Preferred Apartment Communities

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Preferred Apartment Communities, Inc. Reports Results for First Quarter 2019

ATLANTA, April 29, 2019 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company" or "Preferred Apartment Communities") today reported results for the quarter ended March 31, 2019. 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.

"We are very pleased with our first quarter financial results and, in particular, with our multifamily same store NOI growth. We expect 2019 to be a transformative year for PAC as we seek to build a sustainable program of excellence," said Daniel M. DuPree, Preferred Apartment Communities' Chairman and Chief Executive Officer.

Preferred Apartment Communities

Financial Highlights

                Our operating results are presented below.











Three months ended March 31,






2019


2018


% change











Revenues (in thousands)

$

111,506


$

90,370


23.4

%











Per share data:








Net income (loss) (1)

$

(0.66)


$

(0.14)













FFO (2)

$

0.39


$

0.37


5.4

%











AFFO (2)

$

0.32


$

0.26


23.1

%











Dividends (3)

$

0.26


$

0.25


4.0

%










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

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

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


 

  • For the first quarter 2019, our FFO payout ratio to Common Stockholders and Unitholders was approximately 67.1% and our FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 60.0%. (A)
  • For the first quarter 2019, our AFFO payout ratio to Common Stockholders and Unitholders was approximately 80.8% and our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 64.4%. (B)
  • For the quarter ended March 31, 2019, our rental revenue increased approximately 3.1% and our net operating income increased approximately 3.1% for our same-store multifamily communities as compared to the quarter ended March 31, 2018.(C) For the first quarter 2019, our average same-store multifamily communities' physical occupancy was 95.2%.
  • At March 31, 2019, the market value of our common stock was $14.82 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 18.2% through March 31, 2019.
  • As of March 31, 2019, the average age of our multifamily communities was approximately 5.2 years, which is the youngest in the public multifamily REIT industry.
  • Approximately 88.6% of our permanent property-level mortgage debt has fixed interest rates and approximately 5.8% has variable interest rates which are capped. After the refinancing of the variable rate mortgages on our Royal Lakes Marketplace and Cherokee Plaza properties in April 2019, 90.0% of our mortgage debt has fixed interest rates. In addition, we plan to refinance the remaining uncapped variable rate mortgage debt into new fixed rate instruments during the remainder of 2019. We believe we are well protected against potential increases in market interest rates.
  • At March 31, 2019, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 53.0%. Included in our total assets were our investments in the Series 2018-ML04 and Series 2019-ML05 from the Freddie Mac K program. Our leverage calculation excludes the gross assets and liabilities of approximately $544.9 million that are owned by other pool participants in the Freddie Mac K program that we consolidated under the VIE rules.
  • As of March 31, 2019, our total assets were approximately $4.8 billion compared to approximately $3.4 billion as of March 31, 2018, an increase of approximately $1.4 billion, or approximately 41.5%. This growth was driven by (i) the acquisition of 16 real estate properties (partially offset by the sale of 3 properties) and (ii) the consolidation of the mortgage pools from the Freddie Mac K program. Excluding the VIE mortgage pool assets from other participants in the K Program, our total assets grew approximately $862.9 million, or 25.4% since March 31, 2018.
  • On March 25, 2019, we closed on a real estate loan investment aggregating approximately $10.8 million in support of a multifamily community to be located in Destin, Florida.

 

(A) We calculate the FFO payout ratio to Common Stockholders as the ratio of Common Stock dividends and distributions to FFO Attributable to Common Stockholders and Unitholders. We calculate the FFO payout ratio to preferred stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and FFO. 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) 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.


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

Acquisitions of Properties

During the first quarter 2019, we acquired the following properties:










Property


Location (MSA)


Beds / Gross leasable area
(square feet)











Student housing property:








Haven49 (1)


Charlotte, NC


887

beds











Grocery-anchored shopping center:








Gayton Crossing


Richmond, VA


158,316

GLA



















(1) The Company assumed the membership interests of the project from the developer in satisfaction of the project indebtedness owed to the Company.









 

Real Estate Assets












Owned as of
March 31, 2019


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


Potential total




Multifamily communities:









Properties

32


7


39




Units

9,768


2,153


11,921




Grocery-anchored shopping centers:









Properties

46



46




Gross leasable area (square feet)

4,889,011



4,889,011




Student housing properties:









Properties

8


1


9




Units

2,011


175


2,186




Beds

6,095


543


6,638




Office buildings:









Properties

7


1


8




Rentable square feet

2,578,000


191,000


2,769,000














(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)

The Company has terminated various purchase option agreements in exchange for termination fees.  These properties 
     are excluded from the potential additions from our real estate loan investment portfolio

Subsequent to Quarter End

     On April 12, 2019, we closed on a real estate loan investment of up to approximately $7.2 million in connection with the development of a 204-unit second phase of our Lodge at Hidden River multifamily community located in Tampa, Florida.

     On April 12, 2019, we refinanced the variable-rate mortgage on our Royal Lakes Marketplace grocery-anchored shopping center into a new 10 year, $9,700,000 loan with a fixed rate of 4.29%.

     On April 12, 2019, we refinanced the variable-rate mortgage on our Cherokee Plaza grocery-anchored shopping center into a new 8 year, $25,200,000 loan with a fixed rate of 4.28%.

Same-Store Multifamily Communities Financial Data

The following chart presents same store operating results for the Company's same-store multifamily communities. We define our population of same-store multifamily communities as those that have achieved occupancy at or above 93% occupancy for all three 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 same-store multifamily communities containing an aggregate 6,172 units:

Aster at Lely Resort


Avenues at Cypress


Avenues at Northpointe

Citi Lakes


Lenox Village


Retreat at Lenox Village

Overton Rise


Sorrel


Venue at Lakewood Ranch

Avenues at Creekside


525 Avalon Park


Vineyards

Citrus Village


Retreat at Greystone


City Vista

Founders' Village


Luxe at Lakewood Ranch


Adara at Overland Park

Summit Crossing I


Summit Crossing II


Aldridge at Town Village

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 Net Income (Loss) to Multifamily Communities' Same-Store Net Operating Income (NOI)








Three months ended:

(in thousands)


3/31/2019


3/31/2018






Net income (loss)


$

(2,280)


$

14,263

Add:





Equity stock compensation


311


1,135

Depreciation and amortization


45,289


40,616

Interest expense


26,756


20,968

Management fees


7,829


6,241

Insurance, professional fees and other expenses

1,464


706

Waived asset management and general and administrative expense fees


(2,629)


(1,220)

Less:





Interest revenue on notes receivable


11,288


10,300

Interest revenue on related party notes receivable


5,802


4,265

Income from consolidated VIEs


141


Loss on extinguishment of debt


(17)


Gains on sales of real estate and trading investment


4


20,354






Property net operating income


59,522


47,790

Less:





Non-same-store property revenues


(68,586)


(50,679)

Add:





Non-same-store property operating expenses


24,267


17,632






Same store net operating income


$

15,203


$

14,743

 

Multifamily Communities' Same Store Net Operating Income












Three months ended:





(in thousands)


3/31/2019


3/31/2018


$ change


% change

Revenues:









Rental revenues


$

24,997


$

24,240


$

757


3.1

%

Other property revenues


833


887


(54)


(6.1)

%

Total revenues


25,830


25,127


703


2.8

%










Operating expenses:









Property operating and maintenance


2,938


3,020


(82)


(2.7)

%

Payroll


2,042


1,904


138


7.2

%

Property management fees


1,030


1,005


25


2.5

%

Real estate taxes


3,561


3,470


91


2.6

%

Other


1,056


985


71


7.2

%

Total operating expenses


10,627


10,384


243


2.3

%










Same store net operating income


$

15,203


$

14,743


$

460


3.1

%

Same store average physical occupancy


95.2

%

94.7

%





 

Capital Markets Activities

During the first quarter 2019, we issued and sold an aggregate of 129,680 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 $116.7 million after commissions and other fees.

