Preferred Apartment Communities

Investor

News Releases

Preferred Apartment Communities, Inc. Reports Results for Second Quarter Ended 2018

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

Preferred Apartment Communities

"We had another strong quarter across all of our business operations. At the beginning of the year, we increased our focus on results at the property level and our same store net operating income numbers reflect that effort," said Daniel M. DuPree, Preferred Apartment Communities' Chairman and Chief Executive Officer.

Financial Highlights

Our operating results are presented below:

















Three months ended June 30,




Six months ended June 30,






2018


2017


% change


2018


2017


% change

















Revenues (in thousands)

$

96,389



$

70,890



36.0

%


$

186,759



$

137,452



35.9

%

















Per share data:














Net income (loss) (1)

$

(0.66)



$

(0.40)





$

(0.81)



$

0.09




















FFO (2)

$

0.38



$

0.31



22.6

%


$

0.75



$

0.65



15.4

%

















AFFO (2)

$

0.37



$

0.31



19.4

%


$

0.63



$

0.58



8.6

%

















Dividends (3)

$

0.255



$

0.235



8.5

%


$

0.505



$

0.455



11.0

%
















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

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

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

  • For the second quarter 2018, our FFO payout ratio to Common Stockholders and Unitholders was approximately 66.8% and our FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 57.4%.
  • For the second quarter 2018, our AFFO payout ratio to Common Stockholders and Unitholders was approximately 68.6% and our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 58.0%.(A)
  • For the second quarter 2018, our same store net operating income for our established multifamily communities increased approximately 5% as compared to the second quarter 2017. (B) For the quarter ended June 30, 2018, our average established multifamily communities' physical occupancy was 95.2% and our same-store rental revenue grew 3.4% from the second quarter 2017. For the six-month period ended June 30, 2018, our same store net operating income for our established multifamily communities increased approximately 8% as compared to the six-month period ended June 30, 2017.
  • At June 30, 2018, the market value of our common stock was $16.99 per share. A hypothetical investment in our Common Stock in our initial public offering on April 5, 2011, assuming the reinvestment of all dividends and no transaction costs, would have resulted in an average annual return of approximately 23.4% through June 30, 2018.
  • As of June 30, 2018, the average age of our multifamily communities was approximately 5.6 years, which is the youngest in the public multifamily REIT industry.
  • Approximately 89.8% of our permanent property-level mortgage debt has fixed interest rates or has variable interest rates which are capped. We believe we are well protected against potential increases in market interest rates.
  • In the second quarter, PAC closed on its first "B" piece investment in the Freddie Mac K program. This investment was approximately $4.6 million and used to purchase a zero coupon security in the ML-04 pool of multifamily mortgages securitized by Freddie Mac. Due to accounting rules, we were required to include the assets, liabilities and cash flows of the entire ML-04 pool on our consolidated balance sheets and consolidated statements of cash flows. Our maximum amount at risk is $4.6 million, the amount of our investment. 
  • At June 30, 2018, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 53.9%. Our leverage calculation excludes the gross assets of approximately $266.7 million and liabilities of approximately $261.9 million that we consolidated as a result of our investment in the Freddie Mac K program.
  • As of June 30, 2018, our total assets were approximately $3.9 billion compared to approximately $2.6 billion as of June 30, 2017, an increase of approximately $1.3 billion, or approximately 48.5%. This growth was driven primarily by the acquisition of 23 real estate properties (net of the sale of one property). In addition, our assets increased due to the consolidation of the ML-04 pool.
  • Cash flow from operations for the quarter ended June 30, 2018 was approximately $41.7 million, an increase of approximately $17.7 million, or 73.4%, compared to approximately $24.1 million for the quarter ended June 30, 2017. Cash flow from operations for the second quarter 2018 was more than sufficient to fund our aggregate dividends and distributions for the period, which totaled approximately $31.3 million.
  • On April 11, 2018, we closed on two real estate loan investments aggregating up to approximately $30.2 million in support of a multifamily community project in Alexandria, Virginia. On May 24, 2018, we closed on two real estate loan investments aggregating up to approximately $11.9 million in support of a multifamily community project in Nashville, Tennessee.
  • On May 7, 2018, we terminated our existing purchase options on the Encore, Bishop Street and Hidden River multifamily communities and the Haven 46 and Haven Charlotte student housing properties, all of which are partially supported by real estate loan investments held by us. In exchange, we received termination fees aggregating approximately $12.5 million from the developers. These fees are treated as additional interest revenue and are amortized over the period ending with the earlier of the sale of the underlying property or the maturity of the associated real estate loan. For the second quarter 2018, we recorded approximately $2.2 million of interest revenue related to these transactions.

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

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

Acquisitions of Properties

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













Property


Location (MSA)


Units


Beds


Leasable
square feet














Student housing properties:











The Tradition


College Station, TX


427


808


n/a



The Retreat at Orlando


Orlando, FL


221


894


n/a



The Bloc


Lubbock, TX


140


556


n/a


















788


2,258





Grocery-anchored shopping centers:











Greensboro Village


Nashville, TN


n/a




70,203



Governors Towne Square


Atlanta, GA


n/a




68,658



Neapolitan Way


Naples, FL


n/a




137,580



Conway Plaza


Orlando, FL


n/a




117,705






















394,146
























Real Estate Assets











Owned as of
June 30, 2018


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


Potential total



Multifamily communities:








Properties

31


11


42



Units

9,768


3,226


12,994



Grocery-anchored shopping centers:








Properties

43



43



Gross leasable area (square feet)

4,449,860



4,449,860



Student housing properties:








Properties

7


1


8



Units

1,679


248


1,927



Beds

5,208


816


6,024



Office buildings:








Properties

5



5



Rentable square feet

1,539,000



1,539,000











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


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

Subsequent to Quarter End

  • On July 6, 2018, we acquired a grocery-anchored shopping center located in the Charlotte, North Carolina MSA comprising 122,028 square feet of gross leasable area.

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:

Aster at Lely Resort


Avenues at Cypress


Avenues at Northpointe

Citi Lakes


Lenox Portfolio


McNeil Ranch

Overton Rise


Sorrel


Venue at Lakewood Ranch



Vineyards



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

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

Multifamily Established Communities' Same Store Net Operating Income












Three months ended:





(in thousands)


6/30/2018


6/30/2017


$ change


% change

Revenues:









Rental revenues


$

11,491



$

11,110



$

381



3.4

%

Other property revenues


1,209



1,081



128



11.8

%

Total revenues


12,700



12,191



509



4.2

%










Operating expenses:









Property operating and maintenance


1,675



1,571



104



6.6

%

Payroll


1,054



1,025



29



2.8

%

Property management fees


509



495



14



2.8

%

Real estate taxes


1,904



1,912



(8)



(0.4)

%

Other


561



523



38



7.3

%

Total operating expenses


5,703



5,526



177



3.2

%










Same store net operating income


$

6,997



$

6,665



$

332



5.0

%

 

 

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








Three months ended:

(in thousands)


6/30/2018


6/30/2017






Same store net operating income


$

6,997



$

6,665


Add:





Non-same-store property revenues


65,656



44,872


Less:





Non-same-store property operating expenses

24,367



16,788







Property net operating income


48,286



34,749


Add:





Interest revenue on notes receivable


13,658



8,490


Interest revenue on related party notes receivable


4,374



5,338


Less:





