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30.10.2017 21:45:00

Preferred Apartment Communities, Inc. Reports Results for Third Quarter 2017

ATLANTA, Oct. 30, 2017 /PRNewswire/ -- Preferred Apartment Communities, Inc. (NYSE: APTS) ("we", "our", the "Company" or "Preferred Apartment Communities") today reported results for the quarter ended September 30, 2017. Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of Common Stock and Class A Units of the Company's operating partnership ("Class A Units") outstanding.

Preferred Apartment Communities

"The third quarter continued our strong results for the year. Our FFO is up 53% per share for the first nine months; our Core FFO is up 12.1% and our dividend increase is 15.5% per share.  These were extraordinary accomplishments.  During the nine months, we have issued 9.1 million shares of Common Stock," said John A. Williams, Preferred Apartment Communities' Chairman and Chief Executive Officer.

Financial Highlights

Our operating results are presented below.



Three months ended September 30,




Nine months ended September 30,






2017


2016


% change


2017


2016


% change

















Revenues

$

74,900,199



$

53,537,337



39.9

%


$

212,352,447



$

141,127,062



50.5

%

















Per share data:














Net income (loss) (1)

$

(0.49)



$

(0.56)



(12.5)

%


$

(0.46)



$

(1.45)



(68.3)

%

















FFO (2)

$

0.36



$

0.31



16.1

%


$

1.01



$

0.66



53.0

%

















Core FFO (2)

$

0.38



$

0.38



—



$

1.11



$

0.99



12.1

%

















Dividends (3)

$

0.235



$

0.2025



16.0

%


$

0.69



$

0.5975



15.5

%


















(1)

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



(2)

FFO and Core FFO are presented per weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliations of FFO, Core FFO and AFFO (each as defined below) to Net Income (Loss) Attributable to Common Stockholders.



(3)

Per share of Common Stock and Class A Unit outstanding.

 

Funds from operations ("FFO") for the three months ended September 30, 2016 reflect acquisition-related costs of approximately $1.4 million, or $0.05 per share. In 2017, the majority of these types of costs are deferred and amortized over the life of the acquired assets (see "2017 Guidance" section). Core Funds From Operations Attributable to Common Stockholders and Unitholders ("Core FFO") excludes acquisition costs and certain other costs not representative of our ongoing operations. Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders ("AFFO") removes significant non-cash revenues and expenses from our Core FFO results.

  • For the third quarter 2017, our Core FFO payout ratio to our Common Stockholders and Unitholders was approximately 64.5% and our AFFO payout ratio to Common Stockholders and Unitholders was approximately 88.2%. (1)
  • For the third quarter 2017, our Core FFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 55.9% and our AFFO payout ratio (before the deduction of preferred dividends) to our Series A Preferred Stockholders was approximately 63.4%. (1)
  • We issued approximately 3.2 million shares of Common Stock during the third quarter 2017 and approximately 9.1 million shares of Common Stock during the nine months ended September 30, 2017.
  • At September 30, 2017, the market value of our common stock was $18.88. 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 28.7% through September 30, 2017.
  • As of September 30, 2017, our total assets were approximately $2.9 billion compared to approximately $2.1 billion as of September 30, 2016, an increase of approximately $0.8 billion, or approximately 37.9%. This growth was driven primarily by the acquisition of 18 real estate properties (less the sale of three properties) and an increase of approximately $104.3 million of the funded amount of our real estate loan investment portfolio since September 30, 2016.
  • As of September 30, 2017, the average age of our multifamily communities was approximately 5.9 years, which we believe is among the youngest in the multifamily REIT industry.
  • At September 30, 2017, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 54.3%.
  • Cash flow from operations for the quarter ended September 30, 2017 was approximately $28.1 million, an increase of approximately $7.0 million, or 33.8%, compared to approximately $21.0 million for the quarter ended September 30, 2016.
  • For the three-month period ended September 30, 2017, our average physical occupancy was 94.9%.
  • We sustained damages at our Stone Creek multifamily community from Hurricane Harvey in the third quarter. The resulting impact required us to write off approximately $6.9 million in depreciated real estate assets. We expect our property insurance to cover all losses. Our income for the three-month period ended September 30, 2017 was impacted by approximately $217,000 for our insurance deductible, lost rent, and other related costs. Hurricane Irma also impacted our portfolio of multifamily and grocery-anchored shopping center properties in Florida. We anticipate costs associated with this storm to total approximately $300,000 to $500,000, which will be recognized during the fourth quarter 2017 and beyond.

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

Acquisitions of Properties

During the third quarter 2017, we acquired the following properties:


Property


Location (MSA)


Units


Leasable

 square feet












Multifamily communities:









Luxe Lakewood Ranch


Sarasota, FL


280


n/a



Adara


Kansas City, KS


260


n/a



Aldridge at Town Village


Atlanta, GA


300


n/a



The Reserve at Summit Crossing


Atlanta, GA


172


n/a












Grocery-anchored shopping centers:









Irmo Station


Columbia, SC


n/a


99,384



Maynard Crossing


Raleigh, NC


n/a


122,781



Woodmont Village


Atlanta, GA


n/a


85,639



West Town Market


Charlotte, NC


n/a


67,883


 

Real Estate Loan Investments

During the third quarter 2017, we closed on the following real estate loan investments in support of the development and construction of four multifamily communities and one student housing property. For each of these loans, we hold an option to purchase the property at a discount to market value, once stabilized.


Date


Location (MSA)


Underlying

 Units


Maximum

 principal

 amount
(millions)












7/11/2017


Atlanta, GA


356


$

22.4




7/31/2017


Atlanta, GA


258


17.9




8/3/2017


Fort Myers, FL


224


15.6




8/18/2017


Charlotte, NC


338


17.7




9/27/2017


Atlanta, GA


248

(1)


20.7

















1,424


$

94.3













(1) An 816-bed student housing property located near the campus of Kennesaw State University in Atlanta, Georgia.


 

Real Estate Assets



Owned as of

 September 30,
2017


Potential additions

 from real estate
loan investment
portfolio (1)


Potential total



Multifamily communities:








Properties

29


16


45



Units

9,086


4,836


13,922



Grocery-anchored shopping centers:








Properties

37


—

(2)

37



Gross leasable area (square feet)

3,854,196


—


3,854,196



Student housing properties:








Properties

2


9


11



Units

444


2,122


2,566



Beds

1,319


6,509


7,828



Office buildings:








Properties

3


—


3



Rentable square feet

1,094,000


—


1,094,000



















(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)  Effective as of September 29, 2017, we negotiated the cancelation of the purchase option on our real estate investment loan supporting the Dawsonville grocery-anchored shopping center in exchange for a fee of $250,000.

 

Subsequent to Quarter End

On October 27, 2017, we acquired a 98% interest in a joint venture which owns the Stadium Village student housing property in Atlanta, Georgia.

Multifamily Same Store Financial Data

The following chart presents same store operating results for the Company's multifamily communities. Effective with the third quarter 2017, we define our population of same store properties 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, enabling comparisons of the current year quarterly and annual reporting periods to the prior year comparative periods. The Company excludes the same store operating results of properties for which construction of adjacent phases has commenced (e.g., the Company holds real estate loans partially supporting an additional phase of the CityPark View multifamily community, which is excluded as well), properties which are undergoing significant capital projects, have sustained significant casualty losses, or are currently being marketed for sale. For the periods presented, same store operating results consist of the operating results of the following multifamily communities:

Stoneridge Farms at Hunt Club


Lake Cameron


Avenues at Cypress

Vineyards


Aster at Lely


Avenues at Northpointe

McNeil Ranch


Venue at Lakewood Ranch


Stone Rise

Citi Lakes


Lenox Portfolio



 

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

 

Same Store Net Operating Income












Nine months ended:







9/30/2017


9/30/2016


$ change


% change

Revenues:









Rental revenues


$

35,434,014



$

35,076,434



$

357,580



1.0

%

Other property revenues


3,882,091



3,891,569



(9,478)



(0.2)

%

Total revenues


39,316,105



38,968,003



348,102



0.9

%










Operating expenses:









Property operating and maintenance


5,443,671



5,353,482



90,189



1.7

%

Payroll


3,422,160



3,330,848



91,312



2.7

%

Property management fees


1,580,543



1,558,169



22,374



1.4

%

Real estate taxes


5,670,344



5,913,493



(243,149)



(4.1)

%

Other


1,683,005



1,608,652



74,353



4.6

%

Total operating expenses


17,799,723



17,764,644



35,079



0.2

%










Same store net operating income


$

21,516,382



$

21,203,359



$

313,023



1.5

%

 

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








Nine months ended:



9/30/2017


9/30/2016






Same store net operating income


$

21,516,382



$

21,203,359


Add:





Non-same-store property revenues


130,953,152



70,863,871


Less:





Non-same-store property operating expenses

49,283,359



27,803,010







Property net operating income


103,186,175



64,264,220


Add:





Interest revenue on notes receivable


26,111,674



20,984,625


Interest revenue on related party notes receivable


15,971,516



10,310,563


Less:





Equity stock compensation


2,607,667



1,867,706


Depreciation and amortization


82,186,960



54,981,064


Interest expense


48,085,016



30,688,505


Acquisition costs


14,002



6,885,864


Management fees


14,524,517



9,484,161


Insurance, professional fees and other

2,191,192



3,242,490


Gain on sale of real estate


37,635,014



4,271,506


Loss on extinguishment of debt


(888,428)



—


Contingent asset management and general and administrative expense fees


(1,001,864)



