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Preferred Apartment Communities, Inc. Reports Results for Third Quarter 2016

10/31/2016

ATLANTA, Oct. 31, 2016 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we", "our", the "Company" or "Preferred Apartment Communities") today reported results for the quarter ended September 30, 2016. 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.

Preferred Apartment Communities

"We had a superb third quarter with all areas of our business performing exceptionally well.  We believe these results reflect our strategy to acquire and manage multifamily communities in large metropolitan areas that are not considered gateway cities" said John A. Williams, Preferred Apartment Communities' Chairman and Chief Executive Officer.  Leonard A. Silverstein, Preferred Apartment Communities' President and Chief Operating Officer, added "The strength of our third quarter results also reflects our continued focus on Core FFO operating metrics."

Highlights of the Third Quarter 2016

  • During the third quarter 2016, we acquired a 290-unit multifamily community located in Jacksonville, Florida and converted our City Vista real estate loan into an approximate 96% ownership interest in a joint venture which owns the underlying 272-unit multifamily community located in Pittsburgh, Pennsylvania. We also acquired eight grocery-anchored shopping centers located in Georgia, Florida, Texas, and North Carolina, comprising approximately 952,000 aggregate square feet of gross leasable area and a nine-story, 169,500 square foot class A office building located in Birmingham, Alabama.
  • During the third quarter 2016, we closed on a real estate investment loan of up to approximately $21.1 million in support of a proposed 271-unit multifamily community to be located in Birmingham, Alabama and a land loan of up to $4.0 million in partial support of a proposed 224-unit multifamily community to be located in Fort Myers, Florida.
  • With the closing of the acquisitions referenced above, as of September 30, 2016 we owned 24 multifamily communities consisting of an aggregate of 8,049 units, one 219-unit student housing community, one class A office building comprising 169,500 square feet, and 30 grocery-anchored shopping centers comprising an aggregate of approximately 2,913,000 square feet of gross leasable area. Upon completion of all the projects partially financed by our real estate loan portfolio and if we were to acquire all of the underlying properties, we would own 21 additional multifamily communities, comprising an aggregate of 4,902 units, including seven student housing communities comprising an aggregate of 4,806 beds in 1,542 units, and one additional retail shopping center comprising approximately 212,800 square feet of gross leasable area. We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties.

Financial Highlights

Our operating results are presented below.

















Three months ended September 30,




Nine months ended September 30,






2016


2015


% change


2016


2015


% change



Revenues

$

53,537,337



$

29,955,693



78.7

%


$

141,127,062



$

75,389,035



87.2

%

















Per share data:














Net loss (1)

$

(0.56)



$

(0.31)



(80.6)

%


$

(1.45)



$

(0.65)



(123.1)

%

















FFO (2)

$

0.31



$

0.16



93.8

%


$

0.66



$

0.53



24.5

%

















Core FFO (2)

$

0.38



$

0.32



18.8

%


$

0.99



$

0.82



20.7

%

















Dividends (3)

$

0.2025



$

0.18



12.5

%


$

0.5975



$

0.535



11.7

%
















Core Funds From Operations Attributable to Common Stockholders and Unitholders("Core FFO"), which we previously referred to as Normalized Funds From Operations, excludes acquisition costs and certain other costs not representative of our ongoing operations.

(1) Per weighted average share of Common Stock outstanding for the periods indicated.
(2) FFO and Core FFO are presented per weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated.
(3)  Per share of Common Stock and Class A Unit outstanding.

 

  • For the third quarter 2016, our Core FFO payout ratio to our Common Stockholders and Unitholders was approximately 54.5% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 91.5%. (1)
  • For the third quarter 2016, our Core FFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 53.7% and our AFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 66.1%. (1)
  • Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders, or AFFO, was $0.90 per share for the nine months ended September 30, 2016, an increase of 21.6% from $0.74 per share for the same 2015 period. AFFO is calculated after deductions for all preferred dividends. AFFO was $0.22 per share for the third quarter 2016, no change from $0.22 per share for the third quarter 2015.
  • At September 30, 2016, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 58.6%.
  • Cash flow from operations for the third quarter 2016 was approximately $21.0 million, an increase of approximately $11.1 million, or 112.3%, compared to approximately $9.9 million for the third quarter 2015.

Subsequent to Quarter End

  • On October 18, 2016, we acquired a grocery-anchored shopping center located in Houston, Texas comprising approximately 383,100 square feet of gross leasable area,

(1) We calculate the Core FFO and AFFO payout ratios to Common Stockholders and Unitholders as the ratio of Common Stock dividends and distributions to Unitholders to Core FFO or AFFO, respectively. We calculate the Core FFO and AFFO payout ratios to Series A Preferred Stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and Core FFO or AFFO, respectively. Since our operations resulted in a net loss for the periods presented, a payout ratio based on net loss is not calculable. See Definitions of Non-GAAP Measures on page S-12.

Same Store Operations

The following table presents the percentage change in same store multifamily gross revenues, operating expenses and net operating income for the third quarter 2016 versus the third quarter 2015. Our same store property operating results exclude any properties that are not comparable for the periods presented.










Year over year growth



Three months ended September 30, 2016 versus 2015




Gross
Revenues


Operating
Expenses


Net
Operating
Income









Multifamily


2.2

%


0.9

%


3.3

%



















 

Liquidity and Balance Sheet

Total Assets

As of September 30, 2016, our total assets were approximately $2.1 billion compared to approximately $1.1 billion as of September 30, 2015, an increase of approximately $1.0 billion, or approximately 92.5%. This growth was driven almost entirely by property acquisitions and new real estate loans.

Capital Markets Activities

During third quarter 2016, we issued and sold 120,672 Units, with each Unit consisting of one share of our Series A Redeemable Preferred Stock and one Warrant to purchase up to 20 shares of our Common Stock, under our existing $900 million Unit offering (the "$900 Million Unit Offering"), resulting in gross proceeds of approximately $120.5 million. In addition, during third quarter 2016, we issued 700,800 shares of common stock pursuant to the exercise of warrants issued under our $900 Million Unit Offering and our expired $150 million Unit offering, resulting in aggregate gross proceeds of approximately $7.8 million.

On June 9, 2016, the Company filed a registration statement on Form S-3 (Registration No. 333-211924) (the "Third Series A Registration Statement").  This registration statement, once effective, will allow us to offer up to a maximum of 2,000,000 Units. On October 5, 2016 the Board of Directors of the Company approved an extension of our $900 Million Unit Offering from October 11, 2016 to the earlier of: (1) the sale of all Units in the $900 Million Unit Offering; (2) the effectiveness of the Third Series A Registration Statement; and (3) April 7, 2017.