Equity stock compensation


950



871


Depreciation and amortization


42,095



28,457


Interest expense


22,347



16,398


Acquisition costs




5


Management fees


6,621



4,864


Insurance, professional fees and other

1,068



876


Gain on sale of real estate


2



6,915


Loss on extinguishment of debt




888


Income from consolidated VIEs


54




Waived asset management and general and administrative expense fees


(1,429)



(171)







Net (loss) income


$

(5,278)



$

3,304


 

 

Multifamily Established Communities' Same Store Net Operating Income












Six months ended:





(in thousands)


6/30/2018


6/30/2017


$ change


% change

Revenues:









Rental revenues


$

22,916



$

22,166



$

750



3.4

%

Other property revenues


2,351



2,164



187



8.6

%

Total revenues


25,267



24,330



937



3.9

%










Operating expenses:









Property operating and maintenance


3,121



3,026



95



3.1

%

Payroll


2,013



2,064



(51)



(2.5)

%

Property management fees


1,013



982



31



3.2

%

Real estate taxes


3,840



4,054



(214)



(5.3)

%

Other


1,086



1,060



26



2.5

%

Total operating expenses


11,073



11,186



(113)



(1.0)

%










Same store net operating income


$

14,194



$

13,144



$

1,050



8.0

%

 

 

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








Six months ended:

(in thousands)


6/30/2018


6/30/2017






Same store net operating income


$

14,194



$

13,144


Add:





Non-same-store property revenues


128,895



86,531


Less:





Non-same-store property operating expenses

47,016



32,391







Property net operating income


96,073



67,284


Add:





Interest revenue on notes receivable


23,958



16,438


Interest revenue on related party notes receivable


8,639



10,152


Less:





Equity stock compensation


2,085



1,744


Depreciation and amortization


82,711



53,283


Interest expense


43,315



31,407


Acquisition costs




14


Management fees


12,862



9,377


Insurance, professional fees and other

1,771



1,780


Gain on sale of real estate


20,356



37,639


Loss on extinguishment of debt




888


Income from consolidated VIEs


54




Waived asset management and general and administrative expense fees


(2,649)



(346)







Net income


$

8,985



$

33,366


Capital Markets Activities

During the second quarter 2018, we issued and sold an aggregate of 114,524 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 $103.1 million after commissions and other fees. In addition, during the second quarter 2018, we issued 101,760 shares of Common Stock pursuant to the exercise of warrants issued under our Series A Preferred Stock offering, resulting in aggregate gross proceeds of approximately $1.2 million.

During the second quarter 2018, we issued and sold an aggregate of 8,360 shares of Series M Redeemable Preferred Stock ("mShares"), resulting in net proceeds of approximately $8.1 million after dealer manager fees.

Our outstanding shares of Common Stock totaled approximately 39.7 million shares at June 30, 2018. The market value  of our Common Stock was $16.99 per share on June 30, 2018 versus $15.75 on June 30, 2017. Our total equity book value increased 33.0% to approximately $1.4 billion at June 30, 2018 from $1.1 billion at June 30, 2017.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On April 30, 2018, we declared a quarterly dividend on our Common Stock of $0.255 per share for the second quarter 2018. This represents a 8.5% increase in our common stock dividend from our second quarter 2017 common stock dividend of $0.235 per share, and an annualized dividend growth rate of 14.9% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The second quarter dividend was paid on July 16, 2018 to all stockholders of record on June 15, 2018. In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.255 per unit for the second quarter 2018, which was paid on July 16, 2018 to all Class A Unit holders of record as of June 15, 2018.

Monthly Dividends on Preferred Stock

We declared and paid monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $20.5 million for the quarter ended June 30, 2018 and represent a 6% annual yield. We declared and paid dividends totaling approximately $342,000 on our Series M Redeemable Preferred Stock, or mShares, for the quarter ended June 30, 2018. The mShares have an escalating dividend rate from 5.75% in year one of issuance to 7.50% in year eight and thereafter.

Conference Call and Supplemental Data

We will hold our quarterly conference call on Tuesday, July 31, 2018 at 11:00 a.m. Eastern Time to discuss our second quarter 2018 results. To participate in the conference call, please dial in to the following:

Live Conference Call Details
Domestic Dial-in Number: 1-844-890-1791
International Dial-in Number: 1-412-380-7408
Company: Preferred Apartment Communities, Inc.
Date: Tuesday, July 31, 2018
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

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

2018 Guidance:

Net income (loss) per 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.

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

http://investors.pacapts.com/download/2Q18_Earnings_and_Supplemental_Data.pdf

Forward-Looking Statements

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

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

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

Additional Information

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

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

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

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

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

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

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

             

Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)






Three months ended June 30,

(In thousands, except per-share figures)


2018


2017

Revenues:





Rental revenues


$

66,199



$

48,241


Other property revenues


12,158



8,821


Interest income on loans and notes receivable


13,658



8,490


Interest income from related parties


4,374



5,338


Total revenues


96,389



70,890







Operating expenses:





Property operating and maintenance


10,107



7,198


Property salary and benefits

4,228



3,219


Property management fees

2,776



2,061


Real estate taxes


10,063



7,680


General and administrative


1,957



1,654


Equity compensation to directors and executives

950



871


Depreciation and amortization


42,095



28,457


Acquisition and pursuit costs



5


Asset management and general and administrative expense





fees to related party


6,621



4,864


Insurance, professional fees, and other expenses


2,008



1,377







Total operating expenses


80,805



57,386


Waived asset management and general and administrative




expense fees

(1,429)



(171)







Net operating expenses


79,376



57,215


Operating income


17,013



13,675


Interest expense


22,347



16,398


Change in fair value of net assets of consolidated VIE


54




Loss on debt extinguishment




888


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


(5,280)



(3,611)


Gain on sale of real estate


2



6,915







Net income (loss)


(5,278)



3,304


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

140



(97)







Net income (loss) attributable to the Company


(5,138)



3,207







Dividends declared to preferred stockholders


(20,924)



(15,235)


Earnings attributable to unvested restricted stock


(6)



(6)







Net loss attributable to common stockholders


$

(26,068)



$

(12,034)


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




basic and diluted


$

(0.66)



$

(0.40)







Dividends per share declared on Common Stock


$

0.255



$

0.235







Weighted average number of shares of Common Stock outstanding,




basic and diluted


39,383



29,894


 

 

Reconciliation of FFO and AFFO

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



Three months ended June 30,

(In thousands, except per-share figures)

2018


2017






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

$

(26,068)



$

(12,034)







Add:

Depreciation of real estate assets

29,441



20,616



Amortization of acquired real estate intangible assets and deferred leasing costs

12,314



7,670



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

(140)



97


Less:

Gain on sale of real estate

(2)



(6,915)


FFO

15,545



9,434







Add:

Acquisition and pursuit costs



5



Loan cost amortization on acquisition term note

19



43



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

631



416



Mortgage loan refinancing and extinguishment costs

20



1,058



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

66





Contingent management fees recognized



387



Non-cash equity compensation to directors and executives

950



871



Amortization of loan closing costs (See note 5)

1,213



1,053



Depreciation/amortization of non-real estate assets

340



171



Net loan fees received (See note 6)

411



417



Accrued interest income received (See note 7)

2,769



2,795



Cash received for termination of purchase options (See note 8)

2,514





Deemed dividends from cash redemptions of preferred stock

201





Non-cash dividends on Series M Preferred Stock

47





Amortization of lease inducements (See note 9)

311



93


Less:

Non-cash loan interest income (See note 7)

(5,690)



(4,349)



Amortization of acquired above and below market lease intangibles





and straight-line rental revenues (See note 10)

(2,505)



(1,740)



Amortization of deferred revenues (See note 11)

(642)



(170)



Normally recurring capital expenditures and leasing costs (See note 12)

(1,080)



(972)







AFFO

$

15,120



$

9,512







Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends

$

10,104



$

7,539



Distributions to Unitholders (See note 2)

273



212



Total

$

10,377



$

7,751







Common Stock dividends and Unitholder distributions per share

$

0.255



$

0.235







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

$

0.38



$

0.31


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

$

0.37



$

0.31






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





Basic:

39,383



29,894



Common Stock

1,070



902



Class A Units

40,453



30,796



Common Stock and Class A Units










Diluted Common Stock and Class A Units (B)

41,009



32,627







Actual shares of Common Stock outstanding, including 25 and 24 unvested shares




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

39,750



32,445


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

1,070



901



Total

40,820



33,346







(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 2.64% weighted average non-controlling
interest in the Operating Partnership for the three-month period ended June 30, 2018.

(B) Since our FFO and AFFO results are positive for the periods reflected above, we are presenting recalculated diluted weighted average
shares of Common Stock and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common

stock equivalents from grants of the Class B Units, warrants included in units of Series A Preferred Stock issued, as well as annual grants

of restricted Common Stock. The weighted average shares of Common Stock outstanding presented on the Consolidated Statements of

Operations are the same for basic and diluted for any period for which we recorded a net loss available to common stockholders, excluding
any gains from sales of real estate assets.

See Notes to Reconciliation of FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders.

 

Reconciliation of FFO and AFFO

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



Six months ended June 30,

(In thousands, except per-share figures)

2018


2017









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

$

(31,704)



$

2,641











Add:

Depreciation of real estate assets


57,153



38,748



Amortization of acquired real estate intangible assets and deferred leasing costs

24,905



14,202



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

240



1,096


Less:

Gain on sale of real estate

(20,356)



(37,639)


FFO

30,238



19,048









Add:

Acquisition and pursuit costs



14



Loan cost amortization on acquisition term note

44



70



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

1,107



771



Mortgage loan refinancing and extinguishment costs

61



1,058



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

(194)





Contingent management fees recognized



387



Non-cash equity compensation to directors and executives

2,085



1,744



Amortization of loan closing costs (See note 5)

2,258



1,851



Depreciation/amortization of non-real estate assets

653



333



Net loan fees received (See note 6)

1,211



417



Accrued interest income received (See note 7)

4,112



5,319



Cash received for termination of purchase options (See note 8)

2,514





Deemed dividends from cash redemptions of preferred stock

519





Non-cash dividends on Series M Preferred Stock

153





Amortization of lease inducements (See note 9)

568



93


Less:

Non-cash loan interest income (See note 7)

(10,622)



(8,648)



Cash paid for loan closing costs

(391)





Amortization of acquired above and below market lease intangibles

(5,694)



(3,556)



and straight-line rental revenues (See note 10)





Amortization of deferred revenues (See note 11)

(1,139)



(170)



Normally recurring capital expenditures and leasing costs (See note 12)

(1,954)



(1,817)







AFFO

$

25,529



$

16,914







Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends

$

19,906



$

13,510



Distributions to Unitholders (See note 2)

540



411



Total

$

20,446



$

13,921







Common Stock dividends and Unitholder distributions per share

$

0.505



$

0.455







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

$

0.75



$

0.65


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

$

0.63



$

0.58






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





Basic:

39,241



28,423



Common Stock

1,070



914



Class A Units

40,311



29,337



Common Stock and Class A Units










Diluted Common Stock and Class A Units (B)

41,273



30,855







Actual shares of Common Stock outstanding, including 25 and 24 unvested shares




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

39,750



32,445


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

1,070



901



Total

40,820



33,346







(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 2.65% weighted average non-controlling
interest in the Operating Partnership for the six-month period ended June 30, 2018.

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

any gains from sales of real estate assets.

See Notes to Reconciliation of FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders.

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

1)

Rental and other property revenues and property operating expenses for the quarter ended June 30, 2018 include activity for the four grocery-anchored shopping centers and three student housing properties acquired during the quarter only from their respective dates of acquisition. In addition, the second quarter 2018 period includes a full quarter of activity for the seven multifamily communities, six grocery-anchored shopping centers, two student housing properties and two office buildings acquired during the third and fourth quarters 2017 and first quarter 2018. Rental and other property revenues and expenses for the second quarter 2017 include activity for the acquisitions made during that period only from their respective dates of acquisition.

2)

Non-controlling interests in our Operating Partnership consisted of a total of 1,070,103 Class A Units as of June 30, 2018. Included in this total are 419,228 Class A Units which were granted as partial consideration to the seller in conjunction with the seller's contribution to us on February 29, 2016 of the Wade Green grocery-anchored shopping center. The remaining Class A units were awarded primarily to our key executive officers. The Class A Units are apportioned a percentage of our financial results as non-controlling interests. The weighted average ownership percentage of these holders of Class A Units was calculated to be 2.64% and 2.93% for the three-month periods ended June 30, 2018 and 2017, respectively.

3)

As of January 1, 2016, we pay loan coordination fees to Preferred Apartment Advisors, LLC, our Manager, related to obtaining mortgage financing for acquired properties. Loan coordination fees were introduced to reflect the administrative effort involved in arranging debt financing for acquired properties. The portion of the loan coordination fees paid up until July 1, 2017 attributable to the financing were amortized over the lives of the respective mortgage loans, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Beginning effective July 1, 2017, the loan coordination fee was lowered from 1.6%  to 0.6% of the amount of any mortgage indebtedness on newly-acquired properties or refinancing. All of the loan coordination fees paid to our Manager subsequent to July 1, 2017 are amortized over the life of the debt. At June 30, 2018, aggregate unamortized loan coordination fees were approximately $12.6 million, which will be amortized over a weighted average remaining loan life of approximately 10.2 years.

4)

We sustained weather-related operating losses due to Hurricane Harvey at our Stone Creek multifamily community during the first and second quarters 2018; these costs are added back to FFO in our calculation of AFFO. Included in these adjustments are the receipt from our insurance carrier of approximately $588,000 for recoveries of lost rent, which was recognized in our statements of operations for the six months ended June 30, 2018. Lost rent and other operating costs incurred during the three-month period ended June 30, 2018 totaled approximately $66,000.

5)

We incur loan closing costs on our existing mortgage loans, which are secured on a property-by-property basis by each of our acquired real estate assets, and also for occasional amendments to our syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. On March 23, 2018, but effective April 13, 2018, the maximum borrowing capacity on the Revolving Line of Credit was increased from $150 million to $200 million. These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability. At June 30, 2018, aggregate unamortized loan costs were approximately $20.8 million, which will be amortized over a weighted average remaining loan life of approximately 7.7 years.

6)

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

7)

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

8)

On May 7, 2018, we terminated our existing purchase options on the Encore, Bishop Street and Hidden River multifamily communities and the Haven 46 and Haven Charlotte student housing properties, all of which are partially supported by real estate loan investments held by us. In exchange, we are to receive termination fees aggregating approximately $12.5 million from the developers. During the second quarter, we received approximately $2.5 million in cash in excess of the recognized termination fees, which are added to FFO in our calculation of AFFO.

