Preferred Apartment Communities, Inc. Reports Results for Second Quarter 2021
08/09/2021 - 04:20 PM
Preferred Apartment Communities, Inc. (NYSE: APTS) ("we," "our," the "Company," "Preferred Apartment Communities" or "PAC") today reported results for the quarter ended June 30, 2021. Unless otherwise indicated, all per share results are reported based on the basic weighted average shares of Common Stock and Class A Units ("Class A Units") of the Preferred Apartment Communities Operating Partnership (our "Operating Partnership") outstanding. See Definitions of Non-GAAP Measures.
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“During the second quarter, our high quality Sunbelt multifamily portfolio continued to produce strong results, with top-line same store revenue growth of 5.5% and same store NOI growth of 6.4% . The rent growth we saw in the second quarter has continued into July as our new leases are up 21.3% and our renewals have increased 7.5% . In-migration and employment trends in our markets remain robust, driving strong demand for our well-located multifamily and grocery-anchored retail assets. With our portfolio producing at a high level we have continued to execute against our strategic plan to simplify our business and enhance the flexibility of our capital structure. To that end, on July 29th, we completed the disposition of five office assets and our sole office real estate investment loan to Highwoods Properties, with one additional smaller office portfolio now under contract to Northwoods Investors. At the same time, we announced the call of approximately $221 million of our Preferred Series A stock, which represented the entire amount available to call at the time. As we look ahead, we have a robust pipeline of potential investments, providing a strong foundation for organic and external growth and value creation into 2022 and beyond,” stated Joel Murphy, Preferred Apartment Communities Chairman and Chief Executive Officer.
Conference Call and Supplemental Data
We will hold our quarterly conference call on Tuesday, August 10, 2021 at 11:00 a.m. Eastern Time to discuss our second quarter 2021 results. To participate in the conference call, please dial in to the following:
Live Conference Call Details
Dial-in Number: 1-877-883-0383
The live broadcast of PAC's second quarter 2021 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 "News and Events" heading.
A replay of the call will be archived on PAC's' website under Investors/News and Events/Events.
For Further Information
Paul Cullen
investorrelations@pacapts.com
Operating Results
Our operating results are presented below.
Three months ended June 30,
% change
Six months ended June 30,
% change
2021
2020
2021
2020
Revenues (in thousands)
$
118,706
$
122,980
(3.5)
%
$
234,406
$
253,862
(7.7)
%
Per share data:
Net income (loss) (1)
$
(0.64)
$
(1.06)
—
$
(1.38)
$
(5.47)
—
FFO (2)
$
0.23
$
(0.01)
—
$
0.39
$
(3.39)
—
Core FFO (2)
$
0.33
$
0.22
50.0
%
$
0.58
$
0.50
16.0
%
AFFO (2)
$
0.17
$
0.05
240.0
%
$
0.34
$
0.52
(34.6)
%
Dividends (3)
$
0.175
$
0.175
—
$
0.35
$
0.4375
(20.0)
%
(1)
Per weighted average share of Common Stock outstanding for the periods indicated.
(2)
FFO, Core FFO and AFFO results are presented per basic weighted average share of Common Stock and Class A Unit in our Operating Partnership outstanding for the periods indicated. See Reconciliations of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders and Definitions of Non-GAAP Measures.
(3)
Per share of Common Stock and Class A Unit outstanding.
Financial
Our total revenues for the quarter ended June 30, 2021 decreased approximately $4.3 million , or 3.5% , to $118.7 million from the quarter ended June 30, 2020, due to the absence of revenues from the eight student housing properties that we sold on November 3, 2020. The student housing properties contributed approximately $12.0 million , or 9.8% of our total revenues for the quarter ended June 30, 2020. Excluding the student housing properties' contributions to the second quarter 2020, our total revenues would have increased $7.7 million , or 7.0% .
Our net loss per share was $(0.64) and $(1.06) for the three-month periods ended June 30, 2021 and 2020, respectively. Funds From Operations, or FFO, was $0.23 and $(0.01) per weighted average share of Common Stock and Class A Unit outstanding for the three months ended June 30, 2021 and 2020, respectively. The increase in FFO per share was driven by:
∗ the absence of the loss on extinguishment of debt that was incurred in second quarter 2020 of $0.13 per share;
∗ lower preferred stock dividends of $0.10 per share;
∗ purchase option termination revenue from the repayment of our Vintage Destin loan of $0.05 per share;
∗ lower interest expense of $0.05 per share;
∗ improved property results and increases from acquired properties of $0.03 per share;
∗ lower FFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share; and
∗ lower current interest from our real estate loan investment portfolio of ($0.02) .
Our Core FFO per share (A) increased to $0.33 for the second quarter 2021 from $0.22 for the second quarter 2020, due to:
∗ lower preferred stock dividends of $0.10 per share;
∗ purchase option termination revenue from the repayment of our Vintage Destin loan of $0.05 per share;
∗ lower interest expense of $0.05 per share;
∗ improved property results and increases from acquired properties of $0.03 per share;
∗ lower Core FFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share; and
∗ lower current interest from our real estate loan investment portfolio of ($0.02) .
Our AFFO per share increased to $0.17 for the second quarter 2021 from $0.05 for the second quarter 2020 due to:
∗ lower preferred stock dividends of $0.10 per share;
∗ cash received from purchase option terminations of $0.06 per share;
∗ lower interest expense of $0.05 per share;
∗ improved property results and increases from acquired properties of $0.03 per share;
∗ accrued interest received of $0.03 per share;
∗ lower AFFO resulting from the sale of our student housing properties in the fourth quarter 2020 of ($0.08) per share;
∗ cash paid for closing costs for our renewed revolving line of credit of ($0.04) per share;
∗ lower current interest from our real estate loan investment portfolio of ($0.02) ; and
∗ higher recurring capital expenditures of ($0.01) per share.
Our Core FFO payout ratio to Common Stockholders and Unitholders was approximately 55.3% and our Core FFO payout ratio to our preferred stockholders was approximately 66.8% for the second quarter 2021. (B)
Our AFFO payout ratio to Common Stockholders and Unitholders was approximately 110.3% and our AFFO payout ratio to our preferred stockholders was approximately 80.0% for the second quarter 2021.
As of June 30, 2021, our total assets were approximately $4.3 billion , a decrease from our total assets of approximately $4.8 billion at June 30, 2020, that primarily resulted from the sale of our student housing portfolio during the fourth quarter 2020 for approximately $478.7 million .
(A) Our Core FFO result for the three-month period ended June 30, 2020 has been amended to reflect the movement of the adjustment for expense for current expected credit losses from an adjustment for Core FFO to an adjustment for AFFO.
(B) We calculate the Core FFO and AFFO payout ratios to Common Stockholders as the ratio of Common Stock dividends and distributions to Core FFO and AFFO. We calculate the Core FFO and AFFO payout ratios to preferred stockholders as the ratio of Preferred Stock dividends to the sum of Preferred Stock dividends and Core FFO and AFFO. Since our operations resulted in a net loss from continuing operations for the periods presented, a payout ratio based on net loss is not calculable. See Definitions of Non-GAAP Measures.
Operational
Our multifamily communities' same-store rental and other property revenues increased 5.5% for the quarter ended June 30, 2021 versus 2020. Our multifamily communities' same-store net operating income increased 6.4% for the quarter ended June 30, 2021 versus 2020. Our same-store multifamily communities include all our multifamily communities except Artisan at Viera, The Menlo, The Blake, Parkside at the Beach, Horizon at Wiregrass and The Ellison, all of which were acquired in the last 23 months.
Our rental rates for our multifamily same-store properties for new and renewal leases increased 11.6% and 5.3% respectively for second quarter 2021 as compared to the expiring leases, excluding shorter-term leases.
Our rental rates for our multifamily same-store properties for new and renewal leases increased 21.3% and 7.5% respectively for July 2021 as compared to the expiring leases, excluding shorter-term leases.
As of June 30, 2021, the average age of our multifamily communities was approximately 6.6 years, which is the youngest in the public multifamily REIT industry.
As of June 30, 2021, all of our owned multifamily communities had achieved stabilization except for one second quarter 2021 acquisition. We define stabilization as reaching 93% for all three consecutive months within a single quarter.
The average physical occupancy of our same-store multifamily communities increased to 96.9% for the three-month period ended June 30, 2021 from 94.7% for the three-month period ended June 30, 2020 and 95.8% for the three-month period ended March 31, 2021.
Our average recurring rental revenue collections before and after any effect of rent deferrals for the second quarter 2021 were approximately 99.3% and 99.3% for multifamily communities, 98.9% and 98.9% for grocery-anchored retail properties and 99.7% and 99.9% for office properties, respectively. Rent deferments provided to our residents and tenants are limited and are primarily related to a change of timing of rent payments with no significant changes to total payments or term.
We granted an additional $78,000 of deferred retail rent during the second quarter 2021, raising the total deferred retail rent granted to approximately $2.0 million , or approximately 1.7% of recurring retail rental revenue cumulatively over the last five quarters. Including this deferred rent, our average recurring retail rental revenue collections were 98.9% , 98.7% , 98.7% and 97.9% for second quarter 2021, first quarter 2021, fourth quarter 2020 and third quarter 2020, respectively. As of June 30, 2021, $1.2 million of the $2.0 million of deferred retail rent was in repayment, of which 93.7% has been collected. In addition to the deferrals, we granted an additional $200,000 of COVID-related abatements to retail tenants, raising the total abatement granted to $876,000 , or approximately 0.7% of our retail portfolio's recurring rental revenues cumulatively over the last five quarters. These rental abatements were generally accompanied by an increase in the tenant’s lease term or the lease terms were amended to be more favorable to us. We reduced our reserve by $216,000 , or 0.8% of total retail revenue in the second quarter 2021, or 0.1% of our consolidated rental and other property revenues. Our retail portfolio's total rent reserves over the last five quarters were approximately $2.1 million , or approximately 1.8% of our retail portfolio's recurring rental revenues cumulatively over the same period.
