Preferred Apartment Communities, Inc. Reports Results for Third Quarter Ended 2018

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ATLANTA, Nov. 5, 2018 /PRNewswire/ -- Preferred Apartment Communities, Inc. APTS ("we," "our," the "Company" or "Preferred Apartment Communities") today reported results for the quarter ended September 30, 2018. Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of Common Stock and Class A Units of the Company's operating partnership ("Class A Units") outstanding. See Definitions of Non-GAAP Measures.

"In the third quarter and subsequent to quarter end, we were able to capture approximately $35.5 million in realized gains on the sales of two of our older assets. This was somewhat offset by an approximate $3.0 million ($0.07 per share) loan loss allowance that we recorded on a real estate loan investment we made in Irvine, California. This loan paid over $21.1 million in interest, allowing us to book an approximate 12.9% IRR over the life of the loan. When the property is sold to a third party buyer, however, the total distributable proceeds will not cover all the interest we had accrued. As a result, we are reducing our guidance range for 2018 FFO per share from $1.43 - $1.47 (midpoint $1.45 per share) to $1.39 - $1.42  (midpoint $1.405 per share)," said Daniel M. DuPree, Preferred Apartment Communities' Chairman and Chief Executive Officer.

Preferred Apartment Communities

Financial Highlights

Our operating results for the three-month and nine-month periods ended September 30, 2018 were:

































Three months ended

September 30,







Nine months ended

September 30,











2018



2017



% change



2018



2017



% change

































Revenues (in thousands)

$

104,232





$

74,900





39.2

%



$

290,991





$

212,352





37.0

%

































Per share data:



























Net income (loss) (1)

$

(0.35)





$

(0.49)









$

(1.16)





$

(0.46)







































FFO (2)

$

0.28





$

0.36





(22.2)

%



$

1.03





$

1.01





2.0

%

































AFFO (2)

$

0.21





$

0.28





(25.0)

%



$

0.84





$

0.85





(1.2)

%

































Dividends (3)

$

0.255





$

0.235





8.5

%



$

0.76





$

0.69





10.1

%



































(1)

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

(2)

FFO and AFFO results are presented per weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliation of FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders on page S-3 and Definitions of Non-GAAP Measures beginning on page S-21.

(3)

Per share of Common Stock and Class A Unit outstanding.

 

  • For the third quarter 2018, our FFO payout ratio to Common Stockholders and Unitholders was approximately 92.8% and our FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 66.1%. For the nine months ended September 30, 2018, our FFO payout ratio to Common Stockholders and Unitholders was approximately 74.5% and our FFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 60.1%.



  • For the third quarter 2018, our AFFO payout ratio to Common Stockholders and Unitholders was approximately 124.3% and our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 72.3%. For the nine months ended September 30, 2018, our AFFO payout ratio to Common Stockholders and Unitholders was approximately 91.2% and our AFFO payout ratio (before the deduction of preferred dividends) to our preferred stockholders was approximately 64.8%. (A)



  • For the third quarter 2018, our same store net operating income for our established multifamily communities increased approximately 2.7% as compared to the third quarter 2017. (B) For the third quarter 2018, our average established multifamily communities' physical occupancy was 95.3% and our same-store rental revenue grew 3.8% from the third quarter 2017. For the nine-month period ended September 30, 2018, our same store net operating income for our established multifamily communities increased approximately 6.5% as compared to the nine-month period ended September 30, 2017.



  • At September 30, 2018, the market value of our common stock was $17.58 per share. A hypothetical investment in our Common Stock in our initial public offering on April 5, 2011, assuming the reinvestment of all dividends and no transaction costs, would have resulted in an average annual return of approximately 24.4% through September 30, 2018.



  • As of September 30, 2018, the average age of our multifamily communities was approximately 5.3 years, which is the youngest in the public multifamily REIT industry.



  • Approximately 84.0% of our permanent property-level mortgage debt has fixed interest rates and approximately 6.4% has variable interest rates which are capped. We believe we are well protected against potential increases in market interest rates.



  • At September 30, 2018, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 54.4 %. Our leverage calculation excludes the gross assets of approximately $262.2 million and liabilities of approximately $257.3 million that we consolidated as a result of our investment in the ML-04 pool from the Freddie Mac K program.



  • As of September 30, 2018, our total assets were approximately $4.1 billion compared to approximately $2.9 billion as of September 30, 2017, an increase of approximately $1.2 billion, or approximately 41.9%. This growth was driven primarily by the acquisition of 22 real estate properties (net of the sale of 2 properties). In addition, our assets increased due to the consolidation of the ML-04 pool from the Freddie Mac K program.



  • Cash flow from operations for the quarter ended September 30, 2018 was approximately $38.8 million, an increase of approximately $10.7 million, or 38.1%, compared to approximately $28.1 million for the quarter ended September 30, 2017. Cash flow from operations for the third quarter 2018 was more than sufficient to fund our aggregate dividends and distributions for the period, which totaled approximately $33.0 million.



  • On August 31, 2018, we closed on two real estate loan investments aggregating up to approximately $12.3 million in support of a multifamily community project in Fredericksburg, Virginia.



  • On September 28, 2018, we sold our Stone Rise multifamily community located in Philadelphia, Pennsylvania for a net gain of approximately $18.6 million, which resulted in an internal rate of return of approximately 21.5% from April 15, 2011, the date the property was acquired.

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



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

Acquisitions of Properties

During the third quarter 2018, we acquired the following properties:



















Property



Location (MSA)



Units / Leasable square

feet





















Office building:















150 Fayetteville



Raleigh, NC





560,000

LSF





















Multifamily Community:















The Lodge at Hidden River



Tampa, FL





300

units





















Grocery-anchored shopping center:















Brawley Commons



Charlotte, NC





122,028

LSF



















 Real Estate Assets





















Owned as of

September 30,

2018



Potential additions

from real estate loan

investment

portfolio (1) (2)



Potential total





Multifamily communities:















Properties

31





11





42







Units

9,852





2,915





12,767







Grocery-anchored shopping centers:















Properties

44









44







Gross leasable area (square feet)

4,571,888









4,571,888







Student housing properties:















Properties

7





1





8







Units

1,679





248





1,927







Beds

5,208





816





6,024







Office buildings:















Properties

6









6







Rentable square feet

2,099,000









2,099,000























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



(2)  On May 7, 2018, we terminated purchase options on three multifamily communities and two student housing properties in exchange for aggregate termination fees of approximately $12.5 million. Potential additions to our real estate asset portfolio excludes the properties supported by these five loans.

Subsequent to Quarter End

On October 23, 2018, we sold our Stoneridge Farms at Hunt Club multifamily community located in Nashville, Tennessee for a gain on the sale of approximately $16.9 million, which resulted in an average annual return of approximately 22% from September 26, 2014, the date the property was acquired.

On October 31, 2018, we refinanced the variable rate mortgage on our Sol student housing community into a $36.2 million mortgage maturing on November 1, 2028 and which bears interest at a fixed rate of 4.71% per annum.

On November 1, 2018, our board of directors declared a quarterly dividend on our Common Stock of $0.26 per share, payable on January 15, 2019 to stockholders of record on December 14, 2018.

Multifamily Established Communities Financial Data

The following chart presents same store operating results for the Company's established communities.We define our population of established communities as those that have achieved occupancy at or above 93% occupancy for all 3 consecutive months within a single quarter (stabilized) before the beginning of the prior year and that have been owned for at least 15 full months as of the end of the first quarter of the current year, enabling comparisons of the current year quarterly and annual reporting periods to the prior year comparative periods. The Company excludes the operating results of properties for which construction of adjacent phases has commenced and properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. For the periods presented, same store operating results consist of the operating results of the following multifamily established communities:

Aster at Lely Resort



Avenues at Cypress



Avenues at Northpointe

Citi Lakes



Lenox Portfolio



Venue at Lakewood Ranch

Overton Rise



Sorrel



Vineyards

At September 30, 2018, our Stoneridge Farms at Hunt Club and McNeil Ranch multifamily communities were being marketed for sale and are therefore excluded from our established communities same store population.