In addition, during the first quarter 2019, we issued 334,480 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 $4.2 million. We also issued approximately 1.1 million shares of Common Stock for redemptions of 16,189 shares of our Series A Redeemable Preferred Stock.

During the first quarter 2019, we issued and sold an aggregate of 12,472 shares of Series M Redeemable Preferred Stock ("mShares"), resulting in net proceeds of approximately $12.1 million after dealer manager fees.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On February 21, 2019, we declared a quarterly dividend on our Common Stock of $0.26 per share for the first quarter 2019. This represents a 4.0% increase in our common stock dividend from our first quarter 2018 common stock dividend of $0.25 per share, and an average annual dividend growth rate of 14.0% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The first quarter dividend was paid on April 15, 2019 to all stockholders of record on March 15, 2019. In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.26 per unit for the first quarter 2019, which was paid on April 15, 2019 to all Class A Unit holders of record as of March 15, 2019.

Monthly Dividends on Preferred Stock

We declared monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $24.7 million for the first quarter 2019 and represent a 6% annual yield. We declared dividends totaling approximately $806,000 on our Series M Redeemable Preferred Stock, or mShares, for the first quarter 2019. The mShares have a dividend rate that escalates 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, April 30, 2019 at 11:00 a.m. Eastern Time to discuss our first quarter 2019 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, April 30, 2019
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

The live broadcast of our first quarter 2019 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.

2019 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 $1.44 - $1.50 per share for the full year 2019.

AFFO and FFO are calculated after deductions for all preferred stock dividends. Reconciliations of net income (loss) attributable to common stockholders to FFO and AFFO for the three-month periods ended March 31, 2019 and 2018 appear in the attached report, as well as on our website using the following link:

http://investors.pacapts.com/download/1Q19_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, 2018 that was filed with the Securities and Exchange Commission, or SEC, on March 1, 2019, 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, will arrange to send you a prospectus with respect to the mShares Offering and/or the $1.5 Billion Unit Offering upon request by contacting Leonard A. Silverstein at (770) 818-4100, 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.

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

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

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

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

    

FIRST QUARTER – SUPPLEMENTAL FINANCIAL DATA

Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)






Three months ended March 31,

(In thousands, except per-share figures)


2019


2018

Revenues:





Rental revenues


$

92,238


$

74,261

Other property revenues


2,178


1,544

Interest income on loans and notes receivable


11,288


10,300

Interest income from related parties


5,802


4,265

Total revenues


111,506


90,370






Operating expenses:





Property operating and maintenance


10,792


8,805

Property salary and benefits


4,657


3,899

Property management fees


3,267


2,756

Real estate taxes


12,500


9,975

General and administrative


2,614


1,841

Equity compensation to directors and executives


311


1,135

Depreciation and amortization


45,289


40,616

Asset management and general and administrative expense





fees to related party


7,829


6,241

Insurance, professional fees, and other expenses


2,528


1,445






Total operating expenses


89,787


76,713

Waived asset management and general and administrative





expense fees


(2,629)


(1,220)






Net operating expenses


87,158


75,493

Operating income before gains on sales of





real estate and trading investment


24,348


14,877

Gains on sales of real estate and trading investment


4


20,354

Operating income


24,352


35,231






Interest expense


26,756


20,968

Change in fair value of net assets of consolidated





VIEs from mortgage-backed pools


141


Loss on extinguishment of debt


(17)







Net (loss) income


(2,280)


14,263

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


(492)


(380)






Net (loss) income attributable to the Company


(2,772)


13,883






Dividends declared to preferred stockholders


(25,539)


(19,517)

Earnings attributable to unvested restricted stock


(2)


(2)






Net loss attributable to common stockholders


$

(28,313)


$

(5,636)






Net loss per share of Common Stock available to





 common stockholders, basic and diluted


$

(0.66)


$

(0.14)






Weighted average number of shares of Common Stock outstanding,





basic and diluted


42,680


39,098

 

 

Reconciliation of FFO Attributable to Common Stockholders and Unitholders and AFFO

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






Three months ended March 31,

(In thousands, except per-share figures)



2019


2018









Net loss attributable to common stockholders (See note 1)

$

(28,313)



$

(5,636)










Add:

Depreciation of real estate assets


35,717



27,712



Amortization of acquired real estate intangible assets and deferred leasing costs

9,123



12,591



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


492



380


Less:

Gains on sales of trading investment and real estate




(20,354)


FFO attributable to common stockholders and unitholders

17,019



14,693










Add:

Loan cost amortization on acquisition term note

19



25



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

468



476



Weather-related property operating losses (See note 4)



(260)



Payment of costs related to property refinancing

55



41



Non-cash equity compensation to directors and executives

311



1,135



Amortization of loan closing costs (See note 5)


1,131



1,045



Depreciation/amortization of non-real estate assets


449



313



Net loan fees received (See note 6)


401



800



Accrued interest income received (See note 7)


2,760



1,343



Internalization costs (See note 8)


45





Deemed dividends from cash redemptions of preferred stock


3



318



Amortization of lease inducements (See note 9)


428



257



Non-cash dividends on Preferred Stock


93



106



Cash received in excess of amortization of purchase option termination revenues (See note 10)

296




Less:

Non-cash loan interest income (See note 7)


(3,324)



(4,932)



Non-cash revenues from mortgage-backed securities


(141)





Cash paid for loan closing costs


(3)



(391)



Amortization of acquired above and below market lease intangibles





and straight-line rental revenues (See note 11)


(3,758)



(3,189)



Amortization of deferred revenues (See note 12)


(940)



(497)



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

(1,180)



(874)










AFFO

$

14,132



$

10,409








Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

11,195



$

9,802



Distributions to Unitholders (See note 2)


229



268



Total




$

11,424



$

10,070










Common Stock dividends and Unitholder distributions per share


$

0.26



$

0.25










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

$

0.39



$

0.37


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

$

0.32



$

0.26






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





Basic:








Common Stock



42,680



39,098



Class A Units




880



1,070



Common Stock and Class A Units


43,560



40,168











Diluted Common Stock and Class A Units (B)


44,199



41,226










Actual shares of Common Stock outstanding, including 6 unvested shares




 of restricted Common Stock at both March 31, 2019 and 2018.

