Preferred Apartment Communities

Investors

News Releases

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

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

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

Preferred Apartment Communities

Financial Highlights

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

















Three months ended
September 30,




Nine months ended
September 30,






2018


2017


% change


2018


2017


% change

















Revenues (in thousands)

$

104,232



$

74,900



39.2

%


$

290,991



$

212,352



37.0

%

















Per share data:














Net income (loss) (1)

$

(0.35)



$

(0.49)





$

(1.16)



$

(0.46)




















FFO (2)

$

0.28



$

0.36



(22.2)

%


$

1.03



$

1.01



2.0

%

















AFFO (2)

$

0.21



$

0.28



(25.0)

%


$

0.84



$

0.85



(1.2)

%

















Dividends (3)

$

0.255



$

0.235



8.5

%


$

0.76



$

0.69



10.1

%


















(1)

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

(2)

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

(3)

Per share of Common Stock and Class A Unit outstanding.

 

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

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

  • For the third quarter 2018, our same store net operating income for our established multifamily communities increased approximately 2.7% as compared to the third quarter 2017. (B) For the third quarter 2018, our average established multifamily communities' physical occupancy was 95.3% and our same-store rental revenue grew 3.8% from the third quarter 2017. For the nine-month period ended September 30, 2018, our same store net operating income for our established multifamily communities increased approximately 6.5% as compared to the nine-month period ended September 30, 2017.

  • At September 30, 2018, the market value of our common stock was $17.58 per share. A hypothetical investment in our Common Stock in our initial public offering on April 5, 2011, assuming the reinvestment of all dividends and no transaction costs, would have resulted in an average annual return of approximately 24.4% through September 30, 2018.

  • As of September 30, 2018, the average age of our multifamily communities was approximately 5.3 years, which is the youngest in the public multifamily REIT industry.

  • Approximately 84.0% of our permanent property-level mortgage debt has fixed interest rates and approximately 6.4% has variable interest rates which are capped. We believe we are well protected against potential increases in market interest rates.

  • At September 30, 2018, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 54.4 %. Our leverage calculation excludes the gross assets of approximately $262.2 million and liabilities of approximately $257.3 million that we consolidated as a result of our investment in the ML-04 pool from the Freddie Mac K program.

  • As of September 30, 2018, our total assets were approximately $4.1 billion compared to approximately $2.9 billion as of September 30, 2017, an increase of approximately $1.2 billion, or approximately 41.9%. This growth was driven primarily by the acquisition of 22 real estate properties (net of the sale of 2 properties). In addition, our assets increased due to the consolidation of the ML-04 pool from the Freddie Mac K program.

  • Cash flow from operations for the quarter ended September 30, 2018 was approximately $38.8 million, an increase of approximately $10.7 million, or 38.1%, compared to approximately $28.1 million for the quarter ended September 30, 2017. Cash flow from operations for the third quarter 2018 was more than sufficient to fund our aggregate dividends and distributions for the period, which totaled approximately $33.0 million.

  • On August 31, 2018, we closed on two real estate loan investments aggregating up to approximately $12.3 million in support of a multifamily community project in Fredericksburg, Virginia.

  • On September 28, 2018, we sold our Stone Rise multifamily community located in Philadelphia, Pennsylvania for a net gain of approximately $18.6 million, which resulted in an internal rate of return of approximately 21.5% from April 15, 2011, the date the property was acquired.

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


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

Acquisitions of Properties

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










Property


Location (MSA)


Units / Leasable square
feet











Office building:








150 Fayetteville


Raleigh, NC



560,000

LSF











Multifamily Community:








The Lodge at Hidden River


Tampa, FL



300

units











Grocery-anchored shopping center:








Brawley Commons


Charlotte, NC



122,028

LSF










 Real Estate Assets











Owned as of
September 30,
2018


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


Potential total



Multifamily communities:








Properties

31



11



42




Units

9,852



2,915



12,767




Grocery-anchored shopping centers:








Properties

44





44




Gross leasable area (square feet)

4,571,888





4,571,888




Student housing properties:








Properties

7



1



8




Units

1,679



248



1,927




Beds

5,208



816



6,024




Office buildings:








Properties

6





6




Rentable square feet

2,099,000





2,099,000












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


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

Subsequent to Quarter End

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

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

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

Multifamily Established Communities Financial Data

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

Aster at Lely Resort


Avenues at Cypress


Avenues at Northpointe

Citi Lakes


Lenox Portfolio


Venue at Lakewood Ranch

Overton Rise


Sorrel


Vineyards

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

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

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








Three months ended:

(in thousands)


9/30/2018


9/30/2017






Net income


$

8,354



$

42


Add:





Equity stock compensation


796



863


Depreciation and amortization


44,499



28,904


Interest expense


25,657



16,678


Management fees


7,234



5,148


Insurance, professional fees and other expenses

715



581


Loan loss allowance


3,029




Waived asset management and general and administrative expense fees


(1,934)



(656)


Less:





Interest revenue on notes receivable


13,618



9,674


Interest revenue on related party notes receivable


3,671



5,820


Income from consolidated VIEs


131




Gain on sale of real estate


18,605









Property net operating income


52,325



36,066


Less:





Non-same-store property revenues


74,937



47,843


Add:





Non-same-store property operating expenses

29,305



18,296






Same store net operating income


$

6,693



$

6,519


 

Multifamily Established Communities' Same Store Net Operating Income












Three months ended:





(in thousands)


9/30/2018


9/30/2017


$ change


% change

Revenues:









Rental revenues


$

10,907



$

10,519



$

388



3.7

%

Other property revenues


1,099



1,044



55



5.3

%

Total revenues


12,006



11,563



443



3.8

%










Operating expenses:









Property operating and maintenance


1,594



1,588



6



0.4

%

Payroll


991



967



24



2.5

%

Property management fees


482



465



17



3.7

%

Real estate taxes


1,748



1,517



231



15.2

%

Other


498



507



(9)



(1.8)

%

Total operating expenses


5,313



5,044



269



5.3

%










Same store net operating income


$

6,693



$

6,519



$

174



2.7

%

 

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








Nine months ended:

(in thousands)


9/30/2018


9/30/2017






Net income


$

17,339



$

33,409


Add:





Equity stock compensation


2,881



2,608


Depreciation and amortization


127,210



82,187


Interest expense


68,972



48,085


Acquisition costs




14


Management fees


20,096



14,525


Insurance, professional fees and other expenses

2,487



2,395


Loan loss allowance


3,029




Waived asset management and general and administrative expense fees


(4,583)