9)

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

10)

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 June 30, 2018, the balance of unamortized below-market lease intangibles was approximately $40.3 million, which will be recognized over a weighted average remaining lease period of approximately 9.2 years.

11)

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

12)

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

See Definitions of Non-GAAP Measures beginning.

 

Preferred Apartment Communities, Inc.


Consolidated Balance Sheets


(Unaudited)


(In thousands, except per-share par values)


June 30, 2018


December 31, 2017


Assets






Real estate





Land


$

470,014



$

406,794



Building and improvements

2,345,033



2,043,853



Tenant improvements

84,988



63,425



Furniture, fixtures, and equipment

255,096



210,779



Construction in progress

18,546



10,491



Gross real estate

3,173,677



2,735,342



Less: accumulated depreciation

(222,785)



(172,756)



Net real estate

2,950,892



2,562,586



Real estate loan investments, net of deferred fee income

314,440



255,345



Real estate loan investments to related parties, net

59,768



131,451



Total real estate and real estate loan investments, net

3,325,100



2,949,382









Cash and cash equivalents

21,303



21,043



Restricted cash

53,982



51,969



Notes receivable

9,400



17,318



Note receivable and revolving lines of credit due from related parties

27,956



22,739



Accrued interest receivable on real estate loans

32,126



26,865



Acquired intangible assets, net of amortization

99,878



102,743



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

1,353



1,385



Deferred offering costs

7,876



6,544



Tenant lease inducements, net

18,827



14,425



Tenant receivables and other assets

43,752



37,957



Variable Interest Entity ("VIE") assets, at fair value

266,673





Total assets

$

3,908,226



$

3,252,370









Liabilities and equity





Liabilities





Mortgage notes payable, net of deferred loan costs

$

1,998,514



$

1,776,652



Revolving line of credit

38,500



41,800



Term note payable, net of deferred loan costs



10,994



Real estate loan investment participation obligation

10,920



13,986



Unearned purchase option termination fees

10,234





Deferred revenue

34,352



27,947



Accounts payable and accrued expenses

43,573



31,253



Accrued interest payable

5,998



5,028



Dividends and partnership distributions payable

17,338



15,680



Acquired below market lease intangibles, net of amortization

40,350



38,857



Security deposits and other liabilities

13,091



9,407



VIE liabilities, at fair value

261,879





Total liabilities

2,474,749



1,971,604









Commitments and contingencies





Equity






Stockholders' equity






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





   shares authorized; 1,443 and 1,250 shares issued; 1,418 and 1,222





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

14



12



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





   shares authorized; 29 and 15 shares issued and outstanding





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





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





39,726 and 38,565 shares issued and outstanding at





June 30, 2018 and December 31, 2017, respectively

397



386



Additional paid-in capital

1,430,713



1,271,040



Accumulated earnings



4,449



      Total stockholders' equity

1,431,124



1,275,887



Non-controlling interest

2,353



4,879



Total equity

1,433,477



1,280,766









Total liabilities and equity

$

3,908,226



$

3,252,370



 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)




Six months ended June 30,

(In thousands)


2018


2017

Operating activities:





Net income


$

8,985



$

33,366


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




Depreciation and amortization expense


82,711



53,283


Amortization of above and below market leases

(2,387)



(1,562)


Deferred revenues and fee income amortization

(2,154)



(804)


Purchase option termination fee amortization

(2,236)




Amortization of market discount on assumed debt and lease incentives

699



92


Deferred loan cost amortization

3,279



2,650


(Increase) in accrued interest income on real estate loans

(5,261)



(2,976)


Change in fair value of net assets of consolidated VIE

(54)




Equity compensation to executives and directors

2,085



1,744


Gain on sale of real estate


(20,356)



(37,639)


Cash received for purchase option terminations


5,100




Loss on extinguishment of debt




888


Mortgage interest received from consolidated VIE


861




Mortgage interest paid to other participants of consolidated VIE


(861)




Other




189


Changes in operating assets and liabilities:




(Increase) in tenant receivables and other assets

(1,718)



(3,619)


(Increase) in tenant lease incentives

(4,972)



(7,239)


Increase in accounts payable and accrued expenses

7,474



4,137


Increase (decrease) in accrued interest, prepaid rents and other liabilities

1,968



(160)


Net cash provided by operating activities

73,163



42,350







Investing activities:





Investment in real estate loans


(117,771)



(70,320)


Repayments of real estate loans


130,185



9,866


Notes receivable issued


(716)



(3,729)


Notes receivable repaid


8,640



1,967


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

(24,093)



(14,979)


Repayments of line of credit by related parties

18,652



14,254


Loan origination fees received

2,422



835


Loan origination fees paid to Manager

(1,211)



(417)


Investment in mortgage-backed securities

(4,739)




Mortgage principal received from consolidated VIE


171




Mortgage principal paid to other participants of consolidated VIE


(171)




Acquisition of properties


(405,870)



(222,435)


Disposition of properties, net


42,269



148,105


Receipt  insurance proceeds for capital improvements

412




Additions to real estate assets - improvements

(18,268)



(7,563)


(Deposits) on acquisitions


(1,538)



(920)


Net cash used in investing activities

(371,626)



(145,336)







Financing activities:





Proceeds from mortgage notes payable

211,949



156,280


Payments for mortgage notes payable

(35,231)



(116,053)


Payments for mortgage prepayment costs

(4,359)



(6,039)


Payments for deposits and other mortgage loan costs



(817)


Proceeds from real estate loan participants

5



166


Payments to real estate loan participants

(3,664)



(2,467)


Proceeds from lines of credit


237,100



97,000


Payments on lines of credit


(240,400)



(186,000)


Repayment of the Term Loan

(11,000)




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

204,201



132,620


Proceeds from sales of Common Stock



56,116


Proceeds from exercises of warrants

(12,374)



14,901


Payments for redemptions of preferred stock


(8,994)



(3,921)


Common Stock dividends paid


(19,378)



(11,711)


Preferred stock dividends paid


(39,310)



(28,990)


Distributions to non-controlling interests

(489)



(394)


Payments for deferred offering costs

(2,068)



(4,459)


Net cash provided by financing activities

300,736



96,232






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

2,273



(6,754)


Cash, cash equivalents and restricted cash, beginning of period

73,012



67,715


Cash, cash equivalents and restricted cash, end of period

$

75,285



$

60,961


 

Real Estate Loan Investments

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

Project/Property


Location


Maturity
date


Optional
extension
date


Total loan
commitments


Carrying amount (1) as of


Current /
deferred
interest %
per annum






June 30, 2018


December 31,
2017

















Multifamily communities:






(in thousands)