(1,458,245)







Net income (loss)


$

33,408,461



$

(5,860,631)


 

Same Store Net Operating Income












Three months ended:







9/30/2017


9/30/2016


$ change


% change

Revenues:









Rental revenues


$

11,915,270



$

11,781,685



$

133,585



1.1

%

Other property revenues


1,330,552



1,291,119



39,433



3.1

%

Total revenues


13,245,822



13,072,804



173,018



1.3

%










Operating expenses:









Property operating and maintenance


1,960,136



1,901,984



58,152



3.1

%

Payroll


1,147,016



1,107,878



39,138



3.5

%

Property management fees


530,011



530,818



(807)



(0.2)

%

Real estate taxes


1,685,947



1,547,755



138,192



8.9

%

Other


560,871



531,387



29,484



5.5

%

Total operating expenses


5,883,981



5,619,822



264,159



4.7

%










Same store net operating income


$

7,361,841



$

7,452,982



$

(91,141)



(1.2)

%

 

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








Three months ended:



9/30/2017


9/30/2016






Same store net operating income


$

7,361,841



$

7,452,982


Add:





Non-same-store property revenues


46,161,252



29,468,290


Less:





Non-same-store property operating expenses

17,491,213



10,768,109







Property net operating income


36,031,880



26,153,163


Add:





Interest revenue on notes receivable


9,673,536



7,194,742


Interest revenue on related party notes receivable


5,819,589



3,801,501


Less:





Equity stock compensation


863,412



638,414


Depreciation and amortization


28,903,770



21,664,363


Interest expense


16,678,418



12,234,174


Acquisition costs


—



1,357,537


Management fees


5,147,606



3,759,084


Insurance, professional fees and other

544,964



921,414


Contingent asset management and general and administrative expense fees


(655,944)



(736,960)







Net income (loss)


$

42,779



$

(2,688,620)


 

Capital Markets Activities

During the third quarter 2017, we issued and sold an aggregate of 77,277 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 proceeds of approximately $69.5 million after commissions and other fees. In addition, during the third quarter 2017, we issued approximately 1.9 million shares of Common Stock pursuant to the exercise of warrants issued under our Series A Preferred Stock offerings, resulting in aggregate gross proceeds of approximately $25.7 million. We also issued approximately 235,000 shares of Common Stock for redemptions of 4,545 shares of Series A Preferred Stock during the third quarter.

During the third quarter 2017, we issued and sold an aggregate of 4,546 shares of Series M Redeemable Preferred Stock ("mShares"), resulting in net proceeds after dealer manager fees of approximately $4.4 million.

During the third quarter 2017, we sold approximately 1.0 million shares of Common Stock pursuant to our "at the market" offering (the "Common Stock ATM Offering"), resulting in aggregate gross proceeds of approximately $18.4 million.

Collectively, these activities added approximately 3.2 million shares to our outstanding shares of Common Stock, which totaled approximately 35.6 million shares at September 30, 2017. The closing price of our Common Stock was $18.88 on September 29, 2017 versus $13.51 on September 30, 2016. Our total equity book value increased approximately 49% to $1.17 billion at September 30, 2017 from $785 million at September 30, 2016.

Dividends

Quarterly Dividends on Common Stock and Class A OP Units

On August 3, 2017, we declared a quarterly dividend on our Common Stock of $0.235 per share for the third quarter 2017. This represents a 16.0% increase in our common stock dividend from our third quarter 2016 common stock dividend of $0.2025 per share, and an annualized dividend growth rate of 14.2% since June 30, 2011, the first quarter end following our initial public offering in April 2011. The third quarter dividend was paid on October 16, 2017 to all stockholders of record on September 15, 2017. In conjunction with the Common Stock dividend, the Company's operating partnership declared a distribution on its Class A Units of $0.235 per unit for the third quarter 2017, which was paid on October 16, 2017 to all Class A Unit holders of record as of September 15, 2017.

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 $16.3 million for the quarter ended September 30, 2017 and represent a 6% annual yield. We declared and paid dividends totaling approximately $139,000 on our Series M Redeemable Preferred Stock, or mShares, for the quarter ended September 30, 2017. The mShares have an escalating dividend rate from 5.75% in year one to 7.50% in year eight and thereafter.

Conference Call and Supplemental Data

Preferred Apartment Communities will hold its quarterly conference call on Tuesday, October 31, 2017 at 11:00 a.m. Eastern Time to discuss its third quarter 2017 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, October 31, 2017
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time)

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

2017 Guidance:

Net income (loss) per share -  We 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. Through December 31, 2016, the Company expensed property acquisition costs as incurred, which include costs such as due diligence, legal, certain accounting, environmental and consulting, when the acquisition constituted a business combination. Accounting Standards Update 2017-01, which was adopted by the Company effective January 1, 2017, will cause the Company to capitalize certain of these costs for transactions deemed to be asset acquisitions (which we believe our contemplated future acquisitions will be deemed to be) and amortize them over their estimated useful lives. 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 Core FFO per share to this measure.

Core FFO per share  -   We currently project Core FFO to be in the range of $1.43 - $1.46 per share for the full year 2017.

Revenue - We currently project total revenues to be in the range of $285 million - $315 million for the full year 2017.

Core FFO, AFFO and FFO are all calculated after deductions for all preferred stock dividends. Reconciliations of net income (loss) attributable to common stockholders to Core FFO, AFFO and FFO for the three-month and nine-month periods ended September 30, 2017 and 2016 appear in the attached report, as well as on the Company's website and is available using the following link:

http://investors.pacapts.com/download/3Q17_Earnings_and_Supplemental_Data.pdf

Forward-Looking Statements

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

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

We refer you to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2016 that was filed with the Securities and Exchange Commission, or SEC, on March 1, 2017, 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-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 calling 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 2017 SUPPLEMENTAL FINANCIAL DATA                       

                                           


Preferred Apartment Communities, Inc.

Consolidated Statements of Operations

(Unaudited)








Three months ended September 30,


Nine months ended September 30,



2017


2016


2017


2016

Revenues:









Rental revenues


$

50,072,135



$

37,319,207



$

143,676,962



$

96,541,544


Other property revenues


9,334,939



5,221,887



26,592,295



13,290,330


Interest income on loans and notes receivable


9,673,536



7,194,742



26,111,674



20,984,625


Interest income from related parties


5,819,589



3,801,501



15,971,516



10,310,563


Total revenues


74,900,199



53,537,337



212,352,447



141,127,062











Operating expenses:









Property operating and maintenance


7,900,753



5,504,848



21,637,551



13,883,133


Property salary and benefits

3,402,623



2,808,402



9,649,843



7,688,470


Property management fees

2,053,446



1,724,411



6,016,003



4,308,841


Real estate taxes


7,705,706



4,789,085



23,289,784



15,457,134


General and administrative


1,701,574



1,144,256



4,861,083



3,255,728


Equity compensation to directors and executives

863,412



638,414



2,607,667



1,867,706


Depreciation and amortization


28,903,770



21,664,363



82,186,960



54,981,064


Acquisition and pursuit costs

—



1,357,537



14,002



6,885,864


Asset management fees to related party


5,147,606



3,759,084



14,524,517



9,484,161


Insurance, professional fees, and other expenses


1,156,056



1,338,343



3,820,010



4,216,838











Total operating expenses


58,834,946



44,728,743



168,607,420



122,028,939


Contingent asset management and general and administrative








expense fees

(655,944)



(736,960)



(1,001,864)



(1,458,245)











Net operating expenses


58,179,002



43,991,783



167,605,556



120,570,694


Operating income


16,721,197



9,545,554



44,746,891



20,556,368


Interest expense


16,678,418



12,234,174



48,085,016



30,688,505


Loss on extinguishment of debt


—



—



888,428



—


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


42,779



(2,688,620)



(4,226,553)



(10,132,137)


Gain on sale of real estate


—



—



37,635,014



4,271,506











Net income (loss)


42,779



(2,688,620)



33,408,461



(5,860,631)


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

(1,119)



86,484



(1,097,008)



175,045











Net income (loss) attributable to the Company


41,660



(2,602,136)



32,311,453



(5,685,586)











Dividends declared to preferred stockholders


(16,420,996)



(11,015,706)



(46,042,181)



(28,341,723)


Earnings attributable to unvested restricted stock


(4,302)



(6,159)



(11,743)



(12,434)











Net loss attributable to common stockholders


$

(16,383,638)



$

(13,624,001)



$

(13,742,471)



$

(34,039,743)











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








basic and diluted


$

(0.49)



$

(0.56)



$

(0.46)



$

(1.45)











Dividends per share declared on Common Stock


$

0.235



$

0.203



$

0.690



$

0.598











Weighted average number of shares of Common Stock outstanding,








basic and diluted


33,539,920



24,340,791



30,147,497



23,552,951


 

 

 

Reconciliation of FFO, Core FFO, and AFFO

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






Three months ended September 30,






2017


2016









Net loss attributable to common stockholders (See note 1)

$

(16,383,638)



$

(13,624,001)










Add:

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

1,119



(86,484)



Depreciation of real estate assets


21,596,586



15,283,505



Amortization of acquired real estate intangible assets and deferred leasing costs

7,105,646



6,243,815










FFO

12,319,713



7,816,835










Add:

Acquisition and pursuit costs



—



1,357,537



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

28,977



26,937



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

407,050



288,127



Weather-related property operating losses  (See note 5)

216,734



—










Core FFO

12,972,474



9,489,436










Add:

