Preferred Apartment Communities

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

ATLANTA, Nov. 4, 2019 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company" or "Preferred Apartment Communities") today reported results for the quarter ended September 30, 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.

Preferred Apartment Communities

"We had a strong quarter, up 10.7% on FFO over Q3 2018. We accomplished this despite incurring nearly $0.02/share in direct costs associated with our consideration of internalizing our external manager. We incurred additional indirect internalization related costs as we built up cash reserves to fund portions of an internalization if required. These extraordinary costs will have a significant impact on our year end numbers and we now expect that when these expenses are added back to FFO we will perform at the low end of our previously provided guidance range," said Daniel M. DuPree, Preferred Apartment Communities' Chairman and Chief Executive Officer.

Financial Highlights

Our operating results are presented below.

















Three months ended September 30,




Nine months ended September 30,






2019


2018


% change


2019


2018


% change

















Revenues (in thousands)

$

120,203



$

104,232



15.3

%


$

345,561



$

290,991



18.8

%

















Per share data:














Net income (loss) (1)

$

(0.71)



$

(0.35)





$

(2.02)



$

(1.16)




















FFO (2)

$

0.31



$

0.28



10.7

%


$

1.06



$

1.03



2.9

%

















AFFO (2)

$

0.12



$

0.21



(42.9)

%


$

0.66



$

0.84



(21.4)

%

















Dividends (3)

$

0.2625



$

0.255



2.9

%


$

0.785



$

0.76



3.3

%
















 

(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 third quarter 2019, our FFO payout ratio to Common Stockholders and Unitholders was approximately 85.0% and our FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 67.5%. (A)
  • Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 223.5% for the third quarter 2019 and 93.2% for the trailing twelve-month period ended September 30, 2019. Our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 84.5% for the third quarter 2019 and 68.2% for the trailing twelve-month period ended September 30, 2019.  (B) We have $27.9 million of accrued but not yet paid interest on our real estate loan investment portfolio.
  • For the quarter ended September 30, 2019, our same-store rental revenues increased approximately 3.3% and our operating expenses increased 2.3%, resulting in an increase in net operating income of approximately 4.4% for our same-store multifamily communities as compared to the quarter ended September 30, 2018.(C) For the third quarter 2019, our average same-store multifamily communities' physical occupancy was 95.6%.
  • At September 30, 2019, the market value of our common stock was $14.45 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 17.4% through September 30, 2019.
  • As of September 30, 2019, the average age of our multifamily communities was approximately 5.4 years, which is the youngest in the public multifamily REIT industry.
  • As of September 30, 2019, approximately 91.6% of our permanent property-level mortgage debt has fixed interest rates and approximately 3.8% has variable interest rates which are capped. We believe we are well protected against potential increases in market interest rates. 
  • During the third quarter 2019, we refinanced six retail assets with new fixed-rate mortgage debt and on October 1, we repaid two other maturing mortgages on retail properties which remain unencumbered.
  • At September 30, 2019, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 52.4%. 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 of approximately $586 million and liabilities of approximately $586 million that are owned by other pool participants in the Freddie Mac K program that we consolidated under the VIE rules.
  • As of September 30, 2019, our total assets were approximately $5.3 billion compared to approximately $4.1 billion as of September 30, 2018, an increase of approximately $1.1 billion, or approximately 26.9%. This growth was driven by (i) the net acquisition of 12 real estate 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 $789 million, or 20.3% since September 30, 2018.
  • On July 29, 2019, we entered into a purchase and sale agreement to sell six of our student housing properties to a third party. A non-refundable earnest money deposit has been placed into an escrow account by the purchaser and we anticipate the sale to close in the near future. We expect to realize a book gain on the sale.
  • On August 16, 2019, we closed on a real estate loan investment of up to approximately $14.8 million in connection with the development of Kennesaw Crossing, a 250-unit multifamily community to be located in Kennesaw, Georgia.

 

(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 third quarter 2019, we acquired the following properties:










Property


Location (MSA)


Units / Leasable
square feet











Multifamily communities:








Artisan at Viera


Melbourne, FL


259

units



Five Oaks at Westchase


Tampa, FL


218

units











Office building:








CAPTRUST Tower


Raleigh, NC


300,000

LSF



251 Armour (1)


Atlanta, GA


35,000

LSF











Grocery-anchored shopping center:








Fairfield Shopping Center (2)


Virginia Beach, VA


231,829

LSF










(1) 251 Armour is  an additional building acquired within our Armour Yards office building complex in Atlanta, Georgia.

(2) Property is owned through a consolidated joint venture.

 

Real Estate Assets

 











Owned as of
September 30, 2019


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


Potential total



Multifamily communities:








Properties

34



8



42




Units

10,245



2,303



12,548




Grocery-anchored shopping centers:








Properties

50

(3)




50




Gross leasable area (square feet)

5,644,427





5,644,427




Student housing properties:








Properties

8



1



9




Units

2,011



175



2,186




Beds

6,095



543



6,638




Office buildings:








Properties

9



1



10




Rentable square feet

2,913,000



192,000



3,105,000












(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.


(3) One property is owned through a consolidated joint venture.

 

Subsequent to Quarter End

Between October 1, 2019 and October 31, 2019, we issued 42,025 Units under the $1.5 Billion Unit Offering and collected net proceeds of approximately $37.8 million after commissions and fees and issued 7,463 shares of Series M Preferred Stock under the mShares offering and collected net proceeds of approximately $7.2 million after commissions and fees.

On October 11, 2019, we closed on a real estate loan investment of up to approximately $10.9 million in connection with the development of a 340-unit multifamily community to be located in Orlando, Florida.

On October 14, 2019, we announced that our Board of Directors had unanimously elected Joel T. Murphy as Chief Executive Officer, effective as of January 1, 2020. Mr. Murphy will continue as a member of the board, where he has served since May 2019. Mr. Murphy currently is, and has for the last five years been, the CEO of our New Market Properties subsidiary, and since June 2018 has been the chairman of the Company's investment committee. Mr. Murphy succeeds our current CEO and Chairman of the Board, Daniel M. DuPree, who will remain with us as Executive Chairman of the Board.

On October 16, 2019, the borrowers repaid all amounts due under the 464 Bishop real estate loan investment and the Newport Development Partners, LLC revolving line of credit held by us. On October 24, 2019, the borrower repaid all amounts due under the Park 35 on Clairmont real estate loan investment held by us. Included in the repayments were accrued interest amounts that totaled approximately $3.4 million.

On October 17, 2019, we closed on mortgage financing for our Five Oaks at Westchase multifamily community located in Tampa, Florida. The new mortgage has a principal amount of $31.5 million, bears interest at a fixed rate of 3.27% per annum and matures on November 1, 2031.

On October 30, 2019, we amended the purchase and sale agreement for the sale of six of our student housing properties to include the sale of our Haven 12 real estate loan investment that has an outstanding principal and accrued interest amount of approximately $7.3 million.

