Preferred Apartment Communities

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Preferred Apartment Communities, Inc. Reports Results for Fourth Quarter and Year Ended 2019

ATLANTA, Feb. 24, 2020 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company" or "Preferred Apartment Communities") today reported results for the quarter and year ended December 31, 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

Financial Highlights

Our operating results are presented below.

















Three months ended December 31,




Years ended December 31,






2019


2018


% change


2019


2018


% change

















Revenues (in thousands)

$

124,866



$

106,280



17.5

%


$

470,427



$

397,271



18.4

%

















Per share data:














Net income (loss) (1)

$

(0.71)



$

0.06





$

(2.73)



$

(1.08)



152.8

%

















FFO (2) (A)

$

0.31



$

0.38



(18.4)

%


$

1.37



$

1.41



(2.8)

%

















AFFO (2)

$

0.35



$

0.48



(27.1)

%


$

1.02



$

1.33



(23.3)

%

















Dividends (3)

$

0.2625



$

0.26



1.0

%


$

1.0475



$

1.02



2.7

%

















(A) FFO includes due diligence and pursuit costs related to the internalization of our Manager of approximately $1.8 million and $3.0 million

for the three months and year ended December 31, 2019, respectively. Excluding these costs, our FFO would have been $0.35 and $1.44 for
these periods.
















 


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


(2) FFO and AFFO results are presented per basic 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.

Management Quote:

"Our fourth quarter and 2019 full year results reflect consistently solid operating performance across all of our operating platforms, including multifamily same store NOI growth of 4.1% year over year and 5.1% quarter over quarter, all despite the impact to earnings from meaningful one-time expenses incurred for our internalization transaction. As we start 2020, we enjoy a simplified, investor-friendly structure with an optimized platform for future growth, substantial cash savings available for reinvestment, and strengthened alignment of management and shareholder interests. We are very excited for the future, as we continue to execute our proven strategies to drive growth in our core Sunbelt markets and create value in the years ahead," said Joel Murphy, Preferred Apartment Communities' Chief Executive Officer.

  • For the fourth quarter 2019, our FFO payout ratio to Common Stockholders and Unitholders was approximately 84.4% and our FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 68.0%. Excluding costs related to the internalization of our Manager, these respective ratios were 75.0% and 65.4%.(A)
  • Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 74.9% for the fourth quarter 2019 and 103.7% for the year ended December 31, 2019. Our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 65.4% for the fourth quarter 2019 and 71.2% for the year ended December 31, 2019.  (B) We have approximately $25.8 million of accrued but not yet paid interest revenues on our real estate loan investment portfolio.
  • For the quarter ended December 31, 2019, our same-store multifamily rental revenues increased approximately 3.8% and our operating expenses increased 2.3%, resulting in an increase in net operating income of approximately 5.1% as compared to the quarter ended December 31, 2018.(C) For the fourth quarter 2019, our average same-store multifamily communities' physical occupancy was 95.1%. Our 2019 same-store multifamily portfolio represents approximately 60.2% of our aggregate multifamily units.
  • At December 31, 2019, the market value of our common stock was $13.32 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 15.2% through December 31, 2019.
  • As of December 31, 2019, the average age of our multifamily communities was approximately 5.7 years, which is the youngest in the public multifamily REIT industry.
  • As of December 31, 2019, approximately 93.2% 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. 
  • On December 10 and December 17, 2019, we sold our investments in the ML-04 and ML-05 tranches of the Freddie Mac K Program, respectively, for a combined $26.6 million, realizing a combined gain of approximately $1.6 million.
  • As of December 31, 2019, our total assets were approximately $4.8 billion compared to approximately $4.4 billion as of December 31, 2018, an increase of approximately $360.0 million, or approximately 8.2%. This growth reflects the acquisition of 13 real estate properties during 2019, partially offset by the sale of our Freddie Mac K program investments in December 2019 and the resulting deconsolidation of the associated VIE mortgage pool assets. Excluding the VIE mortgage pool assets from other participants in the K Program, our total assets grew approximately $624.5 million, or 15.1% since December 31, 2018.
  • On October 17, 2019, we obtained a new fixed-rate mortgage on our Five Oaks at Westchase multifamily community of approximately $31.5 million, which matures on November 1, 2031 and bears interest of 3.27% per annum.
  • At December 31, 2019, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 51.6%.
  • On May 24, 2019, we entered into a purchase and sale agreement to sell six of our student housing properties to a third party. On June 28, 2019, this agreement was terminated and we recorded revenue from a forfeited earnest money deposit of $1.0 million. A new purchase and sale agreement was entered into for the same six student housing properties plus a real estate loan investment supporting yet another student housing property on July 29, 2019. On December 9, 2019, the agreement was amended to extend the closing date to March 20, 2020 and resulted in another $1.0 million deposit forfeiture by the prospective purchaser.
  • On October 11, 2019, we closed on a real estate loan investment of up to $10.9 million in connection with the development of Vintage Horizon West, a 340-unit multifamily community to be located in Orlando, Florida.

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


(B) We calculate the AFFO payout ratio to Common Stockholders as the ratio of Common Stock dividends and distributions to AFFO. We calculate the AFFO payout ratio to preferred stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and AFFO.
 


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

Acquisitions of Properties

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










Property


Location (MSA)


Units / Leasable

square feet











Office building:








Morrocroft Centre (1)


Charlotte, North Carolina


291,000


LSF











Grocery-anchored shopping centers:








Hanover Shopping Center (1)


Wilmington, North Carolina


305,346


LSF



Berry Town Centre


Orlando, Florida


99,441


LSF







404,787













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

Real Estate Assets

At December 31, 2019, our portfolio of owned real estate assets and potential additions from purchase options we held from our real estate loan investments consisted of:











Owned as of

December 31,
2019


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


Potential total



Multifamily communities:








Properties

34


(3)

9



43




Units

10,245



2,643



12,888




Grocery-anchored shopping centers:








Properties

52


(3)



52




Gross leasable area (square feet)

6,041,629





6,041,629




Student housing properties:








Properties

8


(4)

1



9




Units

2,011



175



2,186




Beds

6,095



543



6,638




Office buildings:








Properties

10


(3)

1



11




Rentable square feet

3,204,000



192,000



3,396,000












(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 multifamily community, two student housing properties, two grocery-anchored shopping centers and two office buildings are owned through
consolidated joint ventures.
 


(4) Six of our student housing properties were under contract for sale at December 31, 2019.

Subsequent to Quarter End

On January 1, 2020, Joel T. Murphy became Chief Executive Officer of the Company. Mr. Murphy will continue as a member of the board, where he has served since May 2019. Mr. Murphy was the CEO of our New Market Properties subsidiary for the last five years  until his appointment as our CEO, and since June 2018 has been the chairman of the Company's investment committee. Mr. Murphy succeeded our previous CEO and Chairman of the Board, Daniel M. DuPree, who will remain with us as Executive Chairman of the Board.

On January 31, 2020, we internalized the functions performed by Preferred Apartment Advisors, LLC (the "Manager") and NMP Advisors, LLC (the "Sub-Manager") by acquiring the entities that own the Manager and the Sub-Manager (such transactions, collectively, the "Internalization") for an aggregate purchase price of $154.0 million, plus up to $25.0 million of  additional consideration. Additionally, up to $15.0 million of the $154.0 million purchase price was to be held back and is payable to the sellers less certain losses following final resolution of certain specified matters. Pursuant to the Stock Purchase Agreement entered into on January 31, 2020 the sellers sold all of the outstanding shares of NELL Partners, Inc. ("NELL") and NMA Holdings, Inc., parent companies of the Manager and Sub-Manager, respectively, to us, in exchange for an aggregate of approximately $111.1 million in cash paid at the closing which reflects the satisfaction of certain indebtedness of NELL, the estimated net working capital adjustment, and a hold back of $15.0 million for certain specified matters.