43,244



39,215


Actual Class A Units outstanding at March 31, 2019 and 2018, respectively.

879



1,070



Total




44,123



40,285










(A) Units and Unitholders refer to Class A Units in our Operating Partnership (as defined in note 2), 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 2.02% weighted average non-controlling interest in the Operating Partnership for the three-month period ended March 31, 2019.

(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.


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

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

  1. Rental and other property revenues and property operating expenses for the quarter ended March 31, 2019 include activity for the properties acquired during the quarter only from their respective dates of acquisition. In addition, the first quarter 2019 period includes activity for the properties acquired since March 31, 2018. Rental and other property revenues and expenses for the first quarter 2018 include activity for the acquisitions made during that period only from their respective dates of acquisition.
                                                                                          
  2. Non-controlling interests in Preferred Apartment Communities Operating Partnership, L.P., or our Operating Partnership, consisted of a total of 879,335 Class A Units as of March 31, 2019. 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 2.02% and 2.67% for the three-month periods ended March 31, 2019 and 2018, respectively.
                                                                                          
  3. We pay loan coordination fees to Preferred Apartment Advisors, LLC, our Manager, to reflect the administrative effort involved in arranging debt financing for acquired properties. The fees are calculated as 0.6% of the amount of any mortgage indebtedness on newly-acquired properties or refinancing and are amortized over the lives of the respective mortgage loans. This non-cash amortization expense is an addition to FFO in the calculation of AFFO. At March 31, 2019, aggregate unamortized loan coordination fees were approximately $13.4 million, which will be amortized over a weighted average remaining loan life of approximately 10.7 years.
                                                                                          
  4. We sustained weather-related operating losses due to Hurricane Harvey at our Stone Creek multifamily community during the first quarter 2018; these costs are added back to FFO in our calculation of AFFO. Included in these adjustments are the receipt from our insurance carrier during the first quarter 2018 of claims proceeds for lost rental revenues incurred during the third and fourth quarters of 2017 that totaled approximately $588,000, which was recognized in our statements of operations for the first quarter 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. 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 March 31, 2019, aggregate unamortized loan costs were approximately $23.6 million, which will be amortized over a weighted average remaining loan life of approximately 9.1 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. This adjustment reflects the add-back of exploratory expenses incurred by the Company related to the potential internalization of the functions performed by its Manager.
                                                                                          
  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. Effective January 1, 2019, we terminated our purchase options on the Sanibel Straits, Newbergh, Wiregrass and Cameron Square multifamily communities and the Solis Kennesaw student housing property, all of which are partially supported by real estate loan investments held by us. In exchange for termination fees aggregating $7.9 million from the developers, which are recorded as revenue over  the period beginning on the date of election until the earlier of (i) the maturity of the real estate loan investment and (ii) the sale of the property. The receipt of the cash termination fees are an additive adjustment in our calculation of AFFO and the removal of non-cash revenue from the recognition of the termination fees are a reduction to FFO in our calculation of AFFO; both of these adjustments are presented in a single net number within this line. As of March 31, 2019, we had received cash in excess of recognized termination fee revenues of approximately $296,000. This difference is an additive adjustment 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 March 31, 2019, the balance of unamortized below-market lease intangibles was approximately $46.6 million, which will be recognized over a weighted average remaining lease period of approximately 9.2 years.
                                                                                          
  12. This adjustment removes the non-cash amortization of deferred revenue recorded by us in conjunction with Company-owned lessee-funded tenant improvements in our office buildings.
                                                                                          
  13. We deduct from 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)


March 31, 2019


December 31, 2018

Assets





Real estate




Land


$

535,698


$

519,300

Building and improvements

2,826,609


2,738,085

Tenant improvements

131,117


128,914

Furniture, fixtures, and equipment

296,926


278,151

Construction in progress

9,268


8,265

Gross real estate

3,799,618


3,672,715

Less: accumulated depreciation

(308,004)


(272,042)

Net real estate

3,491,614


3,400,673

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

311,661


282,548

Real estate loan investments to related parties, net

24,477


51,663

Total real estate and real estate loan investments, net

3,827,752


3,734,884






Cash and cash equivalents

80,403


38,958

Restricted cash

45,482


48,732

Notes receivable

16,340


14,440

Note receivable and revolving lines of credit due from related parties

24,980


32,867

Accrued interest receivable on real estate loans

23,540


23,340

Acquired intangible assets, net of amortization

131,560


135,961

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

1,753


1,916

Deferred offering costs

6,346


6,468

Tenant lease inducements, net

20,371


20,698

Receivable from sale of mortgage-backed security


41,181

Tenant receivables and other assets

54,662


41,567

Variable Interest Entity ("VIE") assets mortgage-backed pool, at fair value

568,725


269,946

Total assets

$

4,801,914


$

4,410,958






Liabilities and equity




Liabilities




Mortgage notes payable, net of deferred loan costs and mark-to-market adjustment

$

2,359,939


$

2,299,625

Revolving line of credit

17,000


57,000

Real estate loan investment participation obligation


5,181

Unearned purchase option termination fees

7,276


2,050

Deferred revenue

42,544


43,484

Accounts payable and accrued expenses

40,525


38,618

Accrued interest payable

7,494


6,711

Dividends and partnership distributions payable

20,285


19,258

Acquired below market lease intangibles, net of amortization

46,638


47,149

Security deposits and other liabilities

15,775


17,611

VIE liabilities from mortgage-backed pool, at fair value

544,869


264,886

Total liabilities

3,102,345


2,801,573






Commitments and contingencies




Equity





Stockholders' equity





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




   shares authorized; 1,804 and 1,674 shares issued; 1,720 and 1,608




shares outstanding at March 31, 2019 and December 31, 2018, respectively

17


16

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




   shares authorized; 57 and 44 shares issued and 56 and 44 shares outstanding




at March 31, 2019 and December 31, 2018, respectively

1


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




43,238 and 41,776 shares issued and outstanding at




March 31, 2019 and December 31, 2018, respectively

432


418

Additional paid-in capital

1,698,810


1,607,712

Accumulated (deficit) earnings


      Total stockholders' equity

1,699,260


1,608,146

Non-controlling interest

309


1,239

Total equity

1,699,569


1,609,385

Total liabilities and equity

$

4,801,914


$

4,410,958

 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)




Three months ended March 31,

(In thousands)


2019


2018

Operating activities:





Net (loss) income


$

(2,280)


$

14,263

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




Depreciation and amortization expense

45,289


40,616

Amortization of above and below market leases

(1,436)


(1,178)

Deferred revenues and fee income amortization

(1,357)


(943)

Purchase option termination fee amortization

(4,233)


Non-cash interest income amortization on MBS, net of amortized costs

(141)


Amortization of market discount on assumed debt and lease incentives

494


323

Deferred loan cost amortization

1,552


1,480

(Increase) in accrued interest income on real estate loan investments

(3,551)


