054


2.89

%


Fixed rate


N/A

Luxe Lakewood Ranch

7/26/2017


39,065,729





8/1/2027


3.93

%


Fixed rate


N/A

Adara Overland Park

9/27/2017


31,759,882





4/1/2028


3.90

%


Fixed rate


N/A

Aldridge at Town Village

10/31/2017


37,847,218





11/1/2024


4.19

%


Fixed rate

(8)

N/A

Summit Crossing III

9/29/2017


20,016,609





10/1/2024


3.87

%


Fixed rate


N/A

Overlook at Crosstown Walk

11/21/2017


22,231,000





12/1/2024


3.95

%


Fixed rate


N/A

Colony at Centerpointe

12/20/2017


33,346,281





10/1/2026


3.68

%


Fixed rate


N/A















Total multifamily communities



1,045,311,104



814,980,690
























Grocery-anchored shopping centers:

Spring Hill Plaza

9/5/2014


9,470,041



9,672,371



10/1/2019


3.36

%


Fixed rate


10/31/2015

Parkway Town Centre

9/5/2014


6,887,303



7,034,452



10/1/2019


3.36

%


Fixed rate


10/31/2015

Woodstock Crossing

8/8/2014


2,989,460



3,041,620



9/1/2021


4.71

%


Fixed rate


N/A

Deltona Landings

9/30/2014


6,777,948



6,928,913



10/1/2019


3.48

%


Fixed rate


N/A

Powder Springs

9/30/2014


7,151,903



7,311,197



10/1/2019


3.48

%


Fixed rate


N/A

Kingwood Glen

9/30/2014


11,340,208



11,592,787



10/1/2019


3.48

%


Fixed rate


N/A

Barclay Crossing

9/30/2014


6,375,945



6,517,956



10/1/2019


3.48

%


Fixed rate


N/A

Sweetgrass Corner

9/30/2014


7,730,666



7,900,135



10/1/2019


3.58

%


Fixed rate


N/A

Parkway Centre

9/30/2014


4,440,724



4,539,632



10/1/2019


3.48

%


Fixed rate


N/A

The Market at Salem Cove

10/6/2014


9,423,125



9,586,678



11/1/2024


4.21

%


Fixed rate


11/30/2016

Independence Square

8/27/2015


11,967,246



12,208,524



9/1/2022


3.93

%


Fixed rate


9/30/2016

Royal Lakes Marketplace

9/4/2015


9,690,137



9,800,000



9/4/2020


3.86

%


250


4/3/2017

The Overlook at Hamilton Place

12/22/2015


20,300,862



20,672,618



1/1/2026


4.19

%


Fixed rate


N/A

Summit Point

10/30/2015


12,208,422



12,546,792



11/1/2022


3.57

%


Fixed rate


N/A

East Gate Shopping Center

4/29/2016


5,578,194



5,719,897



5/1/2026


3.97

%


Fixed rate


N/A

Fury's Ferry

4/29/2016


6,443,776



6,607,467



5/1/2026


3.97

%


Fixed rate


N/A

Rosewood Shopping Center

4/29/2016


4,327,909



4,437,851



5/1/2026


3.97

%


Fixed rate


N/A

Southgate Village

4/29/2016


7,694,061



7,889,513



5/1/2026


3.97

%


Fixed rate


N/A

The Market at Victory Village

5/16/2016


9,213,785



9,250,000



9/11/2024


4.40

%


Fixed rate


10/10/2017

Wade Green Village

4/7/2016


7,968,657



8,116,465



5/1/2026


4.00

%


Fixed rate


N/A

Lakeland Plaza

7/15/2016


29,022,665



29,760,342



8/1/2026


3.85

%


Fixed rate


N/A

University Palms

8/8/2016


13,161,942



13,513,891



9/1/2026


3.45

%


Fixed rate


N/A

Cherokee Plaza

8/8/2016


25,322,400



26,017,293



9/1/2021


3.61

%


225

(9)