Non-cash equity compensation to directors and executives

863,412



638,414



Amortization of loan closing costs (See note 6)


905,371



723,426



Depreciation/amortization of non-real estate assets


201,538



137,043



Net loan fees received (See note 7)


878,940



250,602



Accrued interest income received (See note 8)


1,796,789



—



Non-cash dividends on Series M Preferred Stock


33,094



—



Amortization of lease inducements (See note 9)


144,566



—


Less:

Non-cash loan interest income (See note 7)


(4,859,509)



(3,950,676)



Amortization of acquired above and below market lease intangibles

 





and straight-line rental revenues (See note 10)

(1,940,912)



(643,123)



Amortization of deferred revenues (See note 11)


(286,926)



—



Normally recurring capital expenditures and leasing costs (See note 12)

(1,214,309)



(993,684)


AFFO

$

9,494,528



$

5,651,438










Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

8,158,256



$

4,992,038



Distributions to Unitholders (See note 2)


211,781



179,449



Total




$

8,370,037



$

5,171,487










Common Stock dividends and Unitholder distributions per share


$

0.235



$

0.2025










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

$

0.36



$

0.31


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

$

0.38



$

0.38


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

$

0.28



$

0.22






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





Basic:




33,539,920



24,340,791



Common Stock



901,195



886,168



Class A Units




34,441,115



25,226,959



Common Stock and Class A Units














Diluted Common Stock and Class A Units (B)


37,819,923



27,032,093










Actual shares of Common Stock outstanding, including 18,306 and 23,247 unvested shares




 of restricted Common Stock at September 30, 2017 and 2016, respectively

35,616,050



24,681,281


Actual Class A Units outstanding



901,195



886,168



Total




36,517,245



25,567,449










(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 2.62% weighted average non-controlling interest in the Operating Partnership for the three-month period ended September 30, 2017.

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


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

 

 

 

Reconciliation of FFO, Core FFO, and AFFO

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







Nine months ended September 30,






2017


2016









Net loss attributable to common stockholders (See note 1)

$

(13,742,471)



$

(34,039,743)


Less:

Gain on sale of real estate


(37,635,014)



(4,271,506)


Add:

Income (loss) attributable to non-controlling interests (See note 2)

1,097,008



(175,045)



Depreciation of real estate assets


60,344,386



39,006,354



Amortization of acquired real estate intangible assets and deferred leasing costs

21,307,608



15,576,868










FFO

31,371,517



16,096,928










Add:

Acquisition and pursuit costs



14,002



6,885,864



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

99,145



139,744



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

1,178,491



551,654



Mortgage loan refinancing and extinguishment costs (See note 13)

1,058,055



—



Costs incurred from extension of management agreement with advisor (See note 14)

—



421,387



Weather-related property operating losses  (See note 5)

216,734



—



Contingent fees paid on sale of real estate (See note 15)

386,570



—










Core FFO

34,324,514



24,095,577










Add:

Non-cash equity compensation to directors and executives

2,607,667



1,867,706



Amortization of loan closing costs (See note 6)


2,756,519



1,740,411



Depreciation/amortization of non-real estate assets


534,966



397,843



Net loan fees received (See note 7)


1,296,384



1,374,828



Accrued interest income received (See note 8)


7,115,597



6,875,957



Non-cash dividends on Series M Preferred Stock


33,094



—



Amortization of lease inducements (See note 9)


237,037



—


Less:

Non-cash loan interest income (See note 7)


(13,507,054)



(10,457,754)



Cash paid for loan closing costs

—



(13,276)



Amortization of acquired above and below market lease intangibles

 





and straight-line rental revenues (See note 10)

(5,497,183)



(1,714,792)



Amortization of deferred revenues (See note 11)


(456,815)



—



Normally recurring capital expenditures and leasing costs (See note 12)

(3,031,820)



(2,180,123)










AFFO

$

26,412,906



$

21,986,377










Common Stock dividends and distributions to Unitholders declared:





Common Stock dividends



$

21,668,290



$

14,200,114



Distributions to Unitholders (See note 2)


622,304



476,293



Total




$

22,290,594



$

14,676,407










Common Stock dividends and Unitholder distributions per share


$

0.69



$

0.5975










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

$

1.01



$

0.66


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

$

1.11



$

0.99


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

$

0.85



$

0.90






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





Basic:




30,147,497



23,552,951



Common Stock



909,771



796,710



Class A Units




31,057,268



24,349,661



Common Stock and Class A Units






Diluted Common Stock and Class A Units (B)


33,644,520



25,854,478










Actual shares of Common Stock outstanding, including 18,306 and 23,247 unvested shares




 of restricted Common Stock at September 30, 2017 and 2016, respectively

35,616,050



24,681,281


Actual Class A Units outstanding



901,195



886,168



Total




36,517,245



25,567,449



(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 2.93% weighted average non-controlling interest in the Operating Partnership for the nine-month period ended September 30, 2017.

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


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

 

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

  • Rental and other property revenues and expenses for the three-month and nine-month periods ended September 30, 2017 include activity for the four multifamily communities and four grocery-anchored shopping centers acquired during the third quarter 2017 only from their respective dates of acquisition. In addition, the third quarter 2017 period includes a full quarter of activity for the four multifamily communities, three grocery-anchored shopping centers, one student housing property and two office buildings acquired during the fourth quarter of 2016 and first two quarters of 2017. Rental and other property revenues and expenses for the three-month period ended September 30, 2016 include activity for the two multifamily communities, one student housing property, one office building and eight grocery-anchored shopping centers only from their respective dates of acquisition during the third quarter 2016.
  • Non-controlling interests in our Operating Partnership consisted of a total of 901,195 Class A Units as of September 30, 2017. 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 2.62% and 3.51% for the three-month periods ended September 30, 2017 and 2016, respectively.
  • We incurred loan closing costs for the acquisition of the Village at Baldwin Park multifamily community during the first quarter 2016, which were funded by our $35 million acquisition term loan facility, or 2016 Term Loan, and on our $11 million term note, which we used to finance the acquisition of our Anderson Central grocery-anchored shopping center. These costs were deferred and are being amortized over the lives of the two instruments. The amortization expense of these deferred costs is an additive adjustment in the calculation of Core FFO.
  • 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 more accurately 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 Core FFO. 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. 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, 2017, aggregate unamortized loan coordination fees were approximately $11.3 million, which will be amortized over a weighted average remaining loan life of approximately 10.8 years.
  • We sustained weather-related operating losses at certain of our properties during the third quarter 2017; these costs are added back to FFO in our calculation of Core FFO.
  • 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 $150 million syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to Core FFO in the calculation of AFFO. Neither we nor the Operating Partnership have any recourse liability in connection with any of the mortgage loans, nor do we have any cross-collateralization arrangements with respect to the assets securing the mortgage loans, other than security interests in 49% of the equity interests of the subsidiaries owning such assets, granted in connection with our Revolving Line of Credit, which provides for full recourse liability. At September 30, 2017, aggregate unamortized loan costs were approximately $17.2 million, which will be amortized over a weighted average remaining loan life of approximately 7.9 years.
  • 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. We also accrue over the lives of certain loans additional interest amounts that become due to us at the time of repayment of the loan or refinancing of the property, or when the property is sold to a third party.
  • The Company records deferred interest revenue over the lives of certain of its real estate loans. This adjustment reflects the receipt during the periods presented of interest income which was earned and accrued prior to those periods presented on various real estate loans.
  • 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.
  • This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with the Company's acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At September 30, 2017, the balance of unamortized below-market lease intangibles was approximately $31.7 million, which will be recognized over a weighted average remaining lease period of approximately 8.9 years.
  • 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.
  • We deduct from Core FFO normally recurring capital expenditures that are necessary to maintain our assets' revenue streams in the calculation of AFFO. This adjustment also deducts from Core FFO capitalized amounts for third party costs during the period to originate or renew leases in our grocery-anchored shopping centers and office buildings. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures.
  • The adjustment consists of a loan prepayment penalty and other charges related to the refinancing of our Stone Creek multifamily community which totaled $888,428 and for the refinancing of our 525 Avalon multifamily community of $169,627.
  • We incurred legal costs pertaining to the extension of our management agreement with our Manager. The three-year extension was effective as of June 3, 2016.
  • On May 25, 2017,we closed on the sale of our Enclave at Vista Ridge multifamily community to an unrelated third party.  At such date, our Manager collected a cumulative total of approximately $390,000 of contingent fees.  The sales transaction, and the fact that the Company's capital contributions for the Enclave at Vista Ridge property achieved an annual rate of return which exceeded 7%, which triggered the fees to become immediately due and payable to the Manager at the closing of the sale transaction. The recognition of these fees are added to FFO in the calculation of Core FFO as they are not likely to occur on a regular basis.

    • See Definitions of Non-GAAP Measures.

     

    Preferred Apartment Communities, Inc.