Encore


Atlanta, GA


4/8/2019


10/8/2020


$

10,958



$

10,958



$

10,958



8.5 / 5

Encore Capital


Atlanta, GA


4/8/2019


10/8/2020


9,758



7,931



7,521



8.5 / 5

Palisades


Northern VA


5/17/2019


N/A


17,270



17,132



17,111



8 / 5

Fusion


Irvine, CA


12/1/2018


5/31/2020


70,835



67,412



58,447



8.5 / 7.5

Green Park


Atlanta, GA


2/28/2018


N/A






11,464



8.5 / 5.83

Bishop Street


Atlanta, GA


2/18/2020


N/A


12,693



12,673



12,145



8.5 / 6.5

Hidden River


Tampa, FL


12/3/2018


12/3/2020


4,735



4,735



4,735



8.5 / 6.5

Hidden River Capital


Tampa, FL


12/4/2018


12/4/2020


5,380



5,261



5,041



8.5 / 6.5

CityPark II


Charlotte, NC


1/7/2019


1/7/2021


3,365



3,365



3,365



8.5 / 6.5

CityPark II Capital


Charlotte, NC


1/8/2019


1/31/2021


3,916



3,782



3,624



8.5 / 6.5

Park 35 on Clairmont


Birmingham, AL


6/26/2019


6/26/2020


21,060



21,060



21,060



8.5 / 2

Wiregrass


Tampa, FL


5/15/2020


5/15/2023


14,976



13,537



12,972



8.5 / 6.5

Wiregrass Capital


Tampa, FL


5/15/2020


5/15/2023


3,744



3,716



3,561



8.5 / 6.5

Berryessa


San Jose, CA


4/19/2018


N/A






30,571



10.5 / 0

Berryessa


San Jose, CA


2/13/2021


2/13/2023


137,616



54,603





8.5 / 6.0

The Anson (2)


Nashville, TN


6/1/2018


N/A






2,261



12 / 0

The Anson


Nashville, TN


11/24/2021


11/24/2023


6,240







8.5 / 4.5

The Anson


Nashville, TN


11/24/2021


11/24/2023


5,659



68





8.5 / 4.5

Fort Myers


Fort Myers, FL


2/3/2021


2/3/2022


9,416



7,774



3,521



8.5 / 5.5

Fort Myers Capital


Fort Myers, FL


2/3/2021


2/3/2022


6,193



5,211



4,994



8.5 / 5.5

360 Forsyth


Atlanta, GA


7/11/2020


7/11/2022


22,412



18,906



13,400



8.5 / 5.5

Morosgo


Atlanta, GA


1/31/2021


1/31/2022


11,749



10,281



4,951



8.5 / 5.5

Morosgo Capital


Atlanta, GA


1/31/2021


1/31/2022


6,176



4,968



4,761



8.5 / 5.5

University City Gateway


Charlotte, NC


8/15/2021


8/15/2022


10,336



6,526



850



8.5 / 5

University City Gateway















Capital


Charlotte, NC


8/18/2021


8/18/2022


7,338



5,775



5,530



8.5 / 5

Cameron Park


Alexandria, VA


10/11/2021


10/11/2023


21,340



6,126





8.5 / 3

Cameron Park Capital


Alexandria, VA


10/11/2021


10/11/2023


8,850



7,236





8.5 / 3
















Student housing properties:













Haven 12


Starkville, MS


12/17/2018


11/30/2020


6,116



6,116



5,816



8.5 / 0

Haven46


Tampa, FL


3/29/2019


9/29/2020


9,820



9,820



9,820



8.5 / 5

Haven Northgate (3)


College Station, TX


6/20/2019


N/A






65,724



(4)  / 1.5

Lubbock II (3)


Lubbock, TX


4/20/2019


N/A






9,357



8.5 / 0

Haven Charlotte


Charlotte, NC


12/22/2019


12/22/2021


19,582



18,637



17,039



8.5 / 6.5

Haven Charlotte Member

Charlotte, NC


12/22/2019


12/22/2021


8,201



8,167



7,795



8.5 / 6.5

Solis Kennesaw


Atlanta, GA


9/26/2020


9/26/2022


12,359



10,859



1,610



8.5 / 5.5

Solis Kennesaw Capital


Atlanta, GA


10/1/2020


10/1/2022


8,360



7,456



7,145



8.5 / 5.5
















New Market Properties:















Dawson Marketplace


Atlanta, GA


9/24/2020


9/24/2022


12,857



12,857



12,857



8.5 / 6.9 (5)
















Other:















Crescent Avenue (6)


Atlanta, GA


4/13/2018


N/A






8,500



10 / 5

North Augusta Ballpark


North Augusta, SC


1/15/2021


1/15/2024


3,500



3,143





9 / 6
























$

512,810



376,091



388,506




Unamortized loan origination fees








(1,883)



(1,710)



















Carrying amount










$

374,208



$

386,796

















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

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

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

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

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

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

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




Total units
upon


Purchase option window

Project/Property

Location


completion (1)


Begin


End









Multifamily communities:








Encore

Atlanta, GA

(2)



N/A


N/A

Palisades

Northern VA


304



1/1/2019


5/31/2019

Fusion

Irvine, CA


280



10/1/2018


1/1/2019

Bishop Street

Atlanta, GA

(2)



N/A


N/A

Hidden River

Tampa, FL

(2)



N/A


N/A

CityPark II

Charlotte, NC


200



9/30/2018


12/31/2018

Park 35 on Clairmont

Birmingham, AL


271



8/1/2018


9/1/2018

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




N/A


N/A

The Anson

Nashville, TN


301



S + 90 days (3)


S + 150 days (3)

North Augusta Ballpark

North Augusta, SC




N/A


N/A

Cameron Park

Alexandria, VA


302



S + 90 days (3)


S + 150 days (3)









Student housing properties:








Haven46

Tampa, FL

(2)



N/A


N/A

Haven Charlotte

Charlotte, NC

(2)



N/A


N/A

Solis Kennesaw

Atlanta, GA


248



(4)


(4)












3,474














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

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

(3) The option period 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


June 30, 2018


December 31,
2017


Maturity
date


Interest
rate


Basis point
spread over
1 Month
LIBOR
















Multifamily communities:



(in thousands)









Stone Rise

7/3/2014


$

23,659



$

23,939



8/1/2019


2.89

%


Fixed rate


8/31/2015

Summit Crossing

10/31/2017


38,685



39,019



11/1/2024


3.99

%


Fixed rate


N/A

Summit Crossing II

3/20/2014


13,357



13,357



4/1/2021


4.49

%


Fixed rate


4/30/2019

McNeil Ranch

1/24/2013


13,554



13,646



2/1/2020


3.13

%


Fixed rate


2/28/2018

Lake Cameron

1/24/2013



(2)

19,773



2/1/2020


3.13

%


Fixed rate


2/28/2018

Stoneridge

9/26/2014


25,831



26,136



10/1/2019


3.18

%


Fixed rate


N/A

Vineyards

9/26/2014


34,357



34,672



10/1/2021


3.68

%


Fixed rate


10/31/2017

Avenues at Cypress

2/13/2015


21,438



21,675



9/1/2022


3.43

%


Fixed rate


N/A

Avenues at Northpointe

2/13/2015


27,184



27,467



3/1/2022


3.16

%


Fixed rate


3/31/2017

Venue at Lakewood Ranch

5/21/2015


29,037



29,348



12/1/2022


3.55

%


Fixed rate


N/A

Aster at Lely Resort

6/24/2015


32,137



32,471



7/5/2022


3.84

%


Fixed rate


N/A

CityPark View

6/30/2015


20,805



21,038



7/1/2022


3.27

%


Fixed rate


N/A

Avenues at Creekside

7/31/2015


40,110



40,523



8/1/2024


3.69

%


160

(3)

8/31/2016

Citi Lakes

9/3/2015


41,974



42,396



4/1/2023


4.26

%


217

(4)