(1,002)


Loss on extinguishment of debt




888


Less:





Interest revenue on notes receivable


37,576



26,112


Interest revenue on related party notes receivable


12,310



15,971


Income from consolidated VIEs


185




Gain on sale of real estate


38,961



37,635







Property net operating income


148,399



103,391


Less:





Non-same-store property revenues


205,316



135,848


Add:





Non-same-store property operating expenses

77,144



51,441






Same store net operating income


$

20,227



$

18,984


 

Multifamily Established Communities' Same Store Net Operating Income












Nine months ended:





(in thousands)


9/30/2018


9/30/2017


$ change


% change

Revenues:









Rental revenues


$

32,481



$

31,352



$

1,129



3.6

%

Other property revenues


3,308



3,069



239



7.8

%

Total revenues


35,789



34,421



1,368



4.0

%










Operating expenses:









Property operating and maintenance


4,497



4,400



97



2.2

%

Payroll


2,852



2,889



(37)



(1.3)

%

Property management fees


1,435



1,387



48



3.5

%

Real estate taxes


5,251



5,236



15



0.3

%

Other


1,527



1,525



2



0.1

%

Total operating expenses


15,562



15,437



125



0.8

%










Same store net operating income


$

20,227



$

18,984



$

1,243



6.5

%

Capital Markets Activities

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

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

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

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

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

Monthly Dividends on Preferred Stock

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

Conference Call and Supplemental Data

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

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

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

2018 Guidance:

Net income (loss) per 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 $1.39 - $1.42 per share for the full year 2018.

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

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

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

Forward-Looking Statements

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

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

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

Additional Information

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

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

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

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

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

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

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

 

THIRD QUARTER 2018 - SUPPLEMENTAL FINANCIAL DATA

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)






Three months ended September 30,

(In thousands, except per-share figures)


2018


2017

Revenues:





Rental revenues


$

73,640



$

50,072


Other property revenues


13,303



9,335


Interest income on loans and notes receivable


13,618



9,673


Interest income from related parties


3,671



5,820


Total revenues


104,232



74,900







Operating expenses:





Property operating and maintenance


12,893



7,901


Property salary and benefits

4,911



3,403


Property management fees

2,998



2,053


Real estate taxes


10,597



7,706


General and administrative


2,221



1,702


Equity compensation to directors and executives

796



863


Depreciation and amortization


44,499



28,904


Asset management and general and administrative expense





fees to related party


7,234



5,148


Loan loss allowance


3,029




Insurance, professional fees, and other expenses


1,713



1,156







Total operating expenses


90,891



58,836


Waived asset management and general and administrative




expense fees

(1,934)



(656)







Net operating expenses


88,957



58,180


Operating income


15,275



16,720


Interest expense


25,657



16,678


Change in fair value of net assets of consolidated VIE


131




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


(10,251)



42


Gain on sale of real estate


18,605









Net income


8,354



42


Consolidated net (income) attributable to non-controlling interests

(216)



(1)







Net income attributable to the Company


8,138



41







Dividends declared to preferred stockholders


(22,360)



(16,421)


Earnings attributable to unvested restricted stock


(5)



(4)







Net loss attributable to common stockholders


$

(14,227)



$

(16,384)


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




basic and diluted


$

(0.35)



$

(0.49)







Weighted average number of shares of Common Stock outstanding,




basic and diluted


40,300



33,540


 

 

Reconciliation of FFO and AFFO

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






Three months ended September 30,

(In thousands, except per-share figures)



2018


2017









Net loss attributable to common stockholders (See note 1)

$

(14,227)



$

(16,384)










Add:

Depreciation of real estate assets


33,037



21,597



Amortization of acquired real estate intangible assets and deferred leasing costs

11,058



7,106



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


216



1


Less:

Gain on sale of real estate


(18,605)




FFO

11,479



12,320










Add:

Loan cost amortization on acquisition term note

19



29



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

673



407



Weather-related property operating losses (See note 4)

161



217



Non-cash equity compensation to directors and executives

796



863



Amortization of loan closing costs (See note 5)


1,309



905



Depreciation/amortization of non-real estate assets


404



202



Net loan fees received (See note 6)


248



879



Accrued interest income received (See note 7)


4,298



1,797



Loan loss allowance (See note 8)


3,029





Deemed dividends from cash redemptions of preferred stock


2





Amortization of lease inducements (See note 9)


387



145



Non-cash dividends on Series M Preferred Stock


63



33


Less:

Non-cash loan interest income (See note 7)


(4,104)



(4,860)



Non-cash revenues from mortgage-backed securities


(131)





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

(4,478)





Cash paid for loan closing costs


(25)





Amortization of acquired above and below market lease intangibles





and straight-line rental revenues (See note 11)


(3,353)



(1,941)



Amortization of deferred revenues (See note 12)


(680)



(287)



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

(1,528)



(1,214)










AFFO

$

8,569



$

9,495








Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

10,377



$

8,158



Distributions to Unitholders (See note 2)


272



212



Total




$

10,649



$

8,370










Common Stock dividends and Unitholder distributions per share


$

0.255



$

0.235










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

$

0.28



$

0.36


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

$

0.21



$

0.28






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





Basic:








Common Stock



40,300



33,540



Class A Units




1,069



901



Common Stock and Class A Units


41,369



34,441











Diluted Common Stock and Class A Units (B)


42,890



37,820










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




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

40,804



35,616


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

1,068



901



Total




41,872



36,517










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

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


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

 

 

Reconciliation of FFO and AFFO

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






Nine months ended September 30,

(In thousands, except per-share figures)



2018


2017









Net loss attributable to common stockholders (See note 1)

$

(45,931)



$

(13,742)










Add:

Depreciation of real estate assets


90,190



60,344



Amortization of acquired real estate intangible assets and deferred leasing costs

35,963



21,308



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


456



1,097


Less:

Gain on sale of real estate


(38,961)



(37,635)


FFO

41,717



31,372










Add:

Acquisition and pursuit costs





14



Loan cost amortization on acquisition term notes


63



99



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

1,780



1,178



Mortgage loan refinancing and extinguishment costs

61



1,058



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

(33)



217



Contingent management fees recognized





387



Non-cash equity compensation to directors and executives

2,881



2,608



Amortization of loan closing costs (See note 5)


3,567



2,757



Depreciation/amortization of non-real estate assets


1,057



535



Net loan fees received (See note 6)


1,459



1,296



Accrued interest income received (See note 7)


