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Preferred Apartment Communities, Inc. Reports Results for First Quarter 2022

05/09/2022

Total Revenues

$104.9 million for Q1 2022; down 9.4% from Q1 2021 due primarily to absence of $18.7 million of office property revenues

_____________

Net Loss per Share

$(0.62) per share for Q1 2022; $0.11 per share improvement over Q1 2021

_____________

Core FFO per Share*

$0.19 per share for Q1 2022 versus $0.25 per share for Q1 2021

_____________

AFFO per Share*

$0.15 per share for Q1 2022 versus $0.18 per share for Q1 2021

_____________

Multifamily Same Store Results*

Same-store rental and other property revenues increased 11.9% and same-store net operating income increased 15.9% for Q1 2022 versus Q1 2021

_____________

Two Real Estate Loans and One Preferred Equity Investment Closed During First Quarter 2022

Aggregate commitment amount of $48.1 million

780 multifamily units added to PAC's acquisition pipeline

_____________

One Multifamily Community Acquired During First Quarter 2022

Lirio at Rafina, a 280-unit community located in Orlando, Florida

_____________

PAC Enters Multifamily Development Space

PAC to develop a 262-unit community in Wilmington, North Carolina, will invest $14.8 million in equity to capitalize the project

_____________

PAC Enters into a Definitive Agreement with Blackstone Real Estate Income Trust, Inc.

Cash transaction of $25 per share of Common Stock Closing expected during Q2 2022

*Core FFO and AFFO results are per weighted-average share and Class A OP Unit outstanding. Core FFO, AFFO and same-store net operating income are non-GAAP measures that are defined herein.

ATLANTA--(BUSINESS WIRE)-- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company," "Preferred Apartment Communities" or "PAC") today reported results for the quarter ended March 31, 2022. Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of our common stock, par value $0.01 per share ("Common Stock"), Class A Units ("Class A Units") of the Preferred Apartment Communities Operating Partnership (our "Operating Partnership") outstanding. See Definitions of Non-GAAP Measures.

Conference Call

As a result of our entering into a definitive merger agreement with affiliates of Blackstone Real Estate Income Trust, Inc. ("BREIT"), we will not have a conference call to discuss our first quarter ended 2022 earnings. For more details on the merger, see our 8-K filed on February 16, 2022.

For Further Information

Paul Cullen

Executive Vice President-Investor Relations

Chief Marketing Officer

investorrelations@pacapts.com

770-818-4144

Operating Results

Our operating results are presented below.

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

% change

 

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Revenues (in thousands)

$

104,880

 

 

$

115,700

 

 

(9.4

) %

 

 

 

 

 

 

 

 

 

 

Per share data:

 

 

 

 

 

 

 

Net loss (1)

$

(0.62

)

 

$

(0.73

)

 

 

 

 

FFO (2)

$

0.05

 

 

$

0.16

 

 

(68.8

) %

 

 

Core FFO (2)

$

0.19

 

 

$

0.25

 

 

(24.0

) %

 

 

AFFO (2)

$

0.15

 

 

$

0.18

 

 

(16.7

) %

 

 

Dividends (3)

$

0.175

 

 

$

0.175

 

 

 

 

 

 

 

 

 

 

 

 

(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 Loss Attributable to Common Stockholders and Definitions of Non-GAAP Measures.

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

Financial

  • Our total revenues for the quarter ended March 31, 2022 decreased approximately $10.8 million, or 9.4%, to $104.9 million from the quarter ended March 31, 2021, due primarily to the absence of revenues from the eight office properties and one real estate loan investment that we sold during the third and fourth quarters of 2021. The disposed office properties contributed approximately $18.7 million, or 16.1% of our total revenues for the quarter ended March 31, 2021.
  • Our net loss per share was $(0.62) and $(0.73) for the three-month periods ended March 31, 2022 and 2021, respectively. Funds From Operations, or FFO, was $0.05 and $0.16 per weighted average share of Common Stock and Class A Unit outstanding for the three months ended March 31, 2022 and 2021, respectively. The decline in FFO per share was driven by:

* Lower operating results following the sale of our office properties of $(0.17) per share;

* Lower cash dividend requirements on our preferred stock of $0.14 per share;

* Lower revenues from our real estate loan portfolio of $(0.10) per share;

* Merger-related costs incurred of $(0.09) per share;

* Improved property operating performance, lower interest expense and other items of $0.06 per share; and

* Deemed dividends due to calls and cash redemptions of our preferred stock of $0.05 per share.

  • Our Core FFO per share decreased to $0.19 for the first quarter 2022 from $0.25 for the first quarter 2021, due to:

* Lower operating results following the sale of our office properties of $(0.17) per share;

* Lower cash dividend requirements on our preferred stock of $0.14 per share;

* Lower revenues from our real estate loan portfolio of $(0.10) per share; and

* Improved property operating performance, lower interest expense and other items of $0.06 per share.

  • Our AFFO per share decreased to $0.15 for the first quarter 2022, from $0.18 for the first quarter 2021, due to:

* Lower operating results following the sale of our office properties of $(0.17) per share;

* Lower cash dividend requirements on our preferred stock of $0.14 per share;

* Lower revenues from our real estate loan portfolio of $(0.10) per share;

* Improved property operating performance, lower interest expense and other items of $0.06 per share; and

* Lower recurring capital expenditures of $0.03 per share.

  • Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 102.1% and our Core FFO payout ratio to our preferred stockholders was approximately 71.4% for the first quarter 2022. (A)
  • Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 126.9% and our AFFO payout ratio to our preferred stockholders was approximately 75.6% for the first quarter 2022.

(A)

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. 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.

Operational

  • Our multifamily communities' same-store rental and other property revenues increased 11.9%, same-store property operating expenses increased 6.3% and same-store net operating income increased 15.9% for the quarter ended March 31, 2022 versus 2021. Our same-store multifamily communities include 10,442 units, or 84.7% of our aggregate 12,322 units in our multifamily community portfolio.
  • Our rental rates for our multifamily same-store properties for new and renewal leases increased 16.6% and 11.9%, respectively, and 14.1% blended for first quarter 2022 as compared to the expiring leases, excluding shorter-term leases of two months or less.
  • Our rental rates for our multifamily same-store properties for new and renewal leases increased 15.7% and 11.9%, respectively, and 13.7% blended for April 2022 as compared to the expiring leases, excluding shorter-term leases of two months or less.
  • As of March 31, 2022, the average age of our multifamily communities was approximately 6.6 years, which we believe is the youngest in the public multifamily REIT industry.
  • As of March 31, 2022, all of our owned multifamily communities had achieved stabilization except for Lirio at Rafina, which was acquired during the first quarter 2022. We define stabilization as reaching 93% occupancy for all three months within a single quarter.
  • The average physical occupancy of our same-store multifamily communities increased to 96.3% for the three-month period ended March 31, 2022 from 95.8% for the three-month period ended March 31, 2021 but was unchanged from the three-month period ended December 31, 2021.

Financing and Capital Markets

  • As of March 31, 2022, approximately 98.3% of our permanent property-level mortgage debt had fixed interest rates and approximately 0.9% had variable interest rates which are capped. We believe we are well protected against potential increases in market interest rates. Our overall weighted average interest rate for our mortgage debt portfolio was 3.37% for multifamily communities, 4.35% for our remaining office properties, 3.91% for grocery-anchored retail properties and 3.57% in the aggregate.
  • During the first quarter 2022, we issued and sold an aggregate of 3,167 shares of preferred stock prior to February 10, 2022, when we ceased issuing new shares of preferred stock. We redeemed or called an aggregate of 21,189 shares of preferred stock, resulting in a net reduction of 18,022 outstanding shares of preferred stock, for a net cash outflow of approximately $17.7 million.
  • During the first quarter 2022, warrants were exercised by the holders at a weighted average price of $19.68 per share and, as a result, we collected approximately $194.0 million from the issuance of an aggregate of 9,858,480 shares of Common Stock. We issued no shares of Common Stock under the 2019 ATM Offering during the first quarter 2022.
  • At March 31, 2022, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 55.8%.
  • At March 31, 2022, we had no outstanding balance and $200.0 million available to be drawn on our revolving line of credit.
  • Our outstanding shares of preferred stock have decreased since January 1, 2019, as summarized in the following chart:

Shares of Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2020

 

2021

 

First Quarter

2022

Issued

552,938

 

228,788

 

122,297

 

3,167

Redeemed by holders

(68,512)

 

(164,286)

 

(100,946)

 

(21,189)

Called by PAC

 

(208,786)

 

(320,746)

 

 

 

 

 

 

 

 

 

Net increase (decrease)

484,426

 

(144,284)

 

(299,395)

 

(18,022)

 

 

 

 

 

 

 

 

Total outstanding at year end

2,136,257

 

1,991,973

 

1,692,578

 

1,674,556

Significant Transactions

  • On February 10, 2022, we amended our real estate loan investment supporting The Platform, a 551-unit multifamily community located in San Jose, California. The maturity date of the instrument was extended to August 13, 2022 and a second extension option of December 31, 2022 was added. The all-in interest rate was reduced to 9.5% per annum beginning on the original maturity date of February 13, 2022 and increases in steps each three-month period up to 11.0% per annum on November 14, 2022. As of April 30, 2022, the property's physical occupancy was 92.6%.
  • On February 11, 2022, we closed on a real estate loan investment of up to approximately $16.7 million supporting a 286-unit multifamily community in the Orlando, Florida MSA.
  • On February 15, 2022, we refinanced our Chestnut Farm multifamily community with permanent mortgage financing in the amount of approximately $52.3 million, which bears interest at a rate of 3.25% and matures on March 1, 2032.
  • As previously announced, on February 16, 2022, we entered into an agreement and plan of merger (the “Merger Agreement”) with Pike Parent LLC (“Parent”), Pike Merger Sub I LLC (“Merger Sub I”), Pike Merger Sub II LLC (“Merger Sub II”), Pike Merger Sub III LLC (“Merger Sub III” and, together with Parent, Merger Sub I and Merger Sub II, the “Parent Parties”), the Operating Partnership and PAC Operations, LLC (“Operations”). The Parent Parties are affiliates of BREIT, which is an affiliate of Blackstone Inc. Pursuant to the Merger Agreement, (i) Merger Sub II will merge with and into the Operating Partnership (the “Partnership Merger”) with the Operating Partnership being the surviving entity and immediately following the consummation of the Partnership Merger, (ii) Operations will merge with and into Merger Sub III (the “Operations Merger”) with Merger Sub III being the surviving entity and immediately following the Operations Merger, (iii) the Company will merge with and into Merger Sub I (the “Company Merger” and, together with the Partnership Merger and the Operations Merger, the “Mergers”) with Merger Sub I being the surviving entity. Pursuant to the Merger Agreement, (i) each share of Common Stock that is issued and outstanding immediately prior to the Mergers will be automatically cancelled and converted into the right to receive $25.00 in cash and (ii) each share of preferred stock that is issued and outstanding immediately prior to the Mergers will be automatically cancelled and converted into the right to receive $1,000 in cash, plus any accrued but unpaid dividends, if any, to and including the closing date of the Mergers. Notwithstanding the forgoing, any shares of Common Stock or preferred stock held by the Company or any subsidiary of the Company or by the Parent Parties or any of their respective subsidiaries, if any, will no longer be outstanding and will automatically be retired and will cease to exist, and no consideration will be paid in connection with the Mergers.

The Mergers are subject to customary closing conditions, including approval by the Company’s common stockholders at a special meeting to be held on June 7, 2022. The Mergers are expected to close on the third business day after the conditions to closing are satisfied or waived, including approval of the Company’s stockholders of the Mergers. The Company can provide no assurances regarding whether the Mergers will close as expected during the second quarter of 2022, or at all. The board of directors of the Company has unanimously approved the Merger Agreement and has recommended approval of the Mergers by the Company’s common stockholders.

  • On February 25, 2022, we closed on the acquisition of Lirio at Rafina, a 280-unit multifamily community located in the Orlando, Florida MSA.
  • On February 28, 2022, we closed on a real estate loan investment of up to approximately $17.2 million supporting a 242-unit multifamily community in Naples, Florida.
  • On March 2, 2022, we closed on a 65% interest in a $65.0 million joint venture project to develop The Helmsman, a 262-unit multifamily community to be located in Wilmington, North Carolina. This transaction represents our entry into the multifamily development space.
  • On March 31, 2022, we closed on a preferred equity investment of up to approximately $14.3 million supporting The Shoals, a 252-unit multifamily community in Greenville, South Carolina. The investment will pay a fixed return of 12.0% per annum and has a term of 42 months, with a one-year extension option.

Subsequent to Quarter End

  • On April 5, 2022, we sold our Champions Village grocery-anchored shopping center in Houston, Texas for $45.0 million and recorded a gain on the sale of approximately $1.9 million.
  • On April 20, 2022, we sold our Sweetgrass Corner grocery-anchored shopping center in Charleston, South Carolina for $17.0 million and recorded a gain on the sale of approximately $4.3 million.
  • Between April 1, 2022 and April 30, 2022, the Company issued 1,451,700 shares of Common Stock at an average price of $19.70 per share from exercises of Warrants and collected approximately $28.6 million.
  • On April 12, 2022, our Vintage Horizon West real estate loan investment was repaid in full.

2022 Guidance

Due to the pending merger with affiliates of BREIT, we are not issuing guidance at this time with respect to our 2022 financial outlook.

Real Estate Assets

At March 31, 2022, our portfolio of owned real estate assets and potential additions from purchase options we held from our real estate loan investments (and one multifamily development project currently under construction) consisted of:

 

 

 

 

 

 

 

 

 

 

Owned as of

March 31, 2022 (1)

 

Potential additions (2)

 

Potential total

 

 

Residential properties:

 

 

 

 

 

 

 

Properties

42

 

12

 

54

 

 

Units

12,332

 

3,639

 

15,971

 

 

Development properties

1

( 4)

 

1

 

 

Units

 

262

 

262

 

 

Grocery-anchored shopping centers:

 

 

 

 

 

 

 

Properties

54

 

1

 

55

 

 

Gross leasable area (square feet)

6,210,778

 

85,500

( 3)

6,296,278

 

 

Office buildings:

 

 

 

 

 

 

 

Properties

2

 

 

2

 

 

Rentable square feet

1,072,000

 

 

1,072,000

 

 

Land

1

 

 

1

 

 

 

 

 

 

 

 

 

 

(1) One multifamily community and two grocery-anchored shopping centers are owned through consolidated joint ventures. One grocery-anchored shopping center is an investment in an unconsolidated joint venture.

 

(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) Estimated square footage of Nexton Shopping Center development.

 

(4) The Helmsman, a 262-unit multifamily development, will consist of approximately 2,600 square feet of gross leasable area of ground floor retail space which is not included in the totals above for grocery-anchored shopping centers.

Same-Store Financial Data

The following charts present 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 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 held for sale as of the end of the reporting period.

For the periods presented, same-store operating results consist of the operating results of our multifamily communities, comprising an aggregate 10,442 units, or 84.7% of our multifamily units.

Same-store net operating income is a non-GAAP measure that is most directly comparable to net loss, as shown in the reconciliation below. See Definitions of Non-GAAP Measures.