On July 18, 2016, the Company filed a prospectus for its registration statement on Form S-3 (Registration No. 333-211178) to issue and sell up to $150 million of Common Stock from time to time in an "at the market" offering (the "ATM Offering") through JonesTrading Institutional Services LLC, FBR Capital Markets & Co, and Canaccord Genuity Inc, as its sales agents. The Company intends to use any proceeds from the ATM Offering to (a) repay outstanding amounts under our existing senior secured revolving credit facility and (b) for other general corporate purposes, which includes making investments in accordance with the Company's investment objectives. During the third quarter 2016, we issued and sold 197,256 shares of our Common Stock for gross proceeds of approximately $2.9 million.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On August 4, 2016, we declared a quarterly dividend on our Common Stock of $0.2025 per share for third quarter 2016. This represents a 12.5% increase in our common stock dividend from our third quarter 2015 common stock dividend of $0.18 per share, and an annualized dividend growth rate of 11.9% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The third quarter dividend was paid on October 14, 2016 to all stockholders of record on September 15, 2016. In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.2025 per unit for third quarter 2015, which was paid on or around October 14, 2016 to all Class A Unit holders of record as of September 15, 2016.

Monthly Dividends on Series A Redeemable Preferred Stock

We declared and paid monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $11.0 million for the three-month period ended September 30, 2016 and represents a 6% annual yield.

Conference Call and Supplemental Data

Preferred Apartment Communities will hold its quarterly conference call on Tuesday, November 1, 2016 at 11:00 a.m. Eastern Time to discuss its third quarter 2016 results. To participate in the conference call, please dial in to the following:

Live Conference Call Details
Domestic Dial-in Number: (800) 860-2442
International Dial-in Number: (412) 858-4600
Company: Preferred Apartment Communities, Inc.
Date: Tuesday, November 1, 2016
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

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

2016 Guidance:

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

Core FFO per share - We currently project Core FFO to be in the range of $1.28 - $1.30 per share for the full year 2016.

Revenue - We currently project total revenues to be in the range of $190 million - $205 million for the full year 2016.

Core FFO, AFFO and FFO are all calculated after deductions for all preferred stock dividends. A reconciliation of net income (loss) attributable to common stockholders to Core FFO, AFFO and FFO appears on pages S-2 and S-3 of this report, as well as on the Company's website and is available using the following link:

http://investors.pacapts.com/download/3Q16_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 Supplemental Financial Data Report may constitute, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or transactions to be materially different from the results, guidance, goals, performance, achievements or transactions expressed or implied by the forward-looking statements.  Factors that impact such forward-looking statements include, among others, our business and investment strategy; legislative or regulatory actions; the state of the U.S. economy generally or in specific geographic areas; economic trends and economic recoveries; 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; 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 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 twelve months ended December 31, 2015 that was filed with the Securities and Exchange Commission, or SEC, on March 14, 2016, which discusses various factors that could adversely affect our financial results. Such risk factors and information may have been updated or supplemented by our Form 10-Q and Form 8-K filings and other documents filed after March 14, 2016 and from time to time with the SEC.

Additional Information

The SEC has declared effective the registration statement (including prospectus) 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, International Assets Advisory, LLC (with respect to the Follow-On Offering), or its sales agents, JonesTrading Institutional Services LLC, FBR Capital Markets & Co., and Canaccord Genuity Inc. (with respect to the ATM Offering), will arrange to send you the prospectus if you request it by calling Leonard A. Silverstein at (770) 818-4100, or writing to 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.

The final prospectus for the Follow-On Offering, dated October 11, 2013, can be accessed through the following link: http://www.sec.gov/Archives/edgar/data/1481832/000148183213000128/a424b3prospectus900m.htm

The prospectus and base prospectus for the ATM Offering, dated July 18, 2016 and May 17, 2016, respectively, can be accessed through the following link: https://www.sec.gov/Archives/edgar/data/1481832/000148183216000152/atmprospectus.htm

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)



Three months ended September 30,



2016


2015

Revenues:





Rental revenues


$

37,319,207



$

19,442,628


Other property revenues


5,221,887



2,558,185


Interest income on loans and notes receivable


7,194,742



5,909,907




3,801,501



2,044,973


Total revenues


53,537,337



29,955,693







Operating expenses:





Property operating and maintenance


5,504,848



3,097,080


Property salary and benefits reimbursement to related party

2,808,402



1,688,347


Property management fees

1,724,411



857,294


Real estate taxes


4,789,085



2,506,885


General and administrative


1,144,256



632,164


Equity compensation to directors and executives

638,414



593,417


Depreciation and amortization


21,664,363



10,536,486


Acquisition and pursuit costs

1,036,171



1,783,708


Acquisition fees to related parties


321,366



1,541,250


Asset management fees to related party


3,759,084



1,908,742


Insurance, professional fees, and other expenses


1,338,343



1,062,687







Total operating expenses


44,728,743



26,208,060


Contingent asset management and general and administrative expense fees

(736,960)



(373,360)







Net operating expenses


43,991,783



25,834,700


Operating income


9,545,554



4,120,993


Interest expense


12,234,174



5,818,760







Net loss


(2,688,620)



(1,697,767)


Consolidated net loss attributable to non-controlling interests


86,484



15,289







Net loss attributable to the Company


(2,602,136)



(1,682,478)







Dividends declared to Series A preferred stockholders


(11,015,706)



(5,114,126)


Earnings attributable to unvested restricted stock


(6,159)



(4,068)







Net loss attributable to common stockholders


$

(13,624,001)



$

(6,800,672)







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




basic and diluted


$

(0.56)



$

(0.31)







Dividends per share declared on Common Stock


$

0.2025



$

0.18







Weighted average number of shares of Common Stock outstanding,




basic and diluted


24,340,791



22,292,217


 

 

Reconciliation of FFO, Core FFO, and AFFO

to Net Loss Attributable to Common Stockholders (A)



Three months ended:





09/30/2016



09/30/2015



Net loss attributable to common stockholders (See note 1)

$

(13,624,001)


$

(6,800,672)













Less:

Loss attributable to non-controlling interests (See note 2)

(86,484)



(15,289)



Add:

Depreciation of real estate assets


15,283,505



7,510,851




Amortization of acquired real estate intangible assets and deferred leasing costs

6,243,815



2,982,982












FFO

7,816,835



3,677,872











Add:

Acquisition and pursuit costs



1,357,537



3,324,958




Loan cost amortization on acquisition term note (See note 3)

26,937






Amortization of loan coordination fees paid to the Manager (See note 4)

288,127






Costs incurred from extension of management agreement with the Manager (See note 5)



129,279












Core FFO

9,489,436



7,132,109











Add:

Non-cash equity compensation to directors and executives

638,414



593,417




Amortization of loan closing costs (See note 6)


723,426



369,128




Depreciation/amortization of non-real estate assets


137,043



42,653




Net loan fees received (See note 7)


250,602



494,100




Deferred interest income received (See note 8)




282,620



Less:

Non-cash loan interest income (See note 7)


(3,950,676)



(2,640,396)




Abandoned pursuit costs



(39,657)




Cash paid for loan closing costs



(433,195)




Amortization of acquired real estate intangible liabilities (See note 9)

(643,123)



(304,608)




Normally recurring capital expenditures and leasing costs (See note 10)

(993,684)



(462,638)




AFFO

$

5,651,438


$

5,033,533














Common Stock dividends and distributions to Unitholders declared:








Common Stock dividends



$

4,992,038


$

4,018,249




Distributions to Unitholders (See note 2)


179,449



49,781




Total




$

5,171,487


$

4,068,030














Common Stock dividends and Unitholder distributions per share


$

0.2025


$

0.18














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

$

0.31


$

0.16



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

$

0.38


$

0.32



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

$

0.22


$

0.22







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





Basic:








Common Stock



24,340,791



22,292,217




Class A Units



886,168



278,006




Common Stock and Class A Units


25,226,959



22,570,223












Diluted Common Stock and Class A Units (B)


27,032,093



22,953,854











Actual shares of Common Stock outstanding, including 23,247 and 22,602 unvested shares




 of restricted Common Stock at September 30, 2016 and 2015, respectively

24,681,281



22,323,804



Actual Class A Units outstanding



886,168



276,560




Total




25,567,449



22,600,364











(A) Units and Unitholders refer to Class A Units in our Operating Partnership, or Class A Units, and holders of Class A Units, respectively. Unitholders include recipients of awards of Class B Units in our Operating Partnership, or Class B Units, for annual service which became vested and earned and automatically converted to Class A Units. Unitholders also include the entity that contributed the Wade Green grocery-anchored shopping center. The Class A Units collectively represent an approximate 3.51% weighted average non-controlling interest in the Operating Partnership for the three-month period ended September 30, 2016.

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


See Notes to Reconciliation of FFO, Core FFO and AFFO to Net Loss Attributable to Common Stockholders on page S-4.

Reconciliation of FFO, Core FFO, and AFFO

to Net Loss Attributable to Common Stockholders (A)







Nine months ended:








09/30/2016


09/30/2015



Net loss attributable to common stockholders (See note 1)

$

(34,039,743)


$

(14,415,083)












Loss attributable to non-controlling interests (See note 2)

(175,045)



(20,712)



Add:

Depreciation of real estate assets


39,006,354



18,951,905




Amortization of acquired real estate intangible assets and deferred leasing costs

15,576,868



7,343,400



Less:

Gain on sale of real estate



(4,271,506)














FFO

16,096,928



11,859,510












Add:

Acquisition and pursuit costs



6,885,864



6,276,663




Loan cost amortization on acquisition term note (See note 3)

139,744



96,658




Amortization of loan coordination fees paid to the Manager (See note 4)

551,654






Costs incurred from extension of management agreement with the Manager (See note 5)

421,387



129,279












Core FFO

24,095,577



18,362,110












Add:

Non-cash equity compensation to directors and executives

1,867,706



1,761,268




Amortization of loan closing costs (See note 6)


1,740,411



973,303




Depreciation/amortization of non-real estate assets


397,843



114,458




Net loan fees received (See note 7)


1,374,828



1,038,792




Deferred interest income received (See note 8)


6,875,957



3,250,379



Less:

Non-cash loan interest income (See note 7)


(10,457,754)



(6,596,366)




Abandoned pursuit costs



(39,657)




Cash paid for loan closing costs

(13,276)



(529,853)




Amortization of acquired real estate intangible liabilities (See note 9)

(1,714,792)



(695,177)




Normally recurring capital expenditures and leasing costs (See note 10)

(2,180,123)



(1,012,440)













AFFO

$

21,986,377


$

16,626,817













Common Stock dividends and distributions to Unitholders declared:









Common Stock dividends



$

14,200,114


$

11,881,325




Distributions to Unitholders (See note 2)


476,293



149,307




Total




$

14,676,407


$

12,030,632











Common Stock dividends and Unitholder distributions per share


$

0.5975


$

0.535











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

$

0.66


$

0.53



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

$

0.99


$

0.82



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

$

0.90


$

0.74







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





Basic:








Common Stock



23,552,951



22,109,036




Class A Units




796,710



279,481




Common Stock and Class A Units


24,349,661



22,388,517












Diluted Common Stock and Class A Units (B)


25,854,478



22,783,909











Actual shares of Common Stock outstanding, including 23,247 and 22,602 unvested shares






 of restricted Common Stock at September 30, 2016 and 2015, respectively

24,681,281



22,323,804



Actual Class A Units outstanding



886,168



276,560




Total




25,567,449



22,600,364











(A) Units and Unitholders refer to Class A Units in our Operating Partnership, or Class A Units, and holders of Class A Units, respectively. Unitholders include recipients of awards of Class B Units in our Operating Partnership, or Class B Units, for annual service which became vested and earned and automatically converted to Class A Units. Unitholders also include the entity that contributed the Wade Green grocery-anchored shopping center. The Class A Units collectively represent an approximate 3.27% weighted average non-controlling interest in the Operating Partnership for the nine-month period ended September 30, 2016.

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

 

See Notes to Reconciliation of FFO, Core FFO and AFFO to Net Loss Attributable to Common Stockholders on page S-4.