8,410



7,115



Loan loss allowance (See note 8)


3,029





Deemed dividends from cash redemptions of preferred stock


522





Non-cash dividends on Series M Preferred Stock


216



33



Amortization of lease inducements (See note 9)


955



237


Less:

Non-cash loan interest income (See note 7)


(14,726)



(13,507)



Cash paid for loan closing costs


(416)





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

(1,964)





Non-cash revenues from mortgage-backed securities

(185)





Amortization of acquired above and below market lease intangibles

 





and straight-line rental revenues (See note 11)

(9,047)



(5,497)



Amortization of deferred revenues (See note 12)


(1,765)



(457)



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

(3,482)



(3,032)


AFFO

$

34,099



$

26,413






Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



30,283



21,668



Distributions to Unitholders (See note 2)


813



622



Total




31,096



22,290


Common Stock dividends and Unitholder distributions per share


$

0.76



$

0.69










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

$

1.03



$

1.01


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

$

0.84



$

0.85






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





Basic:








Common Stock



39,598



30,147



Class A Units




1,070



910



Common Stock and Class A Units


40,668



31,057











Diluted Common Stock and Class A Units (B)


41,936



33,645










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




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

40,804



35,616


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

1,068



901



Total




41,872



36,517










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

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


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

 

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

1)

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



2)

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



3)

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



4)

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



5)

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



6)

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



7)

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



8)

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



9)

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



10)

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



11)

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



12)

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



13)

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



See Definitions of Non-GAAP Measures.

 

 

Preferred Apartment Communities, Inc.


Consolidated Balance Sheets


(Unaudited)


(In thousands, except per-share par values)


September 30, 2018


December 31, 2017


Assets






Real estate





Land


$

490,394



$

406,794



Building and improvements

2,494,904



2,043,853



Tenant improvements

105,390



63,425



Furniture, fixtures, and equipment

261,806



210,779



Construction in progress

5,353



10,491



Gross real estate

3,357,847



2,735,342



Less: accumulated depreciation

(242,579)



(172,756)



Net real estate

3,115,268



2,562,586



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

326,765



255,345



Real estate loan investments to related parties, net

60,635



131,451



Real estate assets held for sale, net

36,360





Total real estate and real estate loan investments, net

3,539,028



2,949,382









Cash and cash equivalents

26,840



21,043



Restricted cash

59,531



51,969



Notes receivable

14,285



17,318



Note receivable and revolving lines of credit due from related parties

33,140



22,739



Accrued interest receivable on real estate loans

31,250



26,865



Acquired intangible assets, net of amortization

112,914



102,743



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

1,118



1,385



Deferred offering costs

7,741



6,544



Tenant lease inducements, net

20,275



14,425



Tenant receivables and other assets

41,632



37,957



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

262,228





Total assets

$

4,149,982



$

3,252,370









Liabilities and equity





Liabilities





Mortgage notes payable, net of deferred loan costs

$

2,140,583



$

1,776,652



Revolving line of credit

55,700



41,800



Term note payable, net of deferred loan costs



10,994



Real estate loan investment participation obligation

10,495



13,986



Unearned purchase option termination fees

5,756





Deferred revenue

37,964



27,947



Accounts payable and accrued expenses

47,548



31,253



Accrued interest payable

6,322



5,028



Dividends and partnership distributions payable

18,188



15,680



Acquired below market lease intangibles, net of amortization

43,155



38,857



Security deposits and other liabilities

14,586



9,407



VIE liabilities, at fair value

257,303





Total liabilities

2,637,600



1,971,604









Commitments and contingencies





Equity






Stockholders' equity






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





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





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

15



12



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





   shares authorized; 37 and 15 shares issued and outstanding





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





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





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





September 30, 2018 and December 31, 2017, respectively

408



386



Additional paid-in capital

1,509,411



1,271,040



Accumulated earnings



4,449



      Total stockholders' equity

1,509,834



1,275,887



Non-controlling interest

2,548



4,879



Total equity

1,512,382



1,280,766



Total liabilities and equity

$

4,149,982



$

3,252,370



 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)




Nine months ended September 30,

(In thousands)


2018


2017

Operating activities:





Net income


$

17,339



$

33,409


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




Depreciation and amortization expense

127,210



82,187


Amortization of above and below market leases

(4,297)



(2,394)


Deferred revenues and fee income amortization

(3,103)



(1,526)


Purchase option termination fee amortization

(6,554)




Amortization of market discount on assumed debt and lease incentives

1,152



364


Deferred loan cost amortization

5,213



3,907


(Increase) in accrued interest income on real estate loans

(4,385)



(5,832)


Change in fair value of net assets of consolidated VIE

(185)




Equity compensation to executives and directors

2,881



2,608


Gain on sale of real estate


(38,961)



(37,635)


Cash received for purchase option terminations

5,100




Loss on extinguishment of debt




888


Mortgage interest received from consolidated VIE

3,429




Mortgage interest paid to other participants of consolidated VIE

(3,429)




Increase in loan loss allowance

3,029




Other




189


Changes in operating assets and liabilities:




(Increase) in tenant receivables and other assets

(3,518)



(7,818)


(Increase) in tenant lease incentives

(6,786)



(11,890)


Increase in accounts payable and accrued expenses

14,470



11,641


Increase in accrued interest, prepaid rents and other liabilities

3,369



2,348


Net cash provided by operating activities

111,974



70,446







Investing activities:





Investment in real estate loans


(145,413)



(119,226)


Repayments of real estate loans


141,729



42,495


Notes receivable issued


(5,949)



(6,250)


Notes receivable repaid


8,941



3,507


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

(39,377)



(25,740)


Repayments of line of credit by related parties

28,566



23,468


Loan origination fees received

2,919



2,593


Loan origination fees paid to Manager

(1,459)



(1,296)


Investment in mortgage-backed securities

(4,739)




Mortgage principal received from consolidated VIE

705




Acquisition of properties


(662,918)



(485,010)


Disposition of properties, net


83,636



148,101


Receipt of insurance proceeds for capital improvements

412




Additions to real estate assets - improvements

(36,288)



(12,031)


(Deposits) on acquisitions


3,552



2,429


Net cash used in investing activities

(625,683)



(426,960)







Financing activities:





Proceeds from mortgage notes payable

386,559



332,428


Payments for mortgage notes payable

(66,875)



(121,066)


Payments for deposits and other mortgage loan costs

(7,150)



(11,580)


Payments for mortgage prepayment costs



(817)