Financing and Capital Markets
As of June 30, 2021, approximately 95.7% of our permanent property-level mortgage debt has fixed interest rates and approximately 0.8% has variable interest rates which are capped. We believe we are well protected against potential increases in market interest rates. Our overall weighted average interest rate for our mortgage debt portfolio was 3.47% for multifamily communities, 4.13% for office properties, 3.89% for grocery-anchored retail properties and 3.72% in the aggregate.
At June 30, 2021, our leverage, as measured by the ratio of our debt to the undepreciated book value of our total assets, was approximately 56.4% .
At June 30, 2021, we had $143.5 million available to be drawn on our revolving line of credit and approximately $37.1 million of cash on hand.
During the second quarter 2021, we issued and sold an aggregate of 37,872 shares of preferred stock and redeemed or called an aggregate of 47,986 shares of preferred stock, resulting in a net reduction of 10,114 outstanding shares of preferred stock, for a net redemption cost of approximately $12.9 million . For the period of November 1, 2020 through August 3, 2021, we issued and sold an aggregate of 143,498 shares of preferred stock and redeemed or called an aggregate of 558,190 shares of preferred stock, resulting in a net reduction of 414,692 outstanding shares of preferred stock, for a net redemption cost of approximately $425.0 million .
During the second quarter 2021, we issued and sold an aggregate of 1,442,214 shares of Common Stock under our 2019 ATM Offering, generating gross proceeds of approximately $15.1 million and, after deducting commissions and other costs, net proceeds of approximately $14.9 million .
Significant Transactions
During the second quarter 2021, we closed on the acquisition of The Ellison, a 250-unit multifamily community located in suburban Atlanta, Georgia.
During the second quarter 2021, we received the full principal amounts totaling approximately $23.5 million from the repayment of two real estate loan investments, plus a purchase option termination fee of approximately $3.0 million and $1.8 million of accrued interest from these loan payoffs. These transactions collectively returned approximately $28.3 million of capital to us during the second quarter for investment, preferred stock redemptions, or other corporate purposes.
During the second quarter 2021, we originated two real estate loan investments with a combined commitment amount of $17.1 million , in support of the development of a 316-unit multifamily community in Savannah, Georgia.
Subsequent to Quarter End
On July 29, 2021, we sold five office properties (Galleria 75, 150 Fayetteville, Capitol Towers, CapTrust and Morrocroft) and our 8West real estate loan investment in a single transaction, for a gross sales price of approximately $645.5 million . Based on estimated closing costs, the sale will result in a loss on sale of between $20.0 million and $21.0 million in the third quarter. We utilized a significant portion of the net proceeds to call approximately $221.6 million of our outstanding Series A Redeemable Preferred Stock on August 3, 2021.
Between July 1, 2021 and July 31, 2021, we issued 532,917 shares of Common Stock under the 2019 ATM Offering, for aggregate gross proceeds of approximately $5.5 million at an average price of $10.30 per share.
On July 8, 2021, we completed the acquisition of Alleia at Presidio, a 231-unit multifamily community located in Ft. Worth, Texas.
On July 19, 2021, we closed on the sale of Vineyards, a 369-unit multifamily community located in Houston, Texas.
On July 22, 2021, we entered into an agreement to sell two office properties, Armour Yards and 251 Armour Yards (the “Armour Yards Portfolio”), to Northwood Investors.
On August 6, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.17 5 per share, payable on October 15, 2021 to stockholders of record on September 15,2021.
Between July 1, 2021 and July 31, 2021, we issued 29,552 shares of Series A1 Preferred Stock and collected net proceeds of approximately $26.6 million after commissions and fees and issued 2,743 shares of Series M1 Preferred Stock and collected net proceeds of approximately $2.7 million after commissions and fees. During the same period, we redeemed 9,735 shares of Series A Preferred Stock, 871 mShares, 70 shares of Series A1 Preferred Stock, and 52 shares of Series M1 Preferred Stock.
2021 Guidance
Net income (loss) per share -
Core FFO -$0.90 t o $1.00 for the full year 2021.
Underpinning this revised guidance are the following assumptions:
• Multifamily Same-Store NOI growth of 5.0% to 7.0% for the full year, an increase from our previous full year guidance of 2.0% to 3.0% ;
• Multifamily acquisition volume of between $300 million and $400 million for the full year, unchanged; and
• New real estate loan investment originations of $50 -$100 million for the full year, unchanged.
This guidance continues to include the impact of purchase option termination revenues and CECL reserve reversals as a result of real estate investment loans being repaid, which in combination with the accelerating growth in the multifamily portfolio, is helping to offset the dilution of the office portfolio sale in the short term. The increases in purchase option revenue represents a significant acceleration of payoffs and acquisitions of properties that were contemplated in 2022. This acceleration will have a material benefit to our results in 2021, to the detriment of the results in 2022. These one-time items will be very difficult to replace going forward, as we have fewer purchase option termination revenue opportunities in our current portfolio. We expect the dilution from the office transaction will be more impactful in 2022.
AFFO, Core FFO and FFO are calculated after deductions for all preferred stock dividends. Reconciliations of net income (loss) attributable to common stockholders to FFO, Core FFO and AFFO for the three-month and six-month periods ended June 30, 2021 and 2020 appear in the attached report, as well as on our website using the following link:
https://investors.pacapts.com/q2-2021-quarterly-supplemental-financial-data
Real Estate Assets
At June 30, 2021, our portfolio of owned real estate assets and potential additions from purchase options we held from our real estate loan investments consisted of:
Owned as of
(1)
Potential
(2)
Potential total
Residential properties:
Properties
38
13
51
Units
11,393
3,566
14,959
Grocery-anchored shopping centers:
Properties
54
—
54
Gross leasable area (square feet)
6,208,278
—
6,208,278
Office buildings: (3)
Properties
9
1
10
Rentable square feet
3,169,000
195,000
3,364,000
Development properties
2
—
2
Rentable square feet
35,000
—
35,000
(1) One multifamily community, two grocery-anchored shopping centers and two office buildings are owned through consolidated joint ventures. One grocery-anchored shopping center is an investment in an unconsolidated joint venture.
(2) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio.
(3) Five of our office properties and the real estate loan investment supporting the 8West office building were sold to Highwoods Realty Limited Partnership, an unrelated party, on July 29, 2021.
The following chart details quarterly cash collections of recurring rental revenues before and after the effect of rent deferrals across all our operating business lines as of August 5, 2021:
Cash Collections of Recurring Rental Revenues (1)
2020
2021
Unadjusted for
First
Second
Third
Fourth
First
Second
Multifamily
99.9
%
98.8
%
99.0
%
99.1
%
99.1
%
99.3
%
Office
99.9
%
98.1
%
99.7
%
99.7
%
99.8
%
99.7
%
Grocery-anchored retail (2)
99.6
%
91.9
%
96.1
%
97.8
%
98.7
%
98.9
%
Cash Collections of Recurring Rental Revenues (1)
2020
2021
Adjusted for
First
Second
Third
Fourth
First
Second
Multifamily
99.9
%
99.4
%
99.0
%
99.1
%
99.2
%
99.3
%
Office
99.9
%
99.9
%
100.0
%
99.7
%
99.9
%
99.9
%
Grocery-anchored retail (2)
99.6
%
97.0
%
97.9
%
98.7
%
98.7
%
98.9
%
(1)
Percent of revenue billed includes recurring charges for base rent, operating expense escalations, pet, garage, parking and storage rent, as well as receivables from U.S. Government tenants, from which collection is reasonably assured.
(2)
Includes an investment in an unconsolidated joint venture that is not prorated for our ownership percentage.
The following chart details quarterly occupancy and percent leased rates across all our operating business lines:
Occupancy and Percentages Leased
2020
2021
Adjusted for rent deferrals:
First
Second
Third
Fourth
First
Second
Occupancy:
Multifamily (stabilized) (1)
95.5
%
94.7
%
95.6
%
95.6
%
95.8
%
96.8
%
Percent leased: (2)
Office
96.7
%
96.2
%
95.5
%
94.7
%
91.0
%
90.9
%
Grocery-anchored retail (3)
92.6
%
92.7
%
92.5
%
91.0
%
90.8
%
91.1
%
(1)
For quarterly periods, calculated as the average of the number of occupied units on the 20th day of each of the trailing three months from the period end date.
(2)
Percent of total area leased as of the period end date.
(3)
Includes an investment in an unconsolidated joint venture that is not prorated for our ownership percentage.
Same-Store Financial Data
The following charts present same-store operating results for the Company’s multifamily communities. We define our population of same-store multifamily communities as those that have achieved occupancy at or above 93% for all three consecutive months within a single quarter ("stabilized") before the beginning of the prior year and that have been owned for at least 15 full months as of the end of the first quarter of the current year, enabling comparisons of the current year quarterly and annual reporting periods to the prior year comparative periods. The Company excludes the operating results of properties for which construction of adjacent phases has commenced and properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period.
For the periods presented, same-store operating results consist of the operating results of the multifamily communities listed below, comprising an aggregate 9,591 units, or 84.2% of our multifamily units.
Same-store net operating income is a non-GAAP measure that is most directly comparable to net income (loss), as shown in the reconciliation below. See Definitions of Non-GAAP Measures.