Between January 1, 2020 and February 14, 2020, we issued 65,298 Units under the $1.5 billion series A preferred stock and warrant unit offering, or the $1.5 Billion Unit Offering, and collected net proceeds of approximately $58.8 million after commissions and fees; under the Series A1/M1 Offering, we issued 8,067 shares of Series A1 Preferred Stock and collected net proceeds of approximately $7.3 million after commissions and fees; and we issued 469 shares of Series M1 Preferred Stock and collected net proceeds of approximately $455,000 after commissions and fees.

On February 3, 2020, the borrower of the Dawson Marketplace real estate loan repaid all amounts due under the loan, including principal of approximately $12.9 million and accrued interest of approximately $2.7 million, the latter of which will be additive to our first quarter 2020 AFFO result.

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)


12/31/2019


12/31/2018






Net (loss) income


$

(1,364)



$

27,199


Add:





Equity stock compensation


301



(1,178)


Depreciation and amortization


47,874



43,926


Interest expense


28,798



26,592


Management fees


8,867



7,445


Insurance, professional fees and other expenses

3,117



978


Loan loss allowance


2,038



(496)


Waived asset management and general and administrative expense fees


(3,259)



(2,073)


Less:





Interest revenue on notes receivable


13,553



12,614


Interest revenue on related party notes receivable


1,966



3,306


Miscellaneous revenues


1,000




Income from consolidated VIEs


515



135


Gains on sales of real estate and trading investments


1,563



30,744


Gain on land condemnation


207









Property net operating income


67,568



55,594


Less:





Non-same-store property revenues


(81,743)



(64,186)


Add:





Non-same-store property operating expenses

29,423



23,097






Same-store net operating income


$

15,248



$

14,505







 

 

Multifamily Communities' Same Store Net Operating Income












Three months ended:





(in thousands)


12/31/2019


12/31/2018


$ change


% change

Revenues:









Rental revenues


$

25,648



$

24,718



$

930



3.8

%

Other property revenues


957



886



71



8.0

%

Total revenues


26,605



25,604



1,001



3.9

%










Operating expenses:









Property operating and maintenance


3,393



3,183



210



6.6

%

Payroll


2,126



2,130



(4)



(0.2)

%

Property management fees


1,092



1,025



67



6.5

%

Real estate taxes


3,600



3,708



(108)



(2.9)

%

Other


1,146



1,053



93



8.8

%

Total operating expenses


11,357



11,099



258



2.3

%










Same-store net operating income


$

15,248



$

14,505



$

743



5.1

%










Same-store average physical occupancy


95.1

%


94.8

%





 

 

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








Years ended:

(in thousands)


12/31/2019


12/31/2018






Net (loss) income


$

(7,458)



$

44,538


Add:





Equity stock compensation


1,223



1,703


Depreciation and amortization


185,065



171,136


Interest expense


111,964



95,564


Management fees


33,516



27,541


Insurance, professional fees and other expenses

8,005



3,467


Loan loss allowance


2,038



2,533


Waived asset management and general and administrative expense fees


(11,764)



(6,656)


Less:





Interest revenue on notes receivable


49,542



50,190


Interest revenue on related party notes receivable


11,946



15,616


Miscellaneous revenues (1)


2,023




Income from consolidated VIEs


1,831



320


Loss on extinguishment of debt


(84)




Gain on sale of real estate loan investment


747




Gains on sales of real estate and trading investments


1,567



69,705


Gain on land condemnation


207









Property net operating income


254,810



203,995


Less:





Non-same-store property revenues


(301,625)



(228,525)


Add:





Non-same-store property operating expenses

107,489



82,820






Same-store net operating income


$

60,674



$

58,290







(1) Includes $2.0 million of forfeited earnest money deposits from a prospective property purchaser.

 

Multifamily Communities' Same-Store Net Operating Income












Years ended:





(in thousands)


12/31/2019


12/31/2018


$ change


% change

Revenues:









Rental revenues


$

101,620



$

98,329



$

3,291



3.3

%

Other property revenues


3,671



3,656



15



0.4

%

Total revenues


105,291



101,985



3,306



3.2

%










Operating expenses:









Property operating and maintenance


13,137



13,222



(85)



(0.6)

%

Payroll


8,352



8,302



50



0.6

%

Property management fees


4,241



4,082



159



3.9

%

Real estate taxes


14,472



13,942



530



3.8

%

Other


4,415



4,147



268



6.5

%

Total operating expenses


44,617



43,695



922



2.1

%










Same-store net operating income


$

60,674



$

58,290



$

2,384



4.1

%

 

 

For periods beginning on or after January 1, 2020, the multifamily established communities listed below containing an aggregate 8,694 units will be included in our calculations of same store net operating income. The same store pool for 2020 represents approximately 83% of the total 2019 net operating income from our multifamily portfolio, up from approximately 61% for the 2019 pool.

Aster at Lely Resort


Avenues at Cypress


Avenues at Northpointe

Citi Lakes


Lenox Village


Retreat at Lenox Village

Overton Rise


Sorrel


Venue at Lakewood Ranch

Avenues at Creekside


525 Avalon Park


Vineyards

Citrus Village


Retreat at Greystone


City Vista

Founders' Village


Luxe at Lakewood Ranch


Adara at Overland Park

Summit Crossing I


Summit Crossing II


Aldridge at Town Village

City Park View


Crosstown Walk


Claiborne Crossing

Reserve at Summit Crossing


Colony at Centerpointe


Lux at Sorrel

Green Park


Vestavia Reserve



 

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 fourth quarter 2019, we issued and sold an aggregate of 113,989 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 $102.6 million after commissions and other fees.

In addition, during the fourth quarter 2019, we issued 105,900 shares of Common Stock pursuant to the exercise of warrants issued under our Series A Preferred Stock offering, resulting in aggregate gross proceeds of approximately $1.4 million. We also issued  approximately 996,000 shares of Common Stock for redemptions of 14,212 shares of our Series A Redeemable Preferred Stock and paid out $2.9 million in cash for redemptions of 3,230 shares of our Series A Redeemable Preferred Stock.

During the fourth quarter 2019, we issued and sold an aggregate of 14,993 shares of Series M Redeemable Preferred Stock ("mShares"), resulting in net proceeds of approximately $14.5 million after dealer manager fees. During the fourth quarter 2019, we issued and sold an aggregate of 4,736 shares of Series A1 Redeemable Preferred Stock, resulting in net proceeds of approximately $4.3 million after commissions and other fees.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On November 7, 2019, we declared a quarterly dividend on our Common Stock of $0.2625 per share for the fourth quarter 2019. This represents a 1.0% increase in our common stock dividend from our fourth quarter 2018 common stock dividend of $0.26 per share, and an average annual dividend growth rate of 13.0% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The fourth quarter dividend was paid on January 15, 2020 to all stockholders of record on December 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 fourth quarter 2019, which was paid on January 15, 2020 to all Class A Unit holders of record as of December 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 $29.6 million for the fourth quarter 2019 and represent a 6% annual yield. We declared monthly dividends of $5.00 per share on our Series A1 Redeemable Preferred Stock, which totaled approximately $15,000 for the fourth quarter 2019 and also represent a 6% annual yield.We declared dividends totaling approximately $1.6 million on our Series M Redeemable Preferred Stock, or mShares, for the fourth 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, February 25, 2020 at 11:00 a.m. Eastern Time to discuss our fourth 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, February 25, 2020
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

The live broadcast of our fourth 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.

2020 Guidance:

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

FFO per share  - We currently project FFO to be in the range of $1.07 to $1.14 per share for the full year 2020, excluding internalization-related costs.

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

http://investors.pacapts.com/download/4Q19_Earnings_and_Supplemental_Data.pdf

Forward-Looking Statements

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

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

We refer you to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2018 that was filed with the Securities and Exchange Commission, or SEC, on March 1, 2019, which discuss various factors that could adversely affect our financial results. Such risk factors and information may be updated or supplemented by our Form 10-K, Form 10-Q and Form 8-K filings and other documents filed from time to time with the SEC.