Notes to Reconciliation of FFO, Core FFO and AFFO to Net Loss Attributable to Common Stockholders

  1. Rental and other property revenues and expenses for the three-month period ended September 30, 2016 include activity for the two multifamily communities and eight grocery-anchored shopping centers acquired during the third quarter 2016 only from their respective dates of acquisition. In addition, the 2016 period includes a full quarter of activity for the six multifamily communities, ten grocery-anchored shopping centers and one student housing community acquired during the fourth quarters of 2015 and the first and second quarters 2016. Rental and other property revenues and expenses for the three-month period ended September 30, 2015 include activity for the two multifamily communities and two grocery-anchored shopping centers only from their respective dates of acquisition during the third quarter 2015.
  2. Non-controlling interests in our Operating Partnership consisted of a total of 886,168 Class A Units as of September 30, 2016. 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 3.51% and 1.23% for the three-month periods ended September 30, 2016 and 2015, respectively and 3.27% and 1.25% for the nine-month periods ended September 30, 2016 and 2015, respectively.
  3. We incurred loan closing costs for the acquisition of the Village at Baldwin Park multifamily community during the first quarter 2016 on our $35 million acquisition term loan facility with Key Bank National Association, or 2016 Term Loan and on our $11 million term note. These costs were deferred and are being amortized over the life of the 2016 Term Loan. We also incurred loan closing costs for the acquisition of the Avenues at Northpointe and Avenues at Cypress multifamily communities in 2015 on our $32 million acquisition term loan facility with Key Bank National Association, or 2015 Term Loan. These costs were deferred and were amortized over the life of the 2015 Term Loan until it was repaid in full on May 12, 2015. The amortization expense of these deferred costs is an additive adjustment in the calculation of Core FFO.
  4. Beginning in 2016, we pay loan coordination fees to Preferred Apartment Advisors, LLC, our Manager, related to obtaining mortgage financing for acquired properties. The portion of the loan coordination fees attributable to the financing are amortized over the lives of the respective mortgage loans, and this non-cash amortization expense is an addition to FFO in the calculation of Core FFO.  At September 30, 2016, aggregate unamortized loan costs were approximately $7.5 million, which will be amortized over a weighted average remaining loan life of approximately 7.1 years.
  5. We incurred legal costs pertaining to the extension of our management agreement with our Manager. The three-year extension was effective as of June 3, 2016. Such costs are an additive adjustment to FFO in our calculation of 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 multifamily communities and retail assets, and also for occasional amendments to our $135 million syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. 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 Core FFO in the calculation of AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability.  At September 30, 2016, aggregate unamortized loan costs were approximately $18.3 million, which will be amortized over a weighted average remaining loan life of approximately 6.2 years.
  7. We receive loan fees in conjunction with the origination of certain real estate loans.  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 in excess of amortization income, after the payment of acquisition fees to our Manager are additive adjustments in the calculation of AFFO. Correspondingly, the non-cash income recognized under the effective interest method is a deduction in the calculation of AFFO. We also accrue over the lives of certain loans 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 to a third party. This non-cash income is deducted from Core FFO in the calculation of AFFO.
  8. The Company records deferred interest revenue on certain of its real estate loans. These adjustments reflect the receipt during the periods presented of interest income which was earned and accrued prior to those periods presented on various real estate loans.
  9. 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 the Company's 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 retail assets. At September 30, 2016, the balance of unamortized below-market lease intangibles was approximately $19.2 million, which will be recognized over a weighted average remaining lease period of approximately 9.7 years.
  10. We deduct from Core FFO normally recurring capital expenditures that are necessary to maintain our assets' revenue streams in the calculation of AFFO. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures, which totaled $1,140,891 and $1,480,968 for the three-month periods ended September 30, 2016 and 2015, respectively and $4,260,073 and $2,140,381 for the nine-month periods ended September 30, 2016 and 2015, respectively. 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.

See Definitions of Non-GAAP Measures beginning on page S-12.

Preferred Apartment Communities, Inc.

Consolidated Balance Sheets

(Unaudited)




September 30, 2016


December 31, 2015



Assets







Real estate







Land


$

260,222,888


$

141,729,264



Building and improvements


1,333,186,314



733,417,442



Tenant improvements


14,132,772



5,781,199



Furniture, fixtures, and equipment


125,292,571



86,092,408



Construction in progress


2,879,528



609,400



Gross real estate


1,735,714,073



967,629,713



Less: accumulated depreciation


(87,020,014)



(48,155,874)



Net real estate


1,648,694,059



919,473,839



Property held for sale




33,817,081



Real estate loans, net of deferred fee income


195,971,159



180,688,293



Real estate loans to related party, net


109,436,327



57,313,465



Total real estate and real estate loans, net


1,954,101,545



1,191,292,678










Cash and cash equivalents


10,462,384



2,439,605



Restricted cash


32,948,161



12,539,440



Notes receivable


14,341,875



18,489,247



Note receivable and revolving line of credit due from related party


20,986,537



19,454,486



Accrued interest receivable on real estate loans


17,669,121



14,294,648



Acquired intangible assets, net of amortization


49,825,572



19,381,473



Deferred loan costs, net of amortization


1,738,508



488,770



Deferred offering costs


3,809,014



5,834,304



Tenant receivables and other assets


17,654,353



11,314,382










Total assets

$

2,123,537,070


$

1,295,529,033










Liabilities and equity







Liabilities







Mortgage notes payable, principal amount

$

1,183,335,433


$

668,836,291



Less: deferred loan costs, net of amortization


(19,317,090)



(8,099,517)



Mortgage notes payable, net of deferred loan costs


1,164,018,343



660,736,774



Mortgage note held for sale




28,109,000



Revolving line of credit


82,000,000



34,500,000



Term note payable


11,000,000





Less: deferred loan costs, net of amortization


(67,032)





Term note payable, net of deferred loan costs


10,932,968





Real estate loan participation obligation


19,638,232



13,544,160



Accounts payable and accrued expenses


25,309,813



12,644,818



Accrued interest payable


3,490,151



1,803,389



Dividends and partnership distributions payable


9,056,611



6,647,507



Acquired below market lease intangibles, net of amortization


19,180,354



9,253,450



Security deposits and other liabilities


5,161,358



2,836,145



Total liabilities


1,338,787,830



770,075,243










Commitments and contingencies













Equity







Stockholder's equity






Series A Redeemable Preferred Stock, $0.01 par value per share; 1,050,000






   shares authorized; 809,460 and 486,182 shares issued; 802,032 and 482,964






shares outstanding at September 30, 2016 and December 31, 2015, respectively


8,020



4,830



Common Stock, $0.01 par value per share; 400,066,666 shares authorized;






  24,658,034 and 22,761,551 shares issued and outstanding at






September 30, 2016 and December 31, 2015, respectively


246,580



227,616



Additional paid-in capital


802,559,257



536,450,877



Accumulated deficit


(19,384,106)



(13,698,520)



      Total stockholders' equity


783,429,751



522,984,803



Non-controlling interest


1,319,489



2,468,987



Total equity


784,749,240



525,453,790










Total liabilities and equity

$

2,123,537,070


$

1,295,529,033



 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)