Reconciliation of Net Income (Loss) to Multifamily Communities' Same-Store Net Operating Income ("NOI")
Three months ended:
(in thousands)
6/30/2021
6/30/2020
Net income (loss)
$
1,557
$
(15,950)
Add:
Equity stock compensation
925
246
Depreciation and amortization
44,732
51,793
Interest expense
27,296
31,136
Corporate G&A and other
7,696
7,827
(Income) loss from unconsolidated joint venture
175
—
Management Internalization
240
458
Allowance for expected credit losses
(845)
482
Less:
Interest revenue on notes receivable
12,814
10,407
Interest revenue on related party notes receivable
410
604
Miscellaneous revenues
321
395
Loss on extinguishment of debt
—
(6,156)
Property net operating income
68,231
70,742
Less:
Non same-store property revenues
(61,448)
(70,156)
Add:
Non same-store property operating expenses
18,579
23,242
Same-store net operating income
$
25,362
$
23,828
Multifamily Communities' Same-Store NOI
Three months ended:
(in thousands)
6/30/2021
6/30/2020
$ change
% change
Revenues:
Rental and other property revenues
$
43,712
$
41,418
$
2,294
5.5
%
Operating expenses:
Property operating and maintenance
7,587
6,996
591
8.4
%
Payroll
3,356
3,342
14
0.4
%
Real estate taxes and insurance
7,407
7,252
155
2.1
%
Total operating expenses
18,350
17,590
760
4.3
%
Same-store net operating income
$
25,362
$
23,828
$
1,534
6.4
%
Same-store average physical occupancy
96.9
%
94.7
%
Corporate level expenses related to the management and operations of the multifamily portfolio are allocated on a per unit basis to property NOI and are included in Multifamily Same-Store NOI.
Reconciliation of Net Income (Loss) to Multifamily Communities' Same-Store Net Operating Income ("NOI")
Six months ended:
(in thousands)
6/30/2021
6/30/2020
Net income (loss)
$
(1,152)
$
(195,473)
Add:
Equity stock compensation
1,499
476
Depreciation and amortization
90,559
101,302
Interest expense
54,287
60,729
Management fees
—
3,099
Corporate G&A and other
15,235
13,775
(Income) loss from unconsolidated joint venture
369
—
Management Internalization
485
179,251
Allowance for expected credit losses
(323)
5,615
Waived asset management and general and administrative expense fees
—
(1,136)
Less:
Interest revenue on notes receivable
23,326
23,846
Interest revenue on related party notes receivable
815
3,141
Miscellaneous revenues
645
3,435
Gain on sale of real estate, net
798
—
Gain on land sale
—
479
Loss on extinguishment of debt
—
(6,156)
Property net operating income
135,375
142,893
Less:
Non same-store property revenues
(123,273)
(139,770)
Add:
Non same-store property operating expenses
37,807
45,519
Same-store net operating income
$
49,909
$
48,642
Multifamily Communities' Same-Store NOI
Six months ended:
(in thousands)
6/30/2021
6/30/2020
$ change
% change
Revenues:
Rental and other property revenues
$
86,346
$
83,668
$
2,678
3.2
%
Operating expenses:
Property operating and maintenance
14,680
14,090
590
4.2
%
Payroll
6,620
6,461
159
2.5
%
Real estate taxes and insurance
15,137
14,475
662
4.6
%
Total operating expenses
36,437
35,026
1,411
4.0
%
Same-store net operating income
$
49,909
$
48,642
$
1,267
2.6
%
Corporate level expenses related to the management and operations of the multifamily portfolio are allocated on a per unit basis to property NOI and are included in Multifamily Same-Store NOI.
Dividends
Quarterly Dividends on Common Stock and Class A OP Units
On May 6, 2021, our board of directors declared a quarterly dividend on our Common Stock of $0.17 5 per share, which was paid on July 15, 2021 to stockholders of record on June 15, 2021. In conjunction with the Common Stock dividend, our operating partnership declared a distribution on its Class A Units of $0.17 5 per unit for the second quarter 2021, which was paid on July 15, 2021 to all Class A Unit holders of record on June 15, 2021.
Monthly Dividends on Preferred Stock
We declared monthly dividends of $5.00 per share on our Series A Preferred Stock, which totaled approximately $29.0 million for the second quarter 2021 and represents a 6% annual yield. We declared monthly dividends of $5.00 per share on our Series A1 Preferred Stock, which totaled approximately $3.1 million for the second quarter 2021 and also represents a 6% annual yield. We declared dividends totaling approximately $1.4 million on our Series M Preferred Stock, or mShares, for the second quarter 2021. The mShares have a dividend rate that escalates from 5.75% in year one of issuance to 7.50% in year eight and thereafter. We declared dividends totaling approximately $400,000 on our Series M1 Preferred Stock for the second quarter 2021. The Series M1 Preferred Stock has a dividend rate that escalates from 6.1% in year one of issuance to 7.1% in year ten and thereafter.
Forward-Looking Statements
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Estimates of future earnings, guidance, redemptions of Series A Preferred Stock, potential additions of properties from purchase options and rights of first offer from our real estate loan investments, goals and performance are, by definition, and certain other statements in this Earnings Release and Supplemental Financial Data Report may constitute, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, achievements or transactions to be materially different from the results, guidance, goals, performance, achievements or transactions expressed or implied by the forward-looking statements. These statements may be identified by the use of forward-looking terminology such as "may," "trend," "will," "expects," "plans," "estimates," "anticipates," "projects," "intends," "believes," "strategy," "goals," "objectives," "outlook" and similar expressions. These risks, uncertainties and contingencies include, but are not limited to, (a) the impact of the COVID-19 pandemic, including any variants, and related federal, state and local government actions on PAC’s business operations and the economic conditions in the markets in which PAC operates; (b) PAC’s ability to mitigate the impacts arising from COVID-19 or any variants thereof; and (c) those disclosed in PAC's filings with the SEC. Factors that impact such forward-looking statements include, among others, our business and investment strategy; legislative or regulatory actions; the state of the U.S. economy generally or in specific geographic areas; economic trends and economic recoveries; changes in operating costs, including real estate taxes, utilities and insurance costs; our ability to obtain and maintain debt or equity financing; financing and advance rates for our target assets; our leverage level; changes in the values of our assets; the occurrence of natural or man-made disasters; availability of attractive investment opportunities in our target markets; our ability to maintain our qualification as a real estate investment trust, or REIT, for U.S. federal income tax purposes; availability of quality personnel; our understanding of our competition and market trends in our industry; and interest rates, real estate values, the debt securities markets and the general economy.
Except as otherwise required by the federal securities laws, we assume no liability to update the information in this Earnings Release and Supplemental Financial Data Report.
We refer you to the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020 that was filed with the SEC on March 1, 2021, which discuss various factors that could adversely affect our financial results. Such risk factors and information may be updated or supplemented by our Form 10-K, Form 10-Q and Form 8-K filings and other documents filed from time to time with the SEC.
COVID-19
Our percentages of rent collected remained stabilized at or near pre-pandemic levels during the second quarter 2021. While the impacts of COVID-19 are continuing, and particularly so the Delta variant, the effects on our operations have been manageable and we believe this condition will persist, barring a dramatic change in the trajectory of the pandemic. The Company is continuing to monitor the spread and impact of the Delta variant of COVID-19 as well as vaccination rates in its markets.
Additional Information
The SEC has declared effective the registration statement filed by the Company for each of our public offerings. 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. 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. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov . Alternatively, the Company or its dealer manager, Preferred Capital Securities, LLC, will arrange to send you a prospectus with respect to the Series A1/M1 Offering upon request by contacting John A. Isakson at (770) 818-4109, 3284 Northside Parkway NW, Suite 150, Atlanta, Georgia 30327.
The final prospectus for the Series A1/M1 Offering, dated October 22, 2019, can be accessed through the following link:
https://www.sec.gov/Archives/edgar/data/1481832/000148183219000097/a424b5-2019seriesamshares.htm
Preferred Apartment Communities, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended June 30,
(In thousands, except per-share figures)
2021
2020
Revenues:
Rental and other property revenues
$
105,161
$
111,574
Interest income on loans and notes receivable
12,814
10,407
Interest income from related parties
410
604
Miscellaneous revenues
321
395
Total revenues
118,706
122,980
Operating expenses:
Property operating and maintenance
15,580
17,283
Property salary and benefits
4,914
5,720
Property management costs
927
1,042
Real estate taxes and insurance
15,509
16,787
General and administrative
7,696
7,827
Equity compensation to directors and executives
925
246
Depreciation and amortization
44,732
51,793
Allowance for expected credit losses
(845)
482
Management Internalization expense
240
458
Total operating expenses
89,678
101,638
Operating income before loss from unconsolidated joint venture
29,028
21,342
Loss from unconsolidated joint venture
(175)
—
Operating income
28,853
21,342
Interest expense
27,296
31,136
Loss on extinguishment of debt
—
(6,156)
Net income (loss)
1,557
(15,950)
Net (income) loss attributable to non-controlling interests
(3)
266
Net income (loss) attributable to the Company
1,554
(15,684)
Dividends declared to preferred stockholders
(33,983)
(35,624)
Earnings attributable to unvested restricted stock
(138)
(11)
Net loss attributable to common stockholders
$
(32,567)
$
(51,319)
Net loss per share of Common Stock available to
common stockholders, basic and diluted
$
(0.64)
$
(1.06)
Weighted average number of shares of Common Stock outstanding,
basic and diluted
50,518
48,220
Reconciliation of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO
to Net (Loss) Income Attributable to Common Stockholders (A)
Three months ended June 30,
(In thousands, except per-share figures)
2021
2020
Net loss attributable to common stockholders (See note 1)
$
(32,567)
$
(51,319)
Add:
Depreciation of real estate assets
35,977
40,996
Amortization of acquired intangible assets and deferred leasing costs
8,486
9,973
Net loss attributable to Class A Unitholders (See note 2)
16
(249)
FFO attributable to common stockholders and unitholders
11,912
(599)
Acquisition and pursuit costs
1
132
Loan cost amortization on acquisition term notes and loan coordination fees (See note 3)
482
528
Payment of costs related to property refinancing
118
6,863
Internalization costs (See note 4)
240
458
Deemed dividends for redemptions of and non-cash dividends on preferred stock
4,110
2,772
Expenses related to the COVID-19 global pandemic (See note 5)
27
419
Core FFO attributable to common stockholders and unitholders (A)
16,890
10,573
Add:
Non-cash equity compensation to directors and executives
925
246
Amortization of loan closing costs (See note 7)
1,245
1,177
Depreciation/amortization of non-real estate assets
447
616
Net loan origination fees received (See note 8)
386
200
Deferred interest income received (See note 9)
1,569
—
Amortization of lease inducements (See note 10)
452
447
Less:
Amortization of purchase option termination revenues in excess of cash received (See note 11)
(227)
(435)
Non-cash loan interest income (See note 9)
(2,909)
(3,109)
Non-cash (income) expense for current expected credit losses (See note 6)
(1,256)
(122)
Cash paid for loan closing costs
(1,881)
—
Amortization of acquired real estate intangible liabilities and SLR (See note 12)
(3,248)
(4,144)
Amortization of deferred revenues (See note 13)
(941)
(941)
Normally recurring capital expenditures (See note 14)
(2,977)
(2,124)
AFFO attributable to common stockholders and Unitholders
$
8,475
$
2,384
Common Stock dividends and distributions to Unitholders declared:
Common Stock dividends
$
9,259
$
8,624
Distributions to Unitholders (See note 2)
87
130
Total
$
9,346
$
8,754
Common Stock dividends and Unitholder distributions per share
$
0.175
$
0.175
FFO per weighted average basic share of Common Stock and Unit outstanding
$
0.23
$
(0.01)
Core FFO per weighted average basic share of Common Stock and Unit outstanding
$
0.33
$
0.22
AFFO per weighted average basic share of Common Stock and Unit outstanding
$
0.17
$
0.05
Weighted average shares of Common Stock and Units outstanding:
Basic:
Common Stock
50,518
48,220
Class A Units
535
759
Common Stock and Class A Units
51,053
48,979
Diluted Common Stock and Class A Units (See note 15)
51,579
48,980
Actual shares of Common Stock outstanding, including 704 and 548 unvested shares
of restricted Common Stock at June 30, 2021 and 2020, respectively.