Additional Information

The SEC has declared effective the registration statement filed by the Company for each of the offerings to which this communication may relate. Before you invest, you should read the final prospectus, and any prospectus supplements, forming a part of the registration statement and other documents the Company has filed with the SEC for more complete information about the Company and the offering to which this communication may relate. In particular, you should carefully read the risk factors described in the final prospectus and in any related prospectus supplement and in the documents incorporated by reference in the final prospectus and any related prospectus supplement to which this communication may relate. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, the Company or its dealer manager, Preferred Capital Securities, LLC, will arrange to send you a prospectus with respect to the Series A1/M1 Offering upon request by contacting John A. Isakson at (770) 818-4109, 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.

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
December 31,


Years ended

December 31,

(In thousands, except per-share figures)


2019


2018


2019


2018

Revenues:









Rental revenues


$

105,474



$

87,938



$

395,121



$

323,252


Other property revenues


2,873



2,422



11,795



8,213


Interest income on loans and notes receivable


13,553



12,614



49,542



50,190


Interest income from related parties


1,966



3,306



11,946



15,616


Miscellaneous revenues


1,000





2,023













Total revenues


124,866



106,280



470,427



397,271











Operating expenses:









Property operating and maintenance


14,725



12,260



52,911



44,065


Property salary and benefits

5,848



4,728



20,693



17,766


Property management fees

3,807



3,151



13,981



11,681


Real estate taxes


12,384



11,400



50,298



42,035


General and administrative


2,116



2,205



8,541



8,224


Equity compensation to directors and executives

301



(1,178)



1,223



1,703


Depreciation and amortization


47,874



43,926



185,065



171,136


Asset management and general and administrative expense









fees to related party


8,867



7,445



33,516



27,541


Loan loss allowance


2,038



(496)



2,038



2,533


Insurance, professional fees, and other expenses


5,016



2,000



13,687



7,166











Total operating expenses


102,976



85,441



381,953



333,850


Waived asset management and general and administrative








expense fees

(3,259)



(2,073)



(11,764)



(6,656)











Net operating expenses


99,717



83,368



370,189



327,194


Operating income before gains on sales of real estate and trading investments


25,149



22,912



100,238



70,077


Gains on sales of real estate and trading investments


1,563



30,744



1,567



69,705


Operating income


26,712



53,656



101,805



139,782











Interest expense


28,798



26,592



111,964



95,564


Change in fair value of net assets of consolidated









VIEs from mortgage-backed pools


515



135



1,831



320


Loss on extinguishment of debt






(84)




Gains on sale of real estate loan investment and land condemnation


207





954













Net (loss) income


(1,364)



27,199



(7,458)



44,538


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

76



(615)



214



(1,071)











Net (loss) income attributable to the Company


(1,288)



26,584



(7,244)



43,467











Dividends declared to preferred stockholders


(31,245)



(23,940)



(113,772)



(86,741)


Earnings attributable to unvested restricted stock


(3)



(3)



(17)



(16)











Net (loss) income attributable to common stockholders


$

(32,536)



$

2,641



$

(121,033)



$

(43,290)











Net (loss) income per share of Common Stock available to








 common stockholders:









Basic


$

(0.71)



$

0.06



$

(2.73)



$

(1.08)


Diluted


$

(0.71)



$

0.06



$

(2.73)



$

(1.08)











Weighted average number of shares of Common Stock outstanding:








Basic


45,934



41,320



44,265



40,032


Diluted


45,934



42,046



44,265



40,032


 

Reconciliation of FFO Attributable to Common Stockholders and Unitholders and AFFO

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






Three months ended December 31,

(In thousands, except per-share figures)



2019


2018









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

$

(32,536)



$

2,641










Add:

Depreciation of real estate assets


38,798



34,309



Depreciation of real estate assets attributable to joint ventures


(172)





Amortization of acquired real estate intangible assets and deferred leasing costs

8,588



9,173



Net (loss) income attributable to Class A Unitholders (See note 2)


(6)



615


Less:

(Gain) on sale of real estate




(30,682)


FFO attributable to common stockholders and unitholders

14,672



16,056










Add:

Loan cost amortization on acquisition term note

97



20



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

507



707



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



(237)



Payment of costs related to property refinancing



227



Contingent management fees recognized



11



206



Non-cash equity compensation to directors and executives

301



(1,178)



Amortization of loan closing costs (See note 5)


1,160



1,234



Depreciation/amortization of non-real estate assets


488



444



Net loan fees received (See note 6)


109



707



Accrued interest income received (See note 7)


5,436



12,266



Internalization costs (See note 8)


1,844





Increase (decrease) in loan loss allowance


1,400



(496)



Non-cash dividends on Preferred Stock


206



17



Amortization of lease inducements (See note 9)


439



426



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

49



1,044


Less:

Non-cash loan interest income (See note 6)


(3,686)



(4,611)



Non-cash revenues from mortgage-backed securities


1,474



(135)



Cash paid for loan closing costs



(1,073)



Amortization of acquired above and below market lease intangibles

 





and straight-line rental revenues (See note 11)


(4,268)



(2,909)



Amortization of deferred revenues (See note 12)


(941)



(901)



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

(2,765)



(1,485)










AFFO

$

16,533



$

20,329








Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

12,156



$

10,840



Distributions to Unitholders (See note 2)


225



228



Total




$

12,381



$

11,068










Common Stock dividends and Unitholder distributions per share


$

0.2625



$

0.26










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

$

0.31



$

0.38


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

$

0.35



$

0.48






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





Basic:








Common Stock



45,934



41,320



Class A Units




856



954



Common Stock and Class A Units


46,790



42,274











Diluted Common Stock and Class A Units (B)


46,894



43,000










Actual shares of Common Stock outstanding, including 13 and 12 unvested shares




 of restricted Common Stock at December 31, 2019 and 2018, respectively.

46,457



41,788


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

856



877



Total




47,313



42,665










(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 1.83% weighted average non-controlling interest in the Operating Partnership for the three-month period ended December 31,
2019.
 

(B) Since our FFO and AFFO results are positive for the periods reflected above, we are presenting recalculated diluted weighted average shares of Common Stock
and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common stock equivalents from grants of the Class B Units,
warrants included in units of Series A Preferred Stock issued, as well as annual grants of restricted Common Stock and restricted stock units. 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)






Years ended December 31,

(In thousands, except per-share figures)



2019


2018









Net loss attributable to common stockholders (See note 1)

$

(121,033)



$

(43,290)










Add:

Depreciation of real estate assets


148,206



124,499



Depreciation of real estate assets attributable to joint ventures


(172)





Amortization of acquired real estate intangible assets and deferred leasing costs

34,990



45,136



Net (loss) income attributable to Class A Unitholders (See note 2)


(144)



1,071


Less:

(Gain) on sale of real estate




(69,643)


FFO attributable to common stockholders and unitholders

61,847



57,773










Add:

Loan cost amortization on acquisition term note

155



83



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

1,940



2,487



Payment of costs related to property refinancing

594



288



Contingent management fees recognized

11



206



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



(270)



Non-cash equity compensation to directors and executives

1,223



1,703



Amortization of loan closing costs (See note 5)


4,618



4,801



Depreciation/amortization of non-real estate assets


1,869



1,501



Net loan fees received (See note 6)


783



2,166



Accrued interest income received (See note 7)


10,514



20,676



Internalization costs (See note 8)


2,987





Loan loss allowance


1,400



2,533



Non-cash dividends on Preferred Stock


577



755



Amortization of lease inducements (See note 9)


1,734



1,381


Less:

Non-cash loan interest income (See note 6)


(14,431)



(19,337)



Non-cash revenues from mortgage-backed securities


778



(320)



Cash paid for loan closing costs


(37)



(1,489)



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

(2,321)



(920)



Amortization of acquired above and below market lease intangibles

 





and straight-line rental revenues (See note 11)


(16,643)



(11,956)



Amortization of deferred revenues (See note 12)


(3,762)



(2,666)



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

(7,887)



(4,966)










AFFO

45,949



54,429








Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



46,755



41,129



Distributions to Unitholders (See note 2)


908



1,041



Total




47,663



42,170










Common Stock dividends and Unitholder distributions per share


$

1.0475



$

1.02










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

$

1.37



$

1.41


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

$

1.02



$

1.33






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





Basic:




44,265



40,032



Common Stock



870



1,040



Class A Units




45,135



41,072



Common Stock and Class A Units














Diluted Common Stock and Class A Units (B)


45,772



42,390










Actual shares of Common Stock outstanding, including 13 and 12 unvested shares




 of restricted Common Stock at December 31, 2019 and 2018, respectively.

