Preferred Apartment Communities

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Preferred Apartment Communities, Inc. Reports Results for First Quarter 2020

ATLANTA, May 11, 2020 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company" or "Preferred Apartment Communities") today reported results for the quarter ended March 31, 2020. 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.

Financial Highlights

Our operating results are presented below.











Three months ended March 31,






2020


2019


% change











Revenues (in thousands)

$

131,102



$

111,506



17.6

%











Per share data:








Net income (loss) (1)

$

(4.44)



$

(0.66)



-



FFO (2)

$

(3.42)



$

0.39



-



FFO excluding Internalization costs (2)

$

0.31



$

0.39



(20.5)

%



Core FFO (2)

$

0.38



$

0.41



(7.3)

%



AFFO (2)

$

0.47



$

0.32



46.9

%



Dividends (3)

$

0.2625



$

0.26



1.0

%










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

(2)FFO, Core 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, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders and Definitions of Non-GAAP Measures.

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

"Our first quarter reflects continued and consistently solid operating performance across all of our operating platforms, including multifamily same store NOI growth of 4.3% quarter over quarter in a same store pool that represents over 80% of our multifamily units," stated Joel Murphy, Preferred Apartment Communities' President and Chief Executive Officer. "As we moved into the second quarter, the events related to and resulting from the COVID-19 pandemic have disrupted our economy and our markets and we have taken several measures to preserve liquidity. Among them, the Board making the difficult but prudent decision to reduce our common dividend given the uncertainty of the current circumstances and environment.  I am extremely proud of our leadership team and operating teams across all of our platforms that have worked collaboratively and effectively alongside our residents and our tenants in a challenging environment for all concerned. We believe our diversified portfolio, with high quality assets in strong Sunbelt markets, positions us well to create shareholder value over the long term."

  • The following chart details cash collections of rental revenues across all our verticals for the month April.

 



2020 Cash Collections of Certain Rental Revenues (1)



January


February


March


April










Multifamily


99.4

%


99.4

%


99.1

%


97.7

%

Student housing


99.8

%


99.9

%


99.5

%


97.3

%

Office


99.7

%


99.5

%


98.7

%


96.3

%

Grocery-anchored retail:









Grocery anchors


100.0

%


100.0

%


100.0

%


100.0

%

In-line tenants


98.7

%


98.9

%


95.8

%


66.7

%










Occupancy:









Multifamily


95.1

%


95.5

%


95.7

%


94.3

%

Student housing


96.1

%


96.3

%


96.2

%


96.2

%

Percent leased:









Office


96.3

%


96.3

%


96.7

%


95.9

%

Grocery-anchored retail


92.9

%


92.6

%


92.6

%


92.5

%

(1) Percent of revenue billed includes base rent, operating expense escalations, pet, garage, parking and storage rent. Figures are before any effect of rent deferrals.

 

  • Our net loss per share was $(4.44) and $(0.66) for the three-month periods ended March 31, 2020 and 2019, respectively. Funds From Operations, or FFO, for the three months ended March 31, 2020 was $(3.42) per weighted average share and unit outstanding and includes costs associated with the acquisition of Preferred Apartment Advisors, LLC (our "Former Manager") of approximately $178.8 million. Excluding these costs, our FFO per share was $0.31 for the three months ended March 31, 2020. Core FFO was $0.38 for the three months ended March 31, 2020, as compared to $0.41 for the three months ended March 31, 2019.
  • For the first quarter 2020, our declared dividends to preferred and Common Stockholders and distributions to Unitholders exceeded our NAREIT-defined FFO result for the period, which was negative. Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 69.4% and our Core FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 64.4%(B)
  • Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 55.9% for the first quarter 2020. Our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 59.3% for the first quarter 2020. (B) We have approximately $20.2 million of accrued but not yet received interest revenue on our real estate loan investment portfolio.
  • For the quarter ended March 31, 2020, our same-store multifamily rental and other property revenues increased approximately 3.4% and our operating expenses increased 2.1%, resulting in an increase in same-store net operating income of approximately 4.3% as compared to the quarter ended March 31, 2019.(C) For the first quarter 2020, our average same-store multifamily communities' physical occupancy was 95.5%. Our 2020 same-store multifamily portfolio represents approximately 81.7% of our aggregate multifamily units.
  • 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 and as Chairman of the Company's Investment Committee, a role he has had since June 2018. Mr. Murphy was the CEO of our New Market Properties subsidiary for the last five years until his appointment as our CEO. Mr. Murphy succeeded Daniel M. DuPree as CEO. Mr. DuPree 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 to be paid within 36 months. 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.
  • During the first quarter 2020, the borrowers of the Dawson Marketplace, Falls at Forsyth, and (in conjunction with our acquisition of the underlying property) Altis Wiregrass real estate loans repaid all amounts due under the loans, including aggregate principal amounts of approximately $53.9 million and interest accrued in periods prior to the first quarter 2020 of approximately $8.9 million, the latter of which was additive to our first quarter 2020 AFFO result. The three mezzanine loan investments that matured this quarter yielded a weighted average 17% internal rate of return.
  • As of March 31, 2020, the average age of our multifamily communities was approximately 5.8 years, which is the youngest in the public multifamily REIT industry.
  • As of March 31, 2020, approximately 94.5% of our permanent property-level mortgage debt has fixed interest rates and approximately 3.7% has variable interest rates which are capped. We believe we are well protected against potential increases in market interest rates.
  • As of March 31, 2020, our total assets were approximately $4.8 billion. Our total assets at March 31, 2019, also approximately $4.8 billion, included approximately $545 million of VIE mortgage pool assets attributable to other mortgage pool participants that were consolidated due to our investments in the Freddie Mac K Program. During the fourth quarter 2019, we sold our K Program investments, realizing an internal rate of return of approximately 18%. Excluding the consolidated VIE mortgage pool assets from the March 31, 2019 total, our total assets grew approximately $570.4 million, or 13.4%.
  • At March 31, 2020, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 53.7%.
  • On March 20, 2020, we delivered a written termination notice to the prospective purchaser of six of our student housing properties for their failure to consummate the purchase. Accordingly, we received an additional $2.75 million of forfeited earnest money as liquidated damages.

 

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


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

Business Update Related to COVID-19

During the first quarter 2020 and the beginning of the second quarter 2020, the Company has taken various actions in response to the COVID-19 pandemic to adjust our business operations and to address the needs of our residents, tenants and associates.  Our property management and asset management teams continue to respond appropriately to any onsite, tenant and property management requests, while following all applicable safety and social distancing guidelines. All of our multifamily communities, student housing properties, grocery-anchored shopping centers and office buildings have remained open and operating throughout the pandemic and in compliance with government-imposed COVID-19 guidelines and mandates.  More details about our response to the COVID-19 crisis can be found on the Company's website at: https://pacapts.com/covid19/

A presentation providing additional information regarding COVID-19 business updates and impacts is posted on the Company's website at http://investors.pacapts.com/presentations.

Acquisitions of Properties

During the first quarter 2020, we acquired the following properties:










Property


Location (MSA)


Units / Leasable
square feet











Multifamily community:








Altis Wiregrass Ranch


Tampa, Florida


392


units











Grocery-anchored shopping centers:








Wakefield Crossing


Raleigh, North Carolina


75,927


LSF



Midway Market


Dallas, Texas


85,599


LSF







161,526













Office properties:








4th & Brevard


Charlotte, North Carolina


1.74


acres










Real Estate Assets

At March 31, 2020, 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
March 31, 2020 (1)


Potential
additions from
real estate loan investment
portfolio (2) (3)


Potential total



Multifamily communities:








Properties

35



9



44




Units

10,637



2,543



13,180




Grocery-anchored shopping centers:








Properties

54





54




Gross leasable area (square feet)

6,208,278





6,208,278




Student housing properties:








Properties

8



1



9




Units

2,011



175



2,186




Beds

6,095



543



6,638




Office buildings:








Properties

9


(4)

1



10




Rentable square feet

3,169,000



195,000



3,364,000












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


(2)  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.