52,432
49,831
Actual Class A Units outstanding at June 30, 2021 and 2020, respectively.
497
742
Total
52,929
50,573
(A)
Our Core FFO result for the three-month period ended June 30, 2020 has been amended to reflect the movement of the adjustment for expense for current expected credit losses from an adjustment for Core FFO to an adjustment for AFFO.
See Notes to Reconciliation of FFO, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders.
Reconciliation of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO
to Net (Loss) Income Attributable to Common Stockholders (A)
Six months ended June 30,
(In thousands, except per-share figures)
2021
2020
Net loss attributable to common stockholders (See note 1)
$
(69,176)
$
(260,771)
Add:
Depreciation of real estate assets
72,809
80,771
Amortization of acquired intangible assets and deferred leasing costs
17,196
18,955
Gain on sale of real estate
(798)
—
Net loss attributable to Class A Unitholders (See note 2)
(17)
(3,343)
FFO attributable to common stockholders and unitholders
20,014
(164,388)
Acquisition and pursuit costs
5
378
Loan cost amortization on acquisition term notes and loan coordination fees (See note 3)
906
1,206
Payment of costs related to property refinancing
118
6,863
Internalization costs (See note 4)
485
179,251
Deemed dividends for redemptions of and non-cash dividends on preferred stock
7,937
3,316
Expenses related to the COVID-19 global pandemic (See note 5)
81
448
Earnest money forfeited by prospective asset purchaser
—
(2,750)
Core FFO attributable to common stockholders and unitholders (A)
29,546
24,324
Add:
Non-cash equity compensation to directors and executives
1,499
476
Amortization of loan closing costs (See note 7)
2,457
2,343
Depreciation/amortization of non-real estate assets
891
1,172
Net loan origination fees received (See note 8)
1,203
467
Deferred interest income received (See note 9)
4,486
8,277
Amortization of lease inducements (See note 10)
900
886
Earnest money forfeited by prospective asset purchaser
—
2,750
Cash received in excess of amortization of purchase option termination revenues (See note 11)
23
325
Less:
Non-cash loan interest income (See note 9)
(5,783)
(6,128)
Non-cash (income) expense for current expected credit losses (See note 6)
(1,139)
4,408
Cash paid for loan closing costs
(1,891)
—
Amortization of acquired real estate intangible liabilities and SLR (See note 12)
(6,563)
(8,797)
Amortization of deferred revenues (See note 13)
(1,881)
(1,881)
Normally recurring capital expenditures (See note 14)
(6,330)
(3,542)
AFFO attributable to common stockholders and Unitholders
$
17,418
$
25,080
Common Stock dividends and distributions to Unitholders declared:
Common Stock dividends
$
18,250
$
21,115
Distributions to Unitholders (See note 2)
183
333
Total
$
18,433
$
21,448
Common Stock dividends and Unitholder distributions per share
$
0.35
$
0.4375
FFO per weighted average basic share of Common Stock and Unit outstanding
$
0.39
$
(3.39)
Core FFO per weighted average basic share of Common Stock and Unit outstanding
$
0.58
$
0.50
AFFO per weighted average basic share of Common Stock and Unit outstanding
$
0.34
$
0.52
Weighted average shares of Common Stock and Units outstanding:
Basic:
Common Stock
50,277
47,674
Class A Units
572
793
Common Stock and Class A Units
50,849
48,467
Diluted Common Stock and Class A Units (See note 15)
51,271
48,474
Actual shares of Common Stock outstanding, including 704 and 548 unvested shares
of restricted Common Stock at June 30, 2021 and 2020, respectively.
52,432
49,831
Actual Class A Units outstanding at June 30, 2021 and 2020, respectively.
497
742
Total
52,929
50,573
(A)
Our Core FFO result for the three-month period ended June 30, 2020 has been amended to reflect the movement of the adjustment for expense for current expected credit losses from an adjustment for Core FFO to an adjustment for AFFO.
See Notes to Reconciliation of FFO, Core FFO and AFFO to Net Income (Loss) Attributable to Common Stockholders.
Notes to Reconciliations of FFO Attributable to Common Stockholders and Unitholders, Core FFO and AFFO to
1)
Rental and other property revenues and property operating expenses for the three months ended June 30, 2021 include activity for the properties acquired since June 30, 2020. Rental and other property revenues and expenses for the three-month and six-month periods ended June 30, 2020 include activity for the acquisitions made during that period only from their respective dates of acquisition.
2)
Non-controlling interests in our Operating Partnership, consisted of a total of 497,291 Class A Units as of June 30, 2021. Included in this total are 419,228 Class A Units which were granted as partial consideration to the seller in conjunction with the seller's contribution to us on February 29, 2016 of the Wade Green grocery-anchored shopping center. The remaining Class A units were awarded primarily to our key executive officers. The Class A Units are apportioned a percentage of our financial results as non-controlling interests. The weighted average ownership percentage of these holders of Class A Units was calculated to be 1.05% and 1.55% for the three-month periods ended June 30, 2021 and 2020, respectively.
3)
We paid loan coordination fees to Preferred Apartment Advisors, LLC, (our "Former Manager") to reflect the administrative effort involved in arranging debt financing for acquired properties prior to the Internalization Transaction. The fees were calculated as 0.6% of the amount of any mortgage indebtedness on newly-acquired properties or refinancing and are amortized over the lives of the respective mortgage loans. This non-cash amortization expense is an addition to FFO in the calculation of Core FFO and AFFO. At June 30, 2021, aggregate unamortized loan coordination fees were approximately $10.9 million , which will be amortized over a weighted average remaining loan life of approximately 10.2 years.
4)
This adjustment reflects the add-back of (i) consideration paid to the owners of the Former Manager and NMP Advisors, LLC (our "Former Sub-Manager"), (ii) accretion of the discount on the deferred liability payable to the owners of the Former Manager and (iii) due diligence and pursuit costs incurred by the Company related to the internalization of the functions performed by the Former Manager (the "Internalization Transaction").
5)
This additive adjustment to FFO consists of non-recurring costs for signage, cleaning and supplies necessary to create and maintain work environments necessary to adhere to CDC guidelines during the current COVID-19 pandemic. Since we do not expect to incur similar costs once the COVID-19 pandemic has subsided, we add these costs back to FFO in our calculation of Core FFO.
6)
Effective January 1, 2020, we adopted ASU 2016-03, which requires us to estimate the amount of future credit losses we expect to incur over the lives of our real estate loan investments at the inception of each loan. This loss reserve may be adjusted upward or downward over the lives of our loans and therefore the aggregate net adjustment for each period could be positive (removing the non-cash effect of a net increase in aggregate loss reserves) or negative (removing the non-cash effect of a net decrease in aggregate loss reserves) in these adjustments to Core FFO in calculating AFFO.
7)
We incur loan closing costs on our existing mortgage loans, which are secured on a property-by-property basis by each of our acquired real estate assets, and also for occasional amendments to our syndicated revolving line of credit with Key Bank National Association, or our Revolving Line of Credit. These loan closing costs are also amortized over the lives of the respective loans and the Revolving Line of Credit, and this non-cash amortization expense is an addition to FFO in the calculation of AFFO. Neither we nor the Operating Partnership 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 June 30, 2021, unamortized loan costs on all the Company's indebtedness were approximately $30.9 million , which will be amortized over a weighted average remaining loan life of approximately 8.5 years.
8)
We receive loan origination fees in conjunction with the origination of certain real estate loan investments. These fees are then recognized as revenue over the lives of the applicable loans as adjustments of yield using the effective interest method. The total fees received are additive adjustments in the calculation of AFFO. Correspondingly, the amortized non-cash income is a deduction in the calculation of AFFO. Over the lives of certain loans, we accrue additional interest amounts that become due to us at the time of repayment of the loan or refinancing of the property, or when the property is sold. This non-cash interest income is subtracted from Core FFO in our calculation of AFFO. The amount of additional accrued interest becomes an additive adjustment to FFO once received from the borrower.
9)
This adjustment reflects the receipt during the periods presented of additional interest income (described in note 8 above) which was earned and accrued on various real estate loans prior to those periods and previously deducted in our calculation of AFFO.
10)
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.