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

 

 

 

 

 

 

 

Three months ended:

(in thousands)

 

3/31/2022

 

3/31/2021

 

 

 

 

 

Net loss

 

$

(7,844

)

 

$

(2,709

)

Add:

 

 

 

 

Equity stock compensation

 

 

1,223

 

 

 

574

 

Depreciation and amortization

 

 

38,161

 

 

 

45,827

 

Interest expense

 

 

23,160

 

 

 

26,991

 

General and administrative

 

7,842

 

 

 

7,539

 

Merger-related costs

 

 

4,913

 

 

 

 

Loss from unconsolidated joint venture

 

 

108

 

 

 

194

 

Management Internalization

 

 

244

 

 

 

245

 

Allowance for expected credit losses

 

 

572

 

 

 

522

 

Less:

 

 

 

 

Interest revenue on notes receivable

 

 

6,583

 

 

 

10,512

 

Interest revenue on related party notes receivable

 

 

197

 

 

 

405

 

Miscellaneous revenues

 

 

198

 

 

 

324

 

Gain on sale of real estate

 

 

 

 

 

798

 

Loss on sale of land

 

 

(22

)

 

 

 

Loss on extinguishment of debt

 

 

(363

)

 

 

 

 

 

 

 

 

Property net operating income

 

 

61,786

 

 

 

67,144

 

Less:

 

 

 

 

Non same-store property revenues

 

 

(45,355

)

 

 

(57,498

)

Add:

 

 

 

 

Non same-store property operating expenses

 

15,151

 

 

 

17,600

 

 

 

 

 

Same-store net operating income

 

$

31,582

 

 

$

27,246

 

Multifamily Communities' Same-Store NOI

 

 

 

 

 

 

 

 

 

 

 

Three months ended:

 

 

 

 

(in thousands)

 

3/31/2022

 

3/31/2021

 

$ change

 

% change

Revenues:

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

52,546

 

 

$

46,961

 

 

$

5,585

 

11.9

%

Operating expenses:

 

 

 

 

 

 

 

 

Property operating and maintenance

 

 

8,358

 

 

 

7,746

 

 

 

612

 

7.9

%

Payroll

 

 

3,697

 

 

 

3,574

 

 

 

123

 

3.4

%

Real estate taxes and insurance

 

 

8,909

 

 

 

8,395

 

 

 

514

 

6.1

%

Total operating expenses

 

 

20,964

 

 

 

19,715

 

 

 

1,249

 

6.3

%

 

 

 

 

 

 

 

 

 

Same-store net operating income

 

$

31,582

 

 

$

27,246

 

 

$

4,336

 

15.9

%

 

 

 

 

 

 

 

 

 

Same-store average physical occupancy

 

 

96.3

%

 

 

95.8

%

 

 

 

0.5

%

 

 

 

 

 

 

 

 

 

Corporate level expenses related to the management and operations of the multifamily portfolio are allocated on a per unit basis to property NOI and are included in Multifamily Same-Store NOI.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On February 24, 2022, our board of directors declared a quarterly dividend on our Common Stock of $0.175 per share, that was paid on April 14, 2022 to stockholders of record on March 15, 2022. In conjunction with the Common Stock dividend, our Operating Partnership declared a distribution on its Class A Units of $0.175 per unit for the first quarter 2022, which was paid on April 14, 2022 to all Class A Unit holders of record as of March 15, 2022. The Merger Agreement prohibits us from declaring additional dividends on our Common Stock prior to the closing of the Mergers.

Monthly Dividends on Preferred Stock

We declared monthly dividends of $5.00 per share on our Series A Preferred Stock, which totaled approximately $21.2 million for the first quarter 2022 and represents a 6% annual yield. We declared monthly dividends of $5.00 per share on our Series A1 Preferred Stock, which totaled approximately $3.7 million for the first quarter 2022 and also represents a 6% annual yield. We declared dividends totaling approximately $1.4 million on our Series M Preferred Stock, or mShares, for the first quarter 2022. 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 $723,000 on our Series M1 Preferred Stock for the first quarter 2022. The Series M1 Preferred Stock has a dividend rate that escalates from 6.1% in year one of issuance to 7.1% in year ten and thereafter.

Forward-Looking Statements

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: redemptions of Series A Preferred Stock, potential additions of properties from purchase options and rights of first offer from our real estate loan investments, development properties, 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 statements may be identified by the use of forward-looking terminology such as "may," "trend," "will," "expects," "plans," "estimates," "anticipates," "projects," "intends," "believes," "strategy," "goals," "objectives," "outlook" and similar expressions. These risks, uncertainties and contingencies include, but are not limited to, (a) the impact of the COVID-19 pandemic, including any variants, and related federal, state and local government actions 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 or any variants thereof; (c) risks related to the proposed acquisition by BREIT, including the possibility that the consummation of the transaction could be delayed or not completed, and the effect of the announcement or pendency of the transaction on our business; (d) PAC's ability to make distributions to its stockholders in the future and (e) those disclosed in PAC's filings with the SEC. 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; 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, 2021 that was filed with the SEC on February 28, 2022, which includes a discussion of 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.

COVID-19

Our percentages of rent collected remained stabilized at or near pre-pandemic levels during the first quarter 2022. While the impacts of COVID-19 and its variants are continuing, the effects on our operations have been manageable and we believe this condition will persist, barring a dramatic change in the trajectory of the pandemic. We are continuing to monitor the spread and impact of the variants of COVID-19 as well as vaccination rates in our markets.

Preferred Apartment Communities, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three months ended March 31,

(In thousands, except per-share figures)

 

2022

 

 

 

2021

 

Revenues:

 

 

 

Rental and other property revenues

$

97,902

 

 

$

104,459

 

Interest income on loans and notes receivable

 

6,583

 

 

 

10,512

 

Interest income from related parties

 

197

 

 

 

405

 

Miscellaneous revenues

 

198

 

 

 

324

 

 

 

 

 

Total revenues

 

104,880

 

 

 

115,700

 

 

 

 

 

Operating expenses:

 

 

 

Property operating and maintenance

 

14,863

 

 

 

15,249

 

Property salary and benefits

 

4,655

 

 

 

4,821

 

Property management costs

 

792

 

 

 

1,105

 

Real estate taxes and insurance

 

15,806

 

 

 

16,140

 

General and administrative

 

7,842

 

 

 

7,539

 

Merger-related costs

 

4,913

 

 

 

 

Equity compensation to directors and executives

 

1,223

 

 

 

574

 

Depreciation and amortization

 

38,161

 

 

 

45,827

 

Allowance for expected credit losses

 

572

 

 

 

522

 

Management Internalization expense

 

244

 

 

 

245

 

 

 

 

 

Total operating expenses

 

89,071

 

 

 

92,022

 

 

 

 

 

Operating income before loss from unconsolidated joint

 

 

 

venture and gain on sale of real estate

 

15,809

 

 

 

23,678

 

Loss from unconsolidated joint venture

 

(108

)

 

 

(194

)

Gain on sale of real estate, net

 

 

 

 

798

 

Operating income

 

15,701

 

 

 

24,282

 

Interest expense

 

23,160

 

 

 

26,991

 

Loss on extinguishment of debt

 

(363

)

 

 

 

Loss on sale of land

 

(22

)

 

 

 

 

 

 

 

Net loss

 

(7,844

)

 

 

(2,709

)

Net loss attributable to non-controlling interests

 

30

 

 

 

62

 

Net loss attributable to the Company

 

(7,814

)

 

 

(2,647

)

 

 

 

 

Dividends to preferred stockholders

 

(27,033

)

 

 

(33,820

)

Dividends to holders of unvested restricted stock

 

(137

)

 

 

(142

)

 

 

 

 

Net loss attributable to common stockholders

$

(34,984

)

 

$

(36,609

)

 

 

 

 

Net loss per share of Common Stock available to

 

 

 

common stockholders, basic and diluted

$

(0.62

)

 

$

(0.73

)

 

 

 

 

Weighted average number of shares of Common Stock outstanding,

 

 

 

basic and diluted

 

56,255

 

 

 

50,033

 

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

to Net Loss Attributable to Common Stockholders

 

 

 

 

 

Three months ended March 31,

(In thousands, except per-share figures)

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders (See note 1)

$

(34,984

)

 

$

(36,609

)

 

 

 

 

 

 

 

 

Add:

Depreciation of real estate assets

 

 

32,274

 

 

 

36,832

 

 

Amortization of acquired intangible assets and deferred leasing costs

 

5,620

 

 

 

8,710

 

 

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

 

(64

)

 

 

(33

)

 

Gain on sale of real estate

 

 

 

 

(798

)

FFO attributable to common stockholders and Unitholders

 

2,846

 

 

 

8,102

 

 

 

 

 

 

 

 

 

 

Acquisition and pursuit costs

 

100

 

 

 

4

 

 

Loan cost amortization on acquisition line of credit and loan coordination fees (See note 3)

 

301

 

 

 

424

 

 

Payment of costs related to property refinancing

 

363

 

 

 

 

 

Internalization costs (See note 4)

 

244

 

 

 

245

 

 

Corporate governance and merger-related costs

 

5,291

 

 

 

 

 

Deemed dividends for redemptions of and non-cash dividends on preferred stock, plus