(3)  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.


(4)  Excludes our 251 Armour property, comprising 35,000 rentable square feet that is under development.

Subsequent to Quarter End

Between April 1, 2020 and April 30, 2020, we issued 11,461 shares of Series A1 Preferred Stock and collected net proceeds of approximately $10.3 million after commissions and fees and we issued 751 shares of Series M1 Preferred Stock and collected net proceeds of approximately $728,000 after commissions and fees.

On April 23, 2020, we closed on a $52.0 million first mortgage on our Altis at Wiregrass multifamily community. The loan bears interest at a fixed rate of 2.90% per annum and matures on May 1, 2030.

On April 30, 2020, we closed on the acquisition of a 288-unit multifamily community in Panama City, Florida. We partially financed the acquisition with a 10 year, $45.0 million first mortgage that bears interest at a fixed rate of 2.95% per annum.

On May 11, 2020, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, payable on July 15, 2020 to stockholders of record on June 15, 2020.

As a result of the COVID-19 pandemic that resulted in wide spread stay-at-home orders across the country, some of our multifamily residents and office and retail tenants have requested rent relief from the Company. At this point, the Company's policy is to only extend rent deferral options to our residents and tenants. We have not offered any rent abatement options.

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 8,694 units:

Aster at Lely Resort


Avenues at Cypress


Avenues at Northpointe

Citi Lakes


Lenox Village


Retreat at Lenox Village

Overton Rise


Sorrel


Venue at Lakewood Ranch

Avenues at Creekside


525 Avalon Park


Vineyards

Citrus Village


Retreat at Greystone


City Vista

Founders' Village


Luxe at Lakewood Ranch


Adara at Overland Park

Summit Crossing I


Summit Crossing II


Aldridge at Town Village

City Park View


Crosstown Walk


Claiborne Crossing

Reserve at Summit Crossing


Colony at Centerpointe


Lux at Sorrel

Green Park


Vestavia Reserve



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

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








Three months ended:

(in thousands)


3/31/2020


3/31/2019






Net (loss) income


$

(179,523)



$

(2,280)


Add:





Equity stock compensation


230



311


Depreciation and amortization


49,509



45,289


Interest expense


29,593



26,756


Management fees


3,099



7,829


Corporate G&A and other

6,365



1,418


Management Internalization


178,793



45


Loan loss allowance


5,133




Waived asset management and general and administrative expense fees


(1,136)



(2,629)


Less:





Interest revenue on notes receivable


13,439



11,288


Interest revenue on related party notes receivable


2,537



5,802


Miscellaneous revenues


3,260



23


Income from consolidated VIEs




141


Gain on extinguishment of debt




(17)


Gains on land condemnation and trading investment


479



4







Property net operating income


72,348



59,498


Less:





Non-same-store property revenues


(74,248)



(58,003)


Add:





Non-same-store property operating expenses

24,179



19,871






Same-store net operating income


$

22,279



$

21,366







 

 

Multifamily Communities' Same Store Net Operating Income












Three months ended:





(in thousands)


3/31/2020


3/31/2019


$ change


% change

Revenues:









Rental and other property revenues


$

37,618



$

36,390



$

1,228



3.4

%










Operating expenses:









Property operating and maintenance


6,412



6,340



72



1.1

%

Payroll


2,811



2,849



(38)



(1.3)

%

Real estate taxes and insurance


6,116



5,835



281



4.8

%

Total operating expenses


15,339



15,024



315



2.1

%










Same-store net operating income


$

22,279



$

21,366



$

913



4.3

%










Same-store average physical occupancy


95.5

%


94.9

%














Corporate level expenses related to the management and operations of the Multifamily and Student housing property portfolios are allocated on a per unit basis to Property NOI and are included in Multifamily Same Store NOI.

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 first quarter 2020, we issued and sold an aggregate of 32,136 shares of Series A1 Redeemable Preferred Stock, resulting in net proceeds of approximately $28.9 million after commissions and other fees. During the first quarter 2020, we issued and sold an aggregate of 1,933 shares of Series M1 Redeemable Preferred Stock, resulting in net proceeds of approximately $1.9 million after dealer manager fees.

During the first quarter 2020, we issued and sold an aggregate of 65,298 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 $58.8 million after commissions and other fees. The $1.5 Billion Series A Unit Offering expired during the first quarter 2020.

In addition, during the first quarter 2020, we issued approximately 1,014,300 shares of Common Stock for redemptions of 13,313 shares of our Series A Redeemable Preferred Stock and paid out $5.2 million in cash for redemptions of 5,571 shares of our Series A Redeemable Preferred Stock.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On February 20, 2020, we declared a quarterly dividend on our Common Stock of $0.2625 per share for the first quarter 2020. This represents a 1.0% increase in our common stock dividend from our first quarter 2019 common stock dividend of $0.26 per share, and an average annual dividend growth rate of 12.6% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The first quarter dividend was paid on April 15, 2020 to all stockholders of record on March 13, 2020. 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 first quarter 2020, which was paid on April 15, 2020 to all Class A Unit holders of record as of March 13, 2020.

Monthly Dividends on Preferred Stock

We declared monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $31.1 million for the first quarter 2020 and represents a 6% annual yield. We declared monthly dividends of $5.00 per share on our Series A1 Redeemable Preferred Stock, which totaled approximately $212,000 for the first quarter 2020 and also represents a 6% annual yield. We declared dividends totaling approximately $1.7 million on our Series M Redeemable Preferred Stock, or mShares, for the first quarter 2020. The mShares have a dividend rate that escalates from 5.75% in year one of issuance to 7.50% in year eight and thereafter. We declared dividends totaling approximately $10,000 on our Series M1 Redeemable Preferred Stock for the first quarter 2020. The Series M1 Redeemable Preferred Stock has a dividend rate that escalates from 6.1% in year one of issuance to 7.1% in year ten and thereafter.

Conference Call and Supplemental Data

We will hold our quarterly conference call on Tuesday, May 12, 2020 at 11:00 a.m. Eastern Time to discuss our first quarter 2020 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, May 12, 2020
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

The live broadcast of our first quarter 2020 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  - Due to the inherent uncertainty of the scope, duration and rapidly evolving nature of the economic and social disruption from the COVID-19 pandemic, on April 24, 2020 we withdrew our full year 2020 guidance that we previously included in our February 24, 2020 earnings release.

AFFO, Core FFO and FFO are calculated after deductions for all preferred stock dividends. Reconciliations of net income (loss) attributable to common stockholders to FFO, Core FFO and AFFO for the three-month periods ended March 31, 2020 and 2019 appear in the attached report, as well as on our website using the following link:

http://investors.pacapts.com/download/1Q20_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. These risks, uncertainties and contingencies include, but are not limited to, (a) the impact of the coronavirus (COVID-19) pandemic on PAC's business operations and the economic conditions in the markets in which PAC operates; (b) PAC's ability to mitigate the impacts arising from COVID-19 and (c) those disclosed in PAC's filings with the Securities and Exchange Commission. 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, 2019 that was filed with the Securities and Exchange Commission, or SEC, on March 3, 2020, 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.