11)
Occasionally we receive fees in exchange for the termination of our purchase options related to certain multifamily communities. These fees are recorded as revenue over the period beginning on the date of termination until the earlier of (i) the maturity of the real estate loan investment and (ii) the sale of the property. The receipt of the cash termination fees are an additive adjustment in our calculation of AFFO and the removal of non-cash revenue from the recognition of the termination fees are a reduction to Core FFO in our calculation of AFFO; both of these adjustments are presented in a single net number within this line. For periods in which recognized termination fee revenues exceeded the amount of cash received, a negative adjustment is shown to Core FFO in our calculation of AFFO; for periods in which cash received exceeded the amount of recognized termination fee revenues, an additive adjustment is shown to Core FFO in our calculation of AFFO.
12)
This adjustment reflects straight-line rent adjustments and the reversal of the non-cash amortization of below-market and above-market lease intangibles, which were recognized in conjunction with our acquisitions and which are amortized over the estimated average remaining lease terms from the acquisition date for multifamily communities and over the remaining lease terms for grocery-anchored shopping center assets and office buildings. At June 30, 2021, the balance of unamortized below-market lease intangibles was approximately $47.8 million , which will be recognized over a weighted average remaining lease period of approximately 8.4 years.
13)
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.
14)
We deduct from Core FFO normally recurring capital expenditures that are necessary to maintain our assets’ revenue streams in the calculation of AFFO. This adjustment also deducts from Core FFO capitalized amounts for third party costs during the period to originate or renew leases in our grocery-anchored shopping centers and office buildings. This adjustment includes approximately $17,000 and $35,000 of recurring capitalized expenditures incurred at our corporate offices during the three-month and six-month periods ended June 30, 2021, respectively. No adjustment is made in the calculation of AFFO for nonrecurring capital expenditures. See Capital Expenditures, Grocery-Anchored Shopping Center Portfolio, and Office Building Portfolio sections for definitions of these terms.
15)
Since our AFFO results are positive for the periods reflected, we are presenting recalculated diluted weighted average shares of Common Stock and Class A Units for these periods for purposes of this table, which includes the dilutive effect of common stock equivalents from grants of the Class B Units, warrants included in units of Series A Preferred Stock issued, as well as annual grants of restricted Common Stock and restricted stock units. The weighted average shares of Common Stock outstanding presented on the Consolidated Statements of Operations are the same for basic and diluted for any period for which we recorded a net loss available to common stockholders.
See Definitions of Non-GAAP Measures.
Preferred Apartment Communities, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, 2021
December 31, 2020
Assets
Real estate
Land
$
611,966
$
605,282
Building and improvements
3,092,932
3,034,727
Tenant improvements
189,413
184,288
Furniture, fixtures, and equipment
319,328
306,725
Construction in progress
10,980
12,269
Gross real estate
4,224,619
4,143,291
Less: accumulated depreciation
(582,583)
(509,547)
Net real estate
3,642,036
3,633,744
Real estate loan investments, net
269,862
279,895
Total real estate and real estate loan investments, net
3,911,898
3,913,639
Cash and cash equivalents
37,105
28,657
Restricted cash
53,679
47,059
Notes receivable
2,977
1,863
Note receivable and revolving line of credit due from related party
9,011
9,011
Accrued interest receivable on real estate loans
23,183
22,528
Acquired intangible assets, net of amortization
110,656
127,138
Tenant lease inducements, net
17,352
18,206
Investment in unconsolidated joint venture
6,288
6,657
Tenant receivables and other assets
98,050
106,321
Total assets
$
4,270,199
$
4,281,079
Liabilities and equity
Liabilities
Mortgage notes payable, net of deferred loan costs and mark-to-market adjustment
$
2,636,752
$
2,594,464
Revolving line of credit
56,500
22,000
Unearned purchase option termination fees
246
723
Deferred revenue
34,130
36,010
Accounts payable and accrued expenses
47,216
41,912
Deferred liability to Former Manager
23,675
23,335
Contingent liability due to Former Manager
14,725
14,814
Accrued interest payable
7,825
7,877
Dividends and partnership distributions payable
20,811
20,137
Acquired below market lease intangibles, net of amortization
47,820
51,934
Prepaid rent, security deposits and other liabilities
30,119
29,425
Total liabilities
2,919,819
2,842,631
Commitments and contingencies
Equity
Stockholders' equity
Series A Redeemable Preferred Stock, $0.01 par value per share; 3,050 shares authorized; 2,226 shares issued; 1,647 and 1,735 shares outstanding at June 30, 2021 and December 31, 2020, respectively
16
17
Series A1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; 218 and 149 shares issued and 217 and 149 shares outstanding at June 30, 2021 and December 31, 2020, respectively
2
1
Series M Redeemable Preferred Stock, $0.01 par value per share; 500 shares authorized; 106 shares issued; 86 and 89 shares outstanding at June 30, 2021 and December 31, 2020, respectively
1
1
Series M1 Redeemable Preferred Stock, $0.01 par value per share; up to 1,000 shares authorized; 26 and 19 shares issued; 25 and 19 shares outstanding at June 30, 2021 and December 31, 2020, respectively
—
—
Common Stock, $0.01 par value per share; 400,067 shares authorized; 51,728 and 49,994 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively
517
500
Additional paid-in capital
1,543,665
1,631,646
Accumulated (deficit) earnings
(193,539)
(192,446)
Total stockholders' equity
1,350,662
1,439,719
Non-controlling interest
(282)
(1,271)
Total equity
1,350,380
1,438,448
Total liabilities and equity
$
4,270,199
$
4,281,079
Preferred Apartment Communities, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended June 30,
(In thousands)
2021
2020
Operating activities:
Net loss
$
(1,152)
$
(195,473)
Reconciliation of net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense
90,559
101,302
Amortization of above and below market leases
(2,871)
(3,570)
Amortization of deferred revenues and other non-cash revenues
(2,545)
(2,482)
Amortization of purchase option termination fees
(4,440)
(4,475)
Amortization of equity compensation, lease incentives and other non-cash expenses
2,809
1,781
Deferred loan cost amortization
3,307
3,424
Non-cash accrued interest income on real estate loan investments
(5,585)
(6,156)
Receipt of accrued interest income on real estate loan investments
4,930
8,865
Gains on sale of real estate and land, net
(798)
(479)
Loss from unconsolidated joint venture
369
—
Cash received for purchase option terminations
4,463
4,800
Loss on extinguishment of debt
—
6,156
(Decrease) increase in allowance for expected credit losses
(323)
5,615
Changes in operating assets and liabilities:
Decrease (increase) in tenant receivables and other assets
3,710
(12,112)
(Increase) in tenant lease incentives
(45)
(382)
Increase in accounts payable and accrued expenses
7,476
36,431
Increase in deferred liability to Former Manager
—
22,851
Increase in contingent liability
—
15,004
Increase (decrease) in accrued interest, prepaid rents and other liabilities
2,047
(2,234)
Net cash provided by (used in) operating activities
101,911
(21,134)
Investing activities:
Investments in real estate loans
(30,825)
(24,547)
Repayments of real estate loans
41,435
53,896
Notes receivable issued
(1,257)
(686)
Notes receivable repaid
143
10,041
Notes receivable issued to and draws on line of credit by related parties
—
(9,624)
Repayments of notes receivable and lines of credit by related parties
—
4,546
Origination fees received on real estate loan investments
1,203
467
Acquisition of properties
(66,772)
(185,970)
Disposition of properties
4,798
—
Proceeds from land sales
259
738
Investment in property development
—
(50)
Capital improvements to real estate assets
(18,278)
(26,422)
Deposits paid on acquisitions
(1,558)
(105)
Net cash used in investing activities
(70,852)
(177,716)
Preferred Apartment Communities, Inc.