Same-Store Multifamily Communities Financial Data

The following chart presents same-store operating results for the Company's multifamily communities. We define our population of same-store multifamily communities as those that have achieved occupancy at or above 93% 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 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

Summit Crossing I


Sorrel


Venue at Lakewood Ranch

Overton Rise


525 Avalon Park


Vineyards

Avenues at Creekside


Retreat at Greystone


City Vista

Citrus Village


Luxe at Lakewood Ranch


Adara at Overland Park

Founders Village


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)


9/30/2019


9/30/2018






Net (loss) income


$

(2,137)



$

8,354


Add:





Equity stock compensation


305



796


Depreciation and amortization


46,239



44,499


Interest expense


28,799



25,657


Management fees


8,611



7,234


Insurance, professional fees and other expenses

1,945



715


Waived asset management and general and administrative expense fees


(3,081)



(1,934)


Loan loss allowance




3,029


Less:





Interest revenue on notes receivable


12,608



13,618


Interest revenue on related party notes receivable


2,546



3,671


Income from consolidated VIEs


591



131


Gain on sale of real estate




18,605


Loss on extinguishment of debt


(15)









Property net operating income


64,951



52,325


Less:





Non-same-store property revenues


(78,400)



(60,925)


Add:





Non-same-store property operating expenses

28,638



23,143






Same-store net operating income


$

15,189



$

14,543







 

Multifamily Communities' Same Store Net Operating Income












Three months ended:





(in thousands)


9/30/2019


9/30/2018


$ change


% change

Revenues:









Rental revenues


$

25,613



$

24,802



$

811



3.3

%

Other property revenues


1,036



944



92



9.7

%

Total revenues


26,649



25,746



903



3.5

%










Operating expenses:









Property operating and maintenance


3,503



3,566



(63)



(1.8)

%

Payroll


2,150



2,170



(20)



(0.9)

%

Property management fees


1,067



1,032



35



3.4

%

Real estate taxes


3,629



3,422



207



6.0

%

Other


1,111



1,013



98



9.7

%

Total operating expenses


11,460



11,203



257



2.3

%










Same-store net operating income


$

15,189



$

14,543



$

646



4.4

%










Same-store average physical occupancy


95.6

%


95.7

%





 

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








Nine months ended:

(in thousands)


9/30/2019


9/30/2018






Net (loss) income


$

(6,094)



$

17,339


Add:





Equity stock compensation


922



2,881


Depreciation and amortization


137,191



127,210


Interest expense


83,166



68,972


Management fees


24,649



20,096


Insurance, professional fees and other expenses

4,888



2,487


Loan loss allowance




3,029


Waived asset management and general and administrative expense fees


(8,505)



(4,583)


Less:





Interest revenue on notes receivable


35,989



37,576


Interest revenue on related party notes receivable


9,980



12,310


Income from consolidated VIEs


1,316



185


Miscellaneous revenues (1)


1,023




Loss on extinguishment of debt


(84)




Gain on sale of real estate loan investment


747




Gain on sale of real estate




38,961


Gain on sale of trading investment


4









Property net operating income


187,242



148,399


Less:





Non-same-store property revenues


(219,882)



(164,339)


Add:





Non-same-store property operating expenses

78,067



59,726






Same-store net operating income


$

45,427



$

43,786







(1) Revenue from a forfeited earnest money deposit from a prospective property purchaser.

 

Multifamily Communities' Same-Store Net Operating Income












Nine months ended:





(in thousands)


9/30/2019


9/30/2018


$ change


% change

Revenues:









Rental revenues


$

75,972



$

73,611



$

2,361



3.2

%

Other property revenues


2,715



2,770



(55)



(2.0)

%

Total revenues


78,687



76,381



2,306



3.0

%










Operating expenses:









Property operating and maintenance


9,744



10,036



(292)



(2.9)

%

Payroll


6,226



6,173



53



0.9

%

Property management fees


3,149



3,057



92



3.0

%

Real estate taxes


10,872



10,235



637



6.2

%

Other


3,269



3,094



175



5.7

%

Total operating expenses


33,260



32,595



665



2.0

%










Same-store net operating income


$

45,427



$

43,786



$

1,641



3.7

%

 

Capital Markets Activities

On September 27, 2019, our registration statement on Form S-3 (Registration No. 333-233576) (the "Series A1/M1 Registration Statement") was declared effective by the Securities and Exchange Commission (the "SEC"). The Series A1/M1 Registration Statement allows us to offer up to a maximum of 1,000,000 shares of Series A1 Redeemable Preferred Stock, Series M1 Redeemable Preferred Stock or a combination of both (the "Series A1/M1 Offering"). The stated price per share is $1,000, subject to adjustment under certain conditions. The shares are being offered by our affiliate, Preferred Capital Securities, LLC ("PCS"), on a "reasonable best efforts" basis and we intend to invest substantially all the net proceeds of the Series A1/M1 Offering in connection with the acquisition of multifamily communities, grocery-anchored shopping centers, office buildings, real estate loans and mortgages, other real estate-related investments and general working capital purposes.

During the third quarter 2019, we issued and sold an aggregate of 117,787 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 $106.0 million after commissions and other fees.

In addition, during the third quarter 2019, we issued 194,100 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 $2.5 million. We also issued  approximately 869,100 shares of Common Stock for redemptions of 15,601 shares of our Series A Redeemable Preferred Stock.

During the third quarter 2019, we issued and sold an aggregate of 17,156 shares of Series M Redeemable Preferred Stock ("mShares"), resulting in net proceeds of approximately $16.6 million after dealer manager fees.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On August 1, 2019, we declared a quarterly dividend on our Common Stock of $0.2625 per share for the third quarter 2019. This represents a 2.9% increase in our common stock dividend from our third quarter 2018 common stock dividend of $0.255 per share, and an average annual dividend growth rate of 13.4% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The third quarter dividend was paid on October 15, 2019 to all stockholders of record on September 13, 2019. In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.2625 per unit for the third quarter 2019, which was paid on October 15, 2019 to all Class A Unit holders of record as of September 13, 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 $28.1 million for the third quarter 2019 and represent a 6% annual yield. We declared dividends totaling approximately $1.3 million on our Series M Redeemable Preferred Stock, or mShares, for the third 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, November 5, 2019 at 11:00 a.m. Eastern Time to discuss our third 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, November 5, 2019
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

The live broadcast of our third 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  - Extraordinary internalization costs will have a significant impact on our year end numbers and we now expect that when these expenses are added back to FFO we will perform at the low end of our previously provided guidance range of $1.44 to $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 and nine-month periods ended September 30, 2019 and 2018 appear beginning in the attached report, as well as on our website using the following link:

http://investors.pacapts.com/download/3Q19_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 any of the mShares Offering, the $1.5 Billion Unit Offering and the Series A1/M1 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

The final prospectus for the Series A1/M1 Offering, dated October 22, 2019, can be accessed through the following link:

https://www.sec.gov/Archives/edgar/data/1481832/000148183219000097/a424b5-2019seriesamshares.htm

 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)






Three months ended September 30,

(In thousands, except per-share figures)


2019


2018

Revenues:





Rental revenues


$

101,817



$

84,500


Other property revenues


3,232



2,443


Interest income on loans and notes receivable


12,608



13,618


Interest income from related parties


2,546



3,671







Total revenues


120,203



104,232







Operating expenses:





Property operating and maintenance


14,928



12,893


Property salary and benefits

5,360



4,911


Property management fees

3,534



2,998


Real estate taxes


12,870



10,597


General and administrative


1,898



2,221


Equity compensation to directors and executives

305



796


Depreciation and amortization


46,239



44,499


Asset management and general and administrative expense





fees to related party


8,611



7,234


Loan loss allowance




3,029


Insurance, professional fees, and other expenses


3,453



1,713







Total operating expenses


97,198



90,891


Waived asset management and general and administrative




expense fees

(3,081)



(1,934)