    Consolidated Balance Sheets


    (Unaudited)






    September 30, 2017


    December 31, 2016


    Assets






    Real estate





    Land


    $

    345,110,008



    $

    299,547,501



    Building and improvements

    1,802,229,802



    1,513,293,760



    Tenant improvements

    45,208,781



    23,642,361



    Furniture, fixtures, and equipment

    183,879,719



    126,357,742



    Construction in progress

    11,946,666



    2,645,634



    Gross real estate

    2,388,374,976



    1,965,486,998



    Less: accumulated depreciation

    (147,799,077)



    (103,814,894)



    Net real estate

    2,240,575,899



    1,861,672,104



    Real estate loan investments, net of deferred fee income

    243,974,963



    201,855,604



    Real estate loan investments to related parties, net

    165,229,952



    130,905,464



    Total real estate and real estate loan investments, net

    2,649,780,814



    2,194,433,172









    Cash and cash equivalents

    17,054,190



    12,321,787



    Restricted cash

    50,645,432



    55,392,984



    Notes receivable

    18,287,857



    15,499,699



    Note receivable and revolving line of credit due from related party

    24,063,639



    22,115,976



    Accrued interest receivable on real estate loans

    27,726,412



    21,894,549



    Acquired intangible assets, net of amortization

    86,295,192



    79,156,400



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

    1,548,798



    1,768,779



    Deferred offering costs

    6,025,155



    2,677,023



    Tenant lease inducements, net

    11,914,367



    261,492



    Tenant receivables and other assets

    34,377,412



    15,310,741









    Total assets

    $

    2,927,719,268



    $

    2,420,832,602









    Liabilities and equity





    Liabilities





    Mortgage notes payable, net of deferred loan costs

    $

    1,569,569,425



    $

    1,305,870,471



    Revolving line of credit

    43,000,000



    127,500,000



    Term note payable, net of deferred loan costs

    10,994,194



    10,959,905



    Real estate loan investment participation obligation

    17,877,914



    20,761,819



    Deferred revenue

    23,361,489



    —



    Accounts payable and accrued expenses

    34,298,797



    20,814,910



    Accrued interest payable

    4,099,239



    3,541,640



    Dividends and partnership distributions payable

    13,729,774



    10,159,629



    Acquired below market lease intangibles, net of amortization

    31,691,040



    29,774,033



    Security deposits and other liabilities

    8,946,216



    6,189,033



    Total liabilities

    1,757,568,088



    1,535,571,440









    Commitments and contingencies





    Equity






    Stockholder's equity





    Series A Redeemable Preferred Stock, $0.01 par value per share; 3,050,000





       shares authorized; 1,127,566 and 924,855 shares issued; 1,115,616 and 914,422





    shares outstanding at September 30, 2017 and December 31, 2016, respectively

    11,156



    9,144



    Series M Redeemable Preferred Stock, $0.01 par value per share; 500,000





       shares authorized; 12,045 and 0 shares issued and outstanding





    at September 30, 2017 and December 31, 2016, respectively

    124



    —



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





      35,597,744 and 26,498,192 shares issued and outstanding at





    September 30, 2017 and December 31, 2016, respectively

    355,977



    264,982



    Additional paid-in capital

    1,157,030,161



    906,737,470



    Accumulated earnings (deficit)

    9,079,810



    (23,231,643)



          Total stockholders' equity

    1,166,477,228



    883,779,953



    Non-controlling interest

    3,673,952



    1,481,209



    Total equity

    1,170,151,180



    885,261,162









    Total liabilities and equity

    $

    2,927,719,268



    $

    2,420,832,602



     

    Preferred Apartment Communities, Inc.

    Consolidated Statements of Cash Flows

    (Unaudited)




    Nine months ended September 30,



    2017


    2016

    Operating activities:





    Net income (loss )


    $

    33,408,461



    $

    (5,860,631)


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




    Depreciation expense


    60,845,325



    39,387,351


    Amortization expense


    21,341,635



    15,593,713


    Amortization of above and below market leases

    (2,394,233)



    (1,118,329)


    Deferred revenues and fee income amortization

    (1,526,037)



    (725,913)


    Mark to market debt and lease incentive amortization

    364,439



    —


    Deferred loan cost amortization

    3,906,753



    2,431,809


    (Increase) decrease in accrued interest income on real estate loans

    (5,831,863)



    (3,374,473)


    Equity compensation to executives, directors and consultants

    2,607,667



    1,867,706


    Gain on sale of real estate


    (37,635,014)



    (4,271,506)


    Loss on extinguishment of debt


    888,428



    —


    Other


    189,400



    56,582


    Changes in operating assets and liabilities:




    (Increase) in tenant receivables and other assets

    (7,818,433)



    (1,230,183)


    (Increase) in tenant lease incentives

    (11,889,912)



    —


    Increase in accounts payable and accrued expenses

    11,640,777



    8,843,052


    (Decrease) increase in accrued interest and other liabilities

    2,349,282



    2,258,193


    Net cash provided by operating activities

    70,446,675



    53,857,371







    Investing activities:





    Investment in real estate loans


    (119,225,599)



    (123,427,150)


    Repayments of real estate loans


    42,495,393



    36,672,482


    Notes receivable issued


    (6,249,749)



    (8,730,166)


    Notes receivable repaid


    3,506,767



    12,895,101


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

    (25,740,403)



    (25,821,121)


    Repayments of line of credit by related party

    23,468,017



    23,791,676


    Loan origination fees received

    2,592,766



    2,695,961


    Loan origination fees paid to Manager

    (1,296,383)



    (1,374,828)


    Acquisition of properties


    (455,619,414)



    (740,597,973)


    Disposition of properties, net


    118,237,697



    10,606,386


    Additions to real estate assets - improvements

    (12,200,993)



    (7,613,065)


    Refunds (deposits) on acquisitions


    2,428,908



    (3,118,370)


    Decrease (increase) in restricted cash

    5,389,992



    (9,070,073)


    Net cash used in investing activities

    (422,213,001)



    (833,091,140)







    Financing activities:





    Proceeds from mortgage notes payable

    332,427,500



    479,494,000


    Payment for mortgage notes payable

    (121,065,587)



    (7,748,011)


    Payments for deposits and other mortgage loan costs

    (11,579,899)



    (15,400,974)


    Payments for mortgage prepayment costs

    (817,313)



    —


    Proceeds from real estate loan participants

    224,188



    5,575,484


    Payments to real estate loan participants

    (3,466,500)



    —


    Proceeds from lines of credit


    190,000,000



    357,136,020


    Payments on lines of credit


    (274,500,000)



    (309,636,020)


    Proceeds from term loan


    —



    46,000,000


    Repayment of the term loan


    —



    (35,000,000)


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

    201,799,430



    287,830,612


    Proceeds from sales of Common Stock

    74,213,118



    2,810,156


    Proceeds from exercises of warrants

    39,430,314



    19,831,294


    Common stock dividends paid


    (19,250,649)



    (13,523,075)


    Preferred stock dividends paid


    (44,889,676)



    (26,735,870)


    Distributions to non-controlling interests

    (605,479)



    (350,079)


    Payments for deferred offering costs

    (5,420,718)



    (3,476,989)


    Contribution from non-controlling interests

    —



    450,000


    Net cash provided by financing activities

    356,498,729



    787,256,548






    Net increase (decrease) in cash and cash equivalents

    4,732,403



    8,022,779


    Cash and cash equivalents, beginning of period

    12,321,787



    2,439,605


    Cash and cash equivalents, end of period

    $

    17,054,190



    $

    10,462,384



     

    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,
    2017


    December 31,
    2016

















    Multifamily communities:















    Founders Village


    Williamsburg, VA


    —


    N/A


    $

    —



    $

    —

    (2)


    $

    9,866,000



    —

    Encore


    Atlanta, GA


    4/8/2019


    10/8/2020


    10,958,200



    10,958,200



    10,958,200



    8.5 / 5

    Encore Capital


    Atlanta, GA


    4/8/2019


    10/8/2020


    9,758,200



    7,320,613



    6,748,380



    8.5 / 5

    Palisades


    Northern VA


    2/18/2018


    8/18/2019


    17,270,000



    17,111,297



    16,214,545



    8 / 5

    Fusion


    Irvine, CA


    5/31/2018


    5/31/2020


    63,911,961



    55,819,763



    49,456,067



    8.5 / 7.5

    Green Park


    Atlanta, GA


    12/1/2017


    12/1/2019


    13,464,372



    12,464,372



    13,464,372



    8.5 / 5.83

    Summit Crossing III


    Atlanta, GA


    —


    N/A


    —



    —

    (3)


    7,246,400



    —

    Overture


    Tampa, FL


    7/21/2018


    7/21/2020


    6,920,000



    6,530,062



    6,123,739



    8.5 / 7.5

    Aldridge at Town Village


    Atlanta, GA


    —


    N/A


    —



    —

    (3)


    10,656,171



    —

    Bishop Street


    Atlanta, GA


    2/18/2020


    N/A


    12,693,457



    11,884,815



    11,145,302



    8.5 / 6.5

    Hidden River


    Tampa, FL


    12/3/2018


    12/3/2020


    4,734,960



    4,734,960



    4,734,960



    8.5 / 6.5

    Hidden River Capital


    Tampa, FL


    12/4/2018


    12/4/2020


    5,380,000



    4,933,198



    4,626,238



    8.5 / 6.5

    CityPark II


    Charlotte, NC


    1/7/2019


    1/7/2021


    3,364,800



    3,364,800



    3,364,800



    8.5 / 6.5

    CityPark II Capital


    Charlotte, NC


    1/8/2019


    1/31/2021


    3,916,000



    3,546,332



    3,325,668



    8.5 / 6.5

    Park 35 on Clairmont


    Birmingham, AL


    6/26/2018


    6/26/2020


    21,060,160



    21,060,160



    19,795,886



    8.5 / 2

    Wiregrass


    Tampa, FL


    5/15/2020


    5/15/2023


    14,975,853



    12,694,455



    1,862,548



    8.5 / 6.5

    Wiregrass Capital


    Tampa, FL


    5/15/2020


    5/15/2023


    3,744,147



    3,484,963



    3,268,114



    8.5 / 6.5

    Berryessa


    San Jose, CA


    4/19/2018


    N/A


    31,509,000



    29,765,276



    —



    10.5 / 0

    Brentwood


    Nashville, TN


    6/1/2018


    N/A


    2,376,000



    2,192,574



    —



    12 / 0

    Fort Myers


    Fort Myers, FL


    —


    N/A


    —



    —

    (4)