46,457



41,788


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

856



877



Total




47,313



42,665










(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 1.93% weighted average non-controlling interest in the Operating Partnership for the year ended December 31, 2019.
 

(B) Since our FFO and AFFO results are positive for the periods reflected above, we are presenting recalculated diluted weighted average shares of Common Stock
and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common stock equivalents from grants of the Class B Units,
warrants included in units of Series A Preferred Stock issued, as well as annual grants of restricted Common Stock and restricted stock units. 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 and year ended December 31, 2019 include activity for the properties acquired during the periods only from their respective dates of acquisition. In addition, the fourth quarter and year ended 2019 includes activity for the properties acquired since December 31, 2018. Rental and other property revenues and expenses for the fourth quarter and year ended 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 December 31, 2019. Included in this total are 419,228 Class A Units which were granted as partial consideration to the seller in conjunction with the seller's contribution to us on February 29, 2016 of the Wade Green grocery-anchored shopping center. The remaining Class A units were awarded primarily to our key executive officers. The Class A Units are apportioned a percentage of our financial results as non-controlling interests. The weighted average ownership percentage of these holders of Class A Units was calculated to be 1.83% and 2.26% for the three-month periods ended December 31, 2019 and 2018, respectively.



3)

We paid 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 December 31, 2019, aggregate unamortized loan coordination fees were approximately $14.1 million, which will be amortized over a weighted average remaining loan life of approximately 10.3 years.



4)

We sustained weather related operating losses due to hurricanes (primarily due to Hurricane Harvey at our Stone Creek multifamily community) during the year ended December 31, 2018; these costs are added back to FFO in our calculation of AFFO. Lost rent and other operating costs incurred during the year ended December 31, 2018 totaled approximately $563,000. This number is offset by the receipt from our insurance carrier of approximately $833,000 for recoveries of lost rent, which was recognized in our consolidated statements of operations for the year ended December 31, 2018.



5)

We incur loan closing costs on our existing mortgage loans, which are secured on a property-by-property basis by each of our acquired real estate assets, and also for occasional amendments to our syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. Effective April 13, 2018, the maximum borrowing capacity on the Revolving Line of Credit was increased from $150 million to $200 million. These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability. At December 31, 2019, aggregate unamortized loan costs were approximately $25.7 million, which will be amortized over a weighted average remaining loan life of approximately 9.0 years.



6)

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



7)

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



8)

This adjustment reflects the add-back of due diligence and pursuit costs incurred by the Company related to the internalization of the functions performed by its Manager.



9)

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



10)

Effective January 1, 2019, we terminated our purchase options on the Sanibel Straits, Newbergh, Wiregrass and Cameron Square multifamily communities and the Solis Kennesaw student housing property; 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 $20.6 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 years ended December 31, 2019 and 2018, we had recognized termination fee revenues in excess of cash received, resulting in the negative adjustments shown to FFO in our calculation of AFFO.



11)

This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At December 31, 2019, the balance of unamortized below-market lease intangibles was approximately $62.6 million, which will be recognized over a weighted average remaining lease period of approximately 9.2 years.



12)

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



13)

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

See Definitions of Non-GAAP Measures.

Preferred Apartment Communities, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands, except per-share par values)


December 31,

2019


December 31,
2018

Assets





Real estate




Land


$

635,757



$

519,300


Building and improvements

3,256,223



2,738,085


Tenant improvements

167,275



128,914


Furniture, fixtures, and equipment

323,381



278,151


Construction in progress

11,893



8,265


Gross real estate

4,394,529



3,672,715


Less: accumulated depreciation

(421,551)



(272,042)


Net real estate

3,972,978



3,400,673


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

325,790



282,548


Real estate loan investments to related parties, net

23,692



51,663


Total real estate and real estate loan investments, net

4,322,460



3,734,884







Cash and cash equivalents

94,381



38,958


Restricted cash

42,872



48,732


Notes receivable

17,079



14,440


Note receivable and revolving lines of credit due from related parties

24,838



32,867


Accrued interest receivable on real estate loans

25,755



23,340


Acquired intangible assets, net of amortization

154,803



135,961


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

1,286



1,916


Deferred offering costs

2,147



6,468


Tenant lease inducements, net

19,607



20,698


Receivable from sale of mortgage-backed security



41,181


Tenant receivables and other assets

65,332



41,567


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



269,946


Total assets

$

4,770,560



$

4,410,958







Liabilities and equity




Liabilities




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

$

2,567,022



$

2,299,625


Revolving line of credit



57,000


Term note payable, net of deferred loan costs

69,489




Real estate loan investment participation obligation



5,181


Unearned purchase option termination fees

2,859



2,050


Deferred revenue

39,722



43,484


Accounts payable and accrued expenses

42,191



38,618


Accrued interest payable

8,152



6,711


Dividends and partnership distributions payable

23,519



19,258


Acquired below market lease intangibles, net of amortization

62,611



47,149


Security deposits and other liabilities

20,879



17,611


VIE liabilities from mortgage-backed pool, at fair value



264,886


Total liabilities

2,836,444



2,801,573







Commitments and contingencies




Equity





Stockholders' equity





Series A Redeemable Preferred Stock, $0.01 par value per share; 3,050 shares authorized; 2,161 and 1,674




 shares issued; 2,028 and 1,608 shares outstanding at December 31, 2019 and December 31, 2018, respectively

20



16


Series A1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; 5 and no shares




   issued and outstanding at December 31, 2019 and December 31, 2018, respectively




Series M Redeemable Preferred Stock, $0.01 par value per share; 500 shares authorized; 106 and 44 shares




  issued; 103 and 44 shares outstanding at December 31, 2019 and December 31, 2018, respectively

1




Series M1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; no shares




   issued and outstanding at December 31, 2019 or December 31, 2018




Common Stock, $0.01 par value per share; 400,067 shares authorized; 46,443 and 41,776 shares issued and




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

464



418


Additional paid-in capital


1,938,057



1,607,712


Accumulated (deficit) earnings


(7,244)




Total stockholders' equity


1,931,298



1,608,146


Non-controlling interest


2,818



1,239


Total equity


1,934,116



1,609,385







Total liabilities and equity


$

4,770,560



$

4,410,958


 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)




Years ended December 31,

(In thousands)


2019


2018

Operating activities:





Net (loss) income


$

(7,458)



$

44,538


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




Depreciation and amortization expense

185,065



171,136


Amortization of above and below market leases

(5,765)



(5,905)


Deferred revenues and fee income amortization

(5,346)



(4,323)


Purchase option termination fee amortization

(9,111)



(8,660)


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

(928)



(320)


Amortization of market discount on assumed debt and lease incentives

1,997



1,644


Deferred loan cost amortization

6,450



7,108


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

(5,766)



3,524


Equity compensation to executives and directors

1,223



1,703


Gains on sales of real estate and trading investment

(1,567)



(69,705)


Gain on land condemnation, net of expenses

(207)




Cash received for purchase option terminations

3,591



7,740


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

18,750



6,049


Mortgage interest paid to other participants of consolidated VIEs

(18,750)



(6,049)


Loan loss allowance

2,038



2,533


Changes in operating assets and liabilities:




(Increase) in tenant receivables and other assets

(20,565)



(7,631)


(Increase) in tenant lease incentives

(644)



(7,607)


Increase in accounts payable and accrued expenses

1,518



2,876


Increase in accrued interest, prepaid rents and other liabilities

2,406



6,730


Net cash provided by operating activities

145,631



145,381







Investing activities:





Investments in real estate loans


(98,418)



(200,806)


Repayments of real estate loans


54,384



250,448


Notes receivable issued


(5,692)



(9,946)


Notes receivable repaid


3,089



12,759


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

(40,458)



(51,789)


Repayments of notes receivable and lines of credit by related parties

35,239



41,117


Sale of real estate loan investment


747




Origination fees received on real estate loan investments

1,565



4,331


Origination fees paid to Manager on real estate loan investments

(783)



(2,166)


Mortgage principal received from consolidated VIEs

6,570



1,255


Purchases of mortgage-backed securities

(30,841)



(45,927)


Sales of mortgage-backed securities

79,558




Acquisition of properties


(619,089)



(1,007,048)


Disposition of properties, net




164,838


Receipt of insurance proceeds for capital improvements

746



978


Proceeds from land condemnation


643




Equity investment in property development

(100)




Additions to real estate assets – improvements

(48,071)



(44,383)


Deposits paid on acquisitions

(146)



4,534


Net cash used in investing activities

(661,057)



(881,805)







Financing activities:





Proceeds from mortgage notes payable

405,430



602,375


Repayments of mortgage notes payable

(176,903)



(121,797)


Payments for deposits and other mortgage loan costs

(8,705)



(12,299)


Proceeds from real estate loan participants



5


Payments to real estate loan participants

(5,223)



(10,425)


Proceeds from lines of credit


265,200



550,300


Payments on lines of credit


(322,200)



(535,100)


Proceeds from (repayment of) Term Loans

70,000



(11,000)


Mortgage principal paid to other participants of consolidated VIEs

(6,570)



(1,255)


Proceeds from repurchase agreements

4,857




Payments for repurchase agreements

(4,857)




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

501,076



408,644


Proceeds from exercises of warrants

11,659



20,052


Payments for redemptions of preferred stock

(12,124)



(9,367)


Common Stock dividends paid


(45,439)



(39,865)


Preferred stock dividends paid


(110,827)



(84,427)


Distributions to non-controlling interests

(911)



(1,034)


Payments for deferred offering costs

(4,013)



(3,705)


Contributions from non-controlling interests

4,539




Net cash provided by financing activities

564,989



751,102






Net increase in cash, cash equivalents and restricted cash

49,563



14,678


Cash, cash equivalents and restricted cash, beginning of year

87,690



73,012


Cash, cash equivalents and restricted cash, end of period

$

137,253



$

87,690


 

 

Real Estate Loan Investments

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

Project/Property


Location


Maturity

date


Optional
extension
date


Total loan
commitments


Carrying amount (1) as of


Current /
deferred interest %

per annum






December 31,
2019


December 31,
2018

















Multifamily communities:






(in thousands)



Palisades


Northern VA


5/17/2020


5/17/2021


$

17,270



$

17,250



$

17,132



8 / 0  (2)

464 Bishop


Atlanta, GA


N/A


N/A






12,693




Park 35 on Clairmont


Birmingham, AL


N/A


N/A






21,060




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



4,240



3,891



8.5 / 6.5

Berryessa


San Jose, CA


2/13/2021


2/13/2023


137,616



115,819



95,349



8.5 / 3 (3)

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



4,440



3,160



8.5 / 4.5

Sanibel Straights


Fort Myers, FL


2/3/2021


2/3/2022


9,416



8,846



8,118



8.5 / 5.5

Sanibel Straights Capital


Fort Myers, FL


2/3/2021


2/3/2022


6,193



5,930



5,442



8.5 / 5.5

Falls at Forsyth


Atlanta, GA


7/11/2020


7/11/2022


22,412



21,513



19,742



8.5 / 5.5

Newbergh


Atlanta, GA


1/31/2021


1/31/2022


11,749



11,699



10,736



8.5 / 5.5

Newbergh Capital


Atlanta, GA


1/31/2021


1/31/2022


6,176



5,653



5,188



8.5 / 5.5

V & Three


Charlotte, NC


8/15/2021


8/15/2022


10,336



10,336



10,335



8.5 / 5

V & Three Capital


Charlotte, NC


8/18/2021


8/18/2022


7,338



6,571



6,030



8.5 / 5

Cameron Square


Alexandria, VA


10/11/2021


10/11/2023


21,340



18,582



17,050



8.5 / 3

Cameron Square Capital


Alexandria, VA


10/11/2021


10/11/2023


8,850



8,235



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



4,245



3,895



8.5 / 4

E-Town


Jacksonville, FL


6/14/2022


6/14/2023


16,697



14,550



3,886



8.5 / 3.5

Vintage


Destin, FL


3/24/2022


3/24/2024


10,763



8,932





8.5 / 4

Hidden River II


Tampa, FL


10/11/2022


10/11/2024


4,462



3,012





8.5 / 3.5

Hidden River II Capital


Tampa, FL


10/11/2022


10/11/2024


2,763



2,258





8.5 / 3.5

Kennesaw Crossing


Atlanta, GA


9/1/2023


9/1/2024


14,810



7,616





8.5 / 5.5

Vintage Horizon West


Orlando, FL


10/11/2022


10/11/2024


10,900



8,275





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 (4)


Charlotte, NC


N/A


N/A






19,462




Haven Charlotte Member (4)

Charlotte, NC


N/A


N/A






8,201




Solis Kennesaw


Atlanta, GA


N/A


N/A






11,343




Solis Kennesaw Capital


Atlanta, GA


N/A


N/A






7,786




Solis Kennesaw II


Atlanta, GA


5/5/2022


5/5/2024


13,613



12,489



4,268



8.5 / 4
















New Market Properties:















Dawson Marketplace


Atlanta, GA


2/3/2020


N/A


12,857



12,857



12,857



8.5 / 5.0 (5)
















Preferred Office Properties:













8West


Atlanta, GA


11/29/2022


11/29/2024


19,193



4,554





8.5 / 5

8West construction loan


Atlanta, GA


N/A


N/A








(6)
























$

414,299



352,582



336,329




Unamortized loan origination fees








(1,476)



(2,118)




Allowance for loan losses






(1,624)





















Carrying amount










$

349,482



$

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 deferred interest rate decreased from 6.0% to 3.0%.

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

(5) Per the terms of the loan documents, the deferred interest rate reverted to 5.0% from 6.9% per annum effective January 1, 2019.

(6) 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 zero and 15 basis points, depending on the loan. As of December 31, 2019, potential property acquisitions and units from projects in our real estate loan investment portfolio consisted of:




Total units
upon


Purchase option window


Project/Property

Location


completion (1)


Begin


End











Multifamily communities:









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)


Vintage Horizon West

Orlando, FL


340



(4)


(4)











Student housing properties:









Solis Kennesaw II

Atlanta, GA


175



(5)


(5)











Office property:









8West

Atlanta, GA


(6)


(6)


(6)














2,568
















(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 $20.6 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


December 31,
2019


December 31,
2018


Maturity
date


Interest
rate


Basis point
spread over
1 Month
LIBOR
















Multifamily communities:



(in thousands)









Summit Crossing

10/31/2017


$

37,651



$

38,349



11/1/2024


3.99

%


Fixed rate


N/A

Summit Crossing II

3/20/2014


13,221



13,357



4/1/2021


4.49

%


Fixed rate


N/A

Vineyards

9/26/2014


33,382



34,039



10/1/2021


3.68

%


Fixed rate


N/A

Avenues at Cypress

2/13/2015


20,704



21,198



9/1/2022


3.43

%


Fixed rate


N/A

Avenues at Northpointe

2/13/2015


26,313



26,899



3/1/2022


3.16

%


Fixed rate


N/A

Venue at Lakewood Ranch

5/21/2015


28,076



28,723



12/1/2022


3.55

%


Fixed rate


N/A

Aster at Lely Resort

6/24/2015


31,094



31,796



7/5/2022


3.84

%


Fixed rate


N/A

CityPark View

6/30/2015


20,089



20,571



7/1/2022


3.27

%


Fixed rate


N/A

Avenues at Creekside

7/31/2015


38,871



39,697



8/1/2024


3.38

%


160

(2)