Condensed Consolidated Statements of Operations

(Unaudited)






Three months ended
March 31,

(In thousands, except per-share figures)


2020


2019

Revenues:





Rental and other property revenues


$

111,866



$

94,393


Interest income on loans and notes receivable


13,439



11,288


Interest income from related parties


2,537



5,802


Miscellaneous revenues


3,260



23







Total revenues


131,102



111,506







Operating expenses:





Property operating and maintenance


16,800



12,879


Property salary and benefits

5,191



4,657


Property management fees

2,003



3,267


Real estate taxes and insurance


15,525



14,090


General and administrative


6,364



1,420


Equity compensation to directors and executives

230



311


Depreciation and amortization


49,509



45,289


Asset management and general and administrative expense





fees to related party


3,099



7,829


Loan loss allowance


5,133




Management internalization expense


178,793



45







Total operating expenses


282,647



89,787


Waived asset management and general and administrative




expense fees

(1,136)



(2,629)







Net operating expenses


281,511



87,158


Operating (loss) income before gain on sale of trading investment


(150,409)



24,348


Gain on sale of trading investment




4


Operating (loss) income


(150,409)



24,352







Interest expense


29,593



26,756


Change in fair value of net assets of consolidated





VIEs from mortgage-backed pools




141


Loss on extinguishment of debt




(17)


Gain on land condemnation


479









Net loss


(179,523)



(2,280)


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

3,141



(492)







Net loss attributable to the Company


(176,382)



(2,772)







Dividends declared to preferred stockholders


(33,068)



(25,539)


Earnings attributable to unvested restricted stock


(2)



(2)







Net loss attributable to common stockholders


$

(209,452)



$

(28,313)







Net loss per share of Common Stock available to




 common stockholders, basic and diluted


$

(4.44)



$

(0.66)







Weighted average number of shares of Common Stock outstanding,




basic and diluted


47,129



42,680


 

 

Reconciliation of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO

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






Three months ended March 31,

(In thousands, except per-share figures)



2020


2019









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

$

(209,452)



$

(28,313)










Add:

Depreciation of real estate assets


39,775



35,717



Depreciation of real estate assets attributable to joint ventures


8,982



9,123



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

(3,094)



492


FFO attributable to common stockholders and unitholders

(163,789)



17,019











Acquisition and pursuit costs

246





Loan cost amortization on acquisition term notes and loan coordination fees (See note 3)

678



487



Payment of costs related to property refinancing



55



Internalization costs (See note 4)

178,793



45



Noncash dividends on preferred stock


544



96



Noncash (income) expense for current expected credit losses (See note 5)

4,530





Extraordinary Event - COVID-19 Expense

29





Earnest money forfeited by prospective asset purchaser

(2,750)




Core FFO attributable to common stockholders and unitholders

18,281



17,702








Add:

Non-cash equity compensation to directors and executives


230



311



Amortization of loan closing costs (See note 6)


1,166



1,131



Depreciation/amortization of non-real estate assets


556



449



Net loan fees received (See note 7)


267



401



Deferred interest income received (See note 8)


8,277



2,760



Amortization of lease inducements (See note 9)


439



428



Non-operational miscellaneous revenues

2,750





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

760



296


Less:

Non-cash loan interest income (See note 8)


(3,019)



(3,324)



Cash received for sale of K Program securities in excess of noncash revenues



(141)



Cash paid for loan closing costs



(3)



Amortization of acquired real estate intangible liabilities and SLR (See note 11)

(4,653)



(3,758)



Amortization of deferred revenues (See note 12)


(940)



(940)



Normally recurring capital expenditures (See note 13)

(1,418)



(1,180)










AFFO attributable to common stockholders and Unitholders

$

22,696



$

14,132








Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

12,491



$

11,195



Distributions to Unitholders (See note 2)


203



229



Total




$

12,694



$

11,424










Common Stock dividends and Unitholder distributions per share


$

0.2625



$

0.26










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

$

(3.42)



$

0.39


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

$

0.38



$

0.41


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

$

0.47



$

0.32






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





Basic:








Common Stock



47,129



42,680



Class A Units




827



880



Common Stock and Class A Units


47,956



43,560











Diluted Common Stock and Class A Units (B)


47,957



44,199










Actual shares of Common Stock outstanding, including 7 and 6 unvested shares




 of restricted Common Stock at March 31, 2020 and 2019, respectively.

47,585



43,244


Actual Class A Units outstanding at March 31, 2020 and 2019, respectively.

775



879



Total




48,360



44,123










(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 1.72% weighted average non-controlling interest in the Operating Partnership for the three-month period ended March 31, 2020.

(B) Since our 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, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders.

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

1)

Rental and other property revenues and property operating expenses for the quarter ended March 31, 2020 include activity for the properties acquired during the period only from their respective dates of acquisition. In addition, the first quarter 2020 includes activity for the properties acquired since March 31, 2019. Rental and other property revenues and expenses for the first quarter 2019 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 774,687 Class A Units as of March 31, 2020. 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 1.72% and 2.02% for the three-month periods ended March 31, 2020 and 2019, respectively.



3)

We paid loan coordination fees to Preferred Apartment Advisors, LLC, or our Former Manager, to reflect the administrative effort involved in arranging debt financing for acquired properties prior to the Internalization. The fees were 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 Core FFO and AFFO. At March 31, 2020, aggregate unamortized loan coordination fees were approximately $14.0 million, which will be amortized over a weighted average remaining loan life of approximately 10.3 years.



4)

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



5)

Effective January 1, 2020, we adopted ASU 2016-03, which requires us to estimate the amount of future credit losses we expect to incur over the lives of our real estate loan investments at the inception of each loan. This loss reserve may be adjusted upward or downward over the lives of our loans and therefore the aggregate net adjustment for each period could be positive (removing the non-cash effect of a net increase in aggregate loss reserves) or negative (removing the non-cash effect of a net decrease in aggregate loss reserves) in these adjustments to FFO in calculating Core FFO.



6)

We incur loan closing costs on our existing mortgage loans, which are secured on a property-by-property basis by each of our acquired real estate assets, and also for occasional amendments to our syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. Effective April 13, 2018, the maximum borrowing capacity on the Revolving Line of Credit was increased from $150 million to $200 million. These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability. At March 31, 2020, unamortized loan costs on all the Company's indebtedness were approximately $25.2 million, which will be amortized over a weighted average remaining loan life of approximately 9.1 years.



7)

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 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 Core 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 8).



8)

This adjustment reflects the receipt during the periods presented of additional interest income (described in note 7 above) which was earned and accrued prior to those periods presented on various real estate loans.



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 March 6, 2020, our purchase option on the Falls at Forsyth multifamily community was extinguished in conjunction with the loan repayment; 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 Bishop Street multifamily community and the Haven Charlotte student housing property, both 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 $17.2 million from the developers, which are recorded as revenue over the period beginning on the date of election until the earlier of (i) the maturity of the real estate loan investment and (ii) the sale of the property. The receipt of the cash termination fees are an additive adjustment in our calculation of AFFO and the removal of non-cash revenue from the recognition of the termination fees are a reduction to Core FFO in our calculation of AFFO; both of these adjustments are presented in a single net number within this line. For the quarters ended March 31, 2020 and 2019, we had received cash in excess of recognized termination fee revenues, resulting in the positive adjustments shown to Core FFO in our calculation of AFFO.