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

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















Three months ended:

(in thousands)



9/30/2018



9/30/2017











Net income



$

8,354





$

42



Add:









Equity stock compensation



796





863



Depreciation and amortization



44,499





28,904



Interest expense



25,657





16,678



Management fees



7,234





5,148



Insurance, professional fees and other expenses

715





581



Loan loss allowance



3,029







Waived asset management and general and administrative expense fees



(1,934)





(656)



Less:









Interest revenue on notes receivable



13,618





9,674



Interest revenue on related party notes receivable



3,671





5,820



Income from consolidated VIEs



131







Gain on sale of real estate



18,605

















Property net operating income



52,325





36,066



Less:









Non-same-store property revenues



74,937





47,843



Add:









Non-same-store property operating expenses

29,305





18,296











Same store net operating income



$

6,693





$

6,519



 

Multifamily Established Communities' Same Store Net Operating Income























Three months ended:









(in thousands)



9/30/2018



9/30/2017



$ change



% change

Revenues:

















Rental revenues



$

10,907





$

10,519





$

388





3.7

%

Other property revenues



1,099





1,044





55





5.3

%

Total revenues



12,006





11,563





443





3.8

%



















Operating expenses:

















Property operating and maintenance



1,594





1,588





6





0.4

%

Payroll



991





967





24





2.5

%

Property management fees



482





465





17





3.7

%

Real estate taxes



1,748





1,517





231





15.2

%

Other



498





507





(9)





(1.8)

%

Total operating expenses



5,313





5,044





269





5.3

%



















Same store net operating income



$

6,693





$

6,519





$

174





2.7

%

 

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















Nine months ended:

(in thousands)



9/30/2018



9/30/2017











Net income



$

17,339





$

33,409



Add:









Equity stock compensation



2,881





2,608



Depreciation and amortization



127,210





82,187



Interest expense



68,972





48,085



Acquisition costs







14



Management fees



20,096





14,525



Insurance, professional fees and other expenses

2,487





2,395



Loan loss allowance



3,029







Waived asset management and general and administrative expense fees



(4,583)





(1,002)



Loss on extinguishment of debt







888



Less:









Interest revenue on notes receivable



37,576





26,112



Interest revenue on related party notes receivable



12,310





15,971



Income from consolidated VIEs



185







Gain on sale of real estate



38,961





37,635













Property net operating income



148,399





103,391



Less:









Non-same-store property revenues



205,316





135,848



Add:









Non-same-store property operating expenses

77,144





51,441











Same store net operating income



$

20,227





$

18,984



 

Multifamily Established Communities' Same Store Net Operating Income























Nine months ended:









(in thousands)



9/30/2018



9/30/2017



$ change



% change

Revenues:

















Rental revenues



$

32,481





$

31,352





$

1,129





3.6

%

Other property revenues



3,308





3,069





239





7.8

%

Total revenues



35,789





34,421





1,368





4.0

%



















Operating expenses:

















Property operating and maintenance



4,497





4,400





97





2.2

%

Payroll



2,852





2,889





(37)





(1.3)

%

Property management fees



1,435





1,387





48





3.5

%

Real estate taxes



5,251





5,236





15





0.3

%

Other



1,527





1,525





2





0.1

%

Total operating expenses



15,562





15,437





125





0.8

%



















Same store net operating income



$

20,227





$

18,984





$

1,243





6.5

%

Capital Markets Activities

During the third quarter 2018, we issued and sold an aggregate of 101,616 Units from our offering of up to 1,500,000 Units, with each Unit consisting of one share of Series A Redeemable Preferred Stock and one Warrant to purchase up to 20 shares of Common Stock (the "$1.5 Billion Series A Unit Offering"), resulting in net proceeds of approximately $91.4 million after commissions and other fees. In addition, during the third quarter 2018, we issued 358,040 shares of Common Stock pursuant to the exercise of warrants issued under our Series A Preferred Stock offering, resulting in aggregate gross proceeds of approximately $4.6 million.

During the third quarter 2018, we issued and sold an aggregate of 8,199 shares of Series M Redeemable Preferred Stock ("mShares"), resulting in net proceeds of approximately $8.0 million after dealer manager fees.

Our outstanding shares of Common Stock totaled approximately 40.8 million shares at September 30, 2018. The market value of our Common Stock was $17.58 per share on September 30, 2018 versus $18.88 on September 30, 2017. Our total equity book value increased 29.2% to approximately $1.5 billion at September 30, 2018 from $1.2 billion at September 30, 2017.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On August 2, 2018, we declared a quarterly dividend on our Common Stock of $0.255 per share for the third quarter 2018. This represents a 8.5% increase in our common stock dividend from our third quarter 2017 common stock dividend of $0.235 per share, and an annualized dividend growth rate of 14.4% since September 30, 2011, the first quarter end following our initial public offering in April 2011. The third quarter dividend was paid on October 15, 2018 to all stockholders of record on September 14, 2018. In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.255 per unit for the third quarter 2018, which was paid on October 15, 2018 to all Class A Unit holders of record as of September 14, 2018.

Monthly Dividends on Preferred Stock

We declared and paid monthly dividends of $5.00 per share on our Series A Redeemable Preferred Stock, which totaled approximately $21.8 million for the quarter ended September 30, 2018 and represent a 6% annual yield. We declared and paid dividends totaling approximately $466,000 on our Series M Redeemable Preferred Stock, or mShares, for the quarter ended September 30, 2018. The mShares have an escalating dividend rate from 5.75% in year one of issuance to 7.50% in year eight and thereafter.

Conference Call and Supplemental Data

We will hold our quarterly conference call on Tuesday, November 6, 2018 at 11:00 a.m. Eastern Time to discuss our third quarter 2018 results. To participate in the conference call, please dial in to the following:

Live Conference Call Details

Domestic Dial-in Number: 1-844-890-1791

International Dial-in Number: 1-412-380-7408

Company: Preferred Apartment Communities, Inc.

Date: Tuesday, November 6, 2018

Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

The live broadcast of our third quarter 2018 conference call will be available online, on a listen-only basis, at our website, www.pacapts.com, under "Investors" and then click on the "Upcoming Events" link. A replay of the call will be archived on under the Investors/Audio Archive section.

2018 Guidance:

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

FFO per share  -   We currently project FFO to be in the range of $1.39 - $1.42 per share for the full year 2018.

Revenue - We currently project total revenues to be in the range of $400 million - $415 million for the full year 2018.

AFFO and FFO are calculated after deductions for all preferred stock dividends. Reconciliations of net income (loss) attributable to common stockholders to FFO and AFFO for the three-month and nine-month periods ended September 30, 2018 and 2017 appear on page S-3 of the attached report, as well as on our website using the following link:

http://investors.pacapts.com/download/3Q18_Earnings_and_Supplemental_Data.pdf

Forward-Looking Statements

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

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

We refer you to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2017 that was filed with the Securities and Exchange Commission, or SEC, on March 1, 2018, which discuss various factors that could adversely affect our financial results. Such risk factors and information may be updated or supplemented by our Form 10-K, Form 10-Q and Form 8-K filings and other documents filed from time to time with the SEC.

Additional Information

The SEC has declared effective the registration statement filed by the Company for each of the offerings to which this communication may relate. Before you invest, you should read the final prospectus, and any prospectus supplements, forming a part of the registration statement and other documents the Company has filed with the SEC for more complete information about the Company and the offering to which this communication may relate. In particular, you should carefully read the risk factors described in the final prospectus and in any related prospectus supplement and in the documents incorporated by reference in the final prospectus and any related prospectus supplement to which this communication may relate. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, the Company or its dealer manager, Preferred Capital Securities, LLC, with respect to the mShares Offering and the $1.5 Billion Unit Offering, and JonesTrading Institutional Services LLC, with respect to the Common Stock ATM Offering, will arrange to send you a prospectus if you request it by contacting Leonard A. Silverstein at (770) 818-4100, 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.

The prospectus supplement for the Common Stock ATM Offering, dated July 10, 2017, including a base prospectus, dated May 17, 2016, can be accessed through the following link:

https://www.sec.gov/Archives/edgar/data/1481832/000148183217000110/atmprospectusspring2017.htm

The final prospectus for the mShares Offering, dated January 19, 2017, can be accessed through the following link:

https://www.sec.gov/Archives/edgar/data/1481832/000148183217000008/a424prospectus-mshares1.htm

The final prospectus for the $1.5 Billion Unit Offering, dated March 16, 2017, can be accessed through the following link:

https://www.sec.gov/Archives/edgar/data/1481832/000148183217000061/a424prospectus-15bseriesar.htm

 

THIRD QUARTER 2018 - SUPPLEMENTAL FINANCIAL DATA

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)











Three months ended September 30,

(In thousands, except per-share figures)



2018



2017

Revenues:









Rental revenues



$

73,640





$

50,072



Other property revenues



13,303





9,335



Interest income on loans and notes receivable



13,618





9,673



Interest income from related parties



3,671





5,820



Total revenues



104,232





74,900













Operating expenses:









Property operating and maintenance



12,893





7,901



Property salary and benefits

4,911





3,403



Property management fees

2,998





2,053



Real estate taxes



10,597





7,706



General and administrative



2,221





1,702



Equity compensation to directors and executives

796





863



Depreciation and amortization



44,499





28,904



Asset management and general and administrative expense









fees to related party



7,234





5,148



Loan loss allowance



3,029







Insurance, professional fees, and other expenses



1,713





1,156













Total operating expenses



90,891





58,836



Waived asset management and general and administrative







expense fees

(1,934)





(656)













Net operating expenses



88,957





58,180



Operating income



15,275





16,720



Interest expense



25,657





16,678



Change in fair value of net assets of consolidated VIE



131







Net income (loss) before gain on sale of real estate



(10,251)





42



Gain on sale of real estate



18,605

















Net income



8,354





42



Consolidated net (income) attributable to non-controlling interests

(216)





(1)













Net income attributable to the Company



8,138





41













Dividends declared to preferred stockholders



(22,360)





(16,421)



Earnings attributable to unvested restricted stock



(5)





(4)