Nine months ended September 30,



2016


2015


Operating activities:





















Net loss


$

(5,860,631)


$

(2,041,860)


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





Depreciation expense


39,387,351


19,052,639


Amortization expense


15,593,713


7,357,124


Amortization of above and below market leases

(1,118,329)


(566,260


Deferred fee income amortization

(725,913)


(580,996


Deferred loan cost amortization

2,431,809


1,069,961


(Increase) in accrued interest income on real estate loans

(3,374,473)


(3,188,828)


Equity compensation to executives, directors and consultants

1,894,710


1,761,268


Other


29,578


(14,807)


Gain on sale of real estate


(4,271,506)



Changes in operating assets and liabilities:




(Increase) in tenant receivables and other assets

(1,230,183)


(539,565)


Increase in accounts payable and accrued expenses

8,843,052


5,069,158


Increase in accrued interest payable

1,740,420


427,750


Increase in prepaid rents

235,035


237,613


Increase in security deposits and other liabilities

282,738


144,931


Net cash provided by operating activities

53,857,371


28,188,128







Investing activities:





Investment in real estate loans


(123,427,150)


(83,800,145)


Repayments of real estate loans


36,672,482


18,772,024


Notes receivable issued


(8,730,166)


(5,805,972)


Notes receivable repaid


12,895,101


9,897,319


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

(25,821,121)


(12,869,093)


Repayments of line of credit by related party

23,791,676


8,514,582


Acquisition fees received on real estate loans

2,695,961


2,126,913


Acquisition fees paid on real estate loans

(1,374,828)


(1,063,456)


Acquisition fees paid to real estate loan participants


(24,665


Acquisition of properties


(740,597,973)


(311,936,810)


Disposition of properties, net


10,606,386



Additions to real estate assets - improvements

(7,613,065)


(3,007,537)


Proceeds from sale of fixed assets

10,000



Deposits paid on acquisitions


(3,128,370)


(1,519,269)


Decrease in restricted cash

(9,070,073)


(4,998,076)


Net cash used in investing activities

(833,091,140)


(385,714,185)












Financing activities:





Proceeds from mortgage notes payable

479,494,000


204,555,500


Payment for mortgage debt

(7,748,011)


(2,553,190)


Payments for deposits and other mortgage loan costs

(15,400,974)


(3,240,080)


Proceeds from real estate loan participants

5,575,484


4,134,882


Proceeds from lines of credit


357,136,020


165,900,000


Payments on lines of credit


(309,636,020)


(161,700,000)


Proceeds from term loan


46,000,000


32,000,000


Repayment of the term loan


(35,000,000


(32,000,000)


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

287,830,612


173,466,135


Proceeds from sales of Common Stock

2,810,156


5,381,848


Proceeds from exercises of warrants

19,831,294


1,236,437


Common stock dividends paid


(13,523,075)


(11,560,512)


Preferred stock dividends paid


(26,735,870)


(11,453,618)


Distributions to non-controlling interests

(350,079)


(124,905)


Payments for deferred offering costs

(3,476,989)


(1,582,886)


Contributions from non-controlling interests

450,000



Net cash provided by financing activities

787,256,548


362,459,611






Net increase in cash and cash equivalents

8,022,779


4,933,554


Cash and cash equivalents, beginning of period

2,439,605


3,113,270


Cash and cash equivalents, end of period

$

10,462,384


$

8,046,824


 

 

 

Real Estate Loans





Total units upon


Loan balance at September 30,


Total loan


Purchase option window


Purchase option price

Project/Property

(1)

Location


completion


2016 (2)


 commitments


Begin


End

















Haven West

(3)

Atlanta, GA




$

6,784,167



$

6,940,795







$

26,138,466


Haven 12

(4)

Starkville, MS


152



5,815,849



6,116,384



9/1/2017


11/30/2017


(5)

Founders' Village

(6)

Williamsburg, VA


247



9,866,000



10,346,000



2/1/2017


5/31/2017


$

44,266,000


Encore

(6)

Atlanta, GA


340



10,958,200



10,958,200



1/8/2018


5/8/2018


(5)

Encore Capital


Atlanta, GA




6,564,124



9,758,200



N/A


N/A


N/A

Palisades

(6)

Northern VA


304



16,070,000



17,270,000



3/1/2017


7/31/2017


(5)

Fusion


Irvine, CA


280



48,396,901



59,052,583



1/1/2018


4/1/2018


(5)

Green Park

(6)

Atlanta, GA


310



13,180,052



13,464,372



11/1/2017


2/28/2018


(5)

Stadium Village

 (6,7)

Atlanta, GA


198



13,329,868



13,424,995



9/1/2017


11/30/2017


(5)

Summit Crossing III


Atlanta, GA


172



7,246,400



7,246,400



8/1/2017


11/30/2017


(5)

Overture


Tampa, FL


180



5,992,592



6,920,000



1/1/2018


5/1/2018


(5)

Aldridge at Town Village


Atlanta, GA


300



10,427,956



10,975,000



11/1/2017


2/28/2018


(5)

18 Nineteen

(8)

Lubbock, TX


217



15,496,602



15,598,352



10/1/2017


12/31/2017


(5)

Haven South

(9)

Waco, TX


250



15,186,370



15,455,668



10/1/2017


12/31/2017


(5)

Haven46

(10)

Tampa, FL


158



7,146,862



9,819,662



11/1/2018


1/31/2019


(5)

Bishop Street

(11)

Atlanta, GA


232



10,906,611



12,693,457



10/1/2018


12/31/2018


(5)

Dawson Marketplace

(12)

Atlanta, GA




12,343,718



12,857,005



12/16/2017


12/15/2018


(13)

Hidden River


Tampa, FL


300



4,734,960



4,734,960



9/1/2018


12/31/2018


(5)

Hidden River Capital


Tampa, FL




4,527,161



5,380,000



N/A


N/A


N/A

CityPark II


Charlotte, NC


200



3,364,800



3,364,800



5/1/2018


8/31/2018


(5)

CityPark II Capital


Charlotte, NC




3,254,444



3,916,000



N/A


N/A


N/A

Crescent Avenue

(14)

Atlanta, GA




6,000,000



6,000,000



N/A


N/A


N/A

Haven Northgate

(15)

College Station, TX


427



39,082,506



64,678,549



10/1/2018


12/31/2018


(5)

Lubbock II

(16)

Lubbock, TX


140



7,382,840



9,357,171



11/1/2018


1/31/2019


(5)

Fort Myers


Fort Myers, FL


224



3,538,936



4,000,000



N/A


N/A


N/A

Park 35


Birmingham, AL


271



19,371,924



21,060,000



(17)


(17)


(5)





4,902



306,969,843



$

361,388,553








Unamortized loan origination fees




(1,562,357)










Carrying amount






$

305,407,486

























(1)


All loans pertain to developments of multifamily communities, except as otherwise indicated.