N/A

Stone Creek

6/22/2017


20,304



20,467



7/1/2052


3.22

%


Fixed rate


N/A

Lenox Village Town Center

12/21/2015


29,644



30,009



5/1/2019


3.82

%


Fixed rate


N/A

Lenox Village III

12/21/2015


17,635



17,802



1/1/2023


4.04

%


Fixed rate


N/A

Overton Rise

2/1/2016


39,602



39,981



8/1/2026


3.98

%


Fixed rate


N/A

Baldwin Park

1/5/2016


77,800



77,800



1/5/2019


4.39

%


230


1/4/2019

Crosstown Walk

1/15/2016


31,183



31,486



2/1/2023


3.90

%


Fixed rate


N/A

525 Avalon Park

6/15/2017


66,328



66,912



7/1/2024


3.98

%


Fixed rate


N/A

City Vista

7/1/2016


34,732



35,073



7/1/2026


3.68

%


Fixed rate


N/A

Sorrel

8/24/2016


32,470



32,801



9/1/2023


3.44

%


Fixed rate


N/A

Citrus Village

3/3/2017


29,684



29,970



6/10/2023


3.65

%


Fixed rate


6/09/2017

Retreat at Greystone

11/21/2017


34,928



35,210



12/1/2024


4.31

%


Fixed rate


N/A

Founders Village

3/31/2017


31,011



31,271



4/1/2027


4.31

%


Fixed rate


N/A

Claiborne Crossing

4/26/2017


26,592



26,801



6/1/2054


2.89

%


Fixed rate


N/A

Luxe at Lakewood Ranch

7/26/2017


38,723



39,066



8/1/2027


3.93

%


Fixed rate


N/A

Adara at Overland Park

9/27/2017


31,483



31,760



4/1/2028


3.90

%


Fixed rate


N/A

Aldridge at Town Village

10/31/2017


37,535



37,847



11/1/2024


4.19

%


Fixed rate

(5)

N/A

Reserve at Summit Crossing

9/29/2017


19,837



20,017



10/1/2024


3.87

%


Fixed rate


N/A




Principal balance as of








Interest only
through date
(1)


Acquisition/

refinancing
date


June 30, 2018


December 31,
2017


Maturity
date


Interest
rate


Basis point
spread over
1 Month
LIBOR


Overlook at Crosstown Walk

11/21/2017


22,040



22,231



12/1/2024


3.95

%


Fixed rate


N/A

Colony at Centerpointe

12/20/2017


33,087



33,346



10/1/2026


3.68

%


Fixed rate


N/A

Lux at Sorrel

1/9/2018


31,340





2/1/2030


3.91

%


Fixed rate


N/A

Green Park

2/28/2018


39,580





3/10/2028


4.09

%


Fixed rate


N/A















Total multifamily communities



1,087,666



1,045,310
























Grocery-anchored shopping centers:

Spring Hill Plaza

9/5/2014


9,366



9,470



10/1/2019


3.36

%


Fixed rate


10/31/2015

Parkway Town Centre

9/5/2014


6,812



6,887



10/1/2019


3.36

%


Fixed rate


10/31/2015

Woodstock Crossing

8/8/2014


2,962



2,989



9/1/2021


4.71

%


Fixed rate


N/A

Deltona Landings

9/30/2014


6,700



6,778



10/1/2019


3.48

%


Fixed rate


N/A

Powder Springs

9/30/2014


7,070



7,152



10/1/2019


3.48

%


Fixed rate


N/A

Kingwood Glen

9/30/2014


11,211



11,340



10/1/2019


3.48

%


Fixed rate


N/A

Barclay Crossing

9/30/2014


6,303



6,376



10/1/2019


3.48

%


Fixed rate


N/A

Sweetgrass Corner

9/30/2014


7,644



7,731



10/1/2019


3.58

%


Fixed rate


N/A

Parkway Centre

9/30/2014


4,390



4,441



10/1/2019


3.48

%


Fixed rate


N/A

The Market at Salem Cove

10/6/2014


9,339



9,423



11/1/2024


4.21

%


Fixed rate


11/30/2016

Independence Square

8/27/2015


11,843



11,967



9/1/2022


3.93

%


Fixed rate


9/30/2016

Royal Lakes Marketplace

9/4/2015


9,617



9,690



9/4/2020


4.48

%


250


4/3/2017

The Overlook at Hamilton Place

12/22/2015


20,109



20,301



1/1/2026


4.19

%


Fixed rate


N/A

Summit Point

10/30/2015


12,035



12,208



11/1/2022


3.57

%


Fixed rate


N/A

East Gate Shopping Center

4/29/2016


5,505



5,578



5/1/2026


3.97

%


Fixed rate


N/A

Fury's Ferry

4/29/2016


6,359



6,444



5/1/2026


3.97

%


Fixed rate


N/A

Rosewood Shopping Center

4/29/2016


4,271



4,328



5/1/2026


3.97

%


Fixed rate


N/A

Southgate Village

4/29/2016


7,593



7,694



5/1/2026


3.97

%


Fixed rate


N/A

The Market at Victory Village

5/16/2016


9,140



9,214



9/11/2024


4.40

%


Fixed rate


10/10/2017

Wade Green Village

4/7/2016


7,893



7,969



5/1/2026


4.00

%


Fixed rate


N/A

Lakeland Plaza

7/15/2016


28,643



29,023



8/1/2026


3.85

%


Fixed rate


N/A

University Palms

8/8/2016


12,981



13,162



9/1/2026


3.45

%


Fixed rate


N/A

Cherokee Plaza

8/8/2016


24,994



25,322



9/1/2021


4.23

%


225

(6)

N/A

Sandy Plains Exchange

8/8/2016


9,068



9,194



9/1/2026


3.45

%


Fixed rate


N/A

Thompson Bridge Commons

8/8/2016


12,122



12,291



9/1/2026


3.45

%


Fixed rate


N/A

Heritage Station

8/8/2016


8,972



9,097



9/1/2026


3.45

%


Fixed rate


N/A

Oak Park Village

8/8/2016


9,259



9,388



9/1/2026


3.45

%


Fixed rate


N/A

Shoppes of Parkland

8/8/2016


16,110



16,241



9/1/2023


4.67

%


Fixed rate


N/A

Champions Village

10/18/2016


27,400



27,400



11/1/2021


4.99

%


300

(7)

11/1/2021




Principal balance as of








Interest only
through date
(1)


Acquisition/

refinancing
date


June 30, 2018


December 31,
2017


Maturity
date


Interest
rate


Basis point
spread over
1 Month
LIBOR


Castleberry-Southard

4/21/2017


11,280



11,383



5/1/2027


3.99

%


Fixed rate


N/A

Rockbridge Village

6/6/2017


14,009



14,142



7/5/2027


3.73

%


Fixed rate


N/A

Irmo Station

7/26/2017


10,438



10,566



8/1/2030


3.94

%


Fixed rate


N/A

Maynard Crossing

8/25/2017


18,160



18,388



9/1/2032


3.74

%


Fixed rate


N/A

Woodmont Village

9/8/2017


8,640



8,741



10/1/2027


4.125

%


Fixed rate


N/A

West Town Market

9/22/2017


8,852



8,963



10/1/2025


3.65

%


Fixed rate


N/A

Crossroads Market

12/5/2017


18,813



19,000



1/1/2030


3.95

%


Fixed rate


N/A

Anderson Central

3/16/2018


11,955





4/1/2028


4.32

%


Fixed rate


N/A

Greensboro Village

5/22/2018


8,550





6/1/2028


4.20

%


Fixed rate


N/A

Governors Towne Square

5/22/2018


11,375





6/1/2028


4.20

%


Fixed rate


N/A

Conway Plaza

6/29/2018


9,783





7/5/2028


4.29

%


Fixed rate


N/A















Total grocery-anchored shopping centers



447,566



410,281
























Student housing properties:

North by Northwest

6/1/2016


32,388



32,767



10/1/2022


4.02

%


Fixed rate


N/A

SoL

3/29/2018


37,485



37,485



1/29/2019


4.19

%


210


1/29/2019

Stadium Village

10/27/2017


46,514



46,930



11/1/2024


3.80

%


Fixed rate


N/A

Ursa

12/18/2017


31,400



31,400



1/5/2020


5.09

%


300


1/5/2020

The Tradition

5/10/2018


30,000





6/6/2021


6.09

%


400

(8)

6/6/2021

Retreat at Orlando

5/31/2018


47,125





9/1/2025


4.09

%


Fixed rate


9/1/2020

The Bloc

6/27/2018


28,966





7/9/2021


5.64

%


355

(9)

7/9/2021















Total student housing properties



253,878



148,582
























Office buildings:

Brookwood Center

8/29/2016


31,853



32,219



9/10/2031


3.52

%


Fixed rate


10/9/2017

Galleria 75

11/4/2016


5,621



5,716



7/1/2022


4.25

%


Fixed rate


N/A

Three Ravinia

12/30/2016


115,500



115,500



1/1/2042


4.46

%


Fixed rate


1/31/2022

Westridge at La Cantera

11/13/2017


53,808



54,440



12/10/2028


4.10

%


Fixed rate


N/A

Armour Yards

1/29/2018


40,000





2/1/2028


4.10

%


Fixed rate


2/29/2020















Total office buildings



246,782



207,875










Grand total



2,035,892



1,812,048










Less: deferred loan costs



(32,361)



(30,249)










Less: below market debt adjustment



(5,017)



(5,147)










Mortgage notes, net



$

1,998,514



$

1,776,652

























Footnotes to Mortgage Notes Table


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


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


(3)  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%.


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


(5) 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.


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


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


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


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

 

Multifamily Communities

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










Three months ended
June 30, 2018


Property


Location


Number of
units


Average unit

size (sq. ft.)


Average
physical
occupancy


Average
rent per
unit














Established Communities:












McNeil Ranch


Austin, TX


192



1,071



96.4

%


$

1,232



Avenues at Cypress


Houston, TX


240



1,170



92.8

%


$

1,439



Avenues at Northpointe


Houston, TX


280



1,167



96.7

%


$

1,339



Vineyards


Houston, TX


369



1,122



96.4

%


$

1,154



Aster at Lely Resort


Naples, FL


308



1,071



94.8

%


$

1,472



Venue at Lakewood Ranch


Sarasota, FL


237



1,001



95.8

%


$

1,578



Citi Lakes


Orlando, FL


346



984



95.0

%


$

1,410



Lenox Portfolio


Nashville, TN


474



861



95.4

%


$

1,210



Overton Rise


Atlanta, GA


294



1,018



94.0

%


$

1,509



Sorrel


Jacksonville, FL


290



1,048



94.4

%


$

1,263















Total/Average Established Communities




3,030





95.2

%
















Summit Crossing


Atlanta, GA


485



1,053



95.9

%


$

1,177



CityPark View


Charlotte, NC


284



948





$

1,079



Avenues at Creekside


San Antonio, TX


395



974





$

1,152



Stone Creek


Houston, TX


246



852





$

1,049



525 Avalon Park


Orlando, FL


487



1,394





$

1,414



Retreat at Greystone


Birmingham, AL


312



1,100



96.0

%


$

1,227



Broadstone at Citrus Village


Tampa, FL


296



980



97.2

%


$

1,276



Stone Rise


Philadelphia, PA


216



1,078





$

1,443



Stoneridge Farms at the Hunt Club


Nashville, TN


364



1,153





$

1,098



Founders Village


Williamsburg, VA


247



1,070



94.6

%


$

1,372



Crosstown Walk


Tampa, FL


342



981



94.2

%


$

1,282



Claiborne Crossing


Louisville, KY


242



1,204



97.9

%


$

1,306



Luxe at Lakewood Ranch


Sarasota, FL


280



1,105





$

1,509



Adara Overland Park


Kansas City, KS


260



1,116



96.3

%


$

1,310



Aldridge at Town Village


Atlanta, GA


300



969



96.7

%


$

1,319



The Reserve at Summit Crossing


Atlanta, GA


172



1,002



95.2

%


$

1,321



Overlook at Crosstown Walk


Tampa, FL


180



986



95.0

%


$

1,379



Colony at Centerpointe


Richmond, VA


255



1,149



93.9

%


$

1,328



Lux at Sorrel


Jacksonville, FL


265



1,025



93.7

%


$

1,393



Green Park


Atlanta, GA


310



985



94.7

%


$

1,435















Value-add project:












Village at Baldwin Park


Orlando, FL


528



1,069





$

1,621



















6,466









Joint venture:












City Vista


Pittsburgh, PA


272



1,023



95.2

%


$

1,341















Total PAC Non-Established Communities




6,738









Average stabilized physical occupancy








95.3

%
















Total multifamily community units




9,768























 

For the three-month period ended June 30, 2018, our average established multifamily communities' physical occupancy was 95.2%. We calculate average established physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date and that have been owned for at least 15 full months as of the end of the first quarter of each year. We exclude the operating results of properties for which construction of adjacent phases has commenced, properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. For the three-month period ended June 30, 2018, 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 June 30, 2018, 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, Luxe at Lakewood Ranch, CityPark View and Avenues at Creekside). We also exclude properties which are currently being marketed for sale, which included Stone Rise and Stoneridge Farms at Hunt Club at June 30, 2018.

Student Housing Properties

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











Three months ended
June 30, 2018

Property


Location


Number
of units


Number
of beds


Average unit
size (sq. ft.)


Average
physical
occupancy


Average rent
per bed

Student housing properties:













North by Northwest


Tallahassee, FL


219



679



1,250



97.9

%


$

724


SoL


Tempe, AZ


224



639



1,296



92.5

%


$

712


Stadium Village (1)


Atlanta, GA


198



792



1,466



99.3

%


$

671


Ursa (1)


Waco, TX


250



840



1,634





n/a


The Tradition


College Station, TX


427



808



549





n/a


The Retreat at Orlando


Orlando, FL


221



894



2,036





n/a


The Bloc


Lubbock, TX


140



556



1,394





n/a



















1,679



5,208








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

Capital Expenditures

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

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




Capital Expenditures - Multifamily Communities




Recurring


Non-recurring


Total

(in thousands, except per-unit figures)

Amount


Per Unit


Amount


Per Unit


Amount


Per Unit

Appliances

$

75



$

30.63



$



$



$

75



$

30.63


Carpets



311



127.54







311



127.54


Wood / vinyl flooring

77



31.64







77



31.64


Mini blinds and ceiling fans

35



14.19







35



14.19


Fire safety


9



3.8



103



42.43



112



46.23


HVAC


111



45.75







111



45.75


Computers, equipment, misc.