11)

This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At March 31, 2020, the balance of unamortized below-market lease intangibles was approximately $60.5 million, which will be recognized over a weighted average remaining lease period of approximately 9.1 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 Core FFO normally recurring capital expenditures that are necessary to maintain our assets' revenue streams in the calculation of AFFO. This adjustment also deducts from Core FFO capitalized amounts for third party costs during the period to originate or renew leases in our grocery-anchored shopping centers and office buildings. This adjustment includes approximately $40,000 of recurring capitalized expenditures incurred at our corporate offices during the three months ended March 31, 2020. 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.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per-share par values)


March 31, 2020


December 31, 2019

Assets





Real estate




Land


$

665,585



$

635,757


Building and improvements

3,329,579



3,256,223


Tenant improvements

172,136



167,275


Furniture, fixtures, and equipment

341,542



323,381


Construction in progress

16,131



11,893


Gross real estate

4,524,973



4,394,529


Less: accumulated depreciation

(461,957)



(421,551)


Net real estate

4,063,016



3,972,978


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

292,905



325,790


Real estate loan investments to related parties, net

2,568



23,692


Total real estate and real estate loan investments, net

4,358,489



4,322,460







Cash and cash equivalents

120,128



94,381


Restricted cash

43,665



42,872


Notes receivable

7,321



17,079


Note receivable and revolving lines of credit due from related parties

9,011



24,838


Accrued interest receivable on real estate loans

20,186



25,755


Acquired intangible assets, net of amortization

154,351



154,803


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

1,118



1,286


Deferred offering costs

3,085



2,147


Tenant lease inducements, net

19,168



19,607


Tenant receivables and other assets

90,877



65,332


Total assets

$

4,827,399



$

4,770,560







Liabilities and equity




Liabilities




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

$

2,606,251



$

2,567,022


Revolving line of credit

191,500




Term note payable, net of deferred loan costs



69,489


Unearned purchase option termination fees

2,019



2,859


Deferred revenue

38,782



39,722


Accounts payable and accrued expenses

43,797



42,191


Deferred liability to Former Manager

22,982




Contingent liability due to Former Manager

14,911




Accrued interest payable

8,707



8,152


Dividends and partnership distributions payable

24,415



23,519


Acquired below market lease intangibles, net of amortization

60,481



62,611


Security deposits and other liabilities

35,405



20,879


Total liabilities

3,049,250



2,836,444







Commitments and contingencies




Equity





Stockholders' equity





Series A Redeemable Preferred Stock, $0.01 par value per share; 3,050 shares authorized; 2,226 and 2,161




 shares issued; 2,075 and 2,028 shares outstanding at March 31, 2020 and December 31, 2019, respectively

21



20


Series A1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized;




  37 and 5 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively




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




  issued; 98 and 103 shares outstanding at March 31, 2020 and December 31, 2019, respectively

1



1


Series M1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized;




  2 and zero shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

 




Common Stock, $0.01 par value per share; 400,067 shares authorized; 47,129 and 46,443 shares issued




and outstanding at March 31, 2020 and December 31, 2019, respectively

476



464


Additional paid-in capital


1,969,534



1,938,057


Accumulated (deficit) earnings


(191,040)



(7,244)


Total stockholders' equity


1,778,992



1,931,298


Non-controlling interest


(843)



2,818


Total equity


1,778,149



1,934,116







Total liabilities and equity


$

4,827,399



$

4,770,560


 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)




Three-month periods ended March 31,

(In thousands)


2020


2019

Operating activities:





Net (loss) income


$

(179,523)



$

(2,280)


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




Depreciation and amortization expense

49,509



45,289


Amortization of above and below market leases

(1,705)



(1,436)


Deferred revenues and fee income amortization

(1,269)



(1,498)


Purchase option termination fee amortization

(4,040)



(4,233)


Amortization of equity compensation, lease incentives, and other noncash expenses

849



805


Deferred loan cost amortization

1,781



1,552


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

(3,296)



(3,551)


Receipt of accrued interest income on real estate loans

8,865




Gains on sales of trading investment



(4)


Gain on land condemnation, net of expenses

(479)




Cash received for purchase option terminations

4,800



1,330


Loss on extinguishment of debt




17


Loan loss allowance

5,133




Mortgage interest received from consolidated VIEs



2,598


Mortgage interest paid to other participants of consolidated VIEs



(2,598)


Changes in operating assets and liabilities:




(Increase) in tenant receivables and other assets

(10,775)



(8,376)


(Increase) in tenant lease incentives



(102)


Increase in accounts payable and accrued expenses

24,190



1,290


Increase in deferred liability to Former Manager

22,851




Increase in Contingent liability

15,000




Decrease in accrued interest, prepaid rents and other liabilities

(1,282)



(2,441)


Net cash provided by operating activities

(69,391)



26,362







Investing activities:





Investments in real estate loans


(11,631)



(29,795)


Repayments of real estate loans


53,896




Notes receivable issued


(249)



(1,890)


Notes receivable repaid


10,041




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

(9,624)



(13,952)


Repayments of notes receivable and lines of credit by related parties

4,546



8,330


Origination fees received on real estate loan investments

267



801


Origination fees paid to Manager on real estate loan investments



(401)


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



(30,934)


Mortgage principal received from consolidated VIEs



679


Sales of mortgage-backed securities



53,445


Acquisition of properties


(125,107)



(32,540)


Receipt of insurance proceeds for capital improvements



746


Proceeds from land condemnation


738




Additions to real estate assets - improvements

(12,817)



(7,917)


Deposits paid on acquisitions

(915)



(511)


Net cash used in investing activities

(90,855)



(53,939)







Financing activities:





Proceeds from mortgage notes payable

81,413



57,275


Repayments of mortgage notes payable

(42,252)



(38,324)


Payments for deposits and other mortgage loan costs

(1,694)



(996)


Payments to real estate loan participants



(5,223)


Proceeds from lines of credit


284,000



126,200


Payments on lines of credit


(92,500)



(166,200)


Proceeds from (repayment of) Term Loans

(70,000)




Mortgage principal paid to other participants of consolidated VIEs



(679)















 


 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows - continued

(Unaudited)




Three-month periods ended March 31,

(In thousands)


2020


2019





Proceeds from repurchase agreements



4,857


Payments for repurchase agreements



(4,857)


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

89,398



128,573


Proceeds from exercises of warrants

44



3,921


Payments for redemptions of preferred stock

(9,890)



(2,006)


Common Stock dividends paid


(12,156)



(10,840)


Preferred stock dividends paid


(32,732)



(25,097)


Payments for deferred offering costs

(7,042)



(832)


Contributions from non-controlling interests

197




Net cash provided by financing activities

186,786



65,772






Net increase in cash, cash equivalents and restricted cash

26,540



38,195


Cash, cash equivalents and restricted cash, beginning of year

137,253



87,690


Cash, cash equivalents and restricted cash, end of period

$

163,793



$

125,885


Real Estate Loan Investments

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

Project/Property


Location


Maturity
date


Optional
extension
date


Total loan

commitments


Carrying amount (1) as of


Current /
deferred
interest %

per annum






March 31,
2020


December 31,
2019

















Multifamily communities:






(in thousands)



Palisades


Northern VA


5/17/2020


5/17/2021


$

17,270



$

17,250



$

17,250



8 / 0  (2)