    3,654,621



    —

    Fort Myers


    Fort Myers, FL


    2/3/2021


    2/3/2022


    9,416,000



    1,630,690



    —



    8.5 / 5.5

    Fort Myers Capital


    Fort Myers, FL


    2/3/2021


    2/3/2022


    6,193,000



    4,887,145



    —



    8.5 / 5.5

    360 Forsyth


    Atlanta, GA


    —


    N/A


    —



    —

    (4)


    2,520,420



    —

    360 Forsyth


    Atlanta, GA


    7/11/2020


    7/11/2022


    22,412,000



    9,138,037



    —



    8.5 / 5.5

    Morosgo


    Atlanta, GA


    1/31/2021


    1/31/2022


    11,749,000



    2,628,713



    —



    8.5 / 5.5

    Morosgo Capital


    Atlanta, GA


    1/31/2021


    1/31/2022


    6,176,000



    4,659,086



    —



    8.5 / 5.5

    University City Gateway


    Charlotte, NC


    8/15/2021


    8/15/2022


    10,336,000



    —



    —



    8.5 / 5

    University City Gateway















    Capital


    Charlotte, NC


    8/18/2021


    8/18/2022


    7,338,000



    4,617,250



    —



    8.5 / 5
















    Student housing properties:













    Haven West


    Atlanta, GA


    —


    N/A


    —



    —

    (5)


    6,784,167



    —

    Haven 12


    Starkville, MS


    12/16/2017


    11/30/2020


    6,116,384



    5,815,849



    5,815,849



    8.5 / 6.5

    Stadium Village


    Atlanta, GA


    11/27/2017


    N/A


    13,424,995



    13,329,868



    13,329,868



    8.5 / 5.83

    18 Nineteen


    Lubbock, TX


    4/9/2018


    4/9/2020


    15,598,352



    15,584,017



    15,584,017



    8.5 / 6

    Haven South


    Waco, TX


    5/1/2018


    5/1/2019


    15,455,668



    15,422,521



    15,301,876



    8.5 / 6

    Haven46


    Tampa, FL


    3/29/2019


    9/29/2020


    9,819,662



    9,819,662



    9,136,847



    8.5 / 5

    Haven Northgate


    College Station, TX


    6/20/2019


    6/20/2020


    64,678,549



    63,578,998



    46,419,194



    7.25 / 1.5

    Lubbock II


    Lubbock, TX


    4/20/2019


    N/A


    9,357,171



    9,357,078



    8,770,838



    8.5 / 5

    Haven Charlotte


    Charlotte, NC


    12/22/2019


    12/22/2021


    19,581,593



    9,292,516



    5,781,295



    8.5 / 6.5

    Haven Charlotte Member


    Charlotte, NC


    12/22/2019


    12/22/2021


    8,201,170



    7,611,508



    —



    8.5 / 6.5

    Solis Kennesaw


    Atlanta, GA


    9/26/2020


    9/26/2022


    12,358,946



    —



    —



    8.5 / 5.5

    Solis Kennesaw Capital


    Atlanta, GA


    10/1/2020


    10/1/2022


    8,360,000



    5,204,666



    —



    8.5 / 5.5



















    New Market Properties:


















      Dawson Marketplace


    Atlanta, GA


    11/15/2018


    11/15/2020


    12,857,005



    12,857,005



    12,613,860



    8.5 / 5



















    Other:


















      Crescent Avenue


    Atlanta, GA


    1/31/2018


    N/A


    8,500,000



    8,000,000



    6,000,000



    10 / 5









    $  503,966,605



    411,300,449



    334,570,242




    Unamortized loan origination fees









    (2,095,534)



    (1,809,174)




    Carrying amount











    $   409,204,915



    $   332,761,068





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

    (2) The loan extended to Founders Village, with a total commitment of $10.3 million, was paid off during the first quarter.

    (3) Loan was repaid in connection with our acquisition of the property during the third quarter.

    (4) Previously existing land acquisition bridge loan was converted into real estate investment loan and capital/member loan during the third quarter.

    (5) The loan extended to Haven West, with a total commitment of $6.9 million, was paid off during the third quarter.


     




     

    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 15 and 60 basis points, depending on the loan. As of September 30, 2017, our actual and potential purchase option portfolio consisted of:

     




    Total units upon


    Purchase option window


    Project/Property

    Location


    completion (1)


    Begin


    End











    Multifamily communities:









    Encore

    Atlanta, GA


    339



    1/8/2018


    5/8/2018


    Palisades

    Northern VA


    304



    3/1/2018


    7/31/2018


    Fusion

    Irvine, CA


    280



    1/1/2018


    4/1/2018


    Green Park

    Atlanta, GA


    310






    (2)

    Overture

    Tampa, FL


    180



    1/1/2018


    5/1/2018


    Bishop Street

    Atlanta, GA


    232



    10/1/2018


    12/31/2018


    Hidden River

    Tampa, FL


    300



    9/1/2018


    12/31/2018


    CityPark II

    Charlotte, NC


    200



    5/1/2018


    8/31/2018


    Park 35 on Clairmont

    Birmingham, AL


    271



    S + 90 days (3)


    S + 150 days (3)


    Fort Myers

    Fort Myers, FL


    224



    S + 90 days (3)


    S + 150 days (3)


    Wiregrass

    Tampa, FL


    392



    S + 90 days (3)


    S + 150 days (3)


    360 Forsyth

    Atlanta, GA


    356



    S + 90 days (3)


    S + 150 days (3)


    Morosgo

    Atlanta, GA


    258



    S + 90 days (3)


    S + 150 days (3)


    University City Gateway

    Charlotte, NC


    338



    S + 90 days (3)


    S + 150 days (3)


    Berryessa

    San Jose, CA


    551



    N/A


    N/A


    Brentwood

    Nashville, TN


    301



    N/A


    N/A











    Student housing properties:









    Haven 12

    Starkville, MS


    152



    4/1/2018


    6/30/2018


    Stadium Village

    Atlanta, GA


    198



    11/1/2017

    (4)

    1/31/2018


    18 Nineteen

    Lubbock, TX


    217



    4/1/2018


    6/30/2018


    Haven South

    Waco, TX


    250



    4/1/2018


    6/30/2018


    Haven46

    Tampa, FL


    158



    11/1/2018


    1/31/2019


    Haven Northgate

    College Station, TX


    427



    10/1/2018


    12/31/2018


    Lubbock II

    Lubbock, TX


    140



    11/1/2018


    1/31/2019


    Haven Charlotte

    Charlotte, NC


    332



    12/1/2019


    2/28/2020


    Solis Kennesaw

    Atlanta, GA


    248



    (5)


    (5)














    6,958
















    (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) Effective as of October 26, 2017, the purchase option window on the property was amended as shown.


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


    (4) On October 27, 2017, we acquired an approximate 98% interest in a joint venture that owns the Stadium Village student housing property in Atlanta, Georgia.


    (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








    Interest only

     through date (1)


    Acquisition/

    refinancing date


    September 30,

     2017


    December 31,
    2016


    Maturity
    date


    Interest

     rate


    Basis point
     spread over
    1 Month
    LIBOR
















    Multifamily communities:














    Stone Rise

    7/3/2014


    $

    24,078,004



    $

    24,485,726



    8/1/2019


    2.89

    %


    Fixed rate


    8/31/2015

    Summit Crossing

    4/21/2011


    19,774,039



    20,034,920



    5/1/2018


    4.71

    %


    Fixed rate


    5/1/2014

    Summit Crossing secondary financing

    8/28/2014


    4,989,536



    5,057,941



    9/1/2019


    4.39

    %


    Fixed rate


    N/A

    Summit II

    3/20/2014


    13,357,000



    13,357,000



    4/1/2021


    4.49

    %


    Fixed rate


    4/30/2019

    Ashford Park

    1/24/2013


    —

    (2)


    25,626,000



    2/1/2020


    3.13

    %


    Fixed rate


    2/28/2018

    Ashford Park secondary financing

    8/28/2014


    —

    (2)


    6,404,575



    2/1/2020


    4.13

    %


    Fixed rate


    N/A

    McNeil Ranch

    1/24/2013


    13,646,000



    13,646,000



    2/1/2020


    3.13

    %


    Fixed rate


    2/28/2018

    Lake Cameron

    1/24/2013


    19,773,000



    19,773,000



    2/1/2020


    3.13

    %


    Fixed rate


    2/28/2018

    Enclave at Vista Ridge

    9/26/2014


    —

    (3)


    24,862,000



    10/1/2021


    3.68

    %


    Fixed rate


    10/31/2017

    Sandstone

    9/26/2014


    —

    (4)