Proceeds from real estate loan participants

5



224


Payments to real estate loan participants

(4,372)



(3,467)


Proceeds from lines of credit


362,100



190,000


Payments on lines of credit


(348,200)



(274,500)


Repayment of the Term Loan

(11,000)




Mortgage principal paid to other participants of consolidated VIE

(705)




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

303,391



206,312


Proceeds from sales of Common Stock



74,213


Proceeds from exercises of warrants

16,553



39,430


Payments for redemptions of preferred stock

(9,033)



(4,512)


Common Stock dividends paid


(29,488)



(19,251)


Preferred stock dividends paid


(61,093)



(44,890)


Distributions to non-controlling interests

(762)



(605)


Payments for deferred offering costs

(2,862)



(5,420)


Net cash provided by financing activities

527,068



356,499






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

13,359



(15)


Cash, cash equivalents and restricted cash, beginning of period

73,012



67,715


Cash, cash equivalents and restricted cash, end of period

$

86,371



$

67,700


 

Real Estate Loan Investments

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

Project/Property


Location


Maturity date


Optional
extension date


Total loan

commitments


Carrying amount (1) as of


Current /

deferred
interest %

per annum






September 30, 2018


December 31, 2017





















Multifamily communities:






(in thousands)



Encore


Atlanta, GA


12/31/2018


10/9/2020


$

10,958



$

10,958



$

10,958



8.5 / 5

Encore Capital


Atlanta, GA


4/8/2019


10/9/2020


9,758



8,145



7,521



8.5 / 5

Palisades


Northern VA


5/17/2019


N/A


17,270



17,132



17,111



8 / 5

Fusion


Irvine, CA


12/1/2018


5/31/2020


70,835



66,365



58,447



8.5 / 0

Green Park


Atlanta, GA


2/28/2018


N/A






11,464



8.5 / 5.83

Bishop Street


Atlanta, GA


2/18/2020


N/A


12,693



12,693



12,145



8.5 / 6.5

Hidden River (3)


Tampa, FL


12/3/2018


N/A






4,735



8.5 / 6.5

Hidden River Capital (3)


Tampa, FL


12/4/2018


N/A






5,041



8.5 / 6.5

CityPark II


Charlotte, NC


1/7/2019


1/7/2021


3,365



3,365



3,365



8.5 / 6.5

CityPark II Capital


Charlotte, NC


1/8/2019


1/31/2021


3,916



3,864



3,624



8.5 / 6.5

Park 35 on Clairmont


Birmingham, AL


6/26/2019


6/26/2020


21,060



21,060



21,060



8.5 / 2

Wiregrass


Tampa, FL


5/15/2020


5/15/2023


14,976



13,833



12,972



8.5 / 6.5

Wiregrass Capital


Tampa, FL


5/15/2020


5/15/2023


4,244



3,808



3,561



8.5 / 6.5

Berryessa


San Jose, CA


4/19/2018


N/A






30,571



10.5 / 0

Berryessa


San Jose, CA


2/13/2021


2/13/2023


137,616



67,822





8.5 / 6

The Anson (2)


Nashville, TN


6/1/2018


N/A






2,261



12 / 0

The Anson


Nashville, TN


11/24/2021


11/24/2023


6,240







8.5 / 4.5

The Anson


Nashville, TN


11/24/2021


11/24/2023


5,659



824





8.5 / 4.5

Fort Myers


Fort Myers, FL


2/3/2021


2/3/2022


9,416



7,944



3,521



8.5 / 5.5

Fort Myers Capital


Fort Myers, FL


2/3/2021


2/3/2022


6,193



5,325



4,994



8.5 / 5.5

360 Forsyth


Atlanta, GA


7/11/2020


7/11/2022


22,412



19,320



13,400



8.5 / 5.5

Morosgo


Atlanta, GA


1/31/2021


1/31/2022


11,749



10,507



4,951



8.5 / 5.5

Morosgo Capital


Atlanta, GA


1/31/2021


1/31/2022


6,176



5,077



4,761



8.5 / 5.5

University City Gateway


Charlotte, NC


8/15/2021


8/15/2022


10,336



10,335



850



8.5 / 5

University City Gateway















Capital


Charlotte, NC


8/18/2021


8/18/2022


7,338



5,901



5,530



8.5 / 5

Cameron Park


Alexandria, VA


10/11/2021


10/11/2023


21,340



9,874





8.5 / 3

Cameron Park Capital


Alexandria, VA


10/11/2021


10/11/2023


8,850



7,395





8.5 / 3

Southpoint


Fredericksburg, VA


2/28/2022


2/28/2024


7,348







8.5 / 4

Southpoint Capital


Fredericksburg, VA


2/28/2022


2/28/2024


4,962



2,668





8.5 / 4































Student housing properties:









Haven 12


Starkville, MS


12/17/2018


11/30/2020


6,116



6,116



5,816



8.5 / 0

Haven46


Tampa, FL


3/29/2019


9/29/2020


9,820



9,820



9,820



8.5 / 5

Haven Northgate (3)


College Station, TX


6/20/2019


N/A






65,724



(4)  / 1.5

Lubbock II (3)


Lubbock, TX


4/20/2019


N/A






9,357



8.5 / 0

Haven Charlotte


Charlotte, NC


12/22/2019


12/22/2021


19,582



19,045



17,039



8.5 / 6.5

Haven Charlotte Member

Charlotte, NC


12/22/2019


12/22/2021


8,201



8,201



7,795



8.5 / 6.5

Solis Kennesaw


Atlanta, GA


9/26/2020


9/26/2022


12,359



11,100



1,610



8.5 / 5.5

Solis Kennesaw Capital


Atlanta, GA


10/1/2020


10/1/2022


8,360



7,619



7,145



8.5 / 5.5
















New Market Properties:















Dawson Marketplace


Atlanta, GA


9/24/2020


9/24/2022


12,857



12,857



12,857



8.5 / 6.9 (5)
















Other:















Crescent Avenue (6)


Atlanta, GA


4/13/2018


N/A






8,500



10 / 5

North Augusta Ballpark


North Augusta, SC


1/15/2021


1/15/2024


3,500



3,216





9 / 6
























$

515,505



392,189



388,506




Unamortized loan origination fees








(1,760)



(1,710)




Allowance for loan losses






(3,029)























Carrying amount










$

387,400



$

386,796




















































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

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

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

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

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

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

 

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




Total units
upon


Purchase option window


Project/Property

Location


completion (1)


Begin


End











Multifamily communities:









Encore

Atlanta, GA

(2)


N/A


N/A


Palisades

Northern VA


304


1/1/2019


5/31/2019


Bishop Street

Atlanta, GA

(2)


N/A


N/A


Hidden River

Tampa, FL

(2)


N/A


N/A


CityPark II

Charlotte, NC


200


1/1/2019


4/1/2019


Park 35 on Clairmont

Birmingham, AL

(3)


N/A


N/A


Fort Myers

Fort Myers, FL


224


S + 90 days (4)


S + 150 days (4)


Wiregrass

Tampa, FL


392


S + 90 days (4)


S + 150 days (4)


360 Forsyth

Atlanta, GA


356


S + 90 days (4)


S + 150 days (4)


Morosgo

Atlanta, GA


258


S + 90 days (4)


S + 150 days (4)


University City Gateway

Charlotte, NC


338


S + 90 days (4)


S + 150 days (4)


Berryessa

San Jose, CA



N/A


N/A


The Anson

Nashville, TN


301


S + 90 days (4)


S + 150 days (4)


North Augusta Ballpark

North Augusta, SC



N/A


N/A


Cameron Park

Alexandria, VA


302


S + 90 days (4)


S + 150 days (4)


Southpoint

Fredericksburg, VA


240


S + 90 days (4)


S + 150 days (4)











Student housing properties:









Haven46

Tampa, FL

(2)


N/A


N/A


Haven Charlotte

Charlotte, NC

(2)


N/A


N/A


Solis Kennesaw

Atlanta, GA


248


(5)


(5)














3,163















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




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




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




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




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


 


Mortgage Indebtedness

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




Principal balance as of










Acquisition/

refinancing
date


September 30,
2018


December 31,
2017


Maturity
date


Interest
rate


Basis point
spread over
1 Month
LIBOR


Interest only
through date
(1)















Multifamily communities:



(in thousands)









Stone Rise

7/3/2014


$


(2)

$

23,939



8/1/2019


2.89

%


Fixed rate


8/31/2015

Summit Crossing

10/31/2017


38,520



39,019



11/1/2024


3.99

%


Fixed rate


N/A

Summit Crossing II

3/20/2014


13,357



13,357



4/1/2021


4.49

%


Fixed rate


4/30/2019

McNeil Ranch

1/24/2013


13,487



13,646



2/1/2020


3.13

%


Fixed rate


2/28/2018

Lake Cameron

1/24/2013



(3)

19,773



2/1/2020


3.13

%


Fixed rate


2/28/2018

Stoneridge

9/26/2014


25,679



26,136



10/1/2019


3.18

%


Fixed rate


N/A

Vineyards

9/26/2014


34,201



34,672



10/1/2021


3.68

%


Fixed rate


10/31/2017

Avenues at Cypress

2/13/2015


21,319



21,675



9/1/2022


3.43

%


Fixed rate


N/A

Avenues at Northpointe

2/13/2015


27,043



27,467



3/1/2022


3.16

%


Fixed rate


3/31/2017

Venue at Lakewood Ranch

5/21/2015


28,882



29,348



12/1/2022


3.55

%


Fixed rate


N/A

Aster at Lely Resort

6/24/2015


31,967



32,471



7/5/2022


3.84

%


Fixed rate


N/A

CityPark View

6/30/2015


20,690



21,038



7/1/2022


3.27

%


Fixed rate


N/A

Avenues at Creekside

7/31/2015


39,904



40,523



8/1/2024


3.86

%


160

(4)

8/31/2016

Citi Lakes

9/3/2015


41,779



42,396



4/1/2023


4.43

%


217

(5)

N/A

Stone Creek

6/22/2017


20,222



20,467



7/1/2052


3.22

%


Fixed rate


N/A

Lenox Village Town Center

12/21/2015


29,461



30,009



5/1/2019


3.82

%


Fixed rate


N/A

Lenox Village III

12/21/2015


17,551



17,802



1/1/2023


4.04

%


Fixed rate


N/A

Overton Rise

2/1/2016


39,414



39,981



8/1/2026


3.98

%


Fixed rate


N/A

Baldwin Park

1/5/2016


77,800



77,800



1/5/2019


4.56

%


230


1/4/2019

Crosstown Walk

1/15/2016


31,033



31,486



2/1/2023


3.90

%


Fixed rate


N/A

525 Avalon Park

6/15/2017


66,039



66,912



7/1/2024


3.98

%


Fixed rate


N/A

City Vista

7/1/2016


34,562



35,073



7/1/2026


3.68

%


Fixed rate


N/A

Sorrel

8/24/2016


32,306



32,801



9/1/2023


3.44

%


Fixed rate


N/A

Citrus Village

3/3/2017


29,539



29,970



6/10/2023


3.65

%


Fixed rate


6/09/2017

Retreat at Greystone

11/21/2017


34,789



35,210



12/1/2024


4.31

%


Fixed rate


N/A

Founders Village

3/31/2017


30,882



31,271



4/1/2027


4.31

%


Fixed rate


N/A

Claiborne Crossing

4/26/2017


26,487



26,801



6/1/2054


2.89

%


Fixed rate


N/A

Luxe at Lakewood Ranch

7/26/2017


38,554



39,066



8/1/2027


3.93

%


Fixed rate


N/A

Adara at Overland Park

9/27/2017


31,345



31,760



4/1/2028


3.90

%


Fixed rate


N/A

Aldridge at Town Village

10/31/2017


37,381



37,847



11/1/2024


4.19

%


Fixed rate

(6)

N/A

Reserve at Summit Crossing

9/29/2017


19,746



20,017



10/1/2024


3.87

%


Fixed rate


N/A

Overlook at Crosstown Walk

11/21/2017


21,946



22,231



12/1/2024


3.95

%


Fixed rate


N/A

Colony at Centerpointe

12/20/2017


32,929



33,346



10/1/2026


3.68

%


Fixed rate


N/A

Lux at Sorrel

1/9/2018


31,199





2/1/2030


3.91

%


Fixed rate


N/A

Green Park

2/28/2018


39,409





3/10/2028


4.09

%


Fixed rate


N/A

The Lodge at Hidden River

9/27/2018


41,685





10/1/2028


4.32

%


Fixed rate


N/A















Total multifamily communities



1,101,107



1,045,310
























Grocery-anchored shopping centers:

Spring Hill Plaza

9/5/2014


9,314



9,470



10/1/2019


3.36

%


Fixed rate


10/31/2015

Parkway Town Centre

9/5/2014


6,774



6,887



10/1/2019


3.36

%


Fixed rate


10/31/2015

Woodstock Crossing

8/8/2014


2,949



2,989



9/1/2021


4.71

%


Fixed rate


N/A

Deltona Landings

9/30/2014


6,661



6,778



10/1/2019


3.48

%


Fixed rate


N/A

Powder Springs

9/30/2014


7,029



7,152



10/1/2019


3.48

%


Fixed rate


N/A

Kingwood Glen

9/30/2014


11,145



11,340



10/1/2019


3.48

%


Fixed rate


N/A

Barclay Crossing

9/30/2014


6,266



6,376



10/1/2019


3.48

%


Fixed rate


N/A

Sweetgrass Corner

9/30/2014


7,600



7,731



10/1/2019


3.58

%


Fixed rate


N/A

Parkway Centre

9/30/2014


4,364



4,441



10/1/2019


3.48

%


Fixed rate


N/A

The Market at Salem Cove

10/6/2014


9,296



9,423



11/1/2024


4.21

%


Fixed rate


11/30/2016

Independence Square

8/27/2015


11,780



11,967



9/1/2022


3.93

%


Fixed rate


9/30/2016

Royal Lakes Marketplace

9/4/2015


9,580



9,690



9/4/2020


4.61

%


250


4/3/2017

The Overlook at Hamilton Place

12/22/2015


20,012



20,301



1/1/2026


4.19

%


Fixed rate


N/A

Summit Point

10/30/2015


11,947



12,208



11/1/2022


3.57

%


Fixed rate


N/A

East Gate Shopping Center

4/29/2016


5,468



5,578



5/1/2026


3.97

%


Fixed rate


N/A

Fury's Ferry

4/29/2016


6,317



6,444



5/1/2026


3.97

%


Fixed rate


N/A

Rosewood Shopping Center

4/29/2016


4,243



4,328



5/1/2026


3.97

%


Fixed rate


N/A

Southgate Village

4/29/2016


7,542



7,694



5/1/2026


3.97

%


Fixed rate


N/A

The Market at Victory Village

5/16/2016


9,104



9,214



9/11/2024


4.40

%


Fixed rate


10/10/2017

Wade Green Village

4/7/2016


7,854



7,969



5/1/2026


4.00

%


Fixed rate


N/A

Lakeland Plaza

7/15/2016


28,450



29,023



8/1/2026


3.85

%


Fixed rate


N/A

University Palms

8/8/2016


12,890



13,162



9/1/2026


3.45

%


Fixed rate


N/A

Cherokee Plaza

8/8/2016


24,839



25,322



9/1/2021


4.35

%


225

(7)

N/A

Sandy Plains Exchange

8/8/2016


9,004



9,194



9/1/2026


3.45

%


Fixed rate


N/A

Thompson Bridge Commons

8/8/2016


12,037



12,291



9/1/2026


3.45

%


Fixed rate


N/A

Heritage Station

8/8/2016


8,909



9,097



9/1/2026


3.45

%


Fixed rate


N/A

Oak Park Village

8/8/2016


9,194



9,388



9/1/2026


3.45

%


Fixed rate


N/A

Shoppes of Parkland

8/8/2016


16,045



16,241



9/1/2023


4.67

%


Fixed rate


N/A

Champions Village

10/18/2016


27,400



27,400



11/1/2021


5.11

%


300

(8)

11/1/2021

Castleberry-Southard

4/21/2017


11,227



11,383



5/1/2027


3.99

%


Fixed rate


N/A

Rockbridge Village

6/6/2017


13,942



14,142



7/5/2027


3.73

%


Fixed rate


N/A

Irmo Station

7/26/2017


10,373



10,566



8/1/2030


3.94

%


Fixed rate


N/A

Maynard Crossing

8/25/2017


18,044



18,388



9/1/2032


3.74

%


Fixed rate


N/A

Woodmont Village

9/8/2017


8,587



8,741



10/1/2027


4.125

%


Fixed rate


N/A

West Town Market

9/22/2017


8,794



8,963



10/1/2025


3.65

%


Fixed rate


N/A

Crossroads Market

12/5/2017


18,699



19,000



1/1/2030


3.95

%


Fixed rate


N/A

Anderson Central

3/16/2018


11,888





4/1/2028


4.32

%


Fixed rate


N/A

Greensboro Village

5/22/2018


8,501





6/1/2028


4.20

%


Fixed rate


N/A

Governors Towne Square

5/22/2018


11,310





6/1/2028


4.20

%


Fixed rate


N/A

Conway Plaza

6/29/2018


9,756





7/5/2028


4.29

%


Fixed rate


N/A

Brawley Commons

7/6/2018


18,491





8/1/2028


4.36

%


Fixed rate


N/A















Total grocery-anchored shopping centers



463,625



410,281
























Student housing properties:

North by Northwest

6/1/2016


32,198



32,767



10/1/2022


4.02

%


Fixed rate


N/A

SoL

3/29/2018


37,485



37,485



1/29/2019


4.36

%


210


1/29/2019

Stadium Village

10/27/2017


46,308



46,930



11/1/2024


3.80

%


Fixed rate


N/A

Ursa

12/18/2017


31,400



31,400



1/5/2020


5.26

%


300


1/5/2020

The Tradition

5/10/2018


30,000





6/6/2021


6.26

%


400

(9)

6/6/2021

Retreat at Orlando

5/31/2018


47,125





9/1/2025


4.09

%


Fixed rate


9/1/2020

The Bloc

6/27/2018


28,966





7/9/2021


5.81

%


355

(10)

7/9/2021















Total student housing properties



253,482



148,582
























Office buildings:

Brookwood Center

8/29/2016


31,668



32,219



9/10/2031


3.52

%


Fixed rate


10/9/2017

Galleria 75

11/4/2016


5,588



5,716



7/1/2022


4.25

%


Fixed rate


N/A

Three Ravinia

12/30/2016


115,500



115,500



1/1/2042


4.46

%


Fixed rate


1/31/2022

Westridge at La Cantera

11/13/2017


53,488



54,440



12/10/2028


4.10

%


Fixed rate


N/A

Armour Yards

1/29/2018


40,000





2/1/2028


4.10

%


Fixed rate


2/29/2020

150 Fayetteville

7/31/2018


114,400





8/10/2028


4.27

%


Fixed rate


9/9/2020















Total office buildings



360,644



207,875










Grand total



2,178,858



1,812,048










Less: deferred loan costs



(33,775)



(30,249)










Less: below market debt adjustment



(4,500)



(5,147)










Mortgage notes, net



$

2,140,583



$

1,776,652


























Footnotes to Mortgage Notes Table


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

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

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

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

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

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

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

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

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

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

 


Multifamily Communities

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









Three months ended
September 30, 2018


Property


Location


Number of
units


Average unit
size (sq. ft.)