Consolidated Statements of Cash Flows - continued
(Unaudited)
Six months ended June 30,
(In thousands)
2021
2020
Financing activities:
Proceeds from mortgage notes payable
60,293
336,849
Repayments of mortgage notes payable
(20,572)
(134,493)
Payments for deposits and other mortgage loan costs
(2,411)
(10,541)
Payments for mortgage prepayment costs
—
(5,919)
Proceeds from lines of credit
225,000
284,000
Payments on lines of credit
(190,500)
(191,500)
Repayment of Term Loan
—
(70,000)
Proceeds from sales of preferred stock and Units, net of offering costs and redemptions
68,283
120,497
Proceeds from exercises of Warrants
—
29
Payments for redemptions of preferred stock
(83,256)
(48,202)
Proceeds from sales of common stock
14,879
—
Common Stock dividends paid
(17,736)
(24,647)
Preferred stock dividends and Class A Unit distributions paid
(67,870)
(68,538)
Payments for deferred offering costs
(2,001)
(9,701)
(Distributions to) contributions from non-controlling interests
(100)
197
Net cash (used in) provided by financing activities
(15,991)
178,031
Net increase in cash, cash equivalents and restricted cash
15,068
(20,819)
Cash, cash equivalents and restricted cash, beginning of year
75,716
137,253
Cash, cash equivalents and restricted cash, end of period
$
90,784
$
116,434
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
Optional
Total loan
Carrying amount (1) as of
Current /
June 30, 2021
December 31, 2020
Multifamily communities:
(in thousands)
Berryessa
San Jose, CA
2/13/2022
2/13/2023
$
137,616
$
132,103
$
126,237
8.5 / 3
The Anson
Nashville, TN
11/24/2021
11/24/2023
6,240
6,240
6,240
8.5 / 4.5
The Anson Capital
Nashville, TN
11/24/2021
11/24/2023
5,659
5,050
4,839
8.5 / 4.5
V & Three
Charlotte, NC
8/15/2021
8/15/2022
10,336
10,335
10,335
8.5 / 5
V & Three Capital
Charlotte, NC
8/18/2021
8/18/2022
7,338
7,338
7,162
8.5 / 5
Cameron Square
Alexandria, VA
10/11/2021
10/11/2023
21,340
21,298
20,874
8.5 / 3
Cameron Square Capital
Alexandria, VA
10/11/2021
10/11/2023
8,850
8,850
8,850
8.5 / 3
Southpoint
Fredericksburg, VA
2/28/2022
2/28/2024
7,348
7,348
7,348
8.5 / 4
Southpoint Capital
Fredericksburg, VA
2/28/2022
2/28/2024
4,962
4,828
4,626
8.5 / 4
Hidden River II
Tampa, FL
10/11/2022
10/11/2024
4,462
4,462
4,462
8.5 / 3.5
Hidden River II Capital
Tampa, FL
10/11/2022
10/11/2024
2,763
2,568
2,461
8.5 / 3.5
Vintage Horizon West
Orlando, FL
10/11/2022
10/11/2024
10,900
9,412
9,019
8.5 / 5.5
Chestnut Farms
Charlotte, NC
2/28/2025
N/A
13,372
12,179
11,671
8.5 / 5.5
Vintage Jones Franklin
Raleigh, NC
11/14/2023
5/14/2025
10,000
8,608
7,904
8.5 / 5.5
Solis Cumming Town
Center
Atlanta, GA
9/3/2024
9/3/2026
20,681
13,433
5,584
8.5 / 5.5
Hudson at Metro West
Orlando, FL
9/1/2024
3/1/2026
16,791
5,015
—
8.5 / 4.5
Oxford Club Drive
Atlanta, GA
3/30/2022
N/A
7,744
7,744
—
13
Populus at Pooler
Savannah, GA
5/27/2025
5/27/2026
15,907
—
—
8.5 / 4.25
Populus at Pooler Capital
Savannah, GA
5/27/2025
5/27/2026
1,169
—
—
8.5 / 4.25
Repaid multifamily communities:
Newbergh
Atlanta, GA
N/A
N/A
N/A
—
11,749
(2)
Newbergh Capital
Atlanta, GA
N/A
N/A
N/A
—
6,176
(2)
Vintage Destin
Destin, FL
N/A
N/A
N/A
—
9,736
(3)
Kennesaw Crossing
Atlanta, GA
N/A
N/A
N/A
—
13,025
(4)
Office property:
8West (5)
Atlanta, GA
11/29/2022
11/29/2024
19,193
12,735
11,858
8.5 / 5
$
332,671
279,546
290,156
Unamortized loan origination fees
(1,755)
(1,194)
Allowances for expected credit losses and doubtful accounts
(7,929)
(9,067)
Carrying amount
$
269,862
$
279,895
(1) Carrying amounts presented per loan are amounts drawn.
(2) On March 12, 2021, we received approximately $23.7 million in full satisfaction of the principal and all interest due on the loans.
(3) On June 1, 2021, we received approximately $13.8 million in full satisfaction of the principal and all interest due on the loan.
(4) On June 30, 2021, we received approximately $14.8 million in full satisfaction of the principal and all interest due on the loan.
(5) This loan was sold at par, plus accrued interest to date, to Highwoods Properties, an unrelated party, on July 29, 2021.
We hold options or rights of first offer, but not obligations, to purchase some of the properties which are partially financed by our real estate loan investments. Certain option purchase prices may be 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, with discounts up to 15 basis points (if any), depending on the loan. As of June 30, 2021, potential property acquisitions and units from projects in our real estate loan investment portfolio consisted of:
Total units
Purchase option window
Project/Property
Location
completion (1)
Begin
End
Multifamily communities
Purchase options at discount to market:
V & Three
Charlotte, NC
338
S + 90 days (2)
S + 150 days (2)
The Anson
Nashville, TN
301
S + 90 days (2)
S + 150 days (2)
Southpoint
Fredericksburg, VA
240
S + 90 days (2)
S + 150 days (2)
Hidden River II
Tampa, FL
204
S + 90 days (2)
S + 150 days (2)
Purchase options with no discount or rights of first offer:
Hudson at Metro West
Orlando, FL
320
S + 90 days (2)
S + 150 days (2)
Vintage Horizon West
Orlando, FL
340
(3)
(3)
Vintage Jones Franklin
Raleigh, NC
277
(3)
(3)
Club Drive
Atlanta, GA
352
(5)
(5)
Populus at Pooler
Savannah, GA
316
(6)
(6)
Cameron Square
Alexandria, VA
302
(4)
(4)
Solis Chestnut Farm
Charlotte, NC
256
(4)
(4)
Solis Cumming Town Center
Atlanta, GA
320
(4)
(4)
Office property
8West
Atlanta, GA
—
(7)
(7)
3,566
(1) We evaluate each project individually and we make no assurance that we will acquire any of the underlying properties from our real estate loan investment portfolio.
(2) The option period window begins and ends at the number of days indicated beyond the achievement of a 93% physical occupancy rate by the underlying property.
(3) The option period window begins on the later of one year following receipt of final certificate of occupancy or 90 days beyond the achievement of a 93% physical occupancy rate by the underlying property and ends 60 days beyond the option period beginning date.
(4) We hold a right of first offer on the property.
(5) The underlying loan is a land acquisition bridge loan that is anticipated to be converted to a real estate loan investment in the future with a purchase option or right of first offer.
(6) The option period begins upon the property's achievement of 80% occupancy. If we are unable to reach an agreement on the property's market value, we have a right of first offer.
(7) The real estate loan investment supporting the 8West office building and five of our office properties were sold to Highwoods Realty Limited Partnership, an unrelated party, on July 29, 2021.
Mortgage Indebtedness
The following table and chart summarizes the future maturities of our mortgage notes payable:
(in thousands)
Total
Maturity dates occurring in:
2021
$
83,288
2022
121,001
2023
116,768
2024
290,171
2025
58,234
2026
255,709
2027
280,530
2028
339,189
2029
322,040
2030
359,458
Thereafter
454,038
Totals
$
2,680,426
Future Principal Payments
The Company’s estimated future principal payments due on its debt instruments as of June 30, 2021 were:
Period
Future principal
2021 (1)
$
139,788
2022
121,001
2023
116,768
2024
290,171
2025
58,234
2026
255,709
2027
280,530
2028
339,189
2029
322,040
2030
359,458
Thereafter
454,038
Total
$
2,736,926
(1) Includes the principal amount due on our
$56.5 million as of
Multifamily Communities
As of June 30, 2021, our multifamily community portfolio consisted of the following properties:
Three months ended
June 30, 2021
Property
Location
Number of
Average unit
Average
Average rent
Same-Store Communities:
Aldridge at Town Village
Atlanta, GA
300
969
98.1
%
$
1,451
Green Park
Atlanta, GA
310
985
96.7
%
$
1,530
Overton Rise
Atlanta, GA
294
1,018
95.4
%
$
1,603
Summit Crossing I
Atlanta, GA
345
1,034
98.1
%
$
1,301
Summit Crossing II
Atlanta, GA
140
1,100
98.1
%
$
1,401
The Reserve at Summit Crossing
Atlanta, GA
172
1,002
97.9
%
$
1,381
Avenues at Cypress
Houston, TX
240
1,170
96.3
%
$
1,488
Avenues at Northpointe
Houston, TX
280
1,167
96.8
%
$
1,429
Stone Creek
Houston, TX
246
852
96.9
%
$
1,185
Vineyards
Houston, TX
369
1,122
98.2
%
$
1,211
Aster at Lely Resort
Naples, FL
308
1,071
97.2
%
$
1,485
Sorrel
Jacksonville, FL
290
1,048
96.6
%
$
1,360
Lux at Sorrel
Jacksonville, FL
265
1,025
97.0
%
$
1,404
525 Avalon Park
Orlando, FL
487
1,394
96.9
%
$
1,526
Citi Lakes
Orlando, FL
346
984
96.1
%
$
1,457
Village at Baldwin Park
Orlando, FL
528
1,069
96.1
%
$
1,691
Luxe at Lakewood Ranch
Sarasota, FL
280
1,105
95.8
%
$
1,517
Venue at Lakewood Ranch
Sarasota, FL
237
1,001
97.5
%
$
1,564
Crosstown Walk
Tampa, FL
342
1,070
97.3
%
$
1,388
Overlook at Crosstown Walk
Tampa, FL
180
986
96.9
%
$
1,462
Citrus Village
Tampa, FL
296
980
96.3
%
$
1,397
Five Oaks at Westchase
Tampa, FL
218
983
97.4
%
$
1,552
Lodge at Hidden River
Tampa, FL
300
980
96.3
%
$
1,444
Lenox Village
Nashville, TN
273
906
96.7
%
$
1,319
Regent at Lenox
Nashville, TN
18
1,072
100.0
%
$
1,379
Retreat at Lenox
Nashville, TN
183
773
97.3
%
$
1,263
CityPark View
Charlotte, NC
284
948
95.5
%
$
1,168
CityPark View South
Charlotte, NC
200
1,005
95.8
%
$
1,290
Colony at Centerpointe
Richmond, VA
255
1,149
98.2
%
$
1,431
Founders Village
Williamsburg, VA
247
1,070
96.8
%
$
1,435
Retreat at Greystone
Birmingham, AL
312
1,100
97.1
%
$
1,419
Vestavia Reserve
Birmingham, AL
272
1,113
97.1
%
$
1,562
Adara Overland Park
Kansas City, KS
260
1,116
96.3
%
$
1,347
Claiborne Crossing
Louisville, KY
242
1,204
96.8
%
$
1,394
City Vista
Pittsburgh, PA
272
1,023
96.7
%
$
1,472
Total/Average Same-Store Communities
9,591
96.9
%
Stabilized Communities:
Artisan at Viera
Melbourne, FL
259
1,070
95.9
%
$
1,703
The Menlo
Jacksonville, FL
332
966
95.6
%
$
1,517
The Blake
Orlando, FL
281
908
95.5
%
$
1,466
Parkside at the Beach
Panama City Beach, FL
288
1,041
98.3
%
$
1,444
Horizon at Wiregrass
Tampa, FL
392
973
97.8
%
$
1,539
Total/Average Stabilized Communities
1,552
96.8
%
The Ellison
Atlanta, GA
250
1,064
—
—
Total multifamily community units
11,393
For the three-month period ended June 30, 2021, our average same-store multifamily communities' physical occupancy was 96.9% . We calculate average same-store physical occupancy for quarterly periods as the average of the number of occupied units on the 20th day of each of the trailing three months from the reporting period end date and that have been owned for at least 15 full months as of the end of the first quarter of each year. We exclude the operating results of properties for which construction of adjacent phases has commenced, properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. We believe "Same Property" information is useful as it allows both management and investors to gauge our management effectiveness via comparisons of financial and operational results between interim and annual periods for those subsets of multifamily communities owned for current and prior comparative periods.