(2,828)

Equity compensation to executives and directors

311


1,135

Gains on sales of real estate and trading investment

(4)


(20,354)

Cash received for purchase option terminations

1,330


Loss on extinguishment of debt


17


Mortgage interest received from consolidated VIEs

2,598


Mortgage interest paid to other participants of consolidated VIEs

(2,598)


Changes in operating assets and liabilities:




(Increase) decrease in tenant receivables and other assets

(8,376)


625

(Increase) in tenant lease incentives

(102)


(2,149)

Increase (decrease) in accounts payable and accrued expenses

1,290


(1,074)

(Decrease) increase in accrued interest, prepaid rents and other liabilities

(2,441)


1,502

Net cash provided by operating activities

26,362


31,418






Investing activities:





Investments in real estate loans


(29,795)


(68,929)

Repayments of real estate loans



42,312

Notes receivable issued


(1,890)


(472)

Notes receivable repaid



5,618

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

(13,952)


(14,419)

Repayments of line of credit by related parties

8,330


9,034

Origination fees received on real estate loan investments

801


1,600

Origination fees paid to Manager on real estate loan investments

(401)


(800)

Purchases of mortgage-backed securities (K program), net of acquisition costs

(18,656)


Mortgage principal received from consolidated VIEs

679


Purchases of mortgage-backed securities

(12,278)


Sales of mortgage-backed securities

53,445


Acquisition of properties


(32,540)


(170,072)

Disposition of properties, net



42,266

Receipt of insurance proceeds for capital improvements

746


412

Additions to real estate assets - improvements

(7,917)


(7,637)

Deposits (paid) refunded on acquisitions

(511)


4,021

Net cash used in investing activities

(53,939)


(157,066)






Financing activities:





Proceeds from mortgage notes payable

57,275


123,275

Repayments of mortgage notes payable

(38,324)


(27,350)

Payments for deposits and other mortgage loan costs

(996)


(1,733)

Proceeds from real estate loan participants


5

Payments to real estate loan participants

(5,223)


(3,314)

Proceeds from lines of credit


126,200


86,200

Payments on lines of credit


(166,200)


(114,800)

Repayment of the Term Loan


(11,000)

Mortgage principal paid to other participants of consolidated VIEs

(679)


Proceeds from repurchase agreements

4,857


Payments for repurchase agreements

(4,857)


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

128,573


93,234

Proceeds from exercises of warrants

3,921


11,169

Payments for redemptions of preferred stock

(2,006)


(5,744)

Common Stock dividends paid


(10,840)


(9,576)

Preferred stock dividends paid


(24,869)


(18,963)

Distributions to non-controlling interests

(228)


(221)

Payments for deferred offering costs

(832)


(1,152)

Net cash provided by financing activities

65,772


120,030





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

38,195


(5,618)

Cash, cash equivalents and restricted cash, beginning of year

87,690


73,012

Cash, cash equivalents and restricted cash, end of period

$

125,885


$

67,394

 

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






March 31,
2019


December 31,
2018

















Multifamily communities:






(in thousands)



Palisades


Northern VA


5/17/2019


N/A


$

17,270



$

17,132



$

17,132



8 / 0  (2)

464 Bishop


Atlanta, GA


6/30/2019


N/A


12,693



12,693



12,693



8.5 / 0 (3)

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



14,438



14,136



8.5 / 6.5

Wiregrass Capital


Tampa, FL


5/15/2020


5/15/2023


4,244



3,974



3,891



8.5 / 6.5

Berryessa


San Jose, CA


2/13/2021


2/13/2023


137,616



108,561



95,349



8.5 / 3 (4)

The Anson


Nashville, TN


11/24/2021


11/24/2023


6,240



4,136





8.5 / 4.5

The Anson Capital


Nashville, TN


11/24/2021


11/24/2023


5,659



4,162



3,160



8.5 / 4.5

Sanibel Straights


Fort Myers, FL


2/3/2021


2/3/2022


9,416



8,292



8,118



8.5 / 5.5

Sanibel Straights Capital


Fort Myers, FL


2/3/2021


2/3/2022


6,193



5,559



5,442



8.5 / 5.5

Falls at Forsyth


Atlanta, GA


7/11/2020


7/11/2022


22,412



20,165



19,742



8.5 / 5.5

Newbergh


Atlanta, GA


1/31/2021


1/31/2022


11,749



10,966



10,736



8.5 / 5.5

Newbergh Capital


Atlanta, GA


1/31/2021


1/31/2022


6,176



5,299



5,188



8.5 / 5.5

V & Three


Charlotte, NC


8/15/2021


8/15/2022


10,336



10,335



10,335



8.5 / 5

V & Three Capital


Charlotte, NC


8/18/2021


8/18/2022


7,338



6,159



6,030



8.5 / 5

Cameron Square


Alexandria, VA


10/11/2021


10/11/2023


21,340



17,418



17,050



8.5 / 3

Cameron Square Capital


Alexandria, VA


10/11/2021


10/11/2023


8,850



7,718



7,557



8.5 / 3

Southpoint


Fredericksburg, VA

2/28/2022


2/28/2024


7,348



2,532



896



8.5 / 4

Southpoint Capital


Fredericksburg, VA

2/28/2022


2/28/2024


4,962



3,979



3,895



8.5 / 4

E-Town


Jacksonville, FL


6/14/2022


6/14/2023


16,697



5,380



3,886



8.5 / 3.5

Vintage


Destin, FL


3/24/2022


3/24/2024


10,763



1,645





8.5 / 4
















Student housing properties:









Haven 12


Starkville, MS


11/30/2020


N/A


6,116



6,116



6,116



8.5 / 0

Haven Charlotte (5)


Charlotte, NC


12/22/2019


N/A






19,462



8.5 / 6.5

Haven Charlotte Member (5)

Charlotte, NC


12/22/2019


N/A






8,201



8.5 / 6.5

Solis Kennesaw


Atlanta, GA


9/26/2020


9/26/2022


12,359



11,586



11,343



8.5 / 5.5

Solis Kennesaw Capital


Atlanta, GA


10/1/2020


10/1/2022


8,360



7,953



7,786



8.5 / 5.5

Solis Kennesaw II


Atlanta, GA


5/5/2022


5/5/2024


13,613



8,228



4,268



8.5 / 4
















New Market Properties:















Dawson Marketplace


Atlanta, GA


9/24/2020


9/24/2022


12,857



12,857



12,857



8.5 / 5.0 (6)
















Preferred Office Properties:













8West


Atlanta, GA


11/29/2022


11/29/2024


30,329







8.5 / 5

8West construction loan


Atlanta, GA


11/29/2022


11/29/2024


37,250







(7)
























$

484,222



338,343



336,329




Unamortized loan origination fees








(2,205)



(2,118)




Allowance for loan losses


























Carrying amount










$

336,138



$

334,211




















































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

(2) Pursuant to an amendment of the loan agreement, effective January 1, 2019, the loan ceased accruing deferred interest.