Net operating expenses


94,117



88,957


Operating income before (loss) gain on sales of





real estate


26,086



15,275


Gain on sale of real estate




18,605


Operating income


26,086



33,880







Interest expense


28,799



25,657


Change in fair value of net assets of consolidated





VIEs from mortgage-backed pools


591



131


Loss on extinguishment of debt


(15)









Net (loss) income


(2,137)



8,354


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

59



(216)







Net (loss) income attributable to the Company


(2,078)



8,138







Dividends declared to preferred stockholders


(29,446)



(22,360)


Earnings attributable to unvested restricted stock


(5)



(5)







Net loss attributable to common stockholders


$

(31,529)



$

(14,227)







Net loss per share of Common Stock available to




 common stockholders, basic and diluted


$

(0.71)



$

(0.35)







Weighted average number of shares of Common Stock outstanding,




basic and diluted


44,703



40,300


 

 

 

Reconciliation of FFO Attributable to Common Stockholders and Unitholders and AFFO

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






Three months ended September 30,

(In thousands, except per-share figures)



2019


2018









Net loss attributable to common stockholders (See note 1)

$

(31,529)



$

(14,227)










Add:

Depreciation of real estate assets


37,381



33,037



Amortization of acquired real estate intangible assets and deferred leasing costs

8,386



11,058



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


(59)



216


Less:

(Gain) loss on sale of real estate




(18,605)


FFO attributable to common stockholders and unitholders

14,179



11,479










Add:

Loan cost amortization on acquisition term note

19



19



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

492



673



Payment of costs related to property refinancing

170





Weather-related property operating losses



161



Non-cash equity compensation to directors and executives

305



796



Amortization of loan closing costs (See note 4)


1,168



1,309



Depreciation/amortization of non-real estate assets


472



404



Net loan fees received (See note 5)


148



248



Accrued interest income received (See note 6)




4,298



Internalization costs (See note 7)


818





Loan loss allowance




3,029



Deemed dividends from cash redemptions of preferred stock


5



2



Amortization of lease inducements (See note 8)


435



387



Non-cash dividends on Preferred Stock


147



63


Less:

Non-cash loan interest income (See note 6)


(3,763)



(4,104)



Non-cash revenues from mortgage-backed securities


(281)



(131)



Cash paid for loan closing costs

(29)



(25)



Amortization of purchase option termination revenues (See note 9)

(1,283)



(4,478)



Amortization of acquired above and below market lease intangibles





and straight-line rental revenues (See note 10)


(4,293)



(3,353)



Amortization of deferred revenues (See note 11)


(940)



(680)



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

(2,379)



(1,528)










AFFO

$

5,390



$

8,569








Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

11,823



$

10,377



Distributions to Unitholders (See note 2)


225



272



Total




$

12,048



$

10,649










Common Stock dividends and Unitholder distributions per share


$

0.2625



$

0.255










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

$

0.31



$

0.28


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

$

0.12



$

0.21






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





Basic:




44,703



40,300



Common Stock



868



1,069



Class A Units




45,571



41,369



Common Stock and Class A Units














Diluted Common Stock and Class A Units (B)


45,768



42,890










Actual shares of Common Stock outstanding, including 20 and 19 unvested shares




 of restricted Common Stock at September 30, 2019 and 2018, respectively.

45,355



40,804


Actual Class A Units outstanding at September 30, 2019 and 2018, respectively.

856



1,068



Total




46,211



41,872










(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 1.90% weighted average non-controlling interest in the Operating Partnership for the three-month period ended September 30, 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.

 

Reconciliation of FFO Attributable to Common Stockholders and Unitholders and AFFO

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






Nine months ended September 30,

(In thousands, except per-share figures)



2019


2018









Net loss attributable to common stockholders (See note 1)

$

(88,497)



$

(45,931)










Add:

Depreciation of real estate assets


109,408



90,190



Amortization of acquired real estate intangible assets and deferred leasing costs

26,402



35,963



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


(138)



456


Less:

(Gain) loss on sale of real estate




(38,961)


FFO attributable to common stockholders and unitholders

47,175



41,717










Add:

Loan cost amortization on acquisition term note

58



63



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

1,433



1,780



Payment of costs related to property refinancing

594



61



Weather-related property operating losses



(33)



Non-cash equity compensation to directors and executives

922



2,881



Amortization of loan closing costs (See note 4)


3,458



3,567



Depreciation/amortization of non-real estate assets


1,381



1,057



Net loan fees received (See note 5)


674



1,459



Accrued interest income received (See note 6)


5,078



8,410



Internalization costs (See note 7)


1,143





Loan loss allowance




3,029



Deemed dividends from cash redemptions of preferred stock


12



522



Amortization of lease inducements (See note 8)


1,295



955



Non-cash dividends on Preferred Stock


359



216


Less:

Non-cash loan interest income (See note 6)


(10,745)



(14,726)



Non-cash revenues from mortgage-backed securities


(696)



(185)



Cash paid for loan closing costs


(37)



(416)



Amortization of purchase option termination revenues (See note 9)

(2,370)



(1,964)



Amortization of acquired above and below market lease intangibles





and straight-line rental revenues (See note 10)


(12,375)



(9,047)



Amortization of deferred revenues (See note 11)


(2,821)



(1,765)



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

(5,122)



(3,482)










AFFO

$

29,416



$

34,099








Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

34,599



$

30,283



Distributions to Unitholders (See note 2)


683



813



Total




$

35,282



$

31,096










Common Stock dividends and Unitholder distributions per share


$

0.7850



$

0.76










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

$

1.06



$

1.03


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

$

0.66



$

0.84






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





Basic:




43,703



39,598



Common Stock



875



1,070



Class A Units




44,578



40,668



Common Stock and Class A Units














Diluted Common Stock and Class A Units (B)


45,235



41,936










Actual shares of Common Stock outstanding, including 20 and 19 unvested shares




 of restricted Common Stock at September 30, 2019 and 2018, respectively.

45,355



40,804


Actual Class A Units outstanding at September 30, 2019 and 2018, respectively.

856



1,068



Total




46,211



41,872










(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 1.96% weighted average non-controlling interest in the Operating Partnership for the nine-month period ended September 30, 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 September 30, 2019 include activity for the properties acquired during the quarter only from their respective dates of acquisition. In addition, the third quarter 2019 period includes activity for the properties acquired since September 30, 2018. Rental and other property revenues and expenses for the third 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 856,409 Class A Units as of September 30, 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 1.90% and 2.59% for the three-month periods ended September 30, 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 September 30, 2019, aggregate unamortized loan coordination fees were approximately $14.1 million, which will be amortized over a weighted average remaining loan life of approximately 10.4 years.



4)

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 September 30, 2019, aggregate unamortized loan costs were approximately $25.1 million, which will be amortized over a weighted average remaining loan life of approximately 9.1 years.



5)

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 6).



6)

This adjustment reflects the receipt during the periods presented of additional interest income (described in note 5 above) which was earned and accrued prior to those periods presented on various real estate loans.



7)

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.



8)

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.



9)

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; on May 7, 2018, we terminated our purchase options on the Encore, Bishop Street and Hidden River multifamily communities and the Haven46 and Haven Charlotte student housing properties, all of which are (or were) partially supported by real estate loan investments held by us. In exchange, we arranged to receive termination fees aggregating approximately $20.2 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. For the three-month and nine month periods ended September 30, 2019, we had recognized termination fee revenues in excess of cash received, resulting in the negative adjustments shown to FFO in our calculation of AFFO.