    30,894,890



    10/1/2019


    3.18

    %


    Fixed rate


    N/A

    Stoneridge

    9/26/2014


    26,287,032



    26,729,985



    10/1/2019


    3.18

    %


    Fixed rate


    N/A

    Vineyards

    9/26/2014


    34,775,000



    34,775,000



    10/1/2021


    3.68

    %


    Fixed rate


    10/31/2017

    Avenues at Cypress

    2/13/2015


    21,792,368



    22,135,938



    9/1/2022


    3.43

    %


    Fixed rate


    N/A

    Avenues at Northpointe

    2/13/2015


    27,606,706



    27,878,000



    3/1/2022


    3.16

    %


    Fixed rate


    3/31/2017

    Venue at Lakewood Ranch

    5/21/2015


    29,501,327



    29,950,413



    12/1/2022


    3.55

    %


    Fixed rate


    N/A

    Aster Lely

    6/24/2015


    32,635,798



    33,120,899



    7/5/2022


    3.84

    %


    Fixed rate


    N/A

    CityPark View

    6/30/2015


    21,152,547



    21,489,269



    7/1/2022


    3.27

    %


    Fixed rate


    N/A

    Avenues at Creekside

    7/31/2015


    40,729,916



    41,349,590



    8/1/2024


    2.83

    %


    160

    (5)

    8/31/2016

    Citi Lakes

    9/3/2015


    42,619,893



    43,309,606



    4/1/2023


    3.40

    %


    217

    (6)

    N/A

    Stone Creek

    6/22/2017


    20,546,822



    16,497,919



    7/1/2052


    3.22

    %


    Fixed rate


    N/A

    Lenox Village Town Center

    12/21/2015


    30,189,707



    30,717,024



    5/1/2019


    3.82

    %


    Fixed rate


    N/A

    Lenox Village III

    12/21/2015


    17,884,960



    18,125,780



    1/1/2023


    4.04

    %


    Fixed rate


    N/A

    Overton Rise

    2/1/2016


    40,167,749



    40,712,134



    8/1/2026


    3.98

    %


    Fixed rate


    N/A

    Baldwin Park

    1/5/2016


    73,910,000



    73,910,000



    1/5/2019


    3.13

    %


    190


    1/4/2019

    Baldwin Park secondary financing

    1/5/2016


    3,890,000



    3,890,000



    1/5/2019


    11.13

    %


    990


    1/4/2019

    Crosstown Walk

    1/15/2016


    31,634,667



    32,069,832



    2/1/2023


    3.90

    %


    Fixed rate


    N/A

    Avalon Park

    6/15/2017


    67,199,732

    (7)


    61,750,000



    7/1/2024


    3.98

    %


    Fixed rate


    N/A

    Avalon Park secondary financing

    5/31/2016


    —

    (7)


    3,250,000



    6/5/2019


    11.98

    %


    1100


    N/A

    City Vista

    7/1/2016


    35,242,015



    35,734,946



    7/1/2026


    3.68

    %


    Fixed rate


    N/A

    Sorrel

    8/24/2016


    32,964,073



    33,442,303



    9/1/2023


    3.44

    %


    Fixed rate


    N/A

    Citrus Village

    3/3/2017


    30,110,462



    —



    6/10/2023


    3.65

    %


    Fixed rate


    6/09/2017

    Retreat at Greystone

    3/24/2017


    35,210,000



    —



    3/1/2022


    3.03

    %


    185


    2/28/2022

    Founders Village

    3/31/2017


    31,399,437



    —



    4/1/2027


    4.31

    %


    Fixed rate


    N/A

    Claiborne Crossing

    4/26/2017


    26,903,927



    —



    6/1/2054


    2.89

    %


    Fixed rate


    N/A

    Luxe Lakewood Ranch

    7/26/2017


    39,234,476



    —



    8/1/2027


    3.93

    %


    Fixed rate


    N/A

    Adara

    9/27/2017


    31,850,000



    —



    4/1/2028


    3.90

    %


    Fixed rate


    N/A

    Aldridge at Town Village

    9/29/2017


    38,010,000



    —



    3/1/2022


    3.08

    %


    185


    (8)

    Summit Crossing III

    9/29/2017


    20,075,000



    —



    10/1/2024


    3.87

    %


    Fixed rate


    N/A















    Total multifamily communities



    979,141,193



    814,980,690
























    Grocery-anchored shopping centers:

    Spring Hill Plaza

    9/5/2014


    9,521,262



    9,672,371



    10/1/2019


    3.36

    %


    Fixed rate


    10/31/2015

    Parkway Town Centre

    9/5/2014


    6,924,554



    7,034,452



    10/1/2019


    3.36

    %


    Fixed rate


    10/31/2015

    Woodstock Crossing

    8/8/2014


    3,002,830



    3,041,620



    9/1/2021


    4.71

    %


    Fixed rate


    N/A

    Deltona Landings

    9/30/2014


    6,816,182



    6,928,913



    10/1/2019


    3.48

    %


    Fixed rate


    N/A

    Powder Springs

    9/30/2014


    7,192,247



    7,311,197



    10/1/2019


    3.48

    %


    Fixed rate


    N/A

    Kingwood Glen

    9/30/2014


    11,404,178



    11,592,787



    10/1/2019


    3.48

    %


    Fixed rate


    N/A

    Barclay Crossing

    9/30/2014


    6,411,912



    6,517,956



    10/1/2019


    3.48

    %


    Fixed rate


    N/A

    Sweetgrass Corner

    9/30/2014


    7,773,603



    7,900,135



    10/1/2019


    3.58

    %


    Fixed rate


    N/A

    Parkway Centre

    9/30/2014


    4,465,774



    4,539,632



    10/1/2019


    3.48

    %


    Fixed rate


    N/A

    The Market at Salem Cove

    10/6/2014


    9,464,660



    9,586,678



    11/1/2024


    4.21

    %


    Fixed rate


    11/30/2016

    Independence Square

    8/27/2015


    12,028,456



    12,208,524



    9/1/2022


    3.93

    %


    Fixed rate


    9/30/2016

    Royal Lakes Marketplace

    9/4/2015


    9,726,758



    9,800,000



    9/4/2020


    3.72

    %


    250


    4/3/2017

    The Overlook at Hamilton Place

    12/22/2015


    20,395,264



    20,672,618



    1/1/2026


    4.19

    %


    Fixed rate


    N/A

    Summit Point

    10/30/2015


    12,294,149



    12,546,792



    11/1/2022


    3.57

    %


    Fixed rate


    N/A

    East Gate Shopping Center

    4/29/2016


    5,614,148



    5,719,897



    5/1/2026


    3.97

    %


    Fixed rate


    N/A

    Fury's Ferry

    4/29/2016


    6,485,309



    6,607,467



    5/1/2026


    3.97

    %


    Fixed rate


    N/A

    Rosewood Shopping Center

    4/29/2016


    4,355,805



    4,437,851



    5/1/2026


    3.97

    %


    Fixed rate


    N/A

    Southgate Village

    4/29/2016


    7,743,653



    7,889,513



    5/1/2026


    3.97

    %


    Fixed rate


    N/A

    The Market at Victory Village

    5/16/2016


    9,250,000



    9,250,000



    9/11/2024


    4.40

    %


    Fixed rate


    10/10/2017

    Wade Green Village

    4/7/2016


    8,006,164



    8,116,465



    5/1/2026


    4.00

    %


    Fixed rate


    N/A

    Lakeland Plaza

    7/15/2016


    29,209,751



    29,760,342



    8/1/2026


    3.85

    %


    Fixed rate


    N/A

    University Palms

    8/8/2016


    13,251,069



    13,513,891



    9/1/2026


    3.45

    %


    Fixed rate


    N/A

    Cherokee Plaza

    8/8/2016


    25,493,555



    26,017,293



    9/1/2021


    3.48

    %


    225

    (9)

    N/A

    Sandy Plains Exchange

    8/8/2016


    9,256,261



    9,439,850



    9/1/2026


    3.45

    %


    Fixed rate


    N/A

    Thompson Bridge Commons

    8/8/2016


    12,374,160



    12,619,589



    9/1/2026


    3.45

    %


    Fixed rate


    N/A

    Heritage Station

    8/8/2016


    9,158,827



    9,340,483



    9/1/2026


    3.45

    %


    Fixed rate


    N/A

    Oak Park Village

    8/8/2016


    9,451,130



    9,638,584



    9/1/2026


    3.45

    %


    Fixed rate


    N/A

    Shoppes of Parkland

    8/8/2016


    16,305,721



    16,492,503



    9/1/2023


    4.67

    %


    Fixed rate


    N/A

    Champions Village

    10/18/2016


    27,400,000



    27,400,000



    11/1/2021


    4.23

    %


    300

    (10)

    11/1/2021

    Castleberry-Southard

    4/21/2017


    11,433,272



    —



    5/1/2027


    3.99

    %


    Fixed rate


    N/A

    Rockbridge Village

    6/6/2017


    14,206,856



    —



    7/5/2027


    3.73

    %


    Fixed rate


    N/A

    Irmo Station

    7/26/2017


    10,629,105



    —



    8/1/2030


    3.94

    %


    Fixed rate


    N/A

    Maynard Crossing

    8/25/2017


    18,500,000



    —



    9/1/2032


    3.74

    %


    Fixed rate


    N/A

    Woodmont Village

    9/8/2017


    8,775,000



    —



    10/1/2027


    4.125

    %


    Fixed rate


    N/A

    West Town Market

    9/22/2017


    9,000,000



    —



    10/1/2025


    3.65

    %


    Fixed rate


    N/A















    Total grocery-anchored shopping centers



    393,321,615



    325,597,403
























    Student housing properties:

    North by Northwest

    6/1/2016


    32,953,789



    33,499,754



    9/1/2022


    4.02

    %


    Fixed rate


    N/A

    SoL

    2/28/2017


    37,485,000



    —



    3/1/2022


    3.23

    %


    220


    2/28/2022















    Total student housing properties



    70,438,789



    33,499,754
























    Office buildings:

    Brookwood Center

    8/29/2016


    32,400,000



    32,400,000



    9/10/2031


    3.52

    %


    Fixed rate


    10/9/2017

    Galleria 75

    11/4/2016


    5,762,656



    5,900,265



    7/1/2022


    4.25

    %


    Fixed rate


    N/A

    Three Ravinia

    12/30/2016


    115,500,000



    115,500,000



    1/1/2042


    4.46

    %


    Fixed rate


    1/31/2022















    Total office buildings



    153,662,656



    153,800,265










    Grand total



    1,596,564,253



    1,327,878,112










    Less: deferred loan costs



    (26,994,828)



    (22,007,641)










    Mortgage notes, net



    $

    1,569,569,425



    $

    1,305,870,471
























     

     

    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 March 7, 2017, the Company legally defeased the mortgage loan collateralized by its Ashford Park property, located in Atlanta, GA. 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 $1.1 million plus a prepayment premium of approximately $0.4 million.