 

 

 

 

expenses incurred on calls of preferred stock (See note 5)

 

1,682

 

 

 

3,827

 

 

Expenses related to the COVID-19 global pandemic

 

 

 

 

54

 

Core FFO attributable to common stockholders and Unitholders

 

10,827

 

 

 

12,656

 

 

 

 

 

 

 

Add:

Non-cash equity compensation to directors and executives

 

 

1,223

 

 

 

574

 

 

Non-cash income for current expected credit losses (See note 12)

 

 

240

 

 

 

117

 

 

Amortization of loan closing costs (See note 6)

 

 

1,294

 

 

 

1,212

 

 

Depreciation/amortization of non-real estate assets

 

 

451

 

 

 

444

 

 

Net loan origination fees received (See note 7)

 

 

683

 

 

 

817

 

 

Deferred interest income received (See note 8)

 

 

 

 

 

2,917

 

 

Amortization of lease inducements (See note 9)

 

 

447

 

 

 

448

 

 

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

 

 

 

 

250

 

Less:

Non-cash loan interest income (See note 11)

 

 

(2,027

)

 

 

(2,874

)

 

Cash paid for loan closing costs

 

 

 

 

(10

)

 

Amortization of acquired real estate intangible liabilities and straight-line rent adjustments (See note 13)

 

(1,604

)

 

 

(3,315

)

 

Amortization of deferred revenues (See note 14)

 

 

(940

)

 

 

(940

)

 

Normally recurring capital expenditures (See note 15)

 

(1,883

)

 

 

(3,353

)

 

 

 

 

 

 

 

 

AFFO attributable to common stockholders and Unitholders

$

8,711

 

 

$

8,943

 

 

 

 

 

 

 

Common Stock dividends and distributions to Unitholders declared:

 

 

 

 

Common Stock dividends

 

 

$

10,976

 

 

$

8,991

 

 

Distributions to Unitholders (See note 2)

 

 

82

 

 

 

96

 

 

Total

 

 

 

$

11,058

 

 

$

9,087

 

 

 

 

 

 

 

 

 

Common Stock dividends and Unitholder distributions per share

 

$

0.175

 

 

$

0.175

 

 

 

 

 

 

 

 

 

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

$

0.05

 

 

$

0.16

 

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

$

0.19

 

 

$

0.25

 

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

$

0.15

 

 

$

0.18

 

 

 

 

 

Weighted average shares of Common Stock and Units outstanding:

 

 

 

 

Basic:

 

 

 

 

 

 

 

Common Stock

 

 

 

56,255

 

 

 

50,033

 

 

Class A Units

 

 

 

 

468

 

 

 

610

 

 

Common Stock and Class A Units

 

 

56,723

 

 

 

50,643

 

 

 

 

 

 

 

 

 

 

Diluted Common Stock and Class A Units (See note 16)

 

62,457

 

 

 

50,971

 

 

 

 

 

 

 

 

 

Actual shares of Common Stock outstanding, including 782 and 809 unvested shares

 

 

 

of restricted Common Stock at March 31, 2022 and 2021, respectively.

 

63,711

 

 

 

50,904

 

Actual Class A Units outstanding at March 31, 2022 and 2021, respectively.

 

526

 

 

 

548

 

 

Total

 

 

 

 

64,237

 

 

 

51,452

 

 

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

Notes to Reconciliations of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO to

Net Loss Attributable to Common Stockholders

 

1)

Rental and other property revenues and property operating expenses for the three months ended March 31, 2022 include activity for the properties acquired since March 31, 2021.

 

2)

Non-controlling interests in our Operating Partnership consisted of a total of 526,128 Class A Units as of March 31, 2022. 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 0.83% and 1.20% for the three-month periods ended March 31, 2022 and 2021, respectively.

 

3)

We paid loan coordination fees to Preferred Apartment Advisors, LLC (our "Former Manager") to reflect the administrative effort involved in arranging debt financing for acquired properties prior to the Internalization Transaction (defined in note 4 below). 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, 2022, aggregate unamortized loan coordination fees were approximately $7.4 million, which will be amortized over a weighted average remaining loan life of approximately 10.1 years.

 

4)

This adjustment reflects the add-back of accretion of the discount on the deferred liability payable to the owners of the Former Manager and other professional fees related to the internalization of the functions performed by the Former Manager and Former Sub-Manager (the "Internalization Transaction").

 

5)

This additive adjustment removes the effect of deemed dividends that arise from cash calls and redemptions of preferred stock. For shares of preferred stock that are called by the Company or redeemed by the holder, the Company records a deemed dividend for the difference between the redemption of the share at its face value, net of any redemption discount, as compared to the carrying value of the share on the Company’s consolidated balance sheets. Also included in this adjustment is the adding back of expenses incurred related to effecting calls of preferred stock.

 

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. 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 has 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, 2022, unamortized loan costs on all the Company's indebtedness were appro ximately $28.8 million, which will be amortized over a weighted average remaining loan life of approximately 7.8 years.

 

7)

We receive loan origination fees in conjunction with the origination of certain real estate loan investments. The total fees received are additive adjustments to Core FFO in our calculation of AFFO.

 

8)

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. Once received from the borrower, the amount of additional accrued interest becomes an additive adjustment to Core FFO in our calculation of AFFO.

 

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)

Occasionally we receive fees in exchange for the termination of our purchase options related to certain multifamily communities. These fees are recorded as revenue over the period beginning on the date of termination 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 periods in which recognized termination fee revenues exceeded the amount of cash received, a negative adjustment is shown to Core FFO in our calculation of AFFO; for periods in which cash received exceeded the amount of recognized termination fee revenues, an additive adjustment is shown to Core FFO in our calculation of AFFO.

 

11)

Loan origination fees (described in note 7 above) are recognized as revenue over the lives of the applicable loans as adjustments of yield using the effective interest method. Similarly, the accrual of additional interest amounts (described in note 8 above) are recognized beginning from loan inception through the repayment of the loan or the refinancing or sale of the underlying property. This adjustment removes the effect of both these types of non-cash loan interest income from Core FFO in our calculation of AFFO.

 

12)

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 Core FFO in calculating AFFO.

 

13)

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, 2022, the balance of unamortized below-market lease intangibles was approximately $32.9 million, which will be recognized over a weighted average remaining lease period of approximately 8.2 years.

 

14)

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.

 

15)

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 $41,000 of recurring capitalized expenditures incurred at our corporate offices during the three-month period ended March 31, 2022. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures. See Capital Expenditures, Grocery-Anchored Shopping Center Portfolio, and Office Building Portfolio sections for definitions of these terms.

 

16)

Since our AFFO results are positive for the periods reflected, 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 Definitions of Non-GAAP Measures.

Preferred Apartment Communities, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per-share par values)

 

March 31, 2022

 

December 31, 2021

Assets

 

 

 

 

Real estate

 

 

 

Land

 

$

553,900

 

 

$

551,378

 

Building and improvements

 

2,745,749

 

 

 

2,671,535

 

Tenant improvements

 

119,989

 

 

 

119,331

 

Furniture, fixtures, and equipment

 

372,288

 

 

 

359,743

 

Construction in progress

 

11,723

 

 

 

5,151

 

Gross real estate

 

3,803,649

 

 

 

3,707,138

 

Less: accumulated depreciation

 

(611,111

)

 

 

(578,496

)

Net real estate

 

3,192,538

 

 

 

3,128,642

 

Real estate loan investments, net

 

210,280

 

 

 

196,420

 

Total real estate and real estate loan investments, net

 

3,402,818

 

 

 

3,325,062

 

 

 

 

 

 

Cash and cash equivalents

 

117,221

 

 

 

30,205

 

Restricted cash

 

33,474

 

 

 

32,675

 

Note receivable from related party

 

8,875

 

 

 

9,011

 

Accrued interest receivable on real estate loans

 

18,569

 

 

 

17,038

 

Acquired intangible assets, net of amortization

 

55,432

 

 

 

59,622

 

Tenant lease inducements, net

 

15,976

 

 

 

16,420

 

Investment in unconsolidated joint venture

 

 

5,884

 

 

 

5,992

 

Tenant receivables and other assets

 

82,023

 

 

 

67,343

 

 

 