10)

This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At September 30, 2019, the balance of unamortized below-market lease intangibles was approximately $53.0 million, which will be recognized over a weighted average remaining lease period of approximately 9.4 years.



11)

This adjustment removes the non-cash amortization of deferred revenue recorded by us in conjunction with Company-owned lessee-funded tenant improvements in our office buildings.



12)

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

 

See Definitions of Non-GAAP Measures.

 

 

Preferred Apartment Communities, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per-share par values)


September 30, 2019


December 31, 2018

Assets





Real estate




Land


$

607,055



$

519,300


Building and improvements

3,117,087



2,738,085


Tenant improvements

151,960



128,914


Furniture, fixtures, and equipment

321,478



278,151


Construction in progress

11,242



8,265


Gross real estate

4,208,822



3,672,715


Less: accumulated depreciation

(382,479)



(272,042)


Net real estate

3,826,343



3,400,673


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

356,272



282,548


Real estate loan investments to related parties, net

25,214



51,663


Total real estate and real estate loan investments, net

4,207,829



3,734,884







Cash and cash equivalents

86,177



38,958


Restricted cash

61,032



48,732


Notes receivable

17,698



14,440


Note receivable and revolving lines of credit due from related parties

23,959



32,867


Accrued interest receivable on real estate loans

27,877



23,340


Acquired intangible assets, net of amortization

147,649



135,961


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

1,454



1,916


Deferred offering costs

2,804



6,468


Tenant lease inducements, net

19,972



20,698


Receivable from sale of mortgage-backed security



41,181


Tenant receivables and other assets

60,948



41,567


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

610,248



269,946


Total assets

$

5,267,647



$

4,410,958







Liabilities and equity




Liabilities




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

$

2,561,837



$

2,299,625


Revolving line of credit

50,000



57,000


Real estate loan investment participation obligation



5,181


Unearned purchase option termination fees

5,050



2,050


Deferred revenue

40,663



43,484


Accounts payable and accrued expenses

58,762



38,618


Accrued interest payable

7,853



6,711


Dividends and partnership distributions payable

22,429



19,258


Acquired below market lease intangibles, net of amortization

53,033



47,149


Security deposits and other liabilities

19,253



17,611


VIE liabilities from mortgage-backed pool, at fair value

585,837



264,886


Total liabilities

3,404,717



2,801,573







Commitments and contingencies




Equity





Stockholders' equity





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




   shares authorized; 2,047 and 1,674 shares issued; 1,932 and 1,608




shares outstanding at September 30, 2019 and December 31, 2018, respectively

19



16


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




   shares authorized; 91 and 44 shares issued and 90 and 44 shares outstanding




at September 30, 2019 and December 31, 2018, respectively

1




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




45,335 and 41,776 shares issued and outstanding at




September 30, 2019 and December 31, 2018, respectively

453



418


Additional paid-in capital

1,861,446



1,607,712


Accumulated (deficit) earnings




      Total stockholders' equity

1,861,919



1,608,146


Non-controlling interest

1,011



1,239


Total equity

1,862,930



1,609,385






Total liabilities and equity

$

5,267,647



$

4,410,958


 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)




Nine months ended September 30,

(In thousands)


2019


2018

Operating activities:





Net (loss) income


$

(6,094)



$

17,339


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




Depreciation and amortization expense

137,191



127,210


Amortization of above and below market leases

(4,525)



(4,297)


Deferred revenues and fee income amortization

(4,024)



(3,103)


Purchase option termination fee amortization

(6,900)



(6,554)


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

(696)



(185)


Amortization of market discount on assumed debt and lease incentives

1,492



1,152


Deferred loan cost amortization

4,752



5,213


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

(7,888)



(4,385)


Equity compensation to executives and directors

922



2,881


Gains on sales of real estate and trading investment

(4)



(38,961)


Cash received for purchase option terminations

1,330



5,100


Loss on extinguishment of debt


84




Gain from sale of real estate loan investments, net

(747)




Non-cash payment of interest on related party line of credit

(637)




Mortgage interest received from consolidated VIEs

13,398



3,429


Mortgage interest paid to other participants of consolidated VIEs

(13,398)



(3,429)


Loan loss allowance



3,029


Changes in operating assets and liabilities:




(Increase) in tenant receivables and other assets

(12,379)



(3,518)


(Increase) in tenant lease incentives

(570)



(6,786)


Increase in accounts payable and accrued expenses

22,399



14,470


Increase in accrued interest, prepaid rents and other liabilities

730



3,369


Net cash provided by operating activities

124,436



111,974







Investing activities:





Investments in real estate loans


(74,668)



(145,413)


Repayments of real estate loans




141,729


Notes receivable issued


(5,399)



(5,949)


Notes receivable repaid


2,169



8,941


Notes receivable issued and draws on lines of credit by related parties

(30,434)



(39,377)


Repayments of notes receivable and lines of credit by related parties

26,222



28,566


Sale of real estate loan investment


747




Origination fees received on real estate loan investments

1,347



2,919


Origination fees paid to Manager on real estate loan investments

(674)



(1,459)


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

(18,656)




Mortgage principal received from consolidated VIEs

5,024



705


Purchases of mortgage-backed securities

(12,278)



(4,739)


Sales of mortgage-backed securities

53,445




Acquisition of properties


(442,415)



(662,918)


Disposition of properties, net




83,636


Receipt of insurance proceeds for capital improvements

746



412


Additions to real estate assets - improvements

(34,251)



(36,288)


Deposits paid on acquisitions

(952)



3,552


Net cash used in investing activities

(530,027)



(625,683)







Financing activities:





Proceeds from mortgage notes payable

329,905



386,559


Repayments of mortgage notes payable

(106,728)



(66,875)


Payments for deposits and other mortgage loan costs

(6,738)



(7,150)


Proceeds from real estate loan participants



5


Payments to real estate loan participants

(5,223)



(4,372)


Proceeds from lines of credit


240,200



362,100


Payments on lines of credit


(247,200)



(348,200)


Repayment of the Term Loan



(11,000)


Mortgage principal paid to other participants of consolidated VIEs

(5,024)



(705)


Proceeds from repurchase agreements

4,857




Payments for repurchase agreements

(4,857)




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

380,016



303,391


Proceeds from exercises of warrants

9,875



16,553


Payments for redemptions of preferred stock

(7,995)



(9,033)


Common Stock dividends paid


(33,617)



(29,488)


Preferred stock dividends paid


(80,339)



(61,093)


Distributions to non-controlling interests

(686)



(762)


Payments for deferred offering costs

(3,386)



(2,862)


Contributions from non-controlling interests

2,050




Net cash provided by financing activities

465,110



527,068






Net increase in cash, cash equivalents and restricted cash

59,519



13,359


Cash, cash equivalents and restricted cash, beginning of year

87,690



73,012


Cash, cash equivalents and restricted cash, end of period

$

147,209



$

86,371


 

 

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,
2019


December 31,
2018

















Multifamily communities:






(in thousands)



Palisades


Northern VA


5/17/2020


N/A


$

17,270



$

17,250



$

17,132



8 / 0  (2)

464 Bishop


Atlanta, GA


12/31/2019


N/A


12,693



12,693



12,693



8.5 / 0 (3)