For the three-month period ended June 30, 2021, our average stabilized physical occupancy was 96.8% . We calculate average stabilized physical occupancy for quarterly periods as the average number of occupied units on the 20th day of each of the trailing three months from the reporting period end date. All of our multifamily communities were stabilized for the three-month period ended June 30, 2021 except The Ellison.
For the three-month period ended June 30, 2021, our average economic occupancy was 96.5% . We define average economic occupancy as market rent reduced by vacancy losses, expressed as a percentage. All of our multifamily properties are included in these calculations except for properties which are not yet stabilized (which we define as properties having first achieved 93% physical occupancy for three full months in a quarter), properties which are owned for less than the entire reporting period and properties which are undergoing significant capital projects, have sustained significant casualty losses or are adding additional phases. We also exclude properties which are currently being marketed for sale, of which we had none at June 30, 2021. Average economic occupancy is useful both to management and investors as a gauge of our effectiveness in realizing the full revenue generating potential of our multifamily communities given market rents and occupancy rates.
Capital Expenditures
We regularly incur capital expenditures related to our owned multifamily communities. Capital expenditures may be nonrecurring and discretionary, as part of a strategic plan intended to increase a property’s value and corresponding revenue-generating ability, or may be normally recurring and necessary to maintain the income streams and present value of a property. Certain capital expenditures may be budgeted and reserved for upon acquiring a property as initial expenditures necessary to bring a property up to our standards or to add features or amenities that we believe make the property a compelling value to prospective residents in its individual market. These budgeted nonrecurring capital expenditures in connection with an acquisition are funded from the capital source(s) for the acquisition and are not dependent upon subsequent property operating cash flows for funding. Certain recurring safety-related operational capital expenditures have continued without interruption as they remain necessary for the continued normal operation of our properties.
For the three-month period ended June 30, 2021, our capital expenditures for multifamily communities consisted of:
Capital Expenditures - Multifamily Communities
Recurring
Non-recurring
Total
(in thousands, except per-unit figures)
Amount
Per Unit
Amount
Per Unit
Amount
Per Unit
Appliances
$
183
$
16.37
$
—
$
—
$
183
$
16.37
Carpets
489
43.86
—
—
489
43.86
Wood / vinyl flooring
66
5.94
158
14.20
224
20.14
Mini blinds and ceiling fans
30
2.74
—
—
30
2.74
Fire safety
—
—
78
6.99
78
6.99
HVAC
220
19.76
—
—
220
19.76
Computers, equipment, misc.
15
1.35
47
4.14
62
5.49
Elevators
—
—
10
0.92
10
0.92
Exterior painting and lighting
—
—
122
10.90
122
10.90
Leasing office and other common amenities
18
1.62
179
16.11
197
17.73
Major structural projects
—
—
295
26.51
295
26.51
Cabinets, countertops and unit upgrades
—
—
287
25.74
287
25.74
Landscaping and fencing
—
—
255
22.86
255
22.86
Parking lots and sidewalks
19
1.72
2
0.19
21
1.91
Signage and sanitation
—
—
6
0.57
6
0.57
Totals
$
1,040
$
93.36
$
1,439
$
129.13
$
2,479
$
222.49
Grocery-Anchored Shopping Center Portfolio
As of June 30, 2021, our grocery-anchored shopping center portfolio consisted of the following properties:
Property name
Location
Year built
GLA (1)
Percent leased
Grocery anchor tenant
Castleberry-Southard
Atlanta, GA
2006
80,018
100.0
%
Publix
Cherokee Plaza
Atlanta, GA
1958
102,864
100.0
%
Kroger
Governors Towne Square
Atlanta, GA
2004
68,658
100.0
%
Publix
Lakeland Plaza
Atlanta, GA
1990
301,711
95.3
%
Sprouts
Powder Springs
Atlanta, GA
1999
77,853
96.7
%
Publix
Rockbridge Village
Atlanta, GA
2005
102,432
84.4
%
Kroger
Roswell Wieuca Shopping Center
Atlanta, GA
2007
74,370
97.8
%
The Fresh Market
Royal Lakes Marketplace
Atlanta, GA
2008
119,493
94.5
%
Kroger
Sandy Plains Exchange
Atlanta, GA
1997
72,784
100.0
%
Publix
Summit Point
Atlanta, GA
2004
111,970
82.2
%
Publix
Thompson Bridge Commons
Atlanta, GA
2001
92,587
96.2
%
Kroger
Wade Green Village
Atlanta, GA
1993
74,978
94.5
%
Publix
Woodmont Village
Atlanta, GA
2002
85,639
96.3
%
Kroger
Woodstock Crossing
Atlanta, GA
1994
66,122
100.0
%
Kroger
East Gate Shopping Center
Augusta, GA
1995
75,716
95.0
%
Publix
Fury's Ferry
Augusta, GA
1996
70,458
98.0
%
Publix
Parkway Centre
Columbus, GA
1999
53,088
97.7
%
Publix
Greensboro Village
Nashville, TN
2005
70,203
100.0
%
Publix
Spring Hill Plaza
Nashville, TN
2005
66,693
100.0
%
Publix
Parkway Town Centre
Nashville, TN
2005
65,587
100.0
%
Publix
The Market at Salem Cove
Nashville, TN
2010
62,356
97.8
%
Publix
The Market at Victory Village
Nashville, TN
2007
71,300
100.0
%
Publix
The Overlook at Hamilton Place
Chattanooga, TN
1992
213,095
100.0
%
The Fresh Market
Shoppes of Parkland
Miami-Ft. Lauderdale, FL
2000
145,720
100.0
%
BJ's Wholesale Club
Crossroads Market
Naples, FL
1993
126,895
100.0
%
Publix
Neapolitan Way (2)
Naples, FL
1985
137,580
91.5
%
Publix
Berry Town Center
Orlando, FL
2003
99,441
84.0
%
Publix
Deltona Landings
Orlando, FL
1999
59,966
98.4
%
Publix
University Palms
Orlando, FL
1993
99,172
98.9
%
Publix
Disston Plaza
Tampa-St. Petersburg, FL
1954
129,150
96.1
%
Publix
Barclay Crossing
Tampa, FL
1998
54,958
100.0
%
Publix
Polo Grounds Mall
West Palm Beach, FL
1966
130,285
97.3
%
Publix
Kingwood Glen
Houston, TX
1998
103,397
97.1
%
Kroger
Independence Square
Dallas, TX
1977
140,218
87.0
%
Tom Thumb
Midway Market
Dallas, TX
2002
85,599
94.9
%
Kroger
Oak Park Village
San Antonio, TX
1970
64,855
100.0
%
H.E.B.
Irmo Station
Columbia, SC
1980
99,384
90.8
%
Kroger
Rosewood Shopping Center
Columbia, SC
2002
36,887
93.5
%
Publix
Anderson Central
Greenville Spartanburg, SC
1999
223,211
94.9
%
Walmart
Fairview Market
Greenville Spartanburg, SC
1998
46,303
97.0
%
Aldi
Brawley Commons
Charlotte, NC
1997
122,028
98.6
%
Publix
West Town Market
Charlotte, NC
2004
67,883
100.0
%
Harris Teeter
Heritage Station
Raleigh, NC
2004
72,946
100.0
%
Harris Teeter
Maynard Crossing
Raleigh, NC
1996
122,781
93.9
%
Harris Teeter
Wakefield Crossing
Raleigh, NC
2001
75,927
98.2
%
Food Lion
Southgate Village
Birmingham, AL
1988
75,092
96.8
%
Publix
Hollymead Town Center
Charlottesville, VA
2005
158,807
88.4
%
Harris Teeter
Free State Shopping Center
Washington, DC
1970
264,152
98.0
%
Giant
4,922,612
95.8
%
Redevelopment properties:
Champions Village
Houston, TX
1973
383,346
67.6
%
Randalls
Sweetgrass Corner
Charleston, SC
1999
89,124
29.1
%
(3)
Conway Plaza
Orlando, FL
1966
117,705
76.3
%
Publix
Hanover Center (4)
Wilmington, NC
1954
305,346
81.7
%
Harris Teeter
Gayton Crossing
Richmond, VA
1983
158,316
(5)
74.0
%
Kroger
Fairfield Shopping Center (4)
Virginia Beach, VA
1985
231,829
83.6
%
Food Lion
1,285,666
72.7
%
Grand total/weighted average
6,208,278
91.1
%
(1)
Gross leasable area, or GLA, represents the total amount of property square footage that can be leased to tenants.
(2)
Investment in an unconsolidated joint venture that is not prorated for our ownership percentage.
(3)
Bi-Lo (the former anchor tenant) had extended their term through April 30, 2019 and had no further right or option to extend their lease.
(4)
Property is owned through a consolidated joint venture.
(5)
The GLA figure shown excludes the GLA of the Kroger store, which is owned by others.
As of June 30, 2021, our grocery-anchored shopping center portfolio was 91.1% leased (95.8% excluding redevelopment properties). We define percent leased as the percentage of gross leasable area that is leased as of the period end date, including non-cancelable lease agreements that have been signed which have not yet commenced. This metric is used by management to gauge the extent to which our grocery-anchored shopping centers are delivering their total potential rental and other revenues.