    (3) On May 25, 2017, the Company legally defeased the mortgage loan collateralized by its Enclave at Vista Ridge property, located in Dallas, TX. 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 $2.06 million.

    (4) On January 20, 2017, the Company legally defeased the mortgage loan collateralized by its Sandstone property, located in Kansas City, KS. 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 $1.4 million.

    (5)  The mortgage instrument was assumed as part of the sales transaction; the 1 Month LIBOR index is capped at 5.0%.

    (6) The 1 Month LIBOR index is capped at 4.33%.

    (7)  On June 15, 2017, the two existing mortgage instruments were refinanced into a single mortgage in the amount of $67.38 million bearing interest at a fixed rate of 3.98% per annum.

    (8) The property is temporarily financed through a credit facility sponsored by the Federal Home Loan Mortgage Corporation; the Company intends to obtain permanent mortgage financing in the near future.

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

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


     

     

    Multifamily Communities










    Three months ended

     September 30, 2017


    Property


    Location


    Number of units


    Average unit size (sq. ft.)


    Average physical occupancy


    Average rent per unit














    Stone Rise


    Philadelphia, PA


    216


    1,078



    97.1

    %


    $

    1,461



    Lake Cameron


    Raleigh, NC


    328


    940



    94.6

    %


    $

    972



    McNeil Ranch


    Austin, TX


    192


    1,071



    93.4

    %


    $

    1,262



    Avenues at Cypress


    Houston, TX


    240


    1,170



    96.0

    %


    $

    1,420



    Avenues at Northpointe


    Houston, TX


    280


    1,167



    95.4

    %


    $

    1,323



    Stoneridge Farms at the Hunt Club


    Nashville, TN


    364


    1,153



    93.8

    %


    $

    1,100



    Vineyards


    Houston, TX


    369


    1,122



    95.9

    %


    $

    1,135



    Aster at Lely Resort


    Naples, FL


    308


    1,071



    94.3

    %


    $

    1,404



    Venue at Lakewood Ranch


    Sarasota, FL


    237


    1,001



    93.2

    %


    $

    1,524



    Citi Lakes


    Orlando, FL


    346


    984



    93.5

    %


    $

    1,380



    Lenox Portfolio


    Nashville, TN


    474


    861



    95.7

    %


    $

    1,205















    Total/Avg PAC Same Store




    3,354




    94.8

    %
















    Summit Crossing


    Atlanta, GA


    485


    1,053



    95.9

    %


    $

    1,164



    CityPark View


    Charlotte, NC


    284


    948



    —



    $

    1,089



    Avenues at Creekside


    San Antonio, TX


    395


    974



    —



    $

    1,150



    Stone Creek


    Houston, TX


    246


    852



    —



    $

    1,017



    525 Avalon Park


    Orlando, FL


    487


    1,394



    —



    $

    1,365



    Sorrel


    Jacksonville, FL


    290


    1,048



    93.8

    %


    $

    1,234



    Retreat at Greystone


    Birmingham, AL


    312


    1,100



    95.2

    %


    $

    1,214



    Broadstone at Citrus Village


    Tampa, FL


    296


    980



    95.9

    %


    $

    1,243



    Founders Village


    Williamsburg, VA


    247


    1,070



    94.6

    %


    $

    1,340



    Crosstown Walk


    Tampa, FL


    342


    981



    94.3

    %


    $

    1,271



    Overton Rise


    Atlanta, GA


    294


    1,018



    94.6

    %


    $

    1,464



    Claiborne Crossing


    Louisville, KY


    242


    1,204



    —



    $

    1,335



    Luxe at Lakewood Ranch


    Sarasota, FL


    280


    1,105



    —



    n/a


    Adara Overland Park


    Kansas City, KS


    260


    1,116



    —



    n/a


    Aldridge at Town Village


    Atlanta, GA


    300


    969



    —



    n/a


    The Reserve at Summit Crossing


    Atlanta, GA


    172


    1,002



    —



    n/a














    Value-add project:












    Village at Baldwin Park


    Orlando, FL


    528


    1,069



    —



    $

    1,530



















    5,460




















    Joint venture:












    City Vista


    Pittsburgh, PA


    272


    1,023



    —



    $

    1,356















    Total PAC Non-Same Store




    5,732








    Average stabilized physical occupancy








    94.9

    %

    (1)

    $

    1,275



    Student housing communities:










    Average rent per bed


    North by Northwest


    Tallahassee, FL


    219

    (2)


    1,137



    96.1

    %


    $

    725



    SoL


    Tempe, AZ


    225

    (2)


    1,296



    89.3

    %


    $

    715



























    Total All PAC units




    9,530




















    (1) Excludes average occupancy for student housing communities.


    (2) North by Northwest has 679 beds and SoL has 640 beds.

     

    For the three-month period ended September 30, 2017, our average physical occupancy was 94.9%. We calculate average 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, 2017, our average economic occupancy was 94.8%. 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, 525 Avalon Park and CityPark View). We also exclude properties which are currently being marketed for sale, of which there were none at September 30, 2017.

    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, 2017, our capital expenditures  for our multifamily communities and student housing properties were as follows:

     



    Nonrecurring capital expenditures


    Recurring capital expenditures





    Budgeted at acquisition


    Other


    Total



    Total












    Multifamily Communities:











    Summit Crossing


    $

    —



    $

    41,978



    $

    41,978



    $

    46,981



    $

    88,959


    Stone Rise


    —



    8,273



    8,273



    8,254



    16,527


    McNeil Ranch


    —



    —



    —



    12,253



    12,253


    Lake Cameron


    —



    —



    —



    29,562



    29,562


    Stoneridge Farms at the Hunt Club


    —



    16,547



    16,547



    40,643



    57,190


    Vineyards


    —



    13,092



    13,092



    55,667



    68,759


    Cypress


    —



    14,500



    14,500



    13,528



    28,028


    Northpointe


    —



    27,342



    27,342



    24,310



    51,652


    Venue at Lakewood Ranch


    —



    2,470



    2,470



    21,525



    23,995


    Aster at Lely


    —



    9,706



    9,706



    18,282



    27,988


    CityPark View


    —



    30,767



    30,767



    2,796



    33,563


    Avenues at Creekside


    —



    56,549



    56,549



    25,979



    82,528


    Citi Lakes


    —



    8,823



    8,823



    48,557



    57,380


    Stone Creek


    —



    —



    —



    20,820



    20,820


    Lenox Portfolio


    —



    8,424



    8,424



    32,594



    41,018


    Village at Baldwin Park


    1,106,464



    4,050



    1,110,514



    32,234



    1,142,748


    Crosstown Walk


    —



    4,959



    4,959



    15,628



    20,587


    Overton Rise


    —



    3,936



    3,936



    5,824



    9,760


    525 Avalon Park


    —



    8,613



    8,613



    49,025



    57,638


    City Vista


    26,258



    1,282



    27,540



    5,001



    32,541


    Sorrel


    —



    5,790



    5,790



    4,447



    10,237


    Citrus Village


    —



    23,127



    23,127



    16,302



    39,429


    Retreat at Greystone


    —



    4,171



    4,171



    5,711



    9,882


    Founders Village


    —



    9,782



    9,782



    10,199



    19,981


    Claiborne Crossing


    7,339



    5,243



    12,582



    19,161



    31,743


    Luxe Lakewood Ranch


    —



    14,215



    14,215



    —



    14,215


    Adara


    —



    —



    —



    —



    —


    Aldridge at Town Village


    —



    —



    —



    —



    —


    Summit Crossing III


    —



    —



    —



    —



    —













    Total multifamily communities


    1,140,061



    323,639



    1,463,700



    565,283



    2,028,983









    Student Housing:











    North by Northwest


    —



    2,012



    2,012



    48,206



    50,218


    SoL


    —



    9,091



    9,091



    29,746



    38,837













    Total student housing properties


    —



    11,103



    11,103



    77,952



    89,055













    Total


    $

    1,140,061



    $

    334,742



    $

    1,474,803



    $

    643,235



    $

    2,118,038


     

     

     