N/A

Sandy Plains Exchange

8/8/2016


9,194,003



9,439,850



9/1/2026


3.45

%


Fixed rate


N/A

Thompson Bridge Commons

8/8/2016


12,290,931



12,619,589



9/1/2026


3.45

%


Fixed rate


N/A

Heritage Station

8/8/2016


9,097,224



9,340,483



9/1/2026


3.45

%


Fixed rate


N/A

Oak Park Village

8/8/2016


9,387,561



9,638,584



9/1/2026


3.45

%


Fixed rate


N/A

Shoppes of Parkland

8/8/2016


16,241,281



16,492,503



9/1/2023


4.67

%


Fixed rate


N/A

Champions Village

10/18/2016


27,400,000



27,400,000



11/1/2021


4.37

%


300

(10)

11/1/2021

Castleberry-Southard

4/21/2017


11,382,642





5/1/2027


3.99

%


Fixed rate


N/A

Rockbridge Village

6/6/2017


14,141,635





7/5/2027


3.73

%


Fixed rate


N/A

Irmo Station

7/26/2017


10,566,008





8/1/2030


3.94

%


Fixed rate


N/A

Maynard Crossing

8/25/2017


18,387,585





9/1/2032


3.74

%


Fixed rate


N/A

Woodmont Village

9/8/2017


8,741,420





10/1/2027


4.125

%


Fixed rate


N/A

West Town Market

9/22/2017


8,963,126





10/1/2025


3.65

%


Fixed rate


N/A

Crossroads Market

12/5/2017


19,000,000





1/1/2030


3.95

%


Fixed rate


N/A















Total grocery-anchored shopping centers



410,280,795



325,597,403
























Student housing properties:

North by Northwest

6/1/2016


32,766,863



33,499,754



9/1/2022


4.02

%


Fixed rate


N/A

SoL

2/28/2017


37,485,000





3/1/2022


3.57

%


220


2/28/2022

Stadium Village

10/27/2017


46,929,833





11/1/2024


3.80

%


Fixed rate


N/A

Ursa

12/18/2017


28,260,000





1/5/2020


3.61

%


205


1/5/2020

Ursa secondary financing

12/18/2017


3,140,000





1/5/2020


13.11

%


1155


1/5/2020















Total student housing properties



148,581,696



33,499,754
























Office buildings:

Brookwood Center

8/29/2016


32,219,375



32,400,000



9/10/2031


3.52

%


Fixed rate


10/9/2017

Galleria 75

11/4/2016


5,715,804



5,900,265



7/1/2022


4.25

%


Fixed rate


N/A

Three Ravinia

12/30/2016


115,500,000



115,500,000



1/1/2042


4.46

%


Fixed rate


1/31/2022

Westridge at La Cantera

11/13/2017


54,440,000





12/10/2028


4.10

%


Fixed rate


N/A















Total office buildings



207,875,179



153,800,265










Grand total



1,812,048,774



1,327,878,112










Less: deferred loan costs



(30,248,587)



(22,007,641)










    Less: below market debt adjustment



(5,148,016)












Mortgage notes, net



$

1,776,652,171



$

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 in conjunction with the sale of 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 in conjunction with the sale of 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 in conjunction with the sale of 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%, resulting in a cap on the combined rate of 6.6%.

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

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

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

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

 

Multifamily Communities

As of December 31, 2017, our multifamily community portfolio consisted of the following properties:









Three months ended
December 31, 2017


Property


Location


Number of
units


Average unit

size (sq. ft.)