Net loss attributable to common stockholders



$

(14,227)





$

(16,384)



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







basic and diluted



$

(0.35)





$

(0.49)













Weighted average number of shares of Common Stock outstanding,







basic and diluted



40,300





33,540



 

 

Reconciliation of FFO and AFFO

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











Three months ended September 30,

(In thousands, except per-share figures)





2018



2017

















Net loss attributable to common stockholders (See note 1)

$

(14,227)





$

(16,384)



















Add:

Depreciation of real estate assets



33,037





21,597





Amortization of acquired real estate intangible assets and deferred leasing costs

11,058





7,106





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



216





1



Less:

Gain on sale of real estate



(18,605)







FFO

11,479





12,320



















Add:

Loan cost amortization on acquisition term note

19





29





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

673





407





Weather-related property operating losses (See note 4)

161





217





Non-cash equity compensation to directors and executives

796





863





Amortization of loan closing costs (See note 5)



1,309





905





Depreciation/amortization of non-real estate assets



404





202





Net loan fees received (See note 6)



248





879





Accrued interest income received (See note 7)



4,298





1,797





Loan loss allowance (See note 8)



3,029









Deemed dividends from cash redemptions of preferred stock



2









Amortization of lease inducements (See note 9)



387





145





Non-cash dividends on Series M Preferred Stock



63





33



Less:

Non-cash loan interest income (See note 7)



(4,104)





(4,860)





Non-cash revenues from mortgage-backed securities



(131)









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

(4,478)









Cash paid for loan closing costs



(25)









Amortization of acquired above and below market lease intangibles









and straight-line rental revenues (See note 11)



(3,353)





(1,941)





Amortization of deferred revenues (See note 12)



(680)





(287)





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

(1,528)





(1,214)



















AFFO

$

8,569





$

9,495















Common Stock dividends and distributions to Unitholders declared:









Common Stock dividends





$

10,377





$

8,158





Distributions to Unitholders (See note 2)



272





212





Total







$

10,649





$

8,370



















Common Stock dividends and Unitholder distributions per share



$

0.255





$

0.235



















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

$

0.28





$

0.36



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

$

0.21





$

0.28











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









Basic:















Common Stock





40,300





33,540





Class A Units







1,069





901





Common Stock and Class A Units



41,369





34,441





















Diluted Common Stock and Class A Units (B)



42,890





37,820



















Actual shares of Common Stock outstanding, including 19 and 18 unvested shares







 of restricted Common Stock at September 30, 2018 and 2017, respectively

40,804





35,616



Actual Class A Units outstanding at September 30, 2018 and 2017, respectively.

1,068





901





Total







41,872





36,517



















(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 2.58% weighted average non-controlling interest in the Operating Partnership for the three-month period ended September 30, 2018.

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



See Notes to Reconciliation of FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders on page S-5.

 

 

Reconciliation of FFO and AFFO

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











Nine months ended September 30,

(In thousands, except per-share figures)





2018



2017

















Net loss attributable to common stockholders (See note 1)

$

(45,931)





$

(13,742)



















Add:

Depreciation of real estate assets



90,190





60,344





Amortization of acquired real estate intangible assets and deferred leasing costs

35,963





21,308





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



456





1,097



Less:

Gain on sale of real estate



(38,961)





(37,635)



FFO

41,717





31,372



















Add:

Acquisition and pursuit costs









14





Loan cost amortization on acquisition term notes



63





99





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

1,780





1,178





Mortgage loan refinancing and extinguishment costs

61





1,058





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

(33)





217





Contingent management fees recognized









387





Non-cash equity compensation to directors and executives

2,881





2,608





Amortization of loan closing costs (See note 5)



3,567





2,757





Depreciation/amortization of non-real estate assets



1,057





535





Net loan fees received (See note 6)



1,459





1,296





Accrued interest income received (See note 7)



8,410





7,115





Loan loss allowance (See note 8)



3,029









Deemed dividends from cash redemptions of preferred stock



522









Non-cash dividends on Series M Preferred Stock



216





33





Amortization of lease inducements (See note 9)



955





237



Less:

Non-cash loan interest income (See note 7)



(14,726)





(13,507)





Cash paid for loan closing costs



(416)









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

(1,964)









Non-cash revenues from mortgage-backed securities

(185)









Amortization of acquired above and below market lease intangibles

 









and straight-line rental revenues (See note 11)

(9,047)





(5,497)





Amortization of deferred revenues (See note 12)



(1,765)





(457)





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

(3,482)





(3,032)



AFFO

$

34,099





$

26,413











Common Stock dividends and distributions to Unitholders declared:









Common Stock dividends





30,283





21,668





Distributions to Unitholders (See note 2)



813





622





Total







31,096





22,290



Common Stock dividends and Unitholder distributions per share



$

0.76





$

0.69



















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

$

1.03





$

1.01



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

$

0.84





$

0.85











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









Basic:















Common Stock





39,598





30,147





Class A Units







1,070





910





Common Stock and Class A Units



40,668





31,057





















Diluted Common Stock and Class A Units (B)



41,936





33,645



















Actual shares of Common Stock outstanding, including 19 and 18 unvested shares







 of restricted Common Stock at September 30, 2018 and 2017, respectively

40,804





35,616



Actual Class A Units outstanding at September 30, 2018 and 2017, respectively.

1,068





901





Total







41,872





36,517



















(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 2.63% weighted average non-controlling interest in the Operating Partnership for the nine-month period ended September 30, 2018.

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



See Notes to Reconciliation of FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders on page S-5.

 

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

1)

Rental and other property revenues and property operating expenses for the quarter ended September 30, 2018 include activity for the multifamily community, office building and grocery-anchored shopping center acquired during the quarter only from their respective dates of acquisition. In addition, the third quarter 2018 period includes activity for the five multifamily communities, seven grocery-anchored shopping centers, five student housing properties and three office buildings acquired since September 30, 2017. Rental and other property revenues and expenses for the third quarter 2017 include activity for the acquisitions made during that period only from their respective dates of acquisition.





2)

Non-controlling interests in our Operating Partnership consisted of a total of 1,068,400 Class A Units as of September 30, 2018. 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 2.59% and 2.62% for the three-month periods ended September 30, 2018 and 2017, respectively.





3)

As of January 1, 2016, we pay loan coordination fees to Preferred Apartment Advisors, LLC, our Manager, related to obtaining mortgage financing for acquired properties. Loan coordination fees were introduced to reflect the administrative effort involved in arranging debt financing for acquired properties. The portion of the loan coordination fees paid up until July 1, 2017 attributable to the financing were amortized over the lives of the respective mortgage loans, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Beginning effective July 1, 2017, the loan coordination fee was lowered from 1.6%  to 0.6% of the amount of any mortgage indebtedness on newly-acquired properties or refinancing. All of the loan coordination fees paid to our Manager subsequent to July 1, 2017 are amortized over the life of the debt. At September 30, 2018, aggregate unamortized loan coordination fees were approximately $13.0 million, which will be amortized over a weighted average remaining loan life of approximately 10.2 years.





4)

We sustained weather related operating losses due to Hurricane Harvey at our Stone Creek multifamily community during the nine months ended September 30, 2018; these costs are added back to FFO in our calculation of AFFO. Lost rent and other operating costs incurred during the nine-month period ended September 30, 2018 totaled approximately $555,000. This number is offset the receipt from our insurance carrier of approximately $588,000 for recoveries of lost rent, which was recognized in our statements of operations for the nine months ended September 30, 2018.





5)

We incur loan closing costs on our existing mortgage loans, which are secured on a property-by-property basis by each of our acquired real estate assets, and also for occasional amendments to our syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. On March 23, 2018, but effective April 13, 2018, the maximum borrowing capacity on the Revolving Line of Credit was increased from $150 million to $200 million. These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability. At September 30, 2018, aggregate unamortized loan costs were approximately $21.2 million, which will be amortized over a weighted average remaining loan life of approximately 7.6 years.





6)

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





7)

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





8)

During the third quarter 2018, we recorded a $3.0 million allowance for loss on our real estate loan investment to the developer of Fusion Apartments in Irvine, California, which is reflected on our statements of operations.





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)

On May 7, 2018, we terminated our existing purchase options on the Encore, Bishop Street and Hidden River multifamily communities and the Haven 46 and Haven Charlotte student housing properties, all of which are partially supported by real estate loan investments held by us. In exchange, we are to receive termination fees aggregating approximately $12.5 million from the developers. As of September 30, 2018, we have received approximately $4.6 million in cash in excess of the recognized termination fees, which are added to FFO in our calculation of AFFO.





11)

This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At September 30, 2018, the balance of unamortized below-market lease intangibles was approximately $43.2 million, which will be recognized over a weighted average remaining lease period of approximately 8.9 years.





12)

This adjustment removes the non-cash amortization of deferred revenue recorded by us in conjunction with Company-owned lessee-funded tenant improvements in our office buildings, as well as non-cash revenue earned from our investment in the collateralized mortgage-backed security in the ML-04 pool from the Freddie Mac K program.





13)

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





See Definitions of Non-GAAP Measures.