Wiregrass


Tampa, FL


N/A


N/A






14,976



Wiregrass Capital


Tampa, FL


N/A


N/A






4,240



Berryessa


San Jose, CA


2/13/2021


2/13/2023


137,616



118,326



115,819



8.5 / 3

The Anson


Nashville, TN


11/24/2021


11/24/2023


6,240



6,240



6,240



8.5 / 4.5

The Anson Capital


Nashville, TN


11/24/2021


11/24/2023


5,659



4,536



4,440



8.5 / 4.5

Sanibel Straights


Fort Myers, FL


2/3/2021


2/3/2022


9,416



9,038



8,846



8.5 / 5.5

Sanibel Straights Capital


Fort Myers, FL


2/3/2021


2/3/2022


6,193



6,059



5,930



8.5 / 5.5

Falls at Forsyth


Atlanta, GA


N/A


N/A






21,513



Newbergh


Atlanta, GA


1/31/2021


1/31/2022


11,749



11,749



11,699



8.5 / 5.5

Newbergh Capital


Atlanta, GA


1/31/2021


1/31/2022


6,176



5,979



5,653



8.5 / 5.5

V & Three


Charlotte, NC


8/15/2021


8/15/2022


10,336



10,336



10,336



8.5 / 5

V & Three Capital


Charlotte, NC


8/18/2021


8/18/2022


7,338



6,713



6,571



8.5 / 5

Cameron Square


Alexandria, VA


10/11/2021


10/11/2023


21,340



18,985



18,582



8.5 / 3

Cameron Square Capital


Alexandria, VA


10/11/2021


10/11/2023


8,850



8,413



8,235



8.5 / 3

Southpoint


Fredericksburg, VA

2/28/2022


2/28/2024


7,348



7,348



7,348



8.5 / 4

Southpoint Capital


Fredericksburg, VA

2/28/2022


2/28/2024


4,962



4,336



4,245



8.5 / 4

E-Town


Jacksonville, FL


6/14/2022


6/14/2023


16,697



14,865



14,550



8.5 / 3.5

Vintage


Destin, FL


3/24/2022


3/24/2024


10,763



9,126



8,932



8.5 / 4

Hidden River II


Tampa, FL


10/11/2022


10/11/2024


4,462



4,462



3,012



8.5 / 3.5

Hidden River II Capital


Tampa, FL


10/11/2022


10/11/2024


2,763



2,306



2,258



8.5 / 3.5

Kennesaw Crossing


Atlanta, GA


9/1/2023


9/1/2024


14,810



9,921



7,616



8.5 / 5.5

Vintage Horizon West


Orlando, FL


10/11/2022


10/11/2024


10,900



8,454



8,275



8.5 / 5.5

Chestnut Farms


Charlotte, NC


2/28/2025


N/A


13,372



806





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

Solis Kennesaw II


Atlanta, GA


5/5/2022


5/5/2024


13,613



12,759



12,489



8.5 / 4
















New Market Properties:















Dawson Marketplace


Atlanta, GA


N/A


N/A






12,857


















Preferred Office Properties:













8West


Atlanta, GA


11/29/2022


11/29/2024


19,193



6,194



4,554



8.5 / 5
























$

373,182



310,317



352,582




Unamortized loan origination fees








(1,500)



(1,476)




Allowance for loan losses






(13,344)



(1,624)



















Carrying amount










$

295,473



$

349,482



























(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.

We hold options or rights of first offer, but not obligations, to purchase some of the properties which are partially financed by our real estate loan investments. Certain 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 March 31, 2020, 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:









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)


Kennesaw Crossing

Atlanta, GA


250



(5)


(5)


Vintage Horizon West

Orlando, FL


340



(4)


(4)


Solis Chestnut Farm

Charlotte, NC


256



(5)


(5)











Student housing property:









Solis Kennesaw II

Atlanta, GA


175



(6)


(6)











Office property:









8West

Atlanta, GA


(6)


(7)


(7)














2,718
















(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, Solis Kennesaw and Falls at Forsyth projects were terminated, in exchange for an aggregate $17.2 million in termination fees from the developers.


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


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


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


(5) We hold a right of first offer on the property, at a to-be-agreed-upon market price.


(6) 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.


(7) The project plans are for the construction of a class A office building consisting of approximately 195,000 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










Acquisition/

refinancing
date


March 31,
2020


December 31,
2019


Maturity
date


Interest
rate


Basis point
spread over
1 Month
LIBOR


Interest only
through date
(1)















Multifamily communities:



(in thousands)









Summit Crossing

10/31/2017


$

37,472



$

37,651



11/1/2024


3.99

%


Fixed rate


N/A

Summit Crossing II

3/20/2014


13,168



13,221



4/1/2021


4.49

%


Fixed rate


N/A

Vineyards

9/26/2014


33,213



33,382



10/1/2021


3.68

%


Fixed rate


N/A

Avenues at Cypress

2/13/2015


20,578



20,704



9/1/2022


3.43

%


Fixed rate


N/A

Avenues at Northpointe

2/13/2015


26,163



26,313



3/1/2022


3.16

%


Fixed rate


N/A

Venue at Lakewood Ranch

5/21/2015


27,910



28,076



12/1/2022


3.55

%


Fixed rate


N/A

Aster at Lely Resort

6/24/2015


30,914



31,094



7/5/2022


3.84

%


Fixed rate


N/A

CityPark View

6/30/2015


19,965



20,089



7/1/2022


3.27

%


Fixed rate


N/A

Avenues at Creekside

7/31/2015


38,664



38,871



8/1/2024


3.12

%


160

(2)

N/A

Citi Lakes

7/29/2019


40,891



41,079



8/1/2029


3.66

%


Fixed rate


N/A

Stone Creek

6/22/2017


19,714



19,800



7/1/2052


3.22

%


Fixed rate


N/A

Lenox Village Town Center

2/28/2019


38,652



38,813



3/1/2029


4.34

%


Fixed rate


N/A

Retreat at Lenox

12/21/2015


17,024



17,114



1/1/2023


4.04

%


Fixed rate


N/A

Overton Rise

2/1/2016


38,224



38,428



8/1/2026


3.98

%


Fixed rate


N/A

Village at Baldwin Park

12/17/2018


70,371



70,607



1/1/2054


4.16

%


Fixed rate


N/A

Crosstown Walk

1/15/2016


30,083



30,246



2/1/2023


3.90

%


Fixed rate


N/A

525 Avalon Park

6/15/2017


64,205



64,519



7/1/2024


3.98

%


Fixed rate


N/A

City Vista

7/1/2016


33,491



33,674



7/1/2026


3.68

%


Fixed rate


N/A

Sorrel

8/24/2016


31,273



31,449



9/1/2023


3.44

%


Fixed rate


N/A

Citrus Village

3/3/2017


28,643



28,796



6/10/2023


3.65

%


Fixed rate


N/A

Retreat at Greystone

11/21/2017


33,900



34,053



12/1/2024


4.31

%


Fixed rate


N/A

Founders Village

3/31/2017


30,061



30,202



4/1/2027


4.31

%


Fixed rate


N/A

Claiborne Crossing

4/26/2017


25,838



25,948



6/1/2054


2.89

%


Fixed rate


N/A

Luxe at Lakewood Ranch

7/26/2017


37,478



37,662



8/1/2027


3.93

%


Fixed rate


N/A

Adara at Overland Park

9/27/2017


30,474



30,624



4/1/2028


3.90

%


Fixed rate


N/A

Aldridge at Town Village

10/31/2017


36,400



36,569



11/1/2024


4.19

%


Fixed rate


N/A

Reserve at Summit Crossing

9/29/2017


19,180



19,276



10/1/2024


3.87

%


Fixed rate


N/A

Overlook at Crosstown Walk

11/21/2017


21,348



21,450



12/1/2024


3.95

%


Fixed rate


N/A

Colony at Centerpointe

12/20/2017


31,953



32,120



10/1/2026


3.68

%


Fixed rate


N/A

Lux at Sorrel

1/9/2018


30,325



30,474



2/1/2030


3.91

%


Fixed rate


N/A

Green Park

2/28/2018


38,343



38,525



3/10/2028


4.09

%


Fixed rate


N/A

The Lodge at Hidden River

9/27/2018


40,728



40,903



10/1/2028


4.32

%


Fixed rate


N/A

Vestavia Reserve

11/9/2018


36,973



37,130



12/1/2030


4.40

%


Fixed rate


N/A

CityPark View South

11/15/2018


23,670



23,767



6/1/2029


4.51

%


Fixed rate


N/A

Artisan at Viera

8/8/2019


39,647



39,824



9/1/2029


3.93

%


Fixed rate


N/A

Five Oaks at Westchase

10/17/2019


31,293



31,448



11/1/2031


3.27

%


Fixed rate


N/A















Total multifamily communities



1,168,229



1,173,901
























Grocery-anchored shopping centers:

Spring Hill Plaza

9/17/2019


8,115



8,167



10/1/2031


3.72

%


Fixed rate


N/A

Parkway Town Centre

9/17/2019


8,017



8,067



10/1/2031


3.72

%


Fixed rate


N/A

Woodstock Crossing

8/8/2014


2,863



2,877



9/1/2021


4.71

%


Fixed rate


N/A

Deltona Landings

8/16/2019


6,252



6,289



9/1/2029


4.18

%


Fixed rate


N/A

Powder Springs

8/13/2019


7,901



7,951



9/1/2029


3.65

%


Fixed rate


(3)

Barclay Crossing

8/16/2019


6,197



6,233



9/1/2029


4.18

%


Fixed rate


N/A

Parkway Centre

8/16/2019


4,504



4,530



9/1/2029


4.18

%


Fixed rate


N/A

The Market at Salem Cove

10/6/2014


9,029



9,075



11/1/2024


4.21

%


Fixed rate


N/A

Independence Square

8/27/2015


11,388



11,455



9/1/2022


3.93

%


Fixed rate


N/A

Royal Lakes Marketplace

4/12/2019


9,516



9,572



5/1/2029


4.29

%


Fixed rate


N/A

The Overlook at Hamilton Place

12/22/2015


19,405



19,509



1/1/2026


4.19

%


Fixed rate


N/A

Summit Point

10/30/2015


11,402



11,494



11/1/2022


3.57

%


Fixed rate


N/A

East Gate Shopping Center

4/29/2016


5,238



5,277



5/1/2026


3.97

%


Fixed rate


N/A

Fury's Ferry

4/29/2016


6,051



6,096



5/1/2026


3.97

%


Fixed rate


N/A

Rosewood Shopping Center

4/29/2016


4,064



4,095



5/1/2026


3.97

%


Fixed rate


N/A

Southgate Village

4/29/2016


7,225



7,279



5/1/2026


3.97

%


Fixed rate


N/A

The Market at Victory Village

5/16/2016


8,871



8,911



9/11/2024


4.40

%


Fixed rate


N/A

Wade Green Village

4/7/2016


7,614



7,655



5/1/2026


4.00

%


Fixed rate


N/A

Lakeland Plaza

7/15/2016


27,255



27,459



8/1/2026


3.85

%


Fixed rate


N/A

University Palms

8/8/2016


12,324



12,421



9/1/2026


3.45

%


Fixed rate


N/A

Cherokee Plaza

4/12/2019


24,722



24,867



5/1/2027


4.28

%


Fixed rate


N/A

Sandy Plains Exchange

8/8/2016


8,609



8,676



9/1/2026


3.45

%


Fixed rate


N/A

Thompson Bridge Commons

8/8/2016


11,509



11,599



9/1/2026


3.45

%


Fixed rate


N/A

Heritage Station

8/8/2016


8,518



8,585



9/1/2026


3.45

%


Fixed rate


N/A

Oak Park Village

8/8/2016


8,790



8,859



9/1/2026


3.45

%


Fixed rate


N/A

Shoppes of Parkland

8/8/2016


15,630



15,702



9/1/2023


4.67

%


Fixed rate


N/A

Champions Village

10/18/2016


27,400



27,400



11/1/2021


4.59

%


300

(4)

11/1/2021

Castleberry-Southard

4/21/2017


10,904



10,959



5/1/2027


3.99

%


Fixed rate


N/A

Rockbridge Village

6/6/2017


13,527



13,597



7/5/2027


3.73

%


Fixed rate


N/A

Irmo Station

7/26/2017


9,969



10,038



8/1/2030


3.94

%


Fixed rate


N/A

Maynard Crossing

8/25/2017


17,327



17,449



9/1/2032


3.74

%


Fixed rate


N/A

Woodmont Village

9/8/2017


8,265



8,320



10/1/2027


4.13

%


Fixed rate


N/A

West Town Market

9/22/2017


8,443



8,503



10/1/2025


3.65

%


Fixed rate


N/A

Crossroads Market

12/5/2017


17,991



18,112



1/1/2030


3.95

%


Fixed rate


N/A

Anderson Central

3/16/2018


11,467



11,539



4/1/2028


4.32

%


Fixed rate


N/A

Greensboro Village

5/22/2018


8,199



8,250



6/1/2028


4.20

%


Fixed rate


N/A

Governors Towne Square

5/22/2018


10,908



10,976



6/1/2028


4.20

%


Fixed rate


N/A

Conway Plaza

6/29/2018


9,506



9,549



7/5/2028


4.29

%


Fixed rate


N/A

Brawley Commons

7/6/2018


17,854



17,963



8/1/2028


4.36

%


Fixed rate


N/A

Hollymead Town Center

12/21/2018


26,606



26,758



1/1/2029


4.64

%


Fixed rate


N/A

Gayton Crossing

1/17/2019


17,580



17,679



2/1/2029


4.71

%


Fixed rate


N/A

Free State Shopping Center

5/28/2019


46,184



46,391



6/1/2029


3.99

%


Fixed rate


N/A

Polo Grounds Mall

6/12/2019


13,168



13,227



7/1/2034


3.93

%


Fixed rate


N/A

Disston Plaza

6/12/2019


17,825



17,905



7/1/2034


3.93

%


Fixed rate


N/A

Fairfield Shopping Center

8/16/2019


19,750



19,750



8/16/2026


2.76

%


205


8/16/22

Berry Town Center

11/14/2019


11,968



12,025



12/1/2034


3.49

%


Fixed rate


N/A

Hanover Shopping Center

12/19/2019


31,805



32,000



12/19/2026


3.62

%


Fixed rate


N/A

Wakefield Crossing

1/29/2020


7,875





2/1/2032


3.66

%


Fixed rate


N/A















Total grocery-anchored shopping centers



625,530



621,090
























Student housing properties:

North by Northwest

6/1/2016


31,003



31,209



10/1/2022


4.02

%


Fixed rate


N/A

SoL

10/31/2018


35,515



35,656



11/1/2028


4.71

%


Fixed rate


N/A

Stadium Village

10/27/2017


45,005



45,228



11/1/2024


3.80

%


Fixed rate


N/A

Ursa

12/18/2017




31,400



1/5/2020


4.78

%


300


N/A

The Tradition

5/10/2018


30,000



30,000



6/6/2021


5.45

%


375

(5)

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


5.25

%


355

(6)

7/9/2021















Total student housing properties



217,614



249,584
























Office buildings:

Brookwood Center

8/29/2016


30,522



30,716



9/10/2031


3.52

%


Fixed rate


N/A

Galleria 75

11/4/2016


5,288



5,340



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


51,493



51,834



12/10/2028


4.10

%


Fixed rate


N/A

Armour Yards

1/29/2018


39,943



40,000



2/1/2028


4.10

%


Fixed rate


N/A

150 Fayetteville

7/31/2018


114,400



114,400



8/10/2028


4.27

%


Fixed rate


9/9/2020

Capitol Towers

12/20/2018


124,299



124,814



1/10/2037


4.60

%


Fixed rate


N/A

CAPTRUST Tower

7/25/2019


82,650



82,650



8/1/2029


3.61

%


Fixed rate


7/31/2029

Morrocroft Centre

3/19/2020


70,000





4/10/2033


3.40

%


Fixed rate


4/10/2025

251 Armour Yards (7)

1/22/2020


3,522





1/22/2025


4.50

%


Fixed rate


1/21/2023















Total office buildings



637,617



565,254










Grand total



2,648,990



2,609,829










Less: deferred loan costs



(38,182)



(38,185)










Less: below market debt adjustment



(4,557)



(4,622)










Mortgage notes, net



$

2,606,251



$

2,567,022











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 interest rate has a floor of 3.25%.