Park 35 on Clairmont


Birmingham, AL


6/26/2020


N/A


21,060



21,060



21,060



8.5 / 2

Wiregrass


Tampa, FL


5/15/2020


5/15/2023


14,976



14,976



14,136



8.5 / 6.5

Wiregrass Capital


Tampa, FL


5/15/2020


5/15/2023


4,244



4,149



3,891



8.5 / 6.5

Berryessa


San Jose, CA


2/13/2021


2/13/2023


137,616



113,339



95,349



8.5 / 3 (4)

The Anson


Nashville, TN


11/24/2021


11/24/2023


6,240



6,240





8.5 / 4.5

The Anson Capital


Nashville, TN


11/24/2021


11/24/2023


5,659



4,345



3,160



8.5 / 4.5

Sanibel Straights


Fort Myers, FL


2/3/2021


2/3/2022


9,416



8,657



8,118



8.5 / 5.5

Sanibel Straights Capital


Fort Myers, FL


2/3/2021


2/3/2022


6,193



5,803



5,442



8.5 / 5.5

Falls at Forsyth


Atlanta, GA


7/11/2020


7/11/2022


22,412



21,052



19,742



8.5 / 5.5

Newbergh


Atlanta, GA


1/31/2021


1/31/2022


11,749



11,449



10,736



8.5 / 5.5

Newbergh Capital


Atlanta, GA


1/31/2021


1/31/2022


6,176



5,532



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



6,430



6,030



8.5 / 5

Cameron Square


Alexandria, VA


10/11/2021


10/11/2023


21,340



18,184



17,050



8.5 / 3

Cameron Square Capital


Alexandria, VA


10/11/2021


10/11/2023


8,850



8,058



7,557



8.5 / 3

Southpoint


Fredericksburg, VA

2/28/2022


2/28/2024


7,348



7,348



896



8.5 / 4

Southpoint Capital


Fredericksburg, VA

2/28/2022


2/28/2024


4,962



4,154



3,895



8.5 / 4

E-Town


Jacksonville, FL


6/14/2022


6/14/2023


16,697



14,239



3,886



8.5 / 3.5

Vintage


Destin, FL


3/24/2022


3/24/2024


10,763



5,453





8.5 / 4

Hidden River II


Tampa, FL


10/11/2022


10/11/2024


4,462



192





8.5 / 3.5

Hidden River II Capital


Tampa, FL


10/11/2022


10/11/2024


2,763



2,209





8.5 / 3.5

Kennesaw Crossing


Atlanta, GA


9/1/2023


9/1/2024


14,810



5,142





8.5 / 5.5
















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


N/A


N/A






19,462



Haven Charlotte Member (5)

Charlotte, NC


N/A


N/A






8,201



Solis Kennesaw


Atlanta, GA


9/26/2020


9/26/2022


12,359



12,096



11,343



8.5 / 5.5

Solis Kennesaw Capital


Atlanta, GA


10/1/2020


10/1/2022


8,360



8,303



7,786



8.5 / 5.5

Solis Kennesaw II


Atlanta, GA


5/5/2022


5/5/2024


13,613



12,221



4,268



8.5 / 4
















New Market Properties:















Dawson Marketplace


Atlanta, GA


12/31/2019


N/A


12,857



12,857



12,857



8.5 / 5.0 (6)
















Preferred Office Properties:













8West


Atlanta, GA


11/29/2022


11/29/2024


19,193



3,334





8.5 / 5

8West construction loan


Atlanta, GA


N/A


N/A








(7)
























$

457,871



383,216



336,329




Unamortized loan origination fees








(1,730)



(2,118)




Allowance for loan losses


























Carrying amount










$

381,486



$

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 8West construction loan was amended and sold to a third party effective June 30, 2019.

 

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 September 30, 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:









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)


Hidden River II

Tampa, FL


204



S + 90 days (2)


S + 150 days (2)











Student housing properties:









Solis Kennesaw II

Atlanta, GA


175



(5)


(5)











Office property:









8West

Atlanta, GA


(6)



(6)


(6)














2,228
















(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 464 Bishop, Haven Charlotte, Sanibel Straights,
Wiregrass, Newbergh, Cameron Square and Solis Kennesaw projects were terminated, in exchange for an aggregate $20.2 million
in termination fees from the developers, net of amounts due to third party loan participants.


(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 192,000 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 the 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


September 30, 2019


December 31, 2018


Maturity
date


Interest
rate


Basis point
spread over
1 Month
LIBOR
















Multifamily communities:



(in thousands)









Summit Crossing

10/31/2017


$

37,829



$

38,349



11/1/2024


3.99

%


Fixed rate


N/A

Summit Crossing II

3/20/2014


13,273



13,357



4/1/2021


4.49

%


Fixed rate


N/A

Vineyards

9/26/2014


33,549



34,039



10/1/2021


3.68

%


Fixed rate


N/A

Avenues at Cypress

2/13/2015


20,830



21,198



9/1/2022


3.43

%


Fixed rate


N/A

Avenues at Northpointe

2/13/2015


26,462



26,899



3/1/2022


3.16

%


Fixed rate


N/A

Venue at Lakewood Ranch

5/21/2015


28,241



28,723



12/1/2022


3.55

%


Fixed rate


N/A

Aster at Lely Resort

6/24/2015


31,272



31,796



7/5/2022


3.84

%


Fixed rate


N/A

CityPark View

6/30/2015


20,211



20,571



7/1/2022


3.27

%


Fixed rate


N/A

Avenues at Creekside

7/31/2015


39,077



39,697



8/1/2024


3.62

%


160

(2)

N/A

Citi Lakes

7/29/2019


41,266



41,582



8/1/2029


3.66

%


Fixed rate


N/A

Stone Creek

6/22/2017


19,886



20,139



7/1/2052


3.22

%


Fixed rate


N/A

Lenox Village Town Center

2/28/2019


38,972



29,274



3/1/2029


4.34

%


Fixed rate


N/A

Retreat at Lenox

12/21/2015


17,204



17,465



1/1/2023


4.04

%


Fixed rate


N/A

Overton Rise

2/1/2016


38,630



39,220



8/1/2026


3.98

%


Fixed rate


N/A

Village at Baldwin Park

12/17/2018


70,841



71,453



1/1/2054


4.16

%


Fixed rate


N/A

Crosstown Walk

1/15/2016


30,407



30,878



2/1/2023


3.90

%


Fixed rate


N/A

525 Avalon Park

6/15/2017


64,831



65,740



7/1/2024


3.98

%


Fixed rate


N/A

City Vista

7/1/2016


33,856



34,387



7/1/2026


3.68

%


Fixed rate


N/A

Sorrel

8/24/2016


31,624



32,137



9/1/2023


3.44

%


Fixed rate


N/A

Citrus Village

3/3/2017


28,947



29,393



6/10/2023


3.65

%


Fixed rate


N/A

Retreat at Greystone

11/21/2017


34,204



34,644



12/1/2024


4.31

%


Fixed rate


N/A

Founders Village

3/31/2017


30,342



30,748



4/1/2027


4.31

%


Fixed rate


N/A

Claiborne Crossing

4/26/2017


26,057



26,381



6/1/2054


2.89

%


Fixed rate


N/A

Luxe at Lakewood Ranch

7/26/2017


37,845



38,378



8/1/2027


3.93

%


Fixed rate


N/A

Adara at Overland Park

9/27/2017


30,771



31,203



4/1/2028


3.90

%


Fixed rate


N/A

Aldridge at Town Village

10/31/2017


36,736



37,222



11/1/2024


4.19

%


Fixed rate

(3)