(3) Effective January 1, 2019, the loan ceased accruing deferred interest.

(4) Effective January 1, 2019, the deferred interest rate decreased from 6.0% to 3.0%.

(5) The Company assumed the membership interests of the project from the developer in satisfaction of the project indebtedness owed to the Company.

(6) Per the terms of the loan documents, the deferred interest rate reverted to 5.0% from 6.9% per annum in January 2019.

(7) The current interest rate on the 8West construction loan is a variable rate of 400 basis points over LIBOR.

We hold options, but not obligations, to purchase some 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 (if any), depending on the loan. As of March 31, 2019, 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:









Palisades

Northern VA


304



5/1/2019


5/31/2019


Falls at Forsyth

Atlanta, GA


356



S + 90 days (2)


S + 150 days (2)


V & Three

Charlotte, NC


338



S + 90 days (2)


S + 150 days (2)


The Anson

Nashville, TN


301



S + 90 days (2)


S + 150 days (2)


Southpoint

Fredericksburg, VA


240



S + 90 days (2)


S + 150 days (2)


E-Town

Jacksonville, FL


332



S + 90 days (3)


S + 150 days (3)


Vintage

Destin, FL


282



(4)


(4)











Student housing properties:









Solis Kennesaw II

Atlanta, GA


175



(5)


(5)











Office property:









8West

Atlanta, GA


(6)


(6)


(6)














2,328
















(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 purchase options held by us on the Sanibel Straights, Wiregrass, Newbergh, Cameron Square and Solis Kennesaw projects were terminated, in exchange for an aggregate $7.9 million in termination fees from the developers.




(2) 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.




(3) The option period window begins on the earlier of June 21, 2024 and the number of days indicated beyond the achievement of a 93% physical occupancy rate by the underlying property.




(4) The option period window begins on the later of one year following receipt of final certificate of occupancy or 90 days beyond the achievement of a 93% physical occupancy rate by the underlying property and ends 60 days beyond the option period beginning date.




(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, 2020 and end on December 31, 2020.




(6) The project plans are for the construction of a class A office building consisting of approximately 191,000 rentable square feet; our purchase option window opens 90 days following the achievement of 90% lease commencement and ends on November 30, 2024 (subject to adjustment). Our purchase option is at the to-be-agreed-upon market value. In the event the property is sold to a third party, we would be due a fee based on a minimum multiple of 1.15 times the total commitment amount of the real estate loan investment, less the amounts actually paid by borrower, up to and including payment of accrued interest and repayment of principal at the time of the sale.


Mortgage Indebtedness

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




Principal balance as of








Interest only
through date
(1)


Acquisition/

refinancing
date


March 31,
2019


December 31,
2018


Maturity
date


Interest
rate


Basis point
spread over
1 Month
LIBOR
















Multifamily communities:



(in thousands)









Summit Crossing

10/31/2017


$

38,172



$

38,349



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

Vineyards

9/26/2014


33,873



34,039



10/1/2021


3.68

%


Fixed rate


10/31/2017

Avenues at Cypress

2/13/2015


21,074



21,198



9/1/2022


3.43

%


Fixed rate


N/A

Avenues at Northpointe

2/13/2015


26,752



26,899



3/1/2022


3.16

%


Fixed rate


3/31/2017

Venue at Lakewood Ranch

5/21/2015


28,560



28,723



12/1/2022


3.55

%


Fixed rate


N/A

Aster at Lely Resort

6/24/2015


31,623



31,796



7/5/2022


3.84

%


Fixed rate


N/A

CityPark View

6/30/2015


20,450



20,571



7/1/2022


3.27

%


Fixed rate


N/A

Avenues at Creekside

7/31/2015


39,491



39,697



8/1/2024


4.09

%


160

(2)

8/31/2016

Citi Lakes

9/3/2015


41,385



41,582



4/1/2023


4.66

%


217

(3)

N/A

Stone Creek

6/22/2017


20,055



20,139



7/1/2052


3.22

%


Fixed rate


N/A

Lenox Village Town Center

2/28/2019


39,275



29,274



3/1/2029


4.34

%


Fixed rate


N/A

Retreat at Lenox

12/21/2015


17,377



17,465



1/1/2023


4.04

%


Fixed rate


N/A

Overton Rise

2/1/2016


39,020



39,220



8/1/2026


3.98

%


Fixed rate


N/A

Village at Baldwin Park

12/17/2018


71,301



71,453



1/1/2054


4.16

%


Fixed rate


N/A

Crosstown Walk

1/15/2016


30,718



30,878



2/1/2023


3.90

%


Fixed rate


N/A

525 Avalon Park

6/15/2017


65,430



65,740



7/1/2024


3.98

%


Fixed rate


N/A

City Vista

7/1/2016


34,207



34,387



7/1/2026


3.68

%


Fixed rate


N/A

Sorrel

8/24/2016


31,963



32,137



9/1/2023


3.44

%


Fixed rate


N/A

Citrus Village

3/3/2017


29,246



29,393



6/10/2023


3.65

%


Fixed rate


6/09/2017

Retreat at Greystone

11/21/2017


34,493



34,644



12/1/2024


4.31

%


Fixed rate


N/A

Founders Village

3/31/2017


30,609



30,748



4/1/2027


4.31

%


Fixed rate


N/A

Claiborne Crossing

4/26/2017


26,274



26,381



6/1/2054


2.89

%


Fixed rate


N/A

Luxe at Lakewood Ranch

7/26/2017


38,197



38,378



8/1/2027


3.93

%


Fixed rate


N/A

Adara at Overland Park

9/27/2017


31,056



31,203



4/1/2028


3.90

%


Fixed rate


N/A

Aldridge at Town Village

10/31/2017


37,056



37,222



11/1/2024


4.19

%


Fixed rate

(4)

N/A

Reserve at Summit Crossing

9/29/2017


19,561



19,654



10/1/2024


3.87

%


Fixed rate


N/A

Overlook at Crosstown Walk

11/21/2017


21,747



21,848



12/1/2024


3.95

%


Fixed rate


N/A

Colony at Centerpointe

12/20/2017


32,610



32,770



10/1/2026


3.68

%


Fixed rate


N/A

Lux at Sorrel

1/9/2018


30,913



31,057



2/1/2030


3.91

%


Fixed rate


N/A

Green Park

2/28/2018


39,061



39,236



3/10/2028


4.09

%


Fixed rate


N/A

The Lodge at Hidden River

9/27/2018


41,404



41,576



10/1/2028


4.32

%


Fixed rate


N/A

Vestavia Reserve

11/9/2018


37,573



37,726



12/1/2030


4.40

%


Fixed rate


N/A

CityPark View South

11/15/2018


24,044



24,140



6/1/2029


4.51

%


Fixed rate


N/A















Total multifamily communities



1,117,927



1,112,880
























Grocery-anchored shopping centers:

Spring Hill Plaza

9/5/2014


9,207



9,261



10/1/2019


3.36

%


Fixed rate


10/31/2015

Parkway Town Centre

9/5/2014


6,696



6,735



10/1/2019


3.36

%


Fixed rate


10/31/2015

Woodstock Crossing

8/8/2014


2,920



2,935



9/1/2021


4.71

%


Fixed rate


N/A

Deltona Landings

9/30/2014


6,595



6,622



10/1/2019


3.48

%


Fixed rate


N/A

Powder Springs

9/30/2014


6,959



6,987



10/1/2019


3.48

%


Fixed rate


N/A

Kingwood Glen

9/30/2014


11,034



11,079



10/1/2019


3.48

%


Fixed rate


N/A

Barclay Crossing

9/30/2014


6,204



6,229



10/1/2019


3.48

%


Fixed rate


N/A

Sweetgrass Corner

9/30/2014


7,525



7,555



10/1/2019


3.58

%


Fixed rate


N/A

Parkway Centre

9/30/2014


4,321



4,338



10/1/2019


3.48

%


Fixed rate


N/A

The Market at Salem Cove

10/6/2014


9,209



9,253



11/1/2024


4.21

%


Fixed rate


11/30/2016

Independence Square

8/27/2015


11,652



11,716



9/1/2022


3.93

%


Fixed rate


9/30/2016

Royal Lakes Marketplace

9/4/2015


9,507



9,544



9/4/2020


4.99

%


250


4/3/2017

The Overlook at Hamilton Place

12/22/2015


19,814



19,913



1/1/2026


4.19

%


Fixed rate


N/A

Summit Point

10/30/2015


11,768



11,858



11/1/2022


3.57

%


Fixed rate


N/A

East Gate Shopping Center

4/29/2016


5,393



5,431



5/1/2026


3.97

%


Fixed rate


N/A

Fury's Ferry

4/29/2016


6,230



6,273



5/1/2026


3.97

%


Fixed rate


N/A

Rosewood Shopping Center

4/29/2016


4,184



4,214



5/1/2026


3.97

%


Fixed rate


N/A

Southgate Village

4/29/2016


7,439



7,491



5/1/2026


3.97

%


Fixed rate


N/A

The Market at Victory Village

5/16/2016


9,027



9,066



9/11/2024


4.40

%


Fixed rate


10/10/2017

Wade Green Village

4/7/2016


7,775



7,815



5/1/2026


4.00

%


Fixed rate


N/A

Lakeland Plaza

7/15/2016


28,060



28,256



8/1/2026


3.85

%


Fixed rate


N/A

University Palms

8/8/2016


12,705



12,798



9/1/2026


3.45

%


Fixed rate


N/A

Cherokee Plaza

8/8/2016


24,526



24,683



9/1/2021


4.74

%


225

(5)

N/A

Sandy Plains Exchange

8/8/2016


8,875



8,940



9/1/2026


3.45

%


Fixed rate


N/A

Thompson Bridge Commons

8/8/2016


11,864



11,951



9/1/2026


3.45

%


Fixed rate


N/A

Heritage Station

8/8/2016


8,781



8,845



9/1/2026


3.45

%


Fixed rate


N/A

Oak Park Village

8/8/2016


9,061



9,128



9/1/2026


3.45

%


Fixed rate


N/A

Shoppes of Parkland

8/8/2016


15,908



15,978



9/1/2023


4.67

%


Fixed rate


N/A

Champions Village

10/18/2016


27,400



27,400



11/1/2021


5.49

%


300

(6)

11/1/2021

Castleberry-Southard

4/21/2017


11,122



11,175



5/1/2027


3.99

%


Fixed rate


N/A

Rockbridge Village

6/6/2017


13,806



13,875



7/5/2027


3.73

%


Fixed rate


N/A

Irmo Station

7/26/2017


10,241



10,307



8/1/2030


3.94

%


Fixed rate


N/A

Maynard Crossing

8/25/2017


17,809



17,927



9/1/2032


3.74

%


Fixed rate


N/A

Woodmont Village

9/8/2017


8,482



8,535



10/1/2027


4.125

%


Fixed rate


N/A

West Town Market

9/22/2017


8,679



8,737



10/1/2025


3.65

%


Fixed rate


N/A

Crossroads Market

12/5/2017


18,468



18,584



1/1/2030


3.95

%


Fixed rate


N/A

Anderson Central

3/16/2018


11,750



11,817



4/1/2028


4.32

%


Fixed rate


N/A

Greensboro Village

5/22/2018


8,403



8,452



6/1/2028


4.20

%


Fixed rate


N/A

Governors Towne Square

5/22/2018


11,179



11,245



6/1/2028


4.20

%


Fixed rate


N/A

Conway Plaza

6/29/2018


9,675



9,716



7/5/2028


4.29

%


Fixed rate


N/A

Brawley Commons

7/6/2018


18,283



18,387



8/1/2028


4.36

%


Fixed rate


N/A

Hollymead Town Center

12/21/2018


27,203



27,300



1/1/2029


4.64

%


Fixed rate


N/A

Gayton Crossing

1/17/2019


17,968





2/1/2029


4.71

%


Fixed rate


N/A















Total grocery-anchored shopping centers



503,707



488,351
























Student housing properties:

North by Northwest

6/1/2016


31,803



32,004



10/1/2022


4.02

%


Fixed rate


N/A

SoL

10/31/2018


36,058



36,197



11/1/2028


4.71

%


Fixed rate


N/A

Stadium Village

10/27/2017


45,876



46,095



11/1/2024


3.80

%


Fixed rate


N/A

Ursa

12/18/2017


31,400



31,400



1/5/2020


5.49

%


300


1/5/2020

The Tradition

5/10/2018


30,000



30,000



6/6/2021


6.49

%


400

(7)

6/6/2021

Retreat at Orlando

5/31/2018


47,125



47,125



9/1/2025


4.09

%


Fixed rate


9/1/2020

The Bloc

6/27/2018


28,966



28,966



7/9/2021


6.04

%


355

(8)

7/9/2021

Haven49

3/27/2019


41,550





12/22/2019


6.24

%


375


12/22/2019















Total student housing properties



292,778



251,787
























Office buildings:

Brookwood Center

8/29/2016


31,292



31,481



9/10/2031


3.52

%


Fixed rate


10/9/2017

Galleria 75

11/4/2016


5,490



5,540



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


52,837



53,163



12/10/2028


4.10

%


Fixed rate


N/A

Armour Yards

1/29/2018


40,000



40,000



2/1/2028


4.10

%


Fixed rate


2/29/2020

150 Fayetteville

7/31/2018


114,400



114,400



8/10/2028


4.27

%


Fixed rate


9/9/2020

Capitol Towers

12/20/2018


126,322



126,650



1/10/2037


4.60

%


Fixed rate


N/A















Total office buildings



485,841



486,734










Grand total



2,400,253



2,339,752










Less: deferred loan costs



(35,495)



(35,242)










Less: below market debt adjustment



(4,819)



(4,885)










Mortgage notes, net



$

2,359,939



$

2,299,625










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)  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%.

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

(4) 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.