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

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

(7) A construction loan financing redevelopment of the property.


Multifamily Communities

As of March 31, 2020, our multifamily community portfolio consisted of the following properties:









Three months ended
March 31, 2020


Property


Location


Number of
units


Average unit
size (sq. ft.)


Average
physical
occupancy


Average
rent per
unit














Same-Store Communities:












Aldridge at Town Village


Atlanta, GA


300



969



95.8

%


$

1,385



Green Park


Atlanta, GA


310



985



95.4

%


$

1,477



Overton Rise


Atlanta, GA


294



1,018



95.5

%


$

1,588



Summit Crossing I


Atlanta, GA


345



1,034



94.9

%


$

1,218



Summit Crossing II


Atlanta, GA


140



1,100



96.2

%


$

1,325



The Reserve at Summit Crossing


Atlanta, GA


172



1,002



95.7

%


$

1,350



Avenues at Cypress


Houston, TX


240



1,170



95.3

%


$

1,452



Avenues at Northpointe


Houston, TX


280



1,167



96.0

%


$

1,402



Vineyards


Houston, TX


369



1,122



97.1

%


$

1,186



Avenues at Creekside


San Antonio, TX


395



974



93.8

%


$

1,191



Aster at Lely Resort


Naples, FL


308



1,071



94.4

%


$

1,455



Sorrel


Jacksonville, FL


290



1,048



94.6

%


$

1,329



Lux at Sorrel


Jacksonville, FL


265



1,025



94.7

%


$

1,415



525 Avalon Park


Orlando, FL


487



1,394



94.6

%


$

1,501



Citi Lakes


Orlando, FL


346



984



94.5

%


$

1,502



Luxe at Lakewood Ranch


Sarasota, FL


280



1,105



94.9

%


$

1,546



Venue at Lakewood Ranch


Sarasota, FL


237



1,001



95.5

%


$

1,608



Crosstown Walk


Tampa, FL


342



1,070



95.9

%


$

1,323



Overlook at Crosstown Walk


Tampa, FL


180



986



95.6

%


$

1,404



Citrus Village


Tampa, FL


296



980



96.3

%


$

1,324



Lenox Village


Nashville, TN


273



906



98.2

%


$

1,326



Regent at Lenox


Nashville, TN


18



1,072



98.1

%


$

1,363



Retreat at Lenox


Nashville, TN


183



773



96.5

%


$

1,256



CityPark View


Charlotte, NC


284



948



97.1

%


$

1,155



CityPark View South


Charlotte, NC


200



1,005



95.3

%


$

1,286



Colony at Centerpointe


Richmond, VA


255



1,149



95.3

%


$

1,380



Founders Village


Williamsburg, VA


247



1,070



94.5

%


$

1,429



Retreat at Greystone


Birmingham, AL


312



1,100



95.1

%


$

1,346



Vestavia Reserve


Birmingham, AL


272



1,113



96.1

%


$

1,559



Adara Overland Park


Kansas City, KS


260



1,116



96.4

%


$

1,373



Claiborne Crossing


Louisville, KY


242



1,204



95.5

%


$

1,356



City Vista


Pittsburgh, PA


272



1,023



94.5

%


$

1,436















Total/Average Same-Store Communities




8,694





95.5

%
















Stone Creek


Houston, TX


246



852



97.0

%


$

1,159



Village at Baldwin Park


Orlando, FL


528



1,069



95.3

%


$

1,696



Lodge at Hidden River


Tampa, FL


300



980



96.6

%


$

1,398



Five Oaks at Westchase


Tampa, FL


218



983



96.0

%


$

1,520















Total/Average Stabilized Communities




9,986





95.5

%
















Artisan at Viera


Melbourne, FL


259



1,070



%


$

1,707



Wiregrass Ranch


Tampa, FL


392



973



%
















Total PAC Non-Stabilized Communities




651





















Total multifamily community units




10,637





















For the three-month period ended March 31, 2020, our average same-store multifamily communities' physical occupancy was 95.5%. 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 March 31, 2020, our average stabilized physical occupancy was 95.5%. We calculate average stabilized physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date.

For the three-month period ended March 31, 2020, our average economic occupancy was 95.3%. We define average economic occupancy as market rent reduced by vacancy losses, expressed as a percentage. All of our multifamily properties are included in these calculations except for properties which are not yet stabilized (which we define as properties having first achieved 93% physical occupancy for three full months in a quarter; includes Artisan at Viera and Five Oaks at Westchase), properties which are owned for less than the entire reporting period (Wiregrass Ranch) and properties which are undergoing significant capital projects, have sustained significant casualty losses (Stone Creek) or are adding additional phases (Lodge at Hidden River). We also exclude properties which are currently being marketed for sale, of which we had none at March 31, 2020. 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 March 31, 2020, our student housing portfolio consisted of the following properties:











Three months ended
March 31, 2020

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



86.6

%


$

703


SoL  (1)


Tempe, AZ


224



639



1,296



99.2

%


$

719


Stadium Village (1, 2)


Atlanta, GA


198



792



1,466



98.1

%


$

721


Ursa (1, 2)


Waco, TX


250



840



1,634



97.9

%


$

604


The Tradition


College Station, TX


427



808



539



97.8

%


$

607


The Retreat at Orlando (1)


Orlando, FL


221



894



2,036



98.7

%


$

770


The Bloc


Lubbock, TX


140



556



1,394



89.5

%


$

514


Haven49 (1)


Charlotte, NC


332



887



1,224



97.8

%


$

752




















2,011



6,095





96.1

%


$

680



(1) On March 20, 2020, we delivered a written termination notice to the prospective purchaser of six of our student housing properties for their failure to consummate the purchase. Accordingly, we received an additional $2.75 million of forfeited earnest money as liquidated damages.

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

Capital Expenditures

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

For the three-month period ended March 31, 2020, 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

$

176



$

16.87



$



$



$

176



$

16.87


Carpets



305



29.18







305



29.18


Wood / vinyl flooring

20



1.95



106



10.13



126



12.08


Mini blinds and ceiling fans

31



3.01







31



3.01


Fire safety






44



4.22



44



4.22


HVAC


61



5.83







61



5.83


Computers, equipment, misc.

5



0.48



57



5.47



62



5.95


Elevators





16



1.56



16



1.56


Exterior painting





628



60.11



628



60.11


Leasing office and other common amenities

30



2.86



263



25.16



293



28.02


Major structural projects





407



38.94



407



38.94


Cabinets and countertop upgrades





39



3.76



39



3.76


Landscaping and fencing





163



15.61



163



15.61


Parking lot






21



1.98



21



1.98


Signage and sanitation





19



1.84



19



1.84


Totals



$

628



$

60.18



$

1,763



$

168.78



$

2,391



$

228.96


For the three-month period ended March 31, 2020, 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

$

29



$

4.80



$



$



$

29



$

4.80


Carpets



7



1.13







7



1.13


Wood / vinyl flooring












Mini blinds and ceiling fans

2



0.27







2



0.27


Fire safety













HVAC


25



4.04







25



4.04


Computers, equipment, misc.