 

 

Preferred Apartment Communities, Inc.



Consolidated Balance Sheets



(Unaudited)



(In thousands, except per-share par values)



September 30, 2018



December 31, 2017



Assets











Real estate









Land



$

490,394





$

406,794





Building and improvements

2,494,904





2,043,853





Tenant improvements

105,390





63,425





Furniture, fixtures, and equipment

261,806





210,779





Construction in progress

5,353





10,491





Gross real estate

3,357,847





2,735,342





Less: accumulated depreciation

(242,579)





(172,756)





Net real estate

3,115,268





2,562,586





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

326,765





255,345





Real estate loan investments to related parties, net

60,635





131,451





Real estate assets held for sale, net

36,360









Total real estate and real estate loan investments, net

3,539,028





2,949,382

















Cash and cash equivalents

26,840





21,043





Restricted cash

59,531





51,969





Notes receivable

14,285





17,318





Note receivable and revolving lines of credit due from related parties

33,140





22,739





Accrued interest receivable on real estate loans

31,250





26,865





Acquired intangible assets, net of amortization

112,914





102,743





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

1,118





1,385





Deferred offering costs

7,741





6,544





Tenant lease inducements, net

20,275





14,425





Tenant receivables and other assets

41,632





37,957





Variable Interest Entity ("VIE") assets, at fair value

262,228









Total assets

$

4,149,982





$

3,252,370

















Liabilities and equity









Liabilities









Mortgage notes payable, net of deferred loan costs

$

2,140,583





$

1,776,652





Revolving line of credit

55,700





41,800





Term note payable, net of deferred loan costs





10,994





Real estate loan investment participation obligation

10,495





13,986





Unearned purchase option termination fees

5,756









Deferred revenue

37,964





27,947





Accounts payable and accrued expenses

47,548





31,253





Accrued interest payable

6,322





5,028





Dividends and partnership distributions payable

18,188





15,680





Acquired below market lease intangibles, net of amortization

43,155





38,857





Security deposits and other liabilities

14,586





9,407





VIE liabilities, at fair value

257,303









Total liabilities

2,637,600





1,971,604

















Commitments and contingencies









Equity











Stockholders' equity











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









   shares authorized; 1,565 and 1,250 shares issued; 1,508 and 1,222









 shares outstanding at September 30, 2018 and December 31, 2017, respectively

15





12





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









   shares authorized; 37 and 15 shares issued and outstanding









 at September 30, 2018 and December 31, 2017, respectively









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









40,785 and 38,565 shares issued and outstanding at









September 30, 2018 and December 31, 2017, respectively

408





386





Additional paid-in capital

1,509,411





1,271,040





Accumulated earnings





4,449





      Total stockholders' equity

1,509,834





1,275,887





Non-controlling interest

2,548





4,879





Total equity

1,512,382





1,280,766





Total liabilities and equity

$

4,149,982





$

3,252,370





 

 

Preferred Apartment Communities, Inc.

Consolidated Statements of Cash Flows

(Unaudited)







Nine months ended September 30,

(In thousands)



2018



2017

Operating activities:









Net income



$

17,339





$

33,409



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







Depreciation and amortization expense

127,210





82,187



Amortization of above and below market leases

(4,297)





(2,394)



Deferred revenues and fee income amortization

(3,103)





(1,526)



Purchase option termination fee amortization

(6,554)







Amortization of market discount on assumed debt and lease incentives

1,152





364



Deferred loan cost amortization

5,213





3,907



(Increase) in accrued interest income on real estate loans

(4,385)





(5,832)



Change in fair value of net assets of consolidated VIE

(185)







Equity compensation to executives and directors

2,881





2,608



Gain on sale of real estate



(38,961)





(37,635)



Cash received for purchase option terminations

5,100







Loss on extinguishment of debt







888



Mortgage interest received from consolidated VIE

3,429







Mortgage interest paid to other participants of consolidated VIE

(3,429)







Increase in loan loss allowance

3,029







Other







189



Changes in operating assets and liabilities:







(Increase) in tenant receivables and other assets

(3,518)





(7,818)



(Increase) in tenant lease incentives

(6,786)





(11,890)



Increase in accounts payable and accrued expenses

14,470





11,641



Increase in accrued interest, prepaid rents and other liabilities

3,369





2,348



Net cash provided by operating activities

111,974





70,446













Investing activities:









Investment in real estate loans



(145,413)





(119,226)



Repayments of real estate loans



141,729





42,495



Notes receivable issued



(5,949)





(6,250)



Notes receivable repaid



8,941





3,507



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

(39,377)





(25,740)



Repayments of line of credit by related parties

28,566





23,468



Loan origination fees received

2,919





2,593



Loan origination fees paid to Manager

(1,459)





(1,296)



Investment in mortgage-backed securities

(4,739)







Mortgage principal received from consolidated VIE

705







Acquisition of properties



(662,918)





(485,010)



Disposition of properties, net



83,636





148,101



Receipt of insurance proceeds for capital improvements

412







Additions to real estate assets - improvements

(36,288)





(12,031)



(Deposits) on acquisitions



3,552





2,429



Net cash used in investing activities

(625,683)





(426,960)













Financing activities:









Proceeds from mortgage notes payable

386,559





332,428



Payments for mortgage notes payable

(66,875)





(121,066)



Payments for deposits and other mortgage loan costs

(7,150)





(11,580)



Payments for mortgage prepayment costs





(817)



Proceeds from real estate loan participants

5





224



Payments to real estate loan participants

(4,372)





(3,467)



Proceeds from lines of credit



362,100





190,000



Payments on lines of credit



(348,200)





(274,500)



Repayment of the Term Loan

(11,000)







Mortgage principal paid to other participants of consolidated VIE

(705)







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

303,391





206,312



Proceeds from sales of Common Stock





74,213



Proceeds from exercises of warrants

16,553





39,430



Payments for redemptions of preferred stock

(9,033)





(4,512)



Common Stock dividends paid



(29,488)





(19,251)



Preferred stock dividends paid



(61,093)





(44,890)



Distributions to non-controlling interests

(762)





(605)



Payments for deferred offering costs

(2,862)





(5,420)



Net cash provided by financing activities

527,068





356,499











Net increase (decrease) in cash, cash equivalents and restricted cash

13,359





(15)



Cash, cash equivalents and restricted cash, beginning of period

73,012





67,715



Cash, cash equivalents and restricted cash, end of period

$

86,371





$

67,700



 

Real Estate Loan Investments

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

Project/Property



Location



Maturity date



Optional

extension date



Total loan

commitments



Carrying amount (1) as of



Current /

deferred

interest %

per annum











September 30, 2018



December 31, 2017









































Multifamily communities:











(in thousands)





Encore



Atlanta, GA



12/31/2018



10/9/2020



$

10,958





$

10,958





$

10,958





8.5 / 5

Encore Capital



Atlanta, GA



4/8/2019



10/9/2020



9,758





8,145





7,521





8.5 / 5

Palisades



Northern VA



5/17/2019



N/A



17,270





17,132





17,111





8 / 5

Fusion



Irvine, CA



12/1/2018



5/31/2020



70,835





66,365





58,447





8.5 / 0

Green Park



Atlanta, GA



2/28/2018



N/A











11,464





8.5 / 5.83

Bishop Street



Atlanta, GA



2/18/2020



N/A



12,693





12,693





12,145





8.5 / 6.5

Hidden River (3)



Tampa, FL



12/3/2018



N/A











4,735





8.5 / 6.5

Hidden River Capital (3)



Tampa, FL



12/4/2018



N/A











5,041





8.5 / 6.5

CityPark II



Charlotte, NC



1/7/2019



1/7/2021



3,365





3,365





3,365





8.5 / 6.5

CityPark II Capital



Charlotte, NC



1/8/2019



1/31/2021



3,916





3,864





3,624





8.5 / 6.5

Park 35 on Clairmont



Birmingham, AL



6/26/2019



6/26/2020



21,060





21,060





21,060





8.5 / 2

Wiregrass



Tampa, FL



5/15/2020



5/15/2023



14,976





13,833





12,972





8.5 / 6.5

Wiregrass Capital



Tampa, FL



5/15/2020



5/15/2023



4,244





3,808





3,561





8.5 / 6.5

Berryessa



San Jose, CA



4/19/2018



N/A











30,571





10.5 / 0

Berryessa



San Jose, CA



2/13/2021



2/13/2023



137,616





67,822









8.5 / 6

The Anson (2)