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

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

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

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

Multifamily Communities

As of March 31, 2019, our multifamily community portfolio consisted of the following properties:









Three months ended

March 31, 2019

Property


Location


Number of
units


Average unit
size (sq. ft.)


Average
physical
occupancy


Average
rent per
unit












Same-Store Communities:











Summit Crossing I


Atlanta, GA


345


1,034


97.4

%


$

1,161

Summit Crossing II


Atlanta, GA


140


1,100


97.1

%


$

1,263

Overton Rise


Atlanta, GA


294


1,018


94.9

%


$

1,561

Aldridge at Town Village


Atlanta, GA


300


969


94.0

%


$

1,361

Avenues at Cypress


Houston, TX


240


1,170


92.2

%


$

1,452

Avenues at Northpointe


Houston, TX


280


1,167


95.1

%


$

1,380

Vineyards


Houston, TX


369


1,122


94.9

%


$

1,177

Avenues at Creekside


San Antonio, TX


395


974


94.0

%


$

1,155

Aster at Lely Resort


Naples, FL


308


1,071


96.1

%


$

1,477

Venue at Lakewood Ranch


Sarasota, FL


237


1,001


95.8

%


$

1,578

525 Avalon Park


Orlando, FL


487


1,394


94.2

%


$

1,464

Citi Lakes


Orlando, FL


346


984


95.6

%


$

1,446

Luxe at Lakewood Ranch


Sarasota, FL


280


1,105


96.7

%


$

1,503

Citrus Village


Tampa, FL


296


980


96.4

%


$

1,298

Lenox Village


Nashville, TN


273


906


95.5

%


$

1,257

Regent at Lenox


Nashville, TN


18


1,072


98.1

%


$

1,309

Retreat at Lenox


Nashville, TN


183


773


95.1

%


$

1,187

Retreat at Greystone


Birmingham, AL


312


1,100


95.9

%


$

1,251

City Vista


Pittsburgh, PA


272


1,023


95.2

%


$

1,368

Adara Overland Park


Kansas City, KS


260


1,116


95.0

%


$

1,347

Founders Village


Williamsburg, VA


247


1,070


95.3

%


$

1,395

Sorrel


Jacksonville, FL


290


1,048


94.7

%


$

1,284












Total/Average Same-Store Communities




6,172




95.2

%














CityPark View


Charlotte, NC


284


948


93.9

%


$

1,123

CityPark View South


Charlotte, NC


200


1,005


94.0

%


$

1,258

Stone Creek


Houston, TX


246


852




$

1,120

Crosstown Walk


Tampa, FL


342


981


94.2

%


$

1,316

Overlook at Crosstown Walk


Tampa, FL


180


986


95.2

%


$

1,400

Claiborne Crossing


Louisville, KY


242


1,204


94.2

%


$

1,373

The Reserve at Summit Crossing


Atlanta, GA


172


1,002


96.7

%


$

1,336

Colony at Centerpointe


Richmond, VA


255


1,149


93.2

%


$

1,377

Lux at Sorrel


Jacksonville, FL


265


1,025


93.6

%


$

1,388

Green Park


Atlanta, GA


310


985


94.4

%


$

1,480

Lodge at Hidden River


Tampa, FL


300


980




$

1,432

Vestavia Reserve


Birmingham, AL


272


1,113




$

1,569












Value-add project:











Village at Baldwin Park


Orlando, FL


528


1,069




$

1,686












Total PAC Non-Same-Store Communities




3,596


















Average stabilized physical occupancy








95.0

%














Total multifamily community units




9,768


















For the three-month period ended March 31, 2019, our average same-store multifamily communities' physical occupancy was 95.2%. We calculate average same-store 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 March 31, 2019, our average stabilized physical occupancy was 95.0%. 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 March 31, 2019, our average economic occupancy was 94.9%. 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, Lodge at Hidden River and Vestavia Reserve). We also exclude properties which are currently being marketed for sale, of which we had none at March 31, 2019.

Student Housing Properties

                As of March 31, 2019, our student housing portfolio consisted of the following properties:











Three months ended

March 31, 2019

Property


Location


Number
of units


Number
of beds


Average unit
size (sq. ft.)


Average
physical
occupancy (1)


Average rent
per bed

Student housing properties:













North by Northwest


Tallahassee, FL


219


679


1,250


95.0

%


$

728

SoL


Tempe, AZ


224


639


1,296


97.8

%


$

695

Stadium Village (2)


Atlanta, GA


198


792


1,466


93.4

%


$

718

Ursa (2)


Waco, TX


250


840


1,634


91.7

%


$

579

The Tradition


College Station, TX


427


808


539


93.7

%


$

577

The Retreat at Orlando


Orlando, FL


221


894


2,036


98.2

%


$

746

The Bloc


Lubbock, TX


140


556


1,394


%


n/a

Haven49


Charlotte, NC


332


887


1,224


%


n/a


















2,011


6,095







(1) Data only presented for stabilized student housing properties.


(2) 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 March 31, 2019, 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

$

111



$

11.14



$



$



$

111



$

11.14


Carpets



263



26.39







263



26.39


Wood / vinyl flooring

73



7.36







73



7.36


Mini blinds and ceiling fans

27



2.72







27



2.72


Fire safety






24



2.37



24



2.37


HVAC


64



6.34



11



1.15



75



7.49


Computers, equipment, misc.

5



0.51



26



2.58



31



3.09


Elevators





23



2.27



23



2.27


Exterior painting





32



3.17



32



3.17


Leasing office and other common amenities

79



7.95



550



55.26



629



63.21


Major structural projects





828



83.16



828



83.16


Cabinets and countertop upgrades





344



34.57



344



34.57


Landscaping and fencing





536



53.84



536



53.84


Parking lot






165



16.56



165



16.56


Signage and sanitation





48



4.86



48



4.86


Totals



$

622



$

62.41



$

2,587



$

259.79



$

3,209



$

322.20




 For the three-month period ended March 31, 2019, our capital expenditures for student housing properties consisted of:





Capital Expenditures - Student Housing Properties




Recurring


Non-recurring


Total

(in thousands, except per-bed figures)

Amount


Per Bed


Amount


Per Bed


Amount


Per Bed

Appliances

$

19



$

3.56



$



$



$

19



$

3.56


Carpets



4



0.81







4



0.81


Wood / vinyl flooring

1



0.27







1



0.27


Mini blinds and ceiling fans

1



0.28







1



0.28


Fire safety






46



8.67



46



8.67


HVAC


2



0.29







2



0.29


Computers, equipment, misc.