N/A

Reserve at Summit Crossing

9/29/2017


19,372



19,654



10/1/2024


3.87

%


Fixed rate


N/A

Overlook at Crosstown Walk

11/21/2017


21,552



21,848



12/1/2024


3.95

%


Fixed rate


N/A

Colony at Centerpointe

12/20/2017


32,285



32,770



10/1/2026


3.68

%


Fixed rate


N/A

Lux at Sorrel

1/9/2018


30,622



31,057



2/1/2030


3.91

%


Fixed rate


N/A

Green Park

2/28/2018


38,706



39,236



3/10/2028


4.09

%


Fixed rate


N/A

The Lodge at Hidden River

9/27/2018


41,075



41,576



10/1/2028


4.32

%


Fixed rate


N/A

Vestavia Reserve

11/9/2018


37,282



37,726



12/1/2030


4.40

%


Fixed rate


N/A

CityPark View South

11/15/2018


23,861



24,140



6/1/2029


4.51

%


Fixed rate


N/A

Artisan at Viera

8/8/2019


40,000





9/1/2029


3.93

%


Fixed rate


N/A















Total multifamily communities



1,147,918



1,112,880
























Grocery-anchored shopping centers:

Spring Hill Plaza

9/17/2019


8,200



9,261



10/1/2031


3.72

%


Fixed rate


N/A

Parkway Town Centre

9/17/2019


8,100



6,735



10/1/2031


3.72

%


Fixed rate


N/A

Woodstock Crossing

8/8/2014


2,892



2,935



9/1/2021


4.71

%


Fixed rate


N/A

Deltona Landings

8/16/2019


6,325



6,622



9/1/2029


4.18

%


Fixed rate


N/A

Powder Springs

8/13/2019


8,000



6,987



9/1/2029


3.65

%


Fixed rate


(4)

Kingwood Glen

9/30/2014


10,899



11,079



10/1/2019


3.48

%


Fixed rate


N/A

Barclay Crossing

8/16/2019


6,269



6,229



9/1/2029


4.18

%


Fixed rate


N/A

Sweetgrass Corner

9/30/2014


7,434



7,555



10/1/2019


3.58

%


Fixed rate


N/A

Parkway Centre

8/16/2019


4,556



4,338



9/1/2029


4.18

%


Fixed rate


N/A

The Market at Salem Cove

10/6/2014


9,120



9,253



11/1/2024


4.21

%


Fixed rate


N/A

Independence Square

8/27/2015


11,522



11,716



9/1/2022


3.93

%


Fixed rate


N/A

Royal Lakes Marketplace

4/12/2019


9,627



9,544



5/1/2029


4.29

%


Fixed rate


N/A

The Overlook at Hamilton Place

12/22/2015


19,612



19,913



1/1/2026


4.19

%


Fixed rate


N/A

Summit Point

10/30/2015


11,586



11,858



11/1/2022


3.57

%


Fixed rate


N/A

East Gate Shopping Center

4/29/2016


5,316



5,431



5/1/2026


3.97

%


Fixed rate


N/A

Fury's Ferry

4/29/2016


6,141



6,273



5/1/2026


3.97

%


Fixed rate


N/A

Rosewood Shopping Center

4/29/2016


4,125



4,214



5/1/2026


3.97

%


Fixed rate


N/A

Southgate Village

4/29/2016


7,333



7,491



5/1/2026


3.97

%


Fixed rate


N/A

The Market at Victory Village

5/16/2016


8,951



9,066



9/11/2024


4.40

%


Fixed rate


N/A

Wade Green Village

4/7/2016


7,695



7,815



5/1/2026


4.00

%


Fixed rate


N/A

Lakeland Plaza

7/15/2016


27,661



28,256



8/1/2026


3.85

%


Fixed rate


N/A

University Palms

8/8/2016


12,516



12,798



9/1/2026


3.45

%


Fixed rate


N/A

Cherokee Plaza

4/12/2019


25,011



24,683



5/1/2027


4.28

%


Fixed rate


N/A

Sandy Plains Exchange

8/8/2016


8,743



8,940



9/1/2026


3.45

%


Fixed rate


N/A

Thompson Bridge Commons

8/8/2016


11,688



11,951



9/1/2026


3.45

%


Fixed rate


N/A

Heritage Station

8/8/2016


8,651



8,845



9/1/2026


3.45

%


Fixed rate


N/A

Oak Park Village

8/8/2016


8,927



9,128



9/1/2026


3.45

%


Fixed rate


N/A

Shoppes of Parkland

8/8/2016


15,773



15,978



9/1/2023


4.67

%


Fixed rate


N/A

Champions Village

10/18/2016


27,400



27,400



11/1/2021


5.11

%


300

(5)

11/1/2021

Castleberry-Southard

4/21/2017


11,014



11,175



5/1/2027


3.99

%


Fixed rate


N/A

Rockbridge Village

6/6/2017


13,668



13,875



7/5/2027


3.73

%


Fixed rate


N/A

Irmo Station

7/26/2017


10,107



10,307



8/1/2030


3.94

%


Fixed rate


N/A

Maynard Crossing

8/25/2017


17,571



17,927



9/1/2032


3.74

%


Fixed rate


N/A

Woodmont Village

9/8/2017


8,375



8,535



10/1/2027


4.13

%


Fixed rate


N/A

West Town Market

9/22/2017


8,562



8,737



10/1/2025


3.65

%


Fixed rate


N/A

Crossroads Market

12/5/2017


18,232



18,584



1/1/2030


3.95

%


Fixed rate


N/A

Anderson Central

3/16/2018


11,610



11,817



4/1/2028


4.32

%


Fixed rate


N/A

Greensboro Village

5/22/2018


8,302



8,452



6/1/2028


4.20

%


Fixed rate


N/A

Governors Towne Square

5/22/2018


11,045



11,245



6/1/2028


4.20

%


Fixed rate


N/A

Conway Plaza

6/29/2018


9,591



9,716



7/5/2028


4.29

%


Fixed rate


N/A

Brawley Commons

7/6/2018


18,070



18,387



8/1/2028


4.36

%


Fixed rate


N/A

Hollymead Town Center

12/21/2018


26,907



27,300



1/1/2029


4.64

%


Fixed rate


N/A

Gayton Crossing

1/17/2019


17,776





2/1/2029


4.71

%


Fixed rate


N/A

Free State Shopping Center

5/28/2019


46,597





6/1/2029


3.99

%


Fixed rate


N/A

Polo Grounds Mall

6/12/2019


13,286





7/1/2034


3.93

%


Fixed rate


N/A

Disston Plaza

6/12/2019


17,985





7/1/2034


3.93

%


Fixed rate


N/A

Fairfield Shopping Center

8/16/2019


19,750





8/16/2026


4.08

%


205


8/16/22















Total grocery-anchored shopping centers



598,521



488,351
























Student housing properties:

North by Northwest

6/1/2016


31,411



32,004



10/1/2022


4.02

%


Fixed rate


N/A

SoL

10/31/2018


35,795



36,197



11/1/2028


4.71

%


Fixed rate


N/A

Stadium Village

10/27/2017


45,449



46,095



11/1/2024


3.80

%


Fixed rate


N/A

Ursa

12/18/2017


31,400



31,400



1/5/2020


5.02

%


300


1/5/2020

The Tradition

5/10/2018


30,000



30,000



6/6/2021


5.77

%


375

(6)

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


5.57

%


355

(7)

7/9/2021

Haven49

3/27/2019


41,550





12/22/2019


5.77

%


375


12/22/2019















Total student housing properties



291,696



251,787
























Office buildings:

Brookwood Center

8/29/2016


30,910



31,481



9/10/2031


3.52

%


Fixed rate


N/A

Galleria 75

11/4/2016


5,390



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


52,172



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


125,322



126,650



1/10/2037


4.60

%


Fixed rate


N/A

CAPTRUST Tower

7/25/2019


82,650





8/1/2029


3.61

%


Fixed rate


7/31/2029















Total office buildings



566,344



486,734










Grand total



2,604,479



2,339,752










Less: deferred loan costs



(37,954)



(35,242)










Less: below market debt adjustment



(4,688)



(4,885)










Mortgage notes, net



$

2,561,837



$

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 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.