Nashville, TN



6/1/2018



N/A











2,261





12 / 0

The Anson



Nashville, TN



11/24/2021



11/24/2023



6,240













8.5 / 4.5

The Anson



Nashville, TN



11/24/2021



11/24/2023



5,659





824









8.5 / 4.5

Fort Myers



Fort Myers, FL



2/3/2021



2/3/2022



9,416





7,944





3,521





8.5 / 5.5

Fort Myers Capital



Fort Myers, FL



2/3/2021



2/3/2022



6,193





5,325





4,994





8.5 / 5.5

360 Forsyth



Atlanta, GA



7/11/2020



7/11/2022



22,412





19,320





13,400





8.5 / 5.5

Morosgo



Atlanta, GA



1/31/2021



1/31/2022



11,749





10,507





4,951





8.5 / 5.5

Morosgo Capital



Atlanta, GA



1/31/2021



1/31/2022



6,176





5,077





4,761





8.5 / 5.5

University City Gateway



Charlotte, NC



8/15/2021



8/15/2022



10,336





10,335





850





8.5 / 5

University City Gateway





























Capital



Charlotte, NC



8/18/2021



8/18/2022



7,338





5,901





5,530





8.5 / 5

Cameron Park



Alexandria, VA



10/11/2021



10/11/2023



21,340





9,874









8.5 / 3

Cameron Park Capital



Alexandria, VA



10/11/2021



10/11/2023



8,850





7,395









8.5 / 3

Southpoint



Fredericksburg, VA



2/28/2022



2/28/2024



7,348













8.5 / 4

Southpoint Capital



Fredericksburg, VA



2/28/2022



2/28/2024



4,962





2,668









8.5 / 4





























































Student housing properties:

















Haven 12



Starkville, MS



12/17/2018



11/30/2020



6,116





6,116





5,816





8.5 / 0

Haven46



Tampa, FL



3/29/2019



9/29/2020



9,820





9,820





9,820





8.5 / 5

Haven Northgate (3)



College Station, TX



6/20/2019



N/A











65,724





(4)  / 1.5

Lubbock II (3)



Lubbock, TX



4/20/2019



N/A











9,357





8.5 / 0

Haven Charlotte



Charlotte, NC



12/22/2019



12/22/2021



19,582





19,045





17,039





8.5 / 6.5

Haven Charlotte Member

Charlotte, NC



12/22/2019



12/22/2021



8,201





8,201





7,795





8.5 / 6.5

Solis Kennesaw



Atlanta, GA



9/26/2020



9/26/2022



12,359





11,100





1,610





8.5 / 5.5

Solis Kennesaw Capital



Atlanta, GA



10/1/2020



10/1/2022



8,360





7,619





7,145





8.5 / 5.5































New Market Properties:





























Dawson Marketplace



Atlanta, GA



9/24/2020



9/24/2022



12,857





12,857





12,857





8.5 / 6.9 (5)































Other:





























Crescent Avenue (6)



Atlanta, GA



4/13/2018



N/A











8,500





10 / 5

North Augusta Ballpark



North Augusta, SC



1/15/2021



1/15/2024



3,500





3,216









9 / 6















































$

515,505





392,189





388,506







Unamortized loan origination fees















(1,760)





(1,710)







Allowance for loan losses











(3,029)













































Carrying amount



















$

387,400





$

386,796







































































































(1) Carrying amounts presented per loan are amounts drawn, exclusive of deferred fee revenue.

(2) Effective May 24, 2018, the land acquisition bridge loan was converted into a real estate loan and a capital loan, shown below.

(3) The loan was repaid in full in connection with our acquisition of the underlying property.

(4) The current interest rate on the Haven Northgate loan was a variable rate of 600 basis points over LIBOR.

(5) Effective January 1, 2018, the deferred interest rate increased to 6.9% per annum until the accumulated accrued interest balance reaches $250, at which point the deferred interest rate reverts to 5.0%.

(6) The loan was repaid in full on June 20, 2018.

 

We hold options, but not obligations, to purchase certain of the properties which are partially financed by our real estate loan investments. The option purchase prices are negotiated at the time of the loan closing and are to be calculated based upon market cap rates at the time of exercise of the purchase option, less a discount ranging from between 10 and 60 basis points, depending on the loan. As of September 30, 2018, 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:

















Encore

Atlanta, GA

(2)



N/A



N/A



Palisades

Northern VA



304



1/1/2019



5/31/2019



Bishop Street

Atlanta, GA

(2)



N/A



N/A



Hidden River

Tampa, FL

(2)



N/A



N/A



CityPark II

Charlotte, NC



200



1/1/2019



4/1/2019



Park 35 on Clairmont

Birmingham, AL

(3)



N/A



N/A



Fort Myers

Fort Myers, FL



224



S + 90 days (4)



S + 150 days (4)



Wiregrass

Tampa, FL



392



S + 90 days (4)



S + 150 days (4)



360 Forsyth

Atlanta, GA



356



S + 90 days (4)



S + 150 days (4)



Morosgo

Atlanta, GA



258



S + 90 days (4)



S + 150 days (4)



University City Gateway

Charlotte, NC



338



S + 90 days (4)



S + 150 days (4)



Berryessa

San Jose, CA





N/A



N/A



The Anson

Nashville, TN



301



S + 90 days (4)



S + 150 days (4)



North Augusta Ballpark

North Augusta, SC





N/A



N/A



Cameron Park

Alexandria, VA



302



S + 90 days (4)



S + 150 days (4)



Southpoint

Fredericksburg, VA



240



S + 90 days (4)



S + 150 days (4)





















Student housing properties:

















Haven46

Tampa, FL

(2)



N/A



N/A



Haven Charlotte

Charlotte, NC

(2)



N/A



N/A



Solis Kennesaw

Atlanta, GA



248



(5)



(5)



























3,163





























(1) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio. The Berryessa and North Augusta Ballpark projects do not include exclusive purchase options, but we hold a Right of First Offer on these projects at prices acceptable to us and the developer.







(2) On May 7, 2018, these five purchase options were terminated, in exchange for an aggregate $12.5 million in termination fees from the developers.







(3) The option period on the loan expired unexercised on September 1, 2018.







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







(5) The option period begins on October 1 of the second academic year following project completion and ends on the following December 31. The developer may elect to expedite the option period to begin December 1, 2019 and end on December 31, 2019.



 



Mortgage Indebtedness

The following table presents certain details regarding our mortgage notes payable:







Principal balance as of



















Acquisition/

refinancing

date



September 30,

2018



December 31,

2017



Maturity

date



Interest

rate



Basis point

spread over

1 Month

LIBOR



Interest only

through date
(1)





























Multifamily communities:





(in thousands)

















Stone Rise

7/3/2014



$



(2)

$

23,939





8/1/2019



2.89

%



Fixed rate



8/31/2015

Summit Crossing

10/31/2017



38,520





39,019





11/1/2024



3.99

%



Fixed rate



N/A

Summit Crossing II

3/20/2014



13,357





13,357





4/1/2021



4.49

%



Fixed rate



4/30/2019

McNeil Ranch

1/24/2013



13,487





13,646





2/1/2020



3.13

%



Fixed rate



2/28/2018

Lake Cameron

1/24/2013





(3)

19,773





2/1/2020



3.13

%



Fixed rate



2/28/2018

Stoneridge

9/26/2014



25,679





26,136





10/1/2019



3.18

%



Fixed rate



N/A

Vineyards

9/26/2014



34,201





34,672





10/1/2021



3.68

%



Fixed rate



10/31/2017

Avenues at Cypress

2/13/2015



21,319





21,675





9/1/2022



3.43

%



Fixed rate



N/A

Avenues at Northpointe

2/13/2015



27,043





27,467





3/1/2022



3.16

%



Fixed rate



3/31/2017

Venue at Lakewood Ranch

5/21/2015



28,882





29,348





12/1/2022



3.55

%



Fixed rate



N/A

Aster at Lely Resort

6/24/2015



31,967





32,471





7/5/2022



3.84

%



Fixed rate



N/A

CityPark View

6/30/2015



20,690





21,038





7/1/2022



3.27

%



Fixed rate



N/A

Avenues at Creekside

7/31/2015



39,904





40,523





8/1/2024



3.86

%



160

(4)

8/31/2016

Citi Lakes

9/3/2015



41,779





42,396





4/1/2023



4.43

%



217

(5)

N/A

Stone Creek

6/22/2017



20,222





20,467





7/1/2052



3.22

%



Fixed rate



N/A

Lenox Village Town Center

12/21/2015



29,461





30,009





5/1/2019



3.82

%



Fixed rate



N/A

Lenox Village III

12/21/2015



17,551





17,802





1/1/2023



4.04

%



Fixed rate



N/A

Overton Rise

2/1/2016



39,414





39,981





8/1/2026



3.98

%



Fixed rate



N/A

Baldwin Park

1/5/2016



77,800





77,800





1/5/2019



4.56

%



230



1/4/2019

Crosstown Walk

1/15/2016



31,033





31,486





2/1/2023



3.90

%



Fixed rate



N/A

525 Avalon Park

6/15/2017



66,039





66,912





7/1/2024



3.98

%



Fixed rate



N/A

City Vista

7/1/2016



34,562





35,073





7/1/2026



3.68

%



Fixed rate



N/A

Sorrel

8/24/2016



32,306





32,801





9/1/2023



3.44

%



Fixed rate



N/A

Citrus Village

3/3/2017



29,539





29,970





6/10/2023



3.65

%



Fixed rate



6/09/2017

Retreat at Greystone

11/21/2017



34,789





35,210





12/1/2024



4.31

%



Fixed rate



N/A

Founders Village

3/31/2017



30,882





31,271





4/1/2027



4.31

%



Fixed rate



N/A

Claiborne Crossing

4/26/2017



26,487





26,801





6/1/2054



2.89

%



Fixed rate



N/A

Luxe at Lakewood Ranch

7/26/2017



38,554





39,066





8/1/2027



3.93

%



Fixed rate



N/A

Adara at Overland Park

9/27/2017



31,345





31,760





4/1/2028



3.90

%



Fixed rate



N/A

Aldridge at Town Village

10/31/2017



37,381





37,847





11/1/2024



4.19

%



Fixed rate

(6)