 

 

 

Total assets

$

3,740,272

 

 

$

3,563,368

 

 

 

 

 

 

Liabilities and equity

 

 

 

Liabilities

 

 

 

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

$

2,388,772

 

 

$

2,343,364

 

Deferred revenues

 

34,612

 

 

 

35,523

 

Accounts payable and accrued expenses

 

35,046

 

 

 

36,517

 

Deferred liability to Former Manager

 

24,219

 

 

 

24,037

 

Contingent liability due to Former Manager

 

14,564

 

 

 

14,631

 

Accrued interest payable

 

6,990

 

 

 

7,086

 

Dividends and partnership distributions payable

 

21,509

 

 

 

19,912

 

Acquired below market lease intangibles, net of amortization

 

32,936

 

 

 

34,585

 

Prepaid rent, security deposits and other liabilities

 

27,004

 

 

 

25,679

 

Total liabilities

 

2,585,652

 

 

 

2,541,334

 

 

 

 

 

 

Commitments and contingencies

 

 

 

Equity

 

 

 

 

Stockholders' equity

 

 

 

 

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

 

 

 

issued; 1,302 and 1,321 shares outstanding at March 31, 2022 and December 31, 2021, respectively

 

13

 

 

 

13

 

Series A1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; 247

 

 

 

shares issued; 246 shares outstanding at March 31, 2022 and December 31, 2021, respectively

 

2

 

 

 

2

 

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

 

 

 

83 and 84 shares outstanding at March 31, 2022 and December 31, 2021, respectively

 

1

 

 

 

1

 

Series M1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; 47 and 43 shares

 

 

 

issued; 44 and 41 shares outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

 

 

 

Common Stock, $0.01 par value per share; 400,067 shares authorized; 62,929 and 52,975 shares issued and

 

 

 

outstanding at March 31, 2022 and December 31, 2021, respectively

 

629

 

 

 

530

 

Additional paid-in capital

 

 

1,333,284

 

 

 

1,195,775

 

Accumulated (deficit) earnings

 

 

(179,814

)

 

 

(172,000

)

Total stockholders' equity

 

 

1,154,115

 

 

 

1,024,321

 

Non-controlling interest

 

 

505

 

 

 

(2,287

)

Total equity

 

 

1,154,620

 

 

 

1,022,034

 

 

 

 

 

 

Total liabilities and equity

 

$

3,740,272

 

 

$

3,563,368

 

Preferred Apartment Communities, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

(In thousands)

Three-month periods ended March 31,

 

 

2022

 

 

 

2021

 

Operating activities:

 

 

 

Net loss

$

(7,844

)

 

$

(2,709

)

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

 

 

 

Depreciation and amortization expense

 

38,161

 

 

 

45,827

 

Amortization of above and below market leases

 

(1,369

)

 

 

(1,399

)

Amortization of deferred revenues and other non-cash revenues

 

(1,449

)

 

 

(1,195

)

Amortization of purchase option termination fees

 

 

 

 

(1,229

)

Amortization of equity compensation, lease incentives and other non-cash expenses

 

1,628

 

 

 

1,229

 

Deferred loan cost amortization

 

1,566

 

 

 

1,609

 

Non-cash accrued interest income on real estate loan investments

 

(1,531

)

 

 

(2,822

)

Receipt of accrued interest income on real estate loan investments

 

 

 

 

3,109

 

Gains on the sales of real estate, net

 

 

 

 

(798

)

Losses on the sales of land and other, net

 

22

 

 

 

 

Loss from unconsolidated joint ventures

 

108

 

 

 

194

 

Cash received for purchase option terminations

 

 

 

 

1,479

 

Loss on extinguishment of debt

 

363

 

 

 

 

Increase in allowance for expected credit losses

 

572

 

 

 

522

 

Changes in operating assets and liabilities:

 

 

 

Decrease (increase) in tenant receivables and other assets

 

(3,445

)

 

 

4,766

 

Decrease in accounts payable and accrued expenses

 

(429

)

 

 

(2,787

)

Increase in accrued interest, prepaid rents and other liabilities

 

1,874

 

 

 

2,589

 

Net cash provided by operating activities

 

28,227

 

 

 

48,385

 

 

 

 

 

Investing activities:

 

 

 

Investments in real estate loans, net of origination fees received

 

(13,605

)

 

 

(18,840

)

Repayments of real estate loans

 

 

 

 

17,925

 

Notes receivable repaid

 

 

 

 

79

 

Acquisition of properties

 

(90,203

)

 

 

(289

)

Disposition of properties and proceeds from land sales, net

 

(260

)

 

 

4,798

 

Investment into property development

 

(2,718

)

 

 

 

Capital improvements to real estate assets

 

(4,875

)

 

 

(10,263

)

Net cash used in investing activities

 

(111,661

)

 

 

(6,590

)

 

 

 

 

Financing activities:

 

 

 

Proceeds from mortgage notes

 

106,310

 

 

 

2,152

 

Repayment of mortgage notes

 

(61,745

)

 

 

(10,340

)

Payments for deposits and other mortgage loan costs

 

(589

)

 

 

(285

)

Payments for debt prepayment and other debt extinguishment costs

 

(324

)

 

 

 

Proceeds from Revolving Line of Credit

 

185,000

 

 

 

105,000

 

Payments on Revolving Line of Credit

 

(185,000

)

 

 

(87,000

)

Proceeds from sales of Preferred Stock, net of offering costs

 

2,800

 

 

 

34,109

 

Payments for redemptions and calls of Preferred Stock

 

(19,162

)

 

 

(40,018

)

Proceeds from sale of Common Stock and warrant exercises

 

179,213

 

 

 

 

Common Stock dividends paid

 

(9,382

)

 

 

(8,829

)

Preferred Stock dividends and Class A Unit distributions paid

 

(27,118

)

 

 

(33,840

)

Payments for deferred offering costs

 

(1,143

)

 

 

(1,030

)

Contributions from non-controlling interests

 

2,625

 

 

 

 

Distributions to non-controlling interests

 

(236

)

 

 

(56

)

Net cash (used in) provided by financing activities

 

171,249

 

 

 

(40,137

)

 

 

 

 

Net increase in cash, cash equivalents and restricted cash

 

87,815

 

 

 

1,658

 

Cash, cash equivalents and restricted cash, beginning of year

 

62,880

 

 

 

75,716

 

Cash, cash equivalents and restricted cash, end of period

$

150,695

 

 

$

77,374

 

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, 2022

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily communities:

 

 

 

 

 

(in thousands)

 

 

The Platform

 

San Jose, CA

 

8/13/2022

 

(2)

 

$

137,616

 

$

137,616

 

 

$

136,061

 

 

(2)

Vintage Horizon West

 

Orlando, FL

 

10/11/2022

 

10/11/2024

 

 

10,900

 

 

10,038

 

 

 

9,828

 

 

8.5 / 5.5

Nexton

 

Charleston, SC

 

12/16/2022

 

N/A

 

 

 

6,265

 

 

6,265

 

 

 

6,265

 

 

(3)

Vintage Jones Franklin

 

Raleigh, NC

 

11/14/2023

 

5/14/2025

 

 

10,000

 

 

9,182

 

 

 

8,989

 

 

8.5 / 5.5

Solis Cumming Town

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Center

 

Atlanta, GA

 

9/3/2024

 

9/3/2026

 

 

20,681

 

 

18,542

 

 

 

18,153

 

 

8.5 / 5.5

Hudson at Metro West

 

Orlando, FL

 

9/1/2024

 

3/1/2026

 

 

16,791

 

 

14,176

 

 

 

13,873

 

 

8.5 / 4.5

Oxford Club Drive

 

Atlanta, GA

 

2/11/2025

 

2/11/2027

 

 

23,150

 

 

7,513

 

 

 

5,551

 

 

8.5 / 4.5

Populus at Pooler

 

Savannah, GA

 

5/27/2025

 

5/27/2026

 

 

15,907

 

 

7,030

 

 

 

2,104

 

 

8.5 / 4.25

Populus at Pooler Capital

 

Savannah, GA

 

5/27/2025

 

5/27/2026

 

 

1,169

 

 

966

 

 

 

946

 

 

8.5 / 4.25

Menlo II

 