(2)


Loan balances presented are principal amounts due.


(3)


Real estate loan in support of a completed 160-unit, 568-bed student housing community adjacent to the campus of the University of West Georgia. On August 1, 2016, we terminated the purchase option on the community.

(4)


Real estate loan in support of a completed 152-unit, 536-bed student housing community adjacent to the campus of  Mississippi State University.

(5)


The purchase price is to be calculated based upon market cap rates at the time of exercise of the purchase option, with discounts ranging from between 20 and 60 basis points, depending on the loan, plus adjustments, if any.

(6)


Loan balance includes 25% loan participation by an unrelated third party syndicate of lenders, except for our Encore loan, which includes a 49% loan participation as of September 26, 2016.

(7)


Real estate loan in support of a completed 198-unit, 792-bed student housing community adjacent to the campus of Kennesaw State University in Atlanta, Georgia.

(8)


Real estate loan of up to approximately $15.6 million in support of a planned 217-unit, 732-bed student housing community adjacent to the campus of Texas Tech University.

(9)


Real estate loan in support of a planned 250-unit, 840-bed student housing community adjacent to the campus of Baylor University.

(10)


On March 29, 2016, our bridge loan was converted to a real estate loan in support of a planned 158-unit, 542-bed student housing community adjacent to the campus of the University of South Florida.

(11)


On February 18, 2016, our bridge loan was converted to a real estate loan in support of a planned multifamily community in Atlanta, Georgia.

(12)


Real estate loan in support of a planned approximate 200,000 square foot retail center in the Atlanta, Georgia market.

(13)


Includes 10 purchase options to acquire a tract and 14 outlots with a purchase price at a 20 basis point discount to market.

(14)


Bridge loan in support of a proposed multi-use property in Atlanta, Georgia.


(15)


Senior loan in support of a planned 427-unit, 808-bed student housing community adjacent to the campus of Texas A&M University.

(16)


Real estate loan of up to approximately $9.4 million in support of a planned 140-unit, 556-bed second phase student housing community adjacent to the campus of Texas Tech University.

(17)


Option window commences 60 days following achievement of 93% stabilization and expires 60 days from that date.

 

 

Multifamily Communities









Three months ended September 30, 2016

Property


Location


Number of units


Average unit size (sq. ft.)


Average occupancy


Average rent per unit












Ashford Park


Atlanta, GA


408



1,008



96.9

%


$

1,195


Lake Cameron


Raleigh, NC


328



940



96.9

%


$

919


McNeil Ranch


Austin, TX


192



1,071



92.6

%


$

1,240


Stone Rise


Philadelphia, PA


216



1,079



94.7

%


$

1,448


Enclave at Vista Ridge


Dallas, TX


300



1,079



94.8

%


$

1,146


Stoneridge Farms


Nashville, TN


364



1,153



96.1

%


$

1,026


Vineyards


Houston, TX


369



1,122



90.5

%


$

1,123


Avenues at Cypress


Houston, TX


240



1,166



97.2

%


$

1,380


Avenues at Northpointe


Houston, TX


280



1,154



93.7

%


$

1,359


Aster at Lely Resort


Naples, FL


308



979



94.0

%


$

1,342


Venue at Lakewood Ranch


Sarasota, FL


237



1,001



94.3

%


$

1,568













Total/Avg PAC Same Store




3,242





94.7

%














Summit Crossing


Atlanta, GA


485



1,053



%


$

1,223


Sandstone Creek


Kansas City, KS


364



1,135



%


$

1,035


CityPark View


Charlotte, NC


284



948



%


$

1,063


Mansions at Creekside


San Antonio, TX


395



974



94.9

%


$

1,155


Citi Lakes


Orlando, FL


346



984



92.5

%


$

1,417


Lenox Portfolio


Nashville, TN


474



886



97.7

%


$

1,165


Stone Creek


Houston, TX


246



852



%


$

1,001


Overton Rise


Atlanta, GA


294



1,018



94.7

%


$

1,468


Village at Baldwin Park


Orlando, FL


528



1,069



%


$

1,423


Crosstown Walk


Tampa, FL


342



980



92.2

%


$

1,181


Avalon Park


Orlando, FL


487



1,394



%


$

1,319


Sorrel


Jacksonville, FL


290



1,048



%


$













Total/Avg PAC Non-Same Store




4,535



















Student housing community:











North by Northwest


Tallahassee, FL


219



1,137



N/A


$

2,289


Joint venture:











City Vista


Pittsburgh, PA


272



1,023



94.9

%


$













Total All PAC units




8,268





94.6

%




























 

For the three-month period ended September 30, 2016, our average occupancy was 94.6%. We define average occupancy as market rent reduced by vacancy losses, expressed as a percentage. All of our multifamily properties are included in this calculation except for properties which are not yet stabilized, which we define as properties having first achieved 93% physical occupancy, properties which are owned for less than the entire reporting period (Sorrel and City Vista), and properties which are undergoing significant capital projects or are adding additional phases (Summit Crossing, Stone Creek, Sandstone Creek, Village at Baldwin Park, Avalon Park and City Park View).

Capital Expenditures

We regularly incur capital expenditures related to our owned 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 or retail tenants in its individual market. These budgeted nonrecurring capital expenditures in connection with an acquisition are funded from the capital source(s) for the acquisition and are not dependent upon subsequent property operating cash flows for funding.