N/A

Citi Lakes

7/29/2019


41,079



41,582



8/1/2029


3.66

%


Fixed rate


N/A

Stone Creek

6/22/2017


19,800



20,139



7/1/2052


3.22

%


Fixed rate


N/A

Lenox Village Town Center

2/28/2019


38,813



29,274



3/1/2029


4.34

%


Fixed rate


N/A

Retreat at Lenox

12/21/2015


17,114



17,465



1/1/2023


4.04

%


Fixed rate


N/A

Overton Rise

2/1/2016


38,428



39,220



8/1/2026


3.98

%


Fixed rate


N/A

Village at Baldwin Park

12/17/2018


70,607



71,453



1/1/2054


4.16

%


Fixed rate


N/A

Crosstown Walk

1/15/2016


30,246



30,878



2/1/2023


3.90

%


Fixed rate


N/A

525 Avalon Park

6/15/2017


64,519



65,740



7/1/2024


3.98

%


Fixed rate


N/A

City Vista

7/1/2016


33,674



34,387



7/1/2026


3.68

%


Fixed rate


N/A

Sorrel

8/24/2016


31,449



32,137



9/1/2023


3.44

%


Fixed rate


N/A

Citrus Village

3/3/2017


28,796



29,393



6/10/2023


3.65

%


Fixed rate


N/A

Retreat at Greystone

11/21/2017


34,053



34,644



12/1/2024


4.31

%


Fixed rate


N/A

Founders Village

3/31/2017


30,202



30,748



4/1/2027


4.31

%


Fixed rate


N/A

Claiborne Crossing

4/26/2017


25,948



26,381



6/1/2054


2.89

%


Fixed rate


N/A

Luxe at Lakewood Ranch

7/26/2017


37,662



38,378



8/1/2027


3.93

%


Fixed rate


N/A

Adara at Overland Park

9/27/2017


30,624



31,203



4/1/2028


3.90

%


Fixed rate


N/A

Aldridge at Town Village

10/31/2017


36,569



37,222



11/1/2024


4.19

%


Fixed rate


N/A

Reserve at Summit Crossing

9/29/2017


19,276



19,654



10/1/2024


3.87

%


Fixed rate


N/A

Overlook at Crosstown Walk

11/21/2017


21,450



21,848



12/1/2024


3.95

%


Fixed rate


N/A

Colony at Centerpointe

12/20/2017


32,120



32,770



10/1/2026


3.68

%


Fixed rate


N/A

Lux at Sorrel

1/9/2018


30,474



31,057



2/1/2030


3.91

%


Fixed rate


N/A

Green Park

2/28/2018


38,525



39,236



3/10/2028


4.09

%


Fixed rate


N/A

The Lodge at Hidden River

9/27/2018


40,903



41,576



10/1/2028


4.32

%


Fixed rate


N/A

Vestavia Reserve

11/9/2018


37,130



37,726



12/1/2030


4.40

%


Fixed rate


N/A

CityPark View South

11/15/2018


23,767



24,140



6/1/2029


4.51

%


Fixed rate


N/A

Artisan at Viera

8/8/2019


39,824





9/1/2029


3.93

%


Fixed rate


N/A

Five Oaks at Westchase

10/17/2019


31,448





11/1/2031


3.27

%


Fixed rate


N/A















Total multifamily communities



1,173,901



1,112,880
























Grocery-anchored shopping centers:

Spring Hill Plaza

9/17/2019


8,167



9,261



10/1/2031


3.72

%


Fixed rate


N/A

Parkway Town Centre

9/17/2019


8,067



6,735



10/1/2031


3.72

%


Fixed rate


N/A

Woodstock Crossing

8/8/2014


2,877



2,935



9/1/2021


4.71

%


Fixed rate


N/A

Deltona Landings

8/16/2019


6,289



6,622



9/1/2029


4.18

%


Fixed rate


N/A

Powder Springs

8/13/2019


7,951



6,987



9/1/2029


3.65

%


Fixed rate


(3)

Kingwood Glen

9/30/2014



(4)

11,079



10/1/2019


3.48

%


Fixed rate


N/A

Barclay Crossing

8/16/2019


6,233



6,229



9/1/2029


4.18

%


Fixed rate


N/A

Sweetgrass Corner

9/30/2014



(4)

7,555



10/1/2019


3.58

%


Fixed rate


N/A

Parkway Centre

8/16/2019


4,530



4,338



9/1/2029


4.18

%


Fixed rate


N/A

The Market at Salem Cove

10/6/2014


9,075



9,253



11/1/2024


4.21

%


Fixed rate


N/A

Independence Square

8/27/2015


11,455



11,716



9/1/2022


3.93

%


Fixed rate


N/A

Royal Lakes Marketplace

4/12/2019


9,572



9,544



5/1/2029


4.29

%


Fixed rate


N/A

The Overlook at Hamilton Place

12/22/2015


19,509



19,913



1/1/2026


4.19

%


Fixed rate


N/A

Summit Point

10/30/2015


11,494



11,858



11/1/2022


3.57

%


Fixed rate


N/A

East Gate Shopping Center

4/29/2016


5,277



5,431



5/1/2026


3.97

%


Fixed rate


N/A

Fury's Ferry

4/29/2016


6,096



6,273



5/1/2026


3.97

%


Fixed rate


N/A

Rosewood Shopping Center

4/29/2016


4,095



4,214



5/1/2026


3.97

%


Fixed rate


N/A

Southgate Village

4/29/2016


7,279



7,491



5/1/2026


3.97

%


Fixed rate


N/A

The Market at Victory Village

5/16/2016


8,911



9,066



9/11/2024


4.40

%


Fixed rate


N/A

Wade Green Village

4/7/2016


7,655



7,815



5/1/2026


4.00

%


Fixed rate


N/A

Lakeland Plaza

7/15/2016


27,459



28,256



8/1/2026


3.85

%


Fixed rate


N/A

University Palms

8/8/2016


12,421



12,798



9/1/2026


3.45

%


Fixed rate


N/A

Cherokee Plaza

4/12/2019


24,867



24,683



5/1/2027


4.28

%


Fixed rate


N/A

Sandy Plains Exchange

8/8/2016


8,676



8,940



9/1/2026


3.45

%


Fixed rate


N/A

Thompson Bridge Commons

8/8/2016


11,599



11,951



9/1/2026


3.45

%


Fixed rate


N/A

Heritage Station

8/8/2016


8,585



8,845



9/1/2026


3.45

%


Fixed rate


N/A

Oak Park Village

8/8/2016


8,859



9,128



9/1/2026


3.45

%


Fixed rate


N/A

Shoppes of Parkland

8/8/2016


15,702



15,978



9/1/2023


4.67

%


Fixed rate


N/A

Champions Village

10/18/2016


27,400



27,400



11/1/2021


4.70

%


300

(5)