Average
physical
occupancy


Average
rent per
unit














Established Communities:












Avenues at Cypress


Houston, TX


240


1,170



96.8

%


$

1,436


Avenues at Northpointe


Houston, TX


280


1,167



96.2

%


$

1,382


Vineyards


Houston, TX


369


1,122



96.3

%


$

1,167


Aster at Lely Resort


Naples, FL


308


1,071



93.9

%


$

1,480


Venue at Lakewood Ranch


Sarasota, FL


237


1,001



94.0

%


$

1,561


Citi Lakes


Orlando, FL


346


984



93.4

%


$

1,419


Lenox Portfolio


Nashville, TN


474


861



95.7

%


$

1,205


Overton Rise


Atlanta, GA


294


1,018



95.4

%


$

1,541


Sorrel


Jacksonville, FL


290


1,048



95.6

%


$

1,270














Total/Average Established Communities




2,838




95.3

%
















Summit Crossing


Atlanta, GA


485


1,053



97.1

%


$

1,187


McNeil Ranch


Austin, TX


192


1,071





$

1,246


CityPark View


Charlotte, NC


284


948





$

1,099


Avenues at Creekside


San Antonio, TX


395


974





$

1,147


Stone Creek


Houston, TX


246


852





$

1,078


525 Avalon Park


Orlando, FL


487


1,394



96.0

%


$

1,438


Retreat at Greystone


Birmingham, AL


312


1,100



96.5

%


$

1,234


Broadstone at Citrus Village


Tampa, FL


296


980



97.0

%


$

1,288


Stoneridge Farms at the Hunt Club


Nashville, TN


364


1,153





$

1,103


Founders Village


Williamsburg, VA


247


1,070



96.5

%


$

1,373


Crosstown Walk


Tampa, FL


342


981



94.6

%


$

1,293


Claiborne Crossing


Louisville, KY


242


1,204



96.6

%


$

1,334


Luxe at Lakewood Ranch


Sarasota, FL


280


1,105





$

1,505


Adara Overland Park


Kansas City, KS


260


1,116



96.3

%


$

1,335


Aldridge at Town Village


Atlanta, GA


300


969



95.6

%


$

1,350


The Reserve at Summit Crossing


Atlanta, GA


172


1,002



95.7

%


$

1,347


Overlook at Crosstown Walk


Tampa, FL


180


986



94.1

%


$

1,385


Colony at Centerpointe


Richmond, VA


255


1,149



95.9

%


$

1,370


Lux at Sorrel


Jacksonville, FL


265


1,025



94.0

%


$

1,385


Green Park


Atlanta, GA


310


985



94.0

%


$

1,453


Lodge at Hidden River


Tampa, FL


300


980


















Value-add project:












Village at Baldwin Park


Orlando, FL


528


1,069





$

1,646


















6,742








Joint venture:












City Vista


Pittsburgh, PA


272


1,023



96.2

%


$

1,357














Total PAC Non-Established Communities




7,014








Average stabilized physical occupancy








95.6

%
















Total multifamily community units




9,852




















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

Student Housing Properties

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

 











Three months ended
September 30, 2018

Property


Location


Number
of units


Number
of beds


Average unit
size (sq. ft.)


Average
physical
occupancy


Average rent
per bed

Student housing properties:













North by Northwest


Tallahassee, FL


219


679


1,250



95.2

%


$

730

SoL


Tempe, AZ


224


639


1,296



95.1

%


$

701

Stadium Village (1)


Atlanta, GA


198


792


1,466



97.2

%


$

700

Ursa (1)


Waco, TX


250


840


1,634





n/a

The Tradition


College Station, TX


427


808


549





n/a

The Retreat at Orlando


Orlando, FL


221


894


2,036





n/a

The Bloc


Lubbock, TX


140


556


1,394





n/a


















1,679


5,208







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

 

Capital Expenditures

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

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




Capital Expenditures - Multifamily Communities




Recurring


Non-recurring


Total

(in thousands, except per-unit figures)

Amount


Per Unit


Amount


Per Unit


Amount


Per Unit

Appliances

$

117



$

11.96



$



$



$

117



$

11.96


Carpets



418



42.78







418



42.78


Wood / vinyl flooring

87



8.87







87



8.87


Mini blinds and ceiling fans

31



3.17







31



3.17


Fire safety






34



3.46



34



3.46


HVAC


143



14.60







143



14.60


Computers, equipment, misc.

3



0.34



83



8.50



86



8.84


Elevators












Exterior painting





159



16.28



159



16.28


Leasing office and other common amenities

38



3.92



1,741



178.08



1,779



182.00


Major structural projects





5,532



565.93



5,532



565.93


Cabinets and countertop upgrades





769



78.63



769



78.63


Landscaping and fencing





293



29.99



293



29.99


Parking lot






279



28.54



279



28.54


Common area items





95



9.72



95



9.72


Totals



$

837



$

85.64



$

8,985



$

919.13



$

9,822



$

1,004.77


 

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




Capital Expenditures - Student Housing Properties




Recurring


Non-recurring


Total

(in thousands, except per-unit figures)

Amount


Per Bed


Amount


Per Bed


Amount


Per Bed

Appliances

$

23



$

4.47



$



$



$

23



$

4.47


Carpets



73



13.95







73



13.95


Wood / vinyl flooring

1



0.16







1



0.16


Mini blinds and ceiling fans

9



1.76







9



1.76


Fire safety













HVAC


31



5.96







31



5.96


Computers, equipment, misc.