N/A

Reserve at Summit Crossing

9/29/2017



19,746





20,017





10/1/2024



3.87

%



Fixed rate



N/A

Overlook at Crosstown Walk

11/21/2017



21,946





22,231





12/1/2024



3.95

%



Fixed rate



N/A

Colony at Centerpointe

12/20/2017



32,929





33,346





10/1/2026



3.68

%



Fixed rate



N/A

Lux at Sorrel

1/9/2018



31,199









2/1/2030



3.91

%



Fixed rate



N/A

Green Park

2/28/2018



39,409









3/10/2028



4.09

%



Fixed rate



N/A

The Lodge at Hidden River

9/27/2018



41,685









10/1/2028



4.32

%



Fixed rate



N/A





























Total multifamily communities





1,101,107





1,045,310















































Grocery-anchored shopping centers:

Spring Hill Plaza

9/5/2014



9,314





9,470





10/1/2019



3.36

%



Fixed rate



10/31/2015

Parkway Town Centre

9/5/2014



6,774





6,887





10/1/2019



3.36

%



Fixed rate



10/31/2015

Woodstock Crossing

8/8/2014



2,949





2,989





9/1/2021



4.71

%



Fixed rate



N/A

Deltona Landings

9/30/2014



6,661





6,778





10/1/2019



3.48

%



Fixed rate



N/A

Powder Springs

9/30/2014



7,029





7,152





10/1/2019



3.48

%



Fixed rate



N/A

Kingwood Glen

9/30/2014



11,145





11,340





10/1/2019



3.48

%



Fixed rate



N/A

Barclay Crossing

9/30/2014



6,266





6,376





10/1/2019



3.48

%



Fixed rate



N/A

Sweetgrass Corner

9/30/2014



7,600





7,731





10/1/2019



3.58

%



Fixed rate



N/A

Parkway Centre

9/30/2014



4,364





4,441





10/1/2019



3.48

%



Fixed rate



N/A

The Market at Salem Cove

10/6/2014



9,296





9,423





11/1/2024



4.21

%



Fixed rate



11/30/2016

Independence Square

8/27/2015



11,780





11,967





9/1/2022



3.93

%



Fixed rate



9/30/2016

Royal Lakes Marketplace

9/4/2015



9,580





9,690





9/4/2020



4.61

%



250



4/3/2017

The Overlook at Hamilton Place

12/22/2015



20,012





20,301





1/1/2026



4.19

%



Fixed rate



N/A

Summit Point

10/30/2015



11,947





12,208





11/1/2022



3.57

%



Fixed rate



N/A

East Gate Shopping Center

4/29/2016



5,468





5,578





5/1/2026



3.97

%



Fixed rate



N/A

Fury's Ferry

4/29/2016



6,317





6,444





5/1/2026



3.97

%



Fixed rate



N/A

Rosewood Shopping Center

4/29/2016



4,243





4,328





5/1/2026



3.97

%



Fixed rate



N/A

Southgate Village

4/29/2016



7,542





7,694





5/1/2026



3.97

%



Fixed rate



N/A

The Market at Victory Village

5/16/2016



9,104





9,214





9/11/2024



4.40

%



Fixed rate



10/10/2017

Wade Green Village

4/7/2016



7,854





7,969





5/1/2026



4.00

%



Fixed rate



N/A

Lakeland Plaza

7/15/2016



28,450





29,023





8/1/2026



3.85

%



Fixed rate



N/A

University Palms

8/8/2016



12,890





13,162





9/1/2026



3.45

%



Fixed rate



N/A

Cherokee Plaza

8/8/2016



24,839





25,322





9/1/2021



4.35

%



225

(7)

N/A

Sandy Plains Exchange

8/8/2016



9,004





9,194





9/1/2026



3.45

%



Fixed rate



N/A

Thompson Bridge Commons

8/8/2016



12,037





12,291





9/1/2026



3.45

%



Fixed rate



N/A

Heritage Station

8/8/2016



8,909





9,097





9/1/2026



3.45

%



Fixed rate



N/A

Oak Park Village

8/8/2016



9,194





9,388





9/1/2026



3.45

%



Fixed rate



N/A

Shoppes of Parkland

8/8/2016



16,045





16,241





9/1/2023



4.67

%



Fixed rate



N/A

Champions Village

10/18/2016



27,400





27,400





11/1/2021



5.11

%



300

(8)

11/1/2021

Castleberry-Southard

4/21/2017



11,227





11,383





5/1/2027



3.99

%



Fixed rate



N/A

Rockbridge Village

6/6/2017



13,942





14,142





7/5/2027



3.73

%



Fixed rate



N/A

Irmo Station

7/26/2017



10,373





10,566





8/1/2030



3.94

%



Fixed rate



N/A

Maynard Crossing

8/25/2017



18,044





18,388





9/1/2032



3.74

%



Fixed rate



N/A

Woodmont Village

9/8/2017



8,587





8,741





10/1/2027



4.125

%



Fixed rate



N/A

West Town Market

9/22/2017



8,794





8,963





10/1/2025



3.65

%



Fixed rate



N/A

Crossroads Market

12/5/2017



18,699





19,000





1/1/2030



3.95

%



Fixed rate



N/A

Anderson Central

3/16/2018



11,888









4/1/2028



4.32

%



Fixed rate



N/A

Greensboro Village

5/22/2018



8,501









6/1/2028



4.20

%



Fixed rate



N/A

Governors Towne Square

5/22/2018



11,310









6/1/2028



4.20

%



Fixed rate



N/A

Conway Plaza

6/29/2018



9,756









7/5/2028



4.29

%



Fixed rate



N/A

Brawley Commons

7/6/2018



18,491









8/1/2028



4.36

%



Fixed rate



N/A





























Total grocery-anchored shopping centers





463,625





410,281















































Student housing properties:

North by Northwest

6/1/2016



32,198





32,767





10/1/2022



4.02

%



Fixed rate



N/A

SoL

3/29/2018



37,485





37,485





1/29/2019



4.36

%



210



1/29/2019

Stadium Village

10/27/2017



46,308





46,930





11/1/2024



3.80

%



Fixed rate



N/A

Ursa

12/18/2017



31,400





31,400





1/5/2020



5.26

%



300



1/5/2020

The Tradition

5/10/2018



30,000









6/6/2021



6.26

%



400

(9)

6/6/2021

Retreat at Orlando

5/31/2018



47,125









9/1/2025



4.09

%



Fixed rate



9/1/2020

The Bloc

6/27/2018



28,966









7/9/2021



5.81

%



355

(10)

7/9/2021





























Total student housing properties





253,482





148,582















































Office buildings:

Brookwood Center

8/29/2016



31,668





32,219





9/10/2031



3.52

%



Fixed rate



10/9/2017

Galleria 75

11/4/2016



5,588





5,716





7/1/2022



4.25

%



Fixed rate



N/A

Three Ravinia

12/30/2016



115,500





115,500





1/1/2042



4.46

%



Fixed rate



1/31/2022

Westridge at La Cantera

11/13/2017



53,488





54,440





12/10/2028



4.10

%



Fixed rate



N/A

Armour Yards

1/29/2018



40,000









2/1/2028



4.10

%



Fixed rate



2/29/2020

150 Fayetteville

7/31/2018



114,400









8/10/2028



4.27

%



Fixed rate



9/9/2020





























Total office buildings





360,644





207,875



















Grand total





2,178,858





1,812,048



















Less: deferred loan costs





(33,775)





(30,249)



















Less: below market debt adjustment





(4,500)





(5,147)



















Mortgage notes, net





$

2,140,583





$

1,776,652



















































Footnotes to Mortgage Notes Table



(1) Following the indicated interest only period (where applicable), monthly payments of accrued interest and principal are based on a 25 to 35-year amortization period through the maturity date.

(2) On September 28, 2018, the Company legally defeased the mortgage loan in conjunction with the sale of its Stone Rise property located in Philadelphia, PA. In connection with the defeasance, the mortgage and other liens on the property were extinguished and all existing collateral, including various guarantees, were released. As a result of the defeasance, the Company incurred costs associated with a defeasance premium of approximately $71,000.

(3) On March 20, 2018, the Company legally defeased the mortgage loan in conjunction with the sale of its Lake Cameron property, located in Raleigh, NC. In connection with the defeasance, the mortgage and other liens on the property were extinguished and all existing collateral, including various guarantees, were released. As a result of the defeasance, the Company incurred costs associated with a defeasance premium of approximately $355,000.