    Grocery-Anchored Shopping Center Portfolio


    As of September 30, 2017, 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

    Lakeland Plaza

     Atlanta, GA


    1990


    301,711



    95.3

    %


    Sprouts

    Powder Springs

     Atlanta, GA


    1999


    77,853



    91.3

    %


     Publix

    Rockbridge Village

     Atlanta, GA


    2005


    102,432



    95.5

    %


     Kroger

    Royal Lakes Marketplace

     Atlanta, GA


    2008


    119,493



    83.6

    %


     Kroger

    Sandy Plains Exchange

     Atlanta, GA


    1997


    72,784



    93.2

    %


    Publix

    Summit Point

     Atlanta, GA


    2004


    111,970



    82.7

    %


     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



    98.4

    %


    Kroger

    Woodstock Crossing

     Atlanta, GA


    1994


    66,122



    92.6

    %


     Kroger

    East Gate Shopping Center

     Augusta, GA


    1995


    75,716



    89.5

    %


     Publix

    Fury's Ferry

     Augusta, GA


    1996


    70,458



    98.6

    %


     Publix

    Parkway Centre

     Columbus, GA


    1999


    53,088



    97.4

    %


     Publix

    Spring Hill Plaza

     Nashville, TN


    2005


    61,570



    97.7

    %


     Publix

    Parkway Town Centre

     Nashville, TN


    2005


    65,587



    100.0

    %


     Publix

    The Market at Salem Cove

     Nashville, TN


    2010


    62,356



    97.8

    %


     Publix

    The Market at Victory Village

     Nashville, TN


    2007


    71,300



    98.5

    %


     Publix

    The Overlook at Hamilton Place

     Chattanooga, TN


    1992


    213,095



    97.7

    %


     The Fresh Market

    Shoppes of Parkland

     Miami-Ft. Lauderdale, FL


    2000


    145,720



    100.0

    %


    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

    Champions Village

     Houston, TX


    1973


    383,093



    79.3

    %


    Randalls

    Kingwood Glen

     Houston, TX


    1998


    103,397



    100.0

    %


     Kroger

    Independence Square

     Dallas, TX


    1977


    140,218



    88.9

    %


     Tom Thumb

    Oak Park Village

     San Antonio, TX


    1970


    64,855



    100.0

    %


    H.E.B.

    Sweetgrass Corner

     Charleston, SC


    1999


    89,124



    98.6

    %


     Bi-Lo

    Irmo Station

     Columbia, SC


    1980


    99,384



    92.3

    %


    Kroger

    Anderson Central

     Greenville Spartanburg, SC


    1999


    223,211



    96.1

    %


     Walmart

    Fairview Market

     Greenville Spartanburg, SC


    1998


    53,888



    100.0

    %


     Publix

    Rosewood Shopping Center

     Columbia, SC


    2002


    36,887



    90.2

    %


     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



    97.7

    %


    Kroger

    Southgate Village

     Birmingham, AL


    1988


    75,092



    100.0

    %


     Publix











    Grand total/weighted average





    3,854,196



    94.2

    %



     

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

    As of September 30, 2017, our grocery-anchored shopping center portfolio was 94.2% leased. We define percent leased as the percentage of gross leasable area that is leased, including noncancelable lease agreements that have been signed which have not yet commenced.

    Details regarding lease expirations (assuming no exercises of tenant renewal options) within our grocery-anchored shopping center portfolio as of September 30, 2017 were:

     


    Total grocery-anchored shopping center portfolio


    Number of leases


    Leased GLA


    Percent of leased
    GLA







    Month to month

    7



    24,258



    0.7

    %

    2017

    10



    24,542



    0.7

    %

    2018

    95



    339,607



    9.4

    %

    2019

    97



    561,143



    15.5

    %

    2020

    101



    455,157



    12.5

    %

    2021

    85



    428,405



    11.8

    %

    2022

    83



    257,598



    7.1

    %

    2023

    18



    98,573



    2.7

    %

    2024

    18



    551,844



    15.2

    %

    2025

    17



    293,154



    8.1

    %

    2026

    7



    118,711



    3.3

    %

    2027+

    24



    478,693



    13.0

    %







    Total

    562



    3,631,685



    100.0

    %

     

    The Company's Quarterly Report on Form 10-Q for the third quarter 2017 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 2017 totaled $466,598. 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, 2017, our office building portfolio consisted of the following properties:

    Property Name


    Location


    GLA


    Percent leased

    Three Ravinia


    Atlanta, GA


    814,000



    97

    %

    Brookwood Center


    Birmingham, AL


    169,000



    100

    %

    Galleria 75


    Atlanta, GA


    111,000



    94

    %





    1,094,000



    97

    %

     

    The Company defines Annual Base Rent as the current annual cash base rent due under the respective leases, exclusive of expense reimbursement which may also be payable.

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

     




    Square footage


    Percentage of
    total SF


    Annual base rent

    InterContinental Hotels Group

    492,522



    45.0

    %


    $

    11,152,200


    State Farm Mutual Automobile Insurance Company

    183,168



    16.7

    %


    3,218,965


    Access Insurance Holdings Inc

    77,518



    7.1

    %


    1,042,629


    Southern Natural Gas Company

    63,113



    5.8

    %


    1,858,162


    Surgical Care Affiliates

    47,870



    4.4

    %


    1,395,410













    864,191



    79.0

    %


    $

    18,667,366


                   

    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

    2017


    4,063



    0.4

    %

    2018


    4,557



    0.4

    %

    2019


    15,745



    1.5

    %

    2020


    95,656



    9.1

    %

    2021


    217,000



    20.6

    %

    2022


    13,891



    1.3

    %

    2023


    80,472



    7.6

    %

    2024


    19,147



    1.8

    %

    2025


    47,870



    4.5

    %

    2026


    —



    —

    %

    2027+


    555,635



    52.8

    %






    Total


    1,054,036



    100.0

    %

     

    The Company recognized second-generation capital expenditures within its office building portfolio of $25,883 for Brookwood Center and $78,593 for Galleria 75 during  the third quarter 2017. Second-generation capital expenditures exclude those expenditures made in our office building portfolio (i) to lease space to "first generation" tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our Class A ownership standards (and which amounts were underwritten into the total investment at the time of acquisition), (iii) for property re-developments and repositionings and (iv) for building improvements that are recoverable from future operating cost savings.

    Definitions of Non-GAAP Measures

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

    Analysts, managers and investors make certain adjustments to reported net income amounts under U.S. GAAP in order to better assess these vehicles' operating results. FFO is one of the most commonly utilized Non-GAAP measures currently in practice. In its 2002 "White Paper on Funds From Operations," which was most recently revised in 2012, the National Association of Real Estate Investment Trusts, or NAREIT, standardized the definition of how Net income/loss should be adjusted to arrive at FFO, in the interests of uniformity and comparability.

    The NAREIT definition of FFO (and the one reported by the Company) is:

    Net income/loss:

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

    Not all companies necessarily utilize the standardized NAREIT definition of FFO, so caution should be taken in comparing the Company's reported FFO results to those of other companies. The Company's FFO results are comparable to the FFO results of other companies that follow the NAREIT definition of FFO and report these figures on that basis. The Company believes FFO is useful to investors as a supplemental gauge of our operating results.  FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.

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

    Core FFO makes certain adjustments to FFO, which are either not likely to occur on a regular basis or are otherwise not representative of the Company's ongoing operating performance. For example, the Company incurs substantial costs related to property acquisitions, which, prior to 2017, were required to be recognized as expenses when they were incurred. The Company added back any such acquisition and pursuit costs, including costs incurred in connection with obtaining short term debt financing for acquisitions and beginning January 1, 2016, amortization of loan coordination fees to FFO in its calculation of Core FFO since such costs are not representative of our operating results. The Company also adds back any costs incurred related to the extension of our management agreement in June 2016 with our Manager, contingent fees paid to our Manager at the time of a property's sale, realized losses on debt extinguishment or refinancing, weather-related property operating losses and any non-cash dividends in this calculation. Core FFO figures reported by us may not be comparable to those Core FFO figures reported by other companies.

    We utilize Core FFO as a measure of the operating performance of our portfolio of real estate assets.  We believe Core FFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other real estate companies that are not as involved in ongoing acquisition activities. Core FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.

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

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

    Core FFO, plus:

    • non-cash equity compensation to directors and executives;
    • amortization of loan closing costs, excluding costs incurred in connection with obtaining short term financing related to acquisitions;
    • depreciation and amortization of non-real estate assets;
    • net loan fees received;
    • accrued interest income received;
    • 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 is useful in comparing our operating performance with other real estate companies. AFFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.  FFO, Core FFO, and AFFO are not considered measures of liquidity and are not alternatives to measures calculated under GAAP.

    Same Store Net Operating Income (NOI)

    We use same store net operating income as an operational metric for properties we have owned for at least 15 full months, enabling comparisons of those properties' operating results between the current reporting period and the prior year comparative period. We define net operating income as rental and other property revenues, less total property and maintenance expenses, property management fees, real estate taxes, general and administrative expenses, and property insurance. We believe that net operating income is an important supplemental measure of operating performance for REITs because it provides measures of core operations, rather than factoring in depreciation and amortization, financing costs, acquisition costs, and other corporate expenses. Net operating income is a widely utilized measure of comparative operating performance in the REIT industry, but is not a substitute for the most comparable GAAP-compliant measure, net income/loss.

    About Preferred Apartment Communities, Inc.         

    Preferred Apartment Communities, Inc. (NYSE: APTS), 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, 2017, the Company was the approximate 97.3% 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.

     

    View original content with multimedia:http://www.prnewswire.com/news-releases/preferred-apartment-communities-inc-reports-results-for-third-quarter-2017-300545863.html

    SOURCE Preferred Apartment Communities, Inc.

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