2



0.38



51



9.65



53



10.03


Elevators












Exterior painting





221



42.10



221



42.10


Leasing office and other common amenities

22



4.20



101



19.24



123



23.44


Major structural projects





483



91.93



483



91.93


Cabinets and counter top upgrades

93



17.66



7



1.25



100



18.91


Landscaping and fencing





163



30.99



163



30.99


Parking lot





43



8.24



43



8.24


Signage and sanitation





63



11.95



63



11.95


Totals



$

144



$

27.45



$

1,178



$

224.02



$

1,322



$

251.47


               

Grocery-Anchored Shopping Center Portfolio

As of March 31, 2019, 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


98.3

%


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


95.1

%


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


96.6

%


The Fresh Market

Royal Lakes Marketplace

 Atlanta, GA


2008


119,493


93.0

%


Kroger

Sandy Plains Exchange

 Atlanta, GA


1997


72,784


98.4

%


Publix

Summit Point

 Atlanta, GA


2004


111,970


87.4

%


Publix

Thompson Bridge Commons

 Atlanta, GA


2001


92,587


96.1

%


Kroger

Wade Green Village

 Atlanta, GA


1993


74,978


86.0

%


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


96.2

%


Publix

Parkway Centre

 Columbus, GA


1999


53,088


100.0

%


Publix

Greensboro Village

 Nashville, TN


2005


70,203


98.3

%


Publix

Spring Hill Plaza

 Nashville, TN


2005


61,570


100.0

%


Publix

Parkway Town Centre

 Nashville, TN


2005


65,587


100.0

%


Publix

The Market at Salem Cove

 Nashville, TN


2010


62,356


100.0

%


Publix

The Market at Victory Village

 Nashville, TN


2007


71,300


98.0

%


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

Crossroads Market

 Naples, FL


1993


126,895


98.9

%


Publix

Neapolitan Way

 Naples, FL


1985


137,580


91.6

%


Publix

Conway Plaza

 Orlando, FL


1966


117,705


93.6

%


Publix

Deltona Landings

 Orlando, FL


1999


59,966


100.0

%


Publix

University Palms

 Orlando, FL


1993


99,172


100.0

%


Publix

Barclay Crossing

 Tampa, FL


1998


54,958


100.0

%


Publix

Champions Village

 Houston, TX


1973


383,346


79.5

%


Randalls

Kingwood Glen

 Houston, TX


1998


103,397


100.0

%


Kroger

Independence Square

 Dallas, TX


1977


140,218


88.1

%


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

Rosewood Shopping Center

 Columbia, SC


2002


36,887


90.2

%


Publix

Anderson Central

 Greenville Spartanburg, SC


1999


223,211


96.1

%


Walmart

Fairview Market

 Greenville Spartanburg, SC


1998


53,888


73.5

%


Aldi

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


91.1

%


Harris Teeter

Southgate Village

 Birmingham, AL


1988


75,092


98.0

%


 Publix

Hollymead Town Center

Charlottesville, VA


2005


158,807


89.8

%


Harris Teeter

Gayton Crossing

Richmond, VA


1983


158,316

(2)

86.2

%


Kroger











Grand total/weighted average





4,889,011


94.1

%




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

(2) The GLA figure shown excludes the GLA of the Kroger store, which is owned by others.

As of March 31, 2019, our grocery-anchored shopping center portfolio was 94.1% leased. We define percent leased as the percentage of gross leasable area that is leased, including noncancelable lease agreements that have been signed which have not yet commenced.

Details regarding lease expirations (assuming no exercises of tenant renewal options) within our grocery-anchored shopping center portfolio as of March 31, 2019 were:



Totals



Number
of leases


Leased
GLA


Percent of
leased GLA








Month to month


8


11,302


0.2

%

2019


75


268,200


5.8

%

2020


138


525,269


11.4

%

2021


142


639,816


13.9

%

2022


120


373,306


8.1

%

2023


100


392,775


8.5

%

2024


65


936,520


20.4

%

2025


31


552,981


12.0

%

2026


14


155,825


3.4

%

2027


19


121,651


2.6

%

2028


22


288,323


6.3

%

2029 +


21


327,987


7.4

%








Total


755


4,593,955


100.0

%

The Company's grocery-anchored shopping center portfolio contained the following anchor tenants as of March 31, 2019:

Tenant


GLA


Percent of
total GLA

Publix


1,039,959


21.3

%

Kroger


518,194


10.6

%

Harris Teeter


222,523


4.6

%

Wal-Mart


183,211


3.7

%

BJ's Wholesale Club


108,532


2.2

%

Randall's


61,604


1.3

%

Bi-Lo


59,824


1.2

%

H.E.B


54,844


1.1

%

Tom Thumb


43,600


0.9

%

Sprouts


29,855


0.6

%

The Fresh Market


43,321


0.9

%

Aldi


23,622


0.5

%






Total


2,389,089


48.9

%






Total RSF


4,889,011








The Company's Quarterly Report on Form 10-Q for first quarter 2019 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 first quarter 2019 totaled approximately $264,000. 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 redevelopments and repositioning.

Office Building Portfolio

                As of March 31, 2019, 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


88

%

Capitol Towers


Charlotte, NC


479,000


95

%

Westridge at La Cantera


San Antonio, TX


258,000


100

%

Armour Yards


Atlanta, GA


187,000


96

%

Brookwood Center


Birmingham, AL


169,000


100

%

Galleria 75


Atlanta, GA


111,000


96

%












2,578,000


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

520,000


18.8

%


$

11,822

Albemarle

162,000


9.1

%


5,706

State Farm Mutual Automobile Insurance Company

183,000


5.3

%


3,311

United Services Automobile Association

129,000


4.9

%


3,118

Harland Clarke Corporation

129,000


4.6

%


2,881










1,123,000


42.7

%


$

26,838

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


Rented square


rented


feet


square feet

2019


74,000



3.1

%

2020


61,000



2.5

%

2021


245,000



10.3

%

2022


68,000



2.9

%

2023


109,000



4.6

%

2024


209,000



8.8

%

2025


137,000



5.8

%

2026


165,000



7.0

%

2027


267,000



11.2

%

2028


213,000



9.0

%

2029+


827,000



34.8

%






Total


2,375,000



100.0

%

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $149,000 during the first quarter 2019. 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 restated in 2018, 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:

  • depreciation and amortization related to real estate;
  • gains and losses from the sale of certain real estate assets;
  • gains and losses from change in control and
  • impairment writedowns of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.  

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;
  • internalization costs;
  • 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. Since our calculation of AFFO removes other significant non-cash charges and revenues and other costs which are not representative of our ongoing business operations, we believe it improves comparability to investors in assessing our core operating results across periods. 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 Communities' Same-Store Net Operating Income ("NOI")

We use same store net operating income as an operational metric for our same-store communities, enabling comparisons of those properties' operating results between the current reporting period and the prior year comparative period. We define our population of same-store 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. is a Maryland corporation formed primarily to own and operate multifamily properties and, to a lesser extent, own and operate student housing properties, grocery-anchored shopping centers and strategically located, well leased class A office buildings, all 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. 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, membership or partnership interests in other income-producing property types as determined by our manager as appropriate for us. At March 31, 2019, the Company was the approximate 97.9% owner of Preferred Apartment Communities Operating Partnership, L.P., the Company's operating partnership. Preferred Apartment Communities, Inc. has elected to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended, commencing with its tax year ended December 31, 2011. Learn more at www.pacapts.com.

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