(4)  The mortgage instrument was assumed as part of the sales transaction; the 1 Month LIBOR index is capped at 5.0%, resulting in a cap on the combined rate of 6.6%.

(5) The 1 Month LIBOR index is capped at 4.33% resulting in a cap on the combined rate of 6.5%.

(6) The property was temporarily financed through a credit facility sponsored by the Federal Home Loan Mortgage Corporation; the Company obtained permanent mortgage financing subsequent to the closing as shown.

(7) The interest rate has a floor of 2.7%.

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

(9) The interest rate has a floor of 5.6%.

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

 



Multifamily Communities

As of September 30, 2018, our multifamily community portfolio consisted of the following properties:

















Three months ended

September 30, 2018



Property



Location



Number of

units



Average unit

size (sq. ft.)



Average

physical

occupancy



Average

rent per

unit



























Established Communities:























Avenues at Cypress



Houston, TX



240



1,170





96.8

%



$

1,436



Avenues at Northpointe



Houston, TX



280



1,167





96.2

%



$

1,382



Vineyards



Houston, TX



369



1,122





96.3

%



$

1,167



Aster at Lely Resort



Naples, FL



308



1,071





93.9

%



$

1,480



Venue at Lakewood Ranch



Sarasota, FL



237



1,001





94.0

%



$

1,561



Citi Lakes



Orlando, FL



346



984





93.4

%



$

1,419



Lenox Portfolio



Nashville, TN



474



861





95.7

%



$

1,205



Overton Rise



Atlanta, GA



294



1,018





95.4

%



$

1,541



Sorrel



Jacksonville, FL



290



1,048





95.6

%



$

1,270



























Total/Average Established Communities







2,838







95.3

%































Summit Crossing



Atlanta, GA



485



1,053





97.1

%



$

1,187



McNeil Ranch



Austin, TX



192



1,071









$

1,246



CityPark View



Charlotte, NC



284



948









$

1,099



Avenues at Creekside



San Antonio, TX



395



974









$

1,147



Stone Creek



Houston, TX



246



852









$

1,078



525 Avalon Park



Orlando, FL



487



1,394





96.0

%



$

1,438



Retreat at Greystone



Birmingham, AL



312



1,100





96.5

%



$

1,234



Broadstone at Citrus Village



Tampa, FL



296



980





97.0

%



$

1,288



Stoneridge Farms at the Hunt Club



Nashville, TN



364



1,153









$

1,103



Founders Village



Williamsburg, VA



247



1,070





96.5

%



$

1,373



Crosstown Walk



Tampa, FL



342



981





94.6

%



$

1,293



Claiborne Crossing



Louisville, KY



242



1,204





96.6

%



$

1,334



Luxe at Lakewood Ranch



Sarasota, FL



280



1,105









$

1,505



Adara Overland Park



Kansas City, KS



260



1,116





96.3

%



$

1,335



Aldridge at Town Village



Atlanta, GA



300



969





95.6

%



$

1,350



The Reserve at Summit Crossing



Atlanta, GA



172



1,002





95.7

%



$

1,347



Overlook at Crosstown Walk



Tampa, FL



180



986





94.1

%



$

1,385



Colony at Centerpointe



Richmond, VA



255



1,149





95.9

%



$

1,370



Lux at Sorrel



Jacksonville, FL



265



1,025





94.0

%



$

1,385



Green Park



Atlanta, GA



310



985





94.0

%



$

1,453



Lodge at Hidden River



Tampa, FL



300



980



































Value-add project:























Village at Baldwin Park



Orlando, FL



528



1,069









$

1,646



































6,742















Joint venture:























City Vista



Pittsburgh, PA



272



1,023





96.2

%



$

1,357



























Total PAC Non-Established Communities







7,014















Average stabilized physical occupancy















95.6

%































Total multifamily community units







9,852







































For the three-month period ended September 30, 2018, our average established multifamily communities' physical occupancy was 95.3%. We calculate average established physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date and that have been owned for at least 15 full months as of the end of the first quarter of each year. We exclude the operating results of properties for which construction of adjacent phases has commenced, properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. For the three-month period ended September 30, 2018, our average stabilized physical occupancy was 95.6%. We calculate average stabilized physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date. For the three-month period ended September 30, 2018, our average economic occupancy was 95.5%. We define average economic occupancy as market rent reduced by vacancy losses, expressed as a percentage. All of our multifamily properties are included in these calculations except for properties which are not yet stabilized (which we define as properties having first achieved 93% physical occupancy for three full months in a quarter), properties which are owned for less than the entire reporting period and properties which are undergoing significant capital projects, have sustained significant casualty losses or are adding additional phases (Stone Creek, Village at Baldwin Park, Luxe at Lakewood Ranch, CityPark View and Avenues at Creekside). We also exclude properties which are currently being marketed for sale, which included Stoneridge Farms at Hunt Club at September 30, 2018.

Student Housing Properties

As of September 30, 2018, our student housing portfolio consisted of the following properties:

 





















Three months ended

September 30, 2018

Property



Location



Number

of units



Number

of beds



Average unit

size (sq. ft.)



Average

physical

occupancy



Average rent

per bed

Student housing properties:

























North by Northwest



Tallahassee, FL



219



679



1,250





95.2

%



$

730

SoL



Tempe, AZ



224



639



1,296





95.1

%



$

701

Stadium Village (1)



Atlanta, GA



198



792



1,466





97.2

%



$

700

Ursa (1)



Waco, TX



250



840



1,634









n/a

The Tradition



College Station, TX



427



808



549









n/a

The Retreat at Orlando



Orlando, FL



221



894



2,036









n/a

The Bloc



Lubbock, TX



140



556



1,394









n/a



































1,679



5,208













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

 

Capital Expenditures

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

For the three-month period ended September 30, 2018, 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

$

117





$

11.96





$





$





$

117





$

11.96



Carpets





418





42.78













418





42.78



Wood / vinyl flooring

87





8.87













87





8.87



Mini blinds and ceiling fans

31





3.17













31





3.17



Fire safety











34





3.46





34





3.46



HVAC



143





14.60













143





14.60



Computers, equipment, misc.

3





0.34





83





8.50





86





8.84



Elevators























Exterior painting









159





16.28





159





16.28



Leasing office and other common amenities

38





3.92





1,741





178.08





1,779





182.00



Major structural projects









5,532





565.93





5,532





565.93



Cabinets and countertop upgrades









769





78.63





769





78.63



Landscaping and fencing









293





29.99





293





29.99



Parking lot











279





28.54





279





28.54



Common area items









95





9.72





95





9.72



Totals





$

837





$

85.64





$

8,985





$

919.13





$

9,822





$

1,004.77



 

For the three-month period ended September 30, 2018, our capital expenditures for student housing properties consisted of:







Capital Expenditures - Student Housing Properties







Recurring



Non-recurring



Total

(in thousands, except per-unit figures)

Amount



Per Bed



Amount



Per Bed



Amount



Per Bed

Appliances

$

23





$

4.47





$





$





$

23





$

4.47



Carpets





73





13.95













73





13.95



Wood / vinyl flooring

1





0.16













1





0.16



Mini blinds and ceiling fans

9





1.76













9





1.76



Fire safety

























HVAC



31





5.96













31





5.96



Computers, equipment, misc.

3





0.50





44





8.46





47





8.96



Elevators























Exterior painting























Leasing office and other common amenities

66





12.76





29





5.56





95





18.32



Major structural projects









3





0.56





3





0.56



Cabinets and counter top upgrades

1





0.12





227





43.56





228





43.68



Landscaping and fencing









6





1.06





6





1.06



Parking lot

























Common area items









36





6.83





36





6.83



Totals





$

207





$

39.68





$

345





$

66.03





$

552





$

105.71



 