Average
physical
occupancy


Average
rent per
unit














Established Communities:












Stone Rise


Philadelphia, PA


216


1,078


96.9

%


$

1,463



Lake Cameron


Raleigh, NC


328


940


94.1

%


$

978



McNeil Ranch


Austin, TX


192


1,071


93.4

%


$

1,254



Avenues at Cypress


Houston, TX


240


1,170


97.5

%


$

1,418



Avenues at Northpointe


Houston, TX


280


1,167


97.3

%


$

1,349



Stoneridge Farms at the Hunt Club


Nashville, TN


364


1,153


93.4

%


$

1,100



Vineyards


Houston, TX


369


1,122


98.1

%


$

1,141



Aster at Lely Resort


Naples, FL


308


1,071


94.3

%


$

1,439



Venue at Lakewood Ranch


Sarasota, FL


237


1,001


98.2

%


$

1,543



Citi Lakes


Orlando, FL


346


984


94.8

%


$

1,384



Lenox Portfolio


Nashville, TN


474


861


96.7

%


$

1,206















Total/Average Established Communities




3,354




95.9

%
















Summit Crossing


Atlanta, GA


485


1,053


92.9

%


$

1,199



CityPark View


Charlotte, NC


284


948




$

1,089



Avenues at Creekside


San Antonio, TX


395


974




$

1,148



Stone Creek


Houston, TX


246


852




$

1,010



525 Avalon Park


Orlando, FL


487


1,394




$

1,400



Sorrel


Jacksonville, FL


290


1,048


92.1

%


$

1,265



Retreat at Greystone


Birmingham, AL


312


1,100


96.7

%


$

1,219



Broadstone at Citrus Village


Tampa, FL


296


980


97.0

%


$

1,252



Founders Village


Williamsburg, VA


247


1,070


93.4

%


$

1,366



Crosstown Walk


Tampa, FL


342


981


94.9

%


$

1,268



Overton Rise


Atlanta, GA


294


1,018


94.0

%


$

1,479



Claiborne Crossing


Louisville, KY


242


1,204




$

1,330



Luxe at Lakewood Ranch


Sarasota, FL


280


1,105




$

1,521



Adara Overland Park


Kansas City, KS


260


1,116


94.6

%


$

1,308



Aldridge at Town Village


Atlanta, GA


300


969




$

1,298



The Reserve at Summit Crossing


Atlanta, GA


172


1,002




$

1,336



Overlook at Crosstown Walk


Tampa, FL


180


986




n/a


Colony at Centerpointe


Richmond, VA


255


1,149




n/a














Value-add project:












Village at Baldwin Park


Orlando, FL


528


1,069




$

1,547



















5,895








Joint venture:












City Vista


Pittsburgh, PA


272


1,023




$

1,352















Total PAC Non-Established Communities




6,167








Average stabilized physical occupancy








95.3

%

(1)



Student housing communities:(2)










Average

rent per bed


North by Northwest


Tallahassee, FL


219

(2)


1,250


98.4

%


$

725



SoL


Tempe, AZ


224

(2)


1,296


90.0

%


$

715



Stadium Village(3)


Atlanta, GA


198

(2)


1,466


99.4

%


670



Ursa(3)


Waco, TX


250

(2)


1,634




n/a














Total All PAC units




10,412




















(1) Excludes average occupancy for student housing communities.


(2) North by Northwest has 679 beds, SoL has 639 beds, Stadium Village has 792 beds and Ursa has 840 beds.


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


 

For the three-month period ended December 31, 2017, our average established multifamily communities' physical occupancy was 95.9%. We calculate average stabilized physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date and that have been owned for at least 15 full months as of the end of the first quarter of each year. We exclude the operating results of properties for which construction of adjacent phases has commenced, properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. For the three-month period ended December 31, 2017, our average stabilized physical occupancy was 95.3%. We calculate average stabilized physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date. For the three-month period ended December 31, 2017, our average economic occupancy was 95.3%. 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 December 31, 2017.

Capital Expenditures

We regularly incur capital expenditures related to our owned multifamily communities and student housing properties. Capital expenditures may be nonrecurring and discretionary, as part of a strategic plan intended to increase a property's value and corresponding revenue-generating ability, or may be normally recurring and necessary to maintain the income streams and present value of a property. Certain capital expenditures may be budgeted and reserved for upon acquiring a property as initial expenditures necessary to bring a property up to our standards or to add features or amenities that we believe make the property a compelling value to prospective residents in its individual market. These budgeted nonrecurring capital expenditures in connection with an acquisition are funded from the capital source(s) for the acquisition and are not dependent upon subsequent property operating cash flows for funding. For the three-month period ended December 31, 2017, our capital expenditures for multifamily communities and student housing properties consisted of:




Capital Expenditures




Recurring


Non-recurring


Total




Amount


Per Unit


Amount


Per Unit


Amount


Per Unit

Appliances

$

107,009



$

15.74



$



$



$

107,009



$

15.74


Carpets



399,481



58.75







399,481



58.75


Wood / vinyl flooring

89,823



13.21







89,823



13.21


Fire safety






10,155



1.49



10,155



1.49


HVAC


52,318



7.69







52,318



7.69


Computers, equipment, misc.

12,944



1.90



88,639



13.04



101,583



14.94


Exterior painting






19,550



2.88



19,550



2.88


Leasing office and other common amenities

837



0.12



409,632



60.25



410,469



60.37


Major structural projects





2,012,090



295.92



2,012,090



295.92


Cabinets and counter top upgrades





483,151



71.06



483,151



71.06


Landscaping and fencing





191,055



28.10



191,055



28.10


Parking lot






63,843



9.39



63,843



9.39


Common area items





115,123



16.93



115,123



16.93


Totals



$

662,412



$

97.41



$

3,393,238



$

499.06



$

4,055,650



$

596.47


 

Grocery-Anchored Shopping Center Portfolio

As of December 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











Castleberry-Southard

 Atlanta, GA


2006


80,018



100.0

%


 Publix

Cherokee Plaza

 Atlanta, GA


1958


102,864



100.0

%


Kroger

Lakeland Plaza

 Atlanta, GA


1990


301,711



95.3

%


Sprouts

Powder Springs

 Atlanta, GA


1999


77,853



95.1

%


 Publix

Rockbridge Village

 Atlanta, GA


2005


102,432



95.5

%


 Kroger

Roswell Wieuca Shopping Center

 Atlanta, GA


2007


74,370



100.0

%


 The Fresh Market

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



82.7

%


 Publix

Thompson Bridge Commons

 Atlanta, GA


2001


92,587



96.1

%


Kroger

Wade Green Village

 Atlanta, GA


1993


74,978



93.2

%


 Publix

Woodmont Village

 Atlanta, GA


2002


85,639



98.4

%


Kroger

Woodstock Crossing

 Atlanta, GA


1994


66,122



92.6

%


 Kroger

East Gate Shopping Center

 Augusta, GA


1995


75,716



89.5

%


 Publix

Fury's Ferry

 Augusta, GA


1996


70,458



98.6

%


 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



100.0

%


 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



100.0

%


Publix

Crossroads Market

 Naples, FL


1993


126,895



98.1

%


Publix

Champions Village

 Houston, TX


1973


383,093



79.3

%


Randalls

Kingwood Glen

 Houston, TX


1998


103,397



100.0

%


 Kroger

Independence Square

 Dallas, TX


1977


140,218



83.0

%


 Tom Thumb

Oak Park Village

 San Antonio, TX


1970


64,855



100.0

%


H.E.B.

Sweetgrass Corner

 Charleston, SC


1999


89,124



100.0

%


 Bi-Lo

Irmo Station

 Columbia, SC


1980


99,384



92.3

%


Kroger

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

West Town Market

 Charlotte, NC


2004


67,883



100.0

%


Harris Teeter

Heritage Station

 Raleigh, NC


2004


72,946



100.0

%


Harris Teeter

Maynard Crossing

 Raleigh, NC


1996


122,781



96.3

%


Kroger

Southgate Village

 Birmingham, AL


1988


75,092



100.0

%


 Publix











Grand total/weighted average





4,055,461



94.5

%




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

As of December 31, 2017, our grocery-anchored shopping center portfolio was 94.5% 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 December 31, 2017 were:


Total grocery-anchored shopping center portfolio


Number of leases


Leased GLA


Percent of leased
GLA







Month to month

10



17,141



0.4

%

2018

94



377,237



9.9

%

2019

97



561,832



14.7

%

2020

107



467,902



12.2

%

2021

92



437,532



11.4

%

2022

90



313,629



8.2

%

2023

31



127,694



3.3

%

2024

18



551,844



14.4

%

2025

17



293,154



7.7

%

2026

9



127,071



3.3

%

2027

16



112,101



2.9

%

2028+

16



434,426



11.6

%







Total

597



3,821,563



100.0

%

The Company's Annual Report on Form 10-K for 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.