Details regarding lease expirations (assuming no exercises of tenant renewal options) within our grocery-anchored shopping center portfolio as of June 30, 2021 were:
Totals
Number
Leased
Percent of
Month to month
15
24,197
0.4
%
2021
70
219,502
3.9
%
2022
186
640,619
11.3
%
2023
145
642,239
11.4
%
2024
138
1,197,711
21.2
%
2025
126
981,446
17.4
%
2026
100
522,983
9.3
%
2027
31
200,704
3.6
%
2028
29
358,727
6.4
%
2029
25
151,566
2.7
%
2030
17
129,154
2.3
%
2031 +
33
579,718
10.1
%
Total
915
5,648,566
5648566
100.0
%
Our grocery-anchored shopping center portfolio contained the following anchor tenants as of June 30, 2021:
Tenant
GLA
Percent of
Publix
1,179,030
19.0
%
Kroger
581,593
9.4
%
Harris Teeter
273,273
4.4
%
Wal-Mart
183,211
3.0
%
BJ's Wholesale Club
108,532
1.7
%
Food Lion
76,523
1.2
%
Giant
73,149
1.2
%
Randall's
61,604
1.0
%
H.E.B
54,844
0.9
%
Tom Thumb
43,600
0.7
%
The Fresh Market
43,321
0.7
%
Sprouts
29,855
0.5
%
Aldi
23,622
0.4
%
Total
2,732,157
44.1
%
Our Quarterly Report on Form 10-Q for the period ended June 30, 2021 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 second quarter 2021 totaled approximately $1.2 million . Second-generation capital expenditures exclude those expenditures made in our grocery-anchored shopping center and office building portfolios (i) to lease space to "first generation" tenants (i.e. leasing capital for existing vacancies and known move-outs at the time of acquisition), (ii) to bring recently acquired properties up to our ownership standards, and (iii) for property redevelopments and repositioning.
Office Building Portfolio
As of June 30, 2021, our office building portfolio consisted of the following properties:
Property Name
Location
GLA
Percent leased
Three Ravinia
Atlanta, GA
814,000
79
%
150 Fayetteville (1)
Raleigh, NC
560,000
89
%
Capitol Towers(1)
Charlotte, NC
479,000
98
%
CAPTRUST Tower (1)
Raleigh, NC
300,000
97
%
Morrocroft Centre (1)
Charlotte, NC
291,000
98
%
Westridge at La Cantera
San Antonio, TX
258,000
100
%
Armour Yards
Atlanta, GA
187,000
97
%
Brookwood Center
Birmingham, AL
169,000
100
%
Galleria 75 (1)
Atlanta, GA
111,000
70
%
Total/Average
3,169,000
91
%
(1) Properties were sold to Highwoods Properties, an unrelated third party, on July 29, 2021
As of June 30, 2021, our office building portfolio includes the following significant tenants:
Rentable square
Percent of
Annual Base
InterContinental Hotels Group
493,000
14.1
%
$
12,064
Albemarle (1)
162,000
6.9
%
5,870
CapFinancial (1)
105,000
4.4
%
3,767
USAA
129,000
3.8
%
3,276
Vericast
129,000
3.5
%
3,027
Total
1,018,000
32.7
%
$
28,004
(1) The properties leased to these tenants were sold to Highwoods Realty Limited Partnership, an unrelated third party, on July 29, 2021.
We define Annual Base Rent as the current monthly base rent annualized under the respective leases.
As of June 30, 2021, the leased square footage of our office building portfolio expires according to the following schedule:
Percent of
Year of lease expiration
Rented square
rented
feet
square feet
2021
39,000
1.4
%
2022
122,000
4.3
%
2023
134,000
4.7
%
2024
279,000
9.8
%
2025
270,000
9.5
%
2026
282,000
9.9
%
2027
328,000
11.5
%
2028
255,000
9.0
%
2029
57,000
2.0
%
2030
178,000
6.3
%
2031 +
896,000
31.6
%
Total
2,840,000
100.0
%
The Company recognized second-generation capital expenditures within its office building portfolio of approximately $714,000 during the second quarter 2021.
Definitions of Non-GAAP Measures
We disclose FFO, Core FFO, AFFO and NOI, each of which meet the definition of a “non-GAAP financial measure”, as set forth in Item 10(e) of Regulation S-K promulgated by the SEC. As a result we are required to include in this filing a statement of why the Company believes that presentation of these measures provides useful information to investors. The non-GAAP measures of FFO, Core FFO, AFFO and NOI should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further FFO, Core FFO, AFFO and NOI should be compared with our reported net income or net loss and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements. FFO, Core FFO and AFFO are not considered measures of liquidity and are not alternatives to measures calculated under GAAP.
Funds From Operations Attributable to Common Stockholders and Unitholders (“FFO”)
FFO is one of the most commonly utilized Non-GAAP measures currently in practice. In its 2002 “White Paper on Funds From Operations,” which was restated in 2018, the National Association of Real Estate Investment Trusts, or NAREIT, standardized the definition of how Net income/loss should be adjusted to arrive at FFO, in the interests of uniformity and comparability. We have adopted the NAREIT definition for computing FFO as a meaningful supplemental gauge of our operating results, and as is most often presented by other REIT industry participants.
The NAREIT definition of FFO (and the one reported by the Company) is:
Net income/loss, excluding:
depreciation and amortization related to real estate;
gains and losses from the sale of certain real estate assets;
gains and losses from change in control and
impairment writedowns of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
Not all companies necessarily utilize the standardized NAREIT definition of FFO, so caution should be taken in comparing the Company’s reported FFO results to those of other companies. The Company’s FFO results are comparable to the FFO results of other companies that follow the NAREIT definition of FFO and report these figures on that basis. FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.
Core Funds From Operations Attributable to Common Stockholders and Unitholders (“Core FFO”)
The Company makes adjustments to FFO to remove costs incurred and revenues recorded that are singular in nature and outside the normal operations of the Company and portray its primary operational results. The Company calculates Core FFO as:
FFO, plus:
acquisition and pursuit (dead deal) costs;
loan cost amortization on acquisition term notes and loan coordination fees;
losses on debt extinguishments or refinancing costs;
Internalization costs;
expenses incurred on calls of preferred stock;
deemed dividends for redemptions of and non-cash dividends on preferred stock;
expenses related to the COVID-19 global pandemic; and
Less:
earnest money forfeitures by prospective asset purchasers.
Core FFO figures reported by us may not be comparable to Core FFO figures reported by other companies. We utilize Core FFO as a supplemental measure of the operating performance of our portfolio of real estate assets. We believe Core FFO is useful to investors as a supplemental gauge of our operating performance and may be useful in comparing our operating performance with other real estate companies. Since our calculation of Core FFO removes costs incurred and revenues recorded that are often singular in nature and outside the normal operations of the Company, we believe it improves comparability to investors in assessing our core operating results across periods. Core FFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders.
Adjusted Funds From Operations Attributable to Common Stockholders and Unitholders (“AFFO”)
AFFO makes further adjustments to Core FFO results in order to arrive at a more refined measure of operating and financial performance. There is no industry standard definition of AFFO and practice is divergent across the industry. The Company calculates AFFO as:
Core FFO, plus:
non-cash equity compensation to directors and executives;
non-cash (income) expense for current expected credit losses;
amortization of loan closing costs;
depreciation and amortization of non-real estate assets;
net loan origination fees received;
deferred interest income received;
amortization of lease inducements;
cash received in excess of (exceeded by) amortization of purchase option termination revenues;
non-cash dividends on Series M Preferred Stock and mShares; and
earnest money forfeiture from prospective asset purchaser;
Less:
non-cash loan interest income;
cash paid for loan closing costs related to our Revolving Line of Credit;
amortization of straight-line rent adjustments and acquired real estate intangible assets and/or liabilities;
amortization of deferred revenues; and
normally-recurring capital expenditures and capitalized second generation leasing costs.
AFFO figures reported by us may not be comparable to those AFFO figures reported by other companies. We utilize AFFO as another measure of the operating performance of our portfolio of real estate assets. We believe AFFO is useful to investors as a supplemental gauge of our operating performance and may be useful in comparing our operating performance with other real estate companies. Since our calculation of AFFO removes other significant non-cash charges and revenues and other costs which are not representative of our ongoing business operations, we believe it improves comparability to investors in assessing our core operating results across periods. AFFO is a non-GAAP measure that is reconciled to its most comparable GAAP measure, net income/loss available to common stockholders. FFO, Core FFO and AFFO are not considered measures of liquidity and are not alternatives to measures calculated under GAAP.
Same-Store Net Operating Income (“NOI”)
We use same-store net operating income as an operational metric for our same-store multifamily communities, enabling comparisons of those properties’ operating results between the current reporting period and the prior year comparative period. We define our population of same-store multifamily communities as those that are stabilized and that have been owned for at least 15 full months as of the end of the first quarter of each year, and exclude the operating results of properties for which construction of adjacent phases has commenced, and properties which are undergoing significant capital projects, have sustained significant casualty losses, or are being marketed for sale as of the end of the reporting period. We define net operating income as rental and other property revenues, less total property and maintenance expenses, property management fees, real estate taxes, general and administrative expenses, and property insurance. We believe that net operating income is an important supplemental measure of operating performance for REITs because it provides measures of core operations, rather than factoring in depreciation and amortization, financing costs, acquisition costs, and other corporate expenses. Net operating income is a widely utilized measure of comparative operating performance in the REIT industry, but is not a substitute for the most comparable GAAP-compliant measure, net income/loss.
About Preferred Apartment Communities, Inc.
Preferred Apartment Communities, Inc. (NYSE: APTS) is a real estate investment trust engaged primarily in the ownership and operation of Class A multifamily properties, with select investments in grocery-anchored shopping centers. Preferred Apartment Communities’ investment objective is to generate attractive, stable returns for stockholders by investing in income-producing properties and acquiring or originating real estate loans for multifamily communities. As of June 30, 2021, the Company owned or was invested in 117 properties in 13 states, predominantly in the Southeast region of the United States.
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