Jacksonville, FL

 

4/14/2025

 

4/14/2027

 

 

16,610

 

 

6,470

 

 

 

4,500

 

 

8.5 / 3.5

Beaver Ruin

 

Atlanta, GA

 

5/3/2025

 

11/3/2026

 

 

9,133

 

 

1,098

 

 

 

 

 

8.5 / 4.5

Prado

 

Orlando, FL

 

8/11/2025

 

8/11/2027

 

 

16,650

 

 

1,661

 

 

 

 

 

8.5 / 3.5

Altis

 

Naples, FL

 

2/27/2026

 

2/27/2028

 

 

17,151

 

 

 

 

 

 

 

8.5 / 4.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

302,023

 

 

220,557

 

 

 

206,270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred equity: (4)

 

 

 

 

 

 

 

 

 

 

 

 

The Shoals

 

Greenville, SC

 

3/31/2026

 

3/31/2027

 

 

14,284

 

 

 

 

 

 

 

8.5 / 3.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

316,307

 

 

220,557

 

 

 

206,270

 

 

 

Unamortized loan origination fees

 

 

 

 

 

 

 

 

(1,942

)

 

 

(1,755

)

 

 

Allowances for expected credit losses and doubtful accounts

 

 

 

 

 

 

(8,335

)

 

 

(8,095

)

 

 

Carrying amount

 

 

 

 

 

 

 

 

 

$

210,280

 

 

$

196,420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Carrying amounts presented per loan are amounts drawn.

(2) Effective February 10, 2022, the Third Amendment to the loan agreement provided for extension options until August 13, 2022 and December 31, 2022. The interest rate was amended to 8.5% current interest and 1.0% deferred interest per annum until May 13, 2022, then 8.5% current interest and 1.5% deferred interest per annum until August 13, 2022. If the second extension option is exercised, the rate increases to 8.5% current interest and 2.0% deferred interest per annum until November 13, 2022, then 8.5% current interest and 2.5% deferred interest per annum until December 31, 2022.

(3) Loan accrues interest at 11% per annum until June 16, 2022, then 13% per annum until December 16, 2022; all interest is paid monthly.

(4) A fixed-return component of the capital stack in a multifamily community development project that is economically equivalent to our real estate loan investments, with features and terms as shown.

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. Option purchase prices are generally the market value of the property, as negotiated and agreed upon by the purchasing and selling parties and are derived utilizing market cap rates. As of March 31, 2022, 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

 

 

 

 

 

 

 

 

Hudson at Metro West

Orlando, FL

 

320

 

S + 90 days (2)

 

S + 150 days (2)

 

Vintage Horizon West

Orlando, FL

 

340

(10)

(3)

 

(3)

 

Vintage Jones Franklin

Raleigh, NC

 

277

 

(3)

 

(3)

 

Solis Cumming Town Center

Atlanta, GA

 

320

 

(4)

 

(4)

 

Club Drive

Atlanta, GA

 

352

 

(5)

 

(5)

 

Populus at Pooler

Savannah, GA

 

316

 

(6)

 

(6)

 

Menlo II

Jacksonville, FL

 

337

 

(7)

 

(7)

 

Beaver Ruin

Atlanta, GA

 

246

 

S + 90 days (8)

 

S + 150 days (8)

 

One Nexton

Charleston, SC

 

351

 

(9)

 

(9)

 

Prado

Orlando, FL

 

286

 

S + 90 days

 

S + 180 days

 

Altis

Naples, FL

 

242

 

S + 90 days (2)

 

S + 150 days (2)

 

The Shoals

Greenville, SC

 

252

 

(4)

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

3,639

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio.

 

 

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

 

 

(3) 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% occupancy threshold by the underlying property and ends 60 days beyond the option period beginning date.

 

 

(4) We hold a right of first offer on the property.

 

 

(5) The option period window begins upon the property's achievement of an 85% occupancy threshold. If we are unable to reach an agreement on the property's market value, we have a right of first offer.

 

 

(6) The option period window begins upon the property's achievement of an 80% occupancy threshold. If we are unable to reach an agreement on the property's market value, we have a right of first offer.

 

 

(7) The option period window begins either by notice from the seller upon the property's achievement of a 70% occupancy threshold or by notice from the purchaser upon the property's achievement of a 93% occupancy threshold and expires 90 days beyond either event. If we are unable to reach an agreement on the property's market value, we have a right of first offer.

 

 

(8) The option period window begins and ends at the number of days indicated beyond the achievement of an 85% occupancy threshold by the underlying property. If we are unable to reach an agreement on the property's market value, we have a right of first offer.

 

 

(9) The underlying loan is a land acquisition bridge loan that is anticipated to be converted to a real estate loan investment in the future with a purchase option or right of first offer.

 

 

(10) The purchase option was voided in conjunction with the repayment of the loan on April 12, 2022.

 

Mortgage Indebtedness

As of March 31, 2022, our mortgage note principal repayment obligations were:

Period

 

Future principal

payments

(in thousands)

 

 

 

2022

 

$

54,993

2023

 

 

81,841

2024

 

 

300,318

2025

 

 

57,692

2026

 

 

339,105

2027

 

 

320,122

2028

 

 

252,544

2029

 

 

246,473

2030

 

 

357,317

2031

 

 

97,107

Thereafter

 

 

319,705

 

 

 

Totals

 

$

2,427,217

Multifamily Communities

As of March 31, 2022, our multifamily community portfolio consisted of the following properties:

 

 

 

 

 

 

 

 

Three months ended
March 31, 2022

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

 

95.7 %

 

$ 1,628

Green Park

 

Atlanta, GA

 

310

 

985

 

97.1 %

 

$ 1,657

Overton Rise

 

Atlanta, GA

 

294

 

1,018

 

95.0 %

 

$ 1,728

Summit Crossing I

 

Atlanta, GA

 

345

 

1,034

 

97.1 %

 

$ 1,435

Summit Crossing II

 

Atlanta, GA

 

140

 

1,100

 

97.1 %

 

$ 1,582

The Reserve at Summit Crossing

 

Atlanta, GA

 

172

 

1,002

 

97.3 %

 

$ 1,529

Avenues at Cypress

 

Houston, TX

 

240

 

1,170

 

96.4 %

 

$ 1,612

Avenues at Northpointe

 

Houston, TX

 

280

 

1,167

 

94.2 %

 

$ 1,540

Stone Creek

 

Houston, TX

 

246

 

852

 

95.7 %

 

$ 1,241

Aster at Lely Resort

 

Naples, FL

 

308

 

1,071

 

96.4 %

 

$ 1,724

Sorrel

 

Jacksonville, FL

 

290

 

1,048

 

95.6 %

 

$ 1,508

Lux at Sorrel

 

Jacksonville, FL

 

265

 

1,025

 

96.4 %

 

$ 1,557

Artisan at Viera

 

Melbourne, FL

 

259

 

1,070

 

96.5 %

 

$ 1,842

525 Avalon Park

 

Orlando, FL

 

487

 

1,394

 

95.5 %

 

$ 1,694

The Blake

 

Orlando, FL

 

281

 

908

 

96.4 %

 

$ 1,601

Citi Lakes

 

Orlando, FL

 

346

 

984

 

97.4 %

 

$ 1,594

Village at Baldwin Park

 

Orlando, FL

 

528

 

1,069

 

96.7 %

 

$ 1,880

Parkside at the Beach

 

Panama City Beach, FL

 

288

 

1,041

 

98.8 %

 

$ 1,563

Luxe at Lakewood Ranch

 

Sarasota, FL

 

280

 

1,105

 

95.0 %

 

$ 1,808

Venue at Lakewood Ranch

 

Sarasota, FL

 

237

 

1,001

 

97.2 %

 

$ 1,888

Crosstown Walk

 

Tampa, FL

 

342

 

1,070

 

96.6 %

 

$ 1,599

Overlook at Crosstown Walk

 

Tampa, FL

 

180

 

986

 

97.6 %

 

$ 1,641

Citrus Village

 

Tampa, FL

 

296

 

980

 

97.1 %

 

$ 1,579

Five Oaks at Westchase

 

Tampa, FL

 

218

 

983

 

97.6 %

 

$ 1,750

Horizon at Wiregrass

 