Second-generation capital expenditures within our grocery-anchored shopping center portfolio by property for the fourth quarter 2017 totaled $263,000. Second-generation capital expenditures exclude those expenditures made in our grocery-anchored shopping center portfolio (i) to lease space to "first generation" tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our ownership standards, and (iii) for property re-developments and repositioning.

Office Building Portfolio

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

Property Name


Location


GLA


Percent
leased

Three Ravinia


Atlanta, GA


814,000


97

%

Westridge at La Cantera


San Antonio, TX


258,000


100

%

Brookwood Center


Birmingham, AL


169,000


100

%

Galleria 75


Atlanta, GA


111,000


94

%












1,352,000


98

%

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




Square footage


Percentage of
total SF


Annual Base Rent

InterContinental Hotels Group

495,409



36.6

%


$

11,200,200


State Farm Mutual Automobile Insurance Company

183,168



13.5

%


3,232,086


Harland Clarke Corporation

129,016



9.5

%


2,742,125


United Services Automobile Association

129,015



9.5

%


2,967,345


Access Insurance Holdings, Inc.

77,518



5.7

%


1,042,629













1,014,126



74.8

%


$

21,184,385


The Company defines Annual Base Rent as the current annual base rent due under the respective leases, exclusive of expense reimbursement which may also be payable.

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

Office Building portfolio





Percent of

Year of lease
expiration


Rentable square


rented


feet


square feet

2018


6,270



0.5

%

2019


15,745



1.2

%

2020


95,656



7.3

%

2021


217,000



16.5

%

2022


13,891



1.1

%

2023


80,272



6.1

%

2024


19,147



1.5

%

2025


47,870



3.6

%

2026




%

2027


258,031



19.7

%

2028+


558,522



42.5

%






Total


1,312,404



100.0

%

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $101,000 during  the fourth quarter 2017. Second-generation capital expenditures exclude those expenditures made in our office building portfolio (i) to lease space to "first generation" tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our Class A ownership standards (and which amounts were underwritten into the total investment at the time of acquisition) and (iii) for property re-developments and repositionings.

Definitions of Non-GAAP Measures

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

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

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

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

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

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

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, subsequent refinancing of these assets, 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, weather-related property operating losses 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 may be useful in comparing our operating performance with other real estate companies that are not as involved in ongoing acquisition activities, though caution should be taken in comparing Core FFO results as other companies may calculate Core FFO differently. 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;
  • non-cash dividends on Series M Preferred Stock; and
  • amortization of lease inducements;

Less:

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

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

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

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

About Preferred Apartment Communities, Inc.         

Preferred Apartment Communities, Inc. (NYSE: APTS), or the Company, is a Maryland corporation formed primarily to acquire and operate multifamily properties in select targeted markets throughout the United States. As part of our business strategy, we may enter into forward purchase contracts or purchase options for to-be-built multifamily communities and we may make real estate related loans, provide deposit arrangements or provide performance assurances, as may be necessary or appropriate, in connection with the development of multifamily communities and other properties.  As a secondary strategy, we may acquire or originate senior mortgage loans, subordinate loans or real estate loans secured by interests in multifamily properties, membership or partnership interests in multifamily properties and other multifamily related assets and invest a lesser portion of our assets in other real estate related investments, including other income-producing property types, senior mortgage loans, subordinate loans or real estate loans secured by interests in other income-producing property types or membership or partnership interests in other income-producing property types as determined by Preferred Apartment Advisors, LLC, or our Manager, as appropriate for us. At December 31, 2017, the Company was the approximate 97.8% 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.

 

SOURCE Preferred Apartment Communities, Inc.

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