11/1/2021

Castleberry-Southard

4/21/2017


10,959



11,175



5/1/2027


3.99

%


Fixed rate


N/A

Rockbridge Village

6/6/2017


13,597



13,875



7/5/2027


3.73

%


Fixed rate


N/A

Irmo Station

7/26/2017


10,038



10,307



8/1/2030


3.94

%


Fixed rate


N/A

Maynard Crossing

8/25/2017


17,449



17,927



9/1/2032


3.74

%


Fixed rate


N/A

Woodmont Village

9/8/2017


8,320



8,535



10/1/2027


4.13

%


Fixed rate


N/A

West Town Market

9/22/2017


8,503



8,737



10/1/2025


3.65

%


Fixed rate


N/A

Crossroads Market

12/5/2017


18,112



18,584



1/1/2030


3.95

%


Fixed rate


N/A

Anderson Central

3/16/2018


11,539



11,817



4/1/2028


4.32

%


Fixed rate


N/A

Greensboro Village

5/22/2018


8,250



8,452



6/1/2028


4.20

%


Fixed rate


N/A

Governors Towne Square

5/22/2018


10,976



11,245



6/1/2028


4.20

%


Fixed rate


N/A

Conway Plaza

6/29/2018


9,549



9,716



7/5/2028


4.29

%


Fixed rate


N/A

Brawley Commons

7/6/2018


17,963



18,387



8/1/2028


4.36

%


Fixed rate


N/A

Hollymead Town Center

12/21/2018


26,758



27,300



1/1/2029


4.64

%


Fixed rate


N/A

Gayton Crossing

1/17/2019


17,679





2/1/2029


4.71

%


Fixed rate


N/A

Free State Shopping Center

5/28/2019


46,391





6/1/2029


3.99

%


Fixed rate


N/A

Polo Grounds Mall

6/12/2019


13,227





7/1/2034


3.93

%


Fixed rate


N/A

Disston Plaza

6/12/2019


17,905





7/1/2034


3.93

%


Fixed rate


N/A

Fairfield Shopping Center

8/16/2019


19,750





8/16/2026


3.79

%


205


8/16/22

Berry Town Center

11/14/2019


12,025





12/1/2034


3.49%


Fixed rate


N/A

Hanover Shopping Center

12/19/2019


32,000





12/19/2026


3.62%


Fixed rate


N/A















Total grocery-anchored shopping centers



621,090



488,351
























Student housing properties:

North by Northwest

6/1/2016


31,209



32,004



10/1/2022


4.02

%


Fixed rate


N/A

SoL

10/31/2018


35,656



36,197



11/1/2028


4.71

%


Fixed rate


N/A

Stadium Village

10/27/2017


45,228



46,095



11/1/2024


3.80

%


Fixed rate


N/A

Ursa

12/18/2017


31,400



31,400



1/5/2020


4.78

%


300


1/5/2020

The Tradition

5/10/2018


30,000



30,000



6/6/2021


5.53

%


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


5.33

%


355

(7)

7/9/2021















Total student housing properties



249,584



251,787
























Office buildings:

Brookwood Center

8/29/2016


30,716



31,481



9/10/2031


3.52

%


Fixed rate


N/A

Galleria 75

11/4/2016


5,340



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


51,834



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


124,814



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



565,254



486,734










Grand total



2,609,829



2,339,752










Less: deferred loan costs



(38,185)



(35,242)










Less: below market debt adjustment



(4,622)



(4,885)










Mortgage notes, net



$

2,567,022



$

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 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.

(4) The mortgage was repaid in full during the fourth quarter 2019.

(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 December 31, 2019, our multifamily community portfolio consisted of the following properties:









Three months ended
December 31, 2019


Property


Location


Number of
units


Average unit
size (sq. ft.)


Average
physical
occupancy


Average

rent per
unit














Same-Store Communities:












Summit Crossing I


Atlanta, GA


345



1,034



94.4

%


$

1,222



Summit Crossing II


Atlanta, GA


140



1,100



95.7

%


$

1,318



Overton Rise


Atlanta, GA


294



1,018



96.1

%


$

1,573



Aldridge at Town Village


Atlanta, GA


300



969



96.1

%


$

1,390



Avenues at Cypress


Houston, TX


240



1,170



93.8

%


$

1,484



Avenues at Northpointe


Houston, TX


280



1,167



96.0

%


$

1,427



Vineyards


Houston, TX


369



1,122



96.1

%


$

1,190



Avenues at Creekside


San Antonio, TX


395



974



94.3

%


$

1,184



Aster at Lely Resort


Naples, FL


308



1,071



93.8

%


$

1,454



Venue at Lakewood Ranch


Sarasota, FL


237



1,001



95.1

%


$

1,585



525 Avalon Park


Orlando, FL


487



1,394



93.6

%


$

1,509



Citi Lakes


Orlando, FL


346



984



95.1

%


$

1,498



Luxe at Lakewood Ranch


Sarasota, FL


280



1,105



94.9

%


$

1,538



Citrus Village


Tampa, FL


296



980



94.8

%


$

1,326



Lenox Village


Nashville, TN


273



906



96.9

%


$

1,314



Regent at Lenox


Nashville, TN


18



1,072



94.4

%


$

1,379



Retreat at Lenox


Nashville, TN


183



773



97.3

%


$

1,227



Retreat at Greystone


Birmingham, AL


312



1,100



95.8

%


$

1,342



City Vista


Pittsburgh, PA


272



1,023



93.9

%


$

1,445



Adara Overland Park


Kansas City, KS


260



1,116



95.3

%


$

1,375



Founders Village


Williamsburg, VA


247



1,070



94.5

%


$

1,435



Sorrel


Jacksonville, FL


290



1,048



95.2

%


$

1,332















Total/Average Same-Store Communities




6,172





95.1

%
















CityPark View


Charlotte, NC


284



948



95.3

%


$

1,150



CityPark View South


Charlotte, NC


200



1,005



96.7

%


$

1,279



Stone Creek


Houston, TX


246



852



97.7

%


$

1,137



Crosstown Walk


Tampa, FL


342



1,070



94.5

%


$

1,324



Overlook at Crosstown Walk


Tampa, FL


180



986



95.6

%


$

1,398



Claiborne Crossing


Louisville, KY


242



1,204



95.6

%


$

1,376



The Reserve at Summit Crossing


Atlanta, GA


172



1,002



93.6

%


$

1,372



Colony at Centerpointe


Richmond, VA


255



1,149



95.3

%


$

1,409



Lux at Sorrel


Jacksonville, FL


265



1,025



94.1

%


$

1,422



Green Park


Atlanta, GA


310



985



95.1

%


$

1,483



Lodge at Hidden River


Tampa, FL


300



980



94.3

%


$

1,404



Vestavia Reserve


Birmingham, AL


272



1,113



95.6

%


$

1,556



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



95.3

%


$

1,691















Total PAC Non-Same-Store Communities




4,073





















Average stabilized physical occupancy








95.1

%
















Total multifamily community units




10,245





















 

For the three-month period ended December 31, 2019, our average same-store multifamily communities' physical occupancy was 95.1%. 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. We believe "Same Property" information is useful as it allows both management and investors to gauge our management effectiveness via comparisons of financial and operational results between interim and annual periods for those subsets of multifamily communities owned for current and prior comparative periods. For the three-month period ended December 31, 2019, our average stabilized physical occupancy was 95.1%. We calculate average stabilized physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date. For the three-month period ended December 31, 2019, our average economic occupancy was 95.0%. 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 (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 December 31, 2019. Average economic occupancy is useful both to management and investors as a gauge of our effectiveness in realizing the full revenue generating potential of our multifamily communities given market rents and occupancy rates.

Student Housing Properties

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











Three months ended
December 31, 2019

Property


Location


Number of

units


Number

of beds


Average unit

size (sq. ft.)


Average
physical
occupancy


Average rent

per bed

Student housing properties:













North by Northwest (1)


Tallahassee, FL


219


679


1,250



83.8

%


$

702


SoL  (1)


Tempe, AZ


224


639


1,296



99.2

%


$

720


Stadium Village (1, 2)


Atlanta, GA


198


792


1,466



98.8

%


$

721


Ursa (1, 2)


Waco, TX


250


840


1,634



98.0

%


$

604


The Tradition


College Station, TX


427


808


539



97.0

%


$

605


The Retreat at Orlando (1)


Orlando, FL


221


894


2,036



98.7

%


$

769


The Bloc


Lubbock, TX


140


556


1,394



92.4

%


$

515


Haven49 (1)


Charlotte, NC


332


887


1,224



98.2

%


$

751



















2,011


6,095




96.1

%


$

680



(1) On May 24, 2019, we entered into a purchase and sale agreement to sell six of our student housing properties to a third party. On June 28, 2019, this

agreement was terminated and we recorded revenue from a forfeited earnest money deposit of $1.0 million. A new purchase and sale agreement was entered

into for the same six student housing properties plus a real estate loan investment supporting yet another student housing property on July 29, 2019. On
December 9, 2019, the agreement was amended to extend the closing date to March 20, 2020 and resulted in another $1.0 million deposit forfeiture by the

prospective purchaser.