Tampa, FL

 

392

 

973

 

96.9 %

 

$ 1,755

Lodge at Hidden River

 

Tampa, FL

 

300

 

980

 

96.7 %

 

$ 1,623

Lenox Village

 

Nashville, TN

 

273

 

906

 

96.8 %

 

$ 1,431

Regent at Lenox

 

Nashville, TN

 

18

 

1,072

 

100.0 %

 

$ 1,481

Retreat at Lenox

 

Nashville, TN

 

183

 

773

 

96.9 %

 

$ 1,370

CityPark View

 

Charlotte, NC

 

284

 

948

 

94.7 %

 

$ 1,276

CityPark View South

 

Charlotte, NC

 

200

 

1,005

 

95.2 %

 

$ 1,394

Colony at Centerpointe

 

Richmond, VA

 

255

 

1,149

 

97.5 %

 

$ 1,571

Founders Village

 

Williamsburg, VA

 

247

 

1,070

 

96.2 %

 

$ 1,615

Retreat at Greystone

 

Birmingham, AL

 

312

 

1,100

 

94.4 %

 

$ 1,560

Vestavia Reserve

 

Birmingham, AL

 

272

 

1,113

 

95.1 %

 

$ 1,721

Adara Overland Park

 

Kansas City, KS

 

260

 

1,116

 

96.4 %

 

$ 1,427

Claiborne Crossing

 

Louisville, KY

 

242

 

1,204

 

95.6 %

 

$ 1,448

City Vista

 

Pittsburgh, PA

 

272

 

1,023

 

94.5 %

 

$ 1,541

 

 

 

 

 

 

 

 

 

 

 

Total/Average Same-Store Communities

 

 

 

10,442

 

 

 

96.3 %

 

 

Stabilized Communities:

 

 

 

 

 

 

 

 

 

 

The Menlo

 

Jacksonville, FL

 

332

 

966

 

95.2 %

 

$ 1,654

The Ellison

 

Atlanta, GA

 

250

 

1,064

 

99.1 %

 

$ 1,650

Chestnut Farm

 

Charlotte, NC

 

256

 

995

 

98.6 %

 

$ 1,642

Alleia at Presidio

 

Fort Worth, TX

 

231

 

1,022

 

95.7 %

 

$ 1,661

The Anson

 

Nashville, TN

 

301

 

989

 

96.7 %

 

$ 1,595

The Kingson

 

Fredericksburg, VA

 

240

 

993

 

95.7 %

 

$ 1,739

 

 

 

 

 

 

 

 

 

 

 

Total/Average Stabilized Communities

 

 

 

1,610

 

 

 

96.3 %

 

 

Lirio at Rafina

 

Orlando, FL

 

280

 

974

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Multifamily Community Units

 

 

 

12,332

 

 

 

 

 

 

For the three-month period ended March 31, 2022, our average same-store multifamily communities' physical occupancy was 96.3%. We calculate average same-store physical occupancy for quarterly periods as the average of the 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 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 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, 2022, our average stabilized physical occupancy was 96.3%. 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. All of our multifamily communities were stabilized for the three-month period ended March 31, 2022 except Lirio at Rafina.

For the three-month period ended March 31, 2022, our average stabilized economic occupancy was 96.1%. 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, properties which are owned for less than the entire reporting period and properties which are undergoing significant capital projects, have sustained significant casualty losses or are adding additional phases. We also exclude properties which are currently being held for sale, of which we had none within the multifamily community portfolio at March 31, 2022. 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.

Capital Expenditures

We regularly incur capital expenditures related to our owned multifamily communities. 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, 2022, 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

$

227

 

$

18.53

 

$

 

$

 

$

227

 

$

18.53

Carpets

 

 

 

501

 

 

40.85

 

 

 

 

 

 

501

 

 

40.85

Wood / vinyl flooring

 

30

 

 

2.47

 

 

121

 

 

9.83

 

 

151

 

 

12.30

Mini blinds and ceiling fans

 

36

 

 

2.95

 

 

 

 

 

 

36

 

 

2.95

Fire safety

 

 

 

 

 

 

79

 

 

6.44

 

 

79

 

 

6.44

HVAC

 

 

128

 

 

10.44

 

 

 

 

 

 

128

 

 

10.44

Computers, equipment, misc.

 

56

 

 

4.55

 

 

59

 

 

4.82

 

 

115

 

 

9.37

Elevators

 

 

 

 

 

20

 

 

1.60

 

 

20

 

 

1.60

Exterior painting and lighting

 

 

 

 

 

1,101

 

 

89.83

 

 

1,101

 

 

89.83

Leasing office and other common amenities

 

 

 

 

 

257

 

 

20.97

 

 

257

 

 

20.97

Major structural projects

 

 

 

 

 

551

 

 

44.97

 

 

551

 

 

44.97

Cabinets, countertops and unit upgrades

 

 

 

 

 

487

 

 

39.73

 

 

487

 

 

39.73

Landscaping and fencing

 

 

 

 

 

89

 

 

7.28

 

 

89

 

 

7.28

Parking lots and sidewalks

 

 

 

 

 

 

56

 

 

4.58

 

 

56

 

 

4.58

Signage and sanitation

 

 

 

 

 

11

 

 

0.87

 

 

11

 

 

0.87

Totals

 

 

$

978

 

$

79.79

 

$

2,831

 

$

230.92

 

$

3,809

 

$

310.71

Grocery-Anchored Shopping Center Portfolio

As of March 31, 2022, 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

 

100.0 %

 

Publix

Cherokee Plaza

 

Atlanta, GA

 

1958

 

102,864

 

100.0 %

 

Kroger

Governors Towne Square

 

Atlanta, GA

 

2004

 

68,658

 

100.0 %

 

Publix

Lakeland Plaza

 

Atlanta, GA

 

1990

 

301,711

 

95.5 %

 

Sprouts

Powder Springs

 

Atlanta, GA

 

1999

 

77,853

 

98.2 %

 

Publix

Rockbridge Village

 

Atlanta, GA

 

2005

 

102,432

 

91.4 %

 

Kroger

Roswell Wieuca Shopping Center

 

Atlanta, GA

 

2007

 

74,370

 

97.8 %

 

The Fresh Market

Royal Lakes Marketplace

 

Atlanta, GA

 

2008

 

119,493

 

97.7 %

 

Kroger

Sandy Plains Exchange

 

Atlanta, GA

 

1997

 

72,784

 

100.0 %

 

Publix

Summit Point

 

Atlanta, GA

 

2004

 

111,970

 

89.2 %

 

Publix

Thompson Bridge Commons

 

Atlanta, GA

 

2001

 

92,587

 

96.2 %

 

Kroger

Wade Green Village

 

Atlanta, GA

 

1993

 

74,978

 

94.5 %

 

Publix

Woodmont Village

 

Atlanta, GA

 

2002

 

85,639

 

100.0 %

 

Kroger

Woodstock Crossing

 

Atlanta, GA

 

1994

 

66,122

 

98.5 %

 

Kroger

East Gate Shopping Center

 

Augusta, GA

 

1995

 

75,716

 

93.7 %

 

Publix

Fury's Ferry

 

Augusta, GA

 

1996

 

70,458

 

98.6 %

 

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

 

100.0 %

 

Publix

The Market at Victory Village

 

Nashville, TN

 

2007

 

71,300

 

100.0 %

 

Publix

The Overlook at Hamilton Place

 

Chattanooga, TN

 

1992

 

213,095

 

99.5 %

 

The Fresh Market

Shoppes of Parkland

 

Miami-Ft. Lauderdale, FL

 

2000

 

145,720

 

98.6 %

 

BJ's Wholesale Club

Crossroads Market

 

Naples, FL

 

1993

 

126,895

 

100.0 %

 

Publix

Neapolitan Way (2)

 

Naples, FL

 

1985

 

137,580

 

97.5 %

 

Publix

Berry Town Center

 

Orlando, FL

 

2003

 

99,441

 

89.9 %

 

Publix

Deltona Landings

 

Orlando, FL

 

1999

 

59,966

 

94.8 %

 

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

Polo Grounds Mall

 

West Palm Beach, FL

 

1966

 

130,285

 

97.3 %

 

Publix

Kingwood Glen

 

Houston, TX

 

1998

 

103,397

 

97.1 %

 

Kroger

Independence Square

 

Dallas, TX

 

1977

 

140,218

 

92.6 %

 

Tom Thumb

Midway Market

 

Dallas, TX

 

2002

 

85,599

 

94.9 %

 

Kroger

Oak Park Village

 

San Antonio, TX

 

1970

 

64,855

 

100.0 %

 

H.E.B.