2



0.35



2



0.35


Elevators





5



0.84



5



0.84


Exterior painting












Leasing office and other common amenities

2



0.33



13



2.10



15



2.43


Major structural projects





541



88.71



541



88.71


Cabinets and counter top upgrades





2



0.31



2



0.31


Landscaping and fencing





54



8.78



54



8.78


Parking lot












Signage and sanitation





19



3.26



19



3.26


Unit furniture

162



26.63







162



26.63


Totals



$

227



$

37.20



$

636



$

104.35



$

863



$

141.55


Grocery-Anchored Shopping Center Portfolio

As of March 31, 2020, 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



93.9

%


 Publix

Lakeland Plaza

 Atlanta, GA


1990


301,711



93.1

%


Sprouts

Powder Springs

 Atlanta, GA


1999


77,853



87.7

%


 Publix

Rockbridge Village

 Atlanta, GA


2005


102,432



85.4

%


 Kroger

Roswell Wieuca Shopping Center

 Atlanta, GA


2007


74,370



100.0

%


 The Fresh Market

Royal Lakes Marketplace

 Atlanta, GA


2008


119,493



92.7

%


 Kroger

Sandy Plains Exchange

 Atlanta, GA


1997


72,784



96.7

%


Publix

Summit Point

 Atlanta, GA


2004


111,970



87.5

%


 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



97.2

%


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



98.3

%


 Publix

Spring Hill Plaza

 Nashville, TN


2005


66,693



100.0

%


 Publix

Parkway Town Centre

 Nashville, TN


2005


65,587



100.0

%


 Publix

The Market at Salem Cove

 Nashville, TN


2010


62,356



97.8

%


 Publix

The Market at Victory Village

 Nashville, TN


2007


71,300



98.0

%


 Publix

The Overlook at Hamilton Place

 Chattanooga, TN


1992


213,095



100.0

%


 The Fresh Market

Shoppes of Parkland

 Miami-Ft. Lauderdale, FL


2000


145,720



98.9

%


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



92.4

%


Publix

Berry Town Center

 Orlando, FL


2003


99,441



84.2

%


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



76.0

%


Randalls

Kingwood Glen

 Houston, TX


1998


103,397



97.1

%


 Kroger

Independence Square

 Dallas, TX


1977


140,218



86.1

%


 Tom Thumb

Midway Market

 Dallas, TX


2002


85,599



90.2

%


Kroger

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



95.3

%


Kroger

Rosewood Shopping Center

 Columbia, SC


2002


36,887



93.5

%


 Publix

Anderson Central

 Greenville Spartanburg, SC


1999


223,211



95.9

%


 Walmart

Fairview Market

 Greenville Spartanburg, SC


1998


46,303



97.0

%


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



93.4

%


Harris Teeter

Wakefield Crossing

 Raleigh, NC


2001


75,927



98.2

%


Food Lion

Hanover Center (4)

Wilmington, NC


1954


305,346



97.1

%


Harris Teeter

Southgate Village

 Birmingham, AL


1988


75,092



96.8

%


 Publix

Hollymead Town Center

Charlottesville, VA


2005


158,807



90.8

%


Harris Teeter

Gayton Crossing

Richmond, VA


1983


158,316

(3)


83.8

%


Kroger

Fairfield Shopping Center (4)

Virginia Beach, VA


1985


231,829



84.7

%


Food Lion

Free State Shopping Center

Washington, DC


1970


264,152



97.7

%


Giant











Grand total/weighted average





6,208,278



92.6

%




(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 March 31, 2020, our grocery-anchored shopping center portfolio was 92.6% leased. We define percent leased as the percentage of gross leasable area that is leased, including noncancelable lease agreements that have been signed which have not yet commenced. 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 March 31, 2020 were:



Totals



Number
of leases


Leased
GLA


Percent of
leased GLA








Month to month


9



18,456



0.3

%

2020


94



211,258



3.7

%

2021


176



704,957



12.3

%

2022


178



623,979



10.9

%

2023


135



624,239



10.9

%

2024


126



1,157,184



20.1

%

2025


90



926,108



16.1

%

2026


22



221,158



3.9

%

2027


27



192,685



3.4

%

2028


28



354,993



6.2

%

2029


26



182,196



3.2

%

2030 +


20



528,581



9.0

%








Total


931



5,745,794



100.0

%

The Company's grocery-anchored shopping center portfolio contained the following anchor tenants as of March 31, 2020:

Tenant


GLA


Percent of
total GLA

Publix


1,175,430



18.9%

Kroger


580,343



9.3%

Harris Teeter


273,273



4.4%

Wal-Mart


183,211



3.0%

BJ's Wholesale Club


108,532



1.7%

Food Lion


76,523



1.2%

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%

Sprouts


29,855



0.5%

Aldi


23,622



0.4%






Total


2,727,307



43.9%






The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 will present income statements of New Market Properties, LLC within the Results of Operations section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

Second-generation capital expenditures within our grocery-anchored shopping center portfolio by property for the first quarter 2020 totaled approximately $432,000. Second-generation capital expenditures exclude those expenditures made in our grocery-anchored shopping center portfolio (i) to lease space to "first generation" tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our ownership standards, and (iii) for property redevelopments and repositioning.

Office Building Portfolio

As of March 31, 2020, our office building portfolio consisted of the following properties:

Property Name


Location


GLA


Percent
leased

Three Ravinia


Atlanta, GA


814,000



99

%

150 Fayetteville


Raleigh, NC


560,000



91

%

Capitol Towers


Charlotte, NC


479,000



100

%

CAPTRUST Tower


Raleigh, NC


300,000



100

%

Westridge at La Cantera


San Antonio, TX


258,000



100

%

Morrocroft Centre


Charlotte, NC


291,000



90

%

Armour Yards


Atlanta, GA


187,000



96

%

Brookwood Center


Birmingham, AL


169,000



100

%

Galleria 75


Atlanta, GA


111,000



97

%












3,169,000



97

%








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



14.1

%


$

12,043


Albemarle

162,000



6.7

%


5,727


CapFinancial

113,000



4.7

%


3,999


USAA

129,000



3.7

%


3,196


Vericast

129,000



3.4

%


2,953











1,053,000



32.6

%


$

27,918


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


95,000



3.1

%

2021


245,000



8.2

%

2022


127,000



4.2

%

2023


128,000



4.2

%

2024


266,000



8.8

%

2025


251,000



8.3

%

2026


266,000



8.8

%

2027


321,000



10.6

%

2028


232,000



7.7

%

2029


57,000



1.9

%

2030+


1,040,000



34.2

%






Total


3,028,000



100.0

%

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $101,000 during the first quarter 2020. 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, Core 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, Core 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, Core 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, Core 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.

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

The Company makes adjustments to FFO to remove costs incurred and revenues recorded that are singular in nature and outside the normal operations of the Company and portray its primary operational results. The Company calculates Core FFO as:

FFO, plus:

  • acquisition and pursuit (dead deal) costs;
  • Loan cost amortization on acquisition term notes and loan coordination fees;
  • losses on debt extinguishments or refinancing costs;
  • internalization costs;
  • non-cash dividends on preferred stock;
  • non-cash (income) expense for current expected credit losses;
  • Extraordinary Event - COVID-19 Expense; and

Less:

  • earnest money forfeitures by prospective asset purchasers.

Core FFO figures reported by us may not be comparable to Core FFO figures reported by other companies. We utilize Core FFO as a supplemental measure of the operating performance of our portfolio of real estate assets. We believe Core FFO 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 Core FFO removes costs incurred and revenues recorded that are often singular in nature and outside the normal operations of the Company, we believe it improves comparability to investors in assessing our core operating results across periods. Core 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 Core 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:

Core FFO, plus:

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

Less:

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

AFFO figures reported by us may not be comparable to those AFFO figures reported by other companies. We utilize AFFO as another measure of the operating performance of our portfolio of real estate assets. We believe AFFO is useful to investors as a supplemental gauge of our operating performance and may be useful in comparing our operating performance with other real estate companies. 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, Core 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 March 31, 2020, 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: Preferred Apartment Communities, Inc., John A. Isakson, Chief Financial Officer, jisakson@pacapts.com, 770-818-4109