Grocery-Anchored Shopping Center Portfolio

As of September 30, 2018, 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





95.9

%



 Publix

Lakeland Plaza

 Atlanta, GA



1990



301,711





94.6

%



Sprouts

Powder Springs

 Atlanta, GA



1999



77,853





96.9

%



 Publix

Rockbridge Village

 Atlanta, GA



2005



102,432





94.2

%



 Kroger

Roswell Wieuca Shopping Center

 Atlanta, GA



2007



74,370





100.0

%



 The Fresh Market

Royal Lakes Marketplace

 Atlanta, GA



2008



119,493





89.3

%



 Kroger

Sandy Plains Exchange

 Atlanta, GA



1997



72,784





93.2

%



Publix

Summit Point

 Atlanta, GA



2004



111,970





86.9

%



 Publix

Thompson Bridge Commons

 Atlanta, GA



2001



92,587





96.1

%



Kroger

Wade Green Village

 Atlanta, GA



1993



74,978





93.2

%



 Publix

Woodmont Village

 Atlanta, GA



2002



85,639





94.6

%



Kroger

Woodstock Crossing

 Atlanta, GA



1994



66,122





100.0

%



 Kroger

East Gate Shopping Center

 Augusta, GA



1995



75,716





92.2

%



 Publix

Fury's Ferry

 Augusta, GA



1996



70,458





98.6

%



 Publix

Parkway Centre

 Columbus, GA



1999



53,088





100.0

%



 Publix

Spring Hill Plaza

 Nashville, TN



2005



61,570





100.0

%



 Publix

Parkway Town Centre

 Nashville, TN



2005



65,587





98.2

%



 Publix

The Market at Salem Cove

 Nashville, TN



2010



62,356





97.8

%



 Publix

The Market at Victory Village

 Nashville, TN



2007



71,300





98.5

%



 Publix

Greensboro Village

 Nashville, TN



2005



70,203





98.3

%



 Publix

The Overlook at Hamilton Place

 Chattanooga, TN



1992



213,095





100.0

%



 The Fresh Market

Shoppes of Parkland

 Miami-Ft. Lauderdale, FL



2000



145,720





98.4

%



BJ's Wholesale Club

Barclay Crossing

 Tampa, FL



1998



54,958





100.0

%



 Publix

Deltona Landings

 Orlando, FL



1999



59,966





100.0

%



 Publix

University Palms

 Orlando, FL



1993



99,172





100.0

%



Publix

Conway Plaza

 Orlando, FL



1966



117,705





98.0

%



Publix

Crossroads Market

 Naples, FL



1993



126,895





100.0

%



Publix

Neapolitan Way

 Naples, FL



1985



137,580





91.6

%



Publix

Champions Village

 Houston, TX



1973



383,346





78.9

%



Randalls

Kingwood Glen

 Houston, TX



1998



103,397





97.9

%



 Kroger

Independence Square

 Dallas, TX



1977



140,218





84.9

%



 Tom Thumb

Oak Park Village

 San Antonio, TX



1970



64,855





100.0

%



H.E.B.

Sweetgrass Corner

 Charleston, SC



1999



89,124





96.2

%



 Bi-Lo

Irmo Station

 Columbia, SC



1980



99,384





95.3

%



Kroger

Anderson Central

 Greenville Spartanburg, SC



1999



223,211





96.1

%



 Walmart

Fairview Market

 Greenville Spartanburg, SC



1998



53,888





73.5

%



Aldi

Rosewood Shopping Center

 Columbia, SC



2002



36,887





90.2

%



 Publix

Brawley Commons

 Charlotte, NC



1997



122,028





97.4

%



 Publix

West Town Market

 Charlotte, NC



2004



67,883





100.0

%



Harris Teeter

Heritage Station

 Raleigh, NC



2004



72,946





100.0

%



Harris Teeter

Maynard Crossing

 Raleigh, NC



1996



122,781





96.9

%



Harris Teeter

Southgate Village

 Birmingham, AL



1988



75,092





98.0

%



 Publix





















Grand total/weighted average









4,571,888





94.6

%





 

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

As of September 30, 2018, our grocery-anchored shopping center portfolio was 94.6% leased. We define percent leased as the percentage of gross leasable area that is leased, including noncancelable lease agreements that have been signed which have not yet commenced.

Details regarding lease expirations (assuming no exercises of tenant renewal options) within our grocery-anchored shopping center portfolio as of September 30, 2018 were:



Total grocery-anchored shopping center portfolio



Number of leases



Leased GLA



Percent of leased

GLA













Month to month

10





25,107





0.6

%

2018

18





34,746





0.8

%

2019

105





578,975





13.4

%

2020

125





535,312





12.4

%

2021

123





557,261





12.9

%

2022

106





351,053





8.1

%

2023

92





378,994





8.8

%

2024

28





610,914





14.1

%

2025

26





429,810





9.9

%

2026

12





143,420





3.3

%

2027

19





121,651





2.8

%

2028+

36





553,131





12.9

%













Total

700





4,320,374





100.0

%

 

The Company's Quarterly Report on Form 10-Q for third quarter 2018 will present income statements of New Market Properties, LLC within the Results of Operations section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

Second-generation capital expenditures within our grocery-anchored shopping center portfolio by property for the third quarter 2018 totaled approximately $469,000. Second-generation capital expenditures exclude those expenditures made in our grocery-anchored shopping center portfolio (i) to lease space to "first generation" tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our ownership standards, and (iii) for property re-developments and repositioning.

Office Building Portfolio

As of September 30, 2018, our office building portfolio consisted of the following properties:

Property Name



Location



GLA



Percent

leased

Three Ravinia



Atlanta, GA



814,000





91

%

150 Fayetteville



Raleigh, NC



560,000





89

%

Westridge at La Cantera



San Antonio, TX



258,000





100

%

Armour Yards



Atlanta, GA



187,000





94

%

Brookwood Center



Birmingham, AL



169,000





100

%

Galleria 75



Atlanta, GA



111,000





96

%























2,099,000





93

%

 

The Company's office building portfolio includes the following significant tenants:







Rentable square

footage



Percent of

Annual Base

Rent



Annual Base

Rent (in

thousands)

InterContinental Hotels Group

520,039





25.4

%



$

11,821



State Farm Mutual Automobile Insurance Company

183,168





7.1

%



3,300



United Services Automobile Association

129,015





6.5

%



3,042



Harland Clarke Corporation

129,016





6.0

%



2,811



Smith Anderson

91,998





5.9

%



2,768





















1,053,236





50.9

%



$

23,742



               

The Company defines Annual Base Rent as the current monthly base rent annualized under the respective leases.

The Company's leased square footage of its office building portfolio expires according to the following schedule:

Office building portfolio









Percent of

Year of lease

expiration



Rentable square



rented



feet



square feet

2018



23,128





1.2

%

2019



50,109





2.6

%

2020



62,478





3.2

%

2021



241,325





12.5

%

2022



58,922





3.1

%

2023



109,036





5.6

%

2024



203,703





10.5

%

2025



125,987





6.5

%

2026



91,998





4.8

%

2027



259,700





13.4

%

2028+



707,166





36.6

%











Total



1,933,552





100.0

%

 

The Company recognized second-generation capital expenditures within its office building portfolio of approximately $16,000 during the third quarter 2018. Second-generation capital expenditures exclude those expenditures made in our office building portfolio (i) to lease space to "first generation" tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our Class A ownership standards (and which amounts were underwritten into the total investment at the time of acquisition) and (iii) for property re-developments and repositionings.

Definitions of Non-GAAP Measures

We disclose FFO, AFFO and NOI, each of which meet the definition of a "non-GAAP financial measure", as set forth in Item 10(e) of Regulation S-K promulgated by the SEC. As a result we are required to include in this filing a statement of why the Company believes that presentation of these measures provides useful information to investors. None of FFO, AFFO and NOI should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further FFO, AFFO and NOI should be compared with our reported net income or net loss and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements. FFO and AFFO are not considered measures of liquidity and are not alternatives to measures calculated under GAAP.

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

FFO is one of the most commonly utilized Non-GAAP measures currently in practice. In its 2002 "White Paper on Funds From Operations," which was 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. 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 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. FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.

Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders ("AFFO")

AFFO makes further adjustments to FFO results in order to arrive at a more refined measure of operating and financial performance. There is no industry standard definition of AFFO and practice is divergent across the industry. The Company calculates AFFO as:

FFO, plus:

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

Less:

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

AFFO figures reported by us may not be comparable to those AFFO figures reported by other companies. We utilize AFFO as another measure of the operating performance of our portfolio of real estate assets. We believe AFFO is useful to investors as a supplemental gauge of our operating performance and may be useful in comparing our operating performance with other real estate companies. AFFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders. FFO and AFFO are not considered measures of liquidity and are not alternatives to measures calculated under GAAP.

Multifamily Established Communities' Same Store Net Operating Income (NOI)

We use same store net operating income as an operational metric for our established communities, enabling comparisons of those properties' operating results between the current reporting period and the prior year comparative period. We define our population of established communities as those that are stabilized and that have been owned for at least 15 full months, as of the end of the first quarter of each year, and exclude the operating results of properties for which construction of adjacent phases has commenced, and properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. We define net operating income as rental and other property revenues, less total property and maintenance expenses, property management fees, real estate taxes, general and administrative expenses, and property insurance. We believe that net operating income is an important supplemental measure of operating performance for REITs because it provides measures of core operations, rather than factoring in depreciation and amortization, financing costs, acquisition costs, and other corporate expenses. Net operating income is a widely utilized measure of comparative operating performance in the REIT industry, but is not a substitute for the most comparable GAAP-compliant measure, net income/loss.

About Preferred Apartment Communities, Inc.         

Preferred Apartment Communities, Inc. 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 development of multifamily communities and other properties.  As a secondary strategy, we may acquire or originate senior mortgage loans, subordinate loans or real estate loans secured by interests in multifamily properties, membership or partnership interests in multifamily properties and other multifamily related assets and invest a lesser portion of our assets in other real estate related investments, including other income-producing property types, senior mortgage loans, subordinate loans or real estate loans secured by interests in other income-producing property types or membership or partnership interests in other income-producing property types as determined by Preferred Apartment Advisors, LLC, or our Manager, as appropriate for us. At September 30, 2018, the Company was the approximate 97.4% 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.

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/preferred-apartment-communities-inc-reports-results-for-third-quarter-ended-2018-300744186.html

SOURCE Preferred Apartment Communities, Inc.

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