Irmo Station

 

Columbia, SC

 

1980

 

99,384

 

89.0 %

 

Kroger

Rosewood Shopping Center

 

Columbia, SC

 

2002

 

36,887

 

93.5 %

 

Publix

Anderson Central

 

Greenville Spartanburg, SC

 

1999

 

223,211

 

95.6 %

 

Walmart

Fairview Market

 

Greenville Spartanburg, SC

 

1998

 

46,303

 

100.0 %

 

Aldi

Brawley Commons

 

Charlotte, NC

 

1997

 

122,028

 

98.6 %

 

Publix

West Town Market

 

Charlotte, NC

 

2004

 

67,883

 

100.0 %

 

Harris Teeter

Heritage Station

 

Raleigh, NC

 

2004

 

72,946

 

97.9 %

 

Harris Teeter

Maynard Crossing

 

Raleigh, NC

 

1996

 

122,781

 

86.8 %

 

Harris Teeter

Wakefield Crossing

 

Raleigh, NC

 

2001

 

75,927

 

98.2 %

 

Food Lion

Southgate Village

 

Birmingham, AL

 

1988

 

75,092

 

96.8 %

 

Publix

Hollymead Town Center

 

Charlottesville, VA

 

2005

 

158,807

 

90.5 %

 

Harris Teeter

Free State Shopping Center

 

Washington, D.C.

 

1970

 

264,152

 

87.6 %

 

Giant

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,922,612

 

96.0 %

 

 

Redevelopment Properties:

 

 

 

 

 

 

 

 

 

 

Champions Village

 

Houston, TX

 

1973

 

383,346

 

64.9 %

 

Randalls

Sweetgrass Corner

 

Charleston, SC

 

1999

 

89,124

 

32.9 %

 

Conway Plaza

 

Orlando, FL

 

1966

 

117,705

 

80.6 %

 

Publix

Hanover Center (3)

 

Wilmington, NC

 

1954

 

305,346

 

79.8 %

 

Harris Teeter

Gayton Crossing

 

Richmond, VA

 

1983

 

160,816

(4)

74.2 %

 

Kroger

Fairfield Shopping Center (3)

 

Virginia Beach, VA

 

1985

 

231,829

 

83.0 %

 

Food Lion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,288,166

 

72.1 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,210,778

 

91.0 %

 

 

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

(2) Investment in an unconsolidated joint venture that is not prorated for our ownership percentage.

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

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

As of March 31, 2022, our grocery-anchored shopping center portfolio was 91.0% leased (96.0% excluding redevelopment properties). We define percent leased as the percentage of gross leasable area that is leased as of the period end date, including non-cancelable 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 shoppng center portfolio as of March 31, 2022 were:

 

 

Totals

 

 

Number

of leases

 

Leased

GLA

 

Percent of

leased GLA

 

 

 

 

 

 

 

Month to month

 

22

 

65,031

 

1.2 %

2022

 

113

 

318,146

 

5.6 %

2023

 

147

 

614,369

 

10.9 %

2024

 

149

 

1,142,969

 

20.2 %

2025

 

133

 

943,070

 

16.7 %

2026

 

129

 

560,981

 

9.9 %

2027

 

91

 

462,094

 

8.2 %

2028

 

32

 

404,649

 

7.2 %

2029

 

30

 

249,842

 

4.4 %

2030

 

18

 

185,300

 

3.3 %

2031

 

24

 

259,613

 

4.6 %

2032 +

 

31

 

442,570

 

7.8 %

 

 

 

 

 

 

 

Total

 

919

 

5,648,634

 

100.0 %

Our grocery-anchored shopping center portfolio contained the following anchor tenants as of March 31, 2022:

Tenant

 

GLA

 

Percent of

total GLA

Publix

 

1,179,030

 

19.0 %

Kroger

 

581,593

 

9.4 %

Harris Teeter

 

273,273

 

4.4 %

Wal-Mart

 

183,211

 

2.9 %

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

 

2,732,157

 

44.0 %

 

 

 

 

 

Our Quarterly Report on Form 10-Q for the period ended March 31, 2022 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 2022 totaled approximately $713,000. Second-generation capital expenditures exclude those expenditures made in our grocery-anchored shopping center and office building portfolios (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, 2022, our office building portfolio consisted of the following properties:

Property Name

 

Location

 

GLA

 

Percent leased

Three Ravinia

 

Atlanta, GA

 

814,000

 

93 %

Westridge at La Cantera

 

San Antonio, TX

 

258,000

 

100 %

 

 

 

 

 

 

 

Total/Average

 

 

 

1,072,000

 

95 %

As of March 31, 2022, our office building portfolio included the following significant tenants:

 

 

 

Rentable square

footage

 

Percent of

Annual Base Rent

 

Annual Base

Rent (in thousands)

InterContinental Hotels Group

467,000

 

44.8

%

 

$

11,429

USAA

129,000

 

13.1

%

 

 

3,357

Vericast

129,000

 

12.2

%

 

 

3,102

Hapag Lloyd

127,000

 

17.5

%

 

 

4,455

Lease Query

53,000

 

3.8

%

 

 

968

 

 

 

 

 

 

 

 

Total

905,000

 

91.4

%

 

$

23,311

 

 

 

 

 

 

 

 

We define Annual Base Rent as the current monthly base rent annualized under the respective leases.

As of March 31, 2022, the leased square footage of our office building portfolio expires according to the following schedule:

 

 

 

 

Percent of

Year of lease expiration

 

Rented square

 

rented

 

feet

 

square feet

2022

 

 

2023

 

8,000

 

0.8 %

2024

 

5,000

 

0.5 %

2025

 

53,000

 

5.3 %

2026

 

 

2027

 

329,000

 

33.0 %

2028

 

 

2029

 

 

2030

 

 

2031

 

467,000

 

46.8 %

2032 +

 

136,000

 

13.6 %

 

 

 

 

 

Total

 

998,000

 

100.0 %

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $151,000 during the first quarter 2022.

Definitions of Non-GAAP Measures

We disclose FFO, Core FFO, AFFO and NOI, each of which meets 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. The non-GAAP measures 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 our reported FFO results to those of other companies. Our 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”)

We make adjustments to FFO to remove costs incurred and revenues recorded that are singular in nature and outside our normal operations and portray our primary operational results. We calculate Core FFO as:

FFO, plus:

  • acquisition and pursuit (dead deal) costs;
  • loan cost amortization on acquisition line of credit and loan coordination fees;
  • losses on debt extinguishments or refinancing costs;
  • Internalization costs;
  • Corporate governance and merger-related costs;
  • expenses incurred on calls of preferred stock;
  • deemed dividends for redemptions of and non-cash dividends on preferred stock; and
  • expenses related to the COVID-19 global pandemic;

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 our normal operations, 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. We calculate AFFO as:

Core FFO, plus:

  • non-cash equity compensation to directors and executives;
  • non-cash (income) expense for current expected credit losses;
  • amortization of loan closing costs;
  • depreciation and amortization of non-real estate assets;
  • net loan origination fees received;
  • deferred interest income received;
  • amortization of lease inducements;
  • cash received in excess of (exceeded by) amortization of purchase option termination revenues;
  • non-cash dividends on Series M1 Preferred Stock and mShares; and
  • earnest money forfeiture from prospective asset purchaser;

Less:

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

Same-Store Net Operating Income (“NOI”)

We use same-store NOI as an operational metric for our same-store multifamily 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 multifamily 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 NOI 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 NOI 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. NOI 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. 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. As of March 31, 2022, the Company owned or was invested in 113 properties in 13 states, predominantly in the Southeast region of the United States.

Paul Cullen
Executive Vice President-Investor Relations
Chief Marketing Officer
investorrelations@pacapts.com
770-818-4144

Source: Preferred Apartment Communities, Inc.

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