For the three-month period ended September 30, 2016, our capital expenditures were as follows:



Nonrecurring capital expenditures


Recurring capital expenditures





Budgeted at acquisition


Other


Total



Total












Multifamily communities:











Summit Crossing


$



$



$



$

41,482



$

41,482


Stone Rise




12,884



12,884



13,362



26,246


Ashford Park




13,359



13,359



43,329



56,688


McNeil Ranch








31,623



31,623


Lake Cameron








30,508



30,508


Stoneridge Farms


122,791



20,674



143,465



48,749



192,214


Vineyards




11,531



11,531



60,737



72,268


Enclave








49,611



49,611


Sandstone Creek




22,829



22,829



45,729



68,558


Avenues at Cypress








7,309



7,309


Avenues at Northpointe








34,755



34,755


Venue at Lakewood Ranch








8,900



8,900


Aster at Lely Resort








13,248



13,248


CityPark View




2,641



2,641



3,767



6,408


Mansions at Creekside


11,450



613



12,063



20,900



32,963


Citi Lakes


142,704



173



142,877



23,157



166,034


Stone Creek








16,317



16,317


Lenox Portfolio




3,049



3,049



28,895



31,944


Village at Baldwin Park


331,419





331,419



91,354



422,773


Crosstown Walk




24,053



24,053



22,753



46,806


Overton Rise


9,202



7,565



16,767



11,350



28,117


Avalon Park


19,072



7,221



26,293



72,418



98,711


Sorrel


26,036





26,036



255



26,291















662,674



126,592



789,266



720,508



1,509,774


Retail:











Parkway Town Centre




35,762



35,762



20,067



55,829


Spring Hill Plaza








2,743



2,743


Deltona Landings








10,948



10,948


Kingwood Glen








14,700



14,700


Parkway Centre








39,695



39,695


Sweetgrass Corner








38,161



38,161


Salem Cove








19,737



19,737


Independence Square




206,901



206,901



6,181



213,082


Royal Lakes Marketplace








16,434



16,434


Summit Point


24,465



26,100



50,565



10,300



60,865


The Overlook at Hamilton Place








11,478



11,478


Wade Green Village


58,397





58,397



571



58,968


East Gate Shopping Center








5,001



5,001


Fury's Ferry








14,000



14,000


Southgate Village








40,554



40,554















82,862



268,763



351,625



250,570



602,195


Student Housing:











North by Northwest








22,606



22,606













Total


$

745,536



$

395,355



$

1,140,891



$

993,684



$

2,134,575


 

Retail Portfolio

Our retail portfolio consists of the following properties:

Property name

Location


Year built


GLA (1)

Percent leased


Anchor tenant










Woodstock Crossing

 Atlanta, GA


1994


66,122


92.6

%


 Kroger

Cherokee Plaza

 Atlanta, GA


1958


102,864


100.0

%


Kroger

Lakeland Plaza

 Atlanta, GA


1990


301,711


92.3

%


Sprouts/Belk

Powder Springs

 Atlanta, GA


1999


77,853


92.8

%


 Publix

Royal Lakes Marketplace

 Atlanta, GA


2008


119,493


84.4

%


 Kroger

Sandy Plains Exchange

 Atlanta, GA


1997


72,784


100.0

%


Publix

Summit Point

 Atlanta, GA


2004


111,970


80.4

%


 Publix

Thompson Bridge Commons

 Atlanta, GA


2001


92,587


97.3

%


Kroger

Wade Green Village

 Atlanta, GA


1993


74,978


89.7

%


 Publix

East Gate Shopping Center

 Augusta, GA


1995


75,716


89.5

%


 Publix

Fury's Ferry

 Augusta, GA


1996


70,458


91.0

%


 Publix

Parkway Centre

 Columbus, GA


1999


53,088


97.4

%


 Publix

Spring Hill Plaza

 Nashville, TN


2005


61,570


100.0

%


 Publix

Parkway Town Centre

 Nashville, TN


2005


65,587


95.4

%


 Publix

Salem Cove

 Nashville, TN


2010


62,356


97.8

%


 Publix

The Market at Victory Village

 Nashville, TN


2007


71,300


98.5

%


 Publix

The Overlook at Hamilton Place

 Chattanooga, TN


1992


213,095


95.8

%


 The Fresh Market

Sweetgrass Corner

 Charleston, SC


1999


89,124


100.0

%


 Bi-Lo

Anderson Central

 Greenville Spartanburg, SC


1999


223,211


97.1

%


 Walmart

Fairview Market

 Greenville Spartanburg, SC


1998


53,888


96.8

%


 Publix

Rosewood Shopping Center

 Columbia, SC


2002


36,887


90.2

%


 Publix

Heritage Station

 Raleigh, NC


2004


72,946


100.0

%


Harris Teeter

Shoppes of Parkland

 Miami, FL


2000


145,720


95.0

%


BJ's Wholesale Club

Barclay Crossing

 Tampa, FL


1998


54,958


100.0

%


 Publix

Deltona Landings

 Orlando, FL


1999


59,966


95.5

%


 Publix

University Palms

 Orlando, FL


1993


99,172


98.4

%


Publix

Kingwood Glen

 Houston, TX


1998


103,397


100.0

%


 Kroger

Independence Square

 Dallas, TX


1977


140,218


91.5

%


 Tom Thumb

Oak Park Village

 San Antonio, TX


1970


64,287


100.0

%


H.E.B.

Southgate Village

 Birmingham, AL


1988


75,092


100.0

%


 Publix















2,912,398



























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

As of September 30, 2016, our retail portfolio was 94.9% leased. We define percent leased as the percentage of gross leasable area that is leased, including lease agreements that have been fully executed which have not yet commenced.

Details regarding lease expirations (assuming no exercise of tenant renewal options) within our retail assets as of September  30, 2016 were:


Total retail portfolio


Number of leases


Leased GLA


Percent of leased GLA







Month to month

7



13,603



0.5

%

2016

19



41,663



1.5

%

2017

75



139,860



5.1

%

2018

72



262,986



9.5

%

2019

65



557,276



20.2

%

2020

59



369,603



13.4

%

2021

53



264,591



9.5

%

2022

11



80,058



2.9

%

2023

4



15,300



0.6

%

2024

13



313,767



11.4

%

2025

14



212,072



7.7

%

2026+

13



491,914



17.7

%








405



2,762,693



100.0

%



















 

The Company's Quarterly Report on Form 10-Q for the third quarter 2016 will present statements of operations by reportable segment within the Results of Operations section of Management's Discussion and Analysis of Financial Condition and Results of Operations. Included in this disclosure will be revenues and specifically identifiable expenses of New Market Properties, LLC, which the Company plans to spin off to its Common Stockholders in the future.

Multifamily Same Store Financial Data

The following chart presents same store operating results for the Company's multifamily communities that have been owned for at least 15 full months, enabling comparisons of the current reporting period to the prior year comparative period. The Company excludes the same store operating results of properties for which construction of adjacent phases have commenced (the Company holds real estate loans partially supporting additional phases of the CityPark View and Summit Crossing multifamily communities, which are excluded as well).  For the periods presented, same store operating results consist of the operating results of the following multifamily communities:

Stone Rise


Vineyards

Lake Cameron


Avenues at Cypress

Ashford Park


Avenues at Northpointe

McNeil Ranch


Venue at Lakewood Ranch

Enclave at Vista Ridge


Aster at Lely

Stoneridge Farms at Hunt Club



 

Same store net operating income is a non-GAAP measure that is most directly comparable to net income, with a reconciliation following below.