7



2.99



105



42.96



112



45.95


Elevators





9



3.86



9



3.86


Exterior painting





61



24.95



61



24.95


Leasing office and other common amenities

40



16.56



423



173.73



463



190.29


Major structural projects





474



194.59



474



194.59


Cabinets and countertop upgrades





256



105.1



256



105.10


Landscaping and fencing

5



1.85



187



76.73



192



78.58


Parking lot


71



29.18



256



105.27



327



134.45


Common area items



0.18



42



17.38



42



17.56


Totals



$

741



$

304.31



$

1,916



$

787



$

2,657



$

1,091.31


 

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




Capital Expenditures - Student Housing Properties




Recurring


Non-recurring


Total

(in thousands, except per-unit figures)

Amount


Per Unit


Amount


Per Unit


Amount


Per Unit

Appliances

$

7



$

24.32



$



$



$

7



$

24.32


Carpets



1



3.54







1



3.54


Wood / vinyl flooring

5



16.84







5



16.84


Mini blinds and ceiling fans



1.08









1.08


Fire safety













HVAC


23



75.71







23



75.71


Computers, equipment, misc.

4



13.68



6



19.03



10



32.71


Elevators












Exterior painting





11



35.34



11



35.34


Leasing office and other common amenities

20



64.96



225



746.41



245



811.37


Major structural projects





129



428.96



129



428.96


Cabinets and counter top upgrades





1



2.42



1



2.42


Landscaping and fencing





55



183.01



55



183.01


Parking lot






2



6.64



2



6.64


Common area items

2



7.73



14



46.42



16



54.15


Totals



$

62



$

207.86



$

443



$

1,468.23



$

505



$

1,676.09


 

Grocery-Anchored Shopping Center Portfolio

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

Property name

Location


Year built


GLA (1)


Percent
leased


Grocery anchor
tenant











Castleberry-Southard

 Atlanta, GA


2006


80,018



100.0

%


 Publix

Cherokee Plaza

 Atlanta, GA


1958


102,864



100.0

%


Kroger

Governors Towne Square

 Atlanta, GA


2004


68,658



98.0

%


 Publix

Lakeland Plaza

 Atlanta, GA


1990


301,711



95.8

%


Sprouts

Powder Springs

 Atlanta, GA


1999


77,853



96.9

%


 Publix

Rockbridge Village

 Atlanta, GA


2005


102,432



94.2

%


 Kroger

Roswell Wieuca Shopping Center

 Atlanta, GA


2007


74,370



100.0

%


 The Fresh Market

Royal Lakes Marketplace

 Atlanta, GA


2008


119,493



84.4

%


 Kroger

Sandy Plains Exchange

 Atlanta, GA


1997


72,784



93.2

%


Publix

Summit Point

 Atlanta, GA


2004


111,970



85.7

%


 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



96.0

%


Kroger

Woodstock Crossing

 Atlanta, GA


1994


66,122



100.0

%


 Kroger

East Gate Shopping Center

 Augusta, GA


1995


75,716



92.2

%


 Publix

Fury's Ferry

 Augusta, GA


1996


70,458



98.6

%


 Publix

Parkway Centre

 Columbus, GA


1999


53,088



100.0

%


 Publix

Spring Hill Plaza

 Nashville, TN


2005


61,570



100.0

%


 Publix

Parkway Town Centre

 Nashville, TN


2005


65,587



98.2

%


 Publix

The Market at Salem Cove

 Nashville, TN


2010


62,356



97.8

%


 Publix

The Market at Victory Village

 Nashville, TN


2007


71,300



98.5

%


 Publix

Greensboro Village

 Nashville, TN


2005


70,203



98.3

%


 Publix

The Overlook at Hamilton Place

 Chattanooga, TN


1992


213,095



100.0

%


 The Fresh Market

Shoppes of Parkland

 Miami-Ft. Lauderdale, FL


2000


145,720



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

Conway Plaza

 Orlando, FL


1966


117,705



92.3

%


Publix

Crossroads Market

 Naples, FL


1993


126,895



98.1

%


Publix

Neapolitan Way

 Naples, FL


1985


137,580



88.2

%


Publix

Champions Village

 Houston, TX


1973


383,346



79.2

%


Randalls

Kingwood Glen

 Houston, TX


1998


103,397



100.0

%


 Kroger

Independence Square

 Dallas, TX


1977


140,218



84.9

%


 Tom Thumb

Oak Park Village

 San Antonio, TX


1970


64,855



100.0

%


H.E.B.

Sweetgrass Corner

 Charleston, SC


1999


89,124



100.0

%


 Bi-Lo

Irmo Station

 Columbia, SC


1980


99,384



95.3

%


Kroger

Anderson Central

 Greenville Spartanburg, SC


1999


223,211



96.1

%


 Walmart

Fairview Market

 Greenville Spartanburg, SC


1998


53,888



73.5

%


Aldi

Rosewood Shopping Center

 Columbia, SC


2002


36,887



90.2

%


 Publix

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



98.6

%


Kroger

Southgate Village

 Birmingham, AL


1988


75,092



100.0

%


 Publix











Grand total/weighted average





4,449,860



94.4

%



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

As of June 30, 2018, our grocery-anchored shopping center portfolio was 94.4% leased. We define percent leased as the percentage of gross leasable area that is leased, including noncancelable lease agreements that have been signed which have not yet commenced.

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


Total grocery-anchored shopping center portfolio


Number of leases


Leased GLA


Percent of leased
GLA







Month to month

4



7,560



0.2

%

2018

51



107,601



2.6

%

2019

107



628,202



14.9

%

2020

119



523,480



12.5

%

2021

112



506,370



12.0

%

2022

103



344,821



8.2

%

2023

72



347,887



8.3

%

2024

24



560,944



13.3

%

2025

26



429,810



10.2

%

2026

12



143,471



3.4

%

2027

19



121,551



2.9

%

2028+

26



480,822



11.5

%







Total

675



4,202,519



100.0

%

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

Second-generation capital expenditures within our grocery-anchored shopping center portfolio by property for the second quarter 2018 totaled $235,000. 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 June 30, 2018, 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

%

Armour Yards


Atlanta, GA


187,000



96

%

Brookwood Center


Birmingham, AL


169,000



100

%

Galleria 75


Atlanta, GA


111,000



94

%












1,539,000



98

%

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




Rentable square
footage


Percent of
Annual Base
Rent


Annual Base
Rent (in
thousands)

InterContinental Hotels Group

495,409



34.3

%


$

11,410


State Farm Mutual Automobile Insurance Company

183,168



9.9

%


3,300


Harland Clarke Corporation

129,016



8.5

%


2,810


United Services Automobile Association

129,015



9.2

%


3,042


Southern Natural Gas Company, LLC

63,113



5.6

%


1,856













999,721



67.5

%


$

22,418


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

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

Office building portfolio





Percent of

Year of lease
expiration


Rentable square


rented


feet


square feet

2018


2,483



0.2

%

2019


22,890



1.5

%

2020


110,596



7.4

%

2021


231,549



15.5

%

2022


41,532



2.8

%

2023


96,775



6.5

%

2024


24,120



1.6

%

2025


58,276



3.9

%

2026




%

2027


258,031



17.3

%

2028+


645,364



43.3

%






Total


1,491,616



100.0

%

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $41,000 during the second quarter 2018. Second-generation capital expenditures exclude those expenditures made in our office building portfolio (i) to lease space to "first generation" tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our Class A ownership standards (and which amounts were underwritten into the total investment at the time of acquisition) and (iii) for property re-developments and repositionings.

Definitions of Non-GAAP Measures

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

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

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

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

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

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

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

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

FFO, plus:

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

Less:

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

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

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

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

About Preferred Apartment Communities, Inc.         

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

SOURCE Preferred Apartment Communities, Inc.

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