3



0.50



44



8.46



47



8.96


Elevators












Exterior painting












Leasing office and other common amenities

66



12.76



29



5.56



95



18.32


Major structural projects





3



0.56



3



0.56


Cabinets and counter top upgrades

1



0.12



227



43.56



228



43.68


Landscaping and fencing





6



1.06



6



1.06


Parking lot













Common area items





36



6.83



36



6.83


Totals



$

207



$

39.68



$

345



$

66.03



$

552



$

105.71


 

Grocery-Anchored Shopping Center Portfolio

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

Property name

Location


Year built


GLA (1)


Percent
leased


Grocery
anchor
tenant











Castleberry-Southard

 Atlanta, GA


2006


80,018



100.0

%


 Publix

Cherokee Plaza

 Atlanta, GA


1958


102,864



100.0

%


Kroger

Governors Towne Square

 Atlanta, GA


2004


68,658



95.9

%


 Publix

Lakeland Plaza

 Atlanta, GA


1990


301,711



94.6

%


Sprouts

Powder Springs

 Atlanta, GA


1999


77,853



96.9

%


 Publix

Rockbridge Village

 Atlanta, GA


2005


102,432



94.2

%


 Kroger

Roswell Wieuca Shopping Center

 Atlanta, GA


2007


74,370



100.0

%


 The Fresh Market

Royal Lakes Marketplace

 Atlanta, GA


2008


119,493



89.3

%


 Kroger

Sandy Plains Exchange

 Atlanta, GA


1997


72,784



93.2

%


Publix

Summit Point

 Atlanta, GA


2004


111,970



86.9

%


 Publix

Thompson Bridge Commons

 Atlanta, GA


2001


92,587



96.1

%


Kroger

Wade Green Village

 Atlanta, GA


1993


74,978



93.2

%


 Publix

Woodmont Village

 Atlanta, GA


2002


85,639



94.6

%


Kroger

Woodstock Crossing

 Atlanta, GA


1994


66,122



100.0

%


 Kroger

East Gate Shopping Center

 Augusta, GA


1995


75,716



92.2

%


 Publix

Fury's Ferry

 Augusta, GA


1996


70,458



98.6

%


 Publix

Parkway Centre

 Columbus, GA


1999


53,088



100.0

%


 Publix

Spring Hill Plaza

 Nashville, TN


2005


61,570



100.0

%


 Publix

Parkway Town Centre

 Nashville, TN


2005


65,587



98.2

%


 Publix

The Market at Salem Cove

 Nashville, TN


2010


62,356



97.8

%


 Publix

The Market at Victory Village

 Nashville, TN


2007


71,300



98.5

%


 Publix

Greensboro Village

 Nashville, TN


2005


70,203



98.3

%


 Publix

The Overlook at Hamilton Place

 Chattanooga, TN


1992


213,095



100.0

%


 The Fresh Market

Shoppes of Parkland

 Miami-Ft. Lauderdale, FL


2000


145,720



98.4

%


BJ's Wholesale Club

Barclay Crossing

 Tampa, FL


1998


54,958



100.0

%


 Publix

Deltona Landings

 Orlando, FL


1999


59,966



100.0

%


 Publix

University Palms

 Orlando, FL


1993


99,172



100.0

%


Publix

Conway Plaza

 Orlando, FL


1966


117,705



98.0

%


Publix

Crossroads Market

 Naples, FL


1993


126,895



100.0

%


Publix

Neapolitan Way

 Naples, FL


1985


137,580



91.6

%


Publix

Champions Village

 Houston, TX


1973


383,346



78.9

%


Randalls

Kingwood Glen

 Houston, TX


1998


103,397



97.9

%


 Kroger

Independence Square

 Dallas, TX


1977


140,218



84.9

%


 Tom Thumb

Oak Park Village

 San Antonio, TX


1970


64,855



100.0

%


H.E.B.

Sweetgrass Corner

 Charleston, SC


1999


89,124



96.2

%


 Bi-Lo

Irmo Station

 Columbia, SC


1980


99,384



95.3

%


Kroger

Anderson Central

 Greenville Spartanburg, SC


1999


223,211



96.1

%


 Walmart

Fairview Market

 Greenville Spartanburg, SC


1998


53,888



73.5

%


Aldi

Rosewood Shopping Center

 Columbia, SC


2002


36,887



90.2

%


 Publix

Brawley Commons

 Charlotte, NC


1997


122,028



97.4

%


 Publix

West Town Market

 Charlotte, NC


2004


67,883



100.0

%


Harris Teeter

Heritage Station

 Raleigh, NC


2004


72,946



100.0

%


Harris Teeter

Maynard Crossing

 Raleigh, NC


1996


122,781



96.9

%


Harris Teeter

Southgate Village

 Birmingham, AL


1988


75,092



98.0

%


 Publix











Grand total/weighted average





4,571,888



94.6

%



 

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

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

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


Total grocery-anchored shopping center portfolio


Number of leases


Leased GLA


Percent of leased
GLA







Month to month

10



25,107



0.6

%

2018

18



34,746



0.8

%

2019

105



578,975



13.4

%

2020

125



535,312



12.4

%

2021

123



557,261



12.9

%

2022

106



351,053



8.1

%

2023

92



378,994



8.8

%

2024

28



610,914



14.1

%

2025

26



429,810



9.9

%

2026

12



143,420



3.3

%

2027

19



121,651



2.8

%

2028+

36



553,131



12.9

%







Total

700



4,320,374



100.0

%

 

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

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

Office Building Portfolio

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

Property Name


Location


GLA


Percent
leased

Three Ravinia


Atlanta, GA


814,000



91

%

150 Fayetteville


Raleigh, NC


560,000



89

%

Westridge at La Cantera


San Antonio, TX


258,000



100

%

Armour Yards


Atlanta, GA


187,000



94

%

Brookwood Center


Birmingham, AL


169,000



100

%

Galleria 75


Atlanta, GA


111,000



96

%












2,099,000



93

%

 

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




Rentable square
footage


Percent of
Annual Base
Rent


Annual Base
Rent (in
thousands)

InterContinental Hotels Group

520,039



25.4

%


$

11,821


State Farm Mutual Automobile Insurance Company

183,168



7.1

%


3,300


United Services Automobile Association

129,015



6.5

%


3,042


Harland Clarke Corporation

129,016



6.0

%


2,811


Smith Anderson

91,998



5.9

%


2,768











1,053,236



50.9

%


$

23,742


               

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

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

Office building portfolio





Percent of

Year of lease
expiration


Rentable square


rented


feet


square feet

2018


23,128



1.2

%

2019


50,109



2.6

%

2020


62,478



3.2

%

2021


241,325



12.5

%

2022


58,922



3.1

%

2023


109,036



5.6

%

2024


203,703



10.5

%

2025


125,987



6.5

%

2026


91,998



4.8

%

2027


259,700



13.4

%

2028+


707,166



36.6

%






Total


1,933,552



100.0

%

 

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

Definitions of Non-GAAP Measures

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

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

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

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

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

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

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

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

FFO, plus:

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

Less:

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

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

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

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

About Preferred Apartment Communities, Inc.         

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

 

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