(4) The mortgage has interest-only payment terms for the periods of June 1, 2023 through May 1, 2024 and from June 1, 2028 through May 1, 2029.

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

(6) The interest rate has a floor of 5.35%.

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


 

Multifamily Communities

As of September 30, 2019, our multifamily community portfolio consisted of the following properties:

 









Three months ended
September 30, 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



96.7

%


$

1,215



Summit Crossing II


Atlanta, GA


140



1,100



96.7

%


$

1,319



Overton Rise


Atlanta, GA


294



1,018



95.4

%


$

1,574



Aldridge at Town Village


Atlanta, GA


300



969



96.7

%


$

1,374



Avenues at Cypress


Houston, TX


240



1,170



95.1

%


$

1,471



Avenues at Northpointe


Houston, TX


280



1,167



97.6

%


$

1,420



Vineyards


Houston, TX


369



1,122



95.9

%


$

1,186



Avenues at Creekside


San Antonio, TX


395



974



94.3

%


$

1,176



Aster at Lely Resort


Naples, FL


308



1,071



94.5

%


$

1,465



Venue at Lakewood Ranch


Sarasota, FL


237



1,001



92.1

%


$

1,591



525 Avalon Park


Orlando, FL


487



1,394



94.7

%


$

1,504



Citi Lakes


Orlando, FL


346



984



95.1

%


$

1,478



Luxe at Lakewood Ranch


Sarasota, FL


280



1,105



96.4

%


$

1,518



Citrus Village


Tampa, FL


296



980



96.7

%


$

1,312



Lenox Village


Nashville, TN


273



906



96.0

%


$

1,300



Regent at Lenox


Nashville, TN


18



1,072



94.4

%


$

1,400



Retreat at Lenox


Nashville, TN


183



773



96.9

%


$

1,223



Retreat at Greystone


Birmingham, AL


312



1,100



95.4

%


$

1,323



City Vista


Pittsburgh, PA


272



1,023



95.2

%


$

1,428



Adara Overland Park


Kansas City, KS


260



1,116



96.8

%


$

1,358



Founders Village


Williamsburg, VA


247



1,070



95.5

%


$

1,413



Sorrel


Jacksonville, FL


290



1,048



95.3

%


$

1,315















Total/Average Same-Store Communities




6,172





95.6

%
















CityPark View


Charlotte, NC


284



948



95.3

%


$

1,149



CityPark View South


Charlotte, NC


200



1,005



95.8

%


$

1,269



Stone Creek


Houston, TX


246



852



96.1

%


$

1,163



Crosstown Walk


Tampa, FL


342



1,070



94.2

%


$

1,331



Overlook at Crosstown Walk


Tampa, FL


180



986



93.9

%


$

1,413



Claiborne Crossing


Louisville, KY


242



1,204



97.2

%


$

1,379



The Reserve at Summit Crossing


Atlanta, GA


172



1,002



95.3

%


$

1,383



Colony at Centerpointe


Richmond, VA


255



1,149



98.7

%


$

1,395



Lux at Sorrel


Jacksonville, FL


265



1,025



95.0

%


$

1,416



Green Park


Atlanta, GA


310



985



96.7

%


$

1,474



Lodge at Hidden River


Tampa, FL


300



980



95.7

%


$

1,407



Vestavia Reserve


Birmingham, AL


272



1,113



93.1

%


$

1,570



Artisan at Viera


Melbourne, FL


259



1,070







Five Oaks at Westchase


Tampa, FL


218



983



















Value-add project:












Village at Baldwin Park


Orlando, FL


528



1,069



94.9

%


$

1,695















Total PAC Non-Same-Store Communities




4,073





















Average stabilized physical occupancy








95.6

%
















Total multifamily community units




10,245





















 

For the three-month period ended September 30, 2019, our average same-store multifamily communities' physical occupancy was 95.6%. 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 September 30, 2019, 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, 2019, our average economic occupancy was 95.3%. We define average economic occupancy as market rent reduced by vacancy losses, expressed as a percentage. All of our multifamily properties are included in these calculations except for properties which are not yet stabilized (which we define as properties having first achieved 93% physical occupancy for three full months in a quarter), properties which are owned for less than the entire reporting period and properties which are undergoing significant capital projects, have sustained significant casualty losses or are adding additional phases (Village at Baldwin Park, Lodge at Hidden River, Vestavia Reserve, Artisan at Viera and Five Oaks at Westchase). We also exclude properties which are currently being marketed for sale, of which we had none at September 30, 2019.

Student Housing Properties

As of September 30, 2019, our student housing portfolio consisted of the following properties:

 











Three months ended
September 30, 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 (2)


Tallahassee, FL


219



679



1,250



86.7

%


$

712


SoL  (2)


Tempe, AZ


224



639



1,296



98.9

%


$

712


Stadium Village (2, 3)


Atlanta, GA


198



792



1,466



97.4

%


$

721


Ursa (2,3)


Waco, TX


250



840



1,634



95.5

%


$

596


The Tradition


College Station, TX


427



808



539



95.7

%


$

596


The Retreat at Orlando (2)


Orlando, FL


221



894



2,036



98.6

%


$

763


The Bloc


Lubbock, TX


140



556



1,394



%


n/a


Haven49 (2)


Charlotte, NC


332



887



1,224



%


n/a



















2,011



6,095





95.6

%


$

682


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

(2) On July 29, 2019, we entered into a purchase and sale agreement to sell six of our student housing properties to a third party. A non-refundable
earnest money deposit has been placed into an escrow account by the purchaser and we anticipate the sale to close in the near future.

(3) 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, 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

$

143



$

14.11



$



$



$

143



$

14.11


Carpets



474



46.91







474



46.91


Wood / vinyl flooring

28



2.69



74



7.36



102



10.05


Mini blinds and ceiling fans

74



7.32







74



7.32


Fire safety






45



4.36



45



4.36


HVAC


216



21.36







216



21.36


Computers, equipment, misc.

2



0.25



82



8.15



84



8.40


Elevators












Exterior painting





297



29.34



297



29.34


Leasing office and other common amenities

101



9.95



188



18.31



289



28.26


Major structural projects





543



53.36



543



53.36


Cabinets and countertop upgrades





143



14.03



143



14.03


Landscaping and fencing





95



9.02



95



9.02


Parking lot






94



9.24



94



9.24


Signage and sanitation





12



1.16



12



1.16


Totals



$

1,038



$

102.59



$

1,573



$

154.33



$

2,611



$

256.92


 

For the three-month period ended September 30, 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

$

28



$

4.56



$



$



$

28



$

4.56


Carpets



199



34.17







199



34.17


Wood / vinyl flooring





20



3.43



20



3.43


Mini blinds and ceiling fans

22



3.78







22



3.78


Fire safety













HVAC


34



5.79



138



23.18



172



28.97


Computers, equipment, misc.