Same Store Net Operating Income












Three months ended:







9/30/2016


9/30/15


$ inc / dec


% inc

Revenues:









Rental revenues


$

11,297,345



$

11,098,296



$

199,049



1.8

%

Other property revenues


1,360,142



1,285,887



74,255



5.8

%

Total revenues


12,657,487



12,384,183



273,304



2.2

%










Operating expenses:









Property operating and maintenance


1,971,292



1,920,860



50,432



2.6

%

Payroll


1,078,063



1,114,463



(36,400)



(3.3)

%

Property management fees


523,619



494,171



29,448



6.0

%

Real estate taxes


1,567,159



1,577,101



(9,942)



(0.6)

%

Other


519,624



502,507



17,117



3.4

%

Total operating expenses


5,659,757



5,609,102



50,655



0.9

%










Same store net operating income


$

6,997,730



$

6,775,081



$

222,649



3.3

%

 

 

Reconciliation of Same Store Net Operating Income (NOI) to Net Income








Three months ended:



9/30/2016


9/30/15






Same store net operating income


$

6,997,730



$

6,775,081







Add:





Non-same-store property revenues


29,883,605



9,616,630


Less:





Non-same-store property operating expenses

10,719,256



3,402,026







Property net operating income


26,162,079



12,989,685


Add:





Interest revenue on notes receivable


7,194,742



5,909,907


Interest revenue on related party notes receivable


3,801,501



2,044,973


Less:





Equity stock compensation


638,414



593,417


Depreciation and amortization


21,664,363



10,536,486


Interest expense


12,234,174



5,818,760


Acquisition costs


1,036,171



1,783,708


Acquisition costs to related party


321,366



1,541,250


Management fees


3,759,084



1,908,742


Other corporate expenses


930,330



833,329







Contingent asset management and general and administrative expense fees

(736,960)



(373,360)







Net loss


$

(2,688,620)



$

(1,697,767)


Definitions of Non-GAAP Measures

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

Analysts, managers and investors have, since the first real estate investment trusts were created, made certain adjustments to reported net income amounts under U.S. GAAP in order to better assess these vehicles' liquidity and cash flows. FFO is one of the most commonly utilized Non-GAAP measures currently in practice. In its 2002 White Paper on Funds From Operations, which was most recently revised in 2012, the National Association of Real Estate Investment Trusts, or NAREIT, standardized the definition of how Net income/loss should be adjusted to arrive at FFO, in the interests of uniformity and comparability. The NAREIT definition of FFO (and the one reported by the Company) is:

Net income/loss:

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

Not all companies necessarily utilize the standardized NAREIT definition of FFO, so caution should be taken in comparing the Company's reported FFO results to those of other companies. The Company's FFO results are comparable to the FFO results of other companies that follow the NAREIT definition of FFO and report these figures on that basis. The Company believes FFO is useful to investors as a supplemental gauge of our operating and cash-generating results. 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)

Core FFO makes certain adjustments to FFO, which are either not likely to occur on a regular basis or are otherwise not representative of the Company's ongoing operating performance. For example, since the Company is acquiring properties on a regular basis, it incurred substantial costs related to such acquisitions, which are required under GAAP to be recognized as expenses when they are incurred. The Company adds back any such acquisition and pursuit costs, including costs incurred in connection with obtaining short term debt financing for acquisitions and  beginning January 1, 2016, amortization of loan coordination fees, to FFO in its calculation of Core FFO since such costs are not representative of our fund generating results on an ongoing basis. The Company also adds back costs incurred related to the extension of our management agreement with our Manager, realized losses on debt extinguishment and any non-cash dividends in this calculation. Core FFO figures reported by us may not be comparable to those Core FFO figures reported by other companies.

We utilize Core FFO as a 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 is useful in comparing our operating performance with other real estate companies that are not as involved in ongoing acquisition activities. 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, excluding costs incurred in connection with obtaining short term financing related to acquisitions;
  • depreciation and amortization of non-real estate assets;
  • net loan fees received; and
  • deferred interest income received;

less:

  • non-cash loan interest income;
  • cash paid for pursuit costs on abandoned acquisitions;
  • cash paid for loan closing costs;
  • amortization of acquired real estate intangible liabilities; 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 is useful in comparing our operating performance with other real estate companies. AFFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.

Same Store Net Operating Income (NOI)

The Company uses same store net operating income as an operational metric for properties the Company has owned for at least 15 full months, enabling comparisons of those properties' operating results between the current reporting period and the prior year comparative period. The Company defines 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. The Company believes that net operating income is an important supplemental measure of operating performance for a REIT's operating real estate because it provides a measure of the 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 its closest GAAP-compliant measure, net income/loss.

About Preferred Apartment Communities, Inc.               

Preferred Apartment Communities, Inc. (NYSE: APTS), or the Company, is a Maryland corporation formed primarily to acquire and operate multifamily properties in select targeted markets throughout the United States. As part of our business strategy, we may enter into forward purchase contracts or purchase options for to-be-built multifamily communities and we may make real estate related loans, provide deposit arrangements, or provide performance assurances, as may be necessary or appropriate, in connection with the construction of multifamily communities and other properties.  As a secondary strategy, we also may acquire or originate senior mortgage loans, subordinate loans or mezzanine debt secured by interests in multifamily properties, membership or partnership interests in multifamily properties and other multifamily related assets and invest not more than 20% of our assets, subject to any temporary increase unanimously approved by our board of directors, in other real estate related investments, such as grocery-anchored shopping centers, senior mortgage loans, subordinate loans or mezzanine debt secured by interests in grocery-anchored shopping centers, membership or partnership interests in grocery-anchored shopping centers and other grocery-anchored shopping center related assets as determined by Preferred Apartment Advisors, LLC, or our Manager, as appropriate for us. At September 30, 2016, the Company was the approximate 96.5% owner of Preferred Apartment Communities Operating Partnership, L.P., or the Operating Partnership. We elected to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended, commencing with our tax year ended December 31, 2011.

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SOURCE Preferred Apartment Communities, Inc.

For further information: Leonard A. Silverstein, President and Chief Operating Officer, Preferred Apartment Communities, Inc., lsilverstein@pacapts.com, +1-770-818-4147

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