 

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

 

Capital Expenditures

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

For the three-month period ended December 31, 2019, our capital expenditures for multifamily communities consisted of:




Capital Expenditures - Multifamily Communities




Recurring


Non-recurring


Total

(in thousands, except per-unit figures)

Amount


Per Unit


Amount


Per Unit


Amount


Per Unit

Appliances

$

126



$

12.03



$



$



$

126



$

12.03


Carpets



427



40.99







427



40.99


Wood / vinyl flooring

36



3.23



93



9.06



129



12.29


Mini blinds and ceiling fans

49



4.81







49



4.81


Fire safety






79



7.68



79



7.68


HVAC


75



7.03



6



0.57



81



7.60


Computers, equipment, misc.

5



0.46



74



7.13



79



7.59


Elevators





137



13.50



137



13.50


Exterior painting





606



58.97



606



58.97


Leasing office and other common amenities

60



5.67



291



27.69



351



33.36


Major structural projects





505



48.08



505



48.08


Cabinets and countertop upgrades





477



46.49



477



46.49


Landscaping and fencing





370



35.54



370



35.54


Parking lot


107



10.58



254



24.67



361



35.25


Signage and sanitation





13



1.18



13



1.18


Totals



$

885



$

84.80



$

2,905



$

280.56



$

3,790



$

365.36


 

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




Capital Expenditures - Student Housing Properties




Recurring


Non-recurring


Total

(in thousands, except per-bed figures)

Amount


Per Bed


Amount


Per Bed


Amount


Per Bed

Appliances

$

39



$

6.45



$



$



$

39



$

6.45


Carpets



17



2.52







17



2.52


Wood / vinyl flooring





4



0.60



4



0.60


Mini blinds and ceiling fans

4



0.60







4



0.60


Fire safety






4



0.37



4



0.37


HVAC


60



9.98



13



1.40



73



11.38


Computers, equipment, misc.

2



0.20



9



1.20



11



1.40


Elevators





6



1.08



6



1.08


Exterior painting












Leasing office and other common amenities

5



0.88



8



0.67



13



1.55


Major structural projects





29



1.16



29



1.16


Cabinets and counter top upgrades





3



0.50



3



0.50


Landscaping and fencing





15



1.59



15



1.59


Parking lot












Signage and sanitation





4



0.32



4



0.32


Unit furniture

6



0.64







6



0.64


Totals



$

133



$

21.27



$

95



$

8.89



$

228



$

30.16


 

 

Grocery-Anchored Shopping Center Portfolio

As of December 31, 2019, our grocery-anchored shopping center portfolio consisted of the following properties:

Property name

Location


Year built


GLA (1)


Percent
leased


Grocery anchor
tenant











Castleberry-Southard

 Atlanta, GA


2006


80,018



98.3

%


 Publix

Cherokee Plaza

 Atlanta, GA


1958


102,864



100.0

%


Kroger

Governors Towne Square

 Atlanta, GA


2004


68,658



95.9

%


 Publix

Lakeland Plaza

 Atlanta, GA


1990


301,711



95.4

%


Sprouts

Powder Springs

 Atlanta, GA


1999


77,853



87.7

%


 Publix

Rockbridge Village

 Atlanta, GA


2005


102,432



90.6

%


 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



98.4

%


Publix

Summit Point

 Atlanta, GA


2004


111,970



88.7

%


 Publix

Thompson Bridge Commons

 Atlanta, GA


2001


92,587



96.4

%


Kroger

Wade Green Village

 Atlanta, GA


1993


74,978



88.7

%


 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



98.0

%


 Publix

Parkway Centre

 Columbus, GA


1999


53,088



97.7

%


 Publix

Greensboro Village

 Nashville, TN


2005


70,203



91.9

%


 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



100.0

%


 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

Berry Town Center

 Orlando, FL


2003


99,441



85.6

%


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



100.0

%


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


46,303



93.1

%


Aldi

Brawley Commons

 Charlotte, NC


1997


122,028



100.0

%


 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



94.6

%


Harris Teeter

Hanover Center (4)

Wilmington, NC


1954


305,346



100.0

%


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)

84.4

%


Kroger

Fairfield Shopping Center (4)

Virginia Beach, VA


1985


231,829



85.3

%


Food Lion

Free State Shopping Center

Washington, DC


1970


264,152



97.7

%


Giant











Grand total/weighted average





6,041,629



93.2

%



 

(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)

Property is owned through a consolidated joint venture.

 

As of December 31, 2019, our grocery-anchored shopping center portfolio was 93.2% 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. This metric is used by management to gauge the extent to which our grocery-anchored shopping centers are delivering their total potential rental and other revenues.

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



Totals



Number
of leases


Leased
GLA


Percent of
leased GLA








Month to month


9



37,826



0.7

%

2020


125



385,241



6.9

%

2021


173



685,469



12.2

%

2022


173



601,057



10.7

%

2023


132



616,227



11.0

%

2024


124



1,157,454



20.6

%

2025


70



777,600



13.9

%

2026


17



172,282



3.1

%

2027


26



189,485



3.4

%

2028


27



352,816



6.3

%

2029


26



183,451



3.3

%

2030 +


18



456,824



7.9

%








Total


920



5,615,732



100.0

%

 

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

Tenant


GLA


Percent of

total GLA

Publix


1,175,430



19.5%

Kroger


518,194



8.6%

Harris Teeter


273,273



4.5%

Wal-Mart


183,211



3.0%

BJ's Wholesale Club


108,532



1.8%

Giant


73,149



1.2%

Randall's


61,604



1.0%

H.E.B


54,844



0.9%

Tom Thumb


43,600



0.7%

The Fresh Market


43,321



0.7%

Food Lion


38,538



0.6%

Sprouts


29,855



0.5%

Aldi


23,622



0.4%






Total


2,627,173



43.4%






 

The Company's Annual Report on Form 10-K for the year ended December 31, 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 fourth quarter 2019 totaled approximately $528,000. 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 December 31, 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



99

%

Westridge at La Cantera


San Antonio, TX


258,000



100

%

CAPTRUST Tower


Raleigh, NC


300,000



97

%

Morrocroft Centre


Charlotte, NC


291,000



89

%

Armour Yards


Atlanta, GA


187,000


(1)

96

%

Brookwood Center


Birmingham, AL


169,000



100

%

Galleria 75


Atlanta, GA


111,000



96

%












3,169,000



96

%








(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



14.3

%


$

12,043


Albemarle

162,000



6.8

%


5,706


CapFinancial

113,000



4.7

%


3,983


United Services Automobile Association

129,000



3.7

%


3,118


Harland Clarke Corporation

129,000



3.4

%


2,881











1,053,000



32.9

%


$

27,731


               

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

2020


111,000



3.7

%

2021


263,000



8.8

%

2022


127,000



4.2

%

2023


124,000



4.1

%

2024


266,000



8.8

%

2025


251,000



8.3

%

2026


266,000



8.8

%

2027


319,000



10.6

%

2028


213,000



7.1

%

2029


57,000



1.9

%

2030+


1,015,000



33.7

%






Total


3,012,000



100.0

%

 

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $1.2 million during the fourth 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. (NYSE: APTS) is a real estate investment trust engaged primarily in the ownership and operation of Class A multifamily properties, with select investments in grocery anchored shopping centers, Class A office buildings, and student housing properties. Preferred Apartment Communities' investment objective is to generate attractive, stable returns for stockholders by investing in income-producing properties and acquiring or originating real estate loans for multifamily properties. As of December 31, 2019, the Company owned or was invested in 123 properties in 15 states, predominantly in the Southeast region of the United States.

SOURCE Preferred Apartment Communities, Inc.

For further information: For further information: Preferred Apartment Communities, Inc., John A. Isakson, Chief Financial Officer, jisakson@pacapts.com, 770-818-4109