4



0.70



65



10.88



69



11.58


Elevators












Exterior painting





204



32.47



204



32.47


Leasing office and other common amenities





89



14.29



89



14.29


Major structural projects





369



56.27



369



56.27


Cabinets and counter top upgrades





13



1.95



13



1.95


Landscaping and fencing





60



8.43



60



8.43


Parking lot





6



0.83



6



0.83


Signage and sanitation





61



10.16



61



10.16


Unit furniture

291



49.68







291



49.68


Totals



$

578



$

98.68



$

1,025



$

161.89



$

1,603



$

260.57


 

Grocery-Anchored Shopping Center Portfolio

As of September 30, 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



93.6

%


Sprouts

Powder Springs

 Atlanta, GA


1999


77,853



96.9

%


 Publix

Rockbridge Village

 Atlanta, GA


2005


102,432



89.3

%


 Kroger

Roswell Wieuca Shopping Center

 Atlanta, GA


2007


74,370



100.0

%


 The Fresh Market

Royal Lakes Marketplace

 Atlanta, GA


2008


119,493



95.0

%


 Kroger

Sandy Plains Exchange

 Atlanta, GA


1997


72,784



96.7

%


Publix

Summit Point

 Atlanta, GA


2004


111,970



90.7

%


 Publix

Thompson Bridge Commons

 Atlanta, GA


2001


92,587



96.4

%


Kroger

Wade Green Village

 Atlanta, GA


1993


74,978



86.0

%


 Publix

Woodmont Village

 Atlanta, GA


2002


85,639



98.6

%


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



97.7

%


 Publix

Greensboro Village

 Nashville, TN


2005


70,203



96.3

%


 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



100.0

%


BJ's Wholesale Club

Polo Grounds Mall

West Palm Beach, FL


1966


130,285



98.9

%


Publix

Crossroads Market

 Naples, FL


1993


126,895



100.0

%


Publix

Neapolitan Way

 Naples, FL


1985


137,580



91.8

%


Publix

Conway Plaza

 Orlando, FL


1966


117,705



83.4

%


Publix

Deltona Landings

 Orlando, FL


1999


59,966



100.0

%


 Publix

University Palms

 Orlando, FL


1993


99,172



98.6

%


Publix

Disston Plaza

 Tampa-St. Petersburg, FL


1954


129,150



96.6

%


Publix

Barclay Crossing

 Tampa, FL


1998


54,958



100.0

%


 Publix

Champions Village

 Houston, TX


1973


383,346



78.0

%


Randalls

Kingwood Glen

 Houston, TX


1998


103,397



97.1

%


 Kroger

Independence Square

 Dallas, TX


1977


140,218



87.2

%


 Tom Thumb

Oak Park Village

 San Antonio, TX


1970


64,855



100.0

%


H.E.B.

Sweetgrass Corner

 Charleston, SC


1999


89,124



29.1

%


(2)

Irmo Station

 Columbia, SC


1980


99,384



96.4

%


Kroger

Rosewood Shopping Center

 Columbia, SC


2002


36,887



93.5

%


 Publix

Anderson Central

 Greenville Spartanburg, SC


1999


223,211



96.8

%


 Walmart

Fairview Market

 Greenville Spartanburg, SC


1998


53,888



76.6

%


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



96.8

%


 Publix

Hollymead Town Center

Charlottesville, VA


2005


158,807



90.8

%


Harris Teeter

Gayton Crossing

Richmond, VA


1983


158,316


(3)

84.3

%


Kroger

Fairfield Shopping Center (4)

Virginia Beach, VA


1985


231,829



85.8

%


Food Lion

Free State Shopping Center

Washington, DC


1970


264,152



97.7

%


Giant











Grand total/weighted average





5,644,427



92.7

%















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

(2) Bi-Lo (the former anchor tenant) had extended their term through April 30, 2019 and had no further right or option to extend their lease.

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

(4)As of September 30, 2019, our grocery-anchored shopping center portfolio was 92.7% 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, 2019 were:

 



Totals



Number
of leases


Leased
GLA


Percent of
leased GLA








Month to month


6



13,943



0.3

%

2019


22



61,052



1.2

%

2020


139



447,860



8.6

%

2021


158



590,374



11.3

%

2022


158



500,008



9.6

%

2023


118



518,907



9.9

%

2024


116



1,129,834



21.6

%

2025


52



692,952



13.3

%

2026


16



170,882



3.3

%

2027


24



184,585



3.5

%

2028


26



302,066



5.8

%

2029 +


37



617,577



11.6

%








Total


872



5,230,040



100.0

%

 

The Company's grocery-anchored shopping center portfolio contained the following anchor tenants as of September 30, 2019:

 

Tenant


GLA


Percent of
total GLA

Publix


1,131,159



20.0%

Kroger


518,194



9.2%

Harris Teeter


222,523



3.9%

Wal-Mart


183,211



3.2%

BJ's Wholesale Club


108,532



1.9%

Giant


73,149



1.3%

Randall's


61,604



1.1%

H.E.B


54,844



1.0%

Tom Thumb


43,600



0.8%

The Fresh Market


43,321



0.8%

Food Lion


38,538



0.7%

Sprouts


29,855



0.5%

Aldi


23,622



0.5%






Total


2,532,152



44.9%






 

The Company's Quarterly Report on Form 10-Q for third 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 third quarter 2019 totaled approximately $744,000. 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 September 30, 2019, our office building portfolio consisted of the following properties:

 

Property Name


Location


GLA


Percent
leased

Three Ravinia


Atlanta, GA


814,000



98

%

150 Fayetteville


Raleigh, NC


560,000



91

%

Capitol Towers


Charlotte, NC


479,000



96

%

Westridge at La Cantera


San Antonio, TX


258,000



100

%

CAPTRUST Tower


Raleigh, NC


300,000



100

%

Armour Yards


Atlanta, GA


187,000

(1)


95

%

Brookwood Center


Birmingham, AL


169,000



100

%

Galleria 75


Atlanta, GA


111,000



96

%












2,878,000



97

%








(1) GLA for Armour Yards excludes 35,000 square feet for 251 Armour, which is under redevelopment.

 

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



16.0

%


$

12,043


Albemarle

162,000



7.6

%


5,706


CapFinancial

113,000



5.3

%


3,954


United Services Automobile Association

129,000



4.1

%


3,118


Harland Clarke Corporation

129,000



3.8

%


2,881











1,053,000



36.8

%


$

27,702


 

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


25,000



0.9

%

2020


100,000



3.6

%

2021


220,000



7.9

%

2022


106,000



3.9

%

2023


144,000



5.2

%

2024


242,000



8.8

%

2025


217,000



7.9

%

2026


239,000



8.8

%

2027


267,000



9.7

%

2028


213,000



7.8

%

2029+


975,000



35.5

%






Total


2,748,000



100.0

%

 

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $20,000 during the third 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), (iii) to newly leased space which had been vacant for more than one year and (iv) 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 grocery-anchored shopping centers, class A office buildings and student housing properties. 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 September 30, 2019, the Company was the approximate 98.2% 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: For further information: Leonard A. Silverstein, President and Chief Operating Officer, Preferred Apartment Communities, Inc., lsilverstein@pacapts.